More annual reports from Tetragon Financial Group:
2023 Report2021 Annual Report Tetragon Financial Group Contents Delivering results since 2005 Letter to shareholders 4 7 22 Investment review 38 Financial review 42 Governance 58 Other information 84 (cid:38)(cid:90)(cid:73)(cid:78)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88) About us Tetragon* is a closed-ended investment company that invests in a broad range of assets, including public and private equities and credit (including distressed securities and structured credit), convertible bonds, real estate, venture capital, infrastructure, bank loans and TFG Asset (cid:47)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:14)(cid:3)(cid:67)(cid:3)(cid:70)(cid:75)(cid:88)(cid:71)(cid:84)(cid:85)(cid:75)(cid:403)(cid:71)(cid:70)(cid:3)(cid:67)(cid:78)(cid:86)(cid:71)(cid:84)(cid:80)(cid:67)(cid:86)(cid:75)(cid:88)(cid:71)(cid:3)(cid:67)(cid:85)(cid:85)(cid:71)(cid:86)(cid:3) management business. Where appropriate, through TFG Asset Management, Tetragon seeks to own all, or a portion, of asset management companies with which it invests in order to enhance the returns achieved on its capital. Tetragon’s investment objective is to generate distributable income and capital appreciation. It aims to provide stable returns to investors across (cid:91)(cid:70)(cid:87)(cid:78)(cid:84)(cid:90)(cid:88)(cid:5)(cid:72)(cid:87)(cid:74)(cid:73)(cid:78)(cid:89)(cid:17)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:17)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:17)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:70)(cid:81)(cid:5)(cid:74)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:5)(cid:72)(cid:94)(cid:72)(cid:81)(cid:74)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5) company is traded on Euronext in Amsterdam N.V.(1) and on the Specialist Fund Segment(2) of the main market of the London Stock Exchange. To view company updates visit: www.tetragoninv.com Tetragon’s shares are subject to restrictions on ownership by U.S. persons and are not intended for European retail investors. These are described on our website. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long term in a capital appreciation and (cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:18)(cid:85)(cid:87)(cid:84)(cid:73)(cid:90)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:88)(cid:77)(cid:84)(cid:90)(cid:81)(cid:73)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:87)(cid:78)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) collective investment undertakings and be capable themselves of evaluating the merits and risks of Tetragon (cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:94)(cid:5)(cid:88)(cid:77)(cid:84)(cid:90)(cid:81)(cid:73)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5)(cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:89)(cid:84)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:85)(cid:84)(cid:89)(cid:74)(cid:83)(cid:89)(cid:78)(cid:70)(cid:81)(cid:81)(cid:94)(cid:5)(cid:78)(cid:81)(cid:81)(cid:78)(cid:86)(cid:90)(cid:78)(cid:73)(cid:5)(cid:88)(cid:74)(cid:72)(cid:90)(cid:87)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5) to bear any losses (which may equal the whole amount invested) that may result from the investment. *Tetragon Financial Group Limited is referred to in this report as Tetragon. References to “we” are to Tetragon Financial Management LP, Tetragon’s investment manager. (1) (2) Please see important notes on page 6. 2 Tetragon Financial Group Annual Report 2021 Annual Re 3 Delivering results since 2005(3) Net asset value $2.9bn 31 December 2021 Ownership(4) 34.7% Principal & Employee Ownership at 31 December 2021 NAV per share total return(5) Investment returns / return on equity(6) Dividends 14.1% 2021 Full Year 11.3% 5 Years Annualised 12.3% 10 Years Annualised 11.5% Since IPO Annualised 393% Since IPO 17.3% 2021 Return on Equity 10-15% RoE Target 12.5% Annual Average Since IPO $0.11 Q4 2021 Dividend $0.41 2021 Dividends 4.8% Dividend Yield(7) (9.4)% Dividend 5-Year CAGR(8) (1) (2) (3) (4) (5) (6) (7) (8) (10) (11) (12) (13) Please see important notes on page 6. 2021 Snapshot Tetragon aims to provide stable returns to investors across various (cid:72)(cid:87)(cid:74)(cid:73)(cid:78)(cid:89)(cid:17)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:17)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:17)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:70)(cid:81)(cid:5)(cid:74)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:5)(cid:72)(cid:94)(cid:72)(cid:81)(cid:74)(cid:88)(cid:19) Figure 1 Tetragon Financial Group - performance summary Net Assets Fully Diluted NAV Per Share Share Price(9) Dividend (last 12 months) Dividend Yield Ongoing Charges(10) Principal & Employee Ownership Investment Returns/Return on Equity(6) NAV Per Share Total Return(5) Share Price Total Return(11) Tetragon Hurdle: LIBOR +2.65%(12) MSCI ACWI Index Total Return(13) FTSE All-Share Index Total Return(13) Figure 2 Change $402.4m $3.29 ($1.00) $0.00 31 Dec 2021 31 Dec 2020 $2,876.8m $2,474.4m $29.86 $26.57 $8.50 $0.41 4.8% 1.70% 34.7% 2021 17.3% 14.1% (6.8%) 2.9% 19.0% 18.3% $9.50 $0.40 4.2% 1.70% 32.7% 2020 7.6% 9.5% (18.5%) 3.7% 16.8% (9.7%) Tetragon’s NAV per share total return and share price since IPO to 31 December 2021 TFG NAV per share (TR) TFG Share Price (TR) MSCI ACWI (TR) FTSE All-Share Index (TR) TFG LIBOR-based performance hurdle 400 300 200 100 0 (100) 2007 2009 2011 2013 2015 2017 2019 2021 393% 182% 113% 112% 76% 4 Tetragon Financial Group Annual Re Annual Report 2021 5 NotesNotes Letter to our shareholders 1 2 3 4 Euronext in Amsterdam is a regulated market of Euronext Amsterdam N.V. (Euronext Amsterdam). Tetragon’s ‘Home Member State’ for the purposes of the EU Transparency Directive (Directive 2004/109/EC) is the Netherlands. Tetragon commenced investing as an open-ended investment company in 2005, before its initial public offering in April 2007. Shareholdings at 31 December 2021 of the principals of Tetragon’s investment manager and employees of TFG Asset Management, including all deferred compensation arrangements (other than with respect to shares that are subject to performance criteria). Please refer to the Tetragon Financial Group Limited 2021 Audited Financial Statements for more details of these arrangements. 5 NAV per share total return (NAV Total Return) to 31 December (cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5) years, the last ten years, and since Tetragon’s initial public offering in April 2007. NAV Total Return is determined in accordance with the “NAV total return performance” calculation as set forth on the Association of Investment Companies (AIC) website. Tetragon’s NAV Total Return is determined for any period by calculating, as a percentage return on the Fully Diluted NAV per Share (NAV per share) at the start of such period, (i) the change in NAV per share over such period, plus (ii) the aggregate amount of any dividends per share paid during such period, with any dividend deemed reinvested at the NAV per share at the month end date closest to the applicable ex-dividend date (i.e. so that the amount of any dividend is increased or decreased by the same percentage increase or decrease in NAV per share from such ex-dividend date through to the end of the applicable period). NAV per share is calculated as Net Assets divided by Fully Diluted Shares 6 7 8 Outstanding. Please refer to Figure 12 for further details. Tetragon seeks to deliver 10-15% Return on Equity (RoE) per annum to shareholders. Please refer to page 40 for the calculation of RoE. Tetragon seeks to deliver 10-15% RoE per annum to shareholders. Tetragon’s returns will most (cid:81)(cid:78)(cid:80)(cid:74)(cid:81)(cid:94)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:74)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:5) equivalent risk-free short term rate (cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:81)(cid:94)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:88)(cid:84)(cid:82)(cid:74)(cid:5) of Tetragon’s investments; therefore, (cid:78)(cid:83)(cid:5)(cid:77)(cid:78)(cid:76)(cid:77)(cid:18)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5)(cid:74)(cid:83)(cid:91)(cid:78)(cid:87)(cid:84)(cid:83)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5) Tetragon should achieve higher (cid:88)(cid:90)(cid:88)(cid:89)(cid:70)(cid:78)(cid:83)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:87)(cid:74)(cid:89)(cid:90)(cid:87)(cid:83)(cid:88)(cid:32)(cid:5)(cid:78)(cid:83)(cid:5)(cid:81)(cid:84)(cid:92)(cid:18)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55) environments, Tetragon should achieve lower sustainable returns. Please note that from 31 December (cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:87)(cid:74)(cid:85)(cid:81)(cid:70)(cid:72)(cid:74)(cid:73)(cid:5) by an appropriate alternate rate (cid:70)(cid:88)(cid:5)(cid:70)(cid:73)(cid:91)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:46)(cid:56)(cid:41)(cid:38)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5) Fallbacks Protocol, although certain (cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5)(cid:88)(cid:74)(cid:89)(cid:89)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:71)(cid:74) calculated and published using panel bank submissions until mid- 2023. The dividend yield represents the last four quarterly dividends divided by the TFG NA share price at 31 December 2021. The latest declared dividend is included in the calculation. (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:18)(cid:94)(cid:74)(cid:70)(cid:87)(cid:5)(cid:40)(cid:84)(cid:82)(cid:85)(cid:84)(cid:90)(cid:83)(cid:73)(cid:5)(cid:38)(cid:83)(cid:83)(cid:90)(cid:70)(cid:81) (cid:44)(cid:87)(cid:84)(cid:92)(cid:89)(cid:77)(cid:5)(cid:55)(cid:70)(cid:89)(cid:74)(cid:5)(cid:13)(cid:40)(cid:38)(cid:44)(cid:55)(cid:14)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:89) 31 December 2021. The latest declared dividend is included in the calculation. 9 (cid:39)(cid:70)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:83)(cid:5)(cid:57)(cid:43)(cid:44)(cid:19)(cid:51)(cid:38)(cid:19)(cid:5) 10 Annual calculation as at 31 December 2021. The ongoing (cid:72)(cid:77)(cid:70)(cid:87)(cid:76)(cid:74)(cid:88)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:5)(cid:78)(cid:88)(cid:5)(cid:72)(cid:70)(cid:81)(cid:72)(cid:90)(cid:81)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5) (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:38)(cid:46)(cid:40)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:87)(cid:78)(cid:88)(cid:74)(cid:88) all direct recurring expenses to Tetragon expressed as a percentage of average Net Assets, and includes the annual management fee of 1.5%. 11 2021 total shareholder return, (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:5)(cid:85)(cid:87)(cid:78)(cid:72)(cid:74)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:74)(cid:72)(cid:78)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83) including dividends reinvested, as (cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:73)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:39)(cid:81)(cid:84)(cid:84)(cid:82)(cid:71)(cid:74)(cid:87)(cid:76)(cid:19) 12 Cumulative return determined on a quarterly compounding basis using the actual Tetragon quarterly (cid:78)(cid:83)(cid:72)(cid:74)(cid:83)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:75)(cid:74)(cid:74)(cid:5)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:18)(cid:71)(cid:70)(cid:88)(cid:74)(cid:73)(cid:5)(cid:77)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:19)(cid:5) 13 (cid:38)(cid:83)(cid:94)(cid:5)(cid:78)(cid:83)(cid:73)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) benchmarks are provided for illustrative purposes only. Comparisons to indices have limitations because, for example, indices have volatility and other material characteristics that may differ from the fund. Any index information contained herein is included to show general trends in the markets in the periods indicated, is not meant to imply that these indices are the only relevant indices, and is not intended to imply that the portfolio or investment was similar to any particular index either in composition or element of risk. The indices shown here have not been selected to represent an appropriate benchmark to compare an investor’s performance, but rather is disclosed to allow for comparison of the investor’s performance to that of certain well-known and widely- recognised indices. The volatility of the indices may be materially different from the individual (cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:70)(cid:89)(cid:89)(cid:70)(cid:78)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:70)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5) investor. In addition, the fund’s (cid:77)(cid:84)(cid:81)(cid:73)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:73)(cid:78)(cid:75)(cid:75)(cid:74)(cid:87)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5) from the securities that comprise the indices. The MSCI ACWI captures large and mid-cap representation across 23 developed markets and 25 emerging markets countries. With 2,966 constituents, the index covers approximately 85% of the free (cid:1835)(cid:84)(cid:70)(cid:89)(cid:18)(cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:5)(cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81)(cid:78)(cid:88)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83) in each market. Further information relating to the index constituents and calculation methodology can be found at www.msci.com/acwi. The FTSE All-Share Index represents 98-99% of U.K. market capitalisation and is the aggregate of the FTSE 100, FTSE 250 and FTSE Small Cap indices. Further information relating to the index constituents and calculation methodology can be found at www.ftserussell.com/ products/indices/uk. Long-term readers of Tetragon’s Annual Report will notice some Long differences in this year’s report. We have focused on making the diffe document less repetitive, and easier to read. Therefore, we have docu moved most of the investment performance commentary to the mov Investment Review section; however, we discuss some highlights Inve (cid:74)(cid:71)(cid:84)(cid:71) (cid:74)(cid:71)(cid:84)(cid:71)(cid:16)(cid:3)(cid:57)(cid:71)(cid:3)(cid:74)(cid:81)(cid:82)(cid:71)(cid:3)(cid:85)(cid:74)(cid:67)(cid:84)(cid:71)(cid:74)(cid:81)(cid:78)(cid:70)(cid:71)(cid:84)(cid:85)(cid:3)(cid:403)(cid:80)(cid:70)(cid:3)(cid:86)(cid:74)(cid:71)(cid:85)(cid:71)(cid:3)(cid:69)(cid:74)(cid:67)(cid:80)(cid:73)(cid:71)(cid:85)(cid:3)(cid:74)(cid:71)(cid:78)(cid:82)(cid:72)(cid:87)(cid:78)(cid:16) Tetragon delivered an investment Tetragon return on equity (RoE) of 17.3%, a NAV return on per share total return of 14.1% and a per shar share price total return of -6.8% in 2021. share pr Tetragon also declared 41.0 cents of Tetragon dividends per share for the year – a dividend yield of 4.8%. Tetragon’s NAV per share yield of 4 total return has averaged 11.3% over total retu (cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:87)(cid:74)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5) (cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:70)(cid:88)(cid:89)(cid:5) annualised performance of 15.0% for annualis the MSCI ACWI Index1. Further detail the MSC relating to Tetragon’s Key Performance relating t Metrics can be found on page 16. Metrics c Marke Market context Most markets reacted favourably to Most ma the economic rebound caused by the the econ diminishing impact of the COVID-19 diminish pandemic as vaccines were distributed pandem and lockdowns generally eased. The and lock economic rebound in the United States econom was evidenced by strong corporate was evid earnings and increased consumer earnings (cid:73)(cid:74)(cid:82)(cid:70)(cid:83)(cid:73)(cid:19)(cid:5)(cid:55)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:56)(cid:11)(cid:53)(cid:5)(cid:26)(cid:21)(cid:21)(cid:5) (cid:73)(cid:74)(cid:82)(cid:70)(cid:83)(cid:73) Index generated returns of 28.7%.2 Index ge Within th Within the S&P, the energy, real estate and information technology sectors saw the largest gains.2 .Global markets rose alongside those in the United States, with the MSCI ACWI Gross Total Return Local index climbing 21.4%.2 Although credit spreads widened during the pandemic, they ended 2021 narrower than prepandemic levels that persisted for most of 2019.3 Investment highlights Last year, we wrote that Tetragon’s (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:72)(cid:70)(cid:83)(cid:5)(cid:72)(cid:87)(cid:74)(cid:70)(cid:89)(cid:74)(cid:5) multiple “return drivers” which may increase the possibility that, in any given year, the company will generate attractive risk-adjusted returns. We believe that 2021’s returns exemplify (cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:84)(cid:90)(cid:87)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) (cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:31)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:1123)(cid:88)(cid:5)(cid:87)(cid:74)(cid:89)(cid:90)(cid:87)(cid:83)(cid:88)(cid:5) were driven by a number of disparate investments, from Ripple Labs Inc. – one of the world’s largest blockchain companies – to Equitix4 – TFG Asset Management’s integrated core infrastructure asset management and primary project platform. Ripple generated gains of approximately $100 million in 2021. Tetragon became interested in investing in Ripple in early 2018, viewing it as attractive because XRP, Ripple’s digital asset, has certain characteristics that make it more (cid:74)(cid:83)(cid:74)(cid:87)(cid:76)(cid:94)(cid:18)(cid:74)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:81)(cid:74)(cid:88)(cid:88)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) faster to use in transactions than other cryptocurrencies. Tetragon also felt at the time that Ripple’s Series A and B preferred stock were trading on the secondary market at prices that did (cid:83)(cid:84)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:90)(cid:81)(cid:81)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:61)(cid:55)(cid:53)(cid:5) that Ripple held. In late 2019, Tetragon became the lead purchaser in Ripple’s Series C preferred stock offering, acquiring $150 million of the security. In late 2021, Ripple elected to redeem the entire class of Series C preferred stock – including Tetragon’s holding at the time – at 1.5 times the purchase price plus accrued paid-in-kind dividends. Tetragon remains invested in Ripple preferred stock acquired in the secondary market over the last year and is supportive of the company’s current position as well as its direction, and maintains its conviction in Ripple’s prospects. 1 Please see Note 13 on page 6. 1 Pleaas 2 Source: Bloomberg. Sourrc 2 3 Markit CDX North America Investment Grade Index; Markit CDX North American High Yield Index. Source: Bloomberg. 3 Markki Equitix Holdings Limited, referred to in this report as “Equitix”. 4 Equiti 4 6 Tetragon Financial Group Annual Re Annual Report 2021 7 Letter to shareholders TFG Asset Management’s holding in Equitix generated gains of $348.8 million (cid:78)(cid:83)(cid:5)(cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:82)(cid:70)(cid:80)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:82)(cid:84)(cid:88)(cid:89)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) contributor during the year. This gain was driven by a number of factors. First, the business continued to raise (cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81)(cid:5)(cid:70)(cid:89)(cid:5)(cid:70)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:17)(cid:5)(cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:78)(cid:83)(cid:5)(cid:75)(cid:90)(cid:83)(cid:73)(cid:88)(cid:5) and managed accounts, seeing a 23% increase in assets under management during the year. It also plans to add further capital in the near future across the United Kingdom, Europe and North America. In addition, during 2021 a number of more directly comparable asset managers listed on major trading exchanges, bringing additional market-led valuation transparency to a manager like Equitix that has not been available in prior years. LCM5, a specialist in below-investment grade U.S. broadly-syndicated leveraged loans, successfully launched six new CLOs during 2021 with aggregate assets under management (AUM) of $2.8 billion, raising its total AUM to $11.2 billion. TFG Asset Management’s investment in LCM gained $59.8 million in 2021. We believe that 2021’s returns exemplify the (cid:68)(cid:71)(cid:80)(cid:71)(cid:403)(cid:86)(cid:85)(cid:3)(cid:81)(cid:72)(cid:3)(cid:81)(cid:87)(cid:84)(cid:3)(cid:75)(cid:80)(cid:88)(cid:71)(cid:85)(cid:86)(cid:79)(cid:71)(cid:80)(cid:86)(cid:3) (cid:70)(cid:75)(cid:88)(cid:71)(cid:84)(cid:85)(cid:75)(cid:403)(cid:69)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:28)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3) company’s returns were driven by a number of disparate investments. 5 LCM Asset Management LLC, referred to in this report as “LCM.” relative t relative to the index. In order to make the com the comparison useful, we have opted to use th to use the MSCI All Country World Gross To Gross Total Return Local Index, which represen represents the performance of the ACWI index if t index if there were no foreign exchange (cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:78) (cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:13)(cid:88)(cid:78)(cid:82)(cid:78)(cid:81)(cid:70)(cid:87)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:5)(cid:85)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5) currency currency hedges), and with dividends reinvested, gross of any taxes.6 reinveste Return on Equity. Tetragon’s gross Return o RoE was 23.9% in 2021, as compared RoE was to 21.4% to 21.4% for the MSCI All Country World Gr World Gross Total Return Local Index. (cid:52)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74) (cid:52)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:17)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5) gross Ro gross RoE was 16.4% compared to 14.6% fo 14.6% for the MSCI All Country World Gross To Gross Total Return Local Index. Volatility Volatility. The volatility of Tetragon’s gross Ro gross RoE over the same periods was 15.3 was 15.3% for 2021 (or 11.5% on the basis the basis of its net RoE) and 9.9% (cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70) (cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:13)(cid:84)(cid:87)(cid:5)(cid:28)(cid:19)(cid:29)(cid:10)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) basis of basis of its net RoE), versus 8.2% (cid:75)(cid:84)(cid:87)(cid:5)(cid:23)(cid:21)(cid:23)(cid:22)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:22)(cid:24)(cid:19)(cid:28)(cid:10)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5) years for the MSCI All Country World Gross Total Return Local Index. Sharpe Ratio. Looking to Tetragon’s Sharpe Ratio over the same periods, it was 1.56 on a gross basis (and 1.50 on a net basis) for 2021 and 1.53 on a gross basis (and 1.36 on a net basis) for (cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:56)(cid:77)(cid:70)(cid:87)(cid:85)(cid:74)(cid:5)(cid:55)(cid:70)(cid:89)(cid:78)(cid:84)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) the MSCI All Country World Gross Total Return Local Index for 2021 was 2.59 (cid:70)(cid:83)(cid:73)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5)(cid:21)(cid:19)(cid:30)(cid:27)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19) We recognise that shareholders are focused on the share price as well as on dividends and share buybacks. We are as well: 35% of Tetragon’s shares are held by our principals and employees. But if we can continue to deliver what we believe are compelling portfolio returns – with relatively low volatility and at attractive risk versus return levels – we will ultimately drive value to our investors. Tetragon portfolio performance notes (cid:60)(cid:74)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:80)(cid:74)(cid:74)(cid:83)(cid:81)(cid:94)(cid:5)(cid:70)(cid:92)(cid:70)(cid:87)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) discount at which Tetragon’s shares have been trading relative to its net asset value. Our primary focus, however, has been on maximizing the performance of Tetragon’s investment portfolio and we wanted to share some context on that performance in 2021 (cid:70)(cid:88)(cid:5)(cid:92)(cid:74)(cid:81)(cid:81)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19)(cid:5)(cid:60)(cid:74)(cid:5) highlight, in particular, our RoE, portfolio volatility and portfolio Sharpe Ratio (which is useful for understanding the return on investment compared to risk). We have historically compared our net RoE to the MSCI ACWI Index. The MSCI ACWI Index is designed to represent performance of the full opportunity set of large and mid- cap stocks across 23 developed and 25 emerging markets. As the index (cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:76)(cid:87)(cid:84)(cid:88)(cid:88)(cid:5)(cid:87)(cid:74)(cid:89)(cid:90)(cid:87)(cid:83)(cid:88)(cid:17)(cid:5)(cid:92)(cid:74)(cid:5)(cid:70)(cid:81)(cid:88)(cid:84)(cid:5)(cid:92)(cid:70)(cid:83)(cid:89)(cid:74)(cid:73)(cid:5) to present our gross performance TFG Asset Management’s holding in Equitix generated gains of $348.8 million in 2021, making it the (cid:79)(cid:81)(cid:85)(cid:86)(cid:3)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:403)(cid:69)(cid:67)(cid:80)(cid:86)(cid:3)(cid:69)(cid:81)(cid:80)(cid:86)(cid:84)(cid:75)(cid:68)(cid:87)(cid:86)(cid:81)(cid:84)(cid:3) during the year. All statistics are calculated using monthly 6 All stta 6 datapoints. Source: Bloomberg. datap Tetragon’s investment in the Polygon Convertible Opportunities strategy was up by 12.8% in (cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:73) (cid:88)(cid:89)(cid:87)(cid:84)(cid:83)(cid:76)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:71)(cid:94)(cid:5)(cid:40)(cid:46)(cid:52)(cid:5)(cid:50)(cid:78)(cid:80)(cid:74)(cid:5) (cid:45)(cid:90)(cid:82)(cid:85)(cid:77)(cid:87)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:77)(cid:78)(cid:88)(cid:5)(cid:89)(cid:74)(cid:70)(cid:82)(cid:19)(cid:5)(cid:60)(cid:74)(cid:5)(cid:70)(cid:87)(cid:74) (cid:85)(cid:81)(cid:74)(cid:70)(cid:88)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:17) (cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:81)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:50)(cid:78)(cid:80)(cid:74)(cid:5)(cid:88)(cid:78)(cid:83)(cid:72)(cid:74) (cid:23)(cid:21)(cid:21)(cid:30)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:78)(cid:88)(cid:5)(cid:82)(cid:70)(cid:79)(cid:84)(cid:87)(cid:78)(cid:89)(cid:94)(cid:18)(cid:84)(cid:92)(cid:83)(cid:74)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73) (cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:77)(cid:78)(cid:82)(cid:5)(cid:1118)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5) (cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:77)(cid:70)(cid:88) (cid:70)(cid:5)(cid:82)(cid:78)(cid:83)(cid:84)(cid:87)(cid:78)(cid:89)(cid:94)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:1118)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5) (cid:87)(cid:74)(cid:71)(cid:87)(cid:70)(cid:83)(cid:73)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:38)(cid:72)(cid:70)(cid:88)(cid:89)(cid:70)(cid:5)(cid:53)(cid:70)(cid:87)(cid:89)(cid:83)(cid:74)(cid:87)(cid:88)(cid:19) • The Acasta strategy has grown to nearly $1 billion of assets under management and will now sit alongside other offerings managed by the investment team. • The inspiration for the new name came from the Acasta Gneiss, a rock outcropping in the Canadian Northwest Territories nearby the Acasta River. This rock body was metamorphosed approximately four billion years ago and is the oldest known intact crustal fragment on earth and is comprised of unique and diverse minerals. • The team views the cohesive yet diverse nature of this aggregate as reminiscent of its collaborative and multi-disciplinary approach to investing. 8 Tetragon Financial Group Annual Report 2021 Annual Re 9 over the coming years will continue to include individual business transactions, potentially both private and public, that would take advantage of this value enhancement. Although transactions such as these could have the effect of shrinking TFG Asset Management’s portfolio of relatively mature market-leading businesses – thereby possibly delaying progress toward a strategic transaction at the TFG Asset Management level – they would enable TFG Asset Management (cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:70)(cid:85)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:88)(cid:90)(cid:72)(cid:72)(cid:74)(cid:88)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) growing successful asset management businesses without having to wait for an IPO or other strategic transaction at the TFG Asset Management level. In any event, TFG Asset Management will continue to seek to grow and diversify the business, leveraging its operating infrastructure and shared strategic direction, with Tetragon looking to support investments through co- investment and working capital. As part of continuing to improve and enhance the value proposition of its platform, TFG Asset Management added fourteen net new infrastructure employees in 2021. TFG Asset Management will continue to seek to grow and diversify the business, leveraging its operating infrastructure and shared strategic direction... Other investor matters In July, Jefferies International Limited was appointed as joint corporate broker, alongside J.P. Morgan Cazenove. Outlook Entering 2022, Tetragon continues to focus on the evolving coronavirus pandemic, but also takes note of other emerging factors affecting capital markets including labour shortages, (cid:88)(cid:90)(cid:85)(cid:85)(cid:81)(cid:94)(cid:5)(cid:72)(cid:77)(cid:70)(cid:78)(cid:83)(cid:5)(cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:19)(cid:5) In last year’s letter, we wrote about “cheap” money and accommodative monetary policies. Entering 2022, our (cid:70)(cid:89)(cid:89)(cid:74)(cid:83)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:87)(cid:74)(cid:70)(cid:88)(cid:78)(cid:83)(cid:76)(cid:81)(cid:94)(cid:5)(cid:84)(cid:83)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) and its implications on central bank interest rate policy. We are not seeking (cid:89)(cid:84)(cid:5)(cid:75)(cid:84)(cid:87)(cid:74)(cid:72)(cid:70)(cid:88)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:70)(cid:89)(cid:77)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:88)(cid:17)(cid:5) although we certainly consider potential forward scenarios and various tail-risks. We remain focused on continuing to capitalise on opportunities, regardless of the path of the broader markets. With Regards, The Board of Directors 4 March 2022 Dividends and share Divide repur repurchases The fourth quarter 2021 dividend was The four declared at 11.00 cents per share, declared bringing the full-year 2021 dividend bringing to 41.00 cents per share. On 7 March to 41.00 2022, Tetragon will announce its 2022, Te intention to repurchase approximately intention $50.0 million shares, which, based on $50.0 m Tetragon’s current NAV and share price, Tetragon will be a will be accretive to NAV per share. We are p We are pleased that the company has returned returned approximately $1.5 billion to investors through dividends and to invest share repurchases since its initial share re public of public offering in 2007. Tetragon will continue continue to seek to return value to its share its shareholders, including through dividend dividends and share repurchases. Cash Cash Tetragon’s net cash balance, which Tetragon is cash a is cash adjusted for known accruals and liabi and liabilities (short and long-dated), was $7.6 million as at 31 December was $7.6 2021. Tetragon maintains a $250 2021. Te million revolving credit facility. As million r at 31 De at 31 December 2021, $75 million of this fa of this facility was drawn and this liability h liability has been incorporated into the net c the net cash balance calculation. Inside Insider ownership Principal and employee ownership Principa increased during 2021 to 34.7% of the increase company’s shares. We believe that compan this ownership creates an alignment this own of interest between the investment of intere manager, TFG Asset Management, manage and Tetr and Tetragon shareholders. 7 BentallGreenOak, a manager of global real estate funds, was formed in 2019 upon the merger of the GreenOak Real Estate joint venture with Bentall Kennedy, (cid:70)(cid:83)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:56)(cid:49)(cid:40)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:5)(cid:76)(cid:81)(cid:84)(cid:71)(cid:70)(cid:81)(cid:5) institutional asset management arm of Sun Life Financial Inc. 8 Hawke’s Point Manager LP, referred to in this report as “Hawke’s Point. EEn Entering 2022, our atteent attention is increasingly (cid:81)(cid:80)(cid:3)(cid:75)(cid:80)(cid:404)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3)(cid:75)(cid:86)(cid:85)(cid:3) (cid:81)(cid:80) (cid:75)(cid:75)(cid:80)(cid:404) implications on central impplic bank interest rate policy. bannk i Longer-term investment strategy As we communicated to investors last year, Tetragon’s longer-term investment strategy with respect to TFG Asset Management has included transactions relating to individual businesses within TFG Asset Management (such as the merger/acquisition of GreenOak7 by Sun Life in 2019), while we continued to focus on an initial public offering or other strategic transaction at the TFG Asset Management level. The ability to do a transaction for TFG Asset Management as a whole is impacted by the fact that, notwithstanding its growth, TFG Asset Management is currently at a substantially smaller scale than the large multi-strategy organizations that lead the publicly-traded alternative asset management sector. As we laid out last year, Tetragon’s ability to do a successful transaction at the TFG Asset Management level depends on further growth in assets under management and EBITDA (in each case, taking into account the amount, sustainability and blend of management fees and performance fees, as well as (cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:77)(cid:78)(cid:88)(cid:89)(cid:84)(cid:87)(cid:78)(cid:72)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:79)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5) growth, etc.), as well as the relative stages of development of the various businesses on the platform. Although currently BentallGreenOak and LCM may be considered mature businesses, Equitix, Polygon and Acasta Partners are less so to varying degrees, and the four other businesses – Contingency Capital, Hawke’s Point8, Tetragon Credit Partners and Banyan Square Partners – are relatively early in their development. Therefore, at this point, these key elements have not (cid:94)(cid:74)(cid:89)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:88)(cid:70)(cid:89)(cid:78)(cid:88)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:5)(cid:46)(cid:53)(cid:52)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5) strategic transaction involving TFG Asset Management as a whole. At the same time, the high (cid:91)(cid:70)(cid:81)(cid:90)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:85)(cid:90)(cid:71)(cid:81)(cid:78)(cid:72)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) private transactions involving asset management companies, as well as the strong performance of Equitix and LCM in particular, have enhanced the attractiveness of individual business transactions as an alternative way of realising the value inherent in TFG Asset Management. As such, the strategy for TFG Asset Management 10 Tetragon Financial Group Annual Re Annual Report 2021 11 1 Manager’s review /14 Investment objective & strategy /16 Key performance metrics /18 Risk management This section includes commentary from Tetragon’s investment This man manager and includes market context, our investment objective and strat strategy and key performance metrics. /19 Environmental, Social and Governance 12 Tetragon Financial Group Annual Re Annual Report 2021 13 Manager’s review Investment objective & strategy To achieve Tetragon’s investment objective of generating distributable income and capital appreciation, the company’s current investment strategy is: 2 4 Identify Asset Managers Own Asset Manager 1 3 Identify Asset Class Structure Investment 1 2 3 4 To identify attractive asset classes and investment strategies. To identify asset managers it believes to be superior. To use the market experience of Tetragon’s investment manager to negotiate favourable terms for its investments. To own, where appropriate, all, or a portion of, asset management companies with which it invests in order to enhance the returns achieved on its capital. management businesses that derive income from external investors. Certain considerations when evaluating the viability of a potential asset manager typically include performance track records, reputation, regulatory requirements, infrastructure needs and asset gathering capacity. Potential (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:88)(cid:72)(cid:70)(cid:81)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) asset management business are also important considerations. Additionally, the core capabilities, investment focus and strategy of any new business should offer a complementary operating income stream to TFG Asset Management’s existing businesses. Tetragon looks to mitigate potential correlated risks across TFG Asset Management’s investment managers by diversifying its exposure across asset classes, investment vehicles, durations and investor types, among other factors. TFG Asset Management manages, oversees and supervises Tetragon’s private equity investments in asset management companies. TFG Asset (cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:90)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:17)(cid:5) could enhance the value of each individual investment and the entity as a whole through a shared strategic direction and operating infrastructure – encompassing critical business management functions such as risk (cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:84)(cid:87)(cid:5)(cid:87)(cid:74)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) control, technology, and compliance/legal matters – while at the same time giving entrepreneurial independence to the managers of the underlying businesses. In light of the goal to continue to grow and diversify TFG Asset Management, the combination of a number of relatively uncorrelated businesses across different asset classes and at different stages of development under TFG Asset Management is also intended to create a (cid:72)(cid:84)(cid:81)(cid:81)(cid:74)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:81)(cid:94)(cid:5)(cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:87)(cid:84)(cid:71)(cid:90)(cid:88)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) business and income stream. At the same time, TFG Asset Management may seek to realise the enhanced value of its individual asset management companies. To achieve Tetragon’s investment To achie objective of generating objective distributable income and capital distribut appreciation, the company’s apprecia current investment strategy is: current i 1. To identify attractive asset classes 1. To ide and investment strategies. and inve 2. To identify asset managers 2. To ide it believe it believes to be superior. 3. To use the market experience 3. To use of Tetragon’s investment of Tetrag manager manager to negotiate favourable terms fo terms for its investments. 4. To ow 4. To own, where appropriate, all, or a portion of, asset management or a port companies with which it invests compani in order to enhance the returns in order achieved on its capital. achieved In addition, the current investment In additio strategy is to continue to grow and strategy diversify diversify TFG Asset Management – (cid:70)(cid:88)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76) (cid:70)(cid:88)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:81)(cid:89)(cid:74)(cid:87)(cid:83)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5) asset ma asset management business – as well as to enh as to enhance the value of its asset managem management companies with a view to realisi to realising value from the enterprise. As part o As part of its investment strategy, Tetragon Tetragon’s investment manager may emp may employ hedging strategies and leverage leverage in seeking to provide attractive returns w returns while managing risk. The inve The investment manager seeks to identify a identify asset classes that offer excess returns r returns relative to their investment risk, or “intrin or “intrinsic alpha”. It analyses the risk/ reward, c reward, correlation, duration and liquidity characte characteristics of each potential capital use to ga use to gauge its attractiveness and incremen incremental impact on the company. The inve The investment manager then seeks (cid:89)(cid:84)(cid:5)(cid:1834)(cid:83)(cid:73)(cid:5)(cid:77)(cid:78) (cid:89)(cid:84)(cid:5)(cid:1834)(cid:83)(cid:73)(cid:5)(cid:77)(cid:78)(cid:76)(cid:77)(cid:18)(cid:86)(cid:90)(cid:70)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:88)(cid:5)(cid:92)(cid:77)(cid:84)(cid:5) invest in invest in these asset classes; selects or structure structures suitable investment vehicles that opti that optimise risk-adjusted returns for Tetragon Tetragon’s capital; and/or seeks for Tetragon Tetragon (via TFG Asset Management) to own a to own a share of the asset management company company. Tetragon aims to not only produce produce asset level returns, but also aims to e aims to enhance these returns with capital a capital appreciation and investment income f income from its investments in asset About us Tetragon is a closed-ended investment company that invests in a broad range of assets, including public and private equities and credit (including distressed securities and structured credit), convertible bonds, real estate, venture capital, infrastructure, bank loans and TFG Asset Management, (cid:70)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:81)(cid:89)(cid:74)(cid:87)(cid:83)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5) management business. Where appropriate, through TFG Asset Management, Tetragon seeks to own all, or a portion, of asset management companies with which it invests in order to enhance the returns achieved on its capital. Tetragon’s investment objective is to generate distributable income and capital appreciation. It aims to provide stable returns to investors across various credit, equity, interest (cid:87)(cid:70)(cid:89)(cid:74)(cid:17)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:70)(cid:81)(cid:5)(cid:74)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:5) cycles. The company is traded on Euronext in Amsterdam N.V.1 and on the Specialist Fund Segment2 of the main market of the London Stock Exchange. For more information please visit the company’s website g at www.tetragoninv.com . 1 2 Euronext in Amsterdam is a regulated market of Euronext Amsterdam N.V. (Euronext Amsterdam). Tetragon’s ‘Home Member State’ for the purposes of the EU Transparency Directive (Directive 2004/109/EC) is the Netherlands. 14 Tetragon Financial Group Annual Re Annual Report 2021 15 Manager’s review Key Performance Metrics Tetragon focuses on the following key metrics when assessing how value is being created for, and delivered to, Tetragon shareholders: ◆ NAV per share ◆ Investment Returns / Return on Equity ◆ Dividends Figure 3 Fully diluted NAV per share NAV Per Share Total Return 2017-2021 Fully Diluted NAV per share (NAV per share) was $29.86 at 31 December 2021. NAV per share total return was 14.1% for 2021. 13.6% 14.1% 10.3% 9.0% 9.5% Figure Figure 4 Investment returns / Inve return on equity1 retu Retur Return on Equity 2017-2021 RoE f RoE for 2021 was 17.3%. Adjus Adjusted Earnings Per Share (EPS) (EPS) for 2021 was $4.79. 1 AAv 1 Average RoE is calculated from Tetragon’s IPO in 2007. Tetragon seeks TTe to deliver 10-15% RoE per annum to to shareholders. Tetragon’s returns will ssh (cid:82)(cid:84)(cid:88)(cid:89)(cid:5)(cid:81)(cid:78)(cid:80)(cid:74)(cid:81)(cid:94)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:74)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:49)(cid:46)(cid:39)(cid:52)(cid:55)(cid:5)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:5) (cid:82)(cid:82) equivalent risk-free short term rate eeq (cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:81)(cid:94)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:88)(cid:84)(cid:82)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5) (cid:92)(cid:92)(cid:77) Tetragon’s investments and therefore TTe in high-LIBOR environments, Tetragon inn should achieve higher sustainable ssh returns; in low-LIBOR environments, ret Tetragon should achieve lower TTe sustainable returns. Please note ssu that from 31 December 2021, LIBOR th has been replaced by an appropriate hha alternate rate as advised by ISDA in aalt the IBOR Fallbacks Protocol, although th certain LIBOR settings will continue to cce be calculated and published using panel bbe bank submissions until mid-2023. bba Figur Figure 5 Divi Dividends per share (DPS) Dividend per Share Divide Comp Comparison 2017-2021 Tetra Tetragon declared a Q4 2021 divide dividend of $0.11 per share, for a full year d year dividend payout of $0.41 per share share. The cumulative DPS declared since Tetragon’s IPO is $7.7275. since 17.3% 13.4% 12.1% 8.9% 7.6% 2017 2018 2019 2020 2021 Average RoE since IPO: 12.5% Target RoE: 10-15% $0.70 $0.72 $0.74 $0.40 $0.41 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 16 Tetragon Financial Group Annual Re Annual Report 2021 17 Risk management Factors that Tetragon monitors with respect to portfolio risk management(i): 1 Performance review 2 Market risk (cid:1132) • • • • (cid:48)(cid:74)(cid:94)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:77)(cid:78)(cid:76)(cid:77)(cid:81)(cid:78)(cid:76)(cid:77)(cid:89)(cid:88) NAV bridge Investment P&L by asset class Valuation Allocation shifts (additions/disposals) • Concentration limits • Equity exposure • Risk limits • CLO credit metrics • FX exposure • Scenario analysis • Interest rate sensitivity • Tail hedge monitor 4 Operational risk 3 Liquidity risk • Trades done in the month (cid:1132) (cid:53)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:75)(cid:84)(cid:87)(cid:74)(cid:72)(cid:70)(cid:88)(cid:89) • Settlement • Counterparty • Legal • Regulatory / compliance • Finance / tax Notes i These are some of the key risk management functions. However, they may not be the only risk management factors or functions that are considered. (cid:1132) (cid:41)(cid:90)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:81)(cid:74) • Cash versus debt • Leverage facilities • Review borrowing covenants • Short-term cash management • Remaining third-party commitments • Exogenous uses of cash (capital call and FX margining scenarios) Manag Manager’s review Tetragon Financial Management LP (TFM) Tetr Environmental, Social and Governance (ESG) Policy Envi TFM, as the investment manager of Tetragon, is responsible for TFM Tetra Tetragon’s ESG policy. TTF TFM believes that Tetrrag Tetragon’s shareholders should understand how should stroong stronger ESG integration may help deliver sustainable mayy h valuue value over the long-term. Purpose and Scope of the Policy This ESG policy aims to provide transparency around TFM’s ESG beliefs and outlines its commitment to integrate material environmental, social, and governance issues into its investment process. The policy is applicable to Tetragon and its investments. ESG Investment Criteria ESG refers to a broad range of issues that may be considered in the investment process. Below are some examples of ESG issues under each category: E - Enviro E - Environmental S - Social G - Governance Greenhouse gas (GHG) emissions Greenho Energy management Energy m Human rights Data security Minority shareholder rights Board independence Water and wastewater management Water an Workplace health and safety Board diversity Workforce diversity Legal, regulatory and judicial environment ESG-related risks and opportunities vary depending on multiple factors such as the industry, geography and individual (cid:1834)(cid:87)(cid:82)(cid:5)(cid:72)(cid:77)(cid:70)(cid:87)(cid:70)(cid:72)(cid:89)(cid:74)(cid:87)(cid:78)(cid:88)(cid:89)(cid:78)(cid:72)(cid:88)(cid:19)(cid:5)(cid:53)(cid:84)(cid:89)(cid:74)(cid:83)(cid:89)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:78)(cid:88)(cid:80)(cid:88)(cid:5) from poor ESG performance include (cid:76)(cid:84)(cid:91)(cid:74)(cid:87)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:81)(cid:90)(cid:87)(cid:74)(cid:88)(cid:17)(cid:5)(cid:78)(cid:83)(cid:74)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:72)(cid:78)(cid:74)(cid:88)(cid:17)(cid:5) operational disruption, reputational damage, liabilities and low employee engagement. Potential opportunities include access to new and high- growth markets, better relationships with key external stakeholders and competitive advantage. 18 Tetragon Financial Group Annual Report 2021 Annual Re 19 Manager’s review ESG beliefs TFM believes that ESG considerations (cid:69)(cid:81)(cid:87)(cid:78)(cid:70)(cid:3)(cid:75)(cid:80)(cid:404)(cid:87)(cid:71)(cid:80)(cid:69)(cid:71)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:84)(cid:75)(cid:85)(cid:77)(cid:15)(cid:84)(cid:71)(cid:86)(cid:87)(cid:84)(cid:80)(cid:3)(cid:82)(cid:84)(cid:81)(cid:403)(cid:78)(cid:71)(cid:3)(cid:81)(cid:72)(cid:3) Tetragon’s investments. TFM employs an ESG integration strategy, which is (cid:70)(cid:71)(cid:403)(cid:80)(cid:71)(cid:70)(cid:3)(cid:67)(cid:85)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:75)(cid:80)(cid:69)(cid:78)(cid:87)(cid:85)(cid:75)(cid:81)(cid:80)(cid:3)(cid:81)(cid:72)(cid:3)(cid:79)(cid:67)(cid:86)(cid:71)(cid:84)(cid:75)(cid:67)(cid:78)(cid:3)(cid:39)(cid:53)(cid:41)(cid:3) information into the investment process. It is TFM’s view that ESG integration is It is TFM fully consistent with Tetragon’s overall fully con investment strategy. Additionally, given investme the evidence (both from academic and the evide practitioner studies) demonstrating practitio the link between ESG performance the link b (cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:17)(cid:5)(cid:57)(cid:43)(cid:50)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83) believes believes that Tetragon’s shareholders should u should understand how stronger ESG integration may help deliver ESG inte sustaina sustainable value over the long-term. ESG In ESG Integration TFM integrates ESG information into TFM inte its invest its investment process to help identify drivers o drivers of risk and return. It is worth noting th noting that ESG information is not the only con only consideration in TFM’s investment decision decision making but rather expands the total info total information available to it when evaluatin evaluating an investment. As part of its investme investment evaluation, TFM assesses ESG info ESG information alongside a wide variety (cid:84)(cid:75)(cid:5)(cid:74)(cid:72)(cid:84)(cid:83)(cid:84) (cid:84)(cid:75)(cid:5)(cid:74)(cid:72)(cid:84)(cid:83)(cid:84)(cid:82)(cid:78)(cid:72)(cid:5)(cid:82)(cid:74)(cid:89)(cid:87)(cid:78)(cid:72)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:73)(cid:70)(cid:89)(cid:70)(cid:17)(cid:5) making i making investment decisions on a case-by- case-by-case basis. Responsibility for Implementation TFM’s Investment Committee and Risk Committee are responsible for overseeing ESG integration. The ESG policy will be reviewed annually. Relevant Commitments and Policies TFM and Tetragon have adopted a number of policies and commitments that are complementary to the ESG integration approach, including the following: • the Code of Ethics Policy and Proxy Voting Policy as found in the Compliance Manual; and • a Statement on the UK Modern Slavery Act. Tetragon also reports against the Code of Corporate Governance of the Association of Investment Companies (AIC). 20 Tetragon Financial Group Annual Re Annual Report 2021 21 TFM integrates ESG information into its investment process to help identify drivers of risk and return. 2 Investment review /24 Investment review introduction /27 Detailed investment review /28 Net asset breakdown summary This section covers details on Tetragon’s investment performance This durin during 2021. 22 Tetragon Financial Group Annual Re Annual Report 2021 23 Investment review Investment review Tetragon’s Fully Diluted NAV Per Share increased from $26.57 per share to $29.86 per share year over year. TFG Asset Management was the largest driver of performance returns in 2021. TFG Asset Management +$442m gains in the year All of the portfolio’s asset classes produced performance gains for the year, apart from the other equities and credit category. The majority of the portfolio’s gains were generated within TFG Asset Management (which holds private equity investments in asset management companies), which gained $442.2 million year over year. The company’s allocation to private equity and venture capital also delivered strong returns, gaining $120.2 million and bank loans were the third-strongest performer with gains of $48.4 million. The company’s allocation to other equities and credit generated a loss of $18.0 million. Tetragon’s NAV at the end of the year stood at $2.88 billion, compared to $2.47 billion a year ago. A detailed performance review of each asset class follows beginning on page 30. Figure 6 Figure 6 Year-on-Year NAV Per Share Progression (USD)(i) Year-o Tetragon’s Fully Diluted NAV Per Share increased from $26.57 per share as at 31 December 2020 to $29.86 per share as at Tetrago 31 December 2021. 31 Dece 34.00 34.00 32.00 32.00 30.00 30.00 28.00 28.00 26.00 26.00 24.00 24.00 22.00 22.00 20.00 20.00 26.57 (1.82) 6.38 (0.06) (0.40) (0.81) 29.86 NAV at 31 December 2020 Investment income and losses Operating expenses management and incentive fees Interest expense Dividends Other share dilution NAV at 31 December 2021 Progression from 31 December 2020 to 31 December 2021 is an aggregate of each of the 12 months’ NAV progressions. With the exception of Progresssi share repurchases, all of the aggregate monthly Fully Diluted NAV Per Share movements in the table are determined by reference to the fully diluted share rep share count at the start of each month. share coou Figure 7 Figure 7 Net As Net Asset Breakdown Summary The table The table shows a breakdown of the composition of Tetragon’s NAV at 31 December 2020 and 31 December 2021, and the factors contributing to the changes in NAV over the period. contribu (cid:38)(cid:81)(cid:81)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:74)(cid:88) (cid:38)(cid:81)(cid:81)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:88)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:73)(cid:84)(cid:81)(cid:81)(cid:70)(cid:87)(cid:88)(cid:19) Asset Cl Asset Classes Private e Private equity in asset management companies Event-dri Event-driven equities, convertible bonds and other hedge funds Bank loa Bank loans Real esta Real estate Private e Private equity and venture capital Legal assets(ii) Legal ass Other equities and credit(iii) Other eq Net cash(iv) Net cash Total Total NAV at 31 Dec 2020 Additions(i) Disposals/ Receipts(i) Gains/ Losses NAV at 31 Dec 2021 833.5 568.2 278.8 152.4 396.1 - 258.4 (13.0) 10.9 54.0 30.9 26.2 117.7 29.7 60.2 20.3 (30.3) (50.0) (72.5) (22.5) (316.8) - (65.0) - 442.2 1,256.3 13.8 48.4 2.1 120.2 0.6 (18.0) 0.3 586.0 285.6 158.2 317.2 30.3 235.6 7.6 2,474.4 349.9 (557.1) 609.6 2,876.8 i i Any gains or losses on foreign exchange hedging instruments attributable to a particular strategy or sub-asset class have been included in Any g “additions” or “disposals/receipts” respectively. For example, where a hedging gain or loss is made, this will result in either cash being received or “adddit paid, or cash being receivable or payable, which is equivalent to a receipt or disposal. paid, o ii ii (cid:53)(cid:87)(cid:74)(cid:91)(cid:78)(cid:84)(cid:90)(cid:88)(cid:81)(cid:94)(cid:5)(cid:72)(cid:70)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:1126)(cid:81)(cid:78)(cid:89)(cid:78)(cid:76)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:1127)(cid:19) (cid:53)(cid:87)(cid:74)(cid:91)(cid:91)(cid:78)(cid:84) iii Assets characterised as “other equities & credit” consist of investment assets held directly on the balance sheet. For certain contracts for difference iii Asseet (CFD), gross value or required margin is used. Under IFRS, these CFDs are held at fair value which is the unrealised gain or loss at the reporting date. (CFDD) Payments and receipts on the same investments have been netted off against each other. Paymm iv Net cash consists of: (1) cash held directly by Tetragon, (2) excess margin held by brokers associated with assets held directly by Tetragon, and iv Net ca (3) cash held in certain designated accounts related to Tetragon’s investments, some of which may only be used for designated purposes without (3) cca (cid:78)(cid:83)(cid:72)(cid:90)(cid:87)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:89)(cid:70)(cid:93)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:75)(cid:74)(cid:87)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:13)(cid:25)(cid:14)(cid:5)(cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:73)(cid:87)(cid:70)(cid:92)(cid:83)(cid:5)(cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5) (cid:78)(cid:83)(cid:72)(cid:90)(cid:87)(cid:87) the revolving credit facility. the rre 24 Tetragon Financial Group Annual Report 2021 Annual Re 25 Figure 8 Net Asset Composition Summary Net asset breakdown at 31 Dec 2020 Other equities and credit Private equity and venture capital Real estate Bank loans 10% 16% 6% 11% 34% 23% Net asset breakdown at 31 Dec 2021 Legal Assets Private equity and venture capital Real estate Bank loans Event-driven equities, convertible bonds, other hedge funds Figure 9 11% 6% 10% 8% 1% 20% 44% Private equity in asset management companies Top 10 Holdings by Value as of 31 December 2021 Rank Holding Asset Class 1 2 3 4 5 6 7 8 9 Equitix Private equity in asset management company Polygon European Equity Opportunity Fund Absolute Return Event-driven equities LCM Private equity in asset management company BentallGreenOak Private equity in asset management company Polygon European Equity Opportunity Fund Long Bias Event-driven equities Polygon Convertible Opportunity Fund Convertible bonds Banyan Square Fund 1 Private equity and venture capital Public European equity TCI III Other equities Bank loans Private equity in asset management company 10 Polygon Total 26 Value ($ millions) % of Investments 725.6 277.0 237.8 213.5 133.9 25.3% 9.7% 8.3% 7.4% 4.7% 131.6 4.6% 95.5 78.3 72.9 54.3 3.3% 2.7% 2.5% 1.9% 70.4% Figure 10 Figure 10 Detailed Investment Review Detaile (cid:57)(cid:77)(cid:74)(cid:5)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:71)(cid:87)(cid:74)(cid:70)(cid:80)(cid:88)(cid:5)(cid:84)(cid:90)(cid:89)(cid:5)(cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:73)(cid:74)(cid:89)(cid:70)(cid:78)(cid:81)(cid:5)(cid:88)(cid:77)(cid:84)(cid:92)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:74)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:51)(cid:38)(cid:59)(cid:5)(cid:84)(cid:75)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74) (cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:5)(cid:73)(cid:90)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:23)(cid:21)(cid:23)(cid:22)(cid:19)(cid:5)(cid:38)(cid:81)(cid:81)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:88)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:73)(cid:84)(cid:81)(cid:81)(cid:70)(cid:87)(cid:88)(cid:19) (cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:70)(cid:88)(cid:88) Asset Cla Asset Classes NAV at 31 Dec 2020 Additions(i) Disposals/ Receipts(i) Gains/ Losses NAV at 31 Dec 2021 % of NAV Private e Private equity in asset management companies Private equity in asset management companies Event-driven equities, convertible bonds, other hedge funds Other equities and credit Equitix Equitix BentallGreenOak BentallGr LCM LCM Polygon Polygon Tetragon Credit Partners Tetragon Hawke's Point Hawke's Banyan Square Partners Banyan S Contingency Capital Continge Event-driven equities Event-dri Polygon European Equity Opportunity Fund Absolute Return Polygon E Polygon European Equity Opportunity Fund Long Bias Polygon E Polygon Global Equities Fund Polygon G Convertible bonds Convertib 386.1 195.7 176.9 57.4 13.7 2.9 0.8 - 299.9 140.9 7.7 3.3 1.2 1.1 0.3 0.1 - - 4.9 - 16.0 25.0 Polygon Convertible Opportunity Fund Polygon C 116.7 - (12.6) (17.7) - - - - - - (27.0) (23.0) - - - (35.7) (32.5) (4.3) (8.5) (0.4) (10.5) (3.1) - (39.7) - (3.8) (273.3) 348.8 34.3 59.8 (3.4) 2.4 (0.9) - 1.2 4.1 - (3.9) 725.6 213.5 237.8 54.3 16.2 2.0 0.8 6.1 277.0 133.9 28.8 25.3% 7.4% 8.3% 1.9% 0.6% 0.1% 0.0% 0.2% 9.7% 4.7% 1.0% 14.9 131.6 4.6% (1.3) 14.7 0.5% 24.2 20.6 3.6 (0.2) (8.9) 4.4 0.3 6.5 (39.4) 11.7 33.9 114.0 154.2 117.8 13.6 38.5 48.0 23.5 5.5 42.7 57.9 95.5 113.5 50.3 5.4% 4.1% 0.5% 1.3% 1.7% 0.8% 0.2% 1.5% 2.0% 3.3% 4.0% 1.8% 3.0 13.0 134.8 129.7 14.3 38.4 45.7 26.2 6.4 35.7 131.0 31.4 59.1 174.6 30.9 - - 8.8 11.6 3.4 1.9 0.5 6.0 52.4 24.3 35.0 - 29.7 - 0.6 30.3 1.1% 240.5 17.9 (13.0) 2,474.4 60.2 - 20.3 349.9 (61.0) (4.0) - (557.1) (24.2) 6.2 0.3 609.6 7.5% 0.7% 215.5 20.1 7.6 2,876.8 100.0% Other hedge funds Other hed Other hedge funds Other hed Bank loans Bank loan U.S. CLOs (LCM) U.S. CLOs Tetragon Credit Partners funds Tetragon U.S. CLOs (non-LCM) U.S. CLOs Real estate Real esta BentallGreenOak Europe funds & co-investments BentallGr BentallGreenOak U.S. funds & co-investments BentallGr BentallGreenOak Asia funds & co-investments BentallGr BentallGreenOak debt funds BentallGr Other real estate Other rea Private equity and venture capital Private e Hawke's Point funds & co-investments Hawke's Banyan Square funds & co-investments Banyan S Other funds & co-investments Other fun Direct Direct Legal assets Legal ass Contingency Capital funds Continge Other equities & credit(ii) Other equ Other equ Other equities Other credit Other cre Cash Cash Net cash(iii) Net cash Total Total i i Any gains or losses on foreign exchange hedging instruments attributable to a particular strategy or sub-asset class have been included in Any g “additions” or “disposals/receipts” respectively. For example, where a hedging gain or loss is made, this will result in either cash being received or “adddit paid, or cash being receivable or payable, which is equivalent to a receipt or disposal. paidd, ii Assets characterised as “other equities & credit” consist of investment assets held directly on the balance sheet. For certain contracts for difference ii Asseet (CFD), gross value or required margin is used. Under IFRS, these CFDs are held at fair value which is the unrealised gain or loss at the reporting date. (CFDD) Payments and receipts on the same investment have been netted off against each other. Paymm iii Net cash consists of: (1) cash held directly by Tetragon, (2) excess margin held by brokers associated with assets held directly by Tetragon, and iii Net c (3) cash held in certain designated accounts related to Tetragon’s investments, some of which may only be used for designated purposes without (3) cca (cid:78)(cid:83)(cid:72)(cid:90)(cid:87)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:89)(cid:70)(cid:93)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:75)(cid:74)(cid:87)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:13)(cid:25)(cid:14)(cid:5)(cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:73)(cid:87)(cid:70)(cid:92)(cid:83)(cid:5)(cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5) (cid:78)(cid:83)(cid:72)(cid:90)(cid:87)(cid:87) the revolving credit facility. the rre Tetragon Financial Group Annual Report 2021 Annual Re 27 Detailed net asset breakdown 31 December 2020 31 Dec 31 December 2021 TFG Asset Management Other equities & credit Event-driven equities, convertible bonds & other HF Real estate Bank loans Private equity & venture capital TFG A TFG Asset Management Other Other equities & credit Event-driven equities, convertible bonds & other HF Real estate Bank loans Legal assets Private equity & venture capital Cash Equitix Equitix Equitix BentallGreenOak Polygon LCM Tetragon Credit Partners Hawke's Point Banyan Square Partners BentallGreenOak BentallG Polygon Polygon European Equity Opportunity Fund - Absolute Return Polygon Convertible LCM LCM Polygon European Equity Opportunity Fund - Long-Bias Polygon Global Equities Other hedge funds Polygon Polygon European Equity Opportunity Fund - Absolute Return Polygon Convertible Direct Hawke's Point funds Polygon European Equity Opportunity Fund - Long-Bias Polygon Polygon Global Equities Other funds and co-investments Banyan Square funds Other funds and co-investments Other fu Banyan Square funds Direct LCM CLOs Tetragon Credit Partners funds s O L C M C L - n o n Hawke's Point funds LCM CLOs LCM CLO Tetragon Credit Partners funds Other equities BentallGreenOak U.S. BentallGreenOak Europe Other real estate BentallGreenOak Asia Other credit BentallGreenOak debt Other equities Other eq BentallGreenOak U.S. BentallGreenOak Europe Other real estate BentallGreenOak Asia Contingency Capital funds Net Cash Contingency Capital Tetragon Credit Partners Hawke's Point Banyan Square Partners Other hedge funds non-LCM CLOs Other credit BentallGreenOak debt 28 Tetragon Financial Group Annual Re Annual Report 2021 29 Investment review Detailed investment review 1 Private equity investments in asset management companies (cid:52)(cid:83)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) (cid:78)(cid:88)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) alternative asset manager that owns majority and minority private equity stakes in asset management companies. TFG (cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:90)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:17)(cid:5) is intended to enhance the value of each individual investment and the entity as a whole through a shared strategic direction and operating infrastructure – encompassing critical business management functions such as risk management, investor relations, (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) control, technology, and compliance/ legal matters – while at the same time giving entrepreneurial independence to the managers of the underlying businesses. In light of the strategy to continue to grow and diversify TFG Asset Management -- as well as to enhance the value of its asset management companies with a view to realising value from the enterprise -- the combination of relatively uncorrelated businesses across different asset classes and at different stages of development is also intended to create a collectively (cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:87)(cid:84)(cid:71)(cid:90)(cid:88)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5) and income stream. As at 31 December 2021, TFG Asset Management comprised LCM, BentallGreenOak, Polygon, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners and Contingency Capital. TFG Asset Management recorded an investment gain of $442.2 million in 2021, mainly driven by the investment in Equitix. At 1 March 2022, the Polygon convertible business announced its rebranding to Acasta Partners. Equitix Equitix Equitix is an integrated core infrastructure Equitix is asset management and primary project asset ma platform. Tetragon’s investment generated platform. gains of $348.8 million, making it the most gains of $ (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:84)(cid:87)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:5)(cid:73)(cid:90)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83) 2021. Th 2021. This gain was driven by a number of factors of factors. Firstly, the business continued (cid:89)(cid:84)(cid:5)(cid:87)(cid:70)(cid:78)(cid:88)(cid:74)(cid:5)(cid:72) (cid:89)(cid:84)(cid:5)(cid:87)(cid:70)(cid:78)(cid:88)(cid:74)(cid:5)(cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81)(cid:5)(cid:70)(cid:89)(cid:5)(cid:70)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:19)(cid:5)(cid:41)(cid:90)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5) 2021, Equitix Fund VI raised a further £0.6 2021, Eq billion, reaching £1.3 billion AUM by the billion, re end of th end of the year, and is expected to raise further ca further capital in H1 2022. In addition, Equitix su Equitix successfully grew the AUM in its managed managed accounts by approximately £0.8 billio £0.8 billion in the year. This represents a 23% incre 23% increase in AUM during 2021 and a (cid:24)(cid:23)(cid:10)(cid:5)(cid:38)(cid:58)(cid:50) (cid:24)(cid:23)(cid:10)(cid:5)(cid:38)(cid:58)(cid:50)(cid:5)(cid:40)(cid:38)(cid:44)(cid:55)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19)(cid:5) Secondly Secondly, Equitix plans to add further capital in capital in the near future across the United Kingdom Kingdom, Europe and North America. In the DC In the DCF valuation approach, the successf successful track record of AUM growth lends to a lends to a lower risk adjustment applied to future to future capital raising assumptions. Thirdly, d Thirdly, during 2021, some more directly compara comparable asset managers listed on major trading ex trading exchanges, bringing additional market-le market-led valuation transparency to a manag a manager like Equitix. In Q4 2021, the third-part third-party valuation agent added a Market Multiples Multiples approach (EV/EBITDA) to the overall va overall valuation methodology, with the valuation valuation now being the mean of the Market Multiples Multiples and DCF approaches. During the year, Equ year, Equitix paid a dividend of $12.6 million. Bental BentallGreenOak BentallGreenOak is a manager of real BentallG estate in estate investment strategies. During 2021, thi 2021, this investment made a gain of $34.3 mi $34.3 million. Distributions to Tetragon during th during the year totalled $17.7 million, (cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76) (cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:5)(cid:72)(cid:84)(cid:82)(cid:71)(cid:78)(cid:83)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:86)(cid:90)(cid:70)(cid:87)(cid:89)(cid:74)(cid:87)(cid:81)(cid:94)(cid:5) contractu contractual payments, variable payments and carri and carried interest. This investment is valued is valued using the present value of (cid:89)(cid:77)(cid:74)(cid:5)(cid:91)(cid:70)(cid:87)(cid:78)(cid:84) (cid:89)(cid:77)(cid:74)(cid:5)(cid:91)(cid:70)(cid:87)(cid:78)(cid:84)(cid:90)(cid:88)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:74)(cid:81)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) GreenOa GreenOak/Bentall Kennedy merger deal, which co which comprises those three elements plus a pu plus a put/call option in 2026/27, as well as Tetrag as Tetragon’s share of co-investments made. Ea made. Each of those elements contribut contributed to the gain posted this year. LCM Hawke’s Point LCM is a specialist in below-investment grade U.S. broadly-syndicated leveraged loans; currently, it manages loan assets exclusively through CLOs. TFG Asset Management’s investment in LCM gained $59.8 million in 2021. The primary driver of valuation gains was the successful launch of six new CLOs during 2021 with AUM totalling $2.8 billion, raising the total AUM managed by LCM to $11.2 billion. This was partially offset by a 1% increase in the discount rate used in the DCF approach. The third-party valuation agent changed the Market Multiple approach from P/AUM to EV/EBITDA. This change was primarily driven by the fact that the EV/EBITDA approach is forward-looking, as opposed to a backward-looking P/AUM approach, and can better capture the growth potential of a business. Polygon Polygon manages open-ended hedge fund and private equity vehicles across a number of strategies. The investment in Polygon recorded a loss of $3.4 million. Tetragon Credit Partners Tetragon Credit Partners is TFG Asset Management’s structured credit investing business. The value of Tetragon Credit Partners increased by $2.4 million in 2021. During 2021, Tetragon Credit Partners’ TCI III vehicle deployed the remaining 17% of its uninvested capital and began to raise capital for its TCI IV vehicle during the year. Hawke’s Point is an asset management (cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:5)(cid:75)(cid:84)(cid:72)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:83)(cid:5)(cid:82)(cid:78)(cid:83)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5) that provides capital to companies in the mining and resource sectors. Tetragon’s investment recorded a loss of $0.9 million during 2021. Banyan Square Partners Banyan Square Partners is an investment management business focused on providing non-control structured and (cid:72)(cid:84)(cid:82)(cid:82)(cid:84)(cid:83)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:88)(cid:84)(cid:81)(cid:90)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) sponsors, founded by TFG Asset Management in 2019. Tetragon’s investment was valued at $0.8 million, unchanged from 31 December 2020. Contingency Capital Contingency Capital is a global asset management business that sponsors and manages legal assets-related investment funds that launched in November 2020. The asset manager (cid:92)(cid:70)(cid:88)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:89)(cid:78)(cid:82)(cid:74)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) 31 December 2021, at $6.1 million. Tetragon has provided a loan to Contingency Capital of $4.9 million. Please see Note 4 in the 31 December 2021 Tetragon Financial Group Audited Financial Statements for further details on the basis for determining the fair value of TFG Asset Management. Additionally, for further colour on the underlying performance of the asset managers, please see Figure 18 for TFG Asset Management’s pro forma operating results and associated commentary. 30 Tetragon Financial Group Annual Re Annual Report 2021 31 (cid:16)(cid:22)(cid:23)(cid:19)(cid:30)(cid:10)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1835)(cid:70)(cid:76)(cid:88)(cid:77)(cid:78)(cid:85)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:17)(cid:5) compared to the HFR RV Fixed Income- Convertible Arbitrage Index which returned 7.8% in 2021(ii). The fund was nominated for the eleventh time since its inception in 2009 for the 2021 With Intelligence EuroHedge Award in the Convertibles and Volatility category; (cid:78)(cid:89)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:92)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:92)(cid:70)(cid:87)(cid:73)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:89)(cid:78)(cid:82)(cid:74)(cid:88)(cid:19)(iii) As mentioned earlier in this report, the fund was renamed to Acasta Global Fund as of 1 March 2022. Other hedge funds • Investments in hedge funds managed by third-party managers lost $1.3 million during the year. An investment of $13.0 million was made during the the year. 3 Bank loans Tetragon continues to invest in bank loans through CLOs primarily by taking majority positions in the equity tranches. Tetragon’s CLO portfolio recorded a gain during 2021 as corporate credit fundamentals rebounded strongly from the depths of the Covid crisis. Tetragon made new U.S. CLO investments indirectly via the Tetragon Credit Partners platform as well as committed to the purchase of new investments directly. We continue to view CLOs as attractive vehicles for obtaining long-term exposure to the leveraged loan asset class. 2 Event-driven equities, convertible bonds and other hedge funds Tetragon invests in event-driven equities and convertible bonds through hedge funds. At 31 December 2021, these investments are primarily through hedge funds managed by Polygon. Investments in these funds generated a gain of $13.8 million during 2021. Event-driven equities • Polygon European Equity Opportunity Fund: This fund focuses on event- driven European equity strategies with catalysts, particularly in mergers and acquisitions, deep-value dislocation trades, and capital markets special situations. Tetragon’s investments in these funds in 2021 recorded a gain of $4.1 million. Both share classes in which Tetragon is invested had positive returns in 2021; the Absolute Return class had net performance of 1.25% as hedges dampened performance and the Long-Bias share class returned 11.9%. Tetragon redeemed $50.0 million from its investment in 2021. The fund was nominated for the 2021 With Intelligence EuroHedge Award in the Event Driven & Distressed category for the third time since its inception.(i) • Polygon Global Equities Fund: Tetragon’s investment had losses of $3.9 million during 2021. Tetragon increased its holding in this fund by $25.0 million in 2021. The position remains relatively small. Tetragon is the only investor in this fund. Convertible bonds • Polygon Convertible Opportunity Fund: This fund invests in securities across the capital structure of issuers primarily in Europe and North America and seeks to identify relative value opportunities (cid:81)(cid:74)(cid:91)(cid:74)(cid:87)(cid:70)(cid:76)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:91)(cid:74)(cid:83)(cid:89)(cid:18)(cid:73)(cid:87)(cid:78)(cid:91)(cid:74)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) convertible expertise in a concentrated and heavily-researched portfolio. Tetragon’s investment generated a gain of $14.9 million for the year. Net performance in the fund was • U.S. C • U.S. CLOs (LCM): Directly-owned LCM C LCM CLOs gained $24.2 million during during 2021. This performance was driven driven by improvements in underlying funda fundamental credit conditions and a reca a recalibration of certain modelling assum assumptions used to value the positi positions. During the year, investments in this in this segment generated $35.7 million in cas in cash distributions, with the total fair value value ending 2021 at $154.2 million. As of As of the end of 2021, all LCM CLO transa transactions were compliant with their junior junior-most overcollateralization (O/C) tests.(iv) (O/C) In Feb In February 2021, Tetragon purchased a majority stake in the equity tranche a maj of LC of LCM 31 Ltd, for a cost of $15.6 millio million. Through the remainder of 2021, Tetrag Tetragon made minority investments (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74) (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:72)(cid:77)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:49)(cid:40)(cid:50)(cid:18) mana managed CLOs (LCM 32, LCM 33, LCM 3 LCM 34, LCM 35, and LCM 36), for a total c total combined cost of $10.5 million. Tetrag Tetragon also made investments in the de the debt tranches of LCM 32, LCM 33, LCM 3 LCM 34, and LCM 35 to support the comp compliance of E.U. Risk Retention rules for th for those transactions. Tetrag Tetragon currently expects to make most most of its new issue LCM CLO major majority equity investments via the Tetrag Tetragon Credit Partners platform but may c may choose to make opportunistic invest investments directly when appropriate. • Tetragon Credit Partners Funds(v): TCI • Tetra II, TCI II, TCI III, and TCI IV are CLO investment vehic vehicles established by Tetragon Credit Partn Partners, a 100% owned subsidiary of TFG A TFG Asset Management. As of the end of 2021, Tetragon’s commitment to TCI of 202 II was II was $70.0 million (which was fully funde funded), its commitment to TCI III was $85.9 $85.9 million (which was fully funded), and it and its commitment to TCI IV was $10.6 $10.6 million (which is not yet funded). TCI II TCI II and TCI III are fully invested, (cid:92)(cid:77)(cid:78)(cid:81)(cid:74)(cid:5) (cid:92)(cid:77)(cid:78)(cid:81)(cid:74)(cid:5)(cid:57)(cid:40)(cid:46)(cid:5)(cid:46)(cid:59)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:94)(cid:74)(cid:89)(cid:5)(cid:77)(cid:70)(cid:73)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:81)(cid:5) capita capital close. in underlying fundamental credit conditions and a recalibration of certain modelling assumptions used to value the positions. During the year, TCI II (cid:72)(cid:81)(cid:84)(cid:88)(cid:74)(cid:73)(cid:5)(cid:73)(cid:74)(cid:71)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:87)(cid:74)(cid:74)(cid:5) transactions and reset two CLOs, and (cid:57)(cid:40)(cid:46)(cid:5)(cid:46)(cid:46)(cid:46)(cid:5)(cid:72)(cid:81)(cid:84)(cid:88)(cid:74)(cid:73)(cid:5)(cid:73)(cid:74)(cid:71)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:88)(cid:78)(cid:93)(cid:5) transactions. The manager expects that there will be opportunities to (cid:85)(cid:90)(cid:87)(cid:88)(cid:90)(cid:74)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:71)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) 2022. (cid:57)(cid:40)(cid:46)(cid:5)(cid:46)(cid:59)(cid:5)(cid:77)(cid:70)(cid:73)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:72)(cid:81)(cid:84)(cid:88)(cid:74)(cid:5)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) end of May 2021, and as of the end of December 2021, had total accepted committed capital of $105.2 million (including Tetragon’s investment). As of the end of the year, TCI IV had made two majority CLO equity tranche investments and continue to work on a pipeline of near-term opportunities. All CLOs held by TCI II, TCI III, and TCI IV were compliant with their junior-most O/C tests as of the end of December 2021.(vi) During 2021, Tetragon’s investments During in fun in funds managed by Tetragon Credit Partners generated $32.5 million in Partn cash distributions and a gain of $20.6 cash d (cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:82)(cid:85)(cid:87)(cid:84)(cid:91)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) (cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84) • U.S. CLOs (non-LCM): The non- LCM-managed CLO segment posted a gain of $3.6 million during 2021, (cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:82)(cid:85)(cid:87)(cid:84)(cid:91)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:90)(cid:83)(cid:73)(cid:74)(cid:87)(cid:81)(cid:94)(cid:78)(cid:83)(cid:76)(cid:5) fundamental credit conditions, as well as a recalibration of certain model assumptions used to value the positions. Investments in this segment generated $4.3 million in cash distributions during 2021. Tetragon did not add any direct non- LCM-managed CLO investments, and as of the end of 2021, the fair value of this segment stood at $13.6 million. As of the end of 2021, all non-LCM CLOs were compliant with their junior-most O/C tests.(vii) Tetragon currently expects to make most of its new issue non-LCM equity investments indirectly via the Tetragon Credit Partners platform. Tetragon Credit Partners Opportunity Fund The Tetragon Credit Partners Opportunity Fund was closed in 2021, as the targeted investment opportunity in U.S. CLO mezzanine tranches was realized. As of the end of 2021, all capital had been returned to investors, including Tetragon. 32 Tetragon Financial Group Annual Re Annual Report 2021 33 million, Tetragon Credit Partners funds $10.6 million, Contingency Capital funds $10.3 million and Contingency Capital loan $8.3 million) and soft investment commitments (Banyan Square Partners funds $8.5 million and the Contingency Capital funds $10.0 million). The company actively manages its cash levels to cover future commitments and to enable it to capitalise on opportunistic investments and new business opportunities. During 2021, Tetragon used $329.6 million of cash to make investments, and $24.2 million to pay dividends. $557.1 million of cash was received as distributions and proceeds from the sale of investments. Future cash commitments are approximately $108.9 million, comprising hard investment commitments (BentallGreenOak funds $42.8 million, private equity funds $18.4 4 Real estate Tetragon holds most of its investments in real estate through BentallGreenOak- managed funds and co-investment vehicles. The majority of these vehicles are private equity-style funds concentrating on opportunistic investments targeting middle-market opportunities in the United States, Europe and Asia, where BentallGreenOak believes it can increase value and produce positive unlevered returns by sourcing off-market opportunities where it sees pricing discounts and market (cid:78)(cid:83)(cid:74)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:72)(cid:78)(cid:74)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:78)(cid:88)(cid:5)(cid:88)(cid:74)(cid:76)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:74)(cid:73)(cid:5)(cid:9)(cid:23)(cid:19)(cid:22)(cid:5) million during 2021, with gains in the other real estate farmland investment and BentallGreenOak Asia funds offset by losses from the BentallGreenOak U.S. fund investments. Aggregate additions related to capital calls on new and existing investments were $26.2 million and $22.5 million of distributions from these vehicles were received during the year. • BentallGreenOak U.S. funds and co-investments: In the United States, Tetragon is invested in three funds and three co-investments. The initial funds focused on market dislocation (cid:70)(cid:83)(cid:73)(cid:5)(cid:78)(cid:83)(cid:74)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:72)(cid:78)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:82)(cid:70)(cid:79)(cid:84)(cid:87)(cid:5)(cid:72)(cid:84)(cid:70)(cid:88)(cid:89)(cid:70)(cid:81)(cid:5) gateway cities where BentallGreenOak could acquire underperforming assets in dynamic submarkets. Property (cid:89)(cid:94)(cid:85)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:17)(cid:5)(cid:82)(cid:90)(cid:81)(cid:89)(cid:78)(cid:75)(cid:70)(cid:82)(cid:78)(cid:81)(cid:94)(cid:17)(cid:5) retail and hotel properties in New York, Los Angeles, Boston, San Francisco, Washington, D.C. and Miami. The most recent fund has focused on building (cid:70)(cid:5)(cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:85)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:74)(cid:87)(cid:82)(cid:88)(cid:5) of both geography and property type which includes logistics. In 2021, these investments generated a net loss of $8.9 million for Tetragon, primarily driven by revaluations in properties held in US Fund II. • BentallGreenOak Europe funds and co-investments: BentallGreenOak’s Europe-focused products have primarily targeted distressed opportunities and deep-value acquisitions in markets with solid underlying fundamentals. Historically, these assets have focused on (cid:81)(cid:84)(cid:76)(cid:78)(cid:88)(cid:89)(cid:78)(cid:72)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:88)(cid:85)(cid:70)(cid:72)(cid:74)(cid:17)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:5) increasing focus on logistics, including cold storage and data centres. Geographically, the focus has become (cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:17)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) across multiple countries in Western Europe. Tetragon is invested in three funds and seven co-investments in Europe. In 2021, these investments had a small loss of $0.2 million. • BentallGreenOak Asia funds and co-investments: The Asia-focused investments target investment opportunities in Japan, predominantly (cid:78)(cid:83)(cid:5)(cid:57)(cid:84)(cid:80)(cid:94)(cid:84)(cid:17)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:88)(cid:74)(cid:81)(cid:74)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:38)(cid:88)(cid:78)(cid:70)(cid:5)(cid:53)(cid:70)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5) opportunities, primarily in South Korea. These focus on balance sheet restructurings and other distress- related factors that motivate sellers. Tetragon is invested in three funds in Asia. During 2021, these investments contributed a gain of $4.4 million. • BentallGreenOak debt funds: BentallGreenOak provides loans secured by commercial real estate throughout the United Kingdom and Europe. Tetragon’s investments in this segment are currently small relative to its other real estate investments; $0.3 million of gains were generated in 2021. • Other real estate: In addition to the commercial real estate investments through BentallGreenOak-managed real estate funds, Tetragon also has investments in commercial farmland in Paraguay managed by Scimitar, a specialist manager in South American farmland. During 2021, the farmlands were revalued by an independent valuation specialist, resulting in an increase of the current market value of (cid:9)(cid:27)(cid:19)(cid:26)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:82)(cid:85)(cid:87)(cid:84)(cid:91)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) the land held by Tetragon and general market conditions in Paraguay. 5 investments in Hawke’s Point funds and co-investments; (2) investments in Banyan Square Partners funds and co-investments; (3) private equity investments with third-party managers; and (4) direct private equity investments, including venture capital investments. This segment generated gains of $120.2 million during 2021. • Hawke’s Point: Tetragon’s mining (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5) Hawke’s Point generated a loss of $39.4 million during 2021, driven primarily by poor operational performance at one of its Australian gold mining investments and (cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:88)(cid:88)(cid:84)(cid:72)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:82)(cid:85)(cid:70)(cid:72)(cid:89)(cid:19)(cid:5) Tetragon invested $6.0 million into a new co-investment vehicle managed by Hawke’s Point (cid:73)(cid:90)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:77)(cid:70)(cid:81)(cid:75)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:19) • Banyan Square Partners: Banyan Square Partners Fund 1 (comprising 10 positions) made gains of $11.7 million in 2021. Capital called during the period was $52.4 million. • Other funds and co-investments: Investments in externally-managed private equity funds and co- investment vehicles in Europe and North America made gains of $33.9 million in 2021, spread across 22 different positions. Capital called by these investments during the period totalled $24.3 million. • Direct: This category produced gains of $114.0 million in 2021. The largest (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:73)(cid:87)(cid:78)(cid:91)(cid:74)(cid:87)(cid:5)(cid:13)(cid:16)(cid:9)(cid:30)(cid:29)(cid:19)(cid:27)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:14)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5) the December redemption of Ripple Labs Series C shares plus accrued interest by the company for cash. 6 Legal assets Private equity and venture capital Tetragon’s private equity and venture capital investments comprise several types of investments: (1) Tetragon’s Tetragon makes investments in legal assets through vehicles managed by Contingency Capital. Tetragon (cid:82)(cid:70)(cid:73)(cid:74)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:72)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:78)(cid:83)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) asset class in 2021, $29.7 million of which was called. A gain of $0.6 million was generated for the year. 7 7 Other Other equities and credit Tetragon Tetragon also makes investments directly (cid:84)(cid:83)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:71)(cid:70)(cid:81)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:88)(cid:77)(cid:74)(cid:74)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:78)(cid:83)(cid:76)(cid:81)(cid:74)(cid:5) (cid:84)(cid:83)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:71)(cid:70) strategy strategy ideas: either co-investing with some of some of its underlying managers or simply idiosyncr idiosyncratic investments which it believes are attrac are attractive but may be unsuitable for an investme investment via TFG Asset Management vehicles. vehicles. These investments tend to be oppor be opportunistic and with a catalyst. We belie We believe that the sourcing of these investme investments has been facilitated by the manager managers on the TFG Asset Management platform platform as well as third-party managers with who with whom Tetragon invests. We also (cid:71)(cid:74)(cid:81)(cid:78)(cid:74)(cid:91)(cid:74)(cid:5)(cid:89)(cid:77) (cid:71)(cid:74)(cid:81)(cid:78)(cid:74)(cid:91)(cid:74)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:5)(cid:1835)(cid:74)(cid:93)(cid:78)(cid:71)(cid:81)(cid:94)(cid:5)(cid:78)(cid:88)(cid:5) (cid:70)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89) (cid:70)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:88)(cid:89)(cid:87)(cid:90)(cid:72)(cid:89)(cid:90)(cid:87)(cid:74)(cid:19) • Other • Other equities: This segment gener generated a loss of $24.2 million during the ye the year; these investments comprised Europ European and U.S. listed public equiti equities in technology, biotechnology, (cid:70)(cid:83)(cid:73) (cid:1834) (cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5)(cid:88)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:19) • Other • Other credit: This segment generated a gain a gain of $6.2 million during 2021, driven driven by corporate bonds. TTet Tetragon has a 10-year $2500 m $250 million revolving credit facility dating from July faciility 2020. A 2020. As at 31 December 2021, $75 million of this facility $75 m wass dr was drawn. 8 8 Cash Cash Tetragon’s net cash balance, which is Tetragon cash adj cash adjusted for known accruals and liabilities (short and long-dated), was liabilities $7.6 million as at 31 December 2021. $7.6 mill Tetragon has a 10-year $250 million Tetragon revolving revolving credit facility dating from July 202 July 2020. As at 31 December 2021, $75 million of this facility was drawn $75 milli and this and this liability has been incorporated into the n into the net cash balance calculation. 34 Tetragon Financial Group Annual Re Annual Report 2021 35 NotesNotes Further Portfolio Metrics that measure the par amount of underlying CLO collateral (adjusted in certain cases for defaults or other “stressed” asset types) against the par value of the rated CLO debt tranches. The failure of an overcollateralisation test generally results in the temporary cessation (cid:84)(cid:75)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:49)(cid:52)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94) tranche. v TCI II refers to Tetragon Credit Income II L.P., TCI III refers to Tetragon Credit Income III L.P., and TCI IV refers to Tetragon Credit Income IV L.P. vi Based on the most recent trustee reports available as of 31 December 2021. vii Based on the most recent trustee reports available as of 31 December 2021. i The Polygon European Equity Opportunity Fund was nominated for the 2021 EuroHedge Award in the “Event Driven & Distressed” category; there were seven other nominees for this award. The With Intelligence EuroHedge Award is organised by With Intelligence (formerly EuroHedge) magazine, a publication of HFM Global. To be considered for an award, funds must submit performance data to the HFM Database and have at least a 12-month track record history. Winners are decided using an established methodology based upon a combination of Sharpe ratios and returns over the relevant time period. Nominations are decided by those funds in each peer group that achieve the strongest Sharpe ratios over 12 months, so long as they also beat the median returns in their relevant peer groups and are within 10% of their high-water marks. The eventual winners will be the funds that have the best returns, as long as they also have Sharpe ratios within 25% of the best Sharpe of the nominees in their relevant peer groups. For the Management Firm of the Year award, nominees and winners are judged on additional comparative criteria as well as absolute returns and Sharpe ratios. Further information about the award, including nomination and winning criteria, is available at https://p // eurohedgeawards.awardstage. g . com/#Criteria g / ii The indices shown here have not been selected to represent appropriate benchmarks to compare an investor’s performance, but rather are disclosed to allow for comparison of the investor’s performance to that of certain well-known and widely-recognised indices. The volatility of the indices may be materially different from the individual performance attained (cid:71)(cid:94)(cid:5)(cid:70)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:84)(cid:87)(cid:19)(cid:5)(cid:46)(cid:83)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5) the Fund’s holdings may differ (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:88)(cid:74)(cid:72)(cid:90)(cid:87)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) that comprise the indices. You cannot invest directly in an index. The HFRX Convertible Arbitrage Index (Bloomberg Code: HFRXCA) is compiled by HFR Hedge Fund Research Inc. Further information relating to index constituents and calculation methodology can be found at www.hedgefundresearch. com. g iii The Polygon Convertible Opportunity Fund was nominated for the 2021 EuroHedge Award in the Convertibles & Volatility category; there were six other nominees for this award. The With Intelligence EuroHedge Award is organised by With Intelligence (formerly EuroHedge) magazine, a publication of HFM Global. To be considered for an award, funds must submit performance data to the HFM Database and have at least a 12-month track record history. Winners are decided using an established methodology based upon a combination of Sharpe ratios and returns over the relevant time period. Nominations are decided by those funds in each peer group that achieve the strongest Sharpe ratios over 12 months, so long as they also beat the median returns in their relevant peer groups and are within 10% of their high-water marks. The eventual winners will be the funds that have the best returns, as long as they also have Sharpe ratios within 25% of the best Sharpe of the nominees in their relevant peer groups. For the Management Firm of the Year award, nominees and winners are judged on additional comparative criteria as well as absolute returns and Sharpe ratios. Further information about the award, including nomination and winning criteria, is available at https://p // eurohedgeawards.awardstage. g com/#Criteria g / . iv Based on the most recent trustee reports available as of 31 December 2021. Throughout this report, we refer to overcollateralisation or “O/C” (cid:89)(cid:74)(cid:88)(cid:89)(cid:88)(cid:17)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:40)(cid:49)(cid:52)(cid:18)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5)(cid:89)(cid:74)(cid:88)(cid:89)(cid:88)(cid:5) Figure 11 A At 31 Dec 2021 By geography1 North America 38% 1% 5% Latin America Asia Pacific By investment Direct LP external LP internal By exposure2 Banyan Square(i) Hawke’s Point(i) Tetragon Credit Partners(i) 56% Europe Equitix(iii) 25% Contingency Capital Polygon(i) 5% 22% 3% 1% 2% 14% LCM(i) 10% 7% 11% BentallGreen Oak(i) External(ii) Direct balance sheet(ii) 10% 6% 40% 44% GP Tetragon's investments comprise: • GP - private equity in asset management companies • • LP internal - investments in funds/accounts on the TFG Asset Management platform LP external - investments in external funds/ accounts • Direct Curren Currency exposure: Tetragon is a U.S. dollar-based fund and Tetragon reports a reports all of its metrics in U.S. dollars. During 20 During 2021, all investments denominated in other c in other currencies were hedged to U.S. dollars e dollars except for some of the GBP- denomin denominated exposure in Equitix. Notes (1) Assumptions for “By Geography”: • Event-driven equities, convertible bonds, other hedge funds, ‘private equity and venture capital’, ‘legal assets’ and ‘other equities and credit’ investments are based on the geographies of the underlying portfolio assets. • U.S. CLOs and Tetragon Credit Partners funds (bank loans) are treated as 100% North America. • LCM, Tetragon Credit Partners, Banyan Square Partners, and Contingency Capital (TFG Asset Management) are treated as 100% North America. • BentallGreenOak (TFG Asset Management) is treated as 20% Europe, 67% North (cid:38)(cid:82)(cid:74)(cid:87)(cid:78)(cid:72)(cid:70)(cid:17)(cid:5)(cid:22)(cid:24)(cid:10)(cid:5)(cid:38)(cid:88)(cid:78)(cid:70)(cid:18)(cid:53)(cid:70)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:19) • Polygon (TFG Asset Management) is • treated as 80% Europe, 20% North America. Equitix (TFG Asset Management) is treated as 100% Europe. • Hawke’s Point (TFG Asset Management) is (cid:89)(cid:87)(cid:74)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:22)(cid:21)(cid:21)(cid:10)(cid:5)(cid:38)(cid:88)(cid:78)(cid:70)(cid:18)(cid:5)(cid:53)(cid:70)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:19) (2) Assumptions for “By Exposure” (i) Exposure represents the net asset value of (1) the private equity position in the relevant asset management company and (2) investments in funds/accounts managed by that asset management company. (ii) Exposure represents the net asset value of investments. (iii) Exposure represents the net asset value of the private equity position in the asset management company. Source: Tetragon 36 Tetragon Financial Group Annual Re Annual Report 2021 37 3 Financial review /40 Financial highlights (cid:35)(cid:3)(cid:85)(cid:87)(cid:79)(cid:79)(cid:67)(cid:84)(cid:91)(cid:3)(cid:81)(cid:72)(cid:3)(cid:54)(cid:71)(cid:86)(cid:84)(cid:67)(cid:73)(cid:81)(cid:80)(cid:361)(cid:85)(cid:3)(cid:20)(cid:18)(cid:20)(cid:19)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:74)(cid:75)(cid:73)(cid:74)(cid:78)(cid:75)(cid:73)(cid:74)(cid:86)(cid:85)(cid:14)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3)(cid:82)(cid:84)(cid:81)(cid:3)(cid:72)(cid:81)(cid:84)(cid:79)(cid:67)(cid:3) (cid:35)(cid:3)(cid:85)(cid:87) (cid:85)(cid:86)(cid:67)(cid:86)(cid:71) (cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:81)(cid:72)(cid:3)(cid:69)(cid:81)(cid:79)(cid:82)(cid:84)(cid:71)(cid:74)(cid:71)(cid:80)(cid:85)(cid:75)(cid:88)(cid:71)(cid:3)(cid:75)(cid:80)(cid:69)(cid:81)(cid:79)(cid:71)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:82)(cid:81)(cid:85)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)(cid:16) 38 Tetragon Financial Group Annual Re Annual Report 2021 39 Financial review Financial highlights Figure 12 Financial Highlights 2019 - 2021 Reported GAAP Net income ($MM) Adjusted Net income ($MM) Reported GAAP EPS Adjusted EPS Return on equity Net Assets ($MM) IFRS number of shares outstanding (MM) NAV per share Fully diluted shares outstanding (MM) Fully diluted NAV per share NAV per share total return DPS Tetragon uses the following metrics, among others, to understand the progress and performance of the business: 2021 $418.2 $428.6 $4.68 $4.79 17.3% 2020 $171.1 $182.5 $1.87 $1.99 7.6% 2019 $288.0 $293.5 $3.22 $3.28 13.4% $2,876.8 $2,474.4 $2,386.1 90.2 $31.88 96.4 $29.86 14.1% $0.41 88.8 $27.87 93.1 $26.57 9.5% $0.40 92.2 $25.88 96.4 $24.76 13.6% $0.74 • Adjusted Net income ($428.6 million): Please see Figure 13 for more details and a breakdown of the Adjusted Net Income. • Return on Equity (17.3%): Adjusted Net Income ($428.6 million divided by Net Assets at the start of the year ($2,474.4 million). • Fully Diluted Shares Outstanding (96.4 million): Adjusts the IFRS shares outstanding (90.2 million) for various dilutive factors (6.2 million shares). Please see Figure 27 for more details. • Adjusted EPS ($4.79: Calculated as Adjusted Net Income ($428.6 million) divided by the time- weighted average IFRS shares during the period (89.4 million). • Fully Diluted NAV Per Share ($29.86): Calculated as Net Assets ($2,876.8 million) divided by Fully Diluted Shares Outstanding (96.4 million). Figure 13 Pro Forma Statement of Comprehensive Income 2020-2021 2021 ($m) 2020 ($m) (cid:51)(cid:74)(cid:89)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:5)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88) (cid:51)(cid:74)(cid:89)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) Net foreign exchange loss Interest income Investment income Management and incentive fees Other operating and administrative expenses Interest expense Total operating expenses Adjusted Net income 621.2 (10.4) (1.4) 0.2 609.6 (162.1) (13.1) (5.8) (181.0) 428.6 304.4 (0.2) - 2.2 306.4 (107.1) (10.6) (6.2) (123.9) 182.5 (cid:43)(cid:84)(cid:87)(cid:5)(cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:73)(cid:78)(cid:75)(cid:75)(cid:74)(cid:87)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:71)(cid:74)(cid:89)(cid:92)(cid:74)(cid:74)(cid:83)(cid:5)(cid:38)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:51)(cid:74)(cid:89)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:70)(cid:88)(cid:5)(cid:88)(cid:77)(cid:84)(cid:92)(cid:83)(cid:5)(cid:77)(cid:74)(cid:87)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:46)(cid:43)(cid:55)(cid:56)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:87)(cid:74)(cid:77)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:78)(cid:88)(cid:5) an adjustment to remove share-based compensation expense of $10.4 million (2020: $11.4 million). This adjustment is consistent with how Adjusted Net income has been determined in prior periods. During the year, $124.6 million incentive fee was expensed and $104.1 million remains outstanding at 31 December 2021. Figure 14 Pro Forma Statement of Financial Position as at 31 December 2020 and 31 December 2021 Assets Investments (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88) Other receivables Amounts due from brokers Cash and cash equivalents Total assets Liabilities Loans and borrowings (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) Other payables and accrued expenses Total liabilities Net assets 31 December 2021 ($m) 31 December 2020 ($m) 2,851.6 4.2 2.6 5.9 199.6 3,063.9 (75.0) (1.5) (110.6) (187.1) 2,876.8 2,417.6 8.6 3.3 44.4 194.6 2,668.5 (100.0) (25.2) (68.9) (194.1) 2,474.4 Although the consolidated net assets are identical to the IFRS net assets reported by Tetragon, the split between investments and cash is different. Under IFRS, certain investments and cash contained within non-investment fund-controlled subsidiaries are aggregated as an investment and reported at fair value. Instead, this table looks through to the underlying investments and cash, and accounts for each separately, at fair value. This approach has the impact of increasing cash by $0.8 million (2020: $2.9 million) and decreasing investments by $0.8 million (2020: $2.9 million). This treatment is consistent with how Tetragon has reported these investments in prior periods. 40 Tetragon Financial Group Annual Report 2021 Annual Re 41 4 Governance /44 Board of Directors /48 Audit Committee /49 The Investment Manager This section provides details on Tetagon’s corporate governance This matt matters, as well as information regarding the Investment Manager. /56 The AIC Code of Corporate Governanace /57 Additional information 42 Tetragon Financial Group Annual Re Annual Report 2021 43 Governance Board of Directors (cid:54)(cid:74)(cid:71)(cid:3)(cid:36)(cid:81)(cid:67)(cid:84)(cid:70)(cid:3)(cid:81)(cid:72)(cid:3)(cid:38)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:81)(cid:84)(cid:85)(cid:3)(cid:69)(cid:87)(cid:84)(cid:84)(cid:71)(cid:80)(cid:86)(cid:78)(cid:91)(cid:3)(cid:69)(cid:81)(cid:79)(cid:82)(cid:84)(cid:75)(cid:85)(cid:71)(cid:85)(cid:3)(cid:403)(cid:88)(cid:71)(cid:3)(cid:38)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:81)(cid:84)(cid:85)(cid:14)(cid:3)(cid:81)(cid:72)(cid:3)(cid:89)(cid:74)(cid:75)(cid:69)(cid:74)(cid:3) three are Independent Directors. Deron J. Haley Independent Director Deron Haley, also known as D.J., is a founding (cid:53)(cid:70)(cid:87)(cid:89)(cid:83)(cid:74)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:70)(cid:89)(cid:5)(cid:41)(cid:90)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5) Capital Management, LP, a New York-based private (cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:70)(cid:81)(cid:78)(cid:88)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:90)(cid:82)(cid:74)(cid:87)(cid:5)(cid:71)(cid:90)(cid:94)(cid:18)(cid:84)(cid:90)(cid:89)(cid:88)(cid:19)(cid:5) Prior to Durational Capital Management, Mr. Haley (cid:92)(cid:70)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:45)(cid:84)(cid:90)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:87)(cid:89)(cid:83)(cid:74)(cid:87)(cid:88)(cid:17)(cid:5) LLC, a New York-based global equity fund. Prior thereto, he was a senior executive of Ziff Brothers (cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:49)(cid:49)(cid:40)(cid:17)(cid:5)(cid:70)(cid:5)(cid:76)(cid:81)(cid:84)(cid:71)(cid:70)(cid:81)(cid:17)(cid:5)(cid:88)(cid:78)(cid:83)(cid:76)(cid:81)(cid:74)(cid:18)(cid:75)(cid:70)(cid:82)(cid:78)(cid:81)(cid:94)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5) that invested directly in private and public equities, (cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:17)(cid:5)(cid:76)(cid:81)(cid:84)(cid:71)(cid:70)(cid:81)(cid:18)(cid:82)(cid:70)(cid:72)(cid:87)(cid:84)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:82)(cid:82)(cid:84)(cid:73)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:17)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:18)(cid:92)(cid:78)(cid:73)(cid:74)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) (cid:78)(cid:83)(cid:78)(cid:89)(cid:78)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:88)(cid:19)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:45)(cid:70)(cid:81)(cid:74)(cid:94)(cid:5)(cid:71)(cid:74)(cid:76)(cid:70)(cid:83)(cid:5)(cid:77)(cid:78)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:72)(cid:70)(cid:87)(cid:74)(cid:74)(cid:87)(cid:5)(cid:70)(cid:88)(cid:5) an equity research analyst, and later a registered trader before taking on senior managerial roles. (cid:53)(cid:87)(cid:78)(cid:84)(cid:87)(cid:5)(cid:89)(cid:84)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:17)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:45)(cid:70)(cid:81)(cid:74)(cid:94)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:70)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5) duty in the United States Navy. He is a founding Director of the Navy SEAL Foundation and is a member of the Governance and Investment Committees. Mr. Haley is a Director of Ibis Tek, Inc, a small-business defense contractor, and also sits on the Investment Committee of The Heinz Endowments. Mr. Haley recently served as an independent director on the Boards of Directors of several funds managed by TFG Asset Management. He holds a B.S. degree in Mechanical Engineering from Carnegie Mellon University in Pittsburgh and a M.B.A. degree from Harvard Business School. Steven W. Hart Independent Director Steven Hart serves as president of Hart Capital (cid:49)(cid:49)(cid:40)(cid:17)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:77)(cid:74)(cid:5)(cid:75)(cid:84)(cid:90)(cid:83)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:22)(cid:30)(cid:30)(cid:29)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:75)(cid:70)(cid:82)(cid:78)(cid:81)(cid:94)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5) (cid:89)(cid:84)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:85)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:70)(cid:5) strong education industry focus. He also co-founded Florian Education Investors LLC in May 2013, which now includes an ACCSC accredited postsecondary vocational education company offering on ground and online diploma and degree programs to the allied health community. Mr. Hart was the co-owner (1999-2010) and member of the Board of Directors (1999-2007) of Lincoln Educational Services Corporation. From 1983 to 1997, he was co-founder of a family-owned conglomerate where he acquired and managed manufacturing and distribution companies involved in automotive, printing, apparel and industrial textiles, electronics, synthetic foam, and home furnishing industries. Mr. Hart served as chairman of the State of Connecticut Investment Advisory Council from 1995 to 2003, which oversees the State of Connecticut Retirement Plans and Trust Funds, and, as a trustee (1996-2003), and chairman (2003) of the Stanford University Graduate School of Business Endowment Trust. From 2011-2020, Mr. Hart served as a member of the Boards of Directors of several funds connected with Blue Harbour Group, L.P., a hedge fund based in Greenwich, Connecticut. He earned an M.B.A. degree from Stanford University Graduate School of Business and a B.A. degree in mathematics and economics from Wesleyan University. David O’Leary retired from State Street Corporation in Boston, Massachusetts in 2012, where he was Executive Vice President - Chief Administrative (cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:13)(cid:23)(cid:21)(cid:22)(cid:21)(cid:18)(cid:23)(cid:21)(cid:22)(cid:23)(cid:14)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:42)(cid:93)(cid:74)(cid:72)(cid:90)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:59)(cid:78)(cid:72)(cid:74)(cid:5)(cid:53)(cid:87)(cid:74)(cid:88)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:5) - Global Head of Human Resources (2005-2010). At State Street, he managed a global team of 325 staff across 15 countries, and was a member of its 10-person Operating Group and Management Committee, reporting directly to its Chief Executive (cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:19)(cid:5)(cid:43)(cid:87)(cid:84)(cid:82)(cid:5)(cid:22)(cid:30)(cid:29)(cid:26)(cid:5)(cid:89)(cid:84)(cid:5)(cid:23)(cid:21)(cid:21)(cid:25)(cid:17)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:52)(cid:1123)(cid:49)(cid:74)(cid:70)(cid:87)(cid:94)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5) Credit Suisse First Boston, serving as Managing Director, Global Head of Human Resources from 1988 to 2003, where he managed a global team of 250 staff in 13 countries responsible for all aspects of Human Resources in the Americas, Europe, and Asia. Mr. O’Leary began his career (cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:50)(cid:74)(cid:87)(cid:87)(cid:78)(cid:81)(cid:81)(cid:5)(cid:49)(cid:94)(cid:83)(cid:72)(cid:77)(cid:5)(cid:11)(cid:5)(cid:40)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:5) in New York, where he was Vice President - Executive Compensation from 1981 to 1985. He earned a M.B.A. degree from the University of (cid:50)(cid:70)(cid:88)(cid:88)(cid:70)(cid:72)(cid:77)(cid:90)(cid:88)(cid:74)(cid:89)(cid:89)(cid:88)(cid:17)(cid:5)(cid:92)(cid:77)(cid:74)(cid:87)(cid:74)(cid:5)(cid:77)(cid:74)(cid:5)(cid:76)(cid:87)(cid:70)(cid:73)(cid:90)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:77)(cid:78)(cid:88)(cid:5) class, a M.S. degree from the State University of New York and a B.S. degree from Union College. David C. O’Leary David C. Independ Independent Director (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44) (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77) (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77) co-founded the investment manager of Tetragon in 2005 and Polygon in 2002. He is a member of Tetragon’s Board of Directors, the head of the investment manager’s Investment Committee (cid:70)(cid:83)(cid:73)(cid:5)(cid:55)(cid:78)(cid:88)(cid:80)(cid:5)(cid:40)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:89)(cid:74)(cid:74)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5) TFG Asset Management and the Chief Investment (cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:53)(cid:84)(cid:81)(cid:94)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:42)(cid:90)(cid:87)(cid:84)(cid:85)(cid:74)(cid:70)(cid:83)(cid:5)(cid:42)(cid:91)(cid:74)(cid:83)(cid:89)(cid:18)(cid:41)(cid:87)(cid:78)(cid:91)(cid:74)(cid:83)(cid:5)(cid:42)(cid:86)(cid:90)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) (cid:88)(cid:89)(cid:87)(cid:70)(cid:89)(cid:74)(cid:76)(cid:94)(cid:17)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:87)(cid:84)(cid:81)(cid:74)(cid:88)(cid:19)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5) (cid:85)(cid:87)(cid:74)(cid:91)(cid:78)(cid:84)(cid:90)(cid:88)(cid:81)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:84)(cid:90)(cid:83)(cid:73)(cid:74)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:74)(cid:93)(cid:74)(cid:72)(cid:90)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5) (cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:42)(cid:90)(cid:87)(cid:84)(cid:85)(cid:74)(cid:70)(cid:83)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:40)(cid:78)(cid:89)(cid:70)(cid:73)(cid:74)(cid:81)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:44)(cid:87)(cid:84)(cid:90)(cid:85)(cid:17)(cid:5) a multi-strategy hedge fund that he joined in 1998. He was a partner and senior managing director responsible for running the Global Event-Driven arbitrage team in Tokyo, London and Chicago (cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:19)(cid:5)(cid:53)(cid:87)(cid:78)(cid:84)(cid:87)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:17)(cid:5)(cid:77)(cid:74)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:39)(cid:70)(cid:80)(cid:74)(cid:87)(cid:17)(cid:5)(cid:51)(cid:94)(cid:74)(cid:17)(cid:5) where he was an analyst working on an arbitrage (cid:70)(cid:83)(cid:73)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:78)(cid:89)(cid:90)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:85)(cid:84)(cid:87)(cid:89)(cid:75)(cid:84)(cid:81)(cid:78)(cid:84)(cid:19)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:88)(cid:5) an A.B. degree in Economics from Harvard College and a J.D. degree from Harvard Law School. Mr. (cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:78)(cid:88)(cid:5)(cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:70)(cid:5)(cid:82)(cid:74)(cid:82)(cid:71)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:41)(cid:74)(cid:70)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:38)(cid:73)(cid:91)(cid:78)(cid:88)(cid:84)(cid:87)(cid:94)(cid:5) Board at Harvard Law School and was a member of the Financial Sector Forum at the Bank of England (cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:23)(cid:21)(cid:22)(cid:28)(cid:5)(cid:90)(cid:83)(cid:89)(cid:78)(cid:81)(cid:5)(cid:23)(cid:21)(cid:23)(cid:21)(cid:19)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:81)(cid:88)(cid:84)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:83)(cid:5) (cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:50)(cid:70)(cid:87)(cid:78)(cid:83)(cid:74)(cid:5)(cid:40)(cid:84)(cid:87)(cid:85)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:74)(cid:75)(cid:89)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:40)(cid:70)(cid:85)(cid:89)(cid:70)(cid:78)(cid:83)(cid:5) following the 1991 Gulf War. He is based in London. Paddy Dear co-founded the investment manager of Tetragon in 2005 and Polygon in 2002. He is a member of Tetragon’s Board of Directors and a member of the investment manager’s Investment Committee and Risk Committee, in addition to other roles. Mr. Dear was previously a Managing Director and the Global Head of Hedge Fund Coverage for UBS Warburg Equities. Prior to that, he was co-head of European sales trading, execution, arbitrage (cid:88)(cid:70)(cid:81)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:88)(cid:19)(cid:5)(cid:45)(cid:74)(cid:5)(cid:77)(cid:70)(cid:73)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:58)(cid:39)(cid:56)(cid:5) since 1988, including six years in New York. Mr. Dear was in equity sales at Prudential Bache before joining UBS and started his career as a petroleum engineer with Marathon Oil Co. Mr. Dear holds a BSc degree in Petroleum Engineering from Imperial College in London. He is based in London. Paddy Dear Paddy D 44 Tetragon Financial Group Annual Report 2021 Annual Re 45 provisions. The fair value of the award, as determined by the share price on grant date of US$ 12.25 per share, is US$ 300,000 for each Independent Director. Certain corporate governance rules Tetragon is required to comply with all provisions of the Companies (Guernsey) Law, 2008, as amended, relating to corporate governance to the extent the same are applicable and relevant to Tetragon’s activities. In particular, each Director must seek to act in accordance with the “Code of Practice - Company Directors”. Tetragon reports against the AIC Code of Corporate Governance (AIC Code). The 2019 AIC Code has been endorsed by, amongst others, the Financial Reporting Council and the Guernsey Financial Services Commission (GFSC). This means that Tetragon may make a statement that by reporting against the AIC Code it is meeting its applicable obligations under the UK Corporate Governance Code 2018, the 2011 GFSC Finance Sector Code of Corporate Governance and any associated disclosure requirements under paragraph 9.8.6 of the London Stock Exchange’s Listing Rules. No formal corporate governance code applies to Tetragon under Dutch law. Indemnity Each present and former Director or (cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:76)(cid:70)(cid:78)(cid:83)(cid:88)(cid:89)(cid:5) any loss or liability incurred by the Director (cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:71)(cid:94)(cid:5)(cid:87)(cid:74)(cid:70)(cid:88)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:71)(cid:74)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:87)(cid:5)(cid:77)(cid:70)(cid:91)(cid:78)(cid:83)(cid:76)(cid:5) (cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:70)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:19)(cid:5)(cid:46)(cid:83)(cid:5) addition, the Directors may authorise the purchase or maintenance by Tetragon (cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:75)(cid:84)(cid:87)(cid:82)(cid:74)(cid:87)(cid:5) (cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5) insurance, in respect of any liability which would otherwise attach to the Director (cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:75)(cid:84)(cid:87)(cid:82)(cid:74)(cid:87)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:19) Governance Size, independence and composition of the Board of Directors of Tetragon The structure, practices and committees of the Board of Directors of Tetragon, including matters relating to the size, independence and composition of the Board of Directors, the election and removal of Directors, requirements relating to board action and the powers delegated to board committees, are governed by Tetragon’s Memorandum and Articles of Incorporation. (cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:13)(cid:87)(cid:74)(cid:75)(cid:74)(cid:87)(cid:87)(cid:74)(cid:73)(cid:5) to herein as the Directors). Subject as set out below and as elsewhere described in the risk factors found on Tetragon’s website at www.tetragoninv. com/investors/risk-factors.aspx, not less than a majority of the Directors are independent. A Director will be an “Independent Director” if the Board of Directors determines that the (cid:85)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:5)(cid:88)(cid:70)(cid:89)(cid:78)(cid:88)(cid:1834)(cid:74)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:88)(cid:89)(cid:70)(cid:83)(cid:73)(cid:70)(cid:87)(cid:73)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) independence contained in the U.K. Combined Code in all material respects. If the death, resignation or removal of an Independent Director results in the Board of Directors having less than a majority of Independent Directors, the (cid:91)(cid:70)(cid:72)(cid:70)(cid:83)(cid:72)(cid:94)(cid:5)(cid:82)(cid:90)(cid:88)(cid:89)(cid:5)(cid:71)(cid:74)(cid:5)(cid:1834)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:82)(cid:85)(cid:89)(cid:81)(cid:94)(cid:19)(cid:5)(cid:53)(cid:74)(cid:83)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5) (cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:81)(cid:81)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:75)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:91)(cid:70)(cid:72)(cid:70)(cid:83)(cid:72)(cid:94)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:39)(cid:84)(cid:70)(cid:87)(cid:73)(cid:5) of Directors may temporarily consist of less than a majority of Independent Directors and those Directors who do not meet the standards for independence (cid:82)(cid:70)(cid:94)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:19)(cid:5)(cid:38)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5) who is not an Independent Director will not be required to resign as a Director as a result of an Independent Director’s death, resignation or removal. In addition, Tetragon’s Memorandum and Articles of Incorporation prohibit the Board of Directors from consisting of a majority of Directors who are resident in the United Kingdom. Election and removal of Directors of Tetragon Each member of Tetragon’s Board of Directors is elected annually by the holder of Tetragon’s voting shares. All vacancies on the Board of Directors including by reason of death or resignation may (cid:71)(cid:74)(cid:5)(cid:1834)(cid:81)(cid:81)(cid:74)(cid:73)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5) be appointed, by a resolution of the holder of Tetragon’s voting shares. (cid:38)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:87)(cid:74)(cid:82)(cid:84)(cid:91)(cid:74)(cid:73)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5) for any reason by notice requesting resignation signed by all other Directors (cid:89)(cid:77)(cid:74)(cid:83)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:17)(cid:5)(cid:78)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:78)(cid:88)(cid:5) absent from four successive meetings without leave expressed by a resolution of the Directors or for any reason by a resolution of the holder of Tetragon’s voting shares. A Director will also be removed from the Board of Directors if he becomes bankrupt, if he becomes of unsound mind, if he becomes a resident of the United Kingdom and such residency results in a majority of the Board of Directors being residents of the United Kingdom or if he becomes prohibited by law from acting as a Director. A Director is not required to retire upon reaching a certain age. Action by the Board of Directors of Tetragon The Board of Directors of Tetragon may take action in a duly convened meeting, (cid:75)(cid:84)(cid:87)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:70)(cid:5)(cid:86)(cid:90)(cid:84)(cid:87)(cid:90)(cid:82)(cid:5)(cid:78)(cid:88)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:17)(cid:5) or by a written resolution signed by at (cid:81)(cid:74)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:19)(cid:5)(cid:60)(cid:77)(cid:74)(cid:83)(cid:5)(cid:70)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5) be taken by the Board of Directors, the (cid:70)(cid:75)(cid:1834)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:91)(cid:84)(cid:89)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5) (cid:89)(cid:77)(cid:74)(cid:83)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:78)(cid:88)(cid:5)(cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5) action to be taken. As a result, the Board of Directors will not be able (cid:89)(cid:84)(cid:5)(cid:70)(cid:72)(cid:89)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:84)(cid:90)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:91)(cid:84)(cid:89)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5) (cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) holder of Tetragon’s voting shares. The Directors are responsible for the management of Tetragon. They have delegated to the investment manager certain functions, including broad discretion to adopt an investment strategy to implement Tetragon’s investment objective. However, certain matters are (cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:81)(cid:81)(cid:94)(cid:5)(cid:87)(cid:74)(cid:88)(cid:74)(cid:87)(cid:91)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:39)(cid:84)(cid:70)(cid:87)(cid:73)(cid:5) of Directors under the Memorandum and Articles of Incorporation. Transactions in which a Director has an interest Provided that a Director has disclosed to the other Directors the nature and extent of any of such Director’s interests in accordance with the Companies (Guernsey) Law, 2008, as amended, a Director, notwithstanding (cid:77)(cid:78)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:31)(cid:5)(cid:13)(cid:70)(cid:14)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:94)(cid:5)(cid:89)(cid:84)(cid:17)(cid:5)(cid:84)(cid:87)(cid:5) otherwise interested in, any transaction or arrangement with Tetragon or in which Tetragon is otherwise interested; (cid:13)(cid:71)(cid:14)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5) of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by Tetragon or in which Tetragon is otherwise interested; and (c) shall not be accountable to (cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5) any such transaction or arrangement or from any interest in any such body corporate, and no such transaction or arrangement shall be void or voidable on the ground of any such interest or (cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:71)(cid:74)(cid:72)(cid:70)(cid:90)(cid:88)(cid:74)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:78)(cid:88)(cid:5) present at or participates in the meeting present a of the Directors that approves such of the Di transaction or arrangement, provided that transact (i) the material facts as to the interest (i) the m of such Director in such transaction or of such D arrangement have been disclosed or are arrangem known to the Directors and the Directors known to in good f in good faith authorise the transaction or arrang or arrangement and (ii) the approval of such transaction or arrangement of such t includes includes the votes of a majority of the Directors Directors that are not interested in such tran such transaction or such transaction is otherwis otherwise found by the Directors (before or after t or after the fact) to be fair to Tetragon as of the as of the time it is authorised. Under the Investme Investment Management Agreement, the Directors Directors have authorised the investment manager manager to enter into transactions on behalf of behalf of Tetragon with persons who (cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70) (cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:17)(cid:5) provided provided that in connection with any such transact transaction that exceeds $5 million of aggregat aggregate investment the investment manager manager informs the Directors of such transact transaction and obtains either (i) the approval approval of a majority of the Directors that do n that do not have a material interest in such tran such transaction or (ii) an opinion from a recogn a recognised investment bank, auditing (cid:1834)(cid:87)(cid:82)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84) (cid:1834)(cid:87)(cid:82)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:85)(cid:87)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5)(cid:85)(cid:87)(cid:84)(cid:75)(cid:74)(cid:88)(cid:88)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5) (cid:1834)(cid:87)(cid:82)(cid:5)(cid:88)(cid:90)(cid:71) (cid:1834)(cid:87)(cid:82)(cid:5)(cid:88)(cid:90)(cid:71)(cid:88)(cid:89)(cid:70)(cid:83)(cid:89)(cid:78)(cid:91)(cid:74)(cid:81)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:89)(cid:74)(cid:87)(cid:82)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:70)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) (cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76) (cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:78)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:91)(cid:78)(cid:74)(cid:92)(cid:19) Compe Compensation The remuneration for Directors is The rem determined by resolution of the holder determin of Tetragon’s voting shares. Currently, of Tetrag the Directors’ annual fee is $125,000, the Direc in compensation for service on the in compe Board of Directors of Tetragon. The Board of (cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88) (cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:74)(cid:87)(cid:5) of Tetrag of Tetragon’s voting shares have waived t waived their entitlement to a fee. The Directors Directors are entitled to be repaid by Tetragon Tetragon for all travel, hotel and other expense expenses reasonably incurred by them in t them in the discharge of their duties. None of None of the Directors has a contract (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87) (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5) upon ter upon termination of employment. On 1 Jan On 1 January 2020, the Independent Directors Directors were awarded shares in Tetragon Tetragon which vest on 31 December 2022 and 2022 and are subject to forfeiture 46 Tetragon Financial Group Annual Re Annual Report 2021 47 Governance The Audit Committee Govern Governance The The Investment Manager The Audit Committee of Tetragon currently comprises the three Independent Directors and is responsible for, among other items, assisting and advising Tetragon’s Board of Directors with matters relating to Tetragon’s (cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) processes and the integrity and audits (cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5) The Audit Committee is also responsible for reviewing and making recommendations with respect to the plans and results of each audit engagement with Tetragon’s independent auditor, the audit and non- audit fees charged by the independent auditor and the adequacy of Tetragon’s internal accounting controls. Tetragon Financial Management LP has Tetragon been app been appointed the investment manager of Tetrag of Tetragon pursuant to an investment manage management agreement dated 26 April 200 April 2007. The investment manager’s general p general partner, Tetragon Financial Manage Management GP LLC, is responsible for all action all actions of the investment manager. The gene The general partner is ultimately (cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:81)(cid:74) (cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5) Dear, wh Dear, who also control the holder of Tetragon Tetragon’s voting shares and are the voting m voting members of the investment manage manager’s Investment and Risk (cid:40)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:89) (cid:40)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:89)(cid:74)(cid:74)(cid:88)(cid:19)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:72)(cid:89)(cid:88)(cid:5)(cid:70)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) authoris authorised representative of the general partner a partner and the investment manager. Its Inves Its Investment Committee is responsible for the in for the investment management of Tetragon Tetragon and its portfolio and currently (cid:72)(cid:84)(cid:83)(cid:88)(cid:78)(cid:88)(cid:89)(cid:88) (cid:72)(cid:84)(cid:83)(cid:88)(cid:78)(cid:88)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:17)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:5) and Step and Stephen Prince. The Investment Committ Committee determines the investment strategy strategy of Tetragon and approves (cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:88)(cid:78)(cid:76) (cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:71)(cid:94)(cid:5)(cid:78)(cid:89)(cid:19) The inve The investment manager’s Risk Committ Committee is responsible for the risk man risk management of Tetragon and its portfo its portfolio and performs active and regu and regular oversight and risk monitori monitoring. The Risk Committee has the s has the same composition as the Inves the Investment Committee. The inve The investment manager’s Executive Committ Committee oversees all key non- investme investment and risk activities of the investme investment manager and currently (cid:72)(cid:84)(cid:83)(cid:88)(cid:78)(cid:88)(cid:89)(cid:88) (cid:72)(cid:84)(cid:83)(cid:88)(cid:78)(cid:88)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:17)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5) Dear, Ste Dear, Stephen Prince, Paul Gannon, Sean Cô Sean Côté and Greg Wadsworth. Summary of key terms of Tetragon’s Investment Management Agreement Under the terms of the Investment Management Agreement, the investment manager has full discretion to invest the assets of Tetragon in a manner consistent with the investment objective of Tetragon. The investment manager has the authority to determine the investment strategy to be pursued in furtherance of the investment objective, which strategy may be changed from time to time by the investment manager in its discretion. The investment manager is authorised to delegate its functions under the Investment Management Agreement. The Investment Management Agreement continues in full force and effect unless terminated (i) by the investment manager at any time upon 60 days’ notice or (ii) immediately upon Tetragon giving notice to the investment manager or the investment manager giving notice to Tetragon in relation to such entity in the event of (a) the party in respect of which notice has been given becoming insolvent or going into liquidation (other than a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the other party) or a receiver being appointed over all or a substantial part or of its assets or it becoming the subject of any petition for the appointment of an administrator, (cid:89)(cid:87)(cid:90)(cid:88)(cid:89)(cid:74)(cid:74)(cid:5)(cid:84)(cid:87)(cid:5)(cid:88)(cid:78)(cid:82)(cid:78)(cid:81)(cid:70)(cid:87)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:17)(cid:5)(cid:13)(cid:71)(cid:14)(cid:5)(cid:70)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:94)(cid:5) committing a material breach of the Investment Management Agreement which causes a material adverse effect to the non-breaching party and (if such breach shall be capable of remedy) not making good such breach within 30 days of service upon the party in breach of notice requiring the remedy of such breach or (c) fraud or wilful misconduct in the performance of a party’s duties under the Investment Management Agreement. The Investment Management Agreement provides that none of the investment (cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:17)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:78)(cid:87)(cid:5)(cid:87)(cid:74)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5) members, managers, partners, (cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:77)(cid:84)(cid:81)(cid:73)(cid:74)(cid:87)(cid:88)(cid:17)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:17)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) employees (including their respective executors, heirs, assigns, successors or other legal representatives) (each, (cid:70)(cid:88)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:94)(cid:14)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:71)(cid:74)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5) to Tetragon or any investor in Tetragon for any liabilities, obligations, losses (including, without limitation, losses arising out of delay, mis-delivery or error in the transmission of any letter, cable, telephonic communication, telephone, facsimile transmission or other electronic transmission in a readable form), damages, actions, proceedings, suits, costs, expenses (including, without limitation, legal expenses), claims and demands suffered in connection with the performance by the investment manager of its obligations under the Investment Management Agreement or otherwise in connection with the business and operations of Tetragon, in the absence of fraud or wilful misconduct on the part of (cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:94)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5) (cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:75)(cid:94)(cid:5)(cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) party against any such liabilities, obligations, losses, damages, actions, proceedings, suits, costs, expenses, claims and demands, except as may be due to the fraud or wilful misconduct of (cid:89)(cid:77)(cid:74)(cid:5)(cid:78)(cid:83)(cid:73)(cid:74)(cid:82)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:94)(cid:19) 48 Tetragon Financial Group Annual Re Annual Report 2021 49 The investment manager may act as investment manager or advisor to any other person, so long as its services to Tetragon are not materially impaired thereby, and need not disclose to Tetragon anything that comes to its attention in the course of its business in any other capacity than as investment manager. The investment manager (cid:78)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5) (cid:74)(cid:70)(cid:87)(cid:83)(cid:74)(cid:73)(cid:5)(cid:84)(cid:87)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:70)(cid:73)(cid:91)(cid:78)(cid:72)(cid:74)(cid:5) given by the investment manager to other persons. The investment manager will not be liable to Tetragon for any loss suffered in connection with the investment manager’s decision to offer investments to any other person, or failure to offer investments to Tetragon. The investment manager is authorised to enter into transactions on behalf of Tetragon with persons who are (cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:17)(cid:5) provided that in connection with any such transaction that exceeds $5 million of aggregate investment, the investment manager obtains either (i) the approval of a majority of the Directors that do not have a material interest in such transaction (whether as part of a Board of Directors resolution or otherwise) or (ii) an opinion from a recognised investment bank, auditing (cid:1834)(cid:87)(cid:82)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:85)(cid:87)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5)(cid:85)(cid:87)(cid:84)(cid:75)(cid:74)(cid:88)(cid:88)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5) (cid:1834)(cid:87)(cid:82)(cid:5)(cid:88)(cid:90)(cid:71)(cid:88)(cid:89)(cid:70)(cid:83)(cid:89)(cid:78)(cid:91)(cid:74)(cid:81)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:89)(cid:74)(cid:87)(cid:82)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:70)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) (cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:78)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:91)(cid:78)(cid:74)(cid:92)(cid:19) Management and incentive fees; expenses All fees and expenses of Tetragon, except for the incentive fees for the investment manager (as described below), will be paid by Tetragon, including management fees relating to the administration of Tetragon. The investment manager is entitled to receive management fees equal to one and one-half percent (1.5%) per annum of the NAV of Tetragon payable monthly in advance prior to the deduction of any accrued incentive fees. Tetragon will also pay to the investment manager an incentive fee for each (cid:40)(cid:70)(cid:81)(cid:72)(cid:90)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:53)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:5)(cid:13)(cid:70)(cid:88)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:5) equal to 25% of the increase in the NAV of Tetragon during the Calculation Period (before deduction of any dividend paid or the amount of any redemptions or repurchases of shares (or other relevant capital adjustments) during such Calculation Period) above (cid:13)(cid:78)(cid:14)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:55)(cid:74)(cid:75)(cid:74)(cid:87)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:51)(cid:38)(cid:59)(cid:5)(cid:13)(cid:70)(cid:88)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5) (cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:5)(cid:85)(cid:81)(cid:90)(cid:88)(cid:5)(cid:13)(cid:78)(cid:78)(cid:14)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:45)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:13)(cid:70)(cid:88)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5) below) for the Calculation Period. If the Hurdle is not met in any Calculation Period (and no incentive fee is paid), the shortfall will not carry forward to any subsequent Calculation Period. A “Calculation Period” is a period of three months ending on March 31, June 30, September 30 and December 31 of each year, or as otherwise determined by the Board of Directors of Tetragon. The “Reference NAV” is the greater of (i) NAV at the end of the Calculation Period immediately preceding the current Calculation Period and (ii) the NAV as of the end of the Calculation Period ending three months earlier than the Calculation Period referred to in clause (i). For the purposes of determining Reference NAV at the end of a Calculation Period, NAV shall be adjusted by the amount of accrued dividends and amounts of any redemptions or repurchases of shares (or other relevant capital adjustments) and incentive fees to be paid with respect to that Calculation Period. The “Hurdle” for any Calculation Period will equal (i) the Reference NAV multiplied by (ii) the Hurdle (cid:55)(cid:70)(cid:89)(cid:74)(cid:5)(cid:13)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:19) The “Hurdle Rate” for any Calculation Period equals 3-month U.S. Dollar LIBOR determined as of 11:00 a.m. London (cid:89)(cid:78)(cid:82)(cid:74)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:49)(cid:84)(cid:83)(cid:73)(cid:84)(cid:83)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:73)(cid:70)(cid:94)(cid:5) of the then-current Calculation Period plus the hurdle spread of 2.647858%, in each case multiplied by (x) the actual number of days in the Calculation Period divided by (y) 365. (In Tetragon’s initial public offering in April 2007, the (cid:45)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:55)(cid:70)(cid:89)(cid:74)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5)(cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:29)(cid:10)(cid:5)(cid:85)(cid:74)(cid:87)(cid:5)(cid:70)(cid:83)(cid:83)(cid:90)(cid:82)(cid:5) for the 12-month period following IPO (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:78)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:83)(cid:5)(cid:71)(cid:74)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) above. The referenced hurdle spread of 2.647858% is the difference between 8% and the average three-month U.S. Dollar LIBOR at 11:00 a.m. London time on the 20 London business days preceding the IPO pricing date.) The incentive fee in respect of each Calculation Period is calculated by reference to the increase in NAV of the shares before deduction of any accrued incentive fee. The incentive fee is no fee is normally payable in arrears within 14 calen 14 calendar days of the end of the Calculat Calculation Period. If the Investment Manage Management Agreement is terminated other tha other than at the end of a Calculation Period, t Period, the date of termination will be deem be deemed to be the end of the Calculat Calculation Period. The investment manage manager does not charge separate fees bas fees based on the NAV of Tetragon. An incen An incentive fee of $104.1 million was acc was accrued in the fourth quarter of 2021 in 2021 in accordance with Tetragon’s investme investment management agreement. (cid:57)(cid:77)(cid:74)(cid:5)(cid:77)(cid:90)(cid:87)(cid:73) (cid:57)(cid:77)(cid:74)(cid:5)(cid:77)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:86)(cid:90)(cid:70)(cid:87)(cid:89)(cid:74)(cid:87)(cid:5) of 2022 of 2022 incentive fee has been reset at 2.863 at 2.863858% (Q4 2021: 2.780988%) as per th as per the process outlined above and in ac and in accordance with Tetragon’s investme investment management agreement. Tetragon Tetragon generally bears all costs and expe and expenses directly related to its inves its investments or prospective investme investments, such as brokerage commis commissions, interest on debit balances or borrow or borrowings, custodial fees and legal and legal and consultant fees. Tetragon also gen also generally bears all out-of-pocket costs of costs of administration including account accounting, audit, administrator and lega and legal expenses, costs of any litigation litigation or investigation involving their act their activities, costs associated with reporting reporting and providing information to existi to existing and prospective investors and the and the costs of liability insurance. The in The investment manager’s role w role with respect to TFG Asset Management Asset The investment manager’s The inve respons responsibilities with respect to Tetragon Tetragon include, inter alia: • invest • investing and reinvesting the assets of Tetrag Tetragon in securities, derivatives and (cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834) (cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5) invest investments of whatever nature and comm committing the assets of Tetragon in rela in relation to agreements with entitie entities, issuers and counterparties; • holding • holding cash balances or investing them d them directly in any short-term investments, and reinvesting any income earned thereon in accordance Tetragon’s investment strategy; • purchasing, holding, selling, transferring, exchanging, mortgaging, pledging, hypothecating and otherwise acting to acquire and dispose of and exercise all rights, powers, privileges and other incidents of ownership or possession with respect to investments held or owned by Tetragon, with the objective of the preservation, protection and increase in value thereof; • exercising any voting or similar rights attaching to investments purchased on behalf of Tetragon; • borrowing or raising monies from time to time without limit as to amount or manner and time of repayment; • engaging consultants, attorneys, independent accountants or such other persons as the investment manager may deem necessary or advisable; and • entering into any other contracts or agreements in connection with any of the foregoing activities. TFG Asset Management is an investment of Tetragon, and, as such, the investment manager is responsible for exercising any of Tetragon’s voting or similar rights with respect to TFG Asset Management as an investment and is responsible for the management, oversight and/or supervision of such investment. As with any other category of investments, the investment manager is also responsible for decisions with respect to acquisitions of asset management businesses to be added to TFG Asset Management using Tetragon’s cash (which may include minority interests in asset management businesses, joint ventures or other similar arrangements) – as investment decisions with respect to Tetragon’s cash or other assets. Following the acquisition of an asset management business, that business then becomes a part of TFG Asset Management and TFG Asset Management is responsible for the management, oversight and/or supervision of such business, including (cid:70)(cid:82)(cid:74)(cid:83)(cid:73)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:84)(cid:87)(cid:5)(cid:82)(cid:84)(cid:73)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) terms or arrangements of its ownership of such business (except, where relevant, to the extent of decisions with respect to Tetragon’s cash), and any decision to sell or otherwise dispose of all or any portion of such business. TFG Asset Management seeks to generate income and value from its asset management businesses by having these businesses manage third-party investor capital. TFG Asset Management has an internal management team that is responsible for the TFG Asset Management business as a whole, including the management, oversight and/or supervision of its various asset management businesses as they form and grow the funds and vehicles that they manage, and is responsible for its own costs. Tetragon may invest in the various funds and other vehicles managed by a TFG Asset Management business. It may also provide (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:75)(cid:90)(cid:83)(cid:73)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:70)(cid:5) TFG Asset Management business (such as a “seeding” arrangement), or provide equity, (cid:81)(cid:84)(cid:70)(cid:83)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5) Management or its asset management businesses. The investment manager is responsible for any decision to invest cash into any fund or other vehicle managed by a TFG Asset Management business and is also (cid:87)(cid:74)(cid:88)(cid:85)(cid:84)(cid:83)(cid:88)(cid:78)(cid:71)(cid:81)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:73)(cid:74)(cid:72)(cid:78)(cid:88)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:87)(cid:74)(cid:76)(cid:70)(cid:87)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) support for TFG Asset Management. In connection with the management, oversight and/or supervision of asset management businesses within TFG Asset Management, TFG Asset Management (rather than the investment manager) is responsible for, inter alia, business development, marketing, legal and compliance, risk management and governance, as well as guidance on business issues faced by a new fund or vehicle and the strategic direction of such businesses. As such, TFG Asset Management is responsible for any restructuring or reorganisation of these asset management businesses from time to time (to the extent that such arrangements do not involve the acquisition of asset management businesses using Tetragon’s cash), any disputes or litigation with respect to the ownership arrangements of such businesses and any decision to sell or otherwise dispose of all or any portion of such businesses. 50 Tetragon Financial Group Annual Re Annual Report 2021 51 Tetragon’s Board of Directors has adopted Tetragon procedures for related-party transactions procedur that require approval of a majority of that requ disinterested Directors. Accordingly, disintere Tetragon’s Independent Directors are Tetragon required to approve the methodology for required allocating costs and in their sole discretion allocating the application of that methodology as part of their oversight processes. The annual cost allocation methodology update and the actual annual cost allocations that result based on these cost methodology policies and procedures are separately approved by the Independent Directors. Services agreement between the investment manager and certain subsidiaries of TFG Asset Management The investment manager relies on two TFG Asset Management entities1 for a broad range of services to support its activities. The services provided to the investment manager under a Services Agreement by TFG Asset Management, through these entities, include infrastructure (cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) control, trading, marketing and investor (cid:87)(cid:74)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:81)(cid:74)(cid:76)(cid:70)(cid:81)(cid:17)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:81)(cid:78)(cid:70)(cid:83)(cid:72)(cid:74)(cid:17)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5) administration, payroll and employee (cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:19)(cid:5)(cid:52)(cid:83)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:74)(cid:83)(cid:89)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:17)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5) Management UK LLP, which is authorised and regulated by the United Kingdom Financial Conduct Authority, also provides services relating to the dealing in and management of investments, arrangement of deals and advising on investments. Cost recovery by TFG Asset Management for services provided to Tetragon’s investment manager TFG Asset Management, through its Polygon subsidiaries, has implemented a cost-allocation methodology with the objective of allocating service-related costs, including to the investment manager, in a consistent, fair, transparent and commercially based manner.2 TFG Asset Management then charges fees to the investment manager for the services allocated to the investment manager on a cost- recovery basis designed to achieve full recovery of the allocated costs. In 2021 the total amount recharged to the investment manager, excluding direct expenses, was $23.9 million. Most of the costs related to these services are directly or indirectly attributable to personnel or “human capital”, with compensation typically being the largest single cost.3 Consequently, one of the most critical cost allocations relates to professionals’ time, which is commonly expressed as Full Time Equivalents or “FTEs”. On a monthly basis, each TFG Asset Management employee4, directly or via their team head, provides a breakdown of the approximate percentage of time spent supporting the various businesses for the previous month (this excludes certain (cid:75)(cid:90)(cid:83)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) and technology that are charged to business users on a standard basis (e.g., space used or global headcount) which removes any need on the part of those teams to allocate their FTEs to business lines). TFG Asset Management employees should not be incentivised to either over- or under-allocate to any business, as their time allocation is not a consideration in the determination of their overall compensation. Once allocated percentages are determined and agreed, an FTE is derived, subject to adjustments for items determined by contractual arrangements. Core personnel costs, including salary, bonus, pension and healthcare, are charged on an actual employee cost basis to each business line (including the investment manager) based on the FTE allocation described above. data. A standard cost methodology is used to allocate these costs across the various business lines that are supported, including the investment manager. The setting of standard costs is designed (cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5)(cid:92)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:5)(cid:92)(cid:84)(cid:90)(cid:81)(cid:73)(cid:5)(cid:71)(cid:74)(cid:5)(cid:84)(cid:83)(cid:5) an arm’s-length basis. The methodology is designed to create consistency in order to provide a fair allocation of resource costs to all businesses. Employee FTE data is collated and used to process monthly cost allocations. Such allocations are invoiced monthly to users of the TFG Asset Management platform that are not owned by TFG Asset Management, including the investment manager, or allocated within the TFG Asset Management general ledger for businesses owned by TFG Asset Management. TFG Asset Management’s cost allocation methodology is documented and updated annually by TFG Asset Management’s (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:89)(cid:74)(cid:70)(cid:82)(cid:5)(cid:78)(cid:83)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:90)(cid:81)(cid:89)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5) its legal and compliance teams and is approved each year by TFG Asset Management’s executive committee. In addition to FTE costs, there are a (cid:83)(cid:90)(cid:82)(cid:71)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:90)(cid:88)(cid:74)(cid:5) of resources by TFG Asset Management personnel on behalf of the investment manager (in addition to the other TFG Asset Management businesses), including real property costs, technology and market KPMG LLP, reporting directly to Tetragon’s Audit Committee, are currently engaged to periodically test that the costs allocated to (and therefore recovered from) the investment manager have been properly calculated in accordance with the approved cost-allocation methodology. Notes 1 2 3 These TFG Asset Management subsidiaries also provide infrastructure services to LCM and Contingency Capital, infrastructure and investment management services to Polygon, Acasta Partners, Hawke’s Point, the TCI General Partner and Banyan Square Partners, and oversight services with respect to Equitix. This cost allocation methodology also applies to the other TFG Asset Management businesses. Employee compensation will also include TFG Asset Management’s long-term incentive plan and its other equity-based awards. 4 Amounts paid by TFG Asset (cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:78)(cid:83)(cid:5)(cid:72)(cid:84)(cid:83)(cid:83)(cid:74)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) with services provided by him to TFG Asset Management are not allocated to the investment manager. 52 Tetragon Financial Group Annual Re Annual Report 2021 53 Governance Tetragon Financial Group Limited Directors’ report for the year ended 31 December 2021 The Directors present to the shareholders their report together with the audited (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements for the year ended 31 December 2021. The fund and its investment objective Tetragon Financial Group Limited (“Tetragon” or the “Fund”) was registered in Guernsey on 23 June 2005 as a company limited by shares, with registered number 43321. All voting shares of Tetragon are held by Polygon Credit Holdings II Limited (the “Voting Shareholder”). Tetragon continues to be registered and domiciled in Guernsey, Tetragon's non- voting shares are listed on Euronext in Amsterdam, a regulated market of Euronext Amsterdam N.V. (ticker symbol: TFG.NA) and on the Specialist Fund Segment of the London Stock Exchange plc (ticker symbols: TFG.LN and TFGS.LN). Tetragon’s investment objective is to generate distributable income and capital appreciation. It aims to provide returns to investors across various credit, equity, (cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:17)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:70)(cid:81)(cid:5)(cid:74)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:5)(cid:72)(cid:94)(cid:72)(cid:81)(cid:74)(cid:88)(cid:19)(cid:5) Tetragon invests in a broad range of assets, including public and private equities, credit, convertible bonds, real estate, venture capital, infrastructure, bank loans, and (cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) alternative asset management business. As at 31 December 2021, TFG Asset Management’s investments consisted of LCM, BentallGreenOak, Polygon, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners and Contingency Capital. TFG Asset Management LP and Tetragon Financial Management LP (the “Investment Manager”), are both registered as investment advisers under the U.S. Investment Advisers Act of 1940, and two of TFG Asset Management LP’s investment management entities, Polygon Global Partners LLP and Equitix Investment Management Limited, are authorised and regulated by the United Kingdom Financial Conduct Authority. Results, activities and future developments The results of operations are set out on page 93. A detailed review of activities and future developments is contained in the Annual Report issued with these (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) to the shareholders of Tetragon. Directors (cid:57)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:92)(cid:77)(cid:84)(cid:5)(cid:77)(cid:74)(cid:81)(cid:73)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5) during the year were: Paddy Dear (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77) Deron Haley* Steven Hart* David O’Leary* *Independent Directors The remuneration for Directors is determined by resolution of Polygon Credit Holdings II Limited (the “Voting Shareholder”). Each Director’s annual fee is US$ 125,000 (2020: US$ 125,000) as compensation for service on the Board of Directors of the Fund and is paid in quarterly instalments by the Fund. Paddy (cid:41)(cid:74)(cid:70)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:92)(cid:70)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5) their entitlement to a Director’s fee. The Directors have the option to elect to receive shares in the Fund instead of their quarterly Director’s fee. During the year, David O’Leary received 6,502 shares (2020: 6,626). On 1 January 2020, the Independent Directors were awarded shares in Tetragon which vest on 31 December 2022 and are subject to forfeiture provisions. The fair value of the award, as determined by the share price on grant date of US$ 12.25 per share, is US$ 300,000 for each Independent Director. The Directors are entitled to be repaid by the Fund for all travel, hotel and other expenses reasonably incurred by them in the discharge of their duties. None of the Directors has a contract (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5) upon termination of employment. Dividends The Directors have the authority to declare dividend payments, based upon the recommendation of the Investment Manager, subject to the approval of the Voting Shareholder of the Fund and adherence to applicable law including the satisfaction of a solvency test as stated under the Companies (Guernsey) Law, 2008. The Investment Manager’s recommendation with respect to the declaration of dividends (and other capital distributions) may be informed by a variety of considerations, including (i) the expected sustainability of the Fund’s cash generation capacity in the short and medium term, (ii) the current and anticipated performance of the Fund, (iii) the current and anticipated operating and economic environment and (iv) other potential uses of cash ranging f ranging from preservation of the Fund’s (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74) (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5) other inv other investment opportunities. The Directors declared the The Di following dividends during followi the year: the yea • state whether applicable accounting standards have been followed, subject to any material departures disclosed and (cid:74)(cid:93)(cid:85)(cid:81)(cid:70)(cid:78)(cid:83)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:32) • assess the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Disclosure Guidance and Transparency Rules (“DTR”) 4.1.12R and by the Section 5.25c of the Financial Markets Supervision Act of the Netherlands (FMSA) and are in compliance with the requirements set out in the Companies (Guernsey) Law, 2008 as amended. Dividend Dividend period Dividend per share Quarter ended Quarter e 31 December 2020 31 Decem Quarter ended Quarter e 31 March 2021 31 March Quarter ended Quarter e 30 June 30 June 2021 Quarter ended Quarter e 30 Septe 30 September 2021 $0.1000 $0.1000 $0.1000 $0.1000 On 4 March 2022, the Directors approved On 4 Mar a dividend amounting to US$ 0.1100 a dividen per share for the quarter ended 31 per share December 2021. The total dividend Decembe declared for the year ended 31 December declared 2021 amounted to US$ 0.4100 per 2021 am share (20 share (2020: US$ 0.4000 per share). Statem Statement of Directors’ respon responsibilities The Directors are responsible for The Direc preparing preparing the Directors’ Report and the (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:87)(cid:73)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5) with app with applicable law and regulations. The Companies (Guernsey) Law, 2008, The Com (cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:88)(cid:5) (cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83) (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:74)(cid:70)(cid:72)(cid:77)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:19)(cid:5)(cid:5) Accordin Accordingly, the Directors have elected (cid:89)(cid:84)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87) (cid:89)(cid:84)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) in accord in accordance with International Financia Financial Reporting Standards (“IFRS”) a (“IFRS”) as adopted by the European Union (“E Union (“EU”) and applicable law. (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83) (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:73)(cid:5) by law to by law to give a true and fair view of the sta of the state of affairs of the Fund (cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77) (cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5) (cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:87)(cid:74) (cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:87)(cid:74)(cid:81)(cid:74)(cid:91)(cid:70)(cid:83)(cid:89)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:19) (cid:46)(cid:83)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87) (cid:46)(cid:83)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5) the Direc the Directors are required to: • select • select suitable accounting policies and ap and apply them consistently; • make j • make judgments and estimates that ar that are reasonable and prudent; • use the going concern basis of accounting unless they either intend to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for the keeping of proper accounting records which disclose with reasonable accuracy (cid:70)(cid:89)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:89)(cid:78)(cid:82)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Fund and to enable them to ensure that (cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:81)(cid:94)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Companies (Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to enable the (cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5) free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Fund and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the (cid:72)(cid:84)(cid:87)(cid:85)(cid:84)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) included on the Fund’s website, and for the preparation and dissemination of (cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5)(cid:49)(cid:74)(cid:76)(cid:78)(cid:88)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:83)(cid:5) Guernsey governing the preparation and (cid:73)(cid:78)(cid:88)(cid:88)(cid:74)(cid:82)(cid:78)(cid:83)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5) differ from legislation in other jurisdictions. The Fund is required to comply with all provisions of Guernsey Company Law relating to corporate governance to the extent the same are applicable and relevant to its activities. In particular, each Director must seek to act in accordance with the “Code of Practice – Company Directors”. The Fund reports against the Association of Investment Companies (“AIC”) Corporate Governance Guide for Investment Companies and, as such, is deemed to meet the provisions of the Code of Corporate Governance issued by the Guernsey Financial Services Commission. (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:74)(cid:73)(cid:5) in accordance with IFRS, give a true and fair view of the assets, liabilities, (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:87)(cid:74)(cid:88)(cid:90)(cid:81)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5) The annual report gives a fair review of the information required by DTR 4.1.8R and DTR 4.1.11R of the Disclosure Guidance and Transparency Rules and the FMSA, which respectively require, inter alia, (i) an indication of important events that have (cid:84)(cid:72)(cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:73)(cid:5)(cid:88)(cid:78)(cid:83)(cid:72)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:83)(cid:73)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) year and the likely future development of the Fund and (ii) a description of principal risks and uncertainties during the year. (cid:57)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1834)(cid:87)(cid:82)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:94)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5) complied with the above requirements. Disclosure of information to the auditor So far as each of the Directors is aware, there is no relevant audit information of which the Fund’s auditor is unaware, and each has taken all the steps he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Fund’s auditor is aware of that information. Auditor KPMG Channel Islands Limited is the appointed independent auditor of the Fund and it has expressed their (cid:92)(cid:78)(cid:81)(cid:81)(cid:78)(cid:83)(cid:76)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:19)(cid:5)(cid:5)(cid:38)(cid:5) resolution for the re-appointment of KPMG Channel Islands Limited as auditor of the Fund is to be proposed at the forthcoming Annual General Meeting. Signed on behalf of the Board of Directors by: David O’Leary Director Steven Hart Director Date: 4 March 2022 54 Tetragon Financial Group Annual Re Annual Report 2021 55 Governance The AIC code of corporate governance Govern Governance Add Additional information In September 2016, Tetragon became a member of The Association of Investment Companies (AIC), the trade body for closed-ended investment companies. Founded in 1932, the AIC represents approximately 400 members across a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies. obligations under the United Kingdom Corporate Governance Code 2018 (UK Code), the GFSC Finance Sector Code of Corporate Governance 2016 and any associated disclosure requirements under paragraph 9.8.6 of the Listing Rules. The Board of Directors of Tetragon considers that reporting against the principles and provisions of the 2019 AIC Code will provide better information to shareholders. Tetragon’s reporting against the principles and provisions of the 2019 AIC Code is also set out on Tetragon’s website at www.tetragoninv. com/site-services/aic/aic-code. (cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:38)(cid:46)(cid:40)(cid:5)(cid:78)(cid:83)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5) Flexible Investment sector as a company whose policy allows it to invest in a range of asset types. The AIC has indicated that the sector may assist investors (cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:73)(cid:91)(cid:78)(cid:88)(cid:74)(cid:87)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:82)(cid:84)(cid:87)(cid:74)(cid:5)(cid:74)(cid:70)(cid:88)(cid:78)(cid:81)(cid:94)(cid:5)(cid:1834)(cid:83)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) compare those investment companies which have the ability to invest in a range of assets and allow investors to compare investment companies with similar open-ended funds. The AIC has a Code of Corporate Governance (AIC Code) which sets out a framework of best practice in respect of the governance of investment companies. The 2019 AIC Code applies to accounting periods beginning on or after 1 January 2019. The 2019 AIC Code has been endorsed by, amongst others, the Financial Reporting Council and the Guernsey Financial Services Commission (GFSC). This means that Tetragon, as an AIC member company, may make a statement that by reporting against the AIC Code, it is meeting its applicable Tetragon has received appropriate legal (cid:70)(cid:73)(cid:91)(cid:78)(cid:72)(cid:74)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1834)(cid:87)(cid:82)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5) shares do not constitute NMPI under the FCA’s rules and are, therefore, excluded from the FCA’s restrictions that apply to non-mainstream pooled investment products. Tetragon expects that it will continue to conduct its affairs in such a manner that Tetragon’s shares will continue to be excluded from the FCA’s rules relating to NMPI. Dividend and Capital Divide Return Return Policy Tetragon Tetragon seeks to return value to its share its shareholders, including through dividend dividends and share repurchases. Tetragon Tetragon’s Board of Directors has the authority authority to declare dividend payments, based up based upon the recommendation of Tetrag of Tetragon’s investment manager, subject t subject to the approval of Tetragon’s voting sh voting shareholder and adherence to applicab applicable law, including the satisfaction of a solv of a solvency test as required pursuant to the Co to the Companies (Guernsey) Law, 2008, as 2008, as amended. In addition to making d making dividend recommendations to the Bo to the Board of Directors, Tetragon’s investme investment manager may authoris authorise share repurchases. Decision Decisions with respect to declaration of dividend dividends and share repurchases may be informed informed by a variety of considerations, including including (i) the expected sustainability of the co of the company’s cash generation capacity capacity in the short and medium term, (ii) term, (ii) the current and anticipated perform performance of the company, (iii) the curre the current and anticipated operating and econ and economic environment, (iv) other po other potential uses of cash ranging from pre from preservation of the company’s (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74) (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) to other to other investment opportunities and (v) T and (v) Tetragon’s share price. Tetragon Tetragon may also pay scrip dividends, which pa which payments are currently conduct conducted through an optional dividend dividend reinvestment program. Reporting In accordance with applicable regulations under Dutch law, Tetragon publishes monthly statements on its website for (cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:70)(cid:78)(cid:83)(cid:78)(cid:83)(cid:76)(cid:5) the following information: the total value of Tetragon’s investments; a general statement of the composition of Tetragon’s investments; and the number of its legal issued and outstanding shares. In addition, in accordance with the requirements of Euronext Amsterdam and applicable regulations under Dutch law, Tetragon provides annual and semi-annual reports to its shareholders, (cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:18)(cid:74)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5) (cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements provided in its annual reports, will be reported in accordance with IFRS and audited in accordance with international auditing standards as well as U.S. GAAS for regulatory purposes, if applicable. The NAV of Tetragon is available to investors on a monthly basis on the company’s website at www.tetragoninv.com. Statement regarding Non-mainstream pooled investments (NMPI) Tetragon notes the U.K. Financial Conduct Authority (FCA) rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes (referred to as “non-mainstream pooled investments”), which came into effect on 1 January 2014. 56 Tetragon Financial Group Annual Re Annual Report 2021 57 5 Other information /60 TFG Asset Management /72 Risk factors /78 Share repurchases & distributions This section provides further detail about the business including: This TFG TFG Asset Management; Tetragon’s risk factors, and details on histo historical share repurchases and distributions. /80 Additional CLO portfolio statistics /82 Certain regulatory information /82 Equity-based employee compensation plans 58 Tetragon Financial Group Annual Re Annual Report 2021 59 Other information TFG Asset Management (cid:50)(cid:84)(cid:75)(cid:79) (cid:50)(cid:84)(cid:75)(cid:79)(cid:67)(cid:84)(cid:91)(cid:3)(cid:81)(cid:72)(cid:403)(cid:69)(cid:71)(cid:85) Londo London | New York 470 headcount Excluding BentallGreenOak Global Operating platform (cid:49)(cid:80)(cid:71)(cid:3)(cid:81)(cid:72)(cid:3)(cid:54)(cid:71)(cid:86)(cid:84)(cid:67)(cid:73)(cid:81)(cid:80)(cid:361)(cid:85)(cid:3)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:403)(cid:69)(cid:67)(cid:80)(cid:86)(cid:3)(cid:75)(cid:80)(cid:88)(cid:71)(cid:85)(cid:86)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:75)(cid:85)(cid:3)(cid:54)(cid:40)(cid:41)(cid:3)(cid:35)(cid:85)(cid:85)(cid:71)(cid:86)(cid:3)(cid:47)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:14)(cid:3) (cid:67)(cid:3)(cid:70)(cid:75)(cid:88)(cid:71)(cid:84)(cid:85)(cid:75)(cid:403)(cid:71)(cid:70)(cid:3)(cid:67)(cid:78)(cid:86)(cid:71)(cid:84)(cid:80)(cid:67)(cid:86)(cid:75)(cid:88)(cid:71)(cid:3)(cid:67)(cid:85)(cid:85)(cid:71)(cid:86)(cid:3)(cid:79)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:84)(cid:3)(cid:86)(cid:74)(cid:67)(cid:86)(cid:3)(cid:81)(cid:89)(cid:80)(cid:85)(cid:3)(cid:79)(cid:67)(cid:76)(cid:81)(cid:84)(cid:75)(cid:86)(cid:91)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3) minority private equity stakes in asset management companies. $37b $37bn Assets under management(1) Assets 31 Decem 31 December 2021 $1.26bn Total valuation 31 December 2021 Please see important notes on page 62. (cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:90)(cid:83)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:17)(cid:5) is intended to enhance the value of each individual investment and the entity as a whole through a shared strategic direction and operating infrastructure – encompassing critical business management functions such as risk management, investor relations, (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:17)(cid:5)(cid:89)(cid:74)(cid:72)(cid:77)(cid:83)(cid:84)(cid:81)(cid:84)(cid:76)(cid:94)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:81)(cid:78)(cid:70)(cid:83)(cid:72)(cid:74)(cid:20) legal matters – while at the same time giving entrepreneurial independence to the managers of the underlying businesses. In light of the strategy to continue to grow and diversify TFG Asset Management, as well as to enhance the value of its asset management companies with a view to realising value from the enterprise, the combination of a number of relatively uncorrelated businesses across different asset classes and at different stages of development under TFG Asset Management is also intended to create a collectively more robust and (cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:88)(cid:89)(cid:87)(cid:74)(cid:70)(cid:82)(cid:19)(cid:5)(cid:38)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5) 31 December 2021, TFG Asset Management comprised LCM, BentallGreenOak, Polygon, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners and Contingency Capital. The Polygon convertible manager was rebranded as Acasta Partners on 1 March 2022, adding a ninth business to the platform. TFG Asset Management has approximately $37.1 billion of AUM(1) and approximately 470 employees globally (excluding BentallGreenOak). Each of the asset managers on the platform is privately held. Established 2001 Joined Tetragon 2009 2010 2010 2002 2012 Establish Established 2009(5) Joined T Joined Tetragon 2009(5) 2007 2015 2014 2014 2015 2015 2019 2019 2020 2020 Asset class A bank loan asset management company. A real-estate focused principal investing, lending and advisory (cid:1834)(cid:87)(cid:82)(cid:19) A manager of open- ended hedge fund and private equity vehicles across a number of strategies. AUM at 31 Dec 2021 ($Bn) $11.2 100% Percentage Tetragon Ownership Valuation at 31 Dec 2021 ($m) $9.5 13% $1.8 100% $237.8 $213.5 $54.3 Products U.S. CLOs Real estate investment strategies Hedge funds and managed accounts Average fund duration 10-12 years(4) 7-10 years Quarterly liquidity Asset class Asset cla A manager of open-ended hedge fund and managed account vehicles across a number of strategies. An integrated core infrastructure asset management and primary project platform. An asset management company focused on (cid:82)(cid:78)(cid:83)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:19)(cid:5) A structured credit investing business. A private equity (cid:1834)(cid:87)(cid:82)(cid:5)(cid:75)(cid:84)(cid:72)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5) on non-control structured and common equity investment opportunities. A global asset management business focused on credit-oriented legal assets investments. AUM at 3 AUM at 31 Dec 2021 ($B 2021 ($Bn) $0.9 (as at 1 March 2022) $10.8 $0.06 $0.9 $0.1 $0.07 Percenta Percentage Tetragon Tetragon Ownersh Ownership Valuatio Valuation at 31 Dec 2 31 Dec 2021 ($m) ($m) Products Products Average Average fund duration duration Non-controlling interest(5) 75% 100% 100% 100% Non-controlling interest(7) N/A $725.6 $2.0 $16.2 $0.8 $6.1 Hedge funds and managed accounts Infrastructure and renewable funds and managed accounts Private equity- style funds and managed accounts Private equity- style vehicles Private equity fund Private credit vehicles and managed accounts Quarterly liquidity 25 years Not applicable 10 years Not applicable 7 years Valuation Methodology(2) DCF and market multiples DCF (sum-of-parts) DCF Valuatio Valuation Methodology(2) Methodo N/A DCF and market multiples Replacement cost DCF Replacement cost DCF (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89) unobservable inputs(3) Discount rate 12.25%, EV/EBITDA multiple 12.5x, DLOL 15%, control premium 20%, 10% forecast 5Y AUM CAGR Discount rate 11%, DLOL 15%, 18.4% forecast 5Y EBITDA CAGR Discount rate 13%, DLOL 20%, 9.9% forecast 5Y AUM CAGR (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70) (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89) unobser unobservable inputs(3) inputs(3) N/A Discount rate 9.5%, EV/EBITDA multiple 15x, DLOL 10%, control premium 20%, 14.1% forecast 5Y AUM CAGR N/A Discount rate 10.5%, DLOL 15% N/A N/A 60 Tetragon Financial Group Annual Re Annual Report 2021 61 NotesNotes 1 2 3 Includes the AUM of LCM, BentallGreenOak, Polygon, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners and TCICM, as calculated by the applicable fund administrators at 31 December 2021 (AUM of Tetragon Credit Partners represents committed capital). TCICM (which comprises TCI Capital Management II LLC and TCI Capital Management LLC) acts as a CLO collateral manager for certain CLO investments. It had AUM of $2.6 billion at 31 December 2021. Includes, where relevant, investments by Tetragon Financial Group Limited. The AUM for BentallGreenOak represents Tetragon’s pro rata share (12.86%) of BentallGreenOak AUM at 31 December 2021 ($74 billion). “DCF” stands for “Discounted Cash Flow”. Please see Note 4 of the 31 December 2021 Audited Financial Statements for more information. “DLOL” stands for “Discount for Lack Of Liquidity”. Please see Note 4 of the 31 December 2021 Audited Financial Statements for more details of (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:90)(cid:83)(cid:84)(cid:71)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:88)(cid:19)(cid:5) 4 Currently, LCM manages loan assets exclusively through CLOs, which are long-term, multi-year investment vehicles. The typical duration of a CLO, and thus LCM’s management fee stream, depends on, among other things, the term of its reinvestment period (currently typically four to (cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:5)(cid:83)(cid:74)(cid:92)(cid:5)(cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:5)(cid:40)(cid:49)(cid:52)(cid:14)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74) prepayment rate of the underlying loan assets, as well as post- reinvestment period reinvestment (cid:1835)(cid:74)(cid:93)(cid:78)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:92)(cid:74)(cid:78)(cid:76)(cid:77)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:91)(cid:74)(cid:87)(cid:70)(cid:76)(cid:74)(cid:5)(cid:81)(cid:78)(cid:75)(cid:74)(cid:5) constraints. 5 On 1 March 2022, the Polygon convertible business, which was founded in 2009, was renamed Acasta Partners. TFG Asset Management owns a non-controlling interest in this manager as well as providing all infrastructure services to it. Michael Humphries owns a controlling stake. 6 TFG Asset Management owns a non- controlling interest in this manager as well as providing all infrastructure services to it. Brandon Baer owns a controlling stake. Figure 1 Figure 16 TFG As TFG Asset Management AUM by Business at 31 December 2021 This cha This chart shows the breakdown of the AUM by business TCICM Tetragon Credit Credit Partners $2.5 $0.8 LCM $11.2 Equitix $10.8 $1.8 $9.5 P Polygon BentallGreenOak Figure 1 Figure 17 TFG As TFG Asset Management AUM at 31 December 2021 (cid:57)(cid:77)(cid:78)(cid:88)(cid:5)(cid:72)(cid:77)(cid:70)(cid:87)(cid:89)(cid:5)(cid:73)(cid:74)(cid:85)(cid:78)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:76)(cid:87)(cid:84)(cid:92)(cid:89)(cid:77)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:38)(cid:58)(cid:50)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19)(cid:5)(cid:38)(cid:58)(cid:50)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) (cid:57)(cid:77)(cid:78)(cid:88)(cid:5)(cid:72)(cid:77)(cid:70) TFG Asset Management as of 31 December 2021 totalled $37.1 billion.1 TFG Ass 62 Tetragon Financial Group Annual Re Annual Report 2021 63 Notes 1 Please see Note 1 on page 62. The 2019, 2020 and 2021 AUM for BentallGreenOak represents Tetragon’s pro rata share (12.86%) of BentallGreenOak AUM at 31 December 2021 ($74 billion) and 100% of the AUM of the GreenOak joint venture for prior years. Figure 18 TFG Asset Management Pro Forma Statement of Operations(i) Management fee income Performance and success fees(ii) Other fee income Distributions from BentallGreenOak Interest income Total income Operating, employee and administrative expenses Non-TFG Asset Management owned interest Net income - "EBITDA equivalent" 2021 ($m) 2020 ($m) 2019 ($m) 143.4 59.6 24.0 21.6 0.5 249.1 (178.3) (20.1) 50.7 125.8 81.6 18.9 18.1 4.1 248.5 (145.8) (27.5) 75.2 111.2 51.8 15.5 10.8 3.8 193.1 (124.3) (9.3) 59.5 i ii This table includes the income and expenses attributable to TFG Asset Management’s businesses (except BentallGreenOak) during the period. During 2020, Equitix repaid all of its shareholder loans and, as a result, TFG Asset Management’s rights to distributable income reduced from 85% to (cid:28)(cid:26)(cid:10)(cid:19)(cid:5)(cid:46)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:70)(cid:71)(cid:84)(cid:91)(cid:74)(cid:17)(cid:5)(cid:22)(cid:21)(cid:21)(cid:10)(cid:5)(cid:84)(cid:75)(cid:5)(cid:42)(cid:86)(cid:90)(cid:78)(cid:89)(cid:78)(cid:93)(cid:1123)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:83)(cid:88)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:23)(cid:26)(cid:10)(cid:5)(cid:84)(cid:75)(cid:5)(cid:42)(cid:86)(cid:90)(cid:78)(cid:89)(cid:78)(cid:93)(cid:1123)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:83)(cid:88)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:91)(cid:74)(cid:87)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:90)(cid:89)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:1126)(cid:51)(cid:84)(cid:83)(cid:18)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:18)(cid:84)(cid:92)(cid:83)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:1127)(cid:5)(cid:81)(cid:78)(cid:83)(cid:74)(cid:17)(cid:5)(cid:71)(cid:74)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:84)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:70)(cid:89)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:13)(cid:78)(cid:83)(cid:5)(cid:23)(cid:21)(cid:23)(cid:21)(cid:17)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:5)(cid:92)(cid:70)(cid:88)(cid:5)(cid:22)(cid:26)(cid:10)(cid:14)(cid:19)(cid:5)(cid:56)(cid:78)(cid:82)(cid:78)(cid:81)(cid:70)(cid:87)(cid:81)(cid:94)(cid:17)(cid:5)(cid:22)(cid:21)(cid:21)(cid:10)(cid:5) of the income and expenses from the Polygon Convertible Opportunities Fund’s manager, in which TFG Asset Management has a non-controlling (cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:17)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:70)(cid:71)(cid:84)(cid:91)(cid:74)(cid:17)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:74)(cid:87)(cid:72)(cid:74)(cid:83)(cid:89)(cid:70)(cid:76)(cid:74)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:84)(cid:92)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:87)(cid:74)(cid:91)(cid:74)(cid:87)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:90)(cid:89)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1126)(cid:51)(cid:84)(cid:83)(cid:18)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) owned interest” line. BentallGreenOak EBITDA is not included, but distributions relating to ordinary income and carried interest are included. The (cid:1126)(cid:42)(cid:39)(cid:46)(cid:57)(cid:41)(cid:38)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:91)(cid:70)(cid:81)(cid:74)(cid:83)(cid:89)(cid:1127)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:5)(cid:82)(cid:74)(cid:70)(cid:88)(cid:90)(cid:87)(cid:74)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:72)(cid:74)(cid:87)(cid:89)(cid:70)(cid:78)(cid:83)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:87)(cid:74)(cid:72)(cid:90)(cid:87)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:89)(cid:74)(cid:82)(cid:88)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:78)(cid:88)(cid:5)(cid:73)(cid:74)(cid:88)(cid:78)(cid:76)(cid:83)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5) (cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:74)(cid:88)(cid:5)(cid:87)(cid:70)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:70)(cid:83)(cid:5)(cid:92)(cid:77)(cid:70)(cid:89)(cid:5)(cid:78)(cid:88)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5) The performance and success fees include some realised and unrealised Polygon performance fees, representing the fees calculated by the administrator of the relevant Polygon funds, in accordance with the applicable fund constitutional documents when determining NAV at the reporting date. Similar amounts, if any, from LCM are recognised when received. Tetragon pays a mix of full and preferred fees on its investments in TFG Asset Management-managed investment vehicles. Tetragon pays full management and performance fees on its investments in the open Polygon funds. Success fees also include fees earned by Equitix on successfully completing certain primary projects and delivering de-risked investments into their secondary funds; these are recognised once Equitix is entitled to recover them. Overview: The table above shows a pro forma(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5) the aggregate operating performance of the asset management companies (excluding BentallGreenOak) within TFG Asset Management. The reported fee income includes some amounts which were earned on capital invested in certain funds by Tetragon. During 2021, this included $12.0 million of management fees and $5.0 million of performance and success fees. BentallGreenOak’s contribution has been captured by including the distributions that it has made to Tetragon. • EBITDA: In 2021, TFG Asset Management’s EBITDA was $50.7 million, 33% lower than 2020. Higher operating costs and lower performance fees were the primary factors behind the decrease. • Management fee income: Management fee income continued to grow, increasing by $17.6 million or 14% year-on-year. Of note, Equitix management fee income increased by $8.4 million, or 13%, as AUM continued to grow. Polygon increased by $5.3 million, or 28%, due to increased AUM. LCM added $1.6 million following the (cid:87)(cid:70)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:83)(cid:74)(cid:92)(cid:5)(cid:40)(cid:49)(cid:52)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:19)(cid:5) Contingency Capital ($1.3 million) and Banyan Square ($0.6 million) both (cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:89)(cid:78)(cid:82)(cid:74)(cid:19)(cid:5) • Performance and success fees: Overall, this category was down $22.0 million on the prior year, driven primarily by a decline in Equitix primary income as well as decreases in performance fee income earned in aggregate by the hedge funds. As noted previously, unlike management fee income, performance and success fees can be quite volatile in nature and subject to timing differences. • Other fee income: This category includes two different buckets of fees: (i) income generated by Equitix on management services contracts, which is known as the EMS business and (ii) certain cost recoveries from Tetragon relating to seeded Polygon hedge funds. EMS continues to be the main driver, and this increased 21% year on year. • Distributions from BentallGreenOak: Distributions from BentallGreenOak (cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5)(cid:13)(cid:78)(cid:14)(cid:5)(cid:86)(cid:90)(cid:70)(cid:87)(cid:89)(cid:74)(cid:87)(cid:81)(cid:94)(cid:5)(cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:73)(cid:78)(cid:88)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:13)(cid:78)(cid:78)(cid:14)(cid:5) quarterly variable distributions and (iii) distributions of carried interest. Variable distributions which are correlated to the cash generation of BentallGreenOak, increased to $6.2 million which was the driver for the overall increase in this category. Fixed payments contributed $14.1 million with carried interest accounting for the remainder. • Operating expenses: Operating expenses increased by $32.5 million year-on-year, with a little over half of this coming from Equitix. This business added headcount to support its continued growth, adding another $1.5 billion of assets during the year. The scaling up of the team and infrastructure for Contingency Capital contributed close to half of the remaining growth as this business had an initial close on its (cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:75)(cid:90)(cid:83)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:73)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88)(cid:19) Other Other information TFG Asset Management TFG company overviews com The follo The following pages provide a summary of each of TFG Asset Management’s asset management companies and a review of AUM Manage growth and underlying strategies and investment vehicles. growth a All data is at 31 December 2021, unless otherwise stated. Products/mandates listed are not All data is necessarily open for new investment and are not an offer to sell or a solicitation of an offer to necessaar purchase securities in the United States or any other jurisdiction, but to illustrate the TFG Asset purchase Management platform strategy Manageem Descri Description of business • LCM is • LCM is a specialist in below- investm investment grade U.S. broadly- syndic syndicated leveraged loans. • The bu • The business was established (cid:78)(cid:83)(cid:5)(cid:23)(cid:21)(cid:21) (cid:78)(cid:83)(cid:5)(cid:23)(cid:21)(cid:21)(cid:22)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) New Y New York and London. • TFG A • TFG Asset Management owns 1 owns 100% of LCM. • Curren • Currently, LCM manages loan assets exclus exclusively through CLOs, which are long-te long-term, multi-year investment vehicle vehicles. The typical duration of a CLO, a CLO, and thus LCM’s management fee str fee stream, depends on, among other things things, the term of its reinvestment period period (currently typically four to (cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74) (cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:5)(cid:83)(cid:74)(cid:92)(cid:5)(cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:5)(cid:40)(cid:49)(cid:52)(cid:14)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) prepay prepayment rate of the underlying loan assets assets, as well as post-reinvestment (cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73) (cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:5)(cid:87)(cid:74)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:1835)(cid:74)(cid:93)(cid:78)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) weight weighted average life constraints. • Furthe • Further information on LCM is availab available at www.lcmam.com. LCM AUM history(i) ($bn) LCM A Figure 19(i) Figure 11 LCM’s A LCM’s AUM was $11.2 billion at 31 De at 31 December 2021. Produ Products • LCM c • LCM currently manages 25 CLOs. i Includes, where relevant, investments from Tetragon, TCI II , TCI III and TCI IV. $11.2 $9.1 $8.9 $8.3 $6.5 YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 64 Tetragon Financial Group Annual Re Annual Report 2021 65 Description of business • BentallGreenOak is a real estate- focused principal investing, (cid:81)(cid:74)(cid:83)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:73)(cid:91)(cid:78)(cid:88)(cid:84)(cid:87)(cid:94)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:19) • BentallGreenOak was formed in July 2019 upon the merger of the GreenOak Real Estate joint venture (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:39)(cid:74)(cid:83)(cid:89)(cid:70)(cid:81)(cid:81)(cid:5)(cid:48)(cid:74)(cid:83)(cid:83)(cid:74)(cid:73)(cid:94)(cid:17)(cid:5)(cid:70)(cid:83)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5) of SLC Management, a global institutional asset management arm of Sun Life Financial Inc. Tetragon owns approximately 13% of the combined entity. GreenOak Real Estate was founded in 2010. • The BentallGreenOak investment platform serves over 750 institutional clients with approximately $74 billion in assets under management. • With investment professionals based (cid:78)(cid:83)(cid:5)(cid:23)(cid:25)(cid:5)(cid:76)(cid:81)(cid:84)(cid:71)(cid:70)(cid:81)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:88)(cid:17)(cid:5)(cid:39)(cid:74)(cid:83)(cid:89)(cid:70)(cid:81)(cid:81)(cid:44)(cid:87)(cid:74)(cid:74)(cid:83)(cid:52)(cid:70)(cid:80)(cid:5) has deep local knowledge and strong, long-standing investment track records across the United States, Canada, Europe and Asia. • Further information on BentallGreenOak is available at www.bentallgreenoak.com. GreenOak and BentallGreenOak AUM history ($bn) Figure 20 Tetragon’s pro rata share (12.86%) of BentallGreenOak’s AUM at 31 December 2021 ($74 billion) was $9.5 billion. The AUM data for 2017-2018 shows 100% of the historical AUM progression for the GreenOak joint venture. Products • BentallGreenOak offers a broad range of complementary real estate investment strategies that include Core, Core Plus and Value Added equity investment strategies as well as senior and mezzanine real estate debt strategies. We partnered with an experienced team of real estate investment professionals to launch GreenOak Real Estate in 2010, providing among other things working capital, co-investment capital and operating infrastructure to the joint venture. $10.6 $7.6 $9.5 $6.8 $6.3 Descri Description of business • Polygo • Polygon manages open-ended hedge fund and private equity hedge vehicles focused on event- vehicle driven equity investing. driven • Polygon was established in 2002 and • Polygo (cid:77)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:51)(cid:74)(cid:92)(cid:5)(cid:62)(cid:84)(cid:87)(cid:80)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:49)(cid:84)(cid:83)(cid:73)(cid:84)(cid:83)(cid:19) (cid:77)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834) • TFG Asset Management owns • TFG As 100% of the business. 100% o • Further information on Polygon is • Furthe available at www.polygoninv.com. availab Polygon AUM history(i) ($bn) Polygo Figure 21(i) Figure 221 Polygon’ Polygon’s AUM was $1.8 billion at 31 De at 31 December 2021. Produc Products • Polygo • Polygon manages open-ended hedge fund and private equity vehicles fund a across including the Polygon across European Equity Opportunity Fund and Europe associated managed account, and associ the Polygon Global Equities Fund. the Po • TFG Asset Management’s convertible • TFG As business was rebranded as Acasta busine Partners on 1 March 2022 and the Partne Polygo Polygon Convertible Opportunity Fund was re was renamed to Acasta Global Fund. (i) Includes AUM for Polygon European Equity Opportunity Master Fund and associated managed account, Polygon Convertible Opportunity Master Fund, Polygon Global Equities Master Fund and Polygon Distressed Opportunities Master Fund, as calculated by the applicable fund administrator at 31 December 2017, 2018, 2019, 2020 and 2021. Includes, where relevant, investments by Tetragon. The Polygon Distressed Opportunities Fund was closed in the third quarter of 2018. $1.8 $1.5 $1.5 $1.4 $1.3 YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 Europe North America Asia Europe Asia North America Global YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 Convertible Opportunity Fund European Equity Opportunity Fund Distressed Opportunities Fund Global Equities Fund 66 Tetragon Financial Group Annual Re Annual Report 2021 67 Description of business • Acasta Partners manages multi- disciplinary hedge fund vehicles across a number of strategies including convertibles, credit, distressed, mining, metals, commodities and volatility trading. • The business was founded in 2009 as Polygon’s convertible business and rebranded in March 2022. (cid:1132) (cid:38)(cid:72)(cid:70)(cid:88)(cid:89)(cid:70)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:51)(cid:74)(cid:92)(cid:5) York, London and Florida. • TFG Asset Management owns a non-controlling interest in this business and provides infrastructure and other services. • Further information on Acasta is available at www.acasta.com. Acasta Partners AUM history(i) ($bn) Figure 22 Acasta’s AUM was $0.9 billion at 1 March 2022. Products $0.5 • Acasta Partners manages the Acasta Global Fund, formerly known as the Polygon Convertible Opportunity Fund. Acasta favours niche strategies with barriers to entry, drawing on a breadth of expertise and a collaborative process. $0.9 $0.7 $0.6 $0.6 Descri Description of business • Equitix • Equitix is an integrated core infrastructure asset management infrast and primary project platform. and pr • Equitix was established in 2007 • Equitix and is headquartered in London. and is • TFG Asset Management owns • TFG As 75% of the business. 75% of • Equitix invests in infrastructure • Equitix projects in the United Kingdom project and Europe and more recently it and Eu has developed a global presence has de with teams in North America, the with te Middle East and Asia. It has acquired Middle more than 330 core infrastructure more t (cid:85)(cid:87)(cid:84)(cid:79)(cid:74)(cid:72)(cid:89) (cid:85)(cid:87)(cid:84)(cid:79)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:88)(cid:78)(cid:83)(cid:72)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:1123)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:74)(cid:85)(cid:89)(cid:78)(cid:84)(cid:83)(cid:19) • Further information on Equitix is • Furthe available at www.equitix.co.uk. availab Equitix Products and Equitix AUM history(i) (£bn) AUM h Figure 223 Figure 23 Equitix’s AUM was £8.0 billion ($10.8 Equitix’s billion) at 31 December 2021.(i) billion) a Produc Products • Equitix • Equitix manages a number of infrast infrastructure and renewable funds funds and managed accounts. £3.9 £2.7 Since we partnered with them in 2015, Equitix’s assets under management have grown from ~£1.3 billion to £8 billion and their team from about 60 employees to over 300. £8.0 £6.8 £5.4 YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 Acasta Global Fund i i USD-GBP exchange rate at USD-G 31 December 2021. 31 DDe YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 Equitix Fund I Equitix Fund II Equitix Fund III Equitix Fund IV Equitix Fund V (cid:42)(cid:83)(cid:74)(cid:87)(cid:76)(cid:94)(cid:5)(cid:42)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:72)(cid:94)(cid:5) Funds Euro Fund Managed Accounts Equitix Fund VI Rakiza 68 Tetragon Financial Group Annual Re Annual Report 2021 69 Descri Description of business Description of business Description of business • Banyan Square Partners is a • Contingency Capital is a multi- • Hawke • Hawke’s Point is an asset management (cid:72)(cid:84)(cid:82)(cid:85)(cid:70) (cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:5)(cid:75)(cid:84)(cid:72)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:83)(cid:5)(cid:82)(cid:78)(cid:83)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5) that pr that provides capital to companies in the m in the mining and resource sectors. • Hawke • Hawke’s Point was established in 2014 and is and is based in London and New York. (cid:85)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:74)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:5)(cid:75)(cid:84)(cid:72)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5)(cid:84)(cid:83)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18) control structured and common equity investment opportunities. (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:5)(cid:88)(cid:74)(cid:74)(cid:80)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:85)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:74)(cid:5) (cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:72)(cid:86)(cid:90)(cid:78)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:17)(cid:5)(cid:76)(cid:87)(cid:84)(cid:92)(cid:89)(cid:77)(cid:5) initiatives and liquidity events. • TFG As • TFG Asset Management owns 100% o 100% of the business. • Banyan Square Partners was founded in 2020 and is based in New York. • Hawke • Hawke’s Point manages Hawke’s Point F Point Fund 1, which currently has two inv two investments in early-stage gold miners miners, and a co-investment vehicle. • Hawke • Hawke’s Point’s AUM was $60.7 million million at 31 December 2021. • TFG Asset Management owns 100% of the business. • Banyan Square Partners manages Banyan Square Fund 1. • Banyan Square Partners’ AUM was $97.3 million at 31 December 2021. product global asset management business that sponsors and manages investment funds focused on credit-oriented legal assets. • The business was founded in November 2020 and is based in New York. • TFG Asset Management owns a non-controlling interest in this business as well as providing infrastructure services. • Contingency Capital manages Contingency Capital Fund I LP and managed accounts. Description of business • Tetragon Credit Partners is TFG Asset Management’s structured credit investing business. The business has evolved from a historic focus on primary CLO control equity to a broader series of offerings across the CLO capital structure. • The business was originally established at the end of 2015 and the team is based in New York. • TFG Asset Management owns 100% of the business. • Further information on Tetragon Credit Partners is available at www.tetragoninv.com. • For additional information on Tetragon’s CLO equity investments, including its buy and hold strategy, please refer to www.tetragoninv. com/portfolio/bank-loans-via-clos. Tetragon Credit Partners products and committed capital / AUM history ($bn) Figure 24 The sum of total committed capital for the Tetragon Credit Partners products was $884.3 million at 31 December 2021. Products • Tetragon Credit Partners’ income- focused products are currently Tetragon Credit Income II, or TCI II, Tetragon Credit Income III, or TCI III, and Tetragon Credit Income IV, or TCI IV, which are predominantly control-stake CLO equity vehicles. Tetragon is one of the largest, longest tenured CLO equity investors globally with over $2.6 billion of CLO equity invested across more than 110 CLOs and 35 managers since 2005. $884 $779 $796 $750 $604 YE 2017 YE 2018 YE 2019 YE 2020 YE 2021 TCI II TCI III TCI IV TCP Opportunity Fund 70 Tetragon Financial Group Annual Re Annual Report 2021 71 Other information Risk factors Risk Risk factors Principal risks The principal risks facing Tetragon as a listed (cid:75)(cid:80)(cid:88)(cid:71)(cid:85)(cid:86)(cid:79)(cid:71)(cid:80)(cid:86)(cid:3)(cid:69)(cid:81)(cid:79)(cid:82)(cid:67)(cid:80)(cid:91)(cid:3)(cid:67)(cid:84)(cid:71)(cid:3)(cid:68)(cid:81)(cid:86)(cid:74)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3) operational in nature, and ultimately relate to both Tetragon’s issued and outstanding non-voting shares as well as its investment (cid:82)(cid:81)(cid:84)(cid:86)(cid:72)(cid:81)(cid:78)(cid:75)(cid:81)(cid:16)(cid:3)(cid:54)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:84)(cid:75)(cid:85)(cid:77)(cid:85)(cid:3)(cid:75)(cid:80)(cid:74)(cid:71)(cid:84)(cid:71)(cid:80)(cid:86)(cid:3)(cid:75)(cid:80)(cid:3)(cid:75)(cid:86)(cid:85)(cid:3) portfolio are primarily market-related or are otherwise relevant to particular asset classes. Operational risks include those related to Tetragon’s organisational structure, investment manager, legal and regulatory (cid:71)(cid:80)(cid:88)(cid:75)(cid:84)(cid:81)(cid:80)(cid:79)(cid:71)(cid:80)(cid:86)(cid:14)(cid:3)(cid:86)(cid:67)(cid:90)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:14)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:80)(cid:73)(cid:3)(cid:67)(cid:80)(cid:70)(cid:3)(cid:81)(cid:86)(cid:74)(cid:71)(cid:84)(cid:3) areas where internal or external factors could (cid:84)(cid:71)(cid:85)(cid:87)(cid:78)(cid:86)(cid:3)(cid:75)(cid:80)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:81)(cid:84)(cid:3)(cid:84)(cid:71)(cid:82)(cid:87)(cid:86)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:67)(cid:78)(cid:3)(cid:78)(cid:81)(cid:85)(cid:85)(cid:16) The risks and uncertainties highlighted are supplemented and described in further detail on Tetragon’s website at www.tetragoninv.com/investors/risk-factors. Finan Financial Risks • Dividends declared by Tetragon. These include: Risks Risks Relating to Investing in Tetr in Tetragon’s Shares The market price of Tetragon’s non- The mar (cid:91)(cid:84)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:77) (cid:91)(cid:84)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:88)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) may bea may bear no correlation to Tetragon’s NAV, and NAV, and holders may not be able to resell to resell their Tetragon shares at or above th above the price at which these were purchase purchased. In addition to portfolio- level and level and operational risks highlighted below, fa below, factors that may cause the price of Tetrag of Tetragon’s shares to vary include: (cid:1132) (cid:40)(cid:77)(cid:70)(cid:83)(cid:76) (cid:1132) (cid:40)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) perform performance and prospects or in the (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5) of com of companies engaged in businesses that ar that are similar to Tetragon’s business. • Chang • Changes in the underlying values of Tetr of Tetragon’s investments. • Illiquid • Illiquidity in the market for Tetragon shares shares, including due to the liquidity of the of the Euronext Amsterdam N.V. exchan exchange and the Specialist Fund Segme Segment of the Main Market of the Lo the London Stock Exchange. • Specu • Speculation in the press or investment comm community regarding Tetragon’s busine business or investments, or factors or events events that may directly or indirectly affect affect its business or investments. • A loss • A loss of a major funding source. If Tetrag Tetragon breaches the covenants (cid:90)(cid:83)(cid:73)(cid:74)(cid:87)(cid:5) (cid:90)(cid:83)(cid:73)(cid:74)(cid:87)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) it could it could be forced to sell assets at pric at price less than fair value. • A furth • A further issuance of shares or repurc repurchase of shares by Tetragon. (cid:1132) (cid:39)(cid:87)(cid:84)(cid:70)(cid:73)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) securities markets that in general have experienced extreme volatility often unrelated to the operating performance or underlying asset value of particular companies or partnerships. • General economic trends and other external factors. • Sales of Tetragon shares by other shareholders. • The ability to invest in Tetragon shares or to transfer any shares may be limited by restrictions imposed by ERISA regulations and Tetragon’s articles of incorporation. Risks Relating to Tetragon’s Investment Portfolio Tetragon’s investment portfolio comprises a broad range of assets, including public and private equities and credit (including distressed securities and structured credit), convertible bonds, real estate, venture capital, infrastructure, bank loans and (cid:57)(cid:43)(cid:44)(cid:5)(cid:38)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:70)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) alternative asset management business. As a general matter, the portfolio is exposed to the risk that the fair value (cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:74)(cid:19)(cid:5) Risks Relating to TFG Asset Management TFG Asset Management, as one of Tetragon’s investments, has risks particular to private equity investments in asset management businesses. • The asset management business is intensely competitive. • The performance of TFG Asset Management may be negatively (cid:78)(cid:83)(cid:1835)(cid:90)(cid:74)(cid:83)(cid:72)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:91)(cid:70)(cid:87)(cid:78)(cid:84)(cid:90)(cid:88)(cid:5)(cid:75)(cid:70)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:17)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5) the performance of managed funds and vehicles and its ability to raise capital from third-party clients. • TFG Asset Management is highly dependent on its investment professionals for the management of its investment funds and vehicles and on other employees for management, oversight and supervision of its asset management businesses. If and when such persons cease to participate in the management of TFG Asset Management or its investment funds and vehicles, the consequence could be material and adverse. • Certain of TFG Asset Management’s businesses have a limited or no operating history. • The asset management business is subject to extensive regulation. • Misconduct of TFG Asset Management employees or at the companies in which TFG Asset Management has invested could harm TFG Asset Management by impairing its ability to attract and retain clients and (cid:88)(cid:90)(cid:71)(cid:79)(cid:74)(cid:72)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:81)(cid:74)(cid:76)(cid:70)(cid:81)(cid:5) liability and reputational harm. • Failure by TFG Asset Management (cid:89)(cid:84)(cid:5)(cid:73)(cid:74)(cid:70)(cid:81)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:85)(cid:87)(cid:78)(cid:70)(cid:89)(cid:74)(cid:81)(cid:94)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1835)(cid:78)(cid:72)(cid:89)(cid:88)(cid:5) of interest in its investment business could damage its reputation and adversely affect its businesses. • Tetragon’s investment in TFG Asset Management is illiquid. 72 Tetragon Financial Group Annual Re Annual Report 2021 73 • Tetragon engages in over-the-counter trading, which has inherent risks of illiquid markets, wide bid/ask spreads and market disruption. (cid:1132) (cid:49)(cid:74)(cid:91)(cid:74)(cid:87)(cid:70)(cid:76)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:87)(cid:78)(cid:88)(cid:80)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) use of options, futures, short sales, swaps, forwards and other derivative instruments potentially magnify losses in equity investments. • Market illiquidity could negatively affect these investments. • These investments may be subject to medium and long-term commitments with restrictions on redemptions or returns of capital. • The fair value of investments, including illiquid investments, may prove to be inaccurate and require adjustment. • Adverse changes in international, national or local economic and other conditions could negatively affect investments. • Tetragon is subject to concentration and geographic risk in its investment portfolio. • Tetragon’s investments are subject to interest rate risk, which (cid:72)(cid:84)(cid:90)(cid:81)(cid:73)(cid:5)(cid:72)(cid:70)(cid:90)(cid:88)(cid:74)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) value of its investments and its operating results to decrease. • Tetragon’s investments are subject to currency risks, which could cause the value of its investments in U.S. dollars to decrease regardless of the inherent value of the underlying investments. • The utilisation of hedging and risk management transactions may not be successful, which could subject Tetragon’s investment portfolio to increased risk or lower returns on its investments and in turn cause a decrease in the fair value of its assets. Risks Relating to Other Tetragon Portfolio Investments Tetragon otherwise currently invests or expects to invest its capital, directly and indirectly, in: (1) bank loans, generally through subordinated, residual tranches of CLOs; (2) real estate, generally through private equity-style funds managed by BentallGreenOak; (3) public and private equity securities, particularly in event-driven strategies, generally through the Polygon European Equity Opportunity Fund; (4) convertible securities, mainly in the form of debt securities that can be exchanged for equity interests, including through the Polygon Convertible Opportunity Fund; (5) credit securities (including distressed securities and structured credit), including through Tetragon Credit Partners; (6) private equity and venture capital through direct investments and fund investments, including through Banyan Square Partners; (7) infrastructure projects through Equitix Holdings Limited; (8) legal assets; and (9) mining-industry related equity securities and instruments, including through Hawke’s Point. These portfolio investments are subject to various risks, many of which are beyond Tetragon’s control, including: • These securities are susceptible to losses of up to 100% of the initial investments. • The performance of these investments (cid:82)(cid:70)(cid:94)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:73)(cid:74)(cid:85)(cid:74)(cid:83)(cid:73)(cid:5)(cid:90)(cid:85)(cid:84)(cid:83)(cid:5) the performance of the asset manager of funds or products in which Tetragon invests. • Tetragon may be exposed to counterparty risk. Operat Operational Risks Risks Relating to Risks R Organis Organisational Structure Tetragon Tetragon has approved a very broad inv broad investment objective and the investment manager has substantial investme discretion when making investment discretio decision decisions. In addition, the investment manager manager’s strategies may not achieve Tetragon Tetragon’s investment objective. Tetragon Tetragon’s listed shares do not carry any voting rig voting rights other than limited voting rights in rights in respect of variation of their class rig class rights. Tetragon’s voting shares are owne are owned by Polygon Credit Holdings (cid:46)(cid:46)(cid:5)(cid:49)(cid:78)(cid:82)(cid:78)(cid:89)(cid:74)(cid:73) (cid:46)(cid:46)(cid:5)(cid:49)(cid:78)(cid:82)(cid:78)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5) of Tetrag of Tetragon’s investment manager and (cid:78)(cid:88)(cid:5)(cid:90)(cid:81)(cid:89)(cid:78)(cid:82)(cid:70) (cid:78)(cid:88)(cid:5)(cid:90)(cid:81)(cid:89)(cid:78)(cid:82)(cid:70)(cid:89)(cid:74)(cid:81)(cid:94)(cid:5)(cid:84)(cid:92)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5) and Padd and Paddy Dear, who also majority own the inves the investment manager. Pursuant to an agr to an agreement between Reade (cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70) (cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:17)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5) is the co is the controller of Tetragon’s voting shares a shares and the investment manager. Tetragon Tetragon’s voting shares control the composi composition of the Board of Directors (cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:93)(cid:74)(cid:87) (cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:93)(cid:74)(cid:87)(cid:72)(cid:78)(cid:88)(cid:74)(cid:5)(cid:74)(cid:93)(cid:89)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:90)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5) Tetragon Tetragon’s business and affairs. Under Te Under Tetragon’s articles of incorporation, a majorit a majority of its directors are required to be indep be independent (Independent Directors), satisfyin satisfying in all material respects the UK (cid:40)(cid:84)(cid:87)(cid:85)(cid:84)(cid:87)(cid:70)(cid:89) (cid:40)(cid:84)(cid:87)(cid:85)(cid:84)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:44)(cid:84)(cid:91)(cid:74)(cid:87)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:40)(cid:84)(cid:73)(cid:74)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5) that term that term. However, because the Board of Directors Directors may generally take action only (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:91)(cid:70)(cid:81)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:17)(cid:5) the Boar the Board of Directors generally are not able not able to act without the approval of (cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74) (cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:92)(cid:77)(cid:84)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5) the holde the holder of Tetragon’s voting shares. The hold The holder of the voting shares has the right to a right to amend Tetragon’s articles of incorpor incorporation to change these provisions regardin regarding Independent Directors and to (cid:87)(cid:74)(cid:82)(cid:84)(cid:91)(cid:74)(cid:5)(cid:70) (cid:87)(cid:74)(cid:82)(cid:84)(cid:91)(cid:74)(cid:5)(cid:70)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5) reason. A reason. As a result of these provisions, the Indep the Independent Directors are limited (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:78)(cid:87)(cid:5)(cid:70) (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:78)(cid:87)(cid:5)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:74)(cid:93)(cid:74)(cid:87)(cid:72)(cid:78)(cid:88)(cid:74)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:90)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5) over Tetr over Tetragon’s business and affairs. Tetragon Tetragon’s organisational, ownership and inve and investment structure creates (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1835)(cid:78)(cid:72)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) may be r may be resolved in a manner which is not alw is not always in the best interests of Tetrag of Tetragon or its shareholders. Tetragon’s directors and its (cid:70)(cid:73)(cid:82)(cid:78)(cid:83)(cid:78)(cid:88)(cid:89)(cid:87)(cid:70)(cid:89)(cid:84)(cid:87)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1835)(cid:78)(cid:72)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) interest in the course of their duties. Tetragon’s ability to pay its expenses and dividends will depend on its earnings, (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5) assets and such other factors that may be relevant from time to time, including limitations under the Companies (Guernsey) Law, 2008, as amended. The investment manager does not (cid:84)(cid:92)(cid:74)(cid:5)(cid:1834)(cid:73)(cid:90)(cid:72)(cid:78)(cid:70)(cid:87)(cid:94)(cid:5)(cid:73)(cid:90)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5) shareholders. However, these contractual limitations do not constitute a waiver of any obligations that the investment manager has under applicable law, including the U.S. Investment Advisers Act of 1940 and related rules. The investment manager may devote time and commitment to other activities. Risks Relating to Tetragon’s Investment Manager Tetragon’s success depends on its continued relationship with its investment manager and its principals. If this relationship were to end or the principals or other key professionals were to depart, it could have a material adverse effect on Tetragon’s business, investments and results of operations. Tetragon is reliant on the skill and judgment of its investment manager in valuing and determining an appropriate purchase price for its investments. Any determinations of value that differ materially from the values Tetragon realises at the maturity of the investments or upon their disposal will likely have a negative impact on Tetragon and its share price. Tetragon’s arrangements with its investment manager were negotiated in (cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:74)(cid:93)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:83)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:87)(cid:74)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:77)(cid:78)(cid:85)(cid:5) and may contain terms that are less favourable than those which otherwise might have been obtained from unrelated parties in an arm’s-length negotiation. The holders of Tetragon’s listed shares will not be able to terminate its Investment Management Agreement with the investment manager, and the Investment Management Agreement may only be terminated by Tetragon in limited circumstances. The liability of Tetragon’s investment manager is limited under Tetragon’s arrangements with it, and Tetragon has agreed to indemnify the investment manager against claims that it may face in connection with such arrangements, which may lead the investment manager to assume greater risks when making investment related decisions than it otherwise would if investments were being made solely for its own account. The fees payable to the investment manager are based on changes in Tetragon’s NAV, which will not necessarily correlate to changes in the market value of its listed shares. Tetragon’s compensation structure with its investment manager may encourage the investment manager to invest in high risk investments. The management fee payable to the investment manager also creates an incentive for it to make investments and take other actions that increase or maintain Tetragon’s NAV over the near term even though other investments or actions may be more favourable. The compensation of the investment (cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:1123)(cid:88)(cid:5)(cid:85)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:83)(cid:74)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:70)(cid:78)(cid:83)(cid:88)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) performance-related elements, and poor performance by Tetragon or any other entity for which the investment manager provides services (cid:82)(cid:70)(cid:94)(cid:5)(cid:82)(cid:70)(cid:80)(cid:74)(cid:5)(cid:78)(cid:89)(cid:5)(cid:73)(cid:78)(cid:75)(cid:1834)(cid:72)(cid:90)(cid:81)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:1123)(cid:88)(cid:5) investment manager to retain staff. Tetragon’s investment manager relies on two entities that are part of TFG Asset Management for a broad range of services to support its activities. The services include (i) infrastructure services (cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:17)(cid:5) trading, marketing and investor relations, (cid:81)(cid:74)(cid:76)(cid:70)(cid:81)(cid:17)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:81)(cid:78)(cid:70)(cid:83)(cid:72)(cid:74)(cid:17)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:70)(cid:73)(cid:82)(cid:78)(cid:83)(cid:78)(cid:88)(cid:89)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5) (cid:85)(cid:70)(cid:94)(cid:87)(cid:84)(cid:81)(cid:81)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:74)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) (ii) services relating to the dealing in and management of investments, arrangement of deals and advising on investments. TFG Asset Management has implemented a cost-allocation methodology with the objective of allocating service-related costs, including to Tetragon’s investment manager, in a consistent, fair, transparent and commercially based manner. TFG Asset Management then charges fees to Tetragon’s investment manager for the services allocated to it on a cost- 74 Tetragon Financial Group Annual Re Annual Report 2021 75 recovery basis that is designed to achieve full recovery of the allocated costs. Tetragon’s Independent Directors, who (cid:70)(cid:87)(cid:74)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:81)(cid:81)(cid:94)(cid:5)(cid:82)(cid:70)(cid:83)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:91)(cid:74)(cid:17)(cid:5) among other things, related-party transactions, are required to approve the methodology for allocating costs and in their sole discretion the application of that methodology as part of their oversight processes. As such, the annual cost allocation methodology update and the actual annual cost allocations that result based on these cost methodology policies and procedures are separately approved by the Independent Directors. (cid:57)(cid:77)(cid:74)(cid:87)(cid:74)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1835)(cid:78)(cid:72)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:72)(cid:87)(cid:74)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5) by contemporaneous trading by Tetragon’s investment manager and investment managers that are part of TFG Asset Management. Tetragon’s shares are not intended for European retail investors. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long term in a predominantly income-producing investment and who have experience (cid:78)(cid:83)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) collective investment undertakings and are capable themselves of evaluating the merits and risks of Tetragon shares (cid:70)(cid:83)(cid:73)(cid:5)(cid:92)(cid:77)(cid:84)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5)(cid:71)(cid:84)(cid:89)(cid:77)(cid:5) to invest in potentially illiquid securities and to be able to bear any losses (which may equal the whole amount invested) that may result from the investment. Tetragon is not, and does not intend to become, regulated as an investment company under the U.S. Investment Company Act of 1940 and related rules. Risks Relating to Tetragon’s Legal Environment and Regulation Changes in laws or regulations or accounting standards, or a failure to comply with any laws and regulations or accounting standards, may adversely affect Tetragon’s business, investments and results of operations. Tetragon has and may become involved in litigation that may adversely affect Tetragon’s business, investments and results of operations. No formal corporate governance code applies to Tetragon under Dutch law and Tetragon reports against the AIC Corporate Governance Guide for Investment Companies (which incorporates the UK Corporate Governance Code) on a voluntary basis only. The rights of the non-voting shareholders (cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:73)(cid:90)(cid:72)(cid:78)(cid:70)(cid:87)(cid:94)(cid:5)(cid:73)(cid:90)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:84)(cid:92)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Board of Directors to Tetragon will be governed by Guernsey law and its articles of incorporation and may differ from the rights and duties owed to companies under the laws of other countries. Tetragon’s shares are subject to restrictions on transfers to certain shareholders located in the United States or who are U.S. persons, which may impact the price and liquidity of the shares. Risks Relating to Taxation United States investors may suffer adverse tax consequences because Tetragon is treated as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. Changes to tax treatment of derivative instruments may adversely affect Tetragon and certain tax positions it may take may be successfully challenged. Investors may suffer adverse tax consequences if Tetragon is treated as resident in the United Kingdom or the United States for tax purposes. Coronavirus and Public Health Emergency Risks In 2020, there was an outbreak of a novel and highly contagious form of coronavirus, or COVID-19, which the World Health Organization declared to constitute a “Public Health Emergency of International Concern”. The outbreak of COVID-19 resulted in numerous deaths, adversely impacted global commercial (cid:70)(cid:72)(cid:89)(cid:78)(cid:91)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) volatility in many equity and debt markets globally. Many governments and businesses reacted by instituting quarantines and other social distancing measures, prohibitions on travel (including on the movement of people and goods between countries), material (cid:82)(cid:84)(cid:83)(cid:74)(cid:89)(cid:70)(cid:87)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:20)(cid:84)(cid:87)(cid:5)(cid:1834)(cid:88)(cid:72)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:81)(cid:78)(cid:72)(cid:94)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:17)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:81)(cid:84)(cid:88)(cid:90)(cid:87)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:88)(cid:17)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:74)(cid:88)(cid:17)(cid:5) schools, retail stores and other public venues. Such measures, as well as the general uncertainty surrounding the dangers and impact of COVID-19, have (cid:72)(cid:87)(cid:74)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:73)(cid:78)(cid:88)(cid:87)(cid:90)(cid:85)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:83)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:81)(cid:94)(cid:5) chains and economic activity and have had a particularly adverse impact on transportation, hospitality, tourism, entertainment and other industries. Any public health emergency, including any outbreak of COVID-19, SARS, (cid:45)(cid:22)(cid:51)(cid:22)(cid:20)(cid:21)(cid:30)(cid:5)(cid:1835)(cid:90)(cid:17)(cid:5)(cid:70)(cid:91)(cid:78)(cid:70)(cid:83)(cid:5)(cid:1835)(cid:90)(cid:17)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:72)(cid:84)(cid:87)(cid:84)(cid:83)(cid:70)(cid:91)(cid:78)(cid:87)(cid:90)(cid:88)(cid:17)(cid:5) Ebola or other existing or new epidemic diseases, or the threat thereof, could (cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:70)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:73)(cid:91)(cid:74)(cid:87)(cid:88)(cid:74)(cid:5)(cid:78)(cid:82)(cid:85)(cid:70)(cid:72)(cid:89)(cid:5) on Tetragon and could adversely (cid:70)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:75)(cid:90)(cid:81)(cid:1834)(cid:81)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) objectives. The spread of COVID-19 creates a variety of potential risks. The magnitude and duration of these risks cannot be predicted at this time. The extent of the impact of any public health emergency on Tetragon’s (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:1123)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) performance will depend on many factors, including the duration and scope of such public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergency on overall supply and demand (consumer and industrial), goods and services, investor (cid:81)(cid:78)(cid:86)(cid:90)(cid:78)(cid:73)(cid:78)(cid:89)(cid:94)(cid:17)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:90)(cid:82)(cid:74)(cid:87)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1834)(cid:73)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:88)(cid:5) of economic activity and the extent of its disruption to important global, regional and local supply chains and economic markets, disruptions to shipping and other transportation, all of which are highly uncertain and cannot be predicted. The effects of a public health emergency may materially and adversely impact the value and performance of Tetragon’s investments, Tetragon’s ability to source, manage and divest investments and its ability to achieve its investment objectives, all of which could result in (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:74)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:19)(cid:5)(cid:46)(cid:83)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5) the operations of Tetragon’s investments (cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:78)(cid:82)(cid:85)(cid:70)(cid:72)(cid:89)(cid:74)(cid:73)(cid:17)(cid:5)(cid:84)(cid:87)(cid:5)(cid:74)(cid:91)(cid:74)(cid:83)(cid:5) temporarily or permanently halted, as a result of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public health emergency, including operational disruptions and its potential adverse impact on the health of any such entity’s impact o (cid:85)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:83)(cid:74)(cid:81)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:73)(cid:90)(cid:72)(cid:74)(cid:73)(cid:5)(cid:74)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:72)(cid:94)(cid:5)(cid:73)(cid:90)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5) (cid:85)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:83)(cid:74) illness of a portion of the workforce or illness o the need to work remotely. Tetragon’s the need key vendors and service providers, such key vend as providers of outsourced accounting as provid services, consultants and external services counsel, counsel, are also subject to these risks. Risks Resulting from the Risks R United K United Kingdom’s Exit from the Euro the European Union The United Kingdom withdrew from The Unit the Euro the European Union on 31 January 2020. Th 2020. This is referred to as Brexit. In conne In connection with Brexit, the United Kingdom Kingdom and the European Union agreed t agreed the Trade and Cooperation Agreeme Agreement, or TCA, that governs the future tra future trading relationship between the Unite the United Kingdom and the European (cid:58)(cid:83)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:83)(cid:5) (cid:58)(cid:83)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:83)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:70)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:57)(cid:40)(cid:38)(cid:5)(cid:89)(cid:84)(cid:84)(cid:80)(cid:5) effect fro effect from 1 January 2021 following a transiti a transition period that commenced immedia immediately following the Brexit date. The Unit The United Kingdom is no longer in the Euro the European Union customs union and is ou and is outside of the European Union single m single market. As a result, logistical disruptio disruption is expected whilst the United K United Kingdom and European Union impleme implement the new relationship under th under the TCA. Notably, the TCA does not inclu not include a EU-wide cooperation (cid:70)(cid:87)(cid:87)(cid:70)(cid:83)(cid:76)(cid:74)(cid:82) (cid:70)(cid:87)(cid:87)(cid:70)(cid:83)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:17)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5) (cid:58)(cid:19)(cid:48)(cid:19)(cid:5)(cid:1834)(cid:87)(cid:82) (cid:58)(cid:19)(cid:48)(cid:19)(cid:5)(cid:1834)(cid:87)(cid:82)(cid:88)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:74)(cid:70)(cid:73)(cid:5)(cid:77)(cid:70)(cid:91)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:84)(cid:5)(cid:83)(cid:74)(cid:76)(cid:84)(cid:89)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5) individua individual European Union member state reg state regulations and cooperation/ recognit recognition arrangements. The initial (cid:89)(cid:78)(cid:82)(cid:74)(cid:75)(cid:87)(cid:70)(cid:82) (cid:89)(cid:78)(cid:82)(cid:74)(cid:75)(cid:87)(cid:70)(cid:82)(cid:74)(cid:5)(cid:88)(cid:74)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) services services cooperation framework may be subject t subject to extension and a cooperation (cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74) (cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5)(cid:78)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5) guarante guaranteed. The uncertainty surrounding the imple the implementation of the TCA and the outco the outcome of ongoing negotiations (cid:82)(cid:70)(cid:94)(cid:5)(cid:77)(cid:70)(cid:91) (cid:82)(cid:70)(cid:94)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:74)(cid:72)(cid:84)(cid:83)(cid:84)(cid:82)(cid:78)(cid:72)(cid:17)(cid:5)(cid:89)(cid:70)(cid:93)(cid:17)(cid:5)(cid:1834)(cid:88)(cid:72)(cid:70)(cid:81)(cid:17)(cid:5)(cid:81)(cid:74)(cid:76)(cid:70)(cid:81)(cid:17)(cid:5) regulato regulatory and other implications for the asse the asset management industry, the (cid:71)(cid:87)(cid:84)(cid:70)(cid:73)(cid:74)(cid:87)(cid:5) (cid:71)(cid:87)(cid:84)(cid:70)(cid:73)(cid:74)(cid:87)(cid:5)(cid:42)(cid:90)(cid:87)(cid:84)(cid:85)(cid:74)(cid:70)(cid:83)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:76)(cid:81)(cid:84)(cid:71)(cid:70)(cid:81)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) markets markets generally and for Tetragon. This uncertai uncertainty is likely to continue to impact the globa the global economic climate and may impact o impact opportunities, pricing, availability (cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89) (cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:71)(cid:70)(cid:83)(cid:80)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:17)(cid:5)(cid:87)(cid:74)(cid:76)(cid:90)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5) values o values or exit opportunities of companies or assets or assets based, doing business, or Whilst the most immediate impacts of Brexit on corporate transactions will likely be related to changes in market conditions, the development of new regulatory regimes and parallel competition law enforcement may have an adverse impact on transactions, particularly those occurring in, or impacted by conditions in, the United Kingdom and the European Union. (cid:77)(cid:70)(cid:91)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) relationships in, the United Kingdom or the European Union, including companies or assets held or considered for prospective investment by Tetragon. The future application of EU-based legislation and/or taxation to the private fund industry in the United Kingdom will depend, among other things, on how the United Kingdom negotiates its relationship with the European Union as (cid:87)(cid:74)(cid:76)(cid:70)(cid:87)(cid:73)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:87)(cid:74)(cid:5)(cid:72)(cid:70)(cid:83)(cid:5)(cid:71)(cid:74)(cid:5) no assurance that any negotiated laws, taxation and/or regulations will not have an adverse impact on Tetragon and its investments. The ongoing effects of (cid:39)(cid:87)(cid:74)(cid:93)(cid:78)(cid:89)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:87)(cid:74)(cid:88)(cid:90)(cid:81)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:5) dislocation, heightened counterparty risk, an adverse effect on the management of market risk and, in particular, asset and liability management (due in part (cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:73)(cid:74)(cid:83)(cid:84)(cid:82)(cid:78)(cid:83)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) and liabilities), an adverse effect on Tetragon and increased legal, regulatory or compliance burden on Tetragon, each of which may have a negative impact (cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:17)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5) returns or prospects of Tetragon. 76 Tetragon Financial Group Annual Re Annual Report 2021 77 Other information Share repurchases & distributions Other Other information Sha Share reconciliation and shareholdings Figure 25 Share repurchase and dividends history ($ millions) Figure 2 Figure 27 Amount Repurchased Cumulative Amount Repurchased Dividends Cumulative Dvidends IFRS to F IFRS to Fully Diluted Shares Reconciliation Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 TOTAL Figure 26 $2.2 $12.4 $6.6 $25.5 $35.2 $175.6 $16.1 $50.9 $60.9 $157.8 $65.4 - $50.3 $50.3 - $709.1 $2.2 $14.5 $21.2 $46.7 $81.9 $257.5 $273.6 $324.5 $385.4 $543.2 $608.6 $608.6 $658.8 $709.1 $709.1 $56.5 $60.4 $18.8 $37.5 $46.4 $51.5 $55.5 $58.7 $63.3 $61.0 $64.0 $65.1 $66.5 $36.4 $36.8 $778.3 $56.5 $117.0 $135.7 $173.3 $219.6 $271.1 $326.6 $385.3 $448.6 $509.6 $573.6 $638.7 $705.2 $741.5 $778.3 The below graph shows cumulative historical share repurchases and dividends distributed by Tetragon from inception to 31 December 2021 in millions of U.S. dollars.(i) $1,247.2 $638.7 $1,364.0 $705.2 $1,450.6 $741.5 $1,487.4 $778.3 $608.6 $658.8 $709.1 $709.1 i Tetragon seeks to return value to its shareholders, including through dividends and share repurchases. Decisions with respect to declaration of dividends and share repurchases may be informed by a variety of considerations, including (i) the expected sustainability of the company’s cash generation capacity in the short and medium term, (ii) the current and anticipated performance of the company, (iii) the current and anticipated (cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:72)(cid:84)(cid:83)(cid:84)(cid:82)(cid:78)(cid:72)(cid:5)(cid:74)(cid:83)(cid:91)(cid:78)(cid:87)(cid:84)(cid:83)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:13)(cid:78)(cid:91)(cid:14)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:85)(cid:84)(cid:89)(cid:74)(cid:83)(cid:89)(cid:78)(cid:70)(cid:81)(cid:5)(cid:90)(cid:88)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:87)(cid:70)(cid:83)(cid:76)(cid:78)(cid:83)(cid:76)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:85)(cid:87)(cid:74)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:1123)(cid:88)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) position to other investment opportunities and (v) Tetragon’s share price. Cumulative dividends paid includes the cash and stock dividends paid to shareholders, but excludes dividends declared on shares held in escrow. Legal Sh Legal Shares Issued and Outstanding Less: Sha Less: Shares Held in Treasury Less: Total Escrow Shares(1.i) Less: Tot IFRS Sha IFRS Shares Outstanding Add: Dilution for equity-based awards(1.ii) Add: Dilu Fully Dilu Fully Diluted Shares Outstanding Shares at 31 December 2021 (millions) 139.6 38.5 10.9 90.2 6.2 96.4 Shareh Shareholdings (cid:53)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:88)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:82)(cid:70)(cid:78)(cid:83)(cid:89)(cid:70)(cid:78)(cid:83)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:88)(cid:19)(cid:5) (cid:53)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:88)(cid:5) For exam For example, as of 31 December 2021, the following persons own (directly or indirectly indirectly) interests in shares in Tetragon in the amounts set forth below: Figure 2 Figure 28 Individua Individual (cid:50)(cid:87)(cid:19)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(2.i) (cid:50)(cid:87)(cid:19)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73) Mr. Padd Mr. Paddy Dear Mr. David Mr. David O'Leary Other Tetragon/TFG Asset Management Employees Other Tet Equity-based awards(2.ii) Equity-ba Shareholding at 31 December 2021 2 17,667,631 5,202,514 16,880 6,254,998 5,351,590 Notes 1 (i) The Total Escrow Shares of 10.9 million consists of shares held in separate escrow accounts in relation to certain equity-based compensation. (ii) Dilution in relation to equity-based awards by TFG Asset Management for certain senior employees as well as equity-based awards by Tetragon to its independent Directors. At the reporting date, this was 6.2 million. The basis and pace of recognition is expected to match the rate at which service is being provided to TFG Asset Management or Tetragon in relation to these shares. Please see Equity-Based Compensa- tion Plans on page 82 for more details. Cer- tain of these persons may from time to time enter into purchases or sales trading plans (each a, “Fixed Trading Plan”) providing for the sale of Vested Shares or the purchase of Tetragon shares in the market, or may otherwise sell their Vested Shares or pur- chase Tetragon shares, subject to applicable compliance policies. Applicable brokerage (cid:1834)(cid:87)(cid:82)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:90)(cid:89)(cid:77)(cid:84)(cid:87)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:85)(cid:90)(cid:87)(cid:72)(cid:77)(cid:70)(cid:88)(cid:74)(cid:5)(cid:84)(cid:87)(cid:5)(cid:88)(cid:74)(cid:81)(cid:81)(cid:5) Tetragon shares under the relevant Fixed Trading Plan pursuant to certain irrevocable instructions. Each Fixed Trading Plan is intended to comply with Rule 10b5-1 under the United States Securities Exchange Act of 1934, as amended. Each Fixed Trading Plan has been or will be approved by Tetragon in accordance with its applicable compli- ance policies. Rule 10b5-1 provides a “safe harbor” that is designed to permit individuals to establish a pre-arranged plan to buy or sell company stock if, at the time such plan is adopted, the individuals are not in possession of material, non-public information. (i) Includes approximately 2.4 million incentive shares held in escrow with respect (cid:89)(cid:84)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) vesting in July 2024 that are not subject to performance criteria per se. The remaining (cid:78)(cid:83)(cid:72)(cid:74)(cid:83)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:88)(cid:5)(cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:1123)(cid:88)(cid:5) employment agreement are subject to agreed-upon investment performance crite- (cid:87)(cid:78)(cid:70)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:74)(cid:93)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:1834)(cid:76)(cid:90)(cid:87)(cid:74)(cid:19)(cid:5)(cid:53)(cid:81)(cid:74)(cid:70)(cid:88)(cid:74)(cid:5) see page 82 for further details. (ii) Equity-based awards are intended to give certain senior employees of TFG Asset Man- agement long-term exposure to Tetragon stock (with vesting subject to forfeiture and certain restrictions). Where shares have vested but not yet been released, they have been removed from this line and included in shares owned by “Other Tetragon/TFG Asset Management Employees”. Please see page 82 for further details. 78 Tetragon Financial Group Annual Report 2021 Annual Re 79 Other information Additional CLO portfolio statistics Figure 29 Tetragon’s CLO Portfolio Details as of 31 December 2021 Figure 3 Figure 30 Transaction(i) Status(ii) Primary or Secondary Investment(iii) Original Invest. Cost ($m USD) Deal Closing Date Year of Maturity End of Reinv. Period Wtd Avg Spread (bps)(iv) Original Cost of Funds (bps)(v) Current Cost of Funds (bps)(vi) Current Jr- most O/C Cushion(vii) Jr-Most O/C Cushion at Close(viii) Annualised (Loss) Gain of Cushion(ix) IRR(x) ITD Cash Received as % of Cost(xi) 2013 2029 2021 Transaction 83 Outstanding Primary Transaction 84 Outstanding Primary Transaction 85 Outstanding Primary Transaction 88 Outstanding Primary Transaction 89 Outstanding Primary Transaction 90 Outstanding Primary Transaction 91 Outstanding Primary Transaction 92 Outstanding Primary Transaction 93 Outstanding Secondary Transaction 94 Outstanding Secondary Transaction 95 Outstanding Primary Transaction 96 Outstanding Secondary Transaction 97 Outstanding Primary 20.8 24.6 1.0 30.1 33.6 20.7 27.8 34.6 6.1 6.6 2.6 2.7 9.9 Transaction 98 Outstanding Primary 33.2 Transaction 99 Outstanding Primary Transaction 100 Outstanding Primary Transaction 101 Outstanding Primary Transaction 102 Outstanding Primary Transaction 103 Outstanding Primary Transaction 104 Outstanding Primary 8.3 2.6 0.2 5.0 5.6 9.8 2013 2013 2014 2014 2014 2015 2015 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2018 2027 2031 2030 2031 2031 2031 2027 2031 2031 2029 2030 2030 2030 2030 2031 2031 2031 2031 2031 Transaction 105 Outstanding Primary 15.6 2021 2032 Transaction 106 Outstanding Primary Transaction 107 Outstanding Primary Transaction 108 Outstanding Primary Transaction 109 Outstanding Primary Transaction 110 Outstanding Primary Total CLO Portfolio: 2.1 2.0 2.0 2.0 2.4 311.8 2021 2034 2021 2034 2021 2034 2021 2034 2021 2034 2021 2023 2022 2023 2023 2023 2020 2023 2023 2022 2022 2022 2022 2022 2023 2023 2023 2023 2023 2024 2026 2026 2026 2026 2027 363 339 354 346 350 355 350 336 350 350 361 346 346 348 370 367 354 350 355 350 374 378 376 380 350 351 351 193 183 170 199 195 203 215 199 215 195 194 199 178 178 164 111 163 148 159 166 168 162 164 167 150 150 188 152 182 163 162 168 159 148 211 148 168 162 162 162 148 147 111 163 148 159 168 168 162 164 167 150 150 165 2.3% 1.3% 2.0% 1.1% 2.1% 1.5% 1.5% 2.1% 1.5% 2.1% 1.2% 1.1% 1.1% 1.1% 4.5% 4.3% 2.0% 1.5% 1.5% 2.1% 4.7% 4.7% 4.6% 4.6% 4.5% 4.5% 1.9% 6.2% 4.0% 5.0% 4.0% 4.0% 4.0% 4.0% 4.0% 3.6% 3.3% 4.4% 3.0% 3.9% 4.5% 4.5% 7.8% 4.9% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.3% (0.4%) 12.4% 129.8% (0.3%) 17.4% 150.9% (0.4%) (0.4%) (0.3%) (0.3%) (0.4%) (0.3%) (0.3%) (0.2%) (0.6%) 9.5% 114.8% 11.7% 113.8% 12.9% 113.4% 11.6% 105.9% 11.5% 104.1% 8.0% 98.2% 15.6% 106.8% 14.5% 92.4% 6.6% 64.7% (0.2%) 3.6% 49.6% (0.4%) (0.7%) (0.0%) (0.9%) (0.3%) (0.4%) (0.4%) 6.5% 57.5% 7.8% 70.2% 10.5% 60.4% 24.7% 92.5% 9.9% 62.5% 17.5% 79.3% 14.7% 59.1% (0.3%) 12.1% 45.9% 0.2% 0.3% 0.3% 0.3% - - 16.0% 18.6% 13.6% 8.4% 14.4% 0.0% 12.8% 0.0% 10.9% 12.6% 0.0% 0.0% (0.3%) 11.8% 92.8% (cid:71)(cid:84)(cid:89)(cid:77)(cid:5)(cid:77)(cid:78)(cid:88)(cid:89)(cid:84)(cid:87)(cid:78)(cid:72)(cid:70)(cid:81)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:18)(cid:73)(cid:70)(cid:89)(cid:74)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:71)(cid:74)(cid:5) received, based on Tetragon’s base case modelling assumptions. Refer to www. tetragoninv.com for more information on Tetragon’s modelling assumptions and methodology. For all other investments, (cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:88)(cid:5)(cid:84)(cid:83)(cid:81)(cid:94)(cid:5)(cid:77)(cid:78)(cid:88)(cid:89)(cid:84)(cid:87)(cid:78)(cid:72)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:70)(cid:81)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5) received to-date. xi (cid:46)(cid:83)(cid:72)(cid:74)(cid:85)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5) on each transaction as a percentage of its original cost. i ii Transactions are investments made on a particular investment date. Multiple transactions may be associated with the same tranche of the same CLO deal. Note that certain transactions may have been removed from the table above, as the remaining value of the assets of those CLOs is immaterial. The transactions continue to be held as of the date of this report. “Outstanding” refers to investments in CLOs which have not yet been optionally redeemed, sold, or wound down to less-than-material remaining expected value. “Called” refers to investments in CLOs where Tetragon initiated or approved an optional redemption, and “wound down” refers to CLOs which have amortised or repaid without an optional redemption, in both cases with less-than- material remaining expected value. iii “Primary” refers to investments made in the new issuance CLO market, whereas “Secondary” refers to investments made after the original issue date of the CLO. iv Par weighted average spread over LIBOR or EURIBOR (as appropriate) of the underlying loan assets in each CLO’s portfolio. v Notional weighted average spread over LIBOR or EURIBOR (as appropriate) of the debt tranches issued by each CLO, as of the closing date of each transaction. vi Notional weighted average spread over LIBOR or EURIBOR (as appropriate) of the debt tranches issued by each CLO, as of the most recent trustee report date. vii The current junior-most O/C cushion is the (cid:74)(cid:93)(cid:72)(cid:74)(cid:88)(cid:88)(cid:5)(cid:13)(cid:84)(cid:87)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:72)(cid:78)(cid:89)(cid:14)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:79)(cid:90)(cid:83)(cid:78)(cid:84)(cid:87)(cid:18)(cid:82)(cid:84)(cid:88)(cid:89)(cid:5)(cid:52)(cid:20)(cid:40)(cid:5) test ratio over the test requirement, as of the latest trustee report available as of the report date. viii The junior-most O/C cushion at close is the (cid:74)(cid:93)(cid:72)(cid:74)(cid:88)(cid:88)(cid:5)(cid:13)(cid:84)(cid:87)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:72)(cid:78)(cid:89)(cid:14)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:79)(cid:90)(cid:83)(cid:78)(cid:84)(cid:87)(cid:18)(cid:82)(cid:84)(cid:88)(cid:89)(cid:5)(cid:52)(cid:20)(cid:40)(cid:5) test ratio over the test requirement that was expected on each deal’s closing date (or date of purchase, if later). ix Calculated by annualizing the change from the expected closing date junior-most O/C cushion to the current junior-most O/C cushion. x Calculated from Tetragon’s investment date. For outstanding investments, includes Reinvestment end date of outstanding investments based Reinv on original investment size ($ Millions) on or CLO deal maturities of outstanding investments based CLO d on original investment cost ($ Millions) on or Current junior-most O/C test cushion distribution of Curre outstanding investments (by number of transactions) outst 80 Tetragon Financial Group Annual Re Annual Report 2021 81 Other information Certain regulatory information This annual report is made public by means of a press release, which contains inside information within the meaning of Article 7(1) of the EU Market Abuse (cid:55)(cid:74)(cid:76)(cid:90)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:71)(cid:74)(cid:74)(cid:83)(cid:5)(cid:1834)(cid:81)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten). In addition, this report is also made available to the public by way of publication on the Tetragon website (www.tetragoninv.com). An investment in Tetragon involves substantial risks. Please refer to the company’s website at www.tetragoninv.com for a description of the risks and uncertainties pertaining to an investment in Tetragon. This release does not contain or constitute an offer to sell or a solicitation of an offer to purchase securities in the United States or any other jurisdiction. The securities of Tetragon have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to U.S. persons unless they are registered under applicable law or exempt from registration. Tetragon does not intend to register any portion of its securities in the United States or to conduct a public offer of securities in the United States. In addition, Tetragon has not been and will not be registered under the U.S. Investment Company Act of 1940, and investors will not be entitled (cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:38)(cid:72)(cid:89)(cid:19)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5) registered in the public register of the Netherlands Authority for the Financial Markets under Section 1:107 of the FMSA as an alternative investment scheme from a designated country. Tetragon shares are subject to legal and other restrictions on resale and the Euronext Amsterdam and SFS trading markets are less liquid than other major exchanges, which could affect the price of the shares. There are additional restrictions on the resale of Tetragon shares by shareholders who are located in the United States or who are U.S. persons and on the resale of shares by any shareholder to any person who is located in the United States or is a U.S. person. These restrictions include that each shareholder who is located in the United States or who is a U.S. person (cid:82)(cid:90)(cid:88)(cid:89)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:5)(cid:1126)(cid:54)(cid:90)(cid:70)(cid:81)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:53)(cid:90)(cid:87)(cid:72)(cid:77)(cid:70)(cid:88)(cid:74)(cid:87)(cid:1127)(cid:5)(cid:84)(cid:87)(cid:5)(cid:70)(cid:5) “Knowledgeable Employee” (each as (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:40)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:5)(cid:38)(cid:72)(cid:89)(cid:5) of 1940), and, accordingly, that shares may be resold to a person located in the United States or who is a U.S. person only (cid:78)(cid:75)(cid:5)(cid:88)(cid:90)(cid:72)(cid:77)(cid:5)(cid:85)(cid:74)(cid:87)(cid:88)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:5)(cid:1126)(cid:54)(cid:90)(cid:70)(cid:81)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:53)(cid:90)(cid:87)(cid:72)(cid:77)(cid:70)(cid:88)(cid:74)(cid:87)(cid:1127)(cid:5) or a “Knowledgeable Employee” under the Investment Company Act of 1940. These restrictions may adversely affect overall liquidity of the shares. Tetragon’s shares are not intended for European retail investors. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long term in a predominantly income-producing investment and who have experience (cid:78)(cid:83)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:82)(cid:70)(cid:87)(cid:80)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) collective investment undertakings and are capable themselves of evaluating the merits and risks of Tetragon shares (cid:70)(cid:83)(cid:73)(cid:5)(cid:92)(cid:77)(cid:84)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5)(cid:71)(cid:84)(cid:89)(cid:77)(cid:5) to invest in potentially illiquid securities and to be able to bear any losses (which may equal the whole amount invested) that may result from the investment. Equity-based employee compensation plans In the fourth quarter of 2015, Tetragon bought back approximately 5.65 million of its non-voting shares in a tender offer to hedge against (or otherwise offset the future impact of) grants of shares under an equity-based long- term incentive plan and other equity awards by TFG Asset Management for certain senior employees (excluding the principals of the investment manager). These awards under the long-term incentive plan, along with other equity- based awards, are typically spread over multiple vesting dates up to 2024 which may vary for each employee and are subject to forfeiture provisions. The arrangements may also include additional periods, beyond the vesting dates, during which employees gain exposure to the performance of the Tetragon shares, but the shares are not issued to the employees. Such (cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:87)(cid:70)(cid:83)(cid:76)(cid:74)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:84)(cid:83)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5) years beyond the vesting dates. In February 2021, further awards to certain senior TFG Asset Management employees (excluding the principals of the investment manager) were made covering vesting and release periods out to 2032. 2.3 million shares acquired during the buybacks made in 2020 will be used to hedge against (or otherwise offset the future impact of) these awards. The shares underlying these equity- based incentive programs typically will be held in escrow until they vest and will be eligible to receive shares under the Tetragon Optional Stock Dividend Plan (DRIP Shares). In July 2019, TFG Asset Management entered into an employment agreement (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:17)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5) Tetragon, that covers his services to TFG Asset Management for the period (cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:89) (cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:89)(cid:84)(cid:5)(cid:24)(cid:21)(cid:5)(cid:47)(cid:90)(cid:83)(cid:74)(cid:5)(cid:23)(cid:21)(cid:23)(cid:25)(cid:19)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:78)(cid:88)(cid:5) (cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:83)(cid:89)(cid:81)(cid:94) (cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5) TFG Ass TFG Asset Management as well as the (cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:46)(cid:83)(cid:91) (cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:53)(cid:84)(cid:81)(cid:94)(cid:76)(cid:84)(cid:83)(cid:5) event-dri event-driven European equity strategies (in additi (in addition to other roles). Under the (cid:89)(cid:74)(cid:87)(cid:82)(cid:88)(cid:5)(cid:84)(cid:75) (cid:89)(cid:74)(cid:87)(cid:82)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5) received received $9.5 million in cash in July 2019, $3.75 mi $3.75 million in cash in July 2020, 0.3 million T million Tetragon non-voting shares in July 202 July 2021 and will receive the following: • 2.1 mil • 2.1 million Tetragon non-voting shares shares in July 2024; and • betwee • between zero and an additional 3.15 million million Tetragon non-voting shares – with th with the number of shares based on agreed agreed-upon investment performance criteria criteria – vesting in years 5, 6 and 7. All of the All of the Tetragon non-voting shares (cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5) (cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) agreement are subject to forfeiture conditions. The shares are held in escrow for release upon vesting and are eligible to participate in the optional stock dividend program, and as a result of subsequent dividends, further shares will be added to the escrow. Of the shares held in escrow (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:87)(cid:74)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) agreement, the 2.1 million shares (plus dividend shares) vesting in July 2024 are not subject to performance criteria per se and are included in Figure 27. The remaining shares are subject to agreed-upon investment performance criteria and are excluded from Figure 27. among other things and in addition to the award shares, any DRIP Shares and shares that will be required to cover employer taxes. At 31 December 2021, approximately 6.2 million shares were included in the fully diluted share count. On 1 January 2020, the Independent Directors were awarded shares in Tetragon which vest on 31 December 2022 and are subject to forfeiture provisions. The fair value of the award, as determined by the share price on grant date of $12.25 per share, is $300,000 per Independent Director. For the purposes of determining the fully diluted NAV per Share, the dilutive effect of the equity-based compensation (cid:85)(cid:81)(cid:70)(cid:83)(cid:88)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:71)(cid:74)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:90)(cid:81)(cid:81)(cid:94)(cid:5) diluted share count over the life of the plans. Such dilution will include, Shareholder information Sh (cid:55)(cid:74)(cid:76) (cid:55)(cid:74)(cid:76)(cid:78)(cid:88)(cid:89)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5) Tetr Tetragon Financial Group Limited Mill Mill Court, La Charroterie St. P St. Peter Port, Guernsey Cha Channel Islands GY1 1EJ Inve Investment Manager Tetr Tetragon Financial Management LP 399 399 Park Avenue, 22nd Floor New New York, NY 10022 Unit United States of America Gen General Partner of Inve Investment Manager Tetr Tetragon Financial Man Management GP LLC 399 399 Park Avenue, 22nd Floor New New York, NY 10022 Unit United States of America Inve Investor Relations Yuko Yuko Thomas ir@t ir@tetragoninv.com Pres Press Inquiries Pros Prosek Partners And Andy Merrill / Ryan Fitzgibbon pro- pro-tetragon@prosek.com Auditors KPMG Channel Islands Limited Glategny Court, Glategny Esplanade St. Peter Port, Guernsey Channel Islands GY1 1WR Sub-Registrar and CREST Transfer Agent Computershare Investor Services (Guernsey) Limited 1st Floor, Tudor House Le Bordage St Peter Port, Guernsey Channel Islands GY1 1DB Legal Advisor (as to U.S. law) Covington & Burling LLP The New York Times Building 620 Eighth Avenue New York, NY 10018-1405 United States of America Legal Advisor (as to Guernsey law) Ogier (Guernsey) LLP Redwood House St. Julian’s Avenue St. Peter Port, Guernsey Channel Islands GY1 1WA Legal Advisor (as to Dutch law) De Brauw Blackstone Westbroek N.V. Claude Debussylaan 80 1082 MD Amsterdam The Netherlands Stock Listing Euronext in Amsterdam, a regulated market of Euronext Amsterdam N.V. London Stock Exchange (Specialist Fund Segment) Administrator and Registrar TMF Group Fund Administration (Guernsey) Limited Mill Court, La Charroterie St. Peter Port Guernsey GY1 1EJ Channel Islands 82 Tetragon Financial Group Annual Re Annual Report 2021 83 6 Independent Auditor’s Report and Audited Financial Statements /86 Independent Auditor’s Report /92 Consolidated Statement of Financial Position /93 Consolidated Statement of Comprehensive Income /94 Consolidated Statement of Changes in Equity /95 Consolidated Statement of Cash Flows /96 Notes to the Financial Statements 84 Tetragon Financial Group Annual Re Annual Report 2021 85 Independent Auditor’s Report and Audited Financial Statements Independent auditor’s report to the members of Tetragon Financial Group Limited (cid:52)(cid:71)(cid:82)(cid:81)(cid:84)(cid:86)(cid:3)(cid:81)(cid:80)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:67)(cid:87)(cid:70)(cid:75)(cid:86)(cid:3)(cid:81)(cid:72)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:69)(cid:81)(cid:80)(cid:85)(cid:81)(cid:78)(cid:75)(cid:70)(cid:67)(cid:86)(cid:71)(cid:70)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85) (cid:52)(cid:90)(cid:87)(cid:5)(cid:84)(cid:85)(cid:78)(cid:83)(cid:78)(cid:84)(cid:83)(cid:5)(cid:78)(cid:88)(cid:5)(cid:90)(cid:83)(cid:82)(cid:84)(cid:73)(cid:78)(cid:1834)(cid:74)(cid:73) Basis for opinion We have audited the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:74)(cid:89)(cid:87)(cid:70)(cid:76)(cid:84)(cid:83)(cid:5) Financial Group Limited (the “Company”) and its subsidiary (together, the “Group”), which comprise the consolidated (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5) 31 December 2021, the consolidated statements of comprehensive income, (cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) year then ended, and notes, comprising (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:85)(cid:84)(cid:81)(cid:78)(cid:72)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) other explanatory information. In our opinion, the accompanying (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:31) • give a true and fair view of the (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:44)(cid:87)(cid:84)(cid:90)(cid:85)(cid:5)(cid:70)(cid:88)(cid:5) at 31 December 2021, and of the (cid:44)(cid:87)(cid:84)(cid:90)(cid:85)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:74)(cid:87)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) (cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:83)(cid:5)(cid:74)(cid:83)(cid:73)(cid:74)(cid:73)(cid:32) • are prepared in accordance with International Financial Reporting Standards as adopted by the EU; and • comply with the Companies (Guernsey) Law, 2008. We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We (cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:75)(cid:90)(cid:81)(cid:1834)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:84)(cid:90)(cid:87)(cid:5)(cid:74)(cid:89)(cid:77)(cid:78)(cid:72)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:88)(cid:85)(cid:84)(cid:83)(cid:88)(cid:78)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) under, and are independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies’ Audit Rules and Guidance. We believe that the audit (cid:74)(cid:91)(cid:78)(cid:73)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:92)(cid:74)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:84)(cid:71)(cid:89)(cid:70)(cid:78)(cid:83)(cid:74)(cid:73)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5) and appropriate basis for our opinion. Key audit matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgment, (cid:92)(cid:74)(cid:87)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:82)(cid:84)(cid:88)(cid:89)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:70)(cid:90)(cid:73)(cid:78)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements and include the most (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:88)(cid:88)(cid:74)(cid:73)(cid:5)(cid:87)(cid:78)(cid:88)(cid:80)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:82)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:5) misstatement (whether or not due to (cid:75)(cid:87)(cid:70)(cid:90)(cid:73)(cid:14)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:90)(cid:88)(cid:17)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5) which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:92)(cid:77)(cid:84)(cid:81)(cid:74)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2020): The risk Our response Valuation of non-derivative level 3 Valuatio (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81) (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:13)(cid:74)(cid:93)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:58)(cid:83)(cid:81)(cid:78)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5)(cid:56)(cid:89)(cid:84)(cid:72)(cid:80)(cid:5) (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5) and Other Real Estate) and Othe $1,899.7 M $1,899.7 Million; (2020: $1,530.9 Million) Refer to note 2 accounting policy and note 3 Refer to n and 4 disclosures and 4 disc Basis: As at 31 December 2021, the Group held (cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:24)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) (cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:13)(cid:74)(cid:93)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:58)(cid:83)(cid:81)(cid:78)(cid:88)(cid:89)(cid:74)(cid:73)(cid:5) Stock and Other Real Estate) representing 66% of the Group’s net asset value. These (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:5)(cid:40)(cid:49)(cid:52)(cid:5)(cid:42)(cid:86)(cid:90)(cid:78)(cid:89)(cid:94)(cid:5)(cid:57)(cid:87)(cid:70)(cid:83)(cid:72)(cid:77)(cid:74)(cid:88)(cid:17)(cid:5) TFG Asset Management and other Investment Funds & Vehicles. The fair value of these investments is based on the following valuation methodologies: • for CLO Equity Tranches, a marked to model approach; • for TFG Asset Management, a sum of the parts valuation, using a combination of marked to model and market multiple approaches; and • for the remaining level 3 Investments, comprising Investment Funds and Vehicles, partner capital or net asset value statements provided by independent administrators. In addition, independent third party valuation providers (the “Valuation Agent”) have been engaged to assist in the valuation process for certain level 3 investments such as TFG Asset Management. Risk: The valuation of level 3 investments (excluding Other Real Estate of $42.7 million included within “Investment funds and vehicles” and Unlisted Stock of $50.3 million, both as disclosed in note 4) are considered a (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:87)(cid:74)(cid:70)(cid:5)(cid:84)(cid:75)(cid:5)(cid:84)(cid:90)(cid:87)(cid:5)(cid:70)(cid:90)(cid:73)(cid:78)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:91)(cid:78)(cid:74)(cid:92)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:88)(cid:89)(cid:78)(cid:82)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:79)(cid:90)(cid:73)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) that may be involved in the determination of their fair value and given that it represents the majority of the net assets of the Group. The effect of these matters is that, as part of our risk assessment, we determined that the fair value of these non-derivative level 3 (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5) or loss has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our (cid:82)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements as a whole. The consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:73)(cid:78)(cid:88)(cid:72)(cid:81)(cid:84)(cid:88)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:5)(cid:25)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) sensitivities estimated by the Group. Our audit procedures included: Internal control: We have obtained an understanding of the valuation process and tested the design and implementation of the valuation process control. Challenging managements’ assumptions and inputs including use of KPMG specialists: For a risk based sample of CLO Equity Tranches, with the support of a KPMG valuation specialist, we independently tested reference prices through the use of (cid:75)(cid:90)(cid:83)(cid:73)(cid:70)(cid:82)(cid:74)(cid:83)(cid:89)(cid:70)(cid:81)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:82)(cid:84)(cid:73)(cid:74)(cid:81)(cid:81)(cid:78)(cid:83)(cid:76)(cid:17)(cid:5)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5) key inputs and assumptions used, such as default rates, prepayment rates, discount rates and recovery rates, to observable market data. For investments valued by management using the assistance of their Valuation Agent, with the support of a KPMG valuation specialist we: • assessed the objectivity, capabilities and competence of the Valuation Agent engaged to provide valuation services to the Group; • assessed the reasonableness of the methodology applied by the Valuation Agent in developing the fair value of TFG Asset Management; and • critically assessed the valuations provided by the Valuation Agent and challenged and corroborated material valuation inputs and assumptions to supporting documentation or market available information. For Investment Funds & Vehicles valued using net asset values (“NAVs”) we obtained (cid:78)(cid:83)(cid:73)(cid:74)(cid:85)(cid:74)(cid:83)(cid:73)(cid:74)(cid:83)(cid:89)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1834)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:77)(cid:78)(cid:87)(cid:73)(cid:5) party administrators of these investment values as at 31 December 2021 (or latest available date). Where coterminous statements were not available we reconciled (cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:1834)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:88)(cid:90)(cid:71)(cid:88)(cid:74)(cid:86)(cid:90)(cid:74)(cid:83)(cid:89)(cid:5)(cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81)(cid:5) movements to the valuations recorded by the Group. For a statistical sample, we inspected (cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:89)(cid:74)(cid:88)(cid:89)(cid:5)(cid:70)(cid:90)(cid:73)(cid:78)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) Investment Funds & Vehicles in order to consider the nature of the investments held by (cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:75)(cid:90)(cid:83)(cid:73)(cid:88)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:89)(cid:70)(cid:83)(cid:73)(cid:70)(cid:87)(cid:73)(cid:88)(cid:5) (cid:70)(cid:85)(cid:85)(cid:81)(cid:78)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:82)(cid:84)(cid:73)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:90)(cid:73)(cid:78)(cid:89)(cid:84)(cid:87)(cid:88)(cid:1123)(cid:5) reports and other disclosures which may have been relevant to the valuation. Assessing disclosures: We considered the adequacy of the (cid:73)(cid:78)(cid:88)(cid:72)(cid:81)(cid:84)(cid:88)(cid:90)(cid:87)(cid:74)(cid:88)(cid:5)(cid:82)(cid:70)(cid:73)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements (see notes 2, 3 and 4) in relation to the use of estimates and judgements regarding the fair value of investments, the valuation estimation techniques inherent therein and fair value disclosures for compliance with IFRS as adopted by the EU. 86 Tetragon Financial Group Annual Re Annual Report 2021 87 Independent Auditor’s Report and Audited Financial Statements Independent auditor’s report to the members of Tetragon Financial Group Limited (continued) Our application of materiality and an overview of the scope of our audit (cid:50)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements as a whole was set at $57.5 million, determined with reference to a benchmark of group net assets of $2,876.8 million, of which it represents approximately 2.0% (2020: 2.0%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to (cid:70)(cid:5)(cid:82)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:5)(cid:70)(cid:72)(cid:87)(cid:84)(cid:88)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements as a whole. Performance materiality for the Group was set at 75% (2020: 75%) of materiality for the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5) whole, which equates to $43.15 million. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We reported to the Audit Committee (cid:70)(cid:83)(cid:94)(cid:5)(cid:72)(cid:84)(cid:87)(cid:87)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:84)(cid:87)(cid:5)(cid:90)(cid:83)(cid:72)(cid:84)(cid:87)(cid:87)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) misstatements exceeding $2.87 (cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:17)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:73)(cid:73)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) misstatements that warranted reporting on qualitative grounds. Our audit of the Group was undertaken (cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:82)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) above, which has informed our (cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:87)(cid:78)(cid:88)(cid:80)(cid:88)(cid:5) of material misstatement and the associated audit procedures performed in those areas as detailed above. The group team performed the audit of the Group as if it was a single aggregated (cid:88)(cid:74)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:75)(cid:84)(cid:87)(cid:82)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:90)(cid:73)(cid:78)(cid:89)(cid:5) was performed using the materiality level set out above and covered 100% of total (cid:76)(cid:87)(cid:84)(cid:90)(cid:85)(cid:5)(cid:87)(cid:74)(cid:91)(cid:74)(cid:83)(cid:90)(cid:74)(cid:17)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:76)(cid:87)(cid:84)(cid:90)(cid:85)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:71)(cid:74)(cid:75)(cid:84)(cid:87)(cid:74)(cid:5) tax, and total group assets and liabilities. Going concern The directors have prepared the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the (cid:40)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:82)(cid:74)(cid:70)(cid:83)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) this is realistic. They have also concluded that there are no material uncertainties (cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:72)(cid:84)(cid:90)(cid:81)(cid:73)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:89)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:73)(cid:84)(cid:90)(cid:71)(cid:89)(cid:5) over their ability to continue as a going concern for at least a year from the date (cid:84)(cid:75)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:91)(cid:70)(cid:81)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements (the “going concern period”). In our evaluation of the directors’ conclusions, we considered the inherent risks to the Group and the Company’s business model and analysed how those risks might affect the Group and (cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5) or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Group and the Company’s (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:84)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:5) operations over this period were: • Availability of capital to meet operating costs and other (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:32)(cid:5)(cid:70)(cid:83)(cid:73) • The ability of the Group to comply with debt covenants. We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:88)(cid:84)(cid:90)(cid:87)(cid:72)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:73)(cid:78)(cid:72)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:44)(cid:87)(cid:84)(cid:90)(cid:85)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:40)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:75)(cid:84)(cid:87)(cid:74)(cid:72)(cid:70)(cid:88)(cid:89)(cid:88)(cid:19) We considered whether the going concern disclosure in note 2 to the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:76)(cid:78)(cid:91)(cid:74)(cid:88)(cid:5) a full and accurate description of the directors’ assessment of going concern. Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:85)(cid:87)(cid:78)(cid:70)(cid:89)(cid:74)(cid:32) (cid:1132) (cid:92)(cid:74)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:84)(cid:83)(cid:72)(cid:90)(cid:87)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5) the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually (cid:84)(cid:87)(cid:5)(cid:72)(cid:84)(cid:81)(cid:81)(cid:74)(cid:72)(cid:89)(cid:78)(cid:91)(cid:74)(cid:81)(cid:94)(cid:17)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:72)(cid:70)(cid:88)(cid:89)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) doubt on the Group and the Company’s ability to continue as a going concern for the going concern period; and • we found the going concern disclosure in the notes to the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:71)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:74)(cid:85)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:19) However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will continue in operation. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:74)(cid:91)(cid:74)(cid:83)(cid:5)(cid:89)(cid:77)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:92)(cid:74)(cid:5) have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and (cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:70)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:74)(cid:88)(cid:88)(cid:5)(cid:81)(cid:78)(cid:80)(cid:74)(cid:81)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non- compliance with all laws and regulations. Fraud and breaches of Fraud laws and regulations – laws a ability ability to detect Identifyi Identifying and responding to risks of material material misstatement due to fraud To identi To identify risks of material misstate misstatement due to fraud (“fraud risks”) w risks”) we assessed events or conditions that cou that could indicate an incentive or pressure pressure to commit fraud or provide an opportun opportunity to commit fraud. Our risk assessm assessment procedures included: • enquir • enquiring of management as to the Group’ Group’s policies and procedures to prev to prevent and detect fraud as well as enq as enquiring whether management have k have knowledge of any actual, suspec suspected or alleged fraud; • readin • reading minutes of meetings of those charge charged with governance; and • using a • using analytical procedures to iden to identify any unusual or unexpe unexpected relationships. As requi As required by auditing standards, we perform perform procedures to address the risk of mana of management override of controls, in particula particular the risk that management may be in a p be in a position to make inappropriate accounti accounting entries. On this audit we do not belie not believe there is a fraud risk related to revenu to revenue recognition because the Group’s r Group’s revenue streams are simple in nature in nature with respect to accounting (cid:85)(cid:84)(cid:81)(cid:78)(cid:72)(cid:94)(cid:5)(cid:72)(cid:77) (cid:85)(cid:84)(cid:81)(cid:78)(cid:72)(cid:94)(cid:5)(cid:72)(cid:77)(cid:84)(cid:78)(cid:72)(cid:74)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:74)(cid:70)(cid:88)(cid:78)(cid:81)(cid:94)(cid:5)(cid:91)(cid:74)(cid:87)(cid:78)(cid:1834)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5) to extern to external data sources or agreements with little with little or no requirement for estimatio estimation from management. We did not ident not identify any additional fraud risks. We perfo We performed procedures including • Identif • Identifying journal entries and other a other adjustments to test based on risk on risk criteria and comparing any (cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834) (cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:74)(cid:83)(cid:89)(cid:87)(cid:78)(cid:74)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) docum documentation; and • incorp • incorporating an element of unpred unpredictability in our audit procedures. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations (cid:60)(cid:74)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:81)(cid:70)(cid:92)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) regulations that could reasonably be expected to have a material effect on (cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Group and the Company are subject to laws and regulations that (cid:73)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:81)(cid:94)(cid:5)(cid:70)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the (cid:87)(cid:74)(cid:81)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:78)(cid:89)(cid:74)(cid:82)(cid:88)(cid:19) The Group and the Company are subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or (cid:73)(cid:78)(cid:88)(cid:72)(cid:81)(cid:84)(cid:88)(cid:90)(cid:87)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements, for instance through the (cid:78)(cid:82)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:74)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:78)(cid:89)(cid:78)(cid:76)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:87)(cid:5)(cid:78)(cid:82)(cid:85)(cid:70)(cid:72)(cid:89)(cid:88)(cid:5) on the Group and the Company’s ability to (cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:74)(cid:19)(cid:5)(cid:60)(cid:74)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:74)(cid:87)(cid:91)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5) regulation as being the area most likely to have such an effect, recognising the regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. 88 Tetragon Financial Group Annual Re Annual Report 2021 89 Independent Auditor’s Report and Audited Financial Statements Independent auditor’s report to the members of Tetragon Financial Group Limited (continued) Other information The directors are responsible for the other information. The other information comprises the information included (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:83)(cid:83)(cid:90)(cid:70)(cid:81)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:71)(cid:90)(cid:89)(cid:5)(cid:73)(cid:84)(cid:74)(cid:88)(cid:5) (cid:83)(cid:84)(cid:89)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements and our auditor’s report thereon. Our opinion on the consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:73)(cid:84)(cid:74)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5) the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5) our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5) our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. We have nothing to report on other matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: • the Company has not kept proper accounting records; or (cid:1132) (cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements are not in agreement with the accounting records; or • we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on pages 54 and 55, the directors are responsible for: the (cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:71)(cid:74)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:70)(cid:89)(cid:78)(cid:88)(cid:1834)(cid:74)(cid:73)(cid:5) that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) are free from material misstatement, whether due to fraud or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected (cid:89)(cid:84)(cid:5)(cid:78)(cid:83)(cid:1835)(cid:90)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:72)(cid:84)(cid:83)(cid:84)(cid:82)(cid:78)(cid:72)(cid:5)(cid:73)(cid:74)(cid:72)(cid:78)(cid:88)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5) of users taken on the basis of the (cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5) A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The purpose of this report and restrictions on its use by persons other than the Company’s members, as a body This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Report on Regulatory Report Requir Requirements Europea European Single Electronic Format (ESEF) Format ( The Group has prepared its annual The Grou report in ESEF. The requirements for this report in format a format are set out in the Commission Delegate Delegated Regulation (EU) 2019/815 with rega with regard to regulatory technical (cid:88)(cid:89)(cid:70)(cid:83)(cid:73)(cid:70)(cid:87)(cid:73) (cid:88)(cid:89)(cid:70)(cid:83)(cid:73)(cid:70)(cid:87)(cid:73)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:5) single el single electronic reporting format (these re (these requirements are hereinafter referred referred to as: the RTS on ESEF). In our opinion, the annual report In our op prepared in the XHTML format, including prepared the parti the partially tagged consolidated (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) reporting reporting package by the Group, has been pre been prepared in all material respects in accord in accordance with the RTS on ESEF. The direc The directors are responsible for preparin preparing the annual report including (cid:89)(cid:77)(cid:74) (cid:72)(cid:84)(cid:83)(cid:88) (cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) in accord in accordance with the RTS on ESEF, whereby whereby the directors combine the various c various components into a single reporting reporting package. Our responsibility is to obta is to obtain reasonable assurance for our o for our opinion whether the annual report in report in this reporting package, is in accordan accordance with the RTS on ESEF. Our proc Our procedures included: • Obtain • Obtaining an understanding of (cid:89)(cid:77)(cid:74)(cid:5)(cid:44)(cid:87)(cid:84) (cid:89)(cid:77)(cid:74)(cid:5)(cid:44)(cid:87)(cid:84)(cid:90)(cid:85)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:85)(cid:84)(cid:87)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) proces process, including the preparation of the of the reporting package; • Obtain • Obtaining the reporting package and pe and performing validations to determ determine whether the reporting packag package containing the Inline XBRL i XBRL instance document and the (cid:61)(cid:39)(cid:55)(cid:49)(cid:5)(cid:74) (cid:61)(cid:39)(cid:55)(cid:49)(cid:5)(cid:74)(cid:93)(cid:89)(cid:74)(cid:83)(cid:88)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:70)(cid:93)(cid:84)(cid:83)(cid:84)(cid:82)(cid:94)(cid:5)(cid:1834)(cid:81)(cid:74)(cid:88)(cid:5) have b have been prepared in accordance (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77) (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:74)(cid:72)(cid:77)(cid:83)(cid:78)(cid:72)(cid:70)(cid:81)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5) as incl as included in the RTS on ESEF; • Examin • Examining the information related to (cid:89)(cid:77)(cid:74) (cid:72)(cid:84) (cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) in the r in the reporting package to determine whethe whether all required taggings have been a been applied and whether they are in accord accordance with the RTS on ESEF. For and on behalf of KPMG Channel Islands Limited: Deborah Smith Chartered Accountants and Recognised Auditors Guernsey Date: 4 March 2022 90 Tetragon Financial Group Annual Re Annual Report 2021 91 Independent Auditor’s Report and Audited Financial Statements Consolidated Statement of Financial Position Con Consolidated Statement of Comprehensive Income As of Assets (cid:51)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5) (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88) Other receivables and prepayments Amounts due from brokers Cash and cash equivalents Total assets Liabilities Loans and borrowings (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) Other payables and accrued expenses Total liabilities Net assets Equity Share capital Other equity Share-based compensation reserve Retained earnings Shares outstanding Number of shares Net Asset Value per share (US$) Note 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM For the y For the year ended Note 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 4 4 7 6 6 10 4 9 12 12 12 2,852.4 2,420.6 (cid:51)(cid:74)(cid:89)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5) (cid:51)(cid:74)(cid:89)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) (cid:51)(cid:74)(cid:89)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:5) (cid:51)(cid:74)(cid:89)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:5)(cid:84)(cid:83)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88) 4.2 2.6 5.9 198.8 8.6 3.3 44.4 191.6 3,063.9 2,668.5 75.0 1.5 110.6 187.1 100.0 25.2 68.9 194.1 2,876.8 2,474.4 0.1 814.7 60.1 2,001.9 2,876.8 Million 90.2 31.88 0.1 799.6 54.6 1,620.1 2,474.4 Million 88.8 27.87 Net loss Net loss on foreign exchange Interest i Interest income Total inc Total income Managem Management fees Incentive Incentive fee Legal and Legal and professional fees Share ba Share based employee compensation Audit fee Audit fees Other op Other operating expenses and administrative expenses Operatin Operating expenses (cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83) (cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:71)(cid:74)(cid:75)(cid:84)(cid:87)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88) Finance c Finance costs (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:83) (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:87)(cid:74)(cid:77)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87) Earnings Earnings per share Basic Basic Diluted Diluted Weighted Weighted average shares outstanding Basic Basic Diluted Diluted 2 2 15 11 12 10 16 16 16 16 621.2 (10.4) (1.4) 0.2 609.6 (37.5) (124.6) (9.8) (10.4) (0.7) (2.6) 304.4 (0.2) - 2.2 306.4 (34.4) (72.7) (7.7) (11.4) (0.5) (2.4) (185.6) (129.1) 424.0 (5.8) 418.2 US$ 4.68 4.16 177.3 (6.2) 171.1 US$ 1.87 1.67 Million Million 89.4 100.4 91.7 102.6 (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:78)(cid:83)(cid:76)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:76)(cid:87)(cid:70)(cid:81)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84) (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:78)(cid:83)(cid:76)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:76)(cid:87)(cid:70)(cid:81)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) Signed on behalf of the Board of Directors by: David O’Leary Director Steven Hart Director Date: 4 March 2022 92 Tetragon Financial Group Annual Re Annual Report 2021 93 Independent Auditor’s Report and Audited Financial Statements Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Con As at 1 January 2020 0.1 830.9 1,498.0 (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:87)(cid:74)(cid:77)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87) Transactions with owners recognised directly in equity Shares released from escrow Dividends on shares released from escrow Share-based compensation Cash dividends Stock dividends Purchase of treasury shares As at 31 December 2020 (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:82)(cid:85)(cid:87)(cid:74)(cid:77)(cid:74)(cid:83)(cid:88)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:84)(cid:82)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:5) Transactions with owners recognised directly in equity Shares released from escrow Dividends on shares released from escrow Share-based compensation Cash dividends Stock dividends Issue of Shares Purchase of treasury shares As at 31 December 2021 (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:78)(cid:83)(cid:76)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:76)(cid:87)(cid:70)(cid:81)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) Share capital US$ MM Other equity US$ MM Retained earnings US$ MM Share-based compensation reserve US$ MM Total US$ MM - - - - - - - - 171.1 13.9 4.2 - - 14.1 (63.5) - (4.2) - (30.7) (14.1) - 57.1 - 2,386.1 171.1 (13.9) - 11.4 - - - - - 11.4 (30.7) - (63.5) 0.1 799.6 1,620.1 54.6 2,474.4 - - - - - - - - - 418.2 - 418.2 4.9 0.6 - - 11.6 0.1 (2.1) - (0.6) - (24.2) (11.6) - - (4.9) - 10.4 - - - - - - 10.4 (24.2) - 0.1 (2.1) 0.1 814.7 2,001.9 60.1 2,876.8 For the y For the year ended Operating activities Operatin (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:5)(cid:5) (cid:53)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87) Adjustments for: Adjustm Gains on investments and derivatives Gains on Share based compensation Share ba Interest income Interest i Finance costs Finance (cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:71)(cid:74)(cid:75)(cid:84)(cid:87)(cid:74)(cid:5)(cid:82)(cid:84)(cid:91)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:92)(cid:84)(cid:87)(cid:80)(cid:78)(cid:83)(cid:76)(cid:5)(cid:72)(cid:70)(cid:85)(cid:78)(cid:89)(cid:70)(cid:81) (cid:52)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83) Decrease/(increase) in receivables Decrease Increase in payables Increase Decrease Decrease in amounts due from brokers (cid:40)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88) (cid:40)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92) Proceeds Proceeds from sale/prepayment/maturity of investments (cid:51)(cid:74)(cid:89)(cid:5)(cid:85)(cid:70)(cid:94)(cid:82) (cid:51)(cid:74)(cid:89)(cid:5)(cid:85)(cid:70)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88) Purchase Purchase of investments Cash inte Cash interest received Net cash Net cash generated from operating activities Financin Financing activities Repayme Repayment of loans and borrowings Proceeds Proceeds from loans and borrowings Finance Finance costs paid Purchase Purchase of treasury shares Dividend Dividends paid to shareholders* (cid:51)(cid:74)(cid:89)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77) (cid:51)(cid:74)(cid:89)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:72)(cid:89)(cid:78)(cid:91)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) Net incre Net increase in cash and cash equivalents Cash and Cash and cash equivalents at beginning of year Cash and Cash and cash equivalents at end of year (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84) (cid:57)(cid:77)(cid:74)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:82)(cid:85)(cid:70)(cid:83)(cid:94)(cid:78)(cid:83)(cid:76)(cid:5)(cid:83)(cid:84)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:76)(cid:87)(cid:70)(cid:81)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 418.2 171.1 (610.8) (304.2) 10.4 (0.2) 5.8 11.4 (2.2) 6.2 (176.6) (117.7) 0.7 37.3 38.4 (100.2) 531.6 (25.8) (2.6) 31.7 2.7 (85.9) 540.5 (9.5) (341.5) (238.8) 0.2 64.3 2.2 208.5 (75.0) (150.0) 50.0 (5.8) (2.1) (24.2) (57.1) 7.2 191.6 198.8 100.0 (6.2) (63.5) (30.7) (150.4) 58.1 133.5 191.6 94 Tetragon Financial Group Annual Report 2021 Annual Re 95 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85) Note 1 Corporate information Tetragon Financial Group Limited (“Tetragon” or the “Fund”) was registered in Guernsey on 23 June 2005 as a company limited by shares, with registered number 43321. All voting shares of the Fund are held by Polygon Credit Holdings II Limited (the “Voting Shareholder”). The Fund continues to be registered and domiciled in Guernsey, and the Fund’s non-voting shares (the “Shares”) are listed on Euronext in Amsterdam, a regulated market of Euronext Amsterdam N.V. (ticker symbol: TFG.NA) and on the Specialist Fund Segment of the London Stock Exchange plc (ticker symbols: TFG.LN and TFGS. (cid:49)(cid:51)(cid:14)(cid:19)(cid:5)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:87)(cid:74)(cid:76)(cid:78)(cid:88)(cid:89)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:84)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:78)(cid:88)(cid:5) Mill Court, La Charroterie, St. Peter Port, Guernsey, GY1 1EJ, Channel Islands. Note 2 (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) policies Basis of preparation (cid:57)(cid:77)(cid:74)(cid:5)(cid:72)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) of the Fund (the “Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and comply with the Companies (Guernsey) Law, 2008 and give a true and fair view. (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5) been prepared on a historical cost (cid:71)(cid:70)(cid:88)(cid:78)(cid:88)(cid:17)(cid:5)(cid:74)(cid:93)(cid:72)(cid:74)(cid:85)(cid:89)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) instruments and certain non-derivative (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) (cid:77)(cid:74)(cid:81)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5) (“FVTPL”) that have been measured at fair value. The accounting policies have been consistently applied to all periods (cid:85)(cid:87)(cid:74)(cid:88)(cid:74)(cid:83)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:85)(cid:87)(cid:74)(cid:88)(cid:74)(cid:83)(cid:89)(cid:74)(cid:73)(cid:5) in United States Dollars (“USD” or “US$”), which is the functional currency of the Fund, expressed in USD millions (“US$ MM”) (unless otherwise noted). The share capital of the Fund and the majority of its investments are denominated in USD. Most of the expenses and fees paid by the Fund are in USD. Hence, the Directors have determined that USD, as functional and (cid:85)(cid:87)(cid:74)(cid:88)(cid:74)(cid:83)(cid:89)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:5)(cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:83)(cid:72)(cid:94)(cid:17)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) Fund’s primary economic environment. In accordance with IFRS 10 Consolidated Financial Statements (“IFRS 10”), the Fund is an investment entity and, as such, does not consolidate the entities it controls where they are deemed to be subsidiaries except for Tetragon Financial Group (Delaware) LLC. Tetragon Financial Group (Delaware) LLC was formed in July 2020 to hold the collateral for the revolving credit facility. This subsidiary’s main purpose and activity is to provide a service to the Fund, as such, it is consolidated on a line-by-line basis with balances between the Fund and this subsidiary eliminated. The (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:88)(cid:90)(cid:71)(cid:88)(cid:78)(cid:73)(cid:78)(cid:70)(cid:87)(cid:94)(cid:5) are prepared at the same reporting date using the same accounting policies. All other interests in subsidiaries are (cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5) or loss (“FVTPL”). Investments in (cid:70)(cid:88)(cid:88)(cid:84)(cid:72)(cid:78)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:70)(cid:81)(cid:88)(cid:84)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:19)(cid:5)(cid:5) Subsidiaries are consolidated from the date control is established by Tetragon and cease to be consolidated on the date control is transferred from Tetragon. (cid:57)(cid:77)(cid:74)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:88)(cid:70)(cid:89)(cid:78)(cid:88)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:78)(cid:89)(cid:5)(cid:78)(cid:88)(cid:5) appropriate to continue to adopt the going concern basis in preparing (cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) the Fund will be able to continue to meet its liabilities for at least twelve months from the date of approval of (cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5)(cid:5)(cid:46)(cid:83)(cid:5)(cid:82)(cid:70)(cid:80)(cid:78)(cid:83)(cid:76)(cid:5) this determination, the Directors have (cid:72)(cid:84)(cid:83)(cid:88)(cid:78)(cid:73)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:86)(cid:90)(cid:78)(cid:73)(cid:78)(cid:89)(cid:94)(cid:5) projections for the next 12 months, the nature of the Fund’s capital (including readily available resources such as cash, undrawn credit facility and liquid equities) and the applicable covenants on the revolving credit facility. The Directors have also considered the impact of the COVID-19 global pandemic, which resulted in unprecedented risks (cid:70)(cid:83)(cid:73)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:91)(cid:84)(cid:81)(cid:70)(cid:89)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:85)(cid:87)(cid:78)(cid:72)(cid:74)(cid:88)(cid:5) in global equity, bond and property markets. Due to the nature of the Fund and the resources available to it, (cid:40)(cid:52)(cid:59)(cid:46)(cid:41)(cid:18)(cid:22)(cid:30)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:78)(cid:82)(cid:85)(cid:70)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5) the going concern assessment. New standards and amendments to existing standards The Fund has considered all the standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Fund’s (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5)(cid:57)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:88)(cid:89)(cid:70)(cid:83)(cid:73)(cid:70)(cid:87)(cid:73)(cid:88)(cid:5) and interpretations are not relevant to the Fund’s activities, or their effects are not expected to be material. Foreign c Foreign currency translation Transact Transactions in foreign currencies are trans are translated to the Fund’s functional currency currency at the foreign currency exchang exchange rate ruling at the date of the tra of the transaction. All assets and liabilities liabilities denominated in foreign currencie currencies are translated to USD at the forei the foreign currency closing exchange rate rulin rate ruling at the reporting date. Foreign c Foreign currency exchange differences arising o arising on translation and realised gains and loss and losses on disposals or settlements of mone of monetary assets and liabilities are recognis recognised as net foreign exchange gain/ (loss) in (loss) in the Consolidated Statement of Comp of Comprehensive Income except for (cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:70)(cid:87) (cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:70)(cid:87)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) at FVTPL at FVTPL which are recognised as compon components of net gain on non- (cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91) (cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:5) and deriv and derivative instruments which are recognis recognised as components of net (cid:76)(cid:70)(cid:78)(cid:83)(cid:20)(cid:13)(cid:81)(cid:84)(cid:88) (cid:76)(cid:70)(cid:78)(cid:83)(cid:20)(cid:13)(cid:81)(cid:84)(cid:88)(cid:88)(cid:14)(cid:5)(cid:84)(cid:83)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:19) Financ Financial instruments (cid:13)(cid:78)(cid:14)(cid:5)(cid:40)(cid:81)(cid:70)(cid:88)(cid:88) (cid:13)(cid:78)(cid:14)(cid:5)(cid:40)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:88)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5) initial rec initial recognition into the following categorie categories, in accordance with IFRS 9 Financial Instruments (“IFRS 9”). 9 Financ Financial assets at amortised cost Financia (cid:38)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:78)(cid:88)(cid:5)(cid:82)(cid:74)(cid:70)(cid:88)(cid:90)(cid:87)(cid:74)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5) (cid:38)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78) amortised cost if it meets both amortise of the following conditions and is of the fo not designated as at FVTPL: not desig - it is held within a business model - it is hel whose objective is to hold assets to whose o (cid:72)(cid:84)(cid:81)(cid:81)(cid:74)(cid:72)(cid:89)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:70)(cid:72)(cid:89)(cid:90)(cid:70)(cid:81)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:32)(cid:5)(cid:70)(cid:83)(cid:73) (cid:72)(cid:84)(cid:81)(cid:81)(cid:74)(cid:72)(cid:89)(cid:5)(cid:72) - it has contractual terms which - it has c (cid:76)(cid:78)(cid:91)(cid:74)(cid:5)(cid:87)(cid:78)(cid:88)(cid:74)(cid:17)(cid:5)(cid:84)(cid:83)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:88)(cid:17)(cid:5)(cid:89)(cid:84)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5) (cid:76)(cid:78)(cid:91)(cid:74)(cid:5)(cid:87)(cid:78)(cid:88)(cid:74) (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:88)(cid:84)(cid:81)(cid:74)(cid:81)(cid:94)(cid:5)(cid:85)(cid:70)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70) principal and interest outstanding. principal Financial assets and liabilities at FVTPL (cid:38)(cid:81)(cid:81)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) as measured at amortised cost are measured at FVTPL. Financial liabilities attached to derivatives are also measured at FVTPL. Investments in derivatives, collateralised loan obligations (“CLOs”), loans and corporate bonds, listed and unlisted stock, investment funds and vehicles and private equity in asset management companies are included in this category. (cid:52)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89) amortised cost (cid:57)(cid:77)(cid:78)(cid:88)(cid:5)(cid:72)(cid:70)(cid:89)(cid:74)(cid:76)(cid:84)(cid:87)(cid:94)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:88)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:17)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:70)(cid:83)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5) as at FVTPL. The Fund includes in this category loans and borrowings and other payables and accrued expenses. (ii) Recognition (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:88)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5) (cid:84)(cid:87)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:92)(cid:77)(cid:74)(cid:83)(cid:5)(cid:78)(cid:89)(cid:5)(cid:71)(cid:74)(cid:72)(cid:84)(cid:82)(cid:74)(cid:88)(cid:5) a party to the contractual provisions of the instrument. Purchases or (cid:88)(cid:70)(cid:81)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:87)(cid:74)(cid:86)(cid:90)(cid:78)(cid:87)(cid:74)(cid:5) delivery of assets within the time frame generally established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date (i.e. the date that the Fund commits to purchase or sell the asset). (iii) Initial measurement (cid:43)(cid:78)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) liabilities at FVTPL are initially recognised in the Consolidated Statement of Financial Position at fair value. All transaction costs for such instruments are recognised (cid:78)(cid:82)(cid:82)(cid:74)(cid:73)(cid:78)(cid:70)(cid:89)(cid:74)(cid:81)(cid:94)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:19) Financial assets and liabilities (other (cid:89)(cid:77)(cid:70)(cid:83)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:14)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5) measured initially at their fair value adjusted for any directly attributable incremental costs of acquisition or issue. The Fund includes in this category cash The Fund and cash equivalents, amounts due from and cash brokers, receivable for securities sold and brokers, other sundry receivables. These assets other su are held with an intention to collect are held the principal and interest payments. the princ (iv) Subsequent measurement After initial measurement, the Fund (cid:87)(cid:74)(cid:18)(cid:82)(cid:74)(cid:70)(cid:88)(cid:90)(cid:87)(cid:74)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) (cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) value. Subsequent changes in the fair (cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) are recorded in net gain/(loss) on non- (cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:5) in the Consolidated Statement of Comprehensive Income. Subsequent changes in fair value of derivative instruments are recorded in net gain/ (cid:13)(cid:81)(cid:84)(cid:88)(cid:88)(cid:14)(cid:5)(cid:84)(cid:83)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) and liabilities in the Consolidated Statement of Comprehensive Income. Receivables are carried at amortised cost less any allowance for impairment with any impairment losses arising (cid:71)(cid:74)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:19)(cid:5) Financial liabilities, other than (cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:17)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5) measured at amortised cost using the effective interest method. (v) Derecognition (cid:38)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:13)(cid:84)(cid:87)(cid:17)(cid:5)(cid:92)(cid:77)(cid:74)(cid:87)(cid:74)(cid:5)(cid:70)(cid:85)(cid:85)(cid:81)(cid:78)(cid:72)(cid:70)(cid:71)(cid:81)(cid:74)(cid:17)(cid:5) (cid:70)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:70)(cid:5)(cid:85)(cid:70)(cid:87)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5) (cid:70)(cid:5)(cid:76)(cid:87)(cid:84)(cid:90)(cid:85)(cid:5)(cid:84)(cid:75)(cid:5)(cid:88)(cid:78)(cid:82)(cid:78)(cid:81)(cid:70)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:14)(cid:5) is derecognised where (i) the rights (cid:89)(cid:84)(cid:5)(cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5) have expired, or (ii) the Fund has either transferred its rights to receive cash (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:17)(cid:5)(cid:84)(cid:87)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:70)(cid:88)(cid:88)(cid:90)(cid:82)(cid:74)(cid:73)(cid:5) an obligation to pay the received cash (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:75)(cid:90)(cid:81)(cid:81)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:84)(cid:90)(cid:89)(cid:5)(cid:82)(cid:70)(cid:89)(cid:74)(cid:87)(cid:78)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:81)(cid:70)(cid:94)(cid:5) to a third party under a pass-through arrangement and in either cases in (ii): (a) the Fund has transferred substantially all of the risks and rewards of the asset; or (b) the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Fund has transferred its right to (cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:70)(cid:83)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:13)(cid:84)(cid:87)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5) entered into a pass-through arrangement) and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Fund’s continuing involvement in the asset. In that case, the Fund also recognises an associated liability. The transferred asset and the associated liability are measured (cid:84)(cid:83)(cid:5)(cid:70)(cid:5)(cid:71)(cid:70)(cid:88)(cid:78)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:87)(cid:78)(cid:76)(cid:77)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) obligations that the Fund has retained. 96 Tetragon Financial Group Annual Re Annual Report 2021 97 (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:73)(cid:74)(cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:88)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5) when the obligation under the liability is discharged, cancelled or expired. (vi) Impairment The Fund recognises loss allowances for expected credit losses (“ECL”) on (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:70)(cid:82)(cid:84)(cid:87)(cid:89)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:19)(cid:5)(cid:5) When determining whether the credit (cid:87)(cid:78)(cid:88)(cid:80)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:87)(cid:74)(cid:70)(cid:88)(cid:74)(cid:73)(cid:5) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5)(cid:88)(cid:78)(cid:83)(cid:72)(cid:74)(cid:5)(cid:78)(cid:83)(cid:78)(cid:89)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) and when estimating ECLs, the Fund considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Fund’s historical experience and informed credit assessment and including forward-looking information. (cid:52)(cid:75)(cid:75)(cid:88)(cid:74)(cid:89)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88) (cid:43)(cid:78)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) are offset and the net amount reported in the Consolidated Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. Fair value measurement The Fund measures all its investments and derivatives, at fair value at each reporting date. IFRS 13 Fair Value Measurements (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:88)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:70)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:78)(cid:72)(cid:74)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Fund. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. (cid:57)(cid:77)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) traded in active markets at the reporting date is based on their quoted price without any deduction for transaction costs. A market is regarded as “active” if transactions for the asset (cid:84)(cid:87)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:94)(cid:5)(cid:89)(cid:70)(cid:80)(cid:74)(cid:5)(cid:85)(cid:81)(cid:70)(cid:72)(cid:74)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5) frequency and volume to provide pricing information on an ongoing basis. (cid:43)(cid:84)(cid:87)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5) traded in an active market, the fair value is determined by using observable inputs where available and valuation techniques deemed to be appropriate in the circumstances. Refer to Note 4 for the valuation techniques used. For assets and liabilities that are measured at fair value on a recurring (cid:71)(cid:70)(cid:88)(cid:78)(cid:88)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:78)(cid:73)(cid:74)(cid:83)(cid:89)(cid:78)(cid:1834)(cid:74)(cid:88)(cid:5)(cid:89)(cid:87)(cid:70)(cid:83)(cid:88)(cid:75)(cid:74)(cid:87)(cid:88)(cid:5) between levels in the hierarchy by re- assessing the categorisation (based on (cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:84)(cid:92)(cid:74)(cid:88)(cid:89)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:78)(cid:88)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5) the fair value measurement as a whole) and deems transfers to have occurred at the end of each reporting period. Amounts due from brokers Amounts due from brokers include margin accounts which represent cash pledged as collateral on the forward foreign exchange contracts, credit default swaps and contracts for difference. Refer to the accounting (cid:85)(cid:84)(cid:81)(cid:78)(cid:72)(cid:94)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) recognition and measurement. Cash and cash equivalents Cash comprises current deposits with banks. Cash equivalents comprise of short-term highly liquid investments that are readily convertible to known amounts of cash and are subject to an (cid:78)(cid:83)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:87)(cid:78)(cid:88)(cid:80)(cid:5)(cid:84)(cid:75)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5) and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Net gain or loss on non-derivative (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) Net gains or losses on non-derivative (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5) (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) include realised gains and losses, related interest, dividends and foreign exchange gains or losses. Interest income Interest income arising on cash balances and tri-party repurchase agreements are recognised in the Consolidated Statement of Comprehensive Income using the effective interest method. Finance costs Interest and fees charged on borrowings (cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5) loss in the Consolidated Statement of Comprehensive Income using the effective interest method. Expenses Expenses and fees, including Directors’ fees, are recognised through (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5) Statement of Comprehensive Income on the accruals basis. Taxation The Fund is exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged GBP 1,200 per annum (2020: GBP 1,200). Dividend distribution Dividend distributions are recognised in the Consolidated Statement of Changes in Equity, when the shareholders’ right to receive the payment is established. Share-based payment transactions Share-based compensation expense for all equity settled share-based payment awards granted is determined based on the grant-date fair value. The Fund recognises these compensation costs net of an estimated forfeiture rate and recognises compensation cost only for those shares expected to meet the service and non-market performance vesting conditions, on a graded vesting basis over the requisite service period of the award. These compensation costs are determined at the individual vesting tranche level for serviced-based awards. When the shares are issued, the fair value of the shares, as determined at the time of the award, is debited against the share-based compensation reserve and credited to other equity in the Note 4 Financial assets and (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) (cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88) Fair value hierarchy All assets and liabilities for which fair value is measured or disclosed (cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5) categorised within the fair value hierarchy, described as follows: Level 1 Quoted in active markets for identical instruments. Level 2 Prices determined using other (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:84)(cid:71)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:88)(cid:19)(cid:5)(cid:5) These may include quoted prices for similar securities, interest rates, prepayments spreads, credit risk and others. Level 3 Unobservable inputs. (cid:58)(cid:83)(cid:84)(cid:71)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:88)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:5) assumptions market participants would be expected to use in pricing the asset or liability. Consolidated Statement of Changes in Consolid Equity. Any associated stock dividends Equity. A accrued on the original award are accrued debited against retained earnings and debited a credited to other equity using the value credited determined by the stock reference price determin at the date of each applicable dividend. at the da Other equity Other eq Other equity contains the share premium Other eq and treasury shares balances. and trea Operating segments Operatin An operating segment is a component An opera of the Fund that engages in business of the Fu activities activities from which it may earn revenues revenues and incurs expenses, whose operating results are regularly reviewed operatin by the Fund’s chief operating decision by the Fu (cid:82)(cid:70)(cid:80)(cid:74)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:73)(cid:78)(cid:88)(cid:72)(cid:87)(cid:74)(cid:89)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:82)(cid:70)(cid:80)(cid:74)(cid:87)(cid:5)(cid:70)(cid:83) information is available. The chief informat operatin operating decision maker for the Fund is the Bo is the Board of Directors. The Fund has consider considered the information reviewed by the Fu by the Fund’s chief operating decision maker an maker and determined that there is only one oper one operating segment in existence. Note 3 Note 3 (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834) (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:70)(cid:72)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) judgments, estimates judgm and as and assumptions (cid:57)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85)(cid:70)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:74)(cid:85) stateme statements requires management to make to make judgments, estimates and assumpt assumptions that affect the reported (cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88) (cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88)(cid:5)(cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) stateme statements and disclosure of contingent liabilities liabilities. However, uncertainty about these as these assumptions and estimates could res could result in outcomes that could require a require a material adjustment to the carry the carrying amount of the asset or liability a liability affected in future periods. In the pro In the process of applying the Fund’s accounti accounting policies, management has made the made the following judgments, estimates and assu and assumptions which have the most (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70) (cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:88)(cid:5) (cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88) (cid:87)(cid:74)(cid:72)(cid:84)(cid:76)(cid:83)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:31) Judgments Investment entity status The Board of Directors have determined (cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:82)(cid:74)(cid:74)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) of an investment entity as per IFRS (cid:22)(cid:21)(cid:19)(cid:5)(cid:5)(cid:42)(cid:83)(cid:89)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:82)(cid:74)(cid:74)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) of an investment entity within IFRS 10 are generally required to measure their subsidiaries at FVTPL rather than consolidate them. The Fund consolidates Tetragon Financial Group (Delaware) LLC as this subsidiary’s main purpose and activity is to provide a service to the Fund, as such it is consolidated on a line-by-line basis with balances between the Fund and this subsidiary eliminated. The Fund’s investment objective is to generate distributable income and capital appreciation. The Fund reports to its investors via monthly, semi- annual, and annual investor information, and to its management, via internal management reports, on a fair value basis. The Fund has a documented exit strategy for all of its investments. Estimates and assumptions Measurement of fair values The Fund based its assumptions and estimates on year-end parameters (cid:70)(cid:91)(cid:70)(cid:78)(cid:81)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:92)(cid:77)(cid:74)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) were prepared; however, existing circumstances and assumptions about future developments may change due to market changes and circumstances arising beyond the control of the (cid:43)(cid:90)(cid:83)(cid:73)(cid:19)(cid:5)(cid:5)(cid:56)(cid:90)(cid:72)(cid:77)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5) the assumptions when they occur. For detailed information on the estimates and assumptions used to (cid:73)(cid:74)(cid:89)(cid:74)(cid:87)(cid:82)(cid:78)(cid:83)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) instruments, please refer to Note 4. 98 Tetragon Financial Group Annual Re Annual Report 2021 99 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Recurring fair value measurement of assets and liabilities (cid:57)(cid:77)(cid:74)(cid:5)(cid:75)(cid:84)(cid:81)(cid:81)(cid:84)(cid:92)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:88)(cid:77)(cid:84)(cid:92)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:82)(cid:74)(cid:70)(cid:88)(cid:90)(cid:87)(cid:74)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:78)(cid:83)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:77)(cid:78)(cid:74)(cid:87)(cid:70)(cid:87)(cid:72)(cid:77)(cid:94)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:24)(cid:22)(cid:5)(cid:41)(cid:74)(cid:72)(cid:74)(cid:82)(cid:71)(cid:74)(cid:87)(cid:5)(cid:23)(cid:21)(cid:23)(cid:22)(cid:31)(cid:5) (cid:57)(cid:77)(cid:74)(cid:5)(cid:75)(cid:84)(cid:81)(cid:81)(cid:84) (cid:57)(cid:77)(cid:74)(cid:5)(cid:75)(cid:84)(cid:81)(cid:81)(cid:84)(cid:92)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:88)(cid:77)(cid:84)(cid:92)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:82)(cid:74)(cid:70)(cid:88)(cid:90)(cid:87)(cid:74)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:71)(cid:94)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:78)(cid:83)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:77)(cid:78)(cid:74)(cid:87)(cid:70)(cid:87)(cid:72)(cid:77)(cid:94)(cid:5)(cid:70)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:24)(cid:22)(cid:5)(cid:41)(cid:74)(cid:72)(cid:74)(cid:82)(cid:71)(cid:74)(cid:87)(cid:5)(cid:23)(cid:21)(cid:23)(cid:21)(cid:31) (cid:51)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) TFG Asset Management Investment funds and vehicles Listed stock CLO equity tranches1 CLO debt tranches1 Unlisted stock Corporate bonds Level 1 US$ MM Level 2 US$ MM Level 3 US$ MM - - 198.0 - - - - - 1,256.3 638.1 521.7 - - 3.5 - 20.1 - 164.4 - 50.3 - Total Fair Value US$ MM 1,256.3 1,159.8 198.0 164.4 3.5 50.3 20.1 (cid:51)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78) (cid:51)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) Investme Investment funds and vehicles TFG Asse TFG Asset Management CLO equi CLO equity tranches Unlisted Unlisted stock Listed st Listed stock Corporat Corporate bonds Level 1 US$ MM Level 2 US$ MM Level 3 US$ MM - - - - 170.6 701.2 - - - - - 17.9 371.5 833.5 151.3 174.6 - - Total Fair Value US$ MM 1,072.7 833.5 151.3 174.6 170.6 17.9 (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:83)(cid:84)(cid:83) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) 170.6 719.1 1,530.9 2,420.6 (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) 198.0 661.7 1,992.7 2,852.4 (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) Contracts for difference (asset) Currency options (asset) Forward foreign exchange contracts (asset) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88) (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) Contracts for difference (liability) Forward foreign exchange contracts (liability) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) - - - - - - - 0.1 2.3 1.8 4.2 (0.1) (1.4) (1.5) - - - - - - - 0.1 2.3 1.8 4.2 (0.1) (1.4) (1.5) Notes 1 Investment in CLO equity and debt tranches held through special purpose vehicles are included in these captions. (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91) (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) Contract Contracts for difference (asset) Forward Forward foreign exchange contracts (asset) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:87) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91) (cid:41)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) Contract Contracts for difference (liability) Forward Forward foreign exchange contracts (liability) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:83)(cid:84)(cid:83) (cid:57)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49) Transfers between levels Transfer There were no transfers between levels There we during the year ended 31 December during th 2021 or 31 December 2020. 2021 or (cid:52)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) (cid:43)(cid:84)(cid:87)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) liabilities, the carrying value is an approximation of fair value, including other receivables, amounts due from brokers, cash and cash equivalents, loans and borrowings, and other payables. - - - - - - 7.0 1.6 8.6 (0.2) (18.0) (18.2) - - - (7.0) - (7.0) 7.0 1.6 8.6 (7.2) (18.0) (25.2) 100 Tetragon Financial Group Annual Re Annual Report 2021 101 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Level 3 reconciliation The following is a reconciliation of (cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) unobservable inputs (Level 3) were used in determining fair value at 31 December 2021. The following is a reconciliation of (cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:92)(cid:77)(cid:78)(cid:72)(cid:77)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) unobservable inputs (Level 3) were used in determining fair value at 31 December 2020. CLO Equity Tranches US$ MM Unlisted Stock US$ MM Investment Funds and Vehicles US$ MM TFG Asset Management US$ MM Total US$ MM Balance at 1 January 2021 151.3 174.6 Additions Proceeds 26.1 35.0 (42.0) (273.3) (cid:51)(cid:74)(cid:89)(cid:5)(cid:76)(cid:70)(cid:78)(cid:83)(cid:88)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88) 29.0 114.0 Balance at 31 December 2021 164.4 Change in unrealised gains (cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) held at year end 5.1 50.3 15.3 371.5 132.6 (51.0) 68.6 521.7 37.7 833.5 1,530.9 9.9 203.6 (30.3) (396.6) 443.2 654.8 1,256.3 1,992.7 412.9 471.0 CLO Equity Tranches US$ MM Unlisted Stock US$ MM Investment Funds and Vehicles US$ MM TFG Asset Management US$ MM Total US$ MM Balance at 1 January 2020 210.9 273.0 Additions Proceeds Net (losses)/gains through (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88) - - (33.4) (123.0) (26.2) 24.6 Balance at 31 December 2020 151.3 174.6 Change in unrealised (losses)/ (cid:76)(cid:70)(cid:78)(cid:83)(cid:88)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) assets held at year end (33.6) 24.6 394.5 78.1 (88.3) (12.8) 371.5 (33.9) 747.5 1,625.9 4.1 82.2 (106.2) (350.9) 188.1 173.7 833.5 1,530.9 123.8 80.9 Valuation process (framework) TMF Group Fund Administration (Guernsey) Limited (the “Administrator”) serves as the Fund’s independent administrator and values the investments of the Fund on an ongoing basis in accordance with the valuation principles and methodologies approved by the Fund’s Audit Committee, which comprises of independent directors, from time to time. For certain investments, such as TFG Asset Management, a third-party valuation agent is also used. However, the Directors are responsible for the valuations and may, at their discretion, permit any other method of valuation to be used if it considers that such (cid:82)(cid:74)(cid:89)(cid:77)(cid:84)(cid:73)(cid:5)(cid:84)(cid:75)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:71)(cid:74)(cid:89)(cid:89)(cid:74)(cid:87)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5) value and is in accordance with IFRS. Valuat Valuation techniques CLO equ CLO equity tranches A mark to A mark to model approach using (cid:73)(cid:78)(cid:88)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89) (cid:73)(cid:78)(cid:88)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:74)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:70)(cid:83)(cid:70)(cid:81)(cid:94)(cid:88)(cid:78)(cid:88)(cid:5)(cid:13)(cid:1126)(cid:41)(cid:40)(cid:43)(cid:5) Approac Approach”) has been adopted to determine the value the value of the equity tranche CLO investme investments. The model contains certain assumpt assumption inputs that are reviewed and adjusted adjusted as appropriate to factor in how historic, c historic, current, and potential market developm developments (examined through, for example, example, forward-looking observable data) might po might potentially impact the performance of these of these CLO equity investments. Since thi Since this involves modelling, among other thin other things, forward projections over multiple multiple years, this is not an exercise in recalib in recalibrating future assumptions to the lates the latest quarter’s historical data. Subject t Subject to the foregoing, the Fund seeks to derive a v derive a value at which market participants could tra could transact in an orderly market and also seek also seeks to benchmark the model inputs and resu and resulting outputs to observable market data whe data when available and appropriate. Although Although seeking to utilise, where possible, observab observable market data, for certain assumpt assumptions the Investment Manager may be requir be required to make subjective judgments and forw and forward-looking determinations, and its ex and its experience and knowledge is instrume instrumental in the valuation process. As at 31 As at 31 December 2021, key modelling assumpt assumptions used are disclosed above. T above. The modelling assumptions disclosed disclosed here are a weighted average (by USD (by USD amount) of the individual deal assumpt assumptions. Each individual deal’s assumpt assumptions may differ from this average average and vary across the portfolio. Constant Annual Default Rate (“CADR”) 2.38%, which is 1.0x of the original Weighted Average Rating Factor (“WARF”) derived base-case default rate for the life of the transaction (2020: 5% up to 30 June 2021, 2.39% thereafter). Recovery Rate 70% (2020: 60% up to 30 June 2021, 70% thereafter). Prepayment Rate 20%, the original base-case prepayment rate with a 20% prepayment rate on bonds throughout the life of the transaction (2020: 7.5% p.a. up to 30 June 2021, 20% p.a. thereafter. Reinvestment Price and Spread Assumed reinvestment price is par for the life of the transaction, with an effective spread over LIBOR of 347 basis points (“bps”) on broadly U.S. syndicated loan deals which are still in their reinvestment periods (2020: 400 bps up to 30 June 2021, 349 bps thereafter). With effect from 1 January 2022, term SOFR is expected to replace USD LIBOR as the (cid:85)(cid:87)(cid:74)(cid:73)(cid:84)(cid:82)(cid:78)(cid:83)(cid:70)(cid:83)(cid:89)(cid:5)(cid:71)(cid:74)(cid:83)(cid:72)(cid:77)(cid:82)(cid:70)(cid:87)(cid:80)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:1835)(cid:84)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:87)(cid:70)(cid:76)(cid:74)(cid:73)(cid:5)(cid:81)(cid:84)(cid:70)(cid:83)(cid:88)(cid:19)(cid:5)(cid:52)(cid:83)(cid:74)(cid:18) month and three-month LIBOR rates will continue to be published for use in existing contracts until June 2023. The impact of introducing a SOFR referenced reinvestment spread assumption was analysed and is not expected to have a material impact. When determining the fair value of the equity tranches, a discount rate is (cid:70)(cid:85)(cid:85)(cid:81)(cid:78)(cid:74)(cid:73)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:75)(cid:90)(cid:89)(cid:90)(cid:87)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5) derived from the third-party valuation model. The discount rate applied to (cid:89)(cid:77)(cid:84)(cid:88)(cid:74)(cid:5)(cid:75)(cid:90)(cid:89)(cid:90)(cid:87)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) perceived level of risk that would be used by another market participant in determining fair value. In determining the discount rates to use an analysis of the observable risk premium data as well as the individual deal’s structural strength and credit quality is undertaken. At 31 December 2021, a discount rate of 12% (2020: 12%) is applied unless (cid:89)(cid:77)(cid:74)(cid:5)(cid:73)(cid:74)(cid:70)(cid:81)(cid:5)(cid:78)(cid:88)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:78)(cid:83)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:87)(cid:74)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5) period, in which case the deal internal rate of return (“IRR”) is utilised as the discount rate. For deals in this category, the weighted average IRR or discount rate is 14.7% (2020: not applicable). Sensitivity analysis: (cid:57)(cid:77)(cid:74)(cid:5)(cid:73)(cid:78)(cid:88)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:90)(cid:88)(cid:74)(cid:73)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5) impact on the fair value of CLO equity tranches. A reasonable possible alternative assumption is to change the discount rate by 1%. Changing the discount rate and keeping all other variables constant would have the following effects on net assets (cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:31) -1% discount rate +1% discount rate 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 4.8 (4.6) 4.5 (4.3) 102 Tetragon Financial Group Annual Re Annual Report 2021 103 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Private equity in asset management companies The Fund owns a 100% interest in TFG Asset Management which holds majority and minority private equity stakes in asset management companies. The valuation calculation for TFG Asset Management was prepared by a third- party valuation specialist engaged by the Fund’s Audit Committee. Although TFG Asset Management is valued as a single investment, a sum of the parts approach, valuing each business separately has been utilised. This approach aggregates the fair value of all asset managers held by TFG Asset Management overlaying the central costs and net assets at TFG Asset Management level. Currently, no premium has been attributed to the valuation of TFG Asset Management in (cid:87)(cid:74)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:84)(cid:87)(cid:5)(cid:88)(cid:94)(cid:83)(cid:74)(cid:87)(cid:76)(cid:78)(cid:74)(cid:88)(cid:5) between different income streams. (cid:38)(cid:83)(cid:94)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5) Asset Management platform has been captured in the valuation of the individual asset managers by incorporating it in the business plans used in the DCF and Market Multiple Approaches. The DCF Approach calculates the enterprise value of the investments by (cid:90)(cid:89)(cid:78)(cid:81)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5)(cid:82)(cid:84)(cid:73)(cid:74)(cid:81)(cid:5)(cid:89)(cid:84)(cid:5) estimate the generation of future net (cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:19)(cid:5)(cid:42)(cid:70)(cid:72)(cid:77)(cid:5)(cid:82)(cid:84)(cid:73)(cid:74)(cid:81)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:85)(cid:81)(cid:70)(cid:83)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:70)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5)(cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:5) of 5-10 years which includes, where applicable, assumptions (which may not be linear) around planned capital raising and/or organic growth through investment returns. The DCF Approach may also include a terminal value which is calculated by applying a growth (cid:75)(cid:84)(cid:87)(cid:82)(cid:90)(cid:81)(cid:70)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:85)(cid:87)(cid:84)(cid:79)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) the terminal year or to the average of (cid:94)(cid:74)(cid:70)(cid:87)(cid:81)(cid:94)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:18)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5)(cid:85)(cid:81)(cid:70)(cid:83)(cid:19)(cid:5) This terminal value calculation is used in the DCF approach for Equitix, LCM and Polygon. All estimates of future free (cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:74)(cid:87)(cid:82)(cid:78)(cid:83)(cid:70)(cid:81)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5) discounted at a weighted average cost of capital (“WACC”) that captures the risk inherent in the projections. From the enterprise value derived by the DCF Approach, market value of net debt is deducted to arrive at the equity value. An adjustment is made to account for a discount for lack of liquidity (“DLOL”), generally in the range of 10% to 20%. The Market Multiple Approach applies a multiple, considered to be an appropriate and reasonable indicator of value to certain metrics of the business, such as earnings or assets under management (“AUM”), to derive the equity value. The multiple applied in each case is derived by considering the multiples of quoted comparable companies. The multiple is then adjusted to ensure that (cid:78)(cid:89)(cid:5)(cid:70)(cid:85)(cid:85)(cid:87)(cid:84)(cid:85)(cid:87)(cid:78)(cid:70)(cid:89)(cid:74)(cid:81)(cid:94)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5) business being valued, considering its business activities, geography, size, competitive position in the market, risk (cid:85)(cid:87)(cid:84)(cid:1834)(cid:81)(cid:74)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:70)(cid:87)(cid:83)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:76)(cid:87)(cid:84)(cid:92)(cid:89)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5) of the business. The valuation specialist considered a multiple of price-to-assets under management, and/or a multiple of earnings such as a company’s earnings before interest, taxes, depreciation, and amortisation (“EBITDA”), to perform this analysis. These multiples were then adjusted for control premium, if applicable. As of 31 December 2020, Equitix was valued using DCF Approach. During 2021, some more directly comparable asset managers listed on major trading exchanges, bringing additional market-led valuation transparency to a manager like Equitix. In 2021, the third-party valuation agent added a Market Multiple Approach to the overall valuation, with the valuation now being the mean of the Market Multiple and DCF Approaches. Equitix had a 23% increase in AUM during 2021 and a 32% AUM CAGR (Cumulative Annual Growth (cid:55)(cid:70)(cid:89)(cid:74)(cid:14)(cid:5)(cid:84)(cid:91)(cid:74)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:81)(cid:70)(cid:88)(cid:89)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:19)(cid:5)(cid:5)(cid:46)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) DCF Approach, the successful track record of AUM growth lends to a lower risk adjustment applied to future capital (cid:87)(cid:70)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:88)(cid:88)(cid:90)(cid:82)(cid:85)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:19)(cid:5)(cid:5)(cid:5) For LCM, the third-party valuation agent changed the Market Multiple Approach from P/AUM to EV/EBITDA during 2021. This change was primarily driven by the fact that the EV/EBITDA approach is more forward-looking, as opposed to a backward-looking P/AUM approach, and can better capture the growth potential of a business. Both approaches are given 50/50 weighting in the valuation of LCM. Polygon and Tetragon Credit Partners are valued using DCF Approach. TFG Asset Management holds approximately 13% interest in BentallGreenOak and is entitled to (cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:5)(cid:70)(cid:5)(cid:88)(cid:74)(cid:87)(cid:78)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:91)(cid:70)(cid:87)(cid:78)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5) (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:73)(cid:78)(cid:88)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:19)(cid:5)(cid:56)(cid:90)(cid:83)(cid:5)(cid:49)(cid:78)(cid:75)(cid:74)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:70)(cid:83)(cid:5) option to acquire the remaining interest in the merged entity in 2026. TFG Asset Management and other minority owners are entitled to sell their interest to Sun Life in 2027. The Fund’s investment in BentallGreenOak, as at 31 December 2020 and 2021, is valued using the DCF (cid:38)(cid:85)(cid:85)(cid:87)(cid:84)(cid:70)(cid:72)(cid:77)(cid:5)(cid:84)(cid:83)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:72)(cid:89)(cid:74)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:19)(cid:5) The follo The following table shows the unobservable inputs used by the third-party valuation specialist in valuing TFG Asset Management. 31 Dece 31 December 2021 Investme Investment Fair Value US$ MM AUM (billion) Valuation methodology Equitix Equitix 725.6 GBP 8.0 BentallG BentallGreenOak 213.5 US$ 9.0 LCM LCM 237.8 US$ 11.2 Polygon Polygon Tetragon Tetragon Credit Partners Partners Other Other 54.3 16.2 8.9 US$ 1.6 US$ 0.9 DCF and Market Multiples DCF (sum-of- the-parts) DCF and Market Multiples DCF DCF 31 Dece 31 December 2020 Investme Investment Fair Value US$ MM AUM (billion) Valuation methodology (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:90)(cid:83)(cid:84)(cid:71)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:88) WACC EV/EBITDA Multiple DLOL Control premium Forecast 5Y CAGR 9.5% 15x 10% 20% 14.1% (AUM) 11% NA 12.25% 12.5x 13% 10.5% NA NA 15% 15% 20% 15% NA 18.4% (EBITDA) 20% 10.0% (AUM) NA NA 9.9% (AUM) NA (cid:56)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:90)(cid:83)(cid:84)(cid:71)(cid:88)(cid:74)(cid:87)(cid:91)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:78)(cid:83)(cid:85)(cid:90)(cid:89)(cid:88) Discount rate P/AUM Multiple Equitix Equitix 386.1 GBP 6.8 DCF 9.75% BentallGreenOak BentallG 195.7 US$6.8 DCF (sum-of- the-parts) 11% NA NA DLOL 15% 15% Control premium Forecast 5Y CAGR NA 6.6% (AUM) NA 11.9% (EBITDA) LCM LCM 176.9 US$ 8.9 DCF and Market Multiples 12% 2.5% 15% NA 6.5% (AUM) Polygon Polygon Tetragon Credit Tetragon Partners Partners Other Other 57.4 13.7 3.7 US$ 1.6 US$ 0.8 DCF DCF 12.75% 11.25% NA NA 20% 15% NA NA 8.6% (AUM) NA 104 Tetragon Financial Group Annual Re Annual Report 2021 105 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Sensitivity analysis: 31 December 2021 Investment WACC EV/EBITDA multiple DLOL Control premium Forecast 5Y CAGR (cid:42)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:13)(cid:58)(cid:56)(cid:9)(cid:5)(cid:50)(cid:50)(cid:14) -100 bps +100 bps Equitix 54.4 (41.9) BentallGreenOak 4.9 (4.7) LCM 10.4 (8.6) Polygon 6.2 (5.1) Tetragon Credit Partners 0.6 (0.6) +3% 13.7 NA 4.3 NA NA -3% -500 bps +500 bps +500 bps -500 bps +100 bps -100 bps (13.7) 41.6 (41.6) 20.8 NA 12.9 (12.9) (4.3) 12.8 (12.8) NA NA 3.5 (3.5) 1.0 (1.0) NA 6.8 NA NA 2.8 NA 6.8 NA NA 31.3 (30.6) 8.8 5.3 6.5 NA (7.5) (5.1) (6.4) NA 31 December 2020 Investment WACC P/AUM multiple DLOL Control premium Forecast 5Y CAGR (cid:42)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:13)(cid:58)(cid:56)(cid:9)(cid:5)(cid:50)(cid:50)(cid:14) -100 bps +100 bps Equitix 66.0 (51.2) +3% NA -3% -500 bps +500 bps +500 bps -500 bps +100 bps -100 bps (4.0) NA NA NA 22.7 (22.7) 11.7 (11.7) (7.8) 14.4 (14.4) 10.6 (10.6) (5.6) NA NA NA NA 3.4 (3.4) 0.8 (0.8) NA NA NA NA NA NA NA NA NA NA 21.4 (20.3) 6.0 2.8 9.3 NA (5.6) (2.8) (8.4) NA BentallGreenOak LCM Polygon 4.3 7.8 5.6 Tetragon Credit Partners 0.5 (0.5) Investment funds and vehicles Investme Investme Investments in unlisted investment funds, (cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74) (cid:72)(cid:81)(cid:70)(cid:88)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:88)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:23)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:74)(cid:91)(cid:74)(cid:81)(cid:5)(cid:24)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) fair value fair value hierarchy, are valued utilising the net a the net asset valuations provided by the manager managers of the underlying funds and/ or their a or their administrators. Management’s assessm assessment is that these valuations are the fair v the fair value of these investments. In determin determining any adjustments necessary to the ne to the net asset valuations, management has cons has considered the date of the valuation provided provided. No adjustment was deemed material material following this review. The Fund The Fund has an investment in an externall externally managed investment vehicle t vehicle that holds farmlands in Paragua Paraguay. These farmlands are valued utilising utilising inputs from an independent third-par third-party valuation agent. Sensitivi Sensitivity analysis: A 1% inc A 1% increase in net asset value (“NAV”) of the un of the unlisted investment funds included in Level 3 in Level 3 will increase net assets and (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84) (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:58)(cid:56)(cid:9)(cid:5)(cid:26)(cid:19)(cid:23)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:5) (2020: U (2020: US$ 3.7 million). A decrease in the NAV the NAV of the unlisted investment funds will have will have an equal and opposite effect. Unlisted stock At 31 December 2021, the level 3 unlisted stock includes three investments in private companies. Investment no. Fair value (US$ MM) Valuation methodology 31 Dec 2021 31 Dec 2020 1 2 3 4 22.8 20.0 7.5 - - Transaction price from December 2021 - Transaction price from December 2021 - Transaction price from latest funding round in July 2021 174.6 During 2021, this position was fully redeemed by the company Sensitivity analysis: A 5% increase in the valuation will (cid:78)(cid:83)(cid:72)(cid:87)(cid:74)(cid:70)(cid:88)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5) of the Fund by US$ 2.5 million (2020: US$ 8.7 million). A 5% decrease will have an equal but opposite effect (cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:19)(cid:5) Listed stock For listed stock in an active market, the closing exchange price is utilised as the fair value price. Corporate bonds and CLO debt tranches The corporate bonds and CLO debt tranches held by the Fund are valued using the broker quotes obtained at the valuation date. Forward foreign exchange contracts and currency options Forward foreign exchange contracts and currency options are recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Fair values are based on observable foreign currency forward rates, recent market transactions, and valuation techniques, including (cid:73)(cid:78)(cid:88)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:74)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:5)(cid:82)(cid:84)(cid:73)(cid:74)(cid:81)(cid:88)(cid:17)(cid:5)(cid:70)(cid:88)(cid:5) appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The best evidence of fair value of a forward foreign exchange contract at initial recognition is the transaction price. The currency options are recognised initially at the amount of premium paid or received. Contracts for difference The Fund enters into contracts for difference (“CFD”) arrangements with (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:78)(cid:89)(cid:90)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:19)(cid:5)(cid:5)(cid:40)(cid:43)(cid:41)(cid:88)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:89)(cid:94)(cid:85)(cid:78)(cid:72)(cid:70)(cid:81)(cid:81)(cid:94)(cid:5) traded on the over the counter (“OTC”) market. The arrangement generally involves an agreement by the Fund and a counterparty to exchange the difference between the opening and closing price of the position underlying the contract, which are generally on equity positions. Fair values are based on quoted market prices of the underlying security, contract price, and valuation techniques including expected value models, as appropriate. 106 Tetragon Financial Group Annual Re Annual Report 2021 107 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Note 5 Interest in other entities As at 31 December 2021 No. of invest- ments Range of nominal US$ MM Average nominal US$ MM Carrying value US$ MM Percentage of NAV Investment in unconsolidated structured entities (cid:46)(cid:43)(cid:55)(cid:56)(cid:5)(cid:22)(cid:23)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:88)(cid:5)(cid:70)(cid:5)(cid:88)(cid:89)(cid:87)(cid:90)(cid:72)(cid:89)(cid:90)(cid:87)(cid:74)(cid:73)(cid:5)(cid:74)(cid:83)(cid:89)(cid:78)(cid:89)(cid:94)(cid:5)(cid:70)(cid:88)(cid:5) an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant activities are directed by means of contractual agreements. The Fund holds various investments in CLOs and investment funds. The fair value of the CLOs and investment funds (cid:78)(cid:88)(cid:5)(cid:87)(cid:74)(cid:72)(cid:84)(cid:87)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1126)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:1127)(cid:5) line in the Consolidated Statement of Financial Position. The Fund’s maximum exposure to loss from these investments is equal to their total fair value and, if applicable, unfunded commitments. Once the Fund has disposed of its holding in any of these investments, the Fund ceases to be exposed to any risk from that investment. The Fund has not provided and would not be required to (cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:74)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:90)(cid:85)(cid:85)(cid:84)(cid:87)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5) investees. The investments are non- recourse. Please refer to Note 14 for details of unfunded commitments. Here is a summary of the Fund’s holdings in subsidiary unconsolidated structured entities. CLO Equity U.S. CLOs1 Investment Funds Polygon European Equity Opportunity Fund2 Polygon Global Equities Fund2 Tetragon Credit Income II3 Tetragon Credit Income III3 Tetragon Credit Income IV3 Hawke's Point Holdings LP3 Banyan Square Capital Partners LP3 Other Real Estate4 As at 31 December 2020 CLO Equity U.S. CLOs1 Investment Funds Polygon European Equity Opportunity Fund2 Polygon Global Equities Fund2 Polygon Convertible Opportunity Fund2 Tetragon Credit Income II3 Tetragon Credit Income III3 Hawke's Point Holdings LP3 Banyan Square Capital Partners LP3 Other Real Estate4 505.0 154.2 5.4% 16 245.6 - 741.5 Total NAV US$ MM 1 1 1 1 1 2 1 4 455.9 n/a 410.9 14.3% 28.8 219.2 362.2 - 60.7 95.5 42.7 n/a n/a n/a n/a n/a n/a n/a 28.8 44.9 72.9 - 57.9 95.5 1.0% 1.6% 2.5% - 2.0% 3.3% 42.7 1.5% 531.9 134.8 5.4% 10 245.6 - 743.7 Total NAV US$ MM 492.3 n/a 440.4 17.8% 1 1 1 1 1 1 1 4 7.7 725.8 236.3 377.6 131.2 31.4 35.7 n/a n/a n/a n/a n/a n/a n/a 7.7 116.7 48.4 76.0 131.0 31.4 0.3% 4.7% 2.0% 3.1% 5.3% 1.3% Notes (ppre Notes (preceding) 1 1 This i This includes all U.S. CLOs deemed to be co be controlled by the Fund. U.S. CLOs are dommic domiciled in the Cayman Islands. 2 Polyyg 2 Polygon hedge funds are domiciled in the Caymm Cayman Islands. Given the applicable noticce notice, liquidity up to 25% of the investment in Pool in Polygon hedge funds is available on a qua a quarterly basis (subject to certain conddi conditions), and the entire investment could be liqqu be liquidated over four consecutive quarters. 3 Hawwk 3 Hawke's Point Holdings LP, Banyan Square Capiita Capital Partners LP, Tetragon Credit Income II LPP ( II LP (“TCI II”), Tetragon Credit Income III LP (""T LP ("TCI III") and Tetragon Credit Income IV LP (""T LP ("TCI IV") are domiciled in the Cayman Islannd Islands. These are private-equity style invesst investment funds. Please refer to Note 14 for dde for details of unfunded commitments. 4 4 The F The Fund has investments in commercial farmland in Paraguay, via individual farmmla managed accounts managed by Scimitar, manna a specialist manager in South American a speec farmland. The Fund's investment can only farmmla be redeemed when the underlying real estate be reed assets are sold. asseet This is a summary of the Fund’s holding in non-subsidiary unconsolidated structured entities: As at 31 December 2021 No. of invest- ments Range of nominal US$ MM Average nominal US$ MM Carrying value US$ MM Percentage of NAV CLO Equity U.S. CLOs1 Real Estate BentallGreenOak – U.S.2 BentallGreenOak – Europe2 BentallGreenOak – Asia2 Other Funds 2 417.2 - 510.9 464.0 13.6 0.5% 7 13 3 Total AUM US$ MM 30,979 9,946 4,894 Total NAV US$ MM n/a n/a n/a 48.0 43.9 23.5 1.7% 1.3% 0.8% Polygon Convertible Opportunity Fund4 (“PCOF”) 1 913.8 n/a 131.6 4.6% Private Equity Funds3 25 47,212 n/a 149.7 5.2% Notes (subsequent) Notes (su As at 31 December 2020 1 1 Includes all externally managed CLOs that Incluud are outside the Fund’s control. U.S. CLOs are oou are domiciled in the Cayman Islands. are ddo 2 Bentta 2 BentallGreenOak funds hold real estate investments in the United States, Japan and invesst various countries in Europe. Total assets varioou (cid:90)(cid:83)(cid:73)(cid:74)(cid:87)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:13)(cid:1126)(cid:38)(cid:58)(cid:50)(cid:1127)(cid:14)(cid:5)(cid:87)(cid:74)(cid:1835)(cid:74)(cid:72)(cid:89)(cid:88)(cid:5)(cid:22)(cid:21)(cid:21)(cid:10)(cid:5)(cid:84)(cid:75)(cid:5) (cid:90)(cid:83)(cid:73)(cid:74)(cid:74)(cid:87) BentallGreenOak AUM in structured entities Bentta in each region. The number of investments in eaac indicates the Fund’s investments in each indicca region. The Fund’s investment in these regioon funds can only be redeemed in the form of fundds capital distributions when the underlying real capitta estate assets are sold. estate 3 Privaat 3 Private equity funds are domiciled in the Cayman Islands, Luxembourg and the Caymm United States. Uniteed 4 PCOF is domiciled in the Cayman Islands. 4 PCOOF Given the applicable notice, liquidity up Giveen to 25% of the investment is available to 255% on a quarterly basis (subject to certain on a q conditions), and the entire investment could conddi be liquidated over four consecutive quarters. be liqqu CLO Equity U.S. CLOs1 Real Estate BentallGreenOak – U.S.2 BentallGreenOak – Europe2 BentallGreenOak – Asia2 Other Funds No. of invest- ments Range of nominal US$ MM Average nominal US$ MM Carrying value US$ MM Percentage of NAV 2 417.2 - 510.9 464.0 14.3 0.6% 7 13 3 Total AUM US$ MM 25,597 5,807 1,445 Total NAV US$ MM n/a n/a n/a 45.7 44.6 26.2 1.8% 1.8% 1.1% 35.7 1.4% Private Equity Funds3 18 5,616.7 n/a 59.1 2.4% Polygon Convertible Opportunity Fund4 1 725.8 n/a 116.7 4.7% 108 Tetragon Financial Group Annual Re Annual Report 2021 109 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) TFG Asset Management The Fund owns 100% holdings and voting rights in TFG Asset Management LP. As at 31 December 2021 and 31 December 2020, TFG Asset Management LP’s investments were comprised of the following: Notes 1 BentallGreenOak has a presence in North 3 America, Europe, and Asia. 2 The CIO of PCOF has a controlling stake in PCOF’s manager, Polygon CB LP. PCOF continues to operate on the TFG Asset Management platform. In 2022, Polygon CB LP and PCOF were rebranded as Acasta Partners. TFG Asset Management owns a non- controlling interest (“NCI”) as well as providing infrastructure services to this manager. The CIO of Contingency Capital owns a controlling stake. Investment Principal place of business Equitix BentallGreenOak LCM Polygon Tetragon Credit Partners Europe Global1 U.S. and UK U.S. and UK U.S. and UK Hawke's Point U.S. and UK Banyan Square Partners U.S. and UK Contingency Capital U.S. and UK Ownership interest Carrying value US$ MM Percentage of NAV 2021 75% 13% 100% 100%2 100% 100% 100% NCI3 2020 75% 13% 100% 100%2 100% 100% 100% NCI3 2021 725.6 213.5 237.8 54.3 16.2 2.0 0.8 6.1 2020 386.1 195.7 176.9 57.4 13.7 2.9 0.8 - 2021 25.2% 7.4% 8.3% 1.9% 0.6% 0.1% 0.0% 0.2% 2020 15.6% 7.9% 7.1% 2.3% 0.6% 0.1% 0.0% - Tetragon Financial Group Holdings LLC and Tetragon Financial Group (Delaware) LLC Since July 2020, the Fund has held a 100% ownership interest in Tetragon Financial Group Holdings LLC which is a holding company for a 100% ownership interest in Tetragon Financial Group (Delaware) LLC. Both companies are domiciled in Delaware. The purpose of Tetragon Financial Group (Delaware) LLC is to hold the collateral and liabilities related to the revolving credit facility (see Note 10). The fair value of the assets held by Tetragon Financial Group (Delaware) LLC as at 31 December 2021 is US$ 910.0 million (2020: US$ 866.1 million). The outstanding balance on the credit facility as at 31 December 2021 is US$ 75.0 million (2020: US$ 100.0 million). In case of non-payment of principal or interest, the provider of the credit facility has a lien over the assets held by Tetragon Financial Group (Delaware) LLC. There is no recourse to the Fund. LCM Euro LLC The Fund holds 100% ownership interest in LCM Euro LLC Investment Series, domiciled in Delaware. The subsidiary has invested in debt and equity tranches of certain LCM CLOs. LCM Euro LLC Investment Series has entered into sales and repurchase agreement with regards to some of the CLO debt tranches that it holds. The timing and amount of payment of repo interest and repurchase obligations are matched by the interest and principal payments from the relevant debt tranches. Additional interest of 0.5% per annum is payable on the outstanding balance. As of 31 December 2021, LCM Euro LLC Investment Series had total assets of US$ 100.1 million (2020: nil) and aggregate repurchase obligations of US$ 88.1 million (2020: nil). The fair value of LCM Euro LLC Investment Series of US$ 11.9 million (2020: nil) is included in (cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:43)(cid:59)(cid:57)(cid:53)(cid:49)(cid:19)(cid:5) There is no recourse to the Fund in case of non-payment of principal or interest. Note 6 Note 6 Financial risks review Financ Financia Financial Risk Review This note This note presents information about the Fund’s o Fund’s objectives, policies and processes for meas for measuring and managing risk. The Fund The Fund has exposure to the following (cid:87)(cid:78)(cid:88)(cid:80)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82) (cid:87)(cid:78)(cid:88)(cid:80)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:31) • Credit • Credit risk; • Liquidi • Liquidity risk; and • Market • Market risks Risk Man Risk Management Framework: The Fund The Fund’s portfolio comprises a broad ra broad range of assets, including a (cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74) (cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:70)(cid:81)(cid:89)(cid:74)(cid:87)(cid:83)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:5)(cid:82)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) business business, TFG Asset Management, and cove and covers bank loans, real estate, equities, equities, credit, convertible bonds, private e private equity and infrastructure. The Fund The Fund’s investment strategy is to seek to i seek to identify asset classes that offer exc offer excess returns relative to their investme investment risk, or ‘intrinsic alpha’. The Inve The Investment Manager analyses the risk/ the risk/reward, correlation, duration and liqui and liquidity characteristics of each potentia potential capital use to gauge its attractive attractiveness and incremental impact on the Fu on the Fund. As part of the Fund’s investme investment strategy, the Investment Manager Manager may employ hedging strategies and leve and leverage in seeking to provide attractive attractive returns while managing risk. and performs active and regular oversight and risk monitoring. a) Credit risk ‘Credit risk’ is the risk that a counterparty/ (cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:87)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:75)(cid:70)(cid:78)(cid:81)(cid:5)(cid:89)(cid:84)(cid:5) discharge an obligation or commitment that it has entered into with the Fund, (cid:87)(cid:74)(cid:88)(cid:90)(cid:81)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:19)(cid:5)(cid:5)(cid:46)(cid:89)(cid:5) arises principally from the CLO portfolio (cid:77)(cid:74)(cid:81)(cid:73)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:81)(cid:88)(cid:84)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) assets, cash and cash equivalents, corporate bonds, other receivables and balances due from brokers. Credit risk is monitored on an ongoing basis by the Investment Manager in accordance with the policies and procedures in place. The Fund’s activities may give rise to settlement risk. ‘Settlement risk’ is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities or other assets as contractually agreed. For the majority of transactions, the Fund mitigates this risk by conducting settlements through a broker to ensure that a trade is settled only when both (cid:85)(cid:70)(cid:87)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:75)(cid:90)(cid:81)(cid:1834)(cid:81)(cid:81)(cid:74)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:78)(cid:87)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:70)(cid:72)(cid:89)(cid:90)(cid:70)(cid:81)(cid:5) settlement obligations. The Fund conducts diligence on its brokers (cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:74)(cid:87)(cid:85)(cid:70)(cid:87)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:71)(cid:74)(cid:75)(cid:84)(cid:87)(cid:74)(cid:5) (cid:74)(cid:83)(cid:89)(cid:74)(cid:87)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:89)(cid:84)(cid:5)(cid:89)(cid:87)(cid:70)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:84)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5) relationships. The Fund also actively monitors and manages settlement risk by diversifying across counterparties and by monitoring developments in the perceived creditworthiness (cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:74)(cid:87)(cid:85)(cid:70)(cid:87)(cid:89)(cid:78)(cid:74)(cid:88)(cid:19) The Inve The Investment Manager’s risk committ committee is responsible for the risk man risk management of the Fund The carrying value and unfunded (cid:72)(cid:84)(cid:82)(cid:82)(cid:78)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:89)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5) (cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:87)(cid:84)(cid:90)(cid:76)(cid:77)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:84)(cid:87)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:17)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:88)(cid:17)(cid:5) other receivables, amounts due from brokers and cash and cash equivalents, as disclosed in the Consolidated Statement of Financial Position and Note 14, represents the Fund’s maximum credit exposure, hence, no separate disclosure (cid:78)(cid:88)(cid:5)(cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:74)(cid:73)(cid:19)(cid:5)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:42)(cid:40)(cid:49)(cid:5)(cid:84)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) at amortised costs are immaterial. i. Analysis of Credit Quality Cash and cash equivalents The cash and cash equivalents, including reverse sale and repurchase agreements, are concentrated in three (2020: three) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:78)(cid:89)(cid:90)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:72)(cid:87)(cid:74)(cid:73)(cid:78)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5) between AA- and AAA (S&P) (2020: AA- and A+). The Investment Manager monitors these credit ratings and spreads of credit default swaps on a daily basis and actively moves balances between counterparties when deemed appropriate. Amounts due from brokers Balances due from brokers represent margin accounts, cash collateral for borrowed securities and sales transactions awaiting settlement. Credit risk relating to unsettled transactions is considered small due to the short settlement period involved and the credit quality of the brokers used. As at the reporting date, the balance was concentrated among two brokers (2020: four) with S&P’s credit ratings between A- and A+ (2020: between A- and A+). Due to the high credit rating of the brokers, the expected credit losses on these balances are immaterial. 110 Tetragon Financial Group Annual Re Annual Report 2021 111 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) The following table details the amounts held by brokers. BNP Paribas ING UBS AG Bank of America Merrill Lynch 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 5.8 - - 0.1 5.9 21.1 12.7 10.5 0.1 44.4 Corporate bonds The Fund has investments in debt securities of US$ 20.1 million (2020: US$ 17.9 million) with Moody’s credit rating of Caa2 (2020: Caa2). CLOs The Fund’s portfolio is partly invested in CLO equity tranches which are subject to potential non-payment risk. The (cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:71)(cid:74)(cid:5)(cid:78)(cid:83)(cid:5)(cid:70)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:81)(cid:84)(cid:88)(cid:88)(cid:5)(cid:85)(cid:84)(cid:88)(cid:78)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) with respect to realised losses on the collateral in each CLO investment. The Investment Manager assesses the credit risk of the CLOs on a look- through basis to the underlying loans in each CLO investment. The Investment (cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:87)(cid:5)(cid:88)(cid:74)(cid:74)(cid:80)(cid:88)(cid:5)(cid:89)(cid:84)(cid:5)(cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:74)(cid:5)(cid:73)(cid:78)(cid:91)(cid:74)(cid:87)(cid:88)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5) in terms of underlying assets, geography and CLO managers. The maximum loss that the Fund can incur on CLOs is limited to the fair value of these CLOs as disclosed below. The underlying loans are made up of a variety of credit ratings including investment grade and non-investment grade. The following tables show the concentration of CLOs by region and by manager. Region United States (including TCI II & III) Manager LCM Other managers 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 285.6 285.6 63% 37% 100% 275.7 275.7 61% 39% 100% Derivatives Derivativ This tabl This table shows an analysis of (cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91) (cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) liabilities liabilities outstanding at 31 December 2021 and 2021 and 31 December 2020. Derivative assets Derivative liabilities Fair Value US$ MM Notional US$ MM Notional 31 December 2021 31 December 2020 4.2 8.6 257.6 254.5 (1.5) (25.2) 221.3 745.0 ii. Conce ii. Concentration of credit risk The Fund The Fund’s credit risk is concentrated in CLOs, an CLOs, and cash and cash equivalents. The table The table here shows a breakdown of credit of credit risk per investment type. (cid:51)(cid:84)(cid:83)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5) (cid:51)(cid:84)(cid:83)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:92)(cid:74)(cid:87)(cid:74)(cid:5) consider considered to be past due or impaired on 31 Decem 31 December 2021 or 31 December 2020. Investment type CLOs Cash and cash equivalents Corporate bonds Amount due from brokers Other loans and derivatives 31 Dec 2021 31 Dec 2020 42% 50% 5% 2% 1% 37% 46% 4% 11% 2% 100% 100% iii. Collat iii. Collateral and other credit (cid:74)(cid:83)(cid:77)(cid:70)(cid:83)(cid:72)(cid:74) (cid:74)(cid:83)(cid:77)(cid:70)(cid:83)(cid:72)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:17)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:78)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:88) The Fund The Fund mitigates the credit risk of deriva of derivatives and reverse sale and repurcha repurchase agreements through collatera collateral management including master n master netting agreements. Derivativ Derivative transactions are either transacte transacted on an exchange or entered into unde into under International Derivative Swaps a Swaps and Dealers Association (“ISDA”) master n master netting agreements. Under ISDA ma ISDA master netting agreements in certain c certain circumstances, for example, when a c when a credit event such as a default occurs, a occurs, all outstanding transactions under the under the agreement are terminated, the term the termination value is assessed and only and only a single net amount is due or pa due or payable in settlement of all transact transactions. The amount of collateral accepted accepted in respect of derivative assets is assets is shown in Note 6(iv). The Fund’s reverse sale and repurchase transactions are covered by master agreements with netting terms similar to those of ISDA master netting agreements. The table below shows the amount of reverse sale and repurchase agreements. Receivables from reverse sale and repurchase agreements 75.0 65.0 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM No individual trades are under- collaterised. The fair value of collateral as at 31 December 2021 was US$ 76.8 million (2020: US$ 66.4). Collateral accepted includes investment-grade securities that the Fund is permitted to sell or repledge. The Fund has not recognised these securities in the Consolidated Statement of Financial Position. 112 Tetragon Financial Group Annual Re Annual Report 2021 113 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) (cid:78)(cid:91)(cid:19)(cid:5)(cid:52)(cid:75)(cid:75)(cid:88)(cid:74)(cid:89)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88) (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:83)(cid:84)(cid:89)(cid:5)(cid:84)(cid:75)(cid:75)(cid:88)(cid:74)(cid:89)(cid:5)(cid:70)(cid:83)(cid:94)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:84)(cid:83)(cid:88)(cid:84)(cid:81)(cid:78)(cid:73)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:56)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5) Financial Position. The disclosures set out in the tables (cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5) that are subject to an enforceable master netting or (cid:88)(cid:78)(cid:82)(cid:78)(cid:81)(cid:70)(cid:87)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) 31 December 2021 Assets ING BNP Paribas Total Liabilities ING UBS AG Total 31 December 2020 Assets ING UBS AG BNP Paribas Total Liabilities ING UBS AG BNP Paribas Total 114 Gross Amount of Recognised Assets/ Liabilities US$ MM Gross Amounts Offset in the Consolidated Statement of Financial Position US$ MM Net Amounts Presented in the Consolidated Statement of Financial Position US$ MM Financial instruments eligible for netting US$ MM Cash collateral held by brokers US$ MM Net Amount US$ MM 4.1 0.1 4.2 1.4 0.1 1.5 1.6 0.5 6.5 8.6 18.0 0.1 7.1 25.2 - - - - - - - - - - - - - - 4.1 0.1 4.2 1.4 0.1 1.5 1.6 0.5 6.5 8.6 18.0 0.1 7.1 25.2 (1.4) - (1.4) (1.4) - (1.4) (1.6) (0.1) (6.5) (8.2) (1.6) (0.1) (6.5) (8.2) - - - - - - - - - - (12.7) - (0.5) (13.2) 2.7 0.1 2.8 - 0.1 0.1 - 0.4 - 0.4 3.7 - 0.1 3.8 b) Liquid b) Liquidity risk ‘Liquidity risk’ is the risk that the Fund ‘Liquidity (cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:74)(cid:83)(cid:72)(cid:84)(cid:90)(cid:83)(cid:89)(cid:74)(cid:87)(cid:5)(cid:73)(cid:78)(cid:75)(cid:1834)(cid:72)(cid:90)(cid:81)(cid:89)(cid:94)(cid:5)(cid:78)(cid:83)(cid:5)(cid:82)(cid:74)(cid:74)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:74)(cid:83)(cid:72)(cid:84) (cid:84)(cid:71)(cid:81)(cid:78)(cid:76)(cid:70)(cid:89)(cid:78)(cid:84) (cid:84)(cid:71)(cid:81)(cid:78)(cid:76)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:5)(cid:70)(cid:88)(cid:88)(cid:84)(cid:72)(cid:78)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5)(cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) liabilities liabilities that are settled by delivering (cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84) (cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:84)(cid:87)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:19)(cid:5) The Fund The Fund’s policy and the Investment Manager Manager’s approach to managing liquidity liquidity is to ensure, as far as possible, (cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:78)(cid:89)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:70)(cid:81)(cid:92)(cid:70)(cid:94)(cid:88)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5)(cid:81)(cid:78)(cid:86)(cid:90)(cid:78)(cid:73)(cid:78)(cid:89)(cid:94)(cid:5) (cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:78)(cid:89)(cid:5)(cid:92)(cid:78) to meet to meet its liabilities when due. (cid:57)(cid:77)(cid:74) (cid:43)(cid:90)(cid:83)(cid:73) (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:5) some investments which are considered some inv illiquid. T illiquid. These investments include TFG Ass TFG Asset Management, CLO equity tranches tranches, real estate funds and vehicles and unlisted equities. The Fund also holds investments in hedge funds and private equity funds, which are subject to redemption restrictions such as notice periods and, in certain circumstances, redemption gates. As a result, the Fund may not be able to liquidate these investments readily. The Fund’s liquidity risk is managed on a daily basis by the Investment Manager in accordance with the policies and procedures in place. The Fund has access to a revolving credit facility (Note 10) of US$ 250.0 million (2020: US$ 250.0 million) and can also (cid:70)(cid:72)(cid:72)(cid:74)(cid:88)(cid:88)(cid:5)(cid:85)(cid:87)(cid:78)(cid:82)(cid:74)(cid:5)(cid:71)(cid:87)(cid:84)(cid:80)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5) (Note 8). As of 31 December 2021, US$ 75.0 million was drawn on the credit facility (2020: US$ 100.0 million). The Fund has unfunded commitments (Note 14) to private-equity styled funds which can be called immediately. The Fund is not exposed to the liquidity risk of meeting shareholder redemptions as the Fund’s capital is in the form of non-redeemable shares. The following were the contractual (cid:82)(cid:70)(cid:89)(cid:90)(cid:87)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:83)(cid:84)(cid:83)(cid:18)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) liabilities at the reporting date. The amounts are gross and undiscounted. 31 Decem 31 December 2021 Finance c Finance costs on borrowings Loans an Loans and borrowings Expense Expenses payable 31 Decem 31 December 2020 Finance c Finance costs on borrowings Loans an Loans and borrowings Expense Expenses payable Within 1 month US$ MM 1 – 3 months US$ MM 3 months – 1 year US$ MM 1 – 5 years US$ MM Greater than 5 years US$ MM Total US$ MM 0.3 - 6.5 6.8 0.4 - 2.9 3.3 0.6 - 104.1 104.7 0.7 - 66.0 66.7 2.7 - - 2.7 3.3 - - 3.3 14.4 - - 14.4 17.6 - - 12.8 75.0 - 87.8 20.0 100.0 - 17.6 120.0 30.8 75.0 110.6 216.4 42.0 100.0 68.9 210.9 115 Tetragon Financial Group Annual Re Annual Report 2021 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) The tables here analyse the Fund’s (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:73)(cid:74)(cid:87)(cid:78)(cid:91)(cid:70)(cid:89)(cid:78)(cid:91)(cid:74)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5) will be settled on a gross basis into relevant maturity groupings based on the (cid:87)(cid:74)(cid:82)(cid:70)(cid:78)(cid:83)(cid:78)(cid:83)(cid:76)(cid:5)(cid:85)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:5)(cid:74)(cid:83)(cid:73)(cid:5) date to the contractual maturity date. (cid:46)(cid:83)(cid:1835)(cid:84)(cid:92)(cid:88) (cid:52)(cid:90)(cid:89)(cid:1835)(cid:84)(cid:92)(cid:88) Within 1 month US$ MM 1 – 3 months US$ MM 3 months – 1 year US$ MM 1 – 5 years US$ MM Within 1 month US$ MM 1 – 3 months US$ MM 3 months – 1 year US$ MM 1 – 5 years US$ MM 31 Dec 2021 31 Dec 2020 39.2 288.2 - 46.3 22.7 543.3 - - (38.4) (288.6) - (47.3) (22.9) (558.5) - - The Fund manages its liquidity risk (cid:71)(cid:94)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:88)(cid:90)(cid:75)(cid:1834)(cid:72)(cid:78)(cid:74)(cid:83)(cid:89)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5) equivalents and available balance to withdraw on the revolving credit facility (cid:89)(cid:84)(cid:5)(cid:82)(cid:74)(cid:74)(cid:89)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:19)(cid:5)(cid:5)(cid:40)(cid:70)(cid:88)(cid:77)(cid:5) and cash equivalents balance as at reporting date and as percentage of NAV is disclosed in this table. c) Market risk ‘Market risk’ is the risk that changes in market prices, such as interest rates, foreign exchange rates, equity prices and credit spreads, will affect the Fund’s income or the fair value of its (cid:77)(cid:84)(cid:81)(cid:73)(cid:78)(cid:83)(cid:76)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19)(cid:5) The Fund’s strategy for the management of market risk is driven by the Fund’s investment objective of generating distributable income and capital appreciation. The Fund employs hedging strategies, from time to time as deemed necessary, to manage its exposure to foreign currency, interest rate and other price risks. The Fund does not apply hedge accounting. i. Interest Rate Risk Interest rate risk arises from the possibility that changes in interest (cid:87)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:70)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:75)(cid:90)(cid:89)(cid:90)(cid:87)(cid:74)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5) (cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) Investment type 31 Dec 2021 31 Dec 2020 Cash and cash equivalents (US$ MM) Percentage of NAV 198.8 6.9% 191.6 7.7% The fair value of certain of the Fund’s (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:82)(cid:70)(cid:94)(cid:5)(cid:71)(cid:74)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5) affected by changes in interest rates. The Fund’s investments in leveraged loans through CLOs generate LIBOR plus returns and are sensitive to interest rate levels and volatility. Although CLOs are structured to hedge interest rate risk to some degree through the use of matched funding, there may be some difference between the timing of LIBOR resets on the liabilities and assets of a CLO, which could have a negative effect on the amount of funds distributed to residual tranche holders. In addition, many obligors have the ability to choose their loan base from among various terms of LIBOR and the Prime Rate thereby generating an additional source of potential mismatch. Furthermore, in the (cid:74)(cid:91)(cid:74)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:70)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:87)(cid:78)(cid:88)(cid:78)(cid:83)(cid:76)(cid:5)(cid:78)(cid:83)(cid:89)(cid:74)(cid:87)(cid:74)(cid:88)(cid:89)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5) environment and/or economic downturn, loan defaults may increase and result in credit losses that may be expected to (cid:70)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:72)(cid:70)(cid:88)(cid:77)(cid:5)(cid:1835)(cid:84)(cid:92)(cid:17)(cid:5)(cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5) assets and operating results adversely. Change in interest rates may also affect the value of the Fund’s investment in PCOF. Generally, the value of convertible (cid:71)(cid:84)(cid:83)(cid:73)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:93)(cid:74)(cid:73)(cid:5)(cid:87)(cid:70)(cid:89)(cid:74)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) will change inversely with changes in interest rates. The investment managers of Polygon manage interest rate risk by, among other things, entering into interest rate swaps and other derivatives as and when required. From 31 December 2021, LIBOR has been replaced by an appropriate alternate rate as advised by ISDA in the IBOR Fallbacks Protocol. Five US Dollar LIBOR settings, including the 3-month rate utilised separately by the incentive fee hurdle and the revolving credit facility, will continue to be calculated and published using panel bank submissions until mid-2023. Any effect on the value of investments impacted at the time the change occurs is expected to be minimal without the introduction of inferior terms, as a consequence of the process. 116 Tetragon Financial Group Annual Re Annual Report 2021 The table below shows the sensitivity analysis for interest rates movement The tab on the investment portfolio held by the Fund. on the in 31 Decem 31 December 2021 U.S. CLO U.S. CLOs TCI II TCI II TCI III TCI III PCOF PCOF 31 Decem 31 December 2020 U.S. CLO U.S. CLOs TCI II TCI II TCI III TCI III PCOF PCOF Fair Value US$ MM Effects of +100bps change in interest rate on net assets US$ MM Effects of -100bps change in interest rate on net assets US$ MM 164.4 44.9 72.9 131.6 413.8 151.3 48.4 76.0 116.7 392.4 3.4 1.2 2.5 (6.2) 0.9 (20.0) (4.5) (5.6) (3.5) (33.6) 7.0 0.4 2.3 5.1 14.8 6.1 (3.8) 1.3 3.6 7.2 ii. Currency risk (cid:57)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) and enters into transactions that are denominated in currencies other than its functional currency, primarily in Euro (“EUR”), Sterling (“GBP”) and Norwegian Krone (“NOK”). Consequently, the Fund is exposed to risk that the exchange rate of its currency relative to other foreign currencies may change in a manner that has an adverse effect on the fair value or future cash (cid:1835)(cid:84)(cid:92)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5) (cid:84)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:73)(cid:74)(cid:83)(cid:84)(cid:82)(cid:78)(cid:83)(cid:70)(cid:89)(cid:74)(cid:73)(cid:5) in currencies other than USD. The Fund typically hedges against its currency risk, mainly by employing forward foreign exchange contracts. The currency exposure is monitored and managed on a daily basis. Exposur Exposure: At the re At the reporting date, the carrying (cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:5) (cid:70)(cid:82)(cid:84)(cid:90)(cid:83)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:1123)(cid:88)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70) (cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:81)(cid:78)(cid:70)(cid:71)(cid:78)(cid:81)(cid:78)(cid:89)(cid:78)(cid:74)(cid:88)(cid:5)(cid:77)(cid:74)(cid:81)(cid:73)(cid:5) in individ in individual foreign currencies, expresse expressed in USD were as follows. The sens The sensitivity analysis sets out the (cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:83) (cid:74)(cid:75)(cid:75)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:83)(cid:74)(cid:89)(cid:5)(cid:70)(cid:88)(cid:88)(cid:74)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5) for the y for the year of reasonably possible weakeni weakening of USD against EUR, GBP, and NOK and NOK by 5%. The analysis assumes that all o that all other variables, in particular interest interest rates, remain constant. A streng A strengthening of the USD against the abov the above currencies would have resulted resulted in an equal but opposite effect to effect to the amounts shown here. 31 December 2021 Net Monetary and Non-Monetary Assets and Liabilities US$ MM Forward foreign exchange hedging US$ Net exposure US$ MM Effect of 5% on exchange rate US$ MM EUR GBP NOK 31 December 2020 EUR GBP NOK 53.6 807.0 4.4 865.0 53.6 548.9 18.1 620.6 (50.3) (263.9) (5.4) (319.6) (54.9) (422.5) (16.8) (494.2) 3.3 543.1 (1.0) 545.4 (1.3) 126.4 1.3 126.4 0.2 27.2 (0.1) 27.3 (0.1) 6.3 0.1 6.3 117 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) iii. Other Price Risk ‘Other price risk’ is the risk that the (cid:75)(cid:70)(cid:78)(cid:87)(cid:5)(cid:91)(cid:70)(cid:81)(cid:90)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:88)(cid:89)(cid:87)(cid:90)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) (cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:1835)(cid:90)(cid:72)(cid:89)(cid:90)(cid:70)(cid:89)(cid:74)(cid:5)(cid:70)(cid:88)(cid:5)(cid:70)(cid:5)(cid:87)(cid:74)(cid:88)(cid:90)(cid:81)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:72)(cid:77)(cid:70)(cid:83)(cid:76)(cid:74)(cid:88)(cid:5)(cid:78)(cid:83)(cid:5) market prices (other than those arising from interest rate risk or currency risk), whether caused by factors (cid:88)(cid:85)(cid:74)(cid:72)(cid:78)(cid:1834)(cid:72)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:83)(cid:5)(cid:78)(cid:83)(cid:73)(cid:78)(cid:91)(cid:78)(cid:73)(cid:90)(cid:70)(cid:81)(cid:5)(cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) or its issuer or by factors affecting all instruments traded in the market. The Investment Manager manages the Fund’s price risk and monitors its overall market positions on a regular basis in accordance with Fund’s investment objectives and policies. The following table sets out the concentration of the investment assets and liabilities, including derivatives held by the Fund as at the reporting date. The Investment Manager reviews the concentrations against the limits which are set and reviewed periodically. The table here shows the impact of a positive 1% movement in the price of these (cid:78)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:51)(cid:38)(cid:59)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) the Fund. A negative 1% movement will have an equal and opposite effect. Asset class Investment funds and vehicles TFG Asset Management CLO equity & debt tranches Unlisted stock Listed stock Corporate bonds Contracts for difference Forward foreign exchange contracts and options Asset class Investment funds and vehicles TFG Asset Management CLO equity & debt tranches Unlisted stock Listed stock Corporate bonds Contracts for difference Forward foreign exchange contracts and options % of net assets as at 31 Dec 2021 % of net assets as at 31 Dec 2020 Note 7 Note 7 Other receivables Other and prepayments and pr 40.3% 43.7% 5.8% 1.7% 6.9% 0.7% 0.0% 0.1% 43.3% 33.7% 6.1% 7.1% 6.9% 0.7% 0.0% (0.7)% 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 11.6 12.6 1.7 0.5 2.0 0.2 - - 10.7 8.3 1.5 1.8 1.7 0.2 - (0.2) Other receivables Other rec Prepayments Prepaym Interest receivables Interest r Other rec Other receivables and interest receivables are expected to be settled within 12 months. Note 8 Note 8 (cid:53)(cid:87)(cid:78)(cid:82)(cid:74)(cid:5)(cid:71)(cid:87)(cid:84)(cid:80)(cid:74)(cid:87)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5) (cid:53)(cid:87)(cid:78)(cid:82)(cid:74)(cid:5) Value of collateral posted with brokers Value of c The colla The collateral is in the form of long and short list short listed equities and derivatives, and cash. The cash. The Fund can draw cash on the back of t back of these securities from the broker. As of 31 As of 31 December 2021, the payable balance to broker was nil (2020: nil). During 2021, charges of US$ 0.5 million (2020: nil) were paid to the brokers in (cid:87)(cid:74)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:83)(cid:76)(cid:5)(cid:70)(cid:87)(cid:87)(cid:70)(cid:83)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) (cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:19)(cid:5) Note 9 Note 9 Other Other payables and accrued expenses accrue Incentive fee payable Incentive Other payables and accrued expenses Other pay All other All other payables and accrued expenses are due within one year. 118 Tetragon Financial Group Annual Re Annual Report 2021 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 0.4 2.2 - 2.6 0.3 2.9 0.1 3.3 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 196.3 - 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 104.1 6.5 110.6 66.0 2.9 68.9 119 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Note 10 Credit facility Note 11 Incentive fee In July 2020, the Fund obtained a 10-year US$ 250.0 million revolving credit facility. The facility is subject to a non-usage fee of 0.5% which is applied to the undrawn notional amount and a servicing fee of 0.015% of the total size of the facility. Any drawn portion will incur interest at a rate of 3M U.S. LIBOR plus a spread of 3.25%. For the year ended 31 December (cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:89)(cid:84)(cid:89)(cid:70)(cid:81)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:5)(cid:74)(cid:93)(cid:85)(cid:74)(cid:83)(cid:88)(cid:74)(cid:73)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5) paid for the facility was US$ 5.1 million (2020: US$ 6.2 million). In July 2020, the Fund paid US$ 2.5 million in fees directly associated with the facility, of which US$ 2.2 million (2020: US$ 2.4 million) is included in prepayments balance and is amortised over the life of the facility. This expense, US$ 0.2 million (2020: US$ (cid:21)(cid:19)(cid:22)(cid:5)(cid:82)(cid:78)(cid:81)(cid:81)(cid:78)(cid:84)(cid:83)(cid:14)(cid:17)(cid:5)(cid:78)(cid:88)(cid:5)(cid:78)(cid:83)(cid:72)(cid:81)(cid:90)(cid:73)(cid:74)(cid:73)(cid:5)(cid:78)(cid:83)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:74)(cid:5)(cid:72)(cid:84)(cid:88)(cid:89)(cid:88)(cid:19)(cid:5)(cid:5) During 2020, US$ 150.0 million was paid in connection with terminating the Fund’s previous credit facility and US$ 100.0 million was drawn from the new revolving credit facility. During 2021, a further US$ 50.0 million was drawn from the credit facility and US$ 75.0 million were repaid by the Fund. As at 31 December 2021, the drawn balance of the revolving credit facility was US$ 75.0 million (2020: US$ 100.0 million). The Fund pays the Investment Manager an incentive fee for each calculation period (a period of three months ending on 31 March, 30 June, 30 September and 31 December in each year or as otherwise determined by the Directors) (the “Calculation Period”) equal to 25% of the increase in the NAV of the Fund during the Calculation Period (before deduction of any dividend paid or the amount of any redemptions or repurchases of the shares (or other relevant capital adjustments) during such Calculation Period) above the Reference NAV (as (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:5)(cid:85)(cid:81)(cid:90)(cid:88)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:45)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:13)(cid:70)(cid:88)(cid:5) (cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:70)(cid:81)(cid:72)(cid:90)(cid:81)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:5)(cid:53)(cid:74)(cid:87)(cid:78)(cid:84)(cid:73)(cid:19)(cid:5)(cid:5) If the Hurdle is not met in any Calculation Period (and no incentive fee is paid), the shortfall will not carry forward to any subsequent Calculation Period. The Hurdle for any Calculation Period (cid:92)(cid:78)(cid:81)(cid:81)(cid:5)(cid:74)(cid:86)(cid:90)(cid:70)(cid:81)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:55)(cid:74)(cid:75)(cid:74)(cid:87)(cid:74)(cid:83)(cid:72)(cid:74)(cid:5)(cid:51)(cid:38)(cid:59)(cid:5)(cid:13)(cid:70)(cid:88)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5) below) multiplied by the Hurdle Rate (cid:13)(cid:70)(cid:88)(cid:5)(cid:73)(cid:74)(cid:1834)(cid:83)(cid:74)(cid:73)(cid:5)(cid:71)(cid:74)(cid:81)(cid:84)(cid:92)(cid:14)(cid:19)(cid:5)(cid:5)(cid:57)(cid:77)(cid:74)(cid:5)(cid:45)(cid:90)(cid:87)(cid:73)(cid:81)(cid:74)(cid:5)(cid:55)(cid:70)(cid:89)(cid:74)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5) any Calculation Period equals 3-month USD LIBOR determined as of 11:00 a.m. (cid:49)(cid:84)(cid:83)(cid:73)(cid:84)(cid:83)(cid:5)(cid:89)(cid:78)(cid:82)(cid:74)(cid:5)(cid:84)(cid:83)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:87)(cid:88)(cid:89)(cid:5)(cid:49)(cid:84)(cid:83)(cid:73)(cid:84)(cid:83)(cid:5)(cid:71)(cid:90)(cid:88)(cid:78)(cid:83)(cid:74)(cid:88)(cid:88)(cid:5) day of the then current Calculation Period, plus the Hurdle Spread of 2.647858% in each case multiplied by the actual number of days in the Calculation Period divided by 365. The Hurdle Rate for Q1 2022 is 2.863858%. The ‘‘Reference NAV’’ is the greater of (i) the NAV at the end of the Calculation Period immediately preceding the current Calculation Period and (ii) the NAV as of the end of the Calculation Period immediately preceding the Calculation Period referred to in clause (i). For the purpose of determining the Reference NAV at the end of a Calculation Period, the NAV shall be adjusted by the amount of accrued dividends and the amounts of any redemptions or repurchase of the shares (or other relevant capital adjustments) and incentive fees to be paid with respect to that Calculation Period. The incentive fee in respect of each Calculation Period is calculated by reference to the NAV before deduction of any accrued incentive fee. If the Investment Management Agreement is terminated other than at the end of a Calculation Period, the date of termination will be deemed to be the end of the Calculation Period. The incentive fee is normally payable in arrears after the end of the Calculation Period. The incentive fee for the year ended 31 December 2021 was US$ 124.6 million (2020: US$ $ 72.7 million). As at 31 December 2021, US$ 104.1 million was outstanding (2020: US$ 66.0 million). Note 12 Note 1 Share capital Share Authoris Authorised The Fund has an authorised share The Fund capital o capital of US$ 1.0 million divided into 10 voting 10 voting shares, having a par value of US$ 0 of US$ 0.001 each and 999,999,990 non-votin non-voting shares (which are the “shares” “shares” referred to herein), having a par val a par value of US$ 0.001 each. Voting Shares All of the Fund’s voting shares are (cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:73)(cid:5)(cid:70)(cid:89)(cid:5)(cid:85)(cid:70)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:70)(cid:87)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:72)(cid:78)(cid:70)(cid:81)(cid:81)(cid:94)(cid:5) owned by the Voting Shareholder, a (cid:83)(cid:84)(cid:83)(cid:18)(cid:58)(cid:19)(cid:56)(cid:19)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) Manager. The voting shares will be the only shares entitled to vote for the election of Directors and on all other matters put to a vote of shareholders, subject to the limited rights of the shares described below. The voting shares are not entitled to receive dividends. Non-Voting Shares The shares carry a right to any dividends or other distributions declared by the Fund. The shares are not entitled to vote on any matter other than limited voting rights in respect of variation of their own class rights. Dividend Rights Dividends may be paid to the holders of shares at the sole and absolute discretion of the Directors. The voting shares carry no rights to dividends. Share Tr Share Transactions Voting Shares No. Non-Voting Shares* No. MM Treasury Shares No. MM Shares held in Escrow No. MM Shares in issue at 1 January 2020 Shares in Stock div Stock dividends Issued th Issued through release of tranche of escrow shares Shares p Shares purchased during the year Shares in Shares in issue at 31 December 2020 Stock div Stock dividends Issued th Issued through release of tranche of escrow shares Shares p Shares purchased during the year Shares in Shares in issue at 31 December 2021 10 - - - 10 - - - 10 92.2 1.5 1.7 (6.6) 88.8 1.2 0.4 (0.2) 90.2 35.4 (2.0) - 6.6 40.0 (1.6) - 0.2 38.6 12.1 0.5 (1.7) - 10.9 0.4 (0.4) - 10.9 *Non-vot *Non-voting shares do not include the treasury shares, or the shares held in escrow. Optional Optional Stock Dividend The Fund The Fund has an Optional Stock Dividend Dividend Plan which offers investors an oppor an opportunity to elect to receive any declared declared dividend in the form of dividend shares a shares at a reference price determined (cid:71)(cid:94) (cid:72)(cid:70)(cid:81)(cid:72)(cid:90) (cid:71)(cid:94)(cid:5)(cid:72)(cid:70)(cid:81)(cid:72)(cid:90)(cid:81)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:91)(cid:74)(cid:18)(cid:73)(cid:70)(cid:94)(cid:5)(cid:92)(cid:74)(cid:78)(cid:76)(cid:77)(cid:89)(cid:74)(cid:73)(cid:5) average average price post ex-dividend date. During th During the year, a total dividend of US$ 35.8 US$ 35.8 million (2020: US$ 44.8 million) w million) was declared, of which US$ 24.2 mill 24.2 million was paid out as a cash dividend (2020: US$ 30.7 million), and the remaining US$ 11.6 million (2020: US$ 14.1 million) was reinvested under the Optional Stock Dividend Plan. Treasury Shares and Share Repurchases Treasury shares consist of shares that have been bought-back by the Fund from its investors through various tender offers and plans. Whilst they are held by the Fund, the shares are neither eligible to receive dividends nor are they included in the shares outstanding in the Consolidated Statement of Financial Position. In June 2020, under the terms of (cid:1126)(cid:82)(cid:84)(cid:73)(cid:78)(cid:1834)(cid:74)(cid:73)(cid:5)(cid:41)(cid:90)(cid:89)(cid:72)(cid:77)(cid:5)(cid:70)(cid:90)(cid:72)(cid:89)(cid:78)(cid:84)(cid:83)(cid:88)(cid:1127)(cid:17)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5) accepted for purchase approximately 5.5 million non-voting shares at an aggregate cost of US$ 50.2 million, including applicable fees and expenses of US$ 0.2 million. 120 Tetragon Financial Group Annual Re Annual Report 2021 121 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) The Fund made the following purchases of its own shares from related parties using the then-current share price: Date Purchased from No. of shares Cost (US$ MM) January 2020 TFG Asset Management LP January 2020 Tetragon Financial Management LP October 2020 TFG Asset Management LP January 2021 TFG Asset Management LP August 2021 TFG Asset Management LP October 2021 TFG Asset Management LP 691,291 287,153 142,240 17,651 156,023 44,903 8.5 3.5 1.2 0.2 1.5 0.4 Then-current share price US$ 12.25 US$ 12.25 US$ 8.74 US$ 9.50 US$ 9.70 US$ 9.14 Escrow shares Equity-based awards In 2015, the Fund bought back approximately 5.6 million of its non- voting shares in a tender offer for US$ 57.4 million (including fees and expenses) to hedge against (or otherwise offset the future impact of) grants of shares under an equity-based long-term incentive plan and other equity awards by TFG Asset Management for certain of its senior employees (excluding the principals of the Investment Manager). Awards under the long-term incentive plan, along with other equity-based awards, are typically spread over multiple vesting dates up to 2024 which may vary for each employee and are subject to forfeiture provisions. The arrangements may also include additional periods, beyond the vesting dates, during which employees gain exposure to the performance of the Fund’s shares, but the shares are not issued to the employees. Such periods may range from one to (cid:1834)(cid:91)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87)(cid:88)(cid:5)(cid:71)(cid:74)(cid:94)(cid:84)(cid:83)(cid:73)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:91)(cid:74)(cid:88)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:88)(cid:19)(cid:5)(cid:5) The shares underlying these equity- based incentive programs typically will be held in escrow until they vest and will be eligible to receive shares under the Optional Stock Dividend Plan. Under IFRS 2, TFG Asset Management is considered to be the settling entity. As the Fund has contributed these shares, the Fund recorded the imputed value of the shares contributed to escrow as credit to share-based compensation reserve in the year in which the shares were acquired for this purpose, with a corresponding debit to the cost of investment in TFG Asset Management. In February 2021, further awards to certain senior TFG Asset Management employees (excluding the principals of the investment manager) were made covering vesting and release periods out to 2032. 2.3 million shares acquired during the buybacks made in 2020 will be used to hedge against (or otherwise offset the future impact of) these awards. In July 2019, TFG Asset Management entered into an employment agreement (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:17)(cid:5)(cid:41)(cid:78)(cid:87)(cid:74)(cid:72)(cid:89)(cid:84)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:17)(cid:5) that covers his services to TFG Asset Management for the period through to (cid:24)(cid:21)(cid:5)(cid:47)(cid:90)(cid:83)(cid:74)(cid:5)(cid:23)(cid:21)(cid:23)(cid:25)(cid:19)(cid:5)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:78)(cid:88)(cid:5)(cid:72)(cid:90)(cid:87)(cid:87)(cid:74)(cid:83)(cid:89)(cid:81)(cid:94)(cid:5) (cid:89)(cid:77)(cid:74)(cid:5)(cid:40)(cid:77)(cid:78)(cid:74)(cid:75)(cid:5)(cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:57)(cid:43)(cid:44)(cid:5) Asset Management as well as the Chief (cid:46)(cid:83)(cid:91)(cid:74)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:52)(cid:75)(cid:1834)(cid:72)(cid:74)(cid:87)(cid:5)(cid:84)(cid:75)(cid:5)(cid:78)(cid:89)(cid:88)(cid:5)(cid:53)(cid:84)(cid:81)(cid:94)(cid:76)(cid:84)(cid:83)(cid:5)(cid:74)(cid:91)(cid:74)(cid:83)(cid:89)(cid:18) driven European equity strategies (in addition to other roles). Under the terms (cid:84)(cid:75)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:70)(cid:76)(cid:87)(cid:74)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:17)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:87)(cid:74)(cid:72)(cid:74)(cid:78)(cid:91)(cid:74)(cid:73)(cid:5) US$ 9.5 million in July 2019 and US$ 3.75 million in July 2020 in cash, 0.3 million Tetragon non-voting shares in July 2021 and will receive the following: • 2.1 million Tetragon non-voting shares in July 2024; and • between zero and an additional 3.15 million Tetragon non-voting shares – with the number of shares based on agreed-upon investment performance criteria – vesting in years 5, 6 and 7. All of the Tetragon non-voting shares, (cid:72)(cid:84)(cid:91)(cid:74)(cid:87)(cid:74)(cid:73)(cid:5)(cid:71)(cid:94)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:1123)(cid:88)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) agreement are subject to forfeiture conditions. The shares are held in escrow for release upon vesting and are eligib are eligible to participate in the optional stock div stock dividend program, and as a result of result of subsequent dividends, further shares w shares will be added to the escrow. As the Fu As the Fund has the obligation to settle the share the shares, this award is treated as equity-se equity-settled. The fair value of the share award is award is determined using the share price at grant date of US$ 12.50 (ticker symbol: TFG.NA). The total expense is determined by multiplying the share price at grant date and the estimated number of shares that will vest. The expense is recognised in Consolidated Statement of Comprehensive Income on a straight-line basis over the vesting period. A corresponding entry is made to the share-based compensation reserve. The following table shows the expense for each tranche up to the year ending 31 December 2024. Shares estimated Shares e to vest (M to vest (MM) Vesting date 2019 US$ MM 2020 US$ MM 2021 US$ MM 2022 US$ MM 2023 US$ MM 2024 US$ MM 0.3 0.3 2.1 2.1 30 Jun 2021 30 Jun 2024 1.575* 1.575* 30 Jun 2024* 0.9 2.6 2.0 5.5 1.9 5.3 3.9 11.1 0.9 5.3 3.9 10.1 - 5.3 3.9 9.2 - 5.3 3.9 9.2 - 2.6 2.0 4.6 *As at 31 *As at 31 December 2021, it is estimate estimated that 1.575 million (2020: 1.575 m 1.575 million) of the maximum 3.15 million s million shares will vest according to the agreed-u agreed-upon investment performance criteria a criteria at the end of year 5 with no shares v shares vesting in years 6 and 7. This estimate estimate will be revised at each reporting reporting date and as a result, future expense expense may be different from the expense expense presented in the table above. As at 31 As at 31 December 2021, 10.9 million (2020: 1 (2020: 10.9 million) shares related to TFG Ass TFG Asset Management’s employee reward s reward schemes are held in escrow. During th During the year, 0.4 million shares (2020: 1.7 millio 1.7 million) were released from escrow including including stock dividends awarded on the original s original shares. US$ 4.9 million (2020: US$ 13.9 US$ 13.9 million) was transferred from share-ba share-based compensation reserve to other eq other equity in relation to the original shares. An amount of US$ 0.6 million (2020: US$ 4.2 million) was released against retained earnings, based on the stock reference price at each applicable dividend date. These shares are eligible for stock dividends and during the year, 0.4 million (2020: 0.5 million) shares were allocated to this account. On 1 January 2020, the Independent Directors were awarded shares in Tetragon which vest on 31 December 2022 and are subject to forfeiture provisions. The fair value of the aggregate awards, as determined by the share price on grant date of US$ 12.25 per share, is US$ 0.9 million. The expense is recognised on a straight- line basis in Consolidated Statement of Comprehensive Income over the vesting period starting from 1 January 2020. A corresponding entry is made to the share-based compensation reserve. Share-Based Compensation Reserve The balance, US$ 60.1 million (2020: US$ 54.6 million) in share-based compensation reserve is related to Equity-based awards as described above. Capital Management The Fund’s capital is represented by the ordinary share capital, other equity, and accumulated retained earnings, as disclosed in the Consolidated Statement of Financial Position. The Fund’s capital is managed in accordance with its investment objective. The Fund is not subject to externally imposed capital requirements and has no legal restrictions on the issue, repurchase or resale of its shares. 122 Tetragon Financial Group Annual Re Annual Report 2021 123 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) Note 13 Dividends Quarter ended 31 December 2019 of US$ 0.1875 per share Quarter ended 31 March 2020 of US$ 0.1000 per share Quarter ended 30 June 2020 of US$ 0.1000 per share Quarter ended 30 September 2020 of US$ 0.1000 per share Quarter ended 31 December 2020 of US$ 0.1000 per share Quarter ended 31 March 2021 of US$ 0.1000 per share Quarter ended 30 June 2021 of US$ 0.1000 per share Quarter ended 30 September 2021 of US$ 0.1000 per share 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM - - - - 8.9 8.9 9.0 9.0 17.4 9.3 9.0 9.1 - - - - 35.8 44.8 The fourth quarter dividend of US$ 0.1100 per share was approved by the Directors on 4 March 2022 and has not been included as a liability in (cid:89)(cid:77)(cid:74)(cid:88)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:19) Note 14 Contingencies and commitments The Fund has the following unfunded commitments: BentallGreenOak investment vehicles Private equity funds Contingency Capital loan Contingency Capital fund Tetragon Credit Income IV 31 Dec 2021 US$ MM 31 Dec 2020 US$ MM 42.8 18.4 8.3 10.3 10.6 90.4 62.9 29.7 12.5 - - 105.1 Note 15 Note 1 Related-party transactions Relate Investme Investment Manager The Investment Manager is entitled The Inve to receiv to receive management fees equal to 1.5% per 1.5% per annum of the NAV of the Fund payable payable monthly in advance prior to the dedu the deduction of any accrued incentive fee. An i fee. An incentive fee may be paid to the Inves the Investment Manager as disclosed in Note 1 in Note 11. During the year ended 31 Decemb December 2020, the Fund purchased its own s its own shares from the Investment Manager Manager. See Note 12 for details. Voting S Voting Shareholder (cid:57)(cid:77)(cid:74)(cid:5)(cid:59)(cid:84)(cid:89)(cid:78) (cid:57)(cid:77)(cid:74)(cid:5)(cid:59)(cid:84)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5)(cid:56)(cid:77)(cid:70)(cid:87)(cid:74)(cid:77)(cid:84)(cid:81)(cid:73)(cid:74)(cid:87)(cid:5)(cid:78)(cid:88)(cid:5)(cid:70)(cid:83)(cid:5)(cid:70)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:5) of the Inv of the Investment Manager and holds all of the all of the voting shares. As a result of its owne its ownership and the degree of control that it ex that it exercises, the Voting Shareholder will be ab will be able to control the appointment and remo and removal of the Fund’s Directors (cid:13)(cid:88)(cid:90)(cid:71)(cid:79)(cid:74)(cid:72)(cid:89)(cid:5) (cid:13)(cid:88)(cid:90)(cid:71)(cid:79)(cid:74)(cid:72)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:70)(cid:85)(cid:85)(cid:81)(cid:78)(cid:72)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:81)(cid:70)(cid:92)(cid:14)(cid:19)(cid:5)(cid:5)(cid:38)(cid:75)(cid:1834)(cid:81)(cid:78)(cid:70)(cid:89)(cid:74)(cid:88)(cid:5)(cid:84)(cid:75)(cid:5) the Votin the Voting Shareholder also control the Investme Investment Manager and, accordingly, control t control the Fund’s business and affairs. Directors Directors The rem The remuneration for Directors shall be determin determined by resolution of the Voting Shareho Shareholder. Each of the Directors’ annual fe annual fee is US$ 125,000 (2020: US$ 125 US$ 125,000) as compensation for service a service as Directors of the Fund. As at 31 De at 31 December 2021, US$ 15,625 (2020: U (2020: US$ 93,750) was outstanding in relation t relation to Directors’ remuneration. The Dire The Directors have the option to elect to receiv to receive shares in the Fund instead of the quart the quarterly fee. With respect to the year ended 31 December 2021, David O’Leary elected to receive shares in lieu of half of his compensation and received 6,502 shares (2020: 6,626). On 1 January 2020, the Independent Directors were awarded shares in Tetragon which vest on 31 December 2022 and are subject to forfeiture provisions. The fair value of the award, as determined by the share price on grant date of US$ 12.25 per share, is US$ 300,000 per Independent Director. (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:5)(cid:77)(cid:70)(cid:91)(cid:74)(cid:5) waived their entitlement to a fee in respect of their services as Directors. The Directors are entitled to be repaid by the Fund all travel, hotel and other expenses reasonably incurred by them in the discharge of their duties. None of the Directors have a contract (cid:92)(cid:78)(cid:89)(cid:77)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:43)(cid:90)(cid:83)(cid:73)(cid:5)(cid:85)(cid:87)(cid:84)(cid:91)(cid:78)(cid:73)(cid:78)(cid:83)(cid:76)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5) upon termination of employment. (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:17)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:41)(cid:70)(cid:91)(cid:78)(cid:73)(cid:5) O’Leary – all Directors of the Fund during the year - maintained (directly or indirectly) interests in shares of the Fund as at 31 December 2021, with interests of 15,297,765, 5,202,514 and 16,880 shares respectively (2020: 14,505,324, 4,976,960 and 10,378 shares, respectively). (cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:77)(cid:70)(cid:88)(cid:5)(cid:70)(cid:83)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) agreement with TFG Asset Management as described in Note 12. Subsidiaries The Fund has entered into share-based employee reward schemes with its subsidiary, TFG Asset Management LP. See Note 12 for details. Polygon Global Partners LLP and Polygon Global Partners LP (together the “Service Providers”) provide (cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:84)(cid:83)(cid:70)(cid:81)(cid:17)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:87)(cid:84)(cid:81)(cid:17)(cid:5)(cid:89)(cid:87)(cid:70)(cid:73)(cid:78)(cid:83)(cid:76)(cid:17)(cid:5) marketing and investor relations, legal, compliance, administrative, payroll (cid:70)(cid:83)(cid:73)(cid:5)(cid:74)(cid:82)(cid:85)(cid:81)(cid:84)(cid:94)(cid:74)(cid:74)(cid:5)(cid:71)(cid:74)(cid:83)(cid:74)(cid:1834)(cid:89)(cid:88)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:84)(cid:89)(cid:77)(cid:74)(cid:87)(cid:5) services to the Investment Manager in exchange for fees payable by the Investment Manager to the Service Providers. One of these entities, the U.K. Investment Manager, which is authorised and regulated by the United Kingdom Financial Conduct Authority, also provides services to the Investment Manager relating to the dealing in and management of investments, arranging of deals and advising on investments. TFG Asset Management, through the Service Providers, has implemented a cost-allocation methodology with the objective of allocating service-related costs, including to the Investment Manager. TFG Asset Management then charges fees for the services allocated on a cost-recovery basis that is designed to achieve full recovery of the allocated costs. In the year, the amount recharged to the Investment Manager was US$ 23.9 million (2020: US$ 18.1 million). As at 31 December 2021, the outstanding balance due from the Investment Manager was US$ 4.0 million (2020: US$ 2.5 million) During the year ended 31 December 2021, the Fund purchased its own shares from TFG Asset Management LP. See Note 12 for details. (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:5)(cid:72)(cid:84)(cid:83)(cid:89)(cid:78)(cid:83)(cid:90)(cid:74)(cid:5) to hold membership interests in Polygon Global Partners LLP (the “U.K. Investment Manager”) which collectively entitle them to exercise all of the voting rights in respect of the U.K. Investment Manager. 124 Tetragon Financial Group Annual Re Annual Report 2021 125 Independent Auditor’s Report and Audited Financial Statements (cid:48)(cid:81)(cid:86)(cid:71)(cid:85)(cid:3)(cid:86)(cid:81)(cid:3)(cid:86)(cid:74)(cid:71)(cid:3)(cid:403)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:3)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:3)(cid:10)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:71)(cid:70)(cid:11) As part of the acquisition of TFG Asset (cid:50)(cid:70)(cid:83)(cid:70)(cid:76)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:78)(cid:83)(cid:5)(cid:23)(cid:21)(cid:22)(cid:23)(cid:17)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5) and Mr. Dear have agreed that they will (i) exercise their voting rights in a manner that is consistent with the best interests of the Fund and (ii) upon the request of the Fund, for nominal consideration, sell, transfer, and deliver their membership interests in the U.K. Investment Manager to the Fund. (cid:55)(cid:74)(cid:70)(cid:73)(cid:74)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5)(cid:70)(cid:83)(cid:73)(cid:5)(cid:53)(cid:70)(cid:73)(cid:73)(cid:94)(cid:5)(cid:41)(cid:74)(cid:70)(cid:87)(cid:5)(cid:70)(cid:81)(cid:88)(cid:84)(cid:5)(cid:77)(cid:84)(cid:81)(cid:73)(cid:5) membership interests in Pace Cayman Holdco Limited (“Pace Holdco”), an entity through which the Fund ultimately owns its equity stake in Equitix. These membership interests collectively entitle them to exercise all of the voting rights (cid:78)(cid:83)(cid:5)(cid:87)(cid:74)(cid:88)(cid:85)(cid:74)(cid:72)(cid:89)(cid:5)(cid:84)(cid:75)(cid:5)(cid:53)(cid:70)(cid:72)(cid:74)(cid:5)(cid:45)(cid:84)(cid:81)(cid:73)(cid:72)(cid:84)(cid:19)(cid:5)(cid:5)(cid:50)(cid:87)(cid:19)(cid:5)(cid:44)(cid:87)(cid:78)(cid:75)(cid:1834)(cid:89)(cid:77)(cid:5) and Mr. Dear have agreed that they will (i) exercise their voting rights in a manner that is consistent with the best interests of the Fund and (ii) upon the request of the Fund, for nominal consideration, sell, transfer, and deliver their membership interests in the Pace Holdco to the Fund. Investments in internally managed funds The Fund holds various investments in funds managed within TFG Asset Management business. Please see Note 5 for details of these investments and Note 14 for the unfunded commitments related to these funds. Note 16 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings for the purposes of basic earnings per share being net (cid:85)(cid:87)(cid:84)(cid:1834)(cid:89)(cid:5)(cid:70)(cid:89)(cid:89)(cid:87)(cid:78)(cid:71)(cid:90)(cid:89)(cid:70)(cid:71)(cid:81)(cid:74)(cid:5)(cid:89)(cid:84)(cid:5)(cid:88)(cid:77)(cid:70)(cid:87)(cid:74)(cid:77)(cid:84)(cid:81)(cid:73)(cid:74)(cid:87)(cid:88)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:94)(cid:74)(cid:70)(cid:87) Year ended 31 Dec 2021 US$ MM Year ended 31 Dec 2020 US$ MM 418.2 171.1 Weighted average number of shares for the purposes of basic earnings per share 89.4 91.7 Effect of dilutive potential shares: Share-based employee compensation – equity-based awards Weighted average number of shares for the purposes of diluted earnings per share 11.0 100.4 10.9 102.6 Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding assuming conversion of all dilutive potential shares. Share-based employee compensation shares are dilutive potential shares. In respect of share-based employee compensation – equity-based awards, it is assumed that all of the time-based shares currently held in escrow will be released, thereby increasing the weighted average number of shares. The number of dilutive performance-based shares is based on the number of shares that would be issuable if the end of the period were the end of the performance period. Note 17 Note 1 Segment information Segme The shares in issue are in US Dollars. The Fund’s investment geographical exposure is as follows: IFRS 8 Operating Segments requires a IFRS 8 O ‘manage ‘management approach’, under which segment segment information is presented on the sa on the same basis as that used for intern for internal reporting purposes. For man For management purposes, the Fund is organi is organised into one main operating segment segment – its investment portfolio - which invests, either directly or via fund which inv vehicles, vehicles, in a range of alternative asset classes classes including equity securities, debt instrume instruments, real estate, infrastructure, loans an loans and related derivatives. The Fund’s investme investment activities are all determined by the In by the Investment Manager in accordance with the with the Fund’s investment objective. All of the All of the Fund’s activities are interrelat interrelated, and each activity is depende dependent on the others. (cid:38)(cid:72)(cid:72)(cid:84)(cid:87)(cid:73)(cid:78)(cid:83) (cid:38)(cid:72)(cid:72)(cid:84)(cid:87)(cid:73)(cid:78)(cid:83)(cid:76)(cid:81)(cid:94)(cid:17)(cid:5)(cid:70)(cid:81)(cid:81)(cid:5)(cid:88)(cid:78)(cid:76)(cid:83)(cid:78)(cid:1834)(cid:72)(cid:70)(cid:83)(cid:89)(cid:5)(cid:84)(cid:85)(cid:74)(cid:87)(cid:70)(cid:89)(cid:78)(cid:83)(cid:76)(cid:5) decision decisions are based upon analysis of the Fu of the Fund as one segment. The (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81) (cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:87)(cid:74)(cid:88)(cid:90)(cid:81)(cid:89)(cid:88)(cid:5)(cid:75)(cid:87)(cid:84)(cid:82)(cid:5)(cid:89)(cid:77)(cid:78)(cid:88)(cid:5)(cid:88)(cid:74)(cid:76)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5) (cid:70)(cid:87)(cid:74)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:91) (cid:70)(cid:87)(cid:74)(cid:5)(cid:74)(cid:86)(cid:90)(cid:78)(cid:91)(cid:70)(cid:81)(cid:74)(cid:83)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) stateme statements of the Fund as a whole. Region North America Europe (cid:38)(cid:88)(cid:78)(cid:70)(cid:5)(cid:53)(cid:70)(cid:72)(cid:78)(cid:1834)(cid:72) Latin America 31 Dec 2021 31 Dec 2020 38% 56% 5% 1% 42% 48% 8% 2% Note 18 Subsequent events The Directors have evaluated the period up to 4 March 2022, which is (cid:89)(cid:77)(cid:74)(cid:5)(cid:73)(cid:70)(cid:89)(cid:74)(cid:5)(cid:89)(cid:77)(cid:70)(cid:89)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:88)(cid:5) were approved. The Directors have concluded that there are no material events that require disclosure or (cid:70)(cid:73)(cid:79)(cid:90)(cid:88)(cid:89)(cid:82)(cid:74)(cid:83)(cid:89)(cid:5)(cid:89)(cid:84)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5)(cid:88)(cid:89)(cid:70)(cid:89)(cid:74)(cid:82)(cid:74)(cid:83)(cid:89)(cid:19)(cid:5)(cid:5) Note 19 (cid:38)(cid:85)(cid:85)(cid:87)(cid:84)(cid:91)(cid:70)(cid:81)(cid:5)(cid:84)(cid:75)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements The Directors approved and (cid:70)(cid:90)(cid:89)(cid:77)(cid:84)(cid:87)(cid:78)(cid:88)(cid:74)(cid:73)(cid:5)(cid:75)(cid:84)(cid:87)(cid:5)(cid:78)(cid:88)(cid:88)(cid:90)(cid:74)(cid:5)(cid:89)(cid:77)(cid:74)(cid:5)(cid:1834)(cid:83)(cid:70)(cid:83)(cid:72)(cid:78)(cid:70)(cid:81)(cid:5) statements on 4 March 2022. 126 Tetragon Financial Group Annual Re Annual Report 2021 127
Continue reading text version or see original annual report in PDF format above