2021
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.
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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).
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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
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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
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Annual Report 2021
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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
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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
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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
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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
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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.
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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
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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
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Tetragon Financial Group
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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