Tetragon Financial Group Limited

Diversified.

Alternative.

Investors.

2023 Annual Report

Tetragon Financial Group

Contents

4 2023 Snapshot

7 Letter to our shareholders

14 Manager’s review

24 Investment review

42 2023 Financial review

46 Governance

66 Other information

96 Audited financial statements

Annual Report 2023

Tetragon Financial Group

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 and who have experience in investing in financial markets and

collective investment undertakings, who are capable themselves of evaluating the merits and

risks of Tetragon shares, and who have sufficient resources both 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.

Euronext in Amsterdam is a regulated market of Euronext Amsterdam N.V., Tetragon’s “Home Member State” for the

purposes of the EU Transparency Directive (Directive 2004/109/EC) is the Netherlands.

Diversified.

Alternative.

Investors.

2023 Snapshot

Searching for intrinsic alpha – from

returns in excess to risks taken.

At Tetragon, we seek to provide stable

returns to investors across economic

cycles and market conditions.

Tetragon is a Guernsey closed-ended investment

group. Its non-voting shares are listed on

Euronext in Amsterdam and also traded on

the Specialist Fund Segment of the Main

Market of the London Stock Exchange.

Annual Report 2023

Tetragon Financial Group

Distributable income.

Capital appreciation.

2023 Snapshot

6.4%

2023 Full Year

8.8%

5 Years Annualised

9.6%

10 Years Annualised

10.5%

Since IPO Annualised

429%

Since IPO

5.5%

2023 Return on Equity

10-15%

RoE Target

11.3%

Annual Average

Since IPO

$0.11

Q4 2023 Dividend

$0.44

2023 Dividends

4.5%

Dividend Yield

(5)

(9.4%)

Dividend 5-Year CAGR

(6)

Net asset value

(1)

$2.8Bn

31 December 2023

Ownership

(2)

39.2%

Principal and Employee

Ownership at 31 December 2023

NAV per share total return

(3)

Dividends

Investment returns/return on equity

(4)

Annual Report 2023

Tetragon Financial Group

31 Dec 2023 31 Dec 2022 Change

Net Assets $2,825.4m $2,758.5m $66.9m

Fully Diluted NAV Per Share $ 31.13 $29.69 $1.44

Share Price

(1)

$9.88 $9.62 $0.26

Dividend (past 12 months) $0.44 $0.44 $0.00

Dividend Yield 4.5% 4.6%

Ongoing Charges

(2)

1.75% 1.74%

Principal and Employee Ownership 39.2% 37. 3%

2023 2022

Investment Returns/Return on Equity

(3)

5.5% (0.8%)

NAV Per Share Total Return

(4)

6.4% 1.0%

Share Price Total Return

(5)

7.3% 18.5%

Tetragon Hurdle: SOFR +2.75%

(6)

8.2% 4.5%

MSCI ACWI Index Total Return

(7)

22.8% (18.0%)

FTSE All-Share Index Total Return

(7)

7.7 % 0.2%

2023 Snapshot

Tetragon Financial Group – Performance summary

Tetragon’s NAV per Share Total Return and Share Price Since IPO to 31 December 2023

429%

184%

169%

99%

130%

450%

350%

250%

150%

50%

(50%)

(150%)

Dec-23

Apr-23

Aug-22

Dec-21

Apr-21

Aug-20

Dec-19

Apr-19

Aug-18

Dec-17

Apr-17

Aug-16

Dec-15

Apr-15

Aug-14

Dec-13

Apr-13

Aug-12

Dec-11

Apr-11

Aug-10

Dec-09

Apr-09

Aug-08

Dec-07

Apr-07

Figure 1

Figure 2

TFG NAV per share (TR) TFG Share Price (TR) MSCI ACWI (TR)

TFG SOFR-based performance hurdle FTSE All-Share Index (TR)

Annual Report 2023

Tetragon Financial Group

Page 4

(1) The value of Tetragon’s assets, less any liabilities, as at

31 December 2023. Source: Tetragon.

(2) Shareholdings at 31 December 2023 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 page 92 for more details of these

arrangements. Source:Tetragon.

(3) NAV Per Share Total Return to 31 December 2023, for the past

year, the past five years, the past ten years, and since Tetragon’s

initial public offering in April 2007. NAV Per Share 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 Per Share 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 Outstanding. Please

refer to Figure 12 for further details.

(4) Average RoE is calculated from Tetragon’s IPO in 2007. Tetragon

seeks to deliver 10-15% RoE per annum to shareholders. Over

longer time horizons, Tetragon’s returns will most likely reflect

sensitivity to the underlying short-term risk-free rate regime.

Therefore after periods of transition to high-SOFR environments,

Tetragon should achieve higher sustainable returns; after periods

of transition to low-SOFR environments, Tetragon should achieve

lower sustainable returns.

(5) The dividend yield represents the past four quarterly dividends

divided by the TFG NA share price at 31 December 2023. The

latest declared dividend is included in the calculation.

(6) The five-year Compound Annual Growth Rate (CAGR) figure is

at 31 December 2023. The latest declared dividend is included

in the calculation.

Page 5

(1) Based on TFG. NA.

(2) Annual calculation as at 31 December 2023. The ongoing charges

figure is calculated as defined by the AIC, and comprises all direct

recurring expenses to Tetragon expressed as a percentage of

average Net Assets, including the annual management fee of 1.5%.

(3) Please see Note 4 for page 4.

(4) Please see Note 3 for page 4.

(5) 2023 total shareholder return, defined as share price appreciation

including dividends reinvested, as sourced from Bloomberg.

(6) Cumulative return determined on a quarterly compounding basis

using the actual Tetragon quarterly incentive fee SOFR based

hurdle rate. In the period from IPO to June 2008 this was 8%; July

2008 to June 2023, this was three-month USD LIBOR rate on the

first day of each calendar quarter, plus a spread of 2.647858%;

thereafter, the hurdle rate has been determined using the three-

month term SOFR rate on the first day of each calendar quarter,

as sourced from Bloomberg, plus a spread of 2.747858%.

(7) Any indices and other financial 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

performance attained by a specific investor. In addition, the

fund’s holdings may differ significantly from the securities that

comprise the indices. The “MSCI ACWI Index” refers to the MSCI

All Country World Index (USD) which captures large- and mid-cap

representation across 23 developed markets and 24 emerging

markets countries. With 2,921 constituents, the index covers

approximately 85% of the global investable equity opportunity

set. 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 UK 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.

Notes

Annual Report 2023

Tetragon Financial Group

Long-term capital.

Creating opportunities.

Fellow shareholders:

As diversified, alternative investors, our investment objective

continues to be to generate distributable income and capital

appreciation. We do this by seeking to generate stable

returns across economic cycles and market conditions.

2023 was the first full calendar year with no meaningful

Covid restrictions, and we felt the collaboration and culture

benefits of a return to working together in our offices.

However, despite a return to a more “normal” way of living

and working across the globe, markets continued to be

plagued by uncertainty. Both the priced-in optimism and

despair we talked about in our 2022 letter came to pass.

Given that context, defensive capital preservation was a

priority, as this is what allows us to deliver value based

on the long-term compounding of returns. As ever, we

were supported by our diversified approach, focusing our

attention on identifying alternative investments that are more

likely to have low correlation to markets and to each other.

Letter to our shareholders

Letter to shareholders

Annual Report 2023

Tetragon Financial Group

Letter to shareholders

Performance Summary

Tetragon delivered an investment Return on Equity

(RoE) of 5.5%, a NAV per share total return of 6.4% and

a share price total return of 7.3% in 2023. Tetragon also

declared 44.0 cents of dividends per share for the year

– a yield of 4.5%. Further detail relating to Tetragon’s

Key Performance Metrics can be found on page 19.

2023 Market Context

Early 2023 saw a continuation of 2022’s uncertainty,

driven by persistent inflation and the most aggressive

central bank rate hike cycle since the early 1980s.

Expectations of impending recessions in the

United States, Europe and the United Kingdom

peaked in the first quarter, with concerns seemingly

validated as a solvency crisis gripped U.S. regional

banks. This led to the failure of several banks, a

liquidity intervention by the U.S. Federal Reserve

and rapidly tightening lending standards.

U.S. markets shook off these concerns as excitement

around artificial intelligence applications drove a

narrow but impactful rally in the “Magnificent 7”

mega-cap tech companies. Optimism was further

fuelled by clear evidence of slowing inflation, with

the Fed breaking a sequence of 10 consecutive rate

increases by “skipping” a hike in June and pausing

again after a hike in July. Resilient employment data

and remarkably strong third quarter GDP growth

estimates buoyed market hopes that an emerging

“soft landing” narrative would justify a Fed pivot

away from further tightening. By the end of 2023,

the enthusiasm focused on AI beneficiaries had

transformed into a cross-asset class rally with the S&P

500 rising 26.3%,

(1)

the “Magnificent 7” stocks up an

astounding 111.6% on average, the Euro STOXX 600

up 15.8%

(1)

and the MSCI ACWI Local Index rising

22.2%.

(2)

Credit indices rallied from double digit losses

in 2022 with U.S. high yield indices returning 13.4%

(1)

and investment grade indices returning 5.5%.

(1)

In 2023, Tetragon underperformed relative to the

MSCI ACWI Local Index, which represents the

performance of the MSCI ACWI Index if there

were no foreign exchange fluctuations (similar to a

portfolio with currency hedges), and with dividends

reinvested, gross of any taxes.

(3)

Nonetheless,

over the time that Tetragon has been trading as a

publicly-listed company, our NAV per share total

return of 429% has demonstrated our ability to

compound investment growth and return value to

shareholders; this compares to the MSCI ACWI

Local Index returning 209% over the same period.

Roopa Thakrar

Finance, London

Annual Report 2023

Tetragon Financial Group

Letter to shareholders

Our NAV per share total return

has demonstrated our ability to

compound investment growth and

return value to shareholders.

Net asset value

(1)

$2.8Bn

31 December 2023

Ownership

(2)

39.2%

Principal and Employee

Ownership at 31 December 2023

Tetragon portfolio performance notes

Return on Equity. Tetragon’s gross RoE was

+7.6% in 2023 (+5.5% net), as compared to

+22.2% for the MSCI ACWI Local Index. Over

the last five years, Tetragon’s annualised gross

RoE was +12.6% (+8.6% net) compared to

+12.8% for the MSCI ACWI Local Index.

(1)

Volatility. The volatility of Tetragon’s gross RoE

was 5.2% for 2023 (or 4.6% on the basis of its

net RoE) and 10.1% for the last five years (or

8.1% on the basis of its net RoE). The volatility

of the MSCI ACWI Local Index was 12.8% for

2023 and 16.3% for the last five years.

(1)

Sharpe Ratio. Over the last five years, Tetragon’s

Sharpe Ratio was 1.06 on a gross basis (and 0.84

on a net basis). The Sharpe Ratio for the MSCI ACWI

Local Index was 0.66 over the same time period.

(1)

(1) Source: Bloomberg.

Annual Report 2023

Tetragon Financial Group

Letter to shareholders

2023 Performance Highlights

In 2023, six of Tetragon’s seven asset classes

generated gains on the year. The main performance

drivers in Tetragon’s portfolio were Tetragon’s

investments in public equity (“other equities”),

private equity and venture capital investments

and investments in bank loans via CLOs. The only

asset class that generated a loss was real estate.

Of note, Tetragon was able to use its balance sheet

of permanent capital and revolver liquidity to drive

significant performance from its primarily public

equities portfolio which is focused on software and

biotech investments. These investments rallied

strongly in the fourth quarter as sentiment shifted

in the markets, generating gains of +$124.1 million

during 2023. Technology-driven positions contributed

approximately two-thirds of this, driven by companies

well-positioned to benefit from AI infrastructure

demand or to incorporate emergent AI applications

into their business models. Biotechnology contributed

most of the remaining gains, driven by a U.K. biotech

company reporting encouraging developments for

its potential cancer and autoimmune therapies.

Another significant development in the balance sheet

investments was our position in Ripple Labs. In July

2023, a U.S. judge ruled that Ripple Labs did not

violate federal securities law by selling its XRP token

on public exchanges. This ruling was subsequently

upheld in October when the court dismissed the

SEC’s request for an interlocutory appeal. Crypto

markets were further buoyed by expectations

that the SEC was preparing to approve the first

spot Bitcoin ETFs, which contributed to a broad

fourth quarter rally in tokens and related assets.

Our largest investment, TFG Asset Management, had

a number of positive developments in its portfolio:

• Hawke’s Point, TFG Asset Management’s

mining finance business, had a strong year

of performance led by their largest strategic

investment, an Australian gold mining, exploration

and development company. In addition,

the team continues to explore investment

opportunities in the battery metals space.

• After a challenging 2022, Acasta Partners

delivered double-digit net performance in their

flagship vehicle, in what remained a difficult

environment for many alternative investment

strategies. The Acasta Global Fund was

nominated for the 12th time since its inception in

2009 for the 2023 With Intelligence EuroHedge

Award in the Convertibles and Volatility

category; it has won the award five times.

(4)

• Following Acasta Partners’ successful rebrand

in 2022, Polygon Global Partners’ event-driven

business was renamed Westbourne River Partners,

inspired by one of London’s historic rivers.

• Banyan Square also had positive

momentum in its public portfolio and made

allocations to complete their fund.

• As we have discussed previously, in December

2018, GreenOak Real Estate merged with Bentall

Kennedy, Sun Life Financial Inc.’s North American

Annual Report 2023

Tetragon Financial Group

real estate and property management firm, to form

BentallGreenOak (now trading as BGO). Since

then, TFG Asset Management has continued to

own nearly 13% of the combined entity. There

were a number of cash flow elements to the

transaction, including: TFG Asset Management’s

receipt of approximately $42.3 million upon the

closing of the transaction in July 2019; a series

of fixed quarterly payments; and, the distribution

of a portion of BGO’s earnings over the seven

years from the deal closing. In addition, as part of

the transaction, Sun Life has an option to acquire

the remaining interest in BGO approximately

seven years from the closing (i.e., in 2026). The

transaction also includes a put option that entitles

TFG Asset Management and the other minority

owners of BGO to sell their interest to Sun Life

approximately eight and a half years from the

close of the transaction (2027). As a consequence,

it is expected that TFG Asset Management

will sell its interest in BGO in 2026. Although

this is continuously factored into the valuation,

it will have requisite impacts on Tetragon’s

cash levels and reported AUM for TFG Asset

Management. We will keep shareholders apprised

of developments over the coming quarters.

The Acasta Global Fund was nominated

for the 12th time for the 2023

With

Intelligence

EuroHedge Award in the

Convertibles and Volatility category.

Ross Carden

Acasta Partners, London

NAV Total Return in 2023

6.4%

Return on Equity in 2023

5.5%

Dividends in 2023

$0.44

Letter to shareholders

Annual Report 2023

Tetragon Financial Group

Letter to shareholders

We continue to look to add new strategies and help

individuals and teams to create successful asset

management businesses by leveraging TFG Asset

Management’s operating infrastructure and shared

strategic direction with Tetragon, who can support

asset management businesses through co-investment

and working capital. At the same time, we are also

looking for creative ways to help our partners grow

their existing businesses which may involve selling

partial stakes or whole businesses if we believe it may

unlock future growth and value. As we discussed

in our 2021 Annual Report, the strong performance

of BGO, Equitix and LCM, in particular, have

enhanced the attractiveness of individual business

transactions as an important way of realising the

value inherent in TFG Asset Management. As such,

the strategy for TFG Asset Management over the

coming years will continue to include launching new

strategies, and potentially acquiring businesses, but

also executing on individual sale transactions that

would take advantage of this value enhancement.

Although transactions such as these would inevitably

have the effect of shrinking TFG Asset Management’s

portfolio of relatively mature market-leading

businesses – and thus aggregate AUM – thereby

possibly delaying progress toward a strategic

transaction at the TFG Asset Management level – they

would enable TFG Asset Management to monetise

the benefits of its success in growing successful

asset management businesses. Indeed, our view

is that one the key metrics that underscores TFG

Asset Management’s success must be the returns

achieved by successful dispositions of its private

equity stakes in asset management companies.

Board Matters

Dividends and share repurchases

The fourth quarter 2023 dividend was declared

at 11.00 cents per share, bringing the full-year

2023 dividend to 44.00 cents per share.

Tetragon repurchased $60.3 million of its non-voting

shares during 2023. Tetragon is announcing today

its intention to repurchase approximately $25 million

shares, which, based on Tetragon’s current NAV

and share price, will be accretive to NAV per share.

We are pleased that the Company has returned

approximately $1.7 billion to investors through

dividends and share repurchases since its initial

public offering in 2007. Tetragon will continue to

seek to return value to its shareholders, including

through dividends and share repurchases.

Cash

Tetragon’s cash at bank balance was $23.1 million

as at 31 December 2023. After adjusting for known

accruals and liabilities (short- and long-dated), its net

cash balance was -$243.5 million. Tetragon has access

to a credit facility of $400 million with a maturity date

in July 2032. As at 31 December 2023, $250 million

of this facility was drawn and this liability has been

incorporated into the net cash balance calculation.

Other investor matters

As described in the 2023 Half-Yearly report,

Tetragon’s hurdle has moved from a LIBOR-

based hurdle to three-month term SOFR plus

2.747858% per annum as of 1 July 2023.

2024 Outlook

Throughout 2023, the U.S. 10-year Treasury yield

traded between 3.3% and 5.0%, before ending

December at 3.88%, an almost perfect round-trip

to where it began the year. In similar fashion, many

2024 market outlooks seem to echo the beginning of

2023 in balancing hopes for a soft landing against

concerns about slowing global GDP forecasts and

the “last mile” of disinflation. This landscape is further

complicated by hints of weakening in the U.S. jobs

market, the recent recovery in public valuations,

emerging pressures in global shipping and supply

chains, and the growing scale of ongoing geopolitical

tensions across Europe, the Middle East and Asia.

In 2024, more than two billion voters in more than 50

countries will go to the polls, including the U.S. and

U.K. Some of the election outcomes are more likely

than others, but what is certain is that there will be

significant political change against a geopolitically

strained and economically complex backdrop.

Annual Report 2023

Tetragon Financial Group

Letter to our shareholders

While cognisant about macro-economic

risks, we remain excited and highly

selective about emerging opportunities.

Conclusion

Tetragon’s adaptive approach to portfolio construction

is designed to navigate uncertain environments by

identifying and accessing the attractive investment

opportunities that inevitably arise in periods of market

stress, uncertainty, and transformation. While cognisant

about the macro-economic risks, we remain excited

and highly selective about the emerging opportunities

spanning private and convertible credit, legal assets,

asset management partnerships, cryptocurrencies

and equity themes across technology, biotechnology,

raw materials, capital markets and European event-

driven strategies. As we noted in last year’s letter,

Tetragon believes that times like these can set the

stage for the next several years of strong returns.

With Regards,

The Board of Directors

4 March 2024

(1) Source: Bloomberg. Please see note 7 on page 6 for important

disclosures.

(2) We refer throughout this letter to the MSCI ACWI Gross Total Return

Local Index, as the “MSCI ACWI Local Index”. Source: Bloomberg.

Please see note 7 on page 6 for important disclosures.

(3) All statistics are calculated using monthly datapoints.

Source: Bloomberg.

(4) The Acasta Global Fund was nominated for the 2023 EuroHedge

Award in the Convertibles & Volatility category; there were three other

nominees for this award. The With Intelligence EuroHedge Award

is organised by With Intelligence. 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. To qualify

for nominations, funds must achieve annualised returns higher than

the median returns for their peer groups – and they must also be

within 10% of their high-water marks that were set before the start

of the performance period under review. The winners are those

funds that meet the relevant criteria, and which achieve the highest

returns among the nominated funds – so long as they are also within

25% of the best Sharpe ratios within their nominated peer groups.

Further information about the award, including nomination and

winning criteria, is available at https://awards.withintelligence.com/

eurohedgeawards/en/pageiteria#list-your-data.

Annual Report 2023

Tetragon Financial Group

Manager’s review

Investment

objective & strategy

16 – 18

Risk

management

Key performance

metrics

19 – 20

Our

impact

22 – 23

Manager’s

Review

This section includes commentary from

Tetragon’s investment manager and includes

market context, our investment objective and

strategy and key performance metrics.

Annual Report 2023

Tetragon Financial Group

Manager’s

Review

Manager’s review

2023 Nav Per Share Total Return

6.4%

2023 Return on Equity

5.5%

2023 Dividends Per Share

$0.44

Annual Report 2023

Tetragon Financial Group

Tetragon’s investment objective is to generate distributable

income and capital appreciation. Our investment strategy is

as follows:

Investment

objective & strategy

Own asset

managers

Identify asset

managers

Identify asset

classes and

investment

strategies

Structure

investment

Use Tetragon Financial

Management’s market

experience to negotiate

favourable terms for

Tetragon’s investments

Identify asset managers

that Tetragon Financial

Management believes

to be superior

Identify attractive

asset classes and

investment strategies

Own, where appropriate,

all or a portion of the asset

management companies with

which Tetragon invests in

order to enhance the returns

achieved on its capital

In addition, the current investment

strategy is to continue to to enhance

the value of the asset management

companies that form part of

TFG Asset Management with a view to

realising value from the enterprise.

Manager’s review

Our strategy

Our investment strategy is as follows:

Annual Report 2023

Tetragon Financial Group

Investments in managed funds

Internally-managed funds

We invest in a range of specialised funds managed

by TFG Asset Management managers, with a view to

obtaining diversified returns on favourable terms. In

so doing, Tetragon aims to not only produce asset-

level returns, but also to enhance these returns with

capital appreciation and investment income from its

ownership stakes in asset management businesses

that derive income from external investors.

Externally-managed funds

We also invest with high-quality third-party managers in

which we do not have an ownership stake, in order to

access asset classes and investment strategies that we

believe are attractive, and we look to create beneficial

structures for these investments.

Ownership stakes in asset managers

One of Tetragon’s largest investments is TFG Asset

Management, which manages, oversees and supervises

our ownership stakes in asset management companies.

TFG Asset Management enhances 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, financial

control, technology, and compliance/legal matters – while

at the same time giving entrepreneurial independence

to the managers of the underlying businesses.

Factors in building out TFG Asset Management

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 profitability and scalability of the 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.

Manager’s review

The ways we invest

Our investment strategy leads us to invest in three primary ways.

Investments in

managed funds

Ownership stakes

in asset managers

Direct

investments

Annual Report 2023

Tetragon Financial Group

Manager’s review

Our alpha-driven ecosystem

Our alpha-driven ecosystem generates ideas, expertise, insights and connections.

Ownership

stakes in

asset

managers

Ways we invest

Investment manager

Internally-

managed

funds

Tetragon

Financial

Management

The investment

manager

Externally-

managed

funds

Direct

investments

INSIGHTS

EXPERTISE

CONNECTIONS

IDEAS

Longer-term investment strategy

Tetragon’s longer-term investment strategy with respect

to TFG Asset Management is to continue to enhance

the value of its asset management companies, with

a view to realising value from the enterprise. This

may be through transactions relating to individual

businesses within TFG Asset Management, that

would take advantage of this value enhancement or

a strategic transaction at the TFG Asset Management

level. Although transactions relating to individual

businesses could shrink 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 it to monetise the benefits of its

success in growing asset management businesses.

In any event, TFG Asset Management will continue

to leverage its operating infrastructure and shared

strategic direction, with Tetragon looking to support

investments through co-investment and working capital.

Direct Investments

We make investments directly on our balance sheet.

These investments reflect single-strategy ideas or

idiosyncratic investments that we believe are attractive

but may be unsuitable for an investment via TFG

Asset Management vehicles. These investments

tend to be opportunistic and with a catalyst.

Annual Report 2023

Tetragon Financial Group

Tetragon focuses on the following

key metrics when assessing how

value is being created for, and

delivered to, Tetragon shareholders:

Key Performance

Metrics

Manager’s review

2023 Nav Per Share Total Return

6.4%

2023 Return on Equity

5.5%

2023 Dividends Per Share

$0.44

13.6%

2019 2020 2021 2022 2023

9.5%

14.1%

1.0%

Fully diluted NAV per share

NAV per share total return 2019-2023

Fully diluted NAV per share

(NAV per share) was $31.13

at 31 December 2023. NAV

per share total return was

6.4% for 2023.

6.4%

Figure 3

Manager’s review

Annual Report 2023

Tetragon Financial Group

$0.74

2019 2020 2021 2022 2023

$0.40

$0.41

$0.44 $0.44

Dividends per share (DPS)

Dividend per share comparison 2019-2023

Tetragon declared a Q4 2023

dividend of $0.11 per share,

for a full-year dividend payout of

$0.44 per share. The cumulative

DPS declared since Tetragon’s

IPO is $8.6075.

Investment returns/return on equity

(1)

Return on equity 2019-2023

RoE for 2023 was 5.5%.

Adjusted earnings per share

(EPS) for the period was $1.72.

(1) Average RoE is calculated from Tetragon’s

IPO in 2007. Tetragon seeks to deliver 10-

15% RoE per annum to shareholders. Over

longer time horizons, Tetragon’s returns

will most likely reflect sensitivity to the

underlying short-term risk-free rate regime.

Therefore, after periods of transition

to high-SOFR environments, Tetragon

should achieve higher sustainable returns;

after periods of transition to low-SOFR

environments, Tetragon should achieve

lower sustainable returns.

2019 2020 2021 2022 2023

13.4%

7.6%

17.3%

(0.8%)

5.5%

Average RoE since IPO: 11.3%

Target RoE: 10-15%

Figure 4

Figure 5

Annual Report 2023

Tetragon Financial Group

Risk management

(i)

Factors that Tetragon monitors with respect to portfolio risk

management:

• Trades done in the

month

• Settlement

• Counterparty

• Legal

• Regulatory/

compliance

• Finance/tax

• Concentration limits

• Equity exposure

• Risk limits

• CLO credit metrics

• FX exposure

• Scenario analysis

• Interest rate

sensitivity

• Tail hedge monitor

• Key financial

highlights

• NAV bridge

• Investment P&L by

asset class

• Valuation

• Allocation shifts

(additions/disposals)

• Portfolio cash flow

forecast

• Duration profile

• 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)

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.

Liquidity

risk

Market

risk

Operational

risk

Performance

review

Manager’s review

Annual Report 2023

Tetragon Financial Group

Our impact

This year we launched our Tetragon in the

Community initiative. In both London and

New York we have sought to partner with

local organisations from our communities

that we can support both financially

and by volunteering our time.

In London, we partnered with the primary school

across the road from our office, Holy Trinity, which

serves some of the most disadvantaged children in our

London borough. Working with the school’s leadership,

we identified a series of highly targeted and impactful

educational enrichment opportunities to fund, including

Covid catch-up educational support, music lessons for

children with an identified talent and a gardening club for

those that don’t have access to outside space at home.

Our New York office took part in a volunteer day in

collaboration with Children’s Aid, a NYC organisation

whose focus is children living in poverty. The

team travelled to the Dunlevy Milbank Community

Center, located in Central Harlem, where they

took part in a beautification project, including

preparing a large outside wall for a new mural.

TFG Asset Management was the proud sponsor of One

Young World’s Entrepreneur of the Year Award 2023.

Stephen Prince, CEO of TFG Asset Management, chaired

this year’s judging panel, before presenting the award

live at the One Young World Summit 2023 in Belfast. As

a global community for young leaders, One Young World

identifies, connects and promotes the future generation of

leaders, empowering them to build a sustainable future.

The annual Summit, which brings together bright young

leaders from 190+ countries, provides an opportunity for

these individuals to come together to confront the biggest

challenges facing society today. The Entrepreneur of the

Year award celebrates five trailblazing entrepreneurs

under the age of 35 who are addressing important

global issues and inspiring others with their leadership.

Acasta Partners launched the inaugural

Acasta Partners Further Education Scholarship

in partnership with the Eastside Young

Leaders’ Academy (EYLA) in London.

EYLA’s aim is to create leaders of character

and purpose for tomorrow’s world through

leadership workshops and seminars, drawn from

those most in need in grassroots communities.

EYLA views education as a launchpad for this

mission and as a gateway to belonging to an

influential peer group who will individually and

collectively exert positive influence in society.

Matthew, a student from Newham, was selected

as the first recipient of the Acasta Partners

Scholarship after a competitive interview process.

The scholarship comprises an award of £10,000

per year toward tuition, course materials, and other

expenses while at university. Matthew also took up

the option of a paid summer internship with Acasta

Partners, alongside ongoing mentorship. Due

to the strength of the applications, the awarding

committee decided to make two further awards

of £5,000 per year to two additional recipients.

Find out more at

www.acasta.com

Manager spotlight

Annual Report 2023

Tetragon Financial Group

It was an honour to attend the 2023

One Young World Summit in Belfast.

Hearing from the winners about

the impact they are having on their

communities was truly inspiring.”

Stephen Prince

CEO of TFG Asset Management

Manager’s review

New York

Volunteers took part in a

beautification project at the

Dunlevy Millbank Community

Center in Harlem.

Belfast

TFG Asset Management was

the proud sponsor of One

Young World’s Entrepreneur

of the Year Award 2023.

The Equitix Foundation held its annual charity

drinks event, raising over £120,000 in support of

three headline charities, Community Hot-Spots

(a Norfolk-based community that operates a

network of support for those impacted by the

cost of living crisis), Fight 4 Change (a London-

based charity that uses sport to inspire and

educate young people and adults to make

positive change in their lives), and Caring Minds

(a charity that provides comprehensive mental

healthcare service for residents of Birmingham and

Solihull). The Equitix foundation was established

with the vision of creating a lasting entity that

can positively impact charities connected to the

assets and communities that Equitix serves.

Find out more at

www.equitix.com

Manager spotlight

Annual Report 2023

Tetragon Financial Group

This section covers details on Tetragon’s investment

performance during 2023. We focus our time,

energy and capital on alternative assets. We do so

because we believe that investing in alternatives

delivers stable returns to investors across credit,

equity, interest rate, and inflation cycles.

Overview

26 – 28

Further portfolio

metrics

Detailed investment

review

29 – 39

Investment review

Investment

Review

Annual Report 2023

Tetragon Financial Group

Investment review

Investment

Review

Annual Report 2023

Tetragon Financial Group

Tetragon’s Fully Diluted NAV Per Share increased from

$29.69 per share to $31.13 per share year over year. The

“Other equities and credit” segment was the largest positive

contributor to performance returns in 2023, and, apart from

real estate, all asset classes made gains on the year.

Positive performance

returns in 2023

Investment review

Overview

The main performance drivers for the year were

Tetragon’s investments in “other equities and credit”

balance sheet investments, which gained $124.1

million during 2023 and private equity and venture

capital which gained $90.7 million. The only asset

class which generated a loss was real estate, which

lost $5.7 million. Tetragon’s NAV at the end of the

year stood at $2.83 billion, compared to $2.76

billion a year ago. A detailed performance review of

each asset class follows beginning on page 29.

Other equities and credit

+$124M

Gains in 2023

Annual Report 2023

Tetragon Financial Group

Net Asset Breakdown Summary

The table shows a breakdown of the composition of Tetragon’s NAV at 31 December 2022 and 31 December 2023, and the

factors contributing to the changes in NAV over the period.

Progression from 31 December 2022 to 31 December 2023 is an aggregate of each of the 12 months’ NAV progressions. With the exception of share repurchases, all

the aggregate monthly Fully Diluted NAV Per Share movements in the table are determined by reference to the fully-diluted share count at the start of each month.

Asset Classes

All figures are in millions of U.S. dollars

NAV at

31 Dec

2022

Additions

(i)

Disposals/

Receipts

(i)

Gains/

Losses

NAV at

31 Dec

2023

Private equity in asset management companies 1,343.3 61.0 (65.7) 6.8 1,345.4

Event-driven equities, convertible bonds and other hedge funds 548.9 32.4 (16.5) 7.7 572.5

Bank loans 3 04.1 6.0 (77.3) 11.4 244.2

Real estate 151.8 8.9 (7. 3) (5.7) 147.7

Private equity and venture capital 37 7.6 62.0 (20.9) 90.7 509.4

Legal assets 19.3 14.9 - 3.3 37.5

Other equities and credit

(ii)

181.6 25.9 (119.4) 124.1 212.2

Net cash

(iii)

(16 8.1) - (77. 8) 2.4 (243.5)

Total 2,758.5 211.1 (384.9) 240.7 2,825.4

(i) Any gains or losses on foreign exchange hedging instruments attributable to a particular strategy or sub-asset class have been included in “additions” or

“disposals/receipts” respectively. For example, where a hedging gain or loss is made, this will result in either cash being received or paid, or cash being

receivable or payable, which is equivalent to a receipt or disposal.

(ii) Assets characterised as “other equities and credit” consist of investment assets held directly on the balance sheet. For certain contracts for difference (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. Payments and

receipts on the same investments have been netted off against each other.

(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 (3) cash held

in certain designated accounts related to Tetragon’s investments, some of which may only be used for designated purposes without incurring significant tax and

transfer costs, and (4) adjusted for all other assets and liabilities at the reporting date including any drawn amounts on the revolving credit facility.

Investment review

Year-on-Year NAV Per Share Progression (USD)

Tetragon’s Fully Diluted NAV Per Share increased from $29.69 per share as at 31 December 2022 to $31.13 per share as at

31 December 2023.

32.50

31.50

30.50

29.50

28.50

27. 5 0

NAV at

31 December

2022

Investment

income and

losses

Operating

expenses,

management and

incentive fees

Interest

expense

Dividends Other share

dilution

repurchase

NAV at

31 December

2023

29.69

31.13

2.56

(0.69)

(0.27) (0.44)

(0.95)

1.23

Figure 6

Figure 7

Annual Report 2023

Tetragon Financial Group

Net asset composition summary

Rank Holding Asset Class Value

($ millions)

% of

Investments

1 Equitix Private equity in asset management company 737.6 24.0%

2 Westbourne River Event Fund – Low Net

(i)

Event-driven equities 302.5 9.9%

3 BGO Private equity in asset management company 270.5 8.8%

4 LCM Private equity in asset management company 258.5 8.4%

5 Westbourne River Event Fund – Long Bias

(i)

Event-driven equities 14 4.1 4.7%

6 Banyan Square Fund 1 Private equity and venture capital 127.0 4.1%

7 Hawke’s Point Fund 1 Private equity and venture capital 113.4 3.7%

8 Ripple Labs Inc. – Series A & B Preferred Stock Private equity and venture capital 103.8 3.4%

9 Acasta Global Fund Convertible bonds 102.8 3.4%

10 TCI III Bank loans 60.6 2.0%

Total 72.4%

Net asset breakdown at 31 Dec 2023

Private equity in asset management

companies

44%

Bank loans

Private equity and venture capital

16%

Event-driven equities, convertible bonds,

other hedge funds

19%

Real estate

Legal assets

Other equities and credit

Net asset breakdown at 31 Dec 2022

Private equity in asset management

companies

46%

Bank loans

10%

Private equity and venture capital

13%

Event-driven equities, convertible bonds,

other hedge funds

19%

Real estate

Legal assets

Other equities and credit

Invested in three ways

44%

LP external

LP internal

39%

Direct

10%

(i) On 1 November 2023, the Polygon event-driven business was renamed Westbourne River Partners; the Polygon European Equity Fund Absolute Return was

renamed Westbourne River Event Fund – Low Net, and the Polygon European Equity Fund Long Bias was renamed Westbourne River Event Fund – Long Bias.

Investment review

Top 10 Holdings by Value as of 31 December 2023

Figure 8

Figure 9

Annual Report 2023

Tetragon Financial Group

Detailed Investment Review

Figure 10 breaks out more detail showing the effect of capital flows and performance gains and losses on the NAV of each asset

class during 2023; more detailed commentary for each asset class follows.

Asset Classes

All figures are in millions of U.S. dollars

NAV at

31 Dec 2022

Additions

(i)

Disposals/

Receipts

(i)

Gains/

Losses

NAV at

31 Dec 2023

% of

investments

Private equity in asset management companies

Equitix 683.2 29.6 (28.2) 53.0 737.6 24.0%

BGO 283.0 3.3 (17. 8) 2.0 270.5 8.8%

LCM 290.7 3.4 - (35.6) 258.5 8.4%

Other asset managers 86.4 24.7 (19.7) (12.6) 78.8 2.6%

Event-driven equities, convertible bonds and other hedge funds

Westbourne River Event Fund – Low Net

(ii)

287. 8 20.0 - (5.3) 302.5 9.9%

Westbourne River Event Fund – Long Bias

(ii)

131.8 8.9 - 3.4 14 4.1 4.7%

Acasta funds 104.2 - (10.0) 12.4 106.6 3.5%

Other hedge funds 25.1 3.5 (6.5) (2.8) 19.3 0.6%

Bank loans

U.S. CLOs (LCM) 159.7 - (42.8) 10.8 127.7 4.2%

Tetragon Credit Partners funds 132.7 6.0 (28.8) 1.1 111.0 3.6%

U.S. CLOs (non-LCM) 11.7 - (5.7) (0.5) 5.5 0.2%

Real estate

BGO Europe funds & co-investments 35.3 5.9 (2.3) (0.2) 38.7 1.3%

BGO U.S. funds & co-investments 49.2 2.2 (1.2) (4.1) 4 6.1 1.5%

BGO Asia funds & co-investments 21.7 - (1.7) 2.4 22.4 0.7%

BGO debt funds 3.9 0.5 (2.1) 0.3 2.6 0.1%

Other real estate 41.7 0.3 - (4.1) 37. 9 1.2%

Private equity and venture capital

Hawke’s Point funds & co-investments 59.1 6.9 - 50.7 116.7 3.8%

Banyan Square funds 123.6 12.6 (12.5) 3.3 127.0 4.1%

Other funds & co-investments 130.4 20.2 (1.1) 4.5 154.0 5.0%

Direct 64.5 22.3 (7.3) 32.2 111.7 3.6%

Legal assets

Contingency Capital funds 19.3 14.9 - 3.3 37. 5 1.2%

Other equities and credit

(iii)

Other equities 165.7 25.8 (119.4) 124.4 196.5 6.4%

Other credit 15.9 0.1 - (0.3) 15.7 0.5%

Cash

Net cash

(iv)

(16 8.1) - (7 7.8) 2.4 (243.5)

Total 2,758.5 211.1 (384.9) 240.7 2,825.4 100.0%

(i) Any gains or losses on foreign exchange hedging instruments attributable to a particular strategy or sub-asset class have been included in “additions” or

“disposals/receipts” respectively. For example, where a hedging gain or loss is made, this will result in either cash being received or paid, or cash being

receivable or payable, which is equivalent to a receipt or disposal.

(ii) On 1 November 2023, the Polygon event-driven business was renamed Westbourne River Partners; the Polygon European Equity Fund Absolute Return was

renamed Westbourne River Event Fund – Low Net, and the Polygon European Equity Fund Long Bias was renamed Westbourne River Event Fund – Long Bias.

(iii) Assets characterised as “other equities and credit” consist of investment assets held directly on the balance sheet. For certain contracts for difference (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. Payments and

receipts on the same investment have been netted off against each other.

(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 (3) cash held

in certain designated accounts related to Tetragon’s investments, some of which may only be used for designated purposes without incurring significant tax and

transfer costs, and (4) adjusted for all other assets and liabilities at the reporting date including any drawn amounts on the revolving credit facility.

Investment review

Figure 10

Annual Report 2023

Tetragon Financial Group

Detailed net asset breakdown

Private equity in asset

management companies

Other equities and credit Real estate Legal assets

Event-driven equities,

convertible bonds + other HF

Private equity and

venture capital

Bank loans

31 December 2022

Equitix

BGO

Westbourne River Event Fund – Low Net

Other funds & co-investments

U.S. CLOs (LCM)

Other equities BGO

U.S. funds &

co-investments

Other real

estate

BGO Europe funds

& co-investments

BGO Asia funds

& co-investments

Contingency Capital funds

Tetragon Credit Partners funds

U.S. CLOs

(non-LCM)

Other credit

BGO debt funds

Banyan Square funds Direct

Hawke’s Point funds

& co-investments

Westbourne River

Event Fund – Long Bias

Acasta funds

Other hedge funds

LCM

Other asset

managers

Annual Report 2023

Tetragon Financial Group

Private equity in asset

management companies

Other equities and credit Real estate Legal assets

Event-driven equities,

convertible bonds + other HF

Private equity and

venture capital

Bank loans

Investment review

31 December 2023

Equitix

BGO

Westbourne River Event Fund – Low Net

Other funds & co-investments

U.S. CLOs (LCM)

Other equities BGO

U.S. funds &

co-investments

Other real estateBGO Europe

funds &

co-invest.

BGO Asia funds

& co-investments

Contingency Capital funds

Tetragon Credit Partners funds

U.S. CLOs

(non-LCM)

Other credit

BGO debt funds

Banyan Square funds Direct Hawke’s Point funds

& co-investments

Westbourne River

Event Fund – Long Bias

Acasta funds

Other hedge funds

LCM

Other asset

managers

Annual Report 2023

Tetragon Financial Group

Tanvir Islam

Technology, London

Private equity investments

in asset management companies

TFG Asset Management is Tetragon’s diversified

alternative asset management platform. It enables

Tetragon to produce asset level returns on its

investments in managed funds on the platform, and to

enhance those returns through capital appreciation and

investment income from its ownership stakes in the asset

management businesses. The combination 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 diversified business and income stream.

As at 31 December 2023, TFG Asset Management

comprised LCM, BGO (the new trading name of

BentallGreenOak), Westbourne River Partners

(formerly known as Polygon), Acasta Partners, Equitix,

Hawke’s Point, Tetragon Credit Partners, Banyan

Square Partners and Contingency Capital. TFG Asset

Management recorded an investment gain of $6.8 million

in 2023 as gains in Equitix were offset by downward

valuations in LCM and other asset managers.

Equitix: Equitix is an integrated core infrastructure

asset management and primary project platform,

with a sector focus on social infrastructure, transport,

renewable power, environmental services, network

utilities and data infrastructure. Tetragon owns 75% of

the company. During 2023, Equitix’s AUM increased

from £10.0 billion to £10.9 billion. Equitix started raising

capital for Fund VII after closing Fund VI at £1.5 billion

Detailed

Investment Review

Investment review

Annual Report 2023

Tetragon Financial Group

Investment review

During 2023, Equitix started raising

capital for Fund VII after closing

Fund VI at £1.5 billion in AUM.

LCM: LCM is a bank loan asset management

company. LCM manages loan assets through

Collateralised Loan Obligations (CLOs), which are

long-term, multi-year investment vehicles. During

the year, its AUM decreased by 14%, reflecting a

combination of LCM not issuing any new deals due

to market conditions as well as an amortisation of

some existing deals. Tetragon’s investment in LCM

made a loss of $35.6 million in 2023 as the valuation

reflected the impact of the reduction in the AUM.

in AUM, and also raised some capital into managed

accounts during the period. Tetragon’s investment

made a gain of $53.0 million in 2023, mainly during

the first half of the year, driven by a combination of (a)

higher valuation as the business continued to deliver

against its business plan despite a 14% decrease in

the market multiples, (b) a reduction in net debt due to

positive cash generation, (c) dividend income received

by Tetragon of $28.2 million, and (d) foreign exchange

gains on the unhedged portion of this investment.

BGO (the new trading name of BentallGreenOak):

BGO is a real estate-focused principal investing, lending

and advisory firm. During 2023, distributions to Tetragon

totalled $17.8 million, reflecting a combination of fixed

quarterly contractual payments, variable payments and

carried interest. As a result of these distributions, the

value of Tetragon’s investment decreased to $270.5

million during the period with a gain of $2.0 million for the

year. The value of the put/call option decreased by $6.3

million, in part reflecting an update to BGO’s business

plan and forecasts. This was offset by gains in the fixed

quarterly contractual payments due to unwinding of

the discount rate and higher actual variable payments

received in the year as compared to forecast payments.

TFG Asset Management

+$6.8M

2023 performance

Annual Report 2023

Tetragon Financial Group

Investment review

Event-driven equities, convertible

bonds and other hedge funds

Tetragon invests in event-driven equities and

convertible bonds and credit through hedge funds. At

31 December 2023, these investments are primarily

through hedge funds managed by Acasta Partners

and Westbourne River Partners. Investments in these

funds generated a gain of $7.7 million during 2023.

Westbourne River Partners funds: The Westbourne

River Event Fund – Low Net (formerly Polygon European

Equity Opportunity Fund – Absolute Return) focuses

on event-driven investing in European small- and

mid-cap equities to pursue what it believes are more

attractive and less-followed opportunities seeking to

deliver uncorrelated alpha. The Low Net product has

targeted net exposure of between 0-30%. Tetragon’s

investments in this fund recorded a loss of $5.3 million

during the period. Net performance for the fund was

down 1.6% for 2023. Tetragon made an additional

investment of $20 million into this fund during the year.

Platform and other asset managers: TFG Asset

Management’s other asset managers consist of

Westbourne River Partners (the renamed European

event-driven equity investing business of Polygon

Global Partners); Acasta Partners, a manager of

open-ended hedge fund and managed account

vehicles, employing a multi-disciplinary approach;

Tetragon Credit Partners, a structured credit investing

business focused on primary CLO control equity

as well as a broader series of offerings across the

CLO capital structure; Hawke’s Point, an asset

management business that provides strategic capital

to companies in the mining and resource sectors;

Banyan Square Partners, a private equity firm focused

on non-control equity investments; and Contingency

Capital, a global asset management business focused

on credit-oriented legal assets investments. The

collective loss on Tetragon’s investments in these

managers was $12.6 million during 2023, owing

to a combination of a reduction in the fair value of

some of these managers, as well as working capital

support provided to relatively nascent businesses.

Please see Note 4 in the 31 December 2023

Tetragon Financial Group Limited 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.

The Westbourne River team believes

the funds should be able to benefit from

steadily recovering asset prices and

easing interest rates in 2024.

Annual Report 2023

Tetragon Financial Group

Manager’s review

The Westbourne River Event Fund – Long Bias

(formerly Polygon European Equity Opportunity Fund

– Long Bias): this fund follows the same strategy as

the Low Net vehicle, but has targeted net exposure

of approximately 75%. Tetragon’s investment

generated a gain of $3.4 million during 2023. Net

performance for the fund was up 9.5% for 2023.

Taking a moment to reflect on 2023, given the

rally in the tech sector, the funds’ returns may feel

disappointing, but the Westbourne River team believes

that their results over the last two years shows the

benefits of diversification and the focus on reducing

beta to the markets. The team believes the funds

should be able to benefit from steadily recovering

asset prices and easing interest rates in 2024.

Acasta Partners funds: The Acasta Global Fund

pursues a multi-disciplinary approach to investing,

employing niche strategies to profit over economic and

risk cycles. The fund invests opportunistically across the

credit universe with a particular emphasis on convertible

securities, special situations, instruments trading at

stressed or distressed levels, metals and mining capital

structures including related commodities, and in volatility

driven strategies. Acasta Partners also manages the

Acasta Energy Evolution Fund, a portfolio targeted

at opportunities driven by the transition of energy to

renewable resources, and the resulting impact on metals

and mining companies and associated commodities.

Tetragon’s investment in Acasta funds generated a

gain of $12.4 million during 2023. Net performance in

the Acasta Global Fund was +13.0% for its flagship

share class, compared to the HFR RV Fixed Income-

Convertible Arbitrage Index which returned +4.8%

during the period.

(1)

Facing an uncertain macro outlook

going into 2023, during the year, the fund favoured a

core investment book built on safe carry, long/short

credit positioning and strategies driven by idiosyncratic

events and catalysts. Tetragon reduced its holding in

Acasta Global Fund by $10.0 million during 2023.

The fund was nominated for the 12th time since

its inception in 2009 for the 2023 With Intelligence

EuroHedge Award in the Convertibles and Volatility

category; it has won the award five times.

(2)

Other hedge funds: Investments in other hedge funds

had a loss of $2.8 million during 2023. This category now

includes the TFG Asset Management Global Equities

Fund (formerly Polygon Global Equities Fund.) Tetragon

reduced its holdings by net $3.0 million during the period.

Hedge funds

+$7.7M

2023 performance

Investment review

Bank loans

+$11.4M

2023 Performance

Annual Report 2023

Tetragon Financial Group

Investment review

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 of $11.4 million during 2023. Tetragon

made new U.S. CLO investments indirectly via the

Tetragon Credit Partners platform. We continue to

view CLOs as attractive vehicles for obtaining long-

term exposure to the leveraged loan asset class.

U.S. CLOs (LCM): Directly-owned LCM CLOs gained

$10.8 million during 2023. This performance was

driven by rising risk-free rates and loan reinvestment

opportunities which may increase the cash flow

generation ability of CLO equity, and a generally

benign level of loan losses during the year, offset by the

realisation of losses on certain older-vintage underlying

loans. During 2023, investments in this segment

generated $42.8 million in cash proceeds and as of

year-end, the total fair value was $127.7 million. As at the

end of 2023, all LCM CLO transactions were compliant

with their junior-most over-collateralisation (O/C) tests.

(3)

Tetragon made no new investments in U.S. CLOs

managed by LCM during 2023. Tetragon currently

expects to make most of its new-issue LCM CLO

majority equity investments via the Tetragon

Credit Partners platform, but may choose to make

opportunistic investments directly, when appropriate.

Tetragon Credit Partners Funds

(4)

: TCI II, TCI III, and

TCI IV are CLO investment vehicles established by

Tetragon Credit Partners, a 100% owned subsidiary

of TFG Asset Management. As of the end of 2023,

Tetragon’s commitment to TCI II was $70.0 million (which

was fully funded), its commitment to TCI III was $85.9

million (which was fully funded), and its commitment

to TCI IV was $25.6 million (which was 76.3% funded).

TCI II and TCI III are fully invested, while TCI IV remains

in its initial investment period. As at the end of 2023,

the total fair value of this segment was $111.0 million.

During 2023, Tetragon’s investments in funds managed

by Tetragon Credit Partners generated $28.8 million

in cash distributions and a gain of $1.1 million.

Performance was positively impacted by rising risk-

free rates and loan reinvestment opportunities which

may increase the cash flow generation ability of CLO

equity, and a generally benign level of loan losses

during the year, offset by the realisation of losses on

certain older-vintage underlying loans. During the year,

TCI IV made three investments in CLO mezzanine

debt tranches. Additionally, TCI IV refinanced the debt

tranches of one CLO investment and “reset” another

(refinanced all the debt tranches and extended the

reinvestment period of the CLO). 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 2023.

(5)

U.S. CLOs (non-LCM): The non-LCM-managed CLO

segment saw a loss of $0.5 million during 2023 and

generated $5.7 million in cash distributions. Tetragon

did not add any direct non LCM-managed CLO

investments, and as of the end of 2023, the fair value

of this segment stood at $5.5 million. During the year,

Tetragon directed the optional redemption of one

non LCM-managed CLO which increased the cash

distributions received in 2023. As of the end of 2023,

all non-LCM CLOs were compliant with their junior-

most O/C tests. Tetragon currently expects to make

most of its new issue non-LCM equity investments

indirectly via the Tetragon Credit Partners platform.

Real estate

BGO Europe, U.S. and Asia funds and co-investments:

Tetragon holds most of its investments in real estate

through BGO-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 U.S., Europe and Asia, where BGO believes it

can increase value and produce positive unlevered

returns by sourcing off-market opportunities where

it sees pricing discounts and market inefficiencies.

This segment had a net loss of $1.6 million in 2023,

primarily due to losses in the U.S.-focused investments.

Other real estate: In addition to the commercial

real estate investments through BGO-managed

real estate funds, Tetragon also has investments

in commercial farmland in Paraguay managed by

a specialist third-party manager in South American

farmland. This investment generated an unrealised loss

of $4.1 million after a third-party revaluation in 2023.

Real estate

-$5.7M

2023 Performance

Annual Report 2023

Tetragon Financial Group

Private equity and venture capital

Tetragon’s private equity and venture capital investments

comprise several types of investments: (1) Tetragon’s

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

was the second-largest positive driver of performance

during the year, generating gains of $90.7 million.

Hawke’s Point: Tetragon’s mining finance investments

managed by Hawke’s Point generated a gain of $50.7

million during 2023, primarily driven by operational

progress at one of its Australian gold project

investments. Tetragon invested an additional $6.9

million into Hawke’s Point funds during the period.

Banyan Square Partners: In 2023, most of Banyan

Square’s portfolio companies achieved solid operating

results despite macro headwinds, with a particular focus

on profitability. However, the portfolio’s growth was

partially offset by rising interest rates that negatively

impacted several portfolio companies with higher debt

balances. As a result, the net gain during the period

was $3.3 million. There were 12 positions in the fund at

year-end, including positions focused on application

software, infrastructure software, and cybersecurity.

In addition, together with TFG Asset Management,

Banyan Square Partners made a strategic

investment in WovenLight, which is a data-driven

consulting and software services business, which

may add further investment opportunities to the

Banyan Square team. Furthermore, the platform

as a whole stands to benefit from the addition of

WovenLight’s machine learning and AI expertise.

Other funds and co-investments: Investments

in externally-managed private equity funds

and co-investment vehicles in Europe and

North America made gains of $4.5 million in

2023, spread across 36 different positions.

Direct: This category produced gains of $32.2 million

during the period, related to positive performance

in the investment in Ripple Labs Inc. In July 2023,

a U.S. judge ruled that Ripple Labs did not violate

federal securities law by selling its XRP token on

public exchanges. This ruling was subsequently

upheld in October 2023 when the court dismissed

the SEC’s request for an interlocutory appeal.

Crypto markets were further buoyed by expectations

that the SEC was preparing to approve the first

spot Bitcoin ETFs, which contributed to a broad

fourth quarter rally in tokens and related assets.

Hawke’s Point investments gained

$50.7 million, driven by operational

progress at one of its Australian

gold project investments.

Investment review

Annual Report 2023

Tetragon Financial Group

The “other equities” segment

generated a gain of $124.4 million

during 2023, making it the largest

positive contributor to the portfolio.

Investment review

Legal assets

Tetragon makes investments in legal assets through

vehicles managed by Contingency Capital. Tetragon has

committed capital of $60 million, $32.1 million of which

has been called to date, including $14.9 million during

2023. A gain of $3.3 million was generated from this

investment. The performance of the Contingency Capital

fund’s portfolio continues to be above the underwritten

projections and performance targets, and remains

uncorrelated to the public equity and debt markets.

Other equities and credit

Tetragon also makes investments directly on its

balance sheet reflecting single strategy ideas: either

co-investing with some of its underlying managers or

simply idiosyncratic investments which it believes are

attractive but may be unsuitable for an investment via

TFG Asset Management vehicles. These investments

tend to be opportunistic and with a catalyst. We

believe that the sourcing of these investments has

been facilitated by the managers on the TFG Asset

Management platform as well as third-party managers

with whom Tetragon invests. We also believe this

ability to invest flexibly is a benefit of Tetragon’s

structure. With a gain of $124.1 million, this was the

best-performing segment for Tetragon during 2023.

Private equity and venture capital

+$90.7M

2023 Performance

Legal assets

+$3.3M

2023 Performance

Annual Report 2023

Tetragon Financial Group

Investment review

• Other equities: This segment generated a gain of

+$124.4 million during 2023, making it the largest

positive contributor to the portfolio. Technology-

driven positions contributed approximately two

thirds of this, driven by companies well-positioned

to benefit from AI infrastructure demand or to

incorporate emergent AI applications into their

business models. Biotechnology contributed most

of the remaining gains, driven by a U.K. biotech

company reporting encouraging developments for

its potential cancer and autoimmune therapies.

• Other credit: This segment had flat performance

during 2023 and currently comprises one position.

Cash

Tetragon’s cash at bank balance was $23.1 million

as at 31 December 2023. After adjusting for known

accruals and liabilities (short- and long-dated), its net

cash balance was -$243.5 million. Tetragon has access

to a credit facility of $400 million with a maturity date

in July 2032. As at 31 December 2023, $250 million

of this facility was drawn and this liability has been

incorporated into the net cash balance calculation.

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 2023, Tetragon used $211.1 million

of cash to make investments, $60.3 million to repurchase

its shares and $23.3 million to pay dividends. $307.1

million of cash was received as distributions and

proceeds from the sale of investments. Future cash

commitments are $95.4 million, comprising: investment

commitments to BGO funds of $27.4 million; private

equity funds of $32.4 million; Tetragon Credit Partners

funds of $6.1 million; Contingency Capital funds of $27.9

million; and the Contingency Capital loan of $1.6 million.

Annual Report 2023

Tetragon Financial Group

(1) 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 by a specific investor.

In addition, Tetragon’s holdings may differ significantly from the

securities that comprise the indices. You cannot invest directly

in an index. The HFRX Convertible Arbitrage Index (Bloomberg

Code: HFRXCA) is compiled by HFR Hedge Tetragon Research

Inc. Further information relating to index constituents and

calculation methodology can be found at www.hfr.com/.

(2) The Acasta Global Fund was nominated for the 2023 EuroHedge

Award in the Convertibles & Volatility category; there were three

other nominees for this award. The With Intelligence EuroHedge

Award is organised by With Intelligence. 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. To qualify for nominations, funds must achieve annualised

returns higher than the median returns for their peer groups –

and they must also be within 10% of their high-water marks that

were set before the start of the performance period under review.

The winners are those funds that meet the relevant criteria, and

which achieve the highest returns among the nominated funds

– so long as they are also within 25% of the best Sharpe ratios

within their nominated peer groups. Further information about the

award, including nomination and winning criteria, is available at

https://awards.withintelligence.com/eurohedgeawards/en/page/

criteria#list-your-data.

(3) Based on the most recent trustee reports available as of

31 December 2023. Throughout this report, we refer to

overcollateralisation or “O/C” tests, which are CLO-specific

tests 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 of cash flows to the CLO’s equity tranche.

(4) 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.

(5) Based on the most recent trustee reports available as of

31 December 2023.

Notes

Annual Report 2023

Tetragon Financial Group

By geography

(1)

By exposure

(2)

By investment

Investment review

Further portfolio metrics – exposures at 31 December 2023

Figure 11

Investment review

(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.

– BGO (TFG Asset Management) is treated as 24% Europe, 66%

North America, and 10% Asia-Pacific.

– Acasta Partners (TFG Asset Management) is treated as 80%

Europe and 20% North America.

– Westbourne River Partners and Equitix (TFG Asset

Management) are treated as 100% Europe.

– Hawke’s Point (TFG Asset Management) is treated as 100%

Asia-Pacific.

(2) Assumptions for “By exposure”:

(i) Exposure represents the net asset value of the private equity

position in the relevant asset management company and

the 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.

Currency exposure

Tetragon is a U.S. dollar-based

fund and reports all its metrics

in U.S. dollars. During 2023, all

investments denominated in other

currencies were hedged to U.S.

dollars, except for some of the GBP-

denominated exposure in Equitix.

Westbourne River Partners

(i)

15%

LCM

(i)

13%

BGO

(i)

12%

Acasta

(i)

External

(ii)

Direct balance sheet

(ii)

11%

Equitix

(iii)

24%

Tetragon Credit Partners

(i)

Hawke’s Point

(i)

Banyan Square

(i)

Contingency Capital

(i)

North America

42%

Europe

50%

Asia Pacific

Latin America

44%

LP Internal

39%

LP External

Direct

10%

Annual Report 2023

Tetragon Financial Group

Financial review

Financial

Highlights

Pro Forma

Statement

of Financial Position

Pro Forma

Statement of

Comprehensive Income

Financial

Review

A summary of Tetragon’s 2023 financial

highlights, and pro forma statements of

comprehensive income and financial position.

Annual Report 2023

Tetragon Financial Group

Financial review

Annual Report 2023

Tetragon Financial Group

Annual Report 2023

Tetragon Financial Group

2023 2022 2021

Reported GAAP Net income ($MM) $141.1 ($ 32.1) $418.2

Adjusted Net income ($MM) $150.4 ($22.6) $428.6

Reported GAAP EPS $1.62 ($0.35) $4.68

Adjusted EPS $1.72 ($0.25) $4.79

Return on equity 5.5% -0.8% 17. 3%

Net Assets ($MM) $2,825.4 $2,758.5 $2,876.8

IFRS number of shares outstanding (MM) 81.2 85.6 90.2

NAV per share $34.79 $32.24 $31.88

Fully diluted shares outstanding (MM) 90.8 92.9 96.4

Fully diluted NAV per share $ 31.13 $29.69 $29.86

NAV per share total return 6.4% 1.0% 14.1%

DPS $0.44 $0.44 $0.41

Tetragon uses the following metrics, among others, to

understand the progress and performance of the business:

• Adjusted Net income ($150.4 million):

Please see Figure 13 for more details and a

breakdown of the Adjusted Net Income.

• Return on Equity ( 5.5%): Adjusted Net

Income ($150.4 million divided by Net Assets

at the start of the year ($2,758.5 million).

• Fully Diluted Shares Outstanding (90.8 million):

Adjusts the IFRS shares outstanding (81.2 million)

for various dilutive factors (9.6 million shares).

Please see Figure 27 for more details.

• Adjusted EPS ($1.72): Calculated as Adjusted Net

Income ($150.4 million) divided by the time-weighted

average IFRS shares during the period (87.3 million).

• Fully Diluted NAV Per Share ($31.13): Calculated

as Net Assets ($2,825.4 million) divided by Fully

Diluted Shares Outstanding (90.8 million).

Financial

highlights

Financial review

Financial Highlights 2021 – 2023

Figure 12

Annual Report 2023

Tetragon Financial Group

2023 ($M) 2022 ($M)

Net gain on financial assets at fair value through profit or loss 270.6 18.9

Net (loss)/gain on derivative financial assets and liabilities (32.5) 42.4

Net foreign exchange gain 0.3 1.2

Interest income 2.3 0.4

Investment income 240.7 62.9

Management and incentive fees (58.0) (67.6)

Other operating and administrative expenses (8.3) (7.6)

Interest expense (24.0) (10.3)

Total operating expenses (90.3) (85.5)

Adjusted Net income 150.4 (22.6)

For 2023, the difference between Adjusted Net income as shown here and IFRS profit and total comprehensive income is an adjustment

to remove share-based compensation expense of $9.3 million (2022: $9.5 million) This adjustment is consistent with how Adjusted Net

income has been determined in prior periods.

During the year, $16.3 million (2022: $26.5 million) of incentive fee was expensed and remain outstanding at 31 December 2023.

Financial review

Pro Forma Statement of Comprehensive Income 2022 – 2023

31 Dec 2023 ($M) 31 Dec 2022 ($M)

ASSETS

Investments 3,065.7 2,919.2

Derivative financial assets 5.1 21.7

Other receivables 4.7 6.1

Amounts due from brokers 7. 2 5.5

Cash and cash equivalents 23.1 21.7

Total assets 3,105.8 2,974.2

LIABILITIES

Loans and borrowings (250.0) (115.0)

Derivative financial liabilities (8.3) (2.5)

Amounts due to brokers - (68.0)

Other payables and accrued expenses (2 2.1) (30.2)

Total liabilities (280.4) (215.7)

NET ASSETS 2,825.4 2,758.5

Pro Forma Statement of Financial Position

as at 31 December 2022 and 31 December 2023

Figure 13

Figure 14

This section provides details on Tetragon’s

corporate governance matters, as well as

information regarding the Investment Manager.

Directors’

report

62 – 63

Our structure

Additional

information

Our investment

manager

56 – 61

AIC Code of Corporate

Governance

Board

of Directors

49 – 55

Governance

Annual Report 2023

Tetragon Financial Group

Governance

Annual Report 2023

Tetragon Financial Group

Our structure

Governance

Permanent capital

$2.8Bn Net Asset Value

(I)

TFG Asset Management

$42Bn Assets Under Management

(ii)

Direct investments

Types of shareholder

Listed entity

External manager

TFG Asset Management

Ways we invest

Investments in

managed funds

Ownership stakes

in asset managers

Direct investments

Non-voting public shareholders

Ownership stakes in asset managers

Tetragon Financial Management LP

Tetragon Financial Group’s

investment manager

Tetragon Financial Group Limited

(Euronext, SFS London Stock Exchange)

Externally

managed

funds

Investments in managed funds

Internal

funds

(i) The value of Tetragon’s assets, less any liabilities, as at 31 December 2023 . Source: Tetragon.

(ii) Includes the AUM of LCM, Westbourne River Partners, Acasta Partners, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners and

TCICM, at 31 December 2023 and AUM for BGO representing Tetragon’s pro rata share (12.86%) of BGO AUM ($83.2 billion). Includes, where relevant,

investments by Tetragon.

Annual Report 2023

Tetragon Financial Group

Board of

Directors

The Board of Directors currently comprises five

directors, of which three are Independent Directors.

Deron Haley, also known as D.J., is a founding

Partner and Chief Operating Officer at Durational

Capital Management, LP, a New York-based private

equity firm that specialises in consumer buy-outs.

Prior to Durational Capital Management, he was

the Chief Operating Officer of Hound Partners,

LLC, a New York-based global equity fund. Prior

thereto, he was a senior executive of Ziff Brothers

Investments, LLC, a global, single-family office

that invested directly in private and public equities,

fixed income, global macro, and commodities,

and led firmwide operational and management

initiatives. D.J. began his finance career as an

equity research analyst, and later a registered

trader before taking on senior managerial roles.

Prior to finance, he served five years active duty in

the United States Navy. He is a founding Director

of the Navy SEAL Foundation, and sits on the

Investment Committee of The Heinz Endowments.

D.J. 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.

Deron J. Haley

Independent Director

Steven Hart serves as president of Hart Capital

LLC, which he founded in 1998 as a family office

to invest in a diversified portfolio of assets with a

strong education industry focus. Steven 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.

Steven 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, he served as a

member of the Boards of Directors of several funds

connected with Blue Harbour Group, L.P. Steven

earned an M.B.A. degree from Stanford University

Graduate School of Business and a B.A. degree

in Math/Economics from Wesleyan University.

Steven Hart

Independent Director

Governance

Annual Report 2023

Tetragon Financial Group

Governance

Board of

Directors

David O’Leary retired from State Street Corporation

in Boston, Massachusetts in 2012, where he was

Executive Vice President – Chief Administrative

Officer (2010-2012) and Executive Vice President

– 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

Officer. From 1985 to 2004, David was at 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. David began his career in

financial services at Merrill Lynch & Company

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

Massachusetts, where he graduated first in his

class, a M.S. degree from the State University of

New York and a B.S. degree from Union College.

David O’Leary

Independent Director

Reade Griffith is Co-Founder and Chief Investment

Officer of Tetragon Financial Group and TFG

Asset Management. Reade is also a member of

Tetragon’s Board of Directors. Prior to co- founding

Tetragon in 2005, Reade co-founded Polygon,

a multi-strategy hedge fund management

business, in 2002. In 2012, Tetragon acquired

Polygon and it became part of TFG Asset

Management, Tetragon’s diversified alternative

asset management business – which now has more

than $41 billion of assets under management.

(i)

Reade is also Chief Investment Officer for TFG

Asset Management’s European event-driven

equities business, Westbourne River Partners.

Reade holds an A.B. degree in Economics from

Harvard College and a J.D. degree from Harvard

Law School. Reade also served as an officer

in the U.S. Marine Corps and left as a Captain

following the 1991 Gulf War. Reade was previously

the founder and chief executive officer of the

European office of Citadel Investment Group, a

multi-strategy hedge fund that he joined in 1998.

Reade is currently a member of the Royal United

Services Institute Advisory Board and the Dean’s

Advisory Board at Harvard Law School. From

2017 until 2020, Reade and was a member of the

Financial Sector Forum at the Bank of England.

Reade Griffith

Tetragon Co-Founder and Chief Investment Officer

Annual Report 2023

Tetragon Financial Group

Paddy Dear co-founded Tetragon in 2005,

is based in London and is a member of

Tetragon’s Board of Directors and its investment

manager’s Investment and Risk Committee.

Prior to co-founding Tetragon in 2005, Paddy

co-founded Polygon, a multi-strategy hedge fund

management business, in 2002. In 2012, Tetragon

acquired Polygon and it became part of TFG Asset

Management, Tetragon’s diversified alternative

asset management business – which now has more

than $41 billion of assets under management.

(i)

Paddy received a BSc in Petroleum Engineering

from Imperial College London, graduating top of his

year. He started his career as a Petroleum Engineer

with Marathon Oil working in London, Denver and

offshore in the North Sea. He later moved into

finance and prior to setting up Polygon was a

Managing Director at UBS Investment Bank, where

he worked for 14 years in London and New York.

(i) Includes the AUM of LCM, Westbourne River Partners,

Acasta Partners, Equitix, Hawke’s Point, Tetragon Credit

Partners, Banyan Square Partners and TCICM, as calculated

by the applicable fund administrators at 31 December 2023

and AUM for BGO representing Tetragon’s pro rata share

(12.86%) of BGO AUM ($83.2 billion). Includes, where

relevant, investments by Tetragon.

Paddy Dear

Tetragon Co-Founder

Governance

Annual Report 2023

Tetragon Financial Group

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.

Tetragon has five directors, or the Directors. As set out

below and as elsewhere described in the risk factors

found on Tetragon’s website at

www.tetragoninv.com/shareholders#risk-factors, 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 person satisfies the

standards for independence contained in the Corporate

Governance Code 2018 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 vacancy

must be filled promptly. Pending the filling of such

vacancy, the Board of Directors may temporarily

consist of less than a majority of Independent Directors

and those Directors who do not meet the standards

for independence may continue to hold office.

A Director 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 be

filled, and additional Directors may be appointed, by a

resolution of the holder of Tetragon’s voting shares.

A Director may be removed from office for any

reason by notice requesting resignation signed by all

other Directors then holding office, if the Director is

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 they become bankrupt, if they

become of unsound mind, if they become 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 they become 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, for which a quorum is five

Directors, or by a written resolution signed by at least

five Directors. When action is to be taken by the Board

of Directors, the affirmative vote of five of the Directors

then holding office is required for any action to be taken.

As a result, the Board of Directors will not be able to

act without the affirmative vote of both of the Directors

affiliated with the 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

specifically reserved for the Board 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 such Director’s

interests in accordance with the Companies (Guernsey)

Law, 2008, as amended, a Director, notwithstanding

his office: (a) may be a party to, or otherwise interested

in, any transaction or arrangement with Tetragon or in

which Tetragon is otherwise interested; (b) may be a

director or other officer 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 Tetragon for any benefit

derived from 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 grounds of any such interest or benefit or because

The Board of Directors of Tetragon

Annual Report 2023

Tetragon Financial Group

Governance

such Director is present at or participates in the meeting

of the Directors that approves such transaction or

arrangement, provided that (i) the material facts as

to the interest of such Director in such transaction or

arrangement have been disclosed or are known to

the Directors and the Directors in good faith authorise

the transaction or arrangement and (ii) the approval of

such transaction or arrangement includes the votes of a

majority of the Directors that are not interested in such

transaction or such transaction is otherwise found by the

Directors (before or after the fact) to be fair to Tetragon

as of the time it is authorised. Under the Investment

Management Agreement, the Directors have authorised

the investment manager to enter into transactions on

behalf of Tetragon with persons who are affiliates of

the investment manager, provided that in connection

with any such transaction that exceeds $5 million of

aggregate investment the investment manager informs

the Directors of such transaction and obtains either (i)

the approval of a majority of the Directors that do not

have a material interest in such transaction or (ii) an

opinion from a recognised investment bank, auditing

firm or other appropriate professional firm substantively

to the effect that the financial terms of the transaction

are fair to Tetragon from a financial point of view.

Compensation

The remuneration for Directors is determined by

resolution of the holder of Tetragon’s voting shares. From

1 January 2024, the Directors’ annual fee is $150,000

in compensation for service on the Board of Directors

of Tetragon (2023: $125,000). The Directors have the

option to elect to receive shares in Tetragon instead

of the fee. The Directors affiliated with the holder of

Tetragon’s voting shares have waived their entitlement to

a fee. The Directors are entitled to be repaid by Tetragon

for all travel, hotel and other expenses reasonably

incurred by them in the discharge of their duties.

None of the Directors has a contract with Tetragon

providing for benefits upon termination of employment.

On 1 January 2020, the Independent Directors were

awarded 24,490 shares each in Tetragon which vested

on 31 December 2022. 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. In

November 2022, a further 7,724 shares were awarded

to each Independent Director with one-third of the

shares vesting on 31 December 2023, 31 December

2024, and 31 December 2025. The fair value of the

award, as determined by the relevant share price of

$9.71 per share, is $75,000 per Independent Director.

With respect to Director compensation from 1 January

2024, a further award of 10,122 shares was made to

each Independent Director with 5,061 shares vesting

on each of 31 December 2024 and 31 December

2025. The fair value of the award as determined by the

relevant share price of $9.88 per share is $100,000

per Independent Director. The Independent Directors

have deferred the settlement of all the awards to

earlier of three to five years from the vesting date

and/or separation from service with the Fund.

Ben Lim

Finance, London

Annual Report 2023

Tetragon Financial Group

Shaulie Halberstam

Systems Development,

New York

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 that

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 officer of Tetragon

is indemnified against any loss or liability incurred by

the Director or officer by reason of being or having

been a Director or officer of Tetragon. In addition, the

Directors may authorise the purchase or maintenance

by Tetragon for any Director or officer or former

Director or officer of Tetragon of any insurance, in

respect of any liability which would otherwise attach

to the Director or officer or former Director or officer.

The Board of Directors of Tetragon

Annual Report 2023

Tetragon Financial Group

The Audit commitee

Governance

The Audit Committee

The Audit Committee of Tetragon is responsible for,

among other items, assisting and advising Tetragon’s

Board of Directors with matters relating to Tetragon’s

accounting and financial reporting processes and the

integrity and audits of Tetragon’s financial statements.

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, and for

reviewing Tetragon’s administrator’s and Tetragon’s

investment manager’s statements on internal control

systems prior to endorsement by the Board of Directors.

The total audit fee for the year for Tetragon was

$0.8 million. Non-audit fees payable to the independent

auditor and its member firms was $0.1 million in 2023.

In addition to this, $2.2 million of audit fees was payable

by the entities controlled by Tetragon to the independent

auditor and its member firms. The Audit Committee

concluded that these fees do not pose a threat to the

independent auditor’s independence or objectivity.

Emily Cox,

Business Development,

New York

Annual Report 2023

Tetragon Financial Group

Tetragon Financial Management LP, or TFM, has

been appointed the investment manager of Tetragon

pursuant to an investment management agreement

dated 26 April 2007 (see “Summary of Key Terms of

Tetragon’s Investment Management Agreement”).

The investment manager’s general partner, Tetragon

Financial Management GP LLC, is responsible for all

actions of the investment manager. The general partner

is ultimately controlled by Reade Griffith and Paddy

Dear, who also control the holder of Tetragon’s voting

shares and are the voting members of the investment

manager’s Investment and Risk Committees. Reade

Griffith acts as the authorised representative of the

general partner and the investment manager. TFM

is registered as an investment adviser under the

United States Investment Advisers Act of 1940.

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, trustee

or similar officer, (b) a party 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 manager, its affiliates

or their respective members, managers, partners,

shareholders, directors, officers and employees

(including their respective executors, heirs, assigns,

successors or other legal representatives) (each, as

an indemnified party) will be liable 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 an indemnified party,

and Tetragon has agreed to indemnify each indemnified

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 the indemnified party.

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 is not liable to account for

any profit earned or benefit derived from advice 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 affiliates of the investment manager, provided that

Our Investment Manager

Annual Report 2023

Tetragon Financial Group

Governance

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 firm or

other appropriate professional firm substantively to

the effect that the financial terms of the transaction

are fair to Tetragon from a financial point of view.

Management and Incentive Fees; Expenses

All fees and expenses of Tetragon, including

management fees relating to the administration

of Tetragon and incentive fees (each as

described below), will be paid by Tetragon.

The investment manager is entitled to receive

management fees equal to 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 Calculation Period (as defined

below) 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 (i) the Reference NAV (as defined below) plus

(ii) the Hurdle (as defined 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 31 March, 30 June, 30 September

and 31 December 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 the Reference

NAV at the end of a Calculation Period, the 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.

Maureen Wainwright,

Research, London

Annual Report 2023

Tetragon Financial Group

The “Hurdle” for any Calculation Period will

equal (i) the Reference NAV multiplied by

(ii) the Hurdle Rate (defined below).

The “Hurdle Rate” for any Calculation Period prior to

and including 30 June 2023, equals 3-month U.S. Dollar

LIBOR determined as of 11:00 a.m. London time on the

first London business day 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 Hurdle Rate

was fixed at 8% per annum for the 12-month period

following IPO with it then being adjusted as specified

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 “Hurdle Rate” for any Calculation Period

commencing with the Calculation Period

beginning on 1 July 2023, equals (x) Term SOFR

(as defined below) plus 2.747858% per annum,

multiplied by (y) the actual number of days in

the Calculation Period, divided by (z) 365.

“Term SOFR” means a rate per annum equal to the

forward-looking term rate, based on the secured

overnight financing rate published by the Federal

Reserve Bank of New York (or any successor

administrator of the secured overnight financing rate),

that is published by the CME Group Inc. (or a successor

administrator of Term SOFR) for a three-month period,

on the first day of the applicable Calculation Period

(the “Term SOFR Determination Date”); provided,

however, that if as of 5:00 p.m. (Central time) on the

Term SOFR Determination Date, Term SOFR for a

three-month period has not been published, Term

SOFR will be the next available Term SOFR for a

three-month period as published by the CME Group

Inc. (or a successor administrator of Term SOFR).

(1)

Miriam Osman

Acasta Partners, London

Our Investment Manager

Annual Report 2023

Tetragon Financial Group

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 normally payable in arrears within

14 calendar days of the end of the Calculation Period.

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. Apart from the management fees

and the incentive fee, the investment manager does not

charge separate fees based on the NAV of Tetragon.

An incentive fee of $16.3 million was accrued in the

fourth quarter of 2023 in accordance with Tetragon’s

investment management agreement. The hurdle rate

for the first quarter of the 2024 incentive fee has been

reset at 8.075188% (Q4 2023: 8.136008%) as per

the process outlined above and in accordance with

Tetragon’s investment management agreement.

Tetragon generally bears all costs and expenses directly

related to its investments or prospective investments,

such as brokerage commissions, interest on debit

balances or borrowings, custodial fees and legal

and consultant fees. Tetragon also generally bears

all out-of-pocket costs of administration, including

accounting, audit, administrator and legal expenses,

costs of any litigation or investigation involving

their activities, costs associated with reporting and

providing information to existing and prospective

investors and the costs of liability insurance.

The Investment Manager’s Role with

Respect to TFG Asset Management

The investment manager’s responsibilities with

respect to Tetragon include,

inter alia

• investing and reinvesting the assets of Tetragon in

securities, derivatives and other financial instruments

and other investments of whatever nature and

committing the assets of Tetragon in relation to

agreements with entities, issuers and counterparties;

• holding cash balances or investing 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 the 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 amendments to or modifications of the 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 financial support to

any fund managed by a TFG Asset Management

business (such as a “seeding” arrangement), or

provide equity, loans or other financial support to

TFG Asset 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 responsible for decisions regarding

financial 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.

Governance

Annual Report 2023

Tetragon Financial Group

Our Investment Manager

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.

Services Agreement between Tetragon’s

Investment Manager, or TFM, and Certain

Subsidiaries of TFG Asset Management

The investment manager relies on two TFG Asset

Management entities

(2)

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 services such as operations, financial

control, trading, marketing and investor relations,

legal, compliance, office administration, payroll and

employee benefits. One of those entities, TFG Asset

Management UK LLP,

(3)

which is authorised and

regulated by the United Kingdom Financial Conduct

Authority, also provides services to TFM 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 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.

(4)

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 2023,

the total amount recharged to the investment manager,

excluding direct expenses, was $21.6 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.

(5)

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

employee,

(6)

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 functions such as office

management 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.

In addition to FTE costs, there are a number of other

costs that reflect the use 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 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 to reflect what those costs would

be on 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 finance team in consultation with its

legal and compliance teams and is approved each year

by TFG Asset Management’s executive committee.

Annual Report 2023

Tetragon Financial Group

KPMG LLP, reporting directly to Tetragon’s Audit

Committee, is 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. Tetragon’s Board of Directors

has adopted procedures for related-party transactions

that require approval of a majority of disinterested

Directors. Accordingly, Tetragon’s Independent Directors

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.

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.

Investment and Risk Committee

The investment manager’s Investment and Risk

Committee is responsible for the investment and risk

management of Tetragon’s portfolio. The committee

performs active and regular oversight and risk

monitoring. The committee determines the investment

strategy of Tetragon and approves each significant

investment by it. The committee currently consists of

Reade Griffith, Paddy Dear and Stephen Prince.

Executive Committee

The investment manager’s Executive Committee oversees

all key non-investment and risk activities of the investment

manager and currently consists of: Reade Griffith, Co-

Founder and Chief Investment Officer; Paddy Dear,

Co-Founder; Stephen Prince, Chief Executive Officer of

TFG Asset Management; Paul Gannon, Chief Financial

Officer; Sean Côté, General Counsel and Co-Head of

Legal Regulatory and Compliance; and Greg Wadsworth,

Head of Business Development and Investor Relations.

Zubeen Khan

Westbourne River

Partners, London

Governance

(1) Tetragon and its investment manager have agreed on a procedure for

determining an alternate benchmark rate in the event that Term SOFR

is unavailable in the future.

(2) These TFG Asset Management subsidiaries also provide infrastructure

services to LCM and Contingency Capital, and infrastructure and

investment management services to Westbourne River Partners,

Acasta Partners, Hawke’s Point, the TCI General Partner and Banyan

Square Partners.

(3) Reade Griffith and Paddy Dear hold certain membership interests in

TFG Asset Management UK LLP which collectively entitle them

to exercise all of the voting rights in respect of the entity.

Mr. Griffith and Mr. Dear have agreed that they will (i) exercise their

voting rights in a manner that is consistent with the best interests

of Tetragon and (ii) upon the request of Tetragon, for nominal

consideration, sell, transfer, and deliver their membership interests in

TFG Asset Management UK LLP to TFG Asset Management.

(4) This cost allocation methodology also applies to the other TFG Asset

Management businesses.

(5) Employee compensation will also include TFG Asset Management’s

long-term incentive plan and its other equity-based awards.

(6) Amounts paid by TFG Asset Management to Reade Griffith in

connection with services provided by him to TFG Asset Management

are not allocated to the investment manager.

Annual Report 2023

Tetragon Financial Group

Tetragon Financial Group Limited Directors’ Report

The Directors present to the shareholders their report

together with the audited consolidated financial

statements for the year ended 31 December 2023.

Tetragon and its Investment Objective

Tetragon Financial Group Limited, or Tetragon, 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. 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 (ticker

symbol: TFG.NA) and traded 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. Tetragon’s investment

manager, Tetragon Financial Management LP, or TFM,

is registered as an investment adviser under the U.S.

Investment Advisers Act of 1940, as is TFG Asset

Management L.P., Tetragon’s diversified alternative

asset management business. Two of TFG Asset

Management L.P.’s investment management entities,

TFG Asset Management UK 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

105. A detailed review of activities and future

developments is contained in the Annual

Report issued with these consolidated financial

statements to the shareholders of Tetragon.

Directors

The Directors who held office during the year were:

Paddy Dear

Reade Griffith

Deron Haley*

Steven Hart*

David O’Leary*

The remuneration for Directors is determined by

resolution of the holder of Tetragon’s voting shares.

Each Director’s annual for the year ended

31 December 2023 was $125,000 (2022: $125,000)

as compensation for service on Tetragon’s Board

of Directors and is paid in quarterly instalments by

Tetragon. Paddy Dear and Reade Griffith have waived

their entitlement to a Director’s fee. From 1 January

2024, the annual fee was increased to $150,000.

The Independent Directors have the option to

elect to receive Tetragon shares instead of their

quarterly Director’s fee. During the year, David

O’Leary received 6,199 shares (2022: 6,508).

In addition to the annual fee, Tetragon has

awarded its shares to the Independent

Directors as described on page 53.

The Directors are entitled to be repaid by Tetragon

for all travel, hotel and other expenses reasonably

incurred by them in the discharge of their duties.

None of the Directors has a contract with Tetragon

providing for benefits upon termination of employment.

Dividends

The Directors have the authority to declare dividend

payments, based upon the recommendation of

Tetragon’s investment manager, subject to the approval

of the holder of Tetragon’s voting shares and adherence

to applicable law including the satisfaction of a solvency

test as stated under the Companies (Guernsey) Law,

2008. TFM’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 Tetragon’s

cash generation capacity in the short- and medium-term,

(ii) the current and anticipated performance of Tetragon,

(iii) the current and anticipated operating and economic

environment and (iv) other potential uses of cash

ranging from preservation of Tetragon’s investments

and financial position to other investment opportunities.

The Directors declared the following dividends during

the year:

Dividend period Dividend

per share

Quarter ended 31 December 2022 $ 0.110 0

Quarter ended 31 March 2023 $0.1100

Quarter ended 30 June 2023 $0.1100

Quarter ended 30 September 2023 $0.1100

* Independent Directors

Annual Report 2023

Tetragon Financial Group

Governance

On 4 March 2024, the Directors declared a dividend

amounting to US$ 0.1100 per share for the quarter

ended 31 December 2023. The total dividend declared

for the year ended 31 December 2023 amounted to

$0.4400 per share (2022: $0.4400 per share).

Statement of Directors’

Responsibilities

The Directors are responsible for preparing the

Directors’ Report and the financial statements in

accordance with applicable law and regulations.

The Companies (Guernsey) Law, 2008, requires

the Directors to prepare financial statements for

each financial year. Accordingly, the Directors

have elected to prepare the financial statements

in accordance with International Financial

Reporting Standards (IFRS) as adopted by the

European Union (EU) and applicable law.

The financial statements are required by law

to give a true and fair view of the state of

affairs of Tetragon and of the profit or loss of

Tetragon for the relevant financial period.

In preparing those financial statements,

the Directors are required to:

• select suitable accounting policies

and apply them consistently;

• make judgements and estimates that

are reasonable and prudent;

• state whether applicable accounting standards have

been followed, subject to any material departures

disclosed and explained in the financial statements;

• assess Tetragon’s ability to continue as a

going concern, disclosing, as applicable,

matters related to going concern; and

• use the going concern basis of accounting

unless they either intend to liquidate

Tetragon 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 at any time the financial position

of Tetragon and to enable them to ensure that the

financial statements comply with the Companies

(Guernsey) Law, 2008. They are responsible for such

internal control as they determine is necessary to

enable the preparation of financial statements that

are 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 Tetragon and to

prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance

and integrity of the corporate and financial

information included on Tetragon’s website, and for

the preparation and dissemination of the financial

statements. Legislation in Guernsey governing the

preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

Tetragon 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”. Tetragon 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.

The financial statements, prepared in accordance with

IFRS, give a true and fair view of the assets, liabilities,

financial position, results and cash flows of Tetragon as

required by the Disclosure Guidance and Transparency

Rules (DTR) 4.1.12R and by Section 5.25c of the

Financial Markets Supervision Act of the Netherlands

and are in compliance with the requirements set out in

the Companies (Guernsey) Law, 2008 as amended.

This 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 by

Section 5.25c of the Financial Markets Supervision Act

of the Netherlands, which respectively require, inter alia,

(i) an indication of important events that have occurred

since the end of the financial year and the likely future

development of Tetragon and (ii) a description of

principal risks and uncertainties during the year.

The Directors confirm that they have 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 Tetragon’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

Tetragon’s auditor is aware of that information.

Auditor

KPMG Channel Islands Limited is the appointed

independent auditor of Tetragon and it has expressed

its willingness to continue in office. A resolution

for the re-appointment of KPMG Channel Islands

Limited as auditor of Tetragon 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 2024

Annual Report 2023

Tetragon Financial Group

In September 2016, Tetragon became a

member of The Association of Investment

Companies (AIC), the trade body for

closed-ended investment companies.

The AIC Code of Corporate Governance

Founded in 1932, the AIC represents

approximately 350 members across a broad

range of closed-ended investment companies,

incorporating investment trusts and other

closed-ended investment companies.

Tetragon is classified by the AIC in its 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 and advisers to

more easily find and 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 Board of

Directors of Tetragon considers that reporting

against the principles and recommendations

of the AIC Code, and by reference to the

AIC Corporate Governance Guide for

Investment Companies (which incorporates

the UK Corporate Governance 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/shareholders#aic-code.

Annual Report 2023

Tetragon Financial Group

Additional information

Governance

Dividend and Capital Return Policy

Tetragon seeks to return value to its shareholders,

including through dividends and share repurchases.

Tetragon’s Board of Directors has the authority to declare

dividend payments, based upon the recommendation of

Tetragon’s investment manager, subject to the approval

of Tetragon’s voting shareholder and adherence to

applicable law, including the satisfaction of a solvency

test as required pursuant to the Companies (Guernsey)

Law, 2008, as amended. In addition to making dividend

recommendations to the Board of Directors, Tetragon’s

investment manager may authorise 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 operating and economic environment, (iv)

other potential uses of cash ranging from preservation of

the Company’s investments and financial position to other

investment opportunities and (v) Tetragon’s share price.

Tetragon may also pay scrip dividends, which payments

are currently conducted through an optional stock

dividend plan.

Reporting

In accordance with applicable regulations under

Dutch law, Tetragon publishes monthly statements

on its website for the benefit of its investors

containing 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, including year-end

financial statements, which in the case of the financial

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.

Annual Report 2023

Tetragon Financial Group

Other information

TFG Asset

Management

68 – 80

Risk

factors

84 – 90

Our values

and culture

82 – 83

Share repurchases

& distributions

Share reconciliation

& shareholdings

Equity-based employee

compensation plans

Shareholder

information

Certain regulatory

information

Other

Information

This section provides further detail about

the business including our values and

culture, risk factors, and details on historical

share repurchases and distributions.

Annual Report 2023

Tetragon Financial Group

Other

Information

Other information

Annual Report 2023

Tetragon Financial Group

TFG Asset

Management

TFG Asset Management

(1)

is Tetragon’s diversified

alternative asset management platform. It enables

Tetragon to produce asset level returns on its

investments in managed funds on the platform, and

to enhance those returns through capital appreciation

and investment income from its ownership stakes in

the asset management businesses.

The combination 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

diversified business and income stream.

Other information

Annual Report 2023

Tetragon Financial Group

2010

Launched

Asset managers

530

Employees

(Excluding BGO)

$42Bn

Assets Under

Management

(2)

Notes

(1) TFG Asset Management L.P. is registered as an investment adviser under the United States Investment Advisers Act of 1940. TFG Asset Management UK LLP,

which is part of TFG Asset Management, is authorised and regulated by the United Kingdom Financial Conduct Authority. Reade Griffith and Paddy Dear hold

certain membership interests in TFG Asset Management UK LLP which collectively entitle them to exercise all of the voting rights in respect of the entity. Mr.

Griffith and Mr. Dear have agreed that they will (i) exercise their voting rights in a manner that is consistent with the best interests of Tetragon and (ii) upon the

request of Tetragon, for nominal consideration, sell, transfer, and deliver their membership interests in TFG Asset Management UK LLP to TFG Asset Management.

(2) Includes the AUM of LCM, BGO, Westbourne River Partners, Acasta Partners, Equitix, Hawke’s Point, Tetragon Credit Partners, Banyan Square Partners, Contingency

Capital and TCICM. Includes, where relevant, investments by Tetragon. The AUM of Westbourne River Partners, Acasta Partners, Hawke’s Point and Banyan Square

Partners is as calculated by the applicable fund administrators. The AUM for LCM and TCICM is the aggregate value of collateral in each CLO as determined

the applicable trustee. The AUM for Equitix and Tetragon Credit Partners is based on committed capital. The AUM for Contingency Capital is the sum of uncalled

committed capital and the NAV as calculated by the applicable administrator. The AUM for BGO represents Tetragon’s pro rata share (12.86%) of BGO AUM at 31

December 2023 ($83.2 billion). Equitix AUM uses the USD-GBP exchange rate at 31 December 2023. TCICM (which comprises TCI Capital Management II LLC and

TCI Capital Management LLC) acts as a CLO collateral manager for certain CLO investments and had AUM of $2.4 billion at 31 December 2023.

Growth

Proven value creation

Access

Specialised products

on favourable terms

Expertise

Insights from alternative

asset managers

Diversification

Wide range of

income streams

Delivering for Tetragon

Delivering for our managers

Infrastructure

High-quality support

for niche and

scalable businesses

Management expertise

Experienced,

strategic insight

Access to capital

Tetragon can seed

business growth

Connections

Access to relationships

and information

Other information

Annual Report 2023

Tetragon Financial Group

Other information

Established 2001 2010 2002 2009

Joined Tetragon 2009 2010 2012 2012

Strategies U.S. CLOs

Global real estate

funds

Event-driven equities Multi-disciplinary

Description

A specialist in below-

investment grade U.S.

broadly-syndicated

leveraged loans.

A real estate-focused

principal investing,

lending and advisory firm.

An alternative asset

management firm focused

on event-driven investing

in European small- and

mid-cap equities.

An alternative investment

firm that employs

a multi-disciplinary

approach to investing.

AUM at

31 Dec 2023

($Bn)

(1)

$10.7 $10.7 $0.9 $0.9

Percentage

Tetragon

ownership

100% 13% 100%

Non-controlling

interest

(2)

Average fund

duration

10-12 years

(3)

7-10 years Quarterly liquidity Quarterly liquidity

(1) Please see Note 2 on page 69.

(2) 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.

(3) 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 five years for a new issue CLO),

the prepayment rate of the underlying loan assets, as well as post-reinvestment period reinvestment flexibility and weighted average life constraints.

(4) 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 15

Annual Report 2023

Tetragon Financial Group

Other information

Established 2007 2014 2015 2019 2020

Joined Tetragon 2015 2014 2015 2019 2020

Strategies

Infrastructure

funds

Mining finance Structured credit Private equity Legal assets

Description

An integrated core

infrastructure asset

management and

primary project

platform, with a

sector focus on

social infrastructure,

transport, renewable

power, environmental

services, network

utilities and data

infrastructure.

An asset

management

business that

provides strategic

capital to companies

in the mining and

resource sectors.

A structured credit

investing business

focused on control

CLO equity as well

as a broader series

of offerings across

the CLO capital

structure.

A private equity

firm focused on

non-control equity

investments, as well

as opportunistic

investments in

public equity and

credit instruments.

A global asset

management

business focused

on credit-oriented

legal assets.

AUM at

31 Dec 2023

($Bn)

(1)

$13.9 $ 0.1 $0.9 $ 0.1 $0.7

Percentage

Tetragon

ownership

75% 100%

100%

Non-controlling

interest

(4)

Average fund

duration

25 years Not applicable 10 years Not applicable 7 years

Our investment in TFG Asset

Management has been a powerful

driver of Tetragon’s performance.”

Reade Griffith

Chief Investment Officer

Annual Report 2023

Tetragon Financial Group

2019 2020 2021 2022 2023

$27.4

$30.1

$37.1

$41.2

$41.5

Notes

(1) Please see Note 2 on page 69. AUM for BGO represents Tetragon’s pro rata share (12.86%) of BGO AUM at 31 December of each year.

TFG Asset Management AUM by business at 31 December 2023

This chart shows the breakdown of the AUM by business in billions of U.S. dollars.

LCM

$10.7

BGO

$10.7

Westbourne River Partners

$0.9

Acasta Partners

$1.0

Equitix

$13.9

Tetragon Credit Partners

$0.9

TCICM

$2.3

Banyan Square

$0.1

Contingency Capital

$0.7

Other information

TFG Asset Management AUM at 31 December 2019 – 2023

This chart depicts the growth of that AUM over the past five years in billions of U.S. dollars.

(1)

LCM

BGO

Westbourne River Partners

Acasta Partners

Equitix

Tetragon Credit Partners

TCICM

Banyan Square

Contingency Capital

Hawke’s Point

Figure 16

Figure 17

Hawke’s Point

$0.1

Annual Report 2023

Tetragon Financial Group

Overview: Figure 18 shows a

pro forma

statement of

operations that reflects the operating performance of

the majority-owned asset management companies

within TFG Asset Management. The reported fee

income includes some amounts which were earned on

capital invested in certain funds by Tetragon. During

2023, this included $12.9 million of management fees

(2022: $12.5 million) and $1.2 million of performance

and success fees (2022: $3.1 million).

• EBITDA: In 2023, TFG Asset Management’s

EBITDA was $76.8 million, 6.2% higher

than 2022, driven principally by growth in

management and performance fee income.

• Management fee income: Management fee income

continued to grow, increasing by $10.1 million, or

6.0%, year-on-year. Of note, Equitix management fee

income increased by $5.9 million, or 6.4%, as its AUM

continued to grow. LCM increased by $2.6 million due

to the annualisation of CLOs raised in the prior year.

Contingency Capital added $1.4 million as the strategy

continued to deploy capital throughout the year.

• Performance and success fees: Unlike management

fee income, performance and success fees can

be quite volatile in nature and subject to timing

differences. Overall, this category was up $16.3 million

on the prior year, driven primarily by an increase in

performance fee income earned by the Acasta funds.

• 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 funds. EMS continues to be the main

driver, and this increased 34% year on year.

• Distributions from BGO: Distributions from BGO

reflect (i) quarterly fixed distributions, (ii) quarterly

variable distributions and (iii) distributions of carried

interest. A decrease in the variable distributions was

the main driver for the decrease in this line item. For

2023, fixed payments contributed $14.1 million, plus

variable and carried interest payments of $4.3 million.

• Operating expenses: Operating expenses

increased by $22.0 million year-on-year, with

$14.7 million coming from Equitix as this businesses

added headcount and continued to scale up, and

increased costs on Acasta, tracking the higher

performance fee income earned on the funds.

Other information

(i) This table includes the income and expenses attributable to TFG Asset Management’s businesses, (with the exception of BGO) during that period.

In the table above, 100% of Equitix’s income and expenses are reflected and 25% of Equitix’s income and expenses are reversed out through the

Non-TFG Asset Management-owned interest line, being the proportion not attributable to Tetragon. Similarly, 100% of the income and expenses

from Acasta Partners, in which TFG Asset Management has a non-controlling interest, are reflected above with the percentage not owned by TFG

Asset Management reversed out through the Non-TFG Asset Management owned interest line. BGO EBITDA is not included, but distributions

relating to ordinary income and carried interest are included. The EBITDA equivalent is a non-GAAP measure and is designed to reflect the

operating performance of the TFG Asset Management businesses rather than is or what was reflected in Tetragon’s financial statements.

(ii) The performance and success fees include some realised and unrealised Westbourne River and Acasta performance fees. These represent

the fees calculated by the applicable administrator of the relevant 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 full management

and performance fees on its investments in the open Westbourne River and Acasta 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.

2023 ($M) 2022 ($M) 2021 ($M)

Management fee income 179.5 169.4 143.4

Performance and success fees

(ii)

65.2 48.9 59.6

Other fee income 40.5 30.5 24.0

Distributions from BGO 18.4 19.7 21.6

Interest income 2.8 5.4 0.5

Total income 306.4 273.9 249.1

Operating, employee and administrative expenses (204.8) (182.8) (178.3)

Non-TFG Asset Management-owned interest (24.8) (18.8) (2 0.1)

Net income – “EBITDA equivalent” 76.8 72.3 50.7

TFG Asset Management Pro Forma Statement of Operations

(i)

Figure 18

Annual Report 2023

Tetragon Financial Group

(i) Includes, where relevant, investments from Tetragon, TCI II, TCI III and TCI IV.

Other information

A specialist in below-investment

grade U.S. broadly syndicated

leveraged loans

Description of business:

• LCM Asset Management is a specialist

in below-investment grade U.S. broadly

syndicated leveraged loans.

• LCM manages loan assets through Collateralised

Loan Obligations (CLOs), which are long-term,

multi-year investment vehicles. LCM has a track

record of over 20 years in CLO issuance and

management and has launched 40 CLOs to date.

• The team combines fundamental credit

analysis with expertise in CLO structuring.

• LCM is based in New York.

• TFG Asset Management owns 100% of the business

and Tetragon is an investor in LCM products.

• Find out more at www.lcmam.com.

LCM AUM history

(i)

LCM’s AUM was $10.7 billion at 31 December 2023.

Strategies: U.S. CLOs

Founded: 2001

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

Find out more at

www.lcmam.com

$9.1

$8.9

$11.2

$12.5

$10.7

In billions of U.S. dollars

Figure 19

The following pages provide a summary

of each of TFG Asset Management’s

asset management companies and a

review of AUM growth and underlying

strategies and investment vehicles.

Annual Report 2023

Tetragon Financial Group

(i) Includes investment funds and advisory assets managed by BGO. Includes, where relevant, investments from Tetragon.

Other information

A real estate-focused principal

investing, lending and advisory firm

Description of business:

• BGO (the new trading name of BentallGreenOak) is

a real estate-focused principal investing,

lending and advisory firm.

• BGO has $83 billion in Assets Under Management

and over 750 clients and partners. They have

28 offices around the world and have 64 million

square feet of assets under administration.

• BGO was formed in June 2019 upon the merger of

TFG Asset Management’s GreenOak Real Estate

joint venture with Bentall Kennedy, an affiliate

of SLC Management, a global institutional asset

management arm of Sun Life Financial Inc.

• TFG Asset Management owns approximately

13% of the combined business and

Tetragon invests in BGO products.

• Further information on BGO is

available at www.bgo.com.*

*Clicking this link takes you to a website owned and operated by BGO,

a third-party. BGO’s website is not under the control of Tetragon and

Tetragon is not responsible for the content of any hyperlink contained.

BGO AUM history

(i)

Tetragon’s

pro rata

share (12.86%) of BGO’s AUM at

31 December 2023 ($83.2 billion) was $10.7 billion.

The AUM data shows Tetragon’s

pro rata

share of BGO AUM for each year.

Strategies: Global real estate funds

Founded: 2010

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

Europe

North America Asia Global

Find out more at

www.bgo.com

In billions of U.S. dollars

$6.8

$9.5

$10.6

$10.7

$6.3

Figure 20

Annual Report 2023

Tetragon Financial Group

(i) Includes AUM for Westbourne River Event Fund and associated managed account as calculated by the applicable fund administrator at

31 December of each year. Includes, where relevant, investments by Tetragon.

Other information

An alternative asset management firm

focused on event-driven investing in

European small- and mid-cap equities

Description of business:

• Westbourne River Partners is an alternative asset

management firm focused on event-driven investing

in European small- and mid-cap equities.

• Westbourne River Partners has offices

in New York and London.

• TFG Asset Management owns 100% of

the business and Tetragon invests in the

Westbourne River Partners funds.

• Find out more at www.westbourneriverpartners.com.

Westbourne River Partners AUM history

(i)

Westbourne River Partners’s AUM was

$0.9 billion at 31 December 2023.

Strategies: Event-driven equities

Founded: 2009

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

$0.73

$0.79

$0.80

$0.86

Westbourne River Event Fund

Find out more at

www.westbourneriverpartners.com

Figure 21

In billions of U.S. dollars

Annual Report 2023

Tetragon Financial Group

(i) Includes, where relevant, investments by Tetragon.

Other information

An alternative investment firm that

employs a multi-disciplinary approach

to investing

Description of business:

• Acasta Partners is an alternative investment firm that

employs a multi-disciplinary approach to investing.

• Acasta Partners’ approach includes strategies

directed at convertible bonds and volatility-linked

instruments, metals and mining companies and

commodities, as well as fundamental and event-

driven opportunities across the credit markets.

• Acasta Partners has offices in New

York, London and Florida.

• TFG Asset Management owns a non-controlling

interest in the business, and provides infrastructure

and other services. Tetragon invests in Acasta funds.

• Find out more at www.acasta.com.

Acasta AUM history

(i)

Acasta’s AUM was $1.0 billion at 31 December 2023.

Strategies: Multi-disciplinary

Founded: 2009

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

$0.63

$0.75

$0.94

$0.99

$1.0

Acasta Global Fund Acasta Energy Evolution Fund

Find out more at

www.acasta.com

Figure 22

In billions of U.S. dollars

Annual Report 2023

Tetragon Financial Group

(i) USD-GBP exchange rate at 31 December 2023.

Other information

An integrated core infrastructure

asset management and primary

project platform

Description of business:

• Equitix is an integrated core infrastructure asset

management and primary project platform, with

a sector focus on social infrastructure, transport,

renewable power, environmental services,

network utilities and data infrastructure.

• Equitix has over 360 assets, across 21 countries,

including projects in the U.K., Europe, North

America, the Middle East and Asia.

• TFG Asset Management owns 75% of the business.

• Find out more at www.equitix.co.uk*.

* Clicking this link takes you to a website owned and operated by a

third-party. Equitix’s website is not under the control of Tetragon and

Tetragon is not responsible for the content of any hyperlink contained.

Equitix AUM history

(i)

Equitix’s AUM was £10.9 billion ($13.9 billion)

(i)

at 31 December 2023.

Strategies: Infrastructure funds

Founded: 2007

Find out more at

www.equitix.co.uk

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

£5.4

£6.8

£8.0

£10.9

£10.0

Equitix

Fund II

Equitix

Fund IV

Equitix

Fund V

Equitix

Fund I

Equitix

Fund VII

Equitix

Fund III

Energy

Efficiency

Funds

Managed

Accounts

Euro Fund

I & II

Equitix

Fund VI

Rakiza

Figure 23

In billions of pounds

Annual Report 2023

Tetragon Financial Group

(i) Includes, where relevant, investments by Tetragon.

Other information

A structured credit investing business

focused on control CLO equity

Description of business:

• Tetragon Credit Partners is a structured credit

investing business focused on primary CLO

control equity as well as a broader series of

offerings across the CLO capital structure.

• Tetragon Credit Partners is one of the

largest, longest-tenured CLO equity investors

globally, having invested across 124

CLOs and 35 managers since 2005.

• Tetragon Credit Partners is based in New York.

• TFG Asset Management owns 100% of the

business, and Tetragon is an investor in

Tetragon Credit Partners’ products.

• Find out more at www.tetragoncreditpartners.com.

Tetragon Credit Partners committed

capital/AUM history

(i)

The sum of total committed capital for

Tetragon Credit Partners vehicles was

$0.9 billion at 31 December 2023.

Strategies: Structured credit

Founded: 2015

Find out more at

www.tetragoncreditpartners.com

$0.78

$0.80

$0.88

$0.91

$0.92

YE 2019 YE 2020 YE 2021 YE 2022 YE 2023

TCI III TCP Opportunity Fund TCI II TCI IV

Figure 24

In billions of U.S. dollars

Annual Report 2023

Tetragon Financial Group

An asset management

business that provides

strategic capital to

companies in the

mining and resource

sectors

A private equity firm

focused on non-control

equity investment

opportunities, as

well as opportunistic

investments in public

equity and credit

instruments

A global asset

management business

focused on credit-

oriented legal assets

Description of business:

• Hawke’s Point is an asset

management business that provides

strategic capital to companies in

the mining and resource sectors.

• The team’s investment approach

is supported by detailed technical

analysis and mineral resource

modelling, coupled with financial

modelling based on first-

principles-bottom-up analysis.

• Hawke’s Point’s investments

currently include a series of

gold and battery metal assets in

North America and Australia.

• Hawke’s Point has offices in

London and New York.

• TFG Asset Management owns 100%

of the business and Tetragon is an

investor in Hawke’s Point funds.

• Hawke’s Point’s AUM was $0.1

billion at 31 December 2023.

• Find out more at

www.hawkespointcapital.com.

Description of business:

• Banyan Square Partners is a private

equity firm focused on non-control

equity investments, as well as

opportunistic investments in public

equity and credit instruments.

• Banyan Square Partners primarily

invests in enterprise software

and technology companies.

• Banyan Square Partners is

based in New York.

• TFG Asset Management owns

100% of the business, and Tetragon

invests in Banyan Square products.

• Banyan Square Partners’ AUM was

$0.1 billion at 31 December 2023.

• Find out more at

www.banyansq.com.

Description of business:

• Contingency Capital is a global

asset management focused on

credit-oriented legal assets.

• Contingency Capital invests in a

broad spectrum of legal assets

including loans to law firms, portfolios

of litigation, and distressed and

special situations investments where

the primary driver is related to a

legal, tax or regulatory process.

• Contingency Capital is

based in New York.

• TFG Asset Management owns a non-

controlling interest in this business

as well as providing infrastructure

services. Tetragon invests in

Contingency Capital products.

• Contingency Capital’s AUM was

$0.7 billion at 31 December 2023.

• Find out more at

www.contingencycapital.com.

Strategies: Mining finance Strategies: Private equity Strategies: Legal assets

Founded: 2014 Founded: 2019 Founded: 2020

Other information

Annual Report 2023

Tetragon Financial Group

Other information

Annual Report 2023

Tetragon Financial Group

Our values

and culture

Other information

Our values

Rigour

Partnership

Ambition

We are analytical. We do our own

research and highly value expertise

within our team. We are exacting

in our processes and thoughtful in

the decisions we make. We learn

and evolve from our experiences.

We collaborate to generate

and improve ideas. We empower

colleagues to challenge

assumptions. We are non-

hierarchical. Senior leaders

are approachable and accessible

to the team. We respect, support

and learn from each other.

We are forward-looking,

ambitious and look for people

with drive. We embrace new

challenges and ways of thinking.

We work towards common

goals, trusting our people to take

ownership and responsibility.

To be successful you don’t just need

to attract supersmart, hard-working

people – you need them to stay.

That’s why creating a collegial and

respectful culture is so important.”

Reade Griffith

Chief Investment Officer

Annual Report 2023

Tetragon Financial Group

Manager’s review

Building an inclusive workplace

that welcomes people of all races,

ethnicities, cultures, sexual orientations,

genders and class backgrounds

is important to our success.”

Stephen Prince

Chief Executive Officer

Other information

Building an inclusive workplace that welcomes people

of all races, ethnicities, cultures, sexual orientations,

genders and class backgrounds, is important to our

success. So, when we build our teams, we look for

diversity of experience. Combined with intellectual

curiosity, we believe this creates diversity of thought,

superior analysis and a stimulating environment in

which to work and learn.

We strive to ensure that our colleagues and partners

feel comfortable, valued and included. By empowering

them with responsibility. By being open to questions

and ideas from anywhere.

This accessibility and mutual respect for each other’s

experiences and perspectives helps us to work

dynamically and collaboratively. It is how we unlock

innovation and drive growth.

We are committed to conducting our businesses

in accordance with the highest legal and ethical

standards, in furtherance of the interests of our clients

and in a manner that is consistent with all applicable

laws, rules and regulations.

Our culture

Annual Report 2023

Tetragon Financial Group

Principal risks

The principal risks facing Tetragon as a listed

investment company are both financial and

operational in nature, and ultimately relate to

both Tetragon’s issued and outstanding non-

voting shares as well as its investment portfolio.

The financial risks inherent in its 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 environment, taxation, financing and other areas where internal or

external factors could result in financial or reputational loss.

The risks and uncertainties discussed in this section are those that Tetragon

believes are material, but these risks and uncertainties are not the only ones

that the company faces. Additional risks and uncertainties that the company

does not presently know about or that it currently believes are immaterial

may also adversely impact the company’s business, financial condition,

results of operations, the value of its assets or the value of an investment in

Tetragon’s shares. If any of the following risks actually occur, the company’s

business, financial condition, results of operations, the value of its assets and

the value of your investment would likely suffer.

Risk factors

Annual Report 2023

Tetragon Financial Group

Financial risks

Risks relating to investing in Tetragon’s shares

The market price of Tetragon’s non-voting shares

fluctuates significantly and may bear no correlation to

Tetragon’s NAV, and holders may not be able to resell

their Tetragon shares at or above the price at which

these were purchased. In addition to portfolio-level and

operational risks highlighted below, factors that may

cause the price of Tetragon’s shares to vary include:

• Changes in Tetragon’s financial performance and

prospects or in the financial performance and

prospects of companies engaged in businesses

that are similar to Tetragon’s business.

• Changes in the underlying values

of Tetragon’s investments.

• Illiquidity in the market for Tetragon shares,

including due to the liquidity (or lack thereof)

of the Euronext Amsterdam exchange and

the Specialist Fund Segment of the Main

Market of the London Stock Exchange.

• Speculation in the press or investment community

regarding Tetragon’s business or investments,

or factors or events that may directly or

indirectly affect its business or investments.

• A loss of a major funding source. If Tetragon breaches

the covenants under its financing agreements it could

be forced to sell assets at prices less than fair value.

• A further issuance of shares or

repurchase of shares by Tetragon.

• Dividends declared by Tetragon.

• Broad market fluctuations in 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 is comprised of 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, legal assets and TFG Asset

Management, a diversified alternative asset management

business. As a general matter, the portfolio is exposed to

the risk that the fair value of these investments will fluctuate.

Risks relating to TFG Asset Management

• The asset management business

is intensely competitive.

• The performance of TFG Asset Management may be

negatively influenced by various factors, including

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 subjecting it to

significant legal liability and reputational harm.

Other information

Annual Report 2023

Tetragon Financial Group

• Failure by TFG Asset Management to deal

appropriately with conflicts of interest in its

investment business could damage its reputation

and adversely affect its businesses.

• Tetragon’s investment in TFG Asset

Management is illiquid.

Risks relating to other Tetragon portolio investments

• Tetragon otherwise currently invests or expects

to invest its capital, directly and indirectly, in:

• bank loans, generally through subordinated,

residual tranches of CLOs;

• real estate, generally through private equity-

style funds managed by BGO;

• public and private equity securities, particularly

in event-driven strategies, generally through

the Westbourne River Event Fund;

• convertible securities, mainly in the form of debt

securities that can be exchanged for equity interests,

including through the Acasta Global Fund;

• credit securities (including distressed

securities and structured credit), including

through Tetragon Credit Partners;

• private equity and venture capital through

direct investments and fund investments,

including through Banyan Square Partners;

• infrastructure projects through Equitix Holdings Limited;

• legal assets including through

Contingency Capital; and

• 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 may significantly

depend upon the performance of the asset manager

of funds or products in which Tetragon invests.

• Tetragon may be exposed to counterparty risk.

• 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 could cause its cash flow, the fair 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.

• Tetragon engages in over-the-counter trading,

which has inherent risks of illiquid markets, wide

bid/ask spreads and market disruption.

• Leverage and financing risk and the 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.

Risk factors

Annual Report 2023

Tetragon Financial Group

Operational risks

Risks relating to organisational structure

Tetragon has approved a very broad investment

objective and the investment manager has substantial

discretion when making investment decisions. In addition,

the investment manager’s strategies may not achieve

Tetragon’s investment objective.

Tetragon’s listed shares do not carry any voting rights

other than limited voting rights in respect of variation of

their class rights. Tetragon’s voting shares are owned

by Polygon Credit Holdings II Limited which is a non-

U.S. affiliate of Tetragon’s investment manager and is

ultimately controlled by Reade Griffith and Paddy Dear,

who also majority own the investment manager. Pursuant

to an agreement between Reade Griffith and Paddy Dear,

Reade Griffith is the controller of Tetragon’s voting shares

and the investment manager. Tetragon’s voting shares

control the composition of the Board of Directors and

exercise extensive influence over Tetragon’s business

and affairs.

Under Tetragon’s articles of incorporation, a majority of its

directors are required to be independent (Independent

Directors), satisfying in all material respects the UK

Corporate Governance Code definition of that term.

However, because the Board of Directors may generally

take action only with the approval of five of its directors,

the Board of Directors generally are not able to act without

the approval of both directors who are affiliated with the

holder of Tetragon’s voting shares. The holder of the

voting shares has the right to amend Tetragon’s articles

of incorporation to change these provisions regarding

Independent Directors and to remove a Director from

office for any reason. As a result of these provisions, the

Independent Directors are limited in their ability to exercise

influence over Tetragon’s business and affairs.

Tetragon’s organisational, ownership and investment

structure creates significant conflicts of interest that may

be resolved in a manner which is not always in the best

interests of Tetragon or its shareholders.

Tetragon’s directors and its administrator may have

conflicts of interest in the course of their duties.

Tetragon’s ability to pay its expenses and dividends

will depend on its earnings, financial condition, fair

value of its assets and such other factors that may be

relevant from time to time, including limitations under the

Companies (Guernsey) Law, 2008, as amended.

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 judgement 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 the context of an affiliated relationship

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 investment manager does not owe fiduciary duties

to Tetragon 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.

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 manager’s personnel

contains significant performance-related elements, and

poor performance by Tetragon or any other entity for

which the investment manager provides services may

make it difficult for Tetragon’s investment manager to

retain staff.

Other information

Annual Report 2023

Tetragon Financial Group

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 such as operations, financial

control, trading, marketing and investor relations, legal,

compliance, office administration, payroll and employee

benefits and (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-recovery

basis that is designed to achieve full recovery of the

allocated costs. Tetragon’s Independent Directors, who

are specifically mandated to approve, 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.

There are conflicts of interest created by

contemporaneous trading by Tetragon’s investment

manager and investment managers that are part of TFG

Asset Management.

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 and the fiduciary

duties owed by the 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 non-voting shares are subject to restrictions on

ownership by U.S. persons.

Tetragon’s shares have not been and will not be

registered under the United States Securities Act of 1933.

Consequently, Tetragon shares may not be offered, sold

or otherwise transferred within the United States or to, or

for the account or benefit of, “U.S. persons” as defined in

Regulation S under the Securities Act absent registration

or an exemption from registration under the Securities

Act. No public offering of any Tetragon shares is being, or

has been, made in the United States.

Furthermore, Tetragon shares may not be held by any

“benefit plan investor” that is subject to Title I of the

United States Employee Retirement Income Security

Act of 1974. Tetragon’s Articles of Incorporation prohibit

any “ERISA Person” from acquiring or holding Tetragon

shares. The consequences of failing to comply with this

prohibition include the divestment of the relevant shares

and the forfeiture of any dividends previously received

with respect to such shares, as well as any gains from

their disposition.

These restrictions may adversely affect overall liquidity of

Tetragon 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 and who have experience in

investing in financial markets and collective investment

undertakings, who are capable themselves of evaluating

the merits and risks of Tetragon shares, and who have

sufficient resources both 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.

Risk factors

Annual Report 2023

Tetragon Financial Group

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 Organisation declared to constitute

a “Public Health Emergency of International Concern”.

The outbreak of COVID-19 resulted in numerous

deaths, adversely impacted global commercial activity

and contributed to significant 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 monetary and/or fiscal policy

changes, and the closure of offices, businesses, schools,

retail stores and other public venues. Such measures, as

well as the general uncertainty surrounding the dangers

and impact of COVID-19, created significant disruption

in supply chains and economic activity and had a

particularly adverse impact on transportation, hospitality,

tourism, entertainment and other industries.

Any public health emergency, including any outbreak

of COVID-19, SARS, H1N1/09 flu, avian flu, other

coronavirus, Ebola or other existing or new epidemic

diseases, or the threat thereof, could have a significant

adverse impact on Tetragon and could adversely

affect its ability to fulfil its investment 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 investments’ operational and financial

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 liquidity,

consumer confidence and levels 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

significant losses to Tetragon. In addition, the operations

of Tetragon’s investments may be significantly impacted,

or even 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 personnel and reduced

efficiency due to illness of a portion of the workforce

or the need to work remotely. Tetragon’s key vendors

and service providers, such as providers of outsourced

accounting services, consultants and external counsel,

are also subject to these risks.

Risks resulting from the United Kingdom’s

exit from the European Union

The United Kingdom withdrew from the European Union

on 31 January 2020. This is referred to as Brexit. In

connection with Brexit, the United Kingdom and the

European Union agreed the Trade and Cooperation

Agreement, or TCA, that governs the future trading

relationship between the United Kingdom and the

European Union in specified areas. The TCA took effect

from 1 January 2021 following a transition period that

commenced immediately following the Brexit date.

The United Kingdom is no longer in the European

Union customs union and is outside of the European

Union single market. As a result, logistical disruption

is expected whilst the United Kingdom and European

Union implement the new relationship under the

TCA. Notably, the TCA does not include a EU-wide

cooperation arrangement for financial services, with U.K.

firms instead having to negotiate individual European

Union member state regulations and cooperation/

recognition arrangements. The initial timeframe set to

agree a financial services cooperation framework may

be subject to extension and a cooperation agreement

on financial services is not guaranteed. The uncertainty

surrounding the implementation of the TCA and the

outcome of ongoing negotiations may have economic,

tax, fiscal, legal, regulatory and other implications for

the asset management industry, the broader European

and global financial markets generally and for Tetragon.

This uncertainty is likely to continue to impact the global

economic climate and may impact opportunities, pricing,

availability and cost of bank financing, regulation, values

or exit opportunities of companies or assets based,

doing business, or having service or other significant

relationships in, the United Kingdom or the European

Union, including companies or assets held or considered

for prospective investment by Tetragon.

Other information

Annual Report 2023

Tetragon Financial Group

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 regards financial services. There

can be 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 Brexit may result in significant market dislocation,

heightened counterparty risk, an adverse effect on the

management of market risk and, in particular, asset and

liability management (due in part to redenomination of

financial assets and liabilities), an adverse effect on

Tetragon and increased legal, regulatory or compliance

burden on Tetragon, each of which may have a negative

impact on the operations, financial condition, returns or

prospects of Tetragon.

Although 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.

Risks relating to the conflict in Ukraine

On 24 February 2021, the Russian military commenced a

full-scale invasion into Ukraine and the conflict is currently

ongoing. In response, the United States, United Kingdom,

the European Union and other countries imposed

sanctions designed to target the Russian financial

system. Further sanctions may be forthcoming, and the

United States and allied countries have announced they

are committed to taking steps to prevent certain Russian

banks from accessing international payment systems.

Russia’s invasion of Ukraine, the resulting displacement

of persons both within Ukraine and to neighbouring

countries and the increasing international sanctions could

have a negative impact on the economy and business

activity globally and therefore could adversely affect the

performance of Tetragon’s investments. Furthermore,

given the ongoing and evolving nature of the conflict

between the two nations and its ongoing escalation

(such as Russia’s decision to place its nuclear forces on

high alert and the possibility of significant cyberwarfare

against military and civilian targets globally), it is

difficult to predict the conflict’s ultimate impact on

global economic and market conditions, and, as a

result, the situation presents material uncertainty and

risk with respect to Tetragon and the performance of its

investments and operations, and the ability of Tetragon to

achieve its investment objective.

Risks relating to the Israel-Hamas War

On 7 October 2023, the Hamas militant group breached

the fences separating Israel and Gaza and carried out

a violent terrorist attack. The foregoing attack sparked

an armed conflict, which is currently ongoing, between

Hamas and other Palestinian militant groups and

Israel, known as the 2023 Israel-Hamas war. Although

since the establishment of the State of Israel a state

of hostility has existed in varying degrees of intensity

between various Arab countries and Israel, the current

conflict between Israel and Hamas has escalated to

a heightened level not seen in recent years and may

escalate further. Additionally, while Israel has entered

into peace agreements with both Egypt and Jordan,

and several other Middle Eastern and North African

countries have normalized relations with Israel, the 2023

Israel-Hamas war has created tremendous unrest and

uncertainty in the region, which may threaten any such

peace agreements. A further expansion of the hostilities

between Israel and Palestine could have significant

international ramifications. The 2023 Israel-Hamas war

could potentially have a significant adverse impact and

result in significant losses to Tetragon, including those

described above in “Risks Relating to the Conflict in

Ukraine”. The ultimate impact of the 2023 Israel-Hamas

war and its effect on global economic and commercial

activity and conditions, and on the operations, financial

condition and performance of Tetragon or any particular

industry, business or investee country, and the duration

and severity of those effects is impossible to predict.

Risk factors

Annual Report 2023

Tetragon Financial Group

Share repurchases and distributions

Share Repurchase and Dividends History ($ millions)

The below graph shows cumulative historical share repurchases and dividends distributed by Tetragon from inception to 31

December 2023 in millions of U.S. dollars.

(i)

Figure 25

Figure 26

Year Amount

Repurchased

Cumulative Amount

Repurchased

Dividends Cumulative

dividends

2007 $2.2 $2.2 $56.5 $56.5

2008 $12.4 $14.5 $60.4 $117.0

2009 $6.6 $21.2 $18.8 $135.7

2010 $25.5 $46.7 $ 37. 5 $173.3

2011 $35.2 $81.9 $46.4 $219.6

2012 $175.6 $257.5 $51.5 $271.1

2013 $16 .1 $273.6 $55.5 $326.6

2014 $50.9 $324.5 $58.7 $385.3

2015 $60.9 $385.4 $63.3 $448.6

2016 $15 7.8 $543.2 $61.0 $509.6

2017 $65.4 $608.6 $64.0 $573.6

2018 - $608.6 $ 6 5.1 $638.7

2019 $50.3 $658.8 $66.5 $705.2

2020 $50.3 $709.1 $36.4 $741.5

2021 - $709.1 $36.8 $778.3

2022 $ 67.1 $776.3 $38.2 $816.5

2023 $60.3 $836.6 $36.7 $853.2

TOTAL $836.6 $853.2

Notes

(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 operating and economic environment,

(iv) other potential uses of cash ranging from

preservation of the company’s investments and

financial 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.

$1,450.6

$1,487.4

$1,592.8

$1,689.7

Inception-2020 2021 2022

2023

Cumulative Share Repurchases ($MM)

Cumulative Dividends Paid ($MM)

$853.2

$836.6$776.3$709.1$709.1

$816.5

$778.3

$741.5

Annual Report 2023

Tetragon Financial Group

Share reconciliation and shareholdings

IFRS to Fully Diluted Shares Reconciliation

Figure 27

Figure 28

1 (i) The Total Escrow Shares of 10.8 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 9.6 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 employee compensation plans” on

page 94 for more details. Certain 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 purchase Tetragon shares, subject

to applicable compliance policies. Applicable brokerage firms

may be authorised to purchase or sell 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

compliance policies.

Rule 10b5-1 provides a “safe harbour” 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.

2. (i) Includes approximately 2.6 million incentive shares held in escrow

with respect to Mr. Griffith’s employment agreement vesting in

July 2024 that are not subject to performance criteria per se. The

remaining incentive shares covered by Mr. Griffith’s employment

agreement are subject to agreed-upon investment performance

criteria and are excluded from this figure. Please see page 94 for

further details.

(ii) Equity-based awards are intended to give certain senior

employees of TFG Asset Management 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 94 for further details

Shares at 31 December 2023

(millions)

Legal Shares Issued and Outstanding 139.7

Less: Shares Held in Treasury 47.7

Less: Total Escrow Shares

(1.i)

10.8

IFRS Shares Outstanding 81.2

Add: Dilution for equity-based awards

(1.ii)

9.6

Fully Diluted Shares Outstanding 90.8

Shareholdings

Persons affiliated with Tetragon maintain significant

interests in Tetragon shares. For example, as of 31

December 2023, the following persons own (directly or

indirectly) interests in shares in Tetragon in the amounts

set forth below:

Individual Shareholding at 31 December 2023

Mr. Reade Griffith

(2.i)

19,090,590

Mr. Paddy Dear 5,676,316

Mr. David O’Leary 61,476

Mr. Steven Hart 31,889

Mr. Deron Haley 31,889

Other Tetragon/TFG Asset Management Employees 7,172,2 6 6

Equity-based awards

(2.ii)

3, 3 06,101

Annual Report 2023

Tetragon Financial Group

Certain Regulatory Information

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

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 to the benefits of

such Act. Tetragon is registered in the public register of

the Netherlands Authority for the Financial Markets under

Section 1:107 of the Financial Markets Supervision Act of

the Netherlands 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 must be a

“Qualified Purchaser” or a “Knowledgeable Employee”

(each as defined in the Investment Company Act 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 if such person is a “Qualified Purchaser”

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 in investing in

financial markets and collective investment undertakings

and are capable themselves of evaluating the merits and

risks of Tetragon shares and who have sufficient resources

both 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.

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 Regulation, and has it has been filed

in ESEF format with the 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).

Other information

Annual Report 2023

Tetragon Financial Group

Equity-based employee compensation plans

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 periods may range

from one to five years beyond the vesting dates.

In 2021 and 2023, further awards to certain senior TFG

Asset Management employees (excluding the principals

of the investment manager) totalling approximately 3.4

million shares were made covering vesting and release

periods out to 2030.

The shares underlying these equity-based incentive

programs may 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 with Mr. Reade Griffith, Director

of Tetragon, that covers his services to TFG Asset

Management for the period through to 30 June 2024. Mr.

Griffith is currently the Chief Investment Officer of TFG

Asset Management as well as the Chief Investment Officer

of its Westbourne River Partners event-driven European

equity strategies (in addition to other roles). Under the

terms of this agreement, Mr. Griffith received $9.5 million

in cash in July 2019, $3.75 million in cash in July 2020,

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 covered by Mr.

Griffith’s employment 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 with respect to Mr. Griffith’s employment

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.

Tetragon has awarded its shares to the Independent

Directors as described on page 53.

For the purposes of determining the fully diluted NAV

per Share, the dilutive effect of the equity-based

compensation plans will be reflected in the fully diluted

share count over the life of the plans. Such dilution

will include, 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 2023,

approximately 9.6 million shares were included in the fully

diluted share count.

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).

Annual Report 2023

Tetragon Financial Group

Registered Office of Tetragon

Tetragon Financial Group Limited

Mill Court, La Charroterie

St. Peter Port, Guernsey

Channel Islands GY1 1EJ

Investment Manager

Tetragon Financial Management LP

399 Park Avenue, 22nd Floor

New York, NY 10022

United States of America

General Partner of the Investment Manager

Tetragon Financial Management GP LLC

399 Park Avenue, 22nd Floor

New York, NY 10022

United States of America

Investor Relations

Yuko Thomas

ir@tetragoninv.com

Press Inquiries

Prosek Partners

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 GY1 1DB

Channel Islands

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)

Walkers (Guernsey) LLP

Block B, Helvetia Court

Les Echelons

St. Peter Port

Guernsey GY1 1AR

Channel Islands

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

London Stock Exchange

(Specialist Fund Segment)

Administrator and Registrar

TMF Group Fund Services

(Guernsey) Limited

Top Floor

Mill Court, La Charroterie

St. Peter Port

Guernsey GY1 1EJ

Channel Islands

Shareholder information

Other information

Annual Report 2023

Tetragon Financial Group

Financial statements

Financial

statements

Independent

Auditor’s Report

98 – 103

Consolidated statement

of Financial Position

104

Consolidated statement

of Comprehensive Income

105

Consolidated statement

of Changes in Equity

106

Notes to the

Financial Statements

108 – 141

Consolidated statement

of Cash Flows

107

Annual Report 2023

Tetragon Financial Group

Financial

statements

Annual Report 2023

Tetragon Financial Group

Independent auditor’s report to the members of

Tetragon Financial Group Limited

Report on the audit of the consolidated

financial statements

Our opinion is unmodified

We have audited the consolidated financial

statements of Tetragon Financial Group Limited

(the “Company”) and its subsidiary (together, the

“Group”), which comprise the consolidated statement

of financial position as at 31 December 2023, the

consolidated statements of comprehensive income,

changes in equity and cash flows for the year then

ended, and notes, comprising material accounting

policies and other explanatory information.

In our opinion, the accompanying

consolidated financial statements:

• give a true and fair view of the financial

position of the Group as at 31 December 2023,

and of the Group’s financial performance

and cash flows for the year then ended;

• are prepared in accordance with

International Financial Reporting Standards

as adopted by the EU; and

• comply with the Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with

International Standards on Auditing (UK) (“ISAs (UK)”)

and applicable law. Our responsibilities are described

below. We have fulfilled our ethical responsibilities

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 evidence we have obtained

is a sufficient 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, were of most significance in

the audit of the consolidated financial statements

and include the most significant assessed risks of

material misstatement (whether or not due to fraud)

identified by us, including those 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 financial

statements as a whole, and 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:

Annual Report 2023

Tetragon Financial Group

The risk Our response

Our audit procedures included:

Control design:

We have obtained an understanding of the valuation process and tested

the design and implementation of the valuation process control.

We performed the procedures below rather than seeking to rely on

the control as the nature of the balance is such that we would expect

to obtain audit evidence primarily through the detailed procedures

described.

Challenging managements’ assumptions and inputs including use of

KPMG valuation specialist:

With the support of a KPMG valuation specialist we:

• assessed the scope of the services provided by the Valuation Agent

and read the valuation report prepared by them;

• assessed the objectivity, capabilities and competence of the

Valuation Agent;

• assessed the reasonableness of the methodology applied by

the Valuation Agent in developing the fair value of TFG Asset

Management;

• critically assessed the valuations provided by the Valuation Agent

by challenging and corroborating the key and other assumptions,

and by agreeing data points to supporting documentation or market

information where available;

• assessed whether the WACC, the EV/EBITDA multiples and DLOL

employed were within a reasonable range independently developed

based on market data.

Assessing disclosures:

We considered the adequacy of the disclosures made in the

consolidated financial 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.

Valuation of TFG Asset Management included within non-derivative

financial instruments at fair value through profit or loss.

$1,345.4 Million (2022: $1,343.3 Million)

Refer to note 2 accounting policy and note 3 and 4 disclosures

Basis:

As at 31 December 2023, the Group’s investment in TFG Asset

Management represents 47.6% (2022: 48.7%) of the Group’s net asset

value.

TFG Asset Management is valued as a single investment, utilising a sum

of the parts approach, whereby each of the asset managers owned by

TFG Asset Management is valued separately.

This approach aggregates the fair value of the asset managers held

by TFG Asset Management using a combination of discounted cash

flow models (“DCF”) and market multiple approaches, overlayed by the

central costs and net assets at the TFG Asset Management level.

An independent third party valuation specialist (the “Valuation Agent”)

has been engaged to assist in the valuation process of TFG Asset

Management.

Risk:

As the TFG Asset Management investment is unquoted and illiquid, in

order to determine it’s fair value, management adopted a number of

assumptions and data points which are unobservable in the market.

These include:

Key assumptions:

The weighted average cost of capital (“WACC”), the EV/EBITDA multiple

and discount for lack of liquidity (“DLOL”) assumptions have a high

degree of estimation uncertainty with a potential range of reasonable

outcomes greater than our materiality for the consolidated financial

statements as a whole.

Other assumptions and data points:

Whilst we do not consider other assumptions and data points to be at a

significant risk of misstatement, due to the relevance of these elements

in terms of the overall valuation and associated audit effort, the following

areas also have had a significant effect on our audit approach:

• control premium; and

• forecast cashflows and its related assumptions.

The consolidated financial statements disclose in note 4 the sensitivities

estimated by the Group.

Annual Report 2023

Tetragon Financial Group

Financial statements

Independent auditor’s report to the members of

Tetragon Financial Group Limited

Our application of materiality and an

overview of the scope of our audit

Materiality for the consolidated financial statements as a

whole was set at $55.4 million, determined with reference

to a benchmark of group net assets of $2,825.4 million,

of which it represents approximately 2.0% (2022: 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 a material

amount across the financial statements as a whole.

Performance materiality for the Group was set at 75%

(2022: 75%) of materiality for the consolidated financial

statements as a whole, which equates to $41.5 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 any corrected or

uncorrected identified misstatements exceeding $2.77

million, in addition to other identified misstatements

that warranted reporting on qualitative grounds.

Our audit of the Group was undertaken to the

materiality level specified above, which has informed

our identification of significant risks 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 set of financial

information. The audit was performed using the

materiality level set out above and covered 100%

of total group revenue, total group profit before

tax, and total group assets and liabilities.

Going concern

The directors have prepared the consolidated

financial statements on the 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 Company’s

financial position means that this is realistic. They have

also concluded that there are no material uncertainties

that could have cast significant doubt over their

ability to continue as a going concern for at least a

year from the date of approval of the consolidated

financial 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 the

Company’s financial resources 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 financial resources or ability

to continue operations over this period were:

• Availability of capital to meet operating costs

and other financial commitments; and

• 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 financial resources indicated

by the Group and Company’s financial forecasts.

We considered whether the going concern

disclosure in note 2 to the consolidated financial

statements gives 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 financial statements is appropriate;

• we have not identified, and concur with the directors’

assessment that there is not, a material uncertainty

related to events or conditions that, individually

or collectively, may cast significant doubt on the

Group and the Company’s ability to continue as a

going concern for the going concern period; and

Annual Report 2023

Tetragon Financial Group

100

• we found the going concern disclosure

in the notes to the consolidated financial

statements to be acceptable.

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.

Fraud and breaches of laws and

regulations – ability to detect

Identifying and responding to risks of

material misstatement due to fraud

To identify risks of material misstatement due to fraud

(“fraud risks”) we assessed events or conditions

that could indicate an incentive or pressure to

commit fraud or provide an opportunity to commit

fraud. Our risk assessment procedures included:

• enquiring of management as to the Group’s policies

and procedures to prevent and detect fraud as well

as enquiring whether management have knowledge

of any actual, suspected or alleged fraud;

• reading minutes of meetings of those

charged with governance; and

• using analytical procedures to identify any

unusual or unexpected relationships.

As required by auditing standards, we perform

procedures to address the risk of management override

of controls, in particular the risk that management may

be in a position to make inappropriate accounting

entries. On this audit we do not believe there is a

fraud risk related to revenue recognition because the

Group’s revenue streams are simple in nature with

respect to accounting policy choice, and are easily

verifiable to external data sources or agreements with

little or no requirement for estimation from management.

We did not identify any additional fraud risks.

We performed procedures including:

• Identifying journal entries and other adjustments

to test based on risk criteria and comparing any

identified entries to supporting documentation; and

• incorporating an element of unpredictability

in our audit procedures.

Identifying and responding to risks

of material misstatement due to non-

compliance with laws and regulations

We identified areas of laws and regulations that could

reasonably be expected to have a material effect on

the consolidated financial statements 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 directly affect the consolidated financial

statements including financial reporting legislation

and taxation legislation and we assessed the extent of

compliance with these laws and regulations as part of

our procedures on the related financial statement items.

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 disclosures in the consolidated financial statements,

for instance through the imposition of fines or litigation

or impacts on the Group and the Company’s ability

to operate. We identified financial services 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

Annual Report 2023

Tetragon Financial Group

101

Financial statements

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.

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 financial statements, even though we

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 transactions

reflected in the consolidated financial statements,

the less likely the 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.

Other information

The directors are responsible for the other information.

The other information comprises the information

included in the annual report but does not include the

consolidated financial statements and our auditor’s

report thereon. Our opinion on the consolidated

financial statements does not cover 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 consolidated

financial statements, our responsibility is to read the

other information and, in doing so, consider whether

the other information is materially inconsistent with the

consolidated financial statements or 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

• the consolidated financial 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 page

63, the directors are responsible for: the preparation of

the consolidated financial statements including being

satisfied that they give a true and fair view; such internal

control as they determine is necessary to enable the

preparation of consolidated financial statements that 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.

Independent auditor’s report to the members of

Tetragon Financial Group Limited

Annual Report 2023

Tetragon Financial Group

102

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance

about whether the consolidated financial statements

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 to

influence the economic decisions of users taken on

the basis of the consolidated financial statements.

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 Requirements

European Single Electronic Format (“ESEF”)

The Group has prepared its annual report in ESEF. The

requirements for this format are set out in the Commission

Delegated Regulation (EU) 2019/815 with regard to

regulatory technical standards on the specification of a

single electronic reporting format (these requirements

are hereinafter referred to as: the “RTS on ESEF”).

In our opinion, the annual report prepared in the XHTML

format, including the tagged consolidated financial

statements as included in the reporting package

by the Group, has been prepared in all material

respects in accordance with the RTS on ESEF.

The directors are responsible for preparing the

annual report including the consolidated financial

statements in accordance with the RTS on ESEF,

whereby the directors combine the various

components into a single reporting package. Our

responsibility is to obtain reasonable assurance for

our opinion whether the annual report in this reporting

package, is in accordance with the RTS on ESEF.

Our procedures included:

• Obtaining an understanding of the Group’s

financial reporting process, including the

preparation of the reporting package;

• Obtaining the reporting package and performing

validations to determine whether the reporting

package containing the Inline XBRL instance

document and the XBRL extension taxonomy files

have been prepared in accordance with the technical

specifications as included in the RTS on ESEF;

• Examining the information related to the

consolidated financial statements in the reporting

package to determine whether all required

taggings have been applied and whether they

are in accordance with the RTS on ESEF.

Barry Ryan

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors

Guernsey

4 March 2024

Annual Report 2023

Tetragon Financial Group

103

Financial statements

As of Note 31 Dec 2023

31 Dec 2022

Assets

Non-derivative financial assets at fair value

through profit or loss

4 3,065.7 2,919.2

Derivative financial assets 4 5.1 21.7

Other receivables and prepayments 7 4.7 6.1

Amounts due from brokers 6 7.2 5.5

Cash and cash equivalents 6 23.1 21.7

Total assets 3,105.8 2,974.2

Liabilities

Loans and borrowings 10 250.0 115.0

Derivative financial liabilities 4 8.3 2.5

Other payables and accrued expenses 9 22.1 30.2

Amounts due to brokers 8 - 68.0

Total liabilities 280.4 215.7

Net assets 2,825.4 2,758.5

Equity

Share capital 0.1 0.1

Other equity 722.3 768.7

Share-based compensation reserve 12 71.0 61.7

Retained earnings 2,032.0 1,928.0

2,825.4 2,758.5

Shares outstanding

Number of shares (million) 12 81.2 85.6

Net Asset Value per share ($) 34.79 32.24

Signed on behalf of the

Board of Directors by:

David O’Leary

Director

Steven Hart

Director

Date: 4 March 2024

Consolidated Statement of Financial Position

The accompanying notes are an integral part of the consolidated financial statements.

Annual Report 2023

Tetragon Financial Group

104

For the year ended Note 31 Dec 2023

31 Dec 2022

Net gain on non-derivative financial assets at

fair value through profit or loss

270.6 18.9

Net (loss)/gain on derivative financial assets

and liabilities

(32.5) 42.4

Net gain on foreign exchange 0.3 1.2

Interest income 2.3 0.4

Total income 240.7 62.9

Management fees 15 (41.7) (41.1)

Incentive fee 11 (16.3) (26.5)

Legal and professional fees (4.2) (3.3)

Share-based employee compensation 12 (9.3) (9.5)

Audit fees (0.8) (0.6)

Other operating expenses and administrative

expenses

(3.3) (3.7)

Operating expenses (75.6) (84.7)

Operating profit/(loss) before finance costs 165.1 (21.8)

Finance costs 10 (24.0) (10.3)

Profit/(loss) and total comprehensive

income/(loss) for the year

141.1 (32.1)

Earnings per share $ $

Basic 16 1.62 (0.35)

Diluted 16 1.53 (0.34)

Weighted average shares outstanding Million Million

Basic 16 87.3 90.8

Diluted 16 92.2 94.9

Consolidated Statement of Comprehensive Income

The accompanying notes are an integral part of the consolidated financial statements.

Annual Report 2023

Tetragon Financial Group

105

Financial statements

capital

Other

equity

Retained

earnings

Share-based

compensation

reserve

Total

As at 1 January 2022 0.1 814.7 2,001.9 60.1 2,876.8

Loss and total comprehensive loss for the year - - (32.1) - (32.1)

Transactions with owners recognised directly

in equity

Shares released from escrow - 7.9 - (7.9) -

Dividends on shares released from escrow - 3.0 (3.0) - -

Share-based compensation - - - 9.5 9.5

Cash dividends - - (23.8) - (23.8)

Stock dividends - 15.0 (15.0) - -

Issue of shares - 0.1 - - 0.1

Purchase of treasury shares - (72.0) - - (72.0)

As at 31 December 2022 0.1 768.7 1,928.0 61.7 2,758.5

Gain and total comprehensive income for the year - - 141.1 - 141.1

Transactions with owners recognised directly

in equity

Share-based compensation - - - 9.3 9.3

Cash dividends - - (23.3) - (23.3)

Stock dividends - 13.8 (13.8) - -

Issue of shares - 0.1 - - 0.1

Purchase of treasury shares - (60.3) - - (60.3)

As at 31 December 2023 0.1 722.3 2,032.0 71.0 2,825.4

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statement of Changes in Equity

Annual Report 2023

Tetragon Financial Group

106

For the year ended 31 Dec 2023

31 Dec 2022

Operating activities

Profit/(loss) for the year 141.1 (32.1)

Adjustments for:

Gains on investments and derivatives (238.2) (61.3)

Share-based compensation 9.3 9.5

Interest income (2.3) (0.4)

Finance costs 24.0 10.3

Operating cash flows before movements in

working capital

(66.1) (74.0)

(Increase)/decrease in receivables (1.1) 0.1

Decrease in payables (11.0) (77.3)

(Increase)/decrease in amounts due from brokers (1.6) 0.4

(Decrease)/increase in amounts due to brokers (68.0) 68.0

Cash flows from operations (147.8) (82.8)

Proceeds from sale/prepayment/maturity

of investments

345.1 394.8

Net (payments)/receipts from derivative financial

instruments

(5.2) 20.9

Purchase of investments (220.3) (444.3)

Cash interest received 2.2 0.4

Net cash used in operating activities (26.0) (111.0)

Financing activities

Repayment of loans and borrowings (150.0) (175.0)

Proceeds from loans and borrowings 285.0 215.0

Finance costs paid (24.0) (10.3)

Purchase of treasury shares (60.3) (72.0)

Dividends paid to shareholders (23.3) (23.8)

Net cash generated/(used in) financing activities 27.4 (66.1)

Net increase/(decrease) in cash and cash

equivalents

1.4 (177.1)

Cash and cash equivalents at beginning of year 21.7 198.8

Cash and cash equivalents at end of year 23.1 21.7

Consolidated Statement of Cash Flows

The accompanying notes are an integral part of the consolidated financial statements.

Annual Report 2023

Tetragon Financial Group

107

Financial statements

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.LN). The

registered office of the Fund is Mill Court, La Charroterie,

St. Peter Port, Guernsey, GY1 1EJ, Channel Islands.

Note 2 Material Accounting Policies

Basis of Preparation

The consolidated financial statements 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.

The financial statements have been prepared on a

historical cost basis, except for derivative financial

instruments and certain non-derivative financial assets

and financial liabilities held at fair value through profit or

loss (“FVTPL”) that have been measured at fair value.

The accounting policies have been consistently applied

to all periods presented in these financial statements.

The financial statements are presented in United States

Dollars (“USD” or “$”), which is the functional currency

of the Fund, expressed in USD millions (“$m”) (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 presentational currency,

reflects the 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 holds 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 financial statements for

this subsidiary are prepared at the same reporting

date using the same accounting policies. All other

interests in subsidiaries are classified as FVTPL.

Investments in associates are also classified as FVTPL.

Subsidiaries are consolidated from the date control is

established by Tetragon and cease to be consolidated

on the date control is transferred from Tetragon.

The Directors are satisfied that it is appropriate to

continue to adopt the going concern basis in preparing

these financial statements and that the Fund will be able

to continue to meet its liabilities for at least twelve months

from the date of approval of the financial statements.

In making this determination, the Directors have

considered reasonable plausible downside scenarios

in preparing the cash flow and liquidity projections for

the next twelve 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.

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 financial

statements. These standards and interpretations

are not relevant to the Fund’s activities, or their

effects are not expected to be material.

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

108

Foreign Currency Translation

Transactions in foreign currencies are translated to

the Fund’s functional currency at the foreign currency

exchange rate ruling at the date of the transaction.

All assets and liabilities denominated in foreign

currencies are translated to USD at the foreign currency

closing exchange rate ruling at the reporting date.

Foreign currency exchange differences arising on

translation and realised gains and losses on disposals

or settlements of monetary assets and liabilities are

recognised as net foreign exchange gain/(loss)

in the Consolidated Statement of Comprehensive

Income except for those arising on financial

instruments at FVTPL which are recognised as

components of net gain on non-derivative financial

assets at FVTPL and derivative instruments which

are recognised as components of net gain/(loss) on

derivative financial assets and financial liabilities.

Financial Instruments

(i) Classification

The Fund classifies its financial assets and

financial liabilities at initial recognition into

the following categories, in accordance with

IFRS 9 Financial Instruments (“IFRS 9”).

Financial assets at amortised cost

A financial asset is measured at amortised

cost if it meets both of the following conditions

and is not designated as at FVTPL:

– it is held within a business model whose objective is

to hold assets to collect contractual cash flows; and

– it has contractual terms which give rise, on

specified dates, to cash flows that are solely

payments of principal and interest outstanding.

The Fund includes in this category cash and

cash equivalents, amounts due from brokers,

receivable for securities sold and other sundry

receivables. These assets are held with an intention

to collect the principal and interest payments.

Financial assets and liabilities at FVTPL

All financial assets not classified 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.

Other financial liabilities at amortised cost

This category includes all financial liabilities, other

than those classified as at FVTPL. The Fund includes

in this category loans and borrowings, amounts due to

brokers, and other payables and accrued expenses.

(ii) Recognition

The Fund recognises a financial asset or a financial

liability when it becomes a party to the contractual

provisions of the instrument. Purchases or sales of

financial assets that require 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

Financial assets and financial liabilities at FVTPL

are initially recognised in the Consolidated

Statement of Financial Position at fair value.

All transaction costs for such instruments are

recognised immediately through profit or loss.

Financial assets and liabilities (other than those

classified as at FVTPL) are measured initially at

their fair value adjusted for any directly attributable

incremental costs of acquisition or issue.

Annual Report 2023

Tetragon Financial Group

109

Financial statements

(iv) Subsequent measurement

After initial measurement, the Fund re-measures

financial instruments which are classified as at FVTPL

at fair value. Subsequent changes in the fair value

of those financial instruments are recorded in net

gain/(loss) on non-derivative financial assets at FVTPL

in the Consolidated Statement of Comprehensive

Income. Subsequent changes in fair value of

derivative instruments are recorded in net gain/(loss)

on derivative financial assets 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 being included in profit or loss.

Financial liabilities, other than those classified

as at FVTPL, are measured at amortised cost

using the effective interest method.

(v) Derecognition

A financial asset (or, where applicable, a part of

a financial asset or a part of a group of similar

financial assets) is derecognised where (i) the rights

to receive cash flows from the asset have expired,

or (ii) the Fund has either transferred its rights to

receive cash flows from the asset, or has assumed

an obligation to pay the received cash flows in full

without material delay 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 receive cash

flows from an asset (or has 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 on a basis that reflects

the rights and obligations that the Fund has retained.

The Fund derecognises a financial liability

when the obligation under the liability is

discharged, cancelled or expired.

(vi) Impairment

The Fund recognises loss allowances for expected credit

losses (“ECL”) on financial assets at amortised cost.

When determining whether the credit risk of a

financial asset has increased significantly since initial

recognition 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.

Offsetting of financial instruments

Financial assets and financial liabilities 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 defines fair value

as the price that would be received to sell an asset

or paid to transfer a liability in an orderly transaction

between market participants at the measurement

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

110

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.

The fair value for financial instruments 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

or liability take place with sufficient frequency and volume

to provide pricing information on an ongoing basis.

For all other financial instruments not 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 basis, the Fund identifies

transfers between levels in the hierarchy by re-

assessing the categorisation (based on the lowest

level input that is significant to the fair value

measurement as a whole) and deems transfers to

have occurred at the end of each reporting period.

Amounts due from/to 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. Amounts

due to brokers include cash advances obtained

from the brokers by pledging certain investments.

Refer to the accounting policy for financial

instruments for 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 insignificant

risk of changes in value 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 financial

assets and liabilities at FVTPL

Net gains or losses on non-derivative financial assets at

FVTPL are changes in the fair value of financial assets

and financial liabilities at FVTPL and include 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

are recognised through profit or loss in the

Consolidated Statement of Comprehensive

Income using the effective interest method.

Annual Report 2023

Tetragon Financial Group

111

Financial statements

Expenses

Expenses and fees, including Directors’ fees,

are recognised through profit or loss in the

Consolidated 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 (2022: 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 Consolidated

Statement of Changes in Equity. Any associated stock

dividends accrued on the original award are debited

against retained earnings and credited to other equity

using the value determined by the stock reference

price at the date of each applicable dividend.

Other equity

Other equity contains the share premium

and treasury shares balances.

Operating segments

An operating segment is a component of the Fund

that engages in business activities from which it may

earn revenues and incurs expenses, whose operating

results are regularly reviewed by the Fund’s chief

operating decision-maker and for which discrete financial

information is available. The chief operating decision-

maker for the Fund is the Board of Directors. The Fund

has considered the information reviewed by the Fund’s

chief operating decision-maker and determined that

there is only one operating segment in existence.

Note 3 Significant Accounting Judgements,

Estimates and Assumptions

The preparation of the Fund’s financial statements

requires management to make judgements, estimates

and assumptions that affect the reported amounts

recognised in the financial statements and disclosure of

contingent liabilities. However, uncertainty about these

assumptions and estimates could result in outcomes

that could require a material adjustment to the carrying

amount of the asset or liability affected in future periods.

In the process of applying the Fund’s accounting

policies, management has made the following

judgements, estimates and assumptions which

have the most significant effect on the amounts

recognised in the financial statements:

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

112

Judgements

Investment entity status

The Board of Directors have determined that the Fund

meets the definition of an investment entity as per IFRS

10. Entities that meet the definition 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.

Tetragon obtained funds from investors for the purpose

of providing investment management services. 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 parameters available at the year-end when

the financial statements were prepared; however,

existing circumstances and assumptions about

future developments may change due to market

changes and circumstances arising beyond the

control of the Fund. Such changes are reflected

in the assumptions when they occur.

For detailed information on the estimates and

assumptions used to determine the fair value of

financial instruments, please refer to Note 4.

Note 4 Financial Assets and Financial

Liabilities at Fair Value through Profit or Loss

Fair value hierarchy

All assets and liabilities for which fair value is measured

or disclosed in the financial statements are categorised

within the fair value hierarchy, described as follows:

• Level 1 – Quoted in active markets

for identical instruments.

• Level 2 – Prices determined using other significant

observable inputs. These may include quoted

prices for similar securities, interest rates,

prepayments spreads, credit risk and others.

• Level 3 – Unobservable inputs. Unobservable inputs

reflect assumptions market participants would be

expected to use in pricing the asset or liability.

Annual Report 2023

Tetragon Financial Group

113

Financial statements

The following table shows financial instruments measured at fair value by the level in fair value hierarchy as of

31 December 2023:

Non-derivative financial assets at FVTPL Level 1Level 2Level 3TotalFair Value$M$M$M$MTFG Asset Management - - 1,345.4 1,345.4Investment funds and vehicles - 673.3 593.2 1,266.5Listed stock 190.4 - - 190.4(1)CLO equity tranches- - 129.5 129.5(1)CLO debt tranches- 3.8 - 3.8Unlisted stock - 2.7 111.7 114.4Corporate bonds - 15.7 - 15.7Total non-derivative financial assets at FVTPL 190.4 695.5 2,179.8 3,065.7Derivative financial assets Currency options (asset) - 2.2 - 2.2Forward foreign exchange contracts (asset) - 2.9 - 2.9Total derivative financial assets - 5.1 - 5.1Derivative financial liabilities Contracts for difference (liability) - (0.1) - (0.1)Forward foreign exchange contracts (liability) - (8.2) - (8.2)Total derivative financial liabilities - (8.3) - (8.3)

(1) Investment in CLO equity and debt tranches held through special purpose vehicles are included in these captions.

Recurring fair value measurement of assets and liabilities

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

114

The following table shows financial instruments measured at fair value by the level in fair value hierarchy as of

31 December 2022:

Non-derivative financial assets at FVTPL Level 1Level 2Level 3TotalFair Value$M$M$M$MTFG Asset Management - - 1,343.3 1,343.3Investment funds and vehicles - 595.0 570.6 1,16 5.6Listed stock 158.5 - - 158.5(1)CLO equity tranches- - 170.2 170.2(1)CLO debt tranches- 1.2 - 1.2Unlisted stock - - 64.5 64.5Corporate bonds - 15.9 - 15.9Total non-derivative financial assets at FVTPL 158.5 612.1 2,148.6 2,919.2Derivative financial assets Contracts for difference (asset) - 0.3 - 0.3Currency options (asset) - 3.0 - 3.0Forward foreign exchange contracts (asset) - 18.4 - 18.4Total derivative financial assets - 21.7 - 21.7Derivative financial liabilitiesContracts for difference (liability) - (0.1) - (0.1)Forward foreign exchange contracts (liability) - (2.4) - (2.4)Total derivative financial liabilities - (2.5) - (2.5)

Transfers between levels

There were no transfers between levels during the year

ended 31 December 2023 or 31 December 2022.

Other financial assets and liabilities

For all other financial assets and liabilities, the carrying

value is an approximation of fair value, including other

receivables, amounts due from/to brokers, cash and cash

equivalents, loans and borrowings, and other payables.

(1) Investment in CLO equity and debt tranches held through special purpose vehicles are included in these captions.

Annual Report 2023

Tetragon Financial Group

115

Financial statements

Level 3 reconciliation

The following is a reconciliation of the Fund’s assets in

which significant unobservable inputs (Level 3) were

used in determining fair value at 31 December 2023.

The following is a reconciliation of the Fund’s assets in

which significant unobservable inputs (Level 3) were

used in determining fair value at 31 December 2022.

Valuation process (framework)

TMF Group Fund Services (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 they consider that such method of valuation

better reflects value and is in accordance with IFRS.

CLO Unlisted Investment TFG TotalEquity StockFunds and Asset TranchesVehiclesManagement $M$M$M$M$MBalance at 1 January 2023 170.2 64.5 570.6 1,343.3 2,148.6Additions - 22.3 61.7 23.8 107.8Proceeds (4 8.1) (7.3) (48.6) (50.0) (154.0)Net gains through profit or loss 7.4 32.2 9.5 28.3 7 7.4Balance at 31 December 2023 129.5 111.7 593.2 1,345.4 2,179.8Change in unrealised gains/(losses) through profit or (5.3) 29.5 1.5 (17.7) 8.0loss for assets held at year-end

CLO Unlisted Investment TFG TotalEquity StockFunds and Asset TranchesVehiclesManagement $M$M$M$M$MBalance at 1 January 2022 164.4 50.3 521.7 1,256.3 1,992.7Additions 34.7 32.3 95.8 26.1 188.9Proceeds (56.6) (18.7) (97.4) (34.8) (2 07.5)Net gains through profit or loss 27.7 0.6 50.5 95.7 174.5Balance at 31 December 2022 170.2 64.5 570.6 1,343.3 2,148.6Change in unrealised gains through profit or loss for 0.9 0.6 9.3 60.9 71.7assets held at year-end

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

116

Valuation techniques

CLO equity tranches

A mark to model approach using discounted cash

flow analysis (“DCF Approach”) has been adopted

to determine the value of the equity tranche CLO

investments. The model contains certain assumption

inputs that are reviewed and adjusted as appropriate

to factor in how historic, current, and potential

market developments (examined through, for

example, forward-looking observable data) might

potentially impact the performance of these CLO

equity investments. Since this involves modelling,

among other things, forward projections over multiple

years, this is not an exercise in recalibrating future

assumptions to the latest quarter’s historical data.

Subject to the foregoing, the Fund seeks to derive a

value at which market participants could transact in

an orderly market and also seeks to benchmark the

model inputs and resulting outputs to observable

market data when available and appropriate. Although

seeking to utilise, where possible, observable market

data, for certain assumptions the Investment Manager

may be required to make subjective judgements and

forward-looking determinations, and its experience and

knowledge is instrumental in the valuation process.

As at 31 December 2023, key modelling assumptions

used are disclosed below. The modelling assumptions

disclosed below are a weighted average (by USD

amount) of the individual deal assumptions. Each

individual deal’s assumptions may differ from

this average and vary across the portfolio.

When determining the fair value of the equity tranches,

a discount rate is applied to the expected future cash

flows derived from the third-party valuation model.

The discount rate applied to those future cash flows

reflects the 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 2023, a discount rate of

13% (2022: 13%) is applied unless the deal is within its

non-refinancing 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 16.7% (2022: 17.9%). If the deal

is past six months from the end of its reinvestment

period, a discount rate of 15% (2022: 13%) is applied.

31 Dec 31 Dec 20232022$M$M-1% discount rate 3.3 4.8+1% discount rate (3.2) (4.5)

Constant Annual 3.0% up to 31 December 2024, 2.4% thereafter (2022: 2.39%), which is 1.0x of the original Weighted Default Rate Average Rating Factor (“WARF”) derived base-case default rate for the life of the transaction. (“CADR”)Recovery Rate 65% (2022: 65%) up to 31 December 2024, 70% thereafter (2022: 70%).Prepayment Rate 20% (2022: 20%), the original base-case prepayment rate with a 0% prepayment rate (2022: 0%) on bonds throughout the life of the transaction.Reinvestment Assumed reinvestment price is par for the life of the transaction with reinvestments being modelled Price and Spreadfor deals that are still in their reinvestment period. Reinvestment spread consists of U.S. syndicated loans with an effective spread over Term SOFR of 379 bps (2022: 379 bps).

Sensitivity analysis

The discount rate used is a key input in 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 and profits:

Annual Report 2023

Tetragon Financial Group

117

Financial statements

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 agent 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 respect of diversification or synergies

between different income streams. Any benefit from

operating on the TFG 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 utilising a business-specific model

to estimate the generation of future net cash flows.

Each model reflects the business plan over a specific

period 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 formula

to the projected cash flows in the terminal year or to

the average of yearly cash flows in the business plan.

This terminal value calculation is used in the DCF

approach for Equitix, LCM, Westbourne River Partners,

Contingency Capital and Acasta. All estimates of future

free cash flows and the terminal value are 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”), in the range of 5% 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 enterprise 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 it appropriately reflects the

specific business being valued, considering its business

activities, geography, size, competitive position in the

market, risk profile, and earnings growth prospects

of the business. The valuation agent considered 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 the comparable

companies are valued on a minority basis.

Equitix and LCM are valued using a combination

of DCF Approach and quoted market multiples

(“Market Multiple Approach”) based on comparable

companies to determine an appropriate valuation

range. Both approaches are given 50/50 weighting

in the valuation. Westbourne River Partners,

Acasta, Tetragon Credit Partners and Contingency

Capital are valued using the DCF Approach.

TFG Asset Management holds approximately 13%

interest in BGO and is entitled to receive a series of fixed

and variable profit distributions. Sun Life have an 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

exercise price will be determined based on the average

EBITDA of BGO during the two years prior to exercising

the option. The Fund’s investment in BGO is valued

using the DCF Approach on expected cash flows.

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

118

The following table shows the unobservable inputs used by the third-party valuation specialist in valuing TFG Asset

Management. For the purposes of IAS 1 Presentation of Financial Statements, control premium is not a significant input.

31 December 2023

Investment Fair AUMValuation Significant unobservable inputsValue(billion)methodologyWACC EV/DLOL Control Forecast $MEBITDA premium5Y CAGRMultipleEquitix 737.6 GBP 10.9 DCF and 10.5% 9.5x 10% 20% 9.8% Market (AUM)MultiplesBGO 270.5 $10.7 DCF (sum-of-5.6 -11.8% NA 5-15% NA 15.5% the-parts)(EBITDA)LCM 258.5 $10.7 DCF and 10.75% 11.8x 15% 20% 7.2% Market (AUM)MultiplesOther asset 78.8 $6.2 DCF, 11.5%- NA 15-20% NA 7.6% managersreplacement 13.25%(AUM)cost

31 December 2022

Investment Fair AUMValuation Significant unobservable inputsValue(billion)methodologyWACC EV/DLOL Control Forecast $MEBITDA premium5Y CAGRMultipleEquitix 683.2 GBP 10.0 DCF and 10.5% 11x 10% 20% 12.6% Market (AUM)MultiplesBGO 283.0 $10.6 DCF (sum-of-4.8-12% NA 10% NA 21.7% the-parts)(EBITDA)LCM 290.7 $12.5 DCF and 11.5% 12.6x 15% 20% 12.0% Market (AUM)MultiplesOther asset 86.4 $ 6.1 D CF, 11-13% NA 15-20% NA 8.0% managersreplacement (AUM)cost

Annual Report 2023

Tetragon Financial Group

119

Financial statements

31 December 2023

Investment Effects on net assets and profits ($M)WACC EV/EBITDA DLOL Control premium Forecast 5Y CAGRmultiple-100 +100 +10% -10% -500 +500 +500 -500 +100 -100 bpsbpsbpsbpsbpsbpsbpsbpsEquitix 52.0 (40.9) 39.2 (39.2) 39.4 (39.4) 17.7 (17.7) 15.1 (16.8)BGO 5.8 (5.6) NA NA 14.9 (14.9) NA NA 8.9 (8.7)LCM 14.5 (11.5) 14.3 (14.3) 13.6 (13.6) 6.8 (6.8) 4.6 (4.6)Other 5.7 (4.8) NA NA 4.5 (4.5) NA NA 8.5 (8.0)asset managers

31 December 2022

Investment Effects on net assets and profits ($M)WACC EV/EBITDA DLOL Control premium Forecast 5Y CAGRmultiple-100 +100 +3% -3% -500 +500 +500 -500 +100 -100 bpsbpsbpsbpsbpsbpsbpsbpsEquitix 48.9 (38.8) 11.6 (11.6) 38.7 (38.7) 17. 8 (17. 8) 13.6 (13.6)BGO 8.2 (7.8) NA NA 13.5 (13.5) NA NA 14.3 (10.9)LCM 14.5 (11.8) 4.9 (4.9) 15.5 (15.5) 7.7 (7.7 ) 4.0 (4.3)Other 6.4 (5.4) NA NA 4.7 (4.7) NA NA 6.5 (8.0)asset managers

Sensitivity analysis

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

120

Investment funds and vehicles

Investments in unlisted investment funds, classified

as Level 2 and Level 3 in the fair value hierarchy, are

valued utilising the net asset valuations provided by

the managers of the underlying funds and/or their

administrators. Management’s assessment is that these

valuations are the fair value of these investments. In

determining any adjustments necessary to the net

asset valuations, management has considered the

date of the valuation provided. No adjustment was

deemed material following this review. The fair value

hierarchy for the investment funds is determined by the

fair value hierarchy of the underlying investments.

The Fund has an investment in an externally managed

investment vehicle that holds farmlands in Paraguay.

These farmlands are valued utilising inputs from

an independent third-party valuation agent. The

input is adjusted, between 30% to 40%, for factors

such as recent crop yields, conditions specific to

the farms and broker quotes and bids received.

Sensitivity analysis:

A 10% increase in net asset value (“NAV”) of the unlisted

investment funds included in Level 3 will increase net

assets and profits of the Fund by $59.3 million (2022:

$57.1 million). A decrease in the NAV of the unlisted

investment funds will have an equal and opposite effect.

Sensitivity analysis:

A 5% increase in the valuation will increase the net

assets and profits of the Fund by $5.6 million (2022:

$3.2 million). A 5% decrease will have an equal but

opposite effect on the net assets and profits.

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 discounted cash flow models, as 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 financial institutions. CFDs are

typically 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.

Unlisted stock

At 31 December 2023, the Level 3 unlisted stock includes the following investments in private companies.

Investment Fair value ($M) Valuation methodologynumber31 Dec 31 Dec 202320221 103.8 54.1 Valued using two different prices. A part of the holding, $9.7 million, is subject to tender offer and has been valued utilising the tender offer price. Rest of the shares are valued using broker quotes. 2 - 2.5 n/a3 7.5 7. 5 Transaction price4 0.4 0.4 Expected value of cash flows

Annual Report 2023

Tetragon Financial Group

121

Financial statements

Note 5

Interest in Other Entities

Investment in unconsolidated structured entities

IFRS 12 defines a structured entity as 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 is recorded in the “non-derivative

financial assets at fair value through profit or loss” 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 provide, any financial support to these

investees. The investments are non-recourse. Please

refer to Note 14 for details of unfunded commitments.

Below is a summary of the Fund’s holdings in subsidiary unconsolidated structured entities.

As at 31 December 2023 No. of Range of Average Carrying Percentage investmentsnominal nominal value of Tetragon’s $M $M$MNAVCLO Equity(1)U.S. CLOs19 10 0.7–741. 5 423.9 124.0 4.5%Investment Funds Total NAV$M(2)Westbourne River Event Fund1 484.5 NA 446.7 15.8%(2)TFG Asset Management Global Equities Fund1 3.3 NA 3.3 0.1%(3)Tetragon Credit Income funds3 588.6 NA 111.0 3.9%(3)Hawke’s Point Holdings LP2 119.0 NA 116.7 4.1%(3)Banyan Square Capital Partners LP1 128.7 NA 127.0 4.5%(4)Other Real Estate4 37. 9 NA 37.9 1.3%

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

122

(1) This includes all U.S. CLOs deemed to be controlled by the Fund.

U.S. CLOs are domiciled in the Cayman Islands.

(2) Westbourne River Event Fund (formerly Polygon European Equity

Opportunity Fund) and TFG Asset Management Global Equities

Fund (formerly Polygon Global Equities Fund) are domiciled in the

Cayman Islands. Given the applicable notice, liquidity up to 25% of

the investment is available on a quarterly basis (subject to certain

conditions), and the entire investment could be liquidated over four

consecutive quarters.

(3) Hawke’s Point Holdings LP, Banyan Square Capital Partners LP,

Tetragon Credit Partner funds (Tetragon Credit Income II LP (“TCI

II”), Tetragon Credit Income III LP (“TCI III”) and Tetragon Credit

Income IV LP (“TCI IV”)) are domiciled in the Cayman Islands. These

are private-equity style investment funds. Please refer to Note 14 for

details of unfunded commitments.

(4) The Fund has investments in commercial farmland in Paraguay, via

individual managed accounts managed by Scimitar, a specialist

manager in South American farmland. The Fund’s investment can

only be redeemed when the underlying real estate assets are sold.

As at 31 December 2022 No. of Range of Average Carrying Percentage investmentsnominal nominal value of Tetragon’s $M $M$MNAVCLO Equity(1) U.S. CLOs19 245.6–751.6 491.4 158.5 5.7%Investment Funds Total NAV$M(2)Westbourne River Event Fund1 47 7. 2 NA 419.5 15.2%(2)TFG Asset Management Global Equities Fund1 4.4 NA 4.4 0.2%(3)Tetragon Credit Income funds3 674.1 NA 132.7 4.8%(3)Hawke’s Point Holdings LP2 61.8 NA 59.1 2.1%(3)Banyan Square Capital Partners LP1 129.6 NA 123.6 4.5%(4)Other Real Estate4 41.7 NA 41.7 1.5%

Annual Report 2023

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123

Financial statements

Notes to the financial statements

(1) Includes all externally managed CLOs that are outside the Fund’s

control. U.S. CLOs are domiciled in the Cayman Islands.

(2) BGO funds hold real estate investments in the U.S., Japan and

various countries in Europe. Total assets under management (“AUM”)

reflects 100% of BGO AUM in structured entities in each region. The

number of investments indicates the Fund’s investments in each

region. The Fund’s investment in these funds can only be redeemed

in the form of capital distributions when the underlying real estate

assets are sold.

(3) Private equity funds are domiciled in the Cayman Islands,

Luxembourg and the U.S.

(4) Acasta Global Fund and Acasta Energy Evolution Fund are domiciled

in the Cayman Islands. Given the applicable notice, liquidity up to

25% of the investment is available on a quarterly basis (subject to

certain conditions), and the entire investment could be liquidated over

four consecutive quarters.

As at 31 December 2022 No. of Range of Average Carrying Percentage investmentsnominal nominal value of Tetragon’s $M $M$MNAVCLO Equity(1)U.S. CLOs2 415.0 – 512.3 463.6 11.7 0.4%Real Estate Total AUM$M(2)BGO – U.S.7 39,333 NA 49.2 1.8%(2)BGO – Europe10 14,458 NA 39.2 1.4%(2)BGO – Asia2 4,581 NA 21.7 0.8%Other Funds Total NAV$M(4)Acasta Funds2 986.2 NA 104.2 3.8%(3)Private Equity Funds34 50,363 NA 162.5 5.9%

Below is a summary of the Fund’s holding in non-subsidiary unconsolidated structured entities:

As at 31 December 2023 No. of Range of Average Carrying Percentage investmentsnominal nominal value of Tetragon’s $M $M$MNAVCLO Equity(1)U.S. CLOs2 411.9 411.9 5.5 0.2%Real Estate Total AUM$M(2)BGO – U.S.7 37,3 31 NA 4 6 .1 1.6%(2)BGO – Europe11 14,680 NA 41.3 1.5%(2)BGO – Asia2 4,926 NA 22.4 0.8%Other Funds Total NAV$M(4)Acasta Funds2 1,036.3 NA 106.6 3.8%(3)Private Equity Funds42 5 4,16 3 .0 NA 2 07. 5 7. 3%

Annual Report 2023

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124

TFG Asset Management

The Fund owns 100% holdings and voting rights in

TFG Asset Management LP. As at 31 December 2022

and 31 December 2023, TFG Asset Management

LP’s investments were comprised of the following:

Notes

(1) Equitix and BGO have a presence in North America, Europe, and

Asia.

(2) TFG Asset Management owns a non-controlling interest (“NCI”) as

well as providing infrastructure services to these managers. The chief

investment officers of underlying businesses own a controlling stake.

Tetragon Financial Group Holdings LLC and

Tetragon Financial Group (Delaware) LLC

The Fund holds 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 2023

is $1,215.4 million (2022: $1,190.3 million). The

outstanding balance on the credit facility as at 31

December 2023 is $250.0 million (2022: $115.0 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. The following table

shows the breakdown of assets by asset class:

(2)

Investment Principal Ownership interest Carrying value $M Percentage of NAVplace of 2023 2022 2023 2022 2023 2022business(1)Equitix Global 75% 75% 737.6 683.2 2 6.1% 24.8%(1)BGO Global 13% 13% 270.5 283.0 9.6% 10.3%LCM U.S. and U.K. 100% 100% 258.5 290.7 9.1% 10.5%Other asset managers: 78.8 86.4 2.8% 3.1%Westbourne River Partners U.S. and U.K. 100% 100%(2)NCIAcasta Partners U.S. and U.K. NCITetragon Credit Partners U.S. and U.K. 100% 100%Hawke’s Point U.S. and U.K. 100% 100%Banyan Square Partners U.S. and U.K. 100% 100%(2)NCI(2)Contingency Capital U.S. and U.K. NCI

31 Dec 202331 Dec 2022$M$MInvestment funds and vehicles 802.8 780.2TFG Asset Management 332.0 332.8Unlisted stock 57.8 4 6.1CLO equity tranches 22.8 31.2Total 1,215.4 1,190.3

Annual Report 2023

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125

Financial statements

Notes to the financial statements

LCM Euro LLC and LCM Euro II LLC

The Fund holds 100% ownership interest in LCM Euro

LLC and LCM Euro II LLC Investment Series, domiciled

in Delaware. The subsidiaries have invested in debt

and equity tranches of certain LCM CLOs. They have

entered into sales and repurchase agreements 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 2023, LCM

Euro LLC and LCM Euro II LLC Investment Series had

total assets of $162.1 million (2022: $161.7 million) and

aggregate repurchase obligations of $140.5 million

(2022: $140.4 million). The fair value of LCM Euro LLC

and LCM Euro II LLC Investment Series of $21.4 million

(2022: $21.2 million) is included in non-derivative

financial assets at FVTPL. There is no recourse to the

Fund in case of non-payment of principal or interest.

Note 6 Financial Risks Review

Financial Risk Review:

This note presents information about the Fund’s objectives,

policies and processes for measuring and managing risk.

The Fund has exposure to the following

risks from financial instruments:

– Credit risk;

– Liquidity risk; and

– Market risks

Risk Management Framework:

The Fund’s portfolio comprises a broad range of assets,

including a diversified alternative asset management

business, TFG Asset Management, and covers bank loans,

real estate, equities, credit, convertible bonds, private

equity and infrastructure. The Fund’s investment strategy

is to seek to identify asset classes that offer excess returns

relative to their investment risk, or “intrinsic alpha”.

The Investment Manager analyses the risk/reward,

correlation, duration and liquidity characteristics of

each potential capital use to gauge its attractiveness

and incremental impact on the Fund. As part of the

Fund’s investment strategy, the Investment Manager

may employ hedging strategies and leverage in seeking

to provide attractive returns while managing risk.

The Investment Manager’s risk committee is responsible

for the risk management of the Fund and performs

active and regular oversight and risk monitoring.

a) Credit risk

“Credit risk” is the risk that a counterparty/issuer to a

financial instrument will fail to discharge an obligation or

commitment that it has entered into with the Fund, resulting

in a financial loss to the Fund. It arises principally from

the CLO portfolio held, and also from derivative financial

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 parties

have fulfilled their contractual settlement obligations.

The Fund conducts diligence on its brokers and

financing counterparties before entering into trading or

financing relationships. The Fund also actively monitors

and manages settlement risk by diversifying across

counterparties and by monitoring developments in the

perceived creditworthiness of financing counterparties.

The carrying value and unfunded commitments of

financial assets at fair value through profit or loss,

derivatives, 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 is provided. The ECL on

financial assets at amortised costs are immaterial.

Annual Report 2023

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126

31 Dec 202331 Dec 2022$M $MBNP Paribas 3.7 5.5Bank of America Merrill Lynch 0.3 -ING 3.2 -Total 7.2 5.5

Corporate bonds

The Fund has an investment in a debt security

of $15.7 million (2022: $15.9 million) with

Moody’s credit rating of Ba1 (2022: B3).

CLOs

The Fund’s portfolio is partly invested in CLO equity

tranches which are subject to potential non-payment risk.

The Fund will be in a first loss position 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 Manager seeks

to provide diversification 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.

31 Dec 202331 Dec 2022$M $MRegionUnited States 95% 95%Other 5% 5%100% 100%ManagerLCM 61% 62%Other managers 39% 38%Total 100% 100%

The following table details the amounts held by brokers.

The following tables show the concentration of CLOs (including TCI II, III and IV) by region of underlying assets

and by manager.

i. Analysis of Credit Quality

Cash and cash equivalents

The cash and cash equivalents are concentrated

in five (2022: three) financial institutions with credit

ratings between AA– and A+ (S&P) (2022: 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. Any excess

margin is included in cash and cash equivalents.

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 in three brokers

(2022: one) with S&P’s credit rating between A- and A+

(2022: A+). Due to the high credit rating of the brokers, the

expected credit losses on these balances are immaterial.

Annual Report 2023

Tetragon Financial Group

127

Financial statements

Notes to the financial statements

Derivatives

The table below shows an analysis of derivative financial assets and liabilities outstanding at 31 December 2023

and 31 December 2022.

ii. Concentration of credit risk

The Fund’s credit risk is concentrated in CLOs, and cash and cash equivalents. The table below shows a breakdown

of credit risk per investment type. None of the Fund’s financial assets was considered to be past due or impaired on

31 December 2023 or 31 December 2022.

iii. Collateral and other credit enhancements,

and their financial effects

The Fund mitigates the credit risk of

derivatives and reverse sale and repurchase

agreements through collateral management

including master netting agreements.

Derivative transactions are either transacted on an

exchange or entered into under International Derivative

Swaps and Dealers Association (“ISDA”) master

netting agreements. Under ISDA master netting

agreements in certain circumstances, for example,

when a credit event such as a default occurs, all

outstanding transactions under the agreement are

terminated, the termination value is assessed and only

a single net amount is due or payable in settlement of

all transactions. The amount of collateral accepted in

respect of derivative assets is shown in Note 6(iv).

Derivative assets Derivative liabilitiesFair ValueNotional Fair ValueNotional$M$M31 December 2023 5 .1 281.6 (8.3) 299.631 December 2022 21.7 460.9 (2.5) 59.8

Investment type 31 Dec 2023 31 Dec 2022CLOs 71% 72%Cash and cash equivalents 13% 10%Corporate bonds 9% 7%Amount due from brokers 4% 2%Other loans and derivatives 3% 9%Total 100% 100%

Annual Report 2023

Tetragon Financial Group

128

iv. Offsetting financial assets and liabilities

The Fund has not offset any financial assets and

financial liabilities in the Consolidated Statement of

Financial Position. The disclosures set out in the tables

below include financial assets and financial liabilities

that are subject to an enforceable master netting or

similar agreement that covers financial instruments.

31 December 2023 Gross Gross Net Amounts Financial Cash Net Amount of Amounts Presented instruments collateral AmountRecognised Offset in the in the eligible for held by Assets/ Consolidated Consolidated nettingbrokersLiabilitiesStatement Statement of Financial of Financial PositionPosition$M$M$M$M$M$MAssetsING 5.1 - 5.1 (5.1) - -UBS AG - - - - - -Total 5.1 - 5.1 (5.1) - -LiabilitiesING 8.2 - 8.2 (5.1) - 3.1UBS AG 0.1 - 0.1 - - 0.1Total 8.3 - 8.3 (5.1) - 3.231 December 2022AssetsING 21.4 - 21.4 (2.4) - 19.0UBS AG 0.3 - 0.3 - - 0.3Total 21.7 - 21.7 (2.4) - 19.3LiabilitiesING 2.4 - 2.4 (2.4) - -BNP Paribas 0.1 - 0.1 - - 0.1Total 2.5 - 2.5 (2.4) - 0.1

Annual Report 2023

Tetragon Financial Group

129

Financial statements

Notes to the financial statements

b) Liquidity risk

“Liquidity risk” is the risk that the Fund will encounter

difficulty in meeting the obligations associated

with its financial liabilities that are settled by

delivering cash or other financial assets.

The Fund’s policy and the Investment Manager’s

approach to managing liquidity is to ensure, as

far as possible, that it will always have sufficient

liquidity to meet its liabilities when due.

The Fund’s financial assets include some investments

which are considered illiquid. These investments

include TFG Asset Management, CLO equity 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 $400.0 million (2022: $400.0 million) and can

also access prime broker financing (Note 8). As

of 31 December 2023, $250.0 million was drawn

on the credit facility (2022: $115.0 million).

The Fund has unfunded commitments

(Note 14) to private-equity style 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 maturities of

non-derivative financial liabilities at the reporting

date. The amounts are gross and undiscounted.

The finance costs on borrowings are calculated

assuming the drawn balance on the credit facility

and the interest rate remains unchanged and

principal repaid on the maturity date of the facility.

31 December 2023 Within 1 1 – 3 3 months 1 – 5Greater Totalmonthmonths– 1 yearyearsthan 5 years$M$M$M$M$M$MFinance costs on borrowings 1.9 3.8 17.1 90.9 80.5 194.2Loans and borrowings - - - - 250.0 250.0Other payables 5.8 16.3 - - - 2 2.1Total 7.7 20.1 17.1 90.9 330.5 466.331 December 2022Finance costs on borrowings 0.9 1.8 8.0 42.4 48.2 101.3Loans and borrowings - - - - 115.0 115.0Other payables 3.7 26.5 - - - 30.2Amounts due to brokers 68.0 - - - - 68.0Total 72.6 28.3 8.0 42.4 163.2 314.5

Annual Report 2023

Tetragon Financial Group

130

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 holdings of financial instruments.

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 rates will affect future cash

flows or the fair values of financial instruments.

The fair value of certain of the Fund’s investments may

be significantly affected by changes in interest rates.

The Fund’s investments in leveraged loans through

CLOs generate SOFR 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 SOFR 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 SOFR and the Prime Rate thereby

generating an additional source of potential mismatch.

Furthermore, in the event of a significant rising interest

rate environment and/or economic downturn, loan

defaults may increase and result in credit losses that

may be expected to affect the Fund’s cash flow, fair

value of its assets and operating results adversely.

Changes in interest rates may also affect the value

of the Fund’s investment in Acasta Global Fund.

Generally, the value of convertible bonds and other

fixed rate instruments will change inversely with

changes in interest rates. The investment manager

of Acasta Global Fund manages interest rate risk

by, among other things, entering into interest rate

swaps and other derivatives as and when required.

The tables below analyse the Fund’s financial derivative

instruments that will be settled on a gross basis into relevant

maturity groupings based on the remaining period at the

financial year-end date to the contractual maturity date.

The Fund manages its liquidity risk by holding sufficient

cash and cash equivalents and available balance to

withdraw on the revolving credit facility to meet its

financial liabilities. Cash and cash equivalents balance

and undrawn balance on credit facility is disclosed below:

Inflows OutflowsWithin 1 – 3 3 months 1 – 5 Within 1 – 3 3 months 1 – 5 1 monthmonths– 1 yearyears1 monthmonths– 1 yearyears$M$M$M$M$M$M$M$M31 Dec 181.9 248.7 61.9 - (180.7) (253.8) (63.5) -202331 Dec 260.6 190.6 5.9 - (250.5) (184.7) (5.9) -2022

Investment type 31 Dec 202331 Dec 2022$M$MCash and cash equivalents 23.1 21.7Undrawn balance on credit facility 150.0 285.0

Annual Report 2023

Tetragon Financial Group

131

Financial statements

Notes to the financial statements

The table below shows the sensitivity analysis for interest rates movement

on the investment portfolio held by the Fund.

31 December 2023 Fair Value Effects of +100bps change in Effects of – 100bps change interest rate on net assetsin interest rate on net assets $M$M$MU.S. CLOs 133.3 5.6 (5.6)TCI II 29.7 1.3 (1.3)TCI III 60.5 2.6 (2.6)TCI IV 20.7 1.0 (1.0)Acasta Global Fund 102.8 (1.6) 1.9Total 347.0 8.9 (8.6)31 December 2022U.S. CLOs 170.2 8.6 (8.6)TCI II 41.5 1.5 (0.9)TCI III 75.6 2.8 (2.4)TCI IV 15.6 1.2 (1.0)Acasta Global Fund 100.4 (2.2) 2.3Total 403.3 11.9 (10.6)

ii. Currency risk

The Fund invests in financial instruments 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 flows

of the Fund’s financial assets or financial liabilities

denominated 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.

Annual Report 2023

Tetragon Financial Group

132

31 December 2023 Net Monetary and Non-Forward foreign NetEffect of 5% Monetary Assets and Liabilities exchange hedging exposureon exchange $M$M $Mrate $MEUR 49.2 (44.9) 4.3 0.2GBP 817.1 (433.3) 383.8 19.2NOK 8.6 (9.2) (0.6) -Total 874.9 (487.4) 387.5 19.431 December 2022EUR 42.8 (45.4) (2.6) (0.1)GBP 750.5 (369.2) 381.3 19.1NOK 4.0 (6.0) (2.0) (0.1)Total 797.3 (420.6) 376.7 18.9

Exposure

At the reporting date, the carrying amount of

the Fund’s net financial assets and financial

liabilities held in individual foreign currencies,

expressed in USD were as follows.

The sensitivity analysis sets out the effect on the net

assets and profit for the year of reasonably possible

weakening of USD against EUR, GBP, and NOK by

5%. The analysis assumes that all other variables,

in particular interest rates, remain constant.

A strengthening of the USD against the above

currencies would have resulted in an equal but

opposite effect to the amounts shown above.

iii. Other price risk

‘Other price risk’ is the risk that the fair value of the

financial instrument will fluctuate as a result of changes

in market prices (other than those arising from interest

rate risk or currency risk), whether caused by factors

specific to an individual investment or its issuer or by

factors affecting all instruments traded in the market.

Annual Report 2023

Tetragon Financial Group

133

Financial statements

The Investment Manager reviews the concentrations

against the limits which are set and reviewed

periodically. The table below shows the impact of a

positive 1% movement in the price of these investments

on the NAV and profits of the Fund. A negative 1%

movement will have an equal and opposite effect.

31 Dec 31 Dec 20232022$M $MAsset classInvestment funds and vehicles 12.7 11.7TFG Asset Management 13.5 13.4CLO equity and debt tranches 1.4 1.7Unlisted stock 1.3 0.6Listed stock 1.8 1.6Corporate bonds 0.2 0.2Contracts for difference - -Forward foreign exchange contracts and options - 0.2

Notes to the financial statements

The Investment Manager manages the Fund’s

price risk and monitors its overall market positions

on a regular basis in accordance with the

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.

% of net assets % of net assets as at 31 Dec 2023as at 31 Dec 2022Asset classInvestment funds and vehicles 44.8% 42.3%TFG Asset Management 47.6% 48.7%CLO equity and debt tranches 4.8% 6.2%Unlisted stock 4.1% 2.3%Listed stock 6.7% 5.7%Corporate bonds 0.6% 0.6%Contracts for difference 0.0% 0.0%Forward foreign exchange contracts and options 0.1% 0.7%

Annual Report 2023

Tetragon Financial Group

134

The collateral is in the form of long- and short-listed

equities and derivatives, and cash. The Fund can

draw cash on the back of these securities from the

broker. During 2023, no charges (2022: $0.2 million)

were paid to the brokers in relation to this financing

arrangement and included in finance costs.

All other payables and accrued expenses are due within one year.

Other receivables are expected to be settled within 12 months.

31 Dec 202331 Dec 2022$M $MOther receivables 0.4 2.1Prepayments 4.3 4.0Total 4.7 6.1

31 Dec 202331 Dec 2022$M $MIncentive fee payable 16.3 26.5Other payables and accrued expenses 5.8 3.7Total 22.1 30.2

31 Dec 202331 Dec 2022$M $MAmounts due to brokers - 68.0Value of collateral posted with brokers 186.6 17 7.7

Note 7

Other Receivables and Prepayments

Note 8

Amounts Due to Brokers

Note 9

Other Payables and Accrued Expenses

Annual Report 2023

Tetragon Financial Group

135

Financial statements

Note 10

Credit Facility

The Fund has access to a US$ 400.0 million revolving

credit facility with maturity date in July 2032. 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 incurs interest at a rate

of 3M Term SOFR plus a spread of 3.40%.

31 Dec 202331 Dec 2022$M $MDrawn balance at start of the year 115.0 75.0Interest and fees expensed 24.0 10.1Interest and fees paid (24.0) (10.1)Drawdowns 285.0 215.0Repayments (150.0) (175.0)Drawn balance at the end of the year 250.0 115.0

Note 11

Incentive Fee

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 defined below) plus the

Hurdle (as defined 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.

The Hurdle for any Calculation Period will equal the

Reference NAV (as defined below) multiplied by the

Hurdle Rate (as defined below). The Hurdle Rate for any

Calculation Period, prior to and including 30 June 2023,

equals 3-month USD LIBOR determined as of 11:00 a.m.

London time on the first London business day of the then

current Calculation Period, plus the Hurdle Spread of

2.647858% per annum, multiplied by the actual number

of days in the Calculation Period divided by 365.

The Hurdle rate for any Calculation Period commencing

with the Calculation Period beginning on 1 July 2023,

equals Term SOFR as of 5:00 p.m. New York time on the

first day of the applicable Calculation Period on which

Term SOFR is published, plus the Hurdle Spread of

2.747858% per annum, multiplied by the actual number

of days in the Calculation Period, divided by 365.

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.

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

136

Optional Stock Dividend

The Fund has an Optional Stock Dividend Plan which

offers investors an opportunity to elect to receive any

declared dividend in the form of dividend shares at

a reference price determined by calculating the five-

day weighted average price post ex-dividend date.

During the year, a total dividend of $37.1 million (2022:

$38.8 million) was declared, of which $23.3 million was

paid out as a cash dividend (2022: $23.8 million), and

the remaining $13.8 million (2022: $15.0 million) was

reinvested under the Optional Stock Dividend Plan.

Treasury Shares and Share Repurchases

Treasury shares consist of non-voting 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.

During 2023, under the terms of “modified Dutch auction”,

the Fund accepted for purchase approximately 5.7 million

(2022: 6.7 million) non-voting shares at an aggregate cost

of $60.3 million (2022: $67.1 million), including applicable

fees and expenses of $0.3 million (2022: $0.3 million).

Share Transactions Voting Non-Voting Treasury Shares held in Shares No.Shares* Shares EscrowNo. MNo. MNo. MShares in issue at 1 January 2022 10 90.2 38.6 10.9Stock dividends - 1.6 (2.0) 0.4Issued through release of tranche - 1.0 - (1.0)of escrow sharesShares purchased during the year - (7.2) 7.2 -Shares in issue at 31 December 2022 10 85.6 43.8 10.3Stock dividends - 1.3 (1.8) 0.5Shares purchased during the year - (5.7) 5.7 -Shares in issue at 31 December 2023 10 81.2 47.7 10.8

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 2023

was $16.3 million (2022: $26.5 million). As at 31 December

2023, $16.3 million was outstanding (2022: $26.5 million).

Note 12

Share Capital

Authorised

The Fund has an authorised share capital of $1.0

million divided into 10 voting shares, having a

par value of $0.001 each and 999,999,990 non-

voting shares (which are the “shares” referred to

herein), having a par value of $0.001 each.

Voting shares

All of the Fund’s voting shares are issued at par and

are beneficially owned by the Voting Shareholder,

a non-U.S. affiliate of the Investment 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.

*Non-voting shares do not include the treasury shares, or the shares held in escrow.

Annual Report 2023

Tetragon Financial Group

137

Financial statements

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 ($M) Then-current share priceJanuary 2022 TFG Asset Management LP 515,331 4.4 $8.50November 2022 TFG Asset Management LP 41,246 0.4 $8.66

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

$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 five

years beyond the vesting dates. The shares underlying

these equity-based incentive programs may 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 2021 and 2023, further awards to certain senior

TFG Asset Management employees (excluding

the principals of the investment manager) totalling

approximately 3.4 million shares were made

covering vesting and release periods out to 2030.

In July 2019, TFG Asset Management entered into an

employment agreement with Reade Griffith, Director

of the Fund, that covers his services to TFG Asset

Management for the period through to 30 June 2024.

Mr. Griffith is currently the Chief Investment Officer of

TFG Asset Management as well as the Chief Investment

Officer of its European event-driven equities business,

Westbourne River Partners (in addition to other

roles). Under the terms of this agreement, Mr. Griffith

received $9.5 million in July 2019 and $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, covered by Mr.

Griffith’s employment 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.

As the Fund has the obligation to settle the shares, this

award is treated as equity-settled. The fair value of the

share award is determined using the share price at

grant date of $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.

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

138

Shares Vesting date 201920202021202220232024estimated$M$M$M$M$M$Mto vest (M)0.3 30 Jun 2021 0.9 1.9 0.9 - - -2.1 30 Jun 2024 2.6 5.3 5.3 5.3 5.3 2.61.575* 30 Jun 2024* 2.0 3.9 3.9 3.9 3.9 2.05.5 11.1 10.1 9.2 9.2 4.6

As at 31 December 2023, 10.8 million (2022: 10.3

million) shares related to TFG Asset Management’s

employee reward schemes are held in escrow.

These shares are eligible for stock dividends and

during the year, 0.5 million (2022: 0.4 million)

shares were allocated to this account.

On 1 January 2020, the Independent Directors were

awarded 24,490 shares each in Tetragon which vested

on 31 December 2022. 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. In

November 2022, a further 7,724 shares were awarded to

each Independent Director with one-third of the shares

vesting on 31 December 2023, 31 December 2024,

and 31 December 2025. The fair value of the award, as

determined by the relevant share price on grant date of

$9.71 per share, is $75,000 per Independent Director.

With respect to Director compensation from 1 January

2024, a further award of 10,122 shares were made to

each Independent Director with 5,061 shares vesting

on each of 31 December 2024 and 31 December

2025. The fair value of the awards as determined by

the relevant share price of $9.88 per share is $100,000

per Independent Director. The Independent Directors

have deferred the settlement of all the awards to

earlier of three to five years from the vesting date

and/or separation from service with the Fund.

The expense is recognised on a straight-line basis in

Consolidated Statement of Comprehensive Income over

the vesting period of the awards. A corresponding entry

is made to the share-based compensation reserve.

Share-Based Compensation Reserve

The balance, $71.0 million (2022: $61.7 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.

*As at 31 December 2023, it is estimated that 1.575 million (2022: 1.575

million) of the maximum 3.15 million shares will vest according to the

agreed-upon investment performance criteria at the end of year 5 with

no shares vesting in years 6 and 7. This estimate will be revised at each

reporting date and as a result, future expense may be different from the

expense presented in the table above.

Annual Report 2023

Tetragon Financial Group

139

Financial statements

31 Dec 202331 Dec 2022$M$MQuarter ended 31 December 2021 of $0.1100 per share - 9.9Quarter ended 31 March 2022 of $0.1100 per share - 9.6Quarter ended 30 June 2022 of $0.1100 per share - 9.6Quarter ended 30 September 2022 of $0.1100 per share - 9.7Quarter ended 31 December 2022 of $0.1100 per share 9.4 -Quarter ended 31 March 2023 of $0.1100 per share 9.2 -Quarter ended 30 June 2023 of $0.1100 per share 9.2 -Quarter ended 30 September 2023 of $0.1100 per share 9.3 -Total 37.1 38.8

31 Dec 202331 Dec 2022$M$MBGO investment vehicles 27.4 34.1Private equity funds 32.4 26.0Contingency Capital loan 1.6 2.1Contingency Capital fund 27. 9 42.6Tetragon Credit Income IV 6.1 11.0Total 95.4 115.8

Note 13

Dividends

Note 14

Contingencies and Commitments

The Fund has the following unfunded commitments:

Notes to the financial statements

The fourth quarter dividend of $0.1100 per share was approved by the Directors on 4 March 2024 and has not been included as a liability in these

financial statements.

Annual Report 2023

Tetragon Financial Group

140

Note 15

Related-party Transactions

Investment Manager

The Investment Manager is entitled to receive

management fees equal to 1.5% per annum

of the NAV of the Fund payable monthly in

advance prior to the deduction of any accrued

incentive fee. An incentive fee may be paid to the

Investment Manager as disclosed in Note 11.

Voting Shareholder

The Voting Shareholder is an affiliate of the Investment

Manager and holds all of the voting shares. As a

result of its ownership and the degree of control that it

exercises, the Voting Shareholder will be able to control

the appointment and removal of the Fund’s Directors

(subject to applicable law). Affiliates of the Voting

Shareholder also control the Investment Manager and,

accordingly, control the Fund’s business and affairs.

Directors

The remuneration for Directors shall be determined

by resolution of the Voting Shareholder. Each of the

Directors’ annual fee for the year ended 31 December

2023 was $125,000 (2022: $125,000) as compensation

for service as Directors of the Fund. From 1 January

2024, the annual fee has been increased to $150,000.

As at 31 December 2023, $15,625 (2022: $15,625) was

outstanding in relation to Directors’ remuneration.

The Directors have the option to elect to receive shares in

the Fund instead of the quarterly fee. With respect to the

year ended 31 December 2023, David O’Leary elected

to receive shares in lieu of half of his compensation

and received 6,199 shares (2022: 6,508). In addition

to the annual fee, the Fund has awarded its shares to

the Independent Directors as described in Note 12.

Reade Griffith and Paddy Dear have waived their

entitlement to a fee in respect of their services as

Directors. 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 have a contract with the Fund

providing for benefits upon termination of employment.

Reade Griffith, Paddy Dear, David O’Leary, Steven

Hart, and Deron Haley – all Directors of the Fund during

the year – maintained (directly or indirectly) interests

in shares of the Fund as at 31 December 2023, with

interests of 16,500,187, 5,676,316, 61,596, 31,889 and

31,889 shares respectively (2022: 16,010,947, 5,445,046,

51,458, 28,070 and 28,070 shares respectively).

Mr. Griffith has an employment 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.

TFG Asset Management UK LLP and TFG Asset

Management US LP (together the Service Providers)

provide operational, financial control, trading, marketing

and investor relations, legal, compliance, administrative,

payroll and employee benefits and other services to

the Investment Manager in exchange for fees payable

by the Investment Manager to the Service Providers.

One of these entities, TFG Asset Management

UK LLP, 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 $21.6 million (2022:

$21.3 million). As at 31 December 2023, the outstanding

balance due from the Investment Manager was $0.3

million (2022: $1.6 million). During the year ended 31

December 2022, the Fund purchased its own shares from

TFG Asset Management LP. See Note 12 for details.

Reade Griffith and Paddy Dear continue to hold

membership interests in TFG Asset Management

UK 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.

As part of the acquisition of TFG Asset Management in

2012, Mr. Griffith 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 TFG Asset Management UK LLP to the Fund.

Reade Griffith and Paddy Dear also hold membership

interests in Pace Cayman Holdco Limited or 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

in respect of Pace Holdco. Mr. Griffith 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.

Annual Report 2023

Tetragon Financial Group

141

Financial statements

Note 16

Earnings per Share

The calculation of the basic and diluted earnings

per share is based on the following data:

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.

Year endedYear ended31 Dec 202331 Dec 2022$M $M Earnings for the purposes of basic earnings per share 141.1 (32.1)being net profit attributable to shareholders for the yearWeighted average number of shares for the purposes 87. 3 90.8of basic earnings per shareEffect of dilutive potential sharesShare-based employee compensation – 4.9 4.1equity-based awardsWeighted average number of shares for the 92.2 94.9purposes of diluted earnings per share

Notes to the financial statements

Annual Report 2023

Tetragon Financial Group

142

Note 17

Segment Information

IFRS 8 Operating Segments requires a

“management approach”, under which segment

information is presented on the same basis as

that used for internal reporting purposes.

For management purposes, the Fund is organised into

one main operating segment – its investment portfolio

– which invests, either directly or via fund vehicles, in

a range of alternative asset classes including equity

securities, debt instruments, real estate, infrastructure,

loans and related derivatives. The Fund’s investment

activities are all determined by the Investment Manager

in accordance with the Fund’s investment objective.

All of the Fund’s activities are interrelated, and

each activity is dependent on the others.

Accordingly, all significant operating decisions are

based upon analysis of the Fund as one segment.

The financial results from this segment are equivalent

to the financial statements of the Fund as a whole.

The shares in issue are in US Dollars. The Fund’s

investment geographical exposure is as follows:

Region 31 Dec 2023 31 Dec 2022North America 42% 45%Europe 50% 48%Asia Pacific 7% 5%Latin America 1% 2%

Note 18

Subsequent Events

The Directors have evaluated the period up to 4 March

2024, which is the date that the financial statements

were approved. The Directors have concluded that

there are no material events that require disclosure

or adjustment to the financial statement.

Note 19

Approval of Financial Statements

The Directors approved and authorised for issue

the financial statements on 4 March 2024.

Annual Report 2023

Tetragon Financial Group

143

Financial statements