Tetragon Financial Group Limited: 2014 Annual Report

LONDON, Feb. 27, 2015 /PRNewswire/ -- Tetragon Financial Group Limited ("TFG" or the "Company") is a Guernsey closed-ended investment company traded on Euronext Amsterdam N.V. under the ticker symbol "TFG."⁽¹⁾  In this report, we provide an update on TFG's results of operations for the period ending 31 December 2014.

DEAR FELLOW SHAREHOLDERS,

2014 was another active year for TFG: the Company made significant achievements, especially at TFG Asset Management.  Whilst not immediately visible in the 2014 returns, we believe that this is particularly relevant, as the ongoing evolution of that business is creating value – which we hope will be demonstrated in returns over the coming years.  We will focus on some of the details of that value creation in this report.

We articulated the following goals for 2014:

1. To deliver 10-15% Return on Equity ("RoE") per annum to shareholders⁽²⁾: TFG returned RoE of 6.6% in 2014.  Given that global interest rates have been at historical lows, we would not have anticipated 2014 to be a peak RoE year, and whilst 6.6% is a positive figure, it is below our target range.  On the positive side, TFG Asset Management did well; GreenOak Real Estate's⁽³⁾ strong business development resulted in a material increase in the fair value of TFG's holding; and the Company's CLO 1.0 portfolio performed well.  On the negative side, certain European equity investments held directly on the balance sheet suffered losses for the year.
2. To reduce the proportion of TFG's capital that pays away fees to third-party managers:  The amount of capital that paid fees to external managers at 31 December 2014 was 33.6%, down from 53.4% at the end of 2013.⁽⁴⁾
3. To grow client Assets Under Management ("AUM") and fee income within TFG Asset Management:  At 31 December 2014, TFG's AUM was $11.1 billion, up from $9.2 billion at 2013 year-end.⁽⁵⁾  As of early 2015, AUM stands at $13.0 billion following the Equitix acquisition.  Of note, LCM⁽⁶⁾ launched three more new CLOs during the year; the GreenOak joint venture completed its fundraising for its U.S. Fund II ahead of its target, launched a new Spain fund, and began raising assets for its second Asian fund; and Polygon⁽⁷⁾ continued to raise assets for its funds.
4. To add further asset management businesses to the TFG Asset Management platform: The Polygon Distressed fund launched by TFG Asset Management in late 2013 has performed strongly in 2014 and is well-positioned to raise external capital.  TFG added two new businesses onto the platform in 2014: Equitix Holdings Limited ("Equitix"), an integrated core infrastructure asset management and primary project platform with AUM of approximately $2.0 billion (announced in October 2014 and closed on 2 February 2015); and Hawke's Point Resource Finance ("Hawke's Point"), a new start-up mining finance business established in the fourth quarter of 2014.

TFG Asset Management's importance to TFG's results continues to grow rapidly

TFG aims to achieve its RoE target⁽⁸⁾ through a combination of asset returns and asset management operating income.  We believe the latter is becoming more important to the overall returns.  To illustrate this, we have selected two charts.

Figure 1

Source: TFG

Figure 1 shows the percentage of TFG's assets managed by external managers.  In 2007, at the time of its IPO, all of TFG's assets were invested with external managers.  At year end 2014, 34% of TFG's assets were invested in external managers, with the majority of assets now being invested in funds or vehicles where TFG owns all or part of the asset manager (under the umbrella of TFG Asset Management).  TFG expects this trend to continue as TFG Asset Management further diversifies and expands.  Thus, the amount of fees paid away to external managers should also continue to decline.

In addition to saving fees that were previously paid away (TFG invests its own capital on a preferred-fee basis), TFG Asset Management allows TFG to receive fees from third parties, through its ownership of the asset management businesses.  Figure 2 shows the growth in earnings that have derived from TFG Asset Management over the last five years.

Figure 2*

Source: TFG.  *Please refer to the Financial Highlights section, Figure 22 for a definition of Net Economic Income.

TFG's RoE is the aggregate of both the asset returns and TFG Asset Management, and thus we believe this growth is important to the future RoE of the business as a whole.

We are highlighting this for three further reasons:

• First, NAV or NAV per share may not fully reflect value for asset management businesses (hence our earlier comment that we believe we have created value in 2014 that is not recognised in the 2014 RoE) and thus the value of TFG Asset Management may be greater than its NAV. 
• Second, it is the combination of returns on the asset and returns from owning the asset management company that is at the core of our business and a central tenet to our strategy.  The two streams are complementary as well as correlated.
• Third, we believe that looking at the business this way makes it easier for investors and analysts to analyse and anticipate returns.  Instead of being seen as a "balance sheet with some operating businesses" we can increasingly be seen as "operating businesses supported by a strong balance sheet." 

In light of these observations and developments, we present greater information on the asset management business than in previous reports, in order to provide greater clarity on the key drivers of TFG's performance.

Equitix

TFG completed the acquisition of Equitix Holdings Limited on 2 February 2015.  The business was purchased (85% by TFG and 15% by existing management) for an enterprise value of £159.5 million, and partially financed by a £60 million bank facility made to the Equitix business.

Whilst well established, Equitix and its asset class are young enough to have, in our view, strong potential for future growth.  TFG believes the current management team, together with support from TFG Asset Management, and potentially TFG's capital, is well positioned to continue to build the business.

Other Events

Also in 2014, the Company welcomed Frederic M. Hervouet as a non-executive independent director to the Board of Directors in July.  He comes to TFG with over 17 years' experience in financial markets and asset management, and we believe he is a valuable addition to the existing team of independent directors. 

In August 2014, the lawsuit filed by Omega Overseas Partners, Ltd. was dismissed in its entirety.  We are very pleased to have this lawsuit behind us.

We are also pleased that some of our asset managers have been recognised by industry awards.  Polygon hedge funds received three nominations for the 2014 EuroHedge Awards, with the Convertible Opportunity Fund winning the award for the Convertibles & Volatility category, the fund's third win in the last four years, and the Distressed Opportunities Fund nominated in the New Fund of the Year – Macro, Fixed Income, & Relative Value category.⁽⁹⁾  In addition, GreenOak won the 2014 Real Estate Debt Manager of the Year Award at the Professional Pensions Investment Awards (PPIA).⁽¹⁰⁾

Outlook

We have said in the past that TFG's sustainable return levels should fluctuate with LIBOR, and low LIBOR rates will likely mean lower RoE for TFG.  It is worth noting that, as the proportion of CLOs in TFG's portfolio reduces over time, the explicit LIBOR effect could diminish accordingly, although this point is not straightforward as many loans have LIBOR floors.  However, notwithstanding this potential reduction in TFG's explicit correlation to LIBOR, as with all financial assets, expected future returns always have an implicit correlation to "risk free" returns (i.e. government bond yields).  Thus, with government bond yields at multi-year lows we are commensurately cautious on expectations for investment returns in 2015.

Despite this, there are a few points that should differentiate TFG's outlook.  First, nearly all the assets and asset classes in which TFG invests and nearly all of TFG's asset managers are seeking to achieve "absolute" returns as opposed to returns "relative to a financial index"; and to the extent that they achieve this, TFG's aggregate returns should be less affected by fluctuations in major market indices.

Second, as highlighted earlier in this letter, TFG also receives the returns from the asset management businesses it owns.  All of these TFG Asset Management businesses have growth plans for 2015 and beyond, and the Company is working hard to deliver value in these businesses, which, to some degree, will be independent of day-to-day financial market volatility.

Lastly, in addition to the existing TFG Asset Management businesses, the Company continues to look for new asset classes and new asset managers to buy, partner with, or grow from scratch.  To date, this area of the business has successfully grown over the last few years, and we hope and expect continued progress in building value in this part of TFG.

With Regards,

The Board of Directors
27 February 2015

TETRAGON FINANCIAL GROUP OVERVIEW

Tetragon Financial Group Limited ("TFG") is a Guernsey closed-ended company traded on Euronext Amsterdam N.V. under the ticker symbol "TFG" that aims to provide stable returns to investors across various credit, equity, interest rate, inflation and real estate cycles.  TFG's investment objective is to generate distributable income and capital appreciation.

To achieve this objective, TFG's current investment strategy is:

• To identify attractive asset classes and investment strategies.
• To identify asset managers it believes to be superior.
• To use the market experience of the Investment Manager⁽¹¹⁾ to negotiate favourable terms for its investments.
• To seek to own all, or a portion, of asset management companies with which it invests in order to enhance the returns achieved on its capital.

Through this investment strategy, TFG has become a diversified alternative asset management business that owns majority and minority stakes in asset managers and uses its balance sheet to invest in, build and grow those businesses.

The Investment Manager seeks to identify asset classes that offer excess returns relative to their investment risk, or "intrinsic alpha."  It analyses the risk/reward, correlation, duration and liquidity characteristics of each potential capital use to gauge its attractiveness and incremental impact on the Company.

The Investment Manager then seeks to find high-quality managers who invest in these asset classes; selects or structures suitable investment vehicles that optimise risk-adjusted returns for TFG's capital; and seeks for TFG to own a share of the asset management company.  TFG aims to not only produce asset level returns, but also aims to enhance these returns with profits from owning asset management businesses that derive income from external investors.  Thus, TFG seeks to use its balance sheet to facilitate the growth of TFG Asset Management to help create value for itself and for TFG shareholders.

Certain considerations when evaluating the viability of a potential asset manager typically include: performance track records; reputation; regulatory requirements; infrastructure needs; and asset gathering capacity.  Potential profitability and scalability of the 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.  The Investment Manager looks to mitigate potential correlated risks across TFG Asset Management's investment managers by diversifying its exposure across asset classes, investment vehicles, durations, and investor types, among other factors.

TFG's asset management businesses can operate autonomously, or on the TFG Asset Management platform.  In either case, the objective is for them to benefit from an established infrastructure, which can assist in critical business management functions such as risk management, investor relations, financial control, technology, and compliance/legal matters, while maintaining entrepreneurial independence.

TFG's permanent capital base should increase the likelihood of success for this strategy of investing in alternative asset managers and the assets they manage, as its capital is available both for supporting operations of the management businesses and for co-investing, seeding or anchoring new investment funds of the managers.  In this sense, TFG is not only an investor, but also a business builder.

By early 2015, TFG's global alternative asset management businesses had approximately $13.0 billion of assets under management (pro forma).⁽¹²⁾  These businesses consisted of LCM Asset Management ("LCM"), the GreenOak Real Estate ("GreenOak") joint venture, Polygon Global Partners ("Polygon"), and Hawke's Point.  TFG finalised the acquisition of Equitix Holdings Limited ("Equitix") in February 2015 and Equitix's AUM is included in the above figure.

Figure 3⁽¹³⁾

[Figure 3]

The numbers below show annualised total shareholder return to 31 December 2014, defined as share price appreciation including dividends reinvested, for the last year, the last three years, the last five years, and since the Company's initial public offering in April 2007.

Figure 4

Source: Bloomberg TRA function.

LCM

• LCM is a specialist in below-investment grade U.S. senior secured leveraged loans.
• The business was established in 2001 and has offices in New York and London.
• TFG acquired 75% of LCM in 2010 and the remainder in 2012.
• AUM was approximately $5.3 billion at 31 December 2014.
• 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 often four 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.
• CLO managers typically earn a management fee of 0.50% of total assets, and a performance fee of 20% over a CLO equity IRR hurdle.
• Further information on LCM is available at www.lcmam.com.

GREENOAK

• GreenOak is a real estate-focused principal investing, lending and advisory firm that seeks to create long-term value for its investors and provide strategic advice to its clients.
• The business was established in 2010 as a joint venture with TFG and has a presence in New York, London, Tokyo, Los Angeles, Luxembourg, Madrid, Munich, and Seoul.
• TFG owns 23% of the business and carries it at fair value.
• AUM was approximately $4.4 billion at 31 December 2014.
• GreenOak currently has funds with investments focused on the United States, Japan, Spain, and the United Kingdom.
• Funds are typically structured with management fees of 2% and carried interest over a preferred return. The funds generally have a multi-year investment period, with a fund term of seven years after the final close, with possible extensions subject to certain approvals.
• Further information can on GreenOak is available at www.greenoakrealestate.com.

POLYGON

• Polygon manages open-ended hedge fund and private equity vehicles across a number of strategies.
• Polygon was established in 2002 and has offices in New York and London.
• TFG acquired 100% of the business in 2012.
• AUM was approximately $1.4 billion at 31 December 2014.
• Polygon manages funds focusing on the following strategies: European event-driven equities, global convertible bonds, mining company equities, and distressed securities. Polygon also manages a private equity vehicle comprised of certain illiquid investments. Each fund manager has its own CIO and investment team. Polygon's open-ended funds have capacity levels set which seek to optimize the investment opportunity. The liquidity of these products is calibrated to match the duration of the underlying investments.
• Fees in these products include a management fee that is generally between 1.5% and 2.0% and the typical performance fee or carried interest is 20%.
• Further information on Polygon is available at www.polygoninv.com.

EQUITIX

• Equitix is an integrated core infrastructure asset management and primary project platform.
• Equitix was established in 2007 and is based in London.
• TFG acquired 85% of the business in February 2015; over time, TFG's holding is expected to decline to approximately 74.8%. Management own the balance.
• AUM was approximately $2.0 billion at 31 December 2014.
• Since inception of the business, Equitix has raised over £1.2 billion across four UK-focused funds and managed accounts, investing in sectors including healthcare, education, utility infrastructure, social housing, renewable energy, transport, waste, and accommodation.
• Fees in this product include a management fee, and a carry interest fee that is over a hurdle currently set at 7.5%. The carried interest fee is typically 20% over the hurdle, and the management fee after the investment period is typically between 1.25% and 1.65%; during the investment period it has ranged between 0.95% and 2.0% on invested capital. The core funds also have an additional fee on committed capital of approximately 0.30%.
• Further information on Equitix is available at www.equitix.co.uk.

HAWKE'S POINT

• Hawke's Point Resource Finance seeks to provide capital to companies in the mining and resource sectors.
• TFG established Hawke's Point in Q4 2014 and owns 100% of the business.
• Hawke's Point is currently actively evaluating a range of mine financing opportunities.

Board of Directors

TFG's Board of Directors is comprised of six members, four of whom are non-executive independent directors who have significant experience in asset management and financial markets.  Biographies of the directors can be found in the appendix.

• Rupert Dorey (Independent Director)
• Frederic Hervouet (Independent Director)
• David Jeffreys (Independent Director)
• Byron Knief (Independent Director)
• Reade Griffith
• Paddy Dear

KEY METRICS

The Company focuses on four key metrics when assessing how value is being created for, and delivered to, TFG shareholders: Earnings, Net Asset Value ("NAV") per share, Dividends, and AUM.  Drivers for each of the metrics are discussed in the following sections of the report.

EARNINGS - RETURN ON EQUITY ("RoE")

RoE for the full year was 6.6%, following a stronger Q4 compared to Q3 2014

TFG generated Net Economic Income⁽¹⁴⁾ of $118.1 million in 2014, compared with $247.4 million in 2013, a fall of 52% year on year.

Figure 5

EARNINGS PER SHARE ("EPS")

TFG generated an Adjusted EPS of $1.24 in 2014

After adding $0.26 of EPS in Q4, TFG closed the year with an adjusted EPS⁽¹⁵⁾ of $1.24 in 2014 (2013: $2.52).

Figure 6

Further information on the drivers of the Company's performance are examined in more detail later in this report.

NAV PER SHARE

Pro Forma Fully Diluted NAV per Share ended the year at $17.05, up 4.2% on the year

• Total NAV for TFG rose to $1,818.5 million by the end of 2014 from $1,803.2 million at the end of 2013, which equated to Pro Forma Fully Diluted NAV per Share⁽¹⁶⁾ of $17.05, up from $16.82 in Q3 2014.
• TFG's Fully Diluted NAV per share grew by $0.69 or 4.2% in 2014 after distributing dividends of $0.61 per share during the year.

Figure 7

(i) Source: NAV per share based on TFG's financial statements as of the relevant quarter-end date.  Please note that the pro forma fully diluted NAV per share reported as of each quarter-end date excludes any shares held in treasury or in a subsidiary as of that date, but includes shares held in escrow which are expected to be released and incorporated into the U.S. GAAP NAV per Share over a five-year period and the number of shares corresponding to the applicable intrinsic value of the options issued to the Investment Manager at the time of the Company's IPO.  Please see Figure 22 on page 34 for more details.

DIVIDENDS PER SHARE ("DPS")

TFG declared quarterly dividends for 2014 totalling $0.6175 per Share, a 9.3% increase on 2013

• TFG declared a Q4 2014 DPS of $0.1575, up from $0.155 in Q3 2014. On a rolling 12-month basis, the dividend of $0.6175 per share represents a 9.3% increase over the prior year and equated to a dividend yield of 6.2% on the year-end share price of $9.90.
• TFG continues to pursue a progressive dividend policy with a target payout ratio of 30-50% of normalised earnings. The Q4 2014 DPS of $0.1575 brings the cumulative DPS since TFG's IPO to $3.443.

Figure 8

AUM GROWTH

TFG Asset Management grew its total AUM by 20% in 2014 as all business lines added fee-paying capital and ended the year with $11.1 billion of AUM

In addition, as a result of the acquisition of Equitix, TFG Asset Management will start 2015 with an additional $2.0 billion of AUM for a pro forma total of $13.0 billion, which is shown in Figure 9.

Figure 9⁽ⁱ⁾

(i) GreenOak AUM includes funds and advisory assets managed by GreenOak Real Estate, LP, a separately registered investment adviser under the U.S. Investment Advisers Act of 1940.  Polygon AUM includes Polygon Recovery Fund LP, Polygon Convertible Opportunity Master Fund, Polygon European Equity Opportunity Master Fund and associated managed account, Polygon Mining Opportunity Master Fund, Polygon Global Equities Master Fund and Polygon Distressed Opportunities Master Fund, as calculated by the applicable fund administrator.  Includes, where relevant, investments by Tetragon Financial Group Master Fund Limited.  All data is at 31 December 2014.

2014 YEAR IN REVIEW

RETURNS BY ASSET TYPE AND TFG ASSET MANAGEMENT

Figure 10

(i)   "U.S. CLO 1.0" refers to U.S. CLOs issued before or during 2008. "U.S. CLO 2.0" refers to U.S. CLOs issued after 2008.  The U.S. CLO 1.0 segment includes an investment in the BB tranche of a U.S. CLO 1.0 with fair value of $1.7 million.

(ii)   "Hedges" refers to interest rate swaption hedges put in place in relation to certain interest rate risks relating to the CLO portfolio.

(iii)  Assets characterised as "Other Equities, Credit, Convertibles, Distressed" consist of the fair value of, or capital committed to, investment assets held directly on the balance sheet.

(iv)  TFG Asset Management income figure is "Net Economic Income Before Tax."

Figure 10 above shows the returns by asset type for 2014 and the returns for TFG Asset Management.

• CLOs again made the most significant contribution to EPS, although the CLO 1.0 portfolio continues to amortise down and yields on CLO equity dropped again during 2014.
• Sales of some CLO equity positions generated realised gains in the first half of the year.
• Both real estate investments and investments in Polygon credit and convertible funds generated improved returns year-on-year. The equity-focused investments, both through Polygon funds and directly on the balance sheet, generated losses on the year after a strong year in 2013 and indeed a strong start to 2014.

TFG Asset Management had a positive year in 2014, generating net economic income before tax of $45.9 million, and as a contribution to EPS this represented a 129% increase year-on-year.  TFG Asset Management appears to have outperformed in the majority of its funds across asset classes; more details are provided later in this section.  Furthermore, all of TFG Asset Management's businesses raised net new AUM during the year and made progress in growing their businesses. 

Figure 11

(i)   Nets off cost of recovery on "Other fee income" against this cost contained in "Operating, employee, and administrative expenses."  Operating costs also removes amortisation expense from the U.S. GAAP segmental report.  Fee income includes amounts earned through third-party fee sharing arrangements.  It also includes any fees earned through fees paid on investments made by TFG in Polygon hedge funds or other investment vehicles.  TFG is able to invest at a preferred level of fees.

(ii)   Includes an unrealised gain generated by a recalibration of the fair value of the 23% stake held in GreenOak.  For accounting purposes TFG treats this stake as an investment carried at fair value rather than consolidating the underlying net assets and net income of this business.

Figure 11 shows the statement of operations for TFG Asset Management.  The asset managers are at different stages of evolution and therefore different stages of profitability.

Revenues:

LCM is a relatively mature and stable business, although it is the Company's opinion that its AUM can continue to grow.  2014 was a very strong year for LCM as many of the older vintage CLOs paid performance fees. 

GreenOak is still a young and growing business; and notwithstanding the fact that from a standing start in 2010 they have achieved over $4.0 billion of AUM, by the nature of their business, profits are mainly achieved when the carry is paid, which is normally several years after the initial investments are made. 

Within Polygon, each fund operates as a separate entity with different funds at different stages of evolution and profitability.  The Convertibles fund had a strong and profitable year and is keeping its capital constrained; European event-driven equities lost money in 2014 and thus did not earn any substantial performance fees; and the Distressed fund is early-stage so, whilst the fund had a good year of performance, TFG will not benefit from fee income until third-party assets are raised, which is planned for 2015. 

Hawke's Point is a start up business, and thus losses are likely in the early years as the business is established. 

Third-party fees from external managers made another contribution in 2014, albeit lower than in 2013.

Costs:

LCM had higher compensation costs associated with its profitability, as did the Polygon convertibles fund.

Start-up businesses, namely the Polygon distressed fund and Hawke's Point, had costs but no third-party revenues in 2014 as they are in the process of establishing their respective businesses.

Figure 12

EXPOSURE TO ASSET MANAGERS

Given that external managers now only manage 34% of Company assets, the table below has been created to show TFG's exposure to each of TFG Asset Management's underlying asset managers, both in terms of the NAV of TFG monies invested in that asset manager's various funds, and the NAV of the carrying value of TFG's ownership of the asset manager itself.  This illustrates a significant accounting difference between GreenOak, where TFG owns 23% and thus holds it on its balance sheet as an investment, and the other asset managers, where TFG owns a majority stake and thus consolidates the earnings and holds the asset at purchase price less amortisation.  This is important as it is the combined exposure that is relevant from a risk perspective.  In some cases, the NAV of the asset manager may not completely reflect the intrinsic value of the business: for example, under U.S. GAAP, the fair value of the LCM management contracts has amortised to zero since the business was purchased in 2010, whilst its AUM has more than doubled.

Figure 13

(i)   Equitix and cash figures are pro forma. 

(ii)   Adjusted net assets of such investments consists of the fair value of, or capital committed to, investment assets held directly on the balance sheet.

BUSINESS OVERVIEWS

The following pages outline the progress of each business during 2014 in turn.
All data is at 31 December 2014, unless otherwise stated.

LCM

 

 

 

GREENOAK

 

(i) Includes investment funds and advisory assets managed by GreenOak at 31 December 2014. TFG owns a 23% stake in GreenOak. AUM include all third-party interests and total projected capital investment costs.

During 2014, GreenOak completed its fundraising for its U.S. Fund II ahead of its target, launched a new Spain fund, continued to raise assets for its UK debt fund, and began raising assets for its second Japan fund. To date, GreenOak has raised approximately $2.6 billion of equity to invest in targeted strategies and assets.

 

(i) Source: GreenOak, as of 31 December 2014. Includes assets previously purchased by GreenOak but have been monetized.

POLYGON

 

 

 

(i) Includes AUM for Polygon Convertible Opportunity Master Fund, Polygon European Equity Opportunity Master Fund and associated managed account, Polygon Mining Opportunity Master Fund, Polygon Global Equities Master Fund and Polygon Distressed Opportunities Master Fund, as calculated by the applicable fund administrator at 31 December 2014.  Includes, where relevant, investments by Tetragon Financial Group Master Fund Limited.

Note:  The AUM noted above includes investments in the relevant strategies by TFG, other than in respect of the Private Equity Vehicle, where there is no such investment.  The Private Equity vehicle, at the time of the Polygon transaction and currently, remains a closed investment strategy.  P&L for the Private Equity Vehicle was -$19.5 million in 2014, of which FX movements accounted for $19.0 million.  Past performance or experience (actual or simulated) does not necessarily give a guide for the future and no representation is being made that the funds listed will or are likely to achieve profits or losses similar to those shown.  Past performance or experience (actual or simulated) does not necessarily give a guide for the future and no representation is being made that the funds listed will or are likely to achieve profits or losses similar to those shown.  All performance numbers provided herein reflects the actual net performance of the funds net of management and performance fees, as well as any commissions and direct expenses incurred by the funds, but before withholding taxes, and other indirect expenses.  All returns include the reinvestment of dividends, if any.  Differences in account size, timing of transactions and market conditions prevailing at the time of investment may lead to different results.  Differences in the methodology used to calculate performance may also lead to different performance results than those shown.

EQUITIX

 

(i) USD-GBP exchange rate at 31 December 2014. 

HAWKE'S POINT RESOURCE FINANCE

EXTERNAL MANAGERS

DIRECT BALANCE SHEET / CO-INVESTMENT OPPORTUNITIES

• Whilst TFG's Investment Manager does not make investment decisions at the various TFG Asset Management affiliated managers, it does sit on the various investment committees, and, in addition to investing in various funds, it also gets opportunities to make co-investments or additional investments. TFG may invest in opportunities directly from its balance sheet rather than through, for example, investments in other funds or collective investment schemes, when the Investment Manager sees an opportunity that fits its investment criteria, particularly where the structuring ability and the Company's long duration capital may give it a potential investment advantage. In some cases, TFG may also have exposure to the investment indirectly through fund investments.
• The net assets of this part of the portfolio at the end of 2014 were $78.8 million.⁽³⁷⁾ The vast majority of this is invested in publicly quoted equities.
• This segment of the portfolio experienced losses in 2014, primarily from European equity-related investments.

CASH

• As of the end of 2014, TFG continued to have no long-term debt. Investible Cash⁽³⁸⁾ grew over the year from approximately $218.8 million to $352.9 million, as the Company preserved cash in anticipation of funding certain investments, including the acquisition of Equitix.
• Cash flows from operations remained strong, with cash flows from operations reaching $290.4 million in 2014.

BALANCE SHEET COMPOSITION OVERVIEW

The Investment Manager seeks to invest TFG's capital in a manner consistent with the Company's goal of providing stable returns to its investors across various credit, equity, interest rate, inflation and real estate cycles.  Given the long duration of many of the Company's assets, TFG's asset allocation methodology is not a fully dynamic, continuous process of risk adjustment, but is rather an evolution and diversification of income streams.  The Investment Manager seeks to balance not just the risks and rewards of various asset classes, but also the risks and rewards of each asset manager that it owns.

2014 Net Asset Composition Review

Figures 20 and 21 illustrate the composition of TFG's net assets as of the end of 2014 and 2013.  During the course of 2014, the Company's asset composition evolved in a manner consistent with recent historical trends and its intended asset allocation strategy. 

• Key changes included continued reductions in the concentration of U.S. 1.0 and European CLOs, and growth in the share of U.S. 2.0 CLOs, real estate assets, and credit, convertible, and distressed investments.
• The decline in the share of U.S. 1.0 and European CLO transactions reflected post-reinvestment period structural de-leveraging of these transactions as well as selective early optional redemptions and outright secondary sales.
• Conversely, growth in the share of U.S. 2.0 CLOs, real estate assets, and credit, convertible, and distressed investments reflected additional investments into these asset classes (see details below).
• Additionally, the 2014 year-end Investible Cash balance grew both in absolute terms and as a percentage of total Net Assets. A significant share of this cash balance has been applied to the acquisition of Equitix post year-end.

Figure 20

(i)   Net Investible Cash consists of: (1) cash held directly by Tetragon Financial Group Master Fund Limited, (2) excess margin held by brokers associated with assets held directly by Tetragon Financial Group Master Fund Limited, and (3) cash held in certain designated accounts related to TFG's investments, which may only be used for designated purposes without incurring significant tax and transfer costs, net of "Other Net Assets."

(ii)   Assets characterised as "Equities" consist of the fair value of investments in Polygon-managed equity funds as well as the fair value of, or capital committed to, equity assets (as applicable) held directly on TFG's balance sheet.

Figure 21

[Figure 21]

(i)   Investible Cash consists of: (1) cash held directly by Tetragon Financial Group Master Fund Limited, (2) excess margin held by brokers associated with assets held directly by Tetragon Financial Group Master Fund Limited, and (3) cash held in certain designated accounts related to TFG's investments, which may only be used for designated purposes without incurring significant tax and transfer costs.

(ii)   Assets characterised as "Equities" consist of the fair value of investments in Polygon-managed equity funds as well as the fair value of, or capital committed to, equity assets (as applicable) held directly on TFG's balance sheet.

2014 Major New Investments

• U.S. 2.0 CLOs: In 2014, TFG acquired majority equity positions in three LCM-managed CLOs for a total cost of $84.3 million.
• Real estate: During 2014, TFG invested $77.0 million into GreenOak-managed real estate funds and vehicles primarily with exposure to commercial real estate in Tokyo, London, Spain, and gateway U.S. cities.
• Polygon credit, convertible and distressed funds: During 2014, TFG invested $45.0 million into Polygon-managed credit, convertible and distressed funds.
• Equitix: In October 2014, TFG announced a proposed acquisition of 85%⁽³⁹⁾ of Equitix Holdings Limited for a total enterprise value of £159.5 million, which was partially financed by a £60 million bank facility made to Equitix. The acquisition was completed on 2 February 2015.

2014 Major Asset Sales and Optional Redemptions

• U.S. 1.0 CLOs: During 2014, TFG sold eight U.S. CLO 1.0 transactions for total proceeds of $146.2 million. In addition, TFG exercised its optional call rights on five U.S 1.0 CLOs, generating unwind proceeds of $38.2 million to date. Certain of these transactions have not yet liquidated all of their underlying assets and the Company expects to receive additional proceeds from these redemptions in 2015.
• European CLOs: TFG sold one European CLO in the first half of 2014 for proceeds of €18.4 million. In addition, TFG initiated an optional early redemption of one European CLO late in 2014, which generated partial unwind proceeds of €4.7 million in January 2015 and which is expected to complete the unwind process during the remainder of the year.

TFG IN THE COMMUNITY

TFG believes that being a good citizen is an important part of doing business.  It aims to contribute positively to the communities around it by participating in the following initiatives:

• TFG Asset Management is the largest contributor to BACIT Limited (the Battle Against Cancer Investment Trust) a UK-based charitable investment vehicle.  BACIT only invests where the relevant investment manager provides investment capacity on a ''gross return'' basis, meaning that BACIT and its subsidiaries (the "Group") do not bear the impact of management or performance fees on its investments.  This may be achieved by the relevant manager or fund agreeing not to charge management or performance fees, by rebating or donating back to the Group any management or performance fees charged or otherwise arranging for the Group to be compensated so as effectively to increase its investment return on the relevant investment by the amount of any such fees.  BACIT does not charge its investors fees.  However, it donates 1% of NAV each year to charity (50% to The Institute of Cancer Research and 50% to The BACIT Foundation).  In addition, BACIT also intends to invest up to one per cent per annum of NAV to acquire interests in drug development and medical innovation projects undertaken by the Institute of Cancer Research or its subsidiaries in the field of cancer research and therapeutics which have the potential for commercial development and application.  Further information on this initiative can be found on BACIT's website, www.bacitltd.com.
• TFG Asset Management also supports Hedge Funds Care │Help for Children, a charity for the prevention and treatment of child abuse.  Hedge Funds Care, also known as Help For Children (HFC), is an international charity, supported largely by the hedge fund industry, whose sole mission is preventing and treating child abuse.  Its main goals are to raise as much money as possible to fund the programs that do the preventing and treating of child abuse; and to showcase the philanthropy of the hedge fund and finance industries.  Further information can be found at www.hfc.org.
• In addition, TFG Asset Management is a corporate supporter of the Royal Court Theatre, its neighbour in London.  The Royal Court bills itself as "the writer's theatre" and has a particular mission to develop and cultivate new theatrical works from established and budding playwrights.  Corporate sponsorships such as ours enable the Royal Court to support and develop exciting new plays.  Further information can be found at www.royalcourttheatre.com.

2014 FINANCIAL REVIEW

This section shows consolidated financial data incorporating TFG and its 100% subsidiary, Tetragon Financial Group Master Fund Limited (the "Master Fund"), and provides comparative data where applicable.⁽⁴⁰⁾

FINANCIAL HIGHLIGHTS

Figure 22

 

TFG uses, among others, the following metrics to understand the progress and performance of the business:

• Net Economic Income ($118.1 million): adds back to the U.S. GAAP net income ($95.1 million) the imputed 2014 share based employee compensation ($23.0 million), which is generated on an ongoing basis resulting from the 2012 Polygon transaction.
• Return on Equity (6.6%): Net Economic Income ($118.1 million) divided by Net Assets at the start of the year ($1,803.2 million).
• Pro Forma Fully Diluted Shares (106.6 million): adjusts the U.S. GAAP shares outstanding (95.9 million) for the impact of escrow shares used as consideration in the Polygon transaction and associated stock dividends (10.7 million).
• Adjusted EPS ($1.24): calculated as Net Economic Income ($118.1 million) divided by weighted-average U.S. GAAP shares⁽ⁱ⁾ during the period (95.4 million).
• Pro Forma Fully Diluted NAV per Share ($17.05): calculated as Net Assets ($1,818.5 million) divided by Pro Forma Fully Diluted shares (106.6 million).⁽⁴¹⁾

(i) The time-weighted average daily U.S. GAAP Shares outstanding during the applicable year.

EPS ANALYSIS 2013-2014

Figure 23

 

STATEMENT OF OPERATIONS

Figure 24

 

Performance Fee
A performance fee of $4.1 million was accrued in Q4 2014 in accordance with TFG's investment management agreement.  In 2014, the Investment Manager earned performance fees of $22.8 million.  The hurdle rate for the Q1 2015 incentive fee has been reset at 2.903458% (Q4 2014: 2.880458%) as per the process outlined in TFG's 2014 audited financial statements and in accordance with TFG's investment management agreement.  Please see TFG's website, www.tetragoninv.com, and the 2014 TFG audited financial statements for more details on the calculation of this fee.

STATEMENT OF OPERATIONS BY BUSINESS SEGMENT

Figure 25

 

BALANCE SHEET

Figure 26

 

STATEMENT OF CASH FLOWS

Figure 27

 

(i)   The 2014 figure reconciles to the U.S. GAAP Statement of Cash flows, "net cash provided by operating activities" figure of $321.8 million, adjusted for "dividends paid to Feeder in lieu of incentive fee liability" ($51.5 million).

NET ECONOMIC INCOME TO U.S. GAAP RECONCILIATION

Figure 28

 

TFG is primarily reporting earnings through a non-GAAP measurement called Net Economic Income.

The reconciliation on the table above shows the adjustment required to get from this measure of earnings to U.S. GAAP net income.

For the year ended 31 December 2014, the only adjusting line item is share-based employee compensation of $23.0 million.

Under ASC 805, TFG is recognizing the value of the shares given in consideration for the Polygon transaction as employee compensation over the period in which they are vesting.  This mechanic and future vesting schedule are described in more detail in the Master Fund audited financial statements for the year ended 31 December 2014.

APPENDICES

APPENDIX I

DIRECTORS' STATEMENTS

The Directors of TFG confirm that (i) this Annual Report constitutes the TFG management review for the year ended 31 December 2014 and contains a fair review of that period and (ii) the 2014 audited financial statements accompanying this Annual Report for TFG have been prepared in accordance with applicable laws and in conformity with U.S. generally accepted accounting principles.

APPENDIX II

FAIR VALUE DETERMINATION OF CLO EQUITY INVESTMENTS

In accordance with the valuation policies set forth on TFG's website, the values of TFG's CLO equity  investments  are  determined  using  a  third-party  cash  flow  modelling  tool.  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 TFG's 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, when determining the U.S. GAAP-compliant fair value of TFG's portfolio, the Company 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.

Forward-looking CLO equity cash flow modelling assumptions unchanged at the end of Q4 2014:

The Investment Manager reviews and, when appropriate, adjusts in consultation with TFG's audit committee the CLO equity investment portfolio's modelling assumptions as described above.  At the end of 2014, certain key assumptions relating to defaults, recoveries, prepayments and reinvestment prices were unchanged from the previous quarter.  This was the case across both U.S. and European deals.

These key average assumption variables include the modelling assumptions disclosed as a weighted average (by U.S. dollar amount) of the individual deal assumptions, aggregated by geography (i.e. U.S. and European).  Such weighted averages may change from month to month due to movements in the amortised costs of the deals, even without changes to the underlying assumptions.  Each individual deal's assumptions may differ from this geographical average and vary across the portfolio.

The reinvestment price, assumptions about reinvestment spread and reinvestment life are also input into the model to generate an effective spread over LIBOR.  Newer vintage CLOs may have a higher weighted-average   reinvestment   spread   over   LIBOR   or   shorter   reinvestment   life assumptions than older deals.  Across the entire CLO portfolio, for those deals still in their reinvestment periods, the reinvestment price assumption of 100% for U.S. deals and European deals  with  their  respective  assumed  weighted-average  reinvestment  spreads,  generates  an effective spread over LIBOR of approximately 294 bps on broadly syndicated U.S. loans.  All middle market loan deals and European Loan deals are through the end of their reinvestment periods.

Figure 29
U.S. CLOs modelling assumption

 

Figure 30
European CLOs modelling assumption

 

Application of Discount Rate to Projected CLO Equity Cash Flows: U.S. CLO 1.0 Equity – discount rates unchanged

In determining the applicable rates to use to discount projected cash flows, an analysis of observable risk premium data is undertaken.  For U.S. CLOs, observable risk premia such as BB and BBB CLO tranche spreads have been extremely stable at the current low levels.

For example, according to Citibank research, BB spreads were unchanged at 5.0% at the end of Q4 2014, compared with Q3 2014.

Market related information, such as broker research and bid lists, also tended to support the view that discount rates or yields had remained stable.  Taking into account, among other things, the factors outlined above, this discount rate has been maintained at 12%.

European CLO Equity – discount rates unchanged

According to Citibank research, at the end of Q4 2014, European CLO 1.0 BB spreads were 5.9%, which was broadly unchanged on the end of the previous quarter end.  At these levels, they are only 0.9% higher than the U.S. CLO 1.0 BB spreads (see above) and reflect a sustained compression of spreads between Europe and the U.S. over the last few quarters and maintaining a discount rate of 13% is consistent with this.  The observable range of European risk premia over the U.S. equivalent, among other factors, will continue to be monitored in coming quarters.

U.S. CLO 2.0 Equity – seasoned deals now discounted at a standard rate of 11%; other deals discounted using deal IRR

The applicable discount rate for newer vintage deals has historically been determined with reference to each deal's specific IRR which, in the absence of other consistently available observable data points, was deemed to be the most appropriate indication of the current risk premium.  In recent quarters, there has been an improved level of transparency and consistency of data available with respect to U.S. CLO 2.0 deals.  Taking this into account, effective Q4 2014, seasoned CLO 2.0 deals (more than 12 months post purchase) will be discounted using a single generic rate, mirroring the approach for the 1.0 deals.  Based on observable data for this sub-asset class as a whole, a rate of 11.0% has been determined to be the applicable rate.  The deals affected by this change had a weighted average IRR of 11.4% at the end of Q4 2014, so moving to a generic discount rate of 11% has increased fair value by $2.2 million.  For deals that were purchased within the last 12 months, the weighted average IRR was 13.1% at year-end.  The Company will continue to monitor observable data on these newer vintage transactions in the coming quarters.

APPENDIX III

ADDITIONAL CLO PORTFOLIO STATISTICS

Each individual deal's metrics used in the calculation of the figures below will differ from the overall averages and vary across the portfolio.

Figure 31

[Figure 31]

Figure 32

[Figure 32]

(i) The calculation of TFG's lagging 12-month corporate loan default rate does not include certain underlying investment collateral that was assigned a "Selective Default" rating by one or more of the applicable rating agencies.  Such Selected Defaults are included the S&P/LCD lagging 12-month U.S. institutional loan default rate discussed above. Furthermore, TFG's CLO equity and direct loan investment portfolio includes approximately 15.6% CLOs with primary exposure to European senior secured loans and such loans are included in the calculation of TFG's corporate default rate.
(ii) Source: S&P/LCD Quarterly Review as of the outlined quarter-end date.

Figure 33

CLO PORTFOLIO CREDIT QUALITY

 

CLO EQUITY PORTFOLIO DETAILS
AS OF 31 DECEMBER 2014

Figure 34

 

Figure 34 (continued)

 

Notes

(i)     Transactions are investments made on a particular investment date.  Multiple transactions may be associated with the same tranche of the same CLO deal.  Note that certain transactions may have been removed from the table above, as the remaining value of the assets of those CLOs is immaterial. TFG may continue to hold such transactions as of the date of this report.

(ii)    The USD investment cost reflects a USD-EUR exchange rate fixed at a single historical rate to avoid the impact of skewed weightings and FX volatility over time.  As such, the investment costs of European CLOs as shown in this table may not be comparable to the investments costs as shown in TFG's financial statements.

(iii)    Par weighted-average spread over LIBOR or EURIBOR (as appropriate) of the underlying loan assets in each CLO's portfolio.

(iv)   Notional weighted-average spread over LIBOR or EURIBOR (as appropriate) of the debt tranches issued by each CLO, as of the closing date of each transaction.

(v)    Notional weighted-average spread over LIBOR or EURIBOR (as appropriate) of the debt tranches issued by each CLO, as of the most recent trustee report date.

(vi)   The current junior-most O/C cushion is the excess (or deficit) of the junior-most O/C test ratio over the test requirement, as of the latest trustee report available as of the report date. Calculations are ignored and stated as "N/A" In certain cases where debt has been substantially, but not fully, repaid, resulting in a junior-most O/C test cushion that is not meaningful.

(vii)  The junior-most O/C cushion at close is the excess (or deficit) of the junior-most O/C test ratio over the test requirement that was expected on each deal's closing date.  Please note that two of TFG's investments are so called "par structures" which don't include a junior O/C test.  They have been marked by an "N/A" in the relevant junior-most O/C test columns.

(viii)  Calculated by annualising the change from the expected closing date junior-most O/C cushion to the current junior-most O/C cushion.

(ix)   Calculated from TFG's investment date.  Includes both historical cash flows received to-date and prospective cash flows expected to be received, based on TFG's base case modeling assumptions.

(x)    Inception to report date cash flow received on each transaction as a percentage of its original cost.

 

CLO EQUITY PORTFOLIO DETAILS (CONTINUED)
AS OF 31 DECEMBER 2014

Figure 35

[Figure 35]

(i)  The current junior-most O/C cushion is the excess (or deficit) of the junior-most O/C test ratio over the test requirement, as of the latest trustee report available as of the report date.  Calculations are stated as "N/A" In certain cases where debt has been substantially, but not fully, repaid, resulting in a junior-most O/C test cushion that is not meaningful.

APPENDIX IV

SHARE RECONCILIATION AND SHAREHOLDINGS

Figure 36⁽⁴²⁾

 

SHAREHOLDINGS

Persons affiliated with TFG maintain significant interests in TFG shares.  For example, as of 31 December 2014, the following persons own (directly or indirectly) interests in shares in TFG in the amounts set forth below:

*The amounts set forth above in regards to Messrs. Griffith and Dear include their interests with respect to the Escrow Shares^(42.i).  In addition to the foregoing, as of 31 December 2014, certain employees of subsidiaries of TFG and other affiliated persons own in the aggregate approximately 3.9 million shares, including interests with respect to the Escrow Shares^(42.i).

As previously disclosed, non-voting shares of TFG (together with accrued dividends and previously vested shares, (the "Vested Shares") that were issued pursuant to TFG's acquisition in October 2012 of TFG Asset Management L.P. (f/k/a Polygon Management L.P.) and certain of its affiliates (the "Polygon Transaction") have vested with certain persons (other than Messrs. Griffith and Dear) (such persons, the "Sellers"), all of whom are employees or partners ("Employees") of TFG-owned or affiliated entities, pursuant to the Polygon Transaction.

Certain of these Employees may from time to time enter into sales trading plans (each a, "Fixed Trading Plan") providing for the sale of Vested Shares in the market or may otherwise sell their Vested Shares subject to applicable compliance policies.  Applicable brokerage firms may be authorized to sell such TFG 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 TFG in accordance with its applicable compliance policies.

For additional information regarding the Polygon Transaction and the future vesting schedule for shares issued thereunder, see Note 22 to the 2014 Tetragon Financial Group Master Fund Limited audited financial statements, included in the TFG 2014 Annual Report.

Rule 10b5-1 provides a "safe harbor" that is designed to permit individuals to establish a pre-arranged plan to buy or sell company stock if, at the time such plan is adopted, the individuals are not in possession of material, nonpublic information. 

APPENDIX V
ADDITIONAL CORPORATE INFORMATION

DESCRIPTION OF BUSINESS

TFG (company number 43321) is a Guernsey company traded on Euronext Amsterdam N.V. under the ticker symbol "TFG" that aims to provide stable returns to investors across various credit, equity, interest rate, inflation, and real estate cycles.  The Company maintains an asset-management platform and an investment portfolio.  Both business segments cover a broad range of assets including bank loans, real estate, equities, credit, convertible bonds and infrastructure. 

TFG's asset-management platform ("TFG Asset Management") currently consists of Polygon Global Partners ("Polygon"), LCM Asset Management LLC ("LCM"), the GreenOak Real Estate L.P. ("GreenOak") joint venture, Hawke's Point and Equitix Holdings Limited ("Equitix").  TFG Asset Management L.P. is registered as an investment adviser under the U.S. Investment Advisers Act of 1940 and one of its investment management entities, Polygon Global Partners LLP, is authorised and regulated by the United Kingdom Financial Services Authority.  The Company is seeking to realise the benefits of building and integrating existing and potentially new asset management businesses into the platform.  In turn, the Company will continue to advance this effort throughout 2015, including by evaluating other asset managers.

TFG is registered in the public register of the Netherlands Authority for the Financial Markets ("AFM") under section 1:107 of the Netherlands Financial Markets Supervision Act ("FMSA") as a collective investment scheme from a designated country.

TFG's investment objective is to generate distributable income and capital appreciation.  To achieve this objective, Tetragon Financial Management LP (the "Investment Manager") seeks to identify opportunities, assets and asset classes it believes to be attractive and asset managers it believes to be superior based on their track record and expertise.  It also seeks to use the market experience of the Investment Manager to negotiate favourable transactions and terms for its investments in asset classes and in asset managers.  As part of this current investment strategy, the Investment Manager may employ hedging strategies and leverage in seeking to provide attractive returns while managing risk.

INVESTMENT MANAGEMENT

Tetragon Financial Management LP has been appointed the investment manager of TFG and the Master Fund pursuant to an investment management agreement dated 26 April 2007 (the "Investment Management Agreement").  The management and control of the Investment Manager is vested in its general partner, Tetragon Financial Management GP LLC (the "General Partner"), which is responsible for all actions of the Investment Manager.  The General Partner is directly or indirectly controlled by Reade Griffith, Alexander Jackson and Paddy Dear, who also control TFG's voting shareholder.  As the General Partner is responsible for all actions of the Investment Manager, any references to the Investment Manager in this Annual Report or in any of our disclosure shall be deemed to include a reference to the General Partner to the extent applicable.  Mr. Griffith acts as the authorized representative of the General Partner and the Investment Manager.

The Investment Manager is registered as an investment adviser under the U.S. Investment Advisers Act of 1940.

The investment committee of the Investment Manager (the "Investment Committee") currently consists of Jeffrey Herlyn, Michael Rosenberg, David Wishnow, Reade Griffith and Paddy Dear and is responsible for the investment management of the portfolio and the business.  The Investment Committee currently sets forth the investment strategy and approves each significant investment by the Master Fund.

The risk committee of the Investment Manager (the "Risk Committee") has the same composition as the Investment Committee.  The Risk Committee is currently responsible for the risk management of the portfolio and the business and performs active and regular oversight and risk monitoring.

Polygon Global Partners LLP and Polygon Global Partners LP (together, the "Service Providers") provide the Investment Manager with certain services in relation to the Company pursuant to a Services Agreement dated 30 April 2012.  The Service Providers have been indirect subsidiaries of TFG since 28 October 2012, when TFG acquired TFG Asset Management L.P. and certain of its affiliates.  The Service Providers also provide operating, infrastructure and administrative services to LCM and GreenOak and to various Polygon managers pursuant to applicable services agreements.  Polygon Global Partners LLP is authorised and regulated by the United Kingdom Financial Services Authority.

In recognition of the work performed by the Investment Manager in successfully arranging the global offering and the associated raising of new capital for the Company, TFG granted to the Investment Manager options (the "Investment Management Options") to purchase 12,545,330 of TFG's Non-Voting Shares (before the application of potential anti-dilution) at an exercise price per share equal to the IPO offer price (U.S. $10).  The Investment Management Options are fully vested and immediately exercisable on the date of admission to Euronext Amsterdam N.V. and will remain exercisable until the 10^th anniversary of that date (i.e., 26 April 2017).

For more information on TFG's investment manager, including a summary of key terms of the Investment Management Agreement, please refer to TFG's website at www.tetragoninv.com.

CLO BUY-AND-HOLD STRATEGY

The emphasis of the Investment Manager's current CLO investment strategy for the company has been on the selection and structuring of investment positions that are then intended to be held for returns based on cash flows and other revenues to provide a stable stream of income for the company.  The Investment Manager believes, for example, that its buy-and-hold strategy has allowed the company to take a long-term view on the expected cash flows from a CLO or other securitization vehicle.  Market developments, however, have and may continue to, impact the fair value of a securitization vehicle and/or its underlying assets.

VALUATION

State Street (Guernsey) Limited serves as the Company's independent administrator and values the investments of the Master Fund on an ongoing basis.  The NAV per Share is expected to fluctuate over time with the performance of TFG's investments.  The NAV of TFG and the Master Fund and the NAV per Share are determined as at the close of business on the last business day of each fiscal quarter for purposes of calculating incentive fees.  As TFG makes all of its investments through the Master Fund, TFG's NAV will equal the NAV of the Master Fund before any TFG specific liabilities, such as incentive fees.  The Company's valuation policies are set forth on the Company's website at www.tetragoninv.com.  The information on the "Valuation" page of the website supersedes any other disclosure by the Company with respect to such information.  Subject to the foregoing, additional information with respect to TFG's or the Master Fund's valuation policies may be found in each Company's annual audited financial statements accompanying this Annual Report.

CERTAIN CORPORATE AND LISTING BACKGROUND

Shares of TFG (the "Shares") are publicly traded solely on Euronext Amsterdam N.V. under the ticker symbol "TFG".  The Shares do not carry any voting rights other than limited voting rights in respect of variation of their class rights.  The voting shares of TFG are owned by Polygon Credit Holdings II Limited, which is a non-U.S. affiliate of the Investment Manager.  Polygon Credit Holdings II Limited is controlled by Reade Griffith, Alexander Jackson and Paddy Dear.  The voting shares are not entitled to receive dividends.

The current exchange listing, corporate structure and governance and investment management arrangements of TFG were established to help foster the achievement of the Company's investment objective.  In particular, at the time of its initial public offering and in consultation with the Company's underwriters and its legal and financial advisors, the Investment Manager concluded that Euronext Amsterdam N.V. is favourably suited to facilitate the Company's pursuit of its investment objective and to address relevant legal, regulatory, liquidity and other commercial considerations.  Similarly, TFG's corporate structure and governance were designed to seek to position the Company to best serve its investment objective as well as to address a variety of relevant considerations, including applicable legal requirements.  The expansion of TFG's asset management platform may help facilitate a potential listing in the United States over the longer-term, which TFG continues to explore.  U.S. markets tend to offer better research coverage, liquidity and valuations.

DIVIDENDS AND OTHER DISTRIBUTIONS

The Company has sought to continue to return value to its shareholders, including through dividends and share repurchases.

Dividends:
TFG continues to pursue a progressive dividend policy with a target payout ratio of 30-50% of normalised earnings, based on the long-term target RoE of 10-15%.⁽⁴³⁾

The Board of Directors will have the authority to declare dividend payments, based upon the recommendation of the Investment Manager, subject to the approval of the voting shares of TFG and adherence to applicable law, including the satisfaction of a solvency test as required pursuant to the Companies (Guernsey) Law, 2008, as amended.

The Investment Manager's recommendation with respect to the declaration of dividends (and other capital distributions) may be informed by a variety of considerations, including (i) the expected sustainability of the 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 and (iv) other potential uses of cash ranging from preservation of the Company's investments and financial position to other investment opportunities.

TFG has and may continue to also pay scrip dividends currently conducted through an optional dividend reinvestment program.  If the Board of Directors declares a cash dividend payable by TFG, they will also (in their capacity as directors of the Master Fund) declare an equal dividend per share payable concurrently by the Master Fund.

Share Repurchases:

TFG has and may also continue to engage in share repurchases in the market from time to time.  Such purchases may at appropriate price levels below NAV represent an attractive use of TFG's excess cash and an efficient means to return cash to Shareholders.  Any decision to engage in share repurchases will be made by the Investment Manager, upon consideration of relevant factors, and will be subject to, among other things, applicable law and profits at the time.  The Company also continues to explore other methods of improving the liquidity of its shares.

REPORTING

In accordance with applicable regulations under Dutch law, TFG publishes monthly statements on its website for the benefit of its investors containing the following information: the total value of the investments of the Master Fund; a general statement of the composition of the investments of the Master Fund; and the number of legal issued and outstanding shares of TFG.

In addition, in accordance with the requirements of Euronext Amsterdam N.V. and applicable regulations under Dutch law, TFG 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 U.S. GAAP and audited in accordance with international auditing standards as well as U.S. GAAS for regulatory purposes, if applicable.  TFG also provides interim management statements to investors in accordance with section 5:25e of the FMSA.  The NAV of TFG is available to investors on a monthly basis on the Company's website at www.tetragoninv.com.

APPENDIX VI

OTHER LEGAL MATTERS

On 18 June 2013, a shareholder derivative action was filed in United States District Court, Southern District of New York (the "Court"), against the six directors of the Company and the Master Fund, the Investment Manager, the principals of the Investment Manager and other affiliated entities by a purported shareholder of the Company (the "Action").  The Action made a series of allegations including with respect to the Acquisition (see Note 4 of the Master Fund 2014 Audited Financial Statements).  The Company, the Master Fund and their Boards of Directors believed that the Action was factually and legally without merit.  Accordingly, the defendants sought dismissal of the Action.  On 7 August 2014, in an opinion by Judge Richard J. Sullivan, the Court dismissed the Action in its entirety finding that the plaintiffs had "failed to state a federal claim".  The Court likewise refused to exercise its discretion to take cognizance of related claims asserted by the plaintiffs under Guernsey law.  There has been no appeal of that ruling and the time for appeal has expired.

APPENDIX VII

BOARD OF DIRECTORS

Rupert Dorey has over 30 years of experience in financial markets.  Mr. Dorey was at CSFB for 17 years from 1988 to 2005 where he specialised in credit related products, including derivative instruments where his expertise was principally in the areas of debt distribution, origination and trading, covering all types of debt from investment grade to high yield and distressed debt.  He held a number of senior positions at CSFB, including establishing CSFB's high yield debt distribution business in Europe, fixed income credit product coordinator for European offices and head of UK Credit and Rates Sales.  Since 2005, he has been acting in a Non-Executive Directorship capacity for a number of Hedge Funds, Private Equity & Infrastructure Funds, for both listed and unlisted vehicles.  Mr. Dorey is a former President of the Guernsey Chamber of Commerce and is a member of the Institute of Directors.

Frederic Hervouet has over 17 years of experience in financial markets and hedge funds, including in multi-asset class investment and risk management, structured products and structured finance.  Until September 2013, Mr. Hervouet was a Managing Director and Head of Commodity Derivatives Asia for BNP Paribas, where he was focused on trading, structuring and sales.  Previously, Mr. Hervouet was a Director and Global Head of Sales at Diapason Commodities Management SA, a partner at Systeia Capital Management, which is now part of Amundi Asset Management, and a Director and Head of European Market Distribution at BAREP Asset Management, the hedge fund management subsidiary of Société Générale.  Mr. Hervouet has a MSc in Applied Mathematics and International Finance and a Masters Degree (DESS) in Financial Markets, Commodities Markets and Risk Management from the Université Paris Dauphine.  He is a member of the Institute of Directors (IoD) and of the Guernsey Chamber of Commerce.  Mr. Hervouet who is based in Guernsey, is a Non-Executive, Independent Director.

David Jeffreys provides directorship services to a small number of fund groups. From 1993 until June 2004, Mr. Jeffreys was managing director of Abacus Fund Managers (Guernsey) Limited, where he was involved with private client trust arrangements, corporate administration, pension schemes and fund administration.  He was a board member of Abacus' principal administration operating companies and served on the boards of various administrated client companies.  Previously, Mr. Jeffreys worked as an auditor and accountant for 12 years with Coopers & Lybrand (and its predecessor firms).  He has an undergraduate degree in Economics and Accounting from the University of Bristol and is a fellow of the Institute of Chartered Accountants in England and Wales.  Mr. Jeffreys who is based in Guernsey, is a Non-Executive, Independent Director.

Byron Knief is Managing Director of Court Square Capital Advisor, LLC.  Since 1989, he has raised and invested over $3 billion of capital through a series of mezzanine and leveraged debt funds.  Prior to 1989, he ran a variety of businesses for Citigroup in the United States, Europe, Canada and Latin America.  Mr. Knief received an undergraduate degree from Northwestern University and an MBA from Columbia University.  He has served as a director on the boards of several public and private companies.  Current corporate board memberships include DavCo Restaurants, Inc., JAC Products, Inc. and Olameter, Inc.  He was also formerly a director of Polygon Global Opportunities Fund and certain of its affiliates.  Mr. Knief's charitable board memberships include The Milbank Memorial Fund and The Mountain Top Arboretum.  Mr. Knief who is based in the United States of America, is a Non-Executive, Independent Director.

Reade Griffith co-founded Polygon in 2002 and Tetragon Financial Management LP in 2005.  He 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.  He was a partner and senior managing director responsible for running the Global Event Driven arbitrage team of 25 people in Tokyo, London and Chicago for the firm.  He was previously with Baker, Nye, where he was an analyst working on an arbitrage and special situations portfolio.  Mr. Griffith holds a JD from Harvard Law School and an undergraduate degree in Economics from Harvard College.  He also served as an officer in the U.S. Marine Corps and left as a Captain following the 1991 Gulf War.  He is a Principal of Tetragon Financial Group Management LP.  Mr. Griffith, who is based in the United Kingdom, is an Internal Director.

Paddy Dear co-founded Polygon in 2002 and Tetragon Financial Management LP in 2005.  He was previously managing director and the global head of Hedge Fund Coverage for UBS Warburg Equities.  As global head of Hedge Fund Coverage and Chairman of the Global Hedge Fund Committee, he was responsible for the delivery of all of the bank's products and services to hedge fund clients globally.  He was on the board of UBS Netherlands, and was a member of both the European Equity Business Committee and the Extended Global Equity Business Committee.  Prior to this, Mr. Dear was co-head of European sales trading, execution, arbitrage sales and flow derivatives.  He had been with UBS since 1988, including six years in New York.  Mr. Dear was in equity sales at Prudential Bache before UBS.  Prior to moving into investment banking, Mr. Dear was a petroleum engineer with Marathon Oil Co.  He received a Bachelor of Science in Petroleum Engineering from Imperial College in London.  He is a Principal of Tetragon Financial Group Management LP.  Mr. Dear, who is based in the United Kingdom, is an Internal Director.

APPENDIX VIII

RISK FACTORS

An investment in TFG (together with the Master Fund, the "company") involves substantial risks and uncertainties.  Investors may review a more detailed description of these risks and uncertainties and others to which the company is subject on TFG's website at www.tetragoninv.com.

These risks and uncertainties include, among others, those listed below.

Risks Relating to the Company's Asset Management Platform

• As the company becomes more of a financial services firm that functions as a company that owns operating companies, it may face difficulties as it invests in asset classes in which it does not have substantial experience.
• The asset management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, investor liquidity and willingness to invest, fund terms (including fees), brand recognition and business reputation. Our asset management business competes with a number of private equity funds, specialized investment funds, hedge funds, funds of hedge funds and other sponsors managing pools of capital, as well as corporate buyers, traditional asset managers, commercial banks, investment banks and other financial institutions (including sovereign wealth funds).
• Asset management and financial advisory businesses are subject to extensive regulation, which affects the company's activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on the company's business. Recent legislative and regulatory changes in the United States, such as the Dodd-Frank Act, and the European Union, such as the Alternative Investment Fund Managers Directive and the European Market Infrastructure Regulation, could adversely affect the company's business.
• As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our activities. Certain of our funds may have overlapping investment objectives, including funds that have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. To the extent we fail to appropriately deal with any such conflicts, it could negatively impact our reputation and ability to raise additional funds or result in potential litigation against us.
• Poor performance of our managed investment funds and vehicles would cause a decline in our asset management revenue, income and cash flow, and could adversely affect our ability to raise capital for future investment funds.
• Our asset management business depends in part on our ability to raise capital from third-party clients. If we are unable to raise capital from third-party clients, we would be unable to collect management fees or deploy their capital into investments and potentially collect transaction fees or incentive fees, which would materially reduce our asset management revenue and cash flow.
• Misconduct of our employees or at our portfolio companies could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm.
• The performance of LCM and, in turn, the company's operating results, may be negatively influenced by various factors, including the (i) performance of LCM-managed CLOs, which in general are subject to the same risks as the company's CLO investments and are currently the primary source of LCM's revenues and (ii) ability of LCM to retain key personnel, the loss of whom may negatively affect LCM's ability to provide asset and collateral management services in a fashion, and of a quality, consistent with its prior practice. Furthermore, the company's ownership of LCM may negatively impact certain aspects of the company's CLO investment strategy and as a result the company's performance as well as the company's ability to diversify its investments across multiple asset managers.
• The performance of Polygon and, in turn, the company's operating results, may be negatively influenced by various factors, including the (i) performance of Polygon-managed funds, and (ii) ability of Polygon to retain key personnel, the loss of whom may negatively affect Polygon's ability to provide asset management services in a fashion, and of a quality, consistent with its prior practice.
• GreenOak has a limited operating history and it may be unable to successfully operate its business or achieve its investment objectives.
• The company established Hawke's Point as a new start-up mining finance business in the fourth quarter of 2014. There is no assurance that Hawke's Point will find appropriate financing and investment opportunities, will raise third-party funds necessary to pursue opportunities or generate fee income, or that its investments in such opportunities will generate profitable returns in the future.
• Equitix has a limited operating history and the company has controlled Equitix for a short period. The company acquired Equitix in February 2015. The company may not achieve the growth and performance that it expects to achieve by acquiring Equitix, which may adversely affect the company's results of operations.
• As the company invests in new asset classes and as its asset mix changes, its revenues and profitability could be reduced.

Risks Relating to the Company's Investment Portfolio

• Many of the company's investments are in the form of highly subordinated securities, which are susceptible to losses of up to 100% of the initial investments, including losses resulting from changes in the financial rating ascribed to, or changes in the market value or fair value of, the underlying assets of an investment.
• CLO vehicles, which make up a large portion of the company's current investment portfolio generally invest in fixed income securities rated lower than Baa by Moody's or lower than BBB by S&P (or, if not rated, of comparable quality) and may be regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and interest payments. Moreover, market developments (including, without limitation, deteriorating economic outlook, rising defaults and rating agency downgrades) may impact the fair value of an investment and/or its underlying assets, as we experienced during the period from the third quarter of 2008 through the first half of 2009.
• Defaults, their resulting losses and other losses on underlying assets (including bank loans) may have a negative impact on the value of the company's portfolio and cash flows received. In addition, bank loans may require substantial workout negotiations or restructuring in the event of a default or liquidation which could result in a substantial reduction in the interest rate and/or principal.
• The modeled cash flow predictions and assumptions used to calculate the IRR and fair value of each CLO investment may prove to be inaccurate and require adjustment. Factors affecting the accuracy of such modeled cash flow predictions include: (1) uncertainty in predicting future market values of certain distressed asset types, (2) the inability to accurately model collateral manager behaviour and (3) the divergence of assumed variables from realised levels over the period covered by the model.
• Bank loans are generally subject to liquidity risks and, consequently, there may be limited liquidity if a Securitization Vehicle is required to sell or otherwise dispose of such bank loans.
• Many of the company's investments in securitization vehicles are and will be illiquid and have values that are susceptible to changes in the ratings and market values of such vehicles' underlying assets, which may make it difficult for the company to sell such holdings.
• The company may be exposed to counterparty risk, which could make it difficult for the company to collect on the obligations represented by investments and result in significant losses.
• The performance of many of the company's investments may depend to a significant extent upon the performance of its asset managers (internal and external).
• The company is subject to concentration risk in its investment portfolio, which may increase the risk of an investment in TFG.
• The company's CLO investments are subject to (i) interest rate risk, which could cause the company's cash flow, fair value of its assets and operating results to decrease and (ii) currency risk, which could cause the value of the company's CLO investments in U.S. Dollars to decrease regardless of the inherent value of the underlying investments.
• The Investment Manager may not be successful in the utilization of hedging and risk management transactions, which could subject the company's investment portfolio to increased risk or lower returns on its investments and in turn cause a decrease in the fair value of the company's assets.
• The ability of securitization vehicles in which the company invests to sell assets and reinvest the proceeds may be restricted, which may reduce the yield from the company's investment in those Securitization Vehicles.
• In connection with the transaction with GreenOak, the company will invest its capital, directly and indirectly, in certain real estate investments. Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond the company's control.
• The real estate investments made, and to be made, by GreenOak are relatively difficult to sell quickly. Return of capital and realisation of gains, if any, from an investment generally will occur upon disposition or refinance of the underlying property. GreenOak may be unable to realise its investment objectives by sale, other disposition or refinance at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.
• The company invests a portion of its capital, directly and indirectly, in certain European-listed equity securities. Such investments are subject to various risks, many of which are beyond the company's control. Risks or events which could negatively affect such equity security investments include, but are not limited to: increased volatility in the market price and with respect to trading volume of the equity securities and increased uncertainty and government intervention in global financial markets.
• The company invests a portion of its capital, directly and indirectly, in certain mining-industry related equity securities, including through Hawke's Point. Such investments are subject to various risks, many of which are beyond the company's control. In addition to the risks discussed above associated with equity investments generally, risks or events which could negatively affect mining-industry related equity investments include, but are not limited to: exploration, developmental and operational risks.
• The company invests a portion of its capital, directly and indirectly, in certain convertible securities, mainly in the form of debt securities that can be exchanged for equity interests. Such investments are subject to various risks, many of which are beyond the company's control. Risks or events which could negatively affect convertible security investments include, but are not limited to: declining credit quality of issuers of the convertible securities and increased volatility in the market price and with respect to trading volume of the underlying equity into which the convertible securities are convertible.
• The company invests a portion of its capital, directly and indirectly, in certain distressed opportunities. Such investments are subject to various risks, many of which are beyond the company's control. Risks or events which could negatively affect distressed opportunity investments include, but are not limited to: difficulty in obtaining information as to the true condition of the issuer; potential for abrupt and erratic market movements and above average price volatility of the securities; and potential for litigation.
• The company may invest or intends to invest a portion of its capital, directly or indirectly, in infrastructure projects through Equitix, which the company acquired in February 2015. Investments in infrastructure projects are subject to specific risks including, but not limited to: (i) construction risks, (ii) subcontractor risks, (iii) financing risks, (iv) governmental risks and (v) long time horizons.
• Direct investments in asset managers will expose the company's business to additional risks, including: a decline in the price of securities, a more complex regulatory environment and competition.

Risks Relating to TFG and the Master Fund

• TFG's principal source of cash will be the investments that it makes through the Master Fund. TFG's ability to pay dividends will depend on it receiving distributions from the Master Fund.
• Shareholders will not be able to terminate the company's investment management agreement. None of the Investment Manager or the Service Providers owe fiduciary duties to the shareholders of TFG.
• The shares of TFG may continue to trade below NAV. The NAV per Share will change over time with the performance of the company's investments and will be determined by the company's valuation principles. The fees payable to the Investment Manager will be based on NAV and changes in NAV, which will not necessarily correlate to changes in the market value of the shares of TFG.
• TFG and the Master Fund have approved a very broad investment objective and the Investment Manager will have substantial discretion when making investment decisions. In addition, the Investment Manager's strategies may not achieve the company's investment objective.
• TFG is an investment company that has been registered under the laws of Guernsey. The rights of its Shareholders and the fiduciary duties that the Board of Directors owes to TFG and the Shareholders are governed by Guernsey law and TFG's articles of incorporation. As a result, the rights of the Shareholders and the fiduciary duties that are owed to them and TFG may differ in material respects from the rights and duties that would be applicable if TFG were organized under the laws of a different jurisdiction or if it were not permitted to vary such rights and duties in its articles of incorporation.
• The liability of the Investment Manager is limited under the company's arrangements with it, and the company 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.
• TFG is not, and does not intend to become, regulated as an investment company under the Investment Company Act and related rules.
• The company may become involved in litigation that adversely affects the company's business, investments and results of operations.
• No formal corporate governance code applies to TFG under Dutch law and TFG will not be bound to comply with the U.K. Combined Code other than as set forth in its articles of incorporation.

Risks Relating to the Investment Manager and Services Providers and Affiliated Relationships

• The company's organizational, ownership and investment structure may create significant conflicts of interest that may be resolved in a manner which is not always in the best interests of the company or the shareholders of TFG.
• The company's success depends on its continued relationship with the 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 the company's business, investments and results of operations.
• The Investment Manager's compensation structure may encourage the Investment Manager to invest in high-risk investments.
• The liability of the Investment Manager to the company is limited and the company's indemnity of the Investment Manager may lead the Investment Manager to assume greater risks when making investment related decisions than it otherwise would.
• The Investment Manager may devote time and commitment to other activities.

Risks Relating to Taxation

• U.S. investors may suffer adverse tax consequences because TFG will be treated as a passive foreign investment company (a "PFIC") for U.S. federal income tax purposes.
• Investors may suffer adverse tax consequences if TFG or the Master Fund is treated as resident in the U.K. or the U.S. for tax purposes.

Risks Relating to the Shares

• Shares of TFG (the "Shares") do not carry any voting rights other than limited voting rights in respect of variation of their class rights. The holder of the voting shares of TFG will be able to control the composition of the Board of Directors and exercise extensive influence over TFG's and the Master Fund's business and affairs. Additional information on the organizational structure and corporate governance of TFG may be found on TFG's website at www.tetragoninv.com.
• The Shares are subject to legal and other restrictions on resale and the NYSE Euronext in Amsterdam trading market is less liquid than other major exchanges, which could affect the price of the Shares. TFG may decide in the future to list the Shares on a stock exchange other than NYSE Euronext in Amsterdam. There can be no assurance that an active trading market would develop on such an exchange.
• There are additional restrictions on the resale of 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), 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. These restrictions may adversely affect overall liquidity of the Shares.
• Your ability to invest in the Shares or to transfer any Shares that you hold may be limited by restrictions imposed by ERISA regulations, TFG's articles of incorporation and other tax considerations.
• The company may issue additional securities that dilute existing holders of Shares, including as a result of the exercise of the Investment Management Options.

The foregoing is not a comprehensive list of the risks and uncertainties to which the company is subject.

 

SHAREHOLDER INFORMATION

ENDNOTES

TFG is not responsible for the contents of any third-party website noted in this Annual Report.

 

 

An investment in TFG 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 TFG.

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 TFG have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act"), 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.  TFG does not intend to register any portion of its securities in the United States or to conduct a public offer of securities in the United States.  In addition, TFG 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.  TFG is registered in the public register  of  the  Netherlands Authority  for  the  Financial Markets  under  Section  1:107  of  the FMSA as a collective investment scheme from a designated country.  This release constitutes regulated information ("gereglementeerde informative") within the meaning of Section 1:1 of the FMSA.

Please refer to the Company website, www.tetragoninv.com, for the Tetragon Financial Group Limited 2014 Audited Financial Statements and Tetragon Financial Group Master Fund Limited 2014 Audited Consolidated Financial Statements.

 

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SOURCE Tetragon Financial Group Limited