Tetragon Financial Group Limited
("TFG") and Tetragon Financial Group Master Fund Limited (the
"Master Fund" and, together with TFG, the "Fund") Announce Change
to Accounting and Valuation Principles
LONDON, Dec. 23, 2016 -- The Fund today announced that,
effective for the accounting periods ending on and after
December 31, 2016, the Fund (i) will
adopt the International Financial Reporting Standards ("IFRS") as
the accounting standard for preparing and reporting the Fund's
accounts (the "Accounting Change") and (ii) will calculate the Net
Asset Value of the Fund on the basis of IFRS for purposes of
determining the fees payable to Tetragon Financial Management LP
(the "Manager") under the Investment Management Agreement.
While we expect the Fair Value Net Asset Value (as reported by the
Fund since the third quarter of 2015) to be substantially the same
as the Net Asset Value of the Fund in accordance with IFRS, the
Accounting Change will result in an increase in the Net Asset Value
as of December 31, 2016 of certain
TFG Asset Management LP ("TFG AM") businesses, which in turn will
result in an increase in the reported Net Asset Value of the Fund
as of December 31, 2016 (as
determined in accordance with IFRS, when compared to such Net Asset
Value as determined in accordance with United States generally accepted accounting
principles ("US GAAP")). An incentive fee will be payable to the
Manager under the Investment Management Agreement with respect to
such increase as a result of the Net Asset Value as of December 31, 2016 being determined in accordance
with IFRS. While the amount of this incentive fee will depend
on the fair value of these TFG AM businesses as of December 31, 2016, if the Net Asset Value as of
September 30, 2016 had been
determined in accordance with IFRS, the resulting incentive fee
would have been equal to $27.1
million, which imputed performance fee was included in the
reconciliation between US GAAP and fair value performance metrics
in our Performance Report for the Period Ended 30 September
2016. The Manager has agreed to accept payment of any such
incentive fee in the form of TFG Shares, which will be held in
escrow until December 31, 2021 or, at
the Manager's option, the earlier occurrence of a realization event
with respect to these TFG AM business, and subject to a "clawback"
mechanism should the Net Asset Value of the TFG AM businesses
decline at the end of the escrow period.
Historically, the Fund has prepared and reported the Fund's
accounts under US GAAP, which has resulted in certain investments
of the Fund, including these TFG AM businesses, being consolidated
while the other Fund investments were held at their fair
value. For the period ended September
30, 2015 and as announced in the Performance Report for such
period, the Fund, to address this inconsistent treatment of these
TFG AM businesses under US GAAP, began reporting its key
performance metrics on a fair value basis that adjusts US GAAP
metrics to include the fair value of these TFG AM businesses that
are currently consolidated under US GAAP and take into account the
amount of any imputed incentive fees that would have been payable
to the Manager with respect to the resulting increase in Net Asset
Value.
The Fund announced its consideration of the Accounting Change in
its Performance Report for the period ended September 30, 2016 following a determination by
the Manager, in consultation with the Fund's auditors and non-audit
accounting advisors, that, based on the relative growth of the
Fund's investments in the TFG AM businesses, the Fund may be unable
to continue satisfying the requirements for "Investment Company"
reporting under US GAAP, which would result in significantly more
investments being consolidated under US GAAP and, over time, a
greater disparity between the US GAAP and fair value performance
metrics. The Fund's auditors and non-audit accounting
advisors have advised the Manager that, under IFRS, the Fund would
expect to account for all of its investments at fair value, such
that the disparity between IFRS and fair value performance metrics
would be significantly less than the expected disparity between US
GAAP and fair value performance metrics for future periods, thus
allowing for more consistent treatment of the Fund's performance
metrics across the business and over time.
The Accounting Change will initially be reflected in the 2016
Annual Report and will require restatement of certain reports for
prior periods to IFRS. The Accounting Change may result in
differences in the presentation and basis of reporting between the
Fund's reporting for future periods under IFRS and its reporting
for prior periods under US GAAP, limiting the comparability of
reports for these periods.
About TFG:
TFG is a Guernsey closed-ended investment company traded on
Euronext Amsterdam N.V. under the ticker symbol "TFG.NA" and on the
Specialist Fund Segment of the main market of the London Stock
Exchange plc under the ticker symbol "TFG.LN". TFG aims to provide
stable returns to investors across various credit, equity, interest
rate, inflation and real estate cycles. TFG's investment portfolio
comprises a broad range of assets, including a diversified
alternative asset-management business (TFG Asset Management), and
covers bank loans, real estate, equities, credit, convertible bonds
and infrastructure.
Contacts
For Investor Relations
Inquiries: |
For Press Inquiries: |
David Wishnow/Greg Wadsworth
ir@tetragoninv.com |
Prosek Partners
Andy Merrill and Ryan FitzGibbon
+1 212 279 3115 ext. 216 and ext. 234
Pro-tetragon@prosek.com |
This release
contains inside information within the meaning of Article 7(1) of
the EU Market Abuse Regulation.
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, 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 Financial Markets Supervision Act as a collective investment
scheme from a designated country.
SOURCE: Tetragon Financial Group Limited