Valuation

The administrator for Tetragon, TMF Group Fund Services (Guernsey) Limited, values the investments of Tetragon on an ongoing basis. The NAV per share is expected to fluctuate over time with the performance of Tetragon’s investments. The NAV of Tetragon and the NAV per share are determined as at the close of business on the last business day of each fiscal quarter (Valuation Day) for purposes of calculating incentive fees.

Valuation principles

The values of residual tranches of CLO products are determined by reference to a third-party valuation model that is used by both Tetragon’s investment manager and its administrator. The model contains characteristics of the CLO product’s structure, including current assets and liabilities and inception-to-date performance, based upon information derived by a specialist firm from the trustee reports. Key model inputs include asset spreads, expected defaults and expected recovery rates for the relevant category of underlying collateral held in the CLO product. These inputs are derived by reference to a variety of market sources, which are used by both Tetragon’s investment manager and the administrator. The model is used to project future projected cash flows which are discounted back to arrive at a fair value.

Other non-equity investments (i.e., rated tranches) in CLO products are valued on the basis of the latest available valuation provided by an independent valuation agent.

Any security which is listed or quoted on any securities exchange or similar electronic system and regularly traded thereon is valued at its last traded price on the relevant Valuation Day or, if no trades occurred on such day, at the closing bid price if held long by Tetragon and at the closing offer price if sold short by Tetragon, as at the relevant Valuation Day, and as adjusted in such manner as the Board of Directors, in its sole discretion, thinks fit, having regard to the fair value of the security, and where prices are available on more than one exchange or system for a particular security the price is the last traded price or closing bid or offer price, as the case may be, on the exchange which constitutes the main market for such security or the one which the Board of Directors in its sole discretion determines provides the fairest criteria in ascribing a value to such security.

Any security which is not listed or quoted on any securities exchange or similar electronic system or if, being so listed or quoted, is not regularly traded thereon or in respect of which no prices as described above are available, is valued by the Board of Directors in good faith having regard to its cost price, the price at which any recent transaction in the security may have been effected, the size of the holding having regard to the total amount of such security in issue, and such other factors as the Board of Directors in its sole discretion deems relevant in considering a positive or negative adjustment to the valuation.

Investments, other than securities, which are dealt in or traded through a clearing firm or an exchange or through a financial institution are valued by reference to the most recent official settlement price quoted by that clearing house, exchange or financial institution. If there is no such price, then the average will be taken between the lowest offer price and the highest bid price at the close of business on any market on which such investments are or can be dealt in or traded, provided that where such investments are dealt in or traded on more than one market, the Board of Directors may determine at its discretion which market shall prevail.

Investments, other than securities, which are not dealt in or traded through a clearing firm or an exchange or through a financial institution are valued on the basis of the latest available valuation provided by the relevant counterparty.

Deposits are valued at their cost plus accrued interest.

Any value (whether an investment or cash) denominated other than in U.S. Dollars is converted into U.S. Dollars at the rate (whether official or otherwise) which the Board of Directors in its absolute discretion, deems applicable as at the close of business on the relevant Valuation Day, having regard, among other things, to any premium or discount that it considers may be relevant and to costs of exchange.

The Board of Directors or the administrator, as the investment manager’s appointed designee, may, at its discretion, permit any other method of valuation to be used if it considers that such method of valuation better reflects value and is in accordance with good accounting practice. To the extent feasible, expenses, fees and liabilities are accrued in accordance with IFRS. Reserves (whether or not in accordance with IFRS) may be taken for estimated or accrued expenses, liabilities or contingencies. Where there is any conflict between IFRS and the valuation principles set out in Tetragon’s Memorandum and Articles of Incorporation and herein in relation to the calculation of NAV, the latter principles shall take precedence. However, IFRS will take precedence for the purposes of financial reporting. Fully Diluted NAV per share will be made available to shareholders on a monthly basis through Tetragon’s website.

The information contained in this webpage supersedes any other disclosure by Tetragon with respect to such information. Subject to the foregoing, additional information with respect to Tetragon’s valuation policies may be found in the company’s annual audited financial statements.