Tetragon Financial : Halfjaarlijkse financiële verslaggeving

2023

Half-Yearly Report

Tetragon Financial Group

Contents

1. 2023 half-yearly snapshot

1. Letter to our shareholders

1. Manager's review

1. Investment review

1. Financial review

1. Other information

46 Unaudited condensed financial statements for the six months ended 30 June 2023

2	Tetragon Financial Group

Diversified.

Alternative.

Investors.

Searching for intrinsic alpha -

from returns in excess to risks taken.

At Tetragon, we seek to provide stable returns to investors across economic cycles and market conditions.

Tetragon is a Guernsey closed-ended investment company.

Its non-voting shares are listed on Euronext in Amsterdam(1) and also traded on the Specialist Fund Segment of the Main Market

of the London Stock Exchange.

To view company updates visit:

www.tetragoninv.com

Tetragon's shares are subject to restrictions on ownership by U.S. persons and are not intended for European retail investors. These are described on our website. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long term in a capital appreciation and income-producing investment. These investors should have experience in investing in financial markets and collective investment undertakings and be capable themselves of evaluating the merits and risks of Tetragon shares and they should have sufficient resources both to invest in potentially illiquid securities and to be able to bear any losses (which may equal the whole amount invested) that may result from the investment.

1 Euronext in Amsterdam is a regulated market of Euronext Amsterdam

(Euronext Amsterdam). Tetragon's 'Home Member State' for the purposes of the EU Transparency Directive (Directive 2004/109/EC) is the Netherlands.

2023 Half-Yearly Report

3

Distributable income. Capital appreciation.

Net asset value(1)

$2.8BN

30 June 2023

Ownership(2)

37.5%

Principal & Employee Ownership at 30 June 2023

NAV per share total return(3)

6.4%

One Year to 30 June 2023

9.0%

5 Years Annualised

10.1%

10 Years Annualised

10.5%

Since IPO Annualised

406%

Since IPO

Investment returns / return on equity(4)

1.7%

2023 YTD RoE

10-15%

RoE Target

11.4%

Annual Average Since IPO

Dividends

$0.11

Q2 2023 Dividend

$0.22

2023 Dividends

4.5%

Dividend Yield(5)

(9.1)%

Dividend 5-Year CAGR(6)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Please see important notes on page 6.

4	Tetragon Financial Group

H1 2023 Snapshot

Tetragon aims to provide stable returns to investors across various credit, equity, interest rate, inflation and real estate cycles.

Figure 1

Tetragon Financial Group - Performance summary

	30 June 2023	31 December 2022	Change
Net Assets	$2,768.9m	$2,758.5m	$10.4m
Fully Diluted NAV Per Share	$29.97	$29.69	$0.28
Share Price(7)	$9.86	$9.62	$0.24

Dividend (last 12 months)	$0.44	$0.44	$0.00
Dividend Yield	4.5%	4.6%
Ongoing Charges(8)	1.74%	1.74%
Principal & Employee Ownership	37.5%	37.3%
	H1 2023	H1 2022
Investment Returns/Return on Equity(4)	1.7%	(5.0%)
NAV Per Share Total Return(3)	1.7%	(3.5%)
Share Price Total Return(9)	4.7%	25.2%
Tetragon Hurdle: LIBOR +2.65%(10)	3.9%	1.6%
MSCI ACWI Index Total Return(11)	14.3%	(20.0%)
FTSE All-Share Index Total Return(11)	2.5%	(4.6%)

Figure 2

Tetragon's NAV per share total return and share price since IPO to 30 June 2023

2023 Half-Yearly Report

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Notes

1. The value of Tetragon's assets, less any liabilities, as at 30 June 2023.
   Source: Tetragon.
2. Shareholdings at 30 June 2023 of the principals of Tetragon's investment manager and employees of TFG Asset Management, including all deferred compensation arrangements (other than with respect to shares that are subject to performance criteria). Please see
   Figure 22 for more details of these arrangements.

• NAV Per Share Total Return to 30 June 2023, for the last year, the last five years, the last ten years, and since Tetragon's initial public offering in April 2007. NAV Per Share Total Return is determined in accordance with the "NAV total return performance" calculation as set forth on the Association of Investment
  Companies (AIC) website. Tetragon's NAV Per Share Total Return is determined for any period by calculating, as a percentage return on the Fully Diluted NAV per Share (NAV per share) at the start of such period, (i) the change in NAV per share over such period, plus (ii) the aggregate amount of any dividends per share paid during such period, with any dividend deemed reinvested at the NAV per share at the month end date closest to the applicable ex-dividend date (i.e. so that the amount of any dividend is increased or decreased by the same percentage increase or decrease
  in NAV per share from such ex- dividend date through to the end of the applicable period). NAV per share is calculated as Net Assets divided by Fully Diluted Shares Outstanding. Please refer to Figure
  12 for further details.

• Tetragon seeks to deliver 10-
  15% Return on Equity (RoE) per annum to shareholders. Please refer to page 31 for the calculation of RoE. Tetragon's returns will most likely fluctuate with LIBOR or an equivalent risk-freeshort-term rate which directly flows through

some of Tetragon's investments and therefore in high-LIBOR environments, Tetragon should achieve higher sustainable returns; in low-LIBOR environments,Tetragon should achieve lower sustainable returns. Please note that (i) from 31 December 2021, LIBOR was replaced by an appropriate alternate rate as advised by ISDA in the IBOR Fallbacks Protocol, although certain LIBOR settings continued to be calculated and published using panel bank submissions until 30 June 2023, and (ii) LIBOR is longer available from 1 July 2023, and

the market generally is replacing LIBOR with the Secured Overnight Funding Rate (SOFR), which tracks the interest rate on borrowings collateralised by U.S. Treasury securities.

• The dividend yield represents the last four quarterly dividends divided by the TFG NA share price at 30 June 2023. The latest declared dividend is included in the calculation.

• The five-year Compound Annual Growth Rate (CAGR) figure
  is at 30 June 2023. The latest declared dividend is included in the calculation.

• Based on TFG.NA.

• Annual calculation as at 31 December 2022. The ongoing charges figure is calculated as defined by the AIC, and comprises all direct recurring expenses to Tetragon expressed as a percentage of average Net Assets, including the annual management fee of 1.5%.

• H1 2023 total shareholder return, defined as share price appreciation including dividends reinvested, as sourced from Bloomberg.

10 Cumulative return determined on a quarterly compounding basis using the actual Tetragon quarterly incentive fee LIBOR-based hurdle rate. Beginning 1 July 2023, Tetragon's quarterly incentive fee hurdle rate will be SOFR-based.

11 Any indices and other financial benchmarks are provided

for illustrative purposes only.

Comparisons to indices have limitations because, for example, indices have volatility and other material characteristics that may differ from the fund. Any index information contained herein is included to show general trends in the markets in the periods indicated, is not meant to imply that these indices are the only relevant indices, and is not intended to imply that the portfolio or investment was similar to any particular index either in composition or element of risk. The indices shown here have not been selected to represent an appropriate benchmark to compare an investor's performance, but rather is disclosed to allow for comparison of the investor's performance to that of certain well-known and widely-recognised indices. The volatility of the indices may be materially different from the individual performance attained by a specific investor. In addition, the fund's holdings may differ significantly from the securities that comprise the indices. The MSCI ACWI captures large and mid-cap representation across 23 developed markets and

24 emerging markets countries. With

2,935 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Further information relating to the index constituents and calculation methodology can be found at www. msci.com/acwi. The FTSE All-Share Index represents 98-99% of U.K. market capitalisation and is the aggregate of the FTSE 100, FTSE 250 and FTSE Small Cap indices.

Further information relating to the index constituents and calculation methodology can be found at www. ftserussell.com/products/indices/uk.

6	Tetragon Financial Group

Letter to our shareholders

Fellow shareholders:

As diversified, alternative investors, our investment objective continues to be to generate distributable income and capital appreciation. We do this by seeking to generate stable returns across economic cycles and market conditions.

H1 2023 Market Context

In 2022, global risk assets were punished by a combination of geopolitical crisis, supply chain stresses, and central banks aggressively hiking interest rates to curb sharply rising inflation. Against this backdrop, investors struggled to find true sources of diversification with stocks(1), government bonds(2), investment grade credit(3) and high yield credit(4) all down in excess of 10%. By year-end, concerns about the eventual impact of rapid rate increases, ongoing elevated inflation, expectations of more rate hikes and a broadly anticipated recession had resulted in an increasingly pessimistic investor outlook.

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Letter to our shareholders

Many of these challenges came to a head in March 2023, when reported losses in U.S. regional bank investment portfolios raised solvency concerns and prompted an abrupt deposit flight towards "systemically important" banks. The resulting failure of several regional banks prompted the U.S. government to intervene with liquidity backstops

in an attempt to reassure depositors and stabilise the regional banking system. Although this intervention was successful, the subsequent tightening of bank lending standards has set the stage for further stresses in markets reliant on regional bank lending, including commercial real estate and smaller corporations.

Despite these evolving challenges, broad risk assets rallied strongly in the first half of 2023. In the U.S., this was driven by clear signs of disinflation (year-on- year headline inflation declined from 6.5% at year-end to 3.0% in June), a resilient 3.6% unemployment rate near multi-decade lows, and indications from the Fed of an approaching end to the rate hiking cycle in the mid-5% range.

Equity markets posted particularly strong returns, led by the growth-oriented sectors that struggled the most in 2022. The Nasdaq 100 (which returned -32.5% in 2022) posted its strongest-ever first half to a year at +39.4%, buoyed by investor euphoria surrounding artificial intelligence "large language models" ("LLMs" like ChatGPT) and the potential revenue and savings driven by the integration of these capabilities into a wide array of corporate activities. In contrast, the smaller-cap segment of the U.S. market has been weighed down by concerns about regional access

to credit and a potentially slowing economy, with the Russell 2000 rising +8.1%. The MSCI All Country World Gross Total Return Local Index rose +14.4%, the S&P 500 gained +16.9%, and the energy-heavy FTSE All Share Index rose a more modest +2.5%.(5)

Our performance

Tetragon's portfolio produced a net investment return on equity (RoE) of +1.7% and a NAV per share total return of +1.7% during H1 2023. Within Tetragon's portfolio, private and public equity exposures drove gains, along with appreciation in the portfolio of GP investments in asset management businesses. This was partially offset by smaller losses in the hedge fund and real estate private equity portfolios.

NAV Total Return 2023 YTD

1.7%

Return on Equity 2023 YTD

1.7%

Dividends 2023 YTD

$0.22

8	Tetragon Financial Group

Within Tetragon's portfolio, private and public equity exposures drove gains, along with appreciation in the portfolio of GP investments in asset management businesses."

Outlook

In 2023, market sentiment has grown increasingly positive, with equity and credit markets reflecting hopes of a "soft landing" or, at worst, a mild-to- rolling recession. Risk appetites have been revitalised by the stabilisation of the regional banking system, signs of disinflation, an approaching end to rate hikes, the emergence of new AI technologies and the surprising resilience of both U.S. unemployment rates (3.7%) and real GDP forecasts

(+1.3% estimated in 2023). However, the full consequences of rapid rate increases and tightening lending standards have yet to be fully discovered. In our 2022 Annual Report, we noted that such uncertain and contradictory times can pave the way for strong returns in the coming years. Our innovative approach to capital solutions and opportunistic portfolio construction enables us to invest

in situations where other investors are rebalancing portfolios that are unbalanced, illiquid or impaired.

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Letter to our shareholders

In April, Tetragon repurchased $25.1 million of its non-voting shares.

Tetragon portfolio performance notes

Return on Equity. During the

last 12 months, Tetragon's gross RoE was +8.3% (+5.9% net), as compared to +17.1% for the MSCI ACWI Index. Over the last five years, Tetragon's annualised gross RoE was 13.4% (+9.2% net) compared to +9.4% for the MSCI ACWI Index.(6)

Volatility. Over the last year, the annualised volatility of Tetragon's gross RoE was 4.8% (or 4.0% on the basis of its net RoE) and 10.2% for the last five years

(or 8.2% on the basis of its net RoE). The volatility of the MSCI ACWI Index's gross RoE was 17.0% for the last year and 16.4% for the last five years.

Sharpe Ratio. Over the last year, Tetragon's gross Sharpe Ratio was 0.98 (0.57 on a net basis), compared to a Sharpe Ratio of 0.77 for the MSCI ACWI Index. Over the last five years, Tetragon's Sharpe Ratio was 1.16 on a gross basis (and 0.95 on a net basis). The Sharpe Ratio for the MSCI ACWI Index was 0.48 over the same time period.(7)

Board matters

Dividends and share repurchases

The second quarter 2023 dividend was declared at 11.00 cents per share, bringing the 2023 year-to-date dividend to 22.00 cents per share.

In April, Tetragon repurchased $25.1 million of its non-voting shares. The company has returned approximately $1.6 billion to investors through dividends and share repurchases since its initial public offering in 2007. Tetragon will continue to seek to return value to

its shareholders, including through dividends and share repurchases.

Other investor matters

As previously mentioned, beginning 1 July 2023, the Hurdle Rate has been amended to equal to three-month term SOFR plus 2.747858% per annum.

With regards,

The Board of Directors

31 July 2023

Notes:

• MSCI All Country World Gross Total Return Local Index -16%. Source: Bloomberg. Please see note 11 on page 6 for important disclosures. We refer throughout this letter to the MSCI All Country World Gross Total Return Local Index as the MSCI ACWI
  Index.

• S&P US Treasury Bond Current 10- year Total Return Index -16%. Source: Bloomberg.

• Bloomberg Global Aggregate Total Return Index Value Hedged USD -11%. Source: Bloomberg.

• Bloomberg Global High Yield Total Return Index Value Hedged USD -11%. Source: Bloomberg.

• All statistics are calculated using monthly datapoints. Source: Bloomberg.

• All statistics are calculated using monthly datapoints. Represents the performance of the ACWI index if there were no foreign exchange fluctuations (similar to a portfolio with currency hedges), and with dividends reinvested, gross of any taxes. Source:
  Bloomberg.

• The risk-free rate used in the calculation of the Sharpe Ratio is the yield on 1-month U.S. Treasury bills.

10	Tetragon Financial Group