LONDON, December 23, 2016 /PRNewswire/ --
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.
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.
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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