CCSL.L Regulatory News (CCSL)

Chenavari Capital Solutions Limited

(a closed-ended investment company limited by shares incorporated under the laws of

Guernsey with registered number 56977)

Annual Report and Audited Annual Financial Statements

For the year ended 30 September 2017

Potential investors are "qualified eligible persons" and "Non-United States Persons" within the meaning of the US Commodity Futures Trading Commission Regulation 4.7.

Chenavari Credit Partners LLP (the "Investment Manager") is registered as a commodity pool operator ("CPO") with the Commodity Futures Trading Commission (the "CFTC") and is a member of the National Futures Association ("NFA") in such capacity under the U.S. Commodity Exchange Act, as amended ("CEA"). With respect to Chenavari Capital Solutions Limited, the Investment Manager has claimed an exemption pursuant to CFTC Rule 4.7 for relief from certain disclosure, reporting and recordkeeping requirements applicable to a registered CPO. Such exemption provides that certain disclosures specified in section 4.22 (c) and (d) of the regulation are not in its audited annual financial statements and annual report.

Contents

Commodity Exchange Affirmation Statement

Highlights for the year ended 30 September 2017

Corporate Summary

General Information

Chairman's Statement

Investment Manager's Report

Board of Directors

Report of the Directors

AIFM's Report to Shareholders

Corporate Governance Report

Statement of Principal Risks and Uncertainties

Audit Committee Report

Delegation of Duties

Directors' Remuneration Report

Statement of Directors' Responsibilities

Independent Auditor's Report to the Members of Chenavari Capital Solutions Limited

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Condensed Schedule of Investments, at Fair Value

Notes to the Financial Statements

FORWARD-LOOKING STATEMENTS

This annual report includes statements that are, or may be considered, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "plans", "expects", "targets", "aims", "intends", "may", "will", "can", "can achieve", "would" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this annual report, including in the Chairman's Statement. They include statements regarding the intentions, beliefs or expectations of the Company or the Investment Manager concerning, among other things, the investment objectives and investment policies, financing strategies, investment performance, results of operation, financial condition, liquidity prospects, dividend policy and targeted dividend levels of the Company, the development of its financing strategies and the development of the markets in which it, directly and through special purpose vehicles, will invest in and issue securities and other instruments. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments and the development of its financing strategies may differ materially from the impression created by the forward-looking statements contained in this document. In addition, even if the investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments of the Company and the development of its financing strategies are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that may cause differences include, but are not limited to: changes in economic conditions generally and in the structured finance and credit markets particularly; fluctuations in interest and currency exchange rates, as well as the degree of success of the Company's hedging strategies in relation to such changes and fluctuations; changes in the liquidity or volatility of the markets for the Company's investments; declines in the value or quality of the collateral supporting many of the Company's investments; legislative and regulatory changes and judicial interpretations; changes in taxation; the Company's continued ability to invest its cash in suitable investments on a timely basis; the availability and cost of capital for future investments; the availability of suitable financing; the continued provision of services by the Investment Manager and the Investment Manager's ability to attract and retain suitably qualified personnel; and competition within the markets relevant to the Company. These forward-looking statements speak only as at the date of this annual report. Subject to its legal and regulatory obligations, the Company expressly disclaims any obligations to update or revise any forward-looking statement (whether attributed to it or any other person) contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. The Company qualifies all such forward-looking statements by these cautionary statements.

Commodity Exchange Affirmation Statement

Commodity Exchange Affirmation Statement Required by the Commodity Exchange Act, Regulation §4.7(b)(3)(i)

I, Loic Fery, hereby affirm that, to the best of my knowledge and belief, the information contained in this Annual Report and Audited Annual Financial Statements is accurate and complete.

Loic Fery

Chief Executive Officer and representative of the Managing Member of Chenavari Credit Partners LLP, Commodity Pool Operator of Chenavari Capital Solutions Limited

12 January 2018

Highlights for the year ended 30 September 2017

· During the year ended 30 September 2017 (the "Year"), the Company produced a net asset value ("NAV") total return of 5.71% (dividends reinvested) (2016: 4.23%).

· The NAV per Ordinary Share ("Share") declined from 94.26 pence at 30 September 2016 to 92.91 pence at 30 September 2017 net of distributions.

· Dividends of 6.75 pence per Share were declared in respect of the Year (2016: 7.5 pence), of which 5.00 pence per Share was paid during the Year, with a final dividend for the Year of 1.75 pence per Share paid on 30 November 2017.

· The Company's mid-market share price at 30 September 2017 was 90.5 pence (2016: 85.0 pence), representing a discount to NAV of 2.59 % (2016: 9.83%).

· The profit of the Company for the Year was £6.5 million (2016: £5.0 million), or 5.13 pence per Share (2016: 3.80 pence per Share), taking into account recognition of the following significant items:

o total net income of £8.3 million (2016: £6.7 million).

o total operating expenses of £1.8 million (2016: £1.7 million).

· From 1 January 2017, the Company entered into a realisation period and started to return unencumbered cash balances to Shareholders. Two returns of capital were made in April and September 2017 in the form of compulsory redemptions of shares equivalent to a total distribution of 9.9% of the share capital as at the IPO. A third compulsory redemption was made in December 2017 equivalent to a further 9.9% of the share capital as at the IPO. It is expected that the portfolio will be substantially realised and over 90% of the projected cash proceeds will be returned to investors by mid 2021.

· At 30 September 2017, the Company was 82% invested (2016: 91%) in eleven positions, including nine primary transactions valued at £74.2 million (2016: ten valued at £85.1 million) and two secondary transactions valued at £15.05 million (2016: three valued at £22.2 million). The Company had other assets and liabilities equating to 1.71% of NAV and cash equating to 14.98% of NAV at 30 September 2017 (2016: 3.19% and 9.39%).

· During the Year, the Company repurchased and cancelled 121,000 Shares via two Share Repurchases and at 30 September 2017 the Company had 117,253,944 Shares in issue.

Corporate Summary

For the year ended 30 September 2017

The Company

Chenavari Capital Solutions Limited (the "Company") is a closed-ended Collective Investment Scheme registered pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (the "Law") and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (the "Commission").

The IPO of the Company raised gross proceeds of £130.3 million and the Company's Shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange ("SFS") 7 October 2013.

Investment objective and policy

The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in bank capital solutions transactions primarily with UK and European banks.

Investment Period and Realisation Period

Following the extension of the investment period to 31 December 2016 approved by Shareholders at an EGM on 18 December 2015 (the "Investment Period"), the Company continued its ability to invest its cash balances in accordance with its investment policy, to the extent that such cash was not required for working capital purposes or the payment of dividends in accordance with the Company's dividend policy up to and including 31 December 2016, subject to the restrictions applicable to the extension period.

On 13 December 2016 the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it would commence a realisation period which would involve the return of unencumbered cash balances to Shareholders (the "Realisation Period"). Two returns of capital were made in April and September 2017 in the form of compulsory redemptions of shares equivalent to a total distribution of 9.9% of the share capital as at the IPO. A third compulsory redemption was made in December 2017 equivalent to a further 9.9% of the share capital as at the IPO. It is expected that the current portfolio will be substantially realised as a result of investments maturing in accordance with their terms and over 90% of the projected cash proceeds returned to investors by mid 2021. Assets may also be sold or otherwise disposed of as part of the realisation programme.

Target returns and dividend policy

Subject to compliance with the Companies (Guernsey) Law, 2008 (as amended) and the satisfaction of the solvency test, the Company intends to distribute all its income received from investments, net of expenses, by way of dividends on a quarterly basis with dividends declared in October, January, April and July each year and paid in November, February, May and August.

The Company's target NAV total net return to investors is 8-10 % per annum over the life of the Company. From 1 January 2017, returns to Shareholders will be predominantly from the return of unencumbered cash balances described above and as dividend income.

The Investment Manager and Investment Adviser

The Company's Investment Manager is Chenavari Investment Managers (Luxembourg) S.à r.l, a non-cellular company incorporated in Luxembourg under registered number B 0143992, and is licenced and regulated by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg to undertake the activities of an Alternative Investment Fund Manager ("AIFM"). The Investment Manager is a wholly owned entity within the Chenavari Group.

The Investment Manager has appointed Chenavari Credit Partners LLP (the "Investment Adviser"), which is also a member of the Chenavari Group, to provide investment advisory services to the Investment Manager. The Investment Adviser is a limited liability partnership incorporated in England and Wales under registered number OC337434 and is regulated and authorised in the UK by the FCA under registration number 484392 and in the United States by the SEC under Investment Adviser registration number 801/72662.

Asset values

At 30 September 2017, the Company's NAV was £108.9 million, with the NAV per Share amounting to 92.91p. The Company publishes its NAV on a monthly basis. The NAV is calculated as the Company's assets at fair value less liabilities, measured in accordance with International Financial Reporting Standards ("IFRS").

Duration

The Company has an indefinite life.

Corporate Summary (continued)

For the year ended 30 September 2017

Website

The Company's website address is www.chenavaricapitalsolutions.com 

Listing Information

The Company's Shares are admitted to trading on the SFS.

The ISIN number of the Shares is GG00BYQKQC52 and the SEDOL is BYQKQC.

The closing price of the Shares quoted on the SFS at 30 September 2017 was 90.50 pence per Share.

The average closing price of the Shares over the year to 30 September 2017 was 88.52 pence per Share.

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present the Company's annual report and audited financial statements for the year ended 30 September 2017.

Realisation of Investment Portfolio

The main focus of the Board over the period has been the orderly disposal of the underlying investment portfolio in line with the terms set out in an announcement released on 13 December 2016. At that time we set out estimated cash flows for the first year and I am pleased to report that the Company has exceeded these via a combination of capital returns and dividend payments. The table below sets out the payments announced and paid during the Year.

* Figures for Q4 2017 were paid after the end of the accounting period

The Board continue to proactively work with the Investment Manager on the realisation programme and we are pleased with the actions taken thus far to meet our realisation objective. In consultation with the Investment Manager we have revised our objective to return 90% of capital to the end of 2021 with this change being due to the revised realisation projections for the underlying portfolio. The details of the portfolio and its performance are set out in the Investment Managers Report on page 10.

It is anticipated that the Company will return a further £30-35 million in 2018 on a base case scenario as detailed below. It should be noted that these figures are for indication purposes only and owing to changing market conditions, we may not be able to meet these targets.

Period Estimated cash flow to Shareholders

· Q1 2018 £7.4m

· Q2 2018 £7.0m

· Q3 2018 £10.1m

· Q4 2018 £6.9m

Share Repurchases

During the Period the Company bought back 121,000 Shares in two transactions. The buyback on 11 January 2017 of 106,000 Shares was at a price of 84.50 pence per Share. This represented a discount of 8.13% to the NAV per Share of 91.98 pence as at 31 December 2016. At the time of the buy back, the last published NAV per Share was 93.01 pence as at 30 November 2016 and the discount to that NAV was 9.15%. The buyback on 10 February of 15,000 Shares was at a price of 86.00 pence per Share, representing a discount of 6.50% to the 31 December 2016 NAV per Share and 7.54% to the 30 November 2016 NAV per Share.

The Company has obtained Shareholder approval to buy back up to 14.99% of the Share in issue as at the date of the last AGM being 28 March 2017. The Directors have the discretion to use share buy backs as part of the return of capital process where they feel it is appropriate and in the overall interest of Shareholders. Bought back shares were cancelled and are not being held in treasury.

Chairman's Statement (continued)

Total Expense Ratio

As previously mentioned, we are mindful that the total expense ratio of the Company will gradually increase as assets are realised and the Board are monitoring the ongoing expenses closely and will continue to work with our service providers to control costs, where practical, as the Company becomes smaller in size.

Performance

The profit for the Year was £6,519,790, equivalent to earnings per Share of 5.13 pence (2016: £4,954,240, equivalent to earnings per Share of 3.80 pence).

During the Year, the Company's NAV total return was 5.71% (dividends reinvested) and was 23.38% since inception (net of issue costs and dividends reinvested). The NAV per Share declined from 94.26 pence at 30 September 2016 to 92.91 pence at 30 September 2017 as a result primarily of dividends exceeding the return on assets in the Year. In part this was due to the higher levels of cash held in the portfolio pending return of capital to investors and the requirement to hold cash balances to cover margin calls, both of which have had a drag on overall performance and in part due to dividends distributed.

During the Year we have seen the discount narrow significantly following the decision to return capital to investors. The discount to NAV at the year end was 2.59%, and the share price total return for the Year was 14.54%, dividends reinvested. Since launch, the share price total return to the end of the Year was 18.13% (dividends reinvested).

During the Year the Share price moved from 85.0 pence at the close of business on 30 September 2016 to 90.5 pence on 30 September 2017. The discount to NAV reduced from 9.83% on 30 September 2016 to 2.59% on 30 September 2017.

Dividends

Dividends declared for the Year came to 6.5 pence per Share, of which four dividends were declared and paid in the Year (during the year: 1.50 pence per Share was paid on 12 December 2016 for the period ending 30 September 2016, 2.00 pence per Share was paid on 24 February 2017, 1.25 pence per Share was paid on 26 May 2017 and 1.75 pence per Share was paid on 30 August 2017). Following the year end a further dividend of 1.75 pence per Share was paid 30 November 2017.

Board Review

During the year the Board undertook a review of its own performance and an evaluation of the operations of the Company's key service providers. This is detailed further on pages 23 and 24.

We also noted Shareholder responses from the Annual General Meeting ("AGM") held on 28 March 2017 in that Mr Mouchotte, by virtue of his directorship of the Investment Manager (the "AIFM") and other funds within the Chenavari group, is not considered independent. As stated in previous years, given Mr Mouchotte's relevant investment experience, the independent Directors are of the opinion that Shareholders' interests are best served through Mr Mouchotte's continued appointment and his contribution is considered to be an integral part of the Board's decision making process. In order to provide additional comfort on independence, Mr Mouchotte stepped down as a member of the Audit Committee and the Management Engagement Committee on 28 March 2017.

Outlook

Whilst the first nine months of the Realisation Period have been challenging for the Investment Manager, I have been very pleased with its performance in navigating these difficult markets and obtaining positive returns on the disposals within the portfolio. I do not anticipate 2018 being any easier to predict and there will be continued focus on obtaining positive exit prices for realisation of our investments. As you will see from the Investment Manager's report on pages 12 and 13, the majority of the assets are trading at their base case scenarios or better and the Board are optimistic that realisations will be in line with the projected scenarios.

Annual General Meeting

The AGM of the Company will be held at midday on 28 March 2018 and Shareholders are invited to attend.

Rob King

Non-executive Chairman

12 January 2018

Investment Manager's Report

Performance

During the period from 1 October 2016 to 30 September 2017, the Company's NAV total return (dividends reinvested) was 5.71%.

The month-on-month total return since inception, dividends reinvested, was as follows:

Since inception, the Company paid the following dividends:

From 1 January 2017, the Company entered into a Realisation Period and started to return unencumbered cash balances to Shareholders in the form of shares cancellation.

(1) There were 130,000,000 shares in issue at IPO.

It is expected that the portfolio will be substantially realised and 90% of the projected cash proceeds returned to investors by mid 2021.

Investment Manager's Report (continued)

Investment Review

As of 30 September 2017, the Company was 82.01% invested.

The sector allocation as at 30 September 2017 reflected a significant representation of corporate and SME loans.

Geographically the portfolio diversification changed as the consequence of amortizing positions.

As at 30 September 2017, the top five holdings were the following:

Investment Manager's Report (continued)

Noteworthy Portfolio Activity

As previously explained, the Company commenced its Realisation Period from 1 January 2017 and the Company's activity has since centred on portfolio management and management of currency and counterparty risks. There have been no primary transactions executed since May 2016. During the Year, the Company sold part of its position in a UK residential mortgage transaction through two separate trades realising IRRs between 8.7% and 8.9%. The remainder of the position was redeemed at par in September 2017 which realised IRRs between 7.22% and 8.22% depending on the purchase price.

Investment Portfolio Outlook

During the Realisation Period, the Company will continue to manage the portfolio and to assess the opportunistic early sale of the more liquid assets to maximise the return on capital to shareholders.

As a significant part of the Company's assets are denominated in Euros or US Dollars, it will also continue to manage the foreign exchange exposure of the portfolio.

The Investment Adviser maintains a Base Case for each investment in the portfolio, depending on its characteristics and underlying collateral. The Base Cases are derived from a combination of: initial cases derived at the time of investment from analysis of the transaction's structure and the underlying portfolio data, regular tracking of the performance of the transaction's underlying collateral pool and market implied factors such as credit spreads or the performance of other similar deals.

As of 30 September 2017, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company, is 9.94% if all investments perform in line with the "Base Case".

Shareholders should note that, due to the diversification of the portfolio's holdings, it is unlikely that all investments would perform in line with the Base case.

Under the Base Case, it is estimated that investment cash flows during 2018 will be as detailed below, but there can be no assurances to this effect.

· Q1 2018 - £7.4m

· Q2 2018 - £7.0m

· Q3 2018 - £10.1m

· Q4 2018 - £6.9m

Based on the cash flows used to calculate the Base Case internal rate of return above, it is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors by mid 2021.

Investment Manager's Report (continued)

Investment Portfolio Outlook (continued)

Indicative internal rates of portfolio return are dependent on the underlying Base Case asset assumptions that are made by the Investment Adviser. These include, but are not limited to, predictions of default, prepayment, recovery, amortisation, interest rates, asset spread, portfolio replenishment and issuer optional redemptions. The figures are calculated on invested capital of the Company and do not reflect indications of NAV total return. The figures are based on long-term performance projections of the investment strategy and market conditions at the time of modelling and are therefore subject to change. There is no guarantee that any indicative rates of returns can be achieved. Investors should not place any reliance on such target return in deciding whether to invest in the Company. Sensitivity Tests present a set of hypothetical scenarios that assume changes for one or more market variable in order to assess the effect on the portfolio. The results shown represent estimated gross performance of the portfolio under the market conditions stated and do not reflect any management or performance fees or other expenses. The Investment Adviser has made assumptions that it deems reasonable and used the best information available to calculate the rate of return case estimates. If a different set of assumptions were used in these calculations, there could be a material difference in the calculated estimates. Please refer to the prospectus dated 23 September 2013 for risk factors (a copy of which is on the website of the Company at www.chenavaricapitalsolutions.com). Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular investment programme.

Chenavari Investment Managers (Luxembourg) S.àRL.

Investment Manager

12 January 2018

Board of Directors

Directors

The Directors are responsible for the determination of the Company's investment objective and investment policy and have overall responsibility for the Company's activities including the review of investment activity and performance and the control and supervision of the Investment Manager. All of the Directors are non-executive and, save for Mr. René Mouchotte (as described below), are independent of the Investment Manager and the Investment Adviser.

The Directors meet at least four times per annum.

The Directors are as follows:

Robert King (aged 54)

Rob is a non-executive director for a number of open and closed ended investment funds and companies including, Weiss Korea Opportunities Fund Limited. Prior to becoming an independent non-executive director in 2011 he was a Director of Cannon Asset Management Limited and their associated companies, from October 2007 to February 2011. Prior to this he was a Director of Northern Trust International Fund Administration Services (Guernsey) Limited where he had worked from 1990 to 2007. He has been in the offshore finance industry since 1986 specialising in administration and structuring of offshore open and closed ended investment funds. Rob is British and resident in Guernsey.

Iain Stokes, non-executive director (aged 53)

In his early career, Iain worked for BDO and Guersey International Fund Managers Limited (part of ING Barings) before joining Mourant International Finance Administration (MIFA) in 2003. As Group Managing Director, he was a member of the executive team that managed the Sale of MIFA to State Street in 2010 and where he was a Senior Managing Director until 2012. He holds a range of non-executive directorships on fund management and fund investment companies focused on alternative asset strategies. He is resident in Guernsey.

René Mouchotte, non-executive director (aged 71)

René has over 40 years' experience in senior finance positions. He has held senior positions in various investment banks, including managing director global head of securitisation and tax lease for Credit Agricole Indosuez, Chairman of Eurotitrisation and managing director global head of credit portfolio management for CALYON, independent board member of Banque AIG and has also been a board member of IACPM (International Association of Credit Portfolio Managers) from 2007 to 2009. René is currently an independent board member of Eurotitrisation. He is a non-executive director of Taurus Corporate Financing LLP and of Chenavari Investment Managers (Luxembourg) S.à r.l a non-cellular company incorporated in Luxembourg, as well as a non-executive director of the Chenavari Multi-Strategy Fund Limited (and of its trading subsidiaries), a Cayman Islands umbrella fund. Both of these entities are members of, or managed by members of, the Chenavari Financial Group. René holds an MS in Engineering from Ecole des Mines, an MBA from Columbia University Graduate School of Business, an MA in Finance and Economics from Institut d'Etudes Politiques de Paris and a Post-Master's degree in Economics from Paris University. René is not considered independent of the Advisers for the purposes of the Company's voluntary compliance with the Listing Rules of the Financial Conduct Authority by virtue of his directorship of the other funds managed within the Chenavari Group.

Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges

The following summarises the Directors' directorships in other public companies:

TISE is the abbreviation for The International Stock Exchange (formerly the Channel Islands Stock Exchange Authority Limited)

Report of the Directors

The Directors are pleased to present their Annual Report and Audited Financial Statements for the year ended 30 September 2017. In the opinion of the Directors, the Annual Report and Audited Financial Statements are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's performance, business model and strategy.

Incorporation

The Company is a closed-ended limited liability company registered in Guernsey under the Companies (Guernsey) Law, 2008 (as amended) with registered number 56977.

Investment Objective and Policy

The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in bank capital solutions transactions primarily with UK and European banks. From 1 January 2017, returns to Shareholders will be predominantly from the distribution of unencumbered cash balances arising as a result of investments maturing in accordance with their terms or otherwise and as dividend income. The investment policy is set out in full in note 1 to the financial statements.

At 30 September 2017, the Portfolio is invested in nine primary transactions (2016: ten primary transactions) and these represent 68% (2016: 69.33%) of the Company's total assets. During its Investment Period, the Company had flexibility to invest in bank capital solutions transactions with a range of underlying asset types, including (but not limited to) mortgage loans, corporate and SME loans, asset backed securities, derivatives and counterparty risks.

As of 30 September 2017, the Company was 82.01% invested with a sector allocation that reflects the significant representation of corporate and SME loans. No more than 14.99% of the NAV was exposed to any one Bank Counterparty and the largest position was the UK Corporate loans transaction at  12.90% of NAV.

Following the extension of the Investment Period approved by Shareholders at an EGM on 18 December 2015, the Company continued its ability to invest its cash balances in accordance with its investment policy. As previously stated, the Investment Period is not being further extended and with effect from 1 January 2017, the Company commenced the Realisation Period and return to Shareholders of unencumbered cash balances.

Results

The results for the year ended 30 September 2017 are set on page 42. The profit for the year was £6,519,790 (2016: £4,954,240).

Dividends

The table below sets out the Company's dividend history.

The payment of any dividend by the Company is subject to the satisfaction of a solvency test as required by the Companies (Guernsey) Law, 2008 (as amended).

Report of the Directors (continued)

Share Capital and Discount Control

The IPO of the Company raised gross issue proceeds of £130.3 million resulting in 130,300,000 Shares being admitted to trading on the SFS of the London Stock Exchange on 7 October 2013. From 1 January 2017, the Company commenced a realisation programme to return unencumbered cash balances to Shareholders by way of compulsory redemptions. As at 30 September 2017, the Company has returned capital of £11,999,914 via the redemption of 12,925,056 Shares as follows.

A further 12,908,729 Shares were redeemed after the Year end, on 1 December 2017, at a redemption price of 92.96 pence per Share for total consideration £11,999,954.

The Company may, subject to compliance with Companies (Guernsey) Law, 2008 (as amended), purchase its own Shares in the market on an ad hoc basis with a view to addressing any imbalance between the supply of, and demand for, the Shares, to increase the NAV per Share and to assist in minimising any discount to the NAV per Share.

During the Year, the Company repurchased 121,000 Shares via two Share Repurchases and at 30 September 2017 the Company has 117,253,944 Shares in issue, none of which were held in treasury. The current authority to purchase Shares for cancellation expires on the date of the next AGM which will be held in Guernsey on 28 March 2018. The Directors expect to seek renewed authority to purchase Shares for cancellation at that AGM.

Shareholder Information

The NAV will be calculated as of the last Business Day of each month (or at any other times at the Board's discretion) by the Sub-Administrator, based on third party valuations or information supplied by the Bank Counterparties (as applicable) and in consultation with the Advisers. The NAV and the NAV per Share will be published in Pounds Sterling by an RIS announcement and on the website of the Company at www.chenavaricapitalsolutions.com.

Investment Manager

The investment management fee payable to the Investment Manager is paid monthly in arrears at a rate of 1% per annum of NAV, which is based upon the month end NAV and calculated as of the last business day of each month.

The Investment Manager shall be entitled to receive from the Company a performance fee equal to 20% of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5% per annum with a catch up. For the year ended 30 September 2017, no performance fee was paid or accrued for payment to the Investment Manager.

The Board keeps the performance of the Investment Manager under regular review, and the Management Engagement Committee, comprising all Directors, conducts an annual appraisal of the Investment Manager's performance, and makes a recommendation to the Board about the continuing appointment of the Investment Manager. The Investment Manager has executed the investment strategy according to the Board's expectations and it is the opinion of the Directors that the continuing appointment of Chenavari Investment Managers (Luxembourg) S.àRL is in the interests of Shareholders as a whole.

Non-mainstream pooled investments

On 1 January 2014, FCA rules concerning the promotion of non-mainstream pooled investments came into effect. The Board conducts and intends to continue to conduct its affairs so that the Company's Shares will be "excluded securities" under the FCA rules.

This is on the basis that the Company which is resident outside the EEA, would qualify for approval as an investment trust by the Commissioners for HM Revenue and Customs if resident and listed in the United Kingdom. Promotion of the Company's Shares will not be subject to the FCA's restriction on promotion of non-mainstream pooled investments.

Report of the Directors (continued)

AIFMD

The Company is considered to be an Alternative Investment Fund ("AIF") under the Alternative Investment Fund Managers Directive ("AIFMD") and is managed by Chenavari Investment Managers (Luxembourg) S.àRL as Alternative Investment Fund Manager ("AIFM"). However, the Company, as a Guernsey registered closed ended fund which is not currently actively marketed in the EEA, is not significantly impacted by the AIFMD (save for certain consequential effects arising from its appointment of an EU domiciled Alternative Investment fund Manager such as the requirement to appoint a depositary). Quintillion Services Limited was appointed as Depositary for the Company with effect from 1 October 2015. If active marketing is undertaken in the EEA the private placement regime requirements for the relevant jurisdiction would need to be met.

US FATCA

The Foreign Account Tax Compliance Act (FATCA) was introduced by the US in 2010 to identify and report on US citizens, corporates and trusts who held financial assets - whether US source or not - with financial institutions in other jurisdictions. The intention is to reduce tax evasion by ensuring such assets and the related income were being declared on US tax returns.

The Company has registered under the FATCA and its GIIN is RTQKH5.99999.SL.831.

Common Reporting Standard

The Common Reporting Standard ("CRS") is a global tax information sharing initiative promoted by the O.E.C.D., similar to FATCA, which came into force on 1 January 2016. Approximately 60 'Early Adopter' ("EA") countries have signed up to comply with CRS from 1 January 2016 with a further 40 countries in agreement to comply from 1 January 2017. The requirements of CRS are closely aligned to requirements under a FATCA Model 1 Intergovernmental agreement where certain disclosure requirements may be imposed in respect of certain investors in the Company. It is expected that, where applicable, information that may need to be disclosed would include certain information about investors, their ultimate beneficial owners and/or controllers, and their investment in and returns from the Company.

The directors are committed to zero tolerance towards the criminal facilitation of tax evasion.

SFS and FATCA/CRS Exemptions

Whilst there are exemptions to reporting interests (holdings) in shares that are 'regularly traded on an established securities market' the UK FATCA and US FATCA rules and supporting guidance interpret this phrase differently and have tests to help establish adherence. The end result is that if the definition cannot be met - and the US IGA specifically suspends it for Investment Entities - some holdings will instead require the application of FATCA due diligence and subsequent reporting of holders. Helpfully some holding types can be treated as excluded accounts for reporting purposes (e.g. the UK's HMRC now excludes CREST holdings), and there is more to be announced. CRS similarly adds further differences and thus complications.

Further developments will continue to be monitored by the Company's specialist service providers to ensure that the Company remains compliant with each of FATCA and CRS.

The Company's Registrar completed the FATCA and CRS reporting requirements for the year ended 31 December 2016 ahead of the imposed deadlines of 30 June 2017 for the reporting of FATCA related information and 31 July 2017 for the reporting of CRS related information. Relevant reporting information for both FATCA and CRS was submitted to the Guernsey Tax Authority on 5 February 2017.

Significant Shareholdings

Shareholders with holdings of more than 3.0% of the Shares of the Company at 30 September 2017 were as follows:

Report of the Directors (continued)

Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. In reaching their view, the Directors have considered that from 1 January 2017 the Realisation Period commenced as explained in the Chairman's Statement on page 8. The Directors have further considered the Company's holding in cash and cash equivalents, the distribution features of the Company's income generating investments and the proceeds from investment realisations, meaning the Company has adequate financial resources to meet its liabilities as they fall due over a period of at least twelve months from the date of approval of the financial statements.

Report on Viability

The Directors have reassessed the viability of the Company as investments have been realised during the year as part of the ongoing realisation process. The portfolio of assets of the Company is closely monitored and the Directors continue to expect that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected proceeds returned to investors by mid 2021.

The Directors continue to base their opinion on the valuation of the assets of the Company as at 30 September 2017 and have further considered that the Investment Adviser maintains a Base Case and sensitivity scenarios for each investment in the portfolio, depending on its characteristics and underlying collateral. The cases are derived from a combination of initial cases derived at the time of investment from analysis of each transaction's structure and the underlying portfolio data, regular tracking of the performance of the transaction's underlying collateral pool and market implied factors such as credit spreads or the performance of other similar deals.

As of 30 September 2017, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company is 9.94% if all investments perform in line with the "Base Case".

The Directors continue to believe that over the next two years a significant proportion of the assets of the Company will be realised and over 90% of the projected cash proceeds returned to investors by mid 2021. The Directors have therefore maintained the period of viability of the Company to two years and will reassess the position at the end of each accounting period to determine the future viability of the Company, which will be largely dependent on the remaining portfolio. For the determination of the viability period, the Directors have taken into consideration the above assumptions, and that the Company will continue to meet its liabilities on an on-going basis, the Directors have a reasonable expectation that the Company will be able to continue in operation over the two year period.

The principal risks, which are set out in these financial statements on pages 25 to 27, will continue to be monitored closely as these represent the key areas most likely to impact the viability of the Company and also its ability to exit its assets during the Realisation Period.

Directors

The Directors of the Company during the year and at the date of this Report are set out on page 14.

At 30 September 2017 the Directors held the following Shares in the Company: Mr King 27,022, Mr Stokes 36,029 and Mr Mouchotte 4,505.

None of the Directors or any persons connected with them have had a material interest in the Company's transactions or agreements during the year. Mr Mouchotte, by virtue of his directorship of the AIFM and other funds within the Chenavari group, is not considered independent.

Mr Mouchotte resigned as a member of both the Audit Committee and the Management Engagement Committee on 28 March 2017.

Report of the Directors (continued)

Retirement by Rotation

Under the terms of their appointment, each Director is required to retire by rotation and be subject to re-election at least every three years. The Directors are required to seek re-election if they have already served for more than nine years. Mr Mouchotte, by virtue of his other directorships, is required to be re-elected on an annual basis. The Company may terminate the appointment of a Director immediately on serving written notice and no compensation is payable upon termination of office as a Director of the Company becoming effective.

Disclosure of Information to The Auditor

The Directors who held office at the date of approval of these financial statements confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Independent Auditor

Deloitte was formally re-appointed as the Company's auditor for the 2017 year-end audit following the AGM on 28 March 2017.

Deloitte LLP have indicated their willingness to continue in their capacity as auditors. A resolution for the reappointment of Deloitte will be proposed at the next AGM.

Signed on behalf of the Board of Directors by:

Rob King,

Non-executive Chairman

Iain Stokes,

Non-executive Director

12 January 2018

AIFM's Report to Shareholders

The Company is an alternative investment fund (an "AIF") as defined by the Alternative Investment Fund Directive ("AIFMD") and has appointed Chenavari Investment Managers (Luxembourg) S.àRL (the "Investment Manager"), as the Investment Manager in accordance with the terms of an investment management agreement. The Investment Manager has appointed Chenavari Credit Partners LLP to provide investment advisory services to the Investment Manager.

The investment management agreement can be terminated by either party on 12 months' written notice.

Under the terms of the investment management agreement dated 23 September 2013 as novated on 22 July 2014, the Investment Manager receives a fee of one-twelfth of 1% on the NAV of the Company, payable monthly in arrears. The total management fees for the year amounted to £1,180,283 for Chenavari Investment Managers (Luxembourg) S.àRL (2016: £1,230,093) with £188,612 (2016: £100,494) in outstanding accrued fees at the year end."

The Investment Manager is also entitled to receive from the Company a performance fee equal to 20% of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5% per annum with a catch up. The catch up operates such that a performance fee shall not become payable until the Company has distributed to Shareholders an amount equal to the Gross Issue Proceeds as increased by a hurdle rate of 7.5% per annum (the "Hurdle"). Thereafter, amounts available for distribution in excess of the Hurdle shall be distributed by the Company as to 50% to Shareholders and paid as to 50% to the Investment Manager until the Investment Manager has received 20% of all amounts in excess of the Gross Issue Proceeds. Thereafter, all further amounts available for distribution by the Company shall be distributed as to 80% to Shareholders and paid as to 20% by way of payment of the performance fee to the Investment Manager.

As of 30 September 2017, no performance fee was accrued according to those principles (2016: nil).

Total gross remuneration paid by the AIFM to its nine staff for 2017 financial year end was EUR 806,155 (2016: EUR 796,294).

Chenavari Investment Managers (Luxembourg) S.àRL

12 January 2018

The Company was admitted to trading on the SFS of the London Stock Exchange on 7 October 2013 and as such, the Listing Rules applicable to closed-ended investment companies which are listed on the premium listing segment of the Official List of the UKLA do not apply to the Company. 

Whilst the Company is subject to the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority ("DTR") while admitted to trading on SFS, the Directors have resolved that, as a matter of good corporate governance, the Company will also voluntarily comply with certain provisions of the Listing Rules, including the relevant provisions of Chapter 9 regarding corporate governance and continuing obligations.

The Directors recognise the value of the UK Corporate Governance Code (the "UK Code") and have taken appropriate measures to ensure that the Company complies with the UK Code. The UK Code is publically available at www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance.aspx.

Compliance with the UK Code

As the Company has voluntarily complied with the UK Code, there is a requirement to provide Shareholders with a statement on how the main and supporting principles set out in the UK Code have been applied and whether the Company has complied with the provisions of the UK Code. The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate governance which it considers to be appropriate to the business of the Company. The Board has reviewed the principles and recommendations of the UK Code and considers that the Company has complied throughout the period, except as disclosed below:

Section A-C: The Company does not have a Deputy Chairman, Executive Directors or a Chief Executive Officer. Accordingly, provisions of the UK Code relating to the Deputy Chairman, Executive Directors and Chief Executive Officer do not apply to the Company.

Explanation: As the UK Code itself states, investment companies typically have a Board structure that differs from those of other companies and this affects the relevance of particular provisions of the UK Code. Due to the nature of the Company's business and the structure of its relationships with its Administrator, Sub-Administrator, Custodian, Investment Adviser and Investment Manager, the Directors do not believe it would be at present cost-effective or advisable to have full-time Executive Directors.

Section A4.1: The Company has not appointed one of the independent non-executive Directors to be the senior independent director.

Explanation: An independent senior director has not been identified and such a role is not considered necessary because the Company has adopted a policy that the composition of the Board of Directors, which is required by the Company's Articles to comprise of at least two persons, is at all times such that a majority of the Directors are independent of the Investment Manager and Investment Adviser and any company in the same group as the Investment Manager and Investment Adviser. The Chairman and Mr Stokes are free from any conflicts of interest and are independent of the Investment Manager and Investment Adviser and of any company in the same group as the Investment Manager and Investment Adviser, however, Mr Mouchotte, by virtue of his directorship of the AIFM and other funds within the Chenavari group, is not considered independent. Given Mr Mouchotte's directly relevant investment experience, the independent Directors are of the opinion that Shareholders' interests are best served through Mr Mouchotte's continued appointment and his contribution is considered to be an integral part of the Board's decision making process.

Section B2.1: The Company has not established a nomination committee to lead the process for Board appointments and make recommendations to the Board.

Explanation: The appointment of new Directors forms part of the schedule of matters reserved for the Board through the Management Engagement Committee and the Board considers that the process for Board appointments to be the Board's responsibility in accordance with the principles set out in the UK Code.

Section B2.3: Non-executive Directors should be appointed for specified terms subject to re-election and to statutory provisions relating to the removal of a Director.

Explanation: Non-executive Directors are not appointed for a specified term and the Company's articles of association require that all Directors retire by rotation at the annual general meetings of the Company.

Section C3.1: the Board should establish an Audit Committee of at least three, or in the case of smaller companies, two, independent non-executive directors. 

Corporate Governance Report (continued)

Explanation: The Company's Audit Committee comprises Mr. King and Mr. Stokes By virtue of his directorship of the Investment Manager and other funds managed within the Chenavari Group. Mr. Mouchotte ceased to be a member of the Audit Committee with effect from 28 March 2017.

Section C3.5: The audit committee should review arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The audit committee's objective should be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Explanation: Given the Directors are non-executive and the Company does not have employees, there is no whistle-blowing policy and the Company relies on the Company Secretary and other third-party service providers to address any concerns raised.

Section C3.6: The Company does not have an internal audit function.

Explanation: The Directors believe that this requirement of the UK Code was intended for companies with internal accounting departments. The Company has no employees and relies on its Administrator and Sub-Administrator for assistance in drawing up its financial statements and reports to Shareholders. Annually, the Directors review this approach.

Section D.1: The Board has not established a remuneration committee to consider executive directors remuneration to promote the long-term success of the Company.

Explanation: In view of its non-executive nature, the Board considers that it is not appropriate for there to be a separate remuneration committee. The Audit Committee makes all representations to the Board regarding Directors' remuneration. The Board as a whole fulfils the functions of the remuneration committee, and a separate Directors' Remuneration Report is set out on pages 32 and 33 of these Financial Statements.

Further details of compliance with the UK Code are noted in the succeeding pages. There have been no instances of non-compliance, other than those noted above and the Company has therefore not reported further in respect of these provisions.

The Guernsey Financial Services Commission issued a Finance Sector Code of Corporate Governance (the "GFSC Code") which came into effect on 1 January 2012 and was amended in February 2016. As the Company voluntarily reports by reference to the UK Code, it is deemed by the GFSC also to meet the requirements of the GFSC Code.

Composition and Independence of the Board

The Board currently consists of three non-executive Directors. Biographies for all the Directors can be found on page 14. The Chairman and Mr Stokes are considered independent of the Investment Manager and Investment Adviser for the purposes of the Company's compliance with the UK Code. However Mr Mouchotte, by virtue of his directorship of the AIFM and other funds within the Chenavari group, is not considered independent.

As Chairman of the Board, Mr King is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. In considering the independence of the Chairman, the Board has taken note of the criteria set out in B.1.1 of the UK Code relating to independence, and has determined that Mr King is an Independent Director.

The Company has no employees and therefore there is no requirement for a chief executive. The Board is responsible for the appointment and monitoring of all service providers to the Company. Between formal meetings there is regular contact with the Investment Manager, Investment Adviser and the Corporate Broker. The Directors are kept informed of investment and financial controls and other matters that are relevant to the business of the Company and should be brought to the attention of the Directors. The Directors also have access to the Company Secretary and, where necessary in the furtherance of their duties, to independent professional advice at the expense of the Company.

The Board holds quarterly Board meetings, the Audit Committee meets at least three times a year and the Management Engagement Committee meets at least annually. In addition, ad hoc meetings of the Board to review specific items between the regular scheduled quarterly meetings can be arranged.

Corporate Governance Report (continued)

Attendance at the Board, Audit Committee and Management Engagement Committee meetings during the year was as follows:

At Board meetings the Directors review the management of the Company's assets and all other significant matters so as to ensure that the Directors maintain overall control and supervision of the Company's affairs. Agendas and Board papers are circulated in advance of meetings to assist members to discharge their duties appropriately. The Company maintains a formal schedule of matters reserved for the Board. The Directors are responsible for the determination of the Company's investment objective and investment policy and have overall responsibility for the Company's activities including the review of investment activity and performance and the control and supervision of the Investment Manager.

The Board has reviewed its composition and believes that the current appointments provide an appropriate range of skills, experience and diversity. In the context of the Realisation Period, the Board is committed to continuing to review its current composition. No board appointments were made in the period under review. Diversity is important in bringing an appropriate range of skills and experience to the Board, but the Board has not set itself objectives in relation to this element of board composition. In the context of a relatively small Board, the policy when recruiting a new Director, is to appoint individuals on their merit and suitability for the role.

Audit Committee

An Audit Committee has been established consisting of Mr. King and Mr Stokes, who is appointed as Chairman. The Audit Committee's primary function is to assist the Board in fulfilling its oversight responsibilities and under the Terms of Reference its main duties include financial reporting, risk management systems, compliance, whistle blowing and fraud. It will review the scope, results, cost effectiveness, independence and objectivity of the external auditor. Further details on the Audit Committee can be found in the Audit Committee Report on page 28.--

Management Engagement Committee

The Board has established a Management Engagement Committee with formal duties and responsibilities. Its principal duty is to consider the terms of appointment of the Investment Manager and it will annually review that appointment and the terms of the Investment Management Agreement and Investment Advisory Agreement. Its duties and responsibilities also extend to the regular review of the performance of and contractual arrangements with other service providers. The Management Engagement Committee commits to meeting at least once a year and comprises Mr. King as Chairman and Mr. Stokes. Mr. Mouchotte ceased to be a member of the Management Engagement Committee with effect from 28 March 2017.

The Management Engagement Committee carried out its annual review of the performance and capabilities of the Investment Manager and Investment Adviser during November 2017 to confirm that the continued appointment of Chenavari Investment Managers (Luxembourg) S.àRL as Investment Manager and Chenavari Credit Partners LLP as Investment Adviser are deemed to be in the interest of Shareholders. As part of the review process, the Management Engagement Committee concluded that the Company's other service providers are performing in accordance with the Company's expectations and contractual arrangements.

Board Performance

During November 2017, the Management Engagement Committee formally evaluated the Board's effectiveness by considering the balance of skills, experience, independence and knowledge of the Company on the Board, its diversity, how the Board works together as a unit, the allocation of sufficient time to the Company as well as other factors relevant to its effectiveness. The Management Engagement Committee found the performance of the Chairman, individual Directors and the Board as a whole over the review period to be as expected.

Investor Relations

Shareholders are able to contact the Company directly through its dedicated e-mail address (chenavaricapitalsolutions@chenavari.com) or by correspondence sent to the Company Secretary (chenavari@estara.com), Investment Manager or Corporate Broker. As a consequence, the Board receives appropriate updates from the Company Secretary, Investment Manager or Corporate Broker relative to such correspondence to keep it informed of Shareholders' sentiment or analyst views. The Company also publishes a monthly factsheet on its website www.chenavaricapitalsolutions.com, which includes updates on markets and the Company's performance.

Statement of Principal Risks and Uncertainties

Summary

An investment in the Shares is only suitable for institutional investors and professionally advised private investors who understand and are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses (which may equal the whole amount invested) that may result from such an investment. Furthermore, an investment in the Shares should constitute part of a diversified investment portfolio. It should be remembered that the price of securities and the income from them can go down as well as up.

The risks set out below are those which are considered to be the material risks relating to an investment in the Shares but are not the only risks relating to the Shares or the Company. Additional risks and uncertainties of which the Company is presently unaware or that the Company currently believes are immaterial may also adversely affect its business, financial condition, results of operations or the value of the Shares.

The Board have carried out a robust assessment to identify the principal risks that could affect the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board has adopted a controls based approach to its risk monitoring requiring each of the relevant service providers including the Investment Manager to establish the necessary controls to ensure that all known risks are monitored and controlled in accordance with agreed procedures. The Directors receive periodic updates at their Board meetings on key risks and have adopted their own control review to ensure where, possible, risks are monitored appropriately.

Statement of Principal Risks and Uncertainties (continued)

Statement of Principal Risks and Uncertainties (continued)

Audit Committee Report

I am pleased to report to you on the activities of the Audit Committee for the year ended 30 September 2017.

The Board has established terms of reference in respect of the membership of the Audit Committee, its duties, reporting responsibilities, and authority given to its members (the "Terms of Reference"). The Terms of Reference are reviewed on a regular basis and a copy can be accessed on the Company's website at www.chenavaricapitalsolutions.com.

The Audit Committee continues to be supportive of the latest UK Code recommendations and is of the opinion that the revised UK Code allows it to act as a key independent oversight committee contributing to a climate of discipline and control.

Terms of Reference

The Audit Committee's primary function is to assist the Board in fulfilling its oversight responsibilities and, under the Terms of Reference, its main duties include:

Financial Reporting

· monitoring the integrity of the financial statements of the Company, including its annual and half-yearly reports and any other formal announcement relating to its financial performance;

· reviewing significant financial reporting issues and judgements which they contain, including the consistency of accounting policies, the methods used to account for significant or unusual transactions, accounting for key estimates and judgements, the clarity and completeness of disclosure in the Company's financial reports and all material information presented with the financial statements, such as corporate governance statements relating to the audit, risk management, internal control, the going concern basis of accounting and longer term viability.

Risk Management Systems

· review the adequacy and effectiveness of the Company's risk management systems and review and approve the statements to be included in the annual report concerning risk management.

Compliance, Whistle blowing and Fraud

· review the adequacy and security of the Company's arrangements to raise concerns, if any, about possible wrongdoing in financial reporting or other matters;

· reviewing the Company's procedures for detecting fraud;

· reviewing the Company's systems and controls for the prevention of bribery and receive reports on non-compliance;

· reviewing the adequacy and effectiveness of the Company's anti-money laundering systems and controls; and

· reviewing the adequacy and effectiveness of the Company's compliance function.

External audit

· overseeing the relationship with the external auditor including making recommendations of remuneration, terms of engagement, assessing independence and objectivity, compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company, assessing qualifications, expertise and resources and the effectiveness of the audit process.

In regard to the above duties, I confirm, on behalf of the Audit Committee, that, to the best of our knowledge and belief, we have fulfilled our responsibilities in line with our Terms of Reference and in accordance with the UK Code.

Delegation of Duties

The Company has no employees and all functions, including the preparation of the financial statements, have been outsourced to various service providers. Estera Administration (Guernsey) Limited have been appointed as Administrator and Company Secretary, Quintillion Limited as Sub-Administrator and Depositary, Chenavari Investment Managers (Luxembourg) S.àRL as Investment Manager and AIFM, JPMorgan Chase Bank National Association as Custodian and Principal Bankers and Link Asset Services as Registrar (together the "Outsourced Service Providers"). Please see page 7 for further details in relation to the Outsourced Service Providers.

Audit Committee Report (continued)

Membership of the Committee

The Audit Committee was established on incorporation and consists of Rob King, and myself, Iain Stokes, as its Chairman. All the members of the Audit Committee are non-executive Directors and are considered independent of the Investment Manager and Investment Adviser for the purposes of the Company's compliance with the UK Code. Mr Mouchotte, by virtue of his directorship of the AIFM and other funds within the Chenavari group, is not considered independent and following shareholder feedback, for this reason Mr. Mouchotte stood down as a member of the Audit Committee following the Company's Annual General Meeting on 28 March 2017. The Audit Committee has concluded that its membership and competence continues to meet the requirements of C.3.1 of the UK Code.

Each member is financially literate and has knowledge of the following key areas:

· financial reporting principles and accounting standards;

· the regulatory framework within which the Company operates;

· the Company's internal control and risk management environment; and

· factors impacting the Company's financial statements.

The Audit Committee meets at least three times a year. Representatives from the Company's Outsourced Service Providers along with representatives of the Company's external auditor, Deloitte LLP ("Deloitte"), attend Audit Committee meetings when appropriate.

In his role as a member of the Audit Committee, each member is available to discuss any particular matter with his fellow Board members and in addition the Audit Committee has the opportunity to meet with Deloitte without the presence of Outsourced Service Providers. In order to ensure that all Directors are kept up to date and informed of the Audit Committee's work, I provide a verbal report to the Board at Board meetings on key matters discussed at the Audit Committee meetings. In addition, the minutes of all Audit Committee meetings are available to the Board.

How the Audit Committee has Discharged its Responsibilities

In the year under review, the Audit Committee met 6 times, attendance at which is set out on page 24. The Audit Committee meetings focused on the following key areas:

Monitoring the integrity of the financial statements including significant judgements

· We reviewed the appropriateness of the Company's significant accounting policies, critical accounting judgements and key sources of uncertainty and monitored changes to, and compliance with, accounting standards on an ongoing basis.

· Prior to making any recommendations to the Board, we reviewed the Annual Report and Audited Financial statements for the year ended 30 September 2017 (the "Annual Report"). We compared the results with investment models, management accounts, budgets and monthly NAVs, focusing on the significant accounting matters set out below.

· In undertaking this review, we discussed with the Investment Manager, AIFM, Investment Adviser, Administrator, Sub-Administrator and Deloitte the critical accounting policies and judgements that have been applied and at the request of the Audit Committee, the Administrator and Sub-Administrator confirmed that they were not aware of any material misstatements including matters relating to the Annual Report presentation. Deloitte also reported to the Audit Committee on any misstatements that they had found during the course of their work and confirmed no material amounts remained unadjusted.

· At its meeting to review the Annual Report, the Audit Committee received and reviewed a report on the audit from Deloitte. On the basis of its review of the report, the Audit Committee is satisfied Deloitte has fulfilled its responsibilities with diligence and professional scepticism.

· The Audit Committee is satisfied that the Annual Report appropriately addresses the critical judgements and key estimates (both in respect to the amounts reported and the disclosures) and that the significant assumptions used for determining the value of assets and liabilities determined were in compliance with IFRS and were reasonable.

· The Audit Committee is therefore satisfied that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.

Audit Committee Report (continued)

Significant Accounting Matters

During the year the Audit Committee considered key accounting issues, matters and judgements regarding the Company's financial statements and disclosures including those relating to:

Valuation and Classification of Financial Assets at Fair Value through Profit or Loss 

At 30 September 2017, the Company's investments had a fair value of £91.2m and represent a substantial portion of net assets of the Company. As such this is the largest factor in relation to the accuracy of the financial statements and is monitored by the Investment Manager, the Investment Adviser, the Administrator, the Sub-Administrator, the Custodian, the Audit Committee and the Board.

Investments are valued in accordance with the Company's Valuation Policy and with the Accounting Policies set out in note 2 to the Financial Statements. The Valuation Policy is compiled with reference to key principles comprising independence, documentation, transparency, consistency and relevance, and it documents the pricing process and timeline, with particular reference to difficult to value securities, and sets out escalation procedures.

The Audit Committee required the Investment Manager to provide detailed analysis of the broker quotes obtained for investments, including the liquidity, the number of quotes received, and the range of quotes. For primary transactions, the Investment Manager's own analysis of the fair value of the deal was compared to the quotes obtained and where pricing was obtained from the manager of the transaction, the Investment Manager provided an assessment of the manager's independence and reliability.

Where broker quotes are not available, and pricing is the result of the Investment Adviser's internal models, a specialist third party, Duff and Phelps, was engaged to provide estimated ranges of Fair Value for those transactions as at 30 September 2017. In addition to assessing the internal models, the review considered underlying portfolio performance, the requirements of IFRS 13 to use 'market participant' assumptions that are as realistic as possible and the income, market and cost approach to estimate Fair Value. The Audit Committee met with the Investment Adviser and Deloitte and further challenged the key assumptions of the internal models, in particular their sensitivities using test scenarios. Additionally, the Audit Committee required the Investment Manager to provide a reasoned assessment of fair value for each investment held and its classification in the fair value hierarchy.

Following discussion, we were satisfied that the judgements made and methodologies applied were prudent and appropriate and that the correct accounting treatment has been adopted. Please see further details outlined in notes 2 and 7 to the financial statements.

Income Recognition

For primary and secondary transactions, the Audit Committee considered whether the separate presentation of interest income in the statement of comprehensive income is required or if a net fair value movement is more appropriate.

Due to the nature of the Company's investment strategy resulting in the possibility of investments being sold before maturity and given the consequent inherent uncertainty of using maturity dates to calculate income using the Effective Interest Rate method, for both primary and secondary investments, the Company's accounting policy recognises only a net fair value movement rather than reporting a split between fair value movement and interest income in the Statement of Comprehensive Income. This is explained further in notes 7 and 11 to the financial statements.

Assessment of Principal Risks and Uncertainties

The risks associated with the Company's financial assets, as disclosed in the financial statements, particularly in note 6 to the Financial Statements, represent a key accounting disclosure. The Audit Committee critically reviews, on the basis of input from relevant Outsourced Service Providers, the process of ongoing identification and measurement of these risks disclosures.

Audit Committee Report (continued)

Risk Management and Internal Controls

The Board as a whole is responsible for the Company's system of internal control; however, the Audit Committee assists the Board in meeting its obligations in this regard. The daily operational activities of the Company were delegated to the Outsourced Service Providers and as a result the Company has no direct internal audit function and instead places reliance on the external and internal audit controls applicable to the Outsourced Service Providers as regulated entities. The Audit Committee regularly monitors confirmations from the Outsourced Service Providers to the Company that no material issues have arisen in respect of the system of internal controls and risk management operated within the Company's Outsourced Service Providers also considers the Management Engagement Committee's conclusions that the Company's Outsourced Service Providers are performing in accordance with the Company's expectations and contractual arrangements. Annually, the Audit Committee reviews the effectiveness of the Company's material controls, including financial, operational and compliance controls.

External Audit

It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of Deloitte. We met with Deloitte in May 2017 to review their Interim Review Report in relation to the Company's Unaudited Interim Financial Statements for the period from 1 October 2016 to 31 March 2017. In September 2017, we further met with Deloitte who presented their Audit Strategy and Plan for the year; we agreed the audit plan for the year, highlighting the key financial statement and audit risks, to seek to ensure that the audit was appropriately focused. In November 2017, we met with the Investment Adviser and Deloitte to review the assessment of fair value for each investment held and its classification in the fair value hierarchy. Deloitte attends our Audit Committee meetings throughout the year, as appropriate, which allows the opportunity to discuss any matters the auditor may wish to raise without the Investment Manager or other Outsourced Service Providers being present.

Deloitte provides feedback at each Audit Committee meeting on topics such as the key accounting matters, mandatory communications and the control environment.

Deloitte was formally re-appointed as the Company's auditor for the 2017 year-end audit following the AGM on 28 March 2017. Deloitte LLP have expressed their willingness to continue in office as Auditor. The Audit Committee continues to be satisfied with the performance of Deloitte. We have therefore recommended to the Board that Deloitte, in accordance with agreed terms of engagement and remuneration, should continue as the Company's auditor and a resolution proposing their reappointment will be submitted at the forthcoming AGM. The lead audit partner will be rotated every five years to ensure continued independence and objectivity. In advance of the commencement of the annual audit, the Audit Committee reviewed a statement provided by Deloitte confirming their independence within the meaning of the regulations and professional standards. In addition, in order to satisfy itself as to Deloitte's independence, the Audit Committee undertook a review of the auditor compensation and the balance between audit and non-audit fees.

During the year the value of non-audit services provided by Deloitte amounted to £14,386. Non-audit services mainly comprising tax compliance reporting, are not deemed to be material and amounted to approximately 14% of the total fees paid by the Company to Deloitte.

Committee Effectiveness

The effectiveness of the Audit Committee is reviewed on an annual basis by both the Board and the Audit Committee. Following such reviews, I am pleased to advise that the Audit Committee is considered to continue to operate effectively and efficiently. A member of the Audit Committee will be available to Shareholders at the forthcoming AGM of the Company to answer any questions relating to the role of the Audit Committee.

Signed on behalf of the Audit Committee by:

Iain Stokes

Audit Committee Chairman

12 January 2018

Directors' Remuneration Report

The Directors' remuneration report has been prepared on behalf of the Directors in accordance with the UK Code.

The Directors do not consider it necessary for the Company to establish a separate Remuneration Committee since the Board's remuneration forms part of the schedule of matters reserved for the Board and the matters recommended by the UK Code that would be delegated to such a committee, is considered by the Board as a whole.

The Company's policy is to ensure that the fees payable to the Directors reflect the time spent by the Directors on the Company's affairs, the responsibilities borne by the Directors and are sufficient to attract, retain and motivate Directors of a quality required to run the Company successfully.

The Company's policy is to review fee rates periodically. Where fee rates are reviewed, such a review will take account of fees paid to directors of comparable companies but will not necessarily result in any changes to the fee levels.

No element of the Directors' remuneration is performance related, nor does any Director have any entitlement to pensions, Share options or any long term incentive plans from the Company.

Following a recommendation from the Chairman, having regard to the level of fees payable to non-executive Directors that reflects comparable compensation levels of the peer universe for the Company, the role that individual Directors fulfil in respect of Board and Committee responsibilities, it is the responsibility of the Board as a whole to determine and approve the Directors' fees.

The Chairman's remuneration is decided separately and is approved by the Board as a whole.

The Directors are currently subject to the following annual remuneration in the form of Directors' fees:

The Company's Articles limit the fees payable to Directors in aggregate to £300,000 per annum.

The remuneration policy set out above is the one applied for the year ended 30 September 2017. In the context of the Realisation Period, the Board is committed to continuing to review its current composition and fee basis.

Directors' and Officers' liability insurance cover is maintained by the Company on behalf of the Directors.

Mr. King was appointed as a non-executive Director on 21 July 2015 whilst Mr. Stokes and Mr. Mouchotte have served as non-executive Directors since 21 August 2013. Each Director's appointment letter provides that all records received by them during the course of their directorship remain the property of the Company. The Directors' appointments can be terminated in accordance with the Articles and without compensation. There is no notice period specified in the Articles for the removal of Directors. The Articles provide that the office of Director shall be terminated by, among other things: (a) written resignation; (b) unauthorised absences from Board meetings for a consecutive period of twelve months and the Board resolve that the Director in question's office be vacated; (c) unanimous written request of the other Directors; and (d) the Director in question becomes ineligible to be a Director in accordance with Section 137 of the Law.

Under the terms of their appointment, each Director is required to retire by rotation and be subject to re-election at least every three years. The Directors are required to annually seek re-election if they have already served for more than nine years. The Company may terminate the appointment of a Director immediately on serving written notice and no compensation is payable upon termination of office as a Director of the Company becoming effective.

The amounts payable to Directors shown in note 4 to the Financial Statements were for services as non-executive Directors. No Director has a service contract with the Company, nor are any such contracts proposed.

Directors' Remuneration Report (continued)

At 30 September 2017 the Directors held the following Shares in the Company: Mr King 27,022, Mr Stokes 32,029 and Mr Mouchotte 4,505.

Signed on behalf of the Board of Directors by:

Rob King,

Non-executive Chairman

Iain Stokes,

Non-executive Director

12 January 2018

Statement of Directors' Responsibilities 

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable Guernsey law and regulations.

Guernsey Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRS as adopted by the European Union and applicable law.

Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Responsibilities Statement

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· the directors' report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces;

· the Annual Report and Audited Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's performance, business model and strategy; and

· The Annual Report includes information required by the LSE and for ensuring the Company complies with the relevant provisions of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.

This responsibility statement was approved by the Board of Directors on 12 January 2018 and is signed on its behalf by:

Non-Executive Director: Non-Executive Director:

Date: 12 January 2018 Date: 12 January 2018

Independent Auditor's Report to the Members of Chenavari Capital Solutions Limited

Report on the audit of the financial statements

Report on other legal and regulatory requirements

David Becker

For and on behalf of Deloitte LLP

Recognised Auditor

St Peter Port, Guernsey

12 January 2018

Statement of Comprehensive Income

For the year ended 30 September 2017

There were no items recognised as other comprehensive income that have not already been recognised in profit for the year. As such, this represents total comprehensive income for the year.

All items in the above statement derive from continuing operations.

The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements.

Statement of Financial Position

As at 30 September 2017

The financial statements on pages 42 to 47 were approved by the Board of Directors and authorised for issue on 12 January 2018.

Non-Executive Director: Non-Executive Director:

Date: 12 January 2018 Date: 12 January 2018

The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements. 

Statement of Changes in Equity

For the year ended 30 September 2017

For the year ended 30 September 2016

The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements. 

Statement of Cash Flows

For the year ended 30 September 2017

Notes to the Financial Statements

1. General information

Chenavari Capital Solutions Limited (the "Company") is a closed-ended investment company limited by shares. The Company was incorporated with limited liability in Guernsey under the Companies Law (Guernsey) 2008 (the "Law") on 12 July 2013 with registered number 56977, to be a Registered closed-ended Collective Investment Scheme. The principal legislation under which the Company operates is the Law.

The Company is managed by the Investment Manager, a member of the Chenavari Financial Group. The Investment Manager has appointed the Investment Adviser, also a member of the Chenavari Financial Group, to provide investment advisory services to the Investment Manager.

The Company's Shares are admitted to trading on the SFS of the London Stock Exchange. The Shares were also listed on the Official List of The International Stock Exchange (formerly the Channel Islands Securities Exchange) on 7 October 2013 but were delisted on 11 August 2014. The Initial Public Offering ("IPO") of the Company raised gross proceeds of £130,300,000.

Investment objective

The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in bank capital solutions transactions primarily with UK and European banks.

Realisation and dividend policy

The Company expects to target a NAV total net return to investors of 8-10% per annum over the life of the Company and to minimise cash drag to less than 10% of NAV. Returns to Shareholders will be predominantly from the return of unencumbered cash balances (as described below) and as dividend income.

Subject to compliance with the Law and the satisfaction of the solvency test, the Company intends to distribute all of its income from investments, net of expenses, by way of dividends on a quarterly basis with dividends declared in October, January, April and July and paid in November, February, May and August in each year. The Company may retain income for distribution in a subsequent quarter to that in which it arises in order to smooth dividend amounts or for the purpose of efficient cash management.

For the Year the Company has declared and paid three dividends totalling 5p per Share (2p per Share on 24 February 2017 for the period ending 31 December 2016, 1.25p per Share on 26 May 2017 for the period ending 31 March 2017 and 1.75p per Share on 30 August 2017 for the period ending 30 June 2017). Following the year end, the Company announced a dividend of 1.75p per Share for the final period of the Company's financial year which was paid on 30 November 2017.

Since the Company commenced its realisation programme it is unlikely that the historical dividend levels will be maintained as the portfolio becomes more concentrated and becomes reliant on fewer investments to generate dividend income.

The target returns and dividend payments are targets only and there is no guarantee that they can or will be achieved and they should not be seen as an indication of the Company's actual return. Accordingly, investors should not place any reliance on the target returns and dividend payments in deciding whether to invest in the Shares. Dividend payments may fall short of or exceed, the amounts indicated above.

From 1 January 2017, the Company commenced a realisation programme to return unencumbered cash balances to Shareholders. As at 30 September 2017, the Company had returned capital of £11,999,914 (£4,999,956 on 13 April 2017 and £6,999,958 on 13 September 2017) via the compulsory redemption of 12,925,056 Shares. During the Year, the Company repurchased 121,000 Shares via two Share Repurchases, and at 30 September 2017 the Company had 117,253,944 Shares in issue.

Notes to the Financial Statements (continued)

1. General information (continued)

Investment Period and Realisation Period

It is anticipated that future encumbered cash balances will arise predominantly as a result of investments maturing in accordance with their terms. Apart from cessation of new investments, no change to the Company's investment policy has been made or is proposed.

The precise mechanism for any return of cash to Shareholders will depend upon the relevant factors prevailing at the time and will be at the discretion of the Board, but may include a combination of capital distributions, share repurchases and redemptions. The amount and frequency of such distributions will be at the Company's absolute discretion.

Investment policy

The Company seeks to invest in a diversified portfolio of bank capital solutions transactions, entered into primarily with UK and European banks. The focus of the Portfolio is in newly issued transactions ("Primary Transactions") referenced to credit exposure although transactions have been acquired in the secondary market ("Secondary Transactions") where the Investment Adviser identified attractive opportunities.

As of 30 September 2017, the Company was invested in eleven positions including nine Primary Transactions and two Secondary Transactions, with a significant representation of corporate and SME loans. Investments represented 85% of net Asset Value. The Investment Manager's report on page 10 provides an analysis of the Portfolio, by asset class, geography and country.

The Company invests its assets with the aim of spreading investment risk.

No more than 20% of the NAV, calculated at the time of investment, will be exposed to any one Bank Counterparty. Such exposure is calculated on a net basis, taking into account effective credit hedging arrangements entered into by the Company in relation to the relevant Bank Counterparty. This limit increases to 25% net exposure to any one Bank Counterparty where, in the Board's opinion, the relevant Investment Instrument is expected to amortise such that, within one year of investment, the expected capital balance outstanding is less than 20% of NAV, calculated at the time of investment.

Where credit hedging arrangements are used in order to comply with these limits, the hedges are maintained such that the net exposure to the Bank Counterparty is no more than 20% of the NAV as at the date that any relevant credit hedging contract matures or is adjusted or rolled over. For the avoidance of doubt, cash pending investment or held on deposit under the terms of an Investment Instrument is held without limit with a financial institution with short term credit ratings of A-2 (Standard & Poor's) or P-2 (Moody's) or better.

The Company invests in a variety of instruments to gain exposure to bank capital solutions transactions, including (but not limited to) debt instruments and synthetic securities ("Investment Instruments").

The Portfolio will have a weighted average expected maturity of no more than 5 years at the end of its Investment Period while each Investment Instrument in the Portfolio will have an expected maturity of no more than eight years. The Company only invests in an Investment Instrument which has a contractual maturity in excess of eight years provided: (i) the Advisers' assessment of such Investment Instrument's expected maturity is less than eight years; (ii) the Board approves such assessment; and (iii) the Portfolio's weighted average expected maturity continues to be less than 5 years from the end of its investment following such investment. The expected maturity of the Portfolio (or an Investment Instrument) is the number of years until the capital invested in the Portfolio (or such Investment Instrument) is expected to be repaid.

On reviewing the portfolio of assets of the Company, the Directors expect that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors by mid 2021.

During the Realisation Period, no further investments will be made.

Notes to the Financial Statements (continued)

1. General information (continued)

Borrowing and gearing policy

The Company does not intend to use borrowings for investment purposes. However, borrowings may be used from time to time for the purpose of short term bridging, financing repurchases of Shares or managing working capital requirements, including hedging facilities. In this regard, the Company will limit its borrowing from time to time to an amount, which, when aggregated with all outstanding borrowings, would be equivalent to a maximum of 20% of its NAV, at the time of drawdown. The Board will oversee the level of gearing in the Company, and will review the position with the Advisers on a regular basis.

Hedging and derivatives

The types of securities in which the Company invests may be sensitive to changes in interest rates and, to the extent not Sterling denominated, changes in foreign exchange rates.

The Company may implement hedging and derivative strategies designed to protect investment performance against material movements in exchange rates and interest rates and to protect against credit risk. Such strategies may include (but are not limited to) options, forwards and futures and interest rate or credit default swaps ("CDS") and will only be entered into when they are available in a timely manner and on terms acceptable to the Company. The Company may also bear risks that could otherwise be hedged where it is considered appropriate to the investment objective and investment policy.

Investment Instruments may be structured as synthetic securities by means of a CDS, or other derivative or risk transfer transaction, entered into between a Bank Counterparty and the Company. Such transactions would typically be fully collateralised, by means of the Company placing a cash deposit or equivalent (including, but not limited to, money market funds and/or investment grade instruments) in an account. The Company will not acquire Investment Instruments where it could lose more than the amount invested.

The Company will use derivative strategies for efficient portfolio management and may also have exposure where an Investment Instrument is structured as a synthetic security as described above. Derivatives will not be used for speculative purposes. There can be no certainty as to the efficacy of any hedging transactions.

In the event of a breach of the investment policy set out above, the Investment Manager shall inform the Directors upon becoming aware of the same and if the Directors consider the breach to be material, notification will be made to a Regulatory Information Service.

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.

Cash uses and cash management activities

In accordance with the Realisation Period, the Company's principal use of unencumbered cash will be to return it to Shareholders. Cash will also be retained for working capital purposes (including, in particular, a cash reserve for meeting any required margin calls on derivative positions), for the payment of dividends in accordance with the Company's dividend policy.

Cash held by the Company pending distribution or for working capital purposes will be held in either cash or cash equivalents, including but not limited to money market instruments or funds, bonds, commercial paper or other debt obligations with banks or other counterparties having an investment grade credit rating (as determined by any reputable rating agency selected by the Company).

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern to provide returns to Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. To maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to Shareholders, return capital to shareholders, issue new shares or sell assets.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below.

2.1 Basis of preparation

The Audited Annual Financial Statements for the year ended 30 September 2017 have been prepared in accordance with IFRS as adopted by the European Union, the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and applicable legal and regulatory requirements of the Law.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. In reaching their view, the Directors have considered that on 1 January 2017 the Realisation Period commenced as explained in Note 1 to these financial statements. The Directors have further considered the Company's holding in cash and cash equivalents and the distribution features of the Company's income generating investments, meaning the Company has adequate financial resources to meet its liabilities as they fall due over a period of at least twelve months from the date of approval of the financial statements.

New standards and interpretations not yet adopted

The Company has not applied the following new and revised IFRS that have been issued but are not yet effective in these financial statements:

· IFRS 9 Financial Instruments ("IFRS 9")

The International Accounting Standards Board (IASB) has published the final version of IFRS 9 bringing together the classification and measurement, impairment (including the expected loss model for financial assets) and hedge accounting phases of the IASB's project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 is effective for periods beginning on or after 1 January 2018.

The Company will be required to apply the new classification and measurement model for financial assets. This will include both assessing the business model objective of the Company in holding financial assets for the collection of contractual cash flows and sales of such assets; and assessing whether the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the contractual amount outstanding. Depending on the analysis, the Company may be required to measure its investments in accordance with the new provisions of IFRS 9 under Fair Value through Other Comprehensive Income. In such circumstances the Company would be required to apply the impairment provisions of the new expected loss model.

It is currently anticipated that, due to the complex nature of the investments, the Company being in its Realisation phase and the presence of leverage in the financial assets held, that the Company will continue to classify financial assets as Fair Value through Profit and Loss with no change to the measurement basis applied.

· IFRS 15 Revenue from contracts with customers ("IFRS 15")

IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers.

IFRS 15 is effective for annual periods beginning on or after 1 January 2018 with early adoption permitted. No impact is anticipated.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

New standards and interpretations not yet adopted (continued)

· IFRS 16 Leases ("IFRS 16")

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially from its predecessor, IAS 17.

IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. No impact is anticipated.

2.2 Financial assets and financial liabilities at fair value through profit or loss

(a) Classification

The Company classifies its investments in bank capital solutions transactions and derivatives as financial assets or financial liabilities at fair value through profit or loss. These financial assets and financial liabilities are classified as held for trading or designated by the Board of Directors at fair value through profit or loss at inception.

Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short term. Derivatives are also categorised as financial assets or financial liabilities held for trading. The Company does not classify any derivatives as hedges in a hedging relationship.

Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company's documented investment strategy. The Company's policy is for the Investment Manager and the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information.

(b) Recognition/derecognition

Regular-way purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Regulatory capital transactions may be structured in a variety of ways and are highly bespoke to the needs of the bank involved and the investors in the transaction. In all situations, the amount of interest and principal payable on the instrument will be linked to the credit performance of the underlying collateral. The investment characteristics of regulatory capital transactions are such that principal payments are made more frequently than traditional debt securities. The principal may be repaid at any time because the underlying debt or other assets generally may be repaid at any time.

(c) Measurement

Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Statement of Comprehensive Income in the period in which they arise. The net gain on financial assets and financial liabilities held at fair value through profit or loss consists of coupons and interest received and both realised and unrealised gains and losses on financial assets and financial liabilities at fair value through profit or loss, calculated as described in note 7. For the purposes of the statement of cash flows, the coupon income is considered an operating activity.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

2.2 Financial assets and financial liabilities at fair value through profit or loss

(d) Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the reporting date. The Company adopted IFRS 13 and this standard requires the Company to use an exit price (a traded market price or mid-price) for both financial assets and financial liabilities where such price falls within the bid-ask spread. In circumstances where the exit price is not within the bid-ask spread, management will determine the point within the bid-ask spread that is most representative of fair value.

If a significant movement in fair value occurs subsequent to the close of trading up to midnight on the period end date, valuation techniques will be applied to determine the fair value. A significant event is any event that occurs after the last market price for a security, close of market or close of the foreign exchange, but before the Company's valuation time that materially affects the integrity of the closing prices for any security, instrument, currency or securities affected by that event so that they cannot be considered 'readily available' market quotations. Where broker quotes are not available, investment valuations are based on the Investment Adviser's internal models.

The fair value of financial assets and liabilities at fair value through profit or loss is measured through a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised market maker in the respective position.

The fair value of financial assets and liabilities that are not traded in an active market (for example, over-the-counter derivatives) is determined using counterparty valuations for regulatory capital transactions or Markit for credit derivatives instruments. In the opinion of the Directors Markit is the benchmark for CDS pricing data. Markit receives data from the official books of market makers, and then subjects it to a rigorous testing process.

(e) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.3 Due from and to brokers

Amounts due from and to brokers represents receivables for securities sold and payables for securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date, respectively as well as collateral posted to derivatives counterparts.

These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment for amounts due from brokers.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

2.4 Interest income

For primary and secondary transactions, interest income is recognised in the Statement of Comprehensive Income in net gain on financial assets and financial liabilities held at fair value through profit or loss. Income receivable on cash and cash equivalents is recognised separately through profit or loss in the Statement of Comprehensive Income.

2.5 Cash and cash equivalents

Cash and cash equivalents represents cash in-hand, demand deposits, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

2.6 Share Capital

Shares are classified as equity. Incremental costs directly attributable to the issue of Shares are shown in equity as a deduction, net of tax, from the proceeds.

2.7 Foreign currency

(a) Functional and presentation currency

The functional and presentation currency of the Company is GBP (£). The performance of the Company is measured and reported to the investors in GBP.

(b) Foreign currency translation

Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Translation differences on non-monetary financial assets and liabilities at fair value through profit or loss are recognised in the Statement of Comprehensive Income within the fair value net gain or loss.

(c) Exchange rates

The foreign currency exchange rates at 30 September 2017 were as follows: EUR 0.8812, USD 0.7454, CHF 0.7703 (30 September 2016: EUR 0.8651, USD 0.7698, CHF 0.7941).

2.8 Transaction costs

Transaction costs on financial assets at fair value through profit or loss include fees and commissions paid to agents, advisers, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the Statement of Comprehensive Income.

2.9 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board. The Directors are of the opinion that the Company is engaged in a single segment of business, being investments in bank capital solutions transactions. The Directors manage the business in this way.

2.10 Accrued expenses

Expenses are accounted for on an accruals basis.

2.11 Other receivables and prepayments

Other receivables are amounts due in the ordinary course of business. Other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.12 Dividend distribution

Dividend distribution to the Company's Shareholders is recognised as a liability in the Company's financial statements and disclosed in the Statement of Changes in Equity in the period in which the dividends are approved by the Board.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

2.13 Taxation

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £1,200 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains.

3. Critical accounting judgements and key sources of estimation uncertainty

The preparation of the Company's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

3.1 Key sources of estimation uncertainty

Fair value of financial instruments

The assets held by the Company are mostly valued through a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised market maker in the respective position and where there are not readily available, internal valuations are used.

A documented valuation policy determines the hierarchy of prices to be applied to the fair value. Prices are sourced from third party broker or dealer quotes for the relevant security. Where no third party price is available, or where the Investment Manager determines that the third party quote is not an accurate representation of the fair value, the Investment Manager will determine the valuation based on the valuation policy. This may include the use of a comparable arm's length transaction, reference to other securities that are substantially the same, discounted cash flow analysis and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.

The monthly NAV is derived from the Company's valuation policy. In particular, fair values of CDSs are determined with the independent pricing by Markit, which is the benchmark of the industry for CDS pricing data. Markit receives data from the official books of market-makers and then subjects it to a rigorous testing and consistency process to provide closing prices, from which are derived the reported fair values of the financial instruments held by the Company.

Note 7 outlines the Level 3 classifications and the analysis of the impacts of Level 3 investments on the performance of the Company.

3.2 Critical judgements in applying accounting policies

Functional currency

The Company transacts and holds investments and cash balances in multiple currencies. The Board of Directors considers GBP (£) as the currency that most fairly represents the economic effect of the underlying transactions, events and conditions. The performance of the Company is measured and reported to the investors in GBP.

Valuation and classification of investments

The Board of Directors consider the valuation of investments and the classification of these investments in the fair value hierarchy as the critical judgements. The fair value of investments is described in 3.1 above and the judgements associated with the disclosures in the fair value hierarchy are described in note 7.

Notes to the Financial Statements (continued)

4. Related Parties

(a) Directors' Remuneration & Expenses

The Directors of the Company are remunerated for their services at such a rate as the Directors determine. The fee for Mr. Mouchotte is £37,500. The fee for Mr. Stokes as Chairman of the Audit Committee is £40,000 per annum. The fee for Mr. King as Chairman is £40,000 per annum.

During the year ended 30 September 2017, directors fees of £117,500 (2016: £113,388) were charged to the Company, of which £nil (2016: £nil) remained payable at the end of the year.

(b) Shares held by related parties

At 30 September 2017 the Directors held the following Shares in the Company: Mr King 27,022, Mr Stokes 36,029 and Mr Mouchotte 4,505.

As at 30 September 2017 and 30 September 2016, neither the Investment Manager nor partners and employees of the Investment Manager or the Investment Advisor held any of the Issued Share Capital. Chenavari Investment Managers Holdings, which is the holding Company of the Investment Manager and the Investment Advisor held 1,179,934 shares of the Company (approximately 1% of the shares of the Company) and one employee of Chenavari Investment Managers Holdings hold 11,742 shares.

In addition, as of 30 September 2017, a fund managed by the Investment Manager held 23,562,639 shares of the Company.

(c) Investment Manager and AIFM

The Company receives investment management services from the Investment Manager, a limited company (Société à Responsabilité Limitée de Droit Luxembourgeois) incorporated in Luxembourg. Under the terms of the investment management agreement dated 23 September 2013 as novated on 22 July 2014 the Investment Manager receives in return a fee of one-twelfth of 1% on the NAV, payable monthly in arrears. The Investment Manager has appointed the Investment Adviser, to provide investment advisory services to the Investment Manager. The Investment Manager is responsible for paying the Investment Adviser. The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice, such notice not to be served before the fourth anniversary of Admission.

Total management fees for the year amounted to £1,180,283 for Chenavari Investment Managers (Luxembourg) S.à r.l (30 September 2016: £1,230,093) with £188,612 (2016: £100,494) in outstanding accrued fees at the year end.

The Investment Manager is also entitled to receive from the Company a performance fee equal to 20% of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5% per annum with a catch up. The catch-up operates such that a performance fee shall not become payable until the Company has distributed to Shareholders an amount equal to the Gross Issue Proceeds as increased by a hurdle rate of 7.5% per annum (the "Hurdle"). Thereafter, amounts available for distribution in excess of the Hurdle shall be distributed by the Company as to 50% to Shareholders and paid as to 50% to the Investment Manager until the Investment Manager has received 20% of all amounts in excess of the Gross Issue Proceeds. Thereafter, all further amounts available for distribution by the Company shall be distributed as to 80% to Shareholders and paid as to 20% by way of payment of the performance fee to the Investment Manager.

As of 30 September 2017, no performance fee was accrued according to those principles.

The Company has funded investments with a value of £41,979,510 via Convertible Preferred Equity Certificates and/or occasionally beneficiary shares issued by legally segregated compartments of AREO S.à r.l ("Areo"), a company incorporated in Luxembourg under the Securitization Law of 2004. Areo is owned by the Chenavari group and Chenavari funds and is managed by a Board of Directors composed of a majority of independent directors that consider investment opportunities sourced by the Investment Adviser. The Company is currently invested in seven compartments of Areo, and which it fair values in accordance with IFRS 13 as set out in the Company's accounting policies. The Investment Manager and Investment Adviser receive no fees from Areo in relation to these transactions.

Notes to the Financial Statements (continued)

5. Material Agreements

(a) Corporate broker

Fidante Partners Europe Limited, trading as Fidante Capital, receives a retainer for their corporate broking services of £75,000 per annum, payable semi-annually in arrears.

(b) Administration fee

Estera Administration (Guernsey) Limited (formerly Morgan Sharpe Administration Limited) (the "Administrator") serves as the Company's administrator and secretary. The Administrator is entitled to a fee of £52,000 per annum. All fees are payable quarterly in advance. Administration fees for the year amounted to £52,000 (2016: £52,000).

(c) Sub-administration fee

The Administrator has appointed Quintillion Limited (the "Sub-Administrator") as the Company's sub-administrator.

The Sub-Administrator is entitled to receive an annual asset-based fee from the Company of up to 0.085% per annum of NAV, excluding certain expenses. Sub-administration fees for the year amounted to £79,324 (2016: £82,384) of which £5,946 (2016: £7,073) remained payable at the end of the year.

(d) Custodian fee

JPMorgan Chase Bank N.A has been appointed to act as custodian to the Company and to provide custodial, settlement and other associated services to the Company. Under the provisions of the custodian agreement dated 5 September 2013 the Custodian is entitled to a safekeeping and administration fee on each transaction calculated using a basis point fee charge based on the country of settlement and the value of the assets together with various other payment/wire charges on outgoing payments, subject to an aggregate minimum fee of £31,500 per annum.

(e) Depository fee

Elavon Financial Services Limited has been appointed to act as depository to the Company. The Depository is entitled to 0.05% per annum of NAV. Depository fees for the period amounted to £5,901 (2016: £6,150) of which £453 remained payable at the year end (2016: £502).

(f) Investment Manager

Contractual arrangements relating to the Investment Manager are detailed in note 4.

6. Financial risk management

The responsibility for financial risk management lies with the Board of the Company but it has delegated the day to day monitoring of this to the Investment Manager.

The Investment Adviser will be responsible for sourcing potential investments. Recommended investments will be presented to the Investment Manager for its approval. The Investment Manager will not be required to, and generally will not, submit decisions concerning the discretionary or ongoing management of the Company's assets for the approval of the Board, except where such approval relates to an application of the investment guidelines or a conflict of interest. Any investment recommended by the Investment Adviser which the Investment Manager rejects will however, be promptly notified to the Board.

6.1 Credit risk

The main concentration of credit risk to which the Company is exposed arises from the Company's investments in Regulatory Capital Transactions.

The Company mitigates its credit risk on Regulatory Capital transactions through extensive due diligence before investment.

To the extent that the Portfolio is exposed to underlying concentrations in any one geographical region, borrower sector or credit or asset type, an economic downturn relating generally to such geographical region, borrower type or credit or asset type may result in an increase in underlying defaults or prepayments within a short time period. This could reduce the Company's income (and thus the ability to pay dividends to Shareholders), the NAV and the value of the Shares. The Portfolio is expected to carry leveraged exposure and an increase in credit losses with respect to any or all Collateral could reduce the Company's income (and thus the ability to pay dividends to Shareholders), the NAV and the value of the Shares.

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

No more than 20% of the NAV, calculated at the time of investment, will be exposed to any one Bank Counterparty. Such exposure will be calculated on a net basis, taking into account effective credit hedging arrangements entered into by the Company in relation to the relevant Bank Counterparty. This limit shall increase to 25% net exposure to any one Bank Counterparty where, in the Board's opinion, the relevant Investment Instrument is expected to amortise such that, within one year of investment, the expected capital balance outstanding is less than 20% of NAV, calculated at the time of investment.

As at 30 September 2017, the Company had no exposure above the 20% limit.

Where credit hedging arrangements are used in order to comply with these limits, the hedges will be maintained such that the net exposure to the Bank Counterparty is no more than 20% of the NAV as at the date that any relevant credit hedging contract matures or is adjusted or rolled over.

For the avoidance of doubt, cash pending investment or held on deposit under the terms of an Investment Instrument may be held without limit with a financial institution with short term credit ratings of A-2 (Standard & Poor's) or P-2 (Moody's) or better.

The Company manages the portfolio with appropriate diversification in terms of sectors and geographical breakdowns.

As at 30 September 2017 and 30 September 2016, the breakdown of the NAV per asset class and geography was as follows:

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

The Company is also exposed to counterparty credit risk on forwards, cash and cash equivalents, amounts due from brokers and other receivable balances, as shown in the following table:

* JP Morgan cash and cash equivalents represents cash held in a custodian account.

Offsetting Financial Assets and Financial Liabilities

The Company enters into transactions with a number of counterparties whereby the resulting financial instrument is subject to an enforceable master netting arrangement or similar agreement, such as an International Swaps and Derivatives Association ("ISDA") Master Agreement (a "Master Netting Agreement"). Such Master Netting Agreements may allow for net settlement of certain open contracts where the Company and the respective counterparty both elect to settle on a net basis. In the absence of such an election, contracts will be settled on a gross basis. All Master Netting Agreements allow for net settlement at the option of the non-defaulting party in an event of default, such as failure to make payment when due or bankruptcy.

The Company receives and provides cash collateral in respect of derivative transactions subject to the standard industry terms of ISDA's Credit Support Annex.

None of the financial assets and financial liabilities are offset in the Statement of Financial Position, as the Master Netting Agreements create a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Company or counterparties. In addition, the Company and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

6.2 Foreign currency risk

Foreign currency risk is the risk of gain or loss resulting from exposure to movements on exchange rates on investments priced in currencies other than the base currency of the Company. The Company does not actively take risk in foreign currency, but incurs it as a normal course of business and employs a series of economic hedges to minimise these risks.

The currency exposure as at 30 September 2017 is as follows:

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.2 Foreign currency risk (continued)

The currency exposure as at 30 September 2016 is as follows: