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)

Audited Annual Financial Statements

For the period from 12 July 2013 (date of incorporation) to 30 September 2014

Contents

Highlights for the period from 7 October 2013 (the date of admission to listing) to 30 September 2014 (the "Period")

Corporate Summary

General Information

Chairman's Statement

Investment Manager's Report

Board of Directors

Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges

Report of the Directors

Corporate Governance Report

Statement of Principal Risks and Uncertainties

Audit Committee Report

Directors' Remuneration Report

Independent Auditors' Report to 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 for the period 12 July 2013 (date of incorporation) to 30 September 2014

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.

Highlights for the period from 7 October 2013 (the date of admission to listing) to 30 September 2014 (the "Period")

· Successful Initial Public Offering ("IPO") of the Company which raised £130.3 million gross of issue costs.

· During the Period, the Company's net asset value ("NAV") increased by 4% (net of issue costs).

· Dividends of 5.25 pence per share were paid in respect of the Period, of which 4.00 pence per share was paid during the Period with a second dividend of 1.25 pence per share for the Period paid on 28 November 2014. The Board has also announced a third dividend of 1.35 pence per share on 21 January 2015 for the period ending 31 December 2014.

· The Company's mid-market share price at 30 September 2014 was 106.38 pence, representing a premium to NAV of 8.7%

· The profit of the Company for the Period was £5.1 million, or 3.90 pence per share, taking into account recognition of the following significant items:

o total net income of £6.9 million.

o total operating expenses of £1.8 million.

· During the Period, the Company invested £129.0 million in Bank Capital Solutions Transactions through the purchase of four primary transactions and ten secondary transactions of which four primary transactions and seven secondary transactions are held at period end.

Corporate Summary

For the period from 12 July 2013 (date of incorporation) to 30 September 2014

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 Ordinary Shares (the "Shares") were admitted to trading on the Specialist Fund Market of the London Stock Exchange ("SFM") and Channel Island Stock Exchange ("CISX") on 7 October 2013. On 11 August 2014 the Company delisted its shares from the CISX successor exchange, the Channel Islands Security Exchange Authority Limited ("CISEAL")

The Company initially operated with its ordinary shares admitted to trading on the SFM and listed on CISX. At the date of the Company's IPO, shares admitted to trading on the SFM would not have been qualifying investments for ISA purposes and therefore a listing on the Official List of the CISX was required to ensure ISA eligibility of the Company's ordinary shares for investors. As a result of amendments made to the ISA regulations, ISA investors can now invest in shares admitted to trading only on the SFM and therefore the decision was taken for the cancellation of the listing of the Company's ordinary shares on the CISEAL.

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.

Target returns and dividend policy

On the basis of market conditions as at the date of the prospectus, and whilst not forming part of its investment objective or investment policy, the Company will target a net total return on invested capital of 12 per cent. per annum or more over the life of the Company. Returns to Shareholders will be predominantly as dividend income.

The Investment Manager and Investment Adviser

On 22 July 2014, the Company appointed Toro S.a.r.l. as its Investment Manager, replacing Chenavari Investment Managers (Guernsey) Ltd. The Investment Manager is a non-cellular company incorporated in Luxembourg under registered number B 143,992, and is licenced and regulated by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg to undertake the activities of investment management and as the Alternative Investment Fund Manager ("AIFM"). The Investment Manager is a wholly owned entity within the Chenavari Group. Currently the Investment Manager is awaiting final approval from the CSSF for its AIFM Licence, which is expected to be received early in 2015.

The Investment Manager has appointed Chenavari Credit Partners LLP as the Investment Adviser of the Company (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 by the SEC under registration number 801/72662.

Asset Values

At 30 September 2014, the Company's NAV was £127.6 million, with the NAV per share amounting to 97.90 pence. 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.

Duration

The Company has an indefinite life.

Website

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

Listing Information

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

The ISIN number of the Shares is GG00BCHWW517 and the Sedol is BCHWW51.

The closing price of the Shares quoted on the SFM at 30 September 2014 was 106.38 pence per share.

The average closing price of the Shares over the period from 7 October 2013 to 30 September 2014 was 104.62 pence per share.

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present my report on the Company's progress for the period from 7 October 2013 (the date of admission to listing) to 30 September 2014.

The Company raised £130.3 million at IPO and during the Period, the Company invested £129.0 million in Bank Capital Solutions Transactions through the purchase of four primary transactions and ten secondary transactions of which four primary transactions and seven secondary transactions are held at period end.

Share Performance

The Company's shares have traded at a premium to Net Asset Value since launch.

The Net Asset Value per share was 97.90 pence at 30 September 2014.

During the period from launch to 30 September 2014, the Company's NAV increased by 4% (net of issue costs).

Dividends

The Company paid a first dividend of 4.00 pence per share for the period to 30 June 2014. The Company paid a second dividend in November 2014 of 1.25 pence per share for the quarter to 30 September 2014 making a total payment of 5.25 pence per share in respect of the period from admission to the first financial year end.

This total payment of 5.25 pence per share exceeds the pre Admission distribution target that the Company was seeking to pay of 5.00 pence per share.

The Board has also announced on 21 January 2015 a third dividend payment of 1.35 pence per share for the period 1 October 2014 to 31 December 2014. The dividend will be paid on 20 February 2015 to holders of shares recorded on the register as at close of business on 30 January 2015.

Financial Performance

Over the reporting period from 7 October 2013 to 30 September 2014 the Company generated a profit of £5.1 million or earnings of 3.90 pence per share.

The Company's mid-market share price at 30 September 2014 was 106.38 pence representing a premium to NAV of 8.7%.

Investment Portfolio

As referred to in the Investment Manager's Report as at 30 September 2014, the Investment Manager has deployed 67.7% by value of funds raised into eleven Bank Capital Solutions Transactions, consisting of four primary transactions and seven secondary transactions achieving a spread of investment risk.

SME loans at 33.7% of NAV and Corporate loans of 19.97% of NAV comprised the majority of sector allocation with the largest position being an amortising exposure to a granular pool of Portuguese SME and Corporate loans.

The portfolio also has exposure to a range of other asset types.

Two further primary transactions were completed subsequent to the period end.

In October 2014, the Company closed an investment in a portfolio of Spanish real estate exposure (secured loans and residential properties) which was divested by a Spanish bank. The portfolio has been purchased at a significant discount to par and under our base cash flow scenario offers double digit unlevered returns.

In December 2014, the Company closed a first loss regulatory capital investment in a static portfolio of Italian SME exposure, originated by a large Italian corporate and investment bank. This is the first investment for the Company in an exclusively Italian portfolio, and the Investment Adviser has carefully and fully examined the bank's underwriting, monitoring and work-out processes. The investment represented approximately 5% of the Company's NAV, and leaves the Company almost fully invested at an 86% cash utilisation level (based on December month end).

Investment Outlook

The Investment Adviser has continued to work through multiple regulatory capital transactions and is particularly conscious of a high pick up of demand for regulatory capital transactions from aggressive new players in the sector. In the light of this new demand, the Investment Adviser has become increasingly selective, choosing to pass on investments that are not expected to deliver robust relative value for the Company. For further information on the investment outlook please see page 9.

Corporate Governance

Foreign Account Tax Compliance Act ("FATCA")

The Company has registered under the U.S. Foreign Account Tax Compliance Act (" FATCA").

Alternative Investment Fund Managers Directive ("AIFDM")

The Company is considered to be an Alternative Investment Fund ("AIF") under the Alternative Investment Fund Managers Directive ("AIFMD") and will be managed by an Alternative Investment Fund Manager ("AIFM") entity that is part of the Chenavari Group. It is proposed that Quintillion Limited, the Company's Sub-Administrator, will act as depository for the Company.

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's new 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.

Interim Management Statements

Following changes to the Disclosure and Transparency Rules, the Company is no longer required to publish interim management statements. The monthly factsheets will still be produced to keep shareholders and other interested observers informed of developments in the market, and in the Company's portfolio and performance.

Overall, this has been a positive period for the Company. We expect a strong pipeline of issuance in Q1 and Q2 2015 with continued growth anticipated as we source high quality investments at attractive pricing.

Trevor Hunt

Chairman

29 January 2015

Investment Manager's Report

Investment Review

The Company launched with £130.3 million gross proceeds in October 2013. During its first financial period, the Company invested £129m in regulatory capital transactions in accordance with the Company's investment objective and policy and has collected £46m from those investments through sales or principal amortization. As of 30 September 2014, the Company was 67.7% invested.

The sector allocation as of 30 September 2014 reflected the anticipated target portfolio with a significant representation of corporate and SME loans.

Geographically the portfolio was diversified with the largest position being an amortising exposure to a granular pool of Portuguese SME and corporate loans.

As at 30 September 2014, the portfolio consisted of four primary transactions and seven secondary transactions and achieved a spread of investment risk. The top five holdings were the following:

(1) The counterparty exposure to the account bank which holds the cash collateral is above the 25% net exposure to any one bank counterparty as described in the Company's investment objective and policy and has been hedged through a credit default swap in order to comply with the Company's stated bank counterparty limits.

Performance

During the period from launch to 30 September 2014, the Company's NAV increased by 4% (net of issue costs).

The month-on-month performances since inception, dividends reinvested, were the following:

On 1 August 2014, the Company recorded a first dividend payment of 4.00 pence per share for the period to 30 June 2014.

Post Balance Sheet Events

In October 2014, the Company closed a €21.6m investment in a portfolio of Spanish real estate exposure (secured loans and residential properties) which was divested by a Spanish bank. The portfolio has been purchased at a significant discount to par and under our base cash flow scenario offers double digit unlevered returns.

On 7 November 2014, the Company recorded a second dividend payment of 1.25 pence per share for the period to 30 September 2014.

In December 2014, the Company closed an €8.6m first loss regulatory capital investment in a static portfolio of Italian SME exposure, originated by a large Italian corporate and investment bank. This is the first investment for the Company in an exclusively Italian portfolio, and the Investment Adviser has carefully and fully examined the bank's underwriting, monitoring and work-out processes. The investment represented approximately 5% of the Company's NAV, and leaves the Company almost fully invested at an 86% cash utilisation level (based on December month end).

On 31 December 2014, the NAV per share was 99.05 pence and the Company's mid-market share price was 104.50 pence, representing a premium to NAV of 5.5%.

On 21 January 2015 the Company announced a third dividend payment of 1.35 pence per share for the period to 31 December 2014.

Investment Outlook

As 2014 began, we looked forward to a year in which transaction volume motivated by regulatory capital considerations would increase due to three main drivers:

1. A continued increase in acceptance of regulatory capital transactions by the regulatory community as an effective and safe tool for managing the risk in the banking system and reducing risk weighted assets

2. New regulatory pressures such as the Asset Quality Review ("AQR"), the increased focus on Leverage Ratios, Total Loss Absorbing Capital ("TLAC") coming to the fore as well as the continued Basel III phase-in

3. The normalisation of the peripheral banks and a change in their behaviour from "disaster recovery" to rebuilding their origination and optimising their balance sheet

For the first half of the year the progress towards these predictions was frustratingly slow. The number of transactions being discussed by banks was high, but there was little in the way of solid investment opportunities, resulting in a tightening on deals that led to the Investment Manager deciding not to participate in several cases. As for further jurisdictions, we did see a transaction occurring in Italy on a specialist asset class, which was encouraging with respect to the Italian regulator's position.

As Q3 began and internal capital management teams completed their engagement with the ECB regarding the AQR, our predictions materialised. The Italian regulator has signed off on a structure and we have seen a number of deals emerge with SME loan collateral. UK banks have also started to engage investors on transactions which are very attractively structured due to the Prudential Regulation Authority's stringent requirements. Alongside transactions from the "usual participants" this has resulted in a large number of opportunities to deploy capital, which should limit spread compression, and validate the Investment Manager's risk/reward decisions earlier in the year.

The Investment Manager believes many of the themes of 2014 will continue into 2015. Acceptance by national regulators of regulatory capital transactions continues to increase apace, as banks and regulators adopt a more open dialogue with each other. In some jurisdictions, such transactions are now becoming embedded as an effective risk management tool to be used in banks' normal course of business. As part of this, most banks now intend to establish programmes as repeat issuers, which will drive volumes higher through the year. Capital pressures will continue through the year, with a seemingly endless stream of additional regulatory requirements that banks will be required to meet over the coming years.

Toro S.a.r.l.

Invesment Manager

29 January 2015

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 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:

Trevor Hunt, non-executive chairman (aged 61)

Trevor Hunt, a Jersey resident, has extensive experience in the offshore financial services fund administration sector. Mr. Hunt worked for HSBC for over 30 years in various senior management positions, in particular within the open-ended and closed-ended offshore funds industry. Mr. Hunt retired from HSBC in 2003 and spent six years as a director of Capita Financial Administrators (Jersey) Limited and of other Capita entities before leaving in 2009 to join BNP Paribas Securities Services in a senior management role. On 30 September 2011, Mr. Hunt left BNP Paribas in order to focus on providing non-executive directorship services to a number of Channel Islands funds and fund management companies. Mr. Hunt is registered with the Jersey and Guernsey Financial Services Commissions to carry out the provision of services as a non-executive director. Mr. Hunt is also a member of the AIC Channel Islands Committee, the Jersey Association of Directors and Officers and the Guernsey Finance Sector Non-Executive Director Forum and holds the Chartered Institute of Bankers (Trustee Diploma).

René Mouchotte, non-executive director (aged 68)

René Mouchotte 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. Mr. Mouchotte is currently an independent board member of Eurotitrisation and Traccr Ltd. Mr. Mouchotte is an independent non-executive director of Toro S.a.r.l, a Luxembourg private limited liability company, as well as an independent director of the Chenavari Multi-Strategy Fund Limited (and of its trading subsidiaries), a Cayman Islands umbrella fund. Both of these funds are managed within the Chenavari Financial Group. Mr. Mouchotte 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. Mr. Mouchotte 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.

Iain Stokes, non-executive director (aged 50)

Iain Stokes acts as a consultant for Wyvern Partners, an independent corporate advisory firm. In his early career he worked in audit and advisory for BDO, Guernsey before joining Guernsey International Fund Managers Limited (part of Barings) in 1996. Mr. Stokes joined Mourant International Finance Administration (MIFA) in 2003 as Head of its Guernsey office and following a period as Head of Private Equity funds, from 2008 was Group Managing Director. Mr. Stokes was a member of the executive team that managed the sale of MIFA to State Street Corporation in 2010 and was a Senior Managing Director in State Street's Alternative Investment Solutions business unit as Head of Private Equity Product, EMEA until June 2012. Mr. Stokes holds a range of non-executive directorships on fund management and fund investment companies focused on alternative asset strategies. He is a Chartered Certified Accountant, holds the Institute of Directors Diploma in Company Direction and is resident in Guernsey.

Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges

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

Company Name Stock Exchange

Trevor Hunt (Chairman)

GCP Infrastructure Investments Limited London Stock Exchange

The Black Sea Property Fund Limited London Stock Exchange

BDP Limited CISEAL

Iain Stokes

Cayzer Continuation PCC Limited CISEAL

René Mouchotte

None held N/A

Report of the Directors

The Directors are pleased to present their Annual Report and Audited Financial Statements for the period from 12 July 2013 (date of incorporation) to 30 September 2014. 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. Returns to Shareholders will be predominantly as dividend income. The investment policy is set out in full in Note 1 to the financial statements.

The focus of the Portfolio is on investing in newly issued transactions ("Primary Transactions") referenced to credit exposure although transactions may also be acquired in the secondary market ("Secondary Transactions") where the Investment Adviser identifies attractive opportunities. The Company will invest its assets with the aim of spreading investment risk.

It is anticipated that the Portfolio will be focused on between five to ten primary transactions and that these will represent 75 per cent. or more of the Company's total assets, once the Portfolio is fully invested. The Company will have 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. No more than 20 per cent. 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 per cent. 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 per cent. of NAV, calculated at the time of investment.

During the Investment period and realisation period, the Company may invest the Net Issue Proceeds and any further monies raised following Admission, and may reinvest the net capital proceeds of any realisations of investments, up to and including 31 December 2015. Thereafter the net principal receipts from the realisation or amortisation of investments, together with any uninvested funds will be returned to Shareholders. The mechanism for any return of cash to Shareholders may include a combination of capital distributions, share repurchases and redemptions.

Results

The results for the period to 30 September 2014 are set out in the Statement of Comprehensive Income on page 31. The profit for the period and total comprehensive income was £5,083,793.

Dividends

The Directors consider the recommendation of a dividend on a quarterly basis and the Company declared its first dividend of 4.00 pence per share for the period to 30 June 2014, which was paid on 15 August 2014 to shareholders recorded on the register at close of business on 1 August 2014. A second dividend of 1.25 pence per share for the period to 30 September 2014 was paid on 28 November 2014 to shareholders recorded on the register at close of business on 7 November 2014, making a total payment to shareholders of 5.25 pence in respect of the period from admission to the first financial year end.

A third dividend was declared on 21 January 2015 of 1.35 pence per share for the period 1 October 2014 to 31 December 2014 which will be paid on 20 February 2015 to shareholders recorded on the register as at close of business on 30 January 2015.

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).

Share Capital

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 Specialist Fund Market of the London Stock Exchange on 7 October 2013. Details of share movements during the period are set out in Note 15 of the Financial Statements on page 50. At 30 September 2014, the Company's issued share capital amounted to 130,300,000 shares, none of which were held in treasury.  No shares were bought back during the period. The current authority to purchase shares for cancellation expires on the date of the next Annual General Meeting which will be held in Guernsey on 13 March 2015.

Discount control

The Company may, subject to compliance with the 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 in relation to where the market price of a Share trades at more than 7.5 per cent. below the latest published NAV per Share for more than 90 days.

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 a 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 per cent. of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5 per cent. per annum with a catch up. From the period 7 October 2013 to 30 September 2014, no performance fee was paid or accrued for payment to the Investment Manager.

The Board keeps the performance of the Investment Manager under continual review, and the management engagement committee, comprising all Directors, conduct 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 Toro S.a.r.l. 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's new 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.

AIFMD

The Board notes that the transitional period under the Alternative Investment Fund Managers Directive ("AIFMD") expired on 22 July 2014. The Company's Investment Manager is currently awaiting approval from the Commission de Surveillance du Secteur Financier as the Luxembourg 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 directly impacted by the AIFMD (save for certain consequential effects arising from its appointment of an EU domiciled Alternative Investment fund Manager ("AIFM"), such as the requirement to appoint a depositary). The Board acknowledges that if active marketing is undertaken in the EEA the private placement regime requirements for the relevant jurisdiction would need to be met.

FATCA

FATCA became effective on 1 January 2013 and is being gradually implemented under various guises internationally. The initial US legislation was aimed at determining the ownership of US assets in foreign accounts and improving US tax compliance with respect to those assets. To date, 112 countries have noted their intention to comply with US FATCA, 54 of which have signed intergovernmental agreements ("IGA's") which agree to the provision or exchange of information and 58 countries have reached agreements in substance. On 21 July 2014 the first draft of the OECD Common Reporting Standard ("CRS") commentary was released which is hoped will supersede the various FATCA legislations and allow governments to obtain detailed account information from financial institutions, and exchange that information automatically with other jurisdictions on an annual basis. On 13 December 2013, the States of Guernsey entered into an IGA with the US Treasury in order to facilitate the requirements under US FATCA the Company has registered for its Global Intermediary Identification Number ("GIIN") with the Inland Revenue Service ("IRS") and the Board is monitoring developments with the assistance of its professional advisers.

Significant Shareholdings

Shareholders with holdings of more than 3.0% of the Ordinary Shares of the Company at 30 September 2014 were as follows:

Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the Financial Statements in view of its holding in cash and cash equivalents and investments as well as the income deriving from those investments, meaning the Company has adequate financial resources to meet its liabilities as they fall due.

Directors

The Directors of the Company during the period and at the date of this Report are set out on page 5.

Directors' and Other Interests

None of the Directors have a direct or indirect holding in the Company nor have they been granted options to acquire shares in the Company.

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

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. 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 Auditors

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 Auditors

Deloitte LLP ("Deloitte") was formally appointed as the Company's auditor for the 2014 year end audit following a competitive tender process during 2013.

A resolution for the reappointment of Deloitte will be proposed at the next Annual General Meeting.

Signed on behalf of the Board of Directors by:

Trevor Hunt, Chairman

Iain Stokes, Director

29 January 2015

Corporate Governance Report

The Company is admitted to trading on SFM 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 and Transparency Rules of the Financial Conduct Authority ("DTRs") while traded on SFM, 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

Pursuant to the listing rules of the UKLA, the Company is required 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 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 any company in the same group as the Investment Manager; the Chairman of the Board of Directors is free from any conflicts of interest and is independent of the Investment Manager and of any company in the same group as the Investment Manager; and that no partner, employee or professional adviser to the Investment Manager or any company in the same group as the Investment Manager may be a Director of the Company at any time.

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 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 as all Directors are non‑executive 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.

Explanation: The Company's Audit Committee comprises all members of Board, however Mr Mouchotte, by virtue of his directorship of the Investment Manager and other funds managed within the Chenavari Group, is not considered independent of the Advisers. Given Mr Mouchotte's extensive investment experience, the independent members of the Audit Committee are of the opinion that shareholder interests are best served through Mr Mouchotte's membership of the Audit Committee.

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 since 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 accounts and reports to Shareholders.

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 make 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 page 26 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. As the Company voluntarily reports by reference to the UK Code, it is deemed 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 11. Mr Hunt and Mr Stokes are considered independent of the Advisers for the purposes of the Company's compliance with the UK Code. However Mr Mouchotte, by virtue of his directorship of the Investment Manager and other funds managed within the Chenavari Group is not considered independent of the Advisers.

The Chairman of the Board is Trevor Hunt and, in this function, is responsible for the leadership of the Board and ensuring its effectiveness on 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 Hunt 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 and the Corporate Broker. The Directors are kept fully 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 twice 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.

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

At the 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 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 and external audit.

The Management Engagement Committee's 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.

The Board has a breadth of experience relevant to the Company and the Directors believe that any changes to the Board's composition can be managed without undue disruption. With any new director appointment to the Board, consideration will be given as to whether an induction process is appropriate.

The Board has reviewed its composition and believes that the current appointments provide an appropriate range of skills, experience and diversity. In order to maintain its diversity, the Board is committed to continuing to review its current composition.

Audit Committee

An Audit Committee has been established consisting of all Directors with Iain Stokes 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 22.

Management Engagement Committee

The Board has established a Management Engagement Committee with formal duties and responsibilities. The Management Engagement Committee commits to meeting at least once a year and comprises the entire Board with Trevor Hunt appointed as chairman. 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. 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 carried out its first review of the performance and capabilities of the Investment Manager at its meeting on 19 November 2014 to confirm that the continued appointment of Toro S.a.r.l. as Investment Manager is deemed to be in the interest of shareholders. At the same meeting, the Management Engagement Committee concluded that the Company's other service providers were performing in accordance with the Company's expectations and contractual arrangements in place.

Board Performance

In the last quarter of the financial period under review, 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, 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 include 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.

Audit Committee Report

I am pleased to report to you on the activities of the Audit Committee for the period from 12 July 2013 (date of incorporation) to 30 September 2014.

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 Audit Committee is 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 judgments which they contain.

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 as all functions, including the preparation of the financial statements, have been outsourced to various service providers. Morgan Sharpe Administration Limited have been appointed as Administrator and Company Secretary, Quintillion Limited as Sub-Administrator, Toro S.a.r.l. as Investment Manager, JPMorgan Chase Bank National Association as Custodian and Principal Bankers and Capita Registrars (Guernsey) Limited as Registrar (together the "Outsourced Service Providers"). Please see page 5 for further details in relation to these service providers.

Membership of the Committee

The Audit Committee was established on incorporation and consists of Trevor Hunt, Rene Mouchotte and myself, Iain Stokes, as its chairman. All the members of the Audit Committee are non-executive directors. Mr Hunt and I are considered independent of the Advisers for the purposes of the Company's compliance with the UK Code however Mr Mouchotte, by virtue of his directorship of the Investment Manager and other funds managed within the Chenavari Group is not considered independent of the Advisers. The Audit Committee has concluded that its membership meets the requirements of C.3.1 of the UK Code. Each Audit Committee member is expected to be financially literate and to have 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.

As an Audit Committee we meet at least three times a year. Personnel 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 has met 7 times, attendance at which is set out on page 18. The Audit Committee meetings focused on the following key areas:

Monitoring the integrity of the financial statements including significant judgments

· We reviewed the appropriateness of the Company's significant accounting policies, critical accounting judgments 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 period from 12 July 2013 (date of incorporation) to 30 September 2014 (the "Annual Report"). We compared the results with, management accounts, budgets and monthly net asset values, focusing on the significant accounting matters set out below.

· In undertaking this review, we discussed with the Administrator, Sub-Administrator and Deloitte the critical accounting policies and judgments 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 judgments 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 International Financial Reporting Standards ("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.

Significant Accounting Matters

During the year the Audit Committee considered key accounting issues, matters and judgments 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 2014, the Company's investments had a fair value of £87.8m 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 Administrator, the Sub-Administrator the Custodian, the Audit Committee and the Board.

Investments are valued in accordance 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 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. 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 judgments 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 income statement. This is explained further in notes 7 and 11 to the financial statements.

Investment Manager's Fee

The Audit Committee identified the calculation of the Investment Manager's Fee to represent a significant risk of misstatement in the Company's financial reporting. The Committee requested the Administrator, Sub-Administrator, Auditor and Investment Manager to work together to ensure that the Management Fee calculation agreed to the terms of the Management Fee calculation methodology as set out in the Investment Management Agreement. The Audit Committee reviewed a detailed calculation methodology prepared by the Sub-Administrator and agreed the calculation with the Auditor and Investment Manager.

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, 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.

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. However, the Audit Committee receives confirmations from the Outsourced Service Providers 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. The Audit Committee confirms that this is an ongoing process in order to manage the significant risks faced by the Company. We deem that, to date, there are no significant issues in this area that need to be brought to your attention.

External Audit

It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of Deloitte. In January 2014, we 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. We further met with Deloitte in July 2014 to review their Interim Review Report in relation to the Company's Unaudited Interim Financial Statements for the period from 12 July 2013 (date of incorporation) to 31 March 2014. 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 appointed as the Company's auditor for the 2014 year end audit following a competitive tender process during 2013. The lead audit partner will be rotated every five years to ensure continued independence and objectivity. 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 at the forthcoming Annual General Meeting. 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 £45,000. Non-audit services were primarily in relation to the Company's initial public offering and whilst, as a proportion of audit services amount to approximately 67%, the Audit Committee is satisfied that the overall quantum of ongoing non-audit services is not anticipated to be material.

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 Annual General Meeting 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

Chairman, Audit Committee

29 January 2015

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 Boards 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 be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities, as are the Chairmen of the Audit Committee and the Management Engagement Committee. The policy is to review fee rates periodically, although such a review will not necessarily result in any changes to the rates, account will be taken of fees paid to directors of comparable companies.

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

Trevor Hunt (Chairman of the Board) £42,500

Iain Stokes (Audit Committee Chairman) £40,000

Rene Mouchotte £37,500

Total £120,000

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 period from 12 July 2013 (date of incorporation) to 30 September 2014 and is not expected to change in the foreseeable future.

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

The Directors were appointed as non-executive Directors by letters issued in 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 were for services as non-executive Directors. No Director has a service contract with the Company, nor are any such contracts proposed.

None of the Directors has any personal financial interest in any of the Company's investments

Signed on behalf of the Board of Directors on by:

Trevor Hunt, Chairman

Iain Stokes, Director

29 January 2015Statement 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 International Financial Reporting Standards ("IFRS") and applicable law.

The Financial Statements are required by law to 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:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors confirm that they have complied with these requirements in preparing the Financial Statements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements have been properly prepared in accordance with The Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. They also have the responsibility for the maintenance and the integrity of the Company's website.

The maintenance and integrity of the Company's website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with International Financial Reporting Standards asissued by the International Accounting Standards Board, 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; and

· the annual report and 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.

Signed on behalf of the Board of Directors on by:

Trevor Hunt, Chairman

Iain Stokes, Director

29 January 2015

Independent Auditors' Report to Chenavari Capital Solutions Limited

David Becker

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

Guernsey, Channel Islands

29 January 2015

Statement of Comprehensive Income

For the period 12 July 2013 (date of incorporation) to 30 September 2014

Director : Trevor Hunt Director : Iain Stokes

Date : 29 January 2015 Date : 29 January 2015

All items in the above statement derive from continuing operations.

There are no comparative figures as this is the Company's first financial period of operation

The notes to the financial statements are an integral part of the financial statements.

Statement of Financial Position

as at 30 September 2014

Director :Trevor Hunt Director : Iain Stokes

Date : 29 January 2015 Date : 29 January 2015

There are no comparative figures as this is the Company's first financial period of operation

The notes to the financial statements are an integral part of the financial statements.

Statement of Changes in Equity

For the period 12 July 2013 (date of incorporation) to 30 September 2014

There are no comparative figures as this is the Company's first financial period of operation

The notes to the financial statements are an integral part of the financial statements.

Statement of Cash Flows

For the period 12 July 2013 (date of incorporation) to 30 September 2014

There are no comparative figures as this is the Company's first financial period of operation

The notes to the financial statements are an integral part of the financial statements.

Condensed Schedule of Investments, at Fair Value

Chenavari Capital Solutions Limited

As at 30 September 2014

Notes to the Financial Statements for the period 12 July 2013 (date of incorporation) to 30 September 2014

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 Specialist Fund Market of the London Stock Exchange ("SFM"). Such Shares were also listed on the Official List of 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.

Target returns and dividend policy

On the basis of market conditions as at the date of the prospectus, and whilst not forming part of its investment objective or investment policy, the Company will target a net total return on invested capital of 12 per cent. per annum or more over the life of the Company. Returns to Shareholders will be predominantly as dividend income.

Subject to compliance with the Law and the satisfaction of the solvency test, the Company intends to distribute all 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.

The Net Issue Proceeds continue to be invested in accordance with the investment policy as rapidly as practicable. Primary transactions (i.e. transactions that are originated and bought at issue) are expected to be concentrated on between five to ten transactions and whilst the timing of the closing of a particular transaction is difficult to predict, the Company expects to be substantially fully invested by 31 January 2015.

Subject to market conditions and the financial position of the Company, the Company aimed to pay dividends totalling at least 5.00 pence per Ordinary Share in respect of the period from Admission to the first financial period end. The Company declared a dividend of 4.00 pence per share in July 2014 for the period to 30 June 2014 and a further divided of 1.25 pence per share in October 2014 for the period from 1 July 2014 to 30 September 2014 and therefore a total dividend payment of 5.25 pence over the term of the reported financial period.

The target returns and dividend payments should not be taken as a forecast of the Company's future performance, profits or results. 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.

Investment period and realisation period

As noted, the Company expects to be substantially fully invested by 31 January 2015, the Company will seek to invest the Net Issue Proceeds and any further monies raised following Admission as described above and to reinvest all further cash balances that arise, to the extent that they are not required for working capital purposes or the payment of dividends in accordance with the Company's dividend policy.

Notes to the Financial Statements (continued)

1. General information (continued)

Following 31 December 2015, the Company will return to Shareholders any unencumbered cash and such cash balances as arise from time to time as a result, predominantly, of investments maturing in accordance with their terms or otherwise. Amounts required 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 and for settling transactions contractually agreed before 31 December 2015, will be excluded from such returns of cash to Shareholders. The Company will not be under any obligation to sell investments before they mature in order to fund returns of cash to Shareholders, but may do so to optimise returns.

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 once fully invested, will be on investing in newly issued transactions ("primary transactions") referenced to credit exposure although transactions are acquired in the secondary market ("secondary transactions") where the Investment Adviser identifies attractive opportunities.

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

It is anticipated that the Portfolio will be focused on between five to ten primary transactions and that these will represent 75 per cent. or more of the Company's total assets, once the Portfolio is fully invested.

The Company has 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.

No more than 20 per cent. 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 per cent. 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 per cent. 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 per cent. 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-1 (Standard & Poor's) or P-1 (Moody's).

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 from 31 December 2015 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 31 December 2015 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.

Indicative Portfolio composition

The Company seeks to diversify its exposures to underlying asset types. It is anticipated that, once the Portfolio is fully invested, corporate and retail loans will each represent 40 to 60 per cent. of the Company's underlying exposure, with other asset types representing up to 20 per cent. of the Company's underlying exposure. Corporate credit assets could include portfolios of loans to companies and commercial mortgages. Retail credit assets could include portfolios of residential mortgages, credit card loans or other obligations backed by individual borrowers. Other asset types could include derivatives counterparty risk, where banks' exposures to counterparty risk embedded in foreign exchange, interest rate and other similar derivatives transactions and portfolios of securities that have become capital intensive for banks.

Notes to the Financial Statements (continued)

1. General information (continued)

The Company also seeks to diversify its exposure to underlying assets geographically. It is anticipated that, once the Portfolio is fully invested, the Company's underlying exposure will be represented as to 30 to 50 per cent. by UK Bank Counterparties, 20 to 40 per cent. by German and Swiss Bank Counterparties (taken together), 5 to 15 per cent. by Bank Counterparties domiciled in the Benelux countries, 5 to 15 per cent. by French Bank Counterparties and less than 15 per cent. in aggregate by Bank Counterparties domiciled in Portugal, Italy, Ireland, Greece and Spain.

The ranges set out above do not represent maximum or minimum investment exposures and are stated only by way of guidance.

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 per cent. 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 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 credit default swap, 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 Company's investment policy, the Company's principal use of cash (including the Net Issue Proceeds) will be to fund investments sourced by the Investment Adviser, as well as initial expenses related to the Issue, ongoing operational expenses and payment of dividends and other distributions to Shareholders in accordance with the Company's dividend policy as set out in the section entitled "Dividend Policy" in Part I of the prospectus.

Whilst the Company intends to be substantially fully invested by 31 January 2015, the Company may from time to time have surplus cash (for example, following the disposal of an acquired investment). Cash held by the Company pending investment or distribution 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).

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 Annual Financial Statements for the period from 12 July 2013 to 30 September 2014 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, the Disclosure 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.

New standards and interpretations not yet adopted

The Company has not applied the following new and revised IFRSs 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 cashflows 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. Whilst the directors have not completed the analysis of the impact, the presence of leverage in the financial assets held by the Company is currently expected to result in the continued classification of financial assets as Fair Value Through Profit and Loss with no change to the measurement basis applied.

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.

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 (continued)

 (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.

 (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.

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 consolidated 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.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

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 consolidated statement of financial position date, respectively as well as collateral posted to derivatives counterparts.

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. The costs are those which were necessary for the incorporation of the Company, admission to trading on the London Stock Exchange and the initial issue of shares. Such costs and expenses were fixed at 2 per cent of the gross issue 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 period-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 2014 were as follows: EUR 0.7792 USD 0.6168 CHF 0.6456

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

Accrued expenses are recognised initially at fair value and subsequently stated at amortised cost using the effective interest method.

2.11 Other receivables and prepayments

Other receivables are amounts due in the ordinary course of business. Other receivables are recognised at fair value.

Notes to the Financial Statements (continued)

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.

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 £600 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 Annual 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.

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 Net Asset Value ("NAV") is derived from the Company's valuation policy. In particular, fair values of credit default swaps 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.

During the period, the Company made four primary transactions and ten secondary transactions, of which four primary and seven secondary transactions are held at period end. Based on the hierarchy set out in IFRS 13, four secondary transactions are classified as Level 2 based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. The remaining transactions have been classified as Level 3 where broker quotes are unavailable or discounted, or cannot be substantiated by market transactions. The Directors monitor the availability of observable inputs and if necessary, reclassify to level 3 where observable trading is not available.

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 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 initial fee for Mr. Mouchotte is £37,500. The initial fee for Mr. Stokes as chairman of the Audit Committee is £40,000 per annum. The initial fee for Mr. Hunt as Chairman is £42,500 per annum.

During the period ended 30 September 2014, Directors fees of £120,000 were charged to the Company, of which £Nil remained payable at the end of the period.

(b) Shares held by related parties

As at 30 September 2014, none of the Directors held Shares in the Company.

As at 30 September 2014, neither the Investment Manager nor partners and employees of the Investment Manager or the Investment Adviser held any of the Issued Share Capital.

(c) Investment Manager

The Company receives investment management services from the Investment Manager, a limited company incorporated in Luxembourg. Under the terms of the investment management agreement dated 16 September 2013 as novated on 22 July 2014 the Investment Manager receives in return a fee of one-twelfth of 1 per cent on the net asset value, 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 period amounted to £1,063,796 for Chenavari Investment Managers (Guernsey) Ltd and £213,164 for Toro S.a.r.l. with £107,310 in outstanding accrued fees due to Toro S.a.r.l. at the end of the period.

The Investment Manager is also entitled to receive from the Company a performance fee equal to 20 per cent. of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5 per cent 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 cent. per annum (the "Hurdle"). Thereafter, amounts available for distribution in excess of the Hurdle shall be distributed by the Company as to 50 per cent. to Shareholders and paid as to 50 per cent. to the Investment Manager until the Investment Manager has received 20 per cent. 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 per cent. to Shareholders and paid as to 20 per cent. by way of payment of the performance fee to the Investment Manager.

The Hurdle shall be adjusted to reflect any Share repurchases (or equivalent) by the Company and any further issues of Shares (including C Shares) by the Company on the relevant date of repurchase or issue.

Performance fees shall be accrued by the Company over time on the basis that the Net Asset Value at each NAV Calculation Date is treated as a Distributable Surplus.

As of 30 September 2014, no performance fee was accrued according to those principles.

5. Material Agreements

(a) Financial Adviser and Bookrunner to the Placing

For its services as the Company's placing agent pursuant to a placing agreement dated 23 September 2013 in connection with the IPO of shares in October 2013, Dexion Capital Limited (the "Placing Agent") was entitled to receive a corporate finance fee and a commission calculated by reference to the Gross Issue Proceeds of the Placing of the IPO. The Placing Agent received a fee of £2,006,000 under this agreement. These fees are shown in equity as a deduction from the proceeds of the issue of Shares. Dexion is also entitled to receive a retainer for their corporate broking services of £75,000 per annum, payable quarterly in advance.

 (b) Administration fee

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 period amounted to £51,252.

Notes to the Financial Statements (continued)

5. Material Agreements (continued)

(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 0.09% per annum of NAV, excluding certain expenses. Sub-Administration fees for the period amounted to £94,727 of which £11,092 remained payable at the end of the period.

(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) 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.

No more than 20 per cent. 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 per cent. 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 per cent. of NAV, calculated at the time of investment.

As of 30 September 2014, the Company had one exposure representing 26.79% of the NAV, above the 25% limit. The exposure to the account bank which holds the cash collateral has been hedged through a credit default swap resulting in a net exposure within the required 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 per cent. 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-1 (Standard & Poor's) or P-1 (Moody's).

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

The Company manages the portfolio with appropriate diversification in terms of sectors and geographical breakdowns. As of 30 September 2014, the breakdown of the NAV per asset class and geography was as follows:

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:

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 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.

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

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.

6.3 Interest rate risk

Interest rate risk is the risk of gain or loss resulting from exposure to movements on interest rates. The Company does not actively take interest rate risk, but incurs it as a normal course of business and employs a series of hedges to minimise these risks. The Company only holds floating rate financial instruments which have little exposure to fair value interest rate risk as, when the short term interest rates increase, the interest on a floating rate note will increase. The value of assed backed securities may be affected by interest rate movements. Interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations on interest rates, however the underlying cash positions will not be affected.

The Company's continuing position in relation to interest rate risk is monitored by the Investment Manager.

6.4 Liquidity Risk

A proportion of the Company's balance sheet is made up of assets and liabilities which may not be realisable as cash on demand. As a result an exposure to liquidity risk exists. This risk is mitigated by the closed-ended nature of the Company and the reinvestment period and distribution features.

The table below analyses the Company's liabilities into relevant maturity groups based on the remaining period at the balance sheet date to the contractual maturity date.

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.4 Liquidity Risk (continued)

The Company is all equity funded and has been established as a Registered Closed-ended Collective Investment Scheme. Other than in the circumstances and subject to the conditions set out in Part I of the prospectus, Shareholders will have no right to have their Shares redeemed or repurchased by the Company at any time. Shareholders wishing to realise their investment in the Company will normally therefore be required to dispose of their Shares through the secondary market.

6.5 Price Risk

At 30 September 2014, if the market prices had been 5% higher with all other variables held constant, the increase in the net assets attributable to equity Shareholders would have been £4,391,968. An equal change in the opposite direction would have decreased the net assets attributable to equity Shareholders.

7. Fair value of financial instruments

The fair values 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 period end date. The Company has adopted IFRS 13, 'Fair value measurement' and this standard requires the Company price its financial assets and liabilities using the price in the bid-ask spread that is most representative of fair value for both financial assets and financial liabilities. 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. No such event occurred. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

For financial assets and liabilities not traded in active markets the fair value is determined by using various methods including alternative price sources including a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised dealer in the respective position.

The hierarchy is broken down into three levels based on the observability of inputs as follows:

Level 1: Quoted price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Notes to the Financial Statements (continued)

7. Fair value of financial instruments (continued)

The following tables show the Company's assets at 30 September 2014 based on the hierarchy set out in IFRS 13:

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include corporate bonds, asset backed bonds, certain non-sovereign obligations and over-the-counter derivatives. As Level 3 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently.

There have been no significant transfers between levels during the period. Seven Level 3 investments were held during the period.

As of 30 September 2014, seven investments were categorised within Level 3 of the fair value hierarchy, representing 55.0% of the NAV.

Notes to the Financial Statements (continued)

7. Fair value of financial instruments (continued)

With the exception of the CLO warehouse (transaction 1), those investments were valued using third-party pricing information. Those third-party prices were corroborated, when possible, with transactions although those do not always happen frequently.

The below sensitivity analysis presents an approximation of the potential effects of events that could have occurred as at the reporting date, and mostly based on the Investment Advisor's stress case.

However, since all valuations were based upon prices received from banks or other market participants, the sensitivity analyses produced are not necessarily based upon the assumptions used by such banks/market participants as these are not made available to the Company.

Transaction 1

This investment is a CLO warehouse transaction expecting to amortize in the coming months at principal plus interest, and was then valued at a 100% as of 30th September 2014. Reasonably possible changes in the unobservable inputs to the valuation of these transactions would not lead to a significant change in the fair value of the asset.

Transaction 2

This investment was bought on the secondary market and is valued using 2 independent third-parties marks on which a discount was applied. This discount represents less than 0.25% of the NAV. Reasonably possible changes in the unobservable inputs to the valuation of these transactions would not lead to a significant change in the fair value of the asset.

Transaction 3

The valuation of the transaction is sensitive to the performance of the underlying collateral in the reference transaction.

In the Investment Advisor's default stress case the impact to the Company's NAV is less than 0.30%.

Transaction 4

The transaction is resilient to increases in the collateral default rate but shows mark-to-market sensitivity to market credit default swap spreads.

In the Investment Advisor's default stress case the impact to the Company's NAV is minimal.

If the relevant credit default swap spreads widen by 100bps the impact to the Company's NAV is less than 0.50%

Transactions 5 /6

The main sensitivity of those transactions is to the occurrence of defaults in the underlying reference pool.

In the Investment Advisor's default stress case the impact to the Company's NAV is approximately 0.50%.

Transaction 7

The transaction has a short remaining life and hence the price sensitivity to performance of the collateral is now low.

8. Earnings per Share - Basic & Diluted

The earnings per Share - Basic and Diluted of 3.90 pence has been calculated based on the weighted average number of Shares of 130,300,000 and a net gain of £5,083,793 over the period from the IPO.

There were no dilutive elements to shares issued or repurchased during the period.

9. Net Asset Value per Share

The NAV per share of 97.90 pence is determined by dividing the net assets of the Company attributed to the Shares of £127,565,763 by the number of Shares in issue at 30 September 2014 of 130,300,000.

Notes to the Financial Statements (continued)

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