CCSL.L Regulatory News (CCSL)

Chenavari Capital Solutions Limited

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

Guernsey with registered number 56977)

Annual Report and Audited Annual Financial Statements

For the year ended 30 September 2016

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

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

Contents

Commodity Exchange Affirmation Statement

Highlights for the year ended 30 September 2016

Corporate Summary

General Information

Chairman's Statement

Investment Manager's Report

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

Statement of Directors' Responsibilities

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

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Condensed Schedule of Investments, at Fair Value

Notes to the Financial Statements

FORWARD-LOOKING STATEMENTS

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

Commodity Exchange Affirmation Statement

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

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

Kate Haswell

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

20 January 2017

Highlights for the year ended 30 September 2016

· During the year ended 30 September 2016 (the "Year"), the Company produced a net asset value ("NAV") total return of 4.23% (dividends reinvested) (2015: 7.68%).

· The NAV per Ordinary Share ("Share") declined from 99.41 pence at 30 September 2015 to 94.26 pence at 30 September 2016 net of distributions.

· Dividends of 7.5 pence per Share were declared in respect of the Year (2015: 7.5 pence), of which 6 pence per Share was paid during the Year, with a final dividend for the Year of 1.5 pence per Share paid on 12 December 2016.

· The Company's mid-market share price at 30 September 2016 was 85.0 pence (2015: 98.25 pence), representing a discount to NAV of 9.83% (2015: 1.17%).

· The profit of the Company for the Year was £5.0 million (2015: £9.5 million), or 3.80 pence per Share (2015: 7.31 pence per Share), taking into account recognition of the following significant items:

o total net income of £6.7 million (2015: £11.4 million).

o total operating expenses of £1.7 million (2015: £1.9 million).

· During the Year, the Company invested £6.4 million in bank capital solutions transactions (2015: £65.0 million) through the purchase of two primary transactions (2015: seven) and one secondary transaction (2015: four)

· At 30 September 2016, the Company was 91% invested (2015: 92%) in thirteen positions including ten primary transactions valued at £85.1 million (2015: eleven valued at £92.4 million) and three secondary transactions valued at £22.2 million (2015: four valued at £27.1 million). The Company had other assets and liabilities equating to 3.19% of NAV and cash equating to 9.39% of NAV at 30 September 2016 (2015: 4.91% and 3.37%).

· On 13 December 2016, the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it will commence a realisation period which will involve the return of unencumbered cash balances to Shareholders. It is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

Corporate Summary

For the year ended 30 September 2016

The Company

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

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

Investment objective and policy

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

Investment Period and Realisation Period

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

On 13 December 2016 the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it will commence a realisation period which will involve the return of unencumbered cash balances to Shareholders. It is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

Target returns and dividend policy

The Company's target NAV total net return to investors is 8-10 % per annum over the life of the Company. From 1 January 2017, returns to Shareholders will be predominantly from the return of unencumbered cash balances arising as a result of investments maturing in accordance with their terms or otherwise and as dividend income.

The Investment Manager and Investment Adviser

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

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

Asset values

At 30 September 2016, the Company's NAV was £122.8 million, with the NAV per Share amounting to 94.26p. The Company publishes its NAV on a monthly basis. The NAV is calculated as the Company's assets at fair value less liabilities, measured in accordance with International Financial Reporting Standards ("IFRS").

Duration

The Company has an indefinite life.

Corporate Summary (continued)

For the year ended 30 September 2016

Website

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

Listing Information

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

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

The closing price of the Shares quoted on the SFS at 30 September 2016 was 85.0p per Share.

The average closing price of the Shares over the year to 30 September 2016 was 88.0p per Share.

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present the Company's annual report and audited financial statements for the year ended 30 September 2016.

Following the extension of the investment period to 31 December 2016, the Company invested a further £6.4 million through the purchase of two primary and one secondary transactions and, as at 30 September 2016, the Company was 91% invested in thirteen positions (excluding foreign exchange positions and hedges), with its unencumbered cash position being £11.5 million at the year end.

Realisation of Investment Portfolio

On 13 December 2016, the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it will commence a realisation period (the "Realisation Period") which will involve the return of unencumbered cash balances to Shareholders. It is anticipated that such encumbered cash balances will arise predominantly as a result of investments maturing in accordance with their terms.

Apart from cessation of new investments, no further change to the Company's investment policy is proposed.

The precise mechanism for any return of cash to Shareholders will depend upon the relevant factors prevailing at the time and will be at the discretion of the Board, but may include a combination of capital distributions, share repurchases and redemptions. The amount and frequency of such distributions will be at the Company's absolute discretion. The Company may hold back the payment of cash proceeds during the Realisation Period until a material amount is available for distribution to Shareholders to avoid the cost and administrative burden of distributing small amounts.

It is the Company's intention to maintain its admission to trading of the Shares on the Special Fund Segment of the London Stock Exchange (the "Admission") until further notice. Any proposal to cancel the Admission would only be completed with the approval of Shareholders at an extraordinary general meeting.

The Company will continue to publish monthly NAV's and factsheets.

During the Realisation Period, it is inevitable that the Company's portfolio will become less diversified as assets are realised and the proceeds returned to Shareholders. Shareholders and prospective investors should note that this may increase the risk of an investment in the Company.

Based on the cash flows used to calculate the Base Case internal rate of return referred to in the Investment Manager's report, it is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

Performance

The profit for the Year was £5.0 million, equivalent to earnings per Share of 3.80 pence.

During the Year, the Company's NAV total return was 4.23% (dividends reinvested) and was 16.72% since inception (net of issue costs and dividends reinvested). The NAV per Share declined from 99.41 pence at 30 September 2015 to 94.26 pence at 30 September 2016 as a result of dividends exceeding profit for the Year.

Due to the increased discount to NAV at the end of the period, the share price total return for the Year was ‑4.37%, dividends reinvested. Since launch, the share price total return to the end of the Year was 3.17% (dividends reinvested).

During the Year the Share price moved from 98.25 pence at the close of business on 30 September 2015 to 85.0 pence on 30 September 2016. The discount to NAV moved from 1.17% on 30 September 2015 to 9.83% on 30 September 2016.

Dividends

Dividends declared for the Year came to 7.5 pence, of which three dividends were declared and paid in the Year and a fourth was declared and paid after the Year end (during the Year: 2p per Share paid on 26 February 2016 for the period ending 31 December 2015, 2p per Share on 27 May 2016 for the period ending 31 March 2016 and 2p per Share on 26 August 2016 for the period ending 30 June 2016; and following Year end, 1.50p per Share paid on 12 December 2016 for the final period ending 30 September 2016).

Chairman's Statement (continued)

Investment Portfolio and Performance

The details of the portfolio and performance are set out in the Investment Managers Report on page 10.

Board Review

During the year the Board undertook a review of its own performance and an evaluation of the operations of the Company's service providers. This is detailed further on pages 21 and 22.

We also noted Shareholder responses from the Annual General Meeting ("AGM") held on 16 March 2016 in that Mr Mouchotte, by virtue of his directorship of the Investment Manager (the "AIFM") and other funds within the Chenavari group, is not considered independent. Given Mr Mouchotte's directly relevant investment experience, the independent Directors are of the opinion that Shareholders' interests are best served through Mr Mouchotte's continued appointment and his contribution is considered to be an integral part of the Board's decision making process.

Outlook

On 23 June 2016, the United Kingdom voted in a referendum to leave the European Union. Significant uncertainties exist on the exit process and the consequences of such decision.

Since this decision, markets initially saw extreme volatility in forex and equity, and credit markets moved significantly down. The Company had built up sufficient cash reserves in order to meet margin calls on the FX forwards used to hedge the non-GBP fund assets. Given the high volatility expected in FX the Company has chosen to increase the buffer held against these hedging positions and has prudently monitored cash levels.

The Company has three assets that are linked to the UK economy and which have not felt any negative impact since the vote. The Investment Manager continues to monitor these positions actively but does not expect to see any deterioration in performance over the short term.

The focus for the Company over the coming months will be to exit its investments in the portfolio in an orderly manner and return capital to investors in the most expedient way at any particular point in the Realisation Period. As noted in the Company's Report on Viability, the Directors expect that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

The Investment Manager has set out to Shareholders the likely capital returns under a Base Case scenario and the Board will be working with the Investment Manager on the return of both capital and income. As the Company progresses through the Realisation Period and the total assets of the Company contract following each return of capital, the Board will also be working with its service providers to manage the total expense ratio.

Following consultation, it has been agreed to provide quarterly investor calls with Shareholders and these will be announced to the market in advance.

Annual General Meeting

The AGM of the Company will be held at midday on 28 March 2017 and Shareholders are invited to attend.

Rob King

Non-executive Chairman

20 January 2017

Investment Manager's Report

Investment Review

The Company launched with £130.3 million gross proceeds in October 2013. As of 30 September 2016, the Company was 91% invested.

The sector allocation as of 30 September 2016 reflected the anticipated target portfolio with a significant representation of corporate and SME loans.

Geographically the portfolio diversification continued to increase as the consequence of new investment and amortizing positions.

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

Investment Manager's Report (continued)

Performance

During the period from 1 October 2015 to 30 September 2016, the Company's NAV total return (dividends reinvested) was 4.23%.

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

Since inception, the Company paid the following dividends:

New Primary Transactions:

In January 2016 the Company invested €4 million in junior instruments in a short term loan warehousing transaction backed by a portfolio of leveraged corporate loans. Senior finance was provided by a leading global bank and financial services .

In May 2016, the Company re-invested approximately £3.5 million in a repeat transaction replacing an exposure that had recently matured in the portfolio. The transaction is a first loss exposure to SME and corporate loans extended by a large Swiss bank (the "Bank"). The loan portfolio is very granular with over 1,500 reference entities and a maximum concentration of 0.5%. The transaction references the core on-going business of the Bank. The Bank has a long track record of lending in the Swiss SME and corporate market and has experienced extremely low loan losses over the last 10 years with minimal increase through the financial crisis. The tight underwriting standards and borrower characteristics are integral to this stable performance.

Investment Outlook

We note the Company has determined that no further extension to the Investment Period will be sought and that it intends to commence the Realisation Period with effect from 1 January 2017. This is explained in the Chairman's Statement on page 8.

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

Investment Manager's Report (continued)

Investment Outlook (continued)

As of 30 October 2016, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company, are:

· 12.15% if all investments perform in line with the "Base Case";

· 16.91% if all investments perform in line with the "Upside Case"; and

· 3.51% if all investments perform in line with the "Stress Case".

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

Under the Base Case, it is estimated that investment cash flows during 2017 will be as detailed below, but there can be no assurances to this effect.

· Q1 2017 - £6.9m

· Q2 2017 - £7.3m

· Q3 2017 - £5.3m

· Q4 2017 - £8.3m

Based on the cash flows used to calculate the Base Case internal rate of return above, it is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

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

The Company attempts to remove FX risk from its non-GBP investments by hedging the notional or Mark-to-Market values with FX forwards which are rolled continually. This removes the NAV volatility that could be caused from FX movements but introduces a liquidity risk since, as GBP weakens illiquid positions increase in value while the FX forwards decrease in value but have daily margin calls from the counterparties. 

The Investment Manager has an internal risk policy that require a percentage of notional of the FX forward position to be held as cash in order to meet margin calls. Following Brexit this percentage has been increased for the Company to 6% in order to be prudent. The need to hold a buffer may impact the speed of return of capital to shareholders.

Chenavari Investment Managers (Luxembourg) SARL

Investment Manager

20 January 2017

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:

Robert King (aged 53)

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

Iain Stokes, non-executive director (aged 52)

Iain acts as a consultant for Wyvern Partners, an independent corporate advisory firm. In his early career he worked in audit and advisory for BDO before joining Guernsey International Fund Managers Limited (part of Barings) in 1996. Iain joined Mourant International Finance Administration ("MIFA") in 2003 and as Group Managing Director, he was a member of the executive team that managed the sale of MIFA to State Street in 2010. He was a Senior Managing Director with State Street Alternative Investment Solutions as Head of Private Equity Product, EMEA until 2012. He holds a range of non-executive directorships on fund management and fund investment companies focused on alternative asset strategies. He is resident in Guernsey.

René Mouchotte, non-executive director (aged 70)

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

Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges

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

CISEAL is the abbreviation for Channel Islands Stock Exchange Authority Limited

*Delisted as at 31 December 2016

Report of the Directors

The Directors are pleased to present their Annual Report and Audited Financial Statements for the year ended 30 September 2016. In the opinion of the Directors, the Annual Report and Audited Financial Statements are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's performance, business model and strategy.

Incorporation

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

Investment Objective and Policy

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

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.

At 30 September 2016, the Portfolio is invested in ten Primary Transactions and these represent 69.33% of the Company's total assets. 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.

As of 30 September 2016, the Company was 91% invested with a sector allocation that reflects the anticipated target portfolio with a significant representation of corporate and SME loans. No more than 20% of the NAV was exposed to any one Bank Counterparty and the largest position was the Portuguese SME loans transaction at 13.31% of NAV..

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

Results

The results for the year ended 30 September 2016 are set on page 39. The profit for the year was £4,954,240 (2015: £9,522,204).

Dividends

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

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

Report of the Directors (continued)

Share Capital

The IPO of the Company raised gross issue proceeds of £130.3 million resulting in 130,300,000 Shares being admitted to trading on the SFS of the London Stock Exchange on 7 October 2013. At 30 September 2016, 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 year. The current authority to purchase Shares for cancellation expires on the date of the next AGM which will be held in Guernsey on 28 March 2017. The Directors expect to seek renewed authority to purchase Shares for cancellation at that AGM.

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% 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% of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5% per annum with a catch up. For the year ended 30 September 2016, no performance fee was paid or accrued for payment to the Investment Manager.

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

Non-mainstream pooled investments

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

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

AIFMD

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

Report of the Directors (continued)

US FATCA

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

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

Common Reporting Standard

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

SFS and FATCA/CRS Exemptions

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

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

Significant Shareholdings

Shareholders with holdings of more than 3.0% of the Shares of the Company at 30 September 2016 were as follows:

Going Concern

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

Report on Viability

The Directors have reviewed the viability of the Company in light of the Realisation Period. On reviewing the portfolio of assets of the Company, the Directors expect that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) by the end of 2020.

The Directors have based their opinion on the valuation of the assets of the Company as at 30 September 2016 and have further considered that the Investment Adviser maintains a Base Case, an Upside Case and a Stress Case for each investment in the portfolio, depending on its characteristics and underlying collateral. The cases are derived from a combination of initial cases derived at the time of investment from analysis of each transaction's structure and the underlying portfolio data, regular tracking of the performance of the transaction's underlying collateral pool and market implied factors such as credit spreads or the performance of other similar deals.

Report of the Directors (continued)

Report on Viability (continued)

As of 31 October 2016, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company, are:

· 12.15% if all investments perform in line with the "Base Case";

· 16.91% if all investments perform in line with the "Upside Case"; and

· 3.51% if all investments perform in line with the "Stress Case".

The Directors believe that over the next two years a significant proportion of the assets of the Company will be realised and over 90% of the projected cash proceeds returned to investors before the end of 2020. The Directors have therefore revised the period of viability of the Company to two years and will reassess the position at the end of each accounting period to determine the future viability of the Company, which will be largely dependent on the remaining portfolio. For the determination of the viability period, the Directors have taken into consideration the above assumptions, and that the Company will continue to meet its liabilities on an on-going basis, the Directors have a reasonable expectation that the Company will be able to continue in operation over the two year period.

The principal risks, which are set out in these financial statements on pages 23 to 25, will continue to be monitored closely as these represent the key areas most likely to impact the viability of the Company and also its ability to exit its assets during the Realisation Period.

Directors

The Directors of the Company during the year and at the date of this Report are set out on page 7.

At 30 September 2016 the Directors held the following Shares in the Company: Mr King 30,000, Mr Stokes 40,000 and Mr Mouchotte 5,000.

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

Retirement by Rotation

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

Disclosure of Information to 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 Auditor

Deloitte was formally re-appointed as the Company's auditor for the 2016 year-end audit following the AGM on 16 March 2016.

A resolution for the reappointment of Deloitte will be proposed at the next AGM.

Signed on behalf of the Board of Directors by:

Rob King,

Non-executive Chairman

Iain Stokes,

Non-executive Director

20 January 2017

AIFM's Report to Shareholders

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

The investment management agreement can be terminated by either party on 12 months' written notice, with such notice not to be served before the fourth anniversary of Admission, which is 16 September 2017.

Under the terms of the investment management agreement dated 23 September 2013 as novated on 22 July 2014, the Investment Manager receives a fee of one-twelfth of 1% on the NAV of the Company, payable monthly in arrears. The total management fees for the year amounted to £1,230,093 for Chenavari Investment Managers (Luxembourg)  SARL (30 September 2015 the equivalent was £1,282,996 for Chenavari Investment Managers (Guernsey) Ltd and £213,164 for Chenavari Investment Managers (Luxembourg)  SARL) with £100,494 (2015: £107,192) in outstanding accrued fees at the year end.

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

As of 30 September 2016, no performance fee was accrued according to those principles.

As described on page 22, the Management Engagement Committee carried out its third review of the performance and capabilities of the Investment Manager during November 2016 to confirm that the continued appointment of the Investment Manager is deemed to be in the interest of Shareholders.

Total gross remuneration paid by the AIFM to its nine staff for 2016 financial year end was EUR 796,294.

Chenavari Investment Managers (Luxembourg) SARL

20 January 2017

Corporate Governance Report

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

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

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

Compliance with the UK Code

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

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

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

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

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

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

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

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

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

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

Corporate Governance Report (continued)

Explanation: The Company's Audit Committee comprises 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 for the purposes of the UK Code. Given Mr Mouchotte's directly relevant investment experience, the independent members of the Audit Committee are of the opinion that Shareholders' 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 and the Company relies on the Company Secretary and other third-party service providers to address any concerns raised.

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

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

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

Explanation: In view of its non-executive nature, the Board considers that it is not appropriate for there to be a separate remuneration committee. The Audit Committee makes all representations to the Board regarding Directors' remuneration. The Board as a whole fulfils the functions of the remuneration committee, and a separate Directors' Remuneration Report is set out on pages 30 and 31 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 by the GFSC also to meet the requirements of the GFSC Code.

Composition and Independence of the Board

The Board currently consists of three non-executive Directors. Biographies for all the Directors can be found on page 13. The Chairman and Mr Stokes are considered independent of the Investment Manager and Investment Adviser for the purposes of the Company's compliance with the UK Code. However Mr Mouchotte, by virtue of his directorship of the AIFM and other funds within the Chenavari group, is not considered independent.

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

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

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

Corporate Governance Report (continued)

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

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

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

Audit Committee

An Audit Committee has been established consisting of all Directors with Mr 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 26.--

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 Mr King 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 and Investment Advisory Agreement. Its duties and responsibilities also extend to the regular review of the performance of and contractual arrangements with other service providers.

The Management Engagement Committee carried out its annual review of the performance and capabilities of the Investment Manager and Investment Adviser during November 2016 to confirm that the continued appointment of Chenavari Investment Managers (Luxembourg) SARL as Investment Manager and Chenavari Credit Partners LLP as Investment Adviser are deemed to be in the interest of Shareholders. As part of the review process, the Management Engagement Committee concluded that the Company's other service providers are performing in accordance with the Company's expectations and contractual arrangements.

Board Performance

During November 2016, the Management Engagement Committee formally evaluated the Board's effectiveness by considering the balance of skills, experience, independence and knowledge of the Company on the Board, its diversity, how the Board works together as a unit, the allocation of sufficient time to the Company as well as other factors relevant to its effectiveness. The Management Engagement Committee found the performance of the Chairman, individual Directors and the Board as a whole over the review period to be as expected.

Investor Relations

Shareholders are able to contact the Company directly through its dedicated e-mail address (chenavaricapitalsolutions@chenavari.com) or by correspondence sent to the Company Secretary (chenavari@morgansharpe.com), Investment Manager or Corporate Broker. As a consequence, the Board receives appropriate updates from the Company Secretary, Investment Manager or Corporate Broker relative to such correspondence to keep it informed of Shareholders' sentiment or analyst views.

The Company also publishes a monthly factsheet on its website www.chenavaricapitalsolutions.com, which includes updates on markets and the Company's performance.

Statement of Principal Risks and Uncertainties

Summary

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

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

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

Statement of Principal Risks and Uncertainties (continued)

Statement of Principal Risks and Uncertainties (continued)

Audit Committee Report

I am pleased to report to you on the activities of the Audit Committee for the year ended 30 September 2016.

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

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

Terms of Reference

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

Financial Reporting

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

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

Risk Management Systems

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

Compliance, Whistle blowing and Fraud

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

· reviewing the Company's procedures for detecting fraud;

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

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

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

External audit

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

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

Delegation of Duties

The Company has no employees and all functions, including the preparation of the financial statements, have been outsourced to various service providers. Morgan Sharpe Administration Limited have been appointed as Administrator and Company Secretary, Quintillion Limited as Sub-Administrator and Depositary, Chenavari Investment Managers (Luxembourg)  SARL as Investment Manager and AIFM, 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 7 for further details in relation to the Outsourced Service Providers.

Audit Committee Report (continued)

Membership of the Committee

The Audit Committee was established on incorporation and consists of Rob King, Rene Mouchotte and myself, Iain Stokes, as its Chairman. All the members of the Audit Committee are non-executive Directors. Mr King 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 AIFM and other funds within the Chenavari group, is not considered independent. The Audit Committee has concluded that its membership and competence meets the requirements of C.3.1 of the UK Code.

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

· financial reporting principles and accounting standards;

· the regulatory framework within which the Company operates;

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

· factors impacting the Company's financial statements.

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

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

How the Audit Committee has Discharged its Responsibilities

In the year under review, the Audit Committee met four times, attendance at which is set out on page 22. The Audit Committee meetings focused on the following key areas:

Monitoring the integrity of the financial statements including significant judgements

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

· Prior to making any recommendations to the Board, we reviewed the Annual Report and Audited Financial statements for the year ended 30 September 2016 (the "Annual Report"). We compared the results with investment models, management accounts, budgets and monthly NAVs, focusing on the significant accounting matters set out below.

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

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

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

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

Audit Committee Report (continued)

Significant Accounting Matters

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

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

At 30 September 2016, the Company's investments had a fair value of £105.9m and represent a substantial portion of net assets of the Company. As such this is the largest factor in relation to the accuracy of the financial statements and is monitored by the Investment Manager, the Investment Adviser, the Administrator, the Sub-Administrator, the Custodian, the Audit Committee and the Board.

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

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

Where broker quotes are not available, and pricing is the result of the Investment Adviser's internal models, a specialist third party, Duff and Phelps, was engaged to provide estimated ranges of Fair Value for those transactions as at 30 September 2016. In addition to assessing the internal models, the review considered underlying portfolio performance, the requirements of IFRS 13 to use 'market participant' assumptions that are as realistic as possible and the income, market and cost approach to estimate Fair Value. The Audit Committee met with the Investment Adviser and Deloitte and further challenged the key assumptions of the internal models, in particular their sensitivities using stress scenarios. Additionally, the Audit Committee required the Investment Manager to provide a reasoned assessment of fair value for each investment held and its classification in the fair value hierarchy.

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

Income Recognition

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

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

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 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 to the Financial Statements, represent a key accounting disclosure. The Audit Committee critically reviews, on the basis of input from relevant Outsourced Service Providers, the process of ongoing identification and measurement of these risks disclosures.

Audit Committee Report (continued)

Risk Management and Internal Controls

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

External Audit

It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of Deloitte. We met with Deloitte in May 2016 to review their Interim Review Report in relation to the Company's Unaudited Interim Financial statements for the period from 1 October 2015 to 31 March 2016. In August 2016, we further met with Deloitte who presented their Audit Strategy and Plan for the year; we agreed the audit plan for the year, highlighting the key financial statement and audit risks, to seek to ensure that the audit was appropriately focused. In October 2016, we met with the Investment Adviser and Deloitte to review the assessment of fair value for each investment held and its classification in the fair value hierarchy. Deloitte attends our Audit Committee meetings throughout the year, as appropriate, which allows the opportunity to discuss any matters the auditor may wish to raise without the Investment Manager or other Outsourced Service Providers being present.

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

Deloitte was formally re-appointed as the Company's auditor for the 2016 year-end audit following the AGM on 16 March 2016. Deloitte LLP have expressed their willingness to continue in office as Auditor. The Audit Committee continues to be satisfied with the performance of Deloitte. We have therefore recommended to the Board that Deloitte, in accordance with agreed terms of engagement and remuneration, should continue as the Company's auditor and a resolution proposing their reappointment will be submitted at the forthcoming AGM. The lead audit partner will be rotated every five years to ensure continued independence and objectivity. In advance of the commencement of the annual audit, the Audit Committee reviewed a statement provided by Deloitte confirming their independence within the meaning of the regulations and professional standards. In addition, in order to satisfy itself as to Deloitte's independence, the Audit Committee undertook a review of the auditor compensation and the balance between audit and non-audit fees.

During the year the value of non-audit services provided by Deloitte amounted to £13,032. Non-audit services mainly comprise tax compliance reporting are not deemed to be material and amounted to approximately 11% of the total fees paid by the Company to Deloitte.

Committee Effectiveness

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

Signed on behalf of the Audit Committee by:

Iain Stokes

Audit Committee Chairman

20 January 2017

Directors' Remuneration Report

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

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

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

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

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

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

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

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

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

The remuneration policy set out above is the one applied for the year ended 30 September 2016. In the context of the Realisation Period, the Board is committed to continuing to review its current composition and fee basis.

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

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

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

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

Directors' Remuneration Report (continued)

At 30 September 2016 the Directors held the following Shares in the Company: Mr King 30,000, Mr Stokes 40,000 and Mr Mouchotte 5,000.

Signed on behalf of the Board of Directors by:

Rob King,

Non-executive Chairman

Iain Stokes,

Non-executive Director

20 January 2017

Statement of Directors' Responsibilities 

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

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

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

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

· properly select and apply accounting policies;

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

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

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

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

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

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

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

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

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

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

This responsibility statement was approved by the Board of Directors on 20 January 2017 and is signed on its behalf by:

Non-Executive Director: Non-Executive Director:

Date: 20 January 2017 Date: 20 January 2017

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

David Becker (Senior statutory auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditors

St Peter Port, Guernsey

Statement of Comprehensive Income

For the year ended 30 September 2016

Non-Executive Director: Non-Executive Director:

Date: 20 January 2017 Date: 20 January 2017

All items in the above statement derive from continuing operations.

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

Statement of Financial Position

As at 30 September 2016

Non-Executive Director: Non-Executive Director:

Date: 20 January 2017 Date: 20 January 2017

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

Statement of Changes in Equity

For the year ended 30 September 2016

For the year ended 30 September 2015

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

Statement of Cash Flows

For the year ended 30 September 2016

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

Condensed Schedule of Investments, at Fair Value

As at 30 September 2016

Condensed Schedule of Investments, at Fair Value

As at 30 September 2015

Notes to the Financial Statements

1. General information

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

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

The Company's Shares are admitted to trading on the SFS of the London Stock Exchange. The Shares were also listed on the Official List of the 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

The Company expects to target a NAV total net return to investors of 8-10% per annum over the life of the Company and to minimise cash drag to less than 10% of NAV. Returns to Shareholders will be predominantly 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.

Subject to market conditions and the financial position of the Company, returns to Shareholders will be predominantly as dividend income. For the Year the Company has declared and paid three dividends totalling 6p per Share (2p per Share on 26 February 2016 for the period ending 31 December 2015, 2p per Share on 27 May 2016 for the period ending 31 March 2016 and 2.00p per Share on 26 August 2016 for the period ending 30 June 2016). Following the year end, the Company announced a dividend of 1.50p per Share for the final period of the Company's financial year which was paid 12 December 2016.

Whilst it is the Board's intention while the Company is fully invested to maintain these higher levels of dividends when at all possible, 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

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

On 13 December 2016 the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it will commence the Realisation Period, which will involve the return of unencumbered cash balances to Shareholders. It is anticipated that such encumbered cash balances will arise predominantly as a result of investments maturing in accordance with their terms. Apart from cessation of new investments, no change to the Company's investment policy is proposed.

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

Notes to the Financial Statements (continued)

1. General information (continued)

Investment policy

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

As of 30 September 2016, the Portfolio reflects the anticipated target portfolio, with the Company 91% invested in thirteen positions including ten Primary Transactions and three Secondary Transactions, with a significant representation of corporate and SME loans. The Investment Manager's report on page 10 provides an analysis of the Portfolio, by asset class, geography and country.

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

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

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

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

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

On reviewing the portfolio of assets of the Company, the Directors expect that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) by the end of 2020.

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

Borrowing and gearing policy

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