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)

Unaudited Interim Financial Statements

For the period from 12 July 2013 (date of incorporation) to 31 March 2014

Contents

Interim Highlights

Corporate Summary

General Information

Chairman's Statement

Investment Manager's Report

Statement of Principal Risks and Uncertainties

Independent Review Report to Chenavari Capital Solutions Limited

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Condensed Schedule of Investments, at Fair Value

Notes to the Financial Statements

FORWARD-LOOKING STATEMENTS

This interim 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 interim 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 interim 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.

Interim Highlights

· The Net Asset Value ("NAV") was £131.5 million (100.91p per share) at 31 March 2014, an increase of 2.97% from £127.7 million at 7 October 2013 (date of admission to listing).

· The Company's mid-market share price at 31 March 2014 was 104.25p, representing a premium to NAV of 3.3%

· The net profit of the Company for the period was £3.8 million, or 2.9p earnings per share, taking into account recognition of the following significant items:

o net income of £4.7 million.

o total operating expenses of £0.9 million.

· The operating expenses as a percentage of average NAV for the period ended 31 March 2014 were 0.68%, which corresponds to an annualised rate of 1.3%.

· During the period, the Company invested £81 million in Bank Capital Solutions Transactions through the secondary purchase of 9 transactions and 1 primary investment, including approximately £45 million in a mezzanine exposure to short-dated loans made by a Portuguese bank to a diversified pool of over 8,200 underlying Portuguese SME borrowers.

· At the end of the period, the Company was 61% invested and its free cash holdings were £45.2 million.

Corporate Summary

For the period ended 31 March 2014

The Company

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

The Company's Ordinary Shares (the "Shares") are admitted to trading on the Specialist Fund Market of the London Stock Exchange ("SFM") and on the Official List of the Channel Islands Securities Exchange ("CISE").

The Initial Public Offering ("IPO") of the Company raised gross proceeds of £130.3 million and the Company's Shares were admitted to the SFM and CISE on 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.

Target returns and dividend policy

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

The Investment Manager and Investment Adviser

The Investment Manager, Chenavari Investment Managers (Guernsey) Ltd, is a non-cellular company incorporated in Guernsey under registered number 45033 and is licensed and regulated by the Commission to undertake the activities of investment management. The Investment Manager is a wholly owned member of the Chenavari Financial Group.

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

Asset Values

At 31 March 2014, the Company's NAV was £131.5 million, with the NAV per share amounting to 100.91p. The Company publishes its NAV on a monthly basis. The NAV means the Company's assets at fair value less liabilities, measured in accordance with International Financial Reporting Standards.

Duration

The Company has an indefinite life.

Website

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

Listing Information

The Company's Shares are listed on the SFM and on the CISE.

The ISIN number of the Shares is GG00BCHWW517.

The closing price of the Shares quoted on SFM and CISE at 31 March 2014 was 104.25p per share.

The average closing price of the Shares over the period from 7 October 2013 (the date of admission to listing) to 31 March 2014 was 102.33p per share.

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present my first report on the Company's progress for the period from initial public offering on 7 October 2013 to 31 March 2014.

The Company raised £130.3 million from a wide range of investors at IPO, and the Investment Manager has deployed 61% of net assets in bank capital solutions transactions to 31 March 2014.

Share Performance

The Company's shares have traded at a premium to net asset value throughout the period since launch.

The net asset value per share has steadily increased to 100.91 pence per share as at 31 March 2014 and the share price as at 31 March 2014 was 104.25p, representing a premium to net asset value of 3.3%.

Investment Portfolio

As referred to in the Investment Manager's report, as at 31 March 2014, the investment portfolio consisted of 10 positions including 9 secondary transactions and 1 primary transaction.

Two further primary transactions were completed subsequent to the period end. The first comprised approximately £9 million in a thick first loss exposure to primarily investment-grade corporate loans originated by a German corporate and investment bank. The loan portfolio is granular with over 250 loans across more than 150 borrower groups and is well diversified with respect to both geography and industry classification. The second being approximately £9 million in a first-loss credit linked note referencing the relationship loan book of a core Eurozone bank. The portfolio represents approximately 250 credit obligations with a global geographical distribution concentrated in the United States, Great Britain and France and has a majority of investment grade exposure.

Geographically, the portfolio is exposed to a range of countries with the largest position being an amortising primary transaction exposure to a granular pool of Portuguese SME and corporate loans. The portfolio also has exposure to a range of underlying asset types, with an emphasis on SME loans and mortgages.

Investment Outlook

The pipeline of transactions that the Investment Adviser has under review is extremely strong with multiple transactions being analysed by the investment team. The primary focus remains on attractive risk adjusted returns from transactions with robust credit exposures and structural protections.

Dividends

Subject to market conditions and the financial position of the Company, the Company expects to declare its first dividend in July 2014 in respect of the period to 30 June 2014.

Non-Mainstream Pooled Investments

On 1 January 2014, FCA rules concerning the promotion of non-mainstream pooled investments came into effect. The Board conducts and intends to continue to conduct its affairs, so that the Company's shares will be "excluded securities" under the FCA's new rules. This is on the basis that the Company, which is resident outside the EEA, would qualify for approval as an investment trust by the Commissioners for HM Revenue and Customs if resident and listed in the United Kingdom.

Trevor Hunt

Chairman

29 May 2014

Investment Manager's Report

Investment Review

The Company launched with £130.3 million gross issue proceeds in October 2013 of which £81 million has been invested in line with the Company's investment objective and policy.

The sector allocation as of 31 March 2014 reflects the anticipated portfolio with a significant representation of corporate and retail loans.

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

As at 31 March 2014, the portfolio consists of 10 positions including 9 secondary and 1 primary transactions. The top 5 holdings were the following:

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

Investment Manager's Report (continued)

Performance

During the period from launch to 31 March 2014, the Company's net performance was positive +2.97%, despite the impact of the cash holdings.

As at 31 March 2014, the NAV per share was 100.91p per share and the Company's mid-market share price was 104.25p, representing a premium to NAV of 3.3%.

Investment Outlook

For 2014, our investment themes for regulatory driven Bank Capital Solutions Transactions are as follows:

· Continued increase in regulatory acceptance: regulators in countries whose banks have not been active in the regulatory capital space have been seriously considering new primary transactions.

· New regulatory pressures: the Asset Quality Review ("AQR") currently being carried out by the ECB should highlight new problem areas for particular banks and potentially force them into capital raising or deleveraging activity. In particular, an increased focus on so-called "Leverage Ratios" has prompted banks to consider trades that are targeted specifically at this ratio. These transactions can offer attractive leverage terms on core bank portfolios, which continue to be serviced by the bank.

· Peripheral normalisation: As banking systems in European peripheries begin to heal, their banks will begin to focus on optimising their capital profile through sales and Risk Weighted Assets ("RWA") reduction transactions. We have already seen this in Portugal and anticipate this process to pick up pace in both Spain and Italy.

As the year has progressed these predictions appear to be being realised. In Italy we have seen transactions occur on specialist asset classes we would not consider, while transactions with more standard collateral are being discussed with investors. Similarly the stronger banks in Spain, and even Greece, are beginning to consider RWA reduction trades which, with the correct structural features and carefully selected portfolios, can offer an attractive risk reward balance. The influence of the AQR on these banks deciding to transact is unclear but we anticipate some banks being pressured into capital raising transactions later in the year as the release of results approaches.

Pipeline discussions continue with multiple banks on primary transactions. Since the date of this report, two new primary investments were executed. We continue to work on several other bilateral and club transactions, two transactions are providing exposure to corporate loans globally or in a core Euro-zone jurisdiction, a further transaction being contemplated would provide exposure to a portfolio of leasing to SMEs in a peripheral Euro-zone country. In addition, we continue to receive direct approaches on other opportunities, including a SME trade from a southern European bank, and see a strong pipeline forming for the remainder of the year.

Statement of Principal Risks and Uncertainties

The Company invests in a diversified portfolio of Bank Capital Solutions Transactions, entered into primarily with UK and European banks. The focus of the portfolio is on investing in newly issued transactions referenced to credit exposure although transactions are also acquired in the secondary market where the Investment Adviser identifies attractive opportunities.

The principal market risks to which the Company is exposed to are credit (including counterparty), foreign currency, interest rate and liquidity risk and further detail regarding these, and the way that they are managed, are described in more detail in note 6 to the financial statements. Furthermore, as described in the Investment Managers report, the Company's investment outlook will be influenced by continued regulatory acceptance of Bank Capital Solutions Transactions and the banking sector generally focussing on optimising its capital profile through sales and RWA reduction transactions.

Responsibility Statement

We confirm to the best of our knowledge that:

· these Unaudited Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, in order to give a true and fair view of the assets, liabilities, financial position and profit of the Company.

· the interim management report (comprising the Chairman's Statement and Investment Manager's Report) meets the requirements of an interim management report, and includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period from 7 October 2013 to 31 March 2014 and their impact on the Unaudited Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the period from 7 October 2013 to 31 March 2014 and that have materially affected the financial position or performance of the entity during that period.

By order of the Board, 29 May 2014.

Independent Review Report to Chenavari Capital Solutions Limited

We have been engaged by the Company to review the financial statements in the interim financial report for the period from 12 July 2013 to 31 March 2014 which comprises the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and related notes 1 to 20. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the period from 12 July 2013 to 31 March 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants

Guernsey

29 May 2014

Statement of Comprehensive Income

For the period 12 July 2013 (date of incorporation) to 31 March 2014

Director : Trevor Hunt Director : Iain Stokes

Date : 29 May 2014 Date : 29 May 2014

All items in the above statement derive from continuing operations.

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

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

Statement of Financial Position

as at 31 March 2014

Director :Trevor Hunt Director : Iain Stokes

Date : 29 May 2014 Date : 29 May 2014

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

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

Statement of Changes in Equity

For the period 12 July 2013 (date of incorporation) to 31 March 2014

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

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

Statement of Cash Flows

For the period 12 July 2013 (date of incorporation) to 31 March 2014

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

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

Condensed Schedule of Investments, at Fair Value

Chenavari Capital Solutions Limited

As at 31 March 2014

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 have been admitted to trading on the Specialist Fund Market of the London Stock Exchange. Such Shares are also listed on the Official List of the Channel Islands Securities Exchange

The Initial Public Offering ("IPO") of the Company raised gross proceeds of £130,300,000 and the Company's Shares were admitted to the SFM and CISE on 7 October 2013.

Investment objective

The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in Bank Capital Solutions Transactions primarily with UK and European banks.

Target returns and dividend policy

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

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

The Company intends that the Net Issue Proceeds will be invested in accordance with the investment policy as rapidly as practicable following Admission. Primary transactions (i.e. transactions that are originated and bought at issue) are expected to be concentrated on between five to ten transactions and whilst the timing of the closing of a particular transaction is difficult to predict, the Company intends that 50 per cent. of the Net Issue Proceeds will be invested during the first six months following Admission and intends to be substantially fully invested within 12 months following Admission.

Subject to market conditions and the financial position of the Company and assuming that the Net Issue Proceeds are invested in accordance with the intended timetable described above, the Company will seek to pay dividends totalling at least 5 pence per Ordinary Share in respect of the period from Admission to the first financial year end, with the first dividend likely to be declared in July 2014 in respect of the period to 30 June 2014.

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

Investment period and realisation period

During the period from Admission to 31 December 2015, the Company will seek to invest the Net Issue Proceeds and any further monies raised following Admission as described above and to reinvest all further cash balances that arise, to the extent that they are not required for working capital purposes or the payment of dividends in accordance with the Company's dividend policy.

Following 31 December 2015, the Company will return to Shareholders any unencumbered cash and such cash balances as arise from time to time as a result, predominantly, of investments maturing in accordance with their terms or otherwise. Amounts required for working capital purposes (including, in particular, a cash reserve for meeting any required margin calls on derivative positions), for the payment of dividends in accordance with the Company's dividend policy and for settling transactions contractually agreed before 31 December 2015, will be excluded from such returns of cash to Shareholders. The Company will not be under any obligation to sell investments before they mature in order to fund returns of cash to Shareholders, but may do so to optimise returns.

Notes to the Financial Statements (continued)

1. General information (continued)

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

Investment policy

The Company seeks to invest in a diversified portfolio of Bank Capital Solutions Transactions, entered into primarily with UK and European banks. The focus of the Portfolio once fully invested, will be on investing in newly issued transactions ("primary transactions") referenced to credit exposure although transactions are acquired in the secondary market ("secondary transactions") where the Investment Adviser identifies attractive opportunities.

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

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

The Company has flexibility to invest in Bank Capital Solutions Transactions with a range of underlying asset types, including (but not limited to) mortgage loans, corporate and SME loans, asset backed securities, derivatives and counterparty risks.

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

Where credit hedging arrangements are used in order to comply with these limits, the hedges are maintained such that the net exposure to the Bank Counterparty is no more than 20 per cent. of the NAV as at the date that any relevant credit hedging contract matures or is adjusted or rolled over. For the avoidance of doubt, cash pending investment or held on deposit under the terms of an Investment Instrument is held without limit with a financial institution with short term credit ratings of A-1 (Standard & Poor's) or P-1 (Moody's).

The Company invests in a variety of instruments to gain exposure to Bank Capital Solutions Transactions, including (but not limited to) debt instruments and synthetic securities ("Investment Instruments").

The Portfolio will have a weighted average expected maturity of no more than 5 years from 31 December 2015 while each Investment Instrument in the Portfolio will have an expected maturity of no more than eight years. The Company only invests in an Investment Instrument which has a contractual maturity in excess of eight years provided: (i) the Advisers' assessment of such Investment Instrument's expected maturity is less than eight years; (ii) the Board approves such assessment; and (iii) the Portfolio's weighted average expected maturity continues to be less than 5 years from 31 December 2015 following such investment. The expected maturity of the Portfolio (or an Investment Instrument) is the number of years until the capital invested in the Portfolio (or such Investment Instrument) is expected to be repaid.

Indicative Portfolio composition

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

Notes to the Financial Statements (continued)

1. General information (continued)

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

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

Borrowing and gearing policy

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

The Board will oversee the level of gearing in the Company, and will review the position with the Advisers on a regular basis.

Hedging and derivatives

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

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

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

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

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

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

Cash uses and cash management activities

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

Whilst the Company intends to have 50 per cent. of the Net Issue Proceeds invested within 6 months of Admission and to be fully invested within 12 months of Admission, the Company may from time to time have surplus cash (for example, following the disposal of an acquired investment). Cash held by the Company pending investment or distribution will be held in either cash or cash equivalents, including but not limited to money market instruments or funds, bonds, commercial paper or other debt obligations with banks or other counterparties having an investment grade credit rating (as determined by any reputable rating agency selected by the Company).

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies

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

2.1. Basis of preparation

The Interim Financial Statements for the period from 12 July 2013 to 31 March 2014 have been prepared in accordance with IAS 34 "Interim Financial Statements", the Disclosure and Transparency Rules of the Financial Conduct Authority and applicable legal and regulatory requirements of the Companies (Guernsey) Law, 2008. The first full annual financial statements will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at, and for the period ending, 30 September 2014.

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

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

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

(a) Classification

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

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

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

 (b) Recognition/derecognition

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

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

(c) Measurement

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

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

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

(c) Measurement (continued)

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

(d) Fair value estimation

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

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

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

(e) Offsetting financial instruments

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

2.3 Due from and to brokers

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

2.4 Interest income

For secondary transactions, interest income is recognised on a time-proportionate basis using the effective interest method and includes interest income from debt securities.

2.5 Cash and cash equivalents

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

2.6 Share Capital

Shares are classified as equity. Incremental costs directly attributable to the issue of Shares are shown in equity as a deduction, net of tax, from the proceeds. The costs are those which are necessary for the incorporation of the Company, admission to the London Stock Exchange and the CISE and the initial issue of shares. Such costs and expenses are fixed at 2 per cent of the gross issue proceeds.

Notes to the Financial Statements (continued)

2. Summary of significant accounting policies (continued)

2.7 Foreign currency

(a) Functional and presentation currency

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

(b) Foreign currency translation

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

2.8 Transaction costs

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

2.9 Segment reporting

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

2.10 Accrued expenses

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

2.11 Other receivables and prepayments

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

2.12 Dividend distribution

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

2.13 Taxation

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains

2.14 Exchange Rates

The foreign currency exchange rates at 31 March 2014 were as follows: EUR 0.8267 USD 0.5998

3. Critical accounting judgements and key sources of estimation uncertainty

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

3.1 Key sources of estimation uncertainty

Fair value of financial instruments

The assets held by the Company are mostly valued through dealers' quotes and/or end of month statements where the broker is a recognised market maker in the respective position.

Notes to the Financial Statements (continued)

3. Critical accounting judgements and key sources of estimation uncertainty (continued)

3.1 Key sources of estimation uncertainty (continued)

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

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

During the period, the Company made one primary transaction which, based on the hierarchy set out in IFRS 13, is classified as Level 2 based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. Given that the transaction was originated part way through the period, in the opinion of the Directors, the financial asset will be traded and the fair value provided by independent sources at 31 March 2014 reflects available observable inputs. The Directors will continue to monitor the availability of observable inputs and if necessary, reclassify to level 3 if observable trading does not commence.

4. Related Parties

(a) Directors' Remuneration & Expenses

The Directors of the Company are remunerated for their services at such a rate as the Directors determine. The initial fee for Mr. Mouchotte is £37,500. The initial fee for Mr. Stokes as chairman of the Audit Committee is £40,000 per annum. The initial fee for Mr. Hunt as Chairman is £42,500 per annum.

During the period ended 31 March 2014, Directors fees of £60,000 were charged to the Company, of which £20,000 remained payable at the end of the period.

(b) Shares held by related parties

As at 31 March 2014, none of the Directors held Shares in the Company.

As at 31 March 2014, neither the Investment Manager nor partners and employees of the Investment Manager or the Investment Adviser held any of the Issued Share Capital.

(c) Investment Manager

The Company receives investment management services from the Investment Manager, a limited company incorporated in Guernsey. Under the terms of the investment management agreement dated 16 September 2013 the Investment Manager receives in return a fee of one-twelfth of 1 per cent on the net asset value, payable monthly in arrears. The Investment Manager has appointed the Investment Adviser, to provide investment advisory services to the Investment Manager. The Investment Manager is responsible for paying the Investment Adviser.

Total management fees for the period amounted to £622,026 with £108,543 in outstanding accrued fees due to the Investment Manager at the end of the period.

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

Notes to the Financial Statements (continued)

4. Related Parties (continued)

(c) Investment Manager (continued)

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

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

As of 31 March 2014, no performance fee was accrued according to those principles.

5. Material Agreements

(a) Financial Adviser and Bookrunner to the Placing

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

 (b) Administration fee

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

(c) Sub-Administration fee

The Administrator has appointed Quintillion Limited (the "Sub-Administrator") as the Company's sub-administrator. The Sub-Administrator is entitled to receive an annual asset-based fee from the Company of up to 0.09% per annum of NAV, excluding certain expenses. Sub-Administration fees for the period amounted to £46,843 of which £9,539 remained payable at the end of the period.

(d) Custodian fee

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

6. Financial risk management

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

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

6.1 Credit risk

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

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

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

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

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

As of 31 March 2014, the Company had one exposure representing 33.5% of the NAV, above the 25% limit. The exposure to the account bank which holds the cash collateral has been hedged through a credit default swap resulting in a net exposure within the required limit.

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

For the avoidance of doubt, cash pending investment or held on deposit under the terms of an Investment Instrument may be held without limit with a financial institution with short term credit ratings of A-1 (Standard & Poor's) or P-1 (Moody's).

The Company manages the portfolio with appropriate diversification in terms of sectors and geographical breakdowns. As of 31 March 2014, the breakdown of the NAV per asset class and geography was as follows:

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

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

Offsetting Financial Assets and Financial Liabilities

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

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

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

6.2 Foreign currency risk

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

6.3 Interest rate risk

Interest rate risk is the risk of gain or loss resulting from exposure to movements on interest rates. The Company does not actively take interest rate risk, but incurs it as a normal course of business and employs a series of hedges to minimise these risks.

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.4 Liquidity Risk

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

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

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

7. Fair value of financial instruments

The fair values of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the period end date. The Company has adopted IFRS 13, 'Fair value measurement' and this standard requires the Fund price its financial assets and liabilities using the price in the bid-ask spread that is most representative of fair value for both financial assets and financial liabilities. If a significant movement in fair value occurs subsequent to the close of trading up to midnight on the period end date, valuation techniques will be applied to determine the fair value. No such event occurred. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

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

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

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

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

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

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

Notes to the Financial Statements (continued)

7. Fair value of financial instruments (continued)

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

The following tables show the Company's assets at 31 March 2014 based on the hierarchy set out in IFRS 13:

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

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently. There were no Level 3 positions at period end.

There have been no significant transfers between levels during the period and no Level 3 investments were held during the period. Transfers between levels of the fair value hierarchy, are deemed to have occurred at the beginning of the reporting period.

8. Earnings per Share - Basic & Diluted

The earnings per Share - Basic and Diluted of 2.9p has been calculated based on the weighted average number of Shares of 130,300,000 and a net gain of £3,791,286 over the period from the IPO.

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

9. Net Asset Value per Share

The NAV of 100.91p is determined by dividing the net assets of the Company attributed to the Shares of £131,485,286 by the number of Shares in issue at 31 March 2014 of 130,300,000.

Notes to the Financial Statements (continued)

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

11. Net gain on financial assets and liabilities at fair value through profit or loss and foreign exchange and forward contracts

12. Due from broker

13. Other receivables and prepayments

Notes to the Financial Statements (continued)

14. Accrued expenses

15. Share capital

The share capital of the Company consists of an unlimited number of unclassified shares of no par value. The unclassified shares may be issued as, (a) Shares in such currencies as the Directors may determine; (b) C Shares in such currencies as the Directors may determine; and (c) such other classes of shares in such currencies as the Directors may determine in accordance with the Articles and the Law. Shares will be redeemable at the option of the Company and not Shareholders.

The rights attaching to the Shares are as follows:

(a) As to income - subject to the rights of any Shares which may be issued with special rights or privileges, the Shares of each class carry the right to receive all income of the Company attributable to the Shares, and to participate in any distribution of such income by the Company, pro rata to the relative NAVs of each of the classes of Shares and, within each such class, income shall be divided pari passu amongst the holders of Shares of that class in proportion to the number of Shares of such class held by them.

(b) As to capital - on a winding up of the Company or other return of capital (other than by way of a repurchase or redemption of Shares in accordance with the provision of the Articles and the Law), the surplus assets of the Company attributable to the Shares remaining after payment of all creditors shall, subject to the rights of any Shares that may be issued with special rights or privileges, be divided amongst the holders of Shares of each class pro rata to the relative NAVs of each of the classes of Shares and, within each such class, such assets shall be divided pari passu amongst the holders of Shares of that class in proportion to the number of Shares of that class held by them;

(c) As to voting - the holders of the Shares shall be entitled to receive notice of and to attend, speak and vote at general meetings of the Company.

The rights attaching to C Shares are as follows:

(a) subject to the rights of any C Shares which may be issued with special rights or privileges, the C Shares of each class carry the right to receive all income of the Company attributable to the C Shares, and to participate in any distribution of such income by the Company, pro rata to the relevant NAVs of each of the classes of C Shares and within each such class income shall be divided pari passu amongst the holders of that class in proportion to the number of C Shares of such class held by them;

(b) the Shares of the relevant class into which C Shares of the relevant class shall convert shall rank pari passu with the Existing Shares of the relevant class for dividends and other distributions made or declared by reference to a record date falling after the Calculation Date; and

 (c) no dividend or other distribution shall be made or paid by the Company on any of its shares between the Calculation Date and the Conversion Date (both dates inclusive) and no such dividend shall be declared with a record date falling between the Calculation Date and the Conversion Date (both dates inclusive).

Notes to the Financial Statements (continued)

15. Share capital (continued)

The following share transactions took place during the period :

Costs associated with the issue are as follows:

16. Segmental Reporting

The Board is responsible for reviewing the Company's entire portfolio and considers the business to have a single operating segment. The Board's asset allocation decisions are based on a single, integrated investment strategy being investments in Bank Capital Solutions Transactions and the Company's performance is evaluated on an overall basis.

The Company invests in a diversified portfolio of Bank Capital Solutions Transactions. The fair value of the major financial instruments held by the Company and the equivalent percentages of the total value of the Company, are reported in the Schedule of Investments.

Revenue earned is reported separately on the face of the Statement of Comprehensive Income as investment income being interest income received from Bank Capital Solutions Transactions.

17. Dividend Policy

Subject to compliance with the Law and the satisfaction of the solvency test set out therein, the Company intends to distribute all its income received from investments, net of expenses, by way of dividends on a quarterly basis with dividends declared in October, January, April and July each year and paid in November, February, May and August. Subject to market conditions and the financial position of the Company, the Company will seek to pay dividends totalling at least 5 pence per Ordinary Share in respect of the period from Admission to the first financial year end, with the first dividend likely to be declared in July 2014 in respect of the period to 30 June 2014.

Under Guernsey law, companies can pay dividends in excess of accounting profit provided they satisfy the solvency test prescribed by the Companies Law. The solvency test considers whether a company is able to pay its debts when they fall due, and whether the value of a company's assets is greater than its liabilities.

18. Derivative financial instruments

The Company holds the following derivative instruments:

Credit default swaps ("CDS")

These are derivative contracts referencing an underlying credit exposure, which can either be a single credit issuer or a portfolio of credit issuers. The Company pays or receives an interest flow in return for the counterparty accepting or selling all or part of the risk of default or failure to pay of a reference entity on which the swap is written. Where the Company has bought protection the maximum potential payout is the value of the interest flows the Company is contracted to pay until the maturity of the contract. The Company has not entered into any short CDS position during the period.

Notes to the Financial Statements (continued)

18. Derivative financial instruments (continued)

Forward Foreign Currency contracts

Forward Foreign Currency contracts entered into by the Company represent a firm commitment to buy or sell an underlying currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at trade date and the value of the contract at settlement date/period-end date, and is included in the Consolidated Statement of Comprehensive Income.

The following table shows the Company's derivative position at the end of the period:

19. Subsequent events

Subsequent to period end, the Company announced its second and third primary transactions.

On 6 May 2014 the Company has invested approximately £9 million in a thick first loss exposure to primarily investment-grade corporate loans originated by a German corporate and investment bank. The loan portfolio is granular with over 250 loans across more than 150 borrower groups and is well diversified with respect to both geography and industry classification.

On 29 May 2014, the Company has further invested approximately £9 million in a first-loss credit linked note referencing the relationship loan book of a core Eurozone bank. The portfolio represents approximately 250 credit obligations with a global geographical distribution concentrated in the United States, Great Britain and France and has a majority of investment grade exposure.

20. Approval of the financial statements

The financial statements were approved for issue to shareholders by the Directors on 29 May 2014.