CCSL.L Regulatory News (CCSL)

CHENAVARI CAPITAL SOLUTIONS LIMITED (the "Company")

INTERIM MANAGEMENT STATEMENT FOR THE PERIOD 1 APRIL 2014 TO 15 AUGUST 2014

Issued pursuant to the requirements of Chapter 4 of the FCA Disclosure and Transparency Rules.

Objective

The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in transactions where the objective is to allow banks to reduce the risk-weighted asset calculations on portfolios of assets, or otherwise optimise the capital required to be held against such exposures, in order to manage its required capital ("Bank Capital Solutions Transactions") primarily with UK and European banks.

Review of Period

During the period:

· The Net Asset Value of the Company increased by 1.17 pence per share (1.16%) to 102.08 pence per share as at 30 June 2014, being the most recently published NAV.

· The share price of the Company as at 30 June 2014 was 108.5 pence per share, representing an 8.5% increase from the issue price at IPO.

· The Company's Unaudited Interim Financial Statements for the period from 12 July 2013 (date of incorporation) to 31 March 2014 were released on 30 May 2014.

· The Company shares were cancelled from their official listing on the Channel Islands Securities Exchange Authority Ltd with effect from 7am on 11 August 2014.

Highlights

During the second quarter of 2014, the Company participated in two primary transactions and continued to be active in secondary market trading. The Investment Advisor continues to assess multiple investment opportunities with regulatory capital motivations, including portfolio divestments and funding opportunities, as well as traditional risk transfer transactions. Secondary investments in legacy assets continue to add value due to market momentum and in some cases significant call or tender optionality, while post crisis positions add strong positive carry to the portfolio.

Financial Position

At 30 June 2014, the Company had net assets of £133.0 million and was approximately 59% invested in Bank Capital Solutions Transactions. The Company has no borrowings and no significant creditors, other than amounts payable in the ordinary course of business. There has been no significant change in the Company's financial position since 30 June 2014.

Company Financial Statements

The Company's Annual Audited Financial Statements for the period ending 30 September 2014 will be available within four months of the year end in accordance with the Listing Rules.

Dividends

The Company declared a dividend of 4 pence per share on 18 July 2014, which will be paid on 29 August 2014.

Valuation of Portuguese bank transaction

The first primary investment of the Company was a Bank Capital Solution transaction for a Portuguese bank, giving the Company exposure to short-term loans from a diversified pool of more than 8,000 Portuguese SME borrowers.

The transaction has performed better than our base case so far. The cumulative pay-down of the transaction is 15.5% - substantially in line with our modelling - and credit performance is better than our base case, with annualised default rate in the single basis points versus our base case of above 2.5% p.a.

The transaction involved the issue of the credit-linked notes by a special purpose vehicle with the proceeds of the issue deposited with an investment-grade bank in London, thereby removing principal exposure to the Portuguese bank. However, the cash flows on the transaction have counterparty risk exposure to the Portuguese bank which, on a monthly mark-to-market basis, are affected by spreads on Portuguese bank credit default swaps ('CDS').

As a result of CDS spread moves in July, this investment suffered a mark-to-market loss as of July month end of 2%. As of the date of the publication of this Interim Management Statement, a positive mark-to-market would be recorded given the subsequent tightening in CDS spreads. Based on CDS spreads on 13 August, the mark-to-market gain would have more than offset July's mark-to-market loss.

Investment ramp-up

The Company is currently 67% invested in primary and secondary transactions and announces that it has committed capital to two new primary investments to be funded by the end of September, totalling £24 million.

The first of these new primary transactions provides exposure to European leveraged loans and allows a bank to achieve the desired regulatory capital treatment on warehousing those loans. The investment is expected to settle before the end of August.

The second primary investment is in a whole loan portfolio primarily backed by residential properties sold by a Spanish bank. As with all whole loan portfolio sales in Spain, the portfolio is substantially non-performing loans and foreclosed properties. This opportunity has arisen as the bank is in a deleveraging process to manage its capital and attractive pricing has been achieved. The investment will be funded by the end of September.

Both investments provide strong base case returns with significant downside protections built in.

After the funding of those two investments, at the first anniversary of the IPO the Company will have invested circa 86% of the IPO proceeds in five primary transactions together with the current position in secondary Bank Capital transactions.

While this investment is a little slower than the initially expected ramp-up, it reflects the urgency of some investment managers to deploy capital at any cost, which have driven returns on some transactions to levels at which the Investment Advisor has been happy not to participate.

Investment Pipeline

The Investment Advisor believes that the discipline in not investing in some transactions on the basis of risk-adjusted return will be rewarded and that the nervousness that markets experienced throughout July and the beginning of August has created some opportunities. The Investment Advisor is working on several pipeline transactions of which (i) a residential mortgage portfolio first loss investment, (ii) a global corporate loan capital relief transaction for a repeat issuer and (iii) a SME loans regulatory capital first loss from a relationship bank of the Investment Advisor.

While regulatory approvals and other factors always create timing uncertainty, given the general market and regulatory environment continue to be conducive of transactions, we expect the Company to have fully invested the small balance of the IPO proceeds by the end of the calendar year.

By order of the Board

Morgan Sharpe Administration Limited, Company Secretary

15 August 2014

DISCLAIMER

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

This document is only directed at persons in the United Kingdom who are investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, high net worth companies, unincorporated associations and other persons as defined in Article 49 of that Order or others to whom this document can lawfully be distributed or given, inside the United Kingdom, without approval of an authorised person. Any other person should not rely on it or act on it and any investment or investment activity to which it relates will not be engaged in with them.

This document is not for release, publication, or distribution, directly or indirectly, in whole or in part, to US Persons (as defined in Regulation S under the Securities Act of 1933, as amended) or into or within the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, or any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

Past performance is no guide to the future. The value of investments and the income from them may go down as well as up and investors may not get back the full amount they originally invested. The Company's target return and dividend policy should not be taken as an indication of the Company's expected future performance or results. The target return and dividend policy 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 or expected return. Statements contained herein, including statements about market conditions and the economic environment, are based on current expectations, estimates, projections, opinions and/or beliefs of the Company and its investment manager. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Such statements are necessarily speculative in nature, as they are based on certain assumptions. It can be expected that some or all of the assumptions underlying such statements will not reflect actual conditions. Accordingly, there can be no assurance that any projections, forecast or estimates will be realised. The information presented has been obtained from sources believed to be reliable but no representation or warranty is given or may be implied that it is accurate or complete.

The information presented in this interim management statement is solely for information purposes and is not intended to be, and should not be construed as, an offer or recommendation to buy and sell investments. If you are in any doubt as to the appropriate course of action, we would recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser.