Chenavari Toro Regulatory News (TORO)

Toro Limited

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

Guernsey with registered number 59940)

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 "Portfolio 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 the Toro Limited, the Portfolio 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

Portfolio Manager's Report

Board of Directors

Disclosure of Directorships

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

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Condensed Schedule of Investments

Notes to the Financial Statements

Appendix 1

AIFMD Disclosures (Unaudited)

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 Portfolio 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 Portfolio Manager and the Portfolio 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 Affirmation 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 Chenavari Credit Partners LLP, Commodity Pool Operator of Toro Limited.

20 January 2017

Highlights for the year ended 30 September 2016 (the "Year")

· During the Year, the Company's net asset value ("NAV") per Ordinary Share ("Share") decreased by 4.10% to close at 97.38 cents net of dividends paid.

· During the period from 1 October 2015 to 30 September 2016, the Company's NAV total return (dividends reinvested) was 3.27%.

· Dividends of 6.50 cents per Share were declared with respect to the Year, of which 5.25 cents per Share (and an additional 2 cents per Share relating to the previous financial year) were paid during the Year, with a final dividend of 1.25 cents per Share paid on 1 December 2016.

· The Company's mid-market share price at 30 September 2016 was 83.5 cents (2015: 98.5 cents), representing a discount to NAV of 14.26% (2015: 2.99%).

· The profit of the Company for the Year was €11.2 million (2015: €12.3 million), or 3.09 cents per Share (2015: 3.52 cents per share), taking into account recognition of the following significant items:

o total net income of €18.6 million

o total operating expenses of €7.1 million.

· At 30 September 2016, the Net Asset Value was €352.0 million, the Company was 91.1% invested and its free cash holdings were €24.5 million.

Corporate Summary

For the year ended 30 September 2016

The Company

Toro 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 Company's Ordinary Shares (the "Shares") were admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange and the Channel Islands Security Exchange Authority Limited ("CISEAL") on 8 May 2015.

Investment objective and policy

The investment objective of the Company is to deliver an absolute return from investing and trading in Asset Backed Securities ("ABS") and other structured credit investments in liquid markets, and investing directly or indirectly in asset backed transactions including, without limitation, through the origination of credit portfolios.

Target returns and dividend policy

On the basis of market conditions as at the date of the prospectus (28 April 2015), and whilst not forming part of its investment objective or investment policy, the Company will target (i) a NAV total return (including dividend payments) of 12 to 15 per cent per annum over three to five years once the Company is fully invested and (ii) a dividend of 5 per cent per annum payable quarterly in March, June, September and December of each year. Relative to this return, dividends of 6.50 cents per Share were declared with respect to the Year.

Asset Values

At 30 September 2016, the Company's NAV was €352 million (2015: €367 million), with the NAV per share amounting to 97.38 cents (2015: 101.54 cents). 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.

Website

The Company's website address is www.torolimited.gg 

Listing Information

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

The ISIN number of the Euro Shares is GG00BWBSDM98 and the SEDOL is BWBSDM9.

The closing price of the Shares quoted on the SFS at 30 September 2016 was 83.5 cents per Share.

The average closing price of the Shares over the Year was 86.3 cents per Share.

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present my report on the Company's progress for the Year.

Financial Performance

The Company's share price was 83.5 cents as of 30 September 2016, trading then at a discount to NAV of 14.26%.

During the period from 1 October 2015 to 30 September 2016, the Company's NAV total return (dividends reinvested) was 3.27%.

Over the Year the Company generated a profit of €11.2 million or a profit of 3.09 cents per Share.

The NAV per share was 97.38 cents at 30 September 2016 (101.54 cents 30 September 2015).

The Company's NAV decreased during the Year by 4.1%, net of dividends paid.

The Board noted the widening of the discount in year. As such, subsequent to the year end, the Board initiated the buy-back policy published in the Prospectus (and further set out in the Report of the Directors on page 15) as per the shareholder circular dated 22 July 2016.

Dividends

During the Year, the Company has declared two dividends of 2 cents each and two dividends of 1.25 each cents. The total dividend declared for the Year is 6.5 cents, to be compared with an annual target of 5 per cent of the Issue Price per Share as set out in the IPO prospectus (equivalent to 5 cents).

Investment Portfolio and 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. Given the high volatility expected in FX the Company has chosen to increase the cash buffer held and has prudently monitored cash levels.

The fund doesn't have any large single deal exposure to the UK and most of the exposure is not direct. The underlying exposure to UK assets is disclosed in the Investment Manager Report. There has been no negative credit migration or price action 3 months after the vote. The Investment Manager continues to monitor these exposures actively but does not expect to see any deterioration in performance over the short term.

Over the course of the Year Toro invested in an originator, Taurus Corporate Financing LLP ("Taurus"), a Guernsey limited liability partnership, in relation to the Originated Transactions Strategy of the Company, via a loan investment of €35 million. Taurus agreed to act as the originator for, and will hold risk retention securities in, a CLO for which the collateral manager is Chenavari Investment Managers.

As of 30 September 2016, the Company was 91.1% invested, gross of repurchase agreements with a total negative value of 0.26% of the NAV. For further detail on the investment portfolio and outlook please refer to the Portfolio Manager's report on pages 8 to 12.

Frederic Hervouet

Non-executive Chairman

20 January 2017

Portfolio Manager's Report

Performance

During the Year, the Company made a net profit of €11.1 million and distributed dividends of €26.2 million (some of which related to the year ended 30 September 2015). Together, these resulted in a decrease in NAV of €15.0 million or 4.16 cents per Share.

During the period from 1 October 2015 to 30 September 2016, the Company's NAV total return (dividends reinvested) was 3.27%.

The month-on-month NAV performance since inception was the following (with dividends reinvested at NAV):

Since inception, the Company has paid the following dividends:

In relation to the Year, the Company declared dividends totalling 6.5 cents per Share, to be compared with a twelve-month target of 5 per cent of the issue price (i.e. 5 cents) as per the IPO Prospectus. Dividend payments in the Year totalled 7.25 cents per Share as the dividend for the period ending 30 September 2015 (relating to the previous financial year) was paid in the Year and the dividend for the period ending 30 September 2016 was paid after the end of the Year.

Portfolio breakdown

As of 30 September 2016, the Company was 91.1% invested.

The NAV allocation as of 30 September 2016 was as follows:

Portfolio Manager's Report (continued)

Portfolio breakdown (continued)

The geographical breakdown of the underlying assets is as follows:

Investment Strategy

Public ABS Strategy: The Company will opportunistically invest or trade in primary and secondary ABS markets to seek out opportunities that aim to unlock significant value from ABS investments that the Portfolio Manager considers to be mispriced by the market relative to their intrinsic value.

Private Asset Backed Finance Strategy: Through the Portfolio Manager, the Company will leverage on the extensive relationships it has with European Banks and retail credit firms in order to gain access and invest in private asset backed finance transactions that are otherwise unlisted and difficult to source.

Direct Origination Strategy: The Company will primarily invest, on a buy-to-hold basis, in Originators of securitisation vehicles by retaining the requisite Retention Securities in such vehicles, pursuant to the relevant risk retention requirements in the EU or the US. This strategy benefits from a liquidity premium and 'alpha' by participating in the origination, as well as enhanced economics on the retained interests, with further added value derived from the team's sourcing and structuring capabilities. Additional investment opportunities may also include providing warehouse credit facilities.

Gearing

The Company may use borrowings from time to time for the purpose of short term bridging, financing Share buy backs, repurchase agreements with market counterparties or managing working capital requirements, including hedging facilities. Cash borrowings can contribute alongside other forms of leverage to increase the level of gearing of the Company. The Company may also use gearing to increase potential returns to Shareholders. In the past, the Portfolio Manager has employed leverage against senior tranches of ABS to enhance their returns, and expects it will continue to do so, where the economic terms offered by counterparties can increase potential returns to Shareholders.

Activity of the Year

The Investment Portfolio started the Year with 65% in Public ABS and 16% in Private Asset Backed Finance strategy, and ended the Year with 61.3% in Public ABS, 13.8% in Private Asset Backed Finance strategy, and 15.8% in Direct Origination strategy.

The Portfolio Manager started the Year actively rebalancing the Company's portfolio, increasing its RMBS exposure, in particular, UK non-conforming RMBS, as the Portfolio Manager believed that the robust macroeconomic backdrop and the recovering housing and collateral market in the periphery, together with attractively priced UK RMBS second pay IG tranches, provided potential accelerated cash flow realisation and appreciation supported by improving technicals.

Portfolio Manager's Report (continued)

Activity of the Year (continued)

However, low liquidity conditions persisted into 2016 on the back of a widespread negative market and political concerns surrounding Europe. As a result, the Portfolio Manager added tail-risk hedges whilst reducing the credit sensitivity of the Investment Portfolio with a view to rebalance it from outperforming sectors into those stressed by weak technicals and take advantage of any potential rising market dislocation. Despite this, the Company experienced several markdowns in January and February as a result of this market volatility. The Portfolio Manager began to advocate the increase of the Company's cash position in order to opportunistically invest should structured credit markets overshoot on the back of a potential forced deleveraging, and of particular importance, in response to the upcoming UK's EU referendum (the "Referendum").

In the lead up to the Referendum, the Portfolio Manager adopted a defensive positioning. The Portfolio Manager increased the Company's cash position via mechanical deleveraging and selective sales, particularly with UK RMBS, building up the cash position to c. 22%. The leverage ratio was further reduced to c. 78%, and the Company adopted a more disciplined approach to its portfolio's credit sensitivity, favouring a more neutral profile. All in all, the Company was able to offset its mark-to-market losses caused by the Referendum outcome. In addition, the Company realised some gains on hedges placed prior to the Referendum on iTraxx XOVER indices.

Following the Referendum, the Company elevated trading activities, with c. €107m being traded between July and September, with around 80% of the trading volume concentrated on European CLOs, as primary CLO BB and B-rated tranches appeared especially attractive. The neutral credit sensitivity positioning remained until year-end due to the uncertain outlook for Europe and the approaching US presidential election, and the portfolio was rebalanced towards high coupon tranches across sectors, from UK RMBS to Dutch consumer loans ABS, as both prepayment and interest rates were anticipated to fall lower.

In addition, Toro European CLO 2 was priced in August, where the deal was upsized by €50m due to oversubscription. Toro retained, through its Originator subsidiary, 55.6% of the equity, entitling it to a 100% rebate of the pro-rata management fees, and as a result of this and a further new direct origination transaction in Spain (funded by the sales proceeds from a secondary ABS), Toro Limited held c. 15.8% in the Direct Origination strategy at year-end. For further information regarding the investment outlook and pipeline, as well as further information on the portfolio composition as of 30 September 2016, please refer to both the preceding and proceeding sections

Investment Outlook

As we turn the page on what has been a highly surprising political year, fundamentals in Europe have changed little over the period. The better growth outlook at the end of 2016 is at risk from rising political uncertainty across the continent. Spain and Ireland should continue to outperform other peripheral countries, translating into fewer non-performing loans on banks' balance sheets and higher recoveries in these jurisdictions. Nonetheless, Brexit could still impact the UK and Irish economic models, a minority government in Spain remains fragile, while Italy is facing yet another period of heightened political uncertainty. The political calendar is also busy for core countries with Dutch, French and German elections scheduled in 2017. Such potential major changes across the European political landscape may eventually create some well needed stability, foster a stronger European block and deliver a fiscal stimulus, all leading to accelerating growth in the area.

The path toward policy normalisation embarked on by the US Federal Reserve is also a precursor to upcoming changes in other developed countries, which raises the risk of greater volatility in rates markets in 2017. While the European Central Bank should pursue an accommodative monetary policy until March 2017 and beyond, the pace of intervention and the transmission mechanisms are likely to gradually become less supportive in the coming years.

Taking such fundamental, political and technical factors into account, the Portfolio Manager believes that European securitisation products continue to offer some of the best risk-adjusted returns in the global credit markets. Valuations continue to be more compelling in European ABS than in corporate credit, especially as the exposure to interest rate volatility is limited and central bank policy much less distortive. At the same time, the Portfolio Manager will continue to hedge the portfolio dynamically, making capital preservation a priority in an environment characterised by unpredictable and binary events. As strategies on the current Public ABS portfolio are progressively exited, the rebalancing toward the Private Asset Backed Finance and Direct Origination strategies will accelerate in the next 12 months. Indeed, recently launched Direct Origination investments will be expanded and attractive opportunities are likely to emerge from the new regulatory framework and ongoing bank deleveraging and disintermediation.

Portfolio Manager's Report (continued)

Investment Outlook (continued)

Public ABS

European ABS should still benefit from the existing factors such as scarcity of supply, negative net issuance, attractive floating yields, positive credit fundamentals and supportive monetary policy in both the UK and the Eurozone. Alpha continues to be generated on the current Public ABS portfolio, especially on CDO of ABS and legacy ABS, but the Portfolio Manager sees fewer opportunities going forward as the outstanding ABS universe continues to shrink.

Within the legacy spectrum, the Portfolio Manager favours periphery RMBS and CLO 1.0 mezzanine tranches, where call probability remains high as Toro's holdings of Kildare 2007-1 and Celtic 12 both demonstrated in 2016. The Portfolio Manager also prefers high coupon tranches such as CLO 2.0 BB and B-rated tranches given the absolute attractive risk/reward and relative wide basis to investment grade-rated tranches. The Portfolio Manager will avoid long duration and low coupon tranches given negative Euribor. According to Morgan Stanley (2017 European ABS Outlook), as much as 56% of the legacy €-denominated bonds are currently cutting off coupon payments (floored at zero though) to noteholders.

Although alpha generating opportunities will become scarcer, the structural change in liquidity and volatility will also create tactical opportunities where the Portfolio Manager could opportunistically increase the ABS exposure if the market overshoots.

Private Asset Backed Finance Strategy 

In 2016, two private asset backed finance transactions were successfully exited (an investment on a pool of UK mortgage loans and an investment backed by a London office property). Three investments are still outstanding including a CLO warehouse maturing in January 2017 and a Spanish non-performing loan transaction, named WIND. The Portfolio Manager expects the performance of the latter, which disappointed in 2016, to stabilise in 2017 as collections accelerate on the back of the recent change of servicer and the continuing improvement in the Spanish residential market.

Two new transactions were initiated in 2016, including Project Sacramento which consisted of the acquisition of a circa £120m static portfolio of 16,000 UK hire-purchase receivables. The lack of competitive offering across both the prime and near-prime space allowed the originator to access favourable pricing of risk. The transaction was structured in order to maximise the alignment of interests with the originator, providing an excess spread from the revenue waterfall together with a clawback mechanism in case of high default and/or prepayment rates. The Portfolio Manager sees a projected return of 13%, benefiting from attractive financing terms.

Allocation to the Private Asset Backed Finance Strategy is likely to exceed 20% of Toro's NAV in the coming months. The Portfolio Manager will favour niche transactions within less competitive sectors over competitive large portfolio of vanilla products in core jurisdictions or non-performing loans in the periphery.

Direct Origination Strategy

Allocation to the Direct Origination should increase from 16% to over 35% in the coming 12 months, reflecting the growth in non-bank lending opportunities for both corporates and consumers.

Firstly, the launch of Taurus Corporate Finance LLP (the originator entity fully owned by Toro) and subsequent pricing of Toro CLO 2 in 2016 paved the way for further similar transactions in 2017. Taurus, acting as the borrower under a credit facility, has been ramping up newly originated loans and, bar any significant market disruptions, an original portfolio of circa €150m should be ready for a CLO take out in Q1 2017. Taurus will then retain a 5% minimum horizontal slice of the transaction, equivalent to the risk retention requirement. This investment represents a unique opportunity and entitles the Fund to a 100% rebate of the pro-rata CLO management fees. The anticipated gross yield on the bundled investment is forecast at over 20% under a base case scenario and 12% when applying a full credit cycle scenario (for further details please see the Performance Attribution call Q3 2016 transcript available on www.torolimted.gg/documents).

Leveraged loan valuations are currently within fair value levels due to the expectation for improving fundamentals next year. Default rates on leveraged loans, on the other hand, are currently low at 0.53% over the last 12 months (Credit Suisse). Going forward, the Portfolio Manager expects leveraged loan default rates to continue to stay at or below historical averages of 2%.

Portfolio Manager's Report (continued)

Investment Outlook (continued)

Secondly, Toro will continue to launch and expand direct lending platforms with local partners, especially within the periphery where banks carry on deleveraging and focusing on core businesses, therefore creating a gap to be filled by non-traditional lenders. We expect to develop the Irish (Shamrock) and Spanish (SpRED) origination platforms that were launched in 2016 and focused on the residential market.

Buy-to-let lending in Ireland presents an attractive investment opportunity due to the reluctance of banks to extend credit in this space. This is primarily due to i) the high non-performing buy-to-let loan stock that banks still hold, ii) the high capital charges that banks experience on buy-to-let loans and iii) political pressure for banks to focus their mortgage lending on owner-occupied products. The lack of competition means that loans with attractive risk reward characteristics can be written: we are targeting a portfolio with a 5% annual coupon at an average 65% loan-to value. The anticipated exit will be achieved through a capital markets RMBS transaction following a 18 month ramp up period.

The Spanish housing market gathered steam this year and Barcelona, where Toro initiated its first real estate development project with a local developer, is leading the residential market recovery in Spain. According to Tinsa, a Spanish home valuation specialist, prices increased by 9% in the Catalan capital in the first three quarters of 2016. As demand for new-build is high in some specific areas, Toro will continue to selectively finance some projects alongside a fully aligned partner as bank financing remains unavailable for developers.

The ongoing rotation in the portfolio from public ABS to private asset finance and direct origination should increase the gross interest income to 9% and overall yield to 14% in 2017, as indicated in the chart below. Coupled with a sensible hedging policy, the Portfolio Manager will seek to generate sustainable income for shareholders in the long term while protecting capital in case of disruptive events.

Post Balance Sheet Events

On 20 October 2016 the Company declared a further dividend payment of 1.25 cents per share for the quarter to 30 September 2016 which was paid on 1 December 2016.

Subsequent to the year end, the Board initiated the buy-back policy published in the Prospectus as per the shareholder circular dated 22 July 2016.

Chenavari Credit Partners LLP

Portfolio 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 Portfolio Manager. All of the Directors are non-executive and, except for Roberto Silvotti (as described below), are independent of the Portfolio Manager.

The Directors meet at least quarterly.

The Directors are as follows:

Frederic Hervouet, non-executive Chairman (aged 43)

Frederic Hervouet has over 20 years' experience in the financial markets and asset management industry with a focus on multi-asset class investment management, risk management, structured products and structured finance. Mr. Hervouet holds a Masters Degree (DESS 203) in Financial Markets, Commodity Markets and Risk Management and an MSc in Applied Mathematics and International Finance from University Paris Dauphine. Previously Mr. Hervouet worked for two multibillion multi-strategy hedge funds specialising in quantitative strategies, convertible arbitrage, derivatives and emerging markets debt. Mr. Hervouet is an independent director of Tetragon Financial Group Limited and Tetragon Financial Group Master Fund Limited and Funding Circle SME Income Fund Limited. Mr Hervouet is also a Board member of the General Partner on Terra Firma Private Equity funds and Lakestar Private Equity funds. Prior to this role, Mr. Hervouet was managing director and head of commodity derivatives in Asia for BNP Paribas. Mr Hervouet is a resident of Guernsey. He is a member of the UK Institute of Directors ("IoD"), of the UK AIC, Association of Investment Companies, of the Guernsey Chamber of Commerce and of the Guernsey Investment Fund Association ("GIFA").

John Whittle, non-executive director (aged 61)

John Whittle has significant experience of the loan market and is a non-executive director of International Public Partnerships Ltd (as audit committee chair), Starwood European Real Estate Finance LTD (as audit committee chair), India Capital Growth Fund Ltd, Globalworth Real Estate Investments Ltd (as audit committee chair), GLI Finance Ltd (as audit committee chair) and Aberdeen Frontier Markets Investment Company Ltd (as chairman). Mr. Whittle worked as a chartered accountant at PriceWaterhouseCoopers. He is a Chartered Accountant and holds an IoD Diploma in Company Direction. Prior to acting as a non-executive director, Mr. Whittle was finance director at Close Fund Services, a large independent fund administrator. He has also held senior positions at John Lewis, Vodafone and as CFO of Windsmoor (London LSE).

Roberto Silvotti, non-independent non-executive director (aged 58)

Roberto Silvotti has over 20 years' experience in both academic and senior credit market positions, and was formerly the Chief Risk Officer of the Chenavari Financial Group. He started his career as Professor of Mathematics in institutions such as Columbia University (New York), The Institute for Advanced Study (Princeton, New Jersey) and Scuola Normale Superiore (Pisa, Italy). Mr. Silvotti then moved to the capital markets industry. Over the past 10 years, he has held senior positions in various investment banks, including risk manager at Goldman Sachs, head of credit derivatives risk management for Banca Intesa, global head of structured credit trading at Calyon, global head of derivatives structuring and new product development at Dresdner Kleinwort. Prior to his role as Chief Risk Officer of the Chenavari Financial Group he was co-head of structured credit and head of index strategy at Royal Bank of Scotland. Mr Silvotti is a director of Chenavari Multi-Strategy Credit Fund Limited, Chenavari Investment Managers (Guernsey) Limited and Chenavari Investment Managers (Luxembourg) Sàrl and, as such, is not considered independent of the Portfolio Manager.

Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges

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

Report of the Directors

The Directors are pleased to present their Annual Report and Audited Financial Statements for the Year. 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 59940.

Results

The results for the year to 30 September 2016 are set out in the Statement of Comprehensive Income on page 39. The profit for the Year was €11.2 million.

Dividends

Dividends of 6.5 cents per Share were declared in respect of the Year. Dividend payments in the Year were 7.25 cents per Share, which included dividends relating to the previous financial year, as follows:

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

Share Capital and discount control

Details of the rights attaching the Shares are set out in Note 16 of the Financial Statements on page 72. At 30 September 2016, the Company's issued share capital amounted to 361.45 million shares, none of which were held in treasury. No shares were bought back during the Year, but a programme of Share repurchases commenced after the Year end.

The Company may, subject to compliance with the Companies Law (Guernsey) 2008 (the "Law"), 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 the price at which Shares may be trading.

As set out in the Prospectus, the Directors will give consideration to using surplus cash to purchase Shares under this authority, but are not bound to do so, where the market price of a Share trades at more than 7.5% below the latest published NAV per Share for more than 180 days. Surplus cash for these purposes will comprise undistributed coupons and the proceeds of normal portfolio realisations. The Board will continue to apply the buy back policy published in the Prospectus (and set out above) but may, at its sole discretion and without limit, make additional purchases of Shares beyond those required by the policy as per the shareholder circular dated 22 July 2016.

The current authority to purchase shares for cancellation or holding in treasury expires on the date of the next Annual General Meeting ("AGM") which will be held in Guernsey on 17 March 2017. The Directors intend to seek annual renewal of this buyback authority from Shareholders each year at the Company's AGM. If the Company purchases any of its Shares, the maximum price (exclusive of expenses) which may be paid for a Share must not be more than the higher of (i) 5 % above the average of the mid-market values of a Share for the five Business Days before the purchase is made, or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Shares. In addition, Shares will be purchased through the market only at prices below the last published NAV per Share, which should have the effect of increasing the NAV per Share for the remaining Shareholders. Any such purchase will be carried out in accordance with the Companies Law, which provides inter alia, that any buy-back is subject to the Company passing the solvency test contained in the Companies Law at the relevant time. The minimum price payable per Share is £0.01.

Report of the Directors (continued)

Investors should note that the purchase of Shares by the Company is entirely discretionary and no expectation or reliance should be placed on the Directors exercising such discretion on any one or more occasions. Investors should also note that any purchase or redemption of Shares will be subject to the ability of the Company to fund the purchase price or redemption amount. Purchases of Shares may be made only in accordance with the Law, the Disclosure Guidance and Transparency Rules. The Company is not required to comply with the provisions of Chapter 12 of the Listing Rules regarding market repurchases by the Company of its shares. Nonetheless, by adopting the policy above, the Company will voluntarily be complying with the provisions of Listing Rule 12.4.1 and 12.4.2.

The Law allows companies to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them, and Shares purchased since Year end have been placed in treasury. This gives the Company the ability to re-issue Shares quickly and cost effectively, thereby potentially improving liquidity and providing the Company with additional flexibility in the management of its capital base. No Shares will be sold from treasury for cash at a price less than the NAV per Share at the time of their sale without Shareholder approval. During the period when the Company holds Shares as treasury shares, the rights and obligations in respect of those Shares may not be exercised or enforced by or against the Company.

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 bank counterparties (as applicable) or derived from valuation models prepared by the Portfolio manager. The NAV and the NAV per Share will be published in Euros by an RIS announcement and on the website of the Company at www.torolimited.gg.

Portfolio Manager

The Board keeps the performance of the Portfolio Manager under regular review, and the management engagement committee, comprising all Directors, conducts an annual appraisal of the Portfolio Manager's performance, and makes a recommendation to the Board about the continuing appointment of the Portfolio Manager. The Portfolio 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 Credit Partners LLP is in the interests of shareholders as a whole.

The portfolio management fee payable to the Portfolio 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 Portfolio Manager shall be entitled to receive from the Company a performance fee in respect of each Class of Shares as detailed in note 4 of the financial statements. Performance fees of €1,971,246 (period ended 30 September 2015: €2,165,819) were charged in the Year. As at 30 September 2016 €2,837,574 was payable (2015: €2,165,819).

Non-mainstream pooled investments

On 1 January 2014, FCA rules concerning the promotion of non-mainstream pooled investments came into effect. The Board conducts and intends to continue to conduct its affairs so that the Company's shares will be "excluded securities" under the FCA's new rules. This is on the basis that the Company which is resident outside the EEA, would qualify for approval as an investment trust by the Commissioners for HM Revenue and Customs if resident and listed in the United Kingdom. Promotion of the Company's shares will not be subject to the FCA's restriction on promotion of non- mainstream pooled investments.

Report on Viability

The Directors have assessed the viability of the Company over the three years to 30 September 2019. The Board have chosen this timeframe as it reflects a reasonable investment horizon with regards risks and uncertainty and the Board have reviewed a cash flow forecast prepared by the Portfolio Manager consistent with this time horizon. In making this assessment, the Directors have considered detailed information provided at Board meetings taking account of the Company's balance sheet, gearing level, share price discount, asset allocation, operating expenses, investment strategy, the potential impact of the relevant principal risks detailed in the Statement of Principal Risks and Uncertainties on pages 24 to 25 and the expected future cash flows based on the current portfolio. The assumptions herein are based on there being no significant change in the global financial and or credit markets over the three year period.

In making this assessment, the Directors had regard for the expected yield from the portfolio and the significant margin over the low cost base of the Company and it is the Board's opinion that the Company would continue to hold sufficient cash to meet its expenses given the low cost base of the Company.

Report of the Directors (continued)

Report on Viability (continued)

Based on the above, the Board confirms it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of this assessment.

The aforementioned principal risks, set out on pages 24 and 25, will continue to be monitored closely.

Going Concern

Going concern refers to the conclusion that the Company has the resources to continue in operation for the foreseeable future. After analysing the following, the Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements:

1. Working capital - As at 30 September 2016, there was working capital of approximately €30.8 million. The Directors noted that as at 30 September 2016 (i) the gross investment income for the Year was approximately €18.3 million. As such the Board believes the Company has sufficient capital to cover all expenses (which mainly consist of management fees, performance fees, administration fees and professional fees) and to meet all of its obligations as they fall due.

2. Closed-ended Company - The Company has been registered with the Guernsey Financial Services Commission as a Registered Closed-ended Collective Investment Scheme, as such there cannot be any shareholder requested redemptions, and therefore no cash flows out of the Company in this respect. Subsequent to the year end, the Board initiated the buy back policy published in the Prospectus (and set out above) as per the shareholder circular dated 22 July 2016.

3. Investments - The Company has a tradable portfolio, therefore the investments can be sold for cash in most market conditions. At 30 September 2016 the market value of level 1 and 2 securities was €258.3 million and the Company had cash balances of €24.5 million adjusting for repurchase agreements. Part of the portfolio is less liquid, consisting of level 3 assets, under certain market circumstances already seen in the past, most of the portfolio which consists of ABS can become less liquid and the cost of unwinding may become significant. This risk is mitigated by the closed-ended nature of the Company.

Based on the above assessments, the Directors are of the opinion that the Company is able to meet its liabilities as they fall due for payment because it has and is expected to maintain, adequate cash resources. Given the nature of the Company's business, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

AIFMD

Under European Law the Company is considered to be an Alternative Investment Fund ("AIF") under the AIFMD and has appointed Carne Global AIFM Solutions (C.I.) Limited as the Company's external AIFM.

The Company currently intends to operate as an externally managed non-EEA domiciled AIF with a non-EEA AIFM for the purposes of the AIFM Directive and as such neither it nor the AIFM will be required to seek authorisation under the AIFM Directive. However, following national transposition of the AIFM Directive in a given EU member state, the marketing of shares in non-EEA AIFs with a non-EEA AIFM (such as the AIFM) to investors in that EU member state is prohibited unless certain conditions are met. The AIFM filed a notification on 9 April 2015 with the FCA pursuant to Article 42 of the AIFM Directive to market the Shares in the UK under the UK national private placement regime.

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.

Report of the Directors (continued)

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

The Company has received the following notifications of major interests in Shares:

The Concert Party

As a Guernsey company which has its shares admitted to trading on the Specialist Fund Segment of the London Stock Exchange, the Company is subject to The City Code on Takeovers and Mergers (the "Code"). Under Rule 9 of the Code, any person who acquires an interest (as defined in the Code) in shares which, taken together with shares in which he is already interested and shares in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.

Similarly, when any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of such a company, but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.

When members of a concert party hold more than 50 per cent. of the voting rights in a company, no obligations normally arise from acquisitions by any member of the concert party. They may accordingly increase their aggregate interests in shares without incurring any obligation under Rule 9 to make a general offer, although individual members of a concert party will not be able to increase their percentage interests in shares through or between a Rule 9 threshold without Panel consent.

Rule 37 of the Takeover Code further provides that when a company redeems or purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9.

Report of the Directors (continued)

The Concert Party (continued)

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

Shares representing 30% or more (but less than 50%) of the voting rights of the Company are held by a concert party comprising Chenavari Credit Partners LLP (acting as discretionary portfolio manager for Chenavari European Opportunistic Credit Fund Limited), other group companies in the Chenavari Financial Group, certain other individuals connected with, or employed by, the Chenavari Financial Group (including Roberto Silvotti, a director of the Company) (the "Concert Party").

In August 2016, Independent Shareholders approved waivers from the Panel relating to the obligation on any member of the Concert Party (including the Portfolio Manager individually) to make a general offer that would otherwise arise as a result of the issue of the shares to the Portfolio Manager in connection with the performance fee arising in the year to 30 September 2015, or the exercise of the buyback authority.

If the Concert Party's aggregate shareholding were to increase to greater than 50 per cent. of the Company's total voting rights, as a result of the exercise of the buyback authority and/or the issue of Shares relating to the performance fee or otherwise, no obligations would normally arise from acquisitions by any member of the Concert Party. They may accordingly increase their aggregate interests in Shares without incurring any obligation under Rule 9 to make a general offer, although individual members of the Concert Party will not be able to increase their percentage interests in Shares through or between a Rule 9 threshold without Panel consent.

 Directors

The Directors of the Company during the year and at the date of this Report are set out on page 6.

Directors' and Other Interests

The Directors' holdings and interests in the Company are listed in note 4 on page 55.

Mr Silvotti, by virtue of his directorships of entities within the Portfolio Manager's group, previous roles with the Portfolio Manager and other funds managed within the Chenavari Group is not considered independent of the Portfolio Manager.

Retirement by Rotation

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

Disclosure of Information to the Auditor

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

Independent Auditor

Deloitte LLP ("Deloitte") was re-appointed as the Company's Auditor for the 2016 audit following the AGM on 18 March 2016.

A resolution for the re-appointment of Deloitte will be proposed at the next AGM.

Signed on behalf of the Board of Directors by:

Frederic Hervouet, Chairman

John Whittle, Director

20 January 2017

Corporate Governance Report

The Company is admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange 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 ("DTRs") while traded on the 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

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

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

Explanation: As the UK Code itself states, investment companies typically have a Board structure that differs from those of other companies and this affects the relevance of particular provisions of the UK Code. Due to the nature of the Company's business and the structure of its relationships with its Administrator, Sub-Administrator, AIFM, Custodian and Portfolio 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 Portfolio Manager and any company in the same group as the Portfolio Manager; the Chairman of the Board of Directors is free from any conflicts of interest and is independent of the Portfolio Manager and of any company in the same group as the Portfolio Manager; and that no partner, employee or professional adviser to the Portfolio Manager or any company in the same group as the Portfolio Manager may be a Director of the Company at any time.

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

Explanation: The appointment of new Directors forms part of the schedule of matters reserved for the Board 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: All newly appointed Directors shall stand for election by the shareholders at the next AGM following their appointment. The Directors shall retire by rotation every three years and, if appropriate, offer themselves for re-election in accordance with UKLA Listing Rules LR 15.4.7 and 15.2.13A, with which the Company voluntarily complies. Mr Silvotti is subject to annual re-election as he is not considered to be independent due to his current appointment to the Boards of other Company's in the Group of the Portfolio Manager and previous appointment as CRO of the Portfolio Manager.

Corporate Governance Report (continued)

Compliance with the UK Code (continued)

Explanation: (continued) Directors who have served on the Board for more than nine years are subject to annual re-election. The names of Directors submitted for appointment or reappointment shall be accompanied by sufficient biographical details to enable shareholders to make an informed decision.

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

Explanation: The Company's Audit Committee comprises all members of Board, however Mr Silvotti, by virtue of his directorship and previous roles with the Portfolio Manager and other funds managed within the Chenavari Group, is not considered independent of the Advisers. Given Mr Silvotti's extensive investment experience, the independent members of the Audit Committee are of the opinion that shareholder interests are best served through Mr Silvotti's membership of the Audit Committee. Per the Code, for small companies the Company Chairman may be a member but not the Chair 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. As such the applicable internal controls that would normally be expected exist within those organisations. The Audit Committee reviews their internal controls as part of its work. 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 and nominee committee. The Board of Directors make all representations regarding Directors' remuneration. The Board as a whole fulfils the functions of the remuneration committee, and a separate Directors' Remuneration Report is set out on page 30 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 6. Mr Hervouet and Mr Whittle are considered independent of the Advisers for the purposes of the Company's compliance with the UK Code. However Mr Silvotti, by virtue of his directorship and previous roles with the Portfolio Manager and other funds managed within the Chenavari Group is not considered independent of the Advisers and therefore will be re-elected annually at the AGM.

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

Corporate Governance Report (continued)

Composition and Independence of the Board (continued)

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 Portfolio Manager and the Corporate Broker. The Directors are kept fully informed of investment and financial controls and other matters that are relevant to the business of the Company and should be brought to the attention of the Directors. The Directors also have access to the Company Secretary and, where necessary in the furtherance of their duties, to independent professional advice at the expense of the Company.

The Board holds quarterly Board meetings, the Audit Committee meets at least 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.

Attendance at the Board, Audit Committee and Management Engagement Committee meetings for the year ended 30 September 2016 was as follows:

At the Board meetings the Directors review the management of the Company's assets and all other significant matters so as to ensure that the Directors maintain overall control and supervision of the Company's affairs. Agendas and Board papers are circulated in advance of meetings to assist members to discharge their duties appropriately. The Company maintains a formal schedule of matters reserved for the Board. The 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 Portfolio Manager.

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

The Board has reviewed its composition and believes that the current appointments provide an appropriate range of skills, experience and diversity. In order to maintain its diversity, the Board is committed to continuing to review its current composition. 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 and is chaired by John Whittle and also has Frederic Hervouet as a member. The Audit Committee was also attended by Roberto Silvotti. 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 pages 26 and 27.

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 John Whittle appointed as Chairman. Its principal duty is to consider the terms of appointment of the Portfolio Manager and it will annually review that appointment and the terms of the Portfolio Management Agreement. Its duties and responsibilities also extend to the regular review of the performance of and contractual arrangements with other service providers.

The Management Engagement Committee carried out its review of the performance and capabilities of the Portfolio Manager at its meeting on 19 October 2016 to confirm that the continued appointment of Chenavari Credit Partners LLP as Portfolio Manager is deemed to be in the interest of shareholders. At the same meeting, the Management Engagement Committee concluded that the Company's other service providers were performing in accordance with the Company's expectations and contractual arrangements in place.

Corporate Governance Report (continued)

Board Performance

The Management Engagement Committee formally evaluated the Board's effectiveness on 19 October 2016 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 through Chenavari investor relations (e-mail address TLIR@chenavari.com) or by correspondence sent to the Company Secretary (toro@morgansharpe.com) or the Corporate Broker. As a consequence, the Board receives appropriate updates from the Company Secretary, Portfolio 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.torolimited.gg, which include updates on markets and the Company's performance.

Statement of Principal Risks and Uncertainties

Summary

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

The risks set out below are those which are considered to be the material risks relating to an investment in the Shares but are not the only risks relating to the Shares or the Company. Additional risks and uncertainties of which the Company is presently unaware or that the Company currently believes are immaterial may also adversely affect its business, financial condition, results of operations or the value of the Shares. The Directors have undertaken a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, and have undertaken a detailed review of the effectiveness of the risk management and internal control systems. The Directors are comfortable that the risks are being appropriately monitored.

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

Terms of Reference

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

Financial Reporting

· monitoring the integrity of the financial statements of the Company, including its annual and half-yearly reports and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgments which they contain.

Risk Management Systems

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

Compliance, Whistle blowing and Fraud

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

· reviewing the Company's procedures for detecting fraud;

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

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

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

External audit

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

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

Delegation of Duties

The Company has no employees 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, Chenavari Credit Partners LLP as Portfolio Manager, Carne Global AIFM Solutions (C.I.) Limited as AIFM, JPMorgan Chase Bank National Association as Custodian, Depositary and Principal Bankers and Capita Registrars (Guernsey) Limited as Registrar (together the "Outsourced Service Providers"). Please see note 5 for further details in relation to these service providers.

Membership of the Committee

The Audit Committee was established on incorporation and consists of Frederic Hervouet, Roberto Silvotti and myself, John Whittle, as its Chairman. All the members of the Audit Committee are non-executive directors. Mr Hervouet and I are considered independent of the Advisers for the purposes of the Company's compliance with the UK Code however Mr Silvotti, by virtue of his directorship and previous roles with the Portfolio Manager and other funds managed within the Chenavari Group is not considered independent of the Advisers. The Audit Committee has concluded that its membership meets the requirements of C.3.1 of the UK Code and 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

Audit Committee Report (continued)

Membership of the Committee (continued)

· factors impacting the Company's Financial Statements.

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

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

How the Audit Committee has Discharged its Responsibilities

In the period under review, the Audit Committee has met five 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 judgments

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

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

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

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

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

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

Significant Accounting Matters

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

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

At 30 September 2016, the Company's investments had a fair value of €321.2 million and represented 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 Portfolio Manager, the Administrator, the Sub-Administrator, the Custodian, the Audit Committee, the AIFM and the Board.

Investments are valued in accordance the Company's Valuation Policy and with the Accounting Policies set out in note 2.2 to the financial statements. The Valuation Policy is compiled with reference to key principles comprising; independence, documentation, transparency, consistency and relevance and documents the pricing process and timeline, with particular reference to difficult to value securities, and sets out escalation procedures.

Audit Committee Report (continued)

The Audit Committee required the Portfolio 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 Portfolio 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 Portfolio Manager provided an assessment of the manager's independence and reliability. Additionally, the Audit Committee required the Portfolio Manager to provide a reasoned assessment of fair value for each investment held and its classification in the fair value hierarchy.

During the Year the Portfolio Manager also engaged Duff & Phelps, Ltd ("Duff & Phelps"), on behalf of the Company, as a valuation advisor to provide certain limited procedures on some Transactions' valuation which the Investment Adviser identified and requested Duff & Phelps to perform. For the avoidance of doubt, notwithstanding the Company's engagement with Duff & Phelps, the Valuation Committee of the Company remains ultimately responsible for the determination of the Fair Value of each Transaction, but may consider Duff & Phelps' input in making such determinations. Specifically, as of 30 September 2016, Duff & Phelps estimated ranges of Fair Value for the Company's interests in 4 transactions.

Following discussion, we were satisfied that the judgments made and methodologies applied were prudent and appropriate and that the correct accounting treatment has been adopted. Please see further details outlined in notes 2 and 8 to the financial statements.

Income Recognition

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

Due to the nature of the Company's investment strategy resulting in the possibility of investments being sold before maturity and given the consequent inherent uncertainty of using maturity dates to calculate income using the Effective Interest Rate method, for both primary and secondary investments, the Company's accounting policy recognises only a net fair value movement rather than reporting a split between fair value movement and interest income in the income statement. This is explained further in note 2.4 to the financial statements.

Portfolio Manager's Fee

The Audit Committee identified the calculation of the Portfolio Manager's Fee (including Performance Fee) to represent a significant risk of misstatement in the Company's financial reporting given the complexity of the calculation and the related party relationship. The Committee requested the Administrator, Sub-Administrator and Portfolio 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 Portfolio Management Agreement. The Audit Committee reviewed a detailed calculation methodology prepared by the Sub-Administrator and agreed the calculation with the Portfolio Manager.

IFRS 10 Consideration

The Audit Committee has considered and challenged the judgements made by the Directors in considering whether the Company and the Originator meet the criteria described in IFRS to be considered an investment entity. Having considered these judgements, the Audit Committee agreed with the conclusions reached.

Assessment of Principal Risks and Uncertainties

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

Risk Management and Internal Controls

The Board as a whole is responsible for the Company's system of internal control; however, the Audit Committee assists the Board in meeting its obligations in this regard. The daily operational activities of the Company were delegated to the Outsourced Service Providers and as a result the Company has no direct internal audit function and instead places reliance on the external and internal audit controls applicable to the Outsourced Service Providers as regulated entities. The Audit Committee regularly monitors confirmations from the Outsourced Service Providers that no material issues have arisen in respect of the system of internal controls and risk management operated within the Company's Outsourced Service Providers. The Audit Committee confirms that this is an ongoing process in order to manage the significant risks faced by the Company. Annually, the Audit Committee reviews the effectiveness of the Company's material controls, including financial, operational and compliance controls. We deem that, to date, there are no significant issues in this area that need to be brought to your attention. The Board visited the Portfolio Manager on 12 October 2016 in order to review the valuation of securities contained in the portfolio.

Audit Committee Report (continued)

External Audit

It is the responsibility of the Audit Committee to monitor the performance, independence, objectivity and re-appointment of Deloitte. On 7 September 2016, we met with Deloitte who presented their Audit Strategy and Plan for the Year; we agreed the audit plan for the Year, highlighting the key financial statement and audit risks, to seek to ensure that the audit was appropriately focused. Deloitte attended 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 Portfolio 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.

The Committee is required to assess and report to the Board on the effectiveness of the audit process. During the Year it accomplished this as follows:

· Met with Deloitte and reviewed the audit plan as above;

· Met with Deloitte and reviewed the audit report at the conclusion of the audit;

· In addition the Chairman discussed the effectiveness of the audit with staff of the Administrator and Sub-Administrator; and

· Completed a comprehensive check list covering all aspects of the audit process.

· Reviewed the FRC audit quality review

From its work the Committee concluded that audit process had been effective.

Deloitte was re-appointed as the Company's auditor for the 2016 audit following the AGM on 18 May 2016. The lead audit partner will be rotated every five years to ensure continued independence and objectivity. The Audit Committee continues to be satisfied with the performance of Deloitte. We have therefore recommended to the Board that Deloitte, in accordance with agreed terms of engagement and remuneration, should continue as the Company's auditor until the forthcoming AGM. 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 $36,380 consisting of tax and reporting services. Non-audit services were primarily in relation to PFIC statement preparation for the Company and the Audit Committee is satisfied that the overall quantum of ongoing non-audit services is not anticipated to be material. Deloitte also charged a fee for the interim financial statements of £19,000.

Committee Effectiveness

The effectiveness of the Audit Committee was reviewed by both the Board and Audit Committee as part of the annual Board Evaluation process at the meeting held on 19 October 2016. 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:

John Whittle

Chairman, Audit Committee

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. The Board's remuneration along with the matters recommended by the UK Code that would be delegated to such a committee, are considered by the Board as a whole.

The Company's policy is to ensure that the fees payable to the Directors reflect the time spent by the Directors on the Company's affairs, the responsibilities borne by the Directors and be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities, as are the Chairman of the Audit Committee and the Management Engagement Committee. The policy is to review fee rates periodically, although such a review will not necessarily result in any changes to the rates, account will be taken of fees paid to directors of comparable companies.

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

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

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

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

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 and is not expected to change in the foreseeable future.

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

The Directors were appointed as non-executive Directors by letters issued on 20 April 2015. 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.

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

Directors' Remuneration Report (continued)

Quantitative Remuneration Disclosure

Appropriate disclosures will be made in due course in accordance with Article 22(2)(e) and 22(2)(f) of the AIFMD.

Signed on behalf of the Board of Directors by:

Frederic Hervouet, Chairman

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 International Financial Reporting Standards (IFRSs) 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, International Accounting Standards 1 requires that the Directors:

· 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.

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

Frederic Hervouet

Non-executive Chairman

20 January 2017

Independent Auditor's Report to the Members of Toro 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

*Inclusive of issue costs related to the set up and structuring of the Originator of €271,506

All items in the above statement derive from continuing operations.

The Condensed Schedule of Investments and notes to the financial statements are an integral part of the financial statements.

Statement of Financial Position

As at 30 September 2016

__________________________ __________________________

Director: Director:

Date: Date:

The Condensed Schedule of Investments and 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

The Condensed Schedule of Investments and notes to the financial statements are an integral part of the financial statements.

Statement of Cash Flows

For the year ended 30 September 2016

*Presentation restated from 2015 audited financial statements to include the movements on repurchase agreements and reverse repurchase agreements within investment activity and gain/loss on financial assets.

The Condensed Schedule of Investments and 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

\* This consists of all European issued bonds where the fair value is less than 1% of the NAV of the Fund at 30 September 2016.

Condensed Schedule of Investments, at Fair Value (continued)

As at 30 September 2016