Half-year Report

Chenavari Capital Solutions Limited

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

Guernsey with registered number 56977)

Unaudited Interim Financial Statements

For the period from 1 October 2015 to 31 March 2016

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

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

Contents

Commodity Exchange Affirmation Statement

Highlights for the period from 1 October 2015 to 31 March 2016 (the "Period")

Corporate Summary

General Information

Chairman's Statement

Investment Manager's Report

Statement of Principal Risks and Uncertainties

Statement of Directors' Responsibilities

Independent Review Report to Chenavari Capital Solutions Limited

Condensed Statement of Comprehensive Income

Condensed Statement of Financial Position

Condensed Statement of Changes in Equity

Condensed Statement of Cash Flows

Condensed Schedule of Investments, at Fair Value

Notes to the Financial Statements

FORWARD-LOOKING STATEMENTS

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

Commodity Exchange Affirmation Statement

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

I, Loic Fery, representative of the Managing Partner of Chenavari Credit Partners LLP (Commodity Pool Operator of Chenavari Capital Solutions Limited) hereby affirm that, to the best of my knowledge and belief, the information contained in this interim report and unaudited interim financial statements is accurate and complete.

Loic Fery

representative of the Managing Partner

24 May 2016

Highlights for the period from 1 October 2015 to 31 March 2016 (the "Period")

· During the Period, the Company produced a net asset value ("NAV") total return of -1.17% (dividends reinvested).

· The NAV per ordinary share ("Share") declined from 99.41 pence at 30 September 2015 to 93.31 pence at 31 March 2016.

· The Company declared two dividends in respect of the period: 2 pence per Share on 26 February 2016 for the period ending 31 December 2015 and 2 pence per Share to be paid on 27 May 2016 for the period ending 31 March 2016. On 27 November 2015 a dividend of 2.95 pence per Share was paid for the period to 30 September 2015.

· The Company's mid-market share price at 31 March 2016 was 86.50 pence, representing a discount to NAV of 7.30%.

· The loss of the Company for the Period was £1.5 million, or loss of 1.15 pence per Share, taking into account recognition of the following significant items:

o total net loss of £0.6 million.

o total operating expenses of £0.9 million.

· During the Period, the Company invested £2.4 million in bank capital solutions transactions through the purchase of one primary transaction and the investment in two loan positions. One primary transaction was closed in the Period.

· At 31 March 2016, the Company was 90.93% invested in sixteen positions including thirteen primary transactions valued at £85.5 million and three secondary transactions valued at £24.1million. The Company had other assets and liabilities equating to 2.76% of NAV and cash equating to 6.31% of NAV at 31 March 2016.

Corporate Summary

For the Period

The Company

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

The IPO of the Company raised gross proceeds of £130.3 million and the Company's Shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange ("SFS") and Channel Island Stock Exchange ("CISX") on 7 October 2013. On 11 August 2014 the Company delisted its Shares from the CISX successor exchange, the Channel Islands Security Exchange Authority Limited ("CISEAL") as the CISEAL listing was no longer required to ensure that the Shares were eligible for UK ISAs.

Investment objective and policy

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

Investment period

At an EGM on 18 December 2015, Shareholders approved the extension of the investment period for up to 12 months to 31 December 2016 . The extended investment period will cease before 31 December 2016, with immediate effect, if the Company does not declare and pay, by 29 February 2016, a dividend of at least two pence per Share in respect of the three months to 31 December 2015; and declare and pay, by 31 May 2016, a dividend of at least two pence per Share in respect of the three months to 31 March 2016. Following the end of the extended investment period, the Company will return to Shareholders any unencumbered cash and such cash balances as arise from time to time as a result, predominantly, of investments maturing in accordance with their terms or otherwise. Amounts required for working capital purposes (including, in particular, a cash reserve for meeting any required margin calls on derivative positions), for the payment of dividends in accordance with the Company's dividend policy and for settling transactions contractually agreed before 31 December 2016, will be excluded from such returns of cash to Shareholders. The Company will not be under any obligation to sell investments before they mature in order to fund returns of cash to Shareholders, but may do so to optimise returns. The precise mechanism for any return of cash to Shareholders will depend upon the relevant factors prevailing at the time and will be at the discretion of the Board, but may include a combination of capital distributions, share repurchases and redemptions. The amount and frequency of such distributions will be at the Company's absolute discretion.

Target returns and dividend policy

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

The Investment Manager and Investment Adviser

The Company's Investment Manager is Chenavari Investment Managers (Luxembourg) S.àRL (as renamed from Toro S.àRL on 26 June 2015), a non-cellular company incorporated in Luxembourg under registered number B 0143992, and is licenced and regulated by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg to undertake the activities of an Alternative Investment Fund Manager ("AIFM"). The Investment Manager is a wholly owned entity within the Chenavari Group.

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

Asset Values

At 31 March 2016, the Company's NAV was £121.6 million, with the NAV per Share amounting to 93.31 pence. The Company publishes its NAV on a monthly basis. The NAV is calculated as the Company's assets at fair value less liabilities, measured in accordance with International Financial Reporting Standards.

Duration

The Company has an indefinite life.

Website

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

Corporate Summary (continued)

Listing Information

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

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

The closing price of the Shares quoted on the SFS at 31 March 2016 was 86.50 pence per Share.

The average closing price of the Shares over the period to 31 March 2016 was 92.19 pence per Share. 

General Information

Chairman's Statement

Introduction

On behalf of the Board, I am pleased to present the Company's interim report for the Period. I would like to thank Shareholders for their support for the successful passing of the Investment Period Extension on 18 December 2015.

During the Period, the Company invested £2.9 million in Bank Capital Solutions Transactions, all of which has been invested since the Investment Period Extension. The Company was 90.93% invested as at 31 March 2016 and its free cash position was £7.7 million.

Performance

The NAV as at 31 March 2016 was £121.6 million with a NAV per Share of 93.31 pence. Total dividends during the period of 4 pence per Share reinvested, the NAV total return for the period was -1.17%. Since launch, the NAV total return to the end of the period was 10.7% .

Sixteen transactions are held in the portfolio which broadly show underlying credit performance in line with their respective base case metrics determined at the point of acquisition. The loss in NAV total return over the period referred to above was largely driven by a deterioration in valuation of the Company's holdings resulting from increased volatility and risk aversion in markets generally as well as certain transaction-specific factors. Further details on the Company's performance are detailed in the Investment Manager's report on page 10.

The Board remain confident in the quality of the portfolio and the Investment Adviser's estimates of expected return, which were included in the March factsheet and are set out again in the Investment Adviser's report. Recent NAV performance has been disappointing however, absent an unexpected deterioration in underlying credit performance, shareholders can anticipate a recovery as cash flows are realised in the NAV. The Board is also confident in the process by which the Investment Adviser originates, analyses and negotiates new transactions during the remainder of the extended investment period.

The shares were quoted at 86.50 pence per Share at 31 March 2016 which reflects a discount of 7.3%. With dividends reinvested, the share price total return for the period was -7.19% and since launch the share price total return to the end of the Period was 0.13%. Since the end of the Period, the Shares have traded lower however, at the time of writing, the share price has recovered somewhat from its low, closing on 20 May 2016 at 84 pence per Share, representing a discount to the NAV at the end of April of 8.4%.

The Board are cognisant of the importance of the share price to shareholders and are disappointed that the discount expanded during the period and further in April 2016. I met with a number of the Company's larger shareholders in mid-April to gain an understanding of the issues of concern in respect of both NAV and share price performance. At these meetings, shareholders provided useful feedback and expressed a range of opinions, including in relation to the desirability of the Company commencing share repurchases. As mentioned in my previous Chairman's Statement, the Board continue to monitor the share price discount to NAV and will give consideration to purchasing shares under the policy as set out in the Prospectus. The Board will also consider share repurchases outside of this policy where it believes such action would be in the interests of shareholders and the Company as a whole.

Dividends

The Company declared two dividends in respect of the period: 2 pence per share on 26 February 2016 for the period ending 31 December 2015 and 2 pence per share to be paid on 27 May 2016 for the period ending 31 March 2016. It is expected that a similar level of dividend will be declared in July, in respect of the period ending 30 June 2016.

Rob King

Non-executive Chairman

24 May 2016

Investment Manager's Report

Investment Review

The Company launched with £130.3 million gross proceeds in October 2013. As of 31 March 2016, the Company was 90.93% invested.

The sector allocation as of 31 March 2016 reflected the anticipated target portfolio with a significant representation of corporate and SME loans.

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

As at 31 March 2016, the top five holdings were the following:

Investment Manager's Report (continued)

Performance

During the period from 1 October 2015 to 31 March 2016, the Company's NAV performance (dividends reinvested) was -1.17%.

Performance over the period underperformed the target return of the Company due to the following circumstances.

· The Company's exposure to Portugal experienced a mark-down in December 2015 due to:

o An extreme widening in the bank counterparty CDS due to a partial "bail-in" of the bank's senior unsecured bonds;

o A crystallisation of defaults in the transaction in December after minimal credit events to date. The increase in defaults meant that credit events were materially in line with the Investment Advisor's initial underwriting base case scenario at this stage in the transaction; and

o A liquidating hedge fund being a forced seller of bonds in these challenging circumstances.

Against this backdrop, the higher default rate has not continued in the March 2016 reporting and the March 2016 cash flow on the position led to a significant profit due to the lower valuation that in part drove the NAV gains that month.

· Credit spreads widening significantly in January and February 2016 against a backdrop of market fear over Chinese growth and the continued stress in the commodity complex. This led to capital markdowns on the corporate loan regulatory capital positions that are held by the Company. There has been no deterioration in credit performance in these transactions.

As reported in the March 2016 factsheet these markdowns have increased the base and upside case returns on the portfolio. For additional details on these projections, the March 2016 factsheet is available on the Company's website address www.chenavaricapitalsolutions.com.

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

Since inception, the Company recorded the following dividends:

Investment Manager's Report (continued)

New Primary Transactions:

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

The portfolio provides exposure to primarily European and UK corporates with ratings at or higher than B-. The portfolio is diversified with an expected maximum concentration of 4% by group of borrowers. The junior instruments represent first loss risk and the Company expects the thickness of the tranche (approximately 20%) to provide a resilient feature.

Investment Outlook

The Company had a limited amount of cash during the period for reinvestment due to being substantially fully invested. Based on the Investment Manager's cash flow projections there should be a significant return of capital in the next quarter to pursue new opportunities in both the risk sharing and portfolio acquisition spaces.

The investment pipeline is well developed with risk sharing transactions in Germany and Switzerland being analysed while the team is considering mortgage portfolio acquisitions in the UK, Italy and Spain. Origination partnership/warehousing transactions in both French SME leasing and Irish buy-to-let mortgages are also being worked on by the Investment Manager.

Chenavari Investment Managers (Luxembourg) S.àRL

Investment Manager

24 May 2016

Statement of Principal Risks and Uncertainties

Summary

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

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

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

Statement of Directors' Responsibilities

We confirm to the best of our knowledge that:

· these Condensed Unaudited Interim Financial Statements have been prepared in accordance with International Accounting Standard 34.

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

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period from 1 October 2015 to 31 March 2016 and their impact on the Unaudited Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the period from 1 October 2015 to 31 March 2016 and that have materially affected the financial position or performance of the entity during that period.

This responsibility statement was approved by the Board of Directors on 24 May 2016 and is signed on its behalf by:

Non-Executive Director : Rob King Non-Executive Director: Iain Stokes

Date : 24 May 2016 Date : 24 May 2016

Independent Review Report to Chenavari Capital Solutions Limited

We have been engaged by the Company to review the financial statements in the interim financial report for the period from 1 October 2015 to 31 March 2016 which comprises the condensed statement of comprehensive income, the condensed statement of financial position, the condensed statement of changes in equity, the condensed statement of cash flows and related notes 1 to 21. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the period from 1 October 2015 to 31 March 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants

Guernsey

24 May 2016

Condensed Statement of Comprehensive Income

For the period ended 31 March 2016

Non-Executive Director: Rob King Non-Executive Director: Iain Stokes

Date : 24 May 2016 Date : 24 May 2016

All items in the above statement derive from continuing operations.

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

Condensed Statement of Financial Position

As at 31 March 2016

Non-Executive Director: Rob King Non-Executive Director: Iain Stokes

Date : 24 May 2016 Date : 24 May 2016

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

Condensed Statement of Changes in Equity

For the period ended 31 March 2016

For the period ended 31 March 2015

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

Condensed Statement of Cash Flows

For the period ended 31 March 2016

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

Condensed Schedule of Investments, at Fair Value

Chenavari Capital Solutions Limited

As at 31 March 2016

Condensed Schedule of Investments, at Fair Value (continued)

Chenavari Capital Solutions Limited

As at 30 September 2015

Notes to the Financial Statements

1. General information

Background information on the Company's activities can be found in the Company's prospectus dated 23 September 2013 and the Company's latest Audited Annual Financial Statements, both of which are available on our website address www.chenavaricapitalsolutions.com.

2. Summary of significant accounting policies

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

2.1. Basis of preparation

The Interim Financial Statements for the period from 1 October 2015 to 31 March 2016 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, the Disclosure and Transparency Rules of the Financial Conduct Authority and applicable legal and regulatory requirements of the Law. The condensed set of financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Company's latest set of audited financial statements, a copy of which can be found on our website at www.chenavaricapitalsolutions.com. Immaterial changes have been made to comparative figures for the period to 31 March 2015 to correspond to current period presentation requirements.

2.2 Going Concern

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

3. Critical accounting judgements and key sources of estimation uncertainty

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

3.1 Key sources of estimation uncertainty

Fair value of financial instruments

The assets held by the Company are mostly valued through a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised market maker in the respective position and where these are not readily available internal valuations.

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

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

Notes to the Financial Statements (continued)

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

3.1 Key sources of estimation uncertainty (continued)

Fair value of financial instruments (continued)

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

Note 7 outlines the Level 3 classifications and the analysis of the impacts of Level 3 investments on the performance of the Company.

3.2 Critical judgements in applying accounting policies

Functional currency

The Board of Directors considers GBP (£) as the currency that most fairly represents the economic effect of the underlying transactions, events and conditions. The performance of the Company is measured and reported to the investors in GBP.

Valuation and classification of investments

The Board of Directors consider the valuation of investments and the classification of these investments in the fair value hierarchy as the critical judgements. The fair value of investments is described in 3.1 above and the judgements associated with the disclosures in the fair value hierarchy are described in note 7.

4. Related Parties

(a) Directors' Remuneration & Expenses

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

During the period ended 31 March 2016, Directors fees of £57,500 (for the period ended 31 March 2015: £60,000) were charged to the Company, of which £2,862 (2015: £3,982) remained payable at the end of the period.

(b) Shares held by related parties

As at 31 March 2016, the Directors held the following interests: Mr King 30,000 Shares, Mr Stokes 40,000 Shares and Mr Mouchotte 5,000 Shares in the Company.

As at 31 March 2016, neither the Investment Manager nor partners and employees of the Investment Manager or the Investment Adviser held any of the Issued Share Capital.

(c) Investment Manager and AIFM

The Company receives investment management services from the Investment Manager, a limited company (Société à Responsabilité Limitée de Droit Luxembourgeois) incorporated in Luxembourg. Under the terms of the investment management agreement dated 23 September 2013 as novated on 22 July 2014 the Investment Manager receives in return a fee of one-twelfth of 1% on the net asset value, payable monthly in arrears.

The Investment Manager has appointed the Investment Adviser, to provide investment advisory services to the Investment Manager. The Investment Manager is responsible for paying the Investment Adviser. The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice, such notice not to be served before the fourth anniversary of Admission.

Notes to the Financial Statements (continued)

4. Related Parties (continued)

(c) Investment Manager and AIFM (continued)

Total management fees for the period amounted to £622,179 for Chenavari Investment Managers (Luxembourg) S.àRL (for the period ended 31 March 2015 the equivalent was £640,149 for Chenavari Investment Managers (Guernsey) Ltd) with £98,929 (2015: £107,192) in outstanding accrued fees at the period end.

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

As of 31 March 2016, no performance fee was accrued according to those principles.

The Company has funded investments with a value of £47,930,920 via Convertible Preferred Equity Certificates and/or occasionally beneficiary shares issued by legally segregated compartments of AREO S.àRL ("Areo"), a company incorporated in Luxembourg under the Securitization Law of 2004. Areo is owned by the Chenavari group and Chenavari funds and is managed by a Board of Directors composed of a majority of independent directors that consider investment opportunities sourced by the Portfolio Manager. The Company is currently invested in eight compartments of Areo, the investment in which it fair values in accordance with IFRS 13 as set out in the Company's accounting policies. The Investment Manager and Investment Adviser receive no fees from Areo in relation to these transactions.

5. Material Agreements

(a) Corporate broker

Fidante Partners Europe Limited, trading as Fidante Capital, (formerly Dexion Capital plc) receives a retainer for their corporate broking services of £75,000 per annum, payable quarterly in advance.

(b) Administration fee

Morgan Sharpe Administration Limited (the "Administrator") serves as the Company's administrator and secretary. The Administrator is entitled to a fee of £52,000 per annum. All fees are payable quarterly in advance. Administration fees for the period amounted to £26,000 (period ended 31 March 2015: £26,000).

(c) Sub-administration fee

The Administrator has appointed Quintillion Limited (the "Sub-Administrator") as the Company's sub-administrator. The Sub-administrator is entitled to receive an annual asset-based fee from the Company of up to 0.085% per annum of NAV, excluding certain expenses. Sub-administration fees for the period amounted to £39,885 (period ended 31 March 2015: £46,431) of which £6,242 (2014: £14,681) remained payable at the period.

(d) Custodian fee

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

(e) Investment Manager

Contractual arrangements relating to the Investment Manager are detailed in note 4.

Notes to the Financial Statements (continued)

6. Financial risk management

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

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

6.1 Credit risk

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

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

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

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

As of 31 March 2016 (and 30 September 2015), the Company had no exposure above the 20% limit.

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

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

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

The Company manages the portfolio with appropriate diversification in terms of sectors and geographical breakdowns. As of 31 March 2016 and 30 September 2015, the breakdown of the NAV per asset class and geography was as follows:

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

Notes to the Financial Statements (continued)

6. Financial risk management (continued)

6.1 Credit risk (continued)

Offsetting Financial Assets and Financial Liabilities

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

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

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

6.2 Foreign currency risk

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

The currency exposure as at 31 March 2016 is as follows:

The currency exposure as at 30 September 2015 is as follows:

Notes to the Financial Statements (continued)

6. Financial risk management (continued)