Volta Finance Ltd. — Annual Report 2018

Nov 30, 2018

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VOLTA FINANCE LIMITED ANNUAL REPORT AND ACCOUNTS 2018

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VOLTA FINANCE LIMITED (THE “COMPANY” OR “VOLTA”) IS A CLOSED-ENDED LIMITED LIABILITY INVESTMENT COMPANY THAT PURSUES A DIVERSIFIED INVESTMENT STRATEGY ACROSS STRUCTURED FINANCE ASSETS.

Contents	Contents
Volta at a Glance	01
Chairman’s Statement	02
Investment Manager’s Report	04
Report of the Depositary to the Shareholders	08
Report of the Directors	09
Risk Committee Report	12
Principal Risk Factors	13
Corporate Governance Report	17
Audit Committee Report	21
Directors’ Remuneration Report	23
Statement of Directors’ Responsibilities	24
Independent Auditor’s Report	25
Statement of Comprehensive Income	28
Statement of Financial Position	29
Statement of Changes in Shareholders’ Equity	30
Statement of Cash Flows	31
Notes to the Financial Statements	32
Corporate Summary	55
Legal and Regulatory Disclosures	57
Board of Directors	59
Management, Administration and Advisors	61
Glossary	62
Notice of Meeting	64

FORWARD-LOOKING STATEMENTS

This 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 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 operations, 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 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 any 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 report. Subject to its legal and regulatory obligations (including under the rules of Euronext Amsterdam, the UK Listing Authority and the London Stock Exchange) 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. Please keep these cautionary statements in mind while reading this report.

annual report and accounts 2018 VOLTA FINANCE LIMITED 01

VOLTA AT A GLANCE

THE INVESTMENT OBJECTIVES OF VOLTA ARE TO PRESERVE ITS CAPITAL ACROSS THE CREDIT CYCLE AND TO PROVIDE A STABLE STREAM OF INCOME TO ITS SHAREHOLDERS THROUGH DIVIDENDS THAT IT EXPECTS TO DISTRIBUTE ON A QUARTERLY BASIS. VOLTA SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVES BY PURSUING A DIVERSIFIED INVESTMENT STRATEGY ACROSS STRUCTURED FINANCE ASSETS. VOLTA MEASURES AND REPORTS ITS PERFORMANCE IN EURO.

7.8%

3.5%

9.9%

NAV performance[1] per Share (with dividends re-invested at NAV) for the twelve months to 31 July 2018

Share price performance[1] (dividends re-invested) for the twelve months to 31 July 2018

Share price performance[1] (dividends re-invested) from inception to 31 July 2018 (on an annualised basis)

10.8%

8.8%

15.3%

Projected portfolio IRR[1] (under standard AXA IM scenarios, including the gearing effect of the Repo)

Dividend yield[1] for the twelve months ended 31 July 2018 based on the share price as at 31 July 2018

Discount[1] between share price and NAV per share as at 31 July 2018

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NAV PERFORMANCE ANALYSIS FOR THE YEARS ENDED 31 JULY 2018 AND 31 JULY 2017 – CONTRIBUTIONS TO NAV CHANGE (EUROS PER SHARE)

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0.54 1.05
0.01
-0.17 -0.02 -0.22
-0.06
-0.19 -0.16
0.90
8.36 8.36
-0.62 -0.62
7.92
31/07/2016 NAV Coupons and dividend income Net realised and unrealised gains and losses on portfolio investments Net foreign exchange impact Other operating income and financing charges Operating expenditure Dividends paid in cash 31/07/2017 NAV Coupons and dividend income Net realised and unrealised gains and losses on portfolio investments Net foreign exchange impact Other operating income and financing charges Operating expenditure Dividends paid in cash 31/07/2018 NAV
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1 Please see the glossary on pages 62 and 63 for an explanation of the terms used above and elsewhere within this report.

02 VOLTA FINANCE LIMITED annual report and accounts 2018

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CHAIRMAN’S STATEMENT

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Dear Shareholder

Volta generated a net asset value (“NAV”) total return (with dividends re-invested) of 4.7% over the last six months and 7.8% over the year to 31 July 2018. After a slow start in the first half, returns then picked up and have been running at close to our long-term average of around 10% per annum. Share price total returns were lower, however, at 3.5% for the year due to a widening of the discount.

THE PORTFOLIO

The underlying fundamentals of the Company’s portfolio have proven to be strong during the period. Cash flows received from our underlying investments have continued to rise and now stand at the highest level seen since the 2008/09 financial crisis. This reflects two principal factors: firstly, US short-term interest rates have continued to rise; and, secondly, the Investment Manager has gradually been increasing the proportion of the portfolio in highly cash generative assets such as CLO Equity tranches and warehouses. As detailed in the Investment Manager’s Report on page 4, equity tranches of CLOs appear attractively priced relative to debt. At present, CLO returns are in a sweet spot where tightening spreads have permitted attractive refinancing, rising US rates have increased cash flows and default rates remain well below historical norms. The Company’s involvement in a rolling series of warehouses, in the US and Europe, has facilitated our access to CLO Equity issuance from strong managers at attractive economics. The projected IRR of these positions is around 13–15% and the projected IRR of the portfolio as a whole is 10.8%, consistent with last year. Provided, therefore, that the credit cycle does not deteriorate sharply, the returns for Shareholders should continue to be attractive. There seems little evidence for now that deterioration is imminent, despite weakening loan covenants and gradually rising interest rates.

It is worth noting, in addition, that Volta’s historical projected IRR has generally understated the returns generated for us by AXA IM. Active management, strong market access, excellent CLO manager selection and the ability to shift allocations across a broad spectrum of credit assets has allowed AXA IM to add material value to the portfolio. This can sometimes be hard to evidence in the shorter term but AXA IM do have, by way of example, an excellent track record in US CLO selection, a key component of our returns (see table below).

The strong cash flows seen from the portfolio over the past year have continued to permit us to pay an attractive and stable dividend, fully covered from revenues received. As at 31 July 2018, the dividend yield on the share price was 8.8%. Unless default rates rise notably and persist, this dividend should continue to be sustainable.

SHARE PRICE DISCOUNT

At the start of my report, I noted that, over the year, the share price return has been lower than the NAV return. This lower share price return reflects the fact that the share price discount to NAV widened during the period, from 10.8% at 31 July 2017 to 15.0% at the same time this year. The discount is proving to be a stubborn and disappointing feature of the Company. Whilst a wide range of income-orientated peers also saw de-rating during the period, Volta is, nonetheless, a clear outlier and offers material value relative to the broader market, as well as immediate comparators.

The Board, Broker and Investment Manager have continued to address this discount with vigour. The Investment Manager and Broker have been active in promoting us to a wide range of new investors, some of whom have now acquired shares in the Company. The Board has recently introduced a sterling quotation on the London Stock Exchange, to complement the existing euro quote as well as the other measures implemented to broaden the attractiveness of the Company over recent years, such as quarterly dividends and a London listing. This sterling quote can be accessed under the ticker VTAS and should make the Company more accessible via investor platforms. In addition, to broaden our reach in the UK and Ireland, we have recently retained Hardman and Edison, independent research and shareholder liaison agencies, to produce insightful research on the Company and to facilitate meetings by the Investment Manager with new potential investors. Hardman’s research can be found on our website and has been broadly disseminated across the investor community and Edison’s research will be available soon.

USD CLO EQUITY TRANCHES – MEDIAN ANNUAL IRR ON TERMINATED DEALS TO JUNE 2018

Vintage	2001	2002	2003	2004	2005	2006	2007	2007
Wells Fargo Market Data	7.6%	10.5%	3.6%	8.0%	14.2%	16.4%	17.7%
AXA IM Investments	16.2%	20.4%	10.9%	12.2%	14.9%	18.4%	21.2%

Source: AXA IM

annual report and accounts 2018 VOLTA FINANCE LIMITED 03

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We realise that some companies seek to address the challenges of a discount through share repurchases or tender offers. The Board considers this regularly but, at present, does not consider that approach to be in the best interests of all Shareholders, despite some enthusiasm expressed by certain Shareholders. Buybacks and tenders can be a double-edged sword, as another major listed structured finance fund recently found. Rather, the Board has favoured an approach to make the Company more attractive to new investors. By widening and deepening the sources of demand for our shares, this should benefit all Shareholders as it should facilitate the discount to narrow and the Company to expand its share capital in due course, enhancing liquidity and reducing our costs per share.

GOVERNANCE AND REGULATION

After material refreshment over the previous three years, the composition of the Board and its Committees has been stable this year. The Board and Committees have been active in overseeing the Investment Manager and other service providers. The work of each Committee is detailed or referenced in the Corporate Governance Report to be found on pages 17 to 19. However, I am pleased to report that we have a very constructive and open relationship with all service providers.

As before, during the year the Board visited AXA IM at its offices in Paris to review investment management processes, risk management and compliance. A particular focus this year was AXA IM’s approach to environmental, social and governance (“ESG”) issues. The Board received a presentation on AXA IM’s broad approach to ESG and its more recent integration into structured credit investment decision making. Noteworthy was AXA IM’s long-term commitment to ESG and the genuine, long-term performance gains that have been derived from its approach to ESG in other asset classes. Integration of ESG criteria is more complex in structured credit assets but AXA IM is at the vanguard and Volta will benefit from this over the coming years.

One change has been initiated subsequent to the year end: a change of provider of administration, custody and depositary services. On 1 August 2018, BNP Paribas Securities Services S.C.A. Guernsey Branch, was appointed as Custodian and Depositary and will also be taking over as Administrator and Company Secretary in the coming days. This brings Volta into line with the vast majority of AXA IM funds and, through the global relationship between AXA IM and BNP, brings material advantages to us in terms of servicing, scale and economics which, otherwise, we would not be able to access. I would like to thank the individuals at both Sanne Group, our previous Administrator, and State Street, our prior Depositary, for their services.

In the coming year, the Company will adopt the FRC Code of Corporate Governance 2018 via the AIC Code for listed investment companies. Whilst the AIC Code is still in draft, the initial assessment of the proposed amendments are not expected to have a significant impact on the Company.

Earlier in 2018, the US authorities removed the “risk retention requirement” for CLO issuers to retain 5% of the risk of all CLO structures issued. European regulations, which govern AXA IM, our Investment Manager, have not changed. So, whilst the precise implications of this change are still emerging, it will certainly restrict our ability to purchase future “non-EU-compliant” US CLOs. AXA IM does not, at this stage, believe that this will constrain the Company’s overall activities and will simply return us to the position of a few years ago. As matters progress, we will, of course, keep you informed.

OUTLOOK

Over my last couple of reports to you, I have struck a note of caution around the risk of volatility in markets and to the prices of Volta’s assets. Whilst there have been a few lumps and bumps, as well as plenty to worry investors, generally markets have remained resilient. So have Volta’s returns. Once again, I am going to be cautious, if only because the current cycle has been remarkably long lived. We cannot know precisely when this will end but, with the global equity market rally now over a decade old, it is time to be alert.

That said, as I have also emphasised many times, whilst any financial markets downturn will manifest itself in shorter term, mark-to-market capital erosion, it is unlikely to erode materially the Company’s strong cash flows. Whatever the short-term vagaries of markets, these strong cash flows underpin our long-term returns. Volta has a number of advantages: very broad diversification of the portfolio (spread across well over 700 individual credits); the ability of our Investment Manager to be nimble across a wide spectrum of credit assets; its proven ability to add value; and our attractive, stable, well-covered dividend. These advantages are unlikely to go away just because the economic cycle softens. Thus, Volta should prove attractive to investors through the next downturn, whenever that may occur, and beyond. In the meantime, we should enjoy the supportive economic environment and positive market sentiment that has underpinned one of the longest bull markets in history.

PAUL MEADER CHAIRMAN 29 OCTOBER 2018

04 VOLTA FINANCE LIMITED annual report and accounts 2018

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INVESTMENT MANAGER’S REPORT

At the invitation of the Board, this commentary has been provided by AXA Investment Managers Paris S.A. (“AXA IM”) as Investment Manager of Volta. The commentary is not intended to constitute, and should not be construed as, investment advice. Potential investors in the Company should seek their own independent financial advice and may not rely on this communication in evaluating the merits of investing in the Company. The commentary is provided as a source of information for Shareholders of the Company but is not attributable to the Company.

KEY MESSAGES FROM THE INVESTMENT MANAGER

• @ Volta’s NAV performance per share was 7.8% for the annual period (dividends re-invested at NAV).

• @ Interest and coupons continued to be strong contributors to the performance (representing 12.6% of Volta’s beginning-of-period NAV) but the mark-to-market performance was impacted by the overall spread widening in credit markets.

• @ We were again able to source investment opportunities in line with our target return, with an average projected yield on purchases of around 11.2%.

• @ Performance in the near future is expected to come from the ongoing cash flows of the assets, our ability to increase the level of cash flows by increasing the CLO Equity bucket and our ability to extract value from refinancing or resetting of CLOs.

Just as importantly, the returns generated in the annual period have continued to be produced with controlled levels of risk. For the annual period, the volatility of the monthly NAV performance was 2.7%, meaning that the Sharpe Ratio (excess return generated above the risk-free rate relative to the volatility of returns) of Volta’s NAV was at 3.1 for the annual period. This highly stable performance was produced in a period that incorporated several episodes of volatility: a sell-off in credit markets in November 2017, then sharp falls in equity markets in February and then some modest stress in EUR with the Italian election.

Volta’s annual NAV performance compares favourably with global equity, bond and credit markets, as well as our peers. Our ability to build a portfolio that mixes assets with differing dynamics and volatilities has enabled us to source attractive opportunities and to deliver a robust performance over the long term.

Cash flows from the underlying assets have continued to grow, driven by the portfolio mix and the gradual rise in US interest rates; on an annual basis we moved from €33.2 million in the previous annual period to €38.5 million in this annual period.

UNDERSTANDING THE PERFORMANCE FOR THE ANNUAL PERIOD ENDED 31 JULY 2018

As in prior years, the primary contributor to performance was the ongoing cash flows received from our assets. The performance for the annual period can be attributed as follows (figures are expressed as a percentage of the NAV as at the end of July 2017):

		Percentage of NAV	Percentage of NAV
	Interest and coupons received	12.6%
	Realised gains Unrealised losses	0.0% (2.6%)
	Currency impact, net of efect of FX hedging Financing costs and other hedging costs Operating expenses Impact of re-investment of dividends at NAV	0.1% (0.8%) (1.9%) 0.4%
	NAV performance	7.8%

Volta’s overall performance for the year was close to long-term target returns even though we adopted a relatively defensive approach throughout the annual period given our expectation that we are approaching the end of the credit cycle. Turnover was relatively high during the year (€112 million of amortisation/calls/sales), driven in considerable part by repayments. Accordingly, although cash was deployed as quickly as possible, some cash drag was experienced.

During the annual period the performances of our main buckets, according to internal performance attribution estimates and before taking into account the effect of currency exposure and costs but after the impact of leverage from the Repo has been taken into account, were as follows:

	account, were as follows:
		Estimated annual	Average
	Asset class	performance	weight
	Bank Balance Sheet transactions	9.2%	14.7%
	USD CLO Equity	7.7%	12.7%
	EUR CLO Equity	12.2%	12.4%
	CLO Warehouses	14.1%	3.1%
	USD CLO Debt	11.2% *	39.3%
	EUR CLO Debt	4.0%	2.3%
	Cash Corporate Credit ABS	5.4% 7.0%	2.5% 4.4%

• Includes the gearing effect of the Repo.

Clearly, the best buckets were CLO Warehouses, EUR CLO Equity and USD CLO Debt. During the previous annual period from August 2016 to July 2017, our main decisions in terms of overall allocation were to increase exposure to EUR CLO Equity (a process that we continued during this financial year) and to continue to maintain the significant exposure to USD CLO Debt at the expense of EUR CLO Debt (the worst asset class for the last twelve months, representing only 2.2% of Volta’s allocation through the period).

CLO Warehouse exposures are maintained at a relatively low allocation for Volta because of the short-term risk that the warehouse does not transform into a CLO. However, the performance has been in line with target for this asset class. The performance of our EUR CLO Equity bucket was supported by some resets of some of the CLOs that triggered extra payments to the equity position. This kind of event is a clear part of our CLO Equity investment case. USD CLO Debt benefited from the increase in US Libor rates during the year and from some continued pull to par that enhances performance ahead of the simple carry of these positions.

annual report and accounts 2018 VOLTA FINANCE LIMITED 05

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As in prior years, leverage was maintained on a portion of our USD CLO Debt bucket, which magnified the positive contribution to Volta’s overall performance.

Once again, Volta has been able to benefit from the breadth of its investment strategy, maintaining an attractive projected yield on its assets while delivering a solid performance.

LONG-TERM PERFORMANCE

For many years, the strong performance in terms of NAV per share has been in line with the strong fundamentals of Volta’s assets, our ability to benefit from the flexible mandate that governs Volta’s investment approach and also reflects our ability to sell or leverage the most stable part of our portfolio.

As a listed fund investing mainly in US dollar and euro corporate assets, Volta’s performance can be compared with both equity and high yield bond or loan indices. As at the end of July 2018 the annualised performance figures were as follows[1] :

			Since Volta’s	Since Volta’s
	One year %	Five years %	inception %
NAV performance (including
dividends paid and re-invested at NAV)	7.8	11.9	6.4
Share performance
(dividends re-invested in shares)2	3.5	12.9	9.9
S&P 500 (total return)2	16.2	13.1	8.4
MSCI European (total return)2 US High Yield Bonds (H0A0 Index)2	6.5 2.5	9.9 5.3	3.9 7.1
US Loans Market (S&P LSTA Index)2	4.4	3.9	4.6
European High Yield Bonds (HE00 Index)2	1.4	5.5	6.9
European Loans Market
(S&P ELLI Index)2	2.3	4.8	4.1

For this annual period, the performance of the share price was below that of the NAV as the share price discount to NAV widened. As noted in the Chairman’s Statement, the Company continues actively to address the issue.

This year again, the NAV performance was ahead of most of the indices to which we compare Volta. Only the S&P, boosted by the Trump administration’s decision to cut US corporate taxes, exceeded the return of Volta’s NAV per share.

Overall, the annualised share performance of Volta from inception in December 2006 at 9.9% compares favourably to the performance of the large equity indices and high yield bond or loan indices referenced in the table above for the same period.

Since the financial crisis of 2008/2009, Volta’s portfolio has been significantly reshaped and, for the last six years, we have been able to perform strongly with low volatility. The volatility of the monthly NAV performances over this period has been far below the volatility of classic equity indices, while delivering comparable returns.

We frequently compare Volta with other listed vehicles that operate roughly in the same investment space: Carador Income Fund (“CIFU”), Fair Oaks Income (“FAIR”), Blackstone/GSO Loan Financing (“BGLF”) and TwentyFour Income Fund (“TFIF”). The performance and volatility of Volta compared to these four listed funds for the last three years (based on published NAV per share and dividend payments, from end of July 2015 to end of July 2018) was as shown below.

Volta’s Sharpe ratio is higher than that of the majority of its competitors, with only BGLF, which uses a mark-to-model valuation methodology when computing its NAV, having a better Sharpe ratio (but a lower performance).

1 No statement in this comparative table is intended to be nor may be construed as a profit forecast. The figures provided relate to previous months or years and past performance is neither a guide to future returns nor a reliable indicator of the future performance of the Company or the Investment Manager.

2 Figures given by Bloomberg using the total return analysis (“TRA”) function. Each index is measured in its local currency.

Performance and volatility comparison1	Volta (€)	Carador ($)	FAIR ($)	BGLF (€)	TFIF (£)	TFIF (£)
Annualised performance in excess of the risk-free rate	8.9%	3.8%	11.1%	6.6%	5.6%
Annualised volatility	6.0%	9.5%	10.9%	2.7%	5.4%
Sharpe ratio	1.5	0.4	1.0	2.5	1.0

1 The above Sharpe ratios are illustrative and have been computed by AXA IM for information purposes only, using monthly NAV and dividends published on Bloomberg and using three-month Euribor or Libor rates as the risk-free rate. The three-year period (from end of July 2015 to end of July 2018) corresponds to the longest available given the inception dates of the funds. The funds to which Volta is compared have their own investment objectives, constraints, guidelines, horizon, liquidity and other features that may significantly differ from the ones for Volta. This fund list has been determined by AXA IM in consultation with a pool of brokers. AXA IM disclaims any responsibility or liability for the performance of such funds and does not represent that the information provided in respect of such funds is accurate, complete and relevant for assessing in relative or absolute terms the performance of Volta.

06 VOLTA FINANCE LIMITED annual report and accounts 2018

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INVESTMENT MANAGER’S REPORT CONTINUED

VOLTA PORTFOLIO POSITIONING AS AT 31 JULY 2018

During the annual period under review we:

• @ modestly increased the CLO Equity bucket;

• @ continued to increase the size of the Bank Balance Sheet allocation; and

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allocation; and
@
1
ASSET ALLOCATION CHANGES SINCE JULY 2017
4.0%
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• @ continued to decrease the size of our EUR CLO Debt exposure.

ASSET ALLOCATION BREAKDOWN (AS % GAV) AS AT 31 JULY 2018

	USD CLO Equity USD CLO Debt EUR CLO Equity EUR CLO Debt CLO Warehouse Bank Balance Sheet Corporate Credit Funds/Equity Mortgage Equity ABS Debt Cash	12.2% 38.7% 14.3% 2.2% 3.0% 15.0% 2.5% 2.5% 2.4% 7.2%

ASSET ALLOCATION CHANGES SINCE JULY 2017

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4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
USD CLO Equity EUR CLO Debt CLO Warehouse Cash
USD CLO Debt EUR CLO Equity Bank Balance Sheet Corporate Credit Funds/Equity Mortgage Equity ABS Debt
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These changes during the annual period reflect our general view that:

• @ The spread tightening on CLO Debt tranches encourages us to diminish the size of this bucket. We have started by decreasing EUR CLO Debt as we perceived more value in USD CLO Debt assets but, if spread tightening continues, we may also decrease the USD CLO Debt allocation. When and if this happens, we would correspondingly decrease the amount of leverage we have in place on these tranches.

• @ The tightening on CLO Debt tranches, almost mechanically, means that there is more value on CLO Equity tranches. After so many years of spread compression on CLO Debt tranches we believe that it is the right moment to increase the CLO Equity allocation. The appetite for CLO Debt also means that new CLO documentation incorporates more favourable terms for equity tranches than previously as senior debt holders are more flexible than before. These beneficial changes relate primarily to more flexibility around re-investment capabilities and a greater ability to pay to the equity tranche the capital gains that could be generated by the CLO manager.

• @ It continues to make sense to invest in Bank Balance Sheet transactions. These assets, despite the fact they yield slightly below Volta’s overall target, provide considerable diversification as the underlying risks differ from the credit risk underlying our CLO positions and bring some stability to our NAV. It makes sense to increase concurrently the CLO Equity bucket and the Bank Balance Sheet bucket and this has been undertaken during the period.

PROJECTED IRR ON VOLTA’S PORTFOLIO

As at the end of July 2018, based upon reasonable and standard assumptions, Volta’s assets had a projected yield in the area of 10%.

Volta continues to leverage a portion of its CLO Debt bucket and this leverage ($50 million of debt at the end of July 2018) should improve the projected yield of the whole portfolio by roughly 0.8% to 10.8%.

This projected yield is based on the assumption that the CLO Equity tranches will suffer from defaults at the underlying loan portfolio in line with market standard assumptions (a default rate of 2% per year). During the last ten years, defaults in the CLOs selected for Volta by AXA IM occurred at a pace significantly below the historical average as measured by the WARF of the underlying loan portfolio. Taking these considerations into account, as well as the optionality that exists with CLO Equity positions (the possibility to refinance/reset the transactions in order to benefit from a better arbitrage), we anticipate that the overall performance of Volta’s portfolio could be 1% to 2% in excess of the above projected yield.

Inevitably, the asset class with the highest projected IRR as of the end of July 2018 was the USD CLO Equity bucket. Over the annual period, equity positions delivered cash flows in line with expectation but saw market price falls as risk premiums rose in the US credit market and globally. We see this as an opportunity for the next twelve months as we see no evidence that the credit cycle is at the point of an immediate deterioration.

In terms of credit performance, it is notable that Volta’s underlying credit portfolio did not suffer particularly during the annual period. As usual, some defaults occurred in the underlying credit portfolios but at a pace that was below the standard projected default rate that we use when modelling our assets and that did not significantly affect the projected return of our assets.

annual report and accounts 2018 VOLTA FINANCE LIMITED 07

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Indeed, cash flows from our assets have increased and we do not foresee, at the time of writing, any significant change in the expected cash flows from Volta’s portfolio except a further modest increase due to higher interest rates and to the increasing portion of CLO Equity tranches.

CURRENCY EXPOSURE

During the period, there were no significant shifts in the currency hedging of Volta’s USD assets back into euro. Very simplistically, and almost mechanically, we increased the amount of the hedge when the US dollar appreciated and reduced it when the US dollar depreciated somewhat. During the year, Volta’s USD exposure went from 30.9% at the end of July 2017 (1.18 USD/EUR) to 35.9% at the end of January 2018 (1.24 USD/EUR) and to 31.9% at the end of July 2018 (1.17 USD/EUR). Because of the liquidity risk from margin calls associated with seeking to fully hedge US dollar exposures, we have maintained residual USD exposure for many years. Our intention is not to manage this position actively except for the very simple type of management that has been performed again this year (simply reducing USD exposure if the US dollar appreciates and vice versa). Considering the magnitude of the USD exposure of Volta and the historical mean-reverting behaviour of USD/EUR cross rates, we do not expect the currency exposure of Volta to be the main driver, through the cycle, of Volta’s performance. The overall contribution of currency risk to Volta’s performance has been modest since Volta’s inception more than eleven years ago.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

AXA IM is a signatory of the United Nations Principles for Responsible Investment (“UN PRI”). Therefore, AXA IM is active in seeking to integrate ESG considerations into its investment processes. The integration of these processes is more complex in structured finance assets than other, more vanilla, asset classes. However, certain ESG considerations are now being integrated into the CLO manager selection process for Volta and some issuers and some businesses are being systematically excluded, or exclusions are being requested where a sub-manager is involved. Despite the complexities involved, AXA IM is at the forefront of the promotion of ESG considerations into structured finance and is actively supporting the transition.

OUTLOOK FOR THE NEXT ANNUAL PERIOD

For the next annual period, we are optimistic that performance should be at or above our target returns. Based on the current prices of Volta’s positions, performance should, again, be driven by the ongoing cash flows generated by our assets. That said, we can reasonably expect to generate some capital gains from the USD CLO Equity bucket as well as some extra gains from refinancing or reset activity. Those extra gains can take the simple form of capital payments to the equity tranche and/or better terms for the CLO Equity position (a lower cost of debt and/or documentation which is more favourable to the equity). Most of the time, these better terms are reflected through the mark-to-market value of the CLO Equity position as well.

Like every prudent investor, we are alert for signs of imbalances that could cause volatility. We identify the US administration, the continuous increase in corporate debt, the possibility of some interest rate volatility and a possible “hard” Brexit as potential sources of risk for our markets. However, none of this has really materialised so far. There are, of course, still other concerns (the end of QE in the US and later in Europe, the threat to classic retail businesses from online sales, political instability in the Middle East, etc.) but we cannot see, at the time of writing, anything that is expected to be of significant impact to Volta’s portfolio.

Our strong belief is that success in this kind of environment is likely to come from:

• @ the effectiveness of portfolio diversification (Volta is exposed to more than 700 underlying corporate credit issuers);

• @ the high level of cash flows from our assets, which is key to be able to re-invest at discounted prices in the event of market volatility; and

• @ the maintenance of a bifurcated portfolio, mixing long-term assets that are able to go through a full credit cycle (CLO Equity with a long re-investment period) with more short-term and liquid positions (e.g. some of the CLO Debt positions).

Strategically, we expect to continue increasing the Bank Balance Sheet transaction bucket and the CLO Equity bucket (favouring “controlling positions”) and to correspondingly decrease the CLO Debt bucket during the next annual period. At some point in time, with the expected decrease of the CLO Debt bucket, we might reduce the leverage that is in place on CLO Debt tranches.

In aggregate, we will tend to decrease the number of positions, although maintaining a high level of diversification in order to increase the value that can be added from deals “restructuring” (refinancing/resetting/calls/repackaging). CLO warehousing transactions are part of this strategy.

All of this is in line with our overall sentiment that we are approaching the end of the credit cycle: having fewer positions in order to increase our level of control and preferring CLO Equity tranches (that might benefit from credit volatility) to leveraged CLO Debt positions.

We consider that our mandate as Volta’s Investment Manager is to invest in assets that should be able to produce stable revenue (which can support attractive distributions to Shareholders) through investing in assets and structuring investments that are adapted to the prevailing market circumstances. We will continue to draw upon the experience of our teams in the structured finance department of AXA IM and their ability to take advantage of investment opportunities across the different segments of the structured finance markets in order to meet Volta’s objectives.

AXA INVESTMENT MANAGERS PARIS 29 OCTOBER 2018

08 VOLTA FINANCE LIMITED annual report and accounts 2018

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REPORT OF THE DEPOSITARY TO THE SHAREHOLDERS

In our capacity as Depositary to Volta Finance Limited for the year ended 31 July 2018, we confirm that, in our opinion, the Company was managed in accordance with the provisions of the principal documents of the Company, the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended), The AIFMD (Marketing) Rules, 2013, and the rules made thereunder.

STATE STREET CUSTODY SERVICES (GUERNSEY) LIMITED PO BOX 238 FIRST FLOOR, DOREY COURT ADMIRAL PARK ST PETER PORT GUERNSEY GY1 3PF 29 OCTOBER 2018

annual report and accounts 2018 VOLTA FINANCE LIMITED 09

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REPORT OF THE DIRECTORS

The Directors present their report and the audited financial statements for the year ended 31 July 2018. In the opinion of the Directors, 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 position and performance, business model and strategy.

INCORPORATION

The Company is a limited liability company registered in Guernsey under the Companies (Guernsey) Law, 2008 (as amended) with registered number 45747.

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (“AIFM DIRECTIVE” OR “AIFMD”)

The AIFM Directive seeks to regulate managers (‘‘AIFMs’’) of alternative investment funds (‘‘AIFs’’) that are marketed or managed in the European Economic Area. In compliance with the AIFMD, the Company has appointed AXA IM to act as its AIFM and, from 1 August 2018, BNP Paribas Securities Services S.C.A. Guernsey Branch has been appointed to act as its Depositary. State Street Custody Services (Guernsey) Limited (“SSCSGL”) acted as the Company’s Depositary for the year ended 31 July 2018. Please see the legal and regulatory disclosures section on pages 57 and 58 for further information.

ACTIVITIES

The Company is a closed-ended investment company with the objective of investing, among other asset types, in the following main asset classes: CLO, Synthetic Corporate Credit, Cash Corporate Credit and ABS. Further information regarding the Company and its activities is provided in the Corporate Summary on pages 55 and 56.

RESULTS AND DIVIDENDS

During the financial year the Company’s NAV increased by €0.2 million or €0.001 per share. The net comprehensive income for the year, determined under International Financial Reporting Standards (“IFRS”), amounted to €22.7 million.

During the year, the Directors declared the following quarterly dividends: €0.15 per share paid in September 2017; €0.16 per share paid in December 2017; €0.15 per share paid in March 2018; and €0.16 per share paid in June 2018.

REPURCHASE AGREEMENT WITH SOCIÉTÉ GÉNÉRALE

The Company has a repurchase agreement (“Repo”) with Société Générale, Paris, France (“SG”), under the terms of which SG has provided the Company with finance of $50 million secured against a portfolio of USD CLO Debt securities. Please refer to Note 12 to the financial statements for further details.

RISK RETENTION PROVISIONS – THE EUROPEAN UNION AND US RISK RETENTION REQUIREMENTS

EU and US risk retention provisions are/were designed to ensure that the sponsor of a securitisation has “skin in the game” and would bear a risk of principal losses commensurate with the risk taken by the investors in the securitisation in the event of poor performance. The “skin in the game” was characterised in both regimes by an obligation to retain 5% of the risk of the securitisation, although measurement of the risk, instruments held, type of retainer (originator, original lender or sponsor) and eligible forms of retention used varied to a certain extent between the two regimes.

Implementation of the EU risk retention requirements has not, to date, affected the ability of the Company to carry out its investment strategy in the CLO market. The US risk retention requirements were repealed during the year and, consequently, are no longer applicable.

UNITED STATES OF AMERICA FOREIGN ACCOUNT TAX COMPLIANCE ACT (“FATCA”)

Guernsey has entered into an Intergovernmental Agreement (“IGA”) with the US Treasury in order to comply with FATCA for enhanced reporting of tax information. Under the IGA, the Company is regarded as a Foreign Financial Institution (“FFI”) resident in Guernsey.

RISKS AND UNCERTAINTIES

The principal risks and uncertainties faced by the Company are described within the Principal Risk Factors section of the annual report on pages 13 to 16 and Note 19 in the financial statements.

10 VOLTA FINANCE LIMITED annual report and accounts 2018

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REPORT OF THE DIRECTORS CONTINUED

COMMON REPORTING STANDARD

The “Common Reporting Standard” (“CRS”) is a global standard for the automatic exchange of financial account information, similar to the information to be reported under FATCA. As a consequence of the regulations introduced by the States of Guernsey to implement the CRS, the Company is required to report certain tax information to the Guernsey income tax office in respect of investors resident in other CRS participating jurisdictions. That information is transmitted by the Guernsey income tax office to the relevant foreign tax authorities. Please see the legal and regulatory disclosures section on pages 57 and 58 for further information.

GOING CONCERN

The Company currently has only a limited amount of debt financing ($50 million as at the financial year-end date). The Company’s current cash holdings and projected cash flows are sufficient to cover current liabilities and projected liabilities. The Directors have considered financial market conditions at the financial year-end date and subsequently and have concluded that any reasonably foreseeable adverse future investment performance would not have a material impact on the Company’s ability to meet its liabilities as they fall due. After making appropriate enquiries, the Directors are therefore of the opinion that the Company remains a going concern and are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company’s financial statements.

VIABILITY STATEMENT

The Directors have assessed the prospects of the Company over the three-year period from the date of approval of this report. In making this assessment the Directors have taken into account the impact that various significantly adverse scenarios might be expected to have on the Company’s cash flow and its ability to meet its liabilities on a timely basis.

The starting point for this analysis was the Company’s current financial position; current market conditions; the principal risks facing the Company, as described within the Principal Risk Factors section of the annual report on pages 13 to 16; and the risks arising from the Company’s financial instruments set out in Note 19 to the financial statements, and their potential impact on the Company. A forecasting period of three years was considered to be appropriate given the life cycle of the Company’s particular investment universe and the structure and investment objectives of the Company.

In making their assessment of the Company’s prospects, the Directors have focused their attention on those risks impacting the carrying value and liquidity of the Company’s investment portfolio and the Company’s ability to generate cash from its activities, and thereby to enable it to meet its payment obligations as they fall due, including under the Repo and derivatives contracts, as well as to continue to pay a stable stream of dividends in accordance with its investment objectives. The Directors consider that the greatest risks to the Company’s ability to generate cash, and to the carrying value of its investments, would be a sustained increase in the default rate of the credit investments and/or underlying assets of the portfolio and/or any change in market conditions which resulted in severe, prolonged damage to the liquidity and market value of the investment portfolio.

The Directors have considered income, expenditure and NAV projections for the Company, firstly under the assumption that current conditions persist for the entire three-year review period, then under various adverse scenarios that are considered to be severe but plausible and including scenarios where default levels were modelled to peak at a level higher than those previously experienced by the Company during the 2008/2009 crisis and to persist for longer than the heightened default levels that were experienced by the Company at that time.

Under no plausible scenario modelled did the Company become cash flow insolvent but the modelling made two key assumptions: firstly, it was assumed that the portfolio would react to changes in underlying factors in a similar way to that experienced in the past; and secondly, the Directors made the assumption that the Investment Manager would be able to actively and conservatively manage the portfolio during the downturn.

The Directors noted that under various plausible adverse scenarios, while neither of the Company’s objectives of providing a stable income stream and preserving capital across the credit cycle may be met, projected income exceeded projected expenses over the period.

annual report and accounts 2018 VOLTA FINANCE LIMITED 11

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The Directors note that the Company’s shares trade at a discount to NAV. They actively monitor the discount and communicate regularly with Shareholders on this subject. In making their assessment of viability, the Directors have assumed that Shareholders will continue to recognise the value provided by the Company and will not petition to wind up the Company. The Directors have also assumed that no unforeseen change in, or change in interpretation of, the regulations and laws to which the Company is subject will have a materially negative impact upon its viability.

The Directors therefore confirm that they have performed a robust assessment of the viability of the Company over the three-year period from the date of approval of this report, taking into account their assessment of the principal risks facing the Company, including those risks that would threaten its business model, future performance, solvency or liquidity.

The Directors, after due consideration and in the absence of any unforeseen circumstances, confirm that they have 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 their assessment.

DIRECTORS

The Directors who held office during the financial year and up to the date of approval of this report were:

Graham Harrison Stephen Le Page Paul Meader Atosa Moini Paul Varotsis

The Directors’ interests in the Company’s share capital as at the current financial year end were:

DISCLOSURE OF INFORMATION TO AUDITOR

The Directors who held office at the date of approval of this Directors’ Report 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 he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information.

AUDITOR

KPMG Channel Islands Limited served as Auditor during the financial year and has expressed its willingness to continue in office. A resolution to re-appoint KPMG Channel Islands Limited as Auditor will be put to the forthcoming 2018 AGM.

COMPANY SECRETARY

The Company Secretary is Sanne Group (Guernsey) Limited of Third Floor, La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey GY1 1WG, Channel Islands. BNP Paribas Securities Services S.C.A. Guernsey Branch of BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey GY1 1WA, Channel Islands will be appointed as Company Secretary on 31 October 2018.

By order of the Board

SANNE GROUP (GUERNSEY) LIMITED COMPANY SECRETARY 29 OCTOBER 2018

	Number of			Number of	Number of
	shares at	Shares	Shares	shares at
	31 July 2017	issued	purchased	31 July 2018
G Harrison	6,996	3,391	—	10,387
S Le Page	16,507	3,819	5,000	25,326
P Meader	24,969	4,344	—	29,313
A Moini	—	2,766	—	2,766
P Varotsis	171,591	3,402	9,000	183,993

12 VOLTA FINANCE LIMITED annual report and accounts 2018

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RISK COMMITTEE REPORT

The Risk Committee presents its report for the year ended 31 July 2018.

TERMS OF REFERENCE

The Board has established terms of reference for the Risk Committee (the “Committee”) governing its responsibilities, authorities and composition in accordance with the AIC Code.

The Committee’s responsibilities include, but are not limited to, the following:

• @ reviewing and monitoring the effectiveness of the Company’s risk management and internal control procedures pertaining to the investment portfolio, focusing on identifying and overseeing those investment portfolio related risks that might impact upon the performance of the Company’s NAV and/or shares, and reporting its findings to the Board;

• @ the development and maintenance of a risk matrix, incorporating risk mitigation measures, to assist the Committee in identifying, recording and monitoring the key risks faced by the Company, having regard to all risks that may be identified, including those identified in the Principal Risk Factors section on pages 13 to 16;

• @ the recommendation of investment risk limits and tolerances to the Board and regular review of the suitability of those adopted;

• @ monitoring compliance with those investment risk limits and tolerances and notifying the Board of any breaches or material concerns on a timely basis; and

• @ monitoring compliance with operational and regulatory requirements relating to the Company’s investment portfolio and notifying the Board of any breaches or material concerns on a timely basis.

The Risk Committee complements and enhances the work of the Audit Committee, which focuses on risks that might impact upon financial reporting and other areas that are not specifically related to the Company’s investment portfolio.

ACTIVITIES

During the financial year ended 31 July 2018 the Committee met on five occasions and conducted due diligence visits to the Administrator in February 2018 and to the Investment Manager in June 2018.

The Committee reviews both quantitative and qualitative metrics in relation to the categories of risk which are relevant to the Company’s overall activities, the particular characteristics of the Company’s investments and the Company’s investment objectives. These metrics are generally provided to the Committee by the Investment Manager but, from time to time, the Committee may also be provided with information by its Company Secretary or its Corporate Broker.

The Committee constructively challenges the Investment Manager in relation to matters of investment risk.

The Committee ensures that the risk matrix is kept up to date in response to the evolving strategy and risk environment of the Company.

The principal risks facing the Company, as identified by the Committee in conjunction with the Board, including those risks that would threaten its business model, future performance, solvency or liquidity are listed in the Principal Risk Factors section on pages 13 to 16.

The Committee has worked jointly with the Audit Committee to develop a framework for the analysis required for the Board to make the Viability Statement included on page 10 of this report. This work included scenario and stress case modelling produced by the Investment Manager at the Committee’s request.

The Committee has concluded from the results of its activities during the financial year that the risks faced by the Company, as described in this annual report, are appropriate to the Company’s investment objectives and circumstances and are adequately monitored and controlled. The Committee has reported accordingly to the Board.

DELEGATION OF DUTIES

The Committee has no full-time employees as all day-to-day operational functions, including investment management, risk management and internal control, have been outsourced to various service providers. However, the Committee retains full responsibility for the oversight of such service providers.

GRAHAM HARRISON CHAIRMAN OF THE RISK COMMITTEE 29 OCTOBER 2018

COMPOSITION

The Risk Committee currently comprises Mr Harrison (Chairman), Mr Le Page, Mr Meader, Ms Moini and Mr Varotsis. Only Independent Directors may serve on the Risk Committee. The Committee meets at least four times each year.

annual report and accounts 2018 VOLTA FINANCE LIMITED 13

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PRINCIPAL RISK FACTORS

SUMMARY

An investment in the Company’s shares is suitable only for sophisticated investors who 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. The Company offers no assurance that its investment objectives will be achieved. Prospective investors should carefully review and evaluate the descriptions of risk and the other information contained in this report, as well as their own personal circumstances, and consult with their financial and tax advisors before making a decision to invest in the shares.

Prospective investors should be aware that the value of the shares may decrease, any dividend income from them may not reach targeted levels or may decline, and investors may not get back their invested capital. In addition, the market price of the shares may be significantly different from the underlying value of the Company’s net assets. The NAV of the Company as determined by it from time to time may be at a level higher than the amount that could be realised if the Company were liquidated.

The following principal risks and uncertainties are those that the Company believes are material, but these risks and uncertainties may not be the only ones that the Company and its Shareholders may face. Additional risks and uncertainties, including those that the Company is not aware of or currently views as insignificant, may also result in decreased revenues, increased expenses or other events that could result in a decline in the value of the shares. A more comprehensive list of the risks faced by the Company may be found in the Summary Document that is posted on the Company’s website.

STRATEGIC RISKS

These are the investment risks the Company chooses to take in order to meet its performance objectives. The Board has defined limits for various metrics in order to monitor and control the following strategic risks, which are reviewed by the Risk Committee on at least a quarterly basis. The Board also reviews regularly the broad investment environment and receives detailed reports, including scenario analysis, from the Investment Manager on the economic outlook and potential impact on the Company’s performance.

Principal risks Impact, tolerance, controls and mitigation DEFAULT RISK – Depending on the severity of any increase in default rates, particularly the duration of any such increase, The risk that underlying loans the impact of underlying asset default risk could potentially be high. However, the Company is expected or financial assets within the to be able to tolerate a short-term spike in defaults without any material impact on the Company. Default investment portfolio default, risk is monitored and managed by the Investment Manager through active portfolio management and is leading to investment losses, mitigated by the Company’s broadly diversified investment portfolio. Individual and aggregated exposure a reduction in cash flows limits and tolerances in relation to credit risk are set by the Company and reviewed regularly. Because receivable and a fall in most CLOs and some other investments in the Company’s portfolio are actively managed and the the Company’s NAV. Company invests at various levels in the capital structure of CLOs, the aggregate net credit exposure across the portfolio to underlying names cannot be fully controlled. However, the Investment Manager periodically provides granular impact analysis of credit exposure to the larger underlying obligors in order to allow the Board to be satisfied that the portfolio remains broadly diversified and that this risk remains at a tolerable level.

The risk that a counterparty The Company has a moderate credit exposure to counterparties through derivatives, the Repo and cash defaults leading to a financial deposits. On rare occasions, there may be short-term exposure via settlement processes. Limits are loss for the Company. set for individual counterparty exposures. The Investment Manager monitors these limits and provides compliance reports thereon to the Risk Committee. The Investment Manager also monitors the quality and appropriateness of counterparties, upon which it performs regular due diligence.

14 VOLTA FINANCE LIMITED annual report and accounts 2018

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PRINCIPAL RISK FACTORS CONTINUED

STRATEGIC RISKS CONTINUED

STRATEGIC RISKS CONTINUED
Principal risks	Impact, tolerance, controls and mitigation
MARKET RISK –	The impact of market risk on the Company’s ability to achieve its investment objectives could potentially
The impact of movements in	be high. While the Company is well positioned to tolerate short-term market volatility and/or lack of
market prices, interest rates	liquidity, sharp falls in market prices would require more eligible collateral to be posted under the Repo at
and foreign exchange rates	relatively short notice and a prolonged severe drop in NAV could ultimately trigger the termination of the
on cash fows receivable and the Company’s NAV.	Repo. Market risk is therefore monitored closely and is managed and mitigated as far as possible by the Investment Manager through active portfolio management, the maintenance of a diversifed investment portfolio and use of the fexibility of the Company’s investment policy, which permits the Investment
	Manager to switch between asset classes and levels of risk.
	Given that the Company’s investments have foating interest rate characteristics, the direct risk arising
	from interest rate volatility is modest. The Investment Manager carefully manages the Company’s foreign
	exchange exposure hedging through derivatives to balance the partial mitigation of the impact of foreign
	exchange fuctuations upon the NAV with the need to ensure that any margin obligations can be met
	comfortably. The Risk Committee has set foreign exchange exposure tolerances and derivative
	margin tolerances.
The risk of severe market	The Company is well positioned to be able to tolerate prolonged market disruption, as occurred in
disruption leading to impairment of the market value and/or	2008/2009, due to the fact that the Company is fnanced mostly by equity on which it is able to exercise discretion regarding dividend payments and the fact that the Company’s debt fnancing through the
liquidity of the Company’s	Repo transaction is relatively small and structured in a way that should enable repayment in an orderly
investment portfolio.	manner if required. The Board monitors overall leverage levels and the Risk Committee oversees soft
	limits applicable to the Repo and associated collateralisation.
The market value of	The Investment Manager monitors on a daily basis the collateral requirements under the Repo
the collateral posted by the	and ensures that a suitable amount of available cash and other liquid assets is available at all times
Company under the Repo	to respond to any requirement to post additional collateral. The liquidity of the Company is controlled
is signifcantly higher than	through limits set and monitored by the Investment Manager and by the Risk Committee. The Risk
the amount of the loan due	Committee and the Board require timely exception reporting from the Investment Manager upon
to the application of haircuts.	any breach relating to these limits.
The amount of collateral that
would be required could
increase signifcantly in the
event of market disruption.
RE-INVESTMENT RISK –	The potential impact of this risk is considered to be moderate in that it would not be felt immediately,
The ability to re-invest in	given the medium-term nature of the Company’s portfolio. The Company fully tolerates this risk in order
investments that maintain	to achieve its investment objectives. In the Board’s opinion, the ability of the Company and the Investment
the targeted level of returns	Manager to mitigate this risk is necessarily limited by external factors. Nevertheless, the Investment
at an acceptable level of risk.	Manager is alert to the need to anticipate and respond to market and regulatory developments. Taking
	into account the reputation, size and presence in the market of the Investment Manager, which provide
	increased exposure to investment opportunities, and the Company’s fexible investment mandate, the
	Board believes that this risk is mitigated as far as reasonably possible. The Board is aware of the risk of
	“creep” in risk tolerance in order to maintain returns in less favourable market environments and regularly
	challenges the Investment Manager on this point.

annual report and accounts 2018 VOLTA FINANCE LIMITED 15

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PREVENTABLE RISKS

These are the risks that the Board believes should be substantially mitigated by the Company’s controls. The Board has defined limits for various metrics in order to monitor and control the following preventable risks, which are reviewed by the Risk Committee on at least a quarterly basis.

least a quarterly basis.
Principal risks	Impact, tolerance, controls and mitigation
LIQUIDITY AND GOING CONCERN –	If the Company were to be unable to meet its obligations as they fell due, the impact on the Company would
The risk that the Company is	be severe, although this risk is remote. Consequently, the Company monitors this risk and the potential
unable to meet its payment	threats to the liquidity of the portfolio. The availability of liquid resources is a high priority for both the Risk
obligations and is unable to continue as a going concern	Committee and the Board. On a day-to-day basis, the Investment Manager monitors cash fow and payment obligations carefully and retains suffcient cash and/or liquid assets available to meet its obligations. The
for the next twelve months.	Investment Manager also monitors and reports to the Risk Committee on the market liquidity of the portfolio.
	Cash demands may arise from collateralisation and payment obligations under the Repo, margin calls and
	other payment obligations on hedging agreements and any other derivatives the Company might enter into,
	drawdowns on investment commitments and other payment obligations such as ongoing expenses.

OPERATIONAL RISK –

The risk that the Company, through its service providers, fails to meet its contractual and/or legal or regulatory reporting obligations, resulting in sanctions, financial penalties and/or reputational damage.

The Board has noted that this risk is heightened at present due to the recent change of Depositary and the change of Company Secretary and Administrator with effect from 31 October 2018.

The potential impact of this risk is considered to range from low to high, depending on the particular obligation. Regardless of the level of risk, the Company has a very low tolerance level for operational risk. The Company relies upon the procedures and controls at its third-party service providers and carries out regular due diligence to ensure that those procedures and controls are working effectively. The Board monitors the operational performance of all its main service providers and requires them to report any material breaches related to the Company. The Board also carries out periodic due diligence visits to key service providers, including the Investment Manager, the Depositary and the Administrator.

The Board has mitigated the heightened risk caused by the change of Depositary, Company Secretary and Administrator by phasing the changes over a period of three months, with the current Administrator remaining in place while the change of Depositary took place and with the current Administrator continuing to be responsible for the Company’s financial reporting and monthly Estimated NAV reporting until the publication of this annual report had been completed, thereby allowing for a period during which the incoming Administrator could perform “parallel-run” Estimated NAV reporting.

VALUATION OF ASSETS –

The risk that the Company’s assets are incorrectly valued.

INVESTMENT MANAGER RISKS –

The risk that the Investment Manager may execute its investment strategy poorly.

KEY PERSON RISK –

The risk that the Investment Manager resigns, goes out of business or exits the Company’s asset classes.

Whilst there might be no immediate direct impact on the Company from incorrect valuation of the Company’s assets in its monthly Estimated NAV reports and annual and interim financial reports, this is considered to be a high risk area due to the potential impact on the Company’s share price and actions that could arise from the provision to the market of materially inaccurate valuation data. Any material valuation error is reported to investors. The Company’s accounting policies for the valuation of its assets are described in Note 4 in the financial statements. The Company’s Estimated NAVs and semi-annual NAVs are calculated based on valuations provided independently by PricingDirect for the majority of positions. In addition, certain of the prices comprising the semi-annual NAV valuation are further verified using an additional independent pricing source, Omicron.

This risk is mitigated by the fact that the Investment Manager is part of a very large organisation with deep resources. It manages a number of other funds in the same asset classes as the Company and has a strong track record over a long period in the Company’s asset classes.

The Investment Manager has large teams and deep resources of skills to replace key individuals.

The Investment Manager must give six months’ notice before resigning which would help mitigate the disruption caused by any need to appoint a new Investment Manager.

16 VOLTA FINANCE LIMITED annual report and accounts 2018

PRINCIPAL RISK FACTORS CONTINUED

EXTERNAL RISKS

These are risks that are largely outside of the Company’s control, but of which investors should be cognisant.

Principal risks	Impact, tolerance, controls and mitigation
LEGAL AND REGULATORY RISK –	The impact of legal and regulatory change, including tax change, could potentially be high.
The risk that changes in the legal and	The Investment Manager continuously monitors the legal and regulatory environment in
regulatory environment, including changes	which the Company operates in order to enable the Company to continue to adapt to any
in tax rules or interpretation, might adversely	legal and regulatory changes by investing in new asset classes and/or new investment
affect the Company, such as changes in	structures in response to such changes.
regulations governing asset classes that could impair the Company’s ability to hold or re-invest in appropriate assets and lead to impairment in value and or performance	The Investment Manager and the Administrator report to the Board at least semi-annually regarding any relevant upcoming regulatory and tax changes and on an ad hoc basis if appropriate.
of the Company.
BREXIT –	In the Investment Manager’s opinion a “hard” BREXIT could impact some business cases
Risks arising from the proposed	and, on a mid-term basis, might result in some credit deteriorations that could have some
departure of the United Kingdom	impact on the Company’s assets, as European CLOs and some of the Bank Balance Sheet
from the European Union.	transactions are exposed to UK-based credits. However, the Board are monitoring
	developments closely with the assistance of the Investment Manager.

annual report and accounts 2018 VOLTA FINANCE LIMITED 17

CORPORATE GOVERNANCE REPORT

The Company is a Guernsey limited liability company with shares listed on Euronext Amsterdam and the Main Market of the London Stock Exchange. Volta’s home member state for the purposes of the EU Transparency Directive is the Netherlands. As such, Volta is subject to regulation and supervision by the AFM, which supervises compliance with the Financial Markets Supervision Act in the Netherlands.

The Company is a member of the AIC and has elected to follow the AIC Code, as revised in July 2016. The AIC Code has been endorsed by the FRC as an alternative means for their members to meet their obligations in relation to the UK Corporate Governance Code (the “UK Code”). The Company is not required to apply the Dutch Corporate Governance Code. The Guernsey Financial Services Commission (“GFSC”) has also issued a Code of Corporate Governance (the “GFSC Code”), which applies to the Company. Compliance with the AIC Code is deemed to satisfy compliance with the GFSC Code. A full version of the AIC Code can be found on the AIC’s website: https://www.theaic.co.uk.

STATEMENT OF HOW THE PRINCIPLES OF THE AIC CODE ARE APPLIED

The Board has considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for Investment Companies for Guernsey resident companies (the “AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and recommendations of the AIC Code provides better, more relevant, information to Shareholders than would be achieved by reporting against the UK Code.

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code throughout the financial year ended 31 July 2018, except as set out below.

The UK Corporate Governance Code includes provisions relating to:

• @ the role of the Chief Executive;

• @ Executive Directors’ remuneration; and

• @ the need for an internal audit function.

For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has, therefore, not reported further in respect of these provisions. The Directors continue to monitor the systems of internal controls at each of its service providers in order to provide them with assurance that they operate as intended.

PORTFOLIO COMPOSITION

The Company publishes its portfolio composition on its website on a monthly basis.

THE BOARD

The Board is responsible for the determination of the Company’s investment objectives, investment guidelines and dividend policy and has overall responsibility for overseeing the Company’s activities. The Investment Manager has full discretion to make and implement decisions concerning the investments and other assets held by the Company within the guidelines and policies set by the Prospectus and amplified by the Board.

All of the Directors are non-executive. Mr Meader acts as Chairman of the Board and Mr Varotsis acts as the Senior Independent Director. Each of Mr Harrison, Mr Le Page, Mr Meader, Ms Moini and Mr Varotsis are independent from the Investment Manager and satisfy the independence criteria as set out in the AIC Code and as adopted by the Board as follows:

• @ the independent Board members may not be Directors, employees, partners, officers or professional advisors to other funds that are managed by the Investment Manager or managed by any other company in the AXA Group;

• @ the independent Board members may not be Directors, employees, officers, partners or professional advisors to the Investment Manager or any AXA Group companies;

• @ the independent Board members may not have a business relationship with the Investment Manager or any AXA Group companies that is material to the members (although they may acquire and hold AXA Group insurance, investment and other products on the same terms as those available to other parties unaffiliated with AXA Group); and

• @ the independent Board members may not receive remuneration from the Investment Manager or any AXA Group companies (although they may acquire and hold AXA Group insurance, investment and other products on the same terms as those available to other parties unaffiliated with the AXA Group and they may accept commissions or other payments from parties entering into transactions with AXA Group companies as long as those commissions and payments are on market terms and are not material to the members).

18 VOLTA FINANCE LIMITED annual report and accounts 2018

CORPORATE GOVERNANCE REPORT CONTINUED

THE BOARD CONTINUED

Each of Mr Le Page and Mr Meader is a director of Highbridge Multi-Strategy Fund Limited, an investment company whose shares are listed on the London Stock Exchange. The Board reviewed this matter at the time of Mr Le Page’s appointment to the Board and concluded that this cross-directorship does not impair either Director’s independence. The Board notes Mr Meader’s publicly declared intention to resign as a director of Highbridge Multi-Strategy Fund Limited with effect from 31 December 2018.

Mr Varotsis has served on the Board for over ten years. The Board’s Nomination Committee has considered the question of Board tenure and has concluded that there should not be a specific maximum time in position for a director or chairman. Instead, the Nomination Committee keeps under review the balance of skills of the Board and the knowledge, experience, length of service and performance of the Directors and focuses on maintaining the right mix of skills and a balance between bringing in new Directors with fresh ideas and preserving corporate knowledge and experience. In the Board’s opinion, Mr Varotsis continues to maintain his independence, notwithstanding his long service.

The Board reviews at least annually whether there are other factors that potentially affect the independence of the independent members of the Board or involve meaningful conflicts of interest for them with the Company. Prospective investors in the Company’s shares should note that other companies may define “independence” differently. The individual independence status of the Directors was last reviewed and confirmed by the Board on 1 October 2018.

The Company’s day-to-day activities are delegated to third parties, including the Investment Manager, the Administrator and the Depositary. The Company has entered into formal agreements with each of its service providers. Under the terms of the Investment Management Agreement, the Investment Manager is responsible for the management of the Company’s investment portfolio, subject to the Company’s investment guidelines and the overall supervision of the Board. The responsibilities of Sanne Group (Guernsey) Limited in respect of its duties as the Administrator, including its duties as Company Secretary and Portfolio Administrator, are governed by an Administration Agreement and a Portfolio Administration Agreement respectively. The responsibilities of the former Depositary were set out in a Depositary Agreement. The responsibilities of BNP Paribas Securities Services S.C.A. Guernsey Branch, in respect of its duties as the Administrator, including its duties as Company Secretary, will be governed by an Administration Agreement and its duties as the current Depositary are set out in a Depositary Agreement.

The Board monitors the performance of each of its service providers on a continuous basis and reviews their performance on a formal basis at least annually. The Directors have also reviewed the effectiveness of the risk management and internal control systems, including material financial, operational and compliance controls (including those relating to the financial reporting process) and no significant failings or weaknesses were identified.

COMMITTEES OF THE BOARD

Audit, Risk, Nomination and Remuneration Committees have been established by the Board and each Committee has formally delegated duties, responsibilities and terms of reference, which are published on the Company’s website.

AUDIT COMMITTEE

Please see the Audit Committee’s separate report on pages 21 and 22 for details of its composition, responsibilities and activities.

RISK COMMITTEE

Please see the Risk Committee’s separate report on page 12 for details of its composition, responsibilities and activities.

NOMINATION COMMITTEE

The Nomination Committee currently comprises Mr Harrison, Mr Le Page, Mr Meader (Chairman), Ms Moini and Mr Varotsis. Only Independent Directors may serve on the Nomination Committee. The Committee meets at least once each year and considers the size, structure, skills and composition of the Board. The Committee considers retirements, re-appointments and appointments of additional or replacement Directors and makes recommendations to the Board in this respect with particular consideration of the rotation provisions set out in the Company’s Memorandum and Articles of Incorporation.

The Nomination Committee has considered the question of Board tenure and has concluded that there should not be a specific maximum time in position for a director or chairman. Instead, the Committee keeps under review the balance of skills of the Board and the knowledge, experience, length of service and performance of the Directors and focuses on maintaining the right mix of skills and a balance between bringing in new Directors with fresh ideas and preserving corporate knowledge and experience. When recommending new Directors for appointment to the Board, diversity of gender, age, ethnicity and cultural background are taken into consideration in accordance with the Company’s diversity policy. In accordance with the Company’s tenure policy, each Director will stand for annual re-election at each AGM. The Nominations Committee met twice during the financial year.

During the year, Mr Meader conducted formal performance evaluations on each existing member of the Board and the Board as a whole and Mr Varotsis, as Senior Independent Director, conducted a formal performance evaluation on the Chairman. The evaluations included a discussion and evaluation of any training or development requirements. These performance evaluations were reported to the Committee and it was concluded that each such Board member had demonstrated during their current terms of office that he or she continues to demonstrate satisfactory independence; positively adds to the balance of skills of the Board; has current and relevant expertise; effectively contributes to the Board; and demonstrates commitment to the Company’s business. Accordingly the Nomination Committee has recommended that the Board should propose each existing Director for re-election to the Board at the forthcoming AGM.

An independent review of the performance and remuneration of the Board was last carried out in November 2016 by Trust Associates Limited, as disclosed in the Company’s 2017 annual report.

annual report and accounts 2018 VOLTA FINANCE LIMITED 19

COMMITTEES OF THE BOARD CONTINUED

REMUNERATION COMMITTEE

The Remuneration Committee currently comprises Mr Harrison, Mr Le Page, Mr Meader, Ms Moini and Mr Varotsis (Chairman). Only Independent Directors may serve on the Remuneration Committee. The Committee meets at least once each year to review the remuneration of the Directors and make recommendations to the Board in this respect. The Remuneration Committee met twice during the financial year.

COMMITTEE COMPOSITION AND TERMS OF REFERENCE

The composition of the aforementioned Committees and their terms of reference are kept under periodic review. The terms of reference of each of the Committees require that appointments to the Committee shall be for as long as that person remains as a Director or until otherwise removed, subject always to the satisfactory demonstration of independence as a Board member.

ATTENDANCE

There were nine Board meetings held during the financial year ended 31 July 2018. The attendance record of each of the Directors was as follows:

as follows:
	Number of
	attendances~~/~~
	number o~~f~~
	meeting~~s~~
	held durin~~g~~
	the servic~~e~~
	period o~~f~~
	each Directo~~r~~
G Harrison	9/9
P Meader	9/9
A Moini	6/9
P Varotsis	8/9
S Le Page	9/9

There were six Audit Committee meetings, five Risk Committee meetings, two Nomination Committee meetings and two Remuneration Committee meetings held during the financial year ended 31 July 2018. The attendance record of each of the Committee members was as follows:

as follows:
	Number of attendances/number of meetings held during the year (where applicable, i.e. where the relevant Director was a Committee member as at the date of the meeting)
	Audit Committee Risk Committee Nomination Committee Remuneration Committee 6/6 5/5 2/2 2/2 — 5/5 2/2 2/2 5/6 4/5 1/2 1/2 5/6 4/5 1/2 1/2 6/6 5/5 2/2 2/2
G Harrison P Meader A Moini P Varotsis S Le Page

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

For further information regarding the Company’s approach to ESG issues, please refer to the Chairman’s Statement on page 3 and the Investment Manager’s Report on page 7.

20 VOLTA FINANCE LIMITED annual report and accounts 2018

CORPORATE GOVERNANCE REPORT CONTINUED

INVESTMENT MANAGEMENT AGREEMENT AND CONTINUED APPOINTMENT OF THE INVESTMENT MANAGER

Details of the fees payable to the Investment Manager are disclosed in Note 20 within the financial statements.

As previously stated, the Board reviews the performance of the Investment Manager on a regular basis and considers whether or not the continued appointment of the Investment Manager is in the best interests of the Company. The continued appointment of the Investment Manager was most recently reviewed and agreed by the Board on 1 October 2018. If the Company elects to terminate the appointment of the Investment Manager without cause and without giving the Investment Manager two years’ advance notice, the Company may do so upon not less than 60 days’ prior written notice, but will be required to pay a termination fee to the Investment Manager. The termination fee shall be to compensate the Investment Manager for the Management Fees and Incentive Fees that the Investment Manager might have earned had the appointment of the Investment Manager not been terminated prior to the end of the two-year notice period.

Currently, the Company’s investment guidelines state that “the Company will not engage in portfolio transactions (e.g. the purchase or sale of securities) with the Investment Manager acting on a principal basis or with accounts or funds for which the Investment Manager acts as discretionary investment manager (although this restriction does not prohibit investments by the Company in AXA IM Managed Products).” From time to time and on a case-by-case basis, the Board has permitted the Investment Manager to engage in such transactions in order to prevent this restriction from limiting the Company’s ability to take certain investment opportunities. Further to the statement made in the Company’s previous annual report, the Investment Management Agreement was amended on 27 March 2018 to clarify that the Company may engage in portfolio transactions (e.g. the purchase or sale of securities) with the Investment Manager acting on a principal basis and cross-trades between the Company and accounts or funds for which the Investment Manager acts as discretionary Investment Manager are authorised provided they comply with the policies and procedures developed by the Investment Manager in order to eliminate or mitigate conflicts of interest and to ensure that the Company is treated in an equitable manner. In order to identify, prevent or manage and follow up any conflict of interest, the Investment Manager has set up a conflict of interest policy that is available on the following website: www.axa-im.fr.

INVESTOR RELATIONS

Shareholders are able to contact the Board directly via the Company’s dedicated e-mail address (currently voltafinance@sannegroup.com until 31 October 2018 and, from this date, the new contact details will be guernsey.bp2s.volta.cosec@bnpparibas.com) or by post via the Company Secretary. Alternatively, Shareholders are able to contact the Investment Manager directly via the contact details as published in the Company’s monthly reports. In addition, regular meetings are conducted by the Company’s broker and Investment Manager with Shareholders and other interested parties.

As a consequence, the Board receives appropriate updates from the Company Secretary and from the Investment Manager to keep it informed of Shareholders’ sentiment and analysts’ views.

annual report and accounts 2018 VOLTA FINANCE LIMITED 21

AUDIT COMMITTEE REPORT

The Audit Committee presents its report for the year ended 31 July 2018.

TERMS OF REFERENCE

The Board has established terms of reference for the Audit Committee (the “Committee”) governing its responsibilities, authorities and composition (the “Terms of Reference”). As stated in the Corporate Governance Report, the Company applies the AIC Code and accordingly the Terms of Reference of the Committee comply with the AIC Code.

The Committee’s responsibilities include, but are not limited to, the following:

• @ reviewing and monitoring the effectiveness of the Company’s financial reporting and internal control procedures;

• @ monitoring the integrity of the financial statements of the Company, including its annual report and interim report and any other formal announcement relating to its financial performance;

• @ reviewing significant financial reporting issues, estimates and judgements;

• @ reviewing the Company’s accounting policies to ensure that they remain appropriate and are applied consistently;

• @ monitoring the statutory audit of the annual report and the independent review of the Company’s interim report by its Auditor;

• @ reviewing the Auditor’s performance, independence and objectivity;

• @ reviewing and making recommendations to the Board regarding the appointment, re-appointment or removal of the Auditor together with the terms of engagement and level of remuneration of such Auditor;

• @ reviewing and making recommendations to the Board regarding the appointment of the Auditor to perform non-audit related services together with the terms of engagement and level of remuneration for such services;

• @ reviewing such significant financial information contained in other documents or regulatory returns as the Audit Committee might deem appropriate from time to time, particularly announcements considered to contain price-sensitive information; and

• @ reporting to the Board on the Committee’s activities and how it has discharged its responsibilities.

DELEGATION OF DUTIES

The Committee has no full-time employees as all day-to-day operational functions, including investment management, financial reporting, risk management and internal control, have been outsourced to various service providers. However, the Committee retains full responsibility for the oversight of such service providers.

COMPOSITION

The Committee currently comprises Mr Harrison, Mr Le Page (Chairman), Ms Moini and Mr Varotsis. Only Independent Directors may serve on the Committee and members of the Committee shall have no links with the Company’s Auditor. Mr Le Page has recent and relevant financial experience, having been a partner with PricewaterhouseCoopers in the Channel Islands from 1994 until September 2013, thereby enabling him to fulfil his role as Chairman of the Committee. The other members of the Committee have the knowledge and experience necessary to discharge their duties.

ACTIVITIES

During the financial year ended 31 July 2018 the Committee met on six occasions and met with the Auditor on five of these occasions. In addition, the Chairman of the Committee has met separately with the Executive Director responsible for the Company’s audit. The Committee also conducted a due diligence visit to the Depositary in March 2018. The Committee receives and reviews the Company’s annual and interim reports and financial statements, including the reports of the Investment Manager and Auditor contained therein.

In the Committee’s opinion, the principal risk of misstatement in the Company’s financial reporting arises from the valuation of its investments. In order to mitigate this risk, the Company:

• @ obtains a copy of the prices supplied by a third party for the purposes of valuing the interim and year end holdings of investments in CLO Debt and ensures that such prices agree to prices used by the Company to value its investments;

• @ employs an independent external party with expertise in valuation to review the valuations of its CLO investments on a semi-annual basis and to report whether or not such valuations appear reasonable;

• @ reviews the Investment Manager’s valuation assumptions to ensure that such assumptions are reasonable and to ensure that the valuations are consistent with such assumptions; and

• @ compares the fund valuations used in the Company’s financial reporting to net asset value reports received from the relevant fund administrators and, when audited annual financial statements are available for each fund, compares the relevant net asset value reports to such audited financial statements.

22 VOLTA FINANCE LIMITED annual report and accounts 2018

AUDIT COMMITTEE REPORT CONTINUED

ACTIVITIES CONTINUED

The Committee reviews the independent reports and the Investment Manager’s valuation assumptions prior to the publication of the Company’s annual and interim reports. In carrying out the review of the valuations included in this report the Board visited the Investment Manager on 29 June 2018, to review and discuss, in detail, the valuation sources and process. The results of these activities were satisfactory and the Committee has concluded that the investment valuations in this report are fairly stated in accordance with the Company’s accounting policies.

The Committee has also reviewed the Company’s accounting policies applied in the preparation of its annual and interim reports together with the relevant critical judgements, estimates and assumptions and has determined that these are in compliance with IFRS and are appropriate to the Company’s circumstances.

The Committee has reviewed and challenged the materiality levels applied by the Auditor to both the financial statements as a whole and to individual items and is satisfied that these materiality levels are appropriate.

The Committee focuses on ensuring that effective systems of internal financial and non-financial control are maintained and works closely with the Company’s third-party service providers in this regard. As the Company’s accounting functions are delegated to third parties, the Company does not have an internal audit function. The internal control environment of the Company is the product of control systems operated by its third-party service providers, together with the oversight exercised by the Committee. To help satisfy itself as to the existence and efficacy of material controls affecting the Company, the Committee requests its key third-party service providers to complete an annual questionnaire and reviews the responses provided to the questions contained therein. The Committee has also obtained the latest ISAE 3402 Type II controls reports on the Company’s Investment Manager and on its Administrator.

The Auditor, KPMG Channel Islands Limited (“KPMG”) presents its audit plan to the Committee prior to each such audit. KPMG provided the Committee with an overview of their audit strategy and plan for the year ending 31 July 2018 at a meeting in June 2018. KPMG advised that it considered the valuation of investments to be a significant audit risk due to the risks inherent in this area, as in previous years.

KPMG has been the Company’s Auditor since 2006, first auditing the annual report for the period ended 31 July 2007, and therefore the audit of this annual report is its twelfth audit of the Company. The Company benefits from this service continuity as KPMG is able to utilise staff with detailed knowledge of the Company’s investment portfolio and its operations. While such staff continuity is beneficial to the Company, the Committee has noted, as reported in previous years, the developments concerning the rotation of audit firms and audit tendering promulgated by the UK’s FRC and the European Union. However, it should be noted that these developments are not directly applicable to the Company.

The Committee carried out a detailed assessment of KPMG’s performance, service level and quality during the year based upon the following factors, amongst others: KPMG’s demonstration of knowledge of the Company and its investment portfolio; KPMG’s demonstration of experience of auditing similar investment entities; the expertise and qualifications of the personnel assigned to the audit; KPMG’s demonstration of independence and integrity during its conduct of the audit; and KPMG’s communications to the Committee. The Committee has concluded that KPMG’s performance continues to be highly satisfactory. Consequently, and considering the benefits highlighted in the previous paragraph, the Committee decided not to recommend a tender for the current audit of the Company. However, the Committee will continue to monitor the position, the quality of KPMG’s audit and the standard of its performance and will consider whether or not to tender the Company’s audit during the year ending 31 July 2019.

The Committee and KPMG work together to ensure that the independence and objectivity of the Auditor is maintained. In its formal communications with the Committee, KPMG confirms its compliance with all applicable independence and ethical requirements, including, among other things, ensuring periodic rotation of the lead audit director, who is subject to rotation after five years of service. It is noted that the current lead audit director was appointed for the audit of the 2015 annual report. The Committee has formally reviewed this confirmation, which includes a summary of KPMG’s controls to ensure compliance with professional and regulatory standards on independence, and has also noted the level and nature of non-audit services provided during the year. The Committee has concluded from this review, and in light of its knowledge and experience gained through the actual performance of KPMG’s work, that the Auditor remains independent and objective.

When the Auditor is engaged to perform non-audit related work, the Committee safeguards the Auditor’s objectivity and independence by ensuring that the staff members who perform such work are separate from the staff members who perform the audit. Where it is considered to be necessary, this is achieved by engaging staff from a different office to that of the audit staff.

The Committee has reviewed the Company’s financial reports as a whole to ensure that they appropriately describe the Company’s activities and to ensure that all statements contained in them are consistent with the Company’s financial results and expectations. Accordingly, the Committee was able to advise the Board that 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.

STEPHEN LE PAGE CHAIRMAN OF THE AUDIT COMMITTEE 29 OCTOBER 2018

annual report and accounts 2018 VOLTA FINANCE LIMITED 23

DIRECTORS’ REMUNERATION REPORT

Each of Mr Harrison, Mr Le Page, Mr Meader, Ms Moini and Mr Varotsis has signed a letter of appointment with the Company setting out the terms of their appointment. The Chairman is entitled to receive an annual fee of €120,000. Each of the other Directors is entitled to receive an annual fee of €88,000. In addition, the Chairman of the Audit Committee is entitled to receive an additional fee of €17,500 per annum, the Chairman of the Risk Committee is entitled to receive an additional fee of €6,000 per annum and the Senior Independent Director is entitled to receive an additional fee of €6,000 per annum. The Directors’ fees are paid quarterly.

Each Director receives 30% of his or her Director’s fee in the form of newly issued shares. The number of shares allocated is calculated based on the most recently available Estimated NAV at the time of issuance. The Directors are required to retain their shares for at least one year from their respective dates of issuance.

In addition to these fees, the Company reimburses all reasonable travel and other incidental expenses incurred by the Directors in the performance of their duties.

The total amounts of Directors’ remuneration for the financial year ended 31 July 2018 are shown in the table below.

	Cash	Shares	Total	Total
Director	€	€	€
G Harrison	65,800	28,200	94,000
S Le Page	73,850	31,650	105,500
P Meader	84,000	36,000	120,000
A Moini	61,600	26,400	88,000
P Varotsis	65,800	28,200	94,000
Total Directors’ remuneration	351,050	150,450	501,500

The share element of the Directors’ remuneration, amounting to €150,450, was issued as follows:

	Shares issued during	Shares issued after
Director	the year	the year end	Total
G Harrison	2,560	848	3,408
S Le Page	2,874	952	3,826
P Meader	3,269	1,083	4,352
A Moini	2,397	794	3,191
P Varotsis	2,560	848	3,408
Total	13,660	4,525	18,185

The current Directors continue to hold these shares and no disposals of shares have been made by them to date.

All remuneration of the Directors is set out above. There was no performance related compensation.

None of the Directors is subject to a service contract under which any compensation would be payable upon loss of office.

PAUL VAROTSIS CHAIRMAN OF THE REMUNERATION COMMITTEE 29 OCTOBER 2018

24 VOLTA FINANCE LIMITED annual report and accounts 2018

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the annual report, including the Directors’ Report, and the financial statements in accordance with applicable law and regulations.

The Companies (Guernsey) Law, 2008 (as amended) 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 (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and applicable law.

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

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

• @ select suitable accounting policies and then apply them consistently;

• @ make judgements and estimates that are reasonable and prudent;

• @ state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• @ assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to continuing as a going concern; and

• @ use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper 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 its financial statements comply with the Companies (Guernsey) Law, 2008 (as amended). They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the financial statements and that to the best of their knowledge and belief:

• @ this annual 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 the Company faces;

• @ the financial statements, prepared in accordance with IFRS adopted by the IASB and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”), give a true and fair view of the assets, liabilities, financial position and results of the Company; and

• @ the annual report and financial statements, taken as a whole, provides the information necessary to assess the Company’s position and performance, business model and strategy and is fair, balanced and understandable.

This Statement of Directors’ Responsibilities was approved by the Board of Directors on 29 October 2018 and was signed on its behalf by:

PAUL MEADER STEPHEN LE PAGE CHAIRMAN CHAIRMAN OF THE AUDIT COMMITTEE 29 OCTOBER 2018

FOOTNOTE:

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

annual report and accounts 2018 VOLTA FINANCE LIMITED 25

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED

OUR OPINION IS UNMODIFIED

We have audited the financial statements of Volta Finance Limited (the “Company”), which comprise the Statement of Financial Position as at 31 July 2018, the Statements of Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements:

• @ give a true and fair view of the financial position of the Company as at 31 July 2018, and of the Company’s financial performance and the Company’s cash flows for the year then ended;

• @ are prepared in accordance with International Financial Reporting Standards (IFRS); and

• @ comply with the Companies (Guernsey) Law, 2008.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including FRC Ethical Standards as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

KEY AUDIT MATTERS: OUR ASSESSMENT OF THE RISKS OF MATERIAL MISSTATEMENT

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2017):

The risk Our response

VALUATION OF INVESTMENTS

€325,703,159; (2017: €321,283,914)

Refer to pages 21 and 22 of the Audit Committee Report, notes 3b and 4 of the accounting policies and note 19 disclosures

BASIS:

The Company invests in a portfolio comprised of four main asset classes – collateralised loan obligations (“CLO”), synthetic corporate credits (“SCC”), cash corporate credits (“CCC”) and asset-backed securities (“ABS”), with exposure to both European and US credit markets. The fair values of these investments are based on price quotes obtained by the Company’s Investment Manager from arranging banks, other market participants, or independent pricing providers (the “Price Quotes”), models generated by the Investment Manager (the “Internally Generated Models”) or Net Asset Values of the Company’s holdings in other funds from the third party administrator of such funds (the “NAVs”) (70%, 18%, and 12%, respectively). Price Quotes are indicative and may not represent prices traded in an active market. Investments priced using Internally Generated Models are determined using valuation techniques such as a discounted cash flow model approach or with reference to prices of comparable instruments. For investments fair valued using Price Quotes the Company engages the services of an independent third party valuation expert to review the reasonableness of their fair value and the key inputs and assumptions used in determining fair value.

RISK:

The valuation of the Company’s investments is considered a significant area of our audit, given that it represents the majority of the net assets of the Company and in view of the significance of estimates and judgments that may be involved in the determination of fair value.

Our audit procedures included but were not limited to:

CONTROLS EVALUATION:

We documented and assessed the adequacy of the design and implementation of the Investment Manager’s controls in relation to the valuation of investments which included their evaluation of the prices provided by arranging banks, other market participants, or independent pricing providers and, where relevant, their assessment of the appropriateness of valuation techniques adopted and inputs used.

EVALUATING EXPERTS ENGAGED BY MANAGEMENT AND CHALLENGING MANAGEMENTS’ ASSUMPTIONS AND INPUTS INCLUDING THE USE OF KPMG VALUATION SPECIALIST:

For investments fair valued using Price Quotes, we traced the prices to quotes provided by arranging banks, other market participants or independent pricing providers. For a risk-based selection we used our own Valuation Specialist to assist us with the assessment of the quality and integrity of the values used through a combination of independent comparison to available price quotes from independent sources, or applying a discounted cash flow model using contractual terms and market data.

For a risk-based selection of investments priced using Internally Generated Models, our own Valuation Specialist considered the nature and terms of the investments and their knowledge of market practice for the valuation of such investments to assess the appropriateness of the valuation. Our Valuation Specialist agreed the details of the investment to underlying agreements and compared the key inputs and assumptions, such as collateral performance, default rates, prepayment rates and market interest rates used in the Internally Generated Models to market data sources and formed an independent valuation.

For investments fair valued using the NAVs, we traced the values and holdings to the NAVs statements obtained independently from the third party administrator of such funds and examined the most recent audited financial statements of those underlying funds to assess any impact on the values of those investments.

ASSESSING DISCLOSURES:

We also considered the Company’s disclosures (see note 2e) in relation to the use of estimates and judgments in determining the fair value of investments and the Company’s investment valuation policies and fair value disclosures (see notes 3b, 4 and 19) for compliance with IFRS.

26 VOLTA FINANCE LIMITED annual report and accounts 2018

INDEPENDENT AUDITOR’S REPORT CONTINUED TO THE MEMBERS OF VOLTA FINANCE LIMITED

OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT

Materiality for the financial statements as a whole was set at €6,034,000, determined with reference to a benchmark of net assets of €305,698,524 of which it represents approximately 2% (2017: approximately 2%).

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding €301,000 (2017: €309,500), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.

WE HAVE NOTHING TO REPORT ON GOING CONCERN

We are required to report to you if we have anything material to add or draw attention to in relation to the Directors’ statement in note 2a to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company’s use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in this respect.

WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT

The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

DISCLOSURES OF PRINCIPAL RISKS AND LONGER-TERM VIABILITY

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

• @ the Directors’ confirmation in the Viability Statement within the Report of the Directors on page 10 that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

• @ the Principal Risks disclosures describing these risks and explaining how they are being managed or mitigated;

• @ the Directors’ explanation in the Viability Statement within the Report of the Directors on page 10 as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

CORPORATE GOVERNANCE DISCLOSURES

We are required to report to you if:

• @ we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the Directors’ Statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy; or

• @ the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions of the 2016 UK Corporate Governance Code specified by the Listing Rules for our review.

We have nothing to report to you in these respects.

annual report and accounts 2018 VOLTA FINANCE LIMITED 27

OPINION ON OTHER MATTERS

WE HAVE NOTHING TO REPORT ON OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

• @ the Company has not kept proper accounting records; or

• @ the financial statements are not in agreement with the accounting records; or

• @ we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

RESPECTIVE RESPONSIBILITIES

DIRECTORS’ RESPONSIBILITIES

As explained more fully in their statement set out on page 24, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

THE PURPOSE OF THIS REPORT AND RESTRICTIONS ON ITS USE BY PERSONS OTHER THAN THE COMPANY’S MEMBERS AS A BODY

This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s 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 and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

STEVEN STORMONTH

FOR AND ON BEHALF OF KPMG CHANNEL ISLANDS LIMITED CHARTERED ACCOUNTANTS AND RECOGNISED AUDITORS, GUERNSEY 29 OCTOBER 2018

28 VOLTA FINANCE LIMITED annual report and accounts 2018

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 JULY 2018

		1 August 2017 to	1 August 2016 to	1 August 2016 to
		31 July 2018	31 July 2017
	Notes	€	€
Operating income and fnancing charges
Net gain on fnancial assets at fair value through proft or loss	5	32,730,798	40,899,977
Net foreign exchange (loss)/gain, including net losses on foreign exchange
derivatives, but excluding net foreign exchange movement on fnancial assets at fair value through proft or loss		(1,982,567)	5,557,942
Net (loss)/gain on interest rate derivatives		(867,655)	445,624
Interest expense on repurchase agreement	12	(1,351,360)	(1,105,396)
Net bank interest expense and charges		(80,043)	(128,369)
		28,449,173	45,669,778
Operating expenditure
Investment Management Fees	20	(4,198,010)	(4,141,424)
Investment Manager Performance Fees	20	—	(1,528,163)
Directors’ remuneration and expenses	7	(508,604)	(454,590)
Legal fees		(175,645)	(63,105)
Company secretarial, administration and accountancy fees	8	(291,799)	(265,415)
Audit, audit related and non-audit related fees	9	(122,156)	(127,954)
Insurance		(37,412)	(30,499)
Depositary fees		(157,108)	(95,005)
Portfolio valuation and administration fees		(6,000)	(13,366)
Other operating expenses		(240,874)	(215,169)
		(5,737,608)	(6,934,690)
Proft and total comprehensive income for the year		22,711,565	38,735,088
Earnings per share
Basic and diluted earnings per share		€0.6212	€1.0600
		Number	Number
		of shares	of shares
Weighted average number of shares outstanding
Basic and diluted		36,559,725	36,542,152

OTHER COMPREHENSIVE INCOME

There were no items of other comprehensive income in either the current year or prior year.

The Notes on pages 32 to 54 form part of these annual financial statements.

annual report and accounts 2018 VOLTA FINANCE LIMITED 29

STATEMENT OF FINANCIAL POSITION

AS AT 31 JULY 2018

		31 July 2018	31 July 2017	31 July 2017
	Notes	€	€
ASSETS
Financial assets at fair value through proft or loss	11	325,703,159	321,283,914
Derivatives	13	1,302,287	697,538
Trade and other receivables	14	12,921,688	282,620
Cash and cash equivalents		20,470,791	37,087,141
TOTAL ASSETS		360,397,925	359,351,213
EQUITY AND LIABILITIES
Capital and reserves
Share capital	16	—	—
Share premium	17	35,695,308	35,544,715
Other distributable reserves	18	100,928,524	123,596,736
Accumulated gain	18	169,074,692	146,363,127
TOTAL SHAREHOLDERS’ EQUITY		305,698,524	305,504,578
LIABILITIES
Loan fnancing received under repurchase agreement	12	42,715,000	38,101,500
Interest payable on loan fnancing	12	213,901	143,405
Derivatives	13	66,064	—
Trade and other payables	15	11,704,436	15,601,730
TOTAL LIABILITIES		54,699,401	53,846,635
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES		360,397,925	359,351,213
NAV per share outstanding
Basic and diluted		€8.3600	€8.3589

These financial statements on pages 28 to 54 were approved and authorised for issue by the Board of Directors on 29 October 2018 and were signed on its behalf by:

PAUL MEADER STEPHEN LE PAGE CHAIRMAN CHAIRMAN OF THE AUDIT COMMITTEE 29 OCTOBER 2018

The Notes on pages 32 to 54 form part of these audited financial statements.

30 VOLTA FINANCE LIMITED annual report and accounts 2018

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 JULY 2018

				Other
		Share		distributable	Accumulated
		premium	Warrants	reserves	gain	Total
	Notes	€	€	€	€	€
Balance at 31 July 2016		33,989,102	1,410,000	146,252,956	107,628,039	289,280,097
Total comprehensive
income for the year		—	—	—	38,735,088	38,735,088
Issue of Ordinary Shares
to Directors	16, 17	145,613	—	—	—	145,613
Expiry of warrants	16, 17	1,410,000	(1,410,000)	—	—	—
Dividends paid in cash	10, 18	—	—	(22,656,220)	—	(22,656,220)
Balance at 31 July 2017		35,544,715	—	123,596,736	146,363,127	305,504,578
Total comprehensive
income for the year		—	—	—	22,711,565	22,711,565
Issue of Ordinary Shares
to Directors	16, 17	150,593	—	—	—	150,593
Dividends paid in cash	10, 18	—	—	(22,668,212)	—	(22,668,212)
Balance at 31 July 2018		35,695,308	—	100,928,524	169,074,692	305,698,524

The Notes on pages 32 to 54 form part of these audited financial statements.

annual report and accounts 2018 VOLTA FINANCE LIMITED 31

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2018

	1 August 2017 to	1 August 2016 to	1 August 2016 to
	31 July 2018	31 July 2017
	€	€
Cash fows used in operating activities
Proft and total comprehensive income for the year	22,711,565	38,735,088
Adjustments for:
Net gain on fnancial assets at fair value through proft or loss	(32,730,798)	(40,899,977)
Net movement in unrealised (gain)/loss on revaluation of derivatives	(538,685)	539,251
Interest expense on repurchase agreement	1,351,360	1,105,396
Foreign exchange loss/(gain) on retranslation of repurchase agreement	363,819	(2,173,500)
Decrease/(increase) in trade and other receivables, excluding amounts due from brokers	68,265	(66,462)
(Decrease)/increase in trade and other payables, excluding amounts due to brokers	(1,661,809)	1,633,306
Directors’ fees paid in the form of shares	150,593	145,613
Net cash used in operating activities	(10,285,690)	(981,285)
Cash fows from investing activities
Coupons and dividends received	37,969,877	34,386,909
Purchases of fnancial assets at fair value through proft or loss	(138,845,156)	(109,002,144)
Proceeds from sales and redemptions of fnancial assets at fair value through proft or loss	114,244,014	125,491,631
Net cash from investing activities	13,368,735	50,876,396
Cash fows used in fnancing activities
Dividends paid	(22,668,212)	(22,656,220)
Proceeds from loan fnancing under repurchase agreement	4,249,681	—
Interest paid on repurchase agreement	(1,280,864)	(1,076,951)
Net cash used in fnancing activities	(19,699,395)	(23,733,171)
Net (decrease)/increase in cash and cash equivalents	(16,616,350)	26,161,940
Cash and cash equivalents at the beginning of the year	37,087,141	10,925,201
Cash and cash equivalents at the end of the year	20,470,791	37,087,141

The Notes on pages 32 to 54 form part of these audited financial statements.

32 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2018

1. REPORTING ENTITY

Information regarding the Company and its activities is provided in the Corporate Summary on pages 55 and 56.

The Directors have chosen not to present quarterly financial statements nor interim management statements. Semi-annual unaudited condensed interim financial statements are prepared in addition to annual audited financial statements.

2. BASIS OF PREPARATION

A) STATEMENT OF GOING CONCERN

The Directors have considered the state of financial market conditions at the year end date and subsequently and have concluded that any reasonably foreseeable adverse future investment performance would not have a material impact on the Company’s ability to meet its liabilities as they fall due. After making appropriate enquiries, the Directors are therefore of the opinion that the Company remains a going concern and are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company’s financial statements.

B) STATEMENT OF COMPLIANCE

These financial statements comply with the Companies (Guernsey) Law, 2008 (as amended) and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee and applicable law.

New accounting standards, amendments to existing standards and/or new interpretations of existing standards (separately or together,

“New Accounting Requirements”)

The Directors have assessed the impact, or potential impact, of all New Accounting Requirements. In the opinion of the Directors, other than those listed below, there were no mandatory New Accounting Requirements applicable in the current year that had any material effect on the reported performance, financial position or disclosures of the Company. The Company did not early adopt any New Accounting Requirements during the year that were not mandatory. In the Directors’ opinion, there were no non-mandatory New Accounting Requirements that, if adopted, would have had any material effect on the reported performance, financial position or disclosures of the Company. Consequently, no other mandatory New Accounting Requirements are listed.

IAS 7, Statement of Cash Flows (amendments), effective for annual periods beginning on or after 1 January 2017

IAS 7 has been amended to improve disclosure on an entity’s financial liabilities. The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. One way to meet this new disclosure requirement is to provide a reconciliation between opening and closing balances for liabilities arising from financing activities. See Note 12.

Non-mandatory New Accounting Requirements not yet adopted

The Company has not early adopted any New Accounting Requirements that are not mandatory except for IFRS 9, which was adopted for the year ended 31 July 2014 and has continued to be applied subsequently. All other non-mandatory New Accounting Requirements are either not yet permitted to be adopted, or would have no material effect on the reported performance, financial position or disclosures of the Company and consequently have neither been adopted nor listed.

C) BASIS OF MEASUREMENT

These financial statements have been prepared on a historical cost basis except for the revaluation of financial instruments classified or designated at fair value through profit or loss. The methods used to measure fair value are further disclosed in Note 4.

D) FUNCTIONAL AND PRESENTATIONAL CURRENCY

These financial statements are presented in euro (rounded to the nearest whole euro), which is the Company’s functional and presentational currency. In the Directors’ opinion, the euro is the Company’s functional currency as the Company has issued its share capital denominated in euro and the Company partially hedges the projected cash flows from its US dollar investments such that its principal exposure is to the euro.

E) USE OF ESTIMATES AND JUDGEMENTS

The preparation of financial statements in accordance with IFRS requires the Board to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on a semi-annual basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following:

• @ Note 4 – Determination of fair values; and

• @ Note 19 – Financial risk management.

F) PRESENTATION OF ASSETS AND LIABILITIES IN THE STATEMENT OF FINANCIAL POSITION

Assets and liabilities are presented in order of increasing liquidity.

annual report and accounts 2018 VOLTA FINANCE LIMITED 33

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied by the Company as set out below have been applied consistently to all periods presented in these financial statements.

A) FOREIGN CURRENCIES

Transactions in foreign currencies are initially translated at the foreign currency exchange rate ruling at the date of the transaction. Monetary assets and monetary liabilities denominated in foreign currencies are retranslated to euro at the foreign currency closing exchange rate ruling at the reporting date.

Foreign currency exchange differences arising on retranslation of monetary items are recognised in the income statement under the heading of “Net foreign exchange gain/(loss), including net gain/(loss) on foreign exchange derivatives, but excluding net foreign exchange gains/(losses) on financial assets at fair value through profit or loss”.

For the purposes of foreign currency retranslation, all of the Company’s investments are considered to represent monetary items as all such investments are considered to be readily convertible into money, or money’s worth.

B) FINANCIAL INSTRUMENTS

Recognition

Financial assets and financial liabilities are initially recognised in the Company’s Statement of Financial Position when the Company becomes party to the contractual provisions of a given instrument. Routine purchases and sales of financial instruments are recognised on the trade date. Gains and losses are recognised from that date. Interest accrued as at the date of acquisition is included within the cost of an investment and interest accrued as at the date of sale is included within the sale proceeds for an investment.

Derecognition

Financial assets are derecognised when the contractual rights to cash flows from the assets expire or the Company transfers the financial assets and substantially all of the risks and rewards of ownership have been transferred. Financial liabilities are derecognised when the liabilities are extinguished.

Classification and measurement

The Company classifies its financial assets and financial liabilities into categories in accordance with IFRS 9.

Financial assets at fair value through profit or loss

While the Company holds the majority of its investments for long periods in order to collect the contractual cash flows arising therefrom, it will not necessarily hold its investments until maturity. Instead the Company will sell such investments if other investments with better risk/ reward profiles are identified. In addition, debt investments may be purchased at a significant discount or premium to par. Furthermore, the Company reports the Estimated NAV and GAV of its investment portfolio to its investors on a monthly basis. Therefore, in the opinion of the Directors, the Company’s business model as defined by IFRS 9 is to manage its investments on a fair value basis. Consequently, the Company is required to classify its investments as financial assets at fair value through profit or loss. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein are recognised in profit or loss.

Derivative financial instruments – financial assets and financial liabilities at fair value through profit or loss

The Company holds derivative financial instruments to minimise its exposure to foreign exchange risks and from time to time may also hold derivative financial instruments to manage its exposure to interest rate risks or for economic leveraging. Derivatives are classified as financial assets or financial liabilities (as applicable) at fair value through profit or loss and are initially recognised at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognised in profit or loss. The fair values of derivative transactions are measured at their market prices at the reporting date.

Loan financing received under repurchase agreement

The Company has entered into a repurchase agreement (“Repo”) with Société Générale (“SG”) under the terms of which SG provided the Company with finance secured against a portfolio of USD CLO Debt securities. The scheduled repayment date is 15 December 2022. However, the Repo may be terminated by either party with repayment becoming due within one year. The finance proceeds received are classified as a financial liability at amortised cost and presented within current liabilities.

Collateral delivered under repurchase agreement

The Company delivered a portfolio of USD CLO Debt securities to SG as collateral under the Repo. As the Company is obliged to repurchase these securities in the future at a predetermined price that was set when the Company entered into the Repo, such securities continue to be classified as financial assets at fair value through profit or loss held by the Company and are presented in the Statement of Financial Position in the same way as all other investments held by the Company. In addition, as collateral securities may be substituted at any time, such securities continue to be valued in the same way that they would be if they were to be held outright by the Company, with no adjustment for the fact that they are held as collateral under the Repo.

34 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

3. SIGNIFICANT ACCOUNTING POLICIES CONTINUED

C) SHARE CAPITAL

Ordinary shares, Class B ordinary share and Class C ordinary shares (together the “Ordinary Shares”) The Company’s Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares and share options are recognised as a deduction in equity and are charged to the share premium account. The initial set-up costs of the Company were charged to the share premium account.

D) NET GAIN/LOSS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The net gain/loss on financial assets at fair value through profit or loss comprises interest income on funds invested, dividend income, net realised gains and/or losses on disposal of financial assets, net positive and/or negative changes in the fair value of financial assets at fair value through profit or loss and foreign exchange retranslation gains and/or losses.

The net realised gains/losses on financial assets at fair value through profit or loss are calculated as the difference between the total sale or redemption proceeds received, including accrued interest if applicable, and the fair value of the relevant financial asset as at the beginning of the financial year or its cost including accrued interest if purchased during the financial year.

Interest income is recognised on the due date of such income. Dividend income is recognised in the income statement on the date the Company’s right to receive payments is established, which is usually the ex-dividend date.

E) EARNINGS PER SHARE

The Company presents basic and diluted earnings per share (“EPS”) data for its Ordinary Shares. Basic and diluted EPS is calculated by dividing the profit or loss attributable to Ordinary Shareholders by the weighted average number of Ordinary Shares outstanding during the period.

F) TAXATION

The Company is classified as exempt for taxation purposes under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 (as amended) and as such incurs a flat fee (presently GBP 1,200 per annum). No other taxes were incurred in Guernsey during the period.

G) DIVIDENDS PAYABLE

Dividends payable on the Company’s shares are recognised in the Statement of Changes in Shareholders’ Equity when declared by the Directors or, where applicable, when approved by the Shareholders. During the financial year, the Directors considered payment of a dividend on a quarterly basis, having regard to various considerations, including the financial position of the Company. 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).

H) OFFSETTING

Financial assets and liabilities are offset and the net amount is reported within assets and liabilities where there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

I) SEGMENT REPORTING

The Board has considered the requirements of IFRS 8, “Operating Segments”. The Board has delegated the day-to-day implementation of the Company’s investment strategy to its Investment Manager, giving the Investment Manager full authority to act on behalf of the Company in its capacity as Investment Manager, including the authority to purchase and sell securities and other investments and to carry out other actions as appropriate to give effect thereto. However, the Board retains full responsibility for ensuring that the Investment Manager adheres to its mandate and may also modify the definition of what constitutes a target asset class from time to time, provided that the cash flows directly or indirectly supporting any new target asset class are derived principally from underlying assets. Moreover, the Board is fully responsible for the appointment and/or removal of the Investment Manager.

In the Board’s opinion the Company is engaged in a single segment of business, being investment in a diversified portfolio of structured finance assets.

J) SHARE-BASED PAYMENT TRANSACTIONS

Directors receive 30% of their fees in respect of any period in the form of newly issued shares. The share-based payment awards vest immediately as the Directors are not required to satisfy a specified vesting period before becoming unconditionally entitled to the instruments granted. Effective from 1 February 2017, the fair value of equity-settled share-based payment awards is based on the most recently available Estimated NAV as at the date of issuance. Prior to this date, the fair value of equity-settled share-based payment awards was based on the average closing share price for the 60 Euronext Amsterdam trading days preceding the date of issuance. These newly issued shares are recognised as a Directors’ fee, with a corresponding increase in equity.

annual report and accounts 2018 VOLTA FINANCE LIMITED 35

4. DETERMINATION OF FAIR VALUES

A number of the Company’s accounting policies and disclosures require the determination of fair values for financial assets which have been determined based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in Note 19.

Where securities have been purchased less than one month prior to the relevant reporting date and up-to-date market prices are otherwise unavailable, such securities will be valued at cost plus accrued interest, if applicable. The valuation methodologies applied to the Company’s financial assets other than recently purchased securities for which up-to-date market prices are unavailable are as follows:

• @ CLO Equity securities are valued using non-binding quoted market prices from a third party such as the arranging bank or other market participants.

• @ CLO Debt securities are valued using prices obtained from an independent pricing source, PricingDirect. The prices obtained from PricingDirect are derived from observed traded prices where these are available, but may be based upon non-binding quoted prices received by PricingDirect from arranging banks or other market participants, or a combination thereof, where observed traded prices are unavailable.

• @ Fund investments and the CMV are valued using the NAV provided by the underlying fund administrator.

• @ Warehouse transactions are valued at the lower of: (i) the principal amount invested plus accrued income net of financing costs; and (ii) the mark-to-market value of the relevant proportion of the underlying portfolio, taking into account the buffer provided by the gross arranger fee compared to the net arranger fee commonly paid in the market, plus accrued income net of financing costs.

• @ All other investments are valued on a mark-to-model basis using discounted projected cash flow valuation.

Regarding non-binding quoted prices, it is likely that the arranging bank or market participant determines the valuation based on pricing models, which may or may not produce values that correspond to the prices that the Company could obtain if it sought to liquidate such positions. Such valuations generally involve subjective judgements on key model inputs, particularly default and recovery rates, and may not be uniform. Banks and other market participants may be unwilling to disclose all or any of the key model inputs or discount rates that have been used to produce such valuations and it is currently standard market practice to withhold such information. In such circumstances, the valuation continues to be sourced from such arranging bank, or other market participant, despite the lack of information on valuation assumptions.

The Investment Manager reviews the market prices received from third parties for reasonableness against its own valuation models and may adjust the prices where such prices are not considered to represent a reliable estimation of fair value. The Investment Manager’s fair value calculations for the residual and debt tranche investments in securitisation vehicles are sensitive to the following key model inputs: default rates; recovery rates; and prepayment rates. The Investment Manager’s initial model assumptions are reviewed on a regular basis with reference to both current and projected data. In the case of a material change in the actual key model inputs, the model assumptions will be adjusted accordingly. The discount rate used by the Investment Manager when reviewing the fair value of the Company’s portfolio is subject to similar review and adjustment in light of actual experience.

For certain investments targeted by the Company, the secondary trading market may be illiquid or may sometimes become illiquid. As a result, at such times there may be no regularly reported market prices for these investments. In addition, there may not be an agreed industry standard methodology for valuing the investments (e.g. in the case of residual income positions of asset-backed securitisations). In the absence of an active market for an investment and where a financial asset does not involve an arranging bank, or another market participant that is willing to provide valuations on a monthly basis, or if an arranging bank is unwilling to provide valuations, a mark-to- model approach has been adopted by the Investment Manager to determine the valuation. Such pricing models generally involve a number of valuation assumptions, many of which are based on subjective judgements. Key model inputs include (but are not limited to): asset spreads; expected defaults; expected recovery rates; and the price of uncertainty or liquidity through the interest rate at which expected cash flows are discounted. These inputs are derived by reference to a variety of market sources. The method of valuation depends on the nature of the asset.

An independent third party has been engaged by the Board to review the valuations and/or valuation assumptions for CLO Debt and CLO Equity tranches, which in aggregate represent a majority of the Company’s investment portfolio as at 31 July 2018 (65.5% of the Company’s GAV) (31 July 2017: 64.8%), and has concluded that they were fair and reasonable.

Volta’s policy is to publish its Estimated NAV on a timely basis in order to provide Shareholders with appropriately up-to-date NAV information. However, the underlying NAVs as at the relevant month-end date for the fund investments and the CMV held by Volta are normally available only after Volta’s Estimated NAV has already been published. Consequently, such investments are valued using the most recently available NAV.

36 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

4. DETERMINATION OF FAIR VALUES CONTINUED

As at the date of publication of its Estimated NAV as at 31 July 2018, approximately 13.6% of Volta’s Estimated NAV comprised investments for which the relevant NAVs as at the month-end date were not yet available and an investment in one subordinated note security for which a fully up-to-date price was not yet available, being as at 30 June 2018 for 11.5% of Volta’s Estimated NAV and as at 31 March 2018 for 2.1% of Volta’s Estimated NAV. Subsequent to the Estimated NAV publication date, fully up-to-date NAV information was received for all such investments except for Crescent European Specialty Lending Fund and the CMV, representing 1.4% and 2.1% of Volta’s NAV respectively, for which NAVs are available only as at each calendar quarter end date, with the latest available NAVs for these investments being as at 30 June 2018 as at the date of approval of these financial statements. Such investments are valued in the Statement of Financial Position using the relevant up-to-date NAV for each investment.

In accordance with Volta’s valuation policy, the Company’s GAV and NAV as at 31 July 2018 were calculated using prices received from PricingDirect or from arranging banks or other market participants for all assets except for those assets noted below:

	% of NAV as at	% of NAV as at
Asset	31 July 2018	31 July 2017	Valuation methodology
SCC BBS – BBS 2013-1, BBS 2015-1,	12.3%	8.6%	Discounted projected cash fow model-based
BBS 2015-3, BBS 2015-4, BBS 2016-1*,			valuation using discount rates within a range of 8.0%
BBS 2017-1, BBS 2017-2, BBS 2017-3*,			to 12.0% (2017: 5.0% to 12.0%), constant default rates
BBS 2017-4*			within a range of 0.2% to 2.4% (2017: 0.5% to 1.4%),
			prepayment rates within a range of 0.0% to 15.0%
			(2017: 0.0% to 10.0%) and recovery rates within a
			range of 50.0% to 60.0% (2017: 50.0% to 64.0%).
Investments in funds – Bank Deleveraging	10.7%	11.9%	Valued using the most recent NAV, or capital account
Opportunity Fund, St Bernard Opportunity			statement where applicable, provided by the respective
Fund, Tennenbaum Opportunities Fund V,			underlying fund administrators. CESLF was valued
Bank Capital Opportunity Fund and Crescent			using the capital account statement as at 30 June 2018
European Specialty Lending Fund (“CESLF”)			(as such statements for CESLF are produced only
			quarterly), as adjusted for any cash fows received/paid
			between that date and 31 July 2018 in respect of
			distributions/calls respectively.
Recently purchased assets	3.7%	3.7%	Being purchased within less than one month of the
			relevant reporting date, these assets were valued
			at cost.
US and European CLO	3.5%	4.9%	Warehouse transactions are valued at the lower of:
Warehouse transactions			(i) the principal amount invested plus accrued income
			net of fnancing costs; and (ii) the mark-to-market value of
			the relevant proportion of the underlying portfolio, taking
			into account the buffer provided by the gross arranger
			fee compared to the net arranger fee commonly paid in
			the market, plus accrued income net of fnancing costs.
ABS Residual – SANCF* and	2.9%	2.1%	Discounted projected cash fow model-based valuation
Fintake European Leasing DAC*			using a discount rate of 10.9% (2017: 11.0%) for SANCF
			and 9.0% for Fintake European Leasing DAC.
CMV	2.0%	1.0%	Valued using the capital account statement as at
			30 June 2018 provided by the underlying administrator
			(as such statements are produced only quarterly),
			as adjusted for any cash fows received/paid between
			that date and 31 July 2018 in respect of distributions/
			calls respectively.
Total as a percentage of NAV	35.1%	32.2%

• The investments in SANCF, Fintake European Leasing DAC, BBS 2013-1, BBS 2015-1, BBS 2015-3, BBS 2015-4, BBS 2016-1, BBS 2017-1, BBS 2017-2, BBS 2017-3 and BBS 2017-4 are valued at the lower of the result from the discounted projected cash flow and par value plus accrued interest.

annual report and accounts 2018 VOLTA FINANCE LIMITED 37

5. PUBLISHED ESTIMATED NAV RECONCILIATION AND NAV PERFORMANCE ANALYSIS

The key measure used by the Board to assess the Company’s performance is the monthly Estimated NAV, which is prepared on a monthly basis together with the GAV by the Administrator. The published Estimated NAV includes: all of the assets in the Company’s portfolio revalued to the month-end fair value, as adjusted for any amounts due to/from brokers/counterparties; all of the Company’s cash except for the balances that are held on the Company’s accounts at Royal Bank of Scotland International (“RBSI”), which are currently maintained in order to facilitate the efficient payment of the Company’s operating expenses and which are normally very small balances (it should be noted that the Company’s accounts at RBSI will be closed shortly after the appointment of BNP as Administrator and operating expenses will, in future, be settled directly from the Company’s balances held at BNP); all open derivative positions revalued to the month-end fair value, net of any margin amounts paid or received; a deduction for the liability due under the Repo, including accrued interest thereon; and an estimate of the amount payable as at the month end to the Investment Manager with respect to Management Fees and, if applicable, Performance Fees, but excludes the Company’s other liabilities unless such liabilities are considered to be significant. The published GAV includes all of the foregoing except for the deductions for the liability due under the Repo and any accrued interest thereon and also excludes the deduction for the liability due to the Investment Manager. The Estimated NAV and the GAV are published monthly by the Company. The table below shows a reconciliation between the Estimated NAV used by the Board and published as at 31 July 2018 and that contained in these financial statements.

31 July 2018 € 31 July 2017 €	31 July 2018 € 31 July 2017 €	31 July 2018 € 31 July 2017 €	31 July 2018 € 31 July 2017 €	31 July 2018 € 31 July 2017 €
Published Estimated NAV 305,517,745 305,126,814 Adjustments: – Cash balances held at RBSI and other cash adjustment 174,816 215,319 – Prepayments of operating expenses 34,022 10,781 – Accrued income adjustment 77,651 — – Accruals for expenses not taken into account in the published Estimated NAV (279,896) (293,817) – Amendments to valuations used in the published Estimated NAV 32,298 316,062 – Adjustments to valuations of investments to use the up-to-date underlying NAVs 141,888 129,419
NAV per Statement of Financial Position 305,698,524 305,504,578
On a monthly basis, in addition to the published Estimated NAV, the Investment Manager now publishes an initial estimate of Volta’s Estimated NAV (the “Early Estimated NAV”) on or around eight days following the relevant month-end date. The frst such Early Estimated NAV was published in March 2017 with respect to the February 2017 Estimated NAV. The Early Estimated NAV is published for information purposes only in order to provide investors with more timely information. The following table represents an analysis of NAV performance for the years ended 31 July 2018 and 31 July 2017: 1 August 2017 to 31 July 2018 € 1 August 2016 to 31 July 2017 € NAV as at the beginning of the year 305,504,578 289,280,097 Coupons and dividends income 38,485,667 33,170,689 Net (loss)/gain on sales of fnancial assets at fair value through proft and loss (29,130) 3,079,254 Unrealised movement in fair value of fnancial assets at fair value through proft and loss (5,725,739) 4,650,034 Net gain on fnancial assets at fair value through proft and loss 32,730,798 40,899,977 Other operating income and fnancing charges (4,281,625) 4,769,801 Operating expenditure (5,737,608) (6,934,690~~)~~ Proft and total comprehensive income 22,711,565 38,735,088 Issue of Ordinary Shares to Directors in respect of Directors’ fees 150,593 145,613 Dividends paid in cash (22,668,212) (22,656,220~~)~~
NAV as at the beginning of the year Coupons and dividends income Net (loss)/gain on sales of fnancial assets at fair value through proft and loss Unrealised movement in fair value of fnancial assets at fair value through proft and loss Net gain on fnancial assets at fair value through proft and loss Other operating income and fnancing charges Operating expenditure Proft and total comprehensive income Issue of Ordinary Shares to Directors in respect of Directors’ fees Dividends paid in cash	38,485,667 (29,130) (5,725,739)	305,504,578	33,170,689 3,079,254 4,650,034
		32,730,798 (4,281,625) (5,737,608)		40,899,977 4,769,801 (6,934,690~~)~~
		22,711,565 150,593 (22,668,212)		38,735,088 145,613 (22,656,220~~)~~
NAV as at the end of the year		305,698,524		305,504,578

38 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

5. PUBLISHED ESTIMATED NAV RECONCILIATION AND NAV PERFORMANCE ANALYSIS CONTINUED

The following table represents the net gain on financial assets at fair value through profit and loss by asset class for the year ended 31 July 2018:

31 July 2018:
				Net gain on
				fnancial assets
	Net (losses)/gains	Unrealised		at fair valu~~e~~
	on sales and	movement	Coupons and	through proft
	redemptions	in fair value	dividends	and los~~s~~
	€	€	€	~~€~~
CLO – USD Equity	(475,680)	(3,898,510)	7,650,270	3,276,080
CLO – EUR Equity	(38,130)	(4,279,854)	9,036,172	4,718,188
CLO – USD Debt	533,638	4,451,864	10,167,585	15,153,087
CLO – EUR Debt	(37,422)	(154,850)	513,949	321,677
CLO – CMV	—	148,427	494,605	643,032
CLO Warehouse	189,458	210,842	1,236,325	1,636,625
SCC BBS	(180,285)	(1,473,185)	6,491,396	4,837,926
CCC Equity	(20,709)	(213,972)	725,905	491,224
ABS Residual	—	(1,095,755)	2,010,203	914,448
ABS Debt	—	579,254	159,257	738,511
	(29,130)	(5,725,739)	38,485,667	32,730,798

The following table represents the net gain on financial assets at fair value through profit and loss by asset class for the year ended 31 July 2017:

31 July 2017:
				Net gain/(losses)
	Net gains/(losses)	Unrealised		on fnancial assets
	on sales and	movement	Coupons and	at fair value through
	redemptions	in fair value	dividends	proft and loss
	€	€	€	€
CLO – USD Equity	—	(883,986)	7,581,609	6,697,623
CLO – EUR Equity	336,200	685,341	6,768,197	7,789,738
CLO – USD Debt	2,500,367	4,877,275	9,476,135	16,853,777
CLO – EUR Debt	2,033,648	1,143,383	1,206,514	4,383,545
CLO – CMV	(259,079)	(334,265)	115,665	(477,679)
CLO Warehouse	—	(1,000)	490,677	489,677
SCC BBS	—	(1,902,679)	5,502,828	3,600,149
CCC Equity	(1,087,413)	1,177,034	603,090	692,711
CCC Debt	444,995	—	38,398	483,393
ABS Residual	(1,061,506)	(17,047)	1,222,340	143,787
ABS Debt	172,042	(94,022)	165,236	243,256
	3,079,254	4,650,034	33,170,689	40,899,977

6. OPERATING SEGMENTS

The Board has considered the requirements of IFRS 8, “Operating Segments”. The Board is responsible for the determination of the Company’s investment objectives and investment guidelines and has overall responsibility for overseeing the Company’s activities, including oversight of the activities of the Investment Manager. In addition, the Board is fully responsible for the appointment and/or removal of the Investment Manager. In the Board’s opinion, the Company is engaged in a single segment of business, being investment in a diversified portfolio of structured finance assets.

The Company is domiciled in Guernsey. However, none of the Company’s investments are domiciled in Guernsey.

The Company does not hold any non-current assets.

The Company did not hold any investments that individually represented more than 10% of the Company’s income.

7. DIRECTORS’ REMUNERATION AND EXPENSES

7. DIRECTORS’ REMUNERATION AND EXPENSES
	1 August 2017	1 August 2016
	to 31 July 2018	to 31 July 2017
	€	€
Directors’ fees (cash element)	351,050	308,673
Directors’ fees (equity element, settled during the year)	112,838	94,613
Directors’ fees (equity element, settled after the year end)	37,612	37,757
Directors’ expenses	7,104	13,547
	508,604	454,590

annual report and accounts 2018 VOLTA FINANCE LIMITED 39

8. COMPANY SECRETARIAL, ADMINISTRATION, ACCOUNTANCY AND PORTFOLIO ADMINISTRATION FEES

Sanne acted as Company Secretary, Administrator and Portfolio Administrator during the financial year and up until the approval of these financial statements. Company secretarial, administration, accountancy and portfolio administration fees were incurred and billed on a time cost basis in accordance with Sanne’s standard fee scales, subject to an annual cap of GBP 220,000 (2017: GBP 220,000) with respect to the activities and responsibilities as set out in the Administration, Secretarial and Portfolio Administration Agreement. Additional administration fees totalling €41,149 (2017: €11,946) were incurred with respect to matters outside the scope of the Administration, Secretarial and Portfolio Administration Agreement during the current year.

BNP will be appointed as Company Secretary and Administrator on 31 October 2018.

9. AUDIT, AUDIT RELATED AND NON-AUDIT RELATED FEES

The audit fee for the financial year ended 31 July 2018 was €95,800 (2017: €94,655). There were no non-audit services provided to the Company by the Auditor or its affiliates during the year other than the interim review completed at a fee of €26,356 (2017: €26,361). In the prior year, the Auditor or its affiliates provided professional tax services at a fee of €1,080 and other non-audit services at a fee of €5,858.

10. DIVIDENDS

The following dividends were declared and paid during the year ended 31 July 2018 and subsequently and during the prior year:

			Dividend	Dividend
			per share
			€
Dividend paid on	27	September 2018	0.15
Dividend paid on	28	June 2018	0.16
Dividend paid on	29	March 2018	0.15
Dividend paid on	21	December 2017	0.16
Dividend paid on	28	September 2017	0.15
Dividend paid on	29	June 2017	0.16
Dividend paid on	30	March 2017	0.15
Dividend paid on	22	December 2016	0.16
Dividend paid on	27	September 2016	0.15

The Directors consider recommendation of a dividend having regard to various considerations, including the financial position of the Company and the solvency test as required by the Companies (Guernsey) Law 2008 (as amended). Subject to compliance with Section 304 of that law, the Board may at any time declare and pay dividends.

11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial instruments at fair value through profit or loss are measured at fair value and changes therein are recognised in profit or loss.

	1 August 2017	1 August 2016	1 August 2016
	to 31 July 2018	to 31 July 2017
	€	€
Fair value brought forward	321,283,914	324,141,161
Purchases	136,609,671	111,374,678
Sale and redemption proceeds	(126,435,557)	(121,961,213)
Net realised and unrealised movement in fair value, including accrued income
and dividends receivable that are included in the investment fair values	(5,754,869)	7,729,288
Fair value carried forward	325,703,159	321,283,914
	1 August 2017	1 August 2016
	to 31 July 2018	to 31 July 201~~7~~
	€	~~€~~
Realised gains on sales of fnancial assets Realised losses on sales of fnancial assets Unrealised gains in fair value of fnancial assets	1,410,265 (1,439,395) 6,662,635	5,586,773 (2,507,519) 15,420,050
Unrealised losses in fair value of fnancial assets	(12,388,374)	(10,770,016)
Net realised and unrealised movement in fair value of investments	(5,754,869)	7,729,288
Investments subject to restrictions due to being pledged as security under the repurchase agreement, as further detailed in		Note 12 below.
	31 July 2018	31 July 2017
	€	€
Pledged assets	75,619,586	68,742,489
Unpledged assets	250,083,573	252,541,425
Fair value carried forward	325,703,159	321,283,914

40 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

12. LOAN FINANCING RECEIVED UNDER REPURCHASE AGREEMENT

	31 July 2018	31 July 2017	31 July 2017
	€	€
Loan fnancing received under repurchase agreement, opening Proceeds received from additional loan fnancing	38,101,500 4,249,681	40,275,000 —
Foreign exchange movement	363,819	(2,173,500)
Loan fnancing received under repurchase agreement, ending	42,715,000	38,101,500

The Company has entered into a repurchase agreement (“Repo”) under the terms of which the counterparty SG provided the Company with finance through the purchase of a portfolio of USD CLO Debt securities which are subject to repurchase each quarter. Interest is payable on amounts drawn under the Repo at the relevant three-month USD Libor rate plus a margin of 1.50%. The Company initially drew down $30.0 million on 16 March 2015, then subsequently drew down a further $15.0 million on 18 September 2015 and a further $5.0 million on 15 December 2017.

As at 31 July 2018, the collateral provided by the Company under the Repo comprised USD CLO Debt securities with an aggregate market value of €75.6 million ($88.5 million). As at 31 July 2017, the collateral comprised USD CLO Debt securities with an aggregate market value of €68.7 million ($81.2 million).

The scheduled final repurchase date is 15 December 2022. However, on any business day, either the Company or SG may give notice to terminate the Repo. In such event, the collateral shall be repurchased in the following tranches: one-third after six calendar months; one-third after nine calendar months; and the final third after twelve calendar months. The Company may, at any time, submit a request to SG to substitute any pledged securities with other securities, provided that (i) such proposed securities are acceptable by SG in its sole discretion and (ii) the parties agree on the relevant base individual haircut applicable to such proposed securities.

Interest incurred under the Repo during the financial year totalled €1,351,360 (31 July 2017: €1,105,396) and accrued unpaid interest under the Repo as at 31 July 2018 was €213,901 (as at 31 July 2017: €143,405).

13. DERIVATIVES

Foreign exchange swaps and options are held to hedge some of the currency exposure generated by US dollar assets held by the Company (see Note 19). The hedge has been structured taking into account the fact that derivative positions, such as simple foreign exchange swaps, could cause the Company to require cash to fund margin calls on those positions. Considering this, the Company decided to use foreign exchange call and put options to limit the liquidity risk that could be created in the event of significant margin calls. As a consequence of this limitation, there is no certainty that hedging some of the currency exposure generated by US dollar assets could continue to be performed in the future in case of high volatility in the US dollar/euro cross rate. Foreign exchange derivatives are entered into with Citibank, Merrill Lynch and Crédit Agricole, with a margin requirement being applicable upon revaluation of such transactions. The balance on the margin account is included within the total value of the foreign exchange derivative transactions open as at the year end as presented in the Statement of Financial Position.

During the year, the Investment Manager added to the portfolio a long exposure to US government bonds through US Treasury futures and options, with a margin requirement being applicable upon revaluation of such transactions. Such exposure was limited as at the end of the annual financial period (less than one year of duration) but could be increased in the future if, at some point, the Investment Manager were to believe it would make sense to hedge the macro risk of the portfolio through a long synthetic exposure to government bonds.

As at 31 July 2018, there were four (31 July 2017: eight) forward foreign exchange positions, sixteen (31 July 2017: sixteen) foreign exchange option positions, and two (31 July 2017: two) interest rate derivative positions open.

	31 July 2018	31 July 2017	31 July 2017
	€	€
Revaluation of foreign exchange forward and option positions:
– Citibank	—	(367,965)
– Merrill Lynch	—	171,130
– Crédit Agricole	(3,566,064)	5,190,681
Net margin amount as at the year end:
– Citibank	—	250,000
– Merrill Lynch	—	—
– Crédit Agricole	3,500,000	(4,800,000)
Net carrying value of foreign exchange derivative positions	(66,064)	443,846
Unrealised (loss)/gain on interest rate derivative positions:
– Goldman Sachs	(248,280)	55,56~~5~~
Net margin amount as at the year end:
– Goldman Sachs	1,550,567	198,12~~7~~
Net carrying value of interest rate derivative positions	1,302,287	253,692
Net carrying value of derivative positions	1,236,223	697,538

annual report and accounts 2018 VOLTA FINANCE LIMITED 41

14. TRADE AND OTHER RECEIVABLES

14. TRADE AND OTHER RECEIVABLES
	31 July 2018	31 July 2017
	€	€
Prepayments and other receivables	34,022	102,287
Interest receivable	696,123	180,333
Amounts due from brokers	12,191,543	—
	12,921,688	282,620
15. TRADE AND OTHER PAYABLES
	31 July 2018	31 July 2017
	€	€
Investment Management Fees	2,072,153	2,127,638
Investment Manager Performance Fees	—	1,528,163
Directors’ fees (cash payable)	87,763	88,097
Directors’ fees (shares payable)	37,612	37,756
Amounts due to brokers	9,235,399	11,470,884
Accrued expenses and other payables	271,509	349,192
	11,704,436	15,601,730

16. SHARE CAPITAL
AUTHORISED
	31 July 2018	31 July 2017
	Number of Shares	Number of Shares
Ordinary Shares of no par value each	Unlimited	Unlimited
Class B convertible Ordinary Share of no par value	1	1
Class C non-voting convertible Ordinary Shares of no par value each	Unlimited	Unlimited

With respect to voting rights at general meetings of the Company, the Ordinary Shares and Class B share confer on the holder of such shares the right to one vote for each share held, while the holders of Class C shares do not have the right to vote. Each class of share ranks pari passu with each other with respect to participation in the profits and losses of the Company.

The Class B share is identical in all respects to the Company’s Ordinary Shares, except that it entitles the holder of the Class B share (an affiliate of AXA S.A.) to elect a single Director to the Company’s Board of Directors. At such time as the holdings of the AXA Group investors decline to less than 5% of the Company’s equity capitalisation (with the Class B share and the other issued and outstanding Ordinary Shares and Class C shares taken together), the Class B share shall be converted to an Ordinary Share.

There are no Class C shares currently in issue, with the final remaining Class C shares having been converted into Ordinary Shares on 3 May 2016, and there is currently no mechanism by which any Class C shares can be issued in the future.

ISSUED AND FULLY PAID

ISSUED AND FULLY PAID
	Number of	Number of	Number of	Total number	Warrants:
	Ordinary Shares	Class B shares	Class C shares	of shares	potential number
	in issue	in issue	in issue	in issue	of shares
Balance at 31 July 2016	36,528,548	1	—	36,528,549	3,000,000
Issued to Directors during the year	19,918	—	—	19,918	—
Expiration of warrants	—	—	—	—	(3,000,000)
Balance at 31 July 2017	36,548,466	1	—	36,548,467	—
Issued to Directors during the year	18,170	—	—	18,170	~~—~~
Balance at 31 July 2018	36,566,636	1	—	36,566,637	—

As at 31 July 2018, an aggregate amount of 188,282 (31 July 2017: 170,560) Ordinary Shares had been issued to the current Directors on a quarterly basis in respect of 30% of their fees. A total of 18,170 Ordinary Shares were issued to Directors during the year, which includes 17,722 shares issued to the current Directors and 448 shares issued to a former Director who resigned during the previous financial year ended 31 July 2017. Shares were issued to the Directors in respect of their fees during the year at an Estimated NAV of €8.37, €8.28, €8.32 and €8.18 per share. The warrants expired at nil value on 31 December 2016.

As at 31 July 2018 and 31 July 2017, the Company held no treasury shares.

42 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

17. SHARE PREMIUM ACCOUNT

17 SHARE PREMIUM ACCOUNT
.	Ordinary Shares	Class B share	Class C shares	Total
	€	€	€	€
Balance at 31 July 2016	33,989,102	—	—	33,989,102
Issued to Directors during the year	145,613	—	—	145,613
Expiry of warrants	1,410,000	—	—	1,410,000
Balance at 31 July 2017	35,544,715	—	—	35,544,715
Issued to Directors during the year	150,593	—	—	150,59~~3~~
Balance at 31 July 2018	35,695,308	—	—	35,695,308

The share premium account represents the issue proceeds received from, or value attributed to, the issue of share capital, except for the share premium amount of €285,001,174 arising from the Company’s initial issue of share capital upon its IPO, which was transferred to other distributable reserves on 26 January 2007, following approval by the Royal Court of Guernsey (see Note 18).

The reserve balance standing to the credit of the warrants account was transferred to the share premium account upon expiry of the warrants at nil value on 31 December 2016.

18. RESERVES

18 RESERVES
.		Other
	Accumulated	distributable
	gain	reserves
	€	€
At 31 July 2016	107,628,039	146,252,956
Total comprehensive income for the year	38,735,088	—
Dividends paid in cash	—	(22,656,220)
At 31 July 2017	146,363,127	123,596,736
Total comprehensive income for the year	22,711,565	—
Dividends paid in cash	—	(22,668,212~~)~~
At 31 July 2018	169,074,692	100,928,524

The accumulated gain reserve represents all profits and losses recognised through the Statement of Comprehensive Income to date.

Other distributable reserves represent the balance transferred from the share premium account on 26 January 2007, less dividends paid. The initial purpose of this reserve was to create a reserve from which dividend payments could be paid under the law prevailing at that time and the Company’s Articles. However, the Companies (Guernsey) Law 2008 (as amended) became effective from 1 July 2008. Under this law, dividends may now be paid from any source, provided that a company satisfies the relevant solvency test as prescribed under the law and the Directors make the appropriate solvency declaration.

19. FINANCIAL RISK MANAGEMENT

The Board of Directors has established a Risk Committee to which it has delegated its responsibilities for reviewing and monitoring the effectiveness of the Company’s risk management and internal control procedures pertaining to the investment portfolio. Nevertheless, the Board retains overall responsibility for the Risk Committee’s activities and for the establishment and oversight of the Company’s risk management framework. The Risk Committee’s responsibilities and activities are described in the Risk Committee Report on page 12.

MARKET RISK

Market risk is the risk of changes in market prices, such as foreign exchange rates, interest rates, credit spreads and equity prices, affecting the Company’s income and/or the value of its holdings in financial instruments.

The Company’s exposure to market risk is reflected through movements in the value of its investments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising return. The Company’s strategy for the management of market risk is driven by its investment objective to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends by investing in a variety of assets selected for the purpose of generating overall stable and predictable cash flows. The Company’s exposure to market risk is managed on a daily basis by the Investment Manager.

The Company seeks to mitigate market risk by pursuing where possible a diversified investment strategy involving direct and indirect investments in a number of asset types that naturally tend to involve a diversification of underlying market risk. The Company uses derivatives to manage its exposure to foreign currency risks and may also use derivatives from time to time to manage its exposure to interest rate and credit risks. The instruments used include interest rate swaps, forward contracts, futures and options. The Company does not apply hedge accounting. The Company’s market positions are reviewed on a quarterly basis by the Board of Directors.

annual report and accounts 2018 VOLTA FINANCE LIMITED 43

19. FINANCIAL RISK MANAGEMENT CONTINUED

FAIR VALUE ESTIMATION

The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• @ Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Investments, whose values are based on quoted market prices in active markets and are therefore classified within Level 1, include active listed equities. The quoted price for these instruments is not adjusted;

• @ Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information; and

• @ Level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes “observable” requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

The following tables analyse, within the fair value hierarchy, the Company’s financial assets and liabilities (by class, excluding cash and cash equivalents, trade and other receivables and trade and other payables) measured at fair value at 31 July 2018 and 31 July 2017:

	31 July 2018 Level 1 € Level 2 € Level 3 € Total €
Financial assets at fair value through proft or loss: – Securities Financial assets at fair value through proft or loss: – Derivatives Financial liabilities at fair value through proft or loss: – Derivatives	— — 325,703,159 325,703,159 1,302,287 — — 1,302,287 — (66,064) — (66,064)
	1,302,287 (66,064) 325,703,159 326,939,382
	31 July 2017 Level 1 € Level 2 € Level 3 € Total €
Financial assets at fair value through proft or loss: – Securities Financial assets at fair value through proft or loss: – Derivatives	— — 321,283,914 321,283,914 253,692 443,846 — 697,538
	253,692 443,846 321,283,914 321,981,452

All of the Company’s investments are classified within Level 3 as they have significant unobservable inputs and they may trade infrequently. The Company has determined the fair values of its investments as described in Note 4. The sources of these fair values are not considered to be publicly available information. The Company’s foreign exchange derivatives held as at the reporting date (open foreign exchange swaps and options positions) are classified within Level 2 as their prices are not publicly available but are derived from information that is publicly available. The Company’s interest rate derivatives held as at the reporting date (open futures and options positions) are classified within Level 1 as their prices are publicly available.

The following table represents the movement in Level 3 instruments for the year ended 31 July 2018:

	€	€
Fair value at 1 August 2017	321,283,914
Purchases	136,609,671
Sale and redemption proceeds	(126,435,557)
Net losses for the year on assets sold excluding interest and coupons received	(29,130)
Unrealised movement in fair value including accrued interest and coupons	(5,725,739)
Fair value at 31 July 2018	325,703,159

44 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED FAIR VALUE ESTIMATION CONTINUED

The following table represents the movement in Level 3 instruments for the year ended 31 July 2017:

	€	€
Fair value at 1 August 2016	324,141,161
Purchases	111,374,678
Sale and redemption proceeds	(121,961,213)
Net gains for the year on assets sold excluding interest and coupons received	3,079,254
Unrealised movement in fair value including accrued interest and coupons	4,650,034
Fair value at 31 July 2017	321,283,914

The appropriate fair value classification level is reviewed for each of the Company’s investments at each year end. Any transfers into or out of a particular fair value classification level are recognised at the beginning of the year following such re-classification at the fair value as at the date of re-classification. There were no such transfers between fair value classification levels during the year or during the prior year. All of the unrealised movements in fair value disclosed in the tables above relate to investments held as at 31 July 2018 and 31 July 2017, respectively.

SENSITIVITY ANALYSIS

In the opinion of the Directors, the following analysis gives an approximation of the sensitivity of the different asset classes to market risk as at 31 July 2018 that is reasonable considering the current market environment and the nature of the main risks underlying the Company’s assets. This sensitivity analysis presents an approximation of the potential effects of events that could have been reasonably expected to occur as at the reporting date. Where valuations were based upon prices received from arranging banks or other market participants, or on a NAV provided by the underlying fund administrator, the sensitivity analyses are not necessarily based upon the assumptions used by such sources as these are not made available to the Company, as explained in Note 4.

The sensitivity of the fair values of most of the assets held by the Company to the traditional risk variables is not the most relevant in the current environment. For example, the sensitivity to interest rates is interdependent with other, more significant, market variables. This analysis reflects the sensitivity to some of the most relevant determinants of the risks associated with each asset class. While every effort has been made to assess the pertinent risk factors, there is no assurance that all the risk factors have been considered. Other risk factors could become large determinants of the fair value.

CLO tranches

Two of the main risks associated with CLO tranches are the occurrence of defaults and prepayments in the underlying portfolio. The Directors believe it is reasonable to test the sensitivity of these assets to the following reasonably plausible changes to the base case scenarios, which have been derived from historically observed default rates and prepayment rates:

• (i) The base case scenario is to project the rate of occurrence of defaults at the underlying loan portfolio level at circa 2.0% per year which was assumed to approximate the market consensus projected default rate as at 31 July 2018 (base case scenario as at 31 July 2017: 2.8% per year). A reasonably plausible change in the default rate is considered to be an increase to 1.5 times the base case default rate (a decrease to 0.5 times the base case default rate would have approximately an equal and opposite impact, so this is not presented in the table below). For further information, the projected impact of a change in the default rate to 2.0 times the base case default rate is also presented in the table below.

• (ii) The rate of occurrence of prepayments is measured by the constant prepayment rate (“CPR”) at the underlying loan portfolio level. The base case scenario is to project a CPR at circa 30% (2017: 30%) per year for the US and circa 25% (2017: 25%) for Europe. The Directors consider that reasonably plausible changes in the CPR would be a decrease in the CPR of the underlying loan portfolios from 30% to 15% for the US and from 25% to 10% for Europe. The impact of the CPR is approximately linear, so the impact of an opposite test would be likely to result in an equal and opposite impact.

As at 31 July 2018

As at 31 July 2018
Asset class % of GAV	Impact of an increase in default rate to 1.5x base case scenario Impact of an increase in default rate to 2.0x base case scenario Decrease in CPR from 30% to 15% for US and from 25% to 10% for Europe
	Price impact Impact on GAV Price impact Impact on GAV Price impact Impact on GAV
USD CLO Equity 10.4% EUR CLO Equity 14.3% USD CLO Debt 38.7% EUR CLO Debt 2.2%	(6.8%) (0.7%) (21.7%) (2.3%) (2.0%) (0.2%) (10.9%) (1.6%) (25.9%) (3.7%) (3.2%) (0.5%) 0.0% 0.0% (0.2%) (0.1%) 0.0% 0.0% 0.0% 0.0% 0.7% 0.0% 0.0% 0.0%
All CLO tranches 65.6%	(2.3%) (6.1%) (0.7%)

annual report and accounts 2018 VOLTA FINANCE LIMITED 45

19. FINANCIAL RISK MANAGEMENT CONTINUED SENSITIVITY ANALYSIS CONTINUED

As at 31 July 2017

19. FINANCIAL RISK MANAGEMENT CONTINUED SENSITIVITY ANALYSIS CONTINUED As at 31 July 2017
Asset class % of GAV	Impact of an increase in default rate to 1.5x base case scenario Impact of an increase in default rate to 2.0x base case scenario Decrease in CPR from 30% to 15% for US and from 25% to 10% for Europe Price impact Impact on GAV Price impact Impact on GAV Price impact Impact on GAV
USD CLO Equity 11.9% EUR CLO Equity 11.5% USD CLO Debt 38.0% EUR CLO Debt 3.4%	(14.8%) (1.8%) (25.9%) (3.1%) (6.1%) (0.7%) (12.6%) (1.5%) (26.9%) (3.1%) (5.0%) (0.6%) 0.4% 0.2% 0.4% 0.2% 0.4% 0.2% 0.2% 0.0% 0.2% 0.0% 0.4% 0.0% (3.1%) (6.0%) (1.1%)
All CLO tranches 64.8%

As presented above, a reasonably plausible increase in the default rate in the underlying loan portfolios would be likely to have negligible impact on the debt tranches of CLO, but would be detrimental to equity tranches; a decrease in the CPR would likely to have negligible impact on the debt tranches (as principal payment will occur later) and would negatively impact equity tranches as shown above (in such an event excess cash flows to the equity tranches would last longer).

As the CMV is ramping CLO Equities in US and Europe, sensitivity of the CMV position should be inferred from US and European CLO Equity sensitivity analysis.

Synthetic Corporate Credit Bank Balance Sheet transactions

The investments within this asset class (representing 15.0% of the GAV) are first-loss exposures to diversified portfolios of investment grade and sub-investment grade corporate credits. The Directors consider a reasonably plausible change in the default rate to be an increase or decrease to 1.5 times or 0.5 times the historical average default rate. Such an increase in defaults would be likely to lead to a 10.0% decrease in the average prices of these assets, thereby leading to a 1.5% decrease in the GAV. An equal and opposite decrease in defaults as referred to above would be likely to lead to a 10.0% increase in the average prices of these assets, thereby leading to a 1.5% increase in the GAV.

As at 31 July 2018

As at 31 July 2018
Asset class % of GAV	Impact of an increase in default rate to 1.5x historical average Impact of a decrease in default rate to 0.5x historical average Price impact Impact on GAV Price impact Impact on GAV
SCC – BBS 15.0%	(10.0%) (1.5%) 10.0% 1.5% Impact of an increase in default rate to 1.5x historical average Impact of a decrease in default rate to 0.5x historical average Price impact Impact on GAV Price impact Impact on GAV
As at 31 July 2017 Asset class % of GAV
SCC – BBS 13.0%	(12.6%) (1.6%) 12.6% 1.6%

Cash Corporate Credit Equity transactions

As at 31 July 2018, the Company held two investments in this asset class (Tennenbaum Opportunities Fund V and Crescent European Specialty Lending Fund, representing 1.2% and 1.3% of the GAV, respectively) (31 July 2017: Tennenbaum Opportunities Fund V and Crescent European Specialty Lending Fund, representing 1.4% and 1.1% of the GAV, respectively). These assets have exposures to diversified portfolios of investment grade and sub-investment grade corporate credits. The Directors consider that the main risks associated with these assets are the occurrence of defaults in the underlying portfolio and/or the severity of any such defaults.

Tennenbaum Opportunities Fund V has a short remaining life, given that the fund is due to mature during October 2020. More than 60% of its current portfolio comprises unlisted equities while the remainder comprises corporate debt positions. A sensitivity analysis is difficult to model as most of the value may be derived from the exit price the Investment Manager may be able to achieve for the assets. As such, the value of this investment is dependent on default rates and discount rates applied to the corporate debt assets and revenue and EBITDA multiples applied to the equity assets. An increase in default or discount rates may decrease the value of the investment while an increase in revenue and EBITDA multiples may increase the value of the investment.

Crescent European Specialty Lending Fund is now fully drawn down and entered its amortising period. As the largest investment represents circa 5% of its current portfolio, a default of this investment with a 65% recovery rate would lead to a 23 basis points drop in the Company’s GAV.

46 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED SENSITIVITY ANALYSIS CONTINUED

ABS Residual positions

As at 31 July 2018, the Company held two investments in this asset class (Fintake European Leasing DAC and SANCF 2014-1 Class E, representing 1.6% and 0.9% of the GAV, respectively) (31 July 2017: Fintake European Leasing DAC and SANCF 2014-1 Class E, representing 1.0% and 0.8% of the GAV, respectively).

For Fintake European Leasing DAC, the main risk associated with this position is considered to be the level of credit losses in the underlying French leases collateral. No useful sensitivity can be derived yet as this position is still in the ramp-up phase (i.e. it is not yet fully invested).

For SANCF 2014-1 Class E, the main risk associated with this position is considered to be the rate of occurrence of prepayments in the underlying Spanish auto loans collateral. The Directors consider that an increase in the CPR at the underlying portfolio level from 10% to 20% is reasonably plausible and would be likely to decrease the price by 0.25% and decrease the GAV by an insignificant amount. The decrease in the CPR at the underlying portfolio level from 10% to 5% would have no impact on the price as at the end of the year.

ABS Debt positions

As at 31 July 2018, the Company held one investment in this asset class (St Bernard Opportunity Fund) (31 July 2017: one, i.e. St Bernard Opportunity Fund) representing 2.4% of the GAV (31 July 2017: 2.2%).

St Bernard Opportunity Fund is a complex fund and it has not been feasible for the Company to determine a simple stress test that could be implemented. Nevertheless, for the period from the inception of this fund to 31 July 2018, the average annual volatility has been 4.9% for an annualised performance of 11.3% (the respective figures over the last twelve months were volatility of 0.8% for an annual performance of 8.2%). The Investment Manager believes that this gives a reasonable indication of the risk profile of this investment.

VALUATION RISK

The markets for many of the Company’s investments, including residual income positions, are illiquid. Accordingly, many of the Company’s investments are or will be illiquid. In periods of market uncertainty or distress, the markets for the Company’s investments may become increasingly illiquid or even cease to function effectively for a period of time. In addition, investments that the Company may purchase in privately negotiated (also called “over-the-counter” or “OTC”) transactions may not be registered under relevant securities laws or otherwise may not be freely tradable, rendering them less liquid than other investments. Tax or other attributes of securities or loans in which the Company invests may make them attractive to only a limited range of investors. There may also be contractual or other restrictions on transfers of the Company’s investments. As a result of these and other factors, the Company’s ability to vary its portfolio in a timely fashion and to receive a fair price in response to changes in economic and other conditions may be limited and the Company may be forced to hold investments for an indefinite period of time or until their maturity or early redemption.

Furthermore, where the Company acquires investments for which there is not a readily available market, the Company’s ability to obtain reliable information about the resale value of such investments or the risks to which such investments are exposed may be limited. Illiquidity contributes to uncertainty about the values ascribed to investments when NAV determinations are made, which can cause those determinations to vary from amounts that could be realised if the Company were to seek to liquidate its investments. The Company could also face some difficulties when collecting reliable information about the value of its assets if some or all of the participants in the relevant market were to experience significant business difficulties or were to suspend their market activities. This could affect both the timing and the process for assessing the value of the Company’s investments.

Although the Company and its agents are able to refer to reported OTC trading prices and prices from brokers when valuing its investments, for most investments the Company’s pricing sources frequently need to rely on financial pricing models based on assumptions concerning a number of variables, some of which involve subjective judgements and may not be uniform.

If the Company were unable to collect reliable information about the value of its assets the Investment Manager has agreed to provide a monthly valuation based on pricing models. The Company engages an independent third party to review semi-annually the main assumptions employed by the Investment Manager and to report the fairness and reasonableness of those assumptions and valuations to the Portfolio Administrator and the Company.

INTEREST RATE RISK

Changes in interest rates can affect the Company’s net interest income, which is the difference between the interest income earned on interest earning investments and the interest expense incurred on interest bearing liabilities. Changes in the level of interest rates can also affect, among other things, the Company’s ability to acquire loans and investments, the value of its investments and the Company’s ability to realise gains from the settlement of such assets.

The CLO Equity tranches held by the Company would be negatively impacted even by a modest increase in Euribor rates as these assets currently benefit from the existence of Euribor floors attached to underlying loans. Conversely, any increase in such interest rates would benefit the Company’s floating rate assets.

The Company may enter into hedging transactions for the purposes of efficient portfolio management, where appropriate, to protect its investment portfolio from interest rate fluctuations. These instruments may be used to hedge as much of the interest rate risk as the Investment Manager determines is in the best interests of the Company, given the cost of such hedges. The Company may bear a level of interest rate risk that could otherwise be hedged when the Investment Manager believes, based on all relevant facts, that bearing such risk is advisable. During the year, the Investment Manager used US interest rate derivative positions with Goldman Sachs to manage US interest rate exposures.

annual report and accounts 2018 VOLTA FINANCE LIMITED 47

19. FINANCIAL RISK MANAGEMENT CONTINUED

INTEREST RATE RISK CONTINUED

Interest rate risk is analysed by the Investment Manager on a daily basis and is communicated to and monitored by the Board through the quarterly business report.

It should be noted that the Company does not present an effective interest figure for its investments held and therefore does not calculate the effective interest rates applicable to its investments. In the Directors’ opinion, it is not feasible to accurately estimate the effective interest rates applicable to many of the Company’s financial assets. In the Directors’ opinion, market interest rate risk on the Company’s investments is not considered to be material when compared to the risk factors that are considered to be significant, as described in the sensitivity analyses given earlier.

CURRENCY RISK

The Company’s accounts are presented in euro, the Company’s functional and reporting currency, while investments are made and realised in both euro and other currencies. Changes in rates of exchange may have an adverse effect on the reported value, price or income of the investments. A change in foreign currency exchange rates may adversely impact reported returns on the Company’s non-euro denominated investments. The Company’s principal non-euro currency exposures are currently expected to be the US dollar and Swiss francs, but this may change over time.

The Company’s policy is to partially hedge its currency risk on an overall portfolio basis. The Company may bear a level of currency risk that could otherwise be hedged where the Investment Manager considers that bearing such risk is advisable or is in the best interest of the Company considering the liquidity risk that is attached to any derivative contracts that could be used (e.g. margin calls on those contracts). At the end of July 2018 the Investment Manager had put into place arrangements to hedge into euro part of the US dollar exposure associated with the US dollar-denominated assets. In order to reduce the risk of having to post a potentially unlimited amount of cash with respect to forward euro/US dollar foreign exchange swaps, the Investment Manager has capped and floored those amounts using short to mid-term options. Consequently, there is no guarantee that hedging the currency exposure generated by US dollar assets can continue to be performed in the future if volatility in the US dollar/euro cross rate is very high.

The exposures associated with the Swiss franc-denominated Synthetic Corporate Credit Bank Balance Sheet transactions are unhedged as at the end of July 2018 and at the end of July 2017 given the limited amount of exposure, representing 1.0% of GAV (2017: 2.2% of GAV).

Currency risk, and any associated liquidity risk, is analysed by the Investment Manager on a daily basis and is communicated to and monitored by the Board through the quarterly business report.

Currency risk profile as at 31 July 2018

Currency risk profile as at 31 July 2018
	Denominated	Denominated	Denominated	Denominated
	in EUR	in USD	in GBP	in CHF	Total
	€	€	€	€	€
Financial assets at fair value
through proft or loss	106,190,514	216,044,251	—	3,468,394	325,703,159
Derivative contracts	87,849,949	(86,613,726)	—	—	1,236,223
Trade and other receivables	5,904,874	6,989,440	27,374	—	12,921,688
Cash and cash equivalents	11,399,728	8,826,149	149,486	95,428	20,470,791
Loan fnancing received under
repurchase agreement	—	(42,715,000)	—	—	(42,715,000)
Interest payable on loan fnancing	—	(213,901)	—	—	(213,901)
Trade and other payables	(6,780,542)	(4,744,884)	(179,010)	—	(11,704,436)
	204,564,523	97,572,329	(2,150)	3,563,822	305,698,524

The following foreign exchange swaps and options were unsettled as at 31 July 2018:

	Nominal	Average	Average
	amount	strike price
Description of open positions	USD	$/€
Forward foreign exchange contracts (USD sold forward vs. EUR)	130,000,000	1.23
Long position – USD calls vs. EUR	70,000,000	1.10
Short position – USD puts vs. EUR	70,000,000	1.29
		Valuation of foreign
		exchange derivative
		positions
		€
Aggregate revaluation loss		(3,566,064)
Margin accounts balance – amounts paid		3,500,000
Unsettled amount payable		(66,064)

The impact of an appreciation or depreciation in foreign exchange rates on the NAV has been measured at the underlying portfolio level. The Directors consider a change in foreign exchange rates by 10% to be a reasonably plausible change.

48 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED CURRENCY RISK CONTINUED

Currency rate sensitivity as at 31 July 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED CURRENCY RISK CONTINUED Currency rate sensitivity as at 31 July 2018
	Impact of an appreciation in foreign exchange rates by 10% Impact of a depreciation in foreign exchange rates by 10% Price impact on NAV Percentage impact on NAV Price impact on NAV Percentage impact on NAV
CHF/EUR USD/EUR	356,382 0.1% (356,382) (0.1%) 10,243,351 3.4% (9,766,936) (3.2%)
Currency risk profile as at 31 July 2017 Denominated in EUR €	Denominated in USD € Denominated in GBP € Denominated in CHF € Total €
Financial assets at fair value through proft or loss 112,078,738 Derivative contracts 64,986,940 Trade and other receivables 123,672 Cash and cash equivalents 29,341,162 Loan fnancing received under repurchase agreement — Interest payable on loan fnancing — Trade and other payables (3,942,786)	201,353,696 — 7,851,480 321,283,914 (64,289,402) — — 697,538 154,857 4,091 — 282,620 6,952,465 96,272 697,242 37,087,141 (38,101,500) — — (38,101,500) (143,405) — — (143,405) (11,470,883) (188,061) — (15,601,730)
202,587,726	94,455,828 (87,698) 8,548,722 305,504,578

The following foreign exchange swaps and options were unsettled as at 31 July 2017:

	Nominal	Average	Average
	amount	strike price
Description of open positions	USD	$/€
Forward foreign exchange contracts (USD sold forward vs. EUR)	115,000,000	1.11
Long position – USD calls vs. EUR	68,500,000	0.99
Short position – USD puts vs. EUR	68,500,000	1.18
		Valuation of foreign
		exchange derivative
		positions
		€
Aggregate revaluation gain		4,993,846
Margin accounts balance – amounts paid		(4,550,000)
Unsettled amount receivable		443,846

The impact of an appreciation or depreciation in foreign exchange rates on the NAV has been measured at the underlying portfolio level. The Directors consider a change in foreign exchange rates by 10% to be a reasonably plausible change.

Currency rate sensitivity as at 31 July 2017

	Impact of an appreciation in foreign exchange rates by 10% Impact of a depreciation in foreign exchange rates by 10% Price impact on NAV Percentage impact on NAV Price impact on NAV Percentage impact on NAV
CHF/EUR USD/EUR	854,872 0.3% (854,872) (0.3%) 7,961,200 2.6% (10,258,400) (3.4%)

CREDIT RISK AND COUNTERPARTY RISK

Credit and counterparty risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date. At the reporting date, the Company’s financial assets exposed to credit risk are financial assets at fair value through profit or loss, open foreign exchange contracts, interest rate derivatives and cash and cash equivalents. The Company is exposed to counterparty risk regarding the performance of SG under the terms of the Repo. The aggregate value of the Company’s securities pledged as security under the Repo which are therefore exposed to such counterparty risk is disclosed in Note 12.

annual report and accounts 2018 VOLTA FINANCE LIMITED 49

19. FINANCIAL RISK MANAGEMENT CONTINUED CREDIT RISK AND COUNTERPARTY RISK CONTINUED

The positions in the CLO asset class are residual or mezzanine debt tranches of CLOs, which may suffer losses depending upon the level of losses that occur in the underlying loan portfolio and the rate at which such losses might occur. Residual tranches are the first tranche in a CLO capital structure that would suffer losses, followed by mezzanine tranches according to their relative levels of seniority. However, being term leveraged structures at a fixed margin, it is possible for residual tranches to generate more excess payments through re-investments when markets are under stress for relatively short periods than under normal circumstances. A residual position on a CLO also gives access to the amount that remains in the structure once the debt tranches are paid back (at maturity if the normal process of deleveraging the structure takes place, sooner if the deal is called by the residual holders). It can be possible to measure the principal amount of the underlying loan portfolios (defaulted loans are valued at their market value) against the principal amount of the outstanding CLO Debt tranches at any point in time.

CLO residual positions are negatively exposed to an increase in default rates, to an increase in the percentage of assets rated CCC or below and to a significant decrease in underlying loan prices. Nonetheless, the spread tightening impact can also be mitigated through a refinancing or reset of the CLO liabilities at any point in time after the end of the CLO non-call period.

As at 31 July 2018, the Company held 39 positions in debt tranches of CLOs (31 July 2017: 36) accounting for 40.8% of Volta’s end-of-year GAV (31 July 2017: 41.4%). The investments in debt tranches of CLOs have been in tranches initially rated between BB (second loss position) and BBB (generally third loss position). These positions, as for the residual holdings, have cash flows that are sensitive to the level of defaults and the percentage of assets rated CCC or lower in the underlying loan portfolio. Nevertheless, these tranches are structured to be able to absorb a higher level of defaults in the underlying loans portfolio than residual holdings, given their second, third and even higher loss ranking.

Each CLO Debt asset held by the Company, at the time of purchase, was expected to repay its principal in full at maturity and was expected to be able to sustain a certain level of stress. Depending on the ability to find opportunities in the market and on the timing of the purchases, the Company has been able to purchase assets with different levels of initial subordination and IRR.

As at the reporting date, the Company held four CLO Warehouse investments. The targeted return from these investments is in the mid-teens over four to six months. These are between three and five times leveraged exposure to the US and European leveraged loan asset classes and, as such, are anticipated to benefit from the leveraged carry of the investment but are also exposed to mark-to-market risk. Should the CLO markets be shut down or the leveraged loan markets experience a high level of volatility, some or all of the investment may be lost.

The Company is also exposed to a global Capitalised Manager Vehicle which is exposed to similar risks as CLO Equity and Warehouse exposures. The targeted return from the investment is in the mid to high-teens for a six to nine-year weighted average life. In addition to the first-loss Warehouse and CLO Equity risks defined above, it is also exposed to liquidity risk and to regulation risk given that a change in regulation in the US or in Europe could alter the business purpose of the entity and imply either a limited drawing of the Company’s committed capital or even certain levels of restructuring costs. The potential impact on the Company from the recent US Ruling that managers of CLOs are not subject to credit risk retention rules under the Dodd-Frank Act is still fully to be determined but it is likely to return Volta, which can purchase only securities that are in compliance with EU regulations, to the position prevailing a few years ago. As it is capitalising a single entity, it is also incorporating correlation risks between the various sub-investments as well as a strong reliance on key people and processes inside each CLO manager’s entity.

The ABS positions comprise three different investments: a position in a fund mainly investing in US RMBS debt tranches (St Bernard Opportunity Fund), representing 49.0% of the fair value of this asset class and 2.4% of the GAV; a junior debt position in a Spanish auto loan securitisation (SANCF 2014-1 Class E), representing 17.6% of the fair value of this asset class and 0.9% of the GAV; and one French lease’s ABS Residual position (Fintake European Leasing DAC), representing 33.4% of the fair value of this asset class and 1.6% of the GAV.

During the financial year, no particular events affected any of the Company’s ABS positions.

The Cash Corporate Credit assets include two positions: one loan fund (Tennenbaum) and one private debt fund (Crescent). The Synthetic Corporate Credit bucket comprises first-loss positions in credit portfolios, representing 15.0% of the GAV. No particular events during the financial year affected the situation of these positions.

As previously stated, the Company is subject to credit risk with respect to its investments. The Company and its Investment Manager seek to mitigate credit risk by actively monitoring the Company’s portfolio of investments and the underlying credit quality of its holdings. The Company’s multi-asset-class investment strategy is designed to diversify credit risk by pursuing investments in assets that are expected to generate cash flows from underlying portfolios that have, in aggregate at the time of purchase, diverse characteristics such as low historical default rates and/or high expected recovery rates in the event of default and/or significant granularity.

As previously stated, the Company has entered into a repurchase agreement with SG, which is over-collateralised as disclosed in Notes 11 and 12. Bankruptcy or insolvency by SG may cause the Company’s rights with respect to the assets subject to the repurchase agreement to be delayed or limited.

Prior to the transfer of Depositary to BNP on 1 August 2018, substantially all of the cash held by the Company at the reporting date was held at State Street Bank and Trust Company in the name of State Street Custody Services (Guernsey) Limited (“State Street”). On 1 August 2018, the Company appointed BNP as Depositary and, subsequently, the majority of the Company’s cash was held with BNP. Bankruptcy or insolvency by State Street or BNP may cause the Company’s rights with respect to the cash held there to be delayed or limited. In order to limit the Company’s exposure to any single counterparty, the Board has requested that the Investment Manager should avoid holding cash balances in excess of 6% of GAV at State Street, and subsequently BNP, or in excess of 3% of GAV at any other single counterparty, other than on a short-term basis if necessary. Cash in excess of this level for any significant length of time is invested in short-term money market funds, short-term government treasury bills or other cash equivalents.

50 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED

CREDIT RISK AND COUNTERPARTY RISK CONTINUED

The Company may invest in forward foreign currency transactions, foreign currency options, total return swaps, credit default swaps and other derivatives with various financial institution counterparties for the purposes of hedging or securing investment exposure to portfolios of diverse underlying reference obligations. The Company is exposed to counterparty credit risk in respect of these transactions. The Investment Manager employs various techniques to limit actual counterparty credit risk, including the requirement for cash margin payments or receipts for foreign currency derivative transactions on a weekly basis, or more frequently during years of high volatility. As at and during the financial year end, the Company’s derivative counterparties were Crédit Agricole Corporate and Investment Bank (“Crédit Agricole”); Merrill Lynch International (“Merrill Lynch”); and Goldman Sachs International (“Goldman Sachs”).

The Company monitors its counterparty risk by monitoring the credit ratings of Crédit Agricole, Merrill Lynch, Société Générale, State Street and Goldman Sachs, as reported by Standard & Poor’s, Moody’s or Fitch, and analyses any information that could imply deterioration in the financial position of its counterparties. The current long-term issuer credit ratings assigned to each of these counterparties are as follows:

deterioration in the fnancial position of its counterparties. The current long-term counterparties are as follows:	issuer credit ratings assigned to each of these
Counterparties	Credit ratings assigned by the ratings agencies as at the reporting date Moody’s Standard & Poor’s Fitch
Crédit Agricole Merrill Lynch Société Générale State Street Bank Goldman Sachs BNP Paribas S.A.	Aa3 (stable) A (stable) A+ (stable) — A+ (stable) A+ (stable) A1 (stable) A (stable) A (stable) A1 (stable) A (stable) AA- (stable) A1 (stable) A+ (stable) A (stable) Aa3 (stable) A+ (stable) A+ (stable)

The Company’s investment guidelines establish criteria for certain investment exposures and synthetic arrangements entered into by the Company that are intended to limit the investment risk of the Company. Shareholders should, however, be prepared to bear the risks of direct and indirect investment in special purpose structured finance vehicles and arrangements, which often involve reliance on techniques intended to achieve bankruptcy remoteness and protection through security arrangements that may not function as intended in unexpected scenarios.

RISK RELATING TO DERIVATIVES

The Company’s transactions using derivative instruments and any credit default or total return swap arrangements or other synthetic investments entered into by the Company or any of its funding vehicles may involve certain additional risks, including counterparty credit risk. Moreover, as referred to in the preceding paragraph, the Company has established criteria for synthetic arrangements that are intended to limit its investment risk. Certain derivative transactions into which the Company may enter may be sophisticated and innovative and as a consequence may involve tax or other risks that may be misjudged.

CONCENTRATION RISK

The Company may be exposed at any given time to any one corporate credit, counterparty, industry, region, country or asset class or to particular services or asset managers (in addition to the Investment Manager). As a result it may therefore be exposed to a degree of concentration risk. However, the Board considers that the Company is, in general, very diversified and that concentration risk is therefore not significant.

Nevertheless, the Company monitors the concentration of its portfolio and from time to time and, as long as market opportunities and liquidity permit, might rebalance its investment portfolio accordingly, although there can be no assurance that it will succeed. This is because in a stressed situation, which may be characterised by high volatility in the value of the Company’s assets and/or significant changes in the market expectation of default rates and/or significant changes in the liquidity of its assets, the ability of the Company to mitigate its concentration risk could be significantly affected.

As the Company invests primarily in structured finance assets, it is exposed to concentration risks at two levels: direct concentration risk from the Company’s positions in particular deals/transactions and indirect concentration risk arising from the exposures underlying those positions.

A measure of the direct exposure to certain asset types as at the reporting date is given below:

		As at	As at	As at
		31 July 2018	31 July 2017
Main asset class	Detailed classifcation	% (based on GAV)	% (based on GAV)
CLO	USD CLO Equity	10.4	11.9
	EUR CLO Equity	14.3	11.5
	USD CLO Debt	38.7	38.0
	EUR CLO Debt	2.2	3.4
	CMV	1.8	1.0
	EUR CLO Warehouse	1.0	4.2
	USD CLO Warehouse	2.0	—
Synthetic Corporate Credit	Bank Balance Sheet transactions	15.0	13.0
Cash Corporate Credit	Cash Corporate Credit Equity	2.5	2.4
ABS	ABS Residual positions	2.5	1.8
	ABS Debt	2.4	2.2
Cash	(includes other liquid assets)	7.2	10.6

annual report and accounts 2018 VOLTA FINANCE LIMITED 51

19. FINANCIAL RISK MANAGEMENT CONTINUED CONCENTRATION RISK CONTINUED

Indirect exposures to underlying concentrations can be complex and will vary by asset type and factors such as subordination. In general, the Company’s investment portfolio is well diversified. The Company’s principal concentration exposures are derived from its positions in CLO Equity tranches. Based on reports provided to the Investment Manager, the largest 20 underlying exposures aggregated across all the Company’s CLO Equity tranches are listed in the table below. These exposures are stated as the gross exposure to the individual issuers listed below of the underlying CLO collateral pool before taking into account the effect of leverage due to the relative subordination of the CLO tranche held by the Company:

As at 31 July 2018

of the CLO tranche held by the Company: As at 31 July 2018
		Average exposure
		to individual issuers	Average exposure
		in the underlying CLO	to individual issuers
		Equity sub-portfolios	in the underlying CLO
		as a % of Volta’s total	Equity sub-portfolios
Issuer name	Industry group	CLO Equity positions	as a % of Volta’s GAV
Altice Financing	Telecommunications	1.41%	0.35%
Ziggo Secured Finance	Telecommunications	0.82%	0.20%
Verisure Holding	Commercial Services	0.76%	0.19%
Springer Science & Business	Media	0.73%	0.18%
BMC Software Finance	Software	0.63%	0.16%
EG Group Limited	Retail	0.62%	0.15%
Paysafe Group	Internet	0.61%	0.15%
Action Holdings	Retail	0.59%	0.15%
Vedici	Healthcare Services	0.53%	0.13%
Nidda Healthcare Holding	Pharmaceuticals	0.52%	0.13%
MacDermid	Chemicals	0.52%	0.13%
Keter Group	Home Furnishings	0.51%	0.13%
Parex Group	Building materials	0.50%	0.12%
Flora Food Group	Food	0.50%	0.12%
Misys	Software	0.49%	0.12%
Eircom	Telecommunications	0.49%	0.12%
Tipico	Entertainment	0.48%	0.12%
Klockner Pentaplast	Packaging & Containers	0.48%	0.12%
Nord Anglia Education Limited	Commercial Services	0.48%	0.12%
TMF Group	Commercial Services	0.48%	0.12%

As at 31 July 2017

		Average exposure
		to individual issuers	Average exposure
		in the underlying CLO	to individual issuers
		Equity sub-portfolios	in the underlying CLO
		as a % of Volta’s total	Equity sub-portfolios
Issuer name	Industry group	CLO Equity positions	as a % of Volta’s GAV
Altice Financing	Telecommunications	0.89%	0.21%
Ineos Group	Chemicals	0.79%	0.19%
Dell International	Computers	0.74%	0.17%
Ziggo Secured Finance	Telecommunications	0.70%	0.16%
TransDigm	Aerospace/defence	0.58%	0.13%
Calpine	Utilities	0.55%	0.13%
AIlnex & Cy SCA (Monarch/Allnex)	Chemicals	0.52%	0.12%
First Data Corporation	Software	0.47%	0.11%
Asurion	Insurance	0.46%	0.11%
ION Media Networks	Media	0.45%	0.11%
Macdermid Inc.	Chemicals	0.44%	0.10%
Advantage Sales & Marketing	Advertising	0.44%	0.10%
Telenet Communications	Telecommunications	0.44%	0.10%
Springer Science & Business	Media	0.40%	0.09%
Valeant Pharmaceuticals	Pharmaceuticals	0.38%	0.09%
Scientifc Games	Entertainment	0.38%	0.09%
Sabre Industries	Telecommunications	0.37%	0.09%
Oberthur Technologies	Computers	0.37%	0.09%
US Renal Care	Healthcare services	0.37%	0.09%
Bass Pro Group	Retail	0.35%	0.08%

52 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 JULY 2018

19. FINANCIAL RISK MANAGEMENT CONTINUED

CONCENTRATION RISK CONTINUED

Based on the current weighting of CLO Equity positions (24.7% of GAV) (31 July 2017: 23.4% of GAV), the default as at 31 July 2018 of one underlying loan representing 1% of all the CLO Equity underlying portfolios would have caused a decline of approximately 0.86% (31 July 2017: 0.75%) of GAV on a mark-to-market basis, assuming: liquidation of the relevant CLO Equity tranches rather than the continuation of ongoing cash flow receipts from such CLO Equity tranches; a standard recovery rate on the defaulted loan of 65% (31 July 2017: 70%); and, that CLO Equity positions represent, on average, approximately a ten times leverage on the underlying loan portfolios). In practice, at the time of such default, it is likely that the impact on GAV would be mitigated by the fact that CLO Equity valuations take into account the ongoing payments from these positions as well as the liquidation value. As a result, the Company has limited exposure to indirect concentration risk. Accumulation of defaults at the level of the underlying credit portfolios represents a greater risk to the Company.

RE-INVESTMENT RISK

A majority of the Company’s investments (CLO Debt, most of the Bank Balance Sheet transactions and CLO Equity positions) may be sensitive to spread compression. Spread compression in the loan market might increase the prepayment rate of loans causing the underlying loan portfolio of CLOs to carry a lower spread and then leading to lower ongoing cash flows for the CLO Equity positions. This may be counter-balanced by the ability of CLOs to refinance and/or reset the cost of their liabilities in order to re-establish better terms for the CLO Equity position. CLO Debt and Bank Balance Sheet transactions are issued with a non-call period (usually between two and three years), after such non-call period, in the event of spread compression in these markets, Volta might experience these assets being called and might face the challenge of reinvesting in a context of a lower spread environment. One virtue of having a multi-asset-class strategy is that flexibility exists to re-allocate between asset classes in such cases.

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Many of the assets in which the Company invests are illiquid. Changes in market sentiment may make significant portions of the Company’s investment portfolio rapidly more illiquid, particularly with regard to types of assets for which there is not a broad well-established trading market or for which such a market is linked to a fewer number of market participants. Portfolio issuers and borrowers may experience changes in circumstance that adversely affect their liquidity, leading to interruptions in cash flows. The Company can seek to manage liquidity needs by borrowing but turns in market sentiment may make credit expensive or unavailable. Liquidity may also be addressed by selling assets in the Company’s portfolio but selling assets may in some circumstances be significantly disadvantageous for the Company or even almost impossible if liquidity were to disappear for the Company’s assets. In addition, the Company has entered into a Repo transaction under which a significant proportion of its most liquid assets have been provided as collateral to the Repo counterparty, as further disclosed in Notes 11 and 12. Consequently, the Company would be unlikely to be able to sell these assets at short notice. In the event of such adverse liquidity conditions the Company might be unable to fund margin calls on its derivative positions and might consequently be unable to fund the payment of dividends. Liquidity risk is analysed by the Investment Manager on a daily basis and is communicated to and monitored by the Board through the quarterly business report.

MATURITY PROFILE

The following tables show the legal maturity of the securities:

Maturity profile as at 31 July 2018	Within one year	One to fve years	Over fve years	Total	Total
	€	€	€	€
Financial assets
Financial assets at fair value through proft and loss	10,731,886	27,597,755	287,373,518	325,703,159
Derivative contracts	1,302,287	—	—	1,302,287
Trade and other receivables	12,921,688	—	—	12,921,688
Cash and cash equivalents	20,470,791	—	—	20,470,791
	45,426,652	27,597,755	287,373,518	360,397,925
Financial liabilities
Loan fnancing received under the Repo Interest payable on loan fnancing	29,169,948 213,901	14,792,048 —	— —	43,961,996 213,90~~1~~
Derivative contracts	66,064	—	—	66,064
Trade and other payables	11,704,436	—	—	11,704,43~~6~~
	41,154,349	14,792,048	—	55,946,397

The maturity profile for financial assets as shown in the table above and the table below is presented on a fair value basis whereas the maturity profile for financial liabilities is presented on a contractual cash flow basis. In 2017, the apparent mismatch between the Company’s financial assets and liabilities due within one year was not considered to represent an actual shortfall in short-term funds available to meet the Company’s short-term liabilities due to the notice and repayment period provisions applicable to the Company’s loan financing received under the Repo, as detailed in Note 12.

annual report and accounts 2018 VOLTA FINANCE LIMITED 53

19. FINANCIAL RISK MANAGEMENT CONTINUED

MATURITY PROFILE CONTINUED

19. FINANCIAL RISK MANAGEMENT CONTINUED MATURITY PROFILE CONTINUED
Maturity profile as at 31 July 2017	Within one year	One to fve years	Over fve years	Total
	€	€	€	€
Financial assets
Financial assets at fair value through proft and loss	103,620	31,845,804	289,334,490	321,283,914
Derivative contracts	697,538	—	—	697,538
Trade and other receivables	282,620	—	—	282,620
Cash and cash equivalents	37,087,141	—	—	37,087,141
	38,170,919	31,845,804	289,334,490	359,351,213
Financial liabilities
Loan fnancing received under the Repo Interest payable on loan fnancing	25,875,907 143,405	13,079,802 —	— —	38,955,709 143,405
Trade and other payables	15,601,730	—	—	15,601,730
	41,621,042	13,079,802	—	54,700,844

RISKS RELATING TO LEVERAGED EXPOSURE

The Company’s investment strategy involves a high degree of exposure to the risks of leverage. Investors in the Company must accept and be able to bear the risk of investment in a highly leveraged investment portfolio. Predominantly the leverage is provided through investment in structured leveraged instruments (embedded leverage) with no recourse to the Company’s assets, but the Company may also participate in direct leverage transactions with recourse and consequent increased liquidity needs such as the $50 million drawn down under the Repo (31 July 2017: $45 million), as detailed in Note 12.

CAPITAL RISK MANAGEMENT

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Company. The Company’s capital is represented by the Ordinary Shares, share premium account, other distributable reserves and accumulated gain reserve. The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objectives. The Company seeks to attain its investment objectives by pursuing a multi-asset-class investment strategy. The investment strategy focuses on direct and indirect investments in, and exposures to, a variety of assets selected for the purpose of generating cash flows for the Company. The Board of Directors also monitors the level of dividends to Ordinary Shareholders.

There were no changes in the Company’s approach to capital management during the year.

20. RELATED PARTIES DISCLOSURE

TRANSACTIONS WITH DIRECTORS AND THE INVESTMENT MANAGER

For disclosure of Directors’ remuneration, please see Note 7. As at the year end, Directors’ fees to be paid in cash of €87,763 (31 July 2017: €88,097) had been accrued but not paid. Directors’ fees to be paid in shares of €37,612 (31 July 2017: €37,756) had been accrued but not paid and Directors’ expenses of €nil (31 July 2017: €1,748) had been accrued but not paid.

As at 31 July 2018, the Directors of the Company controlled 0.69% (31 July 2017: 0.60%) of the voting shares of the Company.

As announced on 2 October 2017, the Company agreed a revised Management Fee and Performance Fee basis with its Investment Manager under an amended and restated Investment Management Agreement (“IMA”) which is effective from 1 August 2017.

AXA IM is entitled to receive from the Company a Management Fee equal to the aggregate of:

• @ an amount equal to 1.5% of the lower of NAV and €300 million; and

• @ if the NAV is greater than €300 million, an amount equal to 1.0% of the amount by which the NAV of the Company exceeds €300 million.

The Management Fee is calculated for each six-month period ending on 31 July and 31 January of each year on the basis of the Company’s NAV as of the end of the preceding period and payable semi-annually in arrears. The Management Fee payable to AXA IM is subject to reduction for investments in AXA IM Managed Products as set out in the Company’s investment guidelines. Under the previous IMA, the Investment Manager was previously entitled to receive a Management Fee from the Company at a rate of 1.5% per annum on the whole of the Company’s NAV. During the year, the Investment Management Fees earned were €4,198,010 (31 July 2017: €4,141,424). Investment Management Fees accrued but unpaid as at 31 July 2018 were €2,072,153 (31 July 2017: €2,127,638).

Under the amended and restated IMA, the Investment Manager is also entitled to receive a Performance Fee of 20% of any NAV outperformance over an 8% hurdle on an annualised basis, subject to a high-water mark and adjustments for dividends paid, share issuances, redemptions and buybacks. The Performance Fee will be calculated and paid annually in respect of each twelve-month period ending on 31 July (each an “Incentive Period”). Notwithstanding the foregoing, Performance Fees payable to AXA IM in respect of any Incentive Period shall not exceed 4.99% of the NAV at the end of such Incentive Period. During the year ended 31 July 2018, there were no Performance Fees earned (31 July 2017: €1,528,163).

54 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

FOR THE YEAR ENDED 31 JULY 2018

20. RELATED PARTIES DISCLOSURE CONTINUED TRANSACTIONS WITH DIRECTORS AND THE INVESTMENT MANAGER CONTINUED

Under the previous IMA, the Investment Manager was entitled to receive a Performance Fee on a basis that was described in detail in the annual report for the year ended 31 July 2017.

The Investment Manager also acts as investment manager for the following of the Company’s investments held as at the period end which together represented 11.8% of NAV as at 31 July 2018: Adagio V CLO DAC Subordinated Notes; Adagio VI CLO DAC Subordinated Notes; Adagio VII CLO DAC Subordinated Notes; Allegro CLO III Class E Notes; Allegro CLO IV Class E Notes; Bank Capital Opportunity Fund; Bank Deleveraging Opportunity Fund; Prelude Credit Alpha PLC; and St Bernard Opportunity Fund (Series 6). Each of these investments is classified as an AXA IM Managed Product except for Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Notes and Adagio VII CLO DAC Subordinated Notes, which are classified as Restricted AXA IM Managed Products.

The Investment Manager earns Investment Management Fees, including incentive fees where applicable, directly from each of the above investment vehicles, in addition to its Investment Management Fees earned from the Company. However, with respect to the Company’s investments in Bank Deleveraging Opportunity Fund, Bank Capital Opportunity Fund and St Bernard Opportunity Fund, there is no duplication of Investment Management Fees as adjustment for these investments is made in the calculation of the Investment Management Fees payable by the Company such that AXA IM earns Investment Management Fees only at the level of the Company.

Due to the fact that the Company’s investments in Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Notes and Adagio VII CLO DAC Subordinated Notes are classified as Restricted AXA IM Managed Products, AXA IM earns Investment Management Fees at the level of the Restricted AXA IM Managed Product rather than at the Company level and it is possible for AXA IM to earn incentive fees at the level of both the Restricted AXA IM Managed Product and the Company.

Except for the Company’s investments in Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Notes, Adagio VII CLO DAC Subordinated Notes, Bank Deleveraging Opportunity Fund, Bank Capital Opportunities Fund and St Bernard Opportunity Fund, all other investments in products managed by the Investment Manager were made by way of secondary market purchases on a bona fide arm’s length basis from parties unaffiliated with the Investment Manager. Therefore, the Company pays Investment Management Fees with respect to these investments calculated in the same way as if the Investment Manager of these deals were an independent third party.

As at the date of approval of this report, 31 July 2018 and 31 July 2017 respectively, AXA S.A. group, AXA Assurances Vie Mutuelle and AXA IM held the following voting shares in the Company:

• @ AXA S.A. group held 30.2% as at the date of approval of this report and 27.4% as at 31 July 2018 (31 July 2017: 22.0%);

• @ AXA Assurances Vie Mutuelle held 0.0% as at the date of approval of this report and 2.9% as at 31 July 2018 (31 July 2017: 2.9%); and

• @ AXA IM held 0.0% as at the date of approval of this report and 0.0% as at 31 July 2018 (31 July 2017: 5.5%).

21. COMMITMENTS

As at 31 July 2018, the Company had the following uncalled commitments outstanding:

• @ Capitalised Manager Vehicle – $12,558,419 (31 July 2017: $16,053,333) remaining commitment from an original commitment of $20,000,000;

• @ Crescent European Specialty Lending Fund (a Cash Corporate Credit Equity transaction exposed to sub-investment grade corporate credits) – €3,284,796 (31 July 2017: €3,787,825) remaining commitment from an original commitment of €7,500,000;

• @ Fintake European Leasing DAC (an ABS Residual transaction exposed to French leases) – €3,852,000 (31 July 2017: €7,276,000) remaining commitment from an original commitment of €10,700,000;

• @ European CLO Warehouse transaction 2018-1 – €8,875,000 remaining commitment from an original commitment of €12,500,000;

• @ US CLO Warehouse transaction 2018-2 – $19,857,214 remaining commitment from an original commitment of $25,000,000; and

• @ US CLO Warehouse transaction 2018-3 – $7,000,000 remaining commitment from an original commitment of $10,000,000.

22. SUBSEQUENT EVENTS

Since the end of the financial year, no particular event has materially affected the Company. However, the following points are pertinent:

• @ further drawdowns totalling the equivalent of €8.0 million were called and distributions totalling the equivalent of €7.2 million were received on the Company’s investments in US and European Warehouse transactions, with the US CLO Warehouse transaction 2018-2 being priced subsequent to the financial year end;

• @ a further drawdown of €0.3 million was called on the Company’s investment in Crescent European Specialty Lending Fund;

• @ further drawdowns totalling the equivalent of €1.7 million were called and distributions totalling the equivalent of €0.3 million were received on the Company’s investment in the Capitalised Manager Vehicle;

• @ the Company purchased two USD CLO Debt tranches for the equivalent of €6.5 million and redeemed two USD CLO Debt tranches for the equivalent of €7.5 million;

• @ the Company purchased one USD CLO Equity tranche for the equivalent of €10.6 million;

• @ on 30 August, the Company declared a quarterly dividend of €0.15 per share payable in September 2018, amounting to €5.5 million; and

• @ on 1 August 2018, the Company appointed BNP as Depositary and, on 31 October 2018, BNP will be appointed as Company Secretary and Administrator.

annual report and accounts 2018 VOLTA FINANCE LIMITED 55

CORPORATE SUMMARY

THE COMPANY

Volta Finance Limited (the “Company” or “Volta”) is a closed-ended limited liability company registered in Guernsey under the Companies (Guernsey) Law 2008 (as amended) with registered number 45747. The registered office of the Company is Third Floor, La Plaiderie Chambers, La Plaiderie, St Peter Port, Guernsey GY1 1WG, Channel Islands. Effective from 31 October 2018, the registered office of the Company is BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 1WA.

The Company is an authorised collective investment scheme in Guernsey, pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended). The Company’s Ordinary Shares are listed on Euronext Amsterdam and, in addition, on the premium segment of the Official List of the UK Listing Authority and are admitted to trading on the Main Market of the London Stock Exchange (“LSE”). Volta’s home member state for the purposes of the EU Transparency Directive is the Netherlands. As such, Volta is subject to regulation and supervision by the Netherlands Authority for the Financial Markets (the “Autoriteit Financiële Markten” or “AFM”), being the financial markets supervisor in the Netherlands.

INVESTMENT OBJECTIVES

The Company’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis. Subject to the risk factors that are described in the Principal Risk Factors section and in Note 19, it seeks to attain its investment objectives predominantly through investment in a diversified portfolio of structured finance assets. The Company’s investment strategy focuses on direct and indirect investments in, and exposures to, a variety of assets selected for the purpose of generating cash flows for the Company. The assets that the Company may invest in either directly or indirectly include, but are not limited to, corporate credits; sovereign and quasi-sovereign debt; residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; leases; and debt and equity interests in infrastructure projects (the “Underlying Assets”).

The Company’s approach to investment is through vehicles and arrangements that essentially provide leveraged exposure to portfolios of such Underlying Assets. In this regard, the Company reviews the investment strategy adopted by AXA IM on a quarterly basis. The current investment strategy is to concentrate on the following asset classes: CLO (Debt/Equity/Warehouses); Synthetic Corporate Credit; Cash Corporate Credit; and ABS. There can be no assurance that the Company will achieve its investment objectives.

THE INVESTMENT MANAGER

AXA IM is a multi-expert asset management company within the AXA Group, a global leader in financial protection and wealth management, which has a team of experts concentrating on the structured finance markets. AXA IM is authorised by the Autorité des Marchés Financiers (the “AMF”) as an investment management company and its activities are governed by Article L. 532-9 of the French Code Monétaire et Financier. AXA IM was appointed as the Company’s Alternative Investment Fund Manager (“AIFM”) in accordance with the EU Alternative Investment Fund Management Directive (“AIFMD”) on 22 July 2014.

ASSET VALUES

At 31 July 2018, the Company’s NAV was €305.7 million, with the NAV per share amounting to €8.3600. The Company publishes its NAV on a semi-annual basis and publishes its GAV and Estimated NAV monthly.

NAV is an expression of the total value of the Company that takes into account the current fair value of the Company’s investments, accruals for debtors and the amount of the Company’s liabilities. The Company’s NAV at 31 July 2018 can be seen in the Statement of Financial Position on page 29 (“Total Shareholders’ equity” line).

GAV is an expression of the Company’s value that takes into account the fair value of the Company’s assets less the estimated amount of accrued fees payable to the Investment Manager. GAV is used as the reference against which the Company’s investment restrictions are measured. Estimated NAV is an expression of the Company’s value that takes into account the fair value of the Company’s assets less both the amount of any debt finance owed by the Company and the estimated amount of accrued fees payable to the Investment Manager. Estimated NAV, which is published by the Company on a more frequent basis than NAV, may be a useful point of reference.

ONGOING CHARGES PERCENTAGE

The Company’s ongoing charges percentage (previously commonly referred to as a total expense ratio or TER), based upon the ongoing expenses incurred during the financial year ended 31 July 2018 and the Company’s net asset values as at 31 July 2018 and 31 July 2017, was 1.88%. This figure includes only the fees, charges and expenses borne directly by the Company.

DURATION

The Company has a perpetual life.

WEBSITE

The Company’s website address is www.voltafinance.com.

56 VOLTA FINANCE LIMITED annual report and accounts 2018

CORPORATE SUMMARY CONTINUED

LISTING INFORMATION

The Company’s Ordinary Shares are listed on Euronext Amsterdam (website: www.euronext.com) and the premium segment of the London Stock Exchange’s Main Market for listed securities (website: www.londonstockexchange.com). The ISIN number of the Company’s listed shares is GG00B1GHHH78 and the tickers for the relevant markets are listed below:

• @ London Stock Exchange, euro quote: VTA.LN

• @ London Stock Exchange, sterling quote: VTAS.LN

• @ Euronext Amsterdam Stock Exchange, euro quote: VTA.NA

As at 31 July 2018, the closing prices of the Company’s listed shares were as follows:

• @ Euronext Amsterdam – €7.08 per share; and

• @ London Stock Exchange – €7.09 per share.

The Company’s primary central securities depositary is CREST. Shares are eligible for settlement through the CREST and Euroclear Netherlands settlement systems.

As at 31 July 2018, so far as the Directors are aware, no person other than those listed below and those parties disclosed in Note 20 to the financial statements was interested, directly or indirectly, in 5% or more of the issued share capital in the Company:

	Number of	Percentage of
	Ordinary	Ordinary
Registered Shareholder	Shares held	Shares held
Euroclear Nominees Limited	21,025,758	57.5%
The Bank of New York (Nominees) Limited	5,996,867	16.4%
Securities Services Nominees Limited	5,010,279	13.7%
Vidacos Nominees Limited	2,224,537	6.08%

Pursuant to regulatory filings: BNP Paribas S.A. held 3,875,000 Ordinary Shares amounting to 12.9% of the voting shares in the Company as at 20 December 2007; Amundi held 2,663,036 Ordinary Shares amounting to 7.4% of the voting shares in the Company as at 11 February 2015; and City Financial Investment Company held 1,073,126 Ordinary Shares amounting to 2.9% of the voting shares in the Company as at 12 June 2018. As the Company cannot be certain of the registered name under which these Shareholders hold their interests in Volta, the Company cannot currently verify whether or not such interests are represented in the above list of Shareholders holding 5% or more of the Company’s issued share capital. Shareholdings held by AXA S.A. group investors, AXA Assurances Vie Mutuelle and AXA IM are disclosed in Note 20 to the financial statements.

None of the above Shareholders have Shareholder rights that are different from those of other holders of the Company’s Ordinary Shares, except for the holder of the Class B share, an affiliate of AXA S.A., which has the right to appoint a Director to the Board.

PROVISIONAL FINANCIAL CALENDAR

30 October 2018 Announcement of results for the financial year ended 31 July 2018 and publication of the 2018 annual report. 30 November 2018 Annual General Meeting

annual report and accounts 2018 VOLTA FINANCE LIMITED 57

LEGAL AND REGULATORY DISCLOSURES

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (“AIFM DIRECTIVE” OR “AIFMD”)

The AIFM Directive seeks to regulate managers (‘‘AIFMs’’) of alternative investment funds (‘‘AIFs’’) that are marketed or managed in the European Economic Area. In compliance with the AIFMD, the Company has appointed AXA IM to act as its AIFM and had appointed State Street Custody Services (Guernsey) Limited (“SSCSGL”) to act as its Depositary until 31 July 2018. From 1 August 2018, the Company appointed BNP to act as its Depositary.

AXA IM is authorised to act as the Company’s AIFM by the Autorité des Marchés Financiers (the “AMF”) in France. In order to maintain such authorisation and to be able to continue to undertake this role, AXA IM is required to comply with various obligations prescribed under the AIFMD. In conformity with Article 53 of the Commission delegated regulation (EU) No. 231/2013, AXA IM has established appropriate policies and procedures regarding the credit risk of each of the structured credit positions (positions arising from the securitisation of underlying exposures) held by Volta, in order to monitor information regarding the performance of the underlying exposures on a timely basis and to manage such credit risk where applicable and possible. Such policies and procedures are considered as being appropriate to the risk/return profile of these positions. AXA IM also regularly implements stress tests on these positions.

Information on the investment strategy, geographic and sector investment focus, and principal exposures is included in the Investment Manager’s Report and Note 19 to the financial statements. Information regarding the total amount of leverage employed by the Company is disclosed in Note 12 to the financial statements. None of the Company’s assets are subject to special arrangements arising from their illiquid nature, where “special arrangements” refers to arrangements such as side pockets, gates or other similar arrangements, whereby the rights of some investors, usually over certain assets, differ from those of other investors. Note 19 to the financial statements and the Principal Risk Factors section commencing on page 13 of this report describe the risk profile and risk management systems in place.

Certain regulatory changes have arisen from the implementation of the AIFMD that may, in some circumstances, impair the ability of the Investment Manager to manage the investments of the Company and this may adversely affect the Company’s ability to carry out its investment strategy and achieve its investment objectives. In addition, the AIFMD may limit the Company’s ability to market future issuances of its shares in some EU jurisdictions. Certain EU member states may impose stricter rules or interpretations of the AIFM Directive on the AIFM in respect of the marketing of shares than those either required under the AIFMD or as interpreted by other EU member states, as the Company is a non-EU AIF. The Board and the Company’s advisors will continue to monitor implications of the AIFM Directive.

STAFFING AND REMUNERATION DISCLOSURES REGARDING THE AIFM REMUNERATION PAID FOR THE CALENDAR YEAR 2017 TO ALL AXA INVESTMENT MANAGERS GROUP PERSONNEL, SPLIT INTO FIXED AND VARIABLE REMUNERATION PAID[(1)]

VARIABLE REMUNERATION PAID(1)
	Total
Fixed remuneration(2)(€ million)	241.6
Variable remuneration(3)(€ million)	255.8
Number of staff(4)	2,569

AGGREGATE REMUNERATION PAID AND/OR AWARDED(1) FOR THE CALENDAR YEAR 2017 TO SENIOR MANAGEMENT AND MEMBERS OF STAFF WHOSE ACTIONS HAVE A MATERIAL IMPACT ON THE RISK PROFILE OF VOLTA

WHOSE ACTIONS HAVE A MATERIAL IMPACT ON THE RISK PROFILE OF VOLTA
	Managers and other
	employees having a
	direct impact on the	Other senior
	risk profle of Volta	executives	Total
Fixed remuneration(2)and variable(3)remuneration (€ million)	99.8	127.7	227.5
Number of staff(4)	233	113	346

NOTES:

(1) Information on remuneration does not include employer contributions.

(2) Fixed remuneration comprises the base salary and all other components of fixed remuneration paid in the calendar year 2017.

(3) Variable remuneration comprises discretionary, immediate and deferred elements of variable pay and includes:

@ amounts allocated on account of the performance of the previous year and paid out in full during the calendar year 2017 (variable, non-deferred remuneration);

@ amounts allocated on account of the performance of previous years and the calendar year 2017 and paid out in instalments subject to maintaining the performance over several years (variable deferred remuneration); and

• @ long term incentive bonuses awarded by the AXA Group.

(4) The total number of employees includes permanent and temporary contracts other than internships at calendar year 2017.

58 VOLTA FINANCE LIMITED annual report and accounts 2018

LEGAL AND REGULATORY DISCLOSURES CONTINUED

COMMON REPORTING STANDARD

On 13 February 2014, the Organisation for Economic Co-operation and Development released the “Common Reporting Standard” (“CRS”) designed to create a global standard for the automatic exchange of financial account information, similar to the information to be reported under FATCA. To date, over 100 jurisdictions have signed the multilateral competent authority agreement (“Multilateral Agreement”) that activates this automatic exchange of FATCA-like information in line with the CRS. Pursuant to the Multilateral Agreement, certain disclosure requirements may be imposed in respect of certain investors in the Company who are, or are entities that are controlled by one or more, residents of any of the signatory jurisdictions. Where applicable, information that needs to be disclosed includes certain information about investors, their ultimate beneficial owners and/or controllers, and their investment in and returns from the Company. Both Guernsey and the UK have signed up to the Multilateral Agreement, but the US has not signed the Multilateral Agreement.

Guernsey legislation implementing the CRS in Guernsey came into effect on 1 January 2016 (the “Guernsey CRS Legislation”). In summary, the Guernsey CRS Legislation requires “reporting financial institutions” in Guernsey to identify, review and report on “financial accounts” maintained by them and which are held by residents for tax purposes (whether individuals or entities) of jurisdictions with which Guernsey has agreed to exchange information. The reporting deadline for Guernsey reporting financial institutions to report to the Guernsey Director of Taxes is 30 June in the year following the calendar year to which the return relates.

Reports will be made to the Guernsey authorities via the Information Gateway Online Reporter (“IGOR”) and then passed to the competent authority of the jurisdiction in which the account holder is resident. Although the Company will attempt to satisfy any obligations imposed on it by the CRS, no assurance can be given that it will be able to satisfy such obligations. Implementation of the CRS may require the Company to conduct additional due diligence and report upon accounts held with it who are reportable persons in other participating jurisdictions.

The Company may require that members provide, and the Company (and any authorised third-party agent or delegate of the Company) shall be entitled to use and disclose, any information or documentation in relation to members and, if and to the extent required, the direct and indirect beneficial owner(s) (if any) of shares in the Company held by members (if any), as may be necessary or desirable for the Company to comply with any reporting or other obligations and/or prevent or mitigate the withholding of tax under relevant law or other law.

The Board continues to monitor developments in the rules and regulations arising from the implementation of CRS in conjunction with its tax advisors.

SECURITIES FINANCING TRANSACTIONS REGULATIONS

Under EU Regulation (2015/2365), which is commonly referred to as the Securities Financing Transactions Regulations (“SFTR”), the Company is required to make certain disclosures to investors. The SFTR defines a Securities Financing Transaction (“SFT”) as any transaction where securities are used to borrow cash. Therefore, the Repo transaction entered into by the Company, which is described in detail in Note 12 to the financial statements, is classified as an SFT.

Under the Repo, SG acquires legal title to the assets held as collateral and therefore holds such assets at its own custodian and receives all coupons on the collateral. However, the Company retains a beneficial interest in the collateral whereby SG has agreed to pay all coupons received on the collateral to the Company and has agreed to sell the collateral back to the Company at predetermined prices.

The Company considers that its total lendable assets comprises all of its investments in CLO Debt securities which totalled the equivalent of €143,207,316 as at 31 July 2018. The Company utilises a portion of its portfolio of CLO Debt securities as collateral (€75,619,586 or 52.8% of the Company’s total lendable assets as at 31 July 2018) and considers all such collateral to be liquid assets. Information regarding the CLO Debt securities held by the Company are published monthly on the Company’s website in its Portfolio Composition Report. All other disclosures that the Company is required to make under SFTR are provided in the Report of the Directors and Note 12 to the financial statements.

VOLTA FINANCE LIMITED 59

annual report and accounts 2018

BOARD OF DIRECTORS

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60 VOLTA FINANCE LIMITED annual report and accounts 2018

BOARD OF DIRECTORS CONTINUED

01. GRAHAM HARRISON

INDEPENDENT DIRECTOR

Mr Harrison is co-founder and Group Managing Director of ARC Group Limited, a specialist investment advisory and research company. ARC was established in 1995 and provides investment advice to ultra-high net worth families, complex trust structures, charities and similar institutions. Mr Harrison has fund board experience spanning a wide range of asset classes including hedge funds, commodities, property, structured finance, equities, bonds and money market funds. Prior to setting up ARC, he worked for HSBC in its corporate finance division, specialising in financial engineering. Mr Harrison is a Chartered Wealth Manager and a Chartered Fellow of the Chartered Institute of Securities and Investment. He holds a BA in Economics from the University of Exeter and an MSc in Economics from the London School of Economics.

04. ATOSA MOINI

INDEPENDENT DIRECTOR

Ms Moini retired from Goldman Sachs International in September 2016 where she was Head of Origination and Distribution of Asset-backed Products and Loans in EMEA and previous to that she was Co-Head of EMEA Credit Sales. Ms Moini was also a member of the Securities Division Client and Business Standards Committee. Ms Moini has extensive product origination and distribution experience across a wide range of asset classes including corporate and leverage loans, corporate bonds, CLOs and asset-backed products in the real estate, transportation and renewable energies sectors. Ms Moini has an MBA from the London Business School and a BA Honours Degree in Industrial Engineering from the University of Surrey.

02. STEPHEN LE PAGE

INDEPENDENT DIRECTOR

Mr Le Page was a partner with PricewaterhouseCoopers in the Channel Islands from 1994 until September 2013. During his career with that firm he worked with many different types of financial organisation as both auditor and advisor, and he also served as the senior partner of the firm, effectively carrying out the role of chief executive and leading considerable growth in the business. Mr Le Page is a Fellow of the Institute of Chartered Accountants in England and Wales and a Chartered Tax Advisor. He is a past president of the Guernsey Society of Chartered and Certified Accountants and a past Chairman of the Guernsey International Business Association. Mr Le Page holds a number of other non-executive roles.

05. PAUL VAROTSIS

SENIOR INDEPENDENT DIRECTOR

Mr Varotsis was a partner at Reoch Credit Partners LLP until March 2011 where he worked as a consultant for financial institutions and advised investors, asset managers, intermediaries and software vendors on structured credit solutions. Mr Varotsis was Director of CDOs at Barclays Capital from 2002 to 2004. Prior to that, he was Executive Director, Structured Credit Trading, at Lehman Brothers from 2000 to 2002 and spent approximately ten years (1991 to 2000) at Chase Manhattan Bank and its predecessors; his last position at Chase was Head of Credit and Capital Management (Europe, Africa, Middle East). He was European Chairman of the ISDA committee that participated in the drafting of the 2003 Credit Derivatives Definitions and advised the Bank of England and other regulators on the appropriate framework for the market’s development. Mr Varotsis holds an MBA from the Stanford Graduate School of Business, a diplôme from the Institut d’Études Politiques de Paris and a diplôme from the Institut Supérieur de Gestion.

03. PAUL MEADER

CHAIRMAN AND INDEPENDENT DIRECTOR

Mr Meader is an independent director of investment companies, insurers and investment funds. Until the autumn of 2012 he was Head of Portfolio Management for Canaccord Genuity, based in Guernsey, prior to which he was Chief Executive of Corazon Capital, Guernsey. He has over 30 years’ experience in financial markets in London, Dublin and Guernsey, holding senior positions in portfolio management and trading. Prior to joining Corazon Capital he was Managing Director of Rothschild’s Swiss private banking subsidiary in Guernsey. Mr Meader is a Chartered Fellow of the Chartered Institute of Securities & Investments, a past Commissioner of the Guernsey Financial Services Commission and past Chairman of the Guernsey International Business Association. He is a graduate of Hertford College, Oxford.

annual report and accounts 2018 VOLTA FINANCE LIMITED 61

MANAGEMENT, ADMINISTRATION AND ADVISORS

VOLTA FINANCE LIMITED

Company registration number: 45747 (Guernsey, Channel Islands)

REGISTERED OFFICE (UNTIL 31 OCTOBER 2018)

Third Floor, La Plaiderie Chambers La Plaiderie, St Peter Port Guernsey GY1 1WG Channel Islands Tel: +44 (0)1481 739810 E-mail: voltafinance@sannegroup.com Website: www.voltafinance.com

INVESTMENT MANAGER AXA INVESTMENT MANAGERS PARIS S.A.

Tour Majunga La Défense 6 Place de la Pyramide 92800 Puteaux France

CORPORATE BROKER AND CORPORATE FINANCE ADVISOR CENKOS SECURITIES PLC 6.7.8 Tokenhouse Yard London EC2R 7AS United Kingdom

REGISTERED OFFICE (FROM 31 OCTOBER 2018)

BNP Paribas House St Julian’s Avenue, St Peter Port Guernsey GY1 1WA Channel Islands Tel: +44 (0)1481 750800 E-mail: guernsey.bp2s.volta.cosec@bnpparibas.com Website: www.voltafinance.com

LEGAL ADVISORS AS TO ENGLISH LAW HERBERT SMITH FREEHILLS LLP

Exchange House Primrose Street London EC2A 2EG United Kingdom

INDEPENDENT AUDITOR

COMPANY SECRETARY, ADMINISTRATOR AND PORTFOLIO ADMINISTRATOR (UNTIL 31 OCTOBER 2018) SANNE GROUP (GUERNSEY) LIMITED

Third Floor, La Plaiderie Chambers La Plaiderie, St Peter Port Guernsey GY1 1WG Channel Islands

COMPANY SECRETARY AND ADMINISTRATOR (FROM 31 OCTOBER 2018)

BNP PARIBAS SECURITIES SERVICES S.C.A. GUERNSEY BRANCH

BNP Paribas House St Julian’s Avenue, St Peter Port Guernsey GY1 1WA Channel Islands

DEPOSITARY (UNTIL 31 JULY 2018) STATE STREET CUSTODY SERVICES (GUERNSEY) LIMITED

PO Box 238 First Floor, Dorey Court Admiral Park, St Peter Port Guernsey GY1 3PF Channel Islands

DEPOSITARY (FROM 1 AUGUST 2018) BNP PARIBAS SECURITIES SERVICES S.C.A. GUERNSEY BRANCH

BNP Paribas House St. Julian’s Avenue, St Peter Port Guernsey GY1 1WA Channel Islands

KPMG CHANNEL ISLANDS LIMITED

Glategny Court Glategny Esplanade, St Peter Port Guernsey GY1 1WR Channel Islands

LEGAL ADVISORS AS TO DUTCH LAW DE BRAUW BLACKSTONE WESTBROEK N.V.

Claude Debussylaan 80 PO Box 75084 1070 AB Amsterdam The Netherlands

LISTING AGENT (EURONEXT AMSTERDAM) ING BANK N.V.

Bijlmerplein 888 1102 MG Amsterdam The Netherlands

LEGAL ADVISORS AS TO GUERNSEY LAW MOURANT OZANNES

Royal Chambers St Julian’s Avenue, St Peter Port Guernsey GY1 4HP Channel Islands

REGISTRAR

COMPUTERSHARE INVESTOR SERVICES (GUERNSEY) LIMITED

C/o Queensway House Hilgrove Street St Helier Jersey JE1 1ES Channel Islands

62 VOLTA FINANCE LIMITED annual report and accounts 2018

GLOSSARY

Definitions and explanations of methodologies used:

“ABS” asset-backed securities.

“AGM”

“ABS Residual positions”

“AIC”

“AIC Code”

“AFM”

“AIFM”

“AIFMD”

“Articles” “AXA IM”, “Investment Manager” or “Manager” “Bank Balance Sheet transactions”

“Beta”

“BNP”

“Board”

“Cash Corporate Credit” deals

“Cenkos”, “Corporate Broker” or “Broker”

“CLOs” or “CLO”

“Capitalised Manager Vehicle” or “CMV”

“Depositary and Custodian”

“Discount”

“Dividend yield”

“Euronext Amsterdam”

“Estimated NAV”

“Edison”

“Financial year”

“FRC”

“GAV”

Annual General Meeting.

residual income positions, which are a sub-classification of ABS, being backed by any of the following: residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; or leases.

the Association of Investment Companies, of which the Company is a member.

the AIC Code of Corporate Governance for Guernsey Companies.

the Netherlands Authority for the Financial Markets (the “Autoriteit Financiële Markten” or “AFM”), being the financial markets supervisor in the Netherlands.

Alternative Investment Fund Manager, appointed in accordance with the AIFMD.

the Alternative Investment Fund Managers Directive.

the Articles of Incorporation of the Company.

AXA Investment Managers Paris S.A.

synthetic transactions that permit banks to transfer part of their exposures such as exposures to corporate loans, mortgage loans, counterparty risks, trade finance loans or any classic and recurrent risks banks take in conducting their core business.

a security’s beta is a measure of the volatility of the security compared to the volatility of the relevant market.

BNP Paribas Securities Services S.C.A. Guernsey Branch.

the Board of Directors of the Company.

structured credit positions predominantly exposed to corporate credit risks by direct investments in cash instruments (loans and/or bonds).

Cenkos Securities plc.

Collateralised Loan Obligations.

a CMV is a long-term closed-ended structure which is established to act as a CLO manager and to also provide capital in order to meet risk retention obligations when issuing a CLO and also to provide warehousing capabilities.

BNP Paribas Securities Services S.C.A. Guernsey Branch.

calculated as the NAV per share as at 31 July 2018 less Volta’s closing share price on Euronext Amsterdam as at that date, divided by the NAV per share as at that date. calculated as total dividends paid during the financial period divided by the share price as at 31 July 2018.

Euronext in Amsterdam, a regulated market of Euronext Amsterdam N.V.

full details of Volta’s Estimated NAV calculation methodology are presented on page 37.

Edison Investment Research Limited, trading as Edison, an independent research and shareholder liaison agency.

the period from 1 August 2017 to 31 July 2018.

Financial Reporting Council (United Kingdom).

the GAV calculation methodology is described in Note 5 on page 37.

“Hardman” Hardman Research Limited, trading as Hardman & Co, an independent research and shareholder liaison agency.

“IRR”

“Memorandum”

internal rate of return.

the Memorandum of Incorporation of the Company.

annual report and accounts 2018 VOLTA FINANCE LIMITED 63

“MiFID II”

“NAV”

“NAV performance”

“Omicron”

“PricingDirect”

“PRIIPs”

“Projected portfolio IRR”

“QE”

the revised Markets in Financial Instruments Directive, which took effect in January 2018, is a new EU legislative framework that aims to improve the functioning of financial markets and strengthen investor protection.

net asset value.

calculated as the increase in the NAV per share plus the total dividends paid per share during the financial period/financial year, with such dividends paid being re-invested at NAV, as a percentage of the NAV per share as at 31 July 2017.

Omicron Investment Management GmbH.

an independent valuation service which is a wholly-owned subsidiary of JPMorgan Chase & Co.

Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, which took effect on 1 January 2018, aims to encourage efficient EU markets by helping investors to better understand and compare the key features, risk, rewards and costs of different PRIIPs, through access to a short and consumer-friendly Key Information Document (KID).

calculated as the gross projected future return on Volta’s investment portfolio as at 31 July 2018 under standard AXA IM assumptions, after taking into account the effect of direct leverage from the Repo on the overall investment portfolio returns.

quantitative easing.

“Repo” repurchase agreement entered into with Société Générale.

“RMBS”

“semi-annual periods”

residential mortgage-backed securities, which are a sub-classification of ABS.

the period from 1 August 2017 to 31 January 2018 and/or the period from 1 February 2018 to 31 July 2018.

“SG” Société Générale S.A.

“Share” or “Shares”

“Share price performance”

all classes of the shares of the Company in issue.

the percentage increase or decrease in the share price on Euronext Amsterdam plus the total dividends paid per share during the reference period, with such dividends re-invested in the shares. Obtained from Bloomberg using the TRA function.

“Sharpe ratio” the Sharpe ratio is a measure of risk-adjusted return and is calculated as the average return earned, based on the published monthly Estimated NAVs as adjusted for dividends paid, in excess of three-month Euribor, as an assumed risk-free rate, per unit of volatility or total risk (measured as the standard deviation of the adjusted monthly Estimated NAVs).

“SME”

“Synthetic Corporate Credit” deals “Underlying Assets”

“US GAAP”

“Warehouse”

“WARF”

“WAL”

small and medium-sized enterprises.

structured credit positions predominantly exposed to corporate credit risks by synthetic contracts.

the underlying assets principally targeted for direct and indirect investment (collectively, the “Underlying Assets”) consist of corporate credits (investment grade, sub-investment grade and unrated); sovereign and quasi-sovereign debt; residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; and leases.

Generally Accepted Accounting Principles in the United States of America.

a Warehouse is a short-term structure put in place before a CLO happens in order to accumulate assets in order to facilitate the issue of the CLO. A Warehouse is leveraged and can be marked to market.

weighted average ratings factor, giving an indication of the probability of default. weighted average life.

64 VOLTA FINANCE LIMITED annual report and accounts 2018

NOTICE OF MEETING FOR THE YEAR ENDED 31 JULY 2018

VOLTA FINANCE LIMITED

A closed-ended limited liability company registered in Guernsey under the Companies (Guernsey) Law, 2008 (as amended) with registered number 45747 and registered with the Netherlands Authority for the Financial Markets pursuant to Section 1:107 of the Dutch Financial Markets Supervision Act (the “Company”).

NOTICE OF THE TWELFTH ANNUAL GENERAL MEETING OF THE COMPANY

In accordance with the Company’s Articles of Incorporation (the “Articles”), notice is hereby given that the twelfth Annual General Meeting of the Company will be held at the Company’s registered office, BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey GY1 1WA, Channel Islands, at 10:00am (London time) on 30 November 2018.

AGENDA

ORDINARY BUSINESS

To consider and, if thought fit, pass the following as Ordinary Resolutions:

• (1) To adopt the audited financial statements of the Company for the year ended 31 July 2018, including the reports of the Board of Directors of the Company (the “Board”) and the Auditor (together the “Accounts”).

• (2) To re-appoint KPMG Channel Islands Limited of Glategny Court, Glategny Esplanade, St Peter Port, Guernsey GY1 1WR as the Company’s Auditor to hold office until the conclusion of the next AGM.

• (3) To authorise the Board to negotiate and fix the remuneration of the Auditor in respect of the year ending 31 July 2019.

• (4) To re-elect Graham Harrison as an Independent Director of the Company. Mr Harrison has been a Director of the Company since October 2015 and has served as the Company’s Risk Committee Chairman since June 2017. For further information on Mr Harrison, please refer to page 60 of the annual report.

• (5) To re-elect Stephen Le Page as an Independent Director of the Company. Mr Le Page has been a Director of the Company since October 2014 and has served as the Company’s Audit Committee Chairman since then. For further information on Mr Le Page, please refer to page 60 of the annual report.

• (6) To re-elect Paul Meader as an Independent Director of the Company. Mr Meader has been a Director of the Company since May 2014 and has served as Chairman of the Company since November 2015. For further information on Mr Meader, please refer to page 60 of the annual report.

• (7) To re-elect Atosa Moini as an Independent Director of the Company. Ms Moini has been a Director of the Company since June 2017. For further information on Ms Moini, please refer to page 60 of the annual report.

• (8) To re-elect Paul Varotsis as an Independent Director of the Company. Mr Varotsis has been a Director of the Company since its inception in 2006 and has served as the Company’s Senior Independent Director since December 2015. For further information on Mr Varotsis, please refer to page 60 of the annual report.

• (9) To approve the quarterly dividend payments each March, June, September and December and to note that the following dividends should be considered as relating to the financial year ended 31 July 2018: the quarterly dividend of €0.15 paid on 29 March 2018; the quarterly dividend of €0.16 paid on 28 June 2018, the quarterly dividend of €0.15 paid on 27 September 2018 and the quarterly dividend of €0.16 payable in December 2018.

SPECIAL RESOLUTIONS

To consider and, if thought fit, pass the following as Special Resolutions:

• (10) THAT in accordance with Article 5(7) of the Articles, the Board be and is hereby authorised to issue equity securities (within the meaning of the Articles) as if Article 5(2) of the Articles did not apply to any such issue, provided that this power shall be limited to the issue of up to a maximum number of 3,657,116 Ordinary Shares (being not more than 10% of the number of Ordinary Shares in issue as at the date of this notice) or such other number being not more than 10% of the Ordinary Shares in issue at the date of the AGM, whether in respect of the sale of shares held as treasury shares, the issue of newly created shares or the grant of rights to subscribe for, or convert securities into, shares which, in accordance with the Listing Rules, could only be issued at or above net asset value per share (unless offered pro rata to existing Shareholders or pursuant to further authorisation by Shareholders). This authority will expire on the conclusion of the next AGM of the Company unless previously renewed, varied or revoked by the Company at a general meeting, save that the Company shall be entitled to make offers or agreements before the expiry of such power which would or might require equity securities to be allotted after such expiry and the Directors shall be entitled to allot equity securities pursuant to any such offer or agreement as if the power conferred hereby had not expired. For further information, please see Note 10 overleaf.

annual report and accounts 2018 VOLTA FINANCE LIMITED 65

AGENDA CONTINUED

SPECIAL RESOLUTIONS CONTINUED

• (11) THAT the Company be generally and unconditionally authorised to make market purchases, for the purposes of Section 315 of the Companies (Guernsey) Law, 2008 (as amended), of Ordinary Shares in the Company on such terms and in such manner as the Directors may from time to time determine, provided that:

• (a) the maximum number of Ordinary Shares hereby authorised to be acquired is 5,482,017, representing not more than 14.99% of the issued Ordinary Share capital of the Company as at the date of this notice;

• (b) the minimum price (excluding expenses) payable by the Company for each Ordinary Share is 1% of the average of the mid‑market values of the Ordinary Shares of that class in the Company for the five business days prior to the date of the market purchase;

• (c) the maximum price (excluding expenses) which may be paid for any such Ordinary Share is the higher of (i) an amount equal to 105% of the average of the middle market quotations for an Ordinary Share in the Company as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to be purchased; and (ii) the amount stipulated by Article 3(2) of the EU Buy‑back and Stabilisation Regulation (2016/1052/EU) being the higher of the price of the last independent trade and the highest current independent bid for an Ordinary Share in the Company on the trading venues where the market purchases by the Company pursuant to the authority conferred by this resolution will be carried out (provided that limb (ii) shall not apply where the purchases would not bear the risk of breaching the prohibition on market abuse);

• (d) the authority hereby conferred shall expire at the end of the next Annual General Meeting of the Company unless previously renewed, varied or revoked by the Company in general meeting; and

• (e) the Company may make a contract to purchase the Ordinary Shares under the authority hereby conferred prior to the expiry of such authority, which contract will or may be executed wholly or partly after the expiry of such authority, and may purchase its Ordinary Shares in pursuance of any such contract.

NOTES

1. The Company’s Accounts were published on 30 October 2018.

2. Copies of the Company’s Memorandum and Articles of Incorporation and its 2018 Accounts are available for inspection at the Company’s registered office during normal business hours and are available on request free of charge from the Company Secretary, BNP Paribas Securities Services S.C.A. Guernsey Branch, BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey GY1 1WA, Channel Islands (e‑mail: voltafinance@sannegroup.com until 31 October 2018 and from this date, the new contact details will be guernsey.bp2s.volta.cosec@bnpparibas.com) and from the Listing Agent, ING Bank N.V., Bijlmerplein 888, 1102 MG Amsterdam, The Netherlands, or from the Company’s website (www.voltafinance.com).

3. Only those investors holding Ordinary Shares as at 10:00am (London time) on 28 November 2018 shall be entitled to attend and/or exercise their voting rights attached to such shares at the AGM.

4. Investors holding Ordinary Shares via a broker/nominee who wish to attend or to exercise the voting rights attached to the shares at the AGM should contact their broker/nominee as soon as possible.

5. Should the Class B Shareholder being entitled to vote wish to attend or exercise the voting rights attached to the share at the AGM they should contact the Company Secretary as soon as possible.

6. A Shareholder who is entitled to attend, speak and vote at the AGM is entitled to appoint one or more proxies to attend, speak and vote instead of him or her. A proxy need not be a member of the Company.

7. More than one proxy may be appointed provided each proxy is appointed to exercise the rights attached to different shares.

8. The quorum requirements for the conduct of Ordinary Business and Special Business are set out under Article 17 of the Articles.

9. In accordance with the Articles, the notice period for an AGM of the Company is 21 clear calendar days (plus 24 hours deemed service of notice).

10. Article 5 of the Articles requires that where Ordinary Shares are issued, or rights to subscribe for, or convert any securities into, Ordinary Shares are granted, wholly for cash, or where Ordinary Shares are sold out of treasury wholly for cash, either Shareholder approval must be sought to make a non‑pre‑emptive offer or a pre‑emptive offer must be made to all existing Shareholders.

11. For and on behalf of

SANNE GROUP (GUERNSEY) LIMITED COMPANY SECRETARY 29 OCTOBER 2018

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VOLTA FINANCE LIMITED

(UNTIL 31 OCTOBER 2018)

Third Floor, La Plaiderie Chambers La Plaiderie, St Peter Port Guernsey GY1 1WG Channel Islands

Tel: +44 (0)1481 739811 E-mail: voltafinance@sannegroup.com Website: www.voltafinance.com

VOLTA FINANCE LIMITED

(FROM 31 OCTOBER 2018) BNP Paribas House St Julian’s Avenue, St Peter Port Guernsey GY1 1WA Channel Islands

Tel: +44 (0)1481 750800 E-mail: guernsey.bp2s.volta.cosec@bnpparibas.com Website: www.voltafinance.com