BC12.L Regulatory News (BC12)

25 June 2012

BETTER CAPITAL PCC LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital PCC Limited is pleased to announce its 2012 final results for both the 2009 Cell and the 2012 Cell.

Company Final Results

·; Innovative conversion in to a protected cell company with two quoted cells

·; £169.9 million raised for the 2012 Cell

·; 24.88 per cent. growth in NAV in the 2009 Cell

·; Both 2009 Cell and the new 2012 Cell continue to trade at a premium to NAV

·; £422.0m total net asset value

Chairman's Statement

I am pleased to present the second annual report of the Company and am delighted to report that the Company has enjoyed an extremely busy year.

Company re-organisation and fundraising

Following a period of steady investing out of Fund I, the Company decided to raise a new fund in the Autumn of 2011. Given the difficult market conditions prevailing at the time, the backing received from the investor pool was a testimony of their belief in the Better Capital model.

On 12 January 2012, the Company converted from a Guernsey non-cellular to a Guernsey protected cell company. Upon conversion, the Company created the 2009 Cell to which were attributed, at the date of conversion, all of the members' shares, capital, assets and liabilities including all their investments in Fund I. The Company also established the 2012 Cell to raise capital through the issue of the 2012 Cell shares for investment in Fund II.

On 13 January, 169,861,895 2012 Cell shares were admitted to the UKLA Official List and to trading on the Main Market of the London Stock Exchange (ticker: BC12.L), at the launch price of £1 per share.

As a result of the above, the Company has two established cells, the 2009 Cell and the 2012 Cell, both London listedand is therefore currently in a unique position among public investment companies.

Accordingly, the Board will continue to have regard both to what is generally considered to be best practice in relation to corporate governance of investment companies and also to the extent to which the Company's status as a protected cell company may merit and/or require particular treatment. The Company will continue to maintain a dialogue with the Association of Investment Companies in relation to the implications of its protected cell company status.

The 2009 Cell has the investment objective of generating attractive total returns from investing through Fund I. The 2012 Cell has the investment objective of generating attractive total returns from investing through Fund II. Each has a portfolio of distressed businesses, with returns being expected to be substantially from capital growth.

2009 Cell has committed an aggregate of £203.8 million to Fund I and 2012 Cell has committed an aggregate of £165.5 million to Fund II.

Investment activities

Fund I has enjoyed a particularly busy year. Net investments of £92.8 million were made in the year, taking the total committed to £176.3 million. Fund I acquired four company groups and four bolt-on investments to existing investee companies in the year and also made a partial disposal. At 31 March 2012, total cash uninvested stood at £28.7 million. The GP Company of Fund I is of the opinion that there is sufficient capital for a further new investment.

The prospects in Fund II are encouraging as demonstrated by the acquisitions of Everest and Jaeger (post year end) within a short timescale, following fundraising.

Portfolios

The portfolios are now of a considerable size, with combined revenues of over £900 million per annum and over 6,000 people working in the portfolio companies.

Fund I GP Company, has informed the Board that the underlying Fund I portfolio companies are responding well to their respective change programmes and demonstrating improving performance. Progress at Reader's Digest has been more difficult and slower than originally expected.

Whilst still early days, Fund II GP Company has advised the Board of the satisfactory progress achieved to date in the two new investments.

Deal flow

In just over two years since launch, the Company has grown from its start-up position to becoming the leading turnaround investor of mid-market businesses in the UK and Republic of Ireland. This has been no mean feat.

The Better Capital brand was developed on the back of a group of highly experienced turnaround professionals working together as a cohesive team. Significant emphasis has been placed on developing meaningful relationships with the advisory community, lending institutions, corporates and many potential sources of deals, initially to create the Better Capital brand awareness and, latterly, to impress that the Company has a demonstrated solution to save businesses that are in financial and operational distress.

Better Capital LLP, the Consultant to Fund I GP and Fund II GP, has advised that deal flow in the year to 31 March 2012 has remained broadly consistent with the prior period; however, the opportunities are generally more compelling and larger.

At 31 March 2012, Better Capital LLP had logged a total of 719 leads. Consistent with prior period, leads have come from varied sources and cover many industries.

Outlook

At the time of writing, the exit of Greece from the Eurozone is looking increasingly likely. Spanish yields have risen dramatically, even following the bail out of its banking sector. Relations between Germany and France are weak. Forecast economic growth for the Eurozone is poor. All this represents a considerable threat to the stability of the Eurozone.

The UK economy is formally back in recession. GDP shrinkage in Q1 2012 was worse than predicted.

The malaise experienced in the UK and wider European economies dictates that most of the Funds' portfolio companies operate in challenging market conditions. However, the change programmes instigated in the Funds' portfolio companies are shaping these businesses well to cope with a period of subdued growth.

However, the poor economic news actually bodes well for opportunities for the Funds to deploy the remaining capital at attractive valuations.

Richard Crowder

Chairman

22 June 2012

2009 Cell Final Results

·; £176.3 million / 86.5 per cent. committed

·; 7 completed Fund I platform acquisitions to 31 March 20121

·; 6 completed Fund I bolt-on acquisitions to 31 March 2012

·; 2 further Fund I bolt-on acquisitions completed post 31 March 2012

·; 1 partial divestment in the year

·; 24.88 per cent. increase in NAV (net of issue costs)

·; Capacity for one further platform investment

1 DigiPos and Clarity are in the process of merging

2 Based on a weighted average issue price of ordinary shares net of share issue costs

2012 Cell Final Results

·; £169.9 million total capital raised

·; £25.0 million / 15.1 per cent. committed

·; 1 completed Fund II platform acquisition to 31 March 2012

·; 1 further Fund II platform acquisition completed post 31 March 2012

·; Encouraging start to investing the proceeds of Fund II

·; Substantial deal flow

1 Based on a weighted average issue price of ordinary shares net of share issue costs.

Enquiries:

Better Capital Limited +44 (0)1481 716 000

Mark Huntley (Director)

Laurence McNairn (Administrator and Company Secretary)

Numis Securities Limited (Corporate Broker & Financial Adviser) +44 (0)20 7260 1000

Nathan Brown

Oliver Hardy

Powerscourt (Public Relations Adviser) +44 (0) 20 7250 1446

Roderick Cameron

Rory Godson

Report of the Directors

The Directors hereby submit the annual report and audited financial statements of the Company for the year ended 31 March 2012, the 2009 Cell for the year ended 31 March 2012 and the 2012 Cell for the period ended 31 March 2012.

General Information

The Company is a limited liability, Closed-ended Investment Company, which was incorporated on 24 November 2009 in Guernsey and which, by special resolution of its members, converted to a protected cell company on 12 January 2012 and on that same day changed its name from Better Capital Limited to Better Capital PCC Limited. It has an unlimited life and is registered with the GFSC as a Registered Closed-ended Collective Investment Scheme. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

Upon conversion, the Company established the 2009 Cell to which it attributed its investment in Fund I which has a portfolio of investments in distressed businesses. It also established a new protected cell, the 2012 Cell, which issued new shares raising £169.9 million for investment through the 2012 Cell into Fund II which will invest in a portfolio of distressed businesses.

There are currently two protected cells, being the 2009 Cell and the 2012 Cell.

The Cells have the investment objective of generating attractive total returns from investing (through the Funds) in portfolios of businesses which have significant operating issues and may have associated financial distress, with a primary focus on businesses which have significant activities within the United Kingdom and Ireland. Such returns being expected to be largely derived from capital growth.

Business Review

A review of the Company's business and its likely future development is provided in the Chairman's Statement.

Principal Activities

The principal activity of the Company is to act as a feeder fund through each Cell and pursue an investment objective which aims to generate attractive total returns by means of a policy of investing (2009 Cell through Fund I and 2012 cell through Fund II) in a portfolio of distressed businesses, such returns being expected to accrue largely through capital growth.

Results and Dividend

The results of the Company for the year are shown in the audited statement of comprehensive income.

The results of the 2009 Cell for the year are shown in the audited statement of comprehensive income.

The results of the 2012 Cell for the period are shown in the audited statement of comprehensive income.

The Net Asset Value of the Company's Cells as at 31 March 2012 was:

2009 Cell - £256.0 million (2011: £210.4 million)

2012 Cell - £166.0 million (2011: n/a)

The Directors have recommended no dividend be paid in respect of the year ended 31 March 2012. The Company's investment objective is focused primarily on capital appreciation by investing in the Funds through the Cells. The Directors intend to make dividend distributions to Shareholders as and when such distributions are, in their view, feasible.

Annual General Meetings

The Annual General Meetings of the Company and the Cells will be held 31 July 2012 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. The AGM of the 2009 Cell will be held at 09.30am. The AGM of the 2012 Cell will be held at 09.45am or, if later, immediately following the conclusion of the AGM of the 2009 Cell. The AGM of the Company will be held at 10.30am or, if later, immediately following the conclusion of the AGM of the 2012 Cell. Details of the resolutions to be proposed at the AGMs, together with explanations, appear in the Notices of Meetings which are being sent to Shareholders at the same time as this annual report.

Members of the Board , including the Chairman and the audit committee chairman, will be in attendance at the AGMs and will be available to answer shareholder questions.

Statement of Directors Responsibilities

The Directors are responsible for preparing the annual report and the financial statements for each financial year which give a true and fair view of the state of affairs of the Company, the 2009 Cell and the 2012 Cell and of the respective profit for the year/period then ended, in accordance with applicable Guernsey law and those IFRSs as adopted by the European Union. In preparing these financial statements, International Accounting Standard 1 - Annual Financial Reporting as adopted by the European Union requires the Directors 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; and

·; prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the Company and its Cells and which enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that, so far as they are aware, there is no information relevant to the audit of which the Company's auditor is unaware. The Directors also confirm that, they have taken all steps they ought to have taken as Directors to make themselves aware of any information relevant to the audit and to establish that the Company's auditor is aware of that information.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.bettercapital.gg). Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

Responsibility Statement

Each of the Directors, whose names and functions are listed in this Report confirm that, to the best of each person's knowledge and belief:

·; The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and results of the Company, the 2009 Cell and the 2012 Cell; and

·; The Chairman's Statement and the General Partner's Reports include a fair review of the development and performance of the business and the position of the Company, the 2009 Cell and the 2012 Cell and Note 12 to the respective financial statements provides a description of the principal risks and uncertainties that they face.

Listing Requirements

Throughout the period since being admitted to the Official List maintained by the Financial Services Authority, the Company has complied with the Listing Rules of the UK Listing Authority.

Corporate Governance Statement

The Board recognises the value of good corporate governance and, in particular, has regard to the requirements of the UK Code (available from the Financial Reporting Council's website, www.frc.org.uk).

The Company's prospectus dated 19 December 2011 stated that the Company was, and intended to continue to be, in compliance with the UK Code. The Company is a member of the AIC and the Board of the Company has accordingly considered, and resolved to follow, the principles and recommendations of the AIC Code by reference to the AIC Guide (both available from the AIC's website, www.theaic.co.uk). A new version of the AIC Code has been published in March 2012 which is aligned with the UK Code and the Board reports against the new version of the AIC Code.

The GFSC Code came into force in Guernsey on 1 January 2012. Under the GFSC Code, the Company shall be deemed to satisfy the GFSC Code provided that it continues to conduct its governance in accordance with the requirements of the UK Code.

The AIC Code, as explained by the AIC Guide, addresses all the principles set out in Section 1 of the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies such as the Company. The Board considers that reporting against the principles and recommendations of the AIC Code, by reference to the AIC Guide (which incorporates the UK Code), provides better information to shareholders.

The UK Code includes provisions relating to:

·; the role of the chief executive;

·; executive directors' remuneration; and

·; the need for an internal audit function.

The Company has complied with the recommendations of the AIC Code and the relevant provisions of Section 1 of the UK Code, except as set out below.

For the reasons set out in the AIC Guide, and in the preamble to the UK Code, the Board considers these provisions are not relevant to the position of the Company, being a self-managed investment company which delegates most day-to-day functions to third parties and has only non-executive directors. The Company has therefore not reported further in respect of these provisions.

Except as disclosed in the following paragraphs, the Company has complied throughout the period with the provisions of the AIC Code.

·; In view of its non-executive and independent nature, the Board considers that it is not necessary for a senior independent director to be appointed as recommended by principle 1 of the AIC Code, however all members of the Board are available to shareholders if they have unresolved concerns.

Fund I itself is not subject to any code of corporate governance. However, Fund I acts through Fund I GP which in turn acts through Fund I GP Company which is licensed under the POI Law. As a POI Licensee the board of the Fund I GP Company has regard to the GFSC Code, which sets out the general responsibilities of the board of the Fund I GP Company and includes proposals to deal with risk management, internal control procedures, the duties of directors, the composition of the Fund I GP Company Board and self-assessment. The Fund I GP Company is managed in a manner which complies with the GFSC Code.

Fund II itself is not subject to any code of corporate governance. However, the Fund II acts through Fund II GP which in turn acts through Fund II GP Company which is licensed under the POI Law. As a POI Licensee the board of the Fund II GP Company has regard to the GFSC Code, which sets out the general responsibilities of the board of the Fund II GP Company and includes proposals to deal with risk management, internal control procedures, the duties of directors, the composition of the Fund II GP Company Board and self-assessment. The Fund II GP Company is managed in a manner which complies with the GFSC Code.

The Board

The Directors of the Company at the date of this report are Richard Crowder (Chairman), Richard Battey, Philip Bowman and Mark Huntley. Each of the four Directors of the Company was appointed upon incorporation of the Company on 24November 2009 and all submitted themselves for re-election at the first annual general meeting of the Company. Any Director who has been appointed by the Board since the last general meeting or who held office at the time of the two preceding annual general meetings and who did not retire at either of them must offer himself for reappointment by the members. As they were re-elected at the prior AGM of the Company, Messrs Crowder, Battey and Bowman are not required to submit themselves for re-election at the AGM of the Company. Mr Huntley, as a director of the Administrator, the Fund I GP Company and the Fund II GP Company, is subject to annual re-election in accordance with the Listing Rules.

Any director who has held office with the Company, other than employment or executive office, for a continuous period of nine years or more at the date of the meeting, shall retire from office and may offer himself for reappointment by the members. However, the Company will consider whether there is any risk that such director might reasonably be deemed to have lost independence through such long service. At such time, any director would be subject to annual re-election by the shareholders. The Management Engagement, Nomination and Remuneration Committee shall take the lead in any discussions relating to the appointment or re-appointment of directors.

The Board meets on at least a quarterly basis. The dates for each scheduled meeting are planned at the beginning of the year and confirmed in writing upon notice in accordance with the Company's articles of incorporation. Meetings for urgent issues may be and are convened at short notice if all directors are informed and agree. In addition to formal Board and/or committee meetings and to the extent practicable and appropriate, the Directors maintain close contact with each other by email and conference calls and with the Fund I GP and Fund II GP for the purpose of keeping themselves informed about Fund I's and Fund II's activities.

The Directors have adopted a set of Reserved Powers, which establish the key purpose of the Board and detail its major duties; in so doing the Directors demonstrate the seriousness with which they take their fiduciary responsibilities and monitor the effectiveness of the Board's actions.

During the year to 31 March 2012 the Directors' remuneration was paid as follows (of which £nil (2011: £33,750) was outstanding at the year end):

31 March 2012

\* The annual fees were increased by 50 per cent. upon the PCC Conversion and establishment of the 2012 Cell. Prior to the Conversion the Directors' fees were wholly attributable to Better Capital Limited which were attributed to the 2009 Cell on Conversion. Subsequent to the Conversion, the Directors' fees are apportioned between the Cells on a 50/50 basis, therefore, the Directors' fees borne by each Cell are proportionately lower when compared to two separate companies. In the case of the 2009 Cell the Directors' fees are therefore 25 per cent. lower per annum.

31 March 2011

All of the Directors are non-executive. The Board considers Messrs Crowder, Battey and Bowman as independent of the Fund I GP and Fund II GP and free from any business or other relationship that could materially interfere with the exercise of their independent judgment. The Board as a whole is independent of the Consultant, the Fund I GP and the Fund II GP. Mr Huntley is a director of the Administrator, the Fund I GP Company and the Fund II GP Company.

The chairman of the Board must be independent and is appointed in accordance with the Company's articles of incorporation.

Other remuneration paid to each Director of £10,000 during the year was in respect of additional services rendered in relation to the Conversion to the PCC and the launch of 2012 Cell and associated entities and totalled £40,000. These have been included within share premium as costs of raising capital within 2012 Cell.

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring the protection of investors. A summary of the Board's responsibilities is as follows:

·; statutory obligations and public disclosure;

·; strategic matters and financial reporting;

·; oversight of personnel matters;

·; risk assessment and management including reporting, compliance, governance, monitoring and control; and

·; other matters having a material effect on the Company.

As the Company has only been in operation since late 2009, the Board did not consider that there would be substantial value to shareholders in conducting a performance evaluation of the Board and its committees.. The Board has put in place a timetable for completing such evaluations for subsequent reporting periods, a summary of which will be included in future annual reports. Notwithstanding that there has so far not been a formal performance appraisal, the Directors believe that the current mix of skills, experience, ages and length of service of the Directors is appropriate to the requirements of the Company. With any new director appointment to the Board, consideration will be given as to whether an induction process is necessary.

The Board has access to independent legal advice at the Company's expense where the Directors judge this to be necessary in order to fulfil their duties. As a result of the use of professional service providers and the nature of the Company's operations, the Company does not have any employees.

The Company has adopted a share dealing code for the Board and will seek to ensure compliance by the Board and relevant personnel of the Consultant, the Fund I GP and the Fund II GP with the terms of the share dealing code. The share dealing code is compliant with the Model Code for Directors' Dealings contained in the Listing Rules.

The primary focus at board meetings is a review of investment performance and associated matters such as asset allocation, share price discount/premium management, investor relations, peer group information, gearing and industry issues.

The attendance record of the Directors is set out below:

* Mr Huntley is not a member of the Audit Committee

** In addition to the scheduled Board Meetings, a further 8 Board Meetings and 6 Board committee meetings were held during the year. The Board committee was established solely for the purpose of the Company's Conversion to a PCC, the creation of the 2012 Cell and its admission to the Official List of the UKLA and to trading on the LSE.

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Directors

Richard Crowder (Chairman, Guernsey resident (aged 62)

Richard Crowder holds a range of non-executive directorships and consultancy appointments. He works with a wide range of investment styles and portfolios as well as being a director of a variety of family companies where he acts as the offshore adviser/director. In his early career, he worked as an investment manager with Ivory & Sime in Edinburgh and as a head of investment research with W.I. Carr in the Far East. He undertook a wide range of responsibilities for Schroders in London and the Far East, culminating in the role of Managing Director for Schroders' Singapore associate. Having then worked as Chairman of Smith New Court Far East and Director of Smith New Court Plc, Richard Crowder was the founding Managing Director of Schroders' Channel Islands subsidiary from 1991 until he became a full time non-executive director and consultant in 2000. He is a member of the Securities & Investment Institute and he resides in Guernsey. Mr Crowder was appointed as a Director on 24 November 2009.

Richard Battey Guernsey resident (aged 60)

Richard Battey is a non-executive director of a number of investment companies including AcenciA Debt Strategies Limited (UK listed), Juridica Investments Limited (AIM listed), NB Global Floating Rate Income Fund Limited (UK listed), Princess Private Equity Holding Limited (Frankfurt and UK listed) and Prospect Japan Fund Limited (UK listed). For each of these five companies he is Chairman of the Audit Committee. He is a Fellow of the Institute of Chartered Accountants in England and Wales having qualified with Baker Sutton & Co. in London in 1977. He joined the Schroder Group in December 1977 and worked first in London with J. Henry Schroder Wagg & Co. Limited and Schroder Investment Management in financial and management accounting roles and then in Guernsey helping to build Schroders' offshore private banking business. Richard was a director of Schroders (C.I.) Limited in Guernsey from April 1994 to December 2004 where he served as Finance Director and Chief Operating Officer. He was a director of a number of the Schroder Group's Guernsey companies covering banking, investment management, trusts, insurance and private equity administration retiring from his last Schroder directorship in December 2008. He was formerly Chief Financial Officer of CanArgo Energy Corporation (May 2005 to July 2006), which was engaged in oil and gas exploration and production in Georgia and Kazakhstan. Mr Battey was appointed as a Director on 24 November 2009.

Philip Bowman UK resident (aged 59)

Philip Bowman became Chief Executive of Smiths Group plc in December 2007. He previously held the positions of Chief Executive at Scottish Power plc from early 2006 until mid 2007 and Chief Executive at Allied Domecq plc between 1999 and 2005. Mr Bowman is currently the senior independent director of Burberry Group plc and a director of Berry Bros. & Rudd Limited. Past board appointments include British Sky Broadcasting Group plc, Scottish & Newcastle Group plc and Coles Myer Limited as well as Chairman of Liberty plc and Coral Eurobet plc. His earlier career includes five years as a director of Bass plc (now Mitchells & Butler plc and Intercontinental Hotel Group plc), where he held the roles of Chief Financial Officer and subsequently Chief Executive of Bass Taverns. Mr Bowman is an Australian national and was appointed as a Director on 24 November 2009.

Mark Huntley Guernsey resident (aged 53)

Mr Huntley is an Associate Member of the Chartered Institute of Bankers. He is Managing Director of the Administrator, an independent fund administrator based in Guernsey. He is also a director of BECAP GP Limited, the general partner of BECAP GP LP which in turn acts as general partner of Fund I and BECAP12 GP Limited, the general partner of BECAP12 GP LP which in turn acts as general partner of Fund II. Prior to establishing the Administrator, he was Head of Business Development & Communications for the Baring Financial Services Group. At Barings, he was also Deputy Managing Director of Guernsey International Fund Managers Limited, where he was responsible for alternative investments and emerging market funds until April 2000. He has over 30 years' experience in offshore funds, trust and fiduciary services and private banking, with particular focus on the specialist and alternative fund sectors gained whilst at Barings over 19 years and, prior to that, with The First National Bank of Chicago and National Westminster Guernsey Trust Company. He holds appointments for a number of listed and unlisted funds and fund related companies. He is a founding director of the Channel Islands Stock Exchange LBG. Mr Huntley was appointed as a Director on 24 November 2009.

Shareholdings of the Directors

The Directors of the Company and their beneficial interests in the 2009 Shares and the 2012 Shares as at 31 March 2012 are detailed below:

2009 Cell

* Per cent. holding is given on one for one share holding basis rather than on voting rights.

** Following the divorce from his wife on 27 June 2011, Richard Crowder's beneficial interest in shares of the Company reduced from 100,000 to 50,000 being those shares held on his own account.

2012 Cell

* Per cent. holding is given on one for one share holding basis rather than on voting rights.

The Directors acquired their 2012 Shares on admission of the 2012 Cell to trading on the LSE on 13 January 2012.

There have been no changes to the Directors' shareholdings since 31 March 2012

Committees of the Board

Audit committee

The Company has established an audit committee with formally delegated duties and responsibilities within written terms of reference (which are available from the Company's website, www.bettercapital.gg).

The audit committee is chaired by Richard Battey, and its other members are Richard Crowder and Philip Bowman. Only independent directors will serve on the audit committee and members of the audit committee will have no links with the Company's external auditor and will be independent of the Consultant, the Fund I GP and the Fund II GP. The audit committee meets no less than twice a year in Guernsey, and meets the external auditor at least once a year in Guernsey. The identity of the chairman of the audit committee is reviewed on an annual basis and the membership of the audit committee and its terms of reference is kept under review. The chairman of the audit committee must be a non-UK tax resident.

The audit committee is responsible for monitoring the financial reporting process and the effectiveness of the Company's internal control and risk management systems. The audit committee is also responsible for overseeing the Company's relationship with the external auditor, including making recommendations to the Board on the appointment of the external auditor and their remuneration. The committee considers the nature, scope and results of the auditor's work, monitors the independence of the external auditor, and reviews, develops and implements policy on the supply of non-audit services that are to be provided by the external auditor. The audit committee also reviews, considers and, if thought appropriate, recommends for the purposes of the Company's financial statements, 2009 Cell's financial statements and 2012 Cell's financial statements, valuations prepared by the Fund I GP and Fund II GP in respect of the investments of Fund I and Fund II. It also receives and reviews reports from the Fund I GP, the Fund II GP and the Company's external auditor relating to the Company's annual report and financial statements. The audit committee focuses particularly on compliance with legal requirements, accounting standards and the relevant Listing Rules and ensuring that an effective system of internal financial and non-financial controls is maintained. Ultimate responsibility for reviewing and approving the annual report and financial statements will remain with the Board.

Management Engagement, Nomination and Remuneration Committee

On 29 February 2012, the Board established a management engagement, nomination and remuneration committee (the "MNR Committee")which held its first meeting on 20 June 2012. The MNR Committee is chaired by Philip Bowman and shall be made up of at least three members, who shall be independent of the General Partners and the Consultant. The MNR Committee currently consists of Philip Bowman, Richard Battey and Richard Crowder. Any non-executive Directors who are not considered independent do not take part in the MNR Committee's deliberations regarding remuneration levels. The MNR Committee meets at least once a year pursuant to its terms of reference which are available on the Company's website (www.bettercapital.gg).

Regarding management engagement, the MNR Committee provides a formal mechanism for the review of the performance of the Company's advisors. It carries this review out through consideration of a number of objective and subjective criteria and through a review of the terms and conditions of the advisors' appointments with the aim of evaluating performance, identifying any weaknesses and ensuring value for money for the Company's shareholders.

Regarding nomination, the MNR Committee's remit is to regularly review the structure, size and composition of the Board, to give full consideration to succession planning for Directors, to keep under review the leadership needs of the Company and be responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise.

Regarding remuneration, the MNR Committee determines and agrees with the Board the remuneration of the Company's Chairman and non-executive Directors and in determining such remuneration, takes into account all factors which it deems necessary including any relevant legal requirements, the provisions and recommendations in the AIC Code, the Listing Rules and associated guidance.

From 1 April 2012, the Chairman of the MNR Committee receives an additional £5,000 per annum in director's fees in recognition of the additional work the role requires. In recognition of the work performed in the setting up of the MNR Committee, he will also receive a one-off payment of £417.

Internal Control and Financial Reporting

The Directors acknowledge that they are responsible for establishing and maintaining the Company's system of internal control and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatements or loss. The Directors review all controls including operations, compliance and risk management. The key procedures which have been established to provide internal control are:

• The Board monitors the actions of the Fund I GP, the Fund II GP and undertakings of their common Consultant at regular Board meetings and is given frequent updates on developments arising from the operations and strategic direction of the underlying investee companies. The Board has also delegated administration and company secretarial services to the Administrator; however it retains accountability for all functions it delegates.

• The Board considers the process for identifying, evaluating and managing any significant risks faced by the Company and by each of the 2009 Cell and 2012 Cell on an on-going basis. It ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld. In light of recent market volatility and economic turmoil, particular attention has been given to the effectiveness of controls to monitor liquidity risk, asset values and counterparty exposure.

• The Board clearly defines the duties and responsibilities of the Company's agents and advisors and appointments are made by the Board after due and careful consideration. The Board monitors the ongoing performance of such agents and advisors and will continue to do so primarily through the newly established management engagement, nomination and remuneration committee.

• The Fund I GP, Fund II GP and Administrator together maintain a system of internal control on which they report to the Board. The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Fund I GP, Fund II GP and Administrator, including the Administrators internal audit functions, provide sufficient assurance that a sound system of risk management and internal control, which safeguards shareholders' investment and the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

• The systems of control referred to above are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows therefore that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Company. Suitable insurance is in place, having been renewed on 11 January 2012 to reflect the Conversion and establishment of the 2009 Cell and 2012 Cell.

Dealings with shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Company's annual general meeting provides a forum for shareholders to meet and discuss issues with the Directors of the Company. The Chairman and other directors are also available to meet with shareholders at other times, if required. In addition, the Company maintains a website which contains comprehensive information (www.bettercapital.gg), including company notifications, share information, financial reports, investment objectives and policy, investor contacts and information on the Board and corporate governance.

Major Shareholders

As at 28 May 2012, insofar as is known to the Company, the following persons were interested, directly or indirectly, in 5 per cent. or more of the 2009 Shares and 2012 Shares in issue:

2009 Cell

2012 Cell

Other than the 100 Core Shares issued to the Better Capital Purpose Trust as part of the Conversion, the Directors confirm that there are no securities in issue that carry special rights with regards to the control of the Company. The Core Shares have no voting rights for so long as Cell Shares are in issue.

The Company's issued share capital consists of 206,780,952 2009 Shares and 169,861,895 2012 Shares. Under the Company's articles of incorporation, at any general meeting of the Company:

• each holder of 2009 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2009 Share shall count as 1.1096 towards the total number of votes cast; and

• each holder of 2012 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2012 Share shall count as 0.9770 towards the total number of votes cast.

The figure which may be used by the Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Better Capital PCC Limited under the FSA's Disclosure and Transparency Rules, is the aggregate of the number of votes capable of being cast on a poll, namely 395,399,215. This is calculated as the sum of the 2009 Shares (206,780,952) multiplied by 1.1096 plus the 2012 Shares (169,861,895) multiplied by 0.9770.

Similarly, to calculate the numerator, Shareholders should multiply their holding of 2009 Shares by 1.1096 and multiply their holding of 2012 Shares by 0.9770. The sum of those calculations will result in the relevant number of voting rights for the numerator.

Directors' Authority to Issue Shares

2009 Cell

At the Extraordinary General Meeting of the Company held on 11 January 2012, the shareholders resolved by Special Resolution, toissue up to five per cent. of the aggregate 2009 Shares admitted to trading on the LSE, free of restrictions under the Articles, which would otherwise require the Company first to offer the new 2009 Shares to the current holders of the 2009 Shares. In any rolling three-year period, the Company will not issue more than 7.5 per cent. of the 2009 Shares. Although the Directors have no current intention to use this authority the Board reserves the right to utilise it in circumstances deemed appropriate.

This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the annual general meeting of the Company to be held on 31 July 2012.

2012 Cell

At the Extraordinary General Meeting of the Company held on 11 January 2012, the shareholders resolved by Special Resolution, toissue up to five per cent. of the aggregate 2012 Shares admitted to trading on the LSE, free of restrictions under the Articles, which would otherwise require the Company first to offer the new 2012 Shares to the current holders of the 2012 Shares. In any rolling three-year period, the Company will not issue more than 7.5 per cent. of the 2012 Shares.

Although the Directors have no current intention to use this authority the Board reserves the right to utilise it in circumstances deemed appropriate.

This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the annual general meeting of the Company to be held on 31 July 2012. The Board proposes to renew this authority at the annual general meeting of the Company to be held on 31 July 2012.

Directors' Authority to Buy Back Shares

The current authority of the Company to make market purchases of up to a maximum of 14.99 per cent. of the issued 2009 Share Capital is renewable annually. At the Annual General Meetings to take place on 31 July 2012 the Company will seek to renew such authority in respect of the 2009 Shares and will seek an equivalent such authority in respect of the 2012 Shares. The Company will seek to renew such authorities at annual general meetings thereafter. Any buy back of 2009 Shares and/or 2012 Shares will be made subject to Guernsey law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board and not at the option of the Shareholders. Purchases of 2009 Shares and/or 2012 Shares will only be made through the market for cash at prices below the prevailing Net Asset Value of the 2009 Shares and/or 2012 Shares (as last calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the Listing Rules of the UK Listing Authority which provide that the price to be paid must not be more than 5 per cent. above the average of the middle market quotations for the 2009 Shares and/or 2012 Shares for the five business days before the shares are purchased unless previously advised to shareholders.

In accordance with the Company's Articles of Incorporation and Guernsey law up to 10 per cent. of the Company's shares may be held as treasury shares. The Company did not purchase any shares for treasury or cancellation during the year.

Articles of Incorporation

The Company's Articles may only be amended by special resolution of the shareholders and if the amendment affects the rights of the holders of shares of a particular cell, by a separate resolution of such holders only.

Independent Auditor

A resolution proposing the re-appointment of BDO Limited as Auditor of the Company and authorising the Directors to determine their remuneration will be presented at the Annual General Meeting. BDO Limited is also appointed as Auditor to Fund I and Fund II.

Fund I GP's Share and Carried Interest

The Fund I GP's Share is calculated under the terms of the Fund I Limited Partnership Agreement and as described in the Prospectus dated 19 December 2011. Pursuant to the terms of the Fund I Limited Partnership Agreement, where net income and net capital gains are insufficient to extinguish the Fund I GP's Share, Fund I shall advance a non-interest bearing loan to the extent of the Fund I GP's Share not already drawn by the Fund I GP. The loan is not recoverable from the Fund I GP other than by allocation of net income or net capital gains.

In the period under review, Fund I has advanced a non-interest bearing loan to its general partner of £3.1 million (2011: £3.6 million) in respect of the Fund I GP's Share. This has been accounted for when calculating the fair value of the investment by the Company in Fund I.

No amounts are yet liable to be paid in respect of carried interest.

Fund II GP's Share and Carried Interest

The Fund II GP's Share is calculated under the terms of the Fund II Limited Partnership Agreement and as described in the Prospectus dated 19 December 2011. Pursuant to the terms of the Fund II Limited Partnership Agreement, where net income and net capital gains are insufficient to extinguish the Fund II GP's Share, Fund II shall advance a non-interest bearing loan to the extent of the Fund II GP Share not already drawn by the Fund II GP. The loan is not recoverable from the Fund II GP other than by allocation of net income or net capital gains.

In the period under review, Fund II has advanced a non-interest bearing loan to its general partner of £0.5 million in respect of the Fund II GP's Share. This has been accounted for when calculating the fair value of the investment by the Company in Fund II.

No amounts are yet liable to be paid in respect of carried interest.

Going Concern

After making enquiries and given the nature of the Company, Fund I and its investments and Fund II and its investments, the Directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements, and, after due consideration, the Directors consider that the Company is able to continue for the foreseeable future.

By order of the Board

Richard Crowder

Chairman

22 June 2012

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

BETTER CAPITAL PCC LIMITED

(formerly Better Capital Limited)

We have audited the financial statements of Better Capital PCC Limited for the year ended 31 March 2012 which comprise the Company Statement of Financial Position, the Company Statement of Comprehensive Income, the Company Statement of Cash Flows, the Company Statement of Changes in Equity and the Company related Notes 1 to 14. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

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 is 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.

Respective responsibilities of the directors and auditor

As explained more fully in the Directors' Responsibilities Statement within the Report of the Directors, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's ("APB's") Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Company's affairs as at 31 March 2012 and of its profit for the year then ended;

·; have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·; have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

·; proper accounting records have not been kept by the Company; or

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

·; we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

Under the Listing Rules we are required to review:

·; the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Justin Marc Hallett ACA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

22 June 2012

Statement of Financial Position

As at 31 March 2012

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 22 June 2012 and signed on their behalf by:

Richard Crowder 

Chairman

Richard Battey 

Director

The notes form an integral part of the Company financial statements.

Statement of Comprehensive Income

For the year ended 31 March 2012

All activities derive from continuing operations.

The notes form an integral part of the Company financial statements.

Statement of Changes in Equity

For the year ended 31 March 2012

The notes form an integral part of the Company financial statements.

Statement of Cash Flows

For the year ended 31 March 2012

Note

Net cash used in operating activities includes £9,991 (2011: £4,812) interest received on cash balances.

The notes form an integral part of the Company financial statements.

Notes to the Audited Financial Statements

For the year ended 31 March 2012

1. General information

Better Capital Limited

Better Capital Limited was a non-cellular company limited by shares, which was incorporated on 24 November 2009 in Guernsey with an unlimited life and registered with the Commission as a Registered Closed-ended Collective Investment Scheme pursuant to the POI Law. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

Better Capital PCC Limited following the Conversion

Following the Conversion, on the 12 January 2012 by special resolution of its members, the Company is now a PCC limited by shares. It has maintained its date of incorporation, 24 November 2009 in Guernsey, and will continue with an unlimited life and continue to be registered with the Commission as a Registered Closed-ended Collective Investment Scheme pursuant to the POI Law.

The Company maintains a separate cell account for each class of shares, to which the proceeds of issue and the income arising from the investment of these proceeds in the respective Fund are credited, and against which the expenses allocated are charged. Under redemptions, shareholders are only entitled to their proportion of the net assets held in the cell relating to the particular shares.

There are currently two protected cells, being the 2009 Cell and the 2012 Cell.

The Cells have the investment objective of generating attractive total returns from investing (2009 Cell through Fund I and 2012 Cell through Fund II) in portfolios of businesses which have significant operating issues and may have associated financial distress, with a primary focus on businesses which have significant activities within the United Kingdom and Ireland. Such returns being expected to be largely derived from capital growth.

Upon conversion, the Company created the 2009 Cell to which were attributed, at the date of conversion, all of the members' shares, capital, assets and liabilities including all their investments in Fund I.

The 2012 Cell closed on the 12 January 2012, raising £169.9 million gross capital proceeds by way of a placing of shares.

Fund I is managed by its general partner, BECAP GP LP, which is in turn managed by its general partner BECAP GP Limited. Such arrangements are governed under the respective Limited Partnership Agreements, as amended.

Fund II is managed by its general partner, BECAP12 GP LP, which is in turn managed by its general partner BECAP12 GP Limited. Such arrangements are governed under the respective Limited Partnership Agreements, as amended.

2. Accounting policies

Basis of preparation

The financial statements for the year ended 31 March 2012 have been prepared in accordance with EU Adopted IFRSs.

The financial statements are prepared in accordance with the provisions of the Companies (Guernsey) Law, 2008.

The Company does not operate in an industry where significant or cyclical variations as a result of seasonal activity are experienced during the financial period. The underlying investee companies of Fund I and II may experience cyclical variations which may impact the valuation of the Company's investment in Fund I and II.

The principal accounting policies adopted are set out below.

Adoption of new and revised standards

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were issued but not yet effective (and in some cases had not yet been adopted by the EU) and may have a material impact on the financial statements of the Company.

New standards relevant to the entity:

·; IFRS 9: Financial Instruments - IFRS 9 replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: (1) those measured as at fair value and (2) those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The standard also results in one impairment method replacing the numerous impairment methods in IAS 39 that arise from the different classification categories. The Company only has 'loans and receivables' which will now be classified under the two categories as described above. However there is no expected impact on the measurement of these financial instruments. The Company will adopt IFRS 9 no later than the accounting period beginning on 1 January 2013.

·; IFRS 10: Consolidated financial statements - IFRS 10 provides additional guidance to assist in the determination of control where this is difficult to assess. The Company is yet to assess IFRS 10's full impact and intends to adopt IFRS 10 no later than the accounting period beginning on 1 January 2013.

·; IFRS 12: Disclosures of Interests in Other Entities - IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Company is yet to assess IFRS 12's full impact and intends to adopt IFRS 12 no later than the accounting period beginning on 1 January 2013.

·; IFRS 13: Fair value measurement - IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The Company is yet to assess IFRS 13's full impact and intends to adopt IFRS 13 no later than the accounting period beginning on 1 January 2013.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

The Company has not early adopted any standards, amendments and interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning on or after 1 April 2012 or later periods.

Foreign currencies

The functional currency of the Company is Pounds Sterling reflecting the primary economic environment in which the Company operates.

The presentation currency for financial reporting purposes is Pounds Sterling.

Financial instruments

Financial assets and financial liabilities are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the statement of financial position and statement of comprehensive income when there is a currently enforceable legal right to offset the recognised amounts and the Company intends to settle on a net basis or realise the asset and liability simultaneously.

Financial assets

The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics.

All financial assets are initially recognised at fair value. All purchases of financial assets are recorded at trade date, being the date on which the Company became party to the contractual requirements of the financial asset.

The Company has not classified any of its financial assets as Held to Maturity or as Available for Sale.

The Company's financial assets comprise of only loans and receivables and investments held at fair value through profit or loss.

a) Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They principally comprise trade and other receivables and cash and cash equivalents. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition, and subsequently carried at amortised cost using the effective interest rate method, less provisions for impairment. The effect of discounting on these financial instruments is not considered to be material.

b) Investments at fair value through profit or loss

i. Classification

The Company classifies its investments in Fund I and II as financial assets at fair value through profit or loss. The financial assets were designated by the Company at fair value through profit or loss at inception.

ii. Recognition

Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment.

iii. Measurement

The investments in Fund I and II are initially recognised at cost, being the fair value of consideration given.

International Accounting Standard 39, "Financial Instruments: Recognition and Measurement" requires investments treated as "financial assets at fair value through profit or loss" are subsequently measured at fair value. Fair value is defined as the amount for which an asset could be exchanged between knowledgeable willing parties in an arms length transaction.

The Directors base the fair value of the investments in Fund I and II on information received from the General Partners. The General Partners' assessment of fair value of investments held by Fund I and II, through Special Purpose Vehicles, is determined in accordance with the IPEV valuation guidelines. It is the opinion of the General Partners, that the IPEV valuation methodology used in deriving a fair value is not materially different from the fair value requirements of IAS 39.

iv. Fair value estimation

A summary of the more relevant aspects of IPEV valuations is set out below:

Marketable (Listed) Securities - Where an active market exists for the security, the value is stated at the bid price on the last trading day in the period. Marketability discounts should generally not be applied unless there is some contractual, governmental or other legally enforceable restriction preventing realisation at the reporting date.

Unlisted Investments - are carried at such fair value as the General Partners consider appropriate given the performance of each investee company and after taking account of the effect of dilution, the exercise of ratchets, options or other incentive schemes. Methodologies used in arriving at the fair value include prices of recent investment, discounted cost, earnings multiples, net assets, discounted cash flows analysis and industry valuation benchmarks.

Notwithstanding the above, the variety of valuation basis adopted and quality of management information provided by the underlying investee company means there are inherent difficulties in determining the value of these investments. Amounts realised on the sale of these investments will differ from the values reflected in these financial statements and the difference may be significant.

c) Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either:

·; when the Company has transferred substantially all the risks and rewards of ownership; or

·; when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or

·; when the contractual right to receive cash flow has expired.

d) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities

The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.

All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are recorded on trade date, being the date on which the Company becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Company's financial liabilities approximate to their fair values.

The Company's financial liabilities consist of only financial liabilities measured at amortised cost.

a) Financial liabilities measured at amortised cost

These include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

b) Derecognition of financial liabilities

A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

Capital

Financial instruments issued by the Company are treated as equity if the holder has only a residual interest in the assets of the Company after the deduction of all liabilities. The Company's shares are classified as equity instruments.

The Company considers its capital to comprise the 2009 Shares, 2012 Shares, Core Shares, share premium and retained earnings. There has been no change in what the Company considers to be capital since incorporation other than as part of the Conversion to a PCC. The Company is not subject to any externally imposed capital requirements.

Equity instruments

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds.

Incremental costs include those incurred in connection with the placing and admission which include fees payable under the Placing Agreement, legal costs and any other applicable expenses.

Income

Interest income is recognised on a time apportioned basis using the effective interest method.

Income distributions

Income distributions are recognised on an accruals basis.

It is the intention of the General Partners to specifically allocate, on an accruals basis, to the Company investment transaction fee income earned by Fund I and II. Fund I and II charge the investee companies investment transaction fees at two per cent. of the initial investment in the investee company and recognises the fee on an accruals basis.

Other expenses

Other expenses are accounted for on an accruals basis.

Dividends

Dividends paid during the period will be disclosed in equity. Final dividends proposed by the Board and approved by the Shareholders prior to the year end will be disclosed as a liability. Dividends proposed but not approved will be disclosed in the notes.

Going concern

After making appropriate enquiries, the Directors have a reasonable expectation that the Company, and in turn Fund I and II, have adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company. For this reason, they continue to adopt the going concern basis in preparing these financial statements.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.

For management purposes, the Company is organised into two main operating segments, being the 2009 Cell and the 2012 Cell. Full details of the 2009 Cell's and 2012 Cell's results are shown in these financial statements.

All of the Company's income is from within Guernsey.

All of the Company's non-current assets are located in Guernsey.

Due to the Company's nature it has no customers.

Critical accounting judgment and estimation uncertainty

Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The areas involving a high degree of judgement or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed below. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The resulting accounting estimates will, by definition, seldom equal the related actual results.

Investments in Fund I and Fund II

The value of the Company's investments in the Funds are based on the value of the Company's limited partner capital and loan accounts within each Fund, which itself is based on the value of the underlying investee companies as determined by the General Partner of each Fund. Any fluctuation in the value of the underlying investee companies will directly impact on the value of the Company's investment in the Funds.

When valuing the underlying investee companies, the General Partner of each Fund reviews information provided by the underlying investee companies and other business partners and applies widely recognised valuation methods such as price of recent investment, discounted cost, earnings multiple analysis, discounted cash flow method and third party valuation to estimate a fair value as at the date of the statement of financial position. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments will differ from the fair values reflected in these financial statements and the differences may be significant.

Where price of recent investment is determined to be the most appropriate methodology the transactional price will be that of the investing Fund. Interest receivable on loans forwarded by Funds will only be recognised when it is deemed more likely than not that the interest will be paid due to the immaturity of the turnaround position of the investee companies.

Further information in relation to the valuations of the investments in the Funds is disclosed in Note 4.

3. Taxation

The Company and Cell's are exempt from taxation in Guernsey and is charged an annual exemption fee of £600.

4. Investment in Limited Partnerships

Total Investment:

The movement in fair value is derived from the fair value movements in the underlying investments held by Fund I and Fund II, net of income and expenses of Fund I and Fund II and their related special purpose vehicles.

The outstanding loans do not carry interest. The loans will be repaid by way of distributions from the Funds. The Company is not entitled to demand repayment of the outstanding loans. Distributions receivable from the Funds in the year amounted to £1,760,000 (2011: £1,105,000), of which £800,000 (2011: £855,000) remains outstanding at the year end, which have been allocated as income based on discretionary allocation powers of the respective General Partners of the Funds as set out in the respective Limited Partnership Agreements.

In the financial statements of the Company, the fair value of the loans will be increased or reduced to reflect the fair value of the Cell's attributable valuation of net assets within Fund I and Fund II.

The DigiPoS (including Clarity), Fairline and Everest investments are carried at the price of recent investment. Interest receivable in respect of the underlying loans made by the Funds have not been recognised in calculating the fair value of the investments in the Funds due to their circumstances of being relatively immature turnaround opportunities. As at 31 March 2012 such unrecognised interest receivable amounted to £1,044,625 (2011: £789,748) (Note 2).

5. Significant Agreements - Corporate Broker, Administrator & Registrar

Corporate Broker

On 15 April 2010 the Company entered into an engagement letter with Numis which defined the terms of the new corporate broker engagement and constituted the termination of the existing nominated adviser and broker agreement ("Nomad Agreement"), dated 14 December 2009, pursuant to which, Numis had agreed to act as the Company's Nominated Adviser and Broker from admission to trading on AIM for the purpose of Compliance with the AIM Rules. The new corporate broker arrangement became effective upon the admission to the London Stock Exchange Main Market on 8 July 2010. Pursuant to the engagement letter Numis would act as Corporate Broker, rendering brokerage services in relation to the migration of the Company's listed shares from AIM to the London Stock Exchange Main Market and the provision of ongoing support to the Company.

On 11 January 2012 the Company entered into a new engagement letter with Numis on behalf of itself and each of the 2009 Cell and 2012 Cell for the provision of corporate broking services and in relation to any purchase of 2009 Shares and/or 2012 Shares on a principal to principal basis. In exchange for these services the Company agreed to pay an annual retainer fee of £50,000 (£35,000 prior to the Conversion) for the first 12 months of the engagement to Numis. The Company's liabilities under the engagement letter are allocated among the Cells in proportion to their respective net asset values as at the time which the fees accrue. Numis is transacting, separately, with each Cell in respect of each Cell's apportionment of the fees.

Under the terms of the engagement letter the Company agreed to indemnify and hold harmless Numis, including defined indemnified parties, from and against any losses which Numis and the indemnified parties may suffer or incur and any claims made as defined in the engagement letter.

During the year, the Company incurred fees of £39,561 (2011: £68,818) in respect of the Corporate Broker fee.

Administrator

The Administrator has been appointed to provide day to day administration and secretarial services to the Company as set out in the Administration Agreement.

Prior to Conversion, in consideration for its services, the Administrator received an annual fee of 0.10 per cent. of the net asset value (subject to a minimum of £75,000 and a maximum of £175,000), for administration, company secretarial and corporate governance services.

After the Conversion to the PCC, the Administrator receives an annual fee, subject to an overall cap of £250,000 per annum as a whole, of

i) an ad valorem fee of 0.10 per cent. of the Net Asset Value per annum of the first £100 million and 0.05 per cent. thereafter of each of 2009 Cell and 2012 Cell subject to a minimum fee of £75,000 per annum per Cell; and

ii) a fee of £5,000 per annum in respect of the Core.

HIFM also receives £5,000 per annum and £2,500 per annum for the provision of the Company's Compliance Officer and Money Laundering Reporting Officer respectively.

These fees shall apply from the date of Conversion and shall remain in force for a period of 24 months thereafter before becoming eligible for review between the parties.

All reasonable costs and expenses incurred by the Administrator in accordance with this Agreement are reimbursed to the Administrator quarterly in arrears.

During the year, the Company incurred administration fees of £198,866 (2011: £209,772) of which £136,425 was incurred pre-Conversion and £33,523 post-Conversion, apportioned on a NAV basis between the Cells. £62,500 (2011: £43,750) remained outstanding as at the year end.

Registrar

The Company is party to an Offshore Registrar Agreement with the Registrar dated 14 December 2009, pursuant to which the Registrar provides registration services to the Company and its Cells which entails, among other things, the Registrar having responsibility for the transfer of shares, maintenance of the share register and acting as transfer and paying agent. For the provision of such services, the Registrar is entitled to receive a basic fee based on the number of shareholder accounts subject to an annual minimum charge of £6,500. In addition to this basic fee, the Registrar is entitled to additional fees for specific actions.

During the year, the Company incurred fees of £12,116 (2011: £16,691) in respect of this agreement, of which £3,000 (2011: £2,700) remained outstanding as at the year end.

6. Cash and cash equivalents

These comprise cash held by the Company and short-term bank deposits available on demand. The carrying amounts of these assets approximate their fair value.

Interest income of £9,991 (2011: £4,812) arose from assets classified as loans and receivables (including cash and cash equivalents) and has been calculated using the effective interest rate method. There are no other gains or losses on loans and receivables other than the interest income.

There is no interest payable and therefore the interest income represents the total interest income and interest expense for financial assets or financial liabilities that are not at fair value through profit or loss.

7. Trade and other receivables

There are no past due or impaired receivable balances outstanding at the year end. The Directors consider that the carrying value of trade and other receivables approximate their fair value.

In outstanding debtors at the year end £800,000 (2011: £855,000) relates to income distributions receivable from the Funds (Note 2).

8. Trade and other payables

Trade and other payables principally comprise amounts accrued in respect of costs incurred in the normal course of business. The carrying amount of trade payables approximates to their fair value. The Company has financial risk management policies in place to ensure that the payables are paid within the credit time frames.

There are no gains or losses on financial liabilities measured at amortised cost.

9. Share capital

Core Shares

Cell Shares

Period 24 November 2009 to 31 March 2011

Better Capital PCC Limited

On 12 January 2012 the Company converted to a PCC company. On Conversion all the previous share capital of the Company was transferred to Better Capital 2009 Cell and 100 Core Shares were issued to the newly formed Core of the PCC, being Better Capital PCC Limited. The Core Shares have no voting rights for so long as Cell Shares are in issue.

The Company's issued share capital consists of 206,780,952 2009 Shares and 169,861,895 2012 Shares. Under the Company's articles of incorporation, at any general meeting of the Company:

• each holder of 2009 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2009 Share shall count as 1.1096 towards the total number of votes cast; and

• each holder of 2012 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2012 Share shall count as 0.9770 towards the total number of votes cast.

The figure which may be used by the Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Better Capital PCC Limited under the FSA's Disclosure and Transparency Rules, is the aggregate of the number of votes capable of being cast on a poll, namely 395,399,215. This is calculated as the sum of the 2009 Shares (206,780,952) multiplied by 1.1096 plus the 2012 Shares (169,861,895) multiplied by 0.9770.

Similarly, to calculate the numerator, Shareholders should multiply their holding of 2009 Shares by 1.1096 and multiply their holding of 2012 Shares by 0.9770. The sum of those calculations will result in the relevant number of voting rights for the numerator.

Better Capital 2009 Cell

All of the original members at 12 January 2012, shares, capital, assets and liabilities of the existing Company have been attributed to the 2009 Cell. The 2009 Shares will continue to be admitted to the premium segment of the Official List and to trading on the main market of the London Stock Exchange.

Better Capital 2012 Cell

On 12 January 2012, the Company raised gross proceeds of £169,861,895 by the issuance of 169,861,895 ordinary shares in the 2012 Cell at 100 pence per 2012 Share. The 2012 Cell is a new feeder fund legally segregated from the 2009 Cell and which will invest in Fund II. The Company incurred fundraising and listing expenses comprising predominately of commissions, regulatory fees, professional adviser fees and disbursements totalling £3,857,660. These costs have been taken to the share premium account.

The Admission became effective, and dealings in the 2012 Shares commenced on the main market of the London Stock Exchange on 13 January 2012. The 2012 Shares trade separately from the 2009 Shares.

The share premium account is a distributable reserve to be used for any purposes permitted under Guernsey company law, including the buyback of shares and payment of dividends.

Principal members of Better Capital LLP, the appointed Consultant to BECAP GP LP and BECAP12 GP LP, which act as General Partners to Fund I and Fund II, hold investments in the Company in accordance with the terms of the Prospectus. At the year end, those members held the following proportions of shares:

*Shareholding is held through a discretionary trust in favour of Nick Sanders' children

10. Retained earnings

Any surplus/deficit arising from the net profit/loss for that period is taken to the revenue reserve which may be utilised for payment of dividends.

11. Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the party in making financial or operational decisions. The Directors are responsible for overall control, management and supervision of the Company's affairs and are responsible for the overall implementation of the investment objective and policy of the Company.

The Company has four non-executive Directors, all independent of the Administrator other than Mr Mark Huntley, who is also the managing director of HIFM. Mr Huntley is also a director of BECAP GP Limited, the general partner of the Fund I GP and BECAP12 GP Limited, the general partner of the Fund II GP.

Annual remuneration terms for each Director prior to the Conversion was as follows: the Chairman receives £40,000, the chairman of the audit committee receives £35,000 and other non-executive directors receive £30,000 each.

Post Conversion annual remuneration terms for each Director was as follows: the Chairman receives £60,000, the chairman of the audit committee receives £52,500 and other non-executive directors receive £45,000 each.

Directors' fees for the year to 31 March 2012 amounted to £151,875 (2011: £182,805), of which £nil (2011: £33,750) was outstanding at the year end. The Directors also received additional fees totalling £40,000 in respect of additional services rendered on the fundraising for Fund II. The additional Directors' fees have been taken to the share premium account in 2012 Cell.

12. Financial risk management

Financial risk management objectives

The Company's investing activities, through Fund I and Fund II and their special purpose vehicles, expose it to various types of risk that are associated with the investee companies in which it invests. The most important types of financial risk to which the Company is exposed are market risk, liquidity risk and credit risk. Market risk includes price risk, foreign currency risk and interest rate risk. The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. The Board of Directors has overall responsibility for the determination of the Company's risk management and sets policy towards that. The policy and process for measuring and mitigating each of the main risks are described below.

The Corporate Broker and the Administrator provide advice to the Company which allows it to monitor and manage financial risks relating to its operations through internal risk reports which analyse exposures by degree and magnitude of risks. The Corporate Broker and the Administrator report to the Board on a quarterly basis.

Categories of financial instruments

Capital risk management

The Company manages its capital to ensure that it is able to continue as a going concern while maximising the return to shareholders through investing in the Funds. The capital structure of the Company consists of cash and cash equivalents as disclosed on the statement of financial position.

Gearing

As at the date of these financial statements the Company itself has no gearing, however the Funds have indirect gearing through the operations of the underlying investee companies.

Externally imposed capital requirement

There are no external capital requirements imposed on the Company.

Market risk

Price risk

Price risk arises from uncertainty about future prices of financial investments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.

The investments in Fund I and Fund II present a risk of loss of capital.

The Funds are exposed to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates, all of which have an impact on the carrying value of the Company's investment in the Funds.

Funds I and II

The Funds' overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of Funds and hence the Company. The Fund financial risk management factors are summarised below:

i. Foreign exchange risk

The Funds have indirect foreign currency risk, primarily with the Euro and United States Dollar, arising from the overseas operations of the underlying investee companies. The investee companies management continue to monitor options for hedging against adverse exchange rate movements. The Fund GPs do not consider the amount at risk to be material for disclosure in the financial statements. In the period from formation, all of the assets of the Funds have been denominated in Sterling, the Company's functional and reporting currency. The clear majority of the transactions made by the Funds have been denominated in Sterling and accordingly the Fund GPs does not consider foreign exchange risk to be significant at this stage.

ii. Interest rate risk

The Funds' income and operational cash flows are subject to changes in market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. As at the date of the statement of financial position, the Funds held £168.8 million on deposit with several different banks over terms ranging from instant access to one month. The Funds have no other interest-bearing assets or liabilities as at the date of the statement of financial position. As a consequence, the Funds are only exposed to variable market interest rate risk. The Fund GPs do not expect any significant change in interest rates that would have a materially adverse impact on the financial performance of the Funds in the near future.

iii. Credit risk

The Funds' investment activities may result in a credit risk relating to investments in which the Funds have direct or indirect exposure. Investments will be made, via special purpose vehicles, into investee companies, many of which will be unquoted. 

The investment risk is managed by an investment strategy that diversifies the investments in terms of geography, financing stage, industry or time.

The Fund GPs monitor the concentration of each investment in each of the Funds to ensure compliance with their investment policies, as detailed in these financial statements.

In Fund I no single investment will be more than 20 per cent. of Fund I Total Commitments. Following the post year end acquisitions by Gardner of Airia and Pranita (Note 14) the total Gardner investment is 19.94 per cent. of Fund I Total Commitments.

In Fund II no single investment will be more than 30 per cent. of Fund II Total Commitments.

The material cash balances and the credit rating for the counterparties used by each of Fund I and Fund II are shown in these financial statements.

iv. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, the Funds aim at maintaining flexibility in funding by keeping sufficient liquidity in cash and cash equivalents which may be invested on a temporary basis in:

·; cash or cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a "single A" or higher credit rating as determined by any reputable rating agency selected by the Fund GPs; and

·; any "government and public securities" as defined for the purposes of the FSA Rules.

The aggregate amount deposited or invested with any single such bank or other counterparty (including their associates) or in government and public securities of any single issue, shall not exceed £35 million for Fund I and £50 million for Fund II.

The Funds do not follow an over-commitment policy.

v. Market price risk

The Fund GPs moderate this risk through careful selection of investments within specified limits. The investments are monitored on a regular basis by Funds General Partners.

In accordance with the Company's accounting policies the investments in the Funds, and indirectly the investments in investee companies through special purpose vehicles, have been valued at the most recent underlying fair value as advised by the Fund GPs, which has been prepared in accordance with the IPEV valuation guidelines.

The IPEV Valuation Guidelines contain detailed methodology setting out best practice with respect to valuing unquoted investments. It should be noted that a number of the Funds investee companies are expected to be unquoted and therefore the valuation of such companies involves exercising significant judgement. The Company does not hedge against movements in the value of these investments.

Due to the subjectivity of applying model assumptions inherent to the process of assessing the fair value of investments, a sensitivity analysis has been undertaken in respect of thjose investment valuations applying earnings multiples. A 10 per cent. increase or decrease of the applied earnings multiples results in a 3.21 per cent. increase or decrease in the NAV of the Company.

As at 31 March 2012, 40.42 per cent. (2011: 60.50 per cent.) of the Funds financial assets were cash balances held on deposit with several banks.

Foreign currency risk

The Company has no foreign currency risk since all assets and transactions to date have been denominated in Sterling, the Company's functional and reporting currency.

Interest Rate Risk

The Company's exposure to interest rate risk relates to the Company's cash and cash equivalents. The Company is subject to risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. As at the date of the statement of financial position the majority of the Company's cash and cash equivalents was held on interest bearing fixed deposit accounts.

The Company has no other interest-bearing assets or liabilities as at the reporting date. As a consequence, the Company is only exposed to variable market interest rate risk. Management does not expect any significant change in interest rates that would have a materially adverse impact on the financial performance of the Company in the near future.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors.

Liquidity risk is defined as the risk that the Company may not be able to settle or meet its obligations on time or at a reasonable price.

The Company adopts a prudent approach to liquidity management and through the preparation of budgets and cash flow forecasts maintains sufficient cash reserves to meet its obligations.

Financial liabilities consist of trade and other payables.

The following table details the Company's expected maturity for its financial liabilities: 

Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company.

The Company's principal financial assets are the investments in Fund I and Fund II and as a consequence the Company has a significant credit risk if the Funds fail to allocate investments for contributions made.

The carrying value of the investment in Fund I as at 31 March 2012 was £253.8 million (2011: £208.9 million).

The carrying value of the investment in Fund II as at 31 March 2012 was £165.1 million (2011: n/a).

Financial assets mainly consist of cash and cash equivalents and investments at fair value through profit or loss. The Company's risk on liquid funds is minimised because the Funds can only deposit monies with institutions with a minimum credit rating of "single A". The Company mitigates its credit risk exposure on investments at fair value through profit or loss by the exercise of due diligence on the counterparties of Funds and their General Partners. The investment risk is managed by an investment strategy that diversifies the investments in terms of financing stage, industry or time.

The investment objective, policy and restrictions of the Funds are set out in their respective Partnership Agreements and cannot be varied without an amendment to the Partnership Agreement, which would require the consent of all the Partners including the Company.

The table below shows the material cash balances and the credit rating for the counterparties used at the year end date:

The Company's maximum exposure to credit risk at year end date is shown below:

31 March 2012

31 March 2011

Financial investments measured at fair value

IFRS 7 requires disclosure of fair value measurements by level of the following fair value hierarchy:

·; Level 1 - inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

·; Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, prices) or indirectly (that is, derived from prices); and,

·; Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The Company's investment has been classified within level 3 as it has unobservable inputs and is not traded. The following table presents the investments carried on the statement of financial position by level within the valuation hierarchy as at 31 March 2012:

Note 4 shows a reconciliation of movement in the fair value of financial instruments within level 3 of the fair value hierarchy between the beginning and the end of the reporting year.

13. Earnings per share and net asset value per share

Earnings per share