BC12.L Regulatory News (BC12)

13 July 2018

BETTER CAPITAL PCC LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital PCC Limited announces its 2018 annual results for both the 2009 Cell and the 2012 Cell.

2009 Cell Final Results

· NAV at 31 March 2018: £40.4 million, NAV at 30 September 2017: £40.4 million, NAV at 31 March 2016: £260.3 million

· £210.0 million total capital raised

· £203.8 million net proceeds invested in Fund I

· £288.8 million/137.5 per cent. cumulative distributions to date

· 60.6 per cent. return from NAV growth and distributions since inception

· 7.1 per cent. annualised NAV total return including distributions

· 4 good realisations - Gardner, Santia, ATH Coal, Calyx Managed Services

· 2 poor realisations - Reader's Digest, Fairline

· 7.2 years average holding period of portfolio companies

· £0.6 million3 net debt across Fund I portfolio companies

1 Cumulative return over the period of the life of the 2009 Cell since inception based on the weighted average issue price of ordinary shares and net of share issue costs.

2 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders

3 SPOT net debt (£40.6m) excluded from net debt figure.

2012 Cell Final Results

· NAV at 31 March 2018: £138.1 million, NAV at 30 September 2017: £144.3 million, NAV at 31 March 2017: £172.3 million

· £355.5 million total capital raised

· £347.4 million net proceeds invested in Fund II

· £48.4 million/13.6 per cent. cumulative distributions to 31 March 2018

· 5.0 per cent. 2012 Shares acquired by the Company and cancelled on 19 June 2018

· 4.2 per cent. Better Capital 2012 Shares held by Fund II

· 43.4 per cent. value decline combined NAV and distributions since inception

· 10.8 per cent. annualised value decline combined NAV and distributions

· 6 total platform investments

· 1 follow-on investment

· 1 good realisation -iNTERTAIN

· 2 partial losses - City Link, Jaeger

· 3 remaining assets - Everest, SPOT, Northern Aerospace3

· 4.2 years average holding period of portfolio companies

· £21.0 million4 net debt across Fund II portfolio companies

1 Cumulative return over the period of the life of the 2012 Cell since inception based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.

2 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders

3 Formerly traded as CAV Aerospace.

4 Including total net debt of SPOT (£40.6m).

Note:

HOLDERS OF ORDINARY SHARES OF £1 EACH IN THE 2012 CELL ("2012 SHARES") ARE REMINDED THAT, WITH EFFECT FROM 19 JUNE 2018, THE TOTAL NUMBER OF 2012 SHARES IN ISSUE IS 302,181,436. ALL SHAREHOLDERS ARE REFERRED TO THE ANNOUNCEMENT MADE BY THE COMPANY AT 07.00 AM ON 02 JULY 2018 (RNS NUMBER: 1495T) REGARDING THE CALCULATION OF TOTAL VOTING RIGHTS.

Chairman's Statement

Better Capital PCC Limited, together with its two protected cells, the 2009 Cell and 2012 Cell, today issues its Annual Results for the year ended 31 March 2018.

This has been another busy year at Better Capital. Almost to a year following the successful sale of Gardner to SLMR, the Fund II GP notified the Board on 8 June that it was in negotiations to sell Northern Aerospace to Gardner for £44.0 million on an enterprise value basis, which together with the proceeds of the warranty claim would have returned substantial value to Fund II, and to the 2012 Shareholders.

However, the Board and the Fund II GP were informed on 18 June that the Secretary of State for Business, Energy and Industrial Strategy had on 17 June issued an intervention notice in respect of the proposed disposal, further to which the Competition and Markets Authority (the "CMA") issued an Initial Enforcement Order ("IEO") in respect of the proposed disposal. An IEO is a mechanism available to the CMA to prohibit activity in respect of a merger.

In the intervening period, the Fund II GP and Northern Aerospace worked collaboratively to assist with the investigation. Northern Aerospace's business consists very largely of making parts to the design of non-UK civil aviation customers. Less than 1 per cent. of its revenues go to military programs and these are not of a sensitive nature. The CMA refused to provide a derogation to enable Northern Aerospace's shares to be transferred to Gardner on 22 June (being the target completion date) pending the completion of their own procedural investigation.

The Fund II GP and Gardner then entered into an agreement to extend the completion date to 7 July. Both parties agreed that failure by the CMA to provide a derogation allowing the transfer of the shares of Northern Aerospace by this date would terminate the proposed disposal.

No such derogation was provided and accordingly the disposal lapsed.

Northern Aerospace had thoroughly planned for a separate existence and is now engaged in implementing the next stage of its plans.

On 19 June 2018, the Company's 2012 Cell announced the acquisition of 15,870,806 2012 Shares from Fund II under the terms of the buyback contract entered into between the Company and Fund II in December 2016 (the "Shares Buyback"). The 2012 Shares were purchased at 29.693 pence per share, being the volume weighted average price ("VWAP") of the 2012 Shares on the preceding business day.

Following the Shares Buyback, the Company immediately cancelled all of the 2012 Shares acquired, reducing the number of 2012 Shares in issue from 318,052,242 to 302,181,436. The pro forma impact of the Shares Buyback and subsequent cancellation is to provide an uplift to the 2012 NAV per share (including distributions) at 31 March 2018 of 3.1 per cent.

Better Capital 2009 Cell

Omnico has demonstrated solid progress in the first six months of its FY18 financial year ending 30 September 2018. The business is trading ahead of its EBITDA budget due to a combination of better product mix, improved staff utilisation and cost control. Its new V6 retail product is starting to generate sales, particularly in the theme parks and leisure sector and the pipeline has grown as a result. Delivery of the order book is now a key priority.

The Fund I GP, through the Consultant, embarked on a strategic review of m-hance in late 2017/ early 2018. The findings led to the conclusion that a sale now will not generate optimal value to the 2009 Cell Shareholders; however, the business should achieve a higher valuation with further investment effort, particularly in its high growth CRM division.

The 2009 Cell NAV summary is set out below.

The main contributor to performance in Fund I in the year to 31 March 2018 was the sale of Gardner to SLMR in June 2017 which crystallised net proceeds of £254.1 million in Fund I.

The NAV total return2 since inception excluding distributions was 15.6 per cent. to 31 March 2018 (31 March 2017: 27.0 per cent.; 30 September 2017: 15.5 per cent.) and is stated after accounting for a carry provision of £0.2 million (31 March 2017: £29.6 million; 30 September 2017: £0.3 million).

On a cumulative basis, NAV total return2 since inception including distributions was 60.6 per cent. for the year (31 March 2017: 59.5 per cent.; 30 September 2017: 60.6 per cent.) with the annualised NAV total return3 including distributions rising to 7.1 per cent. (31 March 2017: 6.6 per cent.; 30 September 2017: 7.2 per cent.).

1 Includes £150,000 of net proceeds from the Fairline administration received in full in November 2017.2 Based on the weighted average issue price of ordinary shares and net of share issue costs since inception.3 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders

Comprehensive details on Fund I's investment activities, portfolio companies and valuation are set out in the Fund I GP's report below.

Extension to Fund I

In accordance with the terms of the Prospectus of the Company dated 29 July 2013 and the Amended and Restated Limited Partnership Agreement of Fund I dated 16 December 2011, the General Partner of Fund I can exercise its discretion to extend Fund I's term for up to two additional one year periods, subject to the consent of the Company. On 22 February 2017, the Company announced that it had consented to an extension to Fund I of one year to 17 December 2018. On 24 April 2018, the Company announced that it had consented to an extension to Fund I of a further one year to 17 December 2019. The Board considered that this extension to Fund I will provide an appropriate timeframe in which the General Partner of Fund I can maximise returns through the realisation of the residual assets in the portfolio.

Better Capital 2012 Cell

The operational issues plaguing Everest have continued into 2018. Lead generation and order intake continue to perform well, with the order book now standing at c. £45 million but delivery has not been fast enough. Wholesale management changes have recently taken place in the expectation of reinvigorating the improvement programmes.

The Spicers division of SPOT continues to see contraction in its marketplace. Tactical initiatives such as the Alliance Programme with dealers are starting to yield results; however, revenue decline is a major issue. Plans are in place to right-size and refocus this division in order to be more agile and to equip it for more direct business. OfficeTeam is performing well against budget, and acquired ZenOffice in April 2018 principally to complement its managed print services offering. Oyez Professional Services, SPOT's legal subscription services business continues to perform well and is certainly a business capable of being spun off on its own. Overall, SPOT has been marked down by £2.5 million/6.1 per cent. on the back of weaker financial performance in Spicers.

Northern Aerospace is performing well against its EBITDA and cash budget. In the Interim Report, we reported that Airbus, its largest customer had decided not to extend the supply contracts beyond December 2018. Actions were taken by the business to minimise the impact as a result of the loss of these key contracts. Since then, constructive discussions with Airbus have taken place as the latter seeks to secure the crucial parts it requires to deliver on its substantial order book. Northern Aerospace is, following the aborted sale, pursuing clarity as to its way ahead with Airbus whilst energetically pursuing cost reductions and extending its customer base.

The 2012 Cell NAV summary is set out below.

Further details on Fund II's investment activities, portfolio companies and valuation are set out in the Fund II GP's report below.

The NAV total decline5 since inception but excluding distributions was 56.8 per cent. to 31 March 2018 (31 March 2017: 46.0 per cent.; 30 September 2017: 54.8 per cent.).

On a cumulative basis, NAV total decline5 since inception including distributions was 43.4 per cent. for the year (31 March 2017: 33.5 per cent.; 30 September 2017: 39.7 per cent.) with the annualised NAV total decline6 including distributions falling to 10.8 per cent. (31 March 2017: 7.6 per cent.; 30 September 2017: 11.0 per cent.).

1 Includes iNTERTAIN proceeds in escrow payable pending the resolution of legacy matters recorded as a fund receivable.2 28,548,277 2012 Shares at the closing price on 31 March 2018 of 24.00p per share.3 Average cost per remaining share, 40.84p. Includes commission and levy.4 At 31 March 2018, the estimated remaining net receivable from the City Link administration is £135,000 (at 31 March 2017: £200,000). This is after accounting for receipts of £250,000 in September 2017 and a £185,000 improvement to the overall estimated outcome. On 20 June 2018, Fund II received a further distribution of £75,000.5 Based on the weighted average issue price of ordinary shares and net of share issue costs.6 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders.

The main contributors to performance in Fund II in the year to 31 March 2018 were the write downs in Everest and SPOT totalling £18.0 million and £4.5 million respectively. 

Better Capital 2012 Shares buyback and cancellation

On 19 June 2018, Fund II sold 15,870,806 2012 Shares to the 2012 Cell for £4.7 million (29.693 pence per share). The transaction price was based on the terms agreed under the buyback contract entered into in December 2016, being the VWAP of the business day immediately before. The consideration owed by the 2012 Cell to Fund II will be offset against the outstanding loan between the parties and has not resulted in any return of capital to the 2012 Shareholders.

Immediately following the acquisition, the Company cancelled the newly acquired 2012 Shares, reducing the 2012 Shares in issue from 318,052,242 to 302,181,436, a 4.99 per cent. reduction.

The financial effect of the cancellation was to provide a pro-forma uplift to the adjusted NAV per remaining 2012 Shares, of approximately 1.83p per 2012 Share or 3.1 per cent. based on the 2012 Cell's NAV including cumulative distribution per share on 31 March 2018.

Following the 2012 Shares buyback transaction, Fund II held 12,677,471 2012 Shares, representing 4.2 per cent. of the remaining 2012 Shares in issue.

1 Based on the disposal of 15,870,806 2012 Shares at the closing price on 31 March 2018, of 24.00pps2 Based on 318,052,242 2012 Shares in issue3 Based on the new 302,181,436 2012 Shares in issue

Distributions - 2009 Cell

The sale of Gardner to SLMR in June 2017 enabled the distribution of £222.0 million, equivalent to 107.35p per share to the 2009 Shareholders by way of a redemption. Other than Gardner, there were no other distributions made during the year to 31 March 2018 nor is there any expectation of any near term distribution out of the 2009 Cell.

The cumulative distribution to the 2009 Shareholders following the redemption is £288.8 million or 1.4 times of funds raised.

Distributions - 2012 Cell

The sale of the debt instruments in Jaeger enabled a third distribution of £8.3 million, equivalent to 2.6p per share in May 2017 by way of a reduction of share capital to the 2012 Shareholders. There were no other distributions made during the year. 

2012 Cell distributions to date total £48.4 million or 13.6 per cent. of funds raised.

Better Capital LLP

The Fund I GP and Fund II GP have notified the Board of the termination of their respective contractual arrangements with the Consultant effective on 31 March 2018. The GP companies have largely absorbed the Consultant's functions. Separate temporary arrangements are in place for Rob Asplin and Bonnie Kraus for the provision of certain consultancy services. In addition, Simon Pilling has joined Omnico in the capacity of independent chairman, a business which he has chaired and mentored whilst still a member of the Consultant. 

Strategy

As reported above, the Board had in April 2018 consented to a further one year extension to the life of Fund I, taking it to December 2019. Having discussed at length with the Fund I GP, we believe this is vital to maximise value in the remaining portfolio companies and consequently the total returns to the 2009 Shareholders. The Fund I GP remains of the view that the strategic direction set in late 2017 for these businesses are appropriate but will now take longer than initially anticipated and into 2019.

In addition to Northern Aerospace which now remains with Fund II, there remain two other considerable assets in Fund II, namely Everest and SPOT. Both companies are still on extended turnaround journeys and will continue to be actively managed by the Fund II GP. The Fund II GP is further supported by Octavia Morley who is chair at SPOT.

Conclusion

The circumstances around the aborted disposal of Northern Aerospace could not have been foreseen. It is deeply frustrating that unspecified concerns about national security should have been pursued as your Board has no knowledge of their nature or circumstance.

Looking forward the Board is closely engaged with both GPs to ensure that they continue to push for improvements in the portfolios. I am pleased to report they are energetically doing so.

Richard CrowderChairman12 July 2018

Report of the Directors

The Directors hereby submit the annual report and audited financial statements for each of the Company, the 2009 Cell and the 2012 Cell for the year ended 31 March 2018.

Principal activities

Further information on the principal activities of the Company can be found on the inside of the front cover.

Business review

A review of the Company's business and its likely future development is provided in the Chairman's Statement above. The underlying investments of the Funds are reviewed in the relevant General Partner's Report for Fund I and Fund II and are below.

Results and distributions

The Company

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

2009 Cell

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

The Net Asset Value of the 2009 Cell as at 31 March 2018 was £40.4 million (2017: £260.3 million).

During the year, the 2009 Cell made its fifth distribution of £222.0 million (2017: £5.2 million) to shareholders of the 2009 Cell as at the ex-date of 27 June 2017. The distribution consisted of a payment of 107.35 pence per ordinary share payable in cash from the 2009 Cell's share capital account and has been treated as a reduction of share capital and partial distribution from retained earnings.

The five cumulative distributions (including reductions of share capital) at 31 March 2018 for the 2009 Cell total £288.8 million, being 137.5 per cent. of funds raised.

2012 Cell

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

The Net Asset Value of the 2012 Cell as at 31 March 2018 was £138.1 million (2017: £172.3 million).

During the year the 2012 Cell made its third distribution of £8.3 million (2017: £34.0 million) to shareholders of the 2012 Cell as at the ex-date of 4 May 2017. The distribution consisted of a payment of 2.6 pence per ordinary share payable in cash from the 2012 Cell's share capital account and has been treated as a reduction of share capital.

The three cumulative distributions (reductions of share capital) at 31 March 2018 for the 2012 Cell total £48.4 million, being 13.6 per cent. of funds raised.

Annual General Meetings

The Annual General Meetings of the Company and the Cells will be held on 13 September 2018 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. The AGM of the 2009 Cell will be held at 10.00 am. The AGM of the 2012 Cell will be held at 10.15 am or, if later, immediately following the conclusion of the AGM of the 2009 Cell. The AGM of the Company will be held at 10.30 am 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 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 results for the year then ended, in accordance with applicable Guernsey law and EU adopted IFRS. In preparing these financial statements the Directors are required to:

· select suitable accounting policies in accordance with IAS 8: Accounting Policies, changes in Accounting Estimates and Errors and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;

· state that the Company has complied with IFRS, 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 Law. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.

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 are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.bettercapital.gg); the work carried out by the auditor does not involve considerations of these matters and, accordingly, the auditor accepts no responsibility for any change that may have occurred to the financial statements.

Responsibility statement of the Directors in respect of the Annual Report

Each of the Directors, whose names are set out below in the Report of the Directors section of the Annual Report, confirms that, to the best of their knowledge and belief:

· the financial statements, prepared in accordance with EU adopted IFRS give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties faced;

· the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; and

· the Annual Report includes information required by the UK Listing Authority and that the Company complies with the provisions of the Listing Rules and DTRs of the UK Listing Authority which, with regard to corporate governance, require the Company to disclose how it has applied the principles and complied with the provisions of the corporate governance code applicable to the Company.

Listing requirements

Throughout the period since being admitted to the Official List maintained by the FCA, the Company has complied with the Listing Rules.

Non-mainstream pooled investments

The Board notes the FCA rules regarding the restrictions on the promotion to retail investors of unregulated collective investment schemes and close substitutes (referred to as "non-mainstream pooled investments"), which came into effect on 1 January 2014. On the basis of advice received, the Board has concluded that the Company's, the 2009 Cell's and 2012 Cell's Shares are not non-mainstream pooled investments for the purposes of these rules, meaning that the restrictions on promotion imposed by the rules do not apply.

AIFMD

The Directors have considered the impact of the EU AIFMD (no. 2011/61/EU), which became effective in the UK on 22 July 2014 on the Company and its operations.

The Company is a non-EU domiciled alternative investment fund which does not currently intend to market its shares within Europe; therefore, the Directors consider that neither authorisation nor registration is required.

FATCA

The Company was registered by the Administrator in the fourth quarter of 2014. The Board and the Administrator are in regular discussions with the Company's service providers and advisors to ensure that the Company continues to comply with FATCA's requirements to the extent relevant to the Company.

Corporate governance statement

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

The Board monitors developments in corporate governance to ensure the Board remains aligned with best practice especially with respect to the increased focus on diversity. The Board acknowledges the importance of diversity, including gender, for the effective functioning of the Board and commits to supporting diversity in the boardroom. It is the Board's ongoing aspiration to have a well-diversified representation. The Board also values diversity of business skills and experience because Directors with diverse skill sets, capabilities and experience gained from different geographical backgrounds enhance the Board by bringing a wide range of perspectives to the Company.

The Company's prospectus dated 29 July 2013 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).

The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to 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 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 which delegates most day-to-day functions to third parties. The Company does not have a chief executive or any executive directors, employees or internal operations and has therefore not reported further in respect of these provisions. The need for an internal audit function is discussed in the Audit Committee Report.

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

· Principle 1 of the AIC Code states a Board should consider appointing one independent non-executive Director to be the Senior Independent Director. The Board, having taken into account its small size and that the Chairman and two of the other three Directors are each similarly independent and non-executive, considers it unnecessary to appoint such a Senior Independent Director. All members of the Board are available to shareholders if they have unresolved concerns.

· Principle 6 of the AIC Code states Directors should consider the diversity of the Board, including gender. The Board will consider diversity when a vacancy arises.

Pursuant to the GFSC Code, companies which report in line with the UK Code or the AIC Code are deemed to meet the GFSC Code (the GFSC Code is available from the GFSC website www.gfsc.gg).

The Funds themselves are not subject to any code of corporate governance. However, the Funds act through the Fund GPs which in turn act through Fund GP Companies which are licensed under the POI Law. As POI Licensees, the boards of the Fund GP Companies have regard to the GFSC Code, which sets out the general responsibilities of the boards of the Fund GP Companies and includes proposals to deal with risk management, internal control procedures, the duties of directors, the composition of the Boards of the Fund GP Companies and self-assessment. The Fund GP Companies are 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 Jon Moulton.

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 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. In addition to formal Board and/or committee meetings and, to the extent practicable and appropriate, the Directors maintain close contact with each other and the Administrator, by email and conference calls, and with the directors of the Fund I GP Company and Fund II GP Company for the purpose of keeping themselves informed about Fund I's and Fund II's activities. The Board requires information to be supplied in a timely manner by the respective general partner of Fund I and Fund II, the Administrator and other advisors in a form and of a quality appropriate to enable it to discharge its duties.

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 Fund I GP and the Fund II GP with the terms of the share dealing code. The share dealing code is compliant with the EU Market Abuse Regulation.

Board tenure and re-election

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. While no member of the Board has currently served for longer than nine years and no issues have arisen to be considered by the Board with respect to long tenure, all of the Directors have elected to offer themselves for reappointment by the members annually. In accordance with the AIC Code, when and if any director shall have been in office (or on re-election would at the end of that term of office) for more than nine years the Company will consider further whether there is a risk that such a director might reasonably be deemed to have lost independence through such long service. The Management Engagement, Nomination and Remuneration Committee shall take the lead in any discussions relating to the appointment or re-appointment of directors.

Mr Moulton, as a director of the Fund I GP Company and the Fund II GP Company is subject to annual re-election in accordance with the Listing Rules.

A Director who retires at an Annual General Meeting may, if willing to continue to act, be elected or re-elected at that meeting. If, at a general meeting at which a Director retires, the Company neither re-elects that Director nor appoints another person to the Board in the place of that Director, the retiring Director shall, if willing to act, be deemed to have been re-elected unless at the general meeting it is resolved not to fill the vacancy or unless a resolution for the re-election of the Director is put to the meeting and not passed.

The Board is of the opinion that all directors be proposed for re-election because they have the appropriate skills and experience to continue to serve the Company.

Directors do not have service contracts. Directors are appointed under letters of appointment, copies of which are available at the registered office of the Company. The Board considers its composition and succession planning on an on-going basis.

Directors' remuneration

During the year to 31 March 2018 the Directors' remuneration was paid as follows (of which £59,000 (2017: £59,000) was outstanding at the year end):

31 March 2018

31 March 2017

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 Fund I GP and the Fund II GP. Mr Moulton is a director of the Fund I GP Company and the Fund II GP Company and is therefore not considered to be independent.

The Chairman of the Board must be independent and is appointed in accordance with the Company's articles of incorporation. Mr Crowder is considered to be independent because he:

· has no current or historical employment with the GP Companies;

· has no current directorships in any other entities for which the GP Companies provide services; and

· is not an executive of a self-managed company or an ex-employee who has left the executive team of a self-managed company within the last five years.

Duties and responsibilities

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;

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

· other matters having a material effect on the Company.

The Board is responsible to shareholders for the overall management of the Company. The Board has adopted a Schedule of Matters Reserved for the Board which sets out the particular duties of the Board, which demonstrates the seriousness with which it takes its fiduciary responsibilities. Such reserved powers include decisions relating to the determination of investment policy and approval of changes in strategy, capital structure, statutory obligations and public disclosure, and entering into any material contracts by the Company.

The Directors have access to the advice and services of the Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with Companies Law and applicable rules and regulations of the GFSC and the LSE. Where necessary, in carrying out their duties, the Directors may seek independent legal or other professional advice and services at the expense of the Company. 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 maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors. Suitable insurance is in place, having been renewed on 10 January 2018.

The Board's responsibilities for the Annual Report are set out in the Directors' Responsibilities Statement above. The Board is also responsible for issuing appropriate half-yearly financial reports and other price-sensitive public reports.

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

The attendance record of the Directors for the year is set out below:

The Board meets at least four times a year. During the year, a further four ad hoc Board and Board Committee meetings were held to deal with other matters, principally of an administrative nature, and these were attended by those Directors available. Between meetings, there is regular contact with the GPs, the Secretary and the Company's Broker, as necessary.

* Mr Moulton is not a member of the Audit Committee or the Management, Engagement, Nomination and Remuneration Committee, however from time to time he is invited to attend and did so during the year.

Directors

Richard Crowder - Chairman - Guernsey resident (aged 68)

Richard Crowder holds a range of non-executive directorships and advisory appointments. He works with a wide range of investment styles and portfolios as well as being a director of two groups of family companies where he acts as an offshore director/adviser and chairman of an investment committee. He has extensive experience of: Chairmanships and Directorships of quoted and unquoted companies, including chairing a FTSE 250 company; structuring businesses; managing and growing securities, banking, investment and advisory businesses; as well as being well versed in offshore governance. 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 Singapore, Hong Kong and Japan. 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 and Director of J Henry Schroder Wagg & Co. Limited. Having then worked as Chairman of Smith New Court International Agency 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 Chartered Institute for Securities and Investments. Mr Crowder was appointed as a Director on 24 November 2009.

Richard Battey - Non-executive Director - Guernsey resident (aged 66)

Since 2007 Richard Battey has been a non-executive director of a number of listed and unlisted investment companies. Current directorships of listed companies are Juridica Investments Limited (AIM listed), NB Global Floating Rate Income Fund Limited (UK listed), Pershing Square Holdings Limited (UK and Euronext listed) and Princess Private Equity Holding Limited (UK listed). 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 - Non-executive Director - Non-UK resident (aged 65)

Philip Bowman is the chairman of MAF Properties LLC and Potrero Holdings LLP, and a director of Ferrovial S.A. and Kathmandu Holdings Ltd. He previously held the positions of Chief Executive of three FTSE100 companies - Smiths Group plc from December 2007 to September 2015, Scottish Power plc from early 2006 until mid-2007 and Allied Domecq plc between 1999 and 2005. In 1977 Mr Bowman qualified as a Chartered Accountant with the Institute of Chartered Accountants in England and Wales while employed at Price Waterhouse. Past board appointments include British Sky Broadcasting Group plc, Scottish & Newcastle Group plc, Burberry Group plc, Berry Bros. & Rudd Limited and Coles Myer Limited as well as Chairman of Liberty plc, Coral Eurobet plc and Miller Group 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.

Jon Moulton - Non-executive Director - Guernsey resident (aged 67)

Jon Moulton is a Fellow of the Institute for Turnaround Professionals and a Corporate Financier in the Institute of Chartered Accountants in England and Wales. Mr Moulton is the Chairman of FinnCap, the stockbroker and a director or trustee of a number of companies and charities. Mr Moulton is Chairman of The International Stock Exchange. Between 1997 and September 2009, he was the Managing Partner and founder of Alchemy Partners. He worked in the M&A group of Coopers & Lybrand in New York for two years before moving to Citicorp Venture Capital, initially in New York and then, from 1981, in London where he was a Managing Director in the LBOs and venture capital group. From 1985 to 1994, he was the Managing Partner and founder of Schroder Ventures, where he focused on LBOs and venture capital, and was a member of the French and German Investment Committees. Between 1994 and 1997, Mr Moulton was the Director in charge of LBOs at Apax Partners. Mr Moulton was appointed as a Director on 28 June 2013.

Shareholdings of the Directors

Directors of the Company and their beneficial interests in the 2009 Shares and the 2012 Shares as at 31 March 2018 are detailed below:

2009 Cell

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

2012 Cell

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

Jon Moulton has acquired an additional 525,000 2009 Shares since 31 March 2018.

Committees of the Board

Audit Committee

The Company has an Audit Committee with formally delegated duties and responsibilities within written terms of reference. Further information on the Audit Committee is included in the Report of the Audit Committee below.

Management Engagement, Nomination and Remuneration Committee ("MNR Committee")

The MNR Committee is chaired by Philip Bowman. 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 out this review 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 review regularly 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. The Board believes that, as a whole, it comprises an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach, including gender diversity, amongst board members is of great importance and it is the Company's policy to give careful consideration to issues of board balance and diversity when making new appointments.

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.

Board performance and evaluation

In accordance with Principle 7 of the AIC Code, the Board is required to undertake a formal and rigorous evaluation of its performance on an annual basis. Such an evaluation of the performance of the Board as a whole and the Chairman was carried out under the mandate of the MNR Committee and in the form of self-appraisal questionnaires and a detailed discussion of the outcomes. 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, induction training will be provided.

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 any external consultant as appointed by the GPs 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 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 MNR 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 Administrator's own internal controls and procedures, 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.

Relations 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, company newsletter, investment objectives and policy, investor contacts and information on the Board and corporate governance.

Major Shareholders

As at 29 May 2018, 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 35,262,505 shares in the 2009 Cell and 302,181,436 shares in the 2012 Cell (318,052,242 prior to the Shares buyback on 19 June 2018). 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 FCA's DTRs, is the aggregate of the number of votes capable of being cast on a poll. This is calculated as the sum of the 2009 Shares (35,262,505) multiplied by 1.1096 plus the 2012 Shares (302,181,436) 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 value.

Directors' authority to issue shares

2009 Cell

The Directors do not have the power to issue shares in the 2009 Cell.

2012 Cell

At the Annual General Meeting of the Company held on 5 September 2017, the Board renewed its authority to issue up to 5 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. This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the AGM of the Company to be held on 13 September 2018.

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 and/or 2012 Share Capital is renewable annually and was last authorised at the AGM held on 5 September 2017. At the AGM to take place on 13 September 2018 the Board will seek to renew such authority in respect of the 2009 Shares and the 2012 Shares. Any buy back of 2009 Shares and/or 2012 Shares will be made subject to Companies 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 and Companies Law up to 10 per cent. of the Company's shares may be held as treasury shares. The Company has not held any shares in treasury at any time.

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.

Change of control

There are no agreements that the Company considers significant and to which the Company is party that would take effect, alter or terminate upon change of control of the Company following a takeover bid.

Principal risks and uncertainties

The Company's assets consist of investments, through Funds I and 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. Its principal risks are therefore related to market conditions in general, but also the particular circumstance of the businesses in which it is invested. The GP Companies seek to mitigate these risks through active asset management initiatives and carrying out due diligence work on potential targets before entering into any investments.

Each Director is aware of the risks inherent in the Company's business and understands the importance of identifying, evaluating and monitoring these risks. The Board has adopted procedures and controls that enable it to manage these risks within acceptable limits and to meet all of its legal and regulatory obligations.

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 and these risks are reported and discussed at Board Meetings. 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. Particular attention has been given to the effectiveness of controls to monitor liquidity risk, asset values and counterparty exposure.

The financial risks of the Company, the 2009 Cell and 2012 Cell are discussed in Note 9 to the financial statements.

The Company's other risk factors are fully discussed in the Company's prospectuses, available on the Company's website (www.bettercapital.gg) and should be reviewed by Shareholders.

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.

Long-term Viability Statement

As required by the AIC Code, the Directors have assessed the viability of the Company over a period longer than 12 months. The Board has concluded that this period shall be the remaining life of the Funds plus the discretional two one year extensions. In the case of the 2009 Cell, the viability has been assessed up to 31 December 2019. In the case of the 2012 Cell this has been assessed up to 30 June 2023. Once the final Cell has closed, the Company will come to the end of its life.

The Directors have made a robust assessment of the Cells' principal risks and associated mitigations that are outlined in Note 9 to the financial statements and the Company's prospectus along with a review of the nature of the Company's business, reserves of cash, the potential of its portfolio of investments to generate future income and capital proceeds, and the ability of the Directors to minimise the level of cash outflows, should this be necessary. Of the identified principal risks, the most relevant risks identified that could potentially impact the viability of both Cells, and therefore the Company, were considered to be:

· the risk of a substantial litigation resulting in both the Cells and the Funds being unable to continue in existence;

· the inability to recover investments at their carrying value; and

· the key executive in the Fund GP Companies, principally Jon Moulton, being unable or unwilling to devote such time to the business affairs of the Fund GP Companies as is reasonably necessary to enable the proper performance of their general partner duties.

The Board considers the process of evaluation and mitigation of these principal risks on an on-going basis and have concluded that there is a reasonable expectation that the Company and, in turn, the Cells will be able to continue in operation and meet their future liabilities as they fall due over the periods identified.

By order of the BoardRichard CrowderChairman12 July 2018

Report of the Audit Committee

The Audit Committee has been in operation throughout the year. The Audit Committee, chaired by Richard Battey, operates within clearly defined terms of reference (which are available from the Company's website, www.bettercapital.gg), which include all matters indicated by DTR 7.1 and the AIC Code. Its other members are Richard Crowder and Philip Bowman. Only independent directors can serve on the Audit Committee and members of the Audit Committee must have no links with the Company's external auditor and must be independent of the Fund I GP and the Fund II GP. 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 are kept under review. 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 Audit Committee met three times in the year to 31 March 2018.

The Board has taken note of the requirement that at least one member of the Committee should have recent and relevant financial experience and is satisfied that the Committee is properly constituted in that respect, with all members being highly experienced and, in particular two members having backgrounds as chartered accountants.

The duties of the Audit Committee in discharging its responsibilities include reviewing the Interim Report, Annual Report, the valuation of the Company's investment portfolio, the system of internal controls, and the terms of appointment of the external auditor together with their remuneration. It is also the formal forum through which the external auditor reports to the Board of Directors and shall meet not less than twice a year and at such other times as the Audit Committee chairman shall require. The objectivity of the external auditor is reviewed by the Audit Committee which also reviews the terms under which the external auditor is appointed to perform non-audit services and the fees paid to the external auditor or their affiliated firms overseas.

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 and the Fund II GP.

The main duties of the Audit Committee are:

· giving full consideration and recommending to the Board for approval of the contents of the Interim Report and Annual Report and reviewing the external auditor's report thereon;

· reviewing the scope, results, cost effectiveness, independence and objectivity of the external auditor;

· reviewing the draft valuation of the Company's investments in the Funds prepared by the Fund GPs, and making a recommendation to the Board on the valuation of the Company's investments;

· reviewing and recommending to the Board for approval of the audit, audit related and non-audit fees payable to the external auditor and the terms of their engagement;

· reviewing and approving the external auditor's plan for the following financial year;

· reviewing the appropriateness of the Company's accounting policies;

· ensuring the standards and adequacy of the internal control systems;

· reviewing and considering the UK Code, the AIC Code and the FRC Guidance on Audit Committees; and

· reviewing the risks facing the Company and monitoring the risk matrix.

The Audit Committee is required to report its findings to the Board, identifying any matters on which it considers that action or improvement is needed, and make recommendations on the steps to be taken.

The external auditor is invited to attend the Audit Committee meetings at which the Interim Reports and Annual Reports are considered and at which they have the opportunity to meet with the Committee without representatives of any external consultant as appointed by the GPs being present at least once a year.

Financial reporting

The primary role of the Audit Committee in relation to the financial reporting is to review with the Administrator, any external consultant as appointed by the GPs and the external auditor the appropriateness of the Interim Reports and Annual Reports, concentrating on, amongst other matters:

· the quality and acceptability of accounting policies and practices;

· the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements;

· material areas in which significant judgements have been applied or there has been discussion with both any external consultant as appointed by the GPs and the external auditor;

· whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; and

· any correspondence from regulators in relation to the Company's financial reporting.

To aid its review, the Audit Committee considers reports from GPs and any external consultant as appointed by the GPs of the underlying Funds and also reports from the external auditor on the outcomes of their half-year review and annual audit. The Audit Committee supports BDO Limited in displaying the necessary professional scepticism their role requires.

Meetings

The Committee has met on three occasions during the year. The matters discussed at those meetings were:

· review of the terms of reference of the Audit Committee to confirm that they remain appropriate to the business of the committee and the current regulatory environment in which the Company operates;

· review of the accounting policies and format of the financial statements;

· the draft valuation of the Company's investments in the Funds prepared by the Fund GPs, and the recommendation to the Board on the valuation of the Company's investments;

· review and approval of the audit plan of the external auditor;

· discussion and approval of the fee for the external audit;

· detailed review of the Annual Report and recommendation for approval by the Board;

· detailed review of the Interim Report and recommendation for approval by the Board;

· assessment of the effectiveness of the external audit process as described below; and

· review of the Company's key risks and internal controls.

Primary area of judgement

The Audit Committee determined that the key risk of misstatement of the Company's and Cells' financial statements related to the valuation of investments at fair value through profit or loss, in the context of the judgements necessary to evaluate current fair values.

As outlined in Note 4 to the financial statements of the Company, the total carrying value of financial assets of the Company at fair value at 31 March 2018 was £177.4 million (2017: £430.3 million). Market quotations are not available for these financial assets such that the value of the Company's investments in the Funds is based on the value of the Company's limited partner capital and loan accounts within each Fund, which are themselves based on the value of the relevant underlying investee companies as determined by the General Partner of each Fund.

The valuation process and methodology were discussed with the Fund GPs and with the external auditor at a board meeting held on 7 June 2018. The external consultants, as appointed by the GPs, carry out a valuation semi-annually for the GP Companies. In turn the Fund GPs provide valuations of each Cell's investment in the relevant Fund.

The Audit Committee has reviewed the work of the GPs. The external consultants, as appointed by the GPs, confirmed to the Audit Committee that the valuation methodology had been applied consistently during the year. After reviewing the work of the external auditor the Audit Committee concluded that they had not identified any errors or inconsistencies that were material in the context of the financial statements of the Company and Cells as a whole.

The external auditor explained the results of their review of the valuations, including their challenge of management's underlying projections, the economic assumptions and multiples used. On the basis of their audit work, there were no adjustments proposed that were material in the context of the financial statements of the Company and Cells as a whole.

Internal audit

The Audit Committee shall consider at least once a year whether or not there is a need for an internal audit function. Currently, the Audit Committee does not consider there to be a need for an internal audit function, given that there are no employees in the Company and all outsourced functions are with parties who have their own internal controls and procedures.

Appointment of the external auditor

BDO Limited has been the Company's external auditor since the Company's inception. The lead audit director, Richard Searle, has not changed during the year. Mr Searle will be replaced in the year ended 31 March 2021 in accordance with normal audit director rotation arrangements.

The Audit Committee has noted the revisions to the UK Code introduced by the FRC in September 2012 and the AIC Code issued in February 2015, in particular, the recommendation in each, to put the external audit out to tender at least every ten years.

The objectivity of the external auditor is reviewed by the Audit Committee which also reviews the terms under which the external auditor may be appointed to perform non-audit services. The Audit Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the external auditor, with particular regard to any non-audit work that the external auditor may undertake and the level of fees associated to this non-audit work. In order to safeguard external auditor independence and objectivity, the Audit Committee ensures that any other advisory and/or consulting services provided by the external auditor does not conflict with its statutory audit responsibilities. Advisory and/or consulting services will generally only cover reviews of interim financial statements, tax compliance and capital raising work. Any non-audit services conducted by the external auditor outside of these areas require the consent of the Audit Committee before being initiated.

The external auditor may not undertake any work for the Company in respect of the following matters - preparation of the financial statements, preparation of valuations used in financial statements, provision of investment advice, taking management decisions or advocacy work in adversarial situations. The Audit Committee considers BDO Limited to be independent of the Company.

To fulfil its responsibility regarding the independence of the external auditor, the Audit Committee considered:

· changes in audit personnel in the audit plan for the current year;

· a report from the external auditor describing its arrangements to identify, report and manage any conflicts of interest; and

· the extent of non-audit services provided by the external auditor.

To assess the effectiveness of the external auditor, the committee reviewed:

· the external auditor's fulfilment of the agreed audit plan and variations from it;

· reports highlighting the major issues that arose during the course of the audit; and

· feedback from the Fund I GP, Fund II GP and any external consultant as appointed by the GPs evaluating the performance of the audit team.

The Audit Committee is satisfied with BDO Limited's effectiveness and independence as external auditor having considered the degree of diligence and professional scepticism demonstrated by them. As such, the Audit Committee has not considered it necessary this year to conduct a tender process for the appointment of its external auditor. Having carried out the review described above and having satisfied itself that the external auditor remains independent and effective, the Audit Committee has recommended to the Board that BDO Limited be reappointed as external auditor for the year ending 31 March 2019.

On behalf of the Audit Committee,

Richard BatteyChairman of the Audit Committee12 July 2018

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OFBETTER CAPITAL PCC LIMITED

Opinion

We have audited the financial statements of Better Capital PCC Limited (the 'Company') for the year ended 31 March 2018 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. 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.

In our opinion the financial statements:

• give a true and fair view of the state of the Company's affairs as at 31 March 2018 and of its loss 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.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement

We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:

· the disclosures in the annual report set out above that describe the principal risks and explain how they are being managed or mitigated;

· the directors' confirmation above in the annual report that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

· the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors' identification of any material uncertainties to the Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

· whether the directors' statement relating to going concern is materially inconsistent with our knowledge obtained in the audit; or

· the directors' explanation set out above in the annual report as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In arriving at our audit opinion on the financial statements, the key audit matter that had the greatest effect on our audit is included in the table below. In addition, we have set out how we tailored our audit to address this specific area in order to provide an opinion on the financial statements as a whole. This is not a complete list of all risks identified by our audit.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

For planning, we considered materiality to be the level by which misstatements individually or in aggregate, including omissions, could influence the economic decisions of the relevant users. Based on our professional judgment, we determined materiality for the financial statements as a whole to be £2,700,000 (2017: £6,300,000), which is based on a level of 1.5% (2017: 1.5%) of total assets. We considered total assets to be the most appropriate benchmark due to the Company being an investment fund with the objective of long term capital growth.

We considered the application of materiality at the individual account or balance level and set an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. This performance materiality has been set at £2,025,000 (2017: £4,725,000) which is 75% (2017: 75%) of materiality. This has been set based upon the control environment in place and the directors' assessment of risk.

International Standards on Auditing (UK) also allow the auditor to set a lower materiality for particular classes of transaction, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context, we set a lower level of materiality to apply to certain trading activities, such as sensitive overhead expenses. Specific materiality has been determined on the basis of 5% (2017: 1%) of materiality being £135,000 (2017: £63,000).

We agreed with the Board of Directors that we would report all audit differences in excess of £54,000 (2017: £63,000).

An overview of the scope of our audit

We tailored the scope of our audit taking into account the nature of the Company's investments, involvement of external consultants as appointed by the GPs and the Company Administrator, the accounting and reporting environment and the industry in which the Company operates.

In designing our overall audit approach, we determined materiality and assessed the risk of material misstatement in the financial statements.

This assessment took into account the likelihood, nature and potential magnitude of any misstatement. As part of this risk assessment we considered the Company's interaction with the external consultant as appointed by the GPs and the Company Administrator. We assessed the control environment in place at the external consultant as appointed by the GPs and the Company Administrator to the extent that it was relevant to our audit. Following this assessment, we applied professional judgement to determine the extent of testing required over each balance in the financial statements.

As with all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to address specifically the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable set out above - the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

· Audit committee reporting set out above - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

· Directors' statement of compliance with the UK Corporate Governance Code set out above - the parts of the Directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Matters on which we are required to report by exception

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

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

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

· we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out above the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters which we are required to address

Following the recommendation of the Audit Committee, we were appointed by the Board on 27 January 2011 to audit the financial statements for the period ending 31 March 2011 and subsequent financial periods. The period of total uninterrupted engagement is 8 years, covering the period/years ending 31 March 2011 to 31 March 2018.

The non-audit services prohibited by the FRC's Ethical Standards were not provided to the Company and we remain independent of the Company in conducting our audit.

Our audit opinion is consistent with the additional report to the Audit Committee.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Richard Michael Searle FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date: 12 July 2018

Statement of Financial Position

As at 31 March 2018

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 12 July 2018 and signed on its behalf by:

Richard Crowder Jon MoultonChairman Director

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

Statement of Comprehensive IncomeFor the year ended 31 March 2018

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

Statement of Changes in EquityFor the year ended 31 March 2018

Any surplus/deficit arising from the profit/loss for a period is taken to retained earnings which may be utilised for payment of dividends or distributions.

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

Statement of Cash FlowsFor the year ended 31 March 2018

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

Notes to the Audited Financial StatementsFor the year ended 31 March 2018

1. General information

Better Capital PCC Limited is a Closed-ended Investment company, incorporated in, and controlled from Guernsey as a Protected Cell Company. It has an unlimited life and is registered with the GFSC 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 capital 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. In any redemption, shareholders are only entitled to their proportion of the net assets held in the cell relating to the particular shares.

The Company has two cells: 2009 Cell and 2012 Cell. The financial results for each cell can be found below.

2. Accounting policies

Basis of preparation

The financial statements for the year ended 31 March 2018 have been prepared in accordance with EU Adopted IFRS and with the provisions of the Companies Law.

The principal accounting policies adopted are set out below.

Standards, interpretations and amendments to published standards adopted in the period

There were no new standards, interpretations or amendments applied during the year ended 31 March 2018.

New and revised standards

At the date of approval 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 are relevant to the financial statements of the Company and Cells:

IFRS 9: Financial Instruments, replaces IAS 39 Financial Instruments: Recognition and Measurement. The Company will adopt IFRS 9 for the accounting period beginning on 1 April 2018.

IFRS 9, effective date for annual periods beginning on or after 1 January 2018, specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard changes the approach for classification and measurement of financial assets compared with the requirements of IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged. The standard applies a consistent approach to classifying financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had its own classification criteria. The Company's equity and debt instruments continue to be measured at fair vale through profit or loss as it is the Company's business model to convert the debt to equity to sell for a gain. It is not expected that the classification of other financial assets and liabilities will change from fair value through profit or loss.

IFRS 15: Revenue from Contracts with Customers will be adopted for the accounting period beginning on 1 April 2018. IFRS 15 replaces IAS 18: Revenue, and prescribes a model for accounting for revenue arising from contracts with customers. As the Company's only income is interest and distributions received which are part of net fair value under IFRS 9 no impact is expected from the adoption of IFRS 15.

IFRS 16: Leases comes into effect for accounting periods beginning on or after 1 January 2019. As the Company has no leases, there will be no impact from the adoption of IFRS 16.

The Company has not adopted early any standards, amendments or interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning after 1 April 2018 or later periods.

Foreign currencies

The functional currency of the Company is Pound Sterling reflecting the primary economic environment in which the Company operates. The Company does not have any transactions in currencies other than 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

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

The Company's financial assets comprise 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. Cash and cash equivalents comprise cash on hand only.

b) Investments at fair value through profit or loss

i. Classification

The Company's investments in Fund I and Fund II are accounted for as financial assets rather than consolidated as the Company has no substantive removal rights over the General Partners and the GPs have wide ranging discretion in respect of the investments made by the Funds. The investments in Fund I and Fund II were designated as financial assets at fair value through profit or loss on initial recognition as this is the way in which the Company manages and evaluates the performance of those assets. As described further below the Company has invested its funds into Funds I and II with the principal objective of benefiting from capital gains arising from the Funds' activities in investing in and turning round distressed businesses.

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 Fund II were initially recognised at fair value, being the fair value of consideration given.

Investments treated as "investments 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 arm's length transaction.

iv. Fair value estimation

The IFRS 13 and IPEV valuation techniques used are detailed in Note 6 of the Company's and the Cells' financial statements.

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 the date on which the Company becomes party to the contractual requirements of the financial liability.

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

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.

Interest Income

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

Income distributions

Income distributions are distributions from the Funds which have been allocated as income based on the discretionary allocation powers of the General Partner of each fund as set out in each fund's limited partnership agreement and are recognised when the Company becomes entitled to those receipts.

Other expenses

Other expenses are accounted for on an accruals basis.

Going concern

After making appropriate enquiries, the Directors have a reasonable expectation that the Company and in turn Fund I and Fund 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.

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.

The critical accounting judgments and estimation uncertainties for the 2009 Cell and 2012 Cell are stated below.

Taxation

The Company and Cells are exempt from taxation in Guernsey.

3. Segmental reporting

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 below.

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 incur interest. The loans (net of provisions) are expected to be repaid by way of distributions from the Funds. The Company is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the Company any amount of the outstanding loan. During the year £137.0 million was repaid to the Company by Fund I (2017: £5.5 million) and £7.7 million by Fund II (2017: £43.6 million).

Income distributions receivable from the Funds in the year amounted to £nil (2017: £nil). At 31 March 2018 an aggregate £0.8 million (2017: £1.6 million) remained outstanding.

In the financial statements of the Company, the fair value of the investments in limited partnerships is adjusted to reflect the fair value of the Cells' attributable valuation of net assets within Fund I and Fund II, as seen in more detail in Note 6 of the Company's and Cells' financial statements.

5. Trade and other receivables

Full details of the 2009 Cell's and 2012 Cell's trade and other receivables are shown below.

6. Fair value

The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level input that is significant to the fair value measurement.

Financial assets and financial liabilities are classified in their entirety into only one of the three levels.

The fair value hierarchy has the following levels:

- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The only financial instruments carried at fair value are the investments which are fair valued at each reporting date.

The Company's investments in Fund I and Fund II have been classified within Level 3 as they have unobservable inputs and are not traded. Amounts classified under Level 3 for the year are £40.1 million for Fund I (2017: £260.1 million) and £137.2 million for Fund II (2017: £170.2 million).

Transfers during the year

There have been no transfers between levels.

Valuation techniques

The value of the Cells' investments in the Funds is based on the value of each Cell's limited partner capital and loan accounts within each Fund. This is based on the components within the Funds, principally the value of the underlying investee companies. 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 GPs of each Fund reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, to estimate a fair value that is in adherence with the requirements of IFRS 13 as at the date of the statement of financial position.

Initially acquisitions are valued at price of recent investment. Once maintainable earnings can be identified or reasonably estimated the preferred method of valuation is the earnings multiple valuation technique, where a multiple that is an appropriate and reasonable indicator of value (given the size, risk profile and earnings growth prospects of the underlying company) is applied to the maintainable earnings of the company. Occasionally other methods, as deemed suitable by the GPs, may be used, such as revenue multiple, net assets, or break-up value. The techniques used in determining the fair value of the Cells' investments are selected on an investment by investment basis so as to maximise the use of market based observable inputs.

The Board reviews and considers the fair value arrived at by the GPs before incorporating into the fair value of the investment adopted by the Company. 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 disposal of investments may differ from the fair values reflected in these financial statements and the differences may be significant.

The significant unobservable inputs in the 2009 Cell and in the 2012 Cell are shown below.

7. Share capital

Core Shares

Issued and fully paid:

Year ended 31 March 2018

Year ended 31 March 2017

Cell Shares

Year ended 31 March 2018

Year ended 31 March 2017

During the year the 2009 Cell made its fifth distribution of £222.0 million to shareholders of the 2009 Cell as at the ex-date of 27 June 2017. The distribution consisted of a compulsory pro-rata redemption of 82.95 per cent. of the 2009 Shares at 129.42 pence per share redeemed, equivalent to a total distribution of 107.35 pence per share. The redemption was first allocated against the 2009 Cell share capital account until it was exhausted; with the residue allocated to the 2009 Cell retained earnings account.

The five cumulative distributions (reductions of share capital) at 31 March 2018 for the 2009 Cell total £288.8 million, being 137.5 per cent. of funds raised.

During the year the 2012 Cell made its third distribution of £8.3 million to shareholders of the 2012 Cell as at the ex-date of 4 May 2017. The distribution consisted of a payment of 2.6 pence per ordinary share payable in cash from the 2012 Cell's share capital account and has been treated as a reduction of share capital and partial distribution from retained earnings.

The three cumulative distributions (reduction of share capital) at 31 March 2018 for the 2012 Cell total £48.4 million, being 13.6 per cent. of funds raised.

During the prior year the Company entered into a buyback agreement with Fund II to acquire 28,548,278 2012 Shares, representing 50 per cent. of Fund II's holding at the purchase price of 37.12 pence per share. Following the share buyback, the Company immediately cancelled all the 2012 Shares it acquired from Fund II, reducing the number of 2012 Shares in issue from 346,600,520 to 318,052,242.

The Core Shares have no voting rights for so long as Cell Shares are in issue.

 As at 31 March 2018 the Company's issued share capital consisted of 35,262,505 shares in the 2009 Cell and 318,052,242 shares in the 2012 Cell. 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 FCA's Disclosure and Transparency Rules, is the aggregate of the number of votes capable of being cast on a poll, namely 334,358,539. This is calculated as the sum of the 2009 Shares (35,262,505) multiplied by 1.1096 plus the 2012 Shares remaining after the Shares Buyback on 19 June 2018 (302,181,436) multiplied by 0.9770. Further information on the Shares Buyback is given in Note 11 to the financial statements of the 2012 Cell below.

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.

8. Related party transactions

The Company has four non-executive Directors. Mr Jon Moulton is a director and the sole shareholder of BECAP GP Limited, the general partner of the Fund I GP and BECAP12 GP Limited, the general partner of the Fund II GP. Mr Moulton, as a limited partner of Better Capital SLP LP, is due to participate in the accrued carried interest from Fund I. Transactions with the Funds are detailed in Note 4.

Annual remuneration terms for each Director are as follows: the Chairman receives £70,000 (2017: £70,000), the chairman of the audit committee receives £62,500 (2017: £62,500), the chairman of MNR committee receives £60,000 (2017: £60,000) and the other non-executive director receives £45,000 (2017: £45,000).

Directors' fees and expenses for the year to 31 March 2018 amounted to £283,000 (2017: £241,000), of which £59,000 (2017: £59,000) was outstanding at the year end.

The Directors received a distribution of capital from the 2009 Cell of 107.35 pence per ordinary share and from the 2012 Cell of 2.6 pence per ordinary share (2017: 2009 Cell - 2.5 pence, 2012 Cell - 10.7 pence). The Directors' shareholdings can be seen above in the Report of the Directors.

9. Financial risk management

Financial risk management objectives

The Company's investing activities, through Fund I and Fund II and their special purpose vehicles, intentionally expose it to various types of risk that are associated with the investee companies in which it invests in order to generate returns in accordance with its investment policy and objectives. The financial risks to which the Company is exposed are market risk, liquidity risk and credit risk. The Board of Directors has overall responsibility for the determination of the Company's risk management and sets policy to manage that risk at an acceptable level to achieve those objectives. The policy and process for measuring and mitigating each of the main risks are described below.

The Corporate Broker and the Administrator provide information 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.

Due to the nature of the loan investments, being non recourse, the loans have the same characteristics as the capital invested into the Funds. As a result for the purposes of the following disclosure both the capital and loan investments have been considered as one combined investment which is fair valued. Any default/credit risk is taken into account when fair valuing the investments.

Categories of financial instruments

The Directors consider that the carrying values of cash and cash equivalents, creditors and accruals and debtors approximate their fair value.

Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an effective capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may: return capital to shareholders, adjust the amount of distributions paid to shareholders, issue new shares or sell assets to reduce debt.

The Company considers its capital to comprise the 2009 Shares, 2012 Shares, Core Shares, 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.

Market risk

Market risk includes price risk, foreign currency risk and interest rate risk.

(a) Price risk

Price risk arises from uncertainty about future prices of financial investments held. The Company invests through Fund I and Fund II. The underlying investments held by Fund I and Fund II present a potential risk of loss of capital to the Funds and hence to the Company.

The Funds are exposed to a variety of risks which may have an impact on the carrying value of the Company's investment in the Funds. The Funds' risk factors are addressed in the 2009 Cell and 2012 Cell financial statements below.

(b) Foreign currency risk

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

The Funds' indirect foreign currency risk, primarily with the US Dollar, arises from the overseas operations of the underlying portfolio investments. The investee companies' management monitor options for hedging against adverse exchange rate movements. The clear majority of the transactions made by the Funds have been denominated in Pound Sterling and accordingly the Fund GPs do not consider foreign exchange risk to be significant at this stage.

(c) Interest rate risk

The Company's direct 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 reporting date the majority of the Company's cash and cash equivalents were held on instant access deposit.

As at 31 March 2018, £9.5 million (2017: £16.6 million) or 5.1 per cent. (2017: 3.5 per cent.) of the Funds' financial assets were cash balances held on deposit.

Interest income of £nil (2017: £4,000) arose from 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.

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

Liquidity risk

Ultimate responsibility for liquidity risk management of the Company 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.

During the year ended 31 March 2018, the Company had no liabilities other than creditors and accruals (2017: £nil). The Company had sufficient cash and cash equivalents to pay these as they fell due.

The following table details the Company's contractual discounted cash flows 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.

The carrying value of the investment in Fund I as at 31 March 2018 was £40.1 million (2017: £260.1 million).

The carrying value of the investment in Fund II as at 31 March 2018 was £137.2 million (2017: £170.2 million).

Other 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 have a strict cash management policy. 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 geography. 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 £35.0 million for Fund I and £50.0 million for Fund II.

The investment objectives, policy and restrictions of the Funds are set out in their respective partnership agreements and cannot be varied without an amendment to the relevant partnership agreement, which would require the consent of all the partners including the Company.

The table below shows the Company's material cash balances and the short-term issuer credit rating for the counterparties used at the year end date:

The Company's maximum exposure to loss of capital at the year end is shown below:

There are no past due or impaired receivable balances outstanding at the year end.

10. Earnings per share and Net Asset Value per share

The earnings per share, Net Asset Value per share and adjusted Net Asset Value per share for the 2009 Cell and 2012 Cell are shown below.

11. Subsequent events

Subsequent events for 2009 Cell and 2012 Cell are detailed below.

Better Capital 2009 Cell

Summary of Investment policy

Better Capital 2009 Cell has invested in a portfolio of businesses which, when acquired, had significant operating issues and associated financial distress and which have significant activities within the United Kingdom or Ireland.

Uninvested or surplus capital or assets may be invested on a temporary basis in cash deposits.

The 2009 Cell Investment policy is set out in the Company's Prospectus.

General Partner's Report

In my last report to you, I had touched on strategic options available for the remaining assets in Fund I. It is increasingly clear the decision to hold onto, in particular, Omnico is the right one. Omnico has had an encouraging H1 FY18. Performance in H2 FY18 will be somewhat limited by its ability to deploy on the committed order book. A listing on AIM is still a likely route to market; however, not in the timescale originally envisaged.

A sale of the entire m-hance business was considered and several expressions of serious interest were received, albeit none at an acceptable level especially given the growth prospects in its Customer Relationship Management (CRM) division. New leadership has been appointed to bring renewed vigour into the business.

There has been slow progress in dealing with Fund I's holding in SPOT due to structural complexities. Independent advice is being taken in respect of finding an exit route for Fund I's 9.9 per cent. holding in SPOT, a business which is majority owned by Fund II.

Portfolio update

m-hance closed its FY17 financial year ended 31 December with revenue and EBITDA of £13.9 million and £0.7 million respectively (audited revenue and EBITDA FY16: £15.5 million and £1.1 million respectively). Five months into its FY18 financial year, m-hance is performing ahead of its EBITDA budget. The challenge, as reported before, remains one of sales growth in the business, particularly in the Enterprise Resource Planning (ERP) channel. Microsoft's new mid-market cloud-based solution continued to experience branding and functionality changes ahead of its recent full UK launch. This has led prospective customers to delay decisions about ERP replacement, leaving the new business market very soft. With this backdrop, a decision was made in November 2017 to review the size of the sales and marketing department, resulting in a small reduction in headcount.

However, FY17 proved to be a very successful year for the CRM division, particularly in the Not-for-Profit and Education sectors. Service revenue and gross margin grew by 25 per cent. and 16 per cent. respectively. This trend has continued into the current financial period, with further substantial deals contracted in both sectors and with the pipeline looking strong. This, combined with the changes mentioned above, is expected to result in a return to the profitability levels of FY16.

Strategically m-hance will continue to concentrate on its niche CRM division, where the business is seen as a market leader and Microsoft is perceived to provide the most suitable technology platform. The much-delayed Microsoft Dynamics 365 Business Central ERP platform was finally released in April 2018. This gives m-hance's GP customers the ability to upgrade to a cloud-based solution whilst remaining on a Microsoft platform, which will in time allow them to benefit from the common data model Microsoft is developing to integrate all their business applications. This is expected to drive early adopter sales in the latter part of 2018, but it augurs well for future years given the size of m-hance's Microsoft user base.

The CEO retired in May 2018 and Alan Moody, who up until recently was leading the technology and software development division of Henry Schein Inc.'s UK and Europe regions, has replaced him. 

The valuation for m-hance has been retained at £10.5 million. This has been derived using an earnings based approach (range of EV/ EBITDA: 3.4 times to 12.1 times) on the business's FY18 budgeted EBITDA. At 31 March 2018, the business had net debt of £0.6 million.

Omnico's year-to-date EBITDA for its FY18 financial year ending 30 September is ahead of budget and the prior year (audited FY17 EBITDA: £2.3 million) due to improvements in billable utilisation (up 11 per cent. on prior year) and professional services revenue per day achieved (up 17 per cent. on prior year).

Sales revenue is marginally behind budget. The qualified sales pipeline has grown substantially by over 40 per cent. since the start of FY18 but sales have been impacted by delays to customer decision making, coupled with the market shift towards a recurring revenue/subscription pricing model. Whilst this reduces revenue in the short term, it does mean a larger portion of the annual revenue target becomes contracted and recurring, therefore improving the long term value of the business.

Omnico's success is driven by an ability to enable clients to migrate from traditional fixed tills to environments that address multiple sales channels, including those using mobile, Internet of Things and cloud technologies. The business's conscious decision to focus on the destinations market (covering theme parks, leisure and entertainment sites) in 2016 is yielding results as it continues to see substantial opportunity in the global theme park market against a declining UK high street retail backdrop. Omnico is already the leading provider of Point of Sale solutions in North American theme parks, and works with 7 of the world's top 11 park operators where visitors expect retail and hospitality to be seamlessly integrated into their experience. Since my last report, the business has been able to add Welk, a US luxury resorts operator as a net new customer.

Additionally, it is pleasing to report that some existing support and maintenance contracts have been renegotiated on more favourable terms, and that two major customers (one of them being Sodexo) have taken Omnico Managed Services on multi-year contracts. The business has recently completed a roll out of software across 279 individual sites for a UK attractions brand.

Omnico has embarked on a major software upgrade (V6) and will, over the next two years, migrate existing customers to the new platform, with work already commencing with the Merlin Group. The V6 product provides a unique digital enablement platform providing customers with the ability to upgrade to future Omnico digital products and avoiding the costly migrations associated with legacy Point of Sale companies. Omnico has invested and will continue to invest to ensure that the V6 and digital platform rollouts are successful. Key areas of spend, beyond the V6 functional development itself, have been in recruiting fresh talent into the technical teams and on improving the product delivery especially in the areas of testing assurance and performance. The next 6 to 12 months will, undoubtedly, be demanding on the business as it moves the V6 product into full implementation phase for customers.

In general the prospects for Omnico look stronger with good earnings growth now confidently expected.

Based on the business's improving prospects, the carrying value for Omnico has increased by £1.0 million to £23.0 million. This is supported using an earnings based approach to valuation. At 31 March 2018, the business had net cash of £22,000.

An update on Spicers OfficeTeam (SPOT), a portfolio company 9.9 per cent. owned by Fund I, is provided in the Fund II General Partner's Report below. Fund I's interest in SPOT has been written down by £0.3 million to £4.2 million. 

Investment activities

On 12 June 2017, Fund I completed the sale of Gardner to SLMR for £326.0 million on an Enterprise Value basis. The sale realised net proceeds to Fund I of £254.1 million, recording an IRR of 35.3 per cent. and 7 times money multiple on total investment of £41.0 million.

Fund I provided additional funding to m-hance totalling £0.4 million in October 2017, of which £0.3 million was repaid in December 2017, and to Omnico totalling £0.8 million in July 2017.

The administration of Fairline resulted in distributions totalling £0.3 million during the year.

Valuation

The overall portfolio carrying value declined by £251.6 million between 1 April 2017 and 31 March 2018, mainly due to the disposal of Gardner in June 2017. Excluding Gardner and on a like-for-like basis, the portfolio carrying value grew by £2.5 million (7.1 per cent.) in the year principally due to a £3.0 million write up in Omnico (of which £1.0 million occurred in the six months to 31 March 2018), offset by a write down in SPOT of £0.5 million (of which £0.3 million occurred in the six months to 31 March 2018).

Distributions

The sale of Gardner in June 2017 enabled the return of £222.4 million to the 2009 Cell. Accordingly, this enabled the Company to effect a pro rata redemption of the 2009 Shares in July 2017 and return £222.0 million (equivalent to 107.35 pence per share) to the 2009 Cell Shareholders.

There were no further distributions since that date. Future distributions will be driven by the divestments of the remaining Fund I assets.

Cash

The cash balance at the time of writing stands at £2.2 million, which is adequate for the effective functioning of Fund I.

Closing remarks

The task is to realise the remaining assets by the end of 2019. It seems likely that further value will be generated before then.

Jon MoultonChairmanBECAP GP Limited12 July 2018

Investment Report of Fund I

m-hance

Business description

Implements, deploys and manages enterprise wide business management software solutions (www.m-hance.com) (www.highcloudsolutions.co.uk)

Fund I Investment details

Omnico Group

Business description

Provider of omni-channel software solutions and services to the retail, entertainment, hospitality and leisure sectors (www.omnicogroup.com)

Fund I Investment details

SPOT

Business description

Spicers is a leading office products and stationery wholesaler (www.spicers.co.uk)

OfficeTeam is a leading office products and services supplier (www.officeteam.co.uk)

Fund I Investment details

Portfolio summary and reconciliation

Cash Management

As at 31 March 2018, Fund I had placed a total of £2.7 million (2017: £1.4 million) of cash on instant access deposit with one bank. Fund I has in place a strict cash management policy that limits counterparty risks whilst simultaneously seeking to maximise returns.

INDEPENDENT AUDITOR'S REPORT TO THE DIRECTORS OFBETTER CAPITAL PCC LIMITED IN RESPECT OF THE 2009 CELL

We have audited the supplementary financial statements of the 2009 Cell (the "Cell"), a cell of Better Capital PCC Limited (the "Company") for the year ended 31 March 2018 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 11. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards (IFRSs) as adopted by the European Union. 

This report is made solely to the directors of the Company, as a body, in accordance with our engagement letter dated 13 February 2017. Our audit work is undertaken so that we might state to the directors of the Company 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 directors of the Company 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 of the Company 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 International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical Standard 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 Cell's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors of the Company; 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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. 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 Cell's affairs as at 31 March 2018 and of its profit for the year then ended; and

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

BDO Limited

Chartered Accountants

Place du Pré

Rue du Pré

St Peter Port

Guernsey

12 July 2018

Statement of Financial PositionAs at 31 March 2018

The audited financial statements of the 2009 Cell were approved and authorised for issue by the Board of Directors on 12 July 2018 and signed on its behalf by:

Richard Crowder Jon MoultonChairman Director

The notes below form an integral part of the 2009 Cell's financial statements.

Statement of Comprehensive IncomeFor the year ended 31 March 2018

The notes below form an integral part of the 2009 Cell's financial statements.

Statement of Changes in EquityFor the year ended 31 March 2018

Any surplus/deficit arising from the profit/loss for a period is taken to retained earnings which may be utilised for payment of dividends or distributions.

The notes below form an integral part of the 2009 Cell's financial statements.

Statement of Cash FlowsFor the year ended 31 March 2018

The notes below form an integral part of the 2009 Cell's financial statements.

Notes to the Audited Financial Statements of the 2009 CellFor the year ended 31 March 2018

1. General information

The 2009 Cell is a cell of Better Capital PCC Limited and has the investment objective of generating attractive total returns from investing (through Fund I) in a portfolio 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 are expected to be largely derived from capital growth.

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 Agreement, as amended.

The 2009 Cell is listed on the LSE Main Market.

2. Accounting policies

Basis of preparation

The 2009 Cell financial statements for the year ended 31 March 2018 have been prepared in accordance with EU Adopted IFRS.

The principal accounting policies adopted are set out in the Company's accounting policies above.

Going concern

After making appropriate enquiries and considering the extension to the life of Fund I to 17 December 2019, the Directors have a reasonable expectation that the 2009 Cell, and in turn Fund I, 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 2009 Cell. For this reason, they continue to adopt the going concern basis in preparing these financial statements.

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 equate to the related actual results.

Investment in Fund I

The value of the 2009 Cell's investment in Fund I is based on the value of the 2009 Cell's limited partner capital and loan accounts within Fund I. This is based on the components within Fund I, principally the value of the underlying investee companies. Any fluctuation in the value of the underlying investee companies will directly impact on the value of the 2009 Cell's investment in Fund I.

When valuing the underlying investee companies, the General Partner of Fund I reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, as noted above, 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 disposal of investments may differ from the fair values reflected in these financial statements and the differences may be significant.

Further information in relation to the valuation of the investment in Fund I is disclosed in Notes 4 and 6.

3. Segmental reporting

For management purposes, the 2009 Cell is organised into one operating segment, which invests in one limited partnership.

4. Investment in limited partnership

The movement in fair value of the 2009 Cell is derived from the fair value increase in Omnico Group, fair value decrease in SPOT and the sale of Gardner, net of expenses in Fund I and its related special purpose vehicles.

The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from Fund I. The 2009 Cell is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the 2009 Cell any amount of the Cell's outstanding loan. During the year £137.0 million was repaid to the 2009 Cell by Fund I (2017: £5.5 million) following the divestment of Gardner in June 2017.

In the financial statements of the 2009 Cell the fair value of the investment in limited partnership is adjusted to reflect the fair value of the 2009 Cell's attributable valuation of net assets within Fund I, as seen in more detail in Note 6.

5. 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 debtors and prepayments approximates their fair value.

6. Fair value

The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level input that is significant to the fair value measurement. The fair value hierarchy and further information on valuation techniques can be found in Note 6 in the Company financial statements.

The following table summarises the valuation methodologies and inputs used for the 2009 Cell's Level 3 investments as at year end: