BC12.L Regulatory News (BC12)

30 November 2016

BETTER CAPITAL PCC LIMITED

(the "Company")

INTERIM RESULTS UPDATE

Better Capital PCC Limited announces its 2016 interim results for both the 2009 Cell and the 2012 Cell.

2009Cell Interim Results

· NAV at 30 September 2016: £240.0 million, NAV at 31 March 2016: £241.4 million, NAV at 30 September 2015: £264.2 million

· £210.0 million total capital raised

· £203.8 million net proceeds invested in Fund I

· £5.2 million/2.5 per cent. distributed in July 2016

· £66.8 million/31.8 per cent. cumulative distributions to date

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

· 6.08 per cent. annualised NAV total return including distributions

* Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.

** Annualised return since inception

· 4 remaining assets - Gardner, m-hance, Omncio, SPOT

· 3 good realisations - Santia, ATH Coal, Calyx Managed Services

· 2 poor realisations - Reader's Digest, Fairline

· 4.9 years average holding period of remaining portfolio companies

· £45.1 millionⱡ net debt across Fund I portfolio companies

ⱡ SPOT, a minority holding in Fund I excluded (group net debt of £36.1 million)

2012 Cell Interim Results

· NAV at 30 September 2016: £211.9 million, NAV at 31 March 2016: £247.6 million, NAV at 30 September 2015: £263.3 million

· £355.5 million total capital raised

· £347.4 million net proceeds invested in Fund II

· £6.1 million/1.7 per cent. distribution to date

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

· 2.52 pence/4.13 per cent. estimated uplift to NAV per share following proposed buy-back and cancellation1

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

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

* Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.

** Annualised return since inception

· 6 total platform investments

· 1 follow-on investment

· 1 partial loss - City Link

· 5 remaining assets - Everest, Jaeger, SPOT, iNTERTAIN, Northern Aerospace2

· 2.9 years average holding period of portfolio companies

· £21.9 million net debt across Fund II portfolio companies

1 Uplift based upon the 2012 Cell's NAV per share and share price on 30 September 2016

2 Formerly traded as CAV Aerospace

Chairman's Statement

Better Capital PCC Limited, including its two cells, the 2009 Cell and the 2012 Cell, today issues its Interim Report for the six month period ended 30 September 2016.

The Better Capital team and the Funds have had a busy period since my last report. Fund I has entered into exclusive discussions on the proposed sale of Gardner to Shaanxi Ligeance Mineral Resources Co. Limited ("SLMR"). In Fund II, CAV Aerospace entered into, and left, a pre-packaged insolvency process on 16 November 2016. The trade and assets of the CAV Aerospace business were later acquired by Northern Aerospace, a special purpose vehicle within the same group. The Company recently issued proposals to Shareholders, announced in the circular published on 25 November 2016. In the proposal pertaining to the 2009 Cell the Board seeks to increase its flexibility to return cash to the 2009 Shareholders. In the proposal pertaining to the 2012 Cell, the Board seeks to undertake a buy-back of the 2012 Shares from Fund II, which would enhance the NAV per remaining 2012 share by crystallising the value for 2012 Shareholders. The Board is pleased with these announcements, which point to the direction of the Funds, being one of business improvement and asset realisation.

Better Capital 2009 Cell

The 2009 Cell continues to report good overall progress in the review period, with Gardner the main value driver. Brexit has, in particular, been positive for Gardner as the majority of its contracts are U.S. Dollar denominated. The Board is also pleased to note that following a period of restructuring, Omnico is now operating profitably and has received a modest write-up to its carrying value as at 30 September 2016. The 2009 Cell NAV summary is set out below.

1 Includes £0.3 million of Santia escrow cash and £0.2 million of estimated net proceeds from the Fairline administration

The 2009 Cell NAV, including accumulated distributions of £66.8 million (31.8 per cent. of funds raised) rose by £3.7 million, 1.2 per cent. in the period to £306.8 million. This was after accounting for net carry provision of £23.2 million.

Gardner continues to perform at slightly above expectation. On 16 November 2016, the Fund I GP informed the Board that Fund I had entered into exclusive discussions with SLMR, a Chinese company quoted on the Shenzhen Stock Exchange, for the sale of Gardner on an Enterprise Value of £326.0 million.

Gardner's valuation has been written up by £9.0 million to £220.0 million, a discount to the stated price reflecting the timing and conditionality associated with completion. The proposed transaction remains subject to certain legal and other conditions and to regulatory and other approvals and are being presented to Gardner's works council in France, as is required under French law. However, if the proposed transaction proceeds to completion, the 2009 Cell's share of the proceeds net of costs and provisions could increase the 2009 Cell NAV by an estimated 7.35p to 123.43p per share based on the 2009 Cell NAV per share at 30 September 2016. Completion is expected to occur in Q1 2017.

The progress of m-hance has been slower than planned primarily due to lower achieved sales. However, there have been new sales wins across its services (Microsoft GP and HighCloud/NetSuite) and the pipeline is stronger going into Q4 FY16. The business has been written down by £2.0m to reflect slower progress than formerly envisaged.

Omnico closed its FY16 financial year ended September 2016 with positive EBITDA, a considerable improvement on the loss reported for the prior year. This performance demonstrates a turnaround for the business which has successfully transitioned from the legacy custom software development and hardware manufacture to focus on core product development and delivery for Food, Beverage and Retail customers. Opportunities in Hospitality, Entertainment and Retail are looking increasingly positive, particularly in theme parks in the US, Middle East and Asia due to market expansion.

SPOT, which is a minority interest in Fund I, is discussed further below. Comprehensive details on Fund I's investment activities, portfolio companies and valuation are set out in the Fund I GP's report below.

The 2009 Cell NAV per share was 116.08p at 30 September 2016 which compares to 116.73p at 31 March 2016 (127.77p at 30 September 2015). The 2009 Cell Adjusted NAV per share, which includes accumulated distributions, was 148.38p at 30 September 2016 which compares to 146.53p at 31 March 2016 (140.57p at 30 September 2015).

Better Capital 2012 Cell

It is disappointing to note a further decline of £35.7 million or 14.1 per cent. to the 2012 Cell NAV including accumulated distributions of £6.1 million (1.7 per cent. of funds raised) since the Annual Report. This is principally due to write downs in Everest, Jaeger and SPOT. The 2012 Cell NAV summary is set out below.

Everest is expected to close its FY16 financial year ended December 2016 with positive EBITDA a little better than prior year, albeit significantly below expectations and potential, and with a much improved order pipeline going into FY17. This follows on from a series of cost reduction and revenue enhancing initiatives launched during the year. The £6.5 million write down in Everest reflects lower than expected earnings performance and a weakening of market comparable ratings at 30 September 2016.

Recent financial performance in Jaeger has been disappointing. Having enjoyed a strong start to its FY17 financial year through its Spring/ Summer 2016 collection with like-for-likes, full price sell through and EBITDA ahead of budget, the end of season sale proved very competitive with deeper markdowns and a longer sales period. The start of Autumn/ Winter 2016 sales have been slow with the warm weather affecting sales of outerwear. The consequent increase in competitive promotional activity means that trading continues to be challenging, however trading has shown an improvement in November 2016. Pressure from the weakness in Sterling will be more prominent for the purchase of the Spring/ Summer 2017 collection.

SPOT is trading profitably with good cash generation, significantly ahead of prior year but below budgeted levels in a fiercely competitive environment. Daily sales were impacted over the summer period following Brexit and margins are under pressure mainly due to the weakness of the Pound Sterling. The business's valuation has been written down by £23.1 million reflecting the underperformance in earnings.

iNTERTAIN has traded well ahead of prior year although marginally behind expectations. The business performed strongly throughout the Euro 2016 tournament but the prolonged period of hotter than usual weather in July to September was unhelpful to a business with limited outdoor areas. The business has progressed well under Fund II's ownership and is exit ready.

CAV continues its trend of steady improvement on an operational and financial basis. Considerable progress in areas such as machine maintenance and health and safety have helped improve both product quality and the working environment. Customer arrears are significantly and consistently reducing. On 16 November 2016, the business entered into a pre-packaged administration, with its trade and assets subsequently acquired by Northern Aeropsace, a special purpose vehicle within the group. The restructuring has enabled the group to eliminate contingent past liabilities and onerous sales contracts and puts the business on a firmer footing for future growth with expectation of an improved valuation in due course. 550 jobs have been protected as a result.

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

The 2012 Cell NAV per share was 61.13p at 30 September 2016 which compares to 71.43p at 31 March 2016 (75.96p at 30 September 2015). The 2012 Cell Adjusted NAV per share, which includes accumulated distributions, was 62.88p at 30 September 2016 which compares to 73.18p at 31 March 2016 (77.71p at 30 September 2015).

Better Capital 2012 Shares

Since the Annual Results, Fund II acquired a further 23.7 million Better Capital 2012 Shares with an average gross price of 31.96p per share. At 30 September 2016, Fund II held 57.1 million shares (16.47 per cent. of the 2012 Cell share capital) with an average gross price of 38.88p per share. The 2012 Shares are valued based on their quoted closing price at that date of 33.00p.

On 25 November 2016, the Company issued a circular to Shareholders of the Company. Subject to Shareholder consents, it is the Company's current intention to acquire up to 50 per cent. of Fund II's holding of the 2012 Shares by way of an off-market transaction, with an option to acquire the remaining 50 per cent. of the 2012 Shares in one or more tranches at a future date. Following acquisition, it is the Company's intention that these 2012 Shares are cancelled. The financial effect of such cancellation is estimated to be an uplift to the NAV per remaining 2012 Shares, of approximately 2.52p per 2012 Share or 4.13 per cent. based on the 2012 Cell's NAV per share and share price on 30 September 2016. The buy-back of 50 per cent. of Fund II's 2012 Shares is planned to take place before 31 December 2016.

The Extraordinary General Meeting to approve the share buy-back proposal will take place on 7 December 2016.

Distributions

In July 2016, Fund I repaid £5.2 million to the 2009 Cell which facilitated a fourth distribution of 2.5p per 2009 Share to the 2009 Shareholders. Cumulative distribution stands at £66.8 million, representing 31.8 per cent. of total funds raised. Future distributions in the 2009 Cell are expected to be fulfilled from further asset realisations in Fund I, with the likeliest next being Gardner.

To increase the Board's flexibility in relation to future returns of capital to the 2009 Shareholders, it is proposing to convert the 2009 Shares to being redeemable. Under the proposal the Board anticipates that any return of capital to 2009 Shareholders made under these new provisions, if they are approved, will be made, subject to cash being available for distribution, at or close to the last reported 2009 Cell NAV per share on the relevant redemption date less any costs of effecting the redemption.

The Extraordinary General Meeting to approve the 2009 Shares conversion to redeemable will take place on 7 December 2016.

Uses of remaining cash

On 25 November 2016, cash in Funds I and II were £1.6 and £7.3 million respectively. Remaining cash will be used to finance any compelling needs in portfolio companies and as required to fund Better Capital's operating expenses which are declining in line with the Funds' requirements. Any surplus cash will be returned to Shareholders in due course.

Better Capital team

There have been no significant senior personnel changes in Better Capital LLP, the Consultant to the Fund I GP and Fund II GP.

Simon Pilling who took over as CEO in September 2015 continues to lead the Consultant and remains the Head of Portfolio. The team has been structured to support the changing nature of the Funds which is now solely focussed on business improvement and asset realisation. Simon, together with Rob Asplin and Bonnie Kraus make up the executive team, with Rob heading up the deal and financial portfolio team and Bonnie, the finance and operations. The costs of the Better Capital team overall have been markedly reduced since this time last year and will continue to do so into next year. The team will be supplemented by additional skills or resources as necessary on a per project basis. This practice is already evident today across Everest, Jaeger, SPOT and CAV.

Board perspectives

The ongoing process to sell Fund I's interest in Gardner has been the Board's predominant focus for the 2009 Cell during the review period. We have maintained close contact with the Fund I GP and the Consultant regarding the sale process and have approved the Fund I GP's proposed valuation of Gardner in light of the business's continued strong performance and the information gained to date from the sale process. The Company has already published proposals to facilitate future returns of capital to the 2009 Shareholders and it remains our intention to effect a return of capital as soon as possible following any sale of Gardner.

Progress in the 2012 Cell has clearly been disappointing. The Board has sought to understand the dynamics of each business and to provide counsel to the Fund II GP and the Consultant as it progresses plans to drive improvements in operational efficiency, enhance growth potential and exit at a point appropriate for the business. The Board retains confidence in the Better Capital team's determination to achieve the best possible outcome for the 2012 Shareholders, but it is evident that a number of the businesses still face significant challenges and that the portfolio has a bias towards consumer-facing sectors which, given the uncertain economic outlook, may represent a headwind. Valuation in such circumstances carries inherent difficulties. The Board has approved the Fund II GP's proposed valuations, but cautions that the value ultimately realised will likely differ from these valuations due to further developments in the businesses, industries and economic environment.

Richard Crowder

Chairman

29 November 2016

Statement of Responsibility and Other Information

Responsibility Statement

The Directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and

· the Interim Financial Report meets the requirements of an interim management report (as defined below), and includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first period of the financial year; and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties of the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first period of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the audited financial statements that could do so.

Interim management report

· Important events of the interim period

The important events that have occurred during the interim period and the key factors influencing the financial statements are all set out in this report, comprising: the Chairman's Statement, Fund I General Partner's Report, Investment Report of Fund I, Fund II General Partner's Report, Investment Report of Fund II and the Financial Statement sections.

· Principal risks

There are a number of risks that could have a material impact on the performance of the Company over the remaining six months of the financial year, thereby causing actual performance to differ materially from expectations.

The Board considers that the principal risks and uncertainties have not materially altered from those published in the Annual Report for the year ended 31 March 2016. The Company's principal risk relates to the financial and operational performance of the Fund I and Fund II portfolios. The Board has considered the impact of Brexit in light of each portfolio company valuation.

The Company's principal risk factors are fully discussed in the Company's prospectuses, available on the Company's website www.bettercapital.gg.

The Directors of the Company are listed below and have been directors throughout the period.

By order of the Board

Richard Crowder

Chairman

29 November 2016

Independent Review Report to Better Capital PCC Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements of the Company in the interim financial report for the period ended 30 September 2016 which comprises the Company Condensed Statement of Financial Position, Company Condensed Statement of Comprehensive Income, Company Condensed Statement of Changes in Equity, Company Condensed Statement of Cash Flows and Company related notes.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

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

As disclosed in Note 2, the annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. The Company's condensed set of financial statements included in this interim financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

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

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Company's condensed set of financial statements in the interim financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LimitedChartered AccountantsPlace du Pré, Rue du Pré, St Peter Port, Guernsey

29 November 2016

Condensed Statement of Financial Position

As at 30 September 2016

The unaudited condensed interim financial statements of the Company were approved and authorised for issue by the Board of Directors on 29 November 2016 and signed on their behalf by:

Richard Crowder Jon Moulton

Chairman Director

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

Condensed Statement of Comprehensive Income

For the six months ended 30 September 2016

All activities derive from continuing operations.

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

Condensed Statement of Changes in Equity

For the six months ended 30 September 2016

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

Condensed Statement of Cash Flows

For the six months ended 30 September 2016

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

Notes to the Condensed Interim Financial Statements

For the six months ended 30 September 2016

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 unaudited company condensed financial information included in the interim financial report for the six months ended 30 September 2016 has been prepared in accordance with the DTRs and Listing Rules of the UK's FCA and IAS 34, 'Interim Financial Reporting' as adopted by the EU.

The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year to 31 March 2016, which are available on the Company's website www.bettercapital.gg. The annual financial statements have been prepared in accordance with EU adopted IFRS.

The Company does not operate in an industry where significant or cyclical variations, as a result of seasonal activity, are experienced during the financial period.

The same accounting policies and methods of computation are followed in the interim financial statements as in the annual financial statements for the year to 31 March 2016.

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

There were no new standards applied during the period ended 30 September 2016.

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 in some cases had not yet been adopted by the EU) and are relevant to the financial statements of the Company and Cells:

• IFRS 9: Financial Instruments - IFRS 9 replaces IAS 39. The Company will adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2018 (subject to EU endorsement).

• IFRS 15: Revenue from contracts with customers effective no earlier than 1 January 2018.

The Directors anticipate that the adoption of these standards and interpretations in the period of initial application will not have a material impact on the financial statements. IFRS 9 is not anticipated to have an impact as all investments are currently carried at fair value.

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 2016 or later periods.

Going concern

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

Critical accounting judgement 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 judgements 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 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 period £5.2 million was repaid to the Company by Fund I (Six months to 30 September 2015: £nil, Year to 31 March 2016: £35.6 million) and £nil by Fund II (Six months to 30 September 2015: £nil, Year to 31 March 2016: £nil).

Income distributions receivable from the Funds in relation to the period amounted to £nil (Six months to 30 September 2015: £nil, Year to 31 March 2016: £nil) which have been allocated as income based on discretionary allocation powers of the respective General Partners of the Funds as set out in the respective Limited Partnership Agreements. At the period end an aggregate £1.6 million (Six months to 30 September 2015: £1.6 million, Year to 31 March 2016: £1.6 million) remained outstanding.

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

5. Trade and other receivables

Full details of the 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 of 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 in Fund I and Fund II 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 as Level 3 for the period are £239.9 million for Fund I (30 September 2015: £264.1 million, 31 March 2016: £241.0 million) and £208.5 million for Fund II (30 September 2015: £259.4 million, 31 March 2016: £244.0 million).

Transfers during the period

There have been no transfers between levels during the period.

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 review information provided by the underlying investee companies and other business partners and apply IPEV methodologies to estimate a fair value that is in adherence to the requirements of IFRS 13 'Fair Value Measurement' as at the reporting date.

Initially acquisitions were 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, break-up value or discounted cash flows. 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 interim 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

Period ended 30 September 2016

Period ended 30 September 2015

Year ended 31 March 2016

Cell shares

Authorised:

The Cells are authorised to issue an unlimited amount of ordinary shares at £1 par value.

Period ended 30 September 2016

Period ended 30 September 2015

Year ended 31 March 2016

The four capital distributions (reductions of share capital) to date for the 2009 Cell total £66.8 million, being 31.8 per cent. of funds raised.

The one capital distribution (a reduction of share capital) to date for the 2012 Cell totalled £6.1 million, being 1.7 per cent. of funds raised.

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.

Annual remuneration for each Director is as follows: the Chairman receives £70,000, the Chairman of the audit committee receives £62,500, the Chairman of the management engagement, nomination and remuneration committee receives £60,000 and the other non-executive Director receives £45,000.

Directors' fees and expenses for the period to 30 September 2016 amounted to £120,000 (31 March 2016: £211,000, 30 September 2015: £105,000), of which £59,000 (31 March 2016: £52,000, 30 September 2015: £52,000) remained outstanding at the period end.

9. 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.

10. Subsequent events

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

Better Capital 2009 Cell

Investment policy summary

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

The 2009 Cell Investment policy is in the Company's prospectus, available on the Company's website www.bettercapital.gg.

General Partner's Report

Fund I continues to make steady progress. Gardner, the principal investment in the fund, is now in a sales process with SLMR, a company headquartered in China and listed on the Shenzhen Stock Exchange. SLMR is an ultimate parent company of a group whose current main activity is mineral exploration and production, but whose interests include a growing aerospace machining and component manufacture division. The acquisition of Gardner will provide a solid platform for SLMR to grow its interest in the aerospace sector domestically and globally.

Portfolio update

Gardner published an audited EBITDA of £24.3 million for its FY16 financial year ended August 2016, against a budget of £23.1 million and prior year of £16.6 million. The new financial year has started well and Q1 FY17 is expected to trade ahead of its EBITDA budget. With sales volumes increasing in line with its customers' production plans, margins are stronger, further strengthened by the continuing weakness of Sterling. Operational performance continues to be good but nonetheless, the business is focussing on achieving ever higher levels of delivery and quality performance as well as continuing cost reduction programmes. The level of bid activity continues to be high and the strengthening of the business development team completed earlier in the year is bringing in leads from potential new customers.

SLMR's offer for Gardner of £326.0 million is on an Enterprise Value basis, providing an EV/ Historic EBITDA of 13.4 times. Gardner's valuation has been written up by £9 million, reflecting a £12.2 million improvement in the underlying value, offset by a £3.2 million repayment of capital and interest in the review period. The valuation is based on an earnings approach, discounted to stated price reflecting the timing and conditionality associated with completion. At 30 September, the business had net debt of £43.5 million.

m-hance is trading behind its FY16 plan for the year to December 2016 at both revenue and EBITDA levels. This is primarily due to lower monthly sales than budgeted and known contract attrition not being replaced at the same rate. However, there have been new sales wins and the pipeline is stronger going into Q4 FY16, particularly in the Microsoft GP and the SaaS services businesses. The HighCloud (NetSuite) sales pipeline has grown steadily through the year from a standing start. The sales and marketing team has been strengthened to support growth and to position this new business stream positively for FY17.

Previously there was no planned upgrade path available for Microsoft GP customers onto Microsoft Dynamics 365, a new Cloud-only business suite. A route to move customers onto this new platform is now being developed by Microsoft. This is excellent news for m-hance as it will enable the business to grow a new revenue stream of migration and continue to support its Microsoft GP customers.

The valuation for m-hance has been written down by £2.0 million to £10.5 million to reflect the slower than anticipated growth in EBITDA. This has been derived using an earnings approach (range of EV/EBITDA: 7.6 times to 11.8 times), supported by a revenue approach, on the business's maintainable earnings and revenue. Maintainable earnings is derived as the average of FY16 outturn EBITDA and FY17 planned EBITDA; whilst maintainable revenue is the average of FY16 outturn revenue and FY17 planned revenue. At 30 September 2016, the business had net debt of £1.0 million.

Omnico closed its FY16 financial year ended September 2016 in line with forecast expectations. Most significantly, the business has now moved into profit for the first time recording an underlying EBITDA (unaudited) of c. £1.1 million (audited FY15 EBITDA loss of £1.5 million). The business completed the closure of its loss-making hardware division during the first half of FY16 and has refocussed itself as a software solutions business that better serves both current and new customers. The software business has grown by some 9 per cent. over the past year. New contract wins include Excess Baggage and Co-Op Denmark.

The first two product updates were delivered to plan in July and November 2016, signalling a shift in how Omnico engages and supports its customers. Delivery performance continues to improve; however, there is still more to do in order to support a higher number of new contracts. The delivery teams have been better aligned to create clearer accountability for product delivery and customer projects which will enable Omnico to increase efficiency, boost billable utilisation and implement delivery more quickly.

Omnico's valuation benefits from a £1.5 million uplift to £26.5 million. This is supported using an earnings approach to valuation. Maintainable earnings is derived from the average of FY16 outturn and next year's projected EBITDA, benchmarked against Oracle's acquisition of MICROS Systems in September 2014. At 30 September, the business had net debt of £0.6 million.

An update on 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 £2.1 million, made up of a £1.8 million adverse movement in value and a £0.3 million repayment to Fund I in June 2016.

Investment activities

During the review period, Gardner repaid £3.2 million in a combination of capital and interest payments. Total capital and interest repaid to date is £22.5 million from a total capital outlay of £40.5 million (55.7 per cent.).

In June 2016, SPOT repaid £2.7 million of capital and interest funded from internal cash resources, of which £0.3 million was repaid to Fund I and the balance to BECAP12 SPOT Limited.

Valuation

The overall portfolio carrying value rose by £6.4 million between 1 April 2016 and 30 September 2016, largely driven by growth in Gardner and to a lesser extent, Omnico (totalling £13.7 million), offset by repayments in Gardner and SPOT (£3.5 million) and write downs in m-hance and SPOT (£3.8 million).

Distributions

On 8 July 2016, Fund I repaid £5.2 million to the 2009 Cell which facilitated a fourth distribution to the 2009 Shareholders, of 2.5p per share on 13 July 2016.

A successful Gardner sale will see a very significant return of value to the 2009 Cell and its Shareholders. Planning to facilitate such an eventuality has commenced.

Closing remarks

Fund I has achieved a milestone with Gardner, our most valuable asset now in exclusive talks for its disposal. The Better Capital team continues to work tirelessly to ensure the best outcome for the fund and the 2009 Cell, not just on delivering Gardner but also driving incremental value in the remaining assets in Fund I.

Jon Moulton

Chairman

BECAP GP Limited

29 November 2016

Investment Report of Fund I

Gardner

Business description

A Tier-1 supplier of medium and high complexity machined metallic components to the aerospace industry (www.gardner-aerospace.com)

Investment details

m-hance

Business description

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

Investment details

Omnico Group

Business description

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

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)

Investment details

Portfolio summary

* Fund I holds its investments at cost in accordance with the terms of the Limited Partnership Agreement.

** 2009 Cell fair values its investment in Fund I in accordance with the accounting policies as set out in Note 2.

1 Includes £0.3 million of Santia escrow cash and £0.2 million of estimated net proceeds from the Fairline administration.

Summary income statement for the Partnership

Cash Management

As at 30 September 2016, Fund I had placed a total of £1.7 million (31 March 2016: £4.4 million, 30 September 2015: £0.4 million) of cash on instant access deposit with one bank. Fund I has in place a strict cash management policy that limits counterparty credit risk whilst simultaneously seeking to maximise returns.

INDEPENDENT REVIEW REPORT TO BETTER CAPITAL PCC LIMITED IN RESPECT OF THE 2009 CELL

Introduction

We have been engaged by the Company to review the condensed set of financial statements of the 2009 Cell, a cell of Better Capital PCC Limited, for the period ended 30 September 2016 which comprises the 2009 Cell Condensed Statement of Financial Position, the 2009 Cell Condensed Statement of Comprehensive Income, the 2009 Cell Condensed Statement of Changes in Equity, the 2009 Cell Condensed Statement of Cash Flows, and the 2009 Cell related notes.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

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

As disclosed in Note 2, the annual financial statements of the 2009 Cell are prepared in accordance with IFRS as adopted by the European Union. The 2009 Cell's condensed set of financial statements included in this interim financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the 2009 Cell's condensed set of financial statements in the interim financial report based on our review.

Our report, including the conclusion, has been prepared in accordance with the terms of our engagement to assist the 2009 Cell in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. 

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the 2009 Cell's condensed set of financial statements in the interim financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LimitedChartered AccountantsPlace du Pré, Rue du Pré, St Peter Port, Guernsey

29 November 2016

Condensed Statement of Financial Position

As at 30 September 2016