BCAP.L Regulatory News (BCAP)

04 May 2011

BETTER CAPITAL LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital Limited is pleased to announce its 2011 final results. Highlights include:

·; £210.0 million total capital raised

·; £80.5 million committed (39.5%)

·; Shares trading at a premium to NAV

·; IFRS profit for the period £5.4 million

·; Within BECAP Fund LP (the "Better Capital Fund")

·; Six acquisitions; Gardner, RD Precision, Blade, Reader's Digest, Calyx, Santia

·; Portfolio companies on improving trends

·; Diversified portfolio

·; Strong financial position to react to future opportunities

·; Strong deal flow

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

Richard Crowder, Chairman stated:

"The first 16 month period of trading for the Company and the Better Capital Fund has been successful; with four platform investments and two bolt-on acquisitions, a move from AIM to the Main Market and a second fundraising. The portfolio continues to perform with each business continuing to improve and to trade well.

Better Capital has enjoyed a consistent level of referrals throughout its first complete year of operation with a total of 437 leads being generated. These leads have been from a variety of sources and have covered a wide range of industries.

The Better Capital brand is strong and well positioned in the turnaround market and has a reputation for being able to execute complex transactions at pace."

Enquiries:

Better Capital Limited +44 (0)1481 716 000

Mark Huntley (Director)

Laurence McNairn (Administrator and Company Secretary)

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

Nathan Brown

Simon Blank

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

Roderick Cameron

Rory Godson

Chairman's Statement

The first 16 month period of trading for the Company and the Better Capital Fund has been successful; with four platform investments and two bolt-on acquisitions, a move from AIM to the Main Market and a second fundraising.

Fundraising

In December 2009, the Company raised capital proceeds of £142.4 million from the initial listing on AIM. After payment of share issue costs and retaining £1.0 million for working capital purposes, £138.0 million of these proceeds were invested into the Better Capital Fund.

In June 2010, a further fundraising of £67.6 million capital proceeds was completed, bringing the total capital raised to £210.0 million. After payment of share issue costs, the total invested in the Better Capital Fund increased to £203.8 million. In July 2010, the enlarged share capital of the Company was admitted to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's Main Market.

Portfolio

The General Partner has advised the Company that the portfolio continues to perform well with each business continuing to improve and to trade well. None of the companies has material net external debt.

Gardner continues to make good progress and has secured a number of important new long term contracts as a result of its stronger balance sheet. The strengthened management team is implementing a major change programme to improve the quality of its facilities and reduce costs. The acquisitions of both RD Precision and Blade are proving successful and both businesses have been fully integrated into Gardner. In March 2011, the company completed the acquisition of a new production facility in Ilkeston; £7 million has been invested for the purchase of the land and building and to fund the necessary extension.

Having completed a major cost reduction programme, Reader's Digest is focused on growing the active customer base and has recorded its first monthly increase in magazine circulation for 17 years.

Calyx has emerged from the uncertainty of administration and receivership and the new management team has reduced the number of sites and headcount whilst focusing on improving product profitability.

The acquisition of Santia has only recently been completed but there is clearly growing momentum and the early signs are encouraging.

This performance provides the Board with confidence that the rigorous operating model being implemented in each of the portfolio businesses is yielding results and bodes well for further deployment by Better Capital Fund on turnaround opportunities.

Deal flow

The Better Capital brand is strong and well positioned in the turnaround market and has a reputation for being able to execute complex transactions at pace.

Better Capital has enjoyed a consistent level of referrals throughout its first complete year of operation with a total of 437 leads being generated. These leads have been from a variety of sources and have covered a wide range of industries.

Better Capital Fund continues to review carefully each opportunity and remains selective about pursuing only those that have the potential to be turned around, thus providing a potentially strong return for the investors.

These encouraging indications lead the Board to continue to believe that the proceeds of the Better Capital Fund can be invested or committed within the period set out in the Prospectus.

A legacy requirement of the Company's listing on AIM was that at least 50 per cent. of Better Capital Fund's Total Commitments must have been applied or committed to be invested by 21 June 2011. If the 50 per cent. hurdle is not reached by 21 June 2011, the Board will approve the continuation of the Investment Period, in accordance with the direction from shareholders and the authority conferred on them by shareholders, at the Company's last Extraordinary General Meeting of 24 June 2010, and issue a formal consent letter.

Marketplace

Whilst the deal flow experienced by Better Capital has been encouraging, overall the number of corporate insolvencies in the UK continues to remain significantly below levels seen in or after previous recessions. Continuing low interest rates enable really quite troubled companies to keep going.

Better Capital has demonstrated its ability to source and execute turnaround opportunities and remains, in the near term, well-resourced to capitalise on corporate failures when they happen.

Richard Crowder

Chairman 4 May 2011

General Partner's Report

The Fund has invested in four businesses across a diverse range of industry sectors, one of which has made two strategic value enhancing acquisitions.

Bleaker days obviously favour Better Capital's flow of new transactions. The UK economy contracted in the last quarter of 2010 and a mixed picture has emerged for this first quarter of 2011. Retail demand seems to have weakened recently whilst there are some signs of export strength appearing.

The Irish economy remains very troubled and there is a considerable probability of a default on the Irish banks' debt. Many Irish companies have improbable balance sheets and opportunities will arise when the very obvious nettles are grasped.

Interest rates remain low as policymakers seek to enable consumers, companies and some countries to service their improbably high debt loads without generating a lot of short term pain. Whether this policy can be continued effectively in the face of rising inflation and the risks of Eurozone sovereign defaults is open to serious doubt.

Any significant increase in interest rates will precipitate a large increase in the number of UK and Irish companies struggling with their balance sheets. Such an increase would be good for the Better Capital Fund.

Deal flow remains both fascinating and consistent with Better Capital's investment aims. We expect it to increase.

Jon Moulton

Director

BECAP GP Limited 4 May 2011

GARDNER

Business description

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

Progress

·; Site rationalisation programme underway

o Investing in high quality facilities

o Exiting old sites

·; Significant new contracts secured with Airbus, GKN and Rolls Royce

·; Integration of RD Precision and Blade completed and benefits being realised

·; Low cost sourcing programme underway

·; New CEO appointed

Performance

·; Trading in line with investment plan with profitability significantly up on prior year

READERS DIGEST

Business description

·; An iconic brand in direct marketing and publishing in the UK (www.readersdigest.co.uk)

Progress

·; Reduced cost base

o Relocated to well-appointed, but significantly lower cost offices

o Supply chain re-design has delivered major savings

·; Investment in new systems

o Major upgrade of IT systems in progress, enabling focussed customer management

·; Focus on customer growth

o First increase in magazine circulation for 17 years

o Customer call centre repatriated to UK

o Key merchandising relationships being developed

·; New management team in place

Performance

·; Trading in line with investment plan and significant growth in profitability expected in 2011

CALYX

Business description

·; A leading supplier of managed IT services and software to small and medium sized enterprises (www.calyxgroup.com)

Progress

·; The business recovered well from the insolvency processes with minimal customer loss

·; Site consolidation and headcount reduction achieved in three months

·; Experienced and high calibre management team recruited

·; Improved back office systems being implemented

Performance

·; Trading marginally ahead of investment plan

SANTIA

Business description

·; Provider of consultancy and advisory health, safety and environmental services(www.santia.co.uk)

Progress

·; Business stabilised after prolonged period of uncertainty

·; Turnaround plan defined and in progress

o Property savings

o Supply chain savings

o New business systems

Performance

·; Whilst a very recent investment by the Better Capital Fund, Santia has been trading in line with expectation

Portfolio summary and reconciliation

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

** The Company fair values its investment in the Better Capital Fund in accordance with the accounting policies as set out in Note 2.

Cash Management

As at 31 March 2011, Better Capital Fund had placed a total of £123.5 million of cash on deposit with six banks subject to maturity dates ranging from instant access to four months. The Better Capital Fund has in place a strict cash management policy that limits counterparty risks whilst simultaneously seeking to maximise returns.

Report of the Directors

The Directors hereby submit the annual report and audited financial statements of the Company for the period ended 31 March 2011.

Business Review

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

Principal Activities

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

The Company was incorporated in Guernsey on 24 November 2009 as a closed-ended investment company and is registered with the Guernsey Financial Services Commission as a Registered Closed-ended Collective Investment Scheme. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

Results and Dividend

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

The Net Asset Value of the Company as at 31 March 2011 is £210.4 million.

The Directors have not recommended the payment of a dividend in respect of the period to 31 March 2011. The Company's investment objective is focused primarily on capital appreciation by investing in Better Capital Fund. The Directors intend to make dividend distributions to Shareholders as and when such distributions are, in their view, feasible.

Annual General Meeting

The Annual General Meeting of the Company will be held at 9:30am on 24 May 2011 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. Details of the resolutions to be proposed at the AGM, together with explanations, appear in the Notice of Meeting which is being sent to Shareholders at the same time as this annual report.

The Chairman, Mr Crowder, and Mr Battey, the chairman of the audit committee, will be in attendance at the AGM and will be available to answer shareholder questions.

Statement of Directors Responsibilities

The Directors are responsible for preparing the annual report and the financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit for that period, in accordance with applicable Guernsey law and those International Financial Reporting Standards ("IFRS") as adopted by the European Union. In preparing these financial statements, International Accounting Standard 1 - Annual Financial Reporting as adopted by the European Union requires the Directors to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

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

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

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

The Directors confirm that, so far as they are aware, there is no information relevant to the audit of which the Company's auditors are 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 auditors are aware of that information.

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

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

Responsibility Statement

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

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

·; The Chairman's Statement and the General Partner's Report includes a fair review of the development and performance of the business and the position of the Company and Note 12 to the financial statements provides a description of the principal risks and uncertainties that they face.

Listing Requirements

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

Corporate Governance Statement

The Board recognises the value of good corporate governance and, in particular, has regard to the requirements of the Combined Code on Corporate Governance published by the Financial Reporting Council ("Combined Code") (available from the Financial Reporting Council's website, http://www.frc.org.uk/).

The Company's prospectus dated 10 June 2010 stated that the Company was, and intended to continue to be, in compliance with the Combined Code. Since then, the Company has become a member of the Association of Investment Companies ("AIC") and the Board of the Company has accordingly considered, and resolved to follow, the principles and recommendations of the AIC Code of Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide") (both available from the AIC's website, http://www.theaic.co.uk/).

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

The Combined Code includes provisions relating to:

·; the role of the chief executive;

·; executive directors' remuneration; and

·; the need for an internal audit function.

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

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

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

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

·; Following the issue of the Prospectus in June 2010, the Company has not conducted a specific annual strategy session separate to scheduled quarterly board meetings in accordance with principle 14 of the AIC Code during the period. However, a strategy meeting is due to be held in May 2011 which will be conducted in conjunction with the Administrator, General Partner and the Consultant.

The Combined Code is being replaced by the UK Corporate Governance Code which applies to reporting periods beginning on or after 29 June 2010. In response, a new version of the AIC Code has been published which is aligned with the UK Corporate Governance Code. The Board will report against the updated AIC Code for reporting periods beginning on or after 29 June 2010.

Better Capital Fund itself is not subject to any code of corporate governance. However, Better Capital Fund acts through the General Partner which in turn acts through the GP Company which is licensed under the POI Law. As a POI Licensee the board of the GP Company have regard to a document published by the Guernsey Financial Services Commission ("GFSC") on 10 December 2004 entitled "Guidance on Corporate Governance in the Finance Sector in Guernsey". This guidance document sets out the general responsibilities of the Board and includes proposals to deal with risk management, internal control procedures, the duties of directors, the composition of the Board and self assessment. The GP Company is managed in a manner which complies with the content of that guidance document.

The GFSC published a consultation paper on a proposed "Code of Corporate Governance" applicable for Guernsey in April 2011. However, no formal code has been introduced to date.

The Board

The Directors of the Company at the date of this report are Richard Crowder (Chairman), Richard Battey, Philip Bowman and Mark Huntley. Each of the four Directors of the Company has been appointed since the incorporation date of 24November 2009 and must submit themselves for re-election at the first annual general meeting of the Company. Messrs Crowder, Battey and Bowman shall be appointed for no more than 3 year terms. Mr Huntley, as a director of the Administrator and GP Company, is subject to annual re-election in accordance with the listing rules of the Financial Services Authority ("Listing Rules").

None of the Company's directors have served for longer than two years to date. When, and if, any director shall have been in office (or on re-election would at the end of that term of office) for nine years, the Company will consider whether there is any risk that such director might reasonably be deemed to have lost independence through such long service. At such time, any director would be subject to annual re-election by the shareholders. The independent directors take the lead in any discussions relating to the appointment or re-appointment of directors.

The Board meets on a quarterly basis. The dates for each meeting are planned at the beginning of the year and confirmed in writing upon notice in accordance with the Company's articles of incorporation. Meetings for urgent issues may be convened at short notice if all directors are informed and agree.

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

During the period 24 November 2009 to 31 March 2011 the Directors' remuneration was paid as follows (of which £33,750 was outstanding at the period end):

All of the Directors are independent and non-executive.

Other remuneration paid to each Director of £5,000 during the period was in respect of additional services rendered in relation to the second fund raising and Main Market migration project and totalled £20,000. These have been included within share premium as costs of raising capital.

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 are as follows:

·; statutory obligations and public disclosure;

·; strategic matters and financial reporting;

·; oversight of personnel matters;

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

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

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

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

The Board considers Messrs Crowder, Battey and Bowman as independent of the General Partner and free from any business or other relationship that could materially interfere with the exercise of their independent judgment. The Board as a whole is independent of the Consultant and the General Partner. Mr Huntley is a director of the Administrator and the GP Company.

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

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

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

The attendance record of the Directors is set out below:

1 Mr Huntley is not a member of the Audit Committee

During the period there were also a further two committee meetings and four meetings held by the committee established solely for the purposes of the Company's Firm Placing and Placing and Open Offer and Migration to the LSE Main Market.

Directors

Richard Crowder (Chairman), Guernsey resident (aged 61)

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

Richard Battey Guernsey resident (aged 59)

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

Philip Bowman UK resident (aged 58)

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

Mark Huntley Guernsey resident (aged 52)

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

Shareholdings of the Directors

The Directors of the Company and their beneficial interests in shares as at 31 March 2011 are detailed below:

*Represents a shareholding of 50,000 shares each by Richard Crowder and his wife.

There have been no changes to the Directors shareholdings since 31 March 2011.

Committees of the Board

Although the AIC Code recommends that companies should appoint a remuneration committee and a nomination committee the Board has not deemed this necessary as, being comprised wholly of non-executive directors, the whole board considers these matters.

The Board has also chosen not to establish a management engagement committee However, the Board reviews the arrangements for the provision of management and other services to the Company on an ongoing basis. The Company receives regular reporting from the General Partner of Better Capital Fund and also receives regular valuations of the Fund's portfolio, which allows the Board to form a judgement as to the performance of its investment in the Fund. The Board continuously monitors the performance of the Administrator and a review of the Administrator will be conducted annually.

The Administrator has wide experience in managing and administering fund vehicles and has access to extensive investment management resources. In the opinion of the Directors, the continued appointment of the Administrator on the agreed terms is in the interests of the shareholders as a whole.

Audit committee

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

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

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

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 General Partner and undertakings of its Consultant at regular Board meetings and is given frequent updates on developments arising from the operations and strategic direction of the underlying investee companies. The Board has also delegated administration and company secretarial services to the Administrator; however it retains accountability for all functions it delegates.

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

• The Non-Executive Directors of the Company clearly define the duties and responsibilities of their 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.

• The General Partner 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 General Partner and Administrator, including its internal audit functions, provide sufficient assurance that a sound system of risk management and internal control, which safeguards shareholders' investment and the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

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

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Company. Suitable insurance is in place and due for renewal on 8 December 2011.

Dealings with shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Company's annual general meeting provides a forum for shareholders to meet and discuss issues with the Directors of the Company. The Chairman and other directors are also available to meet with shareholders at other times, if required. In addition, the Company maintains a website which contains comprehensive information.

(http://www.bettercapital.gg/), including company notifications, share information, financial reports, investment objectives and policy, investor contacts and information on the Board and corporate governance.

Major Shareholders

As at 31 March 2011, insofar as is known to the Company, the following persons were interested, directly or indirectly, in 5% or more of the Ordinary Shares in issue:

The Directors confirm that there are no securities in issue that carry special rights with regards to the control of the Company. The Company has only issued ordinary shares and each ordinary share in issue is entitled to one vote.

Directors' Authority to Buy Back Shares

The current authority of the Company to make market purchases of up to a maximum of 15 per cent. of the issued Ordinary Share Capital is renewable annually. The Company will seek to renew such authority at the Annual General Meeting to take place on 24 May 2011 and at each annual general meeting thereafter. Any buy back of Ordinary Shares will be made subject to Guernsey law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board and not at the option of the Shareholders. Purchases of Ordinary Shares will only be made through the market for cash at prices below the prevailing Net Asset Value of the Ordinary 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 Ordinary Shares for the five business days before the shares are purchased unless previously advised to shareholders.

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

Articles of Incorporation

The Company's Articles may only be amended by special resolution of the shareholders.

Independent Auditors

A resolution proposing the re-appointment of BDO Limited as Auditors of the Company and authorising the Directors to determine their remuneration will be presented at the Annual General Meeting.

General Partner's Share and Carried Interest

The General Partner's Share is calculated under the terms of the Limited Partnership Agreement and as described in the Prospectus dated 10 June 2010. Pursuant to the terms of the Limited Partnership Agreement, where net income and net capital gains are insufficient to extinguish the General Partner's Share, the Better Capital Fund shall advance a non-interest bearing loan to the extent of the General Partner Share not already drawn by the General Partner. The loan is not recoverable from the General Partner other than by allocation of net income or net capital gains.

In the period under review, the Better Capital Fund has advanced a non-interest bearing loan to its General Partner of £3.6 million in respect of the General Partner's Share. This has been accounted for when calculating the fair value of the investment by the Company in the Better Capital Fund.

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

Going Concern

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

By order of the Board

Richard Crowder

Chairman

4 May 2011

Independent Auditor's Report to the Members of

Better Capital Limited

We have audited the financial statements of Better Capital Limited for the period ended 31 March 2011 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 14. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work is undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditor

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

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

Scope of the audit of the financial statements

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

Opinion on the financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the company's affairs as at 31 March 2011 and of its profit for the period from 24 November 2009 to 31 March 2011;

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

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

Matters on which we are required to report by exception

We have nothing to report in respect of the following:‑

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

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

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

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

Under the Listing Rules we are required to review:

·; the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Justin Marc Hallett ACA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey 4 May 2011

Statement of Financial Position

As at 31 March 2011

The audited financial statements were approved and authorised for issue by the Board of Directors on 4 May 2011 and signed on their behalf by:

Richard Crowder Richard Battey

Chairman Director

Statement of Comprehensive Income

For the period 24 November 2009 to 31 March 2011

All activities derive from continuing operations.

All income is attributable to the holders of the Ordinary Shares of the Company.

Statement of Changes in Equity

For the period 24 November 2009 to 31 March 2011

Statement of Cash Flows

For the period 24 November 2009 to 31 March 2011

Note

Net cash used in operating activities includes £4,812 interest received on cash balances.

Notes to the Audited Financial Statements

For the period 24 November 2009 to 31 March 2011

1. General information

Better Capital Limited (the "Company") was incorporated in Guernsey on 24 November 2009 as a closed-ended investment company with an unlimited life and registration number 51194. The Company is registered with the Guernsey Financial Services Commission as a Registered Closed-ended Collective Investment Scheme. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

The investment objective of the Company is to generate total attractive returns through an investment policy of investing (through Better Capital Fund) in a portfolio of distressed businesses, such returns being expected through capital growth.

Better Capital Fund is managed by its general partner, BECAP GP LP (the "General Partner"), which is in turn managed by its general partner BECAP GP Limited. Such arrangements are governed under the respective Limited Partnership Agreements, as amended.

The Company was initially admitted to list on the London Stock Exchange AIM market on 17 December 2009, raising £142.4 million gross capital proceeds by way of a placing of shares. On 28 June 2010 the Company raised an additional £67.6 million gross capital proceeds from a firm placing and placing and open offer. On 8 July 2010 the Company was admitted to the Official List of the UK Listing Authority and the enlarged share capital of the Company was migrated to the London Stock Exchange Main Market.

2. Accounting policies

Basis of preparation

The financial statements for the period ended 31 March 2011 have been prepared in accordance with International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively "Adopted IFRS's").

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

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

The principal accounting policies adopted are set out below.

Standards, amendments and interpretations to published standards not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied, were in issue but not yet effective.

The IASB issued Conceptual Framework for Financial Reporting 2010 in September 2010. There is no stated effective date therefore the effective date is taken from the date of issue.

Revised, amended and new standards relevant to the entity:

·; IFRS 1: International Financial Reporting Standards - amendments resulting from May 2010 annual improvements to IFRSs' - for accounting periods commencing on or after 1 January 2011

·; IFRS 7: Financial Instruments: Disclosures - amendments resulting from May 2010 annual improvements IFRSs - for accounting periods commencing on or after 1 January 2011

·; IFRS 7: Financial Instruments: Disclosures - amendments enhancing disclosures about transfers of financial assets - for accounting periods beginning on or after 1 July 2011*

·; IFRS 8: Operating Segments - amendments resulting from April 2009 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2010

·; IFRS 9: Financial Instruments - to replace IAS 39 Financial Instruments: Recognition and Measurement - for accounting periods commencing on or after 1 January 2013*

·; IAS 1: Presentation of Financial Statements - amendments resulting from April 2009 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2010

·; IAS 1: Presentation of Financial Statements - amendments resulting from May 2010 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2011

·; IAS 7: Statement of Cash Flows amendment resulting from April 2009 annual improvements to IFRS - for accounting periods commencing on or after 1 January 2010

·; IAS 24: Related Party Disclosures - amendment to simplify related party disclosures - for accounting periods commencing on or after 1 January 2011

·; IAS 27: Consolidated and Separate Financial Statements - amendments resulting from May 2010 annual improvement to IFRS - for accounting periods commencing on or after 1 July 2010

·; IAS 32: Financial Instruments: Presentation - amendments relating to classification of rights issues - for accounting periods commencing on or after 1 February 2010

·; IAS 34: Interim Financial Reporting - amendments resulting from May 2010 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2011

·; IAS 39: Financial Instruments: Recognition and Measurement amendments resulting from April 2009 annual improvements to IFRS - for accounting periods commencing on or after 1 January 2010

Revised, amended and new standards not relevant to the entity:

·; IFRS 1: First-time adoption of International Financial Reporting Standards - limited exemption from comparative IRFS 7 disclosures for first-time adopters - for accounting periods commencing on or after 1 July 2010

·; IFRS 1: First-time adoption of International Financial Reporting Standards - replacement of 'fixed dates' for certain exceptions with 'the date of transition to IFRS' - for accounting periods commencing on or after 1 July 2011*

·; IFRS 1: First-time adoption of International Financial Reporting Standards - additional exemption for entities ceasing to suffer from severe hyperinflation - annual periods beginning on or after 1 July 2011*

·; IFRS 2: Share-based Payment - amendment relating to group cash-settled share-based payment transactions - for accounting periods beginning on or after 1 January 2010

·; IFRS 3: Business Combinations - amendments resulting from May 2010 Annual Improvements to IFRS - for accounting periods beginning on or after 1 July 2010

·; IFRS 5: Non Current Assets held for Sale and Discontinued Operations - amendments resulting from April 2009 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2010

·; IAS 12: Income Taxes - limited scope amendment (recovery of underlying assets) - for accounting periods commencing on or after 1 January 2012*

·; IAS 17: Leases - amendment resulting from April 2009 - annual improvements to IFRS - for accounting periods commencing on or after 1 January 2010

·; IAS 36: Intangible Assets - amendment resulting from April 2009 - annual improvements to IFRS - effective on or after 1 January 2010

·; IFRIC 13: Customer Loyalty Programmes - amendments resulting from May 2010 annual improvement to IFRS - for accounting periods commencing on or after 1 January 2011

·; IFRIC 14: interpretation of IAS 19: Employee Benefits - for accounting periods commencing on or after 1 January 2011

·; IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments - for accounting periods commencing on or after 1 July 2010

* still to be endorsed by the EU.

The Directors anticipate that the adoption of these standards and interpretations in future periods will not have a material impact on the financial statements of the Company.

Foreign currencies

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

The presentation currency for financial reporting purposes is Pounds Sterling.

Financial instruments

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

Financial assets

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

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

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

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

a) Loans and receivables

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

b) Investments at fair value through profit or loss

i. Classification

The Company classifies its investment in Better Capital Fund as a financial asset at fair value through profit or loss. The financial asset was designated by the Company at fair value through profit or loss at inception.

ii. Recognition

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

iii. Measurement

The investment in Better Capital Fund is initially recognised at cost, being the fair value of consideration given.

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

The Directors base the fair value of the investment in Better Capital Fund on information received from the General Partner. The General Partner's assessment of fair value of investments held by Better Capital Fund, through Special Purpose Vehicles, is determined in accordance with the International Private Equity and Venture Capital ("IPEV") Valuation Guidelines. It is the opinion of the General Partner, that the IPEV valuation methodology used in deriving a fair value is not materially different from the fair value requirements of IAS 39.

iv. Fair value estimation

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

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

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

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

c) Derecognition of financial assets

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

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

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

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

d) Cash and cash equivalents

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

Financial liabilities

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

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

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

a) Financial liabilities measured at amortised cost

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

b) Derecognition of financial liabilities

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

Capital

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

The Company considers its capital to comprise its Ordinary Share capital, share premium and retained earnings. There has been no change in what the Company considers to be capital since incorporation. The Company is not subject to any externally imposed capital requirements.

Equity instruments

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

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

Income

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

Income distributions

Income distributions are recognised on an accruals basis.

It is the intention of the General Partner to specifically allocate, on an accruals basis, to the Company investment transaction fee income earned by Better Capital Fund. Better Capital Fund charges the investee companies investment transaction fees at two per cent. of the initial investment and reorganisation of the investee company and recognises the fee on an accruals basis following the completion and reorganisation.

Other expenses

Other expenses are accounted for on an accruals basis.

Dividends

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

Going concern

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

Segmental reporting

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

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

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

All of the Company's non-current assets are located in Guernsey, via Better Capital Fund.

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

Critical accounting judgment and estimation uncertainty

Use of estimates and judgements

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

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

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

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

Investment in Better Capital Fund

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

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

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

Further information in relation to the valuation of the investment in Better Capital Fund is disclosed in Note 4.

3. Taxation

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

4. Investment in Limited Partnership

The movement in fair value is derived from the fair value uplifts in the Gardner and Readers Digest investments, net of income and expenses of Better Capital Fund and its related special purpose vehicles.

The outstanding loans do not carry interest. The loans will be repaid by way of distributions from Better Capital Fund. The Company is not entitled to demand repayment of the outstanding loans. Distributions receivable from Better Capital Fund in the period amounted to £1,105,000, of which £855,000 remains outstanding at the period end, which have been allocated as income based on discretionary allocation powers of the General Partner of Better Capital Fund as set out in the Limited Partnership Agreement.

In the financial statements of the Company the fair value of the loans will be increased or reduced to reflect the fair value of the Company's attributable valuation of net assets within the Better Capital Fund.

The Calyx and Santia investments are carried at the price of recent investment. Interest receivable in respect of the underlying loans made by Better Capital Fund have not been recognised in calculating the fair value of the investment in Better Capital Fund due to their circumstances of being relatively immature turnaround opportunities. As at 31 March 2011 such unrecognised interest receivable amounted to £789,748. (Note 2)

The Company pursues its investment objective and policy by investing in Better Capital Fund.

Better Capital Fund seeks to invest in a portfolio of companies which have significant operating issues and may have associated financial distress, with a primary focus on investments in companies which have significant activities within the United Kingdom and Ireland.

5. Significant Agreements - Corporate Broker, Administrator & Registrar

Corporate Broker

On 15 April 2010 the Company entered into an engagement letter with Numis Securities Limited ("Numis") which defined the terms of the new corporate broker engagement and constituted the termination of the existing nominated adviser and broker agreement ("Nomad Agreement"), dated 14 December 2009, pursuant to which, Numis had agreed to act as the Company's Nominated Adviser and Broker from admission to trading on AIM for the purpose of Compliance with the AIM Rules. The new corporate broker arrangement became effective upon the admission to the London Stock Exchange Main Market on 8 July 2010. Pursuant to the engagement letter Numis would act as Corporate Broker, rendering brokerage services in relation to the migration of the Company's listed shares from AIM to the London Stock Exchange Main Market and the provision of ongoing support to the Company. In exchange for these services the Company agreed to pay a fee of £35,000 for the first 12 months of the engagement to Numis.

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

During the period, the Company incurred fees of £42,459 in respect of the original Nomad agreement, and £26,359 in respect of the Corporate Broker fee.

Administrator

The Administrator has been appointed to provide day to day administration and secretarial services to the Company as set out in the Administration Agreement. In consideration for its services, and in addition to a set up fee of £30,000 plus disbursements, the Administrator receives an annual fee of 0.1 per cent. of the net asset value (subject to a minimum of £75,000 and a maximum of £175,000), for administration, company secretarial and corporate governance services. The Company also reimburses the Administrator for incurred out of pocket expenses. The Administration Agreement can be terminated by either party giving not less than 90 days' notice in writing and in certain other circumstances, including material breach of the terms of the agreement by either party.

During the period, the Company incurred administration fees of £209,772 of which £43,750 remained outstanding as at the period end.

Registrar

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

During the period, the Company incurred fees of £16,691 in respect of this agreement, of which £2,700 remained outstanding as at the period end.

6. Cash and cash equivalents

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

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

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

7. Trade and other receivables

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

Outstanding debtors at the period end relate entirely to income distributions receivable from Better Capital Fund (Note 2).

8. Trade and other payables

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

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

9. Share capital

On incorporation one Ordinary Share of no par value was issued for a consideration of £1. Following the Company's listing on the London Stock Exchange AIM market on 17 December 2009, a total of 142,399,999 additional Ordinary Shares were issued with no par value at 100 pence per share. The Company incurred immediate listing expenses comprising of commissions, professional adviser fees and disbursements of £3,442,928. These costs have been taken to the share premium account.

On 28 June 2010 the Company issued a total of 64,380,952 new additional ordinary shares with no par value at 105 pence per share, raising an additional £67,600,000 gross capital proceeds, under firm placing and placing and open offer. The Company incurred additional fundraising expenses comprising predominately of commissions, regulatory fees, professional adviser fees and disbursements totalling £1,550,374. These costs have been taken to the share premium account.

The Company has one class of Ordinary Shares which carry no right to fixed income.

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

Members of Better Capital LLP, the appointed Consultant to BECAP GP Limited, which acts as general partner to BECAP GP LP, which in turn acts as General Partner to Better Capital Fund, hold investments in the Company in accordance with the terms of the Prospectus. At the period end, those members held the following proportions of Ordinary Shares:

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

10. Retained earnings

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

11. Related party transactions

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

The Company has four non-executive Directors, all independent of the Administrator other than Mr Mark Huntley, who is also the managing director of Heritage International Fund Managers Limited. Mr Huntley is also a director of BECAP GP Limited, the general partner of the General Partner.

Directors' fees for the period to 31 March 2011 amounted to £182,805, of which £33,750 was outstanding at the period end. The Director's also received additional fees totalling £20,000 in respect of additional services rendered on the second fund raising and Main Market migration. The additional Directors' fees have been taken to the share premium account.

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

12. Financial risk management

Financial risk management objectives

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

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

Categories of financial instruments

Capital risk management

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

The investment objective of the Company is to generate attractive total returns through an investment policy of investing through Better Capital Fund in a portfolio of distressed businesses. Such returns being expected to be largely from capital growth.

Gearing

As at the date of these financial statements the Company had no gearing.

Externally imposed capital requirement

There are no external capital requirements imposed on the Company.

Market risk

Price risk

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

The investment in Better Capital Fund presents a risk of loss of capital.

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

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

i. Foreign exchange risk

Better Capital Fund has indirect foreign currency risk, primarily with the Euro, arising from the Irish operations of Calyx. The Calyx management continue to monitor options for hedging against adverse exchange rate movements. The General Partner does not consider the amount at risk to be material for disclosure in the financial statements. In the period from formation, all of the assets of Better Capital Fund have been denominated in Sterling, the Company's functional and reporting currency. The clear majority of the transactions made by Better Capital Fund have been denominated in Sterling and accordingly the General Partner does not consider foreign exchange risk to be significant at this stage.

ii. Interest rate risk

Better Capital Fund's income and operational cash flows are subject to changes in market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. As at the date of the statement of financial position, Better Capital Fund held £123.5 million on deposit with several different banks over terms ranging from instant access to two months. Better Capital Fund has no other interest-bearing assets or liabilities as at the date of the statement of financial position. As a consequence, Better Capital Fund is only exposed to variable market interest rate risk. The General Partner does not expect any significant change in interest rates that would have a materially adverse impact on the financial performance of Better Capital Fund in the near future.

iii. Credit risk

Better Capital Fund's investment activities may result in a credit risk relating to investments in which Better Capital Fund has direct or indirect exposure. Investments will be made, via special purpose vehicles, in to investee companies, many of which will be unquoted. 

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

iv. Liquidity risk

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

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

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

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

Better Capital Fund does not follow an over-commitment policy.

v. Market price risk

The General Partner moderates this risk through careful selection of investments within specified limits. The investments are monitored on a regular basis by Better Capital Fund's General Partner.

In accordance with the Company's accounting policies the investment in Better Capital Fund, and indirectly the investments in investee companies through Better Capital Fund's special purpose vehicles, has been valued at the most recent underlying fair value as advised by the General Partner, which has been prepared in accordance with the IPEV Valuation Guidelines.

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

Due to the subjectivity of applying model assumptions inherent to the process of assessing the fair value of investments, the General Partner has undertaken sensitivity analysis in respect of the applied earnings multiples. A 10 per cent. increase or decrease of the applied earnings multiples results in a 1.95 per cent. increase or decrease in the NAV of the Company.

As at 31 March 2011, 60.5% of Better Capital Fund's financial assets were cash balances held on deposit with several banks.

Foreign currency risk

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

Interest Rate Risk

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

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

Liquidity risk

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

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

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

Financial liabilities consist of trade and other payables.

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

Credit risk

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

The Company's principal financial asset is the investment in Better Capital Fund and as a consequence the Company has a significant credit risk should Better Capital Fund fail to allocate investments for contributions made. The carrying value of the investment in Better Capital Fund as at 31 March 2011 was £208.9 million.

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 Better Capital Funds can only be deposited with institutions with a minimum credit rating of "single A". The Company mitigates its credit risk exposure on investments at fair value through profit or loss by the exercise of due diligence on the counterparties of Better Capital Fund and the General Partner of Better Capital Fund. The investment risk is managed by an investment strategy that diversifies the investments in terms of financing stage, industry or time. The investment objective, policy and restrictions of Better Capital Fund are entrenched in the Partnership Agreement and cannot be varied without an amendment to the Partnership Agreement, which would require the consent of all the Partners including the Company.

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

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

Financial investments measured at fair value

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

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

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

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

The Company's investment has been classified within level 3 as it has unobservable inputs and is not traded. The following table presents the investments carried on the statement of financial position by level within the valuation hierarchy as at 31 March 2011:

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

13. Earnings per share and net asset value per share

Earnings per share

The earnings per share is based on the profit for the period and on the weighted average number of shares in issue for the period.

The Company does not have any instruments which could potentially dilute basic earnings per share in the future.

Net asset value per share

The net asset value per share for the Company is arrived at by dividing the total net assets of the Company at the period end by the number of ordinary shares in issue at the period end.

14. Events after the period end

There are no material post period events.

Defined Terms

General Information

Notice of Annual General Meeting

Better Capital Limited

(the "Company")

NOTICE is hereby given that the First Annual General Meeting of the Company is to be held at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey, on 24 May 2011 at 9.30am for the transaction of the following business:

Ordinary Resolutions

1. To receive and adopt the audited accounts, the Directors' report, and the Auditors' report for the period from 24 November 2009 to 31 March 2011.

2. To approve the Directors' remuneration for the period 24 November 2009 to 31 March 2011.

3. To re-appoint Richard Crowder as Director of the Company, retiring in accordance with the Company's articles of incorporation (the "Articles").

4. To re-appoint Richard Battey as Director of the Company, retiring in accordance with the Company's Articles.

5. To re-appoint Philip Bowman as Director of the Company, retiring in accordance with the Company's Articles.

6. To re-appoint Mark Huntley as Director of the Company, retiring in accordance with the Company's Articles and the UKLA Listing Rules.

7. To re-appoint BDO Limited, who have indicated their willingness to continue in office, as Auditors of the Company and to hold office until the next Annual General Meeting.

8. To authorise the Directors to determine BDO Limited's remuneration.

9. To approve, as special business which will be proposed as an Ordinary Resolution, that the Company generally be and is hereby authorised for the purposes of the Companies (Guernsey) Law, 2008 (the "Law") to make market acquisitions (as defined in the Law) of the ordinary shares in the capital of the Company of nil par value each (the "Ordinary Shares") provided that:-

a. The maximum number of Ordinary Shares authorised to be purchased shall be 15 per cent. of the Company's issued Ordinary Shares immediately following this annual general meeting;

b. The minimum price (exclusive of expenses) which may be paid for such shares is £0.01 per Ordinary Share;

c. The maximum price (exclusive of expenses) payable by the Company which may be paid for Ordinary Shares shall be equal to 105 per cent. of the average of the middle market quotations for the Ordinary Shares as derived from the daily Official List of the London Stock Exchange for the five business days immediately preceding the day on which the purchase is made;

d. The authority hereby conferred shall (unless previously renewed or revoked) expire at the end of the annual general meeting of the Company to be held in 2012 or, if earlier, the date falling eighteen months from the passing of these resolutions;

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

f. The purchase price may be paid by the Company out of distributable profits or out of capital and share premium or otherwise to the fullest extent permitted by the Law.

Special Resolution

10. To approve, as special business which will be proposed as a Special Resolution, THAT the Directors of the Company from time to time (the "Board") be and are hereby generally empowered in accordance with the Company's Articles (in substitution for any existing such power or authority) to allot up to: (i) the aggregate number of Ordinary Shares (within the meaning given in the Articles) as represent no more than 5 per cent. of the existing issued share capital of the Company already admitted to trading on the London Stock Exchange's main market for listed securities immediately following this annual general meeting; and (ii) in any rolling three-year period, such number of Ordinary Shares as constitutes no more than 7.5 per cent. of the existing issued share capital of the Company already admitted to trading on the London Stock Exchange's main market for listed securities immediately following this annual general meeting:-

a. This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the annual general meeting of the Company to be held in 2012, save that the Company may make prior to such expiry any offer or agreement which would or might require shares to be allotted after expiry of such period and the Board may allot shares pursuant to such an offer or agreement notwithstanding the expiry of the authority given by this resolution; and

b. This power shall be limited to the allotment of Ordinary Shares of nil par value each in the Company's capital.

By order of the Board

Heritage International Fund Managers Limited

Company Secretary

4 May 2011

Heritage Hall, Le Marchant Street, St Peter Port, Guernsey

Notes to the notice of the Annual General Meeting:

1. As at the date of sending this notice, the Company has issued share capital of 206,780,952 Ordinary Shares of nil par value each. Pursuant to the Company's Articles of Incorporation, on a show of hands, every Member present in person or by proxy and entitled to vote shall have one vote, and on a poll every Member present in person or by proxy shall have one vote for each share held by him.

2. A Member who is entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. The proxy need not be a Member of the Company.

3. A form of proxy is enclosed with this notice. To be effective, the instrument appointing a proxy (together with any power of attorney or other authority under which it is executed or a duly certified copy of such power) must be sent to the Company's Registrar, c/o Capita Registrars Limited, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England, by 9.30am am on 20 May 2011. A corporation may execute a proxy under its common seal or by the hand of a truly authorised officer or other agent. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the meeting.

4. A member is not entitled to take part in the Annual General Meeting or vote at the same (whether personally or by representative or proxy) unless the following conditions have been satisfied: (i) all calls and amounts due from him to the Company have been paid; (ii) in respect of any Ordinary Shares he has acquired, he has been registered as their holder; and (iii) if and for so long as the Directors determine, he or any other person appearing to be interested in the Ordinary Shares held by him has failed to comply with a notice requiring the disclosure of Members' interests.

5. In accordance with the Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered on the register of members of the Company at close of business on 20 May 2011 shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the register of members after that time shall be disregarded in determining the rights of any person to attend or vote at that meeting.

6. The register of directors' interests kept by the Company shall be open to the inspection of any member of the Company between the hours of 10.00am and noon for a period beginning fourteen days before and ending three days after the Annual General Meeting and from the commencement until the conclusion of the Annual General Meeting.

Better Capital Limited

(the "Company")

Form of Proxy

First Annual General Meeting of Better Capital Limited to be held at the Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey at 9.30am on 24 May 2011.

I/We hereby appoint the Chairman of the meeting or __________________________________________

to be my/our proxy to attend and, on a poll, vote on my/our behalf at the First Annual General Meeting of Better Capital Limited to be held at the Company's Registered Office at 9.30am on 24 May 2011 and at any adjournment thereof. I/We request my/our proxy to vote in the manner indicated below:

Date: Signature:

Notes

1. Only holders of Ordinary Shares, or their duly appointed representatives, are entitled to attend and vote at the Meeting. A member so entitled may appoint (a) proxy(ies) who need not be (a) member(s) to attend and, on a poll, vote on his/her behalf. A proxy may not speak at the meeting except with the permission of the Chairman of the Meeting.

2. If you wish to appoint someone other than the Chairman of the Meeting as your proxy, please insert his/her name and delete "the Chairman of the meeting or".

3. Please indicate with an "X" in the boxes how you wish your vote to be cast. Unless otherwise instructed, the person appointed as a Proxy will exercise his/her discretion as to how he/she votes or whether he/she abstains from voting on any particular resolution and on any other business (including amendments to resolutions and procedural business) which may come before the Meeting.

4. The "Withheld" option on the Form of Proxy is provided to enable you to abstain on any particular resolution. However, a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of votes "For" and "Against" a resolution.

5. A corporation must seal the Form of Proxy or have it signed by an officer or attorney or any other person authorised to sign.

6. In the case of joint holders, only one need sign this Form of Proxy, but the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which the names stand in the Register of Members in respect of the joint holding.

7. To be valid this Form of Proxy must reach the Company's Registrar, by no later than 9.30am on 20 May 2011. Lodgement of a Form of Proxy does not prevent a member from attending the Meeting in person. Please return this Form of Proxy to the following address:

Company Registrar

c/o Capita Registrars Limited

34 Beckenham Road

Beckenham

Kent

BR3 4TU

England.