BCAP.L Regulatory News (BCAP)

30 June 2015

BETTER CAPITAL PCC LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital PCC Limited is pleased to announce its 2015 final results for both the 2009 Cell and the 2012 Cell.

2009 Cell Final Results

- £210.0 million total capital raised

- £26.5 million/12.6 per cent. cumulative distributions to date

- 40.9 per cent. value growth combined NAV and distribution since inception

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

** Annualised return since inception

2012 Cell Final Results

- £355.5 million total capital raised

- £6.1 million/1.7 per cent. cumulative distributions to date

- 0.6 per cent. value decline combined NAV and distribution since inception

- £283.0 million/81.5 per cent. committed to date

- £150.0 million/43.2 per cent. deployed in 3 investments during the year

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

** Annualised return since inception

Chairman's Statement

In the Interim Report published in November 2014, the Board sought to provide insight into the considerable efforts made on Shareholders' behalf to address the issues that the Company had faced. I am pleased to be able to present the Company's 2015 Annual Results which demonstrate encouraging progress in the funds of the 2009 and 2012 Cells.

Portfolio update

The disappointing performance in Fund I as reported in early 2014 has been proactively addressed with positive results. Solid performance from two of the investee companies in Fund I, Gardner and Santia, has been the principal driver of NAV growth in the 2009 Cell by 11.0 per cent. over the full year and 14.5 per cent. since the Interim Report. Fund II has been very acquisitive during the year, deploying £150 million (43.2 per cent. of net fundraising proceeds), into three new promising platform investments. However, the combination of write-downs in City Link and Jaeger have resulted in a NAV decrease of 7.9 per cent. over the full year and 3.9 per cent. since the Interim Report.

The accompanying reports of the Fund GPs provide further detail on the investment activities, portfolio companies and valuations.

2009 Cell Overview

The 2009 Cell NAV, including accumulated distributions of £26.5 million (12.6 per cent. of funds raised), rose by £28.7 million, 11.0 per cent. in the year to £288.8 million. This represents an increase of £36.5 million, 14.5 per cent. since the Interim Report net of a carry provision of £5.0 million.

The majority of the growth was contributed by Gardner, with modest write downs in Fairline and Omnico. A comprehensive overview of the Fund I portfolio companies is set out in the Fund I GP's report below.

The 2009 Cell NAV per share was 126.86p at 31 March 2015 which compares to 112.96p at 31 March 2014 (109.19p at 30 September 2014). The 2009 Cell Adjusted NAV per share, which includes accumulated distributions, was 139.66p at 31 March 2015 which compares to 125.76p at 31 March 2014 (121.99p at 30 September 2014).

2012 Cell Overview

The 2012 Cell NAV, including accumulated distributions of £6.1 million (1.7 per cent. of funds raised), fell by £29.6 million, 7.9 per cent. in the year to £346.0 million. This represents a decline of £14.2 million, 3.9 per cent. since the Interim Report.

The decline in NAV was due to write downs in the carrying value in City Link and Jaeger, offset by modest write ups in Everest and iNTERTAIN. A comprehensive overview of the Fund II portfolio companies is set out in the Fund II GP's report below.

The 2012 Cell NAV per share was 98.06p at 31 March 2015 which compares to 108.37p at 31 March 2014 (102.16p at 30 September 2014). The 2012 Cell Adjusted NAV per share, which includes accumulated distributions, was 99.81p at 31 March 2015 which compares to 108.37p at 31 March 2014 (103.91p at 30 September 2014).

Better Capital Team

I have previously reported that Better Capital LLP, the Consultant to the Funds I and II GP, had implemented considerable personnel changes, primarily in the Operating team where there had been underperformance. During the year Jon Moulton assumed the role of Head of Portfolio to restore the direction and pace of change across the portfolio companies. The Operating team was strengthened by the addition of Simon Pilling (formerly COO of the Capita Group), Peter Mottershead (an engineer with multiple CEO and Chair positions) and, more recently, Kevin Dady (formerly an executive director with the Capita Group). These changes have contributed to improved performance across the businesses.

With effect from April 2015, Simon Pilling has assumed the role of Head of Portfolio with Jon Mouton continuing his role as the General Partner of both Funds I and II, and as a director of three of the portfolio companies (Gardner and Omnico in Fund I and CAV Aerospace in Fund II).

Distributions

The Fund I General Partner has advised the Board that in the absence of a significant exit, cash in Fund I remains tight but adequate to meet any small funding requests from the portfolio companies as well as fund expenses.

Following a busy period of deployment, uninvested cash in Fund II has been reduced to £44.1 million (31 March 2015: £54.7 million; 31 March 2014: £222.9 million). It is anticipated that this balance will improve by between £10 million and £25 million through distributions from SPOT and City Link (in administration) in the short term, and provide adequate capital to deploy in attractive opportunities during the remainder of the investment phase which ends in June 2016.

It is therefore unlikely that there will be distributions by either share class in the short term.

Fund II acquisition of 2012 Cell shares

Fund II, on the instruction of the Fund II GP acquired 3.25 million 2012 Cell shares in April 2015 at a cost of 62.16 pence per share. The Fund II GP considered that the investment in the 2012 Cell shares at the pricing then prevailing provided further upsides on the total returns in Fund II.

A note on valuation

I would like to bring to the attention of the shareholders that the valuation of the portfolio companies in a company such as this is necessarily subjective and lacking in objective precision and likely to give rise to volatility in NAV over time. Unfortunately this is inevitable given the inherent characteristics of turnaround investments.

Investor engagement

The Board has continued to work with the Consultant to enhance the market's understanding of the Company and the underlying Better Capital investment model. For example the first of our investor updates, which will replace the Interim Management Statements, was published on our website in March 2015. We welcome Shareholder feedback on potential further enhancements to the Company's reporting.

Outlook

The Board has been reassured by the continuing determination of the Better Capital team to generate attractive returns and remains confident in the long term outcomes for Shareholders.

Richard Crowder

Chairman

30 June 2015

Enquiries:

Better Capital PCC Limited +44 (0)1481 716 000

Laurence McNairn (Administrator and Company Secretary)

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

Nathan Brown

Oliver Hardy

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

Justin Griffith

Report of the Directors

The Directors hereby submit the annual report and audited financial statements for each of the Company, the 2009 Cell and the 2012 Cell for the year ended 31 March 2015.

Principal Activities

Further information on the principal activities of the Company can be found below.

Business Review

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

Results and Distribution

The Company

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

2009 Cell

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

The Net Asset Value of the 2009 Cell as at 31 March 2015 was £262.3 million (2014: £233.6 million).

No distributions were paid in the year ended 31 March 2015 for the 2009 Cell (31 March 2014: £12.4 million).

The two capital distributions (reductions of share capital) to date for the 2009 Cell total £26.5 million, being 12.6 per cent. of funds raised.

2012 Cell

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

The Net Asset Value of the 2012 Cell as at 31 March 2015 was £339.9 million (2014: £375.6 million).

During the year the 2012 Cell made its first capital distribution of £6.1 million (2014: £nil) to shareholders of the 2012 Cell as at the ex-date of 10 September 2014. The distribution consisted of a payment of 1.75 pence per ordinary share payable in cash from the 2012 Cell's share capital account and has been treated as a reduction of share capital.

Annual General Meetings

The Annual General Meetings of the Company and the Cells will be held on 7 September 2015 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. The AGM of the 2009 Cell will be held at 10.00 am. The AGM of the 2012 Cell will be held at 10.15 am or, if later, immediately following the conclusion of the AGM of the 2009 Cell. The AGM of the Company will be held at 10.30 am or, if later, immediately following the conclusion of the AGM of the 2012 Cell. Details of the resolutions to be proposed at the AGMs, together with explanations, appear in the Notices of Meetings which are being sent to Shareholders at the same time as this Annual Report.

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

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and the financial statements for each financial year which give a true and fair view of the state of affairs of the Company, the 2009 Cell and the 2012 Cell and of the respective results for the year then ended, in accordance with applicable Guernsey law and EU adopted IFRS. In preparing these financial statements the Directors are required to:

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

· make judgements and estimates that are reasonable and prudent;

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

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

· state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and

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

The Directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the Company and its Cells and which enable them to ensure that the financial statements comply with the Companies Law. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.

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

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

Responsibility Statement of the Directors' in respect of the Annual Report

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

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

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

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

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

Listing Requirements

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

Non-mainstream Pooled Investments

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

AIFMD

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

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

FATCA

FATCA became effective on 1 January 2013 with registration required by 31 December 2014 and is being gradually implemented internationally. The legislation is aimed at determining the ownership of U.S. assets in foreign accounts and improving US tax compliance with respect to those assets. The Company was registered by the Administrator in the fourth quarter of 2014. The Board and the Administrator are in discussion with the Company's service providers and advisors to ensure that the Company continues to comply with FATCA's requirements to the extent relevant to the Company.

Corporate Governance Statement 

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

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

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

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

The UK Code includes provisions relating to:

· the role of the chief executive;

· executive directors' remuneration; and

· the need for an internal audit function.

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

For the reasons set out in the AIC Guide, and in the preamble to the UK Code, the Board considers these provisions are not relevant to the position of the Company which delegates most day-to-day functions to third parties. The Company does not have a chief executive or any executive directors, employees or internal operations and has therefore not reported further in respect of these provisions. The need for an internal audit function is discussed in the Audit Committee Report.

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

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

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

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

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

The Board

The Directors of the Company at the date of this report are Richard Crowder (Chairman), Richard Battey, Philip Bowman and Jon Moulton.

The Board meets on at least a quarterly basis. The dates for each scheduled meeting are planned at the beginning of the year and confirmed in writing in accordance with the Company's articles of incorporation. Meetings for urgent issues may be and are convened at short notice if all directors are informed. In addition to formal Board and/or committee meetings and, to the extent practicable and appropriate, the Directors maintain close contact with each other, the Consultant and the Administrator, by email and conference calls and with the directors of the Fund I GP Company and Fund II GP Company for the purpose of keeping themselves informed about Fund I's and Fund II's activities. The Board requires information to be supplied in a timely manner by the respective general partner of Fund I and Fund II, the Consultant, the Administrator and other advisors in a form and of a quality appropriate to enable it to discharge its duties.

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

Board Tenure and Re-election

Any director who has held office with the Company, other than employment or executive office, for a continuous period of nine years or more at the date of the meeting, shall retire from office and may offer himself for reappointment by the members. No member of the Board has served for longer than eight years to date. As such no issue has arisen to be considered by the Board with respect to long tenure. In accordance with the AIC Code, when and if any director shall have been in office (or on re-election would at the end of that term of office) for more than nine years the Company will consider further whether there is a risk that such a director might reasonably be deemed to have lost independence through such long service. The Management Engagement, Nomination and Remuneration Committee shall take the lead in any discussions relating to the appointment or re-appointment of directors.

Any Director who has been appointed by the Board since the last general meeting or who held office at the time of the two preceding annual general meetings and who did not retire at either of them must offer himself for reappointment by the members. Mr Moulton, as a director of the Fund I GP Company and the Fund II GP Company is subject to annual re-election in accordance with the listing rules.

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

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

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

Directors' Remuneration

During the year to 31 March 2015 the Directors' remuneration was paid as follows (of which £52,000 (2014: £52,000) was outstanding at the year end):

31 March 2015

31 March 2014

* Other remuneration paid to each Director was in respect of additional services rendered in relation to the fund raising in 2012 Cell and totalled £17,500. These were included within share capital as costs of raising capital within the 2012 Cell.

** On 28 June 2013, Mr Mark Huntley resigned as a director of the Company.

*** On 28 June 2013, Mr Jon Moulton was appointed as a director of the Company; Mr Moulton waived his fee until 31 December 2013.

All of the Directors are non-executive. The Board considers Messrs Crowder, Battey and Bowman as independent of the Fund I GP and Fund II GP and free from any business or other relationship that could materially interfere with the exercise of their independent judgment. The Board as a whole is independent of the Consultant, the Fund I GP and the Fund II GP. Mr Moulton is a director of the Fund I GP Company and the Fund II GP Company and is therefore not considered to be independent.

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

· has no current or historical employment with the Consultant;

· has no current directorships in any other entities for which the Consultant provides consultancy services; and

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

Duties and Responsibilities

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

· statutory obligations and public disclosure;

· strategic matters and financial reporting;

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

· other matters having a material effect on the Company.

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

The Directors have access to the advice and services of the Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with Guernsey Law and applicable rules and regulations of the GFSC and the LSE. Where necessary, in carrying out their duties, the Directors may seek independent legal or other professional advice and services at the expense of the Company. As a result of the use of professional service providers and the nature of the Company's operations, the Company does not have any employees.

The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors on an on-going basis. Suitable insurance is in place, having been renewed on 12 January 2015.

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

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

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

Non-attendance of meetings during the year was due to a combination of illness and short notice. In the event of short notice, any Directors affected will convey their views to the Chairman in advance of the meeting.

* Mr Moulton is not a member of either the Audit Committee or the Management, Engagement, Nomination and Remuneration Committee.

Directors

Richard Crowder - Chairman - Guernsey resident (aged 65)

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 two groups of family companies where he acts as an offshore adviser/director. He has extensive experience of: Chairmanships and Directorships of quoted and unquoted companies; structuring businesses; managing and growing securities, banking, investment and advisory businesses; as well as being well versed in offshore governance. In his early career, he worked as an investment manager with Ivory & Sime in Edinburgh and as a head of investment research with W.I. Carr in Singapore, Hong Kong and Japan. He undertook a wide range of responsibilities for Schroders in London and the Far East, culminating in the role of Managing Director for Schroders' Singapore associate and Director of J Henry Schroder Wagg. Having then worked as Chairman of Smith New Court International Agency and Director of Smith New Court Plc, Richard Crowder was the founding Managing Director of Schroders' Channel Islands subsidiary from 1991 until he became a full time non-executive director and consultant in 2000. He is a member of the Securities & Investment Institute and he resides in Guernsey. Mr Crowder was appointed as a Director on 24 November 2009.

Richard Battey - Non-executive Director - Guernsey resident (aged 63)

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

Philip Bowman - Non-executive Director - UK resident (aged 62)

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 and chairman of the audit committee of Burberry Group plc, chairman of The Miller Group (UK) Limited and a director of Berry Bros. & Rudd Limited. In 1977 Mr Bowman qualified as a Chartered Accountant with the Institute of Chartered Accountants in England and Wales while employed at Price Waterhouse. Past board appointments include British Sky Broadcasting Group plc, Scottish & Newcastle Group plc 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.

Jon Moulton - Non-executive Director - Guernsey resident (aged 64)

Jon Moulton is a Fellow of the Institute for Turnaround and a Corporate Financier in the Institute of Chartered Accountants in England and Wales. Mr Moulton is the audit committee chairman of Bacit Limited, chairman of FinnCap, the stockbroker and was a member of the Advisory Board of UK government's £3.2 billion UK Regional Growth Fund. Mr Moulton is also a Director and Chairman of the Channel Islands Securities Exchange. Between 1997 and September 2009, he was the Managing Partner and founder of Alchemy Partners. From 1972 to 1978, Mr Moulton was a Manager at Coopers & Lybrand, in Liverpool where he specialised in computer audit and corporate insolvency. He then worked in the M&A group of Coopers & Lybrand in New York for two years before moving to Citicorp Venture Capital, initially in New York and then, from 1981, in London where he was a Managing Director in the LBOs and venture capital group, and a member of the French and German Investment Committees. From 1985 to 1994, he was the Managing Partner and founder of Schroder Ventures, where he focused on LBOs and venture capital, and was a member of the French and German Investment Committees. Between 1994 and 1997, Mr Moulton was the Director in charge of LBOs at Apax Partners. Mr Moulton is resident in Guernsey.

Shareholdings of the Directors

Directors of the Company and their beneficial interests in the 2009 Shares and the 2012 Shares as at 31 March 2015 are detailed below:

2009 Cell

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

2012 Cell

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

There have been no changes to the Directors' shareholdings since 31 March 2015.

Committees of the Board

Audit committee

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

Management Engagement, Nomination and Remuneration Committee

The MNR Committee is chaired by Philip Bowman. The MNR Committee currently consists of Philip Bowman, Richard Battey and Richard Crowder. Any non-executive Directors who are not considered independent do not take part in the MNR Committee's deliberations regarding remuneration levels. The MNR Committee meets at least once a year pursuant to its terms of reference which are available on the Company's website (www.bettercapital.gg).

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

Regarding nomination, the MNR Committee's remit is to review regularly the structure, size and composition of the Board, to give full consideration to succession planning for Directors, to keep under review the leadership needs of the Company and be responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Board believes that, as a whole, it comprises an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach, including gender diversity, amongst board members is of great importance and it is the Company's policy to give careful consideration to issues of board balance and diversity when making new appointments. With any new Director appointment to the Board, induction training will be provided.

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

Board Performance and Evaluation

In accordance with Principle 7 of the AIC Code, the Board is required to undertake a formal and rigorous evaluation of its performance on an annual basis. Such an evaluation of the performance of the Board as a whole and the Chairman was carried out under the mandate of the MNR Committee and in the form of self-appraisal questionnaires and a detailed discussion of the outcomes. The Directors believe that the current mix of skills, experience, ages and length of service of the Directors is appropriate to the requirements of the Company. With any new director appointment to the Board, consideration will be given as to whether an induction process is necessary.

Internal Control and Financial Reporting

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

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

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

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

The systems of control referred to above are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control.

Relations with shareholders

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

Major Shareholders

As at 16 June 2015, insofar as is known to the Company, the following persons were interested, directly or indirectly, in 5 per cent. or more of the 2009 Shares and 2012 Shares in issue:

2009 Cell

2012 Cell

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

The Company's issued share capital consists of 206,780,952 shares in the 2009 Cell and 346,600,520 shares in the 2012 Cell. Under the Company's articles of incorporation, at any general meeting of the Company:

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

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

The figure which may be used by the Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Better Capital PCC Limited under the FCA's DTRs, is the aggregate of the number of votes capable of being cast on a poll, namely 395,399,215. This is calculated as the sum of the 2009 Shares (206,780,952) multiplied by 1.1096 plus the 2012 Shares (346,600,520) multiplied by 0.9770.

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

Directors' Authority to Issue Shares

2009 Cell

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

2012 Cell

At the Annual General Meeting of the Company held on 5 September 2014 the Board renewed its authority to issue up to five per cent. of the aggregate 2012 Shares admitted to trading on the LSE, free of restrictions under the Articles, which would otherwise require the Company first to offer the new 2012 Shares to the current holders of the 2012 Shares. In any rolling three-year period, the Company will not issue more than 7.5 per cent. of the 2012 Shares. This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the AGM of the Company to be held on 7 September 2015. The Board proposes to renew this authority at the AGM.

Although the Directors have not used, and have no current intention to use, this authority the Board reserves the right to utilise it in circumstances deemed appropriate.

Directors' Authority to Buy Back Shares

The current authority of the Company to make market purchases of up to a maximum of 14.99 per cent. of the issued 2009 Share Capital and/or 2012 Share Capital is renewable annually and was last authorised at the AGM held on 5 September 2014. At the AGM to take place on 7 September 2015 the Company will seek to renew such authority in respect of the 2009 Shares and the 2012 Shares. Any buy back of 2009 Shares and/or 2012 Shares will be made subject to Companies Law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board and not at the option of the Shareholders. Purchases of 2009 Shares and/or 2012 Shares will only be made through the market for cash at prices below the prevailing Net Asset Value of the 2009 Shares and/or 2012 Shares (as last calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the Listing Rules of the UK Listing Authority which provide that the price to be paid must not be more than 5 per cent. above the average of the middle market quotations for the 2009 Shares and/or 2012 Shares for the five business days before the shares are purchased unless previously advised to shareholders.

In accordance with the Company's Articles and Companies Law up to 10 per cent. of the Company's shares may be held as treasury shares. The Company has not held any shares in treasury at any time.

Articles of Incorporation

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

Change of control

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

Principal risks and uncertainties

The Company's assets consist of investments, through Funds I and II, in portfolios of businesses which have significant operating issues and may have associated financial distress, with a primary focus on businesses which have significant activities within the United Kingdom and Ireland. Its principal risks are therefore related to market conditions in general, but also the particular circumstance of the businesses in which it is invested. The Consultant to the GPs seeks to mitigate these risks through active asset management initiatives and carrying out due diligence work on potential targets before entering into any investments.

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

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

The financial risks of the Company, the 2009 Cell and 2012 Cell are discussed in Note 8 to the financial statements.

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

Going Concern

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

By order of the Board

Richard Crowder

Chairman

30 June 2015

Report of the Audit Committee

The Audit Committee has been in operation throughout the year. The Audit Committee, chaired by Richard Battey, operates within clearly defined terms of reference (which are available from the Company's website, www.bettercapital.gg) which include all matters indicated by DTR 7.1 and the AIC Code. Its other members are Richard Crowder and Philip Bowman. Only independent directors can serve on the Audit Committee and members of the Audit Committee must have no links with the Company's external auditor and must be independent of the Consultant, the Fund I GP and the Fund II GP. The identity of the chairman of the Audit Committee is reviewed on an annual basis and the membership of the Audit Committee and its terms of reference are kept under review. The Audit Committee meets no less than twice a year in Guernsey, and meets the external auditor at least once a year in Guernsey. The Audit Committee met six times in the year to 31 March 2015.

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

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

The Audit Committee also reviews, considers and, if thought appropriate, recommends for the purposes of the Company's financial statements, 2009 Cell's financial statements and 2012 Cell's financial statements, valuations prepared by the Fund I GP and Fund II GP in respect of the investments of Fund I and Fund II. It also receives and reviews reports from the Fund I GP and the Fund II GP.

The main duties of the Audit Committee are:

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

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

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

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

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

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

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

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

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

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

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

Financial Reporting

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

· the quality and acceptability of accounting policies and practices;

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

· material areas in which significant judgements have been applied or there has been discussion with both the Consultant and the external auditor;

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

· any correspondence from regulators in relation to our financial reporting.

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

Meetings

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

· consideration and agreement of the terms of reference of the audit committee for approval by the Board;

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

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

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

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

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

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

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

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

Primary Area of Judgement

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

As outlined in Note 4 to the financial statements of the Company, the total carrying value of financial assets of the Company at fair value at 31 March 2015 was £597.8 million (2014: £607.4 million). Market quotations are not available for these financial assets such that the value of the Company's investments in the Funds is based on the value of the Company's limited partner capital and loan accounts within each Fund, which are themselves based on the value of the relevant underlying investee companies as determined by the General Partner of each Fund.

The valuation process and methodology were discussed with the Fund GPs with input from the Consultant and with the external auditor at a board meeting held on 30 June 2015. The Consultant carries out a valuation semi-annually for the Fund GPs. In turn the Fund GPs provide valuations of each Cell's investment in the relevant Fund.

The Audit Committee has reviewed the Consultant's work. The Consultant confirmed to the Audit Committee that the valuation methodology had been applied consistently during the year and that the external auditor's work had not identified any errors or inconsistencies that were material in the context of the financial statements of the Company and Cells as a whole.

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

Internal audit

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

Appointment of the External Auditor

BDO Limited has been the Company's external auditor since the Company's inception. The lead audit director, Justin Hallett, has not changed during that period, but Mr Hallett will be replaced in the year ending 31 March 2016 in accordance with normal audit director rotation arrangements.

The Audit Committee has noted the revisions to the UK Code introduced by the FRC in September 2012 and the AIC Code issued in February 2013, in particular, the recommendation in each, to put the external audit out to tender at least every ten years.

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

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

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

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

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

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

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

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

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

- feedback from the Fund I GP, Fund II GP and the Consultant evaluating the performance of the audit team.

The Audit Committee is satisfied with BDO Limited's effectiveness and independence as external auditor having considered the degree of diligence and professional scepticism demonstrated by them. As such, the committee has not considered it necessary this year to conduct a tender process for the appointment of its external auditor. Having carried out the review described above and having satisfied itself that the external auditor remains independent and effective, the Audit Committee has recommended to the Board that BDO Limited be reappointed as external auditor for the year ending 31 March 2016.

On behalf of the Audit Committee

Richard Battey

Chairman of the Audit Committee

30 June 2015

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

BETTER CAPITAL PCC LIMITED

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 2015 and of its loss for the year then ended;

· have been properly prepared in accordance with EU Adopted IFRS; and

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

This opinion is to be read in the context of what we say below.

What we have audited

We have audited the financial statements of Better Capital PCC Limited for the year ended 31 March 2015 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 10. The financial reporting framework that has been applied in their preparation is applicable law and EU Adopted IFRS.

Respective responsibilities of the directors and auditor

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

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

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.

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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the level by which misstatement individually or in aggregate, including omissions, could influence the economic decisions of the relevant users. Misstatements may be considered material for reasons other than size as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements.

Based on our professional judgment, we determined materiality for the financial statements as a whole to be £8,200,000 which is based on a level of 1.5 per cent. of total assets excluding un-invested cash held in Fund II.

International Standards on Auditing (UK and Ireland) also allow the auditor to set a lower materiality for particular classes of transaction, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context, we set a lower level of materiality to apply to income distributions and expenses. We determined materiality for this area to be £164,000.

We agreed with the Audit Committee that we would report all audit differences in excess of £164,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

Overview of the scope of our audit

The Company is a limited liability Guernsey registered closed ended investment company established as a Protected Cell Company. The company consists of two Cells that each invest in a Limited Partnership. Each Limited Partnership holds a portfolio of distressed businesses, which are managed by the Consultant on behalf of the respective General Partner, and cash on account for working capital and further investment.

The financial statements, which remain the responsibility of the Directors, are prepared on their behalf by the Company Administrator, Heritage International Fund Managers Limited.

In establishing our overall audit approach we assessed the risk of material misstatement taking into account the likelihood, nature and potential magnitude of any misstatement. As part of this risk assessment we considered the Company's interaction with the General Partners, Consultant and the Administrator.

Our assessment of risks of material misstatement

In arriving at our audit opinion above on the financial statements, the risk of material misstatement that had the greatest effect on our audit was the valuation of the underlying investments in Limited Partnerships.

The value of the investments in the Limited Partnerships is based on the value of the Limited Partner capital and loan accounts within each Limited Partnership as reported by the respective General Partner. These values are underpinned by the underlying investments held by each Limited Partnership.

This risk is further discussed in the Audit Committee report above.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

· materially inconsistent with the information in the audited financial statements; or

· apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired during the course of performing our audit; or

· is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors' statement that they consider the Annual Report to be fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed.

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 provisions of the UK Corporate Governance Code specified for our review.

Justin Marc Hallett FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

30 June 2015

Statement of Financial Position

As at 31 March 2015

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 30 June 2015 and signed on its behalf by:

Richard Crowder Richard Battey

Chairman Director

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

Statement of Comprehensive Income

For the year ended 31 March 2015

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

Statement of Changes in Equity

For the year ended 31 March 2015

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

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

Statement of Cash Flows

For the year ended 31 March 2015

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

Notes to the Audited Financial Statements

For the year ended 31 March 2015

1. General information

Better Capital PCC Limited is a Closed-ended Investment company, incorporated in, and controlled from Guernsey as a Protected Cell Company.  It has an unlimited life and is registered with the GFSC as a Registered Closed-ended Collective Investment Scheme pursuant to the POI Law.

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

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

2. Accounting policies

Basis of preparation

The financial statements for the year ended 31 March 2015 have been prepared in accordance with EU Adopted IFRS and with the provisions of the Companies Law.

During the current year it has been deemed more appropriate to classify the cash flows arising to/from the investments as operating cash flows within the Statement of Cash Flows. The prior year cash flow statement also reflects this reclassification.

The principal accounting policies adopted are set out below.

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

The following standards, which have no impact on the financial statements, are mandatory for accounting periods beginning on or after 1 January 2014 and have been adopted in the financial statements:

- IFRS 12: Disclosure of Interest in Other Entities

- IFRS 10: Consolidated financial statements

New and revised standards

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were issued but not yet effective (and in some cases had not yet been adopted by the EU) and are relevant to the financial statements of the Company and Cells:

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

None of the standards issued but not yet adopted are expected to have a material effect on the financial statements.

The Company has not adopted early any standards, amendments or interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning after 1 April 2014 or later periods.

Foreign currencies

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

Financial instruments

Financial assets and financial liabilities are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial assets

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

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'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. Cash and cash equivalents comprise cash on hand only.

b) Investments at fair value through profit or loss

i. Classification

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

ii. Recognition

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

iii. Measurement

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

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.

iv. Fair value estimation

The IFRS 13 and IPEV valuation techniques used are detailed in Note 5 of the Company and the Cells.

Financial liabilities

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

All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are recorded on the date on which the Company becomes party to the contractual requirements of the financial liability.

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

Capital

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

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds and 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 distributions from the Funds that have been defined as income distributions by the General Partners and are recognised when the Company becomes entitled to those receipts.

Other expenses

Other expenses are accounted for on an accruals basis.

Going concern

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

Critical accounting judgment and estimation uncertainty

Use of estimates and judgements

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

The critical accounting judgment and estimation uncertainty for the 2009 Cell and 2012 Cell are stated below.

Taxation

The Company and Cells are exempt from taxation in Guernsey and are charged an annual exemption fee of £1,200 (31 March 2014: £600).

3. Segmental reporting

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

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

4. Investment in limited partnerships

Total Investment:

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

The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from the Funds. The Company is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the Company any amount of the outstanding loan. During the year £0.5 million was repaid to the Company by Fund I (2014: £12.4 million) and £6.1 million by Fund II (2014: £nil). 

Income distributions receivable from the Funds in the year amounted to £3.0 million (2014: £0.8 million), with an aggregate £3.8 million (2014: £0.8 million) which remains outstanding at the year end, which have been allocated as income based on discretionary allocation powers of the respective General Partners of the Funds as set out in the respective limited partnership agreements.

In the financial statements of the Company, the fair value of the investments in limited partnerships are adjusted to reflect the fair value of the Cells' attributable valuation of net assets within Fund I and Fund II, as seen in more detail in Note 5 of the Company and the Cells.

5. Fair value

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

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

The fair value hierarchy has the following levels:

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

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

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

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

The Company's investments have been classified within Level 3 as they have unobservable inputs and are not traded. Amounts classified under Level 3 for the year are £262.0 million for Fund I (31 March 2014: £233.4 million) and £335.8 million for Fund II (31 March 2014: £374.0 million).

Transfers during the year

There have been no transfers between levels. Due to the nature of the investments, they are always expected to be classified under Level 3.

Valuation techniques

The value of the Cells' investments in the Funds is based on the value of each Cell's limited partner capital and loan accounts within each Fund. This is based on the components within the Funds, principally the value of the underlying investee companies.

When valuing the underlying investee companies, the GPs of each Fund reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, to estimate a fair value that is in adherence with the requirements of IFRS 13 as at the reporting date.

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

The Board reviews and considers the fair value arrived at by the GPs before incorporating into the fair value of the investment adopted by the Company. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments may differ from the fair values reflected in these financial statements and the differences may be significant.

Where the price of recent investment is determined to be the most appropriate methodology the transactional price will be that of the investment by Fund I or Fund II.

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

6. Share capital

Core Shares

Issued and fully paid:

Year ended 31 March 2015

Year ended 31 March 2014

Cell Shares

Year ended 31 March 2015

Year ended 31 March 2014

The two capital distributions (reductions of share capital) to date for the 2009 Cell total £26.5 million, being 12.6 per cent. of funds raised.

During the year the 2012 Cell made a distribution of capital of 1.75 pence per ordinary share to Shareholders of the 2012 Cell as at the ex-date of 10 September 2014. The distribution of £6.1 million, being 1.7 per cent. of funds raised, has been treated by the Company as a reduction of share capital. The distribution was paid on 19 September 2014.

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

The Company's issued share capital consists of 206,780,952 shares in the 2009 Cell and 346,600,520 shares in the 2012 Cell. Under the Company's articles of incorporation, at any general meeting of the Company:

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

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

The figure which may be used by the Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Better Capital PCC Limited under the FCA's Disclosure and Transparency Rules, is the aggregate of the number of votes capable of being cast on a poll, namely 568,072,852. This is calculated as the sum of the 2009 Shares (206,780,952) multiplied by 1.1096 plus the 2012 Shares (346,600,520) multiplied by 0.9770.

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

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

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

7. Related party transactions

The Company has four non-executive Directors. Mr Jon Moulton is a director and the sole shareholder of BECAP GP Limited, the general partner of the Fund I GP and BECAP12 GP Limited, the general partner of the Fund II GP. Transactions with the Funds are detailed in Note 4.

Annual remuneration terms for each Director are as follows: the Chairman receives £60,000, the chairman of the audit committee receives £52,500, the chairman of the management engagement, nomination and remuneration committee receives £50,000 and the other non-executive director receives £45,000.

Directors' fees and expenses for the year to 31 March 2015 amounted to £209,000 (2014: £187,000), of which £52,000 (2014: £52,000) was outstanding at the year end.

The Directors received a distribution of capital from the 2012 Cell of 1.75 pence per ordinary share. The Directors shareholdings can be seen above in the Report of the Directors.

8. Financial risk management

Financial risk management objectives

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

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

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

Categories of financial instruments

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

Capital risk management

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

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

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

Market risk

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

(a) Price risk

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

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

As at 31 March 2015, £58.8 million (2014: £227.9 million) or 9.4 per cent. (2014: 36.1 per cent.) of the Funds' financial assets were cash balances held on deposit.

(b) Foreign currency risk

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

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

(c) Interest rate risk

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

Interest income of £6,000 (2014: £6,000) 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.

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

Liquidity risk

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

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

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

During the year ended 31 March 2015, the Company had no borrowings other than creditors and accruals (2014: £nil). The Company had sufficient cash and cash equivalents to pay these as they fell due.

The following table details the Company's contractual discounted cash flows for its financial liabilities: 

Credit risk

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

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

The carrying value of the investment in Fund I as at 31 March 2015 was £262.0 million (2014: £233.4 million).

The carrying value of the investment in Fund II as at 31 March 2015 was £335.8 million (2014: £374.0 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 the Funds have a strict cash management policy. The Company mitigates its credit risk exposure on investments at fair value through profit or loss by the exercise of due diligence on the counterparties of Funds and their General Partners. The investment risk is managed by an investment strategy that diversifies the investments in terms of financing stage, industry or time. The aggregate amount deposited or invested with any single such bank or other counterparty (including their associates) or in government and public securities of any single issue, shall not exceed £35.0 million for Fund I and £50.0 million for Fund II.

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

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

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

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

9. Earnings per share and Net Asset Value per share

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

10. Subsequent events

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

Better Capital 2009 Cell

Summary of Investment policy

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

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

General Partner's Report

Over the past year I stepped in as Head of Portfolio, taking over from Nick Sanders in order for him to more fully focus on Gardner which is without doubt our most valuable asset in Fund I. A year ago there were very substantial issues in the portfolio and I am pleased to say that clear progress is visible in all the investee companies relative to the position at 31 March 2014. However further progress is needed.

The portfolio is supported by a team of Operating Partners - since my last report, Thierry Bouzac has left Better Capital LLP with our best wishes and Kevin Dady has joined. Kevin previously worked for Capita plc and has substantial experience running technology based businesses.

I remain as committed to Better Capital in my role as the General Partner of both Funds I and II, a director of Better Capital PCC Limited and a significant shareholder of both the 2009 and 2012 Cells. I am pleased to report, however, that Simon Pilling who joined Better Capital LLP in November 2014 has now taken on the responsibility as Head of Portfolio. Simon was previously the COO of Capita plc and has considerable experience of managing a diversified portfolio of businesses. I remain on the boards of Gardner and Omnico.

Investment activities in the year to 31 March 2015

During the year, Gardner repaid £7.0 million in a combination of capital and interest repayments funded largely through improved cash optimisation in the business. An additional £6.0 million in a mixture of capital and interest was repaid post year end, mainly from the net proceeds of a refinancing and sale of a surplus freehold (the former head office in Ilkeston, Derbyshire). Total repaid to date is £17.2 million from a total capital outlay of £40.5 million (42.5 per cent.).

In February 2015, the General Partner announced the successful disposal of Calyx Managed Services to MXC Capital Limited, a financial consolidator of managed ICT businesses in the UK. An enterprise value of £9.0 million was achieved which, after deducting sales costs and management incentives, resulted in £7.8 million being realised and redeployed at the Fund I level. Calyx Managed Services was carried at £4.9 million in the Interim valuation. This was a respectable outcome for a sub-scale business operating in a highly fragmented industry. 

During the course of the year, Santia repaid £2.0 million in a combination of capital and interest repayments. An additional £0.5 million in interest was repaid post year end. Total repaid to date is £3.5 million from a total capital outlay of £15.0 million (23.3 per cent.).

In August 2014, Fund I acquired the remaining debt and equity positions in Fairline from West Register (Investments) Limited, a wholly owned subsidiary of the Royal Bank of Scotland plc. for £3.1 million. Following the transaction, Fund I provided further funding of £6.0 million in the year to 31 March 2015 and an additional £2.0 million post year end. The cash injection has been used to fund restructuring and working capital requirements whilst the business completes the transition towards a demand-led manufacturing model.

Over the Summer of 2014, Fund I disposed of its interest in Spicers to a special purpose vehicle, The Spicers-OfficeTeam Group Limited ("SPOT"), a company controlled by Fund II. Following a capital restructure, Funds I and II effectively own 9.9 per cent. and 76.0 per cent. of SPOT respectively. The allocation between the funds was derived from the realisable value of Fund I's interest in Spicers and the cash invested by Fund II to acquire OfficeTeam and to fund the restructuring of the enlarged SPOT business.

Other investment activities post 31 March 2015

Omnico received £2.0 million of new investment from Fund I in May 2015. Funds have been deployed towards the development of the Europay, Mastercard and Visa ("EMV") technology and managing the hardware supply chain.

Portfolio update

Progress in Gardner remains encouraging. The business has a financial year ending 31 August and is performing in line with budget. From an operational perspective, the business continues to make efficiencies in its cost base. Initiatives such as increased utilisation of its low cost facilities and shared services and full implementation of standard costing are high priorities. Gardner's French arm is now profitable and is on course to be cash neutral in Q4 FY15; however, there is still more to go for. Gardner's relationship with its key customer is strong and this has resulted in the business winning pre-production contracts on certain new programmes. Gardner's fair value has been written up by £45.0 million year-on-year, being a £52.0 million improvement in the underlying value, offset by a £7.0 million repayment in the year. The budget process for the year to 31 August 2016 is underway and I remain confident that Gardner will deliver considerable improvement in profitability in the next year and beyond.

m-hance Group, the remaining business in the Calyx Group, closed its 31 December 2014 year with EBITDA profitability significantly ahead of budget and prior year albeit from a low base. Current year performance remains on-track and monthly order intake and sales pipeline continue to grow. After a long period of search, the business now has a new CEO, Steve Driscoll, who has been tasked with building the sales pipeline by exploiting its intellectual property, driving more effective cross-sell penetration and also to simplify m-hance's operations. The residual fair value for the Calyx Group following the disposal of Calyx Managed Services of £15.1 million has been marginally written down to £12.5 million. I remain optimistic in the medium to long term outlook for this business.

Following a major reorganisation in December 2014 to optimise value in preparation for exit, Santia is currently performing in line with its budget and substantially ahead of prior year in the year to 31 January 2016. Santia's highly profitable Accreditation division (Safecontractor and EXOR products) continues to perform to plan with a year-on-year revenue growth of 12 per cent. Safecontractor continues to attract blue-chip clients, more recently Selfridges and The Co-operative Group. The re-launch of EXOR in April has been encouraging - there are early signs that it is winning market share. The decision to exit from loss-making contracts in Asbestos, Occupational Health and Health & Safety and as a consequence, the rightsizing of the support functions are producing positive results. Exit preparation for Santia is gaining traction. The business's NAV has been written up by £3.8 million, being a £5.8 million improvement in underlying value, offset by a £2.0 million repayment during the year.

Within Omnico, the Software business is performing in line with expectation, Hardware continues to be challenging. A new CEO was appointed to Omnico in January 2015 to drive the pace of change in the business. Alan Wright brings with him relevant sector experience having previously worked for Motorola in their Point of Sale business. Focus has been on developing the business through productising the Software solutions, investing in stronger people in the management team and cost reduction, particularly in the Hardware business. The carrying value in Omnico has been written down by £9.3 million to £25.0 million to reflect slower traction to maintainable EBITDA profitability albeit the outlook seems quite positive in the medium term.

Fairline has continued with its business improvement programme. Alongside a continuous cost review there has been a readjustment of the dealer stocks to the build-to-order strategy and this is nearing completion with underlying demand expected to become more directly aligned with production demand rather than served from dealer destocking. The new Squadron 53 model which was launched in January has been very well-received and several orders for production to May 2016 accepted. Operationally this business is much improved; however, much remains to be done. The Fund I GP remains committed to Fairline, as signalled by the £2.0 million injection in April 2015 to fund on-going initiatives. Fairline's carrying value has been written up to £13.5 million, reflecting the £3.5 million addition at cost since the Interim Report.

An update on SPOT, a portfolio company 9.9 per cent. owned by Fund I is provided in the Fund II General Partner's Report below. A year ago losses on Spicers were very severe - SPOT is consistently profitable with prospects of improvement very visible.

At 31 May 2015, net debt across the Fund I portfolio companies stood at £29.4 million.

Valuation

The Fund I portfolio carrying value has risen by £34.1 million from 1 April 2014 to 31 March 2015, with Gardner being the major contributor to growth, offset by lesser write-downs in Fairline and Omnico.

Cash

On 30 June 2015, Fund I had cash of £6.1 million. The present intent is to retain the uninvested cash to fund portfolio requirements and Fund I expenses.

Closing remarks

As a couple of the Fund I investments are firmly in the exit trajectory, the focus is shifting towards exit preparation. The recent disposal of Calyx Managed Services (admittedly a small business) was a start. There is still more to be done with the remaining portfolio and the Better Capital team remains focused on the tasks ahead. I, therefore, retain my view of a decent outcome for the stakeholders of the 2009 Cell. The likely major determinants of final outcome are Gardner and Omnico.

Jon Moulton

Director

BECAP GP Limited

30 June 2015

Investment Report of Fund I

Gardner

Business description

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

Fund I Investment details

m-hance (formerly Calyx)

Business description

· m-hance - implements, deploys and manages enterprise wide business management software solutions (www.m-hance.com)

· The interest in Calyx Managed Services was disposed of during the year resulting in a reduction in cost of £19.3 million, offset by an additional £0.5 million invested in m-hance

Fund I Investment details

Santia

Business description

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

Fund I Investment details

Omnico Group

Business description

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

Fund I Investment details

Fairline

Business description

· A leading global brand specialising in the design, engineering, manufacture and distribution of luxury boats in the range of 38 to 80 feet (www.fairline.com)

Fund I Investment details