BCAP.L Regulatory News (BCAP)

28 June 2013

BETTER CAPITAL PCC LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital PCC Limited is pleased to announce its 2013 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

·; 42.08 PER CENT. VALUE GROWTH combined NAV and distribution since inception

·; 7 platform acquisitions

·; 2 new bolt-on acquisitions in the financial year (total 9 since inception)

·; 1 further bolt-on acquisition completed post 31 March 2013 (total 10 since inception)

·; 1 realisation (achieving a high IRR)

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

2012 Cell Final Results

·; £169.9 MILLION total capital raised

·; £165.5 MILLION net proceeds invested in Fund II

·; £110.0 MILLION/ 66.5 PER CENT. committed to date

·; 2 platform acquisitions at 31 March 2013

·; 1 further acquisition completed post 31 March 2013

·; 3.75 PER CENT. increase in NAV (net of issue costs)since inception

* Based on the issue price of ordinary shares and net of share issue costs.

Directorate Change

·; Jon Moulton appointed to the Board and Mark Huntley resigned from the Board effective 28 June 2013

Chairman's Statement

Despite a weak economic backdrop, the Company has again achieved a number of significant milestones during the year. I am pleased to be able to present the Company's third annual report.

2009 Cell

The 2009 Cell invests solely in Fund I. Fund I's investment period closed on 31 December 2012, marking the start of its post-investment phase. In March 2013, Fund I returned £12.8 million to the 2009 Cell. This immediately triggered the 2009 Cell's first capital distribution of £14.1 million to the 2009 Cell investors with the difference met by excess cash in the 2009 Cell. In April 2013, Fund I made a further repayment of £12.4 million to the 2009 Cell which triggered the second capital distribution, of that amount, to the 2009 Cell investors. The first capital distribution was enabled following a £10.0 million repayment by Spicers in December 2012 and the second distribution, after the year end, was enabled by the successful disposal of various debt instruments in ATH Resources plc, an open-surface coal mining business. Total capital distributed to date stands at £26.5 million, representing 12.6 per cent of funds raised in the 2009 Cell.

Since its inception in December 2009, the 2009 Cell NAV has grown steadily and had increased to £291.3 million (including the first distribution of £14.1 million ) by the close of the financial year; a compound annual growth rate of 10.6 per cent. Significant further potential value remains in the underlying portfolio companies as they continue apace with their respective restructuring programmes.

Investment activities

Fund I made its first disposal in the financial year. The sale of the debt instruments in ATH Resources plc realised a net gain of £5.7 million, achieving a high IRR on the transaction. An additional £3.0 million was invested in order to part fund Gardner's bolt-on acquisition of Airia, a French aerospace components manufacturer. A number of further investments totalling £9.5 million were made in the portfolio companies to fund their on-going restructuring programmes and working capital.

Spicers repaid £15.1 million in the financial year, leaving £4.9 million of the original £40.0 million invested after repayments of £20.0 million in the prior year. This return of cash has been achieved in the 12 months from the acquisition of Spicers with further returns expected from the business. Fairline returned £0.5 million of surplus cash in the financial year.

Portfolio

Several of strong performers are now emerging from the Fund I portfolio companies. Gardner is a medium to high complexity components manufacturer for the aerospace industry, an industry that has been largely resilient to the economic downturn. A combination of new contract wins, access to low cost sources through acquisitions and investment in a new production facility has enabled Gardner to achieve significant profits.

Spicers, an office equipment wholesale distributor, has repaid 87.5 per cent of Fund I's original investment of £40.0 million, made in December 2011. A programme of margin improvements and working capital rationalisation has enabled surplus cash to be repatriated. Significant surplus assets are in the process of being realised.

Also performing well is m-hance, a subsidiary of the Calyx Group, which is a provider of business software management solutions. m-hance has enjoyed a busy year with the integration, in February 2012, of its fourth bolt-on acquisition of certain trade and assets of Maxima plc. This acquisition has enabled the business to better position itself as a bespoke provider of business management software and so improve its prospects of future sale.

A number of the Fund I portfolio companies also gained notable momentum in their respective restructuring programmes during the financial year.

Fairline has returned to profitability following a period of sustained losses prior to Fund I's ownership. The demand for luxury boats remains challenging; however, penetration into new geographical markets is showing promise and new products have been well received. The operations of the business have been upgraded and are now regarded as amongst the best in the industry.

Omnico, an omni-channel point of sale software and hardware provider, has seen significant strengthening of its management team and business processes in the financial year. Considerable progress has been achieved in stabilising and improving the business; although it is still early days in its turnaround, the prognosis is optimistic. The business is expected to record a small profit for its current financial year.

Santia is a health and safety consultancy offering services such as occupational health, training, contractor certification, food safety testing and asbestos consultancy. Revenue growth both in the UK and abroad is gaining momentum with some major new contract wins. In April 2013, Santia acquired a bolt-on investment for its asbestos consultancy division, providing the business with a wider geographical reach and access to skilled personnel. Santia drew down £2.0 million to fund the acquisition.

The Fund I portfolio also contains two businesses whose carrying values have been marked down in the financial year.

Reader's Digest entered into a Company Voluntary Arrangement in January 2013 which facilitated an exit from its unprofitable direct marketing business. The magazine business albeit small, is expected to trade profitably.

Calyx Managed Services, a managed service provider is a subsidiary of the Calyx Group. The business is facing tough trading conditions as the UK corporate and public sector continue to delay investment in their IT infrastructure. New management and a new sales team are now in place with further cost reduction measures being deployed.

2012 Cell

Overview

The 2012 Cell invests solely in Fund II. Fund II, the fund invested in by 2012 Cell, incorporated in January 2012, is now 66.5 per cent committed having successfully acquired its second platform investment in April 2012 and then its third, shortly following the close of the financial year. The carrying value of Everest, a leading manufacturer and distributor of double-glazed windows and conservatories, has been increased for the first time, providing a NAV growth in the 2012 Cell of 3.75 per cent since inception, net of issuance costs.

Investment activities

Fund II made net investments totalling £38.6 million in the financial year. Jaeger, a premium British retailer of women's and men's wear was acquired in April 2012 with a net investment of £33.6 million. Fund II also injected £5.0 million into Everest to fund short term working capital requirements.

Subsequent events

Fund II acquired its third platform investment in April 2013. City Link, a leading express parcel delivery business, was acquired for a token sum from Rentokil Initial plc. £40.0 million has been committed to its restructuring which includes investment in new technology, a focus on improving customer satisfaction and cost reduction. Although still early days, City Link's customers and employees have responded well to the change in ownership, with the 60-day plan progressing in line with expectation.

Portfolio

Everest has made significant progress in its turnaround. A programme of cost reduction, management restructuring, improvement in product installations and focused marketing has enabled the business to make significant advances. Progress in Jaeger has been steady. Promising sales growth has been achieved in recent months. Initiatives to improve product appeal, online sales and cost reductions have all been implemented.

Joint venture

In January 2013, Fund II entered into a joint venture with the National Pensions Reserve Fund of Ireland, the Republic of Ireland's €14 billion social welfare and public service pension fund. Under the terms of the joint venture, the NPRF will invest alongside Fund II as a minority shareholder, with the NPRF committing €50.0 million towards a portfolio of distressed businesses in Ireland. A Dublin office of the Consultant has been established to provide local representation to facilitate the research into Irish opportunities. The Fund II GP Company has informed the Board that deal flow in Ireland has been encouraging since the joint venture was announced.

Deal flow

The volume of leads received and investigated by Better Capital LLP, the Consultant to Fund I GP and Fund II GP, and Better Capital (Dublin) Limited, the Consultant to Fund II GP, have increased by almost a quarter in the financial year. This is in part due to the recruitment of the dedicated resource in Dublin which is tracking opportunities across Northern Ireland and the Republic of Ireland. Both the London and Dublin based teams continue to market the Better Capital brand and to demonstrate added value through the progress achieved in the underlying Funds I and II portfolio companies.

A combination of a benign interest rate environment and an unwillingness of lenders to crystallise losses has significantly reduced the anticipated level of business failures. Meanwhile, the increase in the volume of leads has not necessarily led to a stronger investment flow. Notwithstanding the highly selective manner with which deals are assessed, the Board remains confident that current deal flow is sufficient to deploy the remaining funds in businesses capable of generating superior returns.

At 31 March 2013, a total of 1,073 leads had been logged by the Consultant since incorporation. The composition of source and sector for the year to March 2013 remained broadly similar to the prior year. Every lead is given due consideration.

Outlook

The UK economy continues to perform sluggishly with low growth and falling real wages. Any significant improvement in the economy appears unlikely in the near future. Whilst lower fuel costs, a rising trend of house prices and improved car sales are encouraging, these are probably only the temporary effects of recent monetary interventions. There remain a multitude of distressed businesses in the UK and Ireland in need of new investment and direction. Better Capital's non-reliance on debt funding, together with its implementation of deep operational restructuring, enable its businesses to regain stability and re-position themselves for growth.

Fund II is now 66.5 per cent committed having successfully acquired its third platform investment soon after the end of the Company's financial year and the Board is confident that the Better Capital brand is attracting sufficient opportunities for the profitable deployment of the remainder of Fund II in the near term. With the Consultant's confidence in on going deal flow, the Board has decided, in line with the intent stated in the Company's prospectus dated 19 December 2011, to pursue a further fundraising in the coming months by way of an issue of new shares in the 2012 Cell at a premium to NAV.

Board

Jon Moulton has been appointed as a non-executive director of the Company with effect from 28 June 2013. Jon is a director of Fund I GP and Fund II GP, and also a non-executive director of BACIT Limited. Jon will submit himself for re-election at the forthcoming Annual General Meeting and annually thereafter. There are no further details that need to be disclosed in accordance with Listing Rule 9.6.13. Mark Huntley has resigned from the Board with effect from 28 June 2013.

Richard Crowder

Chairman

27 June 2013

Enquiries:

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

Richard Crowder (Chairman)

Mark Huntley (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 2013.

General Information

There are currently two protected cells, being the 2009 Cell and the 2012 Cell as described in the Background and further informationsection.

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

Amendments to the Fund II Investment Policy were approved at the Extraordinary General Meeting on 28 February 2013. The amended 2012 Cell Investment Policy below.

Business Review

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

Principal Activities

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

Results and Dividend

The Company

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

2009 Cell

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

The Net Asset Value of the 2009 Cell as at 31 March 2013 was £277.2 million (2012: £256.0 million).

During the year the 2009 Cell made its first distribution of capital of £14.1 million to shareholders of the 2009 Cell as at the ex-date of 20 February 2013. The distribution consisted of a payment of 6.8 pence per ordinary share payable in cash from the 2009 Cell's share capital account and has been treated as a reduction of capital.

On 22 March 2013, 2009 Cell confirmed a second distribution of capital of 6.0 pence per ordinary share to shareholders of the 2009 Cell as at the ex-date of 3 April 2013. In line with the first distribution, this distribution of £12.4 million will be treated by the Company as a reduction of share capital. The distribution was paid on 19 April 2013.

The two capital distributions (reductions of share capital) announced to date for the 2009 Cell total £26.5 million, 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.

No distributions were paid in the year ended 31 March 2013 for the 2012 Cell.

The Net Asset Value of the 2012 Cell as at 31 March 2013 was £174.7 million (2012: £166.0 million).

Annual General Meetings

The Annual General Meetings of the Company and the Cells will be held on 31 July 2013 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. The AGM of the 2009 Cell will be held at 09.30am. The AGM of the 2012 Cell will be held at 09.45am or, if later, immediately following the conclusion of the AGM of the 2009 Cell. The AGM of the Company will be held at 10.30am or, if later, immediately following the conclusion of the AGM of the 2012 Cell. Details of the resolutions to be proposed at the AGMs, together with explanations, appear in the Notices of Meetings which are being sent to Shareholders at the same time as this annual report.

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

Statement of Directors' Responsibilities

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

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

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

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

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

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

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.bettercapital.gg).

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

Responsibility Statement

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

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

·; the Chairman's Statement and the General Partner's Reports include a fair review of the development and performance of the business and the position of the Company, the 2009 Cell and the 2012 Cell. Note 11 to the respective financial statements provide a description of the principal risks and uncertainties that they face.

Listing Requirements

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

Corporate Governance Statement

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

The Company's prospectus dated 19 December 2011 stated that the Company was, and intended to continue to be, in compliance with the UK Code. The Company is a member of the AIC and the Board of the Company has accordingly considered, and resolved to follow, the principles and recommendations of the AIC Code by reference to the AIC Guide (both available from the AIC's website, www.theaic.co.uk). A new version of the AIC Code was published in February 2013 which is aligned with the UK Code and the Board reports against the new version of the AIC Code.

On 28 September 2012, the FRC announced an updated version of the UK Code. Further to this, on 22 January 2013, the FRC provided the AIC with an updated endorsement letter to cover the latest edition of the AIC Code. The endorsement confirms that by following the AIC Guide investment company boards should fully meet their obligations in relation to the UK Code and paragraph LR9.8.6 of the Listing Rules.

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 has no executive directors, employees or internal operations and has therefore not reported further in respect of these provisions.

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.

Pursuant to the GFSC Code, companies which report against the UK |Code or the AIC Code are deemed to meet the GFSC Code.

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

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

The Board

The Directors of the Company at the date of this report are Richard Crowder (Chairman), Richard Battey, Philip Bowman and Mark Huntley. Each of the four Directors of the Company was appointed upon incorporation of the Company on 24 November 2009 and all submitted themselves for re-election at the first annual general meeting of the Company. Any Director who has been appointed by the Board since the last general meeting or who held office at the time of the two preceding annual general meetings and who did not retire at either of them must offer himself for reappointment by the members. As they were re-elected at the 2011 AGM of the Company, Messrs Crowder, Battey and Bowman are not required to submit themselves for re-election at the AGM of the Company. Mr Huntley, as a director of the Administrator, the Fund I GP Company and the Fund II GP Company, is subject to annual re-election in accordance with the Listing Rules.

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

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

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

During the year to 31 March 2013 the Directors' remuneration was paid as follows (of which £52,000 (2012: £nil) was outstanding at the year end):

31 March 2013

31 March 2012

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

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

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

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.

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.

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

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

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

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

* Mr Huntley is not a member of either the Audit Committee or the MNR Committee.

Directors

Richard Crowder - Chairman - Guernsey resident (aged 63)

Richard Crowder holds a range of non-executive directorships and consultancy appointments. He works with a wide range of investment styles and portfolios as well as being a director of a variety of family companies where he acts as the offshore adviser/director. In his early career, he worked as an investment manager with Ivory & Sime in Edinburgh and as a head of investment research with W.I. Carr in the Far East. He undertook a wide range of responsibilities for Schroders in London and the Far East, culminating in the role of Managing Director for Schroders' Singapore associate and a Director of J. Henry Schroder Wagg & Co. Limited. Having then worked as Chairman of Smith New Court Far East and Director of Smith New Court plc, Mr 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. Mr Crowder was appointed as a Director on 24 November 2009.

Richard Battey - Non-executive Director - Guernsey resident (aged 61)

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

Philip Bowman - Non-executive Director - UK resident (aged 60)

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

Mark Huntley - Non-executive Director - Guernsey resident (aged 54) 

Mark Huntley is Head of the Financial Services Division of the Heritage Group, one of the largest independent financial and insurance providers in Guernsey. He is Managing Director of the Administrator. He holds board appointments for listed and unlisted companies and has over 30 years direct experience of the fund and fiduciary sectors. This includes extensive experience in private equity funds and investment programmes.

Prior to joining Heritage, Mark spent 19 years with Barings, served on the executive committee of the Baring Financial Services Group and was Group Head of Business Development and Communication. Prior to 2000 he was Deputy Managing Director of Guernsey International Fund Managers Limited where he was responsible for alternative investment and emerging market funds.

Mr Huntley is a Guernsey resident and was appointed as a Director on 24th November 2009.

Shareholdings of the Directors

The Directors of the Company and their beneficial interests in the 2009 Shares and the 2012 Shares as at 31 March 2013 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 2013.

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.

Management Engagement, Nomination and Remuneration Committee

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

Regarding management engagement, the MNR Committee provides a formal mechanism for the review of the performance of the Company's advisors. It carries 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.

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

From 1 April 2012, the Chairman of the MNR Committee receives an additional £5,000 per annum in director's fees in recognition of the additional work the role requires.

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 newly established management engagement, nomination and remuneration committee.

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

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

Directors' and Officers' Liability Insurance

The Company maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Company. Suitable insurance is in place, having been renewed on 4 January 2013.

Dealings with shareholders

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

Major Shareholders

As at 28 May 2013, 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 169,861,895 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 395,399,215. This is calculated as the sum of the 2009 Shares (206,780,952) multiplied by 1.1096 plus the 2012 Shares (169,861,895) multiplied by 0.9770.

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

Directors' Authority to Issue Shares

2009 Cell

At an Extraordinary General Meeting of the Company held on 11 January 2012, the shareholders resolved by Special Resolution, to grant the Directors the power to issue up to five per cent. of the aggregate 2009 Shares admitted to trading on the LSE,free of restrictions under the Articles, which would otherwise require the Company first to offer the new 2009 Shares to the current holders of the 2009 Shares. In any rolling three-year period, the Company will not issue more than 7.5 per cent. of the 2009 Shares.

This power expired on the conclusion of the annual general meeting of the Company held on 31 July 2012 and was not renewed. No 2009 Shares were issued in this year.

2012 Cell

At an Extraordinary General Meeting of the Company held on 11 January 2012, the shareholders resolved by Special Resolution, to grant the Directors the power 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 expired on the conclusion of the annual general meeting of the Company held on 31 July 2012.

The Board renewed this authority at the Annual General Meeting of the Company held on 31 July 2012. This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the annual general meeting of the Company to be held on 3 July] 2013. The Board proposes to renew this authority at the annual general meeting of the Company to be held on 31 July 2013.

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 Annual General Meetings held on the 31 July 2012. At the Annual General Meetings to take place on 31 July 2013 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 Guernsey law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board and not at the option of the Shareholders. Purchases of 2009 Shares and/or 2012 Shares will only be made through the market for cash at prices below the prevailing Net Asset Value of the 2009 Shares and/or 2012 Shares (as last calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the Listing Rules of the UK Listing Authority which provide that the price to be paid must not be more than 5 per cent. above the average of the middle market quotations for the 2009 Shares and/or 2012 Shares for the five business days before the shares are purchased unless previously advised to shareholders.

In accordance with the Company's Articles of Incorporation and Guernsey law up to 10 per cent. of the Company's shares may be held as treasury shares. The Company 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.

It is proposed to seek shareholder approval for the adoption of revised articles of incorporation for the Company.

In the revised articles of incorporation, Article 42 has been amended to enhance the ability of Company to communicate with shareholders by electronic means, to the maximum extent permitted by Guernsey law. As a result of the new provisions, shareholders will be deemed to have given their consent to the receipt of all forms of electronic communications, including notices of meetings, from the Company. Such deemed consent may be withdrawn by a shareholder, by giving notice to the Company.

In respect of any shareholder who has not withdrawn that consent, the Company may post a notice or document on a website and send to such shareholder a letter to inform them that the notice or document may be located on the website. In the case of any shareholder who provides to the Company an email address for the purposes of receiving notices and documents, the Company may send such notices and documents direct to that email address.

Certain other references to sending documents to shareholders have been amended so as to ensure that the documents can be sent by electronic means, where permitted by Article 42.

Making documents available electronically will:

·; enable the Company to go some way towards reducing printing and postage costs;

·; allow faster access to information and enable shareholders to access documents on the day they are published on the Company's website; and

·; reduce the amount of resources consumed, such as paper, and lessen the impact of printing and mailing activities on the environment.

Fund I GP's Share and Carried Interest

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

In the year under review, Fund I has advanced £2.9 million (2012: £3.1 million) to its general partner in respect of the Fund I GP's Share. This has been accounted for when calculating the fair value of Fund I.

No amounts are yet liable to be paid or accrued in respect of Carried Interest but is taken into account when calculating the fair value of the 2009 Cell's investment in Fund I.

Fund II GP's Share and Carried Interest

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

In the year under review, Fund II has advanced £2.5 million (2012: £0.5 million) to its general partner of in respect of the Fund II GP's Share. This has been accounted for when calculating the fair value of Fund II.

No amounts are yet liable to be paid or accrued in respect of Carried Interest.

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 Funds 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. It ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld. In light of recent market volatility and economic turmoil, particular attention has been given to the effectiveness of controls to monitor liquidity risk, asset values and counterparty exposure.

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

Going Concern

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

By order of the Board

Richard Crowder

Chairman

27 June 2013

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). 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 chairman of the Audit Committee must be a non-UK tax resident. The Audit Committee meets no less than twice a year in Guernsey, and meets the external auditor at least once a year in Guernsey. The Audit Committee met three times in the year to 31 March 2013.

The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual Report and Audited Financial Statements and Interim Financial Report, the valuation of the Company's investment portfolio, the system of internal controls, and the terms of appointment of the auditor together with their remuneration. It is also the formal forum through which the 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 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, the Fund II GP

The main duties of the Audit Committee are:

·; giving full consideration and recommending to the Board for approval the contents of the half yearly and annual financial statements 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 prepared by the Consultant, and making a recommendation to the Board on the valuation of the Company's investments:

·; reviewing and recommending to the Board for approval 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; and

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

The external auditor is invited to attend the Audit Committee meetings at which the annual and interim accounts are considered and at which they have the opportunity to meet with the Committee without representatives of the Consultant being present.

After discussion with both the Consultant and the external auditor, the Audit Committee determined that the key risk of misstatement of the Company's financial statements related to the valuation of investments and finance receivables at fair value through profit and loss, in the context of the judgements necessary to evaluate current market values.

As outlined in Note 4 to the financial statements, the total carrying value of financial assets at fair value at 31 March 2013 was £450.1 million. Market quotations are not available for these financial assets such that the value of the Company's investments in the Funds are based on the value of the Company's limited partner capital and loan accounts within each Fund, which itself is based on the value of the relevant underlying investee companies as determined by the General Partner of each Fund.

The valuation process and methodology were discussed with GPs with input from the Consultant and with the auditor at board meeting held on 31 May 2013. The Consultant carries out a valuation semi-annually and provides a detailed valuation report to the Company.

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

The auditor explained the results of their review of the valuations, including their challenge of management's underlying projections, the economic assumptions and discount rates. On the basis of their audit work, there were no adjustments proposed that were material in the context of the financial statements 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 yet changed. Mr Hallett will be replaced in the year ended 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 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 auditor, with particular regard to any non-audit work that the auditor may undertake. In order to safeguard 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 generally only covers reviews of interim financial statements, tax compliance and capital raising work. Any non-audit services conducted by the 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 Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to the level of non-audit fees. Notwithstanding such services the Audit Committee considers BDO Limited to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit.

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 Consultant evaluating the performance of the audit team.

The Audit Committee is satisfied with BDO Limited's effectiveness and independence as 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 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 auditor for the year ending 31 March 2014.

On behalf of the Audit Committee

Richard Battey

Chairman of the Audit Committee

27 June 2013

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

BETTER CAPITAL PCC LIMITED

We have audited the financial statements of Better Capital PCC Limited for the year ended 31 March 2013 which comprise the Company Statement of Financial Position, the Company Statement of Comprehensive Income, the Company Statement of Cash Flows, the Company Statement of Changes in Equity and the Company related Notes 1 to 13. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

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

Respective responsibilities of the directors and auditor

As explained more fully in the 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 Auditing Practices Board's ("APB's") Ethical Standards for Auditors.

Scope of the audit of the financial statements

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

Opinion on the financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Company's affairs as at 31 March 2013 and of its profit for the year then ended;

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

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

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

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

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

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

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

Under the Listing Rules we are required to review:

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

Justin Marc Hallett FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

27 June 2013

Statement of Financial Position

As at 31 March 2013

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 27 June 2013 and signed on their behalf by:

Richard Crowder Richard Battey

Chairman Director

Notes 1 to 13 form an integral part of the Company financial statements.

Statement of Comprehensive Income

For the year ended 31 March 2013

All activities derive from continuing operations.

Notes 1 to 13 form an integral part of the Company financial statements.

Statement of Changes in Equity

For the year ended 31 March 2013

Notes 1 to 13 form an integral part of the Company financial statements.

Statement of Cash Flows

For the year ended 31 March 2013

Notes 1 to 13 form an integral part of the Company financial statements.

Notes to the Audited Financial Statements

For the year ended 31 March 2013

1. General information

Better Capital Limited

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

Further information regarding the background of the Company is detailed in the Company Background and further information section.

2. Accounting policies

Basis of preparation

The financial statements for the year ended 31 March 2013 have been prepared in accordance with EU Adopted IFRSs and with the provisions of the Companies (Guernsey) Law, 2008.

The principal accounting policies adopted are set out below.

Adoption of new and revised standards

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

·; IFRS 9: Financial Instruments - IFRS 9 replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: (1) those measured as at fair value and (2) those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The standard also results in one impairment method replacing the numerous impairment methods in IAS 39 that arise from the different classification categories. The Company only has 'loans and receivables' which will now be classified under the two categories as described above. However, there is no expected impact on the measurement of these financial instruments. The Company will adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015 (still to be endorsed).

·; IFRS 10: Consolidated financial statements - IFRS 10 provides additional guidance to assist in the determination of control where this is difficult to assess. The Company intends to adopt IFRS 10 in the next accounting period.

The adoption of the amendment to IFRS 10 relating to investment entities (still to be endorsed by the EU), which is effective for periods commencing on or after 1 January 2014 will not have a significant impact on the measurement, classification and disclosures of financial results. The Directors expect the Company to meet the definition of an investment entity under the amendments to IFRS 10 (October 2012).

The Directors do not expect a significant impact as investments in Limited Partnerships are already recognised at fair value through the Statement of Comprehensive Income.

·; IFRS 12: Disclosures of Interests in Other Entities - IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Company is yet to assess IFRS 12's full impact and intends to adopt IFRS 12 in the next financial reporting period.

·; IFRS 13: Fair value measurement - IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The Company is yet to assess IFRS 13's full impact and intends to adopt IFRS 13 in the next financial reporting period.

The Company has not adopted early any standards, amendments and interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning on or after 1 April 2013 or later periods.

Foreign currencies

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

The presentation currency for financial reporting purposes is Pounds Sterling.

Financial instruments

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

Financial assets

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

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

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

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

a) Loans and receivables

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

b) Investments at fair value through profit or loss

i. Classification

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

ii. Recognition

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

iii. Measurement

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

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

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

iv. Fair value estimation

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

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

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

c) Cash and cash equivalents

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

Financial liabilities

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

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

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

Capital

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

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

Equity instruments

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

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

Income

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

Income distributions

Income distributions are recognised on an accruals basis.

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

Other expenses

Other expenses are accounted for on an accruals basis.

Going concern

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

Segmental reporting

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

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

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

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

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

Critical accounting judgment and estimation uncertainty

Use of estimates and judgements

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

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

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

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

Investments in Fund I and Fund II

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

When valuing the underlying investee companies, the General Partner of each Fund reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, as above noted, to estimate a fair value as at the date of the statement of financial position. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments will differ from the fair values reflected in these financial statements and the differences may be significant.

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

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

3. Taxation

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

4. Investment in Limited Partnerships

Total Investment:

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

The outstanding loans do not carry interest. The loans 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 company's outstanding loan; during the year £12.8 million was repaid to the Company by Fund I (2012: £nil). After the year end a further £12.4 million was returned by Fund I (see Note 13).

Distributions receivable from the Funds in the year amounted to £0.8 million (2012: £1.8 million, of which £0.8 million (2012: £0.8 million) 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 will be increased or reduced to reflect the fair value of the Cell's attributable valuation of net assets within Fund I and Fund II.

The Omnico and Jaeger investments are carried at the price of recent investment. Interest receivable in respect of the underlying loans made by the Funds to Omnico and Jaeger have not been recognised in calculating the fair value of the investments in the Funds due to their circumstances of being relatively immature turnaround opportunities. As at 31 March 2013 such unrecognised interest receivable amounted to £2.1 million (2012: £1.0 million) (Note 2 - Investments in Fund I and Fund II).

5. Cash and cash equivalents

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

Interest income of £8,000 (2012: £10,000) 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.

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

6. Trade and other receivables

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

In outstanding debtors at the year end £0.8 million (2012: £0.8 million) relates to income distributions receivable from the Funds (Note 2).

7. Trade and other payables

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

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

8. Share capital

Core Shares

Year ended 31 March 2013

Year ended 31 March 2012

Cell Shares

Year ended 31 March 2013

Year ended 31 March 2012

During the year the 2009 Cell made its first distribution of capital of £14.1 million to shareholders of the 2009 Cell as at the ex-date of 20 February 2013. The distribution consisted of a payment of 6.8 pence per ordinary share payable in cash from the 2009 Cell's share capital account and was treated as a reduction of capital.

On 22 March 2013, 2009 Cell confirmed a second distribution of capital of 6.0 pence per ordinary share to shareholders of the 2009 Cell as at the ex-date of 3 April 2013. In line with the first distribution, this distribution of £12.4 million will be treated by the Company as a reduction of share capital. The distribution was paid on 19 April 2013.

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

Principal members of Better Capital LLP, the appointed Consultant to BECAP GP LP and BECAP12 GP LP, which act as General Partners to Fund I and Fund II, 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

9. Retained earnings

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

10. Related party transactions

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

Directors

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

Annual remuneration terms for each Director 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 for the year to 31 March 2013 amounted to £208,000 (2012: £152,000), of which £52,000 (2012: £nil) was outstanding at the year end. In the prior year the Directors also received additional fees totalling £40,000 in respect of additional services rendered on the fundraising for Fund II. The additional Directors' fees were taken to the share capital account in 2012 Cell.

Administrator

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

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

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

i) an ad valorem fee of 0.10 per cent. of the Net Asset Value per annum of the first £100.0 million and 0.05 per cent. thereafter of each of 2009 Cell and 2012 Cell subject to a minimum fee of £75,000 per annum per Cell; and

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

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

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

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

During the year, the Company incurred administration fees of £250,000 (2012: £199,000) apportioned on a NAV basis between the Cells. £63,000 (2012: £63,000) remained outstanding as at the year end.

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

Categories of financial instruments

Capital risk management

The Company'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 optimal 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.

During the year ended 31 March 2013, the Company had no borrowings other than trade and other payables. The Company had sufficient cash and cash equivalents to pay these as they fell due.

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 below.

·; The Funds' investments are not traded in an active market but are indirectly exposed to market price risk arising from uncertainties about future values of the investments held. The underlying investments of the Funds vary as to industry sector, level of distress, geographic distribution of operations and size, all of which may impact the susceptibility of their valuation to uncertainty.

This risk is managed by an investment strategy that diversifies the investments in terms of geography, financing stage or industry and through careful selection of investments within the specified limits of the relevant investment policy. The investments are monitored on a regular basis by the Fund GPs.

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

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

Due to the subjectivity of applying model assumptions inherent to the process of assessing the fair value of investments, a sensitivity analysis has been undertaken in respect of those investment valuations applying earnings multiples. A 10 per cent. increase or decrease of the applied earnings multiples results in a 5.93 per cent. increase or decrease in the NAV of the Company.

·; Concentration in an investment portfolio can have opposing effects on the credit risk of a portfolio.

A low number of investments in a portfolio, or high concentration, reduces risk due to better knowledge and information whilst a higher portfolio concentration in a certain sector of; industry, level of distress, geographic distribution of operations or size increases sector concentration and the risk of the portfolio.

Conversely a high number of investments and lower concentration can reduce the credit risk of the portfolio but may limit availability of resources and flexibility.

The level of analytical sophistication, both financial and legal, necessary for successful investment in businesses experiencing significant operating issues and associated financial distress is unusually high. Accordingly the Funds' each have a low number of investments and thus a high concentration. This allows sufficient resources to be allocated to each investment.

The Fund GPs monitor the concentration of each investment in each of the Funds to ensure compliance with their investment policies.

In Fund I no single investment will be more than 20 per cent. of Fund I Total Commitments. Following the acquisitions by Gardner of Airia and Pranita in the year, the total Gardner investment is 19.94 per cent. of Fund I Total Commitments.

In Fund II no single investment will be more than 30 per cent. of Fund II Total Commitments. At the year end Jaeger represented 24.2 per cent. of Fund II Total Commitments.

·; The Funds' underlying investments are dynamic in nature and the Funds aim to maintain flexibility in funding by keeping sufficient liquidity in cash and cash equivalents which may be invested on a temporary basis in:

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

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

The aggregate amount deposited or invested with any single such bank or other counterparty (including their associates) or in government and public securities of any single issue, shall not exceed £35.0 million for Fund I and £50.0 million for Fund II.

As at 31 March 2013, £120.3m (2012: £168.8) or 31.47 per cent. (2012: 40.42 per cent.) of the Funds' financial assets were cash balances held on deposit with several, A or higher rated, banks.

The Funds do not follow an over-commitment policy.

·; The Funds indirect foreign currency risk, primarily with the Euro and United States Dollar, arising 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.

(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.

(c) Interest Rate Risk

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

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

Liquidity risk

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

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

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

Financial liabilities consist of trade and other payables.

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

Credit risk

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

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

The carrying value of the investment in Fund I as at 31 March 2013 was £276.7 million (2012: £253.8 million).

The carrying value of the investment in Fund II as at 31 March 2013 was £173.4 million (2012: £165.1 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 can only deposit monies with institutions with a minimum credit rating of "single A". The Company mitigates its credit risk exposure on investments at fair value through profit or loss by the exercise of due diligence on the counterparties of Funds and their General Partners. The investment risk is managed by an investment strategy that diversifies the investments in terms of financing stage, industry or time.

The investment 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 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:

Financial investments measured at fair value

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

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

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

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

The Company's investment has been classified within level 3 as it has unobservable inputs and is not traded. The following table presents the investments carried on the statement of financial position by level within the valuation hierarchy as at 31 March 2013:

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

Gearing

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

Externally imposed capital requirement

There are no external capital requirements imposed on the Company.

12. Earnings per share and net asset value per share

Earnings per share