BCAP.L Regulatory News (BCAP)

23 June 2016

BETTER CAPITAL PCC LIMITED

(the "Company")

FINAL RESULTS UPDATE

Better Capital PCC Limited is pleased to announce its 2016 final results for both the 2009 Cell and the 2012 Cell.

2009 Cell Final Results

- £210.0 MILLION total capital raised

- £203.8 MILLION net proceeds invested in Fund I

- £61.7 MILLION/29.4 PER CENT. cumulative distributions to date

- £5.2 MILLION/2.5 PERCENT. proposed fourth distribution

- 47.8 PER CENT. return from NAV growth and distributions since inception

- 6.4 PER CENT. annualised NAV total return including distributions

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

** Annualised return since inception.

2012 Cell Final Results

- £355.5 MILLION total capital raised

- £347.4 MILLION net proceeds invested into Fund II

- £6.1 MILLION/1.7 PER CENT. cumulative distributions to date

- £307.8 MILLION/88.6 PER CENT. committed to date

- 27.1 PER CENT. value decline combined NAV and distribution since inception

- 7.3 PER CENT. annualised value decline combined NAV and distributions

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

** Annualised return since inception.

Chairman's Statement

Better Capital PCC Limited, including its two cells, the 2009 Cell and the 2012 Cell, today issues its Annual Report for the year ended 31 March 2016.

Better Capital 2009 Cell

The 2009 Cell made good progress during the year. This was mainly driven by Gardner's sustained solid performance. The successful disposal of Santia delivering net proceeds at around the Interim Results NAV level enabled the Company to make a third capital distribution to the 2009 Cell Shareholders. The 2009 Cell NAV summary is set out below.

1Excludes £4.0 million of interest repaid during the period2 Excludes £0.1 million of interest repaid during the period

3 Excludes £0.3 million of Santia escrow cash recorded as a fund asset

4 Excludes £2.0 million Fairline deferred consideration recorded as a fund asset

5 Excludes £0.2 million of estimated net proceeds from the Fairline administration recorded as a fund asset

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

The 2009 Cell NAV, including accumulated distributions of £61.7 million (29.4 per cent. of funds raised) rose by £14.3 million, 5.0 per cent. in the year to £303.1 million. This was after accounting for the net carry provision of £19.1 million. The 2009 Cell NAV including accumulated distributions rose by £12.4 million, 4.3 per cent. since the Interim Report. This was after accounting for a £12.0 million movement to the net carry provision.

Gardner continues to grow from strength to strength operationally and financially, and dominates the 2009 Cell NAV. Lead advisers were appointed in Q1 2016 to manage its exit and the Board has been informed that exit preparations are well underway. Early indications are that the asset is generating strong global interest.

The sale of Santia completed in December 2015 for an EV of £47.0 million to Alcumus, a business backed by Inflexion Private Equity. This is Fund I's first major profitable exit. Fund I achieved a money multiple of 2.8 times with an IRR of 25.8 per cent. on exit. Initial net proceeds of £38.7 million were received, of which £35.3 million was repaid to the 2009 Cell and £35.2 million distributed to the 2009 Cell Shareholders in January 2016.

In September 2015, Fund I disposed of its equity interest in Fairline to Wessex Bristol for a £2.0 million secured deferred consideration. Following the new owner's failure to adequately fund Fairline, the business entered into administration in December 2015. Fund I as secured creditor to the business has to date received net proceeds of £3.5 million with a further £0.2 million recognised as a fund receivable.

There has been a high level of activity under the new management team in Omnico. The closure of the loss-making Hardware division which completed in Q1 2016 has enabled Omnico to generate monthly profits and this is expected to continue into the future. The business also had good success in winning several significant contracts since my last communication.

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

The 2009 Cell NAV per share was 116.73p at 31 March 2016 which compares to 126.86p at 31 March 2015 (127.77p at 30 September 2015). The 2009 Cell Adjusted NAV per share, which includes accumulated distributions, was 146.53p at 31 March 2016 which compares to 139.66p at 31 March 2015 (140.57p at 30 September 2015).

Better Capital 2012 Cell

It is disappointing to note a further decline of £15.7 million or 5.8 per cent. to the 2012 Cell NAV since the Interim Report. In the year, the 2012 Cell NAV, including accumulated distributions of £6.1 million (1.7 per cent. of funds raised), declined by £92.3 million from £346.0 million to £253.7 million, principally due to write downs in Everest, SPOT, CAV Aerospace and Jaeger, offset by a write up in iNTERTAIN. The 2012 Cell NAV summary is set out below.

1 Excludes £8.9 million of cash repayment currently held in BECAP12 SPOT Limited

2 Includes commission and levy. Closing 2012 Cell Share price on 31 March 2016 - 31.5p

Following a period of profitable growth, it is disappointing to observe a further mark down in Everest. The weakness in trading in 2015 has had a significant bearing on the write-down in the business and continued to impact performance in early 2016. A new senior team was installed in January 2016 and has already made good progress. 

SPOT, which was written down in the Interim Report, is performing broadly to expectations in the current year. Whilst sales growth continues to be a key focus, the business has made significant inroads to improve operationally and these projects have delivered substantial savings.

iNTERTAIN, which operates predominantly the Walkabout late-night venues, has enjoyed a strong year under Fund II's ownership. Unencumbered from certain loss-making venues following a Company Voluntary Arrangement (CVA) in February 2015, the business has been able to invest into the existing estate and acquire additional sites. These new investments have performed to expectation.

The Board has been informed that CAV Aerospace has made good progress, both operationally and financially but from a very weak position. The business's key customers have remained supportive; however, discussions around the legacy loss-making contracts are still being addressed. Further funding in the near term is not anticipated. A substantial warranty claim is underway.

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

The 2012 Cell NAV per share was 71.43p at 31 March 2016 which compares to 98.06p at 31 March 2015 (75.96p at 30 September 2015). The 2012 Cell Adjusted NAV per share, which includes accumulated distributions, was 73.18p at 31 March 2016 which compares to 99.81p at 31 March 2015 (77.71p at 30 September 2015).

Better Capital team

In the Interim Report, I reported that the Board had received assurances from the Consultant that appropriate resource is being deployed to achieve maximum returns to the shareholders of both the 2009 and 2012 Cells.

Simon Pilling, who joined the Consultant in November 2014 as Operating Partner, and became Head of Portfolio in April 2015, took over from Mark Aldridge as CEO in September 2015. Under Simon Pilling's tenure as CEO, the Consultant has been re-shaped to support the Funds' changing requirements. Fund I is firmly in its realisation phase and is seeking an orderly exit from its portfolio companies whilst Fund II comes to the end of its investment period on 30 June 2016. Fund II, through its GP and the Consultant will look to build on the foundations by providing strategic support and further investments into the Fund II portfolio companies, if required. The aim is to help these businesses achieve their full potential and maximise shareholder value.

In light of the end of Fund II's investment period, the deal and portfolio finance team has been restructured. Rob Asplin, who led the Santia sale continues leading this team. In addition, operating partners now have executive roles in the portfolio businesses. Nick Sanders and Chris Horobin remain as the Executive Chairman of Gardner and the Jaeger Interim CEO respectively, and the Board was informed of Peter Mottershead' appointment as Everest CEO in January 2016. 

The Board meets with members of the Consultant on at least a quarterly basis to receive updates on the portfolio companies' performance. In addition, the Board also receives regular communication from Jon Moulton, a director in each of the Fund I and Fund II GP Companies regarding trading performance and ad hoc strategic matters affecting the Funds and the Consultant. The Board is content that it shares a strong working relationship with the Fund GPs and the Consultant and is satisfied that there are adequate resources to manage the underlying assets until the end of the Funds' lives.

Better Capital 2009 Cell - Distributions

The Company and its cells are structured such that net proceeds from realisations are distributed to shareholders and not reinvested beyond the investment phase. The sale of Santia in December 2015 enabled a £35.3 million repayment by Fund I to the 2009 Cell. This repayment in turn enabled the 2009 Cell to make its third capital distribution of 17.00p per share (totalling £35.2 million) to all shareholders of the 2009 Cell in January 2016.

The Fund I GP has recently assessed Fund I's cash requirements and has informed the Board that a further repayment of £5.2 million will be made on 8 July 2016. Having considered the 2009 Cell's own working capital requirements, the Board is pleased to announce a fourth capital distribution of 2.50p per share to the 2009 Cell shareholders. 

This fourth distribution (a reduction of share capital) will have an ex-date of 30 June 2016, record date of 1 July 2016 and pay date of 13 July 2016.

The four capital distributions announced to date total £66.9 million representing 31.8 per cent. of funds raised.

Better Capital 2012 Cell - Cash

As communicated in the Interim Report, the Fund II GP had advised the Board that in respect of the utilisation of cash resources and of future cash inflow, it is the Fund II GP's intention, after providing for the Cell and PCC costs, first to utilise any excess liquidity to purchase the shares of the 2012 Cell, if the opportunity arises to purchase such at an attractive discount to NAV. To the extent that this is not possible, however if more attractive, the remaining liquidity will be available to support add-ons to the existing portfolio. Any cash surplus to the above objectives that is returned to the Company will be distributed to investors.

Since the Interim Report, the Fund II GP authorised the purchase of 30.1 million 2012 Cell Shares in the period up to 31 March 2016 at an average gross price of 41.84p per share (total £12.6 million). Following the year end, a further 1.0 million shares were acquired at the gross price of 31.0p per share (total £0.3 million). Total 2012 Cell Shares held by Fund II, including those acquired earlier in the financial year stands at 34.4 million shares representing 9.92 per cent. of total issued 2012 Cell Shares. The Board has been notified that to the extent further 2012 Cell Shares become available at attractive prices relative to the prevailing NAV, the Fund II GP will arrange further such purchases.

Fund II's investment period terminates on 30 June 2016. Fund II is therefore no longer permitted to invest in new platform investments.

On 21 June 2016, there was £14.8 million of cash in Fund II. In addition, there is surplus cash of £11.3 million in SPOT's SPV (being the £8.9 million currently on deposit and an expectation of a further £2.4 million payable by the end of June 2016).

Board perspectives

At the time of publication, the British public will be casting their vote on the EU Referendum. Personal views aside, your Board has consulted with the Fund GPs to understand the impact, if any. With the exception of Gardner, Omnico and CAV Aerospace, the remaining Better Capital portfolio companies sell almost exclusively in the UK. They do, however, have significant supplies coming from within and outside of the EU. The short term impact, other than confusion, will largely centre on foreign exchange and inflation. The Better Capital portfolio companies with a degree of FX exposure will have hedging in place. However, the effects are not easily predicted. Given the low level of external debt in the portfolio companies, any rise in interest rates would have only a limited direct effect. 

A strong outcome on the 2009 Cell is highly reliant on Gardner. The Board remains in close contact with the Fund I GP throughout this crucial phase of Gardner's journey. 

Whilst the overall decline in the 2012 Cell NAV is disappointing, a number of the Fund II portfolio companies have shown improving key performance indicators in recent months albeit these have yet to manifest in more objective measures such as profitability and cash generation. More time is needed to prove the current strategies in place.

Richard Crowder

Chairman

23 June 2016

 For further information, please contact:

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 2016.

Principal activities

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

Business review

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

Results and distributions

The Company

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

2009 Cell

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

The Net Asset Value of the 2009 Cell as at 31 March 2016 was £241.4 million (2015: £262.3 million).

During the year the 2009 Cell made its third capital distribution of £35.2 million (2015: £nil) to shareholders of the 2009 Cell as at the ex-date of 21 January 2016. The distribution consisted of a payment of 17.0 pence per ordinary share payable in cash from the 2009 Cell's share capital account and has been treated as a reduction of share capital.

The three capital distributions (reductions of share capital) at 31 March 2016 for the 2009 Cell total £61.7 million, being 29.4 per cent. of funds raised.

2012 Cell

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

The Net Asset Value of the 2012 Cell as at 31 March 2016 was £247.6 million (2015: £339.9 million).

No distributions were paid during the year ended 31 March 2016 for the 2012 Cell (2015: £6.1 million).

The one capital distribution (reduction of share capital) at 31 March 2016 for the 2012 Cell totals £6.1 million, being 1.7 per cent. of funds raised.

Annual General Meetings

The Annual General Meetings of the Company and the Cells will be held on 5 September 2016 at Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. The AGM of the 2009 Cell will be held at 10.00 am. The AGM of the 2012 Cell will be held at 10.15 am or, if later, immediately following the conclusion of the AGM of the 2009 Cell. The AGM of the Company will be held at 10.30 am or, if later, immediately following the conclusion of the AGM of the 2012 Cell. Details of the resolutions to be proposed at the AGMs, together with explanations, appear in the Notices of Meetings which are being sent to Shareholders at the same time as this Annual Report.

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

Statement of Directors' responsibilities

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

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

· make judgements and estimates that are reasonable and prudent;

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

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

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

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

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

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

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

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

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

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

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

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

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

Listing requirements

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

Non-mainstream pooled investments

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

AIFMD

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

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

FATCA

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

Corporate governance statement

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

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

The Company's prospectus dated 29 July 2013 stated that the Company was, and intended to continue to be, in compliance with the UK Code. The Company is a member of the AIC and the Board of the Company has accordingly considered, and resolved to follow, the principles and recommendations of the AIC Code by reference to the AIC Guide (both available from the AIC's website, www.theaic.co.uk).

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

The UK Code includes provisions relating to:

· the role of the chief executive;

· executive directors' remuneration; and

· the need for an internal audit function.

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

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

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

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

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

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

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

The Board

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

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

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

Board tenure and re-election

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

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

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

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

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

Directors' remuneration

During the year to 31 March 2016 the Directors' remuneration was paid as follows (of which £52,000 (2015: £52,000) was outstanding at the year end):

31 March 2016

31 March 2015

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

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

· has no current or historical employment with the Consultant;

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

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

Duties and responsibilities

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

· statutory obligations and public disclosure;

· strategic matters and financial reporting;

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

· other matters having a material effect on the Company.

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

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

The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors. Suitable insurance is in place, having been renewed on 12 January 2016.

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

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

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

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

Directors

Richard Crowder - Chairman - Guernsey resident (aged 66)

Richard Crowder holds a range of non-executive directorships and advisory appointments. He works with a wide range of investment styles and portfolios as well as being a director of two groups of family companies where he acts as an offshore director/adviser and chairman of an investment committee. He has extensive experience of: Chairmanships and Directorships of quoted and unquoted companies, including chairing a FTSE 250 company; structuring businesses; managing and growing securities, banking, investment and advisory businesses; as well as being well versed in offshore governance. In his early career, he worked as an investment manager with Ivory & Sime in Edinburgh and as a head of investment research with W.I. Carr in Singapore, Hong Kong and Japan. He undertook a wide range of responsibilities for Schroders in London and the Far East, culminating in the role of Managing Director for Schroders' Singapore associate and Director of J Henry Schroder Wagg & Co. Limited. Having then worked as Chairman of Smith New Court International Agency and Director of Smith New Court Plc, Richard Crowder was the founding Managing Director of Schroders' Channel Islands subsidiary from 1991 until he became a full time non-executive director and consultant in 2000. He is a member of the Chartered Institute for Securities and Investments and resides in Guernsey.

Richard Battey - Non-executive Director - Guernsey resident (aged 64)

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

Philip Bowman - Non-executive Director - UK resident (aged 63)

Philip Bowman is currently the senior independent director and audit committee chairman of Burberry Group plc, chairman of The Miller Group (UK) Limited, and a director of Berry Bros. & Rudd Limited, and Anchor Brewers & Distillers LLC. He previously held the positions of Chief Executive of three FTSE100 companies - Smiths Group plc from December 2007 to September 2015, Scottish Power plc from early 2006 until mid-2007 and Allied Domecq plc between 1999 and 2005. In 1977 Mr Bowman qualified as a Chartered Accountant with the Institute of Chartered Accountants in England and Wales while employed at Price Waterhouse. Past board appointments include British Sky Broadcasting Group plc, Scottish & Newcastle Group plc and Coles Myer Limited as well as Chairman of Liberty plc and Coral Eurobet plc. His earlier career includes five years as a director of Bass plc (now Mitchells & Butler plc and Intercontinental Hotel Group plc), where he held the roles of Chief Financial Officer and subsequently Chief Executive of Bass Taverns. Mr Bowman is an Australian national and was appointed as a Director on 24 November 2009.

Jon Moulton - Non-executive Director - Guernsey resident (aged 65)

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

Shareholdings of the Directors

Directors of the Company and their beneficial interests in the 2009 Shares and the 2012 Shares as at 31 March 2016 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 2016.

Committees of the Board

Audit Committee

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

Management Engagement, Nomination and Remuneration Committee

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

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

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

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

Board performance and evaluation

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

Internal control and financial reporting

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

• The Board monitors the actions of the Fund I GP, the Fund II GP and undertakings of 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 MNR committee.

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

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

Relations with Shareholders

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

Major Shareholders

As at 25 May 2016, insofar as is known to the Company, the following persons were interested, directly or indirectly, in 5 per cent. or more of the 2009 Shares and 2012 Shares in issue:

2009 Cell

2012 Cell

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

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

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

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

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

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

Directors' authority to issue shares

2009 Cell

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

2012 Cell

At the Annual General Meeting of the Company held on 7 September 2015, the Board renewed its authority to issue up to 5 per cent. of the aggregate 2012 Shares admitted to trading on the LSE, free of restrictions under the articles, which would otherwise require the Company first to offer the new 2012 Shares to the current holders of the 2012 Shares. In any rolling three-year period, the Company will not issue more than 7.5 per cent. of the 2012 Shares. This power shall (unless previously revoked, varied or renewed by the Company) expire on the conclusion of the AGM of the Company to be held on 5 September 2016.

Directors' authority to buy back shares

The current authority of the Company to make market purchases of up to a maximum of 14.99 per cent. of the issued 2009 Share Capital and/or 2012 Share Capital is renewable annually and was last authorised at the AGM held on 7 September 2015. At the AGM to take place on 5 September 2016 the Board will seek to renew such authority in respect of the 2009 Shares and the 2012 Shares. Any buy back of 2009 Shares and/or 2012 Shares will be made subject to Companies Law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board and not at the option of the Shareholders. Purchases of 2009 Shares and/or 2012 Shares will only be made through the market for cash at prices below the prevailing Net Asset Value of the 2009 Shares and/or 2012 Shares (as last calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the Listing Rules of the UK Listing Authority which provide that the price to be paid must not be more than 5 per cent. above the average of the middle market quotations for the 2009 Shares and/or 2012 Shares for the five business days before the shares are purchased unless previously advised to shareholders.

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

Articles of Incorporation

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

Change of control

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

Principal risks and uncertainties

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

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

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

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

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

Going concern

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

Long-term Viability Statement

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

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

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

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

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

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

By order of the Board

Richard Crowder

Chairman

23 June 2016

Report of the Audit Committee

The Audit Committee has been in operation throughout the year. The Audit Committee, chaired by Richard Battey, operates within clearly defined terms of reference (which are available from the Company's website, www.bettercapital.gg), which include all matters indicated by DTR 7.1 and the AIC Code. Its other members are Richard Crowder and Philip Bowman. Only independent directors can serve on the Audit Committee and members of the Audit Committee must have no links with the Company's external auditor and must be independent of the Consultant, the Fund I GP and the Fund II GP. The identity of the chairman of the Audit Committee is reviewed on an annual basis and the membership of the Audit Committee and its terms of reference are kept under review. The Audit Committee meets no less than twice a year in Guernsey, and meets the external auditor at least once a year in Guernsey. The Audit Committee met three times in the year to 31 March 2016.

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

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

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

The main duties of the Audit Committee are:

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

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

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

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

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

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

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

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

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

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

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

Financial reporting

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

· the quality and acceptability of accounting policies and practices;

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

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

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

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

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

Meetings

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

· consideration and agreement of the terms of reference of the Audit Committee for approval by the Board;

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

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

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

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

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

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

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

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

Primary area of judgement

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

As outlined in Note 4 to the financial statements of the Company, the total carrying value of financial assets of the Company at fair value at 31 March 2016 was £485.0 million (2015: £597.8 million). Market quotations are not available for these financial assets such that the value of the Company's investments in the Funds is based on the value of the Company's limited partner capital and loan accounts within each Fund, which are themselves based on the value of the relevant underlying investee companies as determined by the General Partner of each Fund.

The valuation process and methodology were discussed with the Fund GPs, with input from the Consultant and with the external auditor at a board meeting held on 20 June 2016. The Consultant carries out a valuation semi-annually for the GP Companies. In turn the Fund GPs provide valuations of each Cell's investment in the relevant Fund.

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

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

Internal audit

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

Appointment of the external auditor

BDO Limited has been the Company's external auditor since the Company's inception. The lead audit director, Mr Justin Hallett, has been rotated during the period and replaced with Mr Richard Searle in accordance with normal audit director rotation arrangements.

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

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

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

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

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

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

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

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

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

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

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

The Audit Committee is satisfied with BDO Limited's effectiveness and independence as external auditor having considered the degree of diligence and professional scepticism demonstrated by them. As such, the Audit Committee has not considered it necessary this year to conduct a tender process for the appointment of its external auditor. Having carried out the review described above and having satisfied itself that the external auditor remains independent and effective, the Audit Committee has recommended to the Board that BDO Limited be reappointed as external auditor for the year ending 31 March 2017.

On behalf of the Audit Committee

Richard Battey

Chairman of the Audit Committee

23 June 2016

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

BETTER CAPITAL PCC LIMITED

Our opinion on the financial statements is unmodified

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 March 2016 and of its loss for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

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

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

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What we have audited

The financial statements, included within the Annual Report, comprise:

• the Statement of Financial Position;

• the Statement of Comprehensive Income;

• the Statement of Changes in Equity;

• the Statement of Cash Flows; and

• the related notes 1 to 11, which include a summary of the significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.

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Respective responsibilities of the directors and auditor

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

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

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

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Scope of the audit of the financial statements

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

We tailored the scope of our audit taking into account the nature of the Company's investments, involvement of the Consultant and the Company Administrator, the accounting and reporting environment and the industry in which the company operates.

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

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

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Our audit approach - Overview

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Our application of materiality

The quantitative thresholds that we applied for materiality helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements.

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

Based on our professional judgment, we determined materiality for the financial statements as a whole to be £7,100,000 which is based on a level of 1.5% of total assets excluding un-invested cash held in Fund II.

International Standards on Auditing (UK & Ireland) also allow the auditor to set a lower materiality for particular classes of transaction, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context, we set a lower level of materiality to apply to income distributions and expenses. We determined materiality for this area to be £142,000.

We agreed with the Audit Committee that we would report all audit differences in excess of £142,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

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Our assessment of risks of material misstatement

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

We have set out how we tailored our audit to address this specific area in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.

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

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

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 ISAs (UK and Ireland) Reporting

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

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

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

• is otherwise misleading.

In particular we are required to report to you if:-

• we have identified any inconsistencies between our knowledge acquired during the audit and the Directors' statement above that they each consider the annual report taken as a whole to be fair, balanced and understandable; or

• the annual report does not appropriately disclose those matters that were communicated to the Audit Committee which we consider should have been disclosed; or

• we have anything material to add or to draw attention to in relation to:

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

• the disclosures above in the annual report that describe those risks and explain how they are being managed or mitigated;

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

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

 We have no exceptions to report arising from these responsibilities.

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Corporate Governance

Under the Listing Rules we are required to review the Directors' statements, set out above, in relation to going concern and set out above in relation to longer-term viability and the part of the corporate governance statement relating to the company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Our review was substantially less in scope than an audit and only consisted of making enquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit.

We have nothing to report having performed our review.

Companies (Guernsey) Law, 2008 Reporting

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.

We have no exceptions to report arising from this responsibility.

Richard Michael Searle FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

23 June 2016

Statement of Financial Position

As at 31 March 2016

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 23 June 2016 and signed on its behalf by:

Richard Crowder Richard Battey

Chairman Director

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

Statement of Comprehensive Income

For the year ended 31 March 2016

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

Statement of Changes in Equity

For the year ended 31 March 2016

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

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

Statement of Cash Flows

For the year ended 31 March 2016

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

Notes to the Audited Financial Statements

For the year ended 31 March 2016

1. General information

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

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

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

2. Accounting policies

Basis of preparation

The financial statements for the year ended 31 March 2016 have been prepared in accordance with EU Adopted IFRS and with the provisions of the Companies Law.

The principal accounting policies adopted are set out below.

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

There were no new standards interpretations or amendments applied during the year ended 31 March 2016.

New and revised standards

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

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

The Board has not yet assessed the standards issued but not yet adopted but does not expect them to have a material effect on the financial statements as the investments would continue to be carried at fair value through profit or loss.

The Company has not adopted early any standards, amendments or interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning after 1 April 2016 or later periods.

Foreign currencies

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

Financial instruments

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

Financial assets

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

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

a) Loans and receivables

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

b) Investments at fair value through profit or loss

i. Classification

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

ii. Recognition

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

iii. Measurement

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

Investments treated as "investments at fair value through profit or loss" are subsequently measured at fair value. Fair value is defined as the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.

iv. Fair value estimation

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

Financial liabilities

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

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

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

Capital

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

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds and include those incurred in connection with the placing and admission which include fees payable under the placing agreement, legal costs and any other applicable expenses.

Interest Income

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

Income distributions

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

Other expenses

Other expenses are accounted for on an accruals basis.

Going concern

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

Critical accounting judgment and estimation uncertainty

Use of estimates and judgements

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

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

Taxation

The Company and Cells are exempt from taxation in Guernsey.

3. Segmental reporting

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

4. Investment in limited partnerships

Total Investment:

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

The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from the Funds. The Company is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the Company any amount of the outstanding loan. During the year £35.6 million was repaid to the Company by Fund I (2015: £0.5 million) and £nil by Fund II (2015: £6.1 million).

Income distributions receivable from the Funds in the year amounted to £nil (2015: £3.0 million) which have been allocated as income based on discretionary allocation powers of the respective General Partners of the Funds as set out in the respective limited partnership agreements. At 31 March 2016 an aggregate £1.6 million (2015: £3.8 million) remained outstanding.

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

5. Debtors and prepayments

Full details of the 2009 Cell's and 2012 Cell's debtors and prepayments are shown on pages below.

6. Fair value

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

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

The fair value hierarchy has the following levels:

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

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

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

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

The Company's investments in Fund I and Fund II have been classified within Level 3 as they have unobservable inputs and are not traded. Amounts classified under Level 3 for the year are £241.0 million for Fund I (2015: £262.0 million) and £244.0 million for Fund II (2015: £335.8 million).

Transfers during the year

There have been no transfers between levels.

Valuation techniques

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

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

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

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

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

7. Share capital

Core Shares

Issued and fully paid:

Year ended 31 March 2016

Year ended 31 March 2015

Cell Shares

Year ended 31 March 2016

Year ended 31 March 2015

During the year, the 2009 Cell made its third capital distribution of £35.2 million (2015: £nil) to Shareholders of the 2009 Cell as at the ex-date of 21 January 2016. The distribution consisted of a payment of 17.0 pence per ordinary share payable in cash from the 2009 Cell's share capital account and has been treated as a reduction of share capital. The distribution was paid on 29 January 2016.

The three capital distributions (reductions of share capital) to date for the 2009 Cell total £61.7 million, being 29.4 per cent. of funds raised.

No distributions were paid during the year ended 31 March 2016 for the 2012 Cell (2015: £6.1 million).

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

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

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

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

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

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

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

8. Related party transactions

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

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

Directors' fees and expenses for the year to 31 March 2016 amounted to £211,000 (2015: £209,000), of which £52,000 (2015: £52,000) was outstanding at the year end.

The Directors received a distribution of capital from the 2009 Cell of 17.0 pence per ordinary share (2015: 2009 Cell - nil pence, 2012 Cell - 1.75 pence). The Directors' shareholdings can be seen on pages above in the Report of the Directors.

9. Financial risk management

Financial risk management objectives

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

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

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

Categories of financial instruments

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

Capital risk management

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

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

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

Market risk

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

(a) Price risk

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

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

As at 31 March 2016, £19.4 million (2015: £58.8 million) or 3.9 per cent. (2014: 9.4 per cent.) of the Funds' financial assets were cash balances held on deposit.

(b) Foreign currency risk

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

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

(c) Interest rate risk

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

Interest income of £7,000 (2015: £6,000) arose from cash and cash equivalents and has been calculated using the effective interest rate method. There are no other gains or losses on loans and receivables other than the interest income.

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

Liquidity risk

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

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

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

During the year ended 31 March 2016, the Company had no borrowings other than creditors and accruals (2015: £nil). The Company had sufficient cash and cash equivalents to pay these as they fell due.

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

Credit risk

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

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

The carrying value of the investment in Fund I as at 31 March 2016 was £241.0 million (2015: £262.0 million).

The carrying value of the investment in Fund II as at 31 March 2016 was £244.0 million (2015: £335.8 million).

Financial assets mainly consist of cash and cash equivalents and investments at fair value through profit or loss. The Company's risk on liquid funds is minimised because the Funds have a strict cash management policy. The Company mitigates its credit risk exposure on investments at fair value through profit or loss by the exercise of due diligence on the counterparties of Funds and their General Partners. The investment risk is managed by an investment strategy that diversifies the investments in terms of financing stage, industry or geography. The aggregate amount deposited or invested with any single such bank or other counterparty (including their associates) or in government and public securities of any single issue, shall not exceed £35.0 million for Fund I and £50.0 million for Fund II.

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

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

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

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

10. Earnings per share and Net Asset Value per share

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

11. Subsequent events

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

Better Capital 2009 Cell

Summary of Investment policy

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

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

General Partner's Report

On balance, this has been a good year for Fund I - its portfolio of businesses continues to stabilise and generate growth, with one asset moving towards realisation. 

Santia, our health and safety consultancy business was sold in December 2015. The investment generated a 2.8 times return with an IRR of 25.8 per cent. This year also saw the realisation of Fairline, a manufacturer and distributor of luxury boats to Wessex Boats for a small deferred consideration. This was beyond disappointing as considerable effort was put into reviving the business and was beginning to show some improving signs. The new owners failed to adequately fund Fairline which resulted in the business moving into administration. Fund I in its capacity as senior creditor has received net proceeds of £3.5 million to date. This is in excess of the £2.0 million deferred consideration but represented only a fragment of the total invested - a very unsatisfactory outcome. 

Gardner, the most valuable asset in Fund I continues to perform to expectation. Advisers to assist with its sale have been appointed. The process is gaining good momentum. I remain confident on the outcome of this investment.

The remaining assets in Fund I, Omnico, m-hance and SPOT, have scope for further value increase. 

Portfolio update

Nine months into its FY16 financial year ending 31 August, Gardner is trading marginally behind budget on sales but trading ahead of its EBITDA and cash budget. Gardner remains on track to achieve or exceed the £23.1 million EBITDA budget set for the full year and cash generation is expected to remain strong. Since the Interim Report, the business returned £2.0 million of cash to Fund I, with a further £2.0 million repaid post year-end (total in the year: £8.0 million). Total repayment (capital and interest payments) now stands at £21.2 million representing 52.5 per cent. of the total investment. A further repayment of £1.3 million is expected in July 2016. 

From an operational perspective, Gardner continues to grow in strength and is consistently meeting its customers' delivery and quality standards. Business processes, including back office functions such as finance and health and safety are now uniform across all geographical locations which facilitates monitoring and real-time decision making. The business has also launched Project Fitness which is making further inroads into the cost base to create a leaner organisation. Gardner continues to be successful in winning new work, both within and outside of Europe and has recently recruited a Head of Sales for America and Asia.

Gardner's valuation has been written up by £26.0 million, reflecting a £28.0 million improvement in the underlying value, offset by a £2.0 million repayment of capital and interest in the interim period. The valuation is based on an earnings approach, with maintainable EBITDA set at £27.5 million, derived from the average of current forecast and next year's projected profits, and benchmarked to transactions that operate in a similar space to Gardner (range of EV/EBITDA: 8.1 times to 12.7 times). At 31 March, the business had net debt of £31.3 million. 

Five months into its FY16 financial year ending 31 December, m-hance is trailing marginally behind its sales budget, but trading on its EBITDA budget. The main challenge for m-hance remains sales growth in its legacy businesses. In early 2016, the business through a new division, HighCloud Solutions, announced a strategic collaboration with NetSuite Inc. to deliver its ERP solutions to small and medium sized enterprises in the UK. NetSuite is one of the fastest growing providers of financial management systems globally due to it being cloud-based and mobile-enabled. HighCloud is delighted to have signed its first NetSuite contract in Q2 2016. The pipeline is developing in line with expectations. Two new senior sales executives have been recruited to grow m-hance's market share.

The valuation for m-hance remains unchanged at £12.5 million. This has been derived using an earnings approach (range of EV/EBITDA: 7.6 times to 11.8 times), supported by a revenue approach, on the business's 2016 budgeted profits and revenue. At 31 March, the business had net debt of £0.7 million. 

Omnico reported year-to-date sales and EBITDA loss for its FY16 financial year ending 30 September that were broadly in line with forecast. In the summer of 2015, the decision to close down its loss-making Hardware division was reached whilst still maintaining third party Hardware supply to support the Software led solutions business. The restructuring was completed in Q1 2016 and has delivered better than anticipated cost savings. At the time of writing, Omnico has delivered four consecutive months of profitability, something that has never been achieved by Omnico before and the business is forecasting monthly profits for the remainder of the year. 

The strategy to position Omnico as a Software products and services business is progressing well. The key focus now is to drive sales growth and to leverage its dominance in the theme parks and hospitality sectors. New notable wins since my last report include a global chain of boutique hotels and Dubai Parks & Resorts (total contract value of c. £4.8 million). On-going negotiations are taking place on existing contracts to support Pay at Table and Europay MasterCard Visa (EMV) chip and pin products. Steps are being taken to significantly improve the quality of project delivery. Morale amongst the senior team is high and management is working well. 

Omnico's valuation is unchanged at £25.0 million, supported using an earnings approach to valuation. Maintainable EBITDA is derived from the average of historic, current forecast and next year's projected profits, benchmarked against Oracle's acquisition of MICROS Systems in September 2014 (17.5 times historic EBITDA). At 31 March, the business had net debt of £0.2 million. 

An update on SPOT, a portfolio company 9.9 per cent. owned by Fund I, is provided in the Fund II General Partner's Report below.

Investment activities

During the year, Gardner repaid £8.0 million in a combination of capital and interest payments, with an additional £2.0 million repaid post period end. Total capital and interest repaid to date is £21.2 million from a total capital outlay of £40.5 million (52.5 per cent.).

Santia was sold on 2 December 2015 to Alcumus Holdings Limited, a company backed by Inflexion Private Equity for an enterprise value of £47.0 million. Net proceeds received to date is £38.7 million, with a further £0.3 million recognised as a fund receivable. 

In August 2015, m-hance repaid £0.2 million to Fund I from surplus cash resources. 

Omnico received £6.6 million of new investment during the year, partly to fund the large-scale restructuring of its loss-making Hardware division and the balance, on working capital. Total investment stands at £40.8 million.

SPOT completed a refinancing exercise in July 2015 which enabled the group to return a total of £10.0 million across the Better Capital entities, of which £1.1 million was repaid to Fund I. A further £2.7 million is payable in June 2016, of which £0.3 million will be due to Fund I.

Fairline also received £7.0 million of new investment to fund on-going losses, the development of the new 53-foot model and the transition towards a demand-led manufacturing model during the year. Demand, however, evaporated. The business was realised to Wessex Bristol, owners of Fletcher Boats in September 2015. In December 2015, Fairline entered into administration as the new owners failed to adequately fund the business. As a secured creditor in Fairline, Fund I has to date received net receipts of £3.5 million. A further £0.2 million has been recognised as a fund asset.

Valuation

The overall portfolio carrying value fell by £7.8 million between 1 April 2015 and 31 March 2016, mainly driven by growth in Gardner's value (£54.9 million), offset by repayments to Fund I in the year (£3.9 million). The sale of Santia in December 2015 also reduced portfolio carrying value by £40.0 million; however, the overall 2009 Cell NAV was only marginally lower as net proceeds of £38.7 million were received. The other main contributor to the reduction of portfolio carrying value was the realisation of Fairline, £13.5 million. 

Distributions

Fund I repaid £35.3 million to the 2009 Cell from the net proceeds of the Santia sale in January 2016 which facilitated a 17.00 pence per share capital distribution to all 2009 Cell shareholders.

Having assessed Fund I's cash resources and requirements for the foreseeable future, the Fund I GP authorised a £5.2 million repayment to the 2009 Cell, payable on 8 July 2016. This equates to a distribution of 2.5 pence per share.

Closing remarks

It is hoped that Gardner will be sold in the current financial year. Omnico, particularly has considerable scope for improvement and we hope will be a significant contributor to taking the 2009 Cell to a respectable return. However, the realisation of companies beyond Gardner has a planning horizon of a couple of years.

Jon Moulton

Chairman

BECAP GP Limited

23 June 2016

Investment Report of Fund I

Gardner

Business description

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

Fund I Investment details

\* This excludes £4.1 million of interest repaid to Fund I during the year

m-hance

Business description

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

Fund I Investment details

Omnico Group

Business description

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

Fund I Investment details

SPOT

Business description

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

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

Fund I Investment details

Portfolio summary and reconciliation

Cash Management

As at 31 March 2016, Fund I had placed a total of £4.4 million (2015: £4.0 million) of cash on instant access deposit with one bank. Fund I has in place a strict cash management policy that limits counterparty risks whilst simultaneously seeking to maximise returns.

* During the prior year the rating of the Royal Bank of Scotland International Limited had dropped below single A rating, as required by the Fund I investment policy. Consequently the Fund I GP Company instructed the Administrator to move funds held at Royal Bank of Scotland International Limited to Barclays Bank Plc which has a rating of A.

INDEPENDENT AUDITOR'S REPORT TO THE DIRECTORS OF

BETTER CAPITAL PCC LIMITED IN REPECT OF THE 2009 CELL

We have audited the supplementary financial statements of the 2009 Cell (the "Cell"), a cell of Better Capital PCC Limited (the "Company") for the year ended 31 March 2016 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 11. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the directors of the Company, as a body, in accordance with our engagement letter dated 6 June 2016. Our audit work is undertaken so that we might state to the directors of the Company those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the directors of the Company as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditor  

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

Our responsibility is to audit and express an opinion on the financial statements in accordance with International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical 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 Cell's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors of the Company; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Cell's affairs as at 31 March 2016 and of its profit for the year then ended; ; and

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

BDO Limited

Chartered Accountants

Place du Pré

Rue du Pré

St Peter Port

Guernsey

23 June 2016

Statement of Financial Position

As at 31 March 2016

The audited financial statements of the 2009 Cell were approved and authorised for issue by the Board of Directors on 23 June 2016 and signed on its behalf by:

Richard Crowder Richard Battey

Chairman Director

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

Statement of Comprehensive Income

For the year ended 31 March 2016

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

Statement of Changes in Equity

For the year ended 31 March 2016