BCAP.L Regulatory News (BCAP)

15 February 2013

Better Capital PCC Limited

Interim Management Statement

Better Capital PCC Limited (the "Company"), including its two cells, the 2009 Cell and 2012 Cell, today issues its Interim Management Statement in accordance with FSA Disclosure and Transparency Rule 4.3 and relates to the period from 1 October 2012 to 13 February 2013.

1 Capital distribution

The Board is pleased to be able to announce its first distribution of capital of £14.1 million to all shareholders of the 2009 Cell. The distribution will consist of a payment of 6.8 pence per ordinary share payable in cash from the 2009 Cell's share capital account and will be treated as a reduction of capital.

The details of the distribution are as follows:

·; Ex-date - 20 February 2013

·; Record date - 22 February 2013

·; Paid date - 8 March 2013

2 Joint venture

On 9 January 2013, BECAP12 Fund LP ("Fund II") entered into a joint venture with the National Pensions Reserve Fund of Ireland ("NPRF"), Ireland's €14 billion social welfare and public service pension fund. Under the terms of the joint venture, the NPRF will commit up to €50.0 million towards a portfolio of distressed businesses in Ireland with Fund II investing alongside but committing not less than 51% of the investment into each transaction. The joint venture will be managed by BECAP12 GP LP ("Fund II GP").

Better Capital LLP, the consultant to Fund II GP (the "Consultant"), has established a Dublin office from which to source deal flow. Marketing activities are increasing in intensity with representation from both the London and Dublin teams.

3 BECAP Fund LP ("Fund I")

Although market conditions remain challenging for the majority of the Fund I portfolio companies, Better Capital's focus on improving operating margins, reducing costs and improving working capital mean that most portfolio businesses are making solid improvements in profitability and cash generation. In the quarter to 31 December 2012, the aggregate EBITDA shown by management accounts in Fund I's portfolio companies more than doubled on a like-for-like basis. A number of portfolio companies are on track to return cash to Fund I in 2013.

Gardner continues to benefit from strong market demand in the civil aerospace sector. The UK site rationalisation programme is now completed and good progress has been achieved in integrating the acquisitions in France and India. A more proactive stance towards managing the business's asset base now means that Gardner is well placed to return capital to Fund I.

Reader's Digest entered into a Creditors Voluntary Arrangement ("CVA") process on 4 January 2013 which was approved at a creditor meeting on 1 February 2013. This process has resulted in the business exiting the declining and unprofitable direct marketing sector whilst retaining the magazine business.

Calyx Managed Services is generating steady profitability and cash. The key focus for the business now is revenue growth and leading the initiative is a new senior management team who have spent recent months reshaping the business to become more sales-driven.

m-hance, also part of the Calyx Group, continues to trade to plan with encouraging uptake on its bespoke Microsoft Dynamics AX software. The business remains on track to return capital to Fund I during the course of the year.

Santia underwent a headcount reduction programme in November 2012 as a result of weakness in the training and occupational health markets. The challenge for Santia is to create further momentum in its growth areas, organically or through acquisitions, whilst extracting value from the slow growth areas through a more efficient cost base.

Omnico Group, the business formed from the merger of DigiPoS and Clarity, is performing to plan under the new senior management team. The software-led sales strategy is gaining traction, particularly in the UK and US markets, with encouraging customer feedback on the new product developments. The centralising of purchasing has led to substantial improvements in working capital and quality control.

Fairline has made significant improvements in production and labour efficiency and even though demand for luxury yachts continues to be subdued, this has enabled the business to return to profitability. The re-configuration of Fairline's Corby plant will facilitate the strategy of moving production to a more demand-driven proposition. New products have also been well received in the market.

Spicers continues to perform well with margin and working capital improvements, partly driven by a deliberate contraction in revenue, following a strategic withdrawal from low margin products. This has enabled £10.0 million to be returned to Fund I in the period under review which is a significant achievement in a market that is undergoing rapid change. The head office relocation has completed with the development of the central distribution centre progressing to plan. Further cash returns to Fund I are anticipated during 2013.

3.1 Recent Fund I transactions

Details of transactions by Fund I in the period from 1 October 2012 to 13 February 2013 are listed below.

3.1.1. 19 November 2012 - ATH is an operator of surface coal mines in Scotland. Fund I invested £15.0 million in a special purpose vehicle, firstly to acquire certain bank facilities and related rights of ATH Resources Plc and its subsidiary, Aardvark TMC Limited (together "ATH"), and secondly to invest in the business following a change of control. Following the debt purchase, representatives, advisers and consultants of Fund I worked with key stakeholders in an attempt to secure the acquisition of the business. This could not be achieved in the initial round of discussions with these stakeholders. As part of the on-going process, on 18 December 2012, Fund I agreed a two month standstill period with Aardvark TMC Limited to allow the ATH management to progress efforts to restructure the balance sheets of the existing group without a change of control.

3.1.2. 12 December 2012 - Fund I received a loan repayment of £10.0 million from Spicers. Total remaining commitment and investment post loan repayment in the business is now £5.0 million from an original commitment and investment of £40.0 million in December 2011. As a consequence of the repayment, this has had a corresponding opposite adjustment to the fair value of the business, valuing Spicers at £42.5 million at 31 December 2012 from £52.5 million at 30 September 2012.

3.1.3 3 January 2013 - Fund I committed and invested a further £5.4 million into Macsco 30 Limited, the acquisition vehicle of Fairline Boats Acquisition Limited to fund the business's working capital requirements, re-configuration of its Corby production facility and the introduction of the new 48 foot range. The additional investment was made alongside West Register (Investments) Limited, a wholly owned subsidiary of Royal Bank of Scotland PLC, who invested £4.6 million into Macsco 30 Limited.

3.1.4 4 February 2013 - BECAP Fairline Boats Limited, a Fund I wholly owned special purpose vehicle incorporated to effect the acquisition of Fairline, has returned £0.5m of surplus cash. The total amount committed and invested in Fairline by Fund I now stands at £21.5 million.

4 BECAP12 Fund LP ("Fund II")

On 13 February 2013, Fund II had cash balances of £99.4 million, placed with maturity dates ranging from instant access to one month through a diversified cash management policy.

Everest has experienced a period of significant restructuring under Fund II's ownership. New management has been brought in to overhaul all aspects of the business, including the sales organisation and incentive structures, marketing, production, distribution channels, quality control and customer satisfaction. The breakeven point of the business has been significantly reduced and the lead conversion rate is improving steadily. Despite difficult market conditions, good progress has been achieved to date and Everest is now being repositioned to achieve sustainable profitability.

Jaeger has seen sales decline year-on-year but the business has migrated away from almost constant discounting to a more premium trading stance. This has resulted in improved margins but the business will sustain a small loss in the current financial year albeit an improvement on prior period. New products for the Spring/Summer 2013 season were recently released to good reviews. The on-line and Regent Street store transformation projects are running broadly to plan, and international expansion is gaining traction. As with all retail businesses, the improvement in product appeal and brand awareness will take time to build.

4.1 Recent Fund II transaction

Details of the transaction by Fund II in the period from 1 October 2012 to 13 February 2013 is shown below.

 4.1.1. 24 December 2012 - Fund II committed and invested a further £5.0 million into Hillary Bidco Limited, the holding company of Everest, to fund continuing business improvements and restructuring requirements. The total amount committed and invested into Everest now stands at £30.0 million.

5 Financial

In accordance with the guidance set out in the Prospectus dated 19 December 2011, fair market valuations of Fund I and Fund II's investments are carried out on a six-monthly basis as at 31 March and 30 September. Consequently, the net asset value has not been subject to a revaluation of the underlying carrying value of investments from those reported in the Interim Report. Follow-on investment made into existing investee companies during the period 1 October 2012 to 31 December 2012 has been added at cost to the carrying values brought forward from the last valuation as at 30 September 2012.

At market close on 13 February 2013, Better Capital's shares, BCAP.L and BC12.L, had a mid-market price on the London Stock Exchange of 151.00 pence and 109.62 pence respectively.

5.1 2009 Cell Portfolio Summary & Reconciliation as at 31 December 2012

5.2 2012 Cell Portfolio Summary & Reconciliation as at 31 December 2012

6 Outlook

Deal flow is tracking at a rate consistent with previous periods and with a marked increase in opportunities originating from Continental Europe. The recent announcement by Better Capital PCC Limited 2012 Cell, proposing a change to the investment restriction will facilitate increased flexibility in Fund II to deploy capital into such opportunities. The joint venture with the NPRF in Ireland and the new Dublin office of the Consultant are expected to result in strong Irish deal flow. A number of high profile retail opportunities seen in the past have resurfaced, underlining the continued difficulties on the high street and perhaps signalling the unwillingness of lending institutions and other key stakeholders in prolonging the lifeline previously offered. Very few of these opportunities were regarded as suitable for investment, with the balance receiving dispensation from their lenders. The Board has been advised that deal flow is expected to remain sufficient to deploy Fund II into attractive investment opportunities on planned timescales.

On the whole, the Fund I portfolio continues to improve on profitability and cash generation. Commenting on the Interim Management Statement, Richard Crowder, Chairman of Better Capital said, "The General Partner of Fund I has advised that despite weak economic conditions, the Fund I portfolio companies are broadly improving in line with plan. Cash extraction from certain of the portfolio companies is now imminent.

"The General Partner of Fund II has advised the Board that Everest and Jaeger are progressing satisfactorily to their respective turnaround programmes. In particular, Everest has achieved significant milestones and is now well-positioned for growth."

Referring to the joint venture between Fund II and the NPRF, Richard Crowder commented "This is an important development in the implementation of the Fund II investment strategy, which has a primary focus on investments in businesses with significant activities within the United Kingdom or Ireland. It enables Better Capital to partner with a significant sovereign entity to enhance Fund II's access to a market that offers considerable potential for turnaround investment opportunities."

7 General information

Better Capital PCC Limited (the "Company") is a limited liability, Closed-ended Investment Company, which was incorporated on 24 November 2009 in Guernsey and which, by special resolution of its members, converted to a protected cell company on 12 January 2012 and on that same date changed its name from Better Capital Limited to Better Capital PCC Limited. It has an unlimited life and is registered with the Guernsey Financial Services Company as a Registered Closed-ended Collective Investment Scheme. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

Upon conversion, the Company established the 2009 Cell to which it attributed its investment in Fund I which has a portfolio of investments in distressed businesses. It also established a new protected cell, the 2012 Cell, which issued new shares for investment through the 2012 Cell into Fund II which will invest in a portfolio of distressed businesses.

The 2009 and 2012 Cells have the investment objective of generating attractive total returns from investing (through Fund I and Fund II respectively) 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; such returns being expected to be largely derived from capital growth.

The 2009 Cell has committed an aggregate of £203.8 million in Fund I and the 2012 Cell has committed an aggregate of £165.5 million in Fund II.

For further information, please contact:

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

Mark Huntley (Director)

Laurence McNairn (Administrator and Company Secretary)

Powerscourt +44 (0)20 7250 1446

Carmen Murray

Jon Earl

Numis Securities Limited +44 (0)20 7260 1000

Nathan Brown

Oliver Hardy

This statement is a general description of the financial position and performance of the Company for the period from 1 October 2012 to 13 February 2013. It does not contain any profit forecast or forward looking information. Future performance and share price are likely to be affected by a number of factors, including (but not limited to) general economic and market conditions and specific factors affecting the financial performance or prospects of individual investments within the Company's portfolios.