BCAP.L Regulatory News (BCAP)

11 August 2010

Better Capital Limited

Interim Management Statement

This statement is made in accordance with the UK Listing Authority's Disclosure Rules and Transparency Rules and relates to the period from 24 November 2009 to 10 August 2010.

Overview

Better Capital Limited is a limited liability, closed-ended investment company, which has been incorporated in Guernsey with an unlimited life and registered with the Guernsey Financial Services Commission ("GFSC") as a Registered Closed-ended Collective Investment Scheme.

Better Capital Limited has the investment objective of generating attractive total returns from investing (through Better Capital Fund) in a portfolio of distressed businesses with significant activities within the United Kingdom or Ireland , such returns being expected to be largely from capital growth.

Better Capital Limited raised total net proceeds of £139m in its initial placing on 17 December 2009. Better Capital Limited is a feeder fund and, after retaining £1m for working capital purposes, invested £138m of the proceeds directly in Better Capital Fund ("BECAP").

On 25 June 2010, Better Capital Limited announced that a total of 64,380,952 new shares were issued under a Firm Placing and Placing and Open Offer, raising gross proceeds of £67.6m. On completion of this process a total of 206,780,952 ordinary shares were in issue

On 2 July 2010, following receipt of the above-mentioned proceeds and providing for direct expenses, Better Capital Limited notified BECAP of its final commitment of £203.8m. That same day a total of £65.8m was transferred to BECAP representing the increase in commitment.

On 8 July Better Capital Limited shares were admitted to the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange. Following cancellation of trading in the ordinary shares of the Company on AIM, dealings in the ordinary shares of the Company commenced on the London Stock Exchange main market at 8.00am on this date.

To date BECAP has invested in two businesses, one of which made a subsequent bolt-on acquisition. The deals in summary:

Financial

At 30 June 2010, the unaudited net asset value of Better Capital Limited was £203.7 million, representing a net asset value per share of 98.5 pence.

At 10 August 2010, BECAP had cash balances of £170.5m.

Investments

Gardner Group Limited

On 3 February 2010, BECAP acquired the entire issued share capital and debt liabilities of Gardner Group Limited and its associated entities ("Gardner").

Gardner is a supplier to the aerospace industry in Europe and provides a range of components to aero structure and engine manufacturers. Headquartered in Ilkeston, Derbyshire, the group has six UK sites and one in Poland.

BECAP released £15m to fund the transaction and working capital. Other than £2m of finance leases there is no external leverage in this Group.

Gardner is already trading profitably and BECAP is pleased with its progress to date.

On 10 May 2010, BECAP advanced funds to allow Gardner to make a strategic, bolt-on acquisition.

The trade and assets of RD Precision Limited and the shares of RD Polska Sp.Zo.o (together "RDP") were acquired by Gardner for cash consideration of £1m. BECAP committed £4m to fund the acquisition, its restructuring and working capital requirement.

RDP is a manufacturer and supplier of parts to the aerospace industry. The acquisition included businesses based in the United Kingdom and Poland.

RDP is performing profitably and in line with Gardner management's expectations.

Vivat Direct Limited (Reader's Digest)

On 9 April 2010, BECAP completed its second acquisition, that of the trade and assets of The Reader's Digest Association Limited (in administration) and its main subsidiary (together "Reader's Digest UK") by a special purpose vehicle, Vivat Direct Limited.

Reader's Digest UK is a direct marketing business selling books, music CDs, DVDs and other products to its customer base of around 600,000 individuals. It also publishes a monthly magazine which is sent to nearly half a million subscribers and regularly operates prize draws.

BECAP released a total of £13m to finance the transaction and fund future growth. There is no external leverage in this investment.

Whilst still currently loss-making, Vivat's management is pleased with the progress of the operational restructuring and are progressing with the restoration of trading volumes.

Outlook

Better Capital Limited is encouraged that it, the General Partner to BECAP and the Consultant continue to be in receipt of a large number of potential investment opportunities, some of which are at an advanced level of consideration.

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