OCI Annual Report 2010 | Quarterlytics

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FY2010 Annual Report · OCI

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OAKLEY CAPITAL INVESTMENTS LIMITED
ANNUAL REPORT AND ACCOUNTS 2010

CONTENTS

Chairman’s Statement

08 Manager’s Report

Directors’ Report

Review of Investments

Host Europe

Daisy Group Plc

Verivox

Time Out

BDO Wealth Management

Headland Media

32 Monument Securities

Independent Auditor’s Report

Financial Statements

Statements of Assets and Liabilities

Schedules of Investments

Statements of Operations

Statements of Changes in Net Assets

Statements of Cash Flows

Notes to the Financial Statements

Directors and Advisers

Notice of Annual General Meeting

CONTENTS

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Chairman’s statement

NAV rose from £1.41 to £1.68,

an improvement of 19%

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CHAIRMAN’S STATEMENT

I am pleased to report that 2010 was another strong
year for the Company. The Oakley Capital Private
Equity L.P.’s (“Limited Partnership”) portfolio
businesses continued to perform well and the Limited
Partnership made its first full realisation with the sale
of Host Europe Corporation Limited (“Host Europe”).
The result of these developments was the lifting of the
Company’s net asset value per share from £1.41 at
31 December 2009 to £1.68 at 31 December 2010,
an improvement of 19%. Following the disposal of
Host Europe, on 10 November 2010 the Limited
Partnership distributed £72.7 million of proceeds to
the Company representing 45% of total commitments
and 140% of the funded commitment at the time of
disposal. In addition, the mezzanine loan of
£16.9 million plus interest of £3.0 million, due to the
Company by Host Europe was repaid in full. As a
consequence of the disposal, the Company received
£92.6 million in cash generating a money multiple
return on its total investment in Host Europe of 1.9x.

Also in November 2010, the Limited Partnership
issued a capital call of €13.1 million representing 7%
of the Company’s total commitments of €187 million.
The total funded commitment to 31 December 2010
was €77.6 million representing 41.5% of the
Company’s total commitments.

The Company’s investment in the Limited Partnership
at 31 December 2010 has been reduced following the
sale of Host Europe and the subsequent cash
distribution. The investment value at the end of 2009
was £104.4 million and this compares to £74.0 million
for 2010. Adding back the distribution received, of
£72.7 million, to the 31 December 2010 net asset
value (“NAV”) produces an adjusted NAV of
£146.7 million, an increase of 41% in the year.

The Limited Partnership’s focus on driving operational
improvements reported in 2009 has continued in
2010. This has been reflected in increasing EBITDA in
its portfolio companies resulting in an attractive return
derived from the sale of Host Europe and an increase
in net asset values of the remaining portfolio
investments. As well as the strong performance in the
underlying investments, the Limited Partnership
continues to employ low levels of leverage in its
businesses which has meant that the Limited
Partnership has been well positioned in the face of
tight credit markets.

The Limited Partnership made two direct investments
during 2010, both taking place in the last quarter.
In the first, the Limited Partnership acquired 84.4%
of Fitzwilliam Holdings Limited (“BDO Wealth
Management”), the UK-wide independent provider
of investment advice and solutions to private
individuals and corporates, from BDO LLP, a leading

firm of accountants in the UK. The transaction valued
BDO Wealth Management at £14.2 million with the
Limited Partnership providing equity of £6.95 million
and the Company providing £6.0 million in mezzanine
loans. The second investment was the acquisition of
50% of Time Out Group Limited (“Time Out”), the
international and iconic multi channel publisher.
The transaction valued Time Out at £13.4 million, with
the Limited Partnership providing equity of £4.7 million
and the Company providing £5.0 million in senior loan
notes and £5.7 million in mezzanine loans.

In early 2010 the Limited Partnership’s Investment
Adviser reported a significant improvement in both the
quantity and quality of investment opportunities it was
investigating. This led to the acquisitions made in the
fourth quarter of 2010 and a further investment
completed in the post balance sheet period with the
acquisition of Emesa B.V., a leading e-commerce
company active in the Dutch online leisure market.

PERFORMANCE

Net asset value in the year, increased by £34.8 million
to £214.9 million as at 31 December 2010. Of this
increase, £74.4 million was in cash as a result of the
proceeds of £92.6 million received following the sale
of Host Europe. At 31 December 2010, the Company
had cash and cash equivalents of £120.9 million.

The cash distribution gave rise to a corresponding
decrease in the value of the Company’s investment
in the Limited Partnership, which fell by £30.4 million,
mitigated by an unrealised gain on the revaluation of
Verivox Holdings Limited (“Verivox”) and a capital call.

Of the total net asset value of £214.9 million,
£74.0 million represents investments made by the
Company into the Limited Partnership and
£19.7 million made directly to the Limited
Partnership’s portfolio companies. The Limited
Partnership had total commitments of €288 million
at 31 December 2010 of which the Company’s
commitment was €187 million or 65% of the total
amount raised; 41.5% of commitments had been
drawn down.

Whilst the Company does not generally invest directly
in the Limited Partnership’s portfolio companies, it is
possible to “see through” the Limited Partnership to
understand the impact of the performance of those
portfolio companies on the investment value attributed
to the Limited Partnership in the Company.

The total value of the portfolio company investments
have seen an increase in their fair value both from
inception and within the year, approximately 65% of
which gets reflected in the Company (through its
investment in the Limited Partnership). Fair values as
at 31 December 2010 have been established in

CHAIRMAN’S
STATEMENT

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CHAIRMAN’S
STATEMENT

continued

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accordance with The International Private Equity
and Venture Capital Valuation Guidelines.

The Limited Partnership’s previous largest portfolio
company, Host Europe, was sold on 28 October 2010
to Montagu Private Equity after a holding period of
31 months. Total consideration for the sale was
£222.0 million. The consideration was used to repay
third party debt and to meet the costs of the
transaction and to repay debt due to the Company of
£19.9 million, leaving net proceeds of £111.9 million.
Of this, £72.7 million was distributed to the Company,
excluding the repayment debt. This represents a
money multiple on the investment through the Limited
Partnership of 2.3x.

Prior to the sale of Host Europe, the shares it held in
Daisy Group plc (“Daisy”) were extracted and continue
to be held by the Limited Partnership. These 36.25
million shares, representing 14% of Daisy, were
acquired as part of the consideration for the disposal
of Vialtus in July 2009. Including the value of Daisy
retained, the money multiple in the Limited Partnership
on the Host Europe disposal is 3x.

A 51% interest in Verivox was acquired by the Limited
Partnership on 4 December 2009. There has been an
impressive unrealised gain attributable to the
Company from the investment in Verivox since
31 December 2009 of £24.4 million which has arisen
from a combination of acquiring the business on an
attractive multiple and a strong trading performance
by Verivox in 2010.

In addition to its investments in the Limited
Partnership, the Company has provided debt finance
directly to a number of the Limited Partnership’s
portfolio companies. These typically take the form of
mezzanine loans with fixed interest rates in the range
15% to 15.25%. The Company occasionally provides
secured senior debt to the portfolio companies at
interest rates around 8.5%. The investments in loan
instruments reduced by £8.7 million from £28.5 million
as at 31 December 2009 to £19.7 million due to the
Host Europe mezzanine loan of £16.9 million and a
loan of £4.4 million to Verivox both being repaid in full.
Three new loans were issued in 2010 with a total
value of £16.7 million.

The increase in net asset value is reflected in an
improvement in net asset value per share, of 27 pence
over the 12 month period to £1.68.

The Company held cash and cash equivalents of
£120.9 million at 31 December 2010. On 28 October
2010, the Company made a capital commitment in
the amount of £86.0 million in a successor fund to the
Limited Partnership. To date there have been no
capital calls in respect of this commitment.

INVESTMENTS

The Limited Partnership undertook two direct
acquisitions in the year; acquiring 50% of Time Out
Group Limited (“Time Out”) and 84.4% in Fitzwilliam
Holdings Limited (“BDO Wealth Management”), both
transactions taking place in November. In addition one
of the Limited Partnership’s portfolio companies,
Headland Media Limited (“Headland Media”) invested
in Newslink Services Limited (“Newslink”) in April
2010. In the post balance sheet period the Limited
Partnership acquired 68% of Emesa BV (“Emesa”),
a Dutch e-commerce business.

Time Out
On 25 November 2010, it was announced that the
Limited Partnership had acquired 50% of Time Out,
the international multi channel publisher at an
enterprise value of £13.4 million.

Time Out was founded in 1968 and publishes in over
30 countries around the world. With its incredible
brand heritage, Time Out is uniquely positioned to
provide services across traditional print, digital
channels and live events. The Time Out brand
currently delivers entertainment, cultural guidance and
information to people through a distribution network
which incorporates city magazines, a comprehensive
online presence, mobile, travel guides, events and
partnerships. Time Out has a worldwide audience of
over 17.0 million per annum across all these channels
and continues to grow its digital presence, with global
unique users up 38% year on year to 7.5 million, of
which 2.0 million are in London.

BDO Wealth Management
On 4 November 2010, the Limited Partnership
announced that it had acquired 84.4% of BDO Wealth
Management, the UK-wide independent provider of
investment advice and solutions to private individuals
and corporates, from BDO LLP. The transaction
values BDO Wealth Management at an enterprise
value of £14.2 million.

With offices throughout the UK, BDO Wealth
Management has over £2 billion of funds under
management and advice and employs approximately
200 people. BDO Wealth Management has two main
divisions; corporate pensions and benefits, and
private clients. David Pitman, who was the former
CEO of Close Wealth Management, has taken on the
CEO role at BDO Wealth Management along with a
new CFO and COO.

Headland Media
On 30 April 2010 Headland Media acquired Newslink.
Newslink primarily provides news digest services to
the maritime industry. The acquisition was funded
through an equity investment of $2.4 million provided
by the Limited Partnership.

2011 Acquisition

On 25 March 2011, the Limited Partnership
announced its acquisition of a significant majority
stake in Emesa B.V. (“Emesa”), a leading e-commerce
company active in the Dutch online leisure market.

Emesa was ranked as the fourth fastest growing
technology company in the Netherlands in the Deloitte
Technology Fast 50. It is a leading online consumer
auction platform in the European leisure industry
which enables online customers to find and book
leisure deals. The Limited Partnership believes Emesa
is well-positioned to achieve further growth in the
Netherlands and expand into other European markets.

OUTLOOK

The Limited Partnership’s Investment Adviser
continues to source opportunities from its own
network of contacts including corporates looking to
divest non-core assets, accountants, corporate
finance practitioners, industry sources, lawyers and
banks seeking to restructure underperforming assets.
The Limited Partnership’s focus continues to be on
the turnaround of underperforming assets in
consolidating or growth industries or within sectors
which are subject to structural change and high
growth. During 2010 the Investment Adviser reported
an improvement in its prospects pipeline which is
manifested in the three investments made by the
Limited Partnership over the last two quarters and
which provides a positive backdrop for the remainder
of 2011.

It is expected that, in aggregate, the established
portfolio companies will continue with their strong
operational performance in 2011 and the Limited
Partnership may contemplate further realisations if the
Investment Adviser judges that the conditions are
conducive for an exit from an investment. The newly
acquired businesses provide exciting opportunities for
the future.

James Keyes
Chairman
19 April 2011

CHAIRMAN’S
STATEMENT

continued

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MANAGER’S
REPORT

Manager’s Report

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MANAGER’S REPORT

THE COMPANY AND THE LIMITED PARTNERSHIP

MARKET BACKGROUND

MANAGER’S
REPORT

The European economic recovery in 2010 has been at
best, patchy. In the UK, following four quarters of
positive growth this fell back in the fourth quarter by
0.6%. Sharp rises in global commodity prices towards
the end of the year have raised concerns that, against
a background of ultra-accommodative monetary
policies, cost increases could set off an inflationary
spiral. Assuming that the recent increase in oil prices
is semi-permanent rather than a temporary spike
there must be adverse consequences for the global
economy. Higher fuel prices are likely to squeeze
business profitability and add to the already
considerable pressures on debt-laden households.

Against this backdrop the Investment Adviser has seen
a significant improvement in the number and quality of
opportunities presented to it and is therefore positive in
its sentiment towards 2011 whilst remaining cautious
in its review and analysis of these opportunities.

The Company provides investors with exposure to
Oakley Capital Private Equity L.P. (the “Limited
Partnership”), an unlisted UK and European mid-
market private equity fund with the aim of providing
investors with significant long term capital appreciation.

Oakley Capital (Bermuda) Limited (the “Manager”), a
Bermudian company, has been appointed manager to
the Company and the Limited Partnership. The Manager
has appointed Oakley Capital Limited (the “Investment
Adviser”) as the investment adviser to the Manager.
The Investment Adviser is primarily responsible for
advising the Manager on the investment of the assets
of the Limited Partnership and the Company.

The Limited Partnership’s investment strategy is to
invest in sectors that are growing or where
consolidation is taking place. Within the core sector
interests, the Limited Partnership invests in both
performing and under-performing companies,
supporting buy and build strategies, businesses
encountering rapid growth, or businesses undergoing
significant operational or strategic change. Investing in
a diverse range of portfolio companies, the Limited
Partnership’s objective is to work proactively with the
portfolio companies’ management teams, together
with other stakeholders, in order to create substantial
shareholder value.

The Limited Partnership looks to acquire a controlling
interest in companies with an enterprise value of
between £20.0 million and £150.0 million, though
companies with a lower enterprise value are
considered where the Manager believes that
anticipated returns justify the investment. The Limited
Partnership aims to deliver in excess of 25% gross
internal rate of return (IRR) per annum on investments.
The life of the Limited Partnership is expected to be
approximately 10 years, which includes a five year
investment period.

FINANCIAL HIGHLIGHTS

Assets at:

31.12.07

31.12.08

31.12.09

31.12.10

Net assets (£m)
Net assets per share (£)
Share price (mid-market) (p)
FTSE AIM Index
FTSE Small-Cap Index

Operational performance

Increase in net assets resulting
from operations (£m)
Net gain per share (£)

99.4
0.99
101.6
3,287
3,418

99.9
1.08
63.5
2,209
1,854

(0.6)
(0.01)

5.1
0.06

180.1
1.41
95.0
2,751
2,777

55.0
0.47

214.9
1.68
145.5
3,063
3,229

34.8
0.27

% change
2010/2007

116%
69%
43%
(7%)
(6%)

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MANAGER’S
REPORT

continued

ANALYSIS OF MOVEMENTS IN NET ASSET VALUE FOR THE YEAR ENDED 31 DECEMBER 2010

Opening net asset value as at 1 January 2010
Gross revenue
Other expenditure
Realised gain on investments
Net unrealised appreciation of investments (excluding accrued interest)

Closing net asset value as at 31 December 2010

£m

180.1
4.8
(1.4)
31.3
0.1

214.9

PERFORMANCE

The Company’s net asset value increased in the year
from £180.1 million to £214.9 million, an increase of
£34.8 million. The Manager follows The International
Private Equity and Venture Capital Valuation
Guidelines in establishing fair value. The Limited
Partnership’s Investment Adviser appointed a third
party valuer to help determine the fair value of certain
investments taking account of financial information
provided by the Investment Adviser. In considering
valuation, the Limited Partnership’s Investment Adviser
used a combination of the market approach and the
income approach. The market approach ascribes a
value to a business interest or shareholding by
comparing it to similar businesses, using the principle
of substitution: that is, that a prudent purchaser would
pay no more for an asset than it would cost to acquire
a substitute asset with the same utility and income
earning potential. In the income approach, an
economic benefit stream from the business interest is
selected, generally based on historic or forecast cash
flows and generally a derivative of profits.

The cash flow is then discounted to present value
using a risk-adjusted discount rate.

The net asset value at 31 December 2010 is
equivalent to 168 pence per share, up from 141 pence
in 2009, an improvement of 27 pence, or 19%. In the
same period the Company’s share price has moved
from 95 pence at 31 December 2009 to 145.5 pence
at 31 December 2010. This represents a significant
narrowing of the discount from net asset value from
33% in 2009 to 13% at the end of 2010.

The primary contributor to the increase in net asset
value in the year was the realised gain on investment
in the Limited Partnership. This amounted to
£31.3 million and was attributable to the sale of
Host Europe.

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MANAGER’S
REPORT

continued

MOVEMENTS IN INVESTMENT PORTFOLIO VALUES FOR THE YEAR ENDING 31 DECEMBER 2010

Host
Host
Europe
Europe

Verivox
Verivox

Daisy
Daisy

Headland
Headland
Media
Media

Monument
Monument

BDO WM
BDO WM

Time Out
Time Out

–
–

10.0
10.0

20.0
20.0

30.0
30.0

40.0
40.0
£m
£m

50.0
50.0

60.0
60.0

70.0
70.0

80.0
80.0

31 December 2010
31 December 2010

31 December 2009
31 December 2009

The Limited Partnership owns 36.25 million shares in
Daisy, representing 14% of Daisy, having transferred
ownership from Host Europe prior to its sale.

Verivox has continued to outperform the Limited
Partnership’s expectations resulting in a significant
unrealised appreciation in its value. The gain
attributable to the Company in 2010 is £24.4 million,
after a holding period of less than 13 months, an
improvement of nearly 250% over the period.

As the above chart indicates, the total increase in the
year in the investment value of the portfolio companies
attributable to the Company was £43.0 million,
including Host Europe at its realisation value,
representing an increase over the period of 44%.
This was driven largely by an improvement in the
underlying operating performance of the portfolio
businesses, together with ratings expansion and
£8.9 million contributed by the 2010 acquisitions.

Host Europe’s attributable fair value increased by
£10.1 million from 31 December 2009 up to
realisation, at a value of £72.7 million.

Daisy’s fair value increased from £18.1 million to
£19.2 million. The share price increased from
97 pence at 31 December 2009 (less a discount to
reflect a lock-in prohibiting the transfer or disposal of
the shares before September 2010) to 100 pence
(with no discount) at 31 December 2010.

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MANAGER’S
REPORT

continued

PORTFOLIO INVESTMENT GROWTH 2010 BY SOURCE

Opening
Opening
valuation
valuation
£98.5m
£98.5m

Current
Current
valuation
valuation
£141.9m
£141.9m

60.0
60.0

50.0
50.0

40.0
40.0

m
m
£
£

30.0
30.0

20.0
20.0

10.0
10.0

–
–

Acquisitions
Acquisitions
at value
at value

Improvements
Improvements
in trading
in trading

Ratings
Ratings
expansion
expansion

Net
Net
Debt
Debt

Forex
Forex
movements
movements

Management
Management
share
share

Total
Total
increase
increase
in value
in value

The performance improvement achieved in the
portfolio businesses would, on exit, give rise to a
percentage of that improvement being earned by the
management teams in those businesses. The
Manager believes that direct participation by key
managers in the portfolio businesses is an essential
component in driving performance. In addition, any
increase in fair value adds to the founding partner’s
performance fee accrual, and there is the charge for
management fees. The founding partner’s
performance fee is dependent upon the Limited
Partnership achieving a hurdle rate of 8% per annum
and is only paid on the successful realisation of
an investment.

The above chart shows the growth in 2010 of the
investment portfolio attributed to its source. The fair
value of the investment in the Limited Partnership
grew from £104.4 million to £146.7 million (including
Host Europe at its realisation value), an increase of
£42.3 million. The dominant influences on this growth
were trading and rating expansion, both of these
being driven by the impact of the overall improvement
in the underlying performance of the portfolio
businesses on their assessed fair value. The most
significant contributor to the growth from
improvements in trading was Verivox which, following
a very strong performance in 2010, added
£24.4 million to investment growth attributable to the
Company. Both Host Europe and Verivox contributed
to rating expansion, the former reflecting the excess
that the distribution represented over its 2009
attributed fair value and for Verivox, recognition that
improved ratings amongst its peer group and the
company’s record of strong growth warranted a
modest improvement in multiple.

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ASSET TYPES 2010

ASSET TYPES 2009

56% Cash

35% Limited Partnership

9% Loan Finance

26% Cash

58% Limited Partnership

16% Loan Finance

At 31 December 2010 the Company’s assets were
divided between its investment in the Limited
Partnership (35%), cash and cash equivalents (56%)
and loans provided directly to portfolio companies
(9%). These loans generally take the form of
mezzanine and senior finance, ensuring that uncalled

cash continues to work for the Company earning a
positive return. At 31 December 2010 the total value
of loans outstanding was £19.7 million (2009: £28.5
million). The significant increase in cash reflects the
distribution received by the Company following the
sale of Host Europe.

SPLIT OF INVESTMENTS IN
LIMITED PARTNERSHIP 2010

SPLIT OF INVESTMENTS IN
LIMITED PARTNERSHIP 2009

48% Verivox

26% Daisy

7% Headland Media

6% BDO WM

4% Time Out

2% Monument

7% Cash and other
net assets

60% Host Europe

11% Verivox

17% Daisy

4% Headland Media

2% Monument

6% Cash and other
net assets

Looking geographically, the portfolio in 2010 has lost
its strong UK bias (at the end of 2009 the UK
represented 63% of the Limited Partnership) and is
now divided between the UK, with a 47% of value,
and Germany with 53%.

The distribution of the portfolio by sector is also better
balanced at the end of 2010. The sale of Host Europe
has eliminated the Limited Partnership’s previous
heavy reliance on the technology sector.
The strongest bias is towards consumer services
because of the influence of Verivox. Verivox is
Germany’s leading consumer energy and telecoms
price comparison website and has seen very high

growth in consumer switching. This is expected to
continue to grow driven by increased competition,
higher internet penetration and growing consumer
awareness of the ability to switch to save on energy
costs. Daisy provides interest in the telecom’s sector
and the recent acquisitions of Time Out and BDO
Wealth Management provide diversification into digital
media/publishing and financial services, respectively,
and in the opinion of the Limited Partnership’s
Investment Adviser, offer significant potential for the
future. Headland Media and Monument add further
limited diversification.

PORTFOLIO DISTRIBUTION BY SECTOR 2010

PORTFOLIO DISTRIBUTION BY SECTOR 2009

51% Consumer

services

28% Telecoms

12% Digital media/
Publishing

9% Financial

services

64% Technology

11% Consumer
services

18% Telecoms

5% Digital media/
Publishing

2% Financial

services

MANAGER’S
REPORT

continued

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Directors’ Report

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DIRECTORS’ REPORT

DIRECTORS’ FUNCTIONS

The Directors are responsible for the overall
management and control of the Company.
The Directors review the operations of the Company
at regular meetings and meet at least quarterly. For
this purpose, the Directors receive periodic reports
from the Manager detailing the Company’s
performance, and receive from the Manager such
other information as may from time to time be
reasonably required by the Directors for the purpose
of such meetings.

The Limited Partnership is managed by the Manager,
and the Directors do not make investment decisions
on behalf of the Limited Partnership, nor do they have
any role or involvement in selecting or implementing
transactions by the Limited Partnership.

DIRECTORS

The Directors of the Company are:

JAMES KEYES
James Keyes has been a Managing Director of
Renaissance Capital since 1 October 2008.
He established the Bermuda office, for which he has
responsibility, of Renaissance in 2008. He was
previously a partner of Appleby, the offshore law firm,
for 11 years. James joined Appleby in 1993 and was
team leader of the Funds and Investment Services
Team. Prior to Appleby, he was employed in the
corporate department of Freshfields law firm, and
worked in the London, New York and Hong Kong
offices. James attended Oxford University in England
as a Rhodes Scholar and graduated with a degree in
Politics, Philosophy and Economics (MA with
Honours) in 1985. He was admitted as a solicitor
in England and Wales in 1991 and called to the
Bermuda Bar in 1993. He became a Notary Public
in 1998. James is a resident of Bermuda.

TINA BURNS
Tina Burns is the Tax Director for Alterra Capital
Holdings Limited. Prior to joining Alterra, Tina was tax
consultant with Schroders Private Equity Services
(“Schroders”) in Bermuda. From 1996 to 2006, Tina
was a Director in the tax services practice of KPMG in
Bermuda. Tina joined KPMG in Bermuda in 1995.
Prior to joining KPMG in Bermuda, she was a tax
senior with KPMG in Atlanta, Georgia. Tina graduated
from the University of North Carolina with a Masters of
Accounting in 1994, and is a member of the American
Institute of Certified Public Accountants and the
Georgia Society of Certified Public Accountants. Tina
is a resident of Bermuda.

PETER DUBENS
Peter Dubens is the founder of Oakley Capital, a
privately owned asset management and advisory

group comprising private equity, fund of funds,
corporate finance, capital introduction and venture
capital operations managing over US$750 million that
was founded in 2002. Peter is the Managing Partner
of Oakley Capital Limited, the investment adviser to
Oakley Capital Private Equity L.P., a European
mid-market private equity fund that invests in
performing and under-performing companies,
supports buy and build strategies, rapid growth, or
businesses undergoing significant operational or
strategic change. During the last 22 years Peter has
acquired, restructured and consolidated public and
private companies. As Executive Chairman, he led the
formation of two public companies, being 365 Media
Group plc and Pipex Communications plc (now Daisy
Group plc). The 365 Media platform consolidated
12 businesses within the online sports information
and gambling industry and the Pipex platform
consolidated 14 businesses within the telecoms
and internet industries. 365 Media was sold for over
£102.0 million to BSkyB and the main operating
divisions of Pipex were sold for approximately
£370.0 million.

LAURENCE BLACKALL
Laurence Blackall has had a 30 year career in the
information, media and communication industries.
After an early career that included Virgin and the
SEMA Group, Laurence was appointed a director of
Frost & Sullivan and a vice-president of McGraw Hill.
He was also CEO of AIM listed Internet Technology
Group, which was founded in 1995, and Chairman of
Boat International Publications. Laurence was also
instrumental in the creation of Pipex Communications
plc. He has an MA in marketing and currently holds a
number of directorships in public and private UK
companies. Laurence is a United Kingdom resident.

IAN PILGRIM
Ian Pilgrim is Chief Executive Officer of the
Administrator, Mayflower Management Services
(Bermuda) Limited, a corporation which provides
consultancy and other services to hedge funds and
is the administrator to the Company and the Limited
Partnership. Prior to founding the Administrator in
January 2006, he was the Managing Director of Citco
Fund Services (Bermuda) Limited and also served as
General Counsel to Citco Fund Services from January
2001 until December 2005. Before joining Citco, Ian
practiced from January 1997 until December 2000 as
a Barrister and Attorney with M.L.H. Quin & Co. (now
Wakefield Quin) in Bermuda. From 1994 to 1996, he
practiced as a solicitor with Allen & Overy in Hong
Kong where he was involved primarily in banking and
project finance, and prior to that from 1991 to 1994
with Deacons in Hong Kong. Ian was admitted to
practice as a solicitor in England and Wales in 1989

DIRECTORS’
REPORT

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DIRECTORS’
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continued

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and in Hong Kong in 1992. He was admitted to the
Bar in Bermuda in 1998. He is a director of Palmer
Capital Associates (International) Limited, Oakley
Absolute Return Limited (formerly Oakley Multi
Manager Funds Limited) and Oakley Capital
Management (Bermuda) Limited, the manager of
Oakley Absolute Return Limited. Ian is a resident
of Bermuda.

CHRISTOPHER WETHERHILL
Christopher Wetherhill founded and was Chief
Executive Officer of Hemisphere Management Limited
(now known as Citi Hedge Fund Services Limited),
a financial services company in Bermuda, from 1981
until 2000. Since 2000, he has served as a board
member of, and a consultant to, a number of
investment companies. He is a Fellow of the Institute
of Chartered Accountants in England and Wales,
a member of the Canadian and Bermudian Institutes
of Chartered Accountants, a Fellow of the Institute of
Directors and a Freeman of the City of London.
Christopher is a resident of Bermuda.

MANAGER

Oakley Capital (Bermuda) Limited was incorporated in
Bermuda on 18 June 2007 under the Bermuda
Companies Act. The Manager is responsible for the
day to day management of the assets of the
Company pursuant to the Management Agreement.
Under the Management Agreement, the Manager has
full discretion, subject to the review by the Directors,
to invest the assets of the Company in a manner
consistent with the investment objective, approach
and restrictions described in the admission document.
Oakley Capital (Bermuda) Limited is also manager of
the Limited Partnership.

Peter Dubens and Ian Pilgrim are directors of both the
Manager and the Company, and cannot vote on any
Board decision relating to the Management
Agreement whilst they have an interest.

INVESTMENT ADVISER

Oakley Capital Limited was incorporated in England
and Wales on 12 October 2000 under the Companies
Act 1985. The Company and the Manager have
appointed the Investment Adviser as investment
adviser to the Company and the Manager has
appointed the Investment Adviser as investment
adviser to the Limited Partnership.

The Investment Adviser is authorised and regulated by
the FSA. The Investment Adviser is not registered as
an “investment adviser” under the US Investment
Advisors Act, but may in the future seek to register.

Peter Dubens and David Till (who are both Directors of
the Investment Adviser) with a team of seven
investment professionals will together be primarily

responsible for performing the investment advisory
obligations of the Investment Adviser.

CORPORATE GOVERNANCE

The Directors recognise the importance of sound
corporate governance and have adopted policies and
procedures which reflect those principles of Good
Governance and Code of Best Practice as published
by the Committee on Corporate Governance
(commonly known as the “Combined Code”) as are
appropriate to the Company’s size and AIM listing.
The Directors note that Bermuda, the country of
incorporation of the Company, has no specific
corporate governance regime.

The Company has established an audit committee
and a remuneration committee, each with formally
delegated duties and responsibilities. The audit
committee and the remuneration committee are each
comprised of all the Independent Directors. The audit
committee is chaired by Tina Burns and the
remuneration committee is chaired by James Keyes.

The audit committee determines the terms of
engagement of the Company’s auditors and, in
consultation with the auditors, the scope of the audit.
The audit committee receives and reviews reports from
management and the Company’s auditors relating to
the annual accounts and the accounting and internal
control systems in the Company. The audit committee
has unrestricted access to and oversees the
relationship with the Company’s auditors.

The remuneration committee reviews the scale and
structure of the Directors’ remuneration and the terms
of their service or employment contracts, including
share option schemes and other bonus arrangements
if any. The remuneration and terms and conditions of
the non executive Directors are set by the Board.
No Director or manager of the Company may
participate in any meeting at which discussion or any
decision regarding his own remuneration takes place.

In addition to establishing an audit committee and a
remuneration committee, the Company has
established a fund committee, comprising all of the
Independent Directors. The fund committee receives
and reviews all matters and contracts where there are
potential conflicts of interest between the Company
and the Limited Partnership. No Director, other than
the Independent Directors, may participate in any
meeting of the fund committee. The fund committee
is chaired by James Keyes.

The Board complies with Rule 21 of the AIM Rules
relating to Directors’ dealings as applicable to AIM
companies and also takes all reasonable steps to
ensure compliance by the Company’s applicable
employees (if any) and has adopted a share dealing
code for this purpose.

DIRECTORS’
REPORT

continued

DIRECTORS’ INTERESTS

DIRECTORS’ REMUNERATION

Christopher Wetherhill is the beneficial owner of
70,000 shares of the Company, otherwise none of
the Directors nor any member of their respective
immediate families, nor any person connected with a
Director, has any interest whether beneficial or non
beneficial in the share capital of the Company.

The emoluments of the individual Directors for the
year were as follows:

James Keyes

Tina Burns

Peter Dubens

Laurence Blackall

Ian Pilgrim

Christopher Wetherhill

£30,000

£nil

£30,000

The above fees do not include reimbursed expenses.

SUBSTANTIAL SHAREHOLDINGS

As at 8 April 2011, the Company has been notified by the following that they have a disclosable beneficial
interest in 3% or more of the issued ordinary share capital of the Company:

AS A PERCENTAGE OF VOTING RIGHTS

Invesco Asset Management

Schroder & Co

Blackrock Investment Management

Ruffer LLP

Gartmore Investments

GAM International

Lloyds Banking Group

Cazenove Capital Management

Fidelity Investments

GAM UK Hedge

29.90%

13.75%

13.00%

12.00%

9.14%

6.97%

6.41%

4.93%

4.88%

3.07%

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Review of investments

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REVIEW OF
INVESTMENTS

2010
£m

74.0

–
1.4
1.6
6.0
5.7

–
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2009
£m

104.4

16.9 1
7.1 2
–
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4.4 1
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93.7

132.9

REVIEW OF INVESTMENTS

SUMMARY

Assets at fair value

Investment in Limited Partnership

Mezzanine loans:

Host Europe
Verivox
Headland Media
BDO Wealth Management
Time Out

Senior loans:

Verivox
Time Out

Total investments

1 Repaid to the Company in full in 2010

2 Part repayment to the Company in 2010

The Company invests principally in the Limited
Partnership. The primary objective of the Limited
Partnership is to invest in a diverse portfolio of private
mid-market UK and European businesses, aiming
to provide investors with significant long-term
capital appreciation.

By 31 December 2010, the Company had invested a
total of £62.9 million in the Limited Partnership since
inception. This investment together with the Limited
Partnership’s own cash resources were invested in
portfolio companies such that the investment by the
Company represents approximately 65% of the total
amount invested. The above summary shows the
values attributed to the Company by virtue of its direct
holding through the Limited Partnership of its interest
in the portfolio businesses. The fall in the value of
investments in 2010 reflects the cash distribution
received by the Company from the Limited
Partnership following the sale of Host Europe,
amounting to £72.7 million and the repayment of
loans at the time of the sale, amounting to a further
£16.9 million plus accrued interest. At 31 December
2010, the Limited Partnership’s Investment Adviser
appointed a third party valuer to determine fair value
taking account of financial information provided by
the Investment Adviser. As a result of this assessment,
the fair value of investments made in the Limited
Partnership at 31 December 2010 stands at
£74.0 million.

In addition to its investments in the Limited
Partnership, the Company has provided loans directly
to a number of the portfolio companies.
At 31 December 2010, the Company had outstanding
mezzanine finance provided to Headland Media of
£1.6 million carrying an annual interest rate of 15.0%
and with a maturity date of December 2014, but
repayable at any time before this date.
At 31 December 2009, Verivox had a mezzanine loan
from the Company of £7.1 million with a fixed interest
rate of 15% and maturing no later than December
2019. All but £1.4 million of this loan was repaid by
Verivox in December 2010, and the remaining balance
was repaid in March 2011. Verivox’s senior debt
finance bridge loan of £4.4 million was repaid in full in
December 2010. With the acquisition of BDO Wealth
Management the Company provided mezzanine
finance of £6.0 million with an interest rate of 15.0%
per annum maturing no later than November 2015.
Alongside the Limited Partnership’s own investment,
the Company provided both mezzanine finance and
senior debt finance to Time Out. The mezzanine
finance was £5.7 million with an interest rate of 15.0%
per annum maturing no later than November 2015.
The senior loan notes amounted to £5.0 million and
have an annual interest rate of 8.5% and are due to
be repaid by no later than March 2013.

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Sector:
Technology

Location:
United Kingdom

Investment date:
2 April 2008

Website:
www.hosteurope.com

BUSINESS UPDATE

On 15 September 2010 the Limited Partnership announced the disposal
of Host Europe to Montagu Private Equity, subject to approval by
Germany’s Federal Cartel Office (Bundeskartellamt). Having received this
approval, the sale was completed on 28 October 2010.

Total consideration for the sale was £222 million. The consideration was
used to repay third party debt; to pay Host Europe management in
respect of their interests; to meet transaction costs; and to repay debt
due to the Company of £16.9 million plus accrued interest. As a result of
the disposal, on 10 November 2010, the Limited Partnership distributed
£111.9 million of proceeds to the Limited Partners, including £72.7 million
to the Company.

Prior to the sale of Host Europe, the shares it held in Daisy Group plc
(“Daisy”) were extracted and continue to be held by the Limited
Partnership. These 36.25 million shares, representing 14% of Daisy were
acquired as part of the consideration for the disposal of Host Europe’s
Vialtus division in July 2009.

PERFORMANCE

Host Europe continued to perform well in 2010. The exit value of the
investment in Host Europe was £111.9 million against an invested cost of
£48.0 million, generating a money multiple of 2.3x and an IRR of 48% to
the Limited Partners.

HOST EUROPE

Value of Host Europe
at acquisition

Total equity
held

Exit value of the
Company’s interest

£128m

83%

£92.6m

REVIEW OF
INVESTMENTS

continued

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REVIEW OF
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continued

Sector:
Telecoms

Location:
United Kingdom

Investment date:
21 July 2009

Website:
www.daisyplc.com

TRANSACTION DETAILS

On 21 July 2009, Host Europe sold Vialtus, one of its three operating
divisions, for £42.0 million to Daisy Group plc (“Daisy”). In consideration for
the disposal of Vialtus, Host Europe received £13.0 million of cash and
£29.0 million worth of ordinary shares in Daisy representing 36.26 million
Daisy ordinary shares. Daisy is listed on the London Stock Exchange
under AIM.

BUSINESS OVERVIEW

Daisy is a leading provider of integrated voice and data services to small
and medium sized businesses providing customers with access to a
combined product set from a single platform.

Daisy’s strategic objective is to consolidate the fragmented mid-market
telecommunications sector with the aim of building a business of
considerable scale. Following the acquisition of Vialtus Solutions, Daisy
has completed a further 12 acquisitions.

The Daisy share price on 31 December 2010 was 100.0 pence and this
was used to establish the fair value of the investment.

DAISY GROUP PLC

Value of Daisy Group
plc at acquisition

Total equity
held

Fair value of the
Company’s interest

N/A

14%

£19m

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Sector:
Online consumer

Location:
Germany

Investment date:
4 December 2009

Website:
www.verivox.de

TRANSACTION DETAILS

On 4 December 2009, the Limited Partnership acquired 51% of Verivox,
Germany’s largest independent online consumer energy price comparison
site, funded using a combination of debt and preferred equity. The Limited
Partnerships’ contribution was €5.3 million.

The Company’s investment in Verivox via the Limited Partnership is held
in preferred shares. In addition, the Company provided €13.0 million in
the form of mezzanine finance and bridging loan. Of these loans, at
31 December 2010 €1.65 million was outstanding but was fully repaid
on 11 March 2011.

In accordance with management performance, at exit, following
repayment of the loans and preferred equity, including accrued interest,
the economic gain is to be divided between the Limited Partnership and
management in the ratio 40.5 : 59.5.

BUSINESS OVERVIEW

Verivox, which has been established more than 10 years, is Germany’s
leading energy price comparison website. Verivox receives commissions
from energy suppliers when consumers elect to switch their provider,
using the company’s website www.verivox.de. Verivox’s commission is
based on a typical household bill of €700 to €1,300 per annum.

In contrast to the UK energy market, Germany has historically
experienced relatively low levels of consumer switching due primarily to
the slower introduction of effective competition into the market. However,
with recent deregulation of the energy market the level of consumer
switching is growing, driven by increasing consumer awareness and by
increased competition and higher internet penetration. In 2010, Verivox
handled 80 million price enquiries leading to 1 million customer switches.

PERFORMANCE

Verivox enjoyed a strong performance in 2010 with EBITDA of
€27.4 million compared to €11.4 million in 2009, an increase of 140%.

VERIVOX

Value of Verivox
at acquisition

Total equity
held

Fair value of the
Company’s interest

£17.0m

51%

£37.0m

REVIEW OF
INVESTMENTS

continued

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Sector:
Digital Media/Publishing

Location:
United Kingdom

Investment date:
25 November 2010

Website:
www.timeout.com

TRANSACTION DETAILS

In November 2010 the Limited Partnership acquired 50% of Time Out, the
international multi channel publisher. The Limited Partnership subscribed
for equity of £4.7 million and the Company provided loans in the form of
mezzanine finance of £5.7 million and senior debt of £5.0 million.

On 18 January 2010, the Company increased the mezzanine loan to
Time Out by another £0.5m taking the total to £6.2 million.

BUSINESS OVERVIEW

Time Out was established in 1968 by Tony Elliott and today is a globally
recognised brand in the publishing industry that publishes city-based
magazines and travel guides and is beginning to build an online presence.
The development of the internet has presented Time Out with an
opportunity to transition the business from a magazine listings business
to a real-time digital provider of entertainment information and qualified
editorial opinions, with an added transactional capability.

INVESTMENT RATIONALE

The company is positioned to transition a well known brand from a
listings business to a real-time, location-based content provider,
capitalising on the rapid growth and acceptance of digital content.
Time Out’s digital and mobile offering can be developed to provide an
easy platform for transactions and a one-stop-shop for entertainment.
Further, geographic growth can be achieved through brand extensions
by leveraging Time Out’s reputation built through the guides business.

PERFORMANCE

Revenue for the year to 31 December 2010 was £16.9 million with an
EBITDA of £1.7 million.

TIME OUT

Value of Time Out
at acquisition

Total equity
held

Fair value of the
Company’s interest

£13.4m

50%

£13.8m

REVIEW OF
INVESTMENTS

continued

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REVIEW OF
INVESTMENTS

continued

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WEALTH MANAGEMENT

Sector:
Financial services

Location:
United Kingdom

Investment date:
4 November 2010

Website:
www.bdo.uk.com

TRANSACTION DETAILS

On 4 November 2010, the Limited Partnership announced that it had
acquired 84.4% of BDO Wealth Management, the UK-wide independent
provider of investment advice and solutions to private individuals and
corporates, from BDO LLP. The transaction valued BDO Wealth
Management at an enterprise value of £14.2 million. The Limited
Partnership provided equity of £7.0 million and the Company a mezzanine
loan of £6.0 million. As anticipated, in the first quarter of 2011, an
additional £2.5 million was injected by way of equity in order to provide
working capital and to fund regulatory capital.

BUSINESS OVERVIEW

Formed by BDO LLP in 1989, BDO Wealth Management has grown to
become a leading UK mid-market independent wealth manager and
investment advisory firm with £2.0 billion under management and advice.
The Company operates two principal divisions; private client services; and
corporate pensions and benefits. BDO Wealth Management’s main
source of revenues is time-based fees, with commissions and
performance fees accounting for less than 10% of annual revenues.

INVESTMENT RATIONALE

This was an opportunity to acquire a top 40 UK wealth manager with high
quality clients. The business employs a highly qualified base of advisors, and
is Retail Distribution Review ready. BDO Wealth Management’s centralised
investment processes provide the opportunity to grow a profitable
business with scale; forming the basis for consolidation opportunities.

PERFORMANCE

Revenue for the year to 31 December 2010 was £16.7 million with an
EBITDA loss of £1.4 million.

BDO WEALTH MANAGEMENT

Value of BDO WM
at acquisition

Total equity
held

Fair value of the
Company’s interest

£14.2m

84%

£10.5m

REVIEW OF
INVESTMENTS

continued

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Sector:
Digital media

Location:
United Kingdom

Investment date:
25 January 2008

BUSINESS OVERVIEW

Headland Media is a business-to-business media content provider with
offices in the UK, Europe and the US. It is the leading provider of news
digest services to the hotel and shipping sectors and is a provider of
entertainment and training services to offshore industries and other
remote locations.

Website:
www.headlandmedia.com

Headland Media distributes media content to around 6,500 destinations
using proprietary channels and has an audience of approximately
20 million listeners and 250,000 readers.

BUSINESS UPDATE

On 30 April 2010 Headland Media acquired Newslink Services Limited
(“Newslink”). Newslink primarily provides news digest services to the
maritime industry. The acquisition provided access to Newslink’s
customer base into which Headland Media expects to cross sell
additional products and the acquisition will help Headland Media to
increase its market share with access to a further 4,700 vessels.
The acquisition was financed through an investment of £2.0 million
resulting in Headland Media drawing a further £1.6 million of mezzanine
debt from the Company.

PERFORMANCE

Headland Media’s financial performance in the year to 31 December 2010
was in line with expectations. Revenue for the year to 31 December 2010
was £7.8 million with an EBITDA of £2.0 million.

HEADLAND MEDIA

Value of Headland
Media at acquisition

Total equity
held

Fair value of the
Company’s interest

£6.3m

80%

£7.0m

REVIEW OF
INVESTMENTS

continued

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REVIEW OF
INVESTMENTS

continued

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REVIEW OF
INVESTMENTS

continued

Sector:
Financial services

Location:
United Kingdom

Investment date:
31 March 2008

Website:
www.monumentsecurities.com

BUSINESS OVERVIEW

Monument Securities Limited (“Monument”) is an independent equity,
derivatives and fixed income broker with an 18 year history. The company
provides services to institutions, fund managers, market professionals,
corporates and hedge funds. Monument Securities is a member of the
NYSE, Euronext, LIFFE, Eurex, the London Stock Exchange and the
International Capital Markets Association and is regulated by the
Financial Services Authority.

BUSINESS UPDATE

The Limited Partnership’s ownership of Monument has coincided with
difficult economic and market conditions. Equity trading volumes have
remained low in 2010 and this has again been reflected in brokering
commissions which ended the year lower than in 2009. Monument’s
balance sheet remains strong. Monument’s performance has been
reflected in a reduction in the Company’s assessed fair value, from
£2.2 million at the end of 2009 to £1.4 million at 31 December 2010.

PERFORMANCE

Revenue for the year was £6.2 million, which is 17% down from the
previous year. Cost savings of around 15% have ensured that the
business finished 2010 with EBITDA close to break-even.

MONUMENT SECURITIES

Value of Monument
at acquisition

Total equity
held

Fair value of the
Company’s interest

£5.5m

51%

£1.4m

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INDEPENDENT
AUDITOR’S
REPORT

Independent Auditor’s Report

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INDEPENDENT AUDITOR’S REPORT
to the Board of Directors and Shareholders of
Oakley Capital Investments Limited

We have audited the accompanying statements of assets and liabilities of
Oakley Capital Investments Limited (the “Company”), including the
schedules of investments, as of 31 December 2010 and 2009 and the
related statements of operations, changes in net assets and cash flows
for the years then ended. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oakley Capital Investments
Limited as of 31 December 2010 and 2009 and the results of its
operations, changes in its net assets and cash flows for the years then
ended in conformity with US generally accepted accounting principles.

KPMG
Chartered Accountants
Hamilton, Bermuda
18 April 2011

INDEPENDENT
AUDITOR’S
REPORT

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FINANCIAL
STATEMENTS

Financial Statements

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FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

Assets

Investments (cost 2010: £42,127,743; 2009: £81,356,297)

Cash and cash equivalents

Accrued interest receivable

Other receivables

Total assets

Liabilities

notes

5, 7

2010
£

2009
£

93,708,239

132,883,058

120,915,727

46,511,535

814,139

29,553

781,118

41,394

215,467,658

180,217,105

Accounts payable and accrued expenses

4, 6

520,316

106,747

Total liabilities

520,316

106,747

Net assets attributable to shareholders

214,947,342

180,110,358

Represented by:

Share capital

Share premium

Retained earnings

1,281,250

119,276,094

94,389,998

59,553,014

214,947,342

180,110,358

Number of shares outstanding

128,125,000

Net asset value per share

1.68

1.41

Signed on behalf of the Board on 18 April 2011 by

Ian Pilgrim

Director

Tina Burns

Director

The notes following form an integral part of these financial statements

FINANCIAL
STATEMENTS

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FINANCIAL
STATEMENTS

continued

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SCHEDULES OF INVESTMENTS
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

31 December 2010

Fair value as
a percentage
of net assets

Percentage
interest

Principal
amount/
Quantity

Cost
£

Fair value
£

Investments in Limited Partnership

Bermuda
Oakley Capital Private Equity LP

Unquoted debt securities

Investments in senior loan notes

United Kingdom

Time Out Group BC Limited
Interest at 8.5% p.a.
Maturity date March 2013

Investments in mezzanine loans

United Kingdom

Headland Media Limited
Interest at 15% p.a.
Maturity date December 2014

Bermuda

V V X (Bermuda) Limited
Interest rate at 15% p.a.
Maturity date December 2019

Fitzwilliam Holdco Limited
Interest rate at 15% p.a.
Maturity date November 2015

Time Out (Bermuda) Limited
Interest rate at 15% p.a.
Maturity date November 2015

Total mezzanine loans

34.42%

65.01%

22,278,648

73,977,584

2.33%

£5,000,000

5,000,000

0.75%

$2,500,000

1,645,945

1,610,500

0.66%

€1,650,000

1,503,150

1,420,155

2.79%

£6,000,000

6,000,000

2.65%

6.85%

£5,700,000

5,700,000

14,849,095

14,730,655

Total investments

43.60%

42,127,743

93,708,239

For details of the underlying investments of the Limited Partnership, please refer to Note 7.

The notes following form an integral part of these financial statements

SCHEDULES OF INVESTMENTS (continued)
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

31 December 2009

Fair value as
a percentage
of net assets

Percentage
interest

Principal
amount/
Quantity

Cost
£

Fair value
£

Investments in Limited Partnership

Bermuda
Oakley Capital Private Equity LP

Unquoted debt securities

Investments in mezzanine loans

United Kingdom

Host Europe Corporation Limited
Interest at 15.25% p.a.
Maturity date December 2015

Bermuda

V V X (Bermuda) Limited
Interest rate at 15% p.a.
Maturity date December 2019

Total mezzanine loans

Investment in bridge loans

Bermuda

V V X Investments Limited
Interest rate at 8.5% p.a.
Maturity date December 2012

Total investments

57.98%

66.05%

52,607,753

104,432,214

9.39%

£16,905,544

16,905,544

3.94%

13.33%

2.47%

73.78%

€8,000,000

7,288,000

7,104,800

24,193,544

24,010,344

€5,000,000

4,555,000

4,440,500

81,356,297

132,883,058

For details of the underlying investments of the Limited Partnership, please refer to Note 7.

The notes following form an integral part of these financial statements

FINANCIAL
STATEMENTS

continued

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FINANCIAL
STATEMENTS

continued

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

Investment income

Interest

Total income

Expenses

Management fees

Performance fees

Professional fees

Other

Interest

Total expenses

notes

2010
£

2009
£

6,10

4,835,741

4,389,662

4,835,741

4,389,662

306,677

408,948

279,086

372,133

379

–

529,441

970,094

223,733

1,677

1,367,223

1,724,945

Net investment income

3,468,518

2,664,717

Realised and unrealised gains (losses)
on foreign exchange and investments

Net realised gains (losses) on foreign exchange

Net change in unrealised (losses) gains on foreign exchange

Net realised gains on investments

51,288

(545)

31,263,988

(95,088)

1,226

–

Net change in unrealised appreciation on investments

53,735

52,466,526

Net realised and unrealised gains on foreign exchange and investments

31,368,466

52,372,664

Net earnings

Net earnings per share

34,836,984

55,037,381

0.27

0.47

The notes following form an integral part of these financial statements

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FINANCIAL
STATEMENTS

continued

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

notes

2010
£

2009
£

Net increase in net assets resulting from operations

Net investment income

3,468,518

2,664,717

Net realised gains (losses) on foreign exchange

Net change in unrealised (losses) gains on foreign exchange

Net realised gains on investments

51,288

(545)

31,263,988

(95,088)

1,226

–

Net change in unrealised appreciation on investments

53,735

52,466,526

Net increase in net assets resulting from operations

34,836,984

55,037,381

Capital share transactions

Proceeds on issue of shares

Net increase in net assets from capital share transactions

Net increase in net assets

Net assets at beginning of year

–

25,133,660

34,836,984

80,171,041

180,110,358

99,939,317

Net assets at end of year

214,947,342

180,110,358

The notes following form an integral part of these financial statements

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STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(Expressed in British Pounds)

2010
£

2009
£

Cash flows from operating activities

Net increase in net assets resulting from operations

34,836,984

55,037,381

Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by (used in) operating activities:

Net realised and unrealised gains on foreign exchange and investments

(31,368,466)

(52,372,664)

Payments for purchases of investments

Proceeds on disposal of investments

Change in accrued interest receivable

Change in other receivables

Change in accounts payable and accrued expenses

(36,490,528)

(27,283,560)

106,983,070

11,314,316

(33,021)

11,841

413,569

1,849,376

(21,114)

54,149

Net cash provided by (used in) operating activities

74,353,449

(11,422,116)

Cash flows from capital transactions

Proceeds on issuance of shares

Net cash provided by capital transactions

Net effect of foreign exchange

–

25,133,660

50,743

(93,855)

Net increase in cash and cash equivalents

74,404,192

13,617,689

Cash and cash equivalents at beginning of year

46,511,535

32,893,846

Cash and cash equivalents at end of year

120,915,727

46,511,535

Interest paid during the year

379

1,677

The notes following form an integral part of these financial statements

FINANCIAL
STATEMENTS

continued

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

1. THE COMPANY

Oakley Capital Investments Limited (the “Company”) is a closed-ended investment company which was
incorporated under the laws of Bermuda on 28 June 2007. The principal objective of the Company is to
achieve capital appreciation through investments in a diversified portfolio of private mid-market UK and
European businesses. The Company achieves its investment objective primarily through an investment in
Oakley Capital Private Equity L.P. (the “Limited Partnership”), an exempted limited partnership established
in Bermuda on 10 July 2007. The manager is Oakley Capital (Bermuda) Limited (the “Manager”) and the
investment adviser is Oakley Capital Limited (the “Investment Adviser”). The Company and the general
partner of the Limited Partnership have at least one director in common.

The Company listed on the AIM market of the London Stock Exchange on 3 August 2007.

2. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

The accompanying financial statements are prepared in accordance with US generally accepted accounting
principles.

b) Use of estimates

The preparation of financial statements in conformity with US generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements and the
reported amounts of increases and decreases in net assets during the reporting period. Actual results could
differ from those estimates.

c) Investment valuation
Limited Partnership
Security transactions are accounted for on a trade date basis, based on the capital drawdown and
proceeds distribution dates from the Limited Partnership. The Company’s investment in the Limited
Partnership is valued at the balance on the Company’s capital account in the Limited Partnership as at the
reporting date. Any difference between the capital introduced and the balance on the Company’s capital
account in the Limited Partnership is recognised in net change in unrealised appreciation and depreciation
on investments in the Statements of Operations.

The Limited Partnership values investments at fair value and recognises gains and losses on security
transactions using the specific cost method.

Mezzanine loans, bridge loans and senior loans
Mezzanine loans, bridge loans and senior loans are initially valued at the price the loan was granted.
Subsequent to initial recognition the loans are valued on a fair value basis taking into account market
conditions and any appreciation or deterioration in value.

Realised gains and losses are recorded when the security acquired is realised. The net realised gains and
losses on sale of securities are determined using the specific cost method.

The Company is subject to the provisions of the FASB guidance on Fair Value Measurements and
Disclosure (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value in
accordance with US generally accepted accounting principles and expands disclosures about fair value
measurements. ASC 820 establishes a hierarchical disclosure framework which prioritises and ranks the
level of market price observability used in measuring investments at fair value. Market price observability is
affected by a number of factors, including the type of investment and the characteristics specific to the
investment. Investments with readily available active market quoted prices or for which fair value can be
measured from actively quoted prices generally will have a higher degree of market price observability and
a lesser degree of judgment used in measuring fair value.

NOTES TO THE
FINANCIAL
STATEMENTS

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NOTES TO THE
FINANCIAL
STATEMENTS

continued

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O

The hierarchy of inputs is summarised below.

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates,

prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Investment Adviser’s own assumptions in

determining the fair value of investments)

The inputs and methodologies used in valuing the securities are not necessarily an indication of the risks
associated with investing in those securities.

Securities traded on a national stock exchange are valued at the last reported sales price on the valuation
date and are categorized as Level 1 within the fair value hierarchy. When prices are not readily available, or
are determined not to reflect fair value, the Company may value these securities at fair value as determined
in accordance with the procedures approved by the Investment Adviser in consultation with the Manager.

Level 2 securities are valued using representative brokers’ prices, quoted prices for similar investments,
published reports or, third-party valuations.

Level 3 securities are valued at the direction of the Investment Adviser in consultation with the Manager.
In these circumstances, the Manager will attempt to use consistent and fair valuation criteria and may
(but is not required to) obtain independent appraisals at the expense of the Company.

The level in the fair value hierarchy within which the fair value measurement falls is determined based on
the lowest level input that is significant to the fair value measurement.

d) Income recognition

Interest income and expenses are recognised on the accruals basis.

e) Foreign currency translation

Investments and other monetary assets and liabilities denominated in foreign currencies are translated into
British Pound amounts at exchange rates prevailing at the reporting date. Capital drawdowns and proceeds
of distributions from the Limited Partnership in foreign currencies and income and expense items
denominated in foreign currencies are translated into British Pound amounts at the exchange rate on the
respective dates of such transactions.

Foreign exchange gains and losses on other monetary assets and liabilities are recognised in net realised
and unrealised gain or loss from foreign exchange in the Statements of Operations.

The Company does not isolate unrealised or realised foreign exchange gains and losses arising from
changes in the fair value of investments. All such foreign exchange gains and losses are included with
the net realised and unrealised gain or loss on investments in the Statements of Operations.

f) Cash and cash equivalents

The Company considers all short-term deposits with a maturity of 90 days or less as equivalent to cash.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents at 31 December 2010 and 2009 consist of the following:

Cash

Short-term deposits

2010
£

2009
£

–

10,581,913

120,915,727

35,929,622

120,915,727

46,511,535

NOTES TO THE
FINANCIAL
STATEMENTS

continued

4. MANAGEMENT AND PERFORMANCE FEES

(a) The Company has entered into a Management Agreement with the Manager to manage the Company’s

investment portfolio. The Manager will not receive a management fee from the Company in respect of funds
either committed or invested by the Company in the Limited Partnership or any successor fund managed by
the Manager. The Manager will receive a management fee at the rate of 1% per annum in respect of those
funds that are not committed to the Limited Partnership or any successor fund (but including the proceeds
of any realisations), which are invested in cash, cash deposits or near cash deposits and a management fee
at the rate of 2% per annum in respect of those funds which are invested directly in co-investments.
The management fee is payable monthly in arrears. During the year ended 31 December 2010, the Company
incurred management fees of £306,677 (2009: £Nil). As at 31 December 2010, management fees in the
amount of £306,677 were payable to the Manager (2009: £Nil).

The Manager may also receive a performance fee of 20% of the excess of the amount earned by the
Company over and above an 8% hurdle rate per annum on any monies invested as a co-investment with
the Limited Partnership or any successor limited partnership. Any co-investment will be treated as a
segregated pool of investments by the Company. If the calculation period is greater than one year, the
hurdle rate shall be compounded on each anniversary of the start of the calculation period for each
segregated co-investment. If the Manager does not exceed the hurdle rate on any given co-investment
that co-investment shall be included in the next calculation on a co-investment so that the hurdle rate is
measured across both co-investments. No previous payments of performance fee will be affected if any
co-investment does not reach the hurdle rate of the return. During the year ended 31 December 2010,
the Company incurred performance fees of £408,948 (2009: £529,441). As at 31 December 2010,
performance fees in the amount of £107,044 were payable to the Manager (2009: £Nil).

(b) The Manager has entered into an Investment Adviser Agreement with the Investment Adviser to advise
the Manager on the investment of the assets of the Company. The Investment Adviser will not receive
a management or performance fee from the Company. Any fees due to the Investment Adviser will be
paid by the Manager out of the management fees it receives from the Company.

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NOTES TO THE
FINANCIAL
STATEMENTS

continued

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following is a summary of the inputs used in valuing the Company’s assets carried at fair value:

Investments in Securities

Quotes prices (Level 1)

Other significant observable inputs (Level 2)

31 December
2010
£

31 December
2009
£

–

Significant unobservable inputs (Level 3)

93,708,239

132,883,058

The instruments comprising investments in securities are disclosed in the schedules of investments.

The Company has an investment into a private equity limited partnership. The investment is included at fair
value based on the Company’s balance on its capital account in the Limited Partnership. The valuation of
non-public investments requires significant judgment by the Limited Partnership’s investment adviser in
consultation with the manager of the Limited Partnership due to the absence of quoted market values,
inherent lack of liquidity and the long-term nature of such assets. Private equity investments are valued
initially based upon transaction price. Valuations are reviewed periodically utilising available market data to
determine if the carrying value of these investments should be adjusted. Such market data primarily includes
observations of the trading multiples of public companies considered comparable to the private companies
being valued. In addition, a variety of additional factors are reviewed by the Limited Partnership’s investment
adviser, including, but not limited to, financing and sales transactions with third parties, current operating
performance and future expectations of the particular investment, changes in market outlook and the third
party financing environment.

Mezzanine loans, bridge loans and senior loan notes are initially valued at the price the loan was granted.
Subsequent to initial recognition, the loans are valued on a fair value basis taking into account market
conditions and any appreciation or deterioration in value.

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NOTES TO THE
FINANCIAL
STATEMENTS

continued

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used
to determine fair value:

Investment in Limited Partnership

Fair value at beginning of year

Purchases

Proceeds on disposal

Realised gain on disposal

Investment
in Securities
2010
£

Investment
in Securities
2009
£

104,432,214

39,325,959

11,194,582

12,342,035

(73,476,433)

31,952,746

–

Net change in unrealised appreciation on investments

(125,525)

52,764,220

Limited Partnership, fair value at end of year

73,977,584

104,432,214

Unquoted debt securities

Fair value at beginning of year

Purchases

Proceeds on disposal

Net realised gain (loss) on disposal and net change
in unrealised depreciation on investments

28,450,844

25,121,336

25,295,946

14,941,524

(33,506,637)

(11,314,316)

(509,498)

(297,700)

Unquoted debt securities, fair value at end of year

19,730,655

28,450,844

Fair value at end of year

93,708,239

132,883,058

The net change in unrealised appreciation on investments relates to investments held at the respective
year end.

Of the investments held by the Limited Partnership, 29% (2009: 0%) are classified as Level 2 investments
and 71% (2009: 100%) are classified as Level 3 investments by the Limited Partnership.

6. ADMINISTRATION FEE

Under the terms of the Company Administration Agreement dated 30 July 2007 between Mayflower
Management Services (Bermuda) Limited (the “Administrator”) and the Company, the Administrator receives
an annual administration fee at prevailing commercial rates, subject to the minimum monthly fee of
US$5,000 per month. During the year ended 31 December 2010, the Company incurred administration
fees of £63,044 (2009: £43,675), which is included in professional fees in the Statements of Operations.
As at 31 December 2010, there was a balance payable of £35,002 (2009: £14,408), which is included in
accounts payable and accrued expenses.

7. INVESTMENTS

Limited Partnership
The Company has committed substantially all of its capital to the Limited Partnership and its successor
fund. The Limited Partnership’s primary objective is to invest in a diversified portfolio of private mid-market
UK and European businesses, aiming to provide investors with significant long-term capital appreciation.
The investment in the Limited Partnership is denominated in Euros. The Limited Partnership has an initial
period of ten years from its final closing date of 30 November 2009; however the life of the Limited
Partnership may be extended, at the discretion of the General Partner, by up to three additional one year
periods to provide for the orderly realisation of investments. The Limited Partnership will make distributions
as its investments are realised.

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NOTES TO THE
FINANCIAL
STATEMENTS

continued

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The Company’s share of the total capital called by the Limited Partnership to 31 December 2010 was
£62,882,391 (€77,605,000) (2009: £52,607,753 (€64,515,000)), representing 41.50% of the Company’s
total capital commitment. As at 31 December 2010, the Company accounted for 65.01% of the total capital
and commitments in the Limited Partnership (2009: 66.05%).

The Company may also make co-investments with the Limited Partnership based on the recommendations
of the Manager.

At 31 December 2010 all of the Limited Partnership’s investments have been valued at fair value.
The Limited Partnership appointed a third party valuer to determine the fair value of certain underlying
businesses taking into account financial information provided by the Limited Partnership’s investment
adviser. The Limited Partnership’s accounts have been audited for the year ending 31 December 2010.
The Company’s participation in the Limited Partnership has been valued at £73,977,584 (2009: £104,432,214)
at year end.

Limited Partnership’s investments
The Limited Partnership made its first realisation with the disposal of Host Europe Corporation Limited
(“Host Europe”). The Limited Partnership made two direct acquisitions in 2010, Time Out Group Limited and
BDO Wealth Management, and it made an investment through the existing investment, Headland Media
Limited (“Headland Media”). The Company was involved in the refinancing of all three investee companies.

Host Europe Corporation
On 15 September 2010 the Limited Partnership announced the disposal of Host Europe to Montagu Private
Equity, subject to approval by Germany’s Federal Cartel Office (Bundeskartellamt). Having received this
approval, the sale was completed on 28 October 2010. Total consideration for the sale was £222.0 million.
The consideration was used to repay third party debt of £51.0 million; to repay debt due and interest to the
Company of £20.0 million; to pay Host Europe management in respect of their interests of £19.0 million; and
to meet transaction costs of £4.3 million. Net proceeds from the investment were therefore £126.5 million.

Total net proceeds paid to the Limited Partners on 9 November 2010 was £112.0 million, after performance
fees. The Company received £73.0 million representing approximately 45% of the Company’s total
commitments and approximately 114% of its called capital.

Prior to the sale of Host Europe, the shares it held in Daisy Group plc (“Daisy”) were extracted and continue
to be held by the Limited Partnership through Host Europe (Bermuda) Limited. These 36.25 million shares,
representing 14% of Daisy were acquired as part of the consideration for the disposal of Host Europe’s
Vialtus division in July 2009. The value of the Daisy shares as at 31 December 2010 was 100 pence.
As at 31 December 2010, the net fair value of this investment attributable to the Company was £19.2 million
(2009: £18.0 million).

Headland Media Limited
Headland Media Limited (“Headland Media”) is a leading business to business media content provider of
news digest services to the hotel and shipping sectors; as well as a leading provider of entertainment and
training services to offshore industries. On 30 April 2010 Headland Media made a further acquisition of
Newslink Services Limited. In total the Limited Partnership has invested £4.4 million. As at 31 December
2010, the net fair value of the investment attributable to the Company was £6.0 million (2009: £4.4 million).

Monument Securities Limited
Monument Securities Limited (“Monument Securities”) is a global equity, derivatives and fixed income broker
with an 18 year history. Monument Securities provides services to institutions, fund managers, market
professionals, corporates and hedge funds. The total transaction value in March 2008 was £5.5 million.
The Limited Partnership has a 51% interest in Monument Securities and its contribution was £2.8 million.

As at 31 December 2010, the net fair value of the investment attributable to the Company was £1.4 million
(2009: £2.2 million).

VVX (Bermuda) Limited
On 4 December 2009, the Limited Partnership, through V VX (Bermuda) Limited, acquired 51% of Verivox
Holdings Limited (“Verivox”), Germany’s largest independent online consumer energy price comparison
service, for £17.0 million. The consideration was funded using a combination of debt and equity. The
Limited Partnership’s contribution was £4.6 million for equity. Verivox receives commission from energy
suppliers when consumers elect to switch providers through its website.

As at 31 December 2010, the net fair value of the investment attributable to the Company was £35.5 million
(2009: £11.1 million).

Fitzwilliam Holdco Limited (BDO Wealth Management)
On 4 November 2010, the Limited Partnership announced that, through its wholly owned subsidiary
Fitzwilliam Holdco Limited, it had acquired 84.4% of Fitzwilliam Holdings Limited (BDO Wealth
Management), the UK-wide independent provider of investment advice and solutions to private individuals
and corporates, from BDO LLP. The total transaction value was £14.2 million funded through a combination
of debt and equity. The Limited Partnership’s contribution was £7.0 million. At 31 December 2010, the
acquisition was valued at cost given the short period between the time of acquisition and the year end.

TO (Bermuda) Limited (Time Out)
On 25 November 2010, the Limited Partnership acquired 50% of Time Out, the international multi channel
publisher. Time Out was founded in 1968 and publishes in over 30 countries around the world. Time Out is
uniquely positioned to provide services across traditional print, digital channels and live events. The total
transaction value was £13.4 million funded through a combination of debt and equity. The Partnership’s
contribution was £4.7 million. At 31 December 2010, the acquisition was valued at cost given the short
period between the time of acquisition and the year end.

Certain directors of the Company and the general partner of the Limited Partnership may also be directors
of the investee companies.

Mezzanine financing investments
Headland Media Limited
As part of the Limited Partnership’s acquisition of Newslink through Headland Media, the Company
provided £1.6 million of debt finance, in the form of a secured mezzanine instrument from the Company.
The instrument carries a fixed interest rate of 15% and is due December 2014.

Host Europe Corporation
As at 31 December 2009, the Company had a mezzanine loan outstanding with Host Europe of £16.9 million.
This instrument carried a fixed interest rate of 15.25% maturing on the earlier of 31 December 2015, the
date of sale or IPO of Host Europe. On November 2010 as consideration from the sale of Host Europe to
Montagu Private Equity, the £16.9 million loan plus interest was repaid in full.

Time Out (Bermuda) Limited
As part of the Limited Partnership’s acquisition of Time Out Group Limited, the Company provided debt
finance of £5.7 million in the form of a mezzanine loan. The instrument carries a fixed interest rate of 15%
maturing on 30 November 2015. The Company has also provided a secured senior loan of £5.0 million.
The instrument carries a fixed interest rate of 8.5% and matures on 31 March 2013. The fair value is
considered to equal the amortised cost.

Fitzwilliam Holdco Limited (BDO Wealth Management)
As part of the Limited Partnership’s acquisition of BDO Wealth Management, the Company provided debt
finance of £6.0 million in the form of a mezzanine loan. The instrument carries an interest rate of 15% and
matures on 30 November 2015. The fair value is considered to equal the amortised cost.

VVX (Bermuda) Limited (Verivox)
As part of the Limited Partnership’s acquisition of Verivox the Company provided debt finance of £7.3 million
(€8 million), in the form of an unsecured mezzanine instrument. The instrument carries a fixed interest rate of
15.0%, maturing no later than 4 December 2019. Due to the strong trading performance enjoyed by
Verivox, it was able to pay £6.35 million of the loan on 21 December 2010 leaving a principal balance of
£1.42 million (€1.65 million) at 31 December 2010. This was subsequently repaid in full on 11 March 2011.
The fair value is considered to equal the amortised cost.

NOTES TO THE
FINANCIAL
STATEMENTS

continued

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Senior loan notes
Verivox Investments Limited (Verivox)
As at 31 December 2009, Verivox has drawn £4.6 million (€5 million) of a secured debt finance facility
provided by the Company. The instrument carries a fixed interest rate of 8.5%, maturing no later than
4 December 2012. As mentioned previously, Verivox Holdings Limited had a very strong trading
performance and as a result was able to pay the senior debt in full on 21 December 2010.

Bridge financing investments
Oakley Capital Private Equity L.P.
On 2 November 2010, the Company provided a 30 day bridging loan to the Limited Partnership for
£6.0 million at an interest rate of 6% per annum for the acquisition of BDO Wealth Management.
The loan was repaid in full by 16 November 2010.

8. CAPITAL COMMITMENT

The total capital commitment made by the Company in the Limited Partnership is £160,950,900
(€187,000,000) (2009: 166,074,700 (€187,000,000)). The Limited Partnership may draw upon the capital
commitment at any time subject to two weeks’ notice on an as needed basis. Since inception, capital in the
amount of £62,882,391 (€77,605,000) (2009: £52,607,753 (€64,515,000)) was called from the Company by
the Limited Partnership. As at 31 December 2010, the amount of capital commitment available to be called
from the Company by the Limited Partnership was £94,156,277 (€109,395,000) (2009: £108,788,929
(€122,485,000)).

On 28 October 2010, the Company made a capital commitment in the amount of €100,000,000
(£86,070,000) in a successor fund to the Limited Partnership. As at 31 December 2010, there have
been no capital calls in respect of this commitment.

9. SHARE CAPITAL AND WARRANTS

(a) Share capital

The authorised share capital of the Company on incorporation was $1,000 divided into 1,000 shares par
value $1.00 each. On incorporation, one ordinary share of par value $1.00 was issued to Codan Trust
Company Limited (the “Initial Subscriber”). The currency denomination of the Company’s authorised share
capital was subsequently changed from US Dollars to Euros, the shares were subdivided and the authorised
share capital increased to €2,500,000 divided into 250,000,000 shares of par value €0.01 each.
The currency denomination of the Company’s authorised share capital was further changed from Euros to
British Pounds, the shares were consolidated, divided and redenominated and the authorised share capital
increased to £2,000,000 divided into 200,000,000 shares of par value 1 pence each. After the
consolidation, division and redenomination the Initial Subscriber was the registered shareholder of one
Ordinary Share of par value 1 pence. This Ordinary Share was made available, under the terms of the
Placing. The Placing Price of £1.00 per Ordinary Share represented a premium of 99 pence to the nominal
value of an Ordinary Share issued under the Placing.

The Placing of the Company’s Shares was fully subscribed, so that immediately after the Placing, the
authorised share capital of the Company consisted of 200,000,000 Ordinary Shares and the issued share
capital of the Company of 100,000,000 Ordinary Shares.

NOTES TO THE
FINANCIAL
STATEMENTS

continued

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(b) Warrants

50,000,000 warrants were issued in conjunction with the subscription of Ordinary Shares at a ratio of one
warrant for every two shares. Each warrant conferred on the holder the right to purchase one fully paid
Ordinary Share at an exercise price of £1.30 as adjusted in accordance with Condition 2.3 of the AIM
Admission Document. Warrants were capable of exercise at the option of the holder at any time prior to the
close of business on AIM of the third anniversary of the date of admission of the Company warrants to AIM.

As the exchange traded price of the Ordinary Shares as at 31 December 2009 was below the exercise price
of the warrants, there was no dilution caused by the warrants in the net asset value and gain per share.
In accordance with the terms and conditions set out in the warrant instrument dated 30 July 2007, the final
date for exercising the subscription rights conferred by the Warrants was 3 August 2010. Cancellation of the
listing of the Warrants took place on 4 August 2010.

On 9 March 2009, a secondary placing took place whereby the Company issued 28,125,000 shares, which
were sold at a price of 64 pence per share raising £18,000,000.

(d) Share repurchase

On 2 October 2008, the Board of Directors authorised a repurchase programme of 7,589,000 shares.
Under the tender offer, the Company repurchased 7,589,000 shares for £4,576,316 at a price of 60 pence
per share and held them in treasury. All of the rights of the treasury shares were suspended (including
economic participation, voting and dividend distribution rights).

On 21 October 2009, an additional placing took place whereby the Company re-issued the 7,589,000
shares previously repurchased at a price of 94 pence per share raising £7,133,660.

Shares of common stock and warrants outstanding are:

Common stock

2010

2009

Balance at beginning of year

128,125,000

92,411,000

Issued

Repurchased

–

35,714,000

–

Balance at end of year

128,125,000

Weighted average shares in issue at end of year

128,125,000

116,825,010

Warrants

Balance at beginning of year

Expired

Balance at end of year

2010

2009

48,750,000

(48,750,000)

–

48,750,000

NOTES TO THE
FINANCIAL
STATEMENTS

continued

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10. RELATED PARTIES

Certain Directors of the Company are also Directors, Members and/or shareholders of the Manager, Oakley
Capital Corporate Finance LLP (“Oakley Finance”), Palmer Capital Associates (International) Limited and the
Administrator; entities which provide services to and receive compensation from the Company.

The Company has a financial advisory agreement with Oakley Finance. During 2010, the Company incurred
financial advisory fees of £42,500 (2009: £20,125), which is included in professional fees in the Statements
of Operations. As at 31 December 2010, there was no balance payable (2009: £Nil) to Oakley Finance.

11. TAXATION

Under current Bermuda law the Company is not required to pay any taxes in Bermuda or either income or
capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda that in the
event of such taxes being imposed, the Company will be exempt from such taxation at least until the year 2016.

The Company was not required to recognise any amounts for uncertain tax positions under FASB ASC 740-10.

12. INDEMNIFICATIONS AND WARRANTIES

In the ordinary course of business, the Company may enter into contracts or agreements that may contain
indemnifications or warranties. Future events could occur that lead to the execution of these provisions
against the Company. Based on its history, experience and assessment of existing contracts, management
feels that the likelihood of such an event is remote.

13. SUBSEQUENT EVENTS

The Directors have evaluated subsequent events from the year end through 14 April 2011 which is the date
the financial statements were available to be issued. The following events have been identified for disclosure.

On 18 January 2010, the Company increased the mezzanine loan to Time Out (Bermuda) Limited by a
further £0.5 million taking the total to £6.2 million.

In March 2011, through a wholly owned subsidiary, SUN Cooperatif U.A., the Limited Partnership made an
investment in Emesa B.V. in the amount of €11.85 million. Emesa is a leading on-line e-commerce business
operating in the Dutch online leisure market. The Company supported the Limited Partnership’s acquisition
in Emesa by providing a short-term bridge loan to the Limited Partnership in the amount of €12.5 million at a
fixed interest rate of 6.5%. The Company also provided debt finance to Emesa in the form a mezzanine loan
facility of €5.4 million and senior debt facility of €10.0 million. The mezzanine loan carries a fixed interest rate
of 15%, maturing no later than 31 March 2016 and the Senior debt facility carries a fixed interest of 8.5%,
repayable on the earlier of a sale, change of control or borrower, listing or by 31 March 2014.

In March 2011, V VX (Bermuda) Limited repaid the outstanding balance on the mezzanine loan in full.

In April 2011, the Limited Partnership made a capital call of 10% or €18.7 million of the Company’s
commitment. The Limited Partnership has advised that it will use part of the proceeds from the capital call to
repay the bridge loan in full and use the remaining proceeds to fund future investments.

NOTES TO THE
FINANCIAL
STATEMENTS

continued

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DIRECTORS AND ADVISERS

DIRECTORS

James Michael Keyes
Independent Director and Chairman

Laurence Charles Neil Blackall
Independent Director

Christine (Tina) Michelle Burns
Independent Director

Peter Adam Daiches Dubens
Director

Ian Patrick Pilgrim
Director

Christopher Wetherhill
Independent Director

Legal Advisers to the Company
as to Bermuda Law
Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM CX
Bermuda

Nominated Adviser and Broker
to the Company
Liberum Capital Limited
Level 12, Ropemaker Place
25 Ropemaker Street
London EC2Y 9AR
United Kingdom

Auditors to the Company and
the Limited Partnership
KPMG
Crown House
4 Par la Ville Road
Hamilton HM 08
Bermuda

Branch Registrar
Computershare Investor Services
(Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES

ADVISERS

Registered Office
102 St. James Court
Flatts
Smiths FL04
Bermuda

Manager to the Company
and the Limited Partnership
Oakley Capital (Bermuda) Limited
102 St. James Court
Flatts
Smiths FL04
Bermuda

Investment Adviser to the Manager
Oakley Capital Limited
3 Cadogan Gate
London SW1X 0AS
United Kingdom

Legal Advisers to the Company
as to English Law
Simpson Thacher & Bartlett LLP
City Point
1 Ropemaker Street
London EC2Y 9HU
United Kingdom

CREST Depositary
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
United Kingdom

Administrator to the Company
and the Limited Partnership
Mayflower Management Services (Bermuda) Limited
102 St. James Court
Flatts
Smiths FL04
Bermuda

DIRECTORS
AND
ADVISERS

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that the 2011 Annual General Meeting of the members of the Company will be
held at 102 St. James Court, Flatts, Smiths FL04, Bermuda on:

15 June 2011 at 11.00 a.m. (Bermuda time)

AGENDA

1. To elect a Chairman, if necessary.

2. To read the Notice convening the Meeting.

3. To lay before the Members the Company’s audited report and accounts for the financial year ended 31

December 2010.

4. To re-appoint KPMG of Crown House, 4 Par-la-Ville Road, Hamilton HM 08, Bermuda as auditors for

the ensuing year, and to authorise the Directors to fix their remuneration.

5. To note the retirement by rotation as Directors of the Company of Ian Pilgrim and Tina Burns at the

Meeting in accordance with Bye-law 105 of the Company’s Bye-laws.

6. To:

a) determine the minimum and maximum number of Directors as not less than two (2) and not more

than twelve (12);

b) re-elect Peter Dubens as a Director of the Company so to serve until the next Annual General

Meeting or until his successor is elected or appointed;

c) re-elect James Keyes as a Director of the Company so to serve until the next Annual General

Meeting or until his successor is elected or appointed;

d) re-elect Laurence Blackall as a Director of the Company so to serve until the next Annual General

Meeting or until his successor is elected or appointed;

e) re-elect Christopher Wetherhill as a Director of the Company so to serve until the next Annual

General Meeting or until his successor is elected or appointed;

re-elect Tina Burns as a Director of the Company so to serve until the next Annual General Meeting
or until her successor is elected or appointed;

g) re-elect Ian Pilgrim as a Director of the Company so to serve until the next Annual General Meeting

or until his successor is elected or appointed;

h) authorise the Directors from time to time to fill any vacancies on the Board; and

i) confer general authority on the Directors to appoint alternate Directors.

Copies of the letters of appointment of the Directors of the Company will be available for inspection for at
least 15 minutes prior to the Meeting and during the Meeting itself.

9 May 2011
BY ORDER of the Directors
Mayflower Management Services (Bermuda) Limited
Secretary

NOTICE OF
ANNUAL
GENERAL
MEETING

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NOTICE OF
ANNUAL
GENERAL
MEETING

NOTES

1. The Company has established the date of this Notice as the record date (the “Record Date”) for the purposes

of the Meeting, and accordingly only the registered holders of the Company’s Ordinary Shares who are
entered in the Company’s Register of Members as at the Record Date are entitled to receive notice of, and
attend and vote at, the Meeting.

2. A member is entitled to appoint one or more proxies to attend the Meeting, and, on a poll, vote instead of that

member. A proxy need not be a Member.

3. Enclosed is a Form of Proxy appointing the Chairman, failing which the Secretary, of the Meeting or some

other person to vote your shares with respect to any and all matters coming before the Meeting.

To be valid the Form of Proxy must be received no later than 11.00 a.m. Bermuda time on 15 June 2011 at:

Mayflower Management Services (Bermuda) Limited
Secretary
Oakley Capital Investments Limited
102 St. James Court
Flatts
Smiths FL04
Bermuda

Email: ipilgrim@mayflower.bm
Fax: (441) 236 6724

Please return the completed Form of Proxy by scanned e-mail or by facsimile.

4. The Company advises that it knows of no other items to be brought before the Meeting other than the

agenda items specified in the Notice. However, should any other items be presented at the Meeting of which
the Company is not aware, it is the intention that the Proxy-holder vote at his/her discretion.

5. The giving of a proxy does not preclude the right to vote in person, should the Member giving the proxy so

desire, as the proxy may be revoked at any time, provided Notice of Revocation is received by the Company
at the address given in paragraph 3 above before commencement of the Meeting. Notice of Revocation may
be served by scanned e-mail or by facsimile.

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FOR YOUR NOTES

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Designed by addtotaste.com and printed by Portman Lodge Limited
Designed by add to taste and printed by Portman Lodge Limited

Oakley Capital Investments Limited is registered in Bermuda with company number 40324.
Registered office: 102 St. James Court, Flatts, Smiths FL04, Bermuda