Annual Report and Accounts 2016
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Oakley Capital Investments Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton
HM08
Bermuda
T: +1 441 542 6330
F: +1 441 542 6724
E: investorrelations@oakleycapital.com
Oakley Capital Investments Limited (“OCI” or the
“Company”) is a Bermuda based company listed on
AIM. OCI seeks to provide investors with long-term
capital appreciation, through its investment in the
Oakley Funds and co-investment opportunities.
Overview
01 Financial Highlights
02 At a Glance
04 Chairman’s Statement
Strategic Report by the Investment Adviser
08
Introduction to the Investment
Manager and Adviser
09 OCI Investment Policy and Strategy
11 Investment Approach
14 Environmental, Social and Governance
16 Market Overview and Outlook
17 OCI NAV Overview
18 Movement in Net Asset Value
19 OCI Investment Activity
Governance
38 Board of Directors
40 Directors’ Report
42 Statement of Directors’ Responsibilities
43 Audit Committee Report
44 Corporate Governance Report
Financial Statements
50 Independent Auditor’s Report
52
Consolidated Statement
of Comprehensive Income
53 Consolidated Balance Sheet
54
Consolidated Statement
of Changes in Equity
55 Consolidated Statement of Cash Flows
56 Notes to the Consolidated Financial Statements
21 Portfolio Review: Oakley Fund I Investment Activity
79 Glossary
22 Portfolio Review: Oakley Fund II Investment Activity
80 Directors and Advisers
81 Notice of Annual General Meeting
23 Oakley Funds’ Realisations and Distributions
24 Portfolio Review: Co-Investment Activity
26 Case Study: Parship Elite Group
28 Overview of Oakley Funds’ Portfolio Companies
For more information visit
www.oakleycapitalinvestments.com
01
Financial Highlights
Net Asset Value1
Net Asset Value per Share2
Total NAV per Share Return
£438.4m
(2015: £382.2m)
£2.31
(2015: £2.00)
+16%
(2015: 0%)
Share Price
£1.64
(2015: £1.44)
Total Shareholder Return3
+17%
(2015: -7%)
Underlying Oakley Funds’
Portfolio Growth4
+30%
(2015: +31%)
Maiden Dividend
4.5p
(2015: nil)
Number of Shares in Issue
at 31 December 2016
189.8m
(2015: 191.1m)
Value of Current Investments
£340.9m
(2015: £289.2m)
Oakley Funds’ Portfolio Companies
Parship Elite Group
Page 26
Time Out
Page 28
North Sails
Page 30
Facile.it
Page 31
Educas
Page 29
Damovo
Page 32
Daisy
Page 33
Verivox
Page 34
Host Europe Group
Page 35
1 This is the post-dividend NAV, pre-dividend NAV was £447.0 million at 31 December 2016.
2 Calculated based on the post-dividend NAV, pre-dividend NAV per share was £2.35 at 31 December 2016.
3 Calculated based on the share price at 31 December 2016 of £1.64 plus the maiden dividend of 4.5 pence.
4 Calculated on a like-for-like basis.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 02
03
At a Glance
The post-dividend NAV of OCI was £438.4m* (2015: £382.2m) on 31 December 2016, a 15% increase
year-on-year. It consists of the following components:
48.2%
of total NAV
29.6%
of total NAV
22.2%
of total NAV
£211.3m
£129.6m
£97.5m
Assets in the
underlying Oakley Funds.
Investments held by OCI
directly or indirectly in the
portfolio companies either
through equity or debt.
Other assets
and liabilities held by OCI,
primarily cash.
PORTFOLIO
KEY EVENTS DURING 2016:
The Company invests in a number of portfolio companies,
indirectly through the Oakley Funds, or directly through its
co-investments. The composition of OCI’s investment in the
underlying portfolio companies is represented in the pie-chart
below, (which includes debt and equity investments).
OCI’s share
of the underlying
Portfolio
Companies
Time Out
Educas
North Sails
Daisy
Facile
Parship
£87.2m
£69.7m
£54.3m
£42.8m
£39.3m
£22.7m
Fund Facilities
£22.6m
HEG
Verivox
Damovo
Broadstone
£12.2m
£9.8m
£5.5m
£0.4m
• Time Out Group plc successfully listed on the AIM market of
the London Stock Exchange, raising net proceeds of £59m.
• A partial sale of Parship Elite Group to ProSiebenSat.1 Media
SE (“ProSieben”) resulting in proceeds of €43.3m (£38.9m)
being distributed to the Company.
• An agreement to sell Host Europe Group ("HEG") to GoDaddy
Inc. was reached in December 2016. Expected proceeds to the
Company are approximately €14.4m (£12.2m).
• Total commitments of €325.0m (£277.3m) were made to Fund
III during the year.
• Maiden dividend was declared of 4.5 pence which was paid
on 30 January 2017.
• Announcement of Fund III’s first investment in December
2016, acquiring a portfolio of online property portals
including the leading website in Luxembourg, atHome.lu, and
the number two player in Italy, Casa.it.
* This is the post-dividend NAV, pre-dividend NAV was £447.0 million at 31 December 2016.
SECTOR FOCUS
GEOGRAPHICAL FOCUS
Oakley has developed an expertise in three core sectors in which
it has successfully invested.
Investments are focused primarily in Western Europe.
TMT
CONSUMER
EDUCATION
WESTERN EUROPE
PERFORMANCE
The table and graphs below reflect the performance from inception to date.
OCI NAV & NAV per share
*Based on pre-dividend share price growth
OCI long-term performance vs Indices
500
400
300
200
100
m
£
0
2008
2009
2010
2011
2012
2013
2014
2015
NAV £m
NAV per share
2.50
2.00
1.50
1.00
0.50
£
0
2016
200
180
160
140
120
100
80
60
40
20
x
e
d
n
i
e
c
n
a
m
r
o
f
r
e
P
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
ALL Share
AIM all share
AIM 100
OCI
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016Performance (Total Return)1 year5 yearsSince inceptionOCI NAV per share growth16%35%133%OCI share price growth*14%24% 61%FUND INVESTMENTSCO-INVESTMENTSOTHER ASSETS/LIABILITIES
04
05
I am pleased to report that the underlying performance of the Oakley Funds’
portfolio companies has been strong, reflected in the 30% like-for-like growth in the
fair value of the Oakley Funds’ investment portfolios over the past twelve months.
Chairman’s Statement
including Casa.it
Fund III announced its first investment in December 2016,
acquiring a number of European real estate consumer
in
websites
Luxembourg. This will build on Oakley’s experience in the
digital consumer sector through its previous investments
in Facile, Parship Elite Group and Verivox. This transaction
completed in January 2017.
in Italy and atHome.lu
Funding and Commitments
The Company has a capital commitment of €188.4 million
(£160.1 million) to Fund I of which 95.0% had been called at
31 December 2016, making Fund I fully invested with just
two companies remaining in the portfolio.
The Company has a capital commitment of €200.0 million
(£170.6 million) to Fund II of which 76.5% had been called
at 31 December 2016. Including debt facilities provided to
the Fund, 93% of commitments have been deployed, making
Fund II also essentially fully invested.
The Company has made a capital commitment of €325.0
million (£277.3 million) to Fund III, of which 3% had been
called at 31 December 2016.
Performance
The NAV per share as at 31 December 2016 was £2.31,
(2015: £2.00) an increase of 16% (18% before the maiden
dividend is taken into account). Of the 31 pence uplift in
NAV per share, 18 pence is attributable to the significant
weakening of Sterling over 2016, and 13 pence is due to the
strong performance of the portfolio which was partly offset
by the dividend paid.
increased
The Company’s NAV
the year by
£56.2 million to £438.4 million (2015: £382.2 million) which
is due to the movements in the underlying Funds and co-
investments.
in
Fund I represented £64.9 million (2015: £56.3 million)
of the Company’s NAV at year end, an increase of
£8.6 million in the year. The movement in Fund I was driven
by the uplift in the valuation of Educas, which was partly
offset by the decrease in Time Out’s share price following
Brexit, and the disposal of the remaining investment
in Broadstone.
“The Company’s net asset value increased in
the year by £56.2 million to £438.4 million.”
Christopher Wetherhill
Chairman
Overview
I am pleased to report that the Company has performed
well in 2016. There has been a 30% increase (on a like-for-
like basis) in the fair values of the portfolio companies held
by the Oakley Funds, reflecting strong underlying growth.
This, together with the favourable impact on the Company
of weaker Sterling, has resulted in an increase in the NAV
per share year-on-year of 16%.
In June 2016, Time Out Group plc (“Time Out”) successfully
listed on the AIM of the London Stock Exchange, generating
net proceeds of £59 million after fees and debt repayment.
Following the listing, the Company has a direct interest in
Time Out representing 24.0% of Time Out’s issued share
capital, and an indirect interest through Fund I of a further
22.7%.
In October 2016, Parship Elite Group was partially sold
to ProSiebenSat.1 Media SE (“ProSieben”). The Company
received proceeds of €43.3 million (£38.9 million) from this
transaction. The Fund generated a gross money multiple
and IRR of 3.6x and 145% respectively, from the realisation
and from its retained interest.
In December 2016, Fund II reached an agreement with
Cinven (the majority shareholder of Host Europe Group
(“HEG”)) to sell HEG to GoDaddy Inc. HEG was Oakley’s
third investment in the hosting space and demonstrates
its expertise in the TMT sector, which it continues to build
upon.
Fund II represented £144.0 million (2015: £102.0 million) of
the Company’s NAV, an increase of £42.0 million in the year.
The main driver of this increase was an uplift in fair value
arising from improved trading performances in a number of
the underlying portfolio companies, particularly Educas and
Facile. Fund II also made follow-on investments in Educas,
Daisy, North Sails and Verivox in 2016, totalling €81.3
million (£69.3 million).
Co-investments represented £129.6 million of
the
Company’s NAV at year end, comprising quoted and
included
unquoted equity and debt securities. This
£6.8 million of follow-on investment in Time Out, and
debt financing provided to North Sails Apparel BV (“North
Sails Apparel”) of £10.0 million.
Board and Committee Changes
In June 2016, Caroline Foulger was appointed as a Non-
executive Director to the Board and Chair of the Risk
Committee and Laurence Blackhall was appointed Chair
of the Audit Committee. Caroline has been an independent
Director in the financial services industry since early 2013,
and brings her significant experience to the Board of OCI.
These appointments replace Tina Burns as Non-executive
Director and Chair of the Audit Committee and Ian Pilgrim
as Non-executive Director. Both Ian Pilgrim and Tina Burns
did not offer themselves to be re-elected in the AGM on
7 June 2016. I would like to thank Tina and Ian for their
contribution to the Company over the years.
Dividend
In December 2016, the Board took a decision to introduce
a dividend of 4.5 pence per share, for the year ended 31
December 2016, given the consistent income generated
from co-investments and increased cash returns from
exits. The dividend payment equated to 2.0% of the NAV at
31 December 2016. The dividend was paid on 30 January
2017 to shareholders registered on 30 December 2016.
Outlook
OCI has performed well in the current market which is
shown in the performance of the underlying portfolio
companies. The portfolio has remained resilient
the current challenging macroeconomic and
to
geopolitical markets.
The first few months of 2017 have shown that the events
of Brexit and the new US political regime will take time to
unfold and we will be presented with new challenges along
the way. The Company is in a good position to continue to
perform well and provide long-term capital appreciation for
its shareholders.
Post Balance Sheet Events
On 23 January 2017, the Company announced a placing
of up to 17.1 million treasury shares at a price of £1.57 per
share. The Company sold 15.0 million treasury shares and
cancelled the remaining 2.1 million. This transaction settled
on 7 February 2017 raising funds of £23.6 million. The
number of ordinary shares with voting rights currently in
issue is 204,804,036, and the Company no longer holds any
shares in treasury. The dilution impact of this on the NAV per
share as at 31 December 2016 was approximately 2.6%, or
5.9 pence (2015 dilution: 1.4%, 2.9 pence).
On 31 January 2017, Fund III completed
its first
acquisition, purchasing a group of European real estate
consumer websites including Casa.it in Italy and atHome.lu
in Luxembourg. The Company’s contribution to the equity
investment, through its interest in Fund III, is approximately
€32.5 million (£28.2 million).
The sale of HEG completed on 3 April 2017, with total
proceeds of €42.2 million (£36.2 million) received by
Fund II, of which the Company will receive €14.6 million
(£12.5 million). This is a slight increase from the expected
proceeds of €14.4 million (£12.2 million) used in the year
end accounts. The exit generated a gross money multiple
and IRR of 2.1x and 40% respectively, for Fund II. The Fund
took a minority stake in HEG at the time it sold intergenia to
HEG in January 2015. This deal means, since its acquisition
of intergenia in January 2014, the combined return and IRR
to Fund II across both the HEG and intergenia investments
is 1.8x and 44% respectively.
In February 2017, Steven Tredget joined Oakley, with
responsibility for investor relations. Steven has worked in
investment banking for 17 years and was a founding partner
of our Nominated Adviser and Broker, Liberum Capital
Limited. With his knowledge of the investment community
and his understanding of and passion for the Company, he is
well placed in this role.
Christopher Wetherhill
Chairman
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 06
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Strategic Report by
the Investment Adviser
08
09
11
14
16
17
18
19
21
22
23
24
26
28
Introduction to the Investment Manager and Adviser
OCI Investment Policy and Strategy
Investment Approach
Environmental, Social and Governance
Market Overview and Outlook
OCI NAV Overview
Movement in Net Asset Value
OCI Investment Activity
Portfolio Review: Oakley Fund I Investment Activity
Portfolio Review: Oakley Fund II Investment Activity
Oakley Funds’ Realisations and Distributions
Portfolio Review: Co-Investment Activity
Case Study: Parship Elite Group
Overview of Oakley Funds’ Portfolio Companies
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 08
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Introduction to the Investment Manager and Adviser
OCI Investment Policy and Strategy
Oakley Capital
(the “Manager”),
(Bermuda) Limited
a Bermudian company, is the manager of the Company. The
Manager appointed Oakley Capital Limited, a UK company,
(“Oakley”, or the “Investment Adviser”) as its investment
adviser. Oakley also serves as Investment Adviser to the
Oakley Funds. The Investment Adviser is authorised and
regulated by the Financial Conduct Authority.
OCI offers investors a liquid investment vehicle, through
which they can obtain exposure to the underlying Oakley
Funds with minimal administrative burden, no long-term
lock-up and no minimum investment size. The Investment
Adviser is primarily responsible for advising the Manager
of the Oakley Funds, Oakley Capital Manager Limited
(“OCML”) on the investment and realisation of the assets for
each of the Funds. Peter Dubens and David Till have a team
of twenty-three investment professionals and are together
primarily responsible for performing its investment advisory
obligations with respect to the Company and the Funds.
The Oakley Funds invest in companies that can achieve
exceptional growth through acquisition and operational
improvement. The Investment Adviser has a strong track
record in exploring different sectors and geographical
areas to find investments that will create value for the
Company in the future. For example, Parship Elite Group,
an online matchmaking service in Germany, was partially
exited in 2016 at a value which represented a gross money
multiple of 3.6x and 145% IRR on the investment, returning
€43.3 million (£38.9 million) to OCI. Fund II has a remaining
stake of 38.5% in the company post-realisation.
The Oakley Funds’ focus
transactions. The deals may include:
is on primary, proprietary
• Challenging or complex management buy-outs and
buy-ins
• Carve-outs
• Operational businesses that require improvement.
look for businesses where the
The Oakley Funds
Investment Adviser’s team can make a difference. Senior
team members include proven business leaders who have
successfully run, transformed and grown businesses
themselves throughout their careers.
OCI Investment Objective
OCI has been established to provide investors with long-term capital appreciation through its investments in the
Oakley Funds managed by the Investment Manager and/or General Partners and/or advised by the Investment
Adviser (or their respective affiliates) and through co-investment opportunities alongside the Oakley Funds, either
through debt or equity instruments.
OCI Investment Strategy
Private equity funds are, traditionally, only available to very
large investors who have the financial resources to make
significant long-term commitments and can therefore be
difficult for the vast majority of smaller investors to gain
access to. OCI allows its shareholders to participate in the
private equity model through their shareholding; providing
the opportunity to access a differentiated portfolio of
private equity investments. The benefits of this include
no minimum size of investment is required and it provides
liquidity via the listed structure. The need to manage
resources to meet capital drawdowns is also removed by
investing in this way.
OCI will hold cash on the balance sheet where it has not yet
been called by the Oakley Funds or has not been deployed in
co-investment opportunities. Where possible the Company
will look to invest this cash to yield returns for the Company.
Cash investing activities are governed by the Board, and
primarily includes the investment of funds in near term cash
deposits. Whilst OCI must maintain a level of liquidity in
order to meet its commitments to the Oakley Funds, it aims
to maximise the returns made on its cash resources.
OCI also has the ability to invest alongside the Oakley
Funds in certain co-investment opportunities, in the form
of equity and debt. These opportunities arise particularly
when a deal becomes too large for the Oakley Funds and
can occur when a platform deal grows significantly and
further capital is required to grow the business and realise
its potential. Co-investments provide a means for OCI
to achieve high returns and gain direct exposure to the
value of the underlying portfolio companies. In this way
OCI can leverage the Investment Adviser’s expertise to
generate quality deal flow, whilst benefitting from direct
participation in the deal. The Board determines the level
of co-investments and carefully considers the Company’s
exposure and portfolio diversification. North Sails and Time
Out are examples of co-investments made by OCI.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 10
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OCI Investment Policy and Strategy continued
Investment Approach
Funds’ Investment Strategy
Oakley’s investment style is characterised by its ability to
empathise with entrepreneurs and ambitious managers,
combined with its analytical and operational experience.
Oakley seeks to make investments in companies with
enterprise values of approximately €60 – €300 million and
secure a controlling position in the target company.
The Oakley networks and wider ecosystem attract a range
of entrepreneurs and managers to the broader group. It
believes it has developed a respected reputation and brand
among business owners that are otherwise not attracted
to the standard auction-led private equity market. These
relationships are carefully cultivated to deliver differentiated
deal flow, limiting Oakley’s reliance on intermediaries and
auctions. Oakley rarely participates in intermediated deals
or active M&A auction processes unless it has a compelling
competitive advantage.
in-house execution capabilities enable
Oakley’s
it to
effectively exploit off-market opportunities, which tend to
be more complex, unpackaged and require speed and agility
in order to deliver. These off-market opportunities generate
a distinctive portfolio, typically at entry multiples which are
low or below the sector average.
Oakley focuses on companies undergoing significant
change, in sectors with strong growth dynamics. The sector
strategy is therefore pragmatic, with the development of
‘hubs’ of sector expertise that have evolved through a series
of successful investments. For instance, strong credentials
and networks in Digital Consumer and TMT sectors. These
spaces are represented strongly across the Oakley Funds,
but more recently Oakley has also entered the highly
attractive education sector with the investment in Educas,
which it aims to develop, through the expertise acquired by
working with this business.
Oakley primarily invests in Western Europe, with particularly
strong credentials and networks in the UK and Germany,
as well as experience of investing in the Netherlands and
Northern Italy. Oakley recognises the benefits of operating
in regions where it has a strong network and operating
experience. The entrepreneurial heritage and strong
connections among the European business community
provides a flow of attractive proprietary introductions to
primary deals.
Oakley (the Investment Adviser to the Company and the Oakley Funds) applies consistent investment criteria when accessing
opportunities. These include:
M&A potential
Robust business
models
Sector of Oakley
expertise
Attractive financial
markets
Partnership with
entrepreneurial
management teams
Sector focus
Portfolio Companies by Sector
Oakley has developed particular expertise in three core
sectors, with deep knowledge in certain subsectors
where repeated investments have been made.
All investments are managed by specialist, dedicated
sector and portfolio management teams located in
London. They work with a common purpose and
in applying consistent methodologies and
culture
processes to create value and growth in the Oakley
Funds’ portfolios.
TMT
Hosting
Consumer
Telecoms
Global Brands
Digital Consumer
Education
Private Education
Geographical focus
The Funds focus primarily in Western Europe.
100%
80%
60%
40%
20%
0%
14%
29%
43%
14%
10%
20%
40%
30%
8%
17%
50%
25%
2014
2015
2016
TMT
Consumer
Education
Other
The above graph illustrates Oakley’s focus and expertise
in the core sectors. It is calculated based on the number
of portfolio companies held by the Oakley Funds in each
sector for each respective year.
Portfolio Companies by Country
14%
14%
14%
58%
10%
10%
30%
8%
8%
34%
50%
50%
100%
80%
60%
40%
20%
0%
2014
2015
2016
UK
Germany
Italy
USA
The above graph illustrates the location of the portfolio
companies, by headquarter, over the last three years. It is
calculated based on the number of portfolio companies
held by the Oakley Funds in each geographic location.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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Investment Approach continued
Company/sector characteristics
Opportunities for value creation
OCI Re-investment
The sectors and companies that the Investment Adviser
targets are generally expected to exhibit the following
characteristics:
The Investment Adviser will seek to target investments
that have a potential for value creation through active
management in the following areas:
On any realisation of investments, the Company may re-invest
funds in any of the following ways:
Sustainable competitive advantage
Strategic redirection
In existing Oakley Funds
• Brand strength
• Flexible cost structures
• Focus on core business
• New market expansion
• New product introduction
Consolidation opportunities
Industry consolidation
• Industries early in consolidation lifecycle
• Economies of scale through buy and build
Industry attraction
• Sustainable barriers to entry
• Stable customer and supplier bases
• Attractive forecasted growth
Ability to generate sustainable earnings
and cash flow from recurring revenues
• Predictable cash-flows
• High return on invested capital
Defensible market position
• Leaders in their niches with demonstrable resilience
in downturns
• Main business risks are within the control of the
Funds and/or Company
• Economies of scale through acquisition and
integration
• Business roll-outs
Operational restructuring
• Cost structure re-alignment
• Working capital and cash management
• Information technology and systems integration
• Improved asset utilisation
Financial restructuring
• Over-leveraged capital structures
• Public to private in smaller mid-market companies
with a focus on AIM
• Non-core divestitures
Human capital management
• Management incentives through equity participation
• Removal of underperforming management teams
• Injection of new talent
in
If still
commitments
investment period, and accepting additional
Successor or new Oakley Funds
In successor and/or new Oakley Funds, with successor
in each case managed by the Investment
strategies,
Investment Adviser
Manager and/or advised by the
Co-investment opportunities
In co-investment opportunities alongside the Oakley
Funds, provided by the General Partners of any successor
Oakley Funds
Cash
In cash, cash deposits and near cash deposits
Investment Approach
Oakley employs a disciplined and methodical investment approach.
In order to evaluate a target company’s potential, Oakley will
typically conduct a detailed analysis of the sector; the target
company’s position within that sector; any consolidation potential;
the target company’s financial performance relative to its peers;
its key performance drivers; and to which potential buyers the
Investment Adviser believes the target company could ultimately
be sold.
When making acquisitions or investing in a portfolio company,
the Company and/or the Oakley Funds may invest directly or
indirectly in equity and/or debt instruments, including convertible
preference shares,
loan notes, warrants, debentures and
convertible loan stock. The debt securities in which the Company
and/or the Funds may invest may be below investment grade.
The Company and/or the Oakley Funds may also directly or
indirectly invest in derivative instruments for purposes of efficient
portfolio management (and not for speculative purposes) and make
loans or acquire debt instruments issued with a coupon and/or at a
discount to the redemption price. The Company and/or the Oakley
Funds may utilise leverage when deemed appropriate (subject to
borrowing powers of the Company).
Although the Company and/or the Oakley Funds generally expect
to invest directly in securities, subject to any applicable regulatory
requirements, the Company and/or the Oakley Funds may invest
indirectly through one or more subsidiaries or other vehicles
where the Investment Manager and/or the Directors consider that
this would be commercially preferable, tax efficient, or provide the
only practicable means of access to the relevant security.
Borrowing Powers of the Company
OCI has the power to borrow money in any manner. The Directors
cannot borrow more than 25% of the Net Asset Value of the
Company determined at the time of drawdown and in accordance
with the valuation policies and procedures adopted by OCI, as
detailed in the Company Byelaws. It may utilise leverage when
deemed appropriate by the Board, and it may be required to use
its investments as security for any borrowings which it does put
in place.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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Environmental, Social and Governance
Oakley is committed to being a responsible investor and became a signatory of the UN Principles for Responsible
Investing in December 2015. Oakley recognises that investments have an impact beyond a financial return for
investors, in particular human, environmental and social factors.
investing
is an approach to
Responsible
investment
that explicitly acknowledges the relevance to the investor
of environmental, social and governance (“ESG”) factors,
and the long-term health and stability of the market
as a whole. The Company recognises that the generation of
long-term sustainable returns is dependent on stable,
well-functioning and well governed social, environmental
and economic systems.
Awareness of environmental, social and governance
factors are important to Oakley because:
• Shareholder value can be created through improving
ESG in the underlying portfolio companies;
• There are material financial risks associated with
ESG criteria;
• ESG aligns our interest with a long-term approach
to return, as opposed to a focus on short-term
company performance;
• Understanding and mitigating the ESG risks helps
protect our reputation and goodwill in the market;
and
• Regulatory attention is increasing, with stewardship
codes launched in many jurisdictions including the UK
and EU.
ESG issues can have a significant impact on private equity
investments in terms of making and managing investments,
and creating value in each portfolio company.
The following core ESG Principles are being implemented
by Oakley to ensure that operations are in line with
responsible investing:
Core ESG Principles:
• Complying with best practice, regulations, industry
guidance and the principles of the law;
• Approaching the investment process responsibly and
considering the environmental and social impact that
any investments may have;
• Strict observance of the Company and any Fund investee
entities, on respecting fundamental human rights;
• Aiming to mitigate the environmental impact of its
own operations;
• Respecting the wishes of investors who do not wish
to invest in specific sectors; and
• Seeking equality and diversity in employment.
Responsible Investing
When considering potential new
the
Investment Adviser will assess them against certain
criteria. As part of responsible investing, there will not be
any investing in or development of relationships with a
company which:
investments,
• produces any illegal products or engages in any illegal
activities;
• has production or other activities that involve harmful
or exploitative forms of forced labour or child labour;
• manufactures, distributes or sells arms or ammunitions
designed or designated for military purposes;
• produces or sells pornography;
• is
involved with products and activities that are
banned under global conventions and agreements,
such as certain pesticides, chemicals, wastes, ozone-
depleting substances and endangered or protected
wildlife or wildlife products; or
• is involved in the supply or purchase of sanctioned
products or goods to or from countries or regions
covered by United Nations sanctions.
Governance
Oakley has an ESG Committee which meets quarterly to
discuss the ESG impact of its activities, and to evaluate
whether or not any measures need to be taken to ensure
that the ESG principles and goals are maintained.
to encourage participation
The aim is to engage and work closely with all Oakley
employees
(and, where
relevant, ensure compliance) with the ESG programme.
It is implementing the UNPRI principals in advance of the
initial reporting cycle in Q1 2018.
Oakley in the Community:
Oakley is active in the community and promotes a number of charities and trusts. OCI makes a number of donations every year to
Bermudian charities. For further details, see page 47.
The Prince’s Trust believes that every
young person should have the chance to
succeed. It helps 13 to 30 year-olds who
are unemployed or struggling at school to
transform their lives.
is an
funds
The Royal Brompton & Harefield Hospitals
independent charity that
Charity
raises
for specific projects at
hospitals that the NHS is unable to fund.
Current fundraising priorities are the Royal
Brompton Hybrid Theatre Appeal and the
Harefield Centenary Appeal.
Great Ormond Street Hospital Children’s
Charity raises money so it can provide world-
class care and to pioneer new treatments
and cures for childhood illnesses.
The Weizmann Institute of Science is one of
the world’s leading multidisciplinary basic
research institutions in natural and exact
sciences. Its dedicated scientists are working
to solve humanity’s greatest challenges.
Jeans for Genes Day funds a range of
initiatives that improve the quality of life of
children affected by genetic disorders. Jeans
for Genes Day funds Genetic Disorders UK,
a national charity dedicated to supporting
families affected by genetic disorders.
Young Enterprise is the UK’s leading charity
that empowers young people to harness
their personal and business skills. It gives
young people from all backgrounds the
opportunity to realise their full potential
through a range of practical enterprise
programmes, from one-day masterclasses
to year-long projects. These programmes
can empower young people to learn, to work
and to live.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 16
17
Market Overview and Outlook
OCI NAV Overview
The Company has continued to perform well during 2016.
The underlying portfolio companies in the Oakley Funds
have demonstrated resilience, in a year characterised by
uncertainty and volatility due to the events of Brexit and
the new US regime.
As has been widely reported
throughout 2016,
private equity investment activity remained subdued
in a market heavily influenced by price pressures. The
interest rate environment was benign and costs of
debt remained low, making the leveraging of new deals
cheaper. The demand for deals outstripped supply as
Private Equity firms came under pressure to deploy
high volumes of capital. Together with low interest
rates, this has continued to push up prices of investee
companies at entry as well as enhancing the value at
exit. The Investment Adviser’s strategy of pursuing non-
competitive, proprietary deals has enabled the Oakley
Funds to invest in high-quality companies. Oakley’s
analysis indicates that across the majority of the Funds’
portfolios, companies have been purchased at an
average EV/EBITDA multiple lower than the relevant
sector average, demonstrating an effective strategy in
an inflated valuation environment.
The exit environment was made more complex by
difficult IPO conditions across Europe in 2016. Investor
uncertainty depressed IPO volumes in the lead-up to
the UK’s Referendum on EU membership, and concerns
about the performance of the British economy outside
the European Union has caused many European firms to
postpone IPO plans. Nevertheless, the successful IPO of
Time Out onto the AIM was completed, just nine days
before the referendum.
Following Brexit, Sterling has seen a marked weakening
against other major currencies. For OCI, this has
contributed to an uplift in the Company’s NAV, however,
this is subject to market volatility going forward as the
implementation of Brexit takes shape.
there will be continued geopolitical and
Although
economic uncertainty in 2017, the Investment Adviser’s
investment strategy
focussed on actively
remains
seeking new investments where it can leverage its sector
expertise and detailed knowledge base, building strong
relationships with founders and management. It continues
to be diligent in its approach to sourcing new deals and,
while macroeconomic factors are outside of its control,
the Investment Adviser continues to believe that it can
identify opportunities to deliver long-term value accretion
to the Company.
.
x
1
2
1
.
x
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2
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.
x
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9
.
.
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.
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.
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.
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4
.
Oakley Funds’ Portfolio Companies Entry Analysis1
.
x
5
2
1
.
x
9
0
1
x
4
9
.
x
4
9
.
.
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.
OCI has three key areas of investment; being its investment in the Oakley Funds, co-investments including debt
facilities, and other asset holdings (primarily cash).
NAV at 31 Dec 2016 – £438.4m*
48.2%
of NAV
29.6%
of NAV
22.2%
of NAV
Fund Portfolio
£211.3m
Co-Investments
Other Assets and Liabilities
£129.6m
£97.5m
Fund I, Fund II & Fund III
Debt and Equity
Co-investments
Primarily cash, offset by other
payables
Headland
Media
Host
Europe
Monument
Verivox
Time Out
Emesa
Intergenia
I
Educas
Fund I & II3
Intergenia
II
North
Sails
Facile Host Europe
Damovo
Parship
Daisy II
Verivox II
Group I
Entry PF4
Entry
Sector
Sector Average
Oakley Entry Average2
Notes:
1.
Excludes: Broadstone, as business was loss making at point of acquisition; Daisy, as it was a share deal; Daisy Data Centre Solutions,
as it was a short-term investment acquired out of administration.
2. Oakley Entry Average includes pro forma multiples.
3.
4.
Educas multiples based on aggregation of school acquisitions across Fund I and Fund II excluding Bearwood as it was loss making.
PF – Pro forma numbers include identified synergies and effects of planned acquisitions at the point of entry; in the case of Facile,
given the Companies high forecast growth, pro forma multiple represents a forward year multiple.
* This is the post-dividend NAV, pre-dividend NAV was £447.0 million for the year ended 2016.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 18
19
Movement in Net Asset Value
OCI Investment Activity
The movement in the Company’s NAV over the year is summarised below:
The 2016 transactional activity for the Company’s investment portfolio is summarised below:
Opening net asset value as at start of year
Gross revenue
Other expenditure
Net foreign currency gains/(losses)
Realised gain on investments
Net change in unrealised appreciation/(depreciation) on investments
Shares issued
Treasury shares bought
Treasury shares sold
Dividend expense
Closing net asset value as at end of year
NAV per share
Movement in Net Asset Value (£m)
2015
£m
256.9
5.6
(7.3)
(2.0)
29.0
(3.6)
126.8
(24.6)
1.4
–
382.2
£2.00
2016
£m
382.2
11.7
(4.5)
4.7
8.5
46.2
–
(1.9)
–
(8.5)
438.4
£2.31
£66.6m
11.7
0.2
8.5
46.2
(1.9)
(8.5)
438.4
382.2
500
400
300
200
100
0
Opening net
asset value
at 1 Jan 2016
Gross
revenue
Net other
expenditure/FX
gains (losses)
Realised gain
on investments
Net change
in unrealised
appreciation on
investments
Treasury
shares bought
Dividend
expense
Closing net
asset value at
31 Dec 2016
During the year, the NAV increased by £56.2 million to
£438.4 million (2015: £382.2 million).
The Company’s net earnings for 2016 were £66.6 million
(2015: £21.6 million), consisting of:
• Realised gain of £8.5 million and net change
in
unrealised gain of £46.2 million, driven predominantly
by the uplift in the valuations of the underlying
portfolio companies in the Funds and the weakening
of Sterling over the year.
• Gross revenue of £11.7 million comprising of interest
income earned on the debt facilities provided to
portfolio companies and the Funds.
• Net other expenditure of £0.2 million, consisting
of gross expenses being £4.5 million offset against
positive net currency gains of £4.7 million due to the
weakening of Sterling.
• The increase of the NAV was offset by the declaration
of the Company’s maiden dividend of £8.5 million, and
by the buyback of treasury shares of £1.9 million.
Investment
Investment in Oakley Funds
Co-Investments
Equity securities
Debt securities
Total Investments
Portfolio Investment Growth (£m)
31 Dec 2015
Fair value
£m
31 Dec 2016
Fair value
£m
158.4
158.4
25.9
104.9
130.8
289.2
211.3
211.3
43.9
85.8
129.6
340.9
52.9
3.7
(4.9)
340.9
289.2
400
300
200
100
0
Total Amount
Invested at
1 Jan 2016
Fair value
movement
in Oakley Funds
Net impact of
Time Out
transactions
Movement in
Debt securities
(other than those
of Time Out)
Total Amount
Invested at
31 Dec 2016
Breakdown of the fair value movement of Investment in Oakley Funds:
Capital Calls
£41.8m
(2015: £27.1m)
Cost of Investments
sold
Fair value changes
in portfolio
£39.2m
(2015: £16.5m)
£50.3m
(2015: £(4.1)m)
Total
£52.9m
The increase in the fair value of the Company’s investments in the Oakley Funds was £52.9 million to £211.3million (2015: £158.4 million), which
represents an increase of £8.6 million for Oakley Fund I, £42.0 million for Oakley Fund II and £2.3 million for Oakley Fund III.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
20
21
OCI Investment Activity continued
Portfolio Review: Oakley Fund I Investment Activity
Overview of OCI’s underlying investments held through Oakley Funds I, II & III
The investment activity of Oakley Fund I during the year is summarised in the table below. Oakley Fund I is denominated in Euros, and the year end
exchange rate was used, where applicable. The Company held a 65.5% stake in the Fund at 31 December 2016.
Fund
Fund I
Fund I
Investments held at Year End:
Sector
Location
Time Out
Educas
Consumer
Education
Global
Global
OCI's proportionate allocation of Fund I investments (on a look through basis)
Other Assets and Liabilities (includes receivable of £0.4m for Broadstone)
OCI's investment in Oakley Fund I
Year of
Investment
2010
2013
Cost
£m
26.4
12.4
Fund II
Fund II
Fund II
Fund II
Fund II
Fund II
Fund II
Fund II
North Sails
Educas
Facile
Host Europe Group
Damovo
Consumer
Education
Consumer
Global
Global
Italy
TMT
Germany
TMT
Germany
Parship Elite Group
Consumer
Germany
Daisy
Verivox
TMT
UK
Consumer
Germany
2014
2014
2014
2015
2015
2015
2015
2015
28.3
24.7
14.5
6.5
3.4
0.0
12.1
7.0
OCI's proportionate allocation of Fund II investments (on a look through basis)
Other Assets and Liabilities
OCI's investment in Oakley Fund II
OCI's investment in Oakley Fund III
Co-Investment
Daisy
Co-Investment
North Sails
Co-Investment
Time Out
Co-Investment
Fund Facilities
Total Co-Investments
TMT
Consumer
Consumer
n/a
UK
Global
Global
n/a
2015
2014
2010
28.2
20.0
47.2
Fair Value
£m
33.9
35.9
69.8
(4.9)
64.9
32.3
33.8
39.3
12.2
5.5
22.7
11.0
9.8
166.8
(22.8)
144.0
2.3
31.7
22.0
53.3
22.6
129.6
The OCI look-through values are calculated using the OCI attributable proportion (determined as the ratio which OCI’s commitments to the
relevant Fund bear to total commitments to that Fund) applied to each investment’s fair value as held in the relevant Oakley Fund, net of any
accrued performance fees relating to that investment, and converted using the year end EUR:GBP exchange rate.
FUND I
Open Investments at 31.12.16
Educas
Time Out
Broadstone
Other
Total Current Investments
Realisations during 2016:
Broadstone
Verivox
Other
Total
Fund I
Portfolio
Educas
Time Out
51%
49%
31 Dec 2015
Fair value
€m
31 Dec 2016
Fair value
€m
31.6
82.0
9.8
0.1
123.5
64.3
60.5
0.6
0.1
125.5
Proceeds
€m
Realised Gain/
(Loss)
€m
6.3
2.1
0.2
8.6
(27.3)
2.1
0.2
(25.0)
There was an overall increase of €2.0 million in the fair
value of the Fund I portfolio investments in the year.
This is due to the uplift in Educas’ valuation, offset by
a reduction in Time Out’s share price performance
and weakening of Sterling following Brexit and the
Broadstone disposal.
In November 2016, Educas went through a structural
reorganisation creating a new Oakley Holdco (OCPE
Education LP). This was established to hold both Fund I
and Fund II Educas stakes. An independent valuation was
undertaken to establish the relative shareholdings held by
the Funds in this new entity. As a result, Fund I now has
a stake in all consolidated Educas investments. A further
€0.5 million was invested by Fund I into Educas in 2016.
Movement in Fund I Investment Portfolio (€m)
0.5
123.5
(33.6)
35.1
125.5
140
120
100
80
60
40
20
0
Fair Value at
1 Jan 2016
Investment
Additions
Investment
Disposals
at cost
Change in
unrealised
gain (loss)
Fair Value at
31 Dec 2016
Time Out is now a listed company and its fair value is
determined by a mark-to-market valuation, based on a
year end share price of £1.38.
Final deferred consideration of €2.1 million was received
by the Fund from Verivox in 2016, after the successful exit
from this investment in 2015.
The remaining Broadstone division comprising the
shares of Broadstone Corporate Benefits Limited and
Broadstone Risk and Healthcare Limited, was disposed of
in May 2016 to Livingbridge LP, after reaching a decision
to sell in December 2015, with proceeds received of
€6.3 million.
As at 31 December 2016, Fund I had called €179.0
million (£152.7 million) from OCI representing 95% of the
Company’s total capital commitment.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 22
23
Portfolio Review: Oakley Fund II Investment Activity
Oakley Funds’ Realisations and Distributions
The investment activity of Oakley Fund II during the year is summarised in the table below. Oakley Fund II is denominated in Euros, and the year
end exchange rate was used, where applicable. The Company held a 38.1% stake in the Fund at 31 December 2016.
Funds’ Realisations and Distributions during 2016:
FUND II
Investments held at 31.12.16
Facile
Educas
North Sails
Parship Elite Group
Host Europe Group
Daisy
Verivox
Damovo
Total Investments
Realisations during 2016:
Parship Elite Group
Facile
Total Realisations
31 Dec 2015
Fair value
€m
31 Dec 2016
Fair value
€m
123.3
40.8
97.3
107.9
26.4
21.3
20.6
16.3
137.0
109.8
101.9
84.4
41.4
33.9
32.0
18.4
453.9
558.8
Proceeds Realised Gain/Loss
125.3
11.8
137.1
69.4
0.0
69.4
Fund II
Portfolio
Facile
Educas
North Sails
Parship
Host Europe
Daisy
Verivox
Damovo
25%
20%
18%
15%
7%
6%
6%
3%
The overall increase of €104.9 million in the fair value
of the Fund II portfolio investments is due to the strong
performances in the portfolio companies throughout 2016,
with Facile and Educas being the biggest contributors.
Investment additions over the year of €81.3 million
comprised of €49.0 million investment into Educas which
was provided to acquire three schools during 2016 and
Fund II now has an interest in all Educas investments
through the reorganisation of Educas and the creation
of OCPE Education. There were follow-on investments
in North Sails of €16.5 million, Daisy of €14.9 million and
Verivox of €0.9 million during the year.
As part of its refinancing strategy, Facile repurchased
shares which returned €11.8 million to the Fund, and
€4.5 million (£3.8 million) to the Company.
The partial realisation of Parship Elite Group was
completed in October 2016, with Fund II receiving
proceeds of €125.3 million, of which the Company
received €43.3 million (£38.6 million). This reduced
Fund II’s stake in the investment from 80.3% to 38.5%.
An agreement was reached to sell Host Europe Group to GoDaddy Inc in December
2016. This is expected to complete in the second quarter of 2017 with €41.4 million
anticipated proceeds for the Fund of which, OCI expected to receive €14.4 million
(£12.2 million). This sale completed on 3 April 2017, with actual proceeds received by
Fund II of €42.2 million (£31.6 million), a slight increase from expectations. OCI will
receive proceeds of €14.6 million (£12.5 million) from this transaction.
The fair value of Verivox and Damovo increased during the year, however Daisy was
adversely affected by the weakening of Sterling.
As at 31 December 2016, Fund II had called €153.0 million (£130.5 million) from the
Company representing 76.5% of the Company’s total capital commitment to Fund II.
Movement in Fund II Investment Portfolio (€m)
600
81.3
(67.7)
91.3
558.8
453.9
500
400
300
200
100
0
Fair Value at
1 Jan 2016
Investment
Additions
Investment
Disposals
at cost
Change in
unrealised
gain/(loss)
Fair Value at
31 Dec 2016
Oakley Fund II
Partially Exited
Oakley Fund II
Refinancing
• Sale of a controlling stake to ProSieben, resulting in proceeds
of €43.3 million (£38.9 million) distributed to OCI from its
investment in Fund II.
• The Facile refinancing in August 2016 resulted in proceeds of
€11.8 million for Fund II.
• OCI received €4.5 million (£3.8 million) of proceeds from
• Repayment of a loan of £5.3 million (€6.2 million) to OCI
this distribution.
following the partial realisation.
€55.9m Cost
€125.3m Proceeds
€11.8m Cost
€11.8m Proceeds
Oakley Fund I
Exited
Oakley Fund I
Exited
• Sale of the remainder of the business to Livingbridge which
• Deferred consideration received during the year for the
completed on 3 May 2016.
investment previously held by Fund I and sold in 2015.
• Repayment of loan to OCI amounting to £11.2 million.
• From total proceeds of €2.1 million, OCI received €1.3 million
• A final receivable balance remains at year end of €0.6 million.
(£1.1 million) in 2016.
€33.6m Cost
€6.3m Proceeds
€2.1m Proceeds
Fund Realisations and Distributions subsequent to year end:
Oakley Fund II
Post year end Exit
• Agreement reached in December 2016 by Cinven (the majority
shareholder in HEG), to sell to ProSieben.
• The sale of HEG completed on 3 April 2017, and proceeds
of €42.2 million (£31.6 million) was received by Fund II.
• OCI will receive proceeds of €14.6 million (£12.5 million)
from the sale, a slight increase from the expected proceeds of
€14.4 million (£12.2 million).
€20.0m Cost
€42.2m Actual Proceeds
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 24
25
Portfolio Review: Co-Investment Activity
The investment activity of the co-investments during the year is summarised in the table below:
Equity securities
Co-Investments:
Equity Securities
Time Out
Debt Securities
Time Out
North Sails
Daisy
Damoco Bermuda
Bellwood Holdings
Broadstone
Fund Facilities
Total Investments
31 Dec 2015
Fair value
£m
31 Dec 2016
Fair value
£m
26.0
23.6
10.1
39.8
4.2
2.8
10.9
13.4
130.8
43.9
9.5
22.0
31.6
22.6
129.6
Co-Investment
Portfolio
Time Out
Daisy
North Sails
Fund Facilities
41%
25%
17%
17%
Co-investments held by the Company consist of equity and debt facilities provided to the underlying
Oakley Funds’ portfolio companies.
Movement in the Co-Investment Portfolio (£m)
250
200
150
100
50
0
130.8
129.6
0.9
(13.5)
11.4
Fair Value at
1 Jan 2016
Net impact of
Time Out
movements
in 2016
Net movement
in debt
securities
Interest
income
Fair Value at
31 Dec 2016
In June 2016, as part of the IPO of Time Out, the
Company exchanged its preference shares and ordinary
shares held in Time Out Mercado and its preference
shares held in Flypay and Time Out HC Limited which
had an aggregated fair value at 31 December 2015 of
£26.0 million, for ordinary shares in Time Out Group plc.
The Company received 10.0 million shares in Time Out
as repayment of loans to the Time Out companies and
21.4 million shares for ordinary and preference shares
held
in Time Out Mercado and Time Out Group
HC Limited. The fair value of Time Out at year end is
mark-to-market based on a share price of £1.38 per share.
The Company provides revolving credit facilities to the
Oakley Funds. Each drawing under these facilities is for no
more than one year. The loans are used to fund short-term
cash requirements. The interest generated from these
facilities exceeds the interest earned on the Company’s bank
deposits, allowing OCI to earn higher returns on part of its
cash reserves. OCI earned £11.4 million (2015: £4.9 million)
interest income on the debt facilities that were in place
during the year. As at 31 December 2016, the Company
had an outstanding debt facilities balance of £22.6 million
(2015: £13.4 million) to the Oakley Funds. All outstanding
loan amounts include accrued interest.
Debt Securities
A mezzanine loan of £6.2 million was provided to Time Out
(Bermuda) Ltd in 2015. It was partially repaid following the
IPO and has a balance of £9.5 million outstanding at the year
end including accrued interest.
The net movement in debt securities (excluding Time Out)
provided by OCI is £13.5 million. This consists of new facilities
provided of £78.5 million and repayments of facilities over
2016, of £92.0 million including accrued interest.
Further facilities were provided to the following portfolio
companies over 2016: £10.0 million was provided to North
Sails for its apparel business; a £5.2 million facility was
provided to Parship Elite Group during the year, which was
repaid to OCI following the partial realisation in October
2016; £2.2 million was provided to Bellwood but was fully
repaid prior to year end. A total of £61.1 million of further
facilities were provided to the Oakley Funds including Oakley
Capital II Limited and Oakley Capital III Limited.
Repayments of £92.0 million were received throughout
the year. These
included a partial repayment of
£12.5 million from Daisy for a loan made through the
Ellisfield investment. The balance outstanding on this loan
at year end was £31.6 million including interest. Following
the disposal of Broadstone in May 2016, the previously
provided
loan facility was fully repaid amounting to
£11.2 million being received by OCI. The Parship, Bellwood
and Damovo loans were fully repaid during the year with a
total balance received of £14.7 million including interest.
Total repayments of £53.6 million including accrued interest
were received from the Oakley Funds during the year.
Net movement in Debt Securities of
(£13.5m):
New Securities
£78.5m
Fund Facilities £61.1m
North Sails
£10.0m
Parship
Bellwood
£5.2m
£2.2m
Repayments
(£92.0m)
Fund Facilities £53.6m
Daisy
£12.5m
Broadstone
£11.2m
Parship
Bellwood
Damovo
£5.3m
£5.1m
£4.3m
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 26
CASE STUDY
27
As the leading provider of online dating services in Europe,
it is the Group’s goal to find the perfect match for everyone.
Because a good relationship makes people happy – and the
world a better place.
Sector:
Fund:
Consumer
Fund II
Date of Initial Investment: April 2015
OCI’s investment through Fund II
Cost:
Valuation:
£0.0m*
£22.7m*
Valuation Methodology
Earnings Multiple
Entry Multiple:
Location:
Website:
8.1x
Germany
www.parshipelite.com
Financial performance
EBITDA
2016
2015
2014
€27.6m
+57%
€18.0m
€11.2m
“ Every 11 minutes a single
person finds his or her match
with Parship.”
Timeline of Key Transactions:
MAR
2015
Signing of
Parship deal
APR
2015
Completion
of Parship
acquisition
JUN
2015
NOV
2015
SEP
2016
OCT
2016
Signing of
ElitePartner deal
by Parship
Completion of
ElitePartner
acquisition
Signing of partial
realisation to
ProSieben
Completion of
partial realisation
to ProSieben
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds; Fund I 65.5%
and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
Business Overview
Part-Realisation
Parship Elite Group was formed through the combination of
two of the leading online dating brands in Europe, Parship and
ElitePartner.
Parship was founded in 2001 and is Germany’s and Europe’s
largest online dating service. The Parship principle
is a
scientifically-based method following the maxim: “As many
similarities as possible, as many differences as necessary”.
It allows singles to search for a serious relationship with the
best possible chances of success. Parship currently offers its
services in 13 countries.
ElitePartner is the premium partner agency for sophisticated
singles aged 30 plus. Since 2004, ElitePartner has been
matching people with similar lifestyles, interests and values.
A thorough screening of each registration creates an exclusive
circle of interesting contacts.
A strategic media buyer was a likely exit route for Parship Elite
Group. Oakley decided to sell a majority stake when ProSieben
made an approach in early 2016 but retained a 38.5% stake
given the strength of the underlying business and the synergies
that could be achieved with the strategic shareholder.
On 13 October 2016, Fund II completed the sale of its
controlling stake in Parship Elite Group to ProSieben valuing
the Group at €300 million, representing a gross return of 3.6x
on the original investment and an IRR of 145% for Fund II.
The financial outperformance against forecasts and the
successful acquisition of ElitePartner has created significant
value. Through OCI’s investment in Fund II, the Company’s
indirect economic interest in the Group increased from €20.3
million to €67.2 million at the time of the partial realisation and
led to a cash return of €43.3 million (£38.9 million) in 2016.
Headquartered in the heart of Hamburg, the Group employs
over 230 people, ranging from IT to product management,
marketing and customer services. Together they work
passionately for one common goal: love.
The graph below demonstrates how this value is split across
the capital structure of Parship Elite Group from acquisition
in April 2015 to the partial realisation in October 2016 from
OCI’s perspective.
The Investment Case
Current Performance
• Ranked number one in the online matchmaking segment
in Germany, Austria and Switzerland (“the DACH region”).
• Parship’s addressable market expected to grow as online
dating has become more mainstream and it is more normal
for the “millennial” generation to look online for a life partner.
• Strong management team with excellent internal systems
and processes.
• Good opportunity to use Parship as a basis for consolidation
(subsequently acquired) and similar
with ElitePartner
targets.
Oakley’s Investment
Oakley tracked Parship for some time prior to the acquisition.
Once acquired, Oakley was able to move swiftly to negotiate
the deal and secure exclusivity for the purchase of ElitePartner,
combining these two leading brands and creating the Parship
Elite Group; the premier matchmaking brand in Europe.
Through management’s commercial
insight and Oakley’s
streamlined transaction process, the ElitePartner deal was
signed just six weeks after completion of Parship.
Financial Performance
Since acquisition, Parship’s management team has worked
hard to extend Parship’s leading position in the DACH region
while also integrating ElitePartner. Parship achieved strong
growth in 2015, which continued into 2016.
The combination of Parship’s strong organic growth and the
realisation of synergies with ElitePartner has resulted in a
compound annual growth rate (CAGR) of 57% since 2014
for the Parship Elite Group.
Parship Elite Group continues to prosper under the same
management team Oakley backed, and now with the support
of ProSieben as a strategic investor.
Oakley retains a significant minority position in the Parship
Elite Group, providing the Company and other Fund II
investors to participate in the further potential of this high-
quality digital market leader.
Value Creation – Parship Elite Group (€m)
300.0
244.8
OCI equity
increased from
€20.3m to €67.2m
101.0
54.3
46.7
49.0
6.2
April 2015
Initial Investment
October 2016
Partial Exit
Net Debt
OCI Loan
Total Equity (including OCI allocation)
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 28
Overview of Oakley Funds’ Portfolio Companies
29
Time Out, founded by Tony Elliott in 1968, has become
one of the world’s leading brands for leisure and lifestyle
in today’s increasingly urban environment. Time Out’s
local opinions and unique
emphasis on
information
editorial content
on what to do in many of the world’s major cities.
is a trusted source of
independent
Sector:
Fund:
Consumer
Fund I
Date of Initial Investment:
November 2010
OCI’s investment through Fund I & OCI
Cost:
Valuation:
OCI Direct Investment:
£26.4m*
£33.9m*
£9.5m (debt facility)
£43.9m (equity)
Valuation Methodology:
Mark-to-Market
Entry Multiple:
Location:
Website:
7.1x
Global
www.timeout.com
Educas was established by Nadim Nsouli in July 2013 to
acquire controlling stakes in premium private schools
around the world. Educas has grown through acquisition and
partners with family owned businesses and management
teams to achieve transformational growth.
Sector:
Fund:
Education
Fund I
Fund II
Date of Initial Investment:
July 2013
August 2014
OCI’s investment through Fund I & Fund II
Cost:
Valuation:
£37.1m*
£69.7m*
Valuation Methodology:
Market and Income Approach
Entry Multiple:
Location:
Website:
9.4x
Global
www.educasinternational.com
Business Overview
• Opportunity to monetise through advertising, e-commerce
Business Overview
Time Out’s global distribution network
incorporates a
comprehensive online presence, an offers-and-e-commerce
platform, paid local business listings, mobile applications, city
magazines, travel guides, live events, physical markets and syndicated
content partnerships.
Time Out directly manages operations across 63 cities worldwide,
and extends that reach through brand franchisee partners in a further
44 cities around the globe. Time Out’s combined brand audience
reach (across digital, print, social media and the physical markets) is
approximately 100 million.
Time Out successfully listed on the AIM of the London Stock Exchange
in June 2016. It raised £90 million which, after fees and debt repayment
generated net proceeds of £59 million. These funds are being used to
accelerate Time Out’s growth plans, to invest in digital and e-commerce
opportunities and the roll-out of the Time Out Market concept.
and sponsored listings.
• Capacity to turn around the digital and mobile platform to provide
transactional ease and one-stop-shop for entertainment.
• Rapid market growth and acceptance of digital content.
Current Performance
Revenue for the full year was ahead of expectations due to positive
trading in the second half of the year.
Time Out’s Group revenue, including a full year of Time Out Market on
a pro forma basis, showed growth for the year of 23% (17% in constant
currency) to £37.1 million (2015: £30.2 million), with revenue growth
in the second half of 29% compared to 16% in the first half of the year.
Time Out Digital delivered revenue growth in 2016 of 39%. Within
digital revenue, advertising grew by 36%, Premium Profiles by 51%
and e-commerce by 45% year-on-year.
Oakley’s Investment Rationale
• Trusted brand of 49 years with strong local editorial integrity
synonymous with entertainment.
Time Out Market has also shown strong year-on-year revenue
growth of 115% for the full year. Time Out Market Lisbon hit a
record level of 3.1 million visitors in 2016.
• Consolidation of the Time Out brand under common
ownership with the acquisition of Time Out New York and
Time Out Chicago.
Time Out noted the signing of conditional leases for new Time
Out Markets located in London and in Miami South Beach, with
further locations being assessed.
Educas made its first acquisition in July 2013, taking a majority stake
in Reddam House – a group of four premium, private South African
schools. In order to broaden its international footprint, Educas has
made further acquisitions in Africa, Europe, Australia and South
America since then, as well as opening schools in South Africa and
Australia. Today the group comprises 27 schools and 5 early learning
centres, and educates c. 17,000 students.
the Group,
On 30 November 2016, Educas reorganised
resulting
in the consolidation of the African, European and
Australian assets into a single Educas holding company. As part
of this reorganisation, a new Oakley Holdco (OCPE Education LP)
was established to hold both the Fund I and Fund II stakes. A third-
party valuation was undertaken in order to establish the relative
shareholdings held by Fund I and Fund II in OCPE Education LP.
Oakley’s Investment Rationale
• Long-term revenue visibility with strong cash flow generation
and limited cyclicality.
• Attractive market dynamics in developing countries: weak public
school systems and fast growth of middle classes are driving
demand for quality education.
• Fragmented market with a small number of large operators,
helping to drive premium valuations for schools groups.
• Potential for multiple arbitrage as single schools can typically be
acquired at lower multiples.
• Reddam has strong brand recognition in both South Africa
and Australia, helping to drive growth in pupil numbers at
greenfield schools.
Current Performance
Educas has achieved strong growth during 2016 with continued
growth in pupil numbers at its existing schools. Two new greenfield
schools were opened during the year in South Africa, while the
European footprint was further enhanced through the acquisitions
of the International School of Europe and St Louis School in Italy, and
St John’s International School in Belgium.
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 30
Overview of Oakley Funds’ Portfolio Companies (continued)
31
North Technology Group, founded in 1957 by Lowell North,
comprises three market-leading marine brands (North Sails,
Southern Spars, EdgeWater Power Boats) focused on providing
innovative and high-performance products and solutions to
the worlds sailors and yachtsmen.
Sector:
Time Out, founded by Tony Elliott in 1968, has become
one of the world’s leading brands for leisure and
lifestyle in today’s increasingly urban environment.
Time Out’s emphasis on independent local opinions
and unique editorial content is a trusted source of
information on what to do in many of the world’s
major cities.
Date of Initial Investment: March 2014
OCI’s investment through Fund II & OCI
Consumer
Fund II
Fund:
Cost:
Valuation:
£28.3m*
£32.3m*
OCI Direct Investment:
£22.0m (debt facility)
Valuation Methodology:
Earnings / Revenue Multiple
Entry Multiple:
Location:
Website:
8.6x
Global
www.northsails.com
• Oakley
identified significant synergy and cost reduction
potential by merging the North Sails Group with its principal
European licensee.
• Opportunities to license the North Sails brand in apparel
and ancillary products.
Current Performance
North Sails revenue was flat on prior year primarily due to fewer
major sailing race events in 2016. In mid-2016, North Sails Apparel
signed an agreement with a global retailer to launch the clothing
brand in the USA, and initial trading is looking positive. However, it
faced a challenging year in its core domestic market of Italy, with retail
and wholesale revenues down on prior year.
The Group continues its consolidation of the North Sails brand
and acquired the Australian licensee after the year end.
Business Overview
North Technology Group supplies the most technologically advanced
sails, spars and rigging to the majority of the world’s largest yachts
and premier sailing teams.
North Sails, the largest brand in the group, is the world leader
in sailmaking. North Sails is focused on providing innovative,
high performance products including 3Di, the sail of choice on
the majority of America’s Cup, Grand Prix, ocean race boats and
Superyachts. North Sails also produces and distributes branded
sportswear throughout Europe and Asia through its partnership
network of 1,000 chain and independent stores, as well as through
proprietary and franchise retail stores across Europe.
Other brands in the Group are; Southern Spars, the world leader
in composite spars, rigging and marine components; EdgeWater
Boats, a line of high-performance outboard sport boats; and North
Thin Ply Technology, a developer of thin ply carbon pre-pregnated
for non-marine markets such as aerospace.
Oakley’s Investment Rationale
• North Sails is the global market leader in sails and spars, with
strong recurring revenues from the sail replacement cycle and
an expansive portfolio of patents.
Founded in 2008, Facile.it is Italy’s leading destination for
consumers to compare prices for motor insurance, energy,
telecoms and personal finance. Facile is the market leader
in online motor insurance comparison in Italy, with over 70%
market share.
Sector:
Fund:
Consumer
Fund II
Date of Initial Investment:
September 2014
OCI’s investment through Fund II
Cost:
Valuation:
£14.5m*
£39.3m*
Valuation Methodology:
Earnings Multiple
Entry Multiple:
Location:
Website:
12.1x
Italy
www.facile.it
Business Overview
Current Performance
Facile achieved strong growth in 2016 versus the prior year,
with revenues up 27% and EBITDA up 25%. Growth has been
predominantly driven by increased switching volumes in Facile’s
core car insurance vertical, in which it maintains a 70% market share,
also through non-insurance verticals (e.g. broadband and financial
products) which are gaining traction in the marketplace. In 2016,
these accounted for 21% of Group revenues, up from 15% in 2015.
Facile is a leader to the fast-growing online price comparison market,
providing a platform for consumers to compare prices on a range of
household services including motor insurance, energy, telecoms and
personal finance. Facile has a strong position in its core market (car
insurance) with over 70% market share. In order to capitalise on this
leading market position, Facile has launched new product verticals in
ADSL (broadband), gas and electricity, and financial products. Today
Facile helps over 2.2 million Italians a month to compare prices on key
elements of their household expenditure.
Oakley’s Investment Rationale
• Dominant market position
in
the online car
insurance
switching market.
• Online penetration of the Italian car insurance market is only
10%, versus 80% in the UK, suggesting there is substantial
growth potential.
• Facile generates additional revenues from renewals, benefits
in the sector, consistently profitable
low seasonality
from
and highly cash-generative month on month.
• Multiple new product verticals to be exploited (Oakley offers
expertise from the German market, with the proven success
of the Fund I investment in Verivox).
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
32
Overview of Oakley Funds’ Portfolio Companies (continued)
33
Damovo is one of Europe’s leading providers of Information
Communication Technology solutions and services with over
2,000 customers globally. Its mission is to deliver innovative
end-to-end ICT solutions and managed services to support
customers’ business requirements, enabling them to stay
ahead in todays digitally transforming world.
Sector:
Fund:
TMT
Fund II
Date of Initial Investment:
January 2015
OCI’s investment through Fund II
Cost:
Valuation:
£3.4m*
£5.5m*
Valuation Methodology:
Earnings Multiple
Entry Multiple:
Location:
Website:
4.9x
Germany
www.damovo.com
Daisy is a leading digital supplier of end-to-end business
communications and managed services to UK SMB, mid-
market and corporate businesses.
Sector:
Fund:
TMT
Fund II
Date of Initial Investment:
July 2015
OCI’s investment through Fund II & OCI
Cost:
Valuation:
£12.1m*
£11.0m*
OCI Direct Investment:
£31.7m (debt facility)
Valuation Methodology:
Earnings Multiple
Entry Multiple:
Location:
Website:
9.0x
UK
www.daisygroup.com
Business Overview
• Potential for significant margin improvement.
Business Overview
Oakley’s Investment Rationale
Damovo is a provider of information communication technology
(“ICT”) services and solutions to businesses. Its core areas of
expertise are unified communications and collaborations (“UCC”),
contract centres, enterprise networks, cloud services and managed
services. It has regional offices across Europe and a global capacity
spanning over 120 countries. Damovo is one of the only ICT
providers in Europe that has the highest level of accreditation with all
four of the leading Unified Communications suppliers in the Gartner
Magic Quadrant.
Oakley’s Investment Rationale
• Unique proposition in the European market with the ability to
independently provide all of the major UCC technologies.
• Opportunity
to create scale and
improved commercial
relationships through a targeted roll-up strategy.
• Low entry multiple as a result of historical issues (in particular,
underinvestment by previous owners) within the business.
• Complex carve out.
• Consistently high customer satisfaction scores – one of the
highest in the market.
• 50% of revenues are recurring, with a strategy to increase
this going forward.
Current Performance
Damovo’s results for 2016 were positive, with revenue growth of
9% against the prior year. This was due to a number of significant
new customer wins, including two large German banks, along
with improvement in gross margin, demonstrating good progress
in its transition from a product business to a true managed
services provider.
Damovo’s recent acquisition of Netfarmers GmbH, a German-
based specialist in unified communication, security and networking,
has added geographic and technical capability to the business.
This strengthens the Damovo’s ability to deliver Cisco end-to-
end solutions and architectures to clients which helps increase
organic sales.
Formed in 2001, Daisy has grown into the UK’s largest independent
telecommunications provider with 30 locations nationwide. Daisy
offers a comprehensive range of products and services including
fixed line voice, data, hosting, mobile telephony, IT infrastructure
and associated managed services.
Since 2015, Daisy has completed the following transformative
Public-to-Private acquisitions:
• Phoenix, a UK-based provider of IT managed services was
acquired in July 2015. Phoenix was founded in 1979 and listed
on the main market of the London Stock Exchange in 2004.
It offers a comprehensive range of managed IT infrastructure
services
including systems management, communications,
remote telephone support, project and consultancy services,
business continuity and disaster recovery services.
• Alternative Networks, a UK-based IT and telecoms provider was
acquired in December 2016. Alternative Networks was founded
in 1994 and listed on the AIM of the London Stock Exchange in
2005. It provides IT managed services and B2B communications
to UK businesses.
Daisy has now completed over 50 acquisitions since its formation
in 2001.
• Strong existing relationship with management that Oakley was
keen to back in the next phase of Daisy’s evolution.
• Acquisitions of Phoenix and Alternative Networks provided
significant scale.
• A number of other target companies are suitable M&A candidates
in a highly fragmented sector.
• Improving sector dynamics with the SME ICT sector forecast to
grow at 4.2% CAGR 2015-2017.
Current Performance
Daisy has performed as expected for the first nine months of its
financial year, ending March 2017.
The acquisition of Alternative Networks represents a strong,
complementary fit with Daisy’s existing business and operations.
It also continues Daisy’s track record of accretive acquisitions to
build scale and deliver synergies across the Group.
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 34
Overview of Oakley Funds’ Portfolio Companies (continued)
35
Founded in 1998, Verivox is Germany’s leading consumer
energy and telecoms price comparison website. The
company receives commission from energy suppliers when
consumers elect to switch providers. Since 2012, Verivox has
also offered price comparison services in the insurance and
personal finance sectors.
Sector:
Fund:
Consumer
Fund II
Date of Initial Investment:
August 2015
OCI’s investment through Fund II
Cost:
Fair Value:
£7.0m*
£9.8m*
Valuation Methodology:
Earnings Multiple
Entry Multiple:
Location:
Website:
10.0x
Germany
www.verivox.de
HEG is a leading provider of domain and hosting services in
Europe, with an end-to-end product suite covering the entire
hosting value chain including domains, application hosting,
cloud hosting and managed hosting.
Sector:
Fund:
TMT
Fund II
Date of Initial Investment:
January 2015
Date of Exit:
December 2016
(completed 3 April 2017)
OCI’s investment through Fund II
Cost:
Fair Value:
£6.5m*
£12.2m*
Valuation Methodology:
Expected Sales Proceeds
Entry Multiple:
Location:
Website:
9.8x
Germany
www.hosteurope.com
Business Overview
Verivox is one of Germany’s leading price comparison websites,
enabling consumers to compare and switch providers across a
range of household services including energy, telecoms, insurance
and personal finance.
Verivox is a well-recognised brand in Germany and is regularly
quoted by the media as an independent source of energy price data.
The company has also been certified by Germany’s leading consumer
protection and standards bodies.
Oakley’s Investment Rationale
• One of only two major players in the German price comparison
its acquisitions of Toptarif and
services market following
Transparo in 2014.
• German price comparison services sector
is projected to
continue to show strong growth.
• Verivox’s partnership with ProSieben will drive synergies through
lower-cost TV advertising and increased marketing know-how.
• Oakley can add significant value through its knowledge of the
price comparison sector gained through its historic investments
in Verivox and Facile.
Current Performance
in 2016 against 2015,
Verivox achieved strong growth
with revenues up 25% and EBITDA up 13%. Total contracts
switched across Verivox in 2016 were almost 1.9 million (up 27%
versus prior year).
Growth was predominantly driven by Verivox’s core energy
switching business, but contract volume growth was also strong in
telecoms, banking and insurance verticals, all of which grew volumes
by at least 40%.
Business Overview
Current Performance
On 7 December 2016, an agreement was reached to sell HEG to
GoDaddy Inc, the world’s largest cloud platform dedicated to small
independent ventures, for an Enterprise Value of €1.7 billion.
The transaction closed on 3 April 2017, with total proceeds of
€42.2 million being received by Fund II. This transaction generated a
gross money multiple of 2.1x and 40% IRR for Fund II.
HEG operates primarily in the UK and Germany, the two largest
hosting markets in Europe, where it is ranked in the top 1–3 across
all segments. Since being acquired by Cinven in 2013, HEG has
acquired DomainFactory, a leading domains and shared hosting
business in Germany, and Telefonica Online Services (“TOS”),
a high-end managed hosting provider in Germany.
Oakley’s Investment Rationale
• HEG is Europe’s largest independently-held hosting business and
is well-positioned to continue its consolidation of the European
hosting sector having already acquired DomainFactory, TOS
and intergenia.
• Investment
into HEG at a
low multiple, allowing Oakley
to benefit from the synergies realised from the deal.
In January 2015, coinciding with the completion of the inter-
genia sale to HEG, Fund II invested €20m in the enlarged Host
Europe Group obtaining a 3% minority stake in the Group.
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Note* – The fair value and cost of the underlying investments have been calculated using year end FX rates. They have been calculated using OCI’s proportionate share in each of the Funds;
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
Fund I 65.5% and Fund II 38.1%. These valuations exclude costs and other fees, and are approximate valuations of the underlying portfolio companies.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 36
37
Governance
38
40
42
43
44
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Audit Committee Report
Corporate Governance Report
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 38
39
Board of Directors
Christopher Wetherhill
Chairman
James Keyes
Non-executive Director
Caroline Foulger
Non-executive Director
Laurence Blackall
Non-executive Director
Peter Dubens
Non-executive Director
Christopher Wetherhill founded and was
Chief Executive Officer of Hemisphere
Management Limited (now 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
Professional
Accountants, a Fellow of the Institute of
Directors and a Freeman of the City of London.
He is a resident of Bermuda.
Chartered
of
Christopher is Chairman of the Board of
Directors.
James Keyes was a Managing Director of
Renaissance Capital, an emerging markets
investment bank, from 2008 until 2013.
He established the Renaissance Bermuda
office and remained with the firm until the
office closed in 2013.
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.
Caroline Foulger has been an independent
Non-executive Director in the financial services
industry since early 2013. In addition to her seat
on the OCI Board, Caroline currently sits on the
Board of a FTSE 250 insurance company and its
subsidiaries at Lloyds and in Bermuda, a NYSE
listed bank and several private companies.
Caroline was previously a partner with PwC
for 12 years, primarily leading the insurance
practice in Bermuda and servicing listed clients
with both audit and advisory services and
has 25 years’ experience in public accounting.
Caroline is a Fellow of the Institute of Chartered
Accountants in England & Wales, CPA Bermuda
and a Member of the Institute of Directors.
Laurence Blackall has thirty years experience
in the information, media and communication
industries, pioneering electronic publishing
(especially at McGraw Hill where he was a
Vice-President) and the internet in the United
Kingdom.
He has proven expertise
in establishing
internet companies and developing them
through to public offering and subsequent sale.
He holds Directorships in a number of public
and private companies. Laurence is a resident
of the United Kingdom.
Peter Dubens is the founder and Managing
Partner of the Oakley Capital Group, a
privately-owned asset management and
advisory group comprising Private Equity,
Venture Capital, Corporate Finance and
Capital Introduction operations managing over
€1.5 billion.
Peter founded the Oakley Capital Group in
2002 to be a best-of-breed, entrepreneurially-
driven UK
investment house, creating an
ecosystem to support the companies in which
Oakley Capital invests, whether they are early-
stage companies or established businesses.
David Till serves as an alternate Director
to Peter Dubens.
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 40
Directors’ Report
The Directors present their report and financial statements for the year ended 31 December 2016. The results for
the year are set out in the attached financial statements. The Company’s financial statements have been prepared
in accordance with International Financial Reporting Standards (“IFRS”), which have been adopted for the first
time for the year ended 31 December 2016.
Directors
Substantial Shareholdings
During the year there were changes to the composition of
the Board. Tina Burns and Ian Pilgrim left the Board during
2016, and Caroline Foulger joined the Board as a Non-
Executive Director.
As of March 2017, the Company has received the following
notifications of interest of 3% or more in the voting rights
attached to the Company’s ordinary shares:
% of voting
rights
20.4%
20.3%
17.2%
8.9%
5.5%
4.9%
4.0%
The Company is not aware of any potential conflicts of
interest between any duty of any of the Directors owed to
it and respective private interests. All Directors, other than
Peter Dubens, are considered to be independent.
Shareholder
Invesco Perpetual
Woodford Investment Management
Directors’ Interests in Shares
As at 28 March 2017, Directors who are beneficial owners
of shares in the Company are:
Ruffer LLP
Sarasin & Partners
Fidelity International
Henderson Volantis Capital
Director
Peter Dubens
Laurence Blackall
Christopher Wetherhill
Caroline Foulger
James Keyes
No. of
Shares
Talisman
1,784,588
Corporate Responsibility
200,000
175,000
61,000
10,000
The Board of the Company considers the ongoing interests
of investors on the basis of open and regular dialogue with
the Investment Advisor. The Board receives regular updates
outlining regulatory and statutory developments and
responds as appropriate.
Manager
The Manager was incorporated in Bermuda on 18 June
2007 under the Bermuda Companies Act. The Manager
is responsible for advising and arranging in respect
of the assets of the Company in accordance with the
Management Agreement, subject to review by the
Directors, in a manner consistent with the investment
objective, approach and restrictions described in the
Company’s admission document. For the purposes of
AIFMD, however, the Manager is not the “Alternative
Investment Fund Manager” of the Company. The
Company is self-managed under AIFMD.
Peter Dubens is a Director of both the Manager and the
Company, and cannot vote on any Board decision relating to
the Management Agreement whilst he has an interest.
Save as disclosed above, 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.
Relations with Shareholders
The Board recognises that it is important to maintain
appropriate contact with major shareholders in order
to understand their issues and concerns. Members of
the Board have had the opportunity to attend meetings
with major shareholders, and the Board receives major
shareholders’ views of the Company via direct face-to-face
contact, and analyst and broker briefings.
In addition, the Investment Adviser maintains dialogue
with institutional shareholders, the feedback from which is
reported to the Board. The Board monitors the Company’s
trading activity on a regular basis.
The Company reports formally to shareholders twice a year.
In addition, current information is provided to shareholders
on an ongoing basis through the Company’s website.
41
Investment Adviser
Dividends and Distributions
The Investment Adviser was incorporated in England and
Wales on 12 October 2000 under the Companies Act
1985. The Investment Adviser serves as investment adviser
to the Manager with respect to the Company, and the
general partners of the Oakley Funds.
The Investment Adviser is authorised and regulated by
the Financial Conduct Authority. It is not registered as an
“investment adviser” under the US Investment Advisers
Act, but may in the future seek to register.
Peter Dubens and David Till (both Directors of the
Investment Adviser), with a team of twenty-three
investment
primarily
responsible for performing investment advisory obligations
with respect to the Company and the Funds.
professionals,
together
are
Peter Dubens is a Director of both the Investment Adviser
and the Company, and cannot vote on any Board decision
relating to the Investment Adviser Agreement whilst he has
an interest.
Delegation of Responsibilities
Under the Management Agreement, the Board has
delegated to the Manager, substantial authority for
carrying out the day-to-day management and operations
of the Company. The Board has the ultimate decision to
invest after reviewing the recommendations provided by
the Investment Adviser.
Board Responsibilities
The Board meets at least quarterly and between these
scheduled meetings there is regular contact between
Directors and the Investment Adviser as otherwise required
for the purpose of considering key investment decisions of
the Company.
The Directors are kept fully informed of investments
and other matters that are relevant to the business
of the Company. Such information is brought to the
attention of the Board by the Investment Adviser and by
the Administrator in their periodic reports detailing the
Company’s performance, and receives from the Investment
Adviser and other service providers such other information
as may from time to time be reasonably required by the
Directors for the purpose of such meetings.
For the avoidance of doubt, the Directors do not make
investment decisions on behalf of the Oakley Funds,
nor do they have any role or involvement in selecting or
implementing transactions by the Funds.
A maiden dividend was announced in December 2016 of
4.5 pence per share in respect of the 2016 financial year.
The decision to introduce a dividend was based on the
consistent income generated from co-investments and
increased cash returns from exits. The Company has
experienced strong NAV growth in 2016 due to growth in
the underlying portfolio companies.
The Board has adopted a dividend policy which takes into
account the profitability and underlying performance of
the Company in addition to capital requirements, cash
flows and distributable reserves. Subject to any unforeseen
circumstances, the Board intends to maintain a dividend
of 4.5 pence per share for the 2017 financial year, paying
2.25 pence per share semi-annually following the publication
of half yearly reports as of 30 June and 31 December.
Directors’ Remuneration
There are no long-term incentive schemes provided by the
Company and no performance fees are paid to Directors.
No Director has a service contract with the Company
and each Director is appointed by a letter of appointment
setting out the terms of the appointment.
Directors are remunerated in the form of fees, payable
annually in advance, to the Director personally. The table
below details the fees paid to each Director of the Company
for the year ended 31 December 2016.
The below fees do not include reimbursed expenses.
Fees
£55,000
£45,000
£25,644
£nil
£45,000
£45,000
£45,000
Director
Christopher Wetherhill
James Keyes
Caroline Foulger
Peter Dubens
Laurence Blackall
Tina Burns
Ian Pilgrim
Signed on behalf of the Board by:
Christopher Wetherhill
Chairman
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 42
43
Statement of Directors’ Responsibilities
Audit Committee Report
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the
Directors have prepared the Consolidated Financial
Statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. Under company
law, the Directors must not
approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for
that period. In preparing those Financial Statements, the
Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgments and estimates that are reasonable
and prudent;
• state whether applicable IFRSs as adopted by the
European Union have been followed subject to any
material departures disclosed and explained in the
Financial Statements; and
• prepare the Financial Statements on the going concern
basis, unless it is inappropriate to presume that the
Company will continue in business.
The Consolidated Financial Statements are published on
www.oakleycapitalinvestments.com. The maintenance and
integrity of the website, so far as it relates to the Company,
is the responsibility of the Company. The work carried
out by the Auditor does not involve consideration of the
maintenance and integrity of this website and, accordingly,
the Auditor accepts no responsibility for any changes that
have occurred to the Financial Statements since they were
initially presented on the website. Visitors to the website
need to be aware that legislation in Bermuda governing the
preparation and dissemination of the Consolidated Financial
Statements may differ from legislation in other jurisdictions.
The Directors are responsible
for keeping proper
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the Financial Statements
comply with the Bermuda Companies Act (1981). They are
also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each of the Directors, whose names and functions are listed
in the Board of Directors section of the Annual Report,
confirms that, to the best of their knowledge:
• The Consolidated Financial Statements, which have been
prepared in accordance with IFRS as adopted by the
EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
• So far as each Director is aware, there is no relevant
audit information of which the Company’s Auditors
are unaware;
• They have taken all the steps that they ought to have
taken as a Director in order to make themselves aware of
any relevant audit information and to establish that the
Company’s Auditor is aware of that information; and
• The Consolidated Financial Statements, are fair, balanced
and understandable, and provide the
information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
The Board is supported by the Audit Committee, which
comprises James Keyes and Laurence Blackall. We are
pleased to report to you on the range of matters which the
Audit Committee has considered during 2016, the key risks
and judgment areas and the decisions applied.
The valuations are independently reviewed by a professional
valuation firm who report on their procedures and the
conclusions of their work. The Audit Committee concluded
that the year-end valuation process had been effectively
carried out and that the investments have been fairly valued.
The principal role of the Audit Committee is to consider the
following matters and make appropriate recommendations
to the Board to ensure that:
The Audit Committee reports to the Board after each
Audit Committee meeting on the main matters discussed
at the meeting.
• the accounting and internal control systems of the service
IFRS conversion
providers are adequate;
• the integrity of the Consolidated Financial Statements,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Company’s performance, business model
and strategy;
• the independence, objectivity and effectiveness of the
appointed external auditor is monitored and reviewed;
• the Company’s policy on the provision of non-audit
services by the external auditors is developed and
implemented ; and
• recommendations are made to the Board that the
external audit is put out to external tender as appropriate
in accordance with applicable law, rules, regulation and
best practice, and initiate and oversee as required fair
tendering and selection processes.
The Audit Committee met twice during the year under
review and has continued to support the Board in fulfilling
its oversight responsibilities.
Review of Accounting Policies and Areas of
Judgment or Estimation
The most significant risk in the Company’s accounts is
whether its investments are fairly and consistently valued
and this issue is considered carefully when the Audit
Committee reviews the Company’s Annual and Interim
Report and Accounts. The Investment Adviser provides
detailed explanations of the rationale for the valuation of
each investment. These are discussed in detail with the
other members of the Committee and the Auditor.
The main risk identified by the Audit Committee is the
valuation of the Oakley Funds. The key area of focus
of the Committee is the valuation methodology and
underlying business performance of the Oakley Funds’
portfolio companies.
The Consolidated Financial Statements have been prepared
in accordance with IFRS for the first time. The Company’s
effective date of transition from US GAAP is 1 January
2015. The transition to IFRS has been detailed in note 27 of
the financial statements.
External Audit
OCI’s external auditor, KPMG Audit Limited, located in
Hamilton, Bermuda, has been Auditor since 2007 and the
Audit Committee reviews their performance annually. The
Audit Committee considers a range of factors including
the quality of service, the auditors’ specialist expertise
and the level of audit fee. The Audit Committee remains
satisfied with KPMG’s effectiveness and therefore has not
considered it necessary to date, to require the auditors to
tender for the audit work. The Auditors are required to
rotate the audit partner and the current partner has been in
place for five years.
The Audit Committee has reviewed the provision of non-
audit services and believes them to be cost-effective and
not an impediment to the external auditor’s objectivity
and independence. This is assessed by ensuring that
KPMG has appropriate measures in place to safeguard
their
include ensuring
that separate engagement teams provide audit and
non-audit services.
independence; such measures
It has been agreed that the Audit Committee must approve
in advance all non-audit work to be carried out by the
external Auditor for the Company.
On behalf of the Audit Committee
Laurence Blackhall
Chairman of the Audit Committee
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 44
45
Corporate Governance Report
Directors’ Terms of Appointment
In accordance with best practice, two of the Directors retire
and are subject to re-election annually. In accordance with
the appointment and rotation policy, Peter Dubens and
Laurence Blackall were re-elected at the Annual General
Meeting on 7 June 2016. Ian Pilgrim and Tina Burns did
not offer themselves for re-election at the Annual General
Meeting (“AGM”) on 7 June 2016 and therefore no longer
sit on the Board.
Caroline Foulger was appointed to the Board at the AGM
on 7 June 2016, as an independent Director. She is an
experienced Non-executive Director
in the financial
services industry and sat on her first Board in early 2013.
She brings a wealth of experience to the Board and was
previously a partner in PwC in Bermuda for 12 years with
25 years experience in the public accounting sector.
Board Meetings
The Board met formally six times during 2016 with regular
contact amongst the Directors between these meetings.
Where necessary, the Directors may seek independent
professional advice at the expense of the Company to aide
their duties.
Director
Total meetings held:
Number attended:
Christopher Wetherhill
James Keyes
Laurence Blackall
Caroline Foulger (a)
Peter Dubens
Ian Pilgrim (b)
Tina Burns (b)
Board
Attendance
6
6
6
4
4
2
2
2
(a)
Caroline Foulger was appointed at the Annual General Meeting on
7 June 2016
(b)
Ian Pilgrim and Tina Burns did not offer themselves for re-election at
the Annual General Meeting on 7 June 2016 and were not present at
the AGM on 7 June 2016
The Board recognises the importance of sound corporate
governance and have adopted policies and procedures that
reflect those principles of the UK Corporate Governance
code (formally 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
regulatory regime.
This report describes the Company’s corporate governance
practices that were in place throughout the financial year
ended 31 December 2016.
Chairman’s Introduction to
Corporate Governance
Good corporate governance is a key component of the
Company’s activities. Governance and oversight of these
activities form an integral part of the Company’s operations
and it is as important as ever to monitor these to create and
deliver value to the Company’s stakeholders. The primary
function of the Board is to provide leadership and strategic
direction and it is responsible for the overall management
and control of the Company. It is through these functions
the Board creates and delivers value and growth for
its shareholders.
The Board
The Board was comprised of five Directors at 31
December 2016, with Christopher Wetherhill as
Chairman. All Directors are considered independent,
with the exception of Peter Dubens, who is founder
and Managing Partner of the Oakley Capital Group.
Christopher Wetherhill, James Keyes and Laurence
Blackall remain independent despite their individual
length of service on the Board, as they are free from
any business or other relationship that could materially
interfere with their exercise of judgment. With respect
to any decisions that Peter Dubens is deemed to have a
conflict of interest, he does not vote on these matters.
It is the Board’s responsibility to ensure that the Company
has a clear strategy and vision, and to oversee the overall
management and oversight of the Company, and for its
growing success. In particular, the Board is responsible for
monitoring financial performance, setting and monitoring
the Company’s risk appetite and ensuring that obligations
to shareholders and other stakeholders are understood
and met.
The Directors believe that the Board has an appropriate
balance of skills and experience,
independence and
knowledge of the Company to enable it to provide effective
strategic leadership and proper governance of the Company.
Information about the Directors, including their relevant
experience is summarised in their respective biographies.
The principal matters considered by the Board during
2016 included:
• Regular reports and updates from the Investment
Adviser on the co-investments and debt facilities held by
the Company;
The Board discontinued its Remuneration Committee
during the year. The work previously undertaken by this
committee is considered core to the Company and that it
is more appropriate to be dealt with by the full Board. It is
noted that no Director determines their own remuneration.
• Reports and updates from the Manager;
Audit Committee
• Consideration of the Company’s share price and net
asset value;
• Regular reports from the Board’s committees;
• The Annual Report and Accounts and half-yearly Report;
• Reports from external consultants on market and
regulatory updates; and
• Corporate matters
including dividend policy, share
buybacks and treasury shares.
The Board receives information that it considers to be
sufficient and appropriate to enable it to discharge its
duties. Directors receive Board papers in advance of
Board meetings and are able to consider in detail the
Company’s performance and any issues to be discussed at
the relevant meeting.
Board Training
New Directors are provided with an induction programme
tailored to the particular circumstances of the appointee
and which includes being briefed fully about the Company
by the Chairman and Senior Executives of the Investment
Adviser. The Chairman regularly reviews and agrees
with Directors their training and development needs as
necessary to enable them to discharge their duties.
Board Committees
OCI has an Audit Committee with formal delegated duties
and responsibilities. It currently comprises James Keyes and
Laurence Blackall (Chair of Committee).
In consultation with the Auditor, the Audit Committee
determines the terms of engagement and the scope of
the audit. It continuously monitors the external auditor’s
independence and objectivity, and has unrestricted access
to oversee the relationship with the Company’s Auditor.
The Audit Committee receives and reviews reports both
from management and the Company’s Auditor relating to
the annual accounts and the accounting and internal control
systems of the Company.
For more information, please find the full Audit Committee
report on page 43.
Director
Total meetings held:
Number attended:
Christopher Wetherhill
James Keyes
Laurence Blackall
Tina Burns
Audit
Committee
2
2 (a)
2
1 (b)
1 (a)
The Board has delegated a number of areas of responsibility
to its committees. Laurence Blackall became Chairman
of the Audit Committee at the AGM on 7 June 2016 after
Tina Burns did not offer herself for re-election. Caroline
Foulger is the Chairman of the Risk Committee. Nomination
and Remuneration decisions are taken by the whole Board.
(a)
(b)
Member of the Audit Committee for the period 1 January 2016 through
7 June 2016
Laurence Blackall was a member of the committee for the full year of 2016
and was elected Chairman of the Audit committee on 7 June 2016
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 46
47
Corporate Governance Report continued
Risk Committee
As part of the continuous programme to improve the
risk governance framework, the Risk Committee was
in 2015 to oversee the adequacy and
established
effectiveness of
the Company’s risk management
framework and policies. The Risk Committee is responsible
for identifying and assessing current and emerging material
risks and for the monitoring and mitigation of these, in
accordance with the Company’s risk policy and internal
procedures. The current members of the Committee are
Christopher Wetherhill and Caroline Foulger (Chair of
Committee).
Attendance at the Risk Committee meetings in 2016 was
as follows:
Director
Total meetings held:
Number attended:
Christopher Wetherhill
Caroline Foulger
Risk
Committee
2
2
2
Risk is an integral part of business and the effective
identification and management of risks
is central to
operating a successful business and to the Company
achieving its strategic objectives. Having a clear and well
understood risk management strategy assists the firm
in achieving an appropriate balance between generating
returns for its investors and taking risk. In that respect,
the Board has established the Risk Committee to monitor,
manage and mitigate those identified risks.
The principal risks and uncertainties faced by the Company
are described below and note 5 to the Consolidated
Financial Statements provides detailed explanations of the
risks associated with the Company’s financial instruments.
• Regulatory: the risk that a change in the laws and
regulations will materially impact the business if the
Company is not in compliance. The laws and regulations
include the AIM listing rules, AIFMD requirements, FCA
requirements and corporate governance requirements.
This risk also relates to the quality of the Company’s
relationship with its regulators.
• External: relates to losses that could be incurred due to
changes in external market factors (i.e. prices, volatilities,
and correlations, foreign exchange, political risk, event
risk). The Company may face market risks from its
currency exposures through investing into the Oakley
Funds and through any bridging loans or co-investments
pursued alongside the Funds.
• Counterparty: relates to losses that could be incurred
due to declines in the creditworthiness of entities in which
the Company invests or counterparties to transactions.
From time-to-time the Company may provide bridging or
debt finance to other entities, such as the Oakley Funds
or underlying portfolio companies. The credit risk of
lending to these entities will be considered on a case-by-
case basis through the Board and Risk Committee.
• Financial: relates to
inadequate controls by the
Investment Adviser or other third party services
providers which could lead to misappropriation of assets.
Inappropriate accounting policies or failure to comply
with accounting standards could lead to misreporting or
breaches of regulations.
• Operational: relates to risk associated with, and
supporting the operating environment of the Company.
The operating environment includes middle and back-
office functions such as trade processing, accounting,
administration, valuation and reporting. The Company
is dependent on
its
investment professionals. The Investment Adviser’s
employees play key roles in the operation and control
of the Company. The departure or reassignment of some
or all of these professionals could prevent the Company
from achieving its investment objectives.
Investment Adviser and
its
Shareholder Communications:
Board Oversight
The Company places great importance on communication
with its shareholders and endeavours to provide clear
information, as well as maintaining a regular dialogue
with shareholders.
The Investment Adviser briefs the Board on a regular basis
with regards to any feedback received from analysts and
investors. Any significant concern raised by shareholders
in relation to the Company is also communicated to the
(Liberum
Board. The Company’s Nominated Broker
Capital Limited) regularly reports directly to the Board at
their meetings. In addition, research reports published by
financial institutions on the Company are circulated to the
Board on a regular basis.
AGM
An Annual General Meeting is held each year, where a
separate resolution is proposed on each substantially
separate issue, including receipt of the annual report
and accounts. All proxy votes are counted and, except
where a poll is called, the level of proxies lodged for each
resolution is announced at the Meeting and is published on
the Company’s website. The notice of the Annual General
Meeting and related papers are sent to shareholders at least
20 working days before the meeting.
The Chairman and the Directors can be contacted
through the Company Secretary, Mayflower Management
Services (Bermuda) Limited, 3rd Floor, Mintflower Place,
8 Par-la-Ville Road, Hamilton HM08, Bermuda.
Capital Markets Day
An annual Capital Markets Day consists of a presentation to
significant shareholders and analysts by senior Partners and
the management teams of certain portfolio companies. The
events are held in London. The presentations are focused on
the performance of the investment portfolio.
Public Reporting
The Company’s Annual Report and Accounts, along
with the half-year Financial Statements and other RNS
releases are prepared
in accordance with applicable
regulatory requirements.
Donations
The Company made charitable donations during 2016
of US$20,000 (£15,916) (2015: US$15,000 (£9,844))
to Bermuda registered charities.
Through the Risk Committee, the Board has an ongoing
process in place for the identification, evaluation and
management of these risks.
Alternative Investment Fund Managers Directive
Status and Legal Form
Remuneration Disclosure
The Company is a self managed non-EU Alternative
Investment Fund (‘AIF’). It is a closed-ended investment
company incorporated in Bermuda and listed on the
London Stock Exchange. The Company’s registered office is
3rd Floor, Mintflower Place, 8 Par-la-Ville Road, Hamilton
HM08, Bermuda.
total amount of remuneration paid by
The
the
Company, to
its Directors (the senior management)
solely of fixed
was £260,644. This
remuneration; no variable remuneration was paid. Fixed
remuneration was composed of agreed fixed fees and
any other expenses paid. There were six beneficiaries of
this remuneration.
comprised
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 48
Financial Statements
49
Financial Statements
50
52
53
54
55
56
79
80
81
Independent Auditor's Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Glossary
Directors and Advisers
Notice of Annual General Meeting
OverviewStrategic Report by Investment Advisors’GovernanceOakley Capital Investments LimitedAnnual Report & Accounts 2016 50
51
Independent Auditor’s Report
To the Shareholders and Board of Directors of Oakley Capital Investments Limited
Opinion
We have audited the consolidated financial statements of Oakley
Capital Investments Limited (the “Company”), which comprise
the consolidated balance sheet as at 31 December 2016 and the
consolidated statements of comprehensive
in
equity and cash flows for the year then ended and notes, comprising
significant accounting policies and other explanatory information.
income, changes
In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the consolidated financial
position of the Company as at 31 December 2016 and
its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International Standards
on Auditing (ISA). Our responsibilities under those standards are
further described in the “Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements” section of our report. We
are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the consolidated
financial statements in Bermuda and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the consolidated
financial statements for the current year. These matters were
addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
The key audit matter that arose is as follows:
Valuation of the unquoted investment portfolio
As discussed in the Audit Committee Report on page 43, the
Accounting Policies on pages 56 to 58 and in notes 6 and 8 to
the consolidated financial statements on pages 63 to 64 and 65
to 69, respectively, the Company holds investments in private
equity partnerships (the Funds) and unquoted debt securities at
31 December 2016 of £297.0 million, where quoted prices do not
exist. Such unquoted equity investments and debt securities are
carried at their estimated fair values based upon the principles of the
International Private Equity and Venture Capital Association (“IPEV”)
valuation guidelines.
The valuation of the unquoted private equity partnerships and debt
securities held in the Company’s investment portfolio is the key
driver of its net asset value and total return to shareholders.
in
The private equity partnerships hold equity
unquoted portfolio companies. The valuation of these portfolio
companies is complex and requires the application of judgement by
the Investment Adviser.
investments
The fair values are based upon the income approach, where
estimated future cash flows are discounted at an appropriate
interest rate, or the market approach which estimates the enterprise
value of the investee using a comparable multiple of revenues or
EBITDA, information from recent comparable transactions, or the
underlying net asset value.
The risk
The significance of the unquoted investments to the Company’s
consolidated financial statements, combined with the judgement
required in estimating their fair values means this was an area of focus
during our audit.
Our response to the risk
We performed the following procedures:
We selected a sample of the unquoted debt securities held by the
Company and unquoted equity investments held by the private
equity partnerships and performed the following audit procedures:
• Obtained
independent confirmations of the existence and
accuracy of the unquoted equity investments and debt securities
or agreed them to loan agreements;
• Obtained the Investment Adviser’s models for valuing the
unquoted equity investments and debt securities;
• Determined that the valuation specialists engaged by the
Investment Adviser are qualified and independent of the Company;
• Challenged the
Investment Adviser on the methodologies
followed and key assumptions used in determining the valuations
of the unquoted equity investments and debt securities in the
context of the IPEV valuation guidelines;
• Obtained management
including budgets and
information,
forecasts for revenues and EBITDA, which are the key inputs
used in the valuation models by the Investment Adviser and
compared this information to that used in the models;
• Independently sourced multiples for comparable companies
used by the Investment Adviser, considered whether those
companies are comparable to the investee and compared them
to the multiples used in the valuations;
• Tested the mathematical accuracy of the valuation models;
• Tested the disclosures made about the unquoted equity
investments and debt securities in the notes to the consolidated
financial statements for compliance with IFRS; and
• Monitored any events that emerged in the post balance sheet
period (up to the date of signing the Company’s consolidated
financial statements) that would have a potential impact on the
value of the unquoted equity investments and debt securities
held at the year end.
Other Information in the Annual Report
Management is responsible for the other information contained
within the Annual Report. The other
information comprises
the Overview, Strategic Report by the Investment Adviser, and
Governance sections.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance or conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those
Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation
of the consolidated financial statements in accordance with IFRS, and
for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management
is responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect
a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit
professional
throughout the audit.
in accordance with ISAs, we exercise
judgement and maintain professional skepticism
We also:
• Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design 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.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures
in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent
auditor’s report is Neil Patterson.
KPMG Audit Limited
Chartered Professional Accountants
Hamilton, Bermuda
28 March 2017
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 52
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Consolidated Statement of Comprehensive Income
for the year ended 31 December 2016
Consolidated Balance Sheet
As at 31 December 2016
Income
Interest income
Net realised gains on investments at fair value through profit and loss
Net change in unrealised gains (losses) on investments at fair value through profit and loss
Net foreign currency gains (losses)
Other income
Total income
Expenses
Operating profit
Finance cost
Profit before tax
Withholding tax
Notes
13
6, 7
6, 7
14
2016
£’000
2015
£’000
11,637
8,545
46,196
4,733
140
71,251
(4,519)
66,732
(55)
5,053
29,041
(3,561)
(2,000)
597
29,130
(7,319)
21,811
(2)
66,677
21,809
19
–
(235)
Profit after tax attributable to equity shareholders/total comprehensive income
66,677
21,574
Earnings per share
Basic and diluted earnings per share
20
0.35
0.12
The Notes on pages 56 to 78 are an integral part of these financial statements.
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Net assets attributable to shareholders
Equity
Share capital
Share premium
Treasury shares
Retained earnings
Total shareholders’ equity
Net asset per ordinary share
Basic and diluted net assets per share
Ordinary shares in issue at 31 December
Notes
2016
£’000
2015
£’000
2014
£’000
6, 8
340,869
289,216
220,344
340,869
289,216
220,344
11
10
12
22
22
22
673
106,509
107,182
5
29,748
95,520
95,525
6,882
36,630
448,051
384,741
256,974
9,619
9,619
9,619
2,591
2,591
2,591
52
52
52
438,432
382,150
256,922
2,069
2,069
1,281
246,245
246,245
120,209
(25,024)
(23,170)
–
215,142
157,006
135,432
438,432
382,150
256,922
21
2.31
2.00
2.01
189,804
191,078
128,125
The Notes on pages 56 to 78 are an integral part of these financial statements.
The financial statements of Oakley Capital Investments Limited (registration number: 40324) on pages 52 to 78 were approved by the Board
of Directors and authorised for issue on 28 March 2017 and were signed on their behalf by:
Christopher Wetherhill
Director
Laurence Blackall
Director
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 54
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Consolidated Statement of Changes in Equity
for the year ended 31 December 2016
Consolidated Statement of Cash Flows
for the year ended 31 December 2016
Balance at 1 January 2015
Profit for the year/ total comprehensive income
Ordinary shares issued
Purchase of treasury shares
Sale of treasury shares
Dividends
Share capital
£’000
Share premium
£’000
1,281
120,209
–
–
788
126,036
Treasury
shares
£’000
–
–
–
–
–
–
–
–
–
(24,591)
1,421
–
Total transactions with equity shareholders
788
126,036
(23,170)
Retained
earnings
£’000
Total
shareholders'
equity
£’000
135,432
256,922
21,574
21,574
–
–
–
–
–
126,824
(24,591)
1,421
–
103,654
Balance at 31 December 2015
2,069
246,245
(23,170)
157,006
382,150
Profit for the year/ total comprehensive income
Ordinary shares issued
Purchase of treasury shares
Sale of treasury shares
Dividends
Total transactions with equity shareholders
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,854)
–
–
66,677
66,677
–
–
–
–
(1,854)
–
(8,541)
(8,541)
(1,854)
(8,541)
(10,395)
Balance at 31 December 2016
2,069
246,245
(25,024)
215,142
438,432
The Notes on pages 56 to 78 are an integral part of these financial statements.
Cash flows from operating activities
Purchases of investments
Sales of investments
Interest income received
Expenses paid
Finance cost paid
Other income received
Net cash provided by (used in) operating activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from treasury shares sold
Payment for treasury shares purchased
Dividends paid
Net cash (used in) provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
The Notes on pages 56 to 78 are an integral part of these financial statements.
Notes
2016
£’000
2015
£’000
(178,228)
(131,118)
173,554
122,579
17,403
(4,704)
(55)
140
1,687
(6,759)
(2)
597
8,110
(13,016)
22
22
22
23
–
–
126,824
1,421
(1,854)
(24,591)
–
–
(1,854)
103,654
6,256
90,638
95,520
6,882
4,733
(2,000)
10
106,509
95,520
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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57
Notes to the Consolidated Financial Statements
for the year ended 31 December 2016
1. Reporting entity
3. Significant accounting policies
Oakley Capital Investments Limited (the “Company”) is a closed-
end investment company 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 businesses, primarily in the UK and
Europe. The Company currently achieves its investment objective
primarily through its investments in the following three private
equity funds (the “Funds”): Oakley Capital Private Equity L.P.
(“Fund I”), an exempted limited partnership established in Bermuda,
Oakley Capital Private Equity II-A L.P., which together with Oakley
Capital Private Equity II-B L.P., Oakley Capital Private Equity II-C
L.P. (collectively the “Feeder Funds”) and OCPE II Master L.P. (the
“Fund II Master”) collectively comprise “Fund II”, and Oakley Capital
Private Equity III-A L.P., which together with Oakley Capital Private
Equity III-B L.P., Oakley Capital Private Equity III-C L.P. (collectively
the “Fund III Feeder Funds”) and OCPE III Master L.P. (the “Fund III
Master”) collectively comprise “Fund III”.
The Company’s manager is Oakley Capital (Bermuda) Limited (the
“Manager”), whose investment adviser in relation to the Company is
Oakley Capital Limited (the “Investment Adviser”). The Company’s
Administrator
(Bermuda)
Limited (the “Administrator”).
is Mayflower Management Services
term
“Company”
The defined
requires for the purposes of consolidation,
wholly owned subsidiary, OCIL Financing
(“OCI Financing”).
shall, where
the
include
context
its sole,
(Bermuda) Limited
The Company listed on the AIM market of the London Stock
Exchange on 3 August 2007.
2. Basis of preparation
The consolidated financial statements of the Company have been
prepared on a going concern basis and under the historical cost
convention, except for financial instruments at fair value through
profit and loss, which are measured at fair value.
2.1 Basis for compliance
The consolidated financial statements of the Company have been
prepared
in accordance with International Financial Reporting
Standards (“IFRS”).
2.2 Functional and presentation currency
The consolidated financial statements are presented in British
Pounds (“Pounds”), which is the Company’s functional currency.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all periods presented,
unless otherwise stated.
3.1 Changes in accounting policies and disclosures
(a) Transition to IFRS
The consolidated financial statements and notes have been
prepared in accordance with IFRS for the first time.
The Company's effective transition date from US GAAP is 1 January
2015. The Company prepared its opening balance sheet using IFRS
at that date and the Company's IFRS adoption date is 31 December
2015. In preparing these consolidated financial statements
in
accordance with IFRS 1, the Company has applied the mandatory
exemptions from full retrospective application of IFRS as described
in note 27.
(b) New standards, amendments and interpretations that are not
yet effective and might be relevant for the Company;
• IFRS 9 Financial Instruments (effective 1 January 2018, early
adoption permitted); and
• Disclosure Initiative - Amendments to IAS 7 (effective 1 January
2017).
The Company is currently in the process of analysing the impact
of these new standards, amendments to existing standards and
annual improvements to IFRS in detail but these are not expected
to have a material effect on the consolidated financial statements of
the Company.
3.2 Basis for consolidation
Subsidiaries are entities controlled by the Company. The Company
controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. While the
Company may have a greater than 50% ownership interest in a Fund, it
does not have the ability to affect the decisions of the Fund’s General
Partner or the returns of the Funds. The consolidated financial
statements have been prepared using uniform accounting policies for
like transactions and other events in similar circumstances.
The consolidated financial statements include the financial statements
of the Company and its wholly owned subsidiary, after the elimination
of all significant
intercompany balances and transactions. The
financial statements of the Company’s sole wholly owned subsidiary,
OCI Financing, are included in the consolidation. As at 31 December
2016, the Company holds $29,201,704 share capital in OCI Financing
(2015: $15,011,794).
As a result of the amendments to IFRS 10, investment entities are
exempted from consolidating controlled investees. The Company
meets the definition of an investment entity, as the following
conditions are met:
• The Company provides investment management services.
• The business purpose of the Company is the purchase, holding and
disposal of investments held in private equity funds and directly
in portfolio companies with above-average growth potential
with the goal of achieving returns from capital appreciation and
investment income.
• The performance of these investments is measured and evaluated
on a fair value basis.
• The Company holds multiple investments.
The Company therefore measures its investments at fair value
through profit and
investment
entity exemption. The Company does not consolidate any of its
investments in the Funds.
in accordance with the
loss
3.3 Investments
(a) Classification
The Company classifies its investments in private equity funds, direct
investments and loans to the Funds, portfolio companies and other
loans (herein referred to as “unquoted debt securities”) as financial
assets held at fair value through profit and loss at inception.
Financial assets held at fair value through profit and loss at inception
are assets that are managed and their performance evaluated on a fair
value basis in accordance with the Company’s investment strategy.
(b) Recognition and measurement
Financial assets held at fair value through profit and loss are
recognised initially on the trade date, which is the date that the
Company becomes a party to the contractual provisions of the
instrument. Financial assets held at fair value through profit and
loss are recognised initially at fair value, with transaction costs
recognised in profit or loss.
Net gains and losses from financial assets held at fair value
through profit and loss include all realised and unrealised fair value
changes and foreign exchange differences and are included in the
consolidated statement of comprehensive income in the period in
which they arise.
Quoted investments are subsequently carried at fair value. Fair
value is measured using the closing bid price at the reporting date,
where the investment is quoted on an active stock market.
investments,
including both equities and
loans, are
Unquoted
subsequently carried in the consolidated balance sheet at fair value.
Fair value is determined in line with the Company’s investment
valuation policy, which is compliant with the fair value guidelines
under IFRS 13 and the International Private Equity and Venture
Capital (IPEV) Valuation Guidelines.
(c) Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in which
substantially all the risks and rewards of ownership of the financial
asset are transferred or in which the Company neither transfers
nor retains substantially all the risks and rewards of ownership
and does not retain control of the financial asset. Any interest on
such transferred financial assets that is created or retained by the
Company is recognised as a separate asset or liability.
On derecognition of a financial asset, the difference between the
carrying amount of the asset (or the carrying amount allocated to
the portion of the asset derecognised), and consideration received
(including any new asset obtained less any new liability assumed) is
recognised in profit or loss.
3.4 Cash and cash equivalents
Cash and cash equivalents include deposits held on call with banks
and other short-term deposits. The Company considers all short-
term deposits with a maturity of 90 days or less as equivalent to cash.
3.5 Trade receivables
Trade receivables are recognised
fair value and
subsequently measured at amortised cost using the effective
interest method.
initially at
3.6 Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired or received in the ordinary course of business
from suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as non-
current liabilities. Trade payables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method.
3.7 Interest Income
Interest on unquoted debt securities held at fair value through profit
and loss is accrued on a time-proportionate basis, by reference to
the principal outstanding and the effective interest rate applicable,
which is the rate that discounts estimated future cash receipts over
the expected life of the debt security to its net carrying amount
on
is recognised gross of
withholding tax, if any. Interest income on unquoted debt securities
is recognised as a separate line item in the consolidated statement
of comprehensive income and classified within operating activities
in the consolidated cash flow statement.
initial recognition. Interest
income
OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2016
3. Significant accounting policies continued
3.8 Expenses
Expenses are recognised on the accruals basis.
3.9 Foreign currency translation
The functional currency of the Company is Pounds. Transactions in
currencies other than Pounds are recorded at the rates of exchange
prevailing on the dates of the transactions.
At each reporting date, investments and other monetary assets and
liabilities that are denominated in foreign currencies are translated
at the rates prevailing on the reporting date. Capital drawdowns and
proceeds of distributions from the Funds and foreign currencies and
income and expense items denominated in foreign currencies are
translated into Pounds 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 foreign currency gains and losses in the
consolidated statement of comprehensive income.
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 gains or losses on investments
in the consolidated statement of comprehensive income.
3.10 Share capital
Ordinary shares issued by the Company are recognised based on
the proceeds or fair value received, with the excess of the amount
received over their nominal value being credited to the share
premium account. Direct issue costs are deducted from equity.
3.11 Treasury shares
Treasury shares are included at the consideration paid as a reduction
in shareholders’ equity. Gains or losses resulting from the subsequent
sale of treasury shares are recorded as an adjustment to equity.
3.12 Earnings per share
The Company presents basic and diluted earnings per share data
for its ordinary shares. Basic earnings per share are calculated by
dividing the profit or loss attributable to ordinary shareholders of
the Company by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share are
determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares
outstanding for the effects of all potentially dilutive ordinary shares.
4. Critical accounting estimates, assumptions
and judgment
The reported results of the Company are sensitive to the accounting
policies, assumptions and estimates that underlie the preparation
of its consolidated financial statements. IFRS require the Board
of Directors, in preparing the Company’s consolidated financial
statements, to select suitable accounting policies, apply them
consistently and make judgments and estimates that are reasonable
and prudent. The Company’s estimates and assumptions are based
on historical experience and the Board of Directors expectation of
future events and are reviewed periodically. The actual outcome may
be materially different from that anticipated. Revisions to accounting
estimates are recognised in the period in which the estimates are
revised and in any future periods affected.
The judgments, assumptions and estimates involved in the Company’s
accounting policies that are considered by the Board of Directors
to be the most important to the portrayal of its results and financial
condition are the fair valuation of the investments and the assessment
regarding investment entities.
(a) Fair valuation of investments
The fair values assigned to investments held at fair value through
profit and loss are based upon available information and do not
necessarily represent amounts which might ultimately be realised.
Because of the inherent uncertainty of valuation, these estimated
fair values may differ significantly from the values that would have
been used had a ready market for the investments existed, and those
differences could be material.
Investments held at fair value through profit and loss are valued by
the Company in accordance with IAS 39 and IFRS 13 and the IPEV
valuation guidelines. Judgment is required in order to determine
the appropriate valuation methodology under this standard and
subsequently in determining the inputs into the valuation models
used. These judgments include making assessments of the future
earnings potential of portfolio companies, appropriate earnings
multiples to apply, estimating future cash flows and determining
appropriate discount rates.
(b) Assessment as an investment entity
Entities that meet the definition of an investment entity within IFRS
10 are required to account for investments in controlled entities,
as well as investments in associates and joint ventures, at fair value
through profit and loss.
The Board of Directors has concluded that the Company meets
the definition of an investment entity as its strategic objective is
to invest in portfolio investments on behalf of its investors for the
purpose of generating returns in the form of investment income and
capital appreciation.
5. Financial risk management
5.1 Introduction and overview
The Board of Directors, the Company’s Risk Committee (the “Risk Committee”) and the Investment Adviser attribute great importance to
professional risk management, beginning with the sourcing of premier private equity investment opportunities, proper understanding and
negotiation of appropriate terms and conditions and active monitoring, including a thorough analysis of reports and financial statements and
ongoing review of investments made. It is also key to structure the investment vehicles for the portfolio taking into account issues such as
liquidity and tax related issues. The Company has investment guidelines that set out its overall business strategies, its tolerance for risk and its
general risk management philosophy and has established processes to monitor and control the economic impact of these risks. The Investment
Adviser provides the Board of Directors with recommendations as to the Company’s asset allocation and annual investment levels that are
consistent with the Company’s objectives. The Risk Committee reviews and agrees policies for managing the risks as summarised below.
The Company has exposures to the following risks from financial instruments: concentration risk, credit risk, liquidity risk and market risk
(including interest rate risk, currency risk, and price risk). The Company’s overall risk management process focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Company’s financial performance.
5.2 Credit risk
The Company is subject to credit risk on its unquoted investments and cash. The schedule below summarises the Company’s exposure to
credit risk on its cash and unquoted investments.
Cash at HSBC
Cash at Barclays
Cash at Lloyds
Investments in Funds
Investments in unquoted equity and debt securities
2016
2015
Total
£’000
Rating
(Moody’s)
Total
£’000
Rating
(Moody’s)
72,142
34,254
113
211,254
85,761
A1
A1
A1
n/a
n/a
95,292
116
112
158,369
130,847
A1
A2
A1
n/a
n/a
In accordance with the Company’s policy, the Investment Adviser monitors the Company’s exposure to credit risk on cash on a quarterly
basis and the Risk Committee regularly reviews the Company’s exposure to credit risk. The credit quality of the investments in the funds and
unquoted equity and debt securities, which are held at fair value and include debt and equity elements, is based on the financial performance of
the individual investments and they are not rated.
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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5. Financial risk management continued
5.3 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations arising from its financial liabilities that are settled
by delivering cash or another financial asset, or that such obligations will have to be settled in a manner disadvantageous to the Company.
The Company’s policy and the Investment Adviser’s approach to managing liquidity is to have sufficient cash available to meet its liabilities,
including estimated capital calls, without incurring undue losses or risking damage to the Company’s reputation.
Unfunded commitments to the Funds are irrevocable and can exceed cash and cash equivalents available to the Company. Based on
current short-term cash flow projections and barring unforeseen events, the Company expects to be able to honour all capital calls by
the Funds.
As of 31 December 2016 cash and cash equivalents of the Company amount to £106,509,636 (2015: £95,519,939). The Company has total
undrawn capital commitments of £330,796,945 (2015: £89,465,097) relating to the Funds. Of this, £268,971,300 (2015: £nil) relates to the
commitment in Fund III, with drawdowns spread over an expected investment period of five years ending in 2022. The unfunded commitments
of the Company are listed in note 24. As per the Company's Bye-laws, the Company can borrow up to 25% of total shareholders’ equity which
would equal £109,608,000 for the year ending 31 December 2016 (2015: £95,538,000).
The majority of the investments held by the Company are unquoted and subject to specific restrictions on transferability and disposal.
Consequently, the risk exists that the Company might not be able to readily dispose of its holdings in such markets at the time of its
choosing and also that the price attained on a disposal is below the amount at which such investments are included in the Company’s
consolidated balance sheet.
The table below analyses the Company’s consolidated financial liabilities based on the remaining period between the balance sheet date
and the contractual maturity date. The amounts in the schedule are the contractual undiscounted cash flows. Balances due within 12
months equal their fair values, as the impact of discounting is not significant. In accordance with the Company’s policy, the Investment
Adviser monitors the Company’s liquidity position, and the Risk Committee reviews it on a regular basis.
Trade and other payables
Less than 1 month
1–3 months
More than 3 months
No stated maturity
Total trade and other payables
2016
£’000
2015
£’000
8,541
1,078
–
–
1,997
594
–
–
9,619
2,591
5.4 Market risk
Market risk is the risk that changes in market prices, such as equity prices, foreign exchange rates and interest rates will affect the
Company’s income or the value of its holdings of financial instruments. The Company’s sensitivity to these items is set out below.
a) Interest rate risk
Interest rate risk arises principally from changes in interest receivable on cash and deposits. The Company holds unquoted debt securities
at fixed rates of interest and is therefore exposed to interest rate risk.
The impact of an increase or decrease on interest rates of 100 basis points on cash and deposits, based on the closing consolidated
balance sheet position over a 12 month period, would have been:
Impact on interest income from cash and deposits
Impact on profit (loss)
2016
2015
Increase in
variable
£’000
Decrease in
variable
£’000
Increase in
variable
£’000
Decrease in
variable
£’000
9,959
9,959
(9,959)
(9,959)
11,995
11,995
(11,995)
(11,995)
The Company’s unquoted debt investments consist of mezzanine loans, financing loan facilities, revolving loan facilities and senior secured
loans, which carry fixed rates of interest ranging from 6.5% to 15%. These loans are subject to interest rate risk as increases and decreases in
interest rates will have an impact on their fair value. A 100 basis point increase in interest rates would result in a decrease in fair value of those
loans of £1,702,961 and a corresponding decrease of 100 basis points in interest rates would result in an increase in their fair value by the same
amount (2015: £1,880,379).
In addition, the Company has indirect exposure to interest rates through changes to the financial performance and valuation in equity investments
in the Funds and portfolio companies that have issued debt caused by interest rate fluctuations. Short-term receivables and payables are excluded
as the risks due to fluctuation in the prevailing levels of market interest rates associated with these instruments are not significant.
b) Currency risk
The Company holds assets and liabilities denominated in currencies other than its functional currency, which expose the Company to the
risk that the exchange rates of those currencies against the Pound will change in a manner which adversely impacts the Company’s net
profit and net assets attributable to shareholders. The following sensitivity analysis is presented based on the sensitivity of the Company’s
net assets to movements in foreign currency exchange rates assuming a 10% increase in exchange rates against the Pound. A 10%
decrease in exchange rates against the Pound would have an equal and opposite effect.
Assets:
Financial assets at fair value through profit and loss
Cash and cash equivalents
Trade and other receivables
Total assets
Liabilities:
Trade and other payables
Total liabilities
Impact on profit (loss)
2016
2015
Euro
£’000
US dollar
£’000
Euro
£’000
US dollar
£’000
21,125
7,808
64
28,997
–
–
–
–
–
–
(16)
(16)
16,402
6,449
–
22,851
–
–
840
(10)
–
830
(5)
(5)
28,997
(16)
22,851
825
The Investment Adviser monitors the Company’s currency position on a regular basis and reports the impact of currency movements on
the performance of the investment portfolio to the Risk Committee quarterly. As per the Company’s investment policy, all investments in
quoted equity securities and unquoted equity and debt securities are denominated in Pounds, placing currency risk on the counter party. The
investments in the Funds are denominated in Euros.
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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63
5. Financial risk management continued
5.4 Market risk continued
c) Price risk – market fluctuations
The Company’s management of price risk, which arises primarily from quoted and unquoted equity instruments, is through the careful
selection of financial assets within specified limits as advised by the Investment Adviser and approved by the Risk Committee.
For quoted equity securities, the market risk variable is deemed to be the market price itself. A 15% change in the price of those investments
would have the following direct impact on the consolidated statement of comprehensive income:
Quoted equity investments:
15% movement in price of listed investment
Impact on profit (loss)
Impact on net assets attributable to shareholders
2016
2015
Increase in
variable
£’000
Decrease in
variable
£’000
Increase in
variable
£’000
Decrease in
variable
£’000
6,578
6,578
(6,578)
(6,578)
–
–
–
–
For the investment in the Funds and unquoted equity securities, the market risk is deemed to be the change in fair value. A 15% change in
the fair value of those investments would have the following direct impact on the consolidated statement of comprehensive income:
Funds and unquoted equity securities:
15% movement in price of Funds and unquoted equity securities
Impact on profit (loss)
Impact on net assets attributable to shareholders
2016
2015
Increase in
variable
£’000
Decrease in
variable
£’000
Increase in
variable
£’000
Decrease in
variable
£’000
31,688
31,688
(31,688)
(31,688)
27,648
27,648
(27,648)
(27,648)
The Company is exposed to a variety of market risk factors which may change significantly over time. As a result, measurement of such
exposure at any given point in time may be difficult given the complexity and limited transparency of the investments held by the underlying
portfolio companies.
5.5 Capital management
The Company’s capital is represented by ordinary shares with £0.01 par value and they carry one vote each. The shares are entitled to
dividends when declared. The Company has no additional restrictions or specific capital requirements on the issuance and re-purchase
of ordinary shares. The movements of capital are shown in the consolidated statement of changes in equity.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to achieve
positive returns in all market environments. In order to maintain or adjust the capital structure, the Company may return capital to
shareholders through the issue and repurchase of treasury shares. The effects of the issue, repurchase and resale of treasury shares as
a result of market making activities in 2016 are listed in note 22. Liberum Capital Limited acts as the Company’s nominated adviser and
broker. The Company has a policy of share buy backs as part of discount control management and will not sell stock from treasury nor
issue new shares at material discounts to total shareholders’ equity.
6. Investments
Investments as at 31 December 2016:
2015
Fair Value
£’000
Purchases/
Capital calls
£’000
Total sales/
repayment
£’000
Realised
gains (losses)
£’000
Interest
and other
£’000
Change in
unrealised
gains (losses)
£’000
2016
Fair Value
£’000
Funds
Fund I
Fund II
Fund III
56,318
–
(6,271)
(13,686)
102,051
33,989
(42,365)
23,089
–
7,857
–
–
Total funds
158,369
41,846
(48,636)
9,403
Quoted equity securities
Time Out Group plc
Total quoted equity securities
Unquoted equity securities
–
–
47,155
47,155
–
–
Flypay Limited
7,115
–
(6,990)
–
–
–
Time Out Group HC Limited
13,271
4,000
(15,635)
(2,165)
Time Out Mercado Limited
5,564
2,754
(9,530)
747
–
–
–
–
–
–
–
529
574
Total unquoted equity securities
25,950
6,754
(32,155)
(1,418)
1,103
Unquoted debt securities
Bellwood Holdings Ltd
2,805
2,200
(5,055)
BH(B) 55 Limited
Daisy Group Holdings Limited
Damoco Holdco Ltd
Ellisfield (Bermuda) Limited
10,948
14,061
4,212
25,711
–
–
–
–
(11,175)
–
(4,300)
(12,537)
Fund I
Fund II
10,550
12,037
(11,032)
–
43,567
(39,838)
NSG Apparel BV
10,066
10,000
–
Oakley Capital II Limited
2,895
–
(2,214)
Oakley Capital III Limited
Parship GmbH
–
–
Time Out Group BC Limited
4,032
5,500
5,172
–
Time Out Group HC Limited
–
2,000
TO (Bermuda) Limited
TONY MC LLC
11,222
8,395
–
–
(529)
(5,292)
(4,211)
(2,053)
(2,652)
(9,088)
Total unquoted debt securities
104,897
80,476
(109,976)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
560
560
50
227
3,203
88
1,356
701
608
1,912
87
239
120
179
53
910
612
10,345
28,545
64,906
27,251
144,015
(5,524)
2,333
50,272
211,254
(3,301)
43,854
(3,301)
43,854
(125)
–
(109)
(234)
–
–
–
–
–
–
–
–
(62)
17,202
–
–
–
–
–
–
–
–
–
–
–
(479)
(541)
–
14,530
12,256
4,337
21,978
768
5,210
–
–
–
9,480
–
85,761
Total investments
289,216
176,231
(190,767)
8,545
11,448
46,196
340,869
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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6. Investments continued
Investments as at 31 December 2015:
2014
Fair Value
£’000
Purchases
Capital calls
£’000
Total
sales
£’000
Realised
gains (losses)
£’000
Interest
and other
£’000
Change in
unrealised
gains (losses)
£’000
2015
Fair Value
£’000
Funds
Fund I
Fund II
Fund III
87,193
5,973
(26,620)
26,619
64,664
21,173
(18,900)
2,422
–
–
–
–
Total funds
151,857
27,146
(45,520)
29,041
Unquoted equity securities
Flypay Limited
Time Out Group HC Limited
Time Out Mercado Limited
Total unquoted equity securities
Unquoted debt securities
Bellwood Holdings Ltd
BH(B) 55 Limited
Daisy Group Holdings Limited
Damoco Holdco Ltd
Ellisfield (Bermuda) Limited
Fund I
Fund II
NSG Apparel BV
Oakley Capital II Limited
Oakley Capital III Limited
Parship GmbH
Time Out Group BC Limited
Time Out Group HC Limited
TO (Bermuda) Limited
TONY MC LLC
–
–
–
–
2,646
10,752
–
–
–
6,990
13,271
5,455
25,716
–
–
14,000
4,130
24,932
–
–
–
–
–
–
–
–
–
19,907
17,661
(27,850)
8,117
1,252
4,745
–
–
3,604
–
10,174
7,290
4,530
(12,795)
15,000
–
–
–
–
–
–
–
(6,429)
(2,057)
–
–
–
–
–
–
Total unquoted debt securities
68,487
80,253
(49,131)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total investments
220,344
133,115
(94,651)
29,041
–
–
–
–
–
–
–
–
159
196
–
82
779
832
148
245
207
–
–
428
–
1,048
804
4,928
4,928
(36,847)
56,318
32,692
102,051
–
–
(4,155)
158,369
125
7,115
–
13,271
109
234
5,564
25,950
–
–
2,805
10,948
61
14,061
–
–
–
–
4,212
25,711
10,550
–
(2)
10,066
–
–
–
–
–
–
301
360
2,895
–
–
4,032
–
11,222
8,395
104,897
(3,561)
289,216
7. Net gains (losses) from investments at fair value through profit and loss
Net change in unrealised gains (losses) on investments at fair value through profit and loss:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
2016
£’000
2015
£’000
50,272
(4,155)
(3,301)
(234)
(541)
–
234
360
Total net change in unrealised gains (losses) on investments at fair value through profit and loss
46,196
(3,561)
Realised gains (losses) on investments at fair value through profit and loss:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
Total realised gains (losses) on investments at fair value through profit and loss
8. Disclosure about fair value of financial instruments
9,403
29,041
–
(1,418)
560
8,545
–
–
–
29,041
The Company has adopted IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. These fair value
measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The
Company classifies financial instruments measured at fair value in the investment portfolio according to the following hierarchy:
• Level I:
Quoted prices (unadjusted) in active markets for identical instruments that the Company can access at the measurement date.
Level I investments include quoted equity instruments.
• Level II:
Inputs other than quoted prices included within Level I that are observable for the instrument, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
• Level III: Inputs that are not based on observable market data. Level III investments include private equity funds, unquoted equity and
debt securities.
The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input
that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgment, considering factors specific to the instrument. The determination of what constitutes ‘observable’ requires
significant judgment by the Company. The Company considers observable data to be market data that are readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The following table analyses the Company’s investments measured at fair value as of 31 December 2016 by the level in the fair value
hierarchy into which the fair value measurement is categorised:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
Total investments measured at fair value
Level I
£’000
–
43,854
–
–
43,854
Level II
£’000
Level III
£’000
Total
£’000
–
–
–
–
–
211,254
211,254
–
–
43,854
–
85,761
85,761
297,015
340,869
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
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67
8. Disclosure about fair value of financial instruments continued
The following table analyses the Company’s investments measured at fair value as of 31 December 2015 by the level in the fair value
hierarchy into which the fair value measurement is categorised:
As at 31 December 2016, the value of the Funds’ investments, other assets and liabilities attributable to the Company based on its
respective percentage interest was as follows:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
Total investments measured at fair value
Level I
£’000
Level II
£’000
Level III
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
158,369
158,369
–
–
25,950
25,950
104,897
104,897
289,216
289,216
Investments
Loans
Provisional profit allocation
Other net assets
Total value of the Fund attributable to the Company (€’000)
2016
Fund I
(€’000)
Fund II
(€’000)
Fund III
(€’000)
82,225
213,160
(9,241)
(27,564)
–
(17,751)
–
–
–
3,090
949
76,074
168,794
2,734
2,734
Level I
Quoted equity investment values are based on quoted market prices in active markets, and are therefore classified within Level I
investments. The Company does not adjust the quoted price for these investments.
Level II
The Company does not hold any Level II investments as of 31 December 2016 or 31 December 2015.
Level III
The Company has determined that the Funds, unquoted equity securities and unquoted debt securities fall into the category Level III.
Funds, unquoted equity and debt securities are measured in accordance with the IPEV Guidelines with reference to the most appropriate
information available at the time of measurement. The consolidated financial statements as of 31 December 2016 include Level III
investments in the amount of £297,014,877, representing approximately 67.74% of equity (2015: £289,216,303; 75.68%).
Funds
The Company primarily invests in portfolio companies via the Funds. The Funds are unquoted equity securities and in turn invest in
unquoted securities. The Company’s investments in unquoted equity securities are recognised in the consolidated balance sheet at fair
value, in accordance with IPEV Valuation Guidelines and IFRS 13 and are considered Level III investments.
The valuation of unquoted fund investments is generally based on the latest available net asset value (“NAV”) of the fund reported by the
corresponding general partner or administrator, provided that the NAV has been appropriately determined using fair value principles in
accordance with IFRS 13.
The NAV of a fund is calculated after determining the fair value of a fund’s investment in any investee companies. This value is generally
obtained by calculating the Enterprise Value (“EV”) of the portfolio company and then adding excess cash and deducting financial instruments,
such as external debt, ranking ahead of the fund’s highest ranking instrument in the investee company.
A common method of determining the EV is to apply a market-based multiple (e.g. an average multiple based on a selection of comparable
quoted companies) to the ‘maintainable’ earnings or revenues of the portfolio company. This market-based approach presumes that the
comparator companies are correctly valued by the market. A discount is sometimes applied to market based multiples to adjust for points of
difference between the comparators and the company being valued.
Total value of the Fund attributable to the Company (£’000)
64,906
144,015
2,333
As at 31 December 2015, the value of the Funds’ investments, other assets and liabilities attributable to the Company based on its
respective percentage interest was as follows:
2015
Fund I
(€’000)
Fund II
(€’000)
Fund III
(€’000)
Investments
Loans
Provisional profit allocation
Other net assets
Total value of the Fund attributable to the Company (€’000)
80,919
173,127
(9,219)
(31,278)
–
4,808
(4,875)
1,664
76,508
138,638
Total value of the Fund attributable to the Company (£’000)
56,318
102,051
–
–
–
–
–
–
The Company does not utilise valuation models to calculate the fair value of its fund investments. The NAV as reported by the Funds’
General Partner or Administrator is considered to be the key unobservable input. In addition, the Company has the following control
procedures in place to evaluate whether the NAV of the underlying fund investments is calculated in a manner consistent with IFRS 13:
• Thorough initial due diligence process and ongoing monitoring procedures, primarily discussions with the Funds’ Investment Adviser;
• Comparison of historical realisations to last reported fair values; and
• Review of qualifications, if any, in the auditor’s report of a Fund or whether there is a history of significant adjustments to NAV reported
by the Funds’ General Partner or Administrator as a result of its annual audit or otherwise.
Unquoted equity securities
In estimating the fair value of unquoted equity securities, the Company considers the transaction price as a reasonable estimate of fair
value at initial recognition. Subsequently, the Company considers the most appropriate market valuation techniques in determining fair
value. Inputs considered by the Company are mainly comparable company valuation multiples.
Unquoted debt securities
The fair values of the Company’s investments in unquoted debt securities are derived from a Discounted Cash Flow calculation based on
expected future cash flows to be received, discounted at an appropriate rate. Expected future cash flows include interest received and
principal repayment at maturity.
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 68
69
8. Disclosure about fair value of financial instruments continued
Unobservable inputs for Level III investments
Funds
In arriving at the fair value of the unquoted fund investments, the key input used by the Company is the NAV as provided by the General Partner
or Administrator. It is recognised by the Company that the NAVs of the Funds are sensitive to movements in the values of the underlying
portfolio companies.
The underlying portfolio companies of the Funds may include both quoted and unquoted companies. Quoted portfolio companies are valued
based on market prices and no unobservable inputs are used. Unquoted portfolio companies are valued based on a market approach for which
significant judgment is applied.
For the purposes of sensitivity analysis, the Company considers a 10% adjustment to the fair value of the unquoted portfolio companies of the
Funds as reasonable. For the year ending 31 December 2016 a 10% adjustment to the fair value of the unquoted portfolio companies held by
the Funds would result in a 4.9% movement in net assets attributable to shareholders (2015: 4.2%).
Unquoted equity securities
The Company held no unquoted equity securities as at 31 December 2016. For the year ending 31 December 2015, the Company valued
the unquoted equity securities at fair value equal to the transaction price and no unobservable inputs were used.
Unquoted debt securities
In arriving at the fair value of the unquoted debt securities, the key inputs used by the Company are future cash flows expected to
be received until maturity of the debt securities and the discount factor applied. The discount factor applied is considered to be an
unobservable input and range between 6.5% and 15%.
For the purposes of sensitivity analysis, the Company considers a 1% adjustment to the discount factor applied as reasonable. For the
year ending 31 December 2016 a 1% adjustment would result in a 0.4% movement in net assets attributable to shareholders (2015: 0.5%).
Transfers between levels
The following table presents the transfer between Levels for the year ended 31 December 2016:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
Total transfers between Level I and III
Level I
£’000
–
47,155
–
–
47,155
Level II
£’000
Level III
£’000
–
–
–
–
–
–
–
(32,155)
(15,000)
(47,155)
Level III Investments:
2016
Fair value at beginning of year
Purchases
Proceeds on disposals (including interest)
Realised gain on sale
Accrued interest capitalised in debt for share conversion
Net realised loss on debt for share conversion
Transferred to quoted equity securities (Level I)
Interest income and other fee income
Unquoted
equity
securities
£’000
Unquoted
debt
securities
£’000
Funds
£’000
Total
£’000
158,369
25,950
104,897
289,216
41,846
6,754
80,476
129,076
(48,636)
9,403
–
–
–
–
–
–
1,103
(1,418)
(94,976)
(143,612)
–
–
560
9,403
1,103
(858)
(32,155)
(15,000)
(47,155)
–
10,345
10,345
Net change in unrealised gains (losses) on investments
50,272
(234)
(541)
49,497
Fair value at end of year
211,254
–
85,761
297,015
2015
Fair value at beginning of year
Purchases
Proceeds on disposals (including interest)
Realised gain on sale
Interest income and other fee income
Unquoted
equity
securities
£’000
Unquoted
debt
securities
£’000
Funds
£’000
Total
£’000
151,857
–
68,487
220,344
27,146
25,716
80,253
133,115
(45,520)
29,041
–
–
–
–
(49,131)
(94,651)
–
4,928
360
29,041
4,928
(3,561)
Net change in unrealised gains (losses) on investments
(4,155)
234
Fair value at end of year
158,369
25,950
104,897
289,216
Financial instruments not carried at fair value
Financial instruments, other than financial instruments at fair value through profit and loss, where carrying values are equal to fair values:
There were no transfers between the Levels during the year ended 31 December 2015.
On 14 June 2016, the Time Out unquoted debt and equity securities classified as Level III were exchanged for listed shares of Time Out Group
as part of the reorganisation and Initial Public Offering (“IPO”) of the Time Out Group. Transfers are recognised at the date of transfer.
Level I and Level III reconciliation
The changes in investments measured at fair value, for which the Company has used Level I and Level III inputs to determine fair value as of
31 December 2016 and 2015, are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
2016
£’000
2015
£’000
106,509
95,520
673
9,619
5
2,591
Level I Investments:
Quoted equity securities
Fair value at beginning of year
Shares transferred from unquoted debt and equity securities
Net change in unrealised gains (losses) on investments
Fair value of Level I investments at end of year
2016
£’000
2015
£’000
–
47,155
(3,301)
43,854
–
–
–
–
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 70
71
9. Segment information
The segment information for the year ended 31 December 2015 is as follows:
The Company has two reportable segments, as described below. For each of them, the Board of Directors receives detailed reports on at
least a quarterly basis. The following summary describes the operations in each of the Company’s reportable segments:
• Fund investments: includes commitments/investments in three private equity funds.
• Direct investments and loans: includes direct investments, loans to the Funds’ portfolio companies, loans to the Funds and other loans.
Balance sheet and income and expense items which cannot be clearly allocated to one of the segments are shown in the column
“Unallocated” in the following tables.
The reportable operating segments derive their revenue primarily by seeking investments to achieve an attractive return in relation to the
risk being taken. The return consists of interest, dividends and/or unrealised and realised capital gains.
The financial information provided to the Board of Directors with respect to total assets and liabilities is presented in a manner consistent
with the consolidated financial statements. The assessment of the performance of the operating segments is based on measurements
consistent with IFRS. Liabilities are not considered to be segment liabilities but rather managed at the corporate level.
There have been no transactions between the reportable segments during the financial year 2016 (2015: none).
The segment information for the year ended 31 December 2016 is as follows:
Net realised gains on financial assets at fair value
through profit and loss
Net unrealised gains (losses) on financial assets
at fair value through profit and loss
Interest income
Net foreign currency gains (losses)
Other income
Expenses
Finance cost
Withholding tax
Profit (loss) for the year
Total assets
Total liabilities
Net assets
Total assets include:
Fund
investments
£’000
Direct
investments
& loans
£’000
Total
operating
segments
£’000
Unallocated
£’000
9,403
(858)
8,545
50,272
(4,076)
46,196
–
–
Total
£’000
8,545
46,196
–
–
–
–
–
–
–
93
–
–
–
–
93
–
–
–
4,733
47
4,733
140
(4,519)
(4,519)
(55)
–
(55)
–
59,675
6,514
66,189
488
66,677
211,254
129,615
340,869
107,182
448,051
–
–
–
(9,619)
(9,619)
211,254
129,615
340,869
97,563
438,432
Financial assets at fair value through profit and loss
211,254
129,615
340,869
–
340,869
Others
–
–
–
107,182
107,182
11,355
11,355
282
11,637
10. Cash and cash equivalents
Net realised gains on financial assets at fair value
through profit and loss
Net unrealised gains (losses) on financial assets
at fair value through profit and loss
Interest income
Net foreign currency gains (losses)
Other income
Expenses
Finance cost
Withholding tax
Profit (loss) for the year
Total assets
Total liabilities
Net assets
Total assets include:
Fund
investments
£’000
29,041
Direct
investments
& loans
£’000
Total
operating
segments
£’000
–
29,041
(4,155)
594
(3,561)
Unallocated
£’000
–
–
Total
£’000
29,041
(3,561)
–
–
–
–
–
–
4,936
4,936
117
5,053
–
227
–
–
–
(2,000)
(2,000)
227
370
597
–
–
(7,319)
(7,319)
(2)
–
(2)
(235)
(235)
(235)
24,886
5,522
30,408
(8,834)
21,574
158,369
130,847
289,216
95,525
384,741
–
–
–
(2,591)
(2,591)
158,369
130,847
289,216
92,934
382,150
Financial assets at fair value through profit and loss
158,369
130,847
289,216
–
289,216
Others
–
–
–
95,525
95,525
Cash and demand balances at banks
Short-term deposits
11. Trade and other receivables
Prepayments
Amounts due from related parties
12. Trade and other payables
Trade payables
Dividend payable
Investment purchases for future settlement
2016
£’000
2015
£’000
80,402
67,297
26,107
28,223
106,509
95,520
2016
£’000
34
639
673
2016
£’000
1,078
8,541
–
9,619
2015
£’000
5
–
5
2015
£’000
594
–
1,997
2,591
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
72
73
13. Interest Income
Interest income on investments carried at amortised cost:
Cash and cash equivalents
Interest income on investments designated as at fair value through profit and loss:
Debt securities
14. Expenses
Management fees
Professional fees
Performance fees
Administration fees
Directors' fees
Other expenses
Transaction costs
2016
£’000
2015
£’000
282
117
11,355
11,637
4,936
5,053
2016
£’000
2,264
567
607
368
261
452
–
2015
£’000
5,176
563
–
381
203
287
709
4,519
7,319
Notes
15
18
15
16
17
15. Management and performance fees
The Company has appointed the Manager to provide management services pursuant to the management agreement dated 30 July 2007. The
Manager does not receive a management fee from the Company in respect of amounts either committed or invested by the Company in the
Funds. The Manager receives a management fee at the rate of 1% per annum in respect of assets that are not committed to the Funds or any
successor fund, 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 assets which are invested directly in co-investments. The management fee is payable monthly in arrears.
As part of the Company’s investment in Fund III, the Company agreed to pay Oakley Capital Manager Limited, the manager of Fund III (the
“Fund III Manager”), an option fee of €1,500,000 to secure the option to increase the Company’s commitment in Fund III by an additional
€150,000,000 at any time on or prior to 31 December 2016. Under the terms of the option agreement, the Fund III Manager would repay
the option fee in the event that the Company exercises the option. In November 2016, the Company exercised 50% of the option when it
committed an additional €75,000,000 to Fund III. The Fund III Manager repaid 50% of the option fee to the Company at that time. In December
2016, it was agreed that the Fund III Manager would repay the remaining 50% of the option fee. The £639,300 (€750,000) is included in Trade
and other receivables in the consolidated balance sheet. The Company did not exercise the remaining portion of the option and the option
agreement expired on 31 December 2016.
Management fees for the year ended 31 December 2016 totalled £2,263,915 (2015: £5,175,574) and are presented in the consolidated
statement of comprehensive income. The amount outstanding at year end is £802,283 (2015: nil) and is included in Trade and other payables
in the consolidated balance sheet. During 2015, the Company undertook a review of management fees paid to the Manager since inception.
Following the review, it was determined that management fees had been underpaid by £2,797,887, primarily as a result of certain co-investments
made by the Company being excluded from the management fee calculation or being included in the management fee calculation but charged at
a rate of 1% instead of 2%. This amount is included in the 2015 management fee expense balance of £5,175,574.
The Manager also receives a performance fee of 20% of the excess of the amount earned by the Company over and above an 8% per annum
hurdle rate on any monies invested as a co-investment with any Fund. Any co-investment is treated as a segregated pool of investments
by the Company. If the calculation period is greater than one year, the hurdle rate is compounded on each anniversary of the start of the
calculation period for each segregated co-investment. If the amount earned does not exceed the hurdle rate on any given co-investment, that
co-investment is included in the next calculation 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.
Performance fees for the year ended 31 December 2016 totalled £606,701 (2015: nil) and are presented in the consolidated statement of
comprehensive income.
The Manager has entered into an Investment Adviser Agreement with Oakley Capital Limited (the "Investment Adviser") to advise the
Manager on the investment of the assets of the Company. The Investment Adviser does not receive a management or performance fee from
the Company. Any fees due to the Investment Adviser are paid by the Manager out of the management and performance fees it receives
from the Company.
16. Administration fees
The Company has appointed the Administrator to provide administration services pursuant to the administration agreement dated 30 July
2007 and it receives an annual administration fee at prevailing commercial rates. Administration fees for the year ended 31 December 2016
totalled £367,553 (2015: £381,249) and are included in expenses (note 14) in the consolidated statement of comprehensive income. The
amount outstanding at the year end is £91,226 (2015: nil) and is included in trade and other payables in the consolidated balance sheet.
17. Directors' fees
Chairman’s remuneration
Directors’ fees
2016
£’000
55
206
261
2015
£’000
47
156
203
The members of the Board of Directors are listed on pages 38 to 39 of the annual report and are considered to be Key Management
Personnel. No pension contributions were made in respect of any of the directors and none of the directors receives any pension from
any portfolio company held by the Company.
During the year none of the directors waived remuneration (2015: none) and no fees were payable as at year end (2015: none).
During the year the Investment Adviser recharged staff costs of £132,565 (2015: none) and overheads of £42,435 (2015: none) to the
Company. No other staff costs are paid by the Company. For the years ended 31 December 2016 and 31 December 2015 members of
the Board of Directors held shares in the Company and were entitled to dividends as detailed below:
Shares at the beginning of the year
Shares acquired during the year
Shares at the end of the year
Dividends payable to directors
2016
(‘000)
385
1,846
2,231
£100
2015
(‘000)
370
15
385
–
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
74
75
18. Professional fees
Consulting fees
Legal fees
Auditor's remuneration
Other fees
Auditor's remuneration
Audit of consolidated financial statements
Other assurance services
Total auditor's remuneration
19. Withholding tax
2016
£’000
300
63
124
80
567
2015
£’000
212
188
52
111
563
2016
£’000
2015
£’000
96
28
124
52
–
52
Under current Bermuda law the Company is not required to pay tax in Bermuda on 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 is exempt
from such taxation at least until 31 March 2035.
22. Share capital
a) Authorised and issued capital
The authorised share capital of the Company is 280,000,000 ordinary shares at a par value of £0.01 each. Ordinary shares are listed
and traded on the AIM market of the London Stock Exchange. Each share confers the right to one vote and shareholders have the right to
receive dividends.
During the year, no ordinary shares have been issued (2015: 78,787,879 ordinary shares at a price of £1.65 per share).
As at 31 December 2016, the Company’s issued and fully paid share capital was 189,804,036 ordinary shares (2015: 191,078,315).
Ordinary shares outstanding at the beginning of the year
Ordinary shares issued and fully paid
Treasury shares purchased
Treasury shares issued
Ordinary shares outstanding at the end of the year
2016
(‘000)
2015
(‘000)
191,078
128,125
–
78,788
(1,274)
(16,654)
–
819
189,804
191,078
b) Treasury shares
During the year, the Company bought back 1,274,279 (2015: 16,653,814) ordinary shares for a total cash consideration of £1,853,928
(2015: £24,590,657). No treasury shares were issued during the year (2015: 819,250 ordinary shares for a total cash consideration of
£1,421,399). The total number of treasury shares held by the Company as at 31 December 2016 was 17,108,843 (2015: 15,834,564).
All rights associated with treasury shares held by the Company are suspended until the shares are re-issued.
The Company may, however, be subject to foreign withholding taxes in respect of income derived from its investments in other jurisdictions
(2016: nil; 2015: £235,297).
c) Share premium
20. Earnings per share
The earnings per share calculation use the weighted average number of shares in issue during the year.
Basic and diluted earnings per share
Profit for the year (‘000)
Weighted average number of shares outstanding (‘000)
21. Net asset value per share
The net asset value per share calculation uses the number of shares in issue at the end of the year.
Basic and diluted net asset value per share
Net assets attributable to shareholders (‘000)
Number of shares in issue at year end (‘000)
2016
£0.35
2015
£0.12
£66,677
£21,574
189,901
174,008
2016
£2.31
2015
£2.00
£438,432
£382,150
189,804
191,078
Share premium represents the amount received in excess of the nominal value of ordinary shares.
23. Dividends
The Board of Directors recommended and approved a dividend of 4.5 pence per ordinary share during the year ended 31 December 2016
which will result in a dividend payment of £8,541,181 payable on 30 January 2017 (2015: approved nil, paid nil).
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016
76
77
24. Commitments
The Company had the following capital commitments in Euros at year end:
Fund I
Total capital commitment (2016: £160,741; 2015: £138,680)
Called capital, beginning of year
Capital calls during the year (2016: 0%; 2015: 1.5%)
Called capital, end of year (2016: £152,704; 2015: £131,746)
Unfunded capital commitment (2016: £8,037; 2015: £6,934)
Aggregate recycled commitment
Fund II
Total capital commitment (2016: £170,640; 2015: £147,220)
Called capital, beginning of year
Capital calls during the year (2016: 19.5%; 2015: 15%)
Called capital, end of year (2016: £130,540; 2015: £83,915)
Unfunded capital commitment (2016: £40,100; 2015: £63,305)
Fund III
Total capital commitment (2016: £277,290; 2015: nil)
Called capital, beginning of year
Capital calls during the year (2016: 3%; 2015: nil)
Called capital, end of year (2016: £8,319; 2015: nil)
Unfunded capital commitment (2016: £268,971; 2015: nil)
2016
(€’000)
2015
(€’000)
188,398
188,398
178,978
176,152
–
2,826
178,978
178,978
9,420
5,652
9,420
5,652
200,000
200,000
114,000
84,000
39,000
30,000
153,000
114,000
47,000
86,000
325,000
–
9,750
9,750
315,250
–
–
–
–
–
Total unfunded capital commitments (2016: £317,108; 2015: £70,239)
371,670
95,420
The Company had the following loan commitments at year end:
Total revolving loan facility commitments:
Fund I
Fund II
Total unfunded loan commitments:
Fund I
Fund II
2016
£’000
2015
£’000
5,000
15,000
20,000
3,000
10,688
13,688
5,000
15,000
20,000
4,226
15,000
19,226
25. Contingent liabilities
In the ordinary course of business, the Company may enter into contracts or agreements that 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 current likelihood of such an event is remote.
During 2015, the Company agreed to guarantee the following with respect to its investment in Time Out Mercado: a) €1,400,000
contingent consideration payment based on certain performance criteria; and b) provided certain bank guarantees on behalf of Time Out
Mercado totalling €3,134,000. Following the IPO of Time Out in June 2016, the Company was released from both guarantees.
As at 31 December 2016, there are no contingent liabilities outstanding.
26. Related parties
Balances and transactions between the Company and its subsidiary have been eliminated on consolidation and are not disclosed in this
note. Related parties as disclosed below are not part of the consolidation and for this reason are not eliminated.
The Manager, the Investment Adviser and the Board of Directors are considered related parties to the Company due to direct or indirect
control and transactions with them. Management fees and performance fees paid to the Manager are detailed in notes 14 and 15. Amounts
paid to Directors are provided in note 17. One Director of the Company is also a Director of the Manager, the Investment Adviser and Oakley
Capital Corporate Finance LLP; entities which provide services to, and receive compensation from, the Company. The agreements between
the Company and these service providers are based on normal commercial terms.
Until 7 June 2016, the Administrator and the Company were considered related parties by virtue of a Director in common. This Director did
not seek re-election to the Company’s Board of Directors at the Company’s 2016 Annual General Meeting. Administration fees paid to the
Administrator are detailed in note 16. Throughout 2016, no Director of the Company had a personal interest in any transaction of significance
for the Company.
27. Transition to IFRS
As stated in note 3.1, this is the Company’s first set of consolidated financial statements prepared in accordance with IFRS.
The accounting policies set out in note 3 have been applied in preparing the consolidated financial statements for the year ended
31 December 2016, the comparative information presented in these consolidated financial statements for the year ended 31 December 2015
and as at 31 December 2014 and in the preparation of an opening IFRS balance sheet at 1 January 2015.
In preparing its opening IFRS balance sheet, the Company has adjusted amounts reported previously in accordance with US generally
accepted accounting principles (“US GAAP”). An explanation of how the transition from previous US GAAP to IFRS has affected the Company’s
consolidated balance sheet, financial performance and cash flows is set out below.
a) Estimates
The estimates previously made by the Company under US GAAP were not revised for the application of IFRS.
b) Presentation
The presentation in accordance with IFRS differs from the presentation in accordance with US GAAP. The analysis below sets out the
most significant adjustments arising in the transition to IFRS.
c) Consolidated balance sheet
The transition to IFRS resulted in no material adjustments to the consolidated balance sheet.
d) Consolidated statement of comprehensive income
The Company capitalised transaction costs relating to the acquisition of investments in accordance with US GAAP. Under IFRS, transaction
costs must be expensed in the period in which they are incurred. As a result the Company has reclassified costs of £221,297 from unrealised
gains or losses on investments held at fair value through profit and loss to transaction cost expense for the year ended 31 December 2015.
Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2016OverviewStrategic Report by Investment Advisors’GovernanceFinancial StatementsOakley Capital Investments LimitedAnnual Report & Accounts 2016 78
Governance
Financial statements
79
Notes to the Consolidated Financial Statements continued
Glossary
for the year ended 31 December 2016
27. Transition to IFRS continued
e) Consolidated cash flow statement
Under US GAAP the Company presented the consolidated cash flow statement according to the indirect method of presentation. The
Company has elected to present the consolidated cash flow statement according to the direct method under IFRS. There are no other
material adjustments to the consolidated cash flow statement.
The US GAAP consolidated statement of comprehensive income for the year ended 31 December 2015 can be reconciled to IFRS as follows:
Income
Interest income
Net realised gains on investments at fair value through profit and loss
Net change in unrealised gains (losses) on investments at fair value through profit and loss
Net foreign currency gains (losses)
Other income
Total income
Expenses
Operating profit
Finance cost
Profit (loss) before tax
Withholding tax
Profit after tax attributable to equity shareholders
28. Events after balance sheet date
US
GAAP
£’000
Effect of
transition
to IFRS
£’000
5,053
29,041
(3,782)
(2,000)
597
28,909
(7,098)
21,811
(2)
21,809
(235)
21,574
–
–
221
–
–
221
(221)
–
–
–
–
–
IFRS
£’000
5,053
29,041
(3,561)
(2,000)
597
29,130
(7,319)
21,811
(2)
21,809
(235)
21,574
The Board of Directors has evaluated subsequent events from the year end through 28 March 2017, which is the date the consolidated
financial statements were available for issue. The following events have been identified for disclosure.
On 24 January 2017, the Company sold 15,000,000 treasury shares at a price of £1.57 per share. Total cash consideration from the sale
was £23,550,000. The Company's average purchase price of the treasury shares sold was £1.47 per share. The Company subsequently
cancelled its remaining 2,108,843 treasury shares. As at that date the Company had 204,804,036 fully paid ordinary shares in issue.
Following the cancellation of the remaining treasury shares, the Company adopted a policy regarding share buy backs as part of discount
control management and will not sell stock from treasury nor issue new shares at material discounts to total shareholders’ equity.
On 30 January 2017, the Company paid its previously declared maiden dividend of 4.5 pence per share for the year ended 31 December 2016.
The total dividend expense of £8,541,181 was paid to shareholders registered on 30 December 2016.
On 31 January 2017, Fund III Master called for £28,154,750 (€32,500,000) representing 10% of outstanding commitments to partly fund
the acquisition of Casa.it and atHome.lu.
On 17 March 2017, the Company provided a loan facility of £3,000,000 to Oakley NS (Bermuda) LP, the holding entity for Fund II’s investment
in the North Sails group. The instrument carries a fixed interest rate of 10.0% per annum and matures one year from drawdown date. The loan
facility will be used to fund the acquisition of Hall Spars.
On 22 March 2017, the Company agree to extend the repayment date on its loan with Fund I to August 2017.
On 22 March 2017, the Company agreed to increase the revolving credit facility with Fund II to £20,000,000.
On 22 March 2017, the Company entered into a £20,000,000 revolving credit facility with Fund III carrying an interest rate of 6.5% per annum.
On 22 March 2017, the Company agreed to extend the repayment date on its two loans with Oakley Capital III Limited to July 2020.
On 22 March 2017, the Company agree to extend the repayment date on its loan with Ellisfield (Bermuda) Limited to December 2017.
Admission Document
The admission of the Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of
the AIM Rules. The admission document dated 30 July 2007 was prepared by the Company in respect to its
admission to trading on AIM.
AIM
AIFMD
AIF
AIM Rules
Auditor
The Alternative Investment Market of the London Stock Exchange.
Alternative Investment Fund Managers Directive became effective from July 2013. As a result, at
31 December 2016, Oakley Capital Investments Limited is registered as an Alternative Investment Fund (“AIF”).
Alternative Investment Fund, as at 31 December 2016, Oakley Capital Investments Limited is a non-EU AIF.
The AIM Rules for Companies, which sets out the rules and responsibilities for companies listed on AIM,
as amended from time to time.
KPMG Audit Limited or such other auditor as appointed from time to time.
Board / Directors
The board of directors of the Company.
Carried Interest
Commitments
Company / OCI
Cost
EBITDA
20 per cent. of the income and realisation proceeds from the sale of investment by the Funds payable to the
carried interest holders after satisfying any expenses and liabilities of the Funds and subject to the payment of the
General Partner Share as described in Section 11 of Part 1 of the Admission Document.
The amount committed by an investor to the Funds whether or not such amount has been advances in whole or
in part.
Oakley Capital Investments Limited, a company incorporated with limited liability in Bermuda and registered
number 40324.
In relation to the cost of investments, this is the open cost of the investment at 31 December 2016, i.e. the
investment cost net of amounts realised from partial exits and refinancings, where applicable.
Earnings before interest, taxation, depreciation and amortisation and is used as the typical measure of portfolio
company performance.
Exchange Rate
The GBP:EUR exchange rate at 31 December 2016 was £1: €1.1720.
Fund I / Oakley Fund I
Oakley Capital Private Equity L.P.
Fund II / Oakley Fund II
Those limited partnerships constituting the fund known as Oakley Capital Private Equity II, comprising Oakley
Capital Private Equity II-A L.P., Oakley Capital Private Equity II-B L.P, Oakley Capital Private Equity II-C L.P
and OCPE II Master L.P.
Fund III / Oakley Fund III
Those limited partnerships constituting the fund known as Oakley Capital Private Equity III, comprising
Oakley Capital Private Equity III-A L.P., Oakley Capital Private Equity III-B L.P, Oakley Capital Private Equity
III-C L.P and OCPE III Master L.P.
Fund Facilities
This includes debt facilities provided by the Company to the Oakley Funds and to the General Partners of the
Oakley Funds.
General Partners (GP)
Oakley Capital I Limited in respect of Fund I (previously Oakley Capital GP Limited) Oakley Capital II Limited in
respect of Fund II (previously Oakley Capital GP II Limited) and Oakley Capital III Limited in respect of Fund III
(previously Oakley Capital GP III Limited); all exempted companies incorporated in Bermuda.
IFRS
International Financial Reporting Standards. The consolidated financial statements and notes have been prepared
in accordance with IFRS for the first time.
Investment Adviser
Oakley Capital Limited, a company incorporated in England and Wales with registered number 4091922, which is
authorised and regulated by the Financial Conduct Authority; or any successor as Investment Adviser of Fund I,
Fund II or Fund III.
Investment Manager
Oakley Capital Manager Limited (formerly known as Oakley PE Management (Bermuda) Limited, in respect of the
Oakley Funds.
IPO
Manager
NAV
Oakley
Oakley Funds
US GAAP
Initial Public Offering.
Oakley Capital (Bermuda) Limited, in respect of the Company.
Net asset value is the value of the assets less liabilities.
The Investment Adviser being Oakley Capital Limited.
Fund I, Fund II and Fund III and (as applicable) any successor funds.
Generally accepted accounting principles adopted by the US Securities and Exchange Commission.
OverviewStrategic Report by Investment Advisors’Oakley Capital Investments LimitedAnnual Report & Accounts 2016
80
Governance
Financial statements
81
Directors and Advisers
Notice of Annual General Meeting
Directors
Christopher Wetherhill
Independent Director and Chairman
Laurence Charles Neil Blackall
Independent Director
Caroline Foulger
Independent Director
Registered Office
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
Advisers
Manager to the Company
Oakley Capital (Bermuda) Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
Investment Adviser to the Manager
Oakley Capital Limited
3 Cadogan Gate
London SW1X 0AS
United Kingdom
Legal Adviser to the Company
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
Mayflower Management Services (Bermuda) Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
Peter Adam Daiches Dubens
Director
James Michael Keyes
Independent Director
Legal Adviser 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
Auditor to the Company
KPMG Audit Limited
Crown House
4 Par-la-Ville Road
Hamilton HM08
Bermuda
Branch Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
NOTICE is hereby given that the 2017 Annual General Meeting (the “Meeting”) of the members of the Company will be held at 3rd Floor,
Mintflower Place, 8 Par-la-Ville Road, Hamilton HM08, Bermuda on:
14 June 2017 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 2016.
4.
To note the retirement by rotation as a Director of the Company of James Keyes at the Meeting in accordance with Bye-law 105 of the
Company’s Bye-laws.
Ordinary Resolutions
To consider, and if thought fit, pass the following resolutions as ordinary resolutions:
5. THAT KPMG of Crown House, 4 Par-la-Ville Road, Hamilton HM08, Bermuda be re-appointed as auditor for the ensuing year, and that the
Directors be authorised to fix their remuneration.
6. THAT:
a) the maximum number of Directors be determined as not more than six (6);
b)
c)
Peter Dubens be re-elected as a Director of the Company so to serve until the next Annual General Meeting or until his successor is
elected or appointed;
James Keyes be re-elected as a Director of the Company so to serve until the next Annual General Meeting or until his successor is
elected or appointed;
d) Laurence Blackall be re-elected as a Director of the Company so to serve until the next Annual General Meeting or until his successor is
elected or appointed;
e)
f)
Christopher Wetherhill be re-elected as a Director of the Company so to serve until the next Annual General Meeting or until his
successor is elected or appointed;
Caroline Foulger be re-elected as a Director of the Company so to serve until the next Annual General Meeting or until her successor is
elected or appointed;
g) the Directors be authorised from time to time to fill any vacancies on the Board; and
h) general authority be conferred on the Directors to appoint alternate Directors.
7. Special Resolution
To consider whether the Company should cease to continue as constituted.
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.
BY ORDER of the Directors
Mayflower Management Services (Bermuda) Limited
Secretary
28 April 2017
Notes
1.
Only those shareholders registered in the Company's
register of members at:
· 6.00 pm Bermuda time on 7 June 2017; or,
·
if this Meeting is adjourned, at 6.00 pm on the day
seven days prior to the adjourned Meeting,
shall be entitled to attend, speak and vote at the Meeting.
Changes to the register of members after the relevant
deadline shall be disregarded in determining the rights of
any person to 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.
4.
To be valid the Form of Proxy must be received
no later than 11.00 a.m. Bermuda time on 12 June
2017 at:
Mayflower Management Services (Bermuda) Limited
Secretary
Oakley Capital Investments Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
Email: ipilgrim@mayflower.bm
Fax: (441) 542 6724
Please return the completed Form of Proxy by scanned
e-mail or by facsimile.
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.
6.
The Ordinary Resolutions require a simple majority of
votes cast at the Meeting in order to pass. The Special
Resolution will require a majority of not less than three
fourths of the votes cast at the Meeting in order to pass.
Printed by Portman Lodge Limited
OverviewStrategic Report by Investment Advisors’Oakley Capital Investments LimitedAnnual Report & Accounts 2016
Annual Report and Accounts 2016
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Oakley Capital Investments Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton
HM08
Bermuda
T: +1 441 542 6330
F: +1 441 542 6724
E: investorrelations@oakleycapital.com