a
Annual Report & Accounts 2017
OverviewStrategic Report by the Investment AdviserGovernanceFinancial Statements Oakley Capital Investments Limited (“OCI”
or the “Company”) provides its shareholders
with access to a portfolio of high quality
private equity assets through its investments
in the Oakley Funds and co-investments
Contents
Overview
01 Highlights
02 At a Glance
04 Chairman’s Statement
Strategic Report by the Investment Adviser
Governance
08
09
10
12
26
Market Overview and Outlook
38 Board of Directors
Introduction to the Investment
Adviser
Investment Adviser’s Business Model
Investment Sectors
Environmental, Social and
Governance
40 Directors’ Report
42
Statement of Directors’
Responsibilities
43 Audit Committee Report
44
Corporate Governance Report
27 OCI NAV Overview
Financial Statements
28 Outstanding Commitments of OCI
28 OCI Investment Activity
30
31
32
33
34
Portfolio Review:
Oakley Fund I Investment Activity
Portfolio Review:
Oakley Fund II Investment Activity
Portfolio Review:
Oakley Fund III Investment Activity
Oakley Funds’ Realisations and
Distributions
Portfolio Review:
Co-Investment Activity
50
52
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
53 Consolidated Balance Sheet
54
55
56
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
80 Glossary
82 Directors and Advisers
For more information visit
www.oakleycapitalinvestments.com
Oakley Capital Investments LimitedAnnual Report & Accounts 2017
01
The Company’s net asset value increased in
the year by £63.6 million to £502.0 million
OCI Overview
NET
ASSET VALUE
MARKET
CAPITALISATION
NET ASSET VALUE
PER SHARE
£502.0m
£335.9m
£2.45
SHARE PRICE
£1.64
FINAL
DIVIDEND
2.25p
2017 OCI highlights
• 6% NAV/share growth year-on-year
• £201.5m total capital deployed
• £175.0m total proceeds received
• Total commitment of €325.8m to
Oakley Fund III
• Total full year dividend of 4.5 pence
• New co-investment in Inspired
Investment Sectors
2017 Oakley Funds’ highlights
• Portfolio growth +17%*
• €800m final close of Oakley Fund III
• €348.7m total invested capital
• €231.4m distributed to Limited Partners
• Two new partners joined Oakley Capital Limited
• Realisations of Inspired and Host Europe Group
Consumer
TMT
Education
NUMBER OF INVESTMENTS
NUMBER OF INVESTMENTS
NUMBER OF INVESTMENTS
6
4
3
See portfolio companies on page 13
See portfolio companies on page 19
See portfolio companies on page 23
*Calculated on a like-for-like basis
OverviewStrategic Report by the Investment AdviserGovernanceFinancial Statements
02
At a Glance
Providing investors with long-term
capital appreciation
£502.0m NAV breakdown
Oakley Fund
Investments
Co-investments/
debt
56.3%
of total NAV
Equity
13.4%
of total NAV
Debt
13.9%
of total NAV
Cash, other
assets and
liabilities
16.4%
of total NAV
£282.7m
£67.4m
£69.5m
£82.4m
Assets in the
underlying Oakley Funds
Consists of the equity holding in
Time Out Group plc and OCPE
Education (Feeder) L.P.
Debt investments relate to the
unquoted debt securities issued
by OCI
Assets of £118.5m offset by
liabilities (including the capital
call payable) of £36.1m
10 year track record of outperforming market indices
OCI long-term performance vs Indices
x
e
d
n
i
e
c
n
a
m
r
o
f
r
e
P
200
180
160
140
120
100
80
60
40
20
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
View our performance in detail on page 27
OCI
FTSE all share
AIM 100
AIM all share
Oakley Capital Investments LimitedAnnual Report & Accounts 2017
03
Sectors of Oakley Expertise
Oakley Capital Limited (Investment Adviser to OCI and the Oakley Funds) has developed expertise in the
following three core sectors in which OCI and the Oakley Funds have invested:
Consumer
TMT
Oakley’s core concentration
within this sector is in Digital
Consumer, with the focus being
on marketing-led online
businesses with leading positions
in their respective industries.
Originally investing in hosting
and telecoms space, Oakley’s
experience and insightful
network has helped to target
businesses that are key to
supporting advancements
in technology.
Education
A sector with very attractive
fundamentals, Education has
become a significant area of
investment for Oakley, with
multiple growth opportunities
from market consolidation
to internationalisation.
VALUE OF ASSETS*
OF TOTAL NAV
VALUE OF ASSETS*
OF TOTAL NAV
VALUE OF ASSETS*
OF TOTAL NAV
£263.9m
53%
£84.2m
17%
£83.3m
17%
See sector market overview on page 12
See sector market overview on page 18
See sector market overview on page 22
Portfolio
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 look-through and direct investments in the underlying portfolio
companies is represented below, (including both debt and equity investments).
TOTAL
INVESTMENTS
£419.6m**
Time Out
North Sails
Casa & atHome
Facile
Parship
Verivox
£78.7m
£62.0m
£49.6m
£33.1m
£29.5m
£11.0m
Daisy
Plesk
Damovo
TechInsights
£45.0m
£14.1m
£13.7m
£11.4m
Inspired
Schülerhilfe
AMOS
£46.0m
£30.8m
£6.5m
*Sector values are calculated on a look-through basis for each individual portfolio company as described on page 29. These values are gross of
OCI’s proportionate stake of the Oakley Funds’ liabilities, and debt assets.
**Total investments is net of OCI’s proportionate liabilities held by the Oakley Funds of £25.3m, and includes £13.5m of debt assets.
OverviewStrategic Report by the Investment AdviserGovernanceFinancial Statements
04
Chairman’s Statement
Strong investment activity reflected in the
capital deployed and distributions received
Overview
OCI has demonstrated solid performance
in 2017 and is set to benefit from a year of
considerable activity in the underlying portfolio
of investments. Driven by the continued
growth of the underlying portfolio companies,
the Net Asset Value (“NAV”) per share grew 6%
year-on-year. The Company is well positioned
for 2018, with 70% of investments in maturing
businesses held for nearly 3 years or more.
We look forward to increasing realisations and
are excited by new investments, as 22% of the
NAV was deployed via Fund III in the last 12 months.
Oakley Fund III closed at €800 million in
September 2017 and we are pleased to have
made a meaningful commitment to the Fund,
representing an interest of 40.7%.
For our shareholders, OCI provides the
opportunity to participate in the growth of a
range of businesses across attractive sectors
and geographies. Investors are able to benefit
from
the profound partnerships Oakley
forges with founders and managers, as well as
the deep knowledge and expertise that have
been built in core sectors over the last decade
and beyond.
We are pleased that the Investment Adviser
continues to leverage its network-driven
sourcing approach to find highly attractive
deals. With Oakley Fund III already invested
in six companies, we look forward to seeing
these businesses grow and develop under
Oakley’s ownership.
Return of Capital
We have also seen, over the course of the
year, capital being returned to the Company,
with proceeds totalling £175.0 million, of
which £88.2 million was received from the
Oakley Funds and equity co-investments.
£12.0 million was received in April, following
the successful exit of Host Europe Group.
For Oakley Fund II this represented gross
returns of 2.1x MM and 40% IRR and
marked another successful realisation of an
asset in the hosting space.
During the summer, OCI took the opportunity
to take a direct stake in Inspired, the premium
private schools business, when Oakley Fund I
fully realised its stake (gross returns: 3.0x MM
and 36% IRR). The size and funding power of
OCI allows it to gain direct exposure, through
its capacity to make co-investments to Oakley
Funds’ portfolio companies that either require
capital beyond the reach of the Oakley Funds,
or outgrow the Funds’ lifetime.
In August 2017,
Inspired also received
a significant growth investment from TA
Associates. To facilitate the transaction OCI
and Oakley Fund II agreed to sell down part
of their respective holdings and OCI received
total proceeds of £30.8 million from this
transaction. In December a holdco refinancing
returned further capital to the Company of
£21.3 million. The Board is pleased to be able to
support Inspired and be part of its future growth
and expansion.
In recent news, following the year end, Oakley
Fund II has agreed the sale of two of its
portfolio companies in the digital consumer
space, Parship Elite Group and Verivox, to
NuCom Group, ProSiebenSat.1’s commerce
unit. Approximate Fund II gross returns for
Parship Elite Group are 4.7x MM, 119%
IRR and for Verivox are 2.5x MM, 43% IRR.
In aggregate
to
receive £51.1 million from these transactions,
which value the companies at enterprise
values of €440 million (Parship Elite Group)
and
These
valuations represent a 26% premium to the
31 December 2017 carrying value of
these assets.
the Company expects
€530 million
(Verivox).
This f u r t h er d em o ns t r ate d Oa k l ey ’s
ability to return significant amounts of capital
to the Company and capitalise on the success
it has seen in the digital consumer space.
We are pleased that this sector will remain
an area of focus with investments remaining
in Facile (Oakley Fund II) and Casa & atHome
(Oakley Fund III).
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 05
Performance
As demonstrated on page 2 of this report, in reaching
its tenth year since incorporation, the Company has
consistently outperformed the FTSE All-Share Index.
The £2.45 NAV per share represents a 6% uplift
from the previous year and has been driven both by
earnings growth in the underlying portfolio, including
uplifts in three of Oakley Fund III’s investments.
These uplifts have resulted from strong performances
in these businesses and the achievement of key
strategic initiatives since acquisition.
The Board recognises that the share price has lagged
the NAV per share for a prolonged period and is
committed to closing this discount. Communication is
at the forefront of these efforts via greater disclosure
within the pages of this report, more regular
announcements, extensive
investor engagement
and providing a clearer understanding of Oakley’s
investment strategy and the Oakley Fund’s prospects.
The Board upholds a high standard of corporate
governance and ensures the Company operates in
the best interest of its shareholders. Demonstrating
its alignment of interest, board members held over 1%
of the Company’s shares in 2017.
Progress is being made, with share volume increasing
22% over the year, leading to 18% of the register
changing hands. We remain confident that this
improved IR activity, combined with the fast growth of
the portfolio companies, the prospect of realisations
unlocking further value and a progressive dividend
will result in the share price better reflecting the value
of underlying assets.
Funding and Commitments
invested a further
In the year, the Company
€142.2 million (£124.6 million) in the Oakley Funds.
Of this, €14.1 million (£12.3 million) was called by Oakley
Fund I, €14.0 million (£12.3 million) by Oakley Fund II
and €114.0 million (£100.0 million) by Oakley Fund III.
The Company’s remaining unfunded commitments
are €2.6 million (£2.3 million) for Oakley Fund I,
€ 31 . 4 million (£27.9 million) for Oakley Fund II and
€202.0 million (£179.6 million) for Oakley Fund III.
It is expected that these outstanding commitments
will be partly financed by future cashflows from
Oakley Fund II portfolio realisations.
Dividend
In December 2016 the Company announced that the
Board would adopt a dividend policy to pay a dividend
of 2.25 pence per share half-yearly. Accordingly, the
Board paid an interim dividend of 2.25 pence per
share on 26 October 2017 and we are pleased to
confirm, that the Board has resolved to declare and
pay a final dividend for 2017 of 2.25 pence per share,
payable on 26 April 2018.
Outlook
Whilst it seems that uncertainty will continue to
dominate over the coming year, the outlook is
generally good for 2018. Although the outcome is
not yet known, we should start to see some clarity
over the UK’s position as the Brexit deal begins to
take shape. Valuations continue to be high, facilitating
a strong exit environment, however the question
still remains amongst investors whether returns will
be affected in the long run if premiums are being
paid for quality assets. The Board is confident that
the Investment Adviser will continue to remain
disciplined in its investment approach and we have
seen this demonstrated by the quality of the six
new acquisitions made to date by Oakley Fund III.
The underlying portfolio continues to perform
despite macroeconomic factors, and the Company is
strongly positioned to deliver meaningful growth to
shareholders over the next twelve months.
Post Balance Sheet Events
As well as the Parship Elite Group and Verivox disposal,
Oakley Fund III completed its sixth investment,
purchasing Career Partner Group (“CPG”) from its
previous owner in January 2018. CPG is a leading
private provider of higher education and personnel
development in Germany. The Company’s indirect
investment, through
contribution to the equity
its interest in Oakley Fund III is approximately
£30.6 million.
Christopher Wetherhill
Chairman
OverviewStrategic Report by the Investment AdviserGovernanceFinancial Statements 06
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
07
Strategic Report
08 Market Overview and Outlook
09
Introduction to the Investment Adviser
10
Investment Adviser’s Business Model
12
Investment Sectors
26
Environmental, Social and Governance
27 OCI NAV Overview
28 Outstanding Commitments of OCI
28 OCI Investment Activity
30
Portfolio Review:
Oakley Fund I Investment Activity
31
Portfolio Review:
Oakley Fund II Investment Activity
32
Portfolio Review:
Oakley Fund III Investment Activity
33
34
Oakley Funds’ Realisations
and Distributions
Portfolio Review:
Co-Investment Activity
08
Market Overview and Outlook
Exercising caution whilst enjoying
private equity outperformance
For the first time since 2010, the world economy is outperforming most
predictions. Global output is estimated to have grown by 3.7% in 2017, with
Europe being a notable upside surprise and forecasts for 2018 and 2019 have
since been revised upward.
OCI continues to enjoy a strong pipeline from
this sourcing model and has deployed £118 million
in six companies since the beginning of 2017.
These acquisitions have been made at an average
EV/EBITDA multiple below 10x in contrast to sector
averages in mid-teen multiples.
2018 presents plenty of sources of uncertainty and
we foresee many factors that could impact economic
prosperity. The bigger risks to outlook are likely
political; struggling NAFTA negotiations, the impact of
power change in Italy, the journey to Brexit, escalating
tensions around North Korea and ongoing instability
in the Middle East, all at the very least present
uncertainty and all with important consequences for
the global economy.
reflect
this caution,
The portfolio companies
demonstrating business models that are resilient,
operating in niches within sectors that enjoy high
growth dynamics and fragmented participation. The
portfolio continues to broaden its Western European
footprint with a shift from the highly intermediated
UK market to a greater focus in mainland Europe
where Oakley has a strong track record.
Private equity continues to perform well, sustaining
its outperformance over other asset classes. Pertinent
to OCI is the recent AIC report that confirms that
UK listed private equity investment companies have
outperformed the FTSE all-share over one, three, five
and ten years, delivering total returns of 12%, 57%,
98% and 112% respectively.
This outperformance attracted a record $453 billion
to the global private equity industry in 2017 (source:
Preqin) and with $1 trillion to invest, it is no surprise
that 2018 has so far been the busiest start to a year
for private equity in over a decade. According to
Dealogic, the value of sponsor-backed deals to mid-
February soared to $40.5 billion, up from $23.7 billion
in the same period in 2017, with some 11 deals worth
over $1 billion signed in January alone.
It is also no surprise that buyout valuations have
reached new highs, with average enterprise valuation
multiples paid for European companies approaching
12x, compared to the previous high of 10x in 2016.
Oakley has taken advantage of the strong pricing
environment with sales in 2017 of HEG and the
recently announced sales of Parship and Verivox in
Q1 of 2018. Realisations are unlikely to stop here with
a number of additional exit processes underway.
There are growing concerns that high valuations
are making it increasingly difficult to buy high
quality assets at reasonable valuations and this
could affect future returns. The Investment Adviser
however, remains disciplined in its approach to
investing and its strategy of pursuing entrepreneur-
led, non-competitive, proprietary deals has
been advantageous to OCI. 76% of all Oakley’s
investments have been uncontested deals. Reliance
is not on the intermediated market, rather Oakley’s
strong founder/manager relationships, wide network
and reputation for sector expertise.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 09
Introduction to the Investment Adviser
OCI’s structure gives access to a unique
network and exposure to high-performance
The Administrative Agent
Oakley Capital
Manager Limited
The Company
Oakley Capital
Investments Limited
The Investment Adviser
Oakley Capital
Limited
“Administrative
About OCML
Oakley Capital Manager Limited
(the
Agent”)
provides operational assistance and
services
the Board with
respect to OCI’s investments and
administration. The
its general
Administrative Agent
is managed
by experienced administrative and
operational executives.
to
About OCI
OCI is a closed-ended investment
company with the principal objective
to achieve
capital appreciation
through investments in a diversified
portfolio of private mid-market
businesses primarily in Europe. OCI
offers investors a liquid investment
vehicle, through which they can
obtain exposure to the underlying
Funds with minimal
Oakley
administrative burden, no long-term
lock-up and no minimum investment
size. The OCI Board has the ultimate
decision to invest (or take any other
action) in an Oakley Fund or as a co-
investment. In the ordinary course it
makes decisions, after reviewing the
recommendations provided by the
Investment Adviser.
It was
incorporated
About OCL
Oakley Capital Limited
(“Oakley”)
serves as investment adviser to the
Administrative Agent with respect
to OCI.
in
England and Wales in 2000, and
is authorised and regulated by the
Financial Conduct Authority. Oakley
is primarily responsible for making
investment recommendations along
with structuring and negotiating
deals for the Oakley Funds.
What OCML does
• Carrying out the day-to-day
administrative operations
of OCI
• Providing operational
assistance with respect to
OCI’s investments
What OCI does
• Set investment strategy and
business objectives
• Governance, portfolio
management and risk
management
What OCL does
• Identification and due diligence of
investment opportunities
• Recommendations of potential
investments and realisations for
consideration
• Appointment and oversight of
• Structuring and negotiating deals
service providers
for the Oakley Funds
OverviewGovernanceFinancial StatementsStrategic Report by the Investment Adviser 10
Investment Adviser’s Business Model
Preferred partner for
top entrepreneurs
We do this by
leveraging our unique
business network
Sourcing proprietary
deals through our
industry relationships
and experience
Key resources
How we invest
Team
Experienced leadership team of investment
professionals, entrepreneurs and skilled operators
Network
Oakley has built a close partnership with
entrepreneurial founders and managers to become
their long-term partner and source off–market deals
with them
Approach
Oakley’s approach is disciplined and methodical and its
streamlined investment process provides the ability to
execute rapidly when required
Strong management partnerships
Oakley’s entrepreneurial heritage allows it to partner
with strong management teams and become their
preferred partner
Key geography and sectors
Focuses on core sectors and geographic locations to
build on the network and operating experience gained
from previous investments
Complexity
Seeks out complex deals outside
intermediated auctions
Structural growth
Targets companies with sustainable structural
growth dynamics and opportunity for M&A
Operational improvement
Identifies under-managed or non-core assets which can
achieve a step-change in operational performance and
benefit from professionalisation
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 11
Creating value and
growth across the
portfolio
Generating consistently
high returns from strong
performance
Creating value
Generating returns
Professionalisation
Working with founders or newly carved out
companies to develop infrastructure and systems
to support organic growth
Sector insight
Using sector knowledge and Oakley network to
support portfolio strategies and operations
Buy and build
Creating scale and synergies through targeted
M&A opportunities
Accelerate growth
Helping portfolio companies to achieve full potential
with appropriate capital and operational resources
Human capital management
Creating appropriate management incentives
and reshape teams to deliver performance
For the Oakley Funds:
OAKLEY FUND I
(VINTAGE 2007)
OAKLEY FUND II
(VINTAGE 2013)
OAKLEY FUND III
(VINTAGE 2016)
MM*
2.2x
2.0x
1.3x
IRR*
37%
38%
40%
For OCI, as LP in the Oakley Funds:
CALLED CAPITAL TO DATE
£427.8m
CAPITAL RETURNED TO DATE £376.5m
FAIR VALUE OF OAKLEY FUNDS £282.7m
* Gross money multiple and gross IRR are based on realised and
unrealised portfolio returns as at 31 December 2017.
OverviewGovernanceFinancial StatementsStrategic Report by the Investment Adviser
12
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Consumer
Market review
Following the acquisition of
Verivox in 2009, Oakley has
continued to invest in
digital, marketing-led
consumer focused businesses.
Oakley has developed
strong knowledge of these
business models, enabling
the repetition of successful
strategies across assets
from different industries.
The sector is benefitting from continued
growth as consumers increasingly switch
from
to online,
a trend which is expected to continue
in future years.
traditional channels
Successful businesses have strong brand
awareness, which attracts lower-cost, direct
traffic to their websites, helping to drive
improved profitability. Brand awareness
can be built and reinforced by continued
investment in marketing, which also acts as
a barrier to entry. Businesses are typically
highly cash generative, given their limited
Capex requirements, and can scale rapidly
once adoption by consumers reaches an
inflexion point. Online business models
also enable detailed tracking of KPIs, as well
as allowing for continued improvements
to conversion
the user
experience, all of which can help generate
incremental value.
rates and
Given the attractiveness of the sector,
these businesses can often attract premium
valuation multiples at exit once they have
reached scale.
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
13
13
The sector is benefitting from continued
growth as consumers increasingly switch from
traditional channels to online
CONSUMER
SECTOR EBITDA
GROWTH
+19%
53%
CONSUMER SECTOR AS
% OF OCI NAV
Sector investments*
Investment
Oakley Fund
OCI’s open cost
OCI’s valuation
% of OCI NAV
Time Out
North Sails
Casa & atHome
Facile
Parship
Verivox
OCI/Fund I
OCI/Fund II
Fund III
Fund II
Fund II
Fund II
£92.1m
£57.7m
£36.4m
£2.2m
£0.0m
£5.8m
£78.7m
£62.0m
£49.6m
£33.1m
£29.5m
£11.0m
16
12
10
7
6
2
* The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on page 29. These values include both direct and indirect
equity and debt securities in the relevant portfolio companies. Where the location of the investment states “OCI” rather than, or as well as, an Oakley Fund, there is a
direct equity or debt element included in the respective cost and valuation.
14
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Consumer Portfolio Companies
Leading multi-platform media and e-commerce brand with a global content distribution
network comprising websites, mobile apps, magazines and a physical presence via live
events and Time Out Market.
For the year ended 31 December 2017, revenue and adjusted EBITDA are anticipated
to be in line with expectations. Revenue is expected to increase 19% year-on-year on a
proforma basis with strong growth across both Time Out Digital and Time Out Market.
Time Out Market is expected to show revenue growth of 60% in the period, with
the Time Out Market in Lisbon continuing to perform strongly, seeing over 3.6 million
visitors in the full year of 2017.
Extracted from Time Out’s trading update, released 24 January 2018.
£92.1m
OCI’S OPEN COST
£78.7m
OCI’S VALUATION
16%
OF OCI NAV
North Technology Group (“NTG”), comprises three market-leading marine brands (North
Sails, Southern Spars and EdgeWater Power Boats) focused on providing innovative and
high-performance products and solutions for the world’s sailors and yachtsmen.
The group has expanded globally since Oakley’s initial acquisition in 2014, acquiring a
number of licensee companies around the world, whilst also developing the North Sails
brand in apparel and accessories.
It has been a challenging year for NTG with a slowdown in the super-yacht market
primarily impacting the Southern Spars division of the group. However, the outlook
appears positive with the America’s Cup sailing competition returning to New Zealand.
North Sails and Southern Spars are some of the leading suppliers for this event, and are
well placed to support teams with their local manufacturing facilities in Auckland.
In addition, the North Sails Apparel investment is showing positive momentum, with
growth in the wholesale order book being driven from new international customers, as
well as improving like-for-like retail and e-commerce sales. Overall, it is expected that
2018 will demonstrate good progress across all divisions in the group.
£57.7m
OCI’S OPEN COST
£62.0m
OCI’ VALUATION
12%
OF OCI NAV
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
15
Casa & atHome is an online property group comprising a portfolio of real estate
websites and mobile applications, including the #1 property portal in Luxembourg,
atHome.lu, and the #2 player in Italy, Casa.it.
The investment thesis for Casa & atHome was one of restructuring the cost base and
realising synergies between the two businesses, and then accelerating growth through
more efficient marketing and adding other verticals to the platforms. The first phase
of cost reduction was completed in July 2017 delivering material cost savings. atHome
has already been growing strongly, and Casa will now drive its top line performance
through more focussed and innovative sales and marketing initiatives.
On a consolidated basis, in the half-year ended December 2017 (30 June year end)
the group increased revenue by 8% and EBITDA by 77% versus the equivalent prior
year period.
£36.4m
OCI’S OPEN COST
£49.6m
OCI’S VALUATION
10%
OF OCI NAV
Italy’s leading online destination for consumers to compare prices for motor insurance,
energy, telecoms and personal finance.
Facile achieved strong growth in 2017 compared to the prior year, with revenues
up by 14% and EBITDA up 33%. During 2017, Facile’s non-insurance products have
shown very strong growth, with revenues up 39% and EBITDA up over 100% versus
prior year. While insurance continues to be the primary driver of Facile’s revenues, the
strong growth in non-insurance products has further diversified Facile’s revenue base
with these accounting for c.26% of group revenues in 2017.
Facile continues to maintain a market share of over 70% in its core insurance product,
and invests in TV advertising in order to sustain a strong share of the market.
£2.2m
OCI’S OPEN COST
£33.1m
OCI’S VALUATION
7%
OF OCI NAV
16
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Consumer Portfolio Companies continued
A combination of two of the leading online dating brands in the DACH region
(Germany, Austria and Switzerland) - Parship and ElitePartner.
Since the successful consolidation of these two brands in 2016, and Oakley
Fund II’s partial disposal to ProsiebenSat.1 in October 2016, Parship Elite Group
has delivered revenue and EBITDA growth of 6% and 33% respectively in 2017,
creating significant value through realisation of synergies and continuing its strong
focus on product improvements and new marketing initiatives.
£0.0m
OCI’S OPEN COST
£29.5m
OCI’S VALUATION
6%
OF OCI NAV
Post balance sheet event
On 22 February 2018, Oakley Fund II reached an agreement to sell its remaining 38.5% stake in Parship Elite Group
to NCG Commerce GmbH, a new joint venture with ProSieben, based on an enterprise value of €440 million. Oakley
Fund II expects to receive gross proceeds of €138 million generating estimated overall returns of 4.7x gross money
multiple and a gross IRR of 119%.
This realisation will result in OCI receiving approximately £35.9 million on completion of the transaction.
Parship Elite Group; key events from acquisition to realisation:
April 2015
June 2015
Nov 2015
Sep 2016
Feb 2018
Completion
of Parship
acquisition
Signing of
Elite Partner
acquisition
Completion of
Elite Partner
acquisition
Partial
realisation to
ProSieben
Agreement to
sell remaining
stake to
NuCom Group
Resulting in an estimated 4.7x
gross money multiple
and 119% gross IRR for
Oakley Fund II
Estimated proceeds for OCI is
£35.9 million
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
17
Germany’s leading consumer energy and household services price comparison
website, receiving commission and advertising revenues when consumers elect to
switch providers.
Verivox achieved strong revenue and EBITDA growth in 2017, with group revenues
21% and EBITDA 38% ahead of prior year.
Verivox’s core energy vertical has continued to perform well, with net commissions
up significantly versus prior year. Growth in Verivox’s non-energy verticals was
strong in 2017, with net commissions in broadband and mobile up 47% versus prior
year, while insurance net commissions continued on their double-digit growth path
above prior year.
£5.8m
OCI’S OPEN COST
£11.0m
OCI’S VALUATION
2%
OF OCI NAV
Post balance sheet event
On 22 February 2018, Oakley Fund II reached an agreement to sell its 9.9% stake in Verivox to NCG Commerce
GmbH based on an enterprise value of €530 million. Oakley Fund II expects to receive gross proceeds of €53
million, crystallising returns of approximately 2.5x gross money multiple and approximately 43% gross IRR.
This realisation will result in OCI receiving approximately £15.2 million on completion of the transaction.
Verivox; key events from acquisition to realisation:
Dec 2009
Jun 2015
Aug 2015
Sep 2016
Feb 2018
Initial
partnership
with Verivox
via Oakley
Fund I
Completion
of realisation
of Verivox by
Oakley Fund I
Acquisition
of Verivox by
Oakley Fund II
Further
equity
invested by
Oakley Fund II
Agreement to
sell remaining
stake to
NuCom Group
Resulting in an estimated 2.5x
gross money multiple
and 43% gross IRR for
Oakley Fund II
Estimated proceeds for OCI is
£15.2 million
18
Oakley Capital Investments Limited
Annual Report & Accounts 2017
TMT
Market review
From initial investments in
telecoms and webhosting
businesses, Oakley has
built on its experience and
industry expertise to evolve
its approach to investing
in technology assets as the
sector continues to develop.
Over time, Oakley has built a network
of insightful entrepreneurs and founders
who have repeatedly partnered with us to
identify and unlock opportunities in the
TMT space.
There are two key themes that dominate
industry and are causing
the hosting
businesses to change the way in which
they operate. Firstly, the maturity of the
in IT services has
outsourcing model
led to consolidation, with many
large
hosting players making major acquisitions
in recent years.
Secondly, the growth of public cloud hosting
has also forced changes to established
business models.
In the future, industry players will need
to emphasise the added value of their
in order to maintain
service wrapper
market position and enhance their users’/
customers’ experience.
disruptive
innovation
As
continues
across the TMT sector, Oakley looks for
opportunities to invest in companies which
stand to benefit from such changes.
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
19
Industry players will need to emphasise
the added value of their service wrappers
to enhance users’ experiences
TMT SECTOR
EBITDA GROWTH
+24%
17%
TMT SECTOR AS % OF OCI NAV
Sector investments*
Investment
Oakley Fund
OCI’s open cost
OCI’s valuation
% of OCI NAV
Daisy
Plesk
Damovo
TechInsights
OCI/Fund II
£38.4m
Fund III
Fund II
Fund III
£9.4m
£2.9m
£4.3m
£45.0m
£14.1m
£13.7m
£11.4m
9
3
3
2
* The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on page 29. These values include both direct and indirect
equity and debt securities in the relevant portfolio companies. Where the location of the investment states “OCI” rather than or as well as an Oakley Fund, there is a
direct equity or debt element included in the respective cost and valuation.
20
Oakley Capital Investments Limited
Annual Report & Accounts 2017
TMT Portfolio Companies
The UK’s #1 independent provider of converged B2B communications, IT and cloud
services in a large and growing market.
Daisy’s year-to-date financial year 2018 performance was strong, with significant
progress having been made with the integration of the acquired businesses (Phoenix
IT and Alternative Networks) and development of the group’s products and services.
During the year, Daisy completed a partial refinancing of its debt, raising £101 million
of additional senior debt, which was used to repay subordinated facilities, reducing
Daisy’s overall cost of debt.
One of the leading WebOps and Web Hosting platform for web professionals.
Plesk’s web-server management tools run, secure and automate server and website
administration as well as operations.
Significant progress has been made in realising some of Plesk’s strategic goals, including
the acquisition and integration of XOVI, a software platform specialising in search
engine optimisation, and successfully carving out Plesk from the Parallels Group
while maintaining growth. Plesk is now a fully-independent group with a stand-alone
management team and separate accounts. A key element of the investment strategy
was also realised in Q4 when Plesk introduced a price adjustment, which increased
prices across the product portfolio. This initiative should begin to impact results in
2018 and is expected to create significant value while allowing the business to continue
to invest in product development.
Both Plesk and XOVI have performed well and in line with expectations in 2017,
generating revenue and EBITDA ahead of budget.
£38.4m
OCI’S OPEN COST
£45.0m
OCI’S VALUATION
9%
OF OCI NAV
£9.4m
OCI’S OPEN COST
£14.1m
OCI’S VALUATION
3%
OF OCI NAV
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
21
A leading pan-European specialist in delivering mission-critical Unified Communication
and Collaboration solutions and managed services for enterprise and public sector
organisations.
Damovo has performed strongly this year, delivering year-on-year revenue growth of
20% and Trading EBITDA growth of 40% for the financial year ended January
2018. In the last three months Damovo has signed major multi-year contracts with
two new public sector customers in Germany, with combined contract values
of over €90 million.
A global leader in the intellectual property and technology intelligence Market.
TechInsights specialises in reverse engineering, which is used to prove patent
infringement and understand the technology behind mass market consumer
electronics. The company has also amassed a valuable database of technical intelligence
and research reports which is accessible via subscriptions. Following the acquisition in
2016 of a major competitor, Chipworks, TechInsights has solidified its position as the
specialist of choice in providing proof of patent infringement and competitive technical
intelligence.
TechInsights generated revenue growth of 7% year-on-year driven by high growth
of the subscription and project businesses offset by weaker report sales. Proforma
EBITDA for the year increased 23% from the prior year, as a result of strong top-line
performance, growing subscription revenues and lower costs following efficiencies
from the finalisation of the Chipworks integration.
The order book of project work is strong, with new bookings in January significantly
above prior year levels with the subscription business continuing to grow strongly.
£2.9m
OCI’S OPEN COST
£13.7m
OCI’S VALUATION
3%
OF OCI NAV
£4.3m
OCI’S OPEN COST
£11.4m
OCI’S VALUATION
2%
OF OCI NAV
22
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Education
Market review
Education has become
a significant sector for
Oakley in recent years, with
investments across the space,
including premium private
schools, higher education
and after-school tutoring.
backed
successfully
Having
an
entrepreneur to build a premium private
schools group, Oakley began to increase its
focus on the wider education space. With
our experience of investing in Inspired
and having carried out extensive market
mapping and research, we now have a
well-established knowledge base.
Education assets have many attractive
characteristics which Oakley believes
makes the sector an exciting and interesting
area in which to invest.
Demand for education is growing strongly
in both emerging and developed markets,
and supply is limited by public spending
constraints and high barriers to entry,
resulting in above-inflation price increases
in many segments.
This is also a large and fragmented market so
there is value to be created in consolidation
and building scale. Education markets are
typically non-cyclical, as parents place
great importance on the investment they
make in their children’s education. There
are also multiple growth opportunities
from market consolidation, technological
disruption, privatisation, pricing growth
and internationalisation.
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
23
Demand for education is growing in both
emerging and developed markets
EDUCATION
SECTOR EBITDA
GROWTH
+38%
17%
EDUCATION SECTOR AS
% OF OCI NAV
Sector investments*
Investment
Oakley Fund
OCI’s open cost
OCI’s valuation
% of OCI NAV
Inspired
Schülerhilfe
AMOS
OCI/Fund II
Fund III
Fund III
£13.8m
£30.8m
£6.5m
£46.0.m
£30.8m
£6.5m
10
6
1
Post year-end investment
Acquisition date
Oakley Fund
OCI’s cost
Career Partner Group
January 2018
Fund III
£30.6m
* The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on page 29. These values include both direct and indirect
equity and debt securities in the relevant portfolio companies. Where the location of the investment states “OCI” rather than or as well as an Oakley Fund, there is a
direct equity or debt element included in the respective cost and valuation.
24
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Education Portfolio Companies
A leading global premium private schools group, with over 30 schools across five
continents, Inspired has grown rapidly through both greenfield developments and
acquisition. All schools are individually developed and designed to deliver an excellent
education to their respective communities.
At the year ended 31 August 2017, enrolments were up by 54% year-on-year. The
group has continued to perform well with 2017/2018 enrolments ahead of budget.
In the last twelve months Inspired has added new schools in South Africa, Kenya, Peru,
Bahrain and Costa Rica through new openings and acquisition.
Germany’s leading provider of after-school tutoring, Schülerhilfe teaches 125,000
students across Germany and Austria each year. Schülerhilfe’s core service offering
comprises small group tutoring lessons which provide better results at lower cost
compared to one-to-one tutoring.
Full year 2017 performance was strong for Schülerhilfe with revenue and operating
EBITDA increases of 12% and 15%, respectively, year-on-year.
The tutoring market is highly fragmented in Germany. Schülerhilfe has a proven track
record of growing market share both organically and through acquisition.
£13.8m
OCI’S OPEN COST
£46.0m
OCI’S VALUATION
10%
OF OCI NAV
£30.8m
OCI’S OPEN COST
£30.8m
OCI’S VALUATION
6%
OF OCI NAV
Overview
Strategic Report by
Strategic Report by
the Investment Adviser
the Investment Adviser
Governance
Financial Statements
25
France’s leading business school focused entirely on sport management and sport
business.
AMOS educates over 1,400 students across six campuses in France, and offers
international study through its London campus. It was acquired by Oakley Fund III as
part of a higher education strategy with the aim of replicating the success of Inspired
in the K-12 (Kindergarten to Year 12) market.
AMOS’ student enrolments for the current academic year have increased by 28% over
the prior year, with revenues and EBITDA in line with expectations since acquisition.
Plans are underway to open new campuses in Toulouse and Marseilles in September
2018, which are expected to drive further growth in student numbers.
£6.5m
OCI’S OPEN COST
£6.5m
OCI’S VALUATION
1%
OF OCI NAV
Post year-end investment
Completed January 2018
One of the fastest growing and most highly ranked private university businesses in
Germany, with over 15,000 students enrolled in four types of programmes: traditional
on-campus universities, online degrees, dual studies (an alternative to traditional
apprenticeships) and corporate training.
Oakley Fund III acquired 66.7% of CPG in January 2018 for €84.6 million, and seeks
to support the continued development of the business, particularly in the online
university and dual studies segments, two high-growth sectors in Germany.
£30.6m
OCI’S OPEN COST
26
Environmental, Social and Governance
Responsible investing is important to protect and
create long-term investment value, beyond the
standard drivers of compliance and risk
Oakley, the Investment Adviser, believes that a focus on responsible investing (“RI”) can have an impact
beyond a financial return for investors, in particular human, environmental and social (“ESG”) factors, and the
long-term health and stability of the market as a whole.
Oakley became a signatory of the UN Principles for Responsible
Investing in December 2015, showing its commitment to RI and
ESG issues to generate long-term sustainable returns dependent
on stable, well-functioning and well governed systems.
Awareness of ESG 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;
• Encourage portfolio companies to consider and mitigate the
negative ESG impacts of their operations;
• Avoid
investment
in
especially
specific
sensitive
sectors which Oakley
an ESG or
from
considers
ethical viewpoint;
• Seek continuous improvement in RI techniques and ESG
performance at Oakley and the Oakley Funds’ portfolio
companies; and
• Report annually on Oakley’s RI practices via the PRI reporting
process and make information about the RI approach available
on Oakley’s website.
• Understanding and mitigating ESG risks helps protect our
Governance
reputation and goodwill in the market; and
• Regulatory attention is increasing, with stewardship codes
launched in many jurisdictions including the UK and EU.
Responsible investing can have a significant impact on private
equity in terms of making and managing investments and
creating value in each portfolio company. The following core
RI Principles are implemented by Oakley.
Core RI Principles are to:
• Promote compliance with relevant laws and regulations by
portfolio companies;
• Integrate ESG considerations into all stages of the deal cycle,
from due diligence throughout the period of ownership, to exit;
• Pursue alignment, in our RI approach, with the BVCA
RI Guidelines, and other industry good practice as it develops;
• Promote the respect, by Oakley and any fund portfolio
companies, of fundamental human rights;
• Avoid bribery or corruption in any of the Oakley entities and
any Oakley Fund portfolio companies’ dealings;
Oakley has a dedicated RI Committee which is responsible for
the implementation of the RI Policy under the oversight of a
senior partner. A quarterly compliance meeting is held where RI
and ESG issues constitute a standing agenda item.
All Oakley staff are required to follow the RI Policy and
consider its effects throughout the investment process.
Oakley has created an ESG risk assessment tool kit to aid the
team in understanding a variety of inherent ESG-related risks by
both sector and geography.
Oakley works together with the portfolio companies (both
pre- and post-investment) to identify and apply good practice
with regard to managing ESG matters, so as to ensure that RI is
at the core of Oakley’s activities.
Oakley in the Community:
Oakley is active in the community and promotes a number of charities and trusts throughout the year.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 27
OCI NAV Overview
During the year, OCI’s NAV increased by £63.6 million to £502.0 million, an increase of 15% since 31 December 2016.
Opening net asset value at the start of the year
Gross revenue
Net expenses
Net foreign currency gains/(losses)
Realised gains on investments
Net change in unrealised appreciation on investments
Treasury shares bought
Treasury shares sold
Dividend expense
Closing net asset value at the end of the year
Number of shares in issue
NAV per share
31 Dec 2016
£m
382.2
31 Dec 2017
£m
438.4
11.7
(4.5)
4.7
8.5
46.2
(1.9)
–
(8.5)
438.4
189.8
£2.31
7.7
(6.2)
(0.8)
23.9
20.3
–
23.3
(4.6)
502.0
204.8
£2.45
Net earnings were £44.9 million for the year, comprising:
• Gross revenue of £7.7 million arising from interest income earned on the debt facilities provided by the Company.
• Net expenses of £6.2 million (offset by £0.3 million of other income earned by the Company) and
£0.8 million of foreign exchange losses. Expenses includes fees paid to the Administrative Agent and the
Investment Adviser.
• Realised gains of £23.9 million earned from the realisations that occurred in the Oakley Funds. Net change
in unrealised gains of £20.3 million, driven predominantly by the uplift in the valuations of the portfolio
companies in the Oakley Funds.
£23.3 million was received by the Company from the sale of the treasury shares in January. The Company now holds no treasury shares.
An interim dividend of 2.25 pence per share, totalling £4.6 million, was paid to shareholders in October 2017.
Movement in Net Asset Value (£m)
7.7
(7.0)
23.9
20.3
23.3
(4.6)
502.0
438.4
Net earnings: £44.9m
500
400
300
200
100
0
Opening net asset
value as at
1 January 2017
Gross
revenue
Expenditure /
Net FX gains /
(losses)
Realised gains
on investments
Net change
in unrealised
appreciation on
investments
Tresury
shares sold
Dividend
expense
Closing net asset
value as at
31 December 2017
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 28
Outstanding Commitments of OCI
Outstanding commitments to the Oakley Funds as at 31 December 2017 were £209.8 million. The Investment Adviser anticipates
the majority of these will be drawn over the next 36 months as Oakley Fund III continues to deploy capital. The Board has
concluded that as Oakley Fund II has now entered its realisation phase and in the light of the expected distributions to be received, it is
satisfied that OCI will be able to meet its unfunded commitments in the normal course. The table below illustrates the
Company’s outstanding commitments to the Oakley Funds, and their respective percentage of the NAV of the Company at
31 December 2017.
Current
commitment
(€m)
Outstanding at
31 Dec 2017
(€m)
Outstanding at
31 Dec 2017
(£m)
188.4
190.0
325.8
2.6
31.4
202.0
236.0
2.3
27.9
179.6
209.8
(83.3)
126.5
% of
NAV
0
6
36
42
25
Fund
Oakley Fund I
Oakley Fund II
Oakley Fund III
Fund vintage
2007
2013
2016
Cash and cash equivalents (net of capital call paid post year end)
Net outstanding commitments unfunded by cash resources
OCI Investment Activity
The transactional activity for the Company’s investment portfolio for the year is summarised below:
Investment
Investment in Oakley Funds
Co-Investments
Equity securities - quoted
Equity securities - unquoted
Debt securities - unquoted
Total investments
31 Dec 2016
Fair Value
£m
31 Dec 2017
Fair Value
£m
211.3
211.3
43.9
–
85.8
129.6
340.9
282.7
282.7
41.2
26.2
69.5
136.9
419.6
The following pages explain movements in the underlying portfolios and their respective investments.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 29
Year of
investment
Residual cost
£m
Fair value
£m
2010
44.9
2014
2014
2014
2015
2015
2015
2015
2017
2017
2017
2017
2017
2014
2017
2015
2014
32.7
12.4
2.2
2.9
0.0
10.2
5.8
36.4
30.8
9.4
4.3
6.5
47.2
1.4
28.2
25.0
n/a
37.5
37.5
(0.9)
36.6
34.2
19.8
33.1
13.7
29.5
16.8
11.0
158.1
(21.1)
137.0
49.6
30.8
14.1
11.4
6.5
112.4
(3.3)
109.1
41.2
26.2
28.2
27.8
13.5
136.9
419.6
OCI Investment Activity continued
Overview of OCI’s underlying investments
Fund
Fund I
Investments
Time Out
Sector
Consumer
Location
Global
OCI’s proportionate allocation of Fund I investments (on a look-through basis)
Other assets and liabilities
OCI’s investment in Oakley Fund I
Fund II
Fund II
Fund II
Fund II
Fund II
Fund II
Fund II
North Sails
Inspired
Facile
Damovo
Consumer
Education
Consumer
TMT
Parship Elite Group
Consumer
Global
Global
Italy
Germany
Germany
UK
Daisy
Verivox
TMT
Consumer
Germany
OCI’s proportionate allocation of Fund II investments (on a look-through basis)
Other assets and liabilities
OCI’s investment in Oakley Fund II
Fund III
Fund III
Fund III
Fund III
Fund III
Casa & atHome
Consumer
Italy / Luxembourg
Schülerhilfe
Education
Germany
Plesk
TechInsights
AMOS
TMT
TMT
Education
Switzerland
Canada
France
OCI’s proportionate allocation of Fund III investments (on a look-through basis)
Other assets and liabilities
OCI’s investment in Oakley Fund III
Co-investment:
Equity
Equity
Debt
Debt
Debt
Time Out
Inspired
Daisy
Consumer
Education
TMT
North Sails
Consumer
Fund Facilities
n/a
Global
Global
UK
Global
n/a
OCI’s co-investments (both equity and debt)
Total OCI investments
The OCI look-through values are calculated using the OCI attributable proportion (determined as the ratio which OCI’s commitments
to the respective 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.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 30
Portfolio Review: Oakley Fund I Investment Activity
The investment portfolio of Oakley Fund I 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 holds a 65.5% interest in Oakley Fund I.
OAKLEY FUND I
Time Out
Broadstone
Inspired
Total current investments
Distributions during 2017:
Inspired
Total
31 Dec 2016
Fair value
€m
31 Dec 2017
Fair value
€m
60.5
0.7
64.3
125.5
64.3
0.6
–
64.9
Distributions
69.7
69.7
With Oakley Fund I approaching the end of its life-cycle, OCI
made an offer to buy Oakley Fund I’s stake in Inspired. Prior to
Oakley Fund I selling its interest to OCI, it offered its Limited
Partners the option of receiving a cash distribution or to retain
their proportionate interest in Inspired through the specific
investment vehicle OCPE Education Feeder L.P. (“OCPEE
Feeder”). OCI and a small number of other Limited Partners
elected to receive their proportionate interests in kind, being
€46.2 million, through OCPEE Feeder. The remaining Limited
Partners received a cash distribution of €23.5 million, taking the
aggregate fair value of the in-kind interest and cash distribution
to the Limited Partners to €69.7 million. It is due to this
realisation that the portfolio of Oakley Fund I had an overall fair
value decrease of €60.6 million during the year.
Time Out is listed on AIM of the London Stock Exchange, and its
fair value is determined by a mark-to-market valuation, based on
the 31 December 2017 share price of £1.31. Time Out released
its trading update for the year end, reporting that revenue is
expected to increase year-on-year with Time Out Digital
revenue showing strong growth. E-commerce and Time Out
Markets are also performing well. During the year, Oakley Fund I
injected a further €11.2 million into Time Out (Bermuda) Limited
in order to repay the OCI mezzanine loan.
As at 31 December 2017, Oakley Fund I had called €198.8
million (£176.7 million) from the Company, including recycling
of €13.0 million (£11.4 million).
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 31
Portfolio Review: Oakley Fund II Investment Activity
The investment portfolio of Oakley Fund II 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 holds a 36.2% interest in Oakley Fund II.
OAKLEY FUND II
Facile
Parship Elite Group
North Sails
Inspired
Daisy
Damovo
Verivox
Host Europe Group
Total investments
Distributions during 2017:
Host Europe Group
Inspired
Facile
Parship Elite Group
Other
Total
31 Dec 2016
Fair value
€m
31 Dec 2017
Fair value
€m
137.0
84.4
101.9
109.8
33.9
18.4
32.0
41.4
558.8
123.7
111.9
106.1
67.3
55.5
49.6
36.8
–
550.9
Distributions
42.3
52.4
33.4
2.2
0.6
130.9
Oakley Fund II had an active year with one investment
exit, distributions of €130.9 million, and a number of
follow-on investments.
There was an increase in the fair value of the majority of the
investments. The uplift was driven primarily by the portfolio
companies Damovo and Parship Elite Group. Both of these
companies had strong performances in 2017, with Damovo
expanding its presence to Switzerland through the acquisition of
Voice and Data Network AG, and further strong performances
from Parship from its integration with Elite Partner.
There was further capital of €26.4 million invested by
Oakley Fund II; €22.1 million in North Sails to fund the
development of North Sails Apparel and for M&A activities;
€3.7 million in Inspired to facilitate the further development in
school acquisitions; and €0.6 million in Facile for working
capital purposes.
In April 2017, Oakley Fund II completed the sale of Host Europe
Group and returned proceeds of €42.3 million, representing a
gross money multiple of 2.1x and gross IRR of 40%. OCI received
proceeds of €14.6 million (£12.0 million) from this transaction.
Distributions of €135.7 million were received by Oakley Fund II
over the course of 2017 of which €130.9 million of this
was distributed to Limited Partners, with OCI receiving a total
of €47.6 million (£41.4 million).
In July 2017, Inspired received a significant growth investment
from TA Associates. Oakley Fund II elected to sell a portion of
its interest in Inspired resulting in a total distribution of €22.1
million (£7.5 million received by OCI). Deferred consideration
for its stake in Educas Europe was included in this distribution.
As part of a restructuring of the Inspired entities, €45.0
million of debt refinancing was obtained through a wholly
owned subsidiary of OCPEE LP, OCPE Education Finco. From
this, Oakley Fund II received a distribution of €30.3 million
(£11.0 million received by OCI).
In August 2017, Facile Topco secured debt financing of
€35.0 million, resulting in a distribution to Oakley Fund II
of €33.4 million, and to OCI of €12.8 million (£11.4 million).
Parship Elite Group repurchased a number of shares from
Oakley Fund II. This was distributed to Limited Partners with
OCI receiving €0.7 million (£0.6 million).
Deferred consideration of €0.6 million was received from the
sale of intergenia in December 2017, which was distributed to
Limited Partners, with OCI receiving €0.2 million (£0.1 million).
In October 2017, OCI sold 5.0% of its interest in Oakley Fund II,
reducing its stake to 36.2% (2016: 38.1%). OCI received
£7.3 million from this transaction. As at 31 December 2017,
Oakley Fund II had called €158.7 million (£141.0 million) from
OCI, representing 83.5% of its total capital commitments.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 32
Portfolio Review: Oakley Fund III Investment Activity
The investment portfolio of Oakley Fund III is summarised in the table below. Oakley Fund III is denominated in euros, and the
year end exchange rate was used, where applicable. The Company held a 40.7% interest in Oakley Fund III.
OAKLEY FUND III
Casa & atHome
Schülerhilfe
Plesk
TechInsights
AMOS
Total investments
Distributions during 2017:
TechInsights
Total
31 Dec 2017
Fair value
€m
140.4
85.9
40.7
33.4
17.4
317.8
Distributions
30.7
30.7
Oakley Fund III had an active investment year, completing five
acquisitions, with a sixth acquisition completed in January 2018.
Casa & atHome and TechInsights secured debt financing
subsequent to Oakley Fund III’s initial investment. €32.8 million
was received from the Casa & atHome refinancing which was
used to repay debt obligations. €30.7 million was received from
the TechInsights refinancing which was distributed back to
Limited Partners with OCI receiving proceeds of €12.5 million
(£11.4 million).
There was an overall fair value uplift of €73.1 million from the
original invested cost, due to strong performances and growth
since acquisition in Casa & atHome, Plesk and TechInsights.
Schülerhilfe and AMOS were acquired in the second half
of 2017 and are held at fair values approximate to their total
cost invested.
Oakley Fund III held its final close on 29 September 2017,
bringing total committed capital to €800.0 million. OCI’s final
commitment to Oakley Fund III was diluted to 40.7% (2016:
47.4%) at this time.
Oakley Fund III has called €123.8 million (£110.1 million) to date
from the Company, representing 38% of the Company’s total
committed capital.
In January 2018, Oakley Fund III completed the acquisition of
Career Partner Group (“CPG”) from its previous owner Apollo
Education Group Inc. CPG is a leading provider of private higher
education and personnel development in Germany. Oakley Fund
III invested €84.6 million in this acquisition obtaining a 66.7%
stake in the business.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 33
Oakley Funds’ Realisations and Distributions
Year of activity for Oakley Funds and the
Co-investment Fund, with £88.2m returned to OCI
Oakley Funds’ and co-investment Fund's realisations and distributions during 2017:
Oakley Fund II
Realisation
Oakley Fund I
Realisation
• Agreement reached in December 2016 with Cinven
(the majority shareholder in HEG), to sell.
• The sale completed on 3 April 2017, and proceeds
of €42.3 million were received by Fund II resulting in a gross
money multiple of 2.1x and a gross IRR of 40%.
• Agreement reached to sell the 30.5% stake in OCPEE
L.P. to OCI and other Oakley Fund I Limited Partners in
June 2017.
• Total proceeds received by the Fund was €69.7 million.
• This represented a gross money multiple of 3.0x and
a gross IRR of 36%.
OCI’s proceeds: £12.0m
OCI invested £20.8m in Inspired via co-investment
Oakley Fund III
Refinancing
Oakley Fund II
Refinancing
• TechInsights was refinanced in July 2017 resulting in a
distribution of €30.7 million to Oakley Fund III.
• Facile was
refinanced
in August 2017 obtaining
€35.0 million of debt proceeds.
OCI’s proceeds: £11.4m
OCI’s proceeds: £11.4m
OCPEE L.P.
Refinancing
Oakley Fund II
Ad-hoc Proceeds
• As part of the TA Associates growth investment, OCPEE
L.P.‘s two Limited Partners Oakley Fund II and OCPEE
Feeder decided to sell down part of their positions
in Inspired.
• In December 2017, refinancing was received through
a wholly owned subsidiary OCPE Education Finco.
• Shares were repurchased from Oakley Fund II by Parship
in August 2017 resulting in proceeds being distributed to
Limited Partners of €2.2 million.
• Deferred consideration of €0.6 million was received
in December 2017 by Oakley Fund II, from the sale of
intergenia in December 2014.
OCI’s proceeds: £52.7m
OCI’s proceeds: £0.7m
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 34
Portfolio Review: Co-Investment Activity
The co-investment portfolio as at 31 December 2017 is summarised in the table below:
Co-Investments:
Equity Securities
Time Out
OCPEE Feeder
Debt Securities
Daisy
North Sails
Fund Facilities
Time Out
Total investments
31 Dec 2016
Fair value
£m
31 Dec 2017
Fair value
£m
43.9
–
22.6
22.0
22.6
9.5
129.6
41.2
26.2
28.2
27.8
13.5
–
136.9
Equity Securities
In November 2016, the interests held by both Oakley Fund I
and Oakley Fund II in Inspired were restructured into a new
holding entity, OCPEE L.P. At 31 December 2016, the Company
held an indirect interest in Inspired through both Oakley Fund
I and Fund II’s respective interest in OCPEE L.P.
Inspired has grown rapidly both through acquisition and
greenfield development since Oakley Fund I’s first investment in
July 2013. Having built up its pipeline, reputation in the market
and its integration and M&A capabilities over recent years,
Inspired is expected to continue its expansion in the short to
medium term through further acquisitions. With Oakley Fund I
well into its realisation phase it was not in a position to continue
to participate in Inspired’s expansion. In view of future growth
prospects for Inspired, the Company offered to acquire Oakley
Fund I’s interest in OCPEE L.P.
The Company acquired 99.2% of Oakley Fund I’s stake in
Inspired, with the remaining 0.8% being held by a small number
of Oakley Fund I Limited Partners who rolled their interests into
a newly created vehicle, OCPEE Feeder.
In August 2017, Inspired received a significant strategic growth
investment from TA Associates. In order to facilitate entry into
the capital structure, the Company agreed with OCPEE L.P. to
sell-down part of its holding in Inspired. The addition of such
a high quality investor to Inspired’s shareholder base, and the
new investment being made in growth funding, should underpin
Inspired’s ambitious plans.
In December 2017, €45.0 million of refinancing proceeds was
obtained through a wholly owned subsidiary of OCPEE L.P.,
OCPE Education Finco. This resulted in a distribution to both
OCPEE Feeder and Oakley Fund II. From the aggregation of
these transactions in 2017, OCI received total distributions
of €58.6 million (£52.7 million) through it’s stake in both Oakley
Fund II and OCPEE Feeder.
Time Out is a listed company and its fair value is based on a
mark-to-market valuation, using the 31 December 2017 share
price of £1.31. The year end trading update for Time Out is
positive and has demonstrated continued progress in Time Out’s
digital strategy. Revenue in e-commerce and premium profiles
has grown 57% and 43% respectively, compared to the prior
year. Time Out continues to invest in resources across product,
engineering, e-commerce and Time Out Markets with a focus
on driving significant revenue growth and reaching profitability.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 35
Debt Securities
The Company provides debt facilities to certain underlying
entities and portfolio companies. These debt facilities are
provided on an arm’s-length basis at competitive market interest
rates. The interest income generated from these facilities
exceeds the interest earned on the Company’s bank deposits,
allowing the Company to earn higher returns on part of its cash
reserves. During the year, the Company has earned £7.7 million
interest from the debt facilities provided.
A new debt facility of £3.0 million was provided to North Sails
during the year. This loan was used to fund the acquisition
of Hall Spars, a rigging company and competitor to Southern
Spars, a division of North Sails.
As part of the acquisition of Oakley Fund I’s interest in
Time Out, a loan of £6.2 million was provided by OCI to
Time Out (Bermuda) Limited. This was repaid in June 2017,
providing proceeds to the Company of £9.8 million, including
accrued interest.
The Company also provides revolving credit facilities to each
of 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 of the Oakley Funds. As at 31 December
2017, the Company had outstanding debt facilities of
£13.5 million to the Oakley Funds, including accrued
interest, a decrease of £9.1 million from 31 December 2016
primarily due to repayments of the Oakley Fund II facility.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 36
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
37
Governance
38
40
42
43
44
Board of Directors
Directors’ Report
Statement of Directors’
Responsibilities
Audit Committee Report
Corporate Governance Report
38
Board of Directors
Christopher Wetherhill
Chairman
James Keyes
Non-executive Director
Christopher Wetherhill founded, and was
Chief Executive Officer of Hemisphere
Management Limited, a financial services
company in Bermuda, from 1981 until
2000.
Since 2000, he has served as a board
member of, and a consultant to, a number
of investment companies. He is a Fellow
of the Institute of Chartered Accountants
in England and Wales, a member of the
Canadian and Bermudian Institutes of
Chartered Professional Accountants, a
Fellow of the Institute of Directors and
a Freeman of the City of London. He is a
resident of Bermuda.
Christopher is Chairman of the Board
of Directors, and is a member of the
Company’s risk committee.
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 and is a member of the
Company’s Audit Committee.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 39
Caroline Foulger
Non-executive Director
Laurence Blackall
Non-executive Director
Peter Dubens
Non-executive Director
in the
communication
thirty years’
Laurence Blackall has
information, media
experience
and
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, and is
Chair of the Company’s Audit Committee.
Peter Dubens is the founder and Managing
Partner of the Oakley Capital Group, a
privately-owned asset management and
advisory group comprising Private Equity
and Venture Capital operations managing
over €1.6 billion.
founded
Peter
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.
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, 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
in England & Wales,
Accountants
CPA Bermuda and a Member of the
Institute of Directors. Caroline is a resident
of Bermuda.
Caroline
Risk Committee.
is Chair of the Company’s
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 40
Directors’ Report
The Directors present their report and financial statements for the year ended 31 December 2017. The results for the
year are set out in the attached financial statements and have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (“IFRS”).
Directors
Substantial Shareholdings
As at 14 March 2018, the Company has received the following
notifications of interest of 3% or more in the voting rights
attached to the Company’s ordinary shares:
Shareholder
Invesco Perpetual
Woodford Investment Management
Ruffer LLP
Sarasin & Partners
Fidelity International
Rothschild Private Management
Corporate Responsibility
% of voting rights
20.4
19.8
15.0
7.8
6.3
4.0
The Board considers the ongoing interests of shareholders on
the basis of open and regular dialogue with the Investment
Adviser. The Board receives regular updates outlining regulatory
and statutory developments and responds as appropriate.
Administrative Agent
On 1 April 2017, the Company entered into an Operational
Services Agreement appointing Oakley Capital Manager
Limited as its Administrative Agent. Prior to this, the Company
had appointed Oakley Capital (Bermuda) Limited to provide
certain management services. On 31 March 2017, the
management agreement was terminated and the Operational
Services Agreement was entered into. Under this agreement,
the Administrative Agent provides operational assistance
and administrative support to the Board with respect to the
Company’s investments and its general administration for a fee.
The Administrative Agent has entered into an Investment
Advisory Agreement with Oakley Capital Limited (the “Investment
Adviser”) to advise on the investments of the Company.
The Board currently comprises the Chairman and four other
non-executive Directors. All Directors served on the Board
throughout the year under review. There were no changes to the
composition of the Board.
All Directors, other than Peter Dubens, are considered to be
independent. The Company is not aware of any other potential
conflicts of interest between any duty of any of the Directors
owed to it and their respective private interests.
Directors’ Interests in Shares
As at 14 March 2018, Directors who are beneficial owners
of shares in the Company are:
Director
Peter Dubens
Laurence Blackall
Christopher Wetherhill
Caroline Foulger
James Keyes
No. of Shares
2,138,167
200,000
200,000
122,000
30,000
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, 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.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 41
Investment Adviser
Dividends and Distributions
The Investment Adviser, Oakley Capital Limited, was incorporated
in England and Wales on 12 October 2000 under the Companies
Act 1985. The Investment Adviser serves as investment adviser
to Oakley Capital Manager Limited with respect to the Company,
and 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 professionals, are together
primarily responsible for performing
investment advisory
obligations with respect to the Company and the Oakley Funds.
Peter Dubens is a Director of both the Investment Adviser and
the Company, and cannot vote on any Board decision relating to
the Investment Advisory Agreement whilst he has an interest.
Delegation of Responsibilities
Under the Operational Services Agreement the Board has
delegated to the Administrative Agent substantial authority
for carrying out the day-to-day administrative functions of the
Company. The Board has the ultimate decision to invest (or take
any other action) in the Oakley Funds or as a co-investment.
In the ordinary course it makes decisions after reviewing the
recommendations provided by the Investment Adviser on behalf
of the Administrative Agent.
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. The Board
also receives other information as may, from time to time, be
reasonably required by the Directors for the purpose of such
meetings from the Administrative Agent and other service
providers.
A maiden dividend was announced in December 2016 of
4.5 pence per share in respect of the 2016 financial year. The
Company has continued with this policy and declared an interim
dividend of 2.25 pence per share in respect of the 30 June 2017
interim period. This was paid in October 2017. A final dividend of
2.25 pence per share was approved on 14 March 2018 by the
Board in respect of the six months to 31 December 2017. This is
due to be paid on 26 April 2018, to shareholders registered on or
before 13 April 2018 .
The decision to introduce a dividend was based on the consistent
income generated from debt co-investments and increased cash
returns from realisations by the Oakley Funds. The Company
has experienced strong NAV growth in 2017 due to growth in
the Oakley Funds’ 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.
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 their 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 2017.
The Director fees below do not include reimbursed expenses or
other fees paid to the Director.
Director
Christopher Wetherhill
James Keyes
Caroline Foulger
Peter Dubens
Laurence Blackall
Signed on behalf of the Board by:
Fees £
65,000
45,000
50,000
–
45,000
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 Oakley Funds or in the management of the Oakley Funds.
Christopher Wetherhill
Chairman
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 42
Statement of Directors’ Responsibilities
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 (as amended)). 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 his/her 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 Auditor is 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 Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulations.
Bermuda 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
(IFRS) as adopted by the European Union. Under Bermuda
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 IFRS 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.
for
responsibility
The Consolidated Financial Statements are published on www.
oakleycapitalinvestments.com. The
the
maintenance and integrity of the website, so far as it relates to
the Company, has been delegated to the Investment Adviser. 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.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 43
Audit Committee Report
The Board is supported by the Audit Committee, which comprises
two non-executive Directors, James Keyes and Laurence Blackall.
We are pleased to report to you on the range of matters which
the Audit Committee has considered during 2017, 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
Audit
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 Auditor is monitored and reviewed;
• the Company’s policy on the provision of non-audit services
by the Auditor is developed and implemented; and
• recommendations
to
are made
is put out
that
the audit
in
accordance with applicable law, rules, regulation and best
practice, and initiate and oversee as required fair tendering
and selection processes.
tender as appropriate
the Board
to
The Audit Committee met six times 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 the
valuation of the Oakley Funds and the co-investments and
whether its investments are fairly and consistently valued. 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 by the Committee and with the Auditor.
The key area of focus of the Committee is the valuation
methodology and underlying business performance of the
Oakley Funds’ portfolio companies.
OCI’s Auditor, KPMG Audit Limited (“KPMG” or “the Auditor”),
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 Auditor’s 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 Auditor to re-tender for the audit work. The Auditor is
required to rotate the audit partner every five years. For the
year ended 31 December 2017, a new audit partner managed
the engagement.
independence. This
The Audit Committee has reviewed the provision of
non-audit services by KPMG, and believes it to be cost-
effective and not an impediment to the Auditor’s objectivity
and
is assessed by ensuring that
KPMG has appropriate measures in place to safeguard
its
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 Auditor for
the Company.
On behalf of the Audit Committee
Laurence Blackall
Chairman of the Audit Committee
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 44
Corporate Governance Report
The Board recognises the importance of sound corporate
governance and has adopted policies and procedures that
reflect those principles of the UK Corporate Governance Code
(formerly 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.
Directors’ Terms of Appointment
In accordance with best practice, Directors retire on a rotational
basis, and are then subject to re-election. In accordance with the
appointment and rotation policy included in the Bye-Laws of the
Company, James Keyes retired and was re-elected at the Annual
General Meeting on 14 June 2017.
Board Meetings
The Board met formally ten times during 2017 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 aid their duties.
Director
Total meetings held:
Number attended:
Christopher Wetherhill
James Keyes
Laurence Blackall
Caroline Foulger
Peter Dubens*
Board Attendance
10
8
10
5
8
6
* David Till attended three Board meetings as an Alternate Director to Peter Dubens.
This report describes the Company’s corporate governance
practices that were in place throughout the financial year ended
31 December 2017.
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 shareholders. 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
that the Board creates and delivers value and growth for
its shareholders.
The Board
The Board was comprised of the Chairman, Christopher
Wetherhill, and four other non-executive Directors at 31
December 2017. 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, Laurence Blackall and Caroline Foulger 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.
Peter Dubens does not vote on matters in respect of which he is
deemed to have a conflict of interest.
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 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 on pages 38 and 39.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 45
The principal matters considered by the Board during
2017 included:
Audit Committee
OCI has an Audit Committee with formal delegated duties
and responsibilities. It currently comprises Laurence Blackall
(Chair) and James Keyes.
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 Auditor. The Audit Committee receives
and reviews reports from both the Investment Adviser and the
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:
Laurence Blackall
James Keyes
Audit Committee
6
6
6
• Regular
reports
from
the General Partners of
the
Oakley Funds;
• Regular reports and updates from the Investment Adviser on
the co-investments and debt facilities held by the Company;
• Co-investment opportunities;
• Reports and updates from the Administrative Agent;
• 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 buy-backs
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
The Board has delegated a number of areas of responsibility
to its committees. Laurence Blackall is Chair of the Audit
Committee and Caroline Foulger
is Chair of the Risk
Committee. Nomination and Remuneration decisions are taken
by the whole Board.
The Board discontinued its Remuneration Committee. 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.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 46
Corporate Governance Report continued
Risk Committee
OCI’s Risk Committee oversees the adequacy and effectiveness
of the Company’s risk management framework and policies. The
Risk Committee is responsible for the oversight of the Company’s
current and emerging material risks and for the monitoring of
the procedures and policies performed in mitigation of those
risks. It currently comprises Caroline Foulger (Chair) and
Christopher Wetherhill.
Attendance at the Risk Committee meetings in 2017 was
as follows:
Director
Total meetings held:
Number attended:
Caroline Foulger
Christopher Wetherhill
Risk Committee
4
4
4
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 Board to ensure the Company achieves an appropriate
balance between generating returns for its investors and taking
proportionate and managed risks. In that respect, the Board
has established the Risk Committee to have oversight of 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, Bermuda
legal 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,
correlations, foreign exchange, political risk and event risk).
The Company may face market risks from its exposures
through investing into the Oakley Funds and through any
bridging loans or co-investments pursued alongside the
Oakley Funds.
• Counterparty: relates to losses that could be incurred due
to declines in the creditworthiness of entities in which the
Company either directly or through the Oakley Funds invests.
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 is considered on a case-by-case basis by
the Board and Risk Committee.
• Financial: relates to inadequate controls by the Investment
Adviser or other third party service providers which could lead
to misappropriation of assets or incorrect financial reporting.
Inappropriate accounting policies or failure to comply with
accounting standards could lead to misreporting or breaches
of regulations.
• Operational: relates to risks associated with, and supporting
the operating environment of, the Company. The operating
environment includes middle and back-office functions such
as accounting, administration, valuation and reporting, many
of which are performed by service providers. Valuation
is particularly judgmental. The Company is dependent on
the Administrative Agent, its Investment Adviser and its
professionals. The Investment Adviser’s employees, on behalf
of the Administrative Agent, play key roles in the operation
of the Company. The departure or reassignment of some or
all of these professionals could limit the Company’s ability to
achieve its investment objectives.
• Liquidity: relates to the risk that the Company’s commitments
to either meet the capital calls from its investments in the
Oakley Funds or to pay its regular dividend will not be met
from available cash resources. The Investment Adviser has
regard to the liquidity and life-cycle phase of the Oakley
Funds when making investment decisions, and the Company
manages its liquid resources to ensure sufficient cash is
available to meet its contractual commitments. At certain
points in the investment cycle, the Company may hold
substantial amounts of cash awaiting investment, which it
may invest in government or corporate securities, or in bank
deposits.
Through the Risk Committee, the Board has an ongoing process
in place for the identification, evaluation and management of
these risks.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 47
The Chairman and
the Directors can be contacted
through the Company Secretary, Mayflower Corporate Services
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
shareholders and analysts by senior Partners of the Investment
Adviser and management teams from a selection of Oakley
Funds’ portfolio companies. The event is held in London. The
presentations are focused on the performance of the underlying
Oakley Funds’ 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.
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
regard to any feedback received from analysts and investors.
Any significant concern raised by shareholders in relation to the
Company is also communicated to the Board. The Company’s
Nominated Broker (Liberum 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.
AGM
An Annual General Meeting is held each year, where a separate
resolution is proposed on each substantially separate issue along
with the presentation 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.
Alternative Investment Fund Managers’ Directive
Status and Legal Form
Remuneration Disclosure
The Company is a self-managed non-EU Alternative Investment
Fund. It is a closed-ended investment company incorporated in
Bermuda and listed on AIM of the London Stock Exchange.
The Company’s registered office is 3rd Floor, Mintflower
Place, 8 Par-la-Ville Road, Hamilton HM08, Bermuda.
The total amount of remuneration paid by the Company,
to its Directors was £229,694. This comprised solely of
fixed remuneration, no variable remuneration was paid.
Fixed remuneration was composed of agreed fixed fees
and any other expenses paid. There were four beneficiaries of
this remuneration.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 48
Oakley Capital Investments Limited
Annual Report & Accounts 2017
Overview
Strategic Report by
the Investment Adviser
Governance
Financial Statements
49
Financial Statements
50
Independent Auditor's Report
52
Consolidated Statement of
Comprehensive Income
53
54
55
56
80
82
Consolidated Balance Sheet
Consolidated Statement
of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Glossary
Directors and Advisers
50
Independent Auditor’s Report
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 2017 and the
consolidated statements of comprehensive income, changes in
equity and cash flows for the year then ended and notes, comprising
significant accounting policies and other explanatory information.
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 2017 and its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union (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
judgment, 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 59 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 2017 of £378.4million, 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.
The private equity partnerships hold equity investments in
unquoted portfolio companies. The valuation of these portfolio
companies is complex and requires the application of judgment
by the Investment Adviser.
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 judgment
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 information, including budgets and
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.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 51
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 Con-
solidated 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 in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit.
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 James Berry.
KPMG Audit Limited
Chartered Professional Accountants
Hamilton, Bermuda
14 March 2018
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 52
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Income
Interest income
Net realised gains/(losses) 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
Interest expense
Profit attributable to equity shareholders/ total comprehensive income
Earnings per share
Basic and diluted earnings per share
The Notes on pages 56 to 79 are an integral part of these financial statements.
Notes
13
6, 7
6, 7
2017
£’000
2016
£’000
7,722
11,637
23,991
8,545
20,316
46,196
(839)
306
4,733
140
51,496
71,251
14
(6,529)
(4,519)
44,967
66,732
(42)
(55)
44,925
66,677
22
0.22
0.35
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 53
Consolidated Balance Sheet
As at 31 December 2017
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
2017
£’000
2016
£’000
6,8
11
10
12
24
24
24
419,627
419,627
340,869
340,869
668
673
117,836
106,509
118,504
107,182
538,131
448,051
36,091
36,091
9,619
9,619
502,040
438,432
2,048
2,069
244,533
246,245
–
(25,024)
255,459
215,142
502,040
438,432
23
£2.45
£2.31
204,804
189,804
The Notes on pages 56 to 79 are an integral part of these financial statements.
The financial statements of Oakley Capital Investments Limited (registration number 40324) on pages 56 to 79 were approved by
the Board of Directors and authorised for issue on 14 March 2018 and were signed on their behalf by:
Christopher Wetherhill
Director
Laurence Blackall
Director
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview
54
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Share
capital
£’000
Share
premium
£’000
Treasury
shares
£’000
Retained
earnings
£’000
Total
shareholders’
equity
£’000
Balance at 1 January 2016
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
Profit for the year/ total comprehensive income
Ordinary shares issued
Purchase of treasury shares
Sale of treasury shares
Cancellation of treasury shares
Dividends
Total transactions with equity shareholders
–
–
–
–
(21)
–
(21)
–
–
–
–
–
–
(259)
23,550
(1,453)
1,474
44,925
44,925
–
–
–
–
–
–
23,291
–
–
–
(4,608)
(4,608)
(1,712)
25,024
(4,608)
18,683
Balance at 31 December 2017
2,048
244,533
–
255,459
502,040
The Notes on pages 56 to 79 are an integral part of these financial statements.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 55
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Cash flows from operating activities
Purchases of investments
Sales of investments
Interest income received
Expenses paid
Interest expense paid
Other income received
Net cash provided by operating activities
Cash flows from financing activities
Proceeds from treasury shares sold
Payment for treasury shares purchased
Dividends paid
Net cash provided by/(used in) 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
Notes
2017
£’000
2016
£’000
(167,047)
(178,228)
167,773
173,554
7,001
(5,967)
(42)
306
2,024
17,403
(4,704)
(55)
140
8,110
23,291
–
–
(1,854)
(13,149)
10,142
12,166
106,509
(839)
–
(1,854)
6,256
95,520
4,733
24
24
25
Cash and cash equivalents at the end of the year
10
117,836
106,509
The Notes on pages 56 to 79 are an integral part of these financial statements.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 56
Notes to the Consolidated Financial Statements
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 four private equity funds (the “Funds”): Oakley Capital
Private Equity L.P. (“Fund I”), 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 “Fund II
Feeder Funds”) and OCPE II Master L.P. (the “Fund II Master”)
collectively comprise “Fund II”, 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” and OCPE
Education (Feeder) L.P., which together with OCPE Education
L.P. collectively comprise “OCPE Education”. All constituent
limited partnerships comprising the Funds are exempted limited
partnerships established in Bermuda.
The defined term “Company” shall, where the context requires
for the purposes of consolidation, include the Company’s
sole and wholly owned subsidiary, OCIL Financing (Bermuda)
Limited (“OCI Financing”).
The Company listed on AIM of the London Stock Exchange
Limited on 3 August 2007, with “OCI” as its listed ticker.
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 as adopted by the European Union (“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) New and amended standards adopted by the Company
The following amendments to standards and interpretations
are effective for annual periods beginning on or after 1 January
2017, and have been applied in preparing these consolidated
financial statements. None of these had a significant effect
on the measurement of the amounts recognised in the
consolidated financial statements of the Company in the
current or prior periods.
i.
ii.
Disclosure Initiative - Amendments to IAS 7 (effective
1 January 2017). The amendment requires an entity
to provide disclosures that enables users of the
financial statements to evaluate changes in liabilities
arising from financing activities, including both cash
and non-cash charges.
Annual Improvements 2014 to 2016 – Amendments
to IFRS 12 (effective 1 January 2017). IFRS 12 states
that an entity need not provide summarised financial
information for interest in subsidiaries, associates
or joint ventures that are classified as held for
sale. The amendment clarifies that this is the only
concession from the disclosure requirements of
IFRS 12 for such interest.
(b) New standards, amendments and interpretations that are
not yet effective and might be relevant for the Company:
i. IFRS 9 Financial Instruments
The Company is required to adopt IFRS 9 Financial Instruments
from 1 January 2018 and it replaces IAS 39 Financial Instruments:
Recognition and Measurement. It includes revised guidance on
the classification and measurement of financial instruments, a
new expected credit loss model for calculating impairment on
financial assets and new general hedge accounting requirements.
It also carries forward the guidance on recognition and
derecognition of financial instruments from IAS 39.
IFRS 9 contains a new classification and measurement approach
for financial assets with three principal classification categories
for financial assets: measured at amortised cost, fair value
through other comprehensive income (“FVOCI”) and fair value
through profit and loss (“FVTPL”). It eliminates the existing IAS
39 categories of held to maturity, loans and receivables and
available for sale.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017For the year ended 31 December 2017
57
• 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 loss in accordance with the investment
entity exemption. The Company does not consolidate any of its
investments in the Funds.
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. 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.
Unquoted investments, including both equities and loans,
are 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.
IFRS 9 also replaces the ‘incurred losses’ model in IAS 39 with a
forward looking ‘expected credit loss’ model. The new impairment
model will apply to financial assets measured at amortised cost of
FVOCI, except for investments in equity instruments.
The Company is currently in the process of analysing the
impact of this standard but it is not expected to have a material
impact on the Company as the majority of financial assets are
measured at FVTPL.
ii. IFRIC 22 Foreign currency transactions and advance
considerations
IFRIC 22 clarifies the accounting for transactions that
include the receipt or payment of advance consideration in a
foreign currency.
The Company is also currently in the process of analysing the
impact of this standard, as well as amendments to existing
standards and annual improvements to IFRS, but there is not
expected to be 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 is a limited partner and 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 elimination of all
The consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiary,
after
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 2017, the
Company holds $29,201,704 share capital in OCI Financing
(2016: $29,201,704).
significant
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:
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 58
3. Significant accounting policies continued
3.3 Investments continued
(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 initially at fair value and
subsequently measured at amortised cost, less any allowance
for impairment, using the effective interest method.
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 initial recognition. Interest income
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.
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.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 59
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 Company’s 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 these
standards 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, 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. 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: 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.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 60
5. Financial risk management continued
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 debt securities
2017
2016
Total
£’000
29,868
87,855
113
308,943
69,502
Rating
(Moody’s)
A2
A1
Aa3
n/a
n/a
Total
£’000
72,142
34,254
113
211,254
85,761
Rating
(Moody’s)
A1
A1
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.
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 2017, cash and cash equivalents of the Company amount to £117,836,056 (2016: £106,509,636). The
Company has total unfunded capital and loan commitments of £251,900,575 (2016: £330,796,945) relating to the Funds with
the option of further investment to OCPE Education but no commitment. The unfunded commitments of the Company are
listed in Note 26. As per the Company’s Bye-laws, the Company can borrow up to 25% of total shareholders’ equity which would
equal approximately £125,510,000 for the year ending 31 December 2017 (2016: £109,608,000). As at 31 December 2017, the
Company has incurred no borrowings (2016: £nil).
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 may be below the amount at which such investments were
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
Total trade and other payables
2017
£’000
34,457
1,634
36,091
2016
£’000
8,541
1,078
9,619
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 61
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)
2017
2016
Increase
in variable
£’000
840
840
Decrease
in variable
£’000
(840)
(840)
Increase
in variable
£’000
830
830
Decrease
in variable
£’000
(830)
(830)
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 £1,523,034 and a corresponding decrease of 100 basis points in interest rates
would result in an increase in their fair value by the same amount (2016: £1,702,961).
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 and is limited to the Company’s investment in these Funds.
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)
2017
Euro
£’000
US dollar
£’000
2016
Euro
£’000
US dollar
£’000
30,894
9,277
67
40,238
(3,475)
(3,475)
36,763
–
–
–
–
(9)
(9)
(9)
21,125
7,808
64
28,997
–
–
28,997
–
–
–
–
(16)
(16)
(16)
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 counterparty. The investments in the Funds are denominated in Euros.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 62
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
2017
2016
Increase
in variable
£’000
Decrease
in variable
£’000
Increase
in variable
£’000
Decrease
in variable
£’000
6,177
6,177
(6,177)
(6,177)
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
2017
2016
Increase
in variable
£’000
Decrease
in variable
£’000
Increase
in variable
£’000
Decrease
in variable
£’000
46,341
46,341
(46,341)
(46,341)
31,688
31,688
(31,688)
(31,688)
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 may be difficult given the complexity and limited transparency of the investments held by the
underlying portfolio companies.
Limitations of sensitivity analysis
The sensitivity information included in Notes 5 and 8 demonstrates the estimated impact of a change in a major input assumption
while other assumptions remain unchanged. In reality, there are normally significant levels of correlation between the assumptions
and other factors. It should also be noted that these sensitivities are non-linear and larger or smaller impacts should not be
interpolated or extrapolated from these results. Furthermore, estimates of sensitivity may become less reliable in unusual market
conditions such as instances when risk free interest rates fall towards zero.
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 repurchase 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, the repurchase and resale
of treasury shares as a result of market making activities are listed in Note 24. Liberum Capital Limited acts as the Company’s
nominated adviser and broker.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 63
6. Investments
Investments as at 31 December 2017:
2016
Fair value
£’000
Purchases /
capital calls
£’000
Total sales*/
distributions
£’000
Realised
gains/(losses)
£’000
Interest
and other
£’000
Net change
in unrealised
gains/(losses)
£’000
2017
Fair value
£’000
Oakley funds
Fund I
Fund II
Fund III
64,906
12,309
(17,847)
–
144,015
12,319
(49,183)
18,274
2,333
99,962
(11,427)
(2,683)
Total Oakley funds
211,254
124,590
(78,457)
15,591
Co-Investment funds
OCPE Education (Feeder) L.P.
Total co-investment funds
–
–
39,932
39,932
(35,355)
(35,355)
8,400
8,400
Total funds
211,254
164,522
(113,812)
23,991
Quoted equity securities
Time Out Group plc
43,854
Total quoted equity securities
43,854
–
–
–
–
Unquoted debt securities
Bellwood Holdings Ltd
–
1,878
Daisy Group Holdings Limited
Ellisfield (Bermuda) Limited
Fund I
Fund II
Fund III
NSG Apparel BV
Oakley Capital II Limited
17,202
14,530
12,256
(1,970)
(6,610)
–
–
–
7,288
(13,844)
4,337
18,661
(23,551)
–
1,319
(1,356)
21,978
768
–
–
–
(769)
Oakley Capital III Limited
5,210
3,470
(1,872)
Oakley NS (Bermuda) L.P.
OCPE Education L.P.
–
–
TO (Bermuda) Limited
9,480
2,940
1,426
–
–
(1,432)
(9,826)
Total unquoted debt securities
85,761
36,982
(61,230)
–
–
–
–
–
–
–
–
–
–
–
–
Total investments
340,869
201,504
(175,042)
23,991
*
Total sales include sales, loan repayments and transfers.
–
–
–
–
–
–
–
–
–
92
2,109
925
651
553
37
1
360
272
6
346
7,989
7,989
(22,817)
36,551
11,629
137,054
20,873
109,058
9,685
282,663
13,303
26,280
13,303
26,280
22,988
308,943
(2,672)
41,182
(2,672)
41,182
–
–
–
–
–
–
–
–
–
–
–
–
12,701
15,455
6,351
–
–
24,615
–
7,168
3,212
–
–
69,502
20,316
419,627
–
2,637
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 64
6. Investments continued
Investments as at 31 December 2016:
2015
Fair value
£’000
Purchases /
capital calls
£’000
Total sales*/
distributions
£’000
Realised
gains/(losses)
£’000
Interest
and other
£’000
Net change
in unrealised
gains/(losses)
£’000
2016
Fair value
£’000
Oakley funds
Fund I
Fund II
Fund III
56,318
–
(6,271)
(13,686)
102,051
33,989
(42,365)
23,089
–
7,857
–
–
Total Oakley 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)
10,550
12,037
(11,032)
Fund I
Fund II
NSG Apparel BV
Oakley Capital II Limited
Oakley Capital III Limited
Parship GmbH
–
10,066
2,895
–
–
43,567
10,000
–
5,500
5,172
–
(39,838)
–
(2,214)
(529)
(5,292)
(4,211)
(2,053)
(2,652)
(9,088)
Time Out Group BC Limited
4,032
Time Out Group HC Limited
–
2,000
TO (Bermuda) Limited
TONY MC LLC
11,222
8,395
–
–
–
–
–
–
–
–
–
50
227
3,203
88
1,356
701
608
–
1,912
–
–
–
–
–
–
560
560
87
239
120
179
53
910
612
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)
–
14,530
12,256
4,337
21,978
768
5,210
–
–
–
9,480
–
Total unquoted debt securities
104,897
80,476
(109,976)
10,345
(541)
85,761
Total investments
289,216
176,231
(190,767)
8,545
11,448
46,196
340,869
*
Total sales include sales, loan repayments and transfers.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 65
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
2017
£’000
2016
£’000
22,988
(2,672)
–
–
50,272
(3,301)
(234)
(541)
Total net change in unrealised gains/(losses) on investments at fair value through profit and loss
20,316
46,196
Realised gains/(losses) on investments at fair value through profit and loss:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
23,991
–
–
–
Total realised gains/(losses) on investments at fair value through profit and loss
23,991
9,403
–
(1,418)
560
8,545
8. Disclosure about fair value of financial instruments
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:
• Level II:
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.
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 is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 66
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 2017 by the level in the fair
value hierarchy into which the fair value measurement is categorised:
Funds
Quoted equity securities
Unquoted debt securities
Total investments measured at fair value
Level I
£’000
–
41,182
–
41,182
Level III
£’000
Total
£’000
308,943
308,943
–
69,502
378,445
41,182
69,502
419,627
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 debt securities
Total investments measured at fair value
Level I
£’000
Level III
£’000
Total
£’000
–
211,254
211,254
43,854
–
–
85,761
43,854
85,761
43,854
297,015
340,869
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 did not hold any Level II investments as of 31 December 2017 or 31 December 2016.
Level III
The Company has determined that Funds and unquoted debt securities fall into the category Level III. Funds and unquoted debt
securities are measured in accordance with the IPEV Valuation Guidelines with reference to the most appropriate information
available at the time of measurement. The consolidated financial statements as of 31 December 2017 include Level III investments
in the amount of £378,445,332, representing approximately 75.38% of shareholders’ equity (2016: £297,014,877; 67.74%).
Funds
The Company primarily invests in portfolio companies via the Funds. The Funds are unquoted equity securities that primarily
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 as
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 portfolio company. 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 portfolio 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 comparative companies are correctly valued by the market. A discount is sometimes applied to market-based
multiples to adjust for points of difference between the comparatives and the company being valued.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 67
As at 31 December 2017, the value of the Funds’ investments, other assets and liabilities attributable to the Company based on
its respective percentage interest in each Fund was as follows:
Investments
Loans
Provisional profit allocation
Other net assets
Total value of the Fund attributable to the Company
Total value of the Fund attributable to the Company
Fund I
€’000
42,516
(4,565)
–
3,164
41,115
£’000
36,551
Fund II
€’000
199,645
(25,004)
(21,815)
1,341
Fund III
€’000
129,410
(46,015)
(2,847)
42,127
154,167
122,675
£’000
£’000
137,054
109,058
OCPE
Education
€’000
29,282
–
–
278
29,560
£’000
26,280
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 in each Fund was as follows:
Investments
Loans
Provisional profit allocation
Other net assets
Total value of the Fund attributable to the Company
Total value of the Fund attributable to the Company
Fund I
€’000
82,225
(9,241)
–
3,090
76,074
£’000
64,906
Fund II
€’000
213,160
(27,564)
(17,751)
949
168,794
£’000
144,015
Fund III
€’000
–
–
–
2,734
2,734
£’000
2,333
OCPE
Education
€’000
–
–
–
–
–
£’000
–
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 the Board of Directors performing ongoing monitoring procedures, primarily
discussions with the Investment Adviser;
• Comparison of historical realisations to last reported fair values; and
• Review of the Auditor’s report of the respective Fund.
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.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 68
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 NAV of the Funds are sensitive to movements in the
fair values of the underlying portfolio companies.
The underlying portfolio companies owned by 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 2017 a 10% increase to the fair value of the unquoted
portfolio companies held by the Funds would result in a 5.9% movement in net assets attributable to shareholders (2016: 4.9%). A
10% decrease to the fair value of the unquoted portfolio companies held by the Funds would have an equal and opposite effect.
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 2017 a 1% increase to the discount factor would result in a 0.3% movement in net assets
attributable to shareholders (2016: 0.4%). A 1% decrease to the discount factor would have an equal and opposite effect.
Transfers between levels
There were no transfers between the Levels during the year ended 31 December 2017.
The following table presents the transfers between the Levels for the year ended 31 December 2016:
Funds
Quoted equity securities
Unquoted equity securities
Unquoted debt securities
Total transfers between Level I and Level III
Level I
£’000
–
47,155
–
–
47,155
Level III
£’000
–
–
(32,155)
(15,000)
(47,155)
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 plc (“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 2017 and 2016, are as follows:
Level I Investments:
Quoted equity securities
Fair value at the beginning of the year
Shares transferred from unquoted debt and equity securities
Net change in unrealised gains/(losses) on investments
Fair value of Level I investments at the end of the year
2017
£’000
2016
£’000
43,854
–
(2,672)
41,182
–
47,155
(3,301)
43,854
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017
69
Level III Investments:
2017
Fair value at the beginning of the year
Purchases
Proceeds on disposals (including interest)
Realised gain on sale
Interest income and other fee income
Net change in unrealised gains/(losses) on investments
Fair value at the end of the year
Funds
£’000
Unquoted
equity securities
£’000
Unquoted
debt securities
£’000
Total
£’000
211,254
164,522
(113,812)
23,991
–
22,988
308,943
–
–
–
–
–
–
–
85,761
36,982
297,015
201,504
(61,230)
(175,042)
–
7,989
–
23,991
7,989
22,988
69,502
378,445
Funds
£’000
Unquoted
equity securities
£’000
Unquoted
debt securities
£’000
2016
Fair value at the beginning of the 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
Net change in unrealised gains/(losses) on investments
Fair value at the end of the year
158,369
41,846
(48,636)
9,403
–
–
–
–
50,272
211,254
25,950
6,754
–
–
1,103
(1,418)
(32,155)
–
(234)
–
Total
£’000
289,216
129,076
(143,612)
9,403
1,103
(858)
(47,155)
10,345
49,497
104,897
80,476
(94,976)
–
–
560
(15,000)
10,345
(541)
85,761
297,015
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:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
2017
£’000
2016
£’000
117,836
106,509
668
36,091
673
9,619
As at 31 December 2017, trade and other payables includes a balance of €39,093,600 (£34,457,099 ) which is due to Fund
III in relation to a capital call made by Fund III.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 70
9. Segment information
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 four 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. With the exception of capital calls payable, 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 2017 (2016: none).
The segment information for the year ended 31 December 2017 is as follow:
Fund
investments
£’000
Direct
investments
and loans
£’000
Total
operating
segments
£’000
Unallocated
£’000
Net realised gains on financial assets at fair value
23,991
–
23,991
through profit and loss
Net unrealised gains/(losses) on financial assets at
22,988
(2,672)
20,316
fair value through profit and loss
Interest income
Net foreign currency gains/(losses)
Other income
Expenses
Interest expense
–
–
–
–
–
7,683
7,683
–
306
–
–
–
306
–
–
Total
£’000
23,991
20,316
7,722
(839)
306
–
–
39
(839)
–
(6,529)
(6,529)
(42)
(42)
Profit/(loss) for the year
46,979
5,317
52,296
(7,371)
44,925
Total assets
Total liabilities
Net assets
Total assets include:
308,943
110,684
419,627
118,504
538,131
(34,457)
–
(34,347)
(1,634)
(36,091)
274,486
110,684
385,170
116,870
502,040
Financial assets at fair value through profit and loss
308,943
110,684
419,627
–
419,627
Cash and others
–
–
–
118,504
118,504
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017
71
The segment information for the year ended 31 December 2016 is as follows:
Fund
investments
£’000
Direct
investments
and loans
£’000
Total
operating
segments
£’000
Unallocated
£’000
Net realised gains on financial assets at fair value through
9,403
(858)
8,545
profit and loss
Net unrealised gains/(losses) on financial assets at fair value
50,272
(4,076)
46,196
–
–
Total
£’000
8,545
46,196
through profit and loss
Interest income
Net foreign currency gains/(losses)
Other income
Expenses
Interest expense
–
–
–
–
–
11,355
11,355
282
11,637
–
93
–
–
–
93
–
–
4,733
4,733
47
140
(4,519)
(4,519)
(55)
488
(55)
66,677
Profit/(loss) for the year
59,675
6,514
66,189
Total assets
Total liabilities
Net assets
Total assets include:
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
Cash and others
–
–
–
107,182
107,182
10. Cash and cash equivalents
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
Capital call payable
2017
£’000
91,229
26,607
2016
£’000
80,402
26,107
117,836
106,509
2017
£’000
1
667
668
2017
£’000
1,634
–
34,457
36,091
2016
£’000
34
639
673
2016
£’000
1,078
8,541
–
9,619
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview
72
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
Operational and advisory fees
Professional fees
Performance fees
Other expenses
2017
£’000
2016
£’000
39
282
7,683
7,722
2017
£’000
535
2,568
872
1,246
1,308
6,529
11,355
11,637
2016
£’000
2,264
–
1,196
607
452
4,519
Notes
15
16
17
15,16
16
15. Management and performance fees until 31 March 2017
Pursuant to a management agreement dated 30 July 2007, the Company appointed Oakley Capital (Bermuda) Limited (the
“Manager”) to provide management services. On 31 March 2017, the management agreement was terminated. The terms of the
management agreement were as follows:
a) Management fees
The Manager was not entitled to receive a management fee from the Company in respect of amounts either committed or
invested by the Company in the Funds. The Manager received a management fee at the rate of 1% per annum in respect of
assets that were not committed to the Funds and which were 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 were invested directly in co-investments. The
management fee was payable monthly in arrears.
Management fees for the period 1 Januar y 2017 through 31 March 2017 totalled £535,090 (1 Januar y 2016 - 31
December 2016: £2,263,915) and are presented in the consolidated statement of comprehensive income. There
were no management fees payable to the Manager at 31 December 2017 (2016: £802,283).
b) Performance fees
The Manager was also entitled to receive 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 was treated
as a segregated pool of investments by the Company. If the calculation period was greater than one year, the hurdle rate was
compounded on each anniversary of the start of the calculation period for each segregated co-investment. If the amount earned
did not exceed the hurdle rate on any given co-investment, that co-investment was included in the next calculation so that the
hurdle rate is measured across both co-investments.
The Company did not incur any performance fee for the period 1 January 2017 through 31 March 2017 (1 January 2016 –
31 December 2016: £606,701). There was no performance fee payable to the Manager at 31 December 2017 (2016: £nil).
The Manager entered into an Investment Advisory Agreement with the Investment Adviser to advise the Manager on the
investment of the assets of the Company. The Investment Advisory Agreement was terminated on 31 March 2017. The Investment
Adviser did not receive a management or performance fee from the Company. Any fees due to the Investment Adviser were paid
by the Manager out of the management and performance fees it received from the Company.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 73
16. Operational, advisory and performance fees from 1 April 2017
Pursuant to an operational services agreement dated 1 April 2017 (the “Operational Services Agreement”), the Company
appointed Oakley Capital Manager Limited (the “Administrative Agent”) to provide operational assistance and services to the
Board with respect to the Company’s investments and its general administration.
a) Operational fees
Under the Operational Services Agreement, the Administrative Agent receives an operational services fee equal to 2% per annum
of the net asset value (before deduction of any accrued performance fees) of all investments held by the Company except for the
investments in and any revolvers with Fund I, Fund II and Fund III and any loans to entities affiliated with the Administrative
Agent. The fee is pro rata for partial periods and payable quarterly in arrears.
The operational services fee for the period 1 April 2017 through 31 December 2017 totalled £1,892,118 (2016: £nil) and is
presented in the consolidated statement of comprehensive income. The amount outstanding as at 31 December 2017 was
£635,022 (2016: £nil) and is included in ‘Trade and other payables’ in the consolidated balance sheet.
b) Advisory fees
Under the Operational Services Agreement, the Administrative Agent also receives an advisory fee based on the successful buy-
side and sell-side transactions of the Company for any equity investment. The advisory fee is 2% of the equity transaction value
unless otherwise agreed between the parties.
Advisory fees for the period 1 April 2017 through 31 December 2017 totalled £675,712 (2016: £nil) and are presented in the
consolidated statement of comprehensive income. There are no amounts outstanding as at 31 December 2017 (2016: £nil).
c) Performance fees
The Administrative Agent also receives a performance fee of 20% of the excess of any proceeds from the full or partial realisation
on disposal of each of the Company’s co-investments over and above an 8% hurdle rate after the deduction of the original cost
of the co-investment and the attributable proportion of all other expenses incurred by the Company in respect of co-investments.
Performance fees for the period 1 April 2017 through 31 December 2017 totalled £1,246,443 (2016: £nil) and are presented in
the consolidated statement of comprehensive income. The amount outstanding as at 31 December 2017 was £624,297 (2016:
£nil) and is included in ‘Trade and other payables’ in the consolidated balance sheet.
d) Other fees
Under the Operational Services Agreement, the Administrative Agent may also recharge costs incurred, either directly or indirectly
by its contracted advisors, on behalf of the Company. For the period 1 April 2017 through 31 December 2017, the Administrative
Agent recharged such other costs to the Company totalling £595,659 (2016: £nil) and is included in other expenses (Note 14).
The amount outstanding as at 31 December 2017 was £189,464 (2016: £nil) and is included in ‘Trade and other payables’ in the
consolidated balance sheet.
The Administrative Agent has entered into an Investment Advisory Agreement with the Investment Adviser to advise on the
investment of the assets of the Company. The Investment Adviser does not receive any management or performance fees from
the Company. Any fees earned by the Investment Adviser are paid by the Administrative Agent.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 74
17. Professional fees
Administration fees
Consulting fees
Directors’ fees
Auditor’s remuneration
Legal fees
Other fees
18. Administration fees
Notes
18
19
20
2017
£’000
359
34
205
85
104
85
872
2016
£’000
368
300
261
124
63
80
1,196
The Company has appointed Mayflower Management Services (Bermuda) Limited ( 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 2017 totalled £359,432 (2016: £367,553)
and are included in Professional fees (Note 17). There was no administration fee payable to the Administrator as at 31
December 2017 (2016: £91,226).
The Company has also entered into an agreement with Mayflower Corporate Services Limited (“MCS”), a subsidiary of the
Administrator to provide corporate secretarial services. Any fees due to MCS will be paid by the Administrator.
19. Directors’ fees
Chairman’s remuneration
Directors’ fees
2017
£’000
65
140
205
2016
£’000
55
206
261
The members of the Board of Directors are listed on pages 38 and 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 (2016: none). Other fees paid to the Directors included consulting
fees of £24,694 paid to the Chairman of the Board. No fees were payable as at the year end (2016: none). For the years ended
31 December 2017 and 31 December 2016 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 paid to Directors
Dividends payable to Directors
2017
‘000
2,231
459
2,690
£161
–
2016
‘000
385
1,846
2,231
–
£100
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 75
2017
£’000
85
–
85
2016
£’000
96
28
124
20. Auditors’ remuneration
Audit of consolidated financial statements
Other assurance services
Total Auditor’s remuneration
21. Withholding tax
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.
The Company may, however, be subject to foreign withholding taxes in respect of income derived from its investments in other
jurisdictions. For the year ended 31 December 2017, the Company was not subjected to foreign withholding taxes (2016: nil).
22. 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 in issue (‘000)
23. 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)
2017
£0.22
£44,925
203,859
2016
£0.35
£66,677
189,901
2017
£2.45
2016
£2.31
£502,040
£438,432
204,804
189,804
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 76
24. 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 AIM of the London Stock Exchange. Each share confers the right to one vote and shareholders
have the right to receive dividends.
As at 31 December 2017, the Company’s issued and fully paid share capital was 204,804,036 ordinary shares (2016: 189,804,036).
Ordinary shares outstanding at the beginning of the year
Treasury shares purchased
Treasury shares issued
Ordinary shares outstanding at the end of the year
2017
‘000
2016
‘000
189,804
191,078
–
15,000
204,804
(1,274)
–
189,804
b) Treasury shares
On 24 January 2017, the Company sold 15,000,000 (2016: nil) ordinary shares at a share price of £1.57 per share and a total
net cash consideration of £23,290,950 (2016: £nil). No treasury shares were purchased during the year (2016: 1,274,279
ordinary shares for a total cash consideration of £1,853,928). On 25 January 2017, the Company cancelled its remaining
2,108,843 treasury shares.
All rights associated with treasury shares held by the Company are suspended until the shares are re-issued.
As at 31 December 2017, the Company holds no treasury shares (2016: 17,108,843).
c) Share premium
Share premium represents the amount received in excess of the nominal value of ordinary shares.
25. Dividends
On 11 September 2017, the Board of Directors declared and approved payment of an interim dividend of 2.25 pence per ordinary
share which resulted in a dividend payment of £4,608,091 paid on 26 October 2017 (2016: On 16 December 2016, the Board
of Directors declared and approved a final dividend of 4.5 pence per ordinary share which resulted in a dividend payment of
£8,541,181 paid on 30 January 2017).
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 77
26. Commitments
The Company had the following capital commitments in Euros at the year end:
Fund I
Total capital commitment: £167,486 (2016: £160,741)
Called capital at the beginning of the year
Capital calls during the year: 3.6% (2016: 0%)
Called capital at the end of the year: £165,141 (2016: £152,704)
Unfunded capital commitment: £2,345 (2016: £8,037)
Aggregate recycled commitment
Fund II
Total capital commitment: £168,910 (2016: £170,640)
Called capital at the beginning of the year
Capital calls during the year: 7% (2016: 19.5%)
Adjustment for partial sale during the year
Called capital at the end of the year: £141,040 (2016: £130,540)
Unfunded capital commitment: £27,870 (2016: £40,100)
2017
€’000
2016
€’000
188,398
178,978
6,782
185,760
2,638
188,398
178,978
–
178,978
9,420
13,000
5,652
2017
€’000
2016
€’000
190,000
153,000
14,000
(8,350)
158,650
31,350
200,000
114,000
39,000
–
153,000
47,000
During the year, the Company sold 5% of its investment in Fund II for a total consideration of €8,216,636.
2017
€’000
2016
€’000
Fund III
Total capital commitment:£289,618 (2016: £277,290)
325,780
325,000
Called capital at the beginning of the year
Capital calls during the year: 35% (2016: 3%)
Called capital at the end of the year: £110,055 (2016: £8,319)
Unfunded capital commitment: £179,563 (2016: £268,971)
9,750
114,047
123,797
201,983
–
9,750
9,750
315,250
Total unfunded capital commitments: £209,778 (2016: £317,108)
235,971
371,670
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 78
26. Commitments continued
The Company had the following loan commitments at the year end:
Total revolving loan facility commitments:
Fund I
Fund II
Fund III
Oakley NS (Bermuda) L.P.
Total unfunded loan commitments:
Fund I
Fund II
Fund III
Oakley NS (Bermuda) L.P.
27. Contingent liabilities
2017
£’000
2016
£’000
5,000
20,000
20,000
3,000
48,000
2,122
20,000
20,000
–
5,000
15,000
–
–
20,000
3,000
10,688
–
–
42,122
13,688
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, the Board of Directors believe that the current likelihood of such an event is
remote.
As at 31 December 2017 and 2016, there are no contingent liabilities outstanding.
28. 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 Investment Adviser and the Administrative Agent are considered related parties to the Company given the direct and indirect
control and transactions with them. Until 31 March 2017, the Manager was considered a related party to the Company given the
direct and indirect control and transactions with the Manager.
Management fees and performance fees paid for the period 1 January 2017 through 31 March 2017 are detailed in Notes 14 and
15. Operational service fees, advisory fees, performance fees and recharged costs paid to the Administrative Agent for the
period 1 April 2017 through 31 December 2017 are detailed in Notes 14 and 16. The agreements between the Company and
these service providers are based on normal commercial terms.
During the year ended 31 December 2017, the Investment Adviser recharged staff costs of £409,722 (2016: £132,565) and
overheads of £2,343 (2016: £42,435) to the Company which is included in other expenses (Note 14).
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 Company did not exercise the remaining portion of the option and the option
agreement expired on 31 December 2016. As at 31 December 2017, the £666,750 (€750,000) is included in ‘Trade and
other receivables’ in the consolidated balance sheet (2016: £639,300 (€750,000)).
Oakley Capital Investments LimitedAnnual Report & Accounts 2017Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2017 79
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 18.
One Director of the Company is also a Director of the Investment Adviser and Oakley Advisory Limited; entities which provide
services to, and receive compensation from, the Company. Until 31 March 2017, one Director of the Company was also a Director
of the Manager, an entity that provided services to, and received compensation from, the Company. The agreements between the
Company and these service providers were and are based on normal commercial terms.
Throughout 2017, no Director of the Company had a personal interest in any transaction of significance for the Company
(2016: none).
Fund I is considered a related party due to the investment the Company has in Fund I. During the year ended 31 December
2017, the Company acquired an interest in OCPE Education L.P. from most Limited Partners of Fund I and paid €23,492,217
(£20,795,311) for such additional interests in OCPE Education L.P.
29. Events after the balance sheet date
The Board of Directors has evaluated subsequent events from the year end through 14 March 2018, which is the date the
consolidated financial statements were available for issue. The following events have been identified for disclosure.
On 9 February 2018, the Company increased its loan to Oakley NS (Bermuda ) L.P. from £3,000,000 to £7,850,000 and extended
the repayment date to 9 February 2019.
On 12 February 2018, the Company agreed to extend the repayment date on one of its loans to Oakley Capital III Limited
to 30 June 2018.
On 9 March 2018, the Company received a distribution of €11,976,638 (£10,643,639) from Fund III arising from the refinancing
of capital by Casa & atHome.
On 14 March 2018, the Board of Directors declared and approved payment of a dividend of 2.25 pence per ordinary share
resulting in a dividend of £4,608,091 payable on 26 April 2018.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview
80
Glossary
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.
Administrative Agent
Oakley Capital Manager Limited, in respect of the Company.
AIM
AIFMD
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 2017, Oakley Capital Investments Limited is registered as an Alternative Investment Fund
(“AIF”).
AIF
Alternative Investment Fund, as at 31 December 2017, Oakley Capital Investments Limited is a non-EU AIF.
AIM Rules
The AIM Rules for Companies, which sets out the rules and responsibilities for companies listed on AIM,
as amended from time to time.
Auditor
KPMG Audit Limited or such other auditor as appointed from time to time.
Board / Directors
The Board of Directors of the Company.
Carried Interest
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.
Co-investment Fund
OPCE Education (Feeder) L.P., which together with OCPE Education L.P. collectively comprise “OCPE
Education”.
Commitments
The amount committed by an investor to the Funds whether or not such amount has been advances in
whole or in part.
Company / OCI
Oakley Capital Investments Limited, a company incorporated with limited liability in Bermuda and registered
number 40324.
Cost
EBITDA
In relation to the cost of investments, this is the open cost of the investment at 31 December 2017, 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 2017 was £1: €1.1254.
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.
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 81
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 as adopted by the European Union. The consolidated financial
statements and notes have been prepared in accordance with IFRS.
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.
IPO
NAV
Initial Public Offering.
Net asset value is the value of the assets less liabilities.
Oakley
The Investment Adviser being Oakley Capital Limited.
Oakley Funds
Fund I, Fund II and Fund III and (as applicable) any successor funds.
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview 82
Directors and Advisers
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
Administrative Agent
Oakley Capital Manager Limited
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
Investment Adviser to the Administrative Agent
Oakley Capital Limited
3 Cadogan Gate
London SW1X 0AS
United Kingdom
Legal Adviser
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
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 as to Bermuda Law
Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM CX
Bermuda
Nominated Adviser and Broker
Liberum Capital Limited
Level 12, Ropemaker Place
25 Ropemaker Street
London EC2Y 9AR
United Kingdom
Auditor
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
Oakley Capital Investments LimitedAnnual Report & Accounts 2017 83
Notes
Strategic Report by the Investment AdviserGovernanceFinancial StatementsOverview