ANNUAL REPORT & ACCOUNTS 2019
OverviewStrategic ReportGovernanceFinancial Statements OA K L E Y CA P I TA L I N V E S T M E N T S
Overview
02 Why invest?
03 OCI 2019 highlights
04 At a glance
06 Portfolio activity
08 The Oakley Funds
10 Chair’s statement
Strategic report by the Investment Adviser
14
Market outlook
15 Why listed Private Equity?
16
Introduction to Investment Adviser
17
Investment policy
18
Investment Adviser’s approach
20 Overview of OCI investments
22 NAV overview
25 Outstanding commitments of OCI
26
Consumer sector
27 Consumer portfolio companies
30
TMT sector
31
TMT portfolio companies
34 Education sector
35 Education portfolio companies
38 Environmental, Social and Governance policy
39
An example of ESG in action: Alessi
40 Overview of Fund portfolios
43 Direct investment review
Governance
46 Board of Directors
48 Directors’ report
54 Statement of Directors’ responsibilities
55 Corporate Governance report
68 Audit Committee report
70 Risk Committee report
73 Nomination Committee report
74 Management Engagement Committee report
76
Governance, Regulatory and Compliance
Committee report
78 Remuneration Committee report
79 Directors’ remuneration report
80 Alternative Investment Fund Managers’ Directive
81 Shareholder information
Financial Statements
84
Independent Auditor’s report
88
Consolidated statement of
comprehensive income
89 Consolidated balance sheet
90
Consolidated statement of changes in equity
91
Consolidated statement of cash flows
92
Notes to the consolidated financial statements
118 Directors and advisers
119 Glossary
www.oakleycapitalinvestments.com
01
Launched in 2007, OCI is a listed
investment vehicle that provides
its shareholders with liquid access
to a portfolio of high-quality
private investments, managed
by Oakley Capital.
“ The Company’s net asset value increased in
the year by £111.2 million to £686.0 million”
See OCI 2019 highlights on page 3
OverviewStrategic ReportGovernanceFinancial Statements 02
OA K L E Y CA P I TA L I N V E S T M E N T S
Why invest?
OCI shareholders gain access to a
differentiated model of private equity investing.
Market leading
returns
Access to a
portfolio of high
quality private
companies
Proven model
of investment
sourcing
Strong and consistent returns drive
capital growth for shareholders. In
2019 OCI’s total NAV return was 25%,
which drove a total shareholder return
of 56% including a dividend of 4.5p.
16 companies across consumer,
education and TMT sectors,
primarily based across Western
Europe. Opportunities with ongoing
organic growth and the potential
for industry consolidation and
performance improvement.
Investment Adviser, Oakley Capital,
uses its sector and regional expertise,
its ability to tackle transaction
complexity and its deal generating
entrepreneur network to source
high-growth private investments at
attractive valuations.
159%
10 year total
NAV return
30%
Average
EBITDA growth
5
Investments signed
in 2019
See total NAV return
growth on page 23
See current portfolio
company details on page 26
See portfolio
activity on page 6
OAKLEY CAPITAL INVESTMENTS 03
OCI 2019 highlights
The Company’s NAV increased in the year by
64 pence to 345 pence per share.
Total Net
Asset Value
return* 25%
Total
Shareholder
return 56%
Specialist Fund
Segment (SFS)
listing
• Two Oakley Fund realisations at a combined 97%
• Buy-back of 6.2 million shares, enhancing NAV
premium to prevailing book value
by 4 pence per share
• OCI’s share of proceeds from realisations and
• Appointment of two new independent
refinancings was £78 million
Board Directors
• Five new Oakley Fund investments at an average
• Committed €400 million to Oakley Fund IV
entry multiple of 9.7x EV/EBITDA
• OCI deployed £103 million of capital
• Full year dividend of 4.5 pence per share
OCI financial metrics**
Net asset value***
Market capitalisation
3 year total NAV return % p.a.
£686.0m
+19%
£686.0m
£574.8m
£502.0m
2019
2018
2017
£531.3m
2019
2018
2017
£356.4m
£335.9m
+49%
£531.3m
16%
2019
2018
2017
8%
16%
14%
Net asset value per share***
Share price
Annualised dividend
£3.45
2019
2018
2017
+23%
£3.45
£2.81
£2.45
£2.68
2019
2018
2017
£1.74
£1.64
+54%
£2.68
4.5p
2019
2018
2017
4.5p
4.5p
4.5p
*
Total NAV return = Current year NAV per share increase + dividends / prior year NAV per share.
**
The percentage uplifts are calculated on a year-on-year basis from 31 December 2018 to 31 December 2019.
*** The NAV growth versus NAV per share are different due to the reduction in shares in issue during the year.
gOverviewStrategic ReportGovernanceFinancial Statements 04
At a glance
OCI provides access to the performance of a portfolio of
private companies through its investments in the Oakley
Capital managed Funds and direct investments.
NAV breakdown by investment type
1
2
3
Oakley Fund
investments
Direct
investments
61.3% £420.3m
of total NAV
EQUITY
16.5% £113.5m
of total NAV
DEBT
18.5% £127.2m
of total NAV
Cash, other assets
and liabilities
3.7%
of total NAV
£25.0m
Assets in the underlying
Oakley Funds
Direct equity and debt holdings
in certain of the Oakley Funds’
portfolio companies
Cash and cash equivalents
of £48.9m offset by liabilities
of £23.8m
10 year track record of outperformance
OCI share price versus FTSE All-Share Index
OCI share price
FTSE All-Share
450
400
350
300
250
200
150
100
50
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
* Performance record rebased to 100 at 31 December 2008.
OAKLEY CAPITAL INVESTMENTS 05
NAV breakdown by portfolio company
The composition of OCI’s underlying portfolio company exposure, combining the Oakley Funds’ look-through
investments, direct debt and equity investment.
Alessi
Seven Miles
Facile
Inspired
Casa & atHome
Career Partner Group (“CPG”)
Time Out
Schülerhilfe
Seagull & Videotel
AMOS
North Sails
Contabo
TechInsights
Ekon
Daisy
WebPros
Consumer
North Sails
Time Out
Casa & atHome
Facile
Seven Miles
Alessi
TMT
Education
£106.5m
WebPros
£110.1m
Inspired
£99.5m
£40.0m
£35.3m
£23.3m
£7.5m
Daisy
Ekon
TechInsights
Contabo
£26.8m
£17.1m
£13.5m
£4.9m
CPG
Schülerhilfe
Seagull & Videotel
AMOS
£92.3m
£59.2m
£47.1m
£19.3m
£13.6m
£312.1m*
£172.4m*
£231.5m*
* OCI’s NAV of £686m is a combination of total investments (£716.0m – see above) plus Fund Facilities (£14.6m), plus other assets and
liabilities (£25.0m), less OCI’s share of Oakley Fund net liabilities (£69.6m). See pages 20 and 21 for more detail.
OverviewStrategic ReportGovernanceFinancial Statements 0 6
Portfolio activity
An active year for investments, realisations
and refinancings by the Oakley Funds.
OCI look-through capital deployment and proceeds
s
t
n
e
m
t
s
e
v
n
I
OCI Investment – £18m
Fund III acquired Ekon,
a leading Spanish ERP
software provider, in a
carve-out from the Iberian
operations of Unit4.
OCI Investment – £20m
Fund IV acquired Seagull
& Videotel, two leading
maritime e-learning
providers, based in Norway
and the UK, respectively.
January
February
March
April
May
June
s
n
o
i
t
a
s
i
l
a
e
R
Refinancing –
£11m OCI proceeds
Career Partner Group
completed a refinancing
Refinancing –
£16m OCI proceeds
Partial realisation –
£30m OCI proceeds
WebPros completed a
Inspired undertook a capital
partial refinancing resulting
raise which enabled Fund II
resulting in a distribution to
in a distribution to Fund III.
to partially sell-down part
Fund III.
of its stake, at an 80%
premium to the December
2018 book value.
View current portfolio company details on page 26
OAKLEY CAPITAL INVESTMENTS 07
OCI Investment – £8m
OCI Investment – £23m
OCI Investment – £5m
OCI Investment – £44m
Fund III acquired a stake in
Fund IV acquired a majority
Fund IV acquired Contabo,
Fund IV signed an
Alessi, the Italian high-end
stake in Seven Miles, a
one of the leading cloud
agreement to make a
design business focused
on homeware products.
leading German consumer
infrastructure platforms
follow-on investment in
technology company in the
used by developers,
WebPros, to benefit from
gift voucher and B2B gift
entrepreneurs and SME’s.
the significant long-term
card sector.
growth potential of
the business.
July
August
September
October
November
December
Realisation –
£116m OCI proceeds
Fund III signed an
agreement to sell its stake
in WebPros, at a 105%
premium to the December
2018 book value.
Signed in the period and
completed in Q1 2020
OverviewStrategic ReportGovernanceFinancial Statements 2
08
The Oakley Funds
Portfolio companies: the largest
contributors to 2019 NAV growth.
Portfolio Company highlights
WebPros
Inspired
Realisation at a 105% premium to the
December 2018 book value
Partial realisation at an 80% premium
to the December 2018 book value
Fund III originally invested in Plesk in 2017 and
subsequently completed five acquisitions to create
WebPros, a product portfolio that addresses
the full end-to-end customer lifecycle for shared
hosting providers. The group now employs over
450 people across four continents and supports
customers across the globe. The sale was agreed
in December 2019 and subsequently completed
in February 2020, generating gross returns on
investment of 6.9x MM and 152% IRR.
Inspired has grown rapidly by building new schools
and acquiring existing successful establishments
around the world. It is now one of the leading
global groups of premium schools educating over
45,000 students between the ages of 1 and 18
on five continents. As a result of the opportunity
presented by a primary and secondary investment
into the Group in June 2019, Fund II partially sold
down its stake.
+29 pence 2019 NAV per share uplift
+27 pence 2019 NAV per share uplift
Time Out
Share price growth of 73%
It was a significant year for the global media and
leisure business, with the successful opening
of five new Time Out Markets, transforming the
division from a single highly popular market in
Lisbon to a global portfolio. Time Out Media
made similar progress with double-digit digital
advertising growth materially outperforming a
challenging market.
Career Partner Group
Trading performance increased
value by 49%
The fastest growing private university group in
Germany has over 30,000 students enrolled across
four types of programmes: online degree courses,
dual studies, part-time studies and corporate
training. CPG continued to sustain strong growth
in 2019, recording an increase in student intake of
67%, versus the prior year.
+16 pence 2019 NAV per share uplift
+13 pence 2019 NAV per share uplift
OAKLEY CAPITAL INVESTMENTS 2
09
Oakley Funds: total realised returns
of 3.6x MM and 48% gross IRR.
Funds’ overview
Oakley Fund I (“Fund I”)
Oakley Fund II (“Fund II”)
Vintage: 2007
Vintage: 2013
OCI commitment
€188m
Current investments
Time Out
Fund size
€288m
Fund size
€524m
OCI commitment
€190m
Current investments
Inspired
Daisy
North Sails
2.9x
Gross MM
44%
Gross IRR
3.3x
Gross MM
63%
Gross IRR
Oakley Fund III (“Fund III”)
Oakley Fund IV (“Fund IV”)
Vintage: 2016
Vintage: 2019
OCI commitment
€326m
Current investments
Casa & atHome
TechInsights
Schülerhilfe
AMOS
Alessi
CPG
Fund size
€800m
Facile
Ekon
WebPros
Fund size
€1.5bn
OCI commitment
€400m
Current investments
Seagull & Videotel
Seven Miles
Contabo
6.9x
Gross MM
152%
Gross IRR
Note: Returns provided are total realised returns. Fund III returns reflect the sale of WebPros which completed in Q1 2020.
OverviewStrategic ReportGovernanceFinancial Statements 10
Chair’s statement
A year of significant progress that delivered market-leading
returns, a change of share listing and new Board appointments.
We are pleased to report another successful year for
the Company (“OCI”), in which net asset value (NAV)
total return grew by 25%. This market-leading return
was achieved through the strong performance of the
underlying portfolio companies and realisations made
significantly above book value.
The Board has made substantial progress in enhancing
governance and growing shareholder value during the
year. These initiatives include OCI’s share listing move to
the Specialist Fund Segment (“SFS”) of the London Stock
Exchange’s Main Market, a material buy-back of shares
and further refreshment of the Board’s composition.
We are encouraged to see this combination of high NAV
growth and strong governance reflected in the share price.
Total shareholder return was 56% in the year, one of the
highest returns delivered in the UK listed investment trust
sector (source: Quoted Data).
Performance - trading and realisations
OCI’s NAV per share increased from £2.81 to £3.45 in
the period. The key drivers were strong trading in the
underlying portfolio companies with EBITDA growth,
averaging 30%, and two realisations at a combined 97%
above their carrying value. Notably, the agreed sale of
webhosting software provider, WebPros, added 29 pence
to the NAV per share in the period. Having originally
invested in Plesk in 2017 and subsequently completing
five acquisitions, the WebPros group was sold at a 105%
premium to the December 2018 book value, achieving a
gross return of 6.9x money multiple. Portfolio company
performance was partially offset by foreign exchange
movements, which had a negative impact on NAV in the
year of 15 pence per share.
Investments and commitments
The Investment Adviser, Oakley Capital, has continued to
secure high-quality assets at attractive valuations, despite
rising demand for private company investments. In the
period, Oakley’s unique network of business founders and
entrepreneurs helped it to source five acquisitions: Ekon
(TMT), Seagull & Videotel (Education), Alessi (Consumer),
Seven Miles (Consumer) and Contabo (TMT). The average
entry valuation multiple (EV/EBITDA) was 9.7x, compared
to the peer group average of 13.1x.
OCI has outstanding commitments to the Oakley Funds
of £429 million, £313 million of which are to Fund IV, and
following strong investor demand, closed at €1.5 billion
in the year. Available cash at the year-end of £49 million
has grown with the post-period WebPros realisation and
the Career Partner Group refinancing, which together
returned £135 million to OCI, providing liquidity for
future drawdowns.
Direct investments
OCI continues to benefit from returns generated by direct
equity and debt investments in some of the underlying
portfolio companies. Direct equity investments allow OCI
to hold an attractive asset directly when a Fund is reaching
the end of its life. Short-term direct debt investments have
generated an IRR of 10% that has helped to reduce “cash
drag” and provided income to cover dividend payments.
The Board frequently reviews its direct investment
strategy and we are pleased to confirm that, effective
from 1 January 2020, we have agreed with the Investment
Adviser that management and performance fees are no
longer payable on direct debt investments. As the scale
and nature of the Oakley Funds’ portfolio companies
increases, we anticipate fewer suitable opportunities will
be available to OCI in the future and its exposure to, and
earnings from, direct investments will decrease over time.
OAKLEY CAPITAL INVESTMENTS 11
Total shareholder return
Number of shares bought back
Daily share volume growth
56%
6.2m
+85%
Governance
As part of the Board’s commitment to ensure OCI offers
investors best-in-class transparency, risk management
structures and governance, we concluded that the SFS of
the Main Market is now a more appropriate market for a
company of OCI’s size and type. OCI’s share listing was
moved from AIM to the SFS in August 2019.
In conjunction with the move to the SFS, we have
upgraded our investor communications by increasing
disclosure in our Annual Report, relaunching our website,
introducing new marketing materials and continuing to
increase our interactions with investors.
During the year, OCI bought back for cancellation a total
of 6.2 million shares at an average price of 237 pence
per share. These purchases have enhanced the NAV per
share at 31 December 2019 by 4 pence and this approach
to capital management will continue, with further share
buy-backs anticipated. OCI Board Members and Oakley
Partners continued to purchase OCI shares during the
period, resulting in their combined holding growing by
90% to 9.5% of the shares in issue. This reinforces the
alignment of interest between the Board, Oakley Capital
and our shareholders.
These actions have significantly improved OCI’s share
liquidity. Trading volumes increased by 85% year-on-year
and for the first time, the combined holding of OCI’s
top ten shareholders fell below 70%, as the shareholder
base diversified. We are confident that our focus on
governance, combined with sustained superior returns,
will contribute to the narrowing of the discount to the
NAV per share at which the shares trade.
Board update
As part of our commitment to reviewing and refreshing the
Board, I am delighted to welcome two new Non-Executive
Directors. In June 2019, we appointed Craig Bodenstab, a
Chartered Financial Analyst and Accountant with over 25
years’ investment management experience. In December
2019, we welcomed Richard Lightowler, who brings a
wealth of experience in financial services. James Keyes
stepped down as a Non-Executive Director in July 2019,
following a 12-year tenure, and we would like to thank
him for his significant commitment to the Board and OCI
during this time. We believe that the current Board has an
appropriate balance of experience, diversity of skills and
perspective, to support OCI’s continued development.
Environmental, Social & Governance (“ESG”)
The Board believes that responsible investment is important
to protect and create long-term investment value. To this
end, OCI has adopted an ESG policy and monitors the
policies adopted by the Investment Adviser. Oakley works
together with its portfolio companies to identify and apply
good practice with regard to managing ESG matters. We
are particularly encouraged by the positive social and
environmental impact of a number of the portfolio companies.
Dividend
In October, an interim dividend of 2.25 pence per share
was paid for the period ended 30 June 2019, and we
are pleased to announce a final dividend for 2019 of
2.25 pence per share, to be paid in April 2020.
Prospects
At the time of writing the full extent of the COVID-19
outbreak and resultant effect on the global economy
is unknown. A trading impact is expected across most
business activity and the subsequent fall in equity markets
will put pressure on portfolio company valuations.
In light of macro uncertainties in recent years, Oakley has
remained vigilant and cautious in its approach, investing in
businesses with stable revenue streams that demonstrate a
resilience to broader market volatility. Whilst the portfolio will
be affected, Oakley’s investment strategy and sector focus
will provide some resilience during this period of disruption.
Since inception, Oakley has achieved an average 34%
premium to the prevailing carrying value upon the sale
of assets. This gives us confidence in the conservative
approach to valuation and the level of value to be unlocked
through realisations. With the scaling of investments through
organic growth and M&A, the portfolio has proven attractive
to the wider private equity landscape, which has significant
capital to deploy after a successful period of fundraising.
Caroline Foulger
Chair
19 March 2020
OverviewStrategic ReportGovernanceFinancial Statements 12
OA K L E Y CA P I TA L I N V E S T M E N T S
13
Strategic
report by the
Investment
Adviser
Market outlook
Why listed Private Equity?
Introduction to the Investment Adviser
Investment policy
Investment Adviser’s approach
Overview of OCI investments
NAV overview
Outstanding commitments of OCI
Consumer sector
Consumer portfolio companies
TMT sector
TMT portfolio companies
Education sector
Education portfolio companies
Environmental, Social and Governance policy
An example of ESG in action: Alessi
Overview of Fund portfolios
Direct investment review
14
15
16
17
18
20
22
25
26
27
30
31
34
35
38
39
40
43
14
Market outlook
Private equity fundraising and activity remain high,
as the asset class continues to outperform.
Record levels of capital creating demand
for high-quality assets
Assets under management in private equity continued to
increase to over $4 trillion in 2019, with record levels of
unspent capital at the year-end of $1.5 trillion (source: Preqin).
This trend is likely to remain, as private equity firms in Europe
are collectively seeking to raise more than $80 billion this
year, which, if achieved, would mark the largest sum raised
in a single year (source: Preqin). This is largely fuelled by
‘megafunds’ of over $5 billion, which accounted for more
than half of the total funds raised in 2019 (source: McKinsey).
As both the demand for private equity and capital increases,
so too has competition for high-quality assets, with the
average purchase price multiple in Europe reaching a record
high of 10.9x EBITDA in 2019 (source: Bain).
Oakley remains insulated from this backdrop, due to
its mid-market niche and unique sourcing model, which
focuses on identifying off-market deals through a network
of entrepreneurial business founders and managers,
allowing Oakley to avoid highly competitive processes.
As such, Oakley can find defensible businesses at a stage
where valuations are fair and there is opportunity for
significant growth, as evidenced by Oakley’s 9.7x average
entry EV/EBITDA for 2019 investments, compared to the
peer group average of 13.1x.
At exit, Oakley benefits from the excess of capital in the
market, which creates potential buyers and competitive
tension for its portfolio companies. This is demonstrated
by Oakley’s realisations in 2019, which were completed at
a combined 97% premium to book value.
Steven Tredget
Caroline Foulger
Partner
Chair
Increasing valuations leading to rising leverage
While market-level deal activity across Europe fell by 8%
during 2019, multiples paid rose to new records, partly
driven by record leverage, as deals with debt of more than
6x EBITDA accounted for more than 75% of all transactions
(source: Bain). This has continued to fuel debate around the
sustainability of the private equity model and the industry’s
reliance on using leverage to drive returns.
However, these figures are driven by large deals that
‘megafunds’ are now able to secure, which typically
carry higher leverage levels. In contrast, Oakley takes a
disciplined approach to debt, with the underlying portfolio
levered at an average net debt/EBITDA multiple of 3.7x
at the year-end. This level remains appropriate, given the
average 30% annual EBITDA growth, high cash conversion
rate and low capex requirements across the portfolio.
Continued outperformance in Europe
Private markets have experienced an impressive period of
growth, with the number of private equity-backed companies
in North America and Europe increasing by 6.8% in 2019
(source: PitchBook). While Bain reported that returns from US
public markets outperformed private equity over a 10-year
period for the first time, private and public market returns
have not converged in Europe, where private equity’s historic
outperformance has continued (source: Bain).
COVID-19 impact
At the time of writing the full extent of the global COVID-19
outbreak and resultant effect on the economy is unknown.
A trading impact is anticipated across public and private
equity funded companies alike. The scale of this disruption
will be highly dependent on the duration and severity of the
virus and the response by governments and consumers.
In light of macro uncertainties in recent years Oakley
has remained vigilant and cautious in its approach,
investing in businesses with stable revenue streams that
demonstrate a resilience to broader market volatility.
Whilst the portfolio will be affected, Oakley’s investment
strategy and sector focus will provide some resilience
during this period of disruption.
OAKLEY CAPITAL INVESTMENTS 15
Why listed private equity?
Providing access to superior investment returns.
Private equity: the top performer
Private equity has been a consistently attractive asset
class over the past decade, and it continues to grow in
scale and sophistication. The industry now has over
$4 trillion in assets under management globally and
over 8,400 institutional investors (source: Preqin).
This growth is in sharp contrast to the shrinking of public
markets. The number of IPOs is decreasing and companies
are pursuing options to de-list, resulting in the number of
public companies in North America and Europe decreasing
by 3.1% per annum.
Global private equity has achieved consistently strong
returns across the past decade. The sector has benefited
from portfolio diversity and reduced volatility through
access to a range of fast-growing companies, often in
sectors that are harder to reach through public markets.
The global private equity benchmark has consistently
outperformed the FTSE all-share index in the past ten
years (as shown below).
Returns data
25%
20%
15%
10%
5%
0
%
4
2
%
0
1
%
5
%
3
1
%
5
1
%
2
1
%
2
%
6
%
4
1 year
5 years
10 years
FTSE all-share
Global private equity benchmark
UK listed private equity sector
Liquid access to private equity returns
Listed private equity provides retail investors access to
these superior returns, allowing them to overcome the
usual barriers to investment, typically only surmounted by
institutions and high-net-worth individuals.
Listed private equity vehicles can follow different
structures, but direct, single-fund investment companies
and fund of funds allow for investment at a smaller
ticket size, without the average 10-year lock-up period
or regulatory constraints. This allows retail investors to
benefit from the returns created by a longer-term, hands-on
approach and closely aligned management structures
through participation in a diversified portfolio of
unlisted companies.
Manager selection is key
Investing in listed private equity provides investors with
exposure to the returns created in an underlying portfolio
managed by a dedicated team of investment professionals
who engage with companies on a day-to-day basis and
may also hold seats on boards, enabling them to directly
oversee the enhancement of a company’s value.
Management fees are reflective of this active management
and the skills required, meaning that they are typically
higher than those of a public equity fund, but the benefits
of an engaged, experienced manager are manifested in
the underlying fund’s returns. When selecting a manager,
it is important to choose one that can source and execute
attractive deals in a competitive market, and who has a
track record of strong performance.
OCI has been listed since 2007 and provides access to
Oakley’s track record of sourcing high-quality, diversified
investments; supporting their growth through active
management; and selling them at attractive multiples. The
companies which Oakley backs, typically enjoy a set of
key characteristics: market leader in their chosen niche;
stable and recurring revenue stream, diversified customer
base; opportunity to expand its service proposition; and
scope for mergers and acquisitions.
OverviewStrategic ReportGovernanceFinancial Statements 16
Introduction to Investment Adviser
OCI’s structure enables access to a unique network and
exposure to high-performance.
1
2
3
The Company
The Investment Adviser
The Administrative Agent
Oakley Capital Investments
Limited
Oakley Capital Limited
Oakley Capital Manager
Limited
About OCI
About Oakley Capital
About OCML
Oakley Capital Limited (“Oakley”
or “the Investment Adviser”) serves
as Investment Adviser. Oakley is
responsible for making investment
recommendations and for structuring
and negotiating deals for the Oakley
Funds and OCI direct investments.
Oakley is authorised and regulated by
the Financial Conduct Authority.
Oakley Capital Manager Limited
(the “Administrative Agent”)
provides operational assistance and
services to the Board with respect
to OCI’s investments and its general
administration. The Administrative
Agent is managed by experienced
third-party administrative and
operational executives.
OCI is a closed-ended investment
company with the principal objective
of achieving capital appreciation
through investments via the Oakley
Funds in a diversified portfolio of
private mid-market businesses,
primarily in Western Europe. OCI
offers investors a liquid investment
vehicle, through which they can obtain
exposure to the underlying Oakley
Funds with minimal administrative
burden, no long-term lock-up and no
minimum investment size. The OCI
Board takes the ultimate decision to
invest (or to take any other action)
in an Oakley Fund or in a direct
investment. In the ordinary course, it
makes decisions after reviewing the
recommendations provided by the
Investment Adviser.
What OCI does
What Oakley Capital does
What OCML does
• Sets business objectives
• Governance, portfolio
management and risk
management
• Appoints and oversees its
service providers
•
Identifies investment
opportunities and performs
due diligence
• Carries out the day-to-day
and administrative operations
of OCI
• Recommends potential
• Provides operational
investments and realisations
for consideration
assistance with respect to
OCI’s investments
• Structures and negotiates
deals for the Oakley Funds
It is the opinion of the Directors that the continuing appointment of the Administrative Agent and the Investment Adviser
on the terms agreed is in the interests of its shareholders as a whole. Through the work of the Management Engagement
Committee of the Board, the proven strong performance delivery from these service providers were noted, and no
material deficiencies in delivery against agreed terms.
OAKLEY CAPITAL INVESTMENTS 17
Investment policy
The Company will seek to meet its investment objective
primarily by investing in the Oakley Funds, in successor
funds managed by OCML and/or the General Partners and/
or advised by the Investment Adviser (or their respective
affiliates) and, over time, in direct investment opportunities
alongside the Oakley Funds and such successor funds,
either through debt or equity instruments.
Cash resources held by the Company that are not called
upon by the Oakley Funds and their successor funds
(or other investments) will be invested under investment
guidelines set by the Board. These may include investing
such funds in cash deposits or near cash deposits. The
Company may hedge the foreign exchange exposure of
any non-sterling cash deposit or investment.
In connection with certain direct investment opportunities
made available alongside the Oakley Funds and any
successor funds thereto, the Board has been advised by
OCML that, from time-to-time, OCML or (in the case of
Fund IV) the Fund IV AIFM may invite one or more Limited
Partners in the Oakley Funds (and successor funds)
including the Company to directly invest alongside the
Oakley Funds (and successor funds) on the same terms
as such Limited Partnerships. In such event, OCML or (in
the case of Fund IV) the Fund IV AIFM (or, as applicable,
the AIFM of the successor fund) would make available to
the Company copies of the due diligence and analysis
prepared by OCML or the Investment Adviser and any
other third-parties in relation to such direct investment
opportunities. The Board would then determine whether or
not, and to what level, the Company should directly invest.
Investment strategy of the Oakley Funds
The Oakley Funds’ investment strategy is to focus primarily
on private mid-market Western European businesses, with
the objective of delivering long term capital appreciation
within the Oakley Funds. The life of each Oakley Fund is
expected to be approximately 10 years, which includes a
five-year investment period from the date of final closing.
The Oakley Funds primarily focus on equity investments
of at least €20 million per transaction (with certain of the
Oakley Funds targeting a higher minimum transaction
value) that enable them to secure a controlling position in
the target company. The Oakley Funds typically invest in
sectors that are growing or where consolidation is taking
place, investing both in performing and under-performing
companies, supporting buy and build strategies, rapid
growth, or businesses undergoing significant operational
or strategic change. The sectors targeted by the Oakley
Funds have included, in particular, technology, media and
telecommunications, consumer and education. However,
the Oakley Funds’ sector focus is flexible over time to
reflect where the best investment opportunities emerge.
Re-investment
On any realisation of investments, the Company may
re-invest funds in any of the following ways:
•
•
•
In direct investment opportunities alongside the Oakley
Funds and/or successor funds provided by OCML or
(in the case of Fund IV) the Fund IV AIFM, or the AIFM
of any successor fund;
In cash, cash deposits and near cash deposits; or
ln successor funds, or new funds with successor
strategies, in each case managed by OCML and/or
advised by the Investment Adviser or their
respective affiliates.
Borrowing powers of the Company
The Company has the power to borrow money in any
manner. However, the Directors do not intend to borrow
more than 25% of the net asset value of the Company
determined at the time of draw down and in accordance
with the valuation policies and procedures adopted
by the Company from time to time. The Company may
utilise leverage when deemed appropriate by the Board.
The Company may be required to use its investments as
security for any borrowings which it puts in place.
As at 31 December 2019, the Company has no
outstanding borrowings.
Changes to the investment policy
No material change will be made to the Company’s
investment policy without the approval of Shareholders by
ordinary resolution. In the event of a material breach of the
investment policy set out above, notification will be made
to a Regulatory Information Service.
Risk Management
The Board has developed a set of risk management
policies, procedures and controls, and has delegated
the management and mitigation of these principal risks
to the Risk Committee who provide feedback and
oversight to the Board on a regular basis. Refer to the
Risk Committee Report to the Board on page 70.
OverviewStrategic ReportGovernanceFinancial Statements t
18
OA K L E Y CA P I TA L I N V E S T M E N T S
Investment Adviser’s approach
Preferred partner for top entrepreneurs.
1
2
Key resources
How we invest
LEVERAGING OUR UNIQUE
BUSINESS NETWORK
SOURCING
PROPRIETARY DEALS
Team
Experienced team of investment professionals,
entrepreneurs and skilled operators
Network
Oakley builds close partnerships with
entrepreneurial founders and managers.
They provide an invaluable resource to
broaden Oakley’s deal introduction network
and deepen expertise within sector hubs
Strong management
partnerships
Oakley’s entrepreneurial heritage allows it to
partner with strong management teams and become
their preferred partner for completing repeat deals
Key geography and sectors
Focus on core sectors and geographic locations
to build on operating experience and leverage
knowledge gained from previous investments
Complexity
Seeks complex deals outside of
intermediated auctions
Structural growth
Targets companies with sustainable structural
growth dynamics and the opportunity for M&A
€120m
of commitments backed by Oakley
management teams across Funds II, III and IV
90%
of Oakley deals have
been primary
t
Strategic Report
19
Complexity, along with strong management partnerships,
can present opportunities to enable Oakley to create value.
3
4
Creating value
Generating returns
DRIVING GROWTH ACROSS
THE PORTFOLIO
GENERATING CONSISTENTLY
HIGH RETURNS
Buy-and-build
Creating scale and synergies through
targeted M&A opportunities
Growth acceleration
Helping portfolio companies to achieve their
full potential with appropriate capital and
operational resources
Business transformation
Providing support in the transition from
entrepreneurial ownership to businesses with
scalable and sustainable operations
30%
average EBITDA growth
across the underlying portfolio
Oakley Funds
MM*
IRR*
OAKLEY FUND I
(vintage 2007)
OAKLEY FUND II
(vintage 2013)
OAKLEY FUND III
(vintage 2016)
2.2x
37%
2.4x
2.3x
38%
52%
OCI, as investor in the
Oakley Funds
CAPITAL CALLED
TO DATE
CAPITAL RETURNED
TO DATE
PROPORTIONATE FAIR
VALUE OF OAKLEY FUNDS
£517.5m
£540.6m
£661.0m
*
Gross money multiple and gross IRR are based on realised and
unrealised portfolio returns as at 31 December 2019.
OverviewGovernanceFinancial Statements 20
Overview of OCI investments
Sector
Location
investment
(£m)
(£m)
Year of
Open cost
Fair value
Investments
Fund I
Time Out
Consumer
Global
2010
48.3
OCI’s proportionate allocation of Fund I investments (on a look-through basis)
Other assets and liabilities
OCI’s investment in Fund I
Fund II
North Sails
Inspired
Daisy
Consumer
Education
TMT
Global
Global
UK
2014
2014
2015
OCI's proportionate allocation of Fund II investments (on a look-through basis)
Other assets and liabilities
OCI's investment in Fund II
Fund III
Casa & atHome
Schülerhilfe
WebPros
TechInsights
AMOS
CPG
Facile
Ekon
Alessi
Consumer
Education
TMT
TMT
Education
Education
Consumer
TMT
Consumer
Italy/
Luxembourg
Germany
USA/
Switzerland
Canada
France
Germany
Italy
Spain
Italy
2017
2017
2017
2017
2017
2018
2018
2019
2019
OCI's proportionate allocation of Fund III investments (on a look-through basis)
Other assets and liabilities
OCI's investment in Fund III
Fund IV
Seagull & Videotel
Seven Miles
Contabo
Education
Norway/UK
Consumer
TMT
Germany
Germany
2019
2019
2019
OCI's proportionate allocation of Fund IV investments (on a look-through basis)
Other assets and liabilities
OCI's investment in Fund IV
37.6
5.3
10.5
26.3
30.8
7.6
0.4
7.0
20.6
28.8
18.0
7.9
20.2
23.4
5.0
37.7
37.7
(4.3)
33.4
33.0
17.3
11.0
61.3
(4.1)
57.2
40.0
47.1
110.1
13.5
13.6
59.2
35.3
17.1
7.5
343.4
(33.3)
310.1
19.3
23.3
4.9
47.6
(27.8)
19.7
OAKLEY CAPITAL INVESTMENTS 21
Investments
Sector
Location
investment
(£m)
(£m)
Year of
Open cost
Fair value
Direct investments
Equity
Time Out (quoted)
Inspired (unquoted)
Debt
Time Out
Daisy
North Sails
Fund Facilities
Total direct investments
Total OCI investments
Cash, other assets and liabilities
Total OCI NAV
Consumer
Education
Consumer
TMT
Consumer
n/a
Global
Global
Global
UK
Global
n/a
2010
2017
2018
2015
2014
47.2
19.5
20.0
14.2
60.9
n/a
38.5
75.0
23.3
15.8
73.5
14.6
240.7
661.0
25.0
686.0
The OCI look-through values are calculated using the OCI attributable proportion (determined as the ratio of OCI’s
commitments to the respective Oakley Fund 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.
The “Other assets and liabilities” noted in the tables above include OCI’s proportion of third-party debt facilities
in place for Fund II, Fund III and Fund IV. As at 31 December 2019, the third-party debt balances were €21.8 million,
€100.9 million and €156.1 million in Fund II, Fund III and Fund IV respectively, including interest.
OverviewStrategic ReportGovernanceFinancial Statements 22
NAV overview
OCI’s NAV increased from £574.8 million to £686.0 million,
an increase of 19% since 31 December 2018.
Opening net asset value as at the start of the year
Gross revenue
Other expenditure
Net foreign currency gains/(losses)
Realised gain on investments
Net change in unrealised appreciation on investments
Dividend expense
Shares bought-back
Closing net asset value as at the end of the year
Net earnings were £135.2 million for the year, comprising:
31 Dec 2019
31 Dec 2018
£m
574.8
10.3
(17.9)
(2.7)
17.8
127.7
(9.2)
(14.9)
686.0
£m
502.0
6.8
(6.4)
3.1
102.3
(23.9)
(9.2)
–
574.8
• Gross revenue of £10.3 million arising from interest income earned predominantly on the debt facilities provided by
the Company;
• Expenses of £17.9 million with an additional £2.7 million of foreign exchange losses. Expenses include management
and performance fees on direct investments; and
• Realised gains of £17.8 million earned from the realisations that occurred in the Oakley Funds during the year. Net
change in unrealised gains/(losses) on investments of £127.7 million, driven predominantly by the increase in value of
a number of investments within the portfolio. These amounts are net of fees paid to the Investment Adviser.
The Company bought back 6.2 million shares during the year at open market value, for a total of £14.9 million.
A final dividend for the year ended 31 December 2018 of 2.25 pence per share was paid in April 2019 and an interim
dividend for the year ended 31 December 2019 of the same amount was paid to shareholders in October 2019, totalling
a £9.2 million expense.
Movement in NAV (£m)
10.3
(20.6)
17.8
574.8
Net earnings: £135.2m
127.7
(9.2)
(14.9)
686.0
700
600
500
400
300
200
100
0
Opening NAV
as at
1 January 2019
Gross
revenue
Net other
expenditure and
FX losses
Realised gain
on investments
Net change
in unrealised
appreciation on
investments
Dividend
expense
Share
buy-back
Closing NAV
as at
31 December
2019
OAKLEY CAPITAL INVESTMENTS 23
NAV per share since inception (£)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
3.45
2.81
2.45
2.31
1.68
1.71
1.81
2.00
2.01
2.00
1.41
0.99
1.08
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
NAV per share
Attribution analysis of movements in the value of investments (£m)
127.3
(91.8)
17.8
10.2
(29.7)
124.1
33.3
661.0
469.7
Totalling: £127.7m
700
600
500
400
300
200
100
0
2018
Purchases
Distributions
Realised gains
Interest and
other
FX
EBITDA
Multiple
2019
During the year, the net change in unrealised gains of £127.7 million is due to the uplift in value of the underlying
Oakley Funds and equity investments. The majority of this gain was attributed to EBITDA growth in the underlying
portfolio companies across the Oakley Funds, offset by the significant negative impact of FX of £29.7 million. The main
movement was in Fund III, which saw an increase in unrealised gains of £82.7 million.
OverviewStrategic ReportGovernanceFinancial Statements 24
NAV overview continued
Realised and unrealised movements in the value of investments in 2019 (£m)*
WebPros
Inspired
Time Out
23.9
33.5
56.2
30.2
Career Partner Group
16.1
10.9
Schülerhilfe
Facile
AMOS
TechInsights
Casa & atHome
Daisy
North Sails
12.2
7.6
3.2
0.4
0.4
(4.2)
(5.0)
-10
0
10
20
30
40
50
60
70
* The movements do not include the impact of foreign exchange during 2019.
Value Change
Distributions
Geographic location by value
Global – £298.2m
Germany – £134.5m
Switzerland – £110.1m
Italy – £82.7m
UK – £26.8m
Norway – £19.3m
Spain – £17.1m
France – £13.6m
Canada – £13.5m
OAKLEY CAPITAL INVESTMENTS 25
Outstanding commitments of OCI
Outstanding commitments to the Oakley Funds as at
31 December 2019 were £428.7 million, of which £313.1 million
is to Fund IV.
The Board has concluded that the level of the net outstanding commitments in the Oakley Funds is appropriate.
Fund II is in its realisation phase and is expected to receive distributions from the remaining three investments. Fund III
has reached the end of its investment period and any amounts to be drawn in the future by Fund III are expected to be
more than covered by cash proceeds received from the Oakley Funds. Fund IV has begun investing and the Investment
Adviser anticipates that capital will be deployed to fund investments. OCI regularly reviews its own liquidity forecasts
and is satisfied that it will be able to meet its unfunded commitments in the normal course of business.
The table below illustrates OCI’s outstanding commitments to the Oakley Funds, and their respective percentage of
OCI’s NAV at 31 December 2019 .
Total commitment
at 31 Dec 2019
at 31 Dec 2019
Outstanding
Outstanding
Fund
Oakley Fund I
Oakley Fund II
Oakley Fund III
Oakley Fund IV
Outstanding commitments
Cash and cash equivalents
Fund vintage
2007
2013
2016
2019
(€m)
202.4
190.0
325.8
400.0
(€m)
2.8
13.3
120.5
370.0
506.7
Net outstanding commitments unfunded by cash resources at
the year-end
(£m)
2.4
11.3
102.0
313.1
428.7
48.9
379.9
% of NAV
0.3
1.6
14.9
45.6
62.5
55.4
Outstanding commitments unfunded by liquid resources (£m)
500
450
400
350
300
250
200
150
100
50
0
2017
2018
2019
Fund l
Fund ll
Fund lll
Fund lV
Cash
Post year-end proceeds
OverviewStrategic ReportGovernanceFinancial Statements 26
OA K L E Y CA P I TA L I N V E S T M E N T S
Consumer sector
Market review
Oakley has a long track-record of investing in the consumer sector,
since 2009, and deploys its expertise with a focus on quality brands in
established sectors, with strong growth dynamics.
With a consistent focus on particular sub-sectors such
as online price comparison, online dating and online
classifieds, Oakley has been able to successfully
replicate winning models in continental European
markets, as evidenced by its former investments in
Verivox, Facile, and Parship Elite Group, among others.
The ongoing shift of consumers from traditional offline
channels to online platforms is driving strong growth
in the sector, which is expected to continue in future
years, particularly in countries which are at an early
stage of online adoption.
This, coupled with the continued attractive returns to
scale inherent in online consumer-focused businesses,
means that Oakley continues to pursue opportunities
in the broader consumer sector where it can leverage
these positive characteristics and apply the value
creation strategies which have been proven to
generate significant returns.
Sector investments*
Investment
North Sails
Time Out
Casa & atHome
Facile
Alessi
Seven Miles
Oakley Fund
OCI/Fund II
OCI/Fund I
Fund III
Fund III
Fund III
Fund IV
OCI’s open cost (£m)
OCI’s valuation (£m)
% of OCI NAV
98.5
115.5
26.3
28.8
7.9
23.4
106.5
99.5
40.0
35.3
7.5
23.3
16
15
6
5
1
3
*
The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on pages 20 and 21. 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.
27
Consumer portfolio companies
1
North Sails
2
Time Out
North Technology Group (“NTG”) comprises a
portfolio of market-leading marine brands focused
on providing innovative and high-performance
products 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.
Overall NTG trading for the year was mixed, with the
North Sails and Edgewater divisions facing some
trading softness, partially offset by solid growth in the
Masts division. There has been continued progress
with North Sails Apparel, with year-end revenue up
15% from the prior year. Online sales have progressed
significantly, up 52% on the prior year and now
accounting for c.10% of total revenues.
In August 2019, North Kiteboarding was successfully
launched with a new re-designed range of products
and was supported by the distribution platform of
Mystic, the kiteboarding accessories brand, which
was acquired in January 2019.
A trusted global brand that inspires and enables
people to experience the best of the city.
Time Out continues to help people explore and
experience the best of the city through its two
divisions - Time Out Media and Time Out Market.
Across these platforms, Time Out distributes its
curated content around the best food, drink, music,
theatre, art, travel and entertainment across 315 cities
in 58 countries.
The Group’s content proposition has been
strengthened through the launch of the new markets,
with both the existing and newly opened markets
driving revenue growth in the year. Five new markets
opened across North America in 2019 which have
replicated, with a strong local focus, the concept first
launched in Lisbon in 2014. The global roll-out is set
to continue with planned launches in Dubai (2020),
London (2021) and Prague (2023).
Time Out will release its full year results on
26 March 2020.
£98.5m OCI’S OPEN COST £106.5m OCI’S VALUATION16% OF OCI NAV£115.5m OCI’S OPEN COST £99.5m OCI’S VALUATION15% OF OCI NAVOverviewStrategic ReportGovernanceFinancial Statements
28
Consumer portfolio companies continued
3
Casa & atHome
4
Facile
Casa & atHome is an online property group
comprising a portfolio of real estate websites and
mobile applications.
Italy’s leading online destination for consumers
to compare prices for motor insurance, energy,
telecoms and personal finance.
Fund III originally invested in Casa & atHome in 2017,
as part of the acquisition of a portfolio of classifieds
businesses, which comprised Casa.it in Italy and
atHome.lu in Luxembourg. The Casa & atHome
Group finished its last financial year to June 2019
with revenue and EBITDA growth of 13% and 2%
respectively, on a pro forma basis, versus the prior
year. The Casa business achieved revenue growth of
8%, driven by core agent and developer subscription
revenues. atHome Group grew revenue by 23% in the
period, driven by yield expansion in the core property
listings vertical, supplemented by the acquisitions of
Luxauto and atHomeFinance, the leading automotive
classifieds and mortgage broking platforms in
Luxembourg respectively.
Post year-end, Fund III signed an agreement to sell
a majority stake in the atHome Group to Mayfair
Equity Partners. A minority stake will be retained in the
business, as well as the majority stake in Casa, which
continues to benefit from the growth in the online
property classifieds sector in Italy.
Facile has built a strong position in Italy’s fast-growing
online price comparison market and helps over
1.5 million people in Italy to save money every month.
After broadening its offer, customers are now able
to make price comparisons on gas and electricity,
broadband, bank accounts, loans and mortgages
as well as in the company’s core car insurance and
comparison service.
Facile achieved strong growth in 2019, with total
revenue growth of 21% versus the prior year. The
business’ core insurance vertical performed well in
2019, with increased quote volumes on the website,
together with improved conversion rates driving new
switches. Facile’s non-insurance verticals have also
continued to grow significantly, particularly in the
gas & power and broadband product divisions.
£26.3m OCI’S OPEN COST £40.0m OCI’S VALUATION6% OF OCI NAV£28.8m OCI’S OPEN COST £35.3m OCI’S VALUATION5% OF OCI NAVOAKLEY CAPITAL INVESTMENTS 29
5
Seven Miles
6
Alessi
Alessi is a leading producer of high-end
premium consumer goods. Partnering with
renowned designers, Alessi creates iconic
household products with a focus on tableware
and kitchenware.
In August 2019, Fund III made a growth capital
investment into Alessi to partner with the Alessi family
and assist them in the next phase of the company’s
development. Oakley’s strategy will focus on further
strengthening and expanding the proposition of the
brand by targeting new audiences and optimising the
portfolio’s mix of products, pricing and distribution.
In the short period since Oakley’s investment, the core
business is trading well and there are early signs that
the new management team, introduced by Oakley, are
making a positive impact across the business.
Alessi is a leading producer of high-end premium
Based in Germany, Seven Miles is a leading
consumer goods. Partnering with renowned
consumer technology company in the gift voucher
and B2B gift card sector.
designers, Alessi creates
Since it was founded in 2014, the business has grown
kitchenware.
rapidly to become one of the leading physical and
In August 2019, Fund III made a growth capital
digital gift card networks in the DACH region. In
investment into Alessi to partner with the Alessi family
August 2019, Fund IV acquired a majority stake in
and assist them in the next phase of the company’s
the business, partnering with its founders to create
development. Oakley’s strategy will focus on further
a sustainable platform and continue the company’s
strengthening and expanding the proposition of the
growth and leadership in product innovation.
brand by targeting new audiences and optimising the
The market for multi-brand gift cards in Germany is
portfolio’s mix of products, pricing and distribution.
expected to grow at over 15% in the coming years,
In the short period since Oakley’s investment, the core
as consumers increasingly value the convenience and
business is trading well and there are early signs that
flexibility that make gift cards an attractive present
the new management team, introduced by Oakley, are
for many occasions. In 2019, total voucher sales grew
making a positive impact across the business.
88% year-on-year, with total voucher value of Seven
Miles’ core products growing 146% versus the prior
year. This has resulted in significant uplifts to both
revenue and EBITDA, driven by operational leverage
as revenues have grown. The acceleration in growth
has been supported by further roll-out of Seven Miles’
products at new retail partners and significant growth
in the B2B business.
£7.9m OCI’S OPEN COST £7.5m OCI’S VALUATION1% OF OCI NAVNew investment – Fund III£7.9m OCI’S OPEN COST £7.5m OCI’S VALUATION1% OF OCI NAVNew investment – Fund III£23.4m OCI’S OPEN COST £23.3m OCI’S VALUATION3% OF OCI NAVNew investment – Fund IVOverviewStrategic ReportGovernanceFinancial Statements 30
TMT sector
Market review
Building on its strong foundation in the telecoms sector, Oakley
has established itself as a leading investor in webhosting as well
as starting to solidify its track record in software.
Oakley’s network of proven entrepreneurs in the
TMT space continues to be an invaluable source
of investment opportunities and their deep operational
involvement has helped to unlock value across
the portfolio.
In webhosting, the growth of public cloud hosting has
put pressure on certain market segments, especially
dedicated hosting, forcing established business
models to adapt. At the same time, the VPS hosting
market has been largely insulated from the advent of
public cloud and has continued to grow quickly as a
result of its strong value proposition for customers.
Oakley has carefully timed its investments in the sector
and has adapted its approach to ensure its investments
benefit from favourable market tailwinds.
In software we can observe a structural shift to the
cloud and software as a service (“SaaS”) models.
Europe, and Southern Europe in particular, lags the
US when it comes to SaaS adoption and gives rise
to opportunities to support software businesses in
developing strong SaaS product offerings.
As disruptive innovation continues across the TMT
sector, Oakley looks for opportunities to invest in
companies which stand to benefit from such changes.
Sector investments*
Investment
WebPros
Daisy
Ekon
TechInsights
Contabo
Oakley Fund
OCI’s open cost (£m)
OCI’s valuation (£m)
% of OCI NAV
Fund III
OCI/Fund II
Fund III
Fund III
Fund IV
7.6
24.7
18.0
0.4
5.0
110.1
26.8
17.1
13.5
4.9
16
4
2
2
1
*
The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on pages 20 and 21. 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.
OAKLEY CAPITAL INVESTMENTS 31
TMT portfolio companies
1
WebPros
2
Daisy
The WebPros Group comprises two of the most
widely used web hosting automation software
platforms, simplifying the lives of developers and
web professionals the world over.
WebPros is a leading SaaS platform for server
management globally. The group comprises six web
hosting brands including cPanel and Plesk, two of the
most widely used web hosting automation software
platforms. WebPros seeks to simplify the lives of
developers and web professionals by providing highly
scalable software solutions that automate server
tasks for hosting providers and web professionals.
cPanel and Plesk have both established themselves
as leading software solutions/providers over the past
20 years and have over 900,000 active server
licenses globally, supporting the operations of
more than 80 million websites.
Fund III originally invested in Plesk in 2017 and
subsequently completed five acquisitions to create
WebPros, a product portfolio that addresses the
full-end-end customer lifecycle for shared hosting
providers. WebPros performed strongly in 2019 with
revenue growth of 8% and EBITDA growth of 8%,
above the prior year.
The UK’s #1 independent provider of converged
B2B communications, IT and cloud services.
Formed in 2001, Daisy has grown into one of the UK’s
leading telecommunications providers, with 360,000
indirect and direct customers, c.2,100 partners,
c.4,000 employees, and over 30 locations nationwide.
Daisy offers a comprehensive range of products
and services to corporate customers of all sizes,
organised into four main divisions:
• Small and medium businesses
• Digital wholesale solutions
• Daisy corporate services
• Allvotec
Throughout 2019, Daisy has continued to focus on
its divisional strategy with positive momentum in
the small and medium businesses direct and Digital
Wholesale Solutions division, offset by some
shortfalls in other areas.
£7.6m OCI’S OPEN COST £110.1m OCI’S VALUATION16% OF OCI NAVRealisation – Fund III£24.7m OCI’S OPEN COST £26.8m OCI’S VALUATION4% OF OCI NAVOverviewStrategic ReportGovernanceFinancial Statements Th
32
TMT portfolio companies continued
3
Ekon
4
TechInsights
Ekon provides Enterprise Resource Planning
(“ERP”) software to Spanish SMEs in
product-centric industries.
Ekon’s ERP has a flexible multi-tenant architecture,
available on-premise or in the cloud. The migration of
its c.1,000 customers to the cloud is well underway,
with c.40% currently on SaaS. The product is modular
in design, offering functionality across Finance, HR,
CRM and operations with dedicated vertical modules
for its core end-markets: manufacturing, wholesale,
retail, health and construction. Ekon’s software is
developed exclusively in Spain, making it one of the few
local players of scale in a market that, aside from the
dominant international vendors, is highly fragmented.
Six months into Oakley’s investment, Ekon’s
performance is in line with expectations and the
business is making good progress on its planned
strategic initiatives. Key management were employed
and the investment programme has progressed
significantly, notably building the sales and marketing
teams, refreshing the brand and preparing the
business for relocation to the ‘tech hubs’ in Barcelona
and St. Cugat.
A global leader in the intellectual property and
technology services market.
TechInsights is trusted by the world’s leading
technology companies to support IP licensing
activities and inform technology strategies by
leveraging its proprietary database of technical
intelligence and unparalleled reverse engineering
capabilities.
2019 was a year of transition for TechInsights, with
significant growth in recurring revenues against a
challenging market backdrop. The business felt the
effects of a softer semiconductor market however
this was offset by strong growth in the subscriptions
segment of the business, up +30% on the prior
year. The ongoing development of the subscriptions
vertical, which is the major driver of growth for the
business, remains the key strategic objective.
Oakley has supported management in the accelerated
transition toward higher quality recurring revenues and
2019 demonstrates the success of this approach.
£0.4m OCI’S OPEN COST £13.5m OCI’S VALUATION2% OF OCI NAVOAKLEY CAPITAL INVESTMENTS£18.0m OCI’S OPEN COST £17.1m OCI’S VALUATION2% OF OCI NAVNew investment – Fund III Th
33
5
Contabo
Contabo is a cloud hosting platform used
by developers, entrepreneurs and SMEs for
webhosting, development and storage.
Contabo’s web-hosting solution is known in the
market for its technology edge, high performance,
customer support and competitive pricing. Fund IV
acquired a controlling stake in the business from its
founders in October 2019 and will invest alongside
proven hosting entrepreneurs from the Oakley
network, to develop the company.
Oakley’s considerable expertise from investing
successfully in the hosting sector will help to further
professionalise the business and maintain its strong
growth trajectory.
In the short period of Oakley’s ownership, Contabo
has made good progress both financially and
operationally. The management team has already been
strengthened with a new CEO and CFO in place, and
further senior management positions filled.
£5.0m OCI’S OPEN COST £4.9m OCI’S VALUATION1% OF OCI NAVNew investment – Fund IVOverviewStrategic ReportGovernanceFinancial Statements 34
OA K L E Y CA P I TA L I N V E S T M E N T S
Education sector
Market review
Education is a core sector for Oakley, with five investments
ranging from after school tutoring and higher education to
marine e-learning.
Over recent years, Oakley has emerged as one of
the leading investors in education in Europe. From
successfully backing entrepreneur Nadim Nsouli to
establish the Inspired Group in 2013 and growing it into
what is now one of the largest premium private schools
groups globally. Oakley has expanded its focus in
education through five investments in the sector,
spanning after-school tutoring, higher education,
K-12 (kindergarten to year 12) and marine e-learning.
Oakley is well-known in the sector for its substantial
expertise and networks and was recognised by
EducationInvestor as their “Education Investor of the
Year” for 2019.
This year, as the world economy reaches the later
stages of the credit cycle, more and more investors
are drawn to education, attracted by the less cyclical
nature of the sector identified by Oakley several years
ago. At the same time, the education sector globally
remains highly fragmented, with limited assets of scale.
Oakley continues to see significant opportunities
for companies to create value through the
application of technology to education, through the
internationalisation of education and the increased role
of private providers. Oakley’s differentiated approach
to origination, depth of experience in the sector and
reputation as a straightforward counterparty has
allowed Oakley to access opportunities unavailable to
other investors.
Sector investments*
Investment
Inspired
Oakley Fund
OCI/Fund II
Career Partner Group
Fund III
Schülerhilfe
Seagull & Videotel
AMOS
Fund III
Fund IV
Fund III
OCI’s open cost (£m)
OCI’s valuation (£m)
% of OCI NAV
24.8
20.6
30.8
20.2
7.0
92.3
59.2
47.1
19.3
13.6
13
9
7
3
2
*
The OCI cost and valuation numbers above have been calculated on an OCI look-through basis as described on pages 20 and 21. 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.
Strategic Report
35
Education portfolio companies
1
Inspired
2
Career Partner Group
A leading global premium private schools group,
with over 64 schools across five continents.
One of Germany’s leading providers of private
higher education.
Inspired has grown rapidly through acquisition and
greenfield development. The initial investment in the
Group was made in July 2013 and since then, Inspired
has expanded across Africa, Europe, Asia and South
America, educating over 45,000 students across
64 premium schools and early learning centres.
Inspired finished the financial year to August 2019 with
revenue up 53% and adjusted EBITDA growth of 72%,
driven by a mix of revenue growth, M&A and cost
control across all regions.
Following the multiple acquisitions completed during
the previous financial year, Inspired is now one of the
three largest global K-12 groups.
Career Partner Group is the fastest growing private
university group in Germany with c.30,000 students
enrolled across four types of programmes: online
degree courses (“Online”), part-time studies,
corporate training and Dual Studies (private on-site
education in cooperation with corporate partners).
Fund III acquired a majority stake in the company
in 2017, partnering with the entrepreneurial
management team to support the continued
development of the business.
Career Partner Group continued to exhibit strong
performance in 2019, growing both revenue and
EBITDA 41% versus the prior year. Growth has been
driven by significant growth in student intake 69%
versus the prior year, across both new and existing
courses in Online and both new and mature centres
in Dual Studies.
Refinancing – Fund III£20.6m OCI’S OPEN COST £59.2m OCI’S VALUATION9% OF OCI NAVPartial disposal – Fund II£24.7m OCI’S OPEN COST £92.3m OCI’S VALUATION13% OF OCI NAVOverviewGovernanceFinancial Statements
36
OA K L E Y CA P I TA L I N V E S T M E N T S
Education portfolio companies continued
3
Schülerhilfe
4
Seagull & Videotel
The leading provider of after-school tutoring
across Germany and Austria.
Seagull & Videotel are the leading maritime
e-learning businesses worldwide.
Schülerhilfe provides group tutoring to over 125,000
primary and secondary school students in 1,000
branches across Germany and Austria. Lessons are
given in small groups, which produce better results at
a much lower cost than one-to-one tutoring.
Schülerhilfe continues to maintain its track record
of highly consistent growth, which has continued
through 2019. The rate of new centre openings and
franchised buy-backs has increased, which brings the
group to 561 own centres at the year-end, up 6.5%
from the previous year. Enrolment growth in the year
grew by 13% which has resulted in strong revenue
development in both its own and franchised centres,
15% and 8%, respectively.
Over the past 40 years, Seagull & Videotel have
established themselves as best-in-class providers of
e-learning to the maritime sector globally. Every year
they provide 20,000 ships and other installations with
comprehensive and up-to-date compliance, risk and
safety training that ensures adherence to International
Maritime Organisation requirements.
This investment represents a continuation of Oakley’s
successful track record in the education, software
and maritime sectors. The integration of the two
businesses will allow them to share knowledge and
resources, invest more in developing new technology,
content and teaching methods, and build a platform
for further M&A in existing and adjacent markets.
Seagull & Videotel ended the year with revenue
and EBITDA growth of 11% and 5% versus the
prior year, respectively. During the year, the Group
also progressed its M&A strategy by completing
the acquisitions of Tero Marine and COEX
(a fleet management and document management
software businesses).
£20.2m OCI’S OPEN COST £19.3m OCI’S VALUATION3% OF OCI NAVNew investment – Fund IV£30.8m OCI’S OPEN COST £47.1m OCI’S VALUATION7% OF OCI NAV Strategic Report
37
5
AMOS
France’s leading business school focused entirely
on sport management and sport business.
Fund III acquired a majority stake in AMOS in August
2017, as part of Oakley’s roll-up strategy in the
higher-education sector, with the aim of replicating
the success of Inspired in the K-12 market. The group
now also own the Centre Européen de Management
Hotelier International (CMH) a leading business
school in Paris focused on hotel management and
tourism, as well as ESDAC, a group of design and
commination schools based in South-East France.
AMOS has enrolled 2,288 students for the current
academic year, which represents enrolment growth
of over 25% versus the prior year. In September 2019,
AMOS opened a new campus in Rennes, following
the successful opening of campuses in Toulouse
and Aix-Marseilles in 2018. This takes the total
number of campuses in France to nine, up from
five at acquisition.
£7.0m OCI’S OPEN COST £13.6m OCI’S VALUATION2% OF OCI NAVRefinancing – Fund IIIOverviewGovernanceFinancial Statements 38
Environmental, Social and
Governance policy
Responsible investing
The Board adopted an ESG policy in March 2020 which
it plans to evolve further during the year. The Company’s
business model is intertwined with its investment in the
Oakley Funds and as such, OCI’s ESG policy is reliant
upon the relevant policies and practices adopted by the
Investment Adviser. In addition, the Company undertakes
its own independent activities with regard to ESG and will
be continuing to build on these throughout 2020.
The Board has endorsed Oakley’s policies to advise
on the investment of the Company’s resources in a
socially responsible manner. Through the work of the
Management Engagement Committee, the Board will
monitor investment activity to ensure that it is compatible
with the Company’s policies.
The Company believes that responsible investment is
important to protect and create long-term investment
value, beyond the drivers of ethics, compliance and
risk management.
Oakley recognises that ESG considerations may require
different focuses, dependent on the nature of an individual
business. Oakley therefore, works together with its
portfolio companies to identify and apply good practice
with regard to managing ESG matters. This commitment
was underscored by Oakley becoming a signatory to the
United Nations Principles for Responsible Investment
(PRI), in 2016.
Oakley’s core ESG principles include:
•
Integrate ESG considerations into all stages of
the investment process – from due diligence and
throughout the period of ownership, to exit;
• Pursue alignment, in our ESG approach, with the BVCA
Responsible Investing Guidelines, and other industry
good practice as it develops;
• Promote the respect, by Oakley and portfolio
companies, of fundamental human rights;
• Avoid bribery or corruption in any of Oakley’s or its
portfolio companies’ dealings;
• Encourage portfolio companies to consider and
mitigate the ESG impacts of their operations;
• Avoid investment in specific sectors which Oakley,
or its investors, consider especially sensitive from
an ESG or ethical viewpoint; and
• Seek continuous improvement in responsible
investment techniques and ESG performance at
Oakley and its portfolio companies.
Charitable Giving
In addition, the Company aims to support charitable
organisations in Bermuda. In 2019, the Company pledged
£25,000 p.a. to Ignite Bermuda as part of a multi-year
commitment. Ignite Bermuda is a registered charity and
business accelerator which works with local entrepreneurs
towards their mission of job creation, education and
enhancing diversity. More information about this initiative
can be found here: www.ignitebermuda.com.
ESG in the Oakley investment process
Pre-investment
Post-investment
Prior to exit
Due diligence screening for
restricted industries (of buyers),
sanctions, political exposure,
adverse media, regulatory
enforcement
Inherent ESG risk assessment:
• Environmental
• Health and Safety
• Labour / Employees
• Community
Risk-based enhanced ESG
assessments
Due diligence screening for
restricted industries, sanctions,
political exposure, adverse
media, regulatory enforcement
Portfolio companies are
required to provide Oakley with
periodic questionnaire-driven
assessment of:
• Governance
• Workplace
• Marketplace
• Environment
• Community
Where higher ESG risks or
opportunities have been
identified, these are considered
at Board meetings and monitored
appropriately
OAKLEY CAPITAL INVESTMENTS An example of ESG in action:
39
Alessi shareholders share the vision that a company’s primary role is to run a business that meets the highest
standards of social and environmental performance. Corporate Social Responsibility consists, first and
foremost, of carrying out day-to-day business activities with care: producing economic value, creating products
that are good for people and valuing people’s work.
Alessi has always promoted social responsibility initiatives that go beyond its regular activities.
Its approach to creating a positive impact is defined through three key areas:
1
2
3
Product, Art and Culture
Alessi’s mission to continually
pursue design excellence, works
to ensure the success of the
company as well as to bring
awareness of the ethical and
cultural values of its products to its
customers and the general public.
• Alessi products are displayed
in the permanent collections
of over 50 of the world’s
leading contemporary art
museums. This means over
350,000 Works of Art are
brought into people’s homes,
every year.
• All contents and results of
research is collected and
shared in the framework of the
Alessi Museum, an archive
of nearly 40,000 prototypes,
plans and designs, that can
be visited free of charge
by researchers, schools,
journalists and students.
• Alessi takes part in design
exhibitions alongside the
most important cultural
institutions in the world and
provides annual donations in
support of foundations in the
art and design field.
People
Alessi’s company culture and
values ensure that its employees
and their professional fulfilment
remain a priority throughout their
Alessi career.
• 20 years is the average length
of service with more than
30% of the workforce having
more than one generation
employed by the company.
• Alessi provides a Welfare
Programme for employees
and their families, including
nursery grants, additional
work permits to allow care for
children and annual grants to
support education.
• Alessi employees are involved
in the Alessi Anghini
Community Fund, which
provides grants to social
initiatives promoted by or
directly involving Alessi
employees. Over €500,000
has been donated to local
charities since 2009, which
represents approximately 1%
of company profits.
Community and Environment
Alessi is committed to measuring
and improving social and
environmental performances,
resulting in a reduction in
the environmental impact of
its operations.
• The environmental impact
of producing a product is
considered throughout the
product lifecycle. Since 2004,
all processes undergo the
environmental certification
UNI EN ISO 14001:2004, on
raw materials, energy, water,
biodiversity, CO2 emissions
and waste.
•
In 2013, Alessi started the
Buon Lavoro Project, through
which around 20,000 hours
of corporate volunteering
have been donated to local
community projects.
• Alessi’s commitment to social
causes is also reflected through
two programmes, Alessi for
Children and (RED), through
which more than €800,000 has
been donated to international
NGOs, since 2005.
Oakley recognises the importance of encouraging Alessi to continue to implement these initiatives to ensure it maintains
the highest standards of social and environmental performance. Oakley is committed to supporting Alessi to maintain the
right balance between profit and purpose and recognises that value can be created from embracing sustainable practices
both for investors and for the wider community.
OverviewStrategic ReportGovernanceFinancial Statements 40
Overview of Fund portfolios
Oakley Fund I investment activity
Fund I was launched in 2007 and the Funds’ term was
extended to November 2020. It has one remaining
investment. The investment portfolio of Fund I is
summarised in the table below. Fund I is denominated in
euros, and the year-end exchange rate was used. OCI
holds a 70.4% interest in Fund I.
Oakley Fund II investment activity
The investment portfolio of Fund II is summarised in the table
below. Fund II is denominated in euros, and the year-end
exchange rate was used. The Company holds a 36.2%
interest in Oakley Fund II.
31 Dec 2019
31 Dec 2018
Fair value
Fair value
€m
107.6
64.9
35.9
208.5
€m
121.2
106.4
49.8
277.4
Oakley Fund I
Time Out
Broadstone
Total current investments
31 Dec 2019
31 Dec 2018
Oakley Fund II
Fair value
Fair value
North Sails
€m
63.3
–
63.3
Inspired
Daisy
Total investments
€m
34.7
0.6
35.3
Fund II has three remaining investments and the focus is
on managing these businesses to achieve attractive exits
and return capital.
In June, Fund II realised a partial interest in Inspired.
Inspired raised capital to provide further funds to continue
its M&A strategy, and to provide liquidity for certain
shareholders. Following a competitive process, Warburg
Pincus joined the investor group. Fund II sold part of its
stake in Inspired, at an 80% premium to book value and
as a result received €125.3 million of which OCI received
proceeds of €33.9 million (£30.2 million) from
this transaction.
The fair value of the Fund II portfolio has decreased by
€68.9 million since 31 December 2018. €41.5 million of
this reduction is due to the sell-down of Inspired. The
fair value of North Sails decreased by €13.6 million due
to challenging trading performance in the powerboat
business, Edgewater, and an increased level of net
debt. Daisy’s fair value also decreased by €13.9 million,
attributable to a lack of top line growth, primarily reflecting
challenges in the Corporate and Allvotec businesses,
combined with increased levels of net debt.
Oakley Fund II has called €176.7 million, from OCI as at
31 December 2019, representing 93% of the Company’s
total committed capital.
Fund I’s only remaining investment is Time Out Group
plc (“Time Out”). This is a publicly listed entity on AIM
of the London Stock Exchange. As such, its fair value is
determined by a mark-to-market valuation, based on the
31 December 2019 share price of £1.23. There is no
remaining fair value for Broadstone at 31 December 2019.
Time Out continues to help people explore and experience
the best of the city through its two divisions – Time
Out Media and Time Out Market. The Group’s content
proposition has been strengthened through the launch of
the new markets, helping to accelerate synergies between
the divisions, raising the Group’s profile and growing its
highly engaged audience. This has also had a positive
impact on the Time Out share price, increasing from
£0.70 at 31 December 2018 to £1.23 at 31 December 2019.
Time Out Market has seen substantial progress in 2019
and is encouraged by the strong early trading of the five
sites opened in the period. The first Time Out market
opened in 2014 in Lisbon and following this success,
five markets have opened since in Miami, New York,
Boston, Montréal and Chicago, with the global roll-out
set to continue.
Time Out Media has continued to focus on the quality
of its revenue, reducing the frequency of certain print
publications and low margin events and placing a greater
emphasis on organic traffic over paid acquisition, which
has led to an improvement in gross margin.
These initiatives help to ensure the Group remains on track
to deliver near-term EBITDA profitability.
OAKLEY CAPITAL INVESTMENTS 41
Oakley Fund III investment activity
The investment portfolio of Fund III is summarised in the
table below. Fund III is denominated in euros, and the year-
end exchange rate was used. The Company holds a 40.7%
interest in Fund III, which is now fully invested other than
add-on acquisitions.
In June, Fund III invested €49.5 million for a majority stake
in Ekon a leading Spanish provider of Enterprise Resource
Planning software, in a carve-out from its previous owner,
Unit4. The deal marked Oakley’s first investment in Spain,
Fund III’s third in the TMT sector and its second platform
deal in the software space.
In August, Fund III invested €15.8 million for a controlling
stake in Alessi, the Italian high-end homeware producer.
Alessi is an iconic homeware brand with 100 years of
heritage, and by working with some of the world’s leading
architects and designers has captured a global audience
and well-established premium position in the market.
In December, AMOS completed a refinancing which
enabled the repayment of Fund III’s outstanding loan notes
returning €8.4 million of proceeds to Fund III, which were
used to repay debt at the Fund level.
The underlying companies have continued to show good
progress, reflected in positive revaluations across the
portfolio. There was a significant increase in the fair
value of WebPros which was uplifted in anticipation of
completion of its exit, following the signing of a deal in
December 2019. Fund III originally invested in WebPros
in 2017 and subsequently completed six acquisitions to
create a product portfolio that addresses the full end-
to-end customer lifecycle for shared hosting providers.
The fair values of CPG and Schülerhilfe also had notable
increases due to strong growth in those companies.
Fund III has called €205.3 million, from OCI as at
31 December 2019, representing 63% of the Company’s
total committed capital.
Oakley Fund III
Casa & atHome
Schülerhilfe
WebPros
TechInsights
AMOS
Career Partner Group
Facile
Ekon
Alessi
31 Dec 2019
31 Dec 2018
Fair value
Fair value
€m
124.7
147.6
382.6
47.3
43.6
196.3
106.7
49.6
21.9
€m
122.0
113.0
220.9
43.6
44.0
132.4
80.4
–
–
Total investments
1,120.4
756.3
Fund III had an active year, completing two further
acquisitions, investing €71.5 million, and undertaking
three refinancings.
In May, WebPros completed the acquisition of WHMCS,
a leading web hosting management and billing SaaS
Platform. The acquisition was fully debt funded and as
part of the transaction WebPros took on $71.0 million of
additional debt which also led to the repayment of Fund
III’s outstanding loan notes. This resulted in €44.3 million
of proceeds being returned to Fund III, which were used to
repay debt at the Fund level.
During the year, CPG continued its strong performance,
driven by growth across both online and dual studies
programmes. On the back of this strong performance,
CPG secured a committed debt facility with Arcmont
Asset Management (formerly Bluebay), allowing the return
of the full investment cost over the next 15 months in
several tranches, contingent on the performance of the
business. The first tranche was drawn in February 2019
and returned €12.5 million (£10.9 million) to OCI.
OverviewStrategic ReportGovernanceFinancial Statements 42
Overview of Fund portfolios continued
Oakley Fund IV investment activity
The investment portfolio of Fund IV is summarised in the
table below. Fund IV is denominated in euros, and the year-
end exchange rate was used. The Company holds a 28.6%
interest in Fund IV.
Oakley Fund IV
Seagull & Videotel
Seven Miles
Contabo
Total investments
31 Dec 2019
31 Dec 2018
Fair value
Fair value
€m
79.9
96.4
20.3
196.6
€m
–
–
–
–
Fund IV held its final close in June 2019 and closed
exceeding its target size of €1.2 billion with total
committed capital of €1.5 billion. OCI has made a €400
million commitment. Fund IV has been active in deploying
capital in 2019, completing three new investments in the
year, following the same proven strategy as Oakley’s
previous Funds.
In June, Fund IV completed its first investment, acquiring
controlling stakes in two leading maritime e-learning
providers, Seagull and Videotel, based in Norway and
UK respectively. Fund IV invested €79.2 million in the
deal which represents Oakley’s first in the Nordics
and continues Oakley’s successful track record in the
education and maritime sectors.
In August, Fund IV invested €63.0 million to acquire a
majority stake in Seven Miles, a leading German consumer
technology company in the gift voucher and B2B gift
card sector, partnering with its founders, Tom Schröder
and Valentin Schütt. This acquisition continues Oakley’s
successful track record of backing founder managers in
consumer technology platforms in the DACH region.
In October, Fund IV invested €20.3 million to acquire
a majority stake in Contabo, buying from its founder
managers. Contabo’s offering includes virtual, dedicated
and other hosting solutions with optional upgrades,
enabling both short-term project work and long-term
hosting solutions. The brand has a strong reputation
for its technological edge, customer service and
competitive pricing.
Fund IV has called €30.0 million, from OCI as at
31 December 2019, representing 7.5% of the
Company’s total committed capital to the Fund.
COVID-19 impact
At the time of writing, the full extent of the global
COVID-19 outbreak and resultant effect on the
economy is unknown. A trading impact is anticipated
across the Funds but Oakley Capital remain confident
that its investment strategy and sector focus will provide
some resilience during this period of disruption.
The impact of the virus is being closely monitored and
all investee companies have prepared response plans
and proposed measures have been shared across
the portfolio.
OAKLEY CAPITAL INVESTMENTS Direct investment review
The direct investment portfolio as at 31 December 2019 is summarised in the table below:
Direct investments
Equity securities
Inspired (unquoted)
Time Out (quoted)
Debt securities
Time Out
Daisy
North Sails
Fund Facilities
Total direct investments
43
31 Dec 2019
31 Dec 2018
Fair value
Fair value
£m
75.0
38.5
23.3
15.8
73.5
14.6
240.7
£m
41.8
22.3
20.9
14.9
40.6
30.6
171.2
Equity securities
Inspired completed a capital raise in June 2019, representing an 80% premium to the prevailing book value. OCI did not
participate in the sell-down as it continues to see further upside in the investment but benefited from the revaluation.
Inspired has seen further growth throughout 2019, signing the acquisitions of two leading schools, Reddam Australia,
a leading K-12 school in Sydney and King’s Group, a group of K-12 schools based in Europe, which add further scale to
the group. The acquisitions and organic growth have been reflected in the uplift in fair value at the year end.
Time Out has shown significant growth throughout 2019, mainly due to the progress made with the expansion of the
Time Out Markets, seeing five markets opened in North America. The global roll-out is set to continue with planned
launches in Dubai (2020), London (2021) and Prague (2023). The share price performance has been positive, increasing
from £0.71 at 31 December 2018 to £1.23 at 31 December 2019, which has been reflected in the uplift in its fair value at
the year end.
Debt securities
The Company provides debt facilities to certain Oakley Funds and portfolio companies. These are provided on an
arms-length basis at an attractive market interest rate. The interest income generated from these loans exceeds the
interest earned on OCI’s bank deposits, allowing OCI to earn higher returns on part of its cash reserves. During 2019,
OCI received £9.1 million of interest from the debt facilities provided.
The Company provided an additional £25.5 million of debt to North Sails during the year to fund the relaunch of North
Kiteboarding, including the acquisition of kiteboarding accessories brand, Mystic. In addition, the Company provided
£2.3 million of additional funding to North Sails Apparel to accelerate its marketing campaign.
Time Out Group was provided with an additional £2.5 million loan, which was repaid within the period. This was a
short-term loan used to fund the rollout of Time Out Markets until the successful completion of a placing of new shares.
The Company also provides revolving credit facilities, to three of the four Oakley Funds. Each drawing under these
facilities is for no more than one year. As at 31 December 2019, the Company had outstanding debt facilities of
£14.6 million provided to the Oakley Funds, including accrued interest. This represented a decrease of £16.0 million
from 31 December 2018, primarily due to the repayments within the Oakley Fund II facilities and the cancellation of
the Fund III facility.
OverviewStrategic ReportGovernanceFinancial Statements 44
OAKLEY CAPITAL INVESTMENTS 4545
Governance
Board of Directors
Directors’ report
Statement of Director’s responsibilities
Corporate Governance report
Audit Committee report
Risk Committee report
Nomination Committee report
Management Engagement Committee report
Governance, Regulatory and Compliance
Committee report
Remuneration Committee report
Directors’ remuneration report
46
48
54
55
68
70
73
74
76
78
79
Alternative Investment Fund Managers’ Directive 80
Shareholder information
81
OverviewStrategic ReportGovernanceFinancial Statements 46
OA K L E Y CA P I TA L I N V E S T M E N T S
Board of Directors
Caroline Foulger
Chair
Craig Bodenstab
Non-Executive Director
Laurence Blackall
Non-Executive Director
Appointed to the Company’s Board in
June 2016 (Chair in September 2018),
Caroline has been an independent
Non-Executive Director in the financial
services industry since 2013. Caroline
was previously a partner with PwC
for 12 years, primarily leading the
insurance practice in Bermuda and
servicing listed clients, and has 25
years’ experience in public accounting.
Caroline is a Fellow of the Institute of
Chartered Accountants in England &
Wales, CPA Bermuda and a Member
of the Institute of Directors. Caroline
is a resident of Bermuda. Caroline’s
experience as a Director of listed
financial services companies has
proved indispensable during a year
which saw a listing move to the
Specialist Fund Segment of
the London Stock Exchange.
Her leadership skills will continue to
impart a culture of positive change to
service providers, the Board and
its Committees.
Appointed to the Company’s Board
in July 2019, Craig has over 25
years’ experience in investment
management. He recently retired
from his role as Partner and Director
of Orbis Investments, a global asset
manager with over £27 billion of assets
under management, where he held
senior executive roles until stepping
down in 2017. He has a Bachelor of
Commerce from Dalhousie University,
a Master of Business Administration
from Columbia University and
London Business School and is both
a qualified accountant and a CFA
charterholder. Craig is a resident
of Bermuda. His experience in the
investment management industry,
and in relatively fast-growing asset
management entities provides him with
relevant perspective and insights. He
was appointed Senior Independent
Director on 11 March 2020.
Appointed to the Company’s Board
in July 2008, Laurence has 30 years’
experience in the information, media
and communication industries,
pioneering electronic publishing
(especially at McGraw Hill where
he was a Vice-President) and the
internet in the United Kingdom. He
has proven expertise in establishing
internet companies and developing
them through to public offering and
subsequent sale. Laurence’s insights
into the entrepreneurial process is
focal to the Company’s business
model and success. His TMT industry
knowledge has proved valuable during
his tenure to date.
Current Directorships of publicly
listed entities
Current Directorships of publicly
listed entities
Current Directorships of publicly
listed entities
Non-Executive Director of
Hiscox Limited
None
Non-Executive Director of
Pembroke VCT plc
47
Peter Dubens
Non-Executive Director
Stewart Porter
Non-Executive Director
Richard Lightowler
Non-Executive Director
Appointed to the Company’s Board
in July 2007, Peter 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 €3 billion. Peter founded the
Oakley Capital Group in 2002 to be
a best-of-breed, entrepreneurially-
driven UK investment house, creating
an ecosystem to support the
companies in which Oakley Capital
invests, whether they are early-stage
companies or established businesses.
David Till serves as an alternate
Director to Peter.
Appointed to the Company’s Board
in September 2018, Stewart has over
40 years’ of operational experience,
both within private equity and TMT
businesses, the latter being one
of Oakley’s three core sectors for
investment. Stewart worked as Chief
Operating Officer of the Investment
Adviser, Oakley Capital Limited,
from 2010 until his retirement in
2018. During his career, Stewart
has held positions as COO and
CFO at Wilkinson Sword and TI
Group. He was a founder and CFO
of Pipex Communications plc and
was instrumental in the development
and successful sale of the Pipex
group. Stewart’s industry knowledge
and in-depth understanding of
the Investment Adviser makes him
invaluable in providing the Board with
enhanced insights into the detailed
workings of its key service providers.
Appointed December 2019, Richard
has 25 years’ experience in public
accounting and recently retired
as Partner of KPMG in Bermuda,
after almost 19 years in the role. He
was head of the KPMG Insurance
Group in Bermuda for almost 14
years, and was a member of the
firm’s Global Insurance Leadership
Team and Global Lead Partner
for large international insurance
groups listed on the New York and
London Stock Exchanges. Richard
is a resident of Bermuda and he is a
Chartered Accountant of England
& Wales. Richard has significant
regulatory experience and led
KPMG’s relationship with the Bermuda
Monetary Authority (“BMA”). He has
a continuing role advising the BMA
on regulatory matters. Richard brings
with him a wealth of knowledge in
financial services, expertise in best
practice corporate governance and
significant transactional experience.
Current Directorships of publicly
listed entities
Current Directorships of publicly
listed entities
Current Directorships of publicly
listed entities
Non-Executive Director of
Time Out Group plc
None
Non-Executive Director of
Hansa Investment Company Limited
OverviewStrategic ReportGovernanceFinancial Statements 48
Directors’ report
The Company’s registered office and principal place of
business is 3rd Floor, Mintflower Place, 8 Par-la-Ville Road,
Hamilton HM08, Bermuda.
The Board of Directors
The Board currently comprises the Chair and five other
Non-Executive Directors. James Keyes retired from the
Board in July, and was replaced by Craig Bodenstab.
Richard Lightowler joined the Board in December 2019
as an additional Non-Executive Director.
All Directors, other than Peter Dubens and Stewart Porter,
are considered to be independent. Peter Dubens and
David Till (as alternate Director), with a team of investment
professionals, are together primarily responsible for
performing investment advisory obligations with respect
to the Company and the Oakley Funds. Stewart Porter
was employed as the COO of the Investment Adviser
until mid-2018 and is yet to be considered independent
as Director of the Company.
Laurence Blackall remains independent despite his length
of service on the Board as he is free from any business or
other relationship that could materially interfere with his
exercise of judgment.
The Board met formally 12 times during 2019, including
the four quarterly scheduled meetings in Bermuda. This
increased frequency was driven by strategic changes
to the Board and the move to the SFS listing. There is
regular contact between Directors and the Oakley Group
as otherwise required for the purpose of considering key
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, Investment Adviser and
other service providers.
Where necessary, the Directors may seek independent
professional advice at the expense of the Company to aid
their duties.
The rules governing the appointment of Directors to the
Board is contained in the Company’s Bye-laws.
Conflicts of interest
The Directors have declared all conflicts and potential
conflicts of interest to the Board, a register of which is
considered at Board and Committee meetings. Declaration
of Directors’ interests is a standing Board agenda item at the
outset of each meeting. A conflicted Director is not allowed
to take part in the relevant discussion or decision, and is not
counted when determining whether a meeting is quorate.
Peter Dubens is a shareholder and a Director of a number
of the Oakley Group entities and cannot vote on any Board
decision relating to these whilst these interests remain.
Peter is also a Director of portfolio companies in which
the Company directly invests alongside the Oakley Funds,
including Time Out Group plc and North Technology
Group LLC (North Sails).
Each Director’s shareholding is outlined as part of the
Directors’ Remuneration Report, and is considered for fair
dealing purposes as a declared interest at the time of e.g.
share issuance or buybacks.
Investment Management and Administration
The Company is a self-managed Alternative Investment
Fund (“AIF”), and the Board has the ultimate decision to
invest (or take any other action) in the Oakley Funds or as
a direct investment. In the ordinary course of business,
it makes decisions after reviewing the recommendations
provided by the Oakley Group (Investment Adviser on
behalf of the Administrative Agent).
Oakley Capital Manager Limited serves as Administrative
Agent to the Company. It is incorporated in Bermuda and
regulated by the Bermuda Monetary Authority as a licenced
Investment Business. The Administrative Agent provides
operational assistance and corporate secretarial services
to the Board with respect to the Company’s business. The
Administrative Agent is managed by experienced third-party
administrative and operational executives.
Oakley Capital Limited serves as the Investment Adviser
to the Administrative Agent with respect to the Company.
It was incorporated in England and Wales in 2000 under
the Companies Act 1985 and is authorised and regulated
by the Financial Conduct Authority. The Investment
Adviser is primarily responsible for making investment
recommendations to the Company along with structuring
and negotiating deals for the Oakley Funds.
The Directors of the Company believe these arrangements
create the conditions to enhance long-term shareholder
value and, based on the Company’s overall purpose,
to achieve a high level of company performance.
OAKLEY CAPITAL INVESTMENTS 49
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.
The Company has appointed Mayflower Management
Services (Bermuda) Limited (the “Administrator”) to provide
administration services pursuant to an Administration
Agreement. It receives an annual administration fee
at prevailing commercial rates. The Administrator is
responsible for the Company’s general administrative
requirements such as the calculation of the net asset value
and net asset value per share and maintenance of the
Company’s accounting and statutory records.
The Administrative Agent has been appointed pursuant to
an amended and restated operational services agreement
(the “Operational Services Agreement”) that was approved
in 2019. The Operational Services Agreement continues
for consecutive periods beginning on the date of the last
annual general meeting at which a continuation vote was put
to shareholders (a “Continuation Meeting”) and ending on
the date of the next Continuation Meeting. The term of the
agreement automatically renews at the end of each such
period. However, if at any Continuation Meeting (the next
being scheduled for 2022), a discontinuation resolution is
approved and a decision is made to terminate the agreement,
the Administrative Agent must be given one year’s notice of
termination. The Company also has the right to terminate
the agreement with 90 days’ notice in the event of certain
key person events in relation to the Investment Adviser’s
key personnel. The agreement may also be terminated by
either party with immediate effect on the occurrence of
certain other events, including insolvency or in the event of
a material breach that fails to be remedied within 30 days. In
the event of the Company terminating the agreement without
cause, the Administrative Agent is entitled to continue
receiving service fees to the termination date plus termination
proceeds equivalent to the performance fee that would be
payable if all direct investments held by the Company were
realised in full on the termination date.
Ongoing costs
For the period ended 31 December 2019, the Company’s
ongoing charges were calculated as 2.57% of NAV. The
calculation is based on the ongoing annual charges
expressed as a percentage of the average NAV published
half-yearly over the relevant year.
Ongoing charges are calculated in accordance with
the guidelines issues by The Association of Investment
Companies (“AIC”). They comprise recurring costs including
the operating expenses of the Company, operational
services fees paid to the Administrative Agent and, on a
look-through basis, the expenses and management fees paid
by the underlying Oakley Funds. The calculation specifically
excludes the expenses, gains and losses relating to the
acquisition or disposal of investments, performance related
fees (such as carried interest), and financing charges.
When the underlying funds have reached the 8% hurdle
and are paying carry, 20% of the funds fees and expenses
are effectively paid by the carry holders and therefore,
only 80% of such look-through fees and expenses are
attributed to OCI.
Operational service fees paid on direct investments and General Partner’s share payments on the Oakley Funds are:
At 1 January 2020, this fee will no longer be payable.
Debt direct
investments
Equity direct
investments
Oakley Capital Fund I
Oakley Capital Fund II
Oakley Capital Fund III 2% on invested capital, commencing 10 May 2019 (date of closure of investment period).
Oakley Capital Fund IV 2% on fund commitment during investment period (ending five years after the final closing date),
Operational service fee of 2% of NAV (before deduction of any accrued performance fees), payable
to the Administrative Agent.
2% on invested capital, commencing 30 November 2014 (date of closure of investment period).
2% on invested capital, commencing 31 January 2017 (date of closure of investment period).
then 2% on invested capital, stepping down to 1% on invested capital after 10 years after final
closing date.
The Administrative Agent may receive an advisory fee based on the successful buy-side and sell-side transactions of the
Company for any direct equity investments of up to 2% of the equity transaction value as agreed between the parties at
the time of any such transaction.
Under the Operational Services Agreement, the Administrative Agent may recharge costs incurred, either directly or
indirectly by its contracted advisors, on behalf of the Company.
OverviewStrategic ReportGovernanceFinancial Statements 50
Directors’ report continued
Stewardship and 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.
communicated to the Board. The Company’s Broker and
Financial Adviser (Liberum Capital Limited) regularly
reports directly to the Board at meetings. In addition,
research reports published by financial institutions on the
Company are circulated to the Board.
The Company exercises its own voting rights on direct
equity portfolio investments.
Oakley has a policy of active portfolio management and
ensures that significant time and resource is dedicated to
every investment, with Oakley executives and Operating
Partners typically being appointed to portfolio company
Boards, in order to ensure the application of active,
results-orientated corporate governance.
Performance Fees
The Oakley Funds’ Founder Members receive a
performance fee of 20% of any proceeds from the full or
partial realisation on disposal of each of the Company’s
Fund investments after the deduction of: a) the original
cost of the investment and b) the attributable proportion of
expenses incurred, subject to an 8% preferred return.
The Administrative Agent receives a performance fee of
20% of any proceeds from the full or partial realisation
on disposal of each of the Company’s direct equity
investment after the deduction of: a) the original cost
of the direct equity investment and b) the attributable
proportion of all expenses incurred by the Company in
respect of the direct investment (including the operational
service fee), subject to an 8% preferred return.
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.
Capital Markets Day
The Board holds an annual Capital Markets Day
consisting of presentations to shareholders and
analysts by senior members of the Oakley Group and
management teams from a selection of Oakley Funds’
portfolio companies. The event is held in London,
with presentations focused on the performance of the
underlying Oakley Funds’ investment portfolio. Members
of the Board attend the Capital Markets Day.
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 and published on the Company’s website.
Share capital and voting rights
As at the date of this report, the Company had:
• 198,599,936 Ordinary shares and voting rights in
issue; and
•
Issued share capital of 198,599,936.
Shareholder communications
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.
Members of the Board have meetings with major
shareholders, and the Board receives major shareholders’
views of the Company via direct face-to-face meetings,
analyst and broker briefings.
The Oakley Group also briefs the Board on a regular
basis with regard to feedback received from analysts and
investors. Any significant concern and correspondence
raised by shareholders in relation to the Company is also
The rights attaching to the shares are set out in the Bye-
Laws of the Company. There are no restrictions on the
transfer of ordinary shares in the capital of the Company
other than those which may be imposed by law from
time-to-time. There are no special control rights in relation
to the Company’s shares and the Company is not aware
of any agreements between holders of securities that
may result in restrictions on the transfer of securities or
on voting rights, except for the lock-ups agreed at the
time of admission. In accordance with the Market Abuse
Regulation and the Company’s share dealing code, Board
members and certain employees of the Company’s service
providers are required to seek approval to deal in the
Company’s shares.
OAKLEY CAPITAL INVESTMENTS 51
In a general meeting of the Company, every holder of
shares who is present in person or by proxy shall, on a
poll, have one vote for every share of which they are the
holder. All the rights attached to a treasury share shall be
suspended and shall not be exercised by the Company
while it holds such treasury share and, where required
by the Act, all treasury shares shall be excluded from the
calculation of any percentage or fraction of the share
capital or shares of the Company. As at 31 December
2019, the Company does not hold any treasury shares.
Dividend policy and distributions
The Board has adopted a dividend policy which takes
into account the forecast profitability and underlying
performance of the Company in addition to capital
requirements, cash flows and distributable reserves.
The Company has experienced strong NAV growth in
2019 due to the growth in the Oakley Funds’ underlying
portfolio companies.
The Company declared a final dividend of
2.25 pence per share in respect of the year ended
31 December 2018, which was paid in April 2019.
An interim dividend of 2.25 pence per share was
paid by the Company in respect of the six months
to 30 June 2019, in October 2019.
Share issuance and buybacks
By a special resolution passed at the August 2019 AGM,
the Directors were authorised to issue shares and/or sell
shares from treasury for cash on a non-pre-emptive basis
provided that such authority shall be limited to the issue
and/or sale of shares of up to ten percent of the issued
share capital as at the date of that meeting.
Unless authorised by shareholders, no issuance of
ordinary shares on a non-pre-emptive basis will be made
at a price less than the prevailing NAV per ordinary share
at the time of issue.
The Company may conduct share buy-backs in the
market with a view to addressing any imbalance between
the supply of and demand for its shares, to increase the
NAV per ordinary shares and/or to assist in maintaining
a narrow discount to net asset value per ordinary share
in relation to the price at which ordinary shares may be
trading. Such purchases of ordinary shares will only be
made for cash at prices below the prevailing NAV per
ordinary share. Any repurchased shares will be cancelled
in full. Directors’ powers of share issuance and/or
buy-back will only be exercised if thought to be in
the best interests of shareholders as a whole.
During 2019, the Company did not issue any shares.
Three share buy-backs were completed during the year,
6.2 million shares, or 3.0% of the total shares in issue as
at the beginning of 2019, were cancelled at a weighted
average price of 237.3 pence, as follows:
• 404,100 ordinary shares purchased on 15 March 2019,
at 189.0 pence per share, for cancellation;
• 1,800,000 ordinary shares purchased on 14 November
2019, at 220.0 pence per share, for cancellation; and
• 4,000,000 ordinary shares purchased on 20 December
2019, at 250.0 pence per share, for cancellation.
Corporate and social responsibility
The Board considers the ongoing interests of shareholders
and has open and regular dialogue with the Investment
Adviser on the governance of the portfolio companies.
The Company adopted an ESG Policy in March 2020,
refer to page 38.
Significant agreements
The following agreements/appointments are considered
significant to the Company:
• Oakley Capital Manager Limited (“Administrative
Agent”) under the Operational Services Agreement.
• Oakley Capital Limited (“Oakley”) as Investment
Adviser to the Administrative Agent, under the terms of
the Investment Advisory Agreement.
• Mayflower Management Services (Bermuda) Limited
under the Administrator Agreement.
• Computershare as Registrar under the Registration
Agreement.
• KPMG as appointed external Auditor.
• Liberum Capital Limited as Broker and
Financial Adviser.
OverviewStrategic ReportGovernanceFinancial Statements 52
Directors’ report continued
Substantial shareholdings
As at 31 December 2019, 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
Asset Value Investors
OCI Directors
Barwon Investment Partners
Sarasin and Partners
Lombard Odier Asset Management
City of London Investment Management Company
FIL Investment International
Jon Wood and Family
NM Rothschild
% voting rights 31 December 2019 % voting rights 31 December 2018
15.2
14.0
9.2
7.2
7.0
5.1
4.8
4.6
3.4
3.3
20.4
10.8
5.0
0.0
6.0
0.0
2.6
5.7
3.4
4.3
Most notably, the aggregate voting rights of the top three shareholders have decreased from 51% to 38% during the year.
Part of the Company’s rationale for moving its listing to the Specialist Fund Segment in August 2019 was that of
potential for deeper trading from a broader range of shareholders. The following table outlines the shift in full-year
trading volumes and turnover on the Company’s shares:
Measure
Average daily trading volume
Total volume traded in year
Turnover (as % of average issued capital)
2018 full-year
2019 full-year
% Change
342,453
570,857
86,640,604
146,139,416
42.30
72.13
67
69
71
The Directors consider the uplift in turnover as encouraging signs for future trading and unlocking of shareholder value
in line with net asset value growth.
Compensation for loss of office
There are no agreements between the Company and its Directors providing for compensation for loss of office that
occurs because of a change of control.
Financial prospects and position
The Board has established procedures which provide a reasonable basis to make proper judgments on an ongoing
basis as to the principal risks, financial position and prospects of the Company.
Regular reporting to the Risk Committee of the Board provides for ongoing analysis and monitoring against risk appetite.
Strategic considerations of the Board as it relates to financial prospects of the Company include:
• Use of leverage. The Company has to date chosen not to leverage its balance sheet;
• Foreign exchange risk hedging. Historically, the Company has not hedged its foreign exchange exposure due to the
unpredictable timing and quantum of private equity fund distributions;
OAKLEY CAPITAL INVESTMENTS 53
• Cash management. The Company keeps the majority
of its cash balances in Euros, being the operating
currency of the Oakley Funds. Deployment of excess
cash positions used to enhance NAV through share
buy-backs or pay out earnings to investors in the form
of dividends; and
• Commitment to future Oakley Fund contributions and
analysis of liquidity forecast and investment opportunities.
is announced at the Meeting and is published on the
Company’s website. The notice of AGM and related
papers are sent to shareholders at least 21 working days
before the Meeting.
The Chair and the Directors can be contacted through the
Company Secretary, Oakley Capital Manager Limited,
3rd Floor, Mintflower Place, 8 Par-la-Ville Road, Hamilton
HM08, Bermuda.
Going concern
After making enquiries and given the nature of the
Company and its investments, the Directors, after due
consideration, conclude that the Company will be able
to continue for the foreseeable future (being a period of
twelve months from the date of this report). Furthermore,
the Directors are not aware of any material uncertainty
regarding the Company’s ability to do so.
In reaching this conclusion, the Directors have assessed
the nature of the Company’s assets and considers
that adverse investment performance should not have
a material impact on the Company’s ability to meet its
liabilities as they fall due. Accordingly, they are satisfied
that it is appropriate to adopt a going concern basis in
preparing these Financial Statements.
Disclosure of information to the auditor
Having made enquiries of fellow Directors and key service
providers, each of the Directors confirms that:
• To the best of their knowledge and belief, there is no
relevant audit information of which the Company’s
auditor is unaware; and
•
• They have taken all the steps a Director might
reasonably be expected to have taken to be aware
of relevant audit information and to establish that the
Company’s auditor is aware of that information.
Political donations and expenditure
The Company has made no political donations in the
period since incorporation.
Details of the AGM will be notified to shareholders
separately to this report.
Events after the reporting period
The Board noted the following significant post-balance
sheet events:
• On 14 February 2020, the Company received a
distribution of £19.2 million from Fund III relating to the
refinancing of CPG.
• On 21 February 2020, the Company received a
distribution of £116.1 million from Fund III regarding the
sale of WebPros.
• On 11 March 2020, the Board of Directors approved a
final dividend of 2.25 pence per share in respect of the
financial year ended 31 December 2019. This is due to be
paid on 23 April 2020, to shareholders registered on or
before 3 April 2020. The ex-dividend date is 2 April 2020.
• On 18 March 2020, the Company bought 3,000,000
ordinary shares at the market price on that date for a total
of £4,793,850.
In early 2020, the existence of a new coronavirus
(COVID-19) was confirmed and since this time COVID-19
has spread across China and to a significant number
of other countries. COVID-19 has caused disruption
to businesses and economic activity which has been
reflected in recent fluctuations in global stock markets.
The Company considers the emergence and spread
of COVID-19 to be a non-adjusting post balance
sheet event. Given the inherent uncertainties, it is not
practicable at this time to determine the impact of
COVID-19 on the Company or to provide a quantitative
estimate of this impact.
Annual General Meeting (‘AGM’)
An AGM 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
On behalf of the Board
Caroline Foulger
Chair
19 March 2020
OverviewStrategic ReportGovernanceFinancial Statements 54
Statement of Directors’
responsibilities
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 lay
Financial Statements for each financial year before the
Members. The Directors have prepared the Consolidated
Financial Statements in accordance with International
Financial Reporting Standards (IFRS). Consistent with the
common law requirements to exercise their fiduciary duties
consistent with their level of skills, the Directors will 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 the year. In preparing these 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 accounting standards have
been followed subject to any material departures
disclosed and explained in the Financial Statements;
• assess the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to
going concern; and
• use the going concern basis of accounting unless it
is inappropriate to presume that the Company will
continue in business.
The Company’s consolidated Financial Statements
are published on www.oakleycapitalinvestments.com.
The responsibility for the maintenance and integrity
of the website 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 published on
the website.
The Directors are responsible for ensuring that (i) proper
accounting records are kept which 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 (ii) 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.
Responsibility statement of the Directors in
respect of the Annual Report
Each of the Directors, whose names and functions are
listed in the Board of Directors section of this report,
confirms that, to the best of his/her knowledge:
•
•
•
•
•
the Annual Report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description
of the principal risks and uncertainties that the
Company faces;
the consolidated Financial Statements, prepared in
accordance with IFRS, give a true and fair view of the
assets, liabilities, financial position and profit or loss of
the Company and, taken as a whole, are in compliance
with the requirements set out in the Bermuda
Companies Act 1981 (as amended);
the Annual Report includes a fair review of the
information which provides an indication of important
events and a description of the principal risks and
uncertainties the Company faces;
the Investment Adviser’s report, together with the
Directors’ report and Chair’s statement, include a fair
review of the information as required; and
the Annual Report and consolidated Financial
Statements, taken as a whole, provide the information
necessary to assess the Company’s position and
performance, business model and strategy, and is fair,
balanced and understandable.
On behalf of the Board
Caroline Foulger
Chair
19 March 2020
OAKLEY CAPITAL INVESTMENTS 55
Corporate Governance report
• The UK Code further includes provisions relating to
the need for an internal audit function. The Board
considers this function is not required for the Company
given the work conducted by the Management
Engagement Committee in reviewing service providers.
The Company has, therefore, not reported further
in respect of these provisions. This position is
re-assessed on an annual basis.
In the context of the business of the Company, certain
recommendations of the AIC Code have not been deemed
appropriate to its governance framework, an explanation
of which is set out as follows:
• Provision 24: The Board has chosen not to adopt
a fixed policy on tenure of the Chair. The Board
recognises the value of refreshing its membership
regularly, and has established fixed tenure for all four
independent Directors. The Nomination Committee
of the Board prefers to retain the flexibility to assess
the balance of skills and experience of the Board as a
whole. Furthermore, given the long-term nature of the
Company’s investments, the Directors consider that
maintaining some degree of continuity and a long-term
perspective at Board level can be particularly valuable.
The tenure of the current Chair, Caroline Foulger’s
appointment has been set to end and/or be considered
for renewal in September 2022.
• Provision 28: The Board has not adopted a formal
policy on diversity. Given the recent refreshment of
Board membership, the Directors do not consider
a specific policy with respect to diversity to be
appropriate at this time. Diversity of the Board is
considered at least on an annual basis through the
Board effectiveness evaluation process.
The AIC Code
The Board recognises the importance of sound
corporate governance and has chosen to comply with
the Association of the Investment Companies (“AIC”)
Code of Corporate Governance (the “AIC Code”), as is
appropriate for the Company’s size and listing.
The AIC represents closed-ended investment companies
whose shares are traded on public markets. The purpose
of the AIC Code is to provide a framework of best practice
in respect of the governance of investment companies.
The Board has considered the Principles and Provisions
of the AIC Code of Corporate Governance, as updated
in February 2019. The AIC Code addresses the Principles
and Provisions set out in the UK Corporate Governance
Code (the “UK Code”), as well as setting out additional
Principles on issues that are of specific relevance to
the Company.
The Board considers that reporting consistent with the
Principles and Provisions of the AIC Code, which has been
endorsed by the Financial Reporting Council, will provide
more relevant information to shareholders.
A copy of the AIC Code is available on AIC’s website
at www.theaic.co.uk. It includes an explanation of how
the AIC Code adapts the Principles and Provisions
set out in the UK Code to make them relevant for
investment companies.
The Company has complied with all the Principles and
Provisions of the AIC Code and the relevant provisions
of the UK Code, except as set out below:
• The UK Code includes provisions relating to the
role of senior executive remuneration. The Board
considers this provision as not relevant to the
Company with the majority of the Company’s
day-to-day management and administrative
functions are being outsourced to third parties.
Risk management decisions are taken by the
Board and its Committees. The Company has,
therefore, not reported further in respect of
these provisions. This position is re-assessed
on an annual basis.
OverviewStrategic ReportGovernanceFinancial Statements 56
Corporate Governance report continued
The Company’s compliance with the AIC Code principles and provisions is summarised below:
Board leadership and purpose
AIC
Code Provision/Principle
A
B
C
D
1
2
3
4
A successful Company is led by an effective Board, whose role
is to promote the long-term sustainable success of the
Company, generating value for shareholders and contributing
to wider society.
The Board should establish the Company’s purpose, values and
strategy, and satisfy itself that these and its culture are aligned.
All Directors must act with integrity, lead by example and
promote the desired culture.
The Board should ensure that the necessary resources are in
place for the Company to meet its objectives and measure
performance against them. The Board should also establish a
framework of prudent and effective controls, which enable risk
to be assessed and managed.
In order for the Company to meet its responsibilities to
shareholders and stakeholders, the Board should ensure
effective engagement with, and encourage participation from,
these parties.
Evidence of compliance
Board effectiveness assessment is focused on the future
sustainability of the Company.
Through engagement of service providers, the Board actively
demonstrates the desired culture on an ongoing basis.
Through the work of its Committees, the Board ensures
adequate resources and internal controls.
The Board actively engages with shareholders and service
providers on a regular basis.
The Board should assess the basis on which the Company
generates and preserves value over the long-term. It should
describe in the Annual Report how opportunities and risks to
the future success of the business have been considered and
addressed, the sustainability of the Company’s business model
and how its governance contributes to the delivery of its strategy.
For an investment Company, the Annual Report should
also include the Company’s investment objective and
investment policy.
The Company’s Investment policy and objective is included as
part of this Annual Report. The Board, as part of its scheduled
meetings, reviews the performance of its investments and
annually assesses the performance of the Administrative Agent
and the Investment Adviser. The Board also reviews share price
performance, discount and buy-back activity. The Board has
additionally focused on continuing to enhance the Company’s
governance processes in 2019, the results of which can be seen
in the reports by the Committees of the Board.
The Board should assess and monitor its own culture, including
its policies, practices and behaviour to ensure it is aligned with
the Company’s purpose, values and strategy.
The Board is committed to an evaluation of its effectiveness, that
of individual Directors, and that of its Committees. The Board
completed a review in 2019 and will do so again during 2020.
In addition to formal general meetings, the chair should seek
regular engagement with major shareholders in order to
understand their views on governance and performance against
the Company’s investment objective and investment policy.
Committee chairs should seek engagement with shareholders
on significant matters related to their areas of responsibility.
The chair should ensure that the Board as a whole has a clear
understanding of the views of shareholders.
When 20 per cent or more of votes have been cast against the
Board recommendation for a resolution, the Company should
explain, when announcing voting results, what actions it intends
to take to consult shareholders in order to understand the
reasons behind the result. An update on the views received
from shareholders and actions taken should be published no
later than six months after the shareholder meeting. The Board
should then provide a final summary in the Annual Report and,
if applicable, in the explanatory notes to resolutions at the next
shareholder meeting, on what impact the feedback has had on
the decisions the Board has taken and any actions or resolutions
now proposed.
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.
Shareholder Communications processes are outlined in the
Directors’ report. The Chair and other Directors have met with
several shareholders during the year.
The Board is committed to pro-actively consult with
shareholders, trade bodies and other organisations, such as
proxy agents prior to shareholder meetings. There have been no
instances where 20% or more of votes have been cast against
the Board’s recommendation for a resolution.
OAKLEY CAPITAL INVESTMENTS 57
AIC
Code Provision/Principle
Evidence of compliance
5
6
7
The Board should understand the views of the Company’s
other key stakeholders and describe in the Annual Report how
their interests and the matters set out in section 172 of the
Companies Act 2006 have been considered in Board discussions
and decision-making. The Board should keep engagement
mechanisms under review so that they remain effective.
The Board is committed to maintain the Company’s reputation for
high standards of conduct, and actively considers environmental
and social impacts of its operations and decisions together.
Whilst the Company has no direct employees, it recognises
the importance of building successful relationships with its key
service providers.
The Board should take action to identify and manage conflicts of
interest, including those resulting from significant shareholdings,
and ensure that the influence of third parties does not
compromise or override independent judgment.
Where Directors have concerns about the operation of the
Board or the Company that cannot be resolved, their concerns
should be recorded in the Board minutes. On resignation, a
Non-Executive Director should provide a written statement
to the chair, for circulation to the Board, if they have any
such concerns.
The Company implements and strictly monitors its Conflicts of
Interest Policy. There were no breaches of this policy in 2019.
The Company further engages key service providers to align its
conflict policies to a satisfactory standard. Material potential
conflicts of interest are outlined in the Directors’ report,
and Directors’ shareholdings are summarised as part of the
Directors’ Remuneration report.
Whilst there were no material concerns raised about the
operation of the Board or the Company during 2019, the Board
continues to encourage a culture of constructive challenges
amongst themselves and key service providers.
Division of responsibilities
AIC
Code Provision/Principle
F
G
H
I
The Chair leads the Board and is responsible for its overall
effectiveness in directing the Company. They should
demonstrate objective judgment throughout their tenure and
promote a culture of openness and debate. In addition, the
chair facilitates constructive Board relations and the effective
contribution of all Non-Executive Directors, and ensures that
Directors receive accurate, timely and clear information.
The Board should consist of an appropriate combination of
Directors (and, in particular, independent Non-Executive
Directors) such that no one individual or small group of
individuals dominates the Board’s decision making.
Evidence of compliance
The continued enhancement of the Company’s governance
and internal process and control is evidence of the effective
challenge and constructive engagement, the tone of which is set
by the Chair.
The Company has gone through a recent cycle of Board
refreshment and considers the current Board composition as
appropriately diversified.
Non-Executive Directors should have sufficient time to meet
their Board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold
third party service providers to account.
All Non-Executive Board members, via their respective roles
in Committees, provide constructive challenge, strategic
guidance, offer specialist advice and hold third-party service
providers to account.
The Board, supported by the Company Secretary, should
ensure that it has the policies, processes, information, time and
resources.
Board reporting, policies and procedures are refined and
improved on an ongoing basis.
OverviewStrategic ReportGovernanceFinancial Statements 58
Corporate Governance report continued
Division of responsibilities continued
AIC
Code Provision/Principle
Evidence of compliance
8
The responsibilities of the chair, Senior Independent Director,
Board and committees should be clear, set out in writing, agreed
by the Board and made publicly available. The Annual Report
should set out the number of meetings of the Board and its
committees, and the individual attendance by Directors.
The responsibilities of the Board are set out in the Company’s
articles and bye-laws, which are published on its website. All
Committees’ terms of reference are furthermore also published
on the Company’s website https://oakleycapitalinvestments.com/
publication-category/other-publications/
The Company has established the following Committees:
• Audit Committee;
• Risk Committee;
• Management Engagement Committee;
• Governance, Regulatory and Compliance Committee;
• Nomination Committee; and
• Remuneration Committee
The number of meetings of the Board and its committees, and
the individual attendance by Directors are reported on in the
Nomination Committee’s report to the Board, which is included in
this Annual Report.
Prior to appointment, all Capital Directors and Company disclose
all current employment and/or directorship obligations, which are
considered as part of due diligence.
These are updated on an ongoing basis, and a reassessment is
performed if required.
Excluding the Chair, three out of five Directors or 60%, are
independent of the Oakley Group as set out in the Directors’ Report
on page 48.
As Chair, Caroline Foulger was independent on appointment, and
remains independent as considered against the circumstances set
out in Provision 13.
Caroline Foulger had no conflicts at appointment and does not
have any conflicts with the best interests of shareholders.
At no stage was she an employee of the manager, nor a
professional adviser who provided services to the manager or the
Board. She also does not serve on any Boards of any investment
Company with the same manager.
9
10
11
12
When making new appointments, the Board should take into
account other demands on Directors’ time. Prior to appointment,
significant commitments should be disclosed with an indication of
the time involved. Additional external appointments should not be
undertaken without prior approval of the Board, with the reasons
for permitting significant appointments explained in the Annual
Report.
At least half the Board, excluding the chair, should be Non-
Executive Directors whom the Board considers to be independent.
The majority of the Board should be independent of the manager.
There should be a clear division of responsibilities between the
Board and the manager.
The Chair should be independent on appointment when assessed
against the circumstances set out in Provision 13.
On appointment, and throughout the Chair’s tenure, the Chair
should have no relationships that may create a conflict of interest
between the chair’s interest and those of shareholders, including:
• being an employee of the manager or an ex-employee who has
left the employment of the manager within the last five years;
• being a professional adviser who has provided services to the
manager or the Board within the last three years; or
• serving on any other Boards of an investment Company
managed by the same manager.
OAKLEY CAPITAL INVESTMENTS 59
AIC
Code Provision/Principle
Evidence of compliance
13
The Board should identify in the Annual Report each Non-Executive
Director it considers to be independent.
Caroline Foulger, Craig Bodenstab and Richard Lightowler are all
considered independent per AIC principles.
Circumstances which are likely to impair, or could appear to impair,
a Non-Executive Director’s independence include, but are not
limited to, whether a Director:
Laurence Blackall remains independent despite his length of service
on the Board as he is free from any business or other relationship
that could materially interfere with his exercise of judgment.
• has, or has had within the last three years, a material business
relationship with the Company or the manager, either directly or
as a Partner, shareholder, Director or senior employee of a body
that has such a relationship with the Company or the manager;
Stewart Porter retired as COO of the Investment Adviser in 2018,
and is not currently considered independent.
Peter Dubens is the Founder and Managing Partner of the Oakley
Group, and hence not considered independent.
• has received or receives additional remuneration from the
Company apart from a Directors’ fee;
• has close family ties with any of the Company’s advisers,
Directors or the manager;
• holds cross-directorships or has significant links with other
Directors through involvement in other companies or bodies.
Directors who sit on the Boards of more than one Company
managed by the same manager are entitled to serve as
Directors; however, they will not be regarded as independent for
the purposes of fulfilling the requirement that there must be an
independent majority;
• represents a significant shareholder; or
• has served on the Board for more than nine years from the date
of their first appointment.
Where any of these or other relevant circumstances apply, and the
Board nonetheless considers that the Non-Executive Director is
independent, a clear explanation should be provided.
The Board should appoint one of the independent Non-Executive
Directors to be the Senior Independent Director to provide a
sounding Board for the Chair and serve as an intermediary for the
other Directors and shareholders. Led by the Senior Independent
Director, the Non-Executive Directors should meet without the
chair present at least annually to appraise the Chair’s performance,
and on other occasions as necessary.
The primary focus at regular Board meetings should be a review of
investment performance and associated matters such as gearing,
asset allocation, attribution analysis, marketing/investor relations,
peer group information and industry issues.
14
15
The Company implements a strict conflicts of interest policy
to mitigate any potential interference with Directors’ exercise
of judgment. Key existing potential conflicts are outlined in the
Directors’ Report. A register of Directors’ interests is maintained and
monitored by the Risk Committee on an ongoing basis.
The Board appointed Craig Bodenstab as Senior Independent
Director on 11 March 2020.
The performance of the Chair is discussed annually by the
Non-Executive Directors.
The Board reviews the Company’s performance against investment
objectives and policy at least on a quarterly basis. This includes:
• investment performance
• share price and NAV performance review;
• assessment of the share price discount, also as compared to
peers;
• strategies to enhance share price performance;
• marketing and shareholder communication strategies;
• managing potential conflicts of interest;
• reports from the Risk Committee on risk appetite;
• share buy-back policy; and
• reports from the Management Engagement Committee on the
performance and cost of service providers.
OverviewStrategic ReportGovernanceFinancial Statements 60
Corporate Governance report continued
Division of responsibilities continued
AIC
Code Provision/Principle
16
The Board should explain in the Annual Report the areas of
decision making reserved for the Board and those over which
the manager has discretion. Disclosure should include:
• a discussion of the manager’s overall performance, for
example, investment performance, portfolio risk, operational
issues such as compliance etc; and
• the manager’s remit regarding stewardship, for example
voting and shareholder engagement, and environmental,
social and corporate governance issues in respect of
holdings in the Company’s portfolio.
The Board should also agree policies with the manager covering
key operational issues.
Evidence of compliance
• The ultimate decision to invest, or take other investment
decisions, sits with the Board. In the ordinary course, this is
done after reviewing the recommendations of the Investment
Adviser;
• The Board takes responsibility for and is directly involved in
approving major corporate decisions, e.g. in 2019, moving to
the SFS listing;
• Pursuant to the Operational Services Agreement, the Board
has delegated substantial authority for carrying out the day-
to-day administrative functions to the Administrative Agent;
• The exercise of voting rights attached to the Company’s
underlying investments lies with the Oakley Group, and is
outlined in the Directors’ Report; and
• Oakley considers ESG factors at all stages of the investment
process. Refer to the Responsible Investing section of this
report for more information.
17
Non-Executive Directors should review at least annually the
contractual relationships with, and scrutinise and hold to
account the performance of the manager.
The Management Engagement Committee’s report includes an
assessment of the performance of the Oakley Group and other
service providers for the year.
Either the whole Board or a management engagement
committee consisting solely of Directors independent of the
manager (or executives) should perform this review at least
annually with its decisions and rationale described in the Annual
Report. If the whole Board carries out this review, it explains
in this report why it has done rather than establish a separate
Management Engagement Committee.
The Chair of the Company may be a member of, and may Chair,
the Management Engagement committee, provided that they are
independent of the manager.
More detail on the outcomes and actions resulting from
this review can be found in the Management Engagement
Committee’s report.
18
The Board should monitor and evaluate other service providers
(such as the Company Secretary, custodian, depositary,
registrar and broker).
The Board should establish procedures by which other service
providers, should report back and the methods by which these
providers are monitored and evaluated.
The Board and Management Engagement Committee reviews
the performance of key service providers. The Committee is
authorised to seek any information it requires from any service
provider in order to conduct its duties.
In addition to reports from the Administrative Agent (which also
acts as Company Secretary) and Investment Adviser, the Board
regularly receives reporting from:
• Liberum Capital:
Broker and Financial Adviser
• Greenbrook Communications:
Public relations
• Stephenson Harwood:
Legal Adviser in the UK
• Conyers Dill & Pearman:
Legal Adviser in Bermuda
19
All Directors should have access to the advice of the Company
Secretary, who is responsible for advising the Board on all
governance matters. Both the appointment and removal of the
Company Secretary should be a matter for the whole Board.
The Administrative Agent, Oakley Capital Manager Limited, also acts
as Company Secretary and is based at the Company’s registered
address in Bermuda. Representatives of the Administrative Agent
attend all Board and Committee meetings of the Company.
Oakley Capital Manager Limited was appointed as Company
Secretary in July 2019, replacing Mayflower Corporate Services
Limited. This change was unanimously approved by the
whole Board.
OAKLEY CAPITAL INVESTMENTS 61
Evidence of compliance
Directors and Committees of the Board have access to
independent professional advice, at the Company’s expense, if
deemed necessary and appropriate. This is provided for in the
terms of reference of each relevant Committee, available on the
Company’s website.
AIC
Code Provision/Principle
The Directors should have access to independent professional
advice at the Company’s expense where they judge it necessary
to discharge their responsibilities in a proper manner.
20
21
Where a new Company has been created by the manager,
sponsor or other third-party, the Chair and the Board should
be selected and bought into the process of structuring a new
launch at an early stage.
Whilst not considered the launch of a new Company, the Board
was engaged at an early stage and the Company sought
independent legal advice prior to its commitment to invest into
Oakley Fund IV.
The decision to invest was taken by the independent Directors.
Composition, succession and evaluation
AIC
Code Provision/Principle
J
K
L
22
23
Appointments to the Board should be subject to a formal,
rigorous and transparent procedure, and an effective
succession plan should be maintained. Both appointments
and succession plans should be based on merit and objective
criteria and, within this context, should promote diversity of
gender, social and ethnic backgrounds, cognitive and personal
strengths.
The Board and its committees should have a combination of
skills, experience and knowledge. Consideration should be
given to the length of service of the Board as a whole and
membership regularly refreshed.
Annual evaluation of the Board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether
each Director continues to contribute effectively.
The Board should establish a Nomination Committee to lead the
process for appointments, ensure plans are in place for orderly
succession to the Board and oversee the development of a
diverse pipeline for succession. A majority of members of the
committee should be independent Non-Executive Directors. If
the Board has decided that the entire Board should fulfil the role
of the Nomination Committee, it will need to explain why it has
done so in the Annual Report. The Chair of the Board should not
chair the committee when it is dealing with the appointment of
their successor.
All Directors should be subject to annual re-election. The Board
should set out in the papers accompanying the resolutions to
elect each Director the specific reasons why their contribution
is, and continues to be, important to the Company’s long-term
sustainable success.
Evidence of compliance
The Nomination Committee completes a formal due diligence
process on all appointments. Whilst no formal policy on diversity
has been adopted by the Board, any expansion or future
refreshment of the Board will take into account appropriate
factors.
The Company has appointed two new independent Directors
in 2019. The combination of skills and expertise of the Board
is considered appropriately balanced. The weighted average
tenure of Board Directors has decreased from 6.3 years to
4.4 years as at 31 December 2018 and 2019.
The Nomination Committee of the Board considers
effectiveness at least annually.
The Board established a Nomination Committee in 2019,
comprising entirely of Non-Executive Directors. The Committee
terms of reference (available on the Company’s website)
prohibits the Chair of the Board to chair this Committee when
dealing with the appointment of their successor.
Each of the Directors retires and is subject to re-election at
each AGM. Nomination decisions are taken by the Nomination
Committee of the Board.
Refer to the Directors’ Report for the biography of each Director.
OverviewStrategic ReportGovernanceFinancial Statements 62
Corporate Governance report continued
Composition, succession and evaluation continued
AIC
Code Provision/Principle
24
Each Board should determine and disclose a policy on the tenure of the Chair. A
clear rationale for the expected tenure should be provided, and the policy should
explain how this is consistent with the need for regular refreshment and diversity.
25
26
27
Open advertising and/or an external search consultancy should generally be
used for the appointment of the Chair and Non-Executive Directors. If an external
search consultancy is engaged it should be identified in the Annual Report
alongside a statement about any other connection it has with the Company
or individual Directors.
There should be a formal and rigorous annual evaluation of the performance of the
Board, its committees, the Chair and individual Directors. The Chair should consider
having a regular externally facilitated Board evaluation. In FTSE 350 companies this
should be at least every three years. The external evaluator should be identified in
the Annual Report and a statement made about any other connection it has with the
Company or individual Directors.
The Nomination Committee is charged
with oversight of the process to evaluate
Board, Committee and individual Director
effectiveness. Its duties are outlined in
the terms of reference available on the
Company’s website.
The Chair should act on the results of the evaluation by recognising the strengths
and addressing any weaknesses of the Board. Each Director should engage
with the process and take appropriate action when development needs have
been identified.
Evidence of compliance
During 2019, all four independent Directors
signed appointment letters stipulating an
end date, unless terminated earlier. This end
date for the current Chair, Caroline Foulger,
is 30 September 2022, approximately six
years after her first appointment in 2016. Due
to the long-term nature of the Company’s
investments in the Oakley Funds, continuity
and succession planning are important
considerations that are considered and
assessed by the Nomination Committee of
the Board.
The Board did not opt to use open advertising
or an external search consultancy in the
appointment of the two new Non-Executive
Directors in 2019. In the event of search
consultancies being used in future, it will be
duly disclosed in the Annual Report.
The Directors believe 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.
Examples of actions taken in 2019 following
the evaluation of the Board include:
• Appointment of two new Non-Executive
Directors in 2019, in order to rebalance the
skills, experience and length of service of
the Board as a whole;
• Identification and implementation of
new procedures for Board training and
induction; and
• Re-negotiation of certain commercial
agreements with the Oakley Group.
Refer to the report by the Nomination
Committee of the Board. Note that the Board
has not adopted a formal policy on diversity,
given its very recent cycle of refreshment.
The objectives of Board diversity and
inclusion is taken into account during the
Board nomination and evaluation process.
28
The Annual Report should describe the work of the Nomination Committee,
(including where the whole Board is acting as the Nomination Committee) including:
• the process used in relation to appointments, its approach to succession
planning and how both support developing a diverse pipeline;
• how the Board evaluation has been conducted, the nature and extent of an external
evaluator’s contact with the Board and individual Directors, the outcomes and
actions taken, and how it has or will influence Board composition; and
• the policy on diversity and inclusion, its objectives and linkage to Company
strategy, how it has been implemented and progress on achieving the objectives.
OAKLEY CAPITAL INVESTMENTS 63
Audit, risk and internal control
AIC
Code Provision/Principle
Evidence of compliance
The Board should establish formal and transparent policies and procedures to
ensure the independence and effectiveness of external audit functions and satisfy
itself on the integrity of financial and narrative statements.
The Company rigorously follows policy and
procedure to ensure effectiveness of external
audit and integrity of Financial Statements.
The Board should present a fair, balanced and understandable assessment of the
Company’s position and prospects.
The Company’s Financial Prospects and
Position has been defined and documented
as part of the move to the SFS.
The Board should establish procedures to manage risk, oversee the internal control
framework, and determine the nature and extent of the principal risks the Company
is willing to take in order to achieve its long-term strategic objectives.
The Risk Committee of the Board oversees
implementation of its risk appetite, which is
re-assessed at least annually.
M
N
O
29
The Company has an Audit Committee currently
of three independent members, consistent with
the Code for smaller companies. The Board will
continue to ensure that at least one member has
recent and relevant financial experience. The
Chair of the Board does not currently sit on the
Audit Committee. The committee as a whole is
considered to have appropriate competence
relevant to the listed private equity sector.
The annual review of the Audit Committee
terms of reference, available on the Company’s
website, has considered and implemented all
AIC recommendations under this provision.
Refer to the Audit Committee report contained
in this Annual Report.
The Board should establish an Audit Committee of independent Non-Executive
Directors, with a minimum membership of three, or in the case of smaller companies
two. The Chair of the Board should not chair the committee but can be a member if
they were independent on appointment. If the Chair of the Board is a member of the
Audit Committee, the Board should explain in the Annual Report why it believes this
is appropriate. The Board should satisfy itself that at least one member has recent
and relevant financial experience. The committee as a whole shall have competence
relevant to the sector in which the Company operates.
30
The main roles and responsibilities of the Audit Committee should include:
• monitoring the integrity of the Financial Statements of the Company and any formal
announcements relating to the Company’s financial performance, and reviewing
significant financial reporting judgments contained in them;
• providing advice (where requested by the Board) on whether the Annual Report
and accounts, taken as a whole, is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy;
• reviewing the Company’s internal financial controls and internal control and
risk management systems, unless expressly addressed by a separate Board
Risk Committee composed of independent Non-Executive Directors, or by the
Board itself;
• Conducting the tender process and making recommendations to the Board, about
the appointment, reappointment and removal of the external auditor, and approving
the remuneration and terms of engagement of the external auditor;
• Reviewing and monitoring the external auditor’s independence and objectivity;
• Reviewing the effectiveness of the external audit process, taking into consideration
relevant UK professional and regulatory requirements;
• developing and implementing policy on the engagement of the external auditor to
supply non-audit services, ensuring there is prior approval of non-audit services,
considering the impact this may have on independence, taking into account the
relevant regulations and ethical guidance in this regard, and reporting to the Board
on any improvement or action required; and
• reporting to the Board on how it has discharged its responsibilities.
OverviewStrategic ReportGovernanceFinancial Statements 64
Corporate Governance report continued
Audit, risk and internal control continued
AIC
Code Provision/Principle
31
The Annual Report should describe the work of the Audit Committee including:
• The significant issues that the Audit Committee considered relating to the
Financial Statements, and how these issues were addressed;
• An explanation of how it has assessed the independence and effectiveness
of the external audit process and the approach taken to the appointment or
reappointment of the external auditor, information on the length of tenure of the
current audit firm, when a tender was last conducted and advance notice of any
retendering plans;
• In the case of a Board not accepting the Audit Committee’s recommendation on
the external auditor appointment, reappointment or removal, a statement from
the audit committee explaining its recommendation and the reasons why the
Board has taken a different position (this should also be supplied in any papers
recommending appointment or reappointment); and
• An explanation of how auditor independence and objectivity are safeguarded,
if the external auditor provides non-audit services.
Evidence of compliance
The Audit Committee has considered and
reported on all matters recommended by the
AIC. Refer to the Audit Committee report
contained in this Annual Report.
32
33
34
35
36
The Directors should explain in the Annual Report their responsibility for preparing
the report, and state that they consider the report taken as a whole, is fair, balanced
and understandable, and provides the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy.
These considerations and statements are
included in the Statement of Directors’
responsibilities in this report.
The Board should carry out a robust assessment of the Company’s emerging and
principal risks. The Board should confirm in the Annual Report that it has completed
this assessment, including a description of its principal risks, what procedures are in
place to identify emerging risks, and an explanation of how these are being managed
or mitigated.
The Board should monitor the Company’s risk management and internal control
systems and, at least annually, carry out a review of their effectiveness and report
on that review in the Annual Report. The monitoring and review should cover all
material controls, including financial, operational and compliance controls.
In the annual and half-yearly Financial Statements, the Board should state whether
it considers it appropriate to adopt the going concern basis of accounting in
preparing them, and identify any material uncertainties to the Company’s ability to
continue to do so over a period of at least 12 months from the date of approval of
the Financial Statements.
Taking account of the Company’s current position and principal risks, the Board
should explain in the Annual Report how it has assessed the prospects of the
Company, over what period it has done so and why it considers that period to be
appropriate. The Board should state whether it has a reasonable expectation that
the Company will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, drawing attention to any qualifications or
assumptions as necessary.
The Board has completed this assessment.
Refer to the Risk Committee report contained
in this report. The Board has completed this
assessment.
The Board and its six committees (as
delegated) review the Company’s risk
management and internal control systems on
an ongoing basis. Refer to the ‘Reports from
the Committees of the Board’ in this report.
The overlap of membership between the Risk
and Audit Committees provide for enhanced
coverage of both risk management and
internal controls.
This consideration and confirmation of
the going concern basis is included in the
Directors’ report.
Refer to the ‘Financial Prospects and
Position’ and ‘Going Concern’ sections in the
Directors’ Report.
OAKLEY CAPITAL INVESTMENTS 65
Evidence of compliance
The committee is responsible (pursuant to
its terms of reference) for setting Directors’
remuneration so as to encourage enhanced
performance.
Remuneration Committee terms of reference
explicitly state that no Director should be
involved in deciding their own individual
remuneration.
Directors exercise independent judgment
and discretion when authorising
remuneration levels, and take into
consideration Company performance,
individuals performance and market
appropriateness.
The Board established a Remuneration
Committee in 2019. The Committee is not
chaired by the Chair of the Board.
The Remuneration Committee terms of
reference stipulates its responsibility for
determining the remuneration of the Chair
(available on the Company’s website).
Directors of the Company, excluding
Peter Dubens, are paid a fixed Director’s fee
only. Peter Dubens does not receive a fee.
No additional fees were paid during the year.
Refer to the Directors’ Remuneration Report.
Remuneration
AIC
Code Provision/Principle
Remuneration policies and practices should be designed to support strategy and
promote long-term sustainable success.
A formal and transparent procedure for developing policy remuneration should be
established. No Director should be involved in deciding their own remuneration
outcome.
Directors should exercise independent judgment and discretion when authorising
remuneration outcomes, taking account of Company and individual performance,
and wider circumstances.
The Board should establish a Remuneration Committee of independent Non-
Executive Directors with a minimum membership of three, or in the case of smaller
companies, two. In addition, the Chair of the Board can only be a member if
they were independent on appointment and cannot chair the committee. Before
appointment as Chair of the Remuneration Committee, the Board should satisfy
itself that the appointee has relevant experience and understanding of the
Company. If the Board has decided that the entire Board should fulfil the role
of the Remuneration Committee, it will need to explain why it has done so in
the Annual Report.
The Remuneration Committee should have delegated responsibility for determining
the policy and setting the remuneration for the Chair.
The remuneration of Non-Executive Directors should be determined in
accordance with the Articles of Association or, alternatively, by the Board. Levels
of remuneration for the Chair and all Non-Executive Directors should reflect the
time commitment and responsibilities of the role. Remuneration for all Non-
Executive Directors should not include share options or other performance-related
elements. Provision should be made for additional Directors’ fees where Directors
are involved in duties beyond those normally expected as part of the Director’s
appointment. In such instances the Board should provide details of the events,
duties and responsibilities that gave rise to any additional Directors’ fees in the
Annual Report.
P
Q
R
37
38
39
40
Where a remuneration consultant is appointed, this should be the responsibility of
the Remuneration Committee. The consultant should be identified in the Annual
Report alongside a statement about any other connection it has with the Company
or individual Directors. Independent judgment should be exercised when evaluating
the advice of external third-parties.
The Remuneration Committee is responsible
for appointment of remuneration consultants,
if deemed necessary and appropriate. The
Company did not appoint a remuneration
consultant in 2019.
41
The main role and responsibilities of the Remuneration Committee should include:
• In conjunction with the chair, setting the Directors’ remuneration levels; and
• Considering the need to appoint external remuneration consultants.
The Remuneration Committee terms of
reference include the guideline duties as
recommended by the AIC.
42
There should be a description of the work of the Remuneration Committee in the
Annual Report.
Refer to the report by the Remuneration
Committe.
OverviewStrategic ReportGovernanceFinancial Statements 66
Corporate Governance report continued
Chair’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. During 2019 the Board continued to focus on
improving the governance process, to preserve and create
value for 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 delivers
long-term sustainable value and responsible growth
for its shareholders.
Listing Rule 9.8.4C requires the Company to include
certain information in a single identifiable section of this
Annual Report or a cross reference table indicating where
this information is set out. The Directors confirm that there
are no disclosures to be made in this regard, save that: (i)
Peter Dubens has waived his right to receive a Director’s
fee; and (ii) the Company has entered into an Operational
Services Agreement with the Administrative Agent, Oakley
Capital Manager Limited, which is owned 100% by
Peter Dubens, a Director of the Company.
Statement of independence
The AIC Code recommends that the Chair should be
independent in character and judgment and free from
relationships or circumstances that may affect or could
appear to affect his or her judgment.
In addition to this provision, at least half the Board,
excluding the Chair, should be Non-Executive Directors
whom the Board considers to be independent of the
Oakley Group.
Independence is determined by ensuring that, apart
from receiving their fees for acting as Directors or
owning shares, Non-Executive Directors do not have any
other material relationships with, nor derive additional
remuneration from or as a result of transactions with, the
Company, its promoters, its management or its partners,
which in the judgment of the Board may affect, or could
appear to affect the independence of their judgment.
The Board
Caroline Foulger, Craig Bodenstab, Richard Lightowler
and Laurence Blackall remain independent, as they are
free from any business or other relationship that could
materially interfere with their exercise of judgment.
Peter Dubens and Stewart Porter do not vote on matters
in respect of which they are 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 making investment decisions, 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.
Directors’ terms of appointment
The terms and conditions of appointment for
Non-Executive Directors are outlined in their letters
of appointment and are available for inspection at the
Company’s registered office during normal business
hours and at the AGM for 15 minutes prior to and during
the meeting.
In accordance with the Company’s Bye-laws and best
practice, Directors retire on a rotational basis, and are
then subject to re-election.
The Board’s process for the appointment of new Directors
is conducted in a manner which is transparent, engaged
and open. The Nomination Committee oversees the
nomination of a new Board member, the process for
which is detailed in the Nomination Committee report.
OAKLEY CAPITAL INVESTMENTS 67
Board meetings
Director Board attendance is summarised as part of the
Nomination Committee report.
The principal matters reviewed and considered by the
Board during 2019 included:
• Regular reports from the Investment Adviser on the
Oakley Funds;
• Regular reports and updates from the Investment
Adviser on the direct investments and debt facilities
held by the Company;
•
•
•
Information and documentation related to the
Company’s listing move to the SFS;
Direct 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 Half-yearly Report;
• Report from external consultant on market and
regulatory updates;
• Report from the external auditor; and
• Corporate matters including dividend policy and share
buy-backs.
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 Chair and Senior Executives of the
Investment Adviser. The Board determines the training
and development needs of both the Board as a whole
and of individual Directors.
Information and support
The Board ensures it receives, in a timely manner,
information of an appropriate quality to enable it to
adequately discharge its responsibilities. Papers are
provided to the Directors in advance of the relevant
Board or committee meeting to enable them to make
further enquiries about any matter prior to the meeting,
should they so wish. This also allows the Directors
who are unable to attend to submit views in advance
of the meeting.
Reports from the Committees of the Board
The Board has delegated specified areas of responsibility
to its committees. The Company’s Management
Engagement, Risk and Audit Committees have continued
their important roles, with enhanced and refined duties
and terms of reference following the AIC Code update
and the Company’s listing move to the SFS during the
year. The Board furthermore separated the duties of
the Nomination and Remuneration Committee into two
standalone committees, in order to further enhance the
objectivity of the Remuneration Committee. In addition,
the Board created the new Governance, Regulatory and
Compliance Committee with a focus on regulatory and
listing compliance, Board training and overall governance
of the Company.
In practice, all Board members are eligible to attend all
committee meetings, unless specifically identified conflicts
are deemed to require otherwise.
The Board primarily assesses each committee’s
performance by analysing output against its terms of
reference and its members’ attendance at committee
meetings.
The Directors’ report has been approved by the Board and
is signed on its behalf by:
Caroline Foulger
Chair
OverviewStrategic ReportGovernanceFinancial Statements 68
Audit Committee report
The Board is supported by the Audit Committee, comprised of Laurence Blackall as
the Chair of the Committee and Craig Bodenstab who also serves on the Committee.
Effective March 2020, Richard Lightowler was appointed as Chair of the Committee
and Caroline Foulger will also serve on the Committee.
Objectives for 2020
• Challenging the investment valuation
process and methodology to ensure
investments continue to be fairly valued;
• Continuing to monitor and review the
relationship with the external auditor,
and other potential external audit service
providers; and
• Continue to provide oversight of
financial reporting, internal controls
and audit process.
Achievements in 2019
• Determined that a tender process
for external audit services be performed
in 2020;
• Concluded that the year-end valuations
have been effectively carried out and the
investments fairly valued; and
• Challenged and improved narrative reporting
on governance, business model and strategy.
We are pleased to report on the matters which the Audit
Committee has considered during the year, the key risks
and judgment areas and the decisions applied.
The principal role of the Audit Committee is to consider the
following matters and make appropriate recommendations
to the Board to ensure that:
• The integrity of financial reporting and the Annual
Report, 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 Committee additionally reviews the Auditor’s
performance in terms of quality, control and value
and discusses whether shareholders would be better
served by a change of Auditor; and
• The internal control systems of the Company are
adequate and effective.
The Chair of the Audit Committee is appointed by the
Board of Directors. As at 19 March 2020, the Audit
committee comprised Richard Lightowler (Chair), Caroline
Foulger and Craig Bodenstab. As a step towards further
governance improvements, Stewart Porter stepped
down from the Audit Committee in order to ensure fully
independent membership.
The Audit Committee met three times during the year
under review and has continued to support the Board in
fulfilling its oversight responsibilities. The Audit Committee
formally reports to the Board on its proceedings after each
meeting on all matters within its duties and responsibilities.
Attendance is summarised as part of the report by the
Nomination Committee of the Board.
Financial reporting: Fair, balanced
and understandable
One of the most significant risks in the Company’s accounts
is the valuation of the Oakley Funds and of the Company’s
debt and equity direct investments and whether those
investments are fairly and consistently valued. This issue is
considered carefully when the Audit Committee reviews the
Company’s Annual Report.
OAKLEY CAPITAL INVESTMENTS 69
A key area of focus of the Committee is the valuation
methodology and underlying business performance of
the Oakley Funds’ portfolio companies. Valuation model
inputs are also reviewed by the Auditor.
Whilst the Audit Committee remains satisfied with the
Auditor’s effectiveness, due to the long tenure of the
Auditor, it has taken initial steps to put the 2020 year-end
audit up for re-tender and potential rotation.
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
independence. This is assessed by ensuring that KPMG
has appropriate measures in place to safeguard its
independence and manage potential conflicts. Such
measures include ensuring that separate engagement
teams provide audit and non-audit services. The Audit
Committee must approve in advance all non-audit work to
be carried out by the Auditor for the Company.
Internal control and risk management
The Audit Committee considers the potential need for
an internal audit function on an annual basis. For the
year ended 2019, internal testing work completed on
behalf of the Management Engagement Committee on
the controls in place at the Administrative Agent and
Investment Adviser was considered adequately robust
and independent to negate the need of an internal audit.
Neither the internal review nor the Auditor identified
any suspicions of potential fraud, nor material control
weaknesses. The Company and its key service providers
implement clear whistle-blowing and anti-bribery and
corruption policies.
On behalf of the Board
Laurence Blackall
Chair of the Audit Committee
Valuations are produced by the Investment Adviser and
are independently reviewed by a professional valuation
firm who report on their procedures and the conclusions
of their work. 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 Audit Committee
concluded that the year-end valuation process had been
effectively carried out and that the investments have been
fairly valued. It is noted that both the valuation process
and accounting principles applied during the year were
materially consistent with prior years.
During the year, the Audit Committee reviewed and
approved the Company’s interim accounts and dividend
declarations. The Audit Committee approved the
Annual Report.
Audit: Independence and objectivity
The Committee is responsible for overseeing the
relationship with the external auditor including (but not
limited to): approval of their remuneration, approval of
their terms of engagement, assessing annually their
independence and objectivity, monitoring the auditor’s
compliance with relevant ethical and professional
guidance on the rotation of audit partners and assessing
annually their qualifications, expertise and resources and
the effectiveness of the audit process.
KPMG Audit Limited (“KPMG” or “the Auditor”),
located in Hamilton, Bermuda, has been the Company’s
Auditor since 2007. The Audit Committee reviews their
performance annually. The Audit Committee considers a
range of factors in determining the quality of the audit firm
including independence and objectivity, quality of service,
the Auditor’s specialist expertise and the level of audit fee.
The Auditor is required to rotate the audit partner every
five years. The year ended 31 December 2019, is the third
year of the audit partner’s involvement leading the audit of
the Company.
OverviewStrategic ReportGovernanceFinancial Statements 70
Risk Committee report
The Board is supported by the Risk Committee, which comprises three
Non-Executive Directors. Craig Bodenstab is the Chair of the committee
and Caroline Foulger and Richard Lightowler also serve on the committee.
Objectives for 2020
• Ensuring the risk incident report remains
clean of any material risk events for the year;
• Continuing to refine quantifiable risk
reporting metrics for the Company;
• Enabling increased efficiency in policy and
process review and transparency through
the use of technology; and
• Continuing to robustly and effectively
challenge the investment decision and
portfolio monitoring process.
Achievements in 2019
• Risk incident report clean of any material risk
events for the year;
• Appointed two new Non-Executive Directors
to join the Risk Committee;
•
Improved the methodologies and processes
used by the Company for identifying,
evaluating and monitoring risk;
• Enhanced liquidity risk monitoring in the form
of long-term cash forecasts and scenarios
analysis; and
• Quantified and expanded risk appetite
agreed with the Board.
The effective identification, management and mitigation
of risks is central to the Company achieving its strategic
objectives. The Board develops and maintains the
Company’s risk management strategy, and performs
oversight of its implementation. Responsibility for
implementation of the risk management appetite,
strategy, monitoring and reporting is delegated to
the Risk Committee.
The Risk Committee has oversight of the Company’s risk
management process including managing risk tolerances.
The Committee is responsible for ensuring the effective
operation of the risk management function and all that
entails. Amongst other things, the Committee regularly
assesses the share price discount to NAV and, even though
this is largely out of their immediate control, it is generally
recognised by the Board that over time and in the long term,
this discount set by the market should not be excessive.
The Risk Committee acts separately from the function of
portfolio management and is comprised of Non-Executive
Directors, with support from resources independent of
the Investment Adviser. The Chair of the Risk Committee
is appointed by the Board of Directors. The role and
responsibility of the Chair of the Risk committee is to set the
agenda for meetings of the Risk committee and, in doing
so, take responsibility for ensuring that the Risk committee
fulfils its duties under its terms of reference. As at 19 March
2020, the Risk Committee comprised Craig Bodenstab
(Chair), Caroline Foulger and Richard Lightowler.
The Risk Committee met four times during the year under
review and has continued to support the Board in its
oversight, monitoring and mitigation of emerging and
principal 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 investments.
OAKLEY CAPITAL INVESTMENTS 71
Principal risks and uncertainties
During the year under review, the Risk Committee has
continued to identify, assess and manage various risks
within the Company, including those that would impact
its future performance, solvency, liquidity or reputation.
This review includes the monitoring of risk exposure
compared with the risk appetite established by the Board.
The risk appetite methodology documents key risks
and uncertainties of the Company and assesses each
risk indicator on a scale, depending on their impact and
likelihood. The Committee monitors detailed and, wherever
possible, quantifiable indicators of the Company’s
exposure to risk as segmented in five core categories, as
summarised below:
The Company implements strict policies to track,
monitor and mitigate conflicts of interest on both
an individual and transactional basis. The Risk
Committee maintains a register of potential conflicts
of interest for appropriate mitigation in the event of
perceived conflicts.
– Valuation
The main driver of the Company’s performance is
the valuation of the underlying portfolio companies
held by the Oakley Funds and its direct investments.
The Risk Committee monitors the movements in the
valuations of the underlying portfolio on a quarterly
basis and challenges movements which differ
from expectations.
• Operational risk
– Outsourcing
The Company currently has no employees and
relies upon the services provided by contracted
third-party advisers. The valuation of the
underlying portfolio companies, information
security, accounting records and maintenance
of regulatory and legal requirements, depend on
the effective operation of key service providers.
Through the Management Engagement Committee,
regular reviews of the performance of service
providers (including the Administrative Agent
and Investment Adviser) are conducted. The
performance assessment considers cost, efficiency,
performance, key person risk and compliance
with the terms of arrangements. The results of
these reviews are shared with the Board, where
engagement of service providers is discussed
and approved.
– Governance
The effective operation of the Board, including its
composition, is key to the continued success of the
Company and is monitored by the Risk Committee
and overseen by the Nomination Committee of
the Board.
• Regulatory risk
Changes in legislation, regulation and/or government
policy could significantly impact the Company’s
performance.
Whilst no significant changes in regulation or
legislation have occurred in 2019 that materially
impacted the Company, the introduction of the
Economic Substance Act in Bermuda was relevant
to the Company. This legislation was thoroughly
assessed, and the Company is compliant. The Risk
Committee keeps informed of the Company’s position
relative to potential Brexit impacts, specifically the
preparedness of the UK-based Investment Adviser.
The newly formed Governance, Regulatory and
Compliance Committee also tracks and reports on
emerging risks to the Company.
Professional advisers are regularly engaged to
perform regulatory and compliance reviews to ensure
the Company is in line with such regulations and the
general counsel of the Investment Adviser reports to
the Board periodically on any potential regulatory or
compliance changes.
The Committee proposed and implemented new
risk appetite measures to monitor any regulatory
compliance breaches, and the impact of business
development and/or change on the Company.
OverviewStrategic ReportGovernanceFinancial Statements 72
Risk Committee report continued
The move of the Company’s listing to the SFS
continues to be considered a material and noteworthy
change, and compliance with ongoing obligations are
tracked closely. We are pleased to report there were
no regulatory breaches during 2019.
The Company commissioned an independent review of
its tax position during the year, reconfirming its existing
Total NAV return for 2019 was 25%, and total
shareholder return 56%. Amongst other things, the
Risk Committee monitors share price performance,
return to shareholders, share price discount to NAV
and dividend payments to shareholders. Consistent
with guidelines and tolerances set by the Board, the
Committee considers potential corrective action in the
event of tolerances being exceeded.
tax status in Bermuda.
• Liquidity risk
As the Company invests in illiquid private equity
closed-ended funds and direct private debt and equity
investments, forecasting liquidity is particularly difficult
and requires prudent assumptions.
The Company maintains a level of liquidity to
ensure, so far as can be forecast, that it can meet its
capital commitments to the Oakley Funds and can
participate in any other investments made by Oakley
throughout the investment-realisation cycle. The
Investment Adviser performs and reports cashflow
modelling throughout the investment cycle to enable
the Company to ensure it has the ability to fulfil
its commitments as they fall due in the short term,
strategically managing long-term commitments and
cash availability, and also endeavouring to manage
surplus cash to efficient levels.
The Risk Committee developed an improved
longer-term liquidity risk monitoring system during
2019, applying an additional level of scrutiny and
stress on the assumptions, limitations and inputs
from the Investment Adviser.
• Company performance
The Company’s aim is to provide an attractive
return to its shareholders by providing access to a
portfolio of high quality private equity assets through
its investments in the Oakley Funds and also direct
investments. The Board took the decision in 2016 to
introduce an annual dividend which currently continues
to be set at 4.5 pence per share and which the Board
reviews from time-to-time.
• Financial performance
The Company’s investment activities expose it to a
variety of financial risks that include credit, market,
interest rate, currency and valuation risk. Further details
are disclosed in Note 5 to the Financial Statements,
together with a summary of the policies for managing
these risks.
The Company holds investments in portfolio
companies located outside the UK, notably Western
Europe, which are valued in non-GBP currencies.
The Company may hedge the foreign exchange
exposure to any non-GBP investments as deemed
appropriate by the Board from time to time. The Risk
Committee considers potential hedging strategies for
recommendation to the Board.
The credit risk of lending to the Oakley Funds or direct
debt investments in portfolio companies is considered
on a case-by-case and aggregate basis by the Board
and Risk Committee.
Additionally, the Risk Committee has implemented
enhanced monitoring of concentration risk in its
investment portfolio.
On behalf of the Board
Craig Bodenstab
Chair of the Risk Committee
OAKLEY CAPITAL INVESTMENTS 73
Nomination Committee report
The Board is supported by the Nomination Committee, which comprises four Non-Executive
Directors. Caroline Foulger is the Chair of the Committee and Laurence Blackall, Craig
Bodenstab and Richard Lightowler also serve on the Committee. Richard Lightowler was
appointed to the Committee in March 2020.
Objectives for 2020
• Continuing to oversee appointments and re-
appointments to the Board of Directors; and
• Continuing to assess and oversee Board
effectiveness.
Achievements in 2019
• Appointed two new Bermuda-based
Non-Executive Directors to join the Board,
strengthening the balance of skills and providing
further succession planning options; and
• Restructuring of Board Committee
membership and terms for enhanced
effectiveness and compliance with industry
governance standards.
The purpose of the Committee is to provide effective
operation of the Board and to oversee appointments and
re-appointments to the Board.
The Committee oversees the process of nomination and
appointment of new directors. In summary, the process
includes, but is not limited to:
• Reviewing the succession plans and needs for the
Chair of the Board and Directors;
• Seeking the best available candidates considering
specific criteria determined by the Board;
• Agreeing a short-list of candidates, considering the
views of the Company’s professional advisers; and
• Conducting interviews both individually and inclusive
of the Board as a whole.
Members of the Committee vote on the election of new
candidates, following which appointment is recommended to
the full Board. The Board considers diversity when making a
new appointment and seeks to get a unanimous vote on the
appointment of the proposed candidate.
As at 19 March 2020, the Nomination Committee
comprised Caroline Foulger (Chair), Laurence Blackall,
Craig Bodenstab and Richard Lightowler. Caroline, as
Chair of the Board, cannot vote on her own appointment.
The Company does not have a formal policy of tenure in
place but assesses each Director’s role on an individual
basis based on their performance. In its review of the
effectiveness of the Board, the Committee monitors Board
and Committee meeting attendance.
On behalf of the Board
Caroline Foulger
Chair of the Nomination Committee
Number of meetings attended / eligible to attend:
Director
Caroline Foulger
Craig Bodenstab*
Laurence Blackall
Stewart Porter
James Keyes**
Peter Dubens or alternate
Richard Lightowler***
*
appointed July 2019.
**
retired July 2019.
*** appointed December 2019.
Board
12/12
7/7
12/12
12/12
5/5
12/12
1/1
Audit
Risk
Management
Engagement
Governance,
Regulatory and
Compliance Nomination Remuneration
3/3
2/2
3/3
3/3
1/1
3/3
0/0
4/4
3/3
4/4
4/4
2/2
4/4
0/0
2/2
2/2
2/2
2/2
0/0
2/2
0/0
2/2
2/2
2/2
2/2
0/0
2/2
0/0
2/2
2/2
2/2
1/2
0/0
2/2
0/0
1/1
1/1
1/1
1/1
0/0
1/1
0/0
OverviewStrategic ReportGovernanceFinancial Statements 74
Management Engagement
Committee report
The Board is supported by the Management Engagement Committee, which
comprises three Non-Executive Directors. During 2019 the Chair of the Committee
was Laurence Blackall and Caroline Foulger also served on the Committee.
Commencing March 2020, Caroline Foulger is the Chair of the Committee and
Richard Lightowler and Craig Bodenstab also serve on the Committee.
Objectives for 2020
• Continuing to monitor the remuneration,
performance and compliance with respective
agreements of all key service providers; and
• Establishing a system of ongoing monitoring
and reporting of key service provider control
environment and performance.
Achievements in 2019
• Assessment of the remuneration, contractual
arrangements and performance of the
Administrative Agent and Investment Adviser;
• Review of all fees and expenses related to
key material service providers; and
• Direct debt investment performance
fees and operational service fees of 2%
per annum will no longer be charged
effective 2020.
We are pleased to report on the matters which the
Management Engagement Committee has considered.
The purpose of the Committee is to review on a regular
basis the appointment, remuneration and performance of
the key service providers to the Company, with a key focus
on the Investment Adviser and Administrative Agent. The
role and responsibility of the Chair of the Management
Engagement Committee is to set the agenda for meetings
of this committee and, in doing so, take responsibility
for ensuring the Committee fulfils its duties under its
terms of reference.
The Chair of the Management Engagement Committee
is appointed by the Board of Directors. As at 19 March
2020, the Management Engagement Committee
comprised Caroline Foulger (Chair), Richard Lightowler
and Craig Bodenstab.
The Management Engagement Committee met twice
during the year. The Committee formally reports to the
Board on its proceedings on all matters within its duties
and responsibilities. Attendance is summarised as part of
the report by the Nomination Committee of the Board.
Investment Adviser and Administrative Agent
The Management Engagement Committee reviewed the
performance and compliance with agreements of both
the Administrative Agent and Investment Adviser in 2019.
Factors addressed by the Committee during the year include:
•
Investment Performance: Given the investment
performance for the year, the Committee did not
assess any requirement for independent external
review;
• Cashflow Analysis: Improved cashflow projection
and management;
• Marketing and Investor Relations performance; and
• Board Support and quality of Board materials;
OAKLEY CAPITAL INVESTMENTS 75
• Remuneration: Following investor feedback, it was
noted that the practice of paying management fees
on debt direct debt investments were outside of
market practice. It was agreed with the Administrative
Agent that, starting 1 January 2020, zero management
or performance are to be charged on debt direct
investment. Enhanced transparency into staff
recharges from the Investment Adviser;
• Performance fees, incentives and alignment of
interests; and
• Compliance with contractual arrangements and
duties, including an assessment of the internal
control environment.
Other key service providers
In most instances, relationships with key third-party
service providers are managed by employees of the
Investment Adviser and Administrative Agent.
Both the Committee and Board reviewed vendor-
specific expenses during the year, and regularly had
discussions regarding the performance of providers of
legal, financial advisory, brokerage, communications
and administration services.
On behalf of the Board
Laurence Blackall
Chair of the Management Engagement Committee
OverviewStrategic ReportGovernanceFinancial Statements 76
Governance, Regulatory and
Compliance Committee report
The Board is supported by the Governance, Regulatory and Compliance Committee,
which comprises two Non-Executive Directors. During 2019, Stewart Porter chaired
the Committee and, until his departure, James Keyes also served on the Committee.
As from March 2020, Richard Lightowler is the Chair of the Committee and
Stewart Porter also serves on the Committee.
Objectives for 2020
• Continuing to develop and oversee the
framework for Board training;
•
Implementing a system of regular updates on
regulatory and compliance matters; and
• Ensuring the Board remains fully informed of
upcoming changes in regulation, governance
and compliance requirements.
Achievements in 2019
• Review the Company’s requirements relating
to Market Abuse Regulations and inside
information, and the new Bermuda Economic
Substance Act;
• Detailed overview of ongoing obligations
and director responsibilities under the
SFS listing; and
• Due consideration given to the updated
AIC Code provisions.
The Board is pleased to report on the range of matters
which the Governance, Regulatory and Compliance
Committee has considered during 2019.
The purpose of the Committee is to assist the Board to fulfil
its corporate governance and oversight responsibilities in
relation to the relevant codes, laws, regulations and policies
impacting the Company.
Key responsibilities include:
• Evaluate and monitor the Company’s compliance with
relevant codes, laws, regulations and external policies;
• Monitor new governance, legal, regulatory and
compliance standards and ensure that plans are put
in place and implemented to ensure the Company’s
readiness; and
• Oversee the framework for Board training.
The Chair of the Governance, Regulatory and Compliance
Committee is appointed by the Board of directors. As at
19 March 2020, the Committee comprised Richard
Lightowler (Chair), and Stewart Porter.
The Governance, Regulatory and Compliance Committee
met twice during the year. The Committee formally
reports to the Board on all matters within its delegated
responsibilities. Attendance is encouraged for all Board
members, as it serves as a forum for regulatory awareness
and training. Director attendance is summarised as part of
the report by the Nomination Committee of the Board.
Governance
The Committee considered the 42 provisions and
18 principles of the AIC Code of Corporate Governance
(the “AIC Code”), as updated in February 2019.
Compliance with and exceptions to the AIC Code were
reported to the Board, and are presented as part of the
Corporate Governance Statement of this report.
OAKLEY CAPITAL INVESTMENTS 77
Governance, Regulatory and Compliance Committee report
Regulatory and compliance
2019 was a year of significant change for the Company’s
compliance environment, with its listing moving from
AIM to the Specialist Fund Segment of the London
Stock Exchange. The Committee considered in detail the
ongoing obligations and director responsibilities arising
as a result of this move. Compliance with continuing
obligations is monitored on an ongoing basis.
In Bermuda, new Economic Substance regulations were
implemented during the year, with the Company compliant.
In addition, the Administrative Agent, Oakley Capital
Manager Limited, became a licenced and regulated
Investment Business in Bermuda under the Bermuda
Monetary Authority, adding an additional level of oversight
and robustness to the regulatory landscape of the
Company’s key service providers.
On behalf of the Board
Stewart Porter
Chair of the Governance, Regulatory and
Compliance Committee
OverviewStrategic ReportGovernanceFinancial Statements 78
Remuneration Committee report
The Board is supported by the Remuneration Committee, which comprises two
Non-Executive Directors. Craig Bodenstab is the Chair of the Committee and
Richard Lightowler also serves on the Committee.
Objectives for 2020
• Continuing to assess and determine
Directors’ remuneration, ensuring no single
Director determines their own remuneration.
Achievements in 2019
• Establishment of the Remuneration
Committee as a standalone governance
function providing oversight of Directors’
remuneration.
The purpose of the Committee is to determine or (as
applicable) make recommendations regarding the
remuneration of Directors of the Company, whilst ensuring
no single Director determines their own remuneration.
The Remuneration and Nomination Committees separated
into two standalone committees during the year ended
31 December 2019. Baseline Director remuneration was
made consistent to £50,000 per annum for Non-Executive
Directors and £65,000 per annum for the Chair, with Peter
Dubens continuing to serve without a fee.
The Chair of the Remuneration Committee is appointed
by the Board of Directors, and cannot be the Chair
of the Board of Directors. As at 19 March 2020, the
Remuneration Committee comprised Craig Bodenstab
(Chair) and Richard Lightowler.
On behalf of the Board
Craig Bodenstab
Chair of the Remuneration Committee
OAKLEY CAPITAL INVESTMENTS 79
Directors’ remuneration report
Remuneration report
The Non-Executive Directors who served in the period from 1 January 2019 to 31 December 2019 received the
fees detailed in the table below. Directors are remunerated in the form of fees, payable annually in advance, to the
Director personally.
Director
James Keyes*
Caroline Foulger
Peter Dubens**
Laurence Blackall
Stewart Porter
Craig Bodenstab***
Richard Lightowler****
*
James Keyes retired in July 2019.
**
Peter Dubens serves without a fee.
*** Craig Bodenstab was appointed in July 2019.
**** Richard Lightowler was appointed in December 2019.
2019
2018
Fees (£)
Fees (£)
50,000
65,000
0
50,000
50,000
23,315
0
45,000
55,000
0
45,000
14,000
0
0
The table above details the Director’s fee paid to each Director of the Company for the years ended 31 December 2019
and 31 December 2018.
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 elected by shareholders at the AGM.
Directors’ interests in shares of the Company
There is no requirement for Directors to hold shares in the Company. As at 19 March 2020, Directors who are beneficial
owners of shares in the Company are:
Director
Caroline Foulger
Peter Dubens
Laurence Blackall
Stewart Porter
Craig Bodenstab
Richard Lightowler
19 March
13 March
2020
2019
122,000
122,000
17,595,827
9,554,068
400,000
200,000
0
0
0
0
0
0
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.
OverviewStrategic ReportGovernanceFinancial Statements 80
Alternative Investment Fund
Managers’ Directive
Fees, charges and expenses
For details of the fees payable by the Company, refer to
Note 15 of the notes to the Financial Statements.
Fair treatment of shareholders
and preferential treatment
The Company will treat all of the company’s investors
fairly and will not allow any investor to obtain preferential
treatment, unless such treatment is appropriately
disclosed. No investor currently obtains preferential
treatment or the right to obtain preferential treatment.
Remuneration disclosure
The total amount of remuneration paid by the Company
to its Directors during the year ended 31 December 2019
was £240,315. This comprised solely of fixed remuneration;
no variable remuneration was paid. Fixed remuneration
was composed of agreed fixed fees. There were five
beneficiaries of this remuneration.
Status and legal form
The Company is a self-managed non-EU Alternative
Investment Fund. It is a closed-ended investment company
incorporated in Bermuda and its ordinary shares are traded
on the SFS of the London Stock Exchange’s Main Market.
The Company’s registered office is 3rd Floor, Mintflower
Place, 8 Par-la-Ville Road, Hamilton HM08, Bermuda.
Investment policy
For details of the investment policy refer to page 17.
Liquidity management
As the Company is a self-managed non-EU AIF, it is not
required to comply with Article 16 of the AIFMD in relation
to liquidity management.
The Company maintains an adequate level of liquidity to
ensure that it can meet its capital commitments to the
Oakley Funds and can participate in any other investments
made by Oakley throughout the investment-realisation
cycle. Cash flow modelling is performed regularly
throughout the investment cycle to enable the Company
to manage its liquid resources and to ensure it has the
ability to pay commitments as they fall due, whilst also
endeavouring to manage any surplus cash.
The Company is a self-managed non-EU AIF, it is not
required to comply with Article 16 of the AIFMD in relation
to liquidity management.
OAKLEY CAPITAL INVESTMENTS 81
Shareholder information
Financial calendar
The announcement and publication of the Company’s
results is expected in the months shown below:
January
March
April
July
September
Trading update for the year announced
Final results for the year announced Annual
Report published
Payment of final dividend
Interim trading update announced
Interim results announced Interim
Report published
October
Payment of interim dividend
Dividend
The final dividend proposed in respect of the year ended
31 December 2019 is 4.5 pence per share.
Ex-dividend date (date from which shares
2 April 2020
are transferred without dividend)
Record date (last date for registering
3 April 2020
transfers to receive the dividend)
Dividend payment date
23 April 2020
Share dealing
Investors wishing to purchase or sell shares in the
Company may do so through a stockbroker, financial
advisor, bank or share-dealing platforms.
To purchase this investment, you must have read the
Key Information Document (“KID”) before the trade can
be executed.
If you are proposing to use Computershare Investor
Services PLC to purchase shares, please contact them
directly and they will provide you with the KID either by
email or post.
You can contact them on +44 370 703 0084.
Important information
Past performance is not a reliable indicator of future
results. The value of OCI shares can fall as well as rise
and you may get back less than you invested when you
decide to sell your shares.
OverviewStrategic ReportGovernanceFinancial Statements 82
OA K L E Y CA P I TA L I N V E S T M E N T S
83
Financial
Statements
Independent Auditor’s report
84
Consolidated statement of comprehensive income 88
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
89
90
91
Notes to the consolidated financial statements
92
Directors and advisers
Glossary
118
119
OverviewStrategic ReportGovernanceFinancial Statements 84
Independent Auditor’s report
To the Shareholders and Board of Directors of
Oakley Capital Investments Limited
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
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 2019 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 2019 and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with International Financial Reporting
Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). 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 of the current period. 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 private equity partnerships
As discussed in the Audit Committee report on page 68, the accounting policies on pages 91 to 94 and in Notes 6
and 8 to the consolidated financial statements on pages 99 to 100 and 101 to 105, respectively, the Company holds
investments in private equity partnerships (the Funds) at 31 December 2019 of £495.3 million, where quoted prices do
not exist. Such unquoted equity investments 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 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 of these portfolio companies are based upon either: (i) the income approach, where estimated future
cash flows are discounted at an appropriate interest rate; or (ii) or the market approach, which estimates the enterprise
value of the portfolio company using a comparable multiple of revenues or EBITDA, information from recent comparable
transactions, or the underlying net asset value.
OAKLEY CAPITAL INVESTMENTS 85
The risk
The significance of the unquoted private equity partnerships 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 obtained management’s schedule of investments and compared the fair value of the Company’s investments in the
unquoted private equity partnerships to the audited financial statements of the Funds.
We selected all unquoted equity investments held indirectly through investments in the private equity partnerships and
performed the following audit procedures:
• Obtained the Investment Adviser’s models for valuing the unquoted equity investments;
• Obtained independent confirmations of the existence and accuracy of the unquoted equity investments;
• 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 in the context of the IPEV valuation guidelines;
• Obtained management information, including budgets and forecasts for revenues and EBITDA and actual net debt
amounts at the balance sheet date, 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 private equity partnerships 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 held at the year-end.
Other information in the Annual Report
Management is responsible for the other information contained in 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 conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
OverviewStrategic ReportGovernanceFinancial Statements 86
Independent Auditor’s report continued
Responsibilities of management and those charged with governance
for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit 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.
OAKLEY CAPITAL INVESTMENTS 87
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 purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Section 90 of the Companies
Act 1981. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
The Engagement Partner on the audit resulting in this independent auditor’s report is James Berry.
Chartered professional accountants
Hamilton, Bermuda
19 March 2020
OverviewStrategic ReportGovernanceFinancial Statements 88
Consolidated statement of comprehensive income
for the year ended 31 December 2019
Income
Interest income
Net realised gains on investments at fair value through profit and loss
Net change in unrealised gains/(losses) on investments at fair value through
profit and loss
Net foreign currency gains/(losses)
Other income
Total income
Expenses
Profit attributable to equity shareholders/total comprehensive income
Earnings per share
Basic and diluted earnings per share
The Notes on pages 92 to 117 are an integral part of these Financial Statements.
Notes
2019
£’000
2018
£’000
13
6,7
6,7
14
9,218
17,840
6,629
102,314
127,741
(23,877)
(2,715)
1,073
153,157
(17,888)
135,269
3,149
217
88,432
(6,434)
81,998
21
£0.66
£0.40
OAKLEY CAPITAL INVESTMENTS Consolidated balance sheet
as at 31 December 2019
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
Retained earnings
Total shareholders' equity
Net asset per ordinary share
Basic and diluted net assets per share
Ordinary shares in issue at 31 December ('000)
89
Notes
2019
£’000
2018
£’000
6,8
660,966
660,966
469,749
469,749
11
107,888
107,899
40
48,866
48,906
709,872
577,648
23,864
23,864
2,826
2,826
686,008
574,822
1,986
2,048
229,728
244,533
454,294
328,241
686,008
574,822
£3.45
£2.81
198,600
204,804
11
10
12
23
23
22
23
The Notes on pages 92 to 117 are an integral part of these Financial Statements.
The Financial Statements of Oakley Capital Investments Limited (registration number: 40324) on pages 88 to 117 were
approved by the Board of Directors and authorised for issue on 19 March 2020 and were signed on their behalf by:
Caroline Foulger
Director
Laurence Blackall
Director
OverviewStrategic ReportGovernanceFinancial Statements 9 0
Consolidated statement of changes in equity
for the year ended 31 December 2019
Share
capital
£'000
Share
Treasury
Retained
shareholders'
premium
£'000
shares
£'000
earnings
£'000
equity
£'000
Total
Balance at 1 January 2018
2,048
244,533
Profit for the year/total comprehensive income
Dividends
Total transactions with equity shareholders
–
–
–
–
–
–
Balance at 31 December 2018
2,048
244,533
Profit for the year/total comprehensive income
Ordinary shares repurchased and cancelled
Dividends
Total transactions with equity shareholders
–
(62)
–
(62)
–
(14,805)
–
(14,805)
Balance at 31 December 2019
1,986
229,728
–
–
–
–
–
–
–
–
–
–
255,459
502,040
81,998
(9,216)
(9,216)
81,998
(9,216)
(9,216)
328,241
574,822
135,269
135,269
–
(14,867)
(9,216)
(9,216)
(9,216)
(24,083)
454,294
686,008
The Notes on pages 92 to 117 are an integral part of these Financial Statements.
OAKLEY CAPITAL INVESTMENTS 91
Consolidated statement of cash flows
for the year ended 31 December 2019
Cash flows from operating activities
Purchases of investments
Sales of investments
Interest income received
Expenses paid
Other income received
Net cash (used in)/provided by operating activities
Cash flows from financing activities
Purchase of ordinary shares
Dividends paid
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Notes
2019
£’000
2018
£’000
(127,265)
(165,302)
90,005
158,712
842
7,077
(7,009)
(4,585)
1,073
217
(42,354)
(3,881)
(4,737)
(9,216)
(13,953)
–
(9,216)
(9,216)
(56,307)
(13,097)
107,888
117,836
(2,715)
3,149
23
24
Cash and cash equivalents at the end of the year
10
48,866
107,888
The Notes on pages 92 to 117 are an integral part of these Financial Statements.
OverviewStrategic ReportGovernanceFinancial Statements 92
Notes to the consolidated financial statements
for the year ended 31 December 2019
1. Reporting entity
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 high-growth, medium-sized companies, primarily in the UK and Europe.
The Company currently achieves its investment objective primarily through its investments in the following five
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”;
• Oakley Capital IV-A SCSp, which together with Oakley Capital IV-B SCSp, Oakley Capital IV-C SCSp (collectively
the “Fund IV Feeder Funds”) and Oakley Capital IV Master SCSp (the “Fund IV Master”) collectively comprise
“Fund IV”; and
• OCPE Education (Feeder) L.P., which together with OCPE Education L.P. collectively comprise (“OCPE Education”).
Fund I, Fund II, Fund III and OCPE Education are all constituent limited partnerships and are exempted limited
partnerships established in Bermuda. Fund IV constitutes a group of limited partnerships established in Luxembourg.
The defined term “Company” shall, where the context requires for the purposes of consolidation, include the
Company’s sole and wholly owned subsidiary, OCI Financing (Bermuda) Limited (“OCI Financing”). Prior to a name
change made on 23 May 2019, OCI Financing was known as OCIL Financing (Bermuda) Limited. OCI Financing
provides financing to NSG Apparel BV, an entity that forms part of the North Sails Group in which Fund II invest.
The Company was listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange (“LSE”) on
3 August 2007, with “OCI” as its listed ticker. The Ordinary Shares were admitted to the Specialist Fund Segment
(“SFS”), commenced trading on the Main Market and simultaneously ceased trading on AIM on 23 August 2019.
The Company’s ticker symbol continues to be “OCI”.
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.
The Board of Directors consider that it is appropriate to adopt the going concern basis of accounting in preparing these
consolidated Financial Statements. In reaching this assessment, the Board of Directors have considered a wide range of
information relating to the present and future conditions, including the consolidated balance sheet, future projections,
cash flows and the longer-term strategy of the Company.
2.1 Basis for compliance
The consolidated Financial Statements of the Company have been prepared in accordance with International Financial
Reporting Standards (“IFRS”).
2.2 Functional and presentation currency
The consolidated Financial Statements are presented in British Pounds (“Pounds”), which is the Company’s
functional currency.
OAKLEY CAPITAL INVESTMENTS 93
3. Significant accounting policies
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
Several amendments and interpretations apply for the first time effective 1 January 2019 but do not have a material
effect on the Company’s consolidated Financial Statements and did not require retrospective adjustments.
b) New standards, amendments and interpretations that are not yet effective and might be relevant for
the Company:
A number of new standards are effective for annual periods beginning after 1 January 2019 and early application is
admitted, however the Company has not early adopted the new or amended standards in preparing these consolidated
Financial Statements.
The Company is currently in the process of analysing the impact of these new standards, amendments to existing
standards and annual improvements to IFRS in detail but these are not expected to have a material effect on the
consolidated Financial Statements of the Company.
3.2 Basis for consolidation
Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. While the Company may have a greater than 50% ownership interest in a Fund, it 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 consolidated Financial Statements include those of the Company and its wholly owned subsidiary, after the
elimination of all significant intercompany balances and transactions. The Financial Statements of the Company’s sole
wholly owned subsidiary, OCI Financing, are included in the consolidation. As at 31 December 2019, the Company
holds $32,019,609 share capital in OCI Financing (2018: $29,201,704).
As per IFRS 10, investment entities are exempted from consolidating controlled investees. The Company meets the
definition of an investment entity, as the following conditions are met:
• The Company provides investment management services;
• The business purpose of the Company is to invest into private equity funds and to purchase, hold and dispose
of investments directly in portfolio companies 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; and
• 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.
OverviewStrategic ReportGovernanceFinancial Statements
94
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
3. Significant accounting policies continued
As at 31 December 2019 the Company’s ownership in the Funds are:
• Fund I ownership of 70.4% (2018: 65.5%)
• Fund II ownership of 36.2% (2018: 36.2%)
• Fund III ownership of 40.7% (2018: 40.7% )
• Fund IV ownership of 28.6% (2018: 0%)
• OCPE Education (Feeder) L.P. ownership of 99.18% (2018: 98.74%)
3.3 Investments
a) Classification
The Company classifies its investments based on both the Company’s business model for managing those financial
assets and the contractual cash flow characteristics, if any, the financial assets. The portfolio of financial assets is
managed and performance is evaluated on a fair value basis. The Company is primarily focused on fair value information
and uses that information to assess the assets’ performance and to make decisions. The Company has not taken the
option to irrevocably designate any equity securities as fair value through other comprehensive income.
The contractual cash flows of the Company’s debt securities are solely principal and interest, however, these securities
are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows
and for sale. The collection of contractual cash flows is only incidental to achieving the Company’s business model’s
objective. Consequently, the Company classifies its investments in private equity funds, direct investments and loans as
financial assets held at fair value through profit and loss at inception.
Financial assets held at fair value through profit and loss at inception are assets that are managed and their
performance evaluated on a fair value basis in accordance with the Company’s investment strategy.
b) Recognition and measurement
Financial assets held at fair value through profit and loss are recognised initially on the trade date which is the date on
which the Company becomes a party to the contractual provisions of the instrument. Financial assets held at fair value
through profit and loss are recognised initially at fair value, with transaction costs recognised in profit or loss.
Net gains and losses from financial assets held at fair value through profit and loss include all realised and unrealised fair
value changes and foreign exchange differences and are included in the consolidated statement of comprehensive income
in the period in which they arise.
Quoted investments are subsequently carried at fair value. Fair value is measured using the closing bid price at the
reporting date, where the investment is quoted on an active stock market.
Unquoted investments, including both equities and loans, are subsequently carried in the consolidated balance sheet
at fair value. Fair value is determined in accordance 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 (“IPEV”).
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.
OAKLEY CAPITAL INVESTMENTS 95
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 an original 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 statement of cash flows.
3.8 Expenses
Expenses are recognised on the accruals basis. Interest expense is included in expenses in the consolidated statement
of comprehensive income and classified within operating activities in the consolidated statement of cash flows.
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 or receivable, 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.
OverviewStrategic ReportGovernanceFinancial Statements 9 6
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
3. Significant accounting policies continued
3.11 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.
3.12 Comparative balances
Certain balances on the 2018 consolidated statement of comprehensive income has changed to conform with the
current year presentation.
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 Company’s results and financial condition, are the fair valuation of the
investments and the assessment that the Company meets the definition of an investment entity.
a) Fair valuation of investments
The fair values assigned to investments held at fair value through profit and loss are based upon available information
at the time 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 relevant IFRS
requirements. Judgment is required in order to determine the appropriate valuation methodology under these standards.
Subsequently, judgment is required in assessing the net asset value of the Funds and determining the inputs into the
valuation models used for the unquoted debt securities. Inputs includes making assessments of the 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 the Funds on behalf of its investors for the purpose of generating returns in the form of
investment income and capital appreciation.
OAKLEY CAPITAL INVESTMENTS 97
5. Financial risk management
5.1 Introduction and overview
The Board of Directors, the Company’s Risk Committee (the “Risk Committee”) and Oakley Capital Limited (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. 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.
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.
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
2019
2018
Total
£’000
Rating
(Moody's)
23,686
25,068
112
495,300
127,156
A2
A1
Aa3
n/a
n/a
Total
£’000
27,135
80,641
112
340,370
107,059
Rating
(Moody's)
A2
A2
Aa3
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 review detailed cashflow projections which forecast the timing of cashflows, including capital calls which
aim to ensure no undue losses or damage is caused 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 2019, cash and cash equivalents of the Company amount to £48,866,356 (2018: £107,888,282). The
Company has total unfunded capital and loan commitments of £462,781,291 (2018: £187,476,040) relating to the Funds
with the option of further investment in OCPE Education but no outright commitment. The unfunded commitments
of the Company are listed in Note 25. As per the Company’s Bye-laws, the Company can borrow up to 25% of total
shareholders’ equity which would amount to approximately £171,502,000 for the year ending 31 December 2019
(2018: £143,705,500). As at 31 December 2019, the Company did not incur any borrowings (2018: nil).
OverviewStrategic ReportGovernanceFinancial Statements 98
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
5. Financial risk management continued
The majority of the investments held by the Company are in Funds which 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 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
5.4 Market risk
2019
£’000
10,130
13,734
23,864
2018
£’000
–
2,826
2,826
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 are 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 fair value 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)
2019
2018
Increase in
Decrease in
Increase in
Decrease in
variable
variable
variable
variable
£’000
839
839
£’000
(839)
(839)
£’000
1,226
1,226
£’000
(1,226)
(1,226)
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 the fair value of those loans of £2,860,355 and a corresponding decrease of
100 basis points in interest rates would result in an increase in their fair value by the same amount (2018: £2,426,686).
In addition, the Company has indirect exposure to interest rate fluctuation through changes to the financial performance
and valuation in equity investments in the Funds and portfolio companies that have issued debt. 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.
OAKLEY CAPITAL INVESTMENTS 99
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)
2019
2018
Euro
£’000
US dollar
£’000
Euro
£’000
US dollar
£’000
49,530
2,433
–
51,963
–
–
51,963
–
–
–
–
–
–
–
34,041
8,236
–
42,277
–
–
42,277
–
–
–
–
–
–
–
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 debt securities are denominated in Pounds, placing
currency risk on the counterparty. The investments in the Funds are denominated in Euros.
c) Price risk – market fluctuations
The Company’s management of price risk, which arises primarily from quoted and unquoted equity instruments, is
through the 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
2019
2018
Increase in
Decrease in
Increase in
Decrease in
variable
variable
variable
variable
£’000
£’000
£’000
£’000
5,776
5,776
(5,776)
(5,776)
3,348
3,348
(3,348)
(3,348)
OverviewStrategic ReportGovernanceFinancial Statements
10 0
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
5. Financial risk management continued
5.4 Market risk continued
c) Price risk – market fluctuations continued
For the investment in the Funds, 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:
2019
2018
Increase in
Decrease in
Increase in
Decrease in
variable
variable
variable
variable
£’000
£’000
£’000
£’000
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
74,295
74,295
(74,295)
(74,295)
51,056
51,056
(51,056)
(51,056)
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 re-purchase of ordinary shares. The movements of capital are shown in the consolidated statement of
changes in equity.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going
concern and to achieve positive returns in most favourable market environments. In order to maintain or adjust the
capital structure, the Company may issue shares or may return capital to shareholders through the repurchase of shares
or by paying dividends. The effects of the issue, the repurchase and resale of shares as a result of market making
activities are listed in Note 23. Liberum Capital Limited acts as the Company’s broker.
OAKLEY CAPITAL INVESTMENTS
101
6. Investments
Investments as at 31 December 2019
Realised
Net
change in
unrealised
2018 Fair
Purchases /
Total Sales*/
gains/
Interest
gains/
2019 Fair
value
capital calls
Distributions
(losses)
and other
(losses)
£’000
£’000
£’000
£’000
£’000
£’000
value
£’000
Oakley Funds
Fund I
Fund II
Fund III
Fund IV
18,159
71,794
1,788
7,386
–
–
(30,197)
19,067
208,628
29,672
(9,712)
(1,227)
–
25,930
–
–
Total Oakley Funds
298,581
64,776
(39,909)
17,840
Direct Investment Fund
OCPE Education (Feeder) LP
Total Direct Investment Funds
41,789
41,789
672
672
–
–
–
–
Total Funds
340,370
65,448
(39,909)
17,840
Quoted equity securities
Time Out Group plc
Total quoted equity securities
Unquoted debt securities
Ellisfield (Bermuda) Limited
Fund I
Fund II
Fund III
22,320
22,320
14,889
7,035
17,412
–
–
–
–
–
–
9,880
8,344
(8,080)
(21,846)
4,033
13,291
(17,853)
NSG Apparel BV
26,569
2,319
–
Oakley Capital III Limited
2,169
–
(1,518)
Oakley NS (Bermuda) LP
14,038
25,483
–
Time Out Group plc
20,914
2,500
(2,607)
Total unquoted debt securities
107,059
61,817
(51,904)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,411
33,358
(10,868)
57,182
82,707
310,068
(6,222)
19,708
79,028
420,316
32,523
74,984
32,523
74,984
111,551
495,300
16,190
38,510
16,190
38,510
907
600
488
529
1,104
80
3,969
2,507
10,184
–
–
–
–
–
–
–
–
–
15,796
9,435
4,398
–
29,992
731
43,490
23,314
127,156
Total investments
469,749
127,265
(91,813)
17,840
10,184
127,741
660,966
*
Total sales include sales, loan repayments and transfers.
OverviewStrategic ReportGovernanceFinancial Statements 102
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
6. Investments continued
Investments as at 31 December 2018
Realised
Net
change in
unrealised
2017 Fair
Purchases /
Total sales*/
gains/
Interest
gains/
2018 Fair
value
capital calls
distributions
(losses)
and other
(losses)
£’000
£’000
£’000
£’000
£’000
£’000
value
£’000
Oakley Funds
Fund I
Fund II
Fund III
36,551
–
–
–
137,054
15,732
(115,337)
103,988
109,058
43,097
(15,189)
(1,674)
Total Oakley Funds
282,663
58,829
(130,526)
102,314
Direct Investment Fund
OCPE Education (Feeder) LP
Total Direct Investment Funds
26,280
26,280
5,825
5,825
–
–
–
–
Total Funds
308,943
64,654
(130,526)
102,314
Quoted equity securities
Time Out Group plc
Total quoted equity securities
Unquoted debt securities
Daisy Group Holdings Limited
Ellisfield (Bermuda) Limited
Fund I
Fund II
Fund III
NSG Apparel BV
Oakley Capital III Limited
Oakley NS (Bermuda) LP
Time Out Group plc
41,182
41,182
12,701
15,455
6,351
–
–
24,615
7,168
3,212
–
Total unquoted debt securities
69,502
–
–
–
–
7,711
24,386
4,011
–
–
10,113
19,970
66,191
–
–
(13,748)
(1,528)
(7,466)
(7,224)
–
–
(5,303)
–
–
(35,269)
–
–
–
–
–
–
–
–
–
–
–
–
Total investments
419,627
130,845
(165,795)
102,314
*
Total sales include sales, loan repayments and transfers.
–
–
–
–
–
–
–
–
–
(18,392)
18,159
(69,643)
71,794
73,336
208,628
(14,699)
298,581
9,684
9,684
41,789
41,789
(5,015)
340,370
(18,862)
22,320
(18,862)
22,320
1,047
962
439
250
22
1,954
304
713
944
6,635
6,635
–
–
–
–
–
–
–
–
–
–
–
14,889
7,035
17,412
4,033
26,569
2,169
14,038
20,914
107,059
(23,877)
469,749
Quoted equity securities and unquoted debt securities are additional direct investments in certain of the portfolio
companies in the Oakley Funds.
OAKLEY CAPITAL INVESTMENTS 103
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
Total net change in unrealised gains/(losses) on investments at fair value through profit and loss
Realised gains/(losses) on investments at fair value through profit and loss:
Funds
Total realised gains/(losses) on investments at fair value through profit and loss
2019
£’000
2018
£’000
111,551
16,190
127,741
(5,015)
(18,862)
(23,877)
17,840
17,840
102,314
102,314
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:
Quoted prices (unadjusted) in active markets for identical instruments that the Company can access
at the measurement date. Level I investments include quoted equity instruments.
• Level II:
Inputs other than quoted prices included within Level I that are observable for the instrument, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level III:
Inputs that are not based on observable market data. Level III investments include private equity funds,
unquoted equity and debt securities.
The level in the fair value hierarchy, within which the fair value measurement is categorised, is determined on the basis
of the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of
a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the
instrument. The determination of what constitutes ‘observable’ requires significant judgment by the Company. The
Company considers observable data to be market data that 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.
The following table analyses the Company’s investments measured at fair value as of 31 December 2019 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
–
495,300
495,300
38,510
–
38,510
–
127,156
622,456
38,510
127,156
660,966
OverviewStrategic ReportGovernanceFinancial Statements
104
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
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 2018 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
Level I
£’000
Level III
£’000
Total
£’000
–
340,370
340,370
22,320
–
22,320
–
107,059
447,429
22,320
107,059
469,749
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 2019 or 2018.
Level III
The Company has determined that Funds and unquoted debt securities fall into 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 2019
include Level III investments in the amount of £622,456,416, representing approximately 90.74% of shareholders’ equity
(2018: £447,429,457; 77.84%).
Funds
The Company primarily invests in portfolio companies via the Funds in which it is a Limited Partner. The Funds are
unquoted equity securities that 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 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 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 105
As at 31 December 2019, the reported 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
Fund I
Fund II
Fund III
Fund IV
Education
€’000
€’000
€’000
€’000
€’000
44,568
75,540
456,259
57,091
88,436
OCPE
(7,845)
(9,836)
(41,206)
(44,657)
–
(3,130)
(50,487)
–
2,698
5,002
1,858
10,856
–
–
177
88,613
74,984
Total value of the Fund attributable to the Company (€’000)
39,421
67,576
366,424
23,290
Total value of the Fund attributable to the Company (£’000)
33,358
57,182
310,068
19,708
As at 31 December 2018, the reported 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:
Fund I
Fund II
Fund III
Fund IV
Education
€’000
€’000
€’000
€’000
€’000
OCPE
Investments
Loans
Provisional profit allocation
Other net assets
23,112
100,530
307,986
(5,157)
(19,935)
(55,442)
–
(4,987)
(22,300)
2,273
4,367
2,158
Total value of the Fund attributable to the Company (€’000)
20,228
79,975
232,402
Total value of the Fund attributable to the Company (£’000)
18,159
71,794
208,628
–
–
–
–
–
–
46,225
–
–
326
46,551
41,789
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 the last reported fair values; and
• Review of the quarterly financial statements and the annual 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.
Unobservable inputs for Level III investments
Funds
In arriving at the fair value of the unquoted fund investments, the key input used by the Company is the NAV as provided
by the General Partner or administrator. It is recognised by the Company that the NAVs of the Funds are sensitive to
movements in the fair values of the underlying portfolio companies.
OverviewStrategic ReportGovernanceFinancial Statements
10 6
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
8. Disclosure about fair value of financial instruments continued
Unobservable inputs for Level III investments continued
Funds continued
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 2019, a 10% increase to the fair
value of the unquoted portfolio companies held by the Funds would result in a 7.6% movement in net assets attributable
to shareholders (2018: 6.2%). 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 an unobservable input and range between 5% and 12%, based on the accrued interest rate of individual unquoted
debt securities. The accrued interest rates are determined and agreed to the debt security agreements.
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 2019, a 1% increase to the discount factor would result in a 0.4%
movement in net assets attributable to shareholders (2018: 0.4%). A 1% decrease to the discount factor would have an
equal and opposite effect. Refer to Note 5.4(a).
Transfers between levels
There were no transfers between the Levels during the year ended 31 December 2019 (2018: none).
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 2019 and 2018, are as follows:
Level I Investments:
Quoted equity securities
Fair value at the beginning of the year
Net change in unrealised gains/(losses) on investments
Fair value of Level I investments at the end of the year
2019
£’000
22,320
16,190
38,510
2018
£’000
41,182
(18,862)
22,320
OAKLEY CAPITAL INVESTMENTS 107
Total
£’000
447,429
127,265
(91,813)
17,840
10,184
111,551
622,456
Total
£’000
378,445
130,845
(165,795)
102,314
6,635
(5,015)
Level III Investments:
2019
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 debt
securities
£’000
340,370
65,448
(39,909)
17,840
–
111,551
495,300
107,059
61,817
(51,904)
–
10,184
–
127,156
Funds
£’000
Unquoted debt
securities
£’000
2018
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
308,943
64,654
(130,526)
102,314
–
(5,015)
340,370
69,502
66,191
(35,269)
–
6,635
–
107,059
447,429
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
2019
£’000
48,866
40
23,864
2018
£’000
107,888
11
2,826
OverviewStrategic ReportGovernanceFinancial Statements 108
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
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; and
• Direct investments and 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 2019 (2018: none).
The segment information for the year ended 31 December 2019 was as follows:
Direct
Total
Fund
investments
operating
investments
and loans
segments
Unallocated
£’000
£’000
£’000
£’000
Total
£’000
Net realised gains on financial assets at fair value through
profit and loss
17,840
–
17,840
Net change in unrealised gains/(losses) on financial assets
at fair value through profit and loss
111,551
16,190
127,741
–
–
17,840
127,741
Interest income
Net foreign currency gains/(losses)
Other income
Expenses
Profit/(loss) for the year
Total assets
Total liabilities
Net assets
Total assets include:
–
–
–
9,111
9,111
107
9,218
–
–
(2,715)
(2,715)
1,073
1,073
–
1,073
(12,615)
(2,409)
(14,574)
(3,314)
(17,888)
117,226
23,965
141,191
(5,922)
135,269
495,300
165,666
660,966
48,906
709,872
(10,130)
–
(10,130)
(13,734)
(23,864)
485,170
165,666
650,836
35,172
686,008
Financial assets at fair value through profit and loss
495,300
165,666
660,966
–
660,966
Cash and others
–
–
–
48,906
48,906
OAKLEY CAPITAL INVESTMENTS 109
Total
£’000
102,314
(23,877)
6,629
3,149
217
The segment information for the year ended 31 December 2018 was as follows:
Direct
Total
Fund
investments
operating
investments
and loans
segments
Unallocated
£’000
£’000
£’000
£’000
Net realised gains on financial assets at fair value through
profit and loss
102,314
–
102,314
Net change in unrealised gains/(losses) on financial assets
at fair value through profit and loss
(5,015)
(18,862)
(23,877)
–
–
114
3,149
97
–
–
–
6,515
6,515
–
120
–
120
(2,056)
(2,062)
(4,118)
(2,316)
(6,434)
95,243
(14,289)
80,954
1,044
81,998
340,370
129,379
469,749
107,899
577,648
–
–
–
(2,826)
(2,826)
340,370
129,379
469,749
105,073
574,822
Interest income
Net foreign currency gains/(losses)
Other income
Expenses
Profit/(loss) for the year
Total assets
Total liabilities
Net assets
Total assets include:
Financial assets at fair value through profit and loss
340,370
129,379
469,749
–
469,749
Cash and others
–
–
–
107,899
107,899
10. Cash and cash equivalents
Cash and demand balances at banks
Short-term deposits
11. Trade and other receivables
Prepayments
2019
£’000
28,759
20,107
48,866
2019
£’000
40
40
2018
£’000
82,782
25,107
107,888
2018
£’000
11
11
OverviewStrategic ReportGovernanceFinancial Statements
110
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
12. Trade and other payables
Trade payables
Amounts due to related parties
Other payables
2019
£’000
93
13,641
10,130
23,864
2018
£’000
97
2,729
–
2,826
On 20 December 2019, the Company bought 4,000,000 ordinary shares at the market price on that date for a total
of £10,100,250. As at 31 December 2019, the amount payable for the share buy back remains outstanding (refer to
Note 23) and included in Other payables. The payable was repaid after the year end.
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
Operational and advisory fees
Professional fees
Performance fees
Other expenses
2019
£’000
2018
£’000
107
114
9,111
9,218
6,515
6,629
Notes
15
16
15
15
2019
£’000
3,928
1,905
10,646
1,409
17,888
2018
£’000
2,505
876
1,613
1,440
6,434
OAKLEY CAPITAL INVESTMENTS 111
15. Operational, advisory and performance fees
Since 1 April 2017, 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 as defined in the Operational Services Agreement.
During the year ended 31 December 2019, the Company amended the agreement to adjust the operational and advisory
fees, with effect from 1 January 2020, to exclude debt direct investment.
a) Operational fees
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 the Funds 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 year ended 31 December 2019 totalled £3,928,313 (2018: £2,504,757) and is
presented in the consolidated statement of comprehensive income. The amount outstanding as at 31 December 2019
was £1,109,199 (2018: £913,692) and is included in “Trade and other payables” in the consolidated balance sheet.
b) Advisory fees
The Administrative Agent may also receive an advisory fee of up to 2% on the successful buy-side and sell-side
transactions of the Company for any equity investment. The advisory fee on any such transaction is negotiable between
the Company and the Administrative Agent.
The Company did not incur advisory fees for the year ended 31 December 2019 (2018: £nil). There are no amounts
outstanding as at 31 December 2019 (2018: £nil).
c) Performance fees
The Administrative Agent 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 direct investments after the deduction of: a) the original cost of the
direct investment and b) the attributable proportion of all expenses incurred by the Company in respect of the direct
investment (including the operational service fee), subject to an 8% preferred return.
Performance fees for the year ended 31 December 2019 totalled £10,646,241 (2018: £1,613,530) and are presented in
the consolidated statement of comprehensive income. The increase in the amount for the year is a direct reflection of
the increase in the NAV. The amount outstanding as at 31 December 2019 was £12,447,622 (2018: £1,801,381) and is
included in “Trade and other payables” in the consolidated balance sheet.
OverviewStrategic ReportGovernanceFinancial Statements 112
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
15. Operational, advisory and performance fees continued
d) Other fees
The Administrative Agent may also recharge costs incurred, either directly or indirectly by its contracted advisors,
on behalf of the Company. Such recharges are specifically agreed on a case-by-case basis.
For the year ended 31 December 2019, the Administrative Agent recharged such other costs to the Company totalling
£719,034 (2018: £714,873) and is included in other expenses (Note 14). The amount outstanding as at 31 December
2019 was £70,000 (2018: £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.
16. Professional fees
Administration fees
Consulting fees
Directors’ fees
Auditor’s remuneration
Legal fees
Other fees
Notes
17
18
19
2019
£’000
2018
£’000
352
418
240
143
104
648
1,905
327
48
234
96
19
152
876
17. Administration fees
The Company appointed Mayflower Management Services (Bermuda) Limited ( the “Administrator”) in 2007 to provide
administration services at an annual administration fee at prevailing commercial rates. Administration fees for the
year ended 31 December 2019 totalled £352,040 (2018: £326,743). There was no administration fee payable to the
Administrator as at 31 December 2019 (2018: £nil).
OAKLEY CAPITAL INVESTMENTS 113
2019
£’000
65
175
240
2018
£’000
75
159
234
18. Directors’ fees
Chair's remuneration
Directors' fees
The members of the Board of Directors 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 one of the Directors waived remuneration (2018: one). During 2019, no
other fees were paid to the Directors (2018: £nil). No fees were payable as at 31 December 2019 (2018: none). For the
years ended 31 December 2019 and 2018 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 held by a Director who resigned during the year
Shares at the end of the year
Dividends paid to Directors
19. Auditor’s remuneration
Audit of the consolidated Financial Statements
Total auditor’s remuneration
2019
‘000
9,736
8,342
(60)
18,018
561
2019
£’000
143
143
2018
‘000
2,690
7,277
(231)
9,736
278
2018
£’000
96
96
During the year ended 31 December 2019, the Company paid £5,000 (2018: £nil) to KPMG for tax advisory services
fees, which is included in Consulting fees.
20. 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 until at least 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 2019, the Company was not subjected to foreign withholding
taxes (2018: nil).
OverviewStrategic ReportGovernanceFinancial Statements 114
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
21. Earnings per share
The earnings per share calculation uses 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)
2019
£0.66
£135,269
204,113
2018
£0.40
£81,998
204,804
22. Net asset value per share
The net asset value per share calculation uses the number of share 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 the end of the year (‘000)
23. Share capital
a) Authorised and issued capital
2019
£3.45
2018
£2.81
£686,008
£574,822
198,600
204,804
The authorised share capital of the Company is 280,000,000 ordinary shares at a par value of £0.01 each. Ordinary
shares are listed and traded on the SFS of the LSE Main Market. Each share confers the right to one vote and
shareholders have the right to receive dividends.
On 15 March 2019, the Company bought 404,100 ordinary shares at the market price on that date for a total of £767,442.
On 14 November 2019, the Company bought 1,800,000 ordinary shares at the market price on that date for a total of
£3,999,699. On 20 December 2019, the Company bought 4,000,000 ordinary shares at the market price on that date for a
total of £10,100,250. The ordinary shares purchased by the Company were cancelled and are available for re-issue.
As at 31 December 2019, the Company’s issued and fully paid share capital was 198,599,936 ordinary shares
(2018: 204,804,036).
Ordinary shares outstanding at the beginning of the year
Ordinary shares purchased
Ordinary shares outstanding at the end of the year
2019
€‘000
2018
€‘000
204,804
204,804
(6,204)
–
198,600
204,804
b) Share premium
Share premium represents the amount received in excess of the nominal value of ordinary shares.
OAKLEY CAPITAL INVESTMENTS 115
24. Dividends
On 13 March 2019, the Board of Directors declared a final dividend for 2018 of 2.25 pence per ordinary share resulting
in a dividend of £4,608,091 payable on 25 April 2019 (2018: On 14 March 2018, they declared and approved a final
dividend for 2017 of 2.25 pence per ordinary share which resulted in a dividend payment of £4,608,091 which was paid
on 26 April 2018).
On 10 September 2019, the Board of Directors declared an interim dividend of 2.25 pence per ordinary share resulting in
a dividend of £4,608,091 (2018: On 3 September 2018, they also declared an interim dividend of 2.25 pence per ordinary
share which resulted in a dividend of £4,608,091).
25. Commitments
The Company had the following capital commitments in Euros at the end of the year:
Fund I
Total capital commitment (2019: £171,269; 2018: £169,144)
Called capital at the beginning of the year
Additional interest acquired during the year
Capital calls during the year (2019: 0%; 2018: 0%)
Called capital at the end of the year (2019: £168,871; 2018: £166,775)
Unfunded capital commitment (2019: £2,398; 2018: £2,368)
Aggregate recycled commitment
Fund II
Total capital commitment (2019: £160,778; 2018: £170,582)
Called capital at the beginning of the year
Capital calls during the year (2019: 0%; 2018: 9.5%)
Called capital at the end of the year (2019: £149,524; 2018: £158,641)
Unfunded capital commitment (2019: £11,254; 2018: £11,941)
Aggregate recycled commitment
2019
€’000
2018
€’000
202,398
185,760
13,804
–
188,398
185,760
–
–
199,564
185,760
2,834
13,965
2,638
13,000
2019
€’000
2018
€’000
190,000
176,700
–
176,700
13,300
8,550
190,000
158,650
18,050
176,700
13,300
–
OverviewStrategic ReportGovernanceFinancial Statements 116
Notes to the consolidated financial statements continued
for the year ended 31 December 2019
25. Commitments continued
Fund III
Total capital commitment (2019: £275,675; 2018: £292,485)
Called capital at the beginning of the year
Capital calls during the year (2019: 10%; 2018: 15%)
Called capital at the end of the year (2019: £173,675; 2018: £155,017)
Unfunded capital commitment (2019: £102,000; 2018: £137,468)
Fund IV
Total capital commitment (2019: £338,480)
Called capital at the beginning of the year
Capital calls during the year (2019: 8%)
Called capital at the end of the year (2019: £25,386)
Unfunded capital commitment (2019: £313,094)
Total unfunded capital commitments (2019: £428,746; 2018: £151,777)
The Company had the following loan commitments at the end of the year:
Total loan facility commitments:
Fund I
Fund II
Fund III
Oakley NS (Bermuda) LP
Total unfunded loan commitments:
Fund I
Fund II
Fund III
Oakley NS (Bermuda) LP
2019
€’000
2018
€’000
325,780
172,664
32,577
205,241
120,539
325,780
123,797
48,867
172,664
153,116
2019
€’000
2018
€’000
400,000
–
30,000
30,000
370,000
506,673
–
–
–
–
–
169,054
2019
£’000
2018
£’000
5,000
20,000
–
53,850
78,850
4,000
15,700
–
14,334
34,034
5,000
20,000
20,000
25,850
70,850
4,200
2,773
15,989
12,737
35,699
OAKLEY CAPITAL INVESTMENTS 117
26. Related parties
Balances and transactions between the Company and its subsidiary have been eliminated on consolidation and are not
disclosed in this note. Related parties, as disclosed below, are not part of the consolidation and are not eliminated.
One Director of the Company, Peter Dubens, is also a Director of the Investment Adviser, an entity which provides
services to, and receives compensation from, the Company. It is considered a related party to the Company, given the
indirect control this Director has over these entities. Peter is the sole shareholder of Oakley Capital Manager Limited
(the “Administrative Agent”) and is considered a related party to the Company given the direct control this Director
has over this entity. The agreements between the Company and these service providers were and are based on normal
commercial terms and are disclosed in Note 15.
Throughout 2019, no Director of the Company had a personal interest in any transaction of significance for the
Company (2018: none).
Operational service fees, advisory fees, performance fees and recharged costs paid to the Administrative Agent are
detailed in Notes 14 and 15. The agreements between the Company and these service providers are based on normal
commercial terms. The basis for calculating these fees remain substantially unchanged from prior years. The increase is
a function of the change in net asset value of the underlying assets.
During the year ended 31 December 2019, the Investment Adviser recharged staff costs of £649,034 (2018: £714,873)
to the Company which is included in other expenses (Note 14).
27. Events after the balance sheet date
The Board of Directors has evaluated subsequent events from the year-end through 19 March 2020, which is the date
the consolidated Financial Statements were available for issue. The following events have been identified for disclosure:
On 14 February 2020, the Company received a distribution of €23,138,990 (£19,242,384) from Fund III arising from the
refinancing by Career Partners.
On 21 February 2020, the Company received a distribution of €138,707,470 (£116,125,894) from Fund III arising from the
sale of WebPros.
On 11 March 2020, the Board of Directors declared a final dividend for the year ended 31 December 2019 of 2.25 pence
per ordinary share, resulting in a dividend of £4,468,499 which will be payable on 23 April 2020.
On 18 March 2020, the Company bought 3,000,000 ordinary shares at the market price on that date for a total of
£4,793,850.
In early 2020, the existence of a new coronavirus (COVID-19) was confirmed and since this time COVID-19 has spread
across China and to a significant number of other countries. COVID-19 has caused disruption to businesses and
economic activity which has been reflected in recent fluctuations in global stock markets. The Company considers the
emergence and spread of COVID-19 to be a non-adjusting post balance sheet event. Given the inherent uncertainties,
it is not practicable at this time to determine the impact of COVID-19 on the Company or to provide a quantitative
estimate of this impact.
OverviewStrategic ReportGovernanceFinancial Statements 118
Directors and advisers
Directors
Caroline Foulger
Independent Director and Chair
Laurence Blackall
Independent Director
Stewart Porter
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
Peter Dubens
Director
Craig Bodenstab
Independent Director
Richard Lightowler
Independent Director
Legal Adviser as to Bermuda Law
Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM CX
Bermuda
Investment Adviser to the Administrative Agent
Nominated Adviser and Broker
Oakley Capital Limited
3 Cadogan Gate
London SW1X 0AS
United Kingdom
Legal Adviser
Stephenson Harwood
1 Finsbury Circus
London EC2M 7SH
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
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
Channel Islands
OAKLEY CAPITAL INVESTMENTS Governance
Financial Statements
119
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
AIF
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 2019, Oakley Capital Investments Limited is registered
as an Alternative Investment Fund (“AIF”).
Alternative Investment Fund, as at 31 December 2019, 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.
Direct 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
advanced 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 2019, 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 2019 was £1: €1.1818.
Fund I / Oakley Fund I
Oakley Capital Private Equity L.P.
OverviewStrategic Report 120
Glossary continued
Fund II / Oakley Fund II
Those limited partnerships constituting the Fund known as Oakley Capital Private Equity II,
comprising Oakley Capital Private Equity II-A L.P., Oakley Capital Private Equity II-B L.P.,
Oakley Capital Private Equity II-C L.P. and OCPE II Master L.P.
Fund III / Oakley Fund III
Those limited partnerships constituting the Fund known as Oakley Capital Private Equity III,
comprising Oakley Capital Private Equity III-A L.P., Oakley Capital Private Equity III-B L.P.,
Oakley Capital Private Equity III-C L.P. and OCPE III Master L.P.
Fund IV / Oakley Fund IV
Those limited partnerships constituting the Fund know as Oakley Capital IV, comprising
Oakley Capital IV-A SCSp, Oakley Capital IV-B SCSp, Oakley Capital IV-C SCSp and
Oakley Capital IV Master SCSp.
Oakley Group
Oakley Capital Limited as Investment Adviser, Oakley Capital Manager Limited as
Administrative Agent, Oakley Capital Holdings S.à r.l., the General Partners, the Fund IV
AIFM and any other AIFM and General Partner of successor Oakley Funds or any additional
management or holding entities formed under the control of the current Oakley Group.
Fund Facilities
This includes debt facilities provided by the Company to the Oakley Funds and to the
General Partners of the Oakley Funds.
General Partners (GP)
Oakley Capital I Limited in respect of Fund I (previously Oakley Capital GP Limited)
Oakley Capital II Limited in respect of Fund II (previously Oakley Capital GP II Limited) and
Oakley Capital III Limited in respect of Fund III (previously Oakley Capital GP III Limited); all
exempted companies incorporated in Bermuda.
IFRS
International Financial Reporting Standards. The consolidated Financial Statements and
Notes have been prepared in accordance with IFRS.
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
Oakley
Initial Public Offering.
Net asset value is the value of the assets less liabilities.
The Investment Adviser being Oakley Capital Limited.
Oakley Funds
Fund I, Fund II and Fund III and (as applicable) any successor Funds.
SFS
The Specialist Fund Segment is a segment of the London Stock Exchange’s regulated
Main Market.
OAKLEY CAPITAL INVESTMENTS Printed by Portman Lodge Limited
Registered Office
3rd Floor, Mintflower Place
8 Par-la-Ville Road
Hamilton HM08
Bermuda
T: +1 441 542 6330
F: +1 441 542 6724
E: investorrelations@oakleycapital.com