Final Results

RNS Number : 4893F

Oakley Capital Investments Limited

25 April 2014

 



25 April 2014

Oakley Capital Investments Limited

("the Company")

Preliminary results for the twelve months ended 31 December 2013

Commitment to Oakley Capital Private Equity II

Oakley Capital Investments Limited (AIM : OCL, "OCIL"), the AIM-listed company established to provide investors with access to the investment strategy being pursued by Oakley Capital Private Equity L.P. ("Fund I L.P.") and OCPE Master L.P. ("Fund II L.P.") (collectively the "Limited Partnership") announces its preliminary results for the twelve months ended 31 December 2013.

FINANCIAL HIGHLIGHTS

Assets at:	31.12.13	% change 2013/2012	31.12.12	31.12.11	31.12.10	31.12.09	31.12.08	31.12.07	% change 2013/2007
Net assets (£m)	246.9	8.48%	227.6	218.9	214.9	180.1	99.9	99.4	148%
Net assets per share (£)	2.00	10.5%	1.81	1.71	1.68	1.41	1.08	0.99	102%

·      Net asset value of £2.00 per share at 31 December 2013 up from £1.81 last year, an increase of 10.5%

·      OCIL has invested in two funds, Fund I L.P. and Fund II L.P.:

o  Fund II L.P. is now closed to new investors with a final fund close expected this year. Commitments to date in Fund II L.P. amount to €424m including €150m from OCIL

o  Fund I L.P. is now considered fully invested given 88.5% of its capital has been deployed

·      Investments in the year included:

o  Fund I L.P. invested in Educas Investments LLP (""Educas"), an international investment vehicle established to acquire premium private schools, and made follow-on investments in four portfolio companies - Broadstone, intergenia, Time Out London and Time Out New York

o  In the post balance sheet period Fund II L.P. invested in North Technology Group ("NTG"), a leading marine technology group which includes the worldwide leading sailmaker, North Sails.  Fund II L.P. also acquired intergenia from Fund I L.P. to facilitate future growth and enable the funding of a hosting roll up 

·      Disposals of Emesa Group Holdings B.V. ("Emesa"), Headland Media Limited ("Headland Media"), Daisy Data Centre Solutions ("Daisy Data Centre") and Monument Securities 11 Limited ("Monument Securities") achieved a gross money multiple of 2.8x and an IRR of 43%.

Peter Dubens, Director, commented:

"2013 was a good year for OCIL. NAV per share was up by over 10% year on year, driven by a number of strong exits which allowed the Limited Partnership to return significant capital to investors. With Fund I L.P. now fully deployed our focus will be on maximising the value of its portfolio.

In addition, with Fund II L.P.'s fundraising almost complete, our focus will be building a strong and diversified portfolio for this Fund which, with our investment in NTG, has already got off to a strong start.  We also have a number of quality opportunities in Fund II L.P.'s deal pipeline."

Further details on Fund II L.P.'s structure is also provided in this announcement.

For further information please contact:

Oakley Capital Investments Limited	[phone]
Peter Dubens (Director)
FTI Consulting	[phone]
Edward Bridges, Emily Hartman
Liberum Capital Limited (Nominated Adviser & Broker)	[phone]
Steve Pearce

About Oakley Capital Investments Limited

The Company was established to provide investors with access to the investment strategy being pursued by the Limited Partnership.

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

The investment strategy of the Limited Partnership is to focus on companies with the scope for performance improvement operating within industries with growth or consolidation potential. In addition, the Limited Partnership seeks to invest in companies with the potential to achieve scale, thereby commanding a premium on exit.

CHAIRMAN'S STATEMENT

I am pleased to report another year of solid progress for the Company. The Company showed an increase in its net asset value per share from £1.81 at 31 December 2012 to £2.00 at 31 December 2013. The Company invests principally in Oakley Capital Private Equity L.P ("Fund I L.P."), OCPE II Master L.P. ("Fund II L.P."), a successor fund to Fund I, (collectively the "Limited Partnerships") and their portfolio companies. Fund II L.P. has three feeder funds: Oakley Capital Private Equity II-A L.P., Oakley Capital Private Equity II-B L.P. and Oakley Capital Private Equity II-C L.P. (collectively the "Feeder Funds"). The Company invests in Fund II L.P. through its investment in Oakley Capital Private Equity II-A L.P..

The Company has a capital commitment of €187.7 million in Fund I L.P. of which 81.5% had been called at 31 December 2013. Within Fund I L.P.'s portfolio companies, Intergenia Holdings GmbH ("intergenia") continued to perform strongly in 2013 and was sold to Fund II L.P. during the first quarter of 2014. Fund I L.P. made several follow-on investments in Broadstone Pensions and Investments Limited ("Broadstone") and certain Time Out Group companies during 2013. Fund I L.P. sold its investments in Emesa Group Holdings B.V. ("Emesa"), Headland Media Limited ("Headland Media"), Daisy Data Centre Solutions ("Daisy Data Centre") and Monument Securities 11 Limited ("Monument Securities") during 2013. The sale of these investments, together with dividends received by Fund I L.P., resulted in aggregate distributions by Fund I L.P. of £34.9 million to the Company. Following the acquisition of Reddam through Educas Investment LLP ("Educas") in July 2013, Fund I L.P. is for all practical purposes fully invested, given the anticipated programme of follow-on investments in certain of the existing portfolio companies. 

The Company committed €100 million to Fund II L.P. during 2013, of which 3% had been called as at 31 December 2013. Fund II L.P. had no investments as at 31 December 2013.

PERFORMANCE

The Company's net asset value increased in the year by £19.3 million to £246.9 million as at 31 December 2013.  Of this total net asset value, £128.9 million represented the fair value of the investment in Fund I L.P., £1.7 million represented the fair value of the investment in Fund II L.P. and £29.1 million represents investments made directly to certain of Fund I L.P.'s portfolio companies in the form of mezzanine finance and senior loan notes. The Company has short-term revolving credit facilities with Fund I L.P. and Oakley Capital GP II Limited ("GP II"), the general partner of Fund II L.P. and the Feeder Funds. At 31 December 2013 Fund I L.P. had borrowed £22.2 million under its facility with the Company, and GP II had borrowed £2.5 million from the Company. The net balance of £62.6 million was held by the Company as cash and cash equivalents and other assets.

Whilst the Company does not generally invest directly in portfolio companies, other than by the provision of debt finance, it is possible to "look through" each Limited Partnership to understand the impact of the performance of those portfolio companies on the investment values attributed to each Limited Partnership in the Company.

It is the policy of the Limited Partnership to review valuations of its portfolio companies twice a year. These determinations of fair value have been established in accordance with The International Private Equity and Venture Capital Valuation Guidelines adopted by Oakley Capital Limited (the "Investment Adviser"), the Investment Adviser to the general partner of each Limited Partnership. Additionally, a review of the Investment Adviser's fair value calculations of the portfolio companies of each Limited Partnership is performed by an independent third party valuer.

The fair value of the underlying portfolio investments in Fund I L.P. attributable to the Company has increased by £11.0 million to £128.9 million at 31 December 2013. This increase arose as a result of a net increase in the fair values of the underlying portfolio companies arising from performance considerations and the addition of Reddam, more than offsetting the reduction driven by the 2013 disposals.

In addition to its investments in the Limited Partnerships, the Company has provided debt finance directly to a number of Fund I L.P.'s portfolio companies. These typically take the form of mezzanine loans with fixed interest rates of 10% - 15%. The Company has also provided secured senior debt to certain of Fund I L.P.'s portfolio companies at interest rates typically of 8.5% - 10%. These investments in loan instruments increased by a net £4.5 million from £24.6 million as at 31 December 2012 to £29.1 million at 31 December 2013, due principally to the repayment of loans by intergenia and Time Out Group companies and new loans provided to intergenia. The Company has revolving credit facilities with Fund I L.P. and GP II, in each case at an interest rate of 6.5%. The balance owed by Fund I L.P. to the Company at 31 December 2013 was £22.2 million. The balance owed by GP II to the Company at 31 December 2013 was £2.5 million.

Post balance sheet events

Fund I L.P. completed the sale of intergenia to Fund II L.P. for €54.9 million during the first quarter of 2014. The rationale for the disposal by Fund I L.P. was that, notwithstanding intergenia's growth and development to date, the Investment Adviser believed there was further upside to be generated by building up intergenia through a hosting roll up. Fund I L.P. lacked the capital to fund this strategy. The sale and purchase between the Limited Partnerships gave rise to a number of conflicts of interest on which the respective general partners of each Limited Partnership took independent legal advice, resulting in the implementation by the Investment Adviser of a number of measures designed to ensure that the transaction was undertaken on arm's length terms. Following completion of the sale, Fund I L.P. distributed €52.6 million to its limited partners, net of performance fees, of which the Company received €34.4 million. To date, Fund I L.P. has returned 87% of total commitments to its limited partners.

During February 2014, the Company provided additional debt finance of €11.3 million to intergenia to fund an acquisition.

Fund I L.P. made a capital call of 7% (€13.1 million) in March 2014 resulting in aggregate calls by Fund I L.P. of 88.5% of total committed capital.

Following the sale of intergenia, the Company increased its capital commitments in Fund II L.P. from €100 million to €150 million and subsequently Fund II L.P. made a capital call of €13.5 million. In total, Fund II L.P. has called 27% of commitments.

On 6 March 2014, Fund II L.P. acquired a majority stake in North Technology Group LLC ("NTG") through its wholly owned subsidiary, Oakley NS (Bermuda) LP, at an investment cost of €45.7 million. NTG is a leading marine technology group which includes a worldwide leading sail maker, North Sails. The group compromises three market leading marine brands, all focused on providing innovative and high performance products and solutions to the world's sailors and yachtsmen.

OUTLOOK

2014 started very positively for the Limited Partnerships with the sale of intergenia by Fund I L.P. to Fund II L.P. and the acquisition by Fund II L.P. of North Sails.  The Investment Adviser expects to consider additional realisation opportunities for Fund I L.P. and is actively seeking new investment opportunities for Fund II L.P in 2014.

Given that 88.5% of total commitments of Fund I L.P. have now been called, and bearing in mind the requirement to retain headroom to fund follow-on investments in certain of the existing portfolio companies, Fund I L.P. is now effectively fully invested.

Christopher Wetherhill

Chairman

MANAGER'S REPORT

THE COMPANY AND THE LIMITED PARTNERSHIPS

The Company provides investors with exposure to the Limited Partnerships. The Limited Partnerships are unlisted UK and European mid-market private equity funds with the aim of providing investors with significant long-term capital appreciation.

Oakley Capital (Bermuda) Limited (the "Manager"), a Bermudian company, is the manager of the Company and Fund I L.P. The Manager has appointed Oakley Capital Limited (the "Investment Adviser") as the investment adviser to the Manager with respect to Fund I L.P. The Investment Adviser is also the investment adviser to GP II with respect to Fund II L.P. and the Feeder Funds.  The Investment Adviser is primarily responsible for advising the Manager and GP II on the investment and realisation of the assets of Fund I L.P. and Fund II L.P. respectively.

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

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

MARKET BACKGROUND

After a long period of stagnation, recovery in Europe has finally begun.  The main impetus behind the recovery in the Eurozone is Germany where GDP is forecast to grow by 1.8% in 2014.  The UK is also experiencing a robust recovery with GDP set to grow by 2.5% this year.  In the US, the economy finished 2013 on a weaker footing than expected and is anticipated to continue at a steady, if unremarkable, pace. In 2013 Fund I L.P. invested outside its core of Europe and the US with an acquisition in South Africa.  The Rand has slid against the major currencies, falling by 16% against the Euro since the acquisition in July 2013.  Despite this apparent fragility, the economy has already slowed and efforts aimed at tackling the country's current account deficit should be reflected in stabilisation of the currency.

FINANCIAL HIGHLIGHTS

Assets at:	31.12.07	31.12.08	31.12.09	31.12.10	31.12.11	31.12.12	31.12.13	% change 2013/2007
Net assets (£m)	99.4	99.9	180.1	214.9	218.9	227.6	246.9	148%
Net assets per share (£)	0.99	1.08	1.41	1.68	1.71	1.81	2.00	102%
Share price (mid-market) (p)	101.6	63.5	95.0	145.5	132.5	136.5	188.3	85%
FTSE All Share Index	3,287	2,209	2,751	3,063	2,858	3,105	3,610	10%
FTSE Small-Cap Index	3,418	1,854	2,777	3,229	2,749	3,416	4,431	30%
Operational performance
Increase in net assets resulting from operations £m	(0.6)	5.1	55.0	34.8	4.0	11.1	22.8
Net gain per share	(0.01)	0.06	0.47	0.27	0.03	0.09	0.18

 

	£m
Opening net asset value as at 1 January 2013	227.6
Gross revenue	5.5
Other expenditure	(1.8)
Realised gain on investments	24.0
Net unrealised appreciation of investments (excluding accrued interest)	(4.8)
Purchase of treasury shares	(3.4)
Closing net asset value as at period end	246.9

The Company's net asset value increased in 2013 by £19.3 million from £227.6 million to £246.9 million. As at 31 December 2013, the Company's net asset value per share was £2.00, an increase of £0.19 (10.5%) from £1.81 per share as at 31 December 2012. The Company's operational performance for the 2013 was £22.8 million, an increase over 2012 of £11.7 million. This was mainly due to net realised and unrealised gains on the Company's investment in Fund I L.P.

During the year 2013 the Company repurchased in aggregate 2.4 million of shares which are held in treasury.

PERFORMANCE

The total value of investments held by the Company increased by £22.6 million to £184.4 million at 31 December 2013. The increase comprises £28.2 million of capital calls, £49.6 million in new or additional loans made to intergenia, Fund I L.P. and GP II, offset by loan repayments of £39.5 million; net realised and unrealised gains on all investments of £19.2 million; offset by distribution proceeds of £34.9 million from Fund I L.P..

The 2013 transactional activity for the Company's investment portfolio is summarised in the table below:

Loans comprise mezzanine and senior finance loans to certain of Fund I L.P.'s portfolio companies and a short-term revolving credit facility to Fund I L.P. and GP II; thereby ensuring that uninvested cash continues to work for the Company, earning a positive return. At 31 December 2013 the total value of loans outstanding was £53.7 million (2012: £43.9million).

The Company provided both mezzanine finance and senior debt finance to the Time Out Group. On 4 April 2013 the loans to Time Out London were restructured and the interest rate adjusted to 10% per annum. On 10 April 2013, £1.9 million of the loans was repaid by Time Out Group. Certain mezzanine loan and senior loan notes to Time Out Group are subject to US withholding tax, reducing the effective rates of interest to 10.5% and 5.95% respectively.

denominated in Pound million
Investment	Opening Cost (1 Jan 2013)	Opening Fair Value	Investment Additions	Realisations	Closing Cost	Change in Unrealised Gain/Loss	Closing Fair value
Investments held at 31 December 2013
Investments in Limited Partnerships
Fund I L.P.	58.35	117.94	25.69	(10.93)	73.11	(3.76)	128.94
Fund II L.P.	-	-	2.52	-	2.52	(0.83)	1.69
Total	58.35	117.94	28.21	(10.93)	75.63	(4.59)	130.63
Senior Loans
Time Out Group	7.11	7.09	-	(1.93)	5.18	(0.04)	5.12
Intergenia	2.23	2.16	2.09	(2.23)	2.09	0.06	2.08
Total	9.34	9.25	2.09	(4.16)	7.27	0.02	7.20
Mezzanine Loans
Time Out Group	9.30	9.28	-	-	9.30	(0.06)	9.22
Broadstone	6.00	6.00	-	-	6.00	-	6.00
Total	15.30	15.28	-	-	15.30	(0.06)	15.22
Financing Loans
Intergenia	-	-	6.83	-	6.83	(0.18)	6.65
Revolving Loan Facility
Fund I L.P.	19.34	19.34	38.18	(35.35)	22.17	-	22.17
Oakley Capital GP II Ltd	-	-	2.50	-	2.50	-	2.50
Total	19.34	19.34	40.68	(35.35)	24.67	-	24.67
Total Investments	102.33	161.81	77.81	(50.44)	129.70	(4.81)	184.37
Investment	Cost Realised	Proceeds	Realised Gain
Investments realised 2013
Fund I L.P	10.93	34.91	23.98
Time Out Group	1.93	1.93	-
Intergenia	2.23	2.22	(0.01)
Fund I L.P. Revolver	35.35	35.35	-
Total	50.44	74.41	23.97

The Company issued senior debt finance to intergenia of £8.4 million in 2011 bearing an annual interest rate of 8.5%. During 2012, intergenia repaid £6.2 million of the debt plus interest. The balance of the debt plus interest was fully repaid on 20 December 2013. During the year ending 31 December 2013, the Company provided additional debt finance and a finance loan facility to intergenia. The senior loan note was provided on 20 December 2013 and amounted to £2.1 million at an interest rate of 10% per annum maturing November 2014. The finance loan note was provided on 21 June 2013 and amounted to £6.8 million at an interest rate of 10% per annum maturing in December 2014.

The Company provides a revolving credit facility to Fund I L.P.  Each drawing under this facility is generally for a term of six months at an interest rate of 6.5%.  The loans are used by Fund I L.P. to fund short-term cash requirements. The interest generated from the revolving credit facility exceeds the interest earned on the Company's bank deposits, allowing the Company to earn higher returns on part of its cash reserves. As at 31 December 2013, the principal amount available under the revolving credit facility was £24 million, of which £22.2 million had been drawn down.

The Company provided a revolving loan facility to G.P II during 2013 of £2.5 million at an interest rate of 6.5%.  The entire balance was drawn down by GP II during 2013.

During 2013, the Company made a capital commitment to Fund II L.P. of £83 million (€100 million). Fund II L.P has three Feeder Funds. The Company invests in Fund II L.P. through its investment in Oakley Capital Private Equity II-A L.P. As at 31 December 2013, Fund II L.P. had not made any investments. The Company's share of the aggregate capital called by Fund II L.P. as at 31 December 2013 was £2.5 million (€3 million) representing 3% of the Company's capital commitment at that date. The fair value of the Company's investment in Fund II L.P. was £1.7 million as at 31 December 2013.

Fund I L.P. made two capital calls during 2013, the first of 7% on 8 February 2013 and the second of 9% on 24 June 2013.  During the year the Company acquired an additional interest in Fund I L.P. comprising a commitment of €300,000, accounting for 0.10% of committed capital. As at 31 December 2013, the Company's share of total capital calls by Fund I L.P. was £128.8 million representing 81.5% of the Company's total capital commitment (2012: 65.5%).

The fair value the Company's investment in Fund I L.P. increased by £11.0 million from £117.9 million as at 31 December 2012 to £128.9 million as at 31 December 2013. The increase is mainly attributable to capital calls of £25.7 million made by Fund I L.P. to fund follow-on investments in Broadstone and certain Time Out Group companies and a new investment, in Educas, offset by £10.9 million distributions made. During 2013, Fund I L.P. sold its investments in Emesa, Headland Media, Daisy Data Centre and Monument. The Company received distributions from Fund I L.P. of £34.9 million during the year.

Company Asset types:

	2013		2012
Cash & other assets	25%		29%
Limited Partnership	53%		52%
Mezzanine, Senior loan and revolving credit facility	22%		19%

At 31 December 2013 the Company's assets were divided between its investments in the Limited Partnerships (53%), cash and cash equivalents (25%) and loans provided directly to Fund I L.P. portfolio companies, Fund I L.P.  and GP II (22%). This is broadly consistent with prior years.

FUND I L.P. PORTFOLIO INVESTMENT PERFORMANCE FOR THE YEAR 2013

The below table summarises the investment activity of Fund I L.P. during 2013. The values are denominated in Euros and the Company holds 65.25% interest in Fund I L.P. The EUR:GBP exchange rate as at 31 December 2013 was 1:0.8312.

denominated in Euro million
Investment	Opening Cost (1 Jan 2013)	Opening Fair Value	Investment Additions / (Disposals)	Closing Cost	Change in Unrealised Gain/Loss	Closing Fair Value	Money Multiple	Gross IRR
Investments held at 31 December 2013
Verivox	-	53.28	-	-	-	53.28	11.7	87%
Broadstone	24.20	25.20	7.01	31.21	(0.46)	31.75	1.0	1%
Time Out Group	29.56	30.93	18.26	47.82	(1.26)	47.93	1.0	0%
Daisy	2.21	41.21	-	2.21	36.67	77.88	36.0	87%
Intergenia	30.19	51.16	0.18	30.37	3.62	54.96	1.8	35%
Educas	-	-	17.66	17.66	-	17.66	1.0	0%
Total	86.16	201.78	43.11	129.27	38.57	283.46
Investments realised 2013
Monument	4.28	3.44	(2.09)	-	0.84	-	0.5	-15%
Emesa	14.74	51.90	(51.90)	-	(37.16)	-	3.5	109%
Headland Media	4.95	12.67	(14.48)	-	(7.71)	-	2.9	27%
Daisy Data Centre	-	-	(1.18)	-	-	-	3.0	high
Total	23.97	68.01	(69.65)	-	(44.03)	-
Total Investments	110.13	269.79	(26.54)	129.27	(5.46)	283.46	2.3	43%
Investment	Cost	Proceeds	Realised Gain	Distributions			Money Multiple	Gross IRR
Realisations 2013
Monument	4.28	2.09	(2.19)	-			-	-15%
Emesa	14.74	51.90	37.16	45.60			1.2	109%
Headland Media	4.95	14.48	9.53	11.84			1.2	27%
Daisy Centre Solutions	0.58	1.77	1.19	0.95			0.8	high
Total	24.55	70.24	45.69	58.39			1.3	43%
Dividend Income 2013
Verivox		2.75		2.32
Daisy		1.69		1.69
Total		4.44		4.01
Total Distributions to Limited Partners 2013				62.40

The total increase in the year in the investment value of the portfolio companies of Fund I L.P. was €13.7 million. The change in values of the portfolio companies is attributable to three key factors:

Increase of €43.1 million as a result of additional funding into existing portfolio companies and new investments made by Fund I L.P.:

Fund I L.P. provided further equity funding to Broadstone of €7.0 million and to certain Time Out Group companies of €18.3 million during 2013.

The additional investment in Time Out Group was used to fund further development of its global technology platform, which has driven significant audience and traffic growth (43% year-on-year to 18 million monthly unique users); further international expansion, which after the acquisition of Time Out Chicago completed the consolidation of worldwide IP rights in the brand under common ownership; and investment in digital and commercial operations. With this additional investment, the strategic transformation of Time Out Group from one characterised by a geographically fragmented ownership structure and a paid-for, print-based revenue model to one with consolidated ownership and with its business model fundamentally transformed to one based on a global digital platform with free-sheet print editions is now largely complete, in line with the original investment thesis. Digital and licensing revenues continue to grow, and now comprise almost half of group turnover, and the new global digital platform, which now hosts 14 cities, is poised for further global growth in 2014. 

Additionally, Fund I L.P. made a new investment in Educas during 2013 of €17.7 million.

Increase of €38.6 million as a result of a net increase to the fair values of the underlying portfolio companies of Fund I L.P. held at year end:

Two of the portfolio companies, intergenia and Daisy, showed a marked increase in fair value in 2013.

Intergenia performed well since its acquisition by Fund I L.P. in December 2011. During January 2014 the investment was sold by Fund I L.P. to Fund II L.P. which increased the fair value of this investment by €3.6 million

Daisy's share price increased from 92 pence on 31 December 2012 to 176.75 pence on 31 December 2013. This represents an increase in the fair value of Daisy of €36.7 million.

Foreign exchange movements account for the remaining changes in fair values.

Decrease of €68.0 million as a result of investments in the underlying portfolio companies sold by Fund I L.P.:

Monument Securities, Daisy Data Centre, Emesa and Headland Media, were sold in 2013 by Fund I L.P.

Independent Auditors' Report

The Board of Directors and Shareholders of

Oakley Capital Investments Limited

We have audited the accompanying financial statements of Oakley Capital Investments Limited (the "Company"), which comprise the statements of assets and liabilities, including the schedules of investments as of 31 December 2013 and 2012, and the related statements of operations, changes in net assets and cash flows for the years then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Oakley Capital Investments Limited as of 31 December 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

This report, including our opinion, has been prepared for the Board of Directors and Shareholders and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, sae where expressly agreed by our prior consent in writing.

KPMG Audit Limited

Chartered Accountants

Hamilton, Bermuda

15 April 2014

Oakley Capital Investments Limited

Statements of Assets and Liabilities

31 December 2013 and 2012

(Expressed in British Pounds)

		2013		2012
	Notes	£		£
Assets
Investments (cost 2013: £129,708,435; 2012: £102,333,819)	5, 7	184,358,872		161,806,610
Cash and cash equivalents	3	53,789,371		56,036,923
Accrued interest and accounts receivable		9,373,806		10,087,914
Other receivables		42,646		33,993
Total assets		247,564,695		227,965,440
Liabilities
Accounts payable and accrued expenses	4	624,417		401,043
Total liabilities		624,417		401,043
Net assets attributable to shareholders		246,940,278		227,564,397
Represented by:
Share capital		1,287,090		1,281,250
Share premium		120,274,734		119,276,094
Retained earnings		132,309,902		109,519,050
		253,871,726		230,076,394
Less: Treasury stock	9	(6,931,448)		(2,511,997)
		246,940,278		227,564,397
Number of shares outstanding	9	123,699,050		126,061,350
Net asset value per share		2.00		1.81

Signed on behalf of the Board on 15 April 2014

Christopher Wetherhill	Tina Burns
Director	Director

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Schedules of Investments

31 December 2013 and 2012

(Expressed in British Pounds)

31 December 2013

	Fair value as a percentage of net assets	Percentage interest	Principal amount/ Quantity	Cost £		Fair value £
Investments in Limited Partnerships
Bermuda
Oakley Capital Private Equity L.P.	52.21%	65.25%		73,118,049		128,939,558
Oakley Capital Private Equity II-A L.P.	0.68%	48.86%		2,517,600		1,685,288
Total Investments in Limited Partnerships	52.89%			75,635,649		130,624,846
Unquoted debt securities
Investments in senior loan notes
United Kingdom
Time Out London    Interest at 10% p.a.     Maturity date March 2016	1.24%		£3,070,482	3,070,482		3,070,482
United States
Time Out New York    Interest at 8.5% p.a.     Maturity date May 2014	0.83%		$3,400,000	2,109,020		2,051,560
Germany
intergenia    Interest at 10% p.a.     Maturity date November 2014	0.84%		€2,500,000	2,090,000		2,078,000
Total Senior Loan Notes	2.91%			7,269,502		7,200,042

The notes following form an integral part of these financial statements

31 December 2013 (continued)

	Fair value as a percentage of net assets	Percentage interest	Principal amount/ Quantity	Cost £		Fair value £
Investments in mezzanine loans
United Kingdom
Broadstone   Interest at 15% p.a   Maturity date November 2015	2.43%		£6,000,000	6,000,000		6,000,000
Time Out London   Interest rate at 10% p.a.   Maturity date November 2015	2.51%		£6,200,000	6,200,000		6,200,000
United States
Time Out New York   Interest rate at 15% p.a.   Maturity date May 2016	1.22%		$5,000,000	3,101,500		3,017,000
Total mezzanine loans	6.16%			15,301,500		15,217,000
Investments in financing loan facility
Germany
intergenia   Interest at 10% p.a.   Maturity date December 2014	2.69%		€8,000,000	6,834,400		6,649,600
Total finance loans	2.69%			6,834,400		6,649,600
Investments in revolving loan facility
Bermuda
Oakley Capital Private Equity L.P.	8.98%		£22,167,384	22,167,384		22,167,384
Oakley Capital G.P. II Limited	1.01%		£2,500,000	2,500,000		2,500,000
Total revolving loans	9.99%			24,667,384		24,667,384
Total Investments	74.64%			129,708,435		184,358,872

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Schedules of Investments

31 December 2013 and 2012

(Expressed in British Pounds)

31 December 2012

	Fair value as a percentage of net assets	Percentage interest	Principal amount/ Quantity	Cost £		Fair value £
Investments in Limited Partnership
Bermuda
Oakley Capital Private Equity L.P.	51.83%	65.15%		58,354,206		117,940,422
Unquoted debt securities
Investments in senior loan notes
United Kingdom
Time Out London   Interest at 8.5% p.a.   Maturity date March 2013	2.20%		£5,000,000	5,000,000		5,000,000
United States
Time Out New York   Interest at 8.5% p.a.   Maturity date May 2014	0.92%		$3,400,000	2,109,020		2,091,000
Germany
intergenia   Interest at 8.5% p.a.   Maturity date November 2013	0.95%		€2,660,415	2,226,236		2,157,331
Total Senior Loan Notes	4.07%			9,335,256		9,248,331

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Schedules of Investments (continued)

31 December 2013 and 2012

(Expressed in British Pounds)

31 December 2012 (continued)

	Fair value as a percentage of net assets	Percentage interest	Principal amount/ Quantity	Cost £		Fair value £
Investments in mezzanine loans
United Kingdom
Broadstone   Interest at 15% p.a   Maturity date November 2015	2.64%		£6,000,000	6,000,000		6,000,000
Time Out London   Interest rate at 15% p.a.   Maturity date November 2015	2.72%		£6,200,000	6,200,000		6,200,000
United States
Time Out New York   Interest rate at 15% p.a.   Maturity date May 2016	1.35%		$5,000,000	3,101,500		3,075,000
Total mezzanine loans	6.71%			15,301,500		15,275,000
Investments in revolving loan facility
Bermuda
Oakley Capital Private Equity L.P.	8.50%		£19,342,857	19,342,857		19,342,857
Total revolving loans	8.50%			19,342,857		19,342,857
Total Investments	71.11%			102,333,819		161,806,610

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Statements of Operations

For the Years Ended 31 December 2013 and 2012

(Expressed in British Pounds)

		2013		2012
	Notes	£		£
Investment income
Interest		5,726,795		5,821,871
Withholding tax on interest		(253,922)		(210,897)
Other		324		-
		5,473,197		5,610,974
Expenses
Management fees	4	1,243,376		665,995
Performance fees	4	57,718		81,465
Professional fees	6,10	360,827		330,617
Other		392,287		331,392
Interest		1,059		6,595
Total expenses		2,055,267		1,416,064
Net investment income		3,417,930		4,194,910
Realised and unrealised gains (losses) on foreign        exchange and investments
Net realised gains (losses) on foreign exchange		300,438		(409,762)
Net change in unrealised losses on foreign exchange		(82,529)		(26,119)
Net realised gains (losses) on sales of investments		23,977,364		(693,178)
Net change in unrealised (depreciation) appreciation on investments		(4,822,352)		8,081,831
Net realised and unrealised gains on foreign exchange and investments		19,372,921		6,952,772
Net earnings		22,790,851		11,147,682
Net earnings per share	9	0.18		0.09

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Statements of Changes in Net Assets

For the Years Ended 31 December 2013 and 2012

 (Expressed in British Pounds)

	Note	2013		2012
		£		£
Net increase in net assets resulting from operations
Net investment income		3,417,930		4,194,910
Net realised gains (losses) on foreign exchange		300,438		(409,762)
Net change in unrealised losses on foreign exchange		(82,529)		(26,119)
Net realised gains (losses) on sales of investments		23,977,364		(693,178)
Net change in unrealised (depreciation) appreciation on investments		(4,822,352)		8,081,831
Net increase in net assets resulting from operations		22,790,851		11,147,682
Net decrease in net assets resulting from capital transactions
Shares sold		8,882,671		-
Shares repurchased		(12,297,641)		(2,511,997)
Net decrease in net assets resulting from capital transactions		(3,414,970)		(2,511,997)
Net increase in net assets		19,375,881		8,635,685
Net assets at beginning of year		227,564,397		218,928,712
Net assets at end of year		246,940,278		227,564,397

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Statements of Cash Flows

For the Years Ended 31 December 2013 and 2012

 (Expressed in British Pounds)

	2013 £		2012 £
Cash flows from operating activities
Net increase in net assets resulting from operations	22,790,851		11,147,682
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realised and unrealised gains on foreign exchange and investments	(19,372,921)		(6,952,772)
Payments for purchases of investments	(82,311,259)		(19,582,473)
Proceeds on disposal of investments	78,914,009		10,308,303
Change in accrued interest receivable	714,108		(6,126,537)
Change in other receivables	(8,653)		(18,355)
Change in accounts payable and accrued expenses	223,374		100,083
Net cash provided by (used in) operating activities	949,509		(11,124,069)
Cash flows from financing transactions
Proceeds from shares sold	1,004,480		-
Payments for shares repurchased	(4,419,450)		(2,511,997)
Net cash used in financing transactions	(3,414,970)		(2,511,997)
Net effect of foreign exchange	217,909		(435,881)
Net decrease in cash and cash equivalents	(2,247,552)		(14,071,947)
Cash and cash equivalents at beginning of year	56,036,923		70,108,870
Cash and cash equivalents at end of year	53,789,371		56,036,923
Interest paid during the year	1,059		6,595

The notes following form an integral part of these financial statements

Oakley Capital Investments Limited

Notes to the Financial Statements

For the Years Ended 31 December 2013 and 2012

1.      The Company

Oakley Capital Investments Limited (the "Company") is a closed-ended investment company which was incorporated under the laws of Bermuda on 28 June 2007. The principal objective of the Company is to achieve capital appreciation through investments in a diversified portfolio of private mid-market UK and European businesses. The Company achieves its investment objective primarily through its investments in Oakley Capital Private Equity L.P. ("Fund I L.P."), an exempted limited partnership established in Bermuda on 10 July 2007 and Oakley Capital Private Equity II-A L.P. ("Fund II L.P."), an exempted limited partnership established in Bermuda on 27 September 2012 (collectively the "Limited Partnerships"). The manager is Oakley Capital (Bermuda) Limited (the "Manager") and the investment adviser is Oakley Capital Limited (the "Investment Adviser").  The Company and the general partner of the Limited Partnerships have two directors in common.

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

2.      Significant accounting policies

a)   Basis of presentation

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

b)   Use of estimates

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

c)   Investment valuation

Limited Partnerships

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

The Limited Partnerships value their investments at fair value and recognise gains and losses on security transactions using the specific cost method.

Unquoted debt securities (mezzanine loans, senior loans and revolving loan facilities)

Mezzanine loans, senior loans and revolving loan facilities are initially valued at the price the loan was granted. Subsequent to initial recognition the loans are valued on a fair value basis taking into account market conditions and the operating performance and financial condition of the borrower.

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

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

The hierarchy of inputs is summarised below.

-    Level 1 - quoted prices in active markets for identical investments

-    Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit spreads, etc.)

-    Level 3 - significant unobservable inputs (including the Investment Adviser's own assumptions in determining the fair value of investments)

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

Securities traded on a national stock exchange are valued at the last reported price on the valuation date and are categorised as Level 1 within the fair value hierarchy.

When prices are not readily available, or are determined not to reflect fair value, the Company may value these securities at fair value as determined in accordance with the procedures approved by the Investment Adviser in consultation with the Manager.

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

Level 3 securities are valued at the discretion of the Investment Adviser in consultation with the Manager. In these circumstances, the Manager will use consistent fair valuation criteria and may obtain independent appraisals.

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

d)   Income recognition

Interest income and expenses are recognised on the accruals basis.

e)   Foreign currency translation

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

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

 

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

f)    Cash and cash equivalents

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

3.      Cash and cash equivalents

Cash and cash equivalents at 31 December 2013 and 2012 consist of the following:

	2013		2012
	£		£
Cash	11,343,074		14,437,917
Short-term deposits	42,446,297		41,599,006
	53,789,371		56,036,923

4.      Management and performance fees

(a)  The Company has entered into a Management Agreement with the Manager to manage the Company's investment portfolio. The Manager will not receive a management fee from the Company in respect of funds either committed to or invested by the Company in the Limited Partnerships managed by the Manager. The Manager will receive a management fee at the rate of 1% per annum in respect of those funds that are not committed to the Limited Partnerships (but including the proceeds of any realisations), which are invested in cash, cash deposits or near cash deposits and a management fee at the rate of 2% per annum in respect of those funds which are invested directly in co-investments. The management fee is payable monthly in arrears. 

As part of the Company's investment in Fund II L.P., the Company has agreed to pay Oakley Capital GP II Limited ("GP II") an establishment fee equal to 2% per annum of the Company's initial commitment to Fund II L.P. The establishment fee is payable semi-annually in advance and terminates upon the completion of Fund II L.P.'s initial close. The establishment fee is included in Management fees in the Statements of Operations.

During the year ended 31 December 2013, the Company incurred management fees of £1,243,376 (2012: £665,995).  As at 31 December 2013 no management fees were payable to the Manager (2012: £38,641).

 

The Manager may also receive a performance fee of 20% of the excess of the amount earned by the Company over and above an 8% hurdle rate per annum on any monies invested as a co-investment with the Limited Partnerships. Any co-investment will be treated as a segregated pool of investments by the Company. If the calculation period is greater than one year, the hurdle rate shall be compounded on each anniversary of the start of the calculation period for each segregated co-investment. If the Manager does not exceed the hurdle rate on any given co-investment, that co-investment shall be included in the next calculation so that the hurdle rate is measured across both co-investments. No previous payments of performance fee will be affected if any co-investment does not reach the hurdle rate of the return.  During the year ended 31 December 2013, the Company incurred performance fees of £57,718 (2012: £81,465).

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

5.      Fair value of financial instruments

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

31 December 2013

			Other significant		Significant
			observable		unobservable
	Quotes prices		inputs		inputs
	(Level 1)		(Level 2)		(Level 3)
	£		£		£
Investments in Securities	-		-		184,358,872

31 December 2012

			Other significant		Significant
			observable		Unobservable
	Quotes prices		inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
	£		£		£
Investments in Securities	-		-		161,806,610

The instruments comprising investments in securities are disclosed in the Schedules of Investments.

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

Because of the inherent uncertainty of valuing unquoted private equity investments, the estimated fair values may differ from the values that would have been used had a ready market for such investments existed and such differences may be material. Mezzanine loans, senior loans and revolving loan facilities are initially valued at the price the loan was granted. Subsequent to initial recognition, the loans are valued on a fair value basis taking into account market conditions and the operating performance and financial condition of the borrower. The fair values have been determined based on a discounted cash flow valuation approach consistent with prior years. The discount rate used to value the mezzanine loans is 15% (2012:15%), the secured loans 8.5% (2012:8.5%), the financing loan 10% and the revolving loan facility 6.5% (2012:6.5%). A discount rate of 10% is used for the mezzanine and secured loans provided to Time Out London and intergenia.

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

	Investment		Investment
	in Securities		in Securities
	2013		2012
	£		£
Investment in Limited Partnerships
Fair value at beginning of year	117,940,422		112,553,747
Purchases	28,208,475		239,616
Proceeds on disposal	(34,906,526)		(2,737,153)
Realised gain (loss) on disposal	23,979,492		(476,619)
Net change in unrealised (depreciation) appreciation on investments	(4,597,017)		8,360,831
Limited Partnerships, fair value at end of year	130,624,846		117,940,422
Unquoted debt securities
Fair value at beginning of year	43,866,188		32,590,040
Purchases	54,102,784		19,342,857
Proceeds on disposal	(44,007,483)		(7,571,150)
Net realised loss on disposal	(2,128)		(216,559)
Net change in unrealised depreciation on investments	(225,335)		(279,000)
Unquoted debt securities, fair value at end of year	53,734,026		43,866,188
Fair value at end of year	184,358,872		161,806,610

The Company's policy is to recognise transfers into and out the various levels as of the end of the period or change in circumstances that caused the transfer. For the year ended December 31, 2013, the Company did not have any transfers between Levels I, II or III.

Of the investments held by the Limited Partnerships, 27% (2012: 15%) are classified as Level 2 investments and 73% (2012: 85%) are classified as Level 3 investments.

6.      Administration fee

Under the terms of the Administration Agreement dated 30 July 2007 between Mayflower Management Services (Bermuda) Limited (the "Administrator") and the Company, the Administrator receives an annual administration fee at prevailing commercial rates. During the year ended 31 December 2013, the Company incurred administration fees of £182,438 (2012: £157,060), which is included in professional fees in the Statements of Operations.

7.      Investments

Limited Partnerships

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

The Company's share of the total capital called by Fund I L.P. to 31 December 2013 was £127,152,057 (€152,974,082) (2012: £99,534,618 (€122,745,860)). Of the Company's total capital commitments 81.5% (2012: 65.50%) has been called. During the year ended 31 December 2012 the Company acquired an

additional interest in Fund I L.P. comprising a commitment of €398,260, accounting for 0.14% of the committed capital. During the year ended 31 December 2013 the Company acquired an additional interest in Fund I L.P. comprising a commitment of €300,000, accounting for 0.10% of the committed capital.

The Company's share of the total capital called by Fund II L.P. to 31 December 2013 was £2,493,600 (€3,000,000) representing 3% of the Company's total capital commitment.

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

At 31 December 2013 all of the Limited Partnerships' investments are carried at fair value. The Limited Partnerships appointed a third party valuation specialist to assess the investment adviser's determination of the fair value of certain underlying businesses.

Fund I L.P.

Fund I L.P. made follow-on investments in four of the portfolio companies in 2013. These investments were made in Broadstone, intergenia, Time Out London and Time Out New York. Fund I L.P. funded the follow-on investments using a combination of capital calls and loans drawn under a revolving loan facility made available to Fund I L.P. Fund I L.P. bought a new investment, Educas Investments LLP, and sold its investments in Headland Media, Daisy Data Centre, Monument and Emesa during 2013.

Verivox

Fund I L.P. through VVX (Bermuda) Limited, acquired 51% of Verivox Holdings Limited ("Verivox"), an online consumer energy price comparison service in Germany. The company receives commissions from energy suppliers when consumers elect to switch providers through its website.

Broadstone

Fund I L.P. through its wholly owned subsidiary, Broadstone Holdco (Bermuda) Limited, acquired 84.4% of Broadstone Finance Limited ("Broadstone"), a UK-wide independent provider of investment advice and solutions to private individuals and corporates, from BDO LLP.

Time Out Group

The Time Out Group consist of investments in Time Out Group HC Limited ("Time Out London") and Time Out America LLC ("Time Out New York").

Fund I L.P. through its wholly owned subsidiary, TO (Bermuda) Limited, acquired 50% of Time Out London, an international multi channel publisher. Time Out London provides services across traditional print, digital channels and live events. At 31 December 2013, Fund I L.P. owned 51% of Time Out London.

Fund I L.P. through its wholly owned subsidiary, TONY (Bermuda) Limited, acquired 65.7% of Time Out New York. In combination, the Time Out Group control the worldwide rights to the Time Out brand (excluding Chicago). At 31 December 2013, Fund I L.P. owned 76.4% of Time Out New York.

Educas

Fund I L.P. acquired 51% of Educas Investments LLP ("Educas"), an entity investing in private schools in several countries.

intergenia

Fund I L.P. through its wholly owned subsidiary, WHDI (Bermuda) Limited, acquired a 51% stake in Intergenia Holdings GmbH ("intergenia"), a web hosting company providing managed, dedicated and cloud hosting.

Headland Media

Headland Media Limited ("Headland Media") is a leading business to business media content provider of news digest services to the hotel and shipping sectors; as well as a leading provider of entertainment and training services to offshore industries. Fund I L.P. sold its investment in Headland Media during the year ending 31 December 2013.

Emesa

Fund I L.P. acquired 68.0% of Sun Cooperatief U.A. ("Emesa"), an e-commerce company active in the Dutch online leisure market. Emesa enables online customers to find and book leisure deals such as short holidays, weekend breaks, spa/beauty visits, event tickets and restaurant visits through its websites. Fund I L.P. sold its investment in Emesa during the year ending 31 December 2013.

Monument Securities

Fund I L.P. through its wholly owned subsidiary, Monument Securities Group Limited, acquired 51% of Monument Securities 11 Limited ("Monument Securities"). Monument Securities is a global equity, derivatives and fixed income broker with a 20 year history. Monument Securities provides services to institutions, fund managers, market professionals, corporate and hedge funds. Fund I L.P. sold its investment in Monument Securities during the year ending 31 December 2013.

Certain directors of the Company and the general partner of the Limited Partnerships are also directors of the investee companies.

Fund II L.P.

Fund II L.P has three feeder funds: Oakley Capital Private Equity II-A L.P., Oakley Capital Private Equity II-B L.P. and Oakley Capital Private Equity II-C L.P. (collectively the "Feeder Funds"). The Company invests in Fund II L.P through an investment in Oakley Capital Private Equity II-A L.P. As at 31 December 2013, no investments had been made by Fund II L.P.

Mezzanine financing investments

Headland Media

As part of Fund I L.P.'s acquisition of Newslink through Headland Media, the Company provided £1,645,945 of debt finance, in the form of a secured mezzanine instrument. The instrument carries a fixed interest rate of 15.0% and was due in December 2014. The debt was fully repaid on 16 February 2012.

Time Out London

As part of Fund I L.P.'s acquisition of Time Out London, the Company provided debt finance of £6,200,000 in the form of a mezzanine loan to TO (Bermuda) Limited. The instrument carried a fixed interest rate of 15% maturing on 30 November 2013. On 4 April 2013 the instrument was restructured and now carries a fixed interest rate of 10% maturing on 30 November 2015. The fair value of the loan is considered to approximate its amortized cost at 31 December 2013.

Broadstone

As part of Fund I L.P.'s acquisition of Broadstone, the Company provided debt finance of £6,000,000 in the form of a mezzanine loan to Broadstone Holdco (Bermuda) Limited. The instrument carries an interest rate of 15% and matures on 30 November 2015. The fair value of the loan is considered to approximate its amortized cost at 31 December 2013.

Time Out New York

As part of Fund I L.P.'s acquisition of Time Out New York, the Company provided debt finance of $5,000,000 (£3,101,500) to TONY OCIL (Bermuda) Limited in the form of a mezzanine loan. The instrument carries a fixed interest rate of 15% before withholding tax and 10.5% after withholding tax and matures on 26 May 2016. Interest income on the loan is shown net of withholding tax. The fair value of the loan is considered to approximate its amortised cost at 31 December 2013.

Daisy Data Centre Solutions

As part of Fund I L.P.'s acquisition of Daisy Data Centre Solutions, the Company provided debt finance of £4,500,000 in the form of a mezzanine loan. The instrument carried a fixed interest rate of 15% and was repaid in full on 14 February 2013.

Senior Loan notes

Time Out London 

As part of Fund I L.P.'s acquisition of Time Out London, the Company provided a secured senior loan of £5,000,000 to Time Out Group BC Limited, a wholly owned subsidiary of Time Out London. The instrument carried a fixed interest rate of 8.5% and matures on 31 March 2013. On 4 April 2013 the instrument was restructured and now carries a fixed interest rate of 10% maturing on 31 March 2016. On 10 April 2013, £1,929,518 of this loan was repaid. The fair value is considered to approximate its amortised cost at 31 December 2013.

Time Out New York

As part of Fund I L.P.'s acquisition of Time Out New York, the Company provided a secured senior loan of $3,400,000 (£2,109,020) to TONY OCIL (Bermuda) Limited. The instrument carries a fixed interest rate of 8.5% before withholding tax and 5.95% after withholding tax. The instrument matures no later than May 2014. The fair value is considered to approximate its amortised cost at 31 December 2013.

intergenia

As part of Fund I L.P.'s acquisition of intergenia, the Company provided a secured senior loan of €10,000,000 (£8,368,000). The instrument carried a fixed interest rate of 8.5%. On 8 March 2012 €7,339,585 (£6,141,764) of this loan was repaid and the balance of the debt was fully repaid on 20 December 2013. On 20 December 2013 the Company provided a secured senior loan of €2,500,000 (£2,090,000). The instrument carries a fixed interest rate of 10%. The instrument matures no later than November 2014. The fair value is considered to approximate its amortised cost at 31 December 2013.

Financing Loan note

intergenia

On 21 June 2013, the Company provided a finance loan of €8,000,000 (£6,834,400). The instrument carries a fixed interest rate of 10%. The instrument matures no later than December 2014. The fair value of the loan is considered to approximate its amortised cost as at 31 December 2013.

Revolving loan facility

Oakley Capital Private Equity L.P.

On 19 March 2012, the Company provided a revolving loan facility of £23,000,000 to Fund I L.P. at an interest rate of 6.5%. The loan facility was increased to £26,000,000 on 19 November 2013.  As at 31 December 2013 £22,167,384 of the funding had been drawn under the facility. The fair value is considered to approximate its amortised cost at 31 December 2013.

Oakley Capital GP II Limited

On 2 December 2013, the Company provided a loan facility of £2,500,000 to Oakley Capital GP II Limited at an interest rate of 6.5%. The fair value is considered to approximate its amortised cost at 31 December 2013.

8.      Capital commitment

The Company has the following capital commitments:

	Capital		Capital
	commitments		commitments
	2013		2012
	€		€
Fund I L.P.
Total capital commitment (2013: £156,014,794         (2012: £151,961,249))	187,698,260		187,398,260
Called capital at beginning of year	122,745,860		122,485,000
Capital calls during the year
-     8 February 2013 7% call	13,117,879		-
-     24 June  2013 9% call	16,865,843		-
Additional interests acquired (2013: 0.10% (2012: 0.14%))	244,500		260,860
Called capital at end of year (2013: £127,152,057                         (2012: £99,534,618))	152,974,082		122,745,860
Capital commitment available (2013: £28,862,737                         (2012: £52,426,631))	34,724,178		64,652,400
Fund II L.P.
Total capital commitment (2013: £83,120,000)	100,000,000		-
Called capital at beginning of year	-		-
Capital calls during the year
-     8 November 2013 3% call	3,000,000		-
Called capital at end of year (2013: £2,493,600)	3,000,000		-
Capital commitment available (2013: £80,626,400)	97,000,000		-

The Limited Partnerships may draw upon the capital commitment at any time, subject to two weeks' notice, on an as needed basis.

9.      Share capital

(a)  Share capital

The authorised share capital of the Company consists of 200,000,000 Ordinary Shares with the issued share capital of the Company consisting of 100,000,000 Ordinary Shares.

(b)  Secondary placing

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

(c) Share repurchase

On 3 July 2012, the Company repurchased 603,650 shares at a price of 114 pence per share, on 5 July 2012 the Company repurchased an additional 1,355,000 shares at a price of 125 pence and on 9

July 2012 the Company repurchased an additional 105,000 shares at 122 pence per share. Directly attributable costs of £1,987 were incurred in relation to the shares repurchased.

On 14 May 2013, the Company repurchased 1,200,000 shares at a price of 150 pence per share and on 15 May 2013, the Company repurchased 1,745,300 shares at a price of 150 pence per share. On 7 November 2013, the Company sold 584,000 shares at a price of 172 pence per share from the treasury stock. On 9 December 2013, the Company sold 4,425,950 shares at a price of 178 pence per share from the treasury stock. On the same date, the Company repurchased the 4,425,950 shares at a price of 178 pence per share. As at 31 December 2013, a total of 4,425,950 shares are held as treasury stock.

Shares of common stock and warrants outstanding are:

Common stock

	2013		2012
Balance at beginning of year	126,061,350		128,125,000
Shares repurchased	(7,372,250)		(2,063,650)
Shares sold from treasury stock	5,009,950		-
Balance at end of year	123,699,050		126,061,350

10.     Related parties

Certain Directors of the Company are also Directors, Members and/or shareholders of the Manager, Oakley Capital Corporate Finance LLP ("Oakley Finance"), Palmer Capital Associates (International) Limited and the Administrator; entities which provide services to and receive compensation from the Company. These agreements are based on normal commercial terms.

The Company has a financial advisory agreement with Oakley Finance.  During 2013, the Company incurred financial advisory fees of £25,000 (2012: £25,000), which is included in professional fees in the Statements of Operations.

11.     Taxation

Under current Bermuda law the Company is not required to pay any taxes 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 will be exempt from such taxation at least until the year 2035.

The Company was not required to recognise any amounts for uncertain tax positions under FASB ASC 740-10 during the year ended 31 December 2013.

The Company may, however, be subject to foreign withholding tax and capital gains tax in respect of income derived from its investments in other jurisdictions.

12.     Indemnifications and warranties

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

13.     Subsequent events

The Directors have evaluated subsequent events from the year end through 15 April 2014 which is the date the financial statements were available to be issued.  The following events have been identified for disclosure.

On 17 January 2014, Fund II L.P called for €24,000,000 representing 24% of outstanding commitments to partially fund the acquisition of intergenia.

On 31 January 2014, the Company increased its committed capital in Fund II L.P. from €100,000,000 to €150,000,000. On 11 February 2014, €13,500,000 of the additional committed capital was called.

The Company provided additional loan facilities to intergenia of €6,965,000 on 6 February 2014 and €4,300,000 on 26 February 2014.

On 26 February 2014, the Company received a distribution of €34,354,584 from Fund I L.P. due to the sale of its investment in intergenia to Fund II L.P.

On 14 March 2014, Fund I L.P. called for €13,138,878 representing 7% of outstanding commitments.

On 31 March 2014, the Company increased the revolving loan facility available to Oakley Capital GP II Limited to £5,000,000.

For the period since year end through 15 April 2014, Fund I L.P. drew down £5,486,734 from the revolving loan facility to fund follow on investments. On 3 March 2014, the Company increased the revolving loan facility available to £28,000,000. On 31 March 2014, Fund I L.P. repaid £15,137,996 and the Company decreased the revolving loan facility available to £20,000,000.

COMMITMENT TO OAKLEY CAPITAL PRIVATE EQUITY II

OCIL has now committed €150 million in aggregate to Oakley Capital Private Equity II ("Fund II"), the second European-focused buyout fund established by Oakley. This is in addition to OCIL's existing €187.7 million cornerstone commitment to Fund II's predecessor fund, Oakley Capital Private Equity L.P. ("Fund I"), which is also sponsored and advised by Oakley, in accordance with the terms of OCIL's AIM admission document.

OCIL's commitment to Fund II is being funded primarily from investment returns achieved from its existing investment in Fund I and which are consistent with OCIL's investment objectives and investment strategy set out in the AIM admission document.

Total commitments to Fund II by all investors, including OCIL, may not exceed €500,000,000 in aggregate. OCIL will increase its own commitment to Fund II by up to a further €50 million in aggregate at any time up to 31 December 2014, to the extent that corresponding investment proceeds are received by OCIL from Fund I ahead of that date. OCIL will also commit further available funding from its investment returns to a co-investment programme ("Co-Investment Programme") sponsored by Oakley that will co-invest in one or more portfolio company acquisitions to be made by Fund I, Fund II and/or their successor funds. OCIL's commitment to the Co-Investment Programme over the next 5 years is expected to be not less than €100 million, and will be further increased to the extent that additional funds are received that are not able to be committed directly to Fund II.

The net result of these arrangements is that OCIL's overall exposure to Fund II and the Co-Investment Programme will equal approximately €300 million in aggregate.

The material terms of OCIL's participation in Fund II and the Co-Investment Programme are set out below and, other than as specifically highlighted below, its investments therein are or will be made on substantially the same terms as OCIL's commitment to Fund I.

Structure

Consistent with Fund I, both Fund II and the Co-Investment Programme are structured as Bermuda limited partnerships. Fund II comprises a series of three Bermuda limited partnerships investing in parallel, to address the differing requirements of Fund II's investors (including OCIL).

Oakley Capital GP II Limited ("GP"), as general partner and manager of both Fund II and the Co-Investment Programme, has appointed Oakley as its investment adviser in relation to the activities and operations of Fund II and the Co-Investment Programme.

Term

The term of Fund II runs for 10 years from its final closing date (being no later than 31 December 2014), including a 5-year investment period from its final closing date. Fund II may be terminated early in certain circumstances, including at the determination of 75% in interest of investors in the event of cause conduct by the GP which results in material financial harm to Fund II, or may be extended for up to three 1-year periods with the approval of investors. Investors have very limited redemption or withdrawal rights ahead of termination of the fund.

The term and the investment period of the Co-Investment Programme are generally tied to the term of Fund II, although they may be terminated sooner by the GP, or extended with OCIL's consent.

General Partner's Share / Management Fees

For its management of Fund II, and consistent with Fund I, the GP is entitled to a priority share of the fund's proceeds which, during the investment period, is equal to 2% per annum of total investor commitments to Fund II, and after the investment period, is equal to 2% per annum of unreturned invested capital (less any amounts written off).

For its management of the Co-Investment Programme, the GP is entitled to a priority share of the proceeds of the Co-Investment Programme equal to 2% per annum of unreturned invested capital (less any amounts written off).

Carried Interest

For both Fund II and the Co-Investment Programme, and consistent with Fund I, a 20% carried interest on profits is payable to a member of the Oakley group provided an 8% per annum preferred return is made by OCIL and other investors, including a full catch-up on the preferred return. Carried interest is calculated separately for Fund II and the Co-Investment Programme, and within each such fund operates on a cross-aggregated deal by deal basis. Any over-payment of carry will be backed up by an escrow account and individual guarantees from members of the Oakley team.

Fund Expenses

OCIL is required to bear its pro rata share of the establishment and ongoing operating and administration costs of Fund II and Co-Investment Programme, including in relation to investments (whether or not completed). Establishment costs for Fund II are capped at €2,000,000 excluding taxes, and for the Co-Investment Programme are capped at €100,000 excluding taxes. For Fund I, establishment costs were capped at 0.5% of total fund commitments (corresponding to €1,438,250) excluding taxes.

Diversification

On Fund II, no more than 20% of total commitments may be invested in any single portfolio company generally, provided however that Fund II may, on a one-off basis, invest up to 30% of total commitments in a single portfolio company. On Fund I, the diversification cap was 25% of total commitments in any single portfolio company.

The Co-Investment Programme is not subject to any specific diversification requirements or concentration limits.

Geographic investment restrictions

Fund II may invest no more than 30% of total commitments in entities not connected to, or the principal businesses of which are located outside, the Core European Countries (being EU member states and Norway, Switzerland and Turkey).

Fund I can invest no more than 30% of total commitments in entities the principal businesses of which are located outside the UK, and no more than 25% of total commitments in entities the principal businesses of which are located outside Western Europe.

The Co-Investment Programme is not subject to any specific geographic restrictions.

Listed Investments

Consistent with Fund I, both Fund II and the Co-Investment Programme may invest in listed securities subject to certain restrictions.

Key man event and suspension / termination of investment period

On Fund II, the investment period may be suspended at the determination of 75% in interest of investors if certain key persons cease to devote the requisite business time to the activities of Oakley, Fund II and Oakley's other funds. The investment period will terminate automatically if such a suspension period continues for a period of more than twelve months.

On Fund I, the investment period could be terminated at the determination of 75% in interest of investors if a key person suspension continued for a period of more than 6 months.

There are no separate key person provisions for the Co-Investment Programme, but by default the ability to make investments through the Co-Investment Programme is subject to the Oakley funds themselves being able to make investments.

OCIL has additional key person rights under the AIM Document in the event that Peter Dubens and one other key person leaves Oakley.

Investor Committee

OCIL is represented on the investor advisory committees of both Fund I and Fund II. The role of the investor advisory committee is to consult with the GP in relation to certain matters pertaining to the operation of the relevant fund, including in relation to dealing with conflicts of interest.

 

END

 

 

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