Investment objective

The investment objective of OCI is primarily to provide investors with long term capital appreciation through its investments in the Limited Partnerships of Oakley Capital Private Equity

Investing policy of the Company

The Investing Policy was originally set out in the Company’s admission document dated 30 July 2007 (the Admission Document) and as set out herein reflects the current operating structure of the Company and its affiliates, as contemplated in the Admission Document. No substantive changes have been made to the Investing Policy as stated in the Admission Document and none are contemplated at this time.

Investment objective

The investment objective of the Company is primarily to provide investors with long term capital appreciation through its investments in the Limited Partnerships, in successor funds managed by the Investment Manager and/or the General Partners and/or advised by the Investment Adviser (or their respective affiliates) and, over time, through co-investment opportunities alongside the Limited Partnerships and such successor funds, either through debt or equity instruments.

Cash resources held by the Company that are not called upon by the Limited Partnerships and their successor funds 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 co-investment opportunities made available alongside the Limited Partnerships and any successor funds thereto, the Board has been advised by the General Partners that, from time to time, the General Partners (acting in their sole discretion) may invite one or more limited partners in the Limited Partnerships (and successor limited partnerships) including the Company to co-invest alongside the Limited Partnerships (and successor limited partnerships) on the same terms as such limited partnerships. In such event, the General Partner of the relevant Limited Partnership (or, as applicable, the general partner of the successor limited partnership) would make available to the Company copies of the due diligence and analysis prepared by the Investment Manager or the Investment Adviser and any other third parties in relation to such co-investment opportunities. The Board would then determine whether or not, and to what level, the Company should co-invest.

Investment strategy of the Limited Partnerships

The Limited Partnerships’ investment strategy is to focus primarily on private mid-market UK and European businesses, thereby leveraging the Investment Adviser’s previous investment experience with the objective of delivering long term capital appreciation within the Limited Partnerships in line with a target gross internal rate of return in excess of 25 per cent. per annum and a blended gross multiple of three times. The life of each Limited Partnership is expected to be approximately 10 years, which includes a five-year investment period from the date of final closing.

Each Limited Partnership’s (or successor limited partnership’s) primary focus will be on equity investments of approximately £20 million to up to £100 million per transaction that enable it to secure a controlling position in the target company. The Limited Partnerships (and successor limited partnerships) will seek to invest in companies that have achieved, or have the potential to achieve, a critical scale in their industry or sector, creating a sustainable earnings stream which should command a premium. It is the objective of each Limited Partnership and successor limited partnership to build a well-diversified portfolio of investments primarily in buyouts but also which may include some limited exposure to later stage development capital investments. It is not foreseen that the Limited Partnerships (or successor limited partnerships) will invest in early-stage companies or those with unproven technologies. The Limited Partnerships (or successor limited partnerships) may also consider investing in public or listed securities, markets or situations from which the Limited Partnerships (or successor limited partnerships) may otherwise obtain a strategic or financial advantage. Such investments in public or listed securities, markets or situations will be limited to no more than 15 per cent. of the public or listed securities in any target company except where such acquisition forms part of a takeover offer.

As with other investments made by the team of investment professionals in the Investment Adviser, the Limited Partnerships (or successor limited partnerships) intend to adhere to a strict set of procedures when implementing their investment strategy. These procedures emphasise:

  • concentration on a select number of investments;
  • in depth analysis of the industry sector and the company prior to acquisition;
  • focus on cash flow stability and growth prospects; and
  • a hands-on, value creating approach to ownership.

Investment approach

The Investment Adviser will seek to identify portfolio companies for the Limited Partnerships (or successor limited partnerships) that it believes have the ability to create, or defend a sustainable competitive advantage through, a market leading position in their respective industry or sectors.

The Investment Adviser will seek to target investments which it believes have a potential for value creation through active management in the following areas:

Strategic redirection
  • focus on core business
  • new market expansion
  • new product introduction
Industry consolidation
  • economies of scale through acquisition and integration
  • business roll-outs
Operational restructuring
  • cost structure re-alignment
  • working capital and cash management
  • information technology and systems integration
  • improve asset utilisation
Financial restructuring
  • over-leveraged capital structures
  • public to privates in smaller mid-market companies with a focus on AIM
  • non-core divestitures
Human capital management

 

  • management incentives through equity participation
  • removal of underperforming management teams
  • injection of new talent

The Investment Adviser intends to employ a disciplined and methodical investment approach. In order to evaluate a company’s potential, the Investment Adviser will typically conduct a detailed analysis of the sector, the company’s position within that sector, any consolidation potential, the company’s financial performance relative to its peers, its key performance drivers and to which potential buyers the Investment Adviser believes the company could ultimately be sold.

The investment strategy of the Investment Adviser for each industry or sector will be independently reviewed. The sectors and companies that the Investment Adviser currently expects to target are generally expected to exhibit some, or many, of the following characteristics:

Industry attractiveness

 

 

  • sustainable barriers to entry
  • stable customer and supplier bases
  • attractive forecasted growth
Ability to generate sustainable earnings and cash flow recurring revenues
  • predictable cash-flows
  • high return on invested capital
Defensible market position, main business risks within the control of the Limited Partnerships and/or Company

 

  • leaders in their “niches” demonstrable resilience in downturns
Sustainable competitive advantage

 

  • brand strength
  • highly developed distribution networks
  • flexible cost structures
Consolidation opportunities

 

  • identify industries early in consolidation lifecycle
  • economies of scale through buy and build

 

When making acquisitions or investing in a portfolio company, the Limited Partnerships (or successor limited partnerships) and/or the Company may invest directly or indirectly in equity and/or debt instruments, including convertible preference shares, loan notes, warrants, debentures and convertible loan stock. The debt securities in which a Limited Partnership and/or the Company may invest may be below investment grade.

When making acquisitions or investing in a portfolio company, the Limited Partnerships (or successor limited partnerships) and/or the Company may also directly or indirectly invest in derivative instruments, such as contracts for difference, for purposes of efficient portfolio management (and not for speculative purposes) and make loans or acquire debt instruments issued with a coupon and/or at a discount to the redemption price. The Limited Partnerships and/or the Company may utilise leverage when deemed appropriate (subject to “Borrowing powers of the Company” below).

Although the Limited Partnerships (or successor limited partnerships) and/or the Company generally expect to invest directly in securities, subject to any applicable regulatory requirements, the Limited Partnerships (or successor limited partnerships) and/or the Company may invest indirectly through one or more subsidiaries or other vehicles where the Investment Manager and/or the Directors consider that this would be commercially preferable, tax efficient or provide the only practicable means of access to the relevant security.

Re-investment

On any realisation of investments, the Company may re-invest funds in any of the following ways:

  • in co-investment opportunities alongside the Limited Partnerships and/or successor limited partnerships provided by the General Partners or the general partner(s) of any successor limited partnerships;
  • in cash, cash deposits and near cash deposits; or
  • in successor limited partnerships, or new limited partnerships with successor strategies, in each case managed by the Investment Manager and/or advised by the Investment Adviser.

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 per cent. 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.

Relevant definitions:

“Admission”

 

the admission of the Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules;

 

“Admission Document” the admission document dated 30 July 2007 prepared by the Company in respect to its admission to trading on AIM;

 

“AIM”

 

the AIM market of the London Stock Exchange plc;

 

“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;

 

“Board” or “Directors”

 

the board of directors of the Company, whose names are listed on page 8 of this document;

 

“Commitments”

 

the amount committed by an investor to the Limited Partnerships whether or not such amount has been advanced in whole or in part;

 

“Company”

 

Oakley Capital Investments Limited, a company incorporated with limited liability in Bermuda with registered number 40324;

 

“Fund I”

 

Oakley Capital Private Equity L.P.;
“Fund II” OCPE II Master L.P., through a Bermuda feeder limited partnership, Oakley Capital Private Equity II-A L.P.;

 

“General Partners” Oakley Capital GP Limited, a company incorporated with limited liability in Bermuda with registered number 40245, in its capacity as general partner of Fund I and Oakley Capital G.P. II Limited, a company incorporated with limited liability in Bermuda with registered number 44683, in its capacity as general partner of Fund II;

 

“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;

 

“Investment Manager”

 

Oakley Capital (Bermuda) Limited, a company incorporated with limited liability in Bermuda with registered number 40250;

 

“Investing Policy”

 

the investing policy of the Company;
 

“Limited Partnerships”

 

Fund I and Fund II;
 

“UK” or “United Kingdom”

 

the United Kingdom of Great Britain and Northern Ireland;

 

 

“£”

 

the lawful currency of the United Kingdom.

 

 

Further reading