Omni Bridgeway : Investment Portfolio Quarterly Report at 30 June 2023

31 JULY 2023 |

Investment Portfolio Report

at 30 June 2023

Omni Bridgeway Limited (ASX: OBL) (Omni Bridgeway, OBL, Group) announces its investment performance for the three months ended 30 June 2023 (4Q23, Quarter) and for the 2023 financial year (FY23).

Andrew Saker, Managing Director and CEO, commented "I am pleased to report a strong finish to the year, supported by momentum in the United States, and reflecting the effectiveness of Omni Bridgeway's long term diversified funds management strategy.

"We achieved our FY23 commitment target and improved the diversification and resilience of our portfolio. Annual commitments grew 17% to a record high of $544 million and estimated portfolio value (after completions) increased 12% to $30.5 billion. The implied embedded value of our portfolio is now $3.9 billion. The compound annual growth rate over the last four years, for all three metrics, is more than 25%.

"During the year, we achieved a new record with approximately $340 million gross income derived from investment completions and secondary market transactions, including income yet to be recognised from conditionally completed investments. This excludes $87 million third-party income from the sale of an investment vehicle in December 2022.

"We continued to unlock opportunities in the secondary market completing transactions covering 15 assets, diversified income sources and generated gross cash proceeds of approximately

$76 million from those transactions. In May 2023, the sale of a participation in Fund 1 assets represented an important strategic milestone as we recycle capital, de-risk the portfolio and accelerate returns.

"We have a diversified and resilient platform with unrivalled expertise to create value through sourcing and underwriting quality investments. We believe this will generate strong cash returns for shareholders as the market continues to mature. Further, we are returning to a stabilised operating environment following the COVID-19 pandemic which is demonstrated by momentum experienced in the Quarter.

"Capital raising for Fund 8 and the upsizing of Funds 4 and 5 is progressing well. We anticipate the capital will be raised for Fund 8 in 1Q24, and we anticipate a first close of the upsizing of Funds 4 and 5 in the first half of FY24.

"Notwithstanding the recent completion of a previously impaired investment in Fund 4 negatively impacting performance metrics, investor appetite indicates confidence in the embedded value of the remaining investments and the potential for improved returns that we believe will be sufficient to generate performance fees.

"A significant investment pipeline, secondary market opportunities, operating discipline and completion momentum provide confidence in the underlying business model. Omni Bridgeway is well positioned for continued future growth," added Mr Saker.

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Investment Portfolio at 30 June 2023

Key metrics, highlights, and developments

• Generated investment income in FY23 of $338.6 million (from income recognised, income yet to be recognised (IYTBR) and secondary market transactions), with $119.8 million provisionally attributable to OBL.
• Recognised $182.4 million income from diversified sources in 4Q23, representing approximately 65% of annual income recognised.
• Achieved FY23 commitments target with a commitment to fund $544.2 million to investments, representing $11 billion of new EPV (from matters that were newly funded, conditionally approved or had increased investment opportunities).
• Estimated portfolio value (EPV) of $30.5 billion, up 12% in FY23 after completions, reductions from impaired investments and the Fund 1 deconsolidation. Implied embedded value (IEV) is $3.9 billion at 30 June 2023.
• EPV conversion rate for FY23 was 14% reflecting adjusted litigation proceeds. Without these adjustments, the rate was 5%.

Secondary market sales

During the year, we continued to unlock opportunities in the secondary market while diversifying income streams, recycling capital, and accelerating returns to our investors.

Secondary market transactions relating to Fund 1 during FY23 generated gross cash proceeds of $75.7 million, excluding $86.6 million from a third-party sale of an investment vehicle in December 2022, comprising:

• $28.0 million from an investment disposal in December 2022.
• $47.7 million from the sale of a participation in Fund 1 assets which completed on 31 May 2023.

This risk management strategy allows us to reduce duration and completion risks, while enhancing liquidity and preserving internal rates of return.

We expect this market will continue to evolve and we anticipate that it will provide a meaningful contribution to future sources of income.

Subject to achieving appropriate return metrics, we have identified investments (spread across

all our funds) as potential candidates, either in whole or in part, for secondary market transactions.

Cash reporting and financial position

The Group's balance sheet cash and receivables at 30 June 2023 was $129.2 million.

A cash receipt of $13.7 million relating to the final distribution of the Wivenhoe balance sheet investment is anticipated to be collected in August 2023 and is reflected in the balance sheet receivable balance below.

The reimbursement to OBL of Fund 8's $9.4 million (€6.1 million) principal protection insurance premium, which is not included in the balance sheet receivable balance below, is anticipated to occur upon finalisation of the fund in 1Q24.

AUD million		Cash	Receivables
OBL balance sheet (excluding Funds)	92.6	36.6
Funds 2-4, 6 (consolidated)1	24.4	108.2
Fund 5 (unconsolidated)1,2	25.3	73.3
Total at 30-Jun-23	142.3	218.1

Total 129.2

132.6

98.6

360.4

1. Includes 100% of respective Fund's holding including amount attributable to both OBL and external investors.
2. Fund 5 is not consolidated within the Group Consolidated Financial Statements.

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Investment Portfolio at 30 June 2023

Income

The Group generated investment income of $338.6 million in FY23 across the portfolio, excluding $86.6 million third-party income from the sale of an investment vehicle in December 2022, with $119.8 million provisionally attributable to OBL, comprising:

• $283.4 million income recognised ($92.3 million in 1H23, $191.1 million in 2H23), with $113.6 million provisionally attributable to OBL, from 33 completed investments with an EPV of $3.2 billion and $47.7 million cash proceeds from sale of participation in Fund 1.
• $55.2 million IYTBR, with $6.2 million provisionally attributable to OBL, from 4 investments with an EPV of $382 million, relates to substantially completed investments with conditional settlements or judgments on appeal which may ultimately be recognised in the next quarter or future periods.

Investment income recognised in 4Q23 of $182.4 million, which accounted for approximately

65% of our annual income recognised, comprises:

• $89.7 million income recognised from 12 completed investments which had an EPV of $2.2 billion.
• $28.8 million recognised from partial completions of ongoing investments.
• $16.2 million of additional income from completions in previous periods.
• $47.7 million cash proceeds from the sale of a participation in Fund 1.

Included above is $16.0 million income recognised in June 2023 from the Wivenhoe balance sheet investment. This reflects the finalisation of the loss assessment by external counsel and the income from this investment is now fully recognised. The Wivenhoe investment was disclosed as IYTBR as a binding conditional settlement of $9.5 million in the 3Q23 Investment Portfolio Report dated 1 May 2023. Receipt of the final cash distribution of $13.7 million is anticipated in August 2023.

Income recognition

	Balance				Fund
AUD million	1	2&3	4	5	6	7	8	Total
sheet
Income recognised in 1H23	4.1	34.5	4.4	20.3	22.8	6.2	-	-	92.3
Income recognised in 3Q23	0.4	(0.2)	0.2	2.5	3.6	2.2	-	-	8.7
Investments completed in 4Q23	21.5	-	17.0	-	35.1	16.1	-	-	89.7
Investments completed in prior periods	15.4	-	0.7	-	-	0.1	-	-	16.2
Cash proceeds from sale of Fund 1	47.7	-	-	-	-	-	-	-	47.7
participation
Ongoing investments	-	-	2.2	20.2	3.2	3.2	-	-	28.8
Income recognised in 4Q23	84.6	-	19.9	20.2	38.3	19.4	-	-	182.4
Income recognised in FY23	89.1	34.3	24.5	43.0	64.7	27.8	-	-	283.4
- binding conditional settlements	-	-	-	-	-	-	-	-	-
- successful judgments	-	-	-	6.8	-	24.2	-	-	31.0
- executed settlements	-	-	-	-	-	-	-	-	-
- agreed in-principle settlements	-	-	-	24.2	-	-	-	-	24.2
Income yet to be recognised at 30-Jun-23	-	-	-	31.0	-	24.2	-	-	55.2
Total income recognised in FY23 and	89.1	34.3	24.5	74.0	64.7	52.0	-	-	338.6
yet to be recognised at 30-Jun-23

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Investment Portfolio at 30 June 2023

Provisional distribution of income recognised and yet to be recognised¹

	Balance				Fund
AUD million	1	2&3	4	5	6	7	8	Total
sheet
Provisional distribution attributable to OBL	89.1	-	-	14.8	12.9	3.0	-	-	119.8
shareholders
Provisional distribution attributable to NCI	-	34.3	24.5	59.2	51.8	49.0	-	-	218.8
Distribution waterfall of income recognised	89.1	34.3	24.5	74.0	64.7	52.0	-	-	338.6
in FY23 and yet to be recognised at 30-Jun-23

1. Represents indicative cashflows (excluding performance fees) anticipated to flow out of the Funds due to the income generation included in the table above. It represents the aggregate estimate of the cash distributed and yet to be distributed under the various distribution waterfalls of the Funds assuming the income is equivalent to gross cash proceeds. The Fund's capital status and waterfalls operate on a cash collection and distribution basis and do not align with the accounting treatment. Accordingly, the NCI attribution disclosed in the Group Consolidated Financial Statements will not necessarily match this.

EPV conversion to income

The EPV conversion rate for FY23 was 14% reflecting adjusted1 litigation proceeds. Without these adjustments, the rate was 5%.

Investments categorised as income yet to be recognised (subject to achieving the estimated income) have an EPV conversion rate of 14%.

AUD million 4Q23

Balance sheet

Fund

1 2&3 4 5 6 7

8

Total

EPV of investments completed	99	-	140	1,603	276	65	-	-	2,183
Life to date income of fully completed	38	-	17	2	36	18	-	-	111
investments
EPV conversion rate	38%	-	12%	0%	13%	28%	-	-	5%
FY23
EPV of investments completed	101	497	156	1,604	822	66	-	-	3,246
Life to date income of fully completed	42	32	17	2	49	18	-	-	160
investments
EPV conversion rate	42%	6%	11%	0%	6%	27%	-	-	5%
Investments categorised as IYTBR
EPV of investments	-	-	-	256	-	126	-	-	382
Life to date income (estimate)	-	-	-	31	-	24	-	-	55
EPV conversion rate (estimate)	-	-	-	12%	-	19%	-	-	14%

1. Adjustments to litigation proceeds relate to material matters including the impaired Fund 4 matter and the accelerated Fund 5 matter.

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Investment Portfolio at 30 June 2023

Fund summary

Following the sale of a participation in Fund 1 assets which completed on 31 May 2023, the residual interest in Fund 1 is recognised as an investment in associate within the Group Consolidated Financial Statements. As such, Fund 1 metrics from 31 May 2023 are not disclosed in this report.

Funds 2&3 are fully committed and are in harvest mode.

Fund 4 is 86% committed and Fund 5 is 85% committed. Funds 4 and 5, in aggregate, have approximately US$245 million in available capacity including recycling of capital. We plan on executing a first close of the series II upsizing in 1H24 of around US$400 million to US$600 million with existing investors. A second close is planned with other new investors to follow.

Fund 6 is in harvest mode. Merits investment opportunities are being undertaken by Fund 5 and enforcement investment opportunities will flow to Fund 8 once closed.

As part of establishing the first series of the €300 million Fund 8, we are in advanced stages to close a limited recourse debt facility of up to €135 million with stand by equity to be provided by OBL of up to €15 million. The debt will be secured against an already acquired principal protection insurance policy as well as the Fund 8 investments.

We expect that final documentation will be signed shortly, after which details of the facility will be announced. The enforcement investments that are being warehoused on the Group balance sheet will transfer to Fund 8 upon completion, which is anticipated in 1Q24. The insurance policy has an option to extend the indemnity to €270 million, which provides an option for a second series of Fund 8.

Fund breakdown

					Fund breakdown
					Capital
Portfolio	Committed	Fund size	Recycled	Capital	committed -	Capital	Other costs
profits	deployed	undeployed	uncommitted
Funds 2&31	100%	$189m	-	$134m	$44m	($4m)	$15m
Fund 4	86%	US$500m	-	US$225m	US$190m	US$72m	US$13m
Fund 52	85%	US$500m	-	US$134m	US$262m	US$74m	US$30m
Fund 63,4	100%	€188m	(€50m)	€94m	€112m	(€18m)	€50m
Fund 72	4%	US$100m	-	US$4m	-	US$96m	-
Fund 85,6	4%	€150m	-	<€1m	€6m	€144m	-

1. Fund 2&3 capital uncommitted represents the over commitment allowance.
2. Fund 5 and Fund 7 are not consolidated within the Group Consolidated Financial Statements, here they are presented at 100%.
3. Data for Fund 6 is current at 31 March 2023.
4. Fund size is €150m plus an over commitment allowance of 25%.
5. Investments warehoused on OBL balance sheet, fund size subject to completion of the debt facility.
6. The principal protection insurance extends the indemnity to €270 million which facilitates a second series or an upsize of series I.

Fund distribution profiles

		Total	Outstanding amounts yet to be	Outstanding amounts yet to be
	Total capital	distributions	attributable to NCI	attributable to OBL
Portfolio	(capital and	Capital (A$)	Returns (A$)	Capital (A$)	Fees (A$)
called	returns)
Funds 2&3	$163m	($67m)	$64m	$56m¹	$33m	$8m
Fund 4	US$236m	(US$74m)	$196m	-	$49m	-
Fund 5	US$168m	(US$19m)	$179m	-	$45m	-
Fund 62	€91m	-	$142m	-	$7m	-
Fund 7	US$4m	-	$5m	-	<$1m	-
Fund 8	-	-	-	-	-	-
Total			$586m	$56m	$134m	$8m

1. Includes accumulated preferred returns and special distributions.
2. Data for Fund 6 is current at 31 March 2023.

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