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Management's Discussion and Analysis and Financial Statements Management’s Discussion and Analysis and Financial Statements December 31, 2016 ONEX AND ITS OPERATING BUSINESSES Onex is a public company whose shares trade on the Toronto Stock Exchange under the symbol ONEX. Onex’ businesses have assets of $44 billion, generate annual revenues of $29 billion and employ approximately 161,000 people worldwide. Onex operates from offices located in Toronto, New York, New Jersey and London. ONEX ONCAP ONEX ONEX DIRECT PARTNERS CREDIT REAL ESTATE PARTNERS Onex Partners includes investments made through Onex Partners I, II, III and IV. ONCAP includes investments made through ONCAP II, III and IV. Throughout this report, all amounts are in U.S. dollars unless otherwise indicated. Table of Contents 8 Management’s Discussion and Analysis 96 Consolidated Financial Statements 180 Shareholder Information CHAIRMAN’S LETTER Dear Shareholders, With the year just past we once again find ourselves in awe of the world’s capacity for surprises. We didn’t think the people of the United Kingdom would vote to leave the European Union and we didn’t think Donald Trump would be elected president of the United States. Fortunately, because we long ago learned humility as investors, we do not base our acquisitions and investments on an outlook of world events. We simply look for good busi- nesses we and our management teams can make better. Just as we have in the past, we will adapt to changes brought upon us by shifting political winds. As investors we crave certainty but seldom get it, so we must learn to prosper without it. With so much change in the air, our most fervent hope these days is that we never lose access to the smart, creative and driven young professionals we need for continued success. A quick scan of our phone direc- tory or walk through our offices and you would certainly conclude that many of our employees had grand- parents or parents born far from our borders. We didn’t hire them just for the sake of diversity. We hired them because they excelled academically and displayed the grit and drive we like to see at Onex. We need them because we compete with investors throughout the world in a battle for the best ideas and execution. Wouldn’t it be awful if they stopped coming to our shores and we couldn’t hire them? The political drama notwithstanding, we had a very busy year in 2016. In acquisitions totalling $6.1 bil- lion, we invested over $2.2 billion through our private equity funds, of which Onex’ direct share was more than $700 million. ONCAP raised $1.1 billion for ONCAP IV, an increase from C$800 million raised for ONCAP III, in a single close and in just over two months (for readers unfamiliar with private equity fundraising – that’s lightning fast!). Here are some other highlights: • We acquired four companies: – Clarivate Analytics, an owner and operator of a collection of leading subscription-based businesses focused on scientific and academic research, patent analytics, trademark protection and other intellectual property management; – Save-A-Lot, one of the largest hard-discount grocery retailers for value-seeking shoppers in the United States; – WireCo World Group, a global manufacturer of mission-critical steel wire rope, synthetic rope, specialty wire and engineered products; and – Tecta America Corporation, a national commercial roofing company in the United States offering installa- tion, replacement and repair services; • In December 2016, we agreed to acquire Parkdean Resorts, an operator of caravan holiday parks in the United Kingdom; • The value of Onex’ interest in our private equity investments, including realizations and distributions, grew by 7 percent. As more recently acquired businesses start to contribute to value creation, we expect to see stronger growth from our private equity investments; • We distributed close to $1.7 billion to Onex and our partners; and • Our credit platform grew its assets under management by 15 percent to $7.5 billion through continued CLO issuance and strong performance. As we settle into a new year, we are excited to start building value in our recent acquisitions. Collectively, the team invested approximately $130 million in these businesses and in total has $1.9 billion invested in our shares, operating companies and credit platform. Financial alignment between managers, shareholders and limited partners is a core value at Onex. We share with you the risks and rewards of everything we own. As investors, we know our capital is in safe hands. We hope you feel the same. From all of us at Onex, we thank you for your continued support. [signed] Gerald W. Schwartz Chairman and Chief Executive Officer, Onex Corporation Onex Corporation December 31, 2016 1 ONEX CORPORATION Who We Are and What We Do Onex is an investor first and foremost, with $6.3 billion of shareholder capital primarily invested in or commit- ted to private equity and non-investment grade credit. We also manage $18.0 billion for fund investors around the world, including public and private pension plans, sovereign wealth funds, banks, insurance companies and family offices, that have chosen to invest alongside us. With an experienced management team, significant financial resources and no debt at the parent com- pany, Onex is well-positioned to continue building shareholder value through its investing and asset manage- ment activities. Private Equity Investing Founded in 1984, Onex is one of the oldest and most successful private equity firms. We acquire and build high- quality businesses in partnership with talented management teams. Onex invests through its two private equity platforms: Onex Partners for larger transactions and ONCAP for middle-market transactions. We are focused on three primary investment strategies: (i) cost reduction and operational restructurings; (ii) platforms for add-on acquisitions; and (iii) carve-outs of subsidiaries and mission-critical supply divisions from multinational corporations. We have built more than 90 operating businesses, completing about 560 acquisitions with a total value of $68 billion. Onex’ private equity investing has generated a gross multiple of capital invested of 2.7 times since inception, resulting in a 28 percent gross IRR on realized, substantially realized and publicly traded investments. Credit Investing Our credit platform is focused on a variety of credit-oriented investment strategies. We invest primarily in non- investment grade debt. We practise value-oriented investing and employ a bottom-up, fundamental and struc- tural analysis of the underlying borrowers. In credit, we seek to generate strong risk-adjusted and absolute returns across market cycles. 2 Onex Corporation December 31, 2016 Onex Capital At December 31, 2016, Onex’ $6.3 billion of capital was primarily invested in or committed to its private equity and credit platforms. Onex’ $6.3 billion of Capital at December 31, 2016 Onex’ $6.0 billion of Capital at December 31, 2015 Large-Cap Private Equity 56% Large-Cap Private Equity 49% Cash and Near-Cash Items 25% Cash and Near-Cash Items 36% Middle-Market Private Equity 6% Credit 9% Middle-Market Private Equity 6% Real Estate and Other Investments 4% Credit 6% Real Estate and Other Investments 3% The How We Are Invested schedule details Onex’ $6.3 billion of capital at December 31, 2016 (December 31, 2015 – $6.0 billion). One of Onex’ long-term goals is to grow its capital per share by 15 percent per year, and to have that growth reflected in our share price. In the year ended December 31, 2016, Onex capital per share increased by 8 percent in U.S. dollars (5 percent in Canadian dollars) and our share price increased by 11 percent in U.S. dollars (8 percent in Canadian dollars). Over the past five years, Onex capital per share has increased by 10 percent per year in U.S. dollars (16 percent per year in Canadian dollars). Onex Corporation December 31, 2016 3 OnexNav per Capital Shar pere (USD) Share (USD) (December 31, 2011 to December 31, 2016) $60 60 $55 55 $50 50 $45 10% annual growth 45 over the past $40 five years 40 $35 35 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Fund Investor Capital Onex manages $18.0 billion of invested and committed capital on behalf of investors from around the world. In November 2016, we successfully completed fundraising for ONCAP IV, reaching aggregate commitments of $1.1 billion, including Onex’ commitment of $480 million, and exceeding our target size of $1.0 billion. Onex’ $18.0 billion of Fund Investor Capital Onex’ $16.5 billion of Fund Investor Capital at December 31, 2016 at December 31, 2015 Onex Partners 54% Onex Partners 60% Onex Credit 37% Onex Credit 35% ONCAP 5% ONCAP 9% Fund investor capital includes capital managed on behalf of co-investors and the Onex management team. 4 Onex Corporation December 31, 2016 Asset Management Onex’ management of fund investor capital provides two significant financial benefits: (i) a committed stream of annual management fees and (ii) the opportunity to share in fund investors’ profits. Onex has run-rate man- agement fees of $150 million for the next 12 months, consisting of $110 million from its private equity platforms, including the impact of ONCAP IV, and $40 million from its credit platform. We expect our asset managers’ net contribution will more than offset the cost of investing our shareholders’ capital. One of Onex’ long-term goals is to grow its fee-generating capital by 10 percent per year. For the year ended December 31, 2016, fee-generating capital under management grew by 7 percent to $15.9 billion. The closing of ONCAP IV contributed approximately $600 million to the increase in fee-generating capital under manage- ment.
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