TIDMOCI
RNS Number : 8082S
Oakley Capital Investments Limited
14 March 2019
14 March 2019
Oakley Capital Investments Limited
Annual Results for the Year Ended 31 December 2018
Oakley Capital Investments Limited(1) (AIM:OCI, the "Company"),
which provides its shareholders with access to a portfolio of high
quality companies through its investments in the Oakley Funds(2) ,
today announces its annual results for the year ended 31 December
2018.
FINANCIAL HIGHLIGHTS
-- NAV per share of GBP2.81, a total return of 16%
-- Total NAV of GBP574.8 million, a 5-year CAGR of 18%
-- Final dividend of 2.25 pence per share, payable in April 2019
(full year dividend of 4.5 pence)
-- GBP130.8 million of capital was deployed and GBP165.8 million
cash was returned to the Company
PORTFOLIO HIGHLIGHTS
PERFORMANCE
-- Fair value of the underlying portfolio companies grew by 33%
-- Average portfolio company year-on-year EBITDA growth of 39%
-- Average portfolio company valuation multiple (EV/EBITDA) of
12.6x and net debt to EBITDA ratio of 3.8x. The level of both is
considerably below the industry average and conservative given the
earnings growth and the capital light nature of the Oakley Funds'
portfolio companies
-- Positive revaluations across Oakley's three core sectors:
Consumer, TMT and Education. The largest contributors were Career
Partner Group, Inspired and WebPros
REALISATIONS & DISTRIBUTIONS
-- The Company has benefitted from the realisations of Parship
Elite, Verivox, Facile and Damovo, which generated a combined gross
money multiple of 4.0x and returned GBP114.8 million to OCI
-- The realisations were at a combined 36% premium to the OCI
2017 year-end look through value and increased the Company's NAV
per share by 14 pence
-- TechInsights and Casa & atHome were refinanced in the
period and returned GBP15.0 million to OCI
INVESTMENTS
-- Two investments were completed in the period: Career Partner
Group (GBP30.5 million OCI contribution) and Facile (GBP28.9
million OCI contribution)
-- Five follow-on investments were completed during the year.
Most notably, WebPros acquired cPanel (GBP14.6 million OCI
contribution) and AMOS acquired CMH (GBP3.2 million OCI
contribution)
FUND UPDATE
-- As a result of 24 months of successful investment, Fund III
is now approximately 70% deployed
-- OCI announced a EUR400 million commitment to Oakley Capital Fund IV
Caroline Foulger, Chair, Oakley Capital Investments Limited
"Impressive portfolio company growth and successful realisations
resulted in another excellent year for OCI, with a total NAV return
of 16%, well ahead of the wider market. The current high-quality
portfolio of 11 private companies grew average earnings at 39% and
realisations returned GBP115 million, at a combined premium of 36%
to the holding value."
Peter Dubens, Managing Partner, Oakley Capital Limited
"Oakley Capital took advantage of a strong exit environment in
2018, with four disposals made in the year. The most important
ingredient in the success of these investments was the management
we backed. 90% of the entrepreneurs we start an investment with are
still in place when we exit; this compares to an industry average
of 50%. We also go on to back these talented operators time and
again, which is why, as we grow, our network grows, and as a result
our pipeline of opportunities has never looked more
attractive."
Please refer to the Company's website for the Full Year Report
and Accounts
http://oakleycapitalinvestments.com/investor-centre/publications
- ends -
For further information please contact:
Oakley Capital Investments Limited
+44 20 7766 6900
Steven Tredget, Investor Relations
Greenbrook Communications Ltd
+44 20 7952 2000
Alex Jones / Matthew Goodman / Gina Bell
Liberum Capital Limited (Nominated Adviser & Broker)
+44 20 3100 2000
Gillian Martin / Owen Matthews
Notes:
This announcement contains inside information for the purposes
of the Market Abuse Regulation (EU) No. 596/2014.
(1) About Oakley Capital Investments ("OCI")
OCI is an AIM-listed investment vehicle, which provides access
to the Oakley Funds. It is a liquid vehicle that provides capital
growth and dividends to investors.
LEI Number: 213800KW6MZUK12CQ815
(2) The Oakley Funds
Oakley Capital Private Equity L.P. and its successor funds,
Oakley Capital Private Equity II and Oakley Capital Private Equity
III, are unlisted focused mid-market private equity funds with the
aim of providing investors with significant long-term capital
appreciation. The investment strategy of the funds is to focus on
buy-out opportunities in industries with the potential for growth,
consolidation and performance improvement.
(3) The Investment Adviser
Founded in 2002, Oakley Capital has demonstrated the repeated
ability to acquire attractive growth assets at attractive prices.
To do this they rely on their sector and regional expertise, their
ability to tackle transaction complexity and their deal-generating
entrepreneur network.
Chair's Statement
Impressive portfolio company growth and successful realisations
resulted in another excellent year for returns. Oakley continues to
demonstrate its unique sourcing model, identifying and completing
exciting new opportunities for investments.
In my first statement to you as Chair I am pleased to report
another successful 12 months for the Company ("OCI"). A total NAV
return of 16.3% was driven by very strong profit growth across the
Oakley Funds' portfolio companies and realisations at significant
premiums to their holding value.
Realisations and portfolio company refinancings in the Oakley
Funds returned total capital of GBP130.5 million. The Investment
Adviser also continues to source exciting new opportunities in
high-growth sectors in Western Europe.
A total of GBP58.8 million was deployed into the Oakley Funds as
a result of two new acquisitions and follow-on investments. Today,
OCI provides access to a high-quality portfolio of 11 private
companies across Oakley's established areas of expertise -
consumer, education and TMT.
We continue to focus on the best interests of shareholders and
in doing so are taking actions which we hope will narrow the
discount between the OCI share price and the NAV per share. Steps
have been taken to improve governance with the beginning of a
refresh of the Board and a strengthening of its committees, improve
communications with a refresh of this report and our website and
improve our investor relations ("IR") programme with greater
investor and analyst engagement. The year ahead will provide
further opportunities for new initiatives aimed at enhancing and
protecting shareholder value.
Performance
The OCI NAV per share grew from GBP2.45 to GBP2.81 in the last
12 months. The key contributors to this were:
-- Fund Revaluations (+29 pence) - There have been continued
positive revaluations in the underlying portfolio, most notably to
Inspired, WebPros and Career Partner Group. These uplifts have been
driven by strong trading performance with portfolio company EBITDA
growth of 39% on average.
-- Realisations (+14 pence) - OCI benefited from the sale of
Parship Elite Group, Verivox, Facile and Damovo, which generated a
combined gross money multiple of 4.0x and returned GBP114.8 million
to the Company. The reason for the NAV increase was the combined
36% premium to book value achieved upon realisations, demonstrating
the level of demand for these quality businesses and the
consistently conservative approach to the OCI NAV.
-- Co-investment revaluations (-1 pence) - The Company holds two
direct equity investments in underlying portfolio companies;
Inspired and Time Out. Inspired (+8 pence) has undergone another
transformative year and now comprises 42 schools, educating over
31,000 students. Consistent growth coupled with strong revenue
visibility makes this a highly attractive investment. Time Out
Group's (-9 pence) publicly-listed shares fell 46% despite the
operational progress made in the period. This reflects overall
stock market weakness, low Time Out share liquidity and delays to
delivery of some strategic objectives. 2019 is, however, a
potential inflection point for the group with the global roll-out
of the Time Out Market concept.
-- In addition, dividends paid within the year amounted to 4.5
pence per share and fees paid equated to 2 pence per share.
Commitments and cash
OCI has GBP152 million of outstanding commitments to Oakley
Funds I, II and III. As a result of 24 months of successful
investment, Oakley Fund III is now approximately 70% deployed. In
January 2019, OCI announced a EUR400 million commitment to Oakley
Capital Fund IV. The Board is focused on maximising shareholder
exposure to the out performance of the Oakley Funds and the size of
this commitment reflects that.
At year-end, OCI held net cash and cash equivalents of GBP105
million and short-term debt investments of GBP107 million. We
foresee a consistent level of capital returning to the Company as a
result of continued Fund activity. 2019 will provide further
opportunity for realisations and refinancings. Following extensive
analysis of the Funds' cycles and expected cash returns, the Board
is satisfied that the Company has the right balance between Fund
commitments and cash.
Governance and shareholder value
Having originally joined the Board as an Independent Director in
June 2016, I replaced Christopher Wetherhill
as Chair following his retirement in September after 11 years of
service. I would like to take the opportunity to thank Christopher,
on behalf of the entire Board, for his contribution over those
years. As OCI continues its growth journey and its successful
strategy of partnering with Oakley, I was pleased to welcome
Stewart Porter as Director to the Board in September 2018. We
anticipate further changes to the Board membership as we continue
to evolve and keep pace with the demands and growth of OCI.
I look forward to leading OCI in this period and ensuring that
the Company's governance and risk management structures provide a
strong foundation for its growth. The Company's Risk committee and
Audit committee have continued their important roles this year in
an environment of increasing regulation and accounting change.
Additionally, at the start of the year, the Management Engagement
committee was established to provide the Board with greater
oversight over the Company's suppliers and service providers. This
represents a continuation of our drive to enhance internal
governance structures.
As stated in last year's report, the Board remains committed to
shareholder value and is focused on initiatives aimed at closing
the gap between the share price and the NAV per share. As a result,
a variety of measures have been undertaken to increase and improve
investor communication. We continue to upgrade the content of the
Annual Report, providing increased disclosure and a clearer
reflection of the investment opportunity we offer. In line with
these efforts, our website and investor materials have been
relaunched alongside the publication of this report. Our IR
programme has increased and broadened our investor and analyst
engagement. I am pleased to report that, as a result, share
liquidity has further improved, with volumes increasing by an
additional 36% year-on-year. There has been an increased alignment
of interest, with Board members now holding over 5% of the
Company's shares, up from 1% last year. The Board considers this to
be an appropriate alignment whilst maintaining the requisite degree
of independence. The year ahead will provide further opportunities
for new initiatives aimed at improving and protecting shareholder
value. The Board continues to focus on the enhancement of its
capital management by reviewing the options for share buybacks and
also reiterates its commitment to not issuing shares at a discount
to the NAV per share.
Dividend
In October, an interim dividend of 2.25 pence per share was paid
for the period ended 30 June 2018, and I am now pleased to announce
a final dividend for 2018 of 2.25 pence per share.
Prospects
Against a backdrop of uncertainty over the prospects for the
world economy in the coming year, the Company has a balanced and
resilient portfolio which will provide an element of protection
against any softening in the underlying economic outlook.
Investment opportunities have been targeted with the potential for
structural growth and are not reliant on cyclical economic
strength. By way of an example, OCI's 30% exposure to education
offers highly attractive and defensive fundamentals. The underlying
portfolio continues to perform well, as demonstrated by the profit
growth. Leverage across the portfolio is also relatively
conservative, with average net debt to EBITDA standing at 3.8x. As
a result, the Board is confident of delivering further growth to
shareholders over the coming year.
Additionally, despite a continuation of high valuations during
2018, Oakley has demonstrated, with two acquisitions and
follow-ons, its continued ability to source high-quality and
attractively-priced investment opportunities outside of competitive
auction processes. Through its investments in the Oakley Funds, OCI
is therefore able to offer shareholders access to private
companies. which can often yield higher returns than the public
markets.
Caroline Foulger
Chair
Market overview and outlook
Private equity fundraising and activity remains at highs, as the
asset class continues to outperform
Record fundraising and buy-out activity
2018 was a record year for private equity fundraising, as
investors sought to gain exposure to absolute and risk-adjusted
returns that have outperformed other asset classes. Total
commitments rose 7.8% versus 2017, with total undeployed
commitments reaching $2 trillion (source: Preqin). High levels of
dry powder supported a 15% year-on-year rise in the value of
private equity buyouts in continental Europe, reaching EUR79.3
billion across 523 deals in 2018, the highest annual figure since
2007 (source: CMBOR). Despite this investment activity, Oakley's
target geographies have relatively low private equity market
penetration. According to figures from Invest Europe, European PE
investment as a percentage of GDP was 0.3% compared to the US total
at 1.75% (source: EMPEA). Some of the core Oakley target markets
were lower still, with Germany at 0.26%, and Italy at 0.19%.
Managing the risk of overpayment
A combination of high levels of buy-out capital, record
stock-market valuations and increased competition from strategic
buyers, have seen transaction EBITDA multiples remain at elevated
levels of over 11x (source: Preqin). There are growing concerns
that high valuations are making it increasingly difficult to buy
quality assets at reasonable valuations and this could, in turn,
affect future returns. The Investment Adviser, however, remains
disciplined in its approach to investing. Its strategy of pursuing
entrepreneur-led, non-competitive, proprietary deals has been
advantageous to OCI - over 70% of all Oakley's investments have
been uncontested deals. Oakley is not reliant on the intermediated
market, but rather its strong founder/manager relationships, wide
network and reputation for sector expertise, all of which help to
drive off-market deal flow. As such, Oakley has been able to make
acquisitions below prevailing rates, with an average entry
EV/EBITDA multiple of 8.3x versus comparable peer group averages in
double digits.
The rising tide of debt capital
Average debt multiples have entered territory not seen since the
peak of the last cycle, standing at c6x EBITDA. This is the result
of readily available and relatively covenant-lite debt aiding deal
makers (source: Bain & Company). There is nervousness that the
high leveraging of businesses is driving PE returns and may not be
sustainable, especially if credit markets tighten. Oakley's
approach to debt is relatively conservative, with the underlying
portfolio being levered an average 3.8x at the year end. Oakley's
propensity to target asset-light, highly cash-generative businesses
provides confidence in the suitability of these debt levels. In
turn, OCI itself remains prudent in its approach, with no external
debt on its balance sheet.
Softening economic momentum and high uncertainty
Whilst Europe and the global economy are expected to grow at
1.3% and 3.5% respectively in 2019 (source: IMF), these forecasts
have been revised downwards (from 1.9% and 3.7%) in the light of
weakening financial market sentiment, trade policy uncertainty, and
concerns about China's outlook. Risks to global growth are to the
downside, with a range of triggers beyond escalating trade tensions
that could spark economic decline, especially given the high levels
of public and private debt. These potential triggers include a
"no-deal" withdrawal of the United Kingdom from the European Union
and a greater-than-envisaged slowdown in China.
Against this backdrop, Oakley believes that the Funds' portfolio
companies enjoy robust, resilient business models. They are
businesses that hold dominant market positions in attractive
niches, which enjoy structural growth drivers and limited downside
risk. Oakley has invested across Western Europe and beyond. As a
result, its experience of a wide range of geographies and sectors
provides it with the flexibility to take advantage of the
opportunities that an uncertain future may present.
OCI NAV overview
OCI's NAV and NAV per share increased to GBP574.8 million and
GBP2.81 respectively, an increase of 14% since 31 December
2017.
31 Dec 2017 31 Dec 2018
GBPm GBPm
Opening net asset value at the start of
the year 438.4 502.0
-------------------- ---------------------
Gross revenue 7.7 6.8
-------------------- ---------------------
Expenses (6.2) (6.4)
-------------------- ---------------------
Net foreign currency gains/(losses) (0.8) 3.2
-------------------- ---------------------
Realised gains on investments 23.9 102.3
-------------------- ---------------------
Net change in unrealised gains/(losses)
on investments 20.3 (23.9)
-------------------- ---------------------
Treasury shares sold 23.3 -
-------------------- ---------------------
Dividend expense (4.6) (9.2)
-------------------- ---------------------
Closing net asset value at the end of the
year 502.0 574.8
-------------------- ---------------------
Number of shares in issue 204.8 204.8
-------------------- ---------------------
NAV per share GBP2.45 GBP2.81
-------------------- ---------------------
Net earnings were GBP82.0 million for the year, comprising:
-- Gross revenue of GBP6.8 million arising from interest income
earned predominantly on the debt facilities provided by the
Company.
-- Expenses of GBP6.4 million partly offset by GBP3.2 million of
foreign exchange gains. Expenses include fees paid to the
Administrative Agent.
-- Realised gains of GBP102.3 million earned from the
realisations that occurred in the Oakley Funds during the year.
-- Net change in unrealised gains/(losses) on investments of
GBP23.9 million, driven predominantly by the decline in the Time
Out share price during the year.
A final dividend for the year ended 31 December 2017 of 2.25
pence per share was paid in April 2018, and an interim dividend for
the year ended 31 December 2018 of the same amount was paid to
shareholders in October 2018,
totalling a GBP9.2 million expense.
Outstanding commitments of OCI
Outstanding commitments to the Oakley Funds as at 31 December
2018 were GBP151.8 million. OCI committed EUR400 million to Fund IV
at its first close in early 2019. As this Fund has not started
investing yet, the Investment Adviser anticipates the majority of
Fund III outstanding commitments will be drawn first as it
continues to deploy capital for investments.
The Board has concluded that as Oakley Fund II is in its
realisation phase and, having already distributed proceeds of
EUR131.3 million (GBP115.1 million) to OCI, and in the light of the
expected distributions to be received from the remaining three
investments, it is satisfied that OCI will be able to meet its
unfunded commitments in the normal course of business.
The table below illustrates OCI's outstanding commitments to the
Oakley Funds, and their respective percentage of OCI's NAV at 31
December 2018.
Outstanding Outstanding
at at
Current commitment 31 Dec 2018 31 Dec 2018
Fund Fund vintage (EURm) (EURm) (GBPm) % of NAV
Oakley Fund I 2007 188.4 2.6 2.4 0
------------- ------------------------- ------------ --------------- --------
Oakley Fund II 2013 190.0 13.3 11.9 2
------------- ------------------------- ------------ --------------- --------
Oakley Fund III 2016 325.8 153.1 137.5 24
------------- ------------------------- ------------ --------------- --------
169.0 151.8 26
------------------------------- ------------------------- ------------ --------------- --------
Cash and cash equivalents (107.9)
--------------- --------
Net outstanding commitments unfunded by cash
resources 43.9 8
--------------- --------
OCI investment activity
The Company's investment portfolio for the year ended 31
December 2018 is summarised below:
31 Dec 2017 31 Dec 2018
Fair value Fair value
Investment GBPm GBPm
Investment in Oakley
Funds 282.7 298.6
----------- ------------
282.7 298.6
----------- ------------
Co-investments
----------- ------------
Equity securities -
quoted 41.2 22.3
----------- ------------
Equity securities -
unquoted 26.2 41.8
----------- ------------
Debt securities - unquoted 69.5 107.1
----------- ------------
136.9 171.2
----------- ------------
Total investments 419.6 469.8
----------- ------------
The following explain movements in the underlying portfolios and
their respective investments.
Overview of OCI's underlying investments
Residual
Year of cost Fair value
Fund Investments Sector Location investment GBPm GBPm
Fund I Time Out Consumer Global 2010 44.9 20.4
---------- ------------------- ----------- ------------- ------------ -------- ----------
OCI's proportionate allocation of Fund I investments (on
a look-through basis) 20.4
----------------------------------------------------------------------------------- ----------
Other assets and liabilities (2.3)
----------
OCI's investment in Oakley Fund I 18.2
----------
Fund II North Sails Consumer Global 2014 37.6 39.4
------------------- ----------- ------------- ------------ -------- ----------
Fund II Inspired Education Global 2014 17.2 31.1
------------------- ----------- ------------- ------------ -------- ----------
Fund II Daisy TMT UK 2015 10.4 15.2
---------- ------------------- ----------- ------------- ------------ -------- ----------
OCI's proportionate allocation of Fund II investments (on
a look-through basis) 85.8
----------------------------------------------------------------------------------- ----------
Other assets and liabilities (14.0)
------------------------------------------------------------------------- -------- ----------
OCI's investment in Oakley Fund II 71.8
----------
Italy /
Fund III Casa & atHome Consumer Luxembourg 2017 26.3 41.8
------------------- ----------- ------------- ------------ -------- ----------
Fund III Schülerhilfe Education Germany 2017 30.8 39.7
------------------- ----------- ------------- ------------ -------- ----------
Fund III WebPros TMT Switzerland 2017 24.0 71.5
------------------- ----------- ------------- ------------ -------- ----------
Fund III TechInsights TMT Canada 2017 0.4 13.4
------------------- ----------- ------------- ------------ -------- ----------
Fund III AMOS Education France 2017 10.0 15.1
------------------- ----------- ------------- ------------ -------- ----------
Career Partner
Fund III Group Education Germany 2018 30.7 45.6
------------------- ----------- ------------- ------------ -------- ----------
Fund III Facile TMT Italy 2018 29.4 29.4
------------------- ----------- ------------- ------------ -------- ----------
OCI's proportionate allocation of Fund III investments (on
a look-through basis) 256.5
----------------------------------------------------------------------------------- ----------
Other assets and liabilities (47.8)
----------------------------------------------------------------------------------- ----------
OCI's investment in Oakley Fund III 208.6
----------
Co-investment:
----------- ------------- ------------ -------- ----------
Equity Time Out Consumer Global 2014 47.2 22.3
------------------- ----------- ------------- ------------ -------- ----------
Equity Inspired Education Global 2017 18.8 41.8
------------------- ----------- ------------- ------------ -------- ----------
Debt Time Out Consumer Global 2018 20.0 20.9
------------------- ----------- ------------- ------------ -------- ----------
Debt Daisy TMT UK 2015 14.2 14.9
------------------- ----------- ------------- ------------ -------- ----------
Debt North Sails Consumer Global 2014 32.8 40.6
------------------- ----------- ------------- ------------ -------- ----------
Debt Fund Facilities n/a n/a n/a 30.6
------------------- ----------- --------------------------- -------- ----------
OCI's co-investments (both equity and debt) 171.1
----------
Total OCI investments 469.7
----------
The OCI look-through values are calculated using the OCI
attributable proportion (determined as the ratio which OCI's
commitments to the respective Fund bear to total commitments to
that Fund) applied to each investment's fair value as held in the
relevant Oakley Fund, net of any accrued performance fees relating
to that investment, and converted using the year end EUR:GBP
exchange rate.
The "Other assets and liabilities" noted in the table above
include OCI's proportion of the Investec debt facilities that are
used by Oakley Fund II and Fund III.
Portfolio review: Oakley Fund I investment activity
The investment portfolio of Oakley Fund I is summarised in the
table below. Oakley Fund I is denominated in euros, and the
year-end exchange rate was used, where applicable. OCI holds a
65.5% interest in Oakley Fund I.
31 Dec 2017 31 Dec 2018
Fair value Fair value
OAKLEY FUND I EURm EURm
Time Out 64.3 34.7
----------- -----------
Broadstone 0.6 0.6
----------- -----------
Total current
investments 64.9 35.3
----------- -----------
Oakley Fund I's one remaining investment is Time Out Group plc
("Time Out"). This is a public entity however, and is listed on AIM
of the London Stock Exchange. As such, its fair value is determined
by a mark-to-market valuation, based on the 31 December 2018 share
price of GBP0.71. There is EUR0.6 million remaining in fair value
for Broadstone at 31 December 2018.
Despite the operational progress made during 2018 in Time Out,
the share price performance has been poor, declining from GBP1.31
at 31 December 2017 to GBP0.71 at 31 December 2018. This reflects
overall stock market weakness, low Time Out share liquidity and
delays to delivery of some strategic objectives.
Time Out celebrated its 50th year in 2018 and continues to
provide highly regarded professional content to global users across
digital, print and physical platforms. Time Out continues to make
progress in its two key areas of operational focus:
Time Out Markets
The first Time Out Market in Lisbon continues to exceed
expectations, as annual visitors grew a further 11% to c4 million
in 2018. Company-owned and operated markets are set to open in
Miami, New York, Boston and Chicago in 2019. In Q4 2019, the first
franchise location, in partnership with Ivanhoé Cambridge, is
expected to open in Montreal. Time Out is in the unique position of
being able to attract the best chefs and food offerings in a city,
and to drive customers to its locations through its global digital
reach.
Time Out Media
Following the successful integration of franchises in Spain,
Australia, Hong Kong and Singapore and the expansion of its
content, Time Out now owns and operates the Time Out Media business
in 288 cities and has licence agreements in 27 others. Through
these recent acquisitions and further improvements in operating
structure, Time Out will benefit from a much-rationalised cost base
going forward. Furthermore, following a review of revenue lines,
Time Out Media has removed low-margin activity, leading to
significantly improved gross margins which are expected to continue
in 2019. Digital advertising continues to perform well, enjoying
industry-leading sales growth. These moves ensured the group
delivered significantly lower losses in the second half and remains
on track to deliver near-term EBITDA profitability. As at 31
December 2018, Oakley Fund I had called EUR198.8 million (GBP178.5
million) from OCI, including recycled commitments of EUR13.0
million (GBP11.7 million).
Portfolio review: Oakley Fund II investment activity
The investment portfolio of Oakley Fund II is summarised in the
table below. Oakley Fund II is denominated in euros, and the
year-end exchange rate was used, where applicable. The Company
holds a 36.2% interest in Oakley Fund II.
31 Dec 2017 31 Dec 2018
Fair value Fair value
OAKLEY FUND II EURm EURm
North Sails 106.1 121.2
----------- -----------
Inspired 67.3 106.4
----------- -----------
Daisy 55.5 49.8
----------- -----------
Facile 123.7 -
----------- -----------
Parship Elite
Group 111.9 -
----------- -----------
Damovo 49.6 -
----------- -----------
Verivox 36.8 -
----------- -----------
Total investments 550.9 277.4
----------- -----------
Oakley Fund II ("Fund II") had an active year of divestments
with four portfolio realisations in 2018, generating proceeds of
EUR435.6 million, with total proceeds received by OCI of EUR131.3
million (GBP115.1 million).
In April, Fund II realised its remaining interests in Verivox
and Parship Elite Group, both of which had benefited from a
partnership with ProSiebenSat.1 Media SE, the leading German
broadcaster. Both transactions highlight Oakley's proven ability to
benefit from further upside in portfolio companies through the
retention of an interest following an initial exit. These sales
generated a combined gross money multiple of 4.1x and a combined
IRR of 101%, and returned a total of EUR58.2 million (GBP50.7
million) to OCI.
In June, Fund II completed the sale of Facile, Italy's leading
online price comparison site, having originally invested in the
business in September 2014. This represented Oakley's second
investment in the price comparison sector following the successful
investment in Verivox by both Fund I and Fund II. The sale
generated a gross money multiple of 3.7x and an IRR of 51%, and
returned EUR58.8 million (GBP51.5 million) to OCI. As part of the
transaction, Fund III took a minority stake in Facile in order to
benefit from Facile's further growth potential.
In August, Fund II sold its stake in telecoms company Damovo,
generating a gross money multiple of 5.4x and an IRR of 56%, and
proceeds for OCI of EUR14.0 million (GBP12.6 million). The
transaction represented a continuation of a successful partnership
with telecoms entrepreneur Matthew Riley, alongside whom Oakley has
also invested in Daisy, demonstrating how Oakley looks to support
entrepreneurial partners across multiple transactions.
The remaining three investments showed strong growth in the
year, with EBITDA and revenue increases in both Inspired and Daisy.
There was further capital of EUR27.0 million invested in two of
these companies by Fund II; EUR12.1 million in North Sails to fund
the development of North Sails Apparel and for M&A activities;
and EUR14.9 million in Inspired for the acquisition of new schools
during the year.
In July 2018, Daisy undertook a partial refinancing. This
further debt was used to fully repay shareholder loan notes
including interest. As part of this transaction Fund II and OCI
redeemed their position in the Daisy loan notes, receiving GBP1.5
million and GBP13.7 million respectively. Fund II used these
proceeds to re-invest back into Daisy with a further equity
investment of EUR1.7 million.
As at 31 December 2018, Fund II had called EUR176.7 million
(GBP158.6 million) from OCI as at 31 December 2018, representing
93% of its total capital commitments.
Portfolio review: Oakley Fund III investment activity
The investment portfolio of Oakley Fund III is summarised in the
table below. Oakley Fund III is denominated in euros, and the
year-end exchange rate was used, where applicable. The Company
holds a 40.7% interest in Oakley Fund III.
31 Dec 2017 31 Dec 2018
Fair value Fair value
OAKLEY FUND III EURm EURm
Casa & atHome 140.4 122.0
----------- -----------
Schülerhilfe 85.9 113.0
----------- -----------
WebPros 40.7 220.9
----------- -----------
TechInsights 33.4 43.6
----------- -----------
AMOS 17.4 44.0
----------- -----------
Career Partner
Group - 132.4
----------- -----------
Facile - 80.4
----------- -----------
Total investments 317.8 756.3
----------- -----------
Oakley Fund III ("Fund III") had an active investment year,
completing two further acquisitions, two follow-on investments, and
two refinancings.
In January, Fund III invested EUR84.6 million for a 67% stake in
Career Partner Group, one of the fastest growing and most highly
ranked private providers of higher education and personnel
development in Germany.
In June, Fund III invested EUR80.4 million for a 21% stake in
Facile as part of the transaction in which Oakley Fund II exited
its investment in full. The Italian online price comparison market
is less developed than in other European countries, and Facile's
market leading position means it is well-placed to benefit from
this future growth potential.
WebPros (formerly known as "Plesk") completed two follow-on
investments during 2018, adding scale and geographic coverage. The
acquisition of Solus was completed in June at an enterprise value
of $12 million, funded from existing cash resources.
In September, Plesk acquired cPanel - a provider of one of the
internet infrastructure industry's most reliable and intuitive
control panel software platforms. Fund III provided further funding
of $47.2 million (EUR40.4 million) in support of the acquisition
and now holds a 39.4% stake in the combined group, which has since
been renamed WebPros B.V.
In November, AMOS completed the bolt-on acquisition of the
Centre Européen de Management Hotelier International ("CMH"). CMH
is a leading business school in Paris, focused on the hotel
management, luxury brand and tourism sectors, with over 400
students. The acquisition of CMH represents the first addition to
the AMOS group as part of a buy-and-build strategy in the French
tertiary education sector. Fund III provided funding of EUR8.5
million in support of the acquisition.
Casa & atHome and TechInsights increased their debt
financing during the year, with proceeds of EUR28.9 million (28% of
total cost invested) and EUR12.7 million (93% of total cost
invested) returned to Fund III respectively. OCI received EUR16.9
million (GBP15.0 million) from these transactions.
The main driver of the uplift in fair values in the Fund III
portfolio at 31 December 2018, was due to the strong and steady
performances from the underlying operations of the portfolio,
especially WebPros, which accounted for 53%of the uplift.
Oakley Fund III had called EUR172.7 million (GBP155.0 million)
from OCI as at 31 December 2018, representing 53% of the Company's
total committed capital.
Oakley Funds' realisations and distributions
Year of intense activity for the Oakley Funds with a total of
GBP130.5 million returned to OCI. The key transactions that were
realised during 2018 by the Oakley Funds' are noted below:
Oakley Fund II Realisation
Parship Elite Group:
Fund II completed the sale of Parship based on an enterprise
value of EUR440 million to NuCom Group ("NuCom"), ProSiebenSat.1's
Commerce unit.
Total proceeds received by Fund II were EUR137.9 million.
This represented a gross money multiple of 4.7x and a gross IRR
of 118%.
OCI's proceeds: GBP35.6m
Verivox:
Fund II completed the sale of Verivox based on an enterprise
value of EUR530 million to NuCom.
Total proceeds received by Fund II were EUR53.5 million.
This represented a gross money multiple of 2.5x and a gross IRR
of 44%.
OCI's proceeds: GBP15.1m
Facile:
Fund II completed the sale of Facile based on an enterprise
value of EUR445 million to EQT.
Total proceeds received by Fund II were EUR198.4 million.
This represented a gross money multiple of 3.7x and a gross IRR
of 51%.
OCI's proceeds: GBP51.5m
Damovo:
Fund II completed the sale of Damovo based on an enterprise
value of EUR135 million to Eli Global.
Total proceeds received by Fund II were EUR45.1 million, with
consideration of EUR11.4 million expected to be received in late
2019.
This represented a gross money multiple of 5.4x and a gross IRR
of 56%.
OCI's proceeds: GBP12.6m
Oakley Fund III Refinancing
Casa & atHome:
Casa & atHome was refinanced in March 2018 resulting in a
distribution of EUR28.9 million to Fund III
OCI's proceeds: GBP10.5m
TechInsights:
TechInsights was further refinanced in October 2018 resulting in
a distribution of EUR12.7 million to Fund III.
OCI's proceeds: GBP4.6m
Portfolio review: Co-investment activity
The co-investment portfolio as at 31 December 2018 is summarised
in the table below:
31 Dec 2017 31 Dec 2018
Fair value Fair value
Co-investments EURm EURm
Equity investments
----------- -----------
Inspired 26.2 41.8
----------- -----------
Time Out 41.2 22.3
----------- -----------
Debt securities
----------- -----------
North Sails 27.8 40.6
----------- -----------
Fund Facilities 13.5 30.6
----------- -----------
Time Out - 20.9
----------- -----------
Daisy 28.2 14.9
----------- -----------
Total investments 136.9 171.2
----------- -----------
Equity securities
Inspired, held by OCPEE Feeder L.P., continues to grow rapidly
through acquisition and organically, with expansion
into the Middle East, and further acquisitions of schools in
Costa Rica, Spain, Italy and Portugal. A further deal
was signed to acquire a group of eight premium schools across
New Zealand, Vietnam and Indonesia, generating
an estimated EUR24 million EBITDA. With this acquisition,
Inspired is now one of the three largest global K-12 groups,
with a sizeable platform to pursue further acquisitions in Asia.
Enrolment levels and current trading are in line with
expectations. This is reflected in the uplift in fair value
since 31 December 2017.
Despite the operational progress made during 2018 in Time Out,
as discussed on page 35, the share price performance has been poor,
declining from GBP1.31 at 31 December 2017 to GBP0.71 at 31
December 2018. This reflects overall stock market weakness, low
Time Out share liquidity and delays to delivery of some strategic
objectives.
Debt securities
The Company provides debt facilities to certain underlying
entities and portfolio companies. These debt facilities are
provided on an arm's-length basis at competitive market interest
rates. The interest income generated from these
facilities exceeds the interest earned on OCI's bank deposits,
allowing OCI to earn higher returns on part of its
cash reserves.
During the year, OCI has earned GBP6.5 million of interest from
the debt facilities provided. During the year, a debt
facility provided to North Sails was increased to GBP25.8
million with GBP13.1 million drawn at the year end. This was
used to provide additional working capital to North Sails
Apparel. OCI continues to support the turnaround of
North Sails through its growth and the earnings that are
expected to be derived from it.
The Company also provides revolving credit facilities to each of
the Oakley Funds. Each drawing under these
facilities is for no more than one year. The loans are used to
fund short-term cash requirements of the Oakley
Funds to pay fees and expenses as they fall due. As at 31
December 2018, the Company had outstanding debt
facilities of GBP30.6 million with the Oakley Funds, including
accrued interest.
A short-term loan was issued to Time Out during the year bearing
15% interest per annum. Time Out drew a total of GBP20 million
during 2018. Daisy undertook a partial refinancing in July. The
financing received was used to fully repay shareholder loan notes
including interest. As part of this transaction OCI redeemed its
position in the Daisy loan notes and received proceeds of GBP13.7
million,
repaying the full Daisy loan that was outstanding. The
Ellisfield loan remains in place at year end with a balance
of GBP14.9 million, earning interest for OCI at a rate of 6.5%
per annum.
Corporate Governance report
The Board recognises the importance of sound corporate
governance and has chosen to comply with the Association of the
Investment Companies ("AIC") Code of Corporate Governance (the "AIC
Code"), as is appropriate to the Company's size and listing.
The AIC represents closed-ended investment companies whose
shares are traded on public markets. The purpose of the AIC Code is
to provide a framework of best practice in respect of the
governance of investment companies. A copy of the AIC Code is
available on AIC's website at www.theaic.co.uk.
The Board has considered the principles and recommendations of
the AIC Code by reference to the AIC Corporate Governance Guide for
Investment Companies (the "AIC Guide"). The AIC Code, as explained
by the AIC Guide, addresses all the principles set out in the UK
Corporate Governance Code, as well as setting out additional
principles and recommendations on issues that are of specific
relevance to the Company.
The Board considers that reporting consistent with the
principles and recommendations of the AIC Code, and by reference to
the AIC Guide (which incorporates the UK Corporate Governance
Code), will provide better information to shareholders.
The Board recognises the importance of sound corporate
governance and has chosen to comply with the AIC Code as is
appropriate to the Company's size and listing. This report
describes the Company's corporate governance practices that were in
place or adopted in the year ended 31 December 2018.
Chair's introduction to Corporate Governance
Good corporate governance is a key component of the Company's
activities. Governance and oversight of these activities form an
integral part of the Company's operations and it is as important as
ever to monitor these to create and deliver value to the Company's
shareholders. The primary function of the Board is to provide
leadership and strategic direction and it is responsible for the
overall management and control of the Company. It is through these
functions that the Board creates and delivers value and growth for
its shareholders.
Statement of independence
The AIC Code recommends that the chair should be independent in
character and judgment and free from relationships or circumstances
that may affect, or could appear to affect his or her judgment.
In addition to this provision, a majority of the Board of
Directors should be independent of the Investment Adviser.
Independence is determined by ensuring that, apart from
receiving their fees for acting as Directors or owning shares,
Non-executive Directors do not have any other material
relationships with, nor derive additional remuneration from or as a
result of transactions with, the Company, its promoters, its
management or its partners, which in the judgment of the Board may
affect, or could appear to affect the independence of their
judgment.
Explanation of exceptions
The Company has complied with all recommendations of the AIC
Code and the relevant provisions of the UK Corporate Governance
Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to
the role of the Chief Executive, Executive Directors' remuneration
and the need for an internal audit function. The Board considers
these provisions are not relevant to the Company with majority of
the Company's day-to-day management and administrative functions
being outsourced to third parties (investment management and risk
management decisions are taken by the Board and its Committees). As
a result, the Company has no Executive Directors, employees or
internal audit function. The Company has, therefore, not reported
further in respect of these provisions. This position is
re-assessed on an annual basis.
In the context of the nature, scale and complexity of the
Company, certain recommendations of the AIC Code have not been
deemed appropriate to the governance framework of the Company, an
explanation of which is set out as follows:
-- The Company established a separate Nomination and
Remuneration Committee at the Board Meeting held in November 2018.
However, the Committee was not operational throughout the year and
therefore is noted as an exception to the AIC Code. For the year
ended 31 December 2018, the Board as a whole considered matters
relating to the Non-executive Directors' remuneration. The
Company's policy is that the fees payable to the Directors should
reflect the time spent by the Directors on the Company's affairs
and the responsibilities borne by the Directors and be sufficient
to attract, retain and motivate Directors of a quality required to
run the Company successfully. An external assessment of Directors'
remuneration has not been undertaken. However, the Board does
perform informal benchmarking and has made some changes to
remunerations for 2019 to provide improved consistency.
-- The Board has chosen not to adopt a fixed policy on tenure as
recommended by Principle 4 of the AIC Code. While the Board
recognises the value of refreshing its members regularly, it does
not consider it necessary or appropriate to adopt a policy whereby
Directors only serve for limited periods of time. The Directors
prefer to retain the flexibility to assess the balance of skills
and experience of the Board as a whole. Furthermore, given the
long-term nature of the Company's investments, the Directors
consider that maintaining some degree of continuity and a long-term
perspective at Board level can be particularly valuable.
-- The Board has not adopted a formal policy on diversity, as
recommended under Principle 9 of the AIC Code. In view of the
nature, scale and complexity of the Company, the Board does not
consider a specific policy with respect to diversity to be
necessary at this time. Diversity of the Board is further
considered on at least an annual basis through the Board evaluation
process.
-- The costs and charges of the Company are disclosed in Notes
15 to 19 in the financial statements. The Board has chosen not to
disclose the ongoing charges calculation as the Company is
currently working with trade bodies including LPeC to develop
consistent disclosure of fees in the industry. The Board will
review the policy throughout 2019.
-- The Board has chosen to appoint a non-independent Director to
the Audit Committee. Whilst Stewart is not independent due to his
previous role in Oakley, the Board feels it is appropriate to
appoint him to the Committee due to his experience and knowledge of
accounting and auditing.
The Board
The Board was comprised of the Chair, Caroline Foulger, and four
other Non-executive Directors at 31 December 2018. The following
Directors are not considered independent, Peter Dubens, who is
founder and Managing Partner of the Oakley Capital Group, and
Stewart Porter, who is a former employee of the Investment
Adviser.
Caroline Foulger, James Keyes and Laurence Blackall remain
independent despite their individual length of service on the
Board, as they are free from any business or other relationship
that could materially interfere with their exercise of judgment.
The Company does not have a formal policy of tenure in place but
assesses each Director's role on an individual basis based on their
performance. Peter Dubens and Stewart Porter do not vote on matters
in respect of which they are deemed to have a conflict of
interest.
On 11 September 2018, it was announced that after 11 years as
Chair of the Board, Christopher Wetherhill notified the Board of
his intention to retire and step down as Director. Caroline
Foulger, a Non-executive Director since joining the Board in 2016,
was appointed as Chair in his place. Further to this, on 25
September 2018, the Board announced the appointment of Stewart
Porter as a Non-executive Director of OCI.
It is the Board's responsibility to ensure that the Company has
a clear strategy and vision, and to oversee the overall management
and oversight of the Company, and for its growing success. In
particular, the Board is responsible for making investment
decisions, monitoring financial performance, setting and monitoring
the Company's risk appetite and ensuring that obligations to
shareholders are understood and met.
The Directors believe that the Board has an appropriate balance
of skills and experience, independence and knowledge of the Company
to enable it to provide effective strategic leadership and proper
governance of the Company.
Directors' terms of appointment
The terms and conditions of appointment for Non-executive
Directors are outlined in their letters of appointment and are
available for inspection at the Company's registered office during
normal business hours and at the AGM for 15 minutes prior to and
during the AGM.
In accordance with the Company's Bye-laws and best practice,
Directors retire on a rotational basis, and are then subject to
re-election. In accordance with the appointment and rotation policy
included in the Bye-Laws of the Company, Caroline Foulger retired
and was re-elected at the AGM on 4 July 2018.
The Board's process for the appointment of new Directors is
conducted in a manner which is transparent, engaged and open. The
Chair takes the lead in the nomination of a new Board member. In
summary, the process includes, but is not limited to:
-- Reviewing the succession plans and needs for the Chair and Directors
-- Seeking the best available candidates considering specific criteria determined by the Board
-- Agreeing a short-list of candidates, considering the views of
the Company's advisers and the use of a recruitment consultant as
necessary
-- Conducting interviews both individually and inclusive of the Board as a whole
Only the independent Directors (including the Chair) vote on the
election of new candidates. The Board strives to get a unanimous
vote on the appointment of the proposed candidate, failing that, a
super majority vote will suffice.
Board meetings
The Board holds four scheduled Board meetings annually, and in
2018 additionally held three further formal meetings to address
certain matters coming up between those scheduled meetings. Where
necessary, the Directors may seek independent professional advice
at the expense of the Company to aid their duties.
Director Board attendance
Total meetings held 7
-----------------
Number attended:
-----------------
Christopher Wetherhill (retired 10
September 2018)* 5
-----------------
James Keyes 7
-----------------
Laurence Blackall 6
-----------------
Caroline Foulger 6
-----------------
Peter Dubens 6
-----------------
Stewart Porter (appointed 24 September
2018)** 1
-----------------
* Christopher Wetherhill attended all Board meetings in 2018
during the period which he served as a Director.
** Stewart Porter attended all Board meetings held in 2018
following his appointment to the Board.
The principal matters reviewed and considered by the Board
during 2018 included:
-- Regular reports from the Investment Adviser on the Oakley Funds;
-- Regular reports and updates from the Investment Adviser on
the co-investments and debt facilities held by the Company;
-- Co-investment opportunities;
-- Reports and updates from the Administrative Agent;
-- Consideration of the Company's share price and net asset value;
-- Regular reports from the Board's committees;
-- The Annual Report and Accounts and half-yearly Report;
-- Reports from external consultants on market and regulatory updates; and
-- Corporate matters including dividend policy and share buy-backs.
The Board receives information that it considers to be
sufficient and appropriate to enable it to discharge its duties.
Directors receive Board papers in advance of Board meetings and are
able to consider in detail the Company's performance and any issues
to be discussed at the relevant meeting.
Board training
New Directors are provided with an induction programme tailored
to the particular circumstances of the appointee and which includes
being briefed fully about the Company by the Chair and Senior
Executives of the Investment Adviser. The Board determines the
training and development needs of both the Board as a whole and of
individual Directors.
Information and support
The Board ensures it receives, in a timely manner, information
of an appropriate quality to enable it to adequately discharge its
responsibilities. Papers are provided to the Directors in advance
of the relevant Board or committee meeting to enable them to make
further enquiries about any matter prior to the meeting, should
they so wish. This also allows the Directors who are unable to
attend to submit views in advance of the meeting.
Board committees
The Board has delegated a number of areas of responsibility to
its committees. The Company's Risk committee and Audit committee
have continued their important roles, along with the addition of a
new Management Engagement committee which was set up during the
year. The Board established a separate Nomination and Remuneration
committee in November 2018 to take effect from 1 January 2019. For
the year ended 31 December 2018, all remuneration decisions are
taken by the Board as a whole. The Board assesses each committee's
performance on its compliance with its respective Terms of
Reference and its members attendance at committee meetings.
Audit committee
The Chair of the Audit committee is appointed by the Board of
Directors. As at 31 December 2018, the Audit committee comprised
Laurence Blackall (Chair) and Stewart Porter. The role and
responsibility of the Chair of the Audit committee is to set the
agenda for meetings of the Audit committee and, in doing so, take
responsibility for ensuring the Audit committee fulfils its duties
under its terms of reference. These include, but are not limited
to:
-- Monitoring the integrity of the financial statements of the
Company, including its annual and interim reports and any other
formal announcement relating to its financial performance.
-- Reviewing and reporting to the Board on significant financial
reporting issues and judgments which they contain, having regard to
matters communicated to it by the auditor.
-- Overseeing the relationship with the external auditor
including (but not limited to): approval of their remuneration,
approval of their terms of engagement, assessing annually their
independence and objectivity, monitoring the auditor's compliance
with relevant ethical and professional guidance on the rotation of
audit partners and assessing annually their qualifications,
expertise and resources and the effectiveness of the audit
process.
-- Reviewing the adequacy and security of the Company's
arrangements for its Directors and the employees of the Investment
Adviser and contractors to raise concerns, in confidence about
possible wrongdoing in financial reporting or other matters.
-- Reporting formally to the Board on its proceedings after each
meeting on all matters within its duties and responsibilities.
Risk committee
The Risk committee oversees the adequacy and effectiveness of
the Company's risk management framework and policies. It is
responsible for the oversight of the Company's current and emerging
material risks and for the monitoring of the procedures and
policies performed in mitigation of those risks. Until September
2018, the Risk committee comprised of Caroline Foulger (Chair) and
Christopher Wetherhill. Since Christopher's retirement from the
Board in September 2018, the committee falls short of the quorum
and therefore, the risk and responsibilities of the Risk committee
will be performed by the Board as a whole until a new member of the
Risk committee is appointed by the Chair.
The role and responsibility of the Chair of the Risk committee
is to set the agenda for meetings of the Risk committee and, in
doing so, take responsibility for ensuring that the Risk committee
fulfils its duties under its terms of reference. The main role of
the Risk committee is to provide oversight to the operation of the
risk management framework in relation to all identified risk types,
with the exception of Investment Risk which is the responsibility
of the Investment Adviser. The responsibilities of the Risk
committee include, but are not limited to:
-- Monitoring the Company's risk profile in order to confirm the
Company is operating within the Board-approved risk appetite
-- Recommending risk limits and risk appetite criteria to the Board
-- Considering the need for specific risk exposures and ensuring
appropriate action is taken where necessary
-- Ensuring there is a suitable structure in place to identify
the changing nature of risks and to react to forward-looking risk
issues
-- Reviewing risk training programmes to ensure the
strengthening of a risk aware culture in the Company
-- Reviewing the Company's alignment to relevant Bermudian, UK
and EU regulatory standards for systems, controls and conduct of
business
Through the Risk committee, the Board has an ongoing process in
place for the identification, evaluation and management of these
risks.
Management Engagement committee
The purpose of the committee is to review on a regular basis the
appointment, remuneration and performance of the key service
providers to the Company. Laurence Blackall is Chair of the
committee, and the committee includes any other Independent
Director. The role and responsibility of the Chair of the
Management Engagement committee is to set the agenda for meetings
of this committee and, in doing so, take responsibility for
ensuring the committee fulfils its duties under its terms of
reference. These include, but are not limited to:
-- Monitoring compliance by providers of services to the Company
with the terms of their respective agreements
-- Reviewing and considering the appointment and remuneration of
providers of services to the Company
-- Considering any potential conflict of interest which may
arise between the providers of services of the Company
-- Monitoring the performance of all key service providers
-- Monitoring and reviewing the Investment Adviser's
performance, taking into account the following factors: contractual
arrangements with the Administrative Agent and Investment Adviser;
investment performance; cash flow analysis; marketing performance;
communication and support
-- Providing feedback to the Investment Adviser on its
performance, and if necessary, suggesting changes and improvements
to the Board.
The Administrative Agent
Pursuant to an operational services agreement dated 1 April 2017
(the "Operational Services Agreement"), the Company appointed
Oakley Capital Manager Limited ("OCML" or the "Administrative
Agent") to provide operational assistance and services to the Board
with respect to the Company's investments and with its general
administration. The Administrative Agent is managed by experienced
third-party administrative and operational executives.
The Administrative Agent is responsible for carrying out the
day-to-day administrative operations of the Company and provides
operational assistance with respect to the Company's investments.
The Administrative Agent has entered into an Investment Advisory
Agreement with the Investment Adviser to advise on the investment
of the assets of the Company. The Investment Adviser also provides
administrative support services to the Administrative Agent.
Under the Operational Services Agreement, the Administrative
Agent receives an operational services fee equal to 2% per annum of
the net asset value (before deduction of any accrued performance
fees) of all investments held by the Company except for the
investments in and any debt facilities with the Oakley Funds. The
fee is pro rata for partial period and payable quarterly in
arrears.
The Administrative Agent may receive also an advisory fee based
on the successful buy-side and sell-side transactions of the
Company for any direct equity investments of up to 2% of the equity
transaction value as agreed between the parties.
The Administrative Agent also receives a performance fee of 20%
of the excess of any proceeds from the full or partial realisation
on disposal of each of the Company's co-investments over and above
an 8% hurdle rate after the deduction of the original cost of the
co-investment and the attributable proportion of all other expenses
incurred by the Company in respect of co-investments.
Under the Operational Services Agreement, the Administrative
Agent may also recharge costs incurred, either directly or
indirectly by its contracted advisors, on behalf of the
Company.
The Investment Adviser
Oakley Capital Limited ("Oakley") serves as the Investment
Adviser to the Administrative Agent with respect to the Company. It
was incorporated in England and Wales in 2000 under the Companies
Act 1985 and is authorised and regulated by the Financial Conduct
Authority. The Investment Adviser is primarily responsible for
making investment recommendations to the Company along with
structuring and negotiating deals for the Oakley Funds.
The Investment Adviser does not receive any management or
performance fees from the Company. Any fees which are earned by the
Investment Adviser are paid by the Administrative Agent.
Administrator and Company Secretary
The Company has appointed Mayflower Management Services
(Bermuda) Limited (the "Administrator") to provide administration
services pursuant to an Administration Agreement dated 30 July
2007. It receives an annual administration fee at prevailing
commercial rates. The Administrator is responsible for the
Company's general administrative requirements such as the
calculation of the net asset value and net asset value per share
and maintenance of the Company's accounting and statutory
records.
The Company has also entered into an agreement with Mayflower
Corporate Services Limited, a subsidiary of the Administrator to
provide corporate secretarial services. Any fees due to Mayflower
Corporate Services Limited are paid by the Administrator.
Shareholder communications
Board oversight
The Company places great importance on communication with its
shareholders and endeavours to provide clear information, as well
as maintaining a regular dialogue with shareholders.
The Investment Adviser briefs the Board on a regular basis with
regard to any feedback received from analysts and investors. Any
significant concern raised by shareholders in relation to the
Company is also communicated to the Board. The Company's Nominated
Broker (Liberum Capital Limited) regularly reports directly to the
Board at meetings. In addition, research reports published by
financial institutions on the Company are circulated to the
Board.
AGM
An Annual General Meeting is held each year, where a separate
resolution is proposed on each substantially separate issue along
with the presentation of the Annual Report and Accounts. All proxy
votes are counted and, except where a poll is called, the level of
proxies lodged for each resolution is announced at the Meeting and
is published on the Company's website. The notice of the Annual
General Meeting and related papers are sent to shareholders at
least 21 working days before the Meeting.
The Chair and the Directors can be contacted through the Company
Secretary, Mayflower Corporate Services Limited, 3rd Floor,
Mintflower Place, 8 Par-la-Ville Road, Hamilton HM08, Bermuda.
Capital Markets Day
An annual Capital Markets Day consists of a presentation to
shareholders and analysts by senior Partners of the Investment
Adviser and management teams from a selection of Oakley Funds'
portfolio companies. The OCI Board attends the Capital Market's Day
to be available to shareholders. The event is held in London. The
presentations are focused on the performance of the underlying
Oakley Funds' investment portfolio.
Public reporting
The Company's Annual Report and Accounts, along with the
half-year Financial Statements and other RNS releases are prepared
in accordance with applicable regulatory requirements.
Signed on behalf of the Board
Caroline Foulger
Chair
13 March 2019
Audit Committee report
The Board is supported by the Audit Committee, which comprises
two Non-executive Directors. Laurence Blackall is Chair of the
Committee and James Keyes served on the Committee until November
2018, when he was replaced by Stewart Porter. The Board would like
to thank James for his valuable service on the Committee over the
past number of years.
Objectives for 2019
-- Continuing to monitor and review the relationship with the Auditor
-- Ensuring the accounting and internal control systems of the service providers are adequate
-- Challenging the investment valuation process and methodology
to ensure valuations are fairly valued
Achievements in 2018
-- Maintaining and monitoring the relationship with the Auditor,
and the services it provides the Company
-- Concluding that the year-end valuations have been effectively
carried out and the investments fairly valued
We are pleased to report on the range of matters which the Audit
Committee has considered during the year, the key risks and
judgment areas and the decisions applied.
The principal role of the Audit Committee is to consider the
following matters and make appropriate recommendations to the Board
to ensure that:
-- the accounting and internal control systems of the Investment Adviser are adequate;
-- the integrity of the Consolidated Financial Statements, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy;
-- the independence, objectivity and effectiveness of the
appointed Auditor is monitored and reviewed. The Committee
additionally reviews their performance in terms of quality, control
and value and discusses whether shareholders would be better served
by a change of Auditor; and
-- the Company's policy on the provision of non-audit services
by the Auditor is developed and implemented.
The Audit Committee met four times during the year under review
and has continued to support the Board in fulfilling its oversight
responsibilities.
Committee meetings
Director Committee attendance
Total meetings held 4
---------------------
Number attended:
---------------------
Laurence Blackall 4
---------------------
James Keyes* 4
---------------------
Stewart Porter** 1
---------------------
* James Keyes attended all Audit Committee meetings while he served on the Committee in 2018
** Stewart Porter attended all Audit Committee meetings held in
2018 following his appointment to the Board
Review of accounting policies and areas of judgment or
estimation
The most significant risk in the Company's accounts is the
valuation of the Oakley Funds and of the Company's co-investments
and whether those investments are fairly and consistently valued.
This issue is considered carefully when the Audit Committee reviews
the Company's Annual and Interim Report and Accounts. The
Investment Adviser provides detailed explanations of the rationale
for the valuation of each investment. These are discussed in detail
by the Committee and with the Auditor.
The key area of focus of the Committee is the valuation
methodology and underlying business performance of the Oakley
Funds' portfolio companies.
The valuations are produced by the Investment Adviser's
respective deal teams and are independently reviewed by a
professional valuation firm who report on their procedures and the
conclusions of their work. The Audit Committee concluded that the
year-end valuation process had been effectively carried out and
that the investments have been fairly valued.
The Audit Committee reports to the Board after each Audit
Committee meeting on the main matters discussed at the meeting.
Audit
The Company's Auditor, KPMG Audit Limited ("KPMG" or "the
Auditor"), located in Hamilton, Bermuda, has been Auditor since
2007 and the Audit Committee reviews their performance annually.
The Audit Committee considers a range of factors including the
quality of service, the Auditor's specialist expertise and the
level of audit fee. The Audit Committee remains satisfied with
KPMG's effectiveness and therefore has not considered it necessary
to date, to require the Auditor to re-tender for the audit work.
The Auditor is required to rotate the audit partner every five
years. For the year ended 31 December 2018, it is the second year
of the audit partner's engagement on the audit of the Company.
The Audit Committee has reviewed the provision of non-audit
services by KPMG and believes it to be cost-effective and not an
impediment to the Auditor's objectivity and independence. This is
assessed by ensuring that KPMG has appropriate measures in place to
safeguard its independence. Such measures include ensuring that
separate engagement teams provide audit and non-audit services.
The Audit Committee must approve in advance all non-audit work
to be carried out by the Auditor for the Company.
On behalf of the Audit Committee
Laurence Blackall
Chair of the Audit Committee
Risk Committee report
The Board is supported by the Risk Committee, which until
September 2018 comprised two Non-executive Directors, Christopher
Wetherhill and Caroline Foulger. Since Christopher's retirement in
September 2018, Risk Committee functions have been performed by the
Board as a whole. We anticipate appointing a new Non-executive
Director in 2019 who will join the Risk Committee and enable us to
re-establish the Committee separately as before.
Objectives for 2019
-- Appointing a new Non-executive Director to join the Risk Committee
-- Continuing to monitor the key risks identified, reporting to the Board periodically
-- Continuing to improve the methodologies and processes used by
the Company for identifying, evaluating and monitoring risks
Achievements in 2018
-- Monitoring the compliance of the Company with regard to the various regulatory submissions
-- Challenging and maintaining the risk framework for the
Company ensuring the correct reporting to the Board on key risks
for the Company
The Board is pleased to report on the range of matters which the
Risk Committee has considered during 2018, the key risks and
judgment areas and the decisions applied.
Risk is an integral part of business and the effective
identification and management of risks is central to operating a
successful business and to the Company achieving its strategic
objectives. Having a clear and well understood risk management
strategy, assists the Board to ensure the Company achieves an
appropriate balance between generating returns for its investors,
meeting its regulatory and governance responsibilities, considering
the views of other stakeholders and taking proportionate and
managed risks. In that respect, the Board has established the Risk
Committee to have oversight of those identified risks.
The Risk Committee met three times during the year under review
and has continued to support the Board in fulfilling its oversight
responsibilities.
Committee meetings
Director Committee attendance
Total meetings held 3
---------------------
Number attended:
---------------------
Caroline Foulger 3
---------------------
Christopher Wetherhill
* 3
---------------------
* Christopher Wetherhill attended all Risk Committee meetings in
2018 during the period which he served as a Director. After his
retirement from the Board in September, a quorum was not met by the
Risk Committee and therefore Risk Committee functions were
performed by the Board. This will continue until a new Director is
appointed to the Risk Committee in 2019.
The principal risks and uncertainties faced by the Company are
described below and Note 5 to the Consolidated Financial Statements
provides detailed explanations of the risks associated with the
Company's financial instruments.
-- Operational: relates to risks associated with, and supporting
the operating environment of, the Company. The operating
environment middle and back-office functions such as valuation,
accounting, administration and reporting, are primarily performed
by service providers. The Company is dependent on its Investment
Adviser, the Administrative Agent and their professionals. The
Investment Adviser's employees, on behalf of the Administrative
Agent, play key roles in the operation of the Company. The
departure or reassignment of some or all of these professionals
could limit the Company's ability to achieve its investment
objectives.
-- Regulatory: the risk that a change in the laws and
regulations will materially impact the business if the Company is
not in compliance. The laws and regulations include the AIM Rules,
AIFMD requirements, FCA requirements, Bermuda legal and corporate
governance requirements. This risk also relates to the quality of
the Company's relationship with its regulators.
-- Liquidity: relates to the risk that the Company's commitments
to either meet the capital calls from its investments in the Oakley
Funds or to pay its regular dividend will not be met from available
cash resources. The Investment Adviser has regard to the liquidity
and life-cycle phases of the Oakley Funds when making investment
decisions, and the Company manages its liquid resources to ensure
sufficient cash is available to meet its contractual commitments.
At certain points in the investment cycle, the Company may hold
substantial amounts of cash awaiting investment, which it may
temporarily invest in government or corporate securities, or in
bank deposits.
-- Market: relates to losses that could be incurred due to
changes in external market factors (i.e. prices, volatilities,
correlations, foreign exchange, political risk and event risk). The
Company faces market risks from its exposures through investing
into the Oakley Funds and through its loans or co-investments
pursued alongside the Oakley Funds.
-- Counterparty: relates to losses that could be incurred due to
declines in the creditworthiness of entities in which the Company
either directly, or through the Oakley Funds invests. From
time-to-time the Company may provide bridging or debt finance to
other entities, such as the Oakley Funds or underlying portfolio
companies. The credit risk of lending to these entities, together
with any accumulative risk, is considered on a case-by-case basis
by the Board and Risk Committee.
-- Financial: relates to inadequate controls by the Investment
Adviser or other third-party service providers which could lead to
misappropriation of assets, inappropriate valuation or incorrect
financial reporting. Inappropriate accounting policies or failure
to comply with accounting standards could lead to misreporting or
breaches of regulations. Valuation is particularly judgmental
depending as it does upon estimates of future events and
circumstances and upon the methodology used.
For further details on how the Company has addressed and
mitigated these risks throughout 2018, see the risk management
report.
On behalf of the Risk Committee
Caroline Foulger
Chair
Directors' report
The Directors present their report and financial statements for
the year ended 31 December 2018. The results for the year are set
out in the attached financial statements and have been prepared in
accordance with International Financial Reporting Standards
("IFRS").
The Company's registered office and principal place of business
is 3rd Floor, Mintflower Place, 8 Par-la-Ville Road, Hamilton HM08,
Bermuda.
Directors
The Board currently comprises the Chair and four other
non-executive Directors as disclosed in their respective
biographies. During the year, the former Chair, Christopher
Wetherhill, retired from the Board, after holding the position for
11 years. The Company would like to thanks Christopher for his
valuable contribution to the Company during his tenure. In his
place, Caroline Foulger was named Chair of the Board. The Board
also welcomed Stewart Porter as a Non-executive Director in
September 2018. With over 40 years of operational experience within
private equity and TMT businesses, the Board feels he is a valuable
addition.
All Directors, other than Peter Dubens and Stewart Porter, are
considered to be independent. Peter Dubens and David Till (both
Directors of the Investment Adviser), with a team of 19 investment
professionals, are together primarily responsible for performing
investment advisory obligations with respect to the Company and the
Oakley Funds. Peter Dubens is a Director of both the Investment
Adviser and the Company and cannot vote on any Board decision
relating to the Investment Advisory Agreement whilst he has an
interest.
Stewart Porter is a former employee of the Investment Adviser
and retired from his role of Chief Operating Officer in June 2018.
In line with the AIC Code of Compliance, Stewart is not independent
due to his former employment with the Investment Adviser. He will
be submitted for re-election on an annual basis in accordance with
the Bye-Laws of the Company.
The Company is not aware of any other potential conflicts of
interest between any duty of any of the Directors owed to it and
their respective private interests.
Share capital
As at the date of this report, the Company had an issued share
capital of 204,804,036. The rights attaching to the shares are set
out in the Bye-Laws of the Company. There are no restrictions on
the transfer of ordinary shares in the capital of the Company other
than those which may be imposed by law from time-to-time. There are
no special control rights in relation to the Company's shares and
the Company is not aware of any agreements between holders of
securities that may result in restrictions on the transfer of
securities or on voting rights, except for the lock-ups agreed at
the time of admission as set out in the prospectus. In accordance
with the Disclosure and Transparency Rules, Board members and
certain employees of the Company's service providers are required
to seek approval to deal in the Company's shares.
Voting rights
In a general meeting of the Company, every holder of shares who
is present in person or by proxy shall, on a poll, have one vote
for every share of which they are the holder. All the rights
attached to a treasury share shall be suspended and shall not be
exercised by the Company while it holds such treasury share and,
where required by the Act, all treasury shares shall be excluded
from the calculation of any percentage or fraction of the share
capital or shares of the Company. As at 31 December 2018, the
Company does not hold any treasury shares.
Directors' interests in shares
As at 13 March 2019, Directors who are beneficial owners of
shares in the Company are:
Director No. of shares
Caroline Foulger 122,000
--------------
Laurence Blackall 200,000
--------------
Peter Dubens 9,554,068
--------------
Stewart Porter 0
--------------
James Keyes 60,000
--------------
Save as disclosed above, none of the Directors nor any member of
their respective immediate families, nor any person connected with
a Director, has any interest whether beneficial or non-beneficial
in the share capital of the Company.
Relations with shareholders
The Board recognises that it is important to maintain
appropriate contact with major shareholders in order to understand
their issues and concerns. Members of the Board have had the
opportunity to attend meetings with major shareholders, and the
Board receives major shareholders' views of the Company via direct
face-to-face contact, analyst and broker briefings.
In addition, the Investment Adviser maintains dialogue with
institutional shareholders, the feedback from which is reported to
the Board. The Board monitors the Company's trading activity on a
regular basis.
The Company reports formally to shareholders twice a year. In
addition, current information is provided to shareholders on an
ongoing basis through the Company's website.
Corporate responsibility
The Board considers the ongoing interests of shareholders on the
basis of open and regular dialogue with the Investment Adviser. The
Board receives regular updates outlining regulatory and statutory
developments and responds as appropriate.
Significant agreements
The following agreements are considered significant to the
Company:
-- Oakley Capital Manager Limited ("Administrative Agent") under
the Operational Services Agreement
-- Oakley Capital Limited ("Oakley") as Investment Adviser to
the Administrative Agent, under the terms of the Investment Adviser
Agreement
-- Mayflower Management Services (Bermuda) Limited and its
subsidiary Mayflower Corporate Services Limited, under the
Administrator Agreement
-- Computershare as Registrar under the Registration Agreement
-- KPMG as appointed external Auditor
-- Liberum Capital Limited as Nominated Adviser and Broker
Substantial shareholdings
As at 13 March 2019, the Company has received the following
notifications of interest of 3% or more in the voting rights
attached to the Company's ordinary shares:
Shareholder % of voting
rights
Invesco Perpetual 20.4
------------
Woodford Investment Management 19.8
------------
Asset Value Investors 10.8
------------
FIL Investment International 5.6
------------
OCI Directors, employees and
related parties 5.1
------------
Sarasin and Partners 5.0
------------
Rothschild Private Management 4.0
------------
Jon Wood and Family 3.4
------------
Compensation for loss of office
There are no agreements between the Company and its Directors
providing for compensation for loss of office that occurs because
of a change of control.
Delegation of responsibilities
Under the Operational Services Agreement, the Board has
delegated to the Administrative Agent substantial authority for
carrying out the day-to-day administrative functions of the
Company. The Board has the ultimate decision to invest (or take any
other action) in the Oakley Funds or as a co-investment. In the
ordinary course it makes decisions after reviewing the
recommendations provided by the Investment Adviser on behalf of the
Administrative Agent.
The Directors of the Company believe this creates the proper
conditions to enhance long-term shareholder value and to achieve a
high level of corporate performance.
The exercise of voting rights attached to the Company's
underlying investments lies with Oakley. Oakley has a policy of
active portfolio management and ensures that significant time and
resource is dedicated to every investment, with Oakley executives
and Operating Partners typically being appointed to portfolio
company boards, in order to ensure the application of active,
results-orientated corporate governance.
Board responsibilities
The Board meets at least quarterly and between these scheduled
meetings there is regular contact between Directors and the
Investment Adviser as otherwise required for the purpose of
considering key investment decisions of the Company.
The Directors are kept fully informed of investments and other
matters that are relevant to the business of the Company. Such
information is brought to the attention of the Board by the
Investment Adviser and by the Administrator in their periodic
reports detailing the Company's performance. The Board also
receives other information as may, from time-to-time, be reasonably
required by the Directors for the purpose of such meetings from the
Administrative Agent and other service providers.
For the avoidance of doubt, the Directors do not make investment
decisions on behalf of the Oakley Funds, nor do they have any role
or involvement in selecting or implementing transactions by the
Oakley Funds or in the management of the Oakley Funds.
Employees
The Company does not have any direct employees.
Political donations and expenditure
The Company has made no political donations in the period since
incorporation or since admission.
Dividends and distributions
The Board has adopted a dividend policy which takes into account
the profitability and underlying performance of the Company in
addition to capital requirements, cash flows and distributable
reserves. The Company has experienced strong NAV growth in 2018 due
to the successful realisations the Oakley Funds have completed in
the year and the growth in the Oakley Funds' underlying portfolio
companies.
The Company declared a final dividend of 2.25 pence per share in
respect of the year ended 31 December 2017, which was paid in April
2018. An interim dividend of 2.25 pence per share was paid by the
Company in respect of the six months to 30 June 2018, in October
2018.
Events after the reporting period
The Audit Committee noted the following significant post-balance
sheet events:
-- On 3 January 2019, the Company committed EUR400 million to
Oakley Capital IV, an exempted limited partnership established in
Luxembourg.
-- On 13 March 2019, the Board of Directors approved a final
dividend of 2.25 pence per share in respect of the financial year
ended 31 December 2018. This is due to be paid on 25 April 2019, to
shareholders registered on or before 5 April 2019. The ex-dividend
date is 4 April 2019.
Going concern
After making enquiries and given the nature of the Company and
its investments, the Directors, after due consideration, conclude
that the Company should be able to continue for the foreseeable
future.
In reaching this conclusion, the Directors have assessed the
nature of the Company's assets and considers that adverse
investment performance should not have a material impact on the
Company's ability to meet its liabilities as they fall due.
Accordingly, they are satisfied that it is appropriate to adopt a
going concern basis in preparing these financial statements.
Disclosure of information to the auditor
Having made enquiries of fellow Directors and key service
providers, each of the Directors confirms that:
-- To the best of their knowledge and belief, there is no
relevant audit information of which the Company's auditor is
unaware; and
-- They have taken all the steps a Director might reasonably be
expected to have taken to be aware of relevant audit information
and to establish that the Company's auditor is aware of that
information.
AGM
Details of the AGM will be notified to shareholders separately
to this report.
The Directors' report has been approved by the Board and is
signed on its behalf by:
Caroline Foulger
Chair
Directors' remuneration report
As the Company is a self-managed investment company with a Board
comprised wholly of Non-executive Directors, AIC provisions
relating to executive Directors' remuneration are not deemed
relevant.
In particular, the Company's day-to-day management and
administrative functions are outsourced to third parties. As a
result, the Company has no executive Directors, employees or
internal operations. The Company therefore, not reported further in
respect of these provisions.
Remuneration report
The Non-executive Directors who served in the period from 1
January 2018 to 31 December 2018 received the fees detailed in the
table below. Directors are remunerated in the form of fees, payable
annually in advance, to the Director personally.
Director Fees GBP
Christopher Wetherhill 75,000
---------
James Keyes 45,000
---------
Caroline Foulger 55,000
---------
Peter Dubens * 0
---------
Laurence Blackall 45,000
---------
Stewart Porter ** 14,000
---------
* Peter Dubens is also a Director of the Investment Adviser and accordingly serves without fee
** Stewart Porter was appointed in September 2018
There are no long-term incentive schemes provided by the Company
and no performance fees are paid to Directors.
No Director has a service contract with the Company and each
Director is appointed by a letter of appointment setting out the
terms of their appointment. Directors are elected by shareholders
at the AGM.
The table above details the Director's fee paid to each Director
of the Company for the year ended 31 December 2018.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable laws and
regulations.
Bermuda company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have prepared the Consolidated Financial Statements in accordance
with International Financial Reporting Standards (IFRS). Under
Bermuda company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these Financial
Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed subject to any material departures disclosed and explained
in the Financial Statements;
-- assess the Company's ability to continue as a going concern,
disclosing as applicable, matters related to going concern; and
-- use the going concern basis of accounting unless it is
inappropriate to presume that the Company will continue in
business.
The Consolidated Financial Statements are published on
www.oakleycapitalinvestments.com. The responsibility for the
maintenance and integrity of the website, so far as it relates to
the Company, has been delegated to the Investment Adviser. The work
carried out by the Auditor does not involve consideration of the
maintenance and integrity of this website and, accordingly, the
Auditor accepts no responsibility for any changes that have
occurred to the Financial Statements since they were initially
presented on the website.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Bermuda Companies Act
(1981 (as amended)). They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Responsibility statement of the Directors in respect of the
annual financial report
Each of the Directors, whose names and functions are listed in
the Board of Directors section of the Annual Report, confirms that,
to the best of his/her knowledge:
-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that the Company faces;
-- the consolidated financial statements, prepared in accordance
with IFRS, give a true and fair view of the assets, liabilities,
financial position and results of the Company, taken as a whole are
in compliance with the requirements set out in the Bermuda
Companies Act 1981 (as amended);
-- the Annual Report includes a fair review of the information
which provides an indication of important events and a description
of the principal risks and uncertainties the Company faces;
-- the Investment Adviser's report, together with the Directors'
report and Chair's statement, include a fair review of the
information as required; and
-- the Annual Report and consolidated financial statements,
taken as a whole, provide the information necessary to assess the
Company's position and performance, business model and strategy,
and is fair, balanced and understandable.
Signed on behalf of the Board of Directors
Caroline Foulger
Chair
13 March 2019
Alternative Investment Fund Managers' Directive
Status and legal form
The Company is a self-managed non-EU Alternative Investment
Fund. It is a closed-ended investment company incorporated in
Bermuda and traded on AIM of the London Stock Exchange. The
Company's registered office is 3rd Floor, Mintflower Place, 8
Par-la-Ville Road, Hamilton HM08, Bermuda.
Remuneration disclosure
The total amount of remuneration paid by the Company, to its
Directors was GBP234,000. This comprised solely of fixed
remuneration, no variable remuneration was paid. Fixed remuneration
was composed of agreed fixed fees. There were five beneficiaries of
this remuneration.
Independent Auditor's report
To the Shareholders and Board of Directors of Oakley Capital
Investments Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Oakley
Capital Investments Limited (the "Company"), which comprise the
consolidated balance sheet as at 31 December 2018 and the
consolidated statements of comprehensive income, changes in equity
and cash flows for the year then ended, and notes, comprising
significant accounting policies and other explanatory
information.
In our opinion, the accompanying consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as at 31 December
2018 and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Company in accordance with
the ethical requirements that are relevant to our audit of the
consolidated financial statements in Bermuda and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements for the current year. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
The key audit matter that arose is as follows:
Valuation of the unquoted investment portfolio
As discussed in the Audit Committee report, the accounting
policies and Notes 6 and 8 to the consolidated financial
statements, the Company holds investments in private equity
partnerships (the Funds) and unquoted debt securities at 31
December 2018 of GBP447.4 million, where quoted prices do not
exist. Such unquoted equity investments and debt securities are
carried at their estimated fair values based upon the principles of
the International Private Equity and Venture Capital Association
("IPEV") valuation guidelines.
The valuation of the unquoted private equity partnerships and
debt securities held in the Company's investment portfolio is the
key driver of its net asset value and total return to
shareholders.
The private equity partnerships hold equity investments in
unquoted portfolio companies. The valuation of these portfolio
companies is complex and requires the application of judgment by
the Investment Adviser.
The fair values are based upon the income approach, where
estimated future cash flows are discounted at an appropriate
interest rate, or the market approach which estimates the
enterprise value of the investee using a comparable multiple of
revenues or EBITDA, information from recent comparable
transactions, or the underlying net asset value.
The risk
The significance of the unquoted investments to the Company's
consolidated financial statements, combined with the judgment
required in estimating their fair values means this was an area of
focus during our audit.
Our response to the risk
We performed the following procedures:
We selected a sample of the unquoted debt securities held by the
Company and unquoted equity investments held indirectly through
investments in private equity partnerships and performed the
following audit procedures:
-- Obtained independent confirmations of the existence and
accuracy of the unquoted equity investments and debt securities or
agreed them to loan agreements;
-- Obtained the Investment Adviser's models for valuing the
unquoted equity investments and debt securities;
-- Determined that the valuation specialists engaged by the
Investment Adviser are qualified and independent of the
Company;
-- Challenged the Investment Adviser on the methodologies
followed and key assumptions used in determining the valuations of
the unquoted equity investments and debt securities in the context
of the IPEV valuation guidelines;
-- Obtained management information, including budgets and
forecasts for revenues and EBITDA, which are the key inputs used in
the valuation models by the Investment Adviser and compared this
information to that used in the models;
-- Independently sourced multiples for comparable companies used
by the Investment Adviser, considered whether those companies are
comparable to the investee and compared them to the multiples used
in the valuations;
-- Tested the mathematical accuracy of the valuation models;
-- Tested the disclosures made about the unquoted equity
investments and debt securities in the Notes to the consolidated
financial statements for compliance with IFRS; and
-- Monitored any events that emerged in the post balance sheet
period (up to the date of signing the Company's consolidated
financial statements) that would have a potential impact on the
value of the unquoted equity investments and debt securities held
at the year-end.
Other information in the Annual Report
Management is responsible for the other information contained
within the Annual Report. The other information comprises the
overview, strategic report by the Investment Adviser, and
governance sections.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance or conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated if, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of management and those charged with governance
for the consolidated financial statements
Management is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, management
is responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company's financial reporting process.
Auditor's responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit.
We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
-- Conclude on the appropriateness of management's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Company to cease to continue as
a going concern.
-- Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in this
independent auditor's report is James Berry.
KPMG Audit Limited
Chartered Professional Accountants
Hamilton, Bermuda
13 March 2019
Consolidated statement of comprehensive income
For the year ended 31 December 2018
2018 2017
Notes GBP'000 GBP'000
Income
----- -------- --------
Interest income 13 6,629 7,722
----- -------- --------
Net realised gains on investments at fair value
through profit and loss 6, 7 102,314 23,991
----- -------- --------
Net change in unrealised gains/(losses) on investments
at fair value through profit and loss 6, 7 (23,877) 20,316
----- -------- --------
Net foreign currency gains/(losses) 3,149 (839)
----- -------- --------
Other income 217 306
----- -------- --------
Total income 88,432 51,496
----- -------- --------
Expenses 14 (6,045) (6,529)
----- -------- --------
Operating profit 82,387 44,967
----- -------- --------
Interest expense (389) (42)
----- -------- --------
Profit attributable to equity shareholders/total
comprehensive income 81,998 44,925
----- -------- --------
Earnings per share
----- -------- --------
Basic and diluted earnings per share (pence) 22 GBP0.40 GBP0.22
----- -------- --------
Consolidated balance sheet
as at 31 December 2018
2018 2017
Notes GBP'000 GBP'000
Assets
----- -------- --------
Non-current assets
----- -------- --------
Investments 6, 8 469,749 419,627
----- -------- --------
469,749 419,627
----- -------- --------
Current assets
----- -------- --------
Trade and other receivables 11 11 668
----- -------- --------
Cash and cash equivalents 10 107,888 117,836
----- -------- --------
107,899 118,504
----- -------- --------
Total assets 577,648 538,131
----- -------- --------
Liabilities
----- -------- --------
Current liabilities
----- -------- --------
Trade and other payables 12 2,826 36,091
----- -------- --------
Total liabilities 2,826 36,091
----- -------- --------
Net assets attributable to shareholders 574,822 502,040
----- -------- --------
Equity
----- -------- --------
Share capital 24 2,048 2,048
----- -------- --------
Share premium 24 244,533 244,533
----- -------- --------
Retained earnings 328,241 255,459
----- -------- --------
Total shareholders' equity 574,822 502,040
----- -------- --------
Net asset per ordinary share
----- -------- --------
Basic and diluted net assets per share 23 GBP 2.81 GBP 2.45
----- -------- --------
Ordinary shares in issue at 31 December
('000) 24 204,804 204,804
----- -------- --------
The financial statements of Oakley Capital Investments Limited
(registration number: 40324) were approved by the Board of
Directors and authorised for issue on 13 March 2019 and were signed
on their behalf by:
Caroline Foulger
Director
Laurence Blackall
Director
Consolidated statement of changes in equity
For the year ended 31 december 2018
Total
Share Share Treasury Retained shareholders'
capital premium shares earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2017 2,069 246,245 (25,024) 215,142 438,432
-------- -------- -------- --------- --------------
Profit for the year/total comprehensive
income - - - 44,925 44,925
-------- -------- -------- --------- --------------
Sale of treasury shares - (259) 23,550 - 23,291
-------- -------- -------- --------- --------------
Cancellation of treasury shares (21) (1,453) 1,474 - -
-------- -------- -------- --------- --------------
Dividends - - - (4,608) (4,608)
-------- -------- -------- --------- --------------
Total transactions with equity
shareholders (21) (1,712) 25,024 (4,608) 18,683
-------- -------- -------- --------- --------------
Balance at 31 December 2017 2,048 244,533 - 255,459 502,040
-------- -------- -------- --------- --------------
Profit for the year/total comprehensive
income - - - 81,998 81,998
-------- -------- -------- --------- --------------
Dividends - - - (9,216) (9,216)
-------- -------- -------- --------- --------------
Total transactions with equity
shareholders - - - (9,216) (9,216)
-------- -------- -------- --------- --------------
Balance at 31 December 2018 2,048 244,533 - 328,241 574,822
-------- -------- -------- --------- --------------
Consolidated statement of cash flows
for the year ended 31 December 2018
2018 2017
Notes GBP'000 GBP'000
Cash flows from operating activities
----- --------- ---------
Purchases of investments (165,302) (167,047)
----- --------- ---------
Sales of investments 158,712 167,773
----- --------- ---------
Interest income received 7,077 7,001
----- --------- ---------
Expenses paid (4,196) (5,967)
----- --------- ---------
Interest expense paid (389) (42)
----- --------- ---------
Other income received 217 306
----- --------- ---------
Net cash (used in)/provided by operating
activities (3,881) 2,024
----- --------- ---------
Cash flows from financing activities
----- --------- ---------
Proceeds from treasury shares sold 24 - 23,291
----- --------- ---------
Dividends paid 25 (9,216) (13,149)
----- --------- ---------
Net cash (used in)/provided by financing
activities (9,216) 10,142
----- --------- ---------
Net (decrease)/increase in cash and cash
equivalents (13,097) 12,166
----- --------- ---------
Cash and cash equivalents at the beginning
of the year 117,836 106,509
----- --------- ---------
Effect of foreign exchange rate changes 3,149 (839)
----- --------- ---------
Cash and cash equivalents at the end of
the year 10 107,888 117,836
----- --------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2018
1. Reporting entity
Oakley Capital Investments Limited (the "Company") is a
closed-ended investment company incorporated under the laws of
Bermuda on 28 June 2007. The principal objective of the Company is
to achieve capital appreciation through investments in a
diversified portfolio of private mid-market businesses, primarily
in the UK and Europe. The Company currently achieves its investment
objective primarily through its investments in the following four
private equity funds (the "Funds"):
-- Oakley Capital Private Equity L.P. ("Fund I");
-- Oakley Capital Private Equity II-A L.P., which together with
Oakley Capital Private Equity II-B L.P., Oakley Capital Private
Equity II-C L.P. (collectively the "Fund II Feeder Funds") and OCPE
II Master L.P. (the "Fund II Master") collectively comprise "Fund
II";
-- Oakley Capital Private Equity III-A L.P., which together with
Oakley Capital Private Equity III-B L.P., Oakley Capital Private
Equity III-C L.P. (collectively the "Fund III Feeder Funds") and
OCPE III Master L.P. (the "Fund III Master") collectively comprise
"Fund III"; and
-- OCPE Education (Feeder) L.P., which together with OCPE
Education L.P. collectively comprise "OCPE Education".
Fund I, Fund II, Fund III and OCPE Education are all constituent
limited partnerships and are exempted limited partnerships
established in Bermuda.
The defined term "Company" shall, where the context requires for
the purposes of consolidation, include the Company's sole and
wholly owned subsidiary, OCIL Financing (Bermuda) Limited ("OCI
Financing").
The Company listed on AIM of the London Stock Exchange Limited
on 3 August 2007, with "OCI" as its listed ticker.
2. Basis of preparation
The consolidated financial statements of the Company have been
prepared on a going concern basis and under the historical cost
convention, except for financial instruments at fair value through
profit and loss, which are measured at fair value.
The Board of Directors consider that it is appropriate to adopt
the going concern basis of accounting in preparing these
consolidated financial statements. In reaching this assessment, the
Board of Directors have considered a wide range of information
relating to the present and future conditions, including the
consolidated balance sheet, future projections, cash flows and the
longer-term strategy of the Company.
2.1 Basis for compliance
The consolidated financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards ("IFRS").
2.2 Functional and presentation currency
The consolidated financial statements are presented in pounds
sterling ("pounds"), which is the Company's functional
currency.
3. Significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all periods presented,
unless otherwise stated.
3.1 Changes in accounting policies and disclosures
(a) New and amended standards adopted by the Company
The following amendments to standards and interpretations are
effective for annual periods beginning on or after 1 January 2018,
and have been applied in preparing these consolidated financial
statements.
A. IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial
Instruments: Recognition and Measurement for annual periods
beginning on or after 1 January 2018, bringing together all three
aspects of the accounting for financial instruments: classification
and measurement; impairment; and hedge accounting. It includes
revised guidance on the classification and measurement of financial
instruments, a new expected credit loss model for calculating
impairment on financial assets and new general hedge accounting
requirements. It also carries forward the guidance on recognition
and derecognition of financial instruments from IAS 39.
i. Classification and measurement of financial assets and financial liabilities
IFRS 9 contains a new classification and measurement approach
for financial assets with three principal classification categories
for financial assets: measured at amortised cost, fair value
through other comprehensive income and fair value through profit
and loss. It eliminates the existing IAS 39 categories of held to
maturity, loans and receivables and available for sale. The
classification of financial assets under IFRS 9 is generally based
on the business model in which a financial asset is managed and its
contractual cash flow characteristics.
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities as the
new requirements affect only the accounting of financial
liabilities specifically classified at fair value through profit or
loss. The Company does not have such liabilities.
The adoption of IFRS 9 has not had a significant effect on the
Company's accounting policies relating to financial assets or
financial liabilities.
Under IAS 39, the Company classified its investments in private
equity funds, direct investments and loans to the Funds, portfolio
companies and other loans (herein referred to as "unquoted debt
securities") as financial assets held at fair value through profit
and loss. These investments were managed on a fair value basis and
their performances were monitored on this basis. The Company has
elected to continue to classify these investments as financial
assets held at fair value through profit and loss under IFRS 9 and
no changes to retained earnings are required.
Trade and other receivables were classified at amortised cost
under IAS 39. The Company continues to classify it as amortised
cost under IFRS 9 and no adjustments to the consolidated financial
statements are required.
ii. Impairment of financial assets
IFRS 9 replaces the "incurred loss" model in IAS 39 with a
forward looking "expected credit loss" model. The new impairment
model applies to financial assets measured at amortised cost and
debt investments at fair value through other comprehensive income,
but not to investments in equity instruments. Under IFRS 9, credit
losses are recognised earlier than under IAS 39.
The financial assets held by the Company at amortised cost
consist of trade receivables and cash and cash equivalents. Due to
the nature of these financial assets, the Company does not believe
that the risk of impairment is significant and has determined that
the credit risk at the reporting date is low and does not
significantly increase after initial recognition.
iii. Hedge accounting
The new hedge accounting model introduced by IFRS 9 requires
hedge accounting relationships to be aligned with the Company's
risk management strategy and objectives, and to apply a more
qualitative and forward-looking approach to assessing their
effectiveness. Hedge accounting relationships are to be
discontinued only when the relationships no longer qualify for
hedge accounting.
The Company does not currently apply hedge accounting and
changes to hedge accounting due to IFRS 9 does not affect the
Company.
The Company has elected to apply IFRS 9 retrospectively.
B. IFRIC 22 Foreign currency transactions and advance
consideration
IFRIC 22 (the "Interpretation") clarifies the accounting for
transactions that include the receipt or payment of advance
consideration in a foreign currency. The Interpretation clarifies
that, in determining the spot exchange rate to use on initial
recognition of the related asset, expense or income (or part of it)
on the derecognition of a non-monetary asset or non-monetary
liability relating to advance consideration, the date of the
transaction is the date on which an entity initially recognises the
non-monetary asset or non-monetary liability arising from the
advance consideration. If there are multiple payments or receipts
in advance, then the entity must determine a date of the
transactions for each payment or receipt of advance
consideration.
This Interpretation does not have any impact on the Company's
consolidated financial statements.
Several other amendments and interpretations apply for the first
time effective 1 January 2018 but do not have a material effect on
the Company's consolidated financial statements and did not require
retrospective adjustments.
(b) New standards, amendments and interpretations that are not
yet effective and might be relevant for the Company:
A number of standards have been issued but are not yet effective
as at the year end. The Company is currently in the process of
analysing the impact of these new standards, amendments to existing
standards and annual improvements to IFRS in detail but these are
not expected to have a material effect on the consolidated
financial statements of the Company.
3.2 Basis for consolidation
Subsidiaries are entities controlled by the Company. The Company
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
While the Company may have a greater than 50% ownership interest in
a Fund, it is a limited partner and does not have the ability to
affect the decisions of the Fund's General Partner or the returns
of the Funds. The consolidated financial statements have been
prepared using uniform accounting policies for like transactions
and other events in similar circumstances.
The consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiary, after
the elimination of all significant intercompany balances and
transactions. The financial statements of the Company's sole wholly
owned subsidiary, OCI Financing, are included in the consolidation.
As at 31 December 2018, the Company holds $29,201,704 share capital
in OCI Financing (2017: $29,201,704).
As per IFRS 10, investment entities are exempted from
consolidating controlled investees. The Company meets the
definition of an investment entity, as the following conditions are
met:
-- The Company provides investment management services.
-- The business purpose of the Company is to invest into private
equity funds and to purchase, hold and dispose of investments
directly in portfolio companies with above-average growth potential
with the goal of achieving returns from capital appreciation and
investment income.
-- The performance of these investments is measured and evaluated on a fair value basis.
-- The Company holds multiple investments.
The Company therefore measures its investments at fair value
through profit and loss in accordance with the investment entity
exemption. The Company does not consolidate any of its investments
in the Funds.
3.3 Investments
(a) Classification
The Company classifies its investments in private equity funds,
direct investments and loans as financial assets held at fair value
through profit and loss at inception.
Financial assets held at fair value through profit and loss at
inception are assets that are managed and their
performance evaluated on a fair value basis in accordance with
the Company's investment strategy.
(b) Recognition and measurement
Financial assets held at fair value through profit and loss are
recognised initially on the trade date. Financial assets held at
fair value through profit and loss are recognised initially at fair
value, with transaction costs recognised in profit or loss.
Net gains and losses from financial assets held at fair value
through profit and loss include all realised and unrealised fair
value changes and foreign exchange differences and are included in
the consolidated statement of comprehensive income in the period in
which they arise.
Quoted investments are subsequently carried at fair value. Fair
value is measured using the closing bid price at the reporting
date, where the investment is quoted on an active stock market.
Unquoted investments, including both equities and loans, are
subsequently carried in the consolidated balance sheet at fair
value. Fair value is determined in line with the Company's
investment valuation policy, which is compliant with the fair value
guidelines under IFRS 13 and the International Private Equity and
Venture Capital (IPEV) Valuation Guidelines.
(c) Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the
financial asset are transferred or in which the Company neither
transfers nor retains substantially all the risks and rewards of
ownership and does not retain control of the financial asset. Any
interest on such transferred financial assets that is created or
retained by the Company is recognised as a separate asset or
liability.
On derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised), and consideration
received (including any new asset obtained less any new liability
assumed) is recognised in profit or loss.
3.4 Cash and cash equivalents
Cash and cash equivalents include deposits held on call with
banks and other short-term deposits. The Company considers all
short-term deposits with a maturity of 90 days or less as
equivalent to cash.
3.5 Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less any allowance for
impairment, using the effective interest method.
3.6 Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired or received in the ordinary course of business
from suppliers. Accounts payable are classified as current
liabilities if payment is due within one year or less (or in the
normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value and subsequently measured at amortised cost
using the effective interest method.
3.7 Interest income
Interest on unquoted debt securities held at fair value through
profit and loss is accrued on a time-proportionate basis, by
reference to the principal outstanding and the effective interest
rate applicable, which is the rate that discounts estimated future
cash receipts over the expected life of the debt security to its
net carrying amount on initial recognition. Interest income is
recognised gross of withholding tax, if any. Interest income on
unquoted debt securities is recognised as a separate line item in
the consolidated statement of comprehensive income and classified
within operating activities in the consolidated cash flows
statement.
3.8 Expenses
Expenses are recognised on the accruals basis.
3.9 Foreign currency translation
The functional currency of the Company is pounds. Transactions
in currencies other than pounds are recorded at the rates of
exchange prevailing on the dates of the transactions.
At each reporting date, investments and other monetary assets
and liabilities that are denominated in foreign currencies are
translated at the rates prevailing on the reporting date. Capital
drawdowns and proceeds of distributions from the Funds and foreign
currencies and income and expense items denominated in foreign
currencies are translated into pounds at the exchange rate on the
respective dates of such transactions.
Foreign exchange gains and losses on other monetary assets and
liabilities are recognised in net foreign currency gains and losses
in the consolidated statement of comprehensive income.
The Company does not isolate unrealised or realised foreign
exchange gains and losses arising from changes in the fair value of
investments. All such foreign exchange gains and losses are
included with the net realised and unrealised gains or losses on
investments in the consolidated statement of comprehensive
income.
3.10 Share capital
Ordinary shares issued by the Company are recognised based on
the proceeds or fair value received, with the excess of the amount
received over their nominal value being credited to the share
premium account. Direct issue costs are deducted from equity.
3.11 Earnings per share
The Company presents basic and diluted earnings per share data
for its ordinary shares. Basic earnings per share are calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share are
determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares
outstanding for the effects of all potentially dilutive ordinary
shares.
4. Critical accounting estimates, assumptions and judgment
The reported results of the Company are sensitive to the
accounting policies, assumptions and estimates that underlie the
preparation of its consolidated financial statements. IFRS require
the Board of Directors, in preparing the Company's consolidated
financial statements, to select suitable accounting policies, apply
them consistently and make judgments and estimates that are
reasonable and prudent. The Company's estimates and assumptions are
based on historical experience and the Board of Directors'
expectation of future events and are reviewed periodically. The
actual outcome may be materially different from that anticipated.
Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods
affected.
The judgments, assumptions and estimates involved in the
Company's accounting policies that are considered by the Board of
Directors to be the most important to Company's results and
financial condition are the fair valuation of the investments and
the assessment regarding investment entities.
(a) Fair valuation of investments
The fair values assigned to investments held at fair value
through profit and loss are based upon available information and do
not necessarily represent amounts which might ultimately be
realised. Because of the inherent uncertainty of valuation, these
estimated fair values may differ significantly from the values that
would have been used had a ready market for the investments
existed, and those differences could be material.
Investments held at fair value through profit and loss are
valued by the Company in accordance with relevant IFRS
requirements. Judgment is required in order to determine the
appropriate valuation methodology under these standards and
subsequently in determining the inputs into the valuation models
used. These judgments include making assessments of the future
earnings potential of portfolio companies, appropriate earnings
multiples to apply, estimating future cash flows and determining
appropriate discount rates.
(b) Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to account for investments in controlled
entities, as well as investments in associates and joint ventures,
at fair value through profit and loss.
The Board of Directors has concluded that the Company meets the
definition of an investment entity as its strategic objective is to
invest in portfolio investments on behalf of its investors for the
purpose of generating returns in the form of investment income and
capital appreciation.
5. Financial risk management
5.1 Introduction and overview
The Board of Directors, the Company's Risk Committee (the "Risk
Committee") and Oakley Capital Limited (the "Investment Adviser")
attribute great importance to professional risk management, proper
understanding and negotiation of appropriate terms and conditions
and active monitoring, including a thorough analysis of reports and
financial statements and ongoing review of investments made. It is
also key to structure the investment vehicles for the portfolio
taking into account issues such as liquidity and tax. The Company
has investment guidelines that set out its overall business
strategies, its tolerance for risk and its general risk management
philosophy and has established processes to monitor and control the
economic impact of these risks. The Investment Adviser provides the
Board of Directors with recommendations as to the Company's asset
allocation and annual investment levels that are consistent with
the Company's objectives. The Risk Committee reviews and agrees
policies for managing the risks as summarised below.
The Company has exposures to the following risks from financial
instruments: credit risk, liquidity risk and market risk (including
interest rate risk, currency risk and price risk). The Company's
overall risk management process focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Company's financial performance.
5.2 Credit risk
The Company is subject to credit risk on its unquoted
investments and cash. The schedule below summarises the Company's
exposure to credit risk on its cash and unquoted investments.
2018 2017
Total Rating Total Rating
GBP'000 (Moody's) GBP'000 (Moody's)
-------- ---------- -------- ----------
Cash at HSBC 27,135 A2 29,868 A2
-------- ---------- -------- ----------
Cash at Barclays 80,641 A2 87,855 A1
-------- ---------- -------- ----------
Cash at Lloyds 112 Aa3 113 Aa3
-------- ---------- -------- ----------
Investments in Funds 340,370 n/a 308,943 n/a
-------- ---------- -------- ----------
Investments in debt
securities 107,059 n/a 69,502 n/a
-------- ---------- -------- ----------
In accordance with the Company's policy, the Investment Adviser
monitors the Company's exposure to credit risk on cash on a
quarterly basis and the Risk Committee regularly reviews the
Company's exposure to credit risk. The credit quality of the
investments in the funds and unquoted equity and debt securities,
which are held at fair value and include debt and equity elements,
is based on the financial performance of the individual investments
and they are not rated.
5.3 Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations arising from its financial
liabilities that are settled by delivering cash or another
financial asset, or that such obligations will have to be settled
in a manner disadvantageous to the Company. The Company's policy
and the Investment Adviser's approach to managing liquidity is to
have sufficient cash available to meet its liabilities, including
estimated capital calls, without incurring undue losses or risking
damage to the Company's reputation.
Unfunded commitments to the Funds are irrevocable and can exceed
cash and cash equivalents available to the Company. Based on
current short-term cash flow projections and barring unforeseen
events, the Company expects to be able to honour all capital calls
by the Funds.
As of 31 December 2018 cash and cash equivalents of the Company
amount to GBP107,888,282 (2017: GBP117,836,056). The Company has
total unfunded capital and loan commitments of GBP187,476,040
(2017: GBP251,900,575) relating to the Funds with the option of
further investment to OCPE Education but no commitment. The
unfunded commitments of the Company are listed in Note 26. As per
the Company's Bye-laws, the Company can borrow up to 25% of total
shareholders' equity which would equal approximately GBP143,705,500
for the year ending 31 December 2018 (2017: GBP125,510,000). As at
31 December 2018, the Company has incurred no borrowings (2017:
nil).
The majority of the investments held by the Company are unquoted
and subject to specific restrictions on transferability and
disposal. Consequently, the risk exists that the Company might not
be able to readily dispose of its holdings in such markets at the
time of its choosing and also that the price attained on a disposal
may be below the amount at which such investments were included in
the Company's consolidated balance sheet.
The table below analyses the Company's consolidated financial
liabilities based on the remaining period between the balance sheet
date and the contractual maturity date. The amounts in the schedule
are the contractual undiscounted cash flows. Balances due within 12
months equal their fair values, as the impact of discounting is not
significant. In accordance with the Company's policy, the
Investment Adviser monitors the Company's liquidity position and
the Risk Committee reviews it on a regular basis.
2018 2017
GBP'000 GBP'000
Trade and other payables
-------- --------
Less than 1 month - 34,457
-------- --------
1 - 3 months 2,826 1,634
-------- --------
Total trade and other payables 2,826 36,091
-------- --------
5.4 Market risk
Market risk is the risk that changes in market prices, such as
equity prices, foreign exchange rates and interest rates will
affect the Company's income or the value of its holdings of
financial instruments. The Company's sensitivity to these items is
set out below.
a) Interest rate risk
Interest rate risk arises principally from changes in interest
receivable on cash and deposits. The Company holds unquoted debt
securities at fixed rates of interest and is therefore exposed to
interest rate risk.
The impact of an increase or decrease on interest rates of 100
basis points on cash and deposits, based on the closing
consolidated balance sheet position over a 12 month period, would
have been:
2018 2017
Increase Decrease Increase Decrease
in variable in variable in variable in variable
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------
Impact on interest income from cash
and deposits 1,226 (1,226) 840 (840)
------------ ------------ ------------ ------------
Impact on profit/(loss) 1,226 (1,226) 840 (840)
------------ ------------ ------------ ------------
The Company's unquoted debt investments consist of mezzanine
loans, financing loan facilities, revolving loan facilities and
senior secured loans, which carry fixed rates of interest ranging
from 6.5 % to 15%. These loans are subject to interest rate risk as
increases and decreases in interest rates will have an impact on
their fair value. A 100 basis point increase in interest rates
would result in a decrease in fair value of those loans of
GBP2,426,686 and a corresponding decrease of 100 basis points in
interest rates would result in an increase in their fair value by
the same amount (2017: GBP1,523,034).
In addition, the Company has indirect exposure to interest rates
through changes to the financial performance and valuation in
equity investments in the Funds and portfolio companies that have
issued debt caused by interest rate fluctuations. Short term
receivables and payables are excluded as the risks due to
fluctuation in the prevailing levels of market interest rates
associated with these instruments are not significant and is
limited to the Company's investment in these Funds.
b) Currency risk
The Company holds assets and liabilities denominated in
currencies other than its functional currency, which expose the
Company to the risk that the exchange rates of those currencies
against the pound will change in a manner which adversely impacts
the Company's net profit and net assets attributable to
shareholders. The following sensitivity analysis is presented based
on the sensitivity of the Company's net assets to movements in
foreign currency exchange rates assuming a 10% increase in exchange
rates against the pound. A 10% decrease in exchange rates against
the pound would have an equal and opposite effect.
2018 2017
Euro US dollar Euro US dollar
GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- -------- ---------
Assets:
-------- --------- -------- ---------
Financial assets at fair value through profit
and loss 34,041 - 30,894 -
-------- --------- -------- ---------
Cash and cash equivalents 8,236 - 9,277 -
-------- --------- -------- ---------
Trade and other receivables - - 67 -
-------- --------- -------- ---------
Total assets 42,277 - 40,238 -
-------- --------- -------- ---------
Liabilities:
-------- --------- -------- ---------
Trade and other payables - - (3,475) (9)
-------- --------- -------- ---------
Total liabilities - - (3,475) (9)
-------- --------- -------- ---------
Impact on profit/(loss) 42,277 36,763 (9)
-------- --------- -------- ---------
The Investment Adviser monitors the Company's currency position
on a regular basis and reports the impact of currency movements on
the performance of the investment portfolio to the Risk Committee
quarterly. As per the Company's investment policy, all investments
in quoted equity securities and unquoted equity and debt securities
are denominated in pounds, placing currency risk on the
counterparty. The investments in the Funds are denominated in
euros.
c) Price risk - market fluctuations
The Company's management of price risk, which arises primarily
from quoted and unquoted equity instruments, is through the
selection of financial assets within specified limits as advised by
the Investment Adviser and approved by the Risk Committee.
For quoted equity securities, the market risk variable is deemed
to be the market price itself. A 15% change in the price of those
investments would have the following direct impact on the
consolidated statement of comprehensive income:
2018 2017
Increase Decrease Increase Decrease
in variable in variable in variable in variable
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------
Quoted equity investments:
------------ ------------ ------------ ------------
15% movement in price of listed
investment
------------ ------------ ------------ ------------
Impact on profit/(loss) 3,348 (3,348) 6,177 (6,177)
------------ ------------ ------------ ------------
Impact on net assets attributable
to shareholders 3,348 (3,348) 6,177 (6,177)
------------ ------------ ------------ ------------
For the investment in the Funds and unquoted equity securities,
the market risk is deemed to be the change in fair value. A 15%
change in the fair value of those investments would have the
following direct impact on the consolidated statement of
comprehensive income:
2018 2017
Increase Decrease Increase Decrease
in variable in variable in variable in variable
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------
Funds and unquoted equity securities:
------------ ------------ ------------ ------------
15% movement in price of Funds and
unquoted equity securities
------------ ------------ ------------ ------------
Impact on profit/(loss) 51,056 (51,056) 46,341 (46,341)
------------ ------------ ------------ ------------
Impact on net assets attributable
to shareholders 51,056 (51,056) 46,341 (46,341)
------------ ------------ ------------ ------------
The Company is exposed to a variety of market risk factors which
may change significantly over time. As a result, measurement of
such exposure at any given point in time may be difficult given the
complexity and limited transparency of the investments held by the
underlying portfolio companies.
Limitations of sensitivity analysis
The sensitivity information included in Notes 5 and 8
demonstrates the estimated impact of a change in a major input
assumption while other assumptions remain unchanged. In reality,
there are normally significant levels of correlation between the
assumptions and other factors. It should also be noted that these
sensitivities are non-linear and larger or smaller impacts should
not be interpolated or extrapolated from these results.
Furthermore, estimates of sensitivity may become less reliable in
unusual market conditions such as instances when risk free interest
rates fall towards zero.
5.5 Capital management
The Company's capital is represented by ordinary shares with
GBP0.01 par value and they carry one vote each. The shares are
entitled to dividends when declared. The Company has no additional
restrictions or specific capital requirements on the issuance and
re-purchase of ordinary shares. The movements of capital are shown
in the consolidated statement of changes in equity.
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern and to achieve
positive returns in all market environments. In order to maintain
or adjust the capital structure, the Company may return capital to
shareholders through the issue and repurchase of shares or by
paying dividends. The effects of the issue, the repurchase and
resale of shares as a result of market making activities are listed
in Note 24. Liberum Capital Limited acts as the Company's nominated
adviser and broker.
6. Investments
Investments as at 31 December 2018
Net change
in
2017 Purchases/ Realised unrealised 2018
Fair capital Total sales*/ gains/ Interest gains/ Fair
value calls distributions (losses) and other (losses) value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Oakley Funds
-------- ---------- -------------- --------- ---------- ----------- --------
Fund I 36,551 - - - - (18,392) 18,159
-------- ---------- -------------- --------- ---------- ----------- --------
Fund II 137,054 15,732 (115,337) 103,988 - (69,643) 71,794
-------- ---------- -------------- --------- ---------- ----------- --------
Fund III 109,058 43,097 (15,189) (1,674) - 73,336 208,628
-------- ---------- -------------- --------- ---------- ----------- --------
Total Oakley Funds 282,663 58,829 (130,526) 102,314 - (14,699) 298,581
-------- ---------- -------------- --------- ---------- ----------- --------
Co-investment Fund
-------- ---------- -------------- --------- ---------- ----------- --------
OCPE Education (Feeder)
LP 26,280 5,825 - - - 9,684 41,789
-------- ---------- -------------- --------- ---------- ----------- --------
Total co-investment
Fund 26,280 5,825 - - - 9,684 41,789
-------- ---------- -------------- --------- ---------- ----------- --------
Total Funds 308,943 64,654 (130,526) 102,314 - (5,015) 340,370
-------- ---------- -------------- --------- ---------- ----------- --------
Quoted equity securities
-------- ---------- -------------- --------- ---------- ----------- --------
Time Out Group plc 41,182 - - - - (18,862) 22,320
-------- ---------- -------------- --------- ---------- ----------- --------
Total quoted equity
securities 41,182 - - - - (18,862) 22,320
-------- ---------- -------------- --------- ---------- ----------- --------
Unquoted debt securities
-------- ---------- -------------- --------- ---------- ----------- --------
Daisy Group Holdings
Limited 12,701 - (13,748) - 1,047 - -
-------- ---------- -------------- --------- ---------- ----------- --------
Ellisfield (Bermuda)
Limited 15,455 - (1,528) - 962 - 14,889
-------- ---------- -------------- --------- ---------- ----------- --------
Fund I 6,351 7,711 (7,466) - 439 - 7,035
-------- ---------- -------------- --------- ---------- ----------- --------
Fund II - 24,386 (7,224) - 250 - 17,412
-------- ---------- -------------- --------- ---------- ----------- --------
Fund III - 4,011 - - 22 - 4,033
-------- ---------- -------------- --------- ---------- ----------- --------
NSG Apparel BV 24,615 - - - 1,954 - 26,569
-------- ---------- -------------- --------- ---------- ----------- --------
Oakley Capital III
Limited 7,168 - (5,303) - 304 - 2,169
-------- ---------- -------------- --------- ---------- ----------- --------
Oakley NS (Bermuda)
LP 3,212 10,113 - - 713 - 14,038
-------- ---------- -------------- --------- ---------- ----------- --------
Time Out Group plc - 19,970 - - 944 - 20,914
-------- ---------- -------------- --------- ---------- ----------- --------
Total unquoted debt
securities 69,502 66,191 (35,269) - 6,635 - 107,059
-------- ---------- -------------- --------- ---------- ----------- --------
Total investments 419,627 130,845 (165,795) 102,314 6,635 (23,877) 469,749
-------- ---------- -------------- --------- ---------- ----------- --------
* Total sales include sales, loan repayments and transfers
Investments as at 31 December 2017
Net change
in
2016 Purchases/ Realised unrealised 2017
Fair capital Total sales*/ gains/ Interest gains/ Fair
value calls distributions (losses) and other (losses) value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Oakley Funds
-------- ---------- -------------- --------- ---------- ----------- --------
Fund I 64,906 12,309 (17,847) - - (22,817) 36,551
-------- ---------- -------------- --------- ---------- ----------- --------
Fund II 144,015 12,319 (49,183) 18,274 - 11,629 137,054
-------- ---------- -------------- --------- ---------- ----------- --------
Fund III 2,333 99,962 (11,427) (2,683) - 20,873 109,058
-------- ---------- -------------- --------- ---------- ----------- --------
Total Oakley Funds 211,254 124,590 (78,457) 15,591 - 9,685 282,663
-------- ---------- -------------- --------- ---------- ----------- --------
Co-investment Fund
-------- ---------- -------------- --------- ---------- ----------- --------
OCPE Education (Feeder)
LP - 39,932 (35,355) 8,400 - 13,303 26,280
-------- ---------- -------------- --------- ---------- ----------- --------
Total co-investment
Fund - 39,932 (35,355) 8,400 - 13,303 26,280
-------- ---------- -------------- --------- ---------- ----------- --------
Total Funds 211,254 164,522 (113,812) 23,991 - 22,988 308,943
-------- ---------- -------------- --------- ---------- ----------- --------
Quoted equity securities
-------- ---------- -------------- --------- ---------- ----------- --------
Time Out Group plc 43,854 - - - - (2,672) 41,182
-------- ---------- -------------- --------- ---------- ----------- --------
Total quoted equity
securities 43,854 - - - - (2,672) 41,182
-------- ---------- -------------- --------- ---------- ----------- --------
Unquoted debt securities
-------- ---------- -------------- --------- ---------- ----------- --------
Bellwood Holdings Ltd - 1,878 (1,970) - 92 - -
-------- ---------- -------------- --------- ---------- ----------- --------
Daisy Group Holdings
Limited 17,202 - (6,610) - 2,109 - 12,701
-------- ---------- -------------- --------- ---------- ----------- --------
Ellisfield (Bermuda)
Limited 14,530 - - - 925 - 15,455
-------- ---------- -------------- --------- ---------- ----------- --------
Fund I 12,256 7,288 (13,844) - 651 - 6,351
-------- ---------- -------------- --------- ---------- ----------- --------
Fund II 4,337 18,661 (23,551) - 553 - -
-------- ---------- -------------- --------- ---------- ----------- --------
Fund III - 1,319 (1,356) - 37 - -
-------- ---------- -------------- --------- ---------- ----------- --------
NSG Apparel BV 21,978 - - - 2,637 - 24,615
-------- ---------- -------------- --------- ---------- ----------- --------
Oakley Capital II Limited 768 - (769) - 1 - -
-------- ---------- -------------- --------- ---------- ----------- --------
Oakley Capital III Limited 5,210 3,470 (1,872) - 360 - 7,168
-------- ---------- -------------- --------- ---------- ----------- --------
Oakley NS (Bermuda)
LP - 2,940 - - 272 - 3,212
-------- ---------- -------------- --------- ---------- ----------- --------
OCPE Education LP - 1,426 (1,432) - 6 - -
-------- ---------- -------------- --------- ---------- ----------- --------
TO (Bermuda) Limited 9,480 - (9,826) - 346 - -
-------- ---------- -------------- --------- ---------- ----------- --------
Total unquoted debt
securities 85,761 36,982 (61,230) - 7,989 - 69,502
-------- ---------- -------------- --------- ---------- ----------- --------
Total investments 340,869 201,504 (175,042) 23,991 7,989 20,316 419,627
-------- ---------- -------------- --------- ---------- ----------- --------
* Total sales include sales, loan repayments and transfers
7. Net gains/(losses) from investments at fair value through
profit and loss
2018 2017
GBP'000 GBP'000
Net change in unrealised gains/(losses) on investments
at fair value through profit and loss:
-------- --------
Funds (5,015) 22,988
-------- --------
Quoted equity securities (18,862) (2,672)
-------- --------
Unquoted debt securities - -
-------- --------
Total net change in unrealised gains/(losses) on
investments at fair value through profit and loss (23,877) 20,316
-------- --------
Realised gains/(losses) on investments at fair
value through profit and loss:
-------- --------
Funds 102,314 23,991
-------- --------
Quoted equity securities - -
-------- --------
Unquoted debt securities - -
-------- --------
Total realised gains/(losses) on investments at
fair value through profit and loss 102,314 23,991
-------- --------
8. Disclosure about fair value of financial instruments
The Company has adopted IFRS 13 in respect of disclosures about
the degree of reliability of fair value measurements. These fair
value measurements are categorised into different levels in the
fair value hierarchy based on the inputs to valuation techniques
used. The Company classifies financial instruments measured at fair
value in the investment portfolio according to the following
hierarchy:
Level I: Quoted prices (unadjusted) in active markets for
identical instruments that the Company can access at the
measurement date. Level I investments include quoted equity
instruments.
Level II: Inputs other than quoted prices included within Level
I that are observable for the instrument, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level III: Inputs that are not based on observable market data.
Level III investments include private equity funds, unquoted equity
and debt securities.
The level in the fair value hierarchy within which the fair
value measurement is categorised is determined on the basis of the
lowest level input that is significant to the fair value
measurement in its entirety. Assessing the significance of a
particular input to the fair value measurement in its entirety
requires judgment, considering factors specific to the instrument.
The determination of what constitutes 'observable' requires
significant judgment by the Company. The Company considers
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following table analyses the Company's investments measured
at fair value as of 31 December 2018 by the level in the fair value
hierarchy into which the fair value measurement is categorised:
Level I Level III Total
GBP'000 GBP'000 GBP'000
Funds - 340,370 340,370
-------- --------- --------
Quoted equity securities 22,230 - 22,230
-------- --------- --------
Unquoted debt securities - 107,059 107,059
-------- --------- --------
Total investments measured at fair value 22,230 447,429 469,749
-------- --------- --------
The following table analyses the Company's investments measured
at fair value as of 31 December 2017 by the level in the fair value
hierarchy into which the fair value measurement is categorised:
Level I Level III Total
GBP'000 GBP'000 GBP'000
Funds - 308,943 308,943
-------- --------- --------
Quoted equity securities 41,182 - 41,182
-------- --------- --------
Unquoted debt securities - 69,502 69,502
-------- --------- --------
Total investments measured at fair value 41,182 378,445 419,627
-------- --------- --------
Level I
Quoted equity investment values are based on quoted market
prices in active markets, and are therefore classified within Level
I investments. The Company does not adjust the quoted price for
these investments.
Level II
The Company did not hold any Level II investments as of 31
December 2018 or 31 December 2017.
Level III
The Company has determined that Funds and unquoted debt
securities fall into the category Level III. Funds and unquoted
debt securities are measured in accordance with the IPEV Valuation
Guidelines with reference to the most appropriate information
available at the time of measurement. The consolidated financial
statements as of 31 December 2018 include Level III investments in
the amount of GBP447,429,457, representing approximately 77.84% of
shareholders' equity (2017: GBP378,445,332; 75.38%).
Funds
The Company primarily invests in portfolio companies via the
Funds. The Funds are unquoted equity securities that primarily
invest in unquoted securities. The Company's investments in
unquoted equity securities are recognised in the consolidated
balance sheet at fair value, in accordance with IPEV Valuation
Guidelines and IFRS 13 and are considered Level III
investments.
The valuation of unquoted fund investments is generally based on
the latest available net asset value ("NAV") of the Fund as
reported by the corresponding general partner or administrator,
provided that the NAV has been appropriately determined using fair
value principles in accordance with IFRS 13.
The NAV of a fund is calculated after determining the fair value
of a fund's investment in any portfolio company. This value is
generally obtained by calculating the Enterprise Value ("EV") of
the portfolio company and then adding excess cash and deducting
financial instruments, such as external debt, ranking ahead of the
fund's highest ranking instrument in the portfolio company.
A common method of determining the EV is to apply a market-based
multiple (e.g. an average multiple based on a selection of
comparable quoted companies) to the "maintainable" earnings or
revenues of the portfolio company. This market-based approach
presumes that the comparative companies are correctly valued by the
market. A discount is sometimes applied to market based multiples
to adjust for points of difference between the comparatives and the
company being valued.
As at 31 December 2018, the value of the Funds' investments,
other assets and liabilities attributable to the Company based on
its respective percentage interest in each Fund was as follows:
Fund I Fund II Fund III OCPE Education
EUR'000 EUR'000 EUR'000 EUR'000
Investments 23,112 100,530 307,986 46,225
-------- -------- -------- --------------
Loans (5,157) (19,935) (55,442) -
-------- -------- -------- --------------
Provisional profit allocation - (4,987) (22,300) -
-------- -------- -------- --------------
Other net assets 2,273 4,367 2,158 326
-------- -------- -------- --------------
Total value of the Fund attributable
to the Company 20,228 79,975 232,402 46,551
-------- -------- -------- --------------
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------------
Total value of the Fund attributable
to the Company 18,159 71,794 208,628 41,789
-------- -------- -------- --------------
As at 31 December 2017, the value of the Funds' investments,
other assets and liabilities attributable to the Company based on
its respective percentage interest in each Fund was as follows:
Fund I Fund II Fund III OCPE Education
EUR'000 EUR'000 EUR'000 EUR'000
Investments 42,516 199,645 129,410 29,282
-------- -------- -------- --------------
Loans (4,565) (25,004) (46,015) -
-------- -------- -------- --------------
Provisional profit allocation - (21,815) (2,847) -
-------- -------- -------- --------------
Other net assets 3,164 1,341 42,127 278
-------- -------- -------- --------------
Total value of the Fund attributable
to the Company 41,115 154,167 122,675 29,560
-------- -------- -------- --------------
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------------
Total value of the Fund attributable
to the Company 36,551 137,054 109,058 26,280
-------- -------- -------- --------------
The Company does not utilise valuation models to calculate the
fair value of its Fund investments. The NAV as reported by the
Funds' general partner or administrator is considered to be the key
unobservable input. In addition, the Company has the following
control procedures in place to evaluate whether the NAV of the
underlying Fund investments is calculated in a manner consistent
with IFRS 13:
-- Thorough initial due diligence process and the Board of
Directors performing ongoing monitoring procedures, primarily
discussions with the Investment Adviser;
-- Comparison of historical realisations to the last reported fair values; and
-- Review of the Auditor's report of the respective Fund.
Unquoted debt securities
The fair values of the Company's investments in unquoted debt
securities are derived from a discounted cash flow calculation
based on expected future cash flows to be received, discounted at
an appropriate rate. Expected future cash flows include interest
received and principal repayment at maturity.
Unobservable inputs for Level III investments
Funds
In arriving at the fair value of the unquoted fund investments,
the key input used by the Company is the NAV as provided by the
general partner or administrator. It is recognised by the Company
that the NAVs of the Funds are sensitive to movements in the fair
values of the underlying portfolio companies.
The underlying portfolio companies owned by the Funds may
include both quoted and unquoted companies. Quoted portfolio
companies are valued based on market prices and no unobservable
inputs are used. Unquoted portfolio companies are valued based on a
market approach for which significant judgment is applied.
For the purposes of sensitivity analysis, the Company considers
a 10% adjustment to the fair value of the unquoted portfolio
companies of the Funds as reasonable. For the year ending 31
December 2018, a 10% increase to the fair value of the unquoted
portfolio companies held by the Funds would result in a 6.2%
movement in net assets attributable to shareholders (2017: 5.9%). A
10% decrease to the fair value of the unquoted portfolio companies
held by the Funds would have an equal and opposite effect.
Unquoted debt securities
In arriving at the fair value of the unquoted debt securities,
the key inputs used by the Company are future cash flows expected
to be received until maturity of the debt securities and the
discount factor applied. The discount factor applied is considered
to be an unobservable input and range between 6.5% and 15%.
For the purposes of sensitivity analysis, the Company considers
a 1% adjustment to the discount factor applied as reasonable. For
the year ending 31 December 2018, a 1% increase to the discount
factor would result in a 0.4% movement in net assets attributable
to shareholders (2017: 0.3%). A 1% decrease to the discount factor
would have an equal and opposite effect.
Transfers between levels
There were no transfers between the Levels during the year ended
31 December 2018 (2017: none).
Level I and Level III reconciliation
The changes in investments measured at fair value, for which the
Company has used Level I and Level III inputs to determine fair
value as of 31 December 2018 and 2017, are as follows:
2018 2017
Level I Investments: GBP'000 GBP'000
Quoted equity securities
-------- --------
Fair value at the beginning of the year 41,182 43,854
-------- --------
Shares transferred from unquoted debt and equity
securities - -
-------- --------
Net change in unrealised gains/(losses) on investments (18,862) (2,672)
-------- --------
Fair value of Level I investments at the end of
the year 22,320 41,182
-------- --------
Unquoted
Funds debt securities Total
Level III Investments: GBP'000 GBP'000 GBP'000
2018
--------- ---------------- ---------
Fair value at the beginning of the year 308,943 69,502 378,445
--------- ---------------- ---------
Purchases 64,654 66,191 130,845
--------- ---------------- ---------
Proceeds on disposals (including interest) (130,526) (35,269) (165,795)
--------- ---------------- ---------
Realised gain on sale 102,314 - 102,314
--------- ---------------- ---------
Interest income and other fee income - 6,635 6,635
--------- ---------------- ---------
Net change in unrealised gains/(losses)
on investments (5,015) - (5,015)
--------- ---------------- ---------
Fair value at the end of the year 340,370 107,059 447,429
--------- ---------------- ---------
Unquoted
Funds debt securities Total
GBP'000 GBP'000 GBP'000
2017
--------- ---------------- ---------
Fair value at the beginning of the year 211,254 85,761 297,015
--------- ---------------- ---------
Purchases 164,522 36,982 201,504
--------- ---------------- ---------
Proceeds on disposals (including interest) (113,812) (61,230) (175,042)
--------- ---------------- ---------
Realised gain on sale 23,991 - 23,991
--------- ---------------- ---------
Interest income and other fee income - 7,989 7,989
--------- ---------------- ---------
Net change in unrealised gains/(losses)
on investments 22,988 - 22,988
--------- ---------------- ---------
Fair value at the end of the year 308,943 69,502 378,445
--------- ---------------- ---------
Financial instruments not carried at fair value
Financial instruments, other than financial instruments at fair
value through profit and loss, where carrying values are equal to
fair values:
2018 2017
GBP'000 GBP'000
Cash and cash equivalents 107,888 117,836
-------- --------
Trade and other receivables 11 668
-------- --------
Trade and other payables 2,826 36,091
-------- --------
9. Segment information
The Company has two reportable segments, as described below. For
each of them, the Board of Directors receives detailed reports on
at least a quarterly basis. The following summary describes the
operations in each of the Company's reportable segments:
-- Fund investments: includes commitments/investments in four private equity funds.
-- Direct investments and loans: includes direct investments,
loans to the Funds' portfolio companies, loans to the Funds and
other loans.
Balance sheet and income and expense items which cannot be
clearly allocated to one of the segments are shown in the column
"Unallocated" in the following tables.
The reportable operating segments derive their revenue primarily
by seeking investments to achieve an attractive return in relation
to the risk being taken. The return consists of interest, dividends
and/or unrealised and realised capital gains.
The financial information provided to the Board of Directors
with respect to total assets and liabilities is presented in a
manner consistent with the consolidated financial statements. The
assessment of the performance of the operating segments is based on
measurements consistent with IFRS. With the exception of capital
calls payable, liabilities are not considered to be segment
liabilities but rather managed at the corporate level.
There have been no transactions between the reportable segments
during the financial year ended 31 December 2018 (2017: none).
The segment information for the year ended 31 December 2018 is
as follows:
Direct Total
Fund investments operating
investments and loans segments Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net realised gains on financial
assets at fair
value through profit and loss 102,314 - 102,314 - 102,314
------------ ------------ ---------- ----------- --------
Net change in unrealised gains/(losses)
on financial assets
at fair value through profit and
loss (5,015) (18,862) (23,877) - (23,877)
------------ ------------ ---------- ----------- --------
Interest income - 6,515 6,515 114 6,629
------------ ------------ ---------- ----------- --------
Net foreign currency gains/(losses) - - - 3,149 3,149
------------ ------------ ---------- ----------- --------
Other income - 120 120 97 217
------------ ------------ ---------- ----------- --------
Expenses - - - (6,045) (6,045)
------------ ------------ ---------- ----------- --------
Interest expense - - - (389) (389)
------------ ------------ ---------- ----------- --------
Profit/(loss) for the year 97,299 (12,227) 85,072 (3,074) 81,998
------------ ------------ ---------- ----------- --------
Total assets 340,370 129,379 469,749 107,899 577,648
------------ ------------ ---------- ----------- --------
Total liabilities - - - (2,826) (2,826)
------------ ------------ ---------- ----------- --------
Net assets 340,370 129,379 469,749 105,073 574,822
------------ ------------ ---------- ----------- --------
Total assets include:
------------ ------------ ---------- ----------- --------
Financial assets at fair value through
profit and loss 340,370 129,379 469,749 - 469,749
------------ ------------ ---------- ----------- --------
Cash and others - - - 107,899 107,899
------------ ------------ ---------- ----------- --------
The segment information for the year ended 31 December 2017 is
as follows:
Direct Total
Fund investments operating
investments and loans segments Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net realised gains on financial
assets at fair
value through profit and loss 23,991 - 23,991 - 23,991
------------ ------------ ---------- ----------- --------
Net change in unrealised gains/(losses)
on financial assets
at fair value through profit
and loss 22,988 (2,672) 20,316 - 20,316
------------ ------------ ---------- ----------- --------
Interest income - 7,683 7,683 39 7,722
------------ ------------ ---------- ----------- --------
Net foreign currency gains/(losses) - - - (839) (839)
------------ ------------ ---------- ----------- --------
Other income - 306 306 - 306
------------ ------------ ---------- ----------- --------
Expenses - - - (6,529) (6,529)
------------ ------------ ---------- ----------- --------
Interest expense - - - (42) (42)
------------ ------------ ---------- ----------- --------
Profit/(loss) for the year 46,979 5,317 52,296 (7,371) 44,925
------------ ------------ ---------- ----------- --------
Total assets 308,943 110,684 419,627 118,504 538,131
------------ ------------ ---------- ----------- --------
Total liabilities (34,457) - (34,457) (1,634) (36,091)
------------ ------------ ---------- ----------- --------
Net assets 274,486 110,684 385,170 116,870 502,040
------------ ------------ ---------- ----------- --------
Total assets include:
------------ ------------ ---------- ----------- --------
Financial assets at fair value
through profit and loss 308,943 110,684 419,627 - 419,627
------------ ------------ ---------- ----------- --------
Cash and others - - - 118,504 118,504
------------ ------------ ---------- ----------- --------
10. Cash and cash equivalents
2018 2017
GBP'000 GBP'000
Cash and demand balances at banks 82,782 91,229
-------- --------
Short-term deposits 25,107 26,607
-------- --------
107,888 117,836
-------- --------
11. Trade and other receivables
2018 2017
GBP'000 GBP'000
Prepayments 11 1
-------- --------
Amounts due from related parties - 667
-------- --------
11 668
-------- --------
12. Trade and other payables
2018 2017
GBP'000 GBP'000
Trade payables 97 151
-------- --------
Amounts due to related parties 2,729 1,483
-------- --------
Capital call payable - 34,457
-------- --------
2,826 36,091
-------- --------
13. Interest Income
2018 2017
GBP'000 GBP'000
Interest income on investments carried at amortised
cost:
-------- --------
Cash and cash equivalents 114 39
-------- --------
Interest income on investments designated as at
fair value through profit and loss:
-------- --------
Debt securities 6,515 7,683
-------- --------
6,629 7,722
-------- --------
14. Expenses
2018 2017
Notes GBP'000 GBP'000
Operational and advisory fees 15 2,505 2,568
----- -------- --------
Management fees 16 - 535
----- -------- --------
Professional fees 17 876 872
----- -------- --------
Performance fees 15,16 1,613 1,246
----- -------- --------
Other expenses 15 1,051 1,308
----- -------- --------
6,045 6,529
----- -------- --------
15. Operational, advisory and performance fees
Pursuant to an operational services agreement dated 1 April 2017
(the "Operational Services Agreement"), the Company appointed
Oakley Capital Manager Limited (the "Administrative Agent") to
provide operational assistance and services to the Board with
respect to the Company's investments and its general
administration.
a) Operational fees
Under the Operational Services Agreement, the Administrative
Agent receives an operational services fee equal to 2% per annum of
the net asset value (before deduction of any accrued performance
fees) of all investments held by the Company except for the
investments in and any revolvers with Fund I, Fund II and Fund III
and any loans to entities affiliated with the Administrative Agent.
The fee is pro rata for partial periods and payable quarterly in
arrears.
The operational services fee for the year ended 31 December 2018
totalled GBP2,504,757 (2017: GBP1,892,118) and is presented in the
consolidated statement of comprehensive income. The amount
outstanding as at 31 December 2018 was GBP913,692 (2017:
GBP635,022) and is included in "Trade and other payables" in the
consolidated balance sheet.
b) Advisory fees
Under the Operational Services Agreement, the Administrative
Agent also receives an advisory fee based on the successful
buy-side and sell-side transactions of the Company for any equity
investment. The advisory fee is 2% of the equity transaction value
unless otherwise agreed between the parties.
The Company did not incur advisory fees for the year ended 31
December 2018 (2017: GBP675,712 and are presented in the
consolidated statement of comprehensive income). There are no
amounts outstanding as at 31 December 2018 (2017: GBPnil).
c) Performance fees
The Administrative Agent also receives a performance fee of 20%
of the excess of any proceeds from the full or partial realisation
on disposal of each of the Company's co-investments over and above
an 8% hurdle rate after the deduction of the original cost of the
co-investment and the attributable proportion of all other expenses
incurred by the Company in respect of co-investments.
Performance fees for the year ended 31 December 2018 totalled
GBP1,613,530 (2017: GBP1,246,443) and are presented in the
consolidated statement of comprehensive income. The amount
outstanding as at 31 December 2018 was GBP1,801,381 (2017:
GBP624,297) and is included in "Trade and other payables" in the
consolidated balance sheet.
d) Other fees
Under the Operational Services Agreement, the Administrative
Agent may also recharge costs incurred, either directly or
indirectly by its contracted advisors, on behalf of the
Company.
For the year ended 31 December 2018, the Administrative Agent
recharged such other costs to the Company totalling GBP714,873
(2017: GBP595,659) and is included in other expenses (Note 14).
There are no amounts outstanding as at 31 December 2018 (2017:
GBP189,464 and is included in "Trade and other payables" in the
consolidated balance sheet).
The Administrative Agent has entered into an Investment Advisory
Agreement with the Investment Adviser to advise on the investment
of the assets of the Company. The Investment Adviser does not
receive any management or performance fees from the Company. Any
fees earned by the Investment Adviser are paid by the
Administrative Agent.
16. Management and performance fees
Pursuant to a management agreement dated 30 July 2007, the
Company appointed Oakley Capital (Bermuda) Limited (the "Manager")
to provide management services. On 31 March 2017, the management
agreement was terminated. The terms of the management agreement
were as follows:
a) Management fees
The Manager was not entitled to receive a management fee from
the Company in respect of amounts either committed or invested by
the Company in the Funds. The Manager received a management fee at
the rate of 1% per annum in respect of assets that were not
committed to the Funds and which were invested in cash, cash
deposits or near cash deposits and a management fee at the rate of
2% per annum in respect of those assets which were invested
directly in co-investments. The management fee was payable monthly
in arrears.
Management fees for the period 1 January 2017 through 31 March
2017 totalled GBP535,090 and are presented in the consolidated
statement of comprehensive income.
b) Performance fees
The Manager was also entitled to receive a performance fee of
20% of the excess of the amount earned by the Company over and
above an 8% per annum hurdle rate on any monies invested as a
co-investment with any Fund. Any co-investment was treated as a
segregated pool of investments by the Company. If the calculation
period was greater than one year, the hurdle rate was compounded on
each anniversary of the start of the calculation period for each
segregated co-investment. If the amount earned did not exceed the
hurdle rate on any given co-investment, that co-investment was
included in the next calculation so that the hurdle rate was
measured across both co-investments.
The Company did not incur any performance fees for the period 1
January 2017 through 31 March 2017.
The Manager entered into an Investment Advisory Agreement with
the Investment Adviser to advise the Manager on the investment of
the assets of the Company. The Investment Advisory Agreement was
terminated 31 March 2017. The Investment Adviser did not receive a
management or performance fee from the Company. Any fees due to the
Investment Adviser were paid by the Manager out of the management
and performance fees it received from the Company.
17. Professional fees
2018 2017
Notes GBP'000 GBP'000
Administration fees 18 327 359
----- -------- --------
Consulting fees 48 34
----- -------- --------
Directors' fees 19 234 205
----- -------- --------
Auditor's remuneration 20 96 85
----- -------- --------
Legal fees 19 104
----- -------- --------
Other fees 152 85
----- -------- --------
876 872
----- -------- --------
18. Administration fees
The Company has appointed Mayflower Management Services
(Bermuda) Limited ( the "Administrator") to provide administration
services pursuant to the administration agreement dated 30 July
2007 and it receives an annual administration fee at prevailing
commercial rates. Administration fees for the year ended 31
December 2018 totalled GBP326,743 (2017: GBP359,432) and are
included in Professional fees (Note 17). There was no
administration fee payable to the Administrator as at 31 December
2018 (2017: GBPnil).
The Company has also entered into an agreement with Mayflower
Corporate Services Limited ("MCS"), a subsidiary of the
Administrator to provide corporate secretarial services. Any fees
due to MCS will be paid by the Administrator.
19. Directors' fees
2018 2017
GBP'000 GBP'000
Chair's remuneration 75 65
-------- --------
Directors' fees 159 140
-------- --------
234 205
-------- --------
The members of the Board of Directors are considered to be Key
Management Personnel. No pension contributions were made in respect
of any of the Directors and none of the Directors receives any
pension from any portfolio company held by the Company. During the
year, one of the Directors waived remuneration (2017: one). During
2018, no other fees were paid to the Directors (2017: GBP24,694
consulting fees to the former Chair of the Board). No fees were
payable as at 31 December 2018 (2017: none). For the years ended 31
December 2018 and 2017 members of the Board of Directors held
shares in the Company and were entitled to dividends as detailed
below:
2018 2017
'000 '000
Shares at the beginning of the year 2,690 2,231
----- -----
Shares acquired during the year 7,277 459
----- -----
Shares held by a Director who resigned during the
year (231) -
----- -----
Shares at the end of the year 9,736 2,690
----- -----
Dividends paid to Directors 278 161
----- -----
Dividends payable to Directors - -
----- -----
20. Auditor's remuneration
2018 2017
GBP'000 GBP'000
Audit of consolidated financial statements 96 85
-------- --------
Other assurance services - -
-------- --------
Total auditor's remuneration 96 85
-------- --------
21. Withholding tax
Under current Bermuda law the Company is not required to pay tax
in Bermuda on either income or capital gains. The Company has
received an undertaking from the Minister of Finance in Bermuda
that in the event of such taxes being imposed, the Company is
exempt from such taxation at least until 31 March 2035.
The Company may, however, be subject to foreign withholding
taxes in respect of income derived from its investments in other
jurisdictions. For the year ended 31 December 2018, the Company was
not subjected to foreign withholding taxes (2017: nil).
22. Earnings per share
The earnings per share calculation uses the weighted average
number of shares in issue during the year.
2018 2017
Basic and diluted earnings per share GBP0.40 GBP0.22
--------- ---------
Profit for the year ('000) GBP81,998 GBP44,925
--------- ---------
Weighted average number of shares in issue ('000) 204,804 203,859
--------- ---------
23. Net asset value per share
The net asset value per share calculation uses the number of
shares in issue at the end of the year.
2018 2017
Basic and diluted net asset value per share GBP2.81 GBP2.45
---------- ----------
Net assets attributable to shareholders ('000) GBP574,822 GBP502,040
---------- ----------
Number of shares in issue at the year end ('000) 204,804 204,804
---------- ----------
24. Share capital
a) Authorised and issued capital
The authorised share capital of the Company is 280,000,000
ordinary shares at a par value of GBP0.01 each. Ordinary shares are
listed and traded on AIM of the London Stock Exchange. Each share
confers the right to one vote and shareholders have the right to
receive dividends.
As at 31 December 2018, the Company's issued and fully paid
share capital was 204,804,036 ordinary shares (2017:
204,804,036).
2018 2017
'000 '000
Ordinary shares outstanding at the beginning of
the year 204,804 189,804
------- -------
Treasury shares issued - 15,000
------- -------
Ordinary shares outstanding at the end of the year 204,804 204,804
------- -------
b) Share premium
Share premium represents the amount received in excess of the
nominal value of ordinary shares.
25. Dividends
On 14 March 2018, the Board of Directors declared and approved
payment of a final dividend for the year ended 31 December 2017 of
2.25 pence per ordinary share resulting in a dividend payment of
GBP4,608,091 paid on 26 April 2018.
On 3 September 2018, the Board of Directors declared and
approved payment of an interim dividend of 2.25 pence per ordinary
share which resulted in a dividend payment of GBP4,608,091 paid on
25 October 2018 (2017: On 11 September 2017, declared and approved
an interim dividend of 2.25 pence per ordinary share which resulted
in a dividend payment of GBP4,608,091 paid on 26 October 2017).
26. Commitments
The Company had the following capital commitments in euros at
the year-end:
2018 2017
EUR'000 EUR'000
Fund I
-------- --------
Total capital commitment GBP169,144; (2017: GBP167,486) 188,398 188,398
-------- --------
Called capital at the beginning of the year 185,760 178,978
-------- --------
Capital calls during the year 0%; (2017: 3.6%) - 6,782
-------- --------
Called capital at the end of the year GBP166,775;
(2017: GBP165,141) 185,760 185,760
-------- --------
Unfunded capital commitment GBP2,368; (2017: GBP2,345) 2,638 2,638
-------- --------
Aggregate recycled commitment 13,000 13,000
-------- --------
2018 2017
EUR'000 EUR'000
Fund II
-------- --------
Total capital commitment GBP170,582; (2017: GBP168,910) 190,000 190,000
-------- --------
Called capital at the beginning of the year 158,650 153,000
-------- --------
Capital calls during the year 9.5%; (2017: 7%) 18,050 14,000
-------- --------
Adjustment for partial sale during the year - (8,350)
-------- --------
Called capital at the end of the year GBP158,641;
(2017: GBP141,040) 176,700 158,650
-------- --------
Unfunded capital commitment GBP11,941; (2017: GBP27,870) 13,300 31,350
-------- --------
2018 2017
EUR'000 EUR'000
Fund III
-------- --------
Total capital commitment GBP292,485; (2017: GBP289,618) 325,780 325,780
-------- --------
Called capital at the beginning of the year 123,797 9,750
-------- --------
Capital calls during the year 15%; (2017: 35%) 48,867 114,047
-------- --------
Called capital at the end of the year GBP155,017;
(2017: GBP110,055) 172,664 123,797
-------- --------
Unfunded capital commitment GBP137,468; (2017:
GBP179,563) 153,116 201,983
-------- --------
Total unfunded capital commitments GBP151,777;
(2017: GBP209,778) 169,054 235,971
-------- --------
The Company had the following loan commitments at the
year-end:
2018 2017
GBP'000 GBP'000
Total loan facility commitments:
-------- --------
Fund I 5,000 5,000
-------- --------
Fund II 20,000 20,000
-------- --------
Fund III 20,000 20,000
-------- --------
Time Out Group plc 20,000 -
-------- --------
Oakley NS (Bermuda) L.P. 25,850 3,000
-------- --------
90,850 48,000
-------- --------
Total unfunded loan commitments:
-------- --------
Fund I 4,200 2,122
-------- --------
Fund II 2,773 20,000
-------- --------
Fund III 15,989 20,000
-------- --------
Oakley NS (Bermuda) L.P. 12,737 -
-------- --------
35,699 42,122
-------- --------
27. Contingent liabilities
In the ordinary course of business, the Company may enter into
contracts or agreements that 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, the Board of
Directors believe that the current likelihood of such an event is
remote.
As at 31 December 2018 and 2017, there are no contingent
liabilities outstanding.
28. Related parties
Balances and transactions between the Company and its subsidiary
have been eliminated on consolidation and are not disclosed in this
note. Related parties as disclosed below are not part of the
consolidation and for this reason are not eliminated.
One Director of the Company, Peter Dubens, is also a Director of
the Investment Adviser and Oakley Advisory Limited, entities which
provide services to, and receive compensation from, the Company.
These, along with the Administrative Agent are considered related
parties to the Company given the indirect control this Director has
over these entities. Until 31 March 2017, one Director of the
Company was also a Director of the Manager, an entity that provided
services to, and received compensation from, the Company. The
agreements between the Company and these service providers were and
are based on normal commercial terms.
Throughout 2018, no Director of the Company had a personal
interest in any transaction of significance for the Company (2017:
none).
Management fees and performance fees paid for the period 1
January 2017 through 31 March 2017 are detailed in Notes 14 and 16.
Operational service fees, advisory fees, performance fees and
recharged costs paid to the Administrative Agent for the year
ending 31 December 2018 and the period 1 April 2017 through 31
December 2017 are detailed in Notes 14 and 15. The agreements
between the Company and these service providers are based on normal
commercial terms.
During the year ended 31 December 2018, the Investment Adviser
recharged staff costs of GBP714,873 (2017: staff cost of GBP409,722
and overheads of GBP2,343) to the Company which is included in
other expenses (Note 14).
During the year ended 31 December 2018, Oakley Capital Manager
Limited (the "Fund III Manager") repaid the remaining 50% of the
option fee of EUR750,000, along with accrued interest. This was due
to the Company based on the terms of the Fund III Manager option
agreement when the Company only exercised 50% of the option by
committing an additional EUR75,000,000 to Fund III. As at 31
December 2018 no balance is receivable from the Fund III Manager
(2017: EUR750,000 (GBP666,750) which is included in "Trade and
other receivables" in the consolidated balance sheet).
Fund I is considered a related party due to the 65.5% investment
the Company has in Fund I. During the year ended 31 December 2017,
the Company acquired an interest in OCPE Education L.P. from most
limited partners of Fund I and paid EUR23,492,217 (GBP20,795,311)
for such additional interests in OCPE Education L.P.
29. Events after the balance sheet date
The Board of Directors has evaluated subsequent events from the
year end through 13 March 2019, which is the date the consolidated
financial statements were available for issue. The following events
have been identified for disclosure:
On 2 January 2019, the Company bought an additional 4.87%
interest in Fund I for a total consideration of EUR2,000,000. The
Company's unfunded commitment in Fund I increased to
EUR2,833,576.
On 3 January 2019, the Company committed EUR400,000,000 to
Oakley Capital IV-A SCSp, which together with Oakley Capital IV-B
SCSp, Oakley Capital IV-C SCSp (collectively the "Fund IV Feeder
Funds") and Oakley Capital IV Master SCSp (the "Fund IV Master")
collectively comprise "Fund IV". Fund IV is an exempted limited
partnership
established in Luxembourg.
On 13 March 2019, the Board of Directors declared and approved
payment of a final dividend for the year ended
31 December 2018 of 2.25 pence per ordinary share resulting in a
dividend of GBP4,608,091 payable on 25 April 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAEDDFENNEAF
(END) Dow Jones Newswires
March 14, 2019 03:01 ET (07:01 GMT)
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