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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Oakley Capital Investments Limited | LSE:OCI | London | Ordinary Share | BMG670131058 | ORD 1P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -0.11% | 475.00 | 473.00 | 478.00 | 475.50 | 474.50 | 475.50 | 382,146 | 16:35:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 57.09M | 47.49M | 0.2692 | 17.66 | 838.87M |
From May 2019 to May 2024
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.
Hot Features
Premium
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.
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END
FR EAEDDFENNEAF
(END) Dow Jones Newswires
March 14, 2019 03:01 ET (07:01 GMT)
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