Strategic report / Principal risks and uncertainties
Adapting to meet
OCI’s evolving needs
OCI maintains a robust strategy for managing risks, which encompasses:
Maintenance of a comprehensive risk management framework including the risk appetite statement, the risk register and the risk policies and procedures.
Evaluation of emerging risks and assessing potential implications for the Company and any mitigation that can be applied.
Effective communication between our Board of Directors and the Investment Adviser through regular risk reports and discussions.
Proactive risk management
OCI maintains a disciplined approach to risk management through oversight by the Board and the support of the Risk Committee, supplemented by regular input from the Risk function. Oakley provides risk analysis and monitoring across liquidity, commitments, valuation developments, financing conditions and operational matters relevant to OCI’s exposures in the Oakley Funds and its Direct Investments. This framework enables the Board to assess risks in a timely manner, supports capital allocation decisions and ensures that OCI continues to operate within the risk appetite set by the Board.
Looking ahead to 2026, OCI and Oakley will continue to collaborate closely to ensure regular risk oversight and communication between the relevant governance bodies.
Increased risk oversight
The geopolitical risks that shaped 2023 and 2024 continued into 2025, alongside the ongoing conflict in the Middle East, which the Board continues to closely monitor while assessing any potential direct or indirect impact on the Company and its portfolio. The announcement of new US import tariffs in April triggered a sharp sell-off in bond markets and a period of elevated volatility, with renewed global recession concerns. While tensions between the US and China persisted, a subsequent agreement between the US and the EU helped to stabilise macroeconomic conditions. In this context, Eurozone GDP growth is expected to gradually strengthen over the medium term and inflation is projected to stabilise close to the 2% target as core pressures ease. Given that approximately 80% of OCI’s look-through exposure is located between Europe and the United Kingdom, these developments remained a relevant backdrop for OCI during the year.
Despite these macro-financial challenges, OCI continued to deliver positive returns during 2025, with a Total NAV Return per share of 6% and a Total Shareholder Return of 15%, while operating within the risk appetite set by the Board. As private equity markets showed early signs of improvement, the OCI portfolio reflected this trend with look-through proceeds of £92 million, providing additional liquidity for the Company. The portfolio continued to mature over the period and consisted of over 60 investments at year-end, diversified across Oakley’s four core sectors: Business Services, Consumer, Education and Technology, with no single sector exceeding 40% of exposure.
The Risk Committee met twice during the year to monitor risks relevant to OCI, with liquidity remaining a standing item on its agenda. In addition, detailed analysis of portfolio developments, liquidity and other principal risks was presented directly to the Board on two further occasions. These discussions considered varying market and distribution conditions, including scenarios of accelerated capital calls, lower exit values and reduced distributions. This analysis informed key Board decisions during the year, including approval of commitments to Oakley Funds (including €500 million to Fund VI) and the completion of OCI’s £50 million share buyback programme on 8 January 2026 at an average discount to NAV of 28%. The Committee also reviewed the risks associated with OCI’s Direct Investments, supporting the decision to work with Oakley and external parties to explore liquidity options for these positions.
Operational oversight remained a key area of focus during the year, with the Risk function completing a structured review of the central governance, risk and compliance (‘GRC’) tool used for risk monitoring, in particular the log of events and the control framework. These developments provided the Board with greater visibility over emerging risks and clearer insight into the effectiveness of key controls, supporting OCI’s ability to navigate future challenges and protect shareholder value.
Our risk map
Key risks
0
PR1 Liquidity risk
PR2 Portfolio risk
PR3 Counterparty risk
Other core risks
0
OR4 Performance risk
OR5 Operational risk
OR6 Sustainability risk
OR7 Reputational risk
Key risks
1
Liquidity risk
Potential impact Liquidity risk refers to the risk that OCI may be unable to meet its commitments to the Oakley Funds or may be constrained in executing its capital allocation strategy in a timely manner. This could result in reduced financial flexibility, adversely affect OCI’s ability to deploy capital or return capital to shareholders, and may ultimately impact the Company’s share price and shareholder returns.
Risk tolerance
0 2024
0 2025
Mitigation
The Board closely monitors OCI’s liquidity position through regular review of cash flow forecasts and stress testing. These stress tests assess OCI’s ability to meet its obligations under a range of scenarios, including accelerated capital deployment, reduced or delayed distributions and adverse market conditions, and are considered alongside the Company’s overall capital management strategy.
Liquidity risk is overseen by the Risk Committee, with regular reporting to the Board. Where appropriate, the Board engages with the Investment Adviser and other relevant counterparties to assess emerging risks, review liquidity options and ensure continued alignment between commitments, financing arrangements and capital allocation decisions.
Strategic positioning for the upcoming year
During the year, OCI further strengthened its liquidity position and enhanced financial flexibility. In April 2025, OCI refinanced its credit arrangements, replacing the existing facility with a new five-year credit facility totalling £325 million, increasing the overall size by £100 million. This refinancing extended OCI’s maturity profile and improved liquidity headroom.
Further, OCI made a commitment of €500 million to Fund VI, alongside a further commitment of $15 million to Touring I, during the year. As at 31 December 2025, OCI held cash of £95 million and had undrawn credit facilities of £96 million, providing total available liquidity of £191 million. Total outstanding commitments to the Oakley Funds amounted to £992 million, of which approximately £300 million is not expected to be drawn.
The Board continues to monitor the cash flow outlook, considering expected investment activity, refinancing requirements and potential distributions as the underlying funds mature. The Risk Committee remains focused on maintaining sufficient liquidity and flexibility to support OCI’s capital commitments, investment strategy and capital allocation objectives over the coming period.
2
Portfolio risk
Potential impact Portfolio risk principally focuses on valuation risk and concentration risk. Valuation risk looks at the risk of a decline in the valuation of privately held assets, resulting principally from a reduction in comparative multiples in the market or from underperformance of the assets or sector. Concentration risk arises from overexposure to specific investments, strategies, sectors, geographies or currencies, which could amplify the impact of adverse developments on OCI’s Net Asset Value and shareholder returns.
Risk tolerance
0 2024
0 2025
Mitigation
Oakley portfolio company valuations are subject to a structured quarterly process. The Oakley Valuations Team prepares the valuations, which are reviewed by an Investment Team partner or managing director, and then submitted to the Oakley Valuations Review Committee (‘VRC’) for approval. The Alternative Investment Fund Manager (‘AIFM’) Valuation Committee reviews the VRC approved valuations and provides final approval. OCI also commissions an independent valuation of its Direct Investment in North Sails on an annual basis. The external auditor reviews the valuation process and considers the results of the results of the annual valuations of all Oakley Private Equity Portfolio investments prepared by the third-party valuation commissioned by Oakley as part of the annual audit, reinforcing transparency, consistency and independence.
The OCI Board and Audit Committee actively monitor valuation results, the performance of portfolio companies, considering broader sector or macroeconomic factors in its oversight of the valuation process.
Concentration metrics are established and monitored to assess exposure by investment, sector and geography. The Board receives quarterly reporting on portfolio concentration, assessed both by acquisition cost and by the most recent Net Asset Value. At year end, the fair value of the top five holdings represented approximately 54% of OCI’s NAV, including North Sails at 18% on a combined direct and indirect basis, with the remainder diversified across more than 60 investments. No single sector accounted for more than 40% of NAV, reflecting a portfolio that is diversified by sector and geography, with higher concentrations in certain investments primarily arising from relative fair value growth over time.
Strategic positioning for the upcoming year
As OCI’s portfolio continues to expand across newer Oakley Fund vintages and strategies, the sensitivity of the portfolio to individual assets or sectors is expected to reduce over time. During the year, the portfolio generated positive returns, driven primarily by earnings growth, successful exits and operational performance across portfolio companies, supporting valuation resilience despite a cautious approach to valuation multiples, with approximately half of portfolio companies held at or below the multiples paid at acquisition.
Exit activity generated proceeds of approximately £92 million, comprising £57 million from realisations and £35 million from refinancings. Two exits completed during the year were realised at premiums of double and triple digits to their most recent carrying values, providing external validation of valuation discipline.
Looking ahead, the commitment to Oakley Capital Fund VI and the ten new portfolio investments completed during the year further broadens the portfolio and reduces concentration risk, benefitting from increasing operational maturity. The Board and Risk Committee will continue to monitor portfolio composition, valuation trends and concentration metrics to ensure continued alignment with OCI’s risk appetite.
3
Counterparty risk
Potential impact This risk refers to the possibility that a counterparty in a financial transaction may default on its contractual obligations. It arises from OCI’s exposure and reliance on lending institutions. OCI’s risk exposure is categorised into three levels: direct counterparties, counterparties at the Oakley fund level, and counterparties associated with portfolio companies.
Risk tolerance
0 2024
0 2025
Mitigation
During the last three years, the Oakley Funds have significantly diversified their key credit relationships, expanding the pool from four to 11 banks. This diversification included an analysis of credit ratings, geographical distribution and bank sizes. A detailed assessment of core capabilities and ancillary services provided by these institutions was conducted, leading to a reshaped banking strategy. This included a focus on succession planning to address potential scenarios where a bank may be unable to fulfil its contractual obligations. This resulted in OCI securing a new £325 million five-year facility, aligning debt maturity with long-term commitment horizons and reducing refinancing risk.
In parallel, the Capital Markets team conducted a bottom-up evaluation of banking partnerships across Oakley’s portfolio companies. This review reassessed key relationships, identified commonalities across the portfolio and benchmarked debt pricing. The exercise led to the refinancing of portfolio company debt, resulting in distributions to OCI of approximately £35 million on a look-through basis. The team remains actively engaged in securing competitive financing terms for portfolio companies and continues to support OCI in its banking negotiations.
Strategic positioning for the upcoming year
The ongoing trend and efforts to diversify banking relationships are expected to continue in the future, reducing OCI’s exposure to single entities and increasing the long-term certainty of debt support, further enhancing risk mitigation strategies.
Other core risks
4
Performance risk
Potential impact Performance risk represents the risk that returns to OCI’s shareholders may underperform relevant market benchmarks or listed private equity peers. Sustained underperformance could adversely affect the Company’s share price, trading liquidity and reputation, and may limit OCI’s ability to access capital markets or execute its capital allocation strategy effectively.
Risk tolerance
0 2024
0 2025
Mitigation
The Board seeks to mitigate performance risk through regular monitoring of NAV performance and transparent communication with shareholders and the wider market. Quarterly NAV reporting, together with the half-yearly and Annual Reports, provides investors with timely and consistent information on portfolio performance, valuation movements and capital allocation decisions.
Confidence in OCI’s reported NAV is supported by a robust valuation framework applied by the Investment Adviser and subject to independent external audit and independent valuation. OCI also commissions an independent valuation of its Direct Investment in North Sails on an annual basis. The Board and Audit Committee oversee valuation outcomes and consider performance in the context of broader market conditions and peer performance.
Strategic positioning for the upcoming year
During the year, OCI transitioned its listing to the Main Market of the London Stock Exchange and delivered stable NAV growth, with NAV increasing to £1,233 million and NAV per Share rising from 695 pence to 738 pence. Total NAV Return per share for the year was 6%, with 11 pence of this attributable to the £50 million 2025 share buyback programme, executed at an average discount to NAV of 28%. Performance was driven by earnings-led value creation across the portfolio, partly offset by more cautious valuation multiples and adverse foreign exchange movements.
The Board continues to focus on optimising long-term shareholder returns through disciplined capital allocation, including undrawn commitments of £992 million at year-end to Oakley Funds, selective deployment into new investments, and the use of an allocated annual minimum £20 million for share buybacks. Shareholder engagement remains a priority, supported by clear communication and increased interaction with the Investment Adviser. The Risk Committee continues to support the Board by assessing performance risks in the context of portfolio construction, capital allocation decisions and market conditions.
5
Operational risk
Potential impact OCI outsources investment advisory, administrative, finance and operational functions to the Oakley Group. Consequently, inadequate or failed internal processes could expose OCI to operational, regulatory and reputational risks, with potential financial consequences.
Risk tolerance
0 2024
0 2025
Mitigation
The Board regularly engages with Oakley via the Management Engagement Committee to assess the quality and value of the services it receives from Oakley. The Audit Committee also plays an active part in reviewing controls and processes.
The Risk Committee receives a quarterly report on administrative, advisory and operational matters as well as risk controls and a periodic compliance report. When emerging risks appear, ad hoc reports are presented to the Board.
Over the past two years, the Oakley Group has proactively engaged with third-party advisers to obtain independent verification of the control framework’s robustness, confirm the completeness of the updated risk register, and gather feedback on the GRC tool’s development roadmap.
Strategic positioning for the upcoming year
The commitment to operational excellence remains a priority for OCI. Oakley will continue to engage with third-party advisers for operational risk assessments, integrating insights from prior reviews and focusing on control quality and residual risk analysis. In line with Provision 34 of the AIC Corporate Governance Code, the Board has agreed a proportionate, phased plan to support its annual review of the effectiveness of the Company’s risk management and internal control framework. This will include a structured review of the material controls inventory, with particular focus on control design and the operating effectiveness of key controls.
Oakley remains committed to maintaining a high standard of reporting to OCI. This will ensure that the Board of Directors continues to receive timely, accurate and decision-useful information, enabling effective challenge and oversight. Particular focus is placed on transparency around control effectiveness, emerging risks and the outcomes of control testing, supporting robust governance and informed decision-making.
6
Sustainability risk
Potential impact Failure to identify, manage and mitigate material Sustainability risks across OCI’s underlying investments could adversely affect portfolio company performance, resilience and valuations, and may give rise to regulatory or reputational risk over time.
Risk tolerance
0 2024
0 2025
Mitigation
The Board pays close attention and engages with Oakley through regular reporting. Sustainability considerations are embedded throughout the investment lifecycle, including pre-investment due diligence, ownership and exit. Oakley’s Sustainability Team presents the findings of its due diligence to Oakley’s Investment Committee prior to investment, enabling assessment of material risks and mitigation actions; this process was applied to all 11 investments announced during 2025.
During ownership, Oakley engages with portfolio company management teams on sustainability risks most relevant to their business models. In 2025, focus areas included cybersecurity, with portfolio companies onboarded to Oakley’s cybersecurity monitoring platform, and targeted reviews of supply chain management within selected consumer businesses, with particular emphasis on environmental and social risks. Improvements in climate data quality were observed during the year, with approximately 78% of the portfolio participating in voluntary self-reporting of carbon emissions.
In addition, emerging risks associated with artificial intelligence (‘AI’) were assessed by Oakley, with the annual portfolio Sustainability survey enhanced to include specific questions relating to AI adoption, governance and risk management. Further detail is provided in the Sustainability at Oakley Capital section.
Strategic positioning for the upcoming year
In 2026, OCI’s approach to sustainability risk will continue to evolve from transparency towards assessing the effectiveness of mitigation actions and their contribution to portfolio resilience. As data quality and consistency improve across the portfolio, the Board will place increased emphasis on understanding how sustainability-related risks translate into operational, financial and reputational outcomes.
Risk monitoring will remain focused on areas most relevant to portfolio resilience, including cybersecurity, supply chain management and the governance of emerging technologies. Sustainability considerations will continue to be embedded early in the ownership period for new investments, with active engagement used to address material risks in a manner proportionate to each business’s maturity and risk profile. This approach supports informed prioritisation of sustainability risks and mitigation actions, aligned with long-term value creation and evolving regulatory and market expectations.
7
Reputational risk
Potential impact Reputational risk arises from adverse media coverage, ineffective market communication or negative investor feedback, which could affect OCI’s reputation and market perception. Such developments may impact shareholder confidence, trading liquidity and relationships with investors and other stakeholders, and could ultimately influence OCI’s ability to execute its capital allocation strategy.
Risk tolerance
0 2024
0 2025
Mitigation
OCI engages with third-party PR agencies and Oakley’s Head of Communications to manage external communications and monitor reputational risks. As a listed entity, OCI follows a structured financial reporting calendar, providing regular updates via RNS, including transaction announcements.
All material public disclosures are approved by the Board of Directors, having previously being reviewed by Oakley’s Head of Communications, Fund Finance, senior management, and external advisers, including OCI’s broker and PR adviser. Post-publication, media coverage and market commentary are monitored to ensure that disclosures are accurately represented.
Board shareholder engagement is further supported through transparent reporting, regular engagement, shareholder engagement reports prepared by Oakley’s Investor Relations Team, and the Annual Capital Markets Day, ensuring clarity and consistency in disclosures.
Strategic positioning for the upcoming year
OCI remains committed to maintaining market confidence through transparent, timely and consistent communication with investors and stakeholders. Regular financial updates via regulatory announcements, proactive investor engagement, and continued dialogue between the Board, the Investment Adviser and shareholders are expected to support clear understanding of OCI’s performance, strategy and positioning.
Looking ahead, continued engagement with investors, analysts and media will remain a priority, with the aim of reinforcing confidence in OCI’s governance and long-term strategy. By maintaining open and consistent communication, the Board seeks to support investor confidence, safeguard OCI’s reputation and contribute to long-term shareholder value.
Emerging risks
Macroeconomic and policy uncertainty
Political and fiscal developments in major economies continue to create uncertainty around the direction and implementation of government agendas. In particular, the gradual shift towards more protectionist policies in the US, including the increased use of tariffs and a more assertive stance towards China, may result in changes to trade policy, taxation and regulation. Such developments could affect inflation expectations, financing conditions and investor confidence over the medium term. While the inflation forecasts of the countries to which OCI is exposed remained volatile during the year, year-end inflation outcomes were broadly in line with central bank targets across the spectrum, reflecting a mixed policy environment.
During 2025, periods of increased volatility in equity and credit markets highlighted the potential for sudden repricing across asset classes, particularly in more liquid markets. Equity market volatility reached peak levels of approximately VIX 52%1, while rapid movements in government bond yields and widening leveraged finance spreads were observed during periods of market stress. Looking ahead, such repricing could have second-order effects on illiquid assets, including private market valuations and liquidity, particularly in periods of reduced market depth.
Given that approximately 80% of OCI’s look-through portfolio exposure is in Europe and the UK, these developments remain a relevant consideration for OCI. The portfolio remains diversified across vintages and sectors, with a focus on asset-light, technology-enabled business models, which may provide a degree of resilience in periods of macroeconomic uncertainty.
1. VIX Volatility Products | Cboe Cboe® Volatility Index; Chicago Board Options Exchange
Private market liquidity and exit environment
Liquidity and cash flow management remain a principal risk for the private equity industry. Liquidity dynamics have become more challenging as distributions have slowed and exit markets recovered only gradually from the post‑2021 slowdown. Against this backdrop, capital flows across private markets have become less predictable, increasing the risk of mismatches between fundraising, capital deployment, refinancing activity and exit realisation.
Across the industry, exit conditions have remained uneven. Distributions have continued to lag behind capital deployment, reflecting extended holding periods and a gradual but limited recovery in exit markets. Over the last three years, private equity distributions have represented approximately 12%2 of NAV across the industry, compared with historical averages of ~25%2, while DPI levels for more recent vintages remain below long-term benchmarks.
In addition, exit activity has remained skewed towards private channels. In 2024, sales to strategic corporate acquirers represented around 45–50%2 of global private equity exits by value, while sponsor-to-sponsor transactions accounted for roughly 30–35%2, following a 141%2 increase in such deals from 2023. IPOs remained a small part of the exit mix, representing only about 6%2 of global exit value. Available market evidence during 2025 suggests a broadly similar pattern, with private transactions continuing to dominate exit activity amid selective and intermittent public market windows.
Looking ahead, periods of delayed distributions may coincide with ongoing investment activity or refinancing requirements, increasing the importance of liquidity planning and commitment management. OCI continues to actively monitor commitments, cash flows and available liquidity to mitigate the potential impact of adverse timing dynamics. This includes oversight of undrawn commitments of £992 million, of which c.£300 million are not expected to be drawn, as well as available liquidity for the upcoming year of £191 million. In addition, the maturity profile of OCI’s underlying fund exposures and credit facilities is monitored on an ongoing basis to avoid concentration of refinancing and exit risk in any single period.
Regulatory and fiscal developments affecting portfolio sectors and OCI directly
Changes in fiscal and regulatory frameworks affecting specific sectors represent an emerging risk where OCI has material exposure. In the UK, where a third of OCI’s portfolio is invested, measures announced in recent budgets, including changes to taxation and employment-related costs, may influence operating cost structures and demand dynamics in certain sectors as they are implemented over time. Sector-specific measures, including those affecting the education sector, may impact affordability and customer behaviour. At year-end, the education sector represented less than 20% of OCI’s portfolio by value.
Looking ahead, the pace and manner of policy implementation, together with the ability of portfolio companies to mitigate cost pressures through pricing, operational efficiencies or investment, will be key factors influencing outcomes. These considerations are incorporated into the investment assessment and ongoing monitoring of the Oakley Funds, including through scenario analysis and review of business plans, and will continue to be monitored as regulatory and fiscal measures evolve.
Provision 34 of the AIC Corporate Governance Code introduces an enhanced requirement for the Board to monitor and at least annually review, and disclose, the effectiveness of the Company’s risk management and internal control framework, with particular focus on material controls. During 2026, the Board will continue to implement a proportionate approach to formalising and evidencing this review, including structured assessment of material controls and their operating effectiveness, ensuring that the framework remains proportionate.
OCI, together with its Adviser, continues to monitor emerging risks through regular reporting and analysis. The Risk Committee reviews developments throughout the year and considers whether emerging risks should be incorporated into OCI’s principal risk disclosures as they evolve.