Ann: Partial completion of Funds 2&3 investment, page-8

Or another way of looking at this, is that is pays approx 30% of the OBL business overheads for a year.

@MJS

That’s a sensible way of looking at it.

One thing I’ve noticed is that the calculation I made above was done on a single-deal basis, whereas Funds 2 & 3 follow a “European” waterfall; what the latter means is that, from a cash perspective, OBL starts receiving profit distributions (with an 80% share) only once external investors have received 100% of their whole capital contribution to the fund and their entire cumulative preferred return on that capital (12.5% pa in the example above). This is different from the “American” waterfall structure used in Funds 4 & 5, where the distributions occur on a deal-by-deal basis.

In slide 10 of the 29 Feb 2024 presentation (which is the most recent mention of it I can find, see picture below) it was stated that external investors continued to have priority in Funds 2 & 3 (i.e. their cumulative preferred return had not yet been fully paid out); it is not clear to me from the table, though, how far below that threshold the whole-of-fund realised return was, as of that date.



In any event, this partial completion means that we’re either 43.7mA$ closer to the threshold (if still below), or now receiving an 80% share of all profits from Funds 2 & 3 in cash (if fully above), or something in between (if it is this deal that takes us above the line). From a Fair Value perspective, I expect the difference between the realised 8.6x MOIC and the multiple the deal was previously booked at (probably something like 2.0-2.5x) to be recognised as Gross Profit at the next reporting date, with OBL taking an 80% share of it.

Hope this helps (and doesn’t make things even more confusing).