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Report & Accounts
for the year ended 31 December 2021
27 St James’s Place London SW1A 1NR
Contents
Company Highlights
Strategic Report
Chairman’s Statement
Our Purpose, Strategy and Business Model
Manager’s Report
Investment Portfolio
Principal Risks and Viability
Governance
Board of Directors
J. Rothschild Capital Management
Corporate Governance Report
Audit and Risk Committee Report
Directors’ Remuneration Report
Directors’ Report
Financial Statements
Consolidated Income Statement and Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Parent Company Balance Sheet
Consolidated Statement of Changes in Equity
Parent Company Statement of Changes in Equity
Consolidated and Parent Company Cash Flow Statement
Notes to the Financial Statements
Independent Auditor’s Report
Other Information
Investment Portfolio Reconciliation
Glossary and Alternative Performance Measures
Historical Information and Financial Calendar
Investor Information
Directory
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3
6
11
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29
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57
58
59
60
61
86
97
98
100
101
102
Notes
Nothing in this Annual Report & Accounts should be construed as advice to buy or sell a particular investment.
RIT Capital Partners plc (RIT or the Company) is a UK public listed company, and as such complies with the rules of the UK
Listing Authority. The Company conducts its affairs so as to qualify for approval as an investment trust, and has been accepted
as an approved investment trust by HM Revenue & Customs (HMRC), subject to continuing to meet the eligibility conditions.
As an investment trust, it is not authorised or regulated by the Financial Conduct Authority (FCA). RIT is classified as an
Alternative Investment Fund (AIF) in accordance with the UK Alternative Investment Fund Managers Regulations (AIFMR).
The investment manager, administrator, and company secretary (the Manager) is J. Rothschild Capital Management Limited
(JRCM), a subsidiary of RIT. JRCM is authorised and regulated by the FCA and is classified as an Alternative Investment Fund
Manager (AIFM) in accordance with AIFMR.
Warning to shareholders
From time to time investment companies and their shareholders can be the subject of investment scams. The perpetrators
obtain lists of shareholders and make unsolicited phone calls or send correspondence concerning investment matters. They
may offer to sell worthless or high risk shares or, in the case of your RIT Capital Partners plc stock, may offer to buy your
current shareholdings at an unrealistic price. They will often also inform you of untrue scenarios to make you think that you
need to sell your shares or to justify an offer that seems too good to be true.
To find out more about share fraud or ‘boiler room’ scams please visit the website of the Financial Conduct Authority,
https://www.fca.org.uk/scamsmart.
Please note that you cannot buy or sell the shares of RIT Capital Partners plc directly with us, and we will never contact you
with offers to buy or sell shares, nor will our registrar, Computershare. In the event that you are contacted we strongly
recommend that you review the FCA website above and follow the necessary steps. Please do report any company making
unsolicited calls to the FCA using the form that can be found via the above link.
Company Highlights
Corporate Objective
To deliver long-term capital growth, while preserving
shareholders’ capital; to invest without the constraints
of a formal benchmark, but to deliver for shareholders
increases in capital value in excess of the relevant indices
over time.
Investment Policy
To invest in a widely diversified, international portfolio
across a range of asset classes, both quoted and
unquoted; to allocate part of the portfolio to exceptional
managers in order to ensure access to the best external
talent available.
Performance for the year
NAV per share total return*
Share price total return*
RPI plus 3.0%
MSCI All Country World Index
Key data+
NAV per share
Share price
Premium/(discount)
Net assets
Gearing*
Average net quoted equity exposure
Ongoing charges figure for the year*
First interim dividend (April)
Second interim dividend (October)
Total dividend in year
+ 31 December unless otherwise stated.
Performance history
NAV per share total return*
Share price total return*
RPI plus 3.0% per annum
MSCI All Country World Index (ACWI)
2021
23.6%
35.1%
10.5%
20.0%
Change
21.9%
33.2%
8.3% pts
22.3%
1.7% pts
0% pts
0.06% pts
0.7%
0.7%
0.7%
10 Years
191.4%
171.6%
76.9%
232.8%
2021
2,794 pence
2,750 pence
-1.6%
£4,390 million
6.1%
43%
0.72%
17.625 pence
17.625 pence
35.250 pence
3 Years
61.1%
51.4%
21.2%
66.2%
2020
2,292 pence
2,065 pence
-9.9%
£3,590 million
4.4%
43%
0.66%
17.5 pence
17.5 pence
35.0 pence
5 Years
75.8%
58.6%
37.2%
80.2%
Performance since inception
4,000%
RIT NAV per share total return
ACWI
RPI plus 3.0%
3,500%
3,000%
2,500%
2,000%
1,500%
1,000%
500%
0%
1
9
8
8
1
9
9
1
1
9
9
4
1
9
9
7
2
0
0
0
2
0
0
3
2
0
0
6
2
0
0
9
2
0
1
2
2
0
1
5
2
0
1
8
2
0
2
1
A description of the terms used above and in the Strategic Report is set out in the Glossary and Alternative Performance Measures (APMs)
section on pages 98 and 99. The Group’s designated APMs, denoted above with a *, are the NAV per share total return, share price total return,
gearing and the ongoing charges figure.
RIT Capital Partners plc Report and Accounts December 2021 1
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Strategic Report
RIT Capital Partners plc
Chairman’s Statement
Sir James Leigh-Pemberton
Performance
After another eventful year, I am pleased to report very
healthy performance and strong shareholder returns.
Our net asset value per share ended the year at 2,794
pence, representing a total return for the year (including
dividends) of 23.6%. At the same time our share
price closed at 2,750 pence, providing a total return to
shareholders of 35.1%.
In spite of the Delta and Omicron variants, energy price
rises and wider inflation concerns, developed equity
markets posted good gains in 2021. Once again, however,
the headline performance of the indices masked a
difficult environment for global asset managers, with a
widespread dispersion of returns among the components
of the indices, and more broadly across regions, sectors
and asset classes. Notably emerging market equities saw
more mixed performance, with regulatory tightening in
China weighing on markets there. Government bonds,
one of the key components of the traditional ‘balanced
portfolio’, also struggled in 2021, with US and UK
bonds both posting negative returns for the first time
since 2013.
Your Company’s portfolio is deliberately exposed to
a range of asset classes, with a view to protecting
shareholders’ capital from the worst of market declines
while capturing a healthy share of the performance
in rising markets. I am therefore delighted with our
portfolio’s return in 2021. A 23.6% NAV return is above
our typical participation in short-term market rises,
outperforming the broad equity index we reference
(the MSCI ACWI), which returned 20.0%. We also
outperformed our inflation measure (RPI+3.0%), which
totalled 10.5%.
This performance has been achieved with all the core
categories contributing. Among our well-established
themes, the stand-out contributor was the exposure to
innovative companies, which we have chosen to express
through our private investment portfolio. Valuations in
unlisted technology stocks rose strongly during the
year, with multiples expanding and funding readily
available, even at demanding valuations, to finance these
companies’ continued growth. On the other hand, our
China and biotech exposures, predominantly within our
quoted equity portfolio, had a more difficult year, after
a strong 2020. The quoted equity return was helped by
Iam pleased to report very healthy
performance and strong shareholder
returns ... a NAV per share total return of
23.6% and a share price total return of 35.1%.
an increased focus on value equities, which benefited
from the reflationary trend seen in markets. Our absolute
return and credit performed well, delivering steady
returns with limited correlation to stock markets. The NAV
was also reasonably well protected from the meaningful
rise in trade-weighted sterling, by focusing our currency
mix almost exclusively on the strong US dollar and
sterling, and avoiding exposure to the depreciating euro
and yen.
In the course of the year, your Board has continued to
keep our corporate objective and the strategy to achieve it
under review. We believe that one of RIT’s differentiating
features is that, unlike many asset managers with a
diversified multi-asset portfolio of investments, we have
only one ‘product’ – RIT shares. This provides us with
a purity of focus in the creation and execution of our
strategy. JRCM is not incentivised to engage in ‘asset
gathering’; rather the team is intent on NAV performance
above all else, and delivering this growth over the long
term, while protecting the value of shareholders’ capital.
This approach is simple to express, but not easy to
achieve consistently over the long term.
The approach we therefore follow has to be a
sophisticated one. We believe that the techniques used
by JRCM to build and manage a portfolio which aims
to deliver the corporate objective in a range of market
conditions, have a proven track record of success.
This portfolio composition, with its diversified themes,
combined with global access to investment opportunities
and managers (many closed to new investment), is at
the heart of our strategy and is what makes RIT different
from many multi-asset managers. In recent years, strong
contributions from, at different times, quoted equities
(stocks and funds), currency and private investments,
have illustrated some of the benefits of our diversified
approach. Our Manager blends fundamental discipline at
the individual investment level, with a top-down approach,
RIT Capital Partners plc Report and Accounts December 2021 3
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Chairman’s Statement
while keeping a strong focus on risk management
including using various hedging strategies. For example,
the relatively high weighting to technology within our
private book was balanced with a conscious de-emphasis
of such exposure in our quoted portfolio. All this means
that RIT is very different to a conventional fund.
The permanent structure of an investment trust is also a
privileged feature, which we proactively aim to capitalise
upon for the benefit of shareholders. It allows us to
take full advantage of our flexible investment policy, by
targeting opportunities across the investment landscape,
without the pressure of meeting investor redemptions
or being forced to sell investments for external reasons
when we would rather keep them. This enables us,
for example, to allocate a reasonable proportion of the
portfolio to access attractive investments through illiquid
private markets. Indeed, these have been a hallmark of
our approach since RIT’s inception, and a key contributor
to our performance record; this was certainly so in 2021,
when private investments were the best performing of
our main asset categories.
Share capital and dividend
We continued our approach of seeking to minimise
volatility for shareholders in buying back shares as we
approached a high single-digit discount. Over the year, we
bought back some 59,000 shares at a cost of £1.4 million
and by the year end, we held 175,000 shares in treasury.
Our corporate objective is to deliver long-term capital
growth. However, we recognise the value to shareholders
of a modest income yield; our policy remains to maintain
or increase the dividend, subject to the overriding capital
preservation objective. We paid a total dividend of 35.25
pence per share during 2021 and intend to increase
the dividend again in 2022 to 37 pence per share. This
represents a 5.0% increase, reflecting inflation as well as
strong performance in 2021. The dividend will be paid as
normal in equal instalments in April and October, funded
from our significant reserves.
Governance
I highlighted in August our support for greater diversity
on boards, and we are committed to following the
recommendations of the Hampton-Alexander Review
in terms of gender diversity and the Parker Review in
terms of ethnicity. At the year end, your Board comprised
eight Directors, of which three were female. Our
searches during 2022 will be focused on ensuring future
appointments are aligned with these recommendations.
In a challenging year for many, it was perhaps
understandable, though with regret, that we said
goodbye to two non-executive Directors. Both Jeremy
4 Report and Accounts December 2021 RIT Capital Partners plc
Sillem and Jonathan Sorrell stepped down from the Board
on 4 November as a result of the increased demands
of their executive roles. I would like to, again, thank
Jeremy and Jonathan for their significant contributions to
your Company. Amy Stirling has also indicated that she
will not be standing for re-election at the forthcoming
AGM having taken on a new role as CFO of Hargreaves
Lansdown plc from 21 February 2022. Amy has been
an outstanding chair of our Audit & Risk Committee for
almost four years and a valued colleague throughout
her seven-year tenure on our Board. We wish her every
success in her new role. Mike Power will take on the role
of Chair of the Audit & Risk Committee until the end of
2022. We expect to appoint a successor to Amy by the
second quarter of 2022, allowing time for a full handover
before Mike steps down from the Board in early 2023.
Over the year, your Board invested a significant amount
of time in working with our manager to enhance our ESG
capabilities and ensure that appropriate policies are in
place. This led to the publication of JRCM’s Responsible
Investment Framework & Policy during the year, a copy of
which is available on your Company’s website. This policy
explains how we have sought to align our commitment
to responsible investing with our long-standing corporate
objective, taking into consideration the way we invest
and the nature of our investment portfolio. It builds on
our Manager becoming a signatory to the UN Principles
of Responsible Investment (UN PRI) at the beginning
of 2021, and we will continue to develop and refine our
approach over time.
Once again, I must thank all our employees and my Board
colleagues for their commitment and sustained efforts
throughout a year which has been no less challenging
than 2020. The rapidly changing dynamics of the Covid
pandemic and associated government response created
ongoing uncertainty, in addition to the continuing
challenges of remote working, home schooling and
isolation which colleagues and their families have had
to face during the year. Thanks to the commitment,
dedication and flexibility of the team, our culture of
performance, collaboration and mutual support remains
in good health. We are grateful too to our business and
trading counterparties, our advisors and all our service
providers for the way they coped with similar challenges
and for their continued co-operation. It is the combined
effort of colleagues and suppliers which generates the
investment performance that our shareholders enjoy.
Chairman’s Statement
Outlook
As I write this in early 2022, after another successive
year of positive returns for world equity markets with
the S&P 500 having more than doubled since its March
2020 lows, it feels like a good time to draw breath. The
latter part of 2021 and the early weeks of 2022 have
seen the risks of sustained and sharply higher rates of
inflation move central banks to a more hawkish stance
in relation to future interest rate rises and tapering asset
purchases. These moves suggest that the extraordinary
underpins for long-term asset prices of recent years
are shifting. If we are now seeing the beginning of the
end of excessively ‘easy’ monetary conditions, we can
expect a broad range of markets and asset classes to be
affected. These may include the hitherto buoyant funding
market for high growth unlisted companies and ‘frothy’
valuations in certain market areas, along with other asset
classes whose high valuations have been justified by
continued low discount rates. In addition profitability is
likely to be affected by rising costs of labour, energy and
other raw materials. This set of circumstances presents
a challenging environment, but also opportunities, for
managers of multi-asset portfolios.
Our response to these concerns will be familiar to
shareholders. We will continue to be cautious in our
approach to managing the many market risks facing
us and the composition of the portfolio will reflect the
priority we place on seeking to protect shareholders’
capital from the full impact of market drawdowns. With
the advantage of permanent capital, we are not under
pressure to make investments, and our manager regularly
declines investment opportunities which, despite
promising good returns, do not offer the requisite margins
of safety. With turbulent times ahead, this diversified and
disciplined approach will be essential to fulfil our objective
of long-term capital growth while keeping a strong eye on
capital preservation.
Sir James Leigh-Pemberton
Chairman
RIT Capital Partners plc Report and Accounts December 2021 5
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
Purpose and strategic aims
We consider our purpose and strategic aims to be clearly
set out in our Corporate Objective:
“to deliver long-term capital growth, while preserving
shareholders’ capital; to invest without the constraints
of a formal benchmark, but to deliver for shareholders
increases in capital value in excess of the relevant indices
over time.”
This has reflected our aims since Lord Jacob Rothschild
first led what was then called the Rothschild Investment
Trust in the 1970s. Our purpose as an investment
company is therefore to provide diversified portfolio
management on behalf of our shareholders to achieve
this objective.
However, as we differ from many conventional
investment trusts who always aim to be fully invested in
quoted equities, this section provides further clarification
of what we are trying to achieve for shareholders over
time.
The most important objective is long-term capital growth
while preserving shareholders’ capital. The essence
of our investment approach is to protect and enhance
shareholders’ wealth.
There may be times when we will deliberately place
protection of shareholders’ funds ahead of growth but
we believe that active management of equity exposure,
combined with early identification of opportunities and
themes, while investing across multiple asset classes, is
more likely to lead to long-term outperformance.
We would seek therefore to display healthy participation
in up markets, and reasonable protection in down
markets. Over time, this should allow us to compound
ahead of markets throughout the cycles. Indeed, since
your Company’s listing in 1988, we have participated in
74% of the monthly market increases but only 38% of
the market declines. This has resulted in our NAV per
share total return compounding at 11.5% per annum, a
meaningful outperformance of global equity markets.
Over the same period the total return to shareholders
was 12.4% per annum.
Investment approach
The strategic aims are expressed in more practical terms
in our Investment Policy:
“to invest in a widely diversified, international portfolio
across a range of asset classes, both quoted and
unquoted; to allocate part of the portfolio to exceptional
managers in order to ensure access to the best external
talent available.”
This policy guides our Manager and subsidiary,
J. Rothschild Capital Management Limited (JRCM) as it
manages your portfolio. So, while we have a core equity
6 Report and Accounts December 2021 RIT Capital Partners plc
We would seek therefore to display
healthy participation in up markets, and
reasonable protection in down markets. Over
time, this should allow us to compound ahead
of markets throughout the cycles. Indeed,
since your Company’s listing in 1988, we have
participated in 74% of the monthly market
increases but only 38% of the market declines.
bias, we typically invest your portfolio across multiple
asset classes, geographies, industries and currencies.
This has been the basis of our approach over many years
– combining thematic investing with individual securities,
and private investments with public stocks. The long-term
success of your Company has been the result of active
management of a distinctive blend of stocks, private
investments, equity funds, real assets, and absolute
return and credit, all overlaid with currency positioning
and macro exposure management.
We believe the extent of our global reach and unique
network allows us to maximise our ability to deploy
capital effectively. Our Manager’s in-house investment
team works closely with core external managers,
enabling us to invest in funds which may be closed
to new investors, and cannot be accessed by a retail
investor. In addition, this strong network provides access
to intellectual capital and co-investment opportunities.
This aspect of our model is key to our ability to identify
and deliver value from differing sectors, markets and
assets. And while access to such specialist managers
comes at a cost, this is an important part of the
investment decision and, if warranted, is one that we are
comfortable paying.
Above all, our approach is long term. The permanent
capital structure of an investment trust compared to
open-ended funds, means we do not suffer from liquidity-
driven pressures to fund redemptions. We can therefore
hold our investments in both public and private markets
over an extended period and choose to realise them at
the optimal time.
Another key facet of the investment approach is risk
management. The Board establishes and oversees
the risk appetite through regular monitoring of asset
allocation and security limits. These are intended to allow
JRCM to efficiently and effectively manage the portfolio
in line with the Corporate Objective. The Manager has
developed a sophisticated risk management approach, on
which it reports regularly to the Board. This incorporates
quantitative and qualitative measures, as well as the
careful use of hedging. The risk management tools assist
in the construction of a portfolio designed to provide
diversified sources of return and to monitor closely
Our Purpose, Strategy and Business Model
the performance of individual assets and the portfolio
composition. Further information on risk management is
set out on pages 19 to 24.
In summary, our flexible and distinctive model, with the
freedom to utilise multiple asset classes and different
investment structures, allows our Manager to deploy
capital and manage risks as effectively as possible.
Further information in relation to the investment approach
as well as portfolio attribution and returns is set out in the
Manager’s Report on pages 11 to 15.
Business model, culture and values
RIT Capital Partners plc is a listed investment company,
approved by HM Revenue and Customs (HMRC) as an
investment trust. It is a UK Alternative Investment Fund
(AIF) in accordance with UK legislation effective from
1 January 2021 which replicated the European Union’s
Alternative Investment Fund Managers Directive (AIFMD).
Investment management, as well as administration
and company secretarial, is delegated under a formal
agreement to JRCM, a subsidiary of the Company. JRCM
is separately regulated by the Financial Conduct Authority
(FCA) as the UK Alternative Investment Fund Manager
(AIFM) under the same UK rules. JRCM is governed by
a separate board of directors – its Executive Committee.
This Committee is led by Francesco Goedhuis as
Chairman and Chief Executive Officer, and is responsible
for day-to-day operations (see page 28).
Board of
Directors
Alternative
Investment
Fund
RIT Capital Partners
plc
Investment management,
administration and company
secretarial
Executive
Committee
Alternative
Investment
Fund Manager
J. Rothschild Capital
Management Limited
In addition, the Manager is also responsible for our
subsidiary, Spencer House Limited (SHL). This company
provides premises management for Spencer House and
our other investment properties in St. James’s. It also
operates an events business.
I am responsible for the leadership of the Board, which
is ultimately tasked with ensuring that we both meet
our Corporate Objective, and maintain high standards of
corporate governance.
The main focus of the Board is on ensuring that the
investment approach is suitable for achieving our
In summary, our flexible and distinctive
model, with the freedom to utilise multiple
asset classes and different investment
structures, allows our Manager to deploy
capital and manage risks as effectively as
possible.
Corporate Objective, and on monitoring the performance
of the Manager. In order to do this, we receive regular
and detailed reports covering investment performance,
risk, finance and operational matters.
The employees of our Manager and SHL are critical to our
ability to meet all of the objectives of the Company. A key
part of the monitoring of the Group is ensuring that the
Manager is appropriately incentivised to deliver sustained,
risk-adjusted returns and is able to attract, retain and
develop a top quality team which operates in accordance
with our core values, within a culture of high performance.
Our core values of respect, dignity and integrity are
evidenced by the Group’s five business principles
of collaboration, enterprise, efficiency, effective
communication and professional ethics, which are
regularly communicated and reinforced through the
Group’s recruitment and appraisal processes. JRCM
monitors the health of its culture by assessing regularly
how well these principles are being applied, and the
Board receives regular reports on this topic.
The Group has a clear and proactive approach to regular
employee engagement, which was particularly important
during remote working and the many other challenges of
the last two years. The Corporate Governance Report on
pages 29 to 41 provides more detail of these interactions.
We are firm believers in the benefits that cognitive
diversity as well as diversity more generally, brings to
decision-making, and seek to ensure this is reflected in
our recruitment processes, both at Board level and within
our subsidiaries. At the year end the Board comprised
eight Directors, of which five were men and three women.
Within our subsidiaries, the employee base comprised
43 men and 15 women.
Corporate governance
The Directors are responsible for compliance with
applicable rules, regulations and guidance in relation to
governance, in particular taking into account the matters
set out in Section 172(1) of the Companies Act 2006,
which guides our approach to strategy and decision
making (see pages 33, 34 and 53). The Board recognises
that its actions have lasting impacts and consequences
for the future of the Company, its shareholders and
RIT Capital Partners plc Report and Accounts December 2021 7
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
other stakeholders, and approaches its responsibilities
accordingly.
The Board has a responsibility for ensuring that there
are strong and healthy ties with all of our stakeholders,
making sure that we consider their interests and
acknowledge that the Group’s interaction with them is
fundamental to the long-term success of the business.
The Directors receive regular feedback and reports from
the Manager on its investor relations activity, as well
as from brokers and analysts, and our own shareholder
interactions, to ensure that shareholders’ views are well
understood by the Board.
When it comes to our Corporate Objective, shareholders
understandably focus on our investment performance.
This informs the Board’s desire to seek healthy, risk-
adjusted returns over the long term and through the
cycles, with careful attention to capital preservation, and
mindful of the Company’s reputation as a responsible
fiduciary of shareholder capital. In assessing the right
strategy to achieve these aims, the Board considers
the ongoing suitability of the Investment Policy and, in
particular, the approach taken by the Manager to execute
on the policy.
Other areas considered by the Board where shareholder
views were taken into account ranged from the 2022
dividend to Board diversity and its succession planning,
where future appointments to the Board will be aligned
to the recommendations on gender and ethnic diversity
set out in the Hampton-Alexander and Parker Reviews
respectively. In addition, shareholder expectations
on environmental, social and governance (ESG) and
sustainability will continue to help inform our approach to
this area.
The Group has relationships with a number of suppliers
and service providers which play an important role
in enabling us to operate our business efficiently.
The Groups’ overarching policy with respect to these
relationships is that they should be managed so that
they are both sustainable and mutually beneficial over
the medium term, and deliver value for money for our
shareholders (see page 34).
ESG and sustainability
The Board believes that consideration of ESG factors is
important for the delivery of sustainable financial returns
from our portfolio, and for the protection of the value
of our shareholders’ capital. In respect of our internal
operations, we aim to be good corporate citizens, to
apply robust governance and minimise our environmental
impact. Over the past twelve months, your Board has
devoted an extensive period of time to enhancing our
ESG capabilities and ensuring that appropriate policies
are in place. Following on from our Manager becoming a
signatory of the United Nations Principles for Responsible
Investment, we subsequently published JRCM’s
Responsible Investment Framework & Policy. This was
approved by the Board in October 2021 and disclosed
to shareholders via the Company website. This policy
ensures that ESG factors are firmly integrated across
our investment management and internal operations. We
believe that this policy aligns the Corporate Objective
with a commitment to principles of responsible
investment. ESG factors form part of the due diligence
undertaken by JRCM prior to selecting all investments.
Within our own activities, we have always striven to act
as good corporate citizens, to apply robust governance
and to minimise our environmental impact. Further
information is set out on pages 33, 34, 42, 51 and 52.
8 Report and Accounts December 2021 RIT Capital Partners plc
Our Purpose, Strategy and Business Model
Measuring performance and KPIs
While we believe our success can only truly be assessed
over the long term, we also recognise that providing
shareholders with a comparator against which to
measure our performance over shorter periods is helpful.
The strategic aims highlighted on this and earlier pages,
reflect the desire to produce real capital growth with
capital preservation and to exceed markets over time.
These are reflected in the following targets or key
performance indicators (KPIs):
1.
2.
3.
Absolute outperformance: NAV total return in excess
of RPI plus 3.0% per annum;
Relative outperformance: NAV total return in excess
of the MSCI All Country World Index (ACWI); and
Share price total return or total shareholder return
(TSR).
The first two of these relate to our Manager’s investment
performance. RPI plus 3.0% per annum represents the
desire to produce healthy absolute returns, with a meaningful
premium above inflation. While this was unchanged during
2021, with RPI being phased out and no longer viewed as an
accurate measure of inflation, from 1 January this year, we
have amended our inflation measure to the one now used by
the Government - namely the Consumer Price Index or CPI.
Our KPI will therefore become CPI plus 3.0% per annum.
The second reflects our unconstrained global investment
approach and the desire to outperform markets over the
long term. Consistent with many investment companies, we
currently use the ACWI, which we believe is an appropriate
comparator for our global, unconstrained approach although
it does not drive our Manager’s portfolio construction. More
specifically, we use a blended index consisting of 50% of
the ACWI measured in sterling (and exposed to currency
risk) and 50% of the sterling-hedged ACWI.
While JRCM is tasked with managing the portfolio
to deliver a NAV return, ultimately, the return to our
shareholders is through share price growth and dividends.
We therefore also consider the TSR as our third KPI.
Incentive structure
Our approach to remuneration incorporates the Directors’
Remuneration Policy as well as specific structures within
JRCM and SHL designed to attract, motivate and retain
the high-quality individuals we need to deliver our long-
term strategic aims and sustainable success.
Our Corporate Objective...informs the
Board’s desire to seek healthy, risk-
adjusted returns over the long term and
through the cycles, with careful attention
to capital preservation, and mindful of
the Company’s reputation as a responsible
fiduciary of shareholder capital.
The remuneration approach is designed to align with, and
reinforce, these strategic aims.
The Group operates an Annual Incentive Scheme (AIS) for
employees as well as longer-term share-based awards.
The cap for total payments under the AIS is 0.75% of
net assets. This approach is designed to measure and
reward the Group’s performance, and seek to provide an
appropriate balance between shorter-term awards and
longer-term incentives, as well as the need for robust risk
management.
The AIS rewards investment outperformance as
measured against two KPIs: RPI plus 3.0% and the
ACWI. It also rewards wider achievements linked not to
the NAV return, but to the Group’s business principles
and culture. The scheme is measured annually and
includes longer-term features such as a three-year
absolute ‘high water mark’ as well as significant deferral
into the Company’s shares, which vest over three years.
The second main aspect of the remuneration approach is
a long-term incentive plan (LTIP). Following a review by
the Remuneration Committee, and with external advice,
restricted share units (RSUs) are now the awards granted
under the LTIP, which we believe will further reinforce the
alignment with shareholders.
Further details of remuneration are provided in the
Directors’ Remuneration Report on pages 46 to 49.
Covid-19
The Covid-19 pandemic is still impacting our lives and we
continue to support both the well-being of our employees
and also maintain strong lines of communication with
our advisors, counterparties and suppliers to ensure
operational resilience during this time.
RIT Capital Partners plc Report and Accounts December 2021 9
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
Shareholder communication and AGM
While this report forms a core part of the annual
communication to shareholders, there are many
additional ways to remain informed. Reflecting the nature
of our portfolio, including the allocations to external
managers (many of whom report monthly performance),
we publish a monthly NAV as soon as reasonably
practicable following the month end. Shareholders are
encouraged to visit our website, www.ritcap.com, which
provides regular updates of performance and exposure
including our monthly factsheets. Having now been your
Chairman for over two years, I sincerely hope that we
will be able to have our first, in-person, AGM and I look
forward to meeting as many of you as possible there on
4 May, subject to any Covid-19 restrictions being in place
at that time. As normal, there will also be an opportunity
on that occasion to hear directly from our Manager.
I would like to thank shareholders for their continuing loyalty
and support. These are not things we take for granted, and I
hope we will continue to justify them in the years to come.
Sir James Leigh-Pemberton
Chairman
10 Report and Accounts December 2021 RIT Capital Partners plc
Manager’s Report
Manager’s Report
JRCM
•
•
In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
The absolute return and credit book continued to
Overview and performance highlights
provide steady and largely uncorrelated returns, in
Amidst soaring energy prices, disruption to global supply
particular from distressed debt managers; and
chains, historically high inflation, an increasing focus on
interest rate rises, ongoing geopolitical tensions, and
an ever changing global pandemic, developed market
equity indices finished the year apparently immune to
any concerns. An unusual combination of US mega-cap
In terms of portfolio allocation, our average net quoted
technology stocks alongside previously ‘out of favour’
equity exposure was 46%, a slight increase over 2020.
cyclicals, led developed market gains. Emerging markets
The exposure continues to be largely dominated by our
fared significantly worse, largely driven by China’s
structural themes and in particular Asian equities where
regulatory interventions.
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
Inflation driven pressure on central banks continued to
was allocated towards what we characterise as value
build and in December, after years at near zero, the Bank
or cyclical stocks, targeting the gradual re-opening of
of England defied most expectations to raise interest
economies as the vaccine efficacy and rollout continued.
rates to 0.25%, with analysts expecting the Federal
Over the first six months, we increased our allocation
Reserve to follow suit in 2022. As a result, US and UK
to quality defensive names such as Unilever and Reckitt
government bonds suffered their first annual losses
Benckiser, which we considered were disproportionately
since 2013.
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
In the currency markets, with the Federal Reserve and
quality growth and companies benefiting from energy
Bank of England both shifting gears from stimulating the
transition trends.
economy to curbing rising inflation, sterling and the dollar
saw decent gains, whereas the euro and yen saw broad
declines.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
As a global asset manager, and with a flexible policy
currencies) as well as individual stocks, funds or themes,
allowing us to deploy capital across a range of asset
where we might decide to moderate the exposure
types, this was a challenging background. According to
without having to sell the underlying positions. To help
research published by Goldman Sachs, more than 80%
protect the portfolio in downturns, we may also deploy
of mutual funds underperformed over the year. We are
various types of ‘tail hedges’ designed to reduce the
therefore pleased with the performance over 2021, with
impact of such negative volatility.
a NAV total return of 23.6% outperforming both of our
It was a strong period for our private investments.
reference hurdles: our ‘inflation plus’ hurdle (RPI plus
The successful IPO of Coupang, the South Korean
3.0%) which measured 10.5%, and our fully-invested
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Asset category
Quoted equity
Private investments
Absolute return and credit
Real assets
Government bonds and rates
Currency
Total investments
Liquidity, borrowings and other
Total
Average net quoted equity exposure1
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
Asset allocation and portfolio contribution
•
The private funds book continued to benefit from strong
equity index (ACWI) which returned 20.0%. This year
performance, with many of our core partners’ funds
marked the tenth consecutive year of positive returns for
seeing healthy uplifts, helped by the portfolio tilt towards
the portfolio.
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
Overall, the key drivers of performance for the year were:
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
exceptional performance from our private
investments, including Coupang’s IPO and more
widespread gains across investments that focused
A key feature of our differentiated approach to portfolio
on the digital transition;
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
absolute return and credit delivered healthy returns
performance from those managers focusing on
with low correlation to equity markets; distressed credit
distressed debt and special situations. Our merger
managers in particular performed well;
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
positive contribution from our quoted equity book,
have adopted a more cautious approach to direct credit
though the overall return was impacted by two of
investments.
our key areas of focus, China and biotech, which
underperformed in 2021 after a strong 2020; and
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
active currency management provided some shelter
the US dollar as again having the potential to provide a safe
in the face of stronger trade-weighted sterling.
haven in times of stress, we increased our allocation here.
•
•
•
In terms of asset allocation, the levels of net quoted
While the results so far this year, and over recent years,
equity exposure remained moderate, averaging 43%
are pleasing, we nevertheless remain vigilant, and will
for the year while the exposure to private investments
not hesitate to adjust the portfolio should the need arise.
has increased to 36.5%, mainly through strong organic
Experience suggests that when there is a widespread
performance. Within absolute return and credit, we took
consensus, investors can often get trapped in a false
the opportunity to decrease some of our corporate credit
sense of security and let their guard down. As we emerge
exposure following healthy gains. We actively managed
from the most serious public health crisis in modern
our sterling levels over the year, increasing our exposure
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
to the US dollar after sterling’s rise in the first quarter,
in anticipation of a more hawkish Federal Reserve, then
With a strong team around us, we are confident that our
increasing our sterling exposure in the latter part of the
dynamic asset allocation and strong security selection
year – providing some protection from its increase.
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
31 December 2021
% NAV
42.6%
36.5%
17.7%
1.5%
0.0%
0.5%
98.8%
1.2%
100.0%
43%
2021
Contribution %
1.2%1
22.4%
2.1%
Francesco Goedhuis
(0.1%)
Chairman and Chief
0.3%
Executive Officer
(0.8%)2
25.1%
(1.5%)3
23.6%
31 December 2020
2020
% NAV
Contribution %
6.4%1
48.4%
25.6%
9.8%
22.5%
2.5%
Ron Tabbouche
2.0%
0.5%
Chief Investment Officer
(0.1%)
0.0%
(0.6%)2
1.2%
99.7%
18.5%
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
(2.1%)3
0.3%
100.0%
16.4%
43%
1 The quoted equity contribution reflects the profits from the net quoted equity exposure held during the period as well as the costs of portfolio
hedges. The exposure can differ from the % NAV as the former reflects notional exposure through derivatives as well as estimated adjustments
for derivatives and/or liquidity held by managers.
2 Currency exposure is managed centrally on an overlay basis, with the translation impact and the results of the currency hedging and overlay
activity included in this category’s contribution.
3 This category’s contribution includes interest, mark-to-market movements in the fixed interest notes and expenses
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
RIT Capital Partners plc Report and Accounts December 2021 11
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Manager’s Report
Manager’s Report
JRCM
•
The absolute return and credit book continued to
Quoted equity
provide steady and largely uncorrelated returns, in
This category includes directly-held stocks, long-only
particular from distressed debt managers; and
funds, equity hedge funds and our equity exposure
management or hedging positions.
In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
The quoted equity portfolio contributed 1.2% to the overall
absolute terms.
NAV return. This performance reflects a number of factors:
•
•
•
•
•
•
In terms of portfolio allocation, our average net quoted
a relatively, and deliberately, low exposure to
equity exposure was 46%, a slight increase over 2020.
the high-performing technology sector, given its
The exposure continues to be largely dominated by our
prevalence within private investments;
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
China and biotech, two of our structural themes
excess returns. Just under a quarter of the quoted book
which represent approximately 40% of the quoted
was allocated towards what we characterise as value
equity book, both struggled in 2021;
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Exposure to value stocks (such as via Morant Wright)
Over the first six months, we increased our allocation
proved beneficial notwithstanding such stocks
to quality defensive names such as Unilever and Reckitt
exhibited relatively high levels of volatility throughout
Benckiser, which we considered were disproportionately
the year;
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
Portfolio and position hedging was a key part of our
quality growth and companies benefiting from energy
exposure and risk management activity; and
transition trends.
Quality stocks (such as Alphabet and Keurig
A core feature of our approach to portfolio construction
Dr Pepper), defined by strong balance sheets and
is the use of hedging. Here we focus both on macro
the ability to generate superior and stable profits,
positions (such as broad equity market exposures or
provided healthy returns.
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
Quoted equity portfolio by category
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
Hedge funds, 27%
It was a strong period for our private investments.
Long-only funds, 48%
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Stocks, 25%
Note: This chart includes the notional exposure from single stocks
held via equity swaps and excludes portfolio hedges.
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
Following a strong performance in recent years, 2021 was
largest healthcare digital record platform in the US. We
a difficult year for our China theme. The headwinds were
also invested £50 million in Webull and £29 million in
largely due to the well-publicised regulatory tightening
Robinhood, two financial technology platforms disrupting
across several sectors. While none of our managers
the traditional retail trading ecosystem. As part of a
were fully immune, some found solace in rotating
broad strategy seeking targeted exposure to disruptive
towards companies that were aligned with the central
technologies, we made smaller investments totalling
government’s policy objectives, including for example
some £54 million, in promising companies.
electric vehicles and alternative energy.
Biotech also struggled following a strong 2020, which had
attracted significant capital to the sector. An oversupply of
IPOs, coupled with regulatory uncertainty from a change
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
12 Report and Accounts December 2021 RIT Capital Partners plc
The private funds book continued to benefit from strong
in the US administration, led to investors becoming more
performance, with many of our core partners’ funds
defensive and shifting towards more established names.
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
Value stocks had a turbulent but ultimately positive
the valuation lag for this industry means the majority
year, benefitting from the pent-up demand from global
of our funds are included at their 31 March valuations.
economies ‘re-opening’. Conversely, the emergence of
Since the start of the year, we have made £173 million of
new Covid-19 variants added pressure and volatility to
commitments to new funds.
valuations. Overall our Japanese exposure reacted well
to this environment, and we also benefited from funds
A key feature of our differentiated approach to portfolio
exposed to the positive tailwinds from the sustainable
diversification is the absolute return and credit book.
energy transition.
This saw continued steady returns, with the strongest
performance from those managers focusing on
During the year several direct private investments were
distressed debt and special situations. Our merger
transferred to quoted equity following the successful
arbitrage funds also delivered pleasing returns. With
IPOs of the underlying companies – the largest of
credit spreads tightening back to pre-pandemic levels, we
which was Coupang, the South Korean e-commerce
have adopted a more cautious approach to direct credit
business. Since our initial investment, these positions
investments.
have performed strongly, though some have experienced
We continue to hold gold as a portfolio diversifier,
pressure since listing. Consistent with our long-standing
especially in a low interest rate environment and, viewing
risk management approach, where these positions
the US dollar as again having the potential to provide a safe
were not capable of being sold, and we considered it
haven in times of stress, we increased our allocation here.
appropriate, we deployed hedges which helped mitigate
much of the subsequent declines.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
Over the year we made two significant new fund
not hesitate to adjust the portfolio should the need arise.
investments to 3D Opportunity (a Japanese equity
Experience suggests that when there is a widespread
hedge fund) and EcoR1 (a biotech long-short hedge
consensus, investors can often get trapped in a false
fund). Conversely, we chose to redeem our Indian and
sense of security and let their guard down. As we emerge
LATAM funds.
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
In terms of geographical allocation, our quoted equity
is not the time to relax. And rest assured that we will not.
book continues to retain a meaningful exposure to China
and Asia more generally.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
Quoted equity portfolio by geography
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
US, 36%
Asia, 32%
Europe, 13%
Japan, 14%
Francesco Goedhuis
Chairman and Chief
Executive Officer
CEEMEA, 4%
Ron Tabbouche
Chief Investment Officer
LATAM, 1%
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
Note: CEEMEA denotes Central and Eastern Europe, Middle East
and Africa. LATAM denotes Latin America.
The US exposure of our quoted equity book has
increased, though it remains low relative to global indices.
However, it is worth noting that our private investments
are primarily exposed to the US, and when included, the
overall exposure to US equities is comparable to global
indices.
Manager’s Report
Manager’s Report
•
•
The absolute return and credit book continued to
Private investments
provide steady and largely uncorrelated returns, in
The private investment portfolio represented 36.5%
particular from distressed debt managers; and
of net assets at the year end, a marked increase over
the year, largely due to organic growth. The allocation
In terms of headwinds, the relative strength of
is split between 24.8% held in third-party funds and
sterling was the main detractor to performance in
11.7% in direct investments (the latter predominantly
absolute terms.
co-investments with private equity or venture capital
In terms of portfolio allocation, our average net quoted
managers or ‘GPs’). The asset class had a very strong year
equity exposure was 46%, a slight increase over 2020.
and contributed 22% to the overall NAV return, evenly
The exposure continues to be largely dominated by our
split between direct and fund investments.
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
We took the decision some years ago to access the
punished by the rise in bond yields. Other themes
digital revolution through private markets rather than
captured in the quoted equity book include biotech,
public markets, giving the portfolio the ability to benefit
quality growth and companies benefiting from energy
from a typically longer duration value creation cycle.
transition trends.
Having built a formidable network has allowed us to
access both expertise and deal flow.
It is important to re-emphasise our strategy when
allocating capital to this asset class. As mentioned by
the Chairman, RIT as an investment trust, provides a
natural home for such opportunities, without redemptions
causing the liquidity mis-match which faced some
well-known open-ended funds over recent years.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
In terms of performance, approximately a quarter of
positions (such as broad equity market exposures or
the overall contribution of the private investments is
currencies) as well as individual stocks, funds or themes,
attributable to Coupang following its successful IPO in
where we might decide to moderate the exposure
March and subsequent transfer to our quoted equity book.
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
Other direct investments that have performed well include
various types of ‘tail hedges’ designed to reduce the
those where we have invested in businesses supporting
impact of such negative volatility.
the ongoing development and infrastructure underpinning
digital currency markets and blockchain technologies.
More generally, the direct book saw widespread
valuation increases driven by strong underlying business
growth, increased investor appetite for new technology
investments and buoyant funding markets.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
In terms of new direct investments, we deployed
approximately £250 million of capital, mostly in new
investments structured as co-investments led by GPs
Several new investments were made in the direct
where we have built strong relationships.
portfolio including £21 million in Epic Systems, the
The private fund portfolio also had a stellar year, with
largest healthcare digital record platform in the US. We
healthy returns across several funds, particularly those
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
exposed to the digital economy. Funds managed by Iconiq
the traditional retail trading ecosystem. As part of a
and Thrive were the largest contributors to the overall
broad strategy seeking targeted exposure to disruptive
performance, though with good performance across the
technologies, we made smaller investments totalling
majority of the portfolio.
some £54 million, in promising companies.
Additionally, we have made new commitments
amounting to £333 million, the vast majority being in the
US and including funds managed by Hunter Point Capital,
JRCM
The private funds book continued to benefit from strong
Greenoaks and Liontree. Over the year, we funded
performance, with many of our core partners’ funds
capital calls of £218 million and received distributions of
seeing healthy uplifts, helped by the portfolio tilt towards
£146 million.
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
As normal, and reflecting this industry’s well-known
of our funds are included at their 31 March valuations.
reporting lag, the bulk of our private fund positions are
Since the start of the year, we have made £173 million of
held at the GP’s end-September fair valuations. These are
commitments to new funds.
the latest valuations available and were adjusted during
the last quarter for subsequent investments, distributions
A key feature of our differentiated approach to portfolio
and currency moves. We have received Q3 valuations
diversification is the absolute return and credit book.
for many of our direct private co-investments, which are
This saw continued steady returns, with the strongest
also managed by GPs. These have similarly been updated
performance from those managers focusing on
for subsequent investment, distributions and currency
distressed debt and special situations. Our merger
moves, as well as pricing events which are likely to
arbitrage funds also delivered pleasing returns. With
result in a change in their Q4 valuations when finalised.
credit spreads tightening back to pre-pandemic levels, we
We monitor any additional information or new valuations
have adopted a more cautious approach to direct credit
investments.
relating to 2021 up to publication of this report.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
Absolute return and credit
The absolute return and credit book delivered healthy
returns, contributing 2.1% to the overall NAV, showing
little correlation to broader markets, and continuing to
play an important role in portfolio diversification.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
Funds focused on distressed situations performed well,
not hesitate to adjust the portfolio should the need arise.
as corporate restructurings continued. After adding to
Experience suggests that when there is a widespread
our credit exposure in 2020, the normalisation of credit
consensus, investors can often get trapped in a false
markets in 2021 allowed us to reduce our exposure here,
sense of security and let their guard down. As we emerge
realising some of the successes. Macro managers fared
from the most serious public health crisis in modern
less well and our market neutral managers outperformed
times, with systemic market uncertainties remaining, this
their peers.
is not the time to relax. And rest assured that we will not.
Real assets
With a strong team around us, we are confident that our
This category detracted slightly from the NAV return
dynamic asset allocation and strong security selection
for the year, mainly due to our modest holdings in gold,
skills, together with global deal sourcing and integrated
which saw a decline in the spot price of almost 4%.
risk management, will provide us with the best platform
The sluggish performance of gold has been somewhat
to continue to deliver equity-type returns with less risk.
surprising given that real yields have remained negative,
although this may well be explained by institutional
adoption of crypto currencies and flows towards more
economically sensitive commodities. Our St. James’s
investment properties held their value with very little
change throughout 2021.
Francesco Goedhuis
Chairman and Chief
Executive Officer
Ron Tabbouche
Chief Investment Officer
Currencies
As a global investor, our approach to managing currency
exposures can have a significant impact on our overall
performance. Throughout 2021, we were active in
managing our exposure to currency markets, which
played an important role in diversifying the portfolio as
well as providing some protection against the meaningful
rise in sterling towards the end of the year.
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
RIT Capital Partners plc Report and Accounts December 2021 13
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Manager’s Report
Manager’s Report
30%
JRCM
•
US dollar
•
Sterling
Currency exposure as % of NAV
The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
19%
18%
In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
69%
59%
0%
3%
9%
0%
6%
3%
Euro
14%
60%
40%
20%
Other
Japanese yen
31 December 2020
31 December 2021
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
80%
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
Note: The chart excludes exposure from currency options. Where
available, the exposures in this chart are estimated by
considering the underlying currency exposure of third-party funds
rather than by the fund’s currency of denomination.
Debt and leverage
At the year end, we held drawn borrowings of
£240 million through our revolving credit facilities, with a
A core feature of our approach to portfolio construction
further £150 million committed and undrawn.
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
The fair value of RIT’s £151 million loan note liability decreased
currencies) as well as individual stocks, funds or themes,
over the year as gilt yields increased, triggering an accounting
where we might decide to moderate the exposure
mark-to-market gain of approximately £13 million.
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
Throughout the year, we have continued our careful use
various types of ‘tail hedges’ designed to reduce the
of derivatives, principally for hedging as we sought to
impact of such negative volatility.
protect the NAV from unwanted exposures. Currency
hedging, where we increase our levels of sterling, thus
It was a strong period for our private investments.
reducing the currency translation risk, is a prime example
The successful IPO of Coupang, the South Korean
of our use of derivatives to protect the NAV. Additionally,
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
following the successful listing and transfer of private
transferred to the quoted portfolio, and the share price
investments to the quoted equity portfolio, we deployed
ended June at $41.82. The remainder of the direct book
hedges where we felt appropriate to safeguard the overall
also saw widespread gains, reflecting positive company
returns. We also use derivatives to enhance returns
performance, new investment rounds, as well as interest
through efficient structuring.
from special purpose acquisition companies (SPACs).
Operations and costs
Several new investments were made in the direct
JRCM manages the Group on a day-to-day basis on
portfolio including £21 million in Epic Systems, the
behalf of the Board, providing investment management,
largest healthcare digital record platform in the US. We
administration and company secretarial services. At the
also invested £50 million in Webull and £29 million in
year end, we employed 46 people in JRCM and 12 in our
Robinhood, two financial technology platforms disrupting
sister company, SHL.
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
SHL maintains and manages the investment property,
technologies, we made smaller investments totalling
including Spencer House as well as other properties in
some £54 million, in promising companies.
St James’s, and also operates an events business. This
re-opened for the latter part of the year, hosting events
where the government guidelines allowed.
Over the year, keeping the health and well-being of our
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
staff our primary responsibility, the business continued to
14 Report and Accounts December 2021 RIT Capital Partners plc
The private funds book continued to benefit from strong
follow government guidelines in relation to the pandemic.
performance, with many of our core partners’ funds
We introduced hybrid working and also flexible working,
seeing healthy uplifts, helped by the portfolio tilt towards
to assist staff in their return to the office.
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
We would like to again express our gratitude to all
of our colleagues, who have shown resilience and
professionalism in facing yet another year of this
everchanging pandemic and the challenges it continues
to present both at work and at home.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
It remains a priority for JRCM to minimise the effect of costs
This saw continued steady returns, with the strongest
on NAV and shareholder returns and we therefore strive to
performance from those managers focusing on
manage the portfolio as efficiently as possible, taking into
distressed debt and special situations. Our merger
consideration the direct costs of the Group, as well as the
arbitrage funds also delivered pleasing returns. With
fees charged by external fund managers or GPs.
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
In order to provide investors with information on the
costs of RIT’s own investment business, we calculate an
ongoing charges figure (OCF) based on recommendations
We continue to hold gold as a portfolio diversifier,
from the Association of Investment Companies (AIC).
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
This assumes no change in the composition or value of
haven in times of stress, we increased our allocation here.
the portfolio (therefore excluding transaction costs and
While the results so far this year, and over recent years,
direct performance-related compensation) and excludes
are pleasing, we nevertheless remain vigilant, and will
finance costs. For 2021, RIT’s own OCF amounted to
not hesitate to adjust the portfolio should the need arise.
0.72% (2020: 0.66%), with further information provided
Experience suggests that when there is a widespread
on page 98.
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
In addition to our Group costs, RIT’s Investment Policy
from the most serious public health crisis in modern
includes the allocation of part of the portfolio to third-party
times, with systemic market uncertainties remaining, this
managers, which have their own fees. These include
is not the time to relax. And rest assured that we will not.
long-only equity and hedge fund managers, as well as
private equity and absolute return and credit funds. The
With a strong team around us, we are confident that our
managers’ fee structure is always a key consideration in
dynamic asset allocation and strong security selection
our due diligence, with the investment decision made
skills, together with global deal sourcing and integrated
on the basis of expected returns, net of all fees. To assist
risk management, will provide us with the best platform
shareholders, we estimate that the average annual
to continue to deliver equity-type returns with less risk.
management fees for external managers represent an
additional 0.87% of average net assets (2020: 0.89%).
This excludes performance fees/carried interest which
are typically paid for outperformance against an index
or an absolute hurdle, and deducted from the valuations
we receive. These are a necessary cost in investing
in many difficult to access, high-quality managers and
unique deals. As they are only paid for good performance,
we would rather have the strong performance net of
such fees, adding to the NAV return, than not. Further
information on fees is provided on pages 50 and 51.
Francesco Goedhuis
Chairman and Chief
Executive Officer
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
Ron Tabbouche
Chief Investment Officer
Finally in relation to our business, the publication of
this report coincides with the retirement of our Chief
Operating Officer, Jonathan Kestenbaum. Having been
with JRCM for 10 years, Jonathan has made exceptionally
significant contributions to our business operations,
provided sage advice to the RIT Board, and built strong
relationships with many of our shareholders. We would
Manager’s Report
•
•
The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
Manager’s Report
Manager’s Report
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
•
The absolute return and credit book continued to
like to take this opportunity to thank Jonathan for the
to quality defensive names such as Unilever and Reckitt
provide steady and largely uncorrelated returns, in
invaluable part he has played in the success and growth
Benckiser, which we considered were disproportionately
particular from distressed debt managers; and
of your Company for the last decade. He will be deeply
punished by the rise in bond yields. Other themes
missed. With that, we are however delighted to announce
captured in the quoted equity book include biotech,
In terms of headwinds, the relative strength of
•
quality growth and companies benefiting from energy
that, Andrew Jones, our Chief Financial Officer, has
sterling was the main detractor to performance in
transition trends.
been promoted to Chief Financial and Operating Officer.
absolute terms.
Andrew has been with us for 14 years and has an
A core feature of our approach to portfolio construction
In terms of portfolio allocation, our average net quoted
in-depth understanding of our operations, as well as an
is the use of hedging. Here we focus both on macro
equity exposure was 46%, a slight increase over 2020.
experienced team to assist him in this new role.
positions (such as broad equity market exposures or
The exposure continues to be largely dominated by our
currencies) as well as individual stocks, funds or themes,
Outlook
structural themes and in particular Asian equities where
where we might decide to moderate the exposure
we continue to see a long-term potential for growth and
As we write this in early 2022, our focus is, as always, on
without having to sell the underlying positions. To help
excess returns. Just under a quarter of the quoted book
ensuring that the portfolio is positioned as well as it can be for
protect the portfolio in downturns, we may also deploy
was allocated towards what we characterise as value
the range of possible market outcomes that may lie ahead.
various types of ‘tail hedges’ designed to reduce the
or cyclical stocks, targeting the gradual re-opening of
impact of such negative volatility.
Ending 2021 with a shifting monetary policy, ebullient
economies as the vaccine efficacy and rollout continued.
It was a strong period for our private investments.
Over the first six months, we increased our allocation
sentiment, and full valuations in some areas, we expect
The successful IPO of Coupang, the South Korean
to quality defensive names such as Unilever and Reckitt
short-term volatility, particularly in high-growth sectors.
e-commerce giant, contributed 5.5% in our private
Benckiser, which we considered were disproportionately
While markets often appear relatively immune to
investments book at the IPO price of $35.00. It was then
punished by the rise in bond yields. Other themes
geopolitical risks, these of course also remain.
transferred to the quoted portfolio, and the share price
captured in the quoted equity book include biotech,
ended June at $41.82. The remainder of the direct book
quality growth and companies benefiting from energy
At times like this, we approach every new investment
also saw widespread gains, reflecting positive company
transition trends.
with caution – being selective in our allocations to those
performance, new investment rounds, as well as interest
investments we feel offer appropriate margins of safety,
from special purpose acquisition companies (SPACs).
A core feature of our approach to portfolio construction
and passing on those which don’t. It is a time when
is the use of hedging. Here we focus both on macro
the importance of our portfolio construction cannot
Several new investments were made in the direct
positions (such as broad equity market exposures or
be overstated. We will continue to try to balance our
portfolio including £21 million in Epic Systems, the
currencies) as well as individual stocks, funds or themes,
portfolio carefully to ensure that the themes and risks
largest healthcare digital record platform in the US. We
where we might decide to moderate the exposure
also invested £50 million in Webull and £29 million in
are appropriately weighted and reflected in the NAV.
without having to sell the underlying positions. To help
Robinhood, two financial technology platforms disrupting
We started 2022 with a relatively modest quoted equity
protect the portfolio in downturns, we may also deploy
the traditional retail trading ecosystem. As part of a
various types of ‘tail hedges’ designed to reduce the
broad strategy seeking targeted exposure to disruptive
impact of such negative volatility.
technologies, we made smaller investments totalling
some £54 million, in promising companies.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
JRCM
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
JRCM
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
The private funds book continued to benefit from strong
exposure of around 40%. Within the equity book, we
performance, with many of our core partners’ funds
retain a blend of structural themes, including China and
We continue to hold gold as a portfolio diversifier,
seeing healthy uplifts, helped by the portfolio tilt towards
biotech, as well as positions we believe will benefit from
especially in a low interest rate environment and, viewing
technology – one of our structural themes. As normal,
the US dollar as again having the potential to provide a safe
higher interest rates and higher nominal GDP.
the valuation lag for this industry means the majority
haven in times of stress, we increased our allocation here.
of our funds are included at their 31 March valuations.
Whatever the underlying cause, volatility can often feel
Since the start of the year, we have made £173 million of
While the results so far this year, and over recent years,
uncomfortable, but the flip side is that if markets react
commitments to new funds.
are pleasing, we nevertheless remain vigilant, and will
indiscriminately, this can also provide opportunities.
not hesitate to adjust the portfolio should the need arise.
Ultimately our long-standing approach, blending
A key feature of our differentiated approach to portfolio
Experience suggests that when there is a widespread
conviction and diversification, will continue to drive how
diversification is the absolute return and credit book.
consensus, investors can often get trapped in a false
we manage the portfolio to seek the best long-term,
This saw continued steady returns, with the strongest
sense of security and let their guard down. As we emerge
risk-adjusted returns for our shareholders.
performance from those managers focusing on
from the most serious public health crisis in modern
distressed debt and special situations. Our merger
times, with systemic market uncertainties remaining, this
arbitrage funds also delivered pleasing returns. With
is not the time to relax. And rest assured that we will not.
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
Francesco Goedhuis
risk management, will provide us with the best platform
We continue to hold gold as a portfolio diversifier,
Chairman and Chief Executive Officer
to continue to deliver equity-type returns with less risk.
especially in a low interest rate environment and, viewing
J. Rothschild Capital Management Limited
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
Ron Tabbouche
Francesco Goedhuis
Chief Investment Officer
Chairman and Chief
J. Rothschild Capital Management Limited
Executive Officer
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Ron Tabbouche
Experience suggests that when there is a widespread
Chief Investment Officer
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis
Chairman and Chief
Executive Officer
Ron Tabbouche
Chief Investment Officer
J. ROTHSCHILD CAPITAL MANAGEMENT LIMITED
RIT Capital Partners plc Report and Accounts December 2021 15
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Investment Portfolio
Investment portfolio as at 31 December 2021
Investment holdings
Quoted equity1
Stocks:
Coupang2
Keurig Dr Pepper
Helios Towers
Mastercard
IQVIA Holdings
Meta Platforms
Alphabet
Marsh & McLennan
Country/region
Industry/description
Value of
investments
£ million
% of
NAV
Consumer discretionary
Consumer staples
Communication services
IT
Healthcare
Communications services, long 1.1% notional
Communications services, long 0.7% notional
Financials, long 0.3% notional
–
South Korea
United States
Africa
United States
United States
United States
United States
United States
China
United States
Japan
Global
–
Other stocks
Total stock:
Long–only funds:
Springs Opportunities
HCIF Offshore
Morant Wright3
Discerene3
Ward Ferry Asian Smaller Companies Asia
Lansdowne New Energy
BlackRock Emerging Markets
Sand Grove UK
Sumi Trust Japan
Tenere Capital
All–cap, diversified
All–cap, biotechnology
Small/mid–cap, value bias
All–cap, value bias
Small/mid–cap, diversified
All–cap, clean energy
Global
Emerging Markets All–cap, value bias
United Kingdom All–cap, diversified
Japan
Global
Small–cap, diversified
All-cap, technology
Other long–only funds
–
–
Total long–only funds:
Hedge funds:
BlackRock Strategic Equity
3D Opportunity
HHLR4
EcoR1 Capital
Springs Global Strategic Partners
Tribeca
Coreview
Other hedge funds
Total hedge funds:
Derivatives:
Equity Options
MS Tech Basket
Total derivatives:
Total quoted equity
Global
Japan
China
United States
China
Global
China
–
All–cap, diversified
All–cap, diversified
All–cap, diversified
All–cap, biotechnology
All–cap, diversified
All–cap, commodities
All–cap, diversified
–
United States
Global
Premium
Short, 1.1% notional
16 Report and Accounts December 2021 RIT Capital Partners plc
188.8
50.1
49.4
18.5
16.6
10.0
0.7
0.0
126.5
460.6
131.9
127.5
125.7
108.1
93.4
80.7
74.2
69.9
48.0
20.8
4.3%
1.1%
1.1%
0.4%
0.4%
0.2%
0.0%
0.0%
2.9%
10.4%
3.0%
2.9%
2.9%
2.5%
2.1%
1.8%
1.7%
1.6%
1.1%
0.5%
27.4
0.6%
907.6 20.7%
143.8
73.5
72.6
65.8
62.8
43.0
26.0
14.5
502.0
1.2
0.8
2.0
3.3%
1.7%
1.7%
1.5%
1.4%
1.0%
0.6%
0.3%
11.5%
0.0%
0.0%
0.0%
1,872.2
42.6%
Investment Portfolio
Investment holdings
Private investments – direct:
KeepTruckin2
Webull
Kraken2
Animoca
Airtable2
Epic Systems2
Age of Learning²
Paxos
Brex²
Bolt²
Other private investments – direct
Total private investments – direct
Private investments – funds:
Thrive funds
Iconiq funds
Hillhouse funds
BDT Capital funds
Ribbit Capital funds
Greenoaks Capital funds
Arch Venture funds
Lindenwood
Mithril funds
WestCap Strategic
Biomatics Capital funds
Eight Partners funds
Blackstone Tactical Opportunities
Braemar Energy Ventures III
Other private investments – funds
Total private investments – funds
Absolute return and credit:
Eisler Capital
Attestor Value
Sand Grove Tactical
RIT US Value Partnership
Tresidor Credit Opportunities
Farmstead
Hein Park
Caxton Dynamis
Woodline
Elliott International
Liontree Advisory loan note
Highbridge
Other absolute return and credit
Total absolute return and credit
Country/region
Industry/description
Value of
investments
£ million
United States
United States
United States
Global
United States
United States
United States
United States
United States
United States
–
United States
United States
China
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
–
IT, industrials
IT, financials
IT, financials
IT, communication services
IT, communication services
IT, healthcare
IT, consumer discretionary
IT, financials
IT, financials
IT, consumer discretionary
–
Venture capital
Venture capital
Private equity
Private equity
Venture capital
Venture capital
Venture capital
Venture capital
Venture capital
Venture capital
Venture capital
Venture capital
Private equity
Venture capital
–
Global
Macro strategy
Global
Global
Global
Global
United States
Global
Global
Global
Global
Global
Global
–
Distressed and special situations
Multi–strategy
Multi–strategy
Distressed and special situations
Distressed and special situations
Distressed and special situations
Macro strategy
Multi–strategy
Multi–strategy
Corporate loan
Multi-strategy
–
56.4
55.7
33.2
27.8
23.7
22.1
21.9
20.8
17.8
16.8
217.2
513.4
182.3
180.5
93.0
71.1
57.9
51.6
35.8
34.8
22.3
21.9
20.4
19.5
10.9
10.5
276.0
1,088.5
163.9
130.8
76.1
70.1
69.0
40.9
49.4
47.3
42.2
31.9
29.7
19.4
6.7
777.4
% of
NAV
1.3%
1.3%
0.8%
0.6%
0.5%
0.5%
0.5%
0.5%
0.4%
0.4%
4.9%
11.7%
4.2%
4.1%
2.1%
1.6%
1.3%
1.2%
0.8%
0.8%
0.5%
0.5%
0.5%
0.4%
0.2%
0.2%
6.4%
24.8%
3.7%
3.0%
1.7%
1.6%
1.6%
0.9%
1.1%
1.1%
1.0%
0.7%
0.7%
0.4%
0.2%
17.7%
RIT Capital Partners plc Report and Accounts December 2021 17
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Investment Portfolio
Investment holdings
Real assets:
Spencer House
St. James’s properties
Gold futures
Other real assets
Total real assets
Government bonds and rates:
Gilt futures
Total government bonds and rates
Other investments:
Currency forwards
Currency options
Total other investments
Total investments
Liquidity:
Liquidity
Total liquidity
Borrowings:
ICBC6 loan
National Australia Bank loan
RIT senior loan notes
Total borrowings
Other assets/(liabilities):
Margin
Other assets/(liabilities)
Total other assets/(liabilities)
Total net asset value
Country/region
Industry/description
United Kingdom Investment property
United Kingdom Investment property
United Kingdom Long, 3.0% notional
–
–
United Kingdom Long, 1.8% notional5
Various
Various
Forward currency contracts
Premium
–
–
–
–
–
–
Cash at bank
Revolving credit facility
Revolving credit facility
Fixed interest loan notes
–
Various
Value of
investments
£ million
30.3
27.7
3.0
5.6
66.6
% of
NAV
0.7%
0.6%
0.1%
0.1%
1.5%
0.1
0.1
0.0%
0.0%
21.6
(0.6)
21.0
0.5%
(0.0%)
0.5%
4,339.2
98.8%
323.1
323.1
7.4%
7.4%
(86.9)
(153.1)
(168.9)
(408.9)
(2.0%)
(3.5%)
(3.8%)
(9.3%)
87.6
49.3
136.9
2.0%
1.1%
3.1%
4,390.3 100.0%
Note: where relevant, the portfolio positions are ordered by their notional exposure rather than fair value.
1 The quoted equity category includes stocks (held directly and via co–investment vehicles), funds and derivatives. As a result, the liquidity
of the individual positions may be influenced by market volumes as well as the redemption terms of the specific funds or co–investment
vehicles.
2 These investments are held through co–investment vehicles managed by a general partner (GP).
³ These funds are segregated accounts, managed externally on behalf of the Group.
⁴ Previously named Gaoling.
⁵ In relation to interest rate derivatives, the notional exposure is measured in units of a 10–year equivalent bond.
⁶ Industrial and Commercial Bank of China.
18 Report and Accounts December 2021 RIT Capital Partners plc
Principal Risks and Viability
Risk management and internal control
The principal risks facing RIT are both financial and
operational. The ongoing process for identifying,
evaluating and managing these risks, as well as any
emerging risks, is the ultimate responsibility of the
Board and the Audit and Risk Committee. Day-to-day
management is undertaken by JRCM within parameters
set by the Board.
As an investment company, RIT is exposed to financial
risks inherent in its portfolio, which are primarily market-
related and common to any portfolio with significant
exposure to equities and other financial assets. The
ongoing portfolio and risk management includes an
assessment of the macroeconomic and geopolitical
factors that can influence market risk, as well as
consideration of investment-specific risk factors.
Your Company’s broad and flexible investment mandate
allows the Manager to take a relatively unconstrained
approach to asset allocation and utilise whatever action is
considered appropriate in mitigating any attendant risks
to the portfolio.
As further discussed in the Manager’s Report, while
developed markets ended the year strongly, there was
once again, sustained levels of volatility during the year
and a wide divergence between sectors and regions.
With the ongoing impact of the pandemic, Chinese
regulatory tightening and inflation, the challenges
facing a global asset allocator were significant. US and
UK government bonds lost money for the first time
in eight years. As such, once again, risk management
remained critical. The portfolio risk management approach
undertaken by the Manager, and considered regularly by
the Board, is designed to produce a healthy risk-adjusted
return over the long term, through careful portfolio
construction, security selection and the considered
use of hedging. Part of this approach is to emphasise
or de-tune parts of the portfolio to compensate for risk
in other areas. For example, with a decision to deploy
capital to the technology transition theme through the
private portfolio, the exposure to this theme within the
quoted equity book was deliberately smaller. Equally the
deployment of hedges, whether to manage currency
translation risk, or to reduce exposure to particular
companies or sectors, was an important part of protecting
the returns over the year.
As a permanent capital vehicle, and unlike open-ended
funds, we do not need to manage the portfolio to
meet redemptions. With sizeable assets relative to our
modest borrowings and ongoing liabilities, as confirmed
later in this section, we do not consider the Company’s
viability or going concern to represent principal risks.
Nevertheless, and in particular at times of market stress,
the Manager utilises a detailed, day-to-day liquidity risk
management framework to help effectively manage the
balance sheet, including careful monitoring of the banking
covenants.
The Board sets the portfolio risk parameters within
which JRCM operates. This involves an assessment
of the nature and level of risk within the portfolio
using qualitative and quantitative methods. Additional
information in relation to market risk, liquidity risk
and credit risk in accordance with IFRS 7 Financial
Instruments: Disclosures is shown in Note 13 on
pages 70 to 73.
From an operational risk point of view, the ongoing
changes in the pandemic and the associated
governmental response, saw an ever-changing transition
between office-based and remote working. Employee
health and safety was always central to our Manager’s
approach, ensuring staff received appropriate support,
guidance and communication throughout the year. The
professional and resilient response by employees once
again allowed the business to continue uninterrupted,
with all of the key processes and controls followed,
irrespective of the working environment.
Climate-related risks, as well as ESG factors more widely,
are continuing to be key influencers of shareholder and
government behaviour as well as corporate activity. While
the risks associated with climate change will continue
to impact a number of our existing risk categories, we
consider the importance of the risk and the expectations
it places in relation to reporting, are such that we now
classify it as a specific principal risk.
Operational risks more generally include those related to
the legal environment, regulation, taxation, information
security and other areas where internal or external factors
could result in financial or reputational loss. These are also
managed by JRCM with regular reporting to, and review
by, the Audit and Risk Committee and the Board.
The Board is ultimately responsible for the Group’s
system of internal controls and it has delegated
the supervision of the system to the Audit and Risk
Committee. Such systems are designed to manage,
rather than eliminate, the risk of failure to achieve
business objectives and, as such, can provide only
reasonable and not absolute assurance against any
material misstatement or loss. Further information is
provided in the Audit and Risk Committee Report on
pages 42 to 45.
RIT Capital Partners plc Report and Accounts December 2021 19
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Principal Risks and Viability
Principal risks
The Board has carried out a robust assessment of the emerging and principal risks facing the Company, concluding that
the principal risks are as described below:
Risk
Mitigation
Investment strategy risk
As an investment company, a key risk is that the investment
strategy, guided by the Investment Policy:
“To invest in a widely diversified, international portfolio
across a range of asset classes, both quoted and unquoted;
to allocate part of the portfolio to exceptional managers in
order to ensure access to the best external talent
available.”
does not deliver the Corporate Objective:
“To deliver long-term capital growth, while preserving
shareholders’ capital; to invest without the constraints of a
formal benchmark, but to deliver for shareholders increases
in capital value in excess of the relevant indices over time.”
Market risk
Price risk
RIT invests in a number of asset categories including stocks,
equity funds, private investments, absolute return and credit,
real assets, government bonds and derivatives. The portfolio
is therefore exposed to the risk that the fair value of these
investments will fluctuate because of changes in market
prices.
Currency risk
Consistent with the Investment Policy, the Group invests
globally in assets denominated in currencies other than
sterling as well as adjusting currency exposure to either seek
to hedge and/or enhance returns. This approach exposes the
portfolio to currency risk as a result of changes in exchange
rates.
Interest rate risk
In addition, the Group is exposed to the direct and indirect
impact of changes in interest rates.
The Board is responsible for monitoring the investment
strategy to ensure it is consistent with the Investment
Policy and appropriate to meet the Corporate Objective.
The Directors receive a detailed monthly report from the
Manager to enable them to monitor investment performance,
attribution and exposure. They also receive a comprehensive
investment report from the JRCM CIO in advance of the
quarterly Board meetings. In response to the Covid-19
pandemic, the Board and Audit and Risk Committee
continued to monitor the impact on the investment portfolio
and the Manager’s operations, and ensuring that appropriate
measures were in place.
The overall risk appetite is set by the Board, with portfolio
risk managed by JRCM within prescribed limits. This involves
careful assessment of the nature and level of risk within the
portfolio using qualitative and quantitative methods.
The JRCM Investment Committee meets regularly to review
overall investment performance, portfolio exposure and
significant new investments.
The Group has a widely diversified investment portfolio which
significantly reduces the exposure to individual asset price
risk. Detailed portfolio valuations and exposure analysis are
prepared regularly, and form the basis for the ongoing risk
management and investment decisions. In addition, regular
scenario analysis is undertaken to assess likely downside
risks and sensitivity to broad market changes, as well as
assessing the underlying correlations amongst the separate
asset classes.
Exposure management is undertaken with a variety of
techniques including using equity index and interest rate
futures and options to hedge or to increase equity and
interest rate exposure depending on overall macroeconomic
and market views.
Currency exposure is managed via an overlay strategy, typically
using a combination of currency forwards and/or options
to adjust the natural currency of the investments in order
to achieve a desired net exposure. The geographic revenue
breakdown for stocks as well as correlations with other asset
classes are also considered as part of our hedging strategy.
20 Report and Accounts December 2021 RIT Capital Partners plc
Principal Risks and Viability
Risk
Mitigation
Liquidity risk
Liquidity risk is the risk that the Group will have difficulty in
meeting its obligations in respect of financial liabilities as they
fall due.
The Group has significant investments in and commitments
to direct private investments and funds which are inherently
illiquid. In addition, the Group holds investments with other
third-party organisations which may require notice periods in
order to be realised. Capital commitments could, in theory,
be drawn with minimal notice. In addition, the Group may be
required to provide additional margin to support derivative
financial instruments.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument held by the Group will fail to meet an obligation
which could result in a loss to the Group.
Certain investments held within the absolute return and
credit portfolio are exposed to credit risk, including in relation
to underlying positions held by funds.
Substantially all of the listed portfolio investments capable of
being held in safe custody, are held by BNP as custodian and
depositary. Bankruptcy or insolvency of BNP may cause the
Group’s rights with respect to securities held by BNP to be
delayed.
Unrealised profit on derivative financial instruments held
by counterparties is potentially exposed to credit risk in the
event of the insolvency of a broker counterparty.
Key person dependency
In common with other investment trusts, investment
decisions are the responsibility of a small number of key
individuals within the Manager. If for any reason the services
of these individuals were to become unavailable, there could
be a significant impact on our business.
The Group manages its liquid resources to ensure sufficient
cash is available to meet its expected needs. It monitors the
level of short-term funding, and balances the need for access
to such funding and liquidity, with the long-term funding
needs of the Group, and the desire to achieve investment
returns. Covenants embedded within the banking facilities
and long-term notes are monitored on an ongoing basis for
compliance, and form part of the regular stress tests.
In addition, existing cash reserves, as well as the significant
liquidity that could be realised from the sale or redemption of
portfolio investments and undrawn, committed borrowings,
could all be utilised to meet short-term funding requirements
if necessary. As a closed-ended company, there is no requirement
to maintain liquidity to service investor redemptions. The
Depositary, BNP Paribas Securities Services (BNP) has separate
responsibilities in monitoring the Company’s cash flow.
The majority of the exposure to credit risk within the absolute
return and credit portfolio is indirect exposure as a result of
positions held within funds managed externally. These are
typically diversified portfolios monitored by the third-party
managers themselves, as well as through JRCM’s ongoing
portfolio management oversight.
Listed transactions are settled on a delivery versus payment
basis using a wide pool of brokers. Cash holdings and margin
balances are also divided between a number of different
financial institutions, whose credit ratings are regularly
monitored.
All assets held directly by the custodian are in fully
segregated client accounts. Other than where local market
regulations do not permit it, these accounts are designated in
RIT’s name. The custodian’s most recent credit rating was A+
from Standard & Poor’s (S&P).
This risk is closely monitored by the Board, through its
oversight of the Manager’s incentive schemes (on which
it has received external advice) as well as the succession
plans for key individuals. The potential impact is also reduced
by an experienced Board of Directors, with distinguished
backgrounds in financial services and business.
The retirement of the Manager’s COO will see the CFO
become CFOO, in line with existing succession plans, and
supported by an experienced team.
RIT Capital Partners plc Report and Accounts December 2021 21
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Principal Risks and Viability
Risk
Mitigation
Climate-related risks
Ongoing climate changes may impact either our own
business, the external managers with whom we invest, and/
or the underlying portfolio investments. For our own business
this could result in increased costs of complying with new
regulations and/or changes to the way we operate. Portfolio
companies could see demand pressures, an increased
cost of capital, tighter regulation or increased taxation, all
impacting profitability.
Our ability to make climate-change disclosures may be
impacted by our investment approach if the external fund
managers with whom we invest do not provide the desired
information.
More frequent extreme weather could disrupt businesses,
travel, global supply chains and profitability.
Legal and regulatory risk
As an investment trust, RIT’s operations are subject to wide
ranging laws and regulations including in relation to the
Listing Rules and Disclosure, Guidance and Transparency
Rules of the FCA’s Primary Markets function, the Companies
Act 2006, corporate governance codes, as well as continued
compliance with relevant tax legislation including ongoing
compliance with the rules for investment trusts. JRCM is
authorised and regulated by the FCA and acts as Alternative
Investment Fund Manager.
The financial services sector continues to experience
regulatory change at national and international levels,
including in relation to climate change. Failure to act in
accordance with these laws and regulations could result
in fines, censure or other losses including taxation or
reputational loss.
Co-investments and other arrangements with related parties
may result in conflicts of interest.
We do not consider climate-related risks have material,
specific impacts on our own asset management businesses as
distinct from the investment portfolio. Our Manager continues
to monitor, and minimise, the climate-related impacts of our
internal operations; we offset the carbon emissions of this
business – categorised as Scope 1 and Scope 2 emissions by
the Greenhouse Gas (GHG) Protocol – through participation
in an accredited scheme and we are taking steps to further
develop our understanding of our indirect emissions impact
(categorised as Scope 3 emissions).
JRCM is a signatory to the UN PRI, and the Board worked
with our Manager over 2021 to develop JRCM’s Responsible
Investment Framework & Policy, which incorporates
environmental factors into our investment approach. This
allows us to consider the potential wider impacts of climate
change risks to our investments.
JRCM is working with an external adviser to consider our
ability to make additional climate-disclosures in relation to our
investment portfolio.
We monitor developments in regulation and disclosures and
seek as far as possible to prepare for future changes.
The Group’s adoption of fair value in relation to its investments,
means that the climate-related risks recognised by market
participants are incorporated in the valuations (see Note 1,
Accounting Policies).
The Operational Risk Committee of JRCM provides oversight
of all legal, regulatory and other operational risks across the
Group. This Committee reports key findings to the JRCM
Executive Committee and the Audit and Risk Committee.
JRCM employs a general counsel and a compliance officer as
well as other personnel with experience of legal, regulatory,
disclosure and taxation matters. In addition, specialist external
advisers are engaged in relation to complex, sensitive or
emerging matters. For example, during 2021 the Group again
engaged external advisers in supporting its consideration of
ESG matters.
Where necessary, co-investments and other transactions are
subject to review by the Conflicts Committee and/or the FCA.
22 Report and Accounts December 2021 RIT Capital Partners plc
Principal Risks and Viability
Risk
Mitigation
Operational risk
Operational risks are those arising from inadequate or failed
processes, people and systems or other external factors.
Key operational risks include reliance on third-party managers
and suppliers, dealing errors, processing failures, pricing
or valuation errors, fraud, reliability of core systems and IT
security issues.
Systems and control procedures are the subject of continued
development and regular review. During the year the Audit
and Risk Committee reviewed, and satisfied itself with, the
Manager’s approach to due diligence as part of its investment
decision making. Further details on this and internal controls
more generally can be found in the Committee’s Report on
pages 42 to 45.
Processes are in place to ensure the recruitment and ongoing
training of appropriately skilled staff within key operational
functions. Suitable remuneration policies are in place to
encourage staff retention and the delivery of the Group’s
objectives over the medium term.
Independent pricing sources are used where available and
performance is subject to regular monitoring. In relation
to more subjective areas such as private investments and
property, the valuations are estimated by experienced staff
and specialist external managers and valuers using industry
standard approaches, with the final decisions taken by the
independent Valuation Committee, and subject to external
audit as part of the year-end financial statements.
A business continuity and disaster recovery plan is
maintained, and was revised during 2021 following the
success of remote working during the prior year.
Cyber security continues to receive an enhanced focus, with
systems and processes designed to combat the ongoing risk
developments in this area. Such processes are kept under
regular review including multi-factor authorisation, ensuring
effective firewalls, internet and email gateway security
and anti-virus software. This is complemented with staff
awareness programmes (including periodic mock phishing
exercises) which monitor and test both the robustness of
our systems as well as keeping staff alert to potential risks.
During the year, the Manager received the government’s
‘cyber essentials’ security certification. The Manager has
subsequently been awarded the ‘cyber essentials plus’
security certification in February 2022, the highest level
of certification offered under this scheme. The Group has
specific insurance cover in place to cover information security
and cyber risks.
RIT Capital Partners plc Report and Accounts December 2021 23
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Principal Risks and Viability
Viability statement
In accordance with provision 36 of the AIC Code and as
part of an ongoing programme of risk assessment, the
Directors have assessed the prospects of the Group, to
the extent that they are able, over a five-year period. As
the Company is a long-term investor, the Directors have
chosen a five-year period as this is viewed as sufficiently
long term to provide shareholders with a meaningful
view, without extending the period so far into the future
as to undermine the exercise.
The Directors confirm that they have a reasonable
expectation that the Group will continue to operate and
meet its liabilities as they fall due for the next five years.
In making this assessment, the Directors have taken
into consideration the emerging and principal risks
and mitigants set out on the preceding pages and the
impact these might have on the business model, future
performance, solvency and liquidity. In addition, the
Directors reviewed the following:
the Group’s current financial position (with total
assets at the year end of approximately £5.0 billion);
the nature, composition and liquidity profile of
the investment portfolio (including the significant
holdings of liquidity and the value of assets that
could be realised within a relatively short time frame
as well as over longer periods);
the term structure and availability of borrowings (of
which drawn borrowings at the year end totalled
£409 million, with committed but undrawn facilities
totalling £150 million);
the ability to satisfy the associated loan covenants,
meet the ongoing costs of the business and fund
dividends;
the level of outstanding capital commitments
(primarily to long-term private funds) and the ongoing
distributions from this part of the portfolio; and
•
•
•
•
•
•
As part of the approach, due consideration has been
given to the uncertainty inherent in financial forecasts
and, where applicable, reasonable sensitivities have
been applied to the investment portfolio in moderate and
severe stress situations, including in relation to equity
market declines, currency movements, the imposition of
restrictions on redemptions from external funds, and the
level of capital calls in respect of existing commitments.
The stress scenarios under which the borrowing
covenants would be breached involve severe equity
market declines as well as historically high levels
of capital calls, significantly in excess of what was
experienced during the Covid-19 driven volatility in early
2020. This theoretical outcome does not take into account
the Company’s ability to adjust the portfolio composition
to avoid a breach, and to work with its lenders in order
to either avert a breach, or minimise the consequences.
With current gearing of 6.1%, and in the absence of
either a significant adverse change to the regulatory or
taxation environment, it is difficult to reasonably envisage
a situation which would threaten the ongoing viability of
the Company over the five-year time frame.
Going concern
Having assessed the emerging and principal risks and
the other matters considered in connection with the
Viability Statement, and in particular: the liquidity balances
totalling £323 million, committed but undrawn borrowings
of £150 million, the likelihood of renewal of borrowing
facilities, cash flow forecasts for the period to 30 June
2023, what the Group considers its readily realisable
securities of £180 million, that current assets exceed total
liabilities, and the amounts that could be realised from
the remainder of the portfolio, the Directors consider it
appropriate to adopt the going concern basis in preparing
the financial statements.
The Strategic Report on pages 3 to 24 and the s172
statement on page 53 have been approved by the Board
and signed on its behalf by:
the continued attractiveness to shareholders of
the Group’s Corporate Objective and investment
approach.
Sir James Leigh-Pemberton
Chairman
24 Report and Accounts December 2021 RIT Capital Partners plc
Governance
RIT Capital Partners plc Report and Accounts December 2021 25
Board of Directors
Non-Executive Chairman
Senior Independent Director
Sir James Leigh-Pemberton
I
C N R V
Philippe Costeletos
I
C N R V
Sir James Leigh-Pemberton is non-executive Chairman having joined
the Board of the Company as a non-executive Director in April 2019.
He is Chairman of the Nominations Committee and a member of the
Conflicts Committee, Remuneration Committee and the Valuation
Committee. He previously served as an independent non-executive
Director of the Company from 2004 to 2013.
Sir James joined UK Financial Investments (UKFI) in October 2013
as Chief Executive and in January 2014 was appointed Executive
Chairman. On 1 April 2016 he became Non-Executive Chairman
of UKFI. Following the merger of UKFI and UK Government
Investments (UKGI), he became Deputy Chairman of UKGI.
Before joining UKFI, Sir James was Managing Director and
Chief Executive Officer of Credit Suisse in the UK, based in
London. In this role, he was responsible for developing the Bank’s
client relationships in Private Banking, Investment Banking and
Asset Management in the UK. He was also a member of the Credit
Suisse Europe, Middle East & Africa (EMEA) Operating Committee.
He joined Credit Suisse First Boston (CSFB) in 1994. Prior to joining
CSFB, he was a Director of SG Warburg Securities, where he
worked for 15 years.
In the 2019 New Year Honours List, Sir James received a
knighthood for services to financial services, British industry
and government.
Non-Executive Directors
Philippe Costeletos joined the Board as a non-executive Director in
July 2017 and became its Senior Independent Director in April 2019.
He is Chairman of the Conflicts Committee and the Remuneration
Committee and a member of the Nominations Committee, and the
Valuation Committee.
He has over 30 years’ of private investment and board governance
experience and is Founder of Stemar Capital Partners, a private
investment firm focused on building long-term investment
platforms. Philippe was formerly Chairman of International of
Colony Capital, a global real estate and investment management
firm. Previously, he was Head of Europe at TPG, a leading
global private investment firm and a member of TPG’s Global
Management and Investment Committees. Prior to that, Philippe
was a Member of the Management Committee at Investcorp, a
leading manager of alternative investment products. Previously,
Philippe held positions at JP Morgan Capital, JP Morgan’s Private
Equity Group and Morgan Stanley.
Philippe is Chairman of Mistral Fertility and a board member of
Digital Care, Vangest Group and Generation Home. He is a Senior
Advisor to the Blackstone Group. Philippe is a member of the
President’s Council on International Activities at Yale University
and the Yale Center for Emotional Intelligence Advisory Board.
He graduated magna cum laude with a BA with distinction in
Mathematics from Yale University and received an MBA from
Columbia University.
Maggie Fanari
I
C R
Maxim Parr
I
C R V
Maggie Fanari joined the Board of the Company as a non-executive
Director in April 2019 and is a member of the Conflicts Committee
and the Remuneration Committee.
Maxim Parr joined the Board as a non-executive Director in
May 2020 and is a member of the Conflicts Committee, the
Remuneration Committee and the Valuation Committee.
Maggie is the Managing Director, Global Co-Head High Conviction
Equities at Ontario Teachers’ Pension Plan which has a global
mandate to invest in public and private companies.
She started her career as an auditor at KPMG and previously
worked in equity research at Scotia Capital.
Maggie is a Chartered Accountant and a CFA charterholder.
She also holds a BBA from the Schulich School of Business at
York University and ICD.D certification from the Institute of
Corporate Directors.
Maxim started his career at Jardine Matheson and has over 15
years’ experience working in cross-border investment between
Asia and Europe. Maxim lived in Beijing for well over a decade
where, as Founder and CEO of Atlas Capital Group, he worked
alongside FTSE 100 and European corporates on their China
investment strategy in start-ups, growth capital and buyouts.
Working between Paris and Asia, Maxim is the Executive Chairman
of nr2, a cross border technology investment platform.
Maxim graduated with First Class Honours from the School of
Oriental and African Studies and was awarded the Stephen K
Hassenfeld Fellowship to study at the Hopkins Nanjing Centre of
the School of Advanced International Studies.
He is fluent in Mandarin and proficient in Cantonese, Russian,
German and French.
26 Report and Accounts December 2021 RIT Capital Partners plc
Board of Directors
Non-Executive Directors
André Perold
I A
Mike Power
I A V
André Perold joined the Board of the Company as a non-executive
Director in April 2018 and is a member of the Audit and Risk
Committee.
Mike Power joined the Board of the Company as a non-executive
Director in January 2014 and is Chairman of the Valuation
Committee and a member of the Audit and Risk Committee.
André is Co-Founder, Managing Partner and Chief Investment
Officer of HighVista Strategies, a Boston based investment firm. He
is a board member of the Vanguard Group, the global investment
company and also serves on the Investment Committee of the
Partners Healthcare System and for the Museum of Fine Arts. He
was previously the George Gund Professor of Finance and Banking
at the Harvard Business School where he also held senior roles
including Chair of the Finance Faculty and Senior Associate Dean.
He is a Fellow of the Institute of Chartered Accountants in England
and Wales (ICAEW) and Professor of Accounting at the London
School of Economics and Political Science, where he has written
extensively on risk and corporate governance issues. He was a
non-executive director of St. James’s Place plc from 2005 to 2013
where he chaired the Risk Committee and was a member of the
Audit Committee.
Mike has held a number of other advisory positions, including
the Financial Reporting Lab Advisory Committee at the Financial
Reporting Council, and the Technical Development Committee of
the Institute of Risk Management. In 2016 he was elected as a
Fellow of the British Academy.
Amy Stirling
I A V
Hannah Rothschild CBE
NI
Amy Stirling joined the Board of the Company as a non-executive
Director in February 2015 and is Chairman of the Audit and Risk
Committee and a member of the Valuation Committee.
She is a Fellow of the ICAEW and was recently appointed as Chief
Financial Officer of Hargreaves Lansdown plc, having previously
held the same role at the Virgin Group since 2016.
Until July 2017, Amy served as a Director and Chairman of the
Audit Committee of Pets at Home Group plc. She also served as
the Chief Financial Officer of TalkTalk Telecom Group plc until 2013,
having been with the business since its start up as part of the
Carphone Warehouse Group, which she joined in 2000.
Hannah Rothschild joined the Board of the Company as a
non-independent non-executive Director in August 2013.
In addition, she is a non-executive director of WHAM, a Director
of Five Arrows Limited and serves as a Trustee of the Rothschild
Foundation.
Hannah is an award-winning writer and filmmaker with a long
standing career in the media.
She was the first woman to chair the Trustees of the National
Gallery.
In the 2018 Queen’s Birthday Honours, Hannah was appointed
Commander of the Order of the British Empire (CBE) for services
to the arts and to philanthropy.
I
NI
A
C
N
R
V
Independent Director
Non-Independent Director
Audit and Risk Committee member
Conflicts Committee member
Nominations Committee member
Remuneration Committee member
Valuation Committee member
Committee Chair
RIT Capital Partners plc Report and Accounts December 2021 27
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
J. Rothschild Capital Management
JRCM is a wholly-owned subsidiary of RIT and acts as RIT’s Manager. Directors of JRCM are listed below:
Chairman and Chief Executive Officer
Francesco Goedhuis
Executive Directors
Andrew Jones (Chief Financial & Operating Officer)
Ron Tabbouche (Chief Investment Officer)
The Executive Committee of JRCM comprises the above directors, led by Francesco Goedhuis. They are responsible for the
day-to-day management of the business. The biographies of the Executive Committee members can be found below:
Francesco Goedhuis
Andrew Jones
Francesco Goedhuis is the Chairman and Chief Executive Officer,
and also leads the Manager’s private investment strategies. He
joined JRCM as the Principal in Lord Rothschild’s Office (the
Company’s Honorary President, founder and former Chairman) in
2010. Previously, he was in New York working for the Economics
Nobel Laureate Robert Merton and the former Vice Chairman of
J.P. Morgan, Roberto Mendoza at IFL, commercialising financial
academic theory on both the buy and sell sides.
Andrew Jones is the Chief Financial & Operating Officer. He is
responsible for the Group’s financial activities and, from March
2022, its operations. Prior to joining JRCM in 2008, he spent
three years in venture capital and four years at Nomura, advising
on its private equity investments as well as risk, global corporate
development and strategy. A Fellow of the ICAEW, he qualified
as a chartered accountant with Deloitte where he spent time
in audit before specialising in corporate finance and valuation
advice. Andrew is a member of the audit committee of the
British Academy.
Ron Tabbouche
Ron Tabbouche is the Chief Investment Officer. He joined JRCM in
2012 having previously been the Head of Investments for Managed
Portfolios at GAM. At the age of 26, he joined GAM’s Investment
Committee. Subsequently, he led the overall investment strategy
of multi-billion dollar funds across a broad range of asset classes.
Ron is an Adviser to the WHAM Investment Advisory Committee,
and is also a member of the Investment Committee of the
Wolfson Foundation.
28 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
Introduction
The Directors present the Company’s Corporate
Governance Report. This describes our principal
governance bodies, their composition, purpose and
operation within the context of the Principles and
Provisions of the Association of Investment Companies
(AIC) Code of Corporate Governance (AIC Code) and
the UK Corporate Governance Code (UK Code) of the
Financial Reporting Council (FRC), which can be viewed
at www.theaic.co.uk and www.frc.org.uk respectively.
The AIC Code, which has been endorsed by the FRC,
adapts the Principles and Provisions of the UK Code
to make them relevant for investment companies. The
Board of Directors therefore considers the AIC Code to
represent the most appropriate governance framework
for the Company, while recognising that as a self-
managed investment trust, aspects of the UK Code
remain relevant. This report sets out how the Company
has applied the relevant principles and provisions of the
Codes during the financial year ending 31 December
2021.
Leadership
The Company has a non-executive Board, chaired by
Sir James Leigh-Pemberton. The Board is collectively
responsible for setting the Company’s long-term strategic
aims, and its ongoing business and investment strategies.
The schedule of matters reserved for the Board may be
viewed on the website, www.ritcap.com.
The day-to-day management of the business is delegated
under a formal agreement to JRCM, the Company’s
subsidiary and Manager. JRCM is managed by its
Executive Committee, led by its Chairman and CEO,
Francesco Goedhuis. The JRCM Executive Committee
attend the regular Board meetings and provide detailed
reports on investment performance as well as all
operational and financial matters of the Group. JRCM
also attends and reports to all Board Committee
meetings. As a result of the Manager being a wholly-
owned subsidiary of the Company, the Board considers
that this approach provides the most effective means
to constructively challenge and scrutinise all aspects of
the Manager’s performance. It ensures all Directors are
regularly involved in the process, rather than delegating
this responsibility to a selection of Directors through a
separate management engagement committee.
As at the date of this Report, the Board comprised eight
non-executive Directors, of which seven have been
determined by the Board to be independent, with one
(Hannah Rothschild) designated as non-independent.
The Company has in place a structure of five Board
Committees, with clearly defined responsibilities. This is
intended to limit the scope for an individual, or a small
group of individuals, to dominate the Board’s decision
making. The structure of permanent Board Committees,
together with the delegation of investment management,
administration and company secretarial matters to the
Manager, is considered by the Board as appropriate for
a self-managed investment trust on an ongoing basis.
The terms of reference of each of the permanent Board
Committees may be viewed at www.ritcap.com.
As Chairman of the Board, Sir James Leigh-Pemberton
is responsible for its leadership and effectiveness
in dealing with the matters reserved for its decision
with adequate time for consideration. This includes
ensuring a culture of openness and debate and
that Directors are properly briefed on issues arising at
Board meetings. The Chairman is also responsible for
ensuring effective communication with shareholders,
making Directors aware of any concerns raised by
shareholders and for facilitating the contribution of the
Directors.
The current members of the five Board Committees are as follows:
Audit and Risk Committee
Amy Stirling (Chairman)
André Perold
Mike Power
Remuneration Committee
Philippe Costeletos (Chairman)
Maggie Fanari
Sir James Leigh-Pemberton
Maxim Parr
Conflicts Committee
Philippe Costeletos (Chairman)
Maggie Fanari
Sir James Leigh-Pemberton
Maxim Parr
Valuation Committee
Mike Power (Chairman)
Philippe Costeletos
Sir James Leigh-Pemberton
Maxim Parr
Amy Stirling
Nominations Committee
Sir James Leigh-Pemberton (Chairman)
Philippe Costeletos
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Corporate Governance Report
Board and Committee attendance
The Board and Committee attendance of the Directors at meetings during the year is shown below. In each
case the number of meetings attended is shown first, followed by the number of meetings that the Director
was eligible to attend. Due to the impact of Covid-19, a number of Board and Committee meetings were held
virtually.
Number of meetings held during the year
Chairman
Sir James Leigh-Pemberton1
Non-executive Directors
Philippe Costeletos
Maggie Fanari
Maxim Parr2
André Perold
Mike Power
Hannah Rothschild
Jeremy Sillem3
Jonathan Sorrell4
Amy Stirling
Board Audit and Risk
4
4
Conflicts
2
Nominations Remuneration
2
3
Valuation
2
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
–
–
–
–
4/4
4/4
–
–
3/3
4/4
2/2
2/2
2/2
2/2
–
–
–
–
–
–
3/3
3/3
–
–
–
–
–
2/3
–
–
2/2
2/2
2/2
1/1
–
–
–
–
–
–
2/2
2/2
–
2/2
–
2/2
–
–
–
2/2
1 Appointed as a member of the Conflicts Committee on 22 April 2021.
2 Appointed as a member of the Remuneration Committee on 22 April 2021.
3 Retired as a Director on 4 November 2021.
4 Retired as a Director on 4 November 2021.
The Audit and Risk Committee
The Audit and Risk Committee Report is shown on
pages 42 to 45.
The Committee has three members, all of whom are
viewed by the Board as having recent and relevant
financial experience.
The main features of the Group’s internal controls and
risk management are described in the Audit and Risk
Committee Report on pages 42 to 45 and in Principal
Risks and Viability on pages 19 to 24.
The Conflicts Committee
The Conflicts Committee meets at least once a year
on a formal, scheduled basis and on other occasions
as and when required. The Committee is chaired by
the Senior Independent Director, Philippe Costeletos,
and is comprised solely of independent Directors.
Sir James Leigh-Pemberton was appointed to the
Committee on 22 April 2021. The Committee’s principal
responsibility is to monitor transactions with related
parties (as described in Note 17) and to ensure that
potential conflicts of interest are avoided, or managed
appropriately.
30 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
The Nominations Committee
The Nominations Committee meets at least twice
each year and on additional occasions as required. The
Committee is chaired by Sir James Leigh-Pemberton. All
of its members are independent non-executive Directors.
Its responsibilities include overseeing the process of the
appointment of new Directors to the Board, overall Board
composition, succession planning, monitoring progress
on diversity and other matters set out in its terms of
reference.
The Chairman of the Committee has maintained ongoing
and fruitful dialogue throughout the year with a number
of wealth manager shareholders who requested more
information about the diversity policy.
The Committee is mindful of Board balance, experience
and diversity when considering appointments to the
Board and its terms of reference acknowledges the
importance and benefits of diversity. The Committee
is required to have due regard for this in any process
for identifying suitable Board candidates, including
considering candidates from a wide range of backgrounds
and experiences. In terms of succession planning,
diversity and inclusion are key considerations of the
Committee, especially in respect of diversity of gender
and ethnicity. Three of the Board’s eight Directors are
female and the Company will continue to follow the
recommendations of the Hampton-Alexander Review.
The Board also supports the recommendations set out
in the Parker Review and is committed to appointing
a director of colour well within the timeframe set out
in recommendations of the Parker Review. The Board
has appointed Russell Reynolds Associates to assist
with this process. Russell Reynolds Associates has
no other relationships with the Group and is therefore
independent.
The Committee also reviews the designation of Directors
as independent or non-independent and the designation
of Directors is set out on pages 26 and 27.
As a result of Amy Stirling indicating that she will not
stand for re-election at the forthcoming AGM and further
to the Committee’s recommendation, the Board approved
the appointment of Mike Power as Chair of the Audit and
Risk Committee, with effect from her retirement.
Mike Power has been a member of the Audit & Risk
Committee since 2014.
The Remuneration Committee
The Directors’ Remuneration Report is shown on
pages 46 to 49.
The Valuation Committee
The Valuation Committee comprises five Directors, all of
whom are independent, and with appropriate experience.
The Committee plays a key role in providing the Board
with assurance that the valuation process is rigorous and
independently challenged.
The Committee is chaired by Mike Power. It meets at
least twice each year and additionally as may be required.
The Committee’s principal responsibility is to review the
Company’s direct private and other investments to ensure
that they are presented in the annual and half-yearly
accounts at fair value. As a result of the inherent
subjectivity of the valuation of private investments, these
form a key area of focus for the Committee.
At each meeting, the Committee reviews a detailed
report from the Manager which includes: a valuation
report on each of the largest directly-held private
investments, including information on the companies’
performance and valuation and/or the GP’s valuation
where relevant; a sample and overall summary of the
valuation of the smaller directly-held private investments;
a valuation report from Jones Lang LaSalle (JLL) in
relation to the Company’s investment properties; the
valuation approach for the remainder of the portfolio,
including an analysis of the Company’s investments in
private funds; and a valuation of the Company’s loan
notes.
As part of its review and challenge, the Committee
considers: the consistency of the Manager’s approach
over time; the relevance and appropriateness of the
valuation techniques adopted; and a review of the
differences between the price achieved at a liquidity
event and the most recent valuation for any assets sold
during the period.
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In accordance with the Codes, all Directors (other than
those retiring or standing for their first election) stand
for re-election annually, subject of course to continued
satisfactory performance. The re-election of Directors
at the forthcoming AGM is therefore recommended by
the Board.
Subject to his continued annual re-election, the
Chairman’s tenure is not intended to exceed nine years
from the date of his appointment, in line with the relevant
corporate governance expectations. Moreover, as part
of the wider annual evaluation of the Board, length of
service is a key consideration when assessing the general
requirements to regularly refresh the membership,
diversity and overall composition of the Board.
Accountability
The Board, acting where appropriate through the Audit
and Risk Committee, is responsible for determining
the nature and extent of the principal risks it is willing
to take in achieving its strategic objectives. It is also
responsible for maintaining sound risk management and
internal control systems, for setting corporate reporting,
risk management and internal control principles and
for maintaining an appropriate relationship with the
Company’s auditor. These areas are further described in
the Audit and Risk Committee Report on pages 42 to 45.
Corporate Governance Report
Effectiveness and evaluation
Many of the Directors have held or hold senior positions
in the financial services industry, including at prominent
investment banks or asset management companies. In
addition, there are Directors with considerable experience
beyond these areas, including general commercial
organisations and academia. The biographies of the
Directors and the JRCM Executive Committee on pages
26 to 28 demonstrate a strength of experience in the
areas required to oversee and implement the Company’s
strategic, investment and operational aims.
As described above, the process for the appointment
of new Directors to the Board is the responsibility of
the Nominations Committee, as is their induction and
ensuring, on an ongoing basis, that each Director is able
to allocate sufficient time to the Company to discharge
their responsibilities effectively.
JRCM provided relevant and timely information on the
financial, legal and regulatory developments during 2021
in the papers and presentations provided at Board and
Committee meetings.
The Board undertakes an annual review of its
performance, its Committees and each individual
Director (including the Chairman) in accordance with the
requirements of the AIC Code. During 2021 an external
evaluator (BoardAlpha) was appointed to carry out an
independent review of the Board’s effectiveness and
that of its Committees. BoardAlpha held one-to-one
meetings with each of the Directors and the Manager,
focusing on a range of different areas relevant to Board
effectiveness and corporate governance. The external
evaluation concluded that the Board and its Committees
remain effective. It noted that during the year the Board
has addressed the areas of focus identified in the 2020
annual Board evaluation, which was conducted internally.
These included responding well to the challenges of
Covid-19 and playing a key role in enhancing the ESG
capabilities of the Group. The findings of the external
evaluation were discussed with the Chairman and SID
and considered at a meeting of the Board held in February
2022. The Board welcomes the positive conclusions
of the evaluation and will pay particular attention to
BoardAlpha’s recommended areas of focus for 2022,
including in respect of succession planning, shareholder
engagement and ensuring collaboration between the
Board and its Committees remains a core part of its
agenda. BoardAlpha has no other connection with the
Company or any Director.
The next external evaluation is scheduled for 2024.
32 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
Relations with stakeholders
The Board recognises the benefits of engaging with
our shareholders and other key stakeholders in order to
ensure that we are aware, and can take account of, their
views during Board discussions and when the Board
makes decisions. As a result, the following processes and
initiatives are in place.
Shareholders
•
an ongoing dialogue with principal shareholders,
proxy advisors and analysts is maintained and
the Manager regularly reports to the Board on its
shareholder and analyst meetings to ensure that the
members of the Board understand shareholders’
views of the Company. Moreover, the Chairman has
engaged with major shareholders and will continue
to do so each year;
•
•
•
•
•
the Board is aligned with shareholders on the
importance of ESG and has appointed a leading
international sustainability consultancy to assist in
this area. As part of our ongoing commitment to ESG
integration the Manager became a signatory of the
UN PRI and has adopted a Responsible Investment
Framework & Policy which has been disclosed to
shareholders and can be viewed at www.ritcap.com;
a regular review of the composition of our share
register and receipt of feedback from our brokers,
including in the form of an independent survey of
shareholder views conducted by the brokers;
a designated email account (investorrelations@ritcap.
co.uk) for shareholders to communicate directly with
the Group;
we maintained our regular programme of shareholder
engagement activities including shareholder and
analyst meetings (some of which were held by video
calls to comply with any Covid-19 restrictions in
place at that time) to enable us to continue engaging
directly with shareholders and continue to be
informed of their views; and
the 2021 AGM was held remotely to follow
government guidelines and public health advice on
restricting public gatherings. Shareholders were
invited to access the AGM remotely and encouraged
to submit questions to the Directors and the
Manager in advance of the AGM and questions
submitted were directly addressed during the
meeting.
Employees
•
employee communication was a priority when
Covid-19 lockdown restrictions were in place.
Virtual ‘town hall’ meetings with the Group’s
employees were held and chaired by the Chairman
(who is designated as the Director responsible
for engagement with employees) as well as the
Chief Executive Officer of JRCM. More generally,
internal communication platforms were utilised
to accommodate remote working and regular
communication was encouraged. This was also used
to assess resource needs, administer employee
feedback surveys, monitor sickness, employee
support and well-being and address any specific
individual challenges relating to home working;
as part of our employee well-being programme,
flexible working policies have been introduced
and our health and safety policies have been
adjusted as a result of Covid-19 to maintain a safe
working environment within our offices and when
government guidelines deemed it safe to do so. A
series of initiatives were also held to welcome back
employees to the office, including a reception hosted
by the Chairman and the Chief Executive Officer of
JRCM;
financial assistance to casual and agency staff whose
roles were directly affected as a consequence of
the closure of our offices during Covid-19 lockdown
restrictions;
an ongoing commitment to professional
development and the nurturing of talent by giving
employees the appropriate training, development
and support they need and providing them with the
opportunities to gain new skills to perform their roles
effectively;
support and investment in employees’ health and
well-being by providing a wide range of benefits that
are regularly reviewed and updated;
provision of a clear and independent whistleblowing
process;
a carefully structured performance management
process, designed to reinforce the Group’s overall
strategy and culture;
policies to ensure that we continue to provide
an inclusive working environment where all our
employees are treated with dignity and respect,
regardless of their gender, age, ethnicity, disability,
sexual orientation or background; and
provision of an employee assistance programme
providing confidential support on mental health
issues.
•
•
•
•
•
•
•
•
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Corporate Governance Report
Suppliers
•
we place a high value on the relationships with a
broad group of key suppliers and service providers
including fund managers, our auditor and professional
advisers, our custodian/depositary, bankers,
information providers, trading counterparties, and
brokers, and are committed to developing and
maintaining sustainable and transparent working
relationships over the long term;
•
•
while we ensure these relationships are subject
to regular review and refreshed where necessary,
equally some of the suppliers have worked with us
for very many years. Effective management of our
supplier relationships is critical to our ability to deliver
on our broad mandate, and we utilise a combination
of formal and informal feedback, directly and via our
Manager; and
as part of JRCM’s Responsible Investment Framework
& Policy, ascertaining our fund managers’ approach
to ESG forms part of the due diligence undertaken by
JRCM during the investment selection process.
Environment and the community
•
We offset the carbon emissions of our internal
operations through participation in an accredited
scheme involving the planting of trees at primary
schools;
a ‘zero to landfill’ waste and recycling policy;
encouraging employees to reduce their own
environmental impact through a cycle to work
scheme;
procurement of all electricity usage in our property
portfolio from renewable sources;
facilitate employees taking advantage of ‘Give As You
Earn’ for personal charitable donations; and
various employee events to raise money for
designated charities.
•
•
•
•
•
Compliance with the Codes
It is the Board’s view that the Company has complied
with both the principles and the relevant provisions of the
Codes during the year.
The following table describes how the Board has applied
the 17 principles of the AIC Code in practice.
34 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
AIC Code Principle
Application
A. A successful Company is led by an effective Board, whose
role is to promote the long-term sustainable success of the
Company, generating value for shareholders and contributing
to wider society.
B. The Board should establish the Company’s purpose, values
and strategy, and satisfy itself that these and its culture are
aligned. All Directors must act with integrity, lead by example
and promote the desired culture.
C. The Board should ensure that the necessary resources are
in place for the Company to meet its objectives and measure
performance against them. The Board should also establish
a framework of prudent and effective controls, which enable
risk to be assessed and managed.
The Board considers the Company has continued to perform
satisfactorily during the year, with a NAV per share total
return of 23.6%. The external Board evaluation, conducted by
BoardAlpha, concluded that the Board and its Committees
continue to operate effectively. The Board is mindful of
its contribution to the wider society and strives to meet
its obligations through ensuring effective stakeholder
engagement by the Group. Pages 33 and 34 of this Report
illustrates initiatives contributing to the environment and
wider society.
The Directors consider that the purpose and strategy
are enshrined in the Company’s Corporate Objective and
Investment Policy, as described in the Strategic Report
(pages 6 and 7). Our values underpin and govern our Group’s
operations and are based on integrity and respect for all our
stakeholders. Together, our purpose, values and strategy
foster a strong and healthy culture of honest and open
communication and engagement between Directors and
within the wider workforce of the Group, promoting fairness,
equality and professional development. The Directors
recognise the importance of their role in monitoring and
assessing the Company’s purpose, values and strategy,
which are reinforced in meetings between the Directors and
the Manager. Furthermore, the Manager provides quarterly
updates to the Directors on how the Company’s values and
culture are being applied throughout the Group’s operations
and in the implementation of its strategy. The application of
the Manager’s Responsible Investment Framework & Policy,
with its central principles of ESG and continual engagement
with counterparties, is an example of the Company’s
purpose, values and culture working in practice.
The Board receives from the Manager regular and detailed
information in relation to the Company’s investment
performance as well as in relation to its finance and operational
capability, including the annual budget. Performance is
measured against, and the Manager rewarded by reference
to, the published KPIs, as well as wider qualitative criteria
including in relation to risk management, compliance, internal
controls and promotion of the Group’s values and business
principles.
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Corporate Governance Report
AIC Code Principle
Application
D. In order for the Company to meet its responsibilities to
shareholders and stakeholders, the Board should ensure
effective engagement with, and encourage participation from,
these parties.
F. The Chairman leads the Board and is responsible for its
overall effectiveness in directing the Company. They should
demonstrate objective judgement throughout their tenure
and promote a culture of openness and debate. In addition,
the Chairman facilitates constructive Board relations and
the effective contribution of all non-executive Directors, and
ensures that Directors receive accurate, timely and clear
information.
The Board receives regular reports from the Manager in
relation to shareholder engagement as part of an extensive
investor relations programme. Shareholders are encouraged
to attend the AGM, where the Manager presents on
investment performance and strategy (in respect of the
2021 AGM, where physical attendance was not possible,
measures were put in place for shareholders to listen
remotely and submit any question to the Board and Manager
in advance of the meeting). Stakeholders are also able to
access and review all key Company literature on its website
(www.ritcap.com). Questions may be directed to the Board
or the Manager, via the registered office or a dedicated email
address (investorrelations@ritcap.co.uk) and throughout the
year, the Manager’s investor relations function has responded
to a range of enquiries raised by shareholders, including in
relation to issues concerning ESG.
The Group also engaged with leading proxy advisors
during the year as part of its ongoing monitoring of wider
shareholder expectations on ESG matters.
The Manager reports to the Board regularly on its broader
stakeholder engagement, as set out on pages 33 and 34.
The Chairman encourages active participation at Board
meetings, including setting the agenda items for discussion.
The Board receives a comprehensive suite of regular
information, including in-depth reports from the Manager
of performance, attribution, transactions and exposures
on a monthly and quarterly basis. The quarterly Board
meetings also include detailed reports on the finance and
operational activities of the Manager and Group, including
costs, liquidity, risk, investor relations, PR, IT, regulatory, legal
and compliance matters and HR. At these meetings, the
Manager also provides a quarterly update on ESG integration,
which is a standing agenda item.
Furthermore, Board meetings provide the opportunity for
the chairs of each Committee to present a summary of
the activities of their Committee, with minutes from the
Committee meetings included in the Board papers.
Note: the AIC Code does not include a Provision E.
36 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
AIC Code Principle
Application
G. The Board should consist of an appropriate combination
of Directors (and, in particular, independent non-executive
Directors) such that no one individual or small group of
individuals dominates the Board’s decision making.
H. Non-executive Directors should have sufficient time
to meet their Board responsibilities. They should provide
constructive challenge, strategic guidance, offer specialist
advice and hold third party service providers to account.
I. The Board, supported by the company secretary, should
ensure that it has the policies, processes, information, time
and resources it needs in order to function effectively and
efficiently.
J. Appointments to the Board should be subject to a formal,
rigorous and transparent procedure, and an effective
succession plan should be maintained. Both appointments
and succession plans should be based on merit and objective
criteria and, within this context, should promote diversity
of gender, social and ethnic backgrounds, cognitive and
personal strengths.
The Board has delegated responsibility to key Committees,
as well as engaging the Manager under a formal investment
management and services agreement. At 31 December
2021, the Board comprised an independent non-executive
Chairman and seven non-executive Directors. Seven
Directors (including the Chairman) are independent and all
are independent of the Manager, with a clear division of
responsibilities between the Board and the Manager. As
such, the Board considers that its decision making is not
dominated by an individual or small group of individuals.
The Directors consider they have sufficient time to meet
Board responsibilities. While there is a standing meeting
timetable for the Board and Committees, the Directors
participate in additional Board and Committee meetings
as necessary. The Board and Committee meetings provide
opportunities for detailed assessment of both the Manager’s
performance as well as reviewing performance of other key
service providers (see page 34).
The Manager provides company secretarial services to the
Company and, together with external specialist advisors,
ensures that Board procedures and applicable rules and
regulations are observed. Such services also include advice
and support to the Board on all governance matters and on
the discharge of Directors’ duties. Directors are able to take
independent external professional advice to assist with the
performance of their duties at the Company’s expense.
Appointments to the Board follow a careful process, led
by the Nominations Committee who identify candidates to
complement and enhance the collective skills, knowledge
and experience of the Board. Diversity of gender, social and
ethnic backgrounds are key considerations for the Board’s
succession planning, complying with the recommendations
of the Hampton-Alexander Review and the Board is taking
steps to comply with the recommendation of the Parker
Review as part of its succession planning.
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Corporate Governance Report
AIC Code Principle
Application
K. The Board and its Committees should have a combination
of skills, experience and knowledge. Consideration should
be given to the length of service of the Board as a whole and
membership regularly refreshed.
L. Annual evaluation of the Board should consider its
composition, diversity and how effectively members work
together to achieve objectives. Individual evaluation should
demonstrate whether each director continues to contribute
effectively.
M. The Board should establish formal and transparent
policies and procedures to ensure the independence and
effectiveness of external audit functions and satisfy itself on
the integrity of financial and narrative statements.
Directors’ varying backgrounds and wide-ranging experience,
including in the investing world and financial services
generally, as well as commercial businesses and academia,
ensures broad cognitive diversity, which is viewed as key in
assisting effective challenge and discipline. Biographies of
the Board are set out on pages 26 and 27 and demonstrate
the strength of experience in the areas required to provide
effective strategic leadership and appropriate governance of
the Company.
The Board seeks to ensure an appropriate balance between
continuity and experience, and the positive benefits from
refreshing membership and the development of a diverse
Board (see page 31).
During 2021, an external evaluator (BoardAlpha) was
appointed to carry out an independent review of the Board’s
effectiveness and that of its Committees. BoardAlpha held
one-to-one meetings with each of the Directors and the
Manager, focusing on a range of different areas relevant to
Board effectiveness and corporate governance. The external
evaluation concluded that the Board and its Committees
remain effective, responding well to the challenges
presented by Covid-19 and each Director’s performance was
considered to be satisfactory.
In respect of its evaluation of its composition and diversity,
the Board is targeting the appointment of a person of colour
well within the timeframe set by the recommendations of
the Parker Review.
The Board has delegated the assessment of the external
audit function and the review of the integrity of the Annual
Report and Accounts (ARA) and Half-Yearly Financial Report
to the Audit and Risk Committee. EY has been auditor of
the Group since 2018 and the Committee undertook an
assessment of EY’s performance in respect of the annual
statutory audit of the Group for the year ended 31 December
2021, concluding that EY had performed satisfactorily (see
page 45). The Audit and Risk Committee also performed
a detailed review of the 2020 ARA, the 2021 Half-Yearly
Financial Report and this 2021 ARA, as well as reviewing
supporting papers from the Manager, in order to ensure the
integrity of the statements (see page 42).
38 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
AIC Code Principle
Application
N. The Board should present a fair, balanced and
understandable assessment of the Company’s position and
prospects.
O. The Board should establish procedures to manage risk,
oversee the internal control framework, and determine the
nature and extent of the principal risks the Company is willing
to take in order to achieve its long-term strategic objectives.
P. Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
The Audit and Risk Committee reviewed the financial and
narrative statements within the 2021 ARA and 2021 Half-
Yearly Financial Report, as well as supporting papers and
evidence from the Manager in relation to this area. The
Committee concluded that these reports were consistent
with the fair, balanced and understandable requirement and
advised the Board accordingly. The Board considered the
Committee’s advice and its own review, before reaching the
same conclusion.
Day-to-day risk management is undertaken by the
Manager and overseen by the Audit and Risk Committee
which receives detailed reports twice a year on the risk
management and internal control functions. The Group’s
system of internal controls is administered by the Manager,
and designed to manage as far as possible the principal
risks of the Company. Further information can be found in
the Principal Risks and Viability section of the Report on
pages 19 to 24 and the Audit and Risk Committee Report on
pages 42 to 45.
The Directors’ remuneration policy was approved by
shareholders at the 2020 AGM and is in accordance with
the provisions of the Codes for non-executive Directors’
remuneration. Directors receive fixed fees without any
performance related elements. The Remuneration Committee
also has oversight of the remuneration policies and practices
within JRCM and SHL, and seeks to ensure these are tied
to the strategy and long-term sustainable success of the
Company, with clear links to the corporate KPIs (see page 9).
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Corporate Governance Report
AIC Code Principle
Application
Q. A formal and transparent procedure for developing
remuneration policy should be established. No director
should be involved in deciding their own remuneration
outcome.
As set out in the Directors’ Remuneration Report on
pages 46 to 49, Directors are paid on a fixed-fee basis,
as recommended by the Remuneration Committee and
approved by the Board. Such fees take account of the
fees paid by other investment trusts and the advice of its
independent remuneration consultant, Alvarez & Marsal.
R. Directors should exercise independent judgement and
discretion when authorising remuneration outcomes, taking
account of Company and individual performance, and wider
circumstances.
Directors are remunerated on the basis of a flat standard
fee supplemented by additional Committee membership
and chairmanship fees. There are no performance-related
aspects to Directors’ remuneration.
In the oversight of JRCM and SHL’s remuneration, Directors
ensure that it is set by reference to the performance of the
Company and individuals, relative to KPIs and individual
objectives.
In addition, as a self-managed investment trust, the Board
has also considered the following principle from the
UK Code:
UK Code Principle
Application
E. The Board should ensure that workforce policies and
practices are consistent with the Company’s values and
support its long-term sustainable success. The workforce
should be able to raise any matters of concern.
The Group’s workforce, who are employed by JRCM and
SHL, are subject to consistent standards of behaviour set out
in an employee handbook and monitored by the Manager.
All employees are expected to adhere to a standard of
conduct based on respect, courtesy and dignity, adhering to
the highest ethical standards. The employee handbook also
contains policies on inclusion and equal opportunities, anti-
harassment, dignity at work, anti-corruption, whistleblowing,
conflict management and the environment.
Well-established whistleblowing procedures are in place in
which employees have available direct lines of communication
to the Chairman of the Audit and Risk Committee. More
generally, our culture seeks to encourage honest and open
communication across the Group.
As a result of Covid-19, the Group has adapted to new ways
of working, offering flexible working arrangements.
40 Report and Accounts December 2021 RIT Capital Partners plc
Corporate Governance Report
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable
United Kingdom law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group and Parent
Company financial statements in accordance with UK
adopted international accounting standards (UK adopted
IAS). Under 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
Group and the Parent Company and of the profit or loss of
the Group and the Parent Company for that period.
In preparing these financial statements the directors are
required to:
•
•
•
•
•
•
•
select suitable accounting policies in accordance
with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
provide additional disclosures when compliance
with the specific requirements in UK adopted IAS is
insufficient to enable users to understand the impact
of particular transactions, other events and conditions
on the group and company financial position and
financial performance;
in respect of the Group financial statements, state
whether UK adopted IAS have been followed,
subject to any material departures disclosed and
explained in the financial statements;
in respect of the Parent Company financial
statements, state whether UK adopted IAS have
been followed, subject to any material departures
disclosed and explained in the financial statements;
and
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Parent Company and the Group will continue
in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Parent Company’s and Group’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Parent Company and the Group
and enable them to ensure that the Parent Company
and the Group financial statements comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and Parent
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
corporate governance statement that comply with that
law and those regulations. The Directors are responsible
for the maintenance and integrity of the corporate and
financial information included on the Company’s website.
The Directors confirm, to the best of their knowledge:
•
•
•
that the consolidated financial statements, prepared
in accordance with UK adopted IAS give a true and
fair view of the assets, liabilities, financial position
and profit of the Parent Company and undertakings
included in the consolidation taken as a whole;
that the Annual Report, including the Strategic
Report, includes a fair review of the development
and performance of the business and the position
of the Parent Company and undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
that they face; and
that they consider the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Company’s
position, performance, business model and strategy.
The Corporate Governance Report was approved by the
Board and signed on its behalf by:
Sir James Leigh-Pemberton
Chairman
RIT Capital Partners plc Report and Accounts December 2021 41
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Audit and Risk Committee Report
Introduction
I am pleased to present the Audit and Risk Committee
Report for 2021.
This year was, once again, a challenging one in terms
of the ever-changing nature of Covid-19 threats,
governmental responses and therefore the impact
on regular ways of working. I would therefore like to
reiterate our thanks and appreciation to the finance and
compliance functions of the Manager for their continued
professionalism and ensuring high standards of reporting
and control across the operations of the Group during the
year.
Committee responsibility and composition
The Committee has oversight responsibilities delegated
to it by the Board in three principal areas: financial
reporting, risk management and the external audit.
The responsibilities are set out in more detail in the
Committee’s terms of reference, which may be viewed at
www.ritcap.com.
The Committee currently comprises three Directors,
each of whom is non-executive and independent of the
Company. The Board is satisfied that I have requisite,
recent and relevant financial experience to chair the
Committee: I am a Fellow of the ICAEW, Chief Financial
Officer of Hargreaves Landsdown plc and have held
various executive and non-executive roles for public,
private and governmental organisations, many of which
were audit committee roles. I have also been a member
of this Committee since 30 April 2015.
The two other members of the Committee at the year-
end also have recent and relevant financial experience.
Mike Power is a Fellow of the ICAEW and Professor
of Accounting at the London School of Economics and
Political Science and André Perold is Chief Investment
Officer of an investment management firm having
previously been a professor of Finance and Banking at
Harvard Business School.
In November 2021, Jonathan Sorrell stood down as a
member of the Committee and I should like to thank him
for his contribution and insight while a member.
Our individual biographies are shown on page 27. I can
confirm that the Board considers all members of the
Committee to have sufficient recent and relevant financial
experience so as to comply with the requirements of the
2019 AIC Code and the relevant aspects of the 2018 UK
Code (together, the Codes).
42 Report and Accounts December 2021 RIT Capital Partners plc
Committee meetings and activity during the year
We met four times in 2021, and once so far in 2022.
Two of the Committee meetings were held to review the
Group’s 2020 Annual Report and Accounts and the June
2021 Half-Yearly Financial Report, with the review of the
Group’s 2021 Annual Report and Accounts considered in
February 2022.
Our reviews included the assessment and assurance
that the annual reports, taken as a whole, were fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Group’s
position, performance, business model and strategy.
In addition, the Committee considered the evidence
supporting the Group’s going concern and ongoing
viability, including cash flow forecasts as well as levels
of available liquidity. For both the 2020 and 2021 Annual
Report and Accounts, we were satisfied with our reviews
and advised the Board accordingly.
We also considered the year-end reports from the
external auditor, Ernst & Young LLP (EY), and discussed
matters arising with JRCM. The adequacy of the Group’s
accounting policies and financial reporting procedures
are discussed with the external auditor at least annually.
Following these discussions and our review of the annual
reports, we concluded that the accounting policies are
appropriate for the Company and take into account,
where necessary, new accounting standards.
We held two further meetings, in May and November
2021, reviewing the effectiveness of the Group’s risk
management and internal controls, by reference to
reports prepared by the Manager, including from its
internal audit function.
In addition to the activities described above, significant
matters we considered during the year are set out below:
Environmental, social and governance
The Committee is aware of the speed of development,
and importance to stakeholders of ESG matters and
notes the developments in this area made by the Board
and the Manager over the year. During 2021, the Manager
became a signatory to the UN PRI and also developed
and published its own its Responsible Investment
Framework & Policy. We expect to keep under review the
ongoing developments in financial reporting in this regard,
having recognised the importance of climate-related
matters in both our accounting policies and as a principal
risk.
Audit and Risk Committee Report
The valuation of private investments and other assets
Private investments represent 36.5% of net assets
and comprise direct investments, as well as direct
co-investments and diversified funds management by
external managers (or GPs). By their very nature such
investments merit careful attention when considering
their fair value. As these are unlisted investments,
without a public share price, the estimation of fair value
requires the exercise of considerable judgement. This
subjectivity means that there is a higher degree of
uncertainty in such valuations compared with those of
other assets. In assessing the fair values, there is, by
necessity, a degree of reliance on the GPs, with co-
investments and funds representing the majority of the
private portfolio. The GPs will typically have access to
confidential information about the underlying companies
and are required to report fair values in accordance with
internationally recognised accounting standards. The
valuations are usually prepared on a quarterly basis, albeit
with a time lag which may be up to three months, as
is normal in the industry. The Manager reviews these
valuations, and where possible, the justification for any
changes, as well as considering any additional supporting
information. In addition, where the Manager has direct
access to the underlying companies, it prepares its own
valuations using industry-standard approaches. The
results of this analysis is reported in detail on a six-
monthly basis to the Valuation Committee.
We have therefore considered the work of the Valuation
Committee, the results of their discussions with the
Manager and the external auditor. We view the work as
detailed, comprehensive and that the persons preparing
the reports have sufficient and appropriate expertise
through their experience and qualifications. Furthermore,
we believe that the process is planned and managed to
devote adequate time and resource to preparation and
review by both the Manager and the members of the
Valuation Committee.
We also considered the work of the Valuation Committee
as it relates to other assets in the portfolio. Here, the
combination of detailed processes, rigorous analysis and,
where relevant, external advice has provided comfort over
the portfolio valuations. Two members of this Committee,
myself included, also sit on the Valuation Committee. This
Committee also receives an executive summary of the
Manager’s main valuation report as well as the minutes
from the Valuation Committee.
Share-based payments
Following a decision taken by the Remuneration
Committee to replace the LTIPs used by the Manager
from a complex mixture of share appreciation rights and
performance shares, to restricted share units (RSUs),
we reviewed the details of the transition, the accounting
for RSUs and the impact of the change on the financial
statements for the year. The RSUs are designed to
provide a far simpler structure, with closer alignment to
shareholders’ interests.
Deal approval process
The Committee reviewed a paper prepared by the
Manager summarising the process by which new
private investments as well as investments in externally-
managed equity and hedge funds are approved. The
papers incorporated examples of the due diligence
undertaken by the Manager prior to a decision by its
investment committee. The Committee was pleased
with the carefully structured process and the extent of
the due diligence, including in relation to ESG matters,
undertaken prior to committing capital.
Related party disclosures
Related party transactions are a common feature
of commerce and business. The Group often takes
advantage of opportunities offered to it, or services
provided to it via many relationships built up over time
(including those arising from Board members). Disclosure
of such transactions is a requirement in order to allow
shareholders and other users of the financial statements
to assess the risks and opportunities facing the Group.
We consider the work of the Conflicts Committee in
reviewing advisory services, co-investment transactions
and any other similar arrangements with any related
parties and have discussed with the Manager the
systems and processes in place to identify, review, record
and disclose such transactions. We note the importance
the Board and the Manager place upon the work of the
Conflicts Committee. We have reviewed the disclosures
made in the financial statements regarding such
transactions and consider that the necessary disclosures
have been made.
Internal control
The Board of Directors is responsible for the Group’s
system of internal control although it has delegated the
supervision of the system to this Committee. The system
is designed to manage, rather than eliminate, the risk
of failure to achieve business objectives and, as such,
can provide only reasonable and not absolute assurance
against any material misstatement or loss.
RIT Capital Partners plc Report and Accounts December 2021 43
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Audit and Risk Committee Report
The Board has delegated to the Manager the
implementation and day-to-day management of the
system of internal control within an established
framework acceptable throughout the Group. The system
of internal control is reviewed twice each year by the
Committee, using a comprehensive report prepared by
the Manager. The report outlines each of the principal
risks and their management, covering all aspects of
financial risks (including market risk, liquidity risk etc.)
and operational risk (including key man risk, information
security risk etc.) as is summarised in the Principal Risks
and Viability section on pages 19 to 24. The relative
importance of each principal risk is assessed by reference
to the possible impact on the Group’s net asset value or
share price should a loss occur, alongside the likelihood of
that loss occurring, taking into consideration the existing
control environment. The review included consideration
of the main portfolio exposures, as well as the results
of the quarterly portfolio stress tests. In addition, the
Committee reviewed the log of operational risk incidents
during the year, noting that none had a significant impact
on the business.
The Committee considers that the procedures in place
are consistent with the Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting published by the FRC in September 2014.
Internal audit and compliance
As part of the review of the control environment, the
Manager, through its Compliance Officer, undertakes
an internal audit of selected areas agreed with the
Committee. The 2021 internal audits included a
consideration of fraud risk and engaging external experts
for cyber security testing. In addition, BNP Paribas
Securities Services (as Depositary), undertook a review
of the Manager’s arrangements under AIFMR for
investment administration, compliance, risk management
and business continuity. Also EY separately audited the
client asset procedures in relation to a very small amount
of legacy client money. No material weaknesses were
identified through the course of these reviews and the
Committee considers the resource devoted to internal
audit to be appropriate to the nature of the Company’s
operations.
The Manager also reports to the Committee the results of
its monitoring of external managers’ compliance with the
terms of their investment management arrangements,
as well as periodically reviewing their own control
procedures.
The Board has reviewed the effectiveness of the system
of internal control in operation during the financial year,
and up to the date of this report, through the Committee.
During the reviews conducted, the Committee has not
identified or been apprised of any failings or weaknesses
representing a significant business risk.
BEIS White Paper
The Department for Business, Energy and Industrial
Strategy (BEIS) published a White Paper ‘Restoring trust
in audit and corporate governance’ in March 2021, which
proposes wide-ranging changes to the responsibilities
of the audit committee and considers attestation on
internal controls among other proposals. The Committee
is aware of these proposals and has discussed them
with the Manager and external auditor and will take the
appropriate action once any proposals relevant to the
Company are finalised.
Covid-19
The Group operated remotely, without issue for much
of 2021. Its IT systems have continued to perform well
and all internal control procedures have continued to be
applied with specific adaptations to enable controls to be
effective remotely.
External auditor
The external auditor, EY, has completed its fourth annual
audit following the tender process in 2017.
EY attended all relevant meetings of the Committee
and provided reports on its audit approach and work
undertaken, the quality and effectiveness of the Group’s
accounting records and its findings in connection with
the Group’s annual statutory audit for the year ended
31 December 2021. I have also had regular contact with
the lead audit partner during the year.
44 Report and Accounts December 2021 RIT Capital Partners plc
Audit and Risk Committee Report
The level of non-audit services provided to the Group by
the auditor is subject to pre-approval in accordance with
our policy on non-audit services and is monitored, as
is the auditor’s objectivity in providing such service, to
ensure that the independence of the audit team from the
Group is not compromised. Non-audit services provided
by EY in 2021 totalled £11,500 for audit-related assurance
work (regarding JRCM’s regulated activities). Their
selection for this work was based on cost efficiency and
synergies with the audit process and these services are
permitted by the FRC’s revised Ethical Standard. Further
information on fees paid to the auditor is set out in Note 5
to the financial statements.
The Committee considered EY’s independence, objectivity,
and the effectiveness of the audit process with the benefit
of formal and informal feedback from the Manager and
concluded satisfactorily on each of these points.
As the Chairman has noted, I will not be standing for re-
election at the forthcoming AGM and this will therefore
be my last report as Chairman of this Committee. I would
therefore like to thank my colleagues on the Committee
for their contributions, support and wise counsel
over the years, and the team at the Manager for their
professionalism and commitment to providing the highest
standards of reporting. I am delighted to confirm that
Mike Power has agreed to take over as Chairman of the
Committee, having been a member of this Committee for
eight years.
Amy Stirling
Chairman, Audit and Risk Committee
RIT Capital Partners plc Report and Accounts December 2021 45
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Directors’ Remuneration Report
Introduction
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31 December 2021.
The objective of our approach to remuneration is to
attract and retain talented Directors and senior executives
in order to help deliver sustained superior returns for our
shareholders over the long term.
Having successfully transitioned to a conventional,
non-executive Board, and in line with the three-yearly
timetable, the current Directors’ Remuneration Policy was
approved by shareholders with 99.9% of the vote at the
2020 AGM.
As well as the remuneration of RIT Directors, the
Committee is also responsible for oversight of the
remuneration policies associated with our operating
subsidiaries – JRCM, a regulated entity whose
remuneration arrangements are governed by the
FCA’s applicable Remuneration Codes, and SHL. Here,
incentive schemes are in place, tailored to the respective
businesses and appropriately structured and aligned with
shareholders’ interests.
The Directors’ Remuneration Policy and Remuneration
Report have been prepared in accordance with the Listing
Rules of the FCA, the relevant sections of the Companies
Act 2006 and The Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013 as amended in 2018. It also sets out
how it has applied the principles of the Codes relevant to
the Company.
Directors’ remuneration policy
In accordance with the provisions of the AIC Code and
the UK Code, non-executive Directors’ remuneration
reflects their duties and time commitments and is set at
a reasonable level which is consistent with the
requirement to attract and retain Directors of the
appropriate quality and experience. The Board’s policy is
that the fees paid to the non-executive Directors should
reflect the experience of the Board as a whole, be fair
and should take account of the level of fees paid by other
investment trusts. Any views expressed by shareholders
on the fees being paid to Directors will be taken into
consideration by the Board when reviewing the Directors’
Remuneration Policy.
Furthermore, the Company’s Articles of Association
currently limit the aggregate base fees of the non-
executive Directors (excluding the Chairman) to £400,000
per annum. The non-executive Directors receive base fees
and Committee chairmanship and membership fees. They
46 Report and Accounts December 2021 RIT Capital Partners plc
are not eligible for any other remuneration or benefits
apart from the reimbursement of allowable expenses.
There are no performance conditions relating to Directors’
fees and they are not entitled to any long-term incentive
or pension schemes. No compensation is payable on loss
of office.
Committee structure and responsibilities
I have chaired the Committee since 22 July 2019,
having previously served on it since 26 April 2018. As
at 31 December 2021, the Committee included three
further independent non-executive Directors: Sir James
Leigh-Pemberton, Maggie Fanari and Maxim Parr (who
joined the Committee on 22 April 2021). The Committee
meets at least twice a year on a scheduled basis and
additionally as may be required.
The Committee is responsible for recommending the
fees paid to the non-executive Chairman and Directors,
by reference to the roles and time commitment of each
individual concerned. The final determination of the fees
payable to non-executive Directors is a matter for the
Board of Directors as a whole.
The overall fee structure is assessed in part by reference
to other companies of similar size and business
objectives. The Committee seeks information from JRCM
management and advice from an independent advisor, as
required.
The Remuneration Committee appointed a remuneration
specialist from Alvarez & Marsal, to provide the
Committee with advice. During the year, fees of
approximately £18,142 were paid to Alvarez & Marsal
in respect of their advice. Alvarez & Marsal abides by
the Remuneration Consultant’s Code of Conduct which
requires it to provide objective and impartial advice. It has
no other relationships with the Group and is therefore
independent.
In accordance with Chapter 6 of the Companies Act
2006, the Directors’ Remuneration Policy applies
to the Directors of the Company, all of whom are
non-executives.
Incentive structures
In accordance with the relevant principles of the Codes,
the Remuneration Committee has sought to ensure that
there is an appropriate Group-wide incentive structure
to attract, motivate and retain the high-quality individuals
we need to deliver our long-term strategic aims and
sustainable success. The remuneration approach is
designed to align with and reinforce these strategic aims.
The Group operates an Annual Incentive Scheme (AIS)
for employees as well as longer-term share-based
Directors’ Remuneration Report
awards. In 2021, the Committee reviewed the AIS and
made some modest changes to its structure reflecting
the objectives of the scheme and ensuring it remains
aligned with shareholders’ interests. The annual cap
for total awards under the AIS remains at 0.75% of net
assets. Our approach is designed to measure and reward
the Company’s performance, and seeks to provide an
appropriate balance between shorter-term awards and
longer-term incentives, as well as the need for robust
risk management. Following an extensive review with
our advisers during the year, we are satisfied with the
suitability of the AIS in order to meet our objectives.
The scheme rewards investment outperformance as
measured against two KPIs: RPI plus 3.0% and the ACWI.
It also rewards wider achievements not directly linked to
the NAV return. The AIS is measured annually and includes
longer-term features such as a three-year absolute ‘high
water mark’. In addition, and in particular for management
and senior employees, AIS awards include significant
deferrals into RIT shares, which vest over the subsequent
three years.
We are satisfied that rewards are linked to the strong
investment outperformance achieved in 2021. Decisions
made by the Committee have followed a careful appraisal
of Company performance and at all times aim to reinforce
shareholder alignment, both through the link to our
objectives and also the payment via shares.
The Remuneration Committee retains the ability to
clawback elements of previous awards if necessary.
The second main aspect of the remuneration approach is
a long-term incentive plan (LTIP). Here we also carefully
considered the appropriate structures used for longer-
term incentives, shareholder alignment and retention.
With advice from Alvarez & Marsal, we switched from
a mixture of share appreciation rights and performance
shares to restricted share units (RSUs). These have the
dual advantage of reinforcing shareholder alignment
along with greater simplicity. The RSUs vest after three
years and then have a further two-year lock up before the
underlying RIT shares can be sold. They also incorporate
qualitative performance standards, as well as malus and
clawback features. Concurrent with the change in the
nature of LTIPs, employees were given the option to
transfer existing LTIP awards at fair value into RSUs, with
the majority choosing to do so.
Consulting with shareholders
Where appropriate, the Committee is responsible
for ensuring that there is pro-active engagement and
consultation with major shareholders and shareholder
representatives in respect of remuneration.
No payments were made to past Directors during the year.
Non-executive Directors’ remuneration
The remuneration of the non-executive Chairman
and Directors is determined by the Board as a whole.
Non-executive fees are reviewed periodically by the
Board with reference to market levels in comparably
sized listed companies. The Board has discretion to
periodically review and amend fee rates and with effect
from 1 January 2022, it approved the Remuneration
Committee’s recommendation to increase the annual
base fee for each non-executive Director (excluding
the non-executive Chairman) from £30,000 to £35,000.
This is the first such increase since 2016 and follows
advice from Alvarez & Marsal on the level of fees paid to
non-executive directors of other investment trusts. The
current fee rates are listed below:
Base fee:
Non-executive Chairman1
Non-executive Director
Additional fees:
Senior Independent Director fee
Committee membership fees:
Audit and Risk Committee
Conflicts Committee
Nominations Committee
Remuneration Committee
Valuation Committee
Audit and Risk Committee Chairmanship2
All other Committees’ Chairmanship fee
(per committee)2
£150,000
£35,000
£7,500
£6,000
£3,000
£4,000
£4,000
£6,000
£10,000
£7,500
1 The non-executive Chairman fee is inclusive of membership of Board
Committees.
2 The Committee Chairmanship fees are in addition to the Committee
membership fees.
The non-executive Directors each have letters of
appointment that are subject to termination upon one
month’s written notice on either side. The non-executive
Chairman’s letter of appointment provides for six months’
notice on either side.
The letters of appointment for the non-executive
Directors are available for inspection at the Company’s
registered office.
RIT Capital Partners plc Report and Accounts December 2021 47
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Directors’ Remuneration Report
Fees
The total fees payable to Directors for the year was
£525,184 (compared to £532,514 in the year ended
31 December 2020). This includes the Directors’ base
fees (subject to a cap) as well as committee fees.
The aggregate base fees of the non-executive Directors
(excluding the Chairman) for the year was £260,923,
which was within the £400,000 limit for such fees under
the Company’s Articles of Association.
Statement of Directors’ shareholdings – audited
The interests of the Directors holding office at
31 December 2021 in the ordinary shares of the
Company are shown below:
Ordinary shares
of £1 each
Sir James Leigh-
Pemberton
Philippe Costeletos
Maggie Fanari
Maxim Parr
André Perold
Mike Power
Hannah
Rothschild1
Amy Stirling
31 December 2021
Beneficial
Non-
beneficial
% of voting
rights
5,855
51,850
–
–
–
2,488
–
–
–
–
–
–
0.00
0.03
–
–
–
0.00
14,354,565 15,402,708
–
2,058
18.99
0.00
1 The majority of the beneficial interests shown in the table above
for Hannah Rothschild are in respect of shares held via trusts or
companies where she is either one of the beneficiaries or one of
the individuals able to exert significant influence. Similarly, the
non-beneficial interests are held through a charitable foundation
where Hannah is one of the controlling trustees.
Between the end of the year and the date of this report,
there were no changes in the Directors’ interests.
Requests from the Chairman for permission to deal
in the ordinary shares of the Company are considered
by the Senior Independent Director. Requests from
other Directors are referred to the Chairman or Senior
Independent Director. Employees of the Group are
subject to approval by the JRCM Executive Committee
and/or JRCM’s Compliance Officer.
Except as stated in Note 17 to the financial statements no
Director has, or has had during the year under review, any
beneficial interest in any contract or arrangement with the
Company or any of its subsidiaries within the terms set
out in the FCA Listing Rules.
Annual report on remuneration
The annual report on remuneration will be put to
an advisory shareholder vote at the 2022 AGM. The
information on page 48 has been audited where required
under the regulations and is indicated as audited
information where applicable.
Directors’ remuneration – audited
Directors’ remuneration is in the form of fees and, if
applicable, taxable benefits comprising of travel and
subsistence expenses incurred by or on behalf of
Directors in the course of travel to attend Board or
Committee meetings.
The following table sets out the total remuneration for
each Director, which comprises fees and any taxable
benefits applicable to a Director.
Year ended 31
December
Non-executive
Director
Chairman
Sir James Leigh-
Pemberton
Directors
Philippe
Costeletos
Maggie Fanari
Michael Marks1
Maxim Parr2
André Perold3
Mike Power
Hannah Rothschild
Jeremy Sillem4
Jonathan Sorrell4,5
Amy Stirling
The Duke of
Wellington1
2021
2020
Total
remuneration
£
Total
remuneration
£
Change
%
150,000
150,000
–
69,500
67,895
37,000
–
41,774
36,000
49,500
30,000
28,856
30,554
52,000
–
37,000
12,500
23,350
43,714
49,500
30,000
40,215
21,554
52,000
12,500
2.4
–
n/a
78.9
(17.6)
–
–
(28.2)
41.8
–
n/a
1 Michael Marks and the Duke of Wellington retired as Directors of
the Company on 26 May 2020.
2 Maxim Parr was appointed as a Director of the Company on 26 May
2020.
3 André Perold received £7,714 taxable benefits relating to travel from
overseas in 2020, in addition to his annual Director fee of £36,000
received in 2020 and 2021.
4 Jeremy Sillem and Jonathan Sorrell retired as Directors of the
Company on 4 November 2021.
5 Jonathan Sorrell was appointed as a Director of the Company on
26 May 2020.
Note: Lord Rothschild, the Company’s Honorary President, founder
and former Chairman, received a contribution of £41,250 towards
his office and medical insurance costs for the nine months up to
and including September 2020, after which time these contributions
ceased.
48 Report and Accounts December 2021 RIT Capital Partners plc
Directors’ Remuneration Report
Audit
The tables in this report on page 48 have been audited by
Ernst & Young LLP.
The Directors’ Remuneration Report on pages 46 to 49
was approved by the Board and signed on its behalf by:
Philippe Costeletos
Chairman, Remuneration Committee
Relative importance of spend on pay
The following table shows the year-on-year movement
in total remuneration of all employees, compared to the
dividends paid and share buybacks.
£ million
Total staff costs
Dividends
Share buybacks
Year ended
31 December
2020
35.9
Year ended
31 December
2021
46.9
54.7
2.3
55.0
1.4
Change
11.0
0.3
(0.9)
Statement of shareholder voting
Votes in respect of the resolution to approve the
Directors’ Remuneration Report at the Company’s AGM
in April 2021 were cast as follows:
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of
shares
72,158,731
312,122
72,470,853
468,297
% of
votes cast
99.9
0.1
100.0
–
Performance graph
In accordance with the Directors’ Remuneration Report
regulations, a performance graph which measures the
Company’s TSR over the period from 31 March 2011
against that of a broad equity market index is shown
below. This is calculated by reference to the Company’s
share price including dividend reinvestment. The
Committee considers the ACWI to be the most suitable
index for this purpose, being a KPI. In addition, the graph
includes the Company’s absolute return hurdle of RPI plus
3.0%. Further information can be found in the Company’s
Strategic Report.
340
300
260
220
180
140
100
60
Mar
2011
RIT total shareholder return
ACWI
RPI plus 3.0%
Mar
2012
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Dec
2020
Dec
2021
RIT Capital Partners plc Report and Accounts December 2021 49
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Directors’ Report
Directors’ Report: statutory and other disclosures
The Directors present their report and audited financial statements for the year ended 31 December 2021.
Business review and future
developments ............................... page 3
Corporate governance ............... page 29
Directors’ remuneration ..............page 46
Directors’ shareholdings .............page 48
Dividend ........................................page 4
Risk management
and internal control .................... page 19
The section above identifies where certain information required to be disclosed in the Directors’ Report is shown within
other sections of the Report and Accounts (and forms part of the Directors’ Report) starting on the page indicated. Additional
statutory disclosures are set out below.
Status of Company
The Company is registered as a public company and is
incorporated in the UK and registered in England and
Wales (Company Registration Number 2129188). It
conducts its affairs so as to qualify for approval as an
investment trust for tax purposes, and has been accepted
as an approved investment trust by HMRC, subject to
continuing to meet eligibility conditions. The Directors
are of the opinion that the Company has conducted its
affairs in a manner which will satisfy the conditions for
continued approval as an investment trust under Section
1158 of the Corporation Tax Act 2010.
The Company’s subsidiaries are mainly engaged in
investment activities and the activities of the Group are
principally undertaken in the UK.
Directors
The Directors at the date of this report are listed on
pages 26 and 27.
During the year ended 31 December 2021:
Directorate changes
•
Jeremy Sillem and Jonathan Sorrell both retired as
Directors on 4 November 2021.
Committee composition
•
Sir James Leigh-Pemberton was appointed as a
member of the Conflicts Committee on 22 April
2021; and
•
Maxim Parr was appointed as a member of the
Remuneration Committee on 22 April 2021.
Corporate Objective
The Company’s Corporate Objective is: “to deliver
long-term capital growth, while preserving shareholders’
capital; to invest without the constraints of a formal
benchmark, but to deliver for shareholders increases in
capital value in excess of the relevant indices over time.”
Investment Policy
The Company’s Investment Policy is: “to invest in a
widely diversified, international portfolio across a range
of asset classes, both quoted and unquoted; to allocate
part of the portfolio to exceptional managers in order to
ensure access to the best external talent available.”
50 Report and Accounts December 2021 RIT Capital Partners plc
Asset allocation and risk diversification
The Group’s assets continue to be allocated across a
diversified range of asset classes, geographies, industries
and currencies. There are no external restrictions on the
allocation of assets. The portfolio is further diversified
through the use of external managers with different
mandates. Exposures are monitored and managed by
JRCM under the supervision of the Board.
Gearing
The Company maintains structural gearing principally
through fixed-rate private placement notes and revolving
credit facilities. At 31 December 2021, the drawn
indebtedness was £409 million with debt held at fair
value, or £391 million with debt held at par value. This
represented net gearing calculated in accordance with
AIC guidance of 6.1%.
The maximum indebtedness that the Company is
empowered to incur under its Articles of Association is
five times its adjusted capital and reserves.
Further information is shown under debt and leverage on
page 14.
Direct and indirect investment management fees
Consistent with the Investment Policy, the Company
invests a significant proportion of the portfolio with
external managers. The majority of the management and
performance fees charged by such managers are incurred
indirectly by the Company as they are included within the
fund investment valuations and therefore form part of the
investment return. Three fund investments are structured
as segregated accounts. Here, the fees are incurred
directly by the Company (see Note 3 on page 65).
Fees within the long-only equity funds, whether
structured as segregated accounts or otherwise, typically
involve a 1% per annum management fee and in some
cases a performance fee for outperformance relative to
a benchmark. The hedge funds and absolute return and
credit funds are slightly higher – typically a 1% to 2%
management fee and a 15% to 20% performance fee.
Private equity fees are structured differently and will
usually have a 1% to 2% annual charge (often based on
commitments in early years and declining over time with
Directors’ Report
realisations), as well as a 20% carried interest above an
8% hurdle.
The shares of the Company qualify for inclusion within an
Individual Savings Account.
Aggregate management fees (excluding performance
fees and net of fee rebates) for the external funds for
2021 have been estimated at 0.87% of RIT’s total
average net assets (2020: 0.89%).
Share capital
At 31 December 2021, the issued share capital
comprised 156,848,065 £1 ordinary shares, of which
175,229 were held by the Company in treasury following
a series of share buybacks. Further details are shown in
Note 20 on page 79.
No £1 ordinary shares were issued during the year and
the existing shareholder authorities given to the Company
at the last AGM to allot and purchase shares will expire
at the conclusion of the Company’s forthcoming AGM
scheduled for 4 May 2022. At the AGM, shareholders will
be asked to renew these authorities, as explained in the
separate Notice of the meeting.
Major holders of voting rights
As at 31 December 2021, the following notifications
had been received from the holders of 3% or more of
the voting rights conferred through the direct or indirect
holding of the Company’s ordinary shares of £1 each.
31 December 2021
Total number
of shares
% of
voting rights5
Major holders of
voting rights1
Lord Rothschild2,3
Hannah Rothschild2
The Rothschild
Foundation2
19,426,817
15,402,708
15,390,848
Five Arrows Limited4
6,757,835
Direct or
indirect
Indirect
Indirect
Direct
Direct
12.40
9.83
9.82
4.31
1 The above table does not include Lord Rothschild’s or Hannah
Rothschild’s direct voting rights in shares in the Company which are
below the notifiable threshold.
2 As Lord Rothschild and Hannah Rothschild are both trustees of the
Rothschild Foundation, the above notifiable interests include the
same 15,390,848 shares held by this charity (which also represent
Hannah Rothschild’s non-beneficial interests on page 48 under
Directors’ shareholdings).
3 Part of Lord Rothschild’s holdings include entities where Hannah
Rothschild is one of the beneficiaries, and therefore the relevant
shares also form part of her beneficial interests on page 48.
4 Lord Rothschild and Hannah Rothschild have an indirect beneficial
interest in the shares of the Company held by Five Arrows Limited.
5 The total interests notified to the Company that directly relates to,
and is overseen by, the family offices of Lord Rothschild and Hannah
Rothschild (including shares in which Lord Rothschild and Hannah
Rothschild do not have voting rights conferred through a direct or
indirect holding) is 20.94%.
As at 21 February 2022, the voting rights in the above
table remained unchanged.
There are no restrictions or significant agreements that may
restrict, on a change of control, transfer of securities in the
Company or the voting rights attached to those securities.
Corporate responsibility
The Board is responsible for ensuring that appropriate
standards of corporate responsibility are adopted within
the Group, with day-to-day responsibility residing with our
Manager.
Within our own Group activities, we have always sought
to ensure we act as good corporate citizens through
minimising our environmental impact, and robust
corporate governance reinforced with an awareness of
our social responsibility.
In respect of the environment the Board considers
our primary environmental impact comes from direct
emissions generated from business travel, and from our
premises. Where possible, executives will only travel
where alternatives such as video conference facilities
are not practical. In relation to its premises, page 34 sets
out how the Company monitors and has taken steps to
reduce its GHG emissions and maximise the recycling of
materials.
Total energy consumption for the year ended
31 December 2021 was 367,646 kWh compared to
297,987 kWh for the year ended 31 December 2020.
The increase in total energy consumption during the year
reflects the Covid-related lockdowns closing our office for
much of 2020, before a gradual re-opening and a return to
working from the office in accordance with government
guidelines during the course of 2021.
GHG emissions required to be reported in respect of
the years ended 31 December 2021 and 2020 were as
follows:
Source
2021:
Scope 1 Gas
Scope 2 Electricity
Total
Source
2020:
Scope 1 Gas
Scope 2 Electricity
Total
1 Full-time occupant.
Intensity ratio:
CO2 (tonnes)
per FTO1
CO2 (tonnes)
18
57
75
0.2
0.9
1.1
Intensity ratio:
CO2 (tonnes)
per FTO1
CO2 (tonnes)
15
51
66
0.2
0.7
0.9
Our GHG emissions are calculated for the Group under
the financial control approach and in accordance with ISO
14064-1: 2018 standard using the 2021 GHG conversion
RIT Capital Partners plc Report and Accounts December 2021 51
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Directors’ Report
factors developed by the Department for Environment,
Food & Rural Affairs.
The Group supports the ambitions of the Paris Climate
Change Agreement and is committed to reducing its
emissions. As a result, we intend to take steps to
further develop our understanding of the impact of Scope
3 emissions as part of our aim to continue lowering
our emissions from our supply chain and business
activities. This will also form part of our consideration of
the requirements of the Task Force on Climate-related
Financial Disclosures (TCFD) in advance of any reporting
of the TCFD by the Group.
Save for voting rights on the Company’s investments held
in segregated accounts (managed by external managers
who have control on the voting of those shares) the
Manager’s investment department determines voting
on resolutions of directly-held investee companies and
funds. It does not use proxy advisors.
In line with the Engagement and Stewardship Policy,
the Manager will exercise the Company’s vote on items
where it is in the long-term interest of the Company and
its shareholders. In addition, as a signatory of the UN PRI,
we also commit to be active owners and incorporate ESG
issues into our stewardship policies and practices.
The Group operates an ethics policy which applies to
all staff, including in relation to social and human rights
issues. The Board is also supportive of moves towards
greater diversity. At the year end, the RIT Board consisted
of eight Directors, five of whom were men and three
of whom were women. The Board is also committed to
appointing a person of colour to the Board well within the
timeframe of the recommendations of the Parker Review.
The overall employee base is divided between 43 men
and 15 women.
Further information on how ESG factors are considered in
terms of how we engage with our stakeholders is set out
in our Corporate Governance Report.
Diversity
As part of the Group’s diversity policy, recruitment
processes are in place to allow us to monitor the diversity
of Board candidates and job applicants, ensuring we
are attracting potential candidates from a variety of
backgrounds. Further initiatives that we have in place
to support diversity include a flexible working policy,
enhanced maternity leave as well as adoption and shared
parental leave.
JRCM participates in the ‘#10000BlackInterns
programme’ initiative to attract a more diverse range of
talent to the asset management sector and had its first
interns under the programme in the summer of 2021.
Modern slavery
We do not tolerate slavery or human trafficking and we
are committed to acting ethically and with integrity in all
our business dealings and relationships. In accordance
with the Modern Slavery Act 2015, JRCM publishes a
Modern Slavery Statement annually which may be viewed
on the Company’s website: www.ritcap.com.
Engagement and stewardship
The Company’s Engagement and Stewardship Policy may
be viewed on its website.
In 2021, the Company generally voted in favour of
resolutions for investee companies in which it held a
publicly notifiable interest. Monitoring of directly-held
investments is also carried out by JRCM’s investment
department, in line with its Responsible Investment Policy
& Framework, who are responsible for elevating any
matters of concern to the JRCM Investment Committee.
Active intervention appropriate for the circumstances will
be considered where it is in the Company’s best interests
and aligned with the commitments set out in the previous
paragraph.
Cross holdings
The FCA Listing Rules also require closed-ended
investment companies to disclose quarterly all of their
investments in “other listed closed-ended investment
funds ... which themselves do not have stated investment
policies to invest no more than 15% of their total assets
in other listed closed-ended investment funds.”
The Group discloses such investments when necessary,
but does not restrict its own investment policies in this
manner. There were no such investments held by the
Group as at 31 December 2021 and 31 December 2020.
Annual General Meeting
The Company’s AGM is scheduled to be held on 4 May at
3:30pm. Further details will be sent out in the notice of AGM
to be circulated to shareholders and made available on the
Company’s website: www.ritcap.com, in due course.
Auditor
EY has expressed its willingness to continue in office
as the Company’s external auditor. Resolutions to
reappoint EY and to authorise the Directors to set their
remuneration will be proposed at the forthcoming AGM.
Other
The Company seeks to agree the best possible terms on
which business will take place with its suppliers. It is the
Company’s policy to abide by such terms.
52 Report and Accounts December 2021 RIT Capital Partners plc
Directors’ Report
The Company maintained a qualifying third-party liability
insurance for its Directors and Officers throughout the
year and up to the date of approval of the financial report
and accounts.
Statement by the Directors in performance of
their statutory duties in accordance with s172(1)
Companies Act 2006
The Directors consider, both individually and together,
that they have acted in a way they consider, in good faith,
is most likely to promote the success of the Company for
the benefits of its members as a whole (having regard to
the stakeholders and matters set out in s172(1)(a-f) of the
Companies Act 2006 in the decisions taken during the
year ended 31 December 2021 (see pages 7, 8, 31, 33
and 34).
Disclosure of information to the auditor
With regard to the preparation of the Report and Accounts
of the Company for the year ended 31 December 2021,
the Directors have confirmed to the auditor that:
•
•
so far as they are aware, there is no relevant audit
information of which the auditor is unaware; and
they have taken the steps that they ought to have
taken as Directors in order to make themselves
aware of any relevant audit information and to
establish that the auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
Listing Rules disclosures
There are no disclosures required under Listing
Rule 9.8.4.
The Companies, Partnerships and Groups (Accounts
and Reports) Regulations 2015
Information on subsidiaries that is required to be
disclosed under the above regulations is disclosed in
Note 29.
Disclosable information in respect of other investments is
contained in Note 32.
The Directors’ Report on pages 50 to 53 was approved by
the Board and signed on its behalf by:
Sir James Leigh-Pemberton
Chairman
RIT Capital Partners plc Report and Accounts December 2021 53
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Financial Statements
for the year ended 31 December 2021
RIT Capital Partners plc
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Consolidated Income Statement and Consolidated Statement
of Comprehensive Income
Consolidated income statement
Year ended 31 December
£ million
Investment income
Other income
Gains/(losses) on fair value investments
Gains/(losses) on monetary items and borrowings
Expenses
Operating expenses
Profit/(loss) before finance costs and tax
Finance costs
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Earnings/(loss) per ordinary share – basic
Earnings/(loss) per ordinary share – diluted
Notes
2
3
4, 5
6
7
8
9
9
Revenue
12.7
3.8
–
–
16.5
(29.6)
(13.1)
(4.0)
(17.1)
(0.2)
(17.3)
(11.1p)
(11.0p)
Capital
–
–
901.8
18.0
919.8
(24.8)
895.0
(16.0)
879.0
(2.5)
876.5
561.4p
556.5p
2021
Total
12.7
3.8
901.8
18.0
936.3
(54.4)
881.9
(20.0)
861.9
(2.7)
859.2
550.3p
545.5p
Revenue
14.6
8.1
–
–
22.7
(20.6)
2.1
(3.3)
(1.2)
–
(1.2)
(0.8p)
(0.8p)
Capital
–
–
518.5
21.7
540.2
(22.8)
517.4
(13.2)
504.2
0.9
505.1
323.2p
321.8p
2020
Total
14.6
8.1
518.5
21.7
562.9
(43.4)
519.5
(16.5)
503.0
0.9
503.9
322.4p
321.0p
The total column of this statement represents the Group’s consolidated income statement, prepared in accordance with UK adopted
international accounting standards (UK adopted IAS). The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing
operations.
Consolidated statement of comprehensive income
Year ended 31 December
£ million
Profit/(loss) for the year
Revaluation gain/(loss) on property, plant and equipment
Actuarial gain/(loss) in defined benefit pension plan
Deferred tax (charge)/credit allocated to actuarial gain/
(loss)
Total comprehensive income/(expense) for the year
Notes
10
11
12
Revenue
(17.3)
–
1.9
Capital
876.5
(0.2)
–
(1.1)
(16.5)
–
876.3
2021
Total
859.2
(0.2)
1.9
(1.1)
859.8
Revenue
(1.2)
–
(0.8)
Capital
505.1
(1.8)
–
0.1
(1.9)
–
503.3
2020
Total
503.9
(1.8)
(0.8)
0.1
501.4
The Notes on pages 61 to 84 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2021 55
Consolidated Balance Sheet
At 31 December
£ million
Non-current assets
Investments held at fair value
Investment property
Property, plant and equipment
Deferred tax asset
Retirement benefit asset
Derivative financial instruments
Current assets
Derivative financial instruments
Other receivables
Amounts owed by group undertakings
Cash at bank
Total assets
Current liabilities
Borrowings
Derivative financial instruments
Other payables
Amounts owed to group undertakings
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liability
Provisions
Lease liability
Net assets
Equity attributable to owners of the Company
Share capital
Share premium
Capital redemption reserve
Own shares reserve
Capital reserve
Revenue reserve
Revaluation reserve
Total equity
Net asset value per ordinary share – basic
Net asset value per ordinary share – diluted
Notes
2021
2020
13, 14
13, 15
10
12
11
13
13
16
17
18
13
19
18
13
12
20
21
22
23
25
26
27
28
28
4,291.8
38.3
23.1
–
3.8
2.9
4,359.9
32.7
262.8
3.7
325.9
625.1
4,985.0
(240.0)
(8.2)
(168.8)
–
(417.0)
208.1
4,568.0
(168.9)
(2.9)
(1.3)
(1.0)
(3.6)
(177.7)
4,390.3
156.8
45.7
36.3
(23.0)
4,174.4
(11.4)
11.5
4,390.3
2,819p
2,794p
3,520.2
37.8
23.6
2.5
0.7
0.3
3,585.1
57.3
105.3
–
296.8
459.4
4,044.5
(189.0)
(4.5)
(63.5)
(5.3)
(262.3)
197.1
3,782.2
(181.5)
(5.4)
–
(1.1)
(3.8)
(191.8)
3,590.4
156.8
45.7
36.3
(15.3)
3,350.1
5.1
11.7
3,590.4
2,303p
2,292p
The financial statements on pages 55 to 60 were approved by the Board and authorised for issue on 28 February 2022.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 61 to 84 form part of these financial statements.
56 Report and Accounts December 2021 RIT Capital Partners plc
Parent Company Balance Sheet
At 31 December
£ million
Non-current assets
Investments held at fair value
Investment property
Property, plant and equipment
Investments in subsidiary undertakings
Derivative financial instruments
Current assets
Derivative financial instruments
Other receivables
Cash at bank
Total assets
Current liabilities
Borrowings
Derivative financial instruments
Other payables
Amounts owed to group undertakings
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Lease liability
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Capital reserve:
At 1 January
Profit for the year
Treasury shares purchase
Dividends paid
Capital reserve at 31 December
Revenue reserve:
At 1 January
Loss for the year
Revenue reserve at 31 December
Revaluation reserve
Total equity
Notes
2021
2020
13, 14
13, 15
10
29
13
13
16
18
13
19
17
18
13
20
21
22
20
30
25
26
27
4,190.5
38.3
23.0
107.5
2.9
4,362.2
32.7
262.4
313.9
609.0
4,971.2
(240.0)
(8.2)
(143.8)
(125.1)
(517.1)
91.9
4,454.1
(168.9)
(2.9)
(1.0)
(3.7)
(176.5)
4,277.6
156.8
45.7
36.3
3,380.8
879.0
(1.4)
(55.0)
4,203.4
(136.8)
(39.3)
(176.1)
11.5
4,277.6
3,450.7
37.8
23.4
75.6
0.3
3,587.8
57.3
104.9
260.6
422.8
4,010.6
(189.0)
(4.5)
(43.4)
(87.4)
(324.3)
98.5
3,686.3
(181.5)
(5.4)
(1.1)
(3.8)
(191.8)
3,494.5
156.8
45.7
36.3
2,910.9
526.9
(2.3)
(54.7)
3,380.8
(97.6)
(39.2)
(136.8)
11.7
3,494.5
The Company’s total comprehensive income for the year was £839.5 million (2020: £485.9 million).
The financial statements on pages 55 to 60 were approved by the Board and authorised for issue on 28 February 2022.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 61 to 84 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2021 57
Consolidated Statement of Changes in Equity
£ million
Balance at 1 January 2020
Profit/(loss) for the year
Revaluation gain/(loss) on property, plant and
equipment
Actuarial gain/(loss) in defined benefit plan
Deferred tax (charge)/credit allocated to
actuarial gain/(loss)
Total comprehensive
income/(expense) for the year
Dividends paid
Purchase of treasury shares
Movement in own shares reserve
Movement in share-based payments
Balance at 31 December 2020
Balance at 1 January 2021
Profit/(loss) for the year
Revaluation gain/(loss) on property, plant and
equipment
Actuarial gain/(loss) in defined benefit plan
Deferred tax (charge)/credit allocated to
actuarial gain/(loss)
Total comprehensive
income/(expense) for the year
Dividends paid
Purchase of treasury shares
Movement in own shares reserve
Movement in share-based payments
Balance at 31 December 2021
Share
capital
156.8
–
Share
premium
45.7
–
Capital
redemption
reserve
36.3
–
Own
shares
reserve
(7.8)
–
Capital
reserve
2,894.1
505.1
Revenue
reserve
7.0
(1.2)
Revaluation
reserve
13.5
–
Total
equity
3,145.6
503.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
156.8
156.8
–
–
–
45.7
45.7
–
–
–
36.3
36.3
–
(7.5)
–
(15.3)
(15.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.7)
–
–
–
505.1
(54.7)
(2.3)
–
7.9
3,350.1
3,350.1
876.5
–
–
–
876.5
(55.0)
(1.4)
–
–
156.8
–
45.7
–
36.3
–
(23.0)
4.2
4,174.4
–
(0.8)
0.1
(1.9)
–
–
–
5.1
5.1
(17.3)
–
1.9
(1.8)
–
(1.8)
(0.8)
–
0.1
(1.8)
–
–
–
11.7
11.7
–
(0.2)
–
501.4
(54.7)
(2.3)
(7.5)
7.9
3,590.4
3,590.4
859.2
(0.2)
1.9
(1.1)
–
(1.1)
(16.5)
–
–
–
–
(11.4)
(0.2)
–
–
–
–
11.5
859.8
(55.0)
(1.4)
(7.7)
4.2
4,390.3
The Notes on pages 61 to 84 form part of these financial statements.
58 Report and Accounts December 2021 RIT Capital Partners plc
Parent Company Statement of Changes in Equity
£ million
Balance at 1 January 2020
Profit/(loss) for the year
Revaluation gain/(loss) on property, plant and equipment
Total comprehensive income/(expense) for the year
Dividends paid
Purchase of treasury shares
Balance at 31 December 2020
Balance at 1 January 2021
Profit/(loss) for the year
Revaluation gain/(loss) on property, plant and equipment
Total comprehensive income/(expense) for the year
Dividends paid
Purchase of treasury shares
Balance at 31 December 2021
Share
capital
156.8
–
–
–
–
–
156.8
156.8
–
–
–
–
–
156.8
Share
premium
45.7
–
–
–
–
–
Capital
redemption
reserve
36.3
–
–
–
–
–
45.7
45.7
–
–
–
–
–
45.7
36.3
36.3
–
–
–
–
–
Capital
reserve
2,910.9
526.9
–
526.9
(54.7)
(2.3)
3,380.8
3,380.8
879.0
–
879.0
(55.0)
(1.4)
Revenue
reserve
(97.6)
(39.2)
–
(39.2)
–
–
Revaluation
reserve
13.5
–
(1.8)
(1.8)
–
–
(136.8)
(136.8)
(39.3)
–
(39.3)
–
–
11.7
11.7
–
(0.2)
(0.2)
–
–
Total
equity
3,065.6
487.7
(1.8)
485.9
(54.7)
(2.3)
3,494.5
3,494.5
839.7
(0.2)
839.5
(55.0)
(1.4)
36.3
4,203.4
(176.1)
11.5
4,277.6
The Notes on pages 61 to 84 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2021 59
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Consolidated and Parent Company Cash Flow Statement
Year ended 31 December
£ million
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest
Interest paid
Net cash inflow/(outflow) from operating activities
Notes
31
Cash flows from investing activities:
Sale/(purchase) of property, plant and equipment
Investments in subsidiary undertakings
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities:
Repayment of borrowings
Drawing of borrowings
Purchase of ordinary shares by EBT1
Purchase of ordinary shares into treasury
Dividends paid
Net cash inflow/(outflow) from financing activities
Increase/(decrease) in cash in the year
Cash at the start of the year
Effect of foreign exchange rate changes on cash
Cash at the year end
Reconciliation:
Cash at bank
Cash at the year end
23
20
30
1 Shares are disclosed in the own shares reserve on the consolidated balance sheet.
Consolidated cash flow
2020
2021
Parent Company cash flow
2020
2021
71.8
(20.0)
51.8
(0.1)
–
(0.1)
(421.9)
469.8
(21.0)
(1.4)
(55.0)
(29.5)
22.2
296.8
6.9
325.9
325.9
325.9
172.3
(16.4)
155.9
(0.2)
–
(0.2)
(295.0)
445.0
(10.1)
(2.3)
(54.7)
82.9
238.6
61.1
(2.9)
296.8
296.8
296.8
78.1
(20.0)
58.1
(0.1)
(3.1)
(3.2)
(421.9)
469.8
–
(1.4)
(55.0)
(8.5)
46.4
260.6
6.9
313.9
313.9
313.9
147.5
(16.4)
131.1
(0.2)
(15.4)
(15.6)
(295.0)
445.0
–
(2.3)
(54.7)
93.0
208.5
55.0
(2.9)
260.6
260.6
260.6
The Notes on pages 61 to 84 form part of these financial statements.
60 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
1. Accounting Policies
The consolidated financial statements of the Group and Company
are prepared in accordance with UK adopted IAS and, as regards
the parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006. The Company has
taken advantage of section 408 of the Companies Act 2006 not to
present the parent company profit and loss account. The Company is
domiciled in the United Kingdom.
The financial statements have been prepared on a going concern
basis and under the historical cost convention except for the
revaluation of financial instruments (including derivatives),
investment properties held at fair value through profit or loss (FVPL),
associates held at FVPL, certain non-consolidated subsidiaries held
at FVPL, and property, plant and equipment held at fair value. In
making this going concern assumption the Directors have taken into
account the closed-ended nature of the Company, its existing cash
balances (£326 million) and monitoring procedures, its borrowing
capacity (£150 million facilities committed and undrawn), as well as
the value of investments which could be realised to fund liabilities,
and covenants as well as cash flow forecasts for the period to 30
June 2023 and uncalled commitments (£360 million). Further details
can be found on page 24.
The principal accounting policies adopted are set out below.
Where the presentational guidance set out in the Statement of
Recommended Practice: Financial Statements of Investment Trust
Companies (the SORP) issued by the Association of Investment
Companies (AIC) in April 2021 is consistent with the requirements
of UK adopted IAS the Directors have sought to prepare the financial
statements on a basis which complies with the recommendations of
the SORP.
Climate change
In preparing the financial statements, the Directors have considered
the impact of climate change insofar as they are reasonably able,
particularly in the context of the climate-related risks identified
in the principal risks and viability section of the Strategic Report.
These considerations did not have a material impact on the financial
reporting judgements and estimates in the current year, nor were
they expected to have a significant impact on the Group’s going
concern or viability.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. The Board has
concluded that the Company, being the parent entity of the Group,
continues to meet the particular characteristics of an ‘Investment
Entity’. The ‘Investment Entity’ amendment to IFRS 10 Consolidated
Financial Statements requires that:
(i) the single subsidiary J.Rothschild Capital Management Limited
(JRCM), that is not itself an investment entity, which provides
investment management services to the Group, is consolidated
on a line-by-line basis with balances between the parent and this
subsidiary eliminated; and
(ii) all other subsidiaries, including Spencer House Limited (SHL), are
accounted for as investments held at FVPL.
In the financial statements of the Company investments in
non-consolidated subsidiaries are carried at fair value and the
consolidated subsidiary is carried at cost less any provision for
impairment made in accordance with IAS 36 Impairment of Assets.
Impairment tests are carried out twice each year concurrent with the
Group’s principal reporting dates.
The financial statements of the subsidiaries are prepared at the
same reporting date using consistent accounting policies. Control is
achieved where the Company has all of the following;
(i) power over the investee;
(ii) exposure, or rights, to variable returns from its involvement with
the investee; and
(iii) the ability to use its power over the investee to affect the amount
of the Company’s returns.
Both the Group and Company hold investments in associates and
joint ventures at fair value as allowed by IAS 28 Investments in
Associates and Joint Ventures and IFRS 9 Financial Instruments.
Presentation of income statement
In order to better reflect the activities of an investment trust
company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the consolidated income
statement between items of a revenue and capital nature has
been presented within the consolidated income statement and the
consolidated statement of comprehensive income (SOCI).
Income
Dividend income from investments is recognised when the right to
receive payment has been established and this is normally the ex-
dividend date.
UK dividend income is recorded at the amount receivable. Overseas
dividend income is shown net of withholding tax under investment
income.
Interest and other income is accrued on a time basis.
Rental income from investment properties under short-term leases
is accounted for on a straight-line basis, over the lease term.
Allocation between capital and revenue
In respect of the analysis between capital and revenue items
presented within the consolidated income statement, the SOCI and
the statement of changes in equity, all expenses and finance costs,
which are accounted for on an accruals basis, have been presented
as revenue items except those items listed below:
•
•
expenses are allocated to capital where a direct connection with
the maintenance or enhancement of the value of the investments
can be demonstrated. Expenses are allocated to revenue where
there is an indirect connection;
all segregated account fees are considered to be a cost of
achieving a capital return for those external managers operating
segregated accounts. This ensures consistency with the
treatment of all other investment management fees within our
fund investments, which are automatically included in capital and
reflected in the investment gain/loss;
RIT Capital Partners plc Report and Accounts December 2021 61
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
•
the Group has in place certain incentive arrangements
whereby individuals receive share awards based on investment
performance and/or share price growth. The cost of these
arrangements derives principally from the capital performance
and therefore the Directors consider it appropriate to allocate
such costs to capital;
•
expenses which are incidental to the purchase or disposal of an
investment are deducted from the initial fair value or disposal
proceeds of the investment; and
•
costs incurred in connection with aborted portfolio investment
transactions are also allocated to capital.
The following are also presented as capital items:
•
•
•
•
gains and losses on the realisation of investments, including
foreign exchange differences;
increases and decreases in the valuation of investments held at
the year end, including foreign exchange differences;
realised and unrealised gains and losses on derivatives
transactions of a capital nature; and
expenses, together with the related taxation effect, allocated to
capital in accordance with the above policies.
Finance costs
Finance costs on borrowings are accounted for on an accruals basis
and are settled at the end of each contractual period. Finance costs
on derivatives are settled in line with the underlying contract.
Finance costs are allocated in the ratio 20:80 to the revenue and
capital columns of the income statement.
Foreign currencies
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment
in which the entity operates, i.e. its functional currency. For the
purpose of the consolidated financial statements, the results and
financial position of each entity are expressed in sterling which is
the functional currency of the Company, and the presentational
currency of the Group. Transactions in currencies other than sterling
are recorded at the rate of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary items
and non-monetary assets and liabilities that are fair valued and
are denominated in foreign currencies are translated at the rates
prevailing on the balance sheet date. All foreign exchange gains and
losses are recognised in the consolidated income statement.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit before tax as reported in the
consolidated income statement because it excludes items of
income or expense that are taxable or deductible in other years
and it further excludes items that are not subject to tax or are not
deductible for tax purposes. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Investment trusts which have approval under Section 1158 of the
Corporation Tax Act 2010 are not subject to tax on capital gains.
In view of the Company’s status as an investment trust, and its
intention to continue meeting the conditions required to maintain
approval for the foreseeable future, the Company has not provided
current or deferred tax on any capital gains or losses arising on the
revaluation or disposal of investments.
The carrying amount of the deferred tax asset is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited to the consolidated income
statement or SOCI, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Investments
Investments are recognised and derecognised on the trade
date where a purchase or sale is made under a contract whose
terms require delivery within the timeframe established by the
market concerned. All investments are measured initially and
at subsequent reporting dates at fair value and classified in
accordance with IFRS as ‘fair value through profit or loss’ (FVPL).
Unrealised changes in the fair value of these investments are
recognised in the consolidated income statement as capital items.
The realised gain or loss arising on the disposal of investments is
determined as the difference between the sale proceeds and the
carrying amount of the asset at the beginning of the year and is
recognised in the consolidated income statement as capital items.
Transaction costs are included within gains or losses on these
investments.
Fair value, for quoted investments, is either the bid price or the
last traded price, depending on the convention of the exchange
on which the investment is quoted. Investments in externally-
managed funds are valued at the closing price, the bid price or
the single price as appropriate, released by the relevant fund
administrator or investment manager.
In respect of private investments, or where the market for a
financial instrument is not active, fair value is estimated by using
appropriate valuation techniques and often involves significant
judgement and estimation uncertainty. For direct private
investments held through co-investment vehicles managed by a
General Partner (GP), as well as private funds managed by a GP, the
estimated fair value is based on the most recent valuation provided
by the GP. These valuations are normally prepared quarterly and
usually received within three months of the relevant valuation date.
Depending on the timing of the finalisation of the half-year and
year-end report and accounts, it is likely that the majority of these
assets are valued at the previous quarter end. Where this is the
case, the valuations of private funds are adjusted for subsequent
investments, distributions and currency moves. In relation to direct
co-investments, the valuations will also be adjusted for subsequent
investments, distributions and currency moves, as well as pricing
62 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
events where there is sufficient information to suggest the period-end
valuation will be adjusted when finalised by the GP. Further, in light
of the intrinsic valuation uncertainty, where information is received
after the year end which relates to conditions present at the year
end, an adjustment will be considered if it would be likely to have a
material impact on the net assets. Ultimately these valuations are
dependent on the reasonableness of the fair value estimation by the
GP. The valuations are reviewed periodically by the Manager, and in
the absence of contrary information, are assumed to be reliable. A
review is also conducted annually in respect of the valuation bases of
the investee funds to confirm these are in accordance with fair value
standards.
Where the Manager has sufficient information to undertake
its own valuations, these will be prepared having regard to the
International Private Equity and Venture Capital Valuation Guidelines
as recommended by the British Private Equity and Venture Capital
Association. The inputs into the valuation methodologies adopted
include observable data such as historical earnings or cash flows as
well as more subjective data such as earnings forecasts or discount
rates. At period ends, all of the valuations are subject to review,
adjustment as appropriate and ultimately approval by the Company’s
Valuation Committee that operates as a sub-committee of the Board
comprised entirely of independent non-executive Directors.
The gains and losses on financial assets classified at FVPL exclude
any related interest income, dividend income and finance costs where
these items are separately identifiable. These items are disclosed
separately in the financial statements.
Leasehold and freehold investment properties are measured initially
at cost, including related transaction costs. After initial recognition at
cost, investment properties are carried at their fair values based on
the external professional valuation made as of each reporting date.
Valuation surpluses and deficits arising in the year are included in the
consolidated income statement.
Derivative financial instruments, including futures, options and
other derivatives, are stated in the balance sheet at fair value. For
derivatives that are capital in nature, the associated change in value
is presented as a capital item in the income statement. The Group
has adopted trade date accounting. Accordingly, derivative financial
instruments are recognised on the date the Group enters into the
relevant contract, and are derecognised on the date on which it
commits to their sale or they expire. All derivatives are classified as
FVPL and are presented as assets when their fair value is positive,
and as liabilities when their fair value is negative.
Cash at bank
Cash at bank in the balance sheet comprises cash balances and
deposits.
Provisions
A provision is recognised in the balance sheet when the Group or
Company has a constructive or legal obligation as a result of a past
event and it is probable that an outflow of economic benefits will be
required to settle the obligation.
Share-based payment
In accordance with IFRS 2 Share-based Payment, the Group is
required to reflect in its income statement and balance sheet the
effects of share-based payment transactions. The Group’s share-
settled incentive schemes include the Annual Incentive Scheme (AIS)
(in part), share appreciation rights (SARs) and restricted share units
(RSUs).
AIS awards are structured such that 60% of individual amounts in
excess of £150,000 to £250,000 (with the lower amount for senior
management) are paid in deferred shares of the Company which vest
equally over the three years following the award. Deferred shares
are valued using the prevailing market price at award. The expense is
recognised over the year the award relates to and the following three
years.
Historically, long-term incentive plan (LTIP) awards were made via
SARs and performance shares. SARs were measured at the fair value
at grant date using a trinomial option valuation model. The cost is then
recognised through the capital column of the income statement over
the three-year vest period.
Performance shares were conditional awards of shares subject to
performance conditions. They were accounted for as equity settled
in accordance with IFRS 2. The awards were fair valued at grant
using a Monte Carlo model and the resulting cost of an award is then
recognised through the capital column of the income statement over
the vest period particular to that award.
Following a review by the Remuneration Committee, it was decided
that from 2021, future LTIP awards would be made using restricted
share units (RSUs), with the first such award in March 2021.
RSUs are equity-settled awards accounted for in accordance with
IFRS 2 and are measured at fair value using the share price at the
grant date, adjusted for a two year post-vesting sale restriction.
The cost is recognised through the revenue column of the income
statement over the three-year vest period.
On the 31 March 2021, staff members were given the option to
convert their existing SARs and performance shares at fair value into
RSUs, with the vast majority subsequently converted. This conversion
was accounted for in accordance with IFRS 2 Share-based Payment.
Shares required to meet the estimated future requirements from
grants or exercises under all schemes, are purchased by an Employee
Benefit Trust (EBT), which is consolidated by the Group. The cost of
own shares held at the end of the year by the EBT is reflected in the
Group’s own shares reserve on the consolidated balance sheet.
The movement in equity arising under IFRS 2 Share-based Payment is
applied to the capital reserve.
Property, plant and equipment
Property, plant and equipment is shown at cost less accumulated
depreciation, save as detailed below. Depreciation is calculated by the
Group on a straight-line basis by reference to original cost, estimated
useful life and residual value. Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its
working condition for its intended use. The period of estimated useful
life for this purpose is between three and five years for the majority of
RIT Capital Partners plc Report and Accounts December 2021 63
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
prevailing market rate for similar instruments. As a result, the
determination of fair value requires management judgement. Further
details of the loan notes are provided on page 79.
Dividends
The Company recognises interim dividends in the year in which they
are paid.
Share capital and share premium
Share capital is classified as equity. Share premium reflects the
excess of the consideration received on issuing shares over the
nominal value of those shares, net of issue costs.
Treasury shares
The cost of repurchasing shares into treasury, including all related
costs, is dealt with in the Statement of Changes in Equity and
deducted from the Capital Reserve.
New and amended standards and interpretations not applied
The new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the financial
statements are disclosed below. The Group intends to adopt these, if
applicable, when they become effective:
•
•
Amendments to UK adopted IAS 1 Presentation of Financial
Statements on the Classification of Liabilities as Current or Non-
current, effective for annual reporting periods beginning on or
after 1 January 2023; and
Amendments to UK adopted IAS 1 Presentation of financial
statements and IFRS Practice Statement 2 Making Materiality
Judgments on the Disclosure of Accounting Policies, which
provide guidance and examples to help entities apply materiality
judgements to accounting policy disclosures, effective for annual
reporting periods beginning on or after 1 January 2023.
The impact of these amendments is not expected to be material to
the reported results and financial position of the Group.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with UK
adopted IAS requires the use of certain critical accounting estimates.
It also requires the Manager and Board to exercise judgement in
the process of applying the Group’s accounting policies. The areas
requiring a higher degree of judgement or complexity and where
assumptions and estimates are significant to the consolidated
financial statements, are in relation to the valuation of private
investments (see pages 62 and 63 and Note 13) and property (see
pages 63 and 64 and Notes 10 and 15).
assets except for the Company’s leasehold interest in 27 St James’s
Place for which the estimated useful life is 62 years. The proportion
of this asset occupied by the Group is accounted for at fair value
under the revaluation model allowed by IAS 16 Property, Plant and
Equipment, which is intended to ensure that the carrying value of
the asset is never substantially different to its fair value. Changes
in fair value are reflected in the SOCI and a separate revaluation
reserve. The proportion of property assets not occupied by the Group
is accounted for as investment properties at fair value. Determination
of fair value requires significant judgement and external advisers are
used.
Pensions
JRCM is a participating employer in the Group’s non-contributory,
funded, defined benefit retirement scheme which is closed to new
members and the assets of which are held in a trustee-administered
fund. There are no longer any active members of this scheme.
The Group accounts for this defined benefit retirement scheme
by reference to IAS 19 Employee Benefits. The cost of benefits
accruing during the year in respect of past service is charged to the
income statement and allocated to revenue. The net interest on
the net defined benefit liability or asset is recognised in the income
statement. Actuarial gains and losses and the return on plan assets,
excluding amounts included in the net interest on the net defined
benefit liability or asset, are recognised in the SOCI. An actuarial
valuation of the defined benefit retirement scheme is undertaken
every three years as at 1 January and is updated as at each principal
reporting date. The valuation is carried out using the projected
unit credit method of funding basis. The income statement also
includes costs incurred in respect of defined contribution schemes,
comprising the contributions payable in the year.
Other receivables/other payables
Other receivables/other payables do not carry any interest, are
short-term in nature and are carried at amortised cost. Application of
the expected credit loss model to receivables has had an immaterial
impact on their carrying value. The carrying value of receivables and
payables approximates to their fair value.
Amounts owed to/by Group undertakings
Amounts owed to/by Group undertakings do not carry any interest
and are carried at amortised cost. Application of the expected credit
loss model to these items has had an immaterial impact on their
carrying value. The carrying value of amounts owed to/by Group
undertakings approximates to their fair value.
Bank borrowings
Interest-bearing bank loans are recorded initially at the proceeds
received and subsequently at fair value. The fair value is calculated as
the amount to replace the facility which is equal to par.
Loan notes
Loan notes are classified as a financial liability at FVPL and are
measured initially and subsequently at fair value with movements
in fair value taken to the income statement as a capital item. The
fair value is calculated with a discounted cash flow model using the
fixed interest and redemption payments based on the underlying
contractual cash flows. The discount rate adopted reflects the
64 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
2. Investment income
£ million
2021
2020
Income from listed investments:
Dividends
Income from unlisted investments:
Dividends
Interest
Income from investment properties
Total investment income
8.5
–
2.2
2.0
12.7
3. Gains/(losses) on fair value investments
£ million
2021
8.1
2.1
2.3
2.1
14.6
2020
Operating expenses include costs incurred by JRCM in managing the
Group's assets, property costs from the Group’s property portfolio,
as well as costs which are recharged to third parties. Further
information is provided in Note 6.
The figures include Directors’ emoluments, details of which are
shown in the Directors’ Remuneration Report on pages 46 to 49.
The average monthly number of employees during the year was
55 (2020: 52) of which 43 (2020: 40) were employed by JRCM and
12 (2020: 12) were employed by SHL.
5. Other disclosable expenses
During the year the Group obtained the following services from the
Company’s auditor and its associates:
908.4
503.2
£ thousand
2021
2020
Gains/(losses) on fair value investments
excluding segregated accounts
Gross gains/(losses) on segregated
accounts
Segregated account fees - annual
Segregated account fees - performance
Gains/(losses) on fair value investments
held in segregated accounts
Gains/(losses) on fair value investments
(3.4)
(1.9)
(1.3)
(6.6)
901.8
19.5
(1.7)
(2.5)
15.3
518.5
The Company’s Investment Policy involves the allocation of part of
the portfolio to external fund managers. The vast majority of these
managers operate funds where the fees are charged within the fund.
These ‘indirect’ investment management and performance fees are
therefore automatically reflected within the valuations received from
the administrators or managers, and form part of the investment
gains/(losses). At 31 December 2021, three funds (31 December
2020: five) were structured as segregated accounts (disclosed within
the Investment Portfolio on pages 16 to 18), where the managers
separately invoice the Company for investment management. In
order to provide a consistent presentation for all external fees, these
are included within the gain/(losses) on fair value investments as
shown above. Further details on the typical fee structures for the
external funds are set out in the Directors’ Report on page 50 and 51.
4. Operating expenses
£ million
Staff costs:
Wages and salaries
Social security costs
Share-based payment costs1 (Note 24)
Pension costs (Note 11)
Total staff costs
Auditor’s remuneration (Note 5)
Depreciation
Lease payments
Other operating expenses
Total operating expenses
1 Including related social security costs.
2021
23.0
3.1
20.4
0.4
46.9
0.3
0.3
0.4
6.5
54.4
2020
18.9
2.4
14.3
0.3
35.9
0.3
0.4
0.4
6.4
43.4
Fees payable to the Company’s auditor and
its associates for the audit of the Parent
Company and consolidated financial
statements
Fees payable to the Company’s auditor and
its associates for other services:
Audit of the Company’s subsidiaries
Audit-related assurance services
Total
202
163
83
12
297
68
40
271
Transaction costs
The following transaction costs represent commissions paid on the
purchase and sale of listed investments and are included within
gains/(losses) on fair value investments:
£ million
Purchases
Sales
Transaction costs
2021
1.2
1.2
2.4
2020
0.8
0.6
1.4
Furthermore £0.03 million of professional fees (2020: £0.23 million)
incurred on purchases of investments are included within gains/
(losses) on fair value investments.
RIT Capital Partners plc Report and Accounts December 2021 65
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
6. Business and geographical segments
For 2021 and 2020, the Group is considered to have three principal
operating segments, all based in the UK, as follows:
8. Taxation
£ million
Year ended 31 December 2021
Revenue
Capital
2021
Employees1
2020
AUM
£ million2
2020
Employees2
–
–
UK corporation tax charge/(credit)
Current tax charge/(credit)
Deferred tax charge/(credit)
Taxation charge/(credit)
0.2
–
0.2
0.2
2.5
–
2.5
2.5
3,590
–
41
12
£ million
UK corporation tax charge/(credit)
Current tax charge/(credit)
Deferred tax charge/(credit)
Taxation charge/(credit)
Year ended 31 December 2020
Revenue
Capital
–
–
–
–
(0.9)
–
(0.9)
(0.9)
2021
AUM
£ million1
–
4,390
–
Segment
Business
RIT
JRCM
SHL
Investment trust
Investment
manager/
administration
Events/premises
management
1 At 31 December 2021
2 At 31 December 2020
–
46
12
Total
2.7
–
2.7
2.7
Total
(0.9)
–
(0.9)
(0.9)
Key financial information for 2021 is as follows:
£ million
RIT
JRCM
SHL
Adjustments3
Total
Net
assets
4,277.6
119.0
0.8
(7.1)
4,390.3
Income/
gains1
Operating
expenses1
931.2
74.3
2.8
(72.0)
936.3
(74.3)
(49.2)
(2.9)
72.0
(54.4)
Key financial information for 2020 is as follows:
£ million
RIT
JRCM
SHL
Adjustments3
Total
Net
assets
3,494.5
102.0
0.8
(6.9)
3,590.4
Income/
gains1
Operating
expenses1
561.1
53.4
1.9
(53.5)
562.9
(56.4)
(38.1)
(2.4)
53.5
(43.4)
Profit2
856.9
25.1
(0.1)
–
881.9
Profit2
504.7
15.3
(0.5)
–
519.5
1 Includes intra-group income and expenses.
2 Profit before finance costs and tax.
3 Consolidation adjustments in accordance with IFRS 10 Consolidated
Financial Statements.
7. Finance costs
£ million
Interest on borrowings
Interest on swaps
Other finance costs
Finance costs
2021
9.6
10.1
0.3
20.0
2020
11.3
4.5
0.7
16.5
The deferred tax charge in 2021 relates to derecognition of timing
differences as it is considered unlikely that the unrecognised asset
will be utilised in the foreseeable future.
The Finance Act 2021 included an increase in the main corporation
tax rate from the current 19% to 25% with effect from 1 April
2023. The tax charge for the year differs from the effective rate
of corporation tax in the UK for 2021 of 19% (2020: 19%). The
differences are explained below:
£ million
Profit/(loss) before tax
Tax at the standard
Year ended 31 December 2021
Revenue
(17.1)
Capital
879.0
Total
861.9
UK corporation tax rate of 19%
(3.2)
167.0
163.8
Effect of:
Capital items exempt from
corporation tax
Dividend income not taxable
Expenses not deductible
for tax purposes
Tax losses not recognised
Other items
Total tax charge/(credit)
£ million
Profit/(loss) before tax
Tax at the standard
–
(1.1)
0.1
4.3
0.1
0.2
(173.6)
–
(173.6)
(1.1)
–
8.3
0.8
2.5
0.1
12.6
0.9
2.7
Year ended 31 December 2020
Revenue
(1.2)
Capital
504.2
Total
503.0
UK corporation tax rate of 19%
(0.2)
95.8
95.6
Effect of:
Capital items exempt from
corporation tax
Dividend income not taxable
Expenses not deductible
for tax purposes
Tax losses not recognised
Other items
Total tax charge/(credit)
–
(1.2)
0.1
–
1.3
–
(98.1)
–
–
1.3
0.1
(0.9)
(98.1)
(1.2)
0.1
1.3
1.4
(0.9)
66 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
9. Earnings/(loss) per ordinary share –
basic and diluted
The basic earnings per ordinary share for 2021 is based on the profit
of £859.2 million (2020: profit of £503.9 million) and the weighted
average number of ordinary shares in issue during the period of
156.1 million (2020: 156.3 million). The weighted average number of
shares is adjusted for shares held in the employee benefit trust (EBT)
and in treasury in accordance with IAS 33.
£ million
Net revenue profit/(loss)
Net capital profit/(loss)
Total profit/(loss) for the year
Weighted average (million)
Number of shares in issue
Shares held in EBT
Shares held in treasury
Basic shares
pence
Revenue earnings/(loss)
per ordinary share – basic
Capital earnings/(loss)
per ordinary share – basic
Total earnings per share – basic
2021
(17.3)
876.5
859.2
2021
156.8
(0.5)
(0.2)
156.1
2020
(1.2)
505.1
503.9
2020
156.8
(0.5)
–
156.3
2021
2020
(11.1)
(0.8)
561.4
550.3
323.2
322.4
Company
£ million
The diluted earnings per ordinary share for the period is based on the
basic shares (above) adjusted for the weighted average dilutive effect
of share-based payments awards at the average market price for the
period.
Weighted average (million)
Basic shares
Effect of share-based payment awards
Diluted shares
pence
Revenue earnings/(loss)
per ordinary share – diluted
Capital earnings/(loss)
per ordinary share – diluted
Total earnings per ordinary share – diluted
2021
156.1
1.4
157.5
2020
156.3
0.7
157.0
2021
2020
(11.0)
(0.8)
556.5
545.5
321.8
321.0
10. Property, plant and equipment
The Group’s property, plant and equipment as at 31 December 2021
was £23.1 million (2020: £23.6 million).
Group
£ million
At 1 January 2021
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2021
Of which:
Property – leasehold
Cost
17.3
0.1
–
–
17.4
14.1
Accumulated
depreciation Revaluation
Net book/fair
value
(5.4)
–
(0.4)
–
11.7
–
–
(0.2)
(5.8)
11.5
(4.2)
11.5
23.6
0.1
(0.4)
(0.2)
23.1
21.4
Group
£ million
At 1 January 2020
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2020
Of which:
Property – leasehold
Cost
15.7
1.6
–
–
17.3
14.0
Accumulated
depreciation Revaluation
Net book/fair
value
(5.0)
–
(0.4)
–
13.5
–
–
(1.8)
(5.4)
11.7
(3.9)
11.7
24.2
1.6
(0.4)
(1.8)
23.6
21.8
The Company’s property, plant and equipment as at 31 December
2021 was £23.0 million (2020: £23.4 million).
Company
£ million
At 1 January 2021
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2021
Of which:
Property – leasehold
At 1 January 2020
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2020
Of which:
Property – leasehold
Accumulated
depreciation Revaluation
Net book/fair
value
(3.9)
–
(0.3)
–
11.7
–
–
(0.2)
(4.2)
11.5
(4.2)
11.5
23.4
0.1
(0.3)
(0.2)
23.0
21.4
Accumulated
depreciation Revaluation
Net book/fair
value
(3.5)
–
(0.4)
–
13.5
–
–
(1.8)
(3.9)
11.7
(3.9)
11.7
24.0
1.6
(0.4)
(1.8)
23.4
21.8
Cost
15.6
0.1
–
–
15.7
14.1
Cost
14.0
1.6
–
–
15.6
14.0
The fair value at both year ends predominantly relates to the
proportion of the leasehold interest in 27 St. James’s Place occupied
by the Group. The property valuations are based on Jones Lang
LaSalle’s (JLL) valuations at the respective year ends.
11. Pension commitments
JRCM has pension commitments in respect of its participation in
the RITCP Pension and Life Assurance Scheme (the Scheme). The
Scheme consists of a defined benefit section which is closed to new
members. The assets of the Scheme are held in a separate Trustee-
administered fund.
Under IAS 19 Employee Benefits, actuarial gains and losses are
recognised in full in the SOCI in the year in which they occur. The
retirement benefit asset recognised in the balance sheet represents
the fair value of the Scheme’s assets as reduced by the present
value of the defined benefit obligation (DBO). The cost of providing
benefits is determined using the projected unit credit method.
The Scheme is administered under a Trust Deed and Rules. The
Trustees are responsible for agreeing a funding plan with JRCM
such that any deficit in the scheme is expected to be eliminated, and
for agreeing a Statement of Investment Principles that the Scheme
adopts in order to achieve its aim of providing retirement benefits.
RIT Capital Partners plc Report and Accounts December 2021 67
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
Recognised in the consolidated income statement
£ millions
Defined contribution schemes
Defined benefit scheme:
Net interest on defined benefit liability
Total pension cost recognised in the
consolidated income statement
Recognised in the SOCI
£ millions
Defined benefit scheme:
Actuarial loss due to liability experience
Actuarial (gain)/loss due to liability
assumption changes
Actuarial gain due to demographic
assumption changes in DBO
Return on Scheme assets greater than
discount rate
Remeasurement effects recognised in
the SOCI
Total (credit)/expense
2021
0.5
(0.1)
0.4
2020
0.3
(0.0)
0.3
2021
2020
0.9
(1.7)
(0.1)
(1.0)
(1.9)
(1.5)
1.1
2.5
(1.1)
(1.7)
0.8
1.1
The Scheme’s assets and liabilities are shown below together with
the actuarial assumptions used.
Changes in the DBO
£ millions
DBO at end of prior year
Interest cost on the DBO
Actuarial loss - demographic experience
Actuarial gain - demographic assumptions
Actuarial gain - financial assumptions
Benefits paid from scheme assets
Total DBO
Changes in Scheme assets
£ millions
Opening fair value of the Scheme assets
Interest income on Scheme assets
Return on Scheme assets greater than
discount rate
Employer contributions
Benefits paid
Total Scheme assets
2021
28.0
0.4
0.8
(0.1)
(1.7)
(0.7)
26.7
2021
28.6
0.5
1.0
1.1
(0.7)
30.5
2020
25.6
0.5
1.1
(1.1)
2.5
(0.6)
28.0
2020
26.5
0.5
1.7
0.5
(0.6)
28.6
11. Pension commitments (continued)
The trustees have delegated the day-to-day investment management
responsibility to GAM Investments and administration of the Scheme to
JRCM. A corporate trustee, Law Debenture Pension Trust Corporation
plc, who is independent of the Group, was appointed in May 2019.
Description of Scheme characteristics and associated risks
The Scheme operates as a defined benefit scheme in the UK. A full
actuarial valuation was carried out at 1 January 2020 by a qualified
independent actuary, for the purposes of these disclosures.
As this is a closed Scheme, the age profile of the active membership
is rising. Key risks associated with the Scheme are set out below:
•
•
•
Asset volatility: The Scheme’s liabilities are calculated using a
discount rate set with reference to corporate bond yields. If the
Scheme’s assets underperform this yield, this may lead to a
worsening of the funding position of the Scheme;
Changes in bond yields: A decrease in corporate bond yields
will increase the Scheme’s liabilities, although this will be
partially offset by an increase in the value of the Scheme’s bond
holdings; and
Life expectancy and concentration risk: The majority of the
Scheme’s obligations are to provide benefits for the life of the
members, so increases in life expectancy will result in an increase
in the Scheme’s liabilities, and furthermore, inflationary increases
result in higher sensitivity to changes in life expectancy. There
is the risk that the members live longer than implied by current
assumptions used. In particular, the majority of the Scheme’s
liabilities are held by a small number of members, and if these
members live longer than assumed this could put pressure on the
funding of the Scheme.
As a result of the most recent actuarial valuation performed as at
1 January 2020, the sponsoring employer, JRCM, agreed to pay
contributions to the Scheme of £1.11 million per annum for four and
a half years from 1 January 2021 (previously £0.5 million per annum).
The next actuarial valuation will be as at 31 December 2022.
Benefits paid to members of the Scheme upon retirement will depend
upon that member’s final salary upon retirement or date of leaving the
Scheme, if earlier, and the length of service. Pensions in retirement
increase at 4% per annum (for the element earned before 6 April
1997) and between 4% and 5% per annum for elements earned after
6 April 1997, depending upon the annual increase in the RPI.
The costs associated with the Scheme, their recognition in the
financial statements, the assumptions underlying the calculation
of those costs and their disclosure in the consolidated income
statement or SOCI are set out below.
Defined benefit cost
£ millions
Net interest on defined benefit asset
Remeasurement effects recognised in the
SOCI
Total cost/(credit)
2021
(0.1)
(1.9)
(2.0)
2020
(0.0)
0.8
0.8
68 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
11. Pension commitments (continued)
The Company has unrestricted rights to any surplus in the Scheme
upon wind-up. As such there is no irrecoverable surplus for either the
current year or prior year.
Assumptions
used for
sensitivity
analysis
£ millions
Significant actuarial assumptions at 31 December 2020:
2021
2020
Discount rate
Price inflation (RPI)
Life expectancy
0.95%
3.75%
–
Revised DBO
for each
sensitivity
Sensitivity
analysis
0.5% point
0.5% point
Increase of 1 year
Development of the net balance sheet position
£ millions
Net defined benefit asset at end of prior
year
Net interest on defined benefit asset at end
of prior year
Remeasurement effects recognised in the
SOCI
Employer contributions
Net defined benefit asset
0.7
0.1
1.9
1.1
3.8
1.0
0.0
(0.8)
0.5
0.7
The assumptions used to determine the measurements at the
reporting dates are shown below:
Discount rate
Price inflation (RPI)
Rate of salary increase
Pension increases for pre 6 April 1997
2021
1.90%
3.70%
n/a
2020
1.45%
3.25%
n/a
pension
4.00%
4.00%
Pension increases for post 6 April 1997
pension
4.30%
4.20%
Pension increases for deferred benefits
(non Guaranteed Minimum Pension)
Scheme participant census date
Post retirement mortality assumption-
3.70%
31 December
2021
3.25%
31 December
2020
source
SAPS1
SAPS1
1 Self-administered Pension Scheme light series year of birth tables allowing
for Continuous Mortality Investigation projections and a 1.5% per annum
long-term trend.
Sensitivity analysis
In accordance with IAS 19 (revised), the sensitivity of the DBO to
the relevant actuarial assumptions is shown below. In each case the
changed assumption has been considered in isolation (i.e. all other
factors remain constant).
30.6
28.3
29.3
2020
4.7
23.3
28.0
The weighted average duration of the DBO is 17 years. Further
Scheme analysis is shown below.
Analysis of DBO by participant category
£ millions
Deferred participants
Pensioners
DBO
2021
4.5
22.2
26.7
The fair value of Scheme assets of £30.5 million is analysed in the
table below (2020: £28.6 million).
Scheme asset breakdown
Equities securities
Fixed income and credit
Alternative investments
Cash and liquidity/other
Total
Scheme asset breakdown
Equities securities
Fixed income and credit
Alternative investments
Cash and liquidity/other
Total
Quoted
securities1
–
99%
–
–
99%
Quoted
securities1
51%
38%
5%
–
94%
Other
–
–
–
1%
1%
Other
–
–
–
6%
6%
Total
2021
–
99%
–
1%
100%
Total
2020
51%
38%
5%
6%
100%
1 Classed as Level 2 assets under IFRS 13.
12. Deferred tax
The gross movement on deferred tax during the year is shown
below:
£ millions
DBO
£ million
2021
26.7
2020
28.0
Balance at start of year
(Debit)/credit to consolidated income
Significant actuarial assumptions at 31 December 2021:
Assumptions
used for
sensitivity
analysis
£ millions
Discount rate
Price inflation (RPI)
Life expectancy
1.40%
4.20%
–
Sensitivity
analysis
0.5% point
0.5% point
Increase of 1 year
Revised DBO
for each
sensitivity
29.0
27.0
27.9
statement
(Debit)/credit to SOCI
Balance at end of year
2021
2.5
(2.7)
(1.1)
(1.3)
2020
1.5
0.9
0.1
2.5
RIT Capital Partners plc Report and Accounts December 2021 69
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
12. Deferred tax (continued)
The deferred tax asset/(liability) is analysed below:
£ million
Share-based payments
Capital allowances
Retirement benefit asset
Balance at end of year
2021
–
–
(1.3)
(1.3)
2020
2.5
0.2
(0.2)
2.5
The Group had carried forward tax losses of £412 million at
31 December 2021 (2020: £333 million) that have not been recognised
as a deferred tax asset, as it is considered unlikely that the
unrecognised asset will be utilised in the foreseeable future.
13. Financial instruments
As an investment company, financial instruments make up the
vast majority of the Group’s assets and liabilities and generate
its performance.
Financial instruments comprise securities, derivatives and other
investments, cash, short-term receivables and payables, and short
and long-term borrowings.
The nature and extent of the financial instruments outstanding can
be seen on the face of the balance sheet and the risk management
policies employed by the Group and Company are set out below.
The Group’s policy for determining the fair value of investments
(including private investments) is set out on pages 62 and 63. In relation
to receivables, payables and short-term borrowings, the carrying amount
is viewed as being a reasonable approximation of fair value.
13.1 Financial risk management
The main risks arising from the Group’s financial instruments are
market risk (including price risk, interest rate risk and currency risk),
credit risk and liquidity risk. The day-to-day identification, mitigation
and monitoring of these risks is undertaken by the Manager under
the authority of the Board and the Audit and Risk Committee, and is
described in more detail below.
The objectives, policies and processes for managing risks have not
changed since the previous accounting year. The risk management
processes of the Company are aligned with those of the Group
as a whole and it is at the Group level that the majority of the
risk management procedures are performed. Where relevant and
materially different from the Group position, Company-specific risk
exposures are explained alongside those of the Group.
13.1.1 Market risk
The fair value or future cash flows of a financial instrument or
investment property held by the Group may fluctuate as a result
of changes in market prices. Market risk can be summarised as
comprising three types of risk:
• Price risk
The risk that the fair value or future cash flows of financial
instruments and investment properties will fluctuate because of
changes in market prices (other than those arising from interest
rate risk or currency risk).
70 Report and Accounts December 2021 RIT Capital Partners plc
•
Interest rate risk
The risk that the fair value or future cash flows of financial
instruments and investment properties will fluctuate because of
changes in interest rates.
• Currency risk
The risk that the fair value or future cash flows of financial
instruments will fluctuate because of changes in foreign
exchange rates.
The Group’s exposure to, sensitivity to and management of each of
these risks are described in further detail below.
Management of market risk is fundamental to the Group’s
investment objective. The investment portfolio is continually
monitored to target an appropriate balance of risk and reward.
The Manager may seek to reduce or increase the portfolio’s exposure
to stock markets, interest rates and currencies by utilising derivatives
such as index futures, options, swaps and currency forward contracts.
These instruments are used for the purpose of hedging some or all of
the existing exposure within the portfolio to those currencies or particular
markets, as well as to enable increased exposure when deemed
appropriate. With respect to equity, foreign exchange and interest rate
options, the notional exposure presented in this note is adjusted to reflect
the estimated sensitivity of the option to movements in the underlying
security.
13.1.2 Price risk
Price risk may affect the value of the quoted, private and other
investments held by the Group.
The Group has a widely diversified investment portfolio which
significantly reduces the exposure to individual asset price risk. The
performance of third-party investment managers is regularly reviewed
and assessed to ensure compliance with their mandates and that their
performance is compatible with the Group’s investment objective.
The Group’s exposure to price risk is monitored and managed by
analysing the levels of direct exposure from quoted equity price risk
and the exposure from other price risk.
The Group’s exposure to quoted equity price risk (also described as
net quoted equity exposure) can be assumed to be equivalent to the
quoted equity investments in the investment portfolio adjusted for:
• Notional exposure from quoted equity derivatives;
• Estimated cash balances held by external managers; and
• Estimated net equity exposure from hedge fund managers.
Other price risk exposure relates to investments in private
investments, absolute return and credit, and real assets, adjusted for
the notional exposure from commodity derivatives.
£ million
Exposure to quoted equity price risk1
Exposure to other price risk
Total exposure to price risk
31 December
2021
31 December
2020
1,755.0
2,669.5
4,424.5
1,497.7
1,809.3
3,307.0
1 Quoted equity price risk represented 40% of year-end net assets (2020: 42%).
Notes to the Financial Statements
13. Financial instruments (continued)
Price risk sensitivity analysis
The sensitivity of the Group’s net assets and profit with regards to
changes in market prices is illustrated below. This is estimated using an
assumed 10% increase in general market prices with all other variables
held constant. A 10% decrease is assumed to produce an equal and
opposite effect.
The sensitivity analysis takes account of the relevant derivative
transactions the Group has entered into including those designed to
provide a hedge against such movements.
£ million
Quoted equity
Other
Total
2021
Impact on profit
and net assets
2020
Impact on profit
and net assets
177.1
266.9
444.0
149.8
180.9
330.7
The Group is exposed to market risk in respect to the fair value of the
investment properties. The investment properties are valued by JLL using
a market valuation approach and as such, the valuation will be influenced
by trends experienced in the property market and also the wider
economic environment. In particular, the valuation will be dependent on
rental income yields, demand and supply for office space in London and
comparable transactions completed in the marketplace. Fluctuations in
any of the inputs used by the valuers to value the investment properties
may increase or decrease the fair value of the properties.
13.1.3 Interest rate risk
The Group finances its operations mainly through its share capital and
reserves, including realised gains on investments. In addition, financing
has been obtained through bank borrowings and fixed rate loan notes.
Changes in interest rates have a direct or indirect impact on the fair
value or future cash flows of the following financial assets and liabilities:
• Gilts and other government securities;
• Money market funds;
• Credit funds;
• Cash and cash equivalents;
• Group borrowings; and
• Certain derivative contracts.
Changes in interest rates indirectly affect the fair value of the Group’s
other investments including those in quoted equity securities, private
investments or property.
Interest rate risk is managed by taking into account the possible effects
on fair value and cash flows that could arise as a result of changes in
interest rates when making decisions on investments and borrowings.
Exposure of the Group’s financial assets and liabilities to floating
interest rates (giving cash flow interest rate risk when rates are
reset) and fixed interest rates (giving fair value risk), is shown below.
£ million
Portfolio investments –
debt securities1
Cash
Borrowings
Total2
£ million
Total
31 December 2021
Floating
rate
–
325.9
(240.0)
85.9
Fixed
rate
29.7
–
(168.9)
(139.2)
Total
29.7
325.9
(408.9)
(53.3)
£ million
Portfolio investments –
debt securities1
Cash
Borrowings
Total2
31 December 2020
Floating
rate
–
296.8
(189.0)
107.8
Fixed
rate
37.7
–
(181.5)
(143.8)
Total
37.7
296.8
(370.5)
(36.0)
1 In addition, the Group holds £777.4 invested in absolute return and credit,
of which £313.5 million (2020: £366.8 million) is in funds that predominantly
invest in credit instruments. These provide indirect exposure to interest rate
risk.
2 In addition, the Group holds £97.3 million (2020: £402.2 million) notional
exposure to interest rate derivatives.
Exposures vary throughout the year as a consequence of changes
in the composition of the net assets of the Group arising out of
investment, borrowing and risk management processes.
Portfolio investments include direct and indirect (via externally-
managed funds) investments in government securities, money
markets, as well as quoted and unquoted debt securities issued by
companies.
Interest received on cash and cash equivalents is at prevailing market
rates.
The Group has total borrowings with a fair value of £408.9 million
outstanding at the year end (2020: £370.5 million). The revolving
credit facility comprising £240.0 million of this total incurs floating
interest payments (2020: £189.0 million). The loan notes with a fair
value of £168.9 million (par value of £151.0 million) have fixed interest
payments (2020: fair value £181.5 million; par value £151.0 million).
Further details are provided in Note 18.
Interest rate risk sensitivity analysis
The approximate sensitivity of the Group’s net assets and profit in
regard to changes in interest rates is illustrated below. This is based
on an assumed 50 basis point annualised increase in prevailing
interest rates at the balance sheet date applied to the floating rate
and fixed rate assets and liabilities and the following assumptions:
•
•
the fair values of all other assets and liabilities are not affected by
a change in interest rates;
funds will be reinvested in similar interest-bearing securities on
maturity; and
•
all other variables are held constant.
A 50 basis point decrease is assumed to produce an equal and
opposite impact.
2021
Impact on profit
and net assets
2020
Impact on profit
and net assets
4.2
12.7
RIT Capital Partners plc Report and Accounts December 2021 71
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
13. Financial instruments (continued)
The Group has direct exposure to the effect of interest rate changes
on the valuation and cash flows of its interest-bearing assets and
liabilities. However, it may also be indirectly affected by the impact of
interest rate changes on the earnings of certain companies in which
the Group invests, and the impact on valuations that use interest
rates as an input, including valuation models for private investments.
Therefore, the sensitivity analysis may not reflect the full effect on
the Group’s net assets.
13.1.4 Currency risk
Consistent with its Investment Policy, the Group invests in financial
instruments and transactions denominated in currencies other
than sterling. As such, the Group’s profit and net assets could be
significantly affected by currency movements.
Currency risk is managed by the Group by entering into currency
options or forward currency contracts as a means of limiting or
increasing its exposure to particular currencies. These contracts are
used for the purpose of hedging part of the existing currency exposure
of the Group’s portfolio (as a means of reducing risk) or to enable
increased exposure when this is deemed appropriate by the Manager.
Foreign currency exposure
Currency
US dollar
Japanese yen
Euro
Other non-sterling
Total1
2021
Net exposure
% of NAV
2020
Net exposure
% of NAV
26.8
2.7
1.5
0.4
31.4
29.7
5.6
4.4
1.4
41.1
1 Amounts in the above table are based on the carrying value of all foreign
currency denominated assets and liabilities and the underlying notional
amounts of forward currency contracts. It does not take into account any
estimates of ‘look-through’ exposure from our fund investments.
Currency risk sensitivity analysis
The sensitivity of the Group’s net assets and profit in regard to changes
in key currencies is illustrated below. This is based on an assumed
10% strengthening of sterling relative to the foreign currencies as at
31 December 2021, and assumes all other variables are held constant.
A 10% weakening is assumed to produce an equal and opposite effect.
The sensitivity analysis is based on the net foreign currency assets held
at the balance sheet dates and takes account of currency forwards and
options that adjust the effects of changes in currency exchange rates.
£ million
US dollar
Japanese yen
Euro
Other non-sterling
Total
2021
Impact on profit
and net assets
2020
Impact on profit
and net assets
(97.9)
(11.9)
(6.6)
(1.7)
(118.1)
(94.9)
(20.3)
(8.5)
(5.1)
(128.8)
13.1.5 Credit risk
Credit risk is the risk that a counterparty to a financial instrument
held by the Group will fail to discharge an obligation or commitment
that it has entered into with the Group, which could result in a loss
to the Group.
This risk is not considered significant and is managed as follows:
•
•
•
•
the vast majority of the Group’s listed transactions are settled
on a delivery versus payment basis and are held directly by the
custodian in fully segregated client accounts;
use of a range of brokers and counterparties with their credit
quality monitored regularly;
cash balances are predominantly held with our custodian, whose
credit worthiness is regularly monitored;
cash margin is held by a range of approved counterparties, with
both margin balances and counterparties’ creditworthiness
monitored regularly; and
•
careful selection of a diversified portfolio of credit managers.
A credit exposure could arise in respect of derivative contracts
entered into by the Group if a counterparty was unable to fulfil its
contractual obligations.
The Group has exposure to certain debt instruments acquired as
part of its private equity investments. The credit risk associated with
these instruments is managed as part of the overall investment risk
in the relevant portfolio companies and is not considered separately.
The Company’s maximum credit exposure is limited to the carrying
amount of financial assets recognised at the reporting date, as
summarised below.
Credit risk exposure
£ million
Portfolio investments – debt securities1
Derivative financial instruments2
Cash margin
Other receivables
Cash at bank
Total3
2021
29.7
35.6
87.6
175.2
325.9
654.0
2020
37.7
57.6
43.9
61.4
296.8
497.4
1 Debt securities held within portfolio investments include a private loan note
issued by LionTree Advisory Holdings LLC.
2 Represents the fair value of assets held by counterparties.
3 In addition to the table above, the Group holds a credit index derivative with
a notional exposure of £129.0 million, designed to provide some protection
against the deterioration of general investment grade credit.
The credit quality of certain financial assets that are not past due,
where the risk of loss is primarily that a counterparty fails to meet an
obligation, can be assessed by reference to external credit ratings.
The Manager has a review process in place that includes an
evaluation of a potential counterparty’s ability to service and repay its
debt. This is considered on a regular basis. Cash margins and other
receivables comprise mainly balances with counterparties which are
investment grade financial institutions with a short-term credit rating
by S&P of A-2 or higher (2020: A-2).
72 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
BNP is the custodian and depositary to the Company under the
Alternative Investment Fund Managers Directive (AIFMD). Under
the UK equivalent regulations, the Company is the Alternative
Investment Fund (AIF) and JRCM is the Alternative Investment Fund
Manager (AIFM). As custodian, substantially all of the Company’s
directly-held listed portfolio investments and cash at bank are held
by BNP. Bankruptcy or insolvency of the custodian may cause the
Group’s rights with respect to securities held by the custodian to
be delayed; however, the custodian’s local long-term rating from
S&P was A+ in the most recent rating prior to 31 December 2021
(2020: A).
As depositary under AIFMD, the main obligation of BNP is the
safeguarding of those custodied assets on behalf of the RIT
shareholder. The depositary is liable for the loss of financial
instruments held in custody, other than under limited circumstances.
As a result of this obligation, the depositary maintains oversight of
all transactions undertaken by the AIFM (JRCM) on behalf of the AIF
(RIT). This includes reviewing all cash movements, receiving copies
of internal sign‐off documentation and key legal agreements, and
oversight and review of key procedures and controls.
13.1.6 Liquidity risk
Liquidity risk is the risk that the Group will have difficulty in meeting
its obligations in respect of financial liabilities as they fall due.
In addition to the Group’s liquidity balances and committed but undrawn
borrowings, the investment portfolio includes a substantial amount of
assets which would be expected to be realised within a relatively short
time frame, depending on market conditions. This might include stocks
(unless held via a co-investment fund or subject to a lock-up), government
bonds and derivatives. Other investments can be realised over varying
timeframes depending on the nature of the investment and/or the legal
terms governing disposal. Investments in externally-managed equity and
hedge funds have redemption periods which typically range from daily
to quarterly and longer, depending in part on the underlying nature of
the portfolio holdings. There is also a risk in stress situations of the funds
imposing additional restrictions or ‘gates’ on redemptions (as happened in
particular to hedge funds during the global financial crisis). Direct private
and private fund investments are inherently less liquid, and while there
is a secondary market, participants will often experience discounts to fair
value, in particular at times of stress.
JRCM manages the Group’s liquid resources in line with a
liquidity risk framework overseen by the Board. This establishes a
minimum level of liquidity available to meet expected contractual
commitments, including ongoing costs, margin calls and capital calls
(from funds with a commitment/drawdown structure - see Note 14).
The Manager monitors the level of short-term funding, and balances
the need for access to short-term funding, with the long-term
funding needs of the Group.
The Group has three revolving credit facilities with a total capacity of
£385 million (£235 million capacity drawn at the year end and £150
million committed and undrawn) and £151 million of long-term loan
notes (details of which are disclosed in Note 18).
The remaining contractual maturities of the Group’s financial liabilities
at the year end, based on the earliest date on which payment could
be required are as follows:
£ million
Current liabilities:
Bank loan/overdraft
Derivative financial
instruments
Purchases for future
settlement
Amounts owed to Group
undertakings
Non-current liabilities:
Derivative financial
instruments
Borrowings
Lease liability
Financial liabilities
Other non-financial liabilities
Subtotal
Commitments
Total
£ million
Current liabilities:
Bank loan/overdraft
Derivative financial
instruments
Purchases for future
settlement
Amounts owed to Group
undertakings
Non-current liabilities:
Derivative financial
instruments
Borrowings
Lease liability
Financial liabilities
Other non-financial liabilities
Subtotal
Commitments
Total
31 December 2021
3 months
or less
3-12
months
>1 year
Total
240.0
7.9
99.9
–
–
–
–
347.8
168.8
516.6
360.2
876.8
–
0.3
–
–
–
5.2
0.4
5.9
–
5.9
–
5.9
–
–
–
–
240.0
8.2
99.9
–
2.9
194.6
3.9
201.4
1.0
202.4
–
202.4
2.9
199.8
4.3
555.1
169.8
724.9
360.2
1,085.1
31 December 2020
3 months
or less
3-12
months
>1 year
Total
189.0
4.5
3.1
5.3
–
–
–
201.9
63.1
265.0
256.0
521.0
–
–
–
–
–
4.8
0.4
5.2
0.4
5.6
–
5.6
–
–
–
–
5.4
199.8
4.3
209.5
2.9
212.4
–
212.4
189.0
4.5
3.1
5.3
5.4
204.6
4.7
416.6
66.4
483.0
256.0
739.0
13.2 Collateral
Collateral in the form of cash margin is posted by the Group in
relation to certain derivative transactions, transacted under the
auspices of the International Swaps and Derivatives Association. The
Group does not hold collateral from other counterparties.
Set out below is the amount of financial assets pledged as collateral
at the year end.
£ million
Cash margin
2021
87.6
2020
43.9
RIT Capital Partners plc Report and Accounts December 2021 73
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
13. Financial instruments (continued)
13.3 Derivative financial instruments
The Group typically uses the following types of derivative
instruments in the portfolio:
•
•
•
futures and forward contracts relating to market indices, foreign
currencies and government bonds;
options relating to foreign currencies, market indices, stocks and
interest rates; and
swaps relating to interest rates, bonds, credit spreads, equity
indices and stocks.
As explained above, the Manager uses derivatives to hedge various
exposures and also selectively to increase or decrease exposure
where desired. The notional amount of certain types of derivatives
provides a basis for comparison with instruments recognised on
the balance sheet, but does not necessarily indicate the amount of
future cash flows involved or the current fair value of the derivatives.
The derivative instruments become favourable (assets) or
unfavourable (liabilities) as a result of fluctuations in indices, security
prices, market interest rates or foreign exchange rates relevant to
the terms of the derivative instrument. The aggregate contractual or
notional amount of derivative financial instruments held, the extent
to which instruments are favourable or unfavourable and thus the
aggregate fair values of derivative financial assets and liabilities can
fluctuate significantly from time to time.
Details of the unsettled derivatives at 31 December 2021 and
31 December 2020 are:
As at 31 December 2021
£ million
Commodity derivatives
Credit derivatives
Currency derivatives
Equity derivatives
Fixed income derivatives
Total
As at 31 December 2020
£ million
Commodity derivatives
Credit derivatives
Currency derivatives
Equity derivatives
Fixed income derivatives
Interest rate derivatives
Total
Notional1
amount
132.8
178.4
2,364.4
53.0
81.2
Notional1
amount
128.4
189.1
2,300.3
80.8
102.9
315.9
Group and Company
Assets
(positive
fair value)
Liabilities
(negative
fair value)
Total
fair value
3.0
0.4
28.6
3.5
0.1
35.6
–
(3.3)
(7.6)
(0.2)
–
(11.1)
3.0
(2.9)
21.0
3.3
0.1
24.5
Group and Company
Assets
(positive
fair value)
Liabilities
(negative
fair value)
Total
fair value
5.3
0.1
44.6
6.4
0.5
0.7
57.6
–
(3.1)
(4.1)
–
(0.4)
(2.3)
(9.9)
5.3
(3.0)
40.5
6.4
0.1
(1.6)
47.7
1 Long and short notional exposure has been netted.
74 Report and Accounts December 2021 RIT Capital Partners plc
13.4 IFRS 13 fair value measurement classification
IFRS 13 requires the Group to classify its financial instruments held
at fair value using a hierarchy that reflects the significance of the
inputs used in the valuation methodologies. These are as follows:
•
•
Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
•
Level 3: Inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs).
The vast majority of the Group’s financial assets and liabilities,
investment properties and property, plant and equipment are
measured at fair value on a recurring basis.
The Group’s policy is to recognise transfers into and transfers out of
fair value hierarchy levels at the end of the reporting year when they
are deemed to occur.
A description of the valuation techniques used by the Group with
regards to investments categorised in each level of the fair value
hierarchy is detailed below. Where the Group invests in a fund or
a partnership, which is not itself listed on an active market, the
categorisation of such investments between levels 2 and 3 is
determined by reference to the nature of the fund or partnership’s
underlying investments. If such investments are categorised across
different levels, the lowest level of the hierarchy that forms a
significant proportion of the fund or partnership exposure is used to
determine the reporting disclosure.
If the proportion of the underlying investments categorised between
levels changes during the period, these will be reclassified to the
most appropriate level.
Level 1
The fair value of financial instruments traded in active markets is
based on quoted market prices at the balance sheet date. A market
is regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
The quoted market price used for financial assets held by the Group
is the current bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted.
Where a market price is available but the market is not considered
active, the Group has classified these investments as level 2.
Level 2
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques which maximise the
use of observable market data where it is available. Specific valuation
techniques used to value OTC derivatives include quoted market prices
for similar instruments, counterparty quotes and the use of forward
exchange rates to estimate the fair value of forward foreign exchange
contracts at the balance sheet date. Investments in externally-managed
funds which themselves invest primarily in listed securities are valued at
the price or net asset value released by the investment manager or fund
administrator as at the balance sheet date.
Notes to the Financial Statements
13. Financial instruments (continued)
Level 3
The Group considers all private investments, whether direct or funds,
(as described in the Investment Portfolio on page 17) as level 3
assets, as the valuations of these assets are not typically based on
observable market data. Where other funds invest into illiquid stocks,
these are also considered by the Group to be level 3 assets.
Private fund investments are held at the most recent fair values
provided by the GPs managing those funds, adjusted for subsequent
investments, distributions, and currency movements up to the
period end, and are subject to periodic review by the Manager. Direct
co-investments are also held at the most recent fair values provided
by the GPs managing those co-investments, adjusted for subsequent
investments, distributions, currency moves, as well as pricing events
where the Manager has sufficient information to suggest the period
end valuation will be adjusted when finalised by the GP. The remaining
directly-held private investments are valued on a semi-annual basis
using techniques including a market approach, income approach
and/or cost approach. The valuation process involves the investment
functions of the Manager who prepare the proposed valuations, which
are then subject to review by the finance function, with the final
valuations being presented to the Valuation Committee, comprised
of independent non-executive Directors, of which the Audit and Risk
Committee chair is also a member.
Specific valuation techniques used will typically include the value
of recent transactions, earnings multiples, discounted cash flow
analysis, and, where appropriate, industry specific methodologies.
The acquisition cost, if determined to be fair value, may be used to
calibrate inputs to the valuation. The valuations will often reflect a
synthesis of a number of distinct approaches in determining the final
fair value estimate. The individual approach for each investment will
vary depending on relevant factors that a market participant would
take into account in pricing the asset. These might include the specific
industry dynamics, the company’s stage of development, profitability,
growth prospects or risk as well as the rights associated with the
particular security.
Borrowings at 31 December 2021 comprise bank loans and senior
loan notes. The bank loans are revolving credit facilities paying
floating interest, and are typically drawn in tranches with a duration
of three or six months. The loans are therefore short-term in nature,
and their fair value approximates their nominal value. The loan
notes were issued in 2015 with tenors of between 10 and 20 years
with a weighted average of 16 years. They are valued on a monthly
basis using a discounted cash flow model where the discount rate
is derived from the yield of similar tenor UK Government bonds,
adjusted for any significant changes in either credit spreads or the
perceived credit risk of the Company.
The fair value of investments in non-consolidated subsidiaries is
considered to be the net asset value of the individual subsidiary as
at the balance sheet date. The net asset value comprises various
assets and liabilities which are fair valued on a recurring basis and is
considered to be level 3.
On a semi-annual basis, the Group engages external, independent
and qualified valuers to determine the fair value of the Group’s
investment properties and property, plant and equipment held at fair
value. Further information is shown in Note 15.
The following table analyses the Group’s assets and liabilities within
the fair value hierarchy, at 31 December 2021:
As at 31 December 2021
£ million
Level 1
Level 2
Level 3
Total
Financial assets at fair value
through profit or loss (FVPL):
Portfolio investments
Non-consolidated subsidiaries
Investments held at fair value
Derivative financial instruments
Total financial assets at FVPL
Non-financial assets measured
at fair value:
Investment property
Property, plant and
equipment
Total non-financial assets
measured at fair value
Financial liabilities at FVPL:
Borrowings
Derivative financial
instruments
Total financial liabilities at
FVPL
579.6
–
579.6
2.9
582.5
1,797.9
–
1,797.9
32.7
1,830.6
1,813.0
101.3
1,914.3
–
1,914.3
4,190.5
101.3
4,291.8
35.6
4,327.4
–
–
–
–
–
–
–
–
–
–
38.3
38.3
23.1
23.1
61.4
61.4
(408.9)
(408.9)
(11.1)
–
(11.1)
(11.1)
(408.9)
(420.0)
Total net assets measured at
fair value
582.5
1,819.5
1,566.8
Other non-current assets
Cash at bank
Other current assets
Other current liabilities
Other non-current liabilities
Net assets
3,968.8
3.8
325.9
266.5
(168.8)
(5.9)
4,390.3
Movements in level 3 assets
Year ended 31 December 2021
£ million
Opening balance
Purchases
Sales
Realised gains/(losses) through profit
Investments
held at fair
value
1,232.1
857.6
(882.1)
Properties
Total
61.4
0.1
–
1,293.5
857.7
(882.1)
or loss
37.5
–
37.5
Unrealised gains/(losses) through
profit or loss
767.5
0.6
768.1
Unrealised gains/(losses) through
other comprehensive income
Transfer in to level 3
Transfer out of level 3
Other
Closing balance
–
40.9
(139.2)
–
1,914.3
(0.2)
–
–
(0.5)
61.4
(0.2)
40.9
(139.2)
(0.5)
1,975.7
RIT Capital Partners plc Report and Accounts December 2021 75
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Notes to the Financial Statements
13. Financial instruments (continued)
During the year, direct private investments with a fair value of
£139.2 million were reclassified from level 3 to level 2. This reflected
the fact that their main underlying investments are now listed and
disclosed in the Investment Portfolio within quoted equity.
Investments in funds with a fair value of £40.9 million were
transferred from level 2 to 3. This is as a result of new financial
information received during the year in respect of the underlying
investments of the funds.
Level 3 assets
Further information in relation to the directly-held private investments
is set out in the following table. This summarises the portfolio by the
primary method used in fair valuing the asset. As we seek to employ
a range of valuation methods and inputs in the valuation process,
selection of a primary method is subjective, and designed primarily
to assist the subsequent sensitivity analysis.
Primary valuation method/approach
£ million
Third-party valuations
Recent financing round1
Discounted cash flow (DCF)
Market multiples and other industry metrics1
Total
2021
361.1
140.0
11.2
1.1
513.4
2020
202.5
47.7
14.0
49.7
313.9
1 Included within these methods are directly-held private investments held
within the non-consolidated subsidiaries with a fair value of £29.7 million
(2020: £4.0 million).
The majority of the direct private investments are structured as co-
investments, managed by a GP. For these investments, we typically
use the latest quarterly fair valuations provided by the GP, adjusted for
any subsequent investments/distributions and currency moves as well
as pricing events, where there is sufficient information to suggest the
period-end valuation will be adjusted when finalised by the GP.
Where the Manager has sufficient information to undertake its own
valuation, a range of methods will typically be used. For companies
with positive earnings, we seek to utilise an earnings multiple
approach, typically using EBITDA or similar. The earnings multiple is
assessed by reference to similar listed companies or transactions
involving similar companies. When an asset is undergoing a sale
and the price has been agreed but not yet completed or an offer
has been submitted, we use the agreed or offered price, often with
a final discount to reflect the risks associated with the transaction
completing or any price adjustments. Where a company has been the
subject of a recent financing round which is viewed as representative
of fair value, we will use this transaction price. Other methods
employed include discounted cash flow analysis and industry metrics
such as multiples of assets under management or revenue, where
market participants use these approaches in pricing assets.
The following table provides a sensitivity analysis of the valuation of
directly-held private investments, and the impact on net assets:
Valuation method/approach
Sensitivity analysis
Third-party valuations
Recent financing round
Discounted cash flow (DCF)
Market multiples and other
industry metrics
A 5% change in the value of these
assets would result in a £18.1 million
or 0.41% (2020: £10.1 million, 0.28%)
change in net assets.
A 5% change in the value of these
assets would result in a £7.0 million
or 0.16% (2020: £2.4 million, 0.07%)
change in net assets.
Assets in this category are valued using
a weighted average cost of capital range
of 9% - 20%. A 1% point increase/
decrease in the underlying discount rate
would result in a decrease/increase in
the net assets of £2.4 million or 0.06%
(2020: £1.4 million, 0.04%)
A 5% change in the value of these
assets would result in a £0.1 million
or 0.001% (2020: £0.6 million, 0.02%)
change in net assets.
The investment property and property, plant and equipment with an
aggregate fair value of £61.4 million (2020: £61.4 million) were valued
using a third-party valuation provided by JLL. The properties were
valued using weighted average capital values of £1,658 per square
foot (2020: £1.652) developed from rental yields and supported by
market transactions. A £25 per square foot increase/decrease in
capital values would result in a £0.8 million increase/decrease in fair
value (2020: £0.8 million increase/decrease).
The non-consolidated subsidiaries are held at their fair value of
£101.4 million (2020: £69.5 million) representing £104.3 million
of portfolio investments (2020: £63.4 million) and £2.9 million of
remaining liabilities (2020: £6.1 million of remaining assets). A 5%
change in the value of these assets would result in £5.1 million or
0.1% (2020: £3.5 million, 0.1%) change in total net assets.
The remaining investments held at fair value and classified as level 3
of £1,329.2 million (2020: £852.7 million) were valued using third-party
valuations from a GP, administrator or fund manager. A 5% change
in the value of these assets would result in a £66.5 million or 1.51%
(2020: £42.6 million, 1.19%) change in net assets.
In aggregate, the sum of the direct private investments, investment
property, property, plant and equipment, non-consolidated subsidiaries
and the remaining fund investments represents the total level 3 assets
of £1,975.7 million (2020: £1,293.5 million).
76 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
The following table analyses the Group’s assets and liabilities within
the fair value hierarchy, at 31 December 2020:
13.5 Capital management
The Group’s primary objectives in relation to the management of
capital are:
As at 31 December 2020
£ million
Level 1
Level 2
Level 3
Total
Financial assets at FVPL:
Portfolio investments
Non-consolidated subsidiaries
Investments held at fair value
Derivative financial instruments
Total financial assets at FVPL
Non-financial assets measured
at fair value:
Investment property
Property, plant and
equipment
Total non-financial assets
measured at fair value
Financial liabilities at FVPL:
Borrowings
Derivative financial
538.7
–
538.7
5.8
544.5
1,749.4
–
1,749.4
51.8
1,801.2
1,162.6
69.5
1,232.1
–
1,232.1
3,450.7
69.5
3,520.2
57.6
3,577.8
–
–
–
–
–
–
–
37.8
37.8
23.6
23.6
61.4
61.4
–
(370.5)
(370.5)
instruments
(0.3)
(9.6)
–
(9.9)
Total financial liabilities at
FVPL
(0.3)
(9.6)
(370.5)
(380.4)
Total net assets measured at
fair value
544.2
1,791.6
923.0
Other non-current assets
Cash at bank
Other current assets
Other current liabilities
Other non-current liabilities
Net assets
3,258.8
3.2
296.8
105.3
(68.8)
(4.9)
3,590.4
Movements in level 3 assets
Year ended 31 December 2020
£ million
Opening balance
Purchases
Sales
Realised gains/(losses) through profit
Investments
held at fair
value
1,132.6
279.3
(347.4)
Properties
Total
60.3
3.2
–
1,192.9
282.5
(347.4)
or loss
48.9
–
48.9
•
•
to deliver long-term capital growth for its shareholders, while
preserving shareholders’ capital;
to deliver for shareholders increases in capital value in excess of
the relevant indices over time through an appropriate balance of
equity capital and gearing; and
•
to ensure the Group’s ability to continue as a going concern.
The Company is subject to externally imposed capital requirements:
•
•
the Company’s Articles of Association restrict borrowings to a
maximum of five times share capital and reserves; and
the Company’s borrowings are subject to covenants limiting
the total exposure based on a minimum net assets and a cap of
borrowings as a percentage of adjusted net assets.
All these conditions were met during this year and the previous
financial year.
In addition, JRCM is subject to capital requirements imposed by
the FCA and must ensure that it has sufficient capital to meet these
requirements. JRCM was compliant with those capital requirements
throughout the year.
The Group’s capital at 31 December 2021 and 31 December 2020
comprised:
£ million
Equity share capital
Retained earnings and other reserves
Net asset value
Borrowings
Total capital
2021
156.8
4,233.5
4,390.3
408.9
4,799.2
2020
156.8
3,433.6
3,590.4
370.5
3,960.9
There have been no significant changes to the Group’s capital
management objectives, policies and processes in the year, nor has
there been any change in what the Group considers to be its capital.
14. Financial commitments
Financial commitments to invest additional funds which have not
been provided for are as follows:
Unrealised gains/(losses) through
profit or loss
Unrealised gains/(losses) through
other comprehensive income
Transfer out of level 3
Other
Closing balance
250.6
0.1
250.7
Commitments
£ million
31 December 2021
31 December 2020
Group
Company
Group
Company
360.2
360.2
256.0
256.0
–
(131.9)
–
1,232.1
(1.8)
–
(0.4)
61.4
(1.8)
(131.9)
(0.4)
1,293.5
The financial commitments are principally uncalled commitments to
private funds, which are typically established as 10-year funds with
a 5-year investment period, and are diversified across multiple funds
and vintage years.
RIT Capital Partners plc Report and Accounts December 2021 77
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Notes to the Financial Statements
17. Related party transactions
In the normal course of its business, the Group has entered into a
number of transactions with related parties. All arrangements with
related parties are monitored by the Conflicts Committee, which is
comprised solely of independent non-executive Directors.
Transactions with Hannah Rothschild or parties related to her
During the current and prior year the Group transacted with entities
classified as related to Hannah Rothschild as a result of her having
significant influence over them, a beneficial interest in them, or
otherwise in accordance with IAS 24.
The Group had cost-sharing arrangements with these related
parties covering the provision and receipt of administrative as well
as investment advisory, support and supply services. Under these
arrangements the Group received £122,673 (31 December 2020:
£456,792) and paid £82,996 (31 December 2020: £225,006). These
cost sharing arrangements ceased on 31 March 2021.
Certain of these related parties occupy office space in St James’s
Place which is owned or leased by the Group. The rent, rates and
services charged by the Group for the year ended 31 December
2021 amounted to £270,690 (31 December 2020: £322,862).
During the year, the Group made no contribution in respect of the
previous Chairman's office and private medical costs (31 December
2020: £41,250).
Certain activities of the Group were previously carried out in properties
owned by related parties. The cost to the Group for the rent was £nil in
the year ended 31 December 2021 (31 December 2020: £4,749).
Nothing was owed by the Group to the parties related to Hannah
Rothschild at either 31 December 2021 or 31 December 2020. The
balance due to the Group from these related parties was £7,663
(31 December 2020: £6,789).
Other
The Company has an agreement with Spencer House Partners,
of which Jeremy Sillem (formerly a non-executive Director of the
Company) is a member, for the provision of corporate finance advisory
services. During his period of appointment in 2021 RIT incurred
expenses of £143,452 in respect of these services. (2020: £170,000).
Spencer House Partners rents space in one of the Company's
properties and over the same period paid rent of £161,606 (2020:
£178,857).
Law Debenture Trust, a related party to a director of JRCM for part
of 2020, received fees for the provision of pension trustee services
during that period only of £51,192.
No subscriptions were made to JRCM (London) LLP in the year
(2020:Company £50,000; JRCM senior management £50,000)
and the Company has a remaining commitment of £50,000 (2020:
£50,000).
15. Investment property
£ million
Rental income from investment
properties
Direct operating expenses arising from
investment properties that generated
rental income during the year
Cash outflow from leases
2021
2.0
(1.4)
(0.4)
2020
2.1
(1.5)
(0.5)
The Group and Company is committed to making the following
payments under non-cancellable leases over the periods described.
£ million
Within one year
2021
0.4
2020
0.4
Under non-cancellable leases the Group and Company will receive
the following:
£ million
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
2021
2020
1.3
0.6
0.1
–
–
–
1.3
1.0
0.3
–
–
–
All investment properties held by the Group during the year
generated rental income.
The Company leases Spencer House from the Spencer Trustees (the
Trustees). The terms of this lease include provisions such that: any
assignment or sale of the lease can occur only with the consent of the
Trustees, there are limits on event frequency and that the Trustees retain
certain (de minimis) usage rights over the ‘fine rooms’. The Company
is required to externally redecorate every three years and to internally
redecorate every seven years. The property is typically open to the public
for viewing every Sunday, except during August. The investment property
portfolio is valued by JLL on a six-monthly basis in accordance with
current RICS Valuation – Global Standards 2017, published by the Royal
Institution of Chartered Surveyors, on the basis of open market value. The
most recent valuation, which reflects the factors highlighted above, was
undertaken as at 31 December 2021.
16. Other receivables
31 December 2021
31 December 2020
£ million
Group
Company
Group
Company
Cash margin
Amounts receivable
Prepayments and accrued
income
Sales for future settlement
Unsettled investment
subscriptions
Total
87.6
0.7
2.9
123.6
48.0
262.8
87.6
0.7
2.5
123.6
48.0
262.4
43.9
1.2
5.1
39.8
43.9
1.2
4.7
39.8
15.3
105.3
15.3
104.9
The carrying amount of other receivables approximates their fair
value, due to their short-term nature.
78 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
17. Related party transactions (continued)
Group undertakings
JRCM acts as the Company’s manager, administrator and corporate
secretary. During the year ended 31 December 2021, the charge for
these services from JRCM to the Company amounted to £71.5 million
(2020: £52.9 million). JRCM incurred rent charges of £580,000 (2020:
£580,000) from the Company. During the year Spencer House Limited
(also a wholly-owned subsidiary of the Company) earned property
management revenues of £74,961 from JRCM (2020: £94,007) and
£1,671,731 from the Company (2020: £1,569,481).
Amounts due from subsidiaries and to subsidiaries are disclosed on
the face of the Company’s balance sheet. The balances outstanding
between the Company and its subsidiaries at the year ends are
shown below:
£ million
RIT Investments US, Inc
Total
£ million
JRCM
J. Rothschild Capital Management US, Inc
Total
Amounts owed by
Group undertakings
2021
3.7
3.7
2020
–
–
Amounts owed to
Group undertakings
2021
(128.8)
–
(128.8)
2020
(82.3)
(5.1)
(87.4)
RITCP Pension and Life Assurance Scheme
The Group’s pension scheme is deemed to be a related party of the
Company pursuant to IAS 24. Details of the pension contributions
made during the year are disclosed in Note 11. There were no
amounts owing to or by the pension scheme to the Company, or any
subsidiary, at 31 December 2021 (31 December 2020: £nil).
Directors and key management personnel
Details of the remuneration and benefits attributable to Directors and
key management personnel are set out below.
At 31 December 2021 the Company had three revolving credit
facilities (RCFs): a £150 million three-year facility with National Australia
Bank agreed in December 2019, a £150 million five-year facility with
Commonwealth Bank of Australia agreed in December 2018 and an
£85 million three-year facility with Industrial and Commercial Bank of China
agreed in December 2019. These are flexible as to currency, duration and
number of drawdowns, and bear interest linked to the LIBOR rate (or
equivalent) relevant to the period and currency drawn. As they are drawn
in tranches with tenors less than one year they are classified as current
liabilities. The fair value and par value of the drawn borrowings at the year
end was £240 million (2020: £189 million). A change in interest rates is
not expected to have a significant impact on the fair value of the RCFs. No
bank loans are held within subsidiaries. The weighted average interest rate
on the RCFs at the year end was 1.69% (2020: 1.76%).
On 1 June 2015 the Company issued £151.0 million of fixed rate loan
notes with tenors between 10 and 20 years and coupons from 3.00%
to 3.56%. These Notes are held at fair value and pay interest on a
semi-annual basis. The fair value of this debt at the end of the year was
£168.9 million (2020: £181.5 million) calculated using a discount rate of
2.04% (2020: 1.32%). A 5% increase/decrease in the underlying discount
rate would result in an increase/decrease in net assets of £1.4 million
(2020: £1.1 million) or 0.03% (2020: 0.03%). The weighted average
interest rate payable on these Notes is 3.45% and their remaining
weighted average tenor is 9.2 years.
The overall weighted average interest rate on the borrowings at the year
end was 2.38% (2020: 2.49%).
19. Other payables
£ million
Accruals
Other creditors
Purchases for future
settlement
Total
31 December 2021
31 December 2020
Group
Company
Group
Company
28.3
40.6
3.5
40.4
99.9
168.8
99.9
143.8
24.3
36.1
3.1
63.5
4.3
36.0
3.1
43.4
The carrying value of the Group’s other payables approximates their
fair value, due to their short-term nature.
£ million
Short-term employee benefits
Share-based payment
Total
2021
14.6
16.2
30.8
2020
11.5
11.4
22.9
20. Share capital
The Group has no ultimate controlling party.
18. Borrowings
£ million
Unsecured loans payable within one year:
Revolving credit facilities
Unsecured loans payable in more than one year:
Fixed rate loan notes
Total borrowings
Group and Company
2021
2020
240.0
189.0
168.9
408.9
181.5
370.5
£ million
Allotted, issued and fully paid:
At 1 January
Issue of new ordinary shares
At 31 December
2021
Nominal
value of
total shares
in issue
2020
Nominal
value of
total shares
in issue
Shares in
issue
156,848,065
–
156,848,065
156.8
–
156.8
156.8
–
156.8
The Company has one class of ordinary shares which carry no right
to fixed income. The share capital is not distributable.
In the year to 31 December 2021 59,189 shares were bought back at
a cost of £1.4 million and held in treasury (2020: 116,040 shares at a
cost of £2.3 million) meaning at 31 December 2021 175,229 shares
were held in treasury (2020:116,040 shares).
RIT Capital Partners plc Report and Accounts December 2021 79
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
to performance shares, £0.6 million to SARs, £6.3 million to RSUs,
and £13.0 million to deferred shares.
The movement in share-based awards is as follows:
Number (thousand)
2021
2020
Outstanding at the start of the year:
SARs/performance shares
Deferred shares
Total
Granted during the year:
SARs/performance shares
RSUs
Deferred shares
Total
Conversion during the year:
SARs/performance shares (surrendered)
RSUs (replacement)
Total
Exercised/vested during the year:
SARs/performance shares
RSUs
Deferred shares
Total
Lapsed/forfeited during the year:
SARs/performance shares
RSUs
Deferred shares
Total
Outstanding at the end of the year:
SARs/performance shares
RSUs
Deferred shares
Total
SARs exercisable at year end
Intrinsic value exercisable at year end
4,217
488
4,705
–
493
554
1,047
(3,505)
1,151
(2,354)
(263)
(246)
(201)
(710)
(107)
(1)
–
(108)
342
1,397
841
2,580
53
3,681
285
3,966
1,654
–
342
1,996
–
–
–
(2)
–
(139)
(141)
(1,116)
–
–
(1,116)
4,217
–
488
4,705
174
(£ million)
0.4
1.1
For share-based awards granted during the year, the weighted
average fair value of each award was 2,230 pence (2020: 720 pence).
The change in average fair value per award reflects the move from
SARs and performance shares to RSUs, as well as the conversion of
existing awards at fair value.
Share-based awards with only service conditions attached (deferred
shares and RSUs) were valued using the prevailing market price and
a lock-up discount factor as applicable.
21. Share premium
£ million
At 1 January
Issue of new ordinary shares
At 31 December
The share premium is not distributable.
2021
45.7
–
45.7
2020
45.7
–
45.7
22. Capital redemption reserve
2021
2020
£ million
Group
Company
Group
Company
Balance at start of year
Movement during the year
Balance at end of year
36.3
–
36.3
36.3
–
36.3
36.3
–
36.3
36.3
–
36.3
The capital redemption reserve is not distributable and represents
the cumulative nominal value of shares acquired for cancellation.
23. Own shares reserve
£ million
Opening cost
Own shares acquired
Own shares transferred
Closing cost
2021
(15.3)
(21.0)
13.3
(23.0)
2020
(7.8)
(10.1)
2.6
(15.3)
The Group has established an Employee Benefit Trust (EBT) which
purchases shares in order to meet the anticipated value of equity
settled, share-based awards. At the year end, the EBT held 932,403
shares with a cost of £23.0 million and market value of £25.6
million (2020: 809,044 shares, cost £15.3 million, market value
£16.7 million). The own shares reserve is not distributable.
24. Share-based payments
The Group utilises share-based awards for employees, the vast
majority of which are equity-settled, and designed to align the
interests of employees with those of shareholders.
During the year restricted share units (RSUs) were awarded for the
first time. RSUs are commonly used long-term incentive awards that
comprise awards of shares made to employees that will vest after
a three-year service period and then are subject to a further two-
year holding period. At the same time employees were offered the
choice of converting existing LTIP awards (SARs and performance
shares) into RSUs on a fair value equivalent basis, calculated using
the methodologies adopted in previous years. This resulted in all
performance shares and the vast majority of SARs converting into
RSUs.
In addition, 60% of annual bonuses over £150,000 (for JRCM
directors) or £250,000 (for other employees) are made in deferred
shares which vest over three years (based on a service condition).
The total expense for share-based awards, including related social
security costs, recognised in the consolidated income statement
was £20.4 million (2020: £14.3 million) of which £0.5 million related
80 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
25. Capital reserve
28. Net asset value per ordinary share –
31 December 2021
31 December 2020
basic and diluted
Net asset value per ordinary share is based on the following data:
£ million
Group
Company
Group
Company
Balance at start of year
Gains for the year
Dividend paid
Other capital items
Taxation
Total capital return
Balance at end of year
3,350.1
919.8
(55.0)
(38.0)
(2.5)
824.3
4,174.4
3,380.8
919.7
(55.0)
(42.1)
–
822.6
4,203.4
2,894.1
540.2
(54.7)
(30.4)
0.9
456.0
3,350.1
2,910.9
540.2
(54.7)
(15.6)
–
469.9
3,380.8
The Company’s Articles of Association allow distribution by dividends
of realised capital reserves.
£ million
Capital reserve:
in respect of investments realised
in respect of investments held
Balance at end of year
2,854.1
1,349.3
4,203.4
2,233.8
1,147.0
3,380.8
26. Revenue reserve
31 December 2021
31 December 2020
£ million
Group
Company
Group
Company
Balance at start of year
Loss for the year
Actuarial gain/(loss)
Deferred tax (charge)/credit
Balance at end of year
5.1
(17.3)
1.9
(1.1)
(11.4)
(136.8)
(39.3)
–
–
(176.1)
7.0
(1.2)
(0.8)
0.1
5.1
(97.6)
(39.2)
–
–
(136.8)
As permitted by Section 408 of the Companies Act 2006, the
Company has not published a separate income statement or
statement of comprehensive income. The Company’s revenue loss
after tax amounted to £39.3 million (2020: loss £39.2 million). The
Company’s total comprehensive income for the year was £839.5
million (2020: £485.9 million profit).
27. Revaluation reserve
£ million
Group
Company
Group
Company
31 December 2021
31 December 2020
Balance at start of year
Revaluation gain/(loss)
on property, plant and
equipment
Balance at end of year
11.7
11.7
13.5
13.5
(0.2)
11.5
(0.2)
11.5
(1.8)
11.7
(1.8)
11.7
The revaluation reserve is not distributable.
31 December
Net assets (£ million)
Number of shares in issue (million)
Shares held in EBT
Shares held in treasury
Basic shares (million)
Effect of share-based payment awards (million)
Diluted shares (million)
2021
2020
31 December
Net asset value per ordinary share – basic
Net asset value per ordinary share – diluted
2021
2020
4,390.3
156.8
3,590.4
156.8
(0.9)
(0.2)
155.7
1.4
157.1
2021
pence
2,819
2,794
(0.8)
(0.1)
155.9
0.8
156.7
2020
pence
2,303
2,292
75.6
3.1
–
28.8
107.5
55.9
15.4
–
4.3
75.6
29. Investments in subsidiary undertakings
£ million
Carrying value at 1 January 2021
Additions
Disposals
Fair value movements in year
Carrying value at 31 December 2021
£ million
Carrying value at 1 January 2020
Additions
Disposals
Fair value movements in year
Carrying value at 31 December 2020
Investments in subsidiary undertakings are stated at cost or fair
value where appropriate.
At 31 December 2021 the Company held investments in the
following subsidiaries, which, unless otherwise stated, are wholly-
owned, share the same accounting reference date as the Company
and operate principally in their country of incorporation. The voting
share capital, unless otherwise stated, is held directly by the
Company.
In accordance with IFRS 10 the subsidiary below is consolidated by
the Group and held by the Company at cost:
Name
JRCM1
Issued share capital
£6,250,001 divided into 6,250,000 ordinary shares of
£1 each and one special share of £1 which provides
rights over the use of the “J. Rothschild” name.
1 Registered office and principal place of business: 27 St James’s Place,
London SW1A 1NR.
RIT Capital Partners plc Report and Accounts December 2021 81
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Notes to the Financial Statements
29. Investments in subsidiary undertakings
31. Reconciliation of profit/(loss) before finance
(continued)
In accordance with IFRS 10 the Company and Group holds the
following subsidiaries at fair value at 31 December 2021:
costs and taxation to net cash inflow/(outflow)
from operating activities before taxation and
interest
Principal place of
business
Name
Spencer House Limited1,5
RIT US Value Partnership LP1,6
RIT Investments GP Limited2,3,5
J. Rothschild Capital Management US Inc4,5 United States
RIT Investments US Inc3,4,5
United States
RIT US Holdings LLP3,4,6
United States
England
England
Scotland
100%
100%
100%
100%
100%
100%
Ownership
interest
£ million
Profit/(loss) before dividend and interest income,
finance costs and taxation
Dividend income
Interest income
Profit/(loss) before finance costs and taxation
(Increase)/decrease in other receivables
Increase/(decrease) in other payables
Other movements
(Gains)/losses on borrowings
Realised foreign exchange (gains)/losses on
repayments and drawings of borrowings
Unrealised foreign exchange (gains)/losses on
repayments and drawings of borrowings
Purchase of investments held at fair value
Sale of investments held at fair value
(Gains)/losses on fair value investments
Net cash inflow/(outflow) from operating
activities before taxation and interest
£ million
Profit/(loss) before dividend and interest income,
finance costs and taxation
Dividend income
Interest income
Profit/(loss) before finance costs and taxation
(Increase)/decrease in other receivables
Increase/(decrease) in other payables
Other movements
(Gains)/losses on borrowings
Realised foreign exchange (gains)/losses on
repayments and drawings of borrowings
Unrealised foreign exchange (gains)/losses on
repayments and drawings of borrowings
Purchase of investments held at fair value
Sale of investments held at fair value
(Gains)/losses on fair value investments
Net cash inflow/(outflow) from operating
activities before taxation and interest
Group
2021
2020
871.2
8.5
2.2
881.9
(157.5)
105.3
13.3
(12.6)
507.0
10.2
2.3
519.5
66.9
8.2
(8.5)
15.1
(0.6)
(33.0)
3.7
(1,351.6)
1,397.5
(807.6)
(10.3)
(1,328.1)
1,518.9
(576.4)
71.8
172.3
Company
2021
2020
849.0
8.5
2.2
859.7
(157.5)
100.4
35.5
(12.6)
491.8
10.2
2.3
504.3
66.8
(2.0)
(49.3)
15.1
(0.6)
(33.0)
3.7
(1,348.5)
1,405.6
(807.6)
(10.3)
(1,297.3)
1,529.6
(576.4)
78.1
147.5
Reconciliation of liabilities arising from financing activities:
£ million
Borrowings – current
Borrowings – non-current
Total
2020
(189.0)
(181.5)
(370.5)
1 Including currency translation.
Non-cash
changes in
fair value1
Net
drawdowns
2021
(3.1)
12.6
9.5
(47.9)
–
(47.9)
(240.0)
(168.9)
(408.9)
1 Registered office and principal place of business: 27 St James’s Place,
London SW1A 1NR.
2 Registered office and principal place of business: 50 Lothian Road, Edinburgh
EH3 9WJ.
3 Held indirectly.
4 Registered office: 251 Little Falls Drive, Wilmington, Delaware 19808, USA.
5 Ownership interest is ordinary shares.
6 Ownership interest is partnership capital.
For all of the above the proportion of voting rights held is equivalent
to the ownership interest.
There are no significant restrictions arising from any contractual
arrangements or regulatory requirements that would affect the ability
of any of the above entities to transfer funds to or repay loans made
by the Company.
There are no other current commitments or contractual
arrangements to provide financial support to any of the entities
above other than in the normal course of business (e.g. funding of
investment transactions/capital calls). The Company has not assisted
any of the above entities in obtaining financial support in any way
over the year.
30. Dividends
Dividends paid in year
2021
Pence
per share
35.25
2020
Pence
per share
35.0
2021
£ million
55.0
2020
£ million
54.7
The above amounts were paid as distributions to equity holders of
the Company in the relevant year from accumulated capital profits.
On 1 March 2021 the Board declared a first interim dividend of
17.625 pence per share in respect of the year ended 31 December
2021 that was paid on 30 April 2021. A second interim dividend of
17.625 pence per share was declared by the Board on 30 July 2021
and paid on 29 October 2021.
The Board declares the payment of a first interim dividend of
18.5 pence per share in respect of the year ending 31 December
2022. This will be paid on 29 April 2022 to shareholders on the register
on 1 April 2022, and funded from the accumulated capital profits.
82 Report and Accounts December 2021 RIT Capital Partners plc
Notes to the Financial Statements
Unconsolidated structured entities
The Group holds interests in closed-ended limited partnerships
which invest in underlying companies or securities for the
purposes of capital appreciation. The Group, alongside the other
limited partners, makes commitments to finance the investment
programme of the relevant GP or manager, who may draw down
this committed amount either upfront or over a period of years. The
table below shows the Group’s carrying value of such investments
and represents the maximum exposure to loss based on the Group’s
contributions to date.
£ million
Total1
2021
2,590
2020
1,460
1 Included within Investments held at fair value.
The list of significant related undertakings on page 84 is pursuant to
the requirements of Companies Act 2006, Statutory Instrument 2015
No. 980 The Companies, Partnerships and Groups (Accounts and
Reports) Regulations 2015, IFRS and the SORP.
Disclosed on page 84 for the year ended 31 December 2021 are:
•
•
•
Entities classified as significant holdings (20% or greater interest
in a class of shares or partnership);
Material investee undertakings in which the Group had an interest
of over 3% of the allotted shares of any class; and
Material investment funds in which the Group had an interest of
10% or more in any class of share or unit.
All the investments in the table on page 84 are held at FVPL.
32. Material investments and related undertakings
Further information regarding investments is shown here.
Disclosed below are the ten largest investments in the portfolio
(excluding investments in non-consolidated subsidiaries) shown at
fair value:
As at 31 December 2021
Coupang
Eisler Capital Fund
BlackRock Strategic Equity Hedge Fund
Springs Opportunities
Attestor Value Fund
HCIF Offshore
Ward Ferry Asian Smaller Companies
Iconiq Strategic Partners III
Lansdowne New Energy
Sand Grove Tactical
Total
As at 31 December 2020
Eisler Capital Fund
HCIF Offshore
BlackRock European Hedge Fund
Springs Opportunities
Coupang
Attestor Value Fund
Gaoling
Ward Ferry Asian Smaller Companies
Acorn
Tresidor Credit
Total
£ million
188.8
163.9
143.8
131.9
130.8
127.5
93.4
87.5
80.7
76.1
1,224.4
£ million
170.7
156.7
156.0
142.9
140.8
116.5
108.1
93.4
91.5
83.6
1,260.2
Further to the disclosures in Note 29 (investments in subsidiary
undertakings), the table on the following page shows a list of
significant related undertakings of the Group as at 31 December
2021. For the investments shown the principal place of business
is considered to be the place of registration and the proportion of
voting rights held is considered to be the ownership interest.
The Directors do not consider that any of the portfolio investments
shown in the table on the following page fall within the definition
of an associated company (aside from the entities noted below the
table) as the Group does not exercise significant influence over their
operating and financial policies as it is a passive investor.
In a number of cases the Group owns more than 50% of a particular
class of shares or partnership interest. The Group does not consider
these holdings, although greater than 50%, provide control of the
investee entities concerned as firstly the Group’s position as a
passive investor in these entities acts as a substantive barrier to its
exercising any power over the investee and secondly the nature of
the Group’s holding does not give it the ability to direct the relevant
activities of the investee because it does not control or participate in
the governing bodies of these entities.
RIT Capital Partners plc Report and Accounts December 2021 83
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
32. Material investments and related undertakings
(continued)
Investment name
1992 Co-Invest (Offshore) LP
BlackRock Emerging Markets Flexible Fund,
Class R
BlackRock Strategic Hedge Fund Ltd, Class I
Blumberg Capital I LP
BX-B Ribbit Opportunity IV, LLC
BX-C Ribbit Opportunity IV, LLC
Caxton Dynamis Limited
Darwin Private Equity I LP
Dukes Investments Ltd1
Eisler Capital Fund Ltd, C Shares
Firebird New Russia Fund Ltd, Class A1
Gaoling UK Feeder Fund Ltd, Class A
Hein Park Offshore Investors Ltd, Class F
ICQ Holdings 6 LLC
Infinity SDC Ltd1
Japan Small Cap Fund
JNE Fund Ltd
JRCM (London) LLP1
Lansdowne NE Fund, Unhedged Non-Restricted
absolute shares
Media Technology Ventures IV LP
RR Capital Partners LP
Sand Grove Tactical Fund LP
Sand Grove UK Tactical Portfolio
Springs Global Strategic Partners Fund - Anchor
Class
Springs Opportunities Fund LP, Series A
Tresidor Credit Opportunities Fund
Tribeca Global Natural Resources Feeder Fund
Class A Participating Shares Unrestricted
Xander Seleucus II LP
Xander Seleucus LP
Xander Seleucus Retail LP
Registered address
Fair value
£ million
%
interest
PO Box 309, Ugland House, Grand Cayman, KY1-1104
2 Ballsbridge Park, Ballsbridge, Dublin 4
19.4
74.2
Place of registration
Cayman Islands
Ireland
Cayman Islands
Delaware, USA
Delaware, USA
Delaware, USA
Virgin Islands
Scotland
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
Delaware, USA
England & Wales
Ireland
Cayman Islands
England & Wales
Ireland
PO Box 309, Ugland House, Grand Cayman, KY1-1104
580 Howard Street, Suite 401, San Francisco, California 94105
1209 Orange Street, Wilmington, Delaware 19801
1209 Orange Street, Wilmington, Delaware 19801
Maples Corporate Services, PO Box 173, Road Town, Tortola
50 Lothian Road, Festival Square, Edinburgh EH3 9WJ
87 Mary Street, George Town, Grand Cayman KY1-9005
PO Box 309, Ugland House, Grand Cayman, KY1-1104
PO Box 897, Windward 1, Grand Cayman KY1-1103
27 Hospital Road, George Town, Grand Cayman, KY1-9008
27 Hospital Road, George Town, Grand Cayman, KY1-9008
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808
500-600 Witan Gate West, Milton Keynes MK9 1SH
Block 5, Harcourt Centre, Harcourt Road, Dublin 2
PO Box 309, Ugland House, Grand Cayman, KY1-1104
27 St James’s Place, London SW1A 1NR
32 Molesworth Street, Dublin 2
California, USA
Delaware, USA
Cayman Islands
Cayman Islands
Ireland
185 Berry Street, Suite 3600, San Francisco, California 94107
One Maritime Plaza, Suite 2100, San Francisco, California 94111
PO Box 309, Ugland House, Grand Cayman, KY1-1104
PO Box 309, Ugland House, Grand Cayman, KY1-1104
2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin1
Cayman Islands 4th Floor, Willow House, Cricket Square, Grand Cayman KY1-9010
2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin 1
27 Hospital Road, George Town, Grand Cayman, KY1-9008
Ireland
Cayman Islands
131.9
69.0
43.0
Cayman Islands
Cayman Islands
Cayman Islands
PO Box 309, Ugland House, Grand Cayman KY1-1104
PO Box 309, Ugland House, Grand Cayman KY1-1104
PO Box 309, Ugland House, Grand Cayman KY1-1104
0.5
0.0
1.2
143.8
2.9
16.1
1.7
47.3
1.4
0.0
163.9
2.1
72.6
49.4
64.9
6.6
48.0
0.8
0.0
80.7
1.6
0.2
76.1
69.9
62.8
49.7
100.0
41.0
5.1
22.9
29.2
71.8
23.9
49.9
100.0
24.2
78.8
21.2
100.0
23.9
21.6
100.0
50.0
50.4
38.5
20.5
71.5
100.0
100.0
48.0
100.0
62.5
41.9
43.3
48.8
1 The Directors consider these entities, in which it holds ordinary shares, or limited partnership interests, as associated companies as the Group has significant
influence due to circumstances particular to the investment. The Group has chosen to account for associated companies held for investment purposes at FVPL
in accordance with IAS 28 Investments in Associates and Joint Ventures and IFRS 9 Financial Instruments.
84 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report
RIT Capital Partners plc Report and Accounts December 2021 85
Report on the audit of the Financial Statements
Opinion
In our opinion:
RIT Capital Partners plc’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true
and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2021 and of the Group’s profit for the
year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards (‘UK
adopted IAS’);
the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of RIT Capital Partners plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2021 which comprise
Group
Parent Company
Consolidated Income Statement and Consolidated Statement of
Comprehensive Income for the year to 31 December 2021
Consolidated Balance Sheet as at 31 December 2021
Parent Company Balance Sheet as at 31 December 2021
Parent Company Statement of Changes in Equity for the year to
31 December 2021
Consolidated Statement of Changes in Equity for the year to
31 December 2021
Consolidated and Parent Company Cash Flow Statement for the year
to 31 December 2021
Consolidated and Parent Company Cash Flow Statement for the year
to 31 December 2021
Related notes 1 to 32 to the financial statements, including a
summary of significant accounting policies
Related notes 1 to 32 to the financial statements, including a
summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting
standards and as regards to the Parent Company financial statements, as applied in accordance with section 408 of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Group and the Parent Company in conducting the audit.
86 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
Obtaining an understanding of the Directors’ process and controls for determining the appropriateness of the use of the going
concern basis. This included discussions with J. Rothschild Capital Management Limited (the ‘Manager’) on the governance structure,
corroborating our understanding with the Audit and Risk Committee and obtaining the Directors’ going concern assessment, including
cashflow forecasts and covenant calculations, covering the period to 30 June 2023, which is at least twelve months from the date
these financial statements were authorised for issue;
Reviewing the Group’s cashflow forecasts and stress tests, assessing the completeness of the severe scenarios that consider the key
risks identified by the Group. We considered the appropriateness of the methods used to calculate the cashflow forecasts and covenant
calculations and determined through inspection and review of the methodology and calculations that the methods utilised were
appropriate to be able to make an assessment for the entity;
Obtaining the Group’s reverse stress tests and identifying the factors that would lead to the Group utilising all liquidity or breaching
financial covenants during the going concern period;
Considering the actions the Group can take to mitigate the impact of the reverse stress test scenarios. This included evaluating the
Parent Company’s ability to prevent a breach of financial covenants using mitigating actions if required, such as the repayment of
borrowings. We also verified credit facilities available to the Parent Company by obtaining third party confirmations;
Reviewing the liquidity and regulatory capital position of the Group, including an assessment of the liquidity profile of the Group’s
portfolio;
Enquiring of the Manager as to the impact of COVID-19 on the business and reviewing board minutes and key regulatory documents for
risks, events or contrary evidence that may impact the Group’s ability to continue as a going concern; and
Reviewing the Group’s going concern disclosures included in the annual report in order to assess that the disclosures were appropriate
and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern for the period assessed by
the Directors, being the period to 30 June 2023, which is at least twelve months from the date these financial statements were authorised
for issue.
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to
continue as a going concern.
RIT Capital Partners plc Report and Accounts December 2021 87
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Overview of our audit approach
Key audit matters
Audit scope
Risk of inaccurate recognition of investment income and gains/(losses) on investments held at fair value.
Risk of incorrect valuation of direct private and illiquid fund investments.
The Group is principally managed from one location in London. All core functions are located
in London.
The Group comprises one consolidated subsidiary and six subsidiaries held at fair value. Monitoring
and control over the operations of these subsidiaries, including those located overseas, is centralised
in London.
The London based Group audit team directly performed audit procedures on all items material to the
Group and Parent Company financial statements.
Risk of inaccurate recognition of investment income and gains/(losses) on investments held at fair value.
Key audit matters
Risk of incorrect valuation of direct private and illiquid fund investments.
Materiality
This approach is consistent with the 2020 audit.
Overall Group materiality of £43.9 million which represents 1% of net assets
This approach is consistent with the 2020 audit.
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other
factors when assessing the level of work to be performed at each entity.
The investment portfolio balance is the most material part of the Consolidated Balance Sheet. Monitoring and control over the valuation
of investments is exercised by the Manager centrally in London, and as such is audited wholly by the London based Group audit team.
Monitoring and control over the operations of the subsidiaries within the Group is also centralised in London. The Group audit team
performed all the work necessary to issue the Group and Parent Company audit opinion, including undertaking all of the audit work on the
risks of material misstatement identified above. There were no component audit teams.
In establishing our audit approach, we considered the type of audit procedures required to be performed and the audit evidence required
to obtain sufficient and appropriate audit evidence as a basis of our opinion on the Group. As a result of COVID-19, the audit fieldwork was
largely executed remotely. All audit evidence was received electronically. Meetings with the Manager and Directors, as well as audit queries,
were conducted in person and via teleconference with audit evidence transferred via a secure Portal site. The audit team encountered no
difficulties in connecting virtually with the Manager or the Directors and were able to execute the audit fieldwork effectively.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact companies. The Group has determined that
the most significant future impacts from climate change on its operations may be from environmental exposure, and existing or proposed
regulation that may adversely affect their underlying portfolio investments. This is explained on page 22 in the Principal Risks and Viability
section of the Strategic Report, which forms part of the “Other information”, rather than the audited financial statements. Our procedures
on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on the adequacy of the Group’s disclosures in the financial statements as set
out in Note 1 and conclusion that there was no material impact from climate change on the financial statements. We also challenged the
Directors’ considerations of climate change in their assessment of viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
88 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Risk
Our response to the risk
Risk of inaccurate recognition of investment income and
gains/(losses) on investments held at fair value (£914.5
million, 2020: £533.1 million)
Refer to the Audit and Risk Committee Report (pages 42 to
44); Accounting policies (pages 61 to 64); and Notes 2 and
3 of the Consolidated Financial Statements (page 65)
The Group’s revenue consists of investment income and
gains/(losses) on investments held at fair value.
The accuracy of recognition and measurement of revenue is
material to the Group’s financial statements.
Shareholder expectations may place pressure on the
Manager to influence the recognition of revenue. This may
result in overstatement or deferral of revenues to assist in
meeting current or future targets or expectations.
We obtained an understanding of the Manager’s processes and controls
around the investment income process and valuation process to ascertain
whether realised and unrealised gains/(losses) and investment income are
appropriately calculated by performing walkthroughs in which we evaluated
the design and implementation of controls.
For gains/(losses) on investments held at fair value, on a sample basis, we
have:
recalculated the unrealised gains/(losses), considering the procedures
performed on the valuations where relevant;
agreed purchases and sales of investments during the year to trade
tickets, call and distributions notices, and to the corresponding cash
movements in bank statements; and
recalculated realised gains/(losses) from disposals of investments in the
year.
For investment income, on a sample basis, we have:
agreed dividend income to an independent source and to corresponding
receipts in bank statements;
agreed distributions received to the notices from the fund managers and
to bank statements;
recalculated interest income based on the terms of underlying
agreements;
tested the completeness of income receipts by verifying that income
declared during the period, per an independent source, has been
correctly recorded as an income receipt; and
recalculated income from investment properties based on the terms of
the underlying agreements.
Key observations communicated to the Audit and Risk Committee
Our audit procedures did not identify any material matters regarding the recognition of investment income and gains/(losses) on
investments held at fair value.
All transactions tested have been recognised in accordance with contractual terms and UK adopted IAS.
Based on our procedures performed we had no further matters to report to the Audit and Risk Committee.
RIT Capital Partners plc Report and Accounts December 2021 89
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Risk
Our response to the risk
Risk of incorrect valuation of direct private and illiquid fund
investments (£2,379.3 million, 2020: £1,732.7 million)
Refer to the Audit and Risk Committee Report (pages 42 to
45); Accounting policies (pages 61 to 64); and Note 13 of
the Consolidated Financial Statements (pages 70 to 77)
The Group’s investment portfolio includes both direct
private investments and illiquid funds. The valuations are
determined by the Manager and the final valuations are
reviewed and approved by the Valuation Committee.
Direct private investments
Of the direct private investments, £152.3 million of
valuations were assessed directly by the Manager, subject
to final review and approval by the Valuation Committee, as
at 31 December 2021. The valuations of these direct private
investments are material, complex and include estimates
and significant judgments.
The valuations are based on the nature of the underlying
business which has been invested in. The methods used
may include:
applying a multiple to earnings or revenues;
using a discounted cash flow model; and
using recent transaction prices and recent offers.
Illiquid fund investments (including GP-led direct private
investments)
The valuations of the illiquid funds and remaining direct
private investments, which are investments in private
companies held by third-party managed special purpose
vehicles (‘GP-led direct private investments’), are material.
The illiquid funds include investments that are classified by
the Manager as private investments - funds and absolute
return and credit.
The valuations are determined by the governing bodies
of the investment vehicles, typically including the fund
managers, General Partners (‘GP’) and sponsors. The
valuations can include estimates and significant judgments,
as they are often based on fair valuations of their underlying
direct private investments, for which there may be limited
observable information available.
The valuations are provided to the Group and assessed
by the Manager, who are afforded discretion to make
any adjustments they deem appropriate, for example for
transactions between the date of the valuation provided
and the reporting date.
We obtained an understanding of the Manager’s processes and controls for
determining the fair valuation of direct private and illiquid fund investments
by performing a walkthrough in which we evaluated the design and
implementation of controls. This included reviewing the governance structure
and protocols around oversight of the valuation process, including their
oversight of the valuations performed by the underlying GPs and funds and
corroborating our understanding by attending Valuation Committee meetings.
We assessed the Manager’s valuation methodology against applicable
reporting frameworks, including applicable accounting standards and the
International Private Equity and Venture Capital (‘IPEV’) Guidelines. We sought
explanations from the Manager where there were judgments applied in its
application of the guidelines and assessed their appropriateness.
Direct private investments
For the valuation of direct private investments assessed directly by the
Manager, on a sample basis, we corroborated the key inputs into the
valuation models and performed procedures on key judgments made by the
Manager, including:
challenging the appropriateness of assumptions made by the Manager
in the application of the valuation models;
assessing the suitability of earnings multiples by considering the
appropriateness of the selected comparable companies, including
adjustments made to reflect the differences between these and the
investee company;
challenging the appropriateness of discount rates applied in discounted
cash flow models;
testing the mathematical accuracy of the valuation models; and
comparing the fair valuation to recently completed market transactions
or recent offers, where relevant.
With the assistance of our valuation specialists:
we formed an independent range for the key assumptions used in the
valuation of a sample of two direct private investments, with a value of
£73.5 million, with reference to relevant industry and market valuation
considerations;
we derived a range of fair values using our assumptions and other
qualitative risk factors; and
we compared this range to the Manager’s fair values and discussed our
results with both the Manager and the Audit and Risk Committee.
90 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Risk
Our response to the risk
Illiquid fund investments (including GP-led direct private investments)
For the valuation of illiquid fund and GP-led direct private investments, on a
sample basis, we:
confirmed the most recently available fund valuation to third party
statements, including from the GP, fund manager or fund administrator;
assessed prior year valuations which were based on unaudited net asset
statements by reference to their respective audited financial statements.
We have investigated and obtained explanations for all material
movements;
obtained and assessed the due diligence performed by the Manager for
new fund investments invested in the year to gain an understanding of
the Manager’s valuation process; and
where the most recently available fund valuation is not at the year
end date, we reviewed the Manager’s approach to address the timing
difference and challenged any adjustments made to the last valuation
received. Where applicable, we corroborated these adjustments by
agreeing any cash flows between the date of the fund valuation and the
Group’s year end valuation date to supporting documentation.
We discussed with the Manager the rationale for any differences between
the exit prices of investments realised during the year and the prior year
fair value, to further verify the reasonableness of the current year valuation
models and methodology adopted by the Manager.
We challenged the Manager on the IFRS 13 levelling classification of
the illiquid fund portfolio, focusing on those which are considered to be
subjective. We selected a sample of Level 2 investment fund holdings,
for which the judgment is made considering the nature of the underlying
investments of the fund and reviewed their financial statements to confirm
the appropriate levelling classification.
During the post year-end period, we monitored the receipt by the Manager of
updated valuation statements and other financial information relevant to the
valuation of the illiquid fund investments, to ensure no material differences
arose.
We considered the impact of COVID-19 throughout the procedures
performed on the valuation of the investment portfolio, by challenging
whether the valuation methodologies and assumptions used remained
appropriate.
All valuations tested were found to be carried in accordance with UK adopted IAS and the IPEV Guidelines.
Key observations communicated to the Audit and Risk Committee
The valuation of the most material direct private investment prepared by the Manager which was reviewed by our valuations specialists was
within the independently calculated reasonable range.
Through our back testing of exit prices we gained an understanding of the differences between the exit prices of investments realised
during the year and the prior year fair value. We did not identify any realisations of direct private investments with a significant unexplained
movement from the prior year fair value.
We did not identify any material issues when comparing prior year valuations which were based on unaudited net asset statements to their
respective audited financial statements.
Based on our procedures performed we had no material matters to report to the Audit and Risk Committee.
RIT Capital Partners plc Report and Accounts December 2021 91
Independent Auditor’s Report to the Members of RIT Capital Partners plc| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
In the prior year, our auditor’s report included ‘Risk of incomplete or inaccurate related party disclosures’ as a key audit matter. In the year
to 31 December 2021, there have been fewer significant transactions with related parties as part of the business transition to an expected
lower level of related party transaction activity following the retirement of Lord Rothschild. This resulted in a reduction of the audit time
required and this risk no longer being considered as a key audit matter. The key audit matter detailed above as the ‘Risk of incorrect valuation
of direct private and illiquid fund investments’ combines the two key audit matters titled the ‘Risk of incorrect valuation of direct private
investments’ and the ‘Risk of incorrect valuation of illiquid fund investments’ reported separately in the 2020 audit report.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit
procedures.
We determined materiality for the Group to be £43.9 million (2020: £35.9 million), which is 1% (2020: 1%) of net assets. We believe that net
assets provides us with a consistent year on year basis for determining materiality, and is the most relevant measure to the stakeholders of
the entity.
We determined materiality for the Parent Company to be £42.8 million (2020: £34.9 million), which is 1% (2020: 1%) of net assets.
We calculated materiality during the planning stage of the audit and then during the course of our audit, we reassessed initial materiality
based on 31 December 2021 net assets, and adjusted our audit procedures accordingly.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgment was
that performance materiality was 75% (2020: 75%) of our planning materiality, namely £32.9 million (2020: £26.9 million). We have set
performance materiality at this percentage based on the fact that there were no material prior year misstatements, that the internal control
environment is consistent with the prior year and there have been no significant changes in circumstances.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of £2.2 million
(2020: £1.8 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s report
thereon. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
92 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 24;
Directors’ explanation as to its assessment of the Parent Company’s prospects, the period this assessment covers and why the period
is appropriate set out on page 24;
Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its
liabilities set out on page 24;
Directors’ statement on fair, balanced and understandable set out on page 41;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 20;
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 19; and
The section describing the work of the Audit and Risk Committee set out on page 42
RIT Capital Partners plc Report and Accounts December 2021 93
Independent Auditor’s Report to the Members of RIT Capital Partners plc| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 41, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Parent 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 the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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 (UK) 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 financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Parent
Company and the Manager.
Our approach was as follows:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most
significant are those that relate to the reporting framework (UK adopted IAS, the Companies Act 2006, the AIC code, the 2018 UK
Corporate Governance Code and the Companies (Miscellaneous Reporting) Regulations 2018) and relevant tax compliance regulations.
In addition, we concluded that there are certain significant laws and regulations which may influence the determination of the amounts
and disclosures in the financial statements including the Listing Rules of the UK Listing Authority.
We understood how RIT Capital Partners plc is complying with those frameworks by making enquiries of the Manager, including
the General Counsel and Company Secretary, Chief Financial and Operating Officer, Head of Compliance and Internal Audit and
also the Non-Executive Directors including the Chairs of the Audit and Risk Committee and Valuation Committee. We corroborated
our understanding through our review of board minutes, Remuneration Committee minutes, papers provided to the Audit and Risk
Committee, including Valuation Committee packs, minutes of the Manager’s Conflicts Committee and correspondence received from
regulatory bodies.
We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
meeting with Directors and the Manager to understand where they considered there was susceptibility to fraud. We also considered
performance targets and their potential influence on efforts made by Directors and the Manager to manage NAV per share or the NAV
per share total return. We identified a fraud risk with respect to management override in relation to the risk of inaccurate recognition
of investment income and gains/(losses) on unquoted investments held at fair value and the risk of incorrect valuation of direct private
investments. Our audit procedures stated above in the ‘Key audit matters section’ of this Auditor’s report were performed to address
each identified fraud risk. In order to address the residual risk of management override we have performed journal entry testing.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved: journal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based
on our understanding of the business; enquiries of senior management; and focused testing, as referred to in the key audit matters
section above.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
94 Report and Accounts December 2021 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Other matters we are required to address
We were appointed by the Parent Company on 26 April 2018 to audit the financial statements for the year ending 31 December 2018
and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is four years, covering the years ending
31 December 2018 to 31 December 2021.
The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and Parent Company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Matthew Price (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor, London
28 February 2022
Notes:
1.
The maintenance and integrity of the RIT Capital Partners plc web site is the responsibility of the Directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
RIT Capital Partners plc Report and Accounts December 2021 95
Independent Auditor’s Report to the Members of RIT Capital Partners plc| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Other Information
31 December 2021
(Unaudited)
RIT Capital Partners plc
Investment Portfolio Reconciliation
Investment portfolio reconciliation
The following table shows a summary reconciliation between the amounts reported within the Investment Portfolio, as shown on pages 16
to 18, and the 31 December 2021 consolidated balance sheet, as shown on page 56:
£ million
Non-current assets
Portfolio investments at fair value
Non-consolidated subsidiaries
Investments held at fair value
Investment property
Property, plant and equipment
Retirement benefit asset
Derivative financial instruments
Current assets
Derivative financial instruments
Other receivables
Amounts owed by group undertakings
Cash at Bank
Total assets
Current liabilities
Borrowings
Derivative financial instruments
Other payables
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liability
Provisions
Finance lease liability
Net assets
Quoted
equity
Private
investments
Absolute
return
and credit
Real
assets
Other
investments
Net liquidity/
borrowing/
other
Consolidated
balance
sheet
31 December 2021
1,906.8
0.1
1,906.9
–
–
–
2.0
1,567.8
34.1
1,601.9
–
–
–
–
710.2
70.1
780.3
–
–
–
–
1,908.9
1,601.9
780.3
1.5
0.3
–
3.4
5.2
–
–
–
–
–
1,914.1
1,601.9
1,601.9
780.3
–
(0.2)
(41.7)
(41.9)
(36.7)
1,872.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,872.2
1,601.9
0.4
–
–
–
0.4
780.7
–
(0.4)
–
(0.4)
–
–
(2.9)
–
–
–
(2.9)
777.4
5.7
–
5.7
38.3
23.1
–
–
67.1
3.0
–
–
–
3.0
70.1
–
–
–
–
3.0
70.1
–
–
–
–
(3.5)
(3.5)
66.6
–
–
–
–
–
–
0.9
0.9
27.8
–
–
–
27.8
28.7
–
(7.6)
–
(7.6)
20.2
21.1
–
–
–
–
–
–
21.1
–
(3.0)
(3.0)
–
–
3.8
–
0.8
–
262.5
3.7
322.5
588.7
589.5
(240.0)
–
(127.1)
(367.1)
221.6
222.4
4,190.5
101.3
4,291.8
38.3
23.1
3.8
2.9
4,359.9
32.7
262.8
3.7
325.9
625.1
4,985.0
(240.0)
(8.2)
(168.8)
(417.0)
208.1
4,568.0
(168.9)
(168.9)
–
(1.3)
(1.0)
(0.1)
(171.3)
51.1
(2.9)
(1.3)
(1.0)
(3.6)
(177.7)
4,390.3
RIT Capital Partners plc Report and Accounts December 2021 97
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Glossary and Alternative Performance Measures
Glossary
Within this Annual Report and Accounts, we publish certain
financial measures common to investment trusts. Where relevant,
these are prepared in accordance with guidance from the AIC, and
this glossary provides additional information in relation to them.
Net asset value (NAV) per share: The NAV per share is calculated
by dividing the total value of all the assets of the trust less its
liabilities (net assets) by the number of shares outstanding. Unless
otherwise stated, this refers to the diluted NAV per share, with
debt held at fair value.
Alternative performance measures (APMs): APMs are numerical
measures of the Company’s current, historical or future financial
performance, financial position or cash flows, other than financial
measures defined or specified in the Company’s applicable financial
framework – namely UK adopted IAS and the AIC SORP. They are
denoted with an * in this section.
CPI: The CPI refers to the United Kingdom Consumer Price Index
as calculated by the Office for National Statistics and published
monthly. It is the UK Government’s target measure of inflation and,
from 1 January 2022, is used as a measure of inflation in one of the
Company’s KPIs, CPI +3.0% per annum.
Gearing*: Gearing is a measure of the level of debt deployed within
the portfolio. The ratio is calculated in accordance with AIC guidance
as total assets, net of cash, divided by net assets and expressed as
a ‘net’ percentage, e.g. 110% would be shown as 10%.
£ million
Total assets
Less: cash
Sub total
Net assets
Gearing
2021
4,985.0
(325.9)
4,659.1
4,390.3
6.1%
2020
4,044.5
(296.8)
3,747.7
3,590.4
4.4%
Leverage: Leverage, as defined by the UK Alternative Investment
Fund Managers Regulations (AIFMR), is any method which
increases the exposure of the portfolio, whether through
borrowings or leverage embedded in derivative positions or by any
other means.
MSCI All Country World Index: The MSCI All Country World
Index is a total return, market capitalisation-weighted equity index
covering major developed and emerging markets. Described in
this report as the ACWI or the ACWI (50% £), this is one of the
Company’s KPIs or reference hurdles and, since its introduction in
2013, has incorporated a 50% sterling measure. This is calculated
using 50% of the ACWI measured in sterling and therefore
exposed to translation risk from the underlying foreign currencies.
The remaining 50% uses a sterling hedged ACWI from 1 January
2015 (from when this is readily available). This incorporates hedging
costs, which the portfolio also incurs, to protect against currency
risk and is an investable index. Prior to this date it uses the index
measured in local currencies. Before December 1998, when total
return indices were introduced, the index is measured using a
capital-only version.
NAV total return*: The NAV total return for a period represents the
change in NAV per share, adjusted to reflect dividends paid during
the period. The calculation assumes that dividends are reinvested in
the NAV at the month end following the NAV going ex-dividend. The
NAV per share at 31 December 2021 was 2,794 pence, an increase
of 502 pence, or 21.9%, from 2,292 pence at the previous year end.
As dividends totalling 35.25 pence per share were paid during the
year, the effect of reinvesting the dividends in the NAV is 1.7%,
which results in a NAV total return of 23.6%.
Net quoted equity exposure: This is the estimated level of
exposure that the trust has to listed equity markets. It includes the
assets held in the quoted equity category of the portfolio adjusted
for the notional exposure from quoted equity derivatives, as well
as estimated cash balances held by externally-managed funds and
estimated exposure levels from hedge fund managers.
Notional: In relation to derivatives, this represents the estimated
exposure that is equivalent to holding the same underlying position
through a cash security.
Ongoing charges figure (OCF)*: As a self-managed investment
trust with operating subsidiaries, the calculation of the Company’s
OCF requires adjustments to the total operating expenses. In
accordance with AIC guidance, the main adjustments are to
remove performance-related compensation from JRCM, as this is
analogous to a performance fee for an externally-managed trust.
£ million
Operating expenses
JRCM direct performance-
related compensation
Other adjustments
Ongoing charges
Average net assets
OCF
2021
54.4
(24.8)
(0.1)
29.5
4,085
0.72%
2020
43.4
(22.8)
(0.1)
20.5
3,115
0.66%
In addition to the above, managers charge fees within the
external funds (and in a few instances directly to RIT in relation to
segregated accounts). We have estimated that, based on average
net assets across the year and annual management fee rates per
fund (excluding performance fees), these represent an additional
0.87% of average net assets (2020: 0.89%).
98 Report and Accounts December 2021 RIT Capital Partners plc
Glossary and Alternative Performance Measures
Premium/discount: The premium or discount (or rating) is
calculated by taking the closing share price on 31 December
2021 and dividing it by the NAV per share at 31 December 2021,
expressed as a net percentage. If the share price is above/below
the NAV per share, the shares are said to be trading at a premium/
discount.
RPI: The RPI refers to the United Kingdom Retail Price Index
as calculated by the Office for National Statistics and published
monthly. It was used as a measure of inflation in one of the
Company’s KPIs, RPI + 3.0% per annum until 31 December 2021.
Share price total return or total shareholder return (TSR)*: The
TSR for a period represents the change in the share price adjusted
to reflect dividends paid during the period. Similar to calculating
a NAV total return, the calculation assumes the dividends are
notionally reinvested at the daily closing share price following the
shares going ex-dividend. The share price on 31 December 2021
closed at 2,750 pence, an increase of 685 pence, or 33.2%, from
2,065 pence at the previous year end. Dividends totalling
35.25 pence per share were paid during the year, and the effect of
reinvesting the dividends in the share price is 1.9%, which results
in a TSR of 35.1%. The TSR is one of the Company’s KPIs.
RIT Capital Partners plc Report and Accounts December 2021 99
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Historical Information and Financial Calendar
Historical information
02 August 1988
31 March 1989
31 March 1990
31 March 1991
31 March 1992
31 March 1993
31 March 1994
31 March 1995
31 March 1996
31 March 1997
31 March 1998
31 March 1999
31 March 2000
31 March 2001
31 March 2002
31 March 2003
31 March 2004
31 March 2005
31 March 2006
31 March 2007
31 March 2008
31 March 2009
31 March 2010
31 March 2011
31 March 2012
31 December 2012
31 December 2013
31 December 2014
31 December 2015
31 December 2016
31 December 2017
31 December 2018
31 December 2019
31 December 2020
31 December 2021
Notes:
Diluted
net assets
£ million
280.5
344.4
334.0
318.0
305.5
385.9
468.6
450.2
560.8
586.1
737.5
759.7
811.4
759.8
758.3
674.7
981.1
1,113.1
1,534.7
1,635.6
1,690.0
1,350.5
1,815.7
1,984.0
1,920.0
1,847.2
2,146.0
2,299.6
2,441.3
2,692.1
2,858.3
2,830.2
3,145.6
3,590.4
4,390.3
Diluted
NAV
per share
pence
105.9
134.2
131.0
131.7
140.7
181.1
221.6
213.4
283.2
303.5
384.1
398.6
509.0
484.3
483.4
430.2
628.2
712.7
982.7
1,047.3
1,091.6
874.3
1,180.1
1,289.4
1,249.3
1,191.4
1,383.6
1,483.0
1,572.5
1,730
1,839
1,821
2,004
2,292
2,794
Closing
share price
pence
81.5
114.0
97.0
92.0
85.2
117.0
171.0
174.0
223.0
242.5
327.0
341.0
439.0
436.5
424.5
371.5
577.5
694
1,020
1,000
1,147
831
1,082
1,307
1,220
1,131
1,260
1,397
1,681
1,885
1,962
1,910
2,115
2,065
2,750
Premium/
(discount)
%
(23.0)
(15.1)
(26.0)
(30.1)
(39.4)
(35.4)
(22.8)
(18.5)
(21.3)
(20.1)
(14.9)
(14.5)
(13.8)
(9.9)
(12.2)
(13.6)
(8.1)
(2.6)
3.8
(4.5)
5.1
(5.0)
(8.3)
1.4
(2.3)
(5.1)
(8.9)
(5.8)
6.9
9.0
6.7
4.9
5.5
(9.9)
(1.6)
Diluted
earnings
per share
pence
n/a
29.3
(2.5)
0.7
6.6
40.5
41.5
(8.1)
63.3
17.2
81.5
14.6
100.2
(28.8)
2.2
(50.2)
195.9
90.0
270.3
67.0
50.6
(205.2)
306.3
111.7
(35.7)
(29.6)
215.7
129.8
121.4
195.0
142.4
17.5
220.8
321.0
545.5
Dividend
per share
pence
n/a
1.7
2.6
2.4
1.1
1.1
1.6
1.7
1.6
1.8
2.0
2.2
3.1
3.1
3.1
3.1
3.1
3.1
3.1
3.1
4.0
7.5
4.0
4.0
4.0
28.0
28.0
29.4
30.0
31.0
32.0
33.0
34.0
35.0
35.25
1. The Company commenced its business as an approved investment trust on 3 August 1988, following the listing of its share capital on the London Stock
Exchange.
2. Prior to 31 March 2000, the diluted net assets were measured on the assumption that all convertible stock was converted at the balance sheet date. By
31 March 2000, all convertible stock had been converted or redeemed.
3. Dividends per share represent the amounts paid in the relevant financial year or period.
4. Since 31 March 2005 the closing share price has been displayed to the nearest pence and from 31 December 2016 the diluted net assets per share has been
disclosed to the nearest pence.
Financial Calendar:
4 May 2022, 3:30 pm
29 April 2022:
Annual General Meeting.
Payment of interim dividend.
100 Report and Accounts December 2021 RIT Capital Partners plc
Investor Information
Share price information
The Company’s £1 ordinary shares are listed on the London Stock Exchange and may be identified using the following codes:
TIDM:
SEDOL:
ISIN:
RCP LN
0736639 GB
GB0007366395
The closing price of the shares is published in the Financial Times and The Daily Telegraph. Daily and 15 minute delay share price
information is displayed on the Company’s website: www.ritcap.com, as well as numerous online platforms.
Registrar
The Company’s registrar may be contacted as follows:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 0370 703 6307
Overseas: +44 370 703 6307
Shareholders may contact the registrar should they need to notify a change of name or address, or have a query regarding the
registration of their holding or the payment of a dividend. Shareholders who wish to have dividends credited directly to their bank
account rather than paid by cheque may do so by arrangement with the registrar. Shareholders may also arrange with the registrar
to have their dividend payment invested in additional RIT Capital Partners plc ordinary shares purchased in the market.
Registered holders of ordinary shares of RIT Capital Partners plc may elect to receive communications from the Company
electronically as an alternative to receiving hard copy accounts and circulars. This facility is provided by the registrar and shareholders
will need to go online at www.investorcentre.co.uk and select the ‘eComms’ signup section to participate. To complete the
registration process shareholders will need their postcode or country of residence, along with their shareholder reference number
(as shown on their share certificates or dividend advices). Shareholders will also be asked to agree to the terms and conditions for
electronic communication.
Registered shareholders also have the facility to check their shareholding, change their address or update their bank mandate
instruction by registering to become a member of ‘Investorcentre’.
Regardless of whether shareholders sign up for ‘eComms’ or become a member of ‘Investorcentre’, they are able to cast proxy
votes in respect of general meetings electronically if they wish by using the link provided on their proxy form or in their email
notification.
RIT Capital Partners plc Report and Accounts December 2021 101
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Directory
MANAGER, ADMINISTRATOR, COMPANY SECRETARY AND REGISTERED OFFICE
J. Rothschild Capital Management Limited
27 St James’s Place
London SW1A 1NR
INDEPENDENT AUDITOR
Ernst & Young LLP
25 Churchill Place
London E14 5EY
SOLICITOR
Linklaters LLP
One Silk Street
London EC2Y 8HQ
BROKERS
JP Morgan Cazenove Limited
25 Bank Street
London E14 5JP
Numis Securities Limited
45 Gresham Street
London EC2V 7BF
ADVISER TO THE REMUNERATION COMMITTEE
Alvarez & Marsal
Park House
16-18 Finsbury Circus
London EC2M 7EB
CUSTODIAN AND DEPOSITARY
BNP Paribas Securities Services
10 Harewood Avenue
London NW1 6AA
AIC
The Company is a member of the Association of Investment Companies
www.theaic.co.uk
FOR INFORMATION
27 St James’s Place
London SW1A 1NR
Tel: 020 7647 8565
Fax: 020 7493 5765
Email: investorrelations@ritcap.co.uk
Website: www.ritcap.com
102 Report and Accounts December 2021 RIT Capital Partners plc
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Report & Accounts
for the year ended 31 December 2021
27 St James’s Place London SW1A 1NR