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Report & Accounts
for the year ended 31 December 2023
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
Sustainability Report
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
1
3
6
11
21
24
31
37
39
40
52
56
60
64
65
66
67
68
69
70
95
106
107
109
110
111
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 UK Financial
Conduct Authority’s (FCA) Listing Rules. 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 FCA. RIT is classified as an Alternative
Investment Fund (AIF) in accordance with the UK Alternative Investment Fund Managers Directive (AIFMD).
The investment manager, administrator, and company secretary is J. Rothschild Capital Management Limited (JRCM or the
Manager), 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 AIFMD.
This report is printed on Revive 100% White Silk a totally recycled paper produced
using 100% recycled waste at a mill that has been awarded the ISO 14001
certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
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
RIT NAV per share total return1
CPI plus 3.0%
MSCI All Country World Index (ACWI)
RIT share price total return1
FTSE 250 Index2
Key data
NAV per share
Share price
Premium/(discount)
Net assets
Gearing1
Average net quoted equity exposure
Ongoing Charges Figure for the year1
First interim dividend (April)
Second interim dividend (October)
Total dividend in year
2023
2,426 pence
1,882 pence
-22.4%
£3,573 million
3.5%
39%
0.77%
19.0 pence
19.0 pence
38.0 pence
2022
2,388 pence
2,125 pence
-11.0%
£3,722 million
6.2%
38%
0.89%
18.5 pence
18.5 pence
37.0 pence
Performance history
RIT NAV per share total return1
CPI plus 3.0% per annum
MSCI All Country World Index
RIT share price total return1
FTSE 250 Index2
3 Years
10.6%
31.7%
23.5%
-4.1%
4.3%
5 Years
44.2%
42.2%
71.0%
7.5%
28.3%
10 Years
108.8%
77.0%
147.4%
78.7%
61.2%
2023
3.2%
7.0%
18.4%
-9.6%
8.0%
Change
1.6%
-11.4%
-11.4% pts
-4.0%
-2.7% pts
1% pts
-0.12% pts
2.7%
2.7%
2.7%
Since
inception
3,343%
637%
1,126%
3,407%
1,607%
Performance since inception
4,000%
NAV per share total return
ACWI
CPI plus 3.0%
3,500%
3,000%
2,500%
2,000%
1,500%
1,000%
500%
0%
1
9
8
8
1
9
9
3
1
9
9
8
2
0
0
3
2
0
0
8
2
0
1
3
2
0
1
8
2
0
2
3
A description of the terms used in this report, including further information on the calculation of Alternative Performance Measures (APMs), is set
out in the Glossary and APMs section on page 107.
1 The Group’s designated APMs are the NAV per share total return, share price total return, gearing and the ongoing charges figure.
2 RIT’s shares are a constituent of the FTSE 250 Index, which is not considered a Key Performance Indicator (KPI).
RIT Capital Partners plc Report and Accounts December 2023 1
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Strategic Report
RIT Capital Partners plc
Chairman’s Statement
Sir James Leigh-Pemberton
In the first half of 2023, most major indices traded in
a relatively narrow range, punctuated by periods of
weakness and recovery. As the year progressed, a belief
that interest rates may have peaked led to a rebound in
developed world equity markets, which was particularly
marked in the fourth quarter. US equity markets finished
the year strongly, buoyed by a small number of very large
technology companies. These so-called ‘magnificent
seven’ tech stocks accounted for the majority of the S&P
500’s gains. Excluding these few companies, the overall
market returns were more modest.
Our net asset value per share finished the year at 2,426
pence, representing a total return (including dividends)
of 3.2%, lagging our investment hurdles of CPI+3%,
which was up 7.0%, and the MSCI ACWI (50% sterling)
which rose 18.4%. This brings our 10-year performance to
109%, a more than doubling of shareholders’ capital over
the period. Our investment portfolio is structured around
three core pillars of quoted equities, private investments,
and uncorrelated strategies. During 2023, the portfolio
saw good performance from quoted equities, driven
primarily by our successful single stock selection and
exposure to Japan. Uncorrelated strategies also made a
positive contribution, helped by the outperformance of
our credit managers, as well as our investments in carbon
credits. However, the value of our private investments
softened, reflecting lower valuations of external funds
carried over from the fourth quarter of 2022 and our
carefully considered revaluation of our direct investments.
Currency was also a headwind; the pound’s appreciation
of some 5% against the US dollar over the year impacting
the translated value of our global investments.
Our portfolio is made up of high-conviction investments
with differing characteristics and return drivers. While
there will be times when not all asset classes meet our
long-term expectations, we remain committed to our
diversified approach. Our belief is that utilising a carefully
constructed blend of different assets, overlaid with a top-
down risk management function, remains the best way
to manage our investments for the long-term benefit of
shareholders. Our Manager’s Report from J. Rothschild
Capital Management (JRCM or the Manager) provides a
detailed review of investment performance, attribution,
positioning and risk management.
While the most important driver of our share price
performance over the long term is our NAV, the Board is
This brings our 10-year performance
to 109%, a more than doubling of
shareholders’ capital over the period.
also intensely focused on the rating of our shares, and
in this regard 2023 was a difficult year. Discounts for
investment trusts widened considerably, and our discount
was no exception ending the year at -22%, resulting
in a total shareholder return (including dividends) of
-9.6%. This is a source of frustration to our shareholders,
as well as to the Board and our Manager. Directors’
shareholdings are disclosed in this Report and our
colleagues in our Manager also have significant ‘skin in
the game’, with interests in approximately £18 million RIT
shares at the year end, reinforcing the close alignment
with shareholders’ interests. The Board and our Manager
have been, and continue to be, acutely focused on
closing the discount.
During 2023, we increased the level of our interactions
with shareholders, and I am very grateful for their candid
and thoughtful feedback in these discussions, which
has been very helpful in guiding our plans to reduce
the discount. I address below four core topics: private
investments, capital allocation, costs and marketing.
Private investments are currently out of favour with
investors, and discounts for trusts exposed to these
assets have widened significantly in 2023. RIT has
always had private investments as a core part of its
approach, and despite mark-to-market volatility in the
short term, over the long term the success of these
investments has been a strong contributor to our returns.
Our earlier successes have, in part, placed us in a
challenging position; healthy capital growth is one of the
main reasons why, over the past five years, our private
investments had come to represent a higher proportion
of the portfolio than in the past. We are committed to this
asset class and continue to believe that our long-standing
relationships are a source of competitive advantage and
attractive returns to shareholders. This is reflected in
our portfolio, which in aggregate is sitting on sizeable
profits, over and above the capital we invested. The
returns generated by our private portfolio are set out in
more detail in the Manager’s Report. Most of our largest
direct investments are profitable companies with growing
revenues and earnings. Our close manager relationships
RIT Capital Partners plc Report and Accounts December 2023 3
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Chairman’s Statement
and brand strength, often enable us to access a preferred
position in the capital structure of a company, with the
majority of our direct investments having some element
of downside protection.
Nevertheless, over the next two years we will look
to reduce the proportion of the portfolio represented
by private investments to a level of between around
a quarter and a third of NAV. This will be achieved by
organic exits and the continuation of a very high return
bar for any new investments. Where we see realisations
from this portfolio, we expect to deploy the capital to
buy back our shares or to make new investments in the
liquid portfolio, depending on the level of discount, the
opportunity set and general portfolio management needs.
What we will not do is accelerate exits or engage in sales
at discounts to fair value to the detriment of long-term
shareholder value.
During 2023, we undertook one of the largest buybacks
in the investment trust industry, acquiring some 8.6
million shares at a cost of £163 million, our largest single
allocation of capital in the year. This generated a strong
return on investment, increasing the NAV per share
return for shareholders; the buyback also reinforced
the confidence that we have both in our NAV and our
approach. If compelling returns from allocating our capital
in this way continue to be available, we will retain the
flexibility to act.
Over the year, we also paid dividends of 38 pence per
share, an increase of almost 3% over 2022, and totalling
£57 million. Our approach remains to maintain or increase
the dividend, subject to the overriding capital preservation
objective. In 2024, we intend to pay a dividend of 39
pence per share, an increase of 2.6% over 2023. The
dividend will be paid as normal in equal instalments in
April and October, funded from our significant reserves.
Our long-standing investment approach covers multiple
asset classes, sectors and geographies, and provides
shareholders with access to investments, including
specialist funds, which are not typically accessible to
individual shareholders. This approach is in line with our
Investment Policy and has been deployed consistently
year on year. It is a key driver of RIT’s strong long-term
performance. By design, it will not be the cheapest
approach to managing investments, but whenever we
allocate capital, we do so only if the anticipated risk-
adjusted return, net of all costs (both internal costs and
any fees paid to external managers) delivers value to
shareholders.
We continue to look for ways to reduce costs, and
enhance our communications, with a portion of the
savings made over the year reinvested into improving our
marketing and investor relations efforts. We will continue
4 Report and Accounts December 2023 RIT Capital Partners plc
to invest in more regular and informative direct contact
with shareholders.
Our environmental, social, and governance (ESG)
initiatives remain an area of particular focus, with our
Manager, JRCM, submitting its first report during the
year as a signatory of the UN Principles for Responsible
Investment (UN PRI). We also include our first
Sustainability Report within this Annual Report, where
we have collated in one location, all of the activities
we undertake in respect of our wider commitments to
society and the environment.
Governance and employees
Following an extensive international search process,
Maggie Fanari retired from the Board on 29 February,
joining JRCM on 1 March as its CEO. Maggie has an
outstanding track record of successfully leading teams
investing across different asset classes and geographies
at one of the largest and most respected investment
companies in the world – Ontario Teachers’ Pension
Plan – where she was the Senior Managing Director and
Global Group Head High Conviction Equities. We are
delighted that Maggie has joined the exceptional team at
JRCM, and we look forward to working closely with her in
the execution of the important initiatives outlined above.
Maggie succeeds Francesco Goedhuis, who retired as
JRCM’s CEO in December as a result of an illness in his
immediate family. Francesco joined JRCM in 2010 and
was appointed CEO in 2014. During his 13 years with the
Manager, Francesco has provided outstanding leadership,
continuously strengthening both the team in JRCM and
our exceptional network of investment partners. The
Board was very pleased to announce recently that he
will continue his association with RIT in his new role as
Senior Adviser to JRCM.
After 11 years, Ron Tabbouche (latterly the co-CIO at
JRCM) retired to join his family in Israel, with Nick Khuu
appointed to the role of CIO. Nick is a very experienced
investor across multiple asset classes, having worked at
leading investment firms in New York and San Francisco.
He has been with JRCM for over four years operating in
senior investment roles, and we are delighted with his
appointment.
On behalf of the Board, I would like to express our
gratitude to Francesco and Ron for their very significant
contributions to the Manager and to your Company’s
performance over more than a decade.
At the end of September, after more than three years as
a Director of RIT, Maxim Parr retired from the Board to
take on the position of Chair of JRCM, providing valuable
leadership and additional resources during a period of
transition of its senior leadership team.
Chairman’s Statement
I would like to thank my colleagues on the Board, and
our talented and dedicated employees for their hard
work and commitment throughout the year. This diverse
group shares a single aim – creating long-term value for
RIT’s shareholders. At a time when the outlook for global
economies and markets and the geopolitical environment
are particularly complicated, these colleagues, together
with our investment partners and advisers, are the key
to our future success. We have the flexibility to select
the best investments across any asset class, sector or
geography, coupled with the strength of our network
which opens doors to opportunities that others cannot
access. These remain important differentiators on which
we will continue to build for the future.
Nathaniel Charles Jacob Rothschild 1936 – 2024
Finally, it is with great sadness that we mourn the
recent death of our founder and former chairman, Lord
Jacob Rothschild. Jacob was chairman of the Rothschild
Investment Trust, subsequently renamed RIT Capital
Partners plc, from 1971 to 2019. He devised, developed,
and led the growth of the Company, including its listing
on the London Stock Exchange in 1988. During his
tenure, the net asset value increased from £5 million to
over £3 billion by the time he retired from the Board in
September 2019 and was granted the title of Honorary
President. Our thoughts and condolences are with
Hannah Rothschild, his daughter and current Director, and
the rest of the Rothschild family at this time. He will be
missed.
Sir James Leigh-Pemberton
Chairman
RIT Capital Partners plc Report and Accounts December 2023 5
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
Purpose and strategic aims
Since your Company’s inception, our purpose has been
consistent, namely to protect and enhance shareholders’
wealth over time by providing diversified portfolio
management. This is 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.”
The origins of the business can be traced back to the
earlier Rothschild Investment Trust, chaired by Lord Jacob
Rothschild from 1971, when it had a value of £5 million.
In its current form, your Company was listed on the
London Stock Exchange in 1988, and has followed a
constant and unique approach to this day. Our multi-
asset, flexible investment strategy differentiates us from
other conventional investment trusts. Our access and
expertise enable us to build a flexible, diversified portfolio
that delivers through different economic cycles. We invest
for the long term in the most compelling opportunities
across asset classes, geographies and capital structures,
applying careful risk management, all designed to support
our most important objective: long-term capital growth.
There may be periods when we will try to place a
degree of protection of shareholders’ funds ahead of
growth, but we believe that active management of our
portfolio exposures is more likely to lead to long-term
outperformance. We do not target absolute returns and
therefore, ensuring we have sufficient capital deployed to
generate long-term growth will naturally result in us being
exposed to market risk.
Over time, we believe that a combination of healthy
participation in up markets, and reasonable protection
in down markets, should help us to compound ahead
of markets through the cycles. Indeed, since your
Company’s listing in 1988, we have participated in 74% of
the monthly market increases but only 41% of the market
declines. This has resulted in our NAV per share total
return compounding at 10.5% per annum, a meaningful
outperformance of global equity markets at 7.3%. Over
the same period the total return to shareholders was
10.6% per annum.
A bove all, our approach is long term …
Our access and expertise enable us to
build a flexible, diversified portfolio that
delivers through different economic cycles.
Investment approach
Our Investment Policy guides our Manager and
subsidiary, J. Rothschild Capital Management Limited
(JRCM) as it manages your portfolio:
“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.”
We typically invest your portfolio across multiple
asset classes, geographies, industries and currencies
diversified across three investment pillars: quoted
equities, private investments and uncorrelated strategies.
This has been the basis of our approach over many years
and the long-term success of your Company has been
the result of combining thematic investing with active
management of a distinctive blend of investments, all
overlaid with currency positioning and macro exposure
management. Using our unique access and expertise, we
create a distinctive blend of high-conviction investments
of differing profiles and varying underlying return drivers.
This targets long-term performance with a balance of risk
and reward that is superior to the wider equity markets.
Our respected name is a hallmark of quality, affording
us unrivalled access to world-leading investment
opportunities, allowing us to maximise our ability to
deploy capital effectively. We have a highly skilled
investment team with significant depth and breadth of
experience across different asset classes and we are also
able to draw on our network to broaden our intellectual
bandwidth by leveraging specialist insight from our
Manager’s network of exceptional manager partners. The
strength of these relationships enables us to invest in
sectors and geographies which may be inaccessible to
many investors.
Access
global network & heritage
Flexibility
permanent capital & no benchmark
Expertise
team & specialist partners
Disciplined
investing
through RIT’s
diversified,
global portfolio
Capital growth
Superior risk/reward
6 Report and Accounts December 2023 RIT Capital Partners plc
Our Purpose, Strategy and Business Model
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
involves paying fees, the level of these fees is an
important and integral part of the investment decision.
Our focus is solely on the net returns, and therefore
if the returns, net of all fees, meet our target, we are
comfortable paying them. Our reported net asset value is,
of course, net of all management and performance fees.
Above all, our approach is long term. The permanent
capital structure of an investment trust, compared to an
open-ended fund, means we do not suffer from liquidity-
driven pressures to fund investors’ 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 our 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 the performance of individual assets and
the portfolio composition. Further information on risk
management is set out on pages 24 to 30.
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 20.
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 our Manager, 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 has a separate Board of
Directors and is governed by its Executive Committee.
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 a profitable 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 to ensure that the investment
approach is suitable for achieving our Corporate Objective, and
to monitor 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 our objectives. 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. This team is expected to operate in accordance with
our core values, and 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. The Sustainability Report on
pages 31 to 35 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 four were men and four women.
RIT Capital Partners plc Report and Accounts December 2023 7
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
Within our subsidiaries, the employee base comprised 43
men and 19 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 62). The Board recognises that its actions have lasting
impacts and consequences for the future of the Company,
its shareholders and 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 undertake their 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 the
approach taken by the Manager to execute on the policy.
Other areas considered by the Board where shareholder
views were taken into account included discount
management, the dividend, buybacks, capital allocation,
and ESG integration. Our current Board composition
complies with the recommendations of both the
Parker Review and the FTSE Woman Leaders Review
(previously the Hampton-Alexander Review), and also
meets the requirements of the FCA’s listing rules in
relation to diversity. ESG and sustainability will continue
to help inform our approach to this area. Please refer
to our Sustainability Report on pages 31 to 35 for more
information.
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
We recognise that our purpose to protect and enhance
our shareholders’ wealth must combine with a
commitment to reflecting ESG factors in our investment
approach. The application of an ESG lens offers us a
comprehensive understanding of both financial and non-
financial risks, which ultimately contributes to improved
decision-making. As a result, we have a more complete
view of any given opportunity, supporting the delivery
of risk-adjusted returns and aligning with shareholder
expectations. ESG factors are integrated across our
investment management and internal operations, and
we aim to be good corporate citizens, applying robust
governance and minimising our environmental impact.
8 Report and Accounts December 2023 RIT Capital Partners plc
Our Purpose, Strategy and Business Model
Our Manager is a signatory of the UN PRI, and has in
place a Responsible Investment Framework & Policy,
which is 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
for responsible investment. ESG factors form part of the
due diligence undertaken by JRCM prior to selecting
investments and continue to be monitored throughout
our holding of the investment. Further information is set
out in our Sustainability Report on pages 31 to 35.
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. Absolute outperformance: NAV total return in excess of
CPI plus 3.0% per annum;
2. Relative outperformance: NAV total return in excess of
the MSCI All Country World Index (ACWI); and
3. Share price total return or total shareholder return (TSR).
The first two of these relate to our Manager’s investment
performance. CPI plus 3.0% per annum represents the
desire to grow the real value of our portfolio over time, with
a meaningful premium above inflation. 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 our Manager 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
Our Corporate Objective...informs
the Board’s desire to seek healthy,
risk-adjusted returns over the long term
and through the cycles... mindful of the
Company’s reputation as a responsible
fiduciary of shareholder capital.
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 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: CPI 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 outperformance
‘high water mark’ as well as significant deferral into the
Company’s shares, which vest over three years.
The second component of the remuneration approach
is a long-term incentive plan (LTIP) designed to reinforce
the alignment with shareholders. Restricted share units
(RSUs) may be awarded to employees of JRCM and SHL
under the LTIP. RSUs vest after three years, with typically
a further two-year holding period or lock-up before they
can be sold.
All of the awards follow a careful appraisal of
performance, and the high proportion of shares is
designed to reinforce the alignment with our long-term
investment performance and shareholder value creation.
Further details of remuneration are provided in the
Directors’ Remuneration Report on pages 56 to 59.
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
RIT Capital Partners plc Report and Accounts December 2023 9
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Our Purpose, Strategy and Business Model
provides regular updates of performance and exposure
including our monthly factsheets. I look forward to
meeting as many of you as possible at our AGM on 2 May
2024. As normal, there will also be an opportunity on that
occasion to hear directly from our Manager.
I would like to once again thank shareholders for their
continuing loyalty and support over many years.
Sir James Leigh-Pemberton
Chairman
10 Report and Accounts December 2023 RIT Capital Partners plc
Manager’s Report
Summary
In the face of challenges posed by rising interest rates
early in the year, geopolitical unrest, and bank collapses,
major indices recorded robust gains in 2023. A substantial
portion of these gains was attributable to a select
few mega-cap technology companies, overshadowing
more modest returns in other sectors. November
and December saw substantial market returns, when
indications by the US Federal Reserve of a path to lower
rates, together with falling inflation over the course of the
year, caused 10-year US treasury yields to tighten from
4.9% to 3.9%. The majority of annual returns for indices
globally came during this end of year rally, including our
reference hurdle, ACWI (50% £). Our portfolio produced
positive returns and trailed just behind this index for most
of the year, but lagged strongly rising markets in the last
two months of the year.
Despite the headwinds faced in 2022 and 2023, we
remain confident in our long-term investment approach.
Our careful portfolio construction is disciplined,
diversified, and carefully risk managed such that, over
time, we believe we can deliver capital appreciation to
shareholders with attractive risk-reward characteristics.
Portfolio positioning
Within a tried and tested investment risk framework, our
investment “reach” is unconstrained. Having a flexible
investment mandate enables us to invest across capital
structures, asset classes and geographies. Nevertheless,
our portfolio has historically maintained a core equity bias
and will continue to do so.
Group NAV £3,573m
(31 December 2022: £3,722m)
JRCM
Quoted equities,
£1,371m, 38.4% NAV
Private investments,
£1,285m, 35.9% NAV
Uncorrelated strategies,
£914m, 25.6% NAV
Other, £3m, 0.1% NAV
Decision-making starts with a considered, top-down
macro-economic view. We allocate capital to take
advantage of identified structural themes and market
dislocations, drawing upon our seasoned internal
resources and very often leveraging our extensive global
network of managers and partners.
We structure our investment portfolio by allocating capital
across three pillars:
•
•
•
quoted equities;
private investments; and
uncorrelated strategies.
By design, each pillar serves a distinct purpose within
the portfolio, with investments of differing profiles
and return drivers allowing us to benefit from this
broad diversification. Additionally, we make use of risk
management tools and hedging strategies to manage
risk, including currency translation risk.
Quoted equities
The quoted equities portfolio
includes diversified, global high
conviction strategies held directly
through stocks, as well as long-
only funds, and equity hedge
funds. We achieve this through a
combination of our own in-house
expertise and carefully selected
external managers, capitalising on
their specialist expertise in sectors
and geographies where we see the
most potential.
Private investments
Private investments comprise
high quality investments, sourced
directly via our own extensive
global network and through
commitments to exceptional fund
managers in specialist strategies.
Our direct investments are
typically structured to provide
some downside protection, with
the potential to generate attractive
returns over time.
Uncorrelated strategies
Our uncorrelated strategies aim to
generate consistent returns with
lower correlation to equity markets
across the cycle. It includes, but
is not limited to, absolute return,
credit, real assets, government
bonds and interest rate positions.
For absolute return and credit
strategies, we often collaborate
with specialist external managers
to access relevant opportunities.
30-60% NAV
long-term allocation range
20-40% NAV
long-term allocation range
20-40% NAV
long-term allocation range
RIT Capital Partners plc Report and Accounts December 2023 11
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
JRCM
Positive drivers of portfolio performance for the year
were:
•
•
•
high quality stock picking, driven by fundamentals;
Japan exposure, which outperformed all other
developed markets. This involved utilising our
network and working closely with specialist
managers who focus on value equities and engage
directly with management teams of Japanese
companies;
the performance of our credit managers, who were
able to profitably capitalise on dislocations in the
market;
Negative drivers were:
•
•
•
•
moderate quoted equities exposure throughout the
year, which meant that our portfolio as a whole,
lagged behind the equity rally;
our exposure to China, which has had a disappointing
recovery following its post-Covid reopening. The lack
of stimulus and global outflows weighed on shares
here;
currency translation effects from our meaningful US
dollar position, as sterling continued to gain strength
against the dollar; and
a decline in the valuation of our private investments,
mostly due to the funds, where the lagged Q4 2022
valuations impacted our returns this year.
A more detailed analysis on the performance and
positioning of each pillar, can be found in the following
pages.
Manager’s Report
Performance highlights
Our results for the year produced a NAV per share total
return of 3.2%. Comparatively, our two reference hurdles,
ACWI (50% £) and the ‘inflation plus’ hurdle CPI+3%
returned 18.4% and 7.0%.
Two noteworthy aspects underscored the strength
observed in the market-capitalised weighted indices.
First, the market rally exhibited an unusual narrowness,
primarily propelled by a select group of stocks termed
the ‘magnificent seven’ (Alphabet, Amazon, Apple,
Meta, Microsoft, Nvidia, and Tesla), which accounted
for approximately 20% of the MSCI World index and
demonstrated a remarkable 74% increase, while the
remaining 1,473 stocks collectively experienced a more
modest gain of 12%. Second, a substantial portion of
returns across various asset classes materialised during
the liquidity-fueled surge in November and December. For
instance, the Bloomberg Aggregate Bond index posted
-0.6% returns through October 31 and +9.9% over
November and December. Similarly, the ACWI exhibited
+7.0% returns through October 31, and then +10.6%
over November and December.
Asset allocation and portfolio contribution
Asset category
Quoted equities
Private investments
Uncorrelated strategies
Currency
Total investments
Liquidity, borrowings
and other
Total
% NAV
38.4%
35.9%
25.6%
0.9%
100.8%
-0.8%1
100.0%
% Contribution
6.8%
-2.7%
2.1%
-2.9%
3.3%
-0.1%1
3.2%
1 Including accretion benefit of 1.2% from share buybacks.
12 Report and Accounts December 2023 RIT Capital Partners plc
Manager’s Report
Quoted equities
31 December 2023: 38.4% NAV
This pillar includes directly-held stocks, long-only funds,
equity hedge funds and our quoted equity derivatives,
used predominantly to manage exposures. We express
our conviction views through our own stock picking and
through allocation to exceptional managers where we can
capitalise on their specialist expertise.
The average net quoted equities exposure (which
incorporates notional exposure from derivatives) for
the year was 39%, which is towards the lower end of
the 10-year historical range. The low level reflects the
defensive positioning of this book during the year, when
we favoured an increased allocation to uncorrelated
strategies, prioritising greater protection against market
volatility. Towards the end of the year, we increased our
net exposure to 45% as our stance on markets shifted.
Our quoted equities portfolio generated local currency
returns of 18.1% for the year and contributed 6.8% to the
overall NAV, despite our minimal exposure to technology
stocks in this pillar. This substantially outperformed the
ACWI Equal Weighted Index, which grew only 9.4%, and
was in line with our ACWI (50% £) reference hurdle of
18.4% – despite the fact that we didn’t own meaningful
positions in the ‘magnificent seven’ tech stocks, which
had an outsized impact on equity markets in 2023.
The key drivers of our performance were:
•
•
•
•
•
investments in Japan, for example 3D Investment
Partners, continued to perform well reflecting
a mixture of corporate governance reforms and
investor-led activism, helping to unlock value;
healthcare stocks performed well as ‘big pharma’
deployed capital to acquire innovative biotech
companies;
good exposure to global value stocks, accessed via
specialist managers, such as Discerene Group;
astute stock selection, including investments
focused on areas of mispricing such as Builders
FirstSource and Talen Energy; and
headwinds from fund investments with China
exposure, as a result of a lacklustre post-Covid
reopening, lack of stimulus, and global outflows.
With robust valuation levels prevailing in the market,
alongside elevated real interest rates and nominal growth
rates, we believe that engaging in bottom-up fundamental
analysis can unveil appealing opportunities, especially in
the context of market inefficiencies, or where investors
JRCM
Quoted equities £1,371m
(31 December 2022: £1,307m)
Stocks, £472m, 13.2% NAV
Funds, £887m, 24.8% NAV
Other, £12m, 0.4% NAV
Note: Included in stocks is an adjustment of +£90.2m representing
the latest estimate of publicly-traded quoted equities held indirectly
in private investment funds. An offsetting adjustment of -£90.2m is
included in private funds.
prioritised simpler narratives, such as money market
funds in the US, which attracted $1.3 trillion of inflows,
or mega-cap technology stocks. In the short to medium
term, we see compelling opportunities in single stock
investments and themes, where there is substantial
long-term return potential coupled with a lower risk of
permanent capital loss.
One fertile area for exploring market inefficiencies
is event-driven stocks, exemplified by our recent
investment in Talen Energy, a US power utility company.
We initiated this investment after the company emerged
from bankruptcy in 2023, driven by our belief in the
substantial unrecognised value of its nuclear power plant,
conventional gas power plants, and datacentre assets,
that together provide a significant margin of safety for our
investment. The company is a major beneficiary of the
US government’s decision to endorse the role of nuclear
energy in supplying carbon-free baseload power. The US
Inflation Reduction Act, enacted while Talen Energy was
in bankruptcy, provides a floor to revenues for nuclear
power plants, which means we have high conviction in
the minimal downside risk for Talen Energy from our point
of entry. Moreover, the management team is well aligned
with shareholder interests in optimising the value of the
investment.
Investing in companies with small and medium-sized
market capitalisations is a segment of the market that
has been overlooked by investors, creating substantial
valuation inefficiencies. At the beginning of the year,
we entered a position in Tempur Sealy, a prominent
manufacturer, distributor, and retailer of mattresses,
benefiting from the rising consumer demand for
premium mattresses. We invested in this high-quality
business at a valuation of less than 14 times earnings.
RIT Capital Partners plc Report and Accounts December 2023 13
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
JRCM
Elsewhere, a compelling opportunity for outperformance
persists in Japan, where we maintain exposure through
two specialist Japan value-oriented managers: Morant
Wright Management and 3D Investment Partners. The
combination of attractive valuations, improving corporate
governance, a rise in activism, and secular changes such
as labour and capital mobility provide a backdrop for
compelling returns.
Finally, in the healthcare sector, our positive long-term
perspective remains grounded in ongoing innovation,
scientific and technological breakthroughs, a generally
favourable regulatory environment in the US, and the
imperative for large pharmaceutical companies to
offset substantial revenue losses resulting from patent
cliffs through mergers and acquisitions with biotech
firms. Recognising the specialised nature of the sector,
which demands a blend of scientific expertise and
commercial insight, the significance of having the right
partners cannot be overstated. Consequently, we have
strategically invested alongside best-in-class healthcare
managers.
Manager’s Report
Tempur Sealy operates in a fragmented industry, where
its market share is nearly twice the size of its closest
competitor, and where it holds the majority of the profit
pool. This dominant position allows the company to
make aggressive investments in defending its barriers
to entry, including scale, vertical integration, and brand
recognition, facilitating growth beyond industry peers.
Notably, its major competitor, Serta Simmons, underwent
Chapter 11 restructuring in 2023, and a substantial portion
of the industry is grappling with cash flow issues. The
combination of these factors, along with robust cash
flow generation and a management team aligned with
shareholders, provides a solid margin of safety for our
investment.
In short, the ‘value’ sector remains a fertile environment
for stock picking. We express this perspective not
only through individual stock positions but also via our
partnership with Discerene Group. This fund emphasises
businesses exhibiting strong defensive moats, robust
cash flows, and attractive valuations. Notably, over the
past two years, three of the fund’s top five positions have
been subject to acquisition.
In terms of global exposure, despite recent challenges
in Chinese public markets, we believe China remains
a crucial market for capital deployment due to its
status as the second-largest global economy, structural
policy tailwinds (such as self-sufficiency initiatives) and
historically low valuations. Given the cultural nuances
and language barriers, we believe engaging a dedicated
specialist manager is paramount. We have partnered
with Springs Capital given their consistent generation
of significant alpha over extended time periods and the
quality of their investment team.
Quoted equity portfolio by region
US, 57%
Japan, 19%
Asia, 13%
Europe, 9%
Other, 2%
14 Report and Accounts December 2023 RIT Capital Partners plc
Manager’s Report
Private investments
31 December 2023: 35.9% NAV
Private investments remain a key element of our long-
term investment strategy and have been an important
contributor to our track record of outperformance.
The private investment portfolio represented 35.9%
of NAV at year end, divided between 11.0% in direct
investments, including co-investments alongside specialist
partners, and 24.9% in third-party funds. This is in line
with our strategy to allocate capital to this asset class
both through fund managers with specialist expertise
and outstanding track records, as well as directly, often in
co-investment structures. Our relationships with top-tier
partners worldwide, developed over many years, have
been crucial for generating significant returns over the long
term. The direct private investments made in the last 10
years have delivered a compound return of approximately
29% per annum, representing an exceptionally strong
return on our capital.
In 2023 the private investments book declined by
-6.0% and detracted -2.7% to the overall NAV. Private
investments are by their nature, long term and if we look
over the last five years, this book has seen a cumulative
145.7% return and a 28.8% contribution to NAV.
Private direct
Private funds
Total
Dec 2023
% NAV
2023 %
return
2023
contribution
11.0%
24.9%
35.9%
-3.8%
-7.0%
-6.0%
-0.5%
-2.2%
-2.7%
Note: returns are in local currency.
Key positive contributors to 2023 performance included:
•
•
strong revenue growth in many direct holdings,
as well as underlying holdings in funds, and a
continuation of a focus on profitability; and
upward multiple re-rating of the listed technology
sector, driving some valuation uplifts of private
companies.
These were offset by:
•
•
challenges in certain private investments, including
those exposed to reductions in discretionary
spending and investment by small-and-medium sized
businesses; and
the volatile macro landscape, which discouraged
further listings, impacted a traditional route to
valuation uplift and liquidity for private investors.
Private investments NAV bridge
JRCM
Private investments £1,285m
(31 December 2022: £1,516m)
Direct, £392m, 11.0% NAV
Funds, £893m, 24.9% NAV
Note: Included in the funds number is an adjustment of -£90.2m
representing the publicly-traded quoted equities held indirectly in
private investment funds.
During 2023, in the same way that public market issuance
was inconsistent, private financings and transactions
were also subdued. We sold one investment (Infinity) and
the majority of two other positions (Paxos and Animoca),
all at or above their most recent valuations. Despite these
broader market challenges, there were a number of very
positive developments in our direct private investments
as a result of strong operational performance and the
investment structure of the existing portfolio.
One company we are optimistic about is Scale AI, which
specialises in labelling objects in photos and videos
serving the requirements of self-driving cars, virtual/
augmented reality, and U.S. Department of Defense
applications. It has expanded its product offerings to
assist in teaching computers how to generate content
using AI. This company is a good example of the type
of “picks-and-shovels” opportunities RIT pursues;
companies which are positioned to thrive as a result of
a broader trend rather than a particular outcome. We
believe that Scale AI is well-placed to benefit from AI
breakthroughs without the necessity of committing to a
specific foundational model, whether from OpenAI, Meta
or Google.
RIT also holds a stake in Epic Systems, a leading U.S.
electronic health records provider founded by Judith
Faulkner in 1979 with $70k of investment, and which
delivered $4.6 billion of revenue in its recent reporting.
In 2023, management continued to invest in Epic’s cloud
products, which are seeing strong traction – investments
which we believe hold the promise to compound
shareholders capital at attractive rates over the long term,
as Judith has achieved since the company’s founding.
£ million
Private direct
Private funds
Total
Dec 2022
442.7
1,073.1
1,515.8
Additions/
(disposals)
Value change
Currency
translation
Quoted equity
adjustment
-12.5
39.0
26.5
-16.4
-75.3
-91.7
-22.1
-53.8
-75.9
–-
-90.2
-90.2
Dec 2023
391.7
892.8
1,284.5
RIT Capital Partners plc Report and Accounts December 2023 15
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
JRCM
card spending in a higher interest rate environment. Only
founded in 2015, the bank grew total customers by 28%
and now serves 7.4 million, or more than 10% of the
UK population. Having proven its customer model, and
continuing to attract new customers to its digital-first
offering, we believe Monzo can take a substantial share
of the UK retail banking profit pool.
If we look at the returns from the private funds, new
commitments made in the last 10 years have delivered
a compound return of approximately 18% per annum,
representing a very strong return and a healthy profit
over our capital deployed. As of the reporting date, 99%
of our private fund positions were held at September
valuations. This is consistent with the industry, which as
standard reports on a quarter’s lag. The impact of updated
valuations on NAV are published on a monthly basis.
We expect to see the weighting of private investments
reduce as the IPO market reopens and our private
funds continue to make distributions. In the meantime,
we continue to take an active approach to portfolio
management, realising value where opportunities
arise. In February 2024, for example, we received final
distributions from the earlier sale of our holding in Infinity,
a UK data-centre operator, at a price above our December
carrying value and have other potential realisations in
progress.
As we have observed throughout RIT’s history, private
investments appreciate idiosyncratically and show little
correlation to calendar year market moves. However, they
are a substantial contributor to our returns over the long
term. In total, new direct private investments and fund
commitments made in the last 10 years, have delivered a
compound return of approximately 20% per annum due
to this strategy – compared to 9.5% for our MSCI ACWI
hurdle and 12% for the S&P 500.
We hold a deep belief in many of the internet-enabled
technology businesses we hold directly and indirectly.
In line with our patient approach and permanent capital
vehicle, we believe that over the long term, these
opportunities are best accessed through our private
investments and although IPO markets and valuations
remain challenging in the near term, these businesses
should be beneficiaries of what we expect to be
improving market conditions. Historically our realised
investments have been sold at an average 24% increase
from their most recent holding values as determined by
RIT’s independent Valuation Committee.
Manager’s Report
The current weighting of private investments remains
relatively high in comparison to historical levels. This is
primarily a result of performance driving growth within
the portfolio and the relatively inactive IPO market.
Companies like Motive and Brex, for example, have
become significant holdings in the portfolio because their
current valuations are several times higher than RIT’s
initial investment in them.
In the longer list of smaller private direct investments,
there are numerous examples of high potential companies
that have shown early promise which could have
meaningful NAV contribution in the months and years
ahead. Examples of this diversified group of early-stage
investments include: Relativity Space, a next-generation
rocket company relying on market-leading 3D-printing
technology to compete in the lucrative launch market;
Digits, an accounting and financial reporting solution
disrupting an industry reliant on 20th century software;
and Perfect Day, a company innovating in the global dairy
industry with precision fermentation to produce animal-
free milk proteins.
RIT is a sought-after investment partner for the most
attractive private investments worldwide. This means
that not only can we access opportunities otherwise
inaccessible; it also means that we can structure deals on
attractive terms with a measure of downside protection.
The majority by value of our underlying direct private
investments benefit from some form of structural
protection for our capital. This can be in the form of
capped downside, or in preference ranking to ordinary
shareholders while also retaining equity upside. For
example, our investment in Motive, made alongside our
investment partner Greenoaks, benefits from uncapped
upside as well as a set of protections similar to those we
secured for RIT shareholders in our Coupang investment.
While the private funds 2023 performance was impacted
by the receipt of lagged Q4 2022 valuations, we also saw
positives across the book. We believe the private funds
portfolio, which includes a number of the best performing
private investment fund vehicles worldwide, is well
positioned to benefit when the window for technology
IPOs returns. Through our private funds investments we
have meaningful exposure to many of the most promising
later-stage private technology businesses globally;
companies such as ServiceTitan, Stripe, Databricks, and
Rippling.
Monzo, one such larger indirect position closer to
home, saw net operating income grow 88% in its 2023
financials, driven by increased customer deposits and
16 Report and Accounts December 2023 RIT Capital Partners plc
Manager’s Report
Uncorrelated strategies
31 December 2023: 25.6% NAV
Our uncorrelated strategies pillar contains a mix of
strategies with a lower correlation to equity markets that
aim to generate consistent returns across the economic
cycle. The uncorrelated strategies book returned 6.8%
and contributed 2.1% to the overall NAV.
In this pillar, we aim for a diverse mix of investments,
incorporating credit, ‘market neutral’ and macro
strategies. Additionally, we include investments in
interest rates, government bonds and real assets, such as
investment properties and gold. This diversified approach
serves to protect the overall portfolio from volatility, acting
as a crucial driver of returns during periods of market
stress. For absolute return and credit strategies, we often
work with specialist external managers to access the
opportunities.
Key drivers of this performance were:
•
•
strong performance of our credit funds, utilising our
strong network of specialist external managers;
positive contributions from gold, as market volatility
favoured safe-haven assets; and
•
our new investment in carbon credits.
Absolute return & credit strategies
In terms of credit strategies, market volatility has
increased materially due to sharply higher interest rates,
retrenchment of banks from lending beyond their core
client base, and large volumes of debt which are maturing
over the coming years. Opportunities in this market exist
in all major regions, particularly Europe and the US. When
borrowing becomes more expensive, due to a rapid
increase in credit spreads, markets can undergo a broad
sell-off. This presents opportunities for experienced credit
investors to source investments with strong risk-adjusted
return potential given the levels of asset coverage and
security available to lenders.
In 2023, credit markets saw significant volatility, with
spreads widening into the US banking crisis in March,
then tightening into the summer given the liquidity
injections by the Federal Reserve. The roller coaster
continued with a widening into late-summer alongside
the narrative of ‘higher-for-longer’ rates, before materially
tightening in November and December as the narrative
of ‘peak’ rates and hopes of future central bank rate cuts
took hold.
JRCM
Uncorrelated strategies £914m
(31 December 2022: £812m)
Absolute return & credit,
£740m, 20.7% NAV
Government bonds & rates,
£114m, 3.2% NAV
Real assets, £60m, 1.7% NAV
Through close partnerships, we have taken advantage
of this pattern of volatility to build our core exposure
using idiosyncratic opportunities. We have privileged
access to specialists who have expertise in specific sub-
categories of credit markets. During the year, we added
to existing managers in European and emerging market
credit, such as Tresidor Investment Management and
ARCM, as attractive risk-reward asymmetry was present
in these markets. Our credit funds as a group delivered
double digit returns for the year. As a result, credit
strategies drove the majority of the contribution under the
uncorrelated strategies pillar.
Our macro managers focus on absolute return. These
managers had a challenging first half of the year with
most central banks moving in sync on the fight against
inflation. A more varied monetary policy in the second
half of the year provided more opportunities for our
managers, who as a group finished in positive territory
and returned mid-single-digits for the year.
Looking to take advantage of the resurgence of inflation,
and the significant alpha-generating opportunities it
presented, we invested with an experienced inflation
manager with over two decades of expertise and a
remarkable track record. This partnership enables us
to gain unique insights into emerging trends and the
repercussions for a broader range of assets, positioning
us to navigate and capitalise on the dynamic financial
landscape around inflation.
RIT Capital Partners plc Report and Accounts December 2023 17
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
JRCM
Uncorrelated strategies
Dec 2023
% NAV
2023 %
return
2023
contribution
Absolute return &
credit
Government
bonds and rates
Real assets
Total
20.7%
9.2%
2.0%
3.2%
1.7%
25.6%
3.9%
-0.1%
6.8%
0.1%
-0.0%
2.1%
Note: returns are in local currency
Manager’s Report
Our equity market neutral managers also focus on
absolute return. They seek to protect against market
exposure risks by taking long and short positions in
related but different securities, in order to extract the
idiosyncratic return component of a stock’s share price
change. This strategy enables the manager to generate
consistent absolute returns with low correlation to equity
markets and limited risk of loss. During the year, we
made a new investment in Ilex Capital, an equity market
neutral manager who we believe to be of similar calibre
to our existing manager, Woodline, albeit complementary
with different focus markets. The launch was highly
sought after and we were able to secure an allocation
through our network and reputation.
Government bonds and rates
2023 has been another tough year for government
bonds, especially for UK gilts. Stickier inflation in the UK
compared to other developed countries in the first half
of the year, pushed short-dated gilt yields to their highest
level in 15 years. We purchased longer-dated gilts in the
first half when yields were attractive and, thereafter,
benefitted from core inflation’s sharp decline in October.
Real assets
This category holds our property investments as well
as positions in commodities. The former were down
slightly as real estate values softened over the year.
Within commodities, we held some hedges as well as
gold. Gold futures hit a record high of $2,135 per ounce
in December after another volatile year. Our position
in gold, held through derivatives, contributed 0.4% to
NAV as gold performed strongly during this period. This
was driven by geopolitical tensions and central bank
purchases, as well as a decline in real yields in the second
half of the year. Gold continues to play an important role
in our portfolio, serving as an asymmetric hedge to a
central bank ‘pivot’, a reversal of the strong US dollar, or
more generally against the increasing possibility of broad-
based market dislocation.
18 Report and Accounts December 2023 RIT Capital Partners plc
Manager’s Report
Currency
Currency is an important part of our portfolio construction
as an asset class and to manage risk. Given the global
nature of our portfolio, we use currency hedging to
reduce currency translation risk, typically by increasing
our levels of sterling to hedge our significant US Dollar
denominated investment book. We use hedges to limit
potential downside and to protect unrealised gains made
on profitable investments. The use of derivatives also
allows us to enhance returns through efficient structuring.
We also invest in currencies from time-to-time through
the use of currency derivatives. Our approach to
managing currency exposures can have a meaningful
impact on our overall performance.
Given sterling was the best performing currency in the
G7, having appreciated by 5.4% against the US dollar in
2023 and 19.1% since its historical lows in September
2022, our diversified global portfolio was impacted by
foreign currency translation. Our active hedging efforts
softened the impact of currency fluctuations, but
sterling’s strength was the largest detractor from our
absolute performance this year, detracting 2.9% from
NAV. We will continue to closely monitor and actively
manage our currency exposures.
30%
Currency exposure (% of NAV)
Sterling
US dollar
Euro
Japanese yen
Other
6.5%
6.4%
4.8%
4.4%
8.1%
11.7%
47.9%
53.0%
32.7%
24.5%
31 December 2023
31 December 2022
0%
10%
20%
30%
40%
50%
60%
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.
JRCM
Buybacks
Our conviction in the RIT portfolio remains high, and
as such, we have continued to execute on the Board’s
policy to buyback shares at a significant discount to the
underlying net asset value. This has been accretive for
shareholders, and added an estimated 1.2% to the NAV
per share return.
Debt and leverage
Maintaining a healthy balance sheet and ensuring we have
appropriate liquidity and access to leverage to enhance
shareholder returns is a core priority. During the year, we
paid back our £150 million facility with Commonwealth
Bank of Australia (CBA), reducing our debt in an
environment of higher interest rates. At the year end, we
held £281 million in drawn facilities and loan notes, with
£40 million in committed but undrawn facilities – more
information on our borrowings can be found on pages 88
and 89. Taking into consideration our cash balances, this
represented gearing of 3.5% calculated using guidance
from the Association of Investment Companies (AIC).
Operations and costs
JRCM manages the Group on a day-to-day basis on
behalf of the Board, providing investment management,
administration and company secretarial services. The
Manager is also responsible for our subsidiary, Spencer
House Limited (SHL) which maintains and manages the
investment property portfolio, including Spencer House
and other properties in St. James’s, and also operates a
profitable events business.
Careful management of costs is an ongoing priority for
our business. Where we can identify savings, without
impacting the ability to generate investment returns or
ensuring compliance with regulations, we will do so.
During 2023, we invested in building our marketing and
investor relations capabilities, conscious of the desire
from shareholders for greater disclosures and more
regular updates.
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
from the AIC. The OCF assumes a static portfolio, with
therefore no transaction costs or direct performance-
related compensation. It also excludes the costs of
borrowings deployed to enhance returns. For 2023, RIT’s
own OCF was 0.77% (2022: 0.89%); the reduction over
the year reflects lower costs, as well as a reclassification
of performance-linked LTIP costs in line with the AIC
guidance. Further information on the calculation is
provided on page 107.
RIT Capital Partners plc Report and Accounts December 2023 19
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
JRCM
directly own, with this proportion of the portfolio set to
increase. At the same time, we continue to be excited
by themes such as healthcare and Japan, where our
network of specialist external managers means we are
well-positioned to identify and take advantage of these
opportunities.
In uncorrelated strategies, we are enthusiastic about
current opportunities in the corporate credit markets,
driven by factors such as the increase in interest rates,
reluctance by traditional banks to lend to mid-sized
businesses, and the maturing of around $0.6 trillion
in loans over the next two years, which were issued
at lower rates. Where there is a dislocation in credit
markets, our partnerships with specialist managers
provides us with the potential to generate returns of
mid-teens or greater, in quality credits, with limited risk to
our capital due to robust creditor protections. And, even
where there isn’t a dislocation, the managers can still
earn high single digit to low double digit returns on quality
credits.
The positive drivers of our portfolio’s performance in
2023, including high-quality stock picking, strategic
geographic exposure, and the agility of our credit
managers, is illustrative of how our portfolio can perform.
Whatever the market challenges, our proactive approach
to navigate these complexities sets the stage for
continued thoughtful and resilient portfolio management
in the coming period.
Although the percentage allocation across our three
pillars may see modest variations over shorter periods
of time, our portfolio construction and risk management
principles aim to provide shareholders with a diversified
portfolio that delivers long-term capital appreciation on an
attractive risk-adjusted basis.
To conclude, we believe RIT’s competitive edge is derived
from our in-house expertise, our capital structure –
enabling a nimble and flexible investment approach – as
well as our unique access and ability to foster deep,
long-term specialist partnerships. As the market enters a
more idiosyncratic phase, we recognise that careful stock
picking and asset selection exercised within our robust
risk management framework, will be key to delivering
performance.
J. Rothschild Capital Management Limited
Manager’s Report
In addition to our Group costs, RIT’s Investment Policy
includes the allocation of part of the portfolio to third-
party managers, which have their own fees. These include
long-only equity and hedge fund managers, private equity
and funds that sit within our uncorrelated strategies pillar.
We estimate that the average annual management fees
for external managers represent an additional 0.94%
of average net assets (2022: 0.88%). 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.
Further information on fees is provided on page 61.
The managers’ fee structure is always a key consideration
in our due diligence. They are necessary costs in investing
in many difficult to access, high-quality managers or
unique deals, and are only paid for good performance. The
final investment decision is always made on the basis of
expected returns, net of all fees.
Outlook
In 2024, we are navigating a landscape characterised by
a balance of conflicting macro indicators. While US GDP
estimates are trending upward, certain credit indicators
are exhibiting signs of decline. Significant geopolitical
risks, such as conflicts in Ukraine and the Middle East,
coupled with the potential repercussions of the USA
elections in November, cast a shadow over the horizon.
The market’s late upturn in 2023 was driven by the
perception that interest rates may have reached their
peak, and that a soft landing is becoming more probable.
This has led to a scenario where many assets are
perceived to be fully valued.
The above notwithstanding, we believe there are
individual assets that currently trade at appealing price
points, and therefore provide attractive opportunities
for capital deployment. As investors who integrate a
top-down and bottom-up approach, we would highlight
the confidence we have in our own investment portfolio.
Within our private investments book, we see some
strong underlying operating performance, a shift towards
prioritising profit over pure growth, and broader tailwinds
driven by digital transition. These factors underpin our
confidence in the long-term intrinsic value of our private
investments. The reopening of the IPO markets may
also serve as a near-term catalyst for validating their
valuations.
We are also excited about quoted equities, where the
environment is particularly conducive for bottom-up,
fundamental stock picking. We think there are a multitude
of areas to deploy long-term capital with attractive return
potential in areas such as the often overlooked small
to medium-capitalisation stocks, or in ‘event-driven’
stocks. As such, we will lean more into stocks that we
20 Report and Accounts December 2023 RIT Capital Partners plc
Investment Portfolio
Investment portfolio as at 31 December 2023
Country/region
Industry/description
Value of
investments
£ million
% of
NAV
Investment holdings
Quoted equities1, 2
Stocks:
Talen Energy
Mastercard
Intercontinental Exchange
Canadian Pacific Kansas City
Thermo Fisher Scientific
Tempur Sealy
Helios Towers
Vistry
Power utility
United States
Software & services
United States
Diversified financial services
United States
Rail transportation
Canada
Life science tools & services
United States
Home furnishings; 1.2% notional
United States
Africa
Telecommunication services
United Kingdom Homebuilding; 1.0% notional
Consumer staples
Retailing
Energy
Building products; 1.0% notional
Homebuilding; 1.3% notional
Consumer staples; 1.1% notional
Software & services; 0.6% notional
–
All‐cap, diversified
All‐cap, healthcare
All‐cap, value bias
All‐cap, diversified
Small/mid‐cap, value bias
All‐cap, diversified
Small/mid‐cap, diversified
Mid/large‐cap, healthcare
–
Switzerland
South Korea
United States
United States
United States
United States
United States
–
Barry Callebaut
Coupang
Golar LNG
Builders FirstSource
Lennar
Keurig Dr Pepper
Visa
Other direct stocks
Quoted stocks held within private investment funds2
Total stocks
Funds:
3D Opportunity
HCIF Offshore
Japan
United States
Global
Global
Japan
China
Asia
Global
–
Discerene
Blackrock Strategic Equity
Morant Wright
Springs Opportunities
Ward Ferry Asian Smaller Co.’s
DG Offshore
Other funds
Total funds
Other:
S&P call options
Diversified basket
Other
Total other
Total quoted equities
United States
Global
–
Diversified; 4.5% notional
Long; 0.9% notional
–
48.8
45.1
39.6
35.7
30.2
26.4
25.6
22.3
21.8
21.5
19.5
7.0
6.8
1.3
0.1
29.9
90.2
471.8
182.2
156.8
112.3
112.3
100.2
70.7
64.3
17.9
70.5
887.2
9.6
1.1
1.2
11.9
1,370.9
1.4%
1.3%
1.1%
1.0%
0.8%
0.7%
0.7%
0.6%
0.6%
0.6%
0.5%
0.2%
0.2%
0.0%
0.0%
1.0%
2.5%
13.2%
5.1%
4.4%
3.1%
3.1%
2.8%
2.0%
1.8%
0.5%
2.0%
24.8%
0.3%
0.0%
0.1%
0.4%
38.4%
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.
Where positions are held, or partially held, via total return swaps or options, the total delta‐adjusted notional exposure is also disclosed in the
table.
2 Adjustment made for the latest estimate of publicly‐traded quoted equities held indirectly in private investment funds. These positions are
valued based on their most recent traded price at the statement date of the fund in which they are held.
RIT Capital Partners plc Report and Accounts December 2023 21
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Country/region
Industry/description
Value of
investments
£ million
% of
NAV
Investment Portfolio
Investment holdings
Private investments
Private investments – direct3:
Motive
Webull
Epic Systems
Kraken
Lede
Blueground
Infinity4
Airtable
Brex
Age of Learning
Anchorage Digital
Bolt Financial
Scale AI
Paxos
Puck
Everest
Xapo
Dandy
Other private investments – direct
Total private investments – direct
Private investments – funds:
Thrive funds
Iconiq funds
BDT Capital funds
Greenoaks Capital funds
Ribbit Capital funds
Hillhouse funds
Arch Venture funds
Lindenwood
LCV funds
Biomatics funds
Westcap funds
Sound Ventures funds
Eight Partners funds
Firstminute Capital funds
Mithril funds
LionTree Investment fund
Expa Capital
K2 funds
Corsair funds
Blackstone Tactical Opps
Other private investments – funds
Quoted stocks held within private investment funds5
Total private investments – funds
Total private investments
United States
United States
United States
Cargo ground transportation
Investment banking & brokerage
Health care technology
Diversified financial services
United States
Media & entertainment
United States
Real estate operating company
United States
United Kingdom Real estate operating company
United States
United States
United States
United States
United States
United States
United States
United States
Global
Global
United States
–
Software & services
Diversified financial services
Education services
Software & services
Software & services
Application software
Software & services
Publishing
Software & services
Diversified financial services
Health care technology
–
Growth equity
United States
Growth equity
United States
Private equity
United States
Growth equity
United States
Growth equity
United States
Private equity
China
Life sciences
United States
Growth equity
United States
Early stage
United States
Life sciences
United States
Growth equity
United States
United States
Early stage
United Kingdom Early stage
Early stage
United States
Growth equity
United States
Private equity
United States
Early stage
United States
Early stage
China
Private equity
United States
Private equity
United States
–
–
78.0
50.8
23.4
17.9
17.6
14.7
13.3
12.8
12.3
10.4
7.8
7.8
7.8
7.5
7.1
6.7
6.7
6.0
83.1
391.7
147.2
121.6
85.4
77.1
72.1
55.8
45.7
29.2
26.6
17.8
16.4
14.9
14.3
13.9
13.3
13.2
11.8
8.8
8.7
8.6
180.6
(90.2)
892.8
1,284.5
2.2%
1.4%
0.7%
0.5%
0.5%
0.4%
0.4%
0.4%
0.3%
0.3%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
2.3%
11.0%
4.1%
3.4%
2.4%
2.2%
2.0%
1.6%
1.3%
0.8%
0.7%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
0.4%
0.3%
0.2%
0.2%
0.2%
5.0%
(2.5)%
24.9%
35.9%
3 The private direct book includes investments held through co‐investment vehicles managed by a general partner (GP).
4 Balance represents the estimated cash proceeds from the business sale post liquidation of the holding company.
5 Adjustment made for the latest estimate of publicly‐traded quoted equities held indirectly in private investment funds. These positions are
valued based on their most recent traded price at the statement date of the fund in which they are held.
22 Report and Accounts December 2023 RIT Capital Partners plc
Country/region
Industry/description
Value of
investments
£ million
% of
NAV
Investment Portfolio
Investment holdings
Uncorrelated strategies
Absolute return and credit funds:
Tresidor funds
Attestor Value
ARCM
RIT US Value Partnership
Caxton
Woodline
JJJ Feeder
Liontree Advisory
ILEX
Highbridge
Charter Oak
Other absolute return and credit funds
Total absolute return and credit funds
Real assets:
St. James’s properties
Spencer House
Gold futures
Oil futures
Other real assets
Total real assets
Government bonds and rates:
UK treasury gilts 2027 and 2033
Total government bonds and rates
Total uncorrelated strategies
Currency
Currency forward contracts
Currency options
Total currency
Global
Global
Asia
Global
Global
Global
Global
United States
Europe
Global
United States
–
Credit and special situations
Credit and special situations
Credit and special situations
Multi‐strategy
Macro‐strategy
Equity market neutral
Macro‐strategy
Corporate loan note
Equity market neutral
Multi‐strategy
Credit and special situations
–
United Kingdom Investment property
United Kingdom Investment property
Long; 4.2% notional
Global
Long; 1.5% notional
Global
–
–
United Kingdom Government bonds
Various
Various
–
–
Total investments
Liquidity, borrowings and other
Liquidity:
Liquidity6
Total liquidity
Borrowings:
Short‐term bank borrowings7
RIT senior loan notes
Total borrowings
Other assets/(liabilities):
Margin
Trades awaiting settlement
Other assets/(liabilities)
Total other assets/(liabilities)
Total liquidity, borrowings and other
Total net asset value
–
–
–
–
–
–
Cash at bank
Revolving credit facilities
Fixed interest loan notes
–
–
–
130.8
97.5
96.9
77.8
68.5
58.5
44.4
37.0
32.8
30.1
26.7
38.8
739.8
3.7%
2.7%
2.7%
2.2%
1.9%
1.6%
1.2%
1.0%
0.9%
0.8%
0.7%
1.3%
20.7%
26.5
26.3
4.0
(1.8)
4.9
59.9
0.7%
0.7%
0.1%
(0.1)%
0.3%
1.7%
114.4
114.4
914.1
3.2%
3.2%
25.6%
26.8
5.0
31.8
0.8%
0.1%
0.9%
3,601.3 100.8%
202.0
202.0
5.7%
5.7%
(142.9)
(137.9)
(280.8)
37.8
25.3
(12.3)
50.8
(28.0)
(4.0)%
(3.9)%
(7.9)%
1.1%
0.7%
(0.4)%
1.4%
(0.8)%
3,573.3 100.0%
6 The liquidity balance excludes £2.3 million of cash held within segregated accounts managed externally.
7 The Group has two revolving credit facilities with Industrial and Commercial Bank of China and BNP Paribas SA.
RIT Capital Partners plc Report and Accounts December 2023 23
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
it is important to recognise that a carefully designed risk
management and internal control system can only aim to
reduce the probability or mitigate the impact; it cannot
remove the risk. With a global investment portfolio having
meaningful exposure to equities, rather than a pure
absolute return mandate, RIT’s NAV will not be immune
to either falling markets and/or volatility in currency
markets. Equally, with a diversified set of individual and
typically uncorrelated, high return-seeking drivers, the
portfolio could encounter occasions when the level of
volatility results in negative alpha in the short term.
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.
Operational and other risks include those related to the
legal environment, regulation, taxation, cyber security,
climate 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.
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 responsibility of the Board and the
Audit and Risk Committee.
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 the quantum and associated
sensitivity of market risk, credit risk and liquidity risk
in accordance with IFRS 7 Financial Instruments:
Disclosures is shown in Note 13 on pages 78 to 87.
The Board is ultimately responsible for the Group’s
system of internal controls, and has delegated the
supervision of the internal control 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 52 to 55.
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.
With a high degree of volatility in markets and continued
geopolitical tensions, risk management remains 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.
As an investment business, the vast majority of
the day-to-day activities involve the measurement,
evaluation and management of risk and reward. With
a corporate objective which includes an element of
capital preservation, the culture and practice of seeking
to protect the NAV from undue participation in down
markets through the cycles is well established. However,
24 Report and Accounts December 2023 RIT Capital Partners plc
Principal Risks and Viability
Principal risks
The Board has carried out a robust assessment of the emerging and principal risks facing the Company, with input
from the Audit and Risk Committee, as well as the Manager. Following this assessment, the Board has concluded that
there are no material emerging risks, and it is appropriate to reclassify two risks as separate principal risks. The material
widening of the discount at which the shares trade relative to the NAV, has led us to establish a new principal risk –
Discount risk. In addition, the ongoing developments in cyber risk, coupled with the potential that AI could enhance
fraud attempts, means we have also reclassified Cyber security as a new principal risk. The resulting 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:
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.
“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.”
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.
Discount risk
Investment trust shares trade at a price which can be at
a discount or premium relative to their net asset value. If
trading at a discount, there is a risk that a widening of the
discount may result in shareholders achieving a return which
does not reflect the underlying investment performance of
the Company.
The JRCM Investment Committee meets regularly to review
overall investment performance, portfolio exposure and
significant new investments.
To manage this risk, and to reduce the volatility for
shareholders, the Board monitors the level of discount/
premium at which the shares trade and the Group has
authority to buy back its existing shares when deemed
to be in the best interest of the Company and its
shareholders. Buying back shares at a discount signals the
Board’s confidence in the overall approach and the NAV to
shareholders and is accretive to the NAV per share return.
In addition, the Group is investing in developing its investor
relations activity and overall approach to communications to
help ensure that shareholders have the best understanding of
the strategy and approach to investing.
RIT Capital Partners plc Report and Accounts December 2023 25
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Principal Risks and Viability
Risk
Mitigation
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.
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.
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.
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.
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.
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 (BNP) has
separate responsibilities in monitoring the Company’s cash
flow.
26 Report and Accounts December 2023 RIT Capital Partners plc
Principal Risks and Viability
Risk
Mitigation
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 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.
RIT Capital Partners plc Report and Accounts December 2023 27
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Principal Risks and Viability
Risk
Mitigation
We do not consider climate-related risks to 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 has
worked with our Manager 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, while acknowledging the likely
challenges caused by having investments in external funds.
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 2023 the
Group has 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.
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.
28 Report and Accounts December 2023 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 and reliability of core systems.
Cyber security risk
RIT is dependent on technology to support key business
functions and the safeguarding of sensitive information. As a
result, RIT is exposed to the increasingly sophisticated nature
of cyber attacks, and given the growth in AI and the ability to
utilise this for attempts at fraud and data breaches.
RIT is therefore at risk of potential loss or harm as a result
of significant disruption to information technology systems,
including from a potential cyber attack, which may result
in financial losses, the inability to perform business-critical
functions, loss or theft of confidential data, and resulting legal
or reputational damage.
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 52 to 55.
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 includes the ability to use a combination of
an offsite facility and cloud resources to mirror our production
systems in the event of any business disruption. This was
satisfactorily tested during the year.
Cyber security continues to receive an enhanced focus, with
policies, 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 the
effectiveness of our staff at identifying potential risks. We
also test our IT business continuity plan at least once every
year. The process for assessing, identifying and managing
cybersecurity risks is managed on a day-to-day by the
Manager’s IT team and overseen by the JRCM Operational
Risk Committee. Any material risks are reported to the Audit
and Risk Committee.
The Manager maintains the ‘Cyber Essentials Plus’ security
certification, the highest level of certification offered by
the National Cyber Security Centre, the UK Government’s
technical authority for cyber threats. This review is performed
on an annual basis, the most recent completed in November
2023. Additionally, the Group has specific insurance cover
in place to cover information security and cyber risks. The
Manager periodically also engages external consultants to
assess the robustness of its IT systems.
RIT Capital Partners plc Report and Accounts December 2023 29
| 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 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 £3.6 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
£281 million, with committed and undrawn facilities
totalling £40 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
the continued attractiveness to shareholders of
the Group’s corporate objective and investment
approach.
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. This theoretical outcome also 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 3.5%, 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
£204 million and committed but undrawn borrowings
of £40 million, and cash flow forecasts for the period to
30 June 2025, as well as what the Group considers its
readily realisable securities of £445 million, transactions
awaiting settlement of £25 million at year end, 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 35 and the s172(1)
statement on page 62 have been approved by the Board
and signed on its behalf by:
Sir James Leigh-Pemberton
Chairman
30 Report and Accounts December 2023 RIT Capital Partners plc
Sustainability Report
Introduction
Our commitment to sustainability and ESG is a core
objective of the Board. It is based on a dual approach: (i)
incorporation of principles of responsible investment into
our investment processes for the delivery of sustainable
financial returns from our portfolio; and (ii) in respect of
our internal operations, we aim to be good corporate
citizens, engaging regularly with our stakeholders and
minimising our environmental impact.
The Company’s aim is to invest in assets with good
corporate governance and robust leadership, such that,
more often than not, we anticipate aligning our votes with
management recommendations. However, we are ready
to oppose or abstain from voting on issues or measures
that we feel either fail to adequately meet our principles
of responsible investing and/or do not serve the best
interests of the Company and our shareholders. We do
not use proxy advisors.
In 2023, resolutions at 51 shareholder meetings were
voted on in respect of our directly held quoted equities.
We voted against management recommendations on one
occasion as a result of governance issues.
Responsible investment
Our Manager is a signatory of the UN PRI, and has in
place a Responsible Investment Framework & Policy,
which is disclosed to shareholders via the Company
website. This policy sets out practical parameters against
which investments are considered and applies across
asset classes. We believe that this policy aligns our
Corporate Objective with our commitment to responsible
investment. ESG factors form a key part of the due
diligence undertaken by the Manager prior to selecting
investments and are monitored throughout our holding of
the investment.
In Q3 2023, the Manager submitted its first report under
UN PRI on a voluntary basis and we will continue to build
on our reporting capabilities for future submissions.
Responsible investment approach
Investment due diligence
The Manager continues to strengthen the integration
of sustainable investment principles into its decision-
making processes. Due diligence prior to making new
investments always includes the evaluation of key ESG
risks in addition to the traditional process of financial
analysis associated with the asset class or investment.
This applies across the investment universe of directly-
held quoted equity and private equity positions, as well as
investments in uncorrelated strategies.
Voting policy and escalation
We endeavor to be active owners of companies in which
we invest. Save for voting rights on the Company’s
investments held in segregated accounts managed by
external managers, who have control of the voting of
those shares, the Manager’s investment department
determines voting on all the resolutions of directly held
investee companies and maintains close and ongoing
scrutiny of all aspects of company performance including
ESG-related factors.
RIT Capital Partners plc Report and Accounts December 2023 31
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Sustainability Report
vesting through
RIT’s diversified,
global portfolio
In respect of private fund investments, we may have a
position on the fund’s limited partner advisory board which
gives us further opportunity to shape ESG and broader risk
management considerations.
Engagement and active ownership
Reflecting our Corporate Objective, many of our investments
are for the long term, and the ongoing relationship with our
external managers and investee companies, as well as our
regular evaluation of their approach, is crucially important
to maintaining active ownership of that investment over
time. Stewardship activities are key tools to address any
ESG concerns, and we maintain a regular dialogue with
external managers and companies alike, intervening where
we consider it to be in the Company’s and our shareholder’s
best interest. We also seek full portfolio transparency and
request detailed reporting from our external managers,
where possible.
Our commitment
Our commitment to sustainability through ongoing ESG integration
is based on a dual approach.
Our dual approach to sustainability
A responsible investor
A good corporate citizen
Incorporation of principles
of responsible investment into our
processes for the delivery of sustainable
financial returns, while preserving
shareholders’ capital.
Engagement with all our stakeholders
and minimise our environmental
impact.
Our core values
Respect
Dignity
Integrity
32 Report and Accounts December 2023 RIT Capital Partners plc
Sustainability Report
Stakeholder engagement
The Board recognises the benefits of engaging with its
stakeholders in order to ensure that it is aware, and can
take account of, their views during Board discussions and
decision making. As a result, the processes and initiatives
below are in place.
People
There is a focus on having a working environment where
there is engagement and communication between
employees at all levels. Throughout the year, ‘town hall’
meetings for all Group employees are held and chaired
by the Chairman (who is designated as the Director
responsible for engagement with employees). More
generally, regular internal communication is encouraged
through team meetings, training sessions, presentations
and also social and team-building events.
We aim to foster a supportive and inclusive working
environment where all our employees are treated with
dignity and respect, regardless of their gender, age,
ethnicity, disability, sexual orientation or background.
As part of the Group’s diversity and inclusion policies,
we incorporate ‘blind’ recruitment practices where a job
applicant’s personally identifiable information, such as
name, gender and age is omitted from their CVs to avoid
unconscious bias.
At the year end, our Board composition complied with
the recommendations of the Parker Review, the FTSE
Women Leaders Review (previously the Hampton-
Alexander Review) and the FCA’s Listing Rules reporting
requirements on diversity. The overall employee
composition consisted of 43 men and 19 women.
The Manager continues to participate in the ‘10,000 Black
Interns Foundation’ which aims to attract more diverse
and under-represented talent to the asset management
sector, as well as the ‘Girls Are INvestors’ (GAIN)
programme, which aims to improve gender diversity in
the investment sector.
We are committed to the professional development
of our employees and we encourage open and honest
communication across the firm. We operate a formal
annual appraisal process, designed to reinforce the
Group’s overall strategy and culture, and to ensure
that employees have a clear understanding of their
performance and can discuss their goals in order to reach
their full potential. We deem learning required to fulfil
an employee’s current role crucial and also encourage
the development of skills and knowledge beyond that.
Accordingly, all staff were required to complete various
training modules during the year, including in respect of
diversity and inclusion in the workplace.
We take all our employees’ wellbeing seriously and have
maintained flexible hybrid and remote working policies,
as well as offering confidential mental health support and
a wide range of health and wellbeing benefits. Further
initiatives we have in place include an enhanced maternity
leave programme as well as adoption and shared parental
leave.
In addition, there is a clear and independent
whistleblowing process for employees to raise any
concerns.
Society and communities
The society and communities in which we operate are
important to us and employees have been engaged in
activities to help support our community with various
charitable initiatives to support good causes during the
year. We also facilitate employees taking advantage of the
‘Give As You Earn’ initiative through which employees can
make personal charitable contributions.
Shareholders
In 2023, resources have been allocated to strengthen
our marketing and investor relations capabilities leading
to enhanced communication and engagement with
shareholders, proxy advisors, corporate governance
specialists and analysts, through numerous shareholder
meetings, webinars and investor presentations. The
Manager regularly reports to the Board on its shareholder
and analyst meetings to ensure they understand
shareholders’ views of the Company. The Chairman also
maintains regular contact with major shareholders and
will continue to do so. In addition, our monthly NAV
announcements now contain commentary from the
Manager on investment performance during the relevant
month, including in respect of each of the core pillars in
our portfolio, and also provides broader macroeconomic
observations.
The Board recognises the importance shareholders place
on ESG considerations and is committed to advancing
the ESG agenda. JRCM receives advice from a leading
international sustainability consultancy to assist in this
area.
We conduct a regular review of the composition of our
share register and receive feedback from our brokers,
including in the form of an independent survey of
shareholder views conducted by the brokers. We also
have a designated email account (investorrelations@
ritcap.co.uk) to enable shareholders to communicate
directly with the Group.
All shareholders have the opportunity to cast their votes
in respect of proposed resolutions at the AGM by proxy,
either electronically or by post and are encouraged to
RIT Capital Partners plc Report and Accounts December 2023 33
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Sustainability Report
attend the AGM and ask questions of the Directors and
the Manager directly.
Suppliers
We place a high value on our 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 continue to be
committed to developing and maintaining sustainable and
transparent working relationships over the long term. 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.
We ensure these relationships with suppliers, some of
whom we have worked with for many years, are subject
to regular review and are refreshed where necessary.
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.
As part of JRCM’s Responsible Investment Framework
& Policy, ascertaining our fund managers’ approach to
ESG is an important part of the due diligence undertaken
during the investment selection process, and post
investment it is a key part of our ongoing monitoring
and engagement. Reports on the Manager’s responsible
investment activities are submitted to the Board quarterly.
Environment and climate change
Climate change has a significant impact on our societies
and economies. We recognise the part that we have
to play in supporting a sustainable future and reducing
GHG emissions, both as good corporate citizens and also
delivering long-term returns for our shareholders.
Our commitment to sustainability encompasses various
areas of our operations. At our main office site, we
procure 100% of our electricity from renewable sources
and we have installed low emission LED lighting across
all of our buildings. We have adopted a ‘zero-to-landfill’
waste and recycling policy as part of our efforts to
responsibly manage waste. Additionally, we favour
sustainable commuting practices by encouraging our
employees to participate in the Cycle to Work scheme.
34 Report and Accounts December 2023 RIT Capital Partners plc
Sustainability Report
Climate-related risks and opportunities
As a closed-ended investment fund, the Company is
currently exempt from complying with the Task Force on
Climate-related Financial Disclosures (TCFD). However,
the Board is aware that climate change is a systemic
issue which is likely to have a broad impact on the wider
economy and therefore on our portfolio. In recognition of
this, we are working with a sustainability consultancy to
put in place a reporting framework to voluntarily disclose
against the TCFD in 2025.
The assessment and management of climate-related
risks and opportunities forms part of the Group’s general
risk management process, which is the responsibility
of both the Board and the Audit and Risk Committee.
This includes reviewing the Manager’s approach to ESG
and climate-related risks and opportunities, scrutiny of
the responsible investment practices and processes,
discussion of emerging best practices, changing
stakeholder demands, and the latest sustainability-
related regulations that affect the business. Day-to-day
management of climate-related risk is delegated to the
Executive Committee of the Manager.
Metrics and targets
As an investment company based in a single office
and with 62 employees, we recognise that the Group’s
climate impact predominantly relates to our investment
portfolio. As with many other investment companies, we
are cognisant that there is currently insufficient data to
quantify Scope 3 emissions for parts of our investment
portfolio and we will continue to work with our external
managers, investee companies and other relevant
counterparties to facilitate data collection in line with
appropriate global standards, to enable us to report these
emissions in the future. Notwithstanding this, we will
begin to calculate our indirect GHG emissions (Scope
3) from parts of our portfolio (in addition to our internal
operations) over the course of 2024, in preparation for
TCFD reporting in 2025.
Outside of our investment portfolio, our environmental
impact comes from GHG emissions generated from
employee commuting, business travel, and from our
premises. Our focus on reducing business travel has led
to a marked decrease in travel-related emissions. Where
possible, executives will only travel where alternatives
such as video conference facilities are not practical. To
further mitigate our carbon footprint, we actively engage
in an accredited scheme with Carbon Neutral Britain,
effectively offsetting our Scope 1 and 2 GHG emissions
through the Woodland Fund portfolio, a verified carbon
offsetting project. In 2023, the Group received a Carbon
Neutral Britain Certification and is currently certified as
carbon neutral with regards to its Scope 1 and 2 GHG
emissions.
Total energy consumption for the year ended 31
December 2023 was 479,139 kWh compared to 452,923
kWh for 31 December 2022 with the increase attributed
to the Group directly occupying a greater proportion of its
property portfolio during 2023.
2023
Scope 1 Gas
Scope 2 Electricity
Total
2022
Scope 1 Gas
Scope 2 Electricity
Total
CO₂ (tonnes)
27
67
94
Intensity ratio: CO₂
(tonnes) per FTO1
0.4
0.9
1.3
CO₂ (tonnes)
26
59
85
Intensity ratio: CO₂
(tonnes) per FTO1
0.4
0.8
1.2
1 Full-time occupant
Our GHG emissions are calculated for the Group under the financial
control approach and in accordance with ISO 14064-1: 2018 standard
using the 2023 GHG conversion factors developed by the Department
for Environment, Food & Rural Affairs.
The Group supports the ambitions of the 2015 Paris
Agreement and keeps opportunities to reduce emissions
under constant review.
RIT Capital Partners plc Report and Accounts December 2023 35
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Governance
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 A
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, Remuneration and Valuation Committees. 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, a
position he held until September 2022.
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 Chair of the Conflicts and Remuneration Committees
and a member of the Audit and Risk, Nominations, and Valuation
Committees.
He has over 30 years’ of private investment and board governance
experience and is Founder of Stemar Capital Partners (SCP), a private
investment firm focused on building long-term investment platforms.
Philippe was formerly Chair of International of Colony Capital, and a
Senior Advisor of the Blackstone Group. Previously, he was Head
of Europe at TPG and a member of TPG’s Global Management and
Investment Committees. Prior to that, Philippe was a Member of
the Management Committee at Investcorp. Previously, Philippe held
positions at JP Morgan Capital, JP Morgan’s Private Equity Group and
Morgan Stanley.
Philippe is Chair of Clinica Tambre and Zeno Partners and a board
member of AutoHellas, Colosseum Dental Group, Vangest Group
and Generation Home. Philippe serves as a member of the Yale
University Council and the President’s Council on International
Activities. He graduated magna cum laude with a BA with distinction
in Mathematics from Yale University and received an MBA from
Columbia University.
Vikas Karlekar
I
A
Cecilia McAnulty
I
V
Vikas Karlekar joined the Board as a non-executive Director in
August 2022 and is a member of the Audit and Risk Committee.
He is a qualified chartered accountant, and a graduate of the London
School of Economics specialising in Management Sciences and has
held a number of senior finance roles across the financial services
industry. Vikas is currently Managing Director of Group Finance
at Intermediate Capital Group PLC, a UK listed asset manager
specialising in private markets, covering all aspects of financial
and regulatory reporting, valuation governance, key accounting
judgments, financial planning and analysis, and platform and operating
model transformation. In addition, he is a member of the Board of
Trustees, and Treasurer, of the Pepal Foundation, a charity focused on
bringing together NGOs and global corporations to develop leaders
and find practical solutions to challenging social issues.
Vikas previously spent 10 years at Barclays in a series of pan
finance leadership roles, including Global Finance Controller for
Barclays International Division, managing all aspects of financials,
key accounting decisions, valuations, driving technology and
process improvements, and leading key regulatory relationships.
He also spent 13 years at UBS Investment Bank, in both London
and New York in various finance leadership roles. Vikas qualified as
a chartered accountant with KPMG.
Cecilia joined the board as a non-executive director in August
2022. She was appointed as Chair of the Valuation Committee in
September 2023.
She has held senior investment roles for banks and hedge funds
including Centaurus Capital, Barclays Capital and Royal Bank
of Scotland. Her investment experience encompasses several
alternative asset classes including distressed debt, private equity
and credit.
Cecilia holds a number of non-executive roles including Senior
Independent Director of Northern 2 VCT plc, Audit Chair of Polar
Capital Global Financials Trust plc, and Independent Non-Executive
Director (INED) of Eurobank Cyprus.
Her former non-executive roles include INED of Alcentra Limited,
an asset manager specialising in sub investment grade credit, a
member of the Industrial Development Advisory Board, advising
on grants to UK businesses and Chair of the Finance and General
Purposes Committee for English National Ballet.
She qualified as a chartered accountant with Peat Marwick (now
KPMG) in Glasgow.
RIT Capital Partners plc Report and Accounts December 2023 37
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Board of Directors
Non-Executive Directors
André Perold
I
A
Jutta af Rosenborg
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.
Jutta af Rosenborg joined the Board as a non-executive Director in
May 2022. She is Chair of the Audit and Risk Committee, and is a
member of the Valuation Committee.
André is Co-Founder, 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. 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.
She is a qualified accountant and holds a Master’s degree in
Business Economics and Auditing from Copenhagen Business
School and has held a number of senior roles in group finance,
auditing and risk management.
Jutta is a non-executive director of JPMorgan European Growth
& Income plc and Chair of its audit committee. In addition, she is
a non-executive director of Nilfisk Holding A/S and chairs its audit
committee. She is also a member of the supervisory board of BBGI
Global Infrastructure S.A., where she chairs the audit committee.
She was previously a non-executive director at abrdn plc (formerly
Standard Life Aberdeen plc) and NKT A/S, and was also executive
vice president, chief financial officer of ALK Abelló A/S and Chair of
Det Danske Klasselotteri A/S.
Hannah Rothschild CBE
NI
N
Hannah Rothschild joined the Board of the Company as a non-
independent non-executive Director in August 2013 and is a
member of the Nominations Committee.
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
Independent Director
Non-Independent Director
Audit and Risk Committee member
N
R
V
Nominations Committee member
Remuneration Committee member
Valuation Committee member
C Conflicts Committee member
Committee Chair
38 Report and Accounts December 2023 RIT Capital Partners plc
J. Rothschild Capital Management
Executive Committee
Maggie Fanari
JRCM is a wholly-owned subsidiary of RIT and acts as RIT’s
Manager. The Executive Committee of JRCM is responsible
for the day-to-day management of the business and its
members are listed below:
Maggie Fanari (Chief Executive Officer)
Maxim Parr (Chair)
Nick Khuu (Chief Investment Officer)
Aron Balas (Chief Strategy Officer)
Andrew Jones (Chief Financial & Operating Officer)
Maggie Fanari is the Chief Executive Officer at J. Rothschild Capital
Management Limited.
Maggie was previously Senior Managing Director, Global Group
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.
Maggie was previously a non-executive director on the Board of
RIT Capital Partners plc from April 2019 to February 2024.
Maxim Parr
Nick Khuu
Maxim Parr is the Chair at J. Rothschild Capital Management Limited.
He started his career at Jardine Matheson and has extensive
experience working in cross-border investment between the USA,
Asia and Europe. Maxim was previously Founder and CEO of Atlas
Capital Group, where he worked alongside FTSE 100 and European
corporates on their investment strategy in start-ups, growth capital
and buyouts. Maxim was previously a non-executive director on the
Board of RIT Capital Partners from May 2020 to September 2023.
Nick Khuu is the Chief Investment Officer at J. Rothschild Capital
Management Limited.
Prior to joining JRCM in 2020, Nick was a Managing Director at
Adi Capital Management, where he oversaw investments across
a broad range of industries and geographies. From 2008 to 2013,
he was a senior professional at Knighthead Capital Management,
where he invested in bonds, bank loans and special situation
credits and equities.
Prior to this, he worked at Dune Capital Management, a multi-
strategy investment firm, and at IFL, a strategic advisory firm. Nick
began his career in the Investment Banking Division at J.P. Morgan.
Aron Balas
Andrew Jones
Aron Balas is the Chief Strategy Officer at J. Rothschild Capital
Management Limited.
Andrew Jones is the Chief Financial & Operating Officer at
J. Rothschild Capital Management Limited.
He joined the company in 2012 having previously worked in the
Financial Institutions Group within the Investment Banking Division
at Morgan Stanley, where he advised major financial institutions
across Europe with a focus on banks and asset managers. He
started his career at Oliver Wyman in their financial services
practice.
He is responsible for the Group’s financial activities and 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 was previously a
member of the ICAEW’s Valuation Advisory Group and is a member
of the audit committee of the British Academy.
RIT Capital Partners plc Report and Accounts December 2023 39
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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
2018 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
2023.
The FRC published an updated UK Code in 2024. The
Company will report on how it applies the updated UK
Code, and any consequential changes made to the
AIC Code, when it takes effect for the financial year
commencing 1 January 2025.
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, who 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
Board Committee meetings. As our Manager is 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
seven non-executive Directors, of which six 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 set
out in their respective terms of reference, and which
may all be viewed on the Company’s website. 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.
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
Jutta af Rosenborg (Chair)
Philippe Costeletos
Vikas Karlekar
André Perold
Remuneration Committee
Philippe Costeletos (Chair)
Sir James Leigh-Pemberton
Conflicts Committee
Philippe Costeletos (Chair)
Sir James Leigh-Pemberton
Valuation Committee
Cecilia McAnulty (Chair)
Philippe Costeletos
Sir James Leigh-Pemberton
Jutta af Rosenborg
Nominations Committee
Sir James Leigh-Pemberton (Chair)
Philippe Costeletos
Hannah Rothschild
40 Report and Accounts December 2023 RIT Capital Partners plc
Corporate Governance Report
Board and Committee attendance
The Board and Committee attendance of the Directors at meetings in 2023 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. All Directors receive papers and agendas before Board and Committee meetings they are eligible to
attend. Where a Director is unable to attend a meeting, they are encouraged to give the Chairman or relevant
Committee Chair their views in advance.
Number of meetings held during the year
Chairman
Sir James Leigh-Pemberton
Non-executive Directors
Philippe Costeletos
Vikas Karlekar1
Cecilia McAnulty2
Maggie Fanari3
Maxim Parr4
André Perold
Mike Power5
Hannah Rothschild6
Jutta af Rosenborg
Board Audit and Risk
4
8
Conflicts
1
Nominations Remuneration
3
2
Valuation
3
8/8
8/8
8/8
8/8
6/7
7/7
7/8
2/2
7/8
8/8
–
4/4
3/3
–
–
–
3/4
1/1
–
4/4
1/1
1/1
–
–
1/1
–
–
–
–
–
2/2
2/2
–
–
1/1
–
–
–
1/1
–
3/3
3/3
–
–
3/3
1/1
–
–
–
–
3/3
3/3
–
2/2
–
2/2
–
1/1
–
3/3
1 Appointed to the Audit and Risk Committee on 26 April 2023.
2 Appointed to the Valuation Committee on 26 April 2023.
3 Retired as a Director on 29 February 2024.
4 Retired as a Director on 28 September 2023.
5 Retired as a Director on 26 April 2023.
6 Appointed to the Nominations Committee on 6 November 2023.
The Audit and Risk Committee
The Audit and Risk Committee Report is shown on
pages 52 to 55.
The Committee has four members, all of whom are
viewed by the Board as having recent and relevant
financial experience. Vikas Karlekar was appointed to the
Committee on 26 April 2023.
The main features of the Group’s internal controls and
risk management are described in the Audit and Risk
Committee Report on pages 52 to 55 and in Principal
Risks and Viability on pages 24 to 30.
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.
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.
RIT Capital Partners plc Report and Accounts December 2023 41
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
be a senior Board position for a Board comprising non-
executive Directors. Data for the following tables was
obtained on a voluntary self-reporting basis.
Gender identity reporting under LR9.8.6R(10)
Number of board
members
Percentage of the
Board
Number of senior
positions on the
Board
(CEO, CFO, SID
and Chair)
Men
Women
Not specified/prefer
not to say
4
3
–
57%
43%
Not applicable
–
see note 1
Ethnic background reporting under LR9.8.6R(10)
Number of senior
positions on the
Board
(CEO, CFO, SID
and Chair)
Not applicable
see note 1
Number of board
members
Percentage of the
Board
White British
or other White
(including minority-
white groups)
Mixed/Multiple
Ethnic Groups
Asian/Asian British
Black/African/
Caribbean/Black
British
Other ethnic group,
including Arab
6
–
1
–
–
86%
–
14%
–
–
1 As a Board comprising non-executive Directors, it does not
have executive management functions, specifically a CEO or
CFO. The Chairman and the SID are both men. However, the
Company considers the Chairs of Board Committees to be senior
board positions. The Chairs of the Audit and Risk, and Valuation
Committees are held by women.
Corporate Governance Report
The Nominations Committee
The Nominations Committee meets at least once
each year and on additional occasions as required. The
Committee is chaired by Sir James Leigh-Pemberton.
In accordance with the AIC Code, a majority of its
members are independent non-executive Directors.
Hannah Rothschild was appointed to the Committee on
6 November 2023.
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 search process for the new CEO for JRCM
(who’s appointment was announced in early January
2024), was led by the Nominations Committee, which
met upon completion of the search process to formulate
the recommendation for the Board’s approval.
The Committee is mindful of Board balance, experience
and diversity when considering appointments to the
Board and is responsible for identifying suitable Board
candidates, including considering candidates from a
wide range of backgrounds and experiences. In terms of
succession planning, the Committee acknowledges the
importance and benefits of diversity, especially in respect
of gender and ethnicity and the Committee is responsible
for the implementation of the Board’s Diversity and
Inclusion Policy, which may be viewed on the Company’s
website.
The Nominations Committee is responsible for
implementing the Board’s succession planning. Following
Mike Power’s retirement on 26 April 2023, Jutta af
Rosenborg and Maxim Parr replaced him as Chairs of the
Audit and Risk, and Valuation Committees respectively.
In addition, following Maxim Parr retiring as a Director,
in order to become Chair of JRCM on 28 September
2023, Cecilia McAnulty replaced him as Chair of the
Valuation Committee. Each appointment was made
from current members of the relevant committee and
it was determined that they had the requisite skills and
experience to chair these committees.
The Committee continuously monitors Board composition
to ensure it has the right skillset and breadth of
experience with which to function as an effective
Board. The current composition of the Board complies
with its own Diversity and Inclusion Policy, which
includes meeting the gender and/or ethnic diversity
recommendations of both the Parker Review and FTSE
Women Leaders (previously the Hampton-Alexander
Review). Furthermore, in accordance with Listing Rule
9.8.6R(9)(a), as at the date of this report 43% of our
Board are women and one Director is from an ethnic
minority background. The Chairs of the Audit and Risk,
and Valuation Committees are held by women. The
Company considers being Chair of a Board Committee to
42 Report and Accounts December 2023 RIT Capital Partners plc
Corporate Governance Report
The Remuneration Committee
The Directors’ Remuneration Report is shown on
pages 56 to 59.
The Valuation Committee
The Valuation Committee comprises four 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 Cecilia McAnulty. It meets at
least twice each year and additionally as may be required.
In 2023, it met on three occasions. 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 prior to the event.
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. The biographies of the Directors
and the JRCM Executive Committee on pages 37 to
39 demonstrate a strength of experience in the areas
required to oversee and implement the Company’s
strategic, investment and operational aims.
RIT Capital Partners plc Report and Accounts December 2023 43
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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 52 to 55.
Engaging with stakeholders
Details of our engagement with our shareholders and
other stakeholders are set out in the Sustainability Report
on pages 31 to 35.
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, and the one relevant
principle of the UK Code, in practice.
Corporate Governance Report
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
2023, including in the papers and presentations provided
at Board and Committee meetings. The Manager also
facilitates an annual ‘away day’ for the Board, where
a number of ‘deep dive’ sessions are held on Group
strategic issues and opportunities. This year they included
sessions on shareholder engagement and investment
strategy.
The Board undertakes a formal and rigorous annual
review of its performance, its committees and each
individual Director (including the Chairman) in accordance
with the requirements of the AIC Code. The 2023 annual
performance evaluation was led by Philippe Costeletos,
the Senior Independent Director. The evaluation included
Directors completing questionnaires which assessed
the performance and effectiveness of each Director,
the Board collectively and each of its committees. The
results were evaluated and considered by the Board as
a whole. The overall conclusion of the evaluation was
that the Board and its committees operate effectively
and that each Director continues to make constructive
contributions and demonstrates commitment to the role.
The evaluation noted that the areas of focus
recommended in the previous 2022 Board evaluation
had been addressed throughout the year, including
ESG integration and investment strategy. It also set
out the Board’s areas of focus for 2024, including the
discount at which our shares are trading relative to NAV
and shareholder/wider stakeholder engagement. In
accordance with the AIC Code, there will be an externally
facilitated Board evaluation in 2024.
All Directors (other than those retiring or standing for their
first election, if applicable) stand for re-election annually,
subject to continued satisfactory performance. The Board
recommends shareholders approve the election of all
Directors standing at the forthcoming AGM.
Subject to his continued annual re-election, the
Chairman’s tenure is not intended to exceed nine years, 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.
44 Report and Accounts December 2023 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.
The 2023 Board evaluation (see page 43 and 44), concluded
that the Board and its Committees continue to operate
effectively, with the recommendations of the prior year’s
evaluation, addressed during the year.
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.
As part of its role to promote the long-term sustainable
success of the Group, the Board is tasked with meeting
the Company’s Corporate Objective of delivering long-term
capital growth while preserving shareholders’ capital and it
keeps the strategy to achieve this under review.
During 2023, the Company undertook a series of buybacks,
acquiring approximately 8.6 million of its shares, which
is designed to provide an accretive return on investment,
resulting in an increase in the NAV per share return for
shareholders. Moreover, the Board acknowledges the value
to shareholders of a modest income yield and the Board’s
policy is to maintain or increase the dividend, subject to the
overriding capital preservation objective.
The Board is mindful of its contribution to wider society and
strives to meet its obligations through ensuring effective
stakeholder engagement by the Group. Our Sustainability
Report on pages 31 to 35 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 3 to 35). 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
and also ad hoc 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.
RIT Capital Partners plc Report and Accounts December 2023 45
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Corporate Governance Report
AIC Code Principle
Application
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.
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.
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, the published KPIs, as well as wider
qualitative criteria including in relation to ESG integration, risk
management, compliance, internal controls and promotion of
the Group’s values and business principles.
The Board receives regular reports from the Manager in
relation to shareholder engagement as part of an extensive
investor relations programme. The Chairman also meets and
communicates directly with shareholders and shares these
insights with the Board. Shareholders are encouraged to
attend the AGM, where the Manager presents on investment
performance and strategy and there is an opportunity for
shareholders to ask questions to the Board and the Manager.
During the course of 2023, we have allocated resources to
enhance our marketing and investor relations capabilities,
with the objective to effectively communicate and engage
with all areas of our shareholder register and other key
stakeholders.
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.
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.
Note: the AIC Code does not include a Provision E.
46 Report and Accounts December 2023 RIT Capital Partners plc
Corporate Governance Report
AIC Code Principle
Application
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.
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.
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
on performance, attribution, transactions and exposures
on a monthly and quarterly basis. The scheduled quarterly
Board meetings 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 which is a
standing agenda item. The Board can also request updates
from the Manager on any matters at the various ad hoc
meetings that are held, when required.
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.
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
2023, the Board comprised an independent non-executive
Chairman and seven non-executive Directors. Seven
Directors (including the Chairman) were independent and all
were 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.
RIT Capital Partners plc Report and Accounts December 2023 47
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Corporate Governance Report
AIC Code Principle
Application
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.
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.
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. The Board’s Diversity and
Inclusion Policy acknowledges the benefits of diversity of
gender, social and ethnic backgrounds on the Board and
these are key considerations for the Board’s succession
planning. The current composition of the Board complies
with the recommendations of the Parker Review, the FTSE
Women Leaders Review and the FCA’s listing rules reporting
requirements on diversity.
Directors’ varying backgrounds and wide-ranging experience,
including in the investing world and financial services
generally ensures broad cognitive diversity, which is viewed
as key in assisting effective challenge and discipline.
Biographies of the Board are set out on pages 37 and 38 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.
The Senior Independent Director led a formal and rigorous
internal evaluation of the Board in 2023. As part of the
evaluation, each Director completed a questionnaire which
evaluated the performance of the Chairman, each Director,
the Board as a whole and its Committees. The evaluation
concluded that the Board and its Committees continue to
operate effectively.
In respect of its evaluation of its composition and diversity,
the Board’s current composition complies with its own
Diversity and Inclusion Policy, which includes meeting the
gender and/or ethnic diversity recommendations of the
Parker Review, the FTSE Women Leaders Review and the
FCA’s listing rules reporting requirements.
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
2023, concluding that EY had performed satisfactorily (see
page 55). The Audit and Risk Committee also performed
a detailed review of the 2022 ARA, the 2023 Half-Yearly
Financial Report and this 2023 ARA, as well as reviewing
supporting papers from the Manager, in order to ensure the
integrity of the statements (see page 52).
48 Report and Accounts December 2023 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.
Q. A formal and transparent procedure for developing
remuneration policy should be established. No director
should be involved in deciding their own remuneration
outcome.
The Audit and Risk Committee reviewed the financial and
narrative statements within the 2023 ARA and 2023 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 24 to 30 and the Audit and Risk Committee Report
on pages 52 to 55.
The Directors’ remuneration policy was approved by
shareholders at the 2023 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.
As set out in the Directors’ Remuneration Report on
pages 56 to 59, 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 Chair 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.
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Corporate Governance Report
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/discrimination/bullying, 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 Chair of the Audit and Risk Committee. More
generally, our culture seeks to encourage honest and open
communication across the Group.
50 Report and Accounts December 2023 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 Parent 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 Parent 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 or loss 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 Parent
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
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Audit and Risk Committee Report
Introduction
I am pleased to present my first Audit and Risk
Committee Report since being appointed as Chair of the
Committee in May 2023, following the retirement of Mike
Power. On behalf of the Committee, I would like to thank
Mike for his significant contribution and valuable input
over the years.
As highlighted by our Chairman and Manager, we operate
in an environment of increased geopolitical uncertainty,
and with a complicated market outlook. We have also
seen further regulatory changes, although the sizeable
amendments to the UK Corporate Governance Code (the
Code) initially planned did not ultimately take place, with
the new Code published in January this year, reflecting
slightly more modest changes.
Within this context, I would therefore like to thank the
governance functions of the Manager for their continued
professionalism, consistency in the quality of their output,
and for ensuring high standards of reporting and control
across the operations of the Group during the year.
Committee responsibility and composition
This Committee has oversight responsibilities delegated
to it by the Board in three principal areas:
•
•
•
financial reporting and audit;
risk management and internal controls; and
the external auditor.
These responsibilities are set out in more detail in the
Committee’s terms of reference, which may be viewed
on the Company’s website at www.ritcap.com.
The Committee currently comprises four Directors,
each of whom is non-executive and independent of the
Company and the Manager.
The Board is satisfied that I have the requisite experience
to chair the Committee: I joined the Board as a non-
executive Director in May 2022 and am also a member
of the Valuation Committee. I am a qualified accountant,
hold a Master’s degree in Business Economics and
Auditing from Copenhagen Business School, have held
senior roles in finance, audit, risk management and have
significant experience in non-executive capacities.
The other three members of the Committee at the year
end were Philippe Costeletos, André Perold, and Vikas
Karlekar. Philippe, who joined the Committee in February
2023, is our Senior Independent Director. He is a Senior
Advisor to the Blackstone Group and a member of the
President’s Council on International Activities at Yale
University, with widespread experience in senior roles
in private equity, banking and investment firms. André is
Chief Investment Officer of an investment management
firm and a board member of the Vanguard Group, having
52 Report and Accounts December 2023 RIT Capital Partners plc
previously been a professor of Finance and Banking at
Harvard Business School. Vikas, who also joined the
Committee in February 2023, is currently Managing
Director of Group Finance of a UK listed asset manager
and has held various senior financial leadership roles.
Our individual biographies are shown on pages 37 and
38. I can confirm that the Board considers all members
of the Committee to have sufficient recent and relevant
financial as well as accounting and/or auditing experience
to comply with the requirements of the Codes.
Committee meetings and activity during the year
We met four times in 2023, and once so far in 2024.
Committee meetings were held to review the Group’s
2022 Annual Report and Accounts and the June 2023
Half-Yearly Financial Report. A review of the Group’s 2023
Annual Report and Accounts was undertaken in February
2024.
Our reviews included the assessment and assurance
that the annual reports, taken as a whole, are 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 2022 and 2023 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 the Manager. 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
2023, reviewing the effectiveness of the Group’s risk
management and internal control, with reference to
reports prepared by the Manager, including from its risk,
compliance and internal audit function.
During 2023 a migration to a new accounting system
was commenced. The Committee was updated on the
progress of the transition during the year, including
parallel running, reconciliations and various other checks.
The Company is expected to benefit from the full
functionality of the new system in 2024.
In addition to the activities described above, significant
matters we considered during the year are set out below:
Audit and Risk Committee Report
Environmental, social and governance
During 2023, the Group continued to strengthen its
approach to integrating ESG considerations into the
strategy, operations and investment process. The
Manager also made its first submission under the UN
Principles for Responsible Investment (UN PRI).
We recognise the importance of climate-related risks to
the Company across our operations and our portfolio.
During 2024, we are planning to initiate a reporting
framework to enable us to voluntarily report against
the Task Force on Climate related Financial Disclosures
(TCFD) in 2025. Further information is set out on
pages 31 to 35 in our new Sustainability Report.
Consumer Duty
The FCA’s Consumer Duty regulation came into effect
on 31 July 2023, introduced to create a new standard of
care that firms are expected to provide to customers and
applies to our regulated Manager. In advance of the Duty
coming into effect, firms, including JRCM, were required
to complete a Fair Value Assessment, demonstrating,
by way of provision of information, whether the price
a consumer pays for a product or service is reasonable
compared to the benefits they can expect to receive.
The valuation of private investments and other assets
Private investments represent 35.9% of net assets and
comprise direct investments, direct co-investments
and diversified funds managed 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 investments’ 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 GP’s valuations are usually prepared on a quarterly
basis, albeit with a time lag which may be up to three
months, as is the industry norm. The Manager reviews
these valuations and, where possible, the justification for
the valuation and 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 are reported in detail on a six-
monthly basis to the independent Valuation Committee,
which is responsible for the final decision on valuation.
We have therefore considered the work of the Valuation
Committee, the results of their discussions with
the Manager and the external auditor. The Valuation
Committee comprises four 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 independent. Two members of this Committee,
myself included, also sit on the Valuation Committee.
We view the work as detailed and comprehensive, and
are confident that the persons preparing the reports
have sufficient and appropriate expertise through their
experience, skills and qualifications.
Furthermore, we believe that the process is planned
and managed to devote adequate time and resource to
preparation and review, both by the Manager and also by
the members of the Valuation Committee.
We also considered the work of the Valuation Committee
as it relates to other assets in the portfolio, including but
not limited to the Company’s loan notes and real estate
holdings. Here, the combination of detailed processes,
rigorous analysis and, where relevant, external advice has
provided comfort over the portfolio valuations. The Audit
and Risk Committee also receives an executive summary
of the Manager’s main valuation report as well as the
minutes from the Valuation Committee.
Principal risks
As part of its ongoing review of the risks facing the
Group, the Committee has made changes to the way
we classify our principal risks. In recognition of the
increased focus in these areas, we have reclassified two
new principal risks: Discount risk and Cyber security
risk. The former reflects the long-standing risk facing
shareholders in investment trusts, namely that the
share price performance does not match the underlying
investment performance. In relation to the latter, while
we have historically focused on cyber security risks, the
growth in AI and the ability to utilise this for increasingly
sophisticated attempts at fraud, means that we have
also reclassified cyber security as its own, new principal
risk. The efforts taken by the Board and the Manager
in relation to the discount volatility are set out in the
Chairman’s Statement. In relation to cyber security, the
Committee carefully considered the measures in place
across the Group to mitigate these risks. The Manager
has successfully maintained its external classifications,
meeting the National Cyber Security Centre requirements
to hold ‘Cyber Essentials’ and ‘Cyber Essential Plus’
certifications. The Committee was satisfied that sufficient
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Audit and Risk Committee Report
and ongoing measures are in place to address this risk as
far as is reasonably practicable.
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.
The review further included consideration of the five-year
cash flow forecasts and a liquidity summary, 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 most recent Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting published by the FRC.
We consider the work of the Conflicts Committee in
reviewing advisory services, co-investment transactions
and any other similar arrangements with any related party,
and have discussed with the Manager the systems and
processes in place to identify, review, record and disclose
such transactions. We note the importance that 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, and 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.
The Board, who are ultimately responsible for risk
management, has delegated to the Manager the
implementation and day-to-day management of the
system of internal control within an established
framework applicable throughout the Group. A standard
‘three lines of defence’ approach is used to ensure
robust risk management, encompassing: day-to-day
risk management; risk oversight and guidance; and risk
assurance as provided by the external and internal audit
functions, both of which report to this Committee.
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 and operational risk as summarised in the
Principal Risks and Viability section on pages 24 to 30. 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.
54 Report and Accounts December 2023 RIT Capital Partners plc
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 2023 internal audits included the
governance and internal control processes associated
with investment decision making, as well as the key
control procedures employed by the Manager, to ensure
the accuracy of information for regular NAV reporting.
No material weaknesses were identified through the
course of these audits and the Committee considers the
resource devoted to internal audit to be appropriate to the
size and complexity of the Company’s operations.
As part of their duties as depository, BNP undertook a
review of our Manager’s arrangements under AIFMD
and the relevant UK legislation and regulations. This
involved reviewing processes, systems and controls for
organisational structure, compliance, risk management,
fund administration and business continuity, with no
concerns noted.
EY separately audited the Manager’s client asset
procedures in relation to a very small amount of legacy
client money held prior to this being distributed to charity
(while retaining the liability in case any future claimants
arise).
The Manager also reports to the Committee the results
of its monitoring of external fund 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 informed of any failings or weaknesses
representing a significant business risk.
Audit and Risk Committee Report
External auditor
The external auditor, EY, has completed its sixth annual
audit following its appointment as a result of a tender
process in 2017. Consistent with its own procedures in
relation to independence and rotation, the previous audit
partner retired from the audit having completed five
years, and was replaced by a new audit partner during the
year.
EY attended all 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
2023. I have also had regular contact with the new audit
partner during the year.
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 2023 totalled £8,650 for audit-related assurance
work (regarding the Manager’s regulated activities). Their
selection for this work was based on cost efficiency,
synergies with the audit process, and the fact that 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.
Finally, I would like to thank my colleagues on the
Committee for their support and wise counsel during the
year, and the team at the Manager for their dedication
and professionalism.
Jutta af Rosenborg
Chair, Audit and Risk Committee
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Directors’ Remuneration Report
Introduction
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31 December 2023.
The current Directors’ Remuneration Policy was approved
by shareholders with 99% of the vote at the 2023 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, our events and
property subsidiary. 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) Regulations 2008
(as amended). 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 Chair and membership fees. They 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 2023, the Committee included two further
independent non-executive Directors: Sir James Leigh-
Pemberton and Maggie Fanari. Maxim Parr stepped down
56 Report and Accounts December 2023 RIT Capital Partners plc
from the Committee when he retired from the Board
on 28 September 2023. The Committee meets at least
twice a year on a scheduled basis and additionally as
may be required. In 2023, the Committee met on three
occasions.
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 investment trusts. The Committee seeks
information from JRCM management and advice from an
independent advisor, as required.
The Remuneration Committee has appointed a
remuneration specialist from Alvarez & Marsal, to
provide the Committee with advice. In 2023, fees of
approximately £12,675 (2022: £11,519) 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 Part 15, 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,
while promoting responsible risk management.
Fixed remuneration for the Group’s employees
comprises a base salary, which reflects their talent, skills,
competencies and contributions to the Group. Each
employee’s salary is reviewed on an annual basis, and
considers such factors as market levels of remuneration
and individual performance. During 2023, salary increases
were implemented on a tiered basis, targeted towards
more junior employees who were most susceptible to
the financial pressures brought about by higher inflation
and the rising cost of living. Employees are also eligible to
receive various benefits, including pension contributions
and private medical insurance.
Directors’ Remuneration Report
The Group operates an Annual Incentive Scheme (AIS) for
employees as well as longer-term share-based awards.
The annual cap for total awards under the AIS is limited
to 0.75% of net assets. Our approach is designed to
measure and reward 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. We remain satisfied with the suitability of
the AIS in order to meet our objectives.
The performance assessment for awards under the
AIS reflect quantitative investment outperformance
(as measured by the NAV per share total return versus
two KPIs: CPI plus 3.0% and the ACWI) as well as
discretionary awards for wider achievements not directly
linked to the overall NAV return. This may include prudent
risk controls, deal origination, efficient regulation and
initiatives which support and enhance our values and
culture. Any such qualitative rewards are measured
against rigorous performance metrics through a Group-
wide annual appraisal process.
The AIS is measured annually and includes longer-term
features such as a three-year, ‘high water mark’ in relation
to absolute outperformance. In addition, and in particular
for management and senior employees, AIS awards
include significant deferrals into RIT shares. For awards
above £250,000, 60% of these awards are made in
deferred RIT shares. These vest over the subsequent
three years, reinforcing the alignment with shareholders’
interests.
Decisions made by the Committee have followed a
careful appraisal of performance and at all times aim to
reinforce shareholder alignment, both through the link to
our objectives and also the payment via shares.
AIS awards are subject to malus conditions and the
Committee retains the ability to clawback previous
awards if necessary.
The second main aspect of the remuneration approach is
a long-term incentive plan which is structured as awards
of restricted share units (RSUs). RSUs are increasingly
being adopted by listed companies and they form an
important part of aligning awards with our long-term
investment performance and shareholder value creation.
They vest after three years and then have a further two-
year lock-up before the underlying RIT shares can be
sold. The vesting of an RSU is ordinarily subject to the
participant’s continued service over the vesting period.
Following the two-year lock-up, the RSUs are transferred
directly to participants who are then free to sell them
if they so choose. RSUs also incorporate qualitative
performance standards, as well as malus and clawback
features.
Ordinary shares of the Company are used to settle the
share components of existing and future awards granted.
The Group seeks to hedge its exposure to RSUs by using
an employee benefit trust to acquire shares to meet the
estimated future liability.
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.
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 other investment
trusts. The Board has discretion to periodically review and
amend fee rates. 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 Committee Chairmanship fees
(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.
Annual report on remuneration
The annual report on remuneration will be put to
an advisory shareholder vote at the 2024 AGM. The
information on pages 58 and 59 has been audited where
required under the regulations and is indicated as audited
information where applicable.
RIT Capital Partners plc Report and Accounts December 2023 57
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Directors’ Remuneration Report
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:
Year ended 31 December
Non-executive Director
Chairman
2021
Total
remuneration
£
2022
Total
remuneration1
£
2023
Total
remuneration
£
% Change
in total
remuneration
between 2020
and 20212
% Change
in total
remuneration
between 2021
and 20222
% Change
in total
remuneration
between 2022
and 20232
Sir James Leigh-Pemberton
150,000
150,000
150,000
Directors
Philippe Costeletos
Maggie Fanari3
Vikas Karlekar
Cecilia McAnulty
Maxim Parr4
André Perold5
Mike Power6
Jutta af Rosenborg7
Hannah Rothschild
69,500
37,000
–
–
41,774
36,000
49,500
–
30,000
74,500
44,667
13,731
13,731
48,000
52,228
61,167
31,962
35,000
79,823
46,000
39,069
40,973
38,856
44,791
21,500
57,882
35,626
–
2.4
–
n/a
n/a
78.9
(17.6)
–
n/a
–
–
7.2
20.7
n/a
n/a
14.9
45.1
23.6
n/a
16.7
-
7.1
3.0
184.5
198.4
(19.1)
(14.2)
(64.9)
81.1
1.8
Unless taxable benefits are specifically outlined below for each Director, total remuneration above constitutes fees only.
1 With effect from 1 January 2022 the annual base fee for each non-executive Director (excluding the non-executive Chairman) was increased
from £30,000 to £35,000. This was the first such increase since 2016 and followed advice from Alvarez & Marsal on the level of fees paid to non-
executive directors of other investment trusts.
2 The year-on-year percentage changes in total remuneration are influenced by a number of factors including where Directors have completed part-
year service and/or being appointed to Board Committees during the relevant periods.
3 Maggie Fanari retired as a Director on 29 February 2024.
4 Maxim Parr retired as a Director on 28 September 2023.
5 André Perold total remuneration for the relevant periods comprises the following:
Year
2023
2022
2021
Directors fee
41,000
41,000
36,000
Taxable
benefits
3,791
11,228
–
6 Mike Power retired as a Director of the Company on 26 April 2023
7 Jutta af Rosenborg total remuneration for the relevant periods
comprises the following:
Year
2023
2022
2021
Directors fee
53,782
29,044
–
Taxable
benefits
4,100
2,918
–
58 Report and Accounts December 2023 RIT Capital Partners plc
Directors’ Remuneration Report
Fees
The total fees payable to Directors for the year was
£546,629 (compared to £530,498 in the year ended
31 December 2022). This includes the Directors’ base
fees as well as committee fees.
The aggregate base fees of the non-executive Directors
(excluding the Chairman) for the year was £282,692,
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 2023 in the ordinary shares of the
Company are shown below:
Beneficial
Non-
beneficial
Ordinary shares
of £1 each
Sir James Leigh-
–
Pemberton
–
Philippe Costeletos
–
Maggie Fanari
–
Vikas Karlekar
–
Cecilia McAnulty
–
André Perold
Jutta af Rosenborg
–
Hannah Rothschild1 14,358,443 15,402,708
11,055
72,710
–
993
–
–
8,400
% of voting
rights
<0.1
<0.1
–
<0.1
–
–
<0.1
20.2
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.
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
2022
35.6
Year ended
31 December
2023
33.4
57.6
11.0
56.7
163.1
Change
(2.2)
(0.9)
152.1
Statement of shareholder voting
Votes in respect of the resolution to approve the
Directors’ Remuneration Report at the Company’s AGM
in April 2023 were cast as follows:
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of
shares
71,100,118
159,223
71,259,341
67,172
% of
votes cast
99.8
0.2
100.0
–
Votes in respect of the resolution to approve the
Directors’ Remuneration Policy at the Company’s AGM in
April 2023 were cast as follows:
Votes cast in favour
Votes cast against
Total votes cast
Votes withheld
Number of
shares
71,085,685
160,895
71,246,580
82,201
% of
votes cast
99.8
0.2
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 December 2013
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 CPI plus
3.0%. Further information can be found in the Company’s
Strategic Report.
RIT Total Shareholder Return
ACWI
CPI plus 3.0%
300
260
220
180
140
100
60
Dec
2013
Dec
2015
Dec
2017
Dec
2019
Dec
2021
Dec
2023
Audit
The tables in this report on pages 58 and 59, audited by
Ernst & Young LLP, have been marked as such.
The Directors’ Remuneration Report on pages 56 to 59
was approved by the Board and signed on its behalf by:
Philippe Costeletos
Chair, Remuneration Committee
RIT Capital Partners plc Report and Accounts December 2023 59
| 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 2023.
Business review and future
developments ......................page 3
Greenhouse gas
emissions, energy
consumption and energy
efficiency action ..................page 35
Corporate governance ........page 40
Directors’ remuneration ..... page 56
Risk management and
internal control ....................page 24
Directors’ shareholdings .... page 59
Dividend ............................... page 4
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
37 and 38.
During the year ended 31 December 2023:
Directorate changes
• Mike Power retired as a Director on 26 April 2023;
•
Maxim Parr retired as a Director on 28 September
2023;
Committee composition
•
Vikas Karlekar was appointed to the Audit and Risk
Committee on 26 April 2023;
•
Cecilia McAnulty was appointed to the Valuation
Committee on 26 April 2023 and was subsequently
appointed as Chair of this committee on
28 September 2023; and
•
Hannah Rothschild was appointed as a member of
the Nominations Committee on 6 November 2023.
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.”
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 2023, the drawn
indebtedness was £281 million with debt held at fair
value, or £294 million with debt held at par value. This
represented net gearing calculated in accordance with
AIC guidance of 3.5%.
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 19.
60 Report and Accounts December 2023 RIT Capital Partners plc
Major holders of voting rights
As at 31 December 2023, 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.
Major holders of
voting rights1
Lord Rothschild2,3
Hannah Rothschild2
The Rothschild
Foundation2
Evelyn Partners Inv.
Mgt. LLP Limited
Five Arrows Limited4
31 December 2023
Total number
of shares
% of
voting rights5
19,291,497
15,402,708
15,390,848
7,880,671
6,757,835
13.1
10.4
10.4
5.3
4.6
Direct or
indirect
Indirect
Indirect
Direct
Indirect
Direct
1 The above table does not include Lord Rothschild’s or Hannah
Rothschild’s direct voting rights in shares in the Company which
were below the notifiable threshold.
2 As Lord Rothschild and Hannah Rothschild were both members and
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 59
under Directors’ shareholdings).
3 Part of Lord Rothschild’s holdings included entities where Hannah
Rothschild is one of the beneficiaries, and therefore the relevant
shares also form part of her beneficial interests on page 59.
4 Lord Rothschild and Hannah Rothschild had 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 related
to, and was overseen by, the family offices of Lord Rothschild and
Hannah Rothschild (including shares in which Lord Rothschild and
Hannah Rothschild did not have voting rights conferred through a
direct or indirect holding) was 22.2%.
Directors’ Report
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. 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 74).
Fees within the long-only equity funds, whether
structured as segregated accounts or otherwise, typically
incur a management fee of 0.5% to 1.0% per annum 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 typically a 10% to 20%
performance fee. Fees for investments into private funds
are structured differently and will usually have a 1% to
2.5% annual charge (often based on commitments in
early years and declining over time with realisations),
as well as a 20% to 30% carried interest. This may be
above an 8% per annum hurdle and/or with the higher
rates often earned when investors have received back a
minimum multiple of their invested capital (e.g. 3x).
Aggregate management fees (excluding performance
fees and net of fee rebates) for the external funds for
2023 have been estimated at 0.94% of RIT’s total average
net assets (2022: 0.88%).
Share capital
At 31 December 2023, the issued share capital
comprised 156,848,065 £1 ordinary shares, of which
9,307,817 were held by the Company in treasury as a
result of a series of share buybacks. Further details are
shown in Note 21 on page 89.
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 2 May 2024. At the AGM, shareholders
shall be asked to renew these authorities, as will be
explained in the separate Notice of the meeting.
RIT Capital Partners plc Report and Accounts December 2023 61
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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 2023, 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 30.
Disclosable information in respect of other investments is
contained in Note 33.
The Directors’ Report on pages 60 to 62 was approved by
the Board and signed on its behalf by:
Sir James Leigh-Pemberton Chairman
Directors’ Report
As at 14 February 2024, 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.
The shares of the Company qualify for inclusion within an
Individual Savings Account.
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 2023 and 31 December 2022.
Annual General Meeting
The Company’s 2024 AGM is scheduled to be held on
2 May at 12:00. 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.
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 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 2023 (see pages 8, 9, 33 and 34).
62 Report and Accounts December 2023 RIT Capital Partners plc
Financial Statements
for the year ended 31 December 2023
RIT Capital Partners plc
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 taxation
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Earnings/(loss) per ordinary share – basic
Earnings/(loss) per ordinary share – diluted
Notes
2
3, 5
4, 5
6
7
8
9
9
Revenue
29.3
3.2
–
–
32.5
(28.5)
4.0
(6.9)
(2.9)
–
(2.9)
(1.9p)
(1.9p)
Capital
–
–
109.9
0.8
110.7
(14.2)
96.5
(27.5)
69.0
–
69.0
46.1p
45.7p
2023
Total
29.3
3.2
109.9
0.8
143.2
(42.7)
100.5
(34.4)
66.1
–
66.1
44.2p
43.8p
Revenue
19.1
7.6
–
–
26.7
(36.0)
(9.3)
(5.0)
(14.3)
–
(14.3)
(9.2p)
(9.2p)
Capital
–
–
(555.5)
20.2
(535.3)
(7.6)
(542.9)
(20.0)
(562.9)
–
(562.9)
(362.1p)
2022
Total
19.1
7.6
(555.5)
20.2
(508.6)
(43.6)
(552.2)
(25.0)
(577.2)
–
(577.2)
(371.3p)
(362.1p)
(371.3p)
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
(2.9)
–
(0.4)
0.2
(3.1)
Capital
69.0
0.9
–
–
69.9
2023
Total
66.1
0.9
(0.4)
0.2
66.8
Revenue
(14.3)
–
(4.5)
Capital
(562.9)
(2.1)
–
2022
Total
(577.2)
(2.1)
(4.5)
1.1
(17.7)
–
(565.0)
1.1
(582.7)
The Notes on pages 70 to 93 form part of these financial statements.
64 Report and Accounts December 2023 RIT Capital Partners plc
64 Report and Accounts December 2023 RIT Capital Partners plc
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Consolidated Balance Sheet
At 31 December
£ million
Non-current assets
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
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
2023
2022
13
13, 15
10
11
13
13
16
17
18
13
19
17
18
13
12
20
21
22
23
24
26
27
28
29
29
3,499.4
34.1
21.6
0.1
5.9
3,561.1
65.4
71.2
0.1
204.3
341.0
3,902.1
(142.9)
(2.8)
(39.2)
(0.1)
(185.0)
156.0
3,717.1
(137.9)
(0.0)
(0.0)
(3.0)
(2.9)
(143.8)
3,573.3
156.8
45.7
36.3
(36.7)
3,393.1
(32.2)
10.3
3,573.3
2,449p
2,426p
3,586.3
37.9
20.7
0.5
1.0
3,646.4
57.3
245.3
4.5
218.0
525.1
4,171.5
(236.2)
(10.4)
(63.5)
(0.1)
(310.2)
214.9
3,861.3
(134.4)
–
(0.2)
(1.8)
(3.2)
(139.6)
3,721.7
156.8
45.7
36.3
(46.3)
3,548.9
(29.1)
9.4
3,721.7
2,414p
2,388p
The financial statements on pages 64 to 69 were approved by the Board and authorised for issue on 4 March 2024.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 70 to 93 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2023 65
RIT Capital Partners plc Report and Accounts December 2023 65
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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
2023
2022
13
13, 15
10
30
13
13
16
18
13
19
17
18
13
20
21
22
23
21
31
26
27
28
3,362.3
34.1
21.5
143.2
5.9
3,567.0
65.4
70.6
196.7
332.7
3,899.7
(142.9)
(2.8)
(31.9)
(119.6)
(297.2)
35.5
3,602.5
(137.9)
(0.0)
(3.0)
(2.9)
(143.8)
3,458.7
156.8
45.7
36.3
3,578.6
77.0
(163.1)
(56.7)
3,435.8
(209.5)
(16.7)
(226.2)
10.3
3,458.7
3,485.2
37.9
20.6
107.2
1.0
3,651.9
57.3
244.9
193.9
496.1
4,148.0
(236.2)
(10.4)
(54.1)
(90.2)
(390.9)
105.2
3,757.1
(134.4)
–
(2.2)
(3.2)
(139.8)
3,617.3
156.8
45.7
36.3
4,203.4
(556.2)
(11.0)
(57.6)
3,578.6
(176.1)
(33.4)
(209.5)
9.4
3,617.3
The Company’s total comprehensive income for the year was £61.2 million (2022: expense of £591.7 million).
The financial statements on pages 64 to 69 were approved by the Board and authorised for issue on 4 March 2024.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 70 to 93 form part of these financial statements.
66 Report and Accounts December 2023 RIT Capital Partners plc
66 Report and Accounts December 2023 RIT Capital Partners plc
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Consolidated Statement of Changes in Equity
£ million
Balance at 1 January 2022
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 2022
Balance at 1 January 2023
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 2023
Share
capital
156.8
–
Share
premium
45.7
–
Capital
redemption
reserve
36.3
–
Own
shares
reserve
(23.0)
–
Capital
reserve
4,174.4
(562.9)
Revenue
reserve
(11.4)
(14.3)
Revaluation
reserve
11.5
–
Total
equity
4,390.3
(577.2)
–
–
–
–
–
–
–
–
156.8
156.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45.7
45.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36.3
36.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(23.3)
–
(46.3)
(46.3)
–
–
–
–
–
–
–
9.6
–
–
–
(562.9)
(57.6)
(11.0)
–
6.0
3,548.9
3,548.9
69.0
–
–
–
69.0
(56.7)
(163.1)
–
–
(4.5)
(2.1)
–
(2.1)
(4.5)
1.1
–
1.1
(17.7)
–
–
–
–
(29.1)
(29.1)
(2.9)
–
(0.4)
0.2
(3.1)
–
–
–
(2.1)
–
–
–
–
9.4
9.4
–
0.9
–
(582.7)
(57.6)
(11.0)
(23.3)
6.0
3,721.7
3,721.7
66.1
0.9
(0.4)
–
0.2
0.9
–
–
–
66.8
(56.7)
(163.1)
9.6
–
156.8
–
45.7
–
36.3
–
(36.7)
(5.0)
3,393.1
–
(32.2)
–
10.3
(5.0)
3,573.3
The Notes on pages 70 to 93 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2023 67
RIT Capital Partners plc Report and Accounts December 2023 67
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Parent Company Statement of Changes in Equity
Share
premium
45.7
–
–
–
–
–
Capital
redemption
reserve
36.3
–
–
–
–
–
36.3
36.3
–
–
–
–
45.7
45.7
–
–
–
–
–
45.7
Capital
reserve
4,203.4
(556.2)
–
(556.2)
(57.6)
(11.0)
3,578.6
3,578.6
77.0
–
77.0
(56.7)
Revenue
reserve
(176.1)
(33.4)
–
(33.4)
–
–
Revaluation
reserve
11.5
–
(2.1)
(2.1)
–
–
(209.5)
(209.5)
(16.7)
–
(16.7)
–
9.4
9.4
–
0.9
0.9
–
–
Total
equity
4,277.6
(589.6)
(2.1)
(591.7)
(57.6)
(11.0)
3,617.3
3,617.3
60.3
0.9
61.2
(56.7)
(163.1)
–
(163.1)
–
36.3
3,435.8
(226.2)
10.3
3,458.7
£ million
Balance at 1 January 2022
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 2022
Balance at 1 January 2023
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 2023
Share
capital
156.8
–
–
–
–
–
156.8
156.8
–
–
–
–
–
156.8
The Notes on pages 70 to 93 form part of these financial statements.
68 Report and Accounts December 2023 RIT Capital Partners plc
68 Report and Accounts December 2023 RIT Capital Partners plc
| 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
32
Cash flows from investing activities:
Sale/(purchase) of property, plant and equipment
Investments in subsidiary undertakings
Divestments of 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
24
21
31
1 Shares are disclosed in the own shares reserve on the consolidated balance sheet.
Consolidated cash flow
2022
2023
Parent Company cash flow
2022
2023
328.6
(34.4)
294.2
(0.3)
–
–
(0.3)
(699.9)
618.6
(9.8)
(163.1)
(56.7)
(310.9)
(17.0)
218.0
3.3
204.3
57.7
(25.0)
32.7
(0.1)
–
–
(0.1)
(591.6)
555.4
(40.4)
(11.0)
(57.6)
(145.2)
(112.6)
325.9
4.7
218.0
331.1
(34.4)
296.7
(0.3)
(21.0)
25.2
3.9
(699.9)
618.6
–
(163.1)
(56.7)
(301.1)
(0.5)
193.9
3.3
196.7
7.7
(25.0)
(17.3)
(0.1)
(2.5)
–
(2.6)
(591.6)
555.4
–
(11.0)
(57.6)
(104.8)
(124.7)
313.9
4.7
193.9
The Notes on pages 70 to 93 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2023 69
RIT Capital Partners plc Report and Accounts December 2023 69
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | 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 the requirements
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 Group; its existing
cash balances (£204.3 million) and monitoring procedures; its
borrowing capacity (£40 million facilities committed and undrawn);
the value of investments which could be realised to fund liabilities;
loan covenants as well as cash flow forecasts for the period to
30 June 2025; and uncalled commitments (£307.1 million). Further
details can be found on page 30.
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 July 2022 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),
RIT Investments US, Inc and RIT Investments GP Limited, are
accounted for as investments held at FVPL.
70 Report and Accounts December 2023 RIT Capital Partners plc
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;
Notes to the Financial Statements
1. Accounting Policies (continued)
•
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:
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.
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;
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.
•
•
•
•
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.
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’. Unrealised changes in the fair value
of these investments are recognised in the consolidated income
statement as capital items. The 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 events where there is sufficient information
to suggest the period-end valuation should be adjusted. Further,
in light of the intrinsic valuation uncertainty, where information is
RIT Capital Partners plc Report and Accounts December 2023 71
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
1. Accounting Policies (continued)
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.
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 £250,000 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 capital column of the income
statement over the three-year vest period.
On 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.
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 is applied to the capital
reserve.
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 (IFRS 2), the Group
is required to reflect in its income statement and balance sheet the
effects of share-based payment transactions. The Group’s share-
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 assets except for the Company’s leasehold
interest in 27 St. James’s Place for which the estimated useful life is
60 years, which is also the period remaining on the property lease.
The proportion of this asset occupied by the Group is accounted
for at fair value under the revaluation model allowed by IAS 16
72 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
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
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 pages 88 and 89.
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
There are no new standards and interpretations that are relevant
to RIT and effective up to the date of issuance of the financial
statements that require disclosure in the Financial Statements.
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 71 and 72 and Note 13) and property
(see pages 72 and 73 and Notes 10 and 15).
1. Accounting Policies (continued)
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 FVPL, on the basis that the Group and
its performance is evaluated on a fair value basis, in line with IFRS 9,
paragraph 4.2.2. The fair value is calculated as the amount to replace
the facility which is equal to par.
RIT Capital Partners plc Report and Accounts December 2023 73
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
2. Investment income
£ million
Income from listed investments:
Dividends
Income from unlisted investments:
Interest
Interest income on cash balances
Income from investment properties
Total investment income
2023
10.1
3.9
13.5
1.8
29.3
3. Gains/(losses) on fair value investments
£ million
2023
Gains/(losses) on fair value investments
excluding segregated accounts
Gains/(losses) on segregated accounts
Segregated account fees - annual
Segregated account fees - performance
Net gains/(losses) on fair value investments
held in segregated accounts
Gains/(losses) on fair value investments
70.8
47.1
(1.9)
(6.1)
39.1
109.9
2022
7.2
4.3
5.5
2.1
19.1
2022
(579.2)
28.0
(1.7)
(2.6)
23.7
(555.5)
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 2023, three funds
(31 December 2022: three) were structured as segregated accounts,
where the managers separately invoice the Company for investment
management fees. In order to provide a consistent presentation for
all external fees, these are included within the gains/(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 61.
4. Operating expenses
£ million
Staff costs:
Wages and salaries
Share-based payment costs (Note 25)
Social security costs
Pension costs (Note 11)
Total staff costs
Auditor’s remuneration (Note 5)
Depreciation
Lease payments
Other operating expenses
Total operating expenses
2023
14.3
14.7
3.9
0.5
33.4
0.4
0.3
0.5
8.1
42.7
2022
13.3
17.6
4.4
0.3
35.6
0.3
0.4
0.4
6.9
43.6
Operating expenses include costs incurred by JRCM in managing
the Group's assets and property costs from the Group’s property
portfolio. Further information is provided in Note 6.
The figures include Directors’ emoluments, details of which are
shown in the Directors’ Remuneration Report on pages 56 to 59.
The average monthly number of employees during the year was
65 (2022: 59) of which 52 (2022: 47) were employed by JRCM and
13 (2022: 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:
£ thousand
2023
2022
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
278
228
95
9
382
94
12
334
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
2023
0.7
0.6
1.3
2022
1.5
1.2
2.7
Furthermore £0.02 million of professional fees (2022: £0.02 million)
incurred on purchases of investments are included within gains/
(losses) on fair value investments.
6. Business and geographical segments
For 2023 and 2022, the Group is considered to have three principal
operating segments, all based in the UK, as follows:
2023
AUM
£ million1
2023
Employees1
2022
AUM
£ million2
2022
Employees2
–
–
–
3,573
50
3,722
–
12
–
–
49
13
Segment
Business
RIT
JRCM
SHL
Investment trust
Investment
management/
administration
Events/premises
management
1 At 31 December 2023.
2 At 31 December 2022.
74 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
6. Business and geographical segments (continued)
Key financial information for 2023 is as follows:
£ million
£ million
RIT
JRCM
SHL
Adjustments3
Total
Net
assets
3,458.7
120.6
1.3
(7.3)
3,573.3
Income/
gains1
Operating
expenses1
143.0
39.0
4.1
(42.9)
143.2
(45.3)
(36.5)
(3.8)
42.9
(42.7)
Key financial information for 2022 is as follows:
£ million
RIT
JRCM
SHL
Adjustments3
Total
Net
assets
3,617.3
110.3
0.9
(6.8)
3,721.7
Income/
gains1
(511.6)
50.3
3.7
(51.0)
(508.6)
Operating
expenses1
(52.7)
(38.4)
(3.5)
51.0
(43.6)
1 Includes intra-group income and expenses.
2 Profit before finance costs and taxation.
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
8. Taxation
£ million
2023
23.1
11.3
0.0
34.4
2022
14.3
10.4
0.3
25.0
Year ended 31 December 2023
Revenue
Capital
Total
UK corporation tax charge/(credit)
Current tax charge/(credit)
Deferred tax charge/(credit)
Taxation charge/(credit)
–
–
–
–
–
–
–
–
–
–
–
–
Profit2
97.7
2.5
0.3
–
100.5
Profit2
(564.3)
11.9
0.2
–
(552.2)
Profit/(loss) before taxation
Tax at the standard
UK corporation tax rate of
23.5%
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 taxation charge/(credit)
£ million
Profit/(loss) before taxation
Tax at the standard
Year ended 31 December 2023
Revenue
(2.9)
Capital
69.0
Total
66.1
(0.7)
16.2
15.5
–
(1.7)
0.1
2.3
–
–
(25.9)
–
–
10.0
(0.3)
–
(25.9)
(1.7)
0.1
12.3
(0.3)
–
Year ended 31 December 2022
Revenue
(14.3)
Capital
(562.9)
Total
(577.2)
UK corporation tax rate of 19%
(2.7)
(107.0)
(109.7)
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 taxation charge/(credit)
–
(1.2)
0.1
3.8
–
–
102.9
–
–
4.8
(0.7)
–
102.9
(1.2)
0.1
8.6
(0.7)
–
Refer to Note 12 on page 78 for the explanation of carried forward
tax losses.
9. Earnings per ordinary share –
basic and diluted
The basic earnings per ordinary share for 2023 is based on the profit
of £66.1 million (2022: loss of £577.2 million) and the weighted
average number of ordinary shares in issue during the period of
149.5 million (2022: 155.5 million). The weighted average number
of shares is adjusted for shares held in the EBT and in treasury in
accordance with IAS 33 – Earnings per share.
£ million
UK corporation tax charge/(credit)
Current tax charge/(credit)
Deferred tax charge/(credit)
Taxation charge/(credit)
Year ended 31 December 2022
Revenue
Capital
Total
–
–
–
–
–
–
–
–
–
–
–
–
£ million
Net revenue profit/(loss)
Net capital profit/(loss)
Total profit/(loss) for the year
The main corporation tax rate increased from 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 2023 of 23.5% (2022:
19%). The differences are explained as follows:
Weighted average (million)
Number of shares in issue
Shares held in EBT
Shares held in treasury
Basic shares
2023
(2.9)
69.0
66.1
2023
156.8
(1.8)
(5.5)
149.5
2022
(14.3)
(562.9)
(577.2)
2022
156.8
(1.0)
(0.3)
155.5
RIT Capital Partners plc Report and Accounts December 2023 75
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
9. Earnings per ordinary share –
basic and diluted (continued)
pence
Revenue earnings/(loss)
per ordinary share – basic
Capital earnings/(loss)
per ordinary share – basic
Total earnings per share – basic
2023
2022
Company
£ million
(1.9)
(9.2)
46.1
44.2
(362.1)
(371.3)
The diluted earnings per ordinary share for the period is based on the
basic shares (above) adjusted for the effect of share-based payments
awards for the period.
This adjustment was not required for 2022 as an increase in the
shares in issue would have reduced the basic loss per ordinary
share. As a result, there was no difference between the basic and
diluted loss per ordinary share in the prior year.
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
2023
149.5
1.4
150.9
2022
155.5
–
155.5
2023
2022
(1.9)
(9.2)
45.7
43.8
(362.1)
(371.3)
10. Property, plant and equipment
The Group’s property, plant and equipment as at 31 December 2023
was £21.6 million (2022: £20.7 million).
Group
£ million
At 1 January 2023
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2023
Of which:
Property – leasehold
Group
£ million
At 1 January 2022
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2022
Of which:
Property – leasehold
Accumulated
depreciation Revaluation
Net book/fair
value
Cost
17.5
0.3
–
–
17.8
(6.2)
–
(0.3)
–
9.4
–
–
0.9
(6.5)
10.3
20.7
0.3
(0.3)
0.9
21.6
19.5
14.1
(4.9)
10.3
Accumulated
depreciation Revaluation
Net book/fair
value
(5.8)
–
(0.4)
–
(6.2)
(4.6)
11.5
–
–
(2.1)
9.4
9.4
23.1
0.1
(0.4)
(2.1)
20.7
19.0
Cost
17.4
0.1
–
–
17.5
14.2
76 Report and Accounts December 2023 RIT Capital Partners plc
The Company’s property, plant and equipment as at 31 December
2023 was £21.5 million (2022: £20.6 million).
At 1 January 2023
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2023
Of which:
Property – leasehold
Company
£ million
At 1 January 2022
Additions
Charge for depreciation
Revaluation gain/(loss)
Fair value at
31 December 2022
Of which:
Property – leasehold
Accumulated
depreciation Revaluation
Net book/fair
value
(4.6)
–
(0.3)
–
9.4
–
–
0.9
(4.9)
10.3
(4.9)
10.3
20.6
0.3
(0.3)
0.9
21.5
19.5
Accumulated
depreciation Revaluation
Net book/fair
value
(4.2)
–
(0.4)
–
(4.6)
(4.6)
11.5
–
–
(2.1)
9.4
9.4
23.0
0.1
(0.4)
(2.1)
20.6
18.9
Cost
15.8
0.3
–
–
16.1
14.1
Cost
15.7
0.1
–
–
15.8
14.2
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
The Group 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 plan which is closed to new
members. The Scheme is administered under a Trust Deed and Rules
and a corporate trustee, Law Debenture Pension Trust Corporation plc,
who is independent of the Group and was appointed in May 2019.
In December 2022, the Group de-risked its retirement benefit
obligations by supporting the trustees of the Scheme in completing a
£20 million bulk annuity insurance policy ‘buy-in’. The ‘buy-in’ secured
an insurance asset that fully matches almost all the remaining
pension liabilities of the Scheme, with the result that the Group no
longer bears material investment, longevity, interest rate or inflation
risk. The annuity policy is held in the name of the Trustee.
As a result of the ‘buy-in’, current cash contributions into the Scheme
have ceased. In addition, the Group will no longer record non-cash
interest income on the accounting surplus.
It is expected that a full buy-out of the Scheme will complete in
2024, during which individual insurance policies will be purchased for
the beneficiaries of the scheme. After the ‘buy-out’ has completed,
the Group will no longer have any liabilities against the Scheme.
Notes to the Financial Statements
11. Pension commitments (continued)
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)
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 defined benefit
obligation (DBO)
Return on Scheme assets greater than
discount rate
Remeasurement effects recognised in
the SOCI
Total (credit)/expense
2023
(0.0)
0.4
0.4
2023
0.5
0.0
0.5
2022
(0.1)
4.5
4.4
2022
0.4
(0.1)
0.3
2023
2022
0.0
0.5
0.4
(9.6)
(0.3)
(0.1)
0.2
0.4
0.9
13.8
4.5
4.8
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
2023
17.1
0.9
0.0
(0.3)
0.5
(0.9)
17.3
2023
17.6
0.9
(0.2)
–
(0.9)
17.4
2022
26.7
0.5
0.3
–
(9.6)
(0.8)
17.1
2022
30.5
0.6
(13.8)
1.1
(0.8)
17.6
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.
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
2023
2022
0.5
0.0
(0.4)
0.0
0.1
3.8
0.1
(4.5)
1.1
0.5
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
2023
4.65%
3.30%
n/a
2022
4.95%
3.35%
n/a
pension
4.00%
4.00%
Pension increases for post 6 April 1997
pension
4.20%
4.25%
Pension increases for deferred benefits
(non Guaranteed Minimum Pension)
Scheme participant census date
Post retirement mortality assumption-
3.30%
31 December
2023
3.35%
31 December
2022
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).
£ millions
DBO
2023
17.3
2022
17.1
Significant actuarial assumptions at 31 December 2023:
Assumptions
used for
sensitivity
analysis
Sensitivity
analysis
Revised DBO
for each
sensitivity
£ millions
Discount rate
Price inflation (RPI)
Life expectancy
4.15%
3.80%
–
0.5% point decrease
0.5% point increase
Increase of 1 year
18.5
17.6
18.0
RIT Capital Partners plc Report and Accounts December 2023 77
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
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 71 and 72. 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).
•
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.
Revised DBO
for each
sensitivity
18.3
17.2
17.7
2022
2.2
14.9
17.1
11. Pension commitments (continued)
Significant actuarial assumptions at 31 December 2022:
Assumptions
used for
sensitivity
analysis
£ millions
Discount rate
Price inflation (RPI)
Life expectancy
4.45%
3.85%
–
Sensitivity
analysis
0.5% point decrease
0.5% point increase
Increase of 1 year
The weighted average duration of the DBO is 13 years. Further
Scheme analysis is shown below.
Analysis of DBO by participant category
£ millions
Deferred participants
Pensioners
DBO
2023
1.8
15.5
17.3
The fair value of Scheme assets of £17.4 million is analysed in the
table below (2022: £17.6 million).
Scheme asset breakdown
Bulk insurance policy
Cash and liquidity/other
Total
31 December
2023
31 December
2022
98%
2%
100%
96%
4%
100%
12. Deferred taxation
The gross movement on deferred tax during the year is shown
below:
£ million
Balance at start of year
(Debit)/credit to consolidated income
statement
(Debit)/credit to SOCI
Balance at end of year
2023
(0.2)
–
0.2
(0.0)
The deferred tax asset/(liability) is analysed below:
£ million
Retirement benefit asset
Balance at end of year
2023
(0.0)
(0.0)
2022
(1.3)
–
1.1
(0.2)
2022
(0.2)
(0.2)
The Group had carried forward tax losses of £521 million at
31 December 2023 (2022: £453 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.
78 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
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:
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
2023
Impact on profit
and net assets
2022
Impact on profit
and net assets
230.2
260.4
490.6
137.4
239.4
376.8
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;
• Notional exposure from quoted equity derivatives;
• Estimated cash balances held by external managers; and
• Money market funds;
• Credit funds;
• Estimated net equity exposure from hedge fund managers.
• Cash and cash equivalents;
Other price risk exposure relates to investments in private
investments, absolute return and credit, and real assets, adjusted for
the notional exposure from commodity and credit derivatives.
£ million
Exposure to quoted equity price risk1
Exposure to other price risk
Total exposure to price risk
31 December
2023
31 December
2022
1,594.5
2,332.2
3,926.7
1,361.1
2,394.5
3,755.6
1 Quoted equity price risk represented 45% of year-end net assets
(2022: 37%).
• 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.
RIT Capital Partners plc Report and Accounts December 2023 79
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
13. Financial instruments (continued)
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
Total
£ million
Portfolio investments –
debt securities1
Cash
Borrowings
Total
31 December 2023
Floating
rate
–
204.3
(142.9)
61.4
Fixed
rate
154.0
–
(137.9)
16.1
31 December 2022
Floating
rate
–
218.0
(236.2)
(18.2)
Fixed
rate
40.7
–
(134.4)
(93.7)
Total
154.0
204.3
(280.8)
77.5
Total
40.7
218.0
(370.6)
(111.9)
1 In addition, the Group holds £739.8 million (2022: £746.8 million) invested in
absolute return and credit, of which £394.5 million (2022: £443.7 million) is in
funds that predominantly invest in credit instruments. These provide indirect
exposure to interest rate risk.
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 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.
£ million
Total
2023
Impact on profit
and net assets
2022
Impact on profit
and net assets
2.7
6.1
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.
Interest received on cash and cash equivalents is at prevailing market
rates.
Foreign currency exposure
The Group has total borrowings with a fair value of £280.8 million
outstanding at the year end (2022: £370.6 million). The revolving
credit facilities comprising £142.9 million of this total incur floating
interest payments (2022: £236.2 million). The loan notes with a fair
value of £137.9 million (par value of £151.0 million) have fixed interest
payments (2022: fair value £134.4 million; par value £151.0 million).
Further details are provided in Note 18.
Currency
US dollar
Euro
Japanese yen
Other non-sterling
Total1
2023
Net exposure
% of NAV
2022
Net exposure
% of NAV
39.6
6.0
4.4
2.6
52.6
32.5
7.5
4.2
2.9
47.1
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.
80 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
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 2023, 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
2023
Impact on profit
and net assets
2022
Impact on profit
and net assets
(104.8)
(15.9)
(21.5)
(8.9)
(151.1)
(120.8)
(15.6)
(27.8)
(11.2)
(175.4)
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 Group’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
Total
2023
154.0
71.3
37.8
33.4
204.3
500.8
2022
40.7
58.3
85.4
159.9
218.0
562.3
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.
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 (2022: A-2).
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 2023
(2022: 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.
RIT Capital Partners plc Report and Accounts December 2023 81
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
£ million
Current liabilities:
Bank loan/overdraft
Derivative financial
instruments
Non-current liabilities:
Derivative financial
instruments
Borrowings
Lease liability
Financial liabilities
Other non-financial liabilities
Total
31 December 2022
3 months
or less
3-12
months
>1 year
Total
236.2
7.0
–
–
–
243.2
63.5
306.7
–
3.4
–
5.6
0.4
9.4
–
9.4
–
–
–
189.3
5.9
195.2
1.8
197.0
236.2
10.4
–
194.9
6.3
447.8
65.3
513.1
In addition, the Company has contingent liabilities in the form of
commitments amounting to £307 million (2022: £385 million) as set
out in Note 14.
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
2023
37.8
2022
85.4
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.
13. Financial instruments (continued)
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 two revolving credit facilities with a total capacity of
£185 million (of which £40 million was committed and undrawn at
the year end) and £151 million par value 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
Amounts owed to group
undertakings
Non-current liabilities:
Derivative financial
instruments
Borrowings
Lease liability
Financial liabilities
Other non-financial liabilities
Total
31 December 2023
3 months
or less
3-12
months
>1 year
Total
142.9
2.5
0.1
0.0
–
0.1
145.6
39.2
184.8
–
0.3
–
–
5.6
0.3
6.2
–
6.2
–
–
–
–
189.3
8.0
197.3
3.0
200.3
142.9
2.8
0.1
0.0
194.9
8.4
349.1
42.2
391.3
82 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
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 2023 and
31 December 2022 are:
As at 31 December 2023
£ million
Commodity derivatives
Currency derivatives
Equity derivatives
Total
As at 31 December 2022
£ million
Commodity derivatives
Currency derivatives
Equity derivatives
Total
Notional1
amount
233.5
1,406.8
415.9
Notional1
amount
169.1
1,815.1
253.2
Group and Company
Assets
(positive
fair value)
Liabilities
(negative
fair value)
6.0
32.6
32.7
71.3
(1.8)
(0.7)
(0.3)
(2.8)
Group and Company
Assets
(positive
fair value)
Liabilities
(negative
fair value)
6.4
49.6
2.3
58.3
–
(7.0)
(3.4)
(10.4)
Total
fair value
4.2
31.9
32.4
68.5
Total
fair value
6.4
42.6
(1.1)
47.9
1 Long and short notional exposure has been netted.
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.
Level 3
The Group considers all private investments, whether direct or funds,
(as described in the Investment Portfolio on page 22) 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 should be adjusted. 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 initial valuations, which
are then subject to review by the finance function, with the final
valuations being determined by the Valuation Committee, comprised
of independent non-executive Directors, of which the Audit and Risk
Committee Chair is also a member.
RIT Capital Partners plc Report and Accounts December 2023 83
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
13. Financial instruments (continued)
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 2023 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 Notes 10 and 15.
The following table analyses the Group’s assets and liabilities within
the fair value hierarchy, at 31 December 2023:
As at 31 December 2023
£ 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
668.4 1,065.8
–
1,065.8
62.6
1,128.4
–
668.4
8.7
677.1
1,628.1
137.1
1,765.2
–
1,765.2
3,362.3
137.1
3,499.4
71.3
3,570.7
–
–
–
–
–
–
–
–
34.1
34.1
21.6
21.6
55.7
55.7
(280.8)
(280.8)
instruments
(1.8)
(1.0)
–
(2.8)
Total financial liabilities at
FVPL
(1.8)
(1.0)
(280.8)
(283.6)
Total net assets measured at
fair value
675.3
1,127.4
1,540.1
Other non-current assets
Cash at bank
Other current assets
Other current liabilities
Other non-current liabilities
Net assets
3,342.8
0.1
204.3
71.3
(39.3)
(5.9)
3,573.3
84 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
Movements in level 3 assets
Year ended 31 December 2023
£ million
Opening balance
Purchases
Sales
Gains/(losses) through profit or loss1
Unrealised gains/(losses) through
other comprehensive income
Other
Closing balance
Investments
held at fair
value
1,875.3
187.2
(159.0)
(143.2)
–
4.9
1,765.2
Properties
Total
58.6
–
–
(2.9)
0.3
(0.3)
55.7
1,933.9
187.2
(159.0)
(146.1)
0.3
4.6
1,820.9
1 Included within gains/(losses) through profit or loss is £23.3 million (2022:
£60.1 million loss) of unrealised losses, including currency translation, relating
to those level 3 assets held at the end of the reporting period.
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, the agreed or offered price will be used, often with
a discount as appropriate 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, this transaction price will be used. 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
During the year no investments were reclassified between level 2
and level 3.
Recent transaction
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 estimating the fair value of the investment.
As a range of valuation methods and inputs may be used 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 valuations1
Recent transaction
Other industry metrics
Discount to recent transaction2
Discount to sale proceeds
Earnings multiple
Total
2023
259.7
60.0
28.9
22.3
13.3
7.5
391.7
2022
246.3
23.6
21.7
90.5
10.8
49.8
442.7
1 Included in this method are directly-held private investments within
the non-consolidated subsidiaries with a total of £25.1 million (2022:
£24.5 million).
2 Included in this method are direct private investments which have been
discounted due to a decline in public comparables or a general decline in
markets related to or impacting the businesses.
The majority of the direct private investments are structured
as co-investments, managed by a GP. For these investments,
the valuation approach is to 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 should be adjusted.
Where the Manager has sufficient information to undertake its own
valuation, a range of methods will typically be used. For companies
with positive earnings, this will usually involve an earnings multiple
approach, typically using EBITDA or similar. The earnings multiple is
A 5% change in the value of these
assets would result in a £13.0 million or
0.4% (2022: £12.3 million, 0.3%) change
in net assets.
A 5% change in the value of these
assets would result in a £3.0 million
or 0.08% (2022: £1.2 million, 0.03%)
change in net assets.
A 5% change in the value of these
assets would result in a £1.4 million
or 0.04% (2022: £1.1 million, 0.03%)
change in net assets.
Other industry metrics
Discount to recent transaction Assets in this category are valued
using a discount applied to a recent
financing round or secondary transaction.
Discounts range between 9% and 67%,
reflecting factors such as the elapsed
time since the transaction and the
movement in prices of broadly similar
listed companies. A 5% change to the
discount would result in a £1.1 million
or 0.03% (2022: £4.5 million, 0.12%)
change in net assets.
The asset in this category is valued using
a 15% discount to an agreed offer. A 5%
change in the discount would result in
a £0.03 million or <0.001% (2022: £0.1
million, <0.01%) change in net assets.
Assets in this category are valued
using EV/sales multiples in the range
of 2.0x to 5.2x.If the multiple used
for valuation purposes is increased or
decreased by 5% then the net assets
would increase/decrease by £0.5 million or
0.02% (2022: £2.5 million, 0.07%).
Discount to sale proceeds
Earnings multiple
RIT Capital Partners plc Report and Accounts December 2023 85
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
13. Financial instruments (continued)
The investment property and property, plant and equipment with
an aggregate fair value of £55.7 million (2022: £58.6 million) were
valued using a third-party valuation provided by JLL. The properties
were valued using weighted average capital values of £1,499 per
square foot (2022: £1,580) 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 (2022: £0.8 million increase/decrease).
The non-consolidated subsidiaries are held at their fair value of
£137.1 million (2022: £101.1 million) representing £138.1 million
of portfolio investments (2022: £104.7 million) and £1.0 million
of remaining liabilities (2022: £3.3 million of remaining liabilities).
A 5% change in the value of these assets would result in £6.9 million
or 0.2% (2022: £5.1 million, 0.1%) change in total net assets.
The remaining investments held at fair value and classified as level 3 of
£1,261.5 million (2022: £1,355.7 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 £63.1 million or 1.77%
(2022: £67.8 million, 1.82%) 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 £1,820.9 million (2022: £1,933.9 million).
The following table analyses the Group’s assets and liabilities within
the fair value hierarchy, at 31 December 2022:
As at 31 December 2022
£ 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
506.8
–
506.8
6.4
513.2
1,204.2
–
1,204.2
51.9
1,256.1
1,774.2
101.1
1,875.3
–
1,875.3
3,485.2
101.1
3,586.3
58.3
3,644.6
–
–
–
–
–
–
–
–
–
–
37.9
37.9
20.7
20.7
58.6
58.6
(370.6)
(370.6)
(10.4)
–
(10.4)
(10.4)
(370.6)
(381.0)
Total net assets measured at
fair value
513.2
1,245.7
1,563.3
Other non-current assets
Cash at bank
Other current assets
Other current liabilities
Other non-current liabilities
Net assets
Movements in level 3 assets
Year ended 31 December 2022
£ million
Opening balance
Purchases
Sales
Gains/(losses) through profit or
3,322.2
0.5
218.0
249.8
(63.6)
(5.2)
3,721.7
Investments
held at fair
value
1,914.3
222.2
(210.3)
Properties
Total
61.4
0.1
–
1,975.7
222.3
(210.3)
loss
(51.0)
(0.4)
(51.4)
Unrealised gains/(losses) through
other comprehensive income
Transfer in to level 3
Transfer out of level 3
Other
Closing balance
–
–
–
0.1
1,875.3
(2.1)
–
–
(0.4)
58.6
(2.1)
–
–
(0.3)
1,933.9
86 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
13. Financial instruments (continued)
13.5 Capital management
The Group’s primary objectives in relation to the management of
capital are:
•
•
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
15. Investment property
The Group and Company’s investment property as at 31 December
2023 was £34.1 million (2022: £37.9 million).
£ million
Rental income from investment
properties
Direct operating expenses arising from
investment properties that generated
rental income during the year
2023
1.8
(1.5)
(0.5)
2022
2.1
(1.4)
(0.4)
•
to ensure the Group’s ability to continue as a going concern.
Cash outflow from leases
The Group and Company is committed to making the following
payments under non-cancellable leases over the periods described.
£ million
Within one year
2023
0.4
2022
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
2023
2022
0.6
0.3
0.1
0.0
–
–
1.1
0.6
0.1
0.1
–
–
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,
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 2023.
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 2023 and 31 December 2022
comprised:
£ million
Equity share capital
Retained earnings and other reserves
Net asset value
Borrowings
Total capital
2023
156.8
3,416.5
3,573.3
280.8
3,854.1
2022
156.8
3,564.9
3,721.7
370.6
4,092.3
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:
£ million
Commitments
31 December 2023
31 December 2022
Group
Company
Group
Company
307.1
307.1
385.0
385.0
The financial commitments are principally uncalled commitments to
private funds, typically established as 10-year funds with a five-year
investment period, are diversified across multiple funds and vintage
years, and may be called, with customary notice, at any time during
the investment period. The majority are denominated in US dollars
and therefore subject to currency fluctuation.
RIT Capital Partners plc Report and Accounts December 2023 87
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
16. Other receivables
£ million
Group
Company
Group
Company
£ million
31 December 2023
31 December 2022
Cash margin
Amounts receivable
Prepayments and accrued
income
Sales for future settlement
Total
37.8
1.2
4.2
28.0
71.2
37.8
1.2
3.6
28.0
70.6
85.4
0.6
7.0
152.3
245.3
85.4
0.6
6.6
152.3
244.9
The carrying amount of other receivables approximates their fair
value, due to their short-term nature.
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 – Related Party Disclosures
(IAS 24).
The Group had arrangements with these related parties covering the
provision and receipt of administrative, support and supply services.
Under these arrangements the Group received £72,193 (2022:
£61,757) and paid £94,257 (2022: £74,077).
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
2023 amounted to £186,232 (2022: £203,539).
Nothing was owed by the Group to the parties related to Hannah
Rothschild at either 31 December 2023 or 31 December 2022.
The balance due to the Group from these related parties at
31 December 2023 was £12,303 (2022: £11,693).
Other
No subscriptions were made to its associate, JRCM (London) LLP
in the year (2022: Company £nil; JRCM management £nil) and the
Company has a remaining commitment of £50,000 (2022: £50,000).
Group undertakings
JRCM acts as the Company’s manager, administrator and corporate
secretary. During the year ended 31 December 2023, the charge
for these services from JRCM to the Company amounted to
£42.6 million (2022: £49.7 million). JRCM incurred rent charges of
£580,000 (2022: £580,000) from the Company. During the year SHL
(also a wholly-owned subsidiary of the Company) earned property
management revenues of £89,191 from JRCM (2022: £98,827) and
£1,830,681 from the Company (2022: £1,597,394).
Amounts due from subsidiaries and to subsidiaries are disclosed on
the face of the Group’s balance sheet. The balances outstanding at
the year ends are show below:
88 Report and Accounts December 2023 RIT Capital Partners plc
RIT Investments US, Inc
RIT Investments GP Limited
J. Rothschild Capital Management US, Inc
Total
£ million
RIT Investments US, Inc
JRCM
J. Rothschild Capital Management US, Inc
Total
Amounts owed by/(to)
Group undertakings
2023
2022
0.0
(0.1)
0.1
0.0
4.5
(0.1)
0.0
4.4
Amounts owed by/(to)
Company undertakings
2023
0.0
(119.7)
0.1
(119.6)
2022
4.5
(94.7)
0.0
(90.2)
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 was £48,894
owing to the pension scheme by the Company at 31 December 2023
(31 December 2022: £nil). Nothing was owed by the Group’s pension
scheme to the Company at 31 December 2023 (31 December 2022:
£nil).
Directors and key management personnel
Details of the remuneration and benefits attributable to Directors and
key management personnel are set out below.
£ million
Short-term employee benefits
Share-based payment
Social security costs
Total
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
2023
4.2
11.5
2.3
18.0
2022
3.6
14.0
2.5
20.1
Group and Company
2023
2022
142.9
236.2
137.9
280.8
134.4
370.6
At 31 December 2023 the Company had two revolving credit facilities
(RCFs): an £85 million, three-year facility with BNP Paribas SA agreed
in December 2022 and a £100 million three-year facility with Industrial
and Commercial Bank of China agreed in December 2022. These
are flexible as to currency, duration and number of drawdowns, and
pay floating interest linked to SONIA, SOFR 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
£142.9 million (2022: £236.2 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 drawn down RCFs at the year end was 7.28% (2022: 5.85%).
Notes to the Financial Statements
18. Borrowings (continued)
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 £137.9 million (2022: £134.4 million) calculated using a
discount rate of 5.13% (2022: 5.24%). A 5% increase/decrease in
the underlying discount rate would result in an increase/decrease
in net assets of approximately £2.0 million (2022: £2.3 million) or
0.06% (2022: 0.06%). The weighted average interest rate payable on
these Notes is 3.45% and their remaining weighted average tenor is
7.2 years (2022: 8.2 years).
The overall weighted average interest rate on drawn borrowings at
the year end was 5.32% (2022: 4.93%).
21. Share capital
£ million
Allotted, issued and fully paid:
At 1 January
At 31 December
2023
Nominal
value of
total shares
in issue
2022
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 2023, 8,617,954 shares were bought back at a cost of £163.1 million
and held in treasury (2022: 514,634 shares at a cost of £11.0 million)
meaning at 31 December 2023, 9,307,817 shares were held in treasury
(2022: 689,863 shares).
19. Other payables
£ million
Accruals
Other creditors
Purchases for future
settlement
Total
31 December 2023
31 December 2022
Group
Company
Group
Company
22. Share premium
£ million
15.2
21.3
2.7
39.2
8.3
20.9
2.7
31.9
14.5
24.9
24.1
63.5
5.3
24.7
24.1
54.1
At 1 January
At 31 December
The share premium is not distributable.
The carrying value of the Group’s other payables approximates their
fair value, due to their short-term nature.
23. Capital redemption reserve
£ million
Balance at start of year
At 31 December
2023
45.7
45.7
2022
45.7
45.7
2023
36.3
36.3
2022
36.3
36.3
31 December 2023
31 December 2022
Group
Company
Group
Company
The capital redemption reserve is not distributable and represents
the cumulative nominal value of shares cancelled.
20. Provisions
£ million
Opening balance
Additional provision
Amounts utilised
Foreign exchange
movements
Total
1.8
1.7
(0.4)
(0.1)
3.0
2.2
1.3
(0.4)
(0.1)
3.0
1.1
1.0
(0.4)
0.1
1.8
1.1
1.4
(0.4)
0.1
2.2
As at 31 December 2023 there are no provisions in respect of
investments which are expected to settle within the next 12 months (as
at 31 December 2022: £nil). It is anticipated that provisions noted above
will be settled more than 12 months after the balance sheet date.
Indemnity provision
The provision above relates to an indemnity provided by the
Company in 1991 when it profitably disposed its indirect interest in
Cavenham Forest Industries (CFI). The sellers (including the Company)
indemnified the purchasers of CFI against certain ongoing costs being
incurred by CFI. The indemnity provision has been estimated based
on the net present value of the Company’s share of the projected
indemnified costs.
24. Own shares reserve
£ million
Opening cost
Own shares acquired
Own shares transferred
Closing cost
2023
(46.3)
(9.8)
19.4
(36.7)
2022
(23.0)
(40.4)
17.1
(46.3)
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
1,611,339 shares with a cost of £36.7 million and market value of
£30.3 million (2022: 1,988,580 shares, cost £46.3 million, market
value £42.3 million). The own shares reserve is not distributable.
RIT Capital Partners plc Report and Accounts December 2023 89
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Notes to the Financial Statements
25. 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.
Restricted share units (RSUs) were awarded to employees during the
year. These are widely 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 typically subject to a further two-year
holding period or lock-up. There are also a small number of legacy share
appreciation rights (SARs) remaining. These are no longer awarded to
employees since the conversion to RSUs was made in 2021.
In addition, 60% of annual bonuses over £250,000 are made in deferred
shares which vest over three years (based on a service condition).
The total expense for share-based awards is based on the fixed, initial fair
value at the time the award is made. The ultimate impact on the net asset
value is the cost of the shares acquired by the EBT and then transferred
to employees if and when they vest. For 2023, the cost recognised in the
income statement (excluding national insurance) for share-based awards
was £14.7 million (2022: £17.6 million) of which £8.7 million relates to
RSUs and £6.0 million to deferred shares.
The movement in share-based awards is as follows:
Number (thousand)
2023
2022
Share-based awards with service conditions attached (deferred
shares and RSUs) were valued using the prevailing market price and
a lock-up discount factor as applicable.
26. Capital reserve
31 December 2023
31 December 2022
£ million
Group
Company
Group
Company
Balance at start of year
Gains/(loss) for the year
Dividend paid
Other capital items
Taxation
Total capital return
Balance at end of year
3,548.9
110.7
(56.7)
(209.8)
–
(155.8)
3,393.1
3,578.6
110.7
(56.7)
(196.8)
–
(142.8)
3,435.8
4,174.4
(535.3)
(57.6)
(32.6)
–
(625.5)
3,548.9
4,203.4
(535.3)
(57.6)
(31.9)
–
(624.8)
3,578.6
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
2023
2022
2,557.3
878.5
3,435.8
2,542.3
1,036.3
3,578.6
Outstanding at the start of the year:
SARs
RSUs
Deferred shares
Total
Granted during the year:
RSUs
Deferred shares
Total
Exercised/vested during the year:
SARs
RSUs
Deferred shares
Total
Lapsed/forfeited during the year:
SARs
RSUs
Deferred shares
Total
Outstanding at the end of the year:
SARs
RSUs
Deferred shares
Total
SARs exercisable at year end
Intrinsic value of SARs exercisable at year end
315
1,483
988
2,786
342
1,397
841
2,580
424
91
515
–
(377)
(452)
(829)
(206)
(330)
–
(536)
352
553
905
(3)
(256)
(406)
(665)
(24)
(10)
–
(34)
27. Revenue reserve
31 December 2023
31 December 2022
£ 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
(29.1)
(2.9)
(0.4)
0.2
(32.2)
(209.5)
(16.7)
–
–
(226.2)
(11.4)
(14.3)
(4.5)
1.1
(29.1)
(176.1)
(33.4)
–
–
(209.5)
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 £16.7 million (2022: loss £33.4 million).
The Company’s total comprehensive income for the year was
£61.2 million (2022: expense of £591.7 million).
28. Revaluation reserve
£ million
Group
Company
Group
Company
31 December 2023
31 December 2022
109
1,200
627
1,936
109
315
1,483
988
2,786
122
Balance at start of year
Revaluation gain/(loss)
on property, plant and
equipment
Balance at end of year
9.4
9.4
11.5
11.5
0.9
10.3
0.9
10.3
(2.1)
9.4
(2.1)
9.4
(£ million)
0.0
0.1
The revaluation reserve is not distributable.
For share-based awards granted during the year, the weighted average
fair value of each award was 1,770 pence (2022: 2,470 pence).
90 Report and Accounts December 2023 RIT Capital Partners plc
Notes to the Financial Statements
(2.0)
(0.7)
154.1
1.7
155.8
2022
pence
2,414
2,388
107.2
21.0
(25.2)
40.2
143.2
107.5
2.5
–
(2.8)
107.2
29. Net asset value per ordinary share –
basic and diluted
Net asset value per ordinary share is based on the following data:
2023
2022
3,573.3
156.8
3,721.7
156.8
31 December
Net assets (£ million)
Number of shares in issue (million)
Shares held in EBT (million)
Shares held in treasury (million)
Basic shares (million)
Effect of share-based payment awards (million)
Diluted shares (million)
31 December
Net asset value per ordinary share – basic
Net asset value per ordinary share – diluted
(1.6)
(9.3)
145.9
1.4
147.3
2023
pence
2,449
2,426
30. Investments in subsidiary undertakings
£ million
Carrying value at 1 January 2023
Additions
Disposals
Fair value movements in year
Carrying value at 31 December 2023
£ million
Carrying value at 1 January 2022
Additions
Disposals
Fair value movements in year
Carrying value at 31 December 2022
Investments in subsidiary undertakings are stated at cost or fair
value where appropriate.
At 31 December 2023 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.
In accordance with IFRS 10 the Company and Group holds the
following subsidiaries at fair value at 31 December 2023:
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
Ownership
interest
100%
100%
100%
100%
100%
100%
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.
31. Dividends
2023
Pence
per share
2022
Pence
per share
2023
£ million
2022
£ million
Dividends paid in year
38.0
37.0
56.7
57.6
The above amounts were paid as distributions to equity holders of
the Company in the relevant year from accumulated capital profits.
Dividends are not paid on shares held in treasury and the EBT waives
its rights to all dividends.
On 27 February 2023 the Board declared a first interim dividend of
19.0 pence per share in respect of the year ended 31 December
2023 that was paid on 28 April 2023. A second interim dividend of
19.0 pence per share was declared by the Board on 31 July 2023 and
paid on 27 October 2023.
The Board declares the payment of a first interim dividend of
19.5 pence per share in respect of the year ending 31 December
2024. This will be paid on 26 April 2024 to shareholders on the
register on 5 April 2024, and funded from the accumulated capital
profits.
RIT Capital Partners plc Report and Accounts December 2023 91
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
Notes to the Financial Statements
32. Reconciliation of profit/(loss) before finance costs
and taxation to net cash inflow/(outflow) from
operating activities before taxation and interest
Group
£ million
Borrowings – current
£ million
2023
2022
Borrowings – non-current
Profit/(loss) before dividend and interest income,
Total
Non-cash
changes in
fair value1
Net
(drawdowns)/
repayments
12.0
(3.5)
8.5
81.3
–
81.3
2022
(236.2)
(134.4)
(370.6)
2023
(142.9)
(137.9)
(280.8)
Reconciliation of liabilities arising from financing activities:
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 borrowings1
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
(Increase)/decrease in derivatives1
Net cash inflow/(outflow) from operating
activities before taxation and interest
73.0
10.1
17.4
100.5
174.1
(24.3)
20.0
3.6
(569.2)
7.2
9.8
(552.2)
17.5
(105.3)
30.1
(34.5)
(15.3)
29.1
3.3
(853.4)
951.9
(11.2)
(20.6)
(5.2)
(886.3)
1,395.6
192.4
(23.5)
328.6
57.7
1 These line items have been disaggregated from ‘other movements’ in the
current year. The 2022 comparative figures have been re-presented to align
with this updated format.
£ 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 borrowings1
Unrealised foreign exchange (gains)/losses on
repayments and drawings of borrowings
(Increase)/decrease in investments in
subsidiary undertakings1
Increase/(decrease) in amounts owed to
group undertakings1
Purchase of investments held at fair value
Sale of investments held at fair value
(Gains)/losses on fair value investments
(Increase)/decrease in derivatives1
Net cash inflow/(outflow) from operating
activities before taxation and interest
Company
2023
2022
67.2
10.1
17.4
94.7
174.3
(22.2)
1.2
3.6
(581.6)
7.2
9.8
(564.6)
17.5
(89.7)
9.0
(34.5)
(15.3)
29.1
3.3
(5.2)
(40.2)
0.3
29.5
(832.5)
926.7
28.6
(20.6)
(34.9)
(883.8)
1,395.6
192.4
(23.5)
331.1
7.7
1 These line items have been disaggregated from ‘other movements’ in the
current year. The 2022 comparative figures have been re-presented to align
with this updated format.
92 Report and Accounts December 2023 RIT Capital Partners plc
1 Including currency translation.
33. 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 2023
3D Opportunities
HCIF Offshore
BlackRock Strategic Equity
Attestor Value
ARCM IV
Tresidor Credit Opportunities
Motive
RIT US Value Partnership
Springs Opportunities
Caxton Dynamis
Total
As at 31 December 2022
Attestor Value
HCIF Offshore
3D Opportunities
Tresidor Credit Opportunities
BlackRock Strategic Equity
ARCM IV
Springs Opportunities
Motive
RIT US Value Partnership
Caxton Dynamis
Total
£ million
182.2
156.8
112.3
97.5
96.9
89.9
78.0
77.8
70.7
68.5
1,030.6
£ million
148.6
131.0
130.1
108.0
97.1
95.6
92.7
76.2
72.4
71.8
1,023.5
Further to the disclosures in Note 30 (Investments in subsidiary
undertakings), the table on the following page shows a list of
significant related undertakings of the Group as at 31 December
2023. 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.
Notes to the Financial Statements
33. Material investments and related undertakings
(continued)
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.
Unconsolidated structured entities
The Group holds interests in closed-ended limited partnerships
which invest in underlying companies or securities for the purpose 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
2023
1,729
2022
2,034
1 Included within Investments held at fair value.
The list of significant related undertakings below 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 below for the year ended 31 December 2023 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 below are held at FVPL.
Investment name
1992 Co-Invest (Offshore) LP
3D Opportunities
Browning West Cayman SPV 2 LP
Darwin Private Equity I LP
Firebird New Russia Fund Ltd, Class A1
Fortress Credit Opportunities Fund (C) LP
ICQ Holdings 6 LLC
Infinity SDC Ltd1
JRCM (London) LLP1
LCV Fund III LP
Media Technology Ventures IV LP
RR Capital Partners LP
Sand Grove Tactical Fund LP
Springs Global Strategic Partners Fund – Anchor
Class
Springs Opportunities Fund LP, Series A
Tresidor Credit Opportunities Fund
Xander Seleucus II LP
Xander Seleucus LP
Xander Seleucus Retail LP
Place of registration
Registered address
PO Box 309, Ugland House, Grand Cayman, KY1-1104
Cayman Islands
Cayman Islands Maples Corporate Services Limited, PO Box 309, Ugland House,
Grand Cayman, KY1-1104, Cayman Islands
Cayman Islands Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital
Road, George Town, Grand Cayman KY1-9008, Cayman Islands
Scotland
50 Lothian Road, Festival Square, Edinburgh EH3 9WJ
PO Box 897, Windward 1, Grand Cayman KY1-1103
Cayman Islands
Cayman Islands Maples Corporate Services Limited, P.O. Box 309, Ugland House,
Grand Cayman, KY1-1104, Cayman Islands
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808
500-600 Witan Gate West, Milton Keynes MK9 1SH
27 St James’s Place, London SW1A 1NR
3500 South Dupont Highway, Dover, Kent, Delaware, 19901
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
2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin 1
Delaware, USA
England & Wales
England & Wales
Delaware, USA
California, USA
Delaware, USA
Cayman Islands
Ireland
Cayman Islands 4th Floor, Willow House, Cricket Square, Grand Cayman KY1-9010
2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin 1
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
Ireland
Cayman Islands
Cayman Islands
Cayman Islands
Fair value
£ million
%
interest
30.1
182.2
55.4%
18.2%
22.5
20.7%
0.6
1.3
0.7
23.9%
25.0%
33.3%
25.6 100.0%
23.9%
13.3
50.0%
0.0
31.3%
17.2
38.5%
1.6
20.5%
0.3
20.6 100.0%
30.2%
0.4
70.7
58.2%
89.9 100.0%
41.9%
43.3%
48.8%
0.2
0.0
1.3
1 The Directors consider these entities, in which the Group 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.
RIT Capital Partners plc Report and Accounts December 2023 93
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Independent Auditor’s Report
94 Report and Accounts December 2023 RIT Capital Partners plc
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 2023 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;
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 (collectively the ‘Group’) for
the year ended 31 December 2023 which comprise:
Group
Parent Company
Consolidated Income Statement and Consolidated Statement of
Comprehensive Income for the year to 31 December 2023
Consolidated Balance Sheet as at 31 December 2023
Parent Company Balance Sheet as at 31 December 2023
Parent Company Statement of Changes in Equity for the year to
31 December 2023
Consolidated Statement of Changes in Equity for the year to
31 December 2023
Consolidated and Parent Company Cash Flow Statement for the year
to 31 December 2023
Consolidated and Parent Company Cash Flow Statement for the year
to 31 December 2023
Related notes 1 to 33 to the financial statements, including a
summary of significant accounting policies
Related notes 1 to 33 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 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.
RIT Capital Partners plc Report and Accounts December 2023 95
Independent Auditor’s Report to the Members of RIT Capital Partners plc| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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’ processes 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, stress tests and covenant calculations, covering the period to 30 June 2025, which is 16 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, stress tests
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;
Making enquiries of the Manager 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 Report & Accounts 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 a period assessed by
the Directors, being the period to 30 June 2025, which is 16 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.
96 Report and Accounts December 2023 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
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 investments held at fair value.
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.
Materiality
Overall Group materiality of £35.7m which represents 1% of net assets.
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. All audit evidence was received electronically and
there were regular on-site visits to the Manager’s offices. Meetings with the Manager and the Directors were conducted in person or over
video conferencing. The audit team encountered no difficulties in connecting 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 28 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, in line with our responsibilities on
“Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential
material impact on its financial statements.
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 concluded 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.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a
key audit matter.
RIT Capital Partners plc Report and Accounts December 2023 97
Independent Auditor’s Report to the Members of RIT Capital Partners plc| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information |
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.
Risk
Our response to the risk
Risk of inaccurate recognition of investment income
and gains/(losses) on investments held at fair value
(2023: £139.2m, 2022: £(536.4)m)
Refer to the Audit and Risk Committee Report (pages 52
to 55); Accounting policies (pages 70 to 73); and Notes 2
and 3 of the Consolidated Financial Statements (page 74)
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.
For gains/(losses) on investments held at fair value, on a sample basis,
we have:
The Group’s revenue consists of investment income and
gains/(losses) on investments held at fair value.
recalculated the unrealised gains/(losses), considering the procedures
performed on the valuations where relevant;
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.
agreed purchases and sales of investments during the year to trade
tickets, sales agreements, call and distributions notices, and to the
corresponding cash movements in bank statements; and
recalculated realised gains/(losses) from disposals 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;
agreed accrued dividends at the period end to an external source and
post year end bank statements, where received as at the date of this
report, for occurrence and measurement;
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.
We have also performed journal entry testing and made enquiries of
management in order to address the residual risk of management override.
Key observations communicated to the Audit and Risk Committee
The results of our procedures identified no material misstatements in relation to the risk of inaccurate recognition of investment income
and gains/(losses) on investments held at fair value.
98 Report and Accounts December 2023 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Risk
Our response to the risk
Risk of incorrect valuation of investments held at fair value
(2023: £3,602.0m, 2022: £3,672.1m)
Refer to the Audit and Risk Committee Report (pages 52 to
55); Accounting policies (pages 70 to 73); and Note 13 of
the Consolidated Financial Statements (pages 78 to 87).
Investments held at fair value are material, and are
the primary driver of the Group’s net asset value and
total profit.
The Group’s investment portfolio is diverse and includes
both listed and unlisted investments. Unlisted investments
are held in the form of both direct private and illiquid fund
investments. There is also exposure to investment property
and derivative financial instruments.
The Group’s investments are held at fair value through profit
and loss.
We obtained an understanding of the Manager’s processes and controls for
determining the fair valuation of investments by performing walkthroughs.
Our procedures also 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
in an observational capacity.
We assessed the Manager’s valuation methodology against applicable
reporting frameworks, including UK-adopted international accounting
standards and the IPEV and RICS Guidelines. We sought explanations from
the Manager where there were judgements applied in its application of the
guidelines and assessed their appropriateness.
For listed investments, we verified market prices and exchange rates applied
by the Manager to an independent pricing vendor and recalculated the
investment valuations as at the year end.
For a sample of illiquid fund investments, we:
Fair value is determined using prices readily available on an
exchange where the investments are listed.
confirmed the most recently available fund valuation to third party
statements, including from the GP, fund manager or fund administrator;
Investments in illiquid funds are valued based on latest
information provided by the relevant fund administrator or
investment manager.
The valuation of direct private investments are either
prepared by the Manager or General Partner (‘GP’) (and
assessed by the Manager), and ultimately determined by
the independent Valuation Committee, and are complex
and include estimates and significant judgements. Where
the Manager has sufficient information to undertake its
own valuations, these are prepared in accordance with
International Private Equity and Venture Capital Valuation
(‘IPEV’) guidelines.
The Manager has engaged a specialist to prepare valuations
of their investment property, in accordance with Royal
Institution of Chartered Surveyors (‘RICS’) guidelines.
There is the risk that inaccurate judgements made in
the assessment of fair value could lead to the incorrect
valuation of investments. In turn, this could materially
misstate the Financial assets at fair value in the
Consolidated and Parent Company Balance Sheet, and the
Gains/(losses) on fair value investments in the Consolidated
Income Statement. There is also a risk that the Manager
may influence the judgements and estimations in respect of
unlisted investments in order to meet market expectations.
where the most recently available fund valuation was not at the year end
date, 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; and
challenged the Manager on the IFRS 13 levelling classification of
the illiquid fund portfolio, focusing on those which are considered to
be subjective.
For the valuation of a sample of direct private investments determined by the
Manager, we:
challenged the appropriateness of assumptions made in the underlying
valuation models;
verified inputs to the valuation models to source data;
tested the mathematical accuracy of the valuation models;
assessed the impact of contradictory evidence, to ensure an appropriate
valuation was determined;
for a sub-set of our sample, engaged our valuation specialists to form an
independent range for the key assumptions used in the valuation, with
reference to relevant industry and market valuation considerations; and
considered the impact of the current macroeconomic climate throughout
the procedures performed on the valuation of direct private investments,
by challenging whether the valuation methodologies and assumptions
used remained appropriate.
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Risk
Our response to the risk
For a sample of illiquid fund and direct private investments we:
assessed prior year valuations which were based on unaudited net asset
statements by reference to their respective audited financial statements,
and obtained explanations for all material movements;
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.
obtained and assessed the due diligence performed by the Manager for
new investments made in the year.
With the assistance of our valuation specialists, we formed an independent
range for the fair value of the Group’s investment properties and a sample of
unquoted derivative instruments.
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 in order to assess whether any
material differences arose.
We have also performed journal entry testing and made enquiries of
management in order to address the residual risk of management override.
Key observations communicated to the Audit and Risk Committee
The results of our procedures identified no material misstatements in relation to the risk of incorrect valuation of investments held at
fair value.
In the prior year, our auditor’s report included a key audit matter in relation to the ‘Risk of incorrect valuation of direct private and illiquid fund
investments’. This key audit matter was expanded in the year to cover the risk of incorrect valuation of the entire investment portfolio and our
procedures performed are reported above in the ‘Risk of incorrect valuation of investments held at fair value’.
100 Report and Accounts December 2023 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
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 £35.7m (2022: £37.2m), which is 1% (2022: 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 £34.6m (2022: £36.2m), which is 1% (2022: 1%) of net assets.
We calculated materiality during the planning stage of the audit and then during the course of our audit, we reassessed materiality based on
31 December 2023 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% (2022: 75%) of our planning materiality, namely £26.8m (2022: £27.9m). 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 £1.8m (2022: £1.9m),
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 contained within the annual report.
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.
RIT Capital Partners plc Report and Accounts December 2023 101
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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 30;
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 30;
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 30;
Directors’ statement on fair, balanced and understandable set out on page 51;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 25;
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 24; and
The section describing the work of the audit committee set out on page 52.
102 Report and Accounts December 2023 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 51, 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 international accounting standards, 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 Board’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 the net asset value (‘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 and enquiries of senior management as detailed below.
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 the directors of the Manager and of the Audit and Risk Committee at the planning
and completion stages of the audit; 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.
RIT Capital Partners plc Report and Accounts December 2023 103
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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 six years, covering the years ending
31 December 2018 to 31 December 2023.
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.
Mike Gaylor (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor, London
4 March 2024
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.
104 Report and Accounts December 2023 RIT Capital Partners plc
Independent Auditor’s Report to the Members of RIT Capital Partners plc
Other Information
31 December 2023
(Unaudited)
RIT Capital Partners plc
RIT Capital Partners plc Report and Accounts December 2023 105
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 21
to 23, and the 31 December 2023 consolidated balance sheet, as shown on page 65:
£ 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
Amounts owed to group undertakings
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Borrowings
Provisions
Finance lease liability
Net assets
31 December 2023
Quoted
equity
Private
investments
Uncorrelated
strategies
Net liquidity/
borrowing/
other
Consolidated
balance
sheet
1,357.1
0.1
1,357.2
–
–
–
5.9
1,251.0
33.5
1,284.5
–
–
–
–
754.2
104.5
858.7
34.1
21.6
–
–
1,363.1
1,284.5
914.4
26.8
–
–
2.3
29.1
–
–
–
–
–
1,392.2
1,284.5
–
(0.3)
(21.0)
–
(21.3)
7.8
–
–
–
–
–
–
6.0
0.5
–
–
6.5
920.9
–
(1.8)
(2.1)
–
(3.9)
2.6
1,370.9
1,284.5
917.0
–
–
–
–
–
–
–
–
–
–
(2.9)
(2.9)
1,370.9
1,284.5
914.1
–
(1.0)
(1.0)
–
–
0.1
–
(0.9)
32.6
70.7
0.1
202.0
305.4
304.5
(142.9)
(0.7)
(16.1)
(0.1)
(159.8)
145.6
144.7
(137.9)
(3.0)
–
(140.9)
3.8
3,362.3
137.1
3,499.4
34.1
21.6
0.1
5.9
3,561.1
65.4
71.2
0.1
204.3
341.0
3,902.1
(142.9)
(2.8)
(39.2)
(0.1)
(185.0)
156.0
3,717.1
(137.9)
(3.0)
(2.9)
(143.8)
3,573.3
106 Report and Accounts December 2023 RIT Capital Partners plc
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 plus 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
2023
3,902.1
(204.3)
3,697.8
3,573.3
3.5%
2022
4,171.5
(218.0)
3,953.5
3,721.7
6.2%
Leverage: Leverage, as defined by the UK Alternative Investment
Fund Managers Directive (AIFMD), 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 2023 was 2,426 pence, an increase
of 38 pence, or 1.6%, from 2,388 pence at the previous year end.
As dividends totalling 38 pence per share were paid during the year,
the effect of reinvesting the dividends in the NAV is 1.6%, which
results in a NAV total return of +3.2%.
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 non-recurring costs as well as direct performance-related
compensation from JRCM, as this is analogous to a performance
fee for an externally-managed trust.
£ million
Operating expenses
Adjustments
Ongoing charges
Average net assets
OCF
2023
42.7
(15.0)
27.7
3,614
0.77%
2022
43.6
(7.6)
36.0
4,045
0.89%
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
0.94% of average net assets (2022: 0.88%).
RIT Capital Partners plc Report and Accounts December 2023 107
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Glossary and Alternative Performance Measures
Premium/discount: The premium or discount (or rating) is
calculated by taking the closing share price on 31 December
2023 and dividing it by the NAV per share at 31 December 2023,
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.
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 2023
closed at 1,882 pence, a decrease of 243 pence, or 11.4%, from
2,125 pence at the previous year end. Dividends totalling
38 pence per share were paid during the year, and the effect of
reinvesting the dividends in the share price is 1.8%, which results
in a TSR of -9.6%. The TSR is one of the Company’s KPIs.
108 Report and Accounts December 2023 RIT Capital Partners plc
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
31 December 2022
31 December 2023
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
3,721.7
3,573.3
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
2,388
2,426
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
2,125
1,882
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)
(11.0)
(22.4)
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
(371.3)
43.8
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
37.0
38.0
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:
2 May 2024, 12:00pm:
26 April 2024:
Annual General Meeting.
Payment of interim dividend.
RIT Capital Partners plc Report and Accounts December 2023 109
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | 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
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.
110 Report and Accounts December 2023 RIT Capital Partners plc
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
BNP Paribas S.A., London Branch
10 Harewood Avenue
London NW1 6AA
DEPOSITARY
BNP Paribas Trust Corporation UK Limited
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
Email: investorrelations@ritcap.co.uk
Website: www.ritcap.com
RIT Capital Partners plc Report and Accounts December 2023 111
| Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Contents
Company Highlights
Strategic Report
Chairman’s Statement
Our Purpose, Strategy and Business Model
Manager’s Report
Investment Portfolio
Principal Risks and Viability
Sustainability Report
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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31
37
39
40
52
56
60
64
65
66
67
68
69
70
95
106
107
109
110
111
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 UK Financial
Conduct Authority’s (FCA) Listing Rules. 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 FCA. RIT is classified as an Alternative
Investment Fund (AIF) in accordance with the UK Alternative Investment Fund Managers Directive (AIFMD).
The investment manager, administrator, and company secretary is J. Rothschild Capital Management Limited (JRCM or the
Manager), 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 AIFMD.
This report is printed on Revive 100% White Silk a totally recycled paper produced
using 100% recycled waste at a mill that has been awarded the ISO 14001
certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
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Report & Accounts
for the year ended 31 December 2023
27 St. James’s Place London SW1A 1NR