Report & Accounts
for the year ended 31 December 2022
RIT Capital Partners plc
Report & Accounts for the year ended 31 December 2022
Company Highlights
1
Strategic Report
Chairman’s Statement 3
Our Purpose, Strategy and Business Model 6
Manager’s Report 10
Investment Portfolio 17
Principal Risks and Viability 20
Governance
Board of Directors 27
J. Rothschild Capital Management 30
Corporate Governance Report 31
Audit and Risk Committee Report 44
Directors’ Remuneration Report 48
Directors’ Report 52
Financial Statements
Consolidated Income Statement and Consolidated Statement of Comprehensive Income 57
Consolidated Balance Sheet 58
Parent Company Balance Sheet 59
Consolidated Statement of Changes in Equity 60
Parent Company Statement of Changes in Equity 61
Consolidated and Parent Company Cash Flow Statement 62
Notes to the Financial Statements 63
Independent Auditor’s Report 88
Other Information
Investment Portfolio Reconciliation 99
Glossary and Alternative Performance Measures 100
Historical Information and Financial Calendar 102
Investor Information 103
Directory 104
Contents
Notes
Nothing in this Annual Report & Accounts should be construed as advice to buy or sell a particular investment.
Listing Authority. The Company conducts its affairs so as to qualify for approval as an investment trust, and has been accepted
as an approved investment trust by HM Revenue & Customs (HMRC), subject to continuing to meet the eligibility conditions.
As an investment trust, it is not authorised or regulated by the Financial Conduct Authority (FCA). RIT is classified as an
Alternative Investment Fund (AIF) in accordance with the UK Alternative Investment Fund Managers Directive (AIFMD).
The investment manager, administrator, and company secretary (the Manager) is J. Rothschild Capital Management Limited
(JRCM), a subsidiary of RIT. JRCM is authorised and regulated by the FCA and is classified as an Alternative Investment Fund
Manager (AIFM) in accordance with AIFMD.
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RIT Capital Partners plc Report and Accounts December 2022 1
Company Highlights
Corporate Objective
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 2022
NAV per share total return* -13.3%
Share price total return* -21.5%
CPI plus 3.0% 13.5%
MSCI All Country World Index (ACWI) -12.9%
Key data 2022 2021 Change
NAV per share 2,388 pence 2,794 pence -14.5%
Share price 2,125 pence 2,750 pence -22.7%
Premium/(discount) -11.0% -1.6% -9.4% pts
Net assets £3,722 million £4,390 million -15.2%
Gearing* 6.2% 6.1% 0.1% pts
Average net quoted equity exposure 38% 43% -5% pts
Ongoing Charges Figure for the year* 0.89% 0.72% 0.17% pts
First interim dividend (April) 18.5 pence 17.625 pence 5.0%
Second interim dividend (October) 18.5 pence 17.625 pence 5.0%
Total dividend in year 37.0 pence 35.250 pence 5.0%
Performance history 3 Years 5 Years 10 Years
NAV per share total return* 24.8% 40.9% 139.9%
Share price total return* 5.6% 17.7% 125.3%
CPI plus 3.0% 27.5% 39.7% 73.8%
MSCI All Country World Index (ACWI) 17.7% 35.5% 157.0%
Performance since inception
NAV per share total return
ACWI
CPI plus 3.0%
1988
1993
1998
20
03
20
08
2013
2018
500%
0%
1,
000%
1,50
0%
4,000%
2,50
0%
2,
000%
3,
000%
3,50
0%
2022
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 pages 100 and 101. The Group’s designated APMs (denoted above with an *) are the NAV per share total
return, share price total return, gearing and the ongoing charges figure.
RIT Capital Partners plc
Strategic Report
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RIT Capital Partners plc Report and Accounts December 2022 3
Chairman’s Statement
Background and Performance
2022 was the most difficult year for financial markets for
more than a decade. The global economy was affected
by significant supply shocks, with particularly sharp
rises in energy and raw material prices. The consequent
resurgence of inflation was met with a dramatic
tightening of monetary policy. Businesses across a range
of sectors faced increased costs of materials, labour
and capital, impacting margins at a time when revenue
growth has been under pressure as economic activity has
faltered, consumer confidence and purchasing power has
waned and the risk of recession has risen. At the same
time, the conflict in Ukraine has given rise to fundamental
geopolitical changes in the relatively stable world order of
recent decades.
In financial markets almost all asset classes saw
declines. The S&P 500 and the NASDAQ closed the year
down -18% and -32% respectively, while Emerging
Markets recorded a loss of -16%, Europe -10% and the
FTSE 250 -17%. Fixed income markets were no less
adversely affected; long-term US Treasuries lost -29%
and UK government bonds -40%. Corporate bonds
also showed marked declines as both risk-free rates
and credit spreads reacted to tighter monetary policy.
It was the first time in 150 years that both US stocks
and bonds were down by more than 10%. Furthermore,
these year-on-year figures, stark though they are, do
not tell the whole story of 2022, which saw significant
shifts in investor sentiment and money flows at different
points of the year, resulting in elevated levels of volatility.
A good illustration of this in the UK was sterling, which
started the year at an exchange rate of 1.35 against the
US dollar, saw an extraordinarily rapid fall to a low of 1.04
in September, down 23%, before recovering some 16%
from the lows to end the year at 1.21.
Our NAV per share was not immune to the market
declines, and we ended the year at 2,388p per share. This
represented a -13.3% total return (including dividends)
for the year, broadly in line with the MSCI ACWI (50%£)
which fell by -12.9%. While any decline in NAV is
uncomfortable, it is important to restate that our aims
and objectives are long term. In order to achieve them,
we must ensure that we have enough capital deployed
in those areas which will support future growth, while
aiming to mitigate as far as possible participation in down
markets. This we seek to achieve by taking a holistic
and careful approach to portfolio construction, holding a
diversified portfolio of assets, including those which are
not typically correlated with equity markets, and which,
through the cycles, are capable of generating healthy
returns. These considerations have been the principal
determinants of our portfolio composition for a number
of years, and we believe that this approach remains the
most effective means of achieving our corporate objective
over the long term. Indeed, over the last 10 years, our
NAV per share growth (including dividends) was 140%.
Equally, over more recent years, incorporating both up
and down markets, our NAV has grown by 24.8% over
three years compared to 17.7% for the ACWI and 27.5%
for CPI plus 3%. And over five years, our NAV total return
was 40.9% compared to 35.5% for the ACWI, and
39.7% for our inflation index. Since inception, our share
price total return has averaged 11. 2% per annum against
markets of7.0%.
A key driver of RIT’s long-term track record has been
private investments, which, whether direct investments
or commitments to funds, have always been an
essential part of our portfolio. These are, by design,
multi-year investments, which we are not forced to
sell to fund redemptions; we held an investment in the
Economist for 22 years, realising 27x our capital. More
recent investments such as Coupang – one of our most
successful ever private investments – materially boosted
returns. Over 2020 and 2021 private investments added
around 34% to total NAV; it is this growth in their value
which has driven the increased proportion of NAV which
they represent. In 2022, the sharp correction in public
markets, and in particular tech markets, has meant that
we have written down a portion of these significant gains.
During the course of the year, the lower value of our
private direct investments and fund holdings detracted
from the NAV by some 6%. However, on a three-year
basis, we estimate that our private investments added
approximately 26% to total NAV – a strong return, and
against the backdrop of both positive and negative years
for markets. Over this period, we also received in the
order of £500 million of distributions from this portfolio.
A key feature of private investments is, of course, the
challenge in valuing positions which lack a daily traded
share price. Our independent Valuation Committee has
Sir James Leigh-Pemberton
O
ur aims and objectives are long term...
Over the last 10 years our NAV per
share growth (including dividends) was
140%... Since inception in 1988, our share
price total return has averaged 11.2% per
annum against markets of 7.0%.
4 Report and Accounts December 2022 RIT Capital Partners plc
devoted significant time to ensuring that our investments
are marked at levels which reflect both changes in
market conditions and underlying operating performance.
Ihighlighted the rigorous efforts we made in the first half of
the year to ensure our direct investments were fairly valued,
and we have continued this approach at the year end.
For our private fund investments, we are more naturally
reliant on the external managers or ‘GPs’. While there is a
well-understood, industry wide time-lag in their reporting,
our NAV will always reflect the latest available information.
As importantly, our Manager undertakes rigorous due
diligence before committing to these funds–all of which
are required to provide us with fair value.
Critically, the majority of our direct portfolio companies
continue to exhibit strong operating performance.
Our funds exposure is also targeting areas uniquely
positioned to capture some of the most innovative and
transformative structural trends that are underway,
and the great bulk of our investments in funds are with
managers with outstanding track records with whom we
have long standing relationships developed over many
years. Deploying our permanent capital in a diversified
portfolio in these profitable areas has been, and
remains to this day, a core ingredient in RIT’s long term
performance track record.
While private investments are important, they represent
only one part of our diversified multi-asset portfolio which
is constructed and managed by JRCM on a holistic,
top-down basis. For example, a higher allocation to
the digital transition theme in our private investments
was deliberately offset with a reduction within our
quoted equity portfolio. Furthermore, our pessimistic
outlook for markets also led us to run with the lowest
quoted equity exposure for more than a decade. Within
this book, we were more proactive than usual, with a
continued shift from a bias towards long-duration growth
assets, to more value and reflationary assets. These
changes were broadly accretive to performance, with
some standout performers including our exposure to
Japan value-oriented managers as well as to the energy
transition theme. Exposure management is also deployed
in this book, with hedges against tech markets helping to
mitigate some of the declines.
Our absolute return and credit positions held up
reasonably well, notwithstanding the widespread credit
market declines, reflecting the lower-correlation nature of
this exposure and therefore the diversification benefits for
the overall portfolio.
Within currencies, the exposure required careful
management through the volatility, and overall the book
made a meaningful positive contribution. The main
driver was holding around half of the portfolio outside a
depreciating sterling. We continue to hold gold, which,
notwithstanding a late comeback, in light of the shift
in inflation expectations, perhaps underperformed
expectations. We do continue to view it as being capable of
providing both portfolio diversification as well as being in a
position to benefit from a number of wider secular trends.
Throughout 2022, your Board continued to review the
strategy and portfolio composition in the context of our
unchanging corporate objective. The fundamentals of
the multi-asset diversified approach, and our long-term
aims, have not altered. We continue to believe that,
notwithstanding the declines we saw in 2022, this
remains the right approach for our shareholders and is
likely to generate the superior returns through the cycles
that RIT is renowned for producing.
Share capital and dividend
Throughout your Company’s history, the discount or
premium at which our shares have traded relative to our
NAV has seen wide variations. During 2022, we saw the
discount widen, in part perhaps reflecting the monthly
nature of our reporting during times of volatility, and
also perhaps some more widespread concerns around
private equity generally. Where not precluded by being in
a closed period or approaching an imminent publication
of NAV, we have continued seeking to capture value for
shareholders by buying back shares as we approached a
high single-digit discount. Over the year, we bought back
some 515,000shares accretively at a cost of £11.0 million
and by the year end, we held some 690,000 shares in
treasury. In addition, we have enhanced our reporting,
providing additional commentary outside of our main six-
monthly cycle.
Our corporate objective is to deliver long-term capital
growth. However, we recognise the value to shareholders
of a modest income yield; our policy remains to maintain
or increase the dividend, subject to the overriding capital
preservation objective. We paid a total dividend of
37pence per share during 2022 and intend to increase
the dividend again in 2023 to 38 pence per share,
representing a 2.7% increase. The dividend will be paid as
normal in equal instalments in April and October, funded
from our significant reserves.
Governance and employees
During 2022 we welcomed three new non-executive
Directors to the Board. Jutta af Rosenborg was appointed
in May, and Vikas Karlekar and Cecilia McAnulty in
August. These appointments further strengthened the
skills, experience and knowledge of the Board. We
appreciate the benefits which diversity of background and
experience brings to your Board, and I am pleased we
comply with both the FCA’s new requirements and the
recommendations of the Parker and Hampton-Alexander
Reviews in terms of the composition of the Board.
After nine years’ dedicated service on the Board, Mike
Power will not stand for re-election at the upcoming
AGM. I would like to thank Mike for the expertise, energy
and diligence he has devoted to his role as a Director
and for his significant contributions to the Company over
this time, including chairing both the Audit and Risk,
and Valuation Committees. On Mike’s retirement and in
Chairman’s Statement
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RIT Capital Partners plc Report and Accounts December 2022 5
Chairman’s Statement
accordance with the Board’s succession planning, Jutta af
Rosenborg will assume the role of Chair of the Audit and
Risk Committee and Maxim Parr will assume the role of
Chair of the Valuation Committee.
ESG integration remains a core objective of the Board
and we are continuing to develop initiatives aimed at our
stakeholders, and making a positive impact on the society
and the environment we work in. JRCM’s Responsible
Investment Framework & Policy is fully integrated into our
investment processes and is kept under regular review,
and as a signatory of the UN Principles of Responsible
Investment (UN PRI), we look forward to submitting our
first report under this framework in 2023.
Many commentators have highlighted the impact
that the widespread challenges I described earlier
can have, and are having, on people’s mental health.
This is important to us, and we have invested time
with our Manager in ensuring that our employees are
appropriately supported. Steps taken in this regard
include a cost-of-living contribution for employees
who would benefit most from a one-off payment, and
targeted support for staff well-being. JRCM colleagues
have also been engaged in activities to help support our
community with charitable donations, conscious of our
wider responsibilities.
Our employees and my Board colleagues are central to
our long-term success, and once again, I would like to
thank them all for their hard work and commitment during
another particularly challenging year.
Outlook
In last year’s statement written in early 2022, I highlighted
some of the challenges we may see as a result of the
removal of many of the extraordinary underpins for
markets of recent years. It is not clear at all that we
are through the fundamental transition entailed by the
end of low interest rates. While the reintroduction of
more rational pricing for risk and capital is welcome, the
consequences of such a significant shift (and at such a
fast pace) are unlikely to be short lived. The existence
of ‘free money’ for so long, will no doubt have created
widespread embedded distortions, which will take time
to resolve. Low rates of economic growth, continuing
pressure on both corporate earnings and consumer
confidence, and limited scope for fiscal stimulus are likely
to remain with us for some time, so that the conditions
for a sustained recovery in markets appear at present to
be remote.
In this environment we expect to continue with a relatively
cautious exposure to quoted equities, while at the same
time remaining positive about the opportunities for the
long term which will emerge in stocks and alternatives
such as the dislocated regional credit markets. Where we
see interesting investments, we will be very selective,
and the wide network we can call upon, as well as our
Manager’s disciplined due diligence, will be important.
While these are challenging markets, we have managed
through them before, and we remain confident that our
approach is the right one for RIT’s long-term performance
and for our shareholders.
Sir James Leigh-Pemberton
Chairman
6 Report and Accounts December 2022 RIT Capital Partners plc
Our Purpose, Strategy and Business Model
Purpose and strategic aims
We consider our purpose and strategic aims to be clearly
set out in our Corporate Objective:
“to deliver long-term capital growth, while preserving
shareholders’ capital; to invest without the constraints
of a formal benchmark, but to deliver for shareholders
increases in capital value in excess of the relevant indices
over time.”
This has reflected our aims since Lord Jacob Rothschild
first led what was then called the Rothschild Investment
Trust in the 1970s. Our purpose as an investment
company is therefore to provide diversified portfolio
management on behalf of our shareholders to achieve
this objective.
However, as we differ from many conventional
investment trusts who always aim to be fully invested in
quoted equities, this section provides further clarification
of what we are trying to achieve for shareholders
overtime.
The most important objective is long-term capital
growth while preserving shareholders’ capital. The aim
of our investment approach is to protect and enhance
shareholders’ wealth over time.
There may be periods when we will place protection of
shareholders’ funds ahead of growth, but we believe
that active management of equity exposure, combined
with early identification of opportunities and themes,
while investing across multiple asset classes, is more
likely to lead to long-term outperformance. We 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 10.7% per annum, a meaningful
outperformance of global equity markets at 7.0%. Over
the same period the total return to shareholders was
11.2% per annum.
Investment approach
The strategic aims are expressed in more practical terms
in our Investment Policy:
“to invest in a widely diversified, international portfolio
across a range of asset classes, both quoted and
unquoted; to allocate part of the portfolio to exceptional
managers in order to ensure access to the best external
talent available.”
This policy guides our Manager and subsidiary,
J.Rothschild Capital Management Limited (JRCM) as it
manages your portfolio. So, while we have a core equity
bias, we typically invest your portfolio across multiple
asset classes, geographies, industries and currencies.
This has been the basis of our approach over many years
– combining thematic investing with individual securities,
and private investments with public stocks. The long-term
success of your Company has been the result of active
management of a distinctive blend of stocks, private
investments, equity funds, real assets, and absolute
return and credit, all overlaid with currency positioning
and macro exposure management.
We believe the extent of our global reach and unique
network allows us to maximise our ability to deploy
capital effectively. Our Manager’s in-house investment
team works closely with core external managers,
enabling us to invest in funds which may be closed
to new investors, and cannot be accessed by a retail
investor. In addition, this strong network provides access
to intellectual capital and co-investment opportunities.
This aspect of our model is key to our ability to identify
and deliver value from differing sectors, markets and
assets. And while access to such specialist managers
involves paying fees, the level of these fees is considered
carefully as part of the investment decision and, if
warranted, given our focus on net returns, is one that we
are comfortable paying.
Above all, our approach is long term. The permanent
capital structure of an investment trust compared
to open-ended funds, means we do not suffer from
liquidity-driven pressures to fund redemptions. We can
therefore hold our investments in both public and private
markets over an extended period and choose to realise
them at the optimal time.
Another key facet of the investment approach is risk
management. The Board establishes and oversees
the risk appetite through regular monitoring of asset
allocation and security limits. These are intended to
allow JRCM to efficiently and effectively manage
the portfolio in line with the Corporate Objective.
The Manager has developed a sophisticated risk
management approach, onwhich it reports regularly to
the Board. This incorporates quantitative and qualitative
O
ver 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…
Indeed, since your Company’s listing in 1988
we have participated in 74% of monthly
market increases but only 41% of market
declines.
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RIT Capital Partners plc Report and Accounts December 2022 7
Our Purpose, Strategy and Business Model
measures, aswell 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 20 to 25.
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 10 to 16.
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. This Committee is led by Francesco
Goedhuis as Chairman and Chief Executive Officer, and is
responsible for day-to-day operations (see page 30).
Board of
Directors
RIT Capital Partners
plc
J. Rothschild Capital
Management Limited
Executive
Committee
Investment management,
administration and company
secretarial
Alternative
Investment
Fund
Alternative
Investment
Fund Manager
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 on ensuring that the
investment approach is suitable for achieving our
Corporate Objective, and on monitoring the performance
of the Manager. In order to do this, we receive regular
and detailed reports covering investment performance,
risk, finance and operational matters.
The employees of our Manager and SHL are critical to our
ability to meet all of the objectives of the Company. A key
part of the monitoring of the Group is ensuring that the
Manager is appropriately incentivised to deliver sustained,
risk-adjusted returns and is able to attract, retain and
develop a top quality team which operates in accordance
with our core values, within a culture of high performance.
Our core values of respect, dignity and integrity are
evidenced by the Group’s five business principles
of collaboration, enterprise, efficiency, effective
communication and professional ethics, which are
regularly communicated and reinforced through the
Group’s recruitment and appraisal processes. JRCM
monitors the health of its culture by assessing regularly
how well these principles are being applied, and the
Board receives regular reports on this topic.
The Group has a clear and proactive approach to regular
employee engagement, which was particularly important
during remote working and the many other challenges of
the last few years. The Corporate Governance Report on
pages 31 to 43 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 10
Directors, of which six were men and four women. Within
our subsidiaries, the employee base comprised 45 men
and 17 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 35, 36 and 55). The Board recognises
I
n 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
aspossible.
8 Report and Accounts December 2022 RIT Capital Partners plc
Our Purpose, Strategy and Business Model
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 the 2023 dividend
and Board diversity and succession planning. Our current
Board composition complies with the recommendations
of both the Parker Review and the Hampton-Alexander
Review, and also meets the requirements of the FCA’s new
listing rules in relation to diversity. ESG and sustainability will
continue to help inform our approach to this area.
The Group has relationships with a number of suppliers
and service providers which play an important role
in enabling us to operate our business efficiently.
The Groups’ overarching policy with respect to these
relationships is that they should be managed so that
they are both sustainable and mutually beneficial over
the medium term, and deliver value for money for our
shareholders (see page 35).
ESG and sustainability
The Board believes that consideration of ESG factors
is important for the delivery of sustainable financial
returns from our portfolio, and for the preservation of
the value of our shareholders’ capital. In respect of
our internal operations, we aim to be good corporate
citizens, to apply robust governance and minimise our
environmental impact. Over the past 12 months, your
Board has continued to devote time to enhancing our
ESG capabilities and ensuring that appropriate policies
are in place. 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
of responsible investment. ESG factors form part of the
due diligence undertaken by JRCM prior to selecting all
investments and continue to be monitored throughout
our holding of the investment. Further information is set
out on pages 35, 36, 45, 53 and 54.
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RIT Capital Partners plc Report and Accounts December 2022 9
O
ur Corporate Objective...informs the
Board’s desire to seek healthy, risk
adjusted returns over the long term and
through the cycles, with careful attention
to capital preservation, and mindful of
the Company’s reputation as a responsible
fiduciary of shareholder capital.
Our Purpose, Strategy and Business Model
Measuring performance and KPIs
While we believe our success can only truly be assessed
over the long term, we also recognise that providing
shareholders with a comparator against which to
measure our performance over shorter periods is helpful.
The strategic aims highlighted on this and earlier pages,
reflect the desire to produce real capital growth with
capital preservation and to exceed markets over time.
These are reflected in the following targets or key
performance indicators (KPIs):
1. 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 JRCM is tasked with managing the portfolio
to deliver a NAV return, ultimately, the return to our
shareholders is through share price growth and dividends.
We therefore also consider the TSR as our third KPI.
Incentive structure
Our approach to remuneration incorporates the Directors’
Remuneration Policy as well as specific structures
within JRCM and SHL designed to attract, motivate and
retain the high-quality individuals we need to deliver our
long-term strategic aims and sustainable success.
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 ‘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). 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 before they can besold.
Further details of remuneration are provided in the
Directors’ Remuneration Report on pages 48 to 51.
Shareholder communication and AGM
While this report forms a core part of the annual
communication to shareholders, there are many additional
ways to remain informed. Reflecting the nature of our
portfolio, including the allocations to external managers
(many of whom report monthly performance), we publish
a monthly NAV as soon as reasonably practicable following
the month end. Shareholders are encouraged to visit our
website, www.ritcap.com, which provides regular updates of
performance and exposure including our monthly factsheets.
I look forward to meeting as many of you as possible at our
AGM on 26 April. 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 2022 RIT Capital Partners plc
Manager’s Report
Overview and performance highlights
In 2022, financial markets suffered the worst year since
the global financial crisis. Most major equity indices saw
high double-digit declines, driven by multi-decade high
inflation, leading to unprecedented global monetary
tightening. This occurred amidst a backdrop of geopolitical
uncertainty, a war in Ukraine, and a stifled Chinese
economy. In the UK, the Bank of England was forced into
emergency bond-buying to stabilise the government bond
market, after the turmoil of September’s mini-budget.
With investors concerned about both inflation and a
growth slowdown, the swings in market sentiment have
been extreme.
Amidst this unstable backdrop, the NAV total return was
-13.3%, broadly in line with the ACWI (50% £) which was
down -12.9% and below the ‘inflation plus’ hurdle (CPI
plus 3.0%) which hit 13.5% for the year.
In years such as this, investing through market cycles can
feel uncomfortable, but we remain confident in our long-
term investment approach, which is supported by our
longer-term performance. Over three years, our NAV has
outperformed our equity index, and over five years, it has
outperformed both reference hurdles, while maintaining
lower volatility than the market. Since inception, we have
participated in 74% of the monthly market increases but
only 41% of the declines.
Overall, the key drivers of performance for the year were:
• a decline in the value of our private investments,
largely as a result of a reset in markets and public
company comparables;
• our low quoted equity exposure, which provided
some mitigation against the broad declines in equity
markets;
• within the quoted equity book, our exposure to China
was impacted by the government’s policy decisions,
such as zero-covid and property deleveraging;
• a helpful shift in our quoted equity book from
growth assets into assets with a reflationary focus,
driven both by conviction and the desire for further
diversification;
• our investment with Eisler Capital, which was down
-17. 7 %, and which we redeemed at the year end; and
• the allocation of the portfolio’s currency exposure
outside of sterling, notably to the US dollar, which
rallied as investors searched for a safe haven amidst
the enduring volatility.
In order to assist shareholders with their understanding
of our portfolio, we have increased the level of disclosure
and provided more detailed descriptions of our underlying
exposures.
Asset allocation and portfolio contribution
Asset category
31 December 2022
% NAV
2022
Contribution %
31 December 2021
% NAV
2021
Contribution %
Quoted equity 35.1% (6.7%)
1
42.6% 1.2%
1
Private investments 40.7% (6.2%) 36.5% 22.4%
Absolute return and credit 20.1% (0.6%) 17.7% 2.1%
Real assets 1.8% (0.2%) 1.5% (0.1%)
Government bonds and rates 0.0% (0.9%) 0.0% 0.3%
Currency 1.1% 2.1%
2
0.5% (0.8%)
2
Total investments 98.8% (12.5%) 98.8% 25.1%
Liquidity, borrowings and other 1. 2% (0.8%)
3
1.2% (1.5%)
3
Total 100.0% (13.3%) 100.0% 23.6%
Average net quoted equity exposure
1
38% 43%
1
The quoted equity contribution reflects the profits from the net quoted equity exposure held during the period as well as the costs of portfolio
hedges. The exposure can differ from the % NAV as the former reflects notional exposure through derivatives as well as estimated adjustments
for derivatives and/or liquidity held by managers.
2
Currency exposure is managed centrally on an overlay basis, with the translation impact and the results of the currency hedging and overlay
activity included in this category’s contribution.
3
This category’s contribution includes interest, mark-to-market movements in the fixed interest notes and expenses.
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
|
Company Highlights
|
Strategic Report
|
Governance
|
Financial Statements
|
Other Information
|
RIT Capital Partners plc Report and Accounts December 2022 11
Manager’s Report
Quoted equity
This category includes directly-held stocks, long-only
funds, equity hedge funds and our quoted derivatives,
used predominantly to manage exposures. The quoted
equity portfolio detracted -6.7% from the overall NAV
return this year. The main influences were as follows:
• our recent investment with a Japanese manager,
3D, was the largest positive contributor to our NAV,
as they capitalised on the improvement in Japan’s
corporate governance;
• a shift into more value-oriented holdings, epitomised
by Discerene, who produced double-digit returns.
Our investment with Morant Wright also added to our
NAV;
• funds invested in China lagged global markets,
primarily due to the zero-covid policies that negatively
impacted the economy. Our core Chinese holding,
Springs Opportunities, underperformed given its tilt
toward consumer facing companies;
• in light of the share price volatility, we reduced the
size of our Coupang position, and notwithstanding
strong fundamentals, its share price weakened.
Nevertheless, we estimate this investment added
around 7% to NAV over the last three years (including
the direct hedges we deployed post IPO); and
• finally, our risk management strategy made an
impact, as growth and technology-related hedges
partially mitigated market declines.
Quoted equity portfolio by category
Hedge funds, 20%
Stocks, 36%
Long-only funds, 44%
Note: This chart includes the notional exposure from single stocks
held via equity swaps and excludes portfolio hedges.
We maintained an average net quoted equity exposure of
38% for the year, towards the low end of the book’s 10-year
historical range, helping a more defensive stance overall.
We proactively shifted our exposures from growth assets,
such as technology, towards value-oriented assets that
were poised to perform better in a more reflationary
and volatile environment. This also provided further
diversification to the overall portfolio, by balancing the
weight of our more growth-focused private investments
book. Additionally, to further insulate the overall NAV
from the increased volatility in technology markets, we
tactically increased some of the hedges we had in place.
The quoted equities portfolio has been shifting
towards single stock opportunities, which arise from
the indiscriminate selling during extreme swings in
sentiment. These are opportunities where we can
consider there to be healthy long-term returns, with low
risk of permanent capital losses.
An example of such an investment made amidst market
volatility was Builders FirstSource, a distributor of
homebuilding products, which we purchased at less
than five times free cash flow. As the largest player in
a highly fragmented industry, it has scale advantages
and geographic reach, which, combined with innovation,
should help the company to grow above its industry
peers. We also believe there is a healthy margin of safety
from its scale, free cash flow generation, balance sheet
strength, and a constructive approach to shareholder
returns.
To illustrate the changes we made in portfolio composition
and the opportunity set we see ahead of us, the tables
below compare the top three positions in the quoted
equity portfolio between December 2021 and 2022:
Quoted equity – top three positions
Name Description
2022 %
of NAV
HCIF
Biotech 3.5%
3D Opportunity Japan value 3.5%
Discerene Global value 3.2%
Name Description
2021 %
of NAV
Coupang
Retail 4.3%
BlackRock Strategic Equity Long-short equity 3.3%
Springs Opportunities China 3.0%
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
12 Report and Accounts December 2022 RIT Capital Partners plc
Manager’s Report
We believe there is a compelling opportunity for
outperformance in certain Japanese stocks, which exhibit
a combination of low valuations and momentum from
the improvement of corporate governance. These stocks
can also represent a rare opportunity set where global
macro factors do not override fundamental, bottom-up
considerations.
Biotech remains a structural theme for us. An uptick in
corporate activity in the latter half of the year brought
some renewed optimism to the sector, and we also saw
the start of a new product cycle. As a result, during bouts
of sector price weakness, we increased our allocation to
this theme.
It remains a fertile environment for stock picking in the
‘value’ sector. We express this view through our own
stock positions as well as via a concentrated portfolio
with Discerene. This fund focuses on businesses with
strong defensive moats, robust cashflows and cheap
valuations; in the past 18 months, two of the fund’s top
five positions have been acquired, while a third position
has received an acquisition offer.
While we partially trimmed our exposure to China during
2022, we continue to see potential benefits from the
government’s structural economic goals. Investing in the
right areas and with the right partners remains critical.
In terms of geographical allocation, while our quoted
equity book continues to retain a meaningful exposure
to the US, the holdings in the region tend to be highly
idiosyncratic. For example, our exposure to the biotech
theme is expressed primarily via US listed companies.
The remainder of the quoted equity book is diversified
between Asia, Japan and Europe.
Quoted equity portfolio by region
US, 46%
Japan, 18%
Asia, 20%
Europe, 13%
Other, 3%
Private investments
Private investments are a key element of our long-term
investment strategy and have been a core part of our
historical track record. The private investment portfolio
represented 40.7% of NAV at year end, split between
11.9% in direct investments and 28.8% in third-party
diversified funds. The book detracted -6.2% from the NAV
performance for the year, split broadly equally between
direct and fund investments. This represents a decline of
around 17% for the year, compared to the S&P 500 which
lost 18% and the NASDAQ which lost 32%.
Despite some mark-to-market volatility in the short term,
over the long term the private investment book remains
an important returns contributor for the RIT shareholder.
This includes both our direct and fund investments,
where our unique network and the privilege of our
patient, permanent capital base have allowed us to
access high quality assets which can generate attractive
returns over time. By way of example, in the last 10
years, new private direct and fund commitments have
collectively delivered a compound return of approximately
25% per annum.
After very strong performance in 2020 and 2021, the
mark-to-market decline in the direct investments for 2022
followed a rigorous and detailed review of the valuation
of the individual investments by RIT’s independent
Valuation Committee. The decline was largely driven by
the re-rating of public markets during the year, partly
offset by continued strong performance for many of our
companies, including some third-party funding rounds
at higher valuations. For example, Motive (previously
called KeepTruckin’) continues to deliver strong recurring
revenue growth, and raised $150 million in new equity
during 2022 at a 20% higher valuation to the previous
funding round, one year earlier.
We remain confident about the future prospects for this
book, which is diversified across a range of industry
sectors, and with businesses at different stages of
maturity. For example, the majority of our top 10 holdings
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
W
e remain confident in our long-
term investment approach, which is
supported by our long-term performance.
Over three years our NAV has outperformed
our equity index … over five years it has
outperformed both reference hurdles.
|
Company Highlights
|
Strategic Report
|
Governance
|
Financial Statements
|
Other Information
|
RIT Capital Partners plc Report and Accounts December 2022 13
Manager’s Report
are profitable, and additionally, the majority of the book’s
investments also benefit from a degree of structural
protection. In the case of our largest holding, nearly 80%
of our initial capital was deployed via a convertible debt
instrument designed to provide downside protection as
well as equity upside.
Private direct book by sector
Information technology, 14%
Industrials, 19%
Financials, 30%
Consumer discretionary, 8%
Healthcare, 10%
Communication services, 11%
Consumer staples, 1%
Real estate, 7%
The private fund book detracted -3.2% from the NAV
performance for the year, with decreases in valuations
largely reflective of the broader market volatility.
That said, the book continues to generate long-term
value for our shareholders. In the last 10 years, across
all new private fund commitments, we invested
approximately £0.6 billion and have already received
back in distributions around half this amount, with
a further £0.9 billion in remaining value at the year
end. This equates to a Total Return Multiple (TRM) of
around 2.0x. This is a common performance measure
for private funds and means that for these funds, the
aggregate of distributions we have received plus the
remaining NAV represented twice the capital we had
invested, or an overall profit of around 100%. Taken
together, these funds have delivered a compound return
of approximately 22% per annum over the 10 years to
31December 2022.
The portfolio is diversified across styles, managers and
fund ‘vintages’ (i.e. the year the fund started making
investments). It includes funds early in their life cycles
(where they are predominantly deploying capital) and
those later in their life cycle (where they are typically
generating realisations from disposals). Funds which
are past their main investment period (typically five
years from launch), had invested £0.7 billion, distributed
£1.0billion (around 140% of the capital we had invested)
and with £0.4billion remaining, this represents an
approximate 100% profit. Over more recent years,
the almost £0.3 billion we have invested into 2020 to
2022 vintage funds has already produced a 1.3x return,
notwithstanding the funds being earlier in their lives.
Private fund book by vintage year (%,TRM)
2016 – 2014
Prior
2019 – 2017
2022 – 2020
13%,
1.6x
32%,
1.3x
26%,
3.4x
29%,
2.0x
We are taking a selective approach to new commitments,
with 2022 commitments of around £89 million, down
substantially from previous years. The portfolio was self-
funding with new capital calls of approximately £95 million
funded out of distributions of the same amount.
As of the reporting date, 94% of our private fund
positions were held at the GP’s September valuations
and 6% at December. This is consistent with the industry,
which as standard reports on a quarter’s lag. These
were the latest valuations available, and we adjusted
the September marks for subsequent investments,
distributions and currency moves between 30 September
and the year end. While the performance overall was
negative during the year, we saw a wide range of
performance, with many of the funds generating positive
returns, reflecting the diverse nature of the underlying
exposures.
We have provided further granularity on the diversity of
strategies within our private fund holdings. As shown
below, around 60% of the book consists of growth
equity, meaning funds where the underlying holdings
are primarily more established, mature businesses, but
which continue to generate robust growth. Approximately
18% of the book consists of traditional private equity
strategies, and around 16% are focused on investing in
businesses at the earliest stages. The balance of around
6% of the book consists of life sciences holdings, which
often have their own unique life cycle as distinct from
other industries.
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
14 Report and Accounts December 2022 RIT Capital Partners plc
Manager’s Report
Private fund book by strategy
Private equity, 18%
Early stage, 16%
Life sciences, 6%
Growth equity, 60%
Absolute return and credit
The absolute return and credit portfolio showed modest
declines overall, and demonstrated a dispersion of
returns across styles and managers, a key rationale in our
allocation to this category.
Our credit-focused funds held their value against
the sharp downdraft in credit markets, with several
managers’ producing healthy alpha. We also implemented
credit hedges, which benefited the book. Of note, ARCM,
an Asian credit specialist, successfully navigated the
market volatility and produced double-digit returns.
The performance of our macro managers was more mixed
with a wide range of returns. Our investment with Eisler
Capital was down -17. 7 % for the year, and we redeemed
our fund at the year end.
During the year, a combination of higher risk-free rates,
indiscriminate mutual fund selling and low appetite from
investment banks to refinance corporates, provided us an
opportunity to deploy capital in European credit markets.
These investments have double-digit yields for short
duration, with moderate loan-to-value, and, thus, a low
likelihood of permanent capital impairment. We have a
segregated account with our partner, Tresidor, to exploit
this opportunity, and believe the upcoming year will
provide additional chances to deploy capital into credit, as
corporations need to refinance their capital structures.
Real assets
This category detracted slightly from performance this
year, with gold and our investment properties slightly
lower. While gold disappointed somewhat given the shift
in the inflationary regime, we remain supportive of the
role it can play in our portfolio. There is a strong demand
for the commodity from emerging market central banks
as they diversify out of sanction-prone fiat currencies.
Furthermore, the precious metal can also serve as a
good asymmetric hedge to a potential central bank
‘pivot’, a reversal of a strong US dollar, or more generally
against the increasing probability of broad-based market
dislocation.
Currencies
With a global investment mandate, we consider currency
exposures a core part of our portfolio construction. As
with most asset classes, the currency markets were not
immune to 2022’s high levels of volatility, with sterling
particularly impacted during September. The portfolio
benefitted from the diversity of our exposure and active
currency management (as we shifted out of sterling),
which contributed 2.1% for the year, mainly driven by the
strength of the dollar, acting as a safe haven in turbulent
markets.
Currency exposure (% of NAV)
53.0%
30%
68.7%
24.5%
18.9%
6.4%
0.5%
2.9%
11.7%
9.0%
Sterling
US dollar
Euro
J
apanese yen
Other
31 December 2022
31 December 2021
0% 10% 20% 30% 40%50% 60%70% 80%
4.4%
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.
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
I
f we consider the past 20 years of annual
NAV returns, not only have we never lost
money on a rolling three-year basis, but we
have generated healthy growth averaging
10.2% per annum. It is this combination
which sets us apart from the majority of
other trusts.
|
Company Highlights
|
Strategic Report
|
Governance
|
Financial Statements
|
Other Information
|
RIT Capital Partners plc Report and Accounts December 2022 15
Manager’s Report
Debt and leverage
Having refinanced two of our revolving credit facilities
(RCFs) during the year, at the year end we held drawn
borrowings of £236.2 million, with a further £90million
committed and undrawn. The fair value of RIT’s
£151million loan note liability decreased over the year as
gilt yields increased, triggering a mark-to-market gain of
approximately £35million.
We continue to use derivatives where appropriate,
principally to protect the NAV from unwanted exposures.
Currency hedging, where we typically increase our levels
of sterling to our desired weight, thus reducing the
currency translation risk, is a prime example of our use of
derivatives to protect the overall portfolio. Additionally, we
deploy hedges to limit potential downside and to protect
unrealised gains made on profitable investments. We
also use derivatives to enhance returns through efficient
structuring.
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. At the
year end, we employed 49 people in JRCM and 13 in
our sister company, SHL. SHL maintains and manages
the investment property portfolio, including Spencer
House as well as other properties in St. James’s, and also
operates a profitable events business.
2022 marked the return of the ‘new normal’ with
regard to working arrangements, where, thanks to the
professionalism and dedication of our staff, we have
firmly embedded our hybrid and flexible working policies.
It remains a priority for JRCM to minimise the effect of
costs on NAV and shareholder returns and we therefore
strive to manage the portfolio as efficiently as possible,
taking into consideration the direct costs of the Group, as
well as the fees charged by external fund managers and
GPs.
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 Association of Investment Companies (AIC).
This assumes no change in the composition or value of
the portfolio (therefore excluding transaction costs and
direct performance-related compensation) and excludes
finance costs. For 2022, RIT’s own OCF amounted to
0.89% (2021: 0.72%), with further information provided
on page 100.
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, as well as
private equity and absolute return and credit funds. The
managers’ fee structure is always a key consideration in
our due diligence, with the investment decision made on
the basis of expected returns, net of all fees. We estimate
that the average annual management fees for external
managers represent an additional 0.88% of average net
assets (2021: 0.87%).
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. As they are a necessary cost in investing in many
difficult to access, high-quality managers or unique deals,
and are only paid for good performance, we would always
rather have the strong performance net of such fees,
adding to the NAV return, than not. Further information on
fees is provided on pages 52 and 53.
Outlook
It may well be that we are witnessing a reversal of a
decade’s material outperformance of financial assets
over the real economy. Investors will likely need to adjust
their expectations to the very different environment of a
higher cost of capital, labour and raw materials, and with
no safety net provided by central banks. Participating in
this market will be remarkably difficult, with central banks
having unfinished business in their fight against inflation,
companies facing margin pressures and uncertainty
around economic growth, and consumers adjusting to
the tighter financial conditions after a period of generous
covid support schemes. This backdrop, in our view,
warrants a cautious net quoted exposure combined with
dry powder.
However, we also believe the macro uncertainty
discussed above, combined with the risk of ‘financial
accidents’, can create compelling bottom-up liquid
opportunities in both equities and credit markets. We will
follow our long-standing disciplined approach, focused on
fundamentals-driven investing while looking for strategic
openings which present themselves in such dislocated
markets.
We would note that our patient approach also means we
are unlikely to participate in short-term sentiment driven
rallies. Nevertheless, we have demonstrated our resolve
to act quickly and decisively when there is an opportunity,
such as the value-oriented assets that benefitted from
a more reflationary environment. We believe there will
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
16 Report and Accounts December 2022 RIT Capital Partners plc
Manager’s Report
be additional opportunities in the upcoming year. For
example, in 2022, the market disproportionately punished
all long duration assets as a result of higher discount
rates, without discriminating between the fundamental
ability for companies to produce healthy cash flows and
continued growth. We believe that many high-quality
companies in our private investment book as well as our
quoted biotech exposure could benefit from the market
taking a more discriminating view of long duration assets.
Additionally, over the past year, driven by the sharp rise
in the cost of capital, there has been a considerable
expansion of the opportunity set for strategies that do
not require rising equity markets. For example, merger
arbitrage, structured credit, and equity market-neutral
strategies can produce healthy returns with little resort to
leverage in the current market environment.
We are all shareholders in RIT and firmly believe that
our tried and tested approach remains the best way to
manage money over the long term, balancing caution
with deploying risk capital to ensure that investors’
capital grows through the cycles. Over the last 10 years,
our NAV per share total return of approximately 140%
stands up well against other investments and often with
considerably less risk. Even on a shorter time horizon, we
believe our approach of combining capital preservation
with capital growth is a powerful one. Indeed, if we
consider the past 20 years of annual NAV returns, not
only have we never lost money on a rolling three-year
basis, but we have generated healthy growth averaging
10.2% per annum. Itis this combination which sets us
apart from the majority of other trusts.
Francesco Goedhuis
Chairman and Chief Executive Officer
J. Rothschild Capital Management Limited
Ron Tabbouche
Chief Investment Officer
J. Rothschild Capital Management Limited
6 Half-Yearly Financial Report 2021 RIT Capital Partners plc
Manager’s Report
• The absolute return and credit book continued to
provide steady and largely uncorrelated returns, in
particular from distressed debt managers; and
• In terms of headwinds, the relative strength of
sterling was the main detractor to performance in
absolute terms.
In terms of portfolio allocation, our average net quoted
equity exposure was 46%, a slight increase over 2020.
The exposure continues to be largely dominated by our
structural themes and in particular Asian equities where
we continue to see a long-term potential for growth and
excess returns. Just under a quarter of the quoted book
was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of
economies as the vaccine efficacy and rollout continued.
Over the first six months, we increased our allocation
to quality defensive names such as Unilever and Reckitt
Benckiser, which we considered were disproportionately
punished by the rise in bond yields. Other themes
captured in the quoted equity book include biotech,
quality growth and companies benefiting from energy
transition trends.
A core feature of our approach to portfolio construction
is the use of hedging. Here we focus both on macro
positions (such as broad equity market exposures or
currencies) as well as individual stocks, funds or themes,
where we might decide to moderate the exposure
without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy
various types of ‘tail hedges’ designed to reduce the
impact of such negative volatility.
It was a strong period for our private investments.
The successful IPO of Coupang, the South Korean
e-commerce giant, contributed 5.5% in our private
investments book at the IPO price of $35.00. It was then
transferred to the quoted portfolio, and the share price
ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company
performance, new investment rounds, as well as interest
from special purpose acquisition companies (SPACs).
Several new investments were made in the direct
portfolio including £21 million in Epic Systems, the
largest healthcare digital record platform in the US. We
also invested £50 million in Webull and £29 million in
Robinhood, two financial technology platforms disrupting
the traditional retail trading ecosystem. As part of a
broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling
some £54 million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners’ funds
seeing healthy uplifts, helped by the portfolio tilt towards
technology – one of our structural themes. As normal,
the valuation lag for this industry means the majority
of our funds are included at their 31 March valuations.
Since the start of the year, we have made £173 million of
commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book.
This saw continued steady returns, with the strongest
performance from those managers focusing on
distressed debt and special situations. Our merger
arbitrage funds also delivered pleasing returns. With
credit spreads tightening back to pre-pandemic levels, we
have adopted a more cautious approach to direct credit
investments.
We continue to hold gold as a portfolio diversifier,
especially in a low interest rate environment and, viewing
the US dollar as again having the potential to provide a safe
haven in times of stress, we increased our allocation here.
While the results so far this year, and over recent years,
are pleasing, we nevertheless remain vigilant, and will
not hesitate to adjust the portfolio should the need arise.
Experience suggests that when there is a widespread
consensus, investors can often get trapped in a false
sense of security and let their guard down. As we emerge
from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this
is not the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our
dynamic asset allocation and strong security selection
skills, together with global deal sourcing and integrated
risk management, will provide us with the best platform
to continue to deliver equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Chief Investment Officer
Executive Officer
J
R
CM
J
. R
OTHSCHILD
C
APITAL
M
ANAGEMENT
L
IMITED
|
Company Highlights
|
Strategic Report
|
Governance
|
Financial Statements
|
Other Information
|
RIT Capital Partners plc Report and Accounts December 2022 17
Investment Portfolio
Investment portfolio as at 31 December 2022
Investment holdings Country/region Industry/description
Value of
investments
£ million
% of
NAV
Quoted equity
1
Stocks:
Marsh & McLennan United States Insurance brokers 41.0 1.1%
Corteva United States Fertilisers & agricultural chemicals 39.5 1.1%
Builders FirstSource United States Building products 35.0 0.9%
Helios Towers Africa Telecommunication services 33.3 0.9%
Thermo Fisher United States Life science tools & services 25.9 0.7%
Canadian Pacific Railway Canada Transportation & logistics 24.8 0.7%
Coupang South Korea Retailing 1 7. 2 0.5%
Black Knight
2
United States Software, long 0.5% 0.3 0.0%
Mastercard
2
United States Software & services, long 1.0% 0.6 0.0%
Keurig Dr Pepper
2
United States Consumer staples, long 1.2%
(3.1) (0.1%)
Other stocks
– – 41.6 1.1%
Total stock: 256.1 6.9%
Long-only funds:
HCIF Offshore United States All-cap, biotechnology 131.0 3.5%
Discerene
3
Global All-cap, value bias 118.4 3.2%
Morant Wright
3
Japan Small/mid-cap, value bias 108.3 2.9%
Springs Opportunities China All-cap, diversified 92.7 2.5%
NE Fund Global All-cap, clean energy 71. 5 1.9%
Ward Ferry Asian Smaller Co.’s Asia Small/mid-cap, diversified 67.3 1.8%
Sand Grove UK United Kingdom All-cap, diversified 46.5 1.2%
Tenere Capital Global All-cap, technology 16.3 0.4%
Other long-only funds –
– 22.5 0.6%
Total long-only funds: 674.5 18.0%
Hedge funds:
3D Opportunity Japan All-cap, diversified 130.1 3.5%
BlackRock Strategic Equity Global All-cap, diversified 97.1 2.6%
HHLR China All-cap, diversified 62.4 1.7%
EcoR1 Capital United States All-cap, biotechnology 33.4 0.9%
Coreview China All-cap, diversified 28.4 0.8%
Other hedge funds –
– 24.2 0.7%
Total hedge funds: 375.6 10.2%
Derivatives:
Reflation basket Global Long, 1.2% notional 0.2 0.0%
European basket Europe Long, 0.7% notional (0.3) (0.0%)
Biotech basket Global Long, 0.6% notional 1. 0 0.0%
Total derivatives: 0.9 0.0%
Total quoted equity
1,307.1 35.1%
18 Report and Accounts December 2022 RIT Capital Partners plc
Investment Portfolio
Investment holdings Country/region Industry/description
Value of
investments
£ million
% of
NAV
Private investments – direct
4
:
Motive United States Trucking 76.2 2.0%
Webull United States Investment banking & brokerage 46.9 1.3%
Epic Systems United States Health care equipment & services 24.7 0.7%
Brex United States Diversified financials 18.6 0.5%
OneFootball
Global Media & entertainment 1 7. 7 0.5%
Blueground United States Diversified real estate activities 16.9 0.5%
Paxos United States Diversified financials 16.2 0.4%
Kraken United States Financial exchanges & data 16.2 0.4%
Animoca Global Media & entertainment 14.2 0.4%
Airtable United States Application software 13.0 0.3%
Level Home United States Consumer electronics 11. 8 0.3%
Papaya United States Data processing & outsourced services 10.8 0.3%
Infinity United Kingdom Real estate operating company’s 10.8 0.3%
Age of Learning United States Education services 9.9 0.3%
Dandy United States Health care equipment & services 9.6 0.3%
Lede United States Media & entertainment 8.3 0.2%
Bolt Financial United States Data processing & outsourced services 8.3 0.2%
Scale AI United States Application software 8.2 0.2%
Other private investments – direct – – 104.4 2.8%
Total private investments - direct 442.7 11.9%
Private investments – funds:
Thrive funds United States Growth equity 168.9 4.5%
Iconiq funds United States Growth equity 168.2 4.5%
BDT Capital funds United States Private equity 76.0 2.0%
Greenoaks Capital funds United States Growth equity 72.6 2.0%
Ribbit Capital funds United States Growth equity 70.5 1.9%
Hillhouse funds China Private equity 61.6 1.7%
Arch Venture funds United States Life sciences 47.7 1.3%
Lindenwood United States Growth equity 39.6 1.1%
Biomatics Capital funds United States Life sciences 20.1 0.5%
Mithril funds United States Growth equity 18.6 0.5%
WestCap Strategic funds United States Growth equity 18.2 0.5%
Eight Partner funds United States Early stage 1 7. 9 0.5%
Sound Ventures funds United States Early stage 1 7. 3 0.5%
Expa Capital United States Early stage 15.1 0.4%
Firstminute Capital United Kingdom Early stage 12.6 0.3%
Social Capital funds United States Early stage 10.6 0.3%
Blackstone Tactical Opportunities United States Private equity 10.4 0.3%
Braemar Energy United States Growth equity 10.0 0.3%
LCV Fund United States Early stage 9.2 0.2%
Corsair funds United States Private equity 9.1 0.2%
Other private investments –- funds – – 198.9 5.3%
Total private investments – funds 1,073.1 28.8%
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RIT Capital Partners plc Report and Accounts December 2022 19
Investment Portfolio
Investment holdings Country/region Industry/description
Value of
investments
£ million
% of
NAV
Absolute return and credit:
Attestor Value Global Credit, distressed and special situations 148.6 4.0%
Tresidor Credit Opportunities Global Credit, distressed and special situations
108.0 2.9%
ARCM Asia Credit, distressed and special situations 95.6 2.6%
RIT US Value Partnership Global Multi-strategy 72.4 1.9%
Caxton Dynamis Global Macro strategy 7 1. 8 1.9%
Sand Grove Tactical Global Multi-strategy 63.1 1.7%
Woodline Global Multi-strategy 54.6 1.5%
Liontree Advisory loan note United States Corporate loan 36.4 1.0%
Tresidor Europe Credit Europe Credit, distressed and special situations 30.2 0.8%
Hein Park Global Credit, distressed and special situations 25.8 0.7%
Highbridge Global Multi-strategy 26.6 0.7%
Other absolute return and credit – – 13.7 0.4%
Total absolute return and credit 746.8 20.1%
Real assets:
Spencer House United Kingdom Investment property 28.3 0.8%
St. James’s properties United Kingdom Investment property 27.1 0.7%
Gold futures Global Long, 4.5% notional 6.4 0.2%
Other real assets – – 3.6 0.1%
Total real assets 65.4 1.8%
Other investments:
Currency forwards Various Forward currency contracts 42.6 1.1%
Total other investments 42.6 1.1%
Total investments 3,677.7 98.8%
Liquidity:
Liquidity – Cash at bank 206.3 5.5%
Total liquidity 206.3 5.5%
Borrowings:
Short-term bank borrowings
5
– Revolving credit facilities (236.2) (6.3%)
RIT senior loan notes – Fixed interest loan notes (134.4) (3.6%)
Total borrowings (370.6) (9.9%)
Other assets/(liabilities)
Margin – – 85.4 2.3%
Unsettled fund redemptions – – 152.3 4.0%
Other assets/(liabilities) – – (29.4) (0.7%)
Total other assets/(liabilities) 208.3 5.6%
Total net asset value 3,721.7 100.0%
Note: where relevant, the portfolio positions are ordered by their notional exposure rather than fair value.
1
The quoted equity category includes stocks (held directly and via co-investment vehicles), funds and derivatives. As a result, the liquidity of the
individual positions may be influenced by market volumes as well as the redemption terms of the specific funds or co-investment vehicles.
2
Held via total return swaps with notional exposure disclosed in the table.
3
These funds are segregated accounts, managed externally on behalf of the Group.
4
The private direct book includes investments held through co-investment vehicles managed by a general partner (GP).
5
The Group has three revolving credit facilities with Industrial and Commercial Bank of China, Commonwealth Bank of Australia and BNP
Paribas.
20 Report and Accounts December 2022 RIT Capital Partners plc
Principal Risks and Viability
Risk management and internal control
The principal risks facing RIT are both financial and
operational. The ongoing process for identifying,
evaluating and managing these risks, as well as any
emerging risks, is the responsibility of the Board and the
Audit and Risk Committee. Day-to-day management is
undertaken by JRCM within parameters set by the Board.
As an investment company, RIT is exposed to financial
risks inherent in its portfolio, which are primarily market-
related and common to any portfolio with significant
exposure to equities and other financial assets. The
ongoing portfolio and risk management includes an
assessment of the macroeconomic and geopolitical
factors that can influence market risk, as well as
consideration of investment-specific risk factors.
Your Company’s broad and flexible investment mandate
allows the Manager to take a relatively unconstrained
approach to asset allocation and utilise whatever action is
considered appropriate in mitigating any attendant risks
to the portfolio.
As discussed in the Manager’s Report, with inflation rates
reaching multi-decade highs, political and fiscal volatility
impacting the UK, energy price fluctuations magnified
and exacerbated by Russia’s invasion of Ukraine, and
the underperformance of China, 2022 was extremely
turbulent globally, with no asset classes outpacing
inflation and losses across equities and bond markets.
As such, once again, risk management remained critical.
The portfolio risk management approach undertaken by
the Manager, and considered regularly by the Board, is
designed to produce a healthy risk-adjusted return over
the long term, through careful portfolio construction,
security selection and the considered use of hedging.
Part of this approach is to emphasise or de-emphasise
parts of the portfolio to compensate for risk in other
areas. For example, with a decision to deploy capital
to the technology transition theme through the private
portfolio, the exposure to this theme within the quoted
equity book was deliberately smaller. Equally the
deployment of hedges, whether to manage currency
translation risk, or to reduce exposure to particular
companies or sectors, was an important part of mitigating
losses over the year.
As a permanent capital vehicle, and unlike open-ended
funds, we do not need to manage the portfolio to
meet redemptions. With sizeable assets relative to our
modest borrowings and ongoing liabilities, as confirmed
later in this section, we do not consider the Company’s
viability or going concern to represent principal risks.
Nevertheless, and in particular at times of market stress,
the Manager utilises a detailed, day-to-day liquidity risk
management framework to help effectively manage the
balance sheet, including careful monitoring of the banking
covenants.
The Board sets the portfolio risk parameters within
which JRCM operates. This involves an assessment
of the nature and level of risk within the portfolio
using qualitative and quantitative methods. Additional
information in relation to market risk, credit risk and
liquidity risk in accordance with IFRS 7 Financial
Instruments: Disclosures is shown in Note 13 on
pages71 to 75.
Operational risks include those related to the legal
environment, regulation, taxation, information 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.
The Board is ultimately responsible for the Group’s
system of internal controls and it has delegated
the supervision of the system to the Audit and Risk
Committee. Such systems are designed to manage,
rather than eliminate, the risk of failure to achieve
business objectives and, as such, can provide only
reasonable and not absolute assurance against any
material misstatement or loss. Further information is
provided in the Audit and Risk Committee Report on
pages 44 to 47.
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RIT Capital Partners plc Report and Accounts December 2022 21
Principal Risks and Viability
Principal risks
The Board has carried out a robust assessment of the emerging and principal risks facing the Company, concluding that
there are no material emerging risks, and the principal risks are as described below:
Risk Mitigation
Investment strategy risk
As an investment company, a key risk is that the investment
strategy, guided by the Investment Policy:
“To invest in a widely diversified, international portfolio
across a range of asset classes, both quoted and unquoted;
to allocate part of the portfolio to exceptional managers in
order to ensure access to the best external talent available.”
does not deliver the Corporate Objective:
“To deliver long-term capital growth, while preserving
shareholders’ capital; to invest without the constraints of a
formal benchmark, but to deliver for shareholders increases
in capital value in excess of the relevant indices over time.”
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 JRCM in advance of the regular
quarterly Board meetings.
The overall risk appetite is set by the Board, with portfolio
risk managed by JRCM within prescribed limits. This involves
careful assessment of the nature and level of risk within the
portfolio using qualitative and quantitative methods.
The JRCM Investment Committee meets regularly to review
overall investment performance, portfolio exposure and
significant new investments.
Market risk
Price risk
RIT invests in a number of asset categories including stocks,
equity funds, private investments, absolute return and credit,
real assets, government bonds and derivatives. The portfolio
is therefore exposed to the risk that the fair value of these
investments will fluctuate because of changes in market
prices.
Currency risk
Consistent with the Investment Policy, the Group invests
globally in assets denominated in currencies other than
sterling as well as adjusting currency exposure to either seek
to hedge and/or enhance returns. This approach exposes the
portfolio to currency risk as a result of changes in exchange
rates.
Interest rate risk
In addition, the Group is exposed to the direct and indirect
impact of changes in interest rates.
The Group has a widely diversified investment portfolio which
significantly reduces the exposure to individual asset price
risk. Detailed portfolio valuations and exposure analysis are
prepared regularly, and form the basis for the ongoing risk
management and investment decisions. In addition, regular
scenario analysis is undertaken to assess likely downside
risks and sensitivity to broad market changes, as well as
assessing the underlying correlations amongst the separate
asset classes.
Exposure management is undertaken with a variety of
techniques including using equity index and interest rate
futures and options to hedge or to increase equity and
interest rate exposure depending on overall macroeconomic
and market views.
Currency exposure is managed via an overlay strategy,
typically using a combination of currency forwards and/or
options to adjust the natural currency of the investments
in order to achieve a desired net exposure. The geographic
revenue breakdown for stocks as well as correlations with
other asset classes are also considered as part of our hedging
strategy.
22 Report and Accounts December 2022 RIT Capital Partners plc
Principal Risks and Viability
Risk Mitigation
Liquidity risk
Liquidity risk is the risk that the Group will have difficulty in
meeting its obligations in respect of financial liabilities as they
fall due.
The Group has significant investments in and commitments
to direct private investments and funds which are inherently
illiquid. In addition, the Group holds investments with other
third-party organisations which may require notice periods in
order to be realised. Capital commitments could, in theory,
be drawn with minimal notice. In addition, the Group may be
required to provide additional margin to support derivative
financial instruments.
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 Trust Corporation
UK Limited (BNP) has separate responsibilities in monitoring
the Company’s cash flow.
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.
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).
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.
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.
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RIT Capital Partners plc Report and Accounts December 2022 23
Principal Risks and Viability
Risk Mitigation
Climate-related risks
Ongoing climate changes may impact either our own
business, the external managers with whom we invest, and/
or the underlying portfolio investments. For our own business
this could result in increased costs of complying with new
regulations and/or changes to the way we operate. Portfolio
companies could see demand pressures, an increased
cost of capital, tighter regulation or increased taxation, all
impacting profitability.
Our ability to make climate-change disclosures may be
impacted by our investment approach if the external fund
managers with whom we invest do not provide the desired
information.
More frequent extreme weather could disrupt businesses,
travel, global supply chains and profitability.
We do not consider climate-related risks have material,
specific impacts on our own asset management businesses as
distinct from the investment portfolio. Our Manager continues
to monitor, and minimise, the climate-related impacts of our
internal operations; we offset the carbon emissions of this
business – categorised as Scope 1 and Scope 2 emissions by
the Greenhouse Gas (GHG) Protocol – through participation
in an accredited scheme and we are taking steps to further
develop our understanding of our indirect emissions impact
(categorised as Scope 3 emissions).
JRCM is a signatory to the UN PRI, and the Board worked
with our Manager 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 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).
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.
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 2022
the Group again engaged external advisers in supporting its
consideration of ESG matters.
Where necessary, co-investments and other transactions
are subject to review by the Conflicts Committee and/or the
FCA.
24 Report and Accounts December 2022 RIT Capital Partners plc
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 (including under or over-stating the valuations
of private investments leading to the incorrect valuation of
these portfolio holdings), fraud, reliability of core systems and
IT security issues.
Systems and control procedures are the subject of continued
development and regular review. During the year the Audit
and Risk Committee reviewed, and satisfied itself with, the
Manager’s approach to due diligence as part of its investment
decision making. Further details on this and internal controls
more generally can be found in the Committee’s Report on
pages 44 to 47.
Processes are in place to ensure the recruitment and ongoing
training of appropriately skilled staff within key operational
functions. Suitable remuneration policies are in place to
encourage staff retention and the delivery of the Group’s
objectives over the medium term.
Independent pricing sources are used where available and
performance is subject to regular monitoring. In relation
to more subjective areas such as private investments and
property, the valuations are estimated by experienced staff
and specialist external managers and valuers using industry
standard approaches, with the final decisions taken by the
independent Valuation Committee, and subject to external
audit as part of the year-end financial statements.
A business continuity and disaster recovery plan is
maintained, and was updated in 2022 following the move to
a hybrid working arrangement.
Cyber security continues to receive an enhanced focus, with
systems and processes designed to combat the ongoing risk
developments in this area. Such processes are kept under
regular review including multi-factor authentication, ensuring
effective firewalls, internet and email gateway security
and anti-virus software. This is complemented with staff
awareness programmes (including periodic mock phishing
exercises) which monitor and test both the robustness of our
systems as well as keeping staff alert to potential risks.
During the year, the Manager was awarded the government’s
‘cyber essentials plus’ security certification in March 2022,
the highest level of certification offered under this scheme.
The Group has specific insurance cover in place to cover
information security and cyber risks.
Principal Risks and Viability
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RIT Capital Partners plc Report and Accounts December 2022 25
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 £4.2 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
£371 million, with committed but undrawn facilities
totalling £90 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, significantly in excess of what was
experienced during the Covid-19 driven volatility in early
2020. 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 6.2%, 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
timeframe.
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
£206 million and committed but undrawn borrowings
of £90 million, and cash flow forecasts for the period to
30 June 2024, as well as what the Group considers its
readily realisable securities of £258 million, transactions
awaiting settlement of £152 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 25 and the s172
statement on page 55 have been approved by the Board
and signed on its behalf by:
Sir James Leigh-Pemberton
Chairman
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RIT Capital Partners plc Report and Accounts December 2022 27
Board of Directors
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 15years.
In the 2019 New Year Honours List, Sir James received a knighthood
for services to financial services, British industry andgovernment.
Maggie Fanari joined the Board of the Company as a non-executive
Director in April 2019 and is a member of the Conflicts,
Nominations and Remuneration Committees.
Maggie is the 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.
Shealso holds a BBA from the Schulich School of Business at
YorkUniversity and ICD.D certification from the Institute of
Corporate 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, a private
investment firm focused on building long-term investment platforms.
Philippe was formerly Chair of International of Colony Capital, a global
real estate and investment management firm. Previously, he was
Head of Europe at TPG, a leading global private investment firm and a
member of TPG’s Global Management and Investment Committees.
Prior to that, Philippe was a Member of the Management Committee
at Investcorp, a leading manager of alternative investment products.
Previously, Philippe held positions at JP Morgan Capital, JP Morgan’s
Private Equity Group and Morgan Stanley.
Philippe is Chair of Janus Fertility and a board member of Digital Care,
Vangest Group and Generation Home. He is a Senior Advisor to the
Blackstone Group. Philippe is a member of the President’s Council
on International Activities at Yale University and the Yale Center for
Emotional Intelligence Advisory Board. He graduated magna cum
laude with a BA with distinction in Mathematics from Yale University
and received an MBA from Columbia University.
Non-Executive Chairman
Sir James Leigh-Pemberton
Maggie Fanari
Senior Independent Director
Philippe Costeletos
Non-Executive Directors
I C N R V I C N R V
Vikas Karlekar joined the Board as a non-executive Director in
August 2022.
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.
Vikas Karlekar
I
A
I C N R
28 Report and Accounts December 2022 RIT Capital Partners plc
Non-Executive Directors
Maxim Parr joined the Board as a non-executive Director in May
2020 and is a member of the Conflicts, Remuneration and Valuation
Committees.
Maxim started his career at Jardine Matheson and has over
15years’ experience working in cross-border investment between
Asia and Europe. Maxim lived in Beijing for well over a decade
where, as Founder and CEO of Atlas Capital Group, he worked
alongside FTSE 100 and European corporates on their China
investment strategy in start-ups, growth capital and buyouts.
Working between Europe and Asia, Maxim is the Executive Chair
of nr2, a cross border technology investment platform.
Maxim graduated with First Class Honours from the School
of Oriental and African Studies and was awarded the
StephenKHassenfeld Fellowship to study at the Hopkins Nanjing
Centre of the School of Advanced International Studies.
He is fluent in Mandarin and proficient in Cantonese, Russian,
German and French.
Maxim Parr
I C R V
Cecilia joined the board as a non-executive director in August 2022.
She is a qualified accountant and has held senior investment
roles for banks and hedge funds. Her investment experience
encompasses several asset classes including distressed debt,
private equity and credit.
Cecilia is a non-executive director and audit Chair of both Northern
2 VCT plc and Polar Capital Global Financials Trust plc and recently
resigned as an independent NED of Alcentra Limited, an asset
manager wholly owned by Bank Of New York Mellon, specialising
in sub investment grade credit. She is also a member of the
Industrial Development Advisory Board, part of The Department
of Business, Energy & Industrial Strategy (BEIS) which advises on
grants to UK businesses.
She has held senior roles at Centaurus Capital, Barclays Capital,
Royal Bank of Scotland and PwC. She qualified as a chartered
accountant with Peat Marwick (now KPMG) in Glasgow. She has
also held a number of charity roles including Chair of the Finance
and General Purposes Committee for English National Ballet.
Cecilia McAnulty
I
André Perold joined the Board of the Company as a non-executive
Director in April 2018 and is a member of the Audit and
RiskCommittee.
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.
Mike Power joined the Board of the Company as a non-executive
Director in January 2014 and is Chair of the Valuation and the Audit
and Risk Committees.
He is a Fellow of the Institute of Chartered Accountants in England
and Wales (ICAEW) and Professor of Accounting at the London
School of Economics and Political Science, where he has written
extensively on risk and corporate governance issues. He was a
non-executive director of St. James’s Place plc from 2005 to 2013
where he chaired the Risk Committee and was a member of the
Audit Committee.
Mike has held a number of other advisory positions, including
the Financial Reporting Lab Advisory Committee at the Financial
Reporting Council, and the Technical Development Committee of
the Institute of Risk Management. In 2016 he was elected as a
Fellow of the British Academy.
André Perold Mike Power
I A I A V
Board of Directors
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RIT Capital Partners plc Report and Accounts December 2022 29
Non-Executive Directors
Jutta af Rosenborg joined the Board as a non-executive Director
in May 2022 and is a member of the Audit and Risk, and Valuation
Committees.
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.
Jutta af Rosenborg
Hannah Rothschild joined the Board of the Company as a
non-independent non-executive Director in August 2013.
In addition, she is a non-executive director of WHAM, a Director
of Five Arrows Limited and serves as a Trustee of the Rothschild
Foundation.
Hannah is an award-winning writer and filmmaker with a long
standing career in the media.
She was the first woman to Chair the Trustees of the National
Gallery.
In the 2018 Queen’s Birthday Honours, Hannah was appointed
Commander of the Order of the British Empire (CBE) for services
to the arts and to philanthropy.
Hannah Rothschild CBE
NI
V
I
C
N
R
NI
A
Independent Director
Non-Independent Director
Audit and Risk Committee member
Conflicts Committee member
Nominations Committee member
Remuneration Committee member
Valuation Committee member
Committee Chair
I A V
Board of Directors
30 Report and Accounts December 2022 RIT Capital Partners plc
J. Rothschild Capital Management
JRCM is a wholly-owned subsidiary of RIT and acts as RIT’s Manager. The members of the Executive Committee of JRCM are
listed below:
Executive Committee
Francesco Goedhuis (Chairman and Chief Executive Officer)
Andrew Jones (Chief Financial & Operating Officer)
Ron Tabbouche (Chief Investment Officer)
The Executive Committee of JRCM is led by Francesco Goedhuis and is responsible for the day-to-day management of the
business. The biographies of the Executive Committee members can be found below:
Francesco Goedhuis is the Chairman and Chief Executive Officer,
and also leads the Manager’s private investment strategies.
Hejoined JRCM as the Principal in Lord Rothschild’s Office (the
Company’s Honorary President, founder and former Chairman) in
2010. Previously, he was in New York working for the Economics
Nobel Laureate Robert Merton and the former Vice Chairman of
J.P. Morgan, Roberto Mendoza at IFL, commercialising financial
academic theory on both the buy and sell sides.
Andrew Jones is the Chief Financial & Operating Officer. He is
responsible for the Group’s financial activities and its operations.
Prior to joining JRCM in 2008, he spent three years in venture
capital and four years at Nomura, advising on its private equity
investments as well as risk, global corporate development and
strategy. A Fellow of the ICAEW, he qualified as a chartered
accountant with Deloitte where he spent time in audit before
specialising in corporate finance and valuation advice. Andrew is
a member of the audit committee of the British Academy.
Ron Tabbouche is the Chief Investment Officer. He joined JRCM in
2012 having previously been the Head of Investments for Managed
Portfolios at GAM. At the age of 26, he joined GAM’s Investment
Committee. Subsequently, he led the overall investment strategy
of multi-billion dollar funds across a broad range of asset classes.
Ron is an Adviser to the WHAM Investment Advisory Committee,
and is also a member of the Investment Committee of the Wolfson
Foundation.
Francesco Goedhuis Andrew Jones
Ron Tabbouche
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RIT Capital Partners plc Report and Accounts December 2022 31
Corporate Governance Report
Introduction
The Directors present the Company’s Corporate
Governance Report. This describes our principal
governance bodies, their composition, purpose and
operation within the context of the Principles and
Provisions of the Association of Investment Companies
(AIC) Code of Corporate Governance (AIC Code) and
the UK Corporate Governance Code (UK Code) of the
Financial Reporting Council (FRC), which can be viewed
at www.theaic.co.uk and www.frc.org.uk respectively.
The AIC Code, which has been endorsed by the FRC,
adapts the Principles and Provisions of the UK Code
to make them relevant for investment companies.
TheBoard of Directors therefore considers the
AICCode 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 December2022.
Leadership
The Company has a non-executive Board, chaired by
Sir James Leigh-Pemberton. The Board is collectively
responsible for setting the Company’s long-term strategic
aims, and its ongoing business and investment strategies.
The schedule of matters reserved for the Board may be
viewed on the website, www.ritcap.com.
The day-to-day management of the business is delegated
under a formal agreement to JRCM, the Company’s
subsidiary and Manager. JRCM is managed by its
Executive Committee, led by its Chairman and CEO,
Francesco Goedhuis. The JRCM Executive Committee
attend the regular Board meetings and provide detailed
reports on investment performance as well as all
operational and financial matters of the Group. JRCM also
attends and reports to all Board Committee meetings.
Asour 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
10 non-executive Directors, of which nine have been
determined by the Board to be independent, with one,
Hannah Rothschild, designated as non-independent.
The Company has in place a structure of five Board
Committees, with clearly defined responsibilities. This is
intended to limit the scope for an individual, or a small
group of individuals, to dominate the Board’s decision
making. The structure of permanent Board Committees,
together with the delegation of investment management,
administration and company secretarial matters to the
Manager, is considered by the Board as appropriate for
a self-managed investment trust on an ongoing basis.
The terms of reference of each of the permanent Board
Committees may be viewed at www.ritcap.com.
As Chairman of the Board, Sir James Leigh-Pemberton
is responsible for its leadership and effectiveness in
dealing with the matters reserved for its decision with
adequate time for consideration. This includes ensuring
a culture of openness and debate and that Directors are
properly briefed on issues arising at Board meetings.
The Chairman is also responsible for ensuring effective
communication with shareholders, making Directors
aware of any concerns raised by shareholders and for
facilitating the contribution of the Directors.
The current members of the five Board Committees are as follows:
Audit and Risk Committee
Mike Power (Chair)
Philippe Costeletos
André Perold
Jutta af Rosenborg
Remuneration Committee
Philippe Costeletos (Chair)
Maggie Fanari
Sir James Leigh-Pemberton
Maxim Parr
Conflicts Committee
Philippe Costeletos (Chair)
Maggie Fanari
Sir James Leigh-Pemberton
Maxim Parr
Valuation Committee
Mike Power (Chair)
Philippe Costeletos
Sir James Leigh-Pemberton
Maxim Parr
Jutta af Rosenborg
Nominations Committee
Sir James Leigh-Pemberton (Chair)
Philippe Costeletos
Maggie Fanari
32 Report and Accounts December 2022 RIT Capital Partners plc
Corporate Governance Report
The Audit and Risk Committee
The Audit and Risk Committee Report is shown on
pages44 to 47.
The Committee has four members, all of whom are
viewed by the Board as having recent and relevant
financial experience. Jutta af Rosenborg was appointed to
the Committee on 19 May 2022 and Philippe Costeletos
on 9February 2023.
The main features of the Group’s internal controls and
risk management are described in the Audit and Risk
Committee Report on pages 44 to 47 and in Principal
Risks and Viability on pages 20 to 25.
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 Note17)
and to ensure that potential conflicts of interest are
avoided, or managed appropriately.
Board and Committee attendance
The Board and Committee attendance of the Directors at meetings in 2022 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.
Board Audit and Risk Conflicts Nominations Remuneration Valuation
Number of meetings held during the year 5 4 1 3 2 2
Chairman
Sir James Leigh-Pemberton 5/5 – 1/1 3/3 2/2 2/2
Non-executive Directors
Philippe Costeletos
1
5/5 – 1/1 3/3 2/2 2/2
Maggie Fanari
2
5/5 – 1/1 2/2 2/2 –
Vikas Karlekar
3
1/1 – – – – –
Cecilia McAnulty
3
1/1 – – – – –
Maxim Parr 5/5 – 1/1 – 2/2 2/2
André Perold 5/5 4/4 – – – –
Mike Power 4/5 4/4 – – – 2/2
Jutta af Rosenborg
4
3/3 3/3 – – – 2/2
Hannah Rothschild 5/5 – – – – –
Amy Stirling
5
2/2 1/1 – – – –
1
Appointed as a member of the Audit and Risk Committee on 9 February 2023 and therefore did not attend any of its meetings in 2022.
2
Appointed as a member of the Nominations Committee on 4 May 2022.
3
Appointed as a Director on 11 August 2022.
4
Appointed as a Director and a member of the Audit and Risk, and the Valuation Committees on 19 May 2022.
5
Retired as a Director on 4 May 2022.
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RIT Capital Partners plc Report and Accounts December 2022 33
The Nominations Committee
The Nominations Committee meets at least twice each year
and on additional occasions as required. The Committee is
chaired by Sir James Leigh-Pemberton. All of its members
are independent non-executive Directors. Maggie Fanari
was appointed to the Committee on 4 May 2022.
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 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 was published in May 2022, and
may be viewed on the Company’s website.
The Nominations Committee was responsible for
implementing the Board’s succession planning in respect
of Amy Stirling’s retirement from the Board. With effect
from her retirement, Mike Power replaced her as the
Chair of the Audit and Risk Committee. Mike had been a
member of the Audit and Risk Committee for eight years
and it was determined he had the requisite skills and
experiences to be appointed as Chair. The Committee
also oversaw the process to appoint a new Director to
replace Amy. Atthe conclusion of this process, Jutta af
Rosenborg was appointed to the Board on 19 May 2022.
Her skills and experiences complement those of the
other Directors, including being a qualified accountant
and having held a number of senior roles in group finance,
auditing and risk management, and she joined the Audit
and Risk, and Valuation Committees on her appointment.
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. As part
of this role, the Committee recommended that Vikas
Karlekar and Cecilia McAnulty join the Board and they
were both appointed as Directors on 11 August 2022.
Vikas is a qualified accountant who has held a number of
senior financial roles across the financial services industry.
Ceciliais also a qualified accountant, holding senior
investment roles for banks and hedge funds.
The Board appointed Russell Reynolds Associates
to assist with the recruitment of new Directors
during the year. Russell Reynolds Associates has no
other relationships with the Group and is therefore
independent.
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 the Hampton-Alexander
Review and also meets the reporting requirements around
diversity in new listing rules introduced by the FCA.
To ensure a smooth transition as a result of the recent
Board changes, Mike Power has agreed to remain as
a Director until the forthcoming AGM. The Board has
approved that, following his retirement as a Director at
the AGM, Jutta af Rosenborg will replace him as Chair
of the Audit and Risk Committee, and Maxim Parr will
replace him as Chair of the Valuation Committee. Both
Jutta and Maxim currently sit on the Audit and Risk, and
Valuation Committees respectively and it was determined
that each has the requisite skills and experience to chair
these committees.
The Remuneration Committee
The Directors’ Remuneration Report is shown on
pages48 to 51.
The Valuation Committee
The Valuation Committee comprises five Directors, all of
whom are independent, and with appropriate experience.
The Committee plays a key role in providing the Board
with assurance that the valuation process is rigorous and
independently challenged.
The Committee is currently chaired by Mike Power and on his
retirement at the forthcoming AGM, Maxim Parr will become
Chair of the Committee, in line with the Board’s succession
planning. It meets at least twice each year and additionally as
may be required. The Committee’s principal responsibility is to
review the Company’s direct private and other investments to
ensure that they are presented in the annual and half-yearly
accounts at fair value. As a result of the inherent subjectivity
of the valuation of private investments, these form a key area
of focus for the Committee.
At each meeting, the Committee reviews a detailed report
from the Manager which includes: a valuation report on
each of the largest directly-held private investments,
including information on the companies’ performance
and valuation and/or the GP’s valuation where relevant;
asample 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.
Corporate Governance Report
34 Report and Accounts December 2022 RIT Capital Partners plc
Corporate Governance Report
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 27 to 30
demonstrate a strength of experience in the areas required
to oversee and implement the Company’s strategic,
investment and operational aims.
As described above, the process for the appointment
of new Directors to the Board is the responsibility of
the Nominations Committee, as is their induction and
ensuring, on an ongoing basis, that each Director is able
to allocate sufficient time to the Company to discharge
their responsibilities effectively.
JRCM provided relevant and timely information on the
financial, legal and regulatory developments during 2022,
including in the papers and presentations provided at
Board and Committee meetings.
The Board undertakes an annual review of its
performance, its Committees and each individual
Director (including the Chairman) in accordance with
the requirements of the AIC Code. The 2022 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.
Theresults 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 2021 Board evaluation (conducted
externally by BoardAlpha) had been addressed throughout
the year, including Board diversity and succession
planning (see page 54) and shareholder engagement (see
page 49). It also set out the Board’s areas of focus for
2023, including further ESG integration and continuing
to keep under review our strategy and portfolio in the
context of our Corporate Objective.
The next external evaluation is scheduled for 2024.
In accordance with the Codes, all Directors (other than
those retiring or standing for their first election) stand
for re-election annually, subject of course to continued
satisfactory performance. The Board recommends
shareholders approve the election and re-election of
Directors (as applicable) standing at the forthcoming
AGM.
Subject to his continued annual re-election, the
Chairman’s tenure is not intended to exceed nineyears,
inline with the relevant corporate governance
expectations. Moreover, as part of the wider annual
evaluation of the Board, length of service is a key
consideration when assessing the general requirements
to regularly refresh the membership, diversity and overall
composition of the Board.
Accountability
The Board, acting where appropriate through the Audit
and Risk Committee, is responsible for determining
the nature and extent of the principal risks it is willing
to take in achieving its strategic objectives. It is also
responsible for maintaining sound risk management and
internal control systems, for setting corporate reporting,
risk management and internal control principles and
for maintaining an appropriate relationship with the
Company’s auditor. These areas are further described in
the Audit and Risk Committee Report on pages 44 to 47.
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RIT Capital Partners plc Report and Accounts December 2022 35
Corporate Governance Report
Engaging with stakeholders
The Board recognises the benefits of engaging with
our shareholders and other key stakeholders in order to
ensure that we are aware, and can take account of, their
views during Board discussions and when the Board
makes decisions. As a result, the following processes and
initiatives are in place.
Shareholders
• an ongoing dialogue with principal shareholders, proxy
advisors, corporate governance specialists and analysts
is maintained and the Manager regularly reports to
the Board on its shareholder and analyst meetings to
ensure that the members of the Board understand
shareholders’ views of the Company. Moreover, the
Chairman has engaged with major shareholders and
will continue to do so each year;
• the Board is aligned with shareholders on the
importance of ESG and has appointed a leading
international sustainability consultancy to assist in
this area. As part of our ongoing commitment to ESG
integration the Manager became a signatory of the
UN PRI and has adopted a Responsible Investment
Framework & Policy which can be viewed at www.
ritcap.com;
• a regular review of the composition of our share
register and receipt of feedback from our brokers,
including in the form of an independent survey of
shareholder views conducted by the brokers;
• a designated email account (investorrelations@ritcap.
co.uk) for shareholders to communicate directly with
the Group;
• we maintained our regular programme of shareholder
engagement activities including shareholder and
analyst meetings and webinars to enable us to
continue engaging directly with shareholders and
continue to be informed of their views; and
• all shareholders are encouraged to attend the AGM
and ask questions of the Directors and the Manager.
All shareholders have the opportunity to cast their
votes in respect of the proposed resolutions at the
AGM by proxy, either electronically or by post.
Employees
• there is a focus on having a working environment
where there is engagement and communications
with employees at all levels. Throughout the year
‘town hall’ meetings for all Group employees were
held and chaired by the Chief Executive Officer of
JRCM as well as the Chairman (who is designated
as the Director responsible for engagement with
employees). More generally, regular internal
communications are encouraged through team
meetings, training sessions, presentations and also
social and team-building events;
• as part of our employee well-being programme,
hybrid working policies have been introduced with
flexible and remote working arrangements available;
• a financial contribution was made to those employees
impacted the most by the rising cost of living;
• an ongoing commitment to professional
development and the nurturing of talent by giving
employees the appropriate training, development
and support they need and providing them with the
opportunities to gain new skills and professional
qualifications to perform their roles effectively;
• support and investment in employees’ health and
well-being by providing a wide range of benefits that
are regularly reviewed and updated;
• provision of a clear and independent whistleblowing
process;
• a carefully structured performance management
process, designed to reinforce the Group’s overall
strategy and culture;
• policies to ensure that we continue to provide
an inclusive working environment where all our
employees are treated with dignity and respect,
regardless of their gender, age, ethnicity, disability,
sexual orientation or background; and
• provision of an employee assistance programme
providing confidential support on mental health issues.
Suppliers
• we place a high value on the relationships with a broad
group of key suppliers and service providers including
fund managers, our auditor and professional advisers,
our custodian/depositary, bankers, information providers,
trading counterparties, and brokers, and are committed
to developing and maintaining sustainable and
transparent working relationships over the long term;
• while we ensure these relationships are subject to
regular review and refreshed where necessary, equally
some of the suppliers have worked with us for very
many years. Effective management of our supplier
relationships is critical to our ability to deliver on our
broad mandate, and we utilise a combination of formal
and informal feedback, directly and via our Manager; and
• as part of JRCM’s Responsible Investment
Framework& Policy, ascertaining our fund managers’
approach to ESG forms part of the due diligence
36 Report and Accounts December 2022 RIT Capital Partners plc
undertaken by JRCM during the investment selection
process and as part of ongoing monitoring.
Environment and the community
• although it is a last resort after our actions to reduce
and avoid carbon emissions, we offset the carbon
emissions of our residual internal operations through
participation in an accredited scheme, Carbon
Footprint Limited, involving the planting of trees at
primary schools;
• a ‘zero to landfill’ waste and recycling policy;
• encouraging employees to reduce their own
environmental impact through such initiatives as a
cycle to work scheme;
• procurement of all electricity used in our property
portfolio from renewable sources;
• introduction of a biodiversity management plan for
the Spencer House garden, including removal of
the use of pesticides, pollinator-friendly planting and
wild-flowering;
• facilitate employees taking advantage of ‘Give As You
Earn’ for personal charitable donations;
• various employee events to raise money for
designated charities and donations were made by
the Manager to locally based charities which were
voted for by employees; and
• as part of our commitment to improving diversity and
inclusion in the asset management sector, we have
continued our partnership with 10,000 Black Interns
initiative and in 2022, JRCM welcomed its first intern
under the Girls Are INvestors (GAIN) programme
which aims to improve gender diversity in the sector.
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
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RIT Capital Partners plc Report and Accounts December 2022 37
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 2022 Board evaluation (see page 34), concluded that the
Board and its Committees continue to operate effectively,
with the recommendations of the prior year external
evaluation, addressed during the year.
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. 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 the wider society
and strives to meet its obligations through ensuring effective
stakeholder engagement by the Group. Pages 35 and36
of this Report illustrates initiatives contributing to the
environment and wider society.
B. The Board should establish the Company’s purpose, values
and strategy, and satisfy itself that these and its culture are
aligned. All Directors must act with integrity, lead by example
and promote the desired culture.
The Directors consider that the purpose and strategy
are enshrined in the Company’s Corporate Objective and
Investment Policy, as described in the Strategic Report
(pages 6 and 7). Our values underpin and govern our Group’s
operations and are based on integrity and respect for all our
stakeholders. Together, our purpose, values and strategy
foster a strong and healthy culture of honest and open
communication and engagement between Directors and
within the wider workforce of the Group, promoting fairness,
equality and professional development. The Directors
recognise the importance of their role in monitoring and
assessing the Company’s purpose, values and strategy,
which are reinforced in meetings between the Directors and
the Manager. Furthermore, the Manager provides quarterly
updates to the Directors on how the Company’s values and
culture are being applied throughout the Group’s operations
and in the implementation of its strategy. The application of
the Manager’s Responsible Investment Framework & Policy,
with its central principles of ESG and continual engagement
with counterparties, is an example of the Company’s
purpose, values and culture working in practice.
C. The Board should ensure that the necessary resources are
in place for the Company to meet its objectives and measure
performance against them. The Board should also establish
a framework of prudent and effective controls, which enable
risk to be assessed and managed.
The Board 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.
38 Report and Accounts December 2022 RIT Capital Partners plc
Note: the AIC Code does not include a Provision E.
Corporate Governance Report
AIC Code Principle Application
D. In order for the Company to meet its responsibilities to
shareholders and stakeholders, the Board should ensure
effective engagement with, and encourage participation from,
these parties.
The Board receives regular reports from the Manager
in relation to shareholder engagement as part of an
extensive investor relations programme. Shareholders
are encouraged to attend the AGM, where the Manager
presents on investment performance and strategy and
there is an opportunity for shareholders to ask questions to
the Board and the Manager. 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 35 and 36.
F. The Chairman leads the Board and is responsible for its
overall effectiveness in directing the Company. They should
demonstrate objective judgement throughout their tenure
and promote a culture of openness and debate. In addition,
the Chairman facilitates constructive Board relations and
the effective contribution of all non-executive Directors, and
ensures that Directors receive accurate, timely and clear
information.
The Chairman encourages active participation at Board
meetings, including setting the agenda items for discussion.
The Board receives a comprehensive suite of regular
information, including in-depth reports from the Manager
of performance, attribution, transactions and exposures on
a monthly and quarterly basis. The regular quarterly Board
meetings also include detailed reports on the finance and
operational activities of the Manager and Group, including
costs, liquidity, risk, investor relations, PR, IT, regulatory, legal
and compliance matters and HR. At these meetings, the
Manager also provides a quarterly update on ESG integration,
which is a standing agenda item.
Furthermore, Board meetings provide the opportunity for
the chairs of each Committee to present a summary of
the activities of their Committee, with minutes from the
Committee meetings included in the Board papers.
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.
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
2022, the Board comprised an independent non-executive
Chairman and nine non-executive Directors. Nine Directors
(including the Chairman) are independent and all are
independent of the Manager, with a clear division of
responsibilities between the Board and the Manager.
Assuch, the Board considers that its decision making is not
dominated by an individual or small group of individuals.
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Corporate Governance Report
AIC Code Principle Application
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.
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 35).
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 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.
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.
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
Hampton-Alexander Review and the FCA’s new listing rules
reporting requirements on diversity.
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.
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 27 to 29 and
demonstrate the strength of experience in the areas required
to provide effective strategic leadership and appropriate
governance of the Company.
The Board seeks to ensure an appropriate balance between
continuity and experience, and the positive benefits from
refreshing membership and the development of a diverse
Board (see page 33).
40 Report and Accounts December 2022 RIT Capital Partners plc
Corporate Governance Report
AIC Code Principle Application
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.
The Senior Independent Director led a formal and rigorous
internal evaluation of the Board in 2022. 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 Hampton-Alexander Review and the FCA’s
new listing rules reporting requirements.
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.
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
2022, concluding that EY had performed satisfactorily (see
page 47). The Audit and Risk Committee also performed
a detailed review of the 2021 ARA, the 2022 Half-Yearly
Financial Report and this 2022 ARA, as well as reviewing
supporting papers from the Manager, in order to ensure the
integrity of the statements (see page 44).
N. The Board should present a fair, balanced and
understandable assessment of the Company’s position and
prospects.
The Audit and Risk Committee reviewed the financial
and narrative statements within the 2022 ARA and 2022
Half-Yearly Financial Report, as well as supporting papers
and evidence from the Manager in relation to this area.
TheCommittee 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.
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AIC Code Principle Application
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.
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 20 to 25 and the Audit and Risk Committee Report
on pages 44 to 47.
P. Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
The Directors’ remuneration policy is subject to a binding
shareholders’ vote every three years and will next be tabled
to shareholders for approval at the forthcoming AGM.
ThePolicy 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.
Q. A formal and transparent procedure for developing
remuneration policy should be established. No director
should be involved in deciding their own remuneration
outcome.
As set out in the Directors’ Remuneration Report on
pages 48 to 51, 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.
42 Report and Accounts December 2022 RIT Capital Partners plc
AIC Code Principle Application
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.
In addition, as a self-managed investment trust, the Board has also considered the following principle from the UKCode:
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.
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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 andfinancial 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
44 Report and Accounts December 2022 RIT Capital Partners plc
Audit and Risk Committee Report
Introduction
I am pleased to present the Audit and Risk Committee
Report for 2022.
As highlighted in our Strategic Report, we faced a
multitude of challenges in the environment in which we
operate, characterised by high levels of uncertainty and
volatility.
It is with this in mind, that I would like to reiterate
our thanks and appreciation to the finance, risk and
compliance functions of the Manager for their continued
professionalism and for ensuring high standards of
reporting and control across the operations of the Group
during the year. The depth of experience, knowledge and
skill in our teams provides considerable comfort as we
face the challenges ahead.
Committee responsibility and composition
The Committee has oversight responsibilities delegated
to it by the Board in three principal areas: financial
reporting, risk management and the external audit.
The responsibilities are set out in more detail in the
Committee’s terms of reference, which may be viewed at
www.ritcap.com.
The Committee currently comprises four Directors,
each of whom is non-executive and independent of the
Company.
As noted in last years’ report, Amy Stirling elected not
to stand for re-election at our AGM in May. I would like
to thank Amy for her significant contribution, insight
and professionalism in leading this Committee. Having
been a member of this Committee for eight years,
Iaccepted the offer to stand as Committee Chair. The
Board is satisfied that I have requisite recent and relevant
financial experience to chair the Committee: Iam a
Fellow of the ICAEW and Professor of Accounting at
the London School of Economics and Political Science.
I served as a non-executive director on the board of
St.James’s Place plc from 2005 to 2013 where I chaired
the Risk Committee and was also a member of the Audit
Committee. I joined the Board of RIT Capital Partners plc
as a non-executive Director in 2014 and am also Chair of
the Valuation Committee.
The two other members of the Committee at the year
end were André Perold and Jutta af Rosenborg. André is
Chief Investment Officer of an investment management
firm, having previously been a professor of Finance and
Banking at Harvard Business School. Jutta joined the
Board as a non-executive Director in May 2022 and is also
a member of the Valuation Committee. She is a qualified
accountant and holds a Master’s degree in Business
Economics and Auditing from Copenhagen Business
School. She has held numerous senior roles in finance,
audit and risk management and has significant experience
in non-executive capacities.
In addition, I am delighted to welcome Philippe
Costeletos, who joined the Committee in February 2023.
Philippe is our Senior Independent Director, previously
head of Europe for a global private equity business and
has widespread experience in senior roles in banking and
investment firms.
Our individual biographies are shown on pages 27 to 29.
Ican confirm that the Board considers all members of the
Committee to have sufficient recent and relevant financial
experience so as to comply with the requirements of the
2019 AIC Code and the relevant aspects of the 2018 UK
Code (together, the Codes).
Committee meetings and activity during the year
We met four times in 2022, and once so far in 2023.
Committee meetings were held to review the Group’s
2021 Annual Report and Accounts and the June 2022
Half-Yearly Financial Report. A review of the Group’s 2022
Annual Report and Accounts was considered in February
2023.
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 2021 and 2022 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
2022, reviewing the effectiveness of the Group’s risk
management and internal control, by reference to reports
prepared by the Manager, including from its internal audit
function.
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Audit and Risk Committee Report
In addition to the activities described above, significant
matters we considered during the year are set out below:
Environmental, social and governance
During 2022, the Group worked to strengthen its
approach to integrating ESG considerations into its
strategy and operations, including building on the
Responsible Investment Framework & Policy published
in 2021. ESG considerations are embedded within the
approach taken by the Manager to new investments, and
the Manager prepares a quarterly status report in respect
of this, which will help support future reporting, including
under UN PRI during 2023.
In view of the pace of developments, we will keep under
review the ongoing financial reporting obligations in this
area, having previously recognised the importance of
climate-related matters in both our accounting policies
and as a principal risk. Under listing rule 15.4.29(R),
the Company, as a closed ended investment fund, is
exempt from complying with the Task Force on Climate
related Financial Disclosures (TCFD). Nonetheless, the
Company recognises that the TCFD recommendations
are intended to help determine climate-related risks and
opportunities across our operations and our portfolio.
Consequently, over the course of 2022, the Board
engaged a leading international sustainability consultancy
to assist its consideration on TCFD reporting. In 2023,
we will continue to work with this consultancy to further
develop our non-financial reporting in line with elements
of the TCFD framework. Our internal ESG documentation
processes will be subject to an internal audit during 2023.
The valuation of private investments and other assets
Private investments represent 40.7% of net assets
and comprise direct investments, as well as 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 valuations are usually prepared on a quarterly
basis, albeit with a time lag which may be up to three
months, as is normal in the industry. The Manager reviews
these valuations and, where possible, the justification
for any changes, as well as considering any additional
supporting information. In addition, where the Manager has
direct access to the underlying companies, it prepares its
own valuations using industry-standard approaches.
The results of this analysis are reported in detail on a
six-monthly basis to the Valuation Committee, which is
responsible for the final decisions on valuation.
We have therefore considered the work of the Valuation
Committee (which I also chair), the results of their
discussions with the Manager and the external auditor.
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 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. Here, the
combination of detailed processes, rigorous analysis and,
where relevant, external advice has provided comfort over
the portfolio valuations. Three members of this Committee,
myself included, also sit on the Valuation Committee.
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.
Cyber risk
In light of the ongoing elevated cyber risks facing
organisations, the Committee carefully considered the
measures in place across the Group to mitigate these
risks. During the early part of the year, the Manager
undertook an external review of its cyber security
framework, following which the Manager gained
accreditation for ‘cyber essentials’ and ‘cyber essentials
plus’, both provided by the National Cyber Security
Centre. During the year, the Committee received a
separate presentation from the Manager’s Head of IT,
focused on cyber risk and cloud-based systems and the
employee training and awareness programmes in this
area. While there is no room for complacency in such
a fast-moving area, the Committee was satisfied that
sufficient 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.
46 Report and Accounts December 2022 RIT Capital Partners plc
Audit and Risk Committee Report
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 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. 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 is summarised in the
Principal Risks and Viability section on pages 20 to 25. The
relative importance of each principal risk is assessed by
reference to the possible impact on the Group’s net asset
value or share price should a loss occur, alongside the
likelihood of that loss occurring, taking into consideration
the existing control environment. The review included
consideration of the 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 Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting published by the FRC in September 2014.
Internal audit and compliance
As part of the review of the control environment, the
Manager, through its Compliance Officer, undertakes
an internal audit of selected areas agreed with the
Committee. The 2022 internal audits included an
evaluation of the internal process around private
investments know-your-customer procedures and
controls. The dealing process of the Manager was also
considered to ascertain whether best execution was
consistently achieved. 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 nature of the Company’s
operations.
In addition, BNP Paribas Trust Corporation UK
Limited (as Depositary), undertook a review of the
Manager’s arrangements under AIFMD for investment
administration, compliance, risk management 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. During the year, after an extensive tracing
exercise in accordance with FCA guidance, the Manager
was able to pay the residual balance to charity (while
retaining the liability in case any future claimants arise).
Under the FCA’s new Investment Firms Prudential
Regime (IFPR), the Manager is required to produce an
Internal Capital Adequacy and Risk Assessment (ICARA).
The Committee was updated on this process, and on
the satisfactory completion of the first report, with no
substantive concerns raised.
The Manager also reports to the Committee the results
of its monitoring of external fund manager’s 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.
BEIS White Paper
The Department for Business, Energy and Industrial
Strategy (BEIS) published a White Paper ‘Restoring trust
in audit and corporate governance’ in March 2021, which
proposes wide-ranging changes to the responsibilities of
audit committees and considers attestation on internal
controls among other proposals. Consultation continued
in 2022 and we expect that further updates will follow in
due course. The Committee is aware of these proposals
and will take the appropriate action once any proposals
relevant to the Company are finalised.
Post Covid-19 environment
The Group operates a hybrid working policy, which has
proved helpful in a competitive market for talent, while
also allowing the effective and efficient operation of the
Group. The IT systems have continued to perform well
and all internal control procedures have continued to be
applied with specific adaptations to enable controls to be
effective while operating remotely.
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External auditor
The external auditor, EY, has completed its fifth annual
audit following its appointment as a result of a tender
process in 2017.
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
2022. I have also had regular contact with the lead audit
partner during the year, who will be replaced by a new EY
partner after this year end, as part of EY’s auditor rotation
protocols.
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 2022 totalled £12,000 for audit-related assurance
work (regarding the Managers 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.
As the Chairman has noted, I will not be standing for re-
election at the forthcoming AGM and this will therefore
be my first and last report as Chair of this Committee. I
would like to thank my colleagues on the Committee for
their support and wise counsel, and for the team at the
Manager for their dedication and professionalism. I am
delighted to confirm that Jutta af Rosenborg has agreed
to take over as Chair of the Committee, with effect from
the AGM.
Mike Power
Chair, Audit and Risk Committee
Audit and Risk Committee Report
48 Report and Accounts December 2022 RIT Capital Partners plc
Directors’ Remuneration Report
Introduction
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31December 2022.
The current Directors’ Remuneration Policy was approved
by shareholders with 99.9% of the vote at the 2020
AGM and in line with the three-yearly timetable, we shall
submit a new Director’s Remuneration Policy as set out
below, to a binding shareholder vote at the forthcoming
AGM.
As well as the remuneration of RIT Directors, the
Committee is also responsible for oversight of the
remuneration policies associated with our operating
subsidiaries – JRCM, a regulated entity whose
remuneration arrangements are governed by the
FCA’s applicable Remuneration Codes, and SHL. Here,
incentive schemes are in place, tailored to the respective
businesses and appropriately structured and aligned with
shareholders’ interests.
The Directors’ Remuneration Policy and Remuneration
Report have been prepared in accordance with the Listing
Rules of the FCA, the relevant sections of the Companies
Act 2006 and The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008
(as amended). It also sets out how it has applied the
principles of the Codes relevant to the Company.
Proposed 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 2022, the Committee included three
further independent non-executive Directors: Sir James
Leigh-Pemberton, Maggie Fanari and Maxim Parr. The
Committee meets at least twice a year on a scheduled
basis and additionally as may be required.
The Committee is responsible for recommending the
fees paid to the non-executive Chairman and Directors,
by reference to the roles and time commitment of each
individual concerned. The final determination of the fees
payable to non-executive Directors is a matter for the
Board of Directors as a whole.
The overall fee structure is assessed in part by reference to
other 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 2022, fees of approximately
£11,519 (2021: £18,142) were paid to Alvarez & Marsal
in respect of their advice. Alvarez & Marsal abides by
the Remuneration Consultant’s Code of Conduct which
requires it to provide objective and impartial advice. It has
no other relationships with the Group and is therefore
independent.
In accordance with 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.
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.
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RIT Capital Partners plc Report and Accounts December 2022 49
Directors’ Remuneration Report
The performance assessment for awards under the AIS
reflect investment outperformance (as measured against
two KPIs: CPI plus 3.0% and the ACWI) as well as wider
achievements not directly linked to the NAV return.
The AIS is measured annually and includes longer-term
features such as a three-year absolute ‘high water mark’.
In addition, and in particular for management and senior
employees, AIS awards include significant deferrals into
RIT shares, which vest over the subsequent three years.
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.
The Remuneration Committee retains the ability to
clawback elements of previous awards if necessary.
The second main aspect of the remuneration approach is
a long-term incentive plan which is structured as awards
of restricted share units (RSUs). The RSUs vest after
three years and then typically have a further two-year lock
up before the underlying RIT shares can be sold. They
also incorporate qualitative performance standards, as
well as malus and clawback features.
Consulting with shareholders
Where appropriate, the Committee is responsible
for ensuring that there is pro-active engagement and
consultation with major shareholders and shareholder
representatives in respect of remuneration.
No payments were made to past Directors during the year.
Non-executive Directors’ remuneration
The remuneration of the non-executive Chairman
and Directors is determined by the Board as a whole.
Non-executive fees are reviewed periodically by the
Board with reference to market levels in 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 Chairman
1
£150,000
Non-executive Director £35,000
Additional fees:
Senior Independent Director fee £7,500
Committee membership fees:
Audit and Risk Committee £6,000
Conflicts Committee £3,000
Nominations Committee £4,000
Remuneration Committee £4,000
Valuation Committee £6,000
Audit and Risk Committee Chair
2
£10,000
All other Committee Chair fees (per
committee)
2
£7,500
1
The non-executive Chairman fee is inclusive of membership of Board
Committees.
2
The Committee Chair 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 2023 AGM. The
information on pages 50 and 51 has been audited where
required under the regulations and is indicated as audited
information where applicable.
50 Report and Accounts December 2022 RIT Capital Partners plc
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 31December
Non-executive Director
2021
Total
remuneration
£
2022
Total
remuneration
1
£
% Change in total
remuneration
between 2020
and 2021
2
% Change in total
remuneration
between 2021
and 2022
Chairman
Sir James Leigh-Pemberton 150,000 150,000 – –
Directors
Philippe Costeletos 69,500 74,500 2.4 7. 2
Maggie Fanari 37,000 44,667 – 20.7
Vikas Karlekar
3
– 13,731 n/a n/a
Cecilia McAnulty
3
– 13,731 n/a n/a
Maxim Parr 41,774 48,000 78.9 14.9
André Perold
4
36,000 52,228 (17.6) 45.1
Mike Power 49,500 61,167 – 23.6
Jutta af Rosenborg
5
– 31,962 n/a n/a
Hannah Rothschild 30,000 35,000 – 16.7
Amy Stirling
6
52,000 19,658 – (62.2)
Jeremy Sillem
7
28,856 – (28.2) n/a
Jonathan Sorrell
7
30,554 – 41.8 n/a
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
Vikas Karlekar and Cecilia McAnulty were appointed as Directors on 11 August 2022.
4
André Perold received £11,228 taxable benefits relating to travel from overseas in 2022, in addition to his annual Director fee of £41,000. In 2021
he received his annual Director fee of £36,000 and did not receive any taxable benefits.
5
Jutta af Rosenborg was appointed as a Director on 19 May 2022; she received £2,918 taxable benefits relating to travel from overseas in 2022,
in addition to her Director fee of £29,044.
6
Amy Stirling retired as a Director of the Company on 4 May 2022.
7
Jeremy Sillem and Jonathan Sorrell retired as Directors of the Company on 4 November 2021.
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RIT Capital Partners plc Report and Accounts December 2022 51
Directors’ Remuneration Report
Fees
The total fees payable to Directors for the year was
£530,498 (compared to £525,184 in the year ended
31December 2021). 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 £271,160,
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
31December 2022 in the ordinary shares of the
Company are shown below:
31 December 2022
Ordinary shares
of £1 each Beneficial
Non-
beneficial
% of voting
rights
Sir James Leigh-
Pemberton 5,855 – <0.1
Philippe Costeletos 51,850 – <0.1
Maggie Fanari – – –
Vikas Karlekar 993 – <0.1
Cecilia McAnulty – – –
Maxim Parr 321 – <0.1
André Perold – – –
Mike Power 2,488 – <0.1
Jutta af Rosenborg 4,032 – <0.1
Hannah Rothschild
1
14,354,512 15,402,708 19.1
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
Year ended
31 December
2021
Year ended
31 December
2022 Change
Total staff costs 46.9 35.6 (11.3)
Dividends 55.0 5 7. 6 2.6
Share buybacks 1. 4 11.0 9.6
Statement of shareholder voting
Votes in respect of the resolution to approve the
Directors’ Remuneration Report at the Company’s AGM
in May 2022 were cast as follows:
Number of
shares
% of
votes cast
Votes cast in favour 69,084,379 99.9
Votes cast against 64,506 0.1
Total votes cast 69,148,885 100.0
Votes withheld 339,079 –
Performance graph
In accordance with the Directors’ Remuneration Report
regulations, a performance graph which measures the
Company’s TSR over the period from 31 March 2012 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
Dec
2014
Dec
2016
Dec
2018
Dec
2020
Dec
2022
Mar
2012
Dec
2012
CPI plus 3.0%
60
100
140
180
220
260
300
340
Audit
The tables in this report on pages 50 and 51 have been
audited by Ernst & Young LLP.
The Directors’ Remuneration Report on pages 48 to 51
was approved by the Board and signed on its behalf by:
Philippe Costeletos
Chair, Remuneration Committee
52 Report and Accounts December 2022 RIT Capital Partners plc
Directors’ Report
Directors’ Report: statutory and other disclosures
The Directors present their report and audited financial statements for the year ended 31 December 2022.
Business review and future
developments ............................. page 3
Corporate governance ............... page 31
Directors’ remuneration .............page 48
Directors’ shareholdings ............page 51
Dividend .....................................page 4
Risk management and
internal control .......................... page 20
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
Section1158 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
pages27 to 29.
During the year ended 31 December 2022:
Directorate changes
• Amy Stirling retired as a Director on 4 May 2022;
• Jutta af Rosenborg was appointed as a Director on
19 May 2022; and
• Vikas Karlekar and Cecilia McAnulty were both
appointed as Directors on 11 August 2022.
Committee composition
• Mike Power was appointed as Chair of the Audit and
Risk Committee on 4May 2022;
• Maggie Fanari was appointed as a member of the
Nominations Committee on 4 May 2022; and
• Jutta af Rosenborg was appointed as a member of
the Audit and Risk, and Valuation Committees on
19May 2022.
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 2022, the drawn
indebtedness was £371 million with debt held at fair
value, or £387 million with debt held at par value. This
represented net gearing calculated in accordance with
AIC guidance of 6.2%.
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
pages 14 and 15.
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 67).
Fees within the long-only equity funds, whether
structured as segregated accounts or otherwise, typically
incur a management fee of up to 1% per annum and
in some cases a performance fee for outperformance
relative to a benchmark. The hedge funds and absolute
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RIT Capital Partners plc Report and Accounts December 2022 53
Directors’ Report
return and credit funds are slightly higher – typically a
1% to 2% management fee and typically a 15% 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
2022 have been estimated at 0.88% of RIT’s total average
net assets (2021: 0.87%).
Share capital
At 31 December 2022, the issued share capital
comprised 156,848,065 £1 ordinary shares, of which
689,863 were held by the Company in treasury as a result
of a series of share buybacks. Further details are shown
in Note 20 on page 81.
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 26 April 2023. At the AGM, shareholders
shall be asked to renew these authorities, as will be
explained in the separate Notice of the meeting.
Major holders of voting rights
As at 31 December 2022, the following notifications
had been received from the holders of 3% or more of
the voting rights conferred through the direct or indirect
holding of the Company’s ordinary shares of £1 each.
31 December 2022
Major holders of
voting rights
1
Total number
of shares
% of
voting rights
5
Direct or
indirect
Lord Rothschild
2,3
19,307,179 12.4 Indirect
Hannah Rothschild
2
15,402,708 9.9 Indirect
The Rothschild
Foundation
2
15,390,848 9.9 Direct
Evelyn Partners
Inv. Mgt. LLP 7,880,671 5.0 Indirect
Five Arrows Limited
4
6,757,835 4.3 Direct
1
The above table does not include Lord Rothschild’s or Hannah
Rothschild’s direct voting rights in shares in the Company which are
below the notifiable threshold.
2
As Lord Rothschild and Hannah Rothschild are both members and
trustees of the Rothschild Foundation, the above notifiable interests
include the same 15,390,848 shares held by this charity (which are
also included in Hannah Rothschild’s non-beneficial interests on
page 51 under Directors’ shareholdings).
3
Part of Lord Rothschild’s holdings include entities where Hannah
Rothschild is one of the beneficiaries, and therefore the relevant
shares also form part of her beneficial interests on page 51.
4
Lord Rothschild and Hannah Rothschild have an indirect beneficial
interest in the shares of the Company held by Five Arrows Limited.
5
The total interests notified to the Company that directly relates to,
and is overseen by, the family offices of Lord Rothschild and Hannah
Rothschild (including shares in which Lord Rothschild and Hannah
Rothschild do not have voting rights conferred through a direct or
indirect holding) is 20.9%.
As at 15 February 2023, 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.
Corporate responsibility
The Board is responsible for ensuring that appropriate
standards of corporate responsibility are adopted within
the Group, with day-to-day responsibility residing with our
Manager.
Within our own Group activities, we have always sought
to ensure we act as good corporate citizens through
minimising our environmental impact, and robust
corporate governance reinforced with an awareness of
our social responsibility.
In respect of the environment the Board considers our
primary environmental impact, outside of our investment
portfolio, comes from direct emissions generated from
business travel, and from our premises. Where possible,
executives will only travel where alternatives such as
video conference facilities are not practical. In relation
to its premises, page 35 sets out how the Company
monitors and has taken steps to reduce its Greenhouse
Gas (GHG) emissions and maximise the recycling of
materials.
Total energy consumption for the year ended
31December 2022 was 452,923 kWh compared to
367,646 kWh for the year ended 31 December 2021. The
increase in total energy consumption reflects there being
no Covid restrictions in place during the year and the
office being fully open throughout 2022.
GHG emissions required to be reported in respect of the
years ended 31 December 2022 and 2021 were as follows:
Source CO
2
(tonnes)
Intensity ratio:
CO
2
(tonnes)
per FTO
1
2022:
Scope 1 Gas
26
0.4
Scope 2 Electricity
59 0.8
Total 85
1.2
Source CO
2
(tonnes)
Intensity ratio:
CO
2
(tonnes)
per FTO
1
2021:
Scope 1 Gas
18 0.2
Scope 2 Electricity
57 0.9
Total
75 1.1
1
Full-time occupant.
54 Report and Accounts December 2022 RIT Capital Partners plc
Directors’ Report
Our GHG emissions are calculated for the Group under
the financial control approach and in accordance with
ISO14064-1: 2018 standard using the 2022 GHG
conversion factors developed by the Department for
Environment, Food & Rural Affairs.
The Group supports the ambitions of the Paris Climate
Change Agreement and is committed to reducing
its operational emissions, including through energy
efficiency initiatives in areas such as lighting and heating
in our offices. We continue to take steps to further
understand our impact on the environment, covering not
just our direct operational emissions, but also through
our indirect emissions (Scope 3). Consideration of our
Scope 3 emissions forms part of our preparation for
the requirements of the Task Force on Climate-related
Financial Disclosures (TCFD) in advance of any reporting
of the TCFD by the Group.
The Group operates an ethics policy which applies
to all staff, including in relation to social and human
rights issues. The Board is also supportive of moves
towards greater diversity and inclusivity. At the year end,
the composition of the RIT Board complied with the
recommendations of the Parker Review, the Hampton-
Alexander Review and the FCA’s new listing rules
reporting requirements on diversity. The overall employee
base is divided between 45 men and 17 women.
Further information on how ESG factors are considered in
terms of how we engage with our stakeholders is set out
in our Corporate Governance Report.
Diversity
As part of the Group’s diversity and inclusion policies,
recruitment processes are in place to allow us to monitor
the diversity of Board candidates and job applicants,
ensuring we are attracting candidates regardless of
their gender, age, ethnicity, disability, sexual orientation
or background. Further initiatives that we have in place
to support diversity include a flexible working policy,
enhanced maternity leave as well as adoption and shared
parental leave.
JRCM continues to participate in the 10,000 Black Interns
initiative to attract a more diverse range of talent to the
asset management sector and in 2022, JRCM welcomed
its first intern under the Girls Are INvestors (GAIN)
programme which aims to improve gender diversity in the
sector.
Modern slavery
We do not tolerate slavery or human trafficking and we
are committed to acting ethically and with integrity in all
our business dealings and relationships. In accordance
with the Modern Slavery Act 2015, JRCM publishes a
Modern Slavery Statement annually which may be viewed
on the Company’s website: www.ritcap.com.
Engagement and stewardship
The Company’s Engagement and Stewardship Policy may
be viewed on its website.
Save for voting rights on the Company’s investments held
in segregated accounts (managed by external managers
who have control on the voting of those shares) the
Manager’s investment department determines voting on
all the resolutions of directly-held investee companies and
funds. It does not use proxy advisors.
In addition, as a signatory of the UN PRI, we also commit
to be active owners and incorporate ESG issues into our
stewardship policies and practices.
In 2022, the Company generally voted in favour of
resolutions for investee companies in which it held a
publicly notifiable interest. Monitoring of directly-held
investments is also carried out by JRCM’s investment
department, in line with its Responsible Investment Policy
& Framework, who are responsible for elevating any
matters of concern to the JRCM Investment Committee.
Active intervention appropriate for the circumstances will
be considered where it is in the Company’s best interests
and aligned with the commitments set out in the previous
paragraph.
Cross holdings
The FCA Listing Rules also require closed-ended
investment companies to disclose quarterly all of their
investments in “other listed closed-ended investment
funds ... which themselves do not have stated investment
policies to invest no more than 15% of their total assets
in other listed closed-ended investment funds.”
The Group discloses such investments when necessary,
but does not restrict its own investment policies in this
manner. There were no such investments held by the
Group as at 31 December 2022 and 31 December 2021.
Annual General Meeting
The Company’s AGM is scheduled to be held on 26 April 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.
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RIT Capital Partners plc Report and Accounts December 2022 55
Directors’ Report
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 2022 (see pages 7, 8, 33, 35
and 36).
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 2022,
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
Rule9.8.4.
The Companies, Partnerships and Groups (Accounts
and Reports) Regulations 2015
Information on subsidiaries that is required to be
disclosed under the above regulations is disclosed in
Note 29.
Disclosable information in respect of other investments is
contained in Note 32.
The Directors’ Report on pages 52 to 55 was approved by
the Board and signed on its behalf by:
Sir James Leigh-Pemberton
Chairman
RIT Capital Partners plc
Financial Statements
for the year ended 31 December 2022
Consolidated Income Statement and Consolidated Statement
of Comprehensive Income
Consolidated income statement
Year ended 31 December 2022 2021
£ million Notes Revenue Capital Total Revenue Capital Total
Investment income 2 1 9.1 – 1 9.1 1 2.7 – 12.7
Other income
Gains/(losses) on fair value investments
3, 5 – (555.5 ) (555.5 ) – 901 .8 90 1 .8
Gains/(losses) on monetary items and borrowings – 20.2 20.2 – 1 8.0 1 8.0
Expenses
Operating expenses
4, 5 (36.0 ) (7 .6 ) (43.6 ) (29.6 ) (24.8 ) (54.4 )
Profit/(loss) before finance costs and tax 6 (9.3 ) (542.9 ) (552.2 ) (1 3.1 ) 895.0 881 .9
Finance costs 7 (5.0 ) (20.0 ) (25.0 ) (4.0 ) (16.0 ) (20.0 )
Profit/(loss) before tax (1 4.3 ) (562.9 ) (577 .2 ) (17 .1 ) 879.0 861 .9
Taxation 8
Profit/(loss) for the year (14.3 ) (562.9 ) (577 .2 ) (17 .3 ) 876.5 859.2
Earnings/(loss) per ordinary share – basic 9 (9.2 p) (362.1 p) (371 .3 p) (1 1 .1 p) 561 .4 p 550.3 p
Earnings/(loss) per ordinary share – diluted
9 (9.2 p) (362.1 p) (371 .3 p) (1 1 .0 p) 556.5 p 545.5 p
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 2022 2021
£ million Notes Revenue Capital Total Revenue Capital Total
Profit/(loss) for the year (1 4.3 ) (562.9 ) (577 .2 ) (17 .3 ) 876.5 859.2
Revaluation gain/(loss) on property, plant and equipment 10 – (2.1 ) (2.1 ) – (0.2 ) (0.2 )
Actuarial gain/(loss) in defined benefit pension plan 11 (4.5 ) – (4.5 ) 1. 9 – 1. 9
Deferred tax (charge)/credit allocated
to actuarial gain/(loss) 12 1. 1 – 1. 1 (1 .1 ) – (1 .1 )
Total comprehensive income/(expense) for the year (17 .7 ) (565.0 ) (582.7 ) (16.5 ) 876.3 859.8
The Notes on pages 63 to 86 form part of these financial statements.
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RIT Capital Partners plc Report and Accounts December 2022 57
Consolidated Balance Sheet
At 31 December
£ million Notes 2022 2021
Non-current assets
Investments held at fair value 13, 14 3,586.3 4,291 .8
Investment property 13, 15 37 .9 38.3
Property, plant and equipment 10 20.7 23.1
Retirement benefit asset 11 0.5 3.8
Derivative financial instruments 13 1. 0 2.9
Current assets
Derivative financial instruments 13 57 .3 32.7
Other receivables 16 245.3 262.8
Amounts owed by group undertakings 17 4.5 3.7
Cash at bank 21 8.0 325.9
Total assets 4,1 7 1 .5 4,985.0
Current liabilities
Borrowings 18 (236.2 ) (240.0 )
Derivative financial instruments 13 (1 0.4 ) (8.2 )
Other payables 19 (63.5 ) (1 68.8 )
Amounts owed to group undertakings 17 (0.1 ) –
(31 0.2 ) (417 .0 )
Net current assets/(liabilities) 21 4.9 208.1
Total assets less current liabilities 3,861 .3 4,568.0
Non-current liabilities
Borrowings 18 (1 34.4 ) (1 68.9 )
Derivative financial instruments 13 – (2.9 )
Deferred tax liability 12 (0.2 ) (1 .3 )
Provisions (1 .8 ) (1 .0 )
Lease liability (3.2 ) (3.6 )
(1 39.6 ) (1 77 .7 )
Net assets 3,721 .7 4,390.3
Equity attributable to owners of the Company
Share capital
20 1 56.8 156.8
Share premium
21 45.7 45.7
Capital redemption reserve
22 36.3 36.3
Own shares reserve
23 (46.3 ) (23.0 )
Capital reserve
25 3,548.9 4,1 74.4
Revenue reserve
26 (29.1 ) (1 1 .4 )
Revaluation reserve
27 9.4 11. 5
Total equity 3,721 .7 4,390.3
Net asset value per ordinary share – basic 28 2,414 p 2,81 9 p
Net asset value per ordinary share – diluted 28 2,388 p 2,794 p
The financial statements on pages 57 to 62 were approved by the Board and authorised for issue on 27 February 2023.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 63 to 86 form part of these financial statements.
58 Report and Accounts December 2022 RIT Capital Partners plc
Parent Company Balance Sheet
At 31 December
£ million Notes 2022 2021
Non-current assets
Investments held at fair value 13, 14 3,485.2 4,190.5
Investment property 13, 15 37.9 38.3
Property, plant and equipment 10 20.6 23.0
Investments in subsidiary undertakings 29 107.2 107.5
Derivative financial instruments 13 1. 0 2.9
3,651.9 4,362.2
Current assets
Derivative financial instruments 13 57.3 32.7
Other receivables 16 244.9 262.4
Cash at bank 193.9 313.9
496.1 609.0
Total assets 4,148.0 4,971.2
Current liabilities
Borrowings 18 (236.2) (240.0)
Derivative financial instruments 13 (10.4) (8.2)
Other payables 19 (54.1) (143.8)
Amounts owed to group undertakings 17 (90.2) (125.1)
(390.9) (517.1)
Net current assets/(liabilities) 105.2 91.9
Total assets less current liabilities 3,757.1 4,454.1
Non-current liabilities
Borrowings 18 (134.4) (168.9)
Derivative financial instruments 13 – (2.9)
Provisions (2.2) (1.0)
Lease liability (3.2) (3.7)
(139.8) (176.5)
Net assets 3,617.3 4,277.6
Equity
Share capital 20 156.8 156.8
Share premium 21 45.7 45.7
Capital redemption reserve 22 36.3 36.3
Capital reserve:
At 1 January 4,203.4 3,380.8
Profit for the year (556.2) 879.0
Treasury shares purchase 20 (11.0) (1.4)
Dividends paid 30 (57.6) (55.0)
Capital reserve at 31 December 25 3,578.6 4,203.4
Revenue reserve:
At 1 January (176.1) (136.8)
Loss for the year (33.4) (39.3)
Revenue reserve at 31 December 26 (209.5) (176.1)
Revaluation reserve 27 9.4 11. 5
Total equity
3,617.3 4,277.6
The Company’s total comprehensive expense for the year was £591.7 million (2021: income of £839.5 million).
The financial statements on pages 57 to 62 were approved by the Board and authorised for issue on 27 February 2023.
Sir James Leigh-Pemberton
Chairman
The Notes on pages 63 to 86 form part of these financial statements.
RIT Capital Partners plc Report and Accounts December 2022 59
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60 Report and Accounts December 2022 RIT Capital Partners plc
Consolidated Statement of Changes in Equity
£ million
Share
capital
Share
premium
Capital
redemption
reserve
Own
shares
reserve
Capital
reserve
Revenue
reserve
Revaluation
reserve
Total
equity
Balance at 1 January 2021 1 56.8 45.7 36.3 (1 5.3 ) 3,350.1 5.1 11. 7 3,590.4
Profit/(loss) for the year – – – – 876.5 (17 .3 ) – 859.2
Revaluation gain/(loss) on property, plant and
equipment – – – – – – (0.2 ) (0.2 )
Actuarial gain/(loss) in defined benefit plan – – – – – 1. 9 – 1. 9
Deferred tax (charge)/credit allocated to
actuarial gain/(loss) – – – – – (1 .1 ) – (1 .1 )
Total comprehensive
income/(expense) for the year
Dividends paid – – – – (55.0 ) – – (55.0 )
Purchase of treasury shares – – – – (1 .4 ) – – (1 .4 )
Movement in own shares reserve – – – (7 .7 ) – – – (7 .7 )
Movement in share-based payments – – – – 4.2 – – 4.2
Balance at 31 December 2021 156.8 45.7 36.3 (23.0 ) 4,1 7 4.4 (1 1 .4 ) 11 . 5 4,390.3
Balance at 1 January 2022 1 56.8 45.7 36.3 (23.0 ) 4,1 74.4 (1 1 .4 ) 11. 5 4,390.3
Profit/(loss) for the year – – – – (562.9 ) (14.3 ) – (577 .2 )
Revaluation gain/(loss) on property, plant and
equipment – – – – – – (2.1 ) (2.1 )
Actuarial gain/(loss) in defined benefit plan – – – – – (4.5 ) – (4.5 )
Deferred tax (charge)/credit allocated to
actuarial gain/(loss) – – – – – 1. 1 – 1. 1
Total comprehensive
income/(expense) for the year – – – – (562.9 ) (17 .7 ) (2.1 ) (582.7 )
Dividends paid – – – – (57 .6 ) – – (57 .6 )
Purchase of treasury shares – – – – (1 1 .0 ) – – (1 1 .0 )
Movement in own shares reserve – – – (23.3 ) – – – (23.3 )
Movement in share-based payments
Balance at 31 December 2022 156.8 45.7 36.3 (46.3 ) 3,548.9 (29.1 ) 9.4 3,721.7
The Notes on pages 63 to 86 form part of these financial statements.
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Parent Company Statement of Changes in Equity
£ million
Share
capital
Share
premium
Capital
redemption
reserve
Capital
reserve
Revenue
reserve
Revaluation
reserve
Total
equity
Balance at 1 January 2021 156.8 45.7 36.3 3,380.8 (136.8) 11. 7 3,494.5
Profit/(loss) for the year – – – 879.0 (39.3) – 839.7
Revaluation gain/(loss) on property, plant and equipment – – – – – (0.2) (0.2)
Total comprehensive income/(expense) for the year – – – 879.0 (39.3) (0.2) 839.5
Dividends paid – – – (55.0) – – (55.0)
Purchase of treasury shares – – – (1.4) – – (1.4)
Balance at 31 December 2021
156.8 45.7 36.3 4,203.4 (176.1) 11.5 4,277.6
Balance at 1 January 2022 156.8 45.7 36.3 4,203.4 (176.1) 11. 5 4,277.6
Profit/(loss) for the year – – – (556.2) (33.4) – (589.6)
Revaluation gain/(loss) on property, plant and equipment – – – – – (2.1) (2.1)
Total comprehensive income/(expense) for the year – – – (556.2) (33.4) (2.1) (591.7)
Dividends paid – – – (57.6) – – (57.6)
Purchase of treasury shares
– – – (11.0) – – (11.0)
Balance at 31 December 2022
156.8 45.7 36.3 3,578.6 (209.5) 9.4 3,617.3
The Notes on pages 63 to 86 form part of these financial statements.
62 Report and Accounts December 2022 RIT Capital Partners plc
Consolidated and Parent Company Cash Flow Statement
Year ended 31 December Consolidated cash flow Parent Company cash flow
£ million Notes 2022 2021 2022 2021
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest 31 57 .7 7 1. 8 7. 7 78.1
Interest paid (25.0 ) (20.0 ) (25.0) (20.0)
Net cash inflow/(outflow) from operating activities 32.7 51 .8 (17.3) 58.1
Cash flows from investing activities:
Sale/(purchase) of property, plant and equipment (0.1 ) (0.1 ) (0.1) (0.1)
Investments in subsidiary undertakings
Net cash inflow/(outflow) from investing activities (0.1 ) (0.1 ) (2.6) (3.2)
Cash flows from financing activities:
Repayment of borrowings (591 .6 ) (421 .9 ) (591.6) (421.9)
Drawing of borrowings 555.4 469.8 555.4 469.8
Purchase of ordinary shares by EBT
1
23 (40.4 ) (21 .0 ) – –
Purchase of ordinary shares into treasury 20 (1 1 .0 ) (1 .4 ) (11.0) (1.4)
Dividends paid
30 (57 .6 ) (55.0 ) (57.6) (55.0)
Net cash inflow/(outflow) from financing activities (1 45.2 ) (29.5 ) (104.8) (8.5)
Increase/(decrease) in cash in the year (1 1 2.6 ) 22.2 (124.7) 46.4
Cash at the start of the year 325.9 296.8 313.9 260.6
Effect of foreign exchange rate changes on cash
Cash at the year end
Reconciliation:
Cash at bank
Cash at the year end
1
Shares are disclosed in the own shares reserve on the consolidated balance sheet.
The Notes on pages 63 to 86 form part of these financial statements.
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Notes to the Financial Statements
64 Report and Accounts December 2022 RIT Capital Partners plc
Notes to the Financial Statements
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Notes to the Financial Statements
66 Report and Accounts December 2022 RIT Capital Partners plc
Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
72 Report and Accounts December 2022 RIT Capital Partners plc
13. Financial instruments (continued)
Notes to the Financial Statements
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RIT Capital Partners plc Report and Accounts December 2022 73
13. Financial instruments (continued)
Notes to the Financial Statements
74 Report and Accounts December 2022 RIT Capital Partners plc
Notes to the Financial Statements
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Notes to the Financial Statements
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13. Financial instruments (continued)
Notes to the Financial Statements
78 Report and Accounts December 2022 RIT Capital Partners plc
13. Financial instruments (continued)
Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
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Notes to the Financial Statements
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RIT Capital Partners plc Report and Accounts December 2022 87
Independent Auditor’s Report
Independent Auditor’s Report to the Members of
RIT Capital Partners plc
88 Report and Accounts December 2022 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 2022 and of the Group’s loss 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 2022 which comprise:
Group Parent Company
Consolidated Income Statement and Consolidated Statement of
Comprehensive Income for the year to 31 December 2022
Parent Company Balance Sheet as at 31 December 2022
Consolidated Balance Sheet as at 31 December 2022 Parent Company Statement of Changes in Equity for the year to
31December 2022
Consolidated Statement of Changes in Equity for the year to
31December 2022
Consolidated and Parent Company Cash Flow Statement for the year
to 31December 2022
Consolidated and Parent Company Cash Flow Statement for the year
to 31December 2022
Related notes 1 to 32 to the financial statements, including a
summary of significant accounting policies
Related notes 1 to 32 to the financial statements, including a
summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting
standards and as regards 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.
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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 2024, which is sixteen months from the date
these financial statements were authorised for issue;
Reviewing the Group’s cashflow forecasts, stress tests and covenant calculations, 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 Reports & 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 2024, which is sixteen 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.
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90 Report and Accounts December 2022 RIT Capital Partners plc
Overview of our audit approach
Key audit matters
Risk of inaccurate recognition of investment income and gains/(losses) on investments held at fair value.
Risk of incorrect valuation of direct private and illiquid fund investments.
This approach is consistent with the 2021 audit.
Audit scope
The Group is principally managed from one location in London. All core functions are located in
London.
The Group comprises one consolidated subsidiary and seven 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.
This approach is consistent with the 2021 audit.
Materiality
Overall Group materiality of £37.2 million which represents 1% of net assets.
This approach is consistent with 2021 audit.
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other
factors when assessing the level of work to be performed at each entity.
The investment portfolio balance is the most material part of the Consolidated Balance Sheet. Monitoring and control over the valuation
of investments is exercised by the Manager centrally in London, and as such is audited wholly by the London based Group audit team.
Monitoring and control over the operations of the subsidiaries within the Group is also centralised in London. The Group audit team
performed all the work necessary to issue the Group and Parent Company audit opinion, including undertaking all of the audit work on the
risks of material misstatement identified above. There were no component audit teams.
In establishing our audit approach, we considered the type of audit procedures required to be performed and the audit evidence required
to obtain sufficient and appropriate audit evidence as a basis of our opinion on the Group. 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 23 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 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.
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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 (losses of
£536.4 million, 2021: gains of £914.5 million)
Refer to the Audit and Risk Committee Report (pages 44 to
47); Accounting policies (pages 63 to 66); and Notes 2 and
3 of the Consolidated Financial Statements (page 67)
The Group’s revenue consists of investment income and
gains/(losses) on investments held at fair value.
The accuracy of recognition and measurement of revenue is
material to the Group’s financial statements.
Shareholder expectations may place pressure on the
Manager to influence the recognition of revenue. This may
result in overstatement or deferral of revenues to assist in
meeting current or future targets or expectations.
We obtained an understanding of the Manager’s processes and controls
around the investment income process and valuation process to ascertain
whether realised and unrealised gains/(losses) and investment income are
appropriately calculated by performing walkthroughs in which we evaluated
the design and implementation of controls.
For gains/(losses) on investments held at fair value, on a sample basis,
wehave:
recalculated the unrealised gains/(losses), considering the procedures
performed on the valuations where relevant;
agreed purchases and sales of investments during the year to trade
tickets, call and distributions notices, and to the corresponding cash
movements in bank statements; and
recalculated realised gains/(losses) from disposals in the year.
For investment income, on a sample basis, we have:
agreed dividend income to an independent source and to corresponding
receipts in bank statements;
agreed distributions received to the notices from the fund managers and
to bank statements;
recalculated interest income based on the terms of underlying
agreements;
tested the completeness of income receipts by verifying that income
declared during the period, per an independent price source, has been
correctly recorded as an income receipt; and
recalculated income from investment properties based on the terms of
the underlying agreements.
Key observations communicated to the Audit and Risk Committee
Our audit procedures did not identify any material matters regarding the recognition of investment income and gains/(losses)
oninvestments.
All transactions tested have been materially recognised in accordance with contractual terms and UK-adopted international
accountingstandards.
Based on our procedures performed we have no further matters to report to the Audit and Risk Committee.
Independent Auditor’s Report to the Members of
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92 Report and Accounts December 2022 RIT Capital Partners plc
Risk Our response to the risk
Risk of incorrect valuation of direct private and illiquid fund
investments (£2,262.6 million, 2021: £2,379.3 million)
Refer to the Audit and Risk Committee Report (pages 44 to
47); Accounting policies (pages 63 to 66); and Note 13 of
the Consolidated Financial Statements (pages 71 to 79)
The Group’s investment portfolio includes both direct
private and illiquid fund investments.
Direct private investments
Of the direct private investments, £174.3 million of
valuations were assessed directly by the Manager as at
31 December 2022. The valuations are determined by the
Manager and the final valuations are reviewed and approved
by the Valuation Committee.
The valuations are based on the nature of the underlying
business which has been invested in. The methods used
may include:
applying a multiple to earnings or revenues;
using a discounted cash flow model;
using recent transaction prices and recent offers; and
assessing the movement in the market via listed
comparable companies.
We obtained an understanding of the Manager’s processes and controls for
determining the fair valuation of direct private and illiquid fund investments
by performing walkthroughs in which we evaluated the design and
implementation of controls. This included reviewing the governance structure
and protocols around oversight of the valuation process, including their
oversight of the valuations performed by the underlying GPs and funds and
corroborating our understanding by attending Valuation Committee meetings
in an observational capacity.
We assessed the Manager’s valuation methodology against applicable
reporting frameworks, including UK-adopted international accounting
standards and the International Private Equity and Venture Capital (‘IPEV’)
Guidelines. We sought explanations from the Manager where there were
judgments applied in its application of the guidelines and assessed their
appropriateness.
Direct private investments
For the valuation of direct private investments assessed by the Manager, on
a sample basis, we corroborated the key inputs into the valuation models and
performed procedures on key judgments made by the Manager, including:
challenging the appropriateness of assumptions made by the Manager
in the application of the valuation models;
assessing the suitability of earnings multiples by considering the
appropriateness of the selected comparable companies, including
adjustments made to reflect the differences between these and the
investee company;
challenging the appropriateness of discount rates applied in discounted
cash flow models;
testing the mathematical accuracy of the valuation models;
comparing the fair valuation to recently completed market transactions
or recent offers, where relevant and observable; and
reviewing the appropriateness of comparable companies considered by
the Manager and independently verifying market movements to external
sources.
With the assistance of our valuation specialists, we:
formed an independent range for the key assumptions used in the
valuation of a sample of direct private investments, with reference to
relevant industry and market valuation considerations;
derived a range of fair values using our assumption and other qualitative
risk factors; and
compared the range to the Manager’s fair value and discussed our
results with the Manager.
We have considered the impact of COVID-19, the Russia-Ukraine conflict
and recent declines in the cryptocurrency market throughout the procedures
performed on the valuation of direct private investments, by challenging
whether the valuation methodologies and assumptions used remained
appropriate.
We discussed with the Manager the rationale for any differences between
the exit prices of investments realised during the year and the prior year
fair value, to further verify the reasonableness of the current year valuation
models and methodology adopted by the Manager.
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RIT Capital Partners plc Report and Accounts December 2022 93
Risk Our response to the risk
Illiquid fund investments (including GP-led direct private
investments)
The valuations of the illiquid funds and remaining direct
private investments, which are investments in private
companies held by third-party managed special purpose
vehicles (‘GP-led direct private investments’), are material.
The illiquid funds include investments that are classified
by the Manager as ‘private investments – funds and
absolute return and credit’.
The valuations are determined by the governing bodies
of the investment vehicles, typically including the
fund managers, General Partners (‘GP’) and sponsors.
The valuations can include significant estimates and
judgments, as they are often based on fair valuations
of their underlying direct private investments, for which
there may be limited observable information available and
uncertainty about future business performance.
The valuations are provided to the Group and assessed
by the Manager, who are afforded discretion to make
any adjustments they deem appropriate, for example for
transactions between the date of the valuation provided
and the reporting date.
Illiquid fund investments (including GP-led direct private investments)
For the valuation of illiquid fund and GP-led direct private investments, on a
sample basis, we:
confirmed the most recently available fund valuation to third party
statements, including from the GP, fund manager or fund administrator;
assessed prior year valuations which were based on unaudited net asset
statements by reference to their respective audited financial statements.
We have investigated and obtained explanations for all material
movements;
obtained and assessed the due diligence performed by the Manager for
new fund investments made in the year; and
where the most recently available fund valuation is not at the year
end date, we reviewed the Manager’s approach to address the timing
difference and challenged any adjustments made to the last valuation
received. Where applicable, we corroborated these adjustments by
agreeing any cash flows between the date of the fund valuation and the
Group’s year end valuation date to supporting documentation.
For our sample, we also assessed the impact of contradictory evidence, to
ensure an appropriate valuation was determined.
We challenged the Manager on the IFRS 13 levelling classification of
the illiquid fund portfolio, focusing on those which are considered to be
subjective. We selected a sample of Level 2 investment fund holdings,
for which the judgment is made considering the nature of the underlying
investments of the fund and reviewed their financial statements to confirm
the appropriate levelling classification.
During the post year end period, we monitored the receipt by the Manager
of updated valuation statements and other financial information relevant to
the valuation of the illiquid fund investments in order to assess whether any
material differences arose.
Key observations communicated to the Audit and Risk Committee
All valuations tested, including those reviewed by EY valuation specialists, were found to be materially carried in accordance with the
UK-adopted international accounting standards and IPEV Guidelines.
Through our back testing of exit prices we gained an understanding of the differences between the exit prices of investments realised
during the year and the prior year fair value. We did not identify any realisations of direct private investments with a significant unexplained
movement from the prior year fair value.
We did not identify any material issues when comparing prior year valuations which were based on unaudited net asset statements to their
respective audited financial statements.
Based on our procedures performed we had no material matters to report to the Audit and Risk Committee.
Independent Auditor’s Report to the Members of
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94 Report and Accounts December 2022 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
auditprocedures.
We determined materiality for the Group to be £37.2 million (2021: £43.9 million), which is 1% (2021: 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 £36.2 million (2021: £42.8 million), which is 1% (2021: 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 2022 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% (2021: 75%) of our planning materiality, namely £27.9m (2021: £32.9m). 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 £1.9 million (2021:
£2.2 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s report
thereon. The Directors are responsible for the other information 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.
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RIT Capital Partners plc Report and Accounts December 2022 95
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 25;
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 25;
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 25;
Directors’ statement on fair, balanced and understandable set out on page 43;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 21;
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 20; and
The section describing the work of the audit committee set out on page 44.
Independent Auditor’s Report to the Members of
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96 Report and Accounts December 2022 RIT Capital Partners plc
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 43, 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 Chair 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.
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RIT Capital Partners plc Report and Accounts December 2022 97
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 five years, covering the years ending
31 December 2018 to 31 December 2022.
The audit opinion is consistent with the additional report to the Audit and Risk committee.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and Parent Company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Matthew Price (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor, London
27 February 2023
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.
Other Information
31 December 2022
(Unaudited)
RIT Capital Partners plc
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RIT Capital Partners plc Report and Accounts December 2022 99
Investment portfolio reconciliation
The following table shows a summary reconciliation between the amounts reported within the Investment Portfolio, as shown on pages 17
to 19, and the 31 December 2022 consolidated balance sheet, as shown on page 58:
31 December 2022
£ million
Quoted
equity
Private
investments
Absolute
return
and credit
Real
assets
Other
investments
Net liquidity/
borrowing/
other
Consolidated
balance
sheet
Non-current assets
Portfolio investments at fair value 1,323.7 1,483.5 674.4 3.6 – – 3,485.2
Non-consolidated subsidiaries 0.1 32.3 72.4 – – (3.7) 101.1
Investments held at fair value 1,323.8 1,515.8 746.8 3.6 – (3.7) 3,586.3
Investment property – – – 37.9 – – 37.9
Property, plant and equipment – – – 20.7 – – 20.7
Retirement benefit asset – – – – – 0.5 0.5
Derivative financial instruments 1. 0 – – – – – 1. 0
1,324.8 1,515.8 746.8 62.2 – (3.2) 3,646.4
Current assets
Derivative financial instruments
1. 3 – – 6.4 49.6 – 57. 3
Other receivables 0.1 – – – – 245.2 245.3
Amounts owed by group undertakings – – – – – 4.5 4.5
Cash at bank 11. 7 – – – – 206.3 218.0
13.1 – – 6.4 49.6 456.0 525.1
Total assets 1,337.9 1,515.8 746.8 68.6 49.6 452.8 4,171.5
Current liabilities
Borrowings – – – – – (236.2) (236.2)
Derivative financial instruments (3.4) – – – (7.0) – (10.4)
Other payables
(27. 4 ) – – – – (36.1) (63.5)
Amounts owed to group undertakings
– – – – – (0.1) (0.1)
(30.8) – – – (7.0) (272.4) (310.2)
Net current assets/(liabilities) (1 7. 7 ) – – 6.4 42.6 183.6 214.9
Total assets less current liabilities 1,307.1 1,515.8 746.8 68.6 42.6 180.4 3,861.3
Non-current liabilities
Borrowings – – – – – (134.4) (134.4)
Derivative financial instruments – – – – – – –
Deferred tax liability – – – – – (0.2) (0.2)
Provisions – – – – – (1.8) (1.8)
Finance lease liability – – – (3.2) – – (3.2)
– – – (3.2) – (136.4) (139.6)
Net assets
1,307.1 1,515.8 746.8 65.4 42.6 44.0 3,721.7
Investment Portfolio Reconciliation
100 Report and Accounts December 2022 RIT Capital Partners plc
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.
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 2022 2021
Total assets 4,171.5 4,985.0
Less: cash (218.0) (325.9)
Sub total 3,953.5 4,659.1
Net assets 3,721.7 4,390.3
Gearing 6.2% 6.1%
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.
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.
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 2022 was 2,388 pence, a decrease
of 406 pence, or 14.5%, from 2,794 pence at the previous year
end. As dividends totalling 37. 0 pence per share were paid during
the year, the effect of reinvesting the dividends in the NAV is 1. 2 %,
which results in a NAV total return of -13.3%.
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.
Inaccordance with AIC guidance, the main adjustments are to
remove direct performance-related compensation from JRCM, as
this is analogous to a performance fee for an externally-managed
trust.
£ million 2022 2021
Operating expenses 43.6 54.4
JRCM direct performance-
related compensation (7.6) (24.8)
Other adjustments 0.0 (0.1)
Ongoing charges 36.0 29.5
Average net assets 4,045 4,085
OCF 0.89% 0.72%
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
0.88% of average net assets (2021: 0.87%).
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RIT Capital Partners plc Report and Accounts December 2022 101
Premium/discount: The premium or discount (or rating) is
calculated by taking the closing share price on 31 December
2022 and dividing it by the NAV per share at 31 December 2022,
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 2022
closed at 2,125 pence, a decrease of 625 pence, or 22.7%, from
2,750 pence at the previous year end. Dividends totalling
37.0 pence per share were paid during the year, and the effect of
reinvesting the dividends in the share price is 1. 2 %, which results
in a TSR of -21.5%. The TSR is one of the Company’s KPIs.
Glossary and Alternative Performance Measures
102 Report and Accounts December 2022 RIT Capital Partners plc
Historical information
Diluted
net assets
£ million
Diluted
NAV
per share
pence
Closing
share price
pence
Premium/
(discount)
%
Diluted
earnings
per share
pence
Dividend
per share
pence
02 August 1988 280.5 105.9 81.5 (23.0) n/a n/a
31 March 1989 344.4 134.2 114.0 (15.1) 29.3 1.7
31 March 1990 334.0 131.0 97.0 (26.0) (2.5) 2.6
31 March 1991 318.0 131.7 92.0 (30.1) 0.7 2.4
31 March 1992 305.5 140.7 85.2 (39.4) 6.6 1. 1
31 March 1993 385.9 181.1 11 7. 0 (35.4) 40.5 1. 1
31 March 1994 468.6 221.6 171. 0 (22.8) 41.5 1. 6
31 March 1995 450.2 213.4 174.0 (18.5) (8.1) 1. 7
31 March 1996 560.8 283.2 223.0 (21.3) 63.3 1. 6
31 March 1997 586.1 303.5 242.5 (20.1) 1 7. 2 1. 8
31 March 1998 737.5 384.1 327.0 (14.9) 81.5 2.0
31 March 1999 759.7 398.6 341.0 (14.5) 14.6 2.2
31 March 2000 811.4 509.0 439.0 (13.8) 100.2 3.1
31 March 2001 759.8 484.3 436.5 (9.9) (28.8) 3.1
31 March 2002 758.3 483.4 424.5 (12.2) 2.2 3.1
31 March 2003 674.7 430.2 371.5 (13.6) (50.2) 3.1
31 March 2004 981.1 628.2 577.5 (8.1) 195.9 3.1
31 March 2005 1,113.1 712.7 694 (2.6) 90.0 3.1
31 March 2006 1,534.7 982.7 1,020 3.8 270.3 3.1
31 March 2007 1,635.6 1,047.3 1,000 (4.5) 67.0 3.1
31 March 2008 1,690.0 1,091.6 1,147 5.1 50.6 4.0
31 March 2009 1,350.5 874.3 831 (5.0) (205.2) 7.5
31 March 2010 1,815.7 1,180.1 1,082 (8.3) 306.3 4.0
31 March 2011 1,984.0 1,289.4 1,307 1.4 111.7 4.0
31 March 2012 1,920.0 1,249.3 1,220 (2.3) (35.7) 4.0
31 December 2012 1,847.2 1,191.4 1,131 (5.1) (29.6) 28.0
31 December 2013 2,146.0 1,383.6 1,260 (8.9) 215.7 28.0
31 December 2014 2,299.6 1,483.0 1,397 (5.8) 129.8 29.4
31 December 2015 2,441.3 1,572.5 1,681 6.9 121.4 30.0
31 December 2016 2,692.1 1,730 1,885 9.0 195.0 31.0
31 December 2017 2,858.3 1,839 1,962 6.7 142.4 32.0
31 December 2018 2,830.2 1,821 1,910 4.9 1 7. 5 33.0
31 December 2019 3,145.6 2,004 2,115 5.5 220.8 34.0
31 December 2020 3,590.4 2,292 2,065 (9.9) 321.0 35.0
31 December 2021 4,390.3 2,794 2,750 (1.6) 545.5 35.25
31 December 2022
3,721.7 2,388 2,125 (11.0) (371.3) 37.0
Notes:
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
31March 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:
26 April 2023, 12:00pm: Annual General Meeting.
28 April 2023: Payment of interim dividend.
Historical Information and Financial Calendar
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Company Highlights
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Strategic Report
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Governance
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Financial Statements
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Other Information
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RIT Capital Partners plc Report and Accounts December 2022 103
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: RCP LN
SEDOL: 0736639 GB
ISIN: 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.
Investor Information
104 Report and Accounts December 2022 RIT Capital Partners plc
MANAGER, ADMINISTRATOR, COMPANY SECRETARY AND REGISTERED OFFICE
J. Rothschild Capital Management Limited
INDEPENDENT AUDITOR
Ernst & Young LLP
25 Churchill Place
London E14 5EY
SOLICITOR
Linklaters LLP
One Silk Street
London EC2Y 8HQ
BROKERS
JP Morgan Cazenove Limited
25 Bank Street
London E14 5JP
Numis Securities Limited
45 Gresham Street
London EC2V 7BF
ADVISER TO THE REMUNERATION COMMITTEE
Alvarez & Marsal
Park House
16-18 Finsbury Circus
London EC2M 7EB
CUSTODIAN AND DEPOSITARY
BNP Paribas 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
Directory
27 St. James’s Place London SW1A 1NR