### RIT Capital Partners plc ### Report & Accounts for the year ended 31 December 2022 ## Report & Accounts ## for the year ended 31 December 2022 ## Contents ### 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 Notes Nothing in this Annual Report & Accounts should be construed as advice to buy or sell a particular investment. RIT Capital Partners plc (RIT or the Company) is a UK public listed company, and as such complies with the rules of the UK Listing Authority. The Company conducts its affairs so as to qualify for approval as an investment trust, and has been accepted as an approved investment trust by HM Revenue & Customs (HMRC), subject to continuing to meet the eligibility conditions. As an investment trust, it is not authorised or regulated by the Financial Conduct Authority (FCA). RIT is classified as an Alternative Investment Fund (AIF) in accordance with the UK Alternative Investment Fund Managers 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. | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Company Highlights ### Corporate Objective Investment Policy To deliver long-term capital growth, while preserving To invest in a widely diversified, international portfolio across shareholders’ capital; to invest without the constraints of a a range of asset classes, both quoted and unquoted; to formal benchmark, but to deliver for shareholders increases allocate part of the portfolio to exceptional managers in order in capital value in excess of the relevant indices over time. 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 0% CPI plus 3.0% 000% 4,000% 0% 3,50 000% 3, 0% 2,50 000% 2, 500% 1,50 0% 1988 1993 1998 20 20 2013 2018 1, 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 Report and Accounts December 2022 1 2022 03 08 ## Strategic Report ## RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Chairman’s Statement Sir James Leigh-Pemberton Background and Performance ### 2022 was the most difficult year for financial markets for ur aims and objectives are long term... ## more than a decade. The global economy was affected O Over the last 10 years our NAV per by significant supply shocks, with particularly sharp ### share growth (including dividends) was rises in energy and raw material prices. The consequent ### 140%... Since inception in 1988, our share resurgence of inflation was met with a dramatic ### tightening of monetary policy. Businesses across a range price total return has averaged 11.2% per ### of sectors faced increased costs of materials, labour annum against markets of 7.0%. and capital, impacting margins at a time when revenue growth has been under pressure as economic activity has returns. These considerations have been the principal faltered, consumer confidence and purchasing power has determinants of our portfolio composition for a number waned and the risk of recession has risen. At the same of years, and we believe that this approach remains the time, the conflict in Ukraine has given rise to fundamental most effective means of achieving our corporate objective geopolitical changes in the relatively stable world order of over the long term. Indeed, over the last 10 years, our recent decades. NAV per share growth (including dividends) was 140%. In financial markets almost all asset classes saw Equally, over more recent years, incorporating both up declines. The S&P 500 and the NASDAQ closed the year and down markets, our NAV has grown by 24.8% over down -18% and -32% respectively, while Emerging three years compared to 17.7% for the ACWI and 27.5% Markets recorded a loss of -16%, Europe -10% and the for CPI plus 3%. And over five years, our NAV total return FTSE 250 -17%. Fixed income markets were no less was 40.9% compared to 35.5% for the ACWI, and adversely affected; long-term US Treasuries lost -29% 39.7% for our inflation index. Since inception, our share and UK government bonds -40%. Corporate bonds price total return has averaged 11. 2% per annum against also showed marked declines as both risk-free rates markets of7.0%. and credit spreads reacted to tighter monetary policy. A key driver of RIT’s long-term track record has been It was the first time in 150 years that both US stocks private investments, which, whether direct investments and bonds were down by more than 10%. Furthermore, or commitments to funds, have always been an these year-on-year figures, stark though they are, do essential part of our portfolio. These are, by design, not tell the whole story of 2022, which saw significant multi-year investments, which we are not forced to shifts in investor sentiment and money flows at different sell to fund redemptions; we held an investment in the points of the year, resulting in elevated levels of volatility. Economist for 22 years, realising 27x our capital. More A good illustration of this in the UK was sterling, which recent investments such as Coupang – one of our most started the year at an exchange rate of 1.35 against the successful ever private investments – materially boosted US dollar, saw an extraordinarily rapid fall to a low of 1.04 returns. Over 2020 and 2021 private investments added in September, down 23%, before recovering some 16% around 34% to total NAV; it is this growth in their value from the lows to end the year at 1.21. which has driven the increased proportion of NAV which Our NAV per share was not immune to the market they represent. In 2022, the sharp correction in public declines, and we ended the year at 2,388p per share. This markets, and in particular tech markets, has meant that represented a -13.3% total return (including dividends) we have written down a portion of these significant gains. for the year, broadly in line with the MSCI ACWI (50%£) During the course of the year, the lower value of our which fell by -12.9%. While any decline in NAV is private direct investments and fund holdings detracted uncomfortable, it is important to restate that our aims from the NAV by some 6%. However, on a three-year and objectives are long term. In order to achieve them, basis, we estimate that our private investments added we must ensure that we have enough capital deployed approximately 26% to total NAV – a strong return, and in those areas which will support future growth, while against the backdrop of both positive and negative years aiming to mitigate as far as possible participation in down for markets. Over this period, we also received in the markets. This we seek to achieve by taking a holistic order of £500 million of distributions from this portfolio. and careful approach to portfolio construction, holding a A key feature of private investments is, of course, the diversified portfolio of assets, including those which are challenge in valuing positions which lack a daily traded not typically correlated with equity markets, and which, share price. Our independent Valuation Committee has through the cycles, are capable of generating healthy RIT Capital Partners plc Report and Accounts December 2022 3 ## Chairman’s Statement devoted significant time to ensuring that our investments providing both portfolio diversification as well as being in a are marked at levels which reflect both changes in position to benefit from a number of wider secular trends. market conditions and underlying operating performance. Throughout 2022, your Board continued to review the Ihighlighted the rigorous efforts we made in the first half of strategy and portfolio composition in the context of our the year to ensure our direct investments were fairly valued, unchanging corporate objective. The fundamentals of and we have continued this approach at the year end. the multi-asset diversified approach, and our long-term For our private fund investments, we are more naturally aims, have not altered. We continue to believe that, reliant on the external managers or ‘GPs’. While there is a notwithstanding the declines we saw in 2022, this well-understood, industry wide time-lag in their reporting, remains the right approach for our shareholders and is our NAV will always reflect the latest available information. likely to generate the superior returns through the cycles As importantly, our Manager undertakes rigorous due that RIT is renowned for producing. diligence before committing to these funds–all of which are required to provide us with fair value. Share capital and dividend Throughout your Company’s history, the discount or Critically, the majority of our direct portfolio companies premium at which our shares have traded relative to our continue to exhibit strong operating performance. NAV has seen wide variations. During 2022, we saw the Our funds exposure is also targeting areas uniquely discount widen, in part perhaps reflecting the monthly positioned to capture some of the most innovative and nature of our reporting during times of volatility, and transformative structural trends that are underway, also perhaps some more widespread concerns around and the great bulk of our investments in funds are with private equity generally. Where not precluded by being in managers with outstanding track records with whom we a closed period or approaching an imminent publication have long standing relationships developed over many of NAV, we have continued seeking to capture value for years. Deploying our permanent capital in a diversified shareholders by buying back shares as we approached a portfolio in these profitable areas has been, and high single-digit discount. Over the year, we bought back remains to this day, a core ingredient in RIT’s long term some 515,000shares accretively at a cost of £11.0 million performance track record. and by the year end, we held some 690,000 shares in While private investments are important, they represent treasury. In addition, we have enhanced our reporting, only one part of our diversified multi-asset portfolio which providing additional commentary outside of our main six- is constructed and managed by JRCM on a holistic, monthly cycle. top-down basis. For example, a higher allocation to Our corporate objective is to deliver long-term capital the digital transition theme in our private investments growth. However, we recognise the value to shareholders was deliberately offset with a reduction within our of a modest income yield; our policy remains to maintain quoted equity portfolio. Furthermore, our pessimistic or increase the dividend, subject to the overriding capital outlook for markets also led us to run with the lowest preservation objective. We paid a total dividend of quoted equity exposure for more than a decade. Within 37pence per share during 2022 and intend to increase this book, we were more proactive than usual, with a the dividend again in 2023 to 38 pence per share, continued shift from a bias towards long-duration growth representing a 2.7% increase. The dividend will be paid as assets, to more value and reflationary assets. These normal in equal instalments in April and October, funded changes were broadly accretive to performance, with from our significant reserves. some standout performers including our exposure to Japan value-oriented managers as well as to the energy Governance and employees transition theme. Exposure management is also deployed During 2022 we welcomed three new non-executive in this book, with hedges against tech markets helping to Directors to the Board. Jutta af Rosenborg was appointed mitigate some of the declines. in May, and Vikas Karlekar and Cecilia McAnulty in August. These appointments further strengthened the Our absolute return and credit positions held up skills, experience and knowledge of the Board. We reasonably well, notwithstanding the widespread credit appreciate the benefits which diversity of background and market declines, reflecting the lower-correlation nature of experience brings to your Board, and I am pleased we this exposure and therefore the diversification benefits for comply with both the FCA’s new requirements and the the overall portfolio. recommendations of the Parker and Hampton-Alexander Within currencies, the exposure required careful Reviews in terms of the composition of the Board. management through the volatility, and overall the book After nine years’ dedicated service on the Board, Mike made a meaningful positive contribution. The main Power will not stand for re-election at the upcoming driver was holding around half of the portfolio outside a AGM. I would like to thank Mike for the expertise, energy depreciating sterling. We continue to hold gold, which, and diligence he has devoted to his role as a Director notwithstanding a late comeback, in light of the shift and for his significant contributions to the Company over in inflation expectations, perhaps underperformed this time, including chairing both the Audit and Risk, expectations. We do continue to view it as being capable of and Valuation Committees. On Mike’s retirement and in 4 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Chairman’s Statement accordance with the Board’s succession planning, Jutta af Outlook Rosenborg will assume the role of Chair of the Audit and In last year’s statement written in early 2022, I highlighted Risk Committee and Maxim Parr will assume the role of some of the challenges we may see as a result of the Chair of the Valuation Committee. removal of many of the extraordinary underpins for markets of recent years. It is not clear at all that we ESG integration remains a core objective of the Board are through the fundamental transition entailed by the and we are continuing to develop initiatives aimed at our end of low interest rates. While the reintroduction of stakeholders, and making a positive impact on the society more rational pricing for risk and capital is welcome, the and the environment we work in. JRCM’s Responsible consequences of such a significant shift (and at such a Investment Framework & Policy is fully integrated into our fast pace) are unlikely to be short lived. The existence investment processes and is kept under regular review, of ‘free money’ for so long, will no doubt have created and as a signatory of the UN Principles of Responsible widespread embedded distortions, which will take time Investment (UN PRI), we look forward to submitting our to resolve. Low rates of economic growth, continuing first report under this framework in 2023. pressure on both corporate earnings and consumer Many commentators have highlighted the impact confidence, and limited scope for fiscal stimulus are likely that the widespread challenges I described earlier to remain with us for some time, so that the conditions can have, and are having, on people’s mental health. for a sustained recovery in markets appear at present to This is important to us, and we have invested time be remote. with our Manager in ensuring that our employees are In this environment we expect to continue with a relatively appropriately supported. Steps taken in this regard cautious exposure to quoted equities, while at the same include a cost-of-living contribution for employees time remaining positive about the opportunities for the who would benefit most from a one-off payment, and long term which will emerge in stocks and alternatives targeted support for staff well-being. JRCM colleagues such as the dislocated regional credit markets. Where we have also been engaged in activities to help support our see interesting investments, we will be very selective, community with charitable donations, conscious of our and the wide network we can call upon, as well as our wider responsibilities. Manager’s disciplined due diligence, will be important. Our employees and my Board colleagues are central to While these are challenging markets, we have managed our long-term success, and once again, I would like to through them before, and we remain confident that our thank them all for their hard work and commitment during approach is the right one for RIT’s long-term performance another particularly challenging year. and for our shareholders. Sir James Leigh-Pemberton Chairman RIT Capital Partners plc Report and Accounts December 2022 5 ## Our Purpose, Strategy and Business Model Purpose and strategic aims ### We consider our purpose and strategic aims to be clearly ver time we believe that a combination of set out in our Corporate Objective: ## O healthy participation in up markets and ### “to deliver long-term capital growth, while preserving reasonable protection in down markets should ### shareholders’ capital; to invest without the constraints help us to compound ahead of markets… of a formal benchmark, but to deliver for shareholders ### Indeed, since your Company’s listing in 1988 increases in capital value in excess of the relevant indices ### we have participated in 74% of monthly over time.” ### market increases but only 41% of market This has reflected our aims since Lord Jacob Rothschild ### declines. first led what was then called the Rothschild Investment Trust in the 1970s. Our purpose as an investment This policy guides our Manager and subsidiary, company is therefore to provide diversified portfolio J.Rothschild Capital Management Limited (JRCM) as it management on behalf of our shareholders to achieve manages your portfolio. So, while we have a core equity this objective. bias, we typically invest your portfolio across multiple However, as we differ from many conventional asset classes, geographies, industries and currencies. investment trusts who always aim to be fully invested in This has been the basis of our approach over many years quoted equities, this section provides further clarification – combining thematic investing with individual securities, of what we are trying to achieve for shareholders and private investments with public stocks. The long-term overtime. success of your Company has been the result of active management of a distinctive blend of stocks, private The most important objective is long-term capital investments, equity funds, real assets, and absolute growth while preserving shareholders’ capital. The aim return and credit, all overlaid with currency positioning of our investment approach is to protect and enhance and macro exposure management. shareholders’ wealth over time. We believe the extent of our global reach and unique There may be periods when we will place protection of network allows us to maximise our ability to deploy shareholders’ funds ahead of growth, but we believe capital effectively. Our Manager’s in-house investment that active management of equity exposure, combined team works closely with core external managers, with early identification of opportunities and themes, enabling us to invest in funds which may be closed while investing across multiple asset classes, is more to new investors, and cannot be accessed by a retail likely to lead to long-term outperformance. We do not investor. In addition, this strong network provides access target absolute returns and therefore, ensuring we have to intellectual capital and co-investment opportunities. sufficient capital deployed to generate long-term growth This aspect of our model is key to our ability to identify will naturally result in us being exposed to market risk. and deliver value from differing sectors, markets and Over time, we believe that a combination of healthy assets. And while access to such specialist managers participation in up markets and reasonable protection involves paying fees, the level of these fees is considered in down markets, should help us to compound ahead carefully as part of the investment decision and, if of markets through the cycles. Indeed, since your warranted, given our focus on net returns, is one that we Company’s listing in 1988, we have participated in 74% of are comfortable paying. the monthly market increases but only 41% of the market Above all, our approach is long term. The permanent declines. This has resulted in our NAV per share total capital structure of an investment trust compared return compounding at 10.7% per annum, a meaningful to open-ended funds, means we do not suffer from outperformance of global equity markets at 7.0%. Over liquidity-driven pressures to fund redemptions. We can the same period the total return to shareholders was therefore hold our investments in both public and private 11.2% per annum. markets over an extended period and choose to realise Investment approach them at the optimal time. The strategic aims are expressed in more practical terms Another key facet of the investment approach is risk in our Investment Policy: management. The Board establishes and oversees the risk appetite through regular monitoring of asset “to invest in a widely diversified, international portfolio allocation and security limits. These are intended to across a range of asset classes, both quoted and allow JRCM to efficiently and effectively manage unquoted; to allocate part of the portfolio to exceptional the portfolio in line with the Corporate Objective. managers in order to ensure access to the best external The Manager has developed a sophisticated risk talent available.” management approach, onwhich it reports regularly to the Board. This incorporates quantitative and qualitative 6 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Our Purpose, Strategy and Business Model measures, aswell as the careful use of hedging. The risk ### management tools assist in the construction of a portfolio n summary, our flexible and distinctive ## designed to provide diversified sources of return and to I model, with the freedom to utilise multiple monitor closely the performance of individual assets and ### asset classes and different investment the portfolio composition. Further information on risk ### structures, allows our Manager to deploy management is set out on pages 20 to 25. ### capital and manage risks as effectively In summary, our flexible and distinctive model, with the ### aspossible. freedom to utilise multiple asset classes and different investment structures, allows our Manager to deploy capital and manage risks as effectively as possible. The main focus of the Board is on ensuring that the investment approach is suitable for achieving our Further information in relation to the investment approach Corporate Objective, and on monitoring the performance as well as portfolio attribution and returns is set out in the of the Manager. In order to do this, we receive regular Manager’s Report on pages 10 to 16. and detailed reports covering investment performance, Business model, culture and values risk, finance and operational matters. RIT Capital Partners plc is a listed investment company, The employees of our Manager and SHL are critical to our approved by HM Revenue and Customs (HMRC) as an ability to meet all of the objectives of the Company. A key investment trust. It is a UK Alternative Investment Fund part of the monitoring of the Group is ensuring that the (AIF) in accordance with UK legislation effective from Manager is appropriately incentivised to deliver sustained, 1 January 2021 which replicated the European Union’s risk-adjusted returns and is able to attract, retain and Alternative Investment Fund Managers Directive (AIFMD). develop a top quality team which operates in accordance Investment management, as well as administration with our core values, within a culture of high performance. and company secretarial, is delegated under a formal Our core values of respect, dignity and integrity are agreement to our Manager, JRCM, a subsidiary of the evidenced by the Group’s five business principles Company. JRCM is separately regulated by the Financial of collaboration, enterprise, efficiency, effective Conduct Authority (FCA) as the UK Alternative Investment communication and professional ethics, which are Fund Manager (AIFM) under the same UK rules. JRCM regularly communicated and reinforced through the has a separate Board of Directors and is governed by its Group’s recruitment and appraisal processes. JRCM Executive Committee. This Committee is led by Francesco monitors the health of its culture by assessing regularly Goedhuis as Chairman and Chief Executive Officer, and is how well these principles are being applied, and the responsible for day-to-day operations (see page 30). Board receives regular reports on this topic. Board of The Group has a clear and proactive approach to regular Directors employee engagement, which was particularly important Alternative RIT Capital Partners Investment during remote working and the many other challenges of plc Fund the last few years. The Corporate Governance Report on pages 31 to 43 provides more detail of these interactions. Investment management, administration and company We are firm believers in the benefits that cognitive Executive secretarial diversity as well as diversity more generally, brings to Committee decision-making, and seek to ensure this is reflected in Alternative our recruitment processes, both at Board level and within J. Rothschild Capital Investment Management Limited our subsidiaries. At the year end the Board comprised 10 Fund Manager Directors, of which six were men and four women. Within our subsidiaries, the employee base comprised 45 men In addition, the Manager is also responsible for our and 17 women. subsidiary, Spencer House Limited (SHL). This company provides premises management for Spencer House and Corporate governance our other investment properties in St. James’s. It also The Directors are responsible for compliance with operates a profitable events business. applicable rules, regulations and guidance in relation to governance, in particular taking into account the matters I am responsible for the leadership of the Board, which set out in Section 172(1) of the Companies Act 2006, is ultimately tasked with ensuring that we both meet which guides our approach to strategy and decision our Corporate Objective, and maintain high standards of making (see pages 35, 36 and 55). The Board recognises corporate governance. RIT Capital Partners plc Report and Accounts December 2022 7 ## Our Purpose, Strategy and Business Model that its actions have lasting impacts and consequences The Group has relationships with a number of suppliers for the future of the Company, its shareholders and and service providers which play an important role other stakeholders, and approaches its responsibilities in enabling us to operate our business efficiently. accordingly. The Groups’ overarching policy with respect to these relationships is that they should be managed so that The Board has a responsibility for ensuring that there they are both sustainable and mutually beneficial over are strong and healthy ties with all of our stakeholders, the medium term, and deliver value for money for our making sure that we consider their interests and shareholders (see page 35). acknowledge that the Group’s interaction with them is fundamental to the long-term success of the business. ESG and sustainability The Board believes that consideration of ESG factors The Directors receive regular feedback and reports from is important for the delivery of sustainable financial the Manager on its investor relations activity, as well returns from our portfolio, and for the preservation of as from brokers and analysts, and undertake their own the value of our shareholders’ capital. In respect of shareholder interactions, to ensure that shareholders’ our internal operations, we aim to be good corporate views are well understood by the Board. citizens, to apply robust governance and minimise our environmental impact. Over the past 12 months, your When it comes to our Corporate Objective, shareholders Board has continued to devote time to enhancing our understandably focus on our investment performance. This ESG capabilities and ensuring that appropriate policies informs the Board’s desire to seek healthy, risk-adjusted are in place. Our Manager is a signatory of the UN PRI, returns over the long term and through the cycles, with and has in place a Responsible Investment Framework careful attention to capital preservation, and mindful of & Policy, which is disclosed to shareholders via the the Company’s reputation as a responsible fiduciary of Company website. This policy ensures that ESG factors shareholder capital. In assessing the right strategy to are firmly integrated across our investment management achieve these aims, the Board considers the ongoing and internal operations. We believe that this policy aligns suitability of the Investment Policy and the approach taken the Corporate Objective with a commitment to principles by the Manager to execute on the policy. of responsible investment. ESG factors form part of the Other areas considered by the Board where shareholder due diligence undertaken by JRCM prior to selecting all views were taken into account included the 2023 dividend investments and continue to be monitored throughout and Board diversity and succession planning. Our current our holding of the investment. Further information is set Board composition complies with the recommendations out on pages 35, 36, 45, 53 and 54. 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. 8 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Our Purpose, Strategy and Business Model Measuring performance and KPIs ### While we believe our success can only truly be assessed ur Corporate Objective...informs the over the long term, we also recognise that providing ## O Board’s desire to seek healthy, risk shareholders with a comparator against which to ### adjusted returns over the long term and measure our performance over shorter periods is helpful. ### through the cycles, with careful attention ### The strategic aims highlighted on this and earlier pages, to capital preservation, and mindful of ### reflect the desire to produce real capital growth with the Company’s reputation as a responsible capital preservation and to exceed markets over time. ### fiduciary of shareholder capital. These are reflected in the following targets or key performance indicators (KPIs): The AIS rewards investment outperformance as 1. Absolute outperformance: NAV total return in excess measured against two KPIs: CPI plus 3.0% and the of CPI plus 3.0% per annum; ACWI. It also rewards wider achievements linked not to the NAV return, but to the Group’s business principles 2. Relative outperformance: NAV total return in excess and culture. The scheme is measured annually and of the MSCI All Country World Index (ACWI); and includes longer-term features such as a three-year absolute ‘high water mark’ as well as significant deferral 3. Share price total return or total shareholder return into the Company’s shares, which vest over three years. (TSR). The second component of the remuneration approach is The first two of these relate to our Manager’s investment a long-term incentive plan (LTIP). Restricted share units performance. CPI plus 3.0% per annum represents the (RSUs) may be awarded to employees of JRCM and SHL desire to grow the real value of our portfolio over time, with under the LTIP. RSUs vest after three years, with typically a meaningful premium above inflation. The second reflects a further two-year holding period before they can besold. our unconstrained global investment approach and the desire to outperform markets over the long term. Consistent Further details of remuneration are provided in the with many investment companies, we currently use the Directors’ Remuneration Report on pages 48 to 51. ACWI, which we believe is an appropriate comparator for our global, unconstrained approach although it does not Shareholder communication and AGM drive our Manager’s portfolio construction. More specifically, While this report forms a core part of the annual we use a blended index consisting of 50% of the ACWI communication to shareholders, there are many additional measured in sterling (and exposed to currency risk) and ways to remain informed. Reflecting the nature of our 50% of the sterling-hedged ACWI. portfolio, including the allocations to external managers (many of whom report monthly performance), we publish While JRCM is tasked with managing the portfolio a monthly NAV as soon as reasonably practicable following to deliver a NAV return, ultimately, the return to our the month end. Shareholders are encouraged to visit our shareholders is through share price growth and dividends. website, www.ritcap.com, which provides regular updates of We therefore also consider the TSR as our third KPI. performance and exposure including our monthly factsheets. I look forward to meeting as many of you as possible at our Incentive structure AGM on 26 April. As normal, there will also be an opportunity Our approach to remuneration incorporates the Directors’ on that occasion to hear directly from our Manager. Remuneration Policy as well as specific structures within JRCM and SHL designed to attract, motivate and I would like to once again thank shareholders for their retain the high-quality individuals we need to deliver our continuing loyalty and support over many years. long-term strategic aims and sustainable success. The remuneration approach is designed to align with, and Sir James Leigh-Pemberton reinforce, these strategic aims. Chairman 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. RIT Capital Partners plc Report and Accounts December 2022 9 ## J CM ## Manager’s Report Overview and performance highlights Overall, the key drivers of performance for the year were: In 2022, financial markets suffered the worst year since • a decline in the value of our private investments, the global financial crisis. Most major equity indices saw largely as a result of a reset in markets and public high double-digit declines, driven by multi-decade high company comparables; inflation, leading to unprecedented global monetary tightening. This occurred amidst a backdrop of geopolitical • our low quoted equity exposure, which provided uncertainty, a war in Ukraine, and a stifled Chinese some mitigation against the broad declines in equity economy. In the UK, the Bank of England was forced into markets; emergency bond-buying to stabilise the government bond market, after the turmoil of September’s mini-budget. • within the quoted equity book, our exposure to China With investors concerned about both inflation and a was impacted by the government’s policy decisions, growth slowdown, the swings in market sentiment have such as zero-covid and property deleveraging; been extreme. • a helpful shift in our quoted equity book from Amidst this unstable backdrop, the NAV total return was growth assets into assets with a reflationary focus, -13.3%, broadly in line with the ACWI (50% £) which was driven both by conviction and the desire for further down -12.9% and below the ‘inflation plus’ hurdle (CPI diversification; plus 3.0%) which hit 13.5% for the year. • our investment with Eisler Capital, which was down In years such as this, investing through market cycles can -17. 7 %, and which we redeemed at the year end; and feel uncomfortable, but we remain confident in our long- term investment approach, which is supported by our • the allocation of the portfolio’s currency exposure longer-term performance. Over three years, our NAV has outside of sterling, notably to the US dollar, which outperformed our equity index, and over five years, it has rallied as investors searched for a safe haven amidst outperformed both reference hurdles, while maintaining the enduring volatility. lower volatility than the market. Since inception, we have participated in 74% of the monthly market increases but In order to assist shareholders with their understanding only 41% of the declines. of our portfolio, we have increased the level of disclosure and provided more detailed descriptions of our underlying exposures. Asset allocation and portfolio contribution | | 31 December 2022 | | | 2022 | 31 December 2021 | | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Asset category | | % NAV | Contribution % | | | % NAV | Contribution % | | | | | | | | | 1 | | | | 1 | | Quoted equity 35.1% (6.7%) | | | | | | 42.6% 1.2% | | | | 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% 2 2 Currency 1.1% 2.1% 0.5% (0.8%) Total investments 98.8% (12.5%) 98.8% 25.1% 3 3 Liquidity, borrowings and other 1. 2% (0.8%) 1.2% (1.5%) Total 100.0% (13.3%) 100.0% 23.6% 1 Average net quoted equity exposure 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. 10 Report and Accounts December 2022 RIT Capital Partners plc ## R ## Manager’s Report • The absolute return and credit book continued to The private funds book continued to benefit from strong provide steady and largely uncorrelated returns, in performance, with many of our core partners’ funds particular from distressed debt managers; and seeing healthy uplifts, helped by the portfolio tilt towards technology – one of our structural themes. As normal, • In terms of headwinds, the relative strength of the valuation lag for this industry means the majority sterling was the main detractor to performance in of our funds are included at their 31 March valuations. absolute terms. Since the start of the year, we have made £173 million of commitments to new funds. In terms of portfolio allocation, our average net quoted equity exposure was 46%, a slight increase over 2020. A key feature of our differentiated approach to portfolio The exposure continues to be largely dominated by our diversification is the absolute return and credit book. structural themes and in particular Asian equities where This saw continued steady returns, with the strongest we continue to see a long-term potential for growth and performance from those managers focusing on excess returns. Just under a quarter of the quoted book distressed debt and special situations. Our merger was allocated towards what we characterise as value arbitrage funds also delivered pleasing returns. With or cyclical stocks, targeting the gradual re-opening of credit spreads tightening back to pre-pandemic levels, we economies as the vaccine efficacy and rollout continued. have adopted a more cautious approach to direct credit Over the first six months, we increased our allocation investments. to quality defensive names such as Unilever and Reckitt Benckiser, which we considered were disproportionately We continue to hold gold as a portfolio diversifier, punished by the rise in bond yields. Other themes especially in a low interest rate environment and, viewing captured in the quoted equity book include biotech, the US dollar as again having the potential to provide a safe quality growth and companies benefiting from energy haven in times of stress, we increased our allocation here. transition trends. While the results so far this year, and over recent years, A core feature of our approach to portfolio construction are pleasing, we nevertheless remain vigilant, and will is the use of hedging. Here we focus both on macro not hesitate to adjust the portfolio should the need arise. positions (such as broad equity market exposures or Experience suggests that when there is a widespread currencies) as well as individual stocks, funds or themes, consensus, investors can often get trapped in a false where we might decide to moderate the exposure sense of security and let their guard down. As we emerge without having to sell the underlying positions. To help from the most serious public health crisis in modern protect the portfolio in downturns, we may also deploy times, with systemic market uncertainties remaining, this various types of ‘tail hedges’ designed to reduce the is not the time to relax. And rest assured that we will not. impact of such negative volatility. With a strong team around us, we are confident that our It was a strong period for our private investments. dynamic asset allocation and strong security selection The successful IPO of Coupang, the South Korean skills, together with global deal sourcing and integrated e-commerce giant, contributed 5.5% in our private risk management, will provide us with the best platform investments book at the IPO price of $35.00. It was then to continue to deliver equity-type returns with less risk. 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 Francesco Goedhuis Ron Tabbouche portfolio including £21 million in Epic Systems, the Chairman and Chief Chief Investment Officer largest healthcare digital record platform in the US. We Executive Officer also invested £50 million in Webull and £29 million in Robinhood, two financial technology platforms disrupting J . R OTHSCHILD C APITAL M ANAGEMENT L IMITED the traditional retail trading ecosystem. As part of a broad strategy seeking targeted exposure to disruptive technologies, we made smaller investments totalling some £54 million, in promising companies. 6 Half-Yearly Financial Report 2021 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## J CM ## Manager’s Report Quoted equity We proactively shifted our exposures from growth assets, This category includes directly-held stocks, long-only such as technology, towards value-oriented assets that funds, equity hedge funds and our quoted derivatives, were poised to perform better in a more reflationary used predominantly to manage exposures. The quoted and volatile environment. This also provided further equity portfolio detracted -6.7% from the overall NAV diversification to the overall portfolio, by balancing the return this year. The main influences were as follows: weight of our more growth-focused private investments book. Additionally, to further insulate the overall NAV • our recent investment with a Japanese manager, from the increased volatility in technology markets, we 3D, was the largest positive contributor to our NAV, tactically increased some of the hedges we had in place. as they capitalised on the improvement in Japan’s corporate governance; The quoted equities portfolio has been shifting • a shift into more value-oriented holdings, epitomised towards single stock opportunities, which arise from by Discerene, who produced double-digit returns. the indiscriminate selling during extreme swings in Our investment with Morant Wright also added to our sentiment. These are opportunities where we can NAV; consider there to be healthy long-term returns, with low • funds invested in China lagged global markets, risk of permanent capital losses. primarily due to the zero-covid policies that negatively An example of such an investment made amidst market impacted the economy. Our core Chinese holding, volatility was Builders FirstSource, a distributor of Springs Opportunities, underperformed given its tilt homebuilding products, which we purchased at less toward consumer facing companies; than five times free cash flow. As the largest player in • in light of the share price volatility, we reduced the a highly fragmented industry, it has scale advantages size of our Coupang position, and notwithstanding and geographic reach, which, combined with innovation, strong fundamentals, its share price weakened. should help the company to grow above its industry Nevertheless, we estimate this investment added peers. We also believe there is a healthy margin of safety around 7% to NAV over the last three years (including from its scale, free cash flow generation, balance sheet the direct hedges we deployed post IPO); and strength, and a constructive approach to shareholder returns. • finally, our risk management strategy made an impact, as growth and technology-related hedges To illustrate the changes we made in portfolio composition partially mitigated market declines. and the opportunity set we see ahead of us, the tables below compare the top three positions in the quoted Quoted equity portfolio by category equity portfolio between December 2021 and 2022: Quoted equity – top three positions 2022 % | | Name Description | | of NAV | | --- | --- | --- | --- | | Long-only funds, 44% | HCIF | Biotech 3.5% | | | Stocks, 36% | 3D Opportunity Japan value 3.5% | | | Discerene Global value 3.2% Hedge funds, 20% 2021 % Name Description of NAV Coupang Retail 4.3% BlackRock Strategic Equity Long-short equity 3.3% Springs Opportunities China 3.0% 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. RIT Capital Partners plc Report and Accounts December 2022 11 ## R ## Manager’s Report • The absolute return and credit book continued to The private funds book continued to benefit from strong provide steady and largely uncorrelated returns, in performance, with many of our core partners’ funds particular from distressed debt managers; and seeing healthy uplifts, helped by the portfolio tilt towards technology – one of our structural themes. As normal, • In terms of headwinds, the relative strength of the valuation lag for this industry means the majority sterling was the main detractor to performance in of our funds are included at their 31 March valuations. absolute terms. Since the start of the year, we have made £173 million of commitments to new funds. In terms of portfolio allocation, our average net quoted equity exposure was 46%, a slight increase over 2020. A key feature of our differentiated approach to portfolio The exposure continues to be largely dominated by our diversification is the absolute return and credit book. structural themes and in particular Asian equities where This saw continued steady returns, with the strongest we continue to see a long-term potential for growth and performance from those managers focusing on excess returns. Just under a quarter of the quoted book distressed debt and special situations. Our merger was allocated towards what we characterise as value arbitrage funds also delivered pleasing returns. With or cyclical stocks, targeting the gradual re-opening of credit spreads tightening back to pre-pandemic levels, we economies as the vaccine efficacy and rollout continued. have adopted a more cautious approach to direct credit Over the first six months, we increased our allocation investments. to quality defensive names such as Unilever and Reckitt Benckiser, which we considered were disproportionately We continue to hold gold as a portfolio diversifier, punished by the rise in bond yields. Other themes especially in a low interest rate environment and, viewing captured in the quoted equity book include biotech, the US dollar as again having the potential to provide a safe quality growth and companies benefiting from energy haven in times of stress, we increased our allocation here. transition trends. While the results so far this year, and over recent years, A core feature of our approach to portfolio construction are pleasing, we nevertheless remain vigilant, and will is the use of hedging. Here we focus both on macro not hesitate to adjust the portfolio should the need arise. positions (such as broad equity market exposures or Experience suggests that when there is a widespread currencies) as well as individual stocks, funds or themes, consensus, investors can often get trapped in a false where we might decide to moderate the exposure sense of security and let their guard down. As we emerge without having to sell the underlying positions. To help from the most serious public health crisis in modern protect the portfolio in downturns, we may also deploy times, with systemic market uncertainties remaining, this various types of ‘tail hedges’ designed to reduce the is not the time to relax. And rest assured that we will not. impact of such negative volatility. With a strong team around us, we are confident that our It was a strong period for our private investments. dynamic asset allocation and strong security selection The successful IPO of Coupang, the South Korean skills, together with global deal sourcing and integrated e-commerce giant, contributed 5.5% in our private risk management, will provide us with the best platform investments book at the IPO price of $35.00. It was then to continue to deliver equity-type returns with less risk. 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 Francesco Goedhuis Ron Tabbouche portfolio including £21 million in Epic Systems, the Chairman and Chief Chief Investment Officer largest healthcare digital record platform in the US. We Executive Officer also invested £50 million in Webull and £29 million in Robinhood, two financial technology platforms disrupting J . R OTHSCHILD C APITAL M ANAGEMENT L IMITED the traditional retail trading ecosystem. As part of a broad strategy seeking targeted exposure to disruptive technologies, we made smaller investments totalling some £54 million, in promising companies. 6 Half-Yearly Financial Report 2021 RIT Capital Partners plc JRCM ## 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 ![img-0.jpeg](img-0.jpeg) We 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. ### 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 12 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## J CM ## Manager’s Report are profitable, and additionally, the majority of the book’s £1.0billion (around 140% of the capital we had invested) investments also benefit from a degree of structural and with £0.4billion remaining, this represents an protection. In the case of our largest holding, nearly 80% approximate 100% profit. Over more recent years, | of our initial capital was deployed via a convertible debt | the almost £0.3 billion we have invested into 2020 to | | | | --- | --- | --- | --- | | instrument designed to provide downside protection as | 2022 vintage funds has already produced a 1.3x return, | | | | well as equity upside. | notwithstanding the funds being earlier in their lives. | | | | Private direct book by sector | Private fund book by vintage year (%,TRM) | | | | | | 13%, | 32%, | | | | 1.6x | 1.3x | 2022 – 2020 2019 – 2017 2016 – 2014 26%, Prior 3.4x Financials, 30% 29%, Industrials, 19% 2.0x Information technology, 14% Communication services, 11% We are taking a selective approach to new commitments, Healthcare, 10% with 2022 commitments of around £89 million, down Consumer discretionary, 8% Real estate, 7% substantially from previous years. The portfolio was self- Consumer staples, 1% funding with new capital calls of approximately £95 million funded out of distributions of the same amount. The private fund book detracted -3.2% from the NAV performance for the year, with decreases in valuations As of the reporting date, 94% of our private fund largely reflective of the broader market volatility. positions were held at the GP’s September valuations That said, the book continues to generate long-term and 6% at December. This is consistent with the industry, value for our shareholders. In the last 10 years, across which as standard reports on a quarter’s lag. These all new private fund commitments, we invested were the latest valuations available, and we adjusted approximately £0.6 billion and have already received the September marks for subsequent investments, back in distributions around half this amount, with distributions and currency moves between 30 September a further £0.9 billion in remaining value at the year and the year end. While the performance overall was end. This equates to a Total Return Multiple (TRM) of negative during the year, we saw a wide range of around 2.0x. This is a common performance measure performance, with many of the funds generating positive for private funds and means that for these funds, the returns, reflecting the diverse nature of the underlying aggregate of distributions we have received plus the exposures. remaining NAV represented twice the capital we had invested, or an overall profit of around 100%. Taken We have provided further granularity on the diversity of together, these funds have delivered a compound return strategies within our private fund holdings. As shown of approximately 22% per annum over the 10 years to below, around 60% of the book consists of growth 31December 2022. equity, meaning funds where the underlying holdings are primarily more established, mature businesses, but The portfolio is diversified across styles, managers and which continue to generate robust growth. Approximately fund ‘vintages’ (i.e. the year the fund started making 18% of the book consists of traditional private equity investments). It includes funds early in their life cycles strategies, and around 16% are focused on investing in (where they are predominantly deploying capital) and businesses at the earliest stages. The balance of around those later in their life cycle (where they are typically 6% of the book consists of life sciences holdings, which generating realisations from disposals). Funds which often have their own unique life cycle as distinct from are past their main investment period (typically five other industries. years from launch), had invested £0.7 billion, distributed RIT Capital Partners plc Report and Accounts December 2022 13 ## R ## Manager’s Report • The absolute return and credit book continued to The private funds book continued to benefit from strong provide steady and largely uncorrelated returns, in performance, with many of our core partners’ funds particular from distressed debt managers; and seeing healthy uplifts, helped by the portfolio tilt towards technology – one of our structural themes. As normal, • In terms of headwinds, the relative strength of the valuation lag for this industry means the majority sterling was the main detractor to performance in of our funds are included at their 31 March valuations. absolute terms. Since the start of the year, we have made £173 million of commitments to new funds. In terms of portfolio allocation, our average net quoted equity exposure was 46%, a slight increase over 2020. A key feature of our differentiated approach to portfolio The exposure continues to be largely dominated by our diversification is the absolute return and credit book. structural themes and in particular Asian equities where This saw continued steady returns, with the strongest we continue to see a long-term potential for growth and performance from those managers focusing on excess returns. Just under a quarter of the quoted book distressed debt and special situations. Our merger was allocated towards what we characterise as value arbitrage funds also delivered pleasing returns. With or cyclical stocks, targeting the gradual re-opening of credit spreads tightening back to pre-pandemic levels, we economies as the vaccine efficacy and rollout continued. have adopted a more cautious approach to direct credit Over the first six months, we increased our allocation investments. to quality defensive names such as Unilever and Reckitt Benckiser, which we considered were disproportionately We continue to hold gold as a portfolio diversifier, punished by the rise in bond yields. Other themes especially in a low interest rate environment and, viewing captured in the quoted equity book include biotech, the US dollar as again having the potential to provide a safe quality growth and companies benefiting from energy haven in times of stress, we increased our allocation here. transition trends. While the results so far this year, and over recent years, A core feature of our approach to portfolio construction are pleasing, we nevertheless remain vigilant, and will is the use of hedging. Here we focus both on macro not hesitate to adjust the portfolio should the need arise. positions (such as broad equity market exposures or Experience suggests that when there is a widespread currencies) as well as individual stocks, funds or themes, consensus, investors can often get trapped in a false where we might decide to moderate the exposure sense of security and let their guard down. As we emerge without having to sell the underlying positions. To help from the most serious public health crisis in modern protect the portfolio in downturns, we may also deploy times, with systemic market uncertainties remaining, this various types of ‘tail hedges’ designed to reduce the is not the time to relax. And rest assured that we will not. impact of such negative volatility. With a strong team around us, we are confident that our It was a strong period for our private investments. dynamic asset allocation and strong security selection The successful IPO of Coupang, the South Korean skills, together with global deal sourcing and integrated e-commerce giant, contributed 5.5% in our private risk management, will provide us with the best platform investments book at the IPO price of $35.00. It was then to continue to deliver equity-type returns with less risk. 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 Francesco Goedhuis Ron Tabbouche portfolio including £21 million in Epic Systems, the Chairman and Chief Chief Investment Officer largest healthcare digital record platform in the US. We Executive Officer also invested £50 million in Webull and £29 million in Robinhood, two financial technology platforms disrupting J . R OTHSCHILD C APITAL M ANAGEMENT L IMITED the traditional retail trading ecosystem. As part of a broad strategy seeking targeted exposure to disruptive technologies, we made smaller investments totalling some £54 million, in promising companies. 6 Half-Yearly Financial Report 2021 RIT Capital Partners plc JRCM ## Manager's Report 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. It is this combination which sets us apart from the majority of other trusts. ### Private fund book by strategy ![img-1.jpeg](img-1.jpeg) ### 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) ![img-2.jpeg](img-2.jpeg) 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. 14 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## J CM ## Manager’s Report Debt and leverage In addition to our Group costs, RIT’s Investment Policy Having refinanced two of our revolving credit facilities includes the allocation of part of the portfolio to third-party (RCFs) during the year, at the year end we held drawn managers, which have their own fees. These include borrowings of £236.2 million, with a further £90million long-only equity and hedge fund managers, as well as committed and undrawn. The fair value of RIT’s private equity and absolute return and credit funds. The £151million loan note liability decreased over the year as managers’ fee structure is always a key consideration in gilt yields increased, triggering a mark-to-market gain of our due diligence, with the investment decision made on approximately £35million. the basis of expected returns, net of all fees. We estimate that the average annual management fees for external We continue to use derivatives where appropriate, managers represent an additional 0.88% of average net principally to protect the NAV from unwanted exposures. assets (2021: 0.87%). Currency hedging, where we typically increase our levels of sterling to our desired weight, thus reducing the This excludes performance fees/carried interest which currency translation risk, is a prime example of our use of are typically paid for outperformance against an index or derivatives to protect the overall portfolio. Additionally, we an absolute hurdle, and deducted from the valuations we deploy hedges to limit potential downside and to protect receive. As they are a necessary cost in investing in many unrealised gains made on profitable investments. We difficult to access, high-quality managers or unique deals, also use derivatives to enhance returns through efficient and are only paid for good performance, we would always structuring. rather have the strong performance net of such fees, adding to the NAV return, than not. Further information on Operations and costs fees is provided on pages 52 and 53. JRCM manages the Group on a day-to-day basis on behalf of the Board, providing investment management, Outlook administration and company secretarial services. At the It may well be that we are witnessing a reversal of a year end, we employed 49 people in JRCM and 13 in decade’s material outperformance of financial assets our sister company, SHL. SHL maintains and manages over the real economy. Investors will likely need to adjust the investment property portfolio, including Spencer their expectations to the very different environment of a House as well as other properties in St. James’s, and also higher cost of capital, labour and raw materials, and with operates a profitable events business. no safety net provided by central banks. Participating in this market will be remarkably difficult, with central banks 2022 marked the return of the ‘new normal’ with having unfinished business in their fight against inflation, regard to working arrangements, where, thanks to the companies facing margin pressures and uncertainty professionalism and dedication of our staff, we have around economic growth, and consumers adjusting to firmly embedded our hybrid and flexible working policies. the tighter financial conditions after a period of generous covid support schemes. This backdrop, in our view, It remains a priority for JRCM to minimise the effect of warrants a cautious net quoted exposure combined with costs on NAV and shareholder returns and we therefore dry powder. strive to manage the portfolio as efficiently as possible, taking into consideration the direct costs of the Group, as However, we also believe the macro uncertainty well as the fees charged by external fund managers and discussed above, combined with the risk of ‘financial GPs. accidents’, can create compelling bottom-up liquid opportunities in both equities and credit markets. We will In order to provide investors with information on the follow our long-standing disciplined approach, focused on costs of RIT’s own investment business, we calculate an fundamentals-driven investing while looking for strategic ongoing charges figure (OCF) based on recommendations openings which present themselves in such dislocated from the Association of Investment Companies (AIC). markets. This assumes no change in the composition or value of We would note that our patient approach also means we the portfolio (therefore excluding transaction costs and are unlikely to participate in short-term sentiment driven direct performance-related compensation) and excludes rallies. Nevertheless, we have demonstrated our resolve finance costs. For 2022, RIT’s own OCF amounted to to act quickly and decisively when there is an opportunity, 0.89% (2021: 0.72%), with further information provided such as the value-oriented assets that benefitted from on page 100. a more reflationary environment. We believe there will RIT Capital Partners plc Report and Accounts December 2022 15 ## R ## Manager’s Report • The absolute return and credit book continued to The private funds book continued to benefit from strong provide steady and largely uncorrelated returns, in performance, with many of our core partners’ funds particular from distressed debt managers; and seeing healthy uplifts, helped by the portfolio tilt towards technology – one of our structural themes. As normal, • In terms of headwinds, the relative strength of the valuation lag for this industry means the majority sterling was the main detractor to performance in of our funds are included at their 31 March valuations. absolute terms. Since the start of the year, we have made £173 million of commitments to new funds. In terms of portfolio allocation, our average net quoted equity exposure was 46%, a slight increase over 2020. A key feature of our differentiated approach to portfolio The exposure continues to be largely dominated by our diversification is the absolute return and credit book. structural themes and in particular Asian equities where This saw continued steady returns, with the strongest we continue to see a long-term potential for growth and performance from those managers focusing on excess returns. Just under a quarter of the quoted book distressed debt and special situations. Our merger was allocated towards what we characterise as value arbitrage funds also delivered pleasing returns. With or cyclical stocks, targeting the gradual re-opening of credit spreads tightening back to pre-pandemic levels, we economies as the vaccine efficacy and rollout continued. have adopted a more cautious approach to direct credit Over the first six months, we increased our allocation investments. to quality defensive names such as Unilever and Reckitt Benckiser, which we considered were disproportionately We continue to hold gold as a portfolio diversifier, punished by the rise in bond yields. Other themes especially in a low interest rate environment and, viewing captured in the quoted equity book include biotech, the US dollar as again having the potential to provide a safe quality growth and companies benefiting from energy haven in times of stress, we increased our allocation here. transition trends. While the results so far this year, and over recent years, A core feature of our approach to portfolio construction are pleasing, we nevertheless remain vigilant, and will is the use of hedging. Here we focus both on macro not hesitate to adjust the portfolio should the need arise. positions (such as broad equity market exposures or Experience suggests that when there is a widespread currencies) as well as individual stocks, funds or themes, consensus, investors can often get trapped in a false where we might decide to moderate the exposure sense of security and let their guard down. As we emerge without having to sell the underlying positions. To help from the most serious public health crisis in modern protect the portfolio in downturns, we may also deploy times, with systemic market uncertainties remaining, this various types of ‘tail hedges’ designed to reduce the is not the time to relax. And rest assured that we will not. impact of such negative volatility. With a strong team around us, we are confident that our It was a strong period for our private investments. dynamic asset allocation and strong security selection The successful IPO of Coupang, the South Korean skills, together with global deal sourcing and integrated e-commerce giant, contributed 5.5% in our private risk management, will provide us with the best platform investments book at the IPO price of $35.00. It was then to continue to deliver equity-type returns with less risk. 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 Francesco Goedhuis Ron Tabbouche portfolio including £21 million in Epic Systems, the Chairman and Chief Chief Investment Officer largest healthcare digital record platform in the US. We Executive Officer also invested £50 million in Webull and £29 million in Robinhood, two financial technology platforms disrupting J . R OTHSCHILD C APITAL M ANAGEMENT L IMITED the traditional retail trading ecosystem. As part of a broad strategy seeking targeted exposure to disruptive technologies, we made smaller investments totalling some £54 million, in promising companies. 6 Half-Yearly Financial Report 2021 RIT Capital Partners plc ## J CM ## 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. Itis 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 16 Report and Accounts December 2022 RIT Capital Partners plc ## R ## Manager’s Report • The absolute return and credit book continued to The private funds book continued to benefit from strong provide steady and largely uncorrelated returns, in performance, with many of our core partners’ funds particular from distressed debt managers; and seeing healthy uplifts, helped by the portfolio tilt towards technology – one of our structural themes. As normal, • In terms of headwinds, the relative strength of the valuation lag for this industry means the majority sterling was the main detractor to performance in of our funds are included at their 31 March valuations. absolute terms. Since the start of the year, we have made £173 million of commitments to new funds. In terms of portfolio allocation, our average net quoted equity exposure was 46%, a slight increase over 2020. A key feature of our differentiated approach to portfolio The exposure continues to be largely dominated by our diversification is the absolute return and credit book. structural themes and in particular Asian equities where This saw continued steady returns, with the strongest we continue to see a long-term potential for growth and performance from those managers focusing on excess returns. Just under a quarter of the quoted book distressed debt and special situations. Our merger was allocated towards what we characterise as value arbitrage funds also delivered pleasing returns. With or cyclical stocks, targeting the gradual re-opening of credit spreads tightening back to pre-pandemic levels, we economies as the vaccine efficacy and rollout continued. have adopted a more cautious approach to direct credit Over the first six months, we increased our allocation investments. to quality defensive names such as Unilever and Reckitt Benckiser, which we considered were disproportionately We continue to hold gold as a portfolio diversifier, punished by the rise in bond yields. Other themes especially in a low interest rate environment and, viewing captured in the quoted equity book include biotech, the US dollar as again having the potential to provide a safe quality growth and companies benefiting from energy haven in times of stress, we increased our allocation here. transition trends. While the results so far this year, and over recent years, A core feature of our approach to portfolio construction are pleasing, we nevertheless remain vigilant, and will is the use of hedging. Here we focus both on macro not hesitate to adjust the portfolio should the need arise. positions (such as broad equity market exposures or Experience suggests that when there is a widespread currencies) as well as individual stocks, funds or themes, consensus, investors can often get trapped in a false where we might decide to moderate the exposure sense of security and let their guard down. As we emerge without having to sell the underlying positions. To help from the most serious public health crisis in modern protect the portfolio in downturns, we may also deploy times, with systemic market uncertainties remaining, this various types of ‘tail hedges’ designed to reduce the is not the time to relax. And rest assured that we will not. impact of such negative volatility. With a strong team around us, we are confident that our It was a strong period for our private investments. dynamic asset allocation and strong security selection The successful IPO of Coupang, the South Korean skills, together with global deal sourcing and integrated e-commerce giant, contributed 5.5% in our private risk management, will provide us with the best platform investments book at the IPO price of $35.00. It was then to continue to deliver equity-type returns with less risk. 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 Francesco Goedhuis Ron Tabbouche portfolio including £21 million in Epic Systems, the Chairman and Chief Chief Investment Officer largest healthcare digital record platform in the US. We Executive Officer also invested £50 million in Webull and £29 million in Robinhood, two financial technology platforms disrupting J . R OTHSCHILD C APITAL M ANAGEMENT L IMITED the traditional retail trading ecosystem. As part of a broad strategy seeking targeted exposure to disruptive technologies, we made smaller investments totalling some £54 million, in promising companies. 6 Half-Yearly Financial Report 2021 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Investment Portfolio Investment portfolio as at 31 December 2022 Value of investments % of Investment holdings Country/region Industry/description £ million NAV 1 Quoted equity 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% 2 Black Knight United States Software, long 0.5% 0.3 0.0% 2 | Mastercard | | United States Software & services, long 1.0% 0.6 0.0% | | | --- | --- | --- | --- | | | 2 | | (3.1) (0.1%) | | Keurig Dr Pepper | | United States Consumer staples, long 1.2% | | | 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% 3 Discerene Global All-cap, value bias 118.4 3.2% 3 Morant Wright 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% RIT Capital Partners plc Report and Accounts December 2022 17 ## 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 | 17.7 | 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% | | Lerle | 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 | 17.9 | 0.5% | | Sound Ventures funds | United States | Early stage | 17.3 | 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%** | 18 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Investment Portfolio Value of investments % of Investment holdings Country/region Industry/description £ million 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: 5 Short-term bank borrowings – 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. RIT Capital Partners plc Report and Accounts December 2022 19 ## Principal Risks and Viability Risk management and internal control translation risk, or to reduce exposure to particular The principal risks facing RIT are both financial and companies or sectors, was an important part of mitigating operational. The ongoing process for identifying, losses over the year. evaluating and managing these risks, as well as any As a permanent capital vehicle, and unlike open-ended emerging risks, is the responsibility of the Board and the funds, we do not need to manage the portfolio to Audit and Risk Committee. Day-to-day management is meet redemptions. With sizeable assets relative to our undertaken by JRCM within parameters set by the Board. modest borrowings and ongoing liabilities, as confirmed As an investment company, RIT is exposed to financial later in this section, we do not consider the Company’s risks inherent in its portfolio, which are primarily market- viability or going concern to represent principal risks. related and common to any portfolio with significant Nevertheless, and in particular at times of market stress, exposure to equities and other financial assets. The the Manager utilises a detailed, day-to-day liquidity risk ongoing portfolio and risk management includes an management framework to help effectively manage the assessment of the macroeconomic and geopolitical balance sheet, including careful monitoring of the banking factors that can influence market risk, as well as covenants. consideration of investment-specific risk factors. The Board sets the portfolio risk parameters within Your Company’s broad and flexible investment mandate which JRCM operates. This involves an assessment allows the Manager to take a relatively unconstrained of the nature and level of risk within the portfolio approach to asset allocation and utilise whatever action is using qualitative and quantitative methods. Additional considered appropriate in mitigating any attendant risks information in relation to market risk, credit risk and to the portfolio. liquidity risk in accordance with IFRS 7 Financial Instruments: Disclosures is shown in Note 13 on As discussed in the Manager’s Report, with inflation rates pages71 to 75. reaching multi-decade highs, political and fiscal volatility impacting the UK, energy price fluctuations magnified Operational risks include those related to the legal and exacerbated by Russia’s invasion of Ukraine, and environment, regulation, taxation, information security, the underperformance of China, 2022 was extremely climate and other areas where internal or external factors turbulent globally, with no asset classes outpacing could result in financial or reputational loss. These are also inflation and losses across equities and bond markets. managed by JRCM with regular reporting to, and review As such, once again, risk management remained critical. by, the Audit and Risk Committee and the Board. The portfolio risk management approach undertaken by The Board is ultimately responsible for the Group’s the Manager, and considered regularly by the Board, is system of internal controls and it has delegated designed to produce a healthy risk-adjusted return over the supervision of the system to the Audit and Risk the long term, through careful portfolio construction, Committee. Such systems are designed to manage, security selection and the considered use of hedging. rather than eliminate, the risk of failure to achieve Part of this approach is to emphasise or de-emphasise business objectives and, as such, can provide only parts of the portfolio to compensate for risk in other reasonable and not absolute assurance against any areas. For example, with a decision to deploy capital material misstatement or loss. Further information is to the technology transition theme through the private provided in the Audit and Risk Committee Report on portfolio, the exposure to this theme within the quoted pages 44 to 47. equity book was deliberately smaller. Equally the deployment of hedges, whether to manage currency 20 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Principal Risks and Viability Principal risks The Board has carried out a robust assessment of the emerging and principal risks facing the Company, concluding that 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 The Board is responsible for monitoring the investment strategy, guided by the Investment Policy: strategy to ensure it is consistent with the Investment Policy and appropriate to meet the Corporate Objective. “To invest in a widely diversified, international portfolio The Directors receive a detailed monthly report from the across a range of asset classes, both quoted and unquoted; Manager to enable them to monitor investment performance, to allocate part of the portfolio to exceptional managers in attribution and exposure. They also receive a comprehensive order to ensure access to the best external talent available.” investment report from JRCM in advance of the regular does not deliver the Corporate Objective: quarterly Board meetings. “To deliver long-term capital growth, while preserving The overall risk appetite is set by the Board, with portfolio shareholders’ capital; to invest without the constraints of a risk managed by JRCM within prescribed limits. This involves formal benchmark, but to deliver for shareholders increases careful assessment of the nature and level of risk within the in capital value in excess of the relevant indices over time.” 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 The Group has a widely diversified investment portfolio which RIT invests in a number of asset categories including stocks, significantly reduces the exposure to individual asset price equity funds, private investments, absolute return and credit, risk. Detailed portfolio valuations and exposure analysis are real assets, government bonds and derivatives. The portfolio prepared regularly, and form the basis for the ongoing risk is therefore exposed to the risk that the fair value of these management and investment decisions. In addition, regular investments will fluctuate because of changes in market scenario analysis is undertaken to assess likely downside prices. risks and sensitivity to broad market changes, as well as assessing the underlying correlations amongst the separate Currency risk asset classes. Consistent with the Investment Policy, the Group invests globally in assets denominated in currencies other than Exposure management is undertaken with a variety of sterling as well as adjusting currency exposure to either seek techniques including using equity index and interest rate to hedge and/or enhance returns. This approach exposes the futures and options to hedge or to increase equity and portfolio to currency risk as a result of changes in exchange interest rate exposure depending on overall macroeconomic rates. and market views. Interest rate risk Currency exposure is managed via an overlay strategy, In addition, the Group is exposed to the direct and indirect typically using a combination of currency forwards and/or impact of changes in interest rates. 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. RIT Capital Partners plc Report and Accounts December 2022 21 ## Principal Risks and Viability Risk Mitigation Liquidity risk Liquidity risk is the risk that the Group will have difficulty in The Group manages its liquid resources to ensure sufficient meeting its obligations in respect of financial liabilities as they cash is available to meet its expected needs. It monitors the fall due. level of short-term funding, and balances the need for access to such funding and liquidity, with the long-term funding The Group has significant investments in and commitments needs of the Group, and the desire to achieve investment to direct private investments and funds which are inherently returns. Covenants embedded within the banking facilities illiquid. In addition, the Group holds investments with other and long-term notes are monitored on an ongoing basis for third-party organisations which may require notice periods in compliance, and form part of the regular stress tests. order to be realised. Capital commitments could, in theory, be drawn with minimal notice. In addition, the Group may be In addition, existing cash reserves, as well as the significant required to provide additional margin to support derivative liquidity that could be realised from the sale or redemption of financial instruments. 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 The majority of the exposure to credit risk within the absolute instrument held by the Group will fail to meet an obligation return and credit portfolio is indirect exposure as a result of which could result in a loss to the Group. positions held within funds managed externally. These are typically diversified portfolios monitored by the third-party Certain investments held within the absolute return and managers themselves, as well as through JRCM’s ongoing credit portfolio are exposed to credit risk, including in relation portfolio management oversight. to underlying positions held by funds. Listed transactions are settled on a delivery versus payment Substantially all of the listed portfolio investments capable of basis using a wide pool of brokers. Cash holdings and margin being held in safe custody, are held by BNP as custodian and balances are also divided between a number of different depositary. Bankruptcy or insolvency of BNP may cause the financial institutions, whose credit ratings are regularly Group’s rights with respect to securities held by BNP to be monitored. delayed. All assets held directly by the custodian are in fully Unrealised profit on derivative financial instruments held segregated client accounts. Other than where local market by counterparties is potentially exposed to credit risk in the regulations do not permit it, these accounts are designated in event of the insolvency of a broker counterparty. 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 This risk is closely monitored by the Board, through its decisions are the responsibility of a small number of key oversight of the Manager’s incentive schemes (on which individuals within the Manager. If for any reason the services it has received external advice) as well as the succession of these individuals were to become unavailable, there could plans for key individuals. The potential impact is also reduced by an experienced Board of Directors, with distinguished be a significant impact on our business. backgrounds in financial services and business. 22 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Principal Risks and Viability Risk Mitigation Climate-related risks Ongoing climate changes may impact either our own We do not consider climate-related risks have material, business, the external managers with whom we invest, and/ specific impacts on our own asset management businesses as or the underlying portfolio investments. For our own business distinct from the investment portfolio. Our Manager continues this could result in increased costs of complying with new to monitor, and minimise, the climate-related impacts of our regulations and/or changes to the way we operate. Portfolio internal operations; we offset the carbon emissions of this companies could see demand pressures, an increased business – categorised as Scope 1 and Scope 2 emissions by cost of capital, tighter regulation or increased taxation, all the Greenhouse Gas (GHG) Protocol – through participation impacting profitability. in an accredited scheme and we are taking steps to further develop our understanding of our indirect emissions impact Our ability to make climate-change disclosures may be (categorised as Scope 3 emissions). impacted by our investment approach if the external fund managers with whom we invest do not provide the desired JRCM is a signatory to the UN PRI, and the Board worked information. with our Manager to develop JRCM’s Responsible Investment Framework & Policy, which incorporates environmental factors More frequent extreme weather could disrupt businesses, into our investment approach. This allows us to consider travel, global supply chains and profitability. 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 The Operational Risk Committee of JRCM provides oversight ranging laws and regulations including in relation to the of all legal, regulatory and other operational risks across the Listing Rules, and Disclosure, Guidance and Transparency Group. This Committee reports key findings to the JRCM Rules of the FCA’s Primary Markets function, the Companies Executive Committee and the Audit and Risk Committee. Act 2006, corporate governance codes, as well as continued JRCM employs a general counsel and a compliance officer as compliance with relevant tax legislation including ongoing well as other personnel with experience of legal, regulatory, compliance with the rules for investment trusts. JRCM is disclosure and taxation matters. In addition, specialist authorised and regulated by the FCA and acts as Alternative external advisers are engaged in relation to complex, Investment Fund Manager. sensitive or emerging matters. For example, during 2022 The financial services sector continues to experience the Group again engaged external advisers in supporting its regulatory change at national and international levels, consideration of ESG matters. including in relation to climate change. Failure to act in Where necessary, co-investments and other transactions accordance with these laws and regulations could result are subject to review by the Conflicts Committee and/or the in fines, censure or other losses including taxation or FCA. reputational loss. Co-investments and other arrangements with related parties may result in conflicts of interest. RIT Capital Partners plc Report and Accounts December 2022 23 ## Principal Risks and Viability Risk Mitigation Operational risk Operational risks are those arising from inadequate or failed Systems and control procedures are the subject of continued processes, people and systems or other external factors. development and regular review. During the year the Audit and Risk Committee reviewed, and satisfied itself with, the Key operational risks include reliance on third-party managers Manager’s approach to due diligence as part of its investment and suppliers, dealing errors, processing failures, pricing or decision making. Further details on this and internal controls valuation errors (including under or over-stating the valuations more generally can be found in the Committee’s Report on of private investments leading to the incorrect valuation of pages 44 to 47. these portfolio holdings), fraud, reliability of core systems and IT security issues. 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. 24 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Principal Risks and Viability Viability statement As part of the approach, due consideration has been In accordance with provision 36 of the AIC Code and as given to the uncertainty inherent in financial forecasts part of an ongoing programme of risk assessment, the and, where applicable, reasonable sensitivities have Directors have assessed the prospects of the Group, to been applied to the investment portfolio in moderate and the extent that they are able, over a five-year period. As severe stress situations, including in relation to equity the Company is a long-term investor, the Directors have market declines, currency movements, the imposition of chosen a five-year period as this is viewed as sufficiently restrictions on redemptions from external funds, and the long term to provide shareholders with a meaningful level of capital calls in respect of existing commitments. view, without extending the period so far into the future The stress scenarios under which the borrowing as to undermine the exercise. covenants would be breached involve severe equity The Directors confirm that they have a reasonable market declines as well as historically high levels expectation that the Group will continue to operate and of capital calls, significantly in excess of what was meet its liabilities as they fall due for the next five years. experienced during the Covid-19 driven volatility in early 2020. This theoretical outcome also does not take into In making this assessment, the Directors have taken into account the Company’s ability to adjust the portfolio consideration the principal risks and mitigants set out on composition to avoid a breach, and to work with its the preceding pages and the impact these might have on lenders in order to either avert a breach, or minimise the business model, future performance, solvency and the consequences. With current gearing of 6.2%, and liquidity. In addition, the Directors reviewed the following: in the absence of either a significant adverse change to the regulatory or taxation environment, it is difficult to • the Group’s current financial position (with total reasonably envisage a situation which would threaten assets at the year end of approximately £4.2 billion); the ongoing viability of the Company over the five-year timeframe. • the nature, composition and liquidity profile of the investment portfolio (including the significant Going concern holdings of liquidity and the value of assets that Having assessed the emerging and principal risks and the could be realised within a relatively short time frame other matters considered in connection with the Viability as well as over longer periods); Statement, and in particular the liquidity balances totalling £206 million and committed but undrawn borrowings • the term structure and availability of borrowings (of of £90 million, and cash flow forecasts for the period to which drawn borrowings at the year end totalled 30 June 2024, as well as what the Group considers its £371 million, with committed but undrawn facilities readily realisable securities of £258 million, transactions totalling £90 million); awaiting settlement of £152 million at year end, and the • the ability to satisfy the associated loan covenants, amounts that could be realised from the remainder of meet the ongoing costs of the business and fund the portfolio, the Directors consider it appropriate to dividends; adopt the going concern basis in preparing the financial statements. • the level of outstanding capital commitments (primarily to long-term private funds) and the ongoing The Strategic Report on pages 3 to 25 and the s172 distributions from this part of the portfolio; and statement on page 55 have been approved by the Board and signed on its behalf by: • the continued attractiveness to shareholders of the Group’s Corporate Objective and investment approach. Sir James Leigh-Pemberton Chairman RIT Capital Partners plc Report and Accounts December 2022 25 ## Governance | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Board of Directors ### Non-Executive Chairman Senior Independent Director Sir James Leigh-Pemberton I C N R V I C N R V Philippe Costeletos A Sir James Leigh-Pemberton is non-executive Chairman having joined Philippe Costeletos joined the Board as a non-executive Director the Board of the Company as a non-executive Director in April 2019. in July 2017 and became its Senior Independent Director in April He is Chairman of the Nominations Committee and a member of the 2019. He is Chair of the Conflicts and Remuneration Committees Conflicts, Remuneration and Valuation Committees. He previously and a member of the Audit and Risk, Nominations, and Valuation served as an independent non-executive Director of the Company Committees. from 2004 to 2013. He has over 30 years’ of private investment and board governance Sir James joined UK Financial Investments (UKFI) in October 2013 experience and is Founder of Stemar Capital Partners, a private as Chief Executive and in January 2014 was appointed Executive investment firm focused on building long-term investment platforms. Chairman. On 1 April 2016 he became Non-Executive Chairman Philippe was formerly Chair of International of Colony Capital, a global of UKFI. Following the merger of UKFI and UK Government real estate and investment management firm. Previously, he was Investments (UKGI), he became Deputy Chairman of UKGI, a Head of Europe at TPG, a leading global private investment firm and a position he held until September 2022. member of TPG’s Global Management and Investment Committees. Prior to that, Philippe was a Member of the Management Committee Before joining UKFI, Sir James was Managing Director and Chief at Investcorp, a leading manager of alternative investment products. Executive Officer of Credit Suisse in the UK, based in London. In this Previously, Philippe held positions at JP Morgan Capital, JP Morgan’s role, he was responsible for developing the Bank’s client relationships Private Equity Group and Morgan Stanley. in Private Banking, Investment Banking and Asset Management in the UK. He was also a member of the Credit Suisse Europe, Middle Philippe is Chair of Janus Fertility and a board member of Digital Care, East & Africa (EMEA) Operating Committee. He joined Credit Suisse Vangest Group and Generation Home. He is a Senior Advisor to the First Boston (CSFB) in 1994. Prior to joining CSFB, he was a Director Blackstone Group. Philippe is a member of the President’s Council of SG Warburg Securities, where he worked for 15years. on International Activities at Yale University and the Yale Center for Emotional Intelligence Advisory Board. He graduated magna cum In the 2019 New Year Honours List, Sir James received a knighthood laude with a BA with distinction in Mathematics from Yale University for services to financial services, British industry andgovernment. and received an MBA from Columbia University. ### Non-Executive Directors Maggie Fanari I C N R Vikas Karlekar I Maggie Fanari joined the Board of the Company as a non-executive Vikas Karlekar joined the Board as a non-executive Director in Director in April 2019 and is a member of the Conflicts, August 2022. Nominations and Remuneration Committees. He is a qualified chartered accountant, and a graduate of the London Maggie is the Senior Managing Director, Global Group Head High School of Economics specialising in Management Sciences and has Conviction Equities at Ontario Teachers’ Pension Plan which has a held a number of senior finance roles across the financial services global mandate to invest in public and private companies. industry. Vikas is currently Managing Director of Group Finance at Intermediate Capital Group PLC, a UK listed asset manager She started her career as an auditor at KPMG and previously specialising in private markets, covering all aspects of financial and worked in equity research at Scotia Capital. regulatory reporting, valuation governance, key accounting judgments, Maggie is a chartered accountant and a CFA charterholder. financial planning and analysis, and platform and operating model Shealso holds a BBA from the Schulich School of Business at transformation. In addition, he is a member of the Board of Trustees, YorkUniversity and ICD.D certification from the Institute of and Treasurer, of the Pepal Foundation, a charity focused on bringing Corporate Directors. 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. RIT Capital Partners plc Report and Accounts December 2022 27 ## Board of Directors ### Non-Executive Directors Cecilia McAnulty I Maxim Parr I C R V Cecilia joined the board as a non-executive director in August 2022. Maxim Parr joined the Board as a non-executive Director in May 2020 and is a member of the Conflicts, Remuneration and Valuation She is a qualified accountant and has held senior investment Committees. roles for banks and hedge funds. Her investment experience encompasses several asset classes including distressed debt, Maxim started his career at Jardine Matheson and has over private equity and credit. 15years’ experience working in cross-border investment between Asia and Europe. Maxim lived in Beijing for well over a decade Cecilia is a non-executive director and audit Chair of both Northern where, as Founder and CEO of Atlas Capital Group, he worked 2 VCT plc and Polar Capital Global Financials Trust plc and recently alongside FTSE 100 and European corporates on their China resigned as an independent NED of Alcentra Limited, an asset investment strategy in start-ups, growth capital and buyouts. manager wholly owned by Bank Of New York Mellon, specialising in sub investment grade credit. She is also a member of the Working between Europe and Asia, Maxim is the Executive Chair Industrial Development Advisory Board, part of The Department of nr2, a cross border technology investment platform. of Business, Energy & Industrial Strategy (BEIS) which advises on Maxim graduated with First Class Honours from the School grants to UK businesses. of Oriental and African Studies and was awarded the She has held senior roles at Centaurus Capital, Barclays Capital, StephenKHassenfeld Fellowship to study at the Hopkins Nanjing Royal Bank of Scotland and PwC. She qualified as a chartered Centre of the School of Advanced International Studies. accountant with Peat Marwick (now KPMG) in Glasgow. She has He is fluent in Mandarin and proficient in Cantonese, Russian, also held a number of charity roles including Chair of the Finance German and French. and General Purposes Committee for English National Ballet. André Perold Mike Power I A I A V André Perold joined the Board of the Company as a non-executive Mike Power joined the Board of the Company as a non-executive Director in April 2018 and is a member of the Audit and Director in January 2014 and is Chair of the Valuation and the Audit RiskCommittee. and Risk Committees. André is Co-Founder, Partner and Chief Investment Officer of He is a Fellow of the Institute of Chartered Accountants in England HighVista Strategies, a Boston based investment firm. He is a and Wales (ICAEW) and Professor of Accounting at the London board member of the Vanguard Group, the global investment School of Economics and Political Science, where he has written company. He was previously the George Gund Professor of extensively on risk and corporate governance issues. He was a Finance and Banking at the Harvard Business School where he also non-executive director of St. James’s Place plc from 2005 to 2013 held senior roles including Chair of the Finance Faculty and Senior where he chaired the Risk Committee and was a member of the Associate Dean. 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. 28 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Board of Directors ### Non-Executive Directors Jutta af Rosenborg I A V Hannah Rothschild CBE NI Jutta af Rosenborg joined the Board as a non-executive Director Hannah Rothschild joined the Board of the Company as a in May 2022 and is a member of the Audit and Risk, and Valuation non-independent non-executive Director in August 2013. Committees. In addition, she is a non-executive director of WHAM, a Director She is a qualified accountant and holds a Master’s degree in of Five Arrows Limited and serves as a Trustee of the Rothschild Business Economics and Auditing from Copenhagen Business Foundation. School and has held a number of senior roles in group finance, Hannah is an award-winning writer and filmmaker with a long auditing and risk management. standing career in the media. Jutta is a non-executive director of JPMorgan European Growth She was the first woman to Chair the Trustees of the National & Income plc and Chair of its audit committee. In addition, she is Gallery. a non-executive director of Nilfisk Holding A/S and chairs its audit In the 2018 Queen’s Birthday Honours, Hannah was appointed committee. She is also a member of the supervisory board of BBGI Commander of the Order of the British Empire (CBE) for services Global Infrastructure S.A., where she chairs the audit committee. to the arts and to philanthropy. 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. I Independent Director NI Non-Independent Director A Audit and Risk Committee member C Conflicts Committee member N Nominations Committee member R Remuneration Committee member V Valuation Committee member Committee Chair RIT Capital Partners plc Report and Accounts December 2022 29 ## 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 Andrew Jones Francesco Goedhuis is the Chairman and Chief Executive Officer, Andrew Jones is the Chief Financial & Operating Officer. He is and also leads the Manager’s private investment strategies. responsible for the Group’s financial activities and its operations. Hejoined JRCM as the Principal in Lord Rothschild’s Office (the Prior to joining JRCM in 2008, he spent three years in venture Company’s Honorary President, founder and former Chairman) in capital and four years at Nomura, advising on its private equity 2010. Previously, he was in New York working for the Economics investments as well as risk, global corporate development and Nobel Laureate Robert Merton and the former Vice Chairman of strategy. A Fellow of the ICAEW, he qualified as a chartered J.P. Morgan, Roberto Mendoza at IFL, commercialising financial accountant with Deloitte where he spent time in audit before academic theory on both the buy and sell sides. specialising in corporate finance and valuation advice. Andrew is a member of the audit committee of the British Academy. Ron Tabbouche Ron Tabbouche is the Chief Investment Officer. He joined JRCM in 2012 having previously been the Head of Investments for Managed Portfolios at GAM. At the age of 26, he joined GAM’s Investment Committee. Subsequently, he led the overall investment strategy of multi-billion dollar funds across a broad range of asset classes. Ron is an Adviser to the WHAM Investment Advisory Committee, and is also a member of the Investment Committee of the Wolfson Foundation. 30 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report Introduction Asour Manager is a wholly-owned subsidiary of the The Directors present the Company’s Corporate Company, the Board considers that this approach provides Governance Report. This describes our principal the most effective means to constructively challenge and governance bodies, their composition, purpose and scrutinise all aspects of the Manager’s performance. It operation within the context of the Principles and ensures all Directors are regularly involved in the process, Provisions of the Association of Investment Companies rather than delegating this responsibility to a selection of (AIC) Code of Corporate Governance (AIC Code) and Directors through a separate management engagement the UK Corporate Governance Code (UK Code) of the committee. Financial Reporting Council (FRC), which can be viewed As at the date of this Report, the Board comprised at www.theaic.co.uk and www.frc.org.uk respectively. 10 non-executive Directors, of which nine have been The AIC Code, which has been endorsed by the FRC, determined by the Board to be independent, with one, adapts the Principles and Provisions of the UK Code Hannah Rothschild, designated as non-independent. to make them relevant for investment companies. The Company has in place a structure of five Board TheBoard of Directors therefore considers the Committees, with clearly defined responsibilities. This is AICCode to represent the most appropriate governance intended to limit the scope for an individual, or a small framework for the Company, while recognising that group of individuals, to dominate the Board’s decision as a self-managed investment trust, aspects of the making. The structure of permanent Board Committees, UK Code remain relevant. This report sets out how together with the delegation of investment management, the Company has applied the relevant principles and administration and company secretarial matters to the provisions of the Codes during the financial year ending Manager, is considered by the Board as appropriate for 31 December2022. a self-managed investment trust on an ongoing basis. Leadership The terms of reference of each of the permanent Board The Company has a non-executive Board, chaired by Committees may be viewed at www.ritcap.com. Sir James Leigh-Pemberton. The Board is collectively As Chairman of the Board, Sir James Leigh-Pemberton responsible for setting the Company’s long-term strategic is responsible for its leadership and effectiveness in aims, and its ongoing business and investment strategies. dealing with the matters reserved for its decision with The schedule of matters reserved for the Board may be adequate time for consideration. This includes ensuring viewed on the website, www.ritcap.com. a culture of openness and debate and that Directors are The day-to-day management of the business is delegated properly briefed on issues arising at Board meetings. under a formal agreement to JRCM, the Company’s The Chairman is also responsible for ensuring effective subsidiary and Manager. JRCM is managed by its communication with shareholders, making Directors Executive Committee, led by its Chairman and CEO, aware of any concerns raised by shareholders and for Francesco Goedhuis. The JRCM Executive Committee facilitating the contribution of the Directors. 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. The current members of the five Board Committees are as follows: Audit and Risk Committee Conflicts Committee Nominations Committee Mike Power (Chair) Philippe Costeletos (Chair) Sir James Leigh-Pemberton (Chair) Philippe Costeletos Maggie Fanari Philippe Costeletos André Perold Sir James Leigh-Pemberton Maggie Fanari Jutta af Rosenborg Maxim Parr Remuneration Committee Valuation Committee Philippe Costeletos (Chair) Mike Power (Chair) Maggie Fanari Philippe Costeletos Sir James Leigh-Pemberton Sir James Leigh-Pemberton Maxim Parr Maxim Parr Jutta af Rosenborg RIT Capital Partners plc Report and Accounts December 2022 31 # Corporate Governance Report ## 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 | – | – | – | – | – | | Cecilie 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. ## The Audit and Risk Committee The Audit and Risk Committee Report is shown on pages 44 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 9 February 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 Note 17) and to ensure that potential conflicts of interest are avoided, or managed appropriately. 32 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report The Nominations Committee The current composition of the Board complies with its The Nominations Committee meets at least twice each year own Diversity and Inclusion Policy, which includes meeting and on additional occasions as required. The Committee is the gender and/or ethnic diversity recommendations chaired by Sir James Leigh-Pemberton. All of its members of both the Parker Review and the Hampton-Alexander are independent non-executive Directors. Maggie Fanari Review and also meets the reporting requirements around was appointed to the Committee on 4 May 2022. diversity in new listing rules introduced by the FCA. Its responsibilities include overseeing the process of the To ensure a smooth transition as a result of the recent appointment of new Directors to the Board, overall Board Board changes, Mike Power has agreed to remain as composition, succession planning, monitoring progress on a Director until the forthcoming AGM. The Board has diversity and other matters set out in its terms of reference. approved that, following his retirement as a Director at the AGM, Jutta af Rosenborg will replace him as Chair The Committee is mindful of Board balance, experience of the Audit and Risk Committee, and Maxim Parr will and diversity when considering appointments to the replace him as Chair of the Valuation Committee. Both Board and is responsible for identifying suitable Board Jutta and Maxim currently sit on the Audit and Risk, and candidates, including considering candidates from a Valuation Committees respectively and it was determined wide range of backgrounds and experiences. In terms of that each has the requisite skills and experience to chair succession planning, the Committee acknowledges the these committees. importance and benefits of diversity, especially in respect of gender and ethnicity and the Committee is responsible The Remuneration Committee for the implementation of the Board’s Diversity and The Directors’ Remuneration Report is shown on Inclusion Policy, which was published in May 2022, and pages48 to 51. may be viewed on the Company’s website. The Valuation Committee The Nominations Committee was responsible for The Valuation Committee comprises five Directors, all of implementing the Board’s succession planning in respect whom are independent, and with appropriate experience. of Amy Stirling’s retirement from the Board. With effect The Committee plays a key role in providing the Board from her retirement, Mike Power replaced her as the with assurance that the valuation process is rigorous and Chair of the Audit and Risk Committee. Mike had been a independently challenged. member of the Audit and Risk Committee for eight years The Committee is currently chaired by Mike Power and on his and it was determined he had the requisite skills and retirement at the forthcoming AGM, Maxim Parr will become experiences to be appointed as Chair. The Committee Chair of the Committee, in line with the Board’s succession also oversaw the process to appoint a new Director to planning. It meets at least twice each year and additionally as replace Amy. Atthe conclusion of this process, Jutta af may be required. The Committee’s principal responsibility is to Rosenborg was appointed to the Board on 19 May 2022. review the Company’s direct private and other investments to Her skills and experiences complement those of the ensure that they are presented in the annual and half-yearly other Directors, including being a qualified accountant accounts at fair value. As a result of the inherent subjectivity and having held a number of senior roles in group finance, of the valuation of private investments, these form a key area auditing and risk management, and she joined the Audit of focus for the Committee. and Risk, and Valuation Committees on her appointment. At each meeting, the Committee reviews a detailed report The Committee continuously monitors Board composition from the Manager which includes: a valuation report on to ensure it has the right skillset and breadth of experience each of the largest directly-held private investments, with which to function as an effective Board. As part including information on the companies’ performance of this role, the Committee recommended that Vikas and valuation and/or the GP’s valuation where relevant; Karlekar and Cecilia McAnulty join the Board and they asample and overall summary of the valuation of the were both appointed as Directors on 11 August 2022. smaller directly-held private investments; a valuation report Vikas is a qualified accountant who has held a number of from Jones Lang LaSalle (JLL) in relation to the Company’s senior financial roles across the financial services industry. investment properties; the valuation approach for the Ceciliais also a qualified accountant, holding senior remainder of the portfolio, including an analysis of the investment roles for banks and hedge funds. Company’s investments in private funds; and a valuation of The Board appointed Russell Reynolds Associates the Company’s loan notes. 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. RIT Capital Partners plc Report and Accounts December 2022 33 ## Corporate Governance Report As part of its review and challenge, the Committee In accordance with the Codes, all Directors (other than considers: the consistency of the Manager’s approach those retiring or standing for their first election) stand over time; the relevance and appropriateness of the for re-election annually, subject of course to continued valuation techniques adopted; and a review of the satisfactory performance. The Board recommends differences between the price achieved at a liquidity shareholders approve the election and re-election of event and the most recent valuation prior to the event. Directors (as applicable) standing at the forthcoming AGM. Effectiveness and evaluation Many of the Directors have held or hold senior positions Subject to his continued annual re-election, the in the financial services industry, including at prominent Chairman’s tenure is not intended to exceed nineyears, investment banks or asset management companies. In inline with the relevant corporate governance addition, there are Directors with considerable experience expectations. Moreover, as part of the wider annual beyond these areas. The biographies of the Directors evaluation of the Board, length of service is a key and the JRCM Executive Committee on pages 27 to 30 consideration when assessing the general requirements demonstrate a strength of experience in the areas required to regularly refresh the membership, diversity and overall to oversee and implement the Company’s strategic, composition of the Board. investment and operational aims. Accountability As described above, the process for the appointment The Board, acting where appropriate through the Audit of new Directors to the Board is the responsibility of and Risk Committee, is responsible for determining the Nominations Committee, as is their induction and the nature and extent of the principal risks it is willing ensuring, on an ongoing basis, that each Director is able to take in achieving its strategic objectives. It is also to allocate sufficient time to the Company to discharge responsible for maintaining sound risk management and their responsibilities effectively. internal control systems, for setting corporate reporting, risk management and internal control principles and JRCM provided relevant and timely information on the for maintaining an appropriate relationship with the financial, legal and regulatory developments during 2022, Company’s auditor. These areas are further described in including in the papers and presentations provided at the Audit and Risk Committee Report on pages 44 to 47. 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. Theresults were evaluated and considered by the Board as a whole. The overall conclusion of the evaluation was that the Board and its committees operate effectively and that each Director continues to make constructive contributions and demonstrates commitment to the role. The evaluation noted that the areas of focus recommended in the 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. 34 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report Engaging with stakeholders communications are encouraged through team The Board recognises the benefits of engaging with meetings, training sessions, presentations and also our shareholders and other key stakeholders in order to social and team-building events; ensure that we are aware, and can take account of, their • as part of our employee well-being programme, views during Board discussions and when the Board hybrid working policies have been introduced with makes decisions. As a result, the following processes and flexible and remote working arrangements available; initiatives are in place. • a financial contribution was made to those employees Shareholders impacted the most by the rising cost of living; • an ongoing dialogue with principal shareholders, proxy advisors, corporate governance specialists and analysts • an ongoing commitment to professional is maintained and the Manager regularly reports to development and the nurturing of talent by giving the Board on its shareholder and analyst meetings to employees the appropriate training, development ensure that the members of the Board understand and support they need and providing them with the shareholders’ views of the Company. Moreover, the opportunities to gain new skills and professional Chairman has engaged with major shareholders and qualifications to perform their roles effectively; will continue to do so each year; • support and investment in employees’ health and • the Board is aligned with shareholders on the well-being by providing a wide range of benefits that importance of ESG and has appointed a leading are regularly reviewed and updated; international sustainability consultancy to assist in this area. As part of our ongoing commitment to ESG • provision of a clear and independent whistleblowing integration the Manager became a signatory of the process; UN PRI and has adopted a Responsible Investment Framework & Policy which can be viewed at www. • a carefully structured performance management ritcap.com; process, designed to reinforce the Group’s overall strategy and culture; • a regular review of the composition of our share register and receipt of feedback from our brokers, • policies to ensure that we continue to provide including in the form of an independent survey of an inclusive working environment where all our shareholder views conducted by the brokers; employees are treated with dignity and respect, regardless of their gender, age, ethnicity, disability, • a designated email account (investorrelations@ritcap. sexual orientation or background; and co.uk) for shareholders to communicate directly with the Group; • provision of an employee assistance programme providing confidential support on mental health issues. • we maintained our regular programme of shareholder engagement activities including shareholder and Suppliers analyst meetings and webinars to enable us to • we place a high value on the relationships with a broad continue engaging directly with shareholders and group of key suppliers and service providers including continue to be informed of their views; and fund managers, our auditor and professional advisers, our custodian/depositary, bankers, information providers, • all shareholders are encouraged to attend the AGM trading counterparties, and brokers, and are committed and ask questions of the Directors and the Manager. to developing and maintaining sustainable and All shareholders have the opportunity to cast their transparent working relationships over the long term; votes in respect of the proposed resolutions at the AGM by proxy, either electronically or by post. • while we ensure these relationships are subject to regular review and refreshed where necessary, equally Employees some of the suppliers have worked with us for very • there is a focus on having a working environment many years. Effective management of our supplier where there is engagement and communications relationships is critical to our ability to deliver on our with employees at all levels. Throughout the year broad mandate, and we utilise a combination of formal ‘town hall’ meetings for all Group employees were and informal feedback, directly and via our Manager; and held and chaired by the Chief Executive Officer of JRCM as well as the Chairman (who is designated • as part of JRCM’s Responsible Investment as the Director responsible for engagement with Framework& Policy, ascertaining our fund managers’ employees). More generally, regular internal approach to ESG forms part of the due diligence RIT Capital Partners plc Report and Accounts December 2022 35 ## Corporate Governance Report undertaken by JRCM during the investment selection • various employee events to raise money for process and as part of ongoing monitoring. designated charities and donations were made by the Manager to locally based charities which were Environment and the community voted for by employees; and • although it is a last resort after our actions to reduce and avoid carbon emissions, we offset the carbon • as part of our commitment to improving diversity and emissions of our residual internal operations through inclusion in the asset management sector, we have participation in an accredited scheme, Carbon continued our partnership with 10,000 Black Interns Footprint Limited, involving the planting of trees at initiative and in 2022, JRCM welcomed its first intern primary schools; under the Girls Are INvestors (GAIN) programme which aims to improve gender diversity in the sector. • a ‘zero to landfill’ waste and recycling policy; Compliance with the Codes • encouraging employees to reduce their own It is the Board’s view that the Company has complied environmental impact through such initiatives as a with both the principles and the relevant provisions of the cycle to work scheme; Codes during the year. • procurement of all electricity used in our property The following table describes how the Board has applied portfolio from renewable sources; the 17 principles of the AIC Code, and the one relevant principle of the UK Code, in practice. • 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; 36 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report AIC Code Principle Application A. A successful Company is led by an effective Board, whose The 2022 Board evaluation (see page 34), concluded that the role is to promote the long-term sustainable success of the Board and its Committees continue to operate effectively, Company, generating value for shareholders and contributing with the recommendations of the prior year external to wider society. 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 and36 of this Report illustrates initiatives contributing to the environment and wider society. B. The Board should establish the Company’s purpose, values The Directors consider that the purpose and strategy and strategy, and satisfy itself that these and its culture are are enshrined in the Company’s Corporate Objective and aligned. All Directors must act with integrity, lead by example Investment Policy, as described in the Strategic Report and promote the desired culture. (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 The Board receives from the Manager regular and detailed in place for the Company to meet its objectives and measure information in relation to the Company’s investment performance against them. The Board should also establish performance as well as in relation to its finance and operational a framework of prudent and effective controls, which enable capability, including the annual budget. Performance is risk to be assessed and managed. 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. RIT Capital Partners plc Report and Accounts December 2022 37 ## Corporate Governance Report AIC Code Principle Application D. In order for the Company to meet its responsibilities to The Board receives regular reports from the Manager shareholders and stakeholders, the Board should ensure in relation to shareholder engagement as part of an effective engagement with, and encourage participation from, extensive investor relations programme. Shareholders these parties. 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 The Chairman encourages active participation at Board overall effectiveness in directing the Company. They should meetings, including setting the agenda items for discussion. demonstrate objective judgement throughout their tenure The Board receives a comprehensive suite of regular and promote a culture of openness and debate. In addition, information, including in-depth reports from the Manager the Chairman facilitates constructive Board relations and of performance, attribution, transactions and exposures on the effective contribution of all non-executive Directors, and a monthly and quarterly basis. The regular quarterly Board ensures that Directors receive accurate, timely and clear meetings also include detailed reports on the finance and information. 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 The Board has delegated responsibility to key Committees, of Directors (and, in particular, independent non-executive as well as engaging the Manager under a formal investment Directors) such that no one individual or small group of management and services agreement. At 31 December individuals dominates the Board’s decision making. 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. Assuch, the Board considers that its decision making is not dominated by an individual or small group of individuals. Note: the AIC Code does not include a Provision E. 38 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report AIC Code Principle Application H. Non-executive Directors should have sufficient time The Directors consider they have sufficient time to meet to meet their Board responsibilities. They should provide Board responsibilities. While there is a standing meeting constructive challenge, strategic guidance, offer specialist timetable for the Board and Committees, the Directors advice and hold third party service providers to account. 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 The Manager provides company secretarial services to the ensure that it has the policies, processes, information, time Company and, together with external specialist advisors, and resources it needs in order to function effectively and ensures that Board procedures and applicable rules and efficiently. 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, Appointments to the Board follow a careful process, led rigorous and transparent procedure, and an effective by the Nominations Committee who identify candidates to succession plan should be maintained. Both appointments complement and enhance the collective skills, knowledge and succession plans should be based on merit and objective and experience of the Board. The Board’s Diversity and criteria and, within this context, should promote diversity Inclusion Policy acknowledges the benefits of diversity of of gender, social and ethnic backgrounds, cognitive and gender, social and ethnic backgrounds on the Board and personal strengths. 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 Directors’ varying backgrounds and wide-ranging experience, of skills, experience and knowledge. Consideration should including in the investing world and financial services be given to the length of service of the Board as a whole and generally ensures broad cognitive diversity, which is viewed membership regularly refreshed. 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). RIT Capital Partners plc Report and Accounts December 2022 39 ## Corporate Governance Report AIC Code Principle Application L. Annual evaluation of the Board should consider its The Senior Independent Director led a formal and rigorous composition, diversity and how effectively members work internal evaluation of the Board in 2022. As part of the together to achieve objectives. Individual evaluation should evaluation, each Director completed a questionnaire which demonstrate whether each director continues to contribute evaluated the performance of the Chairman, each Director, effectively. 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 The Board has delegated the assessment of the external policies and procedures to ensure the independence and audit function and the review of the integrity of the Annual effectiveness of external audit functions and satisfy itself on Report and Accounts (ARA) and Half-Yearly Financial Report the integrity of financial and narrative statements. 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 The Audit and Risk Committee reviewed the financial understandable assessment of the Company’s position and and narrative statements within the 2022 ARA and 2022 prospects. Half-Yearly Financial Report, as well as supporting papers and evidence from the Manager in relation to this area. TheCommittee concluded that these reports were consistent with the fair, balanced and understandable requirement and advised the Board accordingly. The Board considered the Committee’s advice and its own review, before reaching the same conclusion. 40 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report AIC Code Principle Application O. The Board should establish procedures to manage risk, Day-to-day risk management is undertaken by the oversee the internal control framework, and determine the Manager and overseen by the Audit and Risk Committee nature and extent of the principal risks the Company is willing which receives detailed reports twice a year on the risk to take in order to achieve its long-term strategic objectives. 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 The Directors’ remuneration policy is subject to a binding support strategy and promote long-term sustainable success. shareholders’ vote every three years and will next be tabled to shareholders for approval at the forthcoming AGM. ThePolicy 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 As set out in the Directors’ Remuneration Report on remuneration policy should be established. No director pages 48 to 51, Directors are paid on a fixed-fee basis, should be involved in deciding their own remuneration as recommended by the Remuneration Committee and outcome. 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. RIT Capital Partners plc Report and Accounts December 2022 41 ## Corporate Governance Report AIC Code Principle Application R. Directors should exercise independent judgement and Directors are remunerated on the basis of a flat standard discretion when authorising remuneration outcomes, taking fee supplemented by additional Committee membership account of Company and individual performance, and wider and Chair fees. There are no performance-related aspects to circumstances. Directors’ remuneration. In the oversight of JRCM and SHL’s remuneration, Directors ensure that it is set by reference to the performance of the Company and individuals, relative to KPIs and individual objectives. In addition, as a self-managed investment trust, the Board has also considered the following principle from the UKCode: UK Code Principle Application E. The Board should ensure that workforce policies and The Group’s workforce, who are employed by JRCM and SHL, practices are consistent with the Company’s values and are subject to consistent standards of behaviour set out in an support its long-term sustainable success. The workforce employee handbook and monitored by the Manager. should be able to raise any matters of concern. 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. 42 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Corporate Governance Report Statement of Directors’ responsibilities The Directors are responsible for keeping adequate The Directors are responsible for preparing the Annual accounting records that are sufficient to show and Report and Accounts in accordance with applicable explain the Parent Company’s and Group’s transactions United Kingdom law and regulations. and disclose with reasonable accuracy at any time the financial position of the Parent Company and the Group Company law requires the Directors to prepare financial and enable them to ensure that the Parent Company statements for each financial year. Under that law the and the Group financial statements comply with the Directors have elected to prepare the Group and Parent Companies Act 2006. They are also responsible for Company financial statements in accordance with UK safeguarding the assets of the Group and Parent adopted international accounting standards (UK adopted Company and hence for taking reasonable steps for the IAS). Under company law the Directors must not approve prevention and detection of fraud and other irregularities. the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Under applicable law and regulations, the Directors Group and the Parent Company and of the profit or loss of are also responsible for preparing a Strategic Report, the Group and the Parent Company for that period. Directors’ Report, Directors’ Remuneration Report and corporate governance statement that comply In preparing these financial statements the directors are with that law and those regulations. The Directors are required to: responsible for the maintenance and integrity of the corporate andfinancial information included on the Parent • select suitable accounting policies in accordance Company’s website. with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply The Directors confirm, to the best of their knowledge: them consistently; • that the consolidated financial statements, prepared • make judgements and accounting estimates that are in accordance with UK adopted IAS give a true and reasonable and prudent; fair view of the assets, liabilities, financial position and profit or loss of the Parent Company and • present information, including accounting policies, in undertakings included in the consolidation taken as a a manner that provides relevant, reliable, comparable whole; and understandable information; • that the Annual Report, including the Strategic • provide additional disclosures when compliance Report, includes a fair review of the development with the specific requirements in UK adopted IAS is and performance of the business and the position insufficient to enable users to understand the impact of the Parent Company and undertakings included of particular transactions, other events and conditions in the consolidation taken as a whole, together with on the Group and Parent Company financial position a description of the principal risks and uncertainties and financial performance; that they face; and • in respect of the Group financial statements, state • that they consider the Annual Report and whether UK adopted IAS have been followed, Accounts, taken as a whole, is fair, balanced and subject to any material departures disclosed and understandable and provides the information explained in the financial statements; necessary for shareholders to assess the Parent Company’s position, performance, business model • in respect of the Parent Company financial and strategy. statements, state whether UK adopted IAS have been followed, subject to any material departures The Corporate Governance Report was approved by the disclosed and explained in the financial statements; Board and signed on its behalf by: and • prepare the financial statements on the going concern basis unless it is inappropriate to presume Sir James Leigh-Pemberton that the Parent Company and the Group will continue Chairman in business. RIT Capital Partners plc Report and Accounts December 2022 43 # 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, I accepted the offer to stand as Committee Chair. The Board is satisfied that I have requisite recent and relevant financial experience to chair the Committee: I am 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. I can confirm that the Board considers all members of the Committee to have sufficient recent and relevant financial experience so as to comply with the requirements of the 2019 AIC Code and the relevant aspects of the 2018 UK Code (together, the Codes). ## 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. 44 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Audit and Risk Committee Report In addition to the activities described above, significant direct access to the underlying companies, it prepares its matters we considered during the year are set out below: own valuations using industry-standard approaches. Environmental, social and governance The results of this analysis are reported in detail on a During 2022, the Group worked to strengthen its six-monthly basis to the Valuation Committee, which is approach to integrating ESG considerations into its responsible for the final decisions on valuation. strategy and operations, including building on the We have therefore considered the work of the Valuation Responsible Investment Framework & Policy published Committee (which I also chair), the results of their in 2021. ESG considerations are embedded within the discussions with the Manager and the external auditor. approach taken by the Manager to new investments, and We view the work as detailed and comprehensive, and the Manager prepares a quarterly status report in respect are confident that the persons preparing the reports of this, which will help support future reporting, including have sufficient and appropriate expertise through their under UN PRI during 2023. experience and qualifications. In view of the pace of developments, we will keep under Furthermore, we believe that the process is planned review the ongoing financial reporting obligations in this and managed to devote adequate time and resource to area, having previously recognised the importance of preparation and review, both by the Manager and also by climate-related matters in both our accounting policies the members of the Valuation Committee. and as a principal risk. Under listing rule 15.4.29(R), the Company, as a closed ended investment fund, is We also considered the work of the Valuation Committee exempt from complying with the Task Force on Climate as it relates to other assets in the portfolio. Here, the related Financial Disclosures (TCFD). Nonetheless, the combination of detailed processes, rigorous analysis and, Company recognises that the TCFD recommendations where relevant, external advice has provided comfort over are intended to help determine climate-related risks and the portfolio valuations. Three members of this Committee, opportunities across our operations and our portfolio. myself included, also sit on the Valuation Committee. Consequently, over the course of 2022, the Board The Audit and Risk Committee also receives an executive engaged a leading international sustainability consultancy summary of the Manager’s main valuation report as well as to assist its consideration on TCFD reporting. In 2023, the minutes from the Valuation Committee. we will continue to work with this consultancy to further develop our non-financial reporting in line with elements Cyber risk of the TCFD framework. Our internal ESG documentation In light of the ongoing elevated cyber risks facing processes will be subject to an internal audit during 2023. organisations, the Committee carefully considered the measures in place across the Group to mitigate these The valuation of private investments and other assets risks. During the early part of the year, the Manager Private investments represent 40.7% of net assets undertook an external review of its cyber security and comprise direct investments, as well as direct co- framework, following which the Manager gained investments and diversified funds managed by external accreditation for ‘cyber essentials’ and ‘cyber essentials managers (or GPs). By their very nature such investments plus’, both provided by the National Cyber Security merit careful attention when considering their fair value. Centre. During the year, the Committee received a As these are unlisted investments, without a public share separate presentation from the Manager’s Head of IT, price, the estimation of fair value requires the exercise focused on cyber risk and cloud-based systems and the of considerable judgement. This subjectivity means that employee training and awareness programmes in this there is a higher degree of uncertainty in such valuations area. While there is no room for complacency in such compared with those of other assets. In assessing the a fast-moving area, the Committee was satisfied that fair values, there is, by necessity, a degree of reliance on sufficient and ongoing measures are in place to address the GPs, with co-investments and funds representing the this risk as far as is reasonably practicable. majority of the private investments portfolio. The GPs will typically have access to confidential information about the Related party disclosures underlying companies and are required to report fair values Related party transactions are a common feature in accordance with internationally recognised accounting of commerce and business. The Group often takes standards. The valuations are usually prepared on a quarterly advantage of opportunities offered to it, or services basis, albeit with a time lag which may be up to three provided to it via many relationships built up over time months, as is normal in the industry. The Manager reviews (including those arising from Board members). Disclosure these valuations and, where possible, the justification of such transactions is a requirement in order to allow for any changes, as well as considering any additional shareholders and other users of the financial statements supporting information. In addition, where the Manager has to assess the risks and opportunities facing the Group. RIT Capital Partners plc Report and Accounts December 2022 45 ## Audit and Risk Committee Report We consider the work of the Conflicts Committee in identified through the course of these audits and the reviewing advisory services, co-investment transactions Committee considers the resource devoted to internal and any other similar arrangements with any related party, audit to be appropriate to the nature of the Company’s and have discussed with the Manager the systems and operations. processes in place to identify, review, record and disclose In addition, BNP Paribas Trust Corporation UK such transactions. We note the importance that the Board Limited (as Depositary), undertook a review of the and the Manager place upon the work of the Conflicts Manager’s arrangements under AIFMD for investment Committee. We have reviewed the disclosures made in administration, compliance, risk management and the financial statements regarding such transactions and business continuity, with no concerns noted. consider that the necessary disclosures have been made. EY separately audited the Manager’s client asset Internal control procedures in relation to a very small amount of legacy The Board of Directors is responsible for the Group’s client money. During the year, after an extensive tracing system of internal control and it has delegated the exercise in accordance with FCA guidance, the Manager supervision of the system to this Committee. The system was able to pay the residual balance to charity (while is designed to manage, rather than eliminate, the risk retaining the liability in case any future claimants arise). of failure to achieve business objectives and, as such, can provide only reasonable and not absolute assurance Under the FCA’s new Investment Firms Prudential against any material misstatement or loss. Regime (IFPR), the Manager is required to produce an Internal Capital Adequacy and Risk Assessment (ICARA). The Board has delegated to the Manager the The Committee was updated on this process, and on implementation and day-to-day management of the the satisfactory completion of the first report, with no system of internal control within an established substantive concerns raised. framework applicable throughout the Group. The system of internal control is reviewed twice each year by the The Manager also reports to the Committee the results Committee, using a comprehensive report prepared by of its monitoring of external fund manager’s compliance the Manager. The report outlines each of the principal with the terms of their investment management risks and their management, covering all aspects of arrangements, as well as periodically reviewing their own financial and operational risk as is summarised in the control procedures. Principal Risks and Viability section on pages 20 to 25. The The Board has reviewed the effectiveness of the system relative importance of each principal risk is assessed by of internal control in operation during the financial year, reference to the possible impact on the Group’s net asset and up to the date of this report, through the Committee. value or share price should a loss occur, alongside the During the reviews conducted, the Committee has not likelihood of that loss occurring, taking into consideration identified or been informed of any failings or weaknesses the existing control environment. The review included representing a significant business risk. consideration of the five-year cash flow forecasts and a liquidity summary, the main portfolio exposures, as well BEIS White Paper as the results of the quarterly portfolio stress tests. In The Department for Business, Energy and Industrial addition, the Committee reviewed the log of operational Strategy (BEIS) published a White Paper ‘Restoring trust risk incidents during the year, noting that none had a in audit and corporate governance’ in March 2021, which significant impact on the business. proposes wide-ranging changes to the responsibilities of audit committees and considers attestation on internal The Committee considers that the procedures in place controls among other proposals. Consultation continued are consistent with the Guidance on Risk Management, in 2022 and we expect that further updates will follow in Internal Control and Related Financial and Business due course. The Committee is aware of these proposals Reporting published by the FRC in September 2014. and will take the appropriate action once any proposals relevant to the Company are finalised. Internal audit and compliance As part of the review of the control environment, the Post Covid-19 environment Manager, through its Compliance Officer, undertakes The Group operates a hybrid working policy, which has an internal audit of selected areas agreed with the proved helpful in a competitive market for talent, while Committee. The 2022 internal audits included an also allowing the effective and efficient operation of the evaluation of the internal process around private Group. The IT systems have continued to perform well investments know-your-customer procedures and and all internal control procedures have continued to be controls. The dealing process of the Manager was also applied with specific adaptations to enable controls to be considered to ascertain whether best execution was effective while operating remotely. consistently achieved. No material weaknesses were 46 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Audit and Risk Committee Report External auditor synergies with the audit process, and the fact that these The external auditor, EY, has completed its fifth annual services are permitted by the FRC’s revised Ethical audit following its appointment as a result of a tender Standard. Further information on fees paid to the auditor process in 2017. is set out in Note 5 to the financial statements. EY attended all meetings of the Committee and provided The Committee considered EY’s independence, reports on: its audit approach and work undertaken; objectivity, and the effectiveness of the audit process the quality and effectiveness of the Group’s accounting with the benefit of formal and informal feedback from the records; and its findings in connection with the Group’s Manager and concluded satisfactorily on each of these annual statutory audit for the year ended 31 December points. 2022. I have also had regular contact with the lead audit As the Chairman has noted, I will not be standing for re- partner during the year, who will be replaced by a new EY election at the forthcoming AGM and this will therefore partner after this year end, as part of EY’s auditor rotation be my first and last report as Chair of this Committee. I protocols. would like to thank my colleagues on the Committee for The level of non-audit services provided to the Group by their support and wise counsel, and for the team at the the auditor is subject to pre-approval in accordance with Manager for their dedication and professionalism. I am our policy on non-audit services and is monitored, as delighted to confirm that Jutta af Rosenborg has agreed is the auditor’s objectivity in providing such service, to to take over as Chair of the Committee, with effect from ensure that the independence of the audit team from the the AGM. Group is not compromised. Non-audit services provided by EY in 2022 totalled £12,000 for audit-related assurance Mike Power work (regarding the Managers regulated activities). Their Chair, Audit and Risk Committee selection for this work was based on cost efficiency, RIT Capital Partners plc Report and Accounts December 2022 47 # Directors' Remuneration Report ## Introduction On behalf of the Board, I am pleased to present the Directors' Remuneration Report for the year ended 31 December 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. 48 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Directors’ Remuneration Report The performance assessment for awards under the AIS trusts. The Board has discretion to periodically review and reflect investment outperformance (as measured against amend fee rates. The current fee rates are listed below: two KPIs: CPI plus 3.0% and the ACWI) as well as wider Base fee: achievements not directly linked to the NAV return. 1 Non-executive Chairman £150,000 The AIS is measured annually and includes longer-term Non-executive Director £35,000 features such as a three-year absolute ‘high water mark’. Additional fees: In addition, and in particular for management and senior Senior Independent Director fee £7,500 employees, AIS awards include significant deferrals into RIT shares, which vest over the subsequent three years. Committee membership fees: Audit and Risk Committee £6,000 Decisions made by the Committee have followed a Conflicts Committee £3,000 careful appraisal of performance and at all times aim to Nominations Committee £4,000 reinforce shareholder alignment, both through the link to Remuneration Committee £4,000 our objectives and also the payment via shares. Valuation Committee £6,000 The Remuneration Committee retains the ability to 2 Audit and Risk Committee Chair £10,000 clawback elements of previous awards if necessary. All other Committee Chair fees (per 2 The second main aspect of the remuneration approach is committee) £7,500 a long-term incentive plan which is structured as awards 1 The non-executive Chairman fee is inclusive of membership of Board of restricted share units (RSUs). The RSUs vest after Committees. 2 The Committee Chair fees are in addition to the Committee three years and then typically have a further two-year lock membership fees. up before the underlying RIT shares can be sold. They also incorporate qualitative performance standards, as The non-executive Directors each have letters of well as malus and clawback features. appointment that are subject to termination upon one month’s written notice on either side. The non-executive Consulting with shareholders Chairman’s letter of appointment provides for six months’ Where appropriate, the Committee is responsible notice on either side. for ensuring that there is pro-active engagement and consultation with major shareholders and shareholder The letters of appointment for the non-executive representatives in respect of remuneration. Directors are available for inspection at the Company’s registered office. No payments were made to past Directors during the year. Annual report on remuneration Non-executive Directors’ remuneration The annual report on remuneration will be put to The remuneration of the non-executive Chairman an advisory shareholder vote at the 2023 AGM. The and Directors is determined by the Board as a whole. information on pages 50 and 51 has been audited where Non-executive fees are reviewed periodically by the required under the regulations and is indicated as audited Board with reference to market levels in other investment information where applicable. RIT Capital Partners plc Report and Accounts December 2022 49 # Directors' Remuneration Report ## Directors' remuneration – audited Directors' remuneration is in the form of fees and, if applicable, taxable benefits comprising of travel and subsistence expenses incurred by or on behalf of Directors in the course of travel to attend Board or Committee meetings. The following table sets out the total remuneration for each Director: | Year ended 31 December | 2021 Total remuneration £ | 2022 Total remuneration^{1} £ | % Change in total remuneration between 2020 and 2021^{2} | % Change in total remuneration between 2021 and 2022 | | --- | --- | --- | --- | --- | | Non-executive Director | | | | | | **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. 50 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Directors’ Remuneration Report Fees Relative importance of spend on pay The total fees payable to Directors for the year was The following table shows the year-on-year movement £530,498 (compared to £525,184 in the year ended in total remuneration of all employees, compared to the 31December 2021). This includes the Directors’ base dividends paid and share buybacks. fees as well as committee fees. Year ended Year ended 31 December 31 December The aggregate base fees of the non-executive Directors £ million 2021 2022 Change (excluding the Chairman) for the year was £271,160, Total staff costs 46.9 35.6 (11.3) which was within the £400,000 limit for such fees under Dividends 55.0 5 7. 6 2.6 the Company’s Articles of Association. Share buybacks 1. 4 11.0 9.6 Statement of Directors’ shareholdings – audited The interests of the Directors holding office at Statement of shareholder voting 31December 2022 in the ordinary shares of the Votes in respect of the resolution to approve the Company are shown below: Directors’ Remuneration Report at the Company’s AGM in May 2022 were cast as follows: 31 December 2022 | Ordinary shares | | Non- | % of voting | | | Number of | | | % of | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | of £1 each Beneficial | beneficial | | | rights | | | shares | votes cast | | | Sir James Leigh- | | | | | Votes cast in favour 69,084,379 99.9 | | | | | | Pemberton 5,855 – <0.1 | | | | | Votes cast against 64,506 0.1 | | | | | | Philippe Costeletos 51,850 – <0.1 | | | | | Total votes cast 69,148,885 100.0 | | | | | | Maggie Fanari – – – | | | | | Votes withheld 339,079 – | | | | | Vikas Karlekar 993 – <0.1 | Cecilia McAnulty – – – | | Performance graph | | --- | --- | --- | | Maxim Parr 321 – <0.1 | | In accordance with the Directors’ Remuneration Report | | André Perold – – – | | regulations, a performance graph which measures the | | Mike Power 2,488 – <0.1 | | Company’s TSR over the period from 31 March 2012 against | | Jutta af Rosenborg 4,032 – <0.1 | | that of a broad equity market index is shown below. This | | | 1 | is calculated by reference to the Company’s share price | | Hannah Rothschild | 14,354,512 15,402,708 19.1 | | | 1 | | including dividend reinvestment. The Committee considers | The majority of the beneficial interests shown in the table above for Hannah Rothschild are in respect of shares held via trusts or the ACWI to be the most suitable index for this purpose, companies where she is either one of the beneficiaries or one being a KPI. In addition, the graph includes the Company’s of the individuals able to exert significant influence. Similarly, the absolute return hurdle of CPI plus 3.0%. Further information non-beneficial interests are held through a charitable foundation can be found in the Company’s Strategic Report. 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 Audit Director has, or has had during the year under review, any The tables in this report on pages 50 and 51 have been beneficial interest in any contract or arrangement with the audited by Ernst & Young LLP. Company or any of its subsidiaries within the terms set 340 out in the FCA Listing Rules. RIT total shareholder return The Directors’ Remuneration Report on pages 48 to 51 ACWI 300 CPI plus 3.0% was approved by the Board and signed on its behalf by: 260 220 Philippe Costeletos 180 Chair, Remuneration Committee 140 100 RIT Capital Partners plc Report and Accounts December 2022 51 60 Mar Dec Dec Dec Dec Dec Dec 2012 2012 2014 2016 2018 2020 2022 ## 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 | Directors’ remuneration .............page 48 | Risk management and | | --- | --- | --- | | developments ............................. page 3 | Directors’ shareholdings ............page 51 | internal control .......................... page 20 | | Corporate governance ............... page 31 | Dividend .....................................page 4 | | The section above identifies where certain information required to be disclosed in the Directors’ Report is shown within other sections of the Report and Accounts (and forms part of the Directors’ Report) starting on the page indicated. Additional statutory disclosures are set out below. Status of Company Investment Policy The Company is registered as a public company and is The Company’s Investment Policy is: “to invest in a incorporated in the UK and registered in England and widely diversified, international portfolio across a range Wales (Company Registration Number 2129188). It of asset classes, both quoted and unquoted; to allocate conducts its affairs so as to qualify for approval as an part of the portfolio to exceptional managers in order to investment trust for tax purposes, and has been accepted ensure access to the best external talent available.” as an approved investment trust by HMRC, subject to Asset allocation and risk diversification continuing to meet eligibility conditions. The Directors The Group’s assets continue to be allocated across a are of the opinion that the Company has conducted diversified range of asset classes, geographies, industries its affairs in a manner which will satisfy the conditions and currencies. There are no external restrictions on the for continued approval as an investment trust under allocation of assets. The portfolio is further diversified Section1158 of the Corporation Tax Act 2010. through the use of external managers with different The Company’s subsidiaries are mainly engaged in mandates. Exposures are monitored and managed by investment activities and the activities of the Group are JRCM under the supervision of the Board. principally undertaken in the UK. Gearing Directors The Company maintains structural gearing principally The Directors at the date of this report are listed on through fixed-rate private placement notes and revolving pages27 to 29. credit facilities. At 31 December 2022, the drawn indebtedness was £371 million with debt held at fair During the year ended 31 December 2022: value, or £387 million with debt held at par value. This represented net gearing calculated in accordance with Directorate changes AIC guidance of 6.2%. • Amy Stirling retired as a Director on 4 May 2022; The maximum indebtedness that the Company is • Jutta af Rosenborg was appointed as a Director on empowered to incur under its Articles of Association is 19 May 2022; and five times its adjusted capital and reserves. • Vikas Karlekar and Cecilia McAnulty were both appointed as Directors on 11 August 2022. Further information is shown under debt and leverage on pages 14 and 15. Committee composition • Mike Power was appointed as Chair of the Audit and Direct and indirect investment management fees Risk Committee on 4May 2022; Consistent with the Investment Policy, the Company invests a significant proportion of the portfolio with • Maggie Fanari was appointed as a member of the external managers. The majority of the management and Nominations Committee on 4 May 2022; and performance fees charged by such managers are incurred • Jutta af Rosenborg was appointed as a member of indirectly by the Company. They are included within the the Audit and Risk, and Valuation Committees on fund investment valuations and therefore form part of the 19May 2022. investment return. Three fund investments are structured as segregated accounts. Here, the fees are incurred Corporate Objective directly by the Company (see Note 3 on page 67). The Company’s Corporate Objective is: “to deliver long-term capital growth, while preserving shareholders’ Fees within the long-only equity funds, whether capital; to invest without the constraints of a formal structured as segregated accounts or otherwise, typically benchmark, but to deliver for shareholders increases in incur a management fee of up to 1% per annum and capital value in excess of the relevant indices over time.” in some cases a performance fee for outperformance relative to a benchmark. The hedge funds and absolute 52 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Directors’ Report return and credit funds are slightly higher – typically a As at 15 February 2023, the voting rights in the above 1% to 2% management fee and typically a 15% to 20% table remained unchanged. performance fee. Fees for investments into private funds There are no restrictions or significant agreements that may are structured differently and will usually have a 1% to restrict, on a change of control, transfer of securities in the 2.5% annual charge (often based on commitments in Company or the voting rights attached to those securities. early years and declining over time with realisations), as well as a 20% to 30% carried interest. This may be The shares of the Company qualify for inclusion within an above an 8% per annum hurdle and/or with the higher Individual Savings Account. rates often earned when investors have received back a Corporate responsibility minimum multiple of their invested capital (e.g. 3x). The Board is responsible for ensuring that appropriate Aggregate management fees (excluding performance standards of corporate responsibility are adopted within fees and net of fee rebates) for the external funds for the Group, with day-to-day responsibility residing with our 2022 have been estimated at 0.88% of RIT’s total average Manager. net assets (2021: 0.87%). Within our own Group activities, we have always sought Share capital to ensure we act as good corporate citizens through At 31 December 2022, the issued share capital minimising our environmental impact, and robust comprised 156,848,065 £1 ordinary shares, of which corporate governance reinforced with an awareness of 689,863 were held by the Company in treasury as a result our social responsibility. of a series of share buybacks. Further details are shown in Note 20 on page 81. In respect of the environment the Board considers our primary environmental impact, outside of our investment No £1 ordinary shares were issued during the year and portfolio, comes from direct emissions generated from the existing shareholder authorities given to the Company business travel, and from our premises. Where possible, at the last AGM to allot and purchase shares will expire executives will only travel where alternatives such as at the conclusion of the Company’s forthcoming AGM video conference facilities are not practical. In relation scheduled for 26 April 2023. At the AGM, shareholders to its premises, page 35 sets out how the Company shall be asked to renew these authorities, as will be monitors and has taken steps to reduce its Greenhouse explained in the separate Notice of the meeting. Gas (GHG) emissions and maximise the recycling of Major holders of voting rights materials. As at 31 December 2022, the following notifications Total energy consumption for the year ended had been received from the holders of 3% or more of 31December 2022 was 452,923 kWh compared to the voting rights conferred through the direct or indirect 367,646 kWh for the year ended 31 December 2021. The holding of the Company’s ordinary shares of £1 each. increase in total energy consumption reflects there being 31 December 2022 no Covid restrictions in place during the year and the | Major holders of | | | | Total number | | | % of | | Direct or | office being fully open throughout 2022. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 | | | | | | | 5 | | | | voting rights | | | | | of shares | voting rights | | | indirect | | | | | 2,3 | | | | | | | | GHG emissions required to be reported in respect of the | | Lord Rothschild | | | | | 19,307,179 12.4 Indirect | | | | | | | | | | 2 | | | | | | | years ended 31 December 2022 and 2021 were as follows: | | Hannah Rothschild | | | | 15,402,708 9.9 Indirect | | | | | | | The Rothschild Intensity ratio: 2 Foundation 15,390,848 9.9 Direct CO (tonnes) 2 Evelyn Partners 1 Source CO (tonnes) per FTO 2 Inv. Mgt. LLP 7,880,671 5.0 Indirect 2022: 4 Five Arrows Limited 6,757,835 4.3 Direct 1 Scope 1 Gas 26 0.4 The above table does not include Lord Rothschild’s or Hannah Rothschild’s direct voting rights in shares in the Company which are Scope 2 Electricity 59 0.8 below the notifiable threshold. Total 85 1.2 2 As Lord Rothschild and Hannah Rothschild are both members and trustees of the Rothschild Foundation, the above notifiable interests Intensity ratio: include the same 15,390,848 shares held by this charity (which are CO (tonnes) 2 also included in Hannah Rothschild’s non-beneficial interests on 1 Source CO (tonnes) per FTO 2 page 51 under Directors’ shareholdings). 3 2021: Part of Lord Rothschild’s holdings include entities where Hannah Rothschild is one of the beneficiaries, and therefore the relevant Scope 1 Gas 18 0.2 shares also form part of her beneficial interests on page 51. 4 Scope 2 Electricity 57 0.9 Lord Rothschild and Hannah Rothschild have an indirect beneficial interest in the shares of the Company held by Five Arrows Limited. Total 75 1.1 5 The total interests notified to the Company that directly relates to, 1 Full-time occupant. and is overseen by, the family offices of Lord Rothschild and Hannah Rothschild (including shares in which Lord Rothschild and Hannah RIT Capital Partners plc Report and Accounts December 2022 53 Rothschild do not have voting rights conferred through a direct or indirect holding) is 20.9%. ## Directors’ Report Our GHG emissions are calculated for the Group under Modern slavery the financial control approach and in accordance with We do not tolerate slavery or human trafficking and we ISO14064-1: 2018 standard using the 2022 GHG are committed to acting ethically and with integrity in all conversion factors developed by the Department for our business dealings and relationships. In accordance Environment, Food & Rural Affairs. with the Modern Slavery Act 2015, JRCM publishes a Modern Slavery Statement annually which may be viewed The Group supports the ambitions of the Paris Climate on the Company’s website: www.ritcap.com. Change Agreement and is committed to reducing its operational emissions, including through energy Engagement and stewardship efficiency initiatives in areas such as lighting and heating The Company’s Engagement and Stewardship Policy may in our offices. We continue to take steps to further be viewed on its website. understand our impact on the environment, covering not Save for voting rights on the Company’s investments held just our direct operational emissions, but also through in segregated accounts (managed by external managers our indirect emissions (Scope 3). Consideration of our who have control on the voting of those shares) the Scope 3 emissions forms part of our preparation for Manager’s investment department determines voting on the requirements of the Task Force on Climate-related all the resolutions of directly-held investee companies and Financial Disclosures (TCFD) in advance of any reporting funds. It does not use proxy advisors. of the TCFD by the Group. In addition, as a signatory of the UN PRI, we also commit The Group operates an ethics policy which applies to be active owners and incorporate ESG issues into our to all staff, including in relation to social and human stewardship policies and practices. rights issues. The Board is also supportive of moves towards greater diversity and inclusivity. At the year end, In 2022, the Company generally voted in favour of the composition of the RIT Board complied with the resolutions for investee companies in which it held a recommendations of the Parker Review, the Hampton- publicly notifiable interest. Monitoring of directly-held Alexander Review and the FCA’s new listing rules investments is also carried out by JRCM’s investment reporting requirements on diversity. The overall employee department, in line with its Responsible Investment Policy base is divided between 45 men and 17 women. & Framework, who are responsible for elevating any matters of concern to the JRCM Investment Committee. Further information on how ESG factors are considered in Active intervention appropriate for the circumstances will terms of how we engage with our stakeholders is set out be considered where it is in the Company’s best interests in our Corporate Governance Report. and aligned with the commitments set out in the previous Diversity paragraph. As part of the Group’s diversity and inclusion policies, Cross holdings recruitment processes are in place to allow us to monitor The FCA Listing Rules also require closed-ended the diversity of Board candidates and job applicants, investment companies to disclose quarterly all of their ensuring we are attracting candidates regardless of investments in “other listed closed-ended investment their gender, age, ethnicity, disability, sexual orientation funds ... which themselves do not have stated investment or background. Further initiatives that we have in place policies to invest no more than 15% of their total assets to support diversity include a flexible working policy, in other listed closed-ended investment funds.” enhanced maternity leave as well as adoption and shared parental leave. The Group discloses such investments when necessary, but does not restrict its own investment policies in this JRCM continues to participate in the 10,000 Black Interns manner. There were no such investments held by the initiative to attract a more diverse range of talent to the Group as at 31 December 2022 and 31 December 2021. asset management sector and in 2022, JRCM welcomed its first intern under the Girls Are INvestors (GAIN) Annual General Meeting programme which aims to improve gender diversity in the The Company’s AGM is scheduled to be held on 26 April at sector. 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. 54 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Directors’ Report Auditor The Companies, Partnerships and Groups (Accounts EY has expressed its willingness to continue in office and Reports) Regulations 2015 as the Company’s external auditor. Resolutions to Information on subsidiaries that is required to be reappoint EY and to authorise the Directors to set their disclosed under the above regulations is disclosed in remuneration will be proposed at the forthcoming AGM. Note 29. Other Disclosable information in respect of other investments is The Company seeks to agree the best possible terms on contained in Note 32. which business will take place with its suppliers. It is the The Directors’ Report on pages 52 to 55 was approved by Company’s policy to abide by such terms. the Board and signed on its behalf by: 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 Sir James Leigh-Pemberton Accounts. Chairman 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 Rule9.8.4. RIT Capital Partners plc Report and Accounts December 2022 55 ## Financial Statements ## for the year ended 31 December 2022 ## RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Consolidated Income Statement and Consolidated Statement ## of Comprehensive Income Consolidated income statement Year ended 31 December 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 7. 6 – 7. 6 3.8 – 3.8 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 26.7 (535.3) (508.6) 1 6.5 919.8 936.3 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 – – – (0.2) (2.5) (2.7) Profit/(loss) for the year (14.3) (562.9) (577 .2) (17 .3) 876.5 859.2 Earnings/(loss) per ordinary share – basic 9 (9.2p) (362.1p) (371 .3p) (1 1 .1p) 561 .4p 550.3p Earnings/(loss) per ordinary share – diluted 9 (9.2p) (362.1p) (371 .3p) (1 1 .0p) 556.5p 545.5p 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. 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 3,646.4 4,359.9 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 8.0 325.9 525.1 625.1 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 2,414p 2,81 9p Net asset value per ordinary share – diluted 28 2,388p 2,794p 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 | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## 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 ## 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 | 156.8 | 45.7 | 36.3 | (15.3) | 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** | – | – | – | – | 876.5 | (16.5) | (0.2) | 859.8 | | 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)** | **4,174.4** | **(11.4)** | **11.5** | **4,390.3** | | Balance at 1 January 2022 | 156.8 | 45.7 | 36.3 | (23.0) | 4,174.4 | (11.4) | 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 | – | – | – | – | (11.0) | – | – | (11.0) | | Movement in own shares reserve | – | – | – | (23.3) | – | – | – | (23.3) | | Movement in share-based payments | – | – | – | – | 6.0 | – | – | 6.0 | | **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. 60 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Parent Company Statement of Changes in Equity Capital Share Share redemption Capital Revenue Revaluation Total £ million capital premium reserve reserve reserve reserve 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. RIT Capital Partners plc Report and Accounts December 2022 61 ## Consolidated and Parent Company Cash Flow Statement | Year ended 31 December £ million | Notes | Consolidated cash flow | | Parent Company cash flow | | | --- | --- | --- | --- | --- | --- | | | | 2022 | 2021 | 2022 | 2021 | | **Cash flows from operating activities:** | | | | | | | Cash inflow/(outflow) before taxation and interest | 31 | 57.7 | 71.8 | 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 | | – | – | (2.5) | (3.1) | | **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 | (11.0) | (1.4) | (11.0) | (1.4) | | Dividends paid | 30 | (57.6) | (55.0) | (57.6) | (55.0) | | **Net cash inflow/(outflow) from financing activities** | | **(145.2)** | **(29.5)** | **(104.8)** | **(8.5)** | | Increase/(decrease) in cash in the year | | (112.6) | 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 | | 4.7 | 6.9 | 4.7 | 6.9 | | **Cash at the year end** | | **218.0** | **325.9** | **193.9** | **313.9** | | **Reconciliation:** | | | | | | | Cash at bank | | 218.0 | 325.9 | 193.9 | 313.9 | | **Cash at the year end** | | **218.0** | **325.9** | **193.9** | **313.9** | $^{1}$ 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. 62 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 63 1. Accounting Policies The consolidated financial statements of the Group and Company are prepared in accordance with UK adopted IAS and the requirements of the Companies Act 2006. The Company has taken advantage of section 408 of the Companies Act 2006 not to present the parent company profit and loss account. The Company is domiciled in the United Kingdom. The financial statements have been prepared on a going concern basis and under the historical cost convention except for the revaluation of financial instruments (including derivatives), investment properties held at fair value through profit or loss (FVPL), associates held at FVPL, certain non-consolidated subsidiaries held at FVPL, and property, plant and equipment held at fair value. In making this going concern assumption, the Directors have taken into account the closed-ended nature of the Company, its existing cash balances (£207 million) and monitoring procedures, its borrowing capacity (£90 million facilities committed and undrawn), as well as the value of investments which could be realised to fund liabilities, and covenants as well as cash flow forecasts for the period to 30 June 2024 and uncalled commitments (£385 million). Further details can be found on page 25. The principal accounting policies adopted are set out below. Where the presentational guidance set out in the Statement of Recommended Practice: Financial Statements of Investment Trust Companies (the SORP) issued by the Association of Investment Companies (AIC) in July 2022 is consistent with the requirements of UK adopted IAS, the Directors have sought to prepare the financial statements on a basis which complies with the recommendations of the SORP. Climate change In preparing the financial statements, the Directors have considered the impact of climate change insofar as they are reasonably able, particularly in the context of the climate-related risks identified in the principal risks and viability section of the Strategic Report. These considerations did not have a material impact on the financial reporting judgements and estimates in the current year, nor were they expected to have a significant impact on the Group’s going concern or viability. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. The Board has concluded that the Company, being the parent entity of the Group, continues to meet the particular characteristics of an ‘Investment Entity’. The ‘Investment Entity’ amendment to IFRS 10 Consolidated Financial Statements requires that: (i) the single subsidiary J.Rothschild Capital Management Limited (JRCM), that is not itself an investment entity, which provides investment management services to the Group, is consolidated on a line-by-line basis with balances between the parent and this subsidiary eliminated; and (ii) all other subsidiaries, including Spencer House Limited (SHL), RIT Investments US, Inc and RIT Investments GP Limited, are accounted for as investments held at FVPL. In the financial statements of the Company investments in non-consolidated subsidiaries are carried at fair value and the consolidated subsidiary is carried at cost less any provision for impairment made in accordance with IAS 36 Impairment of Assets. Impairment tests are carried out twice each year concurrent with the Group’s principal reporting dates. The financial statements of the subsidiaries are prepared at the same reporting date using consistent accounting policies. Control is achieved where the Company has all of the following; (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the Company’s returns. Both the Group and Company hold investments in associates and joint ventures at fair value as allowed by IAS 28 Investments in Associates and Joint Ventures and IFRS 9 Financial Instruments. Presentation of income statement In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the consolidated income statement between items of a revenue and capital nature has been presented within the consolidated income statement and the consolidated statement of comprehensive income (SOCI). Income Dividend income from investments is recognised when the right to receive payment has been established and this is normally the ex- dividend date. UK dividend income is recorded at the amount receivable. Overseas dividend income is shown net of withholding tax under investment income. Interest and other income is accrued on a time basis. Rental income from investment properties under short-term leases is accounted for on a straight-line basis, over the lease term. Allocation between capital and revenue In respect of the analysis between capital and revenue items presented within the consolidated income statement, the SOCI and the statement of changes in equity, all expenses and finance costs, which are accounted for on an accruals basis, have been presented as revenue items except those items listed below: • expenses are allocated to capital where a direct connection with the maintenance or enhancement of the value of the investments can be demonstrated. Expenses are allocated to revenue where there is an indirect connection; • all segregated account fees are considered to be a cost of achieving a capital return for those external managers operating segregated accounts. This ensures consistency with the treatment of all other investment management fees within our fund investments, which are automatically included in capital and reflected in the investment gain/loss; ## Notes to the Financial Statements 64 Report and Accounts December 2022 RIT Capital Partners plc • the Group has in place certain incentive arrangements whereby individuals receive share awards based on investment performance and/or share price growth. The cost of these arrangements derives principally from the capital performance and therefore the Directors consider it appropriate to allocate such costs to capital; • expenses which are incidental to the purchase or disposal of an investment are deducted from the initial fair value or disposal proceeds of the investment; and • costs incurred in connection with aborted portfolio investment transactions are also allocated to capital. The following are also presented as capital items: • gains and losses on the realisation of investments, including foreign exchange differences; • increases and decreases in the valuation of investments held at the year end, including foreign exchange differences; • realised and unrealised gains and losses on derivatives transactions of a capital nature; and • expenses, together with the related taxation effect, allocated to capital in accordance with the above policies. Finance costs Finance costs on borrowings are accounted for on an accruals basis and are settled at the end of each contractual period. Finance costs on derivatives are settled in line with the underlying contract. Finance costs are allocated in the ratio 20:80 to the revenue and capital columns of the income statement. Foreign currencies The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates, i.e. its functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in sterling which is the functional currency of the Company, and the presentational currency of the Group. Transactions in currencies other than sterling are recorded at the rate of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items and non-monetary assets and liabilities that are fair valued and are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. All foreign exchange gains and losses are recognised in the consolidated income statement. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not subject to tax or are not deductible for tax purposes. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not subject to tax on capital gains. In view of the Company’s status as an investment trust, and its intention to continue meeting the conditions required to maintain approval for the foreseeable future, the Company has not provided current or deferred tax on any capital gains or losses arising on the revaluation or disposal of investments. The carrying amount of the deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the consolidated income statement or SOCI, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Investments Investments are recognised and derecognised on the trade date where a purchase or sale is made under a contract whose terms require delivery within the timeframe established by the market concerned. All investments are measured initially and at subsequent reporting dates at fair value and classified in accordance with IFRS as ‘fair value through profit or loss’ (FVPL). Unrealised changes in the fair value of these investments are recognised in the consolidated income statement as capital items. The realised gain or loss arising on the disposal of investments is determined as the difference between the sale proceeds and the carrying amount of the asset at the beginning of the year and is recognised in the consolidated income statement as capital items. Transaction costs are included within gains or losses on these investments. Fair value, for quoted investments, is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in externally- managed funds are valued at the closing price, the bid price or the single price as appropriate, released by the relevant fund administrator or investment manager. In respect of private investments, or where the market for a financial instrument is not active, fair value is estimated by using appropriate valuation techniques and often involves significant judgement and estimation uncertainty. For direct private investments held through co-investment vehicles managed by a General Partner (GP), as well as private funds managed by a GP, the estimated fair value is based on the most recent valuation provided by the GP. These valuations are normally prepared quarterly and usually received within three months of the relevant valuation date. Depending on the timing of the finalisation of the half-year and year-end report and accounts, it is likely that the majority of these assets are valued at the previous quarter end. Where this is the case, the valuations of private funds are adjusted for subsequent investments, distributions and currency moves. In relation to direct co-investments, the valuations will also be adjusted for subsequent investments, distributions and currency moves, as well as pricing | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 65 events where there is sufficient information to suggest the period- end valuation should be adjusted. Further, in light of the intrinsic valuation uncertainty, where information is received after the year end which relates to conditions present at the year end, an adjustment will be considered if it would be likely to have a material impact on the net assets. Ultimately these valuations are dependent on the reasonableness of the fair value estimation by the GP. The valuations are reviewed periodically by the Manager, and in the absence of contrary information, are assumed to be reliable. A review is also conducted annually in respect of the valuation bases of the investee funds to confirm these are in accordance with fair value standards. Where the Manager has sufficient information to undertake its own valuations, these will be prepared having regard to the International Private Equity and Venture Capital Valuation Guidelines as recommended by the British Private Equity and Venture Capital Association. The inputs into the valuation methodologies adopted include observable data such as historical earnings or cash flows as well as more subjective data such as earnings forecasts or discount rates. At period ends, all of the valuations are subject to review, adjustment as appropriate and ultimately approval by the Company’s Valuation Committee that operates as a sub-committee of the Board comprised entirely of independent non-executive Directors. The gains and losses on financial assets classified at FVPL exclude any related interest income, dividend income and finance costs where these items are separately identifiable. These items are disclosed separately in the financial statements. Leasehold and freehold investment properties are measured initially at cost, including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on the external professional valuation made as of each reporting date. Valuation surpluses and deficits arising in the year are included in the consolidated income statement. Derivative financial instruments, including futures, options and other derivatives, are stated in the balance sheet at fair value. For derivatives that are capital in nature, the associated change in value is presented as a capital item in the income statement. The Group has adopted trade date accounting. Accordingly, derivative financial instruments are recognised on the date the Group enters into the relevant contract, and are derecognised on the date on which it commits to their sale or they expire. All derivatives are classified as FVPL and are presented as assets when their fair value is positive, and as liabilities when their fair value is negative. Cash at bank Cash at bank in the balance sheet comprises cash balances and deposits. Provisions A provision is recognised in the balance sheet when the Group or Company has a constructive or legal obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Share-based payment In accordance with IFRS 2 Share-based Payment, the Group is required to reflect in its income statement and balance sheet the effects of share-based payment transactions. The Group’s share- settled incentive schemes include the Annual Incentive Scheme (AIS) (in part), share appreciation rights (SARs) and restricted share units (RSUs). AIS awards are structured such that 60% of individual amounts in excess of £150,000 to £250,000 (with the lower amount for senior management) are paid in deferred shares of the Company which vest equally over the three years following the award. Deferred shares are valued using the prevailing market price at award. The expense is recognised over the year the award relates to and the following three years. Historically, long-term incentive plan (LTIP) awards were made via SARs and performance shares. SARs were measured at the fair value at grant date using a trinomial option valuation model. The cost is then recognised through the capital column of the income statement over the three-year vest period. Performance shares were conditional awards of shares subject to performance conditions. They were accounted for as equity settled in accordance with IFRS 2. The awards were fair valued at grant using a Monte Carlo model and the resulting cost of an award is then recognised through the capital column of the income statement over the vest period particular to that award. Following a review by the Remuneration Committee, it was decided that from 2021, future LTIP awards would be made using restricted share units (RSUs), with the first such award in March 2021. RSUs are equity-settled awards accounted for in accordance with IFRS 2 and are measured at fair value using the share price at the grant date, adjusted for a two year post-vesting sale restriction. The cost is recognised through the revenue column of the income statement over the three-year vest period. On 31 March 2021, staff members were given the option to convert their existing SARs and performance shares at fair value into RSUs, with the vast majority subsequently converted. This conversion was accounted for in accordance with IFRS 2. Shares required to meet the estimated future requirements from grants or exercises under all schemes, are purchased by an Employee Benefit Trust (EBT), which is consolidated by the Group. The cost of own shares held at the end of the year by the EBT is reflected in the Group’s own shares reserve on the consolidated balance sheet. The movement in equity arising under IFRS 2 is applied to the capital reserve. Property, plant and equipment Property, plant and equipment is shown at cost less accumulated depreciation, save as detailed below. Depreciation is calculated by the Group on a straight-line basis by reference to original cost, estimated useful life and residual value. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. The period of estimated useful life for this purpose is between three and five years for the majority of assets except for the Company’s leasehold interest in 27 St. James’s Place for which the estimated useful life is 61 years, which is also the period remaining on the property lease. The proportion of this ## Notes to the Financial Statements 66 Report and Accounts December 2022 RIT Capital Partners plc asset occupied by the Group is accounted for at fair value under the revaluation model allowed by IAS 16 Property, Plant and Equipment, which is intended to ensure that the carrying value of the asset is never substantially different to its fair value. Changes in fair value are reflected in the SOCI and a separate revaluation reserve. The proportion of property assets not occupied by the Group is accounted for as investment properties at fair value. Determination of fair value requires significant judgement and external advisers are used. Pensions JRCM is a participating employer in the Group’s non-contributory, funded, defined benefit retirement scheme which is closed to new members and the assets of which are held in a trustee-administered fund. There are no longer any active members of this scheme. The Group accounts for this defined benefit retirement scheme by reference to IAS 19 Employee Benefits. The cost of benefits accruing during the year in respect of past service is charged to the income statement and allocated to revenue. The net interest on the net defined benefit liability or asset is recognised in the income statement. Actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest on the net defined benefit liability or asset, are recognised in the SOCI. An actuarial valuation of the defined benefit retirement scheme is undertaken every three years as at 1 January and is updated as at each principal reporting date. The valuation is carried out using the projected unit credit method of funding basis. The income statement also includes costs incurred in respect of defined contribution schemes, comprising the contributions payable in the year. Other receivables/other payables Other receivables/other payables do not carry any interest, are short-term in nature and are carried at amortised cost. Application of the expected credit loss model to receivables has had an immaterial impact on their carrying value. The carrying value of receivables and payables approximates to their fair value. Amounts owed to/by Group undertakings Amounts owed to/by Group undertakings do not carry any interest and are carried at amortised cost. Application of the expected credit loss model to these items has had an immaterial impact on their carrying value. The carrying value of amounts owed to/by Group undertakings approximates to their fair value. Bank borrowings Interest-bearing bank loans are recorded initially at the proceeds received and subsequently at FVPL, on the basis that the Group and its performance is evaluated on a fair value basis, in line with IFRS 9, paragraph 4.2.2. The fair value is calculated as the amount to replace the facility which is equal to par. Loan notes Loan notes are classified as a financial liability at FVPL and are measured initially and subsequently at fair value with movements in fair value taken to the income statement as a capital item. The fair value is calculated with a discounted cash flow model using the fixed interest and redemption payments based on the underlying contractual cash flows. The discount rate adopted reflects the prevailing market rate for similar instruments. As a result, the determination of fair value requires management judgement. Further details of the loan notes are provided on page 81. Dividends The Company recognises interim dividends in the year in which they are paid. Share capital and share premium Share capital is classified as equity. Share premium reflects the excess of the consideration received on issuing shares over the nominal value of those shares, net of issue costs. Treasury shares The cost of repurchasing shares into treasury, including all related costs, is dealt with in the Statement of Changes in Equity and deducted from the Capital Reserve. New and amended standards and interpretations not applied The new and amended standards and interpretations that are relevant to RIT and issued, but not yet effective up to the date of issuance of the financial statements, are disclosed below. The Group intends to adopt these, if applicable, when they become effective: • Amendments to UK adopted IAS 1 Presentation of Financial Statements on the Classification of Liabilities as Current or Non- current, effective for annual reporting periods beginning on or after 1 January 2023; • Amendments to UK adopted IAS 1 Presentation of financial statements and IFRS Practice Statement 2 Making Materiality Judgments on the Disclosure of Accounting Policies, which provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures, effective for annual reporting periods beginning on or after 1 January 2023; and • Amendments to UK adopted IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors, effective for annual reporting periods beginning on or after 1 January 2023. The impact of these amendments is not expected to be material to the reported results and financial position of the Group. Critical accounting estimates and judgements The preparation of financial statements in conformity with UK adopted IAS requires the use of certain critical accounting estimates. It also requires the Manager and Board to exercise judgement in the process of applying the Group’s accounting policies. The areas requiring a higher degree of judgement or complexity and where assumptions and estimates are significant to the consolidated financial statements, are in relation to the valuation of private investments (see pages 64 and 65 and Note 13) and property (see pages 65 and 66 and Notes 10 and 15). | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 67 2. Investment income £ million 2022 2021 Income from listed investments: Dividends 7. 2 8.5 Income from unlisted investments: Interest 4.3 2.0 Interest income on cash balances 5.5 0.2 Income from investment properties 2.1 2.0 Total investment income 19.1 12.7 3. Gains/(losses) on fair value investments £ million 2022 2021 Gains/(losses) on fair value investments excluding segregated accounts (579.2) 908.4 Net gains/(losses) on segregated accounts 28.0 (3.4) Segregated account fees - annual (1.7) (1.9) Segregated account fees - performance (2.6) (1.3) Gains/(losses) on fair value investments held in segregated accounts 23.7 (6.6) Gains/(losses) on fair value investments (555.5) 901.8 The Company’s Investment Policy involves the allocation of part of the portfolio to external fund managers. The vast majority of these managers operate funds where the fees are charged within the fund. These ‘indirect’ investment management and performance fees are therefore automatically reflected within the valuations received from the administrators or managers, and form part of the investment gains/(losses). At 31 December 2022, three funds (31 December 2021: three) were structured as segregated accounts (disclosed within the Investment Portfolio on pages 17 to 19), where the managers separately invoice the Company for investment management. In order to provide a consistent presentation for all external fees, these are included within the gain/(losses) on fair value investments as shown above. Further details on the typical fee structures for the external funds are set out in the Directors’ Report on pages 52 to 55. 4. Operating expenses £ million 2022 2021 Staff costs: Wages and salaries 13.3 23.0 Social security costs 1. 7 3.1 Share-based payment costs 1 (Note 24) 20.3 20.4 Pension costs (Note 11) 0.3 0.4 Total staff costs 35.6 46.9 Auditor’s remuneration (Note 5) 0.3 0.3 Depreciation 0.4 0.3 Lease payments 0.4 0.4 Other operating expenses 6.9 6.5 Total operating expenses 43.6 54.4 1 Including related social security costs. Operating expenses include costs incurred by JRCM in managing the Group's assets, property costs from the Group’s property portfolio, as well as costs which are recharged to third parties. Further information is provided in Note 6. The figures include Directors’ emoluments, details of which are shown in the Directors’ Remuneration Report on pages 48 to 51. The average monthly number of employees during the year was 59 (2021: 55) of which 47 (2021: 43) were employed by JRCM and 12 (2021: 12) were employed by SHL. 5. Other disclosable expenses During the year the Group obtained the following services from the Company’s auditor and its associates: £ thousand 2022 2021 Fees payable to the Company’s auditor and its associates for the audit of the Parent Company and consolidated financial statements 228 202 Fees payable to the Company’s auditor and its associates for other services: Audit of the Company’s subsidiaries 94 83 Audit-related assurance services 12 12 Total 334 297 Transaction costs The following transaction costs represent commissions paid on the purchase and sale of listed investments and are included within gains/(losses) on fair value investments: £ million 2022 2021 Purchases 1.5 1. 2 Sales 1.2 1. 2 Transaction costs 2.7 2.4 Furthermore £0.02 million of professional fees (2021: £0.03 million) incurred on purchases of investments are included within gains/ (losses) on fair value investments. 6. Business and geographical segments For 2022 and 2021, the Group is considered to have three principal operating segments, all based in the UK, as follows: Segment Business 2022 AUM £ million 1 2022 Employees 1 2021 AUM £ million 2 2021 Employees 2 RIT Investment trust – – – – JRCM Investment manager/ administration 3,722 49 4,390 46 SHL Events/premises management – 13 – 12 1 At 31 December 2022 2 At 31 December 2021 # Notes to the Financial Statements Key financial information for 2022 is as follows: | £ million | Net assets | Income/ gains^{1} | Operating expenses^{2} | Profit^{2} | | --- | --- | --- | --- | --- | | RIT | 3,617.3 | (511.6) | (52.7) | (564.3) | | JRCM | 110.3 | 50.3 | (38.4) | 11.9 | | SHL | 0.9 | 3.7 | (3.5) | 0.2 | | Adjustments^{3} | (6.8) | (51.0) | 51.0 | – | | **Total** | **3,721.7** | **(508.6)** | **(43.6)** | **(552.2)** | Key financial information for 2021 is as follows: | £ million | Net assets | Income/ gains^{1} | Operating expenses^{2} | Profit^{2} | | --- | --- | --- | --- | --- | | RIT | 4,277.6 | 931.2 | (74.3) | 856.9 | | JRCM | 119.0 | 74.3 | (49.2) | 25.1 | | SHL | 0.8 | 2.8 | (2.9) | (0.1) | | Adjustments^{3} | (7.1) | (72.0) | 72.0 | – | | **Total** | **4,390.3** | **936.3** | **(54.4)** | **881.9** | $^{1}$ Includes intra-group income and expenses. $^{2}$ Profit before finance costs and tax. $^{3}$ Consolidation adjustments in accordance with IFRS 10 Consolidated Financial Statements. ## 7. Finance costs | £ million | 2022 | 2021 | | --- | --- | --- | | Interest on borrowings | 14.3 | 9.6 | | Interest on swaps | 10.4 | 10.1 | | Other finance costs | 0.3 | 0.3 | | **Finance costs** | **25.0** | **20.0** | ## 8. Taxation | £ million | Year ended 31 December 2022 | | | | --- | --- | --- | --- | | | Revenue | Capital | Total | | UK corporation tax charge/(credit) | – | – | – | | Current tax charge/(credit) | – | – | – | | Deferred tax charge/(credit) | – | – | – | | **Taxation charge/(credit)** | **–** | **–** | **–** | | £ million | Year ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue | Capital | Total | | UK corporation tax charge/(credit) | 0.2 | 2.5 | 2.7 | | Current tax charge/(credit) | – | – | – | | Deferred tax charge/(credit) | 0.2 | 2.5 | 2.7 | | **Taxation charge/(credit)** | **0.2** | **2.5** | **2.7** | The Finance Act 2021 included an increase in the main corporation tax rate from the current 19% to 25% with effect from 1 April 2023. The tax charge for the year differs from the effective rate of corporation tax in the UK for 2022 of 19% (2021: 19%). The differences are explained as follows: | £ million | Year ended 31 December 2022 | | | | --- | --- | --- | --- | | | Revenue | Capital | Total | | Profit/(loss) before tax | (14.3) | (562.9) | (577.2) | | Tax at the standard UK corporation tax rate of 19% | (2.7) | (107.0) | (109.7) | | Effect of: | | | | | Capital items exempt from corporation tax | – | 102.9 | 102.9 | | Dividend income not taxable | (1.2) | – | (1.2) | | Expenses not deductible for tax purposes | 0.1 | – | 0.1 | | Tax losses not recognised | 3.8 | 4.8 | 8.6 | | Other items | – | (0.7) | (0.7) | | **Total tax charge/(credit)** | **–** | **–** | **–** | | £ million | Year ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue | Capital | Total | | Profit/(loss) before tax | (17.1) | 879.0 | 861.9 | | Tax at the standard UK corporation tax rate of 19% | (3.2) | 167.0 | 163.8 | | Effect of: | | | | | Capital items exempt from corporation tax | – | (173.6) | (173.6) | | Dividend income not taxable | (1.1) | – | (1.1) | | Expenses not deductible for tax purposes | 0.1 | – | 0.1 | | Tax losses not recognised | 4.3 | 8.3 | 12.6 | | Other items | 0.1 | 0.8 | 0.9 | | **Total tax charge/(credit)** | **0.2** | **2.5** | **2.7** | Refer to Note 12 on page 71 for the explanation of carried forward tax losses. ## 9. Earnings per ordinary share – basic and diluted The basic earnings per ordinary share for 2022 is based on the loss of £577.2 million (2021: profit of £859.2 million) and the weighted average number of ordinary shares in issue during the period of 155.5 million (2021: 156.1 million). The weighted average number of shares is adjusted for shares held in the employee benefit trust (EBT) and in treasury in accordance with IAS 33. | £ million | 2022 | 2021 | | --- | --- | --- | | Net revenue profit/(loss) | (14.3) | (17.3) | | Net capital profit/(loss) | (562.9) | 876.5 | | **Total profit/(loss) for the year** | **(577.2)** | **859.2** | | Weighted average (million) | 2022 | 2021 | | Number of shares in issue | 156.8 | 156.8 | | Shares held in EBT | (1.0) | (0.5) | | Shares held in treasury | (0.3) | (0.2) | | **Basic shares** | **155.5** | **156.1** | 68 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 69 pence 2022 2021 Revenue earnings/(loss) per ordinary share – basic (9.2) (11.1) Capital earnings/(loss) per ordinary share – basic (362.1) 561.4 Total earnings per share – basic (371.3) 550.3 The diluted earnings per ordinary share for the period is based on the basic shares (above) adjusted for the effect of share-based payments awards for the period. This adjustment is not required for 2022 as an increase in shares in issue would reduce the basic loss per ordinary share. As a result, there is no difference between the basic and diluted loss per ordinary share. Weighted average (million) 2022 2021 Basic shares 155.5 156.1 Effect of share-based payment awards – 1. 4 Diluted shares 155.5 157.5 pence 2022 2021 Revenue earnings/(loss) per ordinary share – diluted (9.2) (11.0) Capital earnings/(loss) per ordinary share – diluted (362.1) 556.5 Total earnings per ordinary share – diluted (371.3) 545.5 10. Property, plant and equipment The Group’s property, plant and equipment as at 31 December 2022 was £20.7 million (2021: £23.1 million). Group £ million Cost Accumulated depreciation Revaluation Net book/fair value At 1 January 2022 1 7. 4 (5.8) 11. 5 23.1 Additions 0.1 – – 0.1 Charge for depreciation – (0.4) – (0.4) Revaluation gain/(loss) – – (2.1) (2.1) Fair value at 31 December 2022 1 7. 5 (6.2) 9.4 20.7 Of which: Property – leasehold 14.2 (4.6) 9.4 19.0 Group £ million Cost Accumulated depreciation Revaluation Net book/fair value At 1 January 2021 1 7. 3 (5.4) 11. 7 23.6 Additions 0.1 – – 0.1 Charge for depreciation – (0.4) – (0.4) Revaluation gain/(loss) – – (0.2) (0.2) Fair value at 31 December 2021 1 7. 4 (5.8) 11.5 23.1 Of which: Property – leasehold 14.1 (4.2) 11. 5 21.4 The Company’s property, plant and equipment as at 31 December 2022 was £20.6 million (2021: £23.0 million). Company £ million Cost Accumulated depreciation Revaluation Net book/fair value At 1 January 2022 15.7 (4.2) 11. 5 23.0 Additions 0.1 – – 0.1 Charge for depreciation – (0.4) – (0.4) Revaluation gain/(loss) – – (2.1) (2.1) Fair value at 31 December 2022 15.8 (4.6) 9.4 20.6 Of which: Property – leasehold 14.2 (4.6) 9.4 18.9 Company £ million Cost Accumulated depreciation Revaluation Net book/fair value At 1 January 2021 15.6 (3.9) 11. 7 23.4 Additions 0.1 – – 0.1 Charge for depreciation – (0.3) – (0.3) Revaluation gain/(loss) – – (0.2) (0.2) Fair value at 31 December 2021 15.7 (4.2) 11.5 23.0 Of which: Property – leasehold 14.1 (4.2) 11. 5 21.4 The fair value at both year ends predominantly relates to the proportion of the leasehold interest in 27 St. James’s Place occupied by the Group. The property valuations are based on Jones Lang LaSalle’s (JLL) valuations at the respective year ends. 11. Pension commitments The Group has pension commitments in respect of its participation in the RITCP Pension and Life Assurance Scheme (the Scheme). The Scheme consists of a defined benefit plan which is closed to new members. The Scheme is administered under a Trust Deed and Rules and a corporate trustee, Law Debenture Pension Trust Corporation plc, who is independent of the Group, and was appointed in May 2019. In December 2022, the Group de-risked its retirement benefit obligations by supporting the trustees of the Scheme in completing a £20 million bulk annuity insurance policy ‘buy-in’. The ‘buy-in’ secured an insurance asset that fully matches almost all the remaining pension liabilities of the Scheme, with the result that the Group no longer bears material investment, longevity, interest rate or inflation risk. The annuity policy is held in the name of the Trustees. As the Scheme was in surplus on an accounting basis at 31 December 2022, in accordance with the relevant accounting standard the impact of this transaction was to record a re- measurement loss of £4.5 million before tax to other comprehensive income. There was no impact on profit before tax and no incremental funding was required. As a result of the ‘buy-in’, current cash contributions into the Scheme will cease, with the possibility of minimal further contributions. In addition, the Group will no longer record non-cash interest income on the accounting surplus. Within the next 18 months it is expected that a full ‘buy-out’ of the scheme will occur, during which individual insurance policies will be purchased for the beneficiaries of the scheme. After the ‘buy-out’ has completed, the Group will no longer have any liabilities against the Scheme. ## Notes to the Financial Statements The costs associated with the Scheme, their recognition in the financial statements, the assumptions underlying the calculation of those costs and their disclosure in the consolidated income statement or SOCI are set out below. | Defined benefit cost £ millions | 2022 | 2021 | | --- | --- | --- | | Net interest on defined benefit asset | (0.1) | (0.1) | | Remeasurement effects recognised in the SOCI | 4.5 | (1.9) | | **Total cost/(credit)** | **4.4** | **(2.0)** | | Recognised in the consolidated income statement £ millions | 2022 | 2021 | | --- | --- | --- | | Defined contribution schemes | 0.4 | 0.5 | | Defined benefit scheme: | | | | Net interest on defined benefit liability | (0.1) | (0.1) | | **Total pension cost recognised in the consolidated income statement** | **0.3** | **0.4** | | --- | --- | --- | | Recognised in the SOCI £ millions | 2022 | 2021 | | --- | --- | --- | | Defined benefit scheme: | | | | Actuarial loss due to liability experience | 0.4 | 0.9 | | Actuarial (gain)/loss due to liability assumption changes | (9.6) | (1.7) | | Actuarial gain due to demographic assumption changes in defined benefit obligation (DBO) | (0.1) | (0.1) | | Return on Scheme assets greater than discount rate | 13.8 | (1.0) | | **Remeasurement effects recognised in the SOCI** | **4.5** | **(1.9)** | | --- | --- | --- | | **Total (credit)/expense** | **4.8** | **(1.5)** | | --- | --- | --- | The Scheme's assets and liabilities are shown below together with the actuarial assumptions used. | Changes in the DBO £ millions | 2022 | 2021 | | --- | --- | --- | | DBO at end of prior year | 26.7 | 28.0 | | Interest cost on the DBO | 0.5 | 0.4 | | Actuarial loss - demographic experience | 0.3 | 0.8 | | Actuarial gain - demographic assumptions | – | (0.1) | | Actuarial gain - financial assumptions | (9.6) | (1.7) | | Benefits paid from scheme assets | (0.8) | (0.7) | | **Total DBO** | **17.1** | **26.7** | | Changes in Scheme assets £ millions | 2022 | 2021 | | --- | --- | --- | | Opening fair value of the Scheme assets | 30.5 | 28.6 | | Interest income on Scheme assets | 0.6 | 0.5 | | Return on Scheme assets greater than discount rate | (13.8) | 1.0 | | Employer contributions | 1.1 | 1.1 | | Benefits paid | (0.8) | (0.7) | | **Total Scheme assets** | **17.6** | **30.5** | The Company has unrestricted rights to any surplus in the Scheme upon wind-up. As such there is no irrecoverable surplus for either the current year or prior year. | Development of the net balance sheet position £ millions | 2022 | 2021 | | --- | --- | --- | | Net defined benefit asset at end of prior year | 3.8 | 0.7 | | Net interest on defined benefit asset at end of prior year | 0.1 | 0.1 | | Remeasurement effects recognised in the SOCI | (4.5) | 1.9 | | Employer contributions | 1.1 | 1.1 | | **Net defined benefit asset** | **0.5** | **3.8** | The assumptions used to determine the measurements at the reporting dates are shown below: | | 2022 | 2021 | | --- | --- | --- | | Discount rate | 4.95% | 1.90% | | Price inflation (RPI) | 3.35% | 3.70% | | Rate of salary increase | n/a | n/a | | Pension increases for pre 6 April 1997 pension | 4.00% | 4.00% | | Pension increases for post 6 April 1997 pension | 4.25% | 4.30% | | Pension increases for deferred benefits (non Guaranteed Minimum Pension) | 3.35% | 3.70% | | Scheme participant census date | 31 December 2022 | 31 December 2021 | | Post retirement mortality assumption-source | SAPS^{1} | SAPS^{1} | $^{1}$ Self-administered Pension Scheme light series year of birth tables allowing for Continuous Mortality Investigation projections and a 1.5% per annum long-term trend. ### Sensitivity analysis In accordance with IAS 19 (revised), the sensitivity of the DBO to the relevant actuarial assumptions is shown below. In each case the changed assumption has been considered in isolation (i.e. all other factors remain constant). | £ millions | 2022 | 2021 | | --- | --- | --- | | **DBO** | **17.1** | **26.7** | Significant actuarial assumptions at 31 December 2022: | £ millions | Assumptions used for sensitivity analysis | Sensitivity analysis | Revised DBO for each sensitivity | | --- | --- | --- | --- | | Discount rate | 4.45% | 0.5% point decrease | 18.3 | | Price inflation (RPI) | 3.85% | 0.5% point increase | 17.2 | | Life expectancy | – | Increase of 1 year | 17.7 | 70 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements ### 11. Pension commitments (continued) Significant actuarial assumptions at 31 December 2021: Assumptions used for Revised DBO sensitivity Sensitivity for each £ millions analysis analysis sensitivity Discount rate 1.40% 0.5% point decrease 29.0 Price inflation (RPI) 4.20% 0.5% point increase 27.0 Life expectancy – Increase of 1 year 27.9 The weighted average duration of the DBO is 13 years. Further Scheme analysis is shown below. Analysis of DBO by participant category £ millions 2022 2021 Deferred participants 2.2 4.5 Pensioners 14.9 22.2 DBO 1 7. 1 26.7 The fair value of Scheme assets of £17.6 million is analysed in the table below (2021: £30.5 million). Quoted Total Scheme asset breakdown securities 1 Other 2022 Equities securities – – – Fixed income and credit – – – Bulk insurance policy – 96% 96% Cash and liquidity/other – 4% 4% Total – 100% 100% Quoted Total Scheme asset breakdown securities 1 Other 2021 Equities securities – – – Fixed income and credit 99% – 99% Bulk insurance policy – – – Cash and liquidity/other – 1% 1% Total 99% 1% 100% 1 Classed as Level 2 assets under IFRS 13 . RIT Capital Partners plc Report and Accounts December 2022 71 12. Deferred tax The gross movement on deferred tax during the year is shown below: £ million 2022 2021 Balance at start of year (1.3) 2.5 (Debit)/credit to consolidated income statement – (2.7) (Debit)/credit to SOCI 1. 1 (1.1) Balance at end of year (0.2) (1.3) The deferred tax asset/(liability) is analysed below: £ million 2022 2021 Retirement benefit asset (0.2) (1.3) Balance at end of year (0.2) (1.3) The Group had carried forward tax losses of £453 million at 31 December 2022 (2021: £412 million) that have not been recognised as a deferred tax asset, as it is considered unlikely that the unrecognised asset will be utilised in the foreseeable future. 13. Financial instruments As an investment company, financial instruments make up the vast majority of the Group’s assets and liabilities and generate its performance. Financial instruments comprise securities, derivatives and other investments, cash, short-term receivables and payables, and short and long-term borrowings. The nature and extent of the financial instruments outstanding can be seen on the face of the balance sheet and the risk management policies employed by the Group and Company are set out below. The Group’s policy for determining the fair value of investments (including private investments) is set out on pages 64 and 65. In relation to receivables, payables and short-term borrowings, the carrying amount is viewed as being a reasonable approximation of fair value. 13.1 Financial risk management The main risks arising from the Group’s financial instruments are market risk (including price risk, interest rate risk and currency risk), credit risk and liquidity risk. The day-to-day identification, mitigation and monitoring of these risks is undertaken by the Manager under the authority of the Board and the Audit and Risk Committee, and is described in more detail below. The objectives, policies and processes for managing risks have not changed since the previous accounting year. The risk management processes of the Company are aligned with those of the Group as a whole and it is at the Group level that the majority of the risk management procedures are performed. Where relevant and materially different from the Group position, Company-specific risk exposures are explained alongside those of the Group. 13.1.1 Market risk The fair value or future cash flows of a financial instrument or investment property held by the Group may fluctuate as a result of changes in market prices. Market risk can be summarised as comprising three types of risk: • Price risk The risk that the fair value or future cash flows of financial instruments and investment properties will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). • Interest rate risk The risk that the fair value or future cash flows of financial instruments and investment properties will fluctuate because of changes in interest rates. • Currency risk The risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates. # Notes to the Financial Statements ## 13. Financial instruments (continued) The Group's exposure to, sensitivity to and management of each of these risks are described in further detail below. Management of market risk is fundamental to the Group's investment objective. The investment portfolio is continually monitored to target an appropriate balance of risk and reward. The Manager may seek to reduce or increase the portfolio's exposure to stock markets, interest rates and currencies by utilising derivatives such as index futures, options, swaps and currency forward contracts. These instruments are used for the purpose of hedging some or all of the existing exposure within the portfolio to those currencies or particular markets, as well as to enable increased exposure when deemed appropriate. With respect to equity, foreign exchange and interest rate options, the notional exposure presented in this note is adjusted to reflect the estimated sensitivity of the option to movements in the underlying security. ### 13.1.2 Price risk Price risk may affect the value of the quoted, private and other investments held by the Group. The Group has a widely diversified investment portfolio which significantly reduces the exposure to individual asset price risk. The performance of third-party investment managers is regularly reviewed and assessed to ensure compliance with their mandates and that their performance is compatible with the Group's investment objective. The Group's exposure to price risk is monitored and managed by analysing the levels of direct exposure from quoted equity price risk and the exposure from other price risk. The Group's exposure to quoted equity price risk (also described as net quoted equity exposure) can be assumed to be equivalent to the quoted equity investments in the investment portfolio adjusted for: - Notional exposure from quoted equity derivatives; - Estimated cash balances held by external managers; and - Estimated net equity exposure from hedge fund managers. Other price risk exposure relates to investments in private investments, absolute return and credit, and real assets, adjusted for the notional exposure from commodity and credit derivatives. | £ million | 31 December 2022 | 31 December 2021 | | --- | --- | --- | | Exposure to quoted equity price risk^{1} | 1,361.1 | 1,755.0 | | Exposure to other price risk | 2,394.5 | 2,669.5 | | **Total exposure to price risk** | **3,755.6** | **4,424.5** | $^{1}$ Quoted equity price risk represented 37% of year-end net assets (2021: 40%). ### Price risk sensitivity analysis The sensitivity of the Group's net assets and profit with regards to changes in market prices is illustrated below. This is estimated using an assumed 10% increase in general market prices with all other variables held constant. A 10% decrease is assumed to produce an equal and opposite effect. The sensitivity analysis takes account of the relevant derivative transactions the Group has entered into including those designed to provide a hedge against such movements. | £ million | 2022 Impact on profit and net assets | 2021 Impact on profit and net assets | | --- | --- | --- | | Quoted equity | 137.4 | 177.1 | | Other | 239.4 | 266.9 | | **Total** | **376.8** | **444.0** | The Group is exposed to market risk in respect to the fair value of the investment properties. The investment properties are valued by JLL using a market valuation approach and as such, the valuation will be influenced by trends experienced in the property market and also the wider economic environment. In particular, the valuation will be dependent on rental income yields, demand and supply for office space in London and comparable transactions completed in the marketplace. Fluctuations in any of the inputs used by the valuers to value the investment properties may increase or decrease the fair value of the properties. ### 13.1.3 Interest rate risk The Group finances its operations mainly through its share capital and reserves, including realised gains on investments. In addition, financing has been obtained through bank borrowings and fixed rate loan notes. Changes in interest rates have a direct or indirect impact on the fair value or future cash flows of the following financial assets and liabilities: - Gilts and other government securities; - Money market funds; - Credit funds; - Cash and cash equivalents; - Group borrowings; and - Certain derivative contracts. Changes in interest rates indirectly affect the fair value of the Group's other investments including those in quoted equity securities, private investments or property. 72 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 73 13. Financial instruments (continued) Interest rate risk is managed by taking into account the possible effects on fair value and cash flows that could arise as a result of changes in interest rates when making decisions on investments and borrowings. Exposure of the Group’s financial assets and liabilities to floating interest rates (giving cash flow interest rate risk when rates are reset) and fixed interest rates (giving fair value risk), is shown below. £ million 31 December 2022 Floating rate Fixed rate Total Portfolio investments – debt securities 1 – 40.7 40.7 Cash 218.0 – 218.0 Borrowings (236.2) (134.4) (370.6) Total 2 (18.2) (93.7) (111.9) £ million 31 December 2021 Floating rate Fixed rate Total Portfolio investments – debt securities 1 – 29.7 29.7 Cash 325.9 – 325.9 Borrowings (240.0) (168.9) (408.9) Total 2 85.9 (139.2) (53.3) 1 In addition, the Group holds £746.8 million (2021: £777.4 million) invested in absolute return and credit, of which £443.7 million (2021: £313.5 million) is in funds that predominantly invest in credit instruments. These provide indirect exposure to interest rate risk. 2 In addition, the Group holds £nil million (2021: £97.3 million) notional exposure to interest rate derivatives. Exposures vary throughout the year as a consequence of changes in the composition of the net assets of the Group arising out of investment, borrowing and risk management processes. Portfolio investments include direct and indirect (via externally- managed funds) investments in government securities, money markets, as well as quoted and unquoted debt securities issued by companies. Interest received on cash and cash equivalents is at prevailing market rates. The Group has total borrowings with a fair value of £370.6 million outstanding at the year end (2021: £408.9 million). The revolving credit facility comprising £236.2 million of this total incurs floating interest payments (2021: £240.0 million). The loan notes with a fair value of £134.4 million (par value of £151.0 million) have fixed interest payments (2021: fair value £168.9 million; par value £151.0 million). Further details are provided in Note 18. Interest rate risk sensitivity analysis The approximate sensitivity of the Group’s net assets and profit in regard to changes in interest rates is illustrated below. This is based on an assumed 50 basis point annualised increase in prevailing interest rates at the balance sheet date applied to the floating rate and fixed rate assets and liabilities and the following assumptions: • the fair values of all other assets and liabilities are not affected by a change in interest rates; • funds will be reinvested in similar interest-bearing securities on maturity; and • all other variables are held constant. A 50 basis point decrease is assumed to produce an equal and opposite impact. £ million 2022 Impact on profit and net assets 2021 Impact on profit and net assets Total 6.1 4.2 The Group has direct exposure to the effect of interest rate changes on the valuation and cash flows of its interest-bearing assets and liabilities. However, it may also be indirectly affected by the impact of interest rate changes on the earnings of certain companies in which the Group invests, and the impact on valuations that use interest rates as an input, including valuation models for private investments. Therefore, the sensitivity analysis may not reflect the full effect on the Group’s net assets. 13.1.4 Currency risk Consistent with its Investment Policy, the Group invests in financial instruments and transactions denominated in currencies other than sterling. As such, the Group’s profit and net assets could be significantly affected by currency movements. Currency risk is managed by the Group by entering into currency options or forward currency contracts as a means of limiting or increasing its exposure to particular currencies. These contracts are used for the purpose of hedging part of the existing currency exposure of the Group’s portfolio (as a means of reducing risk) or to enable increased exposure when this is deemed appropriate by the Manager. Foreign currency exposure Currency 2022 Net exposure % of NAV 2021 Net exposure % of NAV US dollar 32.5 26.8 Japanese yen 4.2 2.7 Euro 7. 5 1. 5 Other non-sterling 2.9 0.4 Total 1 47.1 31.4 1 Amounts in the above table are based on the carrying value of all foreign currency denominated assets and liabilities and the underlying notional amounts of forward currency contracts. It does not take into account any estimates of ‘look-through’ exposure from our fund investments . # Notes to the Financial Statements ## 13. Financial instruments (continued) ### Currency risk sensitivity analysis The sensitivity of the Group's net assets and profit in regard to changes in key currencies is illustrated below. This is based on an assumed 10% strengthening of sterling relative to the foreign currencies as at 31 December 2022, and assumes all other variables are held constant. A 10% weakening is assumed to produce an equal and opposite effect. The sensitivity analysis is based on the net foreign currency assets held at the balance sheet dates and takes account of currency forwards and options that adjust the effects of changes in currency exchange rates. | £ million | 2022 Impact on profit and net assets | 2021 Impact on profit and net assets | | --- | --- | --- | | US dollar | (120.8) | (97.9) | | Japanese yen | (15.6) | (11.9) | | Euro | (27.8) | (6.6) | | Other non-sterling | (11.2) | (1.7) | | **Total** | **(175.4)** | **(118.1)** | ### 13.1.5 Credit risk Credit risk is the risk that a counterparty to a financial instrument held by the Group will fail to discharge an obligation or commitment that it has entered into with the Group, which could result in a loss to the Group. This risk is not considered significant and is managed as follows: - the vast majority of the Group's listed transactions are settled on a delivery versus payment basis and are held directly by the custodian in fully segregated client accounts; - use of a range of brokers and counterparties with their credit quality monitored regularly; - cash balances are predominantly held with our custodian, whose credit worthiness is regularly monitored; - cash margin is held by a range of approved counterparties, with both margin balances and counterparties' creditworthiness monitored regularly; and - careful selection of a diversified portfolio of credit managers. A credit exposure could arise in respect of derivative contracts entered into by the Group if a counterparty was unable to fulfil its contractual obligations. The Group has exposure to certain debt instruments acquired as part of its private equity investments. The credit risk associated with these instruments is managed as part of the overall investment risk in the relevant portfolio companies and is not considered separately. The Group's maximum credit exposure is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below. ### Credit risk exposure | £ million | 2022 | 2021 | | --- | --- | --- | | Portfolio investments – debt securities^{1} | 40.7 | 29.7 | | Derivative financial instruments^{2} | 58.3 | 35.6 | | Cash margin | 85.4 | 87.6 | | Other receivables | 159.9 | 175.2 | | Cash at bank | 218.0 | 325.9 | | **Total** | **562.3** | **654.0** | $^{1}$ Debt securities held within portfolio investments include a private loan note issued by LionTree Advisory Holdings LLC. $^{2}$ Represents the fair value of assets held by counterparties. The credit quality of certain financial assets that are not past due, where the risk of loss is primarily that a counterparty fails to meet an obligation, can be assessed by reference to external credit ratings. The Manager has a review process in place that includes an evaluation of a potential counterparty's ability to service and repay its debt. This is considered on a regular basis. Cash margins and other receivables comprise mainly balances with counterparties which are investment grade financial institutions with a short-term credit rating by S&P of A-2 or higher (2021: A-2). BNP is the custodian and depositary to the Company under the Alternative Investment Fund Managers Directive (AIFMD). Under the UK equivalent regulations, the Company is the Alternative Investment Fund (AIF) and JRCM is the Alternative Investment Fund Manager (AIFM). As custodian, substantially all of the Company's directly-held listed portfolio investments and cash at bank are held by BNP. Bankruptcy or insolvency of the custodian may cause the Group's rights with respect to securities held by the custodian to be delayed; however, the custodian's local long-term rating from S&P was A+ in the most recent rating prior to 31 December 2022 (2021: A+). As depositary under AIFMD, the main obligation of BNP is the safeguarding of those custodied assets on behalf of the RIT shareholder. The depositary is liable for the loss of financial instruments held in custody, other than under limited circumstances. As a result of this obligation, the depositary maintains oversight of all transactions undertaken by the AIFM (JRCM) on behalf of the AIF (RIT). This includes reviewing all cash movements, receiving copies of internal sign-off documentation and key legal agreements, and oversight and review of key procedures and controls. 74 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements ### 13. Financial instruments (continued) RIT Capital Partners plc Report and Accounts December 2022 75 13.1.6 Liquidity risk Liquidity risk is the risk that the Group will have difficulty in meeting its obligations in respect of financial liabilities as they fall due. In addition to the Group’s liquidity balances and committed but undrawn borrowings, the investment portfolio includes a substantial amount of assets which would be expected to be realised within a relatively short time frame, depending on market conditions. This might include stocks (unless held via a co-investment fund or subject to a lock-up), government bonds and derivatives. Other investments can be realised over varying timeframes depending on the nature of the investment and/or the legal terms governing disposal. Investments in externally-managed equity and hedge funds have redemption periods which typically range from daily to quarterly and longer, depending in part on the underlying nature of the portfolio holdings. There is also a risk in stress situations of the funds imposing additional restrictions or ‘gates’ on redemptions (as happened in particular to hedge funds during the global financial crisis). Direct private and private fund investments are inherently less liquid, and while there is a secondary market, participants will often experience discounts to fair value, in particular at times of stress. JRCM manages the Group’s liquid resources in line with a liquidity risk framework overseen by the Board. This establishes a minimum level of liquidity available to meet expected contractual commitments, including ongoing costs, margin calls and capital calls (from funds with a commitment/drawdown structure - see Note 14). The Manager monitors the level of short-term funding, and balances the need for access to short-term funding, with the long-term funding needs of the Group. The Group has three revolving credit facilities with a total capacity of £335 million (of which £90 million was committed and undrawn at the year end) and £151 million of long-term loan notes (details of which are disclosed in Note 18). The remaining contractual maturities of the Group’s financial liabilities at the year end, based on the earliest date on which payment could be required are as follows: £ million 31 December 2022 3 months or less 3-12 months >1 year Total Current liabilities: Bank loan/overdraft 236.2 – – 236.2 Derivative financial instruments 7. 0 3.4 – 10.4 Non-current liabilities: Derivative financial instruments – – 0.0 0.0 Borrowings – 5.6 189.3 194.9 Lease liability – 0.4 5.9 6.3 Financial liabilities 243.2 9.4 195.2 447.8 Other non-financial liabilities 63.5 – 1. 8 65.3 Total 306.7 9.4 197.0 513.1 £ million 31 December 2021 3 months or less 3-12 months >1 year Total Current liabilities: Bank loan/overdraft 240.0 – – 240.0 Derivative financial instruments 7. 9 0.3 – 8.2 Purchase for future settlement 99.9 – – 99.9 Non-current liabilities: Derivative financial instruments – – 2.9 2.9 Borrowings – 5.2 194.6 199.8 Lease liability – 0.4 3.9 4.3 Financial liabilities 347.8 5.9 201.4 555.1 Other non-financial liabilities 168.8 – 1. 0 169.8 Total 516.6 5.9 202.4 724.9 In addition, the Company has contingent liabilities in the form of commitments amounting to £385 million (2021: £360.2 million) as set out in Note 14 . 13.2 Collateral Collateral in the form of cash margin is posted by the Group in relation to certain derivative transactions, transacted under the auspices of the International Swaps and Derivatives Association. The Group does not hold collateral from other counterparties. Set out below is the amount of financial assets pledged as collateral at the year end. £ million 2022 2021 Cash margin 85.4 87.6 13.3 Derivative financial instruments The Group typically uses the following types of derivative instruments in the portfolio: • futures and forward contracts relating to market indices, foreign currencies and government bonds; • options relating to foreign currencies, market indices, stocks and interest rates; and • swaps relating to interest rates, bonds, credit spreads, equity indices and stocks. As explained above, the Manager uses derivatives to hedge various exposures and also selectively to increase or decrease exposure where desired. The notional amount of certain types of derivatives provides a basis for comparison with instruments recognised on the balance sheet, but does not necessarily indicate the amount of future cash flows involved or the current fair value of the derivatives. # Notes to the Financial Statements ## 13. Financial instruments (continued) The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in indices, security prices, market interest rates or foreign exchange rates relevant to the terms of the derivative instrument. The aggregate contractual or notional amount of derivative financial instruments held, the extent to which instruments are favourable or unfavourable and thus the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. Details of the unsettled derivatives at 31 December 2022 and 31 December 2021 are: | As at 31 December 2022 £ million | Notional^{1} amount | Group and Company | | Total fair value | | --- | --- | --- | --- | --- | | | | Assets (positive fair value) | Liabilities (negative fair value) | | | Commodity derivatives | 169.1 | 6.4 | – | 6.4 | | Credit derivatives | – | – | – | – | | Currency derivatives | 1,815.1 | 49.6 | (7.0) | 42.6 | | Equity derivatives | 253.2 | 2.3 | (3.4) | (1.1) | | Fixed income derivatives | – | – | – | – | | **Total** | | **58.3** | **(10.4)** | **47.9** | | As at 31 December 2021 £ million | Notional^{1} amount | Group and Company | | Total fair value | | --- | --- | --- | --- | --- | | | | Assets (positive fair value) | Liabilities (negative fair value) | | | Commodity derivatives | 132.8 | 3.0 | – | 3.0 | | Credit derivatives | 178.4 | 0.4 | (3.3) | (2.9) | | Currency derivatives | 2,364.4 | 28.6 | (7.6) | 21.0 | | Equity derivatives | 53.0 | 3.5 | (0.2) | 3.3 | | Fixed income derivatives | 81.2 | 0.1 | – | 0.1 | | **Total** | | **35.6** | **(11.1)** | **24.5** | $^{1}$ Long and short notional exposure has been netted. ### 13.4 IFRS 13 fair value measurement classification IFRS 13 requires the Group to classify its financial instruments held at fair value using a hierarchy that reflects the significance of the inputs used in the valuation methodologies. These are as follows: - Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; - Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and - Level 3: Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). The vast majority of the Group's financial assets and liabilities, investment properties and property, plant and equipment are measured at fair value on a recurring basis. The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the reporting year when they are deemed to occur. A description of the valuation techniques used by the Group with regards to investments categorised in each level of the fair value hierarchy is detailed below. Where the Group invests in a fund or a partnership, which is not itself listed on an active market, the categorisation of such investments between levels 2 and 3 is determined by reference to the nature of the fund or partnership's underlying investments. If such investments are categorised across different levels, the lowest level of the hierarchy that forms a significant proportion of the fund or partnership exposure is used to determine the reporting disclosure. If the proportion of the underlying investments categorised between levels changes during the period, these will be reclassified to the most appropriate level. #### Level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Where a market price is available but the market is not considered active, the Group has classified these investments as level 2. #### Level 2 The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques which maximise the use of observable market data where it is available. Specific valuation techniques used to value OTC derivatives include quoted market prices for similar instruments, counterparty quotes and the use of forward exchange rates to estimate the fair value of forward foreign exchange contracts at the balance sheet date. Investments in externally-managed funds which themselves invest primarily in listed securities are valued at the price or net asset value released by the investment manager or fund administrator as at the balance sheet date. #### Level 3 The Group considers all private investments, whether direct or funds, (as described in the Investment Portfolio on page 18) as level 3 assets, as the valuations of these assets are not typically based on observable market data. Where other funds invest into illiquid stocks, these are also considered by the Group to be level 3 assets. Private fund investments are held at the most recent fair values provided by the GPs managing those funds, adjusted for subsequent investments, distributions, and currency movements up to the period end, and are subject to periodic review by the Manager. Direct co-investments are also held at the most recent fair values provided by the GPs managing those co-investments, adjusted for subsequent investments, distributions, currency moves, as well as pricing events where the Manager has sufficient information to suggest the period end valuation should be adjusted. The remaining directly-held private investments are valued on a semi-annual basis using techniques including a market approach, income approach and/or cost approach. The valuation process involves the investment functions of the Manager who prepare the proposed valuations, which are then subject to review by the finance function, with the final valuations being presented to the Valuation Committee, comprised of independent non-executive Directors, of which the Audit and Risk Committee Chair is also a member. 76 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 77 13. Financial instruments (continued) Specific valuation techniques used will typically include the value of recent transactions, earnings multiples, discounted cash flow analysis, and, where appropriate, industry specific methodologies. The acquisition cost, if determined to be fair value, may be used to calibrate inputs to the valuation. The valuations will often reflect a synthesis of a number of distinct approaches in determining the final fair value estimate. The individual approach for each investment will vary depending on relevant factors that a market participant would take into account in pricing the asset. These might include the specific industry dynamics, the company’s stage of development, profitability, growth prospects or risk as well as the rights associated with the particular security. Borrowings at 31 December 2022 comprise bank loans and senior loan notes. The bank loans are revolving credit facilities paying floating interest, and are typically drawn in tranches with a duration of three or six months. The loans are therefore short-term in nature, and their fair value approximates their nominal value. The loan notes were issued in 2015 with tenors of between 10 and 20 years with a weighted average of 16 years. They are valued on a monthly basis using a discounted cash flow model where the discount rate is derived from the yield of similar tenor UK Government bonds, adjusted for any significant changes in either credit spreads or the perceived credit risk of the Company. The fair value of investments in non-consolidated subsidiaries is considered to be the net asset value of the individual subsidiary as at the balance sheet date. The net asset value comprises various assets and liabilities which are fair valued on a recurring basis and is considered to be level 3. On a semi-annual basis, the Group engages external, independent and qualified valuers to determine the fair value of the Group’s investment properties and property, plant and equipment held at fair value. Further information is shown in Note 15. The following table analyses the Group’s assets and liabilities within the fair value hierarchy, at 31 December 2022: As at 31 December 2022 £ million Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss (FVPL): Portfolio investments 506.8 1,204.2 1,774.2 3,485.2 Non-consolidated subsidiaries – – 101.1 101.1 Investments held at fair value 506.8 1,204.2 1,875.3 3,586.3 Derivative financial instruments 6.4 51.9 – 58.3 Total financial assets at FVPL 513.2 1,256.1 1,875.3 3,644.6 Non-financial assets measured at fair value: Investment property – – 37.9 37.9 Property, plant and equipment – – 20.7 20.7 Total non-financial assets measured at fair value – – 58.6 58.6 Financial liabilities at FVPL: Borrowings – – (370.6) (370.6) Derivative financial instruments – (10.4) – (10.4) Total financial liabilities at FVPL – (10.4) (370.6) (381.0) Total net assets measured at fair value 513.2 1,245.7 1,563.3 3,322.2 Other non-current assets 0.5 Cash at bank 218.0 Other current assets 249.8 Other current liabilities (63.6) Other non-current liabilities (5.2) Net assets 3,721.7 Movements in level 3 assets Year ended 31 December 2022 £ million Investments held at fair value Properties Total Opening balance 1,914.3 61.4 1,975.7 Purchases 222.2 0.1 222.3 Sales (210.3) – (210.3) Realised gains/(losses) through profit or loss 8.7 – 8.7 Unrealised gains/(losses) through profit or loss (59.7) (0.4) (60.1) Unrealised gains/(losses) through other comprehensive income – (2.1) (2.1) Transfer in to level 3 – – – Transfer out of level 3 – – – Other 0.1 (0.4) (0.3) Closing balance 1,875.3 58.6 1,933.9 During the year no investments were reclassified between level 2 and level 3. # Notes to the Financial Statements ## 13. Financial instruments (continued) ### Level 3 assets Further information in relation to the directly-held private investments is set out in the following table. This summarises the portfolio by the primary method used in fair valuing the asset. As we seek to employ a range of valuation methods and inputs in the valuation process, selection of a primary method is subjective, and designed primarily to assist the subsequent sensitivity analysis. | Primary valuation method/approach £ million | 2022 | 2021 | | --- | --- | --- | | Third-party valuations^{1} | 246.3 | 361.1 | | Discount to recent transaction^{2} | 90.5 | – | | Earnings multiple | 49.8 | – | | Recent transaction | 23.6 | 140.0 | | Other industry metrics | 21.7 | 12.3 | | Discount to agreed third-party offer | 10.8 | – | | **Total** | **442.7** | **513.4** | $^{1}$ Included in this method are directly-held private investments held within the non-consolidated subsidiaries with a total of £24.5 million (2021: £29.7 million). $^{2}$ Included in this method are direct private investments which have been discounted due to a decline in public markets. The majority of the direct private investments are structured as co-investments, managed by a GP. For these investments, we typically use the latest quarterly fair valuations provided by the GP, adjusted for any subsequent investments/distributions and currency moves as well as pricing events, where there is sufficient information to suggest the period-end valuation should be adjusted. Where the Manager has sufficient information to undertake its own valuation, a range of methods will typically be used. For companies with positive earnings, we seek to utilise an earnings multiple approach, typically using EBITDA or similar. The earnings multiple is assessed by reference to similar listed companies or transactions involving similar companies. When an asset is undergoing a sale and the price has been agreed but not yet completed or an offer has been submitted, we use the agreed or offered price, often with a final discount to reflect the risks associated with the transaction completing or any price adjustments. Where a company has been the subject of a recent financing round which is viewed as representative of fair value, we will use this transaction price. Other methods employed include discounted cash flow analysis and industry metrics such as multiples of assets under management or revenue, where market participants use these approaches in pricing assets. The following table provides a sensitivity analysis of the valuation of directly-held private investments, and the impact on net assets: | Valuation method/approach | Sensitivity analysis | | --- | --- | | Third-party valuations | A 5% change in the value of these assets would result in a £12.3 million or 0.33% (2021: £18.1 million, 0.41%) change in net assets. | | Discount to recent transaction | Assets in this category are valued using a discount applied to a recent financing round or secondary transaction. Discounts range between 15% and 70%, reflecting factors such as the elapsed time since the transaction and the movement in prices of broadly similar listed companies. A 5% change to the discount would result in a £4.5 million or 0.12% (2021: n/a) change in net assets. | | Earnings multiple | Assets in this category are valued using EV/sales multiples in the range of 4.0x- 8.5x. If the multiple used for valuation purposes is increased or decreased by 5% then the net assets would increase/decrease by £2.5 million or 0.07% (2021: n/a). | | Recent transaction | A 5% change in the value of these assets would result in a £1.2 million or 0.03% (2021: £7.0 million, 0.16%) change in net assets. | | Other industry metrics | A 5% change in the value of these assets would result in a £1.1 million or 0.03% (2021: £0.6 million, 0.01%) change in net assets. | | Discount to agreed third-party offer | The asset in this category is valued using a 15% discount to an agreed offer. A 5% change in the discount would result in a £0.1 million or <0.01% (2021: n/a) change in net assets. | The investment property and property, plant and equipment with an aggregate fair value of £58.6 million (2021: £61.4 million) were valued using a third-party valuation provided by JLL. The properties were valued using weighted average capital values of £1,580 per square foot (2021: £1,658) developed from rental yields and supported by market transactions. A £25 per square foot increase/decrease in capital values would result in a £0.8 million increase/decrease in fair value (2021: £0.8 million increase/decrease). The non-consolidated subsidiaries are held at their fair value of £101.1 million (2021: £101.4 million) representing £104.7 million of portfolio investments (2021: £104.3 million) and £3.3 million of remaining liabilities (2021: £2.9 million of remaining liabilities). A 5% change in the value of these assets would result in £5.1 million or 0.1% (2021: £5.1 million, 0.1%) change in total net assets. The remaining investments held at fair value and classified as level 3 of £1,355.7 million (2021: £1,329.2 million) were valued using third-party valuations from a GP administrator or fund manager. A 5% change in the value of these assets would result in a £67.8 million or 1.82% (2021: £66.5 million, 1.51%) change in net assets. 78 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements ### 13. Financial instruments (continued) RIT Capital Partners plc Report and Accounts December 2022 79 In aggregate, the sum of the direct private investments, investment property, property, plant and equipment, non-consolidated subsidiaries and the remaining fund investments represents the total level 3 assets of £1,933.9 million (2021: £1,975.7 million). The following table analyses the Group’s assets and liabilities within the fair value hierarchy, at 31 December 2021: As at 31 December 2021 £ million Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss (FVPL): Portfolio investments 579.6 1,797.9 1,813.0 4,190.5 Non-consolidated subsidiaries – – 101.3 101.3 Investments held at fair value 579.6 1,797.9 1,914.3 4,291.8 Derivative financial instruments 2.9 32.7 – 35.6 Total financial assets at FVPL 582.5 1,830.6 1,914.3 4,327.4 Non-financial assets measured at fair value: Investment property – – 38.3 38.3 Property, plant and equipment – – 23.1 23.1 Total non-financial assets measured at fair value – – 61.4 61.4 Financial liabilities at FVPL: Borrowings – – (408.9) (408.9) Derivative financial instruments – (11.1) – (11.1) Total financial liabilities at FVPL – (11.1) (408.9) (420.0) Total net assets measured at fair value 582.5 1,819.5 1,566.8 3,968.8 Other non-current assets 3.8 Cash at bank 325.9 Other current assets 266.5 Other current liabilities (168.8) Other non-current liabilities (5.9) Net assets 4,390.3 Movements in level 3 assets Year ended 31 December 2021 £ million Investments held at fair value Properties Total Opening balance 1,232.1 61.4 1,293.5 Purchases 857.6 0.1 857.7 Sales (882.1) – (882.1) Realised gains/(losses) through profit or loss 37.5 – 37.5 Unrealised gains/(losses) through profit or loss 767.5 0.6 768.1 Unrealised gains/(losses) through other comprehensive income – (0.2) (0.2) Transfer in to level 3 40.9 – 40.9 Transfer out of level 3 (139.2) – (139.2) Other – (0.5) (0.5) Closing balance 1,914.3 61.4 1,975.7 13.5 Capital management The Group’s primary objectives in relation to the management of capital are: • to deliver long-term capital growth for its shareholders, while preserving shareholders’ capital; • to deliver for shareholders increases in capital value in excess of the relevant indices over time through an appropriate balance of equity capital and gearing; and • to ensure the Group’s ability to continue as a going concern. The Company is subject to externally imposed capital requirements: • the Company’s Articles of Association restrict borrowings to a maximum of five times share capital and reserves; and • the Company’s borrowings are subject to covenants limiting the total exposure based on a minimum net assets and a cap of borrowings as a percentage of adjusted net assets. All these conditions were met during this year and the previous financial year. In addition, JRCM is subject to capital requirements imposed by the FCA and must ensure that it has sufficient capital to meet these requirements. JRCM was compliant with those capital requirements throughout the year. The Group’s capital at 31 December 2022 and 31 December 2021 comprised: £ million 2022 2021 Equity share capital 156.8 156.8 Retained earnings and other reserves 3,564.9 4,233.5 Net asset value 3,721.7 4,390.3 Borrowings 370.6 408.9 Total capital 4,092.3 4,799.2 There have been no significant changes to the Group’s capital management objectives, policies and processes in the year, nor has there been any change in what the Group considers to be its capital. 14. Financial commitments Financial commitments to invest additional funds which have not been provided for are as follows: £ million 31 December 2022 31 December 2021 Group Company Group Company Commitments 385.0 385.0 360.2 360.2 The financial commitments are principally uncalled commitments to private funds, which are typically established as 10-year funds with a five-year investment period, and are diversified across multiple funds and vintage years. The majority are denominated in US dollars and therefore subject to currency fluctuation. ## Notes to the Financial Statements ### 15. Investment property £ million 2022 2021 Rental income from investment properties 2.1 2.0 Direct operating expenses arising from investment properties that generated rental income during the year (1.4) (1.4) Cash outflow from leases (0.4) (0.4) The Group and Company is committed to making the following payments under non-cancellable leases over the periods described. £ million 2022 2021 Within one year 0.4 0.4 Under non-cancellable leases the Group and Company will receive the following: £ million 2022 2021 | Within one year | 1. 1 1. 3 | | --- | --- | | Between one and two years | 0.6 0.6 | | Between two and three years | 0.1 0.1 | Between three and four years 0.1 – Between four and five years – – Over five years – – All investment properties held by the Group during the year generated rental income. The Company leases Spencer House from the Spencer Trustees (the Trustees). The terms of this lease include provisions such that: any assignment or sale of the lease can occur only with the consent of the Trustees, there are limits on event frequency and that the Trustees retain certain (de minimis) usage rights over the ‘fine rooms’. The Company is required to externally redecorate every three years and to internally redecorate every seven years. The property is typically open to the public for viewing every Sunday, except during August. The investment property portfolio is valued by JLL on a six-monthly basis in accordance with current RICS Valuation – Global Standards, published by the Royal Institution of Chartered Surveyors, on the basis of open market value. The most recent valuation, which reflects the factors highlighted above, was undertaken as at 31 December 2022. 80 Report and Accounts December 2022 RIT Capital Partners plc 16. Other receivables £ million 31 December 2022 31 December 2021 Group Company Group Company Cash margin 85.4 85.4 87.6 87.6 Amounts receivable 0.6 0.6 0.7 0.7 Prepayments and accrued income 7. 0 6.6 2.9 2.5 Sales for future settlement 152.3 152.3 123.6 123.6 Unsettled investment subscriptions – – 48.0 48.0 Total 245.3 244.9 262.8 262.4 The carrying amount of other receivables approximates their fair value, due to their short-term nature. 17. Related party transactions In the normal course of its business, the Group has entered into a number of transactions with related parties. All arrangements with related parties are monitored by the Conflicts Committee, which is comprised solely of independent non-executive Directors. Transactions with Hannah Rothschild or parties related to her During the current and prior year the Group transacted with entities classified as related to Hannah Rothschild as a result of her having significant influence over them, a beneficial interest in them, or otherwise in accordance with IAS 24. The Group had cost-sharing arrangements with these related parties covering the provision and receipt of administrative as well as investment advisory, support and supply services. Under these arrangements the Group received £61,757 (2021: £122,673) and paid £74,077 (2021: £82,996). Certain of these related parties occupy office space in St. James’s Place which is owned or leased by the Group. The rent, rates and services charged by the Group for the year ended 31 December 2022 amounted to £203,539 (2021: £270,690). Nothing was owed by the Group to the parties related to Hannah Rothschild at either 31 December 2022 or 31 December 2021. The balance due to the Group from these related parties at 31 December 2022 was £11,693 (2021: £7,663). Other No subscriptions were made to its associate, JRCM (London) LLP in the year (2021: Company £nil; JRCM management £nil) and the Company has a remaining commitment of £50,000 (2021: £50,000). Group undertakings JRCM acts as the Company’s manager, administrator and corporate secretary. During the year ended 31 December 2022, the charge for these services from JRCM to the Company amounted to £49.7 million (2021: £71.5 million). JRCM incurred rent charges of £580,000 (2021: £580,000) from the Company. During the year Spencer House Limited (also a wholly-owned subsidiary of the Company) earned property management revenues of £98,827 from JRCM (2021: £74,961) and £1,597,394 from the Company (2021: £1,671,731). | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements ### 17. Related party transactions (continued) Amounts due from subsidiaries and to subsidiaries are disclosed on the face of the Group’s balance sheet. The balances outstanding at the year ends are show below: Amounts owed by/(to) Group undertakings £ million 2022 2021 RIT Investments US, Inc 4.5 3.7 RIT Investments GP Limited (0.1) – Total 4.4 3.7 Amounts owed by/(to) Company undertakings £ million 2022 2021 RIT Investments US, Inc 4.5 3.7 JRCM (94.7) (128.8) Total (90.2) (125.1) RITCP Pension and Life Assurance Scheme The Group’s pension scheme is deemed to be a related party of the Company pursuant to IAS 24. Details of the pension contributions made during the year are disclosed in Note 11. There were no amounts owing to or by the pension scheme to the Company, or any subsidiary, at 31 December 2022 (2021: £nil). Directors and key management personnel Details of the remuneration and benefits attributable to Directors and key management personnel are set out below. £ million 2022 2021 Short-term employee benefits 4.1 14.6 Share-based payment 16.0 16.2 Total 20.1 30.8 The Group has no ultimate controlling party . RIT Capital Partners plc Report and Accounts December 2022 81 18. Borrowings £ million Group and Company 2022 2021 Unsecured loans payable within one year: Revolving credit facilities 236.2 240.0 Unsecured loans payable in more than one year: Fixed rate loan notes 134.4 168.9 Total borrowings 370.6 408.9 At 31 December 2022 the Company had three revolving credit facilities (RCFs): an £85 million three-year facility with BNP Paribas SA agreed in December 2022, a £150 million five-year facility with Commonwealth Bank of Australia agreed in December 2018 and a £100 million three-year facility with Industrial and Commercial Bank of China agreed in December 2022. These are flexible as to currency, duration and number of drawdowns, and bear interest linked to SONIA, LIBOR or equivalent relevant to the period and currency drawn. As they are drawn in tranches with tenors less than one year they are classified as current liabilities. The fair value and par value of the drawn borrowings at the year end was £236.2 million (2021: £240.0 million). A change in interest rates is not expected to have a significant impact on the fair value of the RCFs. No bank loans are held within subsidiaries. The weighted average interest rate on drawn down RCFs at the year end was 5.85% (2021: 1.69%). On 1 June 2015 the Company issued £151.0 million of fixed rate loan notes with tenors between 10 and 20 years and coupons from 3.00% to 3.56%. These Notes are held at fair value and pay interest on a semi-annual basis. The fair value of this debt at the end of the year was £134.4 million (2021: £168.9 million) calculated using a discount rate of 5.24% (2021: 2.04%). A 5% increase/decrease in the underlying discount rate would result in an increase/decrease in net assets of approximately £2.3 million (2021: £1.4 million) or 0.06% (2021: 0.03%). The weighted average interest rate payable on these Notes is 3.45% and their remaining weighted average tenor is 8.2 years. The overall weighted average interest rate on drawn borrowings at the year end was 4.93% (2021: 2.38%). 19. Other payables £ million 31 December 2022 31 December 2021 Group Company Group Company Accruals 14.5 5.3 28.3 3.5 Other creditors 24.9 24.7 40.6 40.4 Purchases for future settlement 24.1 24.1 99.9 99.9 Total 63.5 54.1 168.8 143.8 The carrying value of the Group’s other payables approximates their fair value, due to their short-term nature. 20. Share capital £ million Shares in issue 2022 Nominal value of total shares in issue 2021 Nominal value of total shares in issue Allotted, issued and fully paid: At 1 January 156,848,065 156.8 156.8 At 31 December 156,848,065 156.8 156.8 The Company has one class of ordinary shares which carry no right to fixed income. The share capital is not distributable. In 2022, 514,634 shares were bought back at a cost of £11. 0 million and held in treasury (2021: 59,189 shares at a cost of £1.4 million) meaning at 31 December 2022, 689,863 shares were held in treasury (2021:175,229 shares). # Notes to the Financial Statements ## 21. Share premium | £ million | 2022 | 2021 | | --- | --- | --- | | At 1 January | 45.7 | 45.7 | | **At 31 December** | **45.7** | **45.7** | The share premium is not distributable. ## 22. Capital redemption reserve | £ million | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Group | Company | Group | Company | | Balance at start of year | 36.3 | 36.3 | 36.3 | 36.3 | | **At 31 December** | **36.3** | **36.3** | **36.3** | **36.3** | The capital redemption reserve is not distributable and represents the cumulative nominal value of shares acquired for cancellation. ## 23. Own shares reserve | £ million | 2022 | 2021 | | --- | --- | --- | | Opening cost | (23.0) | (15.3) | | Own shares acquired | (40.4) | (21.0) | | Own shares transferred | 17.1 | 13.3 | | **Closing cost** | **(46.3)** | **(23.0)** | The Group has established an Employee Benefit Trust (EBT) which purchases shares in order to meet the anticipated value of equity-settled, share-based awards. At the year end, the EBT held 1,988,580 shares with a cost of £46.3 million and market value of £42.3 million (2021: 932,403 shares, cost £23.0 million, market value £25.6 million). The own shares reserve is not distributable. ## 24. Share-based payments The Group utilises share-based awards for employees, the vast majority of which are equity-settled, and designed to align the interests of employees with those of shareholders. Restricted share units (RSUs) were awarded to employees during the year. These are commonly used long-term incentive awards that comprise awards of shares made to employees that will vest after a three-year service period and then are typically subject to a further two-year holding period. There are also a small number of legacy share appreciation rights (SARs) remaining which vest based on market-based performance conditions and subject to continued service. These are no longer awarded to employees since the conversion to RSUs was made in 2021. In addition, 60% of annual bonuses over £150,000 (for JRCM directors) or £250,000 (for other employees) are made in deferred shares which vest over three years (based on a service condition). The total expense for share-based awards, including related social security costs, recognised in the consolidated income statement was £20.3 million (2021: £20.4 million) of which £0.1 million related to SARs, £9.9 million to RSUs, and £10.3 million to deferred shares. The movement in share-based awards is as follows: | Number (thousand) | 2022 | 2021 | | --- | --- | --- | | Outstanding at the start of the year: | | | | SARs/performance shares | 342 | 4,217 | | RSUs | 1,397 | – | | Deferred shares | 841 | 488 | | Total | 2,580 | 4,705 | | Granted during the year: | | | | RSUs | 352 | 493 | | Deferred shares | 553 | 554 | | Total | 905 | 1,047 | | Conversion during the year: | | | | SARs/performance shares (surrendered) | – | (3,505) | | RSUs (replacement) | – | 1,151 | | Total | – | (2,354) | | Exercised/vested during the year: | | | | SARs/performance shares | (3) | (263) | | RSUs | (256) | (246) | | Deferred shares | (406) | (201) | | Total | (665) | (710) | | Lapsed/forfeited during the year: | | | | SARs/performance shares | (24) | (107) | | RSUs | (10) | (1) | | Deferred shares | – | – | | Total | (34) | (108) | | Outstanding at the end of the year: | | | | SARs | 315 | 342 | | RSUs | 1,483 | 1,397 | | Deferred shares | 988 | 841 | | Total | 2,786 | 2,580 | | SARs exercisable at year end | 122 | 53 | | **Intrinsic value of SARs exercisable at year end (£ million)** | **0.1** | **0.4** | For share-based awards granted during the year, the weighted average fair value of each award was 2,470 pence (2021: 2,230 pence). Share-based awards with only service conditions attached (deferred shares and RSUs) were valued using the prevailing market price and a lock-up discount factor as applicable. 82 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 83 25. Capital reserve £ million 31 December 2022 31 December 2021 Group Company Group Company Balance at start of year 4,174.4 4,203.4 3,350.1 3,380.8 Gains/(loss) for the year (535.3) (535.3) 919.8 919.7 Dividend paid (57.6) (57.6) (55.0) (55.0) Other capital items (32.6) (31.9) (38.0) (42.1) Taxation – – (2.5) – Total capital return (625.5) (624.8) 824.3 822.6 Balance at end of year 3,548.9 3,578.6 4,174.4 4,203.4 The Company’s Articles of Association allow distribution by dividends of realised capital reserves. £ million 2022 2021 Capital reserve: in respect of investments realised 2,542.3 2,854.1 in respect of investments held 1,036.3 1,349.3 Balance at end of year 3,578.6 4,203.4 26. Revenue reserve £ million 31 December 2022 31 December 2021 Group Company Group Company Balance at start of year (11.4) (176.1) 5.1 (136.8) Loss for the year (14.3) (33.4) (17.3) (39.3) Actuarial gain/(loss) (4.5) – 1. 9 – Deferred tax (charge)/credit 1. 1 – (1.1) – Balance at end of year (29.1) (209.5) (11.4) (176.1) As permitted by Section 408 of the Companies Act 2006, the Company has not published a separate income statement or statement of comprehensive income. The Company’s revenue loss after tax amounted to £33.4 million (2021: loss £39.3 million). The Company’s total comprehensive expense for the year was £591. 7 million (2021: £839.5 million profit). 27. Revaluation reserve £ million 31 December 2022 31 December 2021 Group Company Group Company Balance at start of year 11. 5 11. 5 11. 7 11. 7 Revaluation gain/(loss) on property, plant and equipment (2.1) (2.1) (0.2) (0.2) Balance at end of year 9.4 9.4 11. 5 11.5 The revaluation reserve is not distributable. 28. Net asset value per ordinary share – basic and diluted Net asset value per ordinary share is based on the following data: 31 December 2022 2021 Net assets (£ million) 3,721.7 4,390.3 Number of shares in issue (million) 156.8 156.8 Shares held in EBT (million) (2.0) (0.9) Shares held in treasury (million) (0.7) (0.2) Basic shares (million) 154.1 155.7 Effect of share-based payment awards (million) 1.7 1. 4 Diluted shares (million) 155.8 157.1 31 December 2022 pence 2021 pence Net asset value per ordinary share – basic 2,414 2,819 Net asset value per ordinary share – diluted 2,388 2,794 29. Investments in subsidiary undertakings £ million Carrying value at 1 January 2022 107.5 Additions 2.5 Disposals – Fair value movements in year (2.8) Carrying value at 31 December 2022 107.2 £ million Carrying value at 1 January 2021 75.6 Additions 3.1 Disposals – Fair value movements in year 28.8 Carrying value at 31 December 2021 107.5 Investments in subsidiary undertakings are stated at cost or fair value where appropriate. At 31 December 2022 the Company held investments in the following subsidiaries, which, unless otherwise stated, are wholly- owned, share the same accounting reference date as the Company and operate principally in their country of incorporation. The voting share capital, unless otherwise stated, is held directly by the Company. In accordance with IFRS 10 the subsidiary below is consolidated by the Group and held by the Company at cost: Name Issued share capital JRCM 1 £6,250,001 divided into 6,250,000 ordinary shares of £1 each and one special share of £1 which provides rights over the use of the “J. Rothschild” name. 1 Registered office and principal place of business: 27 St. James’s Place, London SW1A 1NR. ## Notes to the Financial Statements ### 29. Investments in subsidiary undertakings 31. Reconciliation of profit/(loss) before finance ### (continued) costs and taxation to net cash inflow/(outflow) ### from operating activities before taxation and ### interest Group £ million 2022 2021 Profit/(loss) before dividend and interest income, finance costs and taxation (569.2) 871.2 Dividend income 7. 2 8.5 Interest income 9.8 2.2 Profit/(loss) before finance costs and taxation (552.2) 881.9 (Increase)/decrease in other receivables 1 7. 5 (157.5) Increase/(decrease) in other payables (105.3) 105.3 1 Other movements 35.7 12.7 (Gains)/losses on borrowings (34.5) (12.6) Unrealised foreign exchange (gains)/losses on repayments and drawings of borrowings (5.2) 3.7 Purchase of investments held at fair value (886.3) (1,351.6) Sale of investments held at fair value 1,395.6 1,397.5 (Gains)/losses on fair value investments 192.4 (807.6) Net cash inflow/(outflow) from operating activities before taxation and interest 5 7. 7 71.8 Company £ million 2022 2021 Profit/(loss) before dividend and interest income, finance costs and taxation (581.6) 849.0 Dividend income 7. 2 8.5 Interest income 9.8 2.2 Profit/(loss) before finance costs and taxation (564.6) 859.7 (Increase)/decrease in other receivables 1 7. 5 (157.5) Increase/(decrease) in other payables (89.7) 100.4 1 Other movements (20.0) 34.9 (Gains)/losses on borrowings (34.5) (12.6) Unrealised foreign exchange (gains)/losses on repayments and drawings of borrowings (5.2) 3.7 Purchase of investments held at fair value (883.8) (1,348.5) Sale of investments held at fair value 1,395.6 1,405.6 (Gains)/losses on fair value investments 192.4 (807.6) Net cash inflow/(outflow) from operating activities before taxation and interest 7. 7 78.1 1 Prior year realised foreign exchange (gains)/losses on repayments and drawings of borrowings of £0.6m have been re-presented within Other movements. Reconciliation of liabilities arising from financing activities: | | Non-cash | | | Net | | --- | --- | --- | --- | --- | | | changes in | | (drawdowns)/ | | | £ million 2021 | fair value | 1 | repayments 2022 | | Borrowings – current (240.0) (32.4) 36.2 (236.2) Borrowings – non-current (168.9) 34.5 – (134.4) Total (408.9) 2.1 36.2 (370.6) 1 Including currency translation. 84 Report and Accounts December 2022 RIT Capital Partners plc I n accordance with IFRS 10 the Company and Group holds the following subsidiaries at fair value at 31 December 2022: Name Principal place of business Ownership interest Spencer House Limited 1,5 England 100% RIT US Value Partnership LP 1,6 England 100% RIT Investments GP Limited 2,3,5 Scotland 100% J. Rothschild Capital Management US Inc 4,5 United States 100% RIT Investments US Inc 3,4,5 United States 100% RIT US Holdings LLP 3,4,6 United States 100% 1 Registered office and principal place of business: 27 St. James’s Place, London SW1A 1NR. 2 Registered office and principal place of business: 50 Lothian Road, Edinburgh EH3 9WJ. 3 Held indirectly. 4 Registered office: 251 Little Falls Drive, Wilmington, Delaware 19808, USA. 5 Ownership interest is ordinary shares. 6 Ownership interest is partnership capital. For all of the above the proportion of voting rights held is equivalent to the ownership interest. There are no significant restrictions arising from any contractual arrangements or regulatory requirements that would affect the ability of any of the above entities to transfer funds to or repay loans made by the Company. There are no other current commitments or contractual arrangements to provide financial support to any of the entities above other than in the normal course of business (e.g. funding of investment transactions/capital calls). The Company has not assisted any of the above entities in obtaining financial support in any way over the year. 30. Dividends 2022 Pence per share 2021 Pence per share 2022 £ million 2021 £ million Dividends paid in year 37.0 35.25 57.6 55.0 The above amounts were paid as distributions to equity holders of the Company in the relevant year from accumulated capital profits. On 28 February 2022 the Board declared a first interim dividend of 18.5 pence per share in respect of the year ended 31 December 2022 that was paid on 29 April 2022. A second interim dividend of 18.5 pence per share was declared by the Board on 1 August 2022 and paid on 28 October 2022. The Board declares the payment of a first interim dividend of 19 pence per share in respect of the year ending 31 December 2023. This will be paid on 28 April 2023 to shareholders on the register on 11 April 2023, and funded from the accumulated capital profits. | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Notes to the Financial Statements RIT Capital Partners plc Report and Accounts December 2022 85 32. Material investments and related undertakings Further information regarding investments is shown here. Disclosed below are the ten largest investments in the portfolio (excluding investments in non-consolidated subsidiaries) shown at fair value: As at 31 December 2022 £ million Attestor Value 148.6 HCIF Offshore 131.0 3D Opportunities 130.1 Tresidor Credit Opportunities 108.0 BlackRock Strategic Equity 97.1 ARCM IV 95.6 Springs Opportunities 92.7 Motive 76.2 RIT US Value Partnership 72.4 Caxton Dynamis 71. 8 Total 1,023.5 As at 31 December 2021 £ million Coupang 188.8 Eisler Capital 163.9 BlackRock Strategic Equity 143.8 Springs Opportunities 131.9 Attestor Value 130.8 HCIF Offshore 127.5 Ward Ferry Asian Smaller Companies 93.4 Iconiq Strategic Partners III 87.5 NE Fund (previously Lansdowne New Energy) 80.7 Sand Grove Tactical 76.1 Total 1,224.4 Further to the disclosures in Note 29 (Investments in subsidiary undertakings), the table on the following page shows a list of significant related undertakings of the Group as at 31 December 2022. For the investments shown the principal place of business is considered to be the place of registration and the proportion of voting rights held is considered to be the ownership interest. The Directors do not consider that any of the portfolio investments shown in the table on the following page fall within the definition of an associated company (aside from the entities noted below the table) as the Group does not exercise significant influence over their operating and financial policies as it is a passive investor. In a number of cases the Group owns more than 50% of a particular class of shares or partnership interest. The Group does not consider these holdings, although greater than 50%, provide control of the investee entities concerned as firstly the Group’s position as a passive investor in these entities acts as a substantive barrier to its exercising any power over the investee and secondly the nature of the Group’s holding does not give it the ability to direct the relevant activities of the investee because it does not control or participate in the governing bodies of these entities. Unconsolidated structured entities The Group holds interests in closed-ended limited partnerships which invest in underlying companies or securities for the purposes of capital appreciation. The Group, alongside the other limited partners, makes commitments to finance the investment programme of the relevant GP or manager, who may draw down this committed amount either upfront or over a period of years. The table below shows the Group’s carrying value of such investments and represents the maximum exposure to loss based on the Group’s contributions to date. £ million 2022 2021 Total 1 2,034 2,590 1 Included within Investments held at fair value. The list of significant related undertakings on page 86 is pursuant to the requirements of Companies Act 2006, Statutory Instrument 2015 No. 980 The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015, IFRS and the SORP. Disclosed on page 86 for the year ended 31 December 2022 are: • Entities classified as significant holdings (20% or greater interest in a class of shares or partnership); • Material investee undertakings in which the Group had an interest of over 3% of the allotted shares of any class; and • Material investment funds in which the Group had an interest of 10% or more in any class of share or unit. All the investments in the table on page 86 are held at FVPL. ## Notes to the Financial Statements ### 32. Material investments and related undertakings (continued) | Investment name | Place of registration | Registered address | Fair value £ million | % interest | | --- | --- | --- | --- | --- | | 1992 Co-Invest (Offshore) LP | Cayman Islands | PO Box 309, Ugland House, Grand Cayman, KY1-1104 | 26.6 | 49.7% | | Blumberg Capital I LP | Delaware, USA | 580 Howard Street, Suite 401, San Francisco, California 94105 | 5.4 | 56.1% | | BX-B Ribbit Opportunity IV, LLC | Delaware, USA | 1209 Orange Street, Wilmington, Delaware 19801 | 16.8 | 22.9% | | BX-C Ribbit Opportunity IV, LLC | Delaware, USA | 1209 Orange Street, Wilmington, Delaware 19801 | 1.8 | 29.2% | | Clay Point Investors SPV 9, LP | Delaware, USA | 651 N. Broad St., Suite 206, Middletown, Delaware 19709 | 4.1 | 58.1% | | Darwin Private Equity I LP | Scotland | 50 Lothian Road, Festival Square, Edinburgh EH3 9WJ | 0.8 | 23.9% | | Firebird New Russia Fund Ltd, Class A1 | Cayman Islands | PO Box 897, Windward 1, Grand Cayman KY1-1103 | 1.8 | 25.0% | | Fortress Credit Opportunities Fund (C) LP | Cayman Islands | Maples Corporate Services Limited, PO. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands | 1.1 | 33.3% | | ICQ Holdings 6 LLC | Delaware, USA | 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 | 39.7 | 100.0% | | Infinity SDC Ltd^{1} | England & Wales | 500-600 Witan Gate West, Milton Keynes MK9 1SH | 10.8 | 23.9% | | JRCM (London) LLP^{1} | England & Wales | 27 St James's Place, London SW1A 1NR | 0.0 | 50.0% | | Lansdowne NE Fund, Unhedged Non-Restricted absolute shares | Ireland | 32 Molesworth Street, Dublin 2 | 71.5 | 50.4% | | Media Technology Ventures IV LP | California, USA | 185 Berry Street, Suite 3600, San Francisco, California 94107 | 3.0 | 38.5% | | RR Capital Partners LP | Delaware, USA | One Maritime Plaza, Suite 2100, San Francisco, California 94111 | 0.3 | 20.5% | | Sand Grove Tactical Fund LP | Cayman Islands | PO Box 309, Ugland House, Grand Cayman, KY1-1104 | 63.1 | 100.0% | | Sand Grove UK Tactical Portfolio | Cayman Islands | PO Box 309, Ugland House, Grand Cayman, KY1-1104 | 46.5 | 100.0% | | Springs Global Strategic Partners Fund – Anchor Class | Ireland | 2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin 1 | 11.2 | 30.2% | | Springs Opportunities Fund LP Series A | Cayman Islands | 4th Floor, Willow House, Cricket Square, Grand Cayman KY1-9010 | 92.7 | 53.8% | | Tresidor Credit Opportunities Fund | Ireland | 2nd Floor, 2 Custom House Plaza, Harbourmaster Place, Dublin 1 | 81.9 | 100.0% | | Tribeca Global Natural Resources Feeder Fund Class A Participating Shares Unrestricted | Cayman Islands | 27 Hospital Road, George Town, Grand Cayman, KY1-9008 | 1.0 | 62.5% | | Xander Seleucus II LP | Cayman Islands | PO Box 309, Ugland House, Grand Cayman KY1-1104 | 0.5 | 41.9% | | Xander Seleucus LP | Cayman Islands | PO Box 309, Ugland House, Grand Cayman KY1-1104 | 0.0 | 43.3% | | Xander Seleucus Retail LP | Cayman Islands | PO Box 309, Ugland House, Grand Cayman KY1-1104 | 1.5 | 48.8% | $^{1}$ The Directors consider these entities, in which the Group holds ordinary shares, or limited partnership interests, as associated companies as the Group has significant influence due to circumstances particular to the investment. The Group has chosen to account for associated companies held for investment purposes at FVPL in accordance with IAS 28 Investments in Associates and Joint Ventures and IFRS 9 Financial Instruments. 86 Report and Accounts December 2022 RIT Capital Partners plc ## Independent Auditor’s Report RIT Capital Partners plc Report and Accounts December 2022 87 # Independent Auditor's Report to the Members of 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 31 December 2022 | | Consolidated Statement of Changes in Equity for the year to 31 December 2022 | Consolidated and Parent Company Cash Flow Statement for the year to 31 December 2022 | | Consolidated and Parent Company Cash Flow Statement for the year to 31 December 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. 88 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included: Obtaining an understanding of the Directors’ 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. RIT Capital Partners plc Report and Accounts December 2022 89 ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Overview of our audit approach Risk of inaccurate recognition of investment income and gains/(losses) on investments held at fair value. ### Key audit matters Risk of incorrect valuation of direct private and illiquid fund investments. This approach is consistent with the 2021 audit. 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 ### Audit scope 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. Overall Group materiality of £37.2 million which represents 1% of net assets. ### Materiality 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. 90 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc 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 We obtained an understanding of the Manager’s processes and controls gains/(losses) on investments held at fair value (losses of around the investment income process and valuation process to ascertain £536.4 million, 2021: gains of £914.5 million) whether realised and unrealised gains/(losses) and investment income are appropriately calculated by performing walkthroughs in which we evaluated Refer to the Audit and Risk Committee Report (pages 44 to the design and implementation of controls. 47); Accounting policies (pages 63 to 66); and Notes 2 and 3 of the Consolidated Financial Statements (page 67) For gains/(losses) on investments held at fair value, on a sample basis, wehave: The Group’s revenue consists of investment income and gains/(losses) on investments held at fair value. recalculated the unrealised gains/(losses), considering the procedures performed on the valuations where relevant; The accuracy of recognition and measurement of revenue is material to the Group’s financial statements. agreed purchases and sales of investments during the year to trade tickets, call and distributions notices, and to the corresponding cash Shareholder expectations may place pressure on the movements in bank statements; and Manager to influence the recognition of revenue. This may result in overstatement or deferral of revenues to assist in recalculated realised gains/(losses) from disposals in the year. meeting current or future targets or expectations. 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) oninvestments. All transactions tested have been materially recognised in accordance with contractual terms and UK-adopted international accountingstandards. Based on our procedures performed we have no further matters to report to the Audit and Risk Committee. RIT Capital Partners plc Report and Accounts December 2022 91 ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Risk Our response to the risk Risk of incorrect valuation of direct private and illiquid fund We obtained an understanding of the Manager’s processes and controls for investments (£2,262.6 million, 2021: £2,379.3 million) determining the fair valuation of direct private and illiquid fund investments by performing walkthroughs in which we evaluated the design and Refer to the Audit and Risk Committee Report (pages 44 to implementation of controls. This included reviewing the governance structure 47); Accounting policies (pages 63 to 66); and Note 13 of and protocols around oversight of the valuation process, including their the Consolidated Financial Statements (pages 71 to 79) oversight of the valuations performed by the underlying GPs and funds and corroborating our understanding by attending Valuation Committee meetings The Group’s investment portfolio includes both direct in an observational capacity. private and illiquid fund investments. We assessed the Manager’s valuation methodology against applicable Direct private investments reporting frameworks, including UK-adopted international accounting Of the direct private investments, £174.3 million of standards and the International Private Equity and Venture Capital (‘IPEV’) valuations were assessed directly by the Manager as at Guidelines. We sought explanations from the Manager where there were 31 December 2022. The valuations are determined by the judgments applied in its application of the guidelines and assessed their Manager and the final valuations are reviewed and approved appropriateness. by the Valuation Committee. Direct private investments The valuations are based on the nature of the underlying For the valuation of direct private investments assessed by the Manager, on business which has been invested in. The methods used a sample basis, we corroborated the key inputs into the valuation models and may include: performed procedures on key judgments made by the Manager, including: applying a multiple to earnings or revenues; challenging the appropriateness of assumptions made by the Manager in the application of the valuation models; using a discounted cash flow model; assessing the suitability of earnings multiples by considering the appropriateness of the selected comparable companies, including using recent transaction prices and recent offers; and adjustments made to reflect the differences between these and the assessing the movement in the market via listed investee company; comparable companies. 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. 92 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Risk Our response to the risk Illiquid fund investments (including GP-led direct private Illiquid fund investments (including GP-led direct private investments) investments) For the valuation of illiquid fund and GP-led direct private investments, on a The valuations of the illiquid funds and remaining direct sample basis, we: private investments, which are investments in private companies held by third-party managed special purpose confirmed the most recently available fund valuation to third party vehicles (‘GP-led direct private investments’), are material. statements, including from the GP, fund manager or fund administrator; The illiquid funds include investments that are classified assessed prior year valuations which were based on unaudited net asset by the Manager as ‘private investments – funds and statements by reference to their respective audited financial statements. absolute return and credit’. We have investigated and obtained explanations for all material The valuations are determined by the governing bodies movements; of the investment vehicles, typically including the obtained and assessed the due diligence performed by the Manager for fund managers, General Partners (‘GP’) and sponsors. The valuations can include significant estimates and new fund investments made in the year; and judgments, as they are often based on fair valuations where the most recently available fund valuation is not at the year of their underlying direct private investments, for which end date, we reviewed the Manager’s approach to address the timing there may be limited observable information available and difference and challenged any adjustments made to the last valuation uncertainty about future business performance. received. Where applicable, we corroborated these adjustments by The valuations are provided to the Group and assessed agreeing any cash flows between the date of the fund valuation and the by the Manager, who are afforded discretion to make Group’s year end valuation date to supporting documentation. any adjustments they deem appropriate, for example for For our sample, we also assessed the impact of contradictory evidence, to transactions between the date of the valuation provided ensure an appropriate valuation was determined. and the reporting date. 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. RIT Capital Partners plc Report and Accounts December 2022 93 # Independent Auditor’s Report to the Members of RIT Capital Partners plc ## Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. ## Materiality *The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.* We determined materiality for the Group to be £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.** 94 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Opinions on other matters prescribed by the Companies Act 2006 In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: the information given in the Strategic Report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and the Directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Corporate Governance Statement We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 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. RIT Capital Partners plc Report and Accounts December 2022 95 ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 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. 96 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Independent Auditor’s Report to the Members of ## RIT Capital Partners plc Other matters we are required to address We were appointed by the Parent Company on 26 April 2018 to audit the financial statements for the year ending 31 December 2018 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is 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. RIT Capital Partners plc Report and Accounts December 2022 97 ## Other Information ## 31 December 2022 ## (Unaudited) ## RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Investment Portfolio Reconciliation Investment portfolio reconciliation The following table shows a summary reconciliation between the amounts reported within the Investment Portfolio, as shown on pages 17 to 19, and the 31 December 2022 consolidated balance sheet, as shown on page 58: 31 December 2022 Absolute Net liquidity/ Consolidated Quoted Private return Real Other borrowing/ balance £ million equity investments and credit assets investments other 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 RIT Capital Partners plc Report and Accounts December 2022 99 # Glossary and Alternative Performance Measures ## Glossary Within this Annual Report and Accounts, we publish certain financial measures common to investment trusts. Where relevant, these are prepared in accordance with guidance from the AIC, and this glossary provides additional information in relation to them. **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 370 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. In accordance 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%). 100 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Glossary and Alternative Performance Measures Premium/discount: The premium or discount (or rating) is calculated by taking the closing share price on 31 December 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. RIT Capital Partners plc Report and Accounts December 2022 101 # Historical Information and Financial Calendar ## 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 | 117.0 | (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) | 17.2 | 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 | 17.5 | 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 31 March 2000, all convertible stock had been converted or redeemed. 3. Dividends per share represent the amounts paid in the relevant financial year or period. 4. Since 31 March 2005 the closing share price has been displayed to the nearest pence and from 31 December 2016 the diluted net assets per share has been disclosed to the nearest pence. ## Financial Calendar: 26 April 2023, 12:00pm: Annual General Meeting. 28 April 2023: Payment of interim dividend. 102 Report and Accounts December 2022 RIT Capital Partners plc | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | ## Investor Information Share price information The Company’s £1 ordinary shares are listed on the London Stock Exchange and may be identified using the following codes: TIDM: 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. RIT Capital Partners plc Report and Accounts December 2022 103 ## Directory MANAGER, ADMINISTRATOR, COMPANY SECRETARY AND REGISTERED OFFICE J. Rothschild Capital Management Limited 27 St. James’s Place London SW1A 1NR INDEPENDENT AUDITOR Ernst & Young LLP 25 Churchill Place London E14 5EY SOLICITOR Linklaters LLP One Silk Street London EC2Y 8HQ BROKERS JP Morgan Cazenove Limited 25 Bank Street London E14 5JP Numis Securities Limited 45 Gresham Street London EC2V 7BF ADVISER TO THE REMUNERATION COMMITTEE Alvarez & Marsal Park House 16-18 Finsbury Circus London EC2M 7EB CUSTODIAN AND DEPOSITARY BNP Paribas 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 104 Report and Accounts December 2022 RIT Capital Partners plc ### 27 St. James’s Place London SW1A 1NR