Annual Financial Report

RNS Number : 1110D

RIT Capital Partners PLC

01 March 2022

 

Please click here to view the Company's Report and Accounts http://www.rns-pdf.londonstockexchange.com/rns/1110D_1-2022-2-28.pdf

1 March 2022

RIT Capital Partners plc

Results for the year ended 31 December 2021

RIT Capital Partners plc today published its results for the year ended 31 December 2021.

Financial Highlights:

·	Net Asset Value per share (NAV) total return of 23.6% for the year
·	NAV per share of 2,794 pence at 31 December 2021
·	Significant outperformance of both reference hurdles - absolute and relative
·	Growth in net assets in 2021 of ~£855 million (before dividends)
·	Total net assets stood at ~£4.4 billion at year end; a new all-time high
·	Share price ended the year at 2,750 pence, representing a TSR of 35.1%

Performance Highlights:

·	For the second consecutive year, the portfolio generated meaningful outperformance of both its reference hurdles
·	2021 saw the strongest shareholder return for almost twenty years
·	Moderate net quoted equity exposure averaging 43% over the year
·	Outperformance was achieved through a diversified approach to portfolio construction with core categories contributing to performance
·	Exceptional performance from the private investments book, including gains across investments that focused on the digital transition
·	The non-equity 'diversifiers' played an important role, including healthy returns from the absolute return and credit portfolio which had low correlation to markets
·	Positive contribution from the quoted equity book led by holdings which benefited from a reflationary environment, though China and biotech funds gave back some of their stellar returns of 2020
·	Active currency management provided some shelter in the face of stronger trade-weighted sterling

Dividends and Buybacks:

·	Dividends paid in April and October 2021 totalling 35.25 pence per share
·	The Board intends to pay a dividend of 37 pence per share in 2022 in two equal instalments, in April and October. This represents an increase of 5.0% over the previous year
·	Over the year, the Company continued to buy back shares, seeking to minimise volatility for shareholders

Summary:

·	This year marked the tenth consecutive year of positive returns for the portfolio
·	Over the past five years, the NAV total return was 75.8%, delivering equity-type returns with less risk than the ACWI. Such performance was achieved with significantly less volatility and moderate net quoted equity exposure of 43%
·	Over the same five years, RIT's net assets have grown by almost £2 billion (before dividends)
·	Since inception, RIT's NAV has now participated in 74% of market upside but only 38% of market declines
·	Over the same period, the total shareholder return has compounded at 12.4% per annum compared to the ACWI of 7.8%
·	£10,000 invested in RIT at inception in 1988 would be worth £494,000 today (with dividends reinvested) compared to the same amount invested in the ACWI which would be worth £119,000

Commenting, Sir James Leigh-Pemberton, Chairman of RIT Capital Partners plc, said:

" I am pleased to report very healthy performance and strong shareholder returns. Our net asset value per share ended the year at 2,794 pence, representing a total return for the year (including dividends) of 23.6%. At the same time our share price closed at 2,750 pence, providing a total return to shareholders of 35.1% ...

Once again, however, the headline performance of the indices masked a difficult environment for global asset managers, with a widespread dispersion of returns among the components of the indices, and more broadly across regions, sectors and asset classes. Notably emerging market equities saw more mixed performance, with regulatory tightening in China weighing on markets there. Government bonds, one of the key components of the traditional 'balanced portfolio', also struggled in 2021, with US and UK bonds both posting negative returns for the first time since 2013.

Your Company's portfolio is deliberately exposed to a range of asset classes, with a view to protecting shareholders' capital from the worst of market declines while capturing a healthy share of the performance in rising markets. I am therefore delighted with our portfolio's return in 2021. A 23.6% NAV return is above our typical participation in short-term market rises …

This performance has been achieved with all the core categories contributing. Among our well-established themes, the stand-out contributor was the exposure to innovative companies, which we have chosen to express through our private investment portfolio …

We believe that the techniques used by JRCM to build and manage a portfolio which aims to deliver the corporate objective in a range of market conditions, have a proven track record of success. This portfolio composition, with its diversified themes, combined with global access to investment opportunities and managers (many closed to new investment), is at the heart of our strategy and is what makes RIT different from many multi-asset managers. In recent years, strong contributions from, at different times, quoted equities (stocks and funds), currency and private investments, have illustrated some of the benefits of our diversified approach …

The permanent structure of an investment trust is also a privileged feature, which we proactively aim to capitalise upon for the benefit of shareholders. It allows us to take full advantage of our flexible investment policy, by targeting opportunities across the investment landscape, without the pressure of meeting investor redemptions or being forced to sell investments for external reasons when we would rather keep them …

Once again, I must thank all our employees and my Board colleagues for their commitment and sustained efforts throughout a year which has been no less challenging than 2020 … Thanks to the commitment, dedication and flexibility of the team, our culture of performance, collaboration and mutual support remains in good health. "

Commenting, Francesco Goedhuis, Chairman and Chief Executive Officer of the Company's Manager, J. Rothschild Capital Management Limited (JRCM), and Ron Tabbouche, Chief Investment Officer of JRCM, said:

" According to research published by Goldman Sachs, more than 80% of mutual funds underperformed over the year. We are therefore pleased with the performance over 2021, with a NAV total return of 23.6% outperforming both of our reference hurdles: our 'inflation plus' hurdle (RPI plus 3.0%) which measured 10.5%, and our fully-invested equity index (ACWI) which returned 20.0%. This year marked the tenth consecutive year of positive returns for the portfolio …

As we write this in early 2022, our focus is, as always, on ensuring that the portfolio is positioned as well as it can be for the range of possible market outcomes that may lie ahead. 

Ending 2021 with a shifting monetary policy, ebullient sentiment, and full valuations in some areas, we expect short-term volatility, particularly in high-growth sectors. While markets often appear relatively immune to geopolitical risks, these of course also remain …

At times like this, we approach every new investment with caution - being selective in our allocations to those investments we feel offer appropriate margins of safety, and passing on those which don't. It is a time when the importance of our portfolio construction cannot be overstated. We will continue to try to balance our portfolio carefully to ensure that the themes and risks are appropriately weighted and reflected in the NAV …

Whatever the underlying cause, volatility can often feel uncomfortable, but the flip side is that if markets react indiscriminately, this can also provide opportunities. Ultimately our long-standing approach, blending conviction and diversification, will continue to drive how we manage the portfolio to seek the best long-term, risk‑adjusted returns for our shareholders. "

ENQUIRIES:

Brunswick Group LLP:

Tom Burns: [phone]

About RIT Capital Partners plc:

RIT Capital Partners plc is an investment company listed on the London Stock Exchange.  Its net assets have grown from £280 million on listing in 1988 to ~£4.4 billion at year end. Lord Rothschild and his immediate family interests retain a significant holding.

www.ritcap.com

A description of all terms used above, including further information on the calculation of Alternative Performance Measures (APMs) is set out in the Glossary and APMs section at the end of this RNS.

The following is extracted from the Company's Report and Accounts

COMPANY HIGHLIGHTS

Performance for the year	2021
NAV per share total return*	23.6%
Share price total return*	35.1%
RPI plus 3.0%	10.5%
MSCI All Country World Index	20.0%

Key data+	2021		2020		Change
NAV per share	2,794 pence		2,292 pence		21.9%
Share price	2,750 pence		2,065 pence		33.2%
Premium/(discount)	-1.6%		-9.9%		8.3% pts
Net assets	£4,390 million		£3,590 million		22.3%
Gearing*	6.1%		4.4%		1.7% pts
Average net quoted equity exposure	43%		43%		0% pts
Ongoing charges figure for the year*	0.72%		0.66%		0.06% pts
First interim dividend (April)	17.625 pence		17.5 pence		0.7%
Second interim dividend (October)	17.625 pence		17.5 pence		0.7%
Total dividend in year	35.250 pence		35.0 pence		0.7%

⁺ 31 December unless otherwise stated.

Performance history	3 Years	5 Years	10 Years
NAV per share total return*	61.1%	75.8%	191.4%
Share price total return*	51.4%	58.6%	171.6%
RPI plus 3.0% per annum	21.2%	37.2%	76.9%
MSCI All Country World Index (ACWI)	66.2%	80.2%	232.8%

A description of the terms used in this RNS is set out in the Glossary and Alternative Performance Measures (APMs) section below. The Group's designated APMs, denoted above with a *, are the NAV per share total return, share price total return, gearing and the ongoing charges figure.

CHAIRMAN'S STATEMENT

Performance

After another eventful year, I am pleased to report very healthy performance and strong shareholder returns. Our net asset value per share ended the year at 2,794 pence, representing a total return for the year (including dividends) of 23.6%. At the same time our share price closed at 2,750 pence, providing a total return to shareholders of 35.1%.

In spite of the Delta and Omicron variants, energy price rises and wider inflation concerns, developed equity markets posted good gains in 2021. Once again, however, the headline performance of the indices masked a difficult environment for global asset managers, with a widespread dispersion of returns among the components of the indices, and more broadly across regions, sectors and asset classes. Notably emerging market equities saw more mixed performance, with regulatory tightening in China weighing on markets there. Government bonds, one of the key components of the traditional 'balanced portfolio', also struggled in 2021, with US and UK bonds both posting negative returns for the first time since 2013.

Your Company's portfolio is deliberately exposed to a range of asset classes, with a view to protecting shareholders' capital from the worst of market declines while capturing a healthy share of the performance in rising markets. I am therefore delighted with our portfolio's return in 2021. A 23.6% NAV return is above our typical participation in short-term market rises, outperforming the broad equity index we reference (the MSCI ACWI), which returned 20.0%. We also outperformed our inflation measure (RPI+3.0%), which totalled 10.5%.

This performance has been achieved with all the core categories contributing. Among our well-established themes, the stand-out contributor was the exposure to innovative companies, which we have chosen to express through our private investment portfolio. Valuations in unlisted technology stocks rose strongly during the year, with multiples expanding and funding readily available, even at demanding valuations, to finance these companies' continued growth. On the other hand, our China and biotech exposures, predominantly within our quoted equity portfolio, had a more difficult year, after a strong 2020. The quoted equity return was helped by an increased focus on value equities, which benefited from the reflationary trend seen in markets. Our absolute return and credit performed well, delivering steady returns with limited correlation to stock markets. The NAV was also reasonably well protected from the meaningful rise in trade-weighted sterling, by focusing our currency mix almost exclusively on the strong US dollar and sterling, and avoiding exposure to the depreciating euro and yen.

In the course of the year, your Board has continued to keep our corporate objective and the strategy to achieve it under review. We believe that one of RIT's differentiating features is that, unlike many asset managers with a diversified multi-asset portfolio of investments, we have only one 'product' - RIT shares. This provides us with a purity of focus in the creation and execution of our strategy. JRCM is not incentivised to engage in 'asset gathering'; rather the team is intent on NAV performance above all else, and delivering this growth over the long term, while protecting the value of shareholders' capital. This approach is simple to express, but not easy to achieve consistently over the long term.

The approach we therefore follow has to be a sophisticated one. We believe that the techniques used by JRCM to build and manage a portfolio which aims to deliver the corporate objective in a range of market conditions, have a proven track record of success. This portfolio composition, with its diversified themes, combined with global access to investment opportunities and managers (many closed to new investment), is at the heart of our strategy and is what makes RIT different from many multi-asset managers. In recent years, strong contributions from, at different times, quoted equities (stocks and funds), currency and private investments, have illustrated some of the benefits of our diversified approach. Our Manager blends fundamental discipline at the individual investment level, with a top-down approach, while keeping a strong focus on risk management including using various hedging strategies. For example, the relatively high weighting to technology within our private book was balanced with a conscious de-emphasis of such exposure in our quoted portfolio. All this means that RIT is very different to a conventional fund.

The permanent structure of an investment trust is also a privileged feature, which we proactively aim to capitalise upon for the benefit of shareholders. It allows us to take full advantage of our flexible investment policy, by targeting opportunities across the investment landscape, without the pressure of meeting investor redemptions or being forced to sell investments for external reasons when we would rather keep them. This enables us, for example, to allocate a reasonable proportion of the portfolio to access attractive investments through illiquid private markets. Indeed, these have been a hallmark of our approach since RIT's inception, and a key contributor to our performance record; this was certainly so in 2021, when private investments were the best performing of our main asset categories.

Share capital and dividend

We continued our approach of seeking to minimise volatility for shareholders in buying back shares as we approached a high single-digit discount. Over the year, we bought back some 59,000 shares at a cost of £1.4 million and by the year end, we held 175,000 shares in treasury.

Our corporate objective is to deliver long-term capital growth. However, we recognise the value to shareholders of a modest income yield; our policy remains to maintain or increase the dividend, subject to the overriding capital preservation objective. We paid a total dividend of 35.25 pence per share during 2021 and intend to increase the dividend again in 2022 to 37 pence per share. This represents a 5.0% increase, reflecting inflation as well as strong performance in 2021. The dividend will be paid as normal in equal instalments in April and October, funded from our significant reserves.

Governance

I highlighted in August our support for greater diversity on boards, and we are committed to following the recommendations of the Hampton-Alexander Review in terms of gender diversity and the Parker Review in terms of ethnicity. At the year end, your Board comprised eight Directors, of which three were female. Our searches during 2022 will be focused on ensuring future appointments are aligned with these recommendations.

In a challenging year for many, it was perhaps understandable, though with regret, that we said goodbye to two non-executive Directors. Both Jeremy Sillem and Jonathan Sorrell stepped down from the Board on 4 November as a result of the increased demands of their executive roles. I would like to, again, thank Jeremy and Jonathan for their significant contributions to your Company. Amy Stirling has also indicated that she will not be standing for re-election at the forthcoming AGM having taken on a new role as CFO of Hargreaves Lansdown plc from 21 February 2022. Amy has been an outstanding chair of our Audit & Risk Committee for almost four years and a valued colleague throughout her seven-year tenure on our Board. We wish her every success in her new role. Mike Power will take on the role of Chair of the Audit & Risk Committee until the end of 2022. We expect to appoint a successor to Amy by the second quarter of 2022, allowing time for a full handover before Mike steps down from the Board in early 2023.

Over the year, your Board invested a significant amount of time in working with our manager to enhance our ESG capabilities and ensure that appropriate policies are in place. This led to the publication of JRCM's Responsible Investment Framework & Policy during the year, a copy of which is available on your Company's website. This policy explains how we have sought to align our commitment to responsible investing with our long-standing corporate objective, taking into consideration the way we invest and the nature of our investment portfolio. It builds on our Manager becoming a signatory to the UN Principles of Responsible Investment (UN PRI) at the beginning of 2021, and we will continue to develop and refine our approach over time.

Once again, I must thank all our employees and my Board colleagues for their commitment and sustained efforts throughout a year which has been no less challenging than 2020. The rapidly changing dynamics of the Covid pandemic and associated government response created ongoing uncertainty, in addition to the continuing challenges of remote working, home schooling and isolation which colleagues and their families have had to face during the year. Thanks to the commitment, dedication and flexibility of the team, our culture of performance, collaboration and mutual support remains in good health. We are grateful too to our business and trading counterparties, our advisors and all our service providers for the way they coped with similar challenges and for their continued co-operation. It is the combined effort of colleagues and suppliers which generates the investment performance that our shareholders enjoy.

Outlook

As I write this in early 2022, after another successive year of positive returns for world equity markets with the S&P 500 having more than doubled since its March 2020 lows, it feels like a good time to draw breath. The latter part of 2021 and the early weeks of 2022 have seen the risks of sustained and sharply higher rates of inflation move central banks to a more hawkish stance in relation to future interest rate rises and tapering asset purchases. These moves suggest that the extraordinary underpins for long-term asset prices of recent years are shifting. If we are now seeing the beginning of the end of excessively 'easy' monetary conditions, we can expect a broad range of markets and asset classes to be affected. These may include the hitherto buoyant funding market for high growth unlisted companies and 'frothy' valuations in certain market areas, along with other asset classes whose high valuations have been justified by continued low discount rates. In addition, profitability is likely to be affected by rising costs of labour, energy and other raw materials. This set of circumstances presents a challenging environment, but also opportunities, for managers of multi-asset portfolios.

Our response to these concerns will be familiar to shareholders. We will continue to be cautious in our approach to managing the many market risks facing us and the composition of the portfolio will reflect the priority we place on seeking to protect shareholders' capital from the full impact of market drawdowns. With the advantage of permanent capital, we are not under pressure to make investments, and our manager regularly declines investment opportunities which, despite promising good returns, do not offer the requisite margins of safety. With turbulent times ahead, this diversified and disciplined approach will be essential to fulfil our objective of long-term capital growth while keeping a strong eye on capital preservation.

Sir James Leigh-Pemberton

Chairman
28 February 2022

MANAGER'S REPORT - EXTRACTS

Overview and performance highlights

Amidst soaring energy prices, disruption to global supply chains, historically high inflation, an increasing focus on interest rate rises, ongoing geopolitical tensions, and an ever changing global pandemic, developed market equity indices finished the year apparently immune to any concerns. An unusual combination of US mega-cap technology stocks alongside previously 'out of favour' cyclicals, led developed market gains. Emerging markets fared significantly worse, largely driven by China's regulatory interventions.

Inflation driven pressure on central banks continued to build and in December, after years at near zero, the Bank of England defied most expectations to raise interest rates to 0.25%, with analysts expecting the Federal Reserve to follow suit in 2022. As a result, US and UK government bonds suffered their first annual losses since 2013.

In the currency markets, with the Federal Reserve and Bank of England both shifting gears from stimulating the economy to curbing rising inflation, sterling and the dollar saw decent gains, whereas the euro and yen saw broad declines.

As a global asset manager, and with a flexible policy allowing us to deploy capital across a range of asset types, this was a challenging background. According to research published by Goldman Sachs, more than 80% of mutual funds underperformed over the year. We are therefore pleased with the performance over 2021, with a NAV total return of 23.6% outperforming both of our reference hurdles: our 'inflation plus' hurdle (RPI plus 3.0%) which measured 10.5%, and our fully-invested equity index (ACWI) which returned 20.0%. This year marked the tenth consecutive year of positive returns for the portfolio.

Overall, the key drivers of performance for the year were:
 

·	exceptional performance from our private investments, including Coupang's IPO and more widespread gains across investments that focused on the digital transition;
·	absolute return and credit delivered healthy returns with low correlation to equity markets; distressed credit managers in particular performed well;
·	positive contribution from our quoted equity book, though the overall return was impacted by two of our key areas of focus, China and biotech, which underperformed in 2021 after a strong 2020; and
·	active currency management provided some shelter in the face of stronger trade-weighted sterling.

In terms of asset allocation, the levels of net quoted equity exposure remained moderate, averaging 43% for the year while the exposure to private investments has increased to 36.5%, mainly through strong organic performance. Within absolute return and credit, we took the opportunity to decrease some of our corporate credit exposure following healthy gains. We actively managed our sterling levels over the year, increasing our exposure to the US dollar after sterling's rise in the first quarter, in anticipation of a more hawkish Federal Reserve, then increasing our sterling exposure in the latter part of the year - providing some protection from its increase.

Asset allocation and portfolio contribution

	31 December 2021	2021	31 December 2020	2020
Asset category	% NAV	Contribution %	% NAV	Contribution %
Quoted equity	42.6%	1.2%1	48.4%	6.4%1
Private investments	36.5%	22.4%	25.6%	9.8%
Absolute return and credit	17.7%	2.1%	22.5%	2.5%
Real assets	1.5%	(0.1%)	2.0%	0.5%
Government bonds and rates	0.0%	0.3%	0.0%	(0.1%)
Currency	0.5%	(0.8%)2	1.2%	(0.6%)2
Total investments	98.8%	25.1%	99.7%	18.5%
Liquidity, borrowings and other	1.2%	(1.5%)3	0.3%	(2.1%)3
Total	100.0%	23.6%	100.0%	16.4%
Average net quoted equity exposure1	43%		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.

Currency exposure as % of NAV ¹

		31 December 2021 % NAV	31 December 2020 % NAV
US dollar		19%	18%
Sterling		69%	59%
Euro		0%	3%
Japanese yen		3%	6%
Other		9%	14%
Total		100%	100%

1	This table excludes exposure from currency options. Where available, the exposures in this table are estimated by considering the underlying currency exposure of third-party funds rather than by the fund's currency of denomination.

Outlook

As we write this in early 2022, our focus is, as always, on ensuring that the portfolio is positioned as well as it can be for the range of possible market outcomes that may lie ahead.

Ending 2021 with a shifting monetary policy, ebullient sentiment, and full valuations in some areas, we expect short-term volatility, particularly in high-growth sectors. While markets often appear relatively immune to geopolitical risks, these of course also remain.

At times like this, we approach every new investment with caution - being selective in our allocations to those investments we feel offer appropriate margins of safety, and passing on those which don't. It is a time when the importance of our portfolio construction cannot be overstated. We will continue to try to balance our portfolio carefully to ensure that the themes and risks are appropriately weighted and reflected in the NAV. We started 2022 with a relatively modest quoted equity exposure of around 40%. Within the equity book, we retain a blend of structural themes, including China and biotech, as well as positions we believe will benefit from higher interest rates and higher nominal GDP.

Whatever the underlying cause, volatility can often feel uncomfortable, but the flip side is that if markets react indiscriminately, this can also provide opportunities. Ultimately our long-standing approach, blending conviction and diversification, will continue to drive how we manage the portfolio to seek the best long-term, risk ‑ adjusted returns for our shareholders.

Francesco Goedhuis Chairman and Chief Executive Officer J. Rothschild Capital Management Limited

Ron Tabbouche Chief Investment Officer J. Rothschild Capital Management Limited

PRINCIPAL RISKS - EXTRACT

Risk management and internal control

The principal risks facing RIT are both financial and operational. The ongoing process for identifying, evaluating and managing these risks, as well as any emerging risks, is the ultimate responsibility of the Board and the Audit and Risk Committee. Day-to-day management is undertaken by JRCM within parameters set by the Board.

As an investment company, RIT is exposed to financial risks inherent in its portfolio, which are primarily market-related and common to any portfolio with significant exposure to equities and other financial assets. The ongoing portfolio and risk management includes an assessment of the macroeconomic and geopolitical factors that can influence market risk, as well as consideration of investment-specific risk factors.

Your Company's broad and flexible investment mandate allows the Manager to take a relatively unconstrained approach to asset allocation and utilise whatever action is considered appropriate in mitigating any attendant risks to the portfolio.

As further discussed in the Manager's Report, while developed markets ended the year strongly, there was once again, sustained levels of volatility during the year and a wide divergence between sectors and regions. With the ongoing impact of the pandemic, Chinese regulatory tightening and inflation, the challenges facing a global asset allocator were significant. US and UK government bonds lost money for the first time in eight years. As such, once again, risk management remained critical. The portfolio risk management approach undertaken by the Manager, and considered regularly by the Board, is designed to produce a healthy risk-adjusted return over the long term, through careful portfolio construction, security selection and the considered use of hedging. Part of this approach is to emphasise or de-tune parts of the portfolio to compensate for risk in other areas. For example, with a decision to deploy capital to the technology transition theme through the private portfolio, the exposure to this theme within the quoted equity book was deliberately smaller. Equally the deployment of hedges, whether to manage currency translation risk, or to reduce exposure to particular companies or sectors, was an important part of protecting the returns over the year.

As a permanent capital vehicle, and unlike open-ended funds, we do not need to manage the portfolio to meet redemptions. With sizeable assets relative to our modest borrowings and ongoing liabilities, as confirmed later in this section, we do not consider the Company's viability or going concern to represent principal risks. Nevertheless, and in particular at times of market stress, the Manager utilises a detailed, day-to-day liquidity risk management framework to help effectively manage the balance sheet, including careful monitoring of the banking covenants.

The Board sets the portfolio risk parameters within which JRCM operates. This involves an assessment of the nature and level of risk within the portfolio using qualitative and quantitative methods. Additional information in relation to market risk, liquidity risk and credit risk in accordance with IFRS 7 Financial Instruments.

From an operational risk point of view, the ongoing changes in the pandemic and the associated governmental response, saw an ever-changing transition between office-based and remote working. Employee health and safety was always central to our Manager's approach, ensuring staff received appropriate support, guidance and communication throughout the year. The professional and resilient response by employees once again allowed the business to continue uninterrupted, with all of the key processes and controls followed, irrespective of the working environment.

Climate-related risks, as well as ESG factors more widely, are continuing to be key influencers of shareholder and government behaviour as well as corporate activity. While the risks associated with climate change will continue to impact a number of our existing risk categories, we consider the importance of the risk and the expectations it places in relation to reporting, are such that we now classify it as a specific principal risk.

Operational risks more generally include those related to the legal environment, regulation, taxation, information security and other areas where internal or external factors could result in financial or reputational loss. These are also managed by JRCM with regular reporting to, and review by, the Audit and Risk Committee and the Board.

The Board is ultimately responsible for the Group's system of internal controls and it has delegated the supervision of the system to the Audit and Risk Committee. Such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives and, as such, can provide only reasonable and not absolute assurance against any material misstatement or loss.

Principal risks

The Board has carried out a robust assessment of the emerging and principal risks facing the Company, concluding that the principal risks are as described below:

Risk	Mitigation
Investment strategy risk As an investment company, a key risk is that the investment strategy, guided by the Investment Policy: "To invest in a widely diversified, international portfolio across a range of asset classes, both quoted and unquoted; to allocate part of the portfolio to exceptional managers in order to ensure access to the best external talent available." does not deliver the Corporate Objective: "To deliver long-term capital growth, while preserving shareholders' capital; to invest without the constraints of a formal benchmark, but to deliver for shareholders increases in capital value in excess of the relevant indices over time."	The Board is responsible for monitoring the investment strategy to ensure it is consistent with the Investment Policy and appropriate to meet the Corporate Objective. The Directors receive a detailed monthly report from the Manager to enable them to monitor investment performance, attribution and exposure. They also receive a comprehensive investment report from the JRCM CIO in advance of the quarterly Board meetings. In response to the Covid-19 pandemic, the Board and Audit and Risk Committee continued to monitor the impact on the investment portfolio and the Manager's operations, and ensuring that appropriate measures were in place. The overall risk appetite is set by the Board, with portfolio risk managed by JRCM within prescribed limits. This involves careful assessment of the nature and level of risk within the portfolio using qualitative and quantitative methods. The JRCM Investment Committee meets regularly to review overall investment performance, portfolio exposure and significant new investments.
Market risk Price risk RIT invests in a number of asset categories including stocks, equity funds, private investments, absolute return and credit, real assets, government bonds and derivatives. The portfolio is therefore exposed to the risk that the fair value of these investments will fluctuate because of changes in market prices. Currency risk Consistent with the Investment Policy, the Group invests globally in assets denominated in currencies other than sterling as well as adjusting currency exposure to either seek to hedge and/or enhance returns. This approach exposes the portfolio to currency risk as a result of changes in exchange rates. Interest rate risk In addition, the Group is exposed to the direct and indirect impact of changes in interest rates.	The Group has a widely diversified investment portfolio which significantly reduces the exposure to individual asset price risk. Detailed portfolio valuations and exposure analysis are prepared regularly, and form the basis for the ongoing risk management and investment decisions. In addition, regular scenario analysis is undertaken to assess likely downside risks and sensitivity to broad market changes, as well as assessing the underlying correlations amongst the separate asset classes. Exposure management is undertaken with a variety of techniques including using equity index and interest rate futures and options to hedge or to increase equity and interest rate exposure depending on overall macroeconomic and market views.   Currency exposure is managed via an overlay strategy, typically using a combination of currency forwards and/or options to adjust the natural currency of the investments in order to achieve a desired net exposure. The geographic revenue breakdown for stocks as well as correlations with other asset classes are also considered as part of our hedging strategy.
Liquidity risk Liquidity risk is the risk that the Group will have difficulty in meeting its obligations in respect of financial liabilities as they fall due. The Group has significant investments in and commitments to direct private investments and funds which are inherently illiquid. In addition, the Group holds investments with other third-party organisations which may require notice periods in order to be realised. Capital commitments could, in theory, be drawn with minimal notice. In addition, the Group may be required to provide additional margin to support derivative financial instruments.	The Group manages its liquid resources to ensure sufficient cash is available to meet its expected needs. It monitors the level of short-term funding, and balances the need for access to such funding and liquidity, with the long-term funding needs of the Group, and the desire to achieve investment returns. Covenants embedded within the banking facilities and long-term notes are monitored on an ongoing basis for compliance, and form part of the regular stress tests. In addition, existing cash reserves, as well as the significant liquidity that could be realised from the sale or redemption of portfolio investments and undrawn, committed borrowings, could all be utilised to meet short-term funding requirements if necessary. As a closed-ended company, there is no requirement to maintain liquidity to service investor redemptions. The Depositary, BNP Paribas Securities Services (BNP) has separate responsibilities in monitoring the Company's cash flow.
Credit risk Credit risk is the risk that a counterparty to a financial instrument held by the Group will fail to meet an obligation which could result in a loss to the Group. Certain investments held within the absolute return and credit portfolio are exposed to credit risk, including in relation to underlying positions held by funds. Substantially all of the listed portfolio investments capable of being held in safe custody, are held by BNP as custodian and depositary. Bankruptcy or insolvency of BNP may cause the Group's rights with respect to securities held by BNP to be delayed.   Unrealised profit on derivative financial instruments held by counterparties is potentially exposed to credit risk in the event of the insolvency of a broker counterparty.	The majority of the exposure to credit risk within the absolute return and credit portfolio is indirect exposure as a result of positions held within funds managed externally. These are typically diversified portfolios monitored by the third-party managers themselves, as well as through JRCM's ongoing portfolio management oversight. Listed transactions are settled on a delivery versus payment basis using a wide pool of brokers. Cash holdings and margin balances are also divided between a number of different financial institutions, whose credit ratings are regularly monitored. All assets held directly by the custodian are in fully segregated client accounts. Other than where local market regulations do not permit it, these accounts are designated in RIT's name. The custodian's most recent credit rating was A+ from Standard & Poor's (S&P).
Key person dependency In common with other investment trusts, investment decisions are the responsibility of a small number of key individuals within the Manager. If for any reason the services of these individuals were to become unavailable, there could be a significant impact on our business.	This risk is closely monitored by the Board, through its oversight of the Manager's incentive schemes (on which it has received external advice) as well as the succession plans for key individuals. The potential impact is also reduced by an experienced Board of Directors, with distinguished backgrounds in financial services and business. The retirement of the Manager's COO will see the CFO become CFOO, in line with existing succession plans, and supported by an experienced team.
Climate-related risks Ongoing climate changes may impact either our own business, the external managers with whom we invest, and/ or the underlying portfolio investments. For our own business this could result in increased costs of complying with new regulations and/or changes to the way we operate. Portfolio companies could see demand pressures, an increased cost of capital, tighter regulation or increased taxation, all impacting profitability. Our ability to make climate-change disclosures may be impacted by our investment approach if the external fund managers with whom we invest do not provide the desired information.   More frequent extreme weather could disrupt businesses, travel, global supply chains and profitability.	We do not consider climate-related risks have material, specific impacts on our own asset management businesses as distinct from the investment portfolio. Our Manager continues to monitor, and minimise, the climate-related impacts of our internal operations; we offset the carbon emissions of this business - categorised as Scope 1 and Scope 2 emissions by the Greenhouse Gas (GHG) Protocol - through participation in an accredited scheme and we are taking steps to further develop our understanding of our indirect emissions impact (categorised as Scope 3 emissions). JRCM is a signatory to the UN PRI, and the Board worked with our Manager over 2021 to develop JRCM's Responsible Investment Framework & Policy, which incorporates environmental factors into our investment approach. This allows us to consider the potential wider impacts of climate change risks to our investments. JRCM is working with an external adviser to consider our ability to make additional climate-disclosures in relation to our investment portfolio. We monitor developments in regulation and disclosures and seek as far as possible to prepare for future changes. The Group's adoption of fair value in relation to its investments, means that the climate-related risks recognised by market participants are incorporated in the valuations.
Legal and regulatory risk As an investment trust, RIT's operations are subject to wide ranging laws and regulations including in relation to the Listing Rules and Disclosure, Guidance and Transparency Rules of the FCA's Primary Markets function, the Companies Act 2006, corporate governance codes, as well as continued compliance with relevant tax legislation including ongoing compliance with the rules for investment trusts. JRCM is authorised and regulated by the FCA and acts as Alternative Investment Fund Manager. The financial services sector continues to experience regulatory change at national and international levels, including in relation to climate change. Failure to act in accordance with these laws and regulations could result in fines, censure or other losses including taxation or reputational loss. Co-investments and other arrangements with related parties may result in conflicts of interest.	The Operational Risk Committee of JRCM provides oversight of all legal, regulatory and other operational risks across the Group. This Committee reports key findings to the JRCM Executive Committee and the Audit and Risk Committee. JRCM employs a general counsel and a compliance officer as well as other personnel with experience of legal, regulatory, disclosure and taxation matters. In addition, specialist external advisers are engaged in relation to complex, sensitive or emerging matters. For example, during 2021 the Group again engaged external advisers in supporting its consideration of ESG matters. Where necessary, co-investments and other transactions are subject to review by the Conflicts Committee and/or the FCA.
Operational risk Operational risks are those arising from inadequate or failed processes, people and systems or other external factors. Key operational risks include reliance on third-party managers and suppliers, dealing errors, processing failures, pricing or valuation errors, fraud, reliability of core systems and IT security issues.	Systems and control procedures are the subject of continued development and regular review. During the year the Audit and Risk Committee reviewed, and satisfied itself with, the Manager's approach to due diligence as part of its investment decision making. Processes are in place to ensure the recruitment and ongoing training of appropriately skilled staff within key operational functions. Suitable remuneration policies are in place to encourage staff retention and the delivery of the Group's objectives over the medium term. Independent pricing sources are used where available and performance is subject to regular monitoring. In relation to more subjective areas such as private investments and property, the valuations are estimated by experienced staff and specialist external managers and valuers using industry standard approaches, with the final decisions taken by the independent Valuation Committee, and subject to external audit as part of the year-end financial statements. A business continuity and disaster recovery plan is maintained, and was revised during 2021 following the success of remote working during the prior year. Cyber security continues to receive an enhanced focus, with systems and processes designed to combat the ongoing risk developments in this area. Such processes are kept under regular review including multi-factor authorisation, ensuring effective firewalls, internet and email gateway security and anti-virus software. This is complemented with staff awareness programmes (including periodic mock phishing exercises) which monitor and test both the robustness of our systems as well as keeping staff alert to potential risks. During the year, the Manager received the government's 'cyber essentials' security certification. The Manager has subsequently been awarded the 'cyber essentials plus' security certification in February 2022, the highest level of certification offered under this scheme. The Group has specific insurance cover in place to cover information security and cyber risks.

CORPORATE GOVERNANCE REPORT - EXTRACT

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Parent Company financial statements in accordance with UK adopted international accounting standards (UK adopted IAS). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group and the Parent Company for that period.

In preparing these financial statements the directors are required to:
 

·	select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
·	make judgements and accounting estimates that are reasonable and prudent;
·	present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
·	provide additional disclosures when compliance with the specific requirements in UK adopted IAS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the group and company further position and financial performance;
·	in respect of the Group financial statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed and explained in the financial statements;
·	in respect of the Parent Company financial statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed and explained in the financial statements; and
·	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Parent Company and the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's and Group's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and the Group and enable them to ensure that the Parent Company and the Group financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and corporate governance statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.

The Directors confirm, to the best of their knowledge:

·	that the consolidated financial statements, prepared in accordance with UK adopted IAS give a true and fair view of the assets, liabilities, financial position and profit of the Parent Company and undertakings included in the consolidation taken as a whole;
·	that the Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Parent Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
·	that they consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

FINANCIAL STATEMENTS - EXTRACTS

Consolidated income statement

Year ended 31 December	2021			2020
£ million	Revenue	Capital	Total	Revenue	Capital	Total
Investment income	12.7	-	12.7	14.6	-	14.6
Other income	3.8	-	3.8	8.1	-	8.1
Gains/(losses) on fair value investments	-	901.8	901.8	-	518.5	518.5
Gains/(losses) on monetary items and borrowings	-	18.0	18.0	-	21.7	21.7
	16.5	919.8	936.3	22.7	540.2	562.9
Expenses
Operating expenses	(29.6)	(24.8)	(54.4)	(20.6)	(22.8)	(43.4)
Profit/(loss) before finance costs and tax	(13.1)	895.0	881.9	2.1	517.4	519.5
Finance costs	(4.0)	(16.0)	(20.0)	(3.3)	(13.2)	(16.5)
Profit/(loss) before tax	(17.1)	879.0	861.9	(1.2)	504.2	503.0
Taxation	(0.2)	(2.5)	(2.7)	-	0.9	0.9
Profit/(loss) for the year	(17.3)	876.5	859.2	(1.2)	505.1	503.9
Earnings/(loss) per ordinary share - basic	(11.1p)	561.4p	550.3p	(0.8p)	323.2p	322.4p
Earnings/(loss) per ordinary share - diluted	(11.0p)	556.5p	545.5p	(0.8p)	321.8p	321.0p

The total column of this statement represents the Group's consolidated income statement, prepared in accordance with UK adopted international accounting standards (UK adopted IAS). The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations.

Consolidated statement of comprehensive income

Year ended 31 December	2021			2020
£ million	Revenue	Capital	Total	Revenue	Capital	Total
Profit/(loss) for the year	(17.3)	876.5	859.2	(1.2)	505.1	503.9
Revaluation gain/(loss) on property, plant and equipment	-	(0.2)	(0.2)	-	(1.8)	(1.8)
Actuarial gain/(loss) in defined benefit pension plan	1.9	-	1.9	(0.8)	-	(0.8)
Deferred tax (charge)/credit allocated to actuarial gain/(loss)	(1.1)	-	(1.1)	0.1	-	0.1
Total comprehensive income/(expense) for the year	(16.5)	876.3	859.8	(1.9)	503.3	501.4

Consolidated Balance Sheet

At 31 December
£ million	2021	2020
Non-current assets
Investments held at fair value	4,291.8	3,520.2
Investment property	38.3	37.8
Property, plant and equipment	23.1	23.6
Deferred tax asset	-	2.5
Retirement benefit asset	3.8	0.7
Derivative financial instruments	2.9	0.3
	4,359.9	3,585.1
Current assets
Derivative financial instruments	32.7	57.3
Other receivables	262.8	105.3
Amounts owed by group undertakings	3.7	-
Cash at bank	325.9	296.8
	625.1	459.4
Total assets	4,985.0	4,044.5
Current liabilities
Borrowings	(240.0)	(189.0)
Derivative financial instruments	(8.2)	(4.5)
Other payables	(168.8)	(63.5)
Amounts owed to group undertakings	-	(5.3)
	(417.0)	(262.3)
Net current assets/(liabilities)	208.1	197.1
Total assets less current liabilities	4,568.0	3,782.2
Non-current liabilities
Borrowings	(168.9)	(181.5)
Derivative financial instruments	(2.9)	(5.4)
Deferred tax liability	(1.3)	-
Provisions	(1.0)	(1.1)
Lease liability	(3.6)	(3.8)
	(177.7)	(191.8)
Net assets	4,390.3	3,590.4
Equity attributable to owners of the Company
Share capital	156.8	156.8
Share premium	45.7	45.7
Capital redemption reserve	36.3	36.3
Own shares reserve	(23.0)	(15.3)
Capital reserve	4,174.4	3,350.1
Revenue reserve	(11.4)	5.1
Revaluation reserve	11.5	11.7
Total equity	4,390.3	3,590.4
Net asset value per ordinary share - basic	2,819p	2,303p
Net asset value per ordinary share - diluted	2,794p	2,292p

The financial statements were approved by the Board and authorised for issue on 28 February 2022.

Consolidated Statement of Changes in Equity

			Capital	Own
	Share	Share	redemption	shares	Capital	Revenue	Revaluation	Total
£ million	capital	premium	reserve	reserve	reserve	reserve	reserve	equity
Balance at 1 January 2020	156.8	45.7	36.3	(7.8)	2,894.1	7.0	13.5	3,145.6
Profit/(loss) for the year	-	-	-	-	505.1	(1.2)	-	503.9
Revaluation gain/(loss) on property, plant and equipment	-	-	-	-	-	-	(1.8)	(1.8)
Actuarial gain/(loss) in defined benefit plan	-	-	-	-	-	(0.8)	-	(0.8)
Deferred tax (charge)/credit allocated to actuarial gain/(loss)	-	-	-	-	-	0.1	-	0.1
Total comprehensive income/(expense) for the year	-	-	-	-	505.1	(1.9)	(1.8)	501.4
Dividends paid	-	-	-	-	(54.7)	-	-	(54.7)
Purchase of treasury shares					(2.3)			(2.3)
Movement in own shares reserve	-	-	-	(7.5)	-	-	-	(7.5)
Movement in share-based payments	-	-	-	-	7.9	-	-	7.9
Balance at 31 December 2020	156.8	45.7	36.3	(15.3)	3,350.1	5.1	11.7	3,590.4
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

Consolidated Cash Flow Statement

Year ended 31 December	Consolidated cash flow
£ million	2021	2020
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest	71.8	172.3
Interest paid	(20.0)	(16.4)
Net cash inflow/(outflow) from operating activities	51.8	155.9
Cash flows from investing activities:
Sale/(purchase) of property, plant and equipment	(0.1)	(0.2)
Investments in subsidiary undertakings	-	-
Net cash inflow/(outflow) from investing activities	(0.1)	(0.2)
Cash flows from financing activities:
Repayment of borrowings	(421.9)	(295.0)
Drawing of borrowings	469.8	445.0
Purchase of ordinary shares by EBT1	(21.0)	(10.1)
Purchase of ordinary shares into treasury	(1.4)	(2.3)
Dividends paid	(55.0)	(54.7)
Net cash inflow/(outflow) from financing activities	(29.5)	82.9
Increase/(decrease) in cash in the year	22.2	238.6
Cash at the start of the year	296.8	61.1
Effect of foreign exchange rate changes on cash	6.9	(2.9)
Cash at the year end	325.9	296.8
Reconciliation:
Cash at bank	325.9	296.8
Cash at the year end	325.9	296.8

1	Shares are disclosed in the own shares reserve on the consolidated balance sheet.

NOTES TO THE FINANCIAL STATEMENTS - EXTRACTS

Earnings/(loss) per ordinary share - basic and diluted

The basic earnings per ordinary share for 2021 is based on the profit of £859.2 million (2020: profit of £503.9 million) and the weighted average number of ordinary shares in issue during the period of 156.1 million (2020: 156.3 million). The weighted average number of shares is adjusted for shares held in the employee benefit trust (EBT) and in treasury in accordance with IAS 33.

£ million	2021	2020
Net revenue profit/(loss)	(17.3)	(1.2)
Net capital profit/(loss)	876.5	505.1
Total profit/(loss) for the year	859.2	503.9

Weighted average (million)	2021	2020
Number of shares in issue	156.8	156.8
Shares held in EBT	(0.5)	(0.5)
Shares held in treasury	(0.2)	-
Basic shares	156.1	156.3

pence	2021	2020
Revenue earnings/(loss) per ordinary share - basic	(11.1)	(0.8)
Capital earnings/(loss) per ordinary share - basic	561.4	323.2
Total earnings per share - basic	550.3	322.4

The diluted earnings per ordinary share for the period is based on the basic shares (above) adjusted for the weighted average dilutive effect of share-based payments awards at the average market price for the period.

Weighted average (million)	2021	2020
Basic shares	156.1	156.3
Effect of share-based payment awards	1.4	0.7
Diluted shares	157.5	157.0

pence	2021	2020
Revenue earnings/(loss) per ordinary share - diluted	(11.0)	(0.8)
Capital earnings/(loss) per ordinary share - diluted	556.5	321.8
Total earnings per ordinary share - diluted	545.5	321.0

Net asset value per ordinary share - basic and diluted

Net asset value per ordinary share is based on the following data:

31 December	2021	2020
Net assets (£ million)	4,390.3	3,590.4
Number of shares in issue (million)	156.8	156.8
Shares held in EBT	(0.9)	(0.8)
Shares held in treasury	(0.2)	(0.1)
Basic shares (million)	155.7	155.9
Effect of share-based payment awards (million)	1.4	0.8
Diluted shares (million)	157.1	156.7

	2021	2020
31 December	pence	pence
Net asset value per ordinary share -  basic	2,819	2,303
Net asset value per ordinary share - diluted	2,794	2,292

Dividends

	2021	2020
	Pence	Pence	2021	2020
	per share	per share	£ million	£ million
Dividends paid in year	35.25	35.0	55.0	54.7

The above amounts were paid as distributions to equity holders of the Company in the relevant year from accumulated capital profits.

On 1 March 2021 the Board declared a first interim dividend of 17.625 pence per share in respect of the year ended 31 December 2021 that was paid on 30 April 2021. A second interim dividend of 17.625 pence per share was declared by the Board on 30 July 2021 and paid on 29 October 2021.

The Board declares the payment of a first interim dividend of 18.5 pence per share in respect of the year ending 31 December 2022. This will be paid on 29 April 2022 to shareholders on the register on 1 April 2022, and funded from the accumulated capital profits.

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 +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	2021	2020
Total assets	4,985.0	4,044.5
Less: cash	(325.9)	(296.8)
Sub total	4,659.1	3,747.7
Net assets	4,390.3	3,590.4
Gearing	6.1%	4.4%

Leverage: Leverage, as defined by the UK Alternative Investment Fund Managers Regulations (AIFMR), is any method which increases the exposure of the portfolio, whether through borrowings or leverage embedded in derivative positions or by any other means.

MSCI All Country World Index: The MSCI All Country World Index is a total return, market capitalisation-weighted equity index covering major developed and emerging markets. Described in this report as the ACWI or the ACWI (50% £), this is one of the Company's KPIs or reference hurdles and, since its introduction in 2013, has incorporated a 50% sterling measure. This is calculated using 50% of the ACWI measured in sterling and therefore exposed to translation risk from the underlying foreign currencies. The remaining 50% uses a sterling hedged ACWI from 1 January 2015 (from when this is readily available). This incorporates hedging costs, which the portfolio also incurs, to protect against currency risk and is an investable index. Prior to this date it uses the index measured in local currencies. Before December 1998, when total return indices were introduced, the index is measured using a capital‑only version.

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 2021 was 2,794 pence, an increase of 502 pence, or 21.9%, from 2,292 pence at the previous year end. As dividends totalling 35.25 pence per share were paid during the year, the effect of reinvesting the dividends in the NAV is 1.7%, which results in a NAV total return of 23.6%.

Net quoted equity exposure: This is the estimated level of exposure that the trust has to listed equity markets. It includes the assets held in the quoted equity category of the portfolio adjusted for the notional exposure from quoted equity derivatives, as well as estimated cash balances held by externally-managed funds and estimated exposure levels from hedge fund managers.

Notional: In relation to derivatives, this represents the estimated exposure that is equivalent to holding the same underlying position through a cash security.

Ongoing charges figure (OCF)*: As a self-managed investment trust with operating subsidiaries, the calculation of the Company's OCF requires adjustments to the total operating expenses. In accordance with AIC guidance, the main adjustments are to remove performance-related compensation from JRCM, as this is analogous to a performance fee for an externally-managed trust.

£ million	2021	2020
Operating expenses	54.4	43.4
JRCM direct performance-related compensation	(24.8)	(22.8)
Other adjustments	(0.1)	(0.1)
Ongoing charges	29.5	20.5
Average net assets	4,085	3,115
OCF	0.72%	0.66%

In addition to the above, managers charge fees within the external funds (and in a few instances directly to RIT in relation to segregated accounts). We have estimated that, based on average net assets across the year and annual management fee rates per fund (excluding performance fees), these represent an additional 0.87% of average net assets (2020: 0.89%).

Premium/discount: The premium or discount (or rating) is calculated by taking the closing share price on 31 December 2021 and dividing it by the NAV per share at 31 December 2021, expressed as a net percentage. If the share price is above/below the NAV per share, the shares are said to be trading at a premium/discount.

RPI: The RPI refers to the United Kingdom Retail Price Index as calculated by the Office for National Statistics and published monthly. It was used as a measure of inflation in one of the Company's KPIs, RPI + 3.0% per annum until 31 December 2021.

Share price total return or total shareholder return (TSR)*: The TSR for a period represents the change in the share price adjusted to reflect dividends paid during the period. Similar to calculating a NAV total return, the calculation assumes the dividends are notionally reinvested at the daily closing share price following the shares going ex-dividend. The share price on 31 December 2021 closed at 2,750 pence, an increase of 685 pence, or 33.2%, from 2,065 pence at the previous year end. Dividends totalling 35.25 pence per share were paid during the year, and the effect of reinvesting the dividends in the share price is 1.9%, which results in a TSR of 35.1%. The TSR is one of the Company's KPIs.

Basis of presentation

The financial information for the year ended 31 December 2021 has been extracted from the statutory accounts for that year. The auditor's report on these accounts is unqualified and does not contain a statement under either Section 498(2) or (3) of the Companies Act 2006. The statutory accounts will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The financial information for the year ended 31 December 2020 has been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's report on these accounts is unqualified and does not contain a statement under either Section 498(2) or (3) of the Companies Act 2006.

Report and Accounts

The full statutory accounts are available to be viewed or downloaded from the Company's website at www.ritcap.com. Neither the contents of the Company's website nor the contents of any website accessible from the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

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