Final Results

RIT Capital Partners PLC

05 March 2024

 

Please click here to view the Company's Report and Accounts

http://www.rns-pdf.londonstockexchange.com/rns/5430F_1-2024-3-4.pdf

5 March 2024

RIT Capital Partners plc

("RIT" or the "Company")

Results for the year ended 31 December 2023

RIT's disciplined, flexible model well placed to deliver long-term capital growth

FINANCIAL HIGHLIGHTS

·	Net Asset Value (NAV) per share of 2,426 pence at 31 December 2023.
·	NAV per share total return of +3.2% for the year.
·	Total net assets stood at £3.6 billion at year end.
·	Quoted equities delivered strong performance, returning +18.1% for the year.
·	Uncorrelated strategies produced solid returns, led by credit positions returning double digits.
·	Private investments declined modestly, partly due to lagged valuations for funds in respect of Q4 2022. Private investments are by their nature long term - over five years, this book has yielded a +145.7% return, enhancing NAV by +28.8%.
·	Currencies detracted modestly, due to translation effects from sterling's rise in the year.
·	Profit for the year of £66.1 million.
·	Balance sheet remained robust. Gearing was 3.5% at year end, versus 6.2% in 2022. Repaid £150 million credit facility and reduced overall debt amid higher interest rates.
·	Ongoing Charges Figure (OCF) of 0.77% in 2023, compared to 0.89% in 2022.

CAPITAL ALLOCATION

·	Returned £220 million of capital to shareholders through dividends and buybacks.
·	Bought back £163 million or 8.6 million RIT shares, adding +1.2% to the NAV per share.
·	Board intends to pay a dividend of 39 pence per share in 2024 in two equal instalments, in April and October, a 2.6% increase over the previous year.

GENERAL

·	The discount widened to -22%, alongside much of the investment company sector. The Board is intently focused on narrowing this discount over time.
·	In the last 10 years, RIT has generated a NAV per share total return of approximately +109%, more than doubling shareholders' capital.
·	Since listing, the share price total return has compounded at 10.6% per annum, and the NAV per share total return at 10.5% per annum, compared to the ACWI at 7.3%.
·	Over the same period, RIT has participated in 74% of monthly market increases but only 41% of market declines.
·	£10,000 invested in RIT at inception in 1988 would be worth £351,000 today compared to the same amount invested in the ACWI which would be worth £123,000.
·	Maggie Fanari joined the Manager as its new CEO on 1 March. She brings an exceptional track record and joins an experienced team, including CIO Nick Khuu, who are well placed to continue RIT's long-term track record of success.

FINANCIAL SUMMARY

	2023	2022	Return / Change
NAV per share1	2,426 pence	2,388 pence	3.2%2
Share price	1,882 pence	2,125 pence	-9.6%2
Premium/(discount)	-22.4%	-11.0%	-11.4% pts
Net assets	£3,573 million	£3,722 million	-4.0%
Gearing	3.5%	6.2%	-2.7% pts
OCF for the year	0.77%	0.89%	-0.12% pts
Total dividend in year	38.0 pence	37.0 pence	2.7%
Total buybacks in year	£163 million	£11 million	1,382%

¹ The final audited NAV per share as 31 December 2023 is unchanged from the preliminary unaudited NAV per share published by the Company on 7 February 2024.

² Total return for the year, with dividends reinvested.

PORTFOLIO SUMMARY

A diversified, global portfolio invested for the long term across three key pillars:

Quoted equities: 38.4% of NAV

·	Strong performance from the book, returning +18.1%.
·	Significant outperformance versus the MSCI ACWI Equal Weighted Index, which rose +9.4%, and the MSCI World excluding the 'magnificent seven', which gained +12%.
·	Returns driven by strong stock selection, including Builders FirstSource and Talen Energy.
·	Solid performance from specialist managers focused on Japan and healthcare.

Private investments: 35.9% of NAV

·	Private investments declined -6.0%, partly due to lagged Q4 2022 valuations received for our private funds. This follows exceptional gains for the book in recent years.
·	Continued focus on liquidity. Sales from three direct holdings - Infinity (final cash received in early 2024), Paxos and Animoca - all at prices at or above our carrying value.
·	We expect allocation to this book to reduce further over time through realisations. Several large holdings are actively exploring IPOs and/or secondary sales.
·	Majority of our largest direct holdings are profitable with growing revenues and earnings. Majority also benefit from structural protection for our capital.
·	Private investments remain an exceptional contributor. In last 10 years, new direct investments have generated a +29% compound return. Over the same period, new direct investments and fund commitments have delivered a compound return of +20% per annum.

Uncorrelated strategies: 25.6% of NAV

·	Uncorrelated strategies delivered healthy performance of +6.8%, led by credit funds returning double digits against a backdrop of significant volatility.
·	Absolute return and credit (more than 80% of this book at year end) returned a healthy +9.2%.
·	Strong performance of gold, held through derivatives, added +0.4% to NAV, serving as an asymmetric hedge against the increasing probability of broad-based market dislocation.
·	New investment in California carbon credits also delivered healthy returns during the year.

OUTLOOK

·	In 2024, we are navigating conflicting macro signs. US GDP estimates are rising, but some credit indicators are declining. Geopolitical risks persist and many assets appear fully valued.
·	Despite these conditions, we believe numerous individual assets trade at appealing prices.
·	In quoted equities, we see numerous areas to deploy long-term capital, such as small to medium-capitalisation stocks that are often overlooked, or in 'event-driven' stocks.
·	In private investments, we see strong operating performance, and broader tailwinds driven by the digital transition. The reopening of the IPO markets may also serve as a near-term catalyst.
·	In uncorrelated strategies, we see opportunities in corporate credit markets, with the potential to generate double-digit returns via quality credits, with limited risk to our capital.
·	RIT's competitive edge, which combines in-house expertise, a flexible capital structure, and access to unique, compelling investment opportunities globally, leaves us well positioned to deliver healthy capital appreciation with attractive risk-reward characteristics.

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

"Our net asset value per share finished the year at 2,426 pence, representing a total return (including dividends) of 3.2%... This brings our 10-year performance to 109%, a more than doubling of shareholders' capital over the period… Our portfolio is made up of high-conviction investments with differing characteristics and return drivers…

While the most important driver of our share price performance over the long term is our NAV, the Board is also intensely focused on the rating of our shares... Discounts for investment trusts widened considerably, and our discount was no exception ending the year at -22%... The Board and our Manager have been, and continue to be, acutely focused on closing the discount...

I would like to thank my colleagues on the Board, and our talented and dedicated employees for their hard work and commitment throughout the year. This diverse group shares a single aim - creating long-term value for RIT's shareholders... We have the flexibility to select the best investments across any asset class, sector or geography, coupled with the strength of our network which opens doors to opportunities that others cannot access. These remain important differentiators on which we will continue to build for the future."

Nick Khuu, Chief Investment Officer of JRCM, said:

"In the face of challenges posed by rising interest rates early in the year, geopolitical unrest, and bank collapses, major indices recorded robust gains in 2023. A substantial portion of these gains was attributable to a select few mega-cap technology companies, overshadowing more modest returns in other sectors...

The positive drivers of our portfolio's performance in 2023, including high-quality stock picking, strategic geographic exposure, and the agility of our credit managers, is illustrative of how our portfolio can perform. Whatever the market challenges, our proactive approach to navigate these complexities sets the stage for continued thoughtful and resilient portfolio management in the coming period...

We believe RIT's competitive edge is derived from our in-house expertise, our capital structure - enabling a nimble and flexible investment approach - as well as our unique access and ability to foster deep, long-term specialist partnerships. As the market enters a more idiosyncratic phase, we recognise that careful stock picking and asset selection exercised within our robust risk management framework, will be key to delivering performance."

About RIT Capital Partners plc

RIT's corporate objective is to deliver long-term capital growth, while preserving shareholders' capital; to invest without the constraints of a formal benchmark, but to deliver for shareholders increases in capital value in excess of the relevant indices over time.

For more information

J. Rothschild Capital Management (Manager):

T: 020 7647 8565

E: [e-mail]

Numis (Joint broker):

David Benda

T: 020 7260 1000

JP Morgan Cazenove (Joint broker):

William Simmonds

T: 020 3493 8000

Brunswick Group LLP (Media enquiries):

Nick Cosgrove, Tom Burns

T: 020 7404 5959

E: [e-mail] 

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	2023
RIT NAV per share total return1	3.2%
CPI plus 3.0%	7.0%
MSCI All Country World Index (ACWI)	18.4%
RIT share price total return1	-9.6%
FTSE 250 Index2	8.0%

Key data	2023	2022	Change
NAV per share	2,426 pence	2,388 pence	1.6%
Share price	1,882 pence	2,125 pence	-11.4%
Premium/(discount)	-22.4%	-11.0%	-11.4% pts
Net assets	£3,573 million	£3,722 million	-4.0%
Gearing1	3.5%	6.2%	-2.7% pts
Average net quoted equity exposure	39%	38%	1% pts
Ongoing Charges Figure for the year1	0.77%	0.89%	-0.12% pts
First interim dividend (April)	19.0 pence	18.5 pence	2.7%
Second interim dividend (October)	19.0 pence	18.5 pence	2.7%
Total dividend in year	38.0 pence	37.0 pence	2.7%

Performance history	3 Years	5 Years	10 Years	Since inception
RIT NAV per share total return1	10.6%	44.2%	108.8%	3,343%
CPI plus 3.0% per annum	31.7%	42.2%	77.0%	637%
MSCI All Country World Index	23.5%	71.0%	147.4%	1,126%
RIT share price total return1	-4.1%	7.5%	78.7%	3,407%
FTSE 250 Index2	4.3%	28.3%	61.2%	1,607%

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.
1	The Group's designated APMs are the NAV per share total return, share price total return, gearing and the ongoing charges figure.
2	RIT's shares are a constituent of the FTSE 250 Index, which is not considered a Key Performance Indicator (KPI).

CHAIRMAN'S STATEMENT

Sir James Leigh-Pemberton

In the first half of 2023, most major indices traded in a relatively narrow range, punctuated by periods of weakness and recovery. As the year progressed, a belief that interest rates may have peaked led to a rebound in developed world equity markets, which was particularly marked in the fourth quarter. US equity markets finished the year strongly, buoyed by a small number of very large technology companies. These so-called 'magnificent seven' tech stocks accounted for the majority of the S&P 500's gains. Excluding these few companies, the overall market returns were more modest.

Our net asset value per share finished the year at 2,426 pence, representing a total return (including dividends) of 3.2%, lagging our investment hurdles of CPI+3%, which was up 7.0%, and the MSCI ACWI (50% sterling) which rose 18.4%. This brings our 10-year performance to 109%, a more than doubling of shareholders' capital over the period. Our investment portfolio is structured around three core pillars of quoted equities, private investments, and uncorrelated strategies. During 2023, the portfolio saw good performance from quoted equities, driven primarily by our successful single stock selection and exposure to Japan. Uncorrelated strategies also made a positive contribution, helped by the outperformance of our credit managers, as well as our investments in carbon credits. However, the value of our private investments softened, reflecting lower valuations of external funds carried over from the fourth quarter of 2022 and our carefully considered revaluation of our direct investments. Currency was also a headwind; the pound's appreciation of some 5% against the US dollar over the year impacting the translated value of our global investments.

Our portfolio is made up of high-conviction investments with differing characteristics and return drivers. While there will be times when not all asset classes meet our long-term expectations, we remain committed to our diversified approach. Our belief is that utilising a carefully constructed blend of different assets, overlaid with a top-down risk management function, remains the best way to manage our investments for the long-term benefit of shareholders. Our Manager's Report from J. Rothschild Capital Management (JRCM or the Manager) provides a detailed review of investment performance, attribution, positioning and risk management.

While the most important driver of our share price performance over the long term is our NAV, the Board is also intensely focused on the rating of our shares, and in this regard 2023 was a difficult year. Discounts for investment trusts widened considerably, and our discount was no exception ending the year at -22%, resulting in a total shareholder return (including dividends) of -9.6%. This is a source of frustration to our shareholders, as well as to the Board and our Manager. Directors' shareholdings are disclosed in this Report and our colleagues in our Manager also have significant 'skin in the game', with interests in approximately £18 million RIT shares at the year end, reinforcing the close alignment with shareholders' interests. The Board and our Manager have been, and continue to be, acutely focused on closing the discount.

During 2023, we increased the level of our interactions with shareholders, and I am very grateful for their candid and thoughtful feedback in these discussions, which has been very helpful in guiding our plans to reduce the discount. I address below four core topics: private investments, capital allocation, costs and marketing.

Private investments are currently out of favour with investors, and discounts for trusts exposed to these assets have widened significantly in 2023. RIT has always had private investments as a core part of its approach, and despite mark-to-market volatility in the short term, over the long term the success of these investments has been a strong contributor to our returns. Our earlier successes have, in part, placed us in a challenging position; healthy capital growth is one of the main reasons why, over the past five years, our private investments had come to represent a higher proportion of the portfolio than in the past. We are committed to this asset class and continue to believe that our long-standing relationships are a source of competitive advantage and attractive returns to shareholders. This is reflected in our portfolio, which in aggregate is sitting on sizeable profits, over and above the capital we invested. The returns generated by our private portfolio are set out in more detail in the Manager's Report. Most of our largest direct investments are profitable companies with growing revenues and earnings. Our close manager relationships and brand strength, often enable us to access a preferred position in the capital structure of a company, with the majority of our direct investments having some element of downside protection.

Nevertheless, over the next two years we will look to reduce the proportion of the portfolio represented by private investments to a level of between around a quarter and a third of NAV. This will be achieved by organic exits and the continuation of a very high return bar for any new investments. Where we see realisations from this portfolio, we expect to deploy the capital to buy back our shares or to make new investments in the liquid portfolio, depending on the level of discount, the opportunity set and general portfolio management needs. What we will not do is accelerate exits or engage in sales at discounts to fair value to the detriment of long-term shareholder value.

During 2023, we undertook one of the largest buybacks in the investment trust industry, acquiring some 8.6 million shares at a cost of £163 million, our largest single allocation of capital in the year. This generated a strong return on investment, increasing the NAV per share return for shareholders; the buyback also reinforced the confidence that we have both in our NAV and our approach. If compelling returns from allocating our capital in this way continue to be available, we will retain the flexibility to act.

Over the year, we also paid dividends of 38 pence per share, an increase of almost 3% over 2022, and totalling £57 million. Our approach remains to maintain or increase the dividend, subject to the overriding capital preservation objective. In 2024, we intend to pay a dividend of 39 pence per share, an increase of 2.6% over 2023. The dividend will be paid as normal in equal instalments in April and October, funded from our significant reserves.

Our long-standing investment approach covers multiple asset classes, sectors and geographies, and provides shareholders with access to investments, including specialist funds, which are not typically accessible to individual shareholders. This approach is in line with our Investment Policy and has been deployed consistently year on year. It is a key driver of RIT's strong long-term performance. By design, it will not be the cheapest approach to managing investments, but whenever we allocate capital, we do so only if the anticipated risk-adjusted return, net of all costs (both internal costs and any fees paid to external managers) delivers value to shareholders.

We continue to look for ways to reduce costs, and enhance our communications, with a portion of the savings made over the year reinvested into improving our marketing and investor relations efforts. We will continue to invest in more regular and informative direct contact with shareholders.

Our environmental, social, and governance (ESG) initiatives remain an area of particular focus, with our Manager, JRCM, submitting its first report during the year as a signatory of the UN Principles for Responsible Investment (UN PRI). We also include our first Sustainability Report within the Annual Report, where we have collated in one location, all of the activities we undertake in respect of our wider commitments to society and the environment.

Governance and employees

Following an extensive international search process, Maggie Fanari retired from the Board on 29 February, joining JRCM on 1 March as its CEO. Maggie has an outstanding track record of successfully leading teams investing across different asset classes and geographies at one of the largest and most respected investment companies in the world - Ontario Teachers' Pension Plan - where she was the Senior Managing Director and Global Group Head High Conviction Equities. We are delighted that Maggie has joined the exceptional team at JRCM, and we look forward to working closely with her in the execution of the important initiatives outlined above.

Maggie succeeds Francesco Goedhuis, who retired as JRCM's CEO in December as a result of an illness in his immediate family. Francesco joined JRCM in 2010 and was appointed CEO in 2014. During his 13 years with the Manager, Francesco has provided outstanding leadership, continuously strengthening both the team in JRCM and our exceptional network of investment partners. The Board was very pleased to announce recently that he will continue his association with RIT in his new role as Senior Adviser to JRCM.

After 11 years, Ron Tabbouche (latterly the co-CIO at JRCM) retired to join his family in Israel, with Nick Khuu appointed to the role of CIO. Nick is a very experienced investor across multiple asset classes, having worked at leading investment firms in New York and San Francisco. He has been with JRCM for over four years operating in senior investment roles, and we are delighted with his appointment.

On behalf of the Board, I would like to express our gratitude to Francesco and Ron for their very significant contributions to the Manager and to your Company's performance over more than a decade.

At the end of September, after more than three years as a Director of RIT, Maxim Parr retired from the Board to take on the position of Chair of JRCM, providing valuable leadership and additional resources during a period of transition of its senior leadership team.

I would like to thank my colleagues on the Board, and our talented and dedicated employees for their hard work and commitment throughout the year. This diverse group shares a single aim - creating long-term value for RIT's shareholders. At a time when the outlook for global economies and markets and the geopolitical environment are particularly complicated, these colleagues, together with our investment partners and advisers, are the key to our future success. We have the flexibility to select the best investments across any asset class, sector or geography, coupled with the strength of our network which opens doors to opportunities that others cannot access. These remain important differentiators on which we will continue to build for the future.

Nathaniel Charles Jacob Rothschild 1936 - 2024

Finally, it is with great sadness that we mourn the recent death of our founder and former chairman, Lord Jacob Rothschild. Jacob was chairman of the Rothschild Investment Trust, subsequently renamed RIT Capital Partners plc, from 1971 to 2019. He devised, developed, and led the growth of the Company, including its listing on the London Stock Exchange in 1988. During his tenure, the net asset value increased from £5 million to over £3 billion by the time he retired from the Board in September 2019 and was granted the title of Honorary President. Our thoughts and condolences are with Hannah Rothschild, his daughter and current Director, and the rest of the Rothschild family at this time. He will be missed.

Sir James Leigh-Pemberton

Chairman

4 March 2024

MANAGER'S REPORT - EXTRACTS

Summary

In the face of challenges posed by rising interest rates early in the year, geopolitical unrest, and bank collapses, major indices recorded robust gains in 2023. A substantial portion of these gains was attributable to a select few mega-cap technology companies, overshadowing more modest returns in other sectors. November and December saw substantial market returns, when indications by the US Federal Reserve of a path to lower rates, together with falling inflation over the course of the year, caused 10-year US treasury yields to tighten from 4.9% to 3.9%. The majority of annual returns for indices globally came during this end of year rally, including our reference hurdle, ACWI (50% £). Our portfolio produced positive returns and trailed just behind this index for most of the year, but lagged strongly rising markets in the last two months of the year.

Despite the headwinds faced in 2022 and 2023, we remain confident in our long-term investment approach. Our careful portfolio construction is disciplined, diversified, and carefully risk managed such that, over time, we believe we can deliver capital appreciation to shareholders with attractive risk-reward characteristics.

Portfolio positioning

Within a tried and tested investment risk framework, our investment "reach" is unconstrained. Having a flexible investment mandate enables us to invest across capital structures, asset classes and geographies. Nevertheless, our portfolio has historically maintained a core equity bias and will continue to do so.

Decision-making starts with a considered, top-down macro-economic view. We allocate capital to take advantage of identified structural themes and market dislocations, drawing upon our seasoned internal resources and very often leveraging our extensive global network of managers and partners.

We structure our investment portfolio by allocating capital across three pillars:

·	quoted equities;
·	private investments; and
·	uncorrelated strategies.

By design, each pillar serves a distinct purpose within the portfolio, with investments of differing profiles and return drivers allowing us to benefit from this broad diversification. Additionally, we make use of risk management tools and hedging strategies to manage risk, including currency translation risk.

Performance highlights

Our results for the year produced a NAV per share total return of 3.2%. Comparatively, our two reference hurdles, ACWI (50% £) and the 'inflation plus' hurdle CPI+3% returned 18.4% and 7.0%.

Two noteworthy aspects underscored the strength observed in the market-capitalised weighted indices. First, the market rally exhibited an unusual narrowness, primarily propelled by a select group of stocks termed the 'magnificent seven' (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), which accounted for approximately 20% of the MSCI World index and demonstrated a remarkable 74% increase, while the remaining 1,473 stocks collectively experienced a more modest gain of 12%. Second, a substantial portion of returns across various asset classes materialised during the liquidity-fueled surge in November and December. For instance, the Bloomberg Aggregate Bond index posted -0.6% returns through October 31 and +9.9% over November and December. Similarly, the ACWI exhibited +7.0% returns through October 31, and then +10.6% over November and December.

Asset allocation and portfolio contribution

Asset category	% NAV	% Contribution
Quoted equities	38.4%	6.8%
Private investments	35.9%	-2.7%
Uncorrelated strategies	25.6%	2.1%
Currency	0.9%	-2.9%
Total investments	100.8%	3.3%
Liquidity, borrowings and other	-0.8%1	-0.1%1
Total	100.0%	3.2%
1               Including accretion benefit of 1.2% from share buybacks.

Positive drivers of portfolio performance for the year were:

·	high quality stock picking, driven by fundamentals;
·	Japan exposure, which outperformed all other developed markets. This involved utilising our network and working closely with specialist managers who focus on value equities and engage directly with management teams of Japanese companies;
·	the performance of our credit managers, who were able to profitably capitalise on dislocations in the market;

Negative drivers were:

·	moderate quoted equities exposure throughout the year, which meant that our portfolio as a whole, lagged behind the equity rally;
·	our exposure to China, which has had a disappointing recovery following its post-Covid reopening. The lack of stimulus and global outflows weighed on shares here;
·	currency translation effects from our meaningful US dollar position, as sterling continued to gain strength against the dollar; and
·	a decline in the valuation of our private investments, mostly due to the funds, where the lagged Q4 2022 valuations impacted our returns this year.

Outlook

In 2024, we are navigating a landscape characterised by a balance of conflicting macro indicators. While US GDP estimates are trending upward, certain credit indicators are exhibiting signs of decline. Significant geopolitical risks, such as conflicts in Ukraine and the Middle East, coupled with the potential repercussions of the USA elections in November, cast a shadow over the horizon. The market's late upturn in 2023 was driven by the perception that interest rates may have reached their peak, and that a soft landing is becoming more probable. This has led to a scenario where many assets are perceived to be fully valued.

The above notwithstanding, we believe there are individual assets that currently trade at appealing price points, and therefore provide attractive opportunities for capital deployment. As investors who integrate a top-down and bottom-up approach, we would highlight the confidence we have in our own investment portfolio. Within our private investments book, we see some strong underlying operating performance, a shift towards prioritising profit over pure growth, and broader tailwinds driven by digital transition. These factors underpin our confidence in the long-term intrinsic value of our private investments. The reopening of the IPO markets may also serve as a near-term catalyst for validating their valuations.

We are also excited about quoted equities, where the environment is particularly conducive for bottom-up, fundamental stock picking. We think there are a multitude of areas to deploy long-term capital with attractive return potential in areas such as the often overlooked small to medium-capitalisation stocks, or in 'event-driven' stocks. As such, we will lean more into stocks that we directly own, with this proportion of the portfolio set to increase. At the same time, we continue to be excited by themes such as healthcare and Japan, where our network of specialist external managers means we are well-positioned to identify and take advantage of these opportunities.

In uncorrelated strategies, we are enthusiastic about current opportunities in the corporate credit markets, driven by factors such as the increase in interest rates, reluctance by traditional banks to lend to mid-sized businesses, and the maturing of around $0.6 trillion in loans over the next two years, which were issued at lower rates. Where there is a dislocation in credit markets, our partnerships with specialist managers provides us with the potential to generate returns of mid-teens or greater, in quality credits, with limited risk to our capital due to robust creditor protections. And, even where there isn't a dislocation, the managers can still earn high single digit to low double digit returns on quality credits.

The positive drivers of our portfolio's performance in 2023, including high-quality stock picking, strategic geographic exposure, and the agility of our credit managers, is illustrative of how our portfolio can perform. Whatever the market challenges, our proactive approach to navigate these complexities sets the stage for continued thoughtful and resilient portfolio management in the coming period.

Although the percentage allocation across our three pillars may see modest variations over shorter periods of time, our portfolio construction and risk management principles aim to provide shareholders with a diversified portfolio that delivers long-term capital appreciation on an attractive risk-adjusted basis.

To conclude, we believe RIT's competitive edge is derived from our in-house expertise, our capital structure - enabling a nimble and flexible investment approach - as well as our unique access and ability to foster deep, long-term specialist partnerships. As the market enters a more idiosyncratic phase, we recognise that careful stock picking and asset selection exercised within our robust risk management framework, will be key to delivering performance.

J. Rothschild Capital Management Limited

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 responsibility of the Board and the Audit and Risk Committee.

The Board sets the portfolio risk parameters within which JRCM operates. This involves an assessment of the nature and level of risk within the portfolio using qualitative and quantitative methods.

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

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

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

With a high degree of volatility in markets and continued geopolitical tensions, risk management remains critical. The portfolio risk management approach undertaken by the Manager, and considered regularly by the Board, is designed to produce a healthy risk-adjusted return over the long term, through careful portfolio construction, security selection and the considered use of hedging.

As an investment business, the vast majority of the day-to-day activities involve the measurement, evaluation and management of risk and reward. With a corporate objective which includes an element of capital preservation, the culture and practice of seeking to protect the NAV from undue participation in down markets through the cycles is well established. However, it is important to recognise that a carefully designed risk management and internal control system can only aim to reduce the probability or mitigate the impact; it cannot remove the risk. With a global investment portfolio having meaningful exposure to equities, rather than a pure absolute return mandate, RIT's NAV will not be immune to either falling markets and/or volatility in currency markets. Equally, with a diversified set of individual and typically uncorrelated, high return-seeking drivers, the portfolio could encounter occasions when the level of volatility results in negative alpha in the short term.

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

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

Principal risks

The Board has carried out a robust assessment of the emerging and principal risks facing the Company, with input from the Audit and Risk Committee, as well as the Manager. Following this assessment, the Board has concluded that there are no material emerging risks, and it is appropriate to reclassify two risks as separate principal risks. The material widening of the discount at which the shares trade relative to the NAV, has led us to establish a new principal risk - Discount risk. In addition, the ongoing developments in cyber risk, coupled with the potential that AI could enhance fraud attempts, means we have also reclassified Cyber security as a new principal risk. The resulting principal risks are as described below:

Risk	Mitigation
Investment strategy risk As an investment company, a key risk is that the investment strategy, guided by the Investment Policy: "To invest in a widely diversified, international portfolio across a range of asset classes, both quoted and unquoted; to allocate part of the portfolio to exceptional managers in order to ensure access to the best external talent available." Does not deliver the Corporate Objective: "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. 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.
Discount risk Investment trust shares trade at a price which can be at a discount or premium relative to their net asset value. If trading at a discount, there is a risk that a widening of the discount may result in shareholders achieving a return which does not reflect the underlying investment performance of the Company.	To manage this risk, and to reduce the volatility for shareholders, the Board monitors the level of discount/premium at which the shares trade and the Group has authority to buy back its existing shares when deemed to be in the best interest of the Company and its shareholders. Buying back shares at a discount signals the Board's confidence in the overall approach and the NAV to shareholders and is accretive to the NAV per share return. In addition, the Group is investing in developing its investor relations activity and overall approach to communications to help ensure that shareholders have the best understanding of the strategy and approach to investing.
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. Currency exposure is managed via an overlay strategy, typically using a combination of currency forwards and/or options to adjust the natural currency of the investments in order to achieve a desired net exposure. The geographic revenue breakdown for stocks as well as correlations with other asset classes are also considered as part of our hedging strategy. Exposure management is undertaken with a variety of techniques including using equity index and interest rate futures and options to hedge or to increase equity and interest rate exposure depending on overall macroeconomic and market views.
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 (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.
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 to have material, specific impacts on our own asset management businesses as distinct from the investment portfolio. Our Manager continues to monitor, and minimise, the climate-related impacts of our internal operations; we offset the carbon emissions of this business - categorised as Scope 1 and Scope 2 emissions by the Greenhouse Gas (GHG) Protocol - through participation in an accredited scheme and we are taking steps to further develop our understanding of our indirect emissions impact (categorised as Scope 3 emissions). JRCM is a signatory to the UN PRI, and the Board has worked with our Manager to develop JRCM's Responsible Investment Framework & Policy, which incorporates environmental factors into our investment approach. This allows us to consider the potential wider impacts of climate change risks to our investments. JRCM is working with an external adviser to consider our ability to make additional climate disclosures in relation to our investment portfolio, while acknowledging the likely challenges caused by having investments in external funds. We monitor developments in regulation and disclosures and seek as far as possible to prepare for future changes. The Group's adoption of fair value in relation to its investments means that the climate-related risks recognised by market participants are incorporated in the valuations.
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 2023 the Group has again engaged external advisers in supporting its consideration of ESG matters. Where necessary, co-investments and other transactions are subject to review by the Conflicts Committee.
Operational risk Operational risks are those arising from inadequate or failed processes, people and systems or other external factors. Key operational risks include reliance on third-party managers and suppliers, dealing errors, processing failures, pricing or valuation errors, fraud and reliability of core systems.	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 includes the ability to use a combination of an offsite facility and cloud resources to mirror our production systems in the event of any business disruption. This was satisfactorily tested during the year.
Cyber security risk RIT is dependent on technology to support key business functions and the safeguarding of sensitive information. As a result, RIT is exposed to the increasingly sophisticated nature of cyber attacks, and given the growth in AI and the ability to utilise this for attempts at fraud and data breaches. RIT is therefore at risk of potential loss or harm as a result of significant disruption to information technology systems, including from a potential cyber attack, which may result in financial losses, the inability to perform business-critical functions, loss or theft of confidential data, and resulting legal or reputational damage.	Cyber security continues to receive an enhanced focus, with policies, systems and processes designed to combat the ongoing risk developments in this area. Such processes are kept under regular review including multi-factor authorisation, ensuring effective firewalls, internet and email gateway security and anti-virus software. This is complemented with staff awareness programmes (including periodic mock-phishing exercises) which monitor and test both the robustness of our systems as well as the effectiveness of our staff at identifying potential risks. We also test our IT business continuity plan at least once every year. The process for assessing, identifying and managing cybersecurity risks is managed on a day-to-day by the Manager's IT team and overseen by the JRCM Operational Risk Committee. Any material risks are reported to the Audit and Risk Committee. The Manager maintains the 'Cyber Essentials Plus' security certification, the highest level of certification offered by the National Cyber Security Centre, the UK Government's technical authority for cyber threats. This review is performed on an annual basis, the most recent completed in November 2023. Additionally, the Group has specific insurance cover in place to cover information security and cyber risks. The Manager periodically also engages external consultants to assess the robustness of its IT systems.

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 Parent Company financial position and financial performance;
·	in respect of the Group financial statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed and explained in the financial statements;
·	in respect of the Parent Company financial statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed and explained in the financial statements; and
·	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Parent Company and the Group will continue in business.

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

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

The Directors confirm, to the best of their knowledge:              

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

FINANCIAL STATEMENTS - EXTRACTS

Consolidated income statement

Year ended 31 December				2023			2022
£ million		Revenue	Capital	Total	Revenue	Capital	Total
Investment income		29.3	-	29.3	19.1	-	19.1
Other income		3.2	-	3.2	7.6	-	7.6
Gains/(losses) on fair value investments		-	109.9	109.9	-	(555.5)	(555.5)
Gains/(losses) on monetary items and borrowings		-	0.8	0.8	-	20.2	20.2
		32.5	110.7	143.2	26.7	(535.3)	(508.6)
Expenses
Operating expenses		(28.5)	(14.2)	(42.7)	(36.0)	(7.6)	(43.6)
Profit/(loss) before finance costs and taxation		4.0	96.5	100.5	(9.3)	(542.9)	(552.2)
Finance costs		(6.9)	(27.5)	(34.4)	(5.0)	(20.0)	(25.0)
Profit/(loss) before taxation		(2.9)	69.0	66.1	(14.3)	(562.9)	(577.2)
Taxation		-	-	-	-	-	-
Profit/(loss) for the year		(2.9)	69.0	66.1	(14.3)	(562.9)	(577.2)
Earnings/(loss) per ordinary share - basic		(1.9p)	46.1p	44.2p	(9.2p)	(362.1p)	(371.3p)
Earnings/(loss) per ordinary share - diluted		(1.9p)	45.7p	43.8p	(9.2p)	(362.1p)	(371.3p)

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

Consolidated statement of comprehensive income

Year ended 31 December				2023			2022
£ million		Revenue	Capital	Total	Revenue	Capital	Total
Profit/(loss) for the year		(2.9)	69.0	66.1	(14.3)	(562.9)	(577.2)
Revaluation gain/(loss) on property, plant and equipment		-	0.9	0.9	-	(2.1)	(2.1)
Actuarial gain/(loss) in defined benefit pension plan		(0.4)	-	(0.4)	(4.5)	-	(4.5)
Deferred tax (charge)/credit allocated to actuarial gain/(loss)		0.2	-	0.2	1.1	-	1.1
Total comprehensive income/(expense) for the year		(3.1)	69.9	66.8	(17.7)	(565.0)	(582.7)

Consolidated balance sheet

At 31 December
£ million		2023	2022
Non-current assets
Investments held at fair value		3,499.4	3,586.3
Investment property		34.1	37.9
Property, plant and equipment		21.6	20.7
Retirement benefit asset		0.1	0.5
Derivative financial instruments		5.9	1.0
		3,561.1	3,646.4
Current assets
Derivative financial instruments		65.4	57.3
Other receivables		71.2	245.3
Amounts owed by group undertakings		0.1	4.5
Cash at bank		204.3	218.0
		341.0	525.1
Total assets		3,902.1	4,171.5
Current liabilities
Borrowings		(142.9)	(236.2)
Derivative financial instruments		(2.8)	(10.4)
Other payables		(39.2)	(63.5)
Amounts owed to group undertakings		(0.1)	(0.1)
		(185.0)	(310.2)
Net current assets/(liabilities)		156.0	214.9
Total assets less current liabilities		3,717.1	3,861.3
Non-current liabilities
Borrowings		(137.9)	(134.4)
Derivative financial instruments		(0.0)	-
Deferred tax liability		(0.0)	(0.2)
Provisions		(3.0)	(1.8)
Lease liability		(2.9)	(3.2)
		(143.8)	(139.6)
Net assets		3,573.3	3,721.7
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		(36.7)	(46.3)
Capital reserve		3,393.1	3,548.9
Revenue reserve		(32.2)	(29.1)
Revaluation reserve		10.3	9.4
Total equity		3,573.3	3,721.7
Net asset value per ordinary share - basic		2,449p	2,414p
Net asset value per ordinary share - diluted		2,426p	2,388p

The financial statements were approved by the Board and authorised for issue on 4 March 2024.

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 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
Balance at 1 January 2023	156.8	45.7	36.3	(46.3)	3,548.9	(29.1)	9.4	3,721.7
Profit/(loss) for the year	-	-	-	-	69.0	(2.9)	-	66.1
Revaluation gain/(loss) on property, plant and equipment	-	-	-	-	-	-	0.9	0.9
Actuarial gain/(loss) in defined benefit plan	-	-	-	-	-	(0.4)	-	(0.4)
Deferred tax (charge)/credit allocated to actuarial gain/(loss)	-	-	-	-	-	0.2	-	0.2
Total comprehensive income/(expense) for the year	-	-	-	-	69.0	(3.1)	0.9	66.8
Dividends paid	-	-	-	-	(56.7)	-	-	(56.7)
Purchase of treasury shares	-	-	-	-	(163.1)	-	-	(163.1)
Movement in own shares reserve	-	-	-	9.6	-	-	-	9.6
Movement in share-based payments	-	-	-	-	(5.0)	-	-	(5.0)
Balance at 31 December 2023	156.8	45.7	36.3	(36.7)	3,393.1	(32.2)	10.3	3,573.3

Consolidated cash flow statement

Year ended 31 December		Consolidated cash flow
£ million		2023	2022
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest		328.6	57.7
Interest paid		(34.4)	(25.0)
Net cash inflow/(outflow) from operating activities		294.2	32.7
Cash flows from investing activities:
Sale/(purchase) of property, plant and equipment		(0.3)	(0.1)
Investments in subsidiary undertakings		-	-
Divestments of subsidiary undertakings		-	-
Net cash inflow/(outflow) from investing activities		(0.3)	(0.1)
Cash flows from financing activities:
Repayment of borrowings		(699.9)	(591.6)
Drawing of borrowings		618.6	555.4
Purchase of ordinary shares by EBT1		(9.8)	(40.4)
Purchase of ordinary shares into treasury		(163.1)	(11.0)
Dividends paid		(56.7)	(57.6)
Net cash inflow/(outflow) from financing activities		(310.9)	(145.2)
Increase/(decrease) in cash in the year		(17.0)	(112.6)
Cash at the start of the year		218.0	325.9
Effect of foreign exchange rate changes on cash		3.3	4.7
Cash at the year end		204.3	218.0

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

NOTES TO THE FINANCIAL STATEMENTS - EXTRACTS

Earnings per ordinary share - basic and diluted

The basic earnings per ordinary share for 2023 is based on the profit of £66.1 million (2022: loss of £577.2 million) and the weighted average number of ordinary shares in issue during the period of 149.5 million (2022: 155.5 million). The weighted average number of shares is adjusted for shares held in the EBT and in treasury in accordance with IAS 33 - Earnings per share.

£ million	2023	2022
Net revenue profit/(loss)	(2.9)	(14.3)
Net capital profit/(loss)	69.0	(562.9)
Total profit/(loss) for the year	66.1	(577.2)
Weighted average (million)	2023	2022
Number of shares in issue	156.8	156.8
Shares held in EBT	(1.8)	(1.0)
Shares held in treasury	(5.5)	(0.3)
Basic shares	149.5	155.5

pence	2023	2022
Revenue earnings/(loss) per ordinary share - basic	(1.9)	(9.2)
Capital earnings/(loss) per ordinary share - basic	46.1	(362.1)
Total earnings per share - basic	44.2	(371.3)

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

This adjustment was not required for 2022 as an increase in the shares in issue would have reduced the basic loss per ordinary share. As a result, there was no difference between the basic and diluted loss per ordinary share in the prior year.

Weighted average (million)	2023	2022
Basic shares	149.5	155.5
Effect of share-based payment awards	1.4	-
Diluted shares	150.9	155.5
pence	2023	2022
Revenue earnings/(loss) per ordinary share - diluted	(1.9)	(9.2)
Capital earnings/(loss) per ordinary share - diluted	45.7	(362.1)
Total earnings per ordinary share - diluted	43.8	(371.3)

Net asset value per ordinary share - basic and diluted

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

31 December	2023	2022
Net assets (£ million)	3,573.3	3,721.7
Number of shares in issue (million)	156.8	156.8
Shares held in EBT (million)	(1.6)	(2.0)
Shares held in treasury (million)	(9.3)	(0.7)
Basic shares (million)	145.9	154.1
Effect of share-based payment awards (million)	1.4	1.7
Diluted shares (million)	147.3	155.8
	2023	2022
31 December	pence	pence
Net asset value per ordinary share -  basic	2,449	2,414
Net asset value per ordinary share - diluted	2,426	2,388

Dividends

	2023	2022
	Pence	Pence	2023	2022
	per share	per share	£ million	£ million
Dividends paid in year	38.0	37.0	56.7	57.6

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

Dividends are not paid on shares held in treasury and the EBT waives its rights to all dividends.

On 27 February 2023 the Board declared a first interim dividend of 19.0 pence per share in respect of the year ended 31 December 2023 that was paid on 28 April 2023. A second interim dividend of 19.0 pence per share was declared by the Board on 31 July 2023 and paid on 27 October 2023.

The Board declares the payment of a first interim dividend of 19.5 pence per share in respect of the year ending 31 December 2024. This will be paid on 26 April 2024 to shareholders on the register on 5 April 2024, and funded from the accumulated capital profits.

Glossary and Alternative Performance Measures

Glossary

Within the 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	2023	2022
Total assets	3,902.1	4,171.5
Less: cash	(204.3)	(218.0)
Sub total	3,697.8	3,953.5
Net assets	3,573.3	3,721.7
Gearing	3.5%	6.2%

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

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

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 2023 was 2,426 pence, an increase of 38 pence, or 1.6%, from 2,388 pence at the previous year end. As dividends totalling 38 pence per share were paid during the year, the effect of reinvesting the dividends in the NAV is 1.6%, which results in a NAV total return of +3.2%.

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

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

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

£ million	2023	2022
Operating expenses	42.7	43.6
Adjustments	(15.0)	(7.6)
Ongoing charges	27.7	36.0
Average net assets	3,614	4,045
OCF	0.77%	0.89%

In addition to the above, managers charge fees within the external funds (and in a few instances directly to RIT in relation to segregated accounts). We have estimated that, based on average net assets across the year and annual management fee rates per fund (excluding performance fees), these represent an additional 0.94% of average net assets (2022: 0.88%).

Premium/discount: The premium or discount (or rating) is calculated by taking the closing share price on 31 December 2023 and dividing it by the NAV per share at 31 December 2023, expressed as a net percentage. If the share price is above/below the NAV per share, the shares are said to be trading at a premium/ discount.

Share price total return or total shareholder return (TSR)*: The TSR for a period represents the change in the share price adjusted to reflect dividends paid during the period. Similar to calculating a NAV total return, the calculation assumes the dividends are notionally reinvested at the daily closing share price following the shares going ex-dividend. The share price on 31 December 2023 closed at 1,882 pence, a decrease of 243 pence, or 11.4%, from 2,125 pence at the previous year end. Dividends totalling 38 pence per share were paid during the year, and the effect of reinvesting the dividends in the share price is 1.8%, which results in a TSR of -9.6%. The TSR is one of the Company's KPIs.

Basis of presentation

The financial information for the year ended 31 December 2023 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 2022 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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