Half-Yearly Results and Dividend

RNS Number : 1859P

RIT Capital Partners PLC

15 August 2014

 



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15 August 2014

RIT Capital Partners plc

Results for the six months ending 30 June 2014

RIT Capital Partners plc today publishes its results for the six months ending 30 June 2014.

THE FOLLOWING IS EXTRACTED FROM THE COMPANY'S HALF-YEARLY FINANCIAL REPORT

FINANCIAL SUMMARY

	30 June 2014	31 December 2013	Change
Net Assets	£2,173m	£2,146m	£27m
NAV per share	1,401p	1,384p	17p
Share price	1,316p	1,260p	56p
Discount	-6.1%	-9.0%	2.9%
First interim dividend paid	14.7p	14.0p	5.0%
Second interim dividend declared/paid	14.7p	14.0p	5.0%
Total Dividend	29.4p	28.0p	5.0%
Gearing	13.8%	5.2%	8.6%
NAV per share total return			2.4%
Share price total return			5.6%
RPI plus 3.0% per annum			2.6%
MSCI All Country World Index1			4.1%

Percentage Changes to date	6 Months	1 Year	5 Years	10 Years
NAV per share total return	2.4%	6.7%	65.6%	150.1%
RPI plus 3.0% per annum	2.6%	5.7%	39.2%	84.4%
MSCI All Country World Index1	4.1%	15.0%	89.4%	105.7%

¹ The MSCI All Country World Index (ACWI) we have adopted is a total return index based on 50% of the ACWI measured in 
  

   Sterling  and 50% measured in local currencies.

CHAIRMAN'S STATEMENT

Your Company's net asset value at the end of June was 1,401 pence per share, an all-time high. This represents a total return, including the 14.7 pence interim dividend, of 2.4% for the half year. Over the same period, the share price total return (including the dividend) was 5.6%.

Given current stock market valuations, further market appreciation will continue to be influenced by central bank policy of creating money and maintaining low interest rates. We have become uncomfortable in participating in liquidity fuelled markets and are sceptical as to whether the current degree of investor complacency can be maintained. We continue to search assiduously for investment opportunities that are likely to benefit from structural tailwinds at attractive valuations and which are not conditional on short-term monetary policies. The search however has become increasingly challenging. Almost every asset class is highly priced by historical standards at a time when the precarious geo-political situation in the Middle East and Russia could undermine the fragile economic recovery which central bank policy has helped to bring about.

Our individual stock portfolio now constitutes about 20% of our NAV and has outperformed equity markets over the period. In the first part of the year we took advantage of temporary weaknesses to increase our holdings in emerging market-related and Japanese securities. We avoided some of the sharp falls in technology and growth stocks by reducing exposure in advance of the correction.

Returns from our externally managed equity fund portfolio were positive with a fairly wide dispersion as some of the most significant winners of 2013 have underperformed in 2014. We continue to concentrate our holdings into a reduced number of talented managers, giving us greater focus and allowing a more meaningful impact to our NAV.

Our private investment portfolio had a reasonably positive period with agreed realisations of Metron, Chart Show and, more recently, Martin Currie. In addition there were modest increases in value in our unquoted funds and directly held investments.

Absolute Return and Credit investments now account for approximately 15% of our assets. Through investing in exceptional managers, we are well positioned to capture current structural inefficiencies in credit markets. Our objective is for this asset class to deliver high single digit returns. We have taken advantage of the current low level of interest rates to put in place borrowings of £400 million. In the first six months of the year these investments have generated returns considerably higher than our borrowing costs and profits earned, subject to credit risk, will provide a significant offset against our operating costs.

A challenge in the period under review has been currency allocation. We increased our Sterling exposure to a level higher than at any time in recent history; however its appreciation since the start of the year has affected your Company's NAV given the global nature of our investments. In US Dollar terms our NAV return was 5.7% compared to 2.4% in Sterling. Mindful of the Bank of England's continued hawkish stance we will maintain our relatively high level of exposure to Sterling, a portion of which is held through options as we see risks ahead which may cause a reversal of the currency's upward trend.

During these complex and fragile times, our priority remains capital preservation and creating the foundations for longer term growth. We do this by continuing to search out assets which reflect our belief in investment fundamentals while we strive to identify compelling special situations.

Dividend

Following the first interim dividend of 14.7 pence paid in April, we have declared a second interim dividend of the same amount. This will be paid on 24 October to shareholders registered on 3 October and will provide shareholders with a total dividend in 2014 of 29.4 pence per share, a 5.0% increase over 2013.

Board and Management

As we announced at our AGM, we welcome the appointment of John Makinson to our Board as a non-executive Director. John is the Chairman of Penguin Random House, having previously been the Chairman and CEO of the Penguin Group. He served on the Board of Pearson for many years and as Managing Director of the Financial Times.

On management, Francesco Goedhuis has demonstrated exceptional skills and leadership qualities. His colleagues and I welcome his appointment as Chief Executive of J Rothschild Capital Management. Your Board is confident that he and the team around him have the talent, determination and skills to create value for our shareholders in the years ahead.

Rothschild

14 August 2014

CONTRIBUTION TO TOTAL RETURN, 6 MONTHS TO JUNE 2014    

	30 June 2014 % Net Assets	Return on Capital %¹	Contribution to Total  Return %
Quoted Equity - Long	52.2%	4.2%	1.8%
Quoted Equity - Hedge	15.3%	2.7%	0.4%
Private Investments - Direct	11.7%	4.6%	0.6%
Private Investments - Funds	13.6%	10.3%	1.4%
Absolute Return & Credit	14.9%	4.0%	0.5%
Real Assets	4.3%	9.3%	0.4%
Currency²	0.5%	-	-1.7%
Liquidity, Borrowings and Other	-12.5%	-	-1.0%
Total	100.0%		2.4%

¹ Category returns exclude the impact of currency translation.

² The currency contribution includes the impact of currency translation and gains/(losses) from currency forwards and options.

Net Asset VALUE BY ASSET CATEGORY (%)

	30 June 2014 % Net Assets	31 December 2013 % Net Assets
Quoted Equity - Long	52	49
Quoted Equity - Hedge	15	14
Private Investments - Direct	12	12
Private Investments - Funds	14	13
Absolute Return & Credit	15	7
Real Assets	4	4
Other Investments	1	1
Liquidity, Borrowings and Other	-13	0
Total	100	100

Net Asset VALUE by Currency (%)

	30 June 2014  % Net Assets	31 December 2013 % Net Assets
Sterling	52	54
US Dollar	45	44
Japanese Yen	1	0
Euro	-8	-6
Mexican Peso	2	4
Other	8	4
Total	100	100

Note: This table excludes exposure from currency options.

Net Asset VALUE by Geography (%)

	30 June 2014  % Net Assets	31 December 2013 % Net Assets
North America	48	45
United Kingdom	21	20
Emerging Markets	18	14
Europe	12	12
Japan	10	9
Global/Other	4	2
Liquidity, Borrowings, Currency	-10	3
Total	103	105

Note: Includes long and short equity exposure from futures but excludes exposure from government bond futures.

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 30 June 2014	Notes	Revenue return £ million	Capital return £ million	Total £ million
Income
Investment income		13.6	-	13.6
Other income		0.9	-	0.9
Total income		14.5	-	14.5
Gains/(losses) on portfolio investments held at fair value		-	48.5	48.5
Exchange gains/(losses) on monetary items and borrowings		-	6.6	6.6
		14.5	55.1	69.6
Expenses
Administrative expenses		(8.2)	(1.0)	(9.2)
Investment management fees		(1.9)	(0.3)	(2.2)
Profit/(loss) before finance costs and tax		4.4	53.8	58.2
Finance costs		(6.4)	-	(6.4)
Profit/(loss) before tax		(2.0)	53.8	51.8
Taxation		-	-	-
Profit/(loss) for the period	2	(2.0)	53.8	51.8
Earnings per ordinary share - basic	2	(1.3p)	34.8p	33.5p
Earnings per ordinary share - diluted	2	(1.3p)	34.7p	33.4p

The total column of this statement represents the Group's Consolidated Income Statement, prepared in accordance with International Financial Reporting Standards (IFRS). The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. The notes are an integral part of these condensed interim financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the six months ended 30 June 2014	Revenue return £ million	Capital return £ million	Total £ million
Profit/(loss) for the period	(2.0)	53.8	51.8
Other comprehensive income/(expense) that will not be subsequently reclassified to profit or loss:
Actuarial gain/(loss) in defined benefit pension plan	(0.4)	-	(0.4)
Total comprehensive income/(expense) for the period	(2.4)	53.8	51.4

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 30 June 2013 (restated)	Notes	Revenue return £ million	Capital return £ million	Total £ million
Income
Investment income		11.5	-	11.5
Other income		2.3	-	2.3
Total income		13.8	-	13.8
Gains/(losses) on portfolio investments held at fair value		-	257.1	257.1
Exchange gains/(losses) on monetary items and borrowings		-	(0.7)	(0.7)
		13.8	256.4	270.2
Expenses
Administrative expenses		(10.4)	(1.0)	(11.4)
Investment management fees		(1.7)	(0.7)	(2.4)
Profit/(loss) before finance costs and tax		1.7	254.7	256.4
Finance costs		(2.5)	-	(2.5)
Profit/(loss) before tax		(0.8)	254.7	253.9
Taxation		(0.5)	(0.4)	(0.9)
Profit/(loss) for the period	2	(1.3)	254.3	253.0
Earnings per ordinary share - basic	2	(0.8p)	164.1p	163.3p
Earnings per ordinary share - diluted	2	(0.8p)	164.0p	163.2p

The total column of this statement represents the Group's Consolidated Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. The notes are an integral part of these condensed interim financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the six months ended 30 June 2013 (restated)	Revenue return £ million	Capital return £ million	Total £ million
Profit/(loss) for the period	(1.3)	254.3	253.0
Other comprehensive income/(expense) that will not be subsequently reclassified to profit or loss:
Actuarial gain/(loss) in defined benefit pension plan	1.5	-	1.5
Total comprehensive income/(expense) for the period	0.2	254.3	254.5

CONSOLIDATED BALANCE SHEET (UNAUDITED)

	Notes	30 June 2014 £ million	31 December 2013  (restated) £ million	1 January  2013  (restated) £ million
Non-current assets
Investments held at fair value	6	2,493.6	2,224.9	1,943.9
Investment property		55.4	53.4	46.1
Property, plant and equipment		0.3	0.3	0.2
Retirement benefit asset		0.5	0.5	-
Derivative financial instruments		0.4	0.4	-
Deferred tax asset		1.0	1.0	2.6
		2,551.2	2,280.5	1,992.8
Current assets
Derivative financial instruments		21.3	27.2	25.0
Sales for future settlement		0.8	0.7	66.9
Other receivables		26.3	110.9	25.2
Tax receivable		0.4	0.2	0.5
Cash at bank		147.4	51.0	65.1
		196.2	190.0	182.7
Total assets		2,747.4	2,470.5	2,175.5
Current liabilities
Borrowings		(386.0)	(197.4)	(147.8)
Purchases for future settlement		(44.9)	(0.8)	(4.5)
Derivative financial instruments		(7.1)	(5.8)	(20.2)
Provisions		(0.5)	(0.2)	(1.2)
Other payables	6	(132.3)	(117.4)	(146.8)
		(570.8)	(321.6)	(320.5)
Net current assets/(liabilities)		(374.6)	(131.6)	(137.8)
Total assets less current liabilities		2,176.6	2,148.9	1,855.0
Non-current liabilities
Provisions		(2.4)	(2.4)	(5.4)
Finance lease liability		(0.5)	(0.5)	(0.5)
Retirement benefit liability		-	-	(1.9)
Derivative financial instruments		(1.1)	-	-
		(4.0)	(2.9)	(7.8)
Net assets		2,172.6	2,146.0	1,847.2
Equity attributable to owners of the Company
Share capital		155.4	155.4	155.4
Share premium		17.3	17.3	17.3
Capital redemption reserve		36.3	36.3	36.3
Own shares reserve		(7.8)	(5.5)	(6.4)
Share based payment reserve		5.2	5.0	4.7
Foreign currency translation reserve		0.2	0.2	0.2
Capital reserve		1,946.3	1,915.2	1,609.4
Revenue reserve		19.7	22.1	30.3
Total shareholders' equity		2,172.6	2,146.0	1,847.2
Net asset value per ordinary share - basic	3	1,403p	1,385p	1,192p
Net asset value per ordinary share - diluted	3	1,401p	1,384p	1,191p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Period ended 30 June 2014	Share capital £ million	Share   premium £ million	Capital redemption reserve £ million	Own shares reserve £ million	Share based payment reserve £ million	Foreign  currency translation reserve £ million	Capital reserve £ million	Revenue reserve £ million	Total equity £ million
Balance at 1 January 2014	155.4	17.3	36.3	(5.5)	5.0	0.2	1,915.2	22.1	2,146.0
Profit/(loss) for the period	-	-	-	-	-	-	53.8	(2.0)	51.8
Actuarial gain/(loss) in defined benefit pension plan	-	-	-	-	-	-	-	(0.4)	(0.4)
Total Comprehensive income/(expense) for the period	-	-	-	-	-	-	53.8	(2.4)	51.4
Dividends paid (note 4)	-	-	-	-	-	-	(22.7)	-	(22.7)
Movement in Own shares reserve	-	-	-	(2.3)	-	-	-	-	(2.3)
Movement in Share based payment reserve	-	-	-	-	0.2	-	-	-	0.2
Balance at 30 June 2014	155.4	17.3	36.3	(7.8)	5.2	0.2	1,946.3	19.7	2,172.6
Period ended 30 June 2013 (restated)	Share capital £ million	Share premium £ million	Capital redemption reserve £ million	Own shares reserve £ million	Share based payment reserve £ million	Foreign currency translation reserve £ million	Capital reserve £ million	Revenue reserve £ million	Total equity £ million
Balance at 1 January 2013	155.4	17.3	36.3	(6.4)	4.7	0.2	1,609.4	30.3	1,847.2
Profit/(loss) for the period	-	-	-	-	-	-	254.3	(1.3)	253.0
Actuarial gain/(loss) in defined benefit pension plan	-	-	-	-	-	-	-	1.5	1.5
Total Comprehensive income/(expense) for the period	-	-	-	-	-	-	254.3	0.2	254.5
Dividends paid (note 4)	-	-	-	-	-	-	(21.7)	-	(21.7)
Movement in Own shares reserve	-	-	-	0.9	-	-	-	-	0.9
Movement in Share based payment reserve	-	-	-	-	(0.1)	-	-	-	(0.1)
Balance at 30 June 2013	155.4	17.3	36.3	(5.5)	4.6	0.2	1,842.0	30.5	2,080.8

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

	Six months ended 30 June 2014 £ million	Six months ended 30 June 2013 (restated) £ million
Cash inflow/(outflow) before taxation and interest Taxation received/(paid) Interest paid	(71.3) - (4.6)	112.1 (0.1) (2.5)
Net cash inflow/(outflow) from operating activities	(75.9)	109.5
Investing activities:
Purchase of property, plant and equipment	-	(0.2)
Net cash inflow/(outflow) from investing activities	-	(0.2)
Financing activities: Purchase of ordinary shares by Employee Benefit Trust1 Proceeds/(repayment) of borrowings Equity dividend paid	(2.8) 200.0 (22.7)	- (49.8) (21.7)
Net cash inflow/(outflow) from financing activities	174.5	(71.5)
Increase/(decrease) in cash and cash equivalents in the period	98.6	37.8
Cash and cash equivalents at the start of the period	86.4	88.3
Effect of foreign exchange rate changes	(6.4)	5.8
Cash and cash equivalents at the period end	178.6	131.9
Reconciliation: Cash at bank Money market funds (included in portfolio investments)	147.4 31.2	105.7 26.2
Cash and cash equivalents at the period end	178.6	131.9

¹ Shares are disclosed in 'Own shares reserve' on the Consolidated Balance Sheet.

NOTES TO THE FINANCIAL STATEMENTS

1.   Basis of Accounting

These condensed financial statements are the half-yearly consolidated financial statements of RIT Capital Partners plc ('the Company') and its subsidiaries (together 'the Group') for the six months ended 30 June 2014. They are prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, and with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the European Union, and were approved on 14 August 2014. These half-yearly financial statements should be read in conjunction with the Report and Accounts for the year ended 31 December 2013, which were prepared in accordance with IFRS, as adopted by the European Union, as they provide an update of previously reported information. The half-yearly consolidated financial statements have been prepared in accordance with the accounting policies set out in the notes to the consolidated financial statements for the year ended 31 December 2013 apart from adopting IFRS 10, 'Consolidated Financial Statements', IFRS 11, 'Joint Arrangements', IFRS 12, 'Disclosure of Interests in Other Entities', IAS 27 (revised 2011), 'Separate Financial Statements' and IAS 28 (revised 2011), 'Associates and Joint Ventures' as well as the Investment Entities Amendments to IFRS 10, IFRS 12, IAS 27, and IAS 28 (the 'Amendments'). The amendment to IFRS 10 is effective from 1 January 2014 for investment entities. The Company, possessing all the characteristics required by IFRS 10, considers itself an investment entity. The Group is therefore required to record investments in all of its subsidiaries apart from J Rothschild Capital Management Limited, at their fair value; rather than consolidating these entities on a line by line basis with corresponding elimination of intragroup balances. This is the first time the Group has applied this accounting policy and as a result the comparative figures have been restated. The impact of this change has no effect on net asset value per share or overall earnings per share but will result in further disclosures regarding the non-consolidated subsidiaries in the Report and Accounts for the year ended 31 December 2014.

Critical Accounting Assumptions and Judgements

Private Investments - Direct are valued at management's best estimate of fair value in accordance with IFRS, having regard to International Private Equity and Venture Capital Valuation Guidelines as recommended by the British Venture Capital Association. The inputs into the valuation methodologies adopted include observable historical data such as earnings or cash flow as well as more subjective data such as earnings forecasts or discount rates. As a result of this, the determination of fair value requires significant management judgement.

2.   Earnings Per Ordinary Share (unaudited)

The earnings per ordinary share for the six months ended 30 June 2014 is based on the net profit of £51.8 million (six months ended 30 June 2013: net profit of £253.0 million) and the weighted average number of ordinary shares in issue during the period of 154.8 million (six months ended 30 June 2013: 154.9 million) as shown below:

	Six months ended 30 June 2014  million	Six months ended 30 June 2013 (restated)  million
Weighted average number of shares in issue	154.8	154.9
Weighted average effect of Share Appreciation Rights	0.2	0.1
	155.0	155.0

The earnings per ordinary share figure can be further analysed between revenue and capital as set out below:

	Six months ended 30 June 2014 £ million	Six months ended 30 June 2013 (restated) £ million
Net revenue profit/(loss)	(2.0)	(1.3)
Net capital profit/(loss)	53.8	254.3
Net profit/(loss)	51.8	253.0
	Pence per share	Pence per share
Revenue earnings per ordinary share - basic	(1.3)	(0.8)
Capital earnings per ordinary share - basic	34.8	164.1
Earnings per ordinary share - basic	33.5	163.3
	Pence per share	Pence per share
Revenue earnings per ordinary share - diluted	(1.3)	(0.8)
Capital earnings per ordinary share - diluted	34.7	164.0
Earnings per ordinary share - diluted	33.4	163.2

3.   Net Asset Value Per Ordinary Share - Basic and Diluted (unaudited)

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

	30 June 2014	31 December 2013 (restated)	1 January 2013 (restated)
Net assets (£ million)	2,172.6	2,146.0	1,847.2
Number of shares in issue (million)	155.4	155.4	155.4
Own shares (million)	(0.5)	(0.4)	(0.5)
	154.9	155.0	154.9
Effect of dilutive potential ordinary shares:
Share Appreciation Rights (million)	0.2	0.1	0.1
Diluted shares	155.1	155.1	155.0
	30 June 2014 Pence per share	31 December 2013 (restated) Pence per share	1 January 2013 (restated) Pence per share
Net asset value per ordinary share - basic	1,403p	1,385p	1,192p
Net asset value per ordinary share - diluted	1,401p	1,384p	1,191p

4.   Dividends (unaudited)

	Six months ended 30 June 2014	Six months ended 30 June 2013
Dividends (£ million)	22.7	21.7
Dividends (Pence per share)	14.7	14.0

The Board of Directors declared an interim dividend of 14.7p per ordinary share (£22.7 million) on 5 March 2014. This amount was paid on 29 April 2014. The Board has declared the payment of a second interim dividend of 14.7p per ordinary share (£22.7 million) in respect of the year ending 31 December 2014. This will be paid on 24 October 2014 to shareholders on the register on 3 October 2014.

A more detailed commentary may be found in the Chairman's Statement in the Report and Accounts for the year ended 31 December 2013.

5.   Financial Assets & Liabilities (unaudited)

IFRS 13 requires the Group to classify its fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making those measurements. These are follows:

·      Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

·      Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·      Level 3: Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

The vast majority of the Group's financial assets and liabilities and the investment properties are measured at fair value on a recurring basis. The following table analyses within the fair hierarchy the Group's assets and liabilities at 30 June 2014:

As at 30 June 2014	Level 1 £ million	Level 2 £ million	Level 3 £ million	Total £  million
Financial assets at fair value through profit and loss:
Quoted Equity - Stocks	588.5	5.7	-	594.2
Quoted Equity - Investment Funds	3.3	830.3	6.8	840.4
Private Investments - Direct	-	-	385.0¹	385.0
Private Investments - Funds	-	-	294.7	294.7
Absolute Return & Credit	-	252.2	69.1	321.3
Real Assets	-	26.8	-	26.8
Liquidity	31.2	-	-	31.2
Derivative financial instruments	-	21.7	-	21.7
Total financial assets at fair value through profit and loss	623.0	1,136.7	755.6	2,515.3
Non-financial assets measured at fair value:
Investment Property	-	-	55.4	55.4
Total non-financial assets measured at fair value	-	-	55.4	55.4
Financial liabilities at fair value through profit and loss:
Derivative financial instruments	-	(8.2)	-	(8.2)
Total financial liabilities at fair value through profit and loss	-	(8.2)	-	(8.2)
Total net assets measured at fair value	623.0	1,128.5	811.0	2,562.5

     Movements in Level 3 assets

Period ended 30 June 2014	Opening Balance £ million	Reclass- ifications £ million	Purchases £ million	Sales £ million	Realised gains through profit & loss £ million	Unrealised gains through profit & loss £ million	Closing balance £ million
Quoted Equity - Investment funds	1.7	5.0	0.4	-	-	(0.3)	6.8
Private Investments - Direct	377.2	-	2.2	(3.1)	3.9	4.8	385.0
Private Investments - Funds	282.9	-	13.0	(23.4)	2.3	19.9	294.7
Absolute Return & Credit	149.9	(118.3)	85.2	(52.5)	0.9	3.9	69.1
Investment Property	53.4	-	-	-	-	2.0	55.4
	865.1	(113.3)	100.8	(79.0)	7.1	30.3	811.0

The realised and unrealised gains and losses shown in the table above for level 3 assets are included in 'Gains/(losses) on portfolio investments held at fair value' in the Consolidated Income Statement.

¹ Includes intragroup balances of £131.4 million with non-consolidated subsidiaries.

As discussed in note 1, the retrospective application of the 'Investment Entity: exemption from consolidation' required by IFRS 10 has resulted in certain subsidiaries being recorded within 'Investments held at fair value' on the Consolidated Balance Sheet as they are no longer consolidated on a line by line basis. This reclassification is shown in the comparative table for the year ended 31 December 2013 and is deemed to have occurred at 1 January 2013. During the period the Group transferred assets with a fair value of £5.0 million from level 2 to level 3 and assets with a fair value of £118.3 million from level 3 to level 2 following consideration of the nature of the underlying fund investments, the valuation techniques and inputs used and the significance in each case of unobservable inputs. The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the reporting period when they are deemed to occur. No financial assets or liabilities were reclassified as a result of any change in their purpose or use during the period.

A description of the valuation techniques used by the Group with regard to investments categorised in each level of the fair value hierarchy is detailed below. Where the Group invests in a fund or a partnership, the categorisation of such investment between levels 1 to 3 is determined by reference to the nature of the underlying investments. If the underlying investments are categorised across different levels, the lowest level that forms a significant proportion of   the fund or partnership exposure is used to determine the reporting disclosure.

Level 1

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the    current bid price or the last traded price depending on the convention of the exchange on which the investment is quoted. Where a market price is available but the market is not considered active, the Group has classified these investments as level 2.

Level 2

The fair value of financial instruments that are not traded in an active market is determined by using valuation  techniques which maximise the use of observable market data where it is available. Specific valuation techniques used to value derivatives include quoted market prices for similar instruments, counterparty quotes and the use of forward exchange rates to estimate the fair value of forward foreign exchange contracts at the balance sheet date. Investments in externally managed funds which themselves invest primarily in listed securities are valued at the price or net asset value released by the investment manager/fund administrator as at the balance sheet date.

Level 3

The Group considers all private investments, direct and funds, as level 3 assets, as the valuations of these assets are not based on observable market data. Where other funds invest a significant proportion of their assets into illiquid stocks, these are also considered by the Group to be level 3 assets.

For the Private Investments - Funds fair value is deemed to be the capital statement account balance as reported by the General Partner of the investee fund which represents RIT's pro-rata proportion of the fund's net asset value. A review is conducted annually over the valuation basis of the investee funds to confirm these are valued in accordance with fair value methodologies.

Private Investments - Direct are valued on a semi-annual basis using techniques including a market approach, cost approach or income approach. The valuation process involves the finance and investment functions with the final valuations being reviewed by the Valuation Committee. The specific techniques used will typically include earnings multiples, discounted cash flow analysis, the value of recent share transactions and, where appropriate, industry rules of thumb. The valuations will often reflect a synthesis of a number of distinct approaches in determining the final fair value estimate. The individual approach for each investment will vary depending on relevant factors that a market participant would take into account in pricing the asset. These might include the specific industry dynamics, the company's stage of development, profitability, growth prospects or risk as well as the rights associated with the particular security.

The fair value of investments in non-consolidated subsidiaries is considered to be the net asset value of the individual subsidiary as at the balance sheet date. The net asset value comprises various assets and liabilities which are fair valued on a recurring basis and is considered to be level 3.

On a semi-annual basis, the Group engages external, independent and qualified valuers to determine the fair value of the Group's investment properties. Investment properties were valued at 30 June 2014 by Jones Lang LaSalle in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors on the basis of open market value.

Further information in relation to the directly held private investment portfolio at 30 June 2014 is set out below:

Sector	Fair Value £ million	Valuation Methods/Inputs
Financials	57.8	Revenue multiples (1.1x); Book value multiples (0.7x-0.9x); DCF (5%-20% cost of capital); P/E (11x-17x); EV/EBITDA (6x)
TMT	19.7	DCF (16%-17% cost of capital); EV/EBITDA (7x-20x)
Consumer Staples	10.6	EV/EBITDA (7x)
Industrial	3.3	EV/EBITDA (5x-6x); P/E (9x)
Energy	1.0	DCF (10% cost of capital)
Total	92.4

The remainder of the portfolio was valued using the following primary methods: recent sales price (£14.0 million), price of a recent financing round (£85.6 million), cost of a recent investment (£42.1 million) and third party valuations (£19.5 million).

Given the range of techniques and inputs used in the valuation process, and the fact that in most cases more than one approach is used, a sensitivity analysis is not considered to be a practical or meaningful disclosure. Shareholders should note however that increases or decreases in any of the inputs listed above in isolation may result in higher or lower fair value measurements.

The following table analyses within the fair value hierarchy the Group's assets and liabilities at 31 December 2013:

As at 31 December (restated)	Level 1 £ million	Level 2 £ million	Level 3 £ million	Total £  million
Financial assets at fair value through profit and loss:
Quoted Equity - Stocks	512.4	6.8	-	519.2
Quoted Equity - Investment Funds	-	785.8	1.7	787.5
Private Investments - Direct	-	-	377.2¹	377.2
Private Investments - Funds	-	-	282.9	282.9
Absolute Return & Credit	-	-	149.9	149.9
Real Assets	-	24.3	-	24.3
Liquidity	83.9	-	-	83.9
Derivative financial instruments	-	27.6	-	27.6
Total financial assets at fair value through profit and loss	596.3	844.5	811.7	2,252.5
Non-financial assets measured at fair value:
Investment Property	-	-	53.4	53.4
Total non-financial assets measured at fair value	-	-	53.4	53.4
Financial liabilities at fair value through profit and loss:
Derivative financial instruments	-	(5.8)	-	(5.8)
Total financial liabilities at fair value through profit and loss	-	(5.8)	-	(5.8)
Total net assets measured at fair value	596.3	838.7	865.1	2,300.1

Further information in relation to the directly held private investment portfolio at 31 December 2013 is set out below:

Sector	Fair Value £ million	Valuation Methods/Inputs
Financials	53.8	Revenue multiple (1.1x); Book value multiples (0.7x-0.8x); DCF (5%-20% cost of capital); P/E (17x-22x); EV/EBITDA (5x)
TMT	25.4	DCF (16%-17% cost of capital); EV/EBITDA (7x-20x)
Consumer Staples/Industrial	14.4	EV/EBITDA (5x-8x); P/E (9x)
Total	93.6

The remainder of the direct portfolio was valued using the following primary methods: price of recent financing round (£71.9 million), cost of a recent investment (£76.8 million) and third party valuations (£20.8 million).

¹Includes intragroup balances of £114.1 million with non-consolidated subsidiaries.

Movements in Level 3 assets

Year ended 31 December 2013 (restated)	Opening Balance £ million	Reclass- ifications £ million	Purchases £ million	Sales £ million	Realised gains through profit & loss £ million	Unrealised gains through profit & loss £ million	Closing balance £ million
Quoted Equity - Investment funds	1.9	-	0.6	(0.3)	-	(0.5)	1.7
Private Investments - Direct	209.9	144.3	65.6	(55.9)	3.6	9.7	377.2
Private Investments - Funds	269.0	(1.8)	50.3	(52.8)	2.1	16.1	282.9
Absolute Return & Credit	57.2	-	107.4	(17.0)	1.4	0.9	149.9
Investment Property	46.1	-	-	-	-	7.3	53.4
	584.1	142.5	223.9	(126.0)	7.1	33.5	865.1

For all other financial assets and liabilities as shown on the Consolidated Balance Sheet, the carrying amount is a reasonable approximation of fair value.

In December 2013 the Company signed two new credit facilities totalling £400 million to maintain access to medium term structural gearing and replace the previous $400 million facility on its expiry. The new facilities are multi-currency revolving facilities with a £200million three-year facility provided by National Australia Bank and a £200 million five-year facility provided by Commonwealth Bank of Australia. Both facilities, which are fully drawn, are flexible as to the number, currency and duration of any drawdowns and bear floating interest linked to the relevant three-month LIBOR. As the loans are drawn in tranches with tenors of less than one year, they are classified within current liabilities. The Company has entered into interest rate swaps resulting in an overall fixed cost of borrowing of 2.3%. No bank loans are held with subsidiaries.

6.   Comparative Information

The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 June 2014 and 30 June 2013 has been reviewed not audited.

The information for the year ended 31 December 2013 has been extracted from the latest published audited financial statements and restated following implementation of the 'Investment Entity: exemption from consolidation' amendment required by IFRS 10. The audited financial statements for the year ended 31 December 2013 have been filed with the Registrar of Companies and the report of the auditors on those accounts contained no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

At 1 January 2014, the effective date of the IFRS 10 amendment, the fair value of the subsidiaries that were previously consolidated was £157.4m and their amended treatment under IFRS 10 results in both the 'Investments held at fair value' and 'Other payables' lines on the Consolidated Balance Sheet being increased compared with the previously published figures by the grossing up for intragroup balances previously eliminated on consolidation.

REGULATORY DISCLOSURES

Statement of Directors' Responsibilities

In accordance with the Disclosure and Transparency Rules 4.2.4R, 4.2.7R and 4.2.8R, we confirm that to the best of our knowledge:

a)    The condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union, as required by the Disclosure and Transparency Rule 4.2.4R;

b)    The Chairman's Statement includes a fair review of the information required to be disclosed under the Disclosure and Transparency Rule 4.2.7R, interim management report. This includes an indication of important events that have occurred during the first six months of the financial year, and their impact on that condensed set of financial statements presented in the Half-Yearly Financial Report. A description of the principal risks and uncertainties for the remaining six months of the financial year is set out below; and

c)     There were no changes in the transactions or arrangements with related parties as described in the Group's Report and Accounts for the year ended 31 December 2013 that would have had a material effect on the financial position or performance of the Group in the first six months of the current financial year.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Group for the second half of the financial year are substantially the same as those described in the Report and Accounts for the year ended 31 December 2013. As with any investment company, the main risk is market risk.

Going concern

The factors likely to effect the Group's ability to continue as a going concern were set out in the Report and Accounts for the year ended 31 December 2013. As at 30 June 2014, there have been no significant changes to these factors. Having reviewed the Company's forecasts and other relevant evidence, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.

Rothschild

14 August 2014

For and on behalf of the Board

END OF HALF-YEARLY FINANCIAL REPORT EXTRACTS

ENQUIRIES:

Brunswick Group LLP:

Tom Burns / Fiona Micallef-Eynaud - 020 7404 5959

About RIT Capital Partners plc:

RIT Capital Partners plc is an investment company listed on the London Stock Exchange. It is chaired by Lord Rothschild, whose family interests retain a significant holding. www.ritcap.com

 

END

 

 

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