RIT Cap. Partners - Half-year Report
02/08/2022 07:00
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RNS Number : 5291U RIT Capital Partners PLC 02 August 2022
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(http://www.rns-pdf.londonstockexchange.com/rns/5291U_1-2022-8-1.pdf)
2 August 2022
RIT Capital Partners plc
Results for the half year ended 30 June 2022
RIT Capital Partners plc today published its results for the half year ended
30 June 2022.
Financial Highlights:
· Net Asset Value (NAV) per share of 2,530 pence at 30 June 2022
· NAV per share total return of -8.8% for the period, protecting shareholders
from the worst of the declines in equity markets and outperforming the MSCI
All Country World Index, 50% £ (ACWI) which lost -14.7%
· 5-year NAV return of 54.0%, outperforming the 43.4% for the ACWI, and with
significantly lower risk
· Share price closed at 2,400 pence, a discount of 5.1%
Performance Highlights:
· Keeping our net quoted equity exposure towards the lower end of our historical
ranges (at 38%) helped to protect shareholders from the worst of the market
declines
· Japanese and reflationary exposures outperformed; the quoted equity book
broadly performed in line with markets
· Absolute return and credit portfolio contribution was flat, emphasising its
low correlation to equity markets, and a key feature of our differentiated
approach to portfolio diversification
· After exceptional performance over the past few years, private investments
gave back some gains, impacted in particular by US technology market
disruption
· US dollar and associated currencies strengthening contributed positively
Dividends and Buybacks:
· Dividend paid in April of 18.5 pence per share
· The Board has declared a dividend of 18.5 pence per share for October
· This represents an increase of 5% over the previous year's dividend
· The Company continued its approach of seeking to minimise volatility for
shareholders, buying back shares accretively when they were trading on a high
single-digit discount
Summary:
· Over the last five years, net assets have grown by ~£1.5 billion (before
dividends)
· Over the same period, our NAV total return of 54.0% has outperformed the ACWI
(43.4%) and CPI+3% (36.1%)
· Since inception, RIT has now participated in 76% of monthly market increases
but only 40% of market declines
· £10,000 invested in RIT at inception in 1988 would be worth ~£434,000 today
(with dividends reinvested) compared to the same amount invested in the ACWI
which would be worth ~£101,000
Commenting, Sir James Leigh-Pemberton, Chairman of RIT Capital Partners plc,
said:
"In the short, six-month period from our year end to 30 June 2022, we have
witnessed a combination of geopolitical instability, macro-economic shifts and
market volatility in all asset classes at a level which rivals the most
challenging periods in recent history … By the end of June, equity markets
had suffered substantial losses. The S&P 500 was down -20%, with the FTSE
250 and key European indices in similar territory … Bond markets also
suffered, with the yield on 10-year US treasuries rising from 1.5% at the end
of 2021 to a 10-year peak of 3.5% in mid-June, with corresponding sizeable
losses for investors ...
Keeping our quoted equity exposure towards the lower end of our historical
ranges helped us to protect shareholders from the worst of these market
declines. The NAV per share ended the period at 2,530 pence, representing a
total return (including dividends) of -8.8% as compared to the ACWI, which
lost -14.7% and CPI+3% which was up 6.2%. This means that over the last three
years, RIT's NAV per share has seen a healthy cumulative return of 35.4%,
compared to 22.4% for the market and 22.9% for our inflation measure.
Active portfolio management has been essential … With neither government
bonds nor gold acting as effective portfolio diversifiers, a more
sophisticated approach to portfolio construction is required ... As we
reviewed our portfolio composition in this difficult period, our approach has
remained resolutely long term ...
The risks associated with the fundamental shift in central bank policies …
are by no means behind us. Central banks are faced with the difficult and
delicate task of arresting the recent surge in inflation, without causing a
recession. The outlook for corporate earnings is challenging as costs rise and
economic activity slows ...
Nevertheless … the resulting disruptions will continue to present
opportunities. A flexible mandate and a Manager with the ability to undertake
deep research across asset classes is a powerful combination, enabling us to
take advantage of opportunities to deploy funds, while also seeking to protect
the value of our shareholders' capital over the long term."
Commenting, Francesco Goedhuis, Chairman and Chief Executive Officer of the
Company's Manager, J. Rothschild Capital Management Limited (JRCM), and Ron
Tabbouche, Chief Investment Officer of JRCM, said:
"Our five-year NAV total return of 54.0% outperformed the ACWI, which was up
43.4%, and CPI+3% at 36.1%.
And in line with our approach, these equity-type returns were delivered with
less risk than the market. For example, our annualised NAV volatility over the
five years was 8.9% compared to 13.5% for the market, and we also experienced
significantly lower drawdowns. Since inception, we have participated in 76% of
the monthly market increases but only 40% of the market declines …
… the last few months have reinforced the importance of not being swayed
by market sentiment. We remain confident that our disciplined approach and
diverse portfolio construction, guided by the talent and networks we have
available both internally and externally, will enable us to continue to
deliver long-term equity-type returns with less risk."
ENQUIRIES:
Brunswick Group LLP:
Tom Burns: +44 (0) 207 404 5959
About RIT Capital Partners plc:
RIT Capital Partners plc is an investment company listed on the London Stock
Exchange. Its net assets have grown from £280 million on
listing in 1988 to over £3.9 billion as at 30 June 2022. Lord Rothschild and
his immediate family interests retain a significant holding.
www.ritcap.com (http://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 HALF-YEARLY FINANCIAL REPORT
Performance for the period 30 June 2022
NAV per share total return* -8.8%
Share price total return* -12.1%
CPI plus 3.0% per annum 6.2%
MSCI All Country World Index (ACWI) -14.7%
Key data 30 June 2022 31 December 2021 Change
NAV per share 2,530 pence 2,794 pence -9.4%
Share price 2,400 pence 2,750 pence -12.7%
Premium/(discount) -5.1% -1.6% -3.5% pts
Net assets £3,974 million £4,390 million -9.5%
Gearing* 10.5% 6.1% 4.4% pts
Average net quoted equity exposure for the period 38% 43% -5% pts
Ongoing charges figure* n/a 0.72% n/a
First interim dividend paid 18.5 pence 17.625 pence 5.0%
Second interim dividend declared/paid 18.5 pence 17.625 pence 5.0%
Total dividend in year 37.0 pence 35.250 pence 5.0%
Performance history 1 Year 3 Years 5 Years 10 Years
NAV per share total return* -5.4% 35.4% 54.0% 156.4%
Share price total return* 0.2% 20.9% 37.1% 129.5%
CPI plus 3.0% per annum 12.4% 22.9% 36.1% 70.1%
MSCI All Country World Index (ACWI) -8.8% 22.4% 43.4% 170.1%
The Group's designated APMs (denoted above with an *) include the NAV per
share total return, share price total return, gearing and the ongoing charges
figure.
CHAIRMAN'S STATEMENT
In the short, six-month period from our year end to 30 June 2022, we have
witnessed a combination of geopolitical instability, macro-economic shifts and
market volatility in all asset classes at a level which rivals the most
challenging periods in recent history. There is little to suggest that this
period of uncertainty will end soon. The risks of recession, elevated
inflation, supply side shocks and significant changes in monetary policy are
clear and present dangers for investors.
By the end of June, equity markets had suffered substantial losses. The
S&P 500 was down -20%, with the FTSE 250 and key European indices in
similar territory. There were pockets of relatively stronger performance with
single digit declines in Japan and China, the latter recovering from April
lows as the government's more constructive policies started to have an effect.
Bond markets also suffered, with the yield on 10-year US treasuries rising
from 1.5% at the end of 2021 to a 10-year peak of 3.5% in mid-June, with
corresponding sizeable losses for investors. These developments made the last
six months the most treacherous start to a year for traditional balanced
portfolios on record.
Keeping our quoted equity exposure towards the lower end of our historical
ranges helped us to protect shareholders from the worst of these market
declines. The NAV per share ended the period at 2,530 pence, representing a
total return (including dividends) of -8.8%, as compared to the ACWI which
lost -14.7%, and CPI+3% which was up 6.2%. This means that over the last three
years, RIT's NAV per share has seen a healthy cumulative return of 35.4%,
compared to 22.4% for the market and 22.9% for our inflation measure.
Active portfolio management has been essential in the first half of the year.
With neither government bonds nor gold acting as effective portfolio
diversifiers, a more sophisticated approach to portfolio construction is
required. The Manager's Report from JRCM provides more details on the asset
allocation and contribution to returns. In summary, the key detractors for the
half year were our quoted equities and private investments. As we reviewed our
portfolio composition in this difficult period, our approach has remained
resolutely long term. When we saw significant headwinds in the early months
for some of our thematic exposures such as China and biotech, we invested time
to reassess the validity of the underlying investment theses and concluded
that we remained supportive of the long-term prospects here. It was pleasing
to see the market taking a more constructive view of both these areas in June.
In relation to the private investments, after the very strong performance of
recent years, we saw some pullback, and took write-downs where necessary in
our direct positions to reflect the significant changes in public market
valuations of technology stocks in particular. Outside of equity exposures,
the absolute return and credit portfolio was broadly flat for the period, and
the NAV benefited from currency translation as sterling weakened.
Share capital and dividend
As I have highlighted before, the nature of our portfolio necessitates a
monthly NAV. At times of heightened market stress, this can feed through into
our share price, notwithstanding that our underlying portfolio is
significantly less volatile than equity markets. We therefore continued our
approach of seeking to minimise the impact on shareholders by buying back
shares accretively as the discount to NAV reached high single digits. During
the six months to June, we bought back 65,000 shares at a cost of £1.5
million to leave us with circa 240,000 shares in treasury.
We paid a first interim dividend of 18.5 pence per share in April, and, in
line with my comments in March, have declared a second interim dividend of the
same amount. This will be paid on 28 October to shareholders registered on 7
October, providing shareholders with a total dividend in 2022 of 37 pence per
share, a 5.0% increase over 2021.
Governance
We remain committed to following best practice in relation to diversity, and
published our own Diversity and Inclusion Policy in May of this year.
Following Amy Stirling's retirement from the Board at our AGM, I was delighted
to announce the appointment of Jutta af Rosenborg in May. At 30 June, your
Board comprised eight Directors, of whom three were female. We are continuing
our recruitment efforts to ensure that we are fully compliant with both the
Parker recommendations and the Financial Conduct Authority's new requirements
for at least 40% of our Board to be women by 2023.
When markets are fast moving and volatile, the intensity of effort required
from colleagues to maintain performance and operational resilience is
particularly high, and I must thank my colleagues on the Board, our employees,
and the many suppliers and counterparties who together enable us to do this,
whatever challenges we face.
Outlook
The risks associated with the fundamental shift in central bank policies
towards higher interest rates and balance sheet shrinking, to which I referred
earlier this year, are by no means behind us. Central banks are faced with the
difficult and delicate task of arresting the recent surge in inflation,
without causing a recession. The outlook for corporate earnings is
challenging, as costs rise and economic activity slows, and there remains a
risk of further exogenous shocks, particularly in energy supply and pricing.
Nevertheless, as the market adjusts to these new norms, the resulting
disruptions will continue to present opportunities. A flexible mandate and a
Manager with the ability to undertake deep research across asset classes is a
powerful combination, enabling us to take advantage of opportunities to deploy
funds, while also seeking to protect the value of our shareholders' capital
over the long term.
Sir James Leigh-Pemberton
1 August 2022
MANAGER'S REPORT
Overview
The backdrop to the reporting period was overwhelmingly negative, with soaring
inflation, recessionary fears and ongoing geopolitical turmoil. If that was
not enough, Covid-19 continued to disrupt economies. Firms struggled on
multiple fronts, with the 'great resignation', a sharp rise in the cost of
capital and the extent to which they needed to secure more resilient and
expensive supplies through 'reshoring' or 'nearshoring'. Governments faced
increasing unrest as individuals tried to deal with increased living costs.
And central banks, led by the Fed, have tried to balance the need to tame
multi-decade highs in realised inflation through aggressive tightening,
without causing a collapse in economic growth.
Unsurprisingly, global equities saw their worst performance in decades, with
the S&P 500 down -20%, its biggest H1 decline in 60 years. Not a single
major market ended in positive territory, with most Asian markets showing
single-digit declines, while nearly all Western markets experienced
double-digit losses. The hawkish stance of central banks also caused
significant disruption to bond markets. The US yield curve has priced for
interest rates to reach as high as 4% in the near future, a radical shift from
the 'zero forever' world that dominated markets in the last decade. This
resulted in sizeable losses for US bond investors in what was the worst start
to a year since 1973. Currency markets equally saw widespread volatility, as
the markets reacted to the different quantum and tempos of relative interest
rate policies. The US dollar was the best performing G10 currency, aided by
the increase in real rates and the United States' relative immunity to the
energy crisis in Europe.
Performance commentary
Against this challenging landscape, the NAV total return for the first half of
the year was -8.8%, compared to the ACWI (50% £) which was down -14.7% and
CPI+3% at 6.2% for the half year. If we consider performance over recent
years, our five-year NAV total return of 54.0% outperformed the ACWI, which
was up 43.4%, and CPI+3% at 36.1%. And in line with our approach, these
equity-type returns were delivered with less risk than the market. For
example, our annualised NAV volatility over the five years was 8.9% compared
to 13.5% for the market, and we also experienced significantly lower
drawdowns. Since inception, we have participated in 76% of the monthly market
increases but only 40% of the market declines.
Turning back to the half year, key drivers of performance included:
· Maintaining one of our lowest net quoted equity exposures in a decade
(averaging 38% over the period), helped mitigate the losses;
· The quoted equity book performing broadly in line with markets. Growth assets
and exposure to Chinese markets were the main detractors, while Japanese and
reflationary exposures outperformed;
· After exceptional performance in the past few years, our private investments
gave back some of their gains, impacted by the market disruption, in
particular in US technology markets;
· The absolute return and credit book was broadly flat, reinforcing its low
correlation to equity markets; and
· The portfolio's exposure to non-sterling currencies was the main positive
contributor to performance.
In terms of portfolio activity, we continued this year to adjust our quoted
equity allocation, shifting from a growth stance to a mix of more reflationary
and defensive assets, which proved helpful. We remain committed to our
long-term structural themes, such as China and biotech, and despite weakness
earlier in the year, these started to see good outperformance in June.
Having seen strong outperformance over recent years, the private investment
book experienced some reversals. Within the direct book, many of our
underlying companies continued to generate robust operating performance. In
addition, we saw fundraisings at higher valuations resulting in gains for a
number of companies, including Motive (previously called KeepTruckin') and
OneFootball. While these factors helped provide a degree of resilience to the
book, the portfolio overall ended down for the period, reflecting the broad
malaise and multiple compression seen in listed markets.
The private fund portfolio ended slightly down over the period, although as
normal, this is not a direct comparison as it reflects the industry lag in
producing quarterly valuations, with the majority of the H1 performance
reflecting a mix of Q4 and Q1 valuations. At the time of finalising our June
NAV, 95% of the portfolio was valued at 31 March external manager (or GP)
valuations, with the largest detractors being funds with Chinese and
technology exposures.
Despite these recent headwinds in private markets, the associated levels of
disruption can also provide opportunities for us and our GPs to deploy capital
at attractive valuations - part of our resolutely long-term approach.
The allocation to absolute return and credit remains a key feature of our
differentiated approach to portfolio diversification. This portfolio proved
resilient to the equity market downturns, despite the widening in credit
spreads, as we had deliberately reduced the credit sensitivity of this book.
Additionally, currency translation has been helpful given the broad
strengthening of the US dollar and associated currencies, and commensurate
weakness of the pound.
While we tilted the quoted equity portfolio towards more reflationary assets,
we are reluctant at this stage of the cycle to move further in that direction.
As we saw in June, when recession risks increase, this disproportionately
impacts more cyclically-oriented, reflationary assets. Furthermore, if
inflation does take hold for longer, this will not necessarily be detrimental
to our growth-oriented positions. Notwithstanding an initial derating, over
time, these companies' cash flows should grow with inflation, providing
natural protection to long-term investors. Therefore, as long as there is a
reasonable probability of a recession, and we think there is, we believe it is
important to maintain a healthy balance across our best 'value' and 'growth'
ideas.
Indeed, the last few months have reinforced the importance of not being swayed
by market sentiment. We remain confident that our disciplined approach and
diverse portfolio construction, guided by the talent and networks we have
available both internally and externally, will enable us to continue to
deliver long-term equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Executive Officer Chief Investment Officer
J. Rothschild Capital Management Limited J. Rothschild Capital Management Limited
Asset Allocation and Portfolio Contribution
30 June 2022 Contribution
Asset category % NAV %
Quoted equity 35.5% -7.8%(1)
Private investments 43.0% -1.7%
Absolute return and credit 21.6% -0.3%
Real assets 1.4% -0.1%
Government bonds and rates 0.0% -0.9%
Currency -1.3% 2.4%(2)
Total investments 100.2% -8.4%
Liquidity, borrowings and other -0.2% -0.4%(3)
Total 100.0% -8.8%
Average net quoted equity exposure(1) 38.0%
(1) The quoted equity contribution reflects the profits from
the net quoted equity exposure held during the period as well as the costs of
portfolio hedges. The exposure can differ from the % NAV as the former
reflects notional exposure through derivatives as well as estimated
adjustments for derivatives and/or liquidity held by managers.
(2) Currency exposure is managed centrally on an overlay
basis, with the translation impact and the results of the currency hedging and
overlay activity included in this category's contribution.
(3) This category's contribution includes interest,
mark-to-market movements in the fixed interest notes and expenses.
ASSET CATEGORY (% OF NAV)
30 June 2022 31 December 2021
Asset category % NAV % NAV
Quoted equity(1) 35.5% 42.6%
Private investments 43.0% 36.5%
Absolute return and credit 21.6% 17.7%
Real assets 1.4% 1.5%
Government bonds and rates 0.0% 0.0%
Currency -1.3% 0.5%
Liquidity, borrowings and other -0.2% 1.2%
Net assets 100.0% 100.0%
Note: This table excludes exposure from derivatives.
(1 ) For the period ending 30 June 2022, the underlying net quoted equity exposure
averaged 38% (31 December 2021: 43%).
CURRENCY EXPOSURE (% OF NAV)
30 June 2022 31 December 2021
Currency % NAV % NAV
Sterling 65.0% 68.7%
US dollar 16.1% 18.9%
Euro 3.8% 0.5%
Japanese yen 5.3% 2.9%
Other 9.8% 9.0%
Net assets 100.0% 100.0%
Note: This table excludes exposure from currency options.
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
IAS 34, Interim Financial Reporting, as contained in UK adopted international
accounting standards (UK adopted IAS), as required by the Disclosure and
Transparency Rule 4.2.4R;
(b) The Interim Review includes a fair review of the information required to be
disclosed under the Disclosure and Transparency Rule 4.2.7R in an 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 the condensed set of financial statements presented in the Half-Yearly
Financial Report. A further description of the principal risks and
uncertainties for the remaining six months of the financial year is set out
below; and
(c) In addition, in accordance with the disclosures required under the Disclosure
and Transparency Rule 4.2.8R, there were no transactions with related parties
in the first six months of the current financial year that have had a material
effect on the financial position or performance of the Group, or any changes
to related party transactions described in the Group's Report and Accounts for
the year ended 31 December 2021 that could do so.
Principal risks and uncertainties
The principal risk categories facing the Group for the second half of the
financial year are unchanged from those described in the Report and Accounts
for the year ended 31 December 2021. The principal risks we identify comprise:
● Investment strategy risk;
● Market risk;
● Liquidity risk;
● Credit risk;
● Key person dependency;
● Climate-related risks;
● Legal and regulatory risk; and
● Operational risk.
As an investment company, the most significant risk is considered to be market
risk. As described in the Chairman's Statement and Manager's Report, markets
have experienced some of the most challenging shocks in recent history. In
view of the geopolitical tensions stemming from the war in Ukraine, rising
inflation and recessionary fears, the elevated levels of volatility and
uncertainty in markets may well continue throughout 2022.
From an operational risk perspective, the Manager has successfully introduced
a hybrid working policy, recognising the ongoing benefits that a mixture of
office and home-based working can bring. We continue to keep our internal
controls under close scrutiny and remain satisfied that the environment is
effective.
A key consequence of the ending of Covid-19 restrictions has been a tight and
rapidly changing labour market. We recognise the risks this brings and are
monitoring our overall employment offering accordingly.
Going concern
The key factors likely to affect the Group's ability to continue as a going
concern were set out in the Report and Accounts for the year ended 31 December
2021. As at 30 June 2022 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 condensed interim financial statements.
Sir James Leigh-Pemberton
Chairman
1 August 2022
For and on behalf of the Board
CONDENSED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2022 2021
£ million Notes Revenue Capital Total Revenue Capital Total
Income and gains
Investment income 5.2 - 5.2 6.2 - 6.2
Other income 0.9 - 0.9 1.9 - 1.9
Gains/(losses) on fair value investments - (370.8) (370.8) - 710.4 710.4
Gains/(losses) on monetary items and borrowings - 16.1 16.1 - 10.3 10.3
6.1 (354.7) (348.6) 8.1 720.7 728.8
Expenses
Operating expenses (15.9) (8.4) (24.3) (14.0) (12.2) (26.2)
Profit/(loss) before finance costs and tax 2 (9.8) (363.1) (372.9) (5.9) 708.5 702.6
Finance costs (2.0) (8.0) (10.0) (1.3) (5.2) (6.5)
Profit/(loss) before tax (11.8) (371.1) (382.9) (7.2) 703.3 696.1
Taxation - - - (0.2) (2.5) (2.7)
Profit/(loss) for the period (11.8) (371.1) (382.9) (7.4) 700.8 693.4
Earnings per ordinary share - basic 3 (7.6)p (238.0)p (245.6)p (4.7)p 449.2p 444.5p
Earnings per ordinary share - diluted 3 (7.6)p (238.0)p (245.6)p (4.7)p 446.4p 441.7p
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
For the six months ended 30 June 2022 2021
£ million Revenue Capital Total Revenue Capital Total
Profit/(loss) for the period (11.8) (371.1) (382.9) (7.4) 700.8 693.4
Revaluation gain/(loss) on property, plant and equipment - (0.3) (0.3) - - -
Actuarial gain/(loss) in defined benefit pension plan (0.4) - (0.4) 3.9 - 3.9
Deferred tax (charge)/credit allocated to actuarial gain/(loss) (0.1) - (0.1) (1.6) - (1.6)
Total comprehensive income/(expense) for the period (12.3) (371.4) (383.7) (5.1) 700.8 695.7
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
30 June 31 December
£ million Notes 2022 2021
Non-current assets
Investments held at fair value 4,007.1 4,291.8
Investment property 38.5 38.3
Property, plant and equipment 22.7 23.1
Retirement benefit asset 4.0 3.8
Derivative financial instruments 1.8 2.9
4,074.1 4,359.9
Current assets
Derivative financial instruments 30.0 32.7
Other receivables 285.2 262.8
Amounts owed by group undertakings 4.1 3.7
Cash at bank 220.4 325.9
539.7 625.1
Total assets 4,613.8 4,985.0
Current liabilities
Borrowings (326.2) (240.0)
Derivative financial instruments (88.5) (8.2)
Other payables (67.4) (168.8)
(482.1) (417.0)
Net current assets/(liabilities) 57.6 208.1
Total assets less current liabilities 4,131.7 4,568.0
Non-current liabilities
Borrowings (151.0) (168.9)
Derivative financial instruments (0.5) (2.9)
Deferred tax liability (1.4) (1.3)
Provisions (1.1) (1.0)
Lease liability (3.4) (3.6)
(157.4) (177.7)
Net assets 3,974.3 4,390.3
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 (20.8) (23.0)
Capital reserve 3,768.8 4,174.4
Revenue reserve (23.7) (11.4)
Revaluation reserve 11.2 11.5
Total equity 3,974.3 4,390.3
Net asset value per ordinary share - basic 4 2,551p 2,819p
Net asset value per ordinary share - diluted 4 2,530p 2,794p
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended 30 June 2022 Share Share premium Capital redemption reserve Own shares reserve Capital reserve Revenue reserve Revaluation reserve Total equity
capital
£ million
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 period - - - - (371.1) (11.8) - (382.9)
Revaluation gain/(loss) on property, plant and equipment - - - - - - (0.3) (0.3)
Actuarial gain/(loss) in defined benefit pension plan - - - - - (0.4) - (0.4)
Deferred tax (charge)/credit allocated to actuarial gain/(loss) - - - - - (0.1) - (0.1)
Total comprehensive income/(expense) for the period - - - - (371.1) (12.3) (0.3) (383.7)
Dividends paid (note 5) - - - - (28.9) - - (28.9)
Purchase of treasury shares - - - - (1.5) - - (1.5)
Movement in own shares reserve - - - 2.2 - - - 2.2
Movement in share-based payments - - - - (4.1) - - (4.1)
Balance at 30 June 2022 156.8 45.7 36.3 (20.8) 3,768.8 (23.7) 11.2 3,974.3
Six months ended 30 June 2021 Share capital Share premium Capital redemption reserve Own shares reserve Capital reserve Revenue reserve Revaluation reserve Total equity
£ million
Balance at 1 January 2021 156.8 45.7 36.3 (15.3) 3,350.1 5.1 11.7 3,590.4
Profit/(loss) for the period - - - - 700.8 (7.4) - 693.4
Revaluation gain/(loss) on property, plant and equipment - - - - - - - -
Actuarial gain/(loss) in defined benefit pension plan - - - - - 3.9 - 3.9
Deferred tax (charge)/credit allocated to actuarial gain/(loss) - - - - - (1.6) - (1.6)
Total comprehensive income/(expense) for the period - - - - 700.8 (5.1) - 695.7
Dividends paid (note 5) - - - - (27.5) - - (27.5)
Purchase of treasury shares - - - - (1.4) - - (1.4)
Movement in own shares reserve - - - 7.4 - - - 7.4
Movement in share-based payments - - - - (1.4) - - (1.4)
Balance at 30 June 2021 156.8 45.7 36.3 (7.9) 4,020.6 - 11.7 4,263.2
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Six months ended 30 June 30 June
£ million 2022 2021
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest (122.8) (173.6)
Interest paid (10.0) (6.4)
Net cash inflow/(outflow) from operating activities (132.8) (180.0)
Cash flows from investing activities:
Purchase of property, plant and equipment (0.1) (0.1)
Net cash inflow/(outflow) from investing activities (0.1) (0.1)
Cash flows from financing activities:
Repayment of borrowings (251.7) (185.0)
Proceeds of borrowings 310.0 235.0
Purchase of ordinary shares by employee benefit trust(1) (14.9) (5.4)
Purchase of ordinary shares into treasury (1.5) (1.4)
Equity dividends paid (28.9) (27.5)
Net cash inflow/(outflow) from financing activities 13.0 15.7
Increase/(decrease) in cash in the period (119.9) (164.4)
Cash at the start of the period 325.9 296.8
Effect of foreign exchange rate changes on cash 14.4 (2.0)
Cash at the period end 220.4 130.4
(1) Shares are disclosed in the own shares reserve
on the consolidated balance sheet (unaudited).
The notes are an integral part of these condensed interim financial
statements.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of accounting
These condensed financial statements are the half-yearly consolidated
financial statements of RIT Capital Partners plc (RIT or the Company) and its
subsidiaries (together, the Group) for the six months ended 30 June 2022. 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 United Kingdom, and were
approved on 1 August 2022. These half-yearly consolidated financial statements
should be read in conjunction with the Report and Accounts for the year ended
31 December 2021, which were prepared in accordance with UK adopted IAS.
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 2021.
Critical accounting assumptions and judgements
As further described in the Report and Accounts for the year ended 31 December
2021, areas requiring a higher degree of judgement or complexity and areas
where assumptions and estimates are significant to the consolidated financial
statements, are in relation to the valuation of private investments and
property.
2. Business and geographical segments
For both the six months ended 30 June 2022 and the six months ended 30 June
2021, the Group is considered to have three principal operating segments, all
based in the UK, as follows:
AUM(1)
Segment Business £ million Employees(1)
RIT Investment trust - -
JRCM(2) Investment manager/ administration 3,974.3 46
SHL(3) Events/premises management - 12
(1 ) At 30 June 2022.
(2 ) J. Rothschild Capital Management Limited.
(3 ) Spencer House Limited.
Key financial information for the six months ending 30 June 2022 is as
follows:
Net Income/ Operating Profit/
£ million assets gains(1) expenses(1) (loss)(2)
RIT 3,860.3 (349.3) (27.0) (376.3)
JRCM 120.1 25.4 (22.1) 3.3
SHL 0.6 1.7 (1.6) 0.1
Adjustments(3) (6.7) (26.4) 26.4 -
Total 3,974.3 (348.6) (24.3) (372.9)
Key financial information for the six months ending 30 June 2021 is as
follows:
Net Income/ Operating Profit/
£ million assets gains(1) expenses(1) (loss)(2)
RIT 4,152.6 729.2 (37.0) 692.2
JRCM 116.9 34.3 (23.7) 10.6
SHL 0.6 0.9 (1.1) (0.2)
Adjustments(3) (6.9) (35.6) 35.6 -
Total 4,263.2 728.8 (26.2) 702.6
(1 ) Includes intra-group income and expenses.
(2 ) Profit/(loss) before finance costs and tax.
(3 ) Consolidation adjustments in accordance with
IFRS 10 Consolidated Financial Statements.
3. Earnings per ordinary share - basic and diluted
The basic earnings per ordinary share for the six months ended 30 June 2022 is
based on the loss of £382.9 million (six months ended 30 June 2021: profit
of £693.4 million) and the weighted average number of ordinary shares in
issue during the period of 156.8 million (six months ended 30 June 2021: 156.8
million). The weighted average number of shares is adjusted for shares held in
the employee benefit trust (EBT) and in treasury in accordance with IAS 33.
£ million Six months ended 30 June 2022 Six months ended 30 June 2021
Net revenue profit/(loss) (11.8) (7.4)
Net capital profit/(loss) (371.1) 700.8
Total profit/(loss) for the period (382.9) 693.4
Weighted average (million) Six months ended 30 June 2022 Six months ended 30 June 2021
Number of shares in issue 156.8 156.8
Shares held in EBT (0.7) (0.7)
Shares held in treasury (0.2) (0.1)
Basic shares 155.9 156.0
Pence Six months ended 30 June 2022 Six months ended 30 June 2021
Revenue earnings/(loss) per ordinary share - basic (7.6) (4.7)
Capital earnings/(loss) per ordinary share - basic (238.0) 449.2
Total earnings per share - basic (245.6) 444.5
The diluted earnings per ordinary share for the period is based on basic
shares (above) adjusted for the effect of dilutive share-based payment awards
for the period.
This adjustment is not required for the period ended 30 June 2022 as an
increase in the shares in issue would reduce the basic loss per ordinary
share. As a result, there is no difference between the basic and diluted loss
per ordinary share.
Weighted average (million) Six months ended 30 June 2022 Six months ended 30 June 2021
Basic shares 155.9 156.0
Effect of share-based payment awards - 1.0
Diluted shares 155.9 157.0
Pence Six months ended 30 June 2022 Six months ended 30 June 2021
Revenue earnings/(loss) per ordinary share - diluted (7.6) (4.7)
Capital earnings/(loss) per ordinary share - diluted (238.0) 446.4
Total earnings/(loss) per ordinary share - diluted (245.6) 441.7
4. Net asset value per ordinary share - basic and diluted
Net asset value per ordinary share is based on the following data:
30 June 2022 31 December 2021
Net assets (£ million) 3,974.3 4,390.3
Number of shares in issue (million) 156.8 156.8
Shares held in EBT (0.8) (0.9)
Shares held in treasury (0.2) (0.2)
Basic shares (million) 155.8 155.7
Effect of share-based payment awards (million) 1.3 1.4
Diluted shares (million) 157.1 157.1
Pence per share 30 June 2022 31 December 2021
Net asset value per ordinary share - basic 2,551 2,819
Net asset value per ordinary share - diluted 2,530 2,794
5. Dividends
Six months ended June 2022 Six months ended June 2021 Six months Six months
ended June ended June
Pence per Pence per 2022 2021
share share £ million £ million
Dividends paid in period 18.5 17.625 28.9 27.5
The Board of Directors declared an interim dividend of 18.5 pence per ordinary
share (£28.9 million) on 28 February 2022, which was paid on 29 April 2022.
The Board has declared the payment of a second interim dividend of 18.5 pence
per ordinary share (£28.9 million) in respect of the year ending 31 December
2022.
This will be paid on 28 October 2022 to shareholders on the register on 7
October 2022. Both payments are funded from accumulated capital profits.
Additional commentary may be found in the Report and Accounts for the year
ended 31 December 2021.
6. Financial instruments
IFRS 13 requires the Group to classify its financial instruments held at fair
value using a hierarchy that reflects the significance of the inputs used in
the valuation methodologies. These are as follows:
● Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
● Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
● Level 3: Inputs for the asset or liability that are not based on observable
market data (i.e. unobservable inputs).
The vast majority of the Group's financial assets and liabilities, investment
properties and property, plant and equipment are measured at fair value on a
recurring basis.
The Group's policy is to recognise transfers into and transfers out of fair
value hierarchy levels at the end of the reporting period when they are deemed
to occur.
A description of the valuation techniques used by the Group with regards to
investments categorised in each level of the fair value hierarchy is detailed
below. Where the Group invests in a fund or a partnership, which is not itself
listed on an active market, the categorisation of such investment between
levels 2 and 3 is determined by reference to the nature of the fund or
partnership's underlying investments. If such investments are categorised
across different levels, the lowest level of the hierarchy that forms a
significant proportion of the fund or partnership exposure is used to
determine the reporting disclosure.
If the proportion of the underlying investments categorised between levels
changes during the period, these will be reclassified to the most appropriate
level.
Level 1
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those
prices represent actual and regularly occurring market transactions on an
arm's length basis. The quoted market price used for financial assets held by
the Group is the current bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Where a market
price is available, but the market is not considered active, the Group has
classified these investments as level 2.
Level 2
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques which maximise the use of
observable market data where it is available. Specific valuation techniques
used to value OTC derivatives include quoted market prices for similar
instruments, counterparty quotes and the use of forward exchange rates to
estimate the fair value of forward foreign exchange contracts at the balance
sheet date. Investments in externally-managed funds which themselves invest
primarily in listed securities are valued at the price or net asset value
released by the investment manager or fund administrator as at the balance
sheet date.
Level 3
The Group considers all private investments, whether direct or funds, (as
described in the Investment Portfolio) as level 3 assets, as the valuations of
these assets are not typically based on observable market data. Where other
funds invest into illiquid stocks, these are also considered by the Group to
be level 3 assets.
Private fund investments are held at the most recent fair values provided by
the GPs managing those funds, adjusted for subsequent investments,
distributions, and currency movements up to the period end, and are subject to
periodic review by the Manager.
Direct co-investments are also held at the most recent fair values provided by
the GPs managing those co-investments, adjusted for subsequent investments,
distributions, currency moves, as well as pricing events or material changes
in public market valuations, where the Manager has sufficient information to
suggest the period-end valuation is likely to be adjusted when finalised by
the GP. The remaining directly-held private investments are valued on a
semi-annual basis using techniques including a market approach, income
approach and/or cost approach. The valuation process involves the investment
functions of the Manager who prepare the proposed valuations, which are then
subject to review by the finance function, with the final valuations being
presented to the Valuation Committee, comprised entirely of independent
non-executive Directors, and chaired by the chairman of the Audit and Risk
Committee.
Specific valuation techniques used will typically include the value of recent
transactions, earnings multiples, discounted cash flow (DCF) analysis, and,
where appropriate, industry specific methodologies. The acquisition cost, if
determined to be fair value, may be used to calibrate inputs to the valuation.
The valuations will often reflect a synthesis of a number of distinct
approaches in determining the final fair value estimate. The individual
approach for each investment will vary depending on relevant factors that a
market participant would take into account in pricing the asset. These might
include the specific industry dynamics, the company's stage of development,
profitability, growth prospects or risk as well as the rights associated with
the particular security.
Borrowings at 30 June 2022 comprise bank loans and senior loan notes. The bank
loans are revolving credit facilities paying floating interest and are
typically drawn in tranches with a duration of three or six months. The loans
are therefore short-term in nature, and their fair value approximates their
nominal value. The loan notes were issued in 2015 with tenors of between 10
and 20 years with a weighted average of 16 years. They are valued on a monthly
basis using a DCF model where the discount rate is derived from the yield of
similar tenor UK Government bonds, adjusted for any significant changes in
either credit spreads or the perceived credit risk of the Company.
The fair value of investments in non-consolidated subsidiaries is considered
to be the net asset value of the individual subsidiary as at the balance sheet
date. The net asset value comprises various assets and liabilities which are
fair valued on a recurring basis and is considered to be level 3.
On a semi-annual basis, the Group engages external, independent and qualified
valuers to determine the fair value of the Group's investment properties and
property, plant and equipment held at fair value.
The following table analyses the Group's assets and liabilities within the
fair value hierarchy, at 30 June 2022:
As at 30 June 2022
£ million Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss (FVPL):
Portfolio investments 416.0 1,516.8 1,970.7 3,903.5
Non-consolidated subsidiaries - - 103.6 103.6
Investments held at fair value 416.0 1,516.8 2,074.3 4,007.1
Derivative financial instruments 8.1 23.7 - 31.8
Total financial assets at FVPL: 424.1 1,540.5 2,074.3 4,038.9
Non-financial assets measured at fair value:
Investment property - - 38.5 38.5
Property, plant and equipment - - 22.7 22.7
Total non-financial assets measured at fair value - - 61.2 61.2
Financial liabilities at FVPL:
Borrowings - - (477.2) (477.2)
Derivative financial instruments (10.0) (79.0) - (89.0)
Total financial liabilities at FVPL: (10.0) (79.0) (477.2) (566.2)
Total net assets measured at fair value 414.1 1,461.5 1,658.3 3,533.9
Other non-current assets 4.0
Cash at bank 220.4
Other current assets 289.3
Other current liabilities (67.4)
Other non-current liabilities (5.9)
Net assets 3,974.3
Movement in level 3 assets
Six months ended 30 June 2022 Investments held at fair value Properties Total
£ million
Opening balance 1,914.3 61.4 1,975.7
Purchases 173.0 - 173.0
Sales (149.0) - (149.0)
Realised gains/(losses) through profit or loss 3.3 - 3.3
Unrealised gains/(losses) through profit or loss 132.7 0.1 132.8
Unrealised gains/(losses) through other comprehensive income - (0.3) (0.3)
Transfer into/out of level 3 - - -
Other - - -
Closing balance 2,074.3 61.2 2,135.5
Further information in relation to the directly-held private investments is
set out in the following table. This summarises the portfolio by the primary
method used in estimating the fair value of the investments. As we seek to
employ a range of valuation methods and inputs in the valuation process,
selection of a primary method is subjective, and designed primarily to assist
the subsequent sensitivity analysis.
Primary valuation method/approach 30 June 31 December
- direct private investments
£ million 2022 2021
Recent financing round(1) 209.2 140.0
Third-party valuations 143.3 361.1
Listed comparables 82.0 -
Market multiples 53.8 -
Other industry metrics 14.5 1.1
Discounted cash flow (DCF) 1.8 11.2
Total 504.6 513.4
(1 ) Included within these methods are direct private investments held within the
non-consolidated subsidiaries with a total of £31.5 million (2021: £29.7
million).
The majority of the direct private investments are structured as
co-investments, managed by a GP. For these investments, we typically use the
latest quarterly fair valuations provided by the GP, adjusted for any
subsequent investments/distributions and currency moves as well as pricing
events or material changes in public market valuations, where there is
sufficient information to suggest the period-end valuation is likely to be
adjusted when finalised by the GP.
Where the Manager has sufficient information to undertake its own valuation, a
range of methods will typically be used. For companies with positive earnings,
we seek to utilise an earnings multiple approach, typically using EBITDA or
similar. The earnings multiple is assessed by reference to similar listed
companies or transactions involving similar companies. Where a company has
been the subject of a recent financing round which is viewed as representative
of fair value, we will use this transaction price. Other methods employed
include DCF analysis and industry metrics such as multiples of assets under
management or revenue, where market participants use these approaches in
pricing assets.
Level 3 assets - sensitivity analysis
The following table provides a sensitivity analysis of the valuation of
directly-held private investments and the impact on net assets:
Valuation method/approach Sensitivity analysis
Recent financing round A 5% change in the value of these assets would result in a £10.5 million or
0.26% (2021: £7.0 million, 0.16%) change in net assets.
Third-party valuations A 5% change in the value of these assets would result in a £7.2 million or
0.18% (2021: £18.1 million, 0.41%) change in net assets.
Listed comparables A 5% change in the value of these assets would result in a £4.1 million or
0.10% (2021: £nil) change in net assets.
Market multiples Assets in this category are valued using EV/sales multiples in the range
7x-23x. A 5% change in the multiple would result in a £2.7 million or 0.07%
(2021: £nil) change in net assets.
Other industry metrics A 5% change in the value of these assets would result in a £0.2 million or
0.01% (2021: £0.1 million, 0.001%) change in net assets.
Discounted cash flow (DCF) Assets in this category are valued using weighted average costs of capital in
the range of 10-20%. A 1% point increase/decrease in the underlying discount
rate would result in a decrease/increase in the net assets of £0.02 million
or 0.001% (2021: £2.4 million, 0.06%).
The investment property and property, plant and equipment with an aggregate
fair value of £61.2 million (2021: £61.4 million) were valued using a
third-party valuation provided by Jones Lang LaSalle. The properties were
valued using weighted average capital values of £1,651 per square foot (2021:
£1,658) developed from rental yields and supported by recent market
transactions. A £100 per square foot increase/decrease in capital values
would result in a £3.3 million increase/decrease in fair value (2021: £3.3
million increase/decrease).
The non-consolidated subsidiaries are held at their fair value of £103.6
million (2021: £101.4 million) representing £107.0 million of portfolio
investments (2021: £104.3 million) and £3.4 million of remaining liabilities
(2021: £2.9 million). A 5% change in the value of these assets would result
in £5.2 million or 0.1% (2021: £5.1 million, 0.1%) change in total net
assets.
The remaining investments held at fair value and classified as level 3 were
valued using third-party valuations from a GP, administrator, or fund manager
totalling £1,497.6 million (2021: £1,329.2 million). A 5% change in the
value of these assets would result in a £74.9 million or 1.88% (2021: £66.5
million, 1.51%) change in net assets.
In aggregate, the sum of the direct private investments, investment property,
property, plant and equipment, non-consolidated subsidiaries and the remaining
fund investments represents the total level 3 assets of £2,135.5 million
(2021: £1,975.7 million).
The following table analyses the Group's assets and liabilities within the
fair value hierarchy, at 31 December 2021:
As at 31 December 2021
£ million Level 1 Level 2 Level 3 Total
Financial assets at FVPL:
Portfolio investments 579.6 1,797.9 1,813.0 4,190.5
Non-consolidated subsidiaries - - 101.3 101.3
Investments held at fair value 579.6 1,797.9 1,914.3 4,291.8
Derivative financial instruments 2.9 32.7 - 35.6
Total financial assets at FVPL 582.5 1,830.6 1,914.3 4,327.4
Non-financial assets measured at fair value:
Investment property - - 38.3 38.3
Property, plant and equipment - - 23.1 23.1
Total non-financial assets measured at fair value - - 61.4 61.4
Financial liabilities at FVPL:
Borrowings - - (408.9) (408.9)
Derivative financial instruments - (11.1) - (11.1)
Total financial liabilities at FVPL - (11.1) (408.9) (420.0)
Total net assets measured at fair value 582.5 1,819.5 1,566.8 3,968.8
Other non-current assets 3.8
Cash at bank 325.9
Other current assets 266.5
Other current liabilities (168.8)
Other non-current liabilities (5.9)
Net assets 4,390.3
Movements in level 3 assets
Investments
Year ended 31 December 2021 held at fair
£ million value Properties Total
Opening balance 1,232.1 61.4 1,293.5
Purchases 857.6 0.1 857.7
Sales (882.1) - (882.1)
Realised gains/(losses) through profit or loss 37.5 - 37.5
Unrealised gains/(losses) through profit or loss 767.5 0.6 768.1
Unrealised gains/(losses) through other comprehensive income - (0.2) (0.2)
Transfer into level 3 40.9 - 40.9
Transfer out of level 3 (139.2) - (139.2)
Other - (0.5) (0.5)
Closing balance 1,914.3 61.4 1,975.7
During the year, direct private investments with a fair value of £139.2
million were reclassified from level 3 to level 2. This reflected the fact
that their main underlying investments are now listed and disclosed in the
Investment Portfolio within quoted equity. Investments in funds with a fair
value of £40.9 million were transferred from level 2 to 3. This is as a
result of new financial information received during the period in respect of
the underlying investments of the funds.
7. 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 2022 and
30 June 2021 has been neither reviewed nor audited.
The information for the year ended 31 December 2021 has been extracted from
the latest published audited financial statements.
The audited financial statements for the year ended 31 December 2021 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.
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
Glossary
Within this Half-Yearly Financial Report, 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. The APMs reflect disclosure expectations from the Financial
Reporting Council and 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 is used as a measure of inflation
in one of the Company's key performance indicators (KPIs), CPI+3.0% per annum.
Gearing*: Gearing is a measure of the level of debt deployed within the
portfolio. The ratio is calculated in accordance with AIC guidance as total
assets, net of cash, divided by net assets and expressed as a 'net'
percentage, e.g. 110% would be shown as 10%.
30 June 31 December
£ million 2022 2021
Total assets 4,613.8 4,985.0
Less: cash (220.4) (325.9)
Sub total 4,393.4 4,659.1
Net assets 3,974.3 4,390.3
Gearing 10.5% 6.1%
Leverage: Leverage, as defined by the Alternative Investment Fund Managers
(Amendment) (EU Exit) Regulations 2019 (UK 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 30 June 2022 was
2,530 pence, a decrease of 264 pence, or -9.4%, from 2,794 pence at the
previous year end. As dividends totalling 18.5 pence per share were paid
during the period, the effect of reinvesting the dividends in the NAV is 0.6%,
which results in a NAV total return of -8.8%.
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 JRCM compensation which is linked directly
to investment performance, as this is analogous to a performance fee for an
externally-managed trust. This calculation is performed annually with further
information in the 2021 Report & Accounts.
% Average
2021 net assets
Average net assets 4,085 100.00%
Operating expenses 54.4 1.33%
JRCM performance-related compensation (24.8) (0.61%)
Other adjustments (0.1) (0.00%)
Ongoing charges 29.5 0.72%
OCF 0.72%
In addition to the above, managers charge fees within the external funds (and
in a few instances directly to RIT in relation to segregated accounts). We
have estimated that, based on average net assets across the year and annual
management fee rates per fund (excluding performance fees), these represented
an additional 0.87% of average net assets for 2021.
Premium/discount: The premium or discount (or rating) is calculated by taking
the closing share price on 30 June 2022 and dividing it by the NAV per share
at 30 June 2022, expressed as a net percentage. If the share price is
above/below the NAV per share, the shares are said to be trading at a
premium/discount.
Share price total return or total shareholder return (TSR)*: The TSR for a
period represents the change in the share price adjusted to reflect dividends
paid during the period. Similar to calculating a NAV total return, the
calculation assumes the dividends are notionally reinvested at the daily
closing share price following the shares going ex-dividend. The share price on
30 June 2022 closed at 2,400 pence, a decrease of 350 pence, or -12.7%, from
2,750 pence at the previous year end. Dividends totalling 18.5 pence per share
were paid during the period, and the effect of reinvesting the dividends in
the share price is 0.6% which results in a TSR of -12.1%. The TSR is one of
the Company's KPIs.
END OF HALF-YEARLY FINANCIAL REPORT EXTRACTS
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