257128 RIT R&A Cover.qxp 02/03/2020 12:36 Page 1 RIT Capital Pa RIT Capital r t n e r s plc s plc Repo r t & Accou n ts fo for the year ended 31 December 2019 r the yea r e nd e d 3 1 Dece m be r 2019 Warning to Shareholders From time to time investment companies and their shareholders can be the subject of investment scams. The perpetrators obtain lists of shareholders and make unsolicited phone calls or correspondence concerning investment matters. They may offer to sell worthless or high risk shares or, in the case of your RIT Capital Partners plc stock, may offer to buy your current shareholdings at an unrealistic price. They will often also inform you of untrue scenarios to make you think that you need to sell your shares or to justify an offer that seems too good to be true. To find out more about share fraud or ‘boiler room’ scams please visit the website of the Financial Conduct Authority, https://www.fca.org.uk/scamsmart. Please note that you cannot buy or sell the shares of RIT Capital Partners plc directly with us, and we will never contact you with offers to buy or sell shares, nor will our registrar, Computershare. In the event that you are contacted we strongly recommend that you review the FCA website above and follow the necessary steps. Please do report any company making unsolicited calls to the FCA using the form that can be found using the above link. 27 St James’s Place London SW1A 1NR 257128 RIT R&A Cover.qxp 02/03/2020 12:36 Page 2 Contents Company Highlights 1 Strategic Report Chairman’s Statement 3 Our Purpose, Strategy and Business Model 5 Manager’s Report 9 Investment Portfolio 13 Principal Risks and Viability 16 Governance Board of Directors 21 J. Rothschild Capital Management 24 Corporate Governance Report 25 Audit and Risk Committee Report 36 Directors’ Remuneration Report 39 Directors’ Report 44 Financial Statements Consolidated Income Statement and Consolidated Statement of Comprehensive Income 49 Consolidated Balance Sheet 50 Parent Company Balance Sheet 51 Consolidated Statement of Changes in Equity 52 Parent Company Statement of Changes in Equity 53 Consolidated and Parent Company Cash Flow Statement 54 Notes to the Financial Statements 55 Independent Auditor’s Report 79 Other Information Investment Portfolio Reconciliation 90 Glossary and Alternative Performance Measures 91 Historical Information and Financial Calendar 93 Investor Information 94 Directory 95 257128 RIT R&A pp001-pp019.qxp 02/03/2020 12:43 Page 1 | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Company Highlights Corporate Objective Investment Policy To deliver long-term capital growth, while preserving To invest in a widely diversified, international portfolio shareholders’ capital; to invest without the constraints of across a range of asset classes, both quoted and a formal benchmark, but to deliver for shareholders unquoted; to allocate part of the portfolio to exceptional increases in capital value in excess of the relevant indices managers in order to ensure access to the best external over time. talent available. Performance for the year 2019 NAV per share total return 12.0% Share price total return 12.5% RPI plus 3.0% 5.2% MSCI All Country World Index 24.0% Key data* 2019 2018 Change NAV per share 2,004 pence 1,821 pence 10.0% Share price 2,115 pence 1,910 pence 10.7% Premium 5.5% 4.9% 0.6% Net assets £3,146 million £2,830 million 11.2% Gearing 7.2% 11.5% -4.3% Average net quoted equity exposure 43% 47% -4% Ongoing charges figure for the year 0.68% 0.68% – First interim dividend (April) 17.0 pence 16.5 pence 3.0% Second interim dividend (October) 17.0 pence 16.5 pence 3.0% ––––––––––––– ––––––––––––– ––––––––––––– Total dividend in year 34.0 pence 33.0 pence 3.0% * 31 December unless otherwise stated. Performance history 3 Years 5 Years 10 Years NAV per share total return 22.2% 48.1% 119.7% Share price total return 17.9% 65.2% 138.0% RPI plus 3.0% per annum 19.1% 30.9% 78.4% MSCI All Country World Index 36.0% 65.0% 168.0% Performance since inception 2,800% RIT NAV per share total return MSCI All Country World Index RPI plus 3.0% 2,400% 2,000% 1,600% 1,200% 800% 400% 0% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 A description of the terms used above and further information on the calculation of those designated as Alterative Performance Measures (APMs) included within this section and the Strategic Report is set out in the Glossary and APMs section on pages 91 and 92. The Group’s designated APMs are the NAV per share total return, share price total return, gearing and the ongoing charges figure. RIT Capital Partners plc Report and Accounts December 2019 1 257128 RIT R&A pp001-pp019.qxp 02/03/2020 12:43 Page 2 Strategic Report 257128 RIT R&A pp001-pp019.qxp 02/03/2020 12:43 Page 3 | Company Highlights | Strategic Report | Governance | Financial Statements | Other Information | Chairman’s Statement Sir James Leigh-Pemberton I am delighted to be writing my first Chairman’s Statement, following my appointment on 1 October ver the 31 years since this Company’s 2019. Olisting in 1988, we have produced I must start by expressing, on behalf of colleagues and annualised returns to shareholders of 12.2% shareholders, our respect, admiration and gratitude for per annum, comfortably in excess of general Lord Rothschild’s exceptional leadership of the Company market indices and a very healthy premium over many years. Jacob became chairman of the above inflation. precursor of this Company – Rothschild Investment Trust – in 1971, when it was capitalised at approximately valued equity markets and historically low returns in bond £5 million. Your Company ended 2019 with a market markets. As a result, our returns lagged fully-invested capitalisation in excess of £3.3 billion and net assets of market indices. However, this did not stop our portfolio some £3.1 billion. Over the 31 years since this from generating a healthy absolute return. Considered Company’s listing in 1988, we have produced annualised allocations to a number of key themes, in particular returns to shareholders of 12.2% per annum, comfortably where we saw opportunities to benefit from long-term in excess of general market indices and a very healthy structural trends, together with rigorous security premium above inflation. It is Lord Rothschild’s selection and careful portfolio construction, allowed us to exceptional drive, vision and values which have meet our objective of capital growth. This builds on the contributed so much to making RIT one of the country’s 2018 results, where we were able to protect capital most admired investment companies. when global markets suffered a marked correction and I must also pay tribute to the foresight shown by Jacob many in the industry lost money. As we have explained in and Board colleagues for ensuring that a carefully previous years, when we choose to emphasise caution in constructed transition plan was in place, and in particular such a way, we do so to remain consistent with our for the establishment and cultivation of an excellent team strategy of protecting capital and delivering superior at our Manager and subsidiary – J. Rothschild Capital risk-adjusted returns over the long term. Management Limited (JRCM) – led by Francesco It is a feature of this approach that, while we have a Goedhuis (CEO) and Ron Tabbouche (CIO). Succeeding natural bias for equities, we have a broad investment Lord Rothschild is a daunting task, but his legacy is a policy. This allows JRCM the freedom to deploy capital company which is well positioned to continue to execute across multiple asset classes. As explained in detail in our its established strategy, delivering long-term capital Manager’s Report, the approach seeks to utilise our growth while preserving shareholders’ capital, by enviable network and combine diversified and investing in a diversified portfolio across a range of asset uncorrelated sources of return, targeting a high-quality classes, and by allocating funds to exceptional managers return through the market cycles. to ensure access to the best available external talent. Dividend Performance Unlike many trusts, we do not invest with a view to During 2019, I am pleased to report that your Company’s producing a particular income yield from the portfolio. net asset value per share (NAV) increased to 2,004 Our core objective is to invest to produce capital growth pence, representing a total return (including dividends) of over the long term. However, we recognise that for many 12.0%. The share price total return was 12.5%, with the shareholders, dividends are important, and our significant shares ending the year at 2,115 pence, a premium of reserves give us the flexibility to support our policy of 5.5% above the NAV. maintaining or increasing the annual dividend, as long as Despite a muted outlook for global growth and earnings, it does not come into conflict with your Company’s core 2019 was one of the best years for financial assets, with objective. For 2020, we are intending to pay a dividend of many investors prepared to take more risks than we 35 pence per share, an increase of 2.9% over the considered warranted as risk-free rates moved lower and previous year.