Shareholders' Equity

6 Months Ended

Jun. 30, 2022

Shareholders’ Equity

Capital Structure

We have two classes of voting shares: Class A ordinary shares and Class B ordinary shares, each of which has one vote per ordinary share. The Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of shareholders, except as otherwise required by applicable law. Our Class B ordinary shares are not publicly traded and holders of Class B ordinary shares only have limited rights to receive a distribution equal to their nominal value upon a liquidation, dissolution or winding up of the Company. As of June 30, 2022, we had 437,139 thousand Class A ordinary shares and 170,081 thousand Class B ordinary shares outstanding.

An exchange agreement entered into in connection with the IPO by us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP and EPA Holdings (the “Exchange Agreement”) governs the exchange of RP Holdings Class B Interests held by the Continuing Investors Partnerships for Class A ordinary shares. Pursuant to the Exchange Agreement, RP Holdings Class B interests are exchangeable on a one-for-one basis for Class A ordinary shares on a quarterly basis. Each such exchange also results in the re-designation of the same number of our Class B ordinary shares as deferred shares. As of June 30, 2022, we had outstanding deferred shares of 365,302 thousand.

In addition, we have in issue 50 thousand Class R redeemable shares, which do not entitle the holder to voting or dividend rights. The Class R redeemable shares may be redeemed at our option in the future. Any such redemption would be at the nominal value of £1 each.

Non-Controlling Interests

The net change in the balance of our four non-controlling interests for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):


	RPSFT		Legacy Investors Partnerships		Continuing Investors Partnerships		EPA Holdings		Total
March 31, 2022	$	8,409	$	1,756,269	$	2,599,646	$	—	$	4,364,324
Contributions	—		1,425		1,456		—		2,881
Distributions	(5,754)		(103,385)		(37,828)		—		(146,967)
Other exchanges	—		—		(26,938)		—		(26,938)
Net Income	6,227		61,642		119,224		—		187,093
Other comprehensive income/(loss):
Unrealized gains on available for sale debt securities	—		1,639		2,163		—		3,802
Reclassification of unrealized gains on available for sale debt securities	—		(1,404)		(1,853)		—		(3,257)
June 30, 2022	$	8,882	$	1,716,186	$	2,655,870	$	—	$	4,380,938


	RPSFT		Legacy Investors Partnerships		Continuing Investors Partnerships		EPA Holdings		Total
December 31, 2021	$	13,528	$	1,809,269	$	2,649,154	$	—	$	4,471,951
Contributions	—		3,395		2,808		—		6,203
Distributions	(16,013)		(207,586)		(72,343)		—		(295,942)
Other exchanges	—		—		(62,222)		—		(62,222)
Net Income	11,367		112,162		139,886		—		263,415
Other comprehensive income/(loss):
Unrealized gains on available for sale debt securities	—		1,925		2,545		—		4,470
Reclassification of unrealized gains on available for sale debt securities	—		(2,979)		(3,958)		—		(6,937)
June 30, 2022	$	8,882	$	1,716,186	$	2,655,870	$	—	$	4,380,938


	RPSFT		Legacy Investors Partnerships		Continuing Investors Partnerships		EPA Holdings		Total
March 31, 2021	$	13,841	$	1,882,655	$	3,058,322	$	—	$	4,954,818
Contributions	—		6,654		4,865		—		11,519
Distributions	(12,476)		(127,747)		(30,585)		—		(170,808)
Other exchanges	—		—		(486,591)		—		(486,591)
Net income	19,275		133,743		212,961		—		365,979
Other comprehensive income/(loss):
Unrealized gains on available for sale debt securities	—		1,059		1,618		—		2,677
Reclassification of unrealized gains on available for sale debt securities	—		(2,337)		(3,571)		—		(5,908)
June 30, 2021	$	20,640	$	1,894,027	$	2,757,019	$	—	$	4,671,686


	RPSFT		Legacy Investors Partnerships		Continuing Investors Partnerships		EPA Holdings		Total
December 31, 2020	$	12,436	$	1,939,509	$	3,125,091	$	—	$	5,077,036
Contributions	—		9,907		4,865		—		14,772
Distributions	(26,129)		(222,289)		(67,768)		—		(316,186)
Other exchanges	—		—		(551,663)		—		(551,663)
Net income	34,333		170,000		251,506		—		455,839
Other comprehensive income/(loss):
Unrealized gains on available for sale debt securities	—		1,960		3,130		—		5,090
Reclassification of unrealized gains on available for sale debt securities	—		(5,060)		(8,142)		—		(13,202)
June 30, 2021	$	20,640	$	1,894,027	$	2,757,019	$	—	$	4,671,686

The Continuing Investors Partnerships’ ownership in RP Holdings decreases as the Continuing Investors Partnerships exchange RP Holdings Class B Interests held for Class A ordinary shares. As of June 30, 2022, the Continuing Investors Partnerships owned approximately 28% of RP Holdings with the remaining 72% owned by Royalty Pharma plc.

RP Holdings Class C Special Interest Held by EPA Holdings

EPA Holdings, an affiliate of the Manager, is entitled to Equity Performance Awards (as defined below) through its RP Holdings Class C Special Interest based on our performance, as determined on a portfolio-by-portfolio basis. Investments made during each two-year period are grouped together as separate portfolios (each, a “Portfolio”). Subject to certain conditions, at the end of each fiscal quarter, EPA Holdings is entitled to a distribution from RP Holdings in respect of each Portfolio equal to 20% of the Net Economic Profit (defined as the aggregate cash receipts for all new portfolio investments in such Portfolio less Total Expenses (defined as interest expense, operating expense and recovery of acquisition cost in respect of such Portfolio)) for such Portfolio for the applicable measuring period (the “Equity Performance Awards”). The Equity Performance Awards will be allocated and paid by RP Holdings to EPA Holdings as the holder of the RP Holdings Class C Special Interest. The Equity Performance Awards will be payable in RP Holdings Class B Interests that will be exchanged upon issuance for Class A ordinary shares. We do not currently expect any material Equity Performance Awards to be payable until certain performance conditions discussed above are met.

Dividends

The holders of Class A ordinary shares are entitled to receive dividends subject to approval by our board of directors. The holders of Class B ordinary shares do not have any rights to receive dividends; however, the RP Holdings Class B Interests are entitled to dividends and distributions from RP Holdings. In the six months ended June 30, 2022, we declared and paid two quarterly cash dividends of $0.19 per Class A ordinary share for an aggregate amount of $165.3 million to holders of our Class A ordinary shares. In the six months ended June 30, 2021, we declared and paid two quarterly cash dividends of $0.17 per Class A ordinary share for an aggregate amount of $138.6 million to holders of our Class A ordinary shares.

2020 Independent Directors Equity Incentive Plan

On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares have been reserved for future issuance to our independent directors.

RSU Activity and Share-based Compensation

We grant RSUs to our independent directors under the 2020 Independent Director Equity Incentive Plan. Share-based compensation expense is recognized on a straight-line basis over the requisite service period of generally one year as part of General and administrative expenses in the condensed consolidated statements of operations. In the three and six months ended June 30, 2022 and 2021, respectively, we did not recognize material share-based compensation expenses.