Interim Results

Ruffer Investment Company Limited
16 March 2007


RUFFER INVESTMENT COMPANY LIMITED


Investment Manager's Report
For the period ended 31 December 2006


Investment Objective

The principal objective of the Company is to achieve a positive total annual
return, after all expenses, of at least twice the Bank of England base rate (5
per cent as at 31 December 2006) by investing in internationally listed or
quoted equities or equity related securities (including convertibles) and bonds
which are issued by corporate issuers, supra-nationals or government
organisations.


Investment Review

The last six months have seen the asset value of the portfolio rise slightly in
capital terms (from 119.4p to 119.6p) which, together with the dividend of 0.5p
which was paid on 13 October 2006, represents a total half-year return of 0.6%.

This is the second disappointing semi-annual figure; the Investment Manager's
report six months ago reflected a full year return of 9.0%, but the majority of
that was in the latter half of 2005. The annual return for the calendar year
2006 did not even match that of a cash return, let alone the targeted aspiration
of twice that level.

During the last six months Sterling rose by 9.4% against the Yen, 5.6% against
the Norwegian Krone and 5.2% against the Swiss Franc. Given that half of the
portfolio has been invested in these three currencies, this created a
significant headwind for the Fund.

During the period Sterling's trade weighted value has risen and while we would
for choice think that Sterling would be a weak currency, the investments we have
made were not based on the thought of Sterling weakness. The question which
preoccupies our thoughts is that we are in the midst of an asset price boom
engineered through the unprecedented opportunities to borrow money at a rate
below the natural level to keep borrowers and lenders in balance. Although
interest rates have been rising in the West for some months, credit spreads have
narrowed, which means that the ability to fund purchases in a leveraged way has
continued uninterruptedly. Stock market commentators have underestimated the
strength of this phenomenon, because the stock market is not at the heart of the
bubble in the way that it was in the 'dot-com boom' of 1999. Today it is the
property market, the sub-prime fixed interest market, and infrastructure plays
which are the targets: it is true that the first and last of these are
represented in the stock market, but they are not central to it. It is certainly
the reason why the mid-cap stocks have been strong, and why the very large
market capitalisations have been, in comparative terms, left behind. Financial
dislocations are the oldest court card in the pack. They always come about from
the same confluence of events - a long period of benign asset price rises which
persuades investors that they are flecked with genius, coupled with the ability
to borrow a lot of money so that their genius can be reflected on the widest of
canvasses. The result is, almost literally, a Jackson Pollock - not cockney
rhyming slang, but an entity of great value to the cognoscenti, but not
necessarily to the average man who has not shared in the prescience of an early
arrival at the investment ball. The end of the benign period always ends
seemingly without warning, and for no apparent reason. The result is, again,
always the same: a time of widespread wealth destruction and discontinuous
markets. The combination of these two make it difficult to be sure that any
asset class will easily ride happily through the storm. The very lack of
liquidity in so many previously 'open' markets means that sound investments are
sold, simply to provide liquidity which always becomes desirable in difficult
times.

These conditions are notoriously difficult to invest in, but currencies are one
of the most effective ways of so doing. For one thing, they are a zero sum game.
For another, they are at the centre of the carry trade whereby speculators who
are taking on big levels of debt can reduce their servicing costs (the rates of
interest on Swiss Francs and Yen are much lower than those obtaining on the
Dollar or Sterling). A reversal of this carry trade could well make significant
capital gains on the currencies, and if these are held through the dislocation,
they could be a fine source of performance for the Fund. The opportunity is also
the reason for the problem: while we wait, the carry trade barrels on, and these
investments in fear, far from being a lost opportunity for making money on the
bull tack, become a source of attrition of value. That attrition may be slow,
but it is an uphill task for the investments in greed to make headway while it
is happening.


Investment Outlook

At the risk of sounding like General Foch, who reported that his centre flank
was giving way, his right flank was in retreat, but the situation was excellent
and he would sound the advance, we remain confident that the risk/reward in this
portfolio is attractive. We further assert that the portfolio is well positioned
for the dangers that we see ahead; we await the future with nervous confidence.


Ruffer LLP
13 February 2007


Company Performance

                       Price at 31.12.2006               Change in Buying Price

                       Buying           Selling          From       From
                       Price            Price            Launch     30.06.05
                         £                £                %          %

Shares                 1.190            1.185            +19.00     -6.30


Prices are published in the Financial Times in the 'Investment Companies'
section, and in the Daily Telegraph's 'Share Prices & Market Capitalisations'
section under 'Investment Trusts'.


Fund Size
                          Net Asset      Net Asset           Number of Shares in
                          Value          Value per Share     Issue
                          £               £

01.07.2006 to 31.12.2006  126,638,547     1.193 *            106,117,074
            30.06.2006    126,375,613     1.191              106,117,074
            30.06.2005     55,935,077     1.119               50,000,000


* Value reported to the London Stock Exchange was 1.196 using mid market values.
Bid prices are presented as fair value in the Financial Statements.


Share Price Range

Accounting Period to:                Highest          Shares      Lowest
                                     Buying Price                 Selling Price
                                           £                          £

   01.07.2006 to 31.12.2006            1.260                        1.165
                 30.06.2006            1.300                        1.120
                 30.06.2005            1.140                        1.000


Net Asset Value Range

Accounting Period to:                    Highest      Shares        Lowest
                                         NAV                        NAV
                                          £                             £

01.07.2006 to 31.12.2006                1.209                         1.173
              30.06.2006                1.234                         0.122
              30.06.2005                1.122                         0.976



Past performance is not a guide to the future. The value of the shares and the
income from them can go down as well as go up and you may not get back the
amount originally invested. Because of this, you are not certain to make a
profit on your investment and you may lose money.


Top Ten Holdings

Stock name                         Currency Holding at    Market        % of
                                               31.12.06   Value         Total
                                                                        Net
                                                                    £   Assets

Treasury 4% 07/03/2009             GBP       11,300,000    11,030,947     8.71
Austria 3% 21/08/2009              CHF       24,750,000    10,499,433     8.29
Switzerland (Govt.) 3 1/2%         CHF       16,800,000     8,332,869     6.58
08/04/2033
Treasury 5 3/4% 07/12/2009         GBP        7,250,000     7,366,747     5.82
Treasury 4 3/4% 07/06/2010         GBP        7,000,000     6,922,230     5.46
Norway 5 1/2% 15/05/2009           NOK       80,000,000     6,724,492     5.31
Switzerland (Govt.) 4% 08/04/2028  CHF       12,240,000     6,340,062     5.01
Norway 6% 16/05/20011              NOK       70,000,000     6,104,513     4.82
Switzerland (Govt.) 1 3/4%         CHF        6,400,000     3,773,358     2.96
05/11/2009
Treasury 2 1/2% Index Linked       GBP        1,500,000     4,053,915     3.20
23/08/2011


Balance Sheet
                                        31.12.06       31.12.05       30.06.06
                                               £              £              £
ASSETS

Cash and cash equivalents                192,784      6,479,022      6,190,457
Receivables                            1,257,005      1,521,101      1,483,682
Financial assets at fair value
through profit or loss               125,654,273    120,241,000    119,449,349

Total Assets                         127,104,062    128,241,123    127,123,488

EQUITY

Capital and reserves attributable
to the Company's shareholders
Management share capital                       2              2              2

Net assets attributable to holders
of redeemable participating
preference shares                    126,638,547    127,717,620    126,375,613

Total Equity                         126,638,549    127,717,622    126,375,615

LIABILITIES

Payables                                 465,513        523,501        747,873
Total Liabilities                        465,513        523,501        747,873

Total Equity and Liabilities         127,104,062    128,241,123    127,123,488

Net assets attributable to holders
of redeemable participating
preference shares (per share)              1.193          1.204          1.191



Statement of Operations

                             Revenue      Capital     01.07.06 to  01.06.05 to
                                                        31.12.06      31.12.05
                                                           Total         Total
                                      £           £            £             £

Bank interest income             10,524           -       10,524       289,094
Fixed interest income         1,538,105           -    1,538,105       880,228
Dividend income                 186,912           -      186,912       271,069
Net gains on financial
assets at fair value 
through profit or loss                -     472,446      472,446     5,143,834

Other (losses)/gains                  -    (464,760)    (464,760)      109,785

Total investment income       1,735,541       7,686    1,743,227     6,694,010

Management fees                (159,045)   (477,136)    (636,181)     (465,438)
Expenses                       (209,037)    (79,370)    (288,407)     (600,417)
Total operating expenses       (368,082)   (556,506)    (924,588)   (1,065,855)

Operating profit before
taxation                      1,367,459    (548,820)     818,639     5,628,155

Withholding tax                 (25,120)          -      (25,120)      (32,074)

Operating profit after
taxation and increase in net
assets attributable to
holders of redeemable
participating preference
shares                        1,342,339    (548,820)     793,519     5,596,081

Earnings per share*                1.27p      (0.52)p       0.75p         7.11p


*Earnings per share is based on the weighted average number of redeemable
participating preference shares. The weighted average number of shares for the
period is 106,117,074.



Statement of Changes in Equity


                                                    01.07.06 to    01.07.05 to
                                                       31.12.06       31.12.05
                                                              £              £
Net assets attributable to holders of redeemable
participating preference shares at the start of
the period                                          126,375,613     55,935,077

Movement due to issue and redemptions of shares:
Proceeds from redeemable participating preference
shares issued                                                 -     66,436,462
Redemption of redeemable participating preference             -              -
shares
Net increase from share transactions                          -     66,436,462

Increase in net assets attributable to holders of
redeemable participating preference shares from
operations                                              793,519      5,596,081
Distributions to holders of redeemable
participating preference shares                        (530,585)      (250,000)
Increase in net assets attributable to holders of
redeemable participating preference shares from
operations (after distributions)                        262,934      5,346,081

Net assets attributable to holders of redeemable
participating preference shares at the end of the
period                                              126,638,547    127,717,620


Cash Flow Statement


                                                    01.07.05 to    01.07.05 to
                                                       31.12.05       31.12.05
                                                              £              £
Cash flows from operating activities
Purchase of financial assets and settlement of
financial liabilities                               (20,530,102)   (64,319,257)
Proceeds from sale of investments (including
realised gains)                                      15,371,477      4,783,621
Amount paid to brokers                                  (81,792)       (91,323)
Bank interest received                                   36,076        225,362
Fixed interest income received                        1,170,276        184,246
Dividends received                                      183,245        184,193
Withholding tax                                         (25,120)       (32,074)
Operating expenses paid                              (1,126,388)      (562,402)
                                                         --------      ---------
Net cash utilised in operating activities            (5,002,328)   (59,627,634)
                                                         --------      ---------

Cash flows from financing activities
Dividends paid                                          (530,585)      (250,000)
Proceeds from issue of 'C' shares                             -      67,500,000
Issue expenses relating to issue of 'C' shares                -      (1,252,670)
                                                         --------      ---------
Net cash flow from financing activities                 (530,585)     65,997,330
                                                         --------      ---------

Net (decrease)/increase in cash and cash
equivalents                                            (5,532,913)     6,369,696

Cash and cash equivalents at the beginning of the
period                                                  6,190,457        138,396
Exchange losses on cash and cash equivalents            (464,760)       (29,070)
                                                         --------      ---------
Cash and cash equivalents at the end of the
period                                                   192,784      6,479,022
                                                         --------      ---------





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