Annual Financial Report

RNS Number : 6426Z

Ruffer Investment Company Limited

24 September 2009

Ruffer Investment Company Limited

Financial Highlights

30.06.09

Offer Price Net Asset Value

£ £

Redeemable participating preference shares 1.570† 1 .526*

† The price an investor would be expected to pay in the market (London Stock Exchange).

* This is the Net Asset Value for valuation purposes as at 30.06.09. The Fund is valued weekly and at month end.

Company Information

Incorporation Date 01.06.04

Launch Date 08 .07 .04 (C shares: 29.09.05)

Initial Net Asset Value 98p per share (98p per 'C' share)**

Launch Price 100p per share (100p per 'C' share)

Accounting dates Interim Final

31 December 30 June

(Unaudited) (Audited)

** On 12 December 2005, the 'C' shares were converted into redeemable participating preference shares in the Company at a ratio of 0.8314 redeemable participating preference shares for each 'C' share, in accordance with the conversion method in the Placing and Offer for Subscription Document.

Chairman's Review

Performance

The Company's investment portfolio earned a positive total return of 18.6% in the year to 30 June 2009. This is calculated after all expenses of management and allowing for the payment of dividends totalling 2.75p per share. The objective rate of return for the year was 5.1%, being twice the Bank of England base rate for the period.

Earnings and Dividends

Earnings for the year were 3.02p per share on revenue account and 21.03p on capital account. In the course of the year dividends totalling 2.75p per share were paid. A final dividend of 1.5p per share in respect of the year to 30 June 2009 was approved on 23 September and will be paid on 23 October 2009.

Share Price

In the year to 30 June 2009 the shares moved from a discount of 1% to Net Asset Value (NAV) at the beginning of the period to a premium of 1% at the end of the period.

Annual General Meeting

The AGM of the Company will be held at 10.30 a.m. on Thursday 26 November at the Company's registered office at Trafalgar Court, Les Banques, St Peter Port, Guernsey.

Share Buyback Authority

With the shares trading at both a premium and discount to NAV throughout the year to 30 June 2009, the Board has resolved to seek, at the AGM on 26 November, a renewal of the authority to buy back shares at a discount to NAV in the terms to be stated in a Special Resolution. No shares have been bought back under authorizations granted at previous AGMs.

Share Redemption Facility

The Company has a Redemption Facility operable in November of each year. This is described in the notes of the Annual Financial Report. The Board has resolved not to offer the Facility in November 2009.

John de Havilland

Chairman

23 September 2009

Directors

The Company has six Non-Executive Directors, all of whom are independent of the Investment Manager and are listed below;

John Anthony de Havilland, aged 71 and a resident of South Africa. He joined J Henry Schroder Wagg and Co Limited in 1959 as a fund manager and he became Director of Schroder Wagg in 1972. He ran the Schroder investment division's own account trading book for 20 years and also managed funds for Schroder clients including overseas government agencies. He retired from Schroders in 1990 since when he has continued with longstanding advisory and/or trustee roles for certain major family groups.

Wayne Bulpitt, aged 47 and a resident of Guernsey. He is managing director and founder of Active Group Limited which provides management and consultancy services to the offshore finance industry. He was formerly Head of Offshore Investment Services for Canadian Imperial Bank of Commerce, Global Private Banking & Trust division (1998-2001) and Managing Director of CIBC Fund Managers (Guernsey) Limited (1992-1998).

Jeannette Elaine Etherden, aged 49 and a resident of the United Kingdom. She started in 1983 as a research analyst at Confederation Life (acquired by Sun Life of Canada in 1994) and was Head of UK Equities from 1991. In 1996 she moved to Newton Investment Management as a multi-asset fund manager. She was appointed a Director of Newton in 1997 and additionally was Chief Operating Officer, Investments from 1999 until her resignation in 2001. From January 2004 to June 2006 she was Business Development Manager for the Candela Fund at Olympus Capital Management.

Peter William Luthy, aged 58 and a resident of the United Kingdom. He has worked in the fixed income market for 25 years. In 1990, he co-founded a credit focused bond broker, Luthy Baillie Dowsett Pethick and Co. Limited ('LBDP'). Dresdner Kleinwort Benson acquired LBDP in 1996 where he was Global Head of Credit Products. In 1998 he became global head of investment banking at Barclays Capital. Currently, he is a Managing Partner of Banquo Credit Management LLP.

Christopher Paul Spencer, aged 59 and a resident of Guernsey. He qualified as a chartered accountant in London in 1975. Following two years post qualification work in Bermuda he moved to Guernsey. He specialised in audit and fiduciary work, whilst managing partner/director of the Guernsey Practice of Pannell Kerr Forster (Guernsey) Limited and Praxis Fiduciaries Limited from 1990 until his retirement in May 2000. He is a non-executive Director of a number of hedge funds, funds of hedge funds and other investment and insurance companies.

Ashe George Russell Windham, CVO, aged 52 and a resident of the United Kingdom. He joined Barclays de Zoete Wedd (BZW) in 1987 as an institutional equities salesman and was appointed a Director of BZW's Equities Division in 1991. He joined CSFB in 1997 when they acquired BZW's Equities business. In 2004 he joined Man Investments as Head of Internal Communications and in 2007 became Man Group's Global Head of Internal Communications. In June 2009 he resigned from Man Group plc to set up a private family office.

Report of the Directors

The Directors of Ruffer Investment Company Limited ('the Company') present their Annual Financial Report for the year ended 30 June 2009 which have been properly presented in accordance with The Companies (Guernsey) Law, 2008.

Registration

The Company was incorporated with limited liability in Guernsey on 1 June 2004 as a company limited by shares and as an authorised closed-ended investment company. As an existing closed-ended fund the Company is deemed to be granted an authorised declaration in accordance with section 8 of the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended and rule 6.02 of the Authorised Closed-ended Investment Schemes Rules 2008 on the same date as the Company obtained consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinance 1959 to 1989.

Principal Activity and Investment Objective

The Company is an authorised closed-ended investment company whose shares are listed on the London Stock Exchange. The principal objective of the Company is detailed in the Annual Financial Report.

Results

The results for the year are set out in the Statement of Operations.

Directors' Responsibilities

The Directors are responsible for preparing financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period and are in accordance with applicable laws. In preparing those financial statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and,

• prepare the financial statements on the going concern basis unless it is inappropriate to assume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors' Statement

So far as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps he/she ought to have taken as a Director to make him/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Auditors

The Auditors, Moore Stephens, have indicated their willingness to continue in office. Accordingly, a resolution for their reappointment will be proposed at the forthcoming Annual General Meeting.

Corporate Governance

The Committee on Corporate Governance published its latest report, being relevant to financial periods which commenced prior to 1 November 2006, on the principles of good governance and code of best practice (the 'Combined Code') in June 2008. The Company is a Guernsey incorporated company, and as such is not required to comply with the Combined Code. However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have therefore adopted the spirit of the Combined Code.

Corporate Governance principles

The Board, having reviewed the Combined Code, considers that it has maintained procedures during the year ended 30 June 2009 to ensure that it complies with the spirit of the Combined Code subject to the exceptions explained below and its special circumstances as an offshore company.

The Company also complies with the AIC guidelines on corporate governance, whose underlying principles are the same as those of the Combined Code.

Board responsibilities

The Board comprises six non-executive directors. All members of the Board are independent of the Investment Manager. None of the Directors has a contract of service with the Company.

The Board meets on at least four occasions each year, at which time the Directors review the management of the Company's assets and all other significant matters so as to ensure that the Directors maintain overall control and supervision of the Company's affairs. The Board is responsible for the appointment and monitoring of all service providers to the Company.

Chairman, Senior Independent Director and Chief Executive

The Chairman of the Board is John de Havilland. A biography for Mr de Havilland and all other Directors appears in the Directors' Report. In considering the independence of the Chairman, the Board has taken note of the provisions of the Combined Code relating to independence, and has determined that Mr de Havilland is an independent Director. As the Chairman is an independent Director, no appointment of a senior independent director has been made. The Company has no employees and therefore there is no requirement for a chief executive. Attendance at the Board and other Committee meetings during the year was as follows:

Directors Board Meetings Committee Meetings

John de Havilland 4 attendances 2 attendances

Wayne Bulpitt 4 attendances 2 attendances

Jeannette Etherden 3 attendances 1 attendance

Peter Luthy 4 attendances 2 attendances

Christopher Spencer 3 attendances 2 attendances

Ashe Windham* 1 attendance 0 attendance

* Appointed to the Board of Directors on 24 February 2009

Performance evaluation

The Chairman evaluates the performance of each of the Directors on an ongoing basis, taking into account the effectiveness of their contributions and their commitment to the role. The Chairman conducts formal appraisals with each Director on an annual basis. The Board conducts a similar appraisal of the Chairman.

Re-election

In accordance with the Company's Articles of Association, at the first Annual General Meeting of the Company all of the Directors retired from office and were subsequently re-elected. At each Annual General Meeting thereafter, one-third of the Directors, (or if their number is not three or an integral multiple of three), the number nearest to, but (except where there are less than three Directors) not greater than one-third, shall retire from office. On 4 December 2008 at the 4th Annual General Meeting of the Company, Christopher Spencer retired as a Director of the Company and being eligible had offered himself for re-election and was re-elected as a Director of the Company by the Shareholders.

Supply of information

The quarterly board meetings are the principal source of regular information for the Board enabling it to determine policy and to monitor performance and compliance. A representative of the Investment Manager attends each board meeting thus enabling the Board to discuss and review the Company's operation and performance. Each Director has direct access to the Company Secretary, and may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.

Nomination committee

The Board as a whole fulfils the function of a Nomination Committee. Any proposal for a new Director will be discussed and approved by the Board. The Board will determine whether in future an external search consultancy or open advertising is used in the appointments of non-executive Directors. Ashe Windham was appointed to the Board of Directors on 24 February 2009.

Directors' remuneration

The level of Directors' fees is determined by the whole Board on an annual basis and therefore a separate Remuneration Committee has not been appointed. When considering the level of Directors' remuneration the Board considers the industry standard and the level of work that is undertaken. Since all Directors are non-executive, the Company is not required to comply with the principles of the Code in respect of executive directors' remuneration. Directors' fees are disclosed fully in each Annual Report. The basic fee payable to the Chairman is £28,500 p.a. and £20,000 p.a. to each Non-Executive Director. None of the Directors had a service contract with the Company during the year and accordingly a Director is not entitled to any minimum period of notice or to compensation in the event of their removal as a Director.

Going concern

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the accounts since the assets of the Company consist mainly of securities which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

Internal control

The Board is responsible for establishing and maintaining the Company's system of internal control and for maintaining and reviewing its effectiveness. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives and as such can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board considers on an ongoing basis the process for identifying, evaluating and managing any significant risks faced by the Company. The process includes reviewing reports from the Company Secretary on risk control and compliance, in conjunction with the Investment Manager's regular reports which cover investment performance.

The Board has contractually delegated to external parties various functions as listed below. The duties of investment management, accounting and custody are segregated. Each of the contracts entered into with the parties was entered into after full and proper consideration by the Board of the quality and cost of services offered, including the control systems in operation as far as they relate to the affairs of the Company.

• Investment Management is provided by Ruffer LLP, a company authorised by the Financial Services

Authority.

• Administration, Registrar and Company Secretarial duties are performed by Northern Trust International Fund Administration Services (Guernsey) Limited, a company licensed and regulated by the Guernsey Financial Services Commission.

• CREST agency functions are performed by Computershare (CI) Limited, a company licensed and regulated by the Jersey Financial Services Commission.

• Custody of assets is undertaken by the RBC Dexia Investor Services Trust, a joint venture equally owned by Royal Bank of Canada and Dexia.

Audit committee

The Company's Audit Committee comprises all of the Directors. The Audit Committee has the following remit: to meet bi-annually and to consider, inter-alia: (a) annual and interim financial statements; (b) auditor reports; and (c) terms of appointment and remuneration for the auditors (including overseeing the independence of the auditors particularly as it relates to the provision of non-audit services). The Board is satisfied that the Audit Committee contains members with sufficient recent and relevant financial experience.

The Audit Committee has considered the requirement for an annual internal audit of the Company. On the basis that the Company is an investment company with no employees, and, due to the Company's service providers all being regulated entities who themselves are subject to internal audits, the Audit Committee is of the opinion that an internal audit is not necessary for the Company.

Dialogue with shareholders

The Investment Manager and the Corporate Broker maintain regular dialogue with institutional shareholders, feedback from which is reported to the Board. In addition, Board members are available to answer shareholders' questions at any time, and specifically at the Annual General Meeting. The Company Secretary is available to answer general shareholder queries at any time during the year.

Investment management

The key terms of the Investment Management Agreement and specifically the fee charged by the Investment Manager are set out in Notes 6 and 15 to the financial statements. The Board believes that the investment management fee is competitive with other investment companies with similar investment mandates.

The Board reviews on an ongoing basis the performance of the Investment Manager and considers whether the investment strategy utilised is likely to achieve the Company's investment objective of achieving a positive total annual portfolio return, after all expenses, of at least twice the return of the Bank of England base rate. Having considered the portfolio performance and investment strategy, the Board has unanimously agreed that the interests of the shareholders as a whole are best served by the continuing appointment of the Investment Manager on the terms agreed.

The Investment Management Agreement will continue in force until determined by the Investment Manager or the Company giving to the other party thereto not less than 12 months notice.

On behalf of the Board

Christopher Spencer Wayne Bulpitt

Director Director

23 September 2009

Investment Manager's Report

For the year ended 30 June 2009

In the twelve month period from 1 July 2008 to 30 June 2009 the asset value of the Company rose in capital terms from 131.3p* to 152.6p* which, together with a dividend of 2.75p, represents a total return of 18.6%, compared to the target return of 5.1%, being twice the Bank of England base rate over the period. Over the same period the FTSE All-share has fallen by 20.5% on a total return basis. Since launch on 8 July 2004 the Company has returned 66.6%,** including dividends.

The events of the last 12 months have been quite a surprise with large swathes of the Western financial system effectively nationalised and the collapse of institutions once considered too big to fail. The response from the authorities has been equally startling and they have proved that they will do everything that is necessary to ensure that they bail out the system. The investment philosophy of the Company reflected this, and the implementation has worked well in practice. The portfolio benefited from being invested outside Sterling, and heavy in Yen exposure - at the highest point 35% of the Company was invested in Japanese Yen. Gold has also been a happy place to be, as have index-linked gilts.

Prior to the financial crisis we wanted to invest a large part of the portfolio outside Sterling and particularly in 'bolt-hole' currencies (Norwegian Krone, Swiss Franc and Japanese Yen). The reasoning behind this is that in times of trouble these currencies would be beneficiaries of a global flight to safety and crucially, the foreign exchange market would remain open when other markets seized up. This is always a feature of debt-driven dislocations. During the third quarter of 2008, we took the decision to reduce Swiss Franc exposure switching into the Yen (hence the heavy weighting). We had become increasingly worried about the fragility of Swiss financial institutions, and the ability of the Swiss authorities to stand behind their banking system. We had previously cut our holding in the Norwegian Krone, after the currency was a beneficiary of the rampant oil price. More recently we have moved to lock in the currency gains, to the extent that, with Sterling no longer so clearly at risk, we now have 71.7% exposure to our base currency.

In the last annual review we wrote about the possibilities that the crisis will play out in an inflationary manner. Our argument was that the Central Bank response to what is an aggressive, but finite, debt deflation was potentially infinite and that they are prepared to compromise currencies to this effect. The Chairman of the Federal Reserve, Ben Bernanke, has made his intentions clear in an oft quoted speech to the National Economists Club in November 2002 - 'What has this got to do with monetary policy? Like gold, US dollars have value only to the extent that they are strictly limited in supply. But the US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost. By increasing the number of US dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.' As such we have become increasingly convinced of this inflationary theory and have more than doubled our exposure to index-linked bonds from 16.2% to 41.0%. We have also extended the duration of this part of the portfolio. Our central case of sharply negative real yields gives a geared benefit through the longer duration bonds.

Japan remains at the heart of our equity investments, making up 13.6% of the portfolio, however the shape of this has changed significantly during the year. Our Japanese domestic utility positions served the portfolio well throughout 2008. We have therefore taken profits in Tohoku and sold our holding in Central Japan Railway. Against a market that fell by 40% they were no-longer the exceptional value they once were, and did not offer the upside we needed in order to participate in an equity market rally. These have been replaced by investments in financials, traders and property companies. These companies offer significant potential upside participation in market rallies. Japanese financial institutions have remained relatively unexposed to the leverage boom/bust of the last decade; contrary to the western banks their deposit bases far outweigh their loans.

Turning to the equity market in general, the sharp upward move in equities since early March has been precipitated by the Fed's injection of liquidity into the credit markets. The result of this has been for economy sensitive stocks and financials to appreciate. Our Japanese exposure has benefitted from this. We now increasingly feel that there will be a swing back to the steady high yielding mega cap stocks which have failed to participate in the rally. Our thinking is that many long-only fund managers have missed this rally. As this money returns to the market we hope that the high yielders will outperform the more 'hairy-chested' assets that have benefited thus far. We have added holdings in Vodafone, KPN (the Dutch telecom company), Kraft, Johnson & Johnson as well as adding to BT.

The outlook remains as it has done for some time: a battle between inflation and deflation. We believe that we are headed for inflation, although we accept that this view could look horribly wrong for some time.

Ruffer LLP

10 July 2009

* Value reported to the London Stock Exchange, using mid market price.

** The Calculation of the Total Return includes an amount of 2.191p per Share which represents the notional amount by which dividends paid to date would have grown if they had not been paid out as dividends but reinvested within the Company.

Company Performance

	Price		Change in
	30.06.09		Bid Price
	Offer	Bid	From	From
	Price	Price	Launch	30.06.08
	£	£	%	%

Shares	1.570	1.548	+ 54.80	+ 20.00

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
	Value	Value per Share	In Issue
	£	£

30.06.09	135,603,281	1.521*	89,129,703
30.06.08	116,617,351	1.308	89,129,703
30.06.07	123,690,774	1.166	106,117,074
30.06.06	126,375,613	1.191	106,117,074
30.06.05	55,935,077	1.119	50,000,000

* Value reported to the London Stock Exchange was 1.5259 using mid market values. Bid prices are presented as fair value in the Financial Statements.

Share Price Range

	Highest	Lowest
Accounting	Offer Price	Bid Price
Period to:	£	£

30.06.09	1.570	1.250
30.06.08	1.300	1.085
30.06.07	1.260	1.110
30.06.06	1.300	1.120
30.06.05	1.140	1.000

	Highest	Lowest
Accounting	NAV	NAV
Period to:	£	£

30.06.09	1.526	1.266
30.06.08	1.333	1.176
30.06.07	1.211	1.166
30.06.06	1.234	1.122
30.06.05	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.

Investment Policy

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 (0.5% as at 30 June 2009) by investing in internationally listed or quoted equities or equity related securities (including convertibles) and/or bonds which are issued by corporate issuers, supra-nationals or government organisations.

Investment Policies

In selecting investments the Company will adopt a stock picking approach and will not adopt any investment weightings by reference to any benchmark. Both the Board and the Investment Manager believe that the adoption of any index related investment style would inhibit the ability of the Company to deliver its objectives.

The Company invests across a broad range of assets, geographies and sectors in order to achieve its objective. This allocation will change over time to reflect the risks and opportunities identified by the Investment Manager across global financial markets, with an underlying focus on capital preservation. The allocation of the portfolio between equities and bonds will vary from time to time so as to enable the Company to achieve its objective. There are no restrictions on the geographical or sectoral exposure of the portfolio (except those restrictions noted below).

The universe of equity, equity related securities or bonds in which the Company may invest will be wide and may include companies domiciled in, and bonds issued by entities based in, non-European countries, including countries that may be classed as emerging or developing. This may result in a significant exposure to currencies other than sterling.

Investment restrictions and guidelines

It is not intended for the Company to have any structural gearing. The Company has the ability to borrow up to 30% of the net asset value at any time for short term or temporary purposes, as may be necessary for settlement of transactions, to facilitate share redemption or to meet ongoing expenses.

The Company will not invest in the securities of any company that is not quoted or does not have a listing on a Relevant Market.

The proportion of the portfolio invested into companies based in emerging or developing countries will be limited, at the time of any investment, to below 15% of the Company's gross assets.

The Directors have determined that the Company will not engage in currency hedging except where the Investment Manager considers such hedging to be in the interests of efficient portfolio management.

The Directors have determined that not more than 10%, in aggregate, of the value of the gross assets of the Company at the time of acquisition may be invested in other listed investment companies (including listed investment trusts) except that this restriction will not apply to investments in such entities which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed investment companies (including listed investment trusts). Regardless of the above restriction, the Directors have further determined that no more than 15% in aggregate of the Company's gross assets will be invested in other listed investment companies (including listed investment trusts).

General

In accordance with the requirements of the UK Listing Authority, any material changes in the Investment Policy of the Company may only be made with the approval of shareholders.

Top Ten Holdings

			Market	% of
		Holding at	Value	Total Net
Stock name	Currency	30.06.09	£	Assets

UK Index-Linked Gilt 1.25% 22/11/2017	GBP	11,500,000	12,951,867	9.55
US Index-Linked Treasury Bond 2.375% 15/01/2025	USD	12,250,000	8,648,157	6.38
UK Index-Linked Gilt 1.25% 22/11/2055	GBP	5,762,000	7,894,706	5.82
Japan Index-Linked Bond 1.30% 10/09/2017	JPY	1,245,000,000	6,893,828	5.08
Japan Index-Linked Bond 1.40% 10/03/2018	JPY	1,124,000,000	6,184,886	4.56
Sweden Index-Linked Bond 3.5% 01/12/2028	SEK	43,000,000	4,983,863	3.68
UK Index-Linked Gilt 1.875% 22/11/2022	GBP	4,000,000	4,531,174	3.34
CF Ruffer Japanese Fund**	GBP	4,000,000	4,108,000	3.02
CF Ruffer Baker Steel Gold Fund**	GBP	2,381,330	3,602,237	2.66
BT Group Plc	GBP	3,509,500	3,562,143	2.63

**CF Ruffer Baker Steel Gold Fund and CF Ruffer Japanese Fund are classed as related investment funds as they share the same Investment Manager as the Company.

The market value of all related investment funds are deducted from the Net Asset Value of the Company before the calculation of management fees on a monthly basis.

Responsibility Statement

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge

(a) The Annual Financial Report has been prepared in accordance with International Financial Reporting Standards (IFRS) and gives a true and fair view of the financial position and profit or loss of the Company as at and for the year ended 30 June 2009.

(b) The Annual Financial Report includes information detailed in the Chairman's Review, Report of the Directors, Investment Manager's Report and Notes to the Financial Statements which provides a fair review of the information required by:

(i) DTR 4.1.8 of the Disclosure and Transparency Rules, being a fair review of the Company business and a description of the principal risks and uncertainties facing the Company; and

(ii) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of important events that have occurred since the end of the financial year and the likely future development of the Company.

Signed on behalf of the Board by:

Christopher Spencer Wayne Bulpitt

Director Director

23 September 2009

Balance Sheet

	Notes	30.06.09	30.06.08
		£	£
ASSETS
Cash and cash equivalents		4,960,204	4,314,396
Unrealised gain on open forward foreign currency contracts	20	3,727,334	9,172
Receivables	9	7,445,243	1,663,321
Financial assets at fair value through profit or loss	1&8	119,837,264	112,057,710

Total Assets		135,970,045	118,044,599

EQUITY
Capital and reserves attributable to the
Company's shareholders
Management share capital	11	2	2
Net assets attributable to holders of redeemable
participating preference shares	12	135,603,281	116,617,351

Total Equity		135,603,283	116,617,353

LIABILITIES

Payables	10	254,472	1,427,246
Unrealised loss on open forward foreign currency contracts	20	112,290	-

Total Liabilities		366,762	1,427,246

Total Equity and Liabilities		135,970,045	118,044,599

Net assets attributable to holders of redeemable
participating preference shares (per share)	13	1.521	1.308

The financial statements were approved on 23 September 2009 and signed on behalf of the Board of Directors by:-

Christopher Spencer Wayne Bulpitt

Statement of Operations

				01.07.08 to	01.07.07 to
				30.06.09	30.06.08
	Notes	Revenue	Capital	Total	Total
		£	£	£	£

Bank interest income	1	128,897	-	128,897	159,786
Fixed interest income	1	1,303,822	-	1,303,822	1,882,955
Dividend income	1	2,396,508	-	2,396,508	1,102,082
Net gains on financial assets
at fair value through profit or loss	1&4	-	15,002,762	15,002,762	13,733,288
Other gains	1&5	-	5,026,077	5,026,077	1,192,921

Total investment income		3,829,227	20,028,839	23,858,066	18,071,032

Management fees	6	(307,886)	(923,657)	(1,231,543)	(1,202,167)
Expenses	7	(436,864)	(359,443)	(796,307)	(548,200)

Total operating expenses		(744,750)	(1,283,100)	(2,027,850)	(1,750,367)


Operating profit before taxation		3,084,477	18,745,739	21,830,216	16,320,665

Withholding tax		(393,219)	-	(393,219)	(225,513)

Operating profit after taxation and increase
in net assets attributable to holders of
redeemable participating preference shares		2,691,258	18,745,739	21,436,997	16,095,152

Basic and diluted earnings per share *		3.02p	21.03p	24.05p	16.72p

* Basic and diluted earnings per share are calculated by dividing the operating profit after taxation and increase in net assets attributable to holders of redeemable participating preference shares by the weighted average number of redeemable participating preference shares. The weighted average number of shares for the period is 89,129,703 (30.06.2008: 96,230,981).

Statement of Changes in Equity

		01.07.08 to	01.07.07 to
	Notes	30.06.09	30.06.08

		£	£
Net assets attributable to holders of redeemable
participating preference shares at the start of the year		116,617,351	123,690,774

Movement due to issues and redemptions of shares:

Redemption of redeemable participating
preference shares		-	(20,727,990)


Net decrease from share transactions		-	(20,727,990)

Increase in net assets attributable to holders of
redeemable participating preference shares from operations		21,436,997	16,095,152

Distributions to holders of redeemable
participating preference shares	3	(2,451,067)	(2,440,585)

Increase in net assets attributable to holders of redeemable
participating preference shares from operations (after distributions)		18,985,930	13,654,567


Net assets attributable to holders of redeemable
participating preference shares at the end of the year		135,603,281	116,617,351

Cash Flow Statement

	01.07.08 to	01.07.07 to
	30.06.09	30.06.08

	£	£
Cash flows from operating activities
Purchase of financial assets and settlement of financial liabilities	(121,440,043)	(73,708,734)
Proceeds from sale of financial assets (including realised gains)	127,575,478	99,546,391
Other receivables	(6,010,705)	(714,297)
Transaction costs paid to brokers	(359,443)	(183,489)
Bank interest received	128,897	164,392
Fixed interest income received	1,823,654	1,839,441
Dividends received	2,105,459	1,016,762
Withholding tax	(343,692)	(225,513)
Operating expenses paid	(1,802,935)	(1,782,442)
Foreign exchange gain	1,420,205	1,183,749

Net cash generated from operating activities	3,096,875	27,136,260

Cash flow from financing activities
Redemptions of shares	-	(20,727,990)
Dividends paid	(2,451,067)	(2,440,585)

Net cash flow from financing activities	(2,451,067)	(23,168,575)

Net increase in cash and cash equivalents	645,808	3,967,685

Cash and cash equivalents at beginning of the year	4,314,396	346,711

Cash and cash equivalents at end of the year	4,960,204	4,314,396

Notes to the financial statements

1. Significant accounting policies

Basis of preparation

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss, and in accordance with International Financial Reporting Standards (IFRS) and the Principal Documents.

In order to better reflect the activities of an investment company supplementary information which analyses the income statement between items of a revenue and capital nature has been presented within the Statement of Operations.

This annual report and financial statements, covering the year from 1 July 2008 to 30 June 2009, has been audited.

Standards, interpretations and amendments to published statements not yet effective:

The IASB's latest annual improvements project was completed in April 2009 and changed a number of standards, but these changes, except for those listed below, are not expected to have a material impact on the Company.

- IFRS 7 - Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments Effective date - 1 January 2009);

Amendments to IFRS 7 were issued by the IASB in March 2009 and become effective for annual periods beginning on or after 1 January 2009 with early application permitted. The amendment to IFRS 7 requires fair value measurements to be disclosed by the source of inputs, using a three-level hierarchy:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2)
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

In addition the amendment revises the specified minimum liquidity risk disclosures including amongst others: the contractual maturity of non derivative and derivative financial liabilities, and a description of how this is managed.

IFRS 8 - Operating segments (Effective date - 1 January 2009)

Financial instruments

Financial assets and financial liabilities are recognised on the Company's Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and liabilities at fair value through profit or loss

Purchases and sales of investments are recognised on trade date (the date on which the Company commits to purchase or sell the investment). Investments purchased are recorded at fair value (excluding transaction costs). Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. Gains and losses on investments sold are shown in Note 4 and recognised in the Statement of Operations in the period in which they arise.

Investments traded in active markets are valued at the latest available bid prices ruling at midnight on the balance sheet date. Gains and losses arising from changes in fair value of financial assets are shown as net gains or losses on financial assets through profit or loss in Note 4 and recognised in the Statement of Operations in the period in which they arise.

For other financial instruments, including other receivables, other payables and unrealised gain/loss on open forward foreign currency contracts, the carrying amounts as shown in the Balance Sheet approximate fair values due to the short term nature of these financial instruments.

Fair value

In accordance with the Company's accounting policies all financial assets and financial liabilities are carried at fair value. Gains and losses arising from changes in fair value of financial assets are shown as net gains or losses on financial assets through profit or loss in Note 4 and recognised in capital in the Statement of Operations in the period in which they arise.

Investments of the Company also consist of shares in investment funds which are not listed on a regulated stock exchange and these are valued at the latest estimate of net asset value from the administrator of the respective investment funds i.e. most recent price is the best estimate of the amount for which holdings could have been disposed of at the Balance Sheet date.

Derecognition of financial instruments

A financial asset is derecognised when: (a) the rights to receive cash flows from the asset have expired, (b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through arrangement'; or (c) the Company has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled.

Significant estimates and judgements

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equate to the related actual results. The main use of accounting estimates and assumptions occurs in the calculation of the sensitivity analysis in note 20.

Income

Dividend income from equity investments is recognised in the Statement of Operations when the relevant investment is quoted ex-dividend. Investment income is included gross of withholding tax. Interest income is recognised in the Statement of Operations for all debt instruments using the effective interest rate method.

Expenses

Expenses are accounted for on an accruals basis. Expenses incurred on the acquisition of investments at fair value through profit or loss are charged to the Income Statement in capital. All other expenses are charged to the Income Statement in revenue.

Cash and cash equivalents

Cash comprises cash in hand and deemed deposits. Cash equivalents are short-term, highly liquid investments with original maturities of three months or less and bank overdrafts.

Translation of foreign currency

Items included in the Company's financial statements are measured using the currency of the primary economic environment in which it operates ('the functional currency'). This is the British Pound ('Sterling'), which is the currency in which its shares are denominated. The Company has also adopted Sterling as its presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and those from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Operations.

Translation differences on non-monetary items such as financial assets held at fair value through profit or loss are reported as part of net gains or losses on financial assets through profit or loss in the Statement of Operations.

Forward foreign currency contracts

Forward foreign currency contracts are treated as derivative contracts and as such are recognised at fair value on the date on which they are entered into and subsequently remeasured at their fair value. Fair value is determined by rates in active currency markets. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

Redeemable participating preference shares

As the Company's Participating Preference Shares are redeemable at the sole option of the Directors they are required to be classified as equity instruments.

2. Taxation

The amounts disclosed as taxation in the Statement of Operations of the Company relate solely to withholding tax suffered at source on income. Foreign capital gains tax charges are deducted from realised investment gains. The Company is exempt from taxation in Guernsey under the provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and has paid an annual exemption fee of £600.

3. Dividend to shareholders

Any dividend will be declared semi-annually in September and February each year. An interim dividend of 1.25p per share (£1,114,121) was declared on 24 September 2008 and paid on 24 October 2008 in respect of the period from 1 January 2008 to 30 June 2008. An interim dividend of 1.5p per share (£1,336,946) was declared on 26 February 2009 and paid on 27 March 2009 in respect of the period covered by this Annual Financial Report. A further dividend of 1.5p per share was approved on 23 September 2009, also in respect of the period covered by this report. The financial impact of this dividend is not included in these financial statements.

4. Net gains on financial assets at fair value through profit or loss

	01.07.08 to	01.07.07 to
	30.06.09	30.06.08
	£	£
The net gains on financial assets at fair value through profit or loss
during the year comprise:

Gains realised on investments sold during the year	13,126,047	8,106,652
Unrealised gains arising from changes in fair value during the year	1,876,715	5,626,636

Net gains on financial assets at fair value through profit or loss	15,002,762	13,733,288

5. Other gains and losses


	01.07.08 to	01.07.07 to
	30.06.09	30.06.08
	£	£
Unrealised gains on forward foreign currency contracts	3,605,872	9,172
Realised gains on forward foreign currency contracts	1,439,906	603,416
Other realised and unrealised foreign exchange (losses)/gains	(19,701)	580,333

	5,026,077	1,192,921

6. Management fees

The Company's Investment Manager is Ruffer LLP. The Manager receives an annual fee, payable monthly in arrears, at the rate of 1 per cent. per annum of the Net Asset Value of the Company on a mid-market basis.

During the year ended 30 June 2009, management fees of £1,231,543 (30.06.08: £1,202,167) were charged to the Company, of which £923,657 (30.06.08: £901,625) was charged to the capital reserves of the Company. The amount of £112,147 (30.06.08: £98,402) remains payable at the year end.

7. Expenses

	01.07.08 to	01.07.07 to
	30.06.09	30.06.08
	£	£
Transaction costs	359,443	183,489
Administration fee	174,360	170,286
Directors' fees	115,418	98,375
General expenses	109,789	77,977
Custodian and trustee charges	18,449	2,212
Audit fee	18,432	15,861
Bank interest expense	416	-


	796,307	548,200

8. Financial assets at fair value through profit or loss

	30.06.09	30.06.08
	£	£
Cost of investments held at end of the year	114,450,340	108,547,501
Appreciation on revaluation	5,386,924	3,510,209


Financial assets at fair value through profit or loss	119,837,264	112,057,710

9. Receivables

	30.06.09	30.06.08
	£	£
Amounts falling due within one year:
Investment income receivable	437,541	146,492
Due from broker	6,725,000	-
Fixed interest income receivable	282,700	802,532
Other receivables	2	714,297


	7,445,243	1,663,321

10. Payables

	30.06.09	30.06.08
	£	£
Amounts falling due within one year:
Management fees payable	112,147	98,402
Withholding taxes payable	49,527	-
Due to broker	-	1,087,773
Other creditors	92,798	241,071


	254,472	1,427,246

11. Share capital and share premium

	30.06.09	30.06.08
Authorised Share Capital	£	£
100 Management Shares of £1.00 each	100	100
200,000,000 Unclassified Shares of 0.01p each	20,000	20,000
75,000,000 C Shares of 0.1p each	75,000	75,000


	95,100	95,100

	Number of shares		Share Capital
	30.06.09	30.06.08	30.06.09	30.06.08
Issued Share Capital			£	£

Management Shares
Management Shares of £1.00 each	2	2	2	2

Equity Shares
Redeemable Participating Preference
Shares of 0.01p each:
Balance at start of year	89,129,703	106,117,074	8,913	10,612
Redeemed during the year (note 21)	-	(16,987,371)	-	(1,699)


Balance as at end of year	89,129,703	89,129,703	8,913	8,913


			30.06.09	30.06.08
			£	£
Share Premium Account
Balance at 1 July 2008/1 July 2007			-	66,430,850
Redeemed during the year (note 21)			-	(20,726,291)


Balance at 30 June 2009/30 June 2008			-	45,704,559
Transferred to distributable reserves			-	(45,704,559)


Balance at 30 June 2009/30 June 2008			-	-

Management Shares

The Management Shares, of which there are 2 in issue, were created to comply with the Company Memorandum and Amended and Restated Articles of Association. The Management Shares carry one vote each on a poll, do not carry any right to dividends and, in a winding-up, rank only for a return of the amount of the paid-up capital on such shares after return of capital on all other shares in the Company. The Management Shares are not redeemable.

Unclassified Shares

Unclassified Shares can be issued as Nominal Shares or Redeemable Participating Preference Shares ('Participating Shares'). Nominal Shares can only be issued at par to the Administrator. The Administrator is obliged to subscribe for Nominal Shares for cash at par when Participating Shares are redeemed to ensure that funds are available to redeem the nominal amount paid up on Participating Shares.

The holder or holders of Nominal Shares shall have the right to receive notice of and to attend general meetings of the Company but shall not be entitled to vote thereat. Nominal Shares shall carry no right to dividends. In a winding-up, holders of Nominal Shares shall be entitled to be repaid an amount equal to their nominal value out of the assets of the Company.

The holders of fully paid Participating Shares carry a preferential right to a return of capital in priority to the Management Shares but have no pre-emptive right and are entitled to one vote at all meetings of the relevant class of shareholders.

''C' Shares

In order to facilitate the expansion of the Company, 75,000,000 'C' shares (of 0.1p) were authorised of which 67,500,000 were issued in the financial year 2006. The holdings in 'C' shares were then converted into 56,117,074 redeemable participating preference shares (of 0.01p).

Share Premium Account

By way of a special resolution passed on 22 June 2004, it was resolved that the amount standing to the credit of the share premium account of the Company following completion of the issue (less any formation and initial expenses set off against the share premium account) be cancelled and the amount so cancelled be credited as a distributable reserve. This resolution was approved by the Royal Court of Guernsey on 17 December 2004.

By way of a special resolution passed on 8 November 2007, it was resolved that the amount standing to the credit of the share premium account of the Company following completion of the issue (less any expenses set off against the share premium account) be cancelled and the amount so cancelled be credited to the reserve to be established in the books of account of the Company, but shall be able to be applied in any manner in which the Company's profits available for distribution (as determined in accordance with the Companies (Guernsey) Law, 1994 to 1996) are able to be applied, including the purchase of the Company's own shares and the payment of dividends. This resolution was approved by the Royal Court of Guernsey on 8 February 2008.

12. Net assets attributable to holders of redeemable participating preference shares


	Non-distributable reserves			Distributable reserves
	Capital	Share	Foreign	Foreign	Revenue
	reserve	capital	exchange	exchange	Reserves	Total
	£	£	£	£	£	£
Balance at 01.07.08	17,822,554	8,913	1,587,072	69,892	97,128,920	116,617,351

Gain on realisation of financial assets
at fair value through profit and loss	13,126,047	-	-	-	-	13,126,047
Increase in unrealised appreciation	1,876,715	-	-	-	-	1,876,715
Movement in unrealised gain
On forward foreign currency contracts	-	-	3,605,872	-	-	3,605,872
Foreign exchange movement	-	-	890,345	529,860	-	1,420,205
Operating profit for the year	-	-	-	-	2,691,258	2,691,258
Capital movement during the year	(1,283,100)	-	-	-	-	(1,283,100)
Distribution for the year	-	-	-	-	(2,451,067)	(2,451,067)


Balance at 30.06.09	31,542,216	8,913	6,083,289	599,752	97,369,111	135,603,281

13. Net asset value reconciliation

The Company announces its Net Asset Value, based on mid-market value, to the London Stock Exchange at each weekly and month end valuation point. The following is a reconciliation of the value attributable to redeemable participating preference shares as presented in these financial statements, using International Financial Reporting Standards, to the last net asset value:-

	30.06.09	30.06.08
	£	£
Net Asset Value per share for valuation purposes	1.526	1.313

Difference due to bid prices presented as fair value as opposed to
mid-market value reported to the London Stock Exchange	(0.004)	(0.005)
Other adjustments	(0.001)	-

Net assets attributable to holders of redeemable
participating preference shares (per share)	1.521	1.308

14. Contingent liabilities

There were no contingent liabilities at the Balance Sheet date.

15. Related party transactions

The Directors are responsible for the determination of the investment policy of the Company and have overall responsibility for the Company's activities.

The Company is managed by Ruffer LLP, an independent business incorporated in the United Kingdom as a limited liability partnership. The Company and the Investment Manager have entered into an Investment Management Agreement under which the Investment Manager has been given responsibility for the day-to-day discretionary management of the Company's assets (including uninvested cash) in accordance with the Company's investment objective and policy, subject to the overall supervision of the Directors and in accordance with the investment restrictions in the Investment Management Agreement and the Articles of Association. The Investment Management Agreement will continue in force until determined by the Investment Manager or the Company giving to the other party thereto not less than 12 months notice. The market value of all related investment funds are deducted from the Net Asset Value of the Company before the calculation of management fees on a monthly basis. Details of the management fees to which the Investment Manager is entitled are in Note 6.

The Company has six non-executive directors, all independent of the Investment Manager.

The Directors of the Company are remunerated for their services at such a rate as the Directors determine provided that the aggregate amount of such fees does not exceed £150,000 per annum.

Each Director was paid a fee of £20,000 (30.06.08: £20,000) per annum, except for the Chairman who was paid £28,500 (30.06.08: £28,500). The Director's fee paid to Ashe Windham was time apportioned based on the date he became a Director of the Company.

Total Directors' fees for the year, including the outstanding Directors' fees due to Directors at the end of the year, are detailed below.

	30.06.09	30.06.08
	£	£
Directors' fees for the year	115,418	98,375


Accrued at end of the year	32,125	26,816

Shares held by related parties

As at 30 June 2009, Directors of the Company held the following numbers of shares beneficially:-

	30.06.09	30.06.08
Directors	Shares	Shares
Wayne Bulpitt	20,000	20,000
Jeannette Etherden	36,627	36,627
Christopher Spencer	14,157	14,157
Ashe Windham	62,906	-

As at 30 June 2009, Jonathan Ruffer, Chief Executive Officer of the Investment Manager and his immediate family owned 384,000 (30.06.08: 384,000) shares in the Company

As at 30 June 2009, the Investment Manager held 23,377,637 (30.06.08: 23,738,780) shares on behalf of its discretionary clients in the Company.

As at 30 June 2009 the Company held investments in two related investment funds valued at £7,710,237 (30.06.08: Nil). Refer to the Portfolio Statement for details.

16. Substantial Interests

As at 31 August 2009, shareholders with holdings greater than 3% in the Company were:

Shareholder	Shares	%
Clients of Roy Nominees Limited	17,550,587	19.69
Clients of State Street Nominees Limited	13,053,841	14.65
Clients of Rathbone Nominees Limited	5,850,179	6.56
Clients of Chase Nominees Limited	5,227,844	5.87
Clients of HSBC Global Custody Nominee (UK) Limited	3,162,728	3.55
Clients of Adam & Company (Nominees) Limited	3,151,997	3.54

17. Segment reporting

As required by IAS 14, the total fair value of the financial instruments held by the Company by each major geographical segment, and the equivalent percentages of the total value of the Company, are as follows:

		30.06.09		30.06.08
Government Index-Linked Bonds	£	%	£	%
Sterling denominated	25,377,747	18.71	11,594,290	9.94
Japanese Yen denominated	16,547,524	12.20	-	-
United States Dollar denominated	8,648,157	6.38	7,349,500	6.30
Swedish Krona denominated	4,983,863	3.68	-	-

Government Bonds
Sterling denominated	-	-	11,826,480	10.15
Swiss Franc denominated	-	-	29,737,703	25.49

Corporate Bonds
Switzerland	-	-	2,959,796	2.54

Gold Bullion
Sterling denominated	2,753,135	2.03	4,536,844	3.89

Equities
Asia	20,717,537	15.28	15,805,839	13.55
United Kingdom	20,313,458	14.98	12,605,735	10.81
Other European	2,821,691	2.08	5,943,796	5.09
North America	6,884,926	5.08	6,760,734	5.80
Africa	1,192,757	0.88	730,624	0.63
Australia	1,158,540	0.85	1,265,292	1.09

Investment Funds
United Kingdom	8,437,929	6.22	941,077	0.81

Total Financial Instruments	119,837,264	88.37	112,057,710	96.09

Revenue earned is reported separately on the face of the Statement of Operations as dividend income received from equities, interest income received from fixed interest securities and interest received from bank deposits.

The Cash Flow Statement separately reports cash flows from operating, investing and financing activities.

18. Subsequent events

No significant subsequent events have occurred in respect of the Company that would have a material impact on these financial statements.

19. Financial instruments

In accordance with its investment objectives and policies, the Company holds financial instruments which at any one time may comprise the following:

* securities held in accordance with the investment objectives and policies;

* cash and short-term receivables and payables arising directly from operations;

* derivative transactions including investment in forward foreign currency contracts; and

* borrowing used to finance investment activity up to a maximum of 30% of the Net Asset Value of the Company.

Terms, conditions and accounting policies

The financial instruments held by the Company comprise principally of internationally listed or quoted equities or equity related securities (including convertibles) or bonds which are issued by corporate issuers, supra-nationals or government organisations.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of its financial assets and liabilities are disclosed in Note 1. The following table analyses the carrying amounts of the financial assets and liabilities by category as defined in IAS 39.

Categories of financial instruments held by the Company at the reporting date.

	30.06.09	30.06.08
	Fair Value	Fair Value
	£	£
Financial assets designated at fair value through profit and loss
Listed securities	112,127,027	112,057,710
Unlisted securities	7,710,237	-
Unrealised gain on open forward foreign currency contracts	3,727,334	9,172


Total financial assets designated at fair value through profit and loss	123,564,598	112,066,882

Receivables	12,405,447	5,977,717


Receivables include Cash and cash equivalents and Receivables

	30.06.09	30.06.08
	Fair Value	Fair Value
	£	£
Financial liabilities measured at amortised cost

Payables	254,472	1,427,246
Unrealised loss on open forward foreign currency contracts	112,290	-


	366,762	1,427,246

20. Financial risk management and associated risks

The Company is exposed to a variety of financial risks as a result of its activities. These risks include market risk (including price risk, foreign currency risk and interest rate risk), credit risk and liquidity risk. These risks, which have applied throughout the year and the Manager's policies for managing them are summarised below:

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The company's activities expose it primarily to the market risks of changes in market prices, interest rates and foreign currency exchange rates.

Market price risk

Market price risk arises mainly from the uncertainty about future prices of the financial instruments held by the Company. It represents the potential loss the Company may suffer through holding market positions in the face of price movements.

The Company's investment portfolio is exposed to market price fluctuations which are monitored by the Investment Manager in pursuance of the investment objectives and policies. Adherence to investment guidelines and to investment and borrowing powers set out in the Placing and Offer for Subscription document mitigates the risk of excessive exposure to any particular type of security or issuer.

Market price sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity and bond price risks at the reporting date. The 5% reasonably possible price movement for equity related securities and 100 basis point movement for interest rate used by the Company is based on the Investment Manager's best estimates.

A 5% increase in the market prices of equity related investments as at 30 June 2009 would have increased the net assets attributable to holders of redeemable participating preference shares by £3,213,999 (30.06.08 £2,429,497) and an equal change in the opposite direction would have decreased the net assets attributable to holders of redeemable participating preference shares by an equal opposite amount.

An increase of 100 basis points in interest rates of bond related investments as at 30 June 2009 would have decreased the net assets attributable to holders of redeemable participating preference shares by £9,051,450 (30.06.08 £4,113,705) and a decrease of 50 basis points in interest rates would have increased the net assets attributable to holders of redeemable participating preference shares by £4,525,725 (30.06.08 £4,761,298).

Foreign currency risk

Foreign currency risk arises from fluctuations in the value of a foreign currency. It represents the potential loss the Company may suffer though holding foreign currency assets in the face of foreign exchange movements.

As a portion of the Company's investment portfolio is invested in securities denominated in currencies other than in Sterling (the functional and presentation currency of the Company) the Balance Sheet may be significantly affected by movements in the exchange rates of such currencies against Sterling. The Investment Manager has the power to manage exposure to currency movements by using forward foreign currency contracts and details of the holdings of such instruments at the date of these financial statements is set out below. The Company will not engage in currency hedging except where it considers such hedging to be in the interests of efficient portfolio management.

As at 30 June 2009, the Company had five (30.06.08: one) open forward foreign currency contracts.

		Notional amount	30.06.09
		of contracts	Fair value
Expiration	Underlying	outstanding	assets/
			(liabilities)
			£
19 November 2009	Foreign currency (Sale of USD)	US$24,455,500	2,385,471
24 March 2010	Foreign currency (Sale of USD)	US$14,700,000	1,082,347
8 September 2009	Foreign currency (Sale of JPY)	¥2,636,000,000	259,516
19 November 2009	Foreign currency (Purchase of USD)	US$2,000,000	(91,889)
24 March 2010	Foreign currency (Purchase of USD)	US$14,700,000	(20,401)

			3,615,044

		Notional amount	30.06.08
		of contracts	Fair value
Expiration	Underlying	outstanding	assets
			£
27 March 2009	Foreign currency (Sale of USD)	US$14,700,000	9,172

			9,172

The Investment Manager's treatment of currency transactions other than in Sterling is set out in Note 1 to the financial statements under 'Translation of foreign currency' and 'Forward foreign currency contracts'.

As at 30 June 2009 and 2008, the Company held the following assets and liabilities in currencies other than the presentational currency:

	30.06.09	30.06.09	30.06.08	30.06.08
	Assets	Liabilities	Assets	Liabilities
	£	£	£	£
Japanese Yen	34,304,401	-	15,145,311	-
United States Dollar	22,575,767	(112,290)	14,406,488	-
Swedish Krona	5,806,732	-	975,722	-
Singapore Dollar	2,277,392	-	1,263,944	-
Euro	2,080,089	-	925,467	-
Australian Dollar	1,158,540	-	1,265,292	-
South African Rand	607,397	-	527,544	-
Swiss Franc	-	-	37,277,886	-

Foreign currency sensitivity

As at 30 June 2009, if the foreign currency balances had weakened 10% (30.06.08: 5%) against Sterling with all other variables held constant, net assets attributable to holders of redeemable participating preference shares would be £3,728,358 lower (30.06.08 £3,598,555), net of open forward foreign currency contracts and due mainly as a result of foreign currency losses on translation of these financial assets and liabilities to Sterling. As at 30 June 2009, a 10% (30.06.08: 5%) strengthening of the foreign currency balances against Sterling would have resulted in an equal but opposite effect on the net assets attributable to holders of redeemable participating preference shares. Any changes in the foreign exchange rate will directly affect the operating profit and loss reported in the Statement of Operations.

Interest rate risk

Interest rate risk represents the uncertainty of investment return due to changes in the market rates of interest.

The Company invests in fixed and floating rate securities. The income of the Company may be affected by changes to interest rates relevant to particular securities or as a result of the Investment Manager being unable to secure similar returns on the expiry of contracts or sale of securities. Interest receivable on bank deposits or payable on the bank overdraft positions will be affected by fluctuations in interest rates.

The Investment Manager actively manages the Company's exposure to interest rate risk, paying heed to prevailing interest rates and economic conditions, market expectations and our own opinions of likely moves in interest rates. Currently the entire exposure of the Company to fixed interest securities is in the form of Index-linked bonds. The value of these investments is determined by current and expected inflation and interest rates.

The value of fixed interest securities will be affected by general changes in interest rates that will in turn result in increases or decreases in the market value of those instruments. When interest rates decline, the value of the Company's investments in fixed rate debt obligations can be expected to rise, and when interest rates rise, the value of those investments may decline.

The investment portfolio details the security type, issuer, interest rate, and maturity date of all of the Company's fixed and floating rate securities as at 30 June 2009.

The table below summarises the Company's exposure to interest rate risks. It includes the Company's financial assets and liabilities at fair values, categorised by the earlier of contractual re-pricing or maturity dates.

	Floating	Fixed	Non-Interest	Total	Total
	rate	rate	bearing	30.06.09	30.06.08
	£	£	£	£	£
Financial Assets

Cash and cash equivalents	4,960,204	-	-	4,960,204	4,314,396
Financial assets at fair value
through profit or loss	-	55,557,291	64,279,973	119,837,264	112,057,710
Unrealised gain on open forward
foreign currency contracts	-	-	3,727,334	3,727,334	9,172
Receivables	-	-	7,445,243	7,445,243	1,663,321


	4,960,204	55,557,291	75,452,550	135,970,045	118,044,599

Financial Liabilities

Payables	-	-	254,472	254,472	1,427,246
Unrealised loss on open forward
foreign currency contracts	-	-	112,290	112,290	-


	-	-	366,762	366,762	1,427,246

The table below summarises weighted average effective interest rates for financial instruments.

		Weighted		Weighted
		average period		average period
	30.06.09	for which rate/	30.06.08	for which rate/
	% p.a.	yield is fixed	% p.a.	yield is fixed

UK government bonds	0.8256%	21.12 years	3.2372%	6.27 years
United States government bonds	2.1640%	15.56 years	2.0200%	16.56 years
Swedish government bonds	1.8550%	11.43 years	-	-
Japanese government bonds	3.1016%	8.28 years	-	-
Swiss corporate bonds	-	-	2.9370%	1.43 years
Austrian government bonds	-	-	2.5020%	1.14 years
Swiss government bonds	-	-	1.6804%	8.72 years

Interest rate sensitivity analysis

An increase of 100 basis points (30.06.08: 100 basis points) in interest rates as at the reporting date would have decreased the net assets attributable to holders of redeemable participating preference shares by £9,051,450 (30.06.08: £4,113,705). A decrease of 50 (30.06.08: 100 basis points) basis points would have had an opposite effect by £4,525,725 (30.06.08: £4,761,298). As all the Company's fixed rate securities are index-linked bonds, their yields, and as a consequence their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, Governments' fiscal positions and rates on nominal bonds of similar maturities. This sensitivity analysis assumes only a 100 basis point increase and a 50 basis point decrease in interest rates, with all other variables unchanged. This would be the equivalent of a 100 basis point increase and 50 basis point decrease in 'real' interest rates and as such is likely to overstate the actual impact of such a move in nominal rates.

Credit risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company. Failure of any relevant counterparty to perform its obligations in respect of these items may lead to a financial loss.

The Company will not invest in the securities of any company that is not quoted or does not have a listing on a market specified in the Financial Services and Markets Act 2000 (Financial Promotions) Order 2001 and such other financial markets as may be specifically agreed from time to time between the Board and the Investment Manager.

All transactions in listed securities are settled/paid upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet their obligation.

The Placing and Offer for Subscription document allows investment in a wide universe of equity related securities and bonds, including countries that may be classed as emerging or developing. In adhering to investment restrictions set out within the document, the Company mitigates the risk of any significant concentration of credit risk.

Credit risk analysis

The Company's maximum credit exposure is limited to the carrying amount of financial assets recognised at the Balance Sheet date, as summarised below:

	30.06.09	30.06.08
	£	£
Cash and cash equivalents	4,960,204	4,314,396
Unrealised gain in open forward foreign currency contracts	3,727,334	9,172
Receivables	7,445,243	1,663,321
Financial assets at fair value through profit or loss	119,837,264	112,057,710


	135,970,045	118,044,599

The Moody's and/or Standard and Poor (S&P) credit ratings of the issuers of Bonds as at 30 June 2009 were as follows:

		30.06.09
	S&P	Moody's
Japan Index-Linked Bond 1.30% 10/09/2017	-	Aa2
Japan Index-Linked Bond 1.20% 10/03/2017	AA	Aa2
Japan Index-Linked Bond 1.40% 10/03/2018	-	Aa2
Sweden Index-Linked Bond 3.5% 01/12/2028	AAA	Aaa
UK Index-Linked Gilt 1.875% 22/11/2022	AAA	-
UK Index-Linked Gilt 1.25% 22/11/2055	AAA	Aaa
UK Index-Linked Gilt 1.25% 22/11/2017	AAA	Aaa
US Index-Linked Treasury Bond 2.375% 15/01/2025	AAA	Aaa

None of the Company's financial assets are secured by collateral or other credit enhancements.

Liquidity risk

Liquidity risk is the risk that the Company will find it difficult or impossible to realise assets or otherwise raising funds to meet financial commitments.

The Company's liquidity risk is managed by the Investment Manager who monitors the cash positions on a regular basis. The Company's overall liquidity risks are monitored on a regular basis by the Board of Directors.

As at 30 June 2009 and 2008, the Company had no significant financial liabilities other than short-term payables arising directly from investing activity.

21. Capital risk management

The fair value of the Company's financial assets and liabilities approximate to their carrying amounts at the date of the Balance Sheet. For the purposes of this disclosure, Redeemable Participating Preference Shares are considered to be capital.

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. There are no externally-imposed capital requirements on the Company.

The Company has the ability to borrow up to 30% of its Net Assets Value at any time for short-term or temporary purposes as is necessary for the settlement of transactions, to facilitate redemption (where applicable) or to meet ongoing expenses. The Directors have put in place a borrowing facility for this purpose.

Redemption Facility

The Company has a Redemption Facility (which takes the form of a tender offer to all holders of redeemable participating preference shares) which was made available after 8 July 2007. This facility may operate annually, in November each year, at the discretion of the Directors. Redemptions on any Redemption Date may be restricted to a maximum of 25% in aggregate of the Shares then in issue, with any tender requests from shareholders in excess of this being scaled back pro rata.

The facility is intended to address any imbalance in the supply and demand for the shares and to assist in maintaining a narrow discount to the Net Asset Value per share at which the shares may be trading, the Company, will at the sole discretion of the Directors:

(i) purchase shares when deemed appropriate; and

(ii) allow an annual redemption of up to 25% of the issued shares at the prevailing Net Asset Value per Share which commenced in November 2007.

The redemption of 16,987,371 shares at the prevailing Net Asset Value per share of £1.2202 (16.01% of issued shares at that time) was made pursuant to (ii) above on 29 November 2007.

Purchase of Own Shares by the Company

A special resolution was granted on 4 December 2008 which authorised the Company in accordance with The Companies (Purchase of Own Shares) Ordinance, 1998 to make purchases of its own shares as defined in that Ordinance of its Participating Shares of 0.0lp each, provided that:

(i) the maximum number of Shares the Company can purchase is no more than 14.99% of the Company's issued share capital:

(ii) the minimum price (exclusive of expenses) which may be paid for a Share is 0.01p, being the nominal value per share;

(iii) the maximum price (exclusive of expenses) which may be paid for a Share is an amount equal to the higher of (a) 105 % of the average of the middle market quotations for a Share taken from the London Stock Exchange Daily Official List for the 5 business days immediately preceding the day on which the Share is purchased and (b) the price stipulated in Article 5(i) of the Buy-back and Stabilisation Regulation (No 2237 of 2003);

(iv) purchases may only be made pursuant to this authority if the Shares are (at the date of the proposed purchase) trading on the London Stock Exchange at a discount to the lower of the undiluted or diluted Net Asset Value;

(v) the authority conferred shall expire at the conclusion of the Annual General Meeting of the Company in 2009 or, if earlier, on the expiry of 12 months from the passing of this resolution, unless such authority is renewed prior to such time; and

(vi) the Company may make a contract to purchase Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Shares pursuant to any such contract.

Independent Auditors' Report

to the shareholders of Ruffer Investment Company Limited

We have audited the financial statements of Ruffer Investment Company Limited for the year ended 30 June 2009 which comprise the Balance Sheet, the Statement of Operations, the Statement of Changes in Equity, the Cash Flow Statement and the related notes. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the company's members as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The Directors' responsibilities for preparing the financial statements in accordance with applicable law and International Financial Reporting Standards (International Generally Accepted Accounting Practice) are set out in the Report of the Directors.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with The Companies (Guernsey) Law, 2008. We also report to you if, in our opinion, the information in the Report of the Directors is not consistent with the financial statements, if the company has not kept proper accounting records or if we have not received all the information and explanations we require for our audit.

We read the information contained in the Annual Financial Report and consider whether it is consistent with the Audited Financial Statements. The other information comprises only the Financial Highlights, Company Information, Chairman's Review, Directors, Report of the Directors, Investment Manager's Report, Company Performance, Investment Policy, Top Ten Holdings, Responsibility Statement, Portfolio Statement, General Information and Management and Administration and consider the implications for our report if we become aware of any apparent misstatements within them.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements:

- give a true and fair view, in accordance with International Financial Reporting Standards, of the state of the company's affairs as at 30 June 2009 and of its profit for the year then ended; and

- have been properly prepared in accordance with The Companies (Guernsey) Law, 2008.

MOORE STEPHENS

Chartered Accountants

Town Mills South

La Rue Du Pre

St Peter Port

Guernsey GY1 3HZ

24 September 2009

Portfolio Statement as at 30 June 2009

		Holding	Market	%
		at	Value	of Total
	Currency	30.06.09	£	Net Assets*
Fixed Interest Nil %
(30.06.08 - 38.18%)

Government Index-Linked Bonds 40.97%
(30.06.08 - 16.24%)

Japan
Japan Index-Linked Bond 1.30% 10/09/2017	JPY	1,245,000,000	6,893,828	5.08
Japan Index-Linked Bond 1.20% 10/03/2017	JPY	625,000,000	3,468,810	2.56
Japan Index-Linked Bond 1.40% 10/03/2018	JPY	1,124,000,000	6,184,886	4.56


			16,547,524	12.20
Sweden
Sweden Index-Linked Bond 3.5% 01/12/2028	SEK	43,000,000	4,983,863	3.68


			4,983,863	3.68
United Kingdom
UK Index-Linked Gilt 1.875% 22/11/2022	GBP	4,000,000	4,531,174	3.34
UK Index-Linked Gilt 1.25% 22/11/2055	GBP	5,762,000	7,894,706	5.82
UK Index-Linked Gilt 1.25% 22/11/2017	GBP	11,500,000	12,951,867	9.55


			25,377,747	18.71
United States
US Index-Linked Treasury Bond 2.375% 15/01/2025	USD	12,250,000	8,648,157	6.38


			8,648,157	6.38

Total Government Index-Linked Bonds			55,557,291	40.97


Gold bullion 2.03%
(30.06.08 - 3.89%)

Gold Bullion Securities 0% Undated Notes	USD	50,000	2,753,135	2.03


Total Gold Bullion			2,753,135	2.03

Equities 39.15%
(30.06.08 - 36.97%)

Europe

Finland
Raisio Oyj	EUR	700,000	1,162,594	0.85


			1,162,594	0.85
Netherlands
Koninklijke KPN NV	EUR	110,000	917,495	0.68


			917,495	0.68
Sweden
LM Ericsson	SEK	125,000	741,602	0.55


			741,602	0.55
United Kingdom
Aurora Russia Ltd	GBP	116,300	27,912	0.02
Booker Group Plc	GBP	5,631,000	1,858,230	1.37
BP Plc	GBP	552,020	2,637,276	1.94
BT Group Plc	GBP	3,509,500	3,562,143	2.63
Charles Taylor Consulting Plc	GBP	742,936	1,378,146	1.02
Colt Telecom Group Ltd	GBP	500,000	542,500	0.40
Electric and General I.T. Plc	GBP	125,000	376,250	0.28
Electrocomponents Plc	GBP	610,000	858,575	0.63
Environmental Recycling Technologies Plc	GBP	500,000	8,750	0.01
Invensys Plc	GBP	1,005,000	2,243,663	1.65
Prodesse Investment Ltd	GBP	522,369	2,141,713	1.58
Ramco Energy Plc	GBP	350,000	276,500	0.20
Service Power Technologies Plc	GBP	8,860,000	443,000	0.33
Sterling Energy Plc	GBP	51,000,000	1,096,500	0.81
System C Healthcare Plc	GBP	400,000	196,000	0.14
Vodafone Group Plc	GBP	2,275,000	2,666,300	1.97


			20,313,458	14.98

Total European Equities			23,135,149	17.06

Australia
Lihir Gold Ltd	AUD	800,000	1,158,540	0.85


Total Australian Equities			1,158,540	0.85

Canada
Barrick Gold Corp	USD	50,000	1,018,611	0.75


Total Canadian Equities			1,018,611	0.75

United States
Annaly Capital Management Inc	USD	100,000	918,724	0.68
Clean Diesel Technologies Inc	USD	201,221	199,162	0.15
Coeur d'Alene Mines Corp	USD	15,000	111,850	0.08
Johnson & Johnson	USD	30,000	1,033,610	0.76
Kraft Foods Inc	USD	210,000	3,231,259	2.39
Newmont Mining Corp	USD	15,000	371,710	0.27


Total United States Equities			5,866,315	4.33

Asia

Japan
Daiei Inc	JPY	388,000	1,054,876	0.78
ITOCHU Corp	JPY	721,000	3,049,233	2.25
Japan Real Estate Investment REIT Corp	JPY	224	1,129,189	0.83
Japan Residential Investment Co Ltd	GBP	2,850,000	1,083,000	0.80
Kao Corp	JPY	75,000	993,572	0.73
Mitsubishi UFJ Financial Group Inc	JPY	770,000	2,893,018	2.13
Mitsui & Co Ltd	JPY	120,000	863,960	0.64
Nippon Building Fund REIT	JPY	490	2,537,944	1.87
Nippon Telegraph & Telephone Corp	JPY	130,000	3,207,122	2.37
Sumitomo Mitsui Financial Group Inc	JPY	66,000	1,628,231	1.20


			18,440,145	13.60

Thailand
Thai Beverage Plc	SGD	25,248,000	2,277,392	1.68


			2,277,392	1.68

Total Asian Equities			20,717,537	15.28

Africa

South Africa
Gold Fields Ltd	ZAR	82,600	607,397	0.45
Gold Fields ADR Rep	USD	80,000	585,360	0.43

Total African Equities			1,192,757	0.88

Total Equities			53,088,909	39.15

Investment Funds 6.22%
(30.06.08 - 0.81%)

United Kingdom
CF Ruffer Baker Steel Gold Fund**	GBP	2,381,330	3,602,237	2.66
Herald Worldwide Fund	GBP	64,341	727,692	0.54
CF Ruffer Japanese Fund**	GBP	4,000,000	4,108,000	3.02

			8,437,929	6.22

Total Investment Funds			8,437,929	6.22

Total financial assets at fair value through profit or loss			119,837,264	88.37

Other net current assets			15,766,019	11.63

Management share capital			(2)	-

Total Value of Company
(attributable to redeemable participating preference shares)			135,603,281	100.00

* All percentages relate to net assets attributable to holders of redeemable participating preference shares.

**CF Ruffer Baker Steel Gold Fund and CF Ruffer Japanese Fund are classed as related parties as they share the same Investment Manager as the Company.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR SESFMLSUSEEU

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