Preliminary Statement

Ruffer Investment Company Limited 27 February 2008 Ruffer Investment Company Limited 27 February 2008 To:RNS Date: 27 February 2008 From: Ruffer Investment Company Limited Ruffer Investment Company Limited is pleased to announce the half-yearly report in respect of the period ended 31 December 2007: Investment Manager's Report For the period ended 31 December 2007 During the six months up to 31st December 2007 the asset value of the Company rose in capital terms from 116.7p to 124.2p(*) which, together with a dividend of 1.25p paid on 28 September 2007, represents a total half-year return of 7.5% or 15% on an annualised basis. Since inception, the portfolio has grown at around 8% compound indicating that without our 'lost' year between May 2006 and June 2007 when we made precious little, we would have achieved our hoped-for double-digit return. Over the period under review, the day to day performance of the portfolio has been stable whilst markets have been extremely volatile. Whether markets have been sharply down or sharply up on any given day, the NAV has remained very little changed, with bias to the upside on a month by month view. This is consistent with the philosophy behind the strategy - which is to be agnostic about the market direction. During the third quarter of 2007, the portfolio's exposure to cyclical stocks was decreased, by selling Asahi, some more of the Invensys holdings, RM and Nissan Motor. The portfolio increased its holding in gold and gold equities by purchasing Newmont, which was trading on a much lower rating than the rest of the large cap gold companies and has since performed well. The portfolio also re-adjusted the duration on the UK gilts by selling the 2009 gilts which had been held for over a year, and purchasing the 4.25% Treasury Stock 2011 and 5% Treasury Stock 2012. In October and November we took the necessary steps to raise the £21 million required to satisfy those shareholders who chose to use the redemption facility. We used this opportunity to reduce the long Swiss bond position, and to sell down some of our mistakes, such as United Microelectronics, Mears Group and one or two other smaller positions. The portfolio has been re-balanced towards the US market following the logic that the one area of credit strength is the corporate market - that is those companies who do not need to borrow money are the only ones able to borrow as much as they like. This argues for a 'nifty-fifty' re-rating of American corporations which fall into this category, such as Coca Cola and Kraft. On the bigger picture, it is pleasing to see that the philosophy of the Company is working out well in practice. The investments in fear have all proved their worth. The Yen and the Swiss Franc (also the Norwegian Krone) have benefited by more than others against the general weakness of Sterling. Gold bullion has been a happy place to be, as have short-dated gilts. The generality of equities has been really quite poor, with the second line equities both in the UK and Finland being weak. The Japanese stocks on balance made money, but this was entirely due to the strength of the currency. It is too early to be sure that the portfolio is back on track, but it certainly feels that way. Looking into 2008, despite the sharp falls in stock markets we remain extremely cautious. There are further skeletons hiding in the dark cupboards of financial institutions and as yet there has been only cursory recognition of the damage this financial crisis will do to activity in the real world. But most importantly the process of de-leveraging has yet to begin in earnest. We remain acutely aware that in a bear market patience is truly a virtue. Enquiries to: The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Tel: 01481 745001 Fax: 01481 745051 Ruffer LLP 27 February 2008 Company Performance Price Change in at 31.12.07 Buying Price Buying Selling From From Price Price Launch 30.06.07 £ £ % % Shares 1.245 1.205 + 24.50 +10.37 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 In Issue Share £ £ 31.12.07 110,441,239 1.239* 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 1.242 using mid market values. Bid prices are presented as fair value in the Financial Statements. Share Price Range Highest Lowest Accounting Buying Price Selling Price Period to: £ £ 31.12.07 1.245 1.085 30.06.07 1.260 1.110 30.06.06 1.300 1.120 30.06.05 1.140 1.000 Net Asset Value Range Highest Lowest Accounting NAV NAV Period to: £ £ 31.12.07 1.242 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 one may not get back the amount originally invested. Top Ten Holdings Market % of Holding at Value Total Net Stock name Currency 31.12.07 £ Assets Treasury 4.25% 07/03/2011 GBP 11,400,000 11,329,320 10.26 Austria 3% 21/08/2009 CHF 24,750,000 11,091,968 10.04 Norway 6% 16/05/2011 NOK 70,000,000 6,735,340 6.10 Treasury 5% 07/03/2012 GBP 6,000,000 6,126,600 5.55 Treasury 4 3/4% 07/06/2010 GBP 6,000,000 6,051,600 5.48 Switzerland 4% 08/04/2028 CHF 12,240,000 5,974,288 5.41 Switzerland 1 3/4% 05/11/2009 CHF 13,100,000 5,766,270 5.22 Gold Bullion GBP 100,000 4,136,944 3.75 Index-Linked Gilt 1.25% 22/11/2017 GBP 3,500,000 3,732,746 3.38 Nippon Telegraph & Telephone Corp JPY 1,300 3,256,140 2.95 Responsibility statement of the directors in respect of the half-yearly financial report We confirm that to the best of our knowledge: - the condensed set of half-yearly financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; - this half-yearly management report includes information detailed in the Managers' Report and Notes to the Condensed Half-yearly Financial Statements which provides a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. On behalf of the Board Director Director Balance Sheet as at 31 December 2007 31.12.07 30.06.07 £ £ ASSETS Cash and cash equivalents 560,426 346,711 Receivables 1,023,420 824,796 Financial assets at fair value through profit 109,145,031 119,449,349 or loss Total Assets 110,728,877 124,245,813 EQUITY Capital and reserves attributable to the Company's shareholders Management share capital 2 2 Net assets attributable to holders of redeemable participating preference shares 110,441,239 123,690,774 Total Equity 110,441,241 123,690,776 LIABILITIES Payables 287,636 555,037 Total Liabilities 287,636 555,037 Total Equity and Liabilities 110,728,877 124,245,813 Net assets attributable to holders of redeemable participating preference shares 1.239 1.166 (per share) Statement of Operations for the six months to 31 December 2007 01.07.07 to 01.07.06 to 31.12.07 31.12.06 Revenue Capital Total Total £ £ £ £ Bank interest income 126,936 - 126,936 10,524 Fixed interest income 1,186,514 - 1,186,514 1,538,105 Dividend income 322,325 - 322,325 186,912 Net (losses)/gains on financial assets at fair value through profit or - 7,956,538 7,956,538 472,446 loss Other (losses)/gains - 216,747 216,747 (464,760) Total investment income/ 1,635,775 8,173,285 9,809,060 1,743,227 (loss) Management fees (156,235) (468,706) (624,941) (636,181) Expenses (201,329) (104,277) (305,606) (288,407) Total operating expenses (357,564) (572,983) (930,547) (924,588) Operating profit/(loss) before 1,278,211 7,600,302 8,878,513 818,639 taxation Withholding tax (73,595) - (73,595) (25,120) Operating profit/(loss) after taxation and increase/(decrease) in net assets attributable to holders of redeemable participating preference shares 1,204,616 7,600,302 8,804,918 793,519 Basic and diluted earnings per 1.17p 7,37p 8,54p 0.75p share * * 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 103,070,425. Statement of Changes in Equity for the six months to 31 December 2007 01.07.07 to 01.07.06 to 31.12.07 31.12.06 £ £ Net assets attributable to holders of redeemable participating preference shares at the start of 123,690,774 126,375,613 the period Movement due to issues and redemptions of shares: Redemptions 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 8,804,918 793,519 operations Distributions to holders of redeemable participating preference shares (1,326,463) (530,585) Increase in net assets attributable to holders of redeemable participating preference shares from operations (after distributions) 7,478,455 262,934 Net assets attributable to holders of redeemable participating preference shares at the end of the 110,441,239 126,638,547 period Cash Flow Statement for the six months to 31 December 2007 01.07.07 to 01.07.06 to 31.12.07 31.12.06 £ £ Cash flows from operating activities Purchase of financial assets and settlement of (46,926,073) (20,530,102) financial liabilities Proceeds from sale of investments (including 64,811,885 15,371,477 realised gains) Redemptions of shares (20,727,990) - Amount paid to brokers (104,277) (81,792) Bank interest received 131,542 36,076 Fixed interest income received 1,003,264 1,170,276 Dividends received 302,345 183,245 Withholding tax (73,595) (25,120) Operating expenses paid (1,093,670) (1,126,388) Net cash generated from/(utilised in) 1,323,431 (5,002,328) operating activities Cash flows from financing activities Dividends paid (1,326,463) (530,585) Net cash flow from financing activities (1,326,463) (530,585) Net decrease in cash and cash equivalents (3,032) (5,532,913) Cash and cash equivalents at beginning of 346,711 6,190,457 the period Exchange gains/(losses) on cash and cash 216,747 (464,760) equivalents Cash and cash equivalents at end of the 560,426 192,784 period Notes to the half-yearly financial statements for the six months to 31 December 2007 1. Significant accounting policies Basis of accounting The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. They 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 the Principal Documents and applicable Guernsey Law. This half-yearly financial report, covering the period from 1 July 2007 to 31 December 2007, is not audited. Change in accounting policies In the current financial year, the Company has adopted International Financial Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the half-yearly financial report. Full details of the change will be disclosed in our annual report for the year ended 30th June 2008. Basis of preparation In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies, supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the Income Statement. The same accounting policies and methods of computation have been applied to the condensed interim financial statements as in the annual financial statements at 30 June 2007. The presentation of the interim financial statements is consistent with the annual financial statements. The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities at the date of the interim financial statements. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Company operates in an industry where significant seasonal or cyclical variations in total income are not experienced during the financial year. 2. Distribution to shareholders Any dividend will be declared semi-annually in September and March each year. An interim dividend of 1.25p per share (£1,326,464) was declared on 18 September 2007 and paid on 12 October 2007 in respect of the year from 1 July 2006 to 30 June 2007. An interim dividend of 1.25p per share in respect of the year ended 30 June 2008 was declared on 27 February 2008. The dividend is payable on 28 March 2008 to shareholders of record on 7 March 2008. 3. Share capital and share premium 31.12.07 30.06.07 Authorised Share Capital £ £ 100 Management Shares of 100 100 £1.00 each 200,000,000 Unclassified Shares of 0.01p each 20,000 20,000 75,000,000 C Shares of 0.1p 75,000 75,000 each 95,100 95,100 Number of shares Share Capital 31.12.07 30.06.07 31.12.07 30.06.07 Issued Share Capital £ £ Management Shares Management Shares of £1.00 2 2 2 2 each Equity Shares Redeemable Participating Preference Shares of 0.01p each: Balance at start of period/ 106,117,074 106,117,074 10,612 10,612 year Redeemed during the period (16,987,371) - (1,699) - Balance as at end of period/ 89,129,703 106,117,074 8,913 10,612 year 31.12.07 30.06.07 £ £ Share Premium Account Opening balance 66,430,850 66,430,850 Redeemed during the period (20,726,291) - Balance at period/year end 45,704,559 66,430,850 Purchase of Own Shares by the Company In order 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; (ii) allow an annual redemption of up to 25 per cent of the issued shares at the prevailing Net Asset Value per Share commencing in November 2007. A redemption of 16,987,371 shares (16.01 per cent of issued shares at that time) was made pursuant to (ii) above on 29th November 2007. A special resolution was passed at the Annual General Meeting held on 8 November 2007, to authorise the Company to make market purchases of its own shares, up to a maximum number of shares representing 14.99 per cent of the number of shares of the Company in issue at the time of the purchase. This authority is due to expire on the earlier of 8 November 2008 or the conclusion of the next Annual General Meeting of the Company. As at the date of issue of this interim report and financial statements, no purchases of shares have been made by the Company. 4. Related party transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. 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 a 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 Management Agreement and the Articles of Association. The Manager receives an annual fee. The Company has five 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. Total Directors' fees for the period, including the outstanding Directors' fees due to Directors at the end of the period, are detailed below. 31.12.07 31.12.06 £ £ Directors' fees for the period 47,890 50,000 Accrued at end of the period 23,831 2,546 Shares held by related parties As at 31 December 2007, Directors of the Company held the following numbers of shares beneficially:- Directors Shares Wayne Bulpitt 20,000 Jan Etherden 36,627 Christopher Spencer 14,157 5. 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 reported in the Portfolio Statement. Revenue earned is reported separately on the face of the Statement of Operations as dividend income received from equities, and interest income received from fixed interest securities and bank deposits. 6. Principal risks and uncertainties In general terms these may be highlighted as including unexpected and sharp appreciation of Sterling against the Swiss Franc, Japanese Yen, Norwegian Krone and other currencies held in the portfolio. A reversal of the current moves to reduce interest rates across developed economies could also have an adverse impact on the portfolio. Other potential risks include a sharp fall in the price of gold and unexpected stock specific declines in the share prices of the portfolio's equity investments. Equities currently constitute no more than 34.6% of the portfolio, with no single exposure greater than 3.0% (NT&T). The above risks could specifically affect, among other things, the Company's 61.5% in non- Sterling assets, 56% in government bonds and 11.5% in gold and gold equities. 7. Subsequent events By way of a special resolution passed on 8 November 2007, it was resolved that the entire amount of the share premium account arising on the issue of 'C' shares will be cancelled in order to provide the company with increased flexibility to effect future purchases of its own shares. This resolution was approved by the Royal Court of Guernsey on 8 February 2008. -------------------------- (*) Based on mid values This information is provided by RNS The company news service from the London Stock Exchange

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