RUFFER INVESTMENT COMPANY LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 41996)

LEI 21380068AHZKY7MKNO47

1 March 2021

HALF-YEARLY FINANCIAL REPORT

The Company has today, in accordance with DTR 6.3.5, released its Half-Yearly Financial Report for the six months ended 31 December 2020 and is attached.

http://www.rns-pdf.londonstockexchange.com/rns/5938Q_1-2021-2-26.pdf

The Half-Yearly Financial Report is also available via the Company's Investment Manager's website www.ruffer.co.uk.

Enquiries:

Praxis Fund Services Limited

Shona Darling

DDI: +44(0)1481 755528

Email: ric@praxisifm.com 

Chairman's review

It is a privilege to have succeeded Ashe Windham as Chairman of the Company and we all wish him well for the future. Ashe joined the Board of Ruffer Investment Company Limited (RICL or 'the Company') in 2009 and became Chairman in 2011. During his tenure as Chairman the total return on the Company's shares was 37.5% and there was significant change, including a new Board, a new broker and a new administrator. Ashe has left the Company in a strong position, at a peak of market capitalisation and with a significantly lower ongoing charges ratio (OCR).

Performance

Lenin said about the year 1917: "there are decades where nothing happens and there are weeks where decades happen". The same was true of 2020. Many financial assets moved more in weeks than they had previously in decades and covid-19 created, or at least furthered, a revolution in a number of areas of commercial, environmental and social life.

RICL achieved its investment objectives in 2020 with colours flying. Over the six months under review the Company's published net asset value (NAV) rose from 245.81p to 260.56p, providing a net asset total return of 6.4%. The share price appreciated from 242p to 263p which, together with the dividends, gave a shareholder total return of 9.1% for the six months, helped by the movement from a small discount to a modest premium over the period.

The 2020 calendar year share price return of 17.8%, and NAV return of 13.5%, contributed to a compound annual NAV return of 7.5% since the Company listed in 2004, compared to 6.8% per annum from the FTSE All-Share Total Return Index.

Ruffer's investment strategy, since before the launch of your Company, has now produced a positive return in the three major bear markets since the firm began in 1994, making money for investors in 2000-2003, 2008 and in 2020. The compound annual return for the strategy is 8.9% after fees with a maximum drawdown of less than 10% compared to a maximum of 48% for the FTSE All-Share Index.

Risk

An American economist named Frank Knight wrote, back in 1921: "if you don't know for sure what will happen, but you know the odds, that's risk, and if you don't even know the odds, that's uncertainty." The future is nearly always uncertain and the past is no guide to the future. However, while history does not necessarily repeat itself, it does tend to rhyme and the results can be measured.

One measure of risk is deviation from an average historical return. More risk should equate to more return, but two portfolios can have identical annual arithmetic average returns over the same period with different wealth outcomes depending on risk. For instance, a portfolio which achieves a mean annual return of 10% over ten years with no volatility will accumulate one fifth more wealth than a portfolio with exactly the same average return but where the return deviates by 20% in two years out of three. For perspective, 20% was the volatility of UK equities over the span of the twentieth century.

The RICL return is not only achieved with the lowest risk of all the funds but with the highest percentage return for every extra percentage point of risk taken.

The Sharpe ratio quantifies the Company's performance relative to a risk-free investment, taking account of any additional risk. The Sortino ratio measures only the downside element of the volatility. The Sortino numbers show that the Company has generated nearly three times more excess return per unit of downside risk since its inception than an investment in the UK stock market.

FTSE All-Share index in GBP. Source: Factset. Ruffer Investment Company data is Total Return NAV. All data measured to 31 December 2020.

Investment objective

The Company is classified as part of the flexible investment sector, which has many different benchmarks, although many different funds in the sector have none. The Company has no index-related benchmark, but its principal objective is: 'to achieve a positive total annual return, after all expenses, of at least twice the Bank of England Bank Rate'. The aim is to create an 'all-weather' portfolio which combines growth and protective investments to provide consistent positive returns regardless of the performance of financial markets. In the words of Jonathan Ruffer, the approach is about trying not to be wrong, rather than attempting to be right.

Bank Rate is just one of the tools of monetary policy set by the Monetary Policy Committee of the Bank of England to maintain price stability and support the government's economic policy. Bank Rate determines the interest rate paid to commercial banks holding money with the Bank of England as part of their liquidity requirements. By influencing the rates which those banks charge for lending, Bank Rate affects economic activity and the valuation of assets. It is used as a tool to encourage growth, as now, and control inflation to preserve the value of money as in the 1970s.

Even during the gold standard days of the nineteenth century, Bank Rate ranged between 2% and 10%. The highest rate ever seen was 17% in 1979, when it was known as minimum lending rate. By the time RICL was launched in June 2004, the rate had fallen to 4.5%. Returning twice 4.5% while trying to avoid significant drawdowns was a testing target given the volatility of equities or equity-related securities and bonds in which the Company is predominantly invested.

Simple but not easy

Since February 2009, Bank Rate has been no higher than 1%, the lowest nominal rate since the Bank of England was founded in 1694 until falling to the current 0.1%. Twice bank rate as a target might seem simple but is not always easy. Cash maintains capital value, carries minimal risk; its return is highly predictable in the short term and it is accessible. In the long term, cash returns have been close to the inflation rate, in fact 1% above it over the twentieth century.

However, the valuation of the assets in which the Company invests is not just determined by the nominal rate of interest but the rate relative to inflation or deflation - the real rate. When measured against the Retail Price Index since 2009, Bank Rate has been negative in real terms in every single year, just as it was positive in every one of the previous ten years. This negative real rate both reduces the universe of return-enhancing safe-haven assets available to achieve the Company's investment objective and encourages taking risk.

Furthermore, it is not the rate but a change in rate, especially unanticipated change, which has the greatest impact on the valuations of the assets in which the Company invests and therefore on returns in the short term. Bank Rate is a blunt instrument of monetary policy. It has only a lagged impact on inflation and the real economy, but can have a dramatic effect on financial markets.

The present value of assets is also a function of future income discounted at rates of interest related to Bank Rate. Growth discounted at low rates of interest creates high present values of long duration assets such as long dated bonds and growth equities. These valuations can remain high and become higher if growth or low interest rates are sustained beyond expectation. And they become vulnerable to any sustained change in the direction or amount of earnings growth, of monetary or of fiscal policy.

Marginal changes in low rates can make valuations volatile, while the cost of protection against that volatility remains relatively high in a low return environment. It may be counter-intuitive, but a consistent positive return of twice Bank Rate has rarely been a more challenging target especially given the implied low level of downside risk. There will be times when the Company far exceeds its target but other times when standing still will be an achievement.

Share buy-backs

Although the Company has never yet used the permission of shareholders to buy back its own shares (the redemption in 2007 was technically a tender offer at NAV rather than a buy-back), it subscribes to the Association of Investment Companies (AIC) Corporate Governance Guide for Investment Companies (the AIC Code). This code, which is endorsed by the Financial Reporting Council, imposes a duty on the Board of Directors to monitor and take action to address discounts to NAV. The AIC Code explicitly references buy-backs as one such tool with which to do so.

In July 2020, the AIC published a paper in response to the Pensions & Investment Research Consultants Ltd (PIRC), a corporate governance and shareholder advisory group, on what PIRC views as the circularity of capital which they believe is not to the long-term advantage of shareholders. PIRC shows that a number of trading companies have issued capital and within weeks or even days sought authority to buy back shares and vice versa.

PIRC applies the same argument to investment companies. It maintains that a discount to NAV is largely a product of the management fee. PIRC's hypothesis is that the NAV of an investment company represents the present value of the market's expected future stream of income and gains or losses from its underlying investments, while the share price of that company represents the NAV less the present value of any future expected charges. The assumption is therefore that if there were no future charges then there would be no discount of share price to NAV.

The AIC paper recommends that PIRC distinguishes between investment companies and trading companies and suggests that buy-backs can be an appropriate mechanism to control discount volatility and deliver shareholder value. 

Empirical evidence

With the help of our broker, Investec, we have investigated the empirical evidence of the correlation between ongoing charges and the average discount to NAV of the entire investment company population. The statistic (R-squared) which indicates the extent to which one of those two variables could explain the other is not significant at less than 6%. This statistic implies that factors other than charges explain at least 94% of any correlation between investment company ongoing charges and share price discounts to NAV.

Further analysis showed that some investment companies have sustained a premium of share price to NAV for long periods of time despite costs of management. Some trusts with lower operating costs than others have had higher levels of discount. Discounts for the same company have varied significantly between time periods when the management charges have not. This was especially the case during market disruptions, such as in 2007/2008 and March 2020, when discounts increased substantially.

Apart from this empirical evidence, it is a mathematical fact that buying back shares at a significant discount and cancelling them increases NAV for the remaining shareholders, although at some point shrinking the company size would lead to a higher ongoing charge and less marketability in the shares. There is also evidence that buying shares into treasury and reissuing can help liquidity in the shares, which shareholders also value.

The conclusion from the empirical analysis is that PIRC's working hypothesis, that discounts are 'largely a product of the management fee', does not in fact work. Management fees may be one of a number of factors. Other factors might include both absolute and relative performance of the fund or underlying asset class; expectation of future returns, dividend yield, cover and sustainability; manager depth and resource; marketability of shares; discount control; and confidence in the Board. However, there appears to be no evidence to support the hypothesis that fees and charges are the main factor in explaining discounts of share price to NAV.

Your Directors sought shareholder permission at the annual general meeting (AGM) in December 2020, as they do each year, to repurchase up to 14.99% of the issued preference shares during the 12 months to the next AGM. Shareholders voted 99.96% in favour of the resolution. In the case of your Company, the Board is alerted by our broker to any discount of share-price to NAV greater than mid-single digits. At that point we might expect some investors to trade the discount, taking a view on it narrowing and compounding positive underlying performance. Others may arbitrage between the Company's shares and units in the equivalent Ruffer open-ended fund.

The Board assesses with the broker the market position in the shares: who are the sellers; what are their reasons; what are volumes which are moving the share price significantly relative to the average liquidity levels; where are and what constitutes potential buyers and at what price level. The Investment Manager is not appraised of this discussion because of potential conflict of interest should they choose to buy the Company's shares for their discretionary clients.

The Board makes its own independent judgement on whether it deems the discount to be a temporary aberration, offering the opportunity to add value to shareholders through buyback, or a longer-term signal for which action other than a share buy-back may be required.

Reporting to shareholders

The annual report will elaborate on Ruffer's environment, social and governance (ESG) policies which have been a focus of the Board's attention and are well documented on the Ruffer website. We are pleased to report continued good progress and many examples of Ruffer acting as a leader in this area. This view was endorsed by the latest Assessment Report from the UN-supported network of investors promoting sustainable investment known as Principles for Responsible Investment (PRI) where Ruffer scored A+ (the highest grading) for their overall ESG strategy and governance framework.

One of the revolutions which covid-19 has furthered is digital communication. It has been a feature of some companies, not least those resident in Guernsey, that AGMs have never been easy for shareholders to attend. For many during lock-down under covid-19 it has been impossible.

Covid-19 has shown that technology can mitigate communication issues, as already demonstrated by Ruffer webinars and Ruffer Radio. Your Board and the Investment Manager are considering how to open the AGM virtually later this year to all shareholders who have appropriate internet access. More on this in the annual report.

Earnings and dividends

Earnings for the half year were 0.93p per share on the revenue account and 15.69p per share on the capital account. The Company's investment strategy continues to focus on total return to achieve its objective. Income remains a by-product of this process, given the high level of investment in assets which themselves offer little or no income. Such net income as arises will be distributed, but capital will not be drawn on to maintain the dividend. However, the Company is carrying retained revenue earnings of approximately £2 million, which the Directors may use to supplement future dividends should they consider it appropriate to do so.

Déjà vu

The focus of government policy in 2021 will likely continue to be to avoid the economic and social deflationary abyss of the 1930s. Markets are clearly discounting this outcome but what policy follows, after the expected fiscal and vaccine-induced recovery, will be the issue for 2021 and beyond.

Whether one subscribes to classical economic thinking or to modern monetary theory (MMT) - which some believe to be neither modern, nor monetary, nor theory, but hypothesis - both have points in common. Both acknowledge that once fiscal policy absorbs unemployed resource with continued growth in money, then inflation becomes the most likely outcome, inducing a government policy response of higher taxation and rates of interest.

John Maynard Keynes wrote in 1923: "a change in the value of money, that is to say in the level of prices… has produced in the past, and is producing now, the vastest social consequences... which generally affect different classes unequally, transfers wealth from one to another, bestows affluence here and embarrassment there…". Plus ça change.

Political recognition of this inequality and its cause is only a matter of time. But until general economic recovery and the signs of inflation are well set, governments and central banks will likely be echoing the prayer of St Augustine: "Lord make me pure but not yet."

The Company's strategy recognises that we are moving into a new investment regime. Ruffer's success during 2020 in managing different and unexpected market scenarios is encouraging for 2021. Your Board is confident that the portfolio will continue to provide 'all-weather' portfolio diversification and protection of wealth.

Christopher Russell

26 February 2021

Investment Manager's report

Performance review

For the six months to 31 December 2020 the NAV return was 6.4% (2019: 3.4%). The share price return of 17.8% and the NAV return of 13.5% for the calendar year 2020 marks two consecutive years of good returns for shareholders (+23.0% in NAV performance over 2019 and 2020) following a lean period in the two years before that.

What most people will find surprising about 2020 is that through a severe global recession, most assets ended up making money. This is hard to reconcile with the lived experience of 2020. Despite the rise in asset prices, the portfolio objective of preserving shareholder capital was thoroughly tested as we experienced the broadest possible range of market and economic environments. We often describe the Ruffer investment approach as 'all-weather' and there was certainly a wide variety of investment weather to deal with.

There were three distinct phases of market behaviour, each of which required a different asset mix to navigate successfully.

Source: Ruffer LLP, Factset

To illustrate this another way the portfolio appreciated by 4.2% in March 2020 when equities fell 15.1% and also appreciated by 5.2% in November 2020 which was the best month for equities since 1987.

Portfolio attribution

Attribution for the year 2020 tells only part of the story. What was important was not just what you owned, but when you owned it.

In order to hold onto the major positive contributions from gold, illiquid strategies, US Treasury Inflation Protected Securities (TIPS) and option protection, we needed to add opportunistically and lock in gains at various points during the year. Similarly, while we lost money in equities over the year as a whole (too much cyclical exposure in Q1), timely additions in the middle of the year and a further rotation into cyclical stocks meant that this part of the portfolio performed strongly in the bounce in markets and vaccine announcement in November 2020.

Within the equity book the standout stock has continued to be Ocado, rising 79% in 2020, 13% since 30 June and 774% since purchase. Three other notable successes were Fujitsu (+45% in 2020, +82% since purchase), Sony (+39% in 2020 and +271% since purchase) and Weiss Korea (+59% in 2020 and +138% since purchase).

Having been a drag in the first half of 2020 our positions in cyclical and value stocks were justified in the second half of the year as they acted as an offset to long duration assets and covid-19 winners (gold and long dated index-linked bonds for us, technology and growth stock for many others). Stocks exposed to a 'v for vaccine' recovery have done well since purchase - notable contributions came from Cemex (+98%), Uber (+44%), Barratt Development (+42%) and Vinci (+42%). At the very end of the period under review the announcement of a post-Brexit trade deal benefited our position in domestic UK equities and the decision to add to this part of the portfolio in October 2020. The reaction was more muted than we expected, but as the covid-19 clouds start to clear we expect the discount on UK equities to narrow.

Portfolio changes

There was some profit taking in gold and trading in US TIPS as mentioned above and the equity weighting rose from c 30% to c 40%. As we reported in July, a portfolio of index-linked bonds, gold and cyclical/value stocks (which benefit from stimulated GDP growth) and a significant sprinkling of protection against market calamity looks to be the right mix for the current environment.

Although our cyclical/value stocks were strong immediately following the vaccine news, we must remember both the portfolio role they play and the longer-term context. These stocks are geared to improving economic prospects and rising interest rates - this is vital as the rest of the portfolio stands to benefit more from continued financial repression and poorer market and economic outcomes. Secondly, these types of stocks have underperformed growth and quality factors for a decade. If there is an extended rotation, which would rely upon improved economic growth, then the recent outperformance has much further to run.

One notable addition to the portfolio during November 2020 was bitcoin exposure. We gained our bitcoin exposure via the Ruffer Illiquid Multi Strategies Fund and two proxy equities in Microstrategy and Galaxy Digital Holdings. At the period end the combined exposure of these was just over 3%. In the short period since investing both stocks are up more than 100% and bitcoin is up 90%.

Our rationale has been well publicised but, briefly, we have a history of using unconventional protections in our portfolio. This is another example, a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio. Due to zero interest rates the investment world is desperate for new safe-havens and uncorrelated assets. We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialisation of bitcoin. Think of bitcoin's bad reputation as a risk premium - as we move through the process of normalisation, regulation, and institutionalisation, the compression of this premium can have a dramatic effect on the price. If we are wrong, bitcoin will return to the shadows and we will lose money - this explains why we have kept the position size small but meaningful.

Investment outlook

As we enter 2021 there is near consensus in financial markets on four things -

1      Covid-19 will be conquered by the vaccine

2      Central banks will keep printing money without limit

3      Governments will keep spending without limit

4      Valuations no longer matter because the winners and losers have been settled

But coming into 2020 there was near universal consensus that global growth would accelerate. The one thing that mattered in 2020, coronavirus, was on few people's radar. Most did not see it coming and markets were complacent to the risk. As Daniel Kahneman put it: "the correct lesson to learn from surprises is that the world is surprising."

Given the unique blow to the economy and the co-ordinated shock-and-awe global response, it seems fair to conclude that the distribution of possible outcomes from here is wider than it has ever been. This makes a genuinely all-weather portfolio even more important.

The economy

It now seems we are in a K-shaped recovery - that means winners and losers. The unique shape of the covid-19 crisis and accompanying recession has meant some industries have thrived whilst others have suffered. What does the K mean? In caricature, everyone now uses Zoom and Peloton and offices and gyms are forced to close. Big beats small. The digital economy beats everything. Covid-19 acted as the 'Great Accelerator' to a whole host of trends which were already in motion.

This applies to individuals as much as it does to companies. The rich have benefited from asset prices rising, access to cheap debt and more independence. Those less fortunate have faced job losses and managing precariously through a patchwork of government support.

The K is not OK because it leads to a hollowing out of the economy and, as we are observing, it will exacerbate inequality and cost far too many jobs. Despite the government schemes, the job losses dwarfed any historical comparison. Even after a significant recovery, US levels of unemployment are only just back to those levels seen at the trough of the global financial crisis.

It feels like we live in a world of two extremes - the real economy which has been severely wounded and a rose-tinted, utopian, liquidity-fuelled world in the financial economy.

Why does this matter? Because governments have a habit of bending to popular will and there are a lot of disenfranchised people as a result of covid-19 who are looking for someone/something to blame. Capitalism, big business, the rich - all seem to be probable targets who will have to 'pay their fair share'. Furthermore, because politicians can read the mood of voters too, this will ultimately lead to government intervention and antitrust. The first signs are showing with talk of student debt forgiveness, a $15 minimum wage in the US and a coming reckoning for Big Tech in the US.

The optimistic take on the current economic situation is, as governments have realised through necessity, that the frontiers of tolerable levels of government borrowing and spending are further out than previously thought. Those, including Ruffer, who have worried about the unsustainable debt dynamics are looking more wrong than ever. This is music to political and Keynesian ears and it is an invitation they won't need to be offered twice to get more active in 'investing in the economy'. Such a policy is entirely unsustainable if bond yields rise, hence the obsession by the authorities in keeping interest rates nailed to the floor.

We can layer on top of this unexpected debt headroom the possibility of significant pent-up demand. After the Spanish flu in 1918 came the roaring 20s. The combination of the First World War plus a pandemic meant that people had put their lives on pause. It is entirely possible that for many something similar has happened during covid-19 - delayed weddings, cancelled holidays, etc. Might the animal spirits post-vaccine in mid-2021 catch us all by surprise? If so it seems plausible that bond yields will indeed rise and there will be upward pressure on prices.

A new investment regime

The question all investors need to be asking themselves today is 'why do I own conventional bonds?'

Bonds have been the cornerstone safe haven asset for investor portfolios since the creation of modern portfolio theory in the 1950s. As an asset class they have done a fantastic job, delivering strong returns and crucially acting as a wonderful portfolio offset. This is because bonds have gone up at times of stress when riskier assets in portfolios have fallen. They have been a hedge, but one with significant positive carry - the holy grail! But from here - with yields as low as they are - it is hard to see why anyone would own them. What do they add to your portfolio?

Bond prices are not just at record highs. They now offer guaranteed negative returns before considering inflation. As Jim Grant famously observed: 'they have gone from risk free return, to return free risk.' This has not escaped the notice of investors, which is why they have taken on more credit risk in order to achieve required yields and branched into assets outside traditional fixed income markets. These bond proxies (think infrastructure, renewable energy projects, property, private credit, defensive equities) are now exposed to the same risks as conventional bonds.

nvestors are prepared to hold around $18tn worth of bonds knowing full well they will get back less than their original investment if held to maturity. Only 15% of the entire world bond market yields more than 2%.

At best, this is a bubble in pessimism. Are asset allocators so devoid of good ideas they will guarantee a small loss at the risk of anything worse happening? At worst, this is the tyranny of benchmarking writ large as 'investors' paint by numbers into assets guaranteeing losses.

But bonds are a mathematically bounded asset class - from here the 'bond math' is challenging. In the US the ten year bond yield would have to fall to -0.7% to offset a 10% fall in the S&P 500 in a typical 60/40 portfolio. This is possible, but not likely, and anything worse than a 10% fall in the equity market would require even more sharply negative yields.

It is worth drawing on a recent example - had you held 10 year German bunds from 2019 through the covid-19 crash you would have lost money. That is to say that through the sharpest, deepest recession in recorded history you lost money in one of the ultimate safe-haven conventional government bonds.

For these reasons we do not hold conventional government bonds in the Company. Inflation-linked bonds offer a different opportunity as explained below.

The big question - how do we pay for all this?

Regardless of how the economy recovers from the pandemic, we can say for sure that western societies will come out of this carrying significantly more debt than before. The need to address this issue has become a necessity. Step 1 is to ensure that borrowing costs are kept as low as possible. Step 2 is to look at ways to start deleveraging. We all know that austerity is politically toxic and ineffective. Growing our way out of this bind is vanishingly unlikely given that it hasn't worked for at least the last half a century. While default will always be the nuclear option to be avoided at all costs, history does show us that a default via the back door of inflation is both the most effective 'solution' and the most politically palatable. In the current situation this option also has the added political benefit of appeasing the social pressure to address wealth inequality. Financial repression (interest rates below the rate of inflation) rewards the have-nots of society at the expense of the haves. Debt is inflated away and asset values typically fall.

Conventional bonds offer no protection in this scenario and equities tend to perform poorly when inflation starts to pick up materially. Our belief is that a combination of index-linked bonds, gold and some digital currency will offer protection.

Summary

We are moving into a new investment regime in the post-covid-19 world. As ever in a regime change, there will be individual winners and losers, but perhaps more importantly the investment template from the previous regime is unlikely to work (aka driving with the rear view mirror). Our key takeaways are as follows-

1      Covid-19 as the Great Accelerator - many existing trends have been amplified. Of these the greatest threat to investors is the necessity of financial repression to pay for past debts.

2      The negative bond/equity correlation trade may be over - conventional portfolios are riskier than they appear through back-testing scenarios.

3      Expect the unexpected - a genuinely all-weather portfolio is going to be essential.

4      Beware the duration trade - many different assets have benefited from falling bond yields. A mix of cyclical equities and interest rate options gives you a genuine diversifier.

Faced with these challenges our job is to construct a portfolio for the Company which will protect and grow our investors' capital in a wide variety of market scenarios. Constructing a genuinely diversified portfolio has never been more challenging, but the results from this year, where we have experienced the full spectrum of market scenarios, is encouraging. On the protective side we have exposure to anti-assets like credit default swaps, index-linked bonds, gold, bitcoin or expressions of volatility. These are assets which, in isolation, may make traditional investors uncomfortable, but through the prism of the whole portfolio can be true diversifiers. On the growth side, if policy makers and vaccine producers are successful in facilitating a re-opening and nominal GDP growth then cyclical equities, those geared into the economic recovery, will be the place to be. We saw the first hint of this trend in November.

Ruffer AIFM Limited

26 February 2021

Top ten holdings

* LF Ruffer Gold Fund is classed as a related party because its investment manager, Ruffer LLP, is the parent company of the Company's Investment Manager.

† Ruffer Illiquid Multi Strategies Fund 2015 Ltd is classed as a related party as it shares the same Investment Manager as the Company.

Statement of principal risks and uncertainties

The Board is responsible for the Company's system of internal controls and for reviewing its effectiveness. The Board, through its Audit and Risk Committee, has carried out a robust assessment of the principal risks and uncertainties facing the Company by using a comprehensive risk matrix as the basis for analysing the Company's system of internal controls while monitoring the investment limits and restrictions set out in the Company's investment objective and policy.

The principal risks assessed by the Board relating to the Company were disclosed in the Annual Financial Report for the year ended 30 June 2020. The principal risks disclosed include investment risk, operational risk, accounting, legal and regulatory risk and financial risks. A detailed explanation of these can be found within the Annual Financial Report. The Board and Investment Manager do not consider these risks to have materially changed during the six months ended 31 December 2020, and are not expected to change in the remaining six months of the financial year.

Going concern

The Directors believe that, having considered the Company's investment objective (see Business Model and Strategy within the Annual Financial Report), financial risk management and associated risks (see note 19 to the Financial Statements within the Annual Financial Report) and in view of the liquidity of investments (assuming, as the Board does, that market liquidity continues), the income deriving from those investments and its holdings in cash and cash equivalents, the Company has adequate financial resources and suitable management arrangements in place to continue as a going concern for at least 12 months from the date of approval of these Interim Financial Statements. The Directors also note that overall, due to the nature of the Company's portfolio, which comprises both equities and other more defensive assets, it has not been materially adversely affected in terms of value or cashflows by the effects of the covid-19 pandemic.

Responsibility statement

Responsibility statement of the Directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge

-     the half-yearly financial report and Unaudited Condensed Interim Financial Statements have been prepared in accordance with International Accounting Standards (IAS) 34, Interim Financial Reporting as adopted by the European Union and

-     the half-yearly financial report and Unaudited Condensed Interim Financial Statements (including the Chairman's Statement and the Investment Manager's Report) meet the requirements of an interim management report and include 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 Financial Report that could do so.

On behalf of the Board

David Staples, Director

26 February 2021

Independent review report to the shareholders of Ruffer Investment Company Limited

We have been engaged by Ruffer Investment Company Limited ('the Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 which comprises the condensed statement of comprehensive income, condensed statement of financial position, the condensed statement of changes in equity and the condensed statement of cash flows and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

St Peter Port

Guernsey

26 February 2021

Condensed statement of financial position (unaudited)

as at 31 December 2020

The Unaudited Condensed Interim Financial Statements were approved on 26 February 2021 and signed on behalf of the Board of Directors by

David Staples, Director

The notes form an integral part of these Unaudited Condensed Interim Financial Statements

Condensed statement of comprehensive income (unaudited)

for the period ended 31 December 2020

The revenue and capital return columns are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations.

* Basic and diluted earnings per share are calculated by dividing the profit after taxation by the weighted average number of redeemable participating preference shares in issue during the period. The weighted average number of shares for the period was 180,788,416 (31 Dec 2019: 180,788,416). As there are no items which would cause a dilution to occur, the basic and diluted earnings per share are the same.

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

Condensed statement of changes in equity (unaudited)

for the period ended 31 December 2020

*Under the Companies (Guernsey) Law, 2008, the Company can distribute dividends from share capital and reserves, subject to satisfying a solvency test. However, the Company's dividend policy is that dividends will only be paid from accumulated revenue reserve. In order to provide clearer information relating to this reserve, the Company has separately identified it in these financial statements as a 'Retained revenue reserve' in the Statement of Financial Position and the Statement of Changes in Equity. 'Other reserves' represents amounts converted from share premium in 2004 and 2008.

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

Condensed statement of cash flows (unaudited)

for the period ended 31 December 2020

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

Notes to the unaudited condensed interim financial statements

for the period ended 31 December 2020

1           The Company

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. The Company is listed on the Main Market of the London Stock Exchange (LSE) and was admitted to the premium segment of the Official List of the UK Listing Authority on 20 December 2005.

2          Significant accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered to be material in relation to the Company's Unaudited Condensed Interim Financial Statements.

Basis of preparation

The Unaudited Condensed Interim Financial Statements for the period ended 31 December 2020 have been prepared using accounting policies consistent with IFRSs as adopted by the European Union and in accordance with IAS 34 as adopted by the European Union, and the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

They have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss.

This half-yearly financial report, covering the period from 1 July 2020 to 31 December 2020, is not audited.

The Unaudited Condensed Interim Financial Statements do not include all the information and disclosures required in the Annual Financial Report and should be read in conjunction with the Annual Financial Report for the year ended 30 June 2020, which was prepared in accordance with IFRSs as adopted by the European Union. The Audit Report on those accounts was not qualified.

Significant judgements and estimates

In the financial period under review, there were no changes to the significant accounting judgements, estimates and assumptions from those applied in the Annual Financial Report for the year ended 30 June 2020.

Standards, amendments and interpretations effective during the period

The accounting policies adopted are consistent with those used in the Annual Financial Report for the year ended 30 June 2020. There were no new standards, interpretations or amendments to standards issued and effective for the period that materially impacted the Company.