6 October 2021

 

RUFFER INVESTMENT COMPANY LIMITED

 

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

 

Annual Report

 

The Company has today, in accordance with DTR 6.3.5, released its Annual Report for the year ended 30 June 2021 and a copy is attached.

 

http://www.rns-pdf.londonstockexchange.com/rns/1742O_1-2021-10-6.pdf

 

The Annual Report is also available via the Investment Manager's website at ruffer.co.uk/2021-ric-annual-report

 

Enquiries

Praxis Fund Services Limited

Company Secretary

Katrina Rowe

+44(0)1481 737673

[email protected]

 

LEI 21380068AHZKY7MKNO47

Key performance indicators

	30 June 2021 %	30 June 2020 %
Share price total return over 12 months1	19.5	12.4
NAV total return per share over 12 months1	15.3	10.1
Premium/(discount) of share price to NAV	2.0	(1.5)
Dividends per share over 12 months2	1.90p	1.85p
Annualised dividend yield3	0.7	0.8
Annualised total return per share since launch1	7.9	7.4
Ongoing charges ratio4	1.08	1.08

Financial highlights

	30 June 2021	30 June 2020
Share price	287.00p	242.00p
NAV at year end as calculated on an IFRS basis5	£575,851,333	£444,112,381
NAV at year end as reported to the LSE	£575,913,008	£444,389,282
Market capitalisation6	£587,541,854	£437,507,967
Number of shares in issue	204,718,416	180,788,416
NAV per share at year end as calculated on an IFRS basis5	281.29p	245.65p
NAV per share at year end as reported to the LSE	281.32p	245.81p

 

[1] Assumes reinvestment of dividends. See appendix for Alternative Performance Measures (APMs)

² Dividends declared during the year

³ Annual dividend yield is calculated using share price at the year end and dividends declared during the year

⁴ See note 9

5 This is the NAV/NAV per share as per the Financial Statements. Refer to note 14 for a reconciliation between this figure and the NAV/NAV per share as reported to the LSE. See appendix for Alternative Performance Measures (APMs)

6 See appendix for Alternative Performance Measures (APMs)

 

Chairman's statement

This has been another excellent year for your company. The net asset value (NAV) total return of the Ruffer Investment Company Limited (RICL or 'the Company') over the year to 30 June 2021 was 15.3% , the NAV per share⁷ rising from 245.65p to 281.29p. The share price total return⁷ was 19.5%. The NAV return was augmented by the share price moving from a discount to NAV⁷ of -1.5% to a premium⁷ of +2.0% over the period. The compound annualised NAV total return to 30 June 2021 since the Company's launch in July 2004 was 7.9%.

7 See appendix for Alternative Performance Measures (APMs)

The nominal annual return is not the only important performance metric. A given return with little volatility will grow more wealth over time than the same average return with greater volatility. Furthermore, a relatively low correlation between RICL and other asset returns helps reduce the volatility of a portfolio which contains RICL shares. And whereas an equity/bond combination has traditionally been a low risk approach to achieving the same outcome, that strategy is now potentially high risk because future returns from bonds and equities are likely to move together when interest rates rise as Central Banks begin to tighten monetary policy.

 

The RICL return has continued to provide the highest return per unit of risk of all the comparators. Relative to a risk-free investment, the return has been approximately twice that of the FTSE All-Share Index since the launch of RICL. In terms of the Sortino Ratio, which only measures the downside element of volatility, the Company has generated nearly three times more excess return per unit of risk than an investment in the UK stock market.

To 30 June 2021	Sharpe ratio	Sortino ratio
Ruffer Investment Company since inception (July 2004)	0.93	2.09
FTSE All-Share Total Return Index since July 2004	0.47	0.75

Portfolio management

My statement in the interim report focused on the 'what' and the 'why' of the Company's long-term investment objective to provide a total return of twice Bank Rate. However, there was little on how that objective is achieved, other than alluding to an 'all-weather portfolio' which, in the words of Jonathan Ruffer, is 'trying not to be wrong rather than attempting to be right'.

'All-weather' implies quite a wardrobe of different assets. The RICL investment strategy is different from the conventional protection of an equity/bond split offering economic cycle exposure to growth as well as protection against deflation.

The RICL portfolio combines some unusual assets to manage exposures. Nicolas Taleb coined the word 'antifragile' to express a concept which goes beyond simply resilience or robustness to an adverse influence. Fragility suffers from shock. Resilience resists shock and stays the same but antifragility implies gain from adversity.

Ruffer AIFM Limited (RAIFM or 'the Investment Manager') uses antifragile assets as part of the all-weather wardrobe by building portfolios which benefit from unexpected events. Fragile assets are combined with a protection strategy which, as Taleb would say, does not try to predict risks but to mitigate against them. RICL achieves this by using financial assets explicitly designed to benefit from market volatility, thereby offsetting fragility.

Real assets

RICL's stated investment objective of a return of twice Bank Rate would have provided a low volatility return over the long run, but in at least one third of the last 120 years cash produced a negative real return, and in eight of those years it lost more than 10% after inflation. Concern over inflation explains the high proportion of the RICL portfolio invested in real assets such as index-linked bonds and gold-related securities.

During the year, RICL briefly added an exposure to cryptocurrency to its armoury of real assets that have the potential to hold their value while fiat currencies are being devalued. Having followed and analysed bitcoin in depth and for an extended period, the Investment Manager viewed the cryptocurrency in November 2020 as an emerging store of value with an attractive risk/return profile. The price subsequently discounted the surge in excess liquidity which appeared to be peaking in April 2021 and the position was sold, having contributed 515 basis points to RICL's total return in the financial year.

More than thirty years before bitcoin was created, Frederick von Hayek, who received a Nobel prize in 1974 for his work on the theory of money, argued the case against government monopoly of money. In a paper published by the Institute of Economic Affairs in 1976 entitled 'the Denationalisation of Money', he suggested there is no need for a very sharp distinction between what is and what is not money, nor for a definition which assumes the medieval conception that all money, or the value of money, must necessarily be a creation of the state.

Government-issued currency has a long history of depreciation of value in relation to goods and services. Hayek cites Diogenes, the 4th century BC cynic, who called money the politician's game of dice. The concept of legal tender was questioned in cases fought in the US Supreme Court after the American Civil War, and in the German courts after the First World War, when debts were enforced which were repaid in Marks worth a 15,000th part of their original value.

Who in the UK today would sensibly exchange one gold sovereign, which in 1913 would buy a suit, for a one pound coin, which is the same in legal tender but which would now buy less than one litre of milk? Since the US Federal Reserve was created in 1913, the US dollar has depreciated, in terms of US consumer prices, by 96%.

Bitcoin may fall in value for other reasons, but as an asset sitting outside the fiat money system it is an intriguing prospect as a digital version of gold. Importantly this is completely different to Central Bank Digitised Currencies (CBDC), which are nothing more than a digital version of their fiat cousins and are in no way protected from a similar debasement.

Hayek's message was that value is a relationship which only has meaning when the quantity of one object is measured in terms of another and the freedom of the individual is best protected by constitutions which prohibit restrictions on transaction in any kind of money or precious metals. He said 'there could be no more effective check against the abuse of money by governments than if people were free to refuse any money they distrusted and to prefer money in which they had confidence'.

This is the backdrop against which the Company has taken significant positions in real assets. In the last six months the threat of inflation has taken centre stage amongst the commentariat and investment community and the Company is positioned to protect investors against what may prove to be a generational event in terms of wealth distribution.

Share buy-backs and issuance

While there have been no share buy-backs during the year, a case was made, in my Chairman's statement in the interim report, for share buy-backs where discounts of the share price to NAV per share were perceived to be excessive and temporary. While discounts to NAV can offer opportunity for arbitrage for potential investors, current shareholders benefit from buy-backs which can add both to NAV per share and market liquidity. Accordingly, the Company is again seeking authority in the forthcoming Annual General Meeting to buy back up to 14.99% of the Company's issued share capital.

At the AGM in December 2020, the Company also sought and obtained authority to issue up to 10% of the Company's issued share capital on a non-pre-emptive basis. In April 2021, the Company issued a circular to extend that permission for a further 19,546,841 shares and this was supported by 98.95% of the votes cast at an EGM in May 2021. Following a second circular, at an EGM in September 2021, 92.96% of votes cast authorised the issuance of another 21,684,841 shares. The shareholder authority for both of these permissions is effective until the AGM in December 2021, when the Company will again seek renewal. Share issuance is, however, separately subject to Prospectus Rules. These rules limit to 20% the aggregate number of shares issued by tap over the preceding twelve months without the Company publishing a prospectus. Consequently, the Board is now planning to issue a prospectus to reset the 20% capacity afforded by the Prospectus Rules, and (subject to shareholder approval) will take the opportunity at the same time to offer new shares to both existing and future investors. We want to ensure that such an offer is accessible to both institutional and retail shareholders.

The case was made for share issuance at a premium, including costs, through share sale, or from treasury, on a non pre-emptive basis on the following grounds

-      to meet ongoing demand in the market in order to provide effective management of the premium to NAV per share at which the shares may trade so as to ensure that long-term investors who regularly acquire shares are not disadvantaged

-      increase the size of the Company, thereby spreading operating costs over a larger capital base which should reduce the ongoing charges ratio

-      enhancement of the NAV per share

-      improvement of liquidity in the market for the shares.

These shares were issued gradually in the second half of the year to meet a market demand which was driving a premium of share price to NAV per share. In the year ended 30 June 2021, the Company issued 23,930,000 shares (13.2% of 30 June 2020 share capital) for a total net consideration of £67.4 million, which contributed 1.1p to NAV per share. Combined with the appreciation of the share price, the market capitalisation of RICL therefore rose from £437.5 million to £587.5 million during the year. Subsequent to the year end, the Company issued a further 14,695,000 shares for a total net consideration of £41.9 million. Whilst size is not an objective in itself, the enhanced marketability of RICL shares potentially enhances the attractiveness of the Company to shareholders.

Earnings and dividends

During the year the Company generated 3.30p per share of revenue and 33.13p per share of capital gain. The Company has always invested for total return which gives flexibility to the Investment Manager to pursue the optimal investment strategy for the long-term generation of return and preservation of capital.

In order for the Company to remain able to be marketed to a UK retail client base, it must distribute at least 85% of revenue earned in any given year. Having paid out an interim dividend in March 2021 amounting to 0.95p per share, the Company has declared a second interim dividend for this year of 1.55 pence per share, of which 0.7 pence relates to a one-off dividend received from one of the Company's investments. The remaining balance of revenue earned has been retained to add to the revenue reserve which may be used to help protect dividends against future fluctuations in revenue.

Responsible investing

The Annual Report includes a comprehensive section on how environmental, social and governance (ESG) considerations are embedded in the Ruffer investment process. The Investment Manager recognises that ESG factors are a source of both opportunity and risk at the macro- and micro-economic level. RICL seeks to be a responsible steward of its shareholders' assets and this is set out in the Responsible Investment report.

Among other things, Ruffer is a signatory to the UN Principles for Responsible Investment (PRI), to Climate Action 100+, to the Transition Pathway Initiative and the Institutional Investors Group on Climate Change (IIGCC). During the year, the Investment Manager has continued the good work achieved in its equity holdings - engaging with companies and advocating for change where appropriate. It has also developed a proprietary sustainability rating model for government debt and is actively researching alternative assets with potential to protect or benefit portfolios in the future.

The Board and the Investment Manager are mindful that ESG considerations continue to emerge, that this area is a marathon and not a sprint, and that the considerations are broad in nature, affecting such areas as public policy, taxation, consumer preferences as well as the impact on specific entities and areas of investment.

Board composition

The Company saw Ashe Windham retire at the AGM in December 2020 after nine successful years as Chairman. This followed the retirement in June 2020 of John Baldwin and the appointment of Shelagh Mason and, on 1 September 2020, Nick Pink. On my appointment as Chairman, Jill May became Senior Independent Director.

While Shelagh has been able to join the other Guernsey Board members in physical meetings, Nick has yet to be able to do so due to Guernsey covid-19 travel restrictions. That said, it is indicative of developments in technology that Nick and Jill have been able to contribute positively through Zoom and other media and we can now look forward, when travel constraints are lifted, to physical meetings. Not least of these is the annual day of information meetings in London between the Board and Ruffer executives. This day allows the Board to meet all the teams which contribute to RICL's portfolio in such areas as ESG, risk, investment and business strategy, specialist investment, counter-party and sub-custody analysis or cyber security. It is the opportunity for the Board to deep-dive in to areas of particular Board focus.

Towards the end of the year, we commissioned an external evaluation of the Board, the Chairman and the Investment Manager. The rankings given by each Director to questions in the survey were useful in as much as they identified above average assessments which needed to be sustained and below average which needed attention. The results of the Board evaluation are discussed further in the corporate governance statement.

Communication with shareholders

The Investment Manager communicates regularly with shareholders on the investment thinking which drives RICL performance. There has been an increased volume of digital connection with current and potential shareholders through website thought pieces, monthly fact sheets, Ruffer radio, shareholder webinars and other media communication.

Given the constraints on public gatherings created by the covid-19 pandemic, and the UK government's plan to permit virtual general meetings, the interim statement mentioned that the Board and Investment Manager were considering how to open the AGM virtually to all shareholders who have internet access. Enabling either a full virtual or hybrid Zoom AGM needs a change to the Articles and this is proposed in the resolutions for the forthcoming AGM.

Zoom AGMs have had a mixed reception so far with other investment companies. In many cases there has been limited if any attendance and in all cases at significant extra cost to all shareholders. If the resolution to change the Articles is passed, we will canvas shareholders for their views before pressing the virtual button.

The future

Inflation is centre stage of debate. Many seem to have ignored the fact that inflation has been devaluing their net worth for years. In the last ten years alone, since December 2010, a pound has lost some 25% of its value in retail price terms, and 43% since December 2000. An investor who bought a FTSE 100 ETF in 2000, thinking to protect wealth by investment in the UK's 100 largest listed companies, will have since lost nearly half that capital in real terms.

The current inflation debate seems to have focused more on the likely rate of change in consumer prices than in asset prices, commodities, energy, metals and food or the extent to which price increases may already be embedded in expectations. The Investment Manager's report shows that the percentage of businesses in the US raising prices is at a 35-year high and that global data indicate a similar picture. As long as Central Banks can continue to contain market expectations on interest rates, inflation will continue to be politically the cheapest form of taxation.

Hayek wrote in 1940: 'it has never been denied that employment can be rapidly increased, and a position of full employment achieved in the shortest possible time, by means of monetary expansion. All that has been contended is that the kind of full employment created in this way is inherently unstable and perpetuates fluctuations'. Post-war economic history seems to prove his point and as a Spanish philosopher once said, if we cannot learn from history we are condemned to repeat it.

Analysis in the Investment Manager's report shows the asymmetry of risk in bonds arising from a sustained inflationary scenario which, as they say, implies 'heads you don't win much, tails you lose a lot'. It also shows the likely impact on other assets, including the risk premium on certain equities, of un-anticipated inflation. The Board is comfortable with the Investment Manager's high level of conviction in the longer-term inflationary end-game, even if the mid-game moves and timings are uncertain, and it is confident that the RICL portfolio adequately combines recognition of the high-conviction scenario with a level of protection against unpredictable outcomes.

 

Christopher Russell

5 October 2021

Business model and strategy

The Company carries on business as a closed-ended investment company. Its shares are traded on the Main Market of the London Stock Exchange (LSE) and it was admitted to the premium segment of the Official List of the UK Listing Authority on 20 December 2005. The Company is externally managed by Ruffer AIFM Limited, a UK investment manager authorised and regulated in the conduct of investment business in the United Kingdom by the Financial Conduct Authority (FCA). Ruffer AIFM Limited is also the Alternative Investment Fund Manager (AIFM) of the Company.

Board

The Board of Directors is responsible for the overall stewardship of the Company, including general management, structure, finance, corporate governance, marketing, risk management, compliance, gearing, contracts and performance. Biographical details of the Directors, all of whom are non-executive, are listed under the 'Directors' heading below, and on the Management and Administration summary. The Company has no executive directors or employees.

The Board has contractually delegated to external parties various functions as disclosed in the Corporate Governance Statement.

Investment objective

The principal objective of the Company is to achieve a positive total annual return, after all expenses, of at least twice the Bank of England Bank Rate.

The Bank of England rate throughout the year ended 30 June 2021 was 0.10%.

The Company predominantly invests in internationally listed or quoted equities or equity related securities (including convertibles) or bonds which are issued by corporate issuers, supra-nationals or government organisations.

Investment strategy

The Company's strategy is to create a balanced portfolio of offsetting assets which in aggregate are intended to enable the Company to meet its investment objective. The aspiration remains to produce consistent positive returns, regardless of the performance of financial markets. Over shorter periods this is likely to result in the Company lagging sharply-rising equity markets, but outperforming falling equity markets. This strategy will be implemented predominantly through investments in listed securities, collective investment schemes and currencies but the Investment Manager has the flexibility to use other asset classes should it be necessary to do so.

The investment strategy has been tested in the last 12 months as conditions in markets have changed quickly, but the portfolio has stood up to this test. In order to achieve the Company's investment objective we need to be able to perform in both rising and falling asset markets. This means that we maintain a balance of investments with a small but potent book of cyclical equities to perform should economic and financial conditions continue to improve, index-linked bonds and gold to benefit from sustained higher inflation and financial repression, and credit protection and options to protect the Company should there be a shock to financial markets.

Investment policy

In selecting investments, the Company adopts a stock picking approach and does 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 objective.

The Company invests across a broad range of assets, geographies and sectors 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 different asset classes 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 is wide and may include companies domiciled in, and bonds issued by entities based in, non-European countries, including countries that are classed as emerging or developing. This may result in a significant exposure to currencies other than pound sterling. Where appropriate, the Investment Manager will also use in-house funds to gain exposure to certain asset classes.

The Company may use derivatives, including (but not limited to) futures, options, swap agreements, structured products, warrants and forward currency contracts, for efficient portfolio management purposes only.

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 NAV 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 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 no more than 15% in aggregate of the Company's gross assets at the time of acquisition will be invested in listed investment companies (including investment trusts), with a maximum of 10% of gross assets invested in investment companies not having stated investment policies allowing them to invest no more than 15% of their own gross assets in other UK listed investment companies (including investment trusts).

General

In accordance with the requirements of the United Kingdom Financial Conduct Authority (FCA), any material changes in the Investment Policies and Objectives of the Company may only be made with the approval of shareholders.

Investment of assets

At each quarterly Board meeting, the Board receives a detailed presentation from the Company's Investment Manager which includes a review of investment performance, recent portfolio activity and a market outlook. It also considers compliance with the investment policy and other investment restrictions during the reporting year. The Company's Top Ten holdings and Portfolio Statement are set out later in the Annual Report.

Environmental policy

Whilst the Company has a limited carbon footprint in respect of its day to day activities, the Board notes that the Investment Manager recognises that environmental responsibility is core to its longer term business success, and actively integrates environmental, social and corporate governance (ESG) issues into its investment process. The Investment Manager's ESG policy is available upon request. For more detail, please see the Responsible investing report.

A number of environmental initiatives have been introduced by the Board and the Administrator, as follows -

-      minimising printing of Board materials

-      deemed consent from shareholders to accept electronic copies of documents

-      use of recycled paper for Annual and Interim Reports for shareholders requiring hard copies

-      use of recycled Woodland Trust printer paper by the Administrator, which funds new UK woodland and

-      Fairtrade tea and coffee and tap water, rather than bottled water, served at all Board meetings.

-      In addition, the Board intends to carbon balance Directors' and Investment Manager's flights upon resumption of business travel.

Shareholder value

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 realising a positive total annual return, after all expenses, of at least twice the return of the Bank of England Bank 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.

Dividend policy

The Board's policy is to pay dividends semi-annually, which are typically declared in September and March, with an objective of distributing a minimum of 85% of the Company's net revenue each year.

Dividends will only be paid from the Company's revenue account and not from capital. Dividend payments by the Company will depend on the net income stream generated by the underlying investments in the Company's investment portfolio and therefore no assurance can be given that dividends will continue to be paid.

The payment of any dividend by the Company is subject to the satisfaction of a solvency test as required by the Companies (Guernsey) Law, 2008, whereby the Board must be satisfied on reasonable grounds that the Company will, immediately after payment of any dividend, be able to pay its debts as they become due and that the value of the Company's assets would be greater than the value of its liabilities.

The Board has the discretion to increase or reduce the dividend, or not to declare a dividend, as appropriate in consideration of the financial position of the Company.

Details of the dividends paid during the year are set out in note 5 to the Financial Statements.

Principal risks and uncertainties and their management

The Board has undertaken a robust assessment of the principal risks facing the Company and has undertaken a detailed review of the effectiveness of the risk management and internal control systems. As stated within the Report of the Audit and Risk Committee, the Board, with the assistance of the Administrator and the Investment Manager, has drawn up a risk assessment matrix, which identifies the key risks to the Company. The principal risks and uncertainties faced by the Company, and the mitigating factors adopted by the Company, are summarised below.

Investment risks - the Company is exposed to the risk that its portfolio fails to perform in line with the Company's objectives. The Board reviews reports from the Investment Manager at each quarterly Board meeting and at other times when expedient, paying particular attention to the diversification of the portfolio and to the performance and volatility of underlying investments.

Operational risks - the Company is exposed to the risks arising from any failure of systems and controls in the operations of its service providers, principally the Investment Manager or the Administrator. The Board receives reports annually from the Investment Manager and Administrator on their internal controls and reviews pricing reports covering the valuations of underlying investments at each quarterly Board meeting. The Board can and does receive explanations and assurances from its key suppliers as to their own operational resilience and plans and ability to respond during times of crisis, such as at present following covid-19.

Accounting, legal and regulatory risks - the Company is exposed to the risk of action or sanction by shareholders, counterparties or regulators if it fails to comply with the regulations of the UK Listing Authority or the Guernsey Financial Services Commission or if it fails to maintain accurate accounting records. The Administrator provides the Board with regular reports on changes in regulations and accounting requirements.

Financial risks - the financial risks faced by the Company include market, credit and liquidity risk. These risks and the controls in place to mitigate them are reviewed at each quarterly Board meeting. Further details on financial risks are discussed in note 19 of the Financial Statements.

Emerging risks - the Board is constantly alert to the identification of any new or emerging risks through the monitoring of the Company's investment portfolio and by conducting regular reviews of the Company's risk assessment matrix. Should an emerging risk be identified the risk assessment matrix is updated and appropriate mitigating measures and controls will be agreed.

The Board seeks to mitigate and manage these risks through continual review, policy-setting, enforcement of contractual obligations and monitoring of the Company's investment portfolio. The Board, Investment Manager and the Company's Broker also regularly monitor the investment environment in order to identify any new or emerging risks.

Going concern

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements since the assets of the Company consist mainly of cash and cash equivalents and securities which are readily realisable. The Directors also note that overall, due to the nature of the Company's portfolio, which - as discussed in more detail in the Performance section of the Chairman's Review and in the Investment Manager's report - comprises both equities and other more defensive assets, it has not been affected significantly in terms of value or cashflows by the effects of the covid-19 pandemic. Accordingly, in the Directors' opinion, the Company has adequate financial resources to continue in operational existence for the foreseeable future. Matters relating to the going concern basis are also discussed in the Long Term Viability Statement below and in note 2(c).

Long term viability statement

The Directors have assessed the prospects of the Company over a longer period than the 12 months minimum required by the 'going concern' provision. For the purposes of this statement, having regard to the economic planning cycle and the Company's strategy review period, the Board has adopted a three year viability period.

In its assessment of the Company's viability over the three year period the Board has considered each of the Company's principal risks and emerging risks as detailed above and in particular the impact of a significant fall in the value of the Company's investment portfolio.

The Directors consider that a 30% fall in the value of the Company's portfolio would be significant but would have little impact on the Company's ability to continue in operation over the next three years. In reaching this conclusion, the Directors considered the Company's expenditure projections, the fact that the Company currently has no borrowing, but has the ability to borrow up to 30% of its NAV and that the Company's investments comprise predominantly readily realisable securities which can be expected to be sold to meet funding requirements if necessary, assuming market liquidity continues.

Also, the Board has assumed that the regulatory and fiscal regimes under which the Company operates will continue in broadly the same form during the viability period. The Board speaks with its broker and legal advisers on a regular basis to understand issues impacting on the Company's regulatory and fiscal structure. The Administrator also monitors changes to regulations and advises the Board as necessary. The Board also has access to the Administrator's compliance resources as well as the compliance department of the AIFM.

Based on the Company's processes for monitoring operating costs, share discount, internal controls, the Investment Manager's performance in relation to the investment objective, the portfolio risk profile, liquidity risk and the robust assessment of the principal risks and uncertainties facing the Company, the Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period.

Key performance indicators

The Board uses a number of performance measures to assess the Company's success in meeting its objectives. The key performance indicators are disclosed in detail.

 

Investment Manager's report

Performance review

For the year to 30 June 2021 the Company had a share price return of 19.5% and a NAV return of 15.3%.

The Company has achieved its objective of preserving shareholder capital regardless of the market conditions. In last year's report we wrote "we feel confident about our prospects from here" and results have borne that out.

Today, our conviction in the long-term inflationary endgame has never been higher but we are cognisant of the fact that the journey to that point will not be direct and the timing is uncertain. For that reason it has never been more important to hold a mix of assets that will deliver our investment objectives regardless of the direction of financial markets. We will continuously aim to provide a superior risk adjusted return which focuses on preservation of capital and is uncorrelated with equities or any other asset class.

Performance	NAV TR %	NAV TR annualised %	Share price TR %	Share price TR annualised %	Correlation with equities
1 year	15.3	15.3	19.5	19.5	0.69
3 years	25.8	8.0	26.9	8.3	0.43
5 years	37.9	6.6	41.2	7.1	0.45
10 years	62.7	5.0	59.5	4.8	0.51
Since inception (Jul 2004)	259.4	7.8	265.2	7.9	0.45

Principal performance contributions

Ruffer Investment Company is not alone in posting good performance numbers over the last 12 months. However, our returns are distinctive both in terms of their source and profile.

1      The shape of the equity book - our equity risk has been focused on value, cyclicals, commodities, and financials since 2018. We added to these positions in the summer of 2020 when the market was most enamoured with the 'covid winners'. We enjoyed particularly strong returns from the stocks geared into re-opening and recovery; UK banks (+57% and 256bps), Walt Disney (+67% and 82bps), General Motors (+135% and 84bps), Cemex (+115% and 40bps) and Arcelor Mittal (+97% and 65bps). These thematic exposures in the portfolio drove significant performance, particularly since the announcement of the vaccine approvals in November 2020.
Exposure to UK equities, previously unloved by investors, also came to life with our smaller companies exposure of around 5% adding 186bps to the return in the 12 months.

2      Bitcoin - exposure to bitcoin was a significant contributor over the period (+515bps) and offers a good example of the flexibility of the Ruffer strategy and our willingness to embrace uncomfortable or idiosyncratic risks. A well-timed exit of our exposure in April 2021 avoided giving back much of the gain in the recent sell-off. MicroStrategy (+421% and 47bps) and Galaxy Digital (+337% and 58bps) were also sold in February.

3      Active duration management - Q1 2021 was one of the worst for bonds in modern history. Despite having over 30% of the portfolio in index-linked bonds, we were able to offset the damage from this risk through the opportunistic use of payer swaptions that lowered the net portfolio duration (sensitivity to changes in interest rates) to zero and index-linked bonds were helped by rising inflation expectations.

Credit protections which helped the portfolio to weather the covid-19 crash were significantly monetised in the heat of the crisis in March 2020. However, within the period, the remaining position gave back 250bps of performance as governments and central banks rode to the rescue of corporate debt markets. We decided it was necessary to retain some of these positions due to ongoing fragility and uncertainty in markets, but the position was reduced in both size and potency.

Gold's contribution was also negative, something that feels quite anomalous in the context of rampant monetary stimulus and inflation concerns. On 30 June 2020, the gold price was US$1,780 and it closed the period a year later at US$1,790, up less than 1% with the gold mining equities index also flat. Our exposure is focused on higher beta, more operationally geared smaller gold mining stocks.

Portfolio changes

In the interim report we covered our rationale for adding bitcoin exposure plus two bitcoin proxies (MicroStrategy and Galaxy Digital) in November 2020. The rationale was that bitcoin was an emerging store of value and institutional investors would move to adopt it as a 'digital gold'. This narrative played out faster than we could have foreseen.

Bitcoin may yet fulfil its potential, but the market displayed many signs of froth - retail speculation, excessive leverage, the Coinbase IPO, Tom Brady's laser eyes, Dogecoin, Elon Musk hosting Saturday Night Live, US$60m non-fungible tokens (NFTs) etc.

 

In the short term at least, bitcoin was exhibiting the characteristics of a risky, speculative asset and therefore no longer fulfilled the portfolio role we had intended for it as a protective and diversifying asset. We sold all our exposure in April 2021 (+515bps performance contribution). Our Chief Investment Officer, Henry Maxey, surmised that excess liquidity has a wonderful way of bringing the hopes of the future into the prices of the present.

During the period there were two returns of capital from Ruffer Illiquid Multi-Strategies Fund 2015. Firstly 0.7% in March 2021 and then 2.3% in June 2021. In effect, this was a return of some of the profits from the bitcoin exposure.

Having been hedged for the interest rate spike in Q1 2021, in May and June 2021 we added 3% to the long-dated UK index-linked gilts, taking these to 13% of the portfolio. We continue to believe these are the best assets for the extended period of financial repression we envisage for the coming years (see below).

Within the equity book, we have been focused on reducing risk in the summer months after value and cyclical stocks experienced a strong run. We have kept equities at around 40% with consistent sales and we have slowly rotated into what we have come to call 'the forgotten middle' making up around 8% of the portfolio. This is a cohort of defensive companies which are delightfully dull, sit outside the bluster of the value/growth debate and offer solid cyclically insensitive earnings on low valuations. This includes Tesco, Cigna and Centene, but also newer purchases like GlaxoSmithKline, Fresenius Medical and BAE Systems.

Investment outlook

A new inflationary regime

In previous reports and elsewhere we have argued covid-19 has acted as an accelerant, catapulting the world into a new economic regime. This new regime is characterised by the adoption of more interventionist policies to target explicitly political causes such as climate change or inequality. This blurring of the lines between monetary and fiscal policy will lead to higher economic and inflation volatility and marks a stark contrast to the benign period of the past 40 years.

However, we are currently enjoying an economic boom which may well extend into 2022. What is the recipe? Take one-part unleashed animal spirits as we exit lockdown, mix with accumulated lockdown savings, pour on lashings of stimulus - serve in a supply constrained glass.

The debate du jour is whether the current inflationary spurt we are living through is a symptom of this new economic regime or a transitory hangover from the supply and demand disruptions of the lockdowns. The scale and breadth of the inflationary impulse is stunning.

This is not a US phenomenon: global data is very similar. Wage pressures are everywhere, companies cannot get staff. McDonalds are paying candidates US$50 to attend interviews. Shortages are a key sign of inflation. The US administration has no sympathy for corporates: if you want workers back, pay them more - this is about levelling up and inequality too.

Used car prices, container shipping rates, house prices, hotel rates, the cost of eating out - the trend is clear, and it is up. Yet long term measures of inflation expectations remain anchored, the market is confident this impulse shall recede.

We think this 'transitory debate' misses the point entirely. Of course, house prices will not rise at 10-20% annualised forever. Inflation is simply a measure of the rate of change. If that delicious beer garden pint was £4.50 in 2019 and now it costs £6, it has inflated by 33%. Next year it might cost £6.25. The Bank of England might say "See! Inflation was transitory, it's only 4%, we told you!", but unless wages have risen by 39% since 2019, you should be feeling worse off.

We fully appreciate that due to base effects it is highly likely that as re-opening enthusiasm wanes inflation is likely to be lower next year. Technically, the transitory crew might be correct, but unless the beer reverts to £4.50, we would say it is 1-0 to the inflation hawks in the real world. The price level is what comes out of your pocket not the second derivative.

This is a febrile environment for a wage and demand spiral considering the context of vast ongoing quantitative easing and seemingly endless fiscal stimulus packages.

The big problem is if the inflationary genie is out of the bottle, how might policymakers get it back in?

The textbook response is that the central bank should raise interest rates. Realistically however, this tool is not available to today's cohort of central bankers for multiple reasons. Firstly, the burden of debt in the world is just too great to service at higher interest costs. Secondly, the political pressures to keep financial conditions supportive in aid of activist policy goals such as tackling climate change or inequality have only grown stronger. So, if these inflationary pressures prove more than transitory, we may realise for the first time in a few decades that central bankers are not omnipotent.

"No, Mr Bond, I expect you to die."

What are the portfolio implications of all this?

Despite global stock indices finishing the period at all-time highs, bond yields remaining low, credit spreads tight and property prices booming, we must re-emphasise how dangerous we believe the coming environment of inflation and volatility is for conventional portfolios.

Inflation changes the way cross-asset correlations behave. Today, the portfolio role of bonds is spent: their role as a hedge is suspect and they effectively guarantee investors will miss their return targets. Remind me why you own bonds?

We saw a glimpse of the future in Q1 2021 when the 30 year US Treasury, supposedly the safest asset in the world, fell by more than 20% for the first time ever.

Current inflation readings correlate to a US ten year bond yield of 5-6% not the current 1.5%. The evidence is the market is sanguine about any enduring inflation risks.

There is an asymmetry of risk, however. Bonds are a mathematically bounded asset class - returns are certain to be low, a best case of 1.5% over 10 years before any inflation risk. If inflation risks recede, then bond investors will earn a zero or slightly negative after inflation return. If inflation remains elevated, then the risks for bond owners are catastrophic. Heads you don't win much, tails you lose a lot. The US ten year yield moving to just 3% (where it was in 2018) would cause a loss of about 15% to bond holders.

Going further, investment grade credit paradoxically offers record low yields despite record levels of debt outstanding. The mathematics of bonds is such that at lower rates the duration increases. This asset class is vulnerable to even the smallest change in yields in response to a change in inflation, credit or term risk premiums. Just a 1% change in investor's required returns will wipe out seven years of coupon income in capital losses (see below).

How are we protecting our shareholder's capital?

The key takeaway is the traditional portfolio ballast in bonds is not just failing to protect, but is actively adding to overall risk. But if conventional hedges are not going to cut it in the new inflationary world, what else is there?

The benefit of being global, multi-asset, unbenchmarked investors is you can go anywhere and invest in anything. This flexibility is increasingly essential in a world where safe havens are so expensive they have become dangerous.

Inflation-linked bonds offer the natural bolthole for investors fleeing the tyranny of fixed income. At the period end we had 26% of the portfolio in these bonds, the key asset being 13% in long-dated UK inflation-linked gilts. The main driver for index-linked returns is the gap between inflation and bond yields. This is something we expect to widen significantly as inflation and growth accelerate, but bond yields remain pinned to the floor under the heavy boot of central bankers.

Gold continues to be a key asset for protection against rising inflation, financial repression and failing trust in institutions. In the last year, precious metals lost some limelight to bitcoin, but the relative stability in recent months has reminded investors of its attractions. We continue to think of the gold price as the inverse of the market's faith in central bankers' ability to micromanage the economy.

We believe for true protection we will need to rely upon the unconventional protective toolkit we have assembled in the last few years.

Credit protection proved its worth last March when these investments almost doubled. Being long credit spreads via Ruffer Multi-Strategies Fund 2015 continues to look a very attractive proposition. The risk/reward is highly skewed in our favour from the current starting point and from a portfolio perspective is almost certain to have a negative correlation to risk assets.

Payer swaptions offer the right, but not the obligation, to enter in a 'pay fixed, receive floating swap agreement'. In essence, an option which benefits from rising bond yields. Rising yields are a tough environment for most asset classes and that makes this a rare and potent protection.

Equity puts - we continue to utilise puts on indices as a direct hedge to manage risk and net exposure.

Other tools - although not currently of meaningful size in the portfolio we continue to monitor the VIX, relative value arbitrage, FX volatility and cryptocurrencies as tools for further protection and diversification.

We are also finding attractive investment opportunities in select real assets which are slightly off the beaten track - PRS Reit, Hipgnosis Songs Fund, Trident Royalties, Weiss Korea, Tufton Oceanic Assets and Taylor Maritime Investments all add something different to the portfolio.

Equities - there is currently one big duration trade going on in markets. Growth stocks are underpinned by the same low bond yield that makes conventional bonds an unattractive addition to the portfolio.

This dynamic is pervasive, reflecting a huge swathe of portfolios in the market and yet, as per bond prices, it could break down spectacularly if inflationary pressures persist. Some investors have bought into the siren-song that equities are an inflation hedge. Unfortunately, the facts do not support this, particularly from the current starting point.

The relationship between inflation versus price/earnings multiples is clear. Equities like low and stable inflation, as we have had in the last 30 years. Equities do not like deflation or higher inflation - both scenarios cause a de-rating of the market. This risk is particularly pernicious from the current starting point of the highest equity multiples on record.

To use a crude example, Microsoft may have the pricing power to pass on inflation but perhaps inflation adds an economic risk premium that takes the p/e multiple from the current 34x to 20x, where it was five years ago (a 40% drawdown). In 2012, Microsoft's P/E ratio was 10x.

Reality is more nuanced; there are many equities which could act as inflation hedge. We own many in the portfolio - banks, financials, energy stocks and commodity producers like Glencore or Yara.

The problem for passive or benchmarked investors is these stocks have withered to a small percentage of the index. If you own the index, you do not own enough of them to make a difference. In 1980 the energy sector, an obvious inflation beneficiary, was 28% of the S&P 500, in 2008 it was 15%, today it is 3% - the whole sector is about half as big as Apple.

The bull case for commodity stocks is simple. They are a pure beneficiary of higher global economic activity. The trends for growth, technology and ESG investing have left them unloved and lowly valued. The green transition, which we fully embrace and have encouraged our investee companies to embrace, has raised the cost of capital for these industries meaning there has been little new supply or capex for several years. But the demand picture is, perhaps counterintuitively, rather bright. Global oil demand is forecast to continue to grow for at least another five years and a green world requires fixed capital and commodity investment spent upfront. One cannot make an electric car or a smart grid without a lot of copper and cobalt (Glencore) or a significant amount of oil related products (BP, Royal Dutch Shell, Equinor). Therefore, the earnings for these stocks are potentially higher and more enduring than is currently factored into the price.

Our equity book continues to look nothing like the broader indices and the opportunity that presents excites us.

A note of caution

There are two quotes which keep wandering through our minds.

The first is from nineteenth century titan Lord Rothschild to "buy on the cannons and sell on the trumpets".

One of the great ironies about investing is that the best time to invest in risky assets is when everything seems utterly bleak, like March 2020. A more dangerous time to invest is when everything is going well and it seems obvious. At the end of June 2021, the US market completed seven consecutive days of new all time highs, a feat not completed since the dot.com bubble.

The second quote is Robert Louis Stevenson's accidentally sage investment advice when he acknowledged sometimes "it is better to travel hopefully, than arrive".

Just as the Coinbase IPO marked the recent top in bitcoin, perhaps 'freedom day' will mark the top in markets? That would be delightfully paradoxical. The truth is nobody knows, but we believe caution is warranted.

The Ruffer portfolio was flat when the market was down 30% at the March 2020 lows, we preserved capital in the crisis, and we have made around a 30% return since then. Since November 2020 markets have been pricing in a recovery and re-opening which has yet to fully materialise. There are clearly bubbles of exuberance in the economy and markets, trumpets if you will, that urge prudence and caution.

There is a battle of competing forces. On the one hand we have a spring of economic momentum, government and central bank support for markets and this is all underwritten by a sense that investors earning nothing on cash have no alternative but to invest.

On the other hand, ponder an economy drowning in debt unevenly staggering out of a huge recession with the looming threat of inflation because of a cocktail of supply chain bottlenecks, reduced capacity and trillions of stimulus. And that cocktail, if served up, will be negative for all asset markets.

Summary

Our key points are as follows

1      We have transitioned into a new economic regime of higher inflation and volatility

2      Conventional bonds no longer have a useful portfolio role

3      We are prepared with a broad toolkit of assets to protect against inflation and financial repression

4      After a huge recovery, some parts of the markets are showing signs of froth and caution is warranted

What we try to do at Ruffer is build an all-weather portfolio. One that offers our investors the antidote to bubbles and hysteria. We have forged our reputation by making money in the three major bear markets since the firm began in 1995 - dot.com, the financial crisis and then the covid crash.

When we see bubbles forming, our approach has always been to eschew the mania and try to find the assets people will panic into when the bubble pops. We owned no tech stocks in 2000 and we owned no banks or property stocks in 2008.

Sometimes what you do not own is just as important as what you do own and that's why being totally un-benchmarked and being truly multi-asset, go-anywhere global investors is so important as we pursue our capital preservation objective.

Asset allocation

	%		Top 10 equity holdings	%
Long-dated index-linked gilts	12.9		Lloyds Banking Group	2.6
Cash and other net current assets	10.3		Royal Dutch Shell	1.9
Short-dated bonds	8.5		BP	1.9
Illiquid strategies and options	7.5		NatWest Group	1.6
Non-UK index-linked	7.2		Centene	1.3
Gold and gold equities	6.6		GlaxoSmithKline	1.2
Index-linked gilts	5.6		Bristol-Myers Squibb	1.2
UK equities	20.1		Tesco	1.2
Japan equities	7.4		Cigna	1.1
North America equities	6.6		Sumitomo Mitsui Financial	1.0
Europe equities	5.7
Asia ex-Japan equities	0.6
Other equities	1.0

As at 30 June 2021.

Ruffer AIFM Limited

5 October 2021

Responsible investment report

At the Ruffer Group ("Ruffer"), we are committed to being good stewards of our investors' assets. To that end, environmental, social and governance (ESG) considerations are fully integrated into our investment process.

We have one investment approach and conduct our own research. This means we can systematically integrate ESG considerations across our whole research and investment process. Our ESG approach is designed to identify material risks and opportunities that could impact our investments. Our decision to invest in companies is based on both fundamental and ESG analysis and we use a wide range of data sources to inform our analysis.

Equally important, our investment approach is an iterative process, and our ESG analysis informs our active stewardship activities through engagement and voting.

Stewardship: voting and engagement

We believe stewardship activities can lead to lasting and meaningful change, resulting in better long-term outcomes for our investors and for broader stakeholders, the environment and society.

Engagement improves our understanding of the material ESG risks a company faces and hopefully helps those companies improve their performance. This is likely to result in superior outcomes and returns for our investors. We will engage independently or through collaborative initiatives, such as the Institutional Investors Group on Climate Change (IIGCC), Climate Action 100+ and the Investor Mining and Tailings Safety Initiative.

In 2020, we focused our engagements on the themes of climate change, lobbying (specifically, political contributions and trade association memberships), Japanese corporate governance and tailings dams.

In fixed-income, we invest predominantly in government bonds and we endeavour to engage in policy decision-making through industry bodies such as the IIGCC and the Investment Association, particularly on climate change issues. We have responded to multiple consultations in recent years in relation to the European Commission's Action Plan on Sustainable Finance, as well as the UK Treasury Select Committee's Decarbonisation Inquiry.

The progress of our engagement is incorporated into our investment theses and informs our investment decision-making and voting activity. Details of all our voting and engagement activity is disclosed on our website in our quarterly and annual Responsible Investment Report and Stewardship Report.

Voting policy

We take our voting responsibility seriously. The opportunity to vote enables us to encourage boards and management teams to consider and address areas that we are concerned about, along with those areas that we want to support. It is Ruffer's policy to vote on AGM and Extraordinary General Meeting resolutions, including shareholder resolutions and corporate actions, and we vote on all shareholdings in the companies held by Ruffer Investment Company Limited (RICL).

We have access to proxy voting research, currently from Institutional Shareholder Services (ISS) to assist in our decision-making process, but although we take note of proxy advisers' voting recommendations, we do not delegate or outsource our stewardship activities when deciding how to vote on our shareholdings.

Voting can also be seen as an escalation method, especially if the outcome of engagement is unsatisfactory. In 2020, we voted against management predominately on issues relating to the independence and effectiveness of directors, remuneration policies, capital structure and supported climate-related shareholders proposals.

We think it is of fundamental importance that the majority of board members are independent to provide a robust oversight of, and counterbalance to, a company's management. This issue is particularly significant in the mining sector, where we abstained on the re-election of directors at Kinross Gold and Wheaton Precious Metals, and we will be engaging with these companies on this issue.

On the topic of climate change, we supported two resolutions on Aena's climate transition plan which garnered shareholder and eventually board support.

Furthermore, we have engaged with ExxonMobil for a number of years on the company's approach to climate change, however due to limited progress being made, we voted against management guidance by supporting the nominations of three independent directors proposed by activist hedge fund, Engine No.1, as well as several shareholder resolutions. Sufficient shareholder support resulted in three likely appointments to the board: a profound wake-up call for ExxonMobil and a message to the industry to take investor concerns on climate change seriously.

We are likely to see more shareholder resolutions filed in 2021 on climate change and would expect to support them, particularly where we believe there are long-term performance implications for the businesses proactively addressing climate change-related risks.

Case studies

Case study 1: Volkswagen

Volkswagen (VW), which is headquartered in Germany, is one of the world's largest auto manufacturers.

Environmental and governance issues formed an integral part of our discussions on VW, both internally and with the company.

Electric vehicles (EVs) - given the importance of EVs for the company's strategy this was a key part of the investment case. We focused on the ambition for EVs within the company, the plans it has in place to meet internal targets and emissions regulations, and how remuneration and company culture is aligned to enable the long-term transition. VW detailed the targets it has set for vehicle production, the key partnerships it is establishing, how internal resources and investments are being allocated between the EV and traditional internal combustion engine (ICE) businesses, including re-skilling employees, and the commitment the company has made to not launch any ICE models in developed markets beyond 2026 (in line with the goals of the Paris Agreement).

Given VW's EV strategy and targets, we asked how this is linked to executive remuneration and we encouraged transparency in disclosing this information to shareholders. The company explained it plans to link executive remuneration with ESG factors and to provide improved disclosure of this in the future.

Corporate governance - the second theme we focused on was the 'Dieselgate' emissions scandal and the corporate governance implications. We discussed how the culture at VW has changed since this scandal and what initiatives have been put in place, both top-down and bottom-up. The company explained the evolution necessary for its long-term sustainability, such as a board level position for integrity and legal affairs, which encourages a 'speak up culture' across the business. On board structure, we raised concerns on the independence of the audit committee, given the length of tenure of two of the committee members and the fact that a controlling shareholder is also the Chair. The company acknowledged these issues, including the limitations of the dual board structure, and assured us this is being reviewed internally. We will continue to engage on these topics.

 

Case study 2: Land Securities

Land Securities is a leading UK real estate company.

Given the company's leadership on environmental sustainability in the sector, we began with a discussion on the drivers of its ambitions. The company explained that it sees sustainability as important both in terms of providing a competitive advantage and in terms of risk management. It has also been participating in various industry initiatives to drive changes at a sector level. We highlighted the importance of sharing best practices and encouraged the company to continue working with its peers and other stakeholders, including tenants, on sustainability efforts. Through our discussions, we also learnt more about the culture at the company and were encouraged to see sustainability embedded in the business processes, targets and remuneration.

The company recently improved its net-zero 2030 CO2 emissions reduction targets from 40% to 70% for its operational energy use and suggested that it will offset all other emissions. The company explained that the targets encompassed all operational aspects of the business, but some scope 3 emissions are excluded as the sourcing of energy by individual tenants is not always within its sphere of influence. These emissions are, however, included in its net-zero targets for 2030 and the company has also been increasing its engagement with these tenants to find potential areas of improvement. We also discussed green building certifications and encouraged the company to continue standing behind industry standards and certifications and encourage laggards to adopt these best practices.

Lobbying

Many companies will make political contributions and have trade association memberships as a way of lobbying governments around the world. It is important to us that a company has robust policies around this activity and that its lobbying is aligned with other ESG targets and ambitions.

In 2020, we engaged with several companies on increasing transparency around their lobbying activities, often building on discussions in 2018 and 2019, asking for public disclosure of political contributions and trade association memberships. Over 2020, we supported shareholder proposals at General Motors and Walt Disney asking for enhanced disclosure.

In response to previous shareholder resolutions in 2018 and 2019, Walt Disney has increased its disclosure of trading association membership, but included only the ones based in the US. When engaging with them, we stated clearly to the company that we were disappointed it has not expanded its analysis and that we would support the shareholder resolution at the 2020 AGM.

For General Motors whilst we acknowledge progress has been made since our discussions in 2019, we did not deem this sufficient. We noted our expectations of lobbying disclosure and stressed that we see this as an important issue for General Motors, given the industry in which it operates and the political environment in the US, and we will continue to engage on this topic.

Climate change

The effects of climate change can be felt in all regions of the world and thus stoke political tensions and intensify geopolitical instability. Markets don't yet seem to be accounting appropriately for these changes, which creates both risks and opportunities. At Ruffer, we consider climate change related risks and opportunities for all our investments.

Over the past year, we have intensified our engagements with companies on climate change to encourage them to adapt their business models to align with the transition to a low-carbon economy. We published our first Task Force on Climate-related Financial Disclosures (TCFD) report this year, which provides insight into our management of climate-related risks.

Climate change framework

Our commitment to reducing carbon emissions applies to our investee companies, Ruffer LLP, as well as RICL. Companies RICL invests in increasingly face risks from the physical aspects of the climate changing around us and from the policy and technological changes necessary to move to a net-zero carbon economy, known as 'physical' and 'transition' risks. These risks, if poorly managed, could harm our shareholders' investments. Careful and concerted management is essential, at both a portfolio and company level. The TCFD's recommendations help us to determine the nature, scale and management of climate-related risks and opportunities across sectors and geographies. Ruffer supports the Paris Agreement, and we advocate the transition to a low-carbon economy consistent with the goal of keeping the increase in global average temperature to well below 2°C.

Ruffer published its inaugural TCFD report in 2021 and this is available at ruffer.co.uk/responsible-investing. It introduces Ruffer's Climate Change Framework and provides a response to the recommendations of the TCFD. The report exhibits our climate-related activities over the past few years and provides an insight into how our understanding of the risks facing our investee companies has evolved. We have set targets for the year ahead, committing to a further strengthening of our approach in managing risk and identifying investment opportunities. These include increasing engagement activities on climate change and TCFD disclosure, encouraging hard-to-abate companies to join industry initiatives, integrating climate change scenario analysis into our investment risk process, and incorporating climate change analysis into overall portfolio thinking. This report is designed to provide detail and clarity to our approach, and to help our investors meet their reporting requirements.

In addition to considering the carbon footprint of the companies in which we invest, we also monitor the emissions from our own business. Since 2017, Ruffer LLP has commissioned South Pole to calculate the carbon footprint of its business. Through reducing emissions and purchasing carbon offsets we have been certified as carbon neutral since 2017.

ESG disclosures

Ruffer has been a signatory to the Principles for Responsible Investment (PRI) since 2016 and we have A+ scores for strategy and governance and A scores in listed equity incorporation and active ownership since 2018.

We are a Tier 1 signatory to the FRC's 2012 UK Stewardship Code and have submitted our response to the revised 2020 code in early 2021. Details are available at ruffer.co.uk/responsible-investing. We are members of Climate Action 100+ and the Institutional Investors Group on Climate Change as well as the Transition Pathway Initiative. In 2021 we also supported the launch of the Association of Investment Companies' (AIC) initiative for disclosure of the ESG policies of all investment companies - full details are available at theaic.co.uk.

 

Top ten holdings

Investments	Currency	Holding at 30 June 2021	Fair value £	% of total net assets
UK index-linked gilt 1.875% 22/11/2022	GBP	20,500,000	32,385,876	5.62
UK index-linked gilt 0.125% 22/03/2068	GBP	9,100,000	30,557,016	5.31
UK gilt 3.75% 07/09/2021	GBP	26,000,000	26,176,020	4.55
Ruffer Illiquid Multi Strategies Fund 2015*	GBP	29,930,171	24,456,899	4.24
UK index-linked gilt 0.125% 22/11/2065	GBP	8,100,000	24,153,776	4.20
LF Ruffer Gold Fund*	GBP	7,676,617	21,602,768	3.75
Ruffer SICAV UK Mid & Smaller Companies Fund*	GBP	73,147	21,563,627	3.73
US Treasury inflation indexed bond 0.625% 15/04/2023	USD	24,100,000	19,799,732	3.44
UK index-linked gilt 0.375% 22/03/2062	GBP	6,050,000	19,488,142	3.38
Ruffer Protection Strategies International*	GBP	5,935,102	18,488,436	3.21

*        Ruffer Illiquid Multi Strategies Fund 2015 Ltd and Ruffer Protection Strategies International are classed as related parties as they share the same Investment Manager (Ruffer AIFM Limited) as the Company. LF Ruffer Gold Fund and Ruffer SICAV UK Mid & Smaller Companies Fund are also classed as related parties as their investment manager (Ruffer LLP) is the parent of the Company's Investment Manager.

Directors

At the date of this report, the Company has five non-executive Directors, all of whom are independent.

Christopher Russell, aged 72 and a resident of Guernsey, is a non-executive director of investment and financial companies. These include Hanseatic Asset Management Ltd, a family office in Guernsey, and JPMorgan Global Core Real Estate Assets Ltd, a vehicle which invests in unlisted global JPMorgan real estate and infrastructure funds. Prior to a non-executive career, Chris was a director of Gartmore Investment Management plc, where he was Head of Gartmore's businesses in the US and Japan. Before that he was a holding board director of the Jardine Fleming Group in Asia, resident in Japan then Hong Kong. Prior to joining Flemings in London, he was with Phillips & Drew Asset Management. He is a Fellow of the UK Society of Investment Professionals and a Fellow of the Institute of Chartered Accountants in England and Wales. He was commissioned by John Wiley to publish in 2006 'Trustee Investment Strategy for Endowments and Foundations'. Mr. Russell was appointed to the Board on 1 December 2016 and became Chairman of the Board on 4 December 2020.

Shelagh Mason, aged 62 and a resident of Guernsey, is a solicitor specialising in English commercial property. She retired as a consultant with Collas Crill LLP in October 2020. She is also non-executive Chairman of the Channel Islands Property Fund Limited, sits on the Board of Riverside Capital PCC and Skipton International Limited, a Guernsey Licensed bank, and is a non-executive director of The Renewables Infrastructure Group Limited, a FTSE 250 company. Shelagh also sits on the board of Starwood European Real Estate Finance Limited, a London-listed company. Previously Shelagh was a member of the board of directors of Standard Life Investments Property Income Trust Limited, a property fund listed on the London Stock Exchange for 10 years until December 2014. She retired from the board of MedicX Fund Limited, a main market listed investment company investing in primary healthcare facilities in 2017 after 10 years on the board. She is a past Chairman of the Guernsey Branch of the Institute of Directors, a member of the Chamber of Commerce and the Guernsey International Legal Association, and she also holds the IOD Company Direction Certificate and Diploma with distinction. Mrs Mason was appointed to the Board on 1 June 2020.

Jill May, aged 60 and a resident of the United Kingdom, has 25 years' experience in investment banking, 13 years in M&A with S.G. Warburg & Co. Ltd. and 12 years as a Managing Director at UBS, focused on group strategy and organisational change. She has broad knowledge of investment banking, asset management and private banking in the UK and EMEA. She is an External Member of the Prudential Regulation Committee of the Bank of England and was a non-executive director of the CMA from its inception in 2013 until October 2016, and a Panel Member of the CMA until 2018. She is a non-executive director of JPMorgan Claverhouse, a UK listed investment trust, Standard Life Investments Property Income Trust, a UK-listed REIT, and of AlphaFMC, a UK-listed financial consulting company. Ms. May was appointed to the Board on 17 March 2017 and became Senior Independent Director on 4 December 2020.

David Staples, aged 64 and a resident of Guernsey, is a fellow of the Institute of Chartered Accountants in England and Wales and an associate of the Chartered Institute of Taxation. He also holds the Institute of Directors' Diploma in Company Direction. For thirteen years until 2003, Mr Staples was a partner with PricewaterhouseCoopers (PwC) and led the tax practice in the South East of England advising several large family and owner-managed businesses. He was also a member of the management board of the firm's London and South East Middle Markets Tax Practice. Since leaving PwC, Mr Staples has joined the boards of several listed companies as a non-executive director. He has served as chairman of MedicX Fund Limited and chairman of the audit committees of Henderson Far East Income Limited and Aberdeen Private Equity Fund Limited. He is currently a director of NB Global Monthly Income Fund Limited and Baker Steel Resources Trust Limited, both of which are listed on the London Stock Exchange. He is also a director and chairman of the general partners of six private equity funds advised by Apax Partners. Mr Staples was appointed to the Board on 2 March 2018.

Nicholas Pink, aged 53 and a resident of the United Kingdom, has extensive senior management experience in financial services with previous roles at UBS Investment Bank, including Global Head of Research, Head of European Research, Head of Asia Research and Head of European Equities. Prior to this he was Head of European Utilities Research at UBS Investment Bank. He is a non-executive director of JP Morgan Russian Securities plc, a UK-listed investment trust, and of Redburn Europe Limited, an independent provider of research and execution services to institutional investors. Mr Pink was appointed to the Board on 1 September 2020.
 

Report of the Directors

The Directors of the Company present the audited Financial Statements and their report for the year ended 30 June 2021 which have been prepared in accordance with the Companies (Guernsey) Law, 2008 ('the Company Law').

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.

Principal activity and investment objective

The Company is a Guernsey authorised closed-ended investment company with a premium listing on the London Stock Exchange (LSE). The principal objective of the Company is detailed in the Business Model and Strategy.

Block listing facility

The block listing facility is set out in note 13. During the year, 23,930,000 new redeemable participating preference shares were allotted or issued under the block listing facility (30 June 2020: no redeemable participating preference shares issued).

Purchase of own shares by the Company

The Company may purchase, subject to various terms as set out in its Articles and in accordance with the Companies (Guernsey) Law, 2008, up to 14.99%. of the Company's shares in issue following the admission of shares trading on the LSE's market for listed securities. For additional information refer to note 20.

The Company did not buy back any shares during the year (30 June 2020: Nil).

The Board also has the discretion to operate the Redemption Facility, offering shareholders the possibility of redeeming all or part of their shareholding for cash at NAV, if it appears appropriate to do so.

Results and dividends

The results for the year are set out in the Statement of Comprehensive Income. Details of dividends paid and proposed are set out in note 5.

Subsequent events

Events occurring after the balance sheet date are disclosed in note 21 in the Financial Statements.

Shareholder information

The Company announces its unaudited NAV on a weekly basis and at the month end. A monthly report on investment performance is published by the Company's Investment Manager, on the Company's website, ruffer.co.uk/ric.

Investment management

The key terms of the Investment Management Agreement and specifically the fee charged by the Investment Manager are set out in notes 8 and 16 of the Financial Statements

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 realising a positive total annual return, after all expenses, of at least twice the return of the Bank of England Bank Rate.

In accordance with Listing Rule 15.6.2 (2) R and having formally appraised the performance, investment strategy and resources of the Investment Manager, 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 terminated by the Investment Manager or the Company giving to the other party thereto not less than 12 months' notice in writing.

Directors

The details of the Directors of the Company during the year and at the date of this report are set out under the 'Directors' heading and in the Management and Administration summary.

Directors' interests

The details of the number of redeemable participating preference shares held beneficially by the Directors who held office at 30 June 2021 and up to the date of this report are set out on in note 16.

Substantial share interests

As at 31 August 2021*, the Company has received notifications in accordance with the FCA's Disclosure and Transparency Rule 5.1.2 R of the following interests in 3% or more of the voting rights attaching to the Company's issued shares.

Investor	Shares held	% of issued share capital
Rathbones	26,504,997	12.26
Brewin Dolphin, stockbrokers	19,493,975	9.01
Hargreaves Lansdown, stockbrokers	16,961,474	7.84
Interactive Investor	15,050,670	6.96
Tilney	12,153,987	5.62
Charles Stanley	11,159,950	5.16
AJ Bell	8,449,574	3.91

*Data is taken from the latest available Share Register Analysis produced by Richard Davies Investor Relations Limited

International tax reporting

For the purposes of the US Foreign Accounts Tax Compliance Act (FATCA), the Company registered with the US Internal Revenue Service (IRS) as a Guernsey reporting Foreign Financial Institution (FFI) in June 2014, received a Global Intermediary Identification Number (99DLPF.99999.SL.831), and can be found on the IRS FFI list.

The Common Reporting Standard (CRS) is a standard developed by the Organisation for Economic Co-operation and Development (OECD) and is a global approach to the automatic exchange of tax information, to counter tax evasion and to build upon other information-sharing legislation, such as FATCA. Guernsey has adopted the CRS, which came into effect on 1 January 2016.

The Board confirms that the Company's FATCA and CRS submissions for 2020 were submitted by the deadline of 30 June 2021.

The Company is committed to zero tolerance towards the facilitation of tax evasion.

Alternative Investment Fund Managers Directive

The Company is categorised as a non-EU Alternative Investment Fund (AIF). The AIFMD seeks to regulate managers of AIFs, such as the Company. It imposes obligations on AIFMs who manage AIFs in a member state of the European Economic Area (EEA state), or who market shares in AIFs to investors who are domiciled, or with a registered office, in an EEA state. Under the AIFMD, an AIFM must be appointed and must comply with various organisational, operational and transparency requirements.

The Company has appointed the Investment Manager to act as AIFM on behalf of the Company. The Investment Manager is responsible for fulfilling the role of the AIFM and ensuring the Company complies with the AIFMD requirements. The AIFM has no direct employees as it delegates its duties to Ruffer LLP. Ruffer LLP's employee remuneration disclosure requirements under the AIFMD are included in its Pillar III remuneration disclosure statement.

Non-mainstream Pooled Investments

The Company intends to be operated in such a manner that its shares are not categorised as non-mainstream pooled investments. Among other things, this requires the Company to pay dividends totalling in excess of 85% of any net income that it receives or is deemed to receive for UK tax purposes on an annual basis so that it would qualify as an investment trust if it were UK tax-resident.

Disclosure of information to the Independent Auditor

Each of the persons who is a Director at the date of approval of the Financial Statements confirms that

1       so far as each Director is aware, there is no relevant audit information of which the Company's Auditor is unaware and

2      each Director has taken all steps he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies (Guernsey) Law, 2008 ('company law').

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable Guernsey law and regulations.

Guernsey company law requires the Directors to prepare Financial Statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law.

Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Financial Statements, International Accounting Standard 1 requires that directors -

-      select suitable accounting policies and apply them consistently

-      make judgements and estimates that are reasonable, relevant and reliable

-      state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements

-      assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and

-      use the going concern basis of accounting, unless they either intend to liquidate the Company or cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with Company Law. 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.

The Directors are responsible for the oversight of the maintenance and integrity of the corporate and financial information included on the Company's website, ruffer.co.uk/ric. Legislation in Guernsey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge -

-      the Financial Statements have been prepared in conformity with IFRS as issued by the IASB and adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.1.12

-      the Annual Financial Report, taken as a whole, is fair, balanced and understandable and provide the information necessary for the shareholders to assess the Company's performance, business model and strategy and

-      the Annual Financial Report including information detailed in the Chairman's review, the Report of the Directors, the Investment Manager's report, the Report of the Depositary and the notes to the Financial Statements, includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces, as required by

a)    DTR 4.1.8 and DTR 4.1.9 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

b)    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.

On behalf of the Board

David Staples                                                                   

Director

5 October 2021

               

Corporate governance statement

Corporate governance

On 1 January 2016, the Company became a member of the Association of Investment Companies (AIC) and complies with the 2019 AIC Code of Corporate Governance issued in February 2019 ('the AIC Code'), effective for accounting periods commencing on or after 1 January 2019. By complying with the AIC Code, the Company is deemed to comply with both the UK and Guernsey Financial Services Commission (GFSC) corporate governance codes.

To ensure ongoing compliance with these principles the Board receives a report from the Company Secretary on an annual basis identifying how the Company is in compliance and identifying any changes that might be necessary.

The AIC Code is available on the AIC's website, theaic.co.uk.

The Board, having reviewed the AIC Code, considers that it has maintained procedures during the year ended 30 June 2021 and up to the date of this report to ensure that it complies with the AIC Code except as explained elsewhere in the Corporate Governance Statement.

Guernsey regulatory environment

The GFSC's Finance Sector Code of corporate governance ('the GFSC Code') comprises Principles and Guidance, and provides a formal expression of good corporate practice against which shareholders, boards and the GFSC can better assess the governance exercised over companies in Guernsey's finance sector. The GFSC recognises that the different nature, scale and complexity of business will lead to differing approaches to meeting the GFSC Code.

Role of the Board

The Board is the Company's governing body and has overall responsibility for ensuring the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring protection of investors. A summary of the Board's responsibilities is as follows -

-      statutory obligations and public disclosure

-      strategic matters and financial reporting

-      review of investment performance and associated matters

-      risk assessment and management including reporting compliance, governance, monitoring and control and

-      other matters having a material effect on the Company.

The Board's responsibilities for the Annual Report are set out in the Statement of Directors' Responsibilities.

The Board has contractually delegated responsibility for the management of its investment portfolio, the arrangement of custodial and depositary services and the provision of accounting and company secretarial services. The Board has adopted a schedule of matters specifically reserved for its decision-making and distinguishing these from matters it has delegated to the Company's key service providers. This schedule is available on the Company's website, ruffer.co.uk/ric.

The Board needs to ensure that the Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

In seeking to achieve this, the Directors have set out the Company's investment objective and strategy (see 'Business model and strategy') and have explained how the Board and its delegated Committees operate and how the Directors review the risk environment within which the Company operates and set appropriate risk controls. Furthermore, throughout the Financial Statements the Board has sought to provide further information to give shareholders a fair, balanced and understandable view.

Relations with shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Board receives regular reports on the views of its shareholders from the Company's Broker and Investment Manager which are taken into consideration as part of the Board's decision-making process.

The Chairman and other Directors are available to meet shareholders if required and the AGM of the Company provides a forum for shareholders to meet and discuss issues with the Directors of the Company.

The Chairman and Directors offer to meet with shareholders at regular investor presentations co-ordinated by the Investment Manager to discuss key strategic matters and any issues raised by shareholders. At present, due to covid-19 restrictions, these presentations are confined to on-line interactions rather than face-to-face meetings.

In addition, the Investment Manager maintains a website which contains comprehensive information, including financial reports, prospectus and monthly reports on investment performance which contains share price information, investment objectives, investment reports and investor contacts.

Stakeholders and Section 172

Whilst directly applicable to companies incorporated in the UK, the Board recognises the intention of the AIC Code that matters set out in section 172 of the Companies Act, 2006 are reported. The Board strives to understand the views of the Company's key stakeholders and to take these into consideration as part of its discussions and decision-making process. As an investment company the Company does not have any employees and conducts its core activities through third-party service providers. Each service provider has an established track record and is required to have in place suitable policies and procedures to ensure it maintains high standards of business conduct, treats customers fairly, and employs corporate governance best practice.

The Board's commitment to maintaining high-standards of corporate governance, combined with the Directors' duties incorporated in the Companies (Guernsey) Law, 2008, the Company's constitutive documents, the Disclosure Guidance and Transparency Rules and the Market Abuse Regulation, ensure that shareholders are provided with frequent and comprehensive information concerning the Company and its activities.

Whilst the primary duty of the Directors is owed to the Company as a whole, the Board considers as part of its decision-making process the interests of all stakeholders. Particular consideration is given to the continued alignment between the activities of the Company and those that contribute to delivering the Board's strategy, which include the Company's Investment Manager, the AIFM, the Administrator, the Broker and the Custodian.

Through the Board's ongoing programme of shareholder engagement (see 'Relations with shareholders' above) and the reports produced by each key service provider at quarterly Board meetings, the Directors are satisfied that sufficient information is provided so as to ensure the matters set out in section 172 of the Companies Act are taken into consideration as part of the Board's decision-making process.

The Board respects and welcomes the views of all stakeholders. Any queries or areas of concern regarding the Company's operations can be raised with the Company Secretary.

Composition and independence of the Board

The Board currently comprises five non-executive Directors, all of whom are considered to be independent. The Board considers that it has a good balance of skills and experience to ensure it operates effectively. The Directors of the Company are listed under the 'Directors' subheading, and in the Management and Administration summary.

The Company has no employees and therefore there is no requirement for a chief executive. None of the Directors has a contract of service with the Company.

The current Chairman of the Board is Mr Christopher Russell. Mr Russell was appointed as Chairman of the Board on 4 December 2020 following the retirement of Ashe Windham.

The Chairman of the Board must be independent for the purposes of Chapter 15 of the Listing Rules. Mr Russell is considered independent because he -

-         has no current or historical employment with the Investment Manager

-         has not provided any professional advisory services to the Investment Manager and

-         has no current directorships in any other investment funds managed by the Investment Manager.

As Chairman, Mr Russell is responsible for leading the Board of Directors and for ensuring its effectiveness in all aspects of its role. The key responsibilities of the Chairman are as follows -

-         meeting with major shareholders to obtain a balanced understanding of any issues, concerns, and providing feedback to the Board

-         demonstrating ethical leadership and promoting the highest standards of integrity, probity and corporate governance throughout the Company

-         setting the Board's agenda and ensuring the Board has in place effective decision-making processes which are supported by accurate and high-quality information and

-         leading the annual performance evaluation of the Board and taking all appropriate actions based on the results of the evaluation.

In accordance with the AIC Code and in recognition of the Board's desire to maintain high standards of corporate governance, the Board appointed Mrs Jill May as the Company's Senior Independent Director (SID) with effect from 4 December 2020.

The key roles and responsibilities of the SID are as follows -

-      providing support to the Chairman in relation to matters of Board effectiveness and governance

-      being available to shareholders and the other Directors as an additional point of contact or to communicate any concerns to the Board

-      leading the annual performance evaluation of the Chairman of the Board and succession planning for the Chairman's role and

-      attending meetings with major shareholders alongside the Chairman, as required.

The Board has engaged external companies to undertake the investment management, administrative and custodial activities of the Company. Documented contractual arrangements are in place with these companies which define the areas where the Board has delegated responsibility to them. For additional information refer to Internal Controls section of the Corporate Governance Statement .

The Company holds a minimum of four Board meetings per year to discuss strategy, general management, structure, finance, dividend payments, capital management, corporate governance, ESG matters, marketing, risk management, compliance and gearing, contracts and performance. The quarterly Board meetings are the principal source of regular information for the Board, enabling it to determine policy and to monitor performance, compliance and controls but these meetings are supplemented by communication and discussions throughout the year.

Representatives of the Investment Manager, Administrator and Company Secretary attend each Board meeting either in person or by videoconference, thus enabling the Board to fully discuss and review the Company's operations and performance. In addition, representatives from the Company's Broker attend at least two Board meetings a year. Each Director has direct access to the Investment Manager and Company Secretary and may at the expense of the Company seek independent professional advice on any matter.

Attendance at the Board and other meetings during the year was as follows -

	Board		Audit & Risk Committee		Management Engagement Committee
Meetings	Scheduled	Attended	Scheduled	Attended	Scheduled	Attended
Ashe Windham	2	2	2	2	-	-
Christopher Russell	4	4	3	3	1	1
Jill May	4	4	3	3	1	1
David Staples	4	4	3	3	1	1
Shelagh Mason	4	4	3	3	1	1
Nicholas Pink	4	4	3	3	1	1

Note: Relates to all meetings scheduled during each Director's term of office. Ashe Windham resigned as a Director on 4 December 2020.

In addition to the above meetings, a number of ad-hoc meetings of an administrative nature were held during the year. 

Conflicts of interest

Directors are required to disclose all actual and potential conflicts of interest as they arise for approval by the Board, who may impose restrictions or refuse to authorise conflicts. The process of consideration and, if appropriate, approval will be conducted only by those Directors with no material interest in the matter being considered. The Board maintains a Conflicts of Interest policy which is reviewed periodically and a Business Interests and Potential Conflicts of Interest Register which is reviewed by the Board at each quarterly Board meeting.

Directors' indemnity

Directors' and Officers' liability insurance cover is maintained by the Company on behalf of the Directors.

Re-election

The Company's Articles prescribe that, at each AGM, one-third of the Directors shall retire from office and may offer themselves for re-election. However, in line with best practice, the Board has determined that all of the Directors should stand for re-election at each AGM.

On 4 December 2020 at the 15th AGM of the Company, both Nicholas Pink and Shelagh Mason were elected as a Director, having been appointed as a Director since the previous AGM. Jill May, Christopher Russell and David Staples retired as Directors of the Company and, being eligible, had offered themselves for re-election, and were re-elected as Directors of the Company by the Shareholders.

With effect from 4 December 2020, the date of the 15th AGM of the Company, Ashe Windham retired as a Director and Christopher Russell replaced him as Chairman of the Board.

The Board remains satisfied that the individual contributions of each Director are, and will continue to be, important to the Company's long-term sustainable success. Accordingly, each of the Directors will be proposed for re-election at the 16th AGM of the Company to be held on 3 December 2021. Further details regarding the experience of each of the Directors are set out later in this Annual Report.

The Directors may at any time appoint any person to be a Director either to fill a vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until, and shall be eligible for election at, the next general meeting following their appointment but shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at that meeting if it is an AGM.

Board evaluation

Towards the end of the financial year, the Board engaged Lintstock, a firm highly experienced in conducting board evaluations, to facilitate an external evaluation of the Board, the Chairman and the Investment Manager. The Board evaluation considered a broad range of areas including; Board composition and expertise, Board dynamics, the structure of the Board and its Committees, Board oversight of investment strategy and performance, relations with shareholders, oversight of risk management, succession planning and priorities for change during the forthcoming financial year.

The Investment Manager evaluation considered the success of the Company's investment policy, benchmarking against a peer group, the Investment Manager's communication of strategy and performance to the Board, shareholder perception of the Investment Manager and priorities for change during the forthcoming financial year.

The results of the external evaluation were discussed at the Board meeting on 5 October 2021. The Board was identified as a well-functioning body, and areas identified for further consideration included: seeking deeper engagement with shareholders following the recent change of Chair and SID; and ensuring effective face-to-face meetings between the Board and Investment Manager in the post-covid-19 environment. The next externally facilitated Board evaluation will be conducted in relation to the financial year ending 30 June 2024.

During the financial years where an external evaluation is not conducted, the Board conducts an annual self-evaluation of its performance and that of the Company's individual Directors, which is led by the Chairman and, as regards the Chairman's performance evaluation, by the Senior Independent Director. The annual self-evaluation considers how the Board functions as a whole, taking into account the balance of skills, experience and length of service of each Director, and also reviews the individual performance of its members.

To facilitate the self-evaluation, the Company Secretary circulates a detailed questionnaire to each Director and a separate questionnaire for the evaluation of the Chairman. The questionnaires, once completed, are returned to the Company Secretary who collates responses, prepares a summary and discusses the Board evaluation with the Chairman prior to circulation to the remaining Board members. The performance of the Chairman is evaluated by the other Directors, led by the Senior Independent Director.

The Board considers the annual self-evaluation process to be appropriate having regard to the non-executive role of the Directors and the significant outsourcing of services by the Company to external providers.

Board succession planning

The Board considers it has a breadth of experience relevant to the Company, and the Directors believe that any changes to the Board's composition can be managed without undue disruption. An induction programme is in place for all Director appointees. Any proposals for a new Director are discussed and approved by the Board.

The Board's succession planning policy seeks to ensure that the Board remains well balanced and that the Directors have a sufficient level of skills, knowledge and experience to meet the needs of the Company. The Directors are ever-cognisant of the need for the Board to have a balance of gender and other attributes, including the requirement to appoint a majority of non-UK resident Directors.

Mr Christopher Russell was appointed as Chairman of the Board following Mr Ashe Windham's retirement at the AGM of the Company held on 4 December 2020. The Board's policy is that a Director of the Company, who subsequently becomes Chairman, should serve for no more than a total of 12 years.

Board diversity

The Board supports the recommendations of the Davies Report and notes the recommendations of the Parker review into ethnic diversity and the Hampton-Alexander review on gender balance in FTSE leadership. The Board supports the widening of its diversity, whilst ensuring the capabilities, experience and background of each member remain appropriate to the Company and continue to contribute to overall Board effectiveness.

Following the Board changes and Mr Windham's retirement during 2020, the Board is 40% female, thus meeting the Hampton-Alexander requirement that a Board should comprise at least 33% females.

Committees of the Board

The Board has established an Audit and Risk Committee and a Management Engagement Committee and approved their terms of reference, copies of which can be obtained from the Company Secretary upon request and on the Company's website at ruffer.co.uk/ric.

The table above sets out the number of Committee meetings held during the year ended 30 June 2021 and the number of such meetings attended by each Committee member.

Audit and Risk Committee

The Company has established an Audit and Risk Committee, with formally delegated duties and responsibilities within written terms of reference. The Audit and Risk Committee is comprised of the entire Board and has been chaired by David Staples since 1 July 2018. The Audit and Risk Committee meets formally at least three times a year and each meeting is attended by the independent Auditor and Administrator.

A report of the Audit and Risk Committee detailing responsibilities and activities is set out below.

Management Engagement Committee

The Company has established a Management Engagement Committee, with formally delegated duties and responsibilities within written terms of reference. The Management Engagement Committee is comprised of the entire Board, with Jill May appointed as Chairman. The Management Engagement Committee meets annually in June each year and holds ad hoc meetings to address any arising issues as required.

The principal duties of the Committee are to review the performance of and contractual arrangements with the Investment Manager and all other service providers to the Company (other than the independent Auditor).

During the year the Committee has reviewed the services provided by the Investment Manager and other service providers, and recommended that the continuing appointments of the Company's service providers was in the best interests of the Company. The last meeting was held on 2 June 2021.

A report of the Management Engagement Committee detailing responsibilities and activities during the year is set out below.

Nomination Committee

The Board does not have a separate Nomination Committee, the functions of which are fulfilled by the Board. Any proposals for a new Director are discussed and approved by the Board. The Board will determine whether an external search consultancy or open advertising is used in the appointments of future non-executive Directors.

Remuneration Committee

In view of its non-executive and independent nature, the Board considers that it is not appropriate to have a Remuneration Committee as anticipated by the UK Code because this function is carried out as part of the regular Board business. A Remuneration report prepared by the Board is set out below.

Internal control

The Company's risk exposure and the effectiveness of its risk management and internal control systems are reviewed by the Audit and Risk Committee at its meetings and annually by the Board.

The Board is responsible for establishing and maintaining the Company's system of internal controls 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. These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable. The Board uses a formal risk assessment matrix to identify and monitor business risks.

The Board has contractually delegated to external parties various functions as listed below. The duties of investment management, administration 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.

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.

Investment and portfolio risk management is provided by Ruffer AIFM Limited, a company authorised by the FCA.

Administration, accounting, registrar, and company secretarial duties are performed by Praxis Fund Services Limited, a company licensed and regulated by the Guernsey Financial Services Commission.

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

Depositary services performed by Northern Trust (Guernsey) Limited, a company licensed and regulated by the Guernsey Financial Services Commission.

Custodial services are provided by Northern Trust (Guernsey) Limited, a company licensed and regulated by the Guernsey Financial Services Commission.

Sponsorship and brokering services are provided by Investec Bank plc (Investec), a firm which is authorised and regulated by the FCA.

The Board reviews regularly the performance of the service companies. The Auditor is reviewed by the Audit Committee and the other service providers by the Management Engagement Committee (MEC) as described in the MEC report.

The Board meets formally with the Investment Manager quarterly to review the performance of the investments in the light of the Company's investment objectives, and the Investment Manager's position against its peers. The Board also conducts an annual visit to the offices of Ruffer LLP to meet with certain of the senior executives in the firm and to review such matters as its internal control procedures; Ruffer's business, product, marketing and personnel strategies, so far as they affect the Company; portfolio risk analysis; integration of ESG into portfolio construction; and cyber vulnerability. This visit took place online during the course of the financial year on 3 December 2020, but in person more recently on 4 October 2021.

The Board receives and reviews quarterly reports from the Investment Manager, the AIFM and the Administrator. In May 2021, the Audit and Risk Committee conducted a review of the internal controls of the Administrator, which was reported to the Board in June 2021. This included meeting with key staff from each relevant department and confirmation from the Administrator of its capability under its ISAE 3402 Type II audit report, as further disclosed in the report of the Audit and Risk Committee. The Management Engagement Committee conducted an annual review of all key service providers in June 2021, which was communicated to the Board, and included a detailed assessment of their performance along with completion of a questionnaires by each service provider regarding key areas including their control environment, business continuity and the impact of covid-19, cyber security arrangements and response to ESG, as further disclosed in the Management Engagement Committee report.

In common with most investment companies, the Company does not have an internal audit function. All of the Company's management functions are delegated to the Investment Manager and Administrator which have their own internal compliance and risk assessment functions. As such, an internal audit function specific to the Company is therefore considered unnecessary, as explained in the Audit and Risk Committee Report.

Principal risks and uncertainties

Principal risks and uncertainties are disclosed under the section titled Business model and strategy.

Anti-bribery and corruption

The Board acknowledges that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of The Bribery Act 2010, enacted in the UK, at the date of this report the Board had conducted a review of the perceived risks to the Company arising from bribery and corruption to identify aspects of business which may be improved to mitigate such risks. The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to carry out business fairly, honestly and openly.

Criminal Finances Act

The Board has a zero tolerance commitment to preventing persons associated with it from engaging in criminal facilitation of tax evasion and will not work with any service provider who does not demonstrate the same commitment. The Board has satisfied itself in relation to its key service providers that they have reasonable provisions in place to prevent the criminal facilitation of tax evasion by their own staff or any associated persons.

UK Modern Slavery Act

The Board acknowledges the requirement to provide information about human rights in accordance with the UK Modern Slavery Act. The Board conducts the business of the Company ethically and with integrity, and has a zero tolerance policy towards modern slavery in all its forms. As the Company has no employees, all its Directors are non-executive and all its functions are outsourced, there are no further disclosures to be made in respect of employees and human rights.