Issue of Equity

Ruffer Investment Company Limited 01 September 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN RUFFER INVESTMENT COMPANY LIMITED (a closed-ended investment company incorporated in Guernsey with registration number 41996) PLACING AND OFFER FOR SUBSCRIPTION OF UP £75 MILLION C SHARES PRELIMINARY RESULTS FOR THE PERIOD ENDED 30 JUNE 2005 Introduction On 14 July 2005, the Board announced proposals to raise up to £75 million by means of a placing and offer for subscription of C Shares. The Board has today published a Prospectus with details of the proposed C Share issue, a circular calling an Extraordinary General Meeting in connection with the C Share issue, and its annual report and accounts for the period ended 30 June 2005 (including a notice of Annual General Meeting). Background to and reasons for the Issue The Company was launched in July 2004. The objective of the Company is to achieve a positive total annual return, after all expenses, of at least twice the Bank of England base rate (4.5 per cent. as at 8 July 2004) by investing 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. Based on the published Net Asset Value of 112.4p as at 8 July 2005, being the first anniversary of the listing of the Company, the total annual return on the portfolio (net of fees and expenses) was 15.2 per cent. (inclusive of income) compared to the return objective of 9.46 per cent., being twice the time weighted Bank of England base rate over the period. The NAV per Share has risen from 98p immediately after launch to 113.90p per Share as at 26 August 2005. Since launch, the Share price has traded at a consistent premium to the NAV per Share. As at 26 August 2005, the NAV per Share was 113.90p compared to the closing middle market price of 115.25p, a premium of 1.19 per cent. In addition a dividend of 0.5p per Share was paid in respect of the period ended 31 December 2004 and a dividend of 0.5 per Share was declared on 1 September 2005 payable on 29 September 2005 to Shareholders as of the record date of 9 September 2005. The Directors, following discussions with the investment manager, Ruffer LLP, and in light of this excellent performance, have decided to increase the size of the Company through a C Share issue of up to 75 million shares to be issued at 100p per share. The proceeds of the Issue will be used to grow the Company and enhance long term returns for shareholders. The costs and expenses (including VAT where relevant) of, and incidental to, the Issue payable by the Company have been fixed at 2 per cent. of the Initial Gross Proceeds. Such expense will be met out of the proceeds of the Issue. In the event that the Issue expenses exceed 2 per cent. of the Initial Gross Proceeds, the excess will be paid by the Investment Manager and UBS (in the case of UBS only in so far as its commission fees are reduced from 1.5 per cent. to 1.25 per cent. of the Initial Gross Proceeds). In the event that the actual Issue expenses are less than 2 per cent. of the Initial Gross Proceeds the Investment Manager will at its discretion be entitled to be paid for its benefit the difference (or part thereof). In the event that the Issue does not proceed all costs and expenses (including VAT where relevant) of, and incidental to, the Issue shall be payable by the Investment Manager. In connection with the Issue, the Company is seeking the consent of existing Shareholders in order to adopt the New Articles to accommodate the rights of the C Shareholders, to increase the Company's authorised share capital, and to cancel the share premium account arising from the Issue. The C Shares will be offered to institutional investors by way of the Placing and to the public by way of the Offer for Subscription. Shareholders should be aware that implementation of the Issue is conditional upon approval of resolution no 1 to be proposed at the Extraordinary General Meeting. If the resolution is not approved, the Issue will not take place and the existing share capital structure will remain in place. Benefits of the Issue The issue of further equity in the form of C Shares is designed to overcome the potential disadvantages for both existing and new shareholders which would arise out of a conventional fixed price issue of further shares for cash. In particular: • the assets from time to time representing the proceeds of the Issue will be accounted for as a distinct pool of assets until the Calculation Time, by which time it is expected they will have been at least 80 per cent. invested in accordance with the Company's investment policy. As a result, holders of existing Shares will not be exposed to a portfolio containing substantial uninvested cash; • the Net Asset Value of the existing Shares will not be diluted by the expenses associated with the Issue which will be borne by the assets attributable to the C Shares; and • the basis upon which the C Shares issued under the Placing and Offer for Subscription will convert into Shares is Net Asset Value to Net Asset Value. That is to say, the number of New Shares to which holders of C Shares will become entitled will reflect the value of the pool of additional capital raised by the Issue as compared to the value of the remainder of the Company's assets. As a result, neither the Net Asset Value attributable to the existing Shares nor the Net Asset Value attributable to the C Shares will be adversely affected by Conversion. Shareholders should note that: the primary rationale for the fundraising is to grow the Company and to improve anticipated long term returns for Shareholders; all the costs of the C Share issue, which have been fixed at 2 per cent. of the proceeds of the Issue, will be borne by the C Shareholders; enlarging the Company will mean the fixed costs of operating the Company are spread across a greater number of assets; and broadening the spread of shareholders within the Company should add further diversification to the shareholder list and provide a larger free float. C Shares The Board is proposing to effect the capital raising exercise by way of an issue of C Shares pursuant to the Placing and Offer for Subscription. On the assumption that the Issue is fully subscribed, the net proceeds of the Issue will be £73.5 million. Once the proceeds of the Issue have been at least 80 per cent. invested, the C Shares issued under the Placing and Offer for Subscription will convert into Shares on the basis of the Conversion Ratio, which will reflect the proportion which the Company's net assets attributable to each C Share bears to the net assets attributable to each existing Share at the Calculation Time. The net assets of the C Shares issued under the Placing and Offer for Subscription will be calculated having deducted the costs of the Placing and Offer for Subscription. The net proceeds of the Issue and the assets representing the net proceeds of the Issue will be accounted for as a separate pool until they have been at least 80 per cent. invested in accordance with the Company's investment policy, at which point the C Shares issued under the Placing and Offer for Subscription will convert into Shares on the basis referred to above. The Directors expect that Conversion of the C Shares will take place by the end of October 2005. The C Shares will carry the same voting rights as the Shares. C Shareholders will have the rights to dividends and be entitled to participate in a winding-up of the Company or on a return of capital as specified in the Prospectus. The new Shares issued on Conversion will rank pari passu with the existing Shares then in issue. Fractions of Shares arising on Conversion will not be allocated to C Shareholders but will be aggregated and sold for the benefit of the Company. Further details in respect of the C Shares are set out in the Prospectus including, in particular, the full terms and conditions of the C Shares. Adoption of the New Articles of Association and increase in Authorised Share Capital. In order for the Company to effect the issue of C Shares (and any further issues of C Shares), certain amendments must be made to the Existing Articles of Association and the authorised share capital of the Company increased by the creation of the C Shares. Consequently, the Board has called the Extraordinary General Meeting at which the Resolutions to be proposed will, amongst other things, increase the authorised share capital of the Company by the creation of 75,000,000 C Shares and adopt the new Articles of Association of the Company which will include provisions reflecting the rights and restrictions attaching to the C Shares (which may be issued in one or more tranches). These, together with other minor consequential changes necessitated by the issue of C Shares and to permit any future issues of C Shares, are the only changes from the Existing Articles. Capital Structure Subject to the passing of the Resolutions, the Company's issued listed share capital will consist of Shares and C Shares, pending Conversion of the C Shares into new Shares. Under the Existing Articles and the New Articles, the Directors have wide powers to issue further shares on a non pre-emptive basis. The Directors will consider issuing further shares at not less than the prevailing Net Asset Value per Share where there is significant demand for further shares and as part of the process of managing any premium which may arise in the market price of the Shares as compared to the prevailing Net Asset Value per Share. In particular the Company may issue further C Shares on a non pre-emptive basis. Cancellation of Share Premium Account Conditional on Admission, it is proposed, subject to Shareholder approval at the Extraordinary General Meeting and confirmation by the Royal Court of Guernsey, to cancel the entire amount of the share premium account arising on the issue of C Shares pursuant to the Placing and Offer for Subscription in order to provide the Company with increased flexibility to effect future purchases of its own Shares. The Company has no intention of using the special reserve arising on the cancellation of the share premium account to make market purchases of its own C Shares. Extraordinary General Meeting The Placing and Offer for Subscription and the commencement of dealings in C Shares are conditional, inter alia, on the passing of Resolution no.1 in the notice of Extraordinary General Meeting set out in the shareholder circular. The Resolutions propose that: • the New Articles be adopted in substitution for, and to the exclusion of, the existing Articles; and the capital of the Company be increased by the creation of 75,000,000 C Shares; and • conditionally upon the issue of C Shares by the Company pursuant to the Placing and Offer for Subscription, the payment in full thereof and with the approval of the Royal Court of Guernsey, the amount standing to the credit of the share premium account of the Company immediately following the issue of the C Shares pursuant to the Placing and Offer for Subscription be cancelled. Recommendation The Board, who have received financial advice from UBS, consider that the terms of the Proposals are fair and reasonable. The Board further considers that the terms of the Proposals are in the best interests of Shareholders as a whole. Accordingly, the Board has unanimously recommended Shareholders to vote in favour of the Resolutions to be proposed at the EGM. In providing its advice, UBS relied upon the Directors' commercial assessment of the Proposals. If Shareholders are in any doubt about the contents of the shareholder circular, the Prospectus or what action they should take, they are recommended to seek immediately their own personal financial advice from an appropriately qualified independent adviser authorised pursuant to the Financial Services and Markets Act 2000. The Directors intend to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting in respect of their entire shareholdings of 50,000 Shares representing 0.1 per cent. of the total number of issued Shares. Preliminary results for the period ended 30 June 2005 Chairman's Review Performance The Company's investment portfolio earned a total return, after all expenses, more than 5 per cent. above the objective of 'at least twice the average of the Bank of England's Base Rate' in the period to 30 June 2005. Details are given in the Investment Manager's Report. Earnings and Dividend Earnings for the period were 13.67p per share in total, of which 1.15p relates to Revenue. An interim dividend of 0.5p per share was paid on 13 April 2005. A second interim dividend is expected to be declared in September in respect of the period ended 30 June 2005. Share Price Throughout the period the shares traded at a premium to their Net Asset Value (NAV). At 30 June 2005 the premium was 1.6 per cent. over the Net Asset Value. Share Buyback Authority With its shares trading at a premium to NAV throughout the period, the Company had no need to use its share buyback authority. However, renewal of the authority will be sought at the Annual General Meeting with a view to enabling the directors to minimise any discount to NAV at which the shares may trade in the future. 'C' Share Issue In light of the Company's performance and following discussions with our Investment Manager, the Directors have decided to propose to shareholders that the size of the Company be increased by the issue of up to 75 million shares at NAV. The expenses of this issue will fall solely on the new shareholders. Existing shareholders will benefit from the fixed costs of management being spread over a broader base. The Directors think that all shareholders will benefit from the greater liquidity in the shares which is likely to result, and from a wider shareholder base. Shareholder approval will be sought at an Extraordinary General Meeting immediately following the Company's first Annual General Meeting. Annual General Meeting The Annual General Meeting of the Company will be held on 23 September 2005 at the Company's registered office at Trafalgar Court, St Peter Port, Guernsey. Acknowledgements I would like to thank my colleagues on the Board for their hard work; Ruffer LLP for an eminently satisfactory investment performance; Guernsey International Fund Managers - our Company Secretary, Administrator and Registrar - for their efficiency; and UBS - our brokers and financial advisors - for their skilful advice. I particularly wish to thank our shareholders for their confidence. John de Havilland Chairman 18 July 2005 Investment Manager's Report For the period ended 30 June 2005 Investment Objective The principal objective of the Company is to achieve a positive total annual return, after all expenses, of at least twice the Bank of England base rate (4.75 per cent. as at 30 June 2005) by investing 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 Review From the launch date on 8 July 2004 to 30 June 2005 the NAV rose 15 per cent. (net of fees and expenses and inclusive of a 0.5p dividend paid on 13 April 2005), compared to the objective return of 9.46 per cent., being twice the time weighted Bank of England base rate over the period. We come to the end of the first year of the life of the investment company reasonably satisfied with the performance. Every aspect of the portfolio - short /medium dated gilts, Swiss bonds, Japan and oil have each played a significant part in producing the return, and their good work has not been undone by any egregious mistakes in stock selection. In the interim report as at December, we articulated the fear that the world could be facing something of a financial crisis. We addressed the question of timing by saying that this could be something that could either happen quite quickly, or be long delayed. Six months on it still has not happened. We further raised the possibility that the prediction of a financial crisis could be quite wrong. What we have tried to do within the investment company is to create a balance of assets designed to bring about a decent return under any of these possible outcomes. We have not changed the shape of the portfolio very much since then. The short/ medium gilts are down to about 30 per cent. of the portfolio, and the Swiss Franc denominated bonds up to about the same percentage. The long dated Swiss bonds have been crackers, but the performance has been almost entirely in the underlying bond prices, and nothing at all to do with the Swiss Franc. We have added to the Swiss Franc exposure by purchasing a Swiss Franc denominated short dated Austrian bond because we think that the balance of reward should now come in the currency rather than bond levels. On the bear side, we have an investment in a US Bear Note (about 7 per cent. of the portfolio) which is a structured product created for Ruffer LLP by Barclays Capital, which gives an assured protection of the capital value on maturity (September 2009), and which is designed to give a capital gain if the US equity market (S&P 500) were to fall (it is quanto'd back into Sterling). We have left the oil party somewhat too soon, letting Statoil go at considerably lower levels than today, Sasol at somewhat lower levels, and Suncor Energy at around current levels. We believe the oil story remains excellent, but is increasingly understood. There has been a long but loose relationship between the oil price and the gold price, and we have used the strength in oil to reinforce slightly the investment in gold mining shares. Newcrest Mining is doing well; Lihir Gold and Coeur D'Alene Mine are slightly above the purchase price. Individual European stocks have done well for us, with the exception of Swisscom - the latter largely because of a poor timing on the currency. We are particularly keen on Raisio. Among the UK equities, BT Group stands out as being the biggest single equity holding in the portfolio (it is 5 per cent. of the portfolio). We are comfortable with this weighting. UK equities represent about 12 per cent. of the portfolio and largely a mixture of specific stories with little, if any, common underlying themes. We have the same percentage of the portfolio in Japan, but there the stocks are much more representative of the themes which commend its attraction to us: asset price reflation (hence the railway companies) and a resurgence of rising prices as a result of currency compromise. These are effectively the same play, with the former being the benign side of the sixpence, and the latter the silver lining to what would be a fairly dark cloud. Ruffer LLP 5 July 2005 Top Ten Holdings As at 30 June 2005 Holding at Market % of 30.06.05 Value Total Net £ Assets Treasury 4% 07/03/2009 4,900,000 4,893,831 8.75 Treasury 5% 07/03/2008 4,600,000 4,712,792 8.43 Switzerland (Govt.) 4% 08/04/2028 8,240,000 4,557,244 8.15 Switzerland (Govt.) 3 1/2% 08/04/2033 8,800,000 4,543,135 8.12 Austria 3% 21/08/2009 9,750,000 4,538,932 8.11 Barclays Bank 0% 16/09/2009 Bear Note S&P 4,000,000 4,002,000 7.15 Switzerland (Govt.) 4% 06/01/2049 6,400,000 3,553,543 6.35 BT Group 1,200,000 2,757,000 4.93 Treasury 5 3/4% 07/12/2009 2,250,000 2,402,932 4.30 Japan Tobacco 320 2,384,436 4.26 Balance Sheet As at 30 June 2005 30.06.05 £ ASSETS Cash and cash equivalents 138,396 Receivables 699,050 Financial assets at fair value through profit or loss 55,562,965 ---------- Total Assets 56,400,411 ---------- EQUITY Capital and reserves attributable to the Company's shareholders Management share capital 2 Net assets attributable to holders of redeemable participating preference shares 55,935,077 ---------- Total Equity 55,935,079 ---------- LIABILITIES Payables 465,332 ---------- Total Liabilities 465,332 ---------- ---------- Total Equity and Liabilities 56,400,411 ---------- Net assets attributable to holders of redeemable participating preference shares (per share) 1.119 ---------- Statement of Operations For the period 1 June 2004 to 30 June 2005 01.06.04 to 30.06.05 Revenue Capital Total £ £ £ Bank interest income 198,573 - 198,573 Fixed interest income 1,099,072 - 1,099,072 Dividend income 332,244 - 332,244 Net gains on financial assets at fair value through profit or loss - 6,305,405 6,305,405 Other gains/(losses) (22,303) 341,295 318,992 -------- -------- --------- Total investment income 1,607,586 6,646,700 8,254,286 -------- -------- --------- Management fees (128,934) (386,799) (515,733) Expenses (759,793) (59) (759,852) -------- -------- --------- Total operating expenses (888,727) (386,858) (1,275,585) -------- -------- --------- -------- -------- --------- Operating profit before taxation 718,859 6,259,842 6,978,701 -------- -------- --------- Withholding tax (143,624) - (143,624) Operating profit after taxation and increase in net assets attributable to holders of -------- -------- --------- redeemable particpating preference shares 575,235 6,259,842 6,835,077 -------- -------- --------- Earnings per share * 1.15p 12.52p 13.67p * Earnings per share is based on the weighted average number of redeemable participating preference shares. There being no change in the number of shares in issue during the period, the weighted average number of shares for the period is 50,000,000. Statement of Changes in Equity For the period from 1 June 2004 to 30 June 2005 01.06.04 to 30.06.05 Net assets attributable to holders of redeemable participating preference shares at the start of the period - ---------- Movement due to issues and redemptions of shares Proceeds from redeemable participating preference shares issued 49,350,000 Redemption of redeemable participating preference shares - ---------- Net increase from share transactions 49,350,000 ---------- Increase in net assets attributable to holders of redeemable participating preference shares from operations 6,835,077 Distributions to holders of redeemable participating preference shares (250,000) Increase in net assets attributable to holders of redeemable ---------- participating preference shares from operations (after distributions) 6,585,077 ---------- Net assets attributable to holders of redeemable participating preference shares at the end of the period 55,935,077 ---------- Cash Flow Statement For the period from 1 June 2004 to 30 June 2005 01.06.04 to 30.06.05 £ Cash flows from operating activities Purchase of financial assets and settlement of financial liabilities (68,344,103) Proceeds from sale of investments (including realised gains) 19,087,977 Amounts paid to brokers (134,210) Bank interest received 198,573 Fixed interest income received 681,153 Dividends received 305,847 Withholding tax (151,204) Operating expenses paid (833,291) ---------- Net cash utilised in operating activities (49,189,258) ---------- Cash flows from financing activities Dividends paid (250,000) Proceeds from issue of redeemable participating preference shares 50,000,000 Issue expenses relating to issue of redeemable participating (650,000) Preference shares ---------- Net cash flow from financing activities 49,100,000 ---------- Net decrease in cash and cash equivalents (89,258) Cash and cash equivalents at beginning of period - Exchange gains on cash and cash equivalents 227,654 ---------- Cash and cash equivalents at end of period 138,396 ---------- Dividend Declaration The Directors, have declared that a second interim dividend of 0.5p be payable in respect of the period ended 30 June 2005. Timetable Declaration of dividend for the six months ended 30 June 2005 1 September 2005 Offer for Subscription opens 1 September 2005 Ex-dividend date 7 September 2005 Record date for dividend 9 September 2005 Latest time and date for receipt of Placing commitments 5pm on 22 September 2005 Latest time and date for receipt of Application forms under the Offer for Subscription 5pm on 22 September 2005 Annual General Meeting 11am on 23 September 2005 Extraordinary General Meeting to approve Issue 11.10am on 23 September 2005 Results of Placing and Offer for Subscription announced 26 September 2005 Dealings in C Shares commence 8am on 29 September 2005 Crediting of CREST accounts pursuant to the Issue 29 September 2005 Share certificate despatched week commencing 3 October 2005 C Shares expected to convert into Shares By end October 2005 A copy of the Prospectus, circular and annual report and accounts referred to in this announcement has been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at: Financial Services Authority 25 The North Colonnade Canary Wharf London, E14 5HS Enquiries Ruffer LLP Jonathan Ruffer 020 7529 7900 Steve Russell 020 7529 7900 UBS Limited Charlie Ricketts 020 7568 4781 Will Rogers 020 7568 2939 This announcement is not for distribution directly or indirectly in or into the United States, Canada, Australia or Japan. This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire C Shares in the capital of Ruffer Investment Company Limited in the United States, Canada, Australia or Japan or any jurisdiction in which such an offer or solicitation is unlawful. The C Shares in Ruffer Investment Company Limited referred to in this announcement have not been and will not be registered under the Securities Act and may not be offered or sold within the United States absent registration or an exemption from registration. No public offering of securities will be made in the United States, Canada or Australia or Japan. This announcement has been communicated by Ruffer Investment Company limited which is authorised and regulated in the United Kingdom by the Financial Services Authority and does not constitute an offer to sell or a solicitation of an offer to purchase any securities. The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares. There is no guarantee that the market price of shares in Ruffer Investment Company Limited will fully reflect their underlying NAV. UBS Limited is acting exclusively for Ruffer Investment Company Limited and no one else in connection with the Placing and Offer for Subscription and will not be responsible to anyone other than Ruffer Investment Company Limited for providing the protections afforded to clients of UBS Limited nor for providing any advice in relation to the Placing and Offer for Subscription or any other matters referred to in this press announcement. This information is provided by RNS The company news service from the London Stock Exchange

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