Ruffer Investment Company
Limited
LEI:21380068AHZKY7MKNO47
(Classified Regulated Information, under DTR 6 Annex 1 section
2.5)
ANNUAL FINANCIAL REPORT
The Company has today, in accordance with DTR 6.3.5, released
its Annual Financial Report for the year ended 30 June 2017. The Report will shortly be
available via the Company's Investment Manager’s website
www.ruffer.co.uk and will shortly be available for
inspection online at www.hemscott.com/nsm.do
website.
Key Performance Indicators*
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30.06.17 |
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30.06.16 |
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Share
price total return over 12 months** |
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12.90% |
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(3.50%) |
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Annualised
NAV total return per share over 12 months |
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8.75% |
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(1.00%) |
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Premium/(discount) of share price to NAV |
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3.04% |
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(0.94%) |
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Dividends per
share |
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2.6p |
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3.4p |
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Dividend yield |
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1.10% |
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1.60% |
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Annualised
total return per share since launch |
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8.35% |
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8.32% |
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Ongoing charges
ratio |
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1.18% |
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1.18% |
Financial Highlights
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30.06.17 |
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30.06.16 |
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Share price at year
end |
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236.00p |
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209.00p |
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NAV at year
end*** |
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£376,116,913 |
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£331,954,470 |
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Market capitalisation
at year end |
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£387,543,662 |
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£325,702,289 |
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Number of
shares in issue at year end |
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164,213,416 |
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155,838,416 |
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NAV per
share at year end as reported to the LSE**** |
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229.04p |
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213.01p |
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NAV per
share at year end as calculated on an IFRS basis |
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228.73p |
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212.70p |
Company Information
Incorporation Date |
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01.06.04 |
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Launch Date |
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08.07.04 |
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Launch Price |
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100p per share |
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Initial Net Asset Value |
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98p per share |
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Accounting dates |
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Interim |
Final |
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31 December |
30 June |
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(Unaudited) |
(Audited) |
† The price an investor
would have paid at the close of trading in the market (London Stock
Exchange (“LSE”)).
* Figures use NAV per share
at mid-market prices as reported to the LSE.
** Assumes reinvestment of
dividends.
*** This is the NAV as released on the London Stock
Exchange (“LSE”) on 30 June each year.
**** This is the Net Asset Value (“NAV”) per share
using International Financial Reporting Standards. The NAV is
calculated weekly and at month end. Refer to note 14 for the NAV
reconciliation.
Company Performance
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Price |
Change in |
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at 30.06.17 |
Bid Price |
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Bid |
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Offer |
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From |
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From |
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Price |
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Price |
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Launch |
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30.06.16 |
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% |
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% |
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Redeemable
participating preference shares |
235.00p |
|
237.00p |
|
+
135.00 |
|
+
12.44 |
Prices are published in the Financial Times in the “Investment
Companies” section, and in the Daily Telegraph’s “Share Prices
& Market Capitalisations” section under “Investment
Trusts”.
Fund Size
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Accounting |
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Net
Asset |
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Net
Asset |
Number of |
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Period
to: |
|
Value |
|
Value
per Share |
Shares In Issue |
|
|
30.06.17 |
|
£375,601,706 |
|
228.73p |
* |
164,213,416 |
|
|
30.06.16 |
|
£331,484,744 |
|
212.71p |
|
155,838,416 |
|
|
30.06.15 |
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£337,222,401 |
|
218.39p |
|
154,413,416 |
|
|
30.06.14 |
|
£318,040,568 |
|
206.50p |
|
154,013,416 |
|
|
30.06.13 |
|
£319,114,093 |
|
213.90p |
|
149,188,416 |
|
|
30.06.12 |
|
£270,884,661 |
|
191.45p |
|
141,488,416 |
* Net Asset Value per share reported to the London
Stock Exchange was £2.290 using mid market values. Bid prices
are presented as fair value in the Financial Statements.
Share Price Range
|
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Accounting |
|
|
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Highest |
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Lowest |
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Period
to: |
|
|
|
Offer
Price |
|
Bid
Price |
|
|
30.06.17 |
|
|
|
241.00p |
|
211.00p |
|
|
30.06.16 |
|
|
|
225.00p |
|
195.00p |
|
|
30.06.15 |
|
|
|
226.00p |
|
194.30p |
|
|
30.06.14 |
|
|
|
229.00p |
|
200.50p |
|
|
30.06.13 |
|
|
|
231.00p |
|
191.50p |
|
|
30.06.12 |
|
|
|
207.00p |
|
190.00p |
Net Asset Value Range
|
|
Accounting |
|
|
|
Highest |
|
Lowest |
|
|
Period
to: |
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|
|
NAV |
|
NAV |
|
|
30.06.17 |
|
|
|
233.40p |
|
213.00p |
|
|
30.06.16 |
|
|
|
219.90p |
|
196.20p |
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|
30.06.15 |
|
|
|
224.30p |
|
204.10p |
|
|
30.06.14 |
|
|
|
220.60p |
|
203.40p |
|
|
30.06.13 |
|
|
|
220.80p |
|
190.30p |
|
|
30.06.12 |
|
|
|
199.10p |
|
187.10p |
Past performance is not a guide to
the future. The value of the shares and the income from them can go
down as well as up and you may not get back the amount originally
invested.
Chairman’s
Review
If you are experiencing a sense of deja vu it is because, for
the first time in this Company’s thirteen year history, we released
an abbreviated, unaudited set of Accounts for the year to
30 June 2017 on 21 July 2017. The Directors wanted to do this so
as to give the Company’s shareholders a more timely look at the
highlights for the year rather than waiting almost another eight
weeks for the fully audited Accounts. As it happens there have been
no material changes to the figures released on 21 July.
Performance
In the twelve months from 1 July
2016 to 30 June 2017, the net
asset value (NAV) per share of the Company rose from 213.01p* to
229.04p*. Adding dividends of 2.6p paid during the period, this
equates to a NAV total return of 8.75%. The target return being
twice the Bank of England base rate, was 0.5% over the period and,
by way of context, the FTSE All-Share Total Return Index rose by
18.1%. We regard this as a satisfactory result given the defensive
positioning of the Company in the last 12 months and it is in line
with the average annual rate of total return since launch on
8 July 2004 (8.4%).
The start of your Company’s financial year came just 6 days
after the unexpected Brexit referendum result. The performance over
the first six months until 31 December
2016 was very impressive given the choppy state of
post-Brexit markets, further agitated by the announcement of
President Trump’s election on 9 November
2016. The NAV rose from 213.01p to 228.98p and relatively
little of this appreciation came from currency translation
effects. From 1 January 2017
until 30 June 2017 progress was much
more pedestrian with a NAV total return of 0.4%.
Since launch, the NAV of the Company has risen by 183.5%
including dividends, compared with a rise of 68% in the target
return and 190.1% in the FTSE All-Share Total Return
index.
*This is the NAV as released on the London Stock Exchange
(“LSE”) on 30 June each year.
Earnings and Dividends
Earnings for the year were 2.23p per share on the revenue
account and 15.91p per share on the capital account. Earnings from
the revenue account remain depressed owing to the heavy weighting
in index-linked securities, illiquid strategy funds, gold and gold
equities, most of which yield next to nothing. As forewarned in the
Chairman’s Review of 30 June 2016,
the Company’s investment portfolio was generating less income than
it had been distributing and the Directors had, until February 2017, called upon income reserves to
help meet dividend payments. Given that the Company’s primary
objective is one of capital preservation, the Board decided on 28
February not to make a distribution from capital profit, but
instead to reduce the dividend to a more sustainable level. This
has allowed the Investment Manager to maintain full flexibility to
pursue our absolute return strategy without having to worry about
the yields of the selected assets. The new policy
re-emphasises that income is a by-product of Ruffer’s total return
investment philosophy, which does not put capital at excessive risk
in the pursuit of income. The Directors consequently cut the
interim dividend from 1.7p to 0.9p per share on 28 February 2017. It is hoped that a total annual
dividend of 1.8p will be sustainable, but the Directors will not
hesitate to reduce the dividend again should this prove necessary
to preserve capital. As far as setting the dividend is concerned
the directors consider their responsibility to be allowing the
Investment Manager maximum flexibility to follow whichever course
will lead to the best results for our shareholders.
Strategy
The Company’s objective remains primarily one of capital
preservation and, in terms of a benchmark, we remain committed to
achieving a positive total annual return, after all expenses, of at
least twice the Bank of England base rate. Naturally, given that
the base rate stands at a multi-century low of 0.25%, your
Directors have debated adjusting the benchmark. Given that
this company presents itself to investors as ‘a slice of Ruffer’
that would necessarily mean Ruffer changing its benchmark. Although
your directors are wholly independent, they are realistic enough to
acknowledge that this tail will not wag the Ruffer dog, not that
the tail necessarily sees any great benefit to adjusting its
target! Ruffer’s primary objective has always been one of capital
preservation and this remains the case.
The Directors accept that, as Jonathan Ruffer has regularly
pointed out in his excellent quarterly reports, the next crisis
will be very difficult to navigate and losses may have to be borne
before the protective assets, primarily in the form of our heavy
weightings in index-linked securities, steady the ship and move it
in a positive direction. In addressing the options a government has
for reducing a debt burden Messrs Reinhart and Sbrancia elegantly
outlined in their 2011 publication ‘The Liquidation of
Government Debt’ five paths: 1) Real Growth – in spite of
countless stimulative efforts this has proved elusive at best 2)
Fiscal adjustment or austerity – we believe that the recent UK
election result has ruled this out as an option (and arguably it
was off the agenda even before the election) 3) Restructuring or
default – why risk alienating your country for a generation from
prime credit markets when the printing press provides an
alternative way to service your debt 4) A sudden burst of inflation
– quite possible and 5) A long period of financial repression, with
interest rates held persistently below inflation – already evident
in the UK and other developed markets.
History argues strongly in favour of the latter two options – in
the study it was concluded that 30 out of 36 post-war episodes of
debt crisis were 'resolved’ through one of these scenarios. The
Company remains firmly in the defensive camp with 60% of its assets
in what we hope will prove to be protective investments, whilst the
other 40% are in the risk basket with almost half of these assets
in Japanese equities. The Japanese equity market remains the stand
out market globally in terms of value and also offers an attractive
way to benefit from global economic growth should our fears not
come to pass. The Directors believe that long dated index-linked
Gilts are the real treasure in the portfolio and have yet to be
properly tested. They were initially issued in March 1981, long after the inflation horse had
bolted the stable and were a way for the UK to regain credibility
in controlling inflation. However, they are a volatile asset; over
the final two months, to 30 June
2017, of the Company’s financial year the long linkers took
a 20% pounding, but the effect on the portfolio was offset by our
option positions. In short, your Directors retain faith in the
Investment Manager’s ability to weather what will be very difficult
times ahead and to come through the coming crisis, whenever that
may strike, with credit.
Premium and discount management
At the start of our financial year, the Company had the ability
to issue 11,556,342 shares under a block listing facility. A buy
recommendation for the Company in the Daily Telegraph’s Questor
column on 26 October 2016 struck a
chord with investors and the Company’s share price returned, once
again, to a premium to its NAV. Your Directors will not issue
shares in a ‘tap’ issue unless it is accretive to existing
shareholders. On 1 November we announced that we had issued 700,000
shares at 233.2p, the first such tap issue since 5 January 2016 and from then until 30 June a
further 7,675,000 shares were issued. In spite of flat performance
in the first six calendar months of this year the shares broadly
retained a low single digit premium to NAV which enabled share
issuance to continue unabated. By 30 June a total of 8,375,000
shares had been tapped out. Cenkos, our brokers, calculate that the
total accretion to the NAV from the issue of these shares was
£252,719 (or 0.16p per share based on the number of shares in issue
at the start of the financial year). Share issuance continues and,
as at 15 September, a further 3,200,000 shares have been issued. As
well as being NAV accretive, the advantage to existing shareholders
of this issuance is that it improves liquidity and our fixed costs
are spread over a greater number of shares which helps reduce the
Ongoing Charges Ratio (OCR). Your Directors are rightly proud that
this Company has an OCR of 1.18% broadly similar to the Ruffer
Total Return Fund, a veritable behemoth rather over eight times our
size in terms of market capitalisation. We have worked hard to
improve efficiencies and reduce fixed costs.
It is our intention to increase the market capitalisation of the
Company to over £500m over the coming years, at which point
liquidity should be good enough that even the largest wealth
managers should continue to be able to acquire our shares. We do of
course retain the ability, granted to us at successive AGMs, to buy
back shares. It must be said that since 2006 they have never stood
at a discount of more than 5% for long enough for us to enact this
particular power. In that year the Company exercised its redemption
facility allowing shareholders to exit at NAV which immediately
cleared the discount with some 13% of shares being tendered.
It is of note that only seven years ago Ruffer LLP was the largest
holder of the Company’s stock, owning some 15% - their holding is
now exactly 5%* and they have been relegated to third position*. I
take great comfort from this knowing that Ruffer ought to be a
natural buyer of the Company’s shares should they move to a
discount.
*Data is taken from the latest available Share Register Analysis
produced by Richard Davies Investor Relations Limited, dated
15 June 2017.
Board composition
There has been a good deal of activity in your Company’s
boardroom since my report last year. On 20
July 2016 we bade farewell to Wayne Bulpitt, a Guernsey
based financial services expert and an inaugural non-executive
director of this Company who incidentally was appointed CBE in the
2017 Birthday Honours for his services to the Scout Association.
Sarah Evans was appointed to the board on the same day to
understudy Chris Spencer, another of the Company’s well respected
non-executive directors who had served as Chairman of the Audit
Committee since the Company’s launch in July
2004. Chris retired on 2 March
2017, on which date Sarah Evans took over the role of Audit
Chair. Jan Etherden, a UK-based highly regarded former equity fund
manager, and another of the Company’s original non-executive
directors, resigned her position on 30 November. Her role as an
acknowledged investment expert was filled by Christopher Russell,
who was appointed to the board on 1 December
2016. On 17 March, Jill May was appointed to the board as a
non-executive director. I am personally very grateful to all three
directors who have retired over the past year and also to Peter
Luthy, another of the inaugural non-executive directors who
resigned from the Company on 19 November
2015. They steered the Company through some tumultuous times
with great skill, commendable attention to an ever-increasing slew
of regulations and no little success. All three of the
non-executive director positions were advertised through a
non-executive recruitment specialist and 96 names were scrutinised.
I am confident that the Company has a fine slate of non-executive
directors with the necessary skills to steer it through the years
ahead and the move from 6 directors to 5 should help reduce costs
without compromising the board’s ability to represent shareholders’
interests.
Regulatory developments
Over the past year there has been a good deal of debate over the
categorisation of investment trusts as either complex or
non-complex financial instruments under the forthcoming MiFID II
regulations, whose provisions come into effect in the UK on
3 January 2018. Happily, the
Association of Investment Companies (AIC), of which body this
Company is a member, came out with clear guidance on 7 July 2017 stating that investment company
securities are not automatically complex. Following the guidance
from the AIC and our broker, the Directors have no reason to
believe that the Company should be considered a complex financial
instrument.
Annual General Meeting
The AGM of the Company will be held at 12 noon on 1 December 2017 at the Company’s registered
offices at Trafalgar Court, Les Banques, St Peter Port,
Guernsey.
Share Buyback Authority
I have already touched upon this power, which has not been
invoked over the period of this report. Nevertheless the
Board has resolved to seek, at the AGM on 1
December 2017, a renewal of its authority to buy back shares
at a discount to NAV under the terms to be stated in a Special
Resolution.
Share Redemption Facility
The Company has a Redemption Facility operable in November each
year. Given that the Company has been trading above or close to its
NAV for most of the year under report, and the fact that it is
currently trading at a 2% to 3% premium to NAV the Board is not
intending to offer this facility in November
2017.
Related Party Share Purchases
When the Company was standing at a discount to its NAV, Jonathan
Ruffer added to his existing holding in the Company with a purchase
of 100,000 shares on 2 August 2016 at
a price of 214.25p. He and his immediate family now own 1,039,335
shares.
Ruffer Culture
Whilst attending an induction programme in Ruffer’s offices on
11 July, it was remarked by all three of the new non-executive
directors that, in their experience, the culture at Ruffer was
unique. Put simply, the fact that the firm is a partnership, with
Jonathan Ruffer, one of the great latter-day unsung Christian
philanthropists, as the controlling shareholder of the Investment
Manager, enables it to pursue its aim of putting their clients
first in preserving their capital without the interference of
having to hit short term financial targets, which often prove
disruptive to long term investment goals. There can be few
companies operating anywhere in the world where the current chief
executive has two of her predecessors actively involved in managing
the business. The first Chief Executive of Ruffer LLP, Jonathan
Ruffer, as I have pointed out in these reports before, is far from
being a distant figurehead – as Executive Chairman he is front and
centre of the firm’s strategic direction and at the heart of the
asset allocation process. Henry Maxey, who took over from Jonathan
as Chief Executive in 2012, handed over to Clemmie Vaughan on 1
April to focus on his key role as Chief Investment Officer and
works closely with Jonathan and Clemmie. The firm appears
wonderfully harmonious but it is clearly imbued with a great deal
of creative, moral and entrepreneurial energy that Clemmie is
focussed on protecting. In short, I am proud to lead a Company
which represents a ‘slice of Ruffer’.
Ashe Windham
15 September 2017
Business Model and
Strategy
Ruffer Investment Company Limited (the “Company”) carries on
business as a closed-ended investment company. Its shares are
traded on the Main Market of the London Stock Exchange (the “LSE”).
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, asset allocation and gearing, contracts and
performance. Biographical details of the Directors, all of whom are
non-executive, are listed in the Directors section 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 base rate (the Bank of England base rate was 0.25% for
the year ended 30 June 2017).
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 provide
positive performance in excess of twice the Bank of England base
rate each year while protecting capital value.
Investment Policies
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 objectives.
The Company invests across a broad range of assets, geographies
and sectors in order to achieve its objective. This allocation will
change over time to reflect the risks and opportunities identified
by the Investment Manager across global financial markets, with an
underlying focus on capital preservation. The allocation of the
portfolio between 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 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 per cent.
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 per cent. of the Company’s gross
assets.
The Directors have determined that the Company will not engage
in currency hedging except where the Investment Manager considers
such hedging to be in the interests of efficient portfolio
management.
The Directors have determined that not more than 10 per cent.,
in aggregate, of the value of the gross assets of the Company at
the time of the acquisition may be invested in other UK listed
investment companies (including UK listed investment trusts) except
that this restriction does not apply to investments in such
entities which themselves have stated investment policies to invest
no more than 15 per cent. of their gross assets in other UK listed
investment companies (including listed investment trusts).
Regardless of the above restriction, the Directors have further
determined that no more than 15 per cent. in aggregate of the
Company’s gross assets will be invested in listed investment
companies (including listed investment trusts).
General
In accordance with the requirements of the United Kingdom
Financial Conduct Authority (the “FCA”), any material changes in
the Investment Policy 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
period.
Environmental Policy
LSE listing rules require most companies to disclose their
Environmental Policy. However, due to the nature of its operations,
the Company is exempt from this obligation. Ruffer AIFM Limited’s
Environmental, Social and Governance Policy is available upon
request from the Investment Manager.
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 portfolio return, after all
expenses, of at least twice the return of the Bank of England base
rate. Having considered the portfolio performance and investment
strategy, the Board has unanimously agreed that the interests of
the shareholders as a whole are best served by the continuing
appointment of the Investment Manager on the terms agreed.
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 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, which are unchanged from the
previous year, 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, 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 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;
• Accounting, Legal
and Regulatory Risks: The Company is exposed to risk 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; and
• 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.
The Board seeks to mitigate and manage these risks through
continual review, policy-setting and enforcement of contractual
obligations. It also regularly monitors the investment environment
and the management of the Company’s portfolio.
Long Term Viability Statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code, (the “Code”), 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 detailed in note 19 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 in 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
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 visiting the
compliance department of the AIFM regularly.
Based on the Company’s processes for monitoring operating costs,
share discount, internal controls, the Investment Manager’s
compliance with the investment objective, asset allocation, 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 in the Key Performance
Indicators section.
Investment
Manager’s Report
Performance
The Chairman’s Review has already provided the headline numbers.
It will come as no surprise to hear that equities were the
Company’s best performing asset class and the large weighting
to Japan made this the largest positive contributor to
performance (608 bps adjusting for currency hedging). Whilst there
is an interesting macro story in Japan, focussing on Abe’s ability
to slay the dragon of deflation, our investments there also provide
exposure to economic growth outside Japan and by extension,
strong global equity markets. Throughout the equity book, a focus
on cyclical and value stocks proved effective in the second half of
2016 as a reflation trade set in putting pressure on bonds and
bond-proxies in the equity market. Index-linked bonds were not
immune from this move, but the blow was cushioned in the UK
holdings (where most of our duration lies) through rising
breakevens and in the performance of rate sensitive global equities
(life assurers and banks in Japan performed
particularly strongly in the final months of the year). Over
the full period, index-linked bonds made a small positive
contribution (226 bps). At the bottom end of the ledger, the
Company’s protective assets held us back – such is the nature of an
insurance policy. Gold cost 43 bps and options (equity and
interest rate protection) cost 145 bps.
Portfolio changes
Our macro position has remained consistent through the year (see
outlook statement below) and so most of the portfolio changes have
been a result of incorporating new ideas or keeping a lid on
overall equity exposure (40% at 30 June
2017). Useful contributions were made by The Boeing Company
(+52%) and Barratt Developments (+83%). In the bond portfolio
duration was reduced in US TIPS in October
2016, and further in January
2017, on the basis that the Fed’s interest rate moves and
Trump’s reflation push might put upward pressure on bond
yields. On the currency side, the Company had a large sterling
position throughout the year (76% at 30 June
2017). With the benefit of hindsight this was the wrong
thing to do. Our fear was that a sharp rally in sterling, induced
by short covering or recognition of a policy error by the Bank
of England in the so-called ‘emergency measures’, would see an
outright capital loss if the Company was heavily exposed to
overseas currencies. The low risk position (which we will always
adopt when we do not have strong conviction in a currency) is
to hedge out the risk. In summary, we missed out on a tailwind but
ran a lower risk portfolio as a result. In the option book equity
protection has continued to be held via VIX call options and
interest rate protection (held through payer swaptions) was
increased over the year allowing us to hold onto the cherished long
dated index-linked Gilts through what might prove to be a volatile
short term if there is a belief that pro-growth policies might be
successful.
Outlook
The monthly commentaries for the Company focus on short term
developments; the annual report is an opportunity to step back and
look at the direction of travel. To many the financial
crisis is a distant memory and is viewed in the past tense. To
us, the sequence of events leading up to the crisis and those that
have happened since 2008 have only managed to defer the day of
reckoning - the seeds of the next crisis (or is it part of the same
crisis?) are sown and are well past the germination stage.
2008 was a rap on the knuckles of the western world. For too long
we had eaten tomorrow’s cake today using debt to bridge the gap.
The belief of the world’s central banks was that sharply lower
interest rates would buy the time needed to get the house back
in order. But far from using this window of opportunity to tighten
belts and deleverage the opposite has happened. Cheap borrowing
costs have allowed debt growth to continue unabated. On its own
this might not be problematic if it was accompanied by strong
economic growth, but this has not been the case.
Once again, we have eaten tomorrow’s cake today but this time at
a moment when we were still trying to atone for yesterday’s binge.
At this crucial juncture the stakes are now higher and the options
more limited. On top of this (and to some extent because of it)
there has been another important development in the last 12 months;
the political winds have changed. Austerity is a vote loser and is
off the table and the have-nots are voting for change. This
means more spending to try to boost growth and more borrowing to
fund that spending. The inflationary risks were already high and
they are about to get higher.
What this boils down to is a transfer of wealth from the world’s
savers to the world’s borrowers and now the political wind is
firmly behind this movement. The mechanism for this change
is financial repression; keep interest rates below the rate of
inflation. This has been happening for some time in the UK, US and
Europe and is likely to become more extreme. Our job is to protect
our investors (the savers) and unlike the last crisis this
one will not be optional and the hiding places will be few and
far between. As we have explained before, index-linked bonds will
play a critical role but the path to this denouement is unlikely to
be a smooth one.
The question we are frequently asked is ‘When?’ and our answer,
depending on how facetious we are feeling, ranges from ‘Don’t know’
to ‘Don’t care’. Think back to 2006 – it did not
matter whether you identified that it would be Lehmans rather
than Bear Stearns that would bring down the banking system, the
useful insight was to spot that at some point a systemically
important bank would fail – the house of cards was already
teetering and the signs were there. The situation is similar
today; the catalyst is less interesting than the outcome. However,
the question of ‘When?’ is important. If we are talking about an
event 10 years hence (highly unlikely) then that is too long to ask
our investors to wait, unless we can make them a steady return
in the interim. If looked at through that prism then the last year
has been a satisfactory one; a respectable return has been achieved
in absolute terms and it has been achieved with a portfolio heavily
skewed in a defensive direction. There will be tougher times
ahead that will challenge our ability to preserve capital, but if
we remain focussed on protecting investors’ capital and manage to
repeat the performance of the last 12 months in making a steady
positive return, then the Company should have a useful role to
play for its investors.
Ruffer AIFM Limited
15 September 2017
Top Ten
Holdings
|
|
|
Fair |
%
of |
|
|
Holding at |
Value |
Total
Net |
Investments |
Currency |
30.06.17 |
£ |
Assets |
|
|
|
|
|
UK Index-Linked Gilt
1.875% 22/11/2022 |
GBP |
14,500,000 |
23,694,378 |
6.30 |
UK Index-Linked Gilt
0.375% 22/03/2062 |
GBP |
8,400,000 |
21,620,945 |
5.76 |
UK Index-Linked Gilt
0.125% 22/03/2068 |
GBP |
7,500,000 |
18,987,263 |
5.06 |
US Treasury Inflation
Indexed Bond 0.625% 15/07/2021 |
USD |
19,350,000 |
16,564,237 |
4.41 |
CF Ruffer Gold
Fund** |
GBP |
9,994,002 |
15,300,817 |
4.07 |
US Treasury Inflation
Indexed Bond 0.125% 15/01/2023 |
USD |
17,500,000 |
14,142,454 |
3.77 |
US Treasury Inflation
Indexed Bond 0.375% 15/07/2023 |
USD |
17,000,000 |
13,840,772 |
3.68 |
Ruffer Illiquid Multi
Strategies Fund 2015* |
GBP |
16,945,510 |
13,061,599 |
3.48 |
UK Index-Linked Gilt
0.125% 22/03/2024 |
GBP |
10,250,000 |
13,251,631 |
3.53 |
US Treasury Inflation
Indexed Bond 1.125% 15/01/2021 |
USD |
13,500,000 |
12,064,178 |
3.21 |
* Ruffer Illiquid Multi Strategies Fund 2015
Ltd is classed as a related party as it shares the same Investment
Manager as the Company.
** CF Ruffer Gold Fund is classed as a related party
because its investment manager, Ruffer LLP, is the parent company
of the Company’s Investment Manager.
Directors
At the date of this report, the Company has five non-executive
Directors, all of whom are independent.
Ashe Windham, CVO, aged 60 and a resident of the
United Kingdom. He joined Barclays de Zoete Wedd (‘‘BZW’’) in 1987
as an institutional equities salesman and was appointed a Director
of BZW’s Equities Division in 1991. He joined Credit Suisse First
Boston in 1997 when they acquired BZW’s equities business. In 2004
he joined Man Investments as Head of Internal Communications and in
2007 became Man Group’s Global Head of Internal Communications. In
June 2009 he resigned from Man Group
plc to set up a private family office. He is a non-executive
Director of EFG Asset Management (UK) Ltd and a non-executive
Director of Miton UK MicroCap Trust Plc. Mr Windham was
appointed to the Board on 24 February
2009.
John V Baldwin, aged 67 and a resident of Italy.
After taking a Master's Degree in Asian Studies at Yale University,
he joined Robert Fleming & Co. in 1983 as an investment analyst
trainee. In 1984 he was seconded to the Tokyo Branch of Jardine
Fleming as an investment analyst, where he continued in various
roles for 16 years, the final five as a Director of Jardine Fleming
Securities (Asia) and Tokyo Branch Manager. The first foreigner
appointed Member Governor of the Tokyo Stock Exchange, he also
served on various committees of the Japan Securities Dealers
Association. In 2001 he retired from successor firm JPMorgan Chase
after serving as Head of Japanese Cash Equities. Mr Baldwin was
appointed to the Board on 24 February
2011.
Sarah Evans, aged 62 and a resident of Guernsey,
is an Oxford graduate, a Chartered Accountant and a non-executive
director of several other listed investment funds. She sits on the
board of the UK Investment Companies’ trade body, the AIC. She
spent over six years with the Barclays Bank plc group from 1994 to
2001. During that time she was a treasury director and for two
years was Finance Director of Barclays Mercantile. Previously,
Sarah ran her own consultancy business advising financial
institutions on all aspects of securitisation. From 1982 to 1988
she was with Kleinwort Benson, latterly as head of group finance.
Sarah is currently a non-executive Director of Apax Global Alpha
Limited, NB Distressed Debt Investment Fund Limited, Real Estate
Credit Investments Limited and Crystal Amber Fund. Ms. Evans was
appointed to the Board on 20 July
2016.
Christopher Russell, aged 68 and a resident of
Guernsey, is a non-executive director of investment and financial
companies in the UK, Hong Kong and Guernsey. These include being
chairman of London main board listed companies such as F&C
Commercial Property Trust Limited and Macau Property Opportunities
Fund Limited and a director of HICL Infrastructure Company Ltd.
Chris was formerly 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 (Hong Kong and Japan). 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.
Jill May, aged 56 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 sits on the board of the Institute of
Chartered Accountants in England and Wales (“ICAEW”). She has broad
knowledge of investment banking, asset management and private
banking in the UK and EMEA. She is a Panel Member of the
Competition and Markets Authority (“CMA”) and was a Non-Executive
Director of the CMA from its inception in 2013 until October 2016. She is a Non-Executive Director of
JP Morgan Claverhouse, a UK listed investment trust. Ms. May was
appointed to the Board on 17 March
2017.
Report of the
Directors
The Directors of the Company present their Annual Financial
Report (the “Financial Statements”) for the year ended 30 June 2017 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 LSE. The principal objective
of the Company is detailed in the Business Model and Strategy
section.
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 securities which
are readily realisable and, accordingly, the Company has adequate
financial resources to continue in operational existence for the
foreseeable future. Factors regarding the going concern basis are
also discussed in the Long Term Viability Statement and note
2(c).
Blocklisting Facility
The blocklisting facility is set out in note 13.
Purchase of Own Shares by the
Company
The Company operates a share buy back facility whereby it 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
per cent. 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 2016: 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 the 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.
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 Investment
Manager’s website, www.ruffer.co.uk.
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 believes
that the investment management fee is competitive with other
investment companies with similar investment mandates.
The Board reviews on an ongoing basis the performance of the
Investment Manager and considers whether the investment strategy
utilised is likely to achieve the Company’s investment objective of
realising a positive total annual portfolio return, after all
expenses, of at least twice the return of the Bank of England base
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 in the Directors section and
on 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 2017 and up to the date of this Report are set out on
in note 16.
Substantial Share Interests
As at 15 June 2017*, 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 |
Brewin Dolphin,
stockbrokers |
12,527,695 |
7.66 |
Alliance Trust
Savings |
10,615,926 |
6.49 |
Ruffer |
8,176,042 |
5.00 |
Tilney |
7,389,891 |
4.52 |
Charles Stanley |
6,600,429 |
4.04 |
Hargreaves Lansdown,
stockbrokers (EO) |
6,500,899 |
3.98 |
Rathbones |
6,025,308 |
3.69 |
Cazenove Capital
Management |
5,898,802 |
3.61 |
Investec Asset
Management |
5,150,000 |
3.15 |
Smith &
Williamson |
4,954,705 |
3.03 |
*Data is taken from the latest available Share Register Analysis
produced by Richard Davies Investor Relations Limited, dated
15 June 2017.
International Tax Reporting
For purposes of the US Foreign Accounts Tax Compliance Act, 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. Guernsey has now adopted the CRS which came into
effect on 1 January 2016. The CRS replaced the
intergovernmental agreement between the UK and Guernsey to improve
tax compliance that had previously applied in respect of 2014 and
2015.
The Board will take the necessary actions to ensure that the
Company is compliant with Guernsey regulations and guidance in this
regard.
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 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 the Directors
are required to prepare the Company’s 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 these Financial Statements, International
Accounting Standard 1 requires that directors:
• properly select and apply accounting
policies;
• present information, including
accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
• provide additional disclosures when
compliance with the specific requirements in IFRS is insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial
position and financial performance; and
• make an assessment of the Company's
ability to continue as a going concern.
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 webpage. 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 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 Review, the Depositary
Statement 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 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
Ashe Windham
Chairman
Sarah Evans
Director
15 September 2017
Corporate
Governance Statement
Corporate Governance
On 1 January 2016, the Company became a member of the
Association of Investment Companies (the “AIC”) and complies with
the AIC Code of Corporate Governance (the “AIC Code”). By complying
with the AIC Code, the Company is deemed to comply with both the UK
and GFSC corporate governance codes.
To ensure ongoing compliance with these principles the Board
receives a report from the Company Secretary, at each quarterly
meeting, identifying how the Company is in compliance and
identifying any changes that might be necessary.
The AIC Code is available in the AIC’s website,
www.theaic.co.uk.
The Board, having reviewed the AIC Code, considers that it has
maintained procedures during the year ended 30 June 2017 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 Guernsey Financial Services Commission’s (the “Commission”)
Finance Sector GFSC Code comprises Principles and Guidance, and
provides a formal expression of good corporate practice against
which Shareholders, boards and the Commission can better assess the
governance exercised over companies in Guernsey’s finance sector.
The Commission 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 maximising 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;
· 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 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 policy 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 enable Shareholders to have a fair, balanced and
understandable view.
Composition and Independence of the
Board
The Board currently comprises five non-executive Directors. The
Directors of the Company are listed in the Directors section and on
the Management and Administration summary.
None of the Directors has a contract of service with the
Company.
The Chairman is Ashe Windham. The Chairman of the Board must be
independent for the purposes of Chapter 15 of the Listing Rules.
Ashe Windham is considered independent because he:
· has no current or historical employment with
the Investment Manager; and
· has no current directorships in any other
investment funds managed by the Investment Manager.
The Board does not consider it appropriate to appoint a Senior
Independent Director because the Board is deemed to be independent
of the Company. The Company has no employees and therefore there is
no requirement for a chief executive. The Board believes it has a
good balance of skills and experience to ensure it operates
effectively. The Chairman, Ashe Windham, is responsible for
leadership of the Board and ensuring its effectiveness. Sarah Evans
was appointed as Director on 20 July
2016, Christopher Russell was appointed as Director on
1 December 2016 and Jill May was
appointed as Director on 17 March
2017.
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 the Corporate Governance Statement.
The Company holds a minimum of four Board meetings per year to
discuss strategy, general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset
allocation 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.
A representative of the Investment Manager, Administrator and
Company Secretary attends each Board meeting either in person or by
telephone 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 Committee meetings during the
year was as follows:
|
Board Meetings |
Audit Committee Meetings |
Annual General Meeting |
|
Scheduled* |
Attended |
Scheduled* |
Attended |
Scheduled* |
Attended |
Wayne Bulpitt
(resigned 20.07.16) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Jeannette
Etherden (resigned 30.11.16) |
2 |
2 |
1 |
1 |
1 |
1 |
Christopher
Spencer (resigned 02.03.17) |
3 |
3 |
2 |
1 |
1 |
1 |
Ashe
Windham |
3 |
3 |
2 |
2 |
1 |
1 |
John V
Baldwin |
3 |
3 |
2 |
2 |
1 |
1 |
Sarah Evans
(appointed 20.07.16) |
3 |
3 |
2 |
2 |
1 |
1 |
Christopher
Russell (appointed 01.12.16) |
2 |
2 |
1 |
1 |
N/A |
N/A |
Jill May
(appointed 17.03.17) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
*Relates to all meetings scheduled during each Director’s term
of office.
All Directors attended all scheduled Board Meetings during their
term of office. The fourth quarterly Board Meeting was held on 17
July, after the year end, to accommodate the diaries of all Board
members.
In addition to the above meetings, a number of ad-hoc meetings
were held throughout the year.
Directors’ Indemnity
Directors' and Officers’ liability insurance cover is maintained
by the Company on behalf of the Directors.
Re-election
At each AGM, all of the Directors shall retire from office and
may offer themselves for re-election.
On 30 November 2016 at the 11th
AGM of the Company, Ashe Windham, John V Baldwin and Christopher
Spencer 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. Sarah Evans who was appointed
on 20 July 2016, stood for election
and was elected as a Director of the Company by the Shareholders.
Christopher Spencer retired as a director in March 2017.
The Directors may at any time appoint any person to be a
Director either to fill a casual vacancy or as an addition to the
existing Directors. Any Director so appointed shall hold office
only until, and shall be eligible for re-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 and Succession
Planning
The Directors consider how the Board functions as a whole taking
balance of skills, experience and length of service into
consideration and also reviews the individual performance of its
members on an annual basis.
To enable this evaluation to take place, the Company Secretary
circulates a detailed questionnaire plus 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. On occasions, the Board may seek to employ an
independent third party to conduct a review of the Board.
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 appointments and
was attended by the three new directors and the existing directors
over a whole day at Ruffer LLP’s offices on 11 July 2017.
The Board is continually considering succession planning as
evidenced by the changes to the Board over the last 18 months.
The Board has also given careful consideration to the
recommendations of the Davies Report on women on boards and as
recommended in that report has reviewed its composition and
believes that it has available an appropriate range of skills and
experience. In order to extend its diversity, the Board is
committed to implementing the recommendations of the Davies Report,
if possible within the timescales proposed in the Davies Report,
and to that end will ensure that women candidates are considered
when appointments to the Board are under consideration – as indeed
has always been its practice.
Committees of the Board
The Board has established Audit and Management Engagement
Committees and approved their terms of reference, copies of which
can be obtained from the Company Secretary upon request.
Audit Committee
The Company has established an Audit Committee, with formally
delegated duties and responsibilities within written terms of
reference. The Company's Audit Committee is comprised of the entire
Board. The Audit Committee is chaired by Sarah Evans. The Audit
Committee meets formally at least twice a year and each meeting is
attended by the independent external auditor and Administrator.
The table above sets out the number of Audit Committee Meetings
held during the year ended 30 June 2017 and the number of
such meetings attended by each Audit Committee member.
A report of the Audit Committee detailing responsibilities and
activities is presented in the Audit Committee Report.
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 John V Baldwin appointed as
Chairman. The Management Engagement Committee meets formally once a
year.
The principal duties of the Management Engagement 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 external auditor).
During the year the Management Engagement Committee has reviewed
the services provided by the Investment Manager as well as the
other service providers and have recommended to the Board that
their continuing appointments is in the best interests of the
Shareholders. The last meeting was held on 12 July 2017.
Nomination Committee
The Board does not have a separate Nomination Committee. The
Board as a whole fulfils the function of a Nomination Committee.
Any proposals for a new Director are discussed and approved by the
Board. The Board will determine whether in future an external
search consultancy or open advertising is used in the appointments
of non-executive Directors.
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 in the Directors’ Remuneration
Report.
Internal Control
The Company’s risk exposure and the effectiveness of its risk
management and internal control systems are reviewed by the Audit
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 Northern Trust International Fund Administration Services
(Guernsey) Limited, a company licensed and regulated by the
Guernsey Financial Services Commission.
• CREST agency
functions are performed by Computershare 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.
• Advisory and
brokering services are provided by Cenkos Securities plc, a firm
which is authorised and regulated by the FCA.
The Board reviews regularly the performance of the services
provided by these companies. The Board reviews the performance of
the Investment Manager annually by assessing the performance of the
investments, and the Investment Manager’s position against its
peers. The Board also conducts an annual visit to the offices of
the Investment Manager to review its internal control
procedures. The Board also receives and reviews quarterly
reports from the Investment Manager, Alternative Investment Manager
and Administrator. The Board also receives confirmation from the
Administrator of its capability under its Service Organisation
Controls 1 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 has their own internal audit and risk assessment functions.
As such, an internal audit function specific to the Company is
therefore considered unnecessary, as explained in the Audit
Committee Report.
Principal Risks and Uncertainties
Principal risks and uncertainties are disclosed in the Business
Model and Strategy section above. There have been no changes to
principal risks during the year ended 30
June 2017.
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 Corporate Broker and Investment Manager.
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.
In recent years the Board has also held a meeting in London with
investors to discuss any issues they may have.
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.
Going Concern
The going concern assumption is disclosed in the Report of
Directors.
Subsequent Events
The subsequent events since the year end that the Directors
consider require adjustment to or disclosure in this Annual
Financial Report or the Financial Statements are disclosed in note
21.
Directors’
Remuneration Report
Introduction
An ordinary resolution for the approval of the annual
remuneration report was put to the shareholders at the AGM held on
30 November 2016.
Remuneration Policy
All Directors are non-executive and a Remuneration Committee has
not been established. The Board as a whole considers matters
relating to the Directors’ remuneration. No advice or services were
provided by any external person in respect of its consideration of
the Directors’ remuneration.
The Company’s policy is that the fees payable to the Directors
should reflect the time spent by the Directors on the Company’s
affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain and motivate directors of a quality
required to run the Company successfully. The Chairs of the Board
and the Audit Committee are paid a higher fee in recognition of
their additional responsibilities. The policy is to review fee
rates periodically, although such a review will not necessarily
result in any changes to the rates, and account is taken of fees
paid to directors of comparable companies.
There are no long term incentive schemes provided by the Company
and no performance fees are paid to Directors.
No Director has a service contract with the Company but each of
the Directors is appointed by a letter of appointment which sets
out the main terms of their appointment. Directors hold office
until they retire by rotation or cease to be a director in
accordance with the Articles of Incorporation, by operation of law
or until they resign.
Remuneration
The Directors of the Company are remunerated for their services
at such a rate as the Directors determine provided that the
aggregate amount of such fees does not exceed £200,000
(30 June 2016: £200,000) per
annum.
Directors are remunerated in the form of fees, payable quarterly
in arrears, to the Director personally. No Directors have been paid
additional remuneration outside their normal Directors’ fees and
expenses. The annual fees paid to each director are shown
below:
|
|
|
30.06.17 |
30.06.16 |
|
|
|
£ |
£ |
Ashe Windham |
|
|
38,000 |
35,000 |
Sarah Evans (appointed
20 July 2016) |
|
|
31,000 |
- |
John Baldwin |
|
|
27,000 |
25,000 |
Christopher Russell (appointed 1 December 2016) |
|
27,000 |
- |
Jill May (appointed 17
March 2017) |
|
|
27,000 |
- |
Christopher Spencer
(resigned 2 March 2017) |
|
|
- |
28,000 |
Jeannette
Etherden (resigned 30 November 2016) |
|
- |
25,000 |
Wayne Bulpitt
(resigned 20 July 2016) |
|
|
- |
25,000 |
|
|
|
150,000 |
138,000 |
During the year ended 30 June 2017, Directors’ fees of
£140,677 (30 June 2016: £146,925)
were charged to the Company of which £38,482 (30 June 2016: £34,500) remained payable at the
year end.
Audit Committee
Report
We present the Audit Committee’s Report for the year ended
30 June 2017, setting out the
responsibilities of the Audit Committee and its key activities for
the year from 1 July 2016 to
30 June 2017. As in previous years,
the Committee has reviewed the Company's financial reporting, the
independence and effectiveness of the external auditor and the
internal control and risk management systems of service providers.
In order to assist the Audit Committee in discharging these
responsibilities, regular reports are received from the Investment
Manager, Administrator and external auditor.
Members of the Audit Committee will continue to be available at
each AGM to respond to any shareholder questions on the activities
of the Audit Committee.
Responsibilities
The Audit Committee reviews and recommends to the Board the
Financial Statements of the Company and is the forum through which
the external auditor reports to the Board of Directors.
The role of the Audit Committee includes:
• Monitoring and
reporting to the Board on such matters as the integrity of the
Financial Statements of the Company and any formal announcements
relating to the Company’s financial performance, and any
significant financial reporting judgements;
• considering the
appropriateness of accounting policies and practices including
critical judgement areas;
• reviewing and
considering the UK Code and FRC Guidance on Audit Committees;
• monitoring and
reviewing the quality, effectiveness and independence of the
external auditor and the effectiveness of the audit process
considering and making recommendations to the Board on the
appointment, re-appointment, replacement and remuneration to the
Company's external auditor;
• reviewing the
Company's procedures for prevention, detection and reporting of
fraud, bribery and corruption;
• monitoring and
reviewing the internal control and risk management systems of the
service providers together with the need for an Internal Audit
function; and
• considering the need
for an internal audit function.
The Audit Committee’s full terms of reference are available in
the Investment Manager’s website, www.ruffer.co.uk.
Key Activities of the Audit
Committee
The following sections discuss the assessments made by the Audit
Committee during the year:
Financial Reporting - The Audit Committee's review of the
Unaudited Half Yearly Financial Report, Unaudited Results
Announcement and Audited Annual Financial Report focused on the
significant risk relating to the valuation and ownership of
investments. The investments comprise the majority of the Company’s
NAV and hence form part of the Key Performance Indicator (“KPI”)
NAV per share. Hence any significant error in valuation or
overstatement of holdings could significantly impact the NAV and
hence the reported NAV per share of the Company.
Valuation of Investments - The Company’s investments had a fair
value of £346,628,281 as at 30 June
2017 (30 June 2016:
325,496,896) and represented the majority of the net assets of the
Company. The investments are predominantly listed except for
investments in unlisted investment funds.
The valuation of investments is in accordance with the
requirements of IFRS. The Audit Committee considered the fair value
of the investments held by the Company as at 30 June 2017 to be reasonable based on
information provided by the Investment Manager and Administrator.
All prices are confirmed to independent pricing sources as at
30 June 2017 by the Administrator and
are subject to review process at the Administrator and oversight at
the Investment Manager.
Ownership of Investments - The Company’s investment holdings are
reconciled to independent reports from the Custodian by the
Administrator with any discrepancies being fully investigated and
reconciled by the Administrator. The Audit Committee satisfied
itself, based on reviews of information provided by the Custodian,
Depositary and Administrator, that the holdings of
investments are correctly recorded.
Risk Management - The Audit Committee considered the process for
managing the risk of the Company and its service providers. Risk
management procedures for the Company, as detailed in the Company's
risk assessment matrix, were reviewed and approved by the Audit
Committee. Regular reports are received from the Investment Manager
and Administrator on the Company’s risk evaluation process and
reviews. Refer to the Business Model and Strategy for details
on principal risks and uncertainties and their management.
Financial risks faced by the Company are discussed in note 19 of
the Financial Statements.
The Company’s AIFM, Ruffer AIFM Limited has responsibilities in
law in relation to risk management under the AIFMD.
Fraud, Bribery and Corruption - The Audit Committee continues to
monitor the fraud, bribery and corruption policies of the Company.
The Board receives a confirmation from all service providers that
there have been no instances of fraud, bribery or corruption.
The External Auditor - In March
2015 the Board entered into a competitive audit tender
process and Deloitte LLP was appointed as the Company’s new
auditor, replacing Moore Stephens, who had been the external
auditor from the date of the initial listing on the LSE.
Independence, Objectivity and Fees - The independence and
objectivity of the external auditor is reviewed by the Audit
Committee which also reviews the terms under which the external
auditor is appointed to perform non-audit services. The Audit
Committee has established pre-approval policies and procedures for
the engagement of Deloitte LLP to provide audit, assurance and tax
services. These are that the external auditor may not provide a
service which:
• places them in a position to audit
their own work;
• creates a mutuality of interest;
• results in the external auditor
developing close relationships with service providers of the
Company;
• results in the external auditor
functioning as a manager or employee of the Company; or
• puts the external auditor in the role
of advocate of the Company.
As a general rule, the Company does not utilise the external
auditor for internal audit purposes, secondments or valuation
advice. Services which are in the nature of audit, such as tax
compliance, tax structuring, private letter rulings, accounting
advice, quarterly reviews and disclosure advice are normally
permitted but must be pre-approved where individual fees are likely
to be above the audit fees.
The following table summarises the remuneration paid to the
previous and current auditors for audit and non-audit services
during the years ended 30 June 2017
and 2016:
|
|
30.06.17 |
|
30.06.16 |
|
|
£ |
|
£ |
Statutory Audit |
|
31,500 |
|
27,500 |
Total Audit fees |
|
31,500 |
|
27,500 |
|
|
|
|
|
Interim Review |
|
8,400 |
|
8,000 |
Total non-audit related
fees |
|
8,400 |
|
8,000 |
No tax services were provided during the year.
In line with the policies and procedures above, the Audit
Committee does not consider that the provision of these non-audit
services to be a threat to the objectivity and independence of the
independent auditor.
Deloitte LLP also has safeguards in place to ensure objectivity
and independence.
When considering the effectiveness and independence of the
external auditor, and the effectiveness of the audit process, the
Audit Committee meets regularly with the external auditors to
discuss the audit plan and the scope of the audit. The Audit
Committee also takes account of factors such as:
• The audit plan presented to them
before each audit;
• The post audit report including
variations from the original plan;
• Changes in audit personnel;
• The external auditor’s own internal
procedures to identify threats to independence; and
• Feedback from both the Investment
Manager and Administrator evaluating the performance of the
team.
The Audit Committee has examined the scope and results of the
audit, its cost effectiveness and the independence and objectivity
of the external auditor, with particular regard to non-audit fees,
and is satisfied that an effective audit has been completed with
diligence and professional scepticism, that the scope of the audit
was appropriate and significant judgements have been challenged
robustly. It also considers Deloitte LLP, as external auditor, to
be independent of the Company.
Re-appointment of the external auditor - At the AGM held on
30 November 2016, Deloitte LLP was re-appointed as the
Company’s external auditor.
Internal Control and Risk Management
Systems
The Audit Committee, after consultation with the Investment
Manager and external auditor, considers the key risk of
misstatement in its Financial Statements to be the override of
controls by its service providers, the Investment Manager and
Administrator.
At each quarterly Board meeting, compliance reports are provided
by the Administrator, Company Secretary and Investment Manager. The
Board also receives confirmation from the Administrator of its
capability under its Service Organisation Controls 1 report. No
significant failings or weaknesses were identified in these
reports.
The Audit Committee has also reviewed the need for an internal
audit function. The Audit Committee has decided that the systems
and procedures employed by the Investment Manager and the
Administrator, including their internal audit functions, provide
sufficient assurance that a sound system of internal control, which
safeguards the Company’s assets, is maintained. An internal audit
function specific to the Company is therefore considered
unnecessary.
For any questions on the activities of the Audit Committee not
addressed in the foregoing, a member of the Audit Committee remains
available to attend each AGM to respond to such questions.
In finalising the Financial Statements for recommendation to the
Board for approval, the Audit Committee has satisfied itself 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.
Sarah Evans
Chairman, Audit Committee
15 September 2017
Report of the
Depositary to the Shareholders of Ruffer Investment Company
Limited
Northern Trust (Guernsey) Limited has been appointed as
Depositary to Ruffer Investment Company Limited (the “Company”) in
accordance with the requirements of Article 36 and Articles 21(7),
(8) and (9) of the Directive 2011/61/EU of the European Parliament
and of the Council of 8 June 2011 on
Alternative Investment Fund Managers and amending Directives
2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and
(EU) No 1095/2010 (the “AIFM Directive”).
We have enquired into the conduct of Ruffer AIFM Limited (the
“AIFM”) and the Company for the year ended 30 June 2017, in our capacity as Depositary to
the Company.
This report including the review provided below has been
prepared for and solely for the Shareholders in the Company. We do
not, in giving this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is
shown.
Our obligations as Depositary are stipulated in the relevant
provisions of the AIFM Directive and the relevant sections of
Commission Delegated Regulation (EU) No 231/2013 (collectively the
“AIFMD legislation”) and the Authorised Closed-ended Investment
Schemes Rules 2008.
Amongst these obligations is the requirement to enquire into the
conduct of the AIFM and the Company and their delegates in each
annual accounting period.
Our report shall state whether, in our view, the Company has
been managed in that period in accordance with the AIFMD
legislation. It is the overall responsibility of the AIFM and the
Company to comply with these provisions. If the AIFM, the Company
or their delegates have not so complied, we as the Depositary will
state why this is the case and outline the steps which we have
taken to rectify the situation.
The Depositary and its affiliates is or may be involved in other
financial and professional activities which may on occasion cause a
conflict of interest with its roles with respect to the
Company. The Depositary will take reasonable care to ensure
that the performance of its duties will not be impaired by any such
involvement and that any conflicts which may arise will be resolved
fairly and any transactions between the Depositary and its
affiliates and the Company shall be carried out as if effected on
normal commercial terms negotiated at arm's length and in the best
interests of Shareholders.
Basis of Depositary Review
The Depositary conducts such reviews as it, in its reasonable
discretion, considers necessary in order to comply with its
obligations and to ensure that, in all material respects, the
Company has been managed (i) in accordance with the limitations
imposed on its investment and borrowing powers by the provisions of
its constitutional documentation and the appropriate regulations
and (ii) otherwise in accordance with the constitutional
documentation and the appropriate regulations. Such reviews
vary based on the type of Fund, the assets in which a Fund invests
and the processes used, or experts required, in order to value such
assets.
Review
In our view, the Company has been managed during the period, in
all material respects:
(i) in
accordance with the limitations imposed on the investment and
borrowing powers of the Company by the constitutional document; and
by the AIFMD legislation; and
(ii) otherwise in
accordance with the provisions of the constitutional
document; and the AIFMD legislation.
For and on behalf of
Northern Trust (Guernsey) Limited
15 September 2017
Independent
Auditor’s Report
To the
Shareholders of Ruffer Investment Company Limited
Opinion |
In our opinion the
financial statements:
·
give a true and fair view of the state of the Company’s affairs
as at 30 June 2017 and of its profit for the year then
ended;
·
have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union; and
·
have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
The financial statements that we have audited comprise:
· the
Statement of Financial Position;
· the
Statement of Comprehensive Income;
· the
Statement of Changes in Equity;
· the
Statement of Cash Flows; and
· the
related notes 1 to 21.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union. |
Basis for opinion |
We conducted our audit
in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities
for the audit of the financial statements section of our
report.
We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We confirm that non-audit services prohibited by the
FRC’s Ethical Standard were not provided to the Company.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion. |
Summary of our audit
approach |
Key Audit
Matters |
The key risks that we
identified in the current year were:
· Valuation and ownership of investments; and
· Recognition of revenue.
The key risks are similar to the prior year. |
Materiality |
The materiality we
used in the current year was £7,500,000 which is approximately 2%
of Net Asset Value (NAV). This is consistent with the prior
year. |
Scoping |
The Company was audited as a single
component. Balances were scoped in for testing based on our
assessment of risk of material misstatement. As part of our risk
assessment process, we considered the impact of controls
implemented at service organisations. |
Significant changes
in our approach |
There has been no
significant changes in our approach from prior year. |
Conclusions relating
to principal risks, going concern and viability statement |
We have reviewed the
Directors’ statement regarding the appropriateness of the going
concern basis of accounting contained within note 2(c) to the
financial statements and the Directors’ statement on the
longer-term viability of the Company contained within the
Directors’ Report .
We are required to state whether we have anything material to add
or draw attention to in relation to:
• the
Directors' confirmation in the Business Model and Strategy section
that they have carried out a robust assessment of the principal
risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity;
• the
disclosures the Business Model and Strategy section and in note 19
that describe those risks and explain how they are being managed or
mitigated;
• the
Directors’ statement in the Report of the Directors to the
financial statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them
and their identification of any material uncertainties to the
Company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial
statements;
• the
Directors’ explanation in the Business Model and Strategy section
as to how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions; and
•
whether the Directors’ statements relating to going concern and the
prospects of the company required in accordance with Listing Rule
9.8.6R (3) are materially inconsistent with our knowledge obtained
in the audit. |
We confirm that we
have nothing material to add or draw attention to in respect of
these matters.
We agreed with the Directors’ adoption of the going concern
basis of accounting and we did not identify any such material
uncertainties. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the
Company’s ability to continue as a going concern. |
Key audit
matters |
Key audit
matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters. |
Valuation and
ownership of investments |
Key audit matter
description |
Included on the
Company’s statement of financial position as at 30 June 2017 are
investments with a fair value of £347 million (2016: £325 million)
as disclosed in Note 10 to the Financial Statements. The Company’s
portfolio is made up of listed equity investments, index linked
bonds and listed funds. Investments are the most quantitatively
significant balance and are an area of focus because they are the
main driver of the Company’s performance and net asset value (NAV).
As explained in Note 2(e), the Company’s accounting policy is to
measure its investments at fair value. Refer to considerations made
by the audit committee on valuation of investments as discussed in
the Audit Committee Report.
The risk exists that:
· there might be errors or fraudulent
manipulation of valuations in order to report favourable key
performance indicators;
· inappropriate exchange rates are
used to convert foreign currency valuations to the Company’s
reporting currency;
· trades made immediately before the
year-end may be excluded from the valuation or conversely, trades
made immediately after the year-end may be included in the
valuation in error; and
· the Company may not have proper
legal title to the investments held. |
How the scope of our
audit responded to the key audit matter |
To test the valuation
and ownership of investments as at 30 June 2017, we performed the
following procedures:
· assessing the design,
implementation and operating effectiveness of controls around the
valuation and ownership of investments through the review of
internal controls reports for the investment manager and
administrator;
· agreed investments held as at year
end to independently obtained custodian confirmation;
· testing the reasonableness of
exchange rates used in converting investments denominated in
currencies other than the Pound Sterling (GBP) by comparing rates
used to independent sources;
· performing detailed testing on
purchases and sales made around year end to assess whether
transactions had been recorded in the correct period; and
· tracing the unit prices of all
investments to independent pricing sources. |
Key
observations |
Having performed the above stated
procedures, we have no material exceptions to report regards
investments valuation and ownership. |
Recognition of
revenue |
Key audit matter
description
|
The significant portion of the
Company’s income emanates from realised and unrealised gains/losses
on financial assets held at fair value through profit and loss (£31
million (2016: £21 million)). Refer to Note 6. Inaccurate
calculation of realised and unrealised gains/(losses) would have a
material impact on income recognition. The risk exists that
inaccurate income recognition could result in manipulation of the
Company’s revenue to support the Company’s performance. |
How the scope of
our audit responded to the key audit matter |
To test
revenue recognition, we performed the following procedures:
· assessing the design,
implementation and operating effectiveness of controls around
revenue recognition through the review of internal controls report
for the administrator;
· testing the accuracy of costs
capitalised to investments by tracing a sample of purchases to
custodian and bank statements;
· for unrealised gains/losses, we
obtained an understanding of, and then tested the valuation process
as set out in the ‘valuation and ownership of investments’ risk
above, we recalculated the valuation movements to test that these
had been appropriately recorded and classified; and
· for realised gains/losses, testing
a sample of disposals made during the year by agreeing the proceeds
to bank statements and custodian confirmations and recalculated the
realised gains/losses to test that these were appropriately
recorded and classified. |
Key
observations
|
Having performed the
above stated procedures, we have no material exceptions to report
regarding the accuracy of fair value gains/losses as recorded in
the financial statements. |
Our application of materiality |
We define materiality as the
magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results
of our work. |
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality |
£7,500,000 (2016: £6,600,000) |
Basis for determining
materiality |
2% (2016: 2%) of Net Asset
Value |
Rationale for the benchmark
applied |
Our materiality is based on the net
asset value of the Company as comprehensive income for the Company
is significantly driven by the net asset value. We consider the net
asset value to be the most important balance on which the
shareholders would judge the performance of the Company. |
We agreed with the Audit Committee that we would report all
audit differences in excess of £150,000 (2016: £133,000), as well
as differences below the threshold the, in our view, warranted
reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
|
An overview of the scope of our
audit |
Our audit was scoped by
obtaining an understanding of the Company and its environment,
including internal control, and assessing the risks of material
misstatement. Audit work to respond to the risks of material
misstatement was performed directly by the audit engagement
team.
The Company is administered by a third party Guernsey regulated
service provider. As part of our audit, we assessed the design and
implementation of relevant controls established at the service
provider. |
Other
information |
The Directors are
responsible for the other information. The other information
comprises the information included in the annual report Chairman’s
Review, Business Model and Strategy, Investment Manager’s Report,
Top Ten Holdings, Directors, Report of the Directors, Corporate
Governance Statement, Directors’ Remuneration Report, Audit
Committee Report and Report of the Depository, other than the
financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
In this context, matters that we are specifically required to
report to you as uncorrected material misstatements of the other
information include where we conclude that: |
We have nothing to report in
respect of these matters. |
Responsibilities of
directors |
As explained more fully
in the directors’ responsibilities statement, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company’s ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so. |
Auditor’s responsibilities for
the audit of the financial statements |
Our objectives are to
obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report. |
Use of our report |
This report is made solely to the
Company’s members, as a body, in accordance with Section 262 of the
Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed. |
Report
on other legal and regulatory requirements
Matters on which we are required to report by exception |
Adequacy of
explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required to report
to you if, in our opinion:
· we have not received all the
information and explanations we require for our audit; or
· proper accounting records have not
been kept by the Company; or
· the financial statements are not in
agreement with the accounting records. |
We have nothing to report in respect of these
matters. |
John Clacy FCA
for and on behalf of Deloitte LLP
Recognised Auditor
St Peter Port, Guernsey
15 September 2017
Statement of
Financial Position
As at 30 June 2017
|
|
|
30.06.17 |
|
30.06.16 |
|
Notes |
|
£ |
|
£ |
ASSETS |
|
|
|
|
|
Non-current
assets |
|
|
|
|
|
Investments at fair
value through profit or loss |
10 |
|
346,628,281 |
|
325,496,896 |
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
|
|
27,950,946 |
|
14,513,399 |
Derivative financial
assets |
18,19 |
|
5,593 |
|
4,071,490 |
Receivables |
11 |
|
3,147,558 |
|
537,094 |
|
|
|
31,104,097 |
|
19,121,983 |
Total
assets |
|
|
377,732,378 |
|
344,618,879 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Capital and
reserves attributable to the |
|
|
|
|
|
Company's
shareholders |
|
|
|
|
|
Management share
capital |
13 |
|
2 |
|
2 |
Net assets
attributable to holders of redeemable |
|
|
|
|
|
participating
preference shares |
|
|
375,601,706 |
|
331,484,744 |
Total
equity |
|
|
375,601,708 |
|
331,484,746 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
Payables |
12 |
|
1,216,265 |
|
400,730 |
Derivative financial
liabilities |
18,19 |
|
914,405 |
|
12,733,403 |
Total
liabilities |
|
|
2,130,670 |
|
13,134,133 |
|
|
|
|
|
|
Total equity and
liabilities |
|
|
377,732,378 |
|
344,618,879 |
|
|
|
|
|
|
Net assets
attributable to holders of redeemable |
|
|
|
|
|
participating
preference shares (per share) |
13,14 |
|
2.287 |
|
2.127 |
The Financial Statements were approved on 15 September 2017
and signed on behalf of the Board of Directors by:
Ashe Windham
Chairman
Sarah Evans
Director
The notes form an integral part of these Financial
Statements.
Statement of
Comprehensive Income
For the year ended
30 June 2017
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
Notes |
|
Revenue |
|
Capital |
|
Total |
|
Total |
|
|
|
£ |
|
£ |
|
£ |
|
£ |
|
|
|
|
|
|
|
|
|
|
Fixed interest
income |
|
|
837,590 |
|
- |
|
837,590 |
|
925,088 |
Dividend income |
|
|
3,961,697 |
|
- |
|
3,961,697 |
|
3,339,639 |
Net changes in fair
value of financial assets |
|
|
|
|
|
|
|
|
|
at fair value through
profit or loss |
6 |
|
- |
|
31,261,914 |
|
31,261,914 |
|
21,005,348 |
Other losses |
7 |
|
- |
|
(2,418,460) |
|
(2,418,460) |
|
(24,242,110) |
Total
income |
|
|
4,799,287 |
|
28,843,454 |
|
33,642,741 |
|
1,027,965 |
|
|
|
|
|
|
|
|
|
|
Management fees |
8 |
|
- |
|
(3,368,232) |
|
(3,368,232) |
|
(3,030,471) |
Expenses |
9 |
|
(838,619) |
|
(241,609) |
|
(1,080,228) |
|
(994,389) |
Total
expenses |
|
|
(838,619) |
|
(3,609,841) |
|
(4,448,460) |
|
(4,024,860) |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for
the year before tax |
|
|
3,960,668 |
|
25,233,613 |
|
29,194,281 |
|
(2,996,895) |
Withholding tax |
|
|
(423,504) |
|
- |
|
(423,504) |
|
(496,837) |
Profit/(loss) for
the year after tax |
|
|
3,537,164 |
|
25,233,613 |
|
28,770,777 |
|
(3,493,732) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income/(loss) |
|
|
|
|
|
|
|
|
|
for the
year |
|
|
3,537,164 |
|
25,233,613 |
|
28,770,777 |
|
(3,493,732) |
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings/(loss) per share * |
|
|
2.23p |
|
15.91p |
|
18.14p |
|
(2.25p) |
* Basic and diluted earnings/(loss) per share
are calculated by dividing the profit after taxation by the
weighted average number of redeemable participating preference
shares. The weighted average number of shares for the year was
158,637,322 (30 June 2016:
155,483,415).
The notes form an integral part of these Financial
Statements.
Statement of
Changes in Equity
For the year ended
30 June 2017
|
|
|
|
|
Total |
|
|
Management |
Share |
Other |
01.07.16 to |
|
Notes |
share
capital |
capital |
reserves |
30.06.17 |
|
|
|
£ |
£ |
£ |
Balance at 30 June
2016 |
|
2 |
128,816,232 |
202,668,512 |
331,484,746 |
Total
comprehensive income for the year |
- |
- |
28,770,777 |
28,770,777 |
Transactions with
Shareholders: |
|
|
|
|
|
Share capital
issued |
13 |
- |
19,617,358 |
- |
19,617,358 |
Share issue costs |
13 |
- |
(182,699) |
- |
(182,699) |
Distribution for the
year |
5 |
- |
- |
(4,088,474) |
(4,088,474) |
Balance at 30 June
2017 |
|
2 |
148,250,891 |
227,350,815 |
375,601,708 |
|
|
|
|
|
|
Net Assets
attributable to holders of redeemable participating preference
shares |
|
|
at the end of the
year |
|
|
|
|
375,601,708 |
|
|
|
|
|
Total |
|
|
Management |
Share |
Other |
01.07.15 to |
|
Notes |
share capital |
capital |
reserves |
30.06.16 |
|
|
|
£ |
£ |
£ |
Balance at 30 June
2015 |
|
2 |
125,770,151 |
211,452,250 |
337,222,403 |
Total
comprehensive loss for the year |
- |
- |
(3,493,732) |
(3,493,732) |
Transactions with Shareholders: |
|
|
|
|
Share capital
issued |
13 |
- |
3,076,850 |
- |
3,076,850 |
Share issue
costs |
13 |
- |
(30,769) |
- |
(30,769) |
Distribution for
the year |
5 |
- |
- |
(5,290,006) |
(5,290,006) |
Balance at 30 June
2016 |
|
2 |
128,816,232 |
202,668,512 |
331,484,746 |
|
|
|
|
|
|
Net
Assets attributable to holders of redeemable participating
preference shares |
|
at the end of the
year |
|
|
|
|
331,484,746 |
Under The Companies (Guernsey) Law, 2008, the Company can
distribute dividends from capital and revenue reserves, subject to
satisfying a solvency test.
The notes form an integral part of these Financial
Statements.
Statement of Cash
Flows
For the year ended
30 June 2017
|
|
|
|
Notes |
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
£ |
|
£ |
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
Purchase
of financial assets at fair value through profit or loss |
|
|
|
(146,776,819) |
|
(125,958,145) |
Proceeds from sale of
financial assets at fair value through profit or loss (including
realised gains) |
|
|
|
|
|
155,819,980 |
|
135,708,770 |
Decrease/(increase) in
other receivables |
|
|
|
11 |
|
7,663 |
|
(69) |
Transaction costs paid
to brokers |
|
|
|
|
|
(241,609) |
|
(223,131) |
Fixed interest income
received |
|
|
|
|
|
888,175 |
|
889,129 |
Dividends
received |
|
|
|
|
|
3,531,814 |
|
2,839,933 |
Operating expenses
paid |
|
|
|
|
|
(4,147,546) |
|
(4,086,989) |
Effect of foreign
exchange rate fluctuations |
|
|
|
|
|
(10,235,151) |
|
(8,161,421) |
Cash (used
in)/generated from operating activities |
|
|
|
|
|
(1,153,493) |
|
1,008,077 |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
|
5 |
|
(4,088,474) |
|
(5,290,006) |
Proceeds
from issue of redeemable participating preference shares |
|
|
|
18,794,509 |
|
3,076,850 |
Share issue costs |
|
|
|
12,
13 |
|
(178,585) |
|
(30,769) |
Net cash generated
from/(used in) financing activities |
|
|
|
|
|
14,527,450 |
|
(2,243,925) |
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents |
|
|
|
|
|
13,373,957 |
|
(1,235,848) |
Cash and cash
equivalents at beginning of the year |
|
|
|
|
|
14,513,399 |
|
16,441,960 |
Exchange
gains/(losses) on cash and cash equivalents |
|
|
|
|
|
63,590 |
|
(692,713) |
Cash and cash
equivalents at end of the year |
|
|
|
|
|
27,950,946 |
|
14,513,399 |
The notes form an integral part of these Financial
Statements.
Notes to the
Financial Statements
For the year ended
30 June 2017
1. The Company
The Company was incorporated with limited liability in Guernsey
on 1 June 2004 as a company limited
by shares and as an authorised closed-ended investment company. As
an existing closed-ended fund the Company is deemed to be granted
an authorised declaration in accordance with section 8 of the
Protection of Investors (Bailiwick of Guernsey) Law, 1987, as
amended and rule 6.02 of the Authorised Closed-ended Investment
Schemes Rules 2008. The Company is listed on the Main Market of the
London Stock Exchange (“LSE”).
2. Significant accounting policies
a) Statement
of Compliance
The Financial Statements of the Company for the year ended
30 June 2017 have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union and the Listing Rules of
the London Stock Exchange in compliance with the Companies
(Guernsey) Law, 2008.
b) Basis of
preparation
The Financial Statements are prepared in Pound Sterling (£),
which is the Company’s functional and presentation currency. The
Financial Statements have been prepared on a going concern basis
under the historical cost convention, as modified by the
revaluation of financial assets and financial liabilities at fair
value through profit or loss.
This Annual Financial Report and Financial Statements, covering
the year from 1 July 2016 to
30 June 2017, has been audited.
c) Going
concern
The Directors believe that, having considered the Company’s
investment objective (see Business Model and Strategy), financial
risk management and associated risks (see note 19 to the Financial
Statements) and in view of the liquidity of investments, the income
deriving from those investments and its holding in cash and cash
equivalents, the Company has adequate financial resources and
suitable management arrangements in place to continue as a going
concern for at least twelve months from the date of approval of the
Annual Financial Statements.
d) Standards,
amendments and interpretations that are not yet effective
The following standards and interpretations, which have not been
applied in these Financial Statements, were in issue at the
reporting date but were not yet effective:
IFRS 9 – Financial instruments: Classification and measurement
(effective date – 1 January 2018)
IFRS 15 – Revenue from Contracts with Customers (effective date
– 1 January 2018)
IFRS 16 – Leases (effective date – 1
January 2019)
The Board anticipate that the adoption of these standards and
interpretations in a future period will not have a material impact
on the Financial Statements of the Company, other than IFRS 9. The
Company is currently evaluating the potential effect of this
standard.
e) Financial
instruments
i)
Classification
Financial assets are classified into the following categories:
financial assets at fair value through profit or loss and loans and
receivables.
The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial
recognition.
Financial liabilities are classified as either financial
liabilities at fair value through profit or loss or other financial
liabilities.
ii)
Recognition
Investment assets at fair value
through profit or loss (“investments”)
Financial assets and derivatives are recognised in the Company’s
Statement of Financial Position when the Company becomes a party to
the contractual provisions of the instrument.
Purchases and sales of investments are recognised on the trade
date (the date on which the Company commits to purchase or sell the
investment). Investments purchased are initially recorded at fair
value, being the consideration given and excluding transaction or
other dealing costs associated with the investment.
Subsequent to initial recognition, investments are measured at
fair value. Gains and losses arising from changes in the fair value
of investments and gains and losses on investments that are sold
are recognised through profit or loss in the Statement of
Comprehensive Income within net changes in fair value of financial
assets at fair value through profit or loss.
Derivatives
Forward foreign currency contracts are treated as derivative
contracts and as such are recognised at fair value on the date on
which they are entered into and subsequently remeasured at their
fair value. Fair value is determined by rates in active currency
markets. All derivatives are carried as assets when fair value is
positive and as liabilities when fair value is negative. The gain
or loss on remeasurement to fair value is recognised immediately
through profit or loss in the Statement of Comprehensive Income
within other gains in the period in which they arise.
Offsetting of financial
instruments
Financial assets and financial liabilities are offset and the
net amount reported in the Statement of Financial Position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net
basis, or to realise assets and settle the liabilities
simultaneously.
iii) Measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Investments traded in
active markets are valued at the latest available bid prices ruling
at midnight on the reporting date. The Directors are of the opinion
that the bid-market prices are the best estimate of fair value.
Gains and losses arising from changes in the fair value of
financial assets/(liabilities) are shown as net gains or losses on
financial assets through profit or loss in note 10 and recognised
in the Statement of Comprehensive Income in the period in which
they arise.
Derecognition of financial
instruments
A financial asset is derecognised when: (a) the rights to
receive cash flows from the asset have expired, (b) the Company
retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to
a third party under a “pass through arrangement”; or (c) the
Company has transferred substantially all the risks and rewards of
the asset, or has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expired.
Realised and unrealised gains and
losses
Realised gains and losses arising on disposal of investments are
calculated by reference to the proceeds received on disposal and
the average cost attributable to those investments, and are
recognised in the Statement of Comprehensive Income. Unrealised
gains and losses on investments are recognised in the Statement of
Comprehensive Income.
Fair value
Investments consist of listed or quoted equities or equity
related securities, options and bonds which are issued by corporate
issuers, supra-nationals or government organisations and investment
in funds.
Investments traded in active markets are valued at the latest
available bid prices ruling at midnight on the reporting date.
Shares in investment funds are not listed on an actively traded
exchange and these are valued at the latest estimate of NAV from
the administrator of the respective investment funds as the most
recent price is the best estimate of the amount for which holdings
could have been disposed of at the reporting date.
f) Income
Dividend income from equity investments is recognised through
profit or loss in the Statement of Comprehensive Income when the
relevant investment is quoted ex-dividend. Investment income is
included gross of withholding tax. Interest income is recognised
through profit or loss in the Statement of Comprehensive Income for
all debt instruments using the effective interest rate method.
g) Expenses
Expenses are accounted for on an accruals basis. Expenses
incurred on the acquisition of financial assets at fair value
through profit or loss and management fees are charged to the
Statement of Comprehensive Income in capital. All other expenses
are recognised through profit or loss in the Statement of
Comprehensive Income in revenue.
The Company’s management fees are allocated between the capital
and revenue accounts of the Company in a ratio as decided by the
Board at its sole discretion. All other administrative expenses of
the Company are charged wholly to the revenue account. Currently
100% of the management fees are charged to capital.
h) Cash and cash
equivalents
Cash comprises cash in hand and deemed deposits. Cash
equivalents are short-term, highly liquid investments with original
maturities of three months or less and bank overdrafts.
i) Translation
of foreign currency
Functional and presentation
currency
The Financial Statements of the Company are presented in the
currency of the primary economic environment in which the Company
operates (its ‘functional currency’). The Directors have considered
the currency in which the original capital was raised,
distributions will be made and ultimately the currency in which
capital would be returned in a liquidation. On balance, the
Directors believe that Pound Sterling best represents the
functional currency of the Company. For the purpose of the
Financial Statements, the results and financial position of the
Company are expressed in Pound Sterling, which is the presentation
currency of the Company.
Foreign currency transactions are translated into the functional
currency using the exchange rate prevailing at the transaction
date. Foreign exchange gains and losses resulting from the
settlement of such transactions and those from the translation at
period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement
of Comprehensive Income.
Translation differences on non-monetary items such as financial
assets held at fair value through profit or loss are reported as
part of net changes in fair value on financial assets through
profit or loss in the Statement of Comprehensive Income.
j) Share issue
costs
Share issue costs are fully written off against the share
capital account in the period of the share issue.
k) Redeemable
participating preference shares
As the Company’s redeemable participating preference shares are
redeemable at the sole option of the Directors, they are required
to be classified as equity instruments.
l)
Receivables
Receivables are amounts due in the ordinary course of business.
If collection is expected in one year or less, they are classified
as current assets. If not, they are presented as non-current
assets. Receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
m) Payables
Payables are obligations to pay for services that have been
acquired in the ordinary course of business. Payables are
classified as current liabilities if payment is due within one year
or less. If not, they are presented as non-current liabilities.
Payables are recognised initially at fair value plus any directly
attributable incremental costs of acquisition or issue.
3. Significant accounting judgements,
estimates and assumptions
The preparation of the Financial Statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and the
reported amounts of assets and liabilities, income and expense and
the accompanying disclosures. Uncertainty about these assumptions
and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of revision and future periods
if the revision affects both current and future periods.
Judgements
In the process of applying the Company’s accounting policies,
management has made the following judgement, which has the most
significant effect on the amounts recognised in the Financial
Statements:
Functional currency
As disclosed in note 2(i), the Company’s functional currency is
Pound Sterling. Pound Sterling is the currency in which the
original capital was raised, distributions are made and ultimately
the currency in which capital would be returned in a
liquidation.
4. Taxation
The Company has been granted Exempt Status under the terms of
The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 to income
tax in Guernsey. Its liability is an annual fee of £1,200
(30 June 2016: £1,200).
The amounts disclosed as taxation in the Statement of
Comprehensive Income relates solely to withholding tax suffered at
source on income. Foreign capital gains tax charges are deducted
from realised investment gains.
5. Dividends to shareholders
Dividends, if any, are declared semi-annually, usually in
September and March each year. The Company paid and declared the
following dividends during the year:
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
|
|
2016
Second interim dividend of 1.7p (2015: 1.7p) |
|
|
|
2,649,253 |
|
2,640,753 |
2017 First
interim dividend of 0.9p (2016: 1.7p) |
|
|
|
1,439,221 |
|
2,649,253 |
|
|
|
|
|
|
4,088,474 |
|
5,290,006 |
6. Net changes in financial assets at
fair value through profit or loss
|
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Net
changes in financial assets at fair value through profit or
loss |
|
|
|
|
during the year
comprise: |
|
|
|
|
|
|
|
|
|
|
Gains
realised on investments sold during the year |
|
|
|
43,074,315 |
|
22,334,266 |
Losses
realised on investments sold during the year |
|
|
(5,640,793) |
|
(13,898,697) |
Movement
in unrealised gains arising from changes in fair value |
|
33,740,317 |
|
49,126,905 |
Movement
in unrealised losses arising from changes in fair value |
|
(39,911,925) |
|
(36,557,126) |
|
|
|
|
|
|
|
|
|
|
|
Net
changes in fair value on financial assets at fair value |
|
|
|
|
through profit or
loss |
|
|
|
|
|
|
|
31,261,914 |
|
21,005,348 |
7. Other (losses)/gains
|
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Movement
in unrealised gains/(losses) on spot and forward foreign currency
contracts |
|
7,753,101 |
|
(15,387,976) |
Realised
losses on spot and forward foreign currency contracts |
|
(10,185,257) |
|
(8,251,130) |
Net losses
on spot and forward foreign currency contracts |
|
(2,432,156) |
|
(23,639,106) |
Other
realised and unrealised foreign exchange gains/(losses) |
|
13,696 |
|
(603,004) |
|
|
|
|
|
|
|
|
(2,418,460) |
|
(24,242,110) |
8. Management fees
The management fees were charged to the capital reserves of the
Company.
The management fees for the year, including outstanding balances
at end of the year, are detailed below.
|
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Management
fees for the year |
|
|
|
|
|
|
3,368,232 |
|
3,030,471 |
|
|
|
|
|
|
|
|
|
|
|
Payable at end of the
year |
|
|
|
|
|
|
|
288,681 |
|
247,113 |
The basis for calculating the management fees is set out in the
General Information section.
9. Expenses
|
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Administration
fee* |
|
|
|
|
|
|
|
410,931 |
|
374,180 |
Transaction costs |
|
|
|
|
|
|
|
241,609 |
|
223,131 |
Directors’ fees |
|
|
|
|
|
|
|
140,677 |
|
146,925 |
General expenses |
|
|
|
|
|
|
|
188,708 |
|
153,497 |
Custodian
and Depositary fees* |
|
|
|
|
|
66,803 |
|
61,156 |
Audit fee |
|
|
|
|
|
|
|
23,100 |
|
27,500 |
Auditors’
remuneration for interim review |
|
|
|
8,400 |
|
8,000 |
|
|
|
|
|
|
|
|
1,080,228 |
|
994,389 |
*The basis for calculating the Administration fees as well as
the Custodian and Depositary fees are set out in the General
Information section.
All expenses were charged to revenue apart from transaction
costs of £241,609 (30 June 2016:
£223,131) which were charged to the capital reserves of the
Company.
10. Investment assets at fair value
through profit or loss
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Cost of
investments held at start of the year |
|
|
|
287,068,071 |
|
288,437,122 |
Acquisitions at cost during the year |
|
|
|
147,526,819 |
|
125,958,145 |
Disposals
at cost during the year |
|
|
|
|
|
(120,223,824) |
|
(127,327,196) |
Cost of
investments held at end of the year |
|
|
|
314,371,066 |
|
287,068,071 |
Fair value above
cost |
|
|
|
|
|
|
|
32,257,215 |
|
38,428,825 |
Investments designated at fair value through profit or loss |
|
346,628,281 |
|
325,496,896 |
11. Receivables
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Amounts
receivable within one year: |
|
|
|
|
|
|
Investment
income receivable |
|
|
|
|
|
233,752 |
|
225,257 |
Fixed
interest income receivable |
|
|
|
|
|
197,512 |
|
248,097 |
Amounts
due on issue of redeemable participating preference shares |
822,850 |
|
- |
Securities sold
receivable |
|
|
|
|
|
|
|
1,891,362 |
|
53,995 |
Other receivables |
|
|
|
|
|
|
|
2,082 |
|
9,745 |
|
|
|
|
|
|
|
|
3,147,558 |
|
537,094 |
The Directors consider that the carrying amount of receivables
approximate to their fair value.
12. Payables
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Amounts
falling due within one year: |
|
|
|
|
|
|
Purchases
of investments awaiting settlement |
|
|
|
750,000 |
|
- |
Share issue costs
payable |
|
|
|
|
|
|
|
4,114 |
|
- |
Management fees
payable |
|
|
|
|
|
|
|
288,681 |
|
247,113 |
Withholding taxes
payable |
|
|
|
|
|
|
|
6,392 |
|
4,276 |
Directors' fees
payable |
|
|
|
|
|
|
|
38,482 |
|
34,500 |
Other payables |
|
|
|
|
|
|
|
128,596 |
|
114,841 |
|
|
|
|
|
|
|
|
1,216,265 |
|
400,730 |
The Directors consider that the carrying amount of payables
approximate to their fair value.
13. Share capital
|
|
|
|
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
Authorised Share Capital |
|
|
|
|
|
|
£ |
|
£ |
100
Management Shares of £1.00 each |
|
|
|
100 |
|
100 |
200,000,000 Unclassified Shares of 0.01p each |
|
|
|
20,000 |
|
20,000 |
75,000,000
C Shares of 0.10p each |
|
|
|
|
|
75,000 |
|
75,000 |
|
|
|
|
|
|
|
|
95,100 |
|
95,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
Share Capital |
|
|
|
|
01.07.16 to |
|
01.07.15 to |
|
01.07.16 to |
|
01.07.15 to |
|
|
|
|
30.06.17 |
|
30.06.16 |
|
30.06.17 |
|
30.06.16 |
Issued Share
Capital |
|
|
|
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
|
|
|
|
Management
Shares |
|
|
|
|
|
|
|
|
|
|
Management
Shares of £1.00 each |
|
2 |
|
2 |
|
2 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Equity
Shares |
|
|
|
|
|
|
|
|
|
|
Redeemable
Participating Preference |
|
|
|
|
|
|
|
Shares of 0.01p
each: |
|
|
|
|
|
|
|
|
|
|
Balance at start of
year |
|
|
|
155,838,416 |
|
154,413,416 |
|
128,816,232 |
|
125,770,151 |
Issued and
fully paid during the year |
8,025,000 |
|
1,425,000 |
|
18,794,508 |
|
3,076,850 |
Issued and
awaiting settlement |
|
350,000 |
|
- |
|
822,850 |
|
- |
Share issue costs |
|
|
|
- |
|
- |
|
(182,699) |
|
(30,769) |
Balance as at end of
year |
|
|
|
164,213,416 |
|
155,838,416 |
|
148,250,891 |
|
128,816,232 |
Management shares
The Management shares, of which there are 2 in issue, were
created to comply with the Company Memorandum and Amended and
Restated Articles of Association. The management shares carry one
vote each on a poll, do not carry any right to dividends and, in a
winding-up, rank only for a return of the amount of the paid-up
capital on such shares after return of capital on all other shares
in the Company. The management shares are not redeemable.
Unclassified shares
Unclassified shares can be issued as nominal shares or
redeemable participating preference shares. Nominal shares can only
be issued at par to the Administrator. The Administrator is obliged
to subscribe for nominal shares for cash at par when redeemable
participating preference shares are redeemed to ensure that funds
are available to redeem the nominal amount paid up on redeemable
participating preference shares. The holder or holders of nominal
shares shall have the right to receive notice of and to attend
general meetings of the Company but shall not be entitled to vote
thereat. Nominal shares shall carry no right to dividends. In a
winding-up, holders of nominal shares shall be entitled to be
repaid an amount equal to their nominal value out of the assets of
the Company.
The holders of fully paid redeemable participating preference
shares carry a preferential right to a return of capital in
priority to the management shares but have no pre-emptive right and
are entitled to one vote at all meetings of the relevant class of
shareholders.
C Shares
There were no C Shares in issue at year end (30 June 2016: Nil).
Blocklisting and additional shares
issued
At the start of the year, the Company had the ability to issue
12,256,342 redeemable participating shares under a blocklisting
facility. Under the blocklisting facility, 8,375,000 (30 June 2016: 1,425,000) new redeemable
participating preference shares of 0.01
pence each were allotted and issued during the year for a
total consideration of £19,617,358 (30 June 2016: £3,076,850).
These new redeemable participating preference shares rank pari
passu with the existing shares in issue.
As at 30 June 2017, the Company had the ability to issue a
further 7,781,342 (30 June 2016:
12,256,342) redeemable participating preference shares under the
blocklisting facility.
Redeemable participating preference
shares in issue
As at 30 June 2017, the Company had 164,213,416
(30 June 2016: 155,838,416)
redeemable participating preference shares of 0.01 (30 June 2016: 0.01) pence each and 2
(30 June 2016: 2) Management shares
of £1.00 (30 June 2016: £1.00) each
in issue. Therefore, the total voting rights in the Company at
30 June 2017 were 164,213,418
(30 June 2016: 155,838,418).
Purchase of Own Shares by the
Company
The Company has the ability to operate a share buy back facility
whereby it 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 per cent. of the Company’s shares in issue following
the admission of shares trading on the LSE’s market for listed
securities.
During the year the Company did not purchase any of its own
shares (30 June 2016: Nil). For
additional information refer to note 20.
14. NAV reconciliation
The Company announces its NAV, based on mid-market value, to the
LSE after each weekly and month end valuation point. The following
is a reconciliation of the NAV per share attributable to redeemable
participating preference shareholders as presented in these
Financial Statements, using International Financial Reporting
Standards, which requires the use of bid prices, to the NAV per
share reported to the LSE:
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
£ |
|
£ |
NAV per
share published on the LSE as at the year end |
|
|
2.290 |
|
2.130 |
IAS 39 valuations (MID
to BID) |
|
|
|
|
|
(0.002) |
|
(0.008) |
Adjustment to
valuation |
|
|
|
|
|
(0.001) |
|
0.005 |
Net assets
attributable to holders of redeemable |
|
|
|
|
|
|
participating preference shares (per share) |
|
|
|
2.287 |
|
2.127 |
15. Contingent liabilities
There were no contingent liabilities as at 30 June 2017 (30 June
2016: £Nil).
16. Related party transactions
The Directors are responsible for the determination of the
investment policy of the Company and have overall responsibility
for the Company's activities.
Investment Management Agreement
The Company is managed by Ruffer AIFM Ltd, a subsidiary of
Ruffer LLP, a privately owned business registered in England and
Wales as a limited liability partnership. The Company and the
Investment Manager have entered into an Investment Management
Agreement under which the Investment Manager has been given
responsibility for the day-to-day discretionary management of the
Company’s assets (including uninvested cash) in accordance with the
Company’s investment objective and policy, subject to the overall
supervision of the Directors and in accordance with the investment
restrictions in the Investment Management Agreement and the
Company’s Articles of Association.
The market value of CF Ruffer Japanese Fund and CF Ruffer Gold
are deducted from the NAV of the Company before the calculation of
management fees on a monthly basis. For additional information,
refer to the Portfolio Statement. Management fees for the year and
payable at the end of the year are disclosed in note 8.
Shares held in the Company as
Managing Member of Ruffer LLP
As at 30 June 2017, an immediate
family member of the Chairman Ashe Windham owned 100 (30 June 2016: 100) Shares in the Managing Member
of the Ruffer LLP. This amounts to less than 5% (30 June 2016: less than 5%) of the Company’s
issued share capital.
Directors’ remuneration
Directors’ remuneration is set out in the Directors’
Remuneration Report.
Shares held by related parties
As at 30 June 2017, Directors of
the Company held the following numbers of shares beneficially:
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
Directors |
|
|
|
|
|
Shares |
|
Shares |
Ashe Windham* |
|
|
|
|
|
90,000 |
|
90,000 |
Sarah Evans |
|
|
|
|
|
10,000 |
|
- |
Christopher
Russell |
|
|
|
|
|
- |
|
- |
John V Baldwin |
|
|
|
|
|
- |
|
- |
Jill May |
|
|
|
|
|
- |
|
- |
Jeannette
Etherden** |
|
|
|
|
|
- |
|
36,627 |
Wayne Bulpitt** |
|
|
|
|
|
- |
|
20,000 |
Christopher
Spencer** |
|
|
|
|
|
- |
|
14,157 |
* Ashe Windham holds 70,000 shares whilst his wife holds 20,000
shares.
** Resigned during the year.
As at 30 June 2017, Hamish Baillie, Investment Director of
the Investment Manager owned 205,000 (30 June 2016:
174,000) shares in the Company.
As at 30 June 2017, Steve Russell, Investment Director of
the Investment Manager owned 6,450 (30 June
2016: 6,450) shares in the Company.
As at 30 June 2017, Duncan
MacInnes, Investment Manager of the Investment Manager owned 21,800
(30 June 2016: 21,800) shares in the
Company.
As at 30 June 2017, Jonathan
Ruffer, chairman of Ruffer LLP, owned 1,039,335 (30 June 2016: 939,335) shares in the Company.
As at 30 June 2017, the Ruffer LLP (the parent company of
the Company’s Investment Manager) and other entities within the
Ruffer Group held 8,176,042 (30 June
2016: 9,609,728) shares in the Company on behalf of its
discretionary clients.
Investments in related funds
As at 30 June 2017, the Company held investments in five
(30 June 2016: seven) related
investment funds valued at £38,448,294 (30
June 2016: £50,338,249). Refer to the Portfolio Statement
for details.
17. Operating segment reporting
The Board of Directors makes the strategic resource allocations
on behalf of the Company. The Company has determined the operating
segments based on the reports reviewed by the Board, which are used
to make strategic decisions.
The Board is responsible for the Company’s entire portfolio and
considers the business to have a single operating segment. The
Board’s asset allocation decisions are based on a single,
integrated investment strategy, and the Company’s performance is
evaluated on an overall basis.
There were no changes in the reportable segments during the
year.
Revenue earned is reported separately on the face of the
Condensed Statement of Comprehensive Income as dividend income
received from equities, and interest income received from fixed
interest securities and bank deposits.
The Statement of Cash Flows separately reports cash flows from
operating and financing activities.
18. Financial instruments
In accordance with its investment objectives and policies, the
Company holds financial instruments which at any one time may
comprise the following:
• securities held in accordance with the
investment objectives and policies;
• cash and short-term receivables and
payables arising directly from operations;
• derivative transactions including
investment in forward foreign currency contracts; and
• borrowing used to finance investment
activity up to a maximum of 30% of the NAV of the Company.
Terms, conditions and accounting
policies
The financial instruments held by the Company comprise
principally internationally listed or quoted equities or equity
related securities (including convertibles), and/or bonds which are
issued by corporate issuers, supra-nationals or government
organisations.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of its financial assets and liabilities are
disclosed in note 2. The following table analyses the carrying
amounts of the financial assets and liabilities by category as
defined in IAS 39.
The following are the categories of financial instruments held
by the Company at the reporting date:
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
Fair
Value |
|
Fair Value |
|
|
|
|
|
|
£ |
|
£ |
Financial
assets |
|
|
|
|
|
|
|
|
Listed securities |
|
|
|
|
|
314,653,908 |
|
293,079,441 |
Delisted
securities |
|
|
|
|
|
893,512 |
|
- |
UCITS funds |
|
|
|
|
|
31,080,861 |
|
32,417,455 |
Derivative financial
assets |
|
|
|
|
|
5,593 |
|
4,071,490 |
Total
financial assets at fair value through profit and loss |
|
346,633,874 |
|
329,568,386 |
|
|
|
|
|
|
|
|
|
Other financial
assets* |
|
|
|
|
|
31,098,504 |
|
15,050,493 |
|
|
|
|
|
|
|
|
|
*Other
financial assets include cash and cash equivalents and
receivables. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
Fair
Value |
|
Fair Value |
|
|
|
|
|
|
£ |
|
£ |
Financial
liabilities |
|
|
|
|
|
|
|
|
Payables |
|
|
|
|
|
1,216,265 |
|
400,730 |
Derivative financial
liabilities |
|
|
|
|
|
914,405 |
|
12,733,403 |
|
|
|
|
|
|
2,130,670 |
|
13,134,133 |
19. Financial risk management and
associated risks
The Company is exposed to a variety of financial risks as a
result of its activities. These risks include market risk
(including price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk. These risks, which have
applied throughout the year and the Investment Manager’s policies
for managing them are summarised as follows:
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. The Company’s activities expose it primarily to the
market risks of changes in market prices, interest rates and
foreign currency exchange rates.
Market price risk
Market price risk arises mainly from the uncertainty about
future prices of the financial instruments held by the Company. It
represents the potential loss the Company may suffer through
holding market positions in the face of price movements.
The Company’s investment portfolio is exposed to market price
fluctuations which are monitored by the Investment Manager in
pursuance of the investment objectives and policies. Adherence to
investment guidelines and to investment and borrowing powers set
out in the Placing and Offer for Subscription document mitigates
the risk of excessive exposure to any particular type of security
or issuer.
Market price sensitivity analysis
The sensitivity analysis below has been determined based on the
exposure to equity, investment funds and bond price risks at the
reporting date. The 10% reasonably possible price movement for
equity related securities and investment funds and a 100 basis
point increase or a 25 basis point reduction for the interest rate
used by the Company is based on the Investment Manager’s best
estimates.
A 10% (30 June 2016: 10%) increase
in the market prices of equity related investments as at
30 June 2017 would have increased the net assets attributable
to holders of redeemable participating preference shares by
£20,004,458 (30 June 2016:
£17,347,176) and a 10% change in the opposite direction would have
decreased the net assets attributable to holders of redeemable
participating preference shares by an equal opposite amount.
A sensitivity analysis based on the interest rates of bond
related investments as at 30 June 2017 has been considered
under Interest rate risk in note 19.
Actual trading results may differ from the above sensitivity
analysis and these differences could be material.
Foreign currency risk
Foreign currency risk arises from fluctuations in the value of a
foreign currency. It represents the potential loss the Company may
suffer though holding foreign currency assets in the face of
foreign exchange movements.
As a portion of the Company’s investment portfolio is invested
in securities denominated in currencies other than Pound Sterling
(the functional and presentation currency of the Company), the
Statement of Financial Position may be significantly affected by
movements in the exchange rates of such currencies against Pound
Sterling. The Investment Manager has the power to manage exposure
to currency movements by using options, warrants and/or forward
foreign currency contracts and details of the holdings of such
instruments at the date of these Financial Statements is set out
below. In the event of a weak base currency these contracts will
expire at a loss that will be offset by a corresponding gain in the
underlying assets. The opposite would be true when the base
currency is strong.
As at 30 June 2017, the Company had five (30 June 2016: ten) open forward foreign currency
contracts.
Forward contracts as at 30 June 2017
|
|
|
|
|
|
Notional amount |
|
|
|
|
|
|
|
|
of
contracts |
|
Fair
value |
Expiry
date |
|
Underlying |
|
|
|
outstanding |
|
(liabilities)/ |
|
|
|
|
|
|
|
|
assets |
|
|
|
|
|
|
|
|
£ |
15 September 2017 |
|
Foreign
currency (Sale of EUR) |
|
€6,292,000 |
|
(256,820) |
18 August 2017 |
|
Foreign
currency (Sale of USD) |
|
US$112,000,000 |
|
378,616 |
18 August 2017 |
|
Foreign
currency (Sale of JPY) |
|
¥5,000,000,000 |
|
(299,719) |
18 August 2017 |
|
Foreign
currency (Sale of JPY) |
|
¥2,258,000,000 |
|
(736,482) |
|
|
|
|
|
|
|
|
(914,405) |
|
|
|
|
|
|
|
|
|
15 September 2017 |
|
Foreign
currency (Purchase of EUR) |
|
€792,000 |
|
5,593 |
|
|
|
|
|
|
|
|
5,593 |
|
|
|
|
|
|
|
|
|
Forward
contracts as at 30 June 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount |
|
|
|
|
|
|
|
|
of
contracts |
|
Fair value |
Expiry
date |
|
Underlying |
|
|
|
outstanding |
|
assets/ |
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
£ |
19 August
2016 |
|
Foreign
currency (Sale of EUR) |
|
€5,837,950 |
|
(278,575) |
15 July
2016 |
|
Foreign
currency (Sale of USD) |
|
$134,268,700 |
|
(6,142,103) |
15 July
2016 |
|
Foreign
currency (Sale of JPY) |
|
¥5,436,300,000 |
|
(4,000,672) |
15 July
2016 |
|
Foreign
currency (Sale of JPY) |
|
¥496,780,000 |
|
(408,718) |
15 July
2016 |
|
Foreign
currency (Sale of JPY) |
|
¥2,260,114,000 |
|
(1,726,908) |
15 July
2016 |
|
Foreign
currency (Sale of JPY) |
|
¥906,114,000 |
|
(176,341) |
|
|
|
|
|
|
|
|
(12,733,317) |
|
|
|
|
|
|
|
|
|
15 July
2016 |
|
Foreign
currency (Purchase of JPY) |
|
¥1,323,080,000 |
|
1,211,062 |
15 July
2016 |
|
Foreign
currency (Purchase of JPY) |
|
¥501,000,000 |
|
481,199 |
15 July
2016 |
|
Foreign
currency (Purchase of JPY) |
|
¥511,000,000 |
|
551,650 |
15 July
2016 |
|
Foreign
currency (Purchase of JPY) |
|
¥1,857,000,000 |
|
1,827,565 |
|
|
|
|
|
|
|
|
4,071,476 |
Spot Contracts
As at 30 June 2017, the Company
had no (30 June 2016: two) open spot
foreign currency contracts.
Spot contracts as at 30 June 2016
|
|
|
|
|
|
Notional amount |
|
Fair value |
|
|
|
|
|
|
of
contracts |
|
assets/ |
Expiry
date |
Underlying |
|
|
|
outstanding |
|
(liabilities) |
|
|
|
|
|
|
|
|
£ |
1 July
2016 |
Foreign
currency (Sale of EUR) |
|
€9,997 |
|
(86) |
4 July
2016 |
Foreign
currency (Sale of EUR) |
|
€2,999 |
|
14 |
|
|
|
|
|
|
|
|
(72) |
The Investment Manager’s treatment of currency transactions
other than in Pound Sterling is set out in note 2 to the Financial
Statements under “Translation of foreign currency.”
As at 30 June 2017 and 2016, the
Company held the following assets and liabilities in currencies
other than the functional currency:
|
|
30.06.17 |
|
30.06.17 |
|
30.06.16 |
|
30.06.16 |
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
|
£ |
|
£ |
|
£ |
|
£ |
Canadian Dollar |
|
5,428,102 |
|
1,707 |
|
3,956,460 |
|
- |
Euro |
|
5,617,076 |
|
- |
|
5,511,179 |
|
278,575 |
Hong Kong Dollar |
|
1,880,981 |
|
3,326 |
|
1,476,613 |
|
4,276 |
Japanese Yen |
|
56,999,414 |
|
1,036,201 |
|
44,334,467 |
|
6,312,639 |
Norwegian Krone |
|
1,722,641 |
|
- |
|
1,614,702 |
|
- |
Swiss Franc |
|
2,931,702 |
|
- |
|
2,810,827 |
|
- |
United States
Dollar |
|
88,530,292 |
|
(377,258) |
|
119,069,985 |
|
6,142,103 |
Foreign currency sensitivity
As at 30 June 2017, if the foreign exchange rates had
weakened 10% (30 June 2016: 10%)
against Pound Sterling with all other variables held constant, net
assets attributable to holders of redeemable participating
preference shares would be £4,822,977 (30
June 2016: £3,796,693) lower net of open forward foreign
currency contracts and due mainly as a result of foreign currency
losses on translation of these financial assets and liabilities to
Pound Sterling. As at 30 June 2017, a 10% (30 June 2016: 10%) strengthening of the foreign
exchange rates against Pound Sterling would have resulted in an
equal but opposite effect on the net assets attributable to holders
of redeemable participating preference shares. Any changes in the
foreign exchange rate will directly affect the profit and loss,
allocated to the capital column of the Statement of Comprehensive
Income.
Actual trading results may differ from the above sensitivity
analysis and these differences could be material.
As has been seen in previous years currencies can fluctuate by
more than this indicative amount. The Investment Manager will
incorporate this variable into risk analysis when managing the
investments.
Interest rate risk
Interest rate risk represents the uncertainty of investment
return due to changes in the market rates of interest.
The Company invests in fixed and floating rate securities. The
income of the Company may be affected by changes to interest rates
relevant to particular securities or as a result of the Investment
Manager being unable to secure similar returns on the expiry of
contracts or sale of securities. Interest receivable on bank
deposits or payable on the bank overdraft positions will be
affected by fluctuations in interest rates.
The Investment Manager actively manages the Company’s exposure
to interest rate risk, paying heed to prevailing interest rates and
economic conditions, market expectations and their own opinions of
likely movements in interest rates. Currently the entire exposure
of the Company to fixed interest securities is in the form of
index-linked bonds. The value of these investments is determined by
current and expected inflation and interest rates.
The value of fixed interest securities will be affected by
general changes in interest rates that will in turn result in
increases or decreases in the market value of those instruments.
When interest rates decline, the value of the Company’s investments
in fixed rate debt obligations can be expected to rise, and when
interest rates rise, the value of those investments may
decline.
The investment portfolio details the security type, issuer,
interest rate, and maturity date of all of the Company’s fixed and
floating rate securities as at 30 June 2017.
The tables below summarise the Company’s exposure to interest
rate risks. It includes the Company’s financial assets and
liabilities at fair values, categorised by underlying interest rate
type.
As at 30 June
2017
|
|
|
Floating |
|
Fixed |
|
Non-Interest |
|
Total |
|
|
|
rate |
|
rate |
|
bearing |
|
30.06.17 |
|
|
|
£ |
|
£ |
|
£ |
|
£ |
Financial
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
27,950,946 |
|
- |
|
- |
|
27,950,946 |
Investments designated at fair value |
|
|
|
|
|
|
|
|
through profit or
loss |
|
|
- |
|
146,839,335 |
|
199,788,946 |
|
346,628,281 |
Unrealised
gain on open spot and |
|
|
|
|
|
|
|
|
forward
foreign currency contracts |
|
- |
|
- |
|
5,593 |
|
5,593 |
Receivables |
|
|
- |
|
- |
|
3,147,558 |
|
3,147,558 |
|
|
|
27,950,946 |
|
146,839,335 |
|
202,942,097 |
|
377,732,378 |
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
- |
|
- |
|
1,216,265 |
|
1,216,265 |
Unrealised
loss on open spot and |
|
|
|
|
|
|
|
|
forward
foreign currency contracts |
|
- |
|
- |
|
914,405 |
|
914,405 |
|
|
|
- |
|
- |
|
2,130,670 |
|
2,130,670 |
As at 30 June 2016
|
|
|
Floating |
|
Fixed |
|
Non-Interest |
|
Total |
|
|
|
rate |
|
rate |
|
bearing |
|
30.06.16 |
|
|
|
£ |
|
£ |
|
£ |
|
£ |
Financial
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
14,513,399 |
|
- |
|
- |
|
14,513,399 |
Investments designated at fair value |
|
|
|
|
|
|
|
|
through profit or
loss |
|
|
- |
|
152,025,136 |
|
173,471,760 |
|
325,496,896 |
Unrealised gain on open forward |
|
|
|
|
|
|
|
|
foreign currency
contracts |
|
|
- |
|
- |
|
4,071,490 |
|
4,071,490 |
Receivables |
|
|
- |
|
- |
|
537,094 |
|
537,094 |
|
|
|
14,513,399 |
|
152,025,136 |
|
178,080,344 |
|
344,618,879 |
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
- |
|
- |
|
400,730 |
|
400,730 |
Unrealised loss on open forward |
|
|
|
|
|
|
|
|
foreign currency
contracts |
|
|
- |
|
- |
|
12,733,403 |
|
12,733,403 |
|
|
|
- |
|
- |
|
13,134,133 |
|
13,134,133 |
The table below summarises weighted average effective interest
rates for fixed rate financial instruments.
|
|
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
|
|
average period |
|
|
|
average period |
|
|
|
30.06.17 |
|
for
which rate/ |
|
30.06.16 |
|
for which rate/ |
|
|
|
%
p.a. |
|
yield
is fixed |
|
%
p.a. |
|
yield is fixed |
|
|
|
|
|
|
|
|
|
|
Canada Government
Bonds |
|
|
0.6470% |
|
24.44
years |
|
0.2950% |
|
25.44
years |
United
Kingdom Government Bonds |
|
-1.9441% |
|
25.83
years |
|
-1.6131% |
|
30.78
years |
United
States Government Bonds |
|
0.2084% |
|
4.91
years |
|
-0.0257% |
|
11.24
years |
Interest rate sensitivity
analysis
An increase of 100 basis points (30 June
2016: 100 basis points) in interest rates as at the
reporting date would have decreased the net assets attributable to
holders of redeemable participating preference shares by
£25,150,358 (30 June 2016:
£29,826,334) and a decrease of 25 basis points (30 June 2016: 25 basis points) in interest rates
would have increased the net assets attributable to holders of
redeemable participating preference shares by £6,287,589
(30 June 2016: £7,456,584).
Key determinants of interest rates include economic growth
prospects, inflation, governments’ fiscal positions and rates on
nominal bonds of similar maturities. This sensitivity analysis
assumes only a 100 basis point increase and a 25 basis point
decrease in interest rates, with all other variables unchanged.
This would be the equivalent of a 100 basis point increase and 25
basis point decreases in ‘real’ interest rates and as such is
likely to overstate the actual impact of such a move in nominal
rates.
As all the Company’s fixed rate securities are index-linked
bonds, their yields, and as a consequence their prices, are
determined by market perception as to the appropriate level of
yields given the economic background.
This analysis does not allow for the impact of investments held
within Ruffer Protection Strategies which may reduce the
sensitivity to changes in interest rates. See derivatives comment
below.
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company. Failure of any relevant counterparty to perform
its obligations in respect of these items may lead to a financial
loss.
The Company is exposed to credit risk in respect of cash and
cash equivalents and receivables. The credit risk associated with
debtors is limited to the unrealised gains on open derivative
contracts such as forward foreign currency contracts, as detailed
above and receivables. It is the opinion of the Board of Directors
that the carrying amounts of these financial assets represent the
maximum credit risk exposure as at the reporting date.
The Company will not invest in the securities of any company
that is not quoted or does not have a listing on a market specified
in the Financial Services and Markets Act 2000 (Financial
Promotions) Order 2001 except for investments in investment funds
and such other financial markets as may be specifically agreed from
time to time between the Board and the Investment Manager.
All transactions in listed securities are settled/paid upon
delivery using approved brokers. The risk of default is considered
minimal, as delivery of securities sold is only made once the
broker has received payment. Payment is made on a purchase once the
securities have been received by the broker. The trade will fail if
either party fails to meet their obligation.
The Placing and Offer for Subscription document allows
investment in a wide universe of equity related securities and
bonds, including countries that may be classed as emerging or
developing. In adhering to investment restrictions set out within
the document, the Company mitigates the risk of any significant
concentration of credit risk.
Credit risk analysis
The Company’s maximum credit exposure is limited to the carrying
amount of financial assets recognised at the reporting date, as
summarised below:
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
£ |
|
£ |
Cash and cash
equivalents |
|
|
|
|
|
|
27,950,946 |
|
14,513,399 |
Unrealised
gain on open spot and forward foreign currency contracts |
|
5,593 |
|
4,071,490 |
Receivables |
|
|
|
|
|
|
3,147,558 |
|
537,094 |
Financial
assets at fair value through profit or loss |
|
|
|
346,628,281 |
|
325,496,896 |
|
|
|
|
|
|
|
377,732,378 |
|
344,618,879 |
The Company is exposed to material credit risk in respect of
cash and cash equivalents. Substantially, all cash is placed with
Northern Trust (Guernsey) Limited (“NTGL”).
NTGL is a wholly owned subsidiary of The Northern Trust
Corporation (“TNTC”). TNTC is publicly traded and a constituent of
the S&P 500. TNTC has a credit rating of A+ (30 June 2016: A+) from Standard & Poor’s and
A2 (30 June 2016: A2) from
Moody’s.
The Moody’s and/or Standard and Poor (S&P) credit ratings of
the issuers of Bonds held by the Company as at 30 June 2017 were as follows:
|
|
|
|
|
|
|
30.06.17 |
|
30.06.17 |
|
|
|
|
|
|
|
S&P |
|
Moody's |
|
|
|
|
|
|
|
|
|
|
Canada
Government Bond Ltd 2.00% 01/12/2041 |
|
|
|
AAA |
|
Aaa |
UK
Index-Linked Gilt 0.125% 22/11/2019 |
|
|
|
AA |
|
Aa1 |
UK
Index-Linked Gilt 1.875% 22/11/2022 |
|
|
|
AA |
|
Aa1 |
UK
Index-Linked Gilt 0.125% 22/03/2024 |
|
|
|
AA |
|
Aa1 |
UK
Index-Linked Gilt 1.250% 22/11/2055 |
|
|
|
AA |
|
Aa1 |
UK
Index-Linked Gilt 0.375% 22/03/2062 |
|
|
|
AA |
|
Aa1 |
UK
Index-Linked Gilt 0.125% 22/03/2068 |
|
|
|
AA |
|
Aa1 |
US
Treasury Inflation Indexed Bond 1.125% 15/01/2021 |
|
|
|
AA+ |
|
Aaa |
US
Treasury Inflation Indexed Bond 0.625% 15/07/2021 |
|
|
|
AA+ |
|
Aaa |
US
Treasury Inflation Indexed Bond 0.125% 15/01/2023 |
|
|
|
AA+ |
|
Aaa |
US
Treasury Inflation Indexed Bond 0.375% 15/07/2023 |
|
|
|
AA+ |
|
Aaa |
None of the Company’s financial assets are secured by collateral
or other credit enhancements.
Derivatives
The Company has gained exposure to derivative contracts
(predominantly options and forward currency contracts) as a risk
management tool. The intention of using such derivative contracts
has been primarily to minimise the exposure of the Company to the
negative impact of changes to foreign exchange rates, interest
rates, market volatility and to protect the portfolio from a
correlated fall in bonds and equities. At the year end, all such
instruments (except forward foreign exchange contracts) were held
within the Ruffer Protection Strategies vehicle as detailed in the
Portfolio Statement.
Fair value
IFRS 7 requires the Company to classify fair value hierarchy
that reflects the significance of the inputs used in making the
measurements. IFRS 7 establishes a fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value
hierarchy under IFRS 7 are as follows:
Level 1: Quoted prices, based on bid prices, (unadjusted) in
active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability either directly
(that is, as prices) or indirectly (that is, derived from prices);
and
Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgment, considering factors
specific to the asset or liability.
The determination of what constitutes ‘observable’ requires
significant judgment by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following table presents the Company’s financial assets and
liabilities by level within the valuation hierarchy at 30 June 2017.
|
|
|
|
|
|
|
|
30.06.17 |
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
£ |
|
£ |
|
£ |
|
£ |
Financial assets at
fair value |
|
|
|
|
|
|
|
|
through profit or
loss: |
|
|
|
|
|
|
|
|
Government
Index-Linked Bonds |
|
146,839,335 |
|
- |
|
- |
|
146,839,335 |
Preference Shares |
|
639,069 |
|
- |
|
- |
|
639,069 |
Options |
|
- |
|
6,362,095 |
|
- |
|
6,362,095 |
Equities |
|
167,267,027 |
|
- |
|
893,512 |
|
168,160,539 |
Investment Funds |
|
- |
|
24,627,243 |
|
- |
|
24,627,243 |
Derivative financial
assets |
|
- |
|
5,593 |
|
- |
|
5,593 |
Total assets |
|
314,745,431 |
|
30,994,931 |
|
893,512 |
|
346,633,874 |
|
|
|
|
|
|
|
|
|
Financial liabilities
at fair value |
|
|
|
|
|
|
|
|
through profit or
loss: |
|
|
|
|
|
|
|
|
Derivative financial
liabilities |
|
- |
|
914,405 |
|
- |
|
914,405 |
Total liabilities |
|
- |
|
914,405 |
|
- |
|
914,405 |
The following table presents the Company’s financial assets and
liabilities by level within the valuation hierarchy at 30 June 2016.
|
|
|
|
|
|
|
|
30.06.16 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
£ |
|
£ |
|
£ |
|
£ |
Financial assets
at fair value |
|
|
|
|
|
|
|
|
through profit
or loss: |
|
|
|
|
|
|
|
|
Government
Index-Linked Bonds |
|
152,025,136 |
|
- |
|
- |
|
152,025,136 |
Preference
Shares |
|
559,769 |
|
- |
|
- |
|
559,769 |
Options |
|
- |
|
1,128,548 |
|
- |
|
1,128,548 |
Equities |
|
142,006,909 |
|
- |
|
893,512 |
|
142,900,421 |
Investment
Funds |
|
- |
|
26,026,221 |
|
2,856,801 |
|
28,883,022 |
Derivative
financial assets |
|
- |
|
4,071,490 |
|
- |
|
4,071,490 |
Total
assets |
|
294,591,814 |
|
31,226,259 |
|
3,750,313 |
|
329,568,386 |
|
|
|
|
|
|
|
|
|
Financial
liabilities at fair value |
|
|
|
|
|
|
|
|
through profit or
loss: |
|
|
|
|
|
|
|
|
Derivative
financial liabilities |
|
- |
|
12,733,403 |
|
- |
|
12,733,403 |
Total
liabilities |
|
- |
|
12,733,403 |
|
- |
|
12,733,403 |
The Company recognises transfers between levels of fair value
hierarchy as of the end of the reporting period during which the
transfer has occurred. During the year ended 30 June 2017, no
transfers were made.
In the prior year ended 30 June
2016, Ruffer Illiquid Strategies Fund of Funds 2009 Ltd was
transferred from Level 2 to Level 3 as a result of voluntary
liquidation.
Movements in Level 3 investments
|
|
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
|
|
£ |
|
£ |
Opening valuation |
|
|
|
|
|
|
|
3,750,313 |
|
1,409,625 |
Transfer from Level
2 |
|
|
|
|
|
|
|
- |
|
2,856,801 |
Disposals during the
year |
|
|
|
|
|
|
|
(2,856,801) |
|
(516,113) |
Closing valuation |
|
|
|
|
|
|
|
893,512 |
|
3,750,313 |
Assets classified in Level 1 consist of listed or quoted
equities or equity related securities, options and bonds which are
issued by corporate issuers, supra-nationals or government
organisations.
Assets classified in Level 2 are investments in funds
fair-valued using the official NAV of each fund as reported by each
fund’s independent administrator at the reporting date and foreign
exchange forwards fairvalued using publicly available data. The
foreign exchange forwards are shown as derivative financial
assets
and liabilities in the above table.
Assets classified in Level 3 consist of liquidated or illiquid
funds and are reported using the latest available official NAV less
dividends declared to date of each fund as reported by each fund’s
independent administrator at the last reporting date.
Liquidity risk
Liquidity risk is the risk that the Company will find it
difficult or impossible to realise assets or otherwise raising
funds to meet financial commitments. The Company’s liquidity risk
is managed by the Investment Manager who monitors the cash
positions on a regular basis. The Company’s overall liquidity risks
are monitored on a regular basis by the Board of Directors and a
formal report is made by the Investment Manager to the Directors at
each Board Meeting.
As at 30 June 2017 and 2016, the
Company had no significant financial liabilities other than
short-term payables arising directly from investing activity.
20. Capital risk management
The fair value of the Company’s financial assets and liabilities
approximate to their carrying amounts at the reporting date. For
the purposes of this disclosure, redeemable participating
preference shares are considered to be capital.
The Company’s objectives when managing capital are to safeguard
the Company’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. There are no externally-imposed capital
requirements on the Company.
The Company has the ability to borrow up to 30% of its NAV at
any time for short-term or temporary purposes as is necessary for
the settlement of transactions, to facilitate redemption (where
applicable) or to meet ongoing expenses. At the year end the
Company had no borrowings. The Company does not have, nor does it
intend to adopt, any structural gearing. The gearing ratio below is
calculated as total liabilities divided by total equity.
|
|
|
|
|
|
30.06.17 |
|
30.06.16 |
|
|
|
|
|
|
£ |
|
£ |
Total assets |
|
|
|
|
|
377,732,378 |
|
344,618,879 |
Less: total
liabilities |
|
|
|
|
|
(2,130,670) |
|
(13,134,133) |
Total equity |
|
|
|
|
|
375,601,708 |
|
331,484,746 |
|
|
|
|
|
|
|
|
|
Gearing ratio |
|
|
|
|
|
0.57% |
|
3.96% |
The Board considers this gearing ratio to be adequate since
total borrowings above refer only to other payables and unrealised
losses on open spot and forward foreign currency contracts.
Redemption Facility
The Company has a Redemption Facility (which takes the form of a
tender offer to all holders of redeemable participating preference
shares) which was made available after 8
July 2007. This facility may operate annually, in November
each year, at the discretion of the Directors. Redemptions on any
Redemption Date may be restricted to a maximum of 25% in aggregate
of the Shares then in issue, with any tender requests from
shareholders in excess of this being scaled back pro rata.
The facility is intended to address any imbalance in the supply
and demand for the shares and to assist in maintaining a narrow
discount to the NAV per Share at which the shares may be trading.
The Company, will at the sole discretion of the Directors:
(i) purchase shares when deemed
appropriate; and
(ii) allow an annual redemption of up to
25% of the issued shares at the prevailing NAV per Share and may
operate annually in November of each year.
Purchase of Own Shares by the
Company
A special resolution was granted on 30
November 2016 which authorised the Company in accordance
with The Companies (Guernsey) Law, 2008 to make purchases of its
own shares as defined in that Ordinance of its redeemable
participating preference shares of 0.0lp each, provided that:
(i) the maximum
number of shares the Company can purchase is no more than 14.99% of
the Company’s issued share capital;
(ii) the minimum price
(exclusive of expenses) which may be paid for a share is
0.01 pence, being the nominal value
per share;
(iii) the maximum price
(exclusive of expenses) which may be paid for the share is an
amount equal to the higher of (i) 105% of the average of the middle
market quotations for a share taken from the London Stock Exchange
Daily Official List for the 5 business days immediately preceding
the day on which the Share is purchased and (ii) the price
stipulated in Article 5(i) of the Buy back and Stabilisation
Regulation (No 2237 of 2003);
(iv) acquisitions may only
be made pursuant to this authority if the shares are (at the date
of the proposed purchase) trading on the London Stock Exchange at a
discount to the lower of the undiluted or diluted NAV;
(v) the authority
conferred shall expire at the conclusion of the AGM of the Company
in 2016 or, if earlier, on the expiry of 15 months from the passing
of this resolution, unless such authority is renewed prior to such
time; and
(vi) the Company may make a
contract to purchase shares under the authority hereby conferred
prior to the expiry of such authority which will or may be executed
wholly or partly after the expiration of such authority and may
make a purchase of Shares pursuant to any such contract.
21. Subsequent events
These Financial Statements were approved for issuance by the
Board on 15 September 2017. Subsequent events have been
evaluated up until this date.
As at the date of this report the Company had 167,413,416
redeemable participating preference shares of 0.01p each and 2
Management shares of £1.00 each in issue. Therefore, the total
voting rights in the Company at the date of this report were
167,413,418.
On 20 July 2017, an application
was made to the UK Listing Authority and the London Stock Exchange
for the blocklisting of 5,902,499 redeemable preference shares of
0.01 pence each pursuant to the
General Corporate Purposes Scheme with an admission date of
21 July 2017. The shares have been
issued and rank pari passu with the existing shares of the
Company.
Portfolio
Statement as at 30 June 2017
|
|
|
Fair |
|
% |
|
|
Holding at |
Value |
|
of
Total |
|
Currency |
30.06.17 |
£ |
|
Net Assets |
|
|
|
|
|
|
Government
Index-Linked Bonds 39.09% |
|
|
|
|
|
(30.06.16 -
45.86%) |
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
|
|
|
Canada Real Return
Bond 2.00% 01/12/2041 |
CAD |
4,200,000 |
3,803,581 |
|
1.01 |
|
|
|
3,803,581 |
|
1.01 |
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
UK Index-Linked Gilt
0.125% 22/11/2019 |
GBP |
6,135,000 |
7,145,950 |
|
1.90 |
UK Index-Linked Gilt
1.875% 22/11/2022 |
GBP |
14,500,000 |
23,694,378 |
|
6.30 |
UK Index-Linked Gilt
0.125% 22/03/2024 |
GBP |
10,250,000 |
13,251,631 |
|
3.53 |
UK Index-Linked Gilt
1.250% 22/11/2055 |
GBP |
500,000 |
1,723,946 |
|
0.46 |
UK Index-Linked Gilt
0.375% 22/03/2062 |
GBP |
8,400,000 |
21,620,945 |
|
5.76 |
UK Index-Linked Gilt
0.125% 22/03/2068 |
GBP |
7,500,000 |
18,987,263 |
|
5.06 |
|
|
|
86,424,113 |
|
23.01 |
|
|
|
|
|
|
United
States |
|
|
|
|
|
US Treasury Inflation
Indexed Bond 1.125% 15/01/2021 |
USD |
13,500,000 |
12,064,178 |
|
3.21 |
US Treasury Inflation
Indexed Bond 0.625% 15/07/2021 |
USD |
19,350,000 |
16,564,237 |
|
4.41 |
US Treasury Inflation
Indexed Bond 0.125% 15/01/2023 |
USD |
17,500,000 |
14,142,454 |
|
3.77 |
US Treasury Inflation
Indexed Bond 0.375% 15/07/2023 |
USD |
17,000,000 |
13,840,772 |
|
3.68 |
|
|
|
56,611,641 |
|
15.07 |
|
|
|
|
|
|
Total Government
Index-Linked Bonds |
|
|
146,839,335 |
|
39.09 |
|
|
|
|
|
|
Preference Shares
0.17% |
|
|
|
|
|
(30.06.16 -
0.17%) |
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
Raven Russia
Preference Shares |
GBP |
466,474 |
639,069 |
|
0.17 |
|
|
|
639,069 |
|
0.17 |
|
|
|
|
|
|
Total Preference
Shares |
|
|
639,069 |
|
0.17 |
|
|
|
|
|
|
Equities
40.16% |
|
|
|
|
|
(30.06.16 -
36.11%) |
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
|
|
|
France |
|
|
|
|
|
Vivendi |
EUR |
150,000 |
2,566,995 |
|
0.68 |
|
|
|
2,566,995 |
|
0.68 |
|
|
|
|
|
|
Germany |
|
|
|
|
|
Deutsche Post |
EUR |
40,000 |
1,152,184 |
|
0.30 |
TAG Immobilien |
EUR |
157,657 |
1,897,897 |
|
0.51 |
|
|
|
3,050,081 |
|
0.81 |
|
|
|
|
|
|
Norway |
|
|
|
|
|
Statoil |
NOK |
135,530 |
1,722,641 |
|
0.46 |
|
|
|
1,722,641 |
|
0.46 |
|
|
|
|
|
|
Switzerland |
|
|
|
|
|
Novartis |
CHF |
45,700 |
2,931,702 |
|
0.78 |
|
|
|
2,931,702 |
|
0.78 |
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
Belvoir Lettings |
GBP |
449,380 |
458,997 |
|
0.12 |
Better Capital
(2012) |
GBP |
3,088,700 |
833,949 |
|
0.22 |
Better Capital
(2009) |
GBP |
294,641 |
132,588 |
|
0.04 |
Booker Group |
GBP |
1,208,665 |
2,248,117 |
|
0.60 |
Countryside
Properties |
GBP |
575,490 |
1,958,968 |
|
0.52 |
Crawshaw Group |
GBP |
2,000,000 |
450,000 |
|
0.12 |
Games Workshop
Group |
GBP |
130,000 |
1,558,700 |
|
0.41 |
Hansteen Holdings |
GBP |
1,500,000 |
1,866,000 |
|
0.50 |
IP Group |
GBP |
618,386 |
825,545 |
|
0.22 |
ITV |
GBP |
1,100,000 |
1,995,400 |
|
0.53 |
Lloyds Banking
Group |
GBP |
12,600,000 |
8,334,900 |
|
2.22 |
Oakley Capital
Investments |
GBP |
2,825,794 |
4,832,108 |
|
1.29 |
Ocado Group |
GBP |
507,000 |
1,466,751 |
|
0.39 |
PRS Real Estate
Investment Trust |
GBP |
571,100 |
596,800 |
|
0.16 |
Raven Russia |
GBP |
1,638,217 |
798,631 |
|
0.21 |
Renn Universal Growth
Trust |
GBP |
937,500 |
893,512 |
|
0.24 |
Ruffer SICAV UK Mid
& Smaller Companies Fund* |
GBP |
13,235 |
2,736,865 |
|
0.73 |
Secure Trust Bank |
GBP |
58,345 |
1,152,314 |
|
0.31 |
Sophos Group |
GBP |
510,280 |
2,261,051 |
|
0.60 |
Tesco |
GBP |
2,085,000 |
3,519,480 |
|
0.94 |
Vodafone Group |
GBP |
959,522 |
2,088,879 |
|
0.55 |
|
|
|
41,009,555 |
|
10.92 |
|
|
|
|
|
|
Total European
Equities |
|
|
51,280,974 |
|
13.65 |
|
|
|
|
|
|
Canada |
|
|
|
|
|
Imperial Oil |
CAD |
72,000 |
1,612,903 |
|
0.43 |
Total Canadian
Equities |
|
|
1,612,903 |
|
0.43 |
|
|
|
|
|
|
United
States |
|
|
|
|
|
Alliance Data
System |
USD |
10,000 |
1,976,366 |
|
0.53 |
Apple |
USD |
30,734 |
3,407,607 |
|
0.91 |
Check Point Software
Technologies |
USD |
30,000 |
2,519,035 |
|
0.67 |
Exxon Mobil |
USD |
42,497 |
2,640,543 |
|
0.70 |
Lamb Weston
Holdings |
USD |
53,000 |
1,796,928 |
|
0.48 |
Leucadia National |
USD |
120,000 |
2,415,797 |
|
0.64 |
McKesson |
USD |
24,000 |
3,040,302 |
|
0.81 |
Oracle |
USD |
65,000 |
2,509,027 |
|
0.67 |
Tenaris |
USD |
153,800 |
3,685,896 |
|
0.98 |
Ultrapar
Participacoes |
USD |
100,935 |
1,826,846 |
|
0.49 |
Walt Disney |
USD |
49,000 |
4,007,291 |
|
1.06 |
Total United States
Equities |
|
|
29,825,638 |
|
7.94 |
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
|
|
|
China |
|
|
|
|
|
China Life
Insurance |
HKD |
459,000 |
1,077,317 |
|
0.29 |
PICC Property &
Casualty |
HKD |
600,000 |
770,400 |
|
0.19 |
|
|
|
1,847,717 |
|
0.48 |
|
|
|
|
|
|
Japan |
|
|
|
|
|
Bandai Namco
Holdings |
JPY |
130,000 |
3,402,535 |
|
0.91 |
CF Ruffer Japanese
Fund* |
GBP |
4,090,101 |
9,339,745 |
|
2.49 |
East Japan
Railway |
JPY |
25,800 |
1,898,540 |
|
0.51 |
Fujifilm Holdings |
JPY |
119,200 |
3,296,274 |
|
0.88 |
Hazama Ando |
JPY |
259,000 |
1,254,628 |
|
0.33 |
Mitsubishi
Electric |
JPY |
242,000 |
2,676,176 |
|
0.71 |
Mitsubishi Heavy
Industries |
JPY |
443,000 |
1,395,321 |
|
0.37 |
Mitsubishi UFJ
Financial Group |
JPY |
1,125,400 |
5,816,301 |
|
1.55 |
Mitsui Fudosan |
JPY |
104,000 |
1,909,339 |
|
0.51 |
Mizuho Financial
Group |
JPY |
2,028,500 |
2,846,432 |
|
0.76 |
NTT Urban
Development |
JPY |
419,000 |
3,109,126 |
|
0.83 |
Rakuten |
JPY |
283,100 |
2,562,351 |
|
0.68 |
Resona Holdings |
JPY |
656,000 |
2,775,920 |
|
0.74 |
Seven & I
Holdings |
JPY |
75,000 |
2,377,183 |
|
0.63 |
Softbank Group |
JPY |
28,000 |
1,744,268 |
|
0.46 |
Sony |
JPY |
105,900 |
3,109,882 |
|
0.83 |
Sumitomo Mitsui
Financial Group |
JPY |
229,200 |
6,872,073 |
|
1.83 |
T&D Holdings |
JPY |
850,000 |
9,953,065 |
|
2.64 |
|
|
|
66,339,159 |
|
17.66 |
|
|
|
|
|
|
Total Asian
Equities |
|
|
68,186,876 |
|
18.14 |
|
|
|
|
|
|
Total
Equities |
|
|
150,906,391 |
|
40.16 |
|
|
|
|
|
|
Global Investment
Funds 6.56% |
|
|
|
|
|
(30.06.16 -
8.71%) |
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
Herald Worldwide
Fund |
GBP |
64,341 |
2,692,654 |
|
0.72 |
Ruffer Illiquid Multi
Strategies Fund 2015* |
GBP |
16,945,510 |
13,061,599 |
|
3.48 |
Ruffer SICAV Global
Smaller Companies Fund* |
GBP |
45,129 |
6,947,990 |
|
1.85 |
Weiss Korea
Opportunity Fund |
GBP |
1,100,000 |
1,925,000 |
|
0.51 |
|
|
|
24,627,243 |
|
6.56 |
|
|
|
|
|
|
Total Global
Investment Funds |
|
|
24,627,243 |
|
6.56 |
|
|
|
|
|
|
Gold & Gold
Mining Equities 4.59% |
|
|
|
|
|
(30.06.16 -
7.00%) |
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
|
|
|
|
|
|
CF Ruffer Gold
Fund** |
GBP |
9,994,002 |
15,300,817 |
|
4.07 |
Gold Bullion
Securities |
USD |
21,559 |
1,953,331 |
|
0.52 |
|
|
|
17,254,148 |
|
4.59 |
|
|
|
|
|
|
Total Gold &
Gold Mining Equities |
|
|
17,254,148 |
|
4.59 |
|
|
|
|
|
|
Options
1.690% |
|
|
|
|
|
(30.06.16 -
0.34%) |
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom |
|
|
|
|
|
Ruffer Protection
Strategies International* |
GBP |
3,322,243 |
6,362,095 |
|
1.69 |
|
|
|
6,362,095 |
|
1.69 |
|
|
|
|
|
|
Total financial
assets at fair value through profit or loss |
|
|
346,628,281 |
|
92.26 |
|
|
|
|
|
|
Other net current
assets |
|
|
28,973,427 |
|
7.74 |
|
|
|
|
|
|
Management share
capital |
|
|
(2) |
|
- |
Total Value of
Company |
|
|
|
|
|
(attributable to redeemable participating preference
shares) |
|
375,601,706 |
|
100.00 |
These fair values are based on information available at the time
of publication and may differ from the fair values shown in the
unaudited results announcement. These fair values comply with
International Financial Reporting Standards (“IFRS”).
* Ruffer Protection Strategies International and
Ruffer Illiquid Multi Strategies Fund 2015 Ltd are classed as
related parties as they share the same Investment Manager (Ruffer
AIFM Limited) as the Company. CF Ruffer Gold Fund, CF Ruffer
Japanese Fund, Ruffer SICAV Global Smaller Companies 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.
General
Information
Ruffer Investment Company Limited was incorporated with limited
liability in Guernsey as a company limited by shares and as an
authorised closed-ended investment company on 1 June 2004. 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. The
Company predominantly invests in internationally listed or quoted
equities or equity related securities (including convertibles)
and/or bonds which are issued by corporate issuers, supra-nationals
or government organisations.
The Company’s redeemable participating preference shares are
listed on the London Stock Exchange.
The accounting date of the Company is 30 June in each year.
These Annual Financial Statements were authorised for issue on
15 September 2017 by the Directors.
The prices of the shares in the Company are published in The
Financial Times in the “Investment Companies” section, and in the
Daily Telegraph’s “Share Prices & Market Capitalisations”
section under “Investment Trusts”.
The Investment Manager is authorised and regulated by the United
Kingdom Financial Conduct Authority as a
full-scope Alternative Investment Fund Manager (“AIFM”). The
Investment Manager is entitled to an investment management fee
payable to the AIFM monthly in arrears at a rate of 1% of the Net
Asset Value per
annum.
The Investment Manager intends to conduct the affairs of the
Company so as to ensure that it will not become resident in the
United Kingdom. Accordingly, and provided that the Company does not
carry on a trade in the United Kingdom through a branch or agency
situated therein, the Company will not be subject to United Kingdom
Corporation Tax or Income Tax.
The Company intends to be operated in such a manner that its
shares are not categorised as non-mainstream pooled investments.
This means that the Company might pay dividends in respect of any
income that it receives or is deemed to receive for UK tax purposes
so that it would qualify as an investment trust if it were UK
tax-resident.
Northern Trust International Fund Administration Services
(Guernsey) Limited (the “Administrator”) is entitled to receive an
annual fee equal to 0.15 per cent. per annum on the first £100
million and 0.10 per cent. per annum thereafter on the NAV of the
Company on a mid market basis, subject to a minimum fee of £60,000
per annum.
Northern Trust (Guernsey) Limited (the “Custodian”) is entitled
to receive from the Company a fee of £2,000 per annum. The
Custodian is also entitled to charge for certain expenses incurred
by it in connection with its duties.
Northern Trust (Guernsey) Limited (the “Depositary”) is entitled
to an annual Depositary fee payable monthly in arrears at a rate of
0.01% of the Net Asset Value of the Company up to £100 million,
0.008% on the next £100 million and 0.006% thereafter as at the
last business day of the month subject to a minimum fee of £20,000
per annum.
Management and
Administration
Directors |
|
Registered Office |
|
Auditor |
Ashe
Windham
John V Baldwin
Wayne Bulpitt (resigned 20 July 2016)
Jeannette Etherden (resigned 30 November 2016)
Christopher Spencer (resigned 2 March 2017)
Sarah Evans (appointed 20 July 2016)
Christopher Russell (appointed
1 December 2016)
Jill May (appointed 17 March 2017) |
|
PO Box
255
Trafalgar Court,
Les Banques,
St. Peter Port,
Guernsey,
Channel Islands, GY1 3QL |
|
Deloitte
LLP
Regency Court,
Glategny Esplanade,
St. Peter Port,
Guernsey,
Channel Islands, GY1 3HW |
Investment Manager and Alternative Investment Fund
Manager |
|
Sponsor and Broker |
|
Solicitors to the Company
as to UK law |
Ruffer
AIFM Limited,
80 Victoria Street,
London, SW1E 5JL |
|
Cenkos
Securities Plc,
6.7.8 Tokenhouse Yard,
London, EC2R 7AS |
|
Gowling
WLG (formerly Lawrence Graham LLP),
4 More London Riverside,
London, SE1 2AU |
|
|
|
|
|
Company Secretary,
Administrator and Registrar |
|
CREST Agent |
|
Advocates to the Company
as to Guernsey law |
Northern
Trust International
Fund Administration Services
(Guernsey) Limited,
Trafalgar Court,
Les Banques,
St. Peter Port,
Guernsey,
Channel Islands, GY1 3QL |
|
Computershare Investor
Services (Jersey)
Limited,
Queensway House,
Hilgrove Street,
St. Helier,
Jersey, JE1 1ES |
|
Mourant
Ozannes,
1 Le Marchant Street,
St. Peter Port,
Guernsey,
Channel Islands, GY1 4HP |
Custodian |
|
Depositary |
|
|
Northern
Trust (Guernsey)
Limited,
Trafalgar Court,
Les Banques,
St. Peter Port,
Guernsey,
Channel Islands, GY1 3QL |
|
Northern
Trust (Guernsey)
Limited,
Trafalgar Court,
Les Banques,
St. Peter Port,
Guernsey,
Channel Islands, GY1 3QL |
|
|