AURORA INVESTMENT TRUST PLC

LEI: 2138007OUWIZFMAGO575

ANNUAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2020

FINANCIAL AND PERFORMANCE HIGHLIGHTS

OBJECTIVE
To provide Shareholders with long-term returns through capital and income growth by investing predominantly in a portfolio of UK listed companies.

POLICY
Phoenix Asset Management Partners Limited (Phoenix) was appointed Investment Manager on 28 January 2016. Phoenix currently seeks to achieve the Objective by investing, primarily, in a portfolio of UK listed equities.

The portfolio will remain relatively concentrated. The exact number of individual holdings will vary over time but typically the portfolio will consist of 15 to 20 holdings.

The Investment Policy of the Company can be found below.

BENCHMARK
Performance is benchmarked against the FTSE All-Share Index (total return), representing the overall London market.

DIVIDEND
The Board proposes to pay a final dividend of 0.55p per Ordinary Share (2019: 4.5p) to be paid on 2 July 2021 to Shareholders who appear on the register as at 11 June 2021, with an ex-dividend date of 10 June 2021. During the year the Company's revenue reduced by 69%. This was due to the cuts in the dividends of the Company's underlying investments brought about by circumstances surrounding the Covid-19 pandemic.

CHAIRMAN'S STATEMENT

PERFORMANCE REVIEW

·        The NAV total return for the year ended 31 December 2020, fell by 5.3% against the benchmark FTSE All-Share Index (total return) which fell by 9.8% - a 4.5% outperformance. The year was dominated by the impact of the COVID-19 pandemic and after a significant fall in the NAV in the first half of the year, it was very pleasing to see the portfolio recover strongly in the final quarter.

·        This year's outperformance has added to the previous year's, so that during the five years since Phoenix took over management of the Company in 2016, the NAV has risen by 47.7% versus a 34.5% rise in the benchmark.

·        One of the unique features of the Investment Management Agreement with Phoenix, and one that creates significant Shareholder alignment, is that the Investment Manager earns no management fees other than the performance fee if it qualifies for this.

·        In 2020, a performance fee was earned by Phoenix. They received this fee in shares in Aurora which they cannot sell for three years. There is also a clawback mechanism, so the shares will be cancelled if the outperformance does not remain after three years.

·        Whilst the NAV traded at a premium during the first half of 2020, at times it fell to a discount during the second half. The Board, along with its Advisers, and the Investment Manager, monitor the premium or discount on an ongoing basis. It was pleasing to see the discount narrow towards the end of the year. The Investment Manager continues to promote the Company proactively with the help of Liberum Capital, our Stockbroker and Frostrow Capital, our distribution adviser.

THE ALTERNATIVE INVESTMENT FUND MANAGER ("AIFM") AND INVESTMENT MANAGER

2020 was the fifth year of Phoenix's management, which began in January 2016. It is positive that 2020 brought continued outperformance of the NAV versus the FTSE All-Share Index (total return).

Phoenix again employed a focused, patient, investment approach during another year of significant market stress. This was highlighted by its work during the early stages of the pandemic as it sought to assess the likelihood of the companies to survive. Once comfortable that the investee companies had the financial resources to withstand the likely impact of the pandemic, the Investment Manager was able to identify opportunities to add to holdings in which it had deep knowledge at attractive prices. This was one factor supporting the strong performance at the end of the year.

GROWTH OF THE COMPANY
Growing the Company remains a key objective of the Board. A total of 8.06 million new Ordinary Shares were issued in 2020 which raised gross proceeds of £12.4 million (excluding 530,311 issued to the Investment Manager to settle the performance fee with a value of £1.2 million). The market capitalisation of the Company rose from £157.6 million on 1 January 2020, to £186.6 million as at 28 May 2021.

Phoenix, along with Frostrow Capital, has continued to undertake investor meetings throughout the country with the aim of increasing the size of the Company, by raising the profile of Aurora.

It is pleasing to note the continued broadening of the Company's Shareholder register. In January 2016 when Phoenix was appointed, the top ten Shareholders owned 77% of the Company. As at 30 April 2021 the top 10 Shareholders account for 55% of the Company. It has also been pleasing to see the ever-increasing representation of platforms on the register. 2020 saw index funds buying the Company after it was included in the FTSE All-Share Index in June 2020.

It remains an objective of the Board and the Investment Manager to increase the value of Aurora to £250 million over the course of the next two to three years. I am pleased to see that investor demand for new shares puts the Company on a pathway to achieving this objective.

In the near future it is our intention to approach Shareholders with more information on the Castelnau Group, the new investment vehicle created by Phoenix to which we made reference last year. The Board is presently in dialogue with the Investment Manager regarding the potential inclusion of Castelnau, which can only be undertaken following a Shareholder vote as it is an entity also managed by Phoenix. We look forward to sharing more details with you soon.

BOARD AND COMMITTEES
As part of its regular review of its operations, the Board appointed an external adviser, Board Alpha Limited, to undertake an evaluation of the Board, its Committee structure and its overall effectiveness. Consequent to this evaluation, the Board is developing a succession plan and will communicate the outcomes of this to Shareholders at the half year. In addition, the Board is considering its Committee structure for the current year, to improve the effectiveness of its operations.

ANNUAL GENERAL MEETING ('AGM')
The Company's AGM will be held at 2.00 pm on 30 June at the Riverside Building, County Hall, Belvedere Road, London SE1 7PB. Under normal circumstances the Board would encourage Shareholders to attend the Company's Annual General Meeting, but, in view of the continuing COVID-19 pandemic, the Company recommends that Shareholders carefully consider whether it is appropriate to attend the meeting in person. If necessary, in line with Government guidelines, attendance of Shareholders may be restricted or prohibited.

Shareholders should monitor the Company's website and London Stock Exchange announcements for any updates regarding the AGM.

Alternatively, Shareholders can contact the Registrar, Link Group, for updated information (please see Notes to the Notice of AGM for the Registrar's contact details).

The Board recognises that Shareholders would value the opportunity to meet the Directors and Investment Manager, so we shall also be holding the AGM via videoconference where Shareholders will be able to attend the meeting virtually for a questions and answers session. If you wish to attend the AGM via videoconference please use the following link to register: https://groovygecko.eckoenterprise.net/aurora/agm2021. Should a Shareholder have a question that they would like to raise at the AGM, the Board would ask that they either ask the question in advance of the AGM by sending it by email to auroracosec@praxisifm.com or attend virtually and ask the question at the meeting at the appropriate time. All questions raised, together with the relevant answer, will be placed on the Company's website at https://www.aurorainvestmenttrust.com/.

CHANGE IN NET ASSET VALUE
You may have noticed there is a marginal difference in the Net Asset Value as at the year end that was released on 4 January 2021 and the Net Asset Value disclosed in these accounts. This is due to the performance fee adjustment under IFRS2. You can find further detail on IFRS2 in note 13 below.

DIVIDEND:
The Board proposes to pay a final dividend of 0.55p (2019: 4.5p) per Ordinary Share, to be paid on 2 July 2021 to Shareholders who appear on the register as at 11 June 2021. The ex-dividend date is 10 June 2021. This dividend will be proposed at the forthcoming AGM to be held on 30 June 2021. The Company's dividend policy, which is to distribute substantially all net revenue proceeds, remains unchanged.

LORD FLIGHT
Chairman
2 June 2021

INVESTMENT POLICY AND RESULTS

INVESTMENT POLICY
The Company's objective is to provide Shareholders with long-term returns through capital and income growth.

The Company seeks to achieve its investment objective by investing predominantly in a portfolio of UK listed companies. The Company may from time to time also invest in companies listed outside the UK and unlisted securities. The investment policy is subject to the following restrictions, all of which are at the time of investment:

·        The maximum permitted investment in companies listed outside the UK at cost price is 20% of the Company's gross assets.

·        The maximum permitted investment in unlisted securities at cost price is 10% of the Company's gross assets.

·        There are no pre-defined maximum or minimum sector exposure levels, but these sector exposures are reported to and monitored by, the Board in order to ensure that adequate diversification is achieved.

·        The Company's policy is not to invest more than 15% of its gross assets in any one underlying issuer.

·        The Company may from time to time invest in other UK listed investment companies, but the Company will not invest more than 10% in aggregate of the gross assets of the Company in other listed closed-ended investment funds.

·        The Company will not invest in any other fund managed by the Investment Manager.

While there is a comparable index for the purposes of measuring performance over relevant performance periods, no attention is paid to the composition of this index when constructing the portfolio and the composition of the portfolio is likely to vary substantially from that of the index. The portfolio will be relatively concentrated. The exact number of individual holdings will vary over time but typically the portfolio will consist of holdings in 15 to 20 companies. The Company may use derivatives and similar instruments for the purpose of capital preservation.

The Company does not currently intend to use gearing. However, if the Board did decide to utilise gearing the aggregate borrowings of the Company would be restricted to 30% of the aggregate of the paid-up nominal capital plus the capital and revenue reserves.

Any material change to the investment policy of the Company will only be made with the approval of Shareholders at a general meeting. In the event of a breach of the Company's investment policy, the Directors will announce, through a Regulatory Information Service the actions which will be taken to rectify the breach.

DIVIDEND POLICY
The investment policy does not include any fixed dividend policy. But the Board will distribute substantially all of the net revenue arising from the investment portfolio. Accordingly, the Company is expected to continue to pay an annual dividend, but this could be lower than the level of recent dividends and may vary each year.

BORROWING POLICY
The Company is not prohibited from incurring borrowings for working capital purposes, however the Board has no current intention to utilise borrowings. Whilst the use of borrowings should enhance the total return on the Ordinary Shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the Ordinary Shares. As a result, the use of borrowings by the Company may increase the volatility of the NAV per Ordinary Share.

The Company has a policy not to invest more than 10% of its gross assets in other UK listed investment companies. As a consequence of its investments, the Company may therefore itself be indirectly exposed to gearing through the borrowings from time to time of these other investment companies.

OBJECTIVES AND KEY PERFORMANCE INDICATORS (KPIS)
The Company's principal investment objective is to achieve capital and income growth. The Board measures the Company's success in attaining its objectives by reference to KPIs as follows:

a.      To make an absolute total return for Shareholders on a long-term basis.

b.      The Company's Benchmark is the FTSE All-Share Index (total return), against which the NAV total return is compared. After achieving the goal of making absolute returns for Shareholders, the next aim is to provide a better return from the portfolio than from the market as measured by the Benchmark.

c.       The Company seeks to ensure that the operating expenses of running the Company as a proportion of NAV (the Ongoing Charges Ratio) are kept to the minimum possible.

d.      The Company's performance and its ongoing charges ratio are compared to that of its peers to ensure Shareholder value is maintained and to ensure the Company's performance is supported in any given market condition.

e.      The discount/premium to NAV at which the Company's Shares trade is also closely monitored in order to maintain Shareholder value.

The Chairman's Statement above incorporates a review of the highlights during the year.

The Investment Manager's Report below gives details on investments made during the year and how performance has been achieved.

PERFORMANCE
The Investment Manager, Phoenix Asset Management Partners Limited ('Phoenix'), which is regulated by the FCA. The Chief Investment Officer of Phoenix is Gary Channon. Phoenix reports in detail upon the Company's activities in the Investment Management Report and Outlook.

Under the Investment Management Agreement, no regular management fees are payable. A performance fee is payable to the Investment Manager only if the benchmark is outperformed.

The benchmark is the FTSE All-Share Index (total return). The Company's performance since Phoenix was appointed is shown below:

The Ongoing Charge Ratio was as follows:

1     These are Alternative Performance Measures ("APMs")

ALTERNATIVE PERFORMANCE MEASURES ("APMS")
The disclosures of Performance above are considered to represent the Company's APMs. An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. Definitions of these APMs together with how these measures have been calculated can be found below. •.

REVENUE RESULT AND DIVIDEND
The Company's revenue profit after tax for the year amounted to £599,000 (2019: £3,289,000)

The Board is today proposing the payment of a final dividend of 0.55p per Ordinary Share (2019: 4.5p per Ordinary Share). This dividend will be paid on 2 July 2021 to Shareholders on the register as at 11 June 2021 the Ordinary Shares will be marked ex-dividend on 10 June 2021. In accordance with International Financial Reporting Standards this dividend is not reflected in the financial statements for the year ended 31 December 2020.

(DISCOUNT)/PREMIUM TO NAV
The discount of the Ordinary Share price to NAV per Ordinary Share is closely monitored by the Board. The Ordinary Share price closed at a 4.6% discount to the NAV per Ordinary Share as at 31 December 2020 (2019: 2.1% premium).

CONTROL OF THE LEVEL OF ONGOING CHARGES
The Board monitors the Company's operating costs carefully. Based on the Company's average net assets for the year ended 31 December 2020, the Company's ongoing charges figure calculated in accordance with the Association of Investment Companies (AIC) methodology was 0.45% (2019: 0.45%). As the size of the Company grows, the Board will manage expenses with the intention of keeping costs down and reducing the ongoing charge ratio accordingly.

FIVE YEAR SUMMARY
The following data are all expressed as pence per Ordinary Share. NAV figures are all calculated at bid prices.

1     This is an APM.

TOP HOLDINGS AT 31 DECEMBER 2020

*     Comprises the assets which make up the investment in Stanley Gibbons plc. No income was derived from this holding during the year.

The Company held over 3% of the issued share capital of the following:

PORTFOLIO ANALYSIS AT 31 DECEMBER 2020

ANALYSIS BY TYPE, MARKET AND CURRENCY
All investments except Phoenix SG, are of listed ordinary shares, denominated in sterling or converted to sterling using the prevailing exchange rate at the time of valuation. All holdings carried at a value are in listed companies with the exception of Hornby, CPP Group and Randall & Quilter, which are quoted on AIM, and Phoenix SG which is unquoted (although part of its assets relate to AIM quoted shares in Stanley Gibbons plc).

The Company also has holdings in China Chaintek and Naibu Global International, which have been written down to a valuation of £nil (2019: £nil) as the respective listings have been suspended.

All active holdings in the Company's portfolio are UK companies, with the exception of Ryanair (Irish) and Phoenix SG, a Cayman Islands company.

STATEMENT FROM THE CIO OF THE INVESTMENT MANAGER

Warren Buffett says the first rule of investing is: Don't Lose Money. We tackled the COVID-19 challenge in that way whilst retaining our focus on upside value. We put considerable effort into ensuring we owned businesses that would survive a bad lockdown and emerge better positioned competitively, or at least no worse. We believe that worked, our intrinsic values never fell to the levels of share prices before the pandemic started, not in one holding.

Buffett's second rule is: Don't Forget Rule No.1. and so, as we sought out opportunities in 2020, it was with a heavy focus on the downside risk and the probability of our making a mistake in our evaluation. This second factor weighed heavily. There were plenty of cheap looking stocks around in Q2 of 2020 but it takes a detailed level of knowledge and expertise to be able to model what will happen to a business if the pandemic drags on and vaccines don't work. We were able to deploy our excess cash in businesses we already knew well and where we set a minimum upside of 200%. We looked at hundreds of opportunities and capital raises and passed on everything bar one small addition, which moved before we could get a proper holding.

The result is that we emerge from the pandemic with an undervalued portfolio positioned to thrive in the resumption of activity and with fewer competitors.

Our focus on risk monitoring and making the most of the downturn meant that we postponed the launch of the vehicle we mentioned last year. It is now formed and we plan to launch it this year. It is called the Castelnau Group and, as outlined in the Chairman's Statement, we are presently in dialogue with the Board for its inclusion in the Company's portfolio. Apart from containing the businesses we are seeking to grow the value of through our engagement, it also contains the companies we are using to do that in the fields of data science, software development and digital marketing. The skills they learn in the group they will be applying to external companies thereby creating additional value for our investors. We are now looking to apply that capability to new candidates. We will write with more details soon.

As the world recovers from the pandemic and support programmes end, there is the potential for opportunities in those businesses impaired by what just happened. We are always looking for opportunities and will look wherever we think we might find them. In the meantime, we expect great things of the portfolio.

GARY CHANNON
CIO PHOENIX ASSET MANAGEMENT PARTNERS
2 June 2021

INVESTMENT MANAGEMENT REVIEW AND OUTLOOK

During the year, the NAV per share reduced by 5.3% and the share price by 10.0%. The FTSE All-Share Index fell by 9.8% over the same period. Since Phoenix began managing the Company on 27 January 2016 its NAV has risen 47.7% versus 34.5% for the FTSE All-Share Index.

The outperformance in 2020 has resulted in a performance fee being earned by Phoenix. In accordance with our Investment Management Agreement, the performance fee was settled by the issuance to Phoenix of Ordinary Shares in the Company, which Phoenix must hold for 3 years. If the outperformance versus the index disappears on the third-year anniversary, these Ordinary Shares will be forfeited, and Phoenix will receive nothing. This, we believe, is one of the most aligned fee structures in the industry.

Over the course of 2020, the Company's Ordinary Shares traded at a premium to NAV which enabled Aurora to issue a total of 8.6 million new Ordinary Shares worth £13.6 million (including 530,311 issued to the Investment Manager to settle the performance fee with a value of £1.2 million). Net assets at year-end, as disclosed in the financial statements were £162.9 million (2019: £154.4 million). As we write in late May, the portfolio and the overall market have enjoyed a positive performance as confidence increases with the impact of vaccinations facilitating a return to normality. As of 30 April, the NAV has risen 8.6% for the year with the FTSE All-Share Index rising 9.8%.

PERFORMANCE REVIEW
From a performance perspective, it is stating the obvious to say that the year was defined by the impact of the COVID-19 pandemic. In Q1 2020 the NAV fell well over 40% by late March, before a small rally saw it down 38.6% at quarter end. The All-Share index was down 25% over the same period.

Q2 2020 saw a modest recovery with the Company rising 16.6% during the quarter to end the half year down 28% versus the index which was down 17.4% at the same point.

Q3 2020 was flat with significant uncertainty as the emergence from the first national lockdown was offset by the reimposition of travel bans in the late summer. At the end of the third quarter the Company was unchanged from 30 June, down 28.1% on the year with the index down 20%.

In Q4 2020 the Company and the overall market experienced a strong rally which was driven by news of the high vaccine efficacy and the likelihood of their availability by year end. The Company rose 31.5% during the quarter to end the year down 5.5% with the index ending the year down 9.7%.

From a share price perspective, there were many holdings which experienced price falls well in excess of the market in the first quarter. These included our housebuilders: Barratt Developments, Bellway and Redrow, and other holdings: easyJet and Frasers Group. Hornby, Randall & Quilter and GlaxoSmithKline counterbalanced these falls as they fell by only single digits during the first quarter.

Hornby's resilient performance continued throughout the year and after good results in Q4, in which it outlined its return to profitability, it ended the year up 68%. Over the full year Ryanair, Dignity, Randall & Quilter and Vesuvius had positive share price performance with Frasers Group close behind, only losing 2%. Dignity's share price benefited after the Competition and Markets Authority (CMA) produced its provisional decision report into the funeral industry in August, which did not include remedies that could be detrimental to the industry.

From a negative perspective, Lloyds, easyJet and JD Wetherspoon were among the holdings whose share prices suffered significant price falls over the whole year.

In the first quarter of 2021 we sold our entire holding in Redrow because of an accumulation of factors. It is a company again in transition following the retirement of its founder, has made some missteps of late and has a landbank with some sites that take a very long time to develop. We expect continued changes in environmental and building regulations in the coming years which will increase the cost of building. Ultimately, that cost will fall on future land sellers but for an existing landbank, it falls on the housebuilder. We prefer the shorter and faster turning landbanks of Barratt and Bellway, which are less exposed to those risks.

ACTIVITY REVIEW
In the early months of 2020, as the extent of the pandemic became clear, our focus was on an assessment of all businesses in the portfolio to determine their ability to survive the likely slowdown. Having made an assessment that all our businesses would survive, our focus moved to identifying opportunities.

In March, we deployed cash at circa 1/3rd of intrinsic value, with 200% upside. We bought Barratt Developments, Ryanair, easyJet and Lloyds. The most significant activity was a 5.5% increase in Barratt Developments in cost price weight terms, as we bought stock at £4 when our estimate of intrinsic value was £12. We could not come up with a realistic scenario where £4 was the right price. It represented an enormous margin of safety.

In the 2nd and 3rd quarters activity, when measured in portfolio turnover, was extremely light. However, our work was ongoing, in a continual effort to ensure that our assessment that all our companies had the financial resource to withstand the major disruption brought about by COVID-19, was sound.

At the end of June, we wrote the following in the Aurora monthly report and the sentiments still holds true:

We went into the downturn with a view that we had strong businesses with robust balance sheets that could withstand major interruptions to their operations. So far, everything that has happened has supported those assessments. Some of them have raised capital, R&Q for opportunistic reasons, JD Wetherspoons out of caution and easyJet to repair a balance sheet for the losses to equity from the lockdown. None of them had to and so none were done at distressed levels and we didn't participate in any. Stronger balance sheets protect us from worst case scenarios at the cost of diluting some of the upside.

We also believe we have a portfolio of companies with competitive advantages and so as they emerge from lockdown, we see many opportunities to grow share. The above effects in retail mean that Frasers Group returns from lockdown to less competition, lower rents and eventually lower rates. The downturn has also given them opportunities to buy businesses at attractive prices. easyJet and Ryanair are poised to benefit from changes in air travel. Our polling during the downturn shows no loss of appetite for leisure travel, but there does seem likely to be less business travel, at least initially because of the alternative of video meetings and the economic recession. Significant amounts of capacity have been taken out of the commercial airline space in Europe, a number of marginal players have failed and those major players who have taken government support look hamstrung by the terms of that support. easyJet and Ryanair, already the no.1 and no.2 airlines in Europe and profitable lowest cost producers look set to gain share, fill the void, and satisfy the pent-up demand to travel that COVID-19 has not permanently damaged.

As well as our work on existing holdings, we looked at many new investments during the year, but we placed great store in the knowledge we had built up in businesses and industries in which we were very familiar. For us to invest outside that area in a time of great uncertainty would have required a very high degree of confidence and significant return expectations. We determined that the probability of error in our assessments was high, therefore we passed. We did have one potential new investment which we missed as it traded just above our entry price, and we did begin to purchase a new holding, but the price moved away before we could build a meaningful position.

As reported earlier, Q4 saw markets and our portfolio recover strongly with news of the high vaccine efficacy.

In late 2020 and into the New Year we became concerned about the potential for higher inflation and the possibility of unexpected interest rate rises if higher inflation was not managed carefully by central banks. It is our belief that an unexpected series of interest rate rises could have a significant negative effect on equity values. Due to the ongoing pandemic, equity index protection remains expensive, therefore, we have investigated the use of options on short sterling futures as a means of effectively hedging at a reasonable cost. At the time of writing the hedge is not yet in place as the price moved during the time it took to determine the regulatory leverage treatment, but it is our intention to spend, at an appropriate price, no more than 1% of NAV, which would pay out circa. one-third of the value of the portfolio if interest rates were 2% in September 2022. We would be buying protection, therefore the value at risk would be the money spent on the option and no more. Regulatory leverage calculations require us to report on the underlying nominal value when calculating leverage which can be much higher, but it bears no relationship to the actual risk of loss.

In early January 2021, Gary Channon wrote to Aurora Shareholders in the December factsheet with his thoughts on the portfolio going into the New Year. Those sentiments hold true today:

We enter 2021 with a portfolio of undervalued businesses that we believe are well positioned to capitalise on a competitive landscape that has been radically altered in some areas by failure and trend accelerations. Our upside to intrinsic value at circa. 100% does not properly reflect that potential because it is hard to estimate how it will play out, but the important thing is that its additive to value.

For example, Ryanair and easyJet will be serving a demand for personal travel that looks undiminished and even enhanced by pandemic lockdowns and they will be doing it with fewer competitors and reduced capacity than those that are left.

Wetherspoons will be serving a demand that, if anything, seems to have been increased by having it rationed and denied. It did not take much government encouragement in the summer to fill pubs and restaurants with casual diners, even with social distancing.

Retailing has been ravaged not just by the business interruption that has impacted travel and hospitality but because the pandemic has accelerated the trend already underway to a different way of retailing. Whilst many companies in the sector have failed, Mike Ashley and his Frasers Group have been busy seizing the opportunities thrown up and have traded profitably throughout. They look well positioned to benefit from their omnichannel offering across sports and luxury as they relentlessly experiment and adapt to the changing consumer demand.

Our cyclical domestic holdings in housebuilders and Lloyds Bank have hurt the portfolio this year. They have actually been less impacted by the downturn than might have been expected and we think are very well placed for 2021. Again, the pandemic seems to have increased the demand for homes; more specifically there is a growing demand for more space and a move away from city centres of which our businesses are a beneficiary.

The final grouping within the portfolio is those businesses where we are trying to increase their value through our involvement, our control and influence holdings. Hornby benefited from the lockdown whereas the others Dignity and Stanley Gibbons were negatively impacted to varying degrees. Dignity benefited from more funerals but as they were smaller affairs the average revenue and profitability declined. Overall, this group significantly lifted the portfolio return and Hornby was the main driver of that. A year ago, we told you of our plans to put all these holdings into a single company which would be separately listed. We paused that project during the pandemic because we didn't think it was the best use of our time. However, the work is all done and so we have recently resumed that process and will be bringing the new company to market, called The Castelnau Group, in the next few months.

As a reminder of what we are trying to achieve, these are businesses that we believe can create considerably more value if they adopt different approaches. We have pulled together the wisdom and techniques we have learned from studying and closely monitoring some great businesses and businesspeople and we are beginning to apply those to these businesses. It is still early days, but our view of the potential has only grown the more we have done this and that is despite the fact that most of the time things don't seem to go to plan, are harder to implement than we expected and we are constantly hit by setbacks. It seems that our rate of progress is accelerating at the rate at which things don't go right and we learn from that.

Separating those businesses where we are trying to add value through involvement will make the effects of that work much easier to measure and evaluate. The Castelnau Group won't just contain the businesses we control and influence but also those businesses we are using to create that value. One is a digital marketing and software development company that Phoenix acquired last year, and the other is a data science company that we are just in the process of setting up. These companies will be able to take the techniques and capabilities they have learned with our businesses and apply them to external companies to create further value for the group. The companies referred to above are part of the Castelnau Group.

STEVE TATTERS
DIRECTOR
PHOENIX ASSET MANAGEMENT PARTNERS
2 June 2021

PHOENIX UK FUND TRACK RECORD

OTHER STRATEGIC REPORT INFORMATION

PRINCIPAL RISKS, EMERGING RISKS AND UNCERTAINTIES
Procedure for Identifying Emerging Risks
The procedures in place to identify emerging or principal risks are described below.

The Audit Committee regularly reviews the Company's risk matrix, focusing on ensuring that the appropriate controls are in place to mitigate each risk. A system has been established to identify emerging risks as they occur as detailed below. The experience and knowledge of the Audit Committee and Board is invaluable to these discussions, as is advice received from the Board's service providers, specifically the Investment Manager who is responsible for all portfolio management services.

The market and operational risks and financial impact as a result of the COVID-19 pandemic, and measures introduced to combat its spread, were discussed by the Board, with updates on operational resilience received from the Investment Manager, Administrator and other key service providers.

The following is a description of the role each service provider plays in the identification of emerging risks.

1.      Investment Manager: the Investment Manager advises the Board at each meeting on world markets, stock market trends, information on stock specific matters as well as regulatory, political and economic changes likely to impact the Company's portfolio;

2.      Distributor and Broker: provides advice periodically specific to the Board on the Company's share register, sector, competitors and the investment company market;

3.      Company Secretary and Accounting Advisor: briefs the Board on forthcoming legislation or regulatory changes that might impact the Company;

4.      AIC: The Company is a member of the AIC, which provides regular technical updates as well as drawing members' attention to forthcoming industry and regulatory issues.

Procedure for oversight of risks
Audit Committee: The risk matrix is reviewed at least twice a year. This includes a review of the risk procedures and controls in place at the key service providers to ensure that emerging (as well as known) risks are adequately identified and - so far as practicable - mitigated.

Experienced Non-Executive Directors on the Committee, each bringing external knowledge of the investment trust (and financial services generally) marketplace, trends, threats etc. as well as macro/strategic insight.

The principal risks faced by the Company, together with the approach taken by the Board towards them, have been summarised below.

PRINCIPAL RISKS, EMERGING RISKS AND UNCERTAINTIES CONSIDERED DURING THE YEAR
Brexit
The uncertainty arising from the UK leaving the EU at the end of the transition period on 31 December 2020 was considered by the Board during the year. Having carefully considered the impact, the Board formed the opinion that Brexit would not present a risk to the Company's viability or going concern status.

Portfolio Risk
Changes in general economic and market conditions including, for example, interest rates, cost increase, rates of inflation, industry conditions, competition, political events and trends, tax laws, national and international conflicts and other factors, particularly noting the recent outbreak of COVID-19 as discussed below and the impact to the economy, could substantially and adversely affect the Company's prospects. Other portfolio risks are outlined as follows.

·        Poor stock selection, resulting in underperformance against the Company's benchmark;

·        Poor use of gearing, creating a drag on performance during times of market declines;

·        Illiquid stock creating a drag on performance; and

·        Concentrated portfolio.

Emerging risk
COVID-19 was identified as an emerging risk. The long-term effects of the COVID-19 pandemic remain unknown, however, the market and operational risks and financial impact as a result of the COVID-19 pandemic, and measures introduced to combat its spread, were considered by the Board. Each of the Company's key service providers was able to demonstrate operational resilience. In addition, the Investment Manager undertook a thorough review of the impact on the Company's portfolio of investments and was able to provide the Board with assurance that the Company's portfolio of investments had strong businesses with robust balance sheets that could withstand major interruptions to their operations. This is discussed further in the Investment Manager's report above. The Directors and the Investment Manager continue to monitor the situation closely.

MANAGEMENT OF RISKS
The Board undertakes a review of the performance of the Company and scrutinises and challenges notable transactions at each quarterly Board meeting. At least on an annual basis the Remuneration and Management Engagement Committee reviews the engagement of the Investment Manager, including the Investment Manager's achievements with regard to the Company's performance.

Risk diversification
The Company invests in organisations normally listed and traded on the London Stock Exchange, and by spreading its investments across a range of such securities. At 31 December 2020, the Company held 19 (2019: 17) stocks, spread across 8 (2019: 7) main sectors. The diversification of the Company's portfolio is considered at each of the quarterly board meetings.

Gearing
The Company has the power under its Articles to borrow money. The Company does not currently intend to use gearing. However, if the Board did decide to utilise gearing the aggregate borrowings of the Company would be restricted to 30% of the aggregate of the paid-up nominal capital plus the capital and revenue reserves.

The Board will keep under review whether any provision should be made for the use of short-term borrowing for the sole purpose of meeting working capital requirements from time-to-time. Further details concerning currency risks, liquidity risks and interest rate risks are given in note 17.

Liquidity
The Board undertakes a review of the liquidity of the investments at each quarterly Board meeting and takes appropriate action, where deemed necessary.

Operational Risk
The Company is exposed to the operational and cyber risks of its third-party service providers and considered the risk and consequences in the event that these systems failed during the year. The Investment Manager, Registrar, Depositary, Administrator and Company Secretary each have comprehensive business continuity plans which facilitate continued operation of the business in the event of a service disruption or major disruption. The Audit Committee received the internal controls reports of the relevant service providers, where available and was able to satisfy itself that adequate controls and procedures were in place to limit the impact to the Company's operations, particularly with regard to a financial loss.

The performance of service providers is reviewed annually via its Remuneration and Management Engagement Committee. Each service provider's contract defines the duties and responsibilities of each and has safeguards in place including provisions for the termination of each agreement in the event of a breach or under certain circumstances. Each agreement also allows for the Board to terminate subject to a stated notice period. During the year under review the Board undertook a thorough review of each service provider and agreed that their continued appointment remained appropriate and in the Company's long term interest.

Regulatory risk
Poor governance, compliance or administration, including particularly the risk of loss of investment trust status and the impact this may have on the Company was considered by the Board. Having been provided with assurance from each of the key service providers, the Board was satisfied that no such breach had occurred.

GOING CONCERN

The financial statements have been prepared on the going concern basis. The Directors have a reasonable expectation, after making enquiries, that the Company has adequate resources to continue in existence for at least twelve months from the date of approval of this document. In reaching this conclusion, the Directors have considered the liquidity of the Company's portfolio of investments as well as its cash position, income and expenditure. As at 31 December 2020, the Company held £5,055,000 (2019: £16,602,000) in cash, £149,828,000 (2019: £130,326,000) in quoted investments and £8,066,000 (2019: £8,487 ,000) in an unquoted investment. This is a conservative approach which does not include the ability to access liquidity through block trades. The total operating expenses for the year ended 31 December 2020 were £597 ,000 (2019: £551,000).

It is estimated that 60%  of the portfolio could be liquidated in a non-market impacting way within 7 days using 15% of average daily volume. Given the level of market volatility experienced during 2020, due to the impact of the COVID-19 pandemic, the Investment Manager has performed stress tests on the Company's portfolio of investments under current conditions and the Board remains comfortable with the liquidity of the Company's portfolio.

At the date of approval of this document, based on the aggregate of investments and cash held, the Company has substantial operating expenses cover and cash flows are at the discretion of the Board. In light of the COVID-19 pandemic, the Board has considered the Company's liabilities and noted cash and investments held are well in excess of the level of liabilities. A prolonged and deep market decline could lead to falling values to investments or interruptions to cash flow, however the Company currently has more than sufficient liquidity available to meet any future obligations.

The financial markets have experienced considerable turmoil as a result of the outbreak of COVID-19 in many countries, including the United Kingdom. The Board is keeping the development of these situations under close scrutiny. The Board does not believe that these will affect the Company's going concern status.

VIABILITY STATEMENT
A resolution was unanimously approved for the continuation of the Company as an investment trust at the 2019 AGM. The continuation vote will be put to Shareholders at every third AGM. The next continuation vote will be put to Shareholders at the 2022 AGM. Investors have given no indication that they would oppose the continuation of the Company when the continuation vote is next presented to Shareholders.

The Directors have considered the viability of the Company over a five-year period to 31 December 2025, which they believe is an appropriate period over which to assess the Company, given the Company's long-term investment strategy and the principal and emerging risks and uncertainties outlined above.

After making inquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and meet its liabilities as they fall due for at least five years from the date of approval of this report.

In reaching this conclusion, the Directors have considered each of the principal risks and uncertainties set out above, including the impact of COVID-19 on the Company. As part of this process the Board considered several severe but plausible scenarios, including the impact of significant market movements. The Board has considered the liquidity and solvency of the Company, the level of discount at which its Ordinary Shares trade at the time of assessment, its income and expenditure profile including the absence of monthly management fees and the non-utilisation of gearing as an instrument of normal investment policy. Most of the Company's investments comprise readily realisable securities which could, if necessary, be sold to meet the Company's funding requirements. The Company's plan to expand by the issue of new share capital is kept under close, ongoing review by the Board. Portfolio changes and market developments are also discussed at quarterly Board meetings.

The internal control framework of the Company is subject to formal review on at least an annual basis.

The Company's income from investments and cash realisable from the sale of investments provide substantial cover to the Company's operating expenses and any other costs likely to be faced by the Company during the period under review.

OUTLOOK
The outlook for the Company is discussed in the Chairman's Statement and the Investment Manager's Review which can be found above.

THIS STRATEGIC REPORT WAS APPROVED BY THE BOARD ON 2 JUNE2021.
FOR AND ON BEHALF OF THE BOARD
LORD FLIGHT
Chairman
2 June 2021

STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE ANNUAL REPORT

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law in the United Kingdom requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the financial statements in accordance with IFRSs adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Under company law, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

·        select suitable accounting policies and then apply them consistently;

·        make judgements and accounting estimates which are reasonable and prudent;

·        state whether international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·        prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate 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 and the Remuneration Report comply with the Companies Act 2006. 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 have delegated responsibility to the Investment Manager for the maintenance and integrity of the Company's page of the Investment Manager's website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

DIRECTORS' CONFIRMATIONS
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Corporate Governance section confirm that, to the best of their knowledge:

·        the Company's financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

·        the Strategic Report 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.

In the case of each Director in office at the date the Directors' report is approved:

·        so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

·        they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

FOR AND ON BEHALF OF THE BOARD
LORD FLIGHT
Chairman
2 June 2021

FINANCIALS

STATEMENT OF COMPREHENSIVE INCOME

The total column represents the statement of comprehensive income of the Company.

The revenue and capital columns, including the revenue and capital earnings per Ordinary Share data, are supplementary information prepared under guidance published by the AIC.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All revenue is attributable to the equity holders of the Company.

The notes below form part of these accounts.

STATEMENT OF FINANCIAL POSITION

Approved by the Board of Directors on 2 June 2021 and signed on its behalf by:
Lord Flight
Company no. 03300814

The notes below form part of these accounts.

STATEMENT OF CHANGES IN EQUITY YEAR TO 31 DECEMBER 2020

The notes below form part of these accounts.

STATEMENT OF CHANGES IN EQUITY YEAR TO 31 DECEMBER 2019

The notes below form part of these accounts.

CASH FLOW STATEMENT

*     Payments to acquire investments and receipts from the disposal of investments have been classified as components of cash flow from operating activities because they form part of the Company's operating activities.

The notes below form part of these accounts.

NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITY
Aurora Investment Trust plc is a closed-ended investment company, registered in England and Wales on 10 January 1997 with Company number 03300814. The Company's registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Business operations commenced on 13 March 1997 when the Company's Ordinary Shares were admitted to trading on the London Stock Exchange.

The Company invests predominantly in a portfolio of UK listed companies and may from time to time also invest in companies listed outside the UK and unlisted securities, with the objective of providing Shareholders with long-term returns through capital and income growth.

Details of the Directors, Investment Manager and Advisers can be found above and in the Annual Report.

The financial statements of the Company are presented for the year ended 31 December 2020 and were authorised for issue by the Board on 2 June 2021.

BASIS OF ACCOUNTING
The financial statements of the Company have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Under IFRS, the AIC Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued in October 2019 has no formal status, but the Company adheres to the guidance of the SORP.

GOING CONCERN
The financial statements have been prepared on a going concern basis. In forming this opinion, the Directors have considered any potential impact of the COVID-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of COVID-19.

The Directors have a reasonable expectation that the Company has adequate operational resources to continue in operational existence for at least twelve months from the date of approval of these financial statements. Further information on the Company's going concern can be found above.

SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted are described below, all other than the performance fee have been consistently applied in the current and preceding year.

a. Accounting Convention
The accounts are prepared under the historical cost basis, except for the measurement of fair value of investments.

b. Adoption of new IFRS standards

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2020. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

IAS 1 and IAS 8 Amendments

Definition of Material. The International Accounting Standards Board has refined its definition of 'material' and issued practical guidance on applying the concept of materiality. These amendments have no impact on the financial statements of the Company.

IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities

As part of its 2018-2020 Annual Improvements to IFRS standards process, the IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. This amendment is unlikely to have any impact on the financial statements of the Company as such will not early adopt.

Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

The amendments to IFRS 7, IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. These amendments have no impact on the financial statements of the Company.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

c. Investments
Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment. After initial recognition, investments are measured at fair value through profit or loss. Gains or losses on investments measured at fair value through profit or loss are included in the Statement of Comprehensive Income as a capital item and transaction costs on acquisition or disposal of investments are also included in the capital column of the Statement of Comprehensive Income. For investments that are actively traded in organised financial markets, fair value is determined by reference to stock exchange quoted market bid prices at the close of business on the year‑end date. All purchases and sales of investments are recognised on the trade date, i.e. the date that the Company commits to purchase or sell an asset. Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment.

Unquoted investments are measured at fair value, which is determined by the Directors in accordance with the International Private Equity and Venture Capital valuation guidelines and IFRS 9. The fair value of the Company's investments in Phoenix SG is based on the reported NAV as at the reporting date. Valuation reports provided by the Investment Manager of the unquoted investments are used to calculate the fair value where there is evidence that the valuation is derived using fair value principles that are consistent with the Company's accounting policies and valuation methods. Such valuation reports may be adjusted to take account of changes or events to the reporting date, or other facts and circumstances which might impact the underlying value.

Upon the sale of Phoenix SG in part or wholly, the fair value would be the expected sale price where this is known or can be reliably estimated.

d. Income from Investments
Investment income from the Company's investment portfolio is accounted for on the basis of ex-dividend dates. Income from fixed interest shares and securities is accounted for on an accrual basis using the effective interest method. Special Dividends are assessed on their individual merits and are credited to the capital column of the Statement of Comprehensive Income if the substance of the payment is a return of capital; with this exception all investment income is taken to the revenue column of the Statement of Comprehensive Income. Income from gilts receivable is accounted for on an accrual basis using the effective yield.

e. Capital Reserves
The Company is not precluded by its Articles from making any distribution of capital profits by way of dividend, but the Directors have no current plans to do so. Profits and losses on disposals of investments are taken to the other capital (gains on disposal) reserve. Revaluation movements are taken to the investment holding reserve via the capital column of the Statement of Comprehensive Income.

f. Investment Management Fees and Other expenses
In the current year, the Company has revised its accounting policy in respect of the recognition and measurement of Investment Management Fees. In the prior year, the fee payable to the Investment Manager was not considered material, therefore the change in accounting policy has not been applied retrospectively. Set out below is the policy applied in the current and prior year.

Current year
The performance fee, which is equity settled, has been recognised and measured in accordance with IFRS 2. The performance fee is recognised as an expense in the capital column of profit and loss with a corresponding entry to equity over the period which the Investment Manager is required to perform services to the Company in order to be entitled to receive unrestricted Ordinary Shares in the Company.

The amount recognised as an expense is adjusted to reflect the number of Ordinary Shares for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of Ordinary Shares that meet the related service and non-market performance conditions at the vesting date at the end of the four-year service period.

Restricted Ordinary Shares are issued to the Investment Manager at the end of the first year of service.

Further details on the judgements that the Board has made on the recognition and measurement of the performance fee can be found below, and further details on the performance fees can be found in Note 4 below.

Prior year
The performance fee is recognised as an expense in the capital column of profit and loss with a corresponding provision based on the cash equivalent of the performance fee due when it becomes payable. When payment of the performance fee becomes due, the Company's Ordinary Shares are issued based on the prevailing NAV on the issue date, which settles the provision created on the recognition of the expense. Retrospective application of the current year policy to prior year would have resulted in reduction in the charge to the profit and loss account of £1,020,750, and the elimination of the performance fee liability of £1,361,000, and the recording of the share-based payment charge to other reserves of £340,250 in relation to the 2019 performance fee earned.

Prior year amount is immaterial as such comparatives have not been restated. Other costs are normally charged to revenue, unless there is a compelling reason to charge to capital. Tax relief in respect of costs allocated to capital is credited to capital via the capital column of the Statement of Comprehensive Income on the marginal basis.

g. Taxation
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the year end date.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. In addition, tax losses available to be carried forward as well as other income tax credits are assessed for recognition as deferred tax assets. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply at their respective period of realisation, provided they are enacted or substantively enacted at the year end date. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity.

h. Foreign currency
The currency of the primary economic environment in which the Company operates (the functional currency) is pounds sterling ("sterling"), which is also the presentational currency of the Company. Transactions involving currencies other than sterling are recorded at the exchange rate ruling on the transaction date. At each year end date, monetary items and non-monetary assets and liabilities, which are fair valued, and which are denominated in foreign currencies, are retranslated at the closing rates of exchange. Such exchange differences are included in the Statement of Comprehensive Income and allocated to capital if of a capital nature or to revenue if of a revenue nature. Exchange differences allocated to capital are taken to gains on disposal or investment holding losses, as appropriate.

i. Cash and cash equivalents
Cash and Cash Equivalents in the Cash Flow Statement comprise cash held at bank.

j. Dividends payable to equity Shareholders
Dividends payable to equity Shareholders are recognised in the Statement of Changes in Equity when they are paid or have been approved by Shareholders in the case of a final dividend. Interim dividends payable are recognised in the period in which they are paid.

k. Judgements, estimations or assumptions
The Directors have reviewed matters requiring judgements, estimations or assumptions. The preparation of the financial statements requires management to make judgements, estimations or assumptions that affect the amounts reported for assets and liabilities as at the year end date and the amounts reported for revenue and expenses during the year. However, the nature of the estimation means that actual outcomes could differ from those estimates.

Performance fees
The recognition and measurement of the performance fee earned by Aurora's Investment Manager. The performance fee earned by the Investment Manager is calculated on the Company's NAV outperformance against its benchmark. In the current financial year, this resulted in the issue of 530,311 Ordinary Shares during the year and a further 1,061,130 Ordinary Shares issued on 3 February 2021. These issued Ordinary Shares are subject to a fixed three-year clawback period. If the outperformance versus the index reverses on the third-year anniversary, subject to the Board's discretion, the shares will be returned, and the Investment Manager will receive nothing.

The Board has considered that the settlement of the performance fee in the Ordinary Shares of the Company is in the scope of IFRS 2 'Share-based Payment'. Further, due to the nature of the service being provided, the Board considers that measuring the performance fee indirectly with reference to the fair value of the Ordinary Shares is more appropriate as it is not possible to reliably measure the fair value of the services received.

In measuring the performance fee, the Board has made further judgements in relation to the service period, which it considers to be four years (being the current year of service plus the further three-year period which is the clawback period). The Board has made the judgement that the performance fee contains a non-market based performance condition as the hurdle is based on the outperformance of the Company's NAV against its benchmark.

However, as the performance fee calculates a fixed fee which is settled in a variable number of shares, the cumulative charge over the four-year period will equate to either the amount calculated at the end of the first year where the performance of the Investment Manager remains on target, or potentially nil where it is considered that the clawback will take effect. This is as a result of the performance fee charge being trued-up during the service period, which is a requirement of IFRS 2 where there is a non-market based performance condition.

The performance fee is recognised on a straight line basis in the statement of comprehensive income and is based on the outcome of the performance fee calculation as stated in the Investment Management Agreement.  This amount excludes the projection of whether the clawback may occur at the end of the performance period, and only takes account of the clawback when, and if, it occurs.  Management have verified that the amount recognised is materially accurate by analysing what the performance fee may be using a Monte Carlo model which projects possible movements in the share price of the Company and the return of the benchmark index. The difference between the straight line basis and the Monte Carlo valuation method is not considered material to the financial statements.

The Board has considered it necessary to make certain judgements in relation to the recognition and measurement of the performance fee, which it considers are reasonable and supportable, because of the lack of specific guidance in IFRS 2 in this area. However, it is acknowledged that if alternative judgements were made, for accounting purposes, the measurement of the performance fee charge to the income statement may be significantly different, either in timing within the four-year service period, or in its totality.

Valuation inputs and assumptions

Valuation is based on Monte Carlo simulation techniques to project changes in the NAV and the Index over a three-year period from 31 December 2020. Monte Carlo modelling was based on the inputs and assumptions such as NAV Volatility of 19.8% and FTSE All-Share Index (total return) volatility of 17.0%.

It is possible for the Company to elect (at its own discretion) not to claw back any of the performance fee already paid or to extend the period of the claw back measurement by a further two years. These events are within the control of management and are not factored into the Monte Carlo model. As such, the result does not take into account the probability that the Company would choose not to claw back any of the performance fee even were it had rights to do so. On that basis, the adjustment derived from the expected performance fee could be regarded as the maximum possible adjustment as at 31 December 2020.

Performance fee Sensitivities
The impact of a 10% movement to the NAV volatility and FTSE All Share Index (total return) volatility on the amount of expected performance fee is as below:

Sensitivities have not been performed for 2019 as a result of the change in accounting policy from prior year.

Investment valuation
The critical judgement, estimate or assumption that may have a significant risk of causing a material adjustment to the Company's NAV relates to the valuation of the Company's unquoted (Level 3) investment in Phoenix SG, which is approximately 5.0% of the Company's NAV.

The Level 3 holding is valued in line with accounting policy as disclosed in Note 1(c). Under the accounting policy, the reported NAV methodology has been adopted in valuing the Level 3 investment. As the Company has judged that it is appropriate to use the reported NAV in valuing the unquoted investment, the Company does not have any other key assumptions concerning the future, or other key sources of estimation uncertainty in the reporting period, which may have a significant risk of causing a material adjustment to the Company's NAV within the next financial year.

Whilst the Board considers the methodologies and assumptions adopted in the valuation of unquoted investments are reasonable and robust, because of the inherent uncertainty of the valuation, the values used may differ significantly from the values that would have been used had a ready market for the investment existed and the differences could be significant. These values may need to be revised as circumstances change and material adjustments may still arise as a result of revaluation of the unquoted investments fair value within the next year.

If the fair value of the Level 3 investment changed by 10% the impact on the Company's NAV would be £806,600 (2019: £848,700), representing 0.5% (2019: 0.5%) of NAV.

2 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS ('FVTPL')

*     These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

(Losses)/gains on Investments

Transaction Charges

Fair Value Hierarchy
Under IFRS13 investment companies are required to disclose the fair value hierarchy that classifies financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair values.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

There were no transfers between levels during the year.

The movement on the Level 3 unquoted investments during the year is shown below:

The Company's unquoted investment represents investment in Phoenix SG Ltd (Phoenix SG). The fair value of the investment in Phoenix SG includes its shares in Stanley Gibbons Group Plc (Stanley Gibbons) and some other assets related to Stanley Gibbons.

Phoenix SG direct investments in Stanley Gibbons Group Plc include the following: Quoted equity shares in Stanley Gibbons, trading on the Alternative Investment Market branch of the London Stock Exchange (the "Equity Investment"). Phoenix SG holds 58.1% in the total equity of Stanley Gibbons.

The total fair value attributable to the Company's investment in Phoenix SG as of 31 December 2020 is £8.07 million (2019: £8.48 million). The Company held 30.12% of the share capital of Phoenix SG.

3. INCOME

4. Investment Management Fees and Other Expenses

*     The amounts excluding VAT paid or accrued for the audit of the Company are £41,200 (2019: £44,000).

The Company has an agreement with its Investment Manager. Under the terms of this agreement, the Investment Manager does not earn an ongoing annual management fee, but will be paid an annual performance fee equal to one third of any outperformance of the Company's NAV per Ordinary Share total return (including dividends and adjusted for the impact of share buybacks and the issue of new shares) over the FTSE All-Share Index (total return) for each financial year.

The total annual performance fee is capped at 4% per annum of the NAV of the Company at the end of the relevant financial year, in the event that the NAV per Ordinary Share has increased in absolute terms over the period, and 2% in the event that the NAV per Ordinary Share has decreased in absolute terms over the period. Any outperformance that exceeds these caps will be carried forward and only paid if the Company outperforms, and the annual cap is not exceeded, in subsequent years.

The performance fee is subject to a high-water mark so that no fee will be payable in any following year until all underperformance of the Company's NAV since the last performance fee was paid has been made up.

Performance fees are settled by issuance of the Company's Ordinary Shares. Such Ordinary Shares are issued at the NAV per Ordinary Share on the date of issue, so that the then current value of the Ordinary Shares equates in terms of NAV to the performance fees calculated at the end of the first relevant financial period.

Any part of the performance fee that relates to the performance of Phoenix SG will be accrued but will not be paid until such time as the Company's investment in Phoenix SG has been realised or is capable of realisation. The position will be reviewed at that time by reference to the realised proceeds of sale or the fully realisable value of Phoenix SG as compared to the original cost of acquisition.

All other performance fees are subject to a review and claw-back procedure if the Company has underperformed its benchmark during a period of three years following the end of the financial year in respect of which the relevant fee was paid. Ordinary Shares received by the Investment Manager under this arrangement must be retained by the Investment Manager throughout the three-year period to which the claw-back procedure applies.

As a result of the above reviewed procedures all or any part of the performance fees might become recoverable, the Company reflects this in the charge recognised in subsequent accounting periods within the vesting period of the Investment Manager through the true-up mechanism in IFRS 2.

The proportion of performance fee for the year ended 31 December 2020 was £665,000 (2019: £1,361,000). During the current year, based on the outcome of the Investment Manager's performance, the Company granted, and the Investment Manager became entitled to £2,659,000 worth of restricted Ordinary Shares in the Company. On 3 February 2021, a total of 1,061,130 Ordinary Shares were issued to the Investment Manager, representing 80% of restricted Ordinary Shares. The restricted Ordinary Shares were issued at the latest prevailing NAV as at 28 January 2021 of 200.43 pence per Ordinary Share. The Share based payment expense in relation to Phoenix SG in accordance with the clawback period is £3,000 will be retained in the Company's Statement of Financial Position. The remaining £532,000 will be paid by issuing restricted Ordinary Shares once the Final Results are released.

5. Share-based Payment arrangements
The Company settles its performance fee to its Investment Manager in Ordinary Shares. Further description of the arrangement is included in Note 4 above.

Restricted Ordinary Shares are awarded to the Investment Manager conditional upon the following non-market performance and service conditions:

·        Outperformance of the Company's NAV per Ordinary Share total return (including dividends and adjusted for the impact of share buybacks and the issue of new shares) over the FTSE All-Share Index (total return) over a one-year service period.

Restricted Ordinary Shares become unrestricted upon completion of the following non-market performance and service conditions:

·        Outperformance of the Company's NAV per Ordinary Share total return (including dividends and adjusted for the impact of share buybacks and the issue of new shares) over the FTSE All-Share Index (total return) over a service period of four years.

Restricted Ordinary Shares provide the Investment Manager with rights to dividends and voting rights, however it is not entitled to sell, pledge, transfer or otherwise dispose of the shares until they become unrestricted.

During the current year, based on the outcome of the Investment Manager's performance, the Company granted, and the Investment Manager became entitled to £2,659,000 worth of restricted Ordinary Shares in the Company. No unrestricted Ordinary Shares were due to the Investment Manager in the current year as the outstanding service period of three years still needed to be served on Ordinary Shares held by the Investment Manager. At 31 December 2020, the Board expects that all restricted Ordinary Shares issued will ultimately vest in unrestricted Ordinary Shares.

The remaining vesting period at 31 December 2020 is three years in respect of the 2020 performance fee and the Ordinary Shares will vest immediately with the Investment Manager at the end of the vesting period, subject to meeting the performance conditions attached to the share awards.

The fair value of the equity instruments granted was based on the outcome of the performance fee calculation (based on the non-market performance set out above), which determined a fixed monetary amount expected to be due to the Investment Manager which is settled in a variable number of Ordinary Shares based on the prevailing NAV per share at the date on which the restricted Ordinary Shares vest with the Investment Manager.

The total expense recognised in the current year was £665,000 (2019:£1,361,000).

6. DIRECTORS' FEES
The fees paid or accrued for the year to 31 December 2020 were £150,000 (2019: £113,000). There were no other emoluments. The gross figures shown for Directors' fees in note 4 above does not include employers' National Insurance charges. Full details of the fees of each director are given in the Directors' Remuneration Report. The Company has paid National Insurance contributions of £11,800 (2019:£7,755) in respect of the Directors remuneration.

7. TAXATION

Current taxation
The taxation charge for the year is different from the standard rate of corporation tax in the UK (19%). The differences are explained below:

Due to the Company's status as an investment trust and its intention to continue meeting the conditions required to maintain its status in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

Deferred Tax
The Company has £12,795,000 (2019: £11,536,000) in respect of excess unutilised management expenses, equivalent to a potential tax saving of £2,175,000 at the prospective tax rate of 19% (2019: £1,961,000) and £1,491,000 (2019: £1,491,000) in respect of loan interest, equivalent to a potential tax saving of £253,000 at the prospective tax rate of 19% (2019: £253,000).

These amounts are available to offset future taxable revenue. A deferred tax asset has not been recognised in respect of these expenses and will be recoverable only to the extent that the Company has sufficient future taxable revenue.

8. ORDINARY DIVIDENDS

9. EARNINGS PER ORDINARY SHARE
Earnings per share are based on the loss of £2,209,000 (2019: profit of £33,582,000) attributable to the weighted average of 72,555,357 (2019: 60,830,284) Ordinary Shares of 25p in issue during the year.

Supplementary information is provided as follows: revenue earnings per share are based on the revenue profit of £599,000 (2019: profit of £3,289,000); capital earnings per share are based on the net capital loss of £2,808,000 (2019: profit of £30,293,000), attributable to the weighted average of 72,555,357 (2019: 60,830,284) ordinary voting shares of 25p. There is no difference between the weighted average Ordinary diluted and undiluted number of Shares. There is no difference between basic and diluted earnings per share as there are no diluted instruments.

10. SHARE CAPITAL

The Company did not purchase any of its own shares during the year ended 31 December 2020 or 2019. No shares were cancelled during either year.

No shares were held in Treasury or sold from Treasury during the year ended 31 December 2020 or 2019.

Placings
There were no placings during the year ended 31 December 2020.

Block listings
The Company had established on 11 June 2019 a block listing facility for up to 12,194,444 new shares to meet market demand arising from time to time. A total of 8,059,871 (excluding 530,311 issued to the Investment Manager to settle the performance fee) new Ordinary Shares were issued during the year 1 January 2020 to 31 December 2020, raising gross proceeds of £12.4 million.

A new block listing facility for up to 14,450,605 new Ordinary Shares was established on 17 April 2020.

At 31 December 2020, the Company had 75,103,743 (2019: 66,513,561) Ordinary Shares in issue. The number of voting shares at 31 December 2020 was 75,103,743 (31 December 2019: 66,513,561).

On 3 February 2021, a total of 1,061,130 Ordinary Shares were issued to the Investment Manager, representing 80% of the total fee due. The Ordinary Shares were issued at the latest prevailing NAV as at 28 January 2021 of 200.43 pence per Ordinary Share.

11. TOTAL EQUITY
Total Equity includes, in addition to Share Capital, the following reserves:

Capital Redemption Reserve. When any shares are redeemed or cancelled, a transfer of realised profit must be made to this reserve in order to maintain the level of capital that is not distributable.

Share Premium Account. When shares are issued at a premium to their nominal value, the "capital profit" arising on their allotment must be held in a Share Premium Account, which is not distributable in the ordinary course and may be utilised only in certain limited circumstances.

Capital profits arising from the Company's investment transactions are held as Capital Reserves, subdivided between Gains on Disposal for profits arising upon sales of investments and Investment Holding gains/losses for portfolio revaluations. The movements on this account are analysed in note 12.

The Company's Revenue Reserves are the net profits that have arisen from the Company's revenue income in the form of dividends and interest, less operating expenses and dividends paid out to the Company's Shareholders.

The Company's Other Reserve represents the share-based payment expense in relation to the performance fee payable to the Investment Manager combined with the effect of issuing restricted Ordinary Shares to the Investment Manager.

12. CAPITAL RESERVES

13. NET ASSETS PER ORDINARY SHARE
The figure for net assets per Ordinary Share is based on £162,921,000 (2019: £154,360,000) divided by 75,103,743 (2019: 66,513,561) voting Ordinary Shares in issue at 31 December 2020.

The table below is a reconciliation between the NAV per Ordinary share announced on the London Stock Exchange and the NAV per Ordinary share disclosed in these financial statements. The difference is as a result of amortising the performance fees over the vesting period in accordance with IFRS 2 - Share based payment, in these financial statements, whereas the NAV as 31 December 2020, published on 4 January 2021 treated the performance fees as earned on 31 December 2020, in accordance with the IMA.

14. Reconciliation of Profit After Finance Costs and Tax to Net Operating Activities Cash flow

15. RELATED PARTY TRANSACTIONS
Details of the management, administration and secretarial contracts can be found in the Directors' Report. There were no transactions with directors other than disclosed in the Directors' Remuneration Report. Fees payable to Phoenix are shown in note 4.

A £665,000 charge has been made for the proportion of performance fee related to 31 December 2020 performance period (2019: £1,361,000). Any performance fee would be payable in Ordinary Shares at the prevailing NAV on the issue date. During the current year, based on the outcome of the Investment Manager's performance, the Company granted, and the Investment Manager became entitled to £2,659,000 worth of restricted Ordinary Shares in the Company. In accordance with the Management Agreement, 1,061,130 of the Company's New Ordinary Shares were issued, representing 80% of the £2,659,000. Further details on the issuance of the remaining 20% can be found in Note 10 above. Other than the performance related fees, the Investment Manager does not receive any financial benefits derived from its relationship with the Company. The Investment Manager has controls in place to avoid the double charging of fees and expenses as a result of the Company's holdings in Phoenix SG, which also have Phoenix as its Investment Advisor.

Other payables include accruals of administration fees of £13,000 (2019: £12,900). All figures include any appropriate VAT.

16. FINANCIAL ASSETS
Investments are carried in the balance sheet at fair value. For other financial assets and financial liabilities, the balance sheet value is considered to be a reasonable approximation of fair value.

Financial assets
The Company's financial assets may include equity investments, fixed interest securities, short-term receivables and cash balances. The currency and cash-flow profile of those financial assets was:

Cash at bank includes £5,055,374 (2019: £16,601,860) held by the Company's Depository, BNP Paribas Securities Services.

Financial liabilities
The Company finances its investment activities through its ordinary share capital and reserves. Foreign currency balances are stated in the accounts in sterling at the exchange rate as at the Balance Sheet date.

There were no short-term trade payables (other than accrued expenses).

17. FINANCIAL INSTRUMENTS - RISK ANALYSIS
The general risk analysis undertaken by the Board and its overall policy approach to risk management are set out in the Strategic Report. Issues associated with portfolio distribution and concentration risk are discussed in the Investment Policy section of the Strategic Report. This note, which is incorporated in accordance with accounting standard IFRS7, examines in greater detail the identification, measurement and management of risks potentially affecting the value of financial instruments and how those risks potentially affect the performance and financial position of the Company. The risks concerned are categorised as follows:

a.      Potential Market Risks, which are principally:

i.        Currency Risk

ii.       Interest Rate Risk and

iii.      Other Price Risk.

b.      Liquidity Risk

c.       Credit Risk

Each is considered in turn below:

A (i) Currency Risk
The portfolio as at 31 December 2020 was invested predominantly in sterling securities, with the exception of Ryanair (Irish) and there was no significant currency risk arising from the possibility of a fall in the value of sterling impacting upon the value of investments or income.

The Company had no foreign currency borrowings at 31 December 2020 or 31 December 2019 and no sensitivity analysis is presented for this risk.

1     Percentage change of sterling against local currency from 1 January to 31 December of relevant year.

Based on the financial assets and liabilities at 31 December 2020 and all other things being equal, if sterling had strengthened by 10%, the profit after taxation for the year ended 31 December 2020 and the Company's net assets at 31 December 2020 would have decreased by the amounts shown  in the table below. If sterling had weakened by 10% this would have had the opposite effect.

A (ii) Interest Rate Risk
The Company did not hold fixed interest securities at 31 December 2020 or 31 December 2019.

With the exception of cash, no interest rate risks arise in respect of any current asset. All cash held as a current asset is sterling denominated, earning interest at the bank's or custodian's variable interest rates.

The Company had no borrowings at 31 December 2020 or 31 December 2019.

A (iii) Other Price Risk
The principal price risk for the Company is the price volatility of shares that are owned by the Company. As described in the Investment Manager's Review, the Company spreads its investments across different sectors and geographies, but, as shown by the Portfolio Analysis in the Business Review, the Company may maintain relatively strong concentrations in particular sectors selected by the Investment Manager.

The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase or decrease of £17,789,000 (2019: £13,881,000) in the investments held at fair value through profit or loss at the period end, which is equivalent to 9.5% (2019: 8.9%) in the net assets attributable to equity holders. This analysis assumes that all other variables remain constant.

B Liquidity Risk
Liquidity Risk is considered to be small, because most of the portfolio is invested in readily realisable securities. As a consequence, cash flow risks are also considered to be immaterial. The Investment Manager estimates that, under normal market conditions and without causing excessive disturbance to the prices of the securities concerned, 60% of the portfolio could be liquidated in a non-market impacting way within 7 days, based on 15% of average daily volume. This is conservative as it does not include the ability to access liquidity through block trades.

C Credit Risk
The Company invests in quoted equities and fixed interest securities. The Company's investments are held by BNP Paribas Securities Services ("the Depository"), which is a large international bank with a high reputation. The Company's normal practice is to remain fully invested at most times and not to hold very large quantities of cash. At 31 December 2020, cash at bank comprised £5,055,374 (2019: £16,601,860) held by the Depository.

Credit Risk arising on transactions with brokers relates to transactions awaiting settlement. This risk is considered to be very low because transactions are almost always undertaken on a delivery versus payment basis with member firms of the London Stock Exchange.

D Capital management policies and procedures
The Company's capital management objectives are:

·        to ensure the Company's ability to continue as a going concern; and

·        to provide an adequate return to Shareholders by pursuing investment policies commensurately with the level of risk.

The Company monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the statement of financial position.

The Company sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to Shareholders (within the statutory limits applying to investment trusts), return capital to Shareholders, issue new shares, or sell assets.

18. POST PERIOD END EVENTS
On 3 February 2021, a total of 1,061,130 Ordinary Shares were issued to the Investment Manager, representing 80% of the total fee due. The Ordinary Shares were issued at the latest prevailing NAV as at 28 January 2021 of 200.43 pence per Ordinary Share.

Subsequent to the year end the Company's holding in Redrow was disposed in its entirety for £6.2 million.

ALTERNATIVE PERFORMANCE MEASURES ('APMS')

DISCOUNT
The amount, expressed as a percentage, by which the share price is less that the NAV per Ordinary Share.

GEARING
A way to magnify income and capital returns, but which can also magnify losses. A bank loan is a common method of gearing.

NAV PER ORDINARY SHARE
The Company's assets less its liabilities, as adjusted for total performance fees earned in the corresponding performance period, divided by the Company's number of Ordinary Shares in issue (excluding any shares held in treasury).

ONGOING CHARGES
A measure of the regular, recurring annual costs of running an investment company, expressed as a percentage of average net assets. The measure is calculated by expressing the regular expenses of the year as a percentage of the average net assets during the year.

TOTAL RETURN
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date.

PUBLICATION OF NON STATUTORY ACCOUNTS

The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The Annual Report and Financial Statements for the year ended 31 December 2020 will be filed with the Registrar of Companies.

The figures set out above have been reported upon by the auditor, whose report for the year ended 31 December 2020 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of the Company for the year ended 31 December 2019, which have been filed with the Registrar of Companies. The report of the auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act 2006.

ANNUAL REPORT AND FINANCIAL STATEMENTS

Copies of the Annual Report and Financial Statements will be published shortly on the Company's website - https://www.aurorainvestmenttrust.com and will be available from the registered office, c/o PraxisIFM Fund Services (UK) Limited - 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Copies of the Annual Report and Financial Statements will shortly be submitted to the National Storage Mechanism.  These documents will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

End