AURORA INVESTMENT TRUST PLC

HALF YEARLY FINANCIAL REPORT

For the six months ended 30 June 2021

FINANCIAL AND PERFORMANCE HIGHLIGHTS

PERFORMANCE

THE TOTAL RETURNS IN STERLING FOR THE PERIOD/YEAR WERE AS FOLLOWS:

1     Definitions of these Alternative Performance Measures ("APMs") together with how these have been calculated can be found below.

2     Including dividend reinvested.

OBJECTIVE AND INVESTMENT POLICY

INVESTMENT OBJECTIVE
Aurora Investment Trust plc's (the "Company") objective is to provide Shareholders with long-term returns through capital and income growth.

NEW INVESTMENT POLICY
Proposed changes to the Investment Policy
At a General Meeting held on 28 September 2021 the following new investment policy was approved:

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 (measured at the time of investment) including in respect of any indirect exposure through Castelnau Group Limited.

·        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.

·        Save for Castelnau Group Limited, 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 material 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 purposes 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.

INVESTMENT MANAGER'S REVIEW

Performance

The NAV total return for the half year was 8.5% and the share price (incl. dividends) 12.3%. At the end of June, the share price was trading at a 0.5% premium to NAV. The FTSE All Share Index rose by 11.1% over the same period.

As at 27 September 2021, performance remained stable. The NAV total return for 2021 was 9.3% versus 13.7% for FTSE All Share. However, the share price weakened and moved to a discount to NAV.

In June 2021, it was pleasing that the Company issued new equity for the first time since June 2020, and we remain keen to grow the Company through both investment performance and new issuance.

Significant share price moves of note in the half year include Dignity up 35%, Frasers up 33% and Lloyds up 30%. Frasers and Lloyds have recently reported results, which highlight their recovery from COVID-19 pandemic-related disruption and being well placed to prosper going forward.

Dignity's share price rise came largely after their AGM in late June 2021 at which Gary Channon presented Phoenix's strategic vision for the business. Later in this report we refer to the AGM presentation and encourage you to read it.

The only significant faller of note was Hornby, which fell 25%. In their full year results the Company reported an increase in sales and a return to profitability.

From a contribution perspective, Frasers contributed 50% of the NAV rise in the first half year with Lloyds and Dignity also significant contributors.

Portfolio Review

The first six months of the year have not seen significant investment activity as we remain comfortable with the portfolio and its prospects as the world returns to some normality.

One change of note in the first quarter was the sale of the entire holding in Redrow. It is a business in transition following the retirement of its Founder. It has made some mis-steps and has a land bank with several sites which take a long time to build. We expect continued environmental and building changes, which will increase the cost of building. This will affect the existing housebuilder land banks. We prefer the short and faster turning land banks of Barratt Developments and Bellway, which are less exposed to those risks.

On page 20 of the 2020 Annual Report, we reported on a plan to put in place a hedge against potential negative equity market movements in response to higher interest rates as result of increasing inflation The report is below:

"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 COVID-19 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 July we began to execute the hedge at the price we wanted to pay, and the hedge is now in place.

In the half year we were successful in a General Meeting Vote we requisitioned at Dignity to replace the existing Executive Chairman with Gary Channon. The potential at the company is significant At the Dignity AGM in June, Gary set out the analysis and strategy that we believe will lead to that potential being realised, and, rather than summarising it here, we would encourage you to look at the slides available on Dignity's corporate website. If you have the time, we would also encourage you to watch the replay of the presentation that accompanies it.

In early September, easyJet announced a rights issue in which we have participated. Whilst we did model the need for an equity fundraise, we believe the size of the raise was unnecessarily large.

Outlook

In the Company's June 2021 monthly factsheet, Gary Channon reported on the outlook for the portfolio and the sentiments expressed remain true today. It is outlined below:

Unlocking has been slowed by the latest variants of the virus, but the effectiveness of the vaccines means that this is gratification postponed, not cancelled. Economic activity is surging back to life, and we expect our portfolio of companies to be beneficiaries. We expect a bumper period ahead.

As support packages unwind, we expect there to be some capital needs that may throw up interesting opportunities for us to act.  Currently we find the most valuable activity we can do with the portfolio is the most undervalued and underrated of all, which is to do nothing.  We would have done a lot better over the past 23 years if we had been better at doing nothing.

Upside to intrinsic value is our key metric when we consider valuation. At the time of writing in late-September it stands at 80%, which highlights the potential in the portfolio.

Castelnau Group

In the same June 2021 factsheet, we announced that the Castelnau Group vehicle would be listed in the near future, and it was our intention, with the Board's agreement, that Aurora participate. The Board agreed but the participation required a shareholder vote because the Company is presently unable to hold a fund which Phoenix manages. The General Meeting was held on 28 September 2021 at which shareholders approved all resolutions proposed, including an amendment to the Company's Investment Policy and authorising the Company to participate.

The Castelnau Group Prospectus was published on 23 September 2021 and trading will begin on 18 October 2021. As outlined in previous communication, the Company will exchange shares in Dignity PLC, Hornby and Phoenix Stanley Gibbons for shares in Castelnau Group. The initial weight of Castelnau Group in the Company's portfolio will be 15%.

Steve Tatters

Phoenix Asset Management Partners Ltd

29 September 2021

Top holdings As at 30 June 2021

*     Comprises the assets which make up the investment in Stanley Gibbons plc.

Sector Breakdown As at 30 June 2021

INTERIM MANAGEMENT REPORT

The Directors are required to provide an Interim Management Report in accordance with the Financial Conduct Authority's ("FCA") Disclosure Guidance and Transparency Rules ("DTR"). The Directors consider that the Investment Manager's Review shown above provide details of the important events which have occurred during the period and their impact on the financial statements. The following statement on the Principal Risks and Uncertainties, the Related Party Transactions, the Statement of Directors' Responsibilities and the Investment Manager's Review together constitute the Interim Management Report of the Company for the six months ended 30 June 2020. The outlook for the Company for the remaining six months of the year ending 31 December 2020 is discussed in the Investment Manager's Review.

Details of the investments held at the period end and the structure of the portfolio at the period end are provided above.

PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties of the Company are detailed on pages 27 to 29 of the Company's most recent Annual Report for the year ended 31 December 2020 which can be found on the Company's website at www.aurorainvestmenttrust.com. The principal risks and uncertainties facing the Company remain unchanged from those disclosed in the Annual Report for the year ended 31 December 2020 and the Board are of the opinion that they will continue to remain unchanged for the forthcoming six month period.

The principal risks and uncertainties facing the Company are as follows:

·        Brexit;

·        Portfolio Risk: including poor stock selection, poor use of gearing, illiquid stock and a concentrated portfolio;

·        The COVID-19 pandemic which continues to impact the Company;

·        Operational Risks; and

·        Corporate governance and regulatory risks.

RELATED PARTY TRANSACTIONS
The Company's Investment Manager is Phoenix Asset Management Partners Limited, ('Phoenix' or the 'Investment Manager'). Phoenix is considered a related party in accordance with the Listing Rules. Phoenix does not earn an ongoing annual management fee. It will be paid an annual performance fee equal to one third of the outperformance of the Company's net asset value 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. Details of the investment management arrangements are shown in note 5 below.

The Board are also considered related parties. Further details of the Board's remuneration and shareholdings can be found on page 54 of the Company's Annual Report.

At a General Meeting held on 28 September 2021 shareholders approved the transfer of certain of the Company's assets to Castelnau Group ('Castelnau'), a company managed by Phoenix, in exchange for shares in Castelnau. As a result of managing Castelnau, the Investment Manager may be paid a performance fee by Castelnau. As explained above, Phoenix is a related party of the Company and will benefit from the Company's transaction with Castelnau through the establishment of the new fund. Therefore, the transfer of assets by the Company to Castelnau in exchange for shares in Castelnau constitutes a related party transaction under LR11.1.7R.

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 12 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 expense flows. As at 30 June 2021, the Company held £10,605,000 (30 June 2020: £6,591,000) in cash, £152,787,000 (30 June 2020: £107,349,000) in quoted investments and £13,327,000 (30 June 2020: £7,601,000) in an unquoted investment. It is estimated that the majority of the portfolio could be realised in seven days under normal conditions. The total operating expenses for the six months to 30 June 2021 was £349,000 (30 June 2020: £299,000).

In light of the COVID-19 pandemic, the Directors have fully considered and assessed the Company's portfolio of investments. A prolonged and deep market decline could lead to falling values in the Company's investments or interruptions to cashflow. However, the Company currently has more than sufficient liquidity available to meet any future obligations.

The market and operational risks associated with the COVID-19 pandemic, and the ongoing economic impact of measures introduced to combat its spread are continually monitored by the Board. The Investment Manager, Administrator and other key service providers are providing regular updates on operational resilience, in light of the COVID-19 pandemic. The Board is satisfied that the key service providers have the ability to continue their operations efficiently in a remote or virtual working environment.

CHANGE TO THE BOARD'S COMMITTEES
Subsequent to the period end the Board agreed to change the names of two of their Committees. The Nomination Committee is now known as the Remuneration and Nomination Committee and the Remuneration and Management Engagement Committee is now known as the Management Engagement Committee.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS
LORD FLIGHT
Chairman
29 September 2021

STATEMENT OF DIRECTORS' RESPONSIBILITies

The Directors confirm to the best of their knowledge that:

·        The condensed set of financial statements contained within the Half Yearly Financial Report have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Company; and

·        The Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's DTR Rules.

The Half Yearly Financial Report was approved by the Board on 29 September 2021 and the above responsibility statement was signed on its behalf by:

LORD FLIGHT
Chairman
29 September 2021

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

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.

CONDENSED STATEMENT OF FINANCIAL POSITION

The notes below form part of these accounts.

CONDENSED STATEMENT OF CHANGES IN EQUITY

The notes below form part of these accounts.

The notes below form part of these accounts.

The notes below form part of these accounts.

CASH FLOW STATEMENT

The notes below form part of these accounts.

NOTES TO THE FINANCIAL STATEMENTS

1. STATUS OF THE FINANCIAL STATEMENTS
The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months period ended 30 June 2021 and 30 June 2020 have not been reviewed or audited by the Company's Auditor. The unaudited Half Yearly Financial Report will be made available to the public at the registered office of the Company. The report will also be available in electronic format on the Company's website, https://www.aurorainvestmenttrust.com/.

The information for the year ended 31 December 2020 has been extracted from the last published Annual Report, unless otherwise stated. The audited financial statement has been delivered to the Registrar of Companies. The Auditors reported on those accounts and their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

The Half Yearly Financial Report was approved by the Board of Directors on 29 September 2021.

2. ACCOUNTING POLICIES
The half yearly financial information has been prepared in accordance with IAS34 Interim Financial Reporting. The accounting policies are unchanged from those used in the last published annual financial statements except where otherwise stated.

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

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 period/year.

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

The Company's unquoted investment represents investment in Phoenix SG Limited (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.

4. INCOME

5. INVESTMENT MANAGEMENT FEES
The Company has an agreement with Phoenix. 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 year until all underperformance of the Company's net asset value 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 liability.

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.

Any performance of Castlenau Group Limited will be excluded from the calculation of the performance fee payable by the Company to Phoenix.

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 period ended 30 June 2021 was £332,000 (30 June 2020: £Nil).

6. DIVIDENDS
In accordance with the stated policy of the Company, the Directors do not recommend an interim dividend.

The final dividend of 0.55p per Ordinary Share in respect of the year ended on 31 December 2020 went ex-dividend on 10 June 2021 and had a record date of 11 June 2021. The dividend was paid on 2 July 2021. This dividend was not reflected in the financial statements for the year ended 31 December 2020, but is reflected in the financial statements for the period to 30 June 2021.

7. SHARE CAPITAL

The Company did not purchase any of its own shares during the period ended 30 June 2021 or the period ended 30 June 2020. No shares were cancelled during either year or period.

Share Issued under the Company's Block Listing Facility
During the period under review 125,000 Ordinary shares were issued from the Company's block listing facility on 8 June 2021 at a price of 238.35 pence per shares.

Further Shares Issued to the Investment Manager
The Company issued 1,061,130 new Ordinary Shares at a price of 200.43 pence per share on 4 February 2021 to the Company's Investment Manager in relation to 80% of the performance fee which had been earned in respect of the Company's outperformance against its benchmark in respect of the year to 31 December 2020. On 17 June 2021, a further 229,802 new Ordinary shares were issued at a price of 230.07 pence per share to the Company's Investment Manager representing the 20% balance of the performance fee earned. These New Ordinary Shares were issued pursuant to the Investment Management Agreement dated 28 January 2016 and are subject to a 36-month lock-in following the date of issue of the new Ordinary Shares and will be subject to a fixed three year clawback period.

Total Voting Rights
At 30 June 2021, the Company had 76,519,675 (30 June 2020: 75,103,743) Ordinary Shares in issue. The number of voting shares at 30 June 2021 was 76,519,675 (30 June 2020: 75,103,743).

8. EARNINGS/(LOSS) PER SHARE
Earnings for the period to 30 June 2021 are stated by reference to the weighted average of 75,995,161 (30 June 2020: 69,978,967) Ordinary Shares in issue during the period, excluding shares held in Treasury.

9. RELATED PARTY TRANSACTIONS
The Board and Phoenix are considered related parties in accordance with the Listing Rules. Fees payable to the Investment Manager are detailed in the Statement of Comprehensive Income and note 5.

Fees payable to the Directors in respect of the period to 30 June 2021 were £69,000 (including NI Contribution or VAT as applicable) (30 June 2020: £69,000).

At a General Meeting held on 28 September 2021 shareholders approved the transfer of certain of the Company's assets to Castelnau Group ('Castelnau'), a company managed by Phoenix, in exchange for shares in Castelnau. As a result of managing Castelnau, the Investment Manager may be paid a performance fee by Castelnau. As explained above, Phoenix is a related party of the Company and will benefit from the Company's transaction with Castelnau through the establishment of the new fund. Therefore, the transfer of assets by the Company to Castelnau in exchange for shares in Castelnau constitutes a related party transaction under LR11.1.7R.

10. POST PERIOD END EVENTS
Since the period the Company held a General Meeting on 28 September 2021. All three Ordinary resolutions proposed at that meeting which related to the Catelnau Group were passed. The Ordinary resolutions proposed at the meeting  can be found in the circular dated 3 September 2021 which can be found on the Company's website at aurorainvestmenttrust.co.uk.

ALTERNATIVE PERFORMANCE MEASURES

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

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.

PREMIUM
The amount, expressed as a percentage, by which the share price is more than the NAV per share.

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.

n/a = not applicable

The Company's LEI is: 2138007OUWIZFMAGO575

A copy of the Interim Financial Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and will also be available on the Company's website at www.aurorainvestmenttrust.com.

Enquires:

PraxisIFM Fund Services (UK) Limited               020 4513 9260

Company Secretary