LEI: 2138007OUWIZFMAGO575

Aurora Investment Trust plc

(the "Company")

Changes to investment objective and performance fee methodology

Eight years into the Company's management by Phoenix Asset Management Partners Limited (the "Investment Manager"), the Company has delivered absolute performance of 96.6% and relative outperformance, against the FTSE All-Share Index, of 10.4%.

The directors of the Company (the "Board") would like to update shareholders on two changes:

Investment Objective

The Board has decided that the wording of the Company's published investment objective should be clarified for consistency with the Company's investment policy and dividend policy.  The existing wording refers to providing shareholders with "long-term returns through capital and income growth" and the Board believes it would be clearer if the words within the quotation marks were replaced with "long-term total returns".  While the Board recognises that "long term total returns" are synonymous with "capital and income growth", the Board considers "long term total returns" to be more accurate in the Company's context, noting in particular that the Company does not have a fixed dividend policy or target and the Board's policy is to seek to distribute substantially all of the net revenue arising from the investment portfolio, regardless of whether such amount is higher or lower than in previous years.

Accordingly, with immediate effect, the Company's investment objective is changed to:

To provide shareholders with long-term total returns by investing predominantly in a portfolio of UK listed companies.

Please note that there is no change to the Company's investment policy or the way in which the investment portfolio is managed. Moreover, there is no change to the dividend policy and the Board expects to continue to distribute substantially all of the net revenue arising from the investment portfolio.

Performance fee methodology

Summary

A key aspect of the Company is its clawback, where performance fees paid to the Investment Manager, can only be retained by the Investment Manager if the Company does not underperform in the subsequent three year lock-in period. Currently if performance fees are clawed back, the high water mark (or level at which future performance fees are payable) does not get adjusted, meaning the Investment Manager must re-earn performance which has already been generated. The Board believes this approach does not reflect the parties' intention that the Investment Manager should be rewarded for generating cumulative long-term outperformance. Therefore with effect from close of business on 13 June 2024, the performance fee methodology has been adjusted to allow the Investment Manager to earn a performance fee in respect of any outperformance that has been clawed back, where it is subsequently re-generated by the Investment Manager. The Board believes that the performance fee, adjusted in this manner, will properly incentivise the Investment Manager for long-term outperformance, consistent with the expectations of shareholders.

Further details regarding the adjustment to the performance fee methodology

The Company's fee structure is unique in that the Investment Manager, does not earn an annual management fee but is entitled to receive a performance fee (the "Performance Fee") equal to one third of the outperformance of the Company's net asset value ("NAV") total return (the "Fund Return") over the percentage return of the FTSE All Share Total Return Index (the "Benchmark Return") for each financial year (or, where no performance fee is payable in respect of a financial year, in the period since a performance fee was last payable) (the "Performance Period"). The Performance Fee is capped at 4 per cent. per annum of the end of year NAV in the event that the NAV per share has increased in absolute terms over the period, and 2 per cent. in the event that the NAV per share has decreased in absolute terms over the period (the "Fee Cap"). Excess outperformance is carried forward and only paid if the Company outperforms, and the Fee Cap is not exceeded, in subsequent years. The Performance Fee is payable in ordinary shares of the Company which must be retained by the Investment Manager for three years (the "Lock-In Period"). In the event that the Fund Return is less than the Benchmark Return at the end of any Lock-In Period, the Company is entitled to claw back the Performance Fee and require some or all of the ordinary shares received by the Investment Manager in satisfaction of the payment of the Performance Fee to be returned to the Company (the "Clawback").

Following a review of the clawback element of the performance fee methodology, it became apparent that the Clawback may, in certain circumstances, operate in a manner which is inconsistent with the parties' original intention that the Investment Manager would earn one-third of outperformance since inception.

While any performance fee with a clawback will generate fees which are not directly linear to the level of outperformance, this is particularly true in the Company's case because the mechanics of the Clawback do not allow for an adjustment to the high-water mark (being the level of outperformance which must be achieved in order for a Performance Fee to become payable) to reflect the impact of the Clawback. This means that, even if the Company's long-term performance improves and the Fund Return returns to outperformance over the Benchmark Return, there is no mechanism for the Investment Manager to be rewarded for long-term outperformance lost as a result of a Clawback.  

In order to allow the Investment Manager to earn a cumulative long-term performance fee which is consistent with the parties' stated intention of generating cumulative long-term outperformance, it is proposed that the clawback mechanics be amended to provide that the high water mark for Performance Periods which arise subsequent to a Clawback will be adjusted to take account of the level of outperformance which was lost as a result of the exercise of such Clawback.  

In respect of the Clawback which occurred on 31 December 2022, the high water mark has today been adjusted to reflect the outperformance related to that Clawback. Adjusting the high water mark in this manner does not crystallise a fee today and does not give rise to any immediate adjustment to the Company's NAV but will reduce the level of outperformance that will need to be generated during the remainder of the current Performance Period in order to achieve a Performance Fee by an amount equal to the performance related to the previous Clawback. Such Performance Fee will only become payable if and when the Fund Return exceeds the Benchmark Return at the end of a calendar year.

In respect of any future Clawbacks, an adjustment will be made to the high-water mark at the same time as the Clawback occurs and daily accruals will be made to ensure that the NAV is adjusted on a daily basis to take account of any Performance Fees which may become payable in the event that performance exceeds the adjusted high water mark. Such accruals will be made without distorting accruals to be made in respect of any Clawbacks for previous Performance Periods.

Any Performance Fee paid on the basis of an adjusted high water mark (or otherwise) will continue to be paid in ordinary shares of the Company that will remain subject to a Lock-In Period and may be clawed back if there is underperformance during that Lock-In Period. Moreover, any Performance Fee paid on the basis of an adjusted high water mark (or otherwise) will be subject to the Fee Cap (which will continue to apply notwithstanding the adjustment to the mechanics of the Clawback).  

Under the Listing Rules of the FCA, the Investment Manager is a related party of the Company. As the adjustment to the performance fee mechanics will reduce the level of outperformance that will need to be generated in order to achieve a Performance Fee in the current Performance Period and in any future Performance Periods which are subsequent to a Clawback, there is a financial benefit to the Investment Manager which has been assessed in accordance with Chapter 11 of the Listing Rules. The adjustment is a smaller related party transaction as defined in LR 11.1.10R.

Contact:

Paul Griggs

Frostrow Capital LLP

Company Secretary

Tel: 020 3709 8733