Aurora Investment Trust : 2019 Annual Report

Contents

Strategic Report

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

Dividend

The Board is today declaring an interim dividend of 4.5p per Ordinary Share (2019: 4.0p) to be paid on 26 June 2020 to Shareholders on the register as at

22 May 2020, with an ex-dividend date of 21 May 2020.

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 on page 8.

Benchmark

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

Annual General Meeting (AGM)

The AGM of the Company will be held at The Norrest, Leigh Sinton, MALVERN, WR13 5EH on 18 June 2020 at 2.00 pm. Please note that as a result of the COVID-19 pandemic and the imposition of compulsory stay-at-home measures by the UK Government, Shareholders are strongly discouraged from attending the AGM in person, and indeed entry may be refused if Government guidance so requires. As a result, there will be no refreshments. Arrangements will be made by the Company to ensure that the minimum number of Shareholders required to form a quorum will attend the meeting in order that the meeting may proceed, and the business of the day conducted.

Aurora

Chairman's

Statement

Lord Flight

Chairman

May 2020

Performance Review

The Net Asset Value ("NAV") per Ordinary Share performance for the year to end December 2019 was 29.9% versus the benchmark FTSE All Share Index which rose 19.1%, a pleasing 10.8% outperformance. The year was volatile,with investors continuing to attempt to determine the implications of Brexit, amid an unstable political environment. The year ended with the election of a Conservative government with a comfortable majority.

The 2019 outperformance versus the FTSE All Share index ensured that the Company has outperformed the benchmark on a cumulative basis since Phoenix Asset Management Partners Limited ("Phoenix" or "Investment Manager") became Investment Manager in January 2016. During this period the Company's NAV per Ordinary Share has risen by 55.9% versus a benchmark rise of 49.1%.

One of the unique features of the Investment Management Agreement with Phoenix, and one that creates significant shareholder alignment, is that Phoenix earns no management fees but has an annual performance fee, equal to one-third of NAV per Ordinary Share total return in excess of the FTSE All-Share.

In 2019 a performance fee was earned by Phoenix for the first time, totalling £1,361,000. They received this fee in the form of the Company's Ordinary Shares which they cannot sell for three years and there is a clawback mechanism. This means that if the outperformance which earned the Ordinary Shares was to have diminished wholly or partially on the three year anniversary of their award, the Ordinary Shares would wholly or partially be forfeited by Phoenix in accordance with the Investment Management Agreement.

The Ordinary Share price of the Company traded at a premium to NAV for substantially all of the year under review, which was helpful in attracting new investors to the Company. During the year, 11.1 million new Ordinary Shares were issued with value at issuance of £22.5 million. Our intention continues to be for the Ordinary Shares to trade at a small premium to NAV.

The Alternative Investment Fund Manager ("AIFM") and Investment Manager

Phoenix continued to employ a focused, patient investment approach during another year of market stress. This was highlighted when Phoenix identified the opportunity to add significantly to holdings in the low-cost airline sector in the summer as it was buffeted by Brexit news and concerns over capacity. This purchase was a key driver

• along with the recovery in the share price of Frasers Group (Sports Direct) - in the strong performance seen in the final quarter.
  Phoenix again highlighted that, through disciplined research and a focus on margin of safety, it will not be knocked off course by market sentiment. This allows it to take advantage of short-term mispricing to add long-term value.
  In 2020 this approach is again being applied as Phoenix stress tests the financial strength of businesses within the portfolio. This is both to ensure they can survive the slowdown in economic activity due to the Coronavirus disease (COVID-19), and to identify where the pricing doesn't reflect the underlying resilience and value.

Growth of the Company

Growing the Company remains a key objective of the Board. A total of 11.1 million new Ordinary Shares were issued in 2019 with an issuance value of £22.5 million. Consequently, the market capitalisation of the Company rose from £101.4 million at the start of January 2019, to finish the year at £157.6 million.

Statement from the CIO of the Investment Manager

Gary Channon

May 2020

As satisfying as last year was, what is of more interest and importance is the current COVID-19 pandemic. As we write, the pandemic is still prevailing, and markets have crashed and then partially rebounded. Let me briefly outline how we approach a situation like this and what you might expect to come from it.

At the very outset back in January, we considered whether our businesses were at risk of ruin if the virus in China ended up being a global pandemic with a shutdown of the economy. We also asked whether our businesses will be weakened competitively by it or strengthened. Our assessment then was that our businesses are all robust enough in their financing that they will be here on the other side and their competitive positions will either be the same or better after. Now we are in the reality of the lockdown and we have had the chance to see the impact and speak to our managements, we still believe those assessments are correct.

That is not to say that the economic shutdown does not do damage - it does.

Our holdings in easyJet, Ryanair, JD Wetherspoon and Frasers in particular will suffer big losses this year from the ceasing of activity. When we apply that to the overall portfolio, that damage is around 13% of our starting estimate of Intrinsic Value. This is bad but not disastrous. In the meantime the portfolio price has dropped by 40%.

We have used the drop in share prices to invest the cash in the portfolio at very attractive levels. We have looked to purchase at one-third of intrinsic value (i.e. with 200% of upside) even adjusted for the impact of COVID-19. As we do this, we add considerable future value, and if we are to do our job well, then we have used the opportunity presented by COVID-19 to build the next leg of our performance. As we have a long history of doing so at Phoenix, downturns are when we do our best work, create the most value whilst reporting negative numbers and then later, provided our investment judgements were correct, we deliver excellent returns whilst seeming to do very little.

COVID-19 is a very unusual type of downturn, but investment-wise, carries all the familiar hallmarks to others in that there is a sudden overreaction to bad news, which of its nature, will mean that it is time limited. A rush for safety and liquidity causes equity prices to plummet and those falls beget more fear and more selling to a point where the price move is out of proportion to the negative news.

We will stick to what we know, avoid using leverage, invest in long-term winners run by honest and competent managers and then let time do its bit. When I write this report next year, this crisis is likely to have passed and you will be able to judge the wisdom and value of our actions. However, as of now, the Company has not represented better value since we started managing it.

Subsequent to the year end, we have started a process which you will hear about in the near future, to organise our activities in companies we control and influence into a single company rather than as separate holdings in our funds. We believe we are adding value in those activities but it is probably not clear to our investors and so by putting that activity into a single investment vehicle and listing it on the London Stock Exchange we create transparency. That listed holding will be subject to the same limits as all of our other listed investments in the Company. We will also remove the current rule that allows up to 10% of the Company to be invested in private companies and make that zero.

We will be writing to you about it in the near future with a lot more detail and information and asking for you to vote on it at a Shareholder meeting where I will come and be ready to answer your questions about it. The attraction of the new structure is that should we, the board or you in the future decide that we do not want that part of what Phoenix does in the portfolio, then it can be sold.

Investment

Management

Review and

Outlook

Steve Tatters

Director

Phoenix Asset Management

Partners

May 2020

During the year, the NAV per Ordinary Share increased by 29.9% and the Ordinary Share price by 32.0%. As of 31 December 2019, the Ordinary Shares were trading at a 2.1% premium and had traded at a small premium for the majority of the year to 31 December 2019. The FTSE All-Share rose by 19.1% over the same period.

Since Phoenix began managing the Company on 28 January 2016 until

31 December 2019, its NAV per Ordinary Share has risen 55.9% versus 49.1% for the FTSE All-Share Index. This has resulted in a performance fee being earned. Phoenix has taken the initial 80% of this fee in Ordinary Shares of the Company, with the remaining 20% to be issued after the Company's full results have been announced. Phoenix must keep those Ordinary Shares for a minimum period of 3 years. If the outperformance over the benchmark has disappeared at the third-year anniversary the Ordinary Shares will be forfeited, and Phoenix will receive nothing. This we believe is one of the most aligned fee structures in the industry.

A total of 11.1 million new Ordinary Shares worth £22.4 million were issued in the year. Net assets at 31 December 2019 were £154.3 million (2018: £101.0 million)as the Phoenix investment approach continued to attract new Shareholders to the Company. As we write at the end of March it is clear the impact of the COVID-19 pandemic

is significant, and the portfolio and the overall market have suffered heavy declines. As at 31 March 2020, the Company's Ordinary Share price is down 36.9% for 2020 with the FTSE All-Share down 25.1%. In the Statement from the CIO report on pages 14 and 15, Gary Channon outlines the work that has been undertaken to stress test the impact of this pandemic on the businesses we own and our confidence in their ability to survive. He outlines our view that our holdings have the financial robustness to ensure their competitive strengths remain intact through this crisis.

Activity Review

2019 saw one new holding, Ryanair, added to the portfolio. This investment leveraged off the knowledge built up through our holding in easyJet. We have previously discussed the background of the European low-cost airline industry from an easyJet perspective and those basic forces of demographic demand are the same for Ryanair, but it operates in a different space within that market as their route overlap is very low. Where they do go head to head, Ryanair operates at a slightly lower cost and easyJet earns a higher price on its tickets resulting in similar returns. Ryanair does not have a big presence in the main slot constrained European airports like easyJet does.

In the September 2019 Aurora factsheet, we introduced the new holding as follows: Ryanair is "Europe's biggest airline measured by passenger numbers, and it is the low-cost producer everywhere that it competes. It is, like easyJet, a product of an inspiration from Herb Kelleher founder and creator of Southwest Airlines, who sadly died earlier this year. He was to aviation what Sam Walton was to retail. Michael O'Leary said of him, "Herb was the Grand Master Yoda of the low-fare airlines. He was the leader, the visionary and the teacher: without Herb there would be no Ryanair, and no low fares airlines anywhere."

Michael O'Leary, an accountant from KPMG, joined Ryanair owner Tony Ryan of GPA as a personal tax advisor but in 1987, then 26 years old, he was sent to Dallas to meet Herb Kelleher and learn about the Southwest Airlines model. He eventually joined Ryanair in 1991 and became CEO in 1994. What he joined was a small loss- making airline in need of a new approach and his epiphany in Dallas gave him the strategy that he believed would work well in Europe.

Report under Section 172 of the Companies Act 2006

Directors Duty to promote the success of the Company

The Board seeks to understand the views of the Company's Shareholders and its other key stakeholders as well as how their interests and the matters set out in section 172 of the Companies Act 2006 have been considered. As part of the Board and stakeholder evaluation processes that are undertaken annually, the Board reviews its engagement mechanisms to ensure they remain effective. In fulfilling their duties, the Directors carefully consider the likely consequences of their actions over the long- term and on other key stakeholders.

During the Board's quarterly meetings the Directors consider and are mindful of:

1. the Company's investment objective and policy;
2. the main trends and factors likely to affect the future development, performance and position of the Company's business;
3. the Company's key performance indicators;
4. the Company's peers;
5. the Company's overall strategy; and
6. the Company's core values which are integrity, accountability, transparency and commitment.

Company sustainability and stakeholders

The Board has identified its key stakeholders which include the Shareholders, investee companies, Investment Manager, financial advisers, the Company Secretary, Administrator, Registrar, Lawyers, Depositary and Custodian. The Board is aware of the need to foster the Company's relationships with its key stakeholders through its stakeholder management activities. The Board provides oversight and challenge to the Investment Manager to ensure that the Company meets its requirements to create and preserve Shareholder value in accordance with (iv) above.

The Board and Investment Manager are seeking to promote an investor base of long-term investors. The appropriate and regular feedback from its Shareholders is achieved through the mechanisms described in detail in the Other Strategic Information and Corporate Governance Report and through relations with Shareholders and the investee companies with the support of Frostrow and the Investment Manager.

The Board expects good standards of business sustainability, especially on environmental, social and governance matters ('ESG'), (as referred to below) at the companies in which it invests and satisfy itself that the Investment Manager consistently and proactively engage with them on this basis.

The Company relies on service providers to manage its operations. The Investment Manager is the most fundamental service provider to the Company's long-term success. A description of each service providers' role together with the terms of their engagement can be found on page 25.

Monitoring and Key Decisions and the outcome of those decisions

The Board meets at least quarterly and at such other times as deemed appropriate. During these meetings, the Board considers reports from the Investment Manager on the Company's portfolio, its investment activity and sector diversity. In addition, the Investment Manager provides an overview of engagement with the investee companies as well as potential investee companies. The Board debates the Company's portfolio and notable acquisitions or disposals at each of its meetings and challenges where deemed appropriate. In between meetings, the Investment Manager and Board maintain contact through which they consider investment ideas, further fund raising initiatives and market outlook and strategies to consider adjusting the Company's portfolio in line with the Company's investment policy.

Directors, Investment Manager and Advisers

Website Address:www.aurorainvestmenttrust.com Registered Number - 03300814

A MEMBER OF THE ASSOCIATION OF INVESTMENT COMPANIES

Governance

Director's Indemnities and Insurance

Subject to the provisions of the Companies Act 2006, the Company may indemnify any person who is a Director, secretary or other officer (other than an auditor) of the Company, against (a) any liability whether in connection with any negligence, default, breach of duty or breach of trust by them in relation to the Company or any associated company or (b) any other liability incurred by or attaching to him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office; and purchase and maintain insurance for any person who is a Director, secretary, or other officer (other than an auditor) of the Company in relation to anything done or omitted to be done or alleged to have been done or omitted to be done as Director, secretary or officer.

A policy of insurance against Directors' and Officers' liabilities is maintained by the Company.

Auditors

In accordance with Section 489 of the Companies Act 2006, a resolution proposing that Grant Thornton UK LLP be re-appointed as auditors of the Company will be put to the AGM. This is item 9 in the Notice of Meeting.

Disclosure of information to auditor

The Directors confirm that:

• so far as each Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and
• the Directors have taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Continuation of the Company

The Company's policy is to hold continuation votes every three years. A new three-year schedule was established upon the appointment of Phoenix in January 2016. The last time the continuation vote was put to Shareholders was in 2019. Therefore, a resolution to approve the continuation of the Company as an investment trust will be put to Shareholders at the AGM to be held in 2022.

Share Capital

The Company has one class of capital, Ordinary Shares. There are no special restrictions or obligations. Shareholders have equal rights with regard to distributions of all kinds in proportion to their shareholdings. Final dividends are payable subject to approval by Shareholders at the AGM; interim dividends can be declared by the Directors.

Purchases of the Company's own Ordinary Shares may be carried out if the relevant sanction is given by Shareholders. Resolutions at general meetings may be carried by show of hands. Each Shareholder present in person or by proxy at a Shareholder's meeting has one vote, or by poll, each Shareholder present in person or by proxy has one vote for every Ordinary Share held.

Governance

1. The Company will use clear and transparent communication that seeks to attract new and existing investors to invest and keep investing in the Company.
2. Execution of the investment strategy as communicated and the delivery of excellentlong-term investment returns in excess of most peers and the benchmark.
3. The Board intends the Company to buy back its Ordinary Shares when the discount to Net Asset Value per Ordinary Share is persistent and a share buy back represents the best use of Shareholders' funds.
4. The Board intends to issue Ordinary Shares when the Company's Ordinary Shares trade at a premium to the then prevailing Net Asset Value per Ordinary Share at a time when, in the opinion of the Board, a further issue of Ordinary Shares is in the best interest of Shareholders.

Holding Shares in Treasury

The Board monitors on an ongoing basis whether Ordinary Shares should be repurchased and, if so whether they should be held in Treasury, or whether they can and should be sold from Treasury. Any sales of Ordinary Shares from Treasury are made at prices not less than the latest available NAV per Ordinary Share at the time of sale.

There were no Ordinary Shares held in Treasury during year ended 31 December 2019 (2018: nil).

Purchase of Own Shares

A resolution is to be proposed at the AGM to renew the Company's powers to purchase its own Ordinary Shares.

Although the current position of the Company is directed towards active expansion, the Directors nevertheless recommend that the general power to purchase shares continues to be held in reserve in case of need. The renewed authority sought by the Company is to purchase up to 14.99% of the voting shares that are in issue as at the date of the AGM.

Investment Management Agreement

The Company entered into a new Investment Management Agreement with Phoenix on 28 January 2016.

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 NAV per Ordinary Share total return (including dividends and adjusted for the impact of share buybacks and the issue of new Ordinary Shares) over the FTSE All-Share Index (total return) for each financial year. The Company's NAV per Ordinary Share return

is based on the weighted number of the Ordinary Shares in issue and NAV over the relevant period.

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

Governance

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 expense flows. As at 31 December 2019, the Company held £16,602,000 (2018: £2,008,000)in cash, £130,326,000 (2018: £91,609,000)in quoted investments and £8,487,000 (2018: £7,010,000)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 2019 were £551,000 (2018: £457,000).

The Company has over 190 years' cover of operating and finance costs, based on net assets as at 30 April 2020 of £116.5 million. As at 30 April 2020, the Company held £9,903,000 in cash, £99,381,000 in quoted investments and £7,578,000 in an unquoted investment.

It is estimated that 70% 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 since 31 December 2019, 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 remain 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.

Brexit

Brexit, or the terms of the exit or withdrawal agreement, could create United Kingdom (and potentially global) uncertainty, which could affect total shareholder returns, the NAV and/or the price of the Ordinary Shares favourably or unfavourably.

COVID-19

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 this situation under close scrutiny. The Company has suffered short-term losses, in line with general market movements. The Board does not believe that this will affect the Company's going concern status.

Governance

Lord Flight

Lord Flight has worked in the financial services industry for over 40 years. He co‑founded Guinness Flight Global Asset Management in 1986. In 1998, upon Guinness Flight's acquisition by Investec, he became Joint Chairman of Investec Asset Management Limited. He was the MP for Arundel and South Downs from 1997 to 2005; was Shadow Chief Secretary to the Treasury between 2000 and 2004 and a member of the Shadow Cabinet. He was appointed to the House of Lords in January 2011. He is Chairman of the EIS Association and of Flight & Partners; he has been a non-executive director of Metro Bank plc and Investec Asset Management Limited and of a number of other companies in the financial services sector. He is also a Commissioner of the Guernsey Financial Services Commission and was a member of the House of Lords EU Finance and Economics Committee from 2010 to 2015.

The Honourable James Nelson

The Honourable James Nelson has had a long career in the financial service sector, working in banking with Morgan Guaranty Trust Company of New York (the predecessor to JP Morgan Chase) in investment management with Foreign & Colonial, where he was a director of F & C Management Limited, and in private equity with Graphite Capital Management Limited as a founding partner. He has held many non-executive directorships, more recently with the Henderson Smaller Companies Investment Trust Plc, Syncora Guarantee (UK) Limited and Intermediate Capital Group Plc. He is a past chairman of the British Private Equity & Venture Capital Association and is currently chairman of the McGill University Trust.

Richard Martin

Richard Martin is an adviser to various family groups and was also chairman of BMO Managed Portfolio Trust plc until 31 December 2018. Previously he was CIO and adviser to T. Bailey Asset Management Limited, a position held for fourteen years, and was chairman of the investment committee of the National Trust for Scotland. Currently, Richard is also a Trustee of Corra Foundation and Saltire Trust.

David Stevenson

David Stevenson is a columnist for the Financial Times, Citywire and Money Week and author of a number of books on investment matters. He was the founding director of Rocket Science Group. Currently he is a director of SQN Secured Income Fund Plc, Gresham House Energy Storage Fund Plc, AltFi Limited and Brismo Limited and a strategy consultant to a number of asset management firms and investment banks.

Lucy Walker

Lucy Walker is a Senior Associate Partner of Sarasin & Partners LLP, having joined as an analyst in January 2011. She is now portfolio manager and Head of Third Party Funds. Lucy previously worked in the Multimanager team at HSBC Global Asset Management. Outside of her executive role, Lucy is Trustee of KEEN London and also sits as an independent member on the Audit & Risk Committee for SportsAid.

Governance

The Board confirms that its members are highly experienced, both generally and in respect of the direction of an investment trust company, and that the backgrounds and seniority of the Directors provide the Board with a high overall level of independence.

Policy with regard to tenure and reappointment

The Directors recognise that independence is not a function of service or age and that experience is an important attribute within the Board. The Directors may decide to recommend a director with more than nine years' service for re-election. In accordance with the 2019 AIC Code of Corporate Governance Directors stand for re-election annually. The performance of each Director will be appraised by the Nomination Committee annually and prior to the AGM.

The Directors have appointment letters which do not state any specific term.

How the Board operates

The Company does not have any employees. The Board has contractually delegated to external agencies, including the Investment Manager, for the management of the Company's investment portfolio, the custodial services (which include the safeguarding of the Company's assets), the registration services and the accounting and company secretarial requirements. Each of these contracts was entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company. The Board reviews these contracts annually. The Board does not undertake any executive function but is responsible to Shareholders for the overall strategy and performance of the Company. It reviews and evaluates all aspects of the Company's performance and all functions performed by the service providers.

There is no formal schedule of matters reserved for the Board. Such a schedule would be inappropriate since the Board decides on all aspects of the activities of the Company and is of sufficiently small size to decide upon such matters as a full Board.

A procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company.

Division of Responsibility

The AIC Corporate Governance Code requires the Board to agree the responsibilities of the chairman, board and committees and to set them out in writing and make them publicly available. The below are the agreed division of responsibilities agreed by the Board.

Role of the Chairman

• Providing leadership to the Board;
• Promoting high standards of governance;
• Ensuring the Board are provided with sufficient information to enable the discharge of their duties;
• Ensuring each Board member's views are considered and appropriate action taken;
• Ensuring each Committee has the support required to fulfil their duties;
• Engaging the Board in assessing and improving its performance;
• Overseeing the induction and development of Directors;
• Remaining independent of the Investment Manager, whilst providing effective support, challenge and advice;
• Supporting other service providers;

Governance

Conflicts of Interest

As required by law, a Director must avoid a situation where he or she has an interest that conflicts with the Company's interests. The Company's Articles of Association provide the Directors authority to authorise potential conflicts of interest. The Directors are able to impose limits or conditions when giving authorisation if they think this is appropriate. The procedure observed by the Board in dealing with conflicted matters is as follows:

• Any Board member so conflicted must recuse themself from the discussion involving the relevant conflict;
• Only Directors who have no interest in the matter being considered are able to debate the matter and take the relevant decision; and
• In taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company's success.

The Directors have declared any potential conflicts of interest to the Company. These are entered into the Company's register of potential conflicts, which is reviewed regularly by the Board. The Directors are obliged to advise the Company Secretary as soon as they become aware of any potential conflicts of interest.

Attendance at Board meetings

The Board holds at least four meetings a year.

During the year ended 31 December 2019 there were five meetings of the Board. Lord Flight, The Hon James Nelson, Mr Martin, Mr Tatters and Mr Stevenson attended all of these meetings. Lady Robathan and Ms Walker did not attend any meetings during 2019 since no meetings were held after their respective appointment on

2 December 2019.

There were also ad-hoc meetings to deal with placings, block listings and other matters.

In addition, there were five fully attended meetings of the Board's committees, as detailed below.

Board Committees

Since all Directors are non-executive and the Chairman is both non-executive and independent, the Board considers that all Directors may normally be present at Committee meetings even if not formally part of the quorum. On certain occasions, as described below, it is inappropriate for the representative of the Investment Manager to be involved. The main purpose of the Committees in the context of the Company's structure is that their existence ensures time is set aside on a formal basis to cover certain important issues of governance, without those issues obscuring the flow of general Board business. Each committee has a separate chairman, as detailed under the separate headings below. The Committees have formal terms of reference, which are available to Shareholders upon request from the Company's registered office and can be viewed via the Company's website at www.aurorainvestmenttrust.com.

Remuneration and Management Engagement Committee

The Board has formed a Remuneration and Management Engagement Committee, which considers the level of fees paid to Directors and also considers issues related to the engagement of the Investment Manager and other service providers, making recommendations as appropriate to the Board. Since all the executive functions of

Governance

The Audit Committee also reviews any non-audit services provided by the auditor. Under the Revised Ethical Code, it is necessary for the tax compliance function to be separated from the audit role. Ernst & Young has been appointed to provide tax compliance services. The auditor did not perform any non-audit services during the year ended 31 December 2019.

All members of the Committee are active in the investment markets and/or the

investment trust sector and the Committee considers that all have recent and relevant financial sector experience.

The work of the Audit Committee during the year ended 31 December 2019, and in relation to this annual report, is described in more detail in the Audit Committee Report on pages 55 and 56.

Nomination Committee

A Nomination Committee has been established by the Board, to identify and interview candidates for vacancies on the Board. It is established as a principle that this process should be led by the independent Directors and the Committee comprises all independent Directors of the Company. The Honourable James Nelson is chairman of the Committee, which will meet as and when required.

The Nomination Committee met once during the year ended 31 December 2019. The Committee reviewed the Company's overall policy on the size and make-up of the Board and considered the Board's performance.

The Committee considered the position of Mr Tatters following just over 20% of the votes cast at the 2019 AGM having been against his membership of the Board. The Committee recommended that the Company discontinue the practice of having an employee of the Investment Manager on the Board. Mr Tatters agreed to stand down as a Director, whilst continuing to attend board meetings as a representative on behalf of the Investment Manager.

The Committee also considered the position of Mr Martin who would no longer be an independent Director and would therefore not be able to Chair the Audit Committee once he had completed his ninth year as a Director of the Company.

Consequently, the Committee recommended two nominations be sought. Having placed an open advertisement on the Company's website and following several interviews, Lady Robathan and Ms Lucy Walker were recommended to the Board and duly appointed as Directors of the Company.

Relations with Shareholders and with Investee Companies

Relations with Shareholders

The Investment Manager regularly meets the largest Shareholders and reports back to the Board on those meetings. The Company encourages all Shareholders to attend the AGM and provides 21 days notice of those meetings. The Notice of Meeting sets out the business of the AGM and any item not of an entirely routine nature is explained in the Directors' Report. Separate resolutions are proposed for each substantive issue.

The Chairman, and where relevant, each committee chair, seeks to engage with the Company's Shareholders (and the Company's other key stakeholders) on significant issues raised by them at the AGM or at other times.

The Board seeks to understand the views of the Shareholders and the Company's other key stakeholders and how their interests and the matters set out in section 172 of the Companies Act 2006 have been considered and especially in Board discussions and decision-making. The Board keeps engagement mechanisms under review so

Governance

Financial Aspects of Internal Control

The Directors are responsible for the internal financial control systems of the Company and for reviewing their effectiveness. These aim to ensure the maintenance of proper accounting records, the reliability of the financial information upon which business decisions are made and which is used for publication and that the assets of the Company are safeguarded. In accordance with the UK Corporate Governance Code, the Directors are responsible for making an assessment of the principal and emerging risks facing the Company and agree procedures for identifying emerging risks. As stated above, the Board has contractually delegated to external agencies the services the Company requires, but they are fully informed of the internal control framework established by the Investment Manager and the Administrator to provide reasonable assurance on the effectiveness of internal financial controls.

The key procedures include monthly production of management accounts and daily NAV calculations, monitoring of performance at regular board meetings, supervision by Directors of the valuation of securities, segregation of the administrative function from that of securities and cash custody and of both from investment management, maintenance of appropriate insurance and adherence to physical and computer security procedures.

The Directors' statement of responsibilities in respect of the accounts is on pages

53 and 54, a statement of going concern is on pages 36 and 37 and the report of the auditors is on pages 57 to 65.

By Order of the Board

John Luetchford

PraxisIFM Fund Services (UK) Limited

Company Secretary

13 May 2020

Governance

Directors'

Remuneration

Report

James Nelson

Chairman of the Remuneration

and Management Engagement

Committee

May 2020

The reports below on Remuneration Policy and Remuneration Policy Implementation have been prepared in accordance with the requirements of the Large and Medium- sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the Regulation).

The Remuneration Policy is required to be put before Shareholders for approval once every three years (unless changed, in which case the changes must be approved). The Remuneration Policy will be proposed as an ordinary resolution at the forthcoming AGM and is binding upon the Company. At the AGM held in 2017 the resolution to approve the Remuneration Policy was passed unanimously by show of hands; the proxy voting was 5,034,384 in favour, 8,500 discretionary on the part of the chairman and 2,952 against.

An ordinary resolution for the approval of the Remuneration Policy Implementation Report will also be put forward at the forthcoming 2020 AGM. The Remuneration Policy Implementation Report is required to be put before Shareholders each year. The Shareholders' vote on the Implementation Report is not binding upon the Company, but the Board and the Committee take account of any concerns that are expressed by Shareholders. At the AGM in 2019, the resolution to approve the Remuneration Implementation Report was passed unanimously by show of hands; the proxy voting on this resolution was 7,809,087 votes in favour, 13,692 votes against and 6,101 withheld.

Shareholders are encouraged as part of the Company's engagement strategy to have the opportunity to ask questions to express their views and ask questions in respect of the Remuneration Policy and Remuneration Implementation report from time to time or at the AGM. Since the last AGM, no Shareholders have commented in respect of the Remuneration Policy or Remuneration Report.

Information not subject to audit

Remuneration Policy

Current and future policy

The Company's remuneration policy was last put forward by ordinary resolution and passed at the Company's AGM held in 2017 and it is intended that the provisions of this policy are to continue to apply after the resolution is approved.

It is linked to the Company's strategy and promoting the long-term success of the Company in accordance with the directors' duties, s 172 Companies Act 2006. This provides fees payable to the Directors to reflect the value of the time spent by the Board on the Company's affairs, the duties of the Directors and sufficient to attract and retain candidates of a high calibre. This is reviewed by the Board annually based upon market rates for non-executive directors commensurate with the growth and size of the Company and reported accordingly in their Policy implementation report.

Directors are remunerated in the form of fees only, payable quarterly in arrears, paid to the Directors personally. Directors are authorised to claim reasonable expenses in the performance of their duties.

Remuneration and Management Engagement Committee

contracted service suppliers other than the Investment Manager. Mr Tatters excused himself when issues related to the Investment Manager's fees were discussed.

Policy on Directors' fees

It is the policy of the Board and the Committee that the remuneration of non- executive Directors should be fair and should reflect the experience, work involved, responsibilities and potential liabilities of the Board as a whole. The non-executive Directors' fees are determined within the maximum limit set out in the Company's Articles of Association, which currently stands at £200,000 per year. The Directors are not eligible for bonuses, pension benefits, share benefits, share options, long- term incentive schemes or other benefits and fees are not linked to Director's individual or collective performance. There are no arrangements in place with respect to compensation for loss of office (for whatever reason) or recruitment incentive remuneration and Directors have no entitlement to any such payments. No Director has waived or agreed to waive any emoluments from the Company or subsidiary undertaking.

Directors' service contracts

The Directors do not have service contracts. The Directors have appointment letters, which do not state any specific term. In accordance with the AIC Corporate Governance Code the Board put themselves forward for annual re-election.

Payments to past Directors

No payments were made during the period to any past Directors.

Remuneration Policy Implementation Report

The levels of remuneration in 2019 were:

Governance

Relative importance of spend on pay

The table below shows the proportion of the Company's income spent on pay (including National Insurance or VAT where applicable).

The information in the table above is required by the Regulations with the exception of other expenses, which have been included to show the total operating expenses of the Company.

Information subject to audit

Directors' emoluments for the year (Audited)

The following emoluments in the form of fees (excluding National Insurance or VAT) were payable to the Directors who served during the year:

None of the fees referred to above were paid to any third-party in respect of services provided by the Directors.

Governance

Statement of Directors' Responsibilities for the Annual Report

Lord Flight

Chairman

May 2020

The Directors are responsible for preparing the Strategic Report, the Directors' Report, the Remuneration Report and the financial statements in accordance with applicable law and regulations.

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) as adopted by 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 applicable IFRSs as adopted by 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 are responsible for the maintenance and integrity of the corporate and financial information included on the website used by the Company.

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

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Audit

Committee

Report

Lady Rachael Robathan

Chairman of the

Audit Committee

May 2020

Independent Auditor's Report to the Members of Aurora Investment Trust Plc

William Pointon

Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London

13 May 2020

Opinion

Our opinion on the financial statements is unmodified

We have audited the financial statements of Aurora Investment Trust Plc (the 'Company') for the year ended 31st December 2019, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Cash Flow Statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

• give a true and fair view of the state of the Company's affairs as at 31 December 2019 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

The impact of macro-economic uncertainties on our audit

Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the Company's future prospects and performance.

Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report their effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the Company's future prospects and performance. However, no audit should be expected to predict the unknowable factors or all possible future implications for a company associated with these particular events.

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Overview of our audit approach

• Overall materiality: £1.5m which represents approximately 1% of the Company's net assets;
• Key audit matters were identified as completeness and occurrence of investment income and existence and valuation of investments; and
• Our audit approach was a risk based substantive audit focused on investments at year end and investment income recognised during the year. There was no significant change in our approach from the prior year.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The Company's accounting policy on income from investments is shown in note 1 (d) to the financial statements and related disclosures are included in note 3

Key observations

Out testing did not identify any material misstatements in the completeness and occurrence of investment income recognised during the year.

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and consistency with the results of other substantive audit procedures performed on investments.

The Company's accounting policy on investments is shown in note 1c to the financial statements and related disclosures are included in note 2. The Audit Committee identified valuation of investments as a significant accounting issue in its report on page 55 where the Committee also described the action that it has taken to address this issue.

Key observations

Our testing did not identify any material misstatements in the valuation of the Company's investment portfolio as at the year end or in the existence of the underlying investments at the year end.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our work and in evaluating the results of that work.

We determined materiality for the audit of the financial statements as a whole to be £1.5m, which is approximately 1% of net assets. This benchmark is considered the most appropriate because net assets, which is primarily composed of the Company's investment portfolio, is considered to be the key driver of the Company's total return performance.

Materiality for the current year is higher than the level that we determined for the year ended 31 December 2018 to reflect the increase in the Company's net assets at the current year end.

We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality.

The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.

Governance

Tolerance for potential uncorrected mis-statements

Performance materiality

• We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to the Administrator and the Company secretary and those charged with governance. We corroborated our inquiries through
  our review of board minutes and papers provided to the Audit Committee. We identified whether there is culture of honesty and ethical behaviour and whether there is a strong emphasis of prevention and deterrence of fraud.
• We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
• • identifying and assessing the potential of fraud given our understanding of an externally managed investment trust Company;
  • understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process
  • assessing matters reported through the group's whistleblowing programme and the results of management's investigation of such matters;
  • challenging assumptions and judgments made by management in its significant accounting estimates;
  • identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
  • assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable set out on page 54 the statement given by the Directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting set out on page 55 the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

Governance

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor's report.

Other matters which we are required to address

We were appointed by the members on 1 January 2000. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 20 years.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

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Statement of Comprehensive Income

For the year ended 31 December 2019

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 year. All revenue is attributable to the equity holders of the Company.

The notes on pages 72 to 86 form part of these accounts.

Financials

Statement of Financial Position

At 31 December 2019

20192018

Approved by the Board of Directors on 13 May 2020 and signed on its behalf by:

Lord Flight

Lady Rachael Robathan Company no. 03300814

NON-CURRENT ASSETS

The notes on pages 72 to 86 form part of these accounts.

Statement of Changes in Equity

Year to 31 December 2019

The notes on pages 72 to 86 form part of these accounts.

Financials

Statement of Changes in Equity continued

Year to 31 December 2018

The notes on pages 72 to 86 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 Mermaid House, 2 Puddle Dock, London EC4V 3DB. 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 providing Shareholders with long-term returns through capital and income growth.

Details of the Directors, Investment Manager and Advisers can be found on page 29.

The financial statements of the Company are presented for the year ended

31 December 2019 and were authorised for issue by the Board on 13 May 2020.

Basis of Accounting

The financial statements of the Company has been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the IASB and International Accounting Standards and Standing Interpretations Committee interpretations approved by the IASC that remain in effect, and to the extent that they have been adopted by 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 Directors have adopted the going concern basis in preparing the financial statements.

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 on pages 36 and 37.

Significant accounting policies

The accounting policies adopted are described below:

1. Accounting Convention

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

1. Standards, amendments and interpretations to existing and/or new accounting standards

1. 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 net profit or loss as a capital item and transaction costs on acquisition or disposal of investments are expensed. 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.

1. 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.

1. 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.

1. Investment Management Fees and Other Expenses

Financials

final dividend. Interim dividends payable are recognised in the period in which they are paid.

1. 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.

The critical judgement, estimate or assumption that may have a significant risk of causing a material adjustment to the Company's NAV relate to the valuation of the Company's unquoted (Level 3) investment in Phoenix SG, which is approximately 5.5% 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 £848,700 (2018: £701,000), representing 0.5% (2018: 0.7%)of NAV.

Financials

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 movements in the level 3 investments during the 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.

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 per cent in the total equity of Stanley Gibbons;

A loan agreement with Stanley Gibbons for a principal amount of £13.0 million over a term of 5 years (the "Debt Investment"). The loan will accrue interest at a rate of 5.0 percent compounding annually and will be repaid in full at maturity. The loan structure also gives Phoenix SG a first charge over the assets and brands of Stanley Gibbons.

The total fair value attributable to the Company's investment in Phoenix SG as of

31 December 2019 is £8.48 million. The Company held 30.36 percent of the share capital of Phoenix SG.

Financials