AURORA INV TST PLC

Earnings Release • Jan 7, 2026

Aurora UK Alpha Monthly Factsheet

December 2025

Holdings >3% 31 December 2025	%
Castelanu Group Ltd	14.8
Frasers Group	14.7
Barratt Redrow	13.4
Lloyds Banking Group	11.9
Ryanair	11.3
Burberry Group	4.3
Others <3%	29.1
Cash & Cash Equivalents	0.5

Share Price:£2.72 Net Asset Value: £3.00 Discount: 9.2% Market Cap: £299m

Data as of 31 December 2025

In December, the NAV was down 1.5% for the month, versus the FTSE All Share (incl. dividends), which was up 2.2%.

Burberry rose 11.4% over the month, while Ryanair gained 4.7%. In contrast, Frasers Group declined by 11.8%.

For the year as a whole, the NAV has risen 16.5% versus 23.9% for the index. Significant price rises of note for 2025 include Lloyds, which has risen 87.9%, followed by Ryanair and Burberry, which rose 58.3% and 29.5% respectively. Finally, Frasers Group was also a material riser after its share price rose 11.3%. The only faller of note was Barratt Redrow, which fell 9.5% during the year.

In terms of contributors to the 16.5% return for the year, Lloyds was the most significant at 6.6%. This was followed by Ryanair at 4.6%. Frasers Group, Burberry and Wayfair also contributed over 1%. Barratt Redrow was the only material detractor with a negative impact of 1.3% on the return

Below is Phoenix CIO, Gary Channon's quarterly commentary, which focuses on patience as a source of outperformance and how it shaped this year's investment decisions. This is followed by an introduction to Wayfair—a holding we are disclosing ahead of our usual 3% threshold given its larger weight in other Phoenix vehicles.

Finally, we would like to draw shareholders' attention to two events taking place in January.

The inaugural Phoenix Quarterly Webinar will be held on Tuesday, 20 January at 4:00pm GMT. Held after the publication of our quarterly letters, the webinar gives the investment team an opportunity to discuss their latest thinking and for investors to ask questions. Hosted by Phoenix, the webinar is open to Aurora shareholders as well as investors in other Phoenix vehicles and marks the first in a new quarterly initiative. Aurora shareholders who can be classified as professional investors and wish to join can register their interest by emailing Phoenix at phoenix@pamp.co.uk.

The second event is an Introduction to Aurora Webinar on Monday, 26 January at 2:00pm GMT, aimed at shareholders newer to the Trust or looking for a refresher. This event is hosted by the Trust via its investor relations adviser, Frostrow Capital, and is open to all Aurora shareholders. Members of the Phoenix investment team will outline the investment approach, discuss performance, and answer shareholder questions. Shareholders wishing to join should email ir@frostrow.com.

Quarterly Commentary from Phoenix CIO, Gary Channon

The key tenets that practitioners of value investing like us follow are well known and most eloquently explained by Messrs Buffett and Munger. Consider shares as fractions of the businesses they represent, study and understand the business well enough to ascribe values and risks, use the stock market as an opportunity either for an attractive, well handicapped investment, or as a way of selling an investment at an attractive price or because it is no longer suitable. Have a prepared mind, wait patiently for great buying opportunities, let business returns do the rest, be patient of the noise that business progression usually comes with, wait patiently for the market ultimately to reflect the underlying value, hold onto the right businesses forever, etc.

All very easy, rational and seductive when written like that. The role of patience is critical and yet not much is written on how to develop and apply it. There is a library of books on how to value a business and even how to be a value investor, but not much on how to develop, harness and improve patience.

It is an interesting word for a value investor because it originates from a Latin word that means to be able to endure pain ("patientia") and until a few hundred years ago that is what it meant before morphing into today's meaning. The word patient is still used for someone who is in hospital and this way of investing does sometimes feel like that! We have noticed how value investors are often drawn to the stoic philosophers.

In modern behavioural psychology patience is either about discounting the future (i.e. gratification postponement, the bird in the hand versus the two in the bush), or impulsivity. Meta-analysis of the studies suggests that patience is partially genetic, impacted by economic security, intelligence and even culture. Population level patience looks to have been relatively stable through time although there is some evidence that social media is reducing it. There are established and proven ways of increasing patience in a personal or social sciences sense, however there isn't much literature showing how to do it for investing.

At Phoenix we are not masochistic stoics, even if it sometimes appears that way, we do though believe in the enormous value of patience and we have applied methods to engineer patience into our approach and continually try to improve it.

It applies differently in four distinct areas:

1. When Buying

We set a level and a detailed set of criteria that are rarely ever achieved and that makes us appear patient, but really, it is a combination of how tightly we set our parameters and their interaction with market prices. That has meant we have had years with no new investments and in 2023 and 2024 we only made one new investment, but in 2025, we made three, two in Q4 alone. A frenzy in Phoenix terms, but not a sudden loss of patience, just the market giving us opportunities.

None of these new holdings have crossed the threshold where we disclose them and although we want to be as transparent as possible with our investors, our reports are read beyond our investor base and giving out our new investments would be sharing work that you have paid for with those who haven't. A lot of work and thought goes into our investments and past evidence suggests they have a good probability of making

money and so we are protective especially as our size now means it is not always easy for us to move in and out of them.

Fortunately, the cupboard isn't bare on discussing a new investment because of one we made in 2022 that has risen so much in the year, that we disclose it now, and that is Wayfair. It is the last to be disclosed of what should be known as the 'Covid Four', which were all investments made post Covid, benefiting from the market's difficulty in estimating the performance and value of businesses whose activities had been heavily distorted by the pandemic. The three previously disclosed ones are Netflix, Hotel Chocolat and AO World. The online furniture market was very distorted by the pandemic, and the effect is still not entirely unwound because of the long replacement cycles in furniture. The Wayfair write up is below.

2. When Observing

Patience is hard to apply when watching. You do not want to be patient with your mistakes but most of our business mistakes have taken a while to become obvious. There is a lot of noise in business, and we are very aware that it doesn't unfold along the smooth paths used in most valuation models. One of the methods we use is making 10-year roadmaps for our investments of ranged assumptions for both financial metrics and non-financial ones. As the future unfolds, one day at a time, we ask ourselves whether what is happening in that business and industry is on or off the roadmap. A lot of our mistakes feel initially like the car just scuffing the curb but ultimately it ends up in the ditch. We sold out entirely this year in our holding in RHI Magnesita after what were increasing signs that it did not have the pricing power which had made it a suitable investment for us. It took a cumulation of evidence to see, which is costly, but without giving that time it could have just been noise. All of our businesses need to have some form of pricing power to be eligible.

It isn't inevitable that things have to go wrong before we can act on them. There are some early warning signs we have developed that are designed to protect us before it does. We sold out of our Bellway holding in 2025 because there has been a complete change of CEO and CFO since we invested, which increases the risks of a capital allocation mistake, and they have changed the way they are internally organised for land purchases in a way that creates future risks, and we have detected signs of that already happening. That said, it is a very attractively valued company in a sector we expect to do very well overall in the coming years, and so the most likely outcome for Bellway shareholders for the future is positive, but we don't like the mix of risks. Fortunately, one of the new investments we made in the quarter is in the same sector and so we have replaced the lost upside with an investment that we estimate has materially better downside characteristics.

3.When Selling

Readers of the last report will know how much we have been impacted by what turned out to be impatient behaviour where patience was the right action. This is the area of our overall framework where we have the most to improve. How to run the right kind of winners whilst recognising when to sell.

We have built a thick filter for buying decisions in part because, when they go wrong, they hurt in an obvious financial way, they damage the track record, and they are very

visible. Selling mistakes are almost invisible until you choose to look at them yourself, then they are even more painful.

We continue to build the selling framework so that it is as effective as our buying one. Selling because something is a mistake or doesn't fit the criteria is the easiest part of selling; the harder part is selling something where the price has risen against improving fundamentals which has changed the risk/reward balance.

For example, our new investment in 2024 in Burberry doubled then halved before we added to it again in March 2025; since then, it has more than doubled again. These gyrations are not matched by the pace of fundamental improvement in the business and could run ahead of it, however, the value of a successful turnaround is greater than the value we put on the business for the buying decision. So, we need to consider a range of potential outcomes and pay attention to the downside scenarios but most of all we need to watch what is happening in the business. So far, we have done nothing with the investment, but this shows how difficult and nuanced the decisions can be.

Lloyds' share price has risen 88% this year, way more than its intrinsic value has, and it is a business whose value range is more bounded than most because it can't grow its core much, its marginal return on capital is the same as its absolute return, and so there will be a price where the balance of returns and risks will make selling a rational thing to do. Growth outside of its core or buying back shares that are no longer cheap will not enhance value the way we see it.

Properly categorising the type of reason why we would sell and collecting the data and the thinking around these considerations is what gives us the material to keep improving how we make them. One day the selling manual may be as big as the buying one (125 pages)!

No winners were sold in 2025.

4.Working for Patient Capital

One of the reasons that focused value investing has not dominated the asset management industry, in a way that might seem merited by the performance of some of its best practitioners, is because it works as a combination in that it needs the right kind of investors. Achieving outperformance from a focused and differentiated portfolio of stocks comes with returns that deviate from the index, can be bumpy and lumpy, and this doesn't suit most investors. In fact, worse than that, most investors will underperform their value manager by adding on highs and redeeming on lows.

We do a number of things to try and attract and retain the right capital for our approach.

The first thing we do is try to put off those who might be likely to sell in a drawdown. We are quite good at putting people off, maybe too good, but drawing attention to how stomach churning our drawdowns have been and asking whether the investor might have a propensity to sell in those times usually does the trick. Our actual investors are the ones who see that those drawdowns set up the next leg of outperformance, they are opportunity.

The studies on patience in its gratification postponement form contain an interesting insight that we try to utilise. It was once thought that those children who did well in the famous Marshmallow Test by giving up 1 now for 2 later and then going on to have success in their lives and careers were genetically preordained, however subsequent work established that what they were doing was using simple mental strategies, like visualising the future reward, that can be taught.

The work on patience has shown that the willingness to less heavily discount the future is a function partly of the confidence in whether that future will happen, not just visualising it but also believing in it. The same is true of investors; they may be willing to stomach volatility and years of poor performance provided they have confidence that the returns will ultimately justify it. If that confidence erodes, then "patience" declines understandably.

One of the tools we use to give confidence in future expected returns is our estimation of the aggregate intrinsic value of the portfolio. It removes the market noise but does reflect fundamental changes. It is a proprietary and not independent measure, but we have been doing it now for every quarter for the Phoenix UK Fund in the same way since we started in 1998, and it has provided a useful correlated forecast of future returns based upon current "cheapness", i.e. upside to IV.

Today, Aurora's IV stands at £6.95 per share—an upside of 132%. Over more than 100 quarters of running this strategy, this level of cheapness has occurred 35 times, and the following three years have never produced a negative return, averaging 57% (16.4% per annum). It is not a forecast, but it is a strong indicator.

When we invest in a business, we have to take a third-party risk in the management of the companies we back and have to build confidence in them. For our investors you need to derive confidence in us. We try to assist that by being as transparent as is in your interest and we are adding to that this quarter by putting some of the team in front of the camera to answer your questions.

Conclusion

Patience is seriously underrated for the role it plays in generating outperformance. AI is transforming the commercial and investing world and we are harnessing the new tools to augment what we do and the impact is really material. We have had our most productive year yet. The new tools will ultimately improve productivity for all, however, the core source of our alpha will remain what it has always been; a willingness to look deeper, think in a measured, structured and clearer way, act with a very long-term perspective, observe business in action, and apply a continuously improving framework to reduce our error rate. Patience is part of that secret sauce and AI shows no signs of changing that, but it is not genetic patience, we are impatiently busy trying to figure things out, it is engineered patience designed to deliver superior long-term returns.

The tide might be turning for the UK, but our returns don't rely upon that. We enter 2026 with what we view as a very attractive portfolio from a risk and reward perspective, and we have high expectations for what it could deliver whatever the macroeconomic backdrop.

New Holding - Wayfair

In the early days of ecommerce, Steve Conine and Niraj Shah, who had met and bonded whilst at Cornell University, set up what would become Wayfair in 2002. They started with a single niche, TV racks and stands, called RacksandStands.com. The model was pure drop ship; in other words, they were leaving the manufacturing and delivery to someone else. Their focus was on acquiring customers, giving them choice and then making sure that the back-end logistics happened through good customer service. They founded the business in Boston where they are now one of the region's biggest employers and a beneficiary of the great education establishments in the area.

Their big insight was with how people searched not for furniture stores, but for products. They kept adding to their niches, dog baskets, bar stools, grandfather clocks, etc. From the start they were a customer focused technology company building a platform using data science. These niches were successful, and they got to over 240 different ones before they decided that to get the benefit of customer goodwill to cross sell, and the scale benefits of investments in brand marketing, they needed in a single umbrella name, and that was Wayfair.

From \$8m in 2003, sales reached \$100m by 2006 and \$600m by 2012, 10 years after they started. By the time they floated in 2014, they were \$1.3bn. In 2019, the year before the pandemic, sales passed \$9bn, and then in 2020 in the pandemic surge in furniture purchases, Wayfair's sales were over \$14bn.

Their market value tracked this rapid growth. From \$2.4bn on float, it was \$9bn before the pandemic and then peaked at \$35bn in early 2021, just as the music stopped and households, having overconsumed on furnishings for their homes, switched to leisure and going out of the home. Shares, having peaked at \$350, fell rapidly; we purchased our holding between March and May 2022 as we caught the falling knife, paying an average of c. \$80 per share (c.\$8bn). They went on to fall below \$30 by October that year and then have doubled and halved many times in the past 3 years before rising 127% last year.

The furniture market is one we have followed and been involved with since 2003, when we invested in DFS. We have been in beds (Silentnight) and floor coverings (Carpetright and Headlam). As a market it has a reassuringly stable demographic backdrop like household formation. Although it has evolved, consumers still purchase things to sit on, sleep on, eat off and cover the floor with as they have for a very long time. Chairs, beds, tables even sofas are things the Romans had.

Despite its size and resilience, it has been a difficult retail proposition partly because of its bulky nature and the variety. Lead times have always been a poor customer experience as well as delivery, and it is hard for showrooms to properly showcase inventory without using enormous amounts of space. Ikea is a standout success story in a sector that has few. Berkshire Hathaway-owned Nebraska Furniture Mart is another.

Like all retail markets, some proportion is likely to go online and in furniture there is a lot of opportunity to improve the customer experience with greater choice and quicker availability. Wayfair has been the primary leader and beneficiary of this; it is the online

market leader in the US and the UK. Wayfair estimates its total addressable market at \$800bn of which \$450bn is the US, and in the US c.\$75bn of that is now online.

One of the key business model factors that makes Wayfair so attractive is that it remains a platform not a retailer. Last year's \$12bn of sales were done on \$70m of inventory because the inventory risk is borne by manufacturers, of which there are 20,000 offering 30 million different products.

As Wayfair scaled up it invested heavily in the underlying logistics infrastructure (\$600m) that takes products from manufacturers to customers, but that investment in infrastructure is mainly fixed, and so future growth in sales and gross profits translate into high marginal returns on capital. The Company hit profitability in 2025 as gross margins of 30% translated into a 3% net income margin, but as sales grow from here that net income margin expands materially. So, the value of Wayfair is very much predicated on how much it grows, which itself is a subset of how much of the furniture market goes online.

There are a large range of intrinsic values depending on what your assumptions are about the above. On the bottom end it's hard to get a value below what we paid for the business. Our central intrinsic value is \$39bn (\$300 per share), but it could be multiples of that if they really succeed in their mission, but we track it carefully and will adjust accordingly.

It is a founder led culture; despite being billionaires, Steve Conine and Niraj Shah, both still run it. They own 14% of the shares and control 75% of the votes. It remains customer centric and their core competences of technology and data science make them well placed to benefit from developments in AI. There is a lot of runway in front of them.

Aurora Track Record

	NAV Return %	Share Price Total Return %**	FTSE All-Share Total Return Index %**	Relative NAV to ASX %
2019	29.7	31.9	19.1	10.6
2020	-5.5	-10.0	-9.7	4.2
2021	19.1	13.5	18.3	0.8
2022	-17.4	-16.3	0.3	-17.7
2023	33.2	28.8	7.9	25.3
2024	-3.6	-5.7	9.5	-13.1
2025	16.5	19.8	23.9	-7.4
Cumulative*	108.1	98.2	123.4	-15.3

^* Since 1 January 2016

^**Share price return with dividends reinvested; FTSE All Share Total Return Index with dividends reinvested. Past performance is not a reliable indicator of future performance. Click here for Aurora's full performance track record.

Aurora Share Price & NAV per Share – 31 December 2025

Past performance is not a reliable indicator of future performance.

Aurora Premium / (Discount) –31 December 2025

Past performance is not a reliable indicator of future performance.

Investment Objective

We seek to achieve long-term returns by investing in predominantly UK-listed equities using a value-based philosophy inspired by the teachings of Warren Buffett, Charlie Munger, Benjamin Graham and Phillip Fisher. Our approach, combined with thorough research, invests in high quality businesses run by honest and competent management purchased at prices that, even with low expectations, aim to deliver excellent returns.

Target Market

Aurora UK Alpha is a long-term investment vehicle, appropriate for those making investments with at least a three-year time horizon. It is aimed at investors looking for a manager with a business and value orientated approach, achieved through investments in predominantly UK companies demonstrating a high return on capital and control over their profitability through the strength of their business franchise. Aurora's portfolio is typically concentrated in a small number of deeply researched stocks, which can result in above average volatility. An investment in Aurora may be best suited to investors with at least an underlying knowledge of equity investments. The Trust is measured against a benchmark but does not follow the benchmark in its portfolio construction. It is intended for investors looking for capital appreciation rather than income, and while it does distribute a dividend, this is not the strategic aim of its investment approach.

Regulatory Notice:

This advertisement is issued by Phoenix Asset Management Partners Limited (PAMP), registered office 80-82 Glentham Road London SW13 9JJ. PAMP is authorised and regulated in the UK by the Financial Conduct Authority. Aurora UK Alpha Plc ("the Trust") is a UK investment trust listed on the London Stock Exchange. Shares in an investment trust are traded on a stock market and the share price will fluctuate in accordance with supply and demand and may not reflect the underlying net asset value of the shares. An investment trust may not be suitable for retail investors with only basic knowledge of investments. The value of investments and any income from them may go down as well as up and investors may not get back the amount invested. There can be no assurance that the Trust's investment objective will be achieved, and investment results may vary substantially over time. Past performance is not a reliable indicator of future performance. Prospective investors should consult their own advisors prior to making any investment. The Prospectus and other regulatory documents can be found at can be found at:

www.auroraukalpha.com

Contact

Phoenix Asset Management Partners Ltd 80-82 Glentham Road London SW13 9JJ Tel: +44 (0) 208 600 0100 Fund Manager since 28 January 2016

Portfolio Manager: Gary Channon Listing: London Stock Exchange Inception Date: 13 March 1997 ISIN: GB0000633262 Bloomberg: ARR

Fees

Management: None Performance: One third of returns in excess of the market