ArsenalHoldingsLimited-AnnualReportandAccountsye31-5-2020.pdf |

ArsenalHoldingsLimited-AnnualReportandAccountsye31-5-2020.pdf

Company Registration No. 4250459

ARSENAL HOLDINGS LIMITED

Annual Report and Financial Statements

31 May 2020

ARSENAL HOLDINGS LIMITED

ANNUAL REPORT AND FINANCIAL STATEMENTS 2020

CONTENTS PAGE

Group Strategic Report 2

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=ZcVTe`cds KVda`_dZSZ]Zej LeReV^V_e 12

IndepenUV_e :fUZe`csd KVa`ce 13

Consolidated Profit and Loss Account and Statement of Comprehensive Income 16

Balance Sheets 17

Statements of Changes in Equity 18

Consolidated Cash Flow Statement 19

Notes to the Accounts 20

OFFICERS AND PROFESSIONAL ADVISERS

DIRECTORS

E.S. Kroenke J.W. Kroenke T.J. Lewis Lord Harris of Peckham

COMPANY SECRETARY

D. Miles

COMPANY NUMBER

4250459

REGISTERED OFFICE

Highbury House 75 Drayton Park London N5 1BU

AUDITOR

Deloitte LLP Statutory Auditor London United Kingdom

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

The directors present their strategic report for the year ended 31 May 2020.

Principal Activity and Strategy

The principal activity of the Group is that of a professional football club playing in the Premier League. The Group is also engaged in a number of property developments.

MYV ;`RcUsd ]`_X eVc^ decReVXj Zd e` T`_eZ_fV e` UVgV]`a :cdV_R] ?“eSR]] <]fS Rd R ]VRUZ_X T]fS `_ S`eY eYV U`^VdeZTand global stages. The Board are committed to a business model which invests the funds generated by the business back into the Club with the aim of achieving an increased level of on-field success with the ultimate goal of winning trophies and using that on-WZV]U dfTTVdd e` Z_TcVRdV eYV <]fSsd V_XRXVU worldwide fan base.

Impact of COVID-19

The results for the financial year have been materially impacted by the Coronavirus pandemic and the consequent lockdown and suspension of the 2019/20 football season. Matches from the closing part of the 2019/20 season, including the Club winning the FA Cup for a record 14th time, were completed in the next financial year, ending 31 May 2021.

MYV Vj T`^a`_V_ed `W eYV @c`fasd I%E* dfTY Rd Sc`RUTRdeZ_X WRTZ]Zej WVVd R_U Y`^V ^ReTY URj cVgV_fVd* RcV YZXY]jpredictable and therefore the impact of the pandemic can be quantified with a reasonable degree of accuracy. For 2019/20 pre-tax losses (unaudited) of £35 million attributable to COVID-19 comprise lost match day revenues of £14 million, deferral of £34 million of broadcasting revenues into financial year 2020/21 and £6 million of other commercial and broadcasting revenue losses, offset by cost savings of £19 million, including the wage reduction dTYV^V RXcVVU Sj eYV FV_sd ?Zcde MVR^ dbfRU,

The impacts of the pandemic have extended into season 2020/21 and are ongoing. Matches continue to be played without fan attendance and consequently the Club is operating without one of its key revenue streams.

Throughout the pandemic, the Group has moved rapidly in making the decisions required to proactively manage and mitigate risk across all areas of its operations and, where possible, to provide appropriate support to its community and stakeholders. Since the year end the Group has refinanced its stadium finance bonds and undertaken a range of cost cutting measures. These steps will ensure the Club is well placed to respond once the situation starts to improve. The financial challenge remains significant, but the Club continues to have options available to it alongside the unwavering support and commitment of its ownership, Kroenke Sports & Entertainment.

Results for the year

The loss for the year after taxation was £47.8 million (2019 o loss of £27.1 million).

Review of the business

The result for the year can be broken down into the following key components:-

2020 £m

2019 £m

Operating profit before player trading 37.1 73.0Exceptional costs (excluding COVID-19) (10.4) (3.9)Amortisation and impairment of player registrations (113.3) (91.0)Sale of player registrations / Loan of players 63.6 16.8Property trading profits 0.3 0.3Net interest costs (13.6) (12.0)Other (17.7) (15.4)

(Loss) before tax (54.0) (32.2)

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

The impact of COVID-19 has been referred to above and is the principal reason for the reduction in operating profits. Football Revenue for the year was £343.5 million (2019 – £394.7 million). Aside from the pandemic, notable changes in income were an increase in commercial revenue from £110.9 million to £142.3 million which was driven by the cV_VhR] `W eYV <]fSsd aRce_VcdYZa hZeY >^ZcReVd R_U eYV deRce `W a new kit partnership with Adidas. Commercial gains were partially offset by lower broadcasting revenues as a consequence of exiting the UEFA Europa League at the Round of 32 (2019 o finalists).

Overall wage costs finished at £234.5 million (2019 – £234.9 million) with underlying growth in player wages offset by cost saving measures in response to COVID-19, including a wage reduction scheme agreed by the First Team players and a waiver of remuneration by the Executive management team.

The exceptional costs incurred of £10.4 million (2019 – £3.9 million) were attributable to a number of changes in the First Team coaching and support personnel.

The total profit on sale of player registrations was £60.1 million (2019 – £12.2 million) and player loans amounted to £3.5 million (2019 – £4.6 million). The players sold included Alex Iwobi to Everton and Krystian Bielik to Derby County. Player trading profits continue to have a significant impact on overall profitability. Average annual profits on sale of player registrations over the last five years, including 2019/20, have been £40.2 million.

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Net interest costs were impacted by a negative movement of £2.5 million (2019 o 0.7 million negative) in the market gR]fV `W eYV @c`fasd LeRUZf^ ?Z_R_TV Znterest rate swap.

Balance Sheet

Following additions to player registrations at a cost of £182.2 million and amortisation charges, the book value of intangible fixed assets (player registrations) was increased to £303.5 million (2019 – £238.2 million). The additions included Nicolas Pépé, Kieran Tierney, William Saliba, Gabriel Martinelli, Pablo Mari and David Luiz.

The year end cash position was significantly impacted by COVID-19 and the exclusion of the normal season ticket renewals process with closing balances of £110.0 million (2019 – £167.0 million). The levels of debtors and creditors were influenced by pandemic related factors and by the <]fSsd transfer activity, both inbound and outbound, with instalments of the transfer fees being payable and receivable over time and mainly over the next two years.

Key performance indicators

Non- financial:

� Premier League 8th place;

� FA Cup winners (competition completed in following financial year) (qualified for UEFA Europa League 2020/21);

� Ticket sales versus capacity (average ticket sales over 21 home games played prior to the first lockdown were 59,254 against 58,943 over 30 home fixtures in the previous season).

Financial

� Cash flow;

� Compliance with applicable financial covenants;

� Revenue;

� Payroll costs;

� Operating profits/EBITDA (before player trading);

� Player trading (acquisitions/sales);

� Property profits;

� Compliance with applicable financial regulations including UEFA Financial Fair Play (FFP).

Quantitative disclosures in respect of financial key performance indicators are included in the financial statements.

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

Risks and uncertainties

There are a number of a`eV_eZR] cZdd R_U f_TVceRZ_eZVd hYZTY T`f]U YRgV R ^ReVcZR] Z^aRTe `_ eYV @c`fasd ]`_X-term performance. The Board meets regularly during the year, either by telephone or on a face to face basis, and monitors these risks on a continual basis. In addition, the management of day to day operational risk is delegated to the Group Executive management team.

The key business risks and uncertainties affecting the Group are considered to relate to:

� The impacts of COVID-/7 `_ eYV <]fSsd cVgV_fVd* `aVcReZ`_d R_U cash flows;

� the performance and popularity of the first team;

� the recruitment and retention of key employees;

� the rules and regulations of the applicable football governing bodies;

� the negotiation and pricing of broadcasting contracts;

� the rates of UK taxation applicable to the Group and its key employees; and

� the renewal of key commercial agreements on similar or improved terms.

MYV @c`fasd Z_T`^V Zd RWWVTeVU Sj eYV aVcW`c^R_TV R_U a`af]RcZej `W eYV WZcde eVR^ R_U dZX_ZWZTR_e d`fcTVd `W cVgV_fVare derived from strong performances in the Premier League and UEFA European competitions. The Group seeks to maintain playing success by continually investing in the development of its playing squad and it enters into employment contracts with each of its key personnel with a view to securing their services for the term of the contract. However, the Group operates in a highly competitive market in both domestic and European competition and retention of personnel cannot be guaranteed. In addition, the activitied `W eYV @c`fasd ^RZ_ T`^aVeZe`cd TR_ UVeVc^Z_V ecV_Udin the market rates for transfers and wages that the Group may be required to follow in order to maintain the strength of its first team squad.

The Club is regulated by the rules of the FA, Premier League, UEFA and FIFA. Any change to FA, Premier League, UEFA and FIFA regulations in the future could have an impact on the Group as the regulations cover areas such as: the format of competitions, FFP, the division of broadcasting income, the eligibility of players and the operation of the transfer market.

The Group monitors its compliance with all applicable rules and regulations on a continuous basis and also monitors and considers the impact of any potential changes.

Broadcasting and certain other revenues are derived from contracts which are currently centrally negotiated by the Premier League and, in respect of European competition, by UEFA; the Group does not have any direct influence, alone, on the outcome of the relevant contract negotiations. The Premier League has secured TV rights sales for the three year cycle, ending season 2021/22, with certain overseas rights already secured for a longer term.

The Group derives a material amount of revenue from sponsorship and other commercial relationships. The underlying commercial agreements have finite terms and, whilst the Group fully expects that the global appeal of its brand will allow its commercial revenues to grow in the medium term, the renewal of existing contracts and / or acquisition of new partnerships cannot be guaranteed.

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ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

Section 172 Statement

Section 172 of the Companies Act 2006 requires the Directors to take into consideration the interests of all stakeholders in promoting the success of the Company and the Group and, in so doing, to have regard to a range of matters, including:

� the long-term consequences;

� the interests of employees;

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� the impact on the community and the environment; and

� the desirability of maintaining a reputation for high standards of business conduct.

Everyone at Arsenal recognises their responsibility as custodians of the Club, to uphold its traditions and values.

Supporters

Our fans are the lifeblood of the Club and we are grateful for their unrelenting, faithful support even more so whilst we play behind closed doors. Despite the challenging circumstances, we are committed to maintaining an open UZR]`XfV hZeY `fc dfaa`ceVcd, MYZd T`^Vd e` ]ZWV eYc`fXY `fc :cdV_R] ?R_ds ?`cf^ hYZTY hV Y`]U eYcVV eZ^Vd R jVRc*enabling fans to put questions to and discuss key issues with our Chief Executive and other senior Club officials. In addition, we keep in regular contact with our supporters through our membership schemes and our network of 185 dfaa`ceVcds T]fSd Rc`f_U eYV h`c]U,

Employees

Our staff are one of our key priorities and the Group has in place a broad suite of policies and programmes which promote the health and safety and the mental health and wellbeing of our employees.

� We ensure equality and fairness in opportunity, pay and promotion decisions and publish our Gender Pay Gap report annually.

� We pay at least the London Living Wage hourly rate of pay to all employees and encourage our third-party suppliers to adopt the same approach to ensure we remain an employer of choice.

In response to the pandemic, we acted swiftly and efficiently to close operational sites to protect our staff, players and community participants and adapt our operations so the majority of our people could operate remotely.

� We have launched a number of initiatives to support our employees, including: value added healthcare services with access to GPs online, a buddy system, mental health first aiders and access to various wellbeing resources.

� Despite reviewing and evaluating the CJRS/JSS schemes offered by the Government, we decided we would not use the schemes and instead used Club funds to protect jobs for as long as possible. We made discretionary payments to our matchday and non-match-day casual workers during the first two lockdown periods in recognition of their contribution and value to the Club.

� We have established a Hardship Fund to support our people who may have found themselves in extreme financial difficulties caused by COVID-19.

Equality, Diversity, and Inclusion

Ensuring equality and diversity is at the heart of Arsenal is a priority. We endeavour to ensure that everyone associated with the Club o employees, fans, our local community and the wider Arsenal family – feels an equal sense of belonging and can interact with the Club in a manner which is fair and free from any form of discrimination.

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

Arsenal in the Community

MYV <]fSsd T`^^Ze^V_e e` Zed ]`TR] R_U X]`SR] T`^^f_Zej Zd TYR__V]]VU eYc`fXY eYV :cdV_R] ?`f_UReZ`_ R_U eYc`fXYArsenal in the Community.

The Arsenal in the Community team delivers sport, social and education programmes to over 5,000 individuals each week o helping to positively change lives of people in our local and global communities.

The Arsenal Foundation supports a wide range of charitable initiatives both locally and across the world. It has a well-established partnership with Save the Children which has delivered large scale infrastructure and support projects through its Coaching for Life scheme.

The pandemic has seen a change from our usual face-to-face delivery, but the Club has continued to provide significant support, including:

� The Arsenal Foundation pledging additional support to local charities;

� Club cars were made available to transport frontline NHS staff, driven by Arsenal staff volunteers;

� PV UZXZeR]ZdVU :cdV_R] Z_ eYV <`^^f_Zejsd RTRUV^ZT cVd`fcTVd R_U ac`gZUVU eYV^ WcVV `W TYRcXV `_]Z_V e`support home schooling; and

� We partnered with HIS Church charity to begin our year-long campaign to deliver half a million free meals to the most vulnerable in our local community.

Sustaining our game

We are firmly committed to operating in a green and sustainable manner and we take our responsibility extremely seriously for the benefit of future generations.

In November 2019 we were named top of the Premier League sustainability table in a report compiled by the BBC and the United Nations backed Sport Positive Summit. This was based on research carried out in eight key categories:

� clean energy

� energy efficiency

� sustainable transport

� single-use plastic reduction or removal

� waste management

� water efficiency

� plant-based or low-carbon food options

� communications or engagement

In February 2020, through a reusable cup scheme in partnership with our Official Beer Partner, Camden Town Brewery, we passed the milestone of saving half a million plastic cups from landfill.

Streamlined Energy and Carbon Reporting (SECR)

The SECR disclosure presents eYV @c`fasd carbon footprint within the United Kingdom for Scope 1, 2 and 3 emissions based on SECR Legislation, an appropriate intensity metric and the total energy use of electricity, gas and transport fuel for the year ended 31 May 2020. This is the first year that SECR has applied and comparative data is not available.

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

Energy consumption used to calculate emissions (kWh) 19,773,528

Emissions from combustion of gas tCO2e (Scope 1) 1,601

Emissions from combustion of fuel for transport purposes tCO2e (Scope 1)

Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing the fuel tCO2e (Scope 3)

Emissions from purchased electricity tCO2e (Scope 2, location-based)

2,807

Total gross tCO2e based on above 4,427

Intensity ratio (tCO2e/£M Turnover) 12.7474

The Group continues to achieve direct savings in energy and associated carbon emissions, through operational and technological improvements, including:

� Being 100% powered from renewable sources via Octopus Energy;

� LED lighting upgrades;

� Increasing investment in training staff about energy efficiency;

� Continuous monitoring and central control of heating, ventilation and air conditioning; and

� Implementation of a new enterprise-level software application providing quality assurance and data capture capabilities into one energy and carbon management solution.

Commercial Partners

We recognise that positive relationships with commercial partners is essential for the continued growth aspirations of the club. We work hard to ensure that we partner with organisations that reflect our values and beliefs and together with our partners, we have continued to push the boundaries to ensure we entertain our fanbase and commit to socially responsible initiatives that promote strong and mutually beneficial relationships.

Suppliers

The Club recognises the importance of its suppliers and has many longstanding contractual relationships in place. The Club monitors its payments to suppliers on a continual basis and seeks to ensure it complies with applicable contractual terms.

Business Conduct

The Group has appropriate policies in place to manage its obligations with regard to employment law and employee matters, environmental issues, anti-corruption / anti-bribery and social matters (including modern slavery and human rights), but does not consider that these are areas of significant strategic risk to its operations.

The Group is committed to paying the right amount of taxes, in the right place, at the right time in accordance with applicable tax laws and regulations. The tax contribution paid by the Group and by its players is substantial and transparent.

ARSENAL HOLDINGS LIMITED STRATEGIC REPORT

Future developments

The 2020/21 season is ongoing and the Club is competing to finish the season as strongly as possible in both the Premier League and UEFA Europa League. The ongoing impacts of the pandemic have been referred to above.

Approved by the Board of Directors and signed on behalf of the Board.

D Miles Company Secretary 26 February 2021

ARSENAL HOLDINGS LIMITED 9>G:8IDGHh G:EDGI

The Directors present their annual report and the audited financial statements for the year ended 31 May 2020.

Principal activities

The principal activity of the Group is that of a professional football club playing in the Premier League. The Group is also engaged in a number of property developments.

Profits and dividends

The results for the year are set out on page 16. The Directors do not recommend the payment of a dividend for the year (2019 – £Nil).

Financial risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern. The Directors cVgZVh WZ_R_TZR] cVa`ced `_ R cVXf]Rc SRdZd R_U eYV @c`fasd finance team monitor working capital and liquidity on a continuous basis. The natucV `W eYV @c`fasd RTeZgZeZVd ^VR_ eYRe eYV ^`de dZX_ZWZTR_e RcVRd `W WZ_Rncial risk relate to cash flow, credit, currency and interest rates. The Group uses financial derivatives, in line with policies approved by the Board, to manage these risks. The Group does not use financial derivatives for speculative purposes.

The Group addresses cash flow risk by carefully managing its working capital inflows and outflows. Forward looking forecasts are prepared, reviewed on a regular basis and subjected to appropriate stress testing.

The Group enters into a number of transactions, relating mainly to its participation in European competition and player transfers, which create exposure to movements in foreign exchange. The Group monitors this foreign exchange exposure on a continuous basis and will usually hedge any significant exposure in its currency receivables and payables.

The Group monitors its compliance with the applicable terms of its debt finance arrangements on a continuous basis and regularly reviews its forecast cash flow to ensure that it holds an appropriate level of bank funds at all times.

Credit checks and other appropriate financial due diligence are performed prior to the Group entering into new material contracts.

The Club continues to be fully compliant with the Financial Fair Play regulations put in place by UEFA and the Premier League including the amendments to those rules put in place to mitigate the impacts of the pandemic.

Going concern

The Directors have given careful consideration to the sufficiency of the financial resources which have been confirmed as available to the Group through loan funding from its ultimate parent company, both now and as required to finance the business for the foreseeable future, together with available bank and other loans and cash balances. On this basis the Directors have a reasonable expectation that the Group and the Company will have adequate financial resources and, accordingly, they continue to adopt the going concern basis in preparing the annual financial statements.

Events after the Balance Sheet Date

Details of significant events since the balance sheet date are included in note 26 to the financial statements.

Future developments

Details of future developments can be found in the Strategic Report.

ARSENAL HOLDINGS LIMITED 9>G:8IDGHh G:EDGI

Directors

The directors of the company, all of whom served throughout the year unless where stated otherwise, are set out below:

E.S. Kroenke J.W. Kroenke T.J. Lewis (appointed 18 June 2020)Lord Harris of Peckham

In addition, Sir Chips Keswick served as a director and Chairman until the date of his retirement on 15 May 2020 and K.J. Friar served as a director until the date of his retirement on 31 August 2020. On his retirement, K.J. Friar was appointed Honorary Life President in recognition of his seventy years service to the Club.

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The Group has made qualifying third party indemnity provisions for the benefit of its directors, which were made during the year and remain in force at the date of this report.

Employee Consultation

Within the bounds of commercial confidentiality, the Group endeavours to keep staff at all levels informed of matters that affect the progress of the Group and are of interest to them as employees. The Group has a Staff Forum, which meets on a regular basis, with representation from across the Club, ensuring that staff are consulted regularly on a wide range of matters which affect their current and future interests.

Equality and Diversity

MYV @c`fasd RZ^ Zd e` V_dure that equality and diversity is at the heart of Arsenal as a priority. This objective is pursued under the banner of Arsenal for Everyone, an initiative launched in 2008 as a celebration of the diversity of the Arsenal family. We endeavour to ensure that everyone associated with the Club o employees, fans, local community and the wider Arsenal family – feels an equal sense of belonging and can interact with the Club in a manner which is fair and free from any form of discrimination.

Disabled Employees

Disabled persons are given full and fair consideration for all types of vacancy in as much as the opportunities available are constrained by the practical limitations of the disability. Should, for whatever reason, an employee of the Group become disabled whilst in employment, every step, where appropriate will be taken to assist with rehabilitation and suitable retraining. It is Group policy that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. The Club has had Disability Confident Leader status since November 2017.

ARSENAL HOLDINGS LIMITED 9>G:8IDGHh G:EDGI

Auditors

In the case of each of the persons who are directors of the Company at the date when this report was approved:

� So far as each of the directors is aware, there is no relevant audit information `W hYZTY eYV <`^aR_jsd RfUZe`c Zdunaware; and

� Each of the directors has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establisY eYRe eYV <`^aR_jsd RfUZe`c Zd RhRcV `W eYRe Z_W`c^ReZ`_,

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

The auditor, Deloitte LLP, is deemed to be reappointed pursuant to Section 487 of the Companies Act 2006.

Approved by the Board of Directors and signed on behalf of the Board

D Miles Company Secretary 26 February 2021

Registered office: Highbury House 75 Drayton Park London N5 1BU

ARSENAL HOLDINGS LIMITED

DIRECTDGHh G:HEDCH>7>A>IM HI6I:B:CI

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The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS /.0 pMYV ?Z_R_TZR] KVa`ceZ_X LeR_URcU Raa]ZTRS]V Z_ eYV ND R_U KVafS]ZT `W BcV]R_Uq, N_UVc T`^aR_j ]Rh eYVDirectors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group 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 that are reasonable and prudent;

� state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

� 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 <`^aR_j R_U eYV @c`fasd ecR_dRTeZ`_d R_U UZdT]`dV hZeY cVRd`_RS]V RTTfcRTj Re R_j eZ^V eYV WZ_R_TZR] a`dZeZ`_ `W eYVCompany and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

ARSENAL HOLDINGS LIMITED

INDEPENDENT AUDITORhS REPORT TO THE MEMBERS OF ARSENAL HOLDINGS LIMITED

Report on the audit of the financial statements

Opinion In our opinion the financial statements of Arsenal Holdings Limited (the raRcV_e T`^aR_js( R_U Zed dfSdZUZRcZVd 'eYVrXc`fas(8

� XZgV R ecfV R_U WRZc gZVh `W eYV deReV `W eYV Xc`fasd R_U `W eYV aRcV_e T`^aR_jsd RWWRZcd Rd Re 1/ FRj 0.20 R_U `W eYV Xc`fasd loss for the year then ended;

� have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, Z_T]fUZ_X ?Z_R_TZR] KVa`ceZ_X LeR_URcU /.0 pMYV ?Z_R_TZR] KVa`ceZ_X LeR_URcU Raa]ZTRS]V Z_ eYV ND R_UKVafS]ZT `W BcV]R_Uq9 R_U

� have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise: � the consolidated profit and loss account; � the consolidated statement of comprehensive income; � the consolidated and parent company balance sheets; � the consolidated and parent company statements of changes in equity; � the consolidated cash flow statement; � the related notes 1 to 27.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial ReporeZ_X LeR_URcU /.0 pMYV ?Z_R_TZR] KVa`ceZ_X LeR_URcU Raa]ZTRS]V Z_eYV ND R_U KVafS]ZT `W BcV]R_Uq 'N_ZeVU DZ_XU`^ @V_VcR]]j :TTVaeVU :TT`f_eZ_X IcRTeZTV(,

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 group and the parent company in accordance with the ethical requirements that are relevant e` `fc RfUZe `W eYV WZ_R_TZR] deReV^V_ed Z_ eYV ND* Z_T]fUZ_X eYV ?Z_R_TZR] KVa`ceZ_X <`f_TZ]sd 'eYV r?K<sds( >eYZTal Standard, 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.

Conclusions relating to going concern We are required by ISAs (UK) to report in respect of the following matters where:

� eYV UZcVTe`cds fdV `W eYV X`Z_X T`_TVc_ SRdZd `W RTT`f_eZ_X Z_ acVaRcReZ`_ `W eYV WZ_R_TZR] deReV^V_ed Zd _`eappropriate; or

� the directors have not disclosed in the financial statements any identified material uncertainties that may TRde dZX_ZWZTR_e U`fSe RS`fe eYV Xc`fasd `c eYV aRcV_e T`^aR_jsd RSZ]Zej e` T`_eZ_fV e` RU`ae eYV X`Z_Xconcern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

We have nothing to report in respect of these matters.

Other information The directors are responsible for the other information. The other information comprises the information includ ed in eYV R__fR] cVa`ce* `eYVc eYR_ eYV WZ_R_TZR] deReV^V_ed R_U `fc RfUZe`csd cVa`ce eYVcV`_, Hfc `aZ_Z`_ `_ eYV WZ_R_TZR]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.

ARSENAL HOLDINGS LIMITED

INDEPENDENT AUD>IDGhH G:EDGI ID I=: B:B7:GH D; 6GH:C6AHOLDINGS LIMITED (continued)

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 respect of these matters.

Responsibilities of directors :d Via]RZ_VU ^`cV Wf]]j Z_ eYV UZcVTe`cds cVda`_dZSZ]ZeZVd deReV^V_e* eYV UZcVTe`cd RcV cVda`_dZS]V W`c eYV acVaRcReZ`_of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the grofasd R_U eYV aRcV_e T`^aR_jsdability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

6bQVa_h` _R`][`VOVYVaVR` S_ aUR NbQVa S aUR SV[N[PVNY `aNaRZR[a`

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.

: WfceYVc UVdTcZaeZ`_ `W `fc cVda`_dZSZ]ZeZVd W`c eYV RfUZe `W eYV WZ_R_TZR] deReV^V_ed Zd ]`TReVU `_ eYV ?K<sd hVSdZeVat: www.frc.org.uk/auditorsresponsibilities. MYZd UVdTcZaeZ`_ W`c^d aRce `W `fc RfUZe`csd cVa`ce,

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:

� the informatio_ XZgV_ Z_ eYV decReVXZT cVa`ce R_U eYV UZcVTe`cds cVa`ce W`c eYV WZ_R_TZR] jVRc W`c hYZTY eYVfinancial statements are prepared is consistent with the financial statements; and

� eYV decReVXZT cVa`ce R_U eYV UZcVTe`cds cVa`ce YRgV SVV_ acVaRcVU Z_ RTT`cUR_Te with applicable legal requirements.

In the light of the knowledge and understanding of the group and of the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the UZcVTe`cds cVa`ce,

ARSENAL HOLDINGS LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 May 2020

2020 2019

Note

Operations excluding

player trading

gh+++

Player trading

gh+++Total gh+++

Operations excluding

player trading

gh+++

Player trading

gh+++Total gh+++

Turnover of the Group including its share of joint ventures 341,431 3,485 344,916 393,492 4,582 398,074Share of turnover of joint venture (389) – (389) (2,515) – (2,515)

Group turnover 3 341,042 3,485 344,527 390,977 4,582 395,559

Operating expenses 4 (330,198) (113,288) (443,486) (337,243) (90,958) (428,201)

Operating profit/(loss) 10,844 (109,803) (98,959) 53,734 (86,376) (32,642)

Share of joint venture operating result (1,492) – (1,492) 190 – 190

Profit on disposal of player registrations – 60,050 60,050 – 12,243 12,243

Profit/(loss) before net finance charges 9,352 (49,753) (40,401) 53,924 (74,133) (20,209)

Net finance charges 5 (13,621) (12,006)

(Loss) before taxation (54,022) (32,215)

Tax on loss 8 6,244 5,141

(Loss) for the financial year (47,778) (27,074)

Player trading consists primarily of loan fees receivable, the amortisation of the costs of acquiring player registrations, any impairment charges and profit on disposal of player registrations.

All trading resulted from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 May 2020

2020 gh+++

2019 gh+++

(Loss) after taxation (47,778) (27,074)Exchange differences 4 10

Total comprehensive (loss) (47,774) (27,064)

ARSENAL HOLDINGS LIMITED

BALANCE SHEET As at 31 May 2020

Group Company

Note 2020

gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Fixed assets Tangible assets 9 416,852 423,817 – -Intangible assets 10 303,547 240,293 – -Investments 11 4,880 6,372 30,059 30,059

725,279 670,482 30,059 30,059Current assets Stock – development properties 12 8,116 8,260 – -Stock – retail merchandise 3,294 1,802 – -Debtors – due within one year 13 62,609 70,331 134,548 134,940

– due after one year 13 27,151 4,258 – -Cash at bank and in hand 14 109,974 166,957 720 717

211,144 251,608 135,268 135,657

Creditors: amounts falling due within one year 15 (235,792) (246,313) (1,809) (1,809)

Net current (liabilities)/assets (24,648) 5,295 133,459 133,848

Total assets less current liabilities 700,631 675,777 163,518 163,907

Creditors: amounts falling due after more than one year 16 (302,954) (228,283) (15,828) (15,395)

Provisions for liabilities 19 (52,599) (54,642) – –

Net assets 345,078 392,852 147,690 148,512

Capital and reservesCalled up share capital 20 62 62 62 62Share premium account 29,997 29,997 29,997 29,997Merger reserve 26,699 26,699 – -Profit and loss account 288,320 336,094 117,631 118,453

HUN_RUYQR_`h Sb[Q` 345,078 392,852 147,690 148,512

The loss W`c eYV WZ_R_TZR] jVRc UVR]e hZeY Z_ eYV WZ_R_TZR] deReV^V_ed `W eYV @c`fasd aRcV_e T`^aR_j* :cdV_R] Aoldings Limited, was £822,000 (2019 o loss of £724,000).

These financial statements of Arsenal Holdings Limited (registered number 4250459) were approved and authorised for issue by the Board of Directors on 26 February 2021.

Signed on behalf of the Board of Directors

T.J. Lewis Director

ARSENAL HOLDINGS LIMITED

STATEMENT OF CHANGES IN EQUITY For the year ended 31 May 2020

Group

Share Capital

gh+++

Share Premium

gh+++

Merger Reserve

gh+++

Profit and Loss

gh+++

Total gh+++

At 1 June 2018 62 29,997 26,699 363,158 419,916

Total comprehensive loss for year ended 31 May 2019 – – – (27,064) (27,064)

At 31 May 2019 62 29,997 26,699 336,094 392,852

Total comprehensive loss for the year ended 31 May 2020 – – – (47,774) (47,774)

As at 31 May 2020 62 29,997 26,699 288,320 345,078

Company

Share Capital

gh+++

Share Premium

gh+++

Merger Reserve

gh+++

Profit and Loss

gh+++

Total gh+++

At 1 June 2018 62 29,997 – 119,177 149,212

Total comprehensive loss for year ended 31 May 2019 – – – (724) (724)

At 31 May 2019 62 29,997 – 118,453 148,512

Total comprehensive loss for the year ended 31 May 2020 – – – (822) (822)

As at 31 May 2020 62 29,997 – 117,631 147,690

ARSENAL HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 May 2020

Note 2020

gh+++

2019 gh+++

Net cash inflow from operating activities 21a 22,502 29,860

Taxation paid (3,900) (109)

Cash flow from investing activities Interest received 667 706Proceeds from sale of fixed assets – 15Purchase of fixed assets (13,108) (12,815)Purchase of investments – (25)Player registrations 21c (57,959) (61,860)

Net cash flow from investing activities (70,400) (73,979)

Cash flow from financing activitiesInterest paid (10,714) (11,175)New debt issued 15,000 -Repayment of debt (9,471) (8,984)

Net cash flow from financing activities (5,185) (20,159)

(Decrease) in cash and cash equivalents (56,983) (64,387)Cash and cash equivalents at start of year 166,957 231,344

Cash and cash equivalents at end of year 14 109,974 166,957

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

1. Accounting policies

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and to the preceding year.

(a) General information and basis of accounting

Arsenal Holdings Limited is a private company limited by shares and registered in England and Wales under the Companies Act. The address of the registered office is given on page 1. The nature of the Gc`fasd `aVcReZ`_d R_U Zed acZ_TZaR] RTeZgZeZVd RcV dVe `fe Z_ eYV decReVXZT cVa`ce `_ aRXVd 2 to 4.

The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council.

The functional currency of Arsenal Holdings Limited is considered to be pounds sterling because that is the currency of the primary economic environment in which the Group operates. The consolidated financial statements are presented in pounds sterling. Foreign operations are included in accordance with the policies set out below.

(b) Basis of preparation of Group financial statements

The Group financial statements consolidate the assets, liabilities and results of the Company and its subsidiary undertakings made up to 31 May 2020. All intra-group transactions, balances, incomes and expenses are eliminated on consolidation.

As permitted by Section 408 of the Companies Act 2006 the profit and loss account of the parent company is not presented as part of these financial statements. The parent company is exempt from the requirement to prepare a cash flow statement.

MYV =ZcVTe`cd YRgV cVTV_e]j f_UVceRV_ R eY`c`fXY cVgZVh `W eYV @c`fasd SfUXVed R_U W`cVTRded, MYZdfinancial assessment takes account of the expected impacts of COVID-19, together with prudent assumptions with regard to on-WZV]U aVcW`c^R_TV* eYV <]fSsd Vy revenue streams, operating costs and cash-flows. It is acknowledged that the pandemic continues to create a significant level of uncertainty. :TT`cUZ_X]j* eYV <]fSsd WZ_R_TZR] ac`[VTeZ`_d YRgV SVV_ decVdd eVdeVU e` V_dfcV eYRe eYV WZ_R_TZR] a`dZeZ`_remains robust in reasonable worst case scenarios, including the extension of restrictions on fan attendance into season 2021/22. The Directors have also considered a number of actions that they could take in order to further mitigate any potential adverse cirTf^deR_TVd, MYV @c`fasd WZ_R_TZR] ac`[VTeZ`_deRV RTT`f_e `W eYV RTeZ`_d R]cVRUj eRV_ e` cVUfTV eYV T`ded `W eYV <]fSsd `aVcReZ`_d R_U cVRd`_RS]jpossible changes in trading performance.

The Group currently meets its day to day working capital requirements through a combination of its own financial resources, which include a loan from its ultimate parent company, and bank and similar debt facilities. ?`]]`hZ_X eYV cVUV^aeZ`_ `W eYV @c`fasd deRUZf^ WZ_R_TV S`_Ud* dfSdVbfV_e e` eYVbalance sheet date and as referred to in note (26), the Group is reliant on the continued financial support of its ultimate parent company, KSE UK Inc., which has provided a loan to enable the refinancing. KSE UK Inc. has indicated that its financial support will continue for the foreseeable future.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

(d) Joint venture and subsidiary undertakings

The joint venture is an undertaking in which the Group holds an interest on a long-term basis and which is jointly controlled by the Group, which holds 50% of the voting rights, and KSE UK Inc under a contractual arrangement.

The Grofasd dYRcV `W eYV cVdf]ed `W eYV [`Z_e gV_efcV RcV included in the consolidated profit and loss account on the basis `W RfUZeVU WZ_R_TZR] deReV^V_ed, MYV @c`fasd dYRcV `W eYV cVdf]ed R_U _Ve RddVed `Wthe joint venture is included under the gross equity method and stated after adjustment to eliminate the @c`fasd dYRcV `W ac`WZed cVdf]eZ_X Wc`^ ecR_dRTeZ`_d SVehVV_ eYV Group and the joint venture which are included in the TRccjZ_X R^`f_e `W RddVed cVa`ceVU Z_ eYV [`Z_e gV_efcVsd SR]R_TV dYVVe,

B_gVde^V_ed Z_ dfSdZUZRcj f_UVceRZ_Xd RcV Z_T]fUVU Z_ eYV <`^aR_jsd WZ_R_TZR] deReV^V_ed Re T`de ]Vddprovisions for impairment.

(e) Turnover and income recognition

Turnover represents income receivable, net of VAT, from football and related commercial activities and income from the sale of development properties completed in the year. The Group has two classes of business – the principal activity of operating a professional football club and property development – both businesses are carried out principally within the United Kingdom.

Gate, match and other event day revenue is recognised over the period of the football season as games are played and events are staged. Sponsorship and similar commercial income is recognised over the duration of the respective contracts. The fixed element of broadcasting revenues is recognised over the duration of the football season whilst facility fees for live coverage or highlights are taken when earned at the point of broadcast. Merit awards have been accounted for based on the known amount at the end of the season pro-rated for games played to the balance sheet date. UEFA pool distributions relating to participation in the Europa League are spread over the matches played in the competition whilst distributions relating to match performance are taken when earned; these distributions are classified as broadcasting revenues. Fees receivable in respect of the loan of players are included in turnover over the period of the loan.

Turnover is recognised in respect of barter transactions only where services are exchanged for dissimilar services and the transaction is deemed to have commercial substance. Such transactions are measured at the fair value of the services received, adjusted by any amount of cash and cash equivalents transferred.

Income from the sale of development properties is recognised on completion of the relevant sale contract. Where elements of the sale price are subject to retentions by the purchaser the retained element of the sale price is not recognised until such time as all of the conditions relating to the retention have been satisfied.

(f) Depreciation

Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment.

Depreciation is calculated to reduce the carrying value of buildings, plant, equipment and motor vehicles to the anticipated residual value of the assets concerned in equal annual instalments over their estimated useful lives as follows:

Freehold buildings 2% per annum Leasehold properties over the period of the lease Plant and equipment 5% to 25% per annum

Freehold land is not depreciated.

(g) Finance costs

Finance costs of debt are recognised in the profit and loss account over the term of the debt using the effective interest method.

Any non-current assets, e.g. player registrations, acquired on deferred terms are recorded at the discounted present value at the date of acquisition. The associated payable is then increased to the settlement value over the period of deferral, with this value being charged as a notional finance cost through the profit and loss account.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

Similarly any intangible asset disposed of on deferred terms will be initially recorded at the discounted present value of future receipts and the receivable is then increased to the settlement value over the period of deferral with this value being charged as notional finance income through the profit and loss account.

(h) Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument and are classified according to the substance of the contractual arrangements entered into.

i. Financial liabilities

Basic financial instruments (including the stadium finance bonds and the C and D debentures) are measured at amortised cost, using the effective interest method. The effective interest rate is the rate which exactly discounts the estimated future payments of receipts over the life of the instrument to its carrying amount at initial recognition, re-estimated periodically to reflect changes in the market rate of interest.

Non basic financial instruments (including the A and B debentures) are recognised at fair value, and measured at the present value of the future payments, discounted at a market rate of interest. Any periodic changes in fair value are recognised in the profit and loss account.

Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires.

ii. Derivative financial instruments

The Group uses derivative financial instruments to reduce its exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(i) Stock

Stock comprises retail merchandise and development property for onward sale and is stated at the lower of cost and net realisable value.

Where properties which are intended to be sold have been acquired they have been included in stock as development properties. Development property comprises freehold land inclusive of the direct cost of acquisition and other directly attributable property development costs including interest costs.

(j) Grants

Grants received in respect of tangible fixed assets are credited to the profit and loss account over the expected useful economic lives of the assets to which they relate. Grants received but not yet released to the profit and loss account are included in the balance sheet as deferred income.

Other grants are credited to the profit and loss account as the related expenditure is incurred.

(k) Player costs

MYV T`ded Rdd`TZReVU hZeY RTbfZcZ_X a]RjVcds cVXZdecReions or extending their contracts* Z_T]fUZ_X RXV_edsfees, are capitalised and amortised, in equal instalments, over the period of the respective a]RjVcds T`_ecRTed, PYVcV R T`_ecRTe ]ZWV Zd cV_VX`eZReVU eYV f_R^`ceZdVU T`ded* e`XVeYVc hZeY eYV _Vhcosts relating to the contract extension, are amortised over the term of the new contract. Where the acquisition of a player registration involves a non-cash consideration, such as an exchange for another player registration, the transaction is accounted for using an estimate of the market value for the non-cash consideration.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

Under the conditions of certain transfer agreements or contract renegotiations, further fees will be payable in the event of the players concerned making a certain number of First Team appearances or on the occurrence of certain other specified future events. Liabilities in respect of these additional fees are accounted for, as provisions, when it becomes probable that the number of appearances will be achieved or the specified future events will occur. The additional costs are capitalised and amortised as set out above.

Profits or losses on the sale of players represent the transfer fee receivable, net of any transaction costs, less the unamortised cost of the applicable a]RjVcsd cVXZdecReZ`_,

Remuneration of players is charged in accordance with the terms of the applicable contractual arrangements and any discretionary bonuses when there is a legal or constructive obligation.

(l) Impairment

The Group will perform an impairment review on player registrations if adverse events indicate that the amortised carrying value of its intangible assets may not be recoverable. Whilst no individual player can be separated from the income generating unit, which is represented by the playing squad and the football operations of the Group as a whole, there may be certain circumstances where a player is taken out of the income generating unit. Such circumstances might include a player being excluded from the playing squad due to sustaining a career threatening injury or where a permanent fall out with senior football management means it is highly unlikely a particular player will ever play for the club again. If such circumstances were to arise and be considered permanent, then the carrying value of the player h`f]U SV RddVddVU RXRZ_de eYV @c`fasd SVde VdeZ^ReV `W eYV a]RjVcsd WRir value less any costs to sell and, if necessary, a provision would be made.

MYV @c`fasd RddVdd^V_e `W WRZc gR]fV hZ]] SV SRdVU `_8-

� in the case of a player who has suffered a career threatening injury, the value attributed by the @c`fasd Z_dfcVcd9 `c

� in the case of a player who has fallen out with senior football management, either the agreed selling price in the event the player has been transferred since the year end or, if the player has _`e SVV_ d`]U* eYV @c`fasd SVde VdeZ^ReZ`_ `W UZda`dR] gR]fV eRZ_X Z_e` RTT`f_e cVTV_e a]RjVcdisposals by both the Group and other clubs.

(m) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

(n) Foreign currencies

Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Foreign currency denominated assets and liabilities held at the year end are translated at year-end exchange rates. Exchange gains or losses are dealt with in the profit and loss account.

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rate ruling at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations are reported in other comprehensive income.

(o) Deferred income

Deferred income represents income from sponsorship agreements and other contractual agreements which will be credited to the profit and loss account over the period of the agreements, season ticket renewals for the 2020/21 season and advance income from executive boxes and Club Tier seats at Emirates Stadium.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

(p) Leases

Rentals payable under operating leases are charged to the profit and loss account evenly over the lease period.

(q) Pensions

The Group makes contributions on behalf of employees and directors to a number of independently controlled defined contribution and money purchase schemes including The Football League Pension and Life Assurance Scheme 'eYV pLTYV^Vq(. Contributions are charged to the profit and loss account over the period to which they relate.

In addition the Group is making contributions in respect of its share of the deficit of the defined benefit dVTeZ`_ `W MYV ?“eSR]] EVRXfV IV_dZ`_ R_U EZWV :ddfcR_TV LTYV^V 'eYV pLTYV^Vq(, : ac`gZdZ`_ YRdSVV_ VdeRS]ZdYVU W`c eYV @c`fasd dYRcV `W eYe deficit which exists in this section of the Scheme and this additional contribution is being charged to the profit and loss account over the remaining service life of those Arsenal employees who are members of the Scheme. The amount attributable to employees who have already retired or who have left the Group has been charged to the profit and loss account.

Under the provisions of FRS 102 Section 28 the Scheme would be treated as a defined benefit multi-V^a]`jVc dTYV^V, MYV LTYV^Vsd RTefRcj YRd RUgZdVU eYRe eYV aRceZTZaReZ_X V^a]`jVcds dYRcV `W eYVunderlying assets and liabilities cannot be identified on a reasonable and consistent basis and accordingly no disclosures are made under the provisions of FRS 102 Section 28.

The assets of all schemes are held in funds independent from the Group.

(r) Taxation

Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are difWVcV_TVd SVehVV_ eYV @c`fasd eRiRS]V ac`WZed R_U Zed cVdf]ed Rd deReVU Z_ eYV WZ_R_TZR] deReV^V_edthat arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or sub-stantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

A deferred tax asset is recognised only when, on the basis of available evidence, it can be regarded as more likely than not that the reversal of underlying timing differences will result in a reduction in future tax payments.

(s) Goodwill Goodwill arising on the acquisition of subsidiary undertakings, representing the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its useful economic life, which is considered to be five years. Provision is made for any impairment.

Critical accounting judgements and estimates B_ eYV Raa]ZTReZ`_ `W eYV @c`fasd RTT`f_eZ_X a`]ZTZVd* hYZTY RcV UVdTcZSVU RS`gV* eYV UZcVTe`cd Rre required to make judgements, estimates and assumptions about the carrying amounts of certain assets and liabilities. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

8_VaVPNY WbQTRZR[a` V[ N]]YfV[T aUR <_b]h` 6PPb[aV[T EYVPVR`

There were no critical judgements apart from those involving estimations, which are dealt with separately below, which the directors have made Z_ eYV ac`TVdd `W Raa]jZ_X eYV @c`fasd Rccounting policies and which would have a significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

Provisions and contingent liabilities for player transactions Creditors and provisions contain allowances for certain contingent amounts payable to players and to other T]fSd SRdVU `_ ^R_RXV^V_esd SVde VdeZ^ReV `W TVceRZ_ WfefcV VgV_ed* dfTY Rd the number of player appearances, and the amount that will become payable as a result. Actual future costs may differ from the amounts provided.

Property trading stocks MYV UZcVTe`cd T`_dZUVc eYRe eYV _Ve cVR]ZdRS]V gR]fV `W eYV @c`fasd ac`aVcej UVgV]`a^V_e stocks, making an appropriate allowance for costs to complete, is greater than their book value.

Current taxation The complex nature of tax legislation under which the Group operates necessitates the use of estimates and assumptions in assessing the tax amounts provided in the financial statements. Actual tax payable may differ from the amounts provided.

2. Segmental analysis

Class of business:- Football Property

development Group 2020

gh+++

2019 gh+++

2020 gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Turnover 343,453 394,730 1,074 829 344,527 395,559

Segment operating (loss)/profit (99,230) (32,841) 271 199 (98,959) (32,642)

Share of operating profit of joint venture (1,492) 190 – – (1,492) 190Profit on disposal of player registrations 60,050 12,243 – – 60,050 12,243

Net finance charges (13,386) (12,120) (235) 114 (13,621) (12,006)

(Loss)/profit before taxation (54,058) (32,528) 36 313 (54,022) (32,215)

Segment net assets 285,842 333,626 59,236 59,226 345,078 392,852

Operating profit from football before amortisation, depreciation and player trading amounted to £37.1 million (2019 – £73.0 million); being segment operating loss (as above) of £99.2 million (2019 o £32.8 million), adding back depreciation (net of grant amortisation) of £16.1 million (2019 – £15.5 million), operating loss from player trading of £109.8 million (2019 – £86.4 million) and exceptional costs (non COVID-19 related) of £10.4 million (2019 – £3.9 million).

Impact of COVID-19 (unaudited)

As described in the Strategic Report the results for the financial year have been materially impacted by the Coronavirus pandemic and the consequent lockdown and suspension of the 2019/20 football season. The Directors consider that the exceptional impact of COVID-19 is fundamental to an understanding of the results for the year and accordingly the financial impacts have been set out in the Strategic Report on page 2. These financial impact disclosures are not repeated in the notes to the accounts as they cannot be audited.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

3. Turnover

Turnover, all of which originates in the UK, comprises the following:2020

gh+++

2019 gh+++

Gate and other match day revenues 78,743 96,244Broadcasting 118,948 183,025Commercial 142,277 110,879Property development 1,074 829Player trading 3,485 4,582

344,527 395,559

4. Operating expenses

Operating expenses comprise:2020

gh+++

2019 gh+++

Amortisation of player registrations 109,114 89,678Impairment of player registrations 4,174 1,280Depreciation and impairment charges (less amortisation of grants) 16,613 15,497

Total depreciation, amortisation and impairment 129,901 106,455Staff costs (see note 6) (including exceptional costs) 234,478 234,922Cost of property sales 201 6Other operating charges (including exceptional costs) 78,906 86,818

Total operating expenses 443,486 428,201

Total operating expenses include:2020

gh+++

2019 gh+++

Exceptional costs (non COVID-19 related) 10,374 3,907

:fUZe`csd cV^f_VcReZ`_- RfUZe `W eYV T`^aR_jsd R__fR] RTT`f_ed 16 23- audit of the subsidiaries pursuant to legislation 106 135

Total audit fees 122 158

– other services 28 42- tax compliance services 10 8

Total non-audit fees 38 50

Operating lease rentals 263 267Profit on disposal of tangible fixed assets – (15)

Exceptional costs (non COVID-19 related) in the current year are attributable to changes to the First Team management, coaching and support staff. In the prior year exceptional costs were attributable to the changes to the First Team management, coaching and support staff and costs of professional advice in connection with KSE UK Inc acquiring 100% of the Company.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

5. Net finance charges

Interest payable and similar charges: 2020

gh+++2019

gh+++

Bank loans and overdrafts 2 3Fixed/floating rate bonds 10,184 10,744Other 787 495Costs of raising long term finance 744 735

Total interest payable and similar charges 11,717 11,977Interest receivable (633) (664)

11,084 11,313Change in fair value of financial instruments 2,537 693

Net finance charges 13,621 12,006

6. Employees

The average monthly number of persons employed by the Group during the year was:

2020 Number

2019 Number

Playing staff 70 73Training staff 77 87Commercial and Administrative staff 432 441Ground staff 124 123

703 724

In addition, the Group used on average 1,135 temporary staff each month, mainly on match days (2019 o1,057). The Company had no employees in either year.

2020 gh+++

2019 gh+++

Staff costs:Wages and salaries 204,700 205,210Social security costs 27,105 27,137Other pension costs 2,673 2,575

234,478 234,922

Exceptional costs (non COVID-19 related) (see note 4) included within staff costs amounted to £9.5 million (2019 o £3.2 million).

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

7. 9V_RPa_`h RZYbZR[a`

2020 gh+++

2019 gh+++

Emoluments 529 1,503Pension contributions o money purchase – -Pension contributions o defined benefit – –

529 1,503

The number of directors who were:- Members of a defined benefit pension scheme 1 1Members of a money purchase pension scheme – 1

Remuneration of the highest paid director:- gh+++ gh+++Emoluments 435 846Pension contributions – –

435 846

Remuneration of key management personnel 2,855 3,983

MYV @c`fasd Vj ^R_RXV^V_e aVcd`__V] comprised of the Board of Directors and the Head of Football and the Managing Director.

8. Tax on loss

2020 gh+++

2019 gh+++

UK corporation tax (credit) at 19% (2019 o 19%) – (3,458)Overseas tax – 3(Over) provision in respect of prior years – (12)

Total current taxation – (3,467)

Deferred taxation (see note 19) Origination and reversal of timing differences (8,834) (1,711)Impact of change in tax rate 2,620 -(Over)/under provision in respect of prior years (30) 37

Total deferred taxation (credit) (6,244) (1,674)

Total tax (credit) on (loss) (6,244) (5,141)

MYV @c`fasd UVWVccVU eRi ]ZRSZ]ZeZVd YRgV SVV_ gR]fVU SRdVU `_ eYV eRi cReVd eYRe RcV ViaVTeVU e` Raa]j Z_ eYVperiods in which the underlying timing differences are predicted to reverse. The expected rate has increased to 19% as legislation to reduce the rate of corporation tax to 17% from April 2020 was withdrawn.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

8. Tax on (loss)/profit (continued)

2020 gh+++

2019 gh+++

The differences between the total tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the (loss)/profit before tax are as follows:

Group (loss) before tax (54,022) (32,215)

Tax on Group (loss) before tax at standard UK corporation tax rate of 19% (2019 o 19%) (10,264) (6,121)

Effects of:Expenses not deductible 1,430 1,198Impact of rate difference between corporation and deferred tax 2,620 (246)Adjustments to tax charge in respect of prior years (30) 25Overseas tax – 3

Group total tax (credit) for the year (6,244) (5,141)

Full provision has been made for the deferred tax liabilities related to the roll-over of profits on sale of player registrations into the tax cost of new qualifying player registrations (see note 19). There is no expiry date on any timing differences.

9. Tangible assets

Freehold properties

Short Leasehold properties

Plant and equipment Total

Group gh+++ gh+++ gh+++ gh+++Cost At 1 June 2019 419,806 23,064 147,710 590,580Foreign exchange – – 22 22Additions – – 9,735 9,735Transfers – 1 (1) -Disposals – – – –

At 31 May 2020 419,806 23,065 157,466 600,337

Depreciation At 1 June 2019 75,719 7,383 83,661 166,763Foreign exchange – – 19 19Charge for the year 5,887 778 10,038 16,703Transfers – 1 (1) -Disposals – – – –

At 31 May 2020 81,606 8,162 93,717 183,485

Net book value

At 31 May 2020 338,200 14,903 63,749 416,852

At 31 May 2019 344,087 15,681 64,049 423,817

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

9. Tangible assets (continued)

At 31 May 2020 the Group had contracted capital commitments of £Nil million (2019 – £5.4 million). The cost of fixed assets includes £38.6 million of interest costs which were incurred on the stadium financing bank facilities during the periods when Emirates Stadium was under construction. The capitalisation of interest ceased in 2006 when Emirates Stadium came into use.

10. Intangible assets gh+++

Cost of player registrations At 1 June 2019 519,817Additions 182,205Disposals (86,356)

At 31 May 2020 615,666

Amortisation of player registrations At 1 June 2019 279,524Charge for the year 109,114Impairment 4,174Disposals (80,693)

At 31 May 2020 312,119

Net book value

At 31 May 2020 303,547

At 31 May 2019 240,293

The figures for cost of player registrations are historic figures for the costs associated with acquiring playerssregistrations or extending their contracts. Accordingly, the net book amount of player registrations will not reflect, nor is it intended to, the current market value of these players nor does it take any account of players UVgV]`aVU eYc`fXY eYV @c`fasd j`feY djdeV^,

The directors consider the net realisable value of intangible assets to be significantly greater than their book value.

11. Investments Group

2020 gh+++

2019 gh+++

Accumulated share of profit of joint venture 4,855 6,347Other investments 25 25

4,880 6,372

The joint venture represents an interest in Arsenal Broadband Limited, a company incorporated in Great Britain and engaged in running the official Arsenal Football Club internet portal. The Group owns all of the 0.*…*../ HcUZ_Rcj p:q dYRcVd `W m/ VRTY R_U eYV `_V p<q dYRcV `W m/ ZddfVU Sj :cdV_R] ;c`RUSR_U Limited and controls 50 perTV_e `W eYV g`eZ_X cZXYed, MYV @c`fasd dYRcV `W eYV net assets included in the audited balance sheet of Arsenal Broadband Limited for the year ended 31 May 2020 is as follows:

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

11. Investments (continued)

2020 gh+++

2019 gh+++

Fixed assets 480 525Current assets 5,336 6,722Liabilities (936) (900)

4,880 6,347

Investments in subsidiary undertakings Company gh+++

Balance at 1 June 2019 and 31 May 2020 30,059

The Company has the following subsidiary companies (of which those marked * are indirectly held):

Country of incorporation

Proportion of ordinary

shares owned Principal activity

Arsenal (AFC Holdings) Limited Great Britain 100% Share holdingThe Arsenal Football Club plc* Great Britain 100% Professional football clubArsenal (Emirates Stadium) Limited* Great Britain 100% Property developmentArsenal Overseas Holdings Limited* Great Britain 100% Share holdingAOH-USA, LLC* USA 100% Data managementArsenal Overseas Limited* Jersey 100% Retail operationsArsenal Securities plc* Great Britain 100% FinancingArsenal Stadium Management Company

Limited*Great Britain 100% Stadium operations

ATL (Holdings) Limited Great Britain 100% Share holdingAshburton Trading Limited* Great Britain 100% Property developmentHHL Holding Company Limited Great Britain 100% Share holdingHighbury Holdings Limited* Great Britain 100% Property holdingArsenal Women Football Club Limited* Great Britain 100% P`^V_sd W“eSR]]Arsenal Football Club Asia PTE Limited* Singapore 100% Commercial operationsAshburton Properties (Northern Triangle)

Limited* Great Britain 100% Dormant

Drayton Park Trading Limited* Great Britain 100% DormantQueensland Road Trading Limited* Great Britain 100% DormantAshburton Properties Holdings Limited Great Britain 100% DormantArsenal Stadium Management Holdings

LimitedGreat Britain 100% Dormant

The registered address for all Group companies and the joint venture company is as for the Company and as deReVU Z_ eYV =ZcVTe`cds KVa`ce ViTVae for Arsenal Overseas Limited (37 Esplanade, St Helier, Jersey JE1 2TR), AOH-USA LLC (Suite 620, 954 W. Washington Blvd, Chicago, IL 60607) and Arsenal Football Club Asia PTE Limited (2 Shenton Way, 18-01 SGX Centre 1, Singapore 068804).

12. Stock – development properties

Properties are held for resale and are recorded at the lower of cost and net realisable value. The directors consider the net realisable value of development property stocks to be greater than their book value.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

13. Debtors Group Company

2020 gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Amounts recoverable within one year Trade debtors 25,403 16,161 – -Other debtors 21,631 21,645 – -Amount due from group undertakings – – 134,548 134,939Prepayments and accrued income 12,244 32,525 – 1Corporation tax recoverable 3,331 – – –

62,609 70,331 134,548 134,940

Amounts recoverable in more than one year Other debtors 26,312 3,232 – -Prepayments and accrued income 839 1,026 – –

27,151 4,258 – –

Other debtors include £46.5 million in respect of player transfers (2019 – £23.5 million).

14. Cash at bank and in hand Group Company

2020 gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Debt service reserve accounts 27,452 36,761 – -Other accounts 82,522 130,196 720 717

109,974 166,957 720 717

The Group was required under the terms of its fixed rate bonds and floating rate bonds to maintain specified amounts on bank deposit as security against future payments of interest and principal. Accordingly the use of these debt service reserve accounts was restricted to that purpose. The Group uses short-term bank treasury deposits as a means of maximising the interest earned on its cash balances.

Group Company 2020

gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Cash at bank and in hand 67,474 135,923 720 717Cash equivalents (short-term deposits) 42,500 31,034 – –

109,974 166,957 720 717

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

15. Creditors: amounts falling due within one year Group Company

2020 gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Fixed rate bonds o secured 9,556 9,016 – -Trade creditors 3,731 11,674 – -Corporation tax – 569 – -Other tax and social security 16,544 17,116 – -Amounts due to group undertakings – – 1,786 1,786Other creditors 78,046 67,714 – -Accruals and deferred income 127,915 140,224 23 23

235,792 246,313 1,809 1,809

Other creditors, above and as disclosed in note 16, include £153.6 million (2019 – £76.7 million) in respect of player transfers.

16. Creditors: amounts falling due after more than one year Group Company

2020 gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Balance due to parent undertaking 15,000 – – -Fixed rate bonds o secured 102,761 112,454 – -Floating rate bonds o secured 48,586 48,449 – -Derivative financial instruments (see note 18) 26,376 23,839 – -Debenture loans 15,865 15,430 15,828 15,395Other creditors 88,363 23,311 – -Grants 3,255 3,345 – -Deferred income 2,748 1,455 – –

302,954 228,283 15,828 15,395

Debenture loans comprise:

Par value of debentures plus accumulated interest 30,566 30,133 16,139 15,706Costs of raising finance (311) (311) (311) (311)Fair value adjustment (14,390) (14,392) – –

15,865 15,430 15,828 15,395

Under the issue terms A and B debentures with a par value of £14,427,000 are repayable at par after 123 years and these debentures are interest free. C and D debentures with a par value of £10,224,000 are repayable at the option of the debenture holders in 8 years and carry cumulative compound interest at 2.75% per annum.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

16. Creditors: amounts falling due after more than one year (continued)

The fixed rate bonds above and disclosed in note 17 comprise: 2020 gh+++

2019 gh+++

Fixed rate bonds 113,771 123,242Costs of raising finance (1,454) (1,772)

112,317 121,470

Due within one year 9,556 9,016Due after more than one year 102,761 112,454

112,317 121,470

The fixed rate bonds bear interest at 5.1418% per annum.

The floating rate bonds above comprise: 2020 gh+++

2019 gh+++

Floating rate bonds 50,000 50,000Costs of raising finance (1,414) (1,551)

48,586 48,449

Due within one year – -Due after more than one year 48,586 48,449

48,586 48,449

As a direct consequence of the financial impact of COVID-19 and subsequent to the balance sheet date, in August 2020, the Group redeemed all of the Fixed Rate Bonds, Floating Rate Bonds and the related interest rate swap. At the same time the Group terminated the guarantee provided by Ambac Assurance UK Limited. Funding for the refinance, including the related break costs, was largely provided through a loan from the @c`fasd aRcV_e f_UVceRZ_X* DL> ND B_T,

The floating rate bonds paid interest at LIBOR for three month deposits plus a margin of 0.55% (2019 o 0.55%) and the Group entered into interest rate swaps which fixed the LIBOR element of this cost at 5.75%.

The costs of raising debt finance, in the form of fixed and floating rate bonds, were being amortised to the profit and loss account over the term of the bonds. The amortisation charge for the year was £455,000 (2019 – £480,000).

The fixed rate bonds and floating rate bonds were guaranteed as to scheduled payments of principal and interest by certain members of the Group and by Ambac Assurance UK Limited. The Group paid Ambac Assurance UK Limited annual guarantee fees at a rate of 0.50% (2019 o 0.65%) of fixed rate bond principal outstanding and 0.50% (2019 o 0.65%) of the floating rate bond principal outstanding.

MYV @c`fasd WZiVU cReV S`_Ud R_U floating rate bonds were secured by a mixture of legal mortgages and fixed charges on certain freehold and leasehold property and certain plant and machinery owned by the Group, by WZiVU TYRcXVd `gVc TVceRZ_ `W eYV @c`fasd ecRde debtors, by fixed charges over certain of the Groupsd SR_deposits, by legal mortgages or fixed charges over the share capital and intellectual property rights of certain subsidiary companies and fixed and floating charges over the other assets of certain subsidiary companies.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

16. Creditors: amounts falling due after more than one year (continued)

17. Financial instruments

MYV @c`fasd WZ_R_TZR] Z_decf^V_ed T`^acZdV ^RZ_]j `W TRdY R_U SR_ SR]R_TVd* WZiVU R_U W]`ReZ_X cReV S`_Ud*debentures and various items, such as trade debtors and trade creditors, that arise directly from its operations. The main purpose of these financiR] Z_decf^V_ed Zd e` ac`gZUV WZ_R_TV W`c eYV @c`fasd `aVcReZ`_d, MYV ^RZ_risks arising from the Gc`fasd WZ_R_TZR] Z_decf^V_ed cV]ReV e` interest rate, liquidity and foreign currency and the Board reviews and agrees its policy for managing these risks.

TYV TRccjZ_X gR]fV `W eYV @c`fasd WZ_R_TZR] Z_decf^V_ed Zd R_R]jdVU Rd W`]]`hd8-

Financial Assets 2020

£h000 2019

£h000

Measured at undiscounted amount receivable:Cash at bank 109,974 166,957Trade and other debtors 73,346 41,038

183,320 207,995

Financial Liabilities

Measured at amortised cost:Fixed rate and floating rate bonds (160,903) (169,919)C & D Debentures (15,828) (15,395)

Measured at fair value through profit and loss:A & B Debentures (37) (35)Interest rate swaps (26,376) (23,839)

Measured at undiscounted amount payable:Trade and other creditors (175,965) (102,699)

(379,109) (311,887)

The Groupsd WZ_R_TZR] ]ZRSZ]ZeZVd-UVSe were repayable as follows:2020

gh+++

2019 gh+++

Between one and two years 10,525 9,984Between two and five years 35,124 33,318After five years 124,003 135,899

169,652 179,201Within one year 9,984 9,471

Total debt 179,636 188,672

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

17. Financial instruments (continued)

Financial liabilities (continued)

The fair value of the interest rate swaps was determined by reference to the market price at the reporting date. MYV @c`fasd TRdY R_U SR_ UVa`dZed VRc_ Z_eVcVde Re cReVd ]Z_VU e` EB;HK, MYV @c`fasd `eYVc WZ_R_TZR] RddVeddo not earn interest. Total interest income for the year is shown in note 5.

MYV Z_eVcVde cReVd ReeRTYZ_X eYV @c`fasd WZiVU cReV S`_Ud* W]`ReZ_X cReV S`_Ud R_U UVSV_efcVd RcV UVeRZ]VU Z_note 16, MYV @c`fasd `eYVc WZ_R_TZR] ]ZRSilities do not attract interest. The cost for the year of the Grofasdfinancial liabilities was as follows (all of these costs are also disclosed within finance charges in note 5):-

2020 £h000

2019 £h000

Fair value gains and (losses):A & B Debentures (2) (1)Interest rate swaps (2,537) (693)

Interest expense at amortised cost:Fixed rate and floating rate bonds (10,184) (10,744)C & D Debentures (433) (421)

(13,156) (11,859)

18. Financial Derivatives

Current Non-current 2020

gh+++

2019 gh+++

2020 gh+++

2019 gh+++

Other derivatives:Interest rate swaps – – (26,376) (23,839)

– – (26,376) (23,839)

As described in note (16) the interest rate swap was terminated as part of the refinance exercise completed subsequent to the balance sheet date.

Interest rate risk

The Group is exposed to interest rate risk because part of its long-term debt is at floating rates of interest. The Group has entered into interest rate swaps the purpose of which is to minimise its exposure to this interest rate risk.

:WeVc eRZ_X Z_e` RTT`f_e eYVdV Z_eVcVde cReV dhRad* eYV Z_eVcVde cReV ac`WZ]V `W eYV @c`fasd WZ_Rncial liabilities at 31 May 2020 was as follows:

Fixed rate

2020

Floating rate

2020

Interest free

2020 Total 2020

Weighted average

fixed rate

Weighted average period for which rate

is fixed gh+++ gh+++ gh+++ gh+++ % yrs

Bonds o fixed rate 113,771 – – 113,771 5.6 9Bonds o floating rate 50,000 – – 50,000 6.8 11Debenture loans 15,828 – 37 15,865 2.8 8

179,599 – 37 179,636

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

18. Financial Derivatives (continued)

Interest rate risk (continued)

The interest rate profile at 31 May 2019 for comparative purposes was:

Borrowing facilities

The Group had undrawn committed borrowing facilities at the balance sheet date, in respect of which all conditions precedent had been met, as follows:

2020 gh+++

2019 gh+++

Expiring in:One year or less 50,000 50,000

Foreign currency management

The Group is mainly exposed to the foreign currencies of the Euro and US dollar.

In assessing its foreign currency exposure the Group will assess the balance of its outstanding currency denominated assets and liabilities together with known future currency cash flows such as from participation in the UEFA Champions League or UEFA Europa League and from contracted player transfers.

MYVcV hVcV _` W`cVZX_ TfccV_Tj T`_ecRTed Z_ a]RTV Re eYV SR]R_TV dYVVe UReV Rd eYV @c`fasd ViaVTeVU foreign currency designated cash flows were projected to be broadly in balance over the short to medium term.

Included in cash and cash equivalents are amounts of £3.7 million (2019 – £6.0 million) denominated in Euros and £0.6 million (2019 – £1.6 million) denominated in US dollars.

Included in trade debtors are amounts of £Nil million (2019 – £0.5 million) denominated in Euros and £0.3 million (2019 – £0.1 million) denominated in US dollars. Included in other debtors are amounts of £14.4 million (2019 – £8.8 million) denominated in Euros.

Included in prepayments and accrued income are amounts of £3.4 million (2019 – £14.5 million) denominated in Euros and £Nil million (2019 – £0.2 million) denominated in US dollars.

Included in trade creditors are amounts of £Nil million (2019 – £0.3 million) denominated in US dollars and £Nil million (2019 – £0.2 million) denominated in Euros.

Included in other creditors are amounts of £91.1 million (2019 – £44.6 million) denominated in Euros. Included in provisions are amounts of £16.6 million (2019 – £10.6 million) denominated in Euros.

Fixed rate

2019

Floating rate

2019

Interest free

2019 Total 2019

Weighted average

fixed rate

Weighted average period for which rate

is fixed gh+++ gh+++ gh+++ gh+++ % yrs

Bonds o fixed rate 123,242 – – 123,242 5.8 10Bonds o floating rate 50,000 – – 50,000 7.0 12Debenture loans 15,395 – 35 15,430 2.8 9

188,637 – 35 188,672

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

19. Provisions for liabilities

Group 2020

gh+++

2019 gh+++

Pensions provision (see note 25 (b)) 1,288 1,756Deferred taxation 19,057 25,301Transfers 32,254 27,585

52,599 54,642

The Transfers provision relates mainly to the probable additional transfer fees payable based on the players concerned achieving a specified number of appearances. In this respect, new provisions of £18.7 million were made during the year, £8.2 million of provisions were reclassified as creditors and £5.7 million of provisions were cancelled as no longer required.

The deferred tax credit for the year was £6.2 million (see note 8) (2019 o charge of £1.7 million).

Group 2020

gh+++

2019 gh+++

Deferred tax provision

Tax losses (5,357) -Accelerated capital allowances 7,320 7,095Capitalised interest 6,062 5,530Rollover relief on player registrations 14,372 14,918Other timing differences (3,340) (2,242)

Total provision for deferred taxation 19,057 25,301

20. Called up share capital

£ £ Allotted, issued and fully paid Subscriber Ordinary shares of £1 each 2 2Ordinary shares of £1 each 62,217 62,217

The two Subscriber Ordinary shares carry no right to vote or to income and a deferred right to a return of capital paid up.

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

21. Notes to the consolidated cash flow statement

(a) Reconciliation of operating loss to net cash inflow from operating activities

2020 gh+++

2019 gh+++

Operating loss (98,959) (32,642)

Amortisation of player registrations 109,114 89,678Impairment of player registrations 4,174 1,180Profit on disposal of tangible fixed assets – (15)Depreciation (net of grant amortisation) 16,613 15,497

Operating cash flow before working capital 30,942 73,698

(Increase)/Decrease in stock (1,348) 3,631Decrease in debtors 11,090 2,137(Decrease) in creditors (18,182) (49,606)

Net cash inflow from operating activities 22,502 29,860

Non cash changes represent £455,000 in respect of the amortisation of costs of raising finance, £433,000 in respect of rolled up, unpaid debenture interest, £2,000 in respect of the change in fair value of the Gc`fasd : R_U ; UVSV_efcVd R_U m2,537,000 in respect oW eYV TYR_XV Z_ WRZc gR]fV `W eYV @c`fasd Z_eVcVderate swaps.

(b) Analysis of changes in net debt At 1 June 2019

gh+++

Non cash changes

gh+++

Cash flows gh+++

At 31 May 2020

gh+++

Cash at bank and in hand 135,923 – (68,449) 67,474Cash equivalents 31,034 – 11,466 42,500

166,957 – (56,983) 109,974Debt due within one year (bonds) (9,016) (10,011) 9,471 (9,556)Debt due after more than one year (bonds) (160,903) 9,556 – (151,347)Derivative financial instruments (23,839) (2,537) – (26,376)Other debt due after more than one year (15,430) (435) (15,000) (30,865)

Net (debt) (42,231) (3,427) (62,512) (108,170)

2019gh+++

Player registrations Payments for purchase of players (100,669) (118,144)Receipts from sale of players 42,710 56,284

(57,959) (61,860)

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

22. Leasing commitments

Total future minimum lease payments under non-cancellable operating leases are as follows:

23. Commitments and contingent liabilities

Under the conditions of certain transfer agreements in respect of players purchased, further transfer fees will be payable to the vendors in the event of the players concerned making a certain number of First Team appearances or in the event of certain other future events specified in the transfer agreements. In accordance hZeY eYV @c`fasd RTT`f_eZ_X a`]ZTj W`c ecR_dWVc WVVd* R_j RUUZeZ`_R] WVVd hYZTY ^Rj SV aRjRS]V f_UVc eYVdVagreements, will be accounted for in the year that it becomes probable that the number of appearances will be achieved or the specified future events will occur. The maximum potential liability not provided for, in respect of contracts in force at the year end date, is £18.1 million (2019 – £8.0 million).

24. Related party transactions

Following a reorganisation of activities, the Group was not charged a fee by its joint venture entity, Arsenal Broadband Limited, in respect of the financial year ended 31 May 2020 (2019 o net charge of £3.4 million). At 31 May 2020 the balance owing from the Group to Arsenal Broadband Limited was £8.3 million (2019 – £11.7 million).

25. Pensions

a) Defined contribution schemes

Total contributions charged to the profit and loss account during the year amounted to £2,613,000 (2019 – £2,515,000).

b) Defined benefit scheme 2020 gh+++

2019 gh+++

Provision at start of year 1,756 2,203Payments in year (468) (447)Increase in provision – –

Provision at end of year 1,288 1,756

The Group is advised of its share of the deficit in the Scheme (Note 1(q)). The most recent actuarial valuation of the Scheme was as at August 2017 and indicated that the contribution required from the Group towards making good this deficit was £2.5 million at 1 September 2017 (the total deficit in the Scheme at this date was £30.4 million). MYV @c`fasd dYRcV `W eYV UVWZTZe Zd SVZ_X aRZU `WW `gVc R aeriod of five and a half years commencing September 2017.

Additional contributions are being charged to the profit and loss account over the remaining service life of those Arsenal employees who are members of the Scheme. The amount attributable to employees who have already retired or who have left the Group has been charged in full to the profit and loss account.

Payments for the year amounted to £0.5 million (2019 – £0.4 million) and the profit and loss account charge was £60,000 (2019 – £60,000).

2020 gh+++

2019 gh+++

Group One year or less 105 249Two to five years 8 106Over five years 84 86

197 441

ARSENAL HOLDINGS LIMITED

NOTES TO THE ACCOUNTS For the year ended 31 May 2020

26. Post balance sheet events

Player transactions

Since the end of the financial year a subsidiary company, Arsenal Football Club plc, has contracted for the purchase and sale of various players. The net payment resulting from these transfers, taking into account the applicable levies, is £54.0 million (2019 o net payment of £92.7 million). These transfers will be accounted for in the year ending 31 May 2021.

Financing

:d UVdTcZSVU Z_ _`eV '/4( eYV @c`fasd deRUZf^ WZnance bonds together with related interest rate swap have been refinanced using a loan provided by KSE UK Inc. The Group has borrowed £120 million via the Coronavirus Corporate Finance Facility, maturing May 2021, to support short-term working capital requirements.

COVID-19

The pandemic YRd T`_eZ_fVU e` Z^aRTe eYV @c`fasd cVgV_fVd R_U `aVcReZ`_d as First Team matches continue to be played behind closed doors.

27. Ultimate parent undertaking and controlling party

The ultimate parent undertaking and controlling party is KSE UK Inc., which owns 100% of the share capital of the Company. KSE UK Inc. is incorporated in the State of Delaware, USA, and is wholly-owned and controlled by Mr E.S. Kroenke.

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