Chair's Statement and Business   Review

Dear Shareholder

I am pleased to present the Annual Financial Report for the year to 31 December 2023.

The Strategic Report section of this Annual Report has been prepared to help all Shareholders understand the drivers of performance in the past year, how the Company operates and to assess its performance.

Financial Summary and Overview

The key performance indicators are as follows:

·     The Trust's Investment performance over 12 months as measured by NAV total return, which is the change in NAV plus the dividend paid, was minus 4.4% (2022: minus 26.2%).

·     The interim dividend of 2.2p per share was paid on 22 September 2023.

·     Your Board recommends a final dividend of 7.6p per share increasing a total dividend payable for the year to 9.8p (2022: 9.6p) an increase of 2.0%. 

·     This is the 21st successive year of progressive dividends and importantly returns the Trust to the "Dividend Heroes" list maintained by the AIC, a list of investment companies that have consistently increased their dividends for 20 or more years in a row.

Performance

The year under review was disappointing.  Equity markets were under pressure throughout with several headwinds, and investment trusts were unable to attract investors away from the lure of gilts and passive funds. The Company suffered negative absolute returns and has underperformed compared to the FTSE 250 largely because of ongoing negative sentiment for UK smaller companies and comparatively high UK interest rates through the year.

In the financial year to 31 December 2023 and on a total return basis, the Company's net asset value (NAV) fell by 4.7%, the share price fell by 11.9% compared to a fall of 8.2% in the AIM All-Share index.

The last 12 months created further surprises and uncertainty for UK investors, as inflation dropped more slowly than in other G7 countries and the resulting medicine of frequent interest rate rises added to geo-political stressors.  For a higher rate UK taxpayer, the resulting yield on gilts translated to some unusually high potential returns, and without the equity risk premium, in general bonds became a more attractive investment.  High quality small company stocks generally lost ground to larger, liquid stocks and after wider market 'poor returns' of the past few years, investors were generally less interested in investment trusts. Discounts to share price widened for many investment trusts and remain, on average, in double-digit territory at 10.0% for UK Smaller Company investment trusts on 31 December 2023.

Over a 5 year period we have outperformed the FTSE 250 by 3.6% points, (per annum and before management fees, expenses and dividends) and maintain that compounded investment into our portfolio still provides attractive returns compared to alternatives.   Further details on the portfolio are under the Fund Manager comments later in this report and historical figures in Table 1 on page 7.

On the positive side, the UK and world economy in general for 2023 have proved to be more resilient than expected as we recover from the impact of Covid; the widely feared deep recession has not materialised (although we may be in a UK technical recession after the late December downward revision of Q3 to a contraction of 0.1% by the ONS) and there are signs that peak interest rates may have been reached in European, UK and US economies.

We believe there is now a strong case for investment in UK equities such as those held by the Trust, which offer great value for money.  Our quality portfolio, plus the discount, translate into a strong upside, if undervalued UK stocks get the investment attention they deserve based on fundamentals, and the general discount shrinks.  This would be a double benefit for those considering further or a new investment in our investment trust.

Dividend and Earnings

I am pleased to report the total revenue earned from the Company's portfolio rose 19.6% to £219,366 from £183,273 last year which is the highest total since 2019.  Our earnings per share rose to 7.7p from 6.9p, an increase of 11.6%.  This improved performance is a welcome return to more normal, pre-COVID figures and further evidences the quality of the portfolio companies and their commitment to shareholder value.

The board is pleased to recommend an increased final dividend of 7.6p, which, subject to shareholder approval at the next AGM, will be paid on 11 April 2024 to those shareholders on the register at 10 March 2024.  Once added to the interim dividend, this brings the full dividend for 2023 to 9.8p a 2.0% increase on the full dividend for 2022. 

I am delighted this would maintain our progressive dividend performance for the 21^st year and maintain our highlighted 'Dividend Hero' status as conferred by the AIC.

Board and Company Developments

The Board places significant importance on corporate governance and compliance with the AIC and UK Corporate Governance Codes.  Full details are set out in the Corporate Governance section on pages 16 to 19.

We note the Financial Conduct Authority's Policy Statement PS22/3 of April 2022 to comply or explain in relation to board diversity and inclusion, with changes to the Listing Rules commencing in 2023 for the Trust.  As a small, low-cost fund, your Board continues to assess how best to structure and plan for a board that meets shareholder and regulatory needs, has continuity, stability and reflects prudent management of costs.

In terms of controllable costs, I confirm a continued freeze on the non-executive director's fee (£10,500) with no premium for Chair positions, which is comparable to the NED fee of other, similarly sized funds. 

Our Ongoing Charges Figure (OCF, calculated using the AIC recommended Ongoing Charges methodology, taking annualised costs that would reasonably be incurred if there was no trading of the investee shares, divided by the average of published monthly NAV) is 3.84% (2022: 2.89%). 

The increase is due to the decrease in NAV through 2023, and also £24,507 net increase in Ongoing Charges in 2023 compared to 2022.  While we remain a small fund, reducing the OCF will continue to be a challenge, however every effort is made to do this, while applying appropriate time and resources to growth and good governance.

As we continue to explore ways to grow the fund, the Company is now using the specialist marketing services of Colchester-based Equity Development Ltd.  We look forward to the impact this will make in the coming year and continue to take opportunities for the Fund Manager to explain his investment approach, including use of Goodacre Events such as the UK Smaller Companies Conferences which can be joined online.

I regret the sudden resignation of Hazlewood's LLP as our auditor on the 9^th October 2023 because of FRC-driven increased regulatory costs and staff impact for their public interest entity (PIE) audits.  Along with some other smaller auditors, Hazlewood's withdrew its PIE registration at very short notice. 

We are delighted to report that after an appropriate, shortened process to review a number of alternative auditors, the Board has accepted the recommendation of the Audit Committee and appointed Moore Kingston Smith LLP as auditor for this financial year on 20 October 2023. 

We welcome general audit reform, after recent, surprising company failures however believe there has been insufficient assessment of the net effect of these new regulations: Other companies like us had to replace auditors after abrupt resignations in recent months and also found there is less choice and capacity than might be expected. 

Our audit fee will quadruple in this transition mainly due to the extra PIE costs and implications for our auditor; the audit approach itself is largely the same as before.  We hope that shareholders and investors in general see benefits as the regulatory changes continue to take effect.

Environmental, Human Rights, Employee, Social and Community Issues

The Board consists entirely of two Non-Executive Directors and one Managing Director who was the sole employee. The Company has no direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

Environmental, Social and Governance factors are considered as part of the commercial evaluation of investee companies.

Annual General Meeting (AGM)

We are pleased to invite shareholders to our AGM at the offices of Druces LLP, Salisbury House, London Wall, London EC2M 5PS on 21 March 2024 at 12.00 noon.  We encourage attendance in order to meet the board and hear from the Fund Manager Dr Manny Pohl.

There will be an opportunity to ask questions during the AGM and also afterwards in a less formal environment.

We encourage all shareholders to vote on the resolutions, all of which the board endorses ahead of the deadline at 12 noon on 19 March 2024.  Details on how to vote and also on the AGM, and its resolutions are in the Notice of AGM, which is delivered with this Annual Report.  Further copies are available on our website, or from the Company Secretary.

An Independent Board

The Directors in place at the time of signing these accounts are:

· Myself, Frank Ashton - Non-Executive Chair

· Simon Moore - Non-Executive Director, Chair of Audit Committee, Chair of Remuneration Committee

· Dr Manny Pohl - Managing Director, Fund Manager

· Jason Pohl - Alternate for Dr Manny Pohl

We currently have three directors who together make up an independent Board under the AIC Code of Governance 2022.

  Capital Gains

  During the year the Company realised capital profits before expenses arising on the sale of investments in the sum of £50,853 (2022: £382,704).

Portfolio Review

Additional Holdings Purchased

Additional and new holdings of AEW UK REIT, Alpha Group International, Cake Box Holdings, Fevertree Drinks, Impax Asset Management, NWF Group, Paypoint, Spirax-Sarco Engineering and Treatt  were acquired.

Holdings Sold or Trimmed

Clarke (T), Games Workshop, Liontrust Asset Management, Londonmetric Property, Rightmove, Smart Metering and Target Healthcare REIT.

Outlook

This has been a difficult year, however there is evidence of a change in the investment landscape in particular the likely reduction of interest rates, that I believe will bring multiple benefits.  We remain cautious and yet also have confidence in our Managing Director and Fund Manager, Manny Pohl and his team in providing for the needs of the Company and its shareholders. 

Last year I referred to Charlie Munger and just one of his many quotations as a champion investor and Vice Chair of Berkshire Hathaway.  It is sad to hear of his death at 99 years but also a chance to remember that he was no stranger to personal tragedy.  Talking about hardship recently he said "you can cry alright. But you can't quit".   Similar things might be said about investing; there can be disappointments and frustrations, often due to circumstances outside our control, however we will not quit on fundamentals and commitment to value.  Over the long term you will win; this next year should see improved performance. 

Thank you for your continued support of the Company.

Frank Ashton

Non-Executive Chair

12 February  2024

Fund Manager's Review

Reflecting on 2023

As we reflect on the past year, the investment climate has been marked by significant events and trends shaping investments and the general economic outlook. The ongoing geopolitical tensions, notably the Russian invasion of Ukraine and the escalated conflict between Israel and Hamas have contributed to a climate of political uncertainty.

These events have had far-reaching economic impacts, further complicating the investment environment.

The required equity risk premium remained high throughout the year, reflecting the market's sensitivity to these global events and amidst these challenges, we've seen global inflationary pressures prompt aggressive interest rate responses from central banks through time. Recently, the rhetoric from central banks has softened, suggesting that while further rate hikes are possible, rates might stabilise near current levels for the foreseeable future.

The macro factors affecting the markets and our performance are covered in the Chair's statement and our portfolio has performed well when compared to the small company indices as shown in Table 1.

However, the NAV has been negatively affected by rising costs, predominantly audit fees and our large dividend payout (DY:5.2%) as compared to the FTSE 250(DY:3.6%) in particular.

While macro/political events have dominated the media, technological advancements have been transformative with Generative Artificial Intelligence (AI) models emerging as a dominant theme in business discussions worldwide. While analysts and researchers have used algorithms to analyse and use data sets to make predictions for decades, it was the release of NVIDIA's CUDA (compute unified device architecture) software for developers in 2006 which enabled scientists to apply parallel processing in complex simulations and data analysis. Parallel processing utilises two or more processors (CPUs or GPUs) to handle separate parts of an overall task, laying the foundation for machine learning. Within this context, even OpenAI would take 300 years to train ChatGPT 3.5 on the fastest single GPU, but with parallel processing and using 1024 GPUs, it can be done in 34 days. The resultant development of large language models like ChatGPT, is revolutionising industries. These developments highlight the importance of investing in businesses that can harness these technologies to enhance their competitive advantage and growth potential.

In this regard, the U.S. and China are leading the AI development race, with significant investments pouring into this technology, while Europe appears to be a laggard. This rapid growth has prompted governments, particularly the U.S., to develop regulations to ensure the safe and trustworthy evolution of these technologies, with many trying to get to grips with the inherent risks associated with the use of the technology, particularly in the areas of cyber security and privacy. 

The recent executive order by US President Joe Biden has been designed to impose national rules on the fast-moving technology to ensure "safe, secure and trustworthy" development. More importantly, this will enable businesses to understand the ground rules and legitimately organise and obtain data without breaching data privacy regulations.

In 2023, ChatGPT consumerised these AI developments that had previously been happening behind closed doors, enabling text, language, speech, and image recognition to cross over human capability. The net result is significant reinvestment in technology, showing up in GPU demand from the Big 5 Tech companies, the owners of proprietary hardware (e.g., NVIDIA) and large-language models (e.g., Microsoft, Google, Amazon, Meta).

Of particular interest for business are "Large Language Models" (LLM), which can train on billions of parameters to develop refined algorithms for new use cases. Clearly, it is also of the utmost importance to ensure that the businesses in which we invest need to utilise these emerging technologies and harness them effectively to expand their economic footprint and enhance investment value.

To this end, our investment process is centred on assessing businesses' Dynamic Capability (DC). DCs are pivotal, change-oriented capabilities that empower firms to adapt and reconfigure their resources in response to evolving customer demands and competitive landscapes. This includes a firm's agility in R&D, its ability to enter new markets with nimble operational structures, the consolidation of central support functions following acquisitions, and the replication of successful processes or systems in new geographical or business sectors.

The impact of early adoption of AI cannot be overstated; the potential economic unlock will be meaningful. AI's potential to transform economic landscapes is immense, as it enables the efficient reading and structuring of vast amounts of corporate data coupled with powerful workflow automation tools (think a far more powerful Excel macro). This combination is set to revolutionise business processes, much like the advent of computer mainframes in the 1980s, significantly reducing manual accounting work.

By investing in quality companies that are early (effective) adopters of AI, investors can position themselves at the forefront of this transformative wave, ready to reap the economic benefits. As we navigate this new AI era, we focus on meticulously evaluating companies' business models, financials, and growth plans. This approach helps us identify quality growth stocks poised for long-term success, leveraging AI to capitalise on market trends and demand.  In addition, we continue to explore the advancements in AI that present potential for substantial long-term returns. Identifying and investing in companies leading these innovations position portfolios to benefit from future market transformations.

In this regard, while we are certainly pleased to book a handsome profit on our investment in Smart Metering as a result of the takeover bid, this was a company which most certainly could have benefitted from future developments in AI. The continued takeover of small companies in the UK market is a worrying feature as our process aims to find high-quality businesses that we would like to own for the very long-term.  However, it does confirm that valuations are very favourable at present. 

During the past year, we increased our exposure to the AEW UK REIT at the expense of the Target Healthcare REIT, maintaining our overall exposure to the Property Trusts in recognition of the need to maintain the dividend paid to shareholders within a growth style portfolio. In the past twelve months we added two new names to the portfolio:

Alpha Group: (LSE: ALPH)

Alpha is a leading non-bank provider of financial solutions to corporates and institutions operating internationally across three continents. Alpha has two operating divisions, the FX Risk Management division which focuses on supporting corporate and institutional clients who need to buy or sell currency to match commercial transactions involving either the buying and/or selling of goods and services overseas; and the Alternative Banking Solutions division which provides multi location banking services at more than 50 countries to alternative investment managers for purposes such as asset sales, purchases, or distributions.  Using cutting-edge technologies to provide an enhanced alternative to traditional banks, Alpha should be able to deliver superior shareholder returns over the medium to long-term.

Cake Box Holdings (LSE: CBOX)

Cake Box Holdings listed on the London Stock Exchange's AIM Market in 2018 and has expanded to more than 230 stores throughout the UK.  It is the market leader in premium celebration products that exclude egg, meat products and alcohol to consumers including those who have dietary or religious restrictions. The company has adopted an e-commerce, data-driven approach to drive future growth and aims to optimise their store rollout based on customer data to both improve new store performance as well as refine their franchisee and property strategy. With a target of doubling to 400 stores, CBOX should be able to deliver superior shareholder returns over the medium to long-term.

Looking ahead

In the evolving technological landscape, it's become increasingly clear how pivotal AI will be in shaping future strategies. While short-term applications of AI, such as customer service chatbots and co-pilot productivity tools, are becoming more commonplace, the broader vision of leveraging AI to revolutionise corporate strategy is still unfolding. This transition, particularly in the context of leveraging vast corporate data, may be gradual due to inherent corporate risk aversion.

During my recent flight to attend the Global Federation of Competitiveness Councils meeting, the following Socrates (470 BC) quote came to my attention: "The secret of change is to focus all of your energy not on fighting the old, but on building the new." This sentiment encapsulates the transformative journey corporations must undertake in the AI era.

For investors, the tangible benefits for companies that effectively integrate AI can be broadly categorised into three areas:

Productivity Enhancement: AI can significantly augment people-centric processes within organisations, unlocking new levels of efficiency and workflow optimisation.

Creation of New Revenue Streams: Leveraging AI for personalised marketing and data-driven insights allows for novel revenue generation strategies, transforming how businesses interact with customers.

Sustaining Competitive Advantages: AI enables the development of unique customer solutions that are challenging to replicate without access to extensive historical data. This creates a formidable competitive edge.

As we step into this burgeoning AI-driven era, our focus remains on evaluating the business models, financial health, and growth strategies of potential investments in a careful, considered and committed way.

A thorough approach lets us pinpoint those quality growth stocks poised for long-term success. Their agility, ability to swiftly capitalise on emerging opportunities and adeptness at applying AI to harness market trends and demands are critical factors in their continued success and the creation of substantial long-term value for our investors.

Companies with a sustainable competitive advantage are especially well-positioned to reap the economic benefits of AI. Their resilience to market disruptions (i.e., business model disruption or price-led competition) and the high barriers to entry for competitors needing similar data assets make these quality companies well-positioned to capture and retain the economic benefits of AI while maintaining their competitive excellence.

Over the past few years, our industry and society have evolved more broadly with heightened expectations of corporate responsibility. Being a compassionate corporate citizen, committed to people, the planet, and the community, is no longer optional but essential.

At ECP, we proudly embrace these values, as evidenced by our third annual Sustainability Report which will be available in February 2024. We are committed to ensuring that our business employs best practices to position our organisation so that we can continue to sustainably grow through time.

We appreciate our role in the investment community, and we will continue to focus on growing our clients' financial wealth, but our commitment extends beyond financial growth to include contributing to the societal well-being of future generations.

Turning to our portfolio, we're encouraged by the notable uptick in our companies' price-to-earnings (P/E) ratios, rebounding from previous lows. This, combined with robust short-term financial indicators - including organic sales growth, solid earnings, and increasing dividends - fortifies our confidence in the future. This positive trend suggests a promising trajectory for valuation enhancements across our investments.

Given the current market landscape, we see a prime opportunity to invest in high-quality franchises. These market conditions are ideal for investors seeking resilient, growth-oriented investments, positioning them well for long-term outperformance.

Our primary focus is investing in quality businesses within the growth phase of their lifecycle. For investors, the material derate of equity valuations, particularly for growth-oriented stocks, and the expected ongoing volatility present an opportunity for those investing in resilient, Quality Franchises - it's time to step in and invest. 

Update

The unaudited NAV on 31 January 2024 was 204.7p per share - down by 2.1% from 31 December 2023. The share price on the same day was 175p (trading at a discount of 14.5%). Further updates can be found at www.athelneytrust.co.uk

Dr Manny Pohl AM

Fund Manager

12 February 2024

Section 172(1) Statement

The Directors of the Company are required to promote the success of the Company for the benefit of the Members and Shareholders as a whole. Section 172(1) of the Companies Act (2006) expands this duty and requires the Directors to consider a broader range of interested parties when considering the promotion of the Company. This wider group of stakeholders will include employees, if any, suppliers, customers and others, and the Board will look to understand and take into account the needs of each stakeholder, although recognising that different stakeholders may have conflicting priorities and not all decisions made will be to the benefit of all stakeholder groups.

When making decisions the Board should consider the following:

·      the likely consequences of any decisions in the long-term;

·      the interests of the Company's employees (if applicable);

·      the impact of the Company's operations on the environment and the community;

·      the need to foster the Company's business relationships with suppliers, customers and others;

·      the need to act fairly for all members of the Company, and

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

In line with similar small Investment Trusts and Investment Companies, Athelney Trust plc does not have any customers and relies on a number of third-party providers of services such as Company Administrator, the Custodian and the Registrar to maintain its operations. The Company takes into account the regulations of the market in which it operates and has regard to the environment and the wider community in which it operates.

At every Board meeting the Directors review the performance of the Company towards meeting the Company's Investment Objective through its strategy. Manny Pohl is the fund manager, reports to other Board members and answers any questions raised. Compliance with existing regulatory and legal requirements is reviewed, together with any new regulations that are due to be introduced or are being proposed that may affect the Company.

The Board recognises the importance of, and is committed to, understanding the views of Shareholders and maintaining communication with its Shareholders in the most appropriate manner.

This is undertaken through:

Annual General Meeting

The Company, in normal circumstances encourages all Shareholders to attend and participate at its Annual General Meeting ("AGM"). Whilst the formal business of the meeting is the primary purpose of the meeting, members of the Board are available to answer questions directly from Shareholders, to provide an update to the meeting and to offer Shareholders an insight into the business.

The Board plan to hold the 2024 AGM on 21 March 2024 at 12.00 noon. Further details regarding the 2024 AGM are contained in the Notice of the Annual General Meeting published in a separate notification.

Published Reports

The Company produces Annual and Half Yearly Reports and monthly fact sheets are all available from the Company's website and paper copies are available on request from the registered office. The publication of these reports is considered to be the primary method of communication to Shareholders and other readers of the reports and provides detailed information on the portfolio, performance over the period and an assessment of the outlook for the Company.

The Annual Report also contains details regarding the Company's corporate governance and the Board seek to ensure that the Report is readable and is mindful that it should be fair, balanced and understandable.

Shareholder enquiries

Shareholders can contact the Company or any of its Directors through the Company Secretary or through their company email address.  Alternatively, letters can be sent to the registered office address. Although the Directors are not available full time, with the assistance of the Company Secretary they seek to maintain open communication to all Shareholders.

Suppliers

The Company Secretary, Deborah Warburton and Administrator GW & Co. Limited, are often the main contact point for advisors and stakeholders in the Company. Regular communication is maintained between the Company Secretary and the Directors advising them of all matters concerning the Company. The Company also relies on the provision of services from outside parties to operate and gives consideration to the needs and objectives of those providers and recognises that their success will often assist the Company in achieving its objectives.

Regulators

The Company operates in an environment that is governed by legal and regulatory requirements. The Board recognises that these requirements are there to protect stakeholders, including the government.

Environment and Community

As the Company does not have any direct employees nor any physical office environment of its own it has little direct impact on the community or the environment. The Company seeks to reduce its impact on the environment in encouraging Shareholders to receive Reports electronically rather than through printed hard copies. When paper copies are requested FSC paper is used. The Board also engage through electronic means where possible rather than hold excessive face to face meetings.

Other Statutory Information

As explained within the Report of the Directors on pages 20 to 22, the Company carries on business as an investment trust. Investment trusts are collective closed-ended public limited companies.

Board

The Board of Directors is responsible for the overall stewardship of the Company, including investment and dividend policies, corporate and gearing strategy, corporate governance procedures and risk management. Biographical details of the three male Directors, can be found on pages 2 and 3.

One of the Directors is the Company's only employee (2022: one employee).

Investment Objective

The investment objective of the Trust is to provide shareholders with prospects of long-term capital growth with the risks inherent in small cap investment minimised through a spread of holdings in quality small cap companies that operate in various industries and sectors. The Fund Manager also considers that it is important to maintain a progressive dividend record.

Investment Policy

The assets of the Trust are allocated predominantly to companies with either a full listing on the London Stock Exchange or a trading facility on AIM or AQSE. The assets of the Trust have been allocated in two main ways: first, to the shares of those companies which have grown steadily over the years in terms of revenue and profits but, despite this progress are undervalued by the market when compared to future earnings and dividends; second, those companies whose shares are undervalued by the market when compared with the value of land, buildings, other assets or cash on their balance sheet.

Investment Strategy

The investment strategy employed by the Fund Manager in meeting the investment objective focuses on active stock selection. The selection of individual holdings is based on analysis of, amongst other things, market positioning, competitive advantage, future growth, financial strength and cash flows. The weighting of individual investments reflects the Fund Manager's conviction in the expected future returns from those holdings.

Investment of Assets

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period. An analysis of the portfolio on 31 December 2023 can be found on pages 11 and 12 of this report.

Responsible Ownership

The Fund Manager takes a particular interest in corporate governance and social responsibility investment policy. As stated within the Corporate Governance Statement on pages 16 to 19, the Fund Manager's current policy is available on the Trust's website www.athelneytrust.co.uk. The Board supports the Fund Manager on his voting policy and his stance towards environmental, social and governance issues.

Review of Performance and Outlook

Reviews of the Company's returns during the financial year, the position of the Company at the year end, and the outlook for the coming year are contained in the Chair's Statement on pages 4 to 6 and the Fund Manager's review on pages 7 to 10 which form part of the Strategic Report.

Principal Risks and Uncertainties and Risk Management

As stated within the Corporate Governance Statement on pages 16 to 19, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

The principal risks and uncertainties faced by the Company are described below and in note 12 which provides detailed explanations of the risks associated with the Company's financial instruments.

·      Global conflict -  The continuing war between Russia and Ukraine has had a significant impact, inter alia, on inflation and, in conjunction with affairs in China, an impact on supply chains and globalisation. Investee companies will vary as to the impact on them and their ability to adapt.

·      Inflationary pressure -  Inflation has escalated sharply in the last 12 months and the Bank of England has raised interest rates on several occasions in an attempt to reduce the level of inflation. Not all investee companies are well-placed to pass on cost pressures to their customers.

·      Market - the Company's fixed assets consist almost entirely of listed securities and it is therefore exposed to movements in the prices of individual securities and the market generally.

·      Investment and strategic - incorrect investment strategy, asset allocation, stock selection and the use of gearing could all lead to poor returns for shareholders.

·       Regulatory - Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages 16 to 19. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

·    Operational - failure of the accounting systems or disruption to its business, or that of other third-party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

·     Financial - inadequate controls by the Fund Manager or other third-party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.  

·    Liquidity - the Company may have difficulty in meeting obligations associated with financial liabilities. 

·    Interest rate risk - this is not considered to be a direct risk to the Company other than through its effect on investee companies.

·    Trading - the Company is a small trust and its shares can be illiquid, which means that investors may have difficulty in dealing in larger amounts of shares.

The Company has complied with the MiFID ll and KID legislation and the deadlines to ensure that shares in the Company were still able to be traded. A copy of the Company's KID can be found on the website http://www.athelneytrust.co.uk

The Board is not aware of any breaches of laws or regulations during the period under review and up to the date of this report.

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio. Investment risk is spread through holding a wide range of securities in different industrial sectors.

Statement Regarding Annual Report and Financial Statements

Following a detailed review of the Annual Report and Financial Statements by the Audit Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Directors have adopted best practices as described by the AIC's Statement of Recommended  Practice on financial statements dated July 2022.

Greenhouse Gas Emissions

As an investment company with its activities outsourced to third parties or self managed by the Non-Executive Directors, the Company's own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. Furthermore, the Company considers itself to be a low energy user under the Streamlined Energy & Carbon Reporting regulations and therefore is not required to disclose energy and carbon information.

Social, Community and Human Rights issues

The Company has one employee and, as far as the Board is aware, no issues exist in respect of social, community or human rights issues.

Alternative Investment Fund Manager's Directive ("AIFMD")

The Company is registered as its own AIFM with the FCA under the AIFMD and confirms that all required returns have been completed and filed.

Going Concern

In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Company, and forecast revenues for the current financial year. The Directors have also taken into account the Company's investment policy, which is described on page 14 is subject to regular Board monitoring processes, and is designed to ensure that the Company is invested in listed securities and those traded on AIM or AQSE.

The Company retains title to all assets held by its Custodian. Note 12 to the financial statements sets out the financial risk profile of the Company and indicates the effect on its assets and liabilities of falls and rises in the value of securities, market rates of interest and changes in exchange rates.

The assets of the Company consist mainly of marketable securities, the directors are of the opinion that at the time of approving the accounts, the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.

In addition, the Directors have regard to ongoing investor interest in the sustainability of the Company's business model and in the continuation of the Company, specifically being interested in feedback from meetings and conversations with Shareholders. In addition to considering the principal risks on pages 14 and 15 and the financial position of the Company as described above, the Board has also considered the following further factors:

·      the Board continues to adopt a long-term view when making investments

·      regulations will not increase to a level that makes the running of the Company uneconomical; and

·      the performance of the Company will be satisfactory and should performance be less than the Board deem acceptable it has the powers to take appropriate action.

Viability Statement

The Directors have assessed the prospects of the Company for a period of three years. The Board believes this time period is appropriate having consideration for the Company's principal risks and uncertainties (outlined on pages 14 and 15), its portfolio of listed equity investments and cash balances, and its ability to achieve the stated dividend policy. The Directors have assessed the ability of the Company to continue as a going concern as outlined above.

In making this assessment, the Directors have considered detailed information provided at Board meetings which includes the Company's balance sheet, investment portfolio and income and operating expenses.

Based on the above, the Board has a reasonable expectation that the Company fully expects it will be able to continue in operation and meet its liabilities as they fall due over the three-year period of this assessment.

Board Diversity

When recruiting a new Director, the Board's policy is to appoint individuals on merit matched against the skill requirements identified by the Board.

The Board believes diversity is important in bringing an appropriate range of skills, knowledge and experience to the Board and gives this consideration when recruiting new Directors and has also noted the requirements of Listing Rule 9.8.6R (9) following the Parker Report on increasing the diversity on the boards of public companies.

 As at 31 December 2023, there were three male Directors on the Board. All Directors identified themselves as Caucasian by ethnic background.

When making appointments in the future the Board will continue to operate an open-minded approach to recruitment without restrictions against any perceived group or individual. The Board will take into consideration the diversity targets set by Listing Rule 9.8.6R (9) when making future appointments, however due to the size of the Board meeting a target of 40% of Directors being women with one being a senior Board position, and one individual being from a minority ethnic background may not be reached in the immediate future.

The Company does not have any employees other than the Managing Director and, as a result, the Board does not consider it necessary to establish means for employee engagement with the Board as required by the latest version of the UK Corporate Governance Code.

Dr Manny Pohl AM

Managing Director

12 February 2024

Statement of Directors' responsibilities

 The Directors state that to the best of their knowledge:

•              the Financial Statements, prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and net return of the Company;

•              consider the Annual Report and accounts, taken as a whole, are fair, balanced and understandable and provide the necessary information for shareholders to assess the Company's position and performance, business model and strategy; and

•              the Chair's Statement and Report of the Directors include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Dr Manny Pohl AM

Managing Director

12 February 2024

Income Statement

For the Year Ended 31 December 2023

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with applicable Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice ("AIC SORP") issued in July 2022 by the Association of Investment Companies.

The notes below form part of these financial statements.

Statement of Financial  Position
As at 31 December  2023

Company Number: 02933559

These financial statements were approved and authorised for issue by the Board of Directors on 12 February 2024 and signed on their behalf by

Dr Manny Pohl AM

Managing Director

The notes below form part of these financial statements.

Statement of Changes in Equity

For the Year Ended 31 December 2023

  The notes below form part of these financial statements.

Statement of Cash Flows

For the Year Ended 31 December 2023