Annual Report 2022

Annual Report

31 December 2022

Company number

02933559

Athelney Trust

Waterside Court, Falmouth Road

Penryn, Cornwall TR10 8AW

Frank Ashton

Non-Executive Chairman

Frank Ashton, aged 61, is a highly experienced senior manager and independent management consultant. After leaving Cambridge University with a Natural Sciences degree (Metallurgy & Materials Science), he spent much of his career providing independent management advice to companies in a wide variety of sectors. With 15 years spent at PricewaterhouseCoopers and KPMG (Operational Due Diligence) and 5 years working in Strategy and M&A for Cummins Inc, he has a proven track record in shareholder value creation and governance, in providing strategic and operational advice to both public and private companies in Europe and USA, as well as working at a policy level for Government entities.

Dr Emmanuel Clive Pohl AM

Managing Director

Manny Pohl, aged 69, is the Chairman and CIO of investment house EC Pohl & Co which he founded in June 2012 and has led through its evolution into today's independent, highly acclaimed Australian fund manager. Manny holds engineering and MBA degrees from the University of Witwatersand and a doctorate in Business Administration (Economics) from Potchefstroom University.

Manny has over 30 years of investment experience, initially as head of research for leading South African broking firm, Davis Borkum Hare, followed by Westpac Investment Management in Australia after he emigrated to Australia in 1994. Manny founded Hyperion Asset Management in 1996 and left in 2012. He has served on the Boards of several major corporations in his native South Africa, the UK and his adopted home Australia. In 2019 Manny was recognised in the Queen's Birthday honours list for significant service to the finance sector, and to the community.

Simon Moore

Non-executive Director

Simon Moore, aged 62, is a consultant Senior Investment Analyst. He has been an investment trust analyst since 1994 and has worked with several stockbrokers in the City of London including Williams de Broe, Teather & Greenwood and Collins Stewart. He was also Senior Investment Manager at Seven Investment Management and Head of Research at Tilney Bestinvest and Senior Investment Analyst at EQ Investors. Simon has been a long-standing member of two important committees at the Association of Investment Companies: the Statistics committee and the Property and Infrastructure Forum. In 2013 and 2014 Simon was chosen as one of the Citywire Wealth Manager Top 100 most influential people in UK private client fund selection. Simon is a scientist by training and has worked at two start up UK biotechnology companies, before passing on his knowledge and passion as a science tutor for the Open University. He has a Biochemistry BSc from Imperial College, and an MSc in Computer Modelling of molecules from Birkbeck College. He is a member of the UK Society of Investment Professionals and the CFA institute. During 2020 he was appointed as a Non-Executive Director of Home REIT Plc.

Dear Shareholder

I am pleased to present the Annual Financial Report for the year to 31 December 2022.

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.

Overview

The key performance points are as follows:

• At 31 December 2022, audited Net Asset Value (NAV) was 219.4 p per share (2021: 310.3p), a decrease of 29.3% over the year as compared to a 19.7% decrease in the FTSE 250 and a 1% increase in the FTSE 100.

• The share price fell to 210.0p from 225.0p at 31 December 2021 a negative return of 6.7%.

• The discount to NAV at the end of year had reduced to 4.3% compared to 27.4% at 31 December 2021.

• 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 26.2% (2021:25.2%).

• The Trust's performance over 12 months as measured by share price total return, which is the change in share price plus the dividend paid, was minus 3.3% (2021:8.2%)

• The 12-month revenue return per ordinary share was 6.9p (2021:7.0p), a decrease of 1%.

• The interim dividend of 2.1p per share was paid on 23 September 2022.

• Your Board recommends a final dividend of 7.5p per share increasing a total dividend payable for the year to 9.6p (2021: 9.5p) an increase of 1%. UK inflation for the 12 months to December 2022 slowed for the second month in a row to 10.5%

• This is the 20th successive year of progressive dividend and importantly returns the Trust to a high position in the dividend yield league table for Investment Companies. It also promotes us 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.

Board and Governance

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 15 to 18.

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.

An Independent Board

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

• Myself, Frank Ashton - Non-Executive Chairman

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

• Dr Manny Pohl - Managing Director, Fund Manager

We currently have three directors who together make up an independent Board under the AIC Code of Governance 2021.

Capital Gains

During the year the Company realised capital profits before expenses arising on the sale of investments in the sum of £382,704 (2021: £354,843).

Portfolio Review

Additional Holdings Purchased

Additional holdings of AEW UK, Cerillion. Close Brothers, Fevertree, Gamma, Impax Asset Management, Paypoint, Target Healthcare, Treatt and Tritax Bigbox were acquired.

Holdings Sold or Trimmed

Abcam, Clinigen, Forterra, Homeserve, Jarvis Securities, JD Sports, Lok'n Store and LXI Reit.

Dividend

During the year the Company paid an interim dividend of 2.1p on 23 September 2022.

The Board recommends a final dividend of 7.5p per ordinary share making an increased dividend this year of 9.6p (2021: 9.5p). Subject to shareholder approval at the Annual General Meeting on 16 March 2023, the dividend will be paid on 6 April 2023 to shareholders on the register on 10 March 2023.

Period Review

The year of 2022 was, for many, including the investment community, one to forget. Shocks and surprises marked the year, which ended very poorly with market uncertainty and loss of confidence created by the short-lived Liz Truss premiership, made worse by the impact of double-digit UK inflation.

In an interview with the BBC in 2014, Charlie Munger, renowned partner in Berkshire Hathaway said:

"Without a system of wise restraints, gross immorality and extreme craziness will happen in markets. They need to be dampened."

He was talking about some of the causes of the Crash and Global Financial Crisis in 2007-08, but this is also true elsewhere. For example, a leader operating in a powerful political and governmental system with few restraints represents a risk: Ukraine's citizens, and to a lesser extent a large proportion of Europe's population are paying the price for Putin's 'grossly immoral' and unfettered ambition to control that country.

A new prime minister, seemingly believing the only opinions on the September mini-budget that mattered were her own and her Chancellor's, was swiftly brought low; however the damage had been done. The mini-budget resulted in 'craziness' for a few weeks with a dramatic loss of financial market confidence in the UK resulting in the Bank of England being forced to stabilise the bond market by temporarily buying long-dated UK gilts. Enter Hunt and Sunak as new Chancellor and PM to try to return the narrative to calmer and more acceptable content and tones. Now homeowners who have to start a new mortgage term face a dramatic rise in cost and many wish Truss and Kwarteng had used any 'system of wise restraints' before launching that particular mini-budget against the backdrop of a rising cost of living crisis.

All these events had a heavy impact on the UK Smaller Companies segment, the focus of this fund; smaller companies can be perceived to be a riskier investment because they tend to be less liquid and less resilient stocks in a challenging environment, compared even to FTSE-250 companies. Market sentiment has recently been strongly negative to this segment. By comparison the blue-chip FTSE-100 fared better than most markets because these large 'old-fashioned', liquid, oil/gas- and commodity-based stocks were buoyed by the run from UK bonds, representing a safer haven than, for example the NASDAQ where Big Tech companies had a torrid 2022.

I am disappointed to report the poor absolute performance of the Company in the past 12 months and comparatively against FTSE- 250 and especially FTSE-100 indices. We are very aware of the trust placed in us by investors in the company and take our responsibilities very seriously. However a better comparison is against UK Smaller Company investment fund peers, and our Share Price Total Return at minus 2.57% has performed much better over the past 12 months in comparative terms than the segment weighted average of minus 23.52%. Our NAV one year Total Return at minus 23.64% confirms we performed similarly to investment funds in the same sector, whose weighted average return was minus 22.32%.

Further information on portfolio activity and the drivers behind the performance is contained in the Managing Director, Dr Manny Pohl's Report below. Manny is highly experienced at managing funds in challenging market environments, and your board is very pleased with the comparative outcome for the year, given the conditions faced. Our invested companies perhaps have a vote of confidence taken as a portfolio, given that the share price was trading at year end at a slightly lower discount of 7.85% (2021:

29.45%) compared to the AIC UK Smaller Companies weighted average of 9.88%.

This time last year I commented on Apple being the first stock to reach $1 trillion market cap on 4 January 2022, after tripling the share price over the prior two years. Well, in 2022 Apple lost a third of that value, beset with problems on iPhone 14 shipments due to COVID restrictions at its main Chinese factory, resulting in declining earnings and disappointing fourth quarter guidance.

I mention such a large US stock in a UK small company fund report because this poor year, especially for Apple shareholders is a timely reminder; we should be investing in good stocks and management teams for the long term and resist perhaps emotionally driven reactions to news or poor performance over a relatively short period of time. Wars, times of political incompetence, market corrections and yes, apparent evidence of fraud at 'star companies' (such as Sam Bankman-Fried's crypto empire FTX) should really not surprise us much. Human nature and systemic failings are hardly news. Temperament is much more important than intelligence for investors (as Messrs Buffett and Munger have told us for a long time).

While others run for safety, cool-headed investors look widely and carefully, to find good companies with shares at low price-book ratios to invest in. In his report below, Manny explains the care he takes to deliver income for investors, as well as investing for growth (which may take a little longer to realise at the moment, but it will come). The coming year will be a time for patience and resisting temptation to run with the herd.

At the start of the year we had hoped dividend income would return to pre-pandemic levels, but that evaporated in the second half as inflation and interest rates rocketed, reducing many UK companies' margins and cash generated. In the end net income was very similar to last year at £148,531 (2021: £151,260). I remind you that as a closed-ended fund we can save up to 15% of our portfolio income each year, which, unlike open-ended funds, provides a reserve to use in those leaner income years.

I am very pleased to tell you that the Board recommends a final dividend payment of 7.5p (total 9.6p) an increase of 0.01p (2021:9.5p). Subject to shareholder approval at the AGM and based on our share price at 31 December 2022 of 210p this represents a dividend yield of 4.6% (2021: 3.1%) and is better than the AIC UK Smaller Companies' weighted average yield of 2.80%.

With this further year of progressive dividend payment (if approved at the AGM), I am delighted to say your company is promoted to the full list of AIC Dividend Heroes, as this would represent the 20th consecutive year of dividend growth. In 2022 this list comprised just seventeen investment companies (out of 324 AIC members), and therefore would be a marvellous company milestone since its inception as a founder member of AIM in 1995, especially because this has been delivered from the UK Smaller Companies segment only.

This is testament and credit to the current MD, Fund Manager and long-standing major shareholder and board member, Manny Pohl, and his predecessor, Robin Boyle who managed the fund over many years, and also to other board members of Athelney Trust, including Simon Moore, well-known in the industry, supported by John Girdlestone, the immediate past CoSec, and ably succeeded by Debbie Warburton. Thank you all.

In terms of controllable costs, I confirm the board has approved a continued freeze on the non-executive director's fee (£10,500) with no premium for Chair positions, which is comparable to NED fees of other, similarly-sized funds. Our Ongoing Charges Figure (OCF, calculated using the AIC recommended Ongoing Charges methodology, April 2022, 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 2.89% (2021: 2.38%). The increase is due to the decrease in NAV through 2022, and also £1,000 net increase in Ongoing Charges in 2022 compared to 2021. 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 resource to growth and good governance.

Outlook

Perhaps the main questions that will affect our performance for 2023 include:

•  How long will UK inflation remain above that of other countries in Europe, and what interest rate medicine will be needed to bring it back in line (after reaching a peak of 11.7% in October, are we over the worst). This will affect our income

•  What costs, including those to settle public sector pay negotiations, will be incurred by the government, over what period of time, and is a Labour government now inevitable in 2025; this affects general sentiment on the economy, tax burden and confidence for investors, including inward investors

•  What global assistance or headwind for UK economic recovery might be expected? Potential global recession, no sight of an end to war in Ukraine, the rate and strength of recovery for China's economy, and the apparent weakening of America's economy, all play into the geo-political environment.

We cannot know the answers to these questions; however, I do know that Manny Pohl's meticulous and repeatable investment and divestment approach, explained in his report, will on average, find and capture value and that being invested for the long term, in those shares, is right also.

I would encourage you to actively take interest in your company; perhaps come to meet the board at the AGM in central London on Thursday 16 March 2023 at 12 noon.

Frank Ashton

Non-Executive Chairman

13 February 2023

Reflecting on 2022

By any measure, the past twelve months have delivered a very poor result, especially when compared to the remarkable return achieved in 2021 when the FTSE 100 was up by 14.6% and our portfolio up by 29.1%. Over the past twelve months we have under-performed the various benchmarks as shown in Table 1

and as one would expect, while our long-term results are still in line with the FTSE 250, this recent underperformance has prompted us to consider if we missed anything in our deliberations or if there was anything we should have done differently in our analysis?

Compound Growth Rate

1 Year

2 Years

3 Years

5 Years

10 Years

ATY PORTFOLIO

-24.7%

-1.5%

0.3%

n.a.

n.a.

ATY NAV

-29.3%

-7.3%

-6.3%

-5.1%

4.3%

FTSE 250

-19.7%

-4.1%

-4.8%

-1.9%

4.3%

FTSE 100

0.9%

7.4%

-0.4%

-0.6%

2.4%

FTSE Small Cap

-16.3%

0.2%

1.6%

1.1%

6.2%

Our Investment Philosophy is based on the belief the economics of a business drives long-term investment returns and evidenced through our investment process which delivers a portfolio of high-quality businesses in the growth stage of their life cycle. However, investment returns over any period comprise two components, namely the dividends received and the movement in the value of the investment portfolio. While the dividends we are likely to receive from the companies in our portfolio are fairly easy to predict and, for the most part increase over time, the

same cannot be said for the market price for the shares. These are affected by investors responding to daily news feeds and commentary on local and global economic data as well as macro events.

Chart 1, showing the FTSE 250 Index in 2022 provides some idea of events that have impacted the market over the past twelve months.

In the first quarter of the financial year, Russia invaded the Ukraine. The West was quick to issue sanctions and multinationals started closing down any operations linked to Russia. However, the war amplified energy and food price issues straining an already COVID constrained supply-side environment and pushing inflation higher. Central banks began raising rates and forecasting future increases which drove down equity-based valuations across the board.

By the second quarter the high inflation readings were a major detractor for all sectors of the financial markets other than mining and energy stocks. The fiscal stimulus plan and series of tax cuts and regulatory reforms announced in the mini-budget in

September sent financial markets into a tailspin with the pound reaching a record low and short-term interest rates and bond yields moving sharply up. The yields on five-year government bonds reached levels similar to those of more heavily-indebted European economies such as Italy and Greece. Commensurate with this rise in short and medium-term interest rates, the quoted prices for income generating assets and REITs in particular, declined materially. The net effect of this and the tightening in monetary policy has been to put pressure on the high PE valuations of the market and growth stocks in particular, as future earnings are discounted at a higher rate.

In spite of this, recent operating results from companies in our portfolio indicate that they have been able to partially withstand these inflationary pressures by implementing appropriate short- term strategies and adapting their business models accordingly.

While the majority of the stocks in the portfolio have declined in value over the past year, dividends for the most part were maintained, with a handful of names producing positive returns for the year. These were Begbies Traynor (LSE: BEG), 4Imprint (LSE: FOUR) and NWF (LSE: NWF).

While we do sell some of our investments from time to time, our process aims to find high-quality businesses that we own for the very long-term and as a result our portfolio turnover remains low. During the past year, while we did reduce our overall exposure to the Property Trusts, we still maintained a material exposure in recognition of the need to maintain the dividend paid to shareholders within a growth style portfolio. However, we are always looking for new investments and when we do find them, we ensure that they have sustainable and resilient characteristics. In the past twelve months we added two new names to the portfolio:

Cerillion: (LSE: CER)

Cerillion joined AIM in 2016 and has since established a very strong record of revenue and profit growth principally from software licences and related support and maintenance sales. It operates in approximately forty-five countries globally, providing customers with mission-critical software for billing, charging and customer relationship management mainly for telecommunications providers, but also for other sectors, including energy and utilities.

Whilst the coronavirus pandemic is no longer directly affecting business operations, the global experience of remote-working - still in place in many economies - has continued to emphasise the dependence of the world economy on state-of-the-art telecoms infrastructure. Over the year, we continued to see high levels of investment in the sector, and an acceleration of investment in 5G and fibre rollouts, with spending trickling down from core network improvements to ancillary system upgrades and replacements, particularly due to national security concerns. We expect to see these trends continue with increasing pressure on telcos to find efficiencies in their digital real-estate. This is likely to encourage further market take-up of product-based SaaS solutions, which Cerillion offers, rather than the more bespoke solutions available from more traditional vendors which require highly complex implementations over several years and have a higher total cost of ownership.

Impax Asset Management (LSE: IPX)

Impax Asset Management is a fund manager who invests globally in companies focused on the transition to a more sustainable global economy and is well placed to benefit from the profound changes to the economic landscape particularly in the areas of climate change, pollution and essential investments in human capital, infrastructure and resource efficiency. Impax has proven expertise in finding and investing in companies and assets that are well positioned in this space and should benefit from these mega-trends which will drive growth for them and create risks for those unable or unwilling to adapt to the changes. They offer a well-rounded suite of investment solutions spanning multiple asset classes and should be able to deliver superior shareholder returns over the medium to long-term.

Looking ahead

While I was preparing to write this year's commentary, the following quote came to my attention:

"Time is the friend of the wonderful business, the enemy of the mediocre." Warren Buffett - Letter to Shareholders 1989

While supply chains are stretched and input products in short supply, it can be challenging to recognise the potential in companies, particularly those that are in the growth stage of their life cycle. It can also be difficult to evaluate the 'narratives' that some companies are telling about themselves. To invest in a company in the growth stage of their life cycle it is important to balance the company's narrative alongside its numbers and it is vital not to get caught up in the hype and noise of the internet and daily market movements.

A sound investment philosophy sets out a number of 'rules' or 'procedures' to fall back on when the market noise gets too loud. Companies that have a sustainable competitive advantage will always be well-placed to withstand short-term headwinds, regardless of market conditions, maintain market share and ultimately find new ways to grow. Their ability to be flexible, to move quickly, to take advantage of opportunities as they arise, and to capitalise on market trends and demand, will continue to support the ongoing success of such businesses, and provide significant long-term opportunities for their investors. The pandemic, devastating weather events, and the invasion of Ukraine are examples of macro-environmental shocks impacting companies worldwide and it is also of paramount importance to take a holistic approach when analysing the companies and their sustainability by considering the business competitiveness and ability to dynamically adapt and react to black swan events - to be resilient.

Over the past few years our industry, and society more broadly, has continued to evolve with higher expectations being made of businesses and their social licence to operate. Being a good corporate citizen is only part of it. Being a good corporate citizen that is compassionate, committed to its people, planet, and the community is mandatory. Any successful business owner makes decisions for the betterment of their long-term business. Having sustainable practices and a long-term mindset is vital for any operator in this modern, rapidly changing world. Sustainability has long been part of our investment process and since we see ourselves as business owners (and not share traders), we invest along similar principles where sustainability and competitiveness are central to any investment analysis.

A genuine long-term approach

Investment management is more than merely generating alpha in excess of a benchmark. While that is a core part of our mandate, other very important qualitative issues are central to what we do. For example, we recognise that capital allocation is a vehicle through which to drive change. We have the opportunity to demand specific standards of corporate governance, decide whether specific social and ethical issues are acceptable and, if they are not, we vote with our feet.

For us, the integrity and credibility of any management team is a founding principle to our investment process. We need to trust that management has the best interests for all stakeholders at heart, and we have faith that they will make sound strategic decisions and have substantial experience and capabilities in their chosen field. As custodians of our capital, we must ensure that we are doing whatever we can to preserve capital and grow it over time. We allocate capital to investments which we believe are sustainable in the long-term, and finding trustworthy, values-based management that aligns with our core values and beliefs will ensure above- average economic portfolio returns. Sustainability of investment performance or the improvement of the wellbeing of broader society hinges upon ethical, transparent, and honest leadership and in cases where we feel we can add something to the conversation, we engage with the company.

While current macro events have put pressure on our portfolio in the short-term, our investment philosophy is based on the belief the long-term economics of a business drives long-term investment returns. Our companies have strong business models with capable and experienced management teams and the long- term financial

metrics of our portfolio companies, including organic sales growth, earnings and dividend growth, should provide the impetus for an improvement in valuations or at least be supportive of the current valuations in the future.

The Athelney dividend is supported in the short-term by the reserves we have built up in the good times as well as by the ongoing distributions from the high yielding property trusts. For many of the companies in the portfolio our estimates and forecasts for earnings and dividends remain promising and over time we expect that dividends from the high growth quality companies in the portfolio will increase sufficiently so that the property trusts can be replaced by other high growth quality companies without jeopardising our AIC dividend hero status.

Update

The unaudited NAV on 31 January 2023 was 229.4p per share - up by 4.6% from 31 December 2022. The share price on the same day was 205p (trading at a discount of 10.7%). Further updates can be found at www.athelneytrust.co.uk

Dr Manny Pohl AM

Fund Manager

13 February 2023

Stock

Holding

Value (£)

SECTOR

£

%

Chemicals

Treatt

30,000

186,000

186,600

4.5%

Construction & materials

Clarke T

145,000

174,000

174,000

4.2%

Electronic & electrical equipment

XP Power

4,000

80,400

80,400

1.9%

Food & beverages

Fevertree

15,000

155,700

155,700

3.7%

General financial

Close Brothers

20,000

209,600

Impax Asset Management

40,000

287,600

Liontrust Asset Management

27,000

300,780

S & U

6,000

124,800

922,780

22.1%

Leisure goods

Games Workshop

3,500

300,125

300,125

7.2%

Media

4Imprint

5,000

214,250

Rightmove

30,000

154,380

Yougov

10,100

102,010

470,640

11.3%

Mobile communications

Gamma Communications

15,000

161,700

161,700

3.9%

Multiutilities

National Grid

14,000

140,140

140,140

3.4%

Property, commercial & residential

AEW UK REIT

475,000

475,950

Londonmetric REIT

100,000

172,600

Target Healthcare REIT

245,000

196,980

Tritax BigBox REIT

200,000

278,800

1,124,330

26.7%

Support services

Begbies Traynor

95,000

135,090

NWF Group

35,000

86,800

Paypoint

12,000

60,960

Smart Metering Systems

8,000

62,720

345,570

8.3%

Technology

Cerillion

10,000

119,000

119,000

2.8%

Portfolio Value

4,180,985

Net Current Assets

553,577

TOTAL VALUE

4,734,562

Shares in issue

2,157,881

Audited NAV

219.4p

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 2023 AGM on 16 March 2023 at 12.00 noon. Further details regarding the 2023 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.

As explained within the Report of the Directors on pages 20 to 21, 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 (2021: 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 2022 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 Chairman'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.

• 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.

• Trading - ATY 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.athelnevtrust.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.

Environment Emissions

The Company does not have any physical assets, property, or operations of its own and as such does not generate any greenhouse gas or other emissions.

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.

On behalf of the Board

Dr Manny Pohl AM

Managing Director

13 February 2023

Shareholders hold the Directors of a company responsible for the stewardship of that company's affairs. Corporate governance is the process by which a Board of Directors discharges this responsibility. The Company's arrangements in respect of corporate governance are explained in this report.

The Company is required to comply with, or to explain its non-compliance with, the relevant provisions of the UK Corporate Governance Code issued by the Financial Reporting Council (the 'FRC') in January 2021 which can be found at www.frc.org.uk . The Association of Investment Companies issued its own Code of Corporate Governance in April 2021 (the 'AIC Code'), which can be found at www.theaic.co.uk . and which has been approved by the FRC as it addresses all the principles of the UK Corporate Governance Code as well as setting out additional principles and provisions on issues which are of specific relevance to investment trusts. The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders.

The Company has not complied with the provisions of the AIC Code and the UK Corporate Governance Code in respect of the following:

• Due to the size of the Board, formal performance evaluations of the Chairman, the Board, its Committees and individual Directors are not undertaken. Instead, it is felt more appropriate to address matters as and when they arise.

• Due to the size of the Board, it is felt inappropriate to appoint a senior independent non-executive Director.

• All the Directors have agreements for provision of their services but no limit has been imposed on the overall length of service. The recommendation of the Code is for fixed term renewable contracts. In recent years each of the Directors has retired and, where appropriate, sought re-election. One third of the Directors retires by rotation annually in accordance with the Company's articles of association.

• The Company has one employee. The Company Secretary's line of communication in relation to whistle- blowing is to the Chairman of the Company.

The Company does not have a Nominations Committee. During the year the Board comprised a maximum of three Directors who liaised continuously throughout and were aware of their obligations to consider recruitment of further Directors as and when the occasion occurred.

Board Membership

At 31 December 2022 the Board consisted of three Directors, of which two were and remain independent. The biographies of all the current Directors are contained on pages 2 and 3.

Manny Pohl and Simon Moore retired by rotation and were re-elected at the AGM on 5 April 2022. The Directors believe that the Board has the balance of skills, experience and length of service to enable it to provide effective leadership and proper governance of the Company. The Directors possess a range of business and financial expertise relevant to the direction of the Company and consider that they commit sufficient time to the Company's affairs.

All Directors receive relevant training, collectively or individually, as necessary.

The Directors of the Company meet at regular Board Meetings. During the year ended 31 December 2022, the Board met a total of 7 times, via conferencing facilities due to face to face meetings being impossible due to COVID-19 restrictions.

The Board subscribes to the view expressed in the AIC Code that long- serving Directors should not be prevented from forming part of an independent majority. It does not consider that the length of a Director's tenure reduces their ability to act independently. The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of services of any of the Company's Directors, including the Chairman, has been imposed, although the Board believes in the merits of periodic and progressive refreshment of its composition.

The Board of Directors of the Company comprises three male Directors. Whilst the Board recognises the benefits of diversity in appointments to the Board, the key criteria for the appointment of new Directors will be the appropriate skills and experience in the interest of shareholder value. The Directors are satisfied that it has an appropriate breadth of skills and experience. The Board is not currently planning to add a fourth Director to the Board.

The basis on which the Company aims to generate value over the longer term is set out in the Strategic Report on pages 4 to 15. All matters, including corporate and gearing strategy, investment and dividend policies, corporate governance procedures and risk management are reserved for the approval of the Board of Directors. The Board receives full information on the Company's investment performance, assets, liabilities and other relevant information in advance of Board meetings.

Board Responsibilities and Relationship with the Fund Manager

The Board is responsible for the investment policy (the Mandate) and strategic and operational decisions of the Company and for ensuring that the Company is run in accordance with all regulatory and statutory requirements.

These matters include:

•  The maintenance of clear investment objective and risk management policies, changes to which require Board approval;

•  The monitoring of the business activities of the Company, including investment performance and annual budgeting; and

•  Review of matters delegated to the Fund Manager and Company Secretary.

The Fund Manager ensures that Directors have timely access to all relevant management and financial information to enable informed decisions to be made and contacts the Board as required for specific guidance. The Company Secretary and Fund Manager prepare monthly reports for Board consideration on matters of relevance, for example current valuation and portfolio changes, dividend comparisons with previous years, cash availability and requirements and a breakdown of shareholdings by listing and sector. The Board takes account of Corporate Governance best practice.

Corporate Governance and Social Responsible Investment Policy

The Board is aware of its duty to act in the interests of the Company. The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. The Fund Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments. The Directors, through the Fund Manager, encourage companies in which investments are held to adhere to best practice in the area of Corporate Governance. They believe that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area. The Company's ultimate objective is to deliver superior long term returns for Shareholders which the Board believe will be produced on a sustainable basis by investing in companies which adhere to best practice in the area of Corporate Governance. Accordingly, the Fund Manager will seek to favour companies which pursue best practice in this area.

Chairman

Mr. N F Ashton is independent and considers himself to have sufficient time to commit to the Company's affairs.

Directors' Independence

In accordance with the Listing Rules for investment entities, the Board has reviewed the status of its individual Directors and the Board as a whole. Two of the three current Directors including the Chairman are considered by the Board to be independent in character and judgement and there are no relationships or circumstances which are likely to affect or could appear to affect the Directors' judgement.

Remuneration Committee

During the year the Remuneration Committee comprised Simon Moore and Frank Ashton. The Committee will meet as necessary to determine and approve Director's fees, following proper consideration of the role that individual Directors fulfil in respect of Board and Committee responsibilities, the time committed to the Company's affairs and remuneration levels generally within the Investment Trust Sector.

Under Listing Rule 15.6.6, the Code principles relating to Directors' remuneration do not apply to an investment trust company other than to the extent that they relate specifically to non-executive Directors. Detailed information on the remuneration arrangements can be found in the Directors' remuneration report on pages 23 to 25 and in note 4 to the financial statements.

Company Secretary

The Company Secretary, Deborah Warburton FCCA, is responsible for ensuring that Board and Committee procedures are followed and that the Company complies with regulations. The Company Secretary also ensures timely delivery of information and reports and that the statutory obligations of the Company are met.

All the Directors have access to the advice and services of the Company Secretary.

Independent Professional Advice and Directors' Training

Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.

The Chairman liaises on a regular basis with the other Directors and the Company Secretary to ensure that they are maintaining adequate training and continuing professional development.

Institutional Investors - Use of Voting Rights and Voting Policy

The Fund Manager, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company's voting rights. The Fund Manager votes against resolutions he believes may damage shareholders' rights or economic interests.

Audit Committee

During the year the Audit Committee comprised Simon Moore and Frank Ashton. The Committee met once during the year. The duties of the committee include reviewing the Annual and Interim Accounts, the system of internal controls, and the terms of appointment and remuneration of the auditor, Hazlewoods LLP, including its independence and objectivity. It is also the forum through which Hazlewoods LLP reports to the Board of Directors.

Much of the Board's corporate governance responsibility is discharged through the Audit Committee. This Committee

operates within clearly defined written terms of reference which are available upon request at the Company's registered office.

Matter

Action

COVID-19 pandemic

The COVID-19 pandemic is still adversely affecting the global economy and this, in turn may, still impact on the valuation of investee companies and their ability to pay dividends. Key service providers could experience high levels of staff illness which may interrupt services.

The Fund manager and the Administrator monitor the dividend situation monthly and make the Board aware of cancelled, postponed dividends as soon as they become aware.

The Board have checked with key service providers the steps they have taken to protect their employees and procedures they have in place for a continuity of service.

Investment Portfolio Valuation

The Company's portfolio is invested predominantly in listed securities. Although all the securities are fully listed or traded on AIM or AQSE, errors in the portfolio valuation could have a material impact on the Company's net asset value per share.

The portfolio is valued at bid price at the end of each month by the custodians James Sharp & Co.

Misappropriation of Assets Misappropriation of the Company's investments or cash balances could have a material impact on its net asset value per share.

The portfolio is agreed on a monthly basis by the Company Secretary during the completion of the monthly accounts.

Income Recognition

Incomplete or inaccurate income recognition could have an adverse effect on the Company's net asset value and earnings per share and its level of dividend cover.

The level of income received for the year and the dividend forecast for the year are agreed on a monthly basis with the Fund Manager and the Company Secretary.

Ukraine War

The war in the Ukraine has adversely affected the global economy and this, may impact on the valuation of investee companies and their ability to pay dividends.

The Fund manager and the Administrator monitor the dividend situation monthly and make the Board aware of cancelled, postponed dividends as soon as they become aware.

The Audit Committee reviews the scope and results of the audit and, during the year, considered and approved Hazlewoods LLP's plan for the audit of the financial statements for the year ended 31 December 2022. At the conclusion of the audit Hazlewoods LLP did not highlight any issues to the Audit Committee which would cause it to qualify its audit report nor did it highlight any fundamental internal control weaknesses. Hazlewoods LLP issued an unqualified audit report which is included on pages 26 to 29.

As part of the review of auditor independence and effectiveness, Hazlewoods LLP has confirmed that it is independent of the Company and has complied with relevant auditing standards. In evaluating Hazlewoods LLP, the Audit Committee has taken into consideration the standing, skills and experience of the firm and the audit team. Following professional guidelines, the audit partner rotates after five years.

Company Information

The following information is disclosed in accordance with The Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 and DTR 7.2.6.

• The Company's capital structure and voting rights are summarised on pages 20 and 21.

• Details of the substantial shareholders in the Company are listed on page 20.

• The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association and are discussed on page 20.

The Board is seeking to renew its current powers to issue and re-purchase shares at the forthcoming Annual General Meeting.

• There are: no restrictions concerning the transfer of securities in the Company; no special rights with regard to the control attached to securities; no restrictions on voting rights; no agreements which the Company is party to that might affect its control following a successful takeover.

• There are no agreements between the Company and its Directors concerning compensation for loss of office.

Relations with Shareholders

The Company places great importance on communication with shareholders and welcomes their views. The Chairman and the other Directors have spoken to major shareholders during the year to discuss their aspirations for the Company going forward. The Annual General Meeting of the Company provides a forum, both formal and informal, for shareholders to meet and discuss issues with the Directors of the Company.

To comply with the AIC Code the Board are required to consult with shareholders when 20 percent or more of votes have been cast against Board recommendations for a resolution. All resolutions proposed at the AGM were unanimously passed.

The notice and further details of the Annual General Meeting, to be held on 16 March 2023 at 12.00 noon, is published in a separate notification. The Annual Report and Notice of Annual General Meeting are sent to shareholders at least 20 working days before the Meeting.

Internal Control

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. It has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed, consistent with the internal control guidance issued by the Financial Reporting Council.

Adequate internal controls are in place for identifying, evaluating and managing risks faced by the Company. This process, together with key procedures established with a view to providing effective financial control, has been in place for the full financial year and up to the date the financial statements were approved and is consistent with the internal control guidance issued by the Financial Reporting Council.

The Board has reviewed the need for an internal audit function. It has decided that the systems and procedures employed by the Directors, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

Internal Control Assessment Process

Risk assessment and the review of internal controls are undertaken by the Board in the context of the Company's overall investment objective. The review covers the key business, operational, compliance and financial risks facing the Company. In arriving at its judgement of what risks the Company faces, the Board has considered the Company's operations in the light of the following factors:

• The nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;

• The threat of such risks becoming a reality;

• The Company's ability to reduce the incidence and impact of risk on its performance; and

• The cost and benefits to the Company of third parties operating the relevant controls.

Against this background, the Board has split the review of risk and associated controls into four sections reflecting the nature of the risks being addressed. These sections are as follows:

• Corporate strategy;

• Published information, compliance with laws and regulations;

• Relationship with service providers; and

• Investment and business activities.

The key procedures which have been established to provide internal controls are as follows:

• Custody and valuation of assets is undertaken by James Sharp & Co;

• The duties of investment management, accounting and the custody of assets are segregated. The procedures of the individual parties are designed to complement one another;

• The Directors of the Company clearly define the duties and responsibilities of their agents and advisers. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved; the Board monitors their ongoing performance and contractual arrangements;

• Mandates for authorisation of investment transactions and expense payments are set by the Board; and

• The Board reviews financial information produced by the Fund Manager and the Company Secretary in detail on a regular basis.

In accordance with guidance issued to Directors of listed companies, the Directors have carried out a review of the effectiveness of the system of internal control as it has operated over the year.

On behalf of the Board

Dr Manny Pohl AM

Managing Director

13 February 2023

The Directors present their report and audited financial statements of the Company for the year ended 31 December 2022. This report also contains certain information required in accordance with S992 of the Companies Act 2006.

Results and Dividends

The return on ordinary revenue activities before dividends for the year is £148,531 (2021: £151,260) as detailed on page 30.

The company paid an interim dividend of 2.1p per ordinary share on the 23 September 2022.

It is recommended that a final dividend of 7.5p per ordinary share be paid. This will increase the total dividend paid this year to 9.6p (2021: 9.5p) per ordinary share.

Principal Activity and Status

The Company (company number: 02933559) is a public limited company, limited by shares and incorporated in England and Wales

The Company carries on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010 for the year ended 31 December 2021. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2022 so as to be able to continue to obtain approval as an authorised investment trust, under Section 1158 of the Corporation Tax Act 2010.

Directors

Biographical details of the Directors can be found on pages 2 and 3.

In accordance with the arrangements for retirement contained in the Company's Articles of Association, the Directors will retire by rotation on a three yearly cycle. Frank Ashton will retire at the 2023 AGM and will offer himself for re-election.

In addition to any power of removal conferred by the Companies Acts, the Company may by special resolution remove any Director without notice.

Conflicts of Interest

Each Director has a statutory duty to avoid a situation where they have, or could have, a direct or indirect interest which conflicts, or may conflict, with the interests of the Company. A Director will not be in breach of that duty if the relevant matter has been authorised by the Board in accordance with the Company's Articles of Association. The Board has approved a protocol for identifying and dealing with conflicts and conducts a review of actual or possible conflicts at least annually. No conflicts or potential conflicts were identified during the year. It is not considered that an interest in the Company's shares held by a Director will of itself give rise to a situation where that Director's interests or duties conflict with the interests of the Company.

Capital Structure

At 31 December 2022 the Company's capital structure consisted of 2,157,881 Ordinary Shares of 25p each (2021: 2,157,881 Ordinary Shares of 25p each).

Directors and Their Interests

The Directors who held office during the year and at the date of this report are shown below; their interest in the ordinary shares of the Company is stated on page 25 in the Directors' Remuneration Report.

The Company does not have any contract of significance subsisting during the year, with any other company in which a Director is or was materially interested.

J C Pohl as alternate Director for Dr E C Pohl. As Dr E C Pohl was able to attend all meetings of the Board during the year, J C Pohl was not required to act as his alternate.

Substantial Shareholders

The Directors have been notified of the following major shareholdings in the Company that represent greater than 3% of the voting rights:

Out of the nine major shareholders listed above Dr. Manny Pohl has control over two substantial shareholdings amounting to 29.5% of the total shareholding, he is also in contact with IP Worldwide Flexible Fund and Mr C Frostick on a regular basis. Simon Moore has control of 3.1% of the total shareholdings and is in regular contact with two of the remaining four substantial shareholders. The remaining two are in regular contact with the Directors (or their respective agent) to ensure that they are frequently apprised and are content with the manner in which the Company is being run.

There have been no changes to the substantial shareholders up until 6 February 2023.

Dividends

The Ordinary Shares carry a right to receive dividends which are declared from time to time by an Ordinary Resolution of the Company (up to the amount recommended by the Directors) and to receive any interim dividends which the Directors may resolve to pay.

Capital Entitlement

On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to ordinary shareholders in proportion to their shareholdings.

Voting

On a show of hands, every ordinary shareholder present in person or by proxy has one vote and, on a poll, every ordinary shareholder present in person has one vote for every share he/she holds and a proxy has one vote for every share in respect of which he/she is appointed.

Engagement with Suppliers and Other Business Relationships

The Directors have regard for the need to maintain good business relationships with suppliers and other businesses that the Company may have contact with throughout the year. Suppliers are paid in a timely manner and well within the credit terms afforded to the Company. Other business relationships are maintained on a professional and courteous level with regular contact being maintained by the Fund Manager, Company Secretary and Audit Committee Chairman.

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 and which 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 Directors believe, in the light of the controls and review processes noted above and bearing in mind the nature of the Company's business and assets that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

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 confirms 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.

Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances and debtors and creditors that arise directly from its operations such as sales and purchases awaiting settlement and accrued income. The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 12 to the financial statements.

Annual General Meeting

The Notice of Annual General Meeting is published in a separate notification.

Disclosure of Information to Auditors

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

Re-appointment of Auditor

A resolution will be put to the shareholders at the Annual General Meeting proposing the re-appointment of Hazlewoods LLP as Auditor to the Company. Hazlewoods LLP has indicated its willingness to continue in office.

On behalf of the Board

Dr Manny Pohl AM

Managing Director

13 February 2023

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

On behalf of the Board

Dr Manny Pohl AM

Managing Director

13 February 2023

The Board has prepared this Report in accordance with the requirements of Section 421 of the Companies Act 2006. An Ordinary Resolution will be put to the members to approve the Report at the forthcoming Annual General Meeting.

The law requires the Company's Auditors to audit certain disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditor's opinion is included in their report on pages 26 to 29.

Remuneration Committee

The Company had a Remuneration Committee during the year comprising Simon Moore and Frank Ashton, Manny Pohl was invited to attend the meeting by the other Board members.

The Committee met during the year to review and implement measures to avoid or manage conflicts of interest where applicable and to consider and approve the Directors' remuneration for the year ending 31 December 2022.

Policy on Directors' Remuneration

The Board's policy is that the remuneration of non-executive Directors should be sufficient to attract and retain Directors with suitable skills and experience, and is determined in such a way as to reflect the experience of the Board as a whole, in order to be comparable with other organisations and appointments. It is intended that this policy will continue for the year ending 31 December 2023 and thereafter.

The fees for non-executive Directors are determined within the limits set out in the Company's Articles of Association. The approval of shareholders would be required to increase the limits set out in the Articles of Association. Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits, as the Board does not consider such arrangements or benefits necessary of appropriate.

Fees for any new Director appointed will be made on the same basis. Non-executive Director's fees have been set at £10,500 per annum for a number of years and no changes are expected for the foreseeable future.

The salary for the Managing Director and Fund Manager has been fixed at 0.75% of the portfolio value.

The policy was last approved by Shareholders at the Annual General Meeting on 30 March 2021 and will remain valid until the Annual General Meeting in 2023.

Directors' Service Contracts

Each of the Directors has a service contract or letter of engagement with the Company for an initial three-year term commencing in 2019. These were renewed for a further three years before the 2022 AGM. There are no provisions in the service agreements for payments to be made for loss of office, the service contracts are kept at the Registered Office and are available for inspection by appointment.

The letters of engagement for all the Directors provide for renewal by the Board on terms to be agreed from time to time.

Company Performance

The graph below compares capital growth, for the ten financial years ended 31 December 2022, as a cumulative performance graph over the whole 10 years and a table of discrete calendar year performance figures. The comparison is between AIM All-Share and FTSE Small Caps indices as the majority of investment holdings by the Company are a constituent of one or the other of these two indices. The comparison is required by Statutory Instrument to enable the readers of the accounts to compare the performance of the Company.

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

ATY NAV

47.0%

4.0%

7.5%

2.5%

13.4%

-20.7%

18.2%

-4.4%

21.5%

-29.3%

FTSE 100

14.4%

-2.7%

-4.9%

14.4%

7.6%

-12.5%

12.1%

-14.3%

14.6%

1.0%

FTSE 250

28.8%

0.9%

8.4%

3.7%

14.7%

-15.6%

25.0%

-6.4%

14.3%

-19.7%

FTSE Small Cap

4.2%

-24.0%

7.8%

4.5%

3.6%

-23.8%

31.2%

4.4%

20.0%

-16.3%

AIM All Share

17.9%

-31.4%

27.5%

8.6%

8.8%

-34.2%

36.4%

20.7%

5.2%

-31.7%

Directors' Remuneration for the Year (audited)

The Directors who served in the year received the following remuneration in the form of salaries or non-executive Directors' fees, no other salary related payments were made to any Director during the year.

The Directors' remuneration for the year of £61,077 which is down by 7.3% on 2021 and is before the proposed final dividend of 7.5p increasing the total dividend for the year to 9.6p (2021: 9.5p) per ordinary share, and as compared to total dividends paid in the year at 9.7p per share amounting to £207,156 (2021: £202,840). The remuneration decrease is due to the decrease in the portfolio value during the year on which the Fund Manager's fee is based.

No expenses were claimed by any Directors during this year.

Performance, Service Contracts, Compensation and Loss of Office

• The Directors' remuneration is not subject to any performance related fee.

• No Director was interested in contracts with the Company during the period or subsequently

• The terms of appointment provide that a Director may be removed without notice.

• Compensation will not be due upon leaving office.

• No Director is entitled to any other monetary payment or any assets of the Company.

• No incentive or introductory fees will be paid to encourage a directorship.

• The Directors are not eligible for bonuses, pension benefits, share options, long term incentive schemes or other benefits.

Directors' & Officers' liability insurance cover is maintained by the Company on behalf of the Directors.

Relative importance of spend on pay

Directors' beneficial and family interests (audited)

The interests of the Directors and their families in the Ordinary shares of the Company are set out below:

Notes:

1. Dr. E. C. Pohl is the sole beneficial owner of E C Pohl & Co Pty Limited. E C Pohl & Co Pty Limited holds 86,000 shares (2021: 496,000).

None of the Directors nor any persons connected with them had a material interest in the Company's transactions, arrangements or agreements during the year other than through their holdings in the Company's shares. There are no requirements for the Director's to own shares in the Company.

The Directors are fully aware that the Company is not a close company and of the rules associated with this status. The Company Secretary maintains a record of shareholders which is regularly updated. The Company breached the 5/50 rule during 2019 and this has remained during the following three years due to the top 5 shareholders owning more than 50% of the total shares in the company. The Company holds its Investment Trust status under the

S446 Companies Act 2010 exemption because more than 35% of the company's shares are held by the public and have been actively traded in the past 12 months on the London Stock Exchange.

The Directors' Remuneration Report for the year ended 31 December 2021 was approved by shareholders at the Annual General Meeting held on 5 April 2022. The votes cast by proxy were as follows:

Approval

The Directors' Remuneration Report was approved by the Board on 13 February 2023.

Dr Manny Pohl AM

Managing Director

Opinion

We have audited the financial statements of Athelney Trust plc (the 'Company') for the year ended 31 December 2022, which comprise the Income Statement, Statement of Changes in Equity, Statement of the Financial Position, Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

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

An overview of the scope of our audit

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

In making this assessment we have considered the directors' procedures for overseeing the activities of the company and reviewing its results and forecasts. The application of those procedures has been supported by us reviewing Board minutes and other accessible documentation which confirm that the directors regularly benchmark key performance indicators which include but is not restricted to, comparing performance against the FTSE Small Cap, FTSE 250 and FTSE 100 markets, frequent monitoring of available funds, anticipated cash outflows and financial headroom.

In conjunction with the evaluation of management's assessment of going concern, we have observed that resources are carefully planned and managed with the intention of ensuring that the Company has sufficient resources available and accessible to ensure that the Company' commitments and obligations are capable of being met as they fall due.

In relation to the entities reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Our approach to the audit

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

Key audit matters identified were valuation, ownership and existence of investments and the allocation of capital and revenue items. Revenue recognition and management override of controls are always deemed risks in any audit. This is not a complete list of all risks identified by our audit.

Valuation, ownership and existence of investments

The Company's investment portfolio is one of the key drivers of its results, of which 100% is represented by quoted investments. The investments are not considered to be at a high risk of material misstatement, or to be subject to a significant level of judgement, because they comprise liquid, quoted investments for which evidence of the market price is readily available.

However, due to their materiality in the context of the financial statements as a whole, they are considered to be a significant risk area. Our audit work included, but was not restricted to, consideration of the design and implementation of controls over the pricing of quoted investments and agreeing 100% of investment prices to independent sources. We considered the appropriateness of the use of the quoted bid price by reviewing the liquidity of the market of the quoted investments held. We also confirmed investment holdings to third party custodian confirmations.

Key observations

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

Allocation of costs between capital and revenue

The Company allocates expenditure between revenue and capital on the basis of the Board's expected long-term capital and revenue returns. The allocation is important as it affects distributable reserves. Our audit work included, but was not restricted to, a detailed review of the actual dividend and capital income received in the past nine years compared to the Board's expected long-term capital and revenue returns. The Company's accounting policy on this allocation is included in note 1 to the financial statements.

Key observations

Our testing did not identify any material misstatements in the allocation of costs between capital and revenue as at the year end.

Management override of financial controls

The risk of management override is always considered a significant audit risk but is particularly relevant for the Company due to the size of the organisation structure. Our audit work included, but was not restricted to: a review of all significant management estimates and judgements applied during the completion of the financial statements. We also reviewed material journal entries processed by management during the period. The Company's principal accounting policies are described note 1 to the financial statements.

Key observations

Our testing did not identify any management override of financial controls that will materially misstate the financial statements.

Revenue recognition

There is always a presumed risk that revenue may be misstated due to the improper and/or incomplete recognition of revenue. In particular we identified completeness and occurrence of investment income as a risk that requires particular audit attention. Our audit work included, but was not restricted to: obtaining an understanding of management's process to recognise revenue in accordance with the stated accounting policy; checking on a sample basis income transactions by comparing dividends during the year obtained from an independent source with those recognised by the Company; checking on a sample basis gains and losses on investments to third party contracts; and checking transactions close to the financial year end date on a sample basis, to ensure that they have been allocated to the correct accounting period.

Key observations

Our testing did not identify any material misstatements in revenue recognition.

Investment trust status

In order to remain tax exempt the criteria of an investment trust must be met. This includes a 15% limit on retention of income after dividends and revenue expenses and a minimum of 35% of its shares must be owned by the general public and traded on a recognised stock exchange. Our audit work included, but was not restricted to: reviewing calculations to ensure that no more than 15% of income was retained after dividends and revenue expenditure; reviewing the shareholder' register to ensure that at least 35% of the share were not held by a related party; and obtaining an Audit Representation Letter from the Company's directors confirming that they complied with the applicable rules.

Key observations

Our testing did not identify any breaches in the criteria stated above.

Our application of materiality

Other information

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

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

We have nothing to report in this regard.

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

• Fair, balanced and understandable, set out on page 15 - the statement given by the Directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

• Audit committee reporting, set out on pages 17 to 18 - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

• Directors' statement of compliance with the UK Corporate Governance Code, set out on page 16 - the parts of the Directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditors in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;

• the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements;

• the information about internal control and risk management

systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and

• information about the Company's corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

Matters on which we are required to report by exception

Corporate governance statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Statement specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

• the disclosures in the annual report set out on pages 14 to 15 that describe the principal risks and explain how they are being managed or mitigated;

• the Directors' confirmation set out on page 14 in the annual report that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;

• the Directors' statement set out on page 21 in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the Directors' identification of any material uncertainties to the Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

• whether the Directors' statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or

• the Directors' explanation set out on page 21 in the annual report as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Responsibilities of Directors

As explained more fully in the Statement of Directors' responsibilities (set out on pages 22), the Directors are responsible for the preparation 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 Company's ability 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 Company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.

The audit evidence available in relation to the investment portfolio and associated returns are publicly available and considered to be strong sources of audit evidence. Ownership of investments has been verified by reference to this information.

The nature of the Company's activities means that overheads are generally consistent and predictable and where unexpected variances occur, adequate evidence is available.

Our audit work, which utilises the above audit evidence along with the audit procedures outlined in our description of our approach to the audit above, provides us with a reasonable assurance that our audit procedures will detect irregularities, including fraud.

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

Use of our report

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

Ryan Hancock

for and on behalf of Hazlewoods LLP

Statutory Auditor, Cheltenham

13 February 2023

2022

2021

Note

Revenue

Capital

Total

Revenue

Capital

Total

£

£

£

£

£

£

(Losses)/gains on investments held at fair value

8

-

(1,787,296)

(1,787,296)

-

1,359,219

1,359,219

Income from investments

2

183,273

-

183,273

186,393

-

186,393

Investment management expenses

3

(4,008

(36,327)

(40,335)

(4,488

(40,692)

(45,180)

Other expenses

3

(30,734

(78,720)

(109,454)

(30,645

(72,964)

(103,609)

Net return on ordinary activities before taxation

148,531

(1,902,343)

(1,753,812)

151,260

1,245,563

1,396,823

Taxation

5

-

-

-

-

-

-

Net return (negative return) on ordinary activities after taxation

6

148,531

(1,902,343)

(1,753,812)

151,260

1,245,563

1,396,823

Net return per ordinary share

6

6.9p

(88.2p)

(81.3p)

7.0p

57.7p

64.7p

Dividend per ordinary share paid during the year

7

9.6

9.7

Called-up

Capital

Capital

Total

Share

Share

reserve

reserve

Revenue

Shareholders'

Capital

Premium

realised

unrealised

reserve

Funds

£

£

£

£

£

£

Balance brought forward at 1 January 2021

539,470

881,087

2,030,550

1,727,408

329,506

5,508,021

Net profits on realisation of investments

-

-

354,843

-

-

354,843

Increase in unrealised Appreciation

-

-

-

1,004,376

-

1,004,376

Expenses allocated to Capital

-

-

(113,656

-

-

(113,656

Profit for the year

-

-

-

-

151,260

151,260

Dividend paid in year

-

-

-

-

(209,314

(209,314

Shareholders' Funds at 31

December 2021

539,470

881,087

2,271,737

2,731,784

271,452

6,695,530

Balance brought forward at 01 January 2022

539,470

881,087

2,271,737

2,731,784

271,452

6,695,530

Net profits on realisation of investments

-

-

382,704

-

-

382,704

Decrease in unrealised Appreciation

-

-

-

(2,170,000

-

(2,170,000

Expenses allocated to Capital

-

-

(115,047

-

-

(115,047

Profit for the year

-

-

-

-

148,531

148,531

Dividend paid in year

-

-

-

-

(207,156

(207,156

Shareholders' Funds at 31 December 2022

539,470

881,087

2,539,394

561,784

212,827

4,734,562

Note

2022

2021

£

£

Fixed assets

Investments held at fair value through profit and loss

8

4,180,985

6,436,820

Current assets

Debtors

9

543,301

245,163

Cash at bank and in hand

27,361

30,676

570,662

275,839

Creditors: amounts falling due within one year

10

(17,085

(17,129

Net current assets

553,577

258,710

Total assets less current liabilities

4,734,562

6,695,530

Net assets

4,734,562

6,695,530

Capital and reserves

Called up share capital

11

539,470

539,470

Share premium account

881,087

881,087

Other reserves (non distributable)

Capital reserve - realised

2,539,394

2,271,737

Capital reserve - unrealised

561,784

2,731,784

Revenue reserve (distributable)

212,827

271,452