Athelney Trust PLC 

Legal Entity Identifier: 

213800ON67TJC7F4DL05

NON- STATUTORY ACCOUNTS 

Athelney Trust plc, the investor in small companies and junior markets announces its final results for the 12 months ended 31 December 2024. 

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2024 and 2023 but is derived from those accounts. Statutory accounts for 2023 have been delivered to the Registrar of Companies, and those for 2024 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Company website: www.athelneytrust.co.uk 

Chair's Statement and Business   Review

Dear Shareholder

I am pleased to present the Annual Financial Report for the year to 31 December 2024.

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

Financial Summary and Overview

The key performance indicators are as follows:

·              The Trust's Investment performance over 12 months as measured by NAV total return, which is the change in NAV plus the dividend paid, was minus 10.4% (2023: minus 4.4%).

·              The interim dividend of 2.3p per share was paid on 27 September 2024.

·              Your Board recommends a final dividend of 7.6p per share increasing a total dividend payable for the year to 9.9p (2023: 9.8p) an increase of 1%. 

·              This is the 22nd successive year of progressive dividends and importantly returns the Trust to the "Dividend Heroes" list maintained by the AIC, a list of investment companies that have consistently increased their dividends for 20 or more years in a row.

Performance

A review of 2024 for UK equity markets suggests a year of underperformance, for a number of reasons, explained below.

Your company's performance for the year was also negative as measured by NAV Total Return (10.4%), and it also underperformed compared to AIM (-5.7%) and FTSE 250 (4.7%) indices.   Much of this can be attributed to the selling of Close Brothers at a loss, and the poor performance of Impax Asset Management, Fevertree and YouGov, covered in the Half Yearly Financial Report (30 June 2024).

As further explanation, in 2024 the UK equities market underperformed relative to the US and other global markets due to a combination of factors spanning economic, market dynamics and investor sentiment dimensions.

On Discount to NAV, the share price performed a little better than most over the year, ending at 10.5% compared to the AIC UK Smaller Company sector average of 12.2%.  At the time of writing on 6 March 2025  this has improved to 3.1% compared to the sub sector average of 12.3%.

Economic Factors

The UK's economic landscape in 2024 was marked by modest growth, with the economy expanding gently after a negative second half in 2023.  Key drivers included real wage growth and sustained full employment. Notably, the UK was the only European country exhibiting a positive outlook across services, manufacturing, and construction sectors.

Despite these positive indicators, the UK faced challenges such as heightened competition in the domestic market and the ongoing cost of living crisis, and uncertainty and delay produced by the general election, which adversely affected consumer cyclical stocks.

The optimism for clarity and momentum created by the new Labour landslide majority was dented by the following weeks of relatively gloomy ministerial analysis, ending in an Autumn Budget that handicapped private sector aspirations, with National Insurance, minimum wage and Inheritance Tax rises.  Since then, evidence from KPMG and other surveys shows that recruitment has reduced as employers are more reluctant to take on new staff.

A large increase in government borrowing and shaving of the expected headroom to one third of the usual, announced at that Budget, translated to the UK being the most vulnerable of G7 countries to the increased interest costs driven by rapidly rising gilt yields during December for US, Germany and UK.  The new Chancellor's position was not helped by the poor reception from economists and business leaders of the 'anti-growth' Budget implications.  In the background, UK actual growth was anaemic at 0.1% in November, half the rate expected.  Reeves' options are now currently being squeezed, along with her fiscal headroom.

Geopolitical turmoil generated by continuing wars in 2024, and uncertainty about global economic pressures after US President Elect Trump's appetite to apply tariffs, both contributed to  delays in investment decisions, layoffs or reduction of expansion plans at the end of 2024.

Market Dynamics and Investor Sentiment factors

Over the past decade, the UK's share of the global equity market has diminished, decreasing from 8.7% in 2010 to 3.7% in 2024. This decline reflects the superior performance of the US economy, a higher volume of IPOs, and substantial returns from US stocks.

The AIM underperformance continues, however there are still good potential opportunities for large gains, even taking into account the negative (but better than expected) impact of the October Budget's reduction of IHT relief.

The UK's primary stock index increased by approximately 20% from 2015 to October 2024, whereas the major US index grew by more than 250% during the same period. This disparity underscores the challenges facing UK capital markets, including low liquidity, diminished investor confidence, and a shrinking pool of capital. However, there are signs that investors are increasingly questioning the ability of US stocks to continue on the same trajectory, and also proving more nervous at potential threats like AI from China's DeepSeek.  In January President Trump called the release of its R1 model, cheaper to develop and using less memory than the West's OpenAI model ChatGPT, a 'wake-up call' for US companies.

Investor sentiment over 2024 favoured US and European stocks over UK equities. Global fund managers have reduced their overweight positions in US stocks from 36% to 19%, while increasing their allocations to European stocks. This shift indicates a growing preference for areas perceived to offer better value, further contributing to the underperformance of UK equities.

The decline of active equity funds in the UK has also impacted the Initial Public Offering (IPO) market. Since 2016, £150 billion has flowed out of active funds due to disappointing performance, high fees, and a shift towards passive funds and alternative assets. This trend has starved active managers of funds, affecting their ability to participate in IPOs and contributing to a weak IPO market.

High potential - UK small cap equities remain undervalued

We remain confident of and committed to our value-based principles, despite the different headwinds nationally and internationally, discussed above.  We believe small cap stocks remain cheap now compared to large cap as well as for their long term performance.

Recent analysis^[1] shows that average outperformance of smaller companies over large caps over the past 5 cycles has been in excess of 50%. Therefore despite being out of favour currently, there remains high potential for rapid and significant small cap recovery. 

Dividend and Earnings

The company's total revenue earned from its portfolio in 2024 dropped 7.5% to £202,843 from £219,366 in the previous year. Our earnings per share fell 3.8% to 7.4p (2023: 7.7p).

Excluding one-off special dividends, UK dividends fell year on year to £86.4bn (-0.4%) in 2024, however the UK market continues to deliver better dividend yield than any other major market - the FTSE Small Cap had a yield of 4.2% and FTSE All Share 3.5% (next best was Japan at 2.3%).

The board is pleased to recommend a maintained final dividend of 7.6p which, subject to shareholder approval at the AGM, will be paid on 15 May 2025 to those shareholders on the register at 11 April 2025.  Once added to the interim dividend, this brings the full dividend for 2024 to 9.9p a 1.0% increase on 2023.

Board and Company Developments

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

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

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

Our Ongoing Charges Figure (OCF), calculated using the AIC recommended Ongoing Charges methodology, taking annualised costs that would reasonably be incurred if there was no trading of the investee shares, divided by the average of published monthly NAV is 3.13% (2023: 3.84%).

The decrease is due to the decrease in auditor fees from the previous year resulting in a net decrease of £11k in Ongoing Charges in 2024 compared to 2023. While we remain a small fund, reducing the OCF will continue to be a challenge, however every effort is made to do this, while applying appropriate time and resources to growth and good governance.

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

I am disappointed to report the sudden resignation of Moore Kingston Smith LLP (MKS) as our auditor on 6 August 2024 because, as it explained in its resignation letter, "the Company's audit partner is shortly to depart MKS.  As a result our firm has reduced its capacity to complete audits for Public Interest Entities and in order to maintain the quality of the audit services that we provide, we have determined that it is necessary for us to resign from the office of auditor.  There are no circumstances connected with our ceasing to hold office as auditor which we consider should be brought to the attention of the company's members or creditors."  

1.             Simon Thompson interview "The scene is set for a UK Small Cap recovery ", Investors Chronical, 19 Dec 2024

We are delighted to report that after an appropriate, competitive tender process to review a number of alternative auditors, the Board has accepted the recommendation of the Audit Committee and appointed Beever and Struthers as auditor for this financial year on 10 October 2024.

Through no fault of the Company's, two auditors have now resigned with no notice in less than 12 months. 

We suggest this is further evidence that audit reforms, though well-intentioned by the FRC, were launched into a sector unprepared for the sudden pressures on audit firm costs, approved individuals and general resources capable of sustainably and reliably delivering PIE audits.

Environmental, Human Rights, Employee, Social and Community Issues

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

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

Annual General Meeting (AGM)

We are pleased to invite shareholders to our AGM at the offices of Druces LLP, Salisbury House, London Wall, London EC2M 5PS on 23 April 2025 at 12.00 noon.

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

We encourage all shareholders to vote on the resolutions, all of which the board endorses ahead of the deadline at 12 noon on 17 April 2025.  Details on how to vote at the AGM, and its resolutions are in the Notice of AGM, which is delivered with this Annual Report.  Further copies are available on our website, or from the Company Secretary.

An Independent Board

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

·              Myself, Frank Ashton - Non-Executive Chair

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

·              Dr Manny Pohl - Managing Director

·              Jason Pohl - Alternate for Dr Manny Pohl

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

Capital Gains

During the year the Company realised capital profits before expenses arising on the sale of investments in the sum of £49,006 (2023: £50,853).

Portfolio Review

Additional Holdings Purchased

Additional and new holdings of AJ Bell, Alpha Group, Auto Trader, Begbies Traynor, Liontrust Asset Management, National Grid, NWF Group, Paypoint, Raspberry Pi, RELX and Wise  were acquired.

Holdings Sold or Trimmed

4Imprint, Cerillion, Clarke T, Close Brothers, Games Workshop, Gamma, LondonMetric Property. Rightmove, Spirax Engineering, Target Healthcare and XP Power.

Outlook

After a brighter start, this has proved to be a further largely challenging year for the Investment Trust sector in the UK.  Some of the optimism and expectation felt at the half year, did not translate into material gains by the year end.    Inflation, elections and eventually rate cuts were filling 2024's headlines.

Although since mid-January 2025 we now have a returning US President in Donald Trump and a ceasefire between Israel and Hamas in Gaza, there are remaining uncertainties and some expectations.  For example, trade tariffs are likely to harm global growth, be inflationary and may cause recession in some countries.  Meanwhile there are increasing fiscal challenges in the UK, given the declining growth forecasts from commentators and the Chancellor's rules.

We are delighted now to be using the very attractive option of moving to fund management fees that are only driven by performance against shareholder returns (in cash terms), underpinned by the external fund management of EC Pohl and Company.  External management is the chosen fund management model for the large majority of investment trusts.  We thank Dr Pohl for his years of service as internal Fund Manager and welcome the new environment which your board believes will translate into lower OCF and strong performance as a result of a mandate executed by EC Pohl and Company.  This is a top-rated Australian investment firm with total funds under management as at December 2024 exceeding Aus$3,000m. Overall this adjusts the balance of performance and cost for shareholders, against a backdrop of continuing market headwinds for the UK Investment Trust sector, and sets up the Company for a successful and stable future.

Thank you for your continued support; we hope to see you in person at the AGM.

Frank Ashton

Non-Executive Chair

11 March 2025

Fund Manager's Review

Reflecting on 2024

As we close the chapter on 2024, it was a year marked by significant global economic shifts, geopolitical complexity, and technological advancements. For many, the rise of artificial intelligence, easing inflation, and the political ramifications of the U.S. elections underscored the year's challenges and opportunities. These themes not only tested global markets but also demonstrated the critical importance of strategic clarity and disciplined execution.

Last year the London Stock Exchange saw the largest outflow of companies since the global financial crisis. A number of these firms said declining liquidity and lower valuations were key reasons for moving away from London, particularly to the US which offers more capital and trading activity and as investors have switched to passive, or tracker, funds that track the main market moves, and as pension funds have ignored smaller companies. This was particularly evident in the Alternative Investment Market (AIM) which declined materially relative to the blue-chip FTSE 100 index since Labour's election win on 4 July and has shrunk to its smallest size in 23 years as business owners and investors anticipated an abolition of inheritance tax relief in the budget.  Twenty-six companies have delisted from AIM since the general election in July, taking the total below 700 for first time since 2001.

The attraction of AIM companies is their potential to grow faster than their main market counterparts and now that the government has made the tax position clear, we expect the share price for these companies to better reflect their potential.  However, many of the companies on AIM do still lack liquidity which can lead to short-term price volatility.

For the broader market, ongoing geopolitical instability, slow economic growth and a diminished appetite for UK equities among pension funds have impacted valuations and liquidity and UK equities have remained out of favour.

These factors have all had an impact on our portfolio which has performed as shown in Table 1, outperforming the AIM index and underperforming the FTSE Small Company Index.

The Athelney NAV has been negatively impacted by rising costs, predominantly audit fees and our large dividend payout (DY:5.4%) as compared to the FTSE250 (DY:3.3%) in particular.

As we reflect on the year, the IMF's recent statement on global growth challenges has proven particularly relevant. Ageing populations, insufficient investment, and stagnant productivity gains have emerged as significant barriers to sustained growth. Against this backdrop, investor attention converged on three critical themes:

1.     The enduring impact and growth potential of the AI revolution.

2.     Disinflation trends and their influence on central bank rate policies.

3.     The economic and geopolitical effects of President Trump's return to office.

Companies using AI reported tangible returns on investment, leveraging AI to enhance efficiency and strengthen their competitive advantage. From customer service innovations to proprietary machine learning models, AI has become a transformative force, underscoring a structural economic shift. Moreover, hyperscale cloud providers like Microsoft (NASDAQ: MSFT) have heavily invested in AI infrastructure, further driving adoption. While AI offers significant operational benefits, questions about its long-term scalability and broader impact continue to shape the conversation.

Disinflation has defined 2024. Easing inflationary pressures have fuelled optimism for potential central bank rate cuts to stimulate growth. While this trend offers relief, underlying risks in energy markets and persisting geopolitical tensions are keeping investors cautious. Lastly, President Trump's return to power has reshaped the political landscape, reigniting debates on globalization and market dynamics with promises of protectionist trade policies and fiscal reforms.

Amidst this backdrop, we have remained true to our process - focusing on the stocks in our portfolio rather than attempting to predict macroeconomic trends and industry responses. Our focus has been to maintain our large exposure to Property Trusts and higher dividend yielding businesses in recognition of the need to maintain the dividend paid to Shareholders within a growth style portfolio.

During the year, Rightmove (LSE: RMV) was approached by the Australian-listed company REA Group (ASX: REA) with a £6bn 'Cash and REA Share' offer, which was ultimately rejected after the fourth attempt. This followed another development in our portfolio: TClarke Plc was successfully acquired by Regent Acquisitions in April 2024.

We exited our positions in Close Brothers, LondonMetric Property, Spirax Sarco, TClarke, and XP Power during the year. The proceeds from these sales were reallocated to strengthen our existing holdings and initiate new positions in companies we believe are well-positioned to expand their economic footprint and generate sustainable growth for the portfolio over the long term.

We increased our exposure to Alpha Group, Begbies Traynor, Liontrust Asset Management, National Grid, NWF Group, and PayPoint while trimming our holdings in Cerillion, Four Imprint, Games Workshop, Gamma Communications, and RightMove.

In the past twelve months we added five new names to the portfolio:

AJ Bell (LSE: AJB)

AJ Bell is one of the largest and most well-regarded UK-based investment platforms, offering pension, ISA, and investment account services. With a low-cost, user-friendly approach, it attracts retail investors and financial advisers. It has achieved strong growth in assets under administration and has a scalable business model, positioning AJ Bell to benefit from increasing demand for digital wealth management solutions.

Auto Trader (LSE: AUTO)

Auto Trader plc is the UK's leading digital automotive marketplace, connecting buyers and sellers of vehicles. Its subscription-based model ensures recurring revenue, supported by strong market share and data-driven insights. Continuous platform enhancements and digital advertising growth, position Auto Trader well to grow its economic footprint and capitalize on the ongoing shift toward online car sales.

Raspberry Pi (LSE: RPI)

Raspberry Pi is a high-growth, high-margin, founder-led tech company dedicated to revolutionising the accessibility and affordability of computing and digital education in a traditional computing market characterised by high barriers to entry, expensive hardware and software costs. Raspberry Pi disrupts this paradigm by offering compact, versatile, and powerful computing devices at a fraction of the cost and adds to our expanding suite of quality growth companies.

RELX (LSE: REL)

RELX plc is a global leader in information and analytics, operating across Scientific, Risk, Legal, and Exhibitions sectors. With a subscription-driven revenue model, it offers stable growth and recurring income. Significant investments in AI and data innovation position RELX to capitalize on rising demand for analytics and decision-making tools.

Wise (LSE: WISE)

    Wise is a high-growth, high-margin, founder-led tech business focused on reducing the cost of cross-border money movement in an extremely inefficient legacy banking network. The intermediary-heavy nature of this network creates pressure to keep fees high, as does banks' short-term profit motive to continue earning the highly profitable income stream from the cross-border transactions. With strong customer growth, increasing transaction volumes, and a scalable business model, Wise is well-positioned to benefit from the ongoing shift toward digital financial services and international money transfers.

   Looking ahead

For investors looking ahead, the three key themes of 2024 remain relevant, but their secondary effects deserve attention:

·      AI Boom and Energy Demand: The increasing demand for energy-intensive computing power may lead to power bottlenecks, potentially sparking a new energy capex boom.

·      Inflationary Pressures: Emerging energy shortages could add to global inflationary pressures, compounded by proposed U.S. import tariffs and potential trade frictions.

·      Central Bank Policies: It may be premature to declare victory over inflation or assume central banks will follow the projected rate-cut cycle.

As we embrace the opportunities of this AI-driven era, our focus remains on thoroughly evaluating the business models, financial strength, and growth strategies of potential investments with care, diligence, and commitment. This rigorous approach enables us to identify high-quality growth stocks that are well-positioned for long-term success. Key to their sustained performance is their agility in seizing emerging opportunities and effectively leveraging AI to navigate market trends and meet evolving demands.

Companies with a sustainable competitive advantage are particularly well-equipped to capitalize on the economic potential of AI to withstand inflationary pressures and interest rate moves. Their resilience to market disruptions such as business model shifts or price-based competition and the significant barriers to entry for competitors lacking equivalent data assets position them to not only capture but retain the economic benefits of AI, ensuring enduring value creation for investors.

For us, having a stock-specific approach is central to our philosophy, driven by the belief that the economics of a business underpin long-term investment returns. Our rigorous research process evaluates industry dynamics, financial stability, and management capability, ensuring our portfolio comprises businesses resilient to macroeconomic challenges while positioned to seize growth opportunities. By leveraging our proprietary 'Pillars of a Quality Franchise' framework, we do believe we are able to deliver sustainable alpha by identifying companies early, holding them long-term, and aligning capital allocation with market valuations. However, the continued takeover of small companies in the UK market and the move away from new listings in London as previously mentioned is a worrying feature as our process aims to find high-quality businesses that we would like to own for the very long-term.

We are encouraged by the recent recovery in our companies' price-to-earnings (P/E) ratios, rebounding from prior lows. Coupled with strong short-term financial performance evidenced by organic sales growth, solid earnings, and rising dividends this reinforces our confidence in their future prospects. These positive developments point to a promising trajectory for further valuation growth across our portfolio.

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

Update

The unaudited NAV on 28 February 2025 was 182.5p per share - down by 1.9% from 31 December 2024. The share price on the same day was 175.0p (trading at a discount of 4.3%). Further updates can be found at www.athelneytrust.co.uk

Dr Manny Pohl AM

BSc (Eng), MBA, DBA, FAICD, F Fin, MSAFAA

Fund Manager

11 March 2025

Section 172(1) Statement

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

When making decisions the Board should consider the following:

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

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

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

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

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

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

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

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

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

This is undertaken through:

Annual General Meeting

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

The Board plan to hold the 2025 AGM on 23 April 2025 at 12.00 noon. Further details regarding the 2025 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 which are all available from the Company's website and paper copies are available on request from the registered office. The publication of these reports is considered to be the primary method of communication to Shareholders and other readers of the reports and provides detailed information on the portfolio, performance over the period and an assessment of the outlook for the Company.

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

Shareholder enquiries

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

Suppliers

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

Regulators

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

Environment and Community

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

Other Statutory Information

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

Board

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

One of the Directors is the Company's only employee (2023: 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 2024 can be found on pages 11 and 12 of this report.

Responsible Ownership

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

Review of Performance and Outlook

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

Principal Risks and Uncertainties and Risk Management

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

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

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

·      Inflationary pressure -  Inflation escalated sharply in 2023 which carried over in to 2024, with the Bank of England raising interest rates on several occasions in an attempt to reduce the level of inflation. This has stabilised in 2024 however not all investee companies are well-placed to pass on cost pressures to their customers.

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

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

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

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

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

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

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

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

·    Geopolitical risk - some of the companies that we have invested in trade globally and their value may be affected by international political developments, changes in government and their policies, changes in taxation, restrictions in foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which they operate.

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

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

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

Statement Regarding Annual Report and Financial Statements

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

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

Greenhouse Gas Emissions

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

Social, Community and Human Rights issues

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

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

The Company was registered for the period to 31 December 2024 as its own AIFM with the FCA under the AIFMD and confirms that all required returns have been completed and filed.

For and on behalf of the Board

Dr Manny Pohl AM

 Managing Director

 11 March 2025

Statement of Directors' responsibilities in respect of the financial statements

The Directors state that to the best of their knowledge:

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

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

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

For and on behalf of the Board

Dr Manny Pohl AM

Managing Director

11 March 2025

Income Statement

For the Year Ended 31 December 2024

2024                                                                        2023                   

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

No operations were acquired or discontinued during the year.

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

Statement of Financial  Position

As at 31 December  2024

Company Number: 02933559

These financial statements were approved and authorised for issue by the Board of Directors on 11 March 2025 and signed on their behalf by

Dr Manny Pohl AM

Managing Director

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