Athelney Trust Plc
Annual Report 2012

Plain-text annual report

Annual Report for the year ended 31 December 2012 COMPANY NUMBER: 2933559 Athelney Trust plc CONTENTS Directors of the Company Chairman's Statement and Business Review Corporate Governance Statement Investment and Portfolio Analysis Report of the Directors Directors’ Remuneration Report Independent Auditors’ Report Income Statement Reconciliation of Movements in Shareholders’ Funds Balance Sheet Cash Flow Statement Notes to the Financial Statements Officers and Financial Advisers Notice of Annual General Meeting Form of Proxy 2 - 3 4 - 9 10 - 14 15 - 17 18 - 21 22 - 23 24 - 25 26 27 28 29 30 - 37 38 39 - 45 46 -47 1 Athelney Trust plc DIRECTORS OF THE COMPANY The Directors of the Company are: Hugo Deschampsneufs, non-executive Chairman Hugo Deschampsneufs, aged 67, has spent his entire working career in finance and is a fellow of the Institute of Chartered Accountants in England and Wales (FCA). He qualified with Binder Hamlyn. He has worked for the Rank Organisation and National CSS Inc., a subsidiary of Dunn & Bradstreet. In 1979 he joined Manchester Exchange & Investment Bank, leaving in 1989 as Director of Leasing Operations. For the next 20 years, he held the position of Finance Director of Longriver Holdings Limited, a group with assets of £70 million, specialising in the leasing of fixture-type assets to local authorities, in which his diverse roles encompassed the disciplines of marketing and legal. He currently acts as an adviser in the leasing industry. His work in both the accounting profession and investment banking has given him extensive knowledge in a wide-ranging variety of business sectors. He has considerable experience of asset management both as a non-executive Director of Dunbar Boyle & Kingsley Holdings, the holding company of a firm of stockbrokers, and as a Director of Athelney Trust plc since its formation. David Horner, non-executive Director David Horner aged 53, qualified as a Chartered Accountant in 1985 with Touche Ross & Co before joining 3i Corporate Finance Limited in 1986 where he was a manager giving corporate finance advice. In May 1993, he joined Strand Partners Limited and was appointed a Director in January 1994, where he carried out a range of corporate finance assignments identifying, structuring and managing investments in quoted and unquoted companies. In October 1997 he left to set up Chelverton Asset Management Limited, which specialises in managing portfolios of private companies and small to medium-sized public companies. He was responsible for setting up Chelverton Growth Trust plc and, since May 1999, has managed the Small Companies Dividend Trust plc. Robin Boyle, Managing Director The assets of the Company have been managed since formation by Robin Boyle, the Managing Director of the Company. Aged 68, he has spent the last forty three years in a number of different roles with institutional fund management and stock broking firms but always retaining an intense interest in Small Caps. His first job in the City of London was with the company that eventually became Gartmore; he then went on to Panmure Gordon, Hoare Govett and Capel-Cure Myers before becoming founder, major shareholder and Managing Director of a private stock broking business, Dunbar Boyle & Kingsley, which he sold in 1994. From 2000 to 2006 he was co-manager of Small Companies Dividend Trust Plc run by Chelverton Asset Management Limited. Between 2006 and 2008 he was non- executive Director of Capcon Holdings plc, now Brady Exploration plc an AIM-traded commercial investigations and stocktaking business. Jonathan Lancelot Addison, non-executive Director Jon Addison, aged 60, has over 30 years experience in the investment management industry, including wide experience in superannuation. Currently he is the Investment Manager, (part time), formally Fund Manager of the Meat Industry Employee Superannuation Fund (MIESF) which he joined in 1999 and where he is responsible for the investment management of the fund. Prior to his appointment to MIESF, Jon was a Director and Asset Consultant within the corporate finance section of Pricewaterhouse Coopers and in this role was responsible for establishing an investment consulting practice with clients ranging from superannuation funds to insurance funds and funds managers. Prior to that, he was a manager Investment Consultant at Sedgwick Noble Lowndes. Jon holds Non Executive Directorships with African Enterprise Limited, African Enterprise New Zealand Limited, African Enterprise International, Hawksbridge Limited, Global Masters Fund, TPCG Limited and Phosphagenics Limited. Jon holds a Bachelor of Economics Degree and a postgraduate diploma from the Institute of Company Secretaries and is a member of the Australian Institute of Company Directors and has addressed a number of Australian and International conferences on investment related matters. 2 Athelney Trust plc DIRECTORS OF THE COMPANY (CONTINUED) Dr Emmanuel Clive Pohl, alternate non-executive Director Manny Pohl, aged 59, is the Chairman and CEO of investment house EC Pohl & Co which he founded after he stepped down in June 2012 as Managing Director and Chair of the Investment Committee of Hyperion Asset Management Limited. Manny founded Hyperion in 1996 and headed the business through its evolution into today’s independent, highly acclaimed fund manager with in excess of $3.2 billion in funds under management. Manny holds engineering and MBA degrees from the University of Witwatersrand and a doctorate in Business Administration (Economics) from Potchefstroom University. Manny has over 29 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. Furthermore, his engineering background gives him a methodical and disciplined approach to his role. He has served on the Boards of several major corporations in his native South Africa and his adopted home Australia. 3 Athelney Trust plc Waterside Court, Falmouth Road, Penryn, Cornwall, TR10 8AW Telephone: 01326 378 288 Email: hugo@athelneytrust.co.uk CHAIRMAN’S STATEMENT AND BUSINESS REVIEW I enclose the results for the year ended 31 December 2012. The salient points are as follows: • Audited Net Asset Value (“NAV”) was 149.1p per share (31 December 2011: 123p) an increase of 21.1 per cent. • Revenue return per ordinary share was 5.4p, (31 December 2011: 5.4p). • Recommended final dividend of 5p per share (2011: 4.95p), an increase of 1 per cent. Review of 2012 We all know what to do, we just don’t know how to get re-elected after we have done it. – Jean-Claude Juncker, prime minister of Luxembourg. Insanity: doing the same thing over and over again and expecting different results – Albert Einstein. To be broke is not a disgrace, it is only a catastrophe. Nero Wolfe, The League of Frightened Men by Rex Stout (1935). Think how much barbarism there is around us, from the brutal savagery of the gutter to the cunning savagery of the Stock Exchange! George Gissing, The Crown of Life (1899). Let’s first have a look at some performance numbers for the year 2012 – and really good they are, too. Taking the major markets, Tokyo, New York, London and Shanghai rose by 22.9 per cent, 9.8 per cent, 8.2 per cent and 3.1 per cent respectively. Best performers among the minor markets were Venezuela +303 per cent, Egypt +55.5 per cent and Turkey + 55.3 per cent. In fact, the only market that I could find which actually fell last year was Spain and that only by 0.6%. Back to London, where small caps had a very good year, with the Small Cap Index up by a powerful 24.4%, Fledgling by 19.8% but the real tiddlers, as represented by the AIM index, rose only by 2.2% (more of this later). For the year as a whole, the Athelney Trust NAV increased by 21.1 per cent so, with 44 per cent, 14 per cent and 39 per cent invested in Small Cap, Fledgling and AIM indices respectively, the blended average comes out at 17.6 per cent so one is relatively pleased by the overall result despite another poor result from AIM. Over the past 17 years since AIM started, the total return from the index of all its constituents has been minus 1.9 per cent a year and, obviously, worse if adjusted for inflation. Critics often say that the poor performance might be due to AIM’s preponderance of small oil, gas and mining companies (in which Athelney does not invest) but that cannot explain away 17 poor years. Two passing thoughts: one, that the average dividend yield is only 0.8 per cent (although the ten largest of Athelney’s AIM holdings actually yield 4.3 per cent on average) and; two, that AIM shares are more volatile than those on the main market. Many AIM companies are very small and have founder-managers who retain large stakes so are not traded easily: in fact, 37 per cent of AIM companies are traded less than once a day. Such volatility may put off potential investors. Again, investors originally probably put too high a value on AIM’s growth potential, which encouraged too many of the wrong sort to come to market. Many of the worst and smallest businesses have left AIM and valuations of the balance are much more realistic so, to my mind, performance in future should pick up markedly. 4 Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) But much of the good performance of major markets was, in my opinion, due to everyone’s favourite central banker, Mario Draghi. Yes, I would certainly give credit to the president of the European Central Bank for his whatever it takes to save the euro comment in July, although his second sound-bite that same day, this time in London, was even more helpful – and, believe me, it will be enough. Mr. Draghi achieved two things. The euro stopped sliding against the dollar: indeed, the exchange rate has recovered sharply from $1.20 in the summer to just over $1.30. Bond yields moved sharply down for Italy and Spain in particular with 10-year bonds for the former down from 7% to 4.5% and the latter from 7.5% to 5.2%. However, words alone will not keep the Eurozone together. Investors worry about the level of complacency that sets in whenever Eurozone leaders make the slightest bit of progress. It is simply not good enough to have the ECB standing on the side-lines ready to wade into debt markets when the next stage of the crisis occurs, which it undoubtedly will. The Eurozone will remain in recession for most of 2013 and, meanwhile, the ability of bailed-out countries to meet ever more demanding targets (see Albert Einstein’s quote above) must be in doubt. Mr. Draghi has taken the Eurozone a step towards safety but there are many more to take. I particularly liked the news story about the American software developer working for Verizon who outsourced his job to China for about 10 per cent of what he was being paid. Could I do the same? To: Chairman, Athelney Trust plc From: Rent-a Riter .com Thank you for selecting Rent-a Riter.com to write your chairman’s reports. As agreed, we will provide you with two commentaries per year on corporate, economic and market news for £2,500 per annum. Please confirm the following template: funny introduction, outline consensus view, state why that view is wrong, set out alternative, list arguments for and against, end with funny pay-off line which refers back to introduction. Perhaps not……. For the first time since the 1950s, we learnt last year that UK pension funds held more bonds (aka fixed interest stocks) than equities. In 1956, though, George Ross Goobey, manager of Imperial Tobacco’s pension fund, gave a landmark speech at the conference of the Association of Superannuation and Pension Funds. He reminded delegates that it was possible to lose money in British Government stocks and that it made sense for equities to yield less than bonds because the latter was being gradually undermined by inflation whereas equity dividends should increase in line with rising prices. Studies going back 80 years and including several depressions show that shares have increased in value at a rate which offsets the long-term rate of inflation and, on top of this, have shown a real yield in terms of purchasing power of about 4-5%, he said. One by one, speakers stood up to make the contrary argument – interest payments on gilts are not passed or cut etc. etc. In the following years, Goobey was shown to be correct and on 27 August 1959 the yield on 2.5% Consols was 4.77% and that of the FT 30 Index 4.76% – the so-called reverse yield gap had arrived. The pension funds had already got the message: in 1958, Manchester Corporation started buying dividend yields of 7% and others rapidly followed. The market rose by 122% between 1958 and 1960. Not everyone was happy with that, the public has been sold a pup said a prominent chartist. He was wrong and the market rose by 49% from June 1962 to October 1964 and, apart from a few blips, the reverse yield gap stayed until 2008 when QE (quantitative easing) and plain fear forced bond yields to historic lows. Today, the equity market yields 3.6% net of basic rate tax compared with the 2.1% before tax on a 10-year gilt. Today’s world is very different from that of the 1950s but the two important questions have remained all these years: will there be inflation and do you trust the government to protect the purchasing power of your savings and investments? How about yes and no respectively? In 1956, I hope that you would have chosen equities and in 2013 you should do the same. 5 Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Many pundits see China as an attractive place to invest in 2013 and I can at least see why. The market has been depressed for even longer than our equity markets in the West, being down by about 40 per cent since 1992 but having bounced strongly in the fourth quarter of 2012. Ratings seem relatively good value and local investors have ceased that crazy speculation on borrowed money that made the local stock market look so dangerous to conservative investors. Yes, I grant that the present rally in prices may well continue for the time being but, longer term, I retain my doubts. Any study of financial cycles shows that a combination of strong credit growth and rapidly rising property prices provides an indicator, not of strength, but of financial fragility. China is currently experiencing a huge boom in credit: in the five years to 2012, the country’s rate of debt to GDP rose by about 60 per cent – a much larger increase than that experienced by either the U.S. prior to 2008 or Japan in the second half of the 1980s. Reckless credit expansion produces unsustainable growth and results in the misallocation of capital: such malinvestment (as our Austrian economist friends would say) is generally accompanied by a property bubble. China resembles a vast building site (62 new airports to be built this year) with land prices in Shanghai and Beijing up by five times since 2005. No-one can tell when the cycle will peak – all I know is that the longer this boom lasts the harder the landing will be. As an appendix to the above, I was interested to read a recent news story about Chinese government officials who have been panicked into a fire sale of their illicit properties by the introduction of a house registration system. Until recently, a bribe was paid in property not cash with that property put into a relative’s name and only sold after six months. Apparently, 714 such officials fled the country last October during the holidays to buy properties in the Cayman Islands and the U.S. and start a new life. Some high-end houses are now being deliberately designed for fleeing Chinese with ponds for koi carp and second kitchens for, er, pungent cooking. Every computer-user knows the feeling of dread when a new piece of software causes the entire system to crash. On 1 August, Knight Capital, a U.S. stockbroker, started to use a new software programme to execute its trades. Within an hour, the programme had reduced the entire market to a shambles, sending wrong buy and sell orders which cost Knight Capital $440m to sort out and forcing its shareholders to accept a rescue bid just five days later. This was just the latest in a series of glitches linked to computerised trading, the most serious of which was the so-called flash-crash of May 2010 on which I commented unfavourably at the time. The financial world needs markets to allocate capital so as to reward good companies with a higher share price but high frequency traders are seeking to benefit from tiny changes in price and are not interested in a company’s future prospects. Such traders might well be dealing in cigarette cards. What we need is an expansion of the circuit-breaker introduced in 1987 in response to Black Monday, when the market fell by 23 per cent in a day. The most successful investor in my life-time, Warren Buffett, says his ideal holding period for a share is for ever. Surely it would not harm investors unduly if they have to wait a second or two before dealing. I am indebted to Lucy Kellaway of the pinko paper for the following Mangled Meanings by Management for 2012:- • In the wholesale channel, Burberry exited doors not aligned with brand status and invested in presentation through both enhanced assortments and dedicated, customised real estate in key doors. (Funny, I thought Burberry made clothing not doors). I’ve got some slides to talk to…..(No-one listening?) • We have made substantial progress against our strategic objectives. (Lloyds). • • What is a Head Inventiologist? • Optimizing the customer footprint across geographies. (Citibank sacking 1,100 employees). • Stockbroker Religare described a fall in profits at United Spirits as Ebitda de-grew by 23.3 per cent. • Finally, You have to appreciate that the milestones we have set in these swim lanes provide a road map for this flow chart. When we get to toll gates, we’ll assess where you sit in the waterfall…….. 6  Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Is a fraudster the victim of circumstances or does he give in to bad impulses that others suppress? Probably a little of both: Kweku Adoboli was jailed for seven years on 10 November for a banking fraud leading to a $2.3bn loss. Adoboli was a reckless gambler and a liar – he used his position as a trader to defraud billions from Swiss banking employer UBS. Having said that, the penitent and tearful Adoboli is an expression of a dysfunctional investment banking culture that cries out for reform. In better times, one line manager praised him for making $6m before ticking him off for breaking his dealing limits in the process! Adoboli worked on the Exchange Trade Funds desk which, apparently combines servicing bank clients and prop trading, i.e. making bets on behalf of UBS. Such a combination is quite common but, nevertheless, the thought of it makes me feel rather queasy. Like predecessors Nick Leeson and Jerome Kerviel, Adoboli moved out of the back office to the trading desk, presumably bringing with him a knowledge of systems useful when concealing escalating losses. Perhaps it is better for such box-wallahs and paper-shufflers to follow a completely separate career path. On 23 November, Psy, a rather chubby South Korean pop star, claimed the title for the most-watched online video of all time. His rodeo-dancing Gangnam Style clip was viewed more than 805m times. His sudden success tells us that video has become the dominant form of online content. Three years ago such entertainment was less than 30 per cent of peak-time internet traffic in America – that share has now doubled, whereas web-browsing has sunk by two-thirds. Just as I was getting the hang of it…… Many international companies that appear to be operating successfully in Britain pay little or no corporation tax here. It is not difficult to understand why ordinary people being paid wages and salaries and small British companies that pay tax at the normal rate on their profits are angry. But the origin of the problem is easier to describe than to solve. If a business operates in many countries and makes a profit, in which country is the profit earned? The old rule that the profit belongs to the country in which the business is managed or headquartered does not work very well because it is often hard to identify exactly where that is. Moreover, if it is highly profitable, then countries all over the world will want to tax it. Profits are therefore often tucked away in tax havens – then there is the case of the Scotch whisky brands which are apparently owned by companies based in the Netherlands. This is all a familiar problem to tax collectors in America where States deal with the issue through apportionment. Instead of attempting to estimate what percentage of a company’s profit was earned in, say, California or Nevada, States use the Massachusetts Formula which gives equal weight to sales, payroll and assets as well as profits. Unfortunately, America agreed to keep apportionment within its own boundaries after a long and successful campaign by the Brutish government and business in the mid-1980s. So a global agreement on apportionment would seem like the only sensible way forward, perhaps through the G8 or G20. 7 Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Results Companies paying dividends Companies sold (therefore no true comparison) Companies purchased (therefore no true comparison) Increased total dividends in the year Reduced total dividends in the year No change in dividend Capital Gains Number 79 15 9 33 15 7 During the year the Company realised capital profits arising on the sale of investments in the sum of £183,707 (31 December 2011: £158,922). Portfolio Review Holdings of Abbey Protection, Greencore, Lok’n Store, NewRiver Retail, Photo-Me, Sweett Group, UTV Media and 4imprint were all purchased for the first time. Additional holdings of Air Partner, Chime Communications, Hansard Global, Huntsworth and Randall & Quilter were also acquired. Alumasc and Timeweave were sold. In addition, a total of twenty one holdings were top-sliced to provide capital for the new purchases. Dividend The Board is pleased to recommend an increased annual dividend of 5p per ordinary share (2011: 4.95p). This represents an increase of 1 per cent over the previous year. Subject to shareholder approval at the Annual General Meeting on 9 April 2013, the dividend will be paid on 12 April 2013 to shareholders on the register on 21 March 2013. For those patient investors who subscribed for Athelney Trust shares in the IPO of 1994, the annual return has now risen to 10 per cent net of basic rate tax on the capital originally invested. 8 Athelney Trust plc CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (CONTINUED) Update The unaudited NAV at 28 February 2013 was 160.9p whereas the share price on the same day stood at 130p. Further updates can be found on www.athelneytrust.co.uk Prospects Markets from London to Tokyo to New York hit multi-year highs in January and the VIX, known as the fear gauge, fell to its lowest since 2007. Is all this optimism justified? Up to a point, Lord Copper. There are three reasons for feeling more hopeful about the world economy: disasters such as the breaking up of the euro and the fiscal cliff in America have been avoided, the ECB, the Fed and the Bank of Japan have promised unlimited bond-buying and there is tentative evidence of accelerating economic growth. There is, though, a gap between market optimism and economic reality. In America, increased workers’ payroll taxes will choke off demand. The single currency area may not fracture but the IMF expects the euro-zone economy to contract by 0.2 per cent in 2013. Those on the periphery are mired in recession whereas even the core is looking a little weaker. With more financial austerity ahead and credit tight, it is hard to see much growth in the UK and continental Europe. So, markets may improve this year on hopes of a better 2014 and blue-chips may out-perform small caps. but cautious optimism feels right to me rather than anything stronger. H.B. Deschampsneufs Chairman 6 March 2013 9  Athelney Trust plc CORPORATE GOVERNANCE STATEMENT UK Corporate Governance Code The Board is committed to achieving and demonstrating high standards of Corporate Governance as set out in the UK Corporate Governance Code published in June 2010. The Corporate Governance Code can be found on the Financial Reporting Council (FRC) website www.frc.org.uk. The Board considers that it has complied with all the provisions of the Corporate Governance Code except in matters identified and explained below. The Board also confirms that, to the best of its knowledge and understanding, procedures were in place to meet the requirements of the Corporate Governance Code relating to corporate reporting, risk management and internal control principles throughout the year under review. This statement describes how the principles of the Combined Code have been applied in the affairs of the company. The Company has not complied with the provisions of the 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 service contracts but no limit has been imposed on the overall length of service, however all Directors are required to retire and, if appropriate, seek re-election at least every three years. The recommendation of the Code is for fixed term renewable contracts. • The Company has just one employee, other than Board members, the Company Secretary, whose line of communication in relation to whistle-blowing is to the Chairman of the Company. • The Company does not have a Nominations Committee, as a Board of only five Directors who liaise continuously throughout the year and are aware of their obligations to consider recruitment of further directors as and when the occasion occurs, such a Committee is not considered necessary. • In consequence of being a company with only five Directors, a Directors’ and Officers’ Liability Insurance policy has not been arranged but is a matter constantly under review by the Board. The Board The Board currently comprises: Robin Boyle, Managing Director Hugo Deschampsneufs, Chairman (non-executive) David Horner, non-executive Jonathan Addison, non-executive Manny Pohl, alternate non-executive Hugo Deschampsneufs and David Horner are members of the Audit Committee and the Remuneration Committee, David Horner being Chairman of each Committee. 10 Athelney Trust plc CORPORATE GOVERNANCE STATEMENT (CONTINUED) Board Responsibilities and Relationship with Investment Manager The Board is responsible for the investment policy 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 objectives 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 Investment Manager and Company Secretary. The Investment 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 Investment 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. Committees of the Board The Board has appointed a number of Committees as set out below to which certain Board functions have been delegated. Each of these Committees has formal written terms of reference, which clearly define their responsibilities and incorporate the best practice recommendation and requirements of the Combined Code. Board Membership At the year end the Board consisted of five Directors. The Directors believe that the Board has the balance of skills, experience, ages 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. Brief biographical details of the Directors can be found on page 2 and 3. The Directors of the Company meet at regular Board Meetings, during the year to 31 December 2012, the Board met three times with all Directors present. Chairman and Senior Independent Director The Chairman, Hugo Deschampsneufs, is independent. He considers himself to have sufficient time to commit to the Company’s affairs. Given the size and nature of the Board it is not considered appropriate to appoint a senior independent Director. 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. The non-executive Directors are considered by the Board to be independent and free of any business or other relationship which could interfere with the exercise of their independent judgement. Hugo Deschampsneufs and David Horner were appointed at the 2012 Annual General Meeting for a term to expire at the next Annual General Meeting. All four non-executive Directors offer themselves for re-election at the forthcoming Annual General Meeting. 11 Athelney Trust plc CORPORATE GOVERNANCE STATEMENT (CONTINUED) Audit Committee The Audit Committee comprises Hugo Deschampsneufs and David Horner, with David Horner as Chairman. The Committee met once during the year ended 31 December 2012. Both committee members were present. It is intended that the Committee will meet at least once a year, to approve the Company’s Annual Report and Accounts. The primary responsibilities of the Audit Committee are: to review the effectiveness of the internal control environment of the Company and monitor adherence to best practice in corporate governance; to make recommendations to the Board in relation to the re-appointment of the Auditors and to approve their remuneration and terms of engagement; to review and monitor the Auditors’ independence and objectivity and the effectiveness of the audit process and to provide a forum through which the Company’s Auditors report to the Board. The Audit Committee also has responsibility for monitoring the integrity of the financial statements and accounting policies of the Company and for reviewing the Company’s financial reporting and internal control procedures. Committee members consider that individually and collectively they are appropriately experienced to fulfil the role required. The Audit Committee has direct access to the Company’s Auditors, Clement Keys LLP. A formal statement of independence is received from the external auditors each year. The Chairman of the Audit Committee will be present at the Annual General Meeting to deal with any questions relating to the accounts. Remuneration Committee The Remuneration Committee comprises Hugo Deschampsneufs and David Horner with David Horner as Chairman. The Committee will meet as necessary to determine and approve Directors’ 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 20 to 21 and in note 4 to the financial statements. The Committee met once during the year and both committee members were present at the meeting. Company Secretary The Company Secretary, John Girdlestone FCA, is responsible for ensuring that Board and Committee procedures are followed and that applicable regulations are complied with. 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 Director’s Training There is an agreed procedure for Directors to seek independent professional advice if necessary at the Company’s expense. 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. 12 Athelney Trust plc CORPORATE GOVERNANCE STATEMENT (CONTINUED) Institutional Investors – Use of Voting Rights The Investment Manager and Managing Director, Robin Boyle, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company’s voting rights. Going Concern After due consideration, the Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Internal Control Review The Board is responsible for establishing and maintaining the Company’s systems of internal control and for reviewing their effectiveness. 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. Internal Control Assessment Process The Directors acknowledge their responsibility for the Company’s system of internal controls and for reviewing its effectiveness on a regular basis. The system of internal controls is designed to manage rather than eliminate risk and can only provide reasonable but not absolute assurance against material misstatement or loss. This responsibility covers the key business, operational, compliance and financial risks facing the company. The procedures in place ensure that consideration is given regularly to the nature and extent of the risks facing the Company and that they are being actively monitored. Where changes in risk have been identified during the year they also provide a mechanism to assess whether further action is required to manage the risks identified. The Board confirms that these procedures have been in place throughout the Company’s financial year, are operating effectively and continue to be in place up to the date of approval of this Report. Internal Audit The company does not have an internal audit function. The day-to-day management functions are dealt with by the Managing Director, Robin Boyle, and the Company Secretary, John Girdlestone, where each is aware of the daily undertakings of the other. The Board as a whole receives regular monthly reports clearly setting out the transactions of that month. The Audit Committee carries out an annual review of the need for an internal audit function. The Committee continues to believe that the compliance and internal control systems and the internal audit function provided by the Investment Manager and Company Secretary give sufficient assurance that a sound system of internal control, which safeguards shareholders’ investment and the Company’s assets, is maintained. An internal audit function, specific to the company, is therefore considered unnecessary. Dialogue with Shareholders The Board place great importance on communication with shareholders and all Directors are available to enter into dialogue with shareholders. Major shareholders of the Company are offered the opportunity to meet with the independent non-executive Directors of the Board to ensure that their views are understood. The Annual General Meeting provides a forum for communication with all shareholders, who are encouraged to attend and vote. During the AGM, the Board, including the Investment Manager, are available to discuss issues affecting the Company and shareholders have the opportunity to address questions to them. 13 Athelney Trust plc CORPORATE GOVERNANCE STATEMENT (CONTINUED) The Annual and Half Yearly Reports of the Company are prepared by the Board and its advisers to present a full and readily understandable review of the Company’s performance. Copies are available for downloading from the Company’s website www.athelneytrust.co.uk and on request from the Company Secretary on 01326 378288. Copies of the Annual Report are mailed to shareholders who have requested paper copies. Voting Policy The Company has given discretionary voting powers to the Investment Manager, Robin Boyle. The Manager votes against resolutions he believes may damage shareholders’ rights or economic interests. Re-appointment of non-executive Directors at the AGM At the AGM the Chairman recommends the following non-executive Directors be proposed for re-election:- Hugo Deschampsneufs –non-executive Chairman David Horner – non-executive Director Jonathan Lancelot Addison - non-executive Director Dr Emmanuel Clive Pohl, alternate non-executive Director The above non-executive Directors should be re-elected for the following reason:- In each case they continue to be valued members of the board bringing fresh insight to the company using their respective knowledge and experience in the management of other investment companies, and by their actions demonstrate effective commitment to their roles. 6 March 2013 R.G. Boyle Managing Director 14 Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2012 Stock Treatt Chemicals Construction and materials Renew Holdings Electronic and electrical equipment Food and beverages General financial Healthcare equipment and services Industrial engineering Industrial transportation Insurance Media XP Power Ltd Greencore Group Wynnstay Group Albemarle & Bond Arbuthnot Banking Group Camellia Charles Taylor Jarvis Securities Park Group Randall & Quilter Investment Holdings S & U Consort Medical Goodwin Hill & Smith Slingsby (H.C) Vitec ACM Shipping Braemar Shipping Services Fisher (James) UK Mail Abbey Protection Chesnara Hansard Global Personal Group Holdings 4Imprint Chime Communications Haynes Publishing Group Huntsworth M&C Saatchi Plc Quarto Group Inc Com UTV Media Wilmington Group SECTOR £ 34,650 47,300 % 1.21% 1.65% 40,320 1.41% 107,320 3.75% Holding 9,000 55,000 Value (£) 34,650 47,300 4,000 32,500 17,000 15,000 4,500 600 25,000 32,500 40,320 32,988 74,332 32,155 34,638 58,822 42,063 55,169 160,000 101,200 40,000 8,000 42,300 73,760 440,107 15.40% 4,500 2,400 12,500 4,000 6,500 22,500 12,000 4,000 18,000 35,000 16,000 30,000 8,000 12,500 20,000 18,000 70,000 35,000 40,500 25,000 42,500 34,718 47,076 49,719 19,000 41,259 32,175 45,570 32,380 53,685 37,100 30,840 28,725 25,760 44,344 46,100 33,300 28,000 63,088 55,384 29,875 64,174 34,718 1.21% 157,054 5.49% 163,810 5.73% 122,425 4.28% 364,265 12.74% Real Estate - REITs Local Shopping REIT McKay Securities 70,000 22,500 16,975 30,206 Mucklow Group 9,000 31,950 Town Centre Securities 27,500 51,356 130,487 4.56% 15 Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2012 (CONTINUED) Stock Holding Value (£) SECTOR £ % Real Estate - Real Estate Investments & Services Retailers Support services Lok'n Store Group Mountview Estates Newriver Retail H & T Group Stanley Gibbons Begbies Traynor Vianet Group Communisis Fiberweb Interior Services Group Latham (James) Macfarlane Group Matchtech Nationwide Accident Repair Office 2 Office Paypoint RWS Holdings Smiths News St Ives Sweett Group 30,000 1,500 34,500 70,673 15,000 30,450 135,623 4.74% 140,928 4.93% 17,000 40,000 60,000 32,500 100,000 50,000 30,000 14,000 160,000 22,500 45,000 20,000 3,750 5,500 50,000 50,000 114,725 47,728 93,200 20,922 31,850 39,000 34,375 42,000 37,800 44,000 53,494 29,138 24,750 30,900 33,413 79,875 50,750 18,356 Technology software and services Phoenix IT 20,000 36,750 36,750 1.29% VP 21,500 73,798 644,421 22.53% Telecommunications KCOM Group 50,000 36,500 36,500 1.28% Travel and leisure Air Partner Cineworld GVC Holdings (trading had been suspended prior to the balance sheet date but was resumed on 28 January 2013) 18,000 25,000 54,855 65,250 30,000 68,100 Photo-Me 55,000 34,788 222,993 7.80% Portfolio Value Net Current Assets TOTAL VALUE Shares in issue £ £ £ 2,859,671 100% 96,357 2,956,028 1,983,081 Audited NAV 149.1p 16 Athelney Trust plc INVESTMENT AND PORTFOLIO ANALYSIS AT 31 DECEMBER 2012 (CONTINUED) Portfolio By Sectors 1.21% 1.65% 7.80% 1.41% Chemicals Food and beverages Industrial engineering Media Retailers Telecommunications Portfolio By Listing Electronic and electrical equipment Healthcare equipment and services Insurance Real Estate Investments & Services Technology software and services 3.75% 15.40% 1.21% 5.49% 5.73% 4.28% 1.28% 1.29% 22.53% 4.93% 4.74% 4.56% 12.74% Construction and materials General financial Industrial transportation Real Estate - REITs Support Services Travel and leisure 3% 39% 44% 14% Non Indexed Small Caps Fledgling AIM 17 REPORT OF THE DIRECTORS OF Athelney Trust plc The directors present their report and audited financial statements of the Company for the year ended 31 December 2012. This report also contains certain information required in accordance with s992 of the Companies Act 2006. Principal Activity and Business Review The principal activity of the Company is that of an investment trust. The investment objectives of the Company are to achieve long term capital growth while at the same time producing a progressive income return. Investments made by the Company are primarily in the equity securities of both unquoted and quoted UK companies, including smaller companies with a market capitalisation of below £50 million. During the period, the Company followed the normal activities of an investment trust. Details of these are given in the Chairman’s Statement and Business Review on pages 4 to 9. Current and Future Developments A review of the main features of the year and outlook is contained in the Chairman’s Statement and Business Review on pages 4 to 9. Environmental Issues The Board has taken steps to reduce any adverse impact on environmental issues and will continue to address this important matter. Social and Community Issues The Company has only one employee and, as far as the Board is aware, no issues exist in respect of social or community issues. Principal Risks and Risk Management The major risks associated with the Company are market and liquidity risk. The Company has established a framework for managing these risks. The Directors have guidelines for the management of investments and financial instruments. The Company’s assets consist mainly of listed securities and its principal risks are therefore market-related. The Company is also exposed to currency risk in respect of a small number of investments held in overseas markets. More detailed explanations of these risks and the way which they are managed are contained in note 13 to the accounts. Directors and Their Interests The directors who held office during the year and their interest in the ordinary shares of the Company are stated below: H.B. Deschampsneufs R.G. Boyle D.A. Horner 31 December 2012 78,038 448,970 20,000 1 January 2012 78,038 443,970 20,000 H.B. Deschampsneufs’ interest includes 19,163 (2011:19,163) shares held in his Self-Invested Personal Pension. R.G. Boyle’s interest includes 16,970 (2011:16,970) shares held in his Self-Invested Personal Pension. D.A. Horner’s interest includes 20,000 (2011:20,000) shares owned by a pension fund in which D.A. Horner has an interest. Dr. E.C. Pohl holds an interest of 5,000 shares in Global Masters Fund which itself holds 225,060 shares in the company and an effective 20% interest in Hyperion Asset Management, a company that manages portfolios for clients who have a controlling interest in Global Masters Fund. There have been no changes in the above Directors’ interests up to 28 February 2013. 18 REPORT OF THE DIRECTORS OF Athelney Trust plc (CONTINUED) Included within R.G. Boyle’s holding is an interest in Trehellas House Limited, a company which holds 391,600 (2011: 391,600) ordinary shares representing 19.75 per cent of the company’s share capital. R.G. Boyle has separately entered into an agreement with Hyperion Asset Management Limited giving Hyperion Asset Management Limited on behalf of its clients the ability to acquire such number of shares from Trehellas House Limited as shall when taken with their existing holding not exceed 29.9% of the issued equity share capital of the company. The price for any such sale and purchase has been agreed at the net tangible asset value of each share as determined by the most recent published statement. This agreement amounts to a right of first refusal only and there is no obligation on Trehellas House Limited to sell its shares at any particular time or, having determined to sell those shares, no obligation on Hyperion Asset Management Limited to buy. 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. Statement of Directors’ Responsibilities The Directors are responsible for preparing the Directors' Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the total return of the Company for that period. In preparing these Financial Statements, the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgments and accounting estimates that are reasonable and prudent; - state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. - The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements and other information included in annual reports may differ from legislation in other jurisdictions. Statement Under the Disclosure and Transparency Rules 4.1.12 The Directors confirm to the best of their knowledge: - the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the company; and - the Report of the Directors includes 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. 19 REPORT OF THE DIRECTORS OF Athelney Trust plc (CONTINUED) Capital Structure At 31 December 2012 the Company’s capital structure consisted of 1,983,081 Ordinary Shares of 25p each (2011: 1,983,081 Ordinary Shares of 25p each). Allotment of Ordinary Shares The Directors are seeking authority to allot further shares not to exceed 10% of the existing shareholding the Chairman’s letter in this respect can be found at page 40. This is subject to approval by the shareholders at the AGM on 9 April 2013. 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. Results and Dividends The return on ordinary revenue activities before dividends for the year is £107,956 (2011: £107,296) as detailed on page 26. It is recommended that a final dividend of 5p (2011: 4.95p) per ordinary share be paid. Significant Shareholders The Directors have been notified of the following major shareholdings in the Company that represent greater than 3% of the voting rights: Mr R.G. Boyle Global Masters Fund Mr G.W. & Mrs D.J. Whicheloe NS Salvesen and Salvesen Family Trust Mr H.B. Deschampsneufs Mrs E. Davison Mr D.C. & Mrs B.I. Mattey Ordinary Shares 448,970 225,060 114,000 87,500 78,038 75,000 60,000 % of issue 22.64 11.35 5.75 4.41 3.94 3.78 3.03 There have been no changes in the above major shareholdings in the company up to 28 February 2013. 20 REPORT OF THE DIRECTORS OF Athelney Trust plc (CONTINUED) Tax Status The Directors have considered the Close Company Tax Status of the Company and do not believe that the Company is a Close Company. Payment of Suppliers It is the Company’s policy to obtain the best possible terms for all business and, therefore, there is no consistent policy as to the terms used. The Company contracts the terms on which business will take place throughout the year with its suppliers. There are accrued expenses outstanding at the end of the year, all of which appear as creditors in the balance sheet. Disclosure of Information to Auditors Each of the persons who are directors at the time when the Report of the Directors is approved has confirmed that: - - so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. The above confirmation is given and should be interpreted in accordance with the provision of Section 418(2) of the Companies Act 2006. Auditors Clement Keys LLP have expressed their willingness to continue in office as Auditors and a resolution proposing that they be re-appointed and to authorise the Directors to determine their remuneration will be put to the Annual General Meeting. BY ORDER OF THE BOARD J. Girdlestone Secretary Waterside Court Falmouth Road Penryn Cornwall TR10 8AW 6 March 2013 21 Athelney Trust plc DIRECTORS’ REMUNERATION REPORT 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 Auditors’ opinion is included in their report on pages 24 and 25. Remuneration Committee The Company has a Remuneration Committee comprising Hugo Deschampsneufs and David Horner. David Horner chairs the meetings. The Committee considers and approves Directors’ remuneration. Policy on Directors’ Remuneration The Board’s policy is that remuneration of non-executive Directors should reflect the experience of the Board as a whole and is determined with reference to comparable organisations and appointments. It is intended that this policy will continue for the year ended 31 December 2013. The remuneration of the non-executive Directors is determined within the limits set out in the Company’s Articles of Association. Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. Directors’ Service Contracts All the Directors have a service contract with the Company. The terms of their appointment provide that a Director shall retire and be subject to re-election at the first annual general meeting after their appointment and at least every three years after that. The Managing Director Robin Boyle has a service contract commencing 21 August 2008 which provides for retirement by the Company giving one year’s written notice and by Robin Boyle giving six months’ written notice. The service contracts for the four non-executive Directors, Hugo Deschampsneufs and David Horner, Jonathan Addison and Manny Pohl provide for their contract to continue until the Annual General Meeting following the appointment and for renewal at each subsequent Annual General Meeting. Their service contracts commenced 21 August 2008 and 19 August 2008 and 28 June 2010 (for Jonathan Addison and Manny Pohl) respectively. Company Performance The graph below compares, for the five financial years ended 31 December 2012, the total return (assuming all dividends are reinvested) to ordinary shareholders compared to the total shareholder return on a notional investment made up of shares in the component parts of the AIM All-Share Index and Small Caps Index. The comparison is made between AIM All-Share and Small Caps as the majority of investment holdings by the Company are a constituent of one or the other of these two indices. Athe lne y's Share holde r Re turn and NAV against Be nchmarks of AIM All-Share and Small Caps (figure s have be e n re base d to 100 at 31 De cembe r 2005) 150.00 140.00 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 *Assuming all dividends are reinvested Past Performance is no guarantee of future performance. NAV Shareholder Return * AIM All Share Ye ar End Small Caps 22 Athelney Trust plc DIRECTORS’ REMUNERATION REPORT (CONTINUED) Directors’ Remuneration for the Year (audited information) The Directors who served in the year received the following remuneration in the form of salaries: Hugo Deschampsneufs (Chairman, non-executive) Robin Boyle (Managing Director) David Horner (Non-executive) Jonathan Addison (Non-executive) Manny Pohl (alternate Non-executive) 2012 £ 10,000 45,000 7,500 - - 62,500 2011 £ 10,000 45,000 7,500 - - 62,500 Approval The Directors’ Remuneration Report was approved by the Board on 6 March 2013. J. Girdlestone Company Secretary 23 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ATHELNEY TRUST PLC We have audited the financial statements of Athelney Trust plc for the year ended 31 December 2012, which comprise the Income Statement, the Reconciliation of Movements in Shareholders’ Funds, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors’ Responsibilities set out on page 19, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the Financial Statements: • • • give a true and fair view of the state of the Company’s affairs as at 31 December 2012 and of its net return and cash flows for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • • • 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 Report of the Directors for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and the information given in the Corporate Governance Statement set out on pages 10 to 14 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements. 24 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ATHELNEY TRUST PLC (CONTINUED) Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: • • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit; or • a Corporate Governance Statement has not been prepared by the Company. Under the Listing Rules we are required to review: • • • the Directors’ Statement, set out on page 13, in relation to going concern; the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and certain elements of the report to the shareholders by the Board on Directors’ remuneration. Simon Atkins FCA Senior Statutory Auditor for and on behalf of Clement Keys LLP Chartered Accountants Statutory Auditors 8 Calthorpe Road Edgbaston Birmingham B15 1QT 6 March 2013 25 Athelney Trust plc INCOME STATEMENT (INCORPORATING THE REVENUE ACCOUNT) For the Year Ended 31 December 2012 For the Year Ended 31 December 2011 Note Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gains/(losses) on investments held at fair value Income from investments Investment Management expenses Other expenses 8 2 3 3 Net return/(loss) on ordinary activities before taxation - 601,046 601,046 - (293,815) (293,815) 141,049 - 141,049 139,558 - 139,558 (5,774) (52,847) (58,621) (5,785) (53,169) (58,954) (27,319) (39,658) (66,977) (26,477) (41,610) (68,087) 107,956 508,541 616,497 107,296 (388,594) (281,298) Taxation 5 - - - - - - Net return/(loss) on ordinary activities after taxation 6 107,956 508,541 616,497 107,296 (388,594) (281,298) Net return/(loss) per ordinary share 6 5.4p 25.6p 31.1p 5.4p (19.5p) (14.1p) Dividend per ordinary share paid during the year 7 4.95p 4.9p The total column of this statement is the profit and loss account for the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the above financial years. A statement of movements of reserves is given in note 12. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above Statement. The notes on pages 30 to 37 form part of these financial statements. 26 Athelney Trust plc RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS Called-up Share Share Capital Premium £ £ Capital reserve realised £ Capital Total reserve Revenue Shareholders’ Funds £ reserve £ unrealised £ Balance brought forward at 1 January 2011 Transfer between capital reserves Net profits on realisation of investments Decrease in unrealised appreciation Expenses allocated to capital Profit for the year Dividend paid in year Shareholders’ Funds at 31 December 2011 Balance brought forward at 1 January 2012 Net profits on realisation of investments Increase in unrealised appreciation Expenses allocated to capital Profit for the year Dividend paid in year Shareholders’ Funds at 31 December 2012 495,770 545,281 620,251 951,712 203,148 2,816,162 - - - - - - - - - - - - (23,568) 23,568 158,922 - - (452,737) - - - (94,779) - - - - - - 107,296 (97,171) - 158,922 (452,737) (94,779) 107,296 (97,171) 495,770 545,281 660,826 522,543 213,273 2,437,693 495,770 545,281 660,826 522,543 213,273 2,437,693 - - - - - - - - - - 183,707 - - 417,339 - - (92,505) - - - - - 107,956 (98,162) - 183,707 417,339 (92,505) 107,956 (98,162) 495,770 545,281 752,028 939,882 223,067 2,956,028 The notes on pages 30 to 37 form part of these financial statements. 27 Athelney Trust plc BALANCE SHEET AS AT 31 DECEMBER 2012 Company Number: 02933559 Note Fixed assets Investments held at fair value through profit and loss Current assets Debtors Cash at bank and in hand 8 9 Creditors: amounts falling due within one year 10 Net current assets 2012 £ 2011 £ 2,859,671 2,375,521 90,209 21,369 111,578 (15,221) 96,357 57,349 19,954 77,303 (15,131) 62,172 Total assets less current liabilities 2,956,028 2,437,693 Provisions for liabilities and charges - - Net assets 2,956,028 2,437,693 Capital and reserves Called up share capital Share premium account Other reserves (non distributable) Capital reserve - realised Capital reserve - unrealised Revenue reserve (distributable) Shareholders' funds - all equity Net Asset Value per share 11 12 12 12 12 14 495,770 545,281 752,028 939,882 223,067 495,770 545,281 660,826 522,543 213,273 2,956,028 2,437,693 149.1p 123p Approved and authorised for issue by the Board of Directors on 6 March 2013. ………………………………. R.G. Boyle Director The notes on pages 30 to 37 form part of these financial statements. 28  Athelney Trust plc CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012 2012 £ £ 2011 £ £ Net cash outflow from operating activities (17,319) (12,466) Taxation Corporation tax paid Capital Expenditure and Financial Investment Purchases of investments Sales of investments - - (308,880) 425,776 (550,494) 647,844 Net cash inflow from Capital Expenditure and Financial Investment Equity dividends paid 116,896 (98,162) Increase/(decrease) in cash in the year 1,415 97,350 (97,171) (12,287) £ 107,296 (25,104) 121 (53,169) (41,610) (12,466) £ 107,956 (32,860) 90 (52,847) (39,658) (17,319) Net funds at 31.12.2011 £ 19,954 Cashflow £ 1,415 Net funds at 31.12.2012 £ 21,369 Reconciliation of operating net revenue to net cash outflow from operating activities Revenue on ordinary activities before taxation Increase in debtors Increase in creditors Investment management expenses charged to capital Other expenses charged to capital Net Cash outflow from operating activities Reconciliation of net cashflow to movement in net funds Cash at bank and in hand The notes on pages 30 to 37 form part of these financial statements. 29 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 1. Accounting Policies 1.1 Basis of Preparation of Financial Statements The financial statements are prepared on a going concern basis under the historical cost convention as modified by the revaluation of investments held at fair value. The financial statements are prepared in accordance with the Companies Act 2006, applicable UK accounting standards and the provisions of the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (SORP) issued by the A.I.C. in January 2009. 1.2 Income Income from investments including taxes deducted at source is recognised when the right to the return is established (normally the ex-dividend date). UK dividend income is reported net of tax credits in accordance with FRS 16 “Current Tax”. Interest is dealt with on an accruals basis. 1.3 Investment Management Expenses Of the two directors involved in investment management, 10% of their salaries have been charged to revenue and the other 90% to capital. All other investment management expenses have been charged to capital. The Board propose continuing this basis for future years. 1.4 Other Expenses Expenses (including VAT) and interest payable are dealt with on an accruals basis and charged through the Revenue and Capital Accounts in an allocation that the Board consider to be a fair distribution of the costs incurred. 1.5 Investments Listed investments comprise those listed on the Official List of the London Stock Exchange. Profits or losses on sales of investments are taken to realised capital reserve. Any unrealised appreciation or depreciation is taken to unrealised capital reserve. Investments have been classified as “fair value through profit and loss” upon initial recognition. Subsequent to initial recognition, investments are measured at fair value with changes in fair value recognised in the Income Statement. Securities of companies quoted on a recognised stock exchange are valued by reference to their quoted bid prices at the close of the year. 1.6 Taxation The tax effect of different items of income and expenses is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company’s effective rate of tax for the year. 30 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 1. Accounting Policies (continued) 1.7 Deferred Taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet date. Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse. Deferred tax assets and liabilities are not discounted. 1.8 Capital Reserves Capital Reserve – Realised Gains and losses on realisation of fixed asset investments are dealt with in this reserve. Capital Reserve – Unrealised Increases and decreases in the valuations of fixed asset investments are dealt with in this reserve. 1.9 Dividends In accordance with FRS 21 “Events after the Balance Sheet Date”, dividends are included in the financial statements in the year in which they are paid. 1.10 Share Issue Expenses The costs associated with issuing shares are written off against any premium arising on the issue of Share Capital. 2. Income Income from investments UK dividend income Bank interest Total income UK dividend income UK Main Market listed investments UK AIM listed investments 2012 £ 141,018 31 141,049 2012 £ 94,597 46,421 141,018 2011 £ 139,493 65 139,558 2011 £ 85,531 53,962 139,493 31 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 3. Return on Ordinary Activities Before Taxation 2012 £ 2011 £ The following amounts (inclusive of VAT) are included within investment management and other expenses: Directors’ remuneration: - Services as a director - Otherwise in connection with management Auditors’ remuneration: - Audit Services - Statutory audit - Audit Services - Statutory audit movement on accruals from previous years - Audit Services - Audit related regulatory reporting Miscellaneous expenses: - Other wages and salaries - PR and communications - Stock Exchange subscription - Sundry investment management and other expenses 4. Employees Costs in respect of Directors: Wages and salaries Social security costs Costs in respect of administrator: Wages and salaries Social security costs Total: Wages and salaries Social security costs Average number of employees: Chairman Investment Administration 32 17,500 45,000 10,260 100 1,050 31,307 5,847 7,638 6,896 125,598 2012 £ 62,500 5,583 68,083 23,500 2,224 25,724 86,000 7,807 93,807 1 2 1 4 17,500 45,000 10,200 210 1,050 30,365 6,230 6,163 10,323 127,041 2011 £ 62,500 5,729 68,229 22,500 2,136 24,636 85,000 7,865 92,865 1 2 1 4 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 5. Taxation (i) On the basis of these financial statements no provision has been made for corporation tax (2011: Nil). (ii) Factors affecting the tax charge for the year The tax charge for the period is the same as (2011:higher than) the average small company rate of corporation tax in the UK 20 per cent. The differences are explained below: 2012 £ 2011 £ Total return/(loss) on ordinary activities before tax 616,497 (281,298) Total return on ordinary activities multiplied by the average small company rate of corporation tax 20% (2011: 20.25%) 123,299 (56,963) Effects of: UK dividend income not taxable Revaluation of shares not taxable Capital gains not taxable Unrelieved management expenses Current tax charge for the year (24,072) (83,468) (36,741) 20,982 - (24,151) 91,679 (32,182) 21,617 - The Company has unrelieved excess revenue management expenses of £67,123 at 31 December 2012 (2011: £43,155) and £102,597 (2011: £102,597) of capital losses for Corporation Tax purposes and which are available to be carried forward to future years. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised. For the year ended 31 December 2011, the Company received approval from HM Revenue and Customs under Section 1158 of the Corporation Tax Act 2010, therefore the Company was not liable to Corporation Tax on any realised investment gains for 2011. The Directors intend to continue to meet the conditions required to obtain approval and therefore no deferred tax has been provided on any capital gains or losses arising on the revaluation or disposal of investments. 6. Return per Ordinary Share The calculation of earnings per share has been performed in accordance with FRS 22 “Earnings Per Share”. Attributable return/(loss) on ordinary activities after taxation Weighted average number of shares £ Revenue 2012 £ Capital £ Total £ Revenue 2011 £ Capital £ Total 107,956 508,541 616,497 107,296 (388,594) (281,298) 1,983,081 1,983,081 Return per ordinary share 5.4p 25.6p 31.1p 5.4p (19.5p) (14.1p) 33 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 7. Dividend Final dividend in respect of 2011 of 4.95p (2011: an interim dividend of 4.9p was paid in respect of 2010 ) per share 2012 £ 98,162 2011 £ 97,171 Set out below is the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered. It is recommended that a final dividend of 5p (2011: 4.95p) per ordinary share be paid amounting to a total of £99,154. For the year 2011, a final dividend of 4.95p was paid on 24 April 2012 amounting to a total of £98,162. Revenue available for distribution Final dividend in respect of financial year ended 31 December 2012 Undistributed Revenue Reserve 8. Investments Movements in year Valuation at beginning of year Purchases at cost Sales - proceeds - realised gains on sales Increase/(decrease) in unrealised appreciation Valuation at end of year Book cost at end of year Unrealised appreciation at the end of the year UK Main Market listed investments UK AIM listed investments 34 2012 £ 107,956 (99,154) 8,802 2012 £ 2,375,521 308,880 (425,776) 183,707 417,339 2,859,671 1,919,789 939,882 2,859,671 1,754,504 1,105,167 2,859,671 2011 £ 107,296 (98,162) 9,134 2011 £ 2,766,686 550,494 (647,844) 158,922 (452,737) 2,375,521 1,852,978 522,543 2,375,521 1,444,747 930,774 2,375,521 Athelney Trust plc NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 8. Investments (continued) Gains/(losses) on investments Realised gains on sales (Increase)/decrease in unrealised appreciation 2012 £ 183,707 417,339 601,046 2011 £ 158,922 (452,737) (293,815) The purchase costs and sales proceeds above include transaction costs of £2,305 (2011: £5,355) and £1,719 (2011: £3,178) respectively. 9. Debtors Investment transaction debtors Other debtors 10. Creditors: amounts falling due within one year Social security and other taxes Other creditors Accruals and deferred income 11. Called Up Share Capital Authorised 10,000,000 Ordinary Shares of 25p Allotted, called up and fully paid 1,983,081 Ordinary Shares of 25p (2011: 1,983,081 Ordinary Shares of 25p) 2012 £ 76,299 13,910 90,209 2012 £ 2,975 172 12,074 15,221 2012 £ 2011 £ 41,356 15,993 57,349 2011 £ 3,049 930 11,152 15,131 2011 £ 2,500,000 2,500,000 495,770 495,770 35 Athelney Trust plc FOR THE YEAR ENDED 31 DECEMBER 2012 NOTES TO THE FINANCIAL STATEMENTS 12. Reserves Share premium account £ 545,281 - - - - - 545,281 2012 Capital reserve realised £ 660,826 183,707 - (92,505) - - 752,028 Capital reserve unrealised £ 522,543 - 417,339 - - - 939,882 Revenue reserve £ 213,273 - - - 107,956 (98,162) 223,067 Balance at 1 January 2012 Net gains on realisation of investments Increase in unrealised appreciation Expenses allocated to capital Profit for the year Dividend paid in year Balance at 31 December 2012 13. Financial Instruments The Company’s financial instruments comprise equity investments, cash balances and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement. Short term debtors and creditors are excluded from disclosure. Fixed asset investments (see note 8) are valued at market bid price where available which equates to their fair values. The fair values of all other assets and liabilities are represented by their carrying values in the balance sheet. The major risks associated with the Company are market and liquidity risk. The Company has established a framework for managing these risks. The directors have guidelines for the management of investments and financial instruments. Market Risk Market risk arises from changes in interest rates, valuations awarded to equities, movements in prices and the liquidity of financial instruments. At the end of the year the Company’s portfolio was invested in UK securities with the exception of 5.73 per cent, which was invested in overseas securities. Liquidity Risk Liquidity Risk is the risk that the Company may have difficulty in meeting obligations associated with financial liabilities. The Company has no borrowings; therefore there is no exposure to interest rate changes. The company is able to reposition its investment portfolio when required so as to accommodate liquidity needs. 36 Athelney Trust plc FOR THE YEAR ENDED 31 DECEMBER 2012 NOTES TO THE FINANCIAL STATEMENTS 14. Net Asset Value Per Share The net asset value per share is based on net assets of £2,956,028 (2011: £2,437,693) divided by 1,983,081 (2011: 1,983,081) ordinary shares in issue at the year end. Net asset value 2012 2011 149.1p 123p 37 Athelney Trust plc OFFICERS AND FINANCIAL ADVISERS H.B. Deschampsneufs (Chairman) Email: hugo@athelneytrust.co.uk Email: robin@athelneytrust.co.uk R.G. Boyle (Managing Director) Email: dah@chelvertonam.com D.A. Horner Email: jladdison@bigpond.com J.L. Addison Email: manny.pohl@ecpohl.com Dr. E.C. Pohl (Alternate Director) J. Girdlestone Waterside Court Falmouth Road Penryn Cornwall, TR10 8AW Waterside Court Falmouth Road Penryn Cornwall, TR10 8AW 02933559 (Registered in England) McClure Naismith LLP 49 Queen Street Edinburgh EH12 3NH Speirs & Jeffrey Limited 36 Renfield Street Glasgow, G2 1NA Clement Keys LLP 8 Calthorpe Road Edgbaston Birmingham, B15 1QT HSBC Bank Plc Market Street Falmouth Cornwall, TR11 3AA Share Registrars Limited Suite E First Floor 9 Lion & Lamb Yard Farnham Surrey, GU9 7LL Email: john@athelneytrust.co.uk Tel: 01326 378 288 Website: www.athelneytrust.co.uk Email: info@athelneytrust.co.uk Tel: 01326 378 288 Email: awilliamson@mcclurenaismith.com Tel: 0131 272 8378 Email: graeme.dickie@speirsjeffrey.co.uk Tel: 0141 248 4311 Email: simon.atkins@clementkeys.co.uk Tel: 0121 456 4456 Email: peter@shareregistrars.uk.com Tel: 01252 821 390 City Road Communications Limited 42-44 Carter Lane London, EC4V 5EA Email: paulquade@cityroad.uk.com Tel: 0207 248 8010 Directors: Secretary: Registered Office: Company Number: Solicitor: Stockbroker: Auditors: Banker: Registrar: Public Relations Consultants: 38 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the content or action you should take, you should immediately consult your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000. If you have sold or otherwise transferred all your shares in Athelney Trust plc please send this document, together with the accompanying Form of Proxy to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. ____________________________________________________________________________________ ATHELNEY TRUST PLC NOTICE OF ANNUAL GENERAL MEETING Notice of the Annual General Meeting to be held at the offices of McClure Naismith LLP, Equitable House, 47 King William Street, London EC4R 9AF on 9 April 2013 at 4.30pm is set out at the end of this document. The accompanying Form of Proxy for use at the Annual General Meeting should be completed and returned and to be valid to reach John Girdlestone, C/O Athelney Trust plc, Waterside Court, Falmouth Road, Penryn, Cornwall TR10 8AW as soon as possible but, in any event so as to arrive not later than 48 hours prior to the meeting time being not later than 4.30pm on 7 April 2013. 39 Letter from the Chairman Athelney Trust PLC (Incorporated and registered in England and Wales with No. 02933559) Directors H. B. Deschampsneufs R.G. Boyle D.A. Horner J.L. Addison Dr E.C. Pohl Registered office: Waterside Court Falmouth Road Penryn Cornwall TR10 8AW To the holders of ordinary shares of 25p each (“Shares”) in the capital of Athelney Trust plc (“Company”). 6 March 2013 Dear Shareholder, ANNUAL GENERAL MEETING APPROVAL OF ANNUAL REPORT AND ACCOUNTS AND OTHER RESOLUTIONS Introduction The Annual General Meeting (“AGM”) of the Company is to be held on 9 April 2013 at 4.30pm at the offices of McClure Naismith LLP, Equitable House, 47 King William Street, London EC4R 9AF. A copy of the notice convening the AGM (the “Notice”) is set out at the end of this letter. Your full attention is directed to the full terms of the Notice. As you will see from the Notice, there are those additional items of special business to be considered at Resolutions 10, 11 & 12 and I am writing to you to explain its purpose. In addition, the normal business of the Annual General Meeting including appointment of directors and the approval of the Annual Report and Accounts for the year ended 31 December 2012 will be undertaken at this meeting. Reference is made to those resolutions at the end of this letter. A copy of the Annual Report and Accounts is enclosed. Proposal It is the belief of the directors of the Company (the “Directors” or the “Board”) that the Company would benefit from the directors being authorised to allot further shares in the Company so that the Company may make offers and enter into agreements during the relevant period which would, or might, require shares to be allotted or rights to subscribe for, or convert other securities into, shares to be granted after the authority ends. The directors further believe that the statutory pre-emption rights contained in the Companies Act be disapplied and that the Company be allowed to purchase its own shares. Resolution 10 proposes as follows: The authority given to the Directors to allot further shares or to grant rights to subscribe for, or to convert securities into ordinary shares in the capital of the Company requires the prior authorisation of the shareholders in general meeting under section 551 Companies Act 2006. Upon the passing of the Resolution 10, the Directors will have the necessary authority until the date of the next annual general meeting or, 9 April 2014 if earlier, to allot and/or grant equity securities (as defined in section 560(1) of the Act), up to an aggregate nominal amount of £49,577. In addition, upon the passing of Resolution 10, (pursuant to paragraph (ii) of Resolution 10) the Directors will have authority, until the date of the next annual general meeting of the Company or 9 April 2014 if earlier, to allot and/or grant equity securities (as defined in section 560(1) of the Act) in connection with a rights issue in favour of Shareholders up to an aggregate nominal amount equal to £49,577 as reduced by the aggregate nominal amount of any shares issued under paragraph (a)(i) of Resolution 10. 40 The Directors will continue to seek to renew this authority at each annual general meeting in accordance with current best practice. This limited authority will enable the Directors to issue shares when they believe it is in the interests of the Company to do so. While the Company would always consider from time to time the best manner of financing the Company, there is no present intention of issuing ordinary shares pursuant to Resolution 10. Resolution 11 proposes as follows: If the Directors wish to exercise the authority under Resolution 10 and offer Shares (or sell any shares which the Company may purchase and elect to hold as treasury shares) for cash, the Companies Act 2006 requires that unless shareholders have given specific authority for the waiver of their statutory pre-emption rights, the new shares must be offered first to existing shareholders in proportion to their existing shareholdings. Resolution 11 empowers the Directors until the date of the next annual general meeting of the Company or, 9 April 2014 if earlier, to allot and/grant equity securities for cash (or transfer shares which are from time to time held by the Company in treasury) (i) (a) by way of a rights issue (subject to certain exclusions), or (b) by way of an open offer or other offer of securities (not being a rights issue) in favour of existing shareholders in proportion to their shareholdings (subject to certain exclusions) or (ii) otherwise than pursuant to (i) up to an aggregate nominal value of £49,577. The Directors will seek to renew such authority and power at successive annual general meetings. This limited authority will enable the Directors to issue shares when they believe it is in the interests of the Company to do so. As at 25 February 2013 (being the last practicable date prior to publication of this document), the Company held no shares in treasury. Resolution 12 proposes as follows: That authority be granted to the directors to make market purchases (as defined in section 693 Companies Act 2006) of ordinary shares of 25p in the capital of the Company. In this case the authority contained in the resolution will be limited to a maximum number of ordinary shares of 25p each equivalent to 10 per cent of the issued ordinary shares of the Company at a minimum price of 25 pence per share and a maximum price (exclusive of expenses) being an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share of the Company (as derived from the Daily Official List of London Stock Exchange plc) for the five trading days immediately preceding the day on which the share is contracted to be purchased. This authority will expire at the Annual General Meeting for 2014 or on 9 April 2014 if sooner. Other resolutions The other resolutions proposed to be taken at the AGM are set out below and constitute the normal annual business of the meeting. Resolutions 1 to 9 relate to the receiving of the report and accounts; the declaration of a dividend; the approval of the report of the remuneration committee; the re-election of the five directors who retire by rotation under the articles of association; and the re-appointment of the auditors and approval of authority to set their remuneration. Form of proxy and meeting arrangements A form of proxy is enclosed for you to complete according to the instructions given in the Notice and on the proxy form. The completed form should be sent to John Girdlestone, C/O Athelney Trust plc, Waterside Court, Falmouth Road, Penryn, Cornwall TR10 8AW to be received not later than 48 hours before the start of the meeting being not later than 4.30pm on 7 April 2013. Appointment of a proxy will not prevent you from attending and voting at the meeting if you subsequently find that you are able to do so. We would very much welcome you to the meeting, if you can attend, where there will be an opportunity for you to ask questions relating to the business of the meeting. 41 Recommendation I consider that all resolutions in the Notice are in the best interests of the Company and shareholders as a whole and I recommend that you vote in favour of them. Yours sincerely, Hugo Deschampsneufs Chairman 42 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of Athelney Trust plc “the Company” will be held at the offices of McClure Naismith LLP, 4th Floor, Equitable House, 47 King William Street, London, EC4R 9AF on 9 April 2013 at 4.30 pm to consider the following Ordinary and Special business, of which Resolutions 1 to 9 will be proposed as Ordinary Resolutions and Resolutions 10 to 12 will be proposed as Special Resolutions: ORDINARY BUSINESS 1 2 3 4 5 6 7 8 9 To receive and adopt the Company’s Accounts for the year ended 31 December 2012. To declare a final dividend of 5p per ordinary share. It is intended that dividend cheques in respect of the dividend will be posted on Friday 12 April 2013 to all shareholders on the register of members at close of business on 21 March 2013. To approve the Director’s Remuneration Report for the year ended 31 December 2012. To re-elect R.G. Boyle as a Director of the Company until the date of the next Annual General Meeting. To re–elect H. B. Deschampsneufs as a Director of the Company until the date of the next Annual General Meeting. To re-elect D.A. Horner as a Director of the Company until the date of the next Annual General Meeting. To re-elect J.L. Addison as a Director of the Company until the date of the next Annual General Meeting. To re-elect Dr E.C. Pohl as a Director of the Company until the date of the next Annual General Meeting. To re-appoint Clement Keys LLP as auditors to the Company and to authorise the Directors to fix their remuneration. SPECIAL BUSINESS 10 Directors’ authority to allot shares To resolve that the directors be generally and unconditionally authorised pursuant to and in accordance with section 551 of the Companies Act 2006 to exercise all the powers of the Company to allot shares or grant rights to subscribe for or to convert any security into shares: (i) up to an aggregate nominal amount of £49,577; and (ii) comprising equity securities (as defined in section 560(1) of the Companies Act 2006) up to a further nominal amount of £49,577 (such amount to be reduced by the aggregate nominal amount of shares allotted or rights to subscribe for or to convert any security into shares allotted or rights to subscribe for or to convert any security into shares in the Company granted under paragraph (i) above) in connection with an offer by way of a rights issue; such authorities to apply in substitution for all previous authorities pursuant to section 551 of the Companies Act 2006 and to expire at the conclusion of the next annual general meeting or on 9 April 2014, whichever is the earlier but, in each case, so that the Company may make offers and enter into agreements during the relevant period which would, or might, require shares to be allotted or rights to subscribe for, or convert other securities into, shares to be granted after the authority ends. For the purposes of this resolution “rights issue” means an offer to: (a) ordinary shareholders in proportion (or as near as may be practicable) to their existing holdings; and 43 (b) people who are holders of other equity securities if this is required by the rights of those securities or, if the directors consider it necessary, as permitted by the rights of those securities; to subscribe for further securities by means of the issue of a renounceable letter (or other negotiable document) which may be traded for a period before payment for the securities is due, but subject in both cases to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory. 11 Limited disapplication of pre-emption rights That, subject to the passing of Resolution 10 above, the directors be empowered to allot equity securities (as defined in section 560(1) of the Companies Act 2006) wholly for cash: (i) pursuant to the authority given by paragraph (i) of Resolution 10 above or where the allotment constitutes an allotment of equity securities by virtue of section 560(3) of the Companies Act 2006 in each case: (a) (b) in connection with a pre-emptive offer; and otherwise than in connection with a pre-emptive offer, up to an aggregate nominal amount of £49,577; and (ii) pursuant to the authority given by paragraph (ii) of Resolution 6 above in connection with a rights issue, as if section 561(1) of the Companies Act 2006 did not apply to any such allotment; such power to expire at the conclusion of the next annual general meeting or on 9 April 2014, whichever is the earlier, but so that the Company may make offers and enter into agreements during this period which would, or might, require equity securities to be allotted after the power ends and the directors may allot equity securities under any such offer or agreement as if the power had not ended. For the purposes of this resolution: (a) (b) (c) (d) “rights issue” has the same meaning as in Resolution 10 above; “pre-emptive offer” means an offer of equity securities open for acceptance for a period fixed by the directors to (a) holders (other than the Company) on the register on a record date fixed by the directors of ordinary shares in proportion to their respective holdings and (b) other persons so entitled by virtue of the rights attaching to any other equity securities held by them, but subject in both cases to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory; references to an allotment of equity securities shall include a sale of treasury shares; and the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for or convert any securities into shares of the Company, the nominal amount of such shares which may be allotted pursuant to such rights. 12 Authority to purchase ordinary shares That the Company be and is hereby generally and unconditionally authorised for the purposes of section 701 of the Companies Act 2006 to make market purchases (within the meaning of section 693 of the Companies Act 2006) of ordinary shares of 25p each in the capital of the Company and where such shares are held in treasury, the Company may use them for the purposes of its employees’ share plans, provided that: (a) the maximum aggregate number of ordinary shares authorised to be purchased shall be such amount as represents 10 per cent of the Company’s issued share capital from time to time; 44 (b) (c) (d) (e) the minimum price which may be paid for each ordinary share shall be 25p; the maximum price, exclusive of expenses, which may be paid for each ordinary share shall be an amount equal to the higher of (a) 105 per cent of the average closing price of the Company’s ordinary shares as derived from the London Stock Exchange Daily Official List for the five London business days immediately preceding the day on which such share is contracted to be purchased or (b) the higher of the price of the last independent trade and the highest current bid as stipulated by Article 5(1) of the Commission Regulation (EC) 22 December 2003 implementing the Market Abuse Directive as regards exemptions for buy-back programmes and stabilisation of financial instruments (No 2273/2003); this authority shall expire at the conclusion of the next annual general meeting or on 9 April 2014 whichever is the earlier, unless such authority is renewed before then; and the Company may make a contract to purchase its ordinary shares under this authority before its expiry which would or might be executed wholly or partly after the expiry, and may make a purchase of its ordinary shares under that contract. Dated 6 March 2013 By Order of the Board John Girdlestone Company Secretary Registered office: Waterside Court Falmouth Road Penryn Cornwall TR10 8AW Notes: 1. 2. 3. 4. 5. A member entitled to attend and vote at the above Meeting is entitled to appoint one or more proxies to attend and vote on his or her behalf. A proxy need not be a member of the Company. Completion of a proxy will not prevent members from attending and voting in person if they so wish. The Company specifies that for a member to be entitled to attend and vote at the meeting (and for the determination by the Company of the number of votes they may cast) they must be entered on the Company’s register of members by 48 hours before meeting (“the Specified Time”). Changes to entries on the register after the Specified Time will be disregarded in determining the rights of any person to attend or vote at the meeting. Copies of all directors’ service contracts of more than one year’s duration will be available for inspection at the Registered Office during normal business hours on weekdays from the date of this notice to the date of the meeting convened by this notice and at the meeting itself for at least 15 minutes prior to and during the meeting. At the date of this Notice there were no directors’ service contracts of more than one year’s duration. The register of directors’ interests will be produced at the commencement of the meeting and will remain open and accessible during the continuance of the meeting to any person attending the meeting. 45 ATHELNEY TRUST PLC Company Number 02933559 Form of Proxy for use at the Annual General Meeting to be held on 9 April 2013 at the offices of McClure Naismith LLP Equitable House, 47 King William Street, London EC4R 9AF in full) (name I/We of ......................................................................................................hereby appoint the Chairman of the Meeting or failing him ..........................................of ................................................................................... to act as my/our proxy to attend, speak and vote at the Annual General Meeting of the Company to be held on 9 April 2013 and at any adjournment thereof. .................................................................(IN CAPITALS) BLOCK I/We direct my/our proxy to vote on the following resolutions as I/we have indicated by marking the appropriate box with an “X”. If no indication is given below, my/our proxy will vote or abstain from voting at his or her discretion. RESOLUTIONS FOR AGAINST ABSTAIN DISCRETIONARY 1 2 3 4 5 6 7 8 9 To receive and adopt the Company’s Accounts for the year ending 31 December 2012. To declare a final dividend of 5p per ordinary share. To approve the Director’s Remuneration Report for the year ended 31 December 2012. To re-elect R.G Boyle as a Director until the date of the next Annual General Meeting. To re–elect H.B Deschampneufs as a Director until the date of the next Annual General Meeting (see comments on page 14). To re-elect D.A Horner as a Director until the date of the next Annual General Meeting (see comments on page 14). To re-elect J.L Addison as a Director until the date of the next Annual General Meeting (see comments on page 14). To re-elect Dr E. C. Pohl as a Director until the date of the next Annual General Meeting (see comments on page 14). To re-appoint Clement Keys LLP as the Auditors and authorise the Directors to fix their remuneration. 10 To resolve that the directors be generally and unconditionally authorised to allot shares. 11 Limited disapplication of Pre-emption rights. 12 To Authorise purchase of own shares. Your attention is drawn to the notes overleaf. Signature(s)...................................................... Dated............................................ 46 Notes: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the Company's register of members at 4.30 pm on 7 April 2013; or, if this Meeting is adjourned, at 6.00 pm on the day two days prior to the adjourned meeting, shall be entitled to attend and vote at the Meeting. As a member of the Company you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at a general meeting of the Company. You can only appoint a proxy using the procedures set out in these notes. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy please contact the Company Secretary, John Girdlestone. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated. A proxy does not need to be a member of the Company but must attend the meeting to represent you. To appoint as your proxy a person other than the Chairman of the meeting, insert their full name in the box. If you sign and return this proxy form with no name inserted in the box, the Chairman of the meeting will be deemed to be your proxy. Where you appoint as your proxy someone other than the Chairman, you are responsible for ensuring that they attend the meeting and are aware of your voting intentions. In order to facilitate voting by corporate representatives at the Meeting, arrangements will be put in place at the Meeting so that: (i) (ii) if a corporate member has appointed the Chairman of the Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all the other corporate representatives for that member at the Meeting, then, on a poll, those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and if more than one corporate representative for the same corporate member attends the Meeting but the corporate member has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. All joint holders should sign this form. In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority is determined by the order in which the names stand in the Register of Members in respect of the joint holding. In the case of a corporation this proxy must be given under its Common Seal or signed on its behalf by an attorney or officer duly authorised. Any alterations made in this form should be initialled. If you submit more than one valid proxy appointment, the appointment received last before the latest time for receipt of proxies will take precedence. This Proxy should be returned to John Girdlestone, C/O Athelney Trust plc, Waterside Court, Falmouth Road, Penryn, Cornwall TR10 8AW. 47 

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