Due to the COVID-19 pandemic it has been a year involving multiple forms of international and national restrictions and 'lock downs' which have adversely affected global trading. During the first wave supply chains were disrupted, export and import transportation slowed, and the movement of people was severely restricted. April was the nadir for market sentiment but subsequently there has been a slow but reasonably constant recovery as companies have adapted to the 'new normal'. Restrictions of various types are likely to continue well into 2021, however, I believe the pandemic has perversely presented business and commerce throughout the world with a new range of opportunities to think and act in more imaginative ways than they have before. Increased use of IT in communications, remote management of supply chains and significant changes to office/home working will significantly and probably permanently alter the industrial and commercial landscape.

The FTSE All-Share Index fell by 12.5% during the year (down 18.7% in the first six months) but the Company's portfolio held firm with net asset value only slightly down from 2275.2p to 2258.9 per share (0.7%). This reflects a strong recovery in the second half after a 20.9% reduction in net assets in the first six months.

The share buy-back programme remains paused for the foreseeable future, subject to operation of the discount management policy when necessary.

A final dividend of 21.5p is proposed, making 32.25p for the year, reflecting the Directors' awareness of the importance of dividend income to the Company's investors and its robust underlying financial position. The directors are closely monitoring the implications of the continuing market volatility and global response to the pandemic for the Company's net asset position and future income streams, and will make changes to the Company's dividend policy when deemed appropriate to do so.

Environmental, Social and Governance risks continue to be recognised as significant matters of global concern and the Board is committed to ensuring that the Company, through the Investment Director, appropriately manages and mitigates these risks through the investment strategy.

I am pleased to confirm that the composition of your Board continues to remain stable and I and my board colleagues look forward to overseeing implementation of the Company's investment strategy and improving returns for shareholders in the future.

In the medium term, the economic outlook is still uncertain but, with the imminent international roll-out of COVID-19 immunisation programmes, 2021 should prove to be a better year than the one everyone has had to endure in 2020.

Dr D. M. BRAMWELL

Chairman

16th February 2021

PORTFOLIO STATEMENT

Details of the investments held within the portfolio as at 31st December 2020 are given below by market value: 


                                                         Holdings           Market Value 
   UK Investments                                                   2020    2019 
                                              2020       2019 
                                                                    GBP'000   GBP'000 
Treatt                                        3,500,000  4,250,000  28,490  19,125 
Hill & Smith                                  1,434,230  1,434,230  20,194  21,126 
Scapa                                         8,000,000  8,000,000  14,880  19,520 
Macfarlane                                    17,250,000 17,250,000 14,869  18,199 
Spirax-Sarco Engineering                      120,714    120,714    13,635  10,731 
Vp                                            1,800,000  1,800,000  13,500  16,920 
Electrocomponents                             1,300,000  1,300,000  11,317  8,757 
Colefax                                       2,365,000  2,100,000  9,696   8,820 
Vitec                                         400,000    400,000    3,656   4,280 
Renold                                        30,000,000 30,000,000 3,600   5,100 
Eleco                                         4,520,781  4,520,781  3,526   3,526 
IMI                                           275,000    -          3,204   - 
Morgan Advanced Materials                     1,000,000  750,000    3,110   2,377 
Bellway                                       80,000     80,000     2,364   3,046 
Menzies (John)                                882,142    882,142    2,276   4,173 
Carr's                                        1,750,000  350,000    2,223   532 
Castings                                      400,000    400,000    1,448   1,640 
National Grid                                 137,500    137,500    1,189   1,298 
Titon                                         1,265,000  1,265,000  1,139   1,518 
GlaxoSmithKline                               70,000     70,000     939     1,245 
Discretionary Unit Fund Managers              93,600     93,600     758     758 
Santander UK 10.375% Non Cumulative Preferred 400,000    400,000    640     668 
Dialight                                      238,095    238,095    600     555 
LPA                                           650,000    650,000    520     572 
Coral Products                                2,000,000  2,000,000  170     190 
Chamberlin                                    1,000,000  1,000,000  60      300 
Dyson                                         1,000,000  1,000,000  2       2 
Low & Bonar                                   -          6,000,000  -       723 
Costain                                       41         41         -       - 
Total Porfolio                                                      158,005 155,701

Unless otherwise specified, the actual holdings are, in each case, of ordinary shares or stock units and of the nominal value for which listing has been granted.

STRATEGIC REPORT

The Strategic Report is designed to provide information primarily about the Company's business and results for the year ended 31st December 2020 and should be read in conjunction with the Chairman's Statement on page 7. 


PERFORMANCE STATISTICS                      31-Dec-20 31-Dec-19 % change 
NAV per Ordinary Share                      2,258.9p  2,275.2p  -0.7% 
Discount to NAV                             6.8%      2.2%      4.6% 
Closing mid-market price per Ordinary Share 2,105.0p  2,225.0p  -5.4% 
Dividends per Ordinary Share                32.25p    32.25p 
Dividend yield*                             1.4%      1.4% 
Ongoing Charges*                            0.5%      0.5% 
Earnings per Ordinary Share - basic 
Revenue                                     11.4p     30.2p 
Capital                                     4.6p      143.3p 
NAV return*                                 -0.7%     7.4% 
FTSE All-Share Index                        -12.5%    14.2%

*These are Alternative Performance Measures.

EXPLANATION OF ALTERNATIVE PERFORMANCE MEASURES (APMS)

An alternative performance measure is a financial measure of historical or future financial performance, financial position or cash flow that is not prescribed by the relevant accounting standards. The APMs are the dividend yield, ongoing charges and NAV return as defined below.

Dividend Yield

The dividend yield is a financial ratio which indicates how much the Company pays out in dividends each year relative to its share price. The figure is calculated by dividing the aggregate value of dividends per share in a given year by the closing share price and is represented as a percentage. 


The dividend yield was calculated as follows: 
                                               2020     2019 
Total dividends per ordinary share (a)         32.25p   32.25p 
NAV per Ordinary Share (b)                     2,258.9p 2,275.2p 
Dividend Yield (a) / (b)*100                   1.4%     1.4%

Ongoing Charges

Ongoing charges are expenses charged to revenue or capital that relate to the operation of the Company as an investment trust and are deemed likely to recur in the foreseeable future. They do not include the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are calculated on the basis of the annualised ongoing charge as a percentage of the average net asset value in the period.

The calculation methodology for ongoing charges is set out by the Association of Investment Companies ("AIC") and was calculated as follows: 


                              2020    2019 
 
                              (GBP000)  (GBP000) 
Total Expenses (a)            749     803 
Average NAV (b)               145,673 170,273 
Ongoing Charge (a) / (b)*100  0.5%    0.5%

NAV Return

NAV return is the percentage change in closing NAV per share compared with opening NAV per share. 


NAV return was calculated as follows: 
 
NAV per Ordinary Share 31st December 2020 (a)  2,258.9p 
NAV per Ordinary Share 31st December 2019 (b)  2,275.2p 
Return [a/b-1]*100                             -0.7%

STATUS

The Company is a self-managed investment trust. The Company is registered as an investment company as defined in section 833 of the Companies Act 2006 and operates as such. The Company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010.

The Company has been approved by the Financial Conduct Authority to be a Small Registered Alternative Investment Fund Manager ("AIFM").

In the opinion of the Directors, the Company has conducted its affairs during the year under review, so as to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and continues to meet the eligibility conditions set out in section 1158 of the Corporation Tax Act 2010.

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