Half-year Report

RNS Number : 5658V

European Assets Trust PLC

10 August 2020

 

Date:  10 August 2020

Contact:  Sam Cosh (Lead Investment Manager) / Scott McEllen (Investment Company Secretary)

  BMO Investment Business Limited 

  020 7628 8000 

LEI:  213800N61H8P3Z4I8726

European Assets Trust PLC

Unaudited Statement of Results

for the half-year ended 30 June 2020

Highlights for the half-year ended 30 June 2020:

"Predicting economic and market direction is fraught with difficulties. What we can say though is that we have used this crisis productively. Our new holdings bolster the quality of the portfolio and have been bought at attractive prices. We therefore look to the future with confidence."

Jack Perry CBE

Chairman

SUMMARY OF RESULTS

	Half-year ended 30 June 2020	Half-year ended 30 June 2019
Net Asset Value per share total return (1)	-3.5%	-0.8%
Share price total return (1)	-8.6%	-1.0%
EMIX Smaller European Companies (ex UK) Index total return	-3.5%	-1.8%
Distributions per ordinary share
Dividends per share - as at 30 June (2)	3.51p	3.00p
Dividends announced for the year	7.02p	5.99p

 (1)   Total Return - the return to Shareholders calculated on a per share basis adding dividends paid in the period to the increase or decrease in the Share Price or Net Asset Value in the period. The dividends are assumed to have been re-invested in the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.

 (2)   The first interim dividend of 1.755 pence per share was paid on 31 January 2020, the second interim dividend of 1.755 pence per share on 30 April 2020 and third interim dividend of 1.755 pence per share on 31 July 2020. The fourth interim dividend is payable to eligible Shareholders on 30 October 2020.

The Chairman, commenting on the results, said:

With the spread of the coronavirus pandemic, recent months have been a period of tremendous uncertainty and for many, worry and concern.  I and the entire Board very much hope that you, our fellow shareholders are managing through these uncertain times as well as possible.

This report is for the six-month period ended 30 June 2020.  European Assets Trust PLC ('the Company') recorded a Sterling net asset value ('NAV') total return during this period of -3.5%. This is in line with the total return of our benchmark the EMIX Smaller European Companies (ex UK) Index which also fell by -3.5% during the same period.  With the share price discount increasing to 10.6% at the period end in comparison to 5.2% as at 31 December 2019, the Sterling share price return for the period was -8.6%.

While this has been a challenging period, from an investment point of view it has been productive. The Investment Managers were able to act quickly during the heavy market falls of March to take advantage of attractive valuations and add some high-quality companies to the portfolio. Trading turnover was therefore higher than usual though we would expect this to diminish over the rest of the year. These new additions in aggregate have performed well for us. However, it was existing holdings that delivered the best performance with our large healthcare holdings performing particularly well as they benefited from increased demand.  While falling short of the Board's aspirations, a NAV return in line with the benchmark is satisfactory.  We are though encouraged by the work undertaken over the first six months of the year and believe the additions made lay a good foundation for the future. The Investment Manager's Review, which follows, discusses the Company's performance in more detail.

The coronavirus pandemic

The impact of the spread of coronavirus on the investment and operational performance of the Company has been monitored actively by the Board.  Additional board meetings have been held by video conference with representatives of the Manager ("BMO Investment Business Limited") and advisers to the Company.  It has been pleasing to note that the home working arrangements implemented by the Manager and many of the Company's suppliers have been very effective.  As a consequence, there has been no noticeable impact upon service delivery and operations. 

As you know we were required as a result of the United Kingdom Government's guidance on social distancing and the prohibition of public gatherings to amend the arrangements for this year's Annual General Meeting ("AGM").  This resulted in the AGM being purely functional with attendance limited to the minimum number of Directors required to form a quorum.  Although the Board encouraged the participation of shareholders through proxy voting and the provision of the Manager's presentation together with some frequently asked questions on the Company's website, the Board was unable to meet the many familiar shareholders who usually attend the AGM in person. We very much look forward to a resumption of our normal AGM practices next year.

One consequence of the pandemic has been a reduction in the dividend income the Company receives from its investment holdings.  Many of the companies held within the investment portfolio have reduced or even cancelled the dividends they pay to their shareholders.  On 1 July 2020 this Company announced that a dividend of 1.755 pence per share would be paid on 31 July 2020. This was in addition to interim dividends of 1.755 pence per share paid in January and April 2020. The Board also intends to declare and pay a further interim dividend of 1.755 pence in October 2020 providing an annual payment to shareholders representing six per cent of the closing net asset value per share of the Company as at 31 December 2019, in line with its long-term distribution policy.  The Company will fund these dividends from a combination of current year profits and the Distributable Reserve.  As at 30 June 2020 the Company had a Distributable Reserve of £368.6 million.

As a consequence of the pandemic this report includes additional disclosures with regard to the principal risks and uncertainties faced by the Company, the steps taken by the Board to identify them and the controls and actions to mitigate them.  We also present an updated analysis to support the continuing adoption of the principle of going concern in preparing these financial statements.

Brexit

Following the Company's migration from the Netherlands to the United Kingdom in March 2019, the Company has ensured that it will have continuity of investment management services, governance and regulatory oversight. The Board continues to monitor the potential impact of Brexit and believes that while the ultimate impact of Brexit on financial and currency markets both in the United Kingdom and the European Union cannot be assessed, any volatility would be managed as part of our normal investment processes.

Management fee amendment

During March 2020 the Company announced an amendment to the basis of calculation of the investment management fee payable to the Manager. 

Previously, the Manager received a fee equal to 0.8 per cent per annum of the value of funds under management.  Funds under management were calculated as the value of total assets less current liabilities (excluding borrowings) at the end of the preceding quarter.  In cases where the value of funds under management exceeded €500 million, the applicable rate over such excess value was 0.65 per cent per annum. 

Following this amendment, which was effective from 1 April 2020, the investment management fee was reduced from 0.8 to 0.75 per cent per annum of the value of funds under management.  For funds under management in excess of €400 million, the applicable rate over such excess value will be 0.6 per cent per annum.  The basis of calculation for funds under management remained unchanged.

Financial reporting

In March 2020 the Board announced that with effect from the reporting period beginning on 1 January 2020, the reporting currency of the Company would change to Sterling from Euro and that all future financial statements would be presented in Sterling.

This report is therefore the first of the Company to be presented in Sterling.  It is anticipated that this change will improve the clarity of the Company's financial statements for its shareholders, the overwhelming majority of whom are located in the United Kingdom.

During this reporting period, the Sterling return to shareholders has benefited from a rise in the Euro exchange rate of 7.1% from €1.00 / £0.85 as at 31 December 2019 to €1.00 / £0.91 at the interim period end.

Outlook

The market recovery has been almost as dramatic as the initial falls. With economic activity recovering surprisingly quickly as the number of coronavirus cases diminishes and governments reduce social restrictions. This has of course been helped by the massive monetary and fiscal stimulus undertaken, with central banks providing seemingly unlimited support for government borrowing. We are encouraged by this but are also aware that the risks have not disappeared. Geopolitical tensions are high, the virus is not under control, and such extraordinary fiscal support cannot be indefinite. As we have said in previous commentary, predicting economic and market direction is fraught with difficulties. What we can say though is that we have used this crisis productively. Our new holdings bolster the quality of the portfolio and have been bought at attractive prices. We therefore look to the future with confidence.

Jack Perry CBE

Chairman

The Investment Manager, commenting on the results, said:

This has been an historic six months and it is no surprise that coronavirus has dominated investment commentary. The scale of the shock to markets in March was almost unprecedented as the investment industry tried to digest the implications of coronavirus and the measures being taken to contain it. The recovery has been nearly as dramatic as economies have started to reopen and economic data has begun to rebound. Overall our returns were in line with the benchmark which showed a small negative return in the context of the large intra-period market moves.

Whilst this has clearly been an unsettling period, from an investment standpoint it has been productive, leading to unusually high trading activity. Ahead of the crisis we had taken some risk out of the portfolio, reducing economically cyclical and financial holdings and entered March with no portfolio gearing. At the outset of the crisis we went further, increasing our cash position. However, the speed and depth of the sell-off gave us a chance to reassess market opportunities. The influence of low interest rates and abundant liquidity on good quality growth stocks has, in recent years, led to challenging valuations and we have shied away from some stocks which would naturally fit within our philosophy. The market fall provided a rare opportunity to invest in some great businesses at exceptionally attractive prices. We therefore quickly deployed our cash and started buying some high-quality companies from our watchlist.

In aggregate these holdings have contributed well to performance. For example, following a dramatic collapse in their share price, we bought Nordic Semiconductor, the leading designer of low power Bluetooth microchips who are building a position in low power radio microchip design. Growth comes from the increasing prevalence of connected devices linked to the emergence of "the internet of things" whilst the nascent radio unit has the potential to become a material contributor to profits. The shares have performed superbly since purchase.

Other new positions that have performed well include MIPs, the Swedish designer of their patented Brain Protection System that is integrated into helmets, Avanza, the Swedish online broker, Hellofresh, the world's leading home meal kit provider, and Remy Cointreau, the French owner of some of the highest quality cognac brands and inventory in the market. The latter was bought when the value of the company was accounted for simply by what we believed was the valuation of their inventory of cognac, a stock that increases in value as it ages. The shares now stand at a material premium to this.

The strongest contributors over the period were however some of our largest existing holdings and sit within the healthcare sector. They have benefitted from their defensive characteristics during the sell-off but have also re-rated as they are likely to see better demand due to the pandemic. For example, Tecan and Diasorin, who both operate in the diagnostics industry, were the leading performers. Diasorin is an Italian listed provider of speciality diagnostic tests, which has introduced a coronavirus serology test. While this will increase revenues and profits, we believe that this may ultimately be only temporary, and have used the higher valuation to take some profits and reduce our holding.  Swiss listed Tecan helps automate diagnostic testing. We have also taken some profit in this holding, however the position remains large as we believe that the increase in demand for fast, reliable testing, could provide a more permanent boost to the company's operations.

Other companies whose business models appeared to thrive in this challenging environment and therefore perform well over the entirety of the six-month period ended 30 June 2020 were Scout24, the German housing portal, Just Eat Takeaway, the food delivery marketplace, and ASM International the Dutch semiconductor equipment business.

Our worst performers were a combination of more economically sensitive companies and those that were exposed to sectors particularly hit by the coronavirus related lockdown. This can be summarised by the fact that our two worst performing sectors were financials and consumer staples.

In an environment where interest rates now appear likely to stay lower for even longer and the impact of the shutdown has hurt businesses, it is perhaps no surprise that the financial sector had such a poor time. We had reduced our exposure to the sector ahead of the crisis, and believe we hold high quality assets in this area that should prosper regardless of the liquidity environment. However, it has been disappointing to see our stocks struggle. We have also continued to re-evaluate our exposure here, adding Avanza, the Swedish online broker, and selling Aareal, the German real estate lender following concerns that its competitive position was being eroded.

The most disappointing aspect of the first half of the year was the poor performance of our consumer staple holdings which you would normally expect to hold firm in periods of both economic and market volatility. This was typified by our worst performer, the leading Italian food distributor Marr. Marr is multiple times bigger than its competitors, has consistently taken market share, and has historically generated stable and increasing returns. Given that their end clients, who principally work in the hospitality sector, have had to close their businesses, it should be no surprise that Marr's revenues have all but disappeared during much of March and April. While the outlook has improved since then, the shares have yet to recover. We believe this is an opportunity and have added to the position in the belief that their market position will be improved when they eventually exit this crisis as their competition would have had a far more challenging time.

Outlook

As was discussed during the introduction to this review the recovery has been surprisingly strong and as we write, almost the entirety of the sell-off losses have been recovered. Central banks and governments have provided enormous amounts of stimulus; coronavirus has begun to diminish in many areas and economies have started to reopen. Economic data is also reflecting this sharp rebound and central banks have made it clear that they are willing to do whatever it takes to keep government and corporate borrowing costs affordable.

Quality assets have led the rebound, but towards the end of the second quarter market leadership transitioned to value, perhaps indicating optimism towards a more sustained economic recovery. This of course remains to be seen but risks remain high. Firstly, the virus has not been entirely contained and a vaccine has not yet been approved. Even in places where infections had fallen to low levels, such as continental Europe, concerns of a second wave have surfaced while in the US and several emerging markets, the virus is not currently under control.

Political tensions also remain high, with US and China's diplomatic relationship challenging whilst the upcoming US elections provides a further level of uncertainty. Finally, we are reaching a stage where the massive fiscal support is now diminishing at the same time as economies are far from fully recovering.

We are not however trying to build a portfolio with any economic prediction in mind. We have worked hard in the last six months, taking advantage of rare opportunities, to bolster the quality of the portfolio at attractive prices. This is what should dictate positive returns over the coming years.

Sam Cosh

Lead Investment Manager

BMO Investment Business Limited

Forward -looking statements

This interim report may contain forward-looking statements with respect to the financial condition, results of operations and business of the Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results to differ materially from those expressed or implied by forward-looking statements. The forward-looking statements are based on the Directors' current view and on information known to them at the date of this report. Nothing should be construed as a profit forecast.

Directors' Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties are market related and no different from those of other investment trusts investing in listed equities. They are described in more detail under the heading "Principal Risks and Changes in the Year" within the Strategic Report in the Company's Report and Accounts for the period ended 31 December 2019.

The principal risks identified in the Report and Accounts for the period ended 31 December 2019 were:

· Poor absolute and/or relative performance;

· Failure to comply with regulations;

· Investment strategy and objective;

· Failure of the Manager or the loss of senior staff; and

· Service provider failure.

Since the beginning of 2020 the global economy has suffered considerable disruption due to the effects of the coronavirus pandemic. The Directors have reviewed and amended, where appropriate, the key risk matrix for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them.

It is also noted that:

·     An analysis of the performance of the Company since 1 January 2020 including the period since the spread of the coronavirus pandemic is included within the Chairman's Statement and the Investment Manager's Review.

·     Within the Chairman's Statement, it is noted that additional board meetings have been held by video conference with representatives of the Manager and advisers to the Company. It is anticipated that these additional meetings will continue to be held throughout the pandemic.

·       In addition, the Board has noted that home working arrangements have been implemented at the Manager and many of the Company's key suppliers without any noticeable impact upon service delivery and operations.

·       The Company has a €45 million multi-currency loan facility with RBSI. Since the beginning of the pandemic until the end of this reporting period this facility has been undrawn. Following the period end €15 Million has been drawn down.

·     Note 3 below details the Board's consideration for the continued applicability of the principle of Going Concern when preparing this report.

On behalf of the Board

Jack Perry CBE

Chairman

7 August 2020

Directors' Statement of Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, that to the best of their knowledge:

·           the condensed set of financial statements has been prepared in accordance with applicable International Financial Reporting Standards on a going concern basis, and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

·           the half-yearly report includes a fair review of the development and performance of the Company and important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·           the Directors' Statement of Principal Risks and Uncertainties is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

·           the half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year.

On behalf of the Board

Jack Perry CBE

Chairman

7 August 2020

 

Condensed Statement of Comprehensive Income

Half-year ended 30 June 2020  (Unaudited)

Half-year ended 30 June 2019 (Unaudited)

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	(Losses)/gains on investments held at fair value through profit or loss	-	(42,402)	(42,402)	-	67,469	67,469
	Foreign exchange (losses)/gains	(2)	(1,303)	(1,305)	-	-	-
	Income	2,751	-	2,751	9,155	-	9,155
	Management fees	(284)	(1,136)	(1,420)	(321)	(1,284)	(1,605)
	Other expenses	(532)	(67)	(599)	(551)	(97)	(648)
	Profit / (loss) before finance costs and taxation	1,933	(44,908)	(42,975)	8,283	66,088	74,371
	Finance costs	(6)	(23)	(29)	(20)	(78)	(98)
	Profit / (loss) before taxation	1,927	(44,931)	(43,004)	8,263	66,010	74,273
	Taxation	(257)	-	(257)	(1,384)	-	(1,384)
	Profit / (loss) for the period	1,670	(44,931)	(43,261)	6,879	66,010	72,889
2	Earnings per share - pence	0.46	(12.48)	(12.02)	1.91	18.35	20.26

The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union. The supplementary revenue returns, and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All income is attributable to the equity holders of European Assets Trust PLC.

 

Condensed Statement of Changes in Equity

		Share					Total
	Share	Premium	Other	Distributable	Capital	Revenue	Shareholders'
Half-year ended 30 June 2020 (Unaudited)	Capital	Account	Reserve	Reserve	Reserve	Reserve	Funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 31 December 2019	35,988	-	-	354,374	27,781	-	418,143
Movements during the half-year ended 30 June 2020
Interim dividends distributed and reinvested	7	-	-	(10,890)	61	(1,670)	(12,492)
Total comprehensive income	-	-	-	-	(44,931)	1,670	(43,261)
Cumulative translation adjustment	2,619	-	-	25,066	434	-	28,119
Balance at 30 June 2020	38,614	-	-	368,550	(16,655)	-	390,509
Half-year ended 30 June 2019 (Unaudited)
Balance at 31 December 2018	-	-	-	-	-	-	-
Movements during the half-year ended 30 June 2019
Transferred from European Assets Trust NV on 1 January 2019	32,292	243,554	93,595	-	-	-	369,441
Total comprehensive income for the period 1 January to 16 March 2019	-	-	53,023	-	-	-	53,023
Interim dividends distributed for the period 1 January to 16 March 2019	6	(6)	(11,553)	-	-	-	(11,553)
Cancelled on 16 March 2019	(32,298)	(243,548)	(137,405)	-	-	-	(413,251)
Issued on 16 March 2019	37,858	375,393	-	-	-	-	413,251
Cancelled by court process	-	(358,561)	-	-	-	-	(358,561)
Arising from cancellation of the Share Premium	-	-	-	358,561	-	-	358,561
Total comprehensive income for the period from 16 March to 30 June 2019	-	-	19,866	-	-	-	19,866
Cumulative translation adjustment	(118)	(16,832)	(299)	15,663	-	-	(1,586)
Balance at 30 June 2019	37,740	-	17,227	374,224	-	-	429,191

 

Condensed Statement of Changes in Equity (continued)

		Share											Total
	Share	Premium		Other		Distributable			Capital		Revenue		Shareholders'
Year ended 31 December 2019 (Audited)	Capital	Account		Reserve		Reserve			Reserve		Reserve		Funds
	£'000s	£'000s		£'000s		£'000s			£'000s		£'000s		£'000s
Balance at 31 December 2018	-		-		-		-	-		-		-
Movements during the year ended 31 December 2019
Transferred from European Assets Trust NV on 1 January 2019	32,292		243,554		93,595		-	-		-		369,441
Total comprehensive income for the period 1 January to 16 March 2019	-		-		53,023		-	-		-		53,023
Interim dividends distributed for the period 1 January to 16 March 2019	6		(6)		(11,553)		-	-		-		(11,553)
Cancelled on 16 March 2019	(32,298)		(243,548)		(137,405)		-	-		-		(413,251)
Issued on 16 March 2019	37,858		375,393		-		-	-		-		413,251
Cancelled by court process	-		(358,561)		-		-	-		-		(358,561)
Arising from cancellation of the Share Premium	-		-		-		358,561	-		-		358,561
Total comprehensive income for the period from 16 March to 30 June 2019	-		-		-		-	30,058		8,068		38,126
Interim dividends distributed for the period 16 March to 31 December 2019	10		-		-		-	(2,734)		(8,068)		(10,792)
Issuance cost of scrip dividend shares	-		-		-		-	(26)		-		(26)
Foreign exchange movement on Sterling denominated share capital	239		-		-		-	(239)		-		-
Cumulative translation adjustment	(2,119)		(16,832)		2,340		(4,187)	722		-		(20,076)
Balance at 31 December 2019	35,988		-		-		354,374	27,781		-		418,143

Condensed Statement of Financial Position

	30 June 2020	30 June 2019	31 December 2019
	(Unaudited)	(Unaudited)	(Audited)
	£'000s	£'000s	£'000s
Non-current assets
Investments at fair value through profit or loss	386,278	428,107	404,590
Current assets
Other receivables	2,407	2,857	2,112
Cash and cash equivalents	2,918	18,860	11,516
Total current assets	5,325	21,717	13,628
Current liabilities
Other payables	(95)	(160)	(75)
Derivative financial instruments held at fair value through profit or loss	(999)	-	-
Bank Loan	-	(20,473)	-
Total current liabilities	(1,094)	(20,633)	(75)
Total current assets less liabilities	4,231	1,084	13,553
Net assets	390,509	429,191	418,143
Capital and reserves
Share capital	38,614	37,740	35,988
Distributable reserve	368,550	374,224	354,374
Other reserve	-	17,227	-
Capital reserves	(16,655)	-	27,781
Total Shareholders' funds	390,509	429,191	418,143
Net Asset Value per ordinary share - pence	108.47	119.28	116.17

 

Condensed Statement of Cash Flows

	Half-year ended	Half-year ended
	30 June 2020	30 June 2019
	£'000s (Unaudited)	£'000s (Unaudited)
Operating activities
Sale of investments	107,277	28,214
Purchase of investments	(103,858)	(17,716)
Investment in subsidiary	-	51
Dividends received	2,346	6,143
Investment management fees paid	(1,420)	(1,605)
Restructuring costs paid	-	(598)
Other operating expenses	(578)	(741)
Interest paid	(29)	(110)
Cash flows from operating activities	3,738	13,638
Financing activities
Equity dividends paid (net)	(12,491)	(11,553)
Drawdown of Bank loan	-	20,473
Cash flows from financing activities	(12,491)	8,920
Net movement in cash and cash equivalents	(8,753)	22,558
Cash and cash equivalents at the beginning of the period	11,516	(3,273)
Effect of movement in foreign exchange	155	(425)
Cash and cash equivalents at the end of the period	2,918	18,860
Represented by:
Cash at bank Short term deposits	755 2,163	18,860 -
	2,918	18,860

 

Notes

1  Basis of preparation

These condensed financial statements, which are unaudited, have been prepared on a going concern basis in accordance with the Companies Act 2006, International Financial Reporting Standards (IFRS) and the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by the AIC in October 2019.

The Company's functional currency is the Euro and reporting currency the Sterling. The condensed financial statements and notes to the financial statements are translated to the reporting currency using the relevant exchange rates on the applicable balance sheet date.

The accounting policies applied in the condensed set of financial statements are set out in the Company's annual report for the year ended 31 December 2019.

2  Earnings per share

Return per ordinary share attributable to Shareholders reflects the overall performance of the Company in the period.  Net revenue recognised in the first six months is not necessarily indicative of the total likely to be received in the full accounting year.

	Half-year ended 30 June 2020 £'000s	Half-year ended 30 June 2019 £'000s
Revenue return	1,670	6,879
Capital return	(44,931)	66,010
Total return	(43,261)	72,889
	Number	Number
Weighted average ordinary shares in issue	359,991,264	359,828,307
Total return per share - pence	(12.02)	20.26

3  Going concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have also considered the Company's objective, high distribution policy, the current cash position of the Company, the availability of the loan facility and compliance with its covenants, the operational resilience of the Company and its service providers.

At present the global economy is suffering considerable disruption due to the effects of the coronavirus pandemic and the Directors have given serious consideration to the consequences for this Company. The Company has a €45 million multi-currency loan facility with RBSI. Throughout this six-month period and as at 30 June 2020 this facility was undrawn. Since the period end €15 million has been drawn down.

The Company has a number of banking covenants and at present the Company's financial position does not suggest that any of these are close to being breached. The primary risk is that there is a very substantial decrease in the net asset value of the Company in the short to medium term. The Directors note that the Company has operated without recourse to the loan facility throughout this reporting period. In addition, in accordance with its investment objective the Company is invested in quoted, realisable securities.

The Company operates within a robust regulatory environment. The Company retains title to all assets held by the Custodian. Cash is held with banks approved and regularly reviewed by the Manager and the Board. The Directors have noted that home working arrangements have been implemented at the Manager and many of the Company's key suppliers without any noticeable impact upon service delivery and operations.

The Company's annual dividend, which is declared in Sterling, is determined by reference to the year-end net asset value. The Company manages any Sterling/Euro exchange rate exposure which may arise from the declaration of a Sterling denominated dividend by entering into specific matched forward currency hedging contracts. As at 30 June 2020 the Company had a Distributable Reserve of £368.6 million.

The Company in common with many investment companies has, as a result of the pandemic, suffered a reduction in dividend income.  The amount of this reduction, while significant, has not had a material impact on either net asset value or distributable reserves.

Based on this information the Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of these financial statements. Accordingly, these financial statements have been prepared on a going concern basis.

4  Results

The results for the half-year ended 30 June 2020 and 30 June 2019, which are unaudited, constitute non-statutory accounts within the meaning of Section 434-436 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 31 December 2019; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 31 December 2019 are an extract from those accounts.

5  Half-yearly report and accounts

The Company's report and accounts are available on the internet at www.europeanassets.co.uk.

Printed copies may be obtained from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

BMO Investment Business Limited, Secretary

Exchange House,

Primrose Street,

London EC2A 2NY

7 August 2020

 

END

 

 

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