European Assets Trust Regulatory News (EAT)

To: RNS

From: European Assets Trust PLC ("the Company")

LEI: 213800N61H8P3Z4I8726

Date: 5 January 2023

Dividend announcement

Highlights

· Continued policy of six per cent dividend on year-end net asset value per share for annual distribution to shareholders.

· Total dividends declared for 2023 will be 5.80 pence per share.

· Dividend to be paid in four equal instalments of 1.45 pence per share in January, April, July and October 2023.

Dividend for 2023

The Board confirms that the Company's stated and long-standing distribution policy of declaring, barring unforeseen circumstances, an annual dividend equivalent to six per cent of the net asset value per share at the end of the preceding year will be continued in 2023. 

With rising inflation expectations driving interest rates higher and war in Eastern Europe, 2022 has been a particularly challenging year for European smaller companies. As such, the net asset value per share decreased over the year which will result in a decrease in total dividends payable by the Company for 2023 to 5.80 pence per share (2022: 8.80 pence per share).

Shareholders will note the substantial reduction in the dividend announced. While this is undoubtedly disappointing it is worth highlighting the reasoning for the Company's distribution policy. The Company offers investors the opportunity of both growth and a high yield from an asset class that comprises some of Europe's most dynamic, entrepreneurial businesses that have significant long-term potential. While there will be some volatility in the dividend payment, through the market cycle, the combination of growth and income should be attractive in the long term.

The 2023 dividend will be paid in four equal instalments of 1.45 pence per share on 31 January, 28 April, 31 July and 31 October 2023.

The January dividend payment of 1.45 pence per share will be paid to shareholders on 31 January 2023, having an ex-dividend date of 12 January 2023 and a record date of 13 January 2023. 

Investment Performance and Review

The Company's net asset value total return (capital performance with dividends reinvested) per share was -28.2 per cent in Sterling (-32.0 per cent in Euros) (unaudited) for the year ended 31 December 2022. Sterling share price total return for the year was -28.4 per cent (-32.3 per cent in Euros). This compares with the EMIX Smaller European Companies (ex UK) Index ("the Benchmark"), which produced a total return of -17.7 per cent in Sterling (-22.1 per cent in Euros). 

Following a couple of strong years, it is disappointing to report a much more challenging performance in 2022. Rising inflation, geopolitical tensions, the resulting energy crisis and continued COVID-19 related supply chain issues, all led to a year of poor returns with smaller companies bearing the brunt of this. The pricing of the Company's asset class has proved more volatile than comparable larger company funds, but historically it has yielded much better long-term returns.

Significant falls in prices have therefore provided a good long-term opportunity, and whilst the outlook is uncertain, the Board believes that taking advantage of better prices in an attractive area, composed of dynamic growth businesses, is the right thing to do. In terms of the Company's portfolio, the Investment Manager has done this by adding some stocks from its watch list which, until recently, have looked too expensive. The Board believes this will drive better returns in the future just as it did in 2020 when the Investment Manager followed a similar strategy.

The Company's performance relative to the Benchmark also fell below the standard that the Board would expect. The most significant reason for this has been the style rotation away from growth stocks towards the more value areas of the market, precipitated by higher interest rates. The Benchmark has been led by energy and value areas of the market and it has been traditional sectors of both stability and safety, such as healthcare, that have significantly underperformed. The Investment Manager recognises there has been some substantial changes in the market and has increased the portfolio's exposure to energy security, reshoring and automation.

Fundamentally, the Board believes the Company's portfolio of businesses with pricing power, long-term structural growth opportunities and run by superior, aligned management teams, will deliver returns that are ahead of the market through the cycle.

For further information contact:

Sam Cosh (Investment Manager) Tel 0131 573 8300

Scott McEllen (Company Secretary) Tel 0131 573 8300

Columbia Threadneedle Investment Business Limited