European Assets Trust Regulatory News (EAT)

Date: 4 August 2021

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 2021

Highlights for the half-year ended 30 June 2021:

· Net Asset Value total return of 13.4%, 2.9% ahead of the benchmark.

· Share price total return of 17.6%, 7.1% ahead of the benchmark.

· The Company achieved a record high share price of 138.75 pence per share during the period∞.

Jack Perry CBE

Chairman

∞ Share price history adjusted for the ten for one stock split effective 2 May 2018.

SUMMARY OF RESULTS

(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 2.00 pence per share was paid on 29 January 2021, the second interim dividend of 2.00 pence per share on 30 April 2021 and the third interim dividend of 2.00 pence per share on 30 July 2021. The fourth interim dividend of 2.00 pence per share is payable to eligible Shareholders on 29 October 2021.

The Chairman, commenting on the results, said:

Since my last report to you, social and economic conditions have remained challenging and difficult. At the time of writing, the rollout of vaccines in the United Kingdom and throughout continental Europe, albeit at a slower pace, provide hope that a return to more normal conditions is underway. I and the entire Board very much hope that you, our fellow Shareholders, are continuing to manage through these uncertain times as well as possible.

This report is for the six-month period ended 30 June 2021. European Assets Trust PLC ('the Company') recorded a Sterling net asset value ('NAV') total return during this period of 13.4%, exceeding the total return of our benchmark, the EMIX Smaller European Companies (ex UK) Index of 10.5% for the same period. With the share price discount reducing to 6.3% at the period end in comparison to 9.4% as at 31 December 2020, the Sterling share price return for the period was an impressive 17.6%. Taking account of the ten for one stock split in 2018 the Company achieved a record share price of 138.75p during the period.

This pleasing performance is, in large part, a result of the hard work done last year during the depths of the pandemic. In our annual report, we noted higher portfolio turnover, that was uncharacteristic of our long-term approach to investing. As discussed at the time, this was because the managers were taking advantage of a rare opportunity to add some high-quality smaller companies, many of them global leaders in their field, at exceptionally attractive prices. This produced a good performance last year and the contribution from many of these companies has continued to spearhead the strong total returns for the first half. Our portfolio trading activity this year has now normalised, a good indication of the confidence the Manager has in the Company's holdings. While our market sector is anticipating the recovery from the crisis, investors are grappling with the pace and sustainability of this recovery and what this means for stock selection. We are not selecting stocks based on a prediction of economic outcomes, but on the performance prospects of the businesses we hold. We will continue to execute this philosophy and process, just as we did last year.

Operations

The continuing impact of the pandemic on the investment and operational performance of the Company has been monitored actively by the Board. It has been pleasing to note that the home working arrangements implemented by BMO Investment Business Limited, ("the Manager") and many of the Company's suppliers have been very effective. As a consequence, there has been no impact upon service delivery and operations.

The Annual General Meeting of the Company was held on 13 May 2021. Due to travel and gathering restrictions arising from the pandemic, Shareholders were not able to attend physically. However, Shareholders were able to view online a presentation by Sam Cosh and Lucy Morris and participate in a live question and answers session with them and me. I would like to thank those Shareholders who participated, and I look forward to a resumption of our normal practices in 2022 and, if possible, with the additional facility of online attendance for those Shareholders unable to travel.

Since March 2020 the Board has met by videoconference with representatives of the Manager and with other advisers attending. Although this has worked well, I am pleased to report that at our most recent Board meeting, most Directors were able to attend physically which I consider a welcome step towards a return to our pre-pandemic practices. In addition, the London and Edinburgh offices of the Manager have reopened recently, initially on a limited basis.

Dividends

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. While we have seen some rebound in dividend receipts during the first half of this year, our total dividend income remains subdued. Notwithstanding the reduced dividend distributions from some of our portfolio companies, we remain confident of the continuation of our dividend policy of paying an annual dividend equivalent to six per cent of the Company's NAV at the end of the preceding year. To fund its dividends the Company can use a combination of current year profits and the Distributable Reserve. As at 30 June 2021 the Company had a Distributable Reserve of £335.8 million.

Ownership of the Manager

On 12 April 2021 BMO announced that it had reached an agreement to sell its asset management business in Europe, the Middle East and Africa. This sale would include the Manager of this Company. Subject to completion, it will become part of Columbia Threadneedle Investments, the global asset management business of Ameriprise Financial, Inc. Details have not yet been finalised and published but both firms have confirmed the importance of maintaining the stability and continuity of the teams which presently support this Company.

The Board is monitoring this situation closely and welcomes this assurance of stability and continuity. We will ensure that Shareholders are kept informed of developments.

Outlook

The majority of the first half of the year has been characterised by optimism of an economic and social recovery following the widespread vaccination programmes. While Europe initially lagged in this regard, it is catching up fast and politicians and central bankers appear determined not to do anything to stall the recovery. Monetary and fiscal policy remain extremely supportive despite growing inflationary pressures. The level and duration of these pressures is the preoccupying debate in the markets, with bond yields moving accordingly. Though the authorities are clear that they believe any inflationary spike will be transitory, the debate is likely to dominate market commentary into the second half. This will not distract the investment team from executing their philosophy and process. We are fortunate that our stock research is conducted in a large diverse region of opportunities. It allows us to uncover high quality niche opportunities at attractive prices, and this is what will drive our long-term returns.

Jack Perry CBE

Chairman

The Investment Manager, commenting on the results, said:

It has been a strong half year for equity markets, and we are pleased to report a good performance from the portfolio with our NAV total return above the benchmark for the six-month period ended 30 June 2021. Our share price outperformed this as our discount narrowed over the period.

This excellent result was achieved despite the depreciation of the Euro and most other continental European currencies

against Sterling which benefitted from the perception that the UK would see a faster recovery due to the speed in which it is vaccinating its population.

This year has seen investors pulled in two directions by contrasting themes. The first quarter was dominated by rising expectations of a strong recovery precipitated by widespread vaccination programmes. This was supported by encouraging economic data and increased inflation expectations leading to rising bond yields. In this environment more cyclically sensitive stocks or those ascribed to the 'value' style took market leadership. However, towards the end of the period, with the emergence of the 'Delta' COVID-19 strain, some indications that the acceleration in economic activity was stalling, and that the increase in inflation is potentially more transitory, leadership shifted back towards the more predictable earnings qualities of 'growth' stocks. The debate around economic activity, inflation and bond yields will likely continue through the year with market leadership swinging between styles depending on which point of view is in ascendance.

In terms of what contributed to this strong performance, our technology holdings led the way. Within the sector our semiconductor stocks performed particularly strongly. The longer-term themes of digitalisation and interconnectivity were supported by economic recovery driving unusually strong demand for semiconductors. Nordic Semiconductor, the global leader in low power Bluetooth chip design, and ASM International, the Dutch listed supplier of equipment that is integral in the production of semiconductors, both announced good results and excellent forward-looking statements.

Financials were our second-best contributing sector. While our more traditional holdings in the sector did well, performance was led by the online broker flatexDEGIRO, whose key differentiator is their technology platform. This gives them advantages over traditional providers of brokerage both in the quality of the product and the scalable, efficient cost structure. This means that the company is taking share aggressively in a buoyant market and producing outstanding results.

Another strong contributor was a new holding, Sdiptech, the Swedish listed industrial consolidator focusing on sustainable businesses. We were fortuitous in buying the stock when it was weak following lacklustre full year results. However, the shares performed well following the announcement that they had sold off some lower quality, legacy businesses and recycled the capital into much better companies with attractive long-term growth prospects. Other performers of note were the Swedish listed helmet technology company MIPs, the swimming pool consumables supplier, Fluidra, and the leading Dutch food services business Sligro.

In terms of disappointing detractors, our holdings in both the healthcare and materials sectors lagged a strong market. No stock stood out but, with the exception of SIG Combibloc, the Swiss supplier of aseptic packaging, the stocks in these sectors in aggregate delivered lacklustre returns. This is particularly the case in materials where we hold staple businesses in contrast to the leadership in the sector that came from 'deep cyclicals'.

Our poorest performer was Fjordkraft, the Norwegian energy retailer. They have suffered during the COVID-19 pandemic as their usual sales effort, which is needed to offset the natural churn of their customer base, has been restricted. Rising energy prices also impacted their margins. We have sold the stock in recognition that the business model was not as strong as we initially conceived.

Following a year of elevated portfolio activity, we have returned to more normalised levels this year. In addition to Sdiptech, we have added two new holdings. Atea, is a Norwegian listed, IT hardware and software value added reseller. They benefit from the digitalisation needs of their client base. They expect to see profits improve as they transition to more value-added services and turn around their loss-making Danish business. We also bought a position in Verallia, a French glass bottling business. Attractively valued, we see improving profitability in a supportive environment as they drive efficiencies through their business. We funded these acquisitions through the sale of CA Immobilien, the Austrian real estate business, who received a bid, and through Cerved, the Italian credit information company, following a review that concluded that the outlook for the business was deteriorating.

Following a strong first half, we do not anticipate making significant changes to the portfolio. We are pleased that our stock selection is delivering, and rather than be distracted by the style swings in the market, and the debate over inflation and bond yields, we will continue to focus on the process of acquiring good businesses at sensible valuations. We believe this is the best way to deliver attractive shareholder returns over the long term.

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 Board's' 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 year ended 31 December 2020.

The principal risks identified in the Report and Accounts for the year ended 31 December 2020 were:

· Poor absolute and/or relative performance;

· Failure to comply with regulations;

· Investment strategy and objective;

· Failure of the Manager or the loss of key investment management staff; and

· Service provider failure.

Since the beginning of 2020 the global economy has suffered considerable disruption due to the effects of the COVID-19 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 2021 is included within the Chairman's Statement and the Investment Manager's Review.

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

· The Company has a €45 million multi-currency loan facility with RBSI. As at 30 June 2021 €30 million was drawn down.

· Note 4 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

3 August 2021

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 shown above 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

3 August 2021

Condensed Statement of Comprehensive Income

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

Condensed Statement of Financial Position

Condensed Statement of Cash Flows

Notes

1 Basis of preparation

The financial statements of the Company have been prepared on a going concern basis under the historical cost convention modified to include fixed asset investments and derivatives at fair value, and in accordance with the Companies Act 2006, International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board (the "IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.

Where presentational guidance set out in the 2018 amended Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

All of the Company's operations are of a continuing nature. The functional currency of the Company is the Euro whilst as previously announced the Company has made a voluntary change in presentational currency with effect from 1 January 2020 to Pound Sterling as a result of the migration from the Netherlands to the United Kingdom.

All transactions during the period are translated on the date of execution and the Statement of Financial Position as at the period end date.

The prior interim comparatives have been restated following a change of approach to the translation from Euro to Pound Sterling, as adopted for the 2020 year-end Report and Accounts. The previous interim financial statements were produced by applying an average foreign exchange rate for the period to transactions. This approach has been changed to transactions being translated using the applicable exchange rate on the date of execution.

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 2020.

2 Earnings per share

Earnings 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.

3 Dividend

The fourth interim dividend of 2.00 pence per share in respect of the year ending 31 December 2021 will be paid on 29 October 2021 to eligible Shareholders on the register. The total cost of this dividend based on 360,069,279 shares in issue is £7,201,000.

4 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 and the operational resilience of the Company and its service providers.

The global economy continues to suffer disruption due to the effects of the COVID-19 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. As at 30 June 2021 €30 million was 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.

As at 2 August 2021, the latest practicable date before the publication of this report, borrowings amounted to €30 million. This is compared to a net asset value of €635.3 million. In accordance with its investment policy the Company is invested mainly in readily realisable listed securities. These can be realised if necessary, to repay the loan facility and fund the cash requirements for future dividend payments.

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 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 2021 the Company had a Distributable Reserve of £335.8 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.

As at 30 June 2021 the Company had current liabilities of £25.8 million. The Company invests in listed securities which can be realised to fund any short-term cash shortfall that may arise.

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.

5 Results

The results for the half-year ended 30 June 2021 and 30 June 2020, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 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 2020; 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 2020 are an extract from those accounts.

6 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 by writing to the Company Secretary at Exchange House, Primrose Street, London EC2A 2NY. 

By order of the Board

BMO Investment Business Limited, Secretary

Exchange House,

Primrose Street,

London EC2A 2NY

3 August 2021