money & pens

European small-cap specialist with attractive yield

European Assets Trust 7 February 2018 Review
Download PDF

European Assets Trust

European small-cap specialist with attractive yield

Investment trusts

7 February 2018

Price

1,267.5p

Market cap

£446.8m

AUM

£443.4m

NAV*

1,273.2p

Discount to NAV

0.4%

**Including income. As at 5 February 2018.

Yield

5.4%

Ordinary shares in issue

35.3m

Code

EAT

Primary exchange

LSE

AIC sector

European Smaller Companies

Benchmark

EMIX Smaller Europe ex-UK

Share price/discount performance

Three-year performance vs index

52-week high/low

1,350.0p

1,084.5.0p

1,337.1p

1,138.9p

**Including income.

Gearing

Gross*

0.3%

Net cash*

0.0%

*As at 31 December 2017.

Analysts

Helena Coles

+44 (0)20 3077 5700

Mel Jenner

+44 (0)20 3077 5720

European Assets Trust is a research client of Edison Investment Research Limited

European Assets Trust (EAT) aims to generate long-term capital growth through investing in listed European small and mid-sized companies. It has a distribution policy to pay 6% of its prior year-end euro-denominated NAV, which supports an attractive yield, currently 5.4%, significantly higher compared with peers. This has helped support a share price premium to EAT’s cum income NAV. The EMIX Smaller Europe ex-UK index had another strong year in 2017, and equity valuations are now more challenging. Notwithstanding, the manager Sam Cosh observes that earnings recoveries are far from mature for many sectors and believes that EAT is well positioned to benefit as Europe’s recovery broadens out.

12 months ending

Share price
(%)

NAV
(%)

EMIX Smaller European ex-UK (%)

FTSE AW Europe ex-UK (%)

FTSE All-
Share (%)

31/01/14

29.6

25.3

22.9

9.8

10.1

31/01/15

9.6

11.5

1.3

6.1

7.1

31/01/16

11.3

11.8

8.2

(1.8)

(4.6)

31/01/17

9.2

14.9

31.8

25.7

20.1

31/01/18

31.3

21.1

22.4

17.8

11.3

Source: Morningstar, Thompson Datastream. Note: All % on a total return basis in GBP.

Investment strategy: Bottom-up, high-conviction

EAT aims to achieve capital growth through investment in small and medium-sized listed companies in Europe ex-UK. Its investment approach is bottom-up, seeking high-quality companies with long-term growth potential, at reasonable valuations. Meeting company managements and undertaking its own in-depth analysis are important parts of EAT’s investment process, and the manager is supported by a well-resourced team of European equities specialists. Unconstrained by sector and geographic weights, the portfolio of 40-60 stocks represents the manager’s high-conviction stock picks.

Market outlook: Earnings recoveries can broaden

Small-cap European equities have had another year of strong performance in 2017, and the EMIX Smaller Europe ex-UK index rose 23.3% in sterling terms. Higher valuations present a headwind for this asset class. However, earnings recoveries have been heavily skewed to global sectors (excluding commodities), while many domestic sectors have yet to recover or have lagged behind. Economic recovery has been broadening across Europe, and positive leading indicators in H217 augur well for earnings prospects to extend beyond export sectors.

Valuation: Modest 0.4% discount to cum income NAV

Over the past three years, EAT has mostly traded at a modest premium to cum income NAV, although it currently trades at a 0.8% discount. This sets it apart from the peer group, which trades at discounts to NAV, and is likely a reflection of EAT’s 5.4% dividend yield. EAT’s board recently declared a total €0.88 dividend payable for 2018, representing an 11.6% increase over 2017.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

European Assets Trust is an investment company incorporated in the Netherlands and listed on the LSE and Euronext Amsterdam. It targets capital growth through investment in quoted small and medium-sized companies in Europe (ex-UK), taking the EMIX Smaller Europe ex-UK index as a benchmark. It has adopted a high distribution policy; dividends have been paid from a combination of income and capital.

5 January 2018: Declaration of 2018 total dividend €0.88 per share, payable in four equal instalments (previously three instalments).

16 November 2017: Announcement of a tiered management fee; assets in excess of €500m will be charged at a reduced rate of 0.65%.

31 August 2017: Final dividend paid net 0.26p per share.

2 August 2017: Interim results announced. Sterling NAV TR +17.3% vs 16.2% for benchmark. Sterling share price TR 30.3%.

Forthcoming

Capital structure

Fund details

AGM

May 2018

Ongoing charges

1.1%

Group

BMO Global Asset Mgt (formerly F&C)

Final results

March 2018

Net cash

0.0% as at end-Dec 2017

Manager

Sam Cosh

Year end

December

Annual mgmt fee

0.8% of gross assets reducing to 0.65% above €500m

Address

Exchange House, Primrose Street, London, EC2A 2NY

Dividend paid

Quarterly

Performance fee

None

Launch date

1972

Trust life

Indefinite

Phone

+44 (0)800 136420

Continuation vote

None

Loan facilities

€45m with Kas Bank

Website

www.europeanassets.eu

Dividend policy and history

Share buyback policy and history

The board targets a distribution of 6% of euro-denominated NAV as at the end of the preceding year, payable in January, April, July and October.

EAT is authorised to both repurchase and allot its ordinary shares. The chart of buybacks and issuance excludes shares issued as scrip dividends.

Shareholder base (as at 31 January 2018)

Portfolio exposure by geography (as at 31 December 2017)

Top 10 holdings (as at 31 December 2017)

Portfolio weight %

Company

Country

Main area of business

31 December 2017

31 December 2016*

CTS Eventim

Germany

Concert and ticketing

3.6

N/A

Gerresheimer

Germany

Glass and plastic containers

3.6

4.2

Cerved Information Solutions

Italy

Solutions credit information provider

3.4

4.2

Forbo Holding

Switzerland

Flooring, adhesives and conveyor belts

3.4

4.4

Sparebank

Norway

Banking

3.4

N/A

Storebrand

Norway

Long-term savings and insurance

3.3

N/A

Origin Enterprises

Ireland

Agricultural nutrition

3.2

3.8

Vidrala

Spain

Glass bottle manufacturer

3.1

N/A

Amer Sports

Ireland

Sporting goods

3.1

3.5

Norma Group

Germany

Joining machinery manufacturer

3.0

N/A

Top 10 (% of holdings)

33.1

38.0

Source: European Assets Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in December 2016 top 10.

Market outlook: A broadening recovery in Europe

As shown in the left-hand chart of Exhibit 2, European equities performed strongly in 2017, in particular smaller companies outside the UK. The EMIX Smaller Europe ex-UK index rose by 23.3%, significantly outpacing the FTSE AW Europe ex-UK index (16.9%) and the FTSE World index (13.8%). This has been driven by a recovery in earnings and relatively benign political outcomes, including the diffusion of fears over the outcome of German elections and Catalan secession. Smaller companies have particularly benefited from the broadening of Europe’s recovery beyond exporters to domestic economies, signalling a cyclical upturn for the region. The right-hand chart shows valuations are no longer cheap and could pose a challenge to continued share price performance, absent continued earnings momentum. The earnings recovery cycle in Europe had been led by global sectors (ex-commodities). However, domestic sectors started to provide a more balanced recovery from H217. Economic leading indicators during H217 have continued to be positive, an encouraging sign for earnings recoveries to extend into the current year.

Exhibit 2: Market performance and valuation

European and world index total returns over five years (£)

Valuation metrics for European small cap, large cap and world equities*

Source: Thomson Datastream, Edison Investment Research, Bloomberg, MSCI. Note: *Valuation data as at 6 February 2018.

Fund profile: High-yield European small-cap fund

EAT was launched as a Dutch company in 1972 and is dual-listed on the London and Amsterdam stock exchanges. Its objective is to generate capital growth through investment in listed small and medium-sized companies in Europe (excluding the UK), defined as those with a market capitalisation below that of the largest company in the EMIX Smaller European Companies (ex-UK) Index. Companies within this segment of the market typically have lower trading volumes than large-cap stocks, and can require a more patient approach to investing, thus a closed-ended investment trust structure is well suited to this asset class.

The investment approach is fundamental, seeking reasonably valued, high-quality companies to build a high-conviction 40-60 stock portfolio. Sam Cosh has been the lead portfolio manager since 2011 and is supported by co-fund manager Lucy Morris. They are members of a 12-strong European equities team at BMO Global Asset Management, from which they are able to draw considerable expertise. The board adopts a high distribution policy to pay dividends representing 6% of prior year-end NAV in euro terms, funded from income and other reserves. EAT’s current yield of 5.3% is significantly higher than its peers (see Exhibit 8).

The fund manager: Sam Cosh

The manager’s view: Still finding exciting investments

High valuations for quality European small-cap equities remains a challenge, and the team’s ‘patient fishermen’ list of candidate stocks has seen little movement into the portfolio, as share price corrections have not materialised. However, Cosh and his team continue to find interesting ideas from meeting with new companies, in particular those less well-known to the investment community, typically those sparsely covered by sell-side brokers.

Furthermore, Cosh finds conventional headline valuations less informative, focusing instead on long-term cash flow generation, which is not captured by metrics such as P/E and price-to-book multiples. He notes that there are many ‘pockets’ where companies have yet to see earnings recoveries, or where they are nascent. Cyclical earnings recoveries are most mature for exporters, while domestically focused companies have typically been laggards. Cosh expects Europe’s economic recovery to continue to extend beyond Germany and the export sectors, which presents interesting investment opportunities elsewhere.

Recent additions to the portfolio illustrate these views. Spain-listed Fluidra was not previously on the team’s radar and the stock is not well covered by the sell side. Fluidra is the global market leader in the construction and maintenance of swimming pools outside the US. Its market position, combined with a strong brand and well entrenched sales network, creates a high barrier to entry for competitors. Its business cycle is aligned to a recovery in the European housing market, which Cosh believes is far from mature. The manager and his colleagues have also been impressed with the management’s capability and ability to allocate capital. A recent merger with a significant US player, Zodiac, extends its global footprint into the world’s largest swimming pool market, a development which was very well received by investors.

Sparebank is a Norwegian regional bank. Since the financial crisis, bank shares have suffered from general investor concerns over asset quality and capital adequacy issues, while Norwegian banks suffered additionally due to weak oil prices further depressing the country’s prospects for economic recovery. At the time of acquisition, Cosh viewed the stock’s below book valuation as unjustifiably pessimistic for a bank with a strong balance sheet and franchise. Sparebank was generating returns on equity (ROE) of around 11-12% and he believes an ROE of 14% is in prospect over the next few years, which could help re-rate the stock to a premium-to-book valuation.

Asset allocation

Investment process: Bottom-up and disciplined

The investment process is bottom-up. Unconstrained by benchmark weight considerations, the portfolio of around 40 to 60 stocks is a reflection of the manager’s high-conviction stock selection. The universe of European small and mid-cap companies consists of over 2,000 names, and a well-resourced team enables screening and initial analysis to identify around 150 companies for further consideration. The manager is particularly focused on a company’s characteristics of quality, management and valuation. Companies must have competitive advantages, attractive business models, low leverage and be cash generative. Managements must be good allocators of capital, capable, with appropriate incentives in place to align interests with those of minority shareholders. Valuations should be reasonable, presenting upside to intrinsic value and durable return potential. Meeting managements is an important part of the investment process to help establish conviction in each company, while detailed propriety research is produced for candidate companies, including valuation targets and triggers for selling the stock. These disciplines give rise to the ‘patient fishermen’ list of companies that meet the manager’s stringent investment criteria, but are currently unattractively valued, awaiting lower share price levels.

EAT further defines its investible universe into four investment themes:

Durable franchise companies have robust business models, disciplined management, sustainable returns and modest growth. EAT targets holding 40-50% of the portfolio in these stocks.

Wide moat growth companies have sustainable competitive advantages and higher capital growth potential. They make up around 25-35% of the portfolio. Together with durable franchises, these are, broadly speaking, ‘quality’ stocks.

Transformation/recovery stocks represent around 15-25% of the portfolio and are companies undergoing change that can positively turnaround prospects, such as new management or reallocation of capital.

Deep value stocks are typically out of favour companies, presenting very attractive valuations, where the manager identifies a good trade-off between risk and reward. The portfolio targets holding 10-15% in these stocks, and in the currently environment the manager finds this the most challenging category for identifying investments.

Current portfolio positioning

EAT is unconstrained by country and sector weights and these exposures in the portfolio reflect stock selection rather than asset allocation. As shown in Exhibit 3, there have been significant geographical changes to the portfolio over the past year to end-December 2017, while sector changes are relatively modest.

Exhibit 3: Portfolio geographic and industrial exposure* (% unless stated)

Portfolio end-Dec 2017

Portfolio end- Dec 2016

Change (pp)

Portfolio end- Dec 2017

Portfolio end- Dec 2016

Change (pp)

Germany

21.0

20.1

0.9

Industrials

30.7

33.3

(2.6)

Spain

13.3

7.2

6.1

Consumer goods

24.9

24.6

0.3

Ireland

11.4

15.7

(4.3)

Financials

16.4

15.3

1.1

Sweden

11.1

7.6

3.5

Consumer services

10.6

11.3

(0.7)

Norway

8.6

8.0

0.6

Basic materials

6.2

4.7

1.5

Switzerland

8.5

6.9

1.6

Healthcare

5.9

6.2

(0.3)

Italy

6.4

13.5

(7.1)

Technology

5.4

4.6

0.8

Netherlands

5.4

6.8

(1.4)

Denmark

5.0

4.4

0.6

France

4.2

3.0

1.2

Finland

3.1

3.7

(0.6)

Austria

2.1

0.0

2.1

Portugal

0.0

3.1

(3.1)

Total

100.0

100.0

Total

100.0

100.0

Source: European Assets Trust, Edison Investment Research. Note: *All figures are subject to rounding.

The biggest country exposure increase is to Spain (6.1pp), which includes new positions, such as Fluidra (discussed on page 4), and strong gains from glass bottle manufacturer Vidrala, now a top 10 holding. A recent acquisition of a competitor in Portugal bolsters the company’s scale and market position in the Iberian Peninsula. The attractive valuation achieved by the company helped reaffirm Cosh’s confidence in the company’s earnings prospects and ability to allocate capital. Sweden’s weight has increased by 3.5pp following the purchase of Alimak, a leading supplier of lifts, hoists and work platforms to the construction industry. The company made two acquisitions last year, which the manager believes offer good synergies and, under Alimak’s management, could become more profitable.

The largest decline in country exposure was to Italy (-7.1pp) where EAT’s stocks performed well operationally. Its Italian holdings were also boosted by tax changes favourable to investment in small-caps for domestic investors, helping propel valuations to levels prompting the manager to take profits. Ireland’s weight in the portfolio declined by 4.3pp. Many of EATs holdings in the country suffered significant falls in share prices as a result of the EU referendum, as they were heavily exposed to the UK and sterling. A rigorous assessment at that time led the manager to hold onto most of the positions, and opportunistically added to selected holdings. A recovery in the Irish stock market subsequently has presented excellent profit-taking opportunities for the portfolio. Although this has reduced the portfolio’s exposure to the country, the manager has nevertheless continued to find new investments, to capture Ireland’s domestic recovery. This includes Cairn Homes, a residential property developer with a large and prime land bank, well placed to capitalise on a shortfall in housing supply, caused by a lack of homebuilding in the years following the financial crisis.

The manager steadfastly focuses on investing in good businesses, with strong potential for long-term growth, at reasonable valuations. He believes the portfolio is well positioned to benefit from the broadening economic recovery across Europe.

Performance: Solid long-term performance

Exhibits 4 and 5 show EAT’s track record. Its NAV total return has underperformed the benchmark over one, three, and five years, and outperformed over 10 years. EAT’s share price, however, has returned gains above the index over one, five and 10 years as the discount narrowed, likely a reflection of investors’ appetite for yield. The most pronounced underperformance is over three years due to a marked decline at the time of, and in the months following the EU referendum in June 2016 (Exhibit 6). The trust was poorly positioned for the referendum outcome, including a significant exposure to Irish companies with large UK exposures, which fell sharply as sterling weakened and investors feared a deteriorating outlook for the UK economy. Performance has since stabilised, but this period of weakness will continue to weigh on three year performance relative to the index.

Exhibit 4: Investment trust performance to 31 December 2017

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to EMIX Smaller Europe ex-UK

(0.6)

0.2

(1.7)

10.3

(10.6)

6.6

19.0

NAV relative to EMIX Smaller Europe ex-UK

0.1

0.1

(1.6)

(0.5)

(11.0)

(0.7)

4.7

Price relative to FTSE AW Europe ex-UK

1.3

1.3

0.1

16.3

6.6

40.3

62.1

NAV relative to FTSE AW Europe ex-UK

2.0

1.2

0.2

5.0

6.2

30.7

42.5

Price relative to FTSE All-Share

(2.7)

(3.1)

(2.6)

20.2

19.4

57.3

53.9

NAV relative to FTSE All-Share

(2.1)

(3.1)

(2.5)

8.4

18.9

46.5

35.3

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-December 2017. Geometric calculation.

Exhibit 6: NAV total return performance relative to benchmark over five years

Source: Thomson Datastream, Edison Investment Research

Discount: Modest to cum-income NAV

At the current share price, EAT is trading at a 0.4% discount to cum-income NAV. This is above the three-year average discount of 0.9% and within the range of 3.7% to -9.6%. As shown in Exhibit 7, over this period EAT has mostly traded at a premium to cum income NAV. The three-year average has been skewed by a period of unusual volatility in 2016, encompassing events such as the EU referendum vote and US presidential election.

Exhibit 7: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

EAT has one class of share; there are currently 35.3m ordinary shares in issue. The trust has a €45m loan facility with Kas Bank, and as at end-December 2017 net gearing was zero. An annual management fee is paid to the investment manager, BMO Global Asset Management, and a tiered fee was recently introduced on 16 November 2017. The company maintains a 0.8% pa fee on the value of funds below €500m, reducing to 0.65% pa on funds above €500m The Dutch management board, FCA Management, is paid an annual fee (€114,091 in 2016).

Dividend policy and record

Barring unforeseen circumstances, the board’s dividend policy is to pay an annual dividend equivalent to 6% of the NAV of the company at the end of the preceding year, funded from current-year net profits as well as other reserves. On 5 January 2018 EAT’s board declared total dividends for 2018 of €0.88 per share (2017: €0.7884), an increase of 11.6%. The total dividend in sterling terms will be determined by the exchange rates prevailing on the payment dates. The board also announced that, with immediate effect, the dividend will be paid in four equal instalments in January, April, July and October (previously three instalments in January, May and August). A scrip alternative (to receive shares instead of cash) is available. For 2017, total net dividends paid amounted to £0.69, representing a dividend yield of 5.4% at the current share price.

Peer group comparison

The AIC European Smaller Companies sector is a small universe consisting of four trusts. Absolute returns for the sector have been strong over one, three, five and 10 years, and EAT ranks third or fourth in each of these periods. EAT stands out with a significantly higher yield than its peers and is the only trust to trade at a premium to NAV.

Exhibit 8: AIC European Smaller Companies peer group as at 6 February 2018*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (ex-par)

Ongoing charge

Perf. fee

Net gearing

Dividend yield (%)

European Assets Trust

446.8

16.6

50.7

110.5

184.7

1.2

1.1

No

101

5.4

JPMorgan European Smaller Cos

644.8

23.8

82.8

146.3

229.1

(6.5)

1.1

No

107

1.2

Montanaro European Smaller

130.5

17.4

73.5

76.3

185.7

(11.8)

1.3

No

102

1.1

TR European Growth

570.2

25.0

99.2

170.5

201.1

(3.1)

0.8

Yes

114

1.0

Weighted average in sector

21.9

79.4

140.0

205.9

(3.9)

1.0

107

2.2

EAT rank in sector

3

4

4

3

4

1

3

4

1

Source: Morningstar, Edison Investment Research. Note: *Performance data to 5 February 2018. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

EAT is incorporated in the Netherlands and has a two-tiered board structure. The management board has a single director, FCA Management, which is represented by Wilbert van Twuijver and Tim Koster. The supervisory board is similar to the board of directors of a UK investment trust and consists of five independent members: Chairman Jack Perry (elected in 2014), deputy chairman and chair of the audit committee, Professor Robert van der Meer (2007), senior independent director Julia Bond (2014), Laurence Jacquot (2011) and Martin Breuer (2016).

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by European Assets Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by European Assets Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues