From European Opportunities Trust plc
Objective of the Company
The objective of the Company is to invest in securities of European companies and in sectors or geographical areas which are considered by the Investment Adviser to offer good prospects for capital growth, taking into account economic trends and business development.
The Company will, at all times, invest and manage its assets, with the objective of spreading risk and in accordance with the following policies:
Notwithstanding the broad powers of investment available to the Company as a closed-ended fund, the Board has adopted the following investment restrictions:
no single holding shall constitute more than 10% of the Company’s total assets (calculated at the time of investment);
the Company will not invest in unlisted securities;
the Company will not invest in derivative instruments, whether for efficient portfolio management, gearing or investment purposes;
the Company will not invest in other listed closed-ended investment funds.
the Company shall not take legal or management control over any investments in its portfolio; and
not more than 50% of the Company’s investments may be in securities which are not qualifying securities or government securities for the purposes of the UK ISA Regulations.
The Directors consider that long-term capital growth can be enhanced by the use of gearing through bank borrowings. The Directors consider that the Company’s level of gearing should be maintained at appropriate levels, with sufficient flexibility to enable the Company to adapt at short notice to changes in market conditions.
The Board oversees the level of gearing in the Company and reviews the position with the Investment Adviser on a regular basis. In normal circumstances the Board does not expect the level of gearing to exceed 20% of the Company’s total assets (calculated at the time of borrowing).
The Investment Adviser adopts a stock picking approach in the belief that a thorough analysis and understanding of a company is the best way to identify long-term superior growth prospects. This understanding begins with identifying those companies where the ownership structure and incumbent management are conducive to the realisation of the aim of achieving superior long-term earnings growth.
The Investment Adviser will seek to identify companies which enjoy certain key business characteristics including some or all of the following:
a strong management record and team, and the confidence that the Investment Adviser has in that management’s ability to explain and account for its actions;
proprietary technology and other factors which indicate a sustainable competitive advantage;
a reasonable expectation that demand for their products or services will enjoy long-term growth; and
an understanding that structural changes are likely to benefit rather than negatively impact that company’s prospects.
In analysing potential investments, the Investment Adviser will employ differing valuation techniques depending on their relevance to the business characteristics of a particular company. However, the underlying feature will be the sustainability and growth of free cashflow in the long-term.
Portfolio risk is mitigated by investment in a diversified spread of investments. The Investment Adviser is not constrained by benchmark weightings, sector, geographical location within Europe or market capitalisation or size of investee companies.
Any material change in the investment policy of the Company described above may only be made with the approval of shareholders by an ordinary resolution.
Primary benchmark index: MSCI Europe Total Return Index in GBP (MXEU)
Secondary benchmark index: MSCI Europe ex-UK Total Return Index in GBP (MXEUG)