Annual Financial Results Report

RNS Number : 9835W

Aberdeen Standard Eur Lgstc Inc PLC

29 April 2021

 

ABERDEEN STANDARD EUROPEAN LOGISTICS INCOME PLC (the "Company")

Legal Entity Identifier (LEI):  213800I9IYIKKNRT3G50

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

Strategic focus on high growth Continental Europe mid box logistics sector delivers strong NAV and earnings growth

Aberdeen Standard European Logistics Income PLC, the Continental European investor in modern warehouses, which is managed by Aberdeen Standard Investments, today announces its final results for the 12 months to 31 December 2020.

Strong financial performance, with valuation increase underpinning double-digit NAV total return:

· Net asset value increased by 8.1% to €1.20 (31 December 2019: €1.11)

· Share price total return +26.6% (31 December 2019: -7%)

· NAV total return of +13.6% (31 December 2019: 8.6%), primarily driven by favourable yield movement

· IFRS earnings per share 14.8 euro cents (31 December 2019: 9.6 euro cents)

· €65 million of cash and undrawn facilities, following a €40 million credit facility signed with Investec Bank, providing additional financial and operational flexibility

· Loan to Value of 31.4% (all-in cost of debt 1.36%, average term to maturity 7.3 years)

· Dividends of 4.96 pence per share paid in respect of the year, in line with the target for the financial year

Asset and counterparty quality delivered resilient income, with acquisitions supporting growth ambitions:

· Strong rent collection with 97% of rent due for the year collected

· Portfolio valued at €425 million, reflecting yield compression and new acquisitions; positive progression in valuations expected into 2021

· Two acquisitions, totalling €78 million, taking the total portfolio to 15 modern properties, diversified by geography and tenant:

· A 43,300 sqm warehouse in Den Hoorn, the Netherlands, purchased for €49.9 million, reflecting a net initial yield of 4.5%

· Post year end, the acquisition of a 34,000 sqm warehouse in Lodz, Poland, for €28 million, reflecting a net initial yield of 5.6%

· Weighted average unexpired lease term ("WAULT") increased to 11 years

Modern, fit for purpose portfolio underpinning continued ESG outperformance:

· GRESB score of 79/100, which compares favourably with the 68/100 average score for the Western Europe Industrial Distribution Warehouse peer group

· Four out of a maximum of five Green Stars awarded

Tony Roper, Chairman, Aberdeen Standard European Income Logistics, commented:

"As Europe's economy starts to open up once again and the mass vaccination programmes allow for a return to some sort of 'normal', the fundamentals underpinning investment in logistics real estate should continue to drive further rental and capital growth which equally should translate into attractive returns for shareholders. Progression in portfolio valuations is expected through 2021 with Q1 looking positive.

"The Continental European logistics market offers a compelling investment case, with e-commerce penetration rates lagging behind other comparable regions. With the pandemic having accelerated the shift to online, businesses have had to urgently future proof their supply chains to meet resulting demand.  As a result, we retain a strong conviction in our strategy, which predates many of these market trends and which to date has delivered a high quality portfolio with strong sustainability credentials, the performance of which has allowed us to reward shareholders with an attractive and, more importantly, stable dividend. Looking forward, a clear priority is to grow the Company, in a sensible and measured way, in order to enjoy the benefits that come with increased scale and liquidity."

Evert Castelein, Lead Fund Manager, Aberdeen Standard European Income Logistics, added:

"As the logistics sector continues to mature, we expect to see increased polarisation in performance across the different asset types. We see mid box properties, in established distribution hubs with good connectivity, as especially attractive, offering strong income and capital appreciation opportunities, whilst also benefitting from their suitability for a range of uses, further underpinning liquidity. With access to a widespread network of local teams giving us a competitive advantage across both our investment and asset management activity, and a clear path to further improving the portfolio's already strong ESG credentials, we are well placed to continue delivering attractive returns for the Company's shareholders."

-Ends-

For further information please contact:

Aberdeen Asset Management PLC  [phone]

Luke Mason

Gary Jones

Investec Bank plc  [phone]

Dominic Waters

Neil Brierley

Will Barnett

David Yovichic

Denis Flanagan

FTI Consulting  [phone]

Dido Laurimore

Richard Gotla

James McEwan

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020

1.  STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS

Financial Highlights as at 31 December 2020

Net asset value total return 1	Net Asset Value (€'000)	Net asset value per share (€)
2020:  13.6% 2019:  8.6%	2020: 293,596 2019: 260,277	2020: 1.20 2019: 1.11
Share price total return 1	Premium/(Discount) to Net Asset Value 1	Ordinary dividend per share
2020:  26.6% 2019:  (7.0)%	2020  0.5% 2019: (4.0)%	2020: 5.64ȼ 2019: 5.75 ȼ 3
Ongoing Charges	IFRS Earnings Per Share	Portfolio Valuation (€'000) 2
2020:  1.3% 2019:  1.5%	2020: 14.8 2019:  9.6ȼ	2020: 425,248 2019: 348,519
Number of assets	Average lease length in years (excl breaks)	Loan-to-value (%)
2020: 14 2019: 13	2020: 1.0 2019: 9.7	2020: 31.4% 2019: 28.4%
Average building size (sqm)
27,710

1 Alternative Performance Measure - see glossary on page 115 of the published Annual Report and financial statements for the year ended 31 December 2020.

2 Excluding IFRS 16 lease liabilities and rent incentive debtor.

3 Included irregular dividend pattern following launch.

2.  CHAIRMAN'S STATEMENT

For the Year ended 31 December 2020

Dear Shareholder,

It is a pleasure to present to you the Company's third Annual Report in respect of the year ended 31 December 2020.

As I sat down to write my text this time last year with the whole world in the grip of COVID-19, little did I or my colleagues on the Board realise how long this terrible pandemic would last. Finally, with vaccine discovery and rollout, there is some light at the end of, what has been for many, a very long tunnel. Our thoughts are with all those who have been impacted by this virus which has had a far-reaching impact on so many people and businesses as well as the global economy. As I relayed last year, many of our tenants, but not all, are involved in the logistics of delivery across the important food supply chain, pharmaceuticals or the rapidly increasing direct to home delivery services. These are parts of the market which have seen extraordinarily fast growth, with little to suggest this is not a permanent shift.

Our Investment Manager's on-the-ground European based teams remain in regular contact with all our tenants seeking to understand their current and future requirements at this time.

Overview

As at 31 December 2020, the Company's property portfolio was independently valued at €430.2 million (£386.7 million) and consisted of 14 assets located across five European countries. This latest valuation included a strong 6.0% uplift of €24.5 million for Q4 2020. The Company's net asset value total return for the year was 13.6%. The valuation increase was predominantly the result of yield compression across the entire portfolio, driven by a combination of the strength of the European logistics real estate market alongside the high-quality nature of the Company's portfolio. This was best demonstrated through consistently high levels of rent collection during 2020 and this compares favourably with other real estate sectors which have been less resilient through COVID-19.

The latter part of 2020 saw a significant increase in the value of prime European logistics real estate assets let to high calibre tenants on long leases. Supply remains constrained and occupier demand for mid-size logistics buildings, which have the benefit of being suitable for an increasingly diverse range of occupiers, continues to strengthen. When combined with the buoyant investment market witnessed, this has driven tighter pricing in transactions, accelerating yield compression and increasing valuations.

In January 2020, the Company completed the acquisition of an urban logistics warehouse in Den Hoorn, the Netherlands, for a net purchase price of €49.9 million.

The newly built warehouse is well located between the cities of the Hague and Rotterdam and already benefits from internal LED lighting and new solar roof panels will add further sustainable credentials to the investment in the course of 2021. This purchase meant that we were fully invested.

In Q4 2020, the Company announced that it had signed a Letter of Intent for the purchase of a new warehouse in Lodz, Poland, valued at approximately €28 million. The Investment Manager entered into advanced due diligence and closed the transaction on 15 April 2021. This 34,000 square metre warehouse, which is located in one of the CEE region's most strategically important manufacturing and logistics hubs, provides an attractive net initial yield of 5.6%, is well located and is 100% leased to six tenants with an average WAULT of 6.7 years.

Our Investment Manager, which has a clear advantage of being able to draw on the relationships and market knowledge of local teams across Europe, has consistently invested with the aim of creating a portfolio of assets diversified by both geography and tenant throughout Europe, targeting well-located assets in established distribution hubs and within close proximity of cities that have substantial labour pools and excellent transport links. Further details on the composition of the portfolio are provided in the Investment Manager's Report.

The Company continues with its objective of seeking to target for an investor at launch an annual yield of 5.0 per cent. per Ordinary Share and a total Shareholder return (NAV total return) of 7.5 per cent. per annum (each in Euro terms). The longer-term nature and CPI indexation of the leases that we have signed with tenants provides for a durability of income that should support our targets.

Results

The audited Net Asset Value ("NAV") per Share as at 31 December 2020 was €1.20 (GBp - 107.95p), compared with the NAV per Share of €1.11 (GBp - 94.2p) at the end of 2019, reflecting, with the interim dividends declared, a NAV total return of 13.6% for the year in euro terms (+20.0% in sterling).

The closing Ordinary Share price at 31 December 2020 was 108.5p (31 December 2019 - 90.4p), representing a small premium to NAV per Share of 0.5%. With dividends reinvested this represented a strong share price total return over the year of 26.6%. At the date of this report the latest closing price was 115.0p, predominantly reflecting the strong underlying performance of the Company's NAV and the continued demand from investors for exposure to the logistics sector and long dated indexed income.

Rent Collection / COVID-19

Economies across Europe and most business sectors have suffered from the long-running government enforced lockdowns that were witnessed in 2020 and to date.

As a result, the Investment Manager's on-the-ground real estate asset managers have had discussions with our tenants to understand their short-term financial difficulties. During Q2 2020, the Company successfully concluded negotiations with certain tenants negatively impacted by COVID-19. Following the conclusion of the quarter, the Company confirmed that it had agreed some short-term rent deferrals and some rent-free periods, in exchange for material lease extensions.

Overall, rent collection for the 2020 financial year was strong in that the Company collected 97% of the rent due with the 3% balance being subject to the above mentioned negotiations.

For Q1 2021, the Company collected 96% of rents due and it is pleasing to report that excluding Office Depot France, as discussed below, no further new requests for support have been received from tenants and rent collection remains good.

The Board, via the Investment Manager, continues to monitor closely rent collections, cash forecasts, loan covenants and the working practices of the Company's suppliers and the impact that COVID-19 has had on all stakeholders.

Tenant Update - Office Dépôt France

Office Dépôt France, the sole tenant occupying the Meung-sur-Loire asset in France, sought court protection and the appointment of an administrator on 5 February 2021. The property serves as the tenant's key national distribution hub, reflecting its strategic location in one of France's fastest-growing logistics regions.

As at 31 December 2020 the property was valued at €27.9 million, or 6.5% of the portfolio's gross asset value. The annual passing rent on the property represents 6.4% of the overall portfolio annual contracted rent.

The warehouse has attractive qualities and is ideally located for national distribution just south of Orleans and close to main motorways towards Bordeaux/ Northern Spain and towards Marseille/ Lyon/ Toulouse. This location has grown in importance due to the lack of greenfield locations in and around Paris.

Whilst undertaking a sale process for the business, the administrator has indicated that rental payments should be made in respect of the period from the date of its appointment. The warehouse is an important part of the company's French distribution network. A small element of 2020 deferred rent and that for January 2021 remains payable, amounting in aggregate to €258,000 as previously announced. The Investment Manager continues to monitor the situation and assess options in the event the building becomes vacant.

Dividends

Unchanged first, second and third interim dividends in respect of the year ended 31 December 2020 of 1.41 euro cents (equivalent to 1.24p) per Ordinary Share were paid to Shareholders on 26 June 2020, 25 September 2020 and 30 December 2020 respectively.

On 24 February 2021 the Board declared a fourth interim dividend of 1.41 euro cents per Ordinary Share (equivalent to 1.24p) which was paid to Shareholders on 26 March 2021, making a total of 5.64 euro cents paid in respect of the financial year under review. The equivalent sterling rate paid was 4.96p per Share (2019 - 5.08p per Share).

It is the intention to continue to pay quarterly interim dividends in line with our policy. Dividends are declared in respect of the quarters ending on the following dates: 31 March, 30 June, 30 September and 31 December in each year. The dividend target and any dividend payment may be made up of both dividend income and income which is designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts. Further details on this breakdown can be found on page 18 of the published Annual Report for the year ended 31 December 2020.

Share Issuance

The Investment Manager reviews a steady pipeline of potential acquisitions for the Company for which additional capital will be required and for which the new banking agreement signed with Investec Bank (see below) may be used for temporary financing. On 26 June 2020 the Board announced the issue of five million new Ordinary shares at a price of 105 pence per share in response to specific investor demand which was followed on 4 August 2020 by the issue of a further five million new Ordinary shares at a price of 104 pence. These issues in aggregate raised an additional £10.45 million (equivalent to approximately €11.5 million) which contributed to the funding of the latest Polish property acquisition.

On 17 March 2021 the Company announced the further issue of 18.45 million new Ordinary shares in the capital of the Company at a price of 105 pence per share, representing a premium to the prevailing NAV and raising gross proceeds of £19.4 million (equivalent to approximately €22.6 million). The shares were issued under the remaining authority granted by shareholders at the AGM in 2020. The Issue was over-subscribed at the issue price and a scaling back process was undertaken. It was very pleasing to see the support shown from our existing shareholders as well as the introduction of some new names on the register. By utilising the total remaining issuance authority and the Company's €40 million loan facility, the Investment Manager has sufficient capital to fund its near-term acquisition pipeline. At the time of writing, the total number of shares in issue and therefore with voting rights in the Company is 262,950,001 shares.

Financing

Fixed term debt from banks is secured on certain assets or groups of assets within the portfolio.

These non-recourse loans range in maturities between 4.4 and 8.2 years with interest rates ranging between 0.94% and 1.62% per annum.

In October the Company entered into a new uncommitted four year €40 million master facilities loan agreement (the "Facility") with Investec Bank plc. Under the Facility, the Company may make requests for drawdowns at selected short-duration tenors, as and when required, to fund acquisitions or for other liquidity requirements. Within the Facility, Investec also agreed to make available a £3.3 million committed revolving credit facility ("RCF") which will be carved out of the total €40 million limit of the Facility. The purpose of this RCF was partly to replace the Company's existing £6 million Société Generale overdraft facility and provide a small amount of committed liquidity with which to cover liquidity gaps.

The master facility agreement includes covenants of a type typical of such an agreement including: a maximum ratio in respect of the loan to adjusted eligible net asset value of 25%, maximum leverage ratio of 55% to gross asset value, a dividend yield test with the minimum dividend paid to loan value of 25% and a diversification test with a minimum number of five eligible investments.

This facility sits at the parent company level and will give added flexibility to the Company. The current average interest rate on the total fixed term debt arrangements of €144.6 million is 1.4%.

The Board continues to keep the level of borrowings under review with the aggregate borrowings always subject to the absolute maximum set at 50 per cent. of gross assets, calculated at the time of drawdown for a property purchase. Despite a target gearing level of 35%, the actual level of gearing may fluctuate over the Company's life as and when new assets are acquired or whilst short term asset management initiatives are being undertaken. At the year-end gearing was 31.4%.

Banking covenants are reviewed by the Investment Manager on a regular basis and reported to the Board.

EPRA Index Inclusion

During the review period, it was pleasing to advise shareholders that effective from 22 June 2020 the Company gained inclusion in the FTSE EPRA/NAREIT Global Real Estate Index Series. This was welcome news and beneficial for the Company as any increase in the liquidity of the Ordinary shares helps further broaden the Company's investor base.

GRESB and Asset Management

The Investment Manager continues to focus on asset management initiatives, leveraging its network of locally based asset managers to enhance the value of the portfolio's assets. This includes continuing discussions around building extensions and improvements to sites both internally and externally for the benefit of tenants and their workforces.

I was very pleased to report towards the end of the year that in the delayed 2020 GRESB survey (Global Real Estate Sustainability Benchmark) the Company had been awarded four Green Stars out of a maximum of five. This compared to the previous two stars awarded in 2019.

The portfolio's GRESB score of 79/100 compares favourably against the 68/100 average score for the Western Europe Industrial Distribution Warehouse peer group, which contains nineteen funds.

This latest scoring reflects the progress made to date with regards to environmental, social and governance ("ESG") factors thanks to solar panel project initiatives, tenant satisfaction surveys, light sustainability audits and 100% data collection across the portfolio linked to Envizi which is used to analyse energy consumption. In addition, all buildings have LED lighting and the Investment Manager continues with plans to further enhance ESG credentials going forward. The Investment Manager obtains volumetric usage data on energy use, waste disposal and water consumption for reporting and possible cost savings.

ESG is embedded within the Investment Manager's investment process and although many of our assets are recently built, a programme of works continues to enhance areas where improvements can be made.

The addition of solar panels for green energy and other initiatives improved our scoring in the GRESB Survey and we continue to look at sustainability issues. Now more than ever the Investment Manager's people on the ground act as an important conduit to our tenants, seeking to maintain clear communication links to understand how they are operating, their concerns and their requirements for the future.

Sustainability is fundamental to our ability to create long-term value for all stakeholders and the Investment Manager has defined and continues to implement a strategy to support our sustainability targets for positive environmental and socio-economic impacts.

A section on ESG within the Investment Manager's report gives further clarity on the process and importantly the ESG Impact Dial which the Company continues to roll out.

Governance

The Company is a member of the Association of Investment Companies and seeks to follow best practice regarding appropriate disclosure.

In accordance with good governance, the Directors offered to meet with a number of our substantial Shareholders during the year to hear their views on the Company and its performance. Directors are available to meet with investors to discuss the Company in more detail throughout the year and may be contacted through the Company Secretary.

As travel restrictions ease, the Board will look to undertake another site visit to view more of the properties owned, meet with tenants where possible and members of local staff and advisers of the Investment Manager.

Following best practice, the whole Board is standing for re-election at the forthcoming AGM and further details on each Director may be found on pages 46 and 47 of the published Annual Report and financial statements for the year ended 31 December 2020.

Annual General Meeting

It is currently the Board's intention to hold the Company's Annual General Meeting in London on 7 June 2021 at 3:00 p.m. at the offices of Aberdeen Standard Investments, Bow Bells House, 1 Bread Street, London EC4M 9HH.

The formal Notice of AGM may be found on page 119 of the published Annual Report and financial statements for the year ended 31 December 2020.

At the time of writing, elements of the National Lockdown remain in place and shareholder attendance at AGMs is not legally permissible. It is very difficult to predict the extent to which public gatherings will be relaxed in the near future. The AGM on 7 June 2021 will therefore, be a functional only AGM. In the light of the Government guidance and social distancing measures, including the restrictions on public gatherings, and the possibility that these measures will remain in place in June, the AGM will follow the minimum legal requirements for an AGM. Arrangements will be made by the Company to ensure that the minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business be concluded.

The Board considers these arrangements to be in the best interests of shareholders given the current circumstances.

The Board strongly discourages shareholders from attending the AGM and entry will be refused if Government guidance so requires or if the Chairman considers it to be necessary.

Instead, shareholders are encouraged to exercise their votes in respect of the meeting in advance. Any questions from shareholders may be submitted to the company secretary at: [e-mail] . The Board and/or the Investment Manager will seek to respond to all such questions received either before, or after the AGM.

In addition the Company will be preparing a detailed presentation by the Investment Manager in advance of the AGM which will be available for viewing on the Company's website. We will notify shareholders of any changes to these plans by updating the Company's website at eurologisticsincome.co.uk and through an RIS announcement, where appropriate, as early as is possible before the date of the meeting.

On behalf of the Board I should like to thank shareholders in advance for their co-operation and understanding.

Outlook

The level of activity seen in the logistics market in 2020 provided the latest endorsement of our strategy when launched in 2017. 2020 was a record year of occupier demand; according to Savills, European logistics take-up reached 26 million sqm during 2020, up 12% on the level observed during 2019 and 19% above the five-year average.

Logistics remains one of the most favoured real estate sectors for investors. The logistics industry has been a stand out performer benefitting from the unprecedented disruption caused by systemic changes to the way global economies function. Logistics assets have benefited from additional occupier demand arising from necessary supply chain restructuring and the rapid increase in demand for home deliveries.

Clients demand frequency and increasing complexity whilst the nature of e-commerce, where Europe lagged the UK, has required operators to adapt faster to future shifts in consumption, particularly so since the start of the pandemic. Including the latest acquisition in Lodz, Poland, we have a portfolio of fifteen assets, with an average size of 28,000 square metres, which are strategically located close to cities, airports and major motorway routes. These urban fringe facilities, while structured for our current tenants, tend to be in the more attractive part of the sector where building reconfiguration is easier and tenant demand strongest helping to provide facilities which have optionality at the maturity of a lease. Leasing 'tension' remains robust with land values under pressure from competing uses and with income growth prospects potentially stronger than for big-boxes where risk is higher at maturity of the lease as the number of potential occupiers are more limited and where replacement costs are more in line with capital costs.

Our tenants' businesses are generally well positioned in areas which remain essential to the everyday operation of an economy. E-commerce and the move to on-line shopping and delivery continues unabated. As Europe's economy starts to open up once again and the mass vaccination programmes allow for a return to some sort of 'normal', I am confident the fundamentals underpinning investment in logistics real estate should continue to drive further rental and capital growth which will translate into attractive returns for shareholders.

The Investment Manager's pipeline of logistics assets is regularly reviewed for quality of location and tenants, and the ability to ensure that they are future fit.

We retain a strong conviction in our Investment Manager's strategy, which to date has delivered a high quality portfolio with strong sustainability credentials, the performance of which has allowed us to reward shareholders with an attractive and stable dividend. Looking forward, a clear priority is to grow the Company, albeit in a sensible and measured way, in order to enjoy the benefits that come with increased scale and liquidity.

The Board has been pleased by the strong level of rent collection through 2020, despite the global impact of the pandemic, and with the recent completion of the latest deal to purchase the 31,500 square metre warehouse in Lodz, Poland. Supported by the Board, the Investment Manager continues to evaluate a pipeline of quality assets that would diversify further our asset and tenant base and enable the Company to grow in line with our ambitions.

In December, we noted the proposed acquisition by Standard Life Aberdeen plc of 60% of Tritax Management. Tritax is a specialist logistics real estate fund manager with £5.1 billion assets under management throughout the UK and Europe. Due to the requirement to obtain regulatory approvals this transaction only completed on 1 April 2021. This regulatory approval process has delayed the Investment Manager from developing and implementing its plans for an integrated logistics team, and from having meaningful discussions with the Board. Now that the transaction has completed, these plans can be progressed and the Board looks forward to understanding how this will benefit the Company and its investment portfolio.

Further details about the Company and the assets in which it is invested are available together with the monthly factsheet and Company announcements on our website at: www.eurologisticsincome.co.uk .

Tony Roper

Chairman

28 April 2021

3.  INVESTMENT MANAGER'S REVIEW

Logistics - the flavour of the day

The year 2020 was dominated by the pandemic and its unprecedented impact on economies worldwide. The fear of spreading the virus with no vaccine developed resulted in national lockdowns, travel restrictions and many people working from home in order to keep the coronavirus under control whilst governments tried to keep their economies afloat with huge fiscal stimulus in order to limit the impact of the recession.

Logistic supply chains were disrupted, but in general the logistics sector has proven to be more resilient than other sectors such as retail, hotels, restaurants or even offices now that many of us are getting used to working from home. Structural trends, such as the rise of e-commerce, have accelerated thanks to the very big shift towards online consumption. Online sales volumes in Europe are probably now where they would have been predicted to be in six years' time, supporting increased demand for logistics space. Supply chains were perhaps too lean and efficient, focusing on 'just-in-time' deliveries, making them susceptible to external shocks. COVID-19 will likely result in a desire for the on-shoring of manufacturing activities from China back to Europe and the building up of inventory levels. This change in philosophy should make supply chains more resilient in aiming to fulfil customer orders.

Overall, the demand-side is holding up well with less than 4% vacancy rates on average across Europe, meaning that there is an undersupply situation and a real shortage of modern, well located logistics warehousing. Such strong fundamentals for the logistics sector led to many investors seeking to invest in this area. Our house view indicates that logistics will be one of the outperforming sectors in the real estate market, together with residential, and that it should continue to outperform the general real estate market over the next three to five years. Rental growth and the wall of capital that is being directed into the logistics market will in many cases lead to higher property values and further yield compression. ASELI is in a good position to benefit from these winds of change given its well located portfolio and strong rent collection witnessed over the 2020 calendar year.

ASELI - a well positioned portfolio

ASELI has a well-diversified, high quality portfolio with fifteen warehouses in five different European countries. Almost half of the Company's capital has been invested in the Netherlands, which is seen as one of the strongest logistics locations in Europe thanks to its strategic geographical location, with Rotterdam being the largest seaport in Europe. The proximity of the German hinterland and transport corridors to the south makes this an important location for large European Distribution Centres (EDCs) given it has the highest amount of logistic space in Europe in square metres per capita, just behind Belgium1.

Property values are also well supported, thanks to a lack of greenfield locations in this densely populated country. Top down country views are important, but even more important is the potential second-life of the warehouse: can the building be leased relatively easily to another company? Having local expertise in the form of our on-the-ground European-based transaction managers assists in finding the right stock at the right price.

The future letting potential of a warehouse is defined by the quality of the location and the specifications of the building. All of the buildings in the Company's portfolio are viewed as 'liquid' investments that can easily be leased out to another tenant or sold to another investor.

A good illustration of this is the brand new warehouse that we added to the portfolio in January 2020 located in Den Hoorn, the Netherlands. This is the largest building in the portfolio at 43,000 square metres and it is located in the most densely populated part of the Netherlands between the cities of Rotterdam and The Hague. Thanks to this urban location, the long lease with a strong covenant, family-owned transport company and the added advantage of the flexibility of the building with the option to split it into two parts, this is a very attractive and liquid investment. LED lighting and the recent signing of a solar lease affords the building very good ESG credentials and an extra income stream of €80,000 per annum from the moment the panels are in operation, expected to be from September 2021.

As at 31 December 2020, The Netherlands was the largest market exposure in the portfolio by value with an allocation of 47%, followed by France (18%), Germany (15%), Poland (13%) and Spain (7%).

1 The Netherlands has 1.9 square metres of logistic space per capita just behind Belgium (2.0 square metres), above Germany (0.9 square metres) and the UK (0.4 square metres)

Country allocation (by % of portfolio value)

As at year end, eight of the fourteen warehouses held in the portfolio were brand-new and have been constructed since 2018 meaning maintenance costs should be low while the specifications of these warehouses are very modern, in line with today's requirements, such as an eaves height of 10-12 metres, floor bearing load capacity of 5 tonnes per square metre and sufficient loading docks (1 for every 1,000 square metres). Average lease length is long at 8.1 years including breaks and 11.0 years excluding break options with the majority of these leases benefiting from full CPI indexation, sometimes with a cap or collar.

The strong ambition to grow the size of the Company remains, to enable us to add comparable quality, diversify risk with further acquisitions and a varied tenant mix and improve liquidity through increased scale.

The €40 million credit facility signed with Investec Bank provides us with the flexibility required as we seek exclusivity on deals ahead of a capital raise helping to reduce cash drag. Over the course of the summer, the team was disappointed to have to abort an off-market deal over which we had exclusivity. This transaction in the Netherlands was aborted during advanced due diligence with the soil found to be heavily polluted with heavy metals. Although any partial remediation would not have affected the current use of the building, the team felt it had no choice but to pull back from the deal as it was clear that any future use of the building could be compromised and the liquidity of the asset harmed. Additionally, it was felt the acquisition of this building, with its associated pollution issues, would not be in line with the Company's ESG ambitions. Our focus moved quickly to a higher yielding, brand new multi-tenant building in Lodz, Central Poland. Following due diligence, this €28 million transaction was completed. The 31,500 square metre property is leased to six tenants with a weighted average lease term of 6.7 years and provides a net initial yield of 5.6%. Located at the centre of Poland's thriving industrial and manufacturing sector, the property benefits from access to the Intermodal Container Terminal, created to support the Bosch-Siemens campus, which offers direct rail connections with China.

Property Portfolio as at 31 December 2020

Country	Location	SPA signed	Closing	Built	WAULT1	WAULT2	% of fund by value
Germany	Flörsheim	Dec-17	Feb-18	2015	4.1	6.2	5.9
Netherlands	Ede	Aug-18	Aug-18	1999/ 2005	6.9	6.9	7.0
France	Avignon	Jul-18	Oct-18	2018	6.6	9.4	11.6
Netherlands	Waddinxveen	Nov-18	Nov-18	1983/ 1994/	12.9	17.9	9.4
				2002/ 2018
France	Meung sur Loire	Nov-18	Feb-19	2004	5.8	5.8	6.5
Poland	Krakow	Feb-19	Feb-19	2018	3.9	3.9	6.3
Germany	Erlensee	Jun-18	Feb-19	2018	5.0	12.4	9.3
Spain	Leon	Jul-18	May-19	2019	8.2	8.2	4.1
Netherlands	Zeewolde	Oct-18	Jun-19	2019	13.5	18.5	7.8
Netherlands	Oss	Oct-18	Jul-19	2019	13.5	18.5	3.8
Netherlands	's Heerenberg	Jun-19	Jul-19	2009/ 2011	11.0	16.0	6.9
Poland	Warsaw	Sep-19	Oct-19	2019	6.9	6.9	6.4
Spain	Madrid	Dec-19	Dec-19	1999	6.0	9.0	2.5
Netherlands	Den Hoorn	Dec-19	Jan-20	2020	9.0	14.0	12.5
TOTAL					8.1	11.0	100.0

1   Weighted average unexpired lease term including break options.

2  Weighted average unexpired lease term excluding break options.

 

Rent collection - proven to be resilient

During the year, much of our attention was focussed understandably on rent collection and the impact of COVID-19 on our tenants' businesses. Through our local on-the-ground asset managers we stayed in close contact with our tenants and worked pro-actively to further build on our long-term relationships. The majority of discussions with tenants whose businesses were impacted by the pandemic and related market shut-downs took place in the months following the first series of lockdowns.

Rents are normally payable in advance either on a monthly or quarterly basis. A small number of tenants requested a (partial) deferral of Q2 rents while others asked for rent free periods in exchange for material lease extensions or the option to pay monthly instead of quarterly rent.

Overall, seven rent deferrals were agreed with three leases extended in exchange for rent free periods. New legislation introduced by the governments in Germany and Poland protected companies struggling due to COVID-19, stating landlords were not allowed to refuse requests for help.

A large part of the deferred rents were repaid in the second half of 2020 resulting in overall rent collection equating to 97% of the total rents due for the full calendar year. The remaining 3% related to deferrals beyond 2020 and rent free periods agreed in exchange for lease extensions.

Clearly, certain sectors and companies have struggled more than others. Companies in the automotive industry, retail or with direct links to restaurants, bars or hotels have been impacted far more than companies with links to groceries or specialised in online sales. Based on our sector profile, ASELI's breakdown of rental income is over-weight sectors that have held up very well with 26% of total rent related to food, 7% related to e-commerce and 27% linked to transport and warehousing. Good illustrations here are the three largest tenants in the portfolio: van der Helm, Biocoop and Combilo, with all of these companies operating at full capacity with their direct links to the food sector. Another good example is Kruidvat, a leading drugstore in the Netherlands and fourth largest tenant in portfolio. It is rolling out its e-commerce platform from our building in Ede supported by their large investment in automation, clearly showing their long-term commitment to this building.

This strong rent collection in combination with a loan portfolio that reflected limited concerns gave the Board confidence to continue to pay full quarterly dividends in line with the stated distribution policy. Our loan portfolio is still young with loan facilities put in place immediately after full deployment of capital from Q1 2019 onwards. Stress-testing on the existing financial covenants such as the Interest Cover Ratio and Loan-To-Value (LTV) indicated a good level of headroom, even more so now that property values have increased strongly and all expected rents were paid. In order to diversify risk all the loan facilities have also been cross-collateralised with a group of single-tenanted buildings or have diversified risk thanks to the multi-tenanted leasing structure.

Office Dépôt

Clearly one area that we are paying particularly close attention to is the situation surrounding Office Dépôt and its occupation of the Meung Sur Loire warehouse as stated in the Chairman's Statement. Whilst awaiting the outcome of the sales process instigated by the owners of the company, we continue to review the property with all relevant parties including agents on the ground. This will ensure that we are ready to act, if required, to look to re-let the property as soon as we are able. In the meantime, the administrators have intimated their desire for the company to continue to trade from the property, Office Dépôt France's main warehouse hub, and to pay rent, which they have done for February, March and April.

Top 10 tenants based on current rents

Tenant		Property	Contracted Rent (€000 p.a.)	Contracted Rent (%)	WAULT incl breaks (years)	WAULT excl  break (years)
1	van der Helm	Den Hoorn	2,809	13%	9.0	14.0
2	Biocoop	Avignon (Noves)	2,344	10%	6.6	9.6
3	Combilo	Waddinxveen	1,859	8%	12.9	17.9
4	Kruidvat	Ede	1,490	7%	7.6	7.6
5	VSH Fittings	Zeewolde	1,556	7%	13.5	18.5
6	JCL	's Heerenberg	1,469	7%	11.0	16.0
7	Office Depot	Meung sur Loire	1,445	6%	5.8	5.8
8	Decathlon	Leon	1,300	6%	8.2	8.2
9	DHL Warsaw	Warsaw	856	4%	8.5	8.5
10	Orangeworks	Oss	852	4%	13.5	18.5
	Portfolio at 31/12/2020		15,980	72%	9.4	12.5
	Other tenants		6,346	28%	4.6	7.3
	Total portfolio		22,326	100%	8.1	11.0

Property values - strong year end performance

The quality we see in the portfolio and the strong fundamentals in the logistics sector are reflected in the positive progression in the property valuations. Over the course of what was globally a difficult year, valuations went up by 7% driven higher by yield compression.

During Q2, the most challenging quarter of the year, valuations remained stable despite the RICS valuation committee insisting on valuers including a 'market uncertainty' clause, albeit temporarily, into their valuation reports as liquidity in the market dried up as investors took a wait and see attitude. Limited transactional evidence meant valuation advisers had less references in order to appraise the buildings. Over the summer, this clause was lifted for the logistics sector first as liquidity improved quickly with investors gaining the confidence required to transact again. In Q4, capital growth accelerated with a 6% increase quarter-on-quarter indicating logistics is very much the flavour of the day.

Modest gearing with attractive all-in costs

Our current total loan to gross asset value gearing is 31%. Our stated target remains at 35% with a maximum allowed loan to value ratio of 50% (measured at the time of drawdown). The Company has implemented fixed rate bank loan gearing in those markets where all-in loan costs are the lowest, such as France, Germany and the Netherlands. German banks have been very active in this space. The average all-in cost of the loan portfolio is currently 1.36% which had an average loan duration of 7.3 years, of which 5.7 years remain. The most recent addition to the loan portfolio was the loan facility of €35.7 million signed in January 2020 to fund the acquisition of our Den Hoorn asset. The building is cross-collateralised against Zeewolde with an all-in cost of 1.25% for a fixed 8.0 year term of which 7.0 years now remain as at 31 December 2020.

As flagged previously, the Company's LTV could rise above 35% with the use of the €40 million credit facility which was signed in October 2020 with Investec Bank. However, this would be on a temporary basis to allow better cash management. This would enable the Company to purchase a warehouse or implement an asset-management initiative, typically ahead of a capital raise, in order to reduce potential cash-drag.

Outlook

The real estate logistics sector has been one of the most positively impacted major investment sectors through technological change and its acceleration through COVID-19. This has created a significant amount of investor attention and strong pricing trends and this means we need to understand the key drivers of the market and the changing nature of risk and reward. Our focus has always been on location, asset quality, future proofing and building sustainability, which are critical.

ASI expects the global direct investible universe to grow from $1.5 to $2.1 trillion by 2030, representing a 40% increase over the next 10 years. Some forecasters suggest that online retail requires three times more floor space than in-store sales fulfilment and our forecast growth is driven by a combination of capital value growth (minus depreciation) and a structural rise in stock through net additions (construction activity). Continental Europe and Asia are expected to experience the strongest growth, with the UK and North America already having more established supply chains.

The pandemic has proved out to many operators that long supply chains carry excess risk and the labour cost arbitrage is becoming less pronounced. Many are switching focus towards certainty over speed which is expected to drive storage requirements whilst automation and robotics have been game-changing.

We anticipate significant volumes of capital will target this sector over the next decade with building specifications being all important and strong competition between operators. Increasingly investors are seeking greater clarity on the business models of the underlying tenants to ensure that they are future proof and supported by buildings that maximise ESG benefits to promote efficiency and employee welfare.

Expected risk and returns will be heavily influenced by the strength and predictability of cash flows.

Risk considerations for us include: the duration of income; volatility of capital values and liquidity; exposure to regulation or the possibility for changing regulation; the strength and depth of the demand base and operator strength.

The digital evolution and the re-shoring of operations is having a profound impact on the sector whilst there continues to be a shortage of modern and sustainable logistics property. Strong market fundamentals offer long term investors the prospect of stable, long term inflation-proofed cash flows. It remains our desire to grow the size of the Company's portfolio and this will be accomplished through sensible, measured acquisitions and the management of assets with a view to improving sustainability. Modest gearing together with diversification across countries and the tenant base will ensure that shareholder returns deliver for the longer term with ESG playing a significant role in the way we manage the portfolio for a sustainable future.

Evert Castelein,

Fund Manager

Aberdeen Standard Investments Ireland Limited

28 April 2021

4. STRATEGIC REPORT - OVERVIEW OF STRATEGY

The Company

The Company is a UK investment trust with a premium listing on the Main Market of the London Stock Exchange. The Company invests in European logistics real estate to achieve its investment objective noted below.

The Company was incorporated in England and Wales on 25 October 2017 with registered number 11032222 and launched on 15 December 2017.

Investment Objective

The Company aims to provide a regular and attractive level of income return together with the potential for long term income and capital growth from investing in high quality European logistics real estate.

Investment Policy

The Company aims to deliver the investment objective through investment in, and management of, a diversified portfolio of ''big box'' logistics warehouses and ''last mile'' urban logistics assets in Europe.

The Company invests in a portfolio of assets diversified by both geography and tenant throughout Europe, predominantly targeting well-located assets at established distribution hubs and within population centres. In particular, the Investment Manager seeks to identify assets benefitting from long-term, index-linked, leases as well as those which may benefit from structural change, and will take into account several factors, including but not limited to:

• the property characteristics (such as location, building quality, scale, transportation links, workforce availability and operational efficiencies);

• the terms of the lease (focusing on duration, inflation-linked terms, the basis for rent reviews and the potential for growth in rental income); and

• the strength of the tenant's financial covenant.

The Company may forward fund the development of, or commit to the forward purchase of, new assets when the Investment Manager believes that to do so would enhance returns for shareholders and/or secure an asset at an attractive yield. The Company intends that forward funded or forward purchased assets will be wholly or predominantly pre-let at the time the investments are committed to.

Diversification of Risk

The Company manages its assets at all times in a manner which is consistent with the spreading of investment risk. The following investment limits and restrictions apply to the Company and its business which, where appropriate, are measured at the time of investment:

• the Company only invests in assets located in Europe;

• no more than 50 per cent. of Gross Assets may be concentrated in a single country;

• no single asset may represent more than 20 per cent. of Gross Assets;

• forward funded commitments must be predominantly pre-let and the Company's overall exposure to forward funded commitments is limited to 20 per cent. of Gross Assets;

• the Company's maximum exposure to any single developer is limited to 20 per cent. of Gross Assets;

• the Company will not invest in other closed-ended investment companies;

• the Company may only invest in assets with tenants which have been classified by the Investment Manager's investment process as having strong financial covenants; and

• no single tenant may represent more than 20 per cent. of the Company's annual gross income measured annually.

The Company is not required to dispose of any asset or to rebalance the Portfolio as a result of a change in the respective valuations of its assets.

The Company conducts its affairs so as to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010.

Borrowing and Gearing

The Company employs gearing with the objective of improving shareholder returns. Debt is typically secured at the asset level and potentially at the Company level with or without a charge over some or all of the Company's assets, depending on the optimal structure for the Company and having consideration to key metrics including lender diversity, cost of debt, debt type and maturity profiles.

Borrowings are typically non-recourse and secured against individual assets or groups of assets and the aggregate borrowings will always be subject to an absolute maximum, calculated at the time of drawdown for a property purchase, of 50 per cent. of Gross Assets. Where borrowings are secured against a group of assets, such group of assets shall not exceed 25 per cent. of Gross Assets in order to ensure that investment risk remains suitably spread.

The Board has established gearing guidelines for the Alternative Investment Fund Manager ("AIFM") in order to maintain an appropriate level and structure of gearing within the parameters set out above. Under these guidelines, the Investment Manager seeks to maintain aggregate asset level borrowings at or around 35% of Gross Asset Value. These limits may be exceeded in the short term from time to time particularly through the use of short term financing facilities as the Investment Manager seeks to manage certain aspects of the portfolio, including, for example, building extensions.

The Board will keep the level of borrowings under review. In the event of a breach of the investment guidelines and restrictions set out above, the AIFM will inform the Board upon becoming aware of the same, and if the Board considers the breach to be material, notification will be made to a Regulatory Information Service and the AIFM will look to resolve the breach with the agreement of the Board. The Directors may require that the Company's assets are managed with the objective of bringing borrowings within the appropriate limit while taking due account of the interests of shareholders. Accordingly, corrective measures may not have to be taken immediately if this would be detrimental to shareholders' interests.

Any material change to the Company's investment policy set out above will require the approval of shareholders by way of an ordinary resolution at a general meeting and the approval of the Financial Conduct Authority. Non-material changes to the investment policy may be approved by the Board.

Comparative Index

The Company does not have a benchmark.

Duration

Although the Company does not have a fixed life, under the Company's articles of association the Directors are required to propose an ordinary resolution for the continuation of the Company at the Annual General Meeting to be held in 2025 and then every third year thereafter.

Manager

Under the terms of the Management Agreement, the Company has appointed Aberdeen Standard Fund Managers Limited as the Company's alternative investment fund manager for the purposes of the AIFM Rules. The AIFM has delegated portfolio management to the Amsterdam Branch of Aberdeen Standard Investments Ireland Limited which acts as Investment Manager.

Pursuant to the terms of the Management Agreement, the AIFM is responsible for portfolio and risk management on behalf of the Company and will carry out the on-going oversight functions and supervision and ensure compliance with the applicable requirements of the AIFM Rules. The AIFM and the Investment Manager are both legally and operationally independent of the Company.

Dividend Policy

Subject to compliance with all legal requirements the Company pays interim Sterling dividends on a quarterly basis. The Company declares dividends in Euros, but shareholders will receive dividend payments in Sterling. If applicable, the date on which the Euro/ Sterling exchange rate is set will be announced at the time the dividend is declared. Distributions made by the Company may take the form of either dividend income or ''qualifying interest income'' which may be designated as interest distributions for UK tax purposes.

The Company targets an annual yield of 5.0 per cent. per Ordinary Share for an investor at launch whilst continuing to aim for a total NAV return of 7.5 per cent. per annum (each in Euro terms).

Key Performance Indicators (KPIs)

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and to determine the progress of the Company in pursuing its Investment Policy. The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are as follows:

KPI	Description
NAV Return (per share)	The Board considers the Company's NAV total return to be the best indicator of performance over time and is therefore the main indicator of performance used by the Board. Performance for the year and since inception is set out on page 18 and 19 of the published Annual Report and financial statements for the year ended 31 December 2020. The Company is targeting, for an investor in the Company at launch, a total NAV return of 7.5 per cent. per annum (in € terms).
Share Price (on a total return basis)1	The Board also monitors the price at which the Company's shares trade on a total return basis over time. A graph showing the share price performance is shown on page 19 of the published Annual Report and financial statements for the year ended 31 December 2020.
Premium/(Discount) 1	The premium/(discount) relative to the NAV per share represented by the share price is closely monitored by the Board. A graph showing the share price (discount)/premium relative to the NAV is shown on page 19 of the published Annual Report and financial statements for the year ended 31 December 2020.
Dividends per Share	The Board's aim is to pay a regular quarterly dividend enabling shareholders to rely on a consistent stream of income. Dividends paid are set out on page 18 of the published Annual Report and financial statements for the year ended 31 December 2020. The Company is targeting, for an investor in the Company at launch, an annual dividend yield of 5.0 per cent. per Ordinary Share (in € terms).

1 Alternative Performance Measure - see glossary on page 115 of the published Annual Report and financial statements for the year ended 31 December 2020.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the principal risks set out in the table below and overleaf together with a description of the mitigating actions taken by the Board. The Board confirms that it has a process in place for regularly reviewing emerging risks that may affect the Company in the future. The Board collectively discusses with the Investment Manager areas where there may be emerging risk themes and maintains a register of these. Such risks may include, but are not limited to, future pandemics, negative interest rates and climate change. In the event that an emerging risk has gained significant weight or importance, that risk is categorised and added to the Company's risk register and is monitored accordingly. The principal risks associated with an investment in the Company's shares can be found in the Company's latest Prospectus dated 5 July 2019, published on the Company's website.

The Board continues to monitor the impact of the UK's departure from the EU ("Brexit") which became effective on 31 January 2020. Following the expiry of the transition period on 1 January 2021 the Board and Manager do not believe that there will be a significant short to medium term impact on the Company from Brexit but will continue to monitor the longer term impact and associated trends. Further details on the impact of Brexit are disclosed in note 25 to the financial statements.

The Board has kept the risks related to the Covid-19 pandemic under regular review throughout the year and subsequently. The impact of the pandemic on markets continues to affect the Company and its tenants due to the ongoing disruption of supply chains and changes in demand for products and services, increased costs and potential cash flow issues. The pandemic has significantly impacted world markets as well as creating uncertainty around future dividend payments. However, the Board notes the Investment Manager's robust and disciplined investment process which continues to focus on asset quality. The pandemic has also impacted the Company's third party service providers, with business continuity and home working plans having been implemented. The Board, through the Investment Manager, has been closely monitoring all third party service arrangements and is pleased to report that it has not seen any reduction in the level of service provided to the Company to date. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the current financial year.

Description	Mitigating Action
Investment and Asset Management Risk: Investment Strategy - Poorly judged investment strategy, regional allocation, use of gearing, inability to deploy capital and the mis-timing of disposals and acquisitions, resulting in poor investment returns.	• ASI has real estate research teams which provide performance forecasts for different sectors and regions. • There is a team of experienced portfolio managers who have detailed knowledge of the markets in which they operate. • ASI has a detailed investment process for both acquisitions and disposals that require to be signed off internally before the Board reviews any final decision. •   The Board is very experienced with Directors having a knowledge of property markets.
Investment and Asset Management Risk: Health and Safety - Failure to identify and mitigate major health & safety issues or to react effectively to an event leading to injury, loss of life, litigation and any ensuing financial and reputational impact.	• For new properties health and safety is included as a key part of due diligence. • Asset managers visit buildings on a regular basis. •   Property managers are appointed by ASI to monitor health & safety in each building and reports are made to the asset managers on a monthly basis. • Asset managers visit each building at least twice a year. • Tenants are responsible for day to day operations of the properties.
Financial Risks: Macroeconomic - Macroeconomic changes (e.g. levels of GDP, employment, inflation, interest rate and FX movements), political changes (e.g. new legislation) or structural changes (e.g. new technology or demographics) negatively impact commercial property values and the underlying businesses of tenants (market risk and credit risk). Falls in the value of investments could result in breaches of loan covenants and solvency issues.	• ASI Research teams take into account macroeconomic conditions when collating forecasts. This research is fed into Investment Manager decisions on purchases/sales and regional allocations. • The portfolio is EU based and diversified across a number of different countries and also has a diverse tenant base seeking to minimise risk concentration. • There is a wide range of lease expiry dates within the portfolio in order to minimise re-letting risk. • The Company has no exposure to speculative development and forward funding is only undertaken where the development is predominantly pre-let. • Rigorous portfolio reviews are undertaken by the Investment Manager and presented to the Board on a regular basis. • Annual asset management plans are developed for each property and individual investment decisions are subject to robust risk versus return evaluation and approval.
Financial Risks: Liquidity Risk and FX Risk - The inability to dispose of property assets in order to meet financial commitments of the Company or obtain funds when required for asset acquisition or payment of expenses or dividends. Movements in foreign exchange and interest rates or other external events could affect the ability of the Company to pay its dividends.	• The diversified portfolio is geared towards a favoured sector. • A cash buffer is maintained and an overdraft facility is currently in place. • Investment is focused on mid-sized properties which is considered the more liquid part of the sector.
Financial Risks: Insufficient Income Generation - Insufficient income generation due to macro-economic factors including the current COVID-19 pandemic, and/or due to inadequate asset management resulting in long voids or rent arrears or insufficient return on cash; dividend cover falls to a level whereby the dividend needs to be cut and/ or the Company becomes unattractive to investors. Level of ongoing charges becomes excessive.	• At regular Board meetings forecast dividend cover is considered. There is regular contact with the broker and shareholders to ascertain, where possible, views on dividend cover. The Investment Manager seeks a good mix of tenants in properties. • A review of tenant risk and profile is undertaken using, for example, the Dun & Bradstreet Failure Scoring method and tenant covenants are thoroughly considered before a lease is granted. • The ASI team consists of asset managers on the ground who undertake asset management reviews and implementation and there is a detailed approval process within ASI for lettings.
Regulatory Risks: Compliance - The regulatory, legal and tax environment in which the Company's assets are located is subject to change and could lead to a sub-optimal corporate structure and result in increased tax charges or penalties.	• The Company has an experienced Company Secretary and engages lawyers who will advise on changes once any new proposals are published.  There is regular contact with tax advisers in relation to tax computations and transfer pricing. • Directors have access to updates on relevant regulatory changes through the Company's professional advisers. • The highest corporate governance standards are required from all key service providers and their performance is reviewed annually by the Management Engagement Committee.
Operational Risks: Service Providers - Poor performance/inadequate procedures at service providers leads to error, fraud, non-compliance with contractual agreements and/or with relevant legislation or the production of inaccurate or insufficient information for the Company (NAV, Board Reports, Regulatory Reporting) or loss of regulatory authorisation. Key service providers include the AIFM, Company Secretary, the Depositary, the Custodian, the managing agents and the Company's Registrar.	• ASI have an experienced Investment Manager and Property Administration Team. • The Company has engaged an experienced registrar: Equiniti is a reputable worldwide organisation. • All service providers have a strong control culture that is regularly monitored. • ASI aim to meet all service providers once a year and the Management Engagement Committee reviews all major service providers annually. • The Company has the ability to terminate contracts.
Operational Risks: Business continuity - Business continuity risk to any of the Company's service providers or properties, following a catastrophic event e.g. pandemic, terrorist attack, cyber attack, power disruptions or civil unrest, leading to disruption of service, loss of data etc.	• ASI has a detailed business continuity plan in place with a separate alternative working office if required and the ability for the majority of its workforce to work from home. • ASI has a dedicated Chief Information Security Officer who leads the Chief Information Security Office (including the following functions: Security Operations & Delivery, Security Strategy, Architecture &  Engineering, Data Governance & Private, Business Resilience, Governance & Risk (Security & IT). • Properties within the portfolio are all insured. • The IT environment of service provides is reviewed as part of the initial appointment on an ongoing basis.

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to, and participation in, the promotional programme run by ASI on behalf of a number of investment trusts under its management.

The Company's financial contribution to the programme is matched by ASI. The management team reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports the ASI's investor relations programme which involves regional roadshows, promotional and public relations campaigns.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members.

The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. However, the Board will continue to ensure that any future appointments are made on the basis of merit against the specification prepared for each appointment and, therefore, the Company does not consider it appropriate to set diversity targets. At 31 December 2020, there were two male Directors and two female Directors on the Board.

Socially Responsible Investment Policy

Further details on the socially responsible investment policies adopted by the AIFM are disclosed on page 38 of the published Annual Report and financial statements for the year ended 31 December 2020.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to Aberdeen Standard Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined in the Investment Manager's Review.

Due to the nature of the Company's business, being a Company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 ("MSA"). In addition the Company's turnover is below the threshold of £36 million. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

A copy of the Manager's statement in compliance with the MSA 2015 is available for download at www.aberdeenstandard.com/

Emissions relating to properties owned by the Company are the responsibility of the tenants and any emissions relating to the Company's registered office are the responsibility of the Standard Life Aberdeen Group.

The Company therefore has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board formally considers risks and strategy at least annually. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have conducted a robust review of the principal risks focussing upon the following factors:

• The principal risks detailed in the Strategic Report;

• The ongoing relevance of the Company's investment objective in the current environment;

• The demand for the Company's shares evidenced by the historical level of premium or discount;

• The level of income generated by the Company;

• The level of gearing including the requirement to negotiate new facilities and repay or refinance future facilities; and

• The flexibility of the Company's bank facilities and putting these facilities in place in time to meet commitments.

The Directors have reviewed summaries from the portfolio models prepared by the Investment Manager which have been stress tested to highlight the performance of the portfolio in a number of varying economic conditions coupled with potential opportunities

for mitigation. The Directors have also stress tested the financial position of the Company with attention on the economic impact of COVID-19, and particularly the sales process more recently undertaken by the administrator of Office Depot in France. The COVID-19 pandemic impacted the Company during 2020 through a small reduction in rental income which the Investment Manager mitigated by negotiating rent deferrals and rent free periods granted in exchange for material lease extensions.

The Company has prepared cash flow forecasts which reflect the potential impact of further reductions in rental income due to COVID-19, including reasonably possible downside scenarios. The impact of reductions in rental income could be mitigated through a reduction in dividends to shareholders if considered necessary by the Board.

The Company has modelled severe but plausible downside scenarios, taking into account specific tenant risks.

These scenarios modelled reduced rental income through to 2023 and the worst case model equates to an overall 20% reduction of rental income per annum over that period.

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as significant economic uncertainty, stock market volatility and changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

s172 Statement

The Board is required to describe to the Company's shareholders how the Directors have discharged their duties and responsibilities over the course of the financial year under section 172 (1) of the Companies Act 2006 (the "s172 Statement"). This s172 Statement requires the Directors to explain how they have promoted the success of the Company for the benefit of its members as a whole, taking into account the likely long term consequences of decisions, the need to foster relationships with all stakeholders and the impact of the Company's operations on the environment.

The Board's philosophy is that the Company should operate in a transparent culture where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of shareholders and other stakeholders alike. The Board reviews the culture and manner in which the Investment Manager operates at its regular meetings and receives regular reporting and feedback from the other key service providers.

Investment trusts are long-term investment vehicles, with a recommended holding period of five or more years with no employees. The Company's Board of Directors sets the investment mandate as published in the most recent prospectus, monitors the performance of all service providers and is responsible for reviewing strategy on a regular basis.

The key service provider for the Company is the Alternative Investment Fund Manager (the "Manager") and this relationship is reviewed at each Board meeting and relationships with other service providers are reviewed at least annually. Shareholders are seen as key stakeholders in the Company. The Board seeks to meet at least annually with shareholders at the Annual General Meeting. This is seen as a very useful opportunity to understand the needs and views of the shareholders.

In between AGMs the Directors and Investment Manager also conduct programmes of investor meetings with larger institutional, private wealth and other shareholders to ensure that the Company is meeting their needs.

Such regular meetings may take the form of joint presentations with the Investment Manager or meetings solely with a Director where any matters of concern may be raised directly.

The other key stakeholder group is that of the underlying tenants that occupy space in the properties that the Company owns. The Board aims to conduct a site visit at least annually with the aim of meeting tenants locally and discussing their businesses and needs and assessing where improvements may be made or expectations managed. The Investment Manager's asset managers are tasked with conducting meetings with building managers and tenant representatives in order to ensure the smooth running of the day to day management operations of the properties. The Board receives reports on the tenants' activities at its regular Board meetings. The Board via the Management Engagement Committee also ensures that the views of its service providers are heard and at least annually reviews these relationships in detail. The aim is to ensure that contractual arrangements remain in line with best practice, services being offered meet the requirements and needs of the Company and performance is in line with the expectations of the Board, Manager, Investment Manager and other relevant stakeholders. Reviews will include those of the Company depositary, custodian, share registrar, broker, legal adviser and auditor.

During the COVID-19 lock downs the Board and the Investment Manager have continued to work effectively from home under the government guidelines and with regular reporting the Board has continued to have oversight of the Company's service providers and their continued operations during this period.

The Investment Manager's Report details the key investment decisions taken during the year and subsequently. The Investment Manager has continued to invest the Company's assets in accordance with the mandate provided by shareholders at launch, under the oversight of the Board. During the year further gearing was introduced into the portfolio with the aim of maintaining gearing at asset level at or around 35% over the longer term. The management team has been successful in negotiating the debt facilities at competitive market rates, resulting in the Company's blended all-in interest rate across all its debt being 1.4% which is to the benefit of all shareholders. In October 2020 the Board announced that the Company had entered into a new uncommitted four year €40 million master facilities loan agreement with Investec Bank plc. Shareholders are keen for the Company to grow its asset base and the new facility has increased the Company's flexibility to acquire new assets prior to any fresh equity raise and will reduce the impact of cash drag on investment returns.

Details of how the Board and Investment Manager have sought to address environmental, social and governance matters across the portfolio are disclosed on pages 38 to 44 of the published Annual Report and financial statements for the year ended 31 December 2020.

The Company is still in its infancy having been launched at the end of 2017. However, it is a long term investor and the Board has established the necessary procedures and processes to promote the long term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company grows, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

Future

Many of the non-performance related matters likely to affect the Company in the future are common across all closed ended investment companies, such as the current COVID-19 pandemic and its impact, the attractiveness of investment companies as investment vehicles, and the impact of regulatory changes.

These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in my Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in the Investment Manager's Review.

Tony Roper

Chairman

28 April 2021

 

 

RESULTS

FINANCIAL HIGHLIGHTS

	31 December 2020	31 December 2019
Total assets (€'000)	484,104	382,981
Total equity shareholders' funds (net assets) (€'000)	293,596	260,277
Net asset value per share (euros)	1.20	1.11
Net asset value per share (pence)	107.95	94.21
Share price (mid market) (pence)	108.50	90.40
Market capitalisation (£'000)	265,283	211,988
Share price premium / (discount) to sterling net asset value1	0.5%	(4.0)%
Dividends and earnings
Net asset value total return per share (€)1	13.6%	8.6%
Dividends paid per share	5.64c (4.96p)	5.75c (5.11p)
Revenue reserves (€'000)	11,720	7,471
Gain/(Loss) (€'000)	35,389	19,429
Operating costs
Ongoing charges ratio (Group only expenses)1	1.3%	1.5%
Ongoing charges ratio (Group and property expenses)1	1.6%	1.7%

PERFORMANCE (TOTAL RETURN)

	Year to 31 December 2020	Since Launch % return
Share price1	26.6%	22.5%
Net Asset Value (EUR)1	13.6%	19.5%

1 Considered to be an Alternative Performance Measure (see Glossary on page 115 of the published Annual Report and financial statements for the year ended 31 December 2020 for more information).

DIVIDENDS DECLARED IN RESPECT OF THE FINANCIAL YEAR TO 31 DECEMBER 2020 (PENCE)

	Dividend Distribution	Qualifying Interest	xd date	Record date	Payment date
First Interim	1.05	0.19	04/06/2020	05/06/2020	26/06/2020
Second Interim	0.93	0.31	03/09/2020	04/09/2020	25/09/2020
Third Interim	0.73	0.51	03/12/2020	04/12/2020	30/12/2020
Fourth Interim	0.80	0.44	04/03/2021	05/03/2021	25/03/2021
Total	3.51	1.45

5.  EXTRACTS FROM THE DIRECTORS' REPORT

The Directors present their Report and the audited financial statements for the year ended 31 December 2020.

Results and Dividends

Details of the Company's results and dividends are shown on page 118 of the published Annual Report and financial statements for the year ended 31 December 2020. The dividend policy is disclosed in the Strategic Report.

Investment Trust Status

The Company was incorporated on 25 October 2017 (registered in England & Wales No. 11032222) and has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial periods commencing on or after 15 December 2017. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2020 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Share Capital

The Company's capital structure is summarised in note 16 to the financial statements. At 31 December 2020, there were 244,500,001 fully paid Ordinary shares of 1p each in issue. During the year no Ordinary shares were purchased in the market for treasury or cancellation and 10,000,000 new Ordinary shares were issued at a premium to NAV. Subsequent to the year end, on 17 March 2021, 18,450,000 new Ordinary shares were issued at a price of 105 pence per share, representing a premium to the prevailing NAV.

Voting Rights, Share Restrictions and Amendments to Articles of Association

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a takeover bid.

In accordance with the Companies Act, amendments to the Company's Articles of Association may only be made by shareholders passing a special resolution in general meeting.

Borrowings

A full breakdown of the Company's loan facilities is provided in note 14 to the financial statements.

Management Agreement

Under the terms of a Management Agreement dated 17 November 2017 between the Company and the AIFM, Aberdeen Standard Fund Managers Limited (and amended by way of side letters on 22 February 2019 and 25 May 2018), the AIFM was appointed to act as alternative investment fund manager of the Company with responsibility for portfolio management and risk management of the Company's investments. Under the terms of the Management Agreement, the AIFM may delegate portfolio management functions to the Investment Manager and is entitled to an annual management fee together with reimbursement of all reasonable costs and expenses incurred by it and the Investment Manager in the performance of its duties.

Pursuant to the terms of the Management Agreement, the AIFM is entitled to receive a tiered annual management fee (the ''Annual Management Fee'') calculated by reference to the Net Asset Value (as calculated under IFRS) on the following basis:

• On such part of the Net Asset Value that is less than or equal to €1.25 billion, 0.75 per cent. per annum.

• On such part of the Net Asset Value that is more than €1.25 billion, 0.60 per cent. per annum.

The Annual Management Fee is payable in Euros quarterly in arrears, save for any period which is less than a full calendar quarter.

The Company may terminate the Management Agreement by giving the AIFM not less than 12 months' prior written notice.

The AIFM has also been appointed by the Company under the terms of the Management Agreement to provide

day-to-day administration services to the Company and provide the general company secretarial functions required by the Companies Act. In this role, the AIFM will provide certain administrative services to the Company which includes reporting the Net Asset Value, bookkeeping and accounts preparation. Effective from March 2020 accounting and administration services undertaken on behalf of the Company have been delegated to Brown Brothers Harriman.

The AIFM has also delegated the provision of the general company secretarial services to Aberdeen Asset Management PLC.

Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company are set out in note 22 to the financial statements.

The Board

The current Directors, Ms Gulliver, Mr Heawood, Mr Roper and Ms Wilde were the only Directors who served during the year. In accordance with the Articles of Association, each Director will retire from the Board at the Annual General Meeting convened for 7 June 2021 and, being eligible, will offer himself or herself for re-election to the Board. In accordance with Principle 23 of the AIC's 2019 Code of Corporate Governance, each Director will retire annually and submit themselves for re-election at the AGM.

The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively.

In common with most investment trusts, the Company has no employees. Directors' & Officers' liability insurance cover has been maintained throughout the period at the expense of the Company.

The Role of the Chairman and Senior Independent Director

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution, and encourages active engagement, by each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman leads the evaluation of the Board and individual Directors, and acts upon the results of the evaluation process by recognising strengths and addressing any weaknesses. The Chairman also engages with major shareholders and ensures that all Directors understand shareholder views.

The Senior Independent Director acts as a sounding board for the Chairman and as an intermediary for other directors, when necessary. The Senior Independent Director takes responsibility for an orderly succession process for the Chairman, and leads the annual appraisal of the Chairman's performance and is also available to shareholders to discuss any concerns they may have.

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"), which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk .

The Board has also considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. The AIC Code is available on the AIC's website: theaic.co.uk .

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC provides more relevant information to shareholders.

The Board confirms that, during the year, the Company complied with the principles and provisions of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

• interaction with the workforce (provisions 2, 5 and 6);

• the need for an internal audit function (provision 26);

• the role and responsibility of the chief executive (provisions 9 and 14);

• previous experience of the chairman of a remuneration committee (provision 32); and

• executive directors' remuneration (provisions 33 and 36 to 40).

The Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

During the year ended 31 December 2020, the Board had four scheduled meetings and a further 16 ad hoc Board meetings as well as numerous update calls. In addition, the Audit Committee met three times and there was one meeting of the Management Engagement Committee and one meeting of the Nomination Committee. Between meetings the Board maintains regular contact with the Investment Manager. The Directors have attended the following scheduled Board meetings and Committee meetings during the year ended 31 December 2020 (with their eligibility to attend the relevant meeting in brackets):

Director	Board	Audit Committee	MEC	Nomination
T Roper1	4 (4)	0 (0)	1 (1)	1 (1)
C Gulliver	4 (4)	3 (3)	1 (1)	1 (1)
D Wilde	4 (4)	3 (3)	1 (1)	1 (1)
J Heawood	4 (4)	3 (3)	1 (1)	1 (1)

1 Mr Roper is not a member of the Audit Committee but attended all meetings by invitation.

 

Policy on Tenure

The Board's policy on tenure is that Directors need not serve on the Board for a limited period of time only. The Board does not consider that the length of service of a Director is as important as the contribution he or she has to make, and therefore the length of service will be determined on a case-by-case basis. However, in accordance with corporate governance best practice and the future need to refresh the Board over time, it is currently expected that Directors will not typically serve on the Board beyond the Annual General Meeting following the ninth anniversary of their appointment.

Board Committees Audit Committee

The Audit Committee Report is on pages 59 and 60 of the published Annual Report and financial statements for the year ended 31 December 2020.

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which, due to the relatively small size of the Board, comprises all of the Directors and is chaired by the Chairman of the Company. The Nomination Committee advises the Board on succession planning, bearing in mind the balance of skills, knowledge and experience existing on the Board, and will make recommendations to the Board in this regard. The Nomination Committee also advises the Board on its balance of relevant skills, experience and length of service of the Directors serving on the Board. The Board's overriding priority when appointing new Directors in the future will be to identify the candidate with the best range of skills and experience to complement existing Directors. The Board recognises the benefits of diversity and its policy on diversity is disclosed in the Strategic Report.

The Committee has put in place the necessary procedures to conduct, on an annual basis, an appraisal of the Chairman of the Board, Directors' individual self evaluation and a performance evaluation of the Board as a whole and its Committees. In 2020 questionnaires covering the Board, individual Directors, the Chairman and the Audit Committee Chairman were completed. The Chairman then met each Director individually to review their responses whilst the Senior Independent Director met with the Chairman to review his performance. This evaluation highlighted certain areas of further focus such as continuing professional development but concluded that collectively the Board has a very relevant and appropriate balance of experience, knowledge of property markets, legal regulation, promotion and financial accounting and continues to work in an effective manner. The Company currently plans to conduct an externally facilitated evaluation during 2021.

In accordance with Principle 23 of the AIC's Code of Corporate Governance which recommends that all directors of investment companies should be subject to annual re-election by shareholders, all the members of the Board will retire at the forthcoming Annual General Meeting and will offer themselves for re-election. In conjunction with the evaluation feedback, the Committee has reviewed each of the proposed reappointments and concluded that each of the Directors has the requisite high level and range of business and financial experience and recommends their re-election at the forthcoming AGM. Details of the contributions provided by each Director during the year are disclosed on pages 46 and 47 of the published Annual Report and financial statements for the year ended 31 December 2020.

Management Engagement Committee

The Management Engagement Committee comprises all of the Directors and is chaired by Mr Heawood.

The Committee reviews the performance of the Manager and Investment Manager and its compliance with the terms of the management and secretarial agreement.

The terms and conditions of the Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. Based upon the competitive management fee and expertise of the Manager, the Committee believes that the continuing appointment of the Manager on the terms agreed is in the interests of shareholders as a whole. The Committee also at least annually reviews the Company's relationships with its other service providers. These reviews aim to ensure that services being offered meet the requirements and needs of the Company and performance is in line with the expectations of stakeholders.

Remuneration Committee

Under the FCA Listing Rules, where an investment trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply.

Accordingly, matters relating to remuneration are dealt with by the full Board, which acts as the Remuneration Committee.

The Company's remuneration policy is to set remuneration at a level to attract individuals of a calibre appropriate to the Company's future development. Further information on remuneration is disclosed in the Directors' Remuneration Report on pages 55 to 57 of the published Annual Report and financial statements for the year ended 31 December 2020.

Terms of Reference

The terms of reference of all the Board Committees may be found on the Company's website eurologisticsincome.co.uk and copies are available from the Company Secretary upon request. The terms of reference are reviewed and re-assessed by the relevant Board committee for their adequacy on an annual basis.

Going Concern

In accordance with the Financial Reporting Council's guidance the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern.

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants.

The Directors are mindful of the principal risks and uncertainties disclosed on pages 11 to 14 and the Viability Statement on page 15 and 16 of the published Annual Report and financial statements for the year ended 31 December 2020 and have reviewed forecasts detailing revenue and liabilities and they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Annual Report.

Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In coming to this conclusion, the Board has also considered the impact where feasible of the COVID-19 pandemic. The Investment Manager is in contact with tenants and third party suppliers and continues to have a constructive dialogue with all parties. A range of scenarios have been modelled looking at possible impact to cash flows in the short to medium term and this is kept under regular review.

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides on any course of action required to be taken if there is a conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential, or actual, conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

No Director has a service contract with the Company although Directors are issued with letters of appointment upon appointment. The Directors' interests in contractual arrangements with the Company are as shown in note 23 to the financial statements. No other Directors had any interest in contracts with the Company during the year or subsequently.

The Board has adopted appropriate procedures designed to prevent bribery. The Company receives periodic reports from its service providers on the anti-bribery policies of these third parties. It also receives regular compliance reports from the Manager.

The Criminal Finances Act 2017 has introduced the corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to the facilitation of tax evasion, whether under UK law or under the law of any foreign country.

Accountability and Audit

The respective responsibilities of the Directors and the auditor in connection with the financial statements are set out on pages 58 and 68 of the published Annual Report and financial statements for the year ended 31 December 2020 respectively.

Each Director confirms that:

• so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware; and,

• each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Additionally there have been no important events since the period end that impact this Annual Report.

The Directors have reviewed the level of non-audit services provided by the independent auditor during the year amounting to nil (2019: €41,300 for reporting accountant services in connection with the issue of a Prospectus in 2019) and remain satisfied that the auditor's objectivity and independence is being safeguarded.

Independent Auditor

The auditor, KPMG LLP, has indicated its willingness to remain in office. The Directors will place a resolution before the Annual General Meeting to re-appoint KPMG LLP as auditor for the ensuing year, and to authorise the Directors to determine its remuneration.

Internal Control

The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness and confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and financial statements. It is regularly reviewed by the Board and accords with the FRC Guidance.

The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and policies by which these risks are managed.

The Directors have delegated the investment management of the Company's assets to members of the Standard Life Aberdeen Group within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by the Standard Life Aberdeen Group's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

Risks are identified and documented through a risk management framework by each function within the Standard Life Aberdeen Group's activities. Risk includes financial, regulatory, market, operational and reputational risk. This helps the internal audit risk assessment model identify those functions for review. Any weaknesses identified are reported to the Board, and timetables are agreed for implementing improvements to systems.

The implementation of any remedial action required is monitored and feedback provided to the Board.

The significant risks faced by the Company have been identified as being strategic; investment and asset management; financial; regulatory; and operational:

The key components of the process designed by the Directors to provide effective internal control are outlined below:

• the AIFM prepares forecasts and management accounts which allows the Board to assess the Company's activities and review its performance;

• the Board and AIFM have agreed clearly defined investment criteria, specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board and there are meetings with the AIFM and Investment Manager as appropriate;

• as a matter of course the AIFM's compliance department continually reviews Aberdeen Standard Investments' operations and reports to the Board on a six monthly basis; and,

• written agreements are in place which specifically define the roles and responsibilities of the AIFM and other third party service providers and, where relevant, ISAE3402 Reports, a global assurance standard for reporting on internal controls for service organisations, or their equivalents are reviewed;

• the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place within Aberdeen Standard Investments, has decided to place reliance on the Manager's systems and internal audit procedures; and at its March 2021 meeting, the Audit Committee carried out an annual assessment of internal controls for the year ended 31 December 2020 by considering documentation from the AIFM, Investment Manager and the Depositary, including the internal audit and compliance functions and taking account of events since 31 December 2020. The results of the assessment, that internal controls are satisfactory, were then reported to the Board at the subsequent Board meeting.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against mis-statement and loss.

Substantial Interests

The Board has been advised that the following shareholders owned 3% or more of the issued Ordinary share capital of the Company at 31 December 2020 (based upon 244,500,001 shares in issue):

Shareholder	No. of Ordinary shares held	% held
East Riding of Yorkshire	27,500,000	11.25
Brewin Dolphin Capital & Investments (Ireland)	22,179,361	9.07
CCLA Investment Management	18,923,387	7.74
Quilter Cheviot Investment Management	16,762,869	6.86
Canaccord Genuity Wealth Management	14,123,315	5.78
BlackRock	13,190,773	5,39
Brewin Dolphin, stockbrokers	9,765,815	3.99
Hargreaves Lansdown, stockbrokers (EO)	9,348,668	3.82
Aberdeen Standard Capital	8,606,001	3.52

On 14 January 2021 the Company was notified that the combined interests of Standard Life Aberdeen plc affiliated investment management entities were below 5%.

Following the Placing of new Ordinary shares on 17 March 2021, the Company is aware of the following substantial shareholders (based upon 262,950,001 shares in issue):

Shareholder	No. of Ordinary shares held	% held
East Riding of Yorkshire	28,000,000	10.65
Brewin Dolphin Capital & Investments (Ireland)	21,880,271	8.32
CCLA Investment Management	19,657,963	7.48
Quilter Cheviot Investment Management	18,238,144	6.94
Canaccord Genuity Wealth Management	15,128,769	5.75
BlackRock	13,274,441	5.05
Hargreaves Lansdown, stockbrokers (EO)	10,240,423	3.89
Brewin Dolphin, stockbrokers	10,209,184	3.88
Aberdeen Standard Capital	8,606,001	3.27

Save as disclosed, there have been no significant changes notified in respect of the above holdings between 31 December 2020 and 28 April 2021.

 

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. The Annual Report will be widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up to date information on the Company through the freephone information service shown under Investor Information and the Company's website eurologisticsincome.co.uk.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of representatives of the Manager (including the Company Secretary and Investment Manager) in situations where direct communication is required and usually a representative from the Board is available to meet with major shareholders on an annual basis in order to gauge their views.

The Notice of the Annual General Meeting, included within the Annual Report and financial statements, is sent out at least 20 working days in advance of the meeting.

In normal circumstances, all Shareholders normally have the opportunity to put questions to the Board or the Investment Manager, either formally at the Company's Annual General Meeting or at the subsequent buffet luncheon for Shareholders. This year, due to the UK Government's compulsory Stay at Home measures to manage the COVID-19 pandemic in the UK, Shareholders are unlikely to be able to attend the AGM and no refreshments will be provided. Shareholders are however invited to send any questions for the Board and or the Investment Manager on the Annual Report by email to [e-mail]. The Company Secretary is available to answer general shareholder queries at any time throughout the year.

Annual General Meeting

Special Business Directors' Authority to Allot Relevant Securities

Approval is sought in Resolution 10, an ordinary resolution, to renew the Directors' existing general power to allot shares but will also provide a further authority (subject to certain limits) to grant rights to subscribe for or to convert any security into shares under a fully pre-emptive rights issue. The effect of Resolution 10 is to authorise the Directors to allot up to a maximum of 173,547,000 shares in total (representing approximately 66% (as at the latest practicable date before publication of this Annual Report) of the existing issued share capital of the Company), of which a maximum of 86,773,500 shares (approximately 33% (as at the latest practicable date before publication of this Annual Report) of the existing issued share capital of the Company) may only be applied other than to fully pre-emptive rights issues. This authority is renewable annually and will expire at the conclusion of the next Annual General Meeting in 2022, or 30 June 2022, whichever is earlier. The Directors do not have any immediate intention to utilise this authority.

Special Business Disapplication of Pre-emption Rights Resolution 11 is a special resolution that seeks to renew the Directors' existing authority until the conclusion of the next Annual General Meeting to make limited allotments of shares for cash of up to a maximum of 26,295,000 shares representing 10% of the issued share capital (as at the latest practicable date before publication of this Annual Report) other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders.

This authority includes the ability to sell shares that have been held in treasury (if any), having previously been bought back by the Company. The Board has established guidelines for treasury shares and will only consider buying in shares for treasury at a discount to their prevailing NAV and selling them from treasury at or above the then prevailing NAV.

New shares issued in accordance with the authority sought in Resolution 11 will always be issued at a premium to the NAV per Ordinary share at the time of issue.

The Board will issue new Ordinary shares or sell Ordinary shares from treasury for cash when it is appropriate to do so, in accordance with its current policy. It is therefore possible that the issued share capital of the Company may change between the date of this document and the Annual General Meeting and therefore the authority sought will be in respect of 10% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document. This authority is renewable annually and will expire at the conclusion of the next Annual General Meeting in 2022 or 30 June 2022, whichever is earlier.

Special Business Purchase of the Company's Shares

Resolution 12 is a special resolution proposing to renew the Directors' authority to make market purchases of the Company's shares in accordance with the provisions contained in the Companies Act 2006 and the Listing Rules of the Financial Conduct Authority. The minimum price to be paid per Ordinary share by the Company will not be less than £0.01 per share (being the nominal value) and the maximum price should not be more than the higher of (i) an amount equal to 5% above the average of the middle market quotations for an Ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the Ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out.

The Directors do not intend to use this authority to purchase the Company's Ordinary shares unless to do so would result in an increase in NAV per share and would be in the interests of Shareholders generally. The authority sought will be in respect of 14.99% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.

The authority being sought in Resolution 12 will expire at the conclusion of the Annual General Meeting in 2022 or June 2022, whichever is earlier unless it is renewed before that date. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly or under the authority granted in Resolution 11 above, may be held in treasury.

If Resolutions 10 to 12 are passed then an announcement will be made on the date of the Annual General Meeting which will detail the exact number of Ordinary shares to which each of these authorities relates.

These powers will give the Directors additional flexibility going forward and the Board considers that it will be in the interests of the Company that such powers be available. Such powers will only be implemented when, in the view of the Directors, to do so will be to the benefit of Shareholders as a whole.

Special Business Notice of Meetings

Resolution 13 is a special resolution seeking to authorise the Directors to call general meetings of the Company (other than Annual General Meetings) on 14 days' clear notice. This approval will be effective until the Company's next Annual General Meeting in 2022 or 30 June 2022 whichever is earlier. In order to utilise this shorter notice period, the Company is required to ensure that Shareholders are able to vote electronically at the general meeting called on such short notice. The Directors confirm that, in the event that a general meeting is called, they will give as much notice as practicable and will only utilise the authority granted by Resolution 13 in limited and time sensitive circumstances.

Dividend Policy

As a result of the timing of the payment of the Company's quarterly dividends, the Company's Shareholders are unable to approve a final dividend each year. In line with good corporate governance, the Board therefore proposes to put the Company's dividend policy to Shareholders for approval at the Annual General Meeting and on an annual basis.

Resolution 3 is an ordinary resolution to approve the Company's dividend policy. The Company's dividend policy shall be that dividends on the Ordinary Shares are payable quarterly in relation to periods ending March, June, September and December and the last dividend referable to a financial year end will not be categorised as a final dividend that is subject to Shareholder approval. It is intended that the Company will pay quarterly dividends consistent with the expected annual underlying portfolio yield. The Company has the flexibility in accordance with its Articles to make distributions from capital.

Shareholders should note that references to ''dividends'' are intended to cover both dividend income, and income which is designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts.

Recommendation

Your Board considers Resolutions 10 to 13 to be in the best interests of the Company and its members as a whole and most likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, your Board unanimously recommends that Shareholders should vote in favour of Resolutions 10 to 13 to be proposed at the AGM, as they intend to do in respect of their own beneficial shareholdings amounting to 215,000 Ordinary shares.

By order of the Board

Aberdeen Asset Management PLC - Secretaries

Bow Bells House 1 Bread Street

London EC4M 9HH

28 April 2021

6.    FINANCIAL HIGHLIGHTS

	31 December 2020	31 December 2019
Total assets (€'000)	484,104	382,981
Total equity shareholders' funds (net assets) (€'000)	293,596	260,277
Net asset value per share (euros)	1.20	1.11
Net asset value per share (pence)	107.95	94.21
Share price (mid market) (pence)	108.50	90.40
Market capitalisation (£'000)	265,283	211,988
Share price premium / (discount) to sterling net asset value1	0.5%	(4.0)%
Dividends and earnings
Net asset value total return per share (€)1	13.6%	8.6%
Dividends paid per share	5.64c (4.96p)	5.75c (5.11p)
Revenue reserves (€'000)	11,720	7,471
Gain/(Loss) (€'000)	35,389	19,429
Operating costs
Ongoing charges ratio (Group only expenses)1	1.3%	1.5%
Ongoing charges ratio (Group and property expenses)1	1.6%	1.7%

PERFORMANCE (TOTAL RETURN)

	Year ended 31 December 2019	Since Launch % return
Share price1	26.6%	22.5%
Net Asset Value (EUR)1	13.6%	19.5%

 

1 Considered to be an Alternative Performance Measure.

Dividends declared in respect of the Financial Year to 31 December 2020 (pence)

	Dividend Distribution	Qualifying Interest	xd date	Record date	Payment date
First Interim	1.05	0.19	04/06/2020	05/06/2020	26/06/2020
Second Interim	0.93	0.31	03/09/2020	04/09/2020	25/09/2020
Third Interim	0.73	0.51	03/12/2020	04/12/2020	30/12/2020
Fourth Interim	0.80	0.44	04/03/2021	05/03/2021	25/03/2021
Total	3.51	1.45

7.  STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant, reliable and prudent;

• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

• for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements;

• assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the group's position and performance, business model and strategy.

By order of the Board

Tony Roper

28 April 2021

8.  CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2019

		Year ended 31 December 2020				Year ended 31 December 2019
Notes		Revenue €'000		Capital €'000	Total €'000	Revenue €'000	Capital €'000	Total €'000
REVENUE
Rental income		20,257		-	20,257	13,376	-	13,376
Property service charge income		3,096		-	3,096	2,233	-	2,233
Other operating income		47		-	47	23	-	23
Total Revenue	2	23,400		-	23,400	15,632	-	15,632
GAINS ON INVESTMENTS Gains on revaluation of investment properties	9	-		32,878	32,878	-	16,852	16,852
Total Income and gains on investments		23,400		32,878	56,278	15,632	16,852	32,484
EXPENDITURE
Investment management fee		(2,066)		-	(2,066)	(1,695)	-	(1,695)
Direct property expenses		(1,305)		-	(1,305)	(265)	-	(265)
Property service charge expenditure		(3,096)		-	(3,096)	(2,233)	-	(2,233)
SPV property management fees		(139)		-	(139)	(154)	-	(154)
Other expenses	3	(1,290)		-	(1,290)	(1,728)	-	(1,728)
Total expenditure		(7,896)		-	(7,896)	(6,075)	-	(6,075)
Net operating return before finance costs		15,504		32,878	48,382	9,557	16,852	26,409
FINANCE COSTS
Finance costs	4	(2,545)		-	(2,545)	(1,411)	-	(1,411)
Effect of foreign exchange differences		(892)		301	(591)	-	-	-
Net return before taxation		12,067		33,179	45,246	8,146	16,852	24,998
Taxation	5	(228)		(9,629)	(9,857)	(415)	(4,662)	(5,077)
Net return for the year		11,839		23,550	35,389	7,731	12,190	19,921
OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED TO PROFIT OR LOSS
Currency translation differences on initial capital proceeds		-		-	-	-	136	136
Currency translation on conversion of distribution payments		-		-	-	-	(328)	(328)
Effect of foreign exchange differences		-		-	-	(300)	-	(300)
Other comprehensive income		-		-	-	(300)	(192)	(492)
Total comprehensive return for the period			11,839	23,550	35,389	7,431	11,998	19,429
Basic and diluted earnings per share	7		4.95¢	9.84¢	14.79¢	3.72¢	5.86¢	9.58¢

The accompanying notes are an integral part of the financial statements.

The total column of the Consolidated Statement of Comprehensive Income is the profit and loss account of the Group.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year

.

9.  CONSOLIDATED BALANCE SHEET

As at 31 December 2020

Notes		As at 31 December 2020 Total €'000	As at 31 December 2019 Total €'000
NON-CURRENT ASSETS Investment properties  9 Deferred tax asset  5		448,418 1,425	348,519 -
Total non-current assets		449,843	348,519
CURRENT ASSETS
Trade and other receivables	10	9,286	9,883
Cash and cash equivalents	11	24,874	24,579
Other Assets		75	-
Derivative financial assets		26	-
Total current assets		34,261	34,462
Total assets		484,104	382,981
CURRENT LIABILITIES
Lease liability	12	550	-
Trade and other payables	13	8,291	9,352
Derivative financial instruments	15	-	8
Total current liabilities		8,841	9,360
NON-CURRENT LIABILITIES
Bank Loans	14	143,331	107,916
Lease liability	12	22,620	-
Deferred tax liability	5	15,716	5,428
Total non-current liabilities		181,667	113,344
Total liabilities		190,508	122,704
Net assets		293,596	260,277
SHARE CAPITAL AND RESERVES
Share capital	16	2,756	2,645
Share premium	17	61,691	50,364
Special distributable reserve	18	185,661	191,579
Capital reserves	19	31,768	8,218
Revenue reserve		11,720	7,471
Equity shareholders' funds		293,596	260,277
Net asset value per share	8	€ 1.20	€ 1.11

10.  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the year ended 31 December 2020

 

	Notes	Share capital €'000	Share premium €'000	Special distributable reserve €'000	Capital reserve €'000	Revenue reserve €'000	Total €'000
Balance at 31 December 2019		2,645	50,364	191,579	8,218	7,471	260,277
Share Issue	16/17	111	11,442	-	-	-	11,553
Share Issue costs	17	-	(115)	-	-	-	(115)
Total Comprehensive return for the period		-	-	-	23,550	11,839	35,389
Dividends paid	6	-	-	(5,918)	-	(7,590)	(13,508)
Balance at 31 December 2020		2,756	61,691	185,661	31,768	11,720	293,596

For the year ended 31 December 2019

	Notes	Share capital €'000	Share premium €'000	Special distributable reserve €'000	Capital reserve €'000	Revenue reserve €'000	Total €'000
Balance at 31 December 2018		2,122	-	203,691	(3,780)	40	202,073
Share Issue	15/16	523	51,147	-	-	-	51,670
Share Issue costs	16	-	(783)	-	-	-	(783)
Total Comprehensive return for the year		-	-	-	11,998	7,431	19,429
Dividends paid	6	-	-	(12,112)	-	-	(12,112)
Balance at 31 December 2019		2,645	50,364	191,579	8,218	7,471	260,277

11.  CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

	Notes	Year ended 31 December 2020 €'000	Year ended 31 December 2019 €'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net gain for the period before taxation		45,246	19,921
Adjustments for:
Gains on investment properties		(32,878)	(16,852)
Land Leasehold Liability decreases		257	-
Decrease in operating trade and other receivables		1,215	1,796
(Decrease)/Increase in operating trade and other payables		(1,270)	6,123
Finance costs	4	2,545	1,411
Tax paid		(106)	-
Cash generated by operations		15,009	12,399
Net cash inflow from operating activities		15,009	12,399
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment properties		(46,223)	(182,749)
Derivative financial instruments		(34)	8
Currency translation differences		-	(492)
Net cash outflow from investing activities		(46,257)	(183,233)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	6	(13,508)	(12,112)
Bank loans interest paid		(1,588)	(1,411)
Bank loans drawn		35,201	107,916
Proceeds from share issue	16/17	11,553	51,670
Issue costs relating to share issue	17	(115)	(783)
Net cash inflow from financing activities		31,543	145,280
Net increase/(decrease) in cash and cash equivalents		295	(25,554)
Opening balance		24,579	50,133
Closing cash and cash equivalents		24,874	24,579
REPRESENTED BY Cash at bank	11	24,874	24,579

12.  NOTES TO THE FINANCIAL STATEMENTS

1.  Accounting Policies

The principal accounting policies adopted by the Group are set out below, all of which have been applied consistently throughout the period.

(a)  Basis of Accounting

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board ('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, and the Listing Rules of the UK Listing Authority.

The audited Consolidated Financial Statements of the Group have been prepared under the historical cost convention as modified by the measurement of investment property and derivative financial instruments at fair value. The consolidated financial statements are presented in Euro.

In compliance with the AIC's Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (Issued November 2014 and updated in October 2019 with consequential amendments), the consolidated statement of comprehensive income is separated between capital and revenue profits and losses.

New and revised standards and interpretations issued in the current period

The accounting policies adopted have been consistently applied throughout the period presented, unless otherwise stated. This includes the below noted Standards and Interpretations that became effective during the period, which the group has incorporated in the preparation of the financial statements:

-  Amendments to IAS 1 and IAS 8 - the amendment clarifies the definition of 'material' and to align the definition used in the Conceptual Framework and the standards themselves and provide extra guidance to financial statement preparers.

-  Amendments to IFRS 3 - the amendments narrowed and clarified the definition of a business. They also permit a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business.

-  Amendments to Conceptual Framework - the amendments support transition to the revised Conceptual Framework for subsidiaries that develop accounting policies using the Conceptual Framework when no IFRS Standard applies to a particular transaction.

-  Amendments to IFRS 9, IAS 39 and IFRS 7 - the amendments provide clarifications for specific hedge accounting requirements for the interest rate benchmark.

-  Amendments to IFRS 16 - the amendments allow lessees not to account for rent concessions as lease modifications if they are a direct consequence of COVID-19 and meet certain conditions.

The Group has made no adjustments to its financial statements following the above listed amendments and hence these are not discussed further.

(b)  Significant accounting judgements, estimates and assumptions

The preparation of the Group's financial statements requires the directors to make judgements, estimates and assumptions that affect the amounts recognised in the financial statements and contingent liabilities. However, uncertainty about these judgements, assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Key estimation uncertainties

Fair value of investment properties: Investment property is stated at fair value as at the balance sheet date as set out in note 9 to these accounts.

The determination of the fair value of investment properties requires the use of estimates such as future cash flows from the assets, estimate inflation, discount and capitalisation rates.. The estimate of future cash flows includes consideration of the repair and condition of the property, lease terms, future lease events, as well as other relevant factors for the particular asset.

These estimates are based on local market conditions existing at the balance sheet date.

(c)  Basis of Consolidation and Going Concern

The consolidated financial statements comprise the accounts of the Company and its subsidiaries drawn up to 31 December 2020. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition by acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.

If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated statement of comprehensive income.

The Group and Company meets its longer term funding and working capital requirements through a combination of cash balances, rental income and a number of bank loans with different banks.

Following the successful share issuance in March 2021 (€22.3m) and purchase of Lodz on 8 April 2021 (€35m including €6.5m recoverable VAT), the Group had cash resources of approximately €9m. The Lodz acquisition included €6.5m of refundable VAT, which is expected to be received in a period of no greater than 6 months.

As detailed in note 14 there are six bank facilities none of which are due to expire before June 2025. The Group also has an undrawn €40m revolving credit facility with Investec Bank, €3.3m of which is committed and available on request to cover any short term liquidity gaps.

The COVID-19 pandemic has not materially impacted the Groups portfolio. Rent collection for the year was 97%, and all 14 of the Groups properties increased in value. The potential impact of continued COVID-19 restrictions could, however, impact the Group through a reduction in rental income and potential reduction in investment property valuation. The Company has prepared cash flow forecasts which reflect these potential impacts, including severe but plausible downside scenarios taking into account specific tenant risks. The impact of reductions in rental income in the scenarios could be mitigated through a reduction in dividends to shareholders if considered necessary by the Board.

The scenarios model reduced rental income through to 2023 and the worst case model equates to an overall 20% reduction of rental income per annum over that period. There are no anticipated breaches of loan to value covenants as a result of reasonably possible reductions in property values or rental income. Regarding interest cover covenants of those three bank loans subject to financial covenants, two are secured over multiple properties. This affords the Group headroom on the interest cover covenants under all scenarios. The third bank loan is secured over only one property, with a single tenant, and as such is more exposed to the risk of rental reductions.

The Group is able to mitigate this risk through a combination of maintaining sufficient cash resources under the modelled scenarios to, as permitted under the provisions of the loan facility agreement, potentially cure a breach should it occur, or provide additional security, or let the property should it become vacant.

While the Company cannot predict with any certainty the full impact of the COVID-19 crisis the financial forecast prepared, including the downside scenarios, indicates that the Company can continue to operate as a going concern and meet its liabilities as they fall due.

Accordingly, the Directors have a reasonable expectation that the Company will be able to continue as a going concern and meet its liabilities as they fall due for a period of at least 12 months from the date of this report.

(d)  Functional and Presentation currency

Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the Company and its subsidiaries operate ("the functional currency") which is Euro. All figures in the consolidated financial statements are rounded to the nearest thousand unless otherwise stated.

(e)  Foreign Currency

Transactions denominated in foreign currencies are converted at the exchange rate ruling at the date of the transaction. Monetary and non-monetary assets and liabilities denominated in foreign currencies held at the financial period end are translated using London closing foreign exchange rates at the financial period end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss to capital or revenue in the Consolidated Statement of Comprehensive Income as appropriate. Foreign exchange movements on investments are included in the Consolidated Statement of Comprehensive Income within gains on investments.

(f)  Revenue Recognition

Rental income, including the effect of lease incentives, arising from operating leases (including those containing fixed rent increases) is recognised on a straight line basis over the lease term.

Service charge income represents the charge to tenants for services the Group is obliged to provide under lease agreements. This income is recorded gross within Income on the basis the Fund is acting as principal, with any corresponding cost shown within expenses.

Interest income is accounted for on an effective interest rate basis.

(g)  Expenses

All expenses are recorded through the revenue column of the Consolidated Statement of Comprehensive Income, except for gains or losses on investment properties which are recorded in the capital column.

(h)  Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from 'net return before tax' as reported in the Consolidated Statement of Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Where corporation tax arises in subsidiaries, these amounts are charged to the Consolidated Statement of Comprehensive Income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the balance sheet in the countries where the Group operates.

The Manager periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The carrying values of the Group's investment properties are assumed to be realised by sale at the end of use. The capital gains tax rate applied is that which would apply on a direct sale of the property recorded in the Consolidated Balance Sheet regardless of whether the Group would structure the sale via the disposal of the subsidiary holding the asset, to which a different tax rate may apply. The deferred tax is then calculated based on the respective temporary differences and tax consequences arising from recovery through sale.

(i)  Investment Properties

Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period during which the expenditure is incurred.

After initial recognition, investment properties are measured at fair value, with the movement in fair value recognised in the Consolidated Statement of Comprehensive Income and transferred to the Capital Reserve. Fair value is based on the external valuation provided by CBRE GmbH, chartered surveyors, at the balance sheet date. The assessed fair value is reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives and/or minimum lease payments.

On derecognition, gains and losses on disposals of investment properties are recognised in the Consolidated Statement of Comprehensive Income.

The Group may enter into forward funding agreements with third party developers in respect of certain properties. Under these agreements the Group will make payments to the developer as construction progresses. The value of these payments is assessed and certified by an expert and capitalised in the period during which the expenditure is incurred and included within the book cost of the property.

(j)  Distributions

Interim and final distributions payable to the holders of equity shares are recognised in the period in which they are paid. An annual shareholder resolution is voted upon to approve the Group's distribution policy. For final dividends, this occurs when they are recommended by the Board and approved by shareholders.

(k)  Lease Contracts

Operating Lease Contracts - the Group as Lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and so accounts for leases as operating leases.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

Operating and Finance Lease Contracts - the Group as intermediate lessor

When the Group is an intermediate lessor, it accounts for its interest in the head lease and the sub-lease separately. The Group assesses all leases where it acts as an intermediate lessor, based on an evaluation of the terms and conditions of the arrangements. Any head leases identified as having a low value at the lease commencement date are classified as operating leases and accounts for the lease payments on a straight-line basis over the lease terms.

Any head leases identified as finance leases are capitalised at the lease commencement present value of the minimum lease payments discounted at an applicable discount rate as a right-of-use asset and leasehold liability.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the Statement of Comprehensive Income over the lease period.

(l)  Share Issue Expenses

Incremental external costs directly attributable to the issue of shares that would otherwise have been avoided are written off to share premium.

(m)  Cash and Cash Equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits, and other short-term highly liquid investments readily convertible within three months or less to known amounts of cash and subject to insignificant risk of changes in value.

(n)  Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the Consolidated Statement of Comprehensive Income.

Financial assets

Financial assets are measured at amortised cost, financial assets 'at fair value through profit or loss' (FVTPL), or financial assets 'at fair value through other comprehensive income' (FVOCI). The classification is based on the business model in which the financial asset is managed and its contractual cash flow characteristics. All purchases and sales of financial assets are recognised on the trade date basis.

Financial assets at amortised cost

Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Loans and receivables (including trade and other receivables, bank balances and cash, and others) are measured at amortised cost using the effective interest method, less any impairment. The Group holds the trade receivables with the objective to collect the contractual cash flows.

Impairment of financial assets

The Group's financial assets are subject to the expected credit loss model. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The expected loss rates are based on the payment profiles of tenants over a period of 12 months before 31 December 2020, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the liability of the tenants to settle the receivable. Such forward-looking information would include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties. The Group's financial assets are subject to the expected credit loss model. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The expected loss rates are based on the payment profiles of tenants over a period of 12 months before 31 December 2020, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the liability of the tenants to settle the receivable. Such forward-looking information would include:

• changes in economic, regulatory, technological and environmental factors, (such as industry outlook, GDP, employment and politics);

• external market indicators; and

• tenant base.

 

Financial liabilities

Financial liabilities are classified as 'other financial liabilities'.

Other financial liabilities

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(o)  Derivative financial instruments

The Company used forward foreign exchange contracts to mitigate potential volatility of income returns and to provide greater certainty as to the level of Sterling distributions expected to be paid in respect of the period covered by the relevant currency hedging instrument, it does not seek to provide a long-term hedge for the Company's income returns, which will continue to be affected by movements in the Euro/Sterling exchange rate over the longer term.

Derivatives are measured at fair value calculated by reference to forward exchange rates for contracts with similar maturity profiles. Changes in the fair value of derivatives are recognised in the Statement of Comprehensive Income as revenue or capital depending on their nature.

(p)  Reserves

Share Capital

This represents the proceeds from issuing Ordinary shares and is non-distributable.

Share Premium

Share premium represents the excess consideration received over the par value of Ordinary shares issued and is classified as equity. Incremental costs directly attributable to the issue of Ordinary shares are recognised as a deduction from share premium.

Special Distributable Reserve

The special reserve is a distributable reserve to be used for all purposes permitted, including the buyback of shares and the payment of dividends.

Capital Reserve

The capital reserve is a distributable reserve subject to applicable legislation and practice, and the following are accounted for in this reserve:

• gains and losses on the disposal of investment properties;

• increases and decreases in the fair value of investment properties held at the period end, which are not distributable.

Revenue Reserve

The revenue reserve is a distributable reserve and reflects any surplus arising from the net return on ordinary activities after taxation.

2.  Revenue

	Year ended 31 December 2020 €'000	Year ended 31 December 2019 €'000
Rental income	20,257	13,376
Property service charge income	3,096	2,233
Other income	47	23
	23,400	15,632

Included within rental income is amortisation of rent free periods granted.

3.  Expenditure

	Year ended 31 December 2020 €'000	Year ended 31 December 2019 €'000
Professional fees	375	1,017
Directors' fees	169	170
Audit fee for statutory services1	270	138
Other expenses	301	216
Broker fees	67	58
Depositary fees	8	24
Stock exchange fees	59	42
Directors liability insurance expense	4	10
Registrar fees	24	40
Employers NI	13	13
Total expenses	1,290	1,728

1   The Audit fee above reflects 2020 audit fee of €172,000, 2019 additional fees of €45,000, Subsidiary audit fees of €23,000 and irrecoverable VAT of €30,000.

4.  Finance Costs

	Year ended 31 December 2020 €'000	Year ended 31 December 2019 €'000
Liquidity fund interest paid	-	37
Interest on bank loans	1,998	1,158
Bank interest	335	98
Amortisation of loan costs	212	118
Total finance costs	2,545	1,411

5.  Taxation

The Company is resident in the United Kingdom for tax purposes. The Company is approved by HMRC as an investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010. In respect of each accounting period for which the Company continues to be approved by HMRC as an investment trust the Company will be exempt from UK taxation on its capital gains. The Company is, however, liable to UK Corporation tax on its income. The Company is able to elect to take advantage of modified UK tax treatment in respect of its ''qualifying interest income'' for an accounting period referred to as the ''streaming'' regime. Under regulations made pursuant to the Finance Act 2009, the Company may, if it so chooses, designate as an ''interest distribution'' all or part of the amount it distributes to Shareholders as dividends, to the extent that it has ''qualifying interest income'' for the accounting period. Were the Company to designate any dividend it pays in this manner, it would be able to deduct such interest distributions from its income in calculating its taxable profit for the relevant accounting period. The Company should in practice be exempt from UK corporation tax on dividend income received, provided that such dividends (whether from UK or non-UK companies) fall within one of the ''exempt classes'' in Part 9A of the CTA 2010. In March 2021 the UK Government confirmed an increase in the Corporation Tax Rate from 19% to 25% from 1 April 2023. This will not affect the Company's ability to take advantage of the streaming regime as it currently does.

Reconciliation between the tax charge and the product of accounting profit/(loss) multiplied by the applicable tax rate for the year ended 31 December 2020.

(a)  Tax charge in the Group Statement of Comprehensive Income

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue €'000	Capital €'000	Total €'000	Revenue €'000	Capital €'000	Total €'000
Current taxation:
Overseas taxation	228	-	228	415	-	415
Deferred taxation:
Overseas taxation	-	9,629	9,629	-	4,662	4,662
Total taxation	228	9,629	9,857	415	4,662	5,077

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue €'000	Capital €'000	Total €'000	Revenue €'000	Capital €'000	Total €'000
Net result before taxation	12,067	33,179	45,246	8,146	16,852	24,998
Theoretical tax at UK corporation	2,293	6,304	8,597	1,548	3,202	4,750
tax rate of 19%
Effect of:
Losses where no deferred taxes	110	-	110	86	-	86
have been recognised
Impact of different tax rates on	(1,381)	3,325	1,944	(217)	1,460	1,243
foreign jurisdictions
Expenses that are not deductible	(81)	-	(81)	(718)	-	(718)
/ income that is not taxable
Impact of UK interest	(713)	-	(713)	(284)	-	(284)
distributions from the
Investment Trust
Total taxation on return	228	9,629	9,857	415	4,662	5,077

(b)  Tax in the Group Balance Sheet

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue €'000	Capital €'000	Total €'000	Revenue €'000	Capital €'000	Total €'000
Deferred tax assets: On tax losses On other temporary differences	- -	1,084 341	1,084 341	- -	766 -	766 -
	-	1,425	1,425	-	766	766

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue €'000	Capital €'000	Total €'000	Revenue €'000	Capital €'000	Total €'000
Deferred tax liabilities: Differences between tax base and property valuation	-	15,716	15,716	-	5,428	5,428
Total taxation on return	-	15,716	15,716	-	5,428	5,428

In March 2021the UK Government announced the UK Corporation tax rate is to remain at 19% until April 2023, at which point it will be increased to 25%. This is not expected to have a material impact on the Group.

A deferred tax asset of €0.00m (2019: €0.05m) on estimated UK tax losses has not been recognised.

6.  Dividends

	Year ended 31 December 2020 €'000	Year ended 31 December 2019 €'000
2019 Fourth Interim dividend of 1.41c (1.27p) per Share paid	3,306	2,856
27 March 2020 (2018 Third interim: 1.3p)
2020 First Interim dividend of 1.41c (1.24p) per Share paid	3,306	2,644
26 June 2020 (2019 First interim: 1.41c/1.27p)
2020 Second Interim dividend of 1.41c (1.24p) per Share paid	3,448	3,306
25 September 2020 (2019 Second interim: 1.41c/1.27p)
2020 Third Interim dividend of 1.41c (1.24p) per Share paid	3,448	3,306
30 December 2020 (2019 Third interim: 1.41c/1.27p)
Total Dividends Paid	13,508	12,112

A fourth interim dividend of 1.41c/(1.24p) per share was paid on 26 March 2021 to Shareholders on the register on 4 March 2021. Although this payment relates to the year ended 31 December 2020, under IFRS it will be accounted for in the year in which it has been paid.

7.  Earnings per Share (Basic and Diluted)

	Year ended 31 December 2020	Year ended 31 December 2019
Revenue net return attributable to Ordinary shareholders (€'000)	11,839	7,731
Weighted average number of shares in issue during the period	239,213,116	207,845,206
Total revenue return per ordinary share	4.95¢	3.72¢
Capital return attributable to Ordinary shareholder (€'000)	23,550	12,190
Weighted average number of shares in issue during the period	239,213,116	207,845,206
Total capital return per ordinary share	9.84¢	5.86¢
Total return per ordinary share	14.79¢	9.58¢

Earnings per Share is calculated on the revenue and capital return for the period (before other comprehensive income) and is calculated using the weighted average number of Shares in the period of 239,213,116 Shares, (2019: 207,845,206).

8.  Net Asset Value Per Share

	2020	2019
Net assets attributable to shareholders (€'000)	293,596	260,277
Number of shares in issue at 31 December	244,500,001	234,500,001
Net asset value per share (€)	1.20	1.11

9.  Investment Properties

	2020 €'000	2019 €'000
Opening carrying value	348,519	148,918
Purchases at cost and Capital Expenditure	43,851	182,749
Gains on revaluation to fair value	32,878	16,852
Purchase of leasehold interest (non cash)	23,170	-
Total carrying value at 31 December	448,418	348,519
Gains on investment properties at fair value comprise
Valuation gains/(losses)	31,958	15,514
Decrease in leasehold liability	(137)	-
Movements in lease incentives	1,057	1,338
	32,878	16,852

 

Valuation Methodology

Valuations were performed by CBRE GmbH, an accredited independent valuer with a recognised and relevant professional qualification. The valuer has sufficient current local and national knowledge of the particular property markets involved and has the skills and understanding to undertake the valuations competently.

The Investment Manager appoints a suitable valuer (such appointment is reviewed on a periodic basis) to undertake a valuation of all the direct real estate investments on a quarterly basis. The valuation is undertaken in accordance with the RICS Valuation - Global Standards 2020, (Red Book), published by the Royal Institution of Chartered Surveyors.

The Investment Manager meets with the valuer on a quarterly basis to ensure the valuer is aware of all relevant information for the valuation and any change in the investments over the quarter. The Investment Manager then reviews and discusses draft valuations with the valuer to ensure correct factual assumptions are made prior to the valuer issuing a final valuation report.

The fair value of completed investment property is determined using the discounted cash flow method. Future annual net operating income over a hold period of 10 years. Growth and inflation are included explicitly in the cash flow forecast. The valuer calculates the present value of cashflow generated by the investment property plus the present value of the exit value at the end of the 10-year hold period. The cash flow is discounted at a rate the valuer considers appropriate for the specific investment property.

The Property Valuer takes account of deleterious materials included in the construction of the investment properties in arriving at its estimate of Fair Value when the Investment Manager advises of the presence of such materials.

The majority of the leases are on a full repairing and insurance basis and as such the Group is not liable for costs in respect of repairs or maintenance to its investment properties.

The fair value of these investment properties amounted to €430,200,000. The difference between the fair value and the value per the Consolidated balance sheet at 31 December 2020 consists of accrued income relating to the pre-payment for rent-free periods recognised over the life of the lease, and a lease asset relating to future use of the leasehold at Den Hoorn. These total €4,952,000 and €23,170,000 respectively. The rent incentive balance is recorded separately in the financial statements as a current asset, and the lease asset is offset by an equal and opposite lease liability.

The following disclosure is provided in relation to the adoption of IFRS 13 Fair Value Measurement. All properties are deemed Level 3 for the purposes of fair value measurement and the current use of each property is considered the highest and best use.

Country and sector	Fair Value €'000	Valuation techniques	Key Unobservable inputs	Range (weighted average)
Netherlands - Logistics Germany - Logistics France - Logistics Poland - Logistics Spain - Logistics	204,100 65,200 77,700 54,700 28,500	Discounted Cash Flow Discounted Cash Flow Discounted Cash Flow Discounted Cash Flow Discounted Cash Flow	Annual rent per sq ft Capitalisation rate Discount rate Annual rent per sq ft Capitalisation rate Discount rate Annual rent per sq ft Capitalisation rate Discount rate Annual rent per sq ft Capitalisation rate Discount rate Annual rent per sq ft Capitalisation rate Discount rate	42.94 - 67.96 (58.55) 4.04% - 5.30% (4.87%) 4.65% - 5.90% (5.41%) 65.96 - 67.67 (67.01) 3.45% - 3.55% (3.49%) 4.20% - 4.35% (4.26%) 47.88 - 87.96 (73.57) 4.55% - 4.55% (4.55%) 4.65% - 4.70% (4.67%) 49.31 - 64.92 (57.16) 5.55% - 6.05% (5.80%) 5.76% - 6.15% (5.95%) 17.98 - 39.82 (31.47) 4.50% - 5.75% (5.27%) 6.50% - 7.72% (7.25%)

Sensitivity Analysis

The table below presents the sensitivity of the valuation to changes in the most significant assumptions underlying the valuation of investment property.

Country and sector	Assumption	Movement	Effect on Valuation €'000
Netherlands - Logistics	Capitalisation and	+50 basis points	(20,000)
	Discount rate	- 50 basis points	25,100
Germany - Logistics	Capitalisation and	+50 basis points	(7,900)
	Discount	- 50 basis points	10,800
France - Logistics	Capitalisation and	+50 basis points	(7,400)
	Discount rate	- 50 basis points	9,100
Poland - Logistics	Capitalisation and	+50 basis points	(4,300)
	Discount rate	- 50 basis points	5,000
Spain - Logistics	Capitalisation and	+50 basis points	(2,500)
	Discount rate	- 50 basis points	3,100

10.  Trade and Other Receivables

	2020 €'000	2019 €'000
Trade Debtors	4,130	3,327
Accrued income	-	160
VAT receivable	140	3,310
Cash held by Solicitors	-	165
Lease incentives	4,952	1,606
Deferred tax	-	766
Other receivables	64	549
Total receivables	9,286	9,883

The ageing of these receivables is as follows:

	2020 €'000	2019 €'000
Less than 6 months	8,769	5,813
Between 6 & 12 months	517	4,070
	9,286	9,883

11.  Cash and Cash Equivalents

	2020 €'000	2019 €'000
Cash at bank	24,874	24,579
Total cash and cash equivalents	24,874	24,579

12.  Leasehold Liability

	2020 €'000	2019 €'000
Maturity analysis - contractual undiscounted cash flows
Less than one year	550	-
One to five years	2,201	-
More than five years	26,165	-
Total undiscounted lease liabilities	28,916	-
Lease liability included in the statement of financial position
Current	550	-
Non - Current	22,620	-
Total lease liability included in the statement of financial position	23,170	-

On 15 January 2020 the group acquired a new logistics warehouse in Den Hoorn. The property is on land owned by the local municipality and leased to the group on a perpetual basis. The Group reserves the option to acquire the freehold ownership on 1 July 2044 for the total sum of €15,983k. The annual ground lease payments amount to €531k per annum, the present value of these future payments being €23,170k as at 31 December 2020.

13.  Trade and Other Payables

	2020 €'000	2019 €'000
Rental income received in advance	2,604	2,224
Accrued acquisition and development costs	833	1,521
Management fee payable	555	471
All other fees payable	-	651
VAT payable	811	670
Other payables	-	11
Accruals	1,048	659
Trade creditors	1,236	1,948
Tenant deposits	1,204	1,197
Total payables	8,291	9,352

14.  Bank Loans

	2020 €'000	2019 €'000
Bank borrowings drawn	144,600	108,900
Loan issue costs paid	(1,599)	(1,102)
Accumulated amortisation of loan issue costs	330	118
Total Bank Loans	143,331	107,916

The above loans are secured on the following properties on a non-recourse basis.

Property	Country	Loan (€'000)	Start date	End date	Lender	Fixed Interest Rate
Erlensee	Germany	17,800	20/02/2019	31/01/2029	DZ HYP	1.62%
Florsheim	Germany	12,400	18/02/2019	30/01/2026	DZ HYP	1.54%
Avignon + Meung Sur Loire	France	33,000	12/02/2019	12/02/2026	BAYERN LB	1.57%
(Ede/Waddinxveen) + Oss	Netherlands	37,700	06/06/2019	06/06/2025	BERLIN HYP	(1.22%) 1.05%
's Heerenberg	Netherlands	8,000	27/06/2019	27/06/2025	BERLIN HYP	0.94%
Zeewolde + Den Hoorn	Netherlands	35,700	15/01/2020	14/01/2028	BERLIN HYP	1.25%
		144,600

15.  Derivative Financial Instruments

	2020 €'000	2019 €'000
Forward foreign exchange contracts	26	(8)
	26	(8)

The Company employed currency hedging to provide greater certainty as to the level of Sterling distributions paid in respect of the year. A forward FX contract was entered into fixing the EUR: GBP exchange rate at €1.13:£1 for the three interim distributions paid in the year, and the fourth interim distribution paid after the year end. The forward FX in place at year end relates solely to the fourth interim distribution payable.

16.  Share Capital

	2020 €'000	2019 €'000
Opening balance Ordinary shares issued	2,645 111	2,122 523
Balance as at 31 December	2,756	2,645

Ordinary shareholders participate in all general meetings of the Company on the basis of one vote for each share held.

Each Ordinary share has equal rights to dividends and equal rights to participate in a distribution arising from a winding up of the Company. The Ordinary shares are not redeemable.

On 26 June 2020, the Group increased its share capital by the issue of 5,000,000 new Ordinary Shares at 105p (€1.16) per share. On 4 August 2020, the Group increased its share capital by the issue of 5,000,000 new Ordinary Shares at 104p (€1.15) per share. The number of Ordinary Shares authorised, issued and fully paid at 31 December 2020 is 244,500,001 (2019: 234,500,001).  The nominal value of each share is £0.01.

17.  Share Premium

	2020 €'000	2019 €'000
Opening balance Premium arising on issue of new shares Share issue costs deducted	50,364 11,442 (115)	- 51,147 (783)
	61,691	50,364

The share premium arising in the year was converted to EUR using the issue date exchange rate on 26 June 2020 of 1.1040574 and on 4 August 2020 of 1.1069906.

18.  Special Distributable Reserve

	2020 €'000	2019 €'000
Opening balance	191,579	203,691
Dividends Paid	(5,918)	(12,112)
Balance as at 31 December	185,661	191,579

At a General Meeting held on 8 November 2017, a special resolution was passed authorising, conditional on the issue of Ordinary shares by the Company, the amount standing to the credit of the share premium account of the Company following issue to be cancelled. In order to cancel the share premium account the Company was required to obtain a Court Order, which was received on 13 March 2018. A Statement of Capital form was lodged at Companies House with a copy of the Court Order on 16 March 2018. With effect from that date the amount of the share premium account cancelled was credited as a special distributable reserve in the Company's books of account.

19.  Capital Reserves

	Realised capital reserve €'000	Unrealised gains/(losses) €'000	Total capital reserve €'000
As at December 2019	145	8,073	8,218
Movement in deferred taxation	-	(9,629)	(9,629)
Movement in fair value gains of	-	32,878	32,878
investments
Currency (losses)/gains during the year	(147)	448	301
Balance as at 31 December 2020	(2)	31,770	31,768

	Realised capital reserve €'000	Unrealised gains/(losses) €'000	Total capital reserve €'000
As at 31 December 2018	345	(4,125)	(3,780)
Movement in deferred taxation	-	(4,662)	(4,662)
Movement in fair value gains of	-	16,852	16,852
investments
Currency (losses)/gains during the year	(200)	8	(192)
Balance at 31 December 2019	145	8,073	8,218

20.  Operating Segments

The Group's reportable segments are the geographical areas in which it operates. These operating segments reflect the components of the Group that are regularly reviewed to allocate resources and assess performance.

2020	Netherlands €'000	Poland €'000	Germany €'000	Spain €'000	France €'000	Parent Company €'000	Total €'000
Total Assets	231,747	57,557	67,387	29,423	83,745	14,245	484,104
Total Liabilities	113,681	3,407	33,038	1,138	38,389	855	190,508
Total Comprehensive return for the period (Revenue)	2,376	(334)	625	437	1,732	7,003	11,839
Total Comprehensive return for the period (Capital)	14,999	865	3,721	490	3,622	(147)	23,550
Included in Total Comprehensive Income
Net gain from the fair value	21,199	1,709	3,931	801	5,238	-	32,878
adjustment on investment property
Rental income	9,674	2,380	2,870	1,531	3,802	-	20,257

2019	Netherlands €'000	Poland €'000	Germany €'000	Spain €'000	France €'000	Parent Company €'000	Total €'000
Total Assets	142,387	56,872	63,252	32,416	77,258	10,796	382,981
Total Liabilities	47,825	3,138	32,953	1,726	36,007	1,055	122,704
Total Comprehensive return for the period (Revenue)	4,622	449	1,759	563	3,208	(3,170)	7,431
Total Comprehensive return for the period (Capital)	1,588	1,575	2,638	1,222	(200)	5,175	11,998
Included in Total Comprehensive Income
Net gain from the fair value	5,455	1,622	5,315	2,197	2,263	-	16,852
adjustment on investment property
Rental income	5,319	1,324	2,494	637	3,602	-	13,376

21.  Financial instruments and investment properties Fair value hierarchy

IFRS 13 requires the Group to classify its financial instruments held at fair value using a hierarchy that reflects the

significance of the inputs used in the valuation methodologies. These are as follows: Level 1 - quoted prices in active markets for identical investments;

Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc.); and

Level 3 - significant unobservable inputs.

The following table shows an analysis of the fair values of investment properties recognised in the balance sheet by level of the fair value hierarchy:

31 December 2020	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Investment properties	-	-	448,418	448,418

31 December 2019	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Investment properties	-	-	348,519	348,519

The lowest level of input is the underlying yields on each property which is an input not based on observable market data.

31 December 2020	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Derivative Financial Instruments	-	26	-	26

31 December 2019	Level 1 €'000	Level 2 €'000	Level 3 €'000	Total fair value €'000
Derivative Financial Instruments	-	(8)	-	(8)

The lowest level of input is EUR:GBP exchange rate.

22.  Risk Management

The Group's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Group also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the Group's activities.

The main risks the Group faces from its financial instruments are (a) market price risk (comprising of (i) interest rate risk, (ii) foreign currency risk and (iii) other price risk), (b) liquidity risk and (c) credit risk.

(a)  Market price risk

The fair value or future cash flows of a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk.

(i)  Market risk arising from interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets and liabilities at the year end were as follows:

As at 31 December 2020	Interest rate %	Local currency '000	Foreign exchange rate	Euro equivalent €'000
Assets:
Euro	(0.50)	23,594	€1.00	23,594
Pound Sterling	0.10	726	0.90	807
Polish Zloty		2,184	4.61	473
Total	24,874

As at 31 December 2019	Interest rate %	Local currency '000	Foreign exchange rate	Euro equivalent €'000
Assets:
Euro	(0.60)	23,393	€1.00	23,393
Pound Sterling	0.07	1,005	0.85	1,186
Total	24,579

The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

An increase of 0.1 per cent in interest rates as at the reporting date would have increased the reported profit and equity shareholders' funds by €24,874. A decrease of 0.1 per cent would have reduced the reported profit and equity shareholders' funds by €24,874. Other financial assets (eg debtors) are not subject to interest rate risk.

(ii)  Market risk arising from foreign currency risk

The income and capital value of the Groups investments and liabilities can be affected by exchange rate movements as some of the Group's assets and income are denominated in currencies other than Euro which is the Group's reporting currency.

The revenue account is subject to currency fluctuation arising from overseas income.

Foreign currency risk profile

Foreign currency risk exposure by currency of denomination:

As at 31 December 2020	Investment exposure €'000	Net monetary exposure €'000	Total currency exposure €'000
Pound Sterling	-	1,052	1,052
Złoty	51,852	473	473
Total foreign currency	51,852	1,525	1,525
Euro	396,566	(156,347)	292,071
Total	448,418	(154,822)	293,596

As at 31 December 2019	Investment exposure €'000	Net monetary exposure €'000	Total currency exposure €'000
Pound Sterling	-	4,652	4,652
Total foreign currency	-	4,652	4,652
Euro	348,519	(92,894)	255,625
Total	348,519	(88,242)	260,277

The asset allocation between specific markets can vary from time to time based on the Investment Manager's opinion of the attractiveness of the individual markets.

 

Foreign currency sensitivity

The following table details the Group's sensitivity to a 10% increase and decrease in sterling and Polish Zloty against the Euro and the resultant impact that any such increase or decrease would have on net return before tax and equity shareholders' funds. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates.

	As at 31 December 2020 €'000	As at 31 December 2019 €'000
Zloty	47.3	-
Pound Sterling	105.2	465.2

 

(iii)  Market risk arising from other price risk

Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. The carrying amount for financial assets approximates to the fair value of trade and other receivables (note 10) and trade and other payables (note 13).

Other price risk sensitivity

If the investment valuation fell by 10% at 31 December 2020, the decrease in total assets and return before tax would be  43m (2019: €35m). If the investment portfolio valuation rose by 10% at 31 December 2020, the increase in total assets and return before tax would be  43m (2019: €35m). Exposures vary throughout the period as a consequence of changes in the net assets of the Group arising out of the investment and risk management processes.

(b)  Liquidity risk

This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. All creditors are payable within three months.

The Group's liquidity risk is managed by the Investment Manager placing cash in liquid deposits and accounts. Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments and also includes:

• The level of dividends and other distributions to be paid by the Group may fluctuate and there is no guarantee that any such distributions will be paid.

• The Group's target returns are targets only and are based on estimates and assumptions about a variety of factors all of which are beyond the Group's control and which may adversely affect the Group's ability to make its target returns. The Group may not be able to implement its investment policy and strategy in a manner that generates dividends in line with the target returns or the Group's investment objective. Liquidity risk is not considered to be significant.

(c)  Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.

The risk is not considered significant by the Board, and is managed as follows:

The Group has acquired a portfolio of European logistics properties and has a number of leases with tenants. In the event of default by a tenant, the Group will suffer a rental shortfall and incur additional costs until the property is re-let, including legal expenses, in maintaining, insuring and re-letting the property. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Investment Manager monitors such reports in order to anticipate and minimise the impact of defaults by tenants. Cash is held only with reputable financial institutions with high quality external credit ratings.

None of the Group's financial assets is secured by collateral.

The maximum credit risk exposure as at 31 December 2020 was €29.0m (2019 - €34.2m). This was due to trade receivables and cash as per notes 10 and 11.

All cash is placed with financial institutions with a credit rating of -A or above. Bankruptcy or insolvency may cause the Group's ability to access cash placed on deposit to be delayed or limited. Should the credit quality or the financial position of the financial institutions currently employed significantly deteriorate, the Investment Manager would move the cash holdings to another financial institution. There are no significant concentrations of liquidity risk within the Group.

(d)  Taxation and Regulation risks

The Company must comply with the provisions of the Companies Act and, as the shares are admitted to the premium segment of the Official List, the Listing Rules and the Disclosure Guidance and Transparency Rules.

A breach of the Companies Act could result in the Company and/or the Board being fined or being the subject of criminal proceedings. Breach of the Listing Rules could result in the shares being suspended from listing. Legal and regulatory changes could occur that may adversely affect the Company. The Company has obtained UK Investment Trust Company status. The Company must comply with the provisions of sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instruments 2011/2999 to maintain this status. Breaching these regulations could result in the Company paying UK Corporation Tax it would otherwise be exempt from, adversely affecting the Company's ability to pursue its investment objective.

Capital Management

The Group considers that capital comprises issued Ordinary shares and long term borrowings. The Group's capital is deployed in the acquisition and management of subsidiaries in line with the Group's investment objective, specifically to provide a regular and attractive level of income return together with the potential for long term income and capital growth from investing in high quality European logistics real estate.

The following investment limits and restrictions apply to the Group and its business which, where appropriate, are measured at the time of investment and once the Group is fully invested:

• the Group will only invest in assets located in Europe;

• no more than 50 per cent. of Gross Assets will be concentrated in a single country;

• no single asset may represent more than 20 per cent. of Gross Assets;

• forward funded commitments will be wholly or predominantly pre-let and the Group's overall exposure to forward funded commitments will be limited to 20 per cent. of Gross Assets;

• the Group's maximum exposure to any single developer will be limited to 20 per cent of Gross Assets;

• the Group will not invest in other closed-ended investment companies;

• the Group may only invest in assets with tenants which have been classified by the Investment Manager's investment process as having strong financial covenants; and

• no single tenant will represent more than 20 per cent. of the Group's annual gross income measured annually.

The Group's principal use of cash will be to fund investments in accordance with its investment policy, on-going operational expenses and to pay dividends and other distributions to shareholders, as set out in the Prospectus. The Group may from time to time have surplus cash (for example, following the disposal of an investment). Pending reinvestment of such cash, it is expected that any surplus cash will be temporarily invested in cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with financial institutions or other counterparties having a single -A (or equivalent) or higher credit rating as determined by an internationally recognised rating agency; or ''government and public securities'' as defined for the purposes of the FCA rules.

The Group monitors capital primarily through regular financial reporting and also through a gearing policy. The Group intends to use gearing with the objective of improving shareholder returns. Debt will typically be secured at the asset level and potentially at the Group level with or without a charge over some or all of the Group's assets, depending on the optimal structure for the Group and having consideration to key metrics including lender diversity, cost of debt, debt type and maturity profiles. Borrowings will typically be non-recourse and secured against individual assets or groups of assets and the aggregate borrowings at asset level will always be subject to an absolute maximum, calculated at the time of drawdown for a property purchase, of 50 per cent. of Gross Assets. Where borrowings are secured against a group of assets, such group of assets shall not exceed 25 per cent. of Gross Assets in order to ensure that investment risk remains suitably spread. The Board has established gearing guidelines for the AIFM in order to maintain an appropriate level and structure of gearing within the parameters set out above. Under these guidelines, aggregate borrowings at asset level are expected to be at or around 35 per cent. of gross assets. The Board will keep the level of borrowings under review and the aggregate borrowings will always be subject to the absolute maximum set at the time of the Group's launch, calculated at the time of drawdown for a property purchase, of 50 per cent. of Gross Assets. The fair value of the Groups bank borrowings as at 31 December 2020 was €150,121,000 (2019: €113,330,000).

Contractual undiscounted maturities

All financial liabilities presented as current are payable within 3 months. The analysis of non-current financial liabilities is below:

At 31 December 2020	Within 1 year €'000	1-2 years €'000	2-5 years €'000	Over 5 years €'000	Total €'000
Bank loans	1,963	1,963	51,588	102,218	157,732
Lease liability	550	550	1,651	26,165	28,916
Total	2,513	2,513	53,239	128,383	186,648

At 31 December 2019	Within 1 year €'000	1-2 years €'000	2-5 years €'000	Over 5 years €'000	Total €'000
Bank loans	1,516	1,516	4,549	112,616	120,197
Total	1,516	1,516	4,549	112,616	120,197

23.  Related Party Transactions

The Company's Alternative Investment Fund Manager ('AIFM') throughout the period was Aberdeen Standard Fund Managers Limited ("ASFML"). Under the terms of a Management Agreement dated 17 November 2017 the AIFM is appointed to provide investment management services, risk management services and general administrative services including acting as the Company Secretary. The agreement is terminable by either the Company or ASFML on not less than 12 months' written notice.

Under the terms of the agreement portfolio management services are delegated by ASFML to Aberdeen Standard Investments Ireland Limited ('ASIIL'). The total management fees charged to the Consolidated Statement of Comprehensive Income during the period were €2,066,000 (2019: €1,695,000), of which €555,000 (2019: €471,000) were payable at the period end. Under the terms of a Global Secretarial Agreement between ASFML and Aberdeen Asset Management PLC ('AAM PLC'), company secretarial services are provided to the Company by AAM PLC.

A Promotional and Marketing Budget fee of €120,000 was approved for 2020/2021 at the November 2020 Board meeting which is payable to Aberdeen Asset Managers Limited ('AAML').

The remuneration of Directors is detailed below. Further details on the Directors can be found on pages 55 to 57 of the published Annual Report and financial statements for the year ended 31 December 2020.

	2020 €'000	2019 €'000
Pascal Duval	-	21
Caroline Gulliver	43	40
John Heawood	37	34
Tony Roper	52	41
Diane Wilde	37	34
Balance as at 31 December	169	170

Please note the above figures are all Euro, while those in the directors remuneration report are stated in GBP. Mr Duval retired on 11 June 2019.

The Directors' shareholdings are detailed below.

	31 December 2020 Ordinary shares	31 December 2019 Ordinary shares
T Roper	55,000	45,000
C Gulliver	40,000	40,000
J Heawood	30,000	30,000
D Wilde	40,000	40,000

On 16 March 2021, the Director's increased their shareholdings by: T Roper 20,000, C Gulliver 10,000, J Heawood 10,000 and D Wilde 10,000.

24.  Lease Analysis

The group leases out its investment properties under operating leases.

The future income under operating leases, based on the unexpired lease length at the year end was as follows (based on total rents).

	2020 €'000	2019 €'000
Less than one year	22,443	19,037
Between one and two years	22,061	19,039
Between two and three years	21,781	18,878
Between three and four years	21,446	18,370
Between four and five years	20,664	17,727
More than five years	140,045	106,778
Total	248,440	199,829

The largest single tenant at the year end accounted for 12.5 per cent of the annualised rental income at 31 December 2020.

The Group has entered into commercial property leases on its investment property portfolio. These leases have remaining lease terms of between 1 and 19 years.

25.  Post Balance Sheet Events Acquisition

On 15 April 2021 the Company acquired a modern logistics and distribution property in Lodz, Poland for €28.0 million, representing a net initial yield of 5.6%.

Equity Raise

The Company issued 18.45 million new ordinary shares at a price of 105 pence per share on 16 March 2021, raising gross proceeds of £19.4 million. Following the issue of the New Ordinary Shares, the total number of voting rights in the Company is 262,950,001. Details of the Directors participation in the share issue is included in note 23.

Office Depot

The Company was made aware in February that Office Dépôt France, the sole tenant occupying its Meung-sur-Loire asset in France, had sought court protection and the appointment of an administrator. The tenant continues to operate from the asset, and pay rent post the appointment of an administrator.

BREXIT

The UK voted to leave the EU in 2016 and officially left the trading bloc on 31 January 2020 with an agreement to keep the majority of the existing relationship in place until 31 December 2020. On 24 December 2020 a deal was reached between the UK and the EU that confirmed the new rules for how the parties would work and trade with each other in the future. On 1 January 2021, the free movement of people and goods and services between the EU and UK ended with new rules coming into effect. The avoidance of a no-deal Brexit is seen as a positive development for both parties but some uncertainty remains and further clarification is required on certain aspects of the deal including, but not limited to, the Northern Ireland protocol, application to financial services and customs documentation requirements.

There does not yet appear to be significant issues impacting real estate specifically that have arisen as a result of Brexit after the reporting period and as a result the Directors considers the new rules coming into effect as a result of Brexit to be a non-adjusting post balance sheet event. Any future impact on the Group is likely to be in connection with the assessment of the fair value of investments and stability of rental income at future dates. At the date of reporting it is not possible to quantify the future financial impact of Brexit on the Group's investments or rental income with any degree of certainty.

The Directors will continue to closely analyse and review the impact of Brexit on the Group and will take appropriate action as required.

26.  Capital Commitments

As at the 31 December 2020 the Group had capital commitments of €nil.

27.  Ultimate Parent Company

In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.

CORPORATE INFORMATION

EPRA FINANCIAL REPORTING (UNAUDITED)

One of EPRA's aims is to improve the transparency, comparability and relevance of the published results of listed real estate companies in Europe. EPRA performance measures calculated in line with 'Best Practice Recommendation Guidelines - November 2016' are therefore enclosed.

EPRA Performance Measures

In October 2019, EPRA issued new best practice recommendations (BPR) for financial guidelines on its definitions of NAV measures: EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value (NDV) - effective 1 Jan 2020. The rationale behind each of these measures is set out below. The Group has adopted these new guidelines and applied them in this Annual Report. EPRA Net Tangible Assets (NTA) is considered to be the most relevant NAV measure for the Group and will now report this as the primary non-IFRS NAV measure, replacing the previously reported EPRA NAV per share metrics.

The tables below sets out what the 2019 EPRA numbers were and what they would have been under the new guidelines.

Rationale:

EPRA Net Tangible Assets:

The underlying assumption behind the EPRA Net Tangible Assets calculation assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability.

EPRA Net Reinstatement Value:

The objective of the EPRA Net Reinstatement Value measure is to highlight the value of net assets on a long-term basis. Assets and liabilities that are not expected to crystallise in normal circumstances such as the fair value movements on financial derivatives and deferred taxes on property valuation surpluses are therefore excluded. Since the aim of the metric is to also reflect what would be needed to recreate the company through the investment markets based on its current capital and financing structure, related costs such as real estate transfer taxes should be included.

EPRA Net Disposal Value:

Shareholders are interested in understanding the full extent of liabilities and resulting shareholder value if company assets are sold and/or if liabilities are not held until maturity. For this purpose, the EPRA Net Disposal Value provides the reader with a scenario where deferred tax, financial instruments, and certain other adjustments are calculated as to the full extent of their liability, including tax exposure not reflected in the Balance Sheet, net.

EPRA Performance Measures

	31 December 2020 Total	31 December 2019 Total
EPRA earnings (€'000)	12,106	7,247
EPRA earnings per share (cents)	5.06	3.49
EPRA Net Tangible Assets ("NTA") (€'000)	309,251	264,947
EPRA NTA per share (cents)	126.48	112.98
EPRA Net Reinstatement Value ("NRV") (€'000)	333,002	282,092
EPRA NRV per share (cents)	136.20	120.30
EPRA Net Disposal Value ("NDV")(€'000)	287,003	260,277
EPRA NDV per share (cents)	117.38	110.99
EPRA Net Initial Yield	4.54%	4.74%
EPRA topped-up Net Initial Yield	4.66%	5.10%
EPRA Vacancy Rate	0.0%	0.0%
EPRA Cost Ratios - including direct vacancy costs	24%	29%
EPRA Cost Ratios - excluding direct vacancy costs	24%	29%

	31 December 2020 Total	31 December 2019 Total
A. EPRA Earnings (€000)
Earnings per IFRS income statement	35,389	19,429
Adjustments to calculate EPRA Earnings, exclude:	-	-
Net changes in value of investment properties	(32,878)	(16,852)
Deferred tax	9,629	4,662
Changes in fair value of financial instruments	(34)	8
EPRA Earnings	12,106	7,247
Weighted average basic number of shares	239,213	207,845
EPRA Earnings per share (pence per share)	5.06	3.49
B. EPRA Net Tangible Assets ("NTA" (€'000)
IFRS NAV	293,596	260,277
Exclude:
Fair value of financial instruments	26	8
Deferred tax in relation to fair value gains of Investment Property	15,629	4,662
	309,251	264,947
Shares in issue at end of year	2,445,000	2,345,000
EPRA NAV per share	126.48	112.98
C. EPRA Net Reinstatement Value ("NRV") (€'000)
EPRA NRV	309,251	264,947
Real Estate Transfer Tax and other acquisition costs	23,751	17,145
EPRA NRV	333,002	282,092
EPRA NRV per share	136.20	120.30
D. EPRA Net Disposal Value ("NDV") (€'000)
IFRS NAV	293,596	260,277
Fair Value of Fixed Interest Debt	(6,593)	(5,414)
EPRA NDV	287,003	254,863
EPRA NRV per share	117.38	108.68

	31 December 2020 Total	31 December 2019 Total
E. EPRA Net Initial Yield and 'topped up' NIY disclosure
Investment property - wholly owned	430,200	350,125
Less developments	-	-
Completed property portfolio	430,200	350,125
Allowance for estimated purchasers' costs	23,751	17,145
Gross up completed property portfolio valuation	453,951	367,270
Annualised cash passing rental income	21,933	17,717
Property outgoings	(1,305)	(319)
Annualised net rents	20,628	17,398
Add: notional rent expiration of rent free periods or other lease	522	1,322
incentives
Topped-up net annualised rent	21,150	18,720
EPRA NIY	4.54%	4.74%
EPRA "topped-up" NIY	4.66%	5.10%
F.  EPRA Cost Ratios
Administrative / property operating expense line per IFRS income	7,895	6,075
statement
Less recoverable service charge	(3,096)	(2,233)
EPRA Costs (including direct vacancy costs)	4,799	3,842
Direct vacancy costs	-	-
EPRA Costs (excluding direct vacancy costs)	4,799	3,842
Gross Rental income less ground rent costs	20,257	13,376
EPRA Cost Ratio (including direct vacancy costs)	24%	29%
EPRA Cost Ratio (excluding direct vacancy costs)	24%	29%

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 December 2020 are an abridged version of the Company's full Annual Report and financial statements, which have been approved and audited with an unqualified report and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain a statement under s.498 of the Companies Act 2006.

The Annual Report will be posted to shareholders in mid May 2021 and additional copies will be available from the registered office of the Company and on the Company's website, eurologisticsincome.co.uk*

The Annual General Meeting will be held at 3:00 pm on 7 June 2021 at Bow Bells House, 1 Bread Street, London EC4M 9HH.

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

*Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

For Aberdeen Standard European Logistics Income PLC

Aberdeen Asset Management PLC, Secretaries

28 April 2021

 

END

 

 

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