LONDON-based Gartmore European Investment Trust has not given up hope of a friendly takeover of Friends Ivory & Sime's #160m European Assets Trust, even though its prey appeared to give its proposals the cold shoulder on Tuesday.

Simon Stevens, of Gartmore European's adviser West Merchant Bank, said yesterday: ''The board . . . would very much prefer that the deal was negotiated in a friendly and constructive manner.''

But the possible loss of the Dutch-registered and guilder-denominated European Assets' funds - which generate about #800,000 a year in management fees - represents another major headache for Friends Ivory & Sime. Since it was formed in February by the merger of Edinburgh-based Ivory & Sime and Wiltshire-based life office Friends Provident's asset management division it has lost the mandate to manage the #92m Continental Assets Trust.

And Gartmore European, which has said its proposals would give European Assets shareholders shares worth about 98.5% of their fund's net asset value or an indirect cash alternative worth about 96%, may have raised the hackles of European Assets' supervisory and management boards.

The boards of European Assets, which was well short of its benchmark index last year and traded at an average discount of 19% to net asset value during April, said on Tuesday that they were ''not in a position to assess'' Gartmore European's proposals principally because it had not provided information relating to the legal effects and tax efficiency of the proposals.

Gartmore European, which is slightly smaller than European Assets, insists its proposals will solve the tax issues associated with European Assets' Dutch registration but is not prepared to reveal its exact methods to potential rivals.

The European Assets boards appeared to favour unnamed rivals of Gartmore European, which would seem likely to include a Friends Ivory & Sime bid to retain management of the funds.

Recent corporate activity in the investment trust sector has normally seen the first bidder to stick its head above the parapet defeated by others more palatable to the under-siege trust's board.

But Gartmore European's no doubt complex proposals to minimise European Assets shareholders' tax liabilities may give it some kind of edge, assuming they work.