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TR European Growth (TRG)

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Monday 19 July, 2010

TR European Growth

Discount Control Provisions

RNS Number : 5767P
TR European Growth Trust PLC
19 July 2010





19 JULY 2010






Proposed changes to the Company's discount protection

and continuation arrangements



Following consultation with the Company's larger shareholders, the Board of TR European Growth Trust PLC wishes to announce that it intends to put a package of proposals to shareholders in relation to changes to the method by which the Company seeks to protect its discount and a reduction in the period between continuation votes.  The Board also wishes to announce a simplification of the Company's benchmark and an addition to the team which manages TREG's portfolio.


The proposals relating to discount protection and continuation will be considered at the Company's Annual General Meeting which is expected to be held in early November 2010.


Discount Protection Mechanism

In 2005, the Company introduced a discount protection mechanism which would allow shareholders to tender up to 10% of their shareholding if the Company's shares traded at an average month end discount of greater than 10% over the course of the Company's financial year.  Any such tender offer would be carried out at a price representing a discount of 6.5% to the net asset value per share on the relevant calculation date. 


In 2009, the discount protection mechanism was modified to allow for a more representative calculation of the Company's discount, namely the aggregate discount to net asset value for each business day in a calendar month divided by the number of business days in that month (the Monthly Average Discount) aggregated with the Monthly Average Discount for each other month in the relevant financial year and divided by 12.


Since the introduction of the discount protection mechanism the Company has bought back approximately 42.4 million shares using its share buy-back authority and in 2009 conducted a tender offer whereby 3,356,055 shares were validly tendered and subsequently cancelled.  This represents 34.2 per cent. of the Company's shares outstanding at the time of the introduction of the Discount Protection Mechanism at a approximate total cost of £169.7 million.



Impact of the discount protection mechanism

The high level of share buy-backs, which are a consequence of the Company's current discount protection mechanism, require considerable liquid resources to be maintained within TREG's portfolio.  This is either in cash, cash equivalents, or European companies at the larger end of the Company's investable universe.  The Board believes these assets could be better invested in attractively priced opportunities which the portfolio manager is able to find in European smaller companies.


The Board further believes that shareholders invest in TREG for its focus on European smaller companies and wish for the portfolio manager to be able to pursue a European smaller companies investment policy without the constraint of retaining a high level of liquidity.  This is in accordance with TREG's investment objective of seeking to generate capital growth from a diversified portfolio of smaller to medium sized companies in Europe (excluding the UK).


Proposed changes to the Company's discount protection method

In light of the above, and following consultation with the Company's larger shareholders, the Board is proposing that the Company's articles be amended to remove the current discount protection mechanism.  It is the Board's intention to continue to actively monitor the level of discount at which TREG trades and use the share buy-back authority granted annually at the Company's AGM where appropriate. Under the Company's revised discount control arrangements, the Board's decision to buy back shares will be influenced by the Company's absolute level of discount, the level relative to its peer group and the availability of stock for repurchase.  The Board's overall aim will be to buy back shares when it is in shareholders' long-term interest to do so.


The Board believes the removal of the discount protection mechanism and the adoption of a less formulaic approach will allow a better balance between addressing the Company's discount, maximising the manager's opportunities to generate capital growth within TREG's portfolio and maintaining a liquid investment vehicle for shareholders and potential investors.


Renewal of the Company's share buy-back authority

The Company's current share buy-back authority, granted in October 2009 for the repurchase of 9,495,783 shares has been almost exhausted.  The Board will therefore be seeking renewal of this authority at an extraordinary general meeting to be held on Wednesday 18 August 2010, in order that it can maintain its power to buy back shares prior to the Company's AGM. A document calling the EGM will be sent to shareholders on 26 July 2010.


Continuation vote

As part of the package of changes to be proposed at the AGM, the Board considers that the Company's continuation votes, currently held every five years, should be held instead every three years.  The reduction in the period between continuation votes is conditional upon approval of the proposed changes to the Company's discount protection method.




The benchmark by which the Company measures its performance (and against which any performance fee is calculated) is a blend of 50% of the return of the HSBC Smaller Europe (ex UK) Index and 50% of the return of the S&P/Citigroup EMI Europe (ex UK) Index (both expressed in Sterling).  Recent shareholder consultation has indicated that shareholders find this blended benchmark unnecessarily complex.  The Board is therefore proposing that, with effect from 1 July 2010, the Company's performance measurement (and any performance fee) is calculated with reference to the returns of a benchmark comprising solely the HSBC Smaller Europe (ex UK) Index.  The change to the benchmark is not dependent on shareholders approving the changes to the Company's discount protection and continuation arrangements, but will be subject to shareholder approval as this represents a change to the Company's investment policy.


Portfolio management

TREG's portfolio has been managed since the Company's launch in 1990 by Stephen Peak, with Simon Savill as assistant portfolio manager since June 2000.  This team will be supplemented by Ollie Beckett.  Ollie has been involved in equity markets for 15 years and has been a specialist in European smaller companies for over five years.  He is the manager of the Henderson Horizon Pan-European Smaller Companies Fund.


Further details in relation to the matters set out in this announcement will be sent to shareholders in late September with the annual report for the year ended 30 June 2010.


- ENDS -




Audley Twiston-Davies


TR European Growth Trust PLC

020 7818 6816


James de Sausmarez

Head of Investment Trusts

Henderson Global Investors

020 7818 3349


Jane Lewis

Winterflood Investment Trusts

020 3100 02950

This information is provided by RNS
The company news service from the London Stock Exchange