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TR European Growth (TRG)

  Print      Mail a friend       Annual reports

Tuesday 01 August, 2000

TR European Growth

Final Results

TR European Growth Trust PLC
1 August 2000

              Unaudited Preliminary Group Results
                for the year ended 30 June 2000

*    Outstanding year with fully diluted NAV rising 95.6% and share price by
*    TREG is the best performing non-venture capital investment trust over the
     period since its launch in September 1990
*    Dividend increases by 11% to 1.0p per share

It is a very great pleasure on behalf of the Board to introduce an outstanding
financial and investment management performance, both for the year and over
the decade since the Company was launched.   Throughout our history
shareholders have enjoyed consistently successful investment management under
the team led by Stephen Peak.  As we approach the continuation vote provided
for in the original prospectus at our forthcoming Annual General Meeting, it
is gratifying for the Board to be able to offer a review from such a strong
position.   The Company was launched in September 1990 with subscribed capital
of £36.4 million and two C share issues in 1994 and 1997 raised an additional
£85.6 million.   At 30 June 2000 total shareholders' funds were £773.4 million
and we now have a significant proportion (approximately 45%) of our shares
held by individual investors.

Year to 30 June 2000
Over the year to 30 June 2000 fully diluted net asset value per share
increased by 95.6%.   This compares very favourably with relative indices
published by the FTSE World Europe ex UK Index of  23.5% and by HSBC Smaller
European ex UK Index of 18.0%.   The ordinary share price increased by 119.5%
over the year and the price of our warrants (which carry the right to
subscribe for shares at a price of £1.66 each compared with a Stock Exchange
price of between £4 and £5 per share) have increased by an even higher

We were able to report good growth in fully diluted net asset value per share
(39%) in our interim results at the half year.   The second half of our
financial year saw even stronger investment performance.

European securities markets during the past twelve months shared the volatile
experience of other Stock Exchanges around the world with exaggerated share
prices in the Telecom, Media and Technology sectors during the last calendar
quarter of 1999 followed by dramatic correction in the first calendar quarter
of 2000.   In these volatile conditions of apparently fickle investment
fashion the disciplines applied by the Manager in selecting individual stocks
for the Company's portfolio proved their worth and contributed importantly to
good performance.   Our financial year was also a period of prolonged weakness
for the recently introduced Euro currency - the trading currency for the great
majority of the companies in which we invest.   The effect of currency
conversion is therefore unhelpful to our performance as measured in Sterling
but that relative Euro weakness undoubtedly contributed to the strengthening
of the overall economic environment in Europe and to the specific business
activity and prosperity of companies we invest in.
Our investment objective emphasises capital growth rather than dividend yield
and we have commented in the past that the type of growth company which we
favour for investment will distribute only a relatively modest proportion of
its total income as dividends.   Nonetheless, the gross revenue of the Company
over the past year increased by nearly 15%.   Net revenue, however, is
considerably less because of high charges for interest on increased borrowings
which financed portfolio purchases.   Higher management fees reflect the
growth achieved in shareholders' funds.   The dividend distribution to our
shareholders is 1.0p per share, an increase on the 0.9p paid last year.

Ten Years to 30 June 2000
The Company is the best performing non-venture capital investment trust over
the period since its launch almost ten years ago. Taking account of share
divisions during the period the subscription price per share in August 1990 of
50p can be compared with the Stock Exchange price quotation on 28 July 2000 of

Also, TREG's record is good over the five year period to date.   According to
statistics published by the Association of Investment Trust Companies (AITC)
the Company is the best performing European Investment Trust in terms of both
net asset value total return and quoted share price.

Share Capital
A small number (158,424) of shares were issued on the conversion of warrants
during the year.   As foreseen in last year's statement, the Board bought back
on advantageous terms one million of the warrants in issue.   Further
purchases have been inappropriate recently having regard to the market price
of the warrant.

At an Extraordinary General Meeting last year the Board was authorised to buy
back shares in circumstances where that would be advantageous to continuing
shareholders.   That authority has not yet been used because the Stock
Exchange rating of our shares has continued to be good.   Indeed, the share
price stood at a premium to net asset value for long periods.   The
flexibility available to the Board which is provided by this buy back
authority is, however, an important tool which can be used in the interests of
shareholders if the share price falls to a major discount to net asset value
per share.   The Board remains alert to its use in appropriate circumstances.

Continuation Vote and Policy Implementation
As referred to in the introduction, business at this year's Annual General
Meeting will include consideration of the continuation vote which will now
require to be considered by shareholders every five years.  This is obviously
an opportunity for the Board to take stock of a number of the practical ways
in which it consistently pursues the policy defined ten years ago. The Board
thought it appropriate to adjust some of the operational limits within which
the portfolio has been managed, particularly in light of changes over the
years in the Company, in securities markets and in the investment trust

The size of companies in which the Company invests will continue to rise in
terms of  market capitalisation.   That reflects a number of influences:
increasing maturity of securities markets throughout all European countries
means that greater capital values are now attached to the type of companies in
which we seek to invest.   Successful growth in the total size of the Company
itself means that investing a worthwhile proportion of our portfolio in a
company capitalised at the bottom end of market capitalisations gives us an
uncomfortably large proportion of that company's total share capital.   That
presents problems of illiquidity and other impediments to flexible management
of the portfolio.

The Company's success has also opened up opportunities to take early
investment in companies preparing for Stock Exchange listing.   The Company
has already enjoyed the benefits flowing from some of these investments and
this will become a slightly more noticeable - but still minor - aspect of the
total portfolio.

The Board will continue to use gearing whenever appropriate - and that too has
contributed positively to the results over the years.   The Board are
exploring opportunities to fix part of the total borrowings in order to secure
advantageous interest rates for a period of years - possibly beyond the five
year continuation vote cycle.   We will also continue to hedge individual
currency exposure whenever it is tactically advantageous to do so but
membership by so many countries of the Euro system reduces both the need and
opportunities to do so.

The Board will be reviewing the basis on which management and finance costs of
the Company are charged in our accounts. It was standard practice to charge
all such costs against revenue when the Company was formed and we have
maintained that practice despite the increasingly common adoption elsewhere of
the practice of dividing these costs between revenue and capital in
appropriate proportions. That obviously makes no difference to the total
return for shareholders but having regard to the relatively modest
contribution which income now makes to total return it seems inconsistent to
continue to charge all base costs against revenue. Gearing and management
obviously have a direct effect on capital, which is where we seek the main
contribution to shareholder value.  The present management agreement with
Henderson Investors now falls to be reviewed and we are exploring the
introduction of a performance related management fee.

Henderson Investors Investment Trust Share Plan and Selection ISA continues to
be an important source of investment in the Company, as was the former
Selection PEP which although now closed to new subscriptions can accept the
transfer of holdings in different PEPs.   We have commented previously that
TREG is one of the more popular investments through these successful
investment plans.

Many shareholders will be aware of the 'its' campaign sponsored by members of
the AITC.   For the reasons outlined last year (our relative success with
ISA/PEPs and savings scheme, our share price history and the basis of
calculation of what our contribution would have been) the Company did not
contribute to the costs of this campaign but have followed its apparent
success in raising general awareness about the potential advantages of
investment trusts for personal investors.   The Board shall continue to follow
the progress of the next phase in the campaign closely.
The Board
Mr Audley Twiston-Davies joined the Board on 31 January 2000 and his re-
election at the Annual General Meeting (as required by our constitution) is
recommended.   Mr Peter Glossop, who has been a Director since 1990, also
retires by rotation is also recommended for re-election.

Mr Olivier Maumus also retires by rotation at this year's Annual General
Meeting.   He has recently indicated his desire not to stand for re-election
following the change in his own professional activities.   He has been an
active member of the Board since the Company's formation and we have benefited
greatly from his knowledge of European securities markets and his French based
insights on the investment population which is our focus.

The remaining three Directors have also served throughout the whole of the
Company's history and we now have plans to refresh the membership of the Board
associated with orderly managed retirals over the next few years.
As referred to earlier, the macro economic circumstances in Europe generally
look good.   The introduction and early life of the Euro has been successfully
managed - its perceived weakness probably owing more to the relative strength
of the dollar rather than resulting from any fundamental Euroland malaise.
However, there is still widespread recognition of a longer term need to
address some structural aspects of business practices in at least some
countries if Euroland generally is to be seen internationally as economically
strong and profitable as, for example, the USA.

Interest rate policy generally is benign as is the collective determination of
national governments to pursue fiscal policies consistent with low inflation.
There are undeniably major opportunities for business success for companies
based in Europe and we remain confident of our Manager's ability to identify
individually profitable investments.

The changes in investment patterns and developing understanding of securities
markets to which reference was made last year continue along the same positive
path.  The companies in which we invest are becoming increasingly
'europeanised'. Most of them operate in Euroland in a common currency and seek
finance from a number a number of financial centres and markets using the full
range of structures and sources of  international capital markets. The
national base does not define the limits of their economic activities nor
necessarily the location of the securities market on which they are quoted.

These trends are reflected in plans to integrate national securities exchanges
as proposed by Paris, Amsterdam and Brussels and in the merger plans for
London and Frankfurt. These influences have emerged during the short history
of the Company and have created the conditions in which our investment
managers have demonstrated it can prosper. The Board therefore, is confident
both in the short term of the next year and over a longer term horizon for the
continuing successful growth of the Company.

Sir John Shaw, CBE
31 July 2000

Group Statement of Total Return (incorporating the consolidated revenue
for the year ended 30 June 2000

                            Year ended 30 June 2000   Year ended 30 June 1999
                            Revenue Capital    Total  Revenue Capital    Total
                              £'000   £'000    £'000    £'000   £'000    £'000
Total capital                     - 396,589  396,589        - (34,508)(34,508)
gains/(losses) from
Repurchase of warrants            - (2,499)  (2,499)        -       -        -
Income from fixed asset       9,513       -    9,513    8,298       -    8,298
Other interest receivable     1,160       -    1,160    1,022       -    1,022
and similar income
                           -------- -------- -------- -------- ------ --------
Gross revenue and capital    10,673 394,090  404,763    9,320 (34,508)(25,188)
Management fee              (3,196)       -  (3,196)  (2,579)       -  (2,579)
Other administrative          (787)       -    (787)    (556)       -    (556)
                           -------- -------- -------- -------- ------- -------
Net return/(loss) on                                                          
ordinary activities before
   interest payable and      6,690 394,090  400,780    6,185 (34,508) (28,323)
Bank loan and overdraft     (3,390)       -  (3,390)  (2,032)       -  (2,032)
interest payable on
loans wholly repayable
within one year
                           -------- -------- -------- -------- ------ --------
Net return/(loss) on                                                          
ordinary activities before
  taxation                   3,300 394,090  397,390    4,153 (34,508) (30,355)
Taxation on net return on   (1,426)       -  (1,426)  (1,157)       -  (1,157)
ordinary activities
                           -------- -------- -------- -------- ------ --------
Net return/(loss) on                                                          
ordinary activities
   after taxation            1,874 394,090  395,964    2,996 (34,508) (31,512)
Appropriations - dividends                                                    
Proposed final dividend     (1,593)       -  (1,593)  (1,432)       -  (1,432)
1.00p (1999: 0.90p)
                           -------- -------- -------- -------- ------ --------
Transfer to/(from)             281 394,090  394,371    1,564 (34,508) (32,944)
                              =====  ======   ======    =====   =====    =====
Return/(loss) per ordinary   1.18p 247.47p  248.65p    1.89p (21.72)p (19.83)p
share     - Basic
          - Diluted          1.10p 231.35p  232.45p    1.83p       -        -
                             =====  ======   ======    =====   =====    =====

The revenue column of this statement represents the consolidated revenue
account of the Group.

Balance Sheets
at 30 June 2000
                                   Group     Group  Company  Company
                                    2000      1999     2000     1999
                                   £'000     £'000    £'000    £'000
Fixed asset investments                                             
Listed  at  market valuation -   909,696   448,896  909,696  448,896
Unquoted -   at   directors'       5,855    15,045    7,379   16,146
                                 -------   -------  -------  -------
Total fixed assets               915,551   463,941  917,075  465,042
                                 -------   -------  -------  -------
Current assets                                                      
Investments                            -       176        -        -
Debtors                            3,159     6,124    3,157    6,124
Cash at bank                       7,127     3,886    6,443    3,820
                                 -------   -------  -------  -------
                                  10,286    10,186    9,600    9,944
Creditors: amounts falling  due  (152,449) (95,365) (153,287)(96,224)
within one year                      
                                 -------   -------  -------  -------
Net current liabilities          (142,163) (85,179) (143,687)(86,280)
                                 -------   -------  -------  -------
Total   assets   less   current  773,388   378,762  773,388  378,762
Provision  for liabilities  and        -       (8)        -      (8)
                                 -------   -------  -------  -------
Total net assets                 773,388   378,754  773,388  378,754
                                 =======   =======  =======   ======
Capital and reserves                                                
Called up share capital           19,912    19,892   19,912   19,892
Share premium                    112,193   111,950  112,193  111,950
Other capital  reserves          636,561   242,471  638,154  243,641
Retained revenue reserve           4,722     4,441    3,129    3,271
                                 -------   -------  -------  -------
Equity Shareholders' Funds       773,388   378,754  773,388  378,754
                                 =======   =======  =======  =======
Net  asset  value per  ordinary                                     
Basic                            485.50p   238.00p  485.50p  238.00p
Diluted                          448.30p   229.20p  448.30p  229.20p

Group Cash Flow Statement
For the year ended 30 June 2000

                                        2000     2000     1999    1999
                                       £'000    £'000    £'000   £'000
Net  cash  inflow  from  operating              3,308            4,277
Servicing of finance                                                  
Interest paid                        (3,291)           (2,074)        
                                     -------           -------        
Net cash outflow from servicing of            (3,291)           (2,074)
UK corporation tax                       256              (77)        
recovered/(paid) (including ACT)
Withholding and  income  tax           1,544               671        
                                     -------           -------        
Net tax recovered                               1,800              594
Financial investment                                                  
Purchase of investments             (430,960)         (197,722)
Sale of investments                  380,698           182,978        
Repurchase of warrants               (2,499)                 -        
                                     -------           -------        
Net  cash  outflow from  financial           (52,761)          (14,744)
Equity dividends paid                         (1,432)            (395)
Gross proceeds on issue of shares        263             4,228        
Drawdown/(repayment) of loans         57,394           (5,358)        
                                     -------           -------        
Net   cash  inflow/(outflow)  from             57,657           (1,130)
                                              -------           ------
Increase/(decrease) in cash                     5,281          (13,472)
                                              =======           ======
Reconciliation of net cash flow to                                    
movement in
net debt
Increase/(decrease)  in  cash   as              5,281          (13,472)
Cash  (inflow)/outflow from  loans            (57,394)           5,358
                                              -------           ------
Change in net debt resulting  from           (52,113)           (8,114)
cash flows                                                          
Exchange difference                                94           (3,365)
                                              -------           ------
Movement in debt in the year                 (52,019)          (11,479)
Net debt at 1 July                           (87,947)          (76,468)
                                              -------           ------
Net debt at 30 June                          (139,966)         (87,947)
                                              =======           ======


1. Return/(loss) per ordinary share
   Revenue  return  per  ordinary share is based on earnings  attributable  to
   ordinary  shares  of  £1,874,000 (1999: £2,996,000)  and  on  the  weighted
   average  number of ordinary shares in issue during the year of  159,244,985
   (1999: 158,880,322).

   Capital  profit per ordinary share is based on net capital profit  for  the
   year  of  £394,090,000  (1999: loss of £34,508,000)  and  on  the  weighted
   average  number of ordinary shares in issue during the year of  159,244,985
   (1999: 158,880,322).

   The  calculation  of  the  fully diluted revenue and  capital  returns  per
   ordinary  share  are  carried out in accordance  with  Financial  Reporting
   Standard   No.14,  Earnings  per  Share  (FRS14).  For  the   purposes   of
   calculating  diluted revenue and capital returns per share, the  number  of
   ordinary shares is the weighted average used in the basic calculation  plus
   the  number of ordinary shares deemed to be issued for no consideration  on
   exercise  of all warrants by reference to the average price of the ordinary
   shares  during  the year.  The calculations indicate that the  exercise  of
   warrants  would  result  in  an increase in a weighted  average  number  of
   ordinary shares of 11,098,311 (1999: 4,515,958).

2. Change in accounting policy
   The  Company  has  adopted Financial Reporting Standard (FRS)  16  'Current
   Tax' under which UK franked dividend income should be accounted for net  of
   the  attributable tax credits.  The comparative figures for the year  ended
   30  June 1999 have been restated accordingly.  The effect of this change is
   that  both  income  and  taxation are reduced  by  £3,000  (1999:  £7,000).
   However,  there is no effect on the revenue or capital returns  per  share,
   nor on the net asset value per share.

3. Dividend
   The  final dividend, subject to approval at the AGM, will be payable  on  1
   November  2000 to shareholders on the register at the close of business  on
   29 September 2000.  The ex dividend date will be 25 September 2000.

4. 1999 Accounts
   The  figures and financial information for the year ended 30 June 1999  are
   an  extract  of  the  latest published accounts of the  Group  and  do  not
   constitute  statutory  accounts for that year.  Those  accounts  have  been
   delivered  to  the Registrar of Companies and included the  Report  of  the
   Auditors  which  was  unqualified and did not contain  a  statement  either
   under section 237(2) or 237(3) of the Companies Act 1985.

5. 2000 Accounts
   The  preliminary  figures  for  the year  ended  30  June  2000  have  been
   extracted  from  the latest Group accounts.  These accounts  have  not  yet
   been  delivered  to the Registrar of Companies nor have  the  auditors  yet
   reported on them.

6. Annual General Meeting
   Copies  of  the  Annual  Report will be posted to shareholders  in  August.
   Further  copies will be available from the Secretary at 3 Finsbury  Avenue,
   London EC2M 2PA thereafter.  The Annual General Meeting will be held on  22
   September 2000.

For further information please contact:

Stephen Peak or Norman Brown
TR European Growth Trust PLC
020 7410 4100

Vicki Staveacre
Henderson Press Office
020 7410 4222


a d v e r t i s e m e n t