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TR European Growth (TRG)

  Print      Mail a friend       Annual reports

Tuesday 26 October, 2004

TR European Growth

Final Results

TR European Growth Trust PLC
26 October 2004

26 October 2004

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

*    Net asset value per ordinary share rises 43.3%

*    Share price up 52.8%

*    Dividend per ordinary share increases by 14.3%

Extracts from the Chairman's Statement


TREG has had an excellent year. The overall results of the Company reveal a
strong rise in net assets per share of 43.3%. This is the best result for four
years and the 3rd highest ever.

This represents very powerful outperformance versus the 15.8% rise of our formal
benchmark index and a 30.8% rise in the more comparable smaller company index.

Our share price did even better, rising by 52.8%, as the discount narrowed over
the year. Encouraged by buy-backs, the discount reduced from 19.3% to 14.0% at
the year end, and currently stands in the region of 8%.

Revenue and Dividend

Our gross revenue increased by 17.6%, due principally to investment income
rising 34.0%. After tax, net revenue grew by 38.1% and earnings per share by

Due to an increase in the level of distributable reserves available to the
Company, we have declared payable an interim dividend per share of 2.40p (a
14.3% increase over the final dividend last year), as well as an additional
special dividend of 0.50p per share. No final dividend is proposed.

Share Capital

A total of 2,735,000 shares were purchased during the year to June and a further
3,180,000 have been purchased subsequently. These shares have been cancelled
thus enhancing the NAV per share for remaining shareholders. At this year's AGM
we will be seeking to refresh the powers to buy back stock.

As stated in our Interim Report, a total of 19,711 new shares were created as a
result of the final opportunity to exercise our warrants last October. These
warrants expired thus simplifying our capital structure to solely ordinary

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                                     - 2 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

Extracts from the Chairman's Statement (cont'd)

The Board

The Board has witnessed one change to its composition during the year. To bring
us into line with the revised Combined Code on Corporate Governance issued in
July 2003, particularly in respect to the independence of directors with any
connection to an Investment Manager, Stephen Peak has decided to stand down as a
director on 26 October 2004 after serving ten years on the Board. However, he
will continue in his role as the Company's Fund Manager. At this year's AGM, we
are seeking approval for the re-election of both Jeremy Lancaster and Jochen
Neynaber who are retiring by rotation.

Management Fee Arrangements

Together with Henderson Global Investors, our Investment Manager, we have been
reviewing our Management Fee. This was set at 0.8% of average net assets and
assessed over the eight previous quarters, however we wished to introduce a more
variable arrangement, which offered Henderson both a carrot and a stick. The new
arrangement, which came into effect on 1 July 2004, reduces the base fee rate to
0.5% and introduces a performance fee with a cap based on a revised benchmark,
which more accurately reflects the scope of TREG's investment exposure. Added to
this, the notice period for termination has been reduced from a year to 6
months.  In summary, TREG will pay less for poor performance and more for good.

We have asked Ernst & Young LLP for their view of the new fee structure, and
they have given a supportive fairness opinion.

Investment Trust Share Plan and ISA

The directors remain committed to the above plans, which enable both new and
existing investors to buy shares by way of a lump sum investment or regular
monthly contributions.


The strong recovery in the American economy has recently been showing more
hesitant signs. Whilst Continental European economies have been more lacklustre,
many capital goods companies have been reporting healthy order trends. The
consumer on both sides of the Atlantic does appear more cautious, with many
companies finding conditions challenging. Stock markets are currently grappling
with this mixed outlook. In many ways a degree of uncertainty is helpful to us
as these conditions tend to generate opportunities. After recording a good year,
an element of caution is generally appropriate. Nevertheless we are optimistic
that we can make further progress in the coming year.

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                                     - 3 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

Group Statement of Total Return (incorporating the consolidated revenue account)
for the year ended 30 June 2004

                                                    Year ended 30 June 2004          Year ended 30 June 2003
                                                  Revenue     Capital      Total    Revenue    Capital     Total
                                                    £'000       £'000      £'000      £'000      £'000     £'000
Total capital gains/(losses) from investments           -     103,832    103,832          -   (24,289)  (24,289)
Income from fixed asset investments                 7,858           -      7,858      5,863          -     5,863
Other interest receivable and similar income          139           -        139        940          -       940
                                                ---------   ---------  ---------  ---------  --------- ---------
Gross revenue and capital gains/(losses)            7,997     103,832    111,829      6,803   (24,289)  (17,486)

Management fee                                      (512)     (2,046)    (2,558)      (772)    (3,089)   (3,861)
Other administrative expenses                       (635)           -      (635)      (525)          -     (525)
                                                ---------   ---------  ---------  ---------  --------- ---------
Net return/(loss) on ordinary activities
   interest payable and taxation                    6,850     101,786    108,636      5,506   (27,378)  (21,872)

Interest payable                                     (30)       (118)      (148)       (45)      (179)     (224)
                                                ---------  ---------   ---------  --------- ---------  ---------
Net return/(loss) on ordinary activities
  taxation                                          6,820     101,668    108,488      5,461   (27,557)  (22,096)

Taxation on net return on ordinary activities     (1,345)         567      (778)    (1,497)        950     (547)
                                                ---------   ---------  ---------  ---------  --------- ---------
Net return/(loss) on ordinary activities
   after taxation                                   5,475     102,235    107,710      3,964   (26,607)  (22,643)

Appropriations - dividends
Interim declared 2.40p (2003: Final 2.10p)        (3,641)           -    (3,641)    (3,211)          -   (3,211)
Special declared 0.50p (2003: nil)                  (759)           -      (759)          -          -         -
                                                ---------   ---------  ---------  ---------  --------- ---------
Total dividends payable                           (4,400)           -    (4,400)    (3,211)          -   (3,211)
                                                ---------   ---------  ---------  ---------  --------- ---------

Transfer to/(from) reserves                         1,075     102,235    103,310        753   (26,607)  (25,854)
                                                =========   =========  =========  =========  ========= =========

Return/(loss) per ordinary share (note 1)
                                                    3.57p      66.68p     70.25p      2.50p   (16.80)p  (14.30)p
                     - Basic
                     - Diluted                        n/a         n/a        n/a          -          -         -
                                                =========   =========  =========  =========  ========= =========

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

                                    - MORE -

                                     - 4 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

Group and Company Balance Sheets
at 30 June 2004
                                                              Group         Group       Company       Company
                                                               2004          2003          2004          2003
                                                              £'000         £'000         £'000         £'000
Fixed asset investments
Listed at market valuation                                  320,985       221,388       320,985       221,388
Unquoted - at directors' valuation                           20,133        20,449        21,628        21,945
                                                       ------------  ------------  ------------  ------------
Total fixed assets                                          341,118       241,837       342,613       243,333
                                                       ------------  ------------  ------------  ------------

Current assets
Debtors                                                         831         6,029           831         6,029
Cash at bank                                                  3,097           720         3,094           717
                                                       ------------  ------------  ------------  ------------
                                                              3,928         6,749         3,925         6,746

Creditors: amounts falling due within one year              (5,056)       (7,152)       (6,548)       (8,645)
                                                       ------------  ------------  ------------  ------------
Net current liabilities                                     (1,128)         (403)       (2,623)       (1,899)
                                                       ------------  ------------  ------------  ------------
Total net assets                                            339,990       241,434       339,990       241,434
                                                       ============  ============  ============  ============

Capital and reserves
Called up share capital                                      18,979        19,318        18,979        19,318
Share premium                                               115,451       115,421       115,451       115,421
Capital redemption reserve                                    1,199           857         1,199           857
Other capital reserves                                      192,753        95,305       194,317        96,870
Revenue reserve                                              11,608        10,533        10,044         8,968
                                                        -----------   -----------  ------------  ------------
Equity shareholders' funds                                  339,990       241,434       339,990       241,434
                                                       ============  ============  ============  ============

Net asset value per ordinary share
Basic                                                       223.93p       156.22p       223.93p       156.22p
Diluted                                                         n/a             -           n/a             -

                                    - MORE -

                                     - 5 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

Group Cash Flow Statement
for the year ended 30 June 2004
                                                                   2004           2004          2003          2003
                                                                  £'000          £'000         £'000         £'000

Net cash inflow from operating activities                                        3,727                       1,160
Servicing of finance

Interest paid                                                     (149)                        (190)
                                                           ------------                 ------------
Net cash outflow from servicing of finance                                       (149)                       (190)

Withholding tax recovered                                           407                          427
                                                           ------------                 ------------
Net tax recovered                                                                  407                         427

Financial investment
Purchase of investments                                       (167,680)                     (82,222)
Sale of investments                                             175,224                       97,694
                                                           ------------                 ------------
Net cash inflow from financial investment                                        7,544                      15,472

Equity dividends paid                                                          (3,242)                     (2,306)

Purchase of ordinary shares                                     (5,591)                      (6,854)
Issue of ordinary shares                                             33                            -
Repayment of loans                                                    -                     (10,459)
                                                           ------------                 ------------
Net cash outflow from financing                                                (5,558)                    (17,313)
                                                                          ------------                ------------
Increase/(decrease) in cash                                                      2,729                     (2,750)
                                                                          ============                ============
Reconciliation of net cash flow to movement in

net funds
Increase/(decrease) in cash as above                                             2,729                     (2,750)
Cash outflow from loans repaid                                                       -                      10,459
                                                                          ------------                ------------
Change in net funds resulting from cash flows                                    2,729                       7,709
Exchange difference                                                              (422)                         712
                                                                          ------------                ------------
Movement in net funds in the year                                                2,307                       8,421
Net funds/(debt) at 1 July                                                         720                     (7,701)
                                                                           -----------                 -----------
Net funds at 30 June                                                             3,027                         720
                                                                          ============                ============

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                                     - 6 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004

1.   Return/(loss) per ordinary share

     Revenue return per ordinary share is based on earnings attributable to
     ordinary shares of £5,475,000 (2003: £3,964,000) and on the weighted 
     average number of ordinary shares in issue during the year of 153,321,883 
     (2003: 158,394,041).

     Capital return per ordinary share is based on the net capital gain for
     the year of £102,235,000 (2003: loss of £26,607,000) and on the weighted 
     average number of ordinary shares in issue during the year of 153,321,883 
     (2003: 158,394,041).

     Following the final warrant exercise on 30 October 2003, 18,870,494
     warrants lapsed unconverted on 13 November 2003, and there is no dilution 
     of returns in the current year.  The existence of warrants in the previous 
     year did not give rise to a dilution of returns, as the average price of 
     the ordinary shares was lower than the warrant conversion price of £1.66.

2.   Dividend

     An interim dividend of 2.40p (2003: 2.10p) per ordinary share and a
     special dividend of 0.50p (2003: nil) per ordinary share have been declared
     payable on 5 November 2004 to shareholders on the register on 1 October 
     2004. The shares were quoted ex-dividend on 29 September 2004.
3.   Revised Management Agreement Terms      

     The Company has agreed revised terms on its management fee with its 
     Investment Manager, Henderson Global Investors.  The new arrangements, 
     which came into effect on 1 July 2004, are:
     •    reduction of the annual management fee from 0.8% to 0.5%, levied as
          0.125% of total net assets at the end of each calendar quarter;
     •    introduction of a performance-related fee, based on the total return
          of the Company's net assets versus a benchmark index over a rolling 
          three year period to each financial year end;
     •    the performance fee benchmark becomes a blend of 50% of the total
          return of the HSBC European Smaller Europe (ex UK) Index and 50% of 
          the total return of the Citibank EMI Europe (ex UK) Index;

     •    the performance fee rate is 15% of the difference between the average 
          annual NAV total return and the average annual total return of the
          benchmark over three years;

     •    the upper limit on the total fee, including the base fee and any
          performance fee, for any given accounting year is 2.4%;

     •    for the year ended 30 June 2005, any performance fee will be based on 
          performance over the one year to that date;

     •    for the year ended 30 June 2006, any performance fee will be based on 
          performance over the two years to that date; and

     •    the share option scheme for Stephen Peak (approved by shareholders
          at the Company's AGM in 2001) is discontinued (no options have been           
          issued under this scheme).

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                                     - 7 -

                          TR EUROPEAN GROWTH TRUST PLC

                      Unaudited Preliminary Group Results
                        for the year ended 30 June 2004
4.   Resignation of Director

     Effective 26 October 2004, Stephen Peak has resigned from the Board of
     Directors.  This has been brought about by the recently revised Corporate
     Governance regulations highlighting the independence of directors who have 
     a connection to an Investment Manager.  He continues as the Company's Fund
5.   2003 Accounts

     The figures and financial information for the year ended 30 June 2003
     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.
6.   2004 Accounts

     The preliminary figures for the year ended 30 June 2004 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.
7.   Annual General Meeting

     Copies of the Annual Report will be posted to shareholders in November.  
     Further copies will be available from the Secretary at 4 Broadgate, London 
     EC2M 2DA thereafter.  The Annual General Meeting will be held on 14 
     December 2004.

For further information please contact:

Stephen Peak                                       Stephen Westwood
Fund Manager                                       Head of Investment Trusts
TR European Growth Trust PLC                       Henderson Global Investors
Telephone: 020 7818 4334                           Telephone: 020 7818 5517

Vicki Staveacre
Henderson Press Office
Henderson Global Investors
Telephone: 020 7818 4222

                                    - ENDS -

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