TRG.L Regulatory News (TRG)

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2015

This announcement contains regulated information

Investment objective

To achieve capital growth by investing predominantly in smaller and medium sized companies in Europe (excluding the UK).

Performance highlights

• The net asset value ("NAV") total return1 (including dividends reinvested) was 5.3% compared to a total return from the benchmark index2 of -0.4%.

• The share price3 total return (including dividends reinvested) was 10.8%.

• Increased proposed annual dividend: final and special dividends of 7.00p and 2.50p per ordinary share respectively (2014: 6.50p and 2.70p respectively).

• The discount4 narrowed from 12.0% to 7.6%.

Financial highlights

1 Net asset value per share total return (including dividends reinvested). This is based on preliminary estimates made by the AIC, which is the industry recognised source for performance data, and does not reflect any subsequent change in the year end NAVs reflected in this report

2 Euromoney Smaller Companies Index (ex UK) expressed in sterling

3 Share price total return using mid-market closing price

4 Calculated using published daily NAVs including current year revenue

5 Calculated from the end of September 1990 (the Company commenced business on 6 September 1990)

6 The sector is the AIC European Smaller Companies sector

7 The ongoing charge excludes the performance fee. The charge including the performance fee would have been 1.34% (2014: 1.07%)

Chairman's Statement

Performance

I am pleased to be able to report that over the year to 30 June 2015 our net asset value per share total return was 5.3% and our share price total return was 10.8% compared to a total return for our

benchmark of -0.4%.

As a consequence of outperformance over the three year qualifying period we will be paying a performance fee to Henderson for the year of £1,759,000 (2014: £1,130,000). The performance fee paid for the year is equal to 0.5% of net assets as at 30 June (2014: 0.3%).

Revenue and dividends

Revenue return per share was 11.34p, a rise of 1.7%.

The Board aims to make progressive and steady increases in annual dividend payments. Shareholders must, however, recognise that such increases can never be guaranteed, and that circumstances may arise when it is necessary to reduce a dividend payment. Equally, there may be instances when the level of payment must be increased in order to comply with Section 1158 of the Corporation Tax Act in respect of the retention of distributable income. Where such instances would result in a payment going beyond the Board's aim, one-off "special dividend" payments are declared.

We are proposing, subject to shareholder approval at our annual general meeting, a final dividend per ordinary share of 7.00p, an increase of 7.7% over last year's final dividend of 6.50p. We are also proposing a special dividend of 2.50p per ordinary share, making a total dividend of 9.50p.

Annual general meeting ("AGM")

Shareholders are encouraged to attend the AGM on Monday 9 November 2015 at 201 Bishopsgate, London, EC2M 3AE. The meeting will start at 12.30 pm, will include a presentation by Ollie Beckett and will be followed by an opportunity for shareholders to meet the Board and management team. The notice of the meeting and full details of the resolutions to be proposed are included in a separate document which will be posted to shareholders with the Annual Report. The Directors recommend that shareholders vote in favour of all of the proposed resolutions as they intend to do in respect of their own beneficial holdings.

For the first time the Company's AGM will be broadcast live on the internet. If you are unable to attend in person you can watch the meeting as it happens by visitingwww.henderson.com/trustslive.

Board changes

As reported last year, Jane Tufnell stood down from the Board on 17 November 2014 and Simona Heidempergher was appointed to the Board with effect from 1 September 2014.

Outlook

Despite the seemingly never ending political squabbles in the Eurozone, it has been a reasonable year for European equity markets. This has been encouraged, from October 2014 onwards, by clear signs that the long awaited economic recovery has finally begun, assisted by the ECB's Quantitative Easing.

The improvement in the economic backdrop in Europe suggests that our Company, which is exposed to companies with a relatively small market capitalisation which are more geared to a recovery, is a great place to be invested.

Going forward the shambolic situation in Greece will probably continue to grab the headlines but more important will be whether the global economy can continue to improve. Our fund managers will monitor the potential economic fracture points around the world, notably China. At a stock level we are starting to see earning upgrades in European smaller companies for the first time in four years, which is clearly very helpful. We are confident that with this backdrop there are still plenty of good investment opportunities in Europe for our fund managers to seek out and deliver healthy returns for shareholders.

Audley Twiston-Davies

Chairman

29 September 2015

Fund Manager's report

Introduction

The year to June 2015 has been good for the Company. Despite periodic wobbles, and the ever present Greek situation, the European economic recovery continues to build, albeit tentatively. The stock market has responded with the Euromoney Smaller Companies Index (ex UK) down 0.4% in sterling terms, though the Company's net asset value total return was 5.3% (19.1% in euro terms).

The benefits of looser monetary policy through European Central Bank ("ECB") quantitative easing ("QE") are being felt in the economy. The big reform efforts in certain countries combined with corporate restructuring led to strong performance of certain stock markets, with Ireland and Italy being two of the strongest markets in Europe. The companies that are taking the difficult decisions are benefiting.

We continue to believe that the European recovery will come through, despite the fact that there will be bumps in the road due to the inadequate political decision making process in the Eurozone. It remains a distinct possibility that the US and the UK monetary authorities will begin the process of raising rates within the next year and this may contribute to equity market volatility, but this reflects a global economy that is healing. This should ultimately be to the benefit of European smaller companies.

The Portfolio

Portfolio positioning

During the 2014/2015 financial year the portfolio benefited from being positioned towards stocks with domestic European earnings. As the valuation discrepancy had unwound towards the end of the last financial year we focused the portfolio towards a more balanced positioning of value and growth, combined with domestic and international earnings. Stock specific stories have been what we have been pursuing and this can be seen in the shape of the portfolio.

An example of this approach is OC Oerlikon, the largest listed holding, that is approaching the end of the process of slimming down from being an unwieldy conglomerate to being a world class business in coatings and man-made fibre spinning machinery. We expect a disposal of its vacuum business and restructuring of its drives business in the next six to twelve months. Belgian construction and dredging company CFE is another large holding. The company has simplified its corporate structure and boosted its margins. It now looks set to benefit from large dredging projects such as the Singapore Port Authority land reclamation project. We invested in Italian fashion retailer OVS at initial public offering ("IPO") in March 2015 as we liked the management's

aggressive growth story of a well-known Italian brand combined with tight cost control. We continue to like Swiss technology company Comet for the broad range of exciting potential it has, such as ebeam technology that is being used to sterilize packaging for Tetra Pak and which can hopefully be extended to sterilizing grain in silos to massively reduce rot. TKH in the Netherlands produces vision systems for a variety of applications including a machine that makes tyres in 32 seconds. We continue to be invested in kitchen manufacturer Nobia that has cut costs ferociously and is well positioned for the economic recovery. We have built a position in Van Lanschot, a Dutch private bank that is cheap and overlooked by the stockbroking community - we expect both characteristics to change in the coming year.

Performance attribution

The Company's performance cannot be explained by broad themes, beyond participation in some successful Italian IPOs that have been very good at growing, such as those of the asset gatherers Anima and FinecoBank or the fashion retailer OVS. Instead performance has been derived from stock specific factors. Dutch semiconductor equipment company BE Semiconductor was the biggest contributor to performance as the market cottoned on that it was gaining market share and that its cost savings programme was yielding better results than hoped for. Outdoor and online advertising company Stroeer Out-Of-Home Media was another strong contributor to performance as German advertising recovery drove increases in earnings forecasts. Danish ferry company DFDS also did well as the market began to appreciate the cost discipline and return on capital focus of the management. Swedish medical equipment company Aerocrine, that makes equipment for measuring the severity of asthma was subject to a bid by London listed Circassia Pharmaceutical. Spanish pulp and renewable energy business, Ence, took advantage of a crisis when Spanish electricity subsidies were cut to slash costs, refocus its business and improve cash flow and return on capital. Belgian specialty chemical company, Tessenderlo Chemie, has done well as the market has begun to believe in the benefits of its restructuring programme.

Conversely, the stocks that have burdened performance have done so for thematic reasons: either due to the falling oil price or the failure to manage change. For instance the holdings of oil and gas companies were hurt by the collapse in the oil price such as Kvaerner, Fugro and Schoeller-Bleckman. OW Bunker was a Danish IPO in the marine fuel sector that we sold immediately after a profit warning having decided the company was not what the management claimed it to be. Selling at a loss was painful, however, it proved the right thing to do as the company subsequently declared bankruptcy after alleging fraud against two employees. French directory and internet company Solocal suffered as the turnaround of the business proved slower than management had hoped. German laser company LPKF Laser & Electronics also disappointed after large customers delayed orders hurting company profitability. German retailer Tom Tailor floundered as management struggled with weather and with the digestion of a company called Bonita that it had acquired. EVS Broadcast Equipment missed numbers having failed to see any upturn in its industry.

Geographical and sector distribution

We remain dedicated to making stock selection on a bottom-up basis, rather than allocating capital to specific countries or sectors. We don't use the benchmark as a guide to portfolio structure and are happy running country and sector weightings that are substantially different from the benchmark, though we pay careful attention to the shape of the portfolio and any concentrated risks that might build up. The portfolio continues to be heavily overweight in Germany as we continue to find good companies, earning attractive returns and that look cheap. The portfolio is still overweight in Switzerland but this has reduced substantially as valuations have become quite full and a number of companies have been impacted by the appreciation of the Swiss Franc after the Swiss National Bank removed the peg with the euro. We also have overweight positions in the Netherlands where we see a housing recovery beginning to kick in; Ireland where the benefits of economic restructuring and exposure to the strong UK are being felt; and France which is an economy that whilst struggling, is nowhere near as bad as some would have you believe.

Our non-consensual views on France are reflected in the stocks owned by the Company, which has benefited from owning shares such as, domestic housebuilder, Nexity. We initially bought the shares in 2013 as they looked very cheap with a dividend yield of over 7.0% complete with a free option on the French economy improving. Now that there are signs of life in the French construction industry the shares have begun to perform, but the stock still yields 5.0%. The Company also continues to hold French Free-To-Air TV broadcaster Television Francais, which did very well last year as the management did an excellent job of realising value with the disposal of Eurosport, whilst maintaining strong cost discipline. There is more to come from self-help and any French advertising recovery will be a welcome bonus. The portfolio also contains a handful of outright growth stocks in France. Teleperformance operates call centres globally for all sorts of businesses from airlines to the largest tech companies in the world and is growing at a good rate - sales increased 13.4% in 2014. We have also added Criteo, a French web advertising business listed in America, which grew sales 70.0% in 2014 and continues to deliver prodigious growth.

The sector exposure of the portfolio remains heavily overweight Industrials. The focus is to find stocks that can improve corporate performance independently of the economic cycle or which can benefit from structural trends. For instance French cable manufacturer Nexans has been poorly run for some time, but the new management have a clear plan to expand margins and narrow the gap with Italian competitor Prysmian. Conversely, we have recently added stocks such as Alimak that have structural growth trends. Alimak make rack and pinion hoists used in construction. Their sales should grow strongly as a more conscientious safety culture replaces ladders with hoists in areas such as construction. The portfolio is also overweight technology as we see this as a real source of growth. Companies such as RIB Software, which produce software for the construction industry, are massively changing how buildings are designed and built. Within IT we have closed positions in Wirecard as the valuation looked too stretched compared to the cash generation and added PC and mobile phone security software company AVG Technologies.

The portfolio is underweight in health care as beyond a few names such as medical and pharmacy software company Cegedim, we struggle to find stocks that have attractive valuations. The portfolio is also underweight in consumer staples for the same reason.

Other purchases

Substantial purchases in the year include Origin Enterprises, an Irish agri-services business, that has shown a consistent capacity to grow, but which is cheap due both to a tough market for crop farmers and a perceived stock overhang. We added Spanish wind turbine producer Gamesa Corp Technologica to the portfolio as the wind market shows real evidence of recovering. The Company participated in a number of well scrutinised IPOs. Most have performed well, such as drill bit manufacturer Robit and Irish housebuilder Cairn Homes; others such as Italian retailer OVS or Swedish wire mesh producer Troax have been terrific. The only one that has been very poor has been OW Bunker.

Other disposals

We sold the holding in German media conglomerate Axel Springer after strong share price performance. We also exited the position in Valmet after a period of strong performance that left the shares looking a bit too expensive. Subsequent to the financial year end we bought some of the shares back after the share price came back. We also sold long term favourites such as asset manager Partners Group and life science equipment manufacturer Stratec after strong performance.

Greece

The portfolio has been underweight Greece and the disposal of toy and baby product retailer Jumbo further reduced that. At the financial year end the Company had two holdings in Greece: Aegean Airlines and industrial conglomerate Mytilineos. As the Greek stock market was closed for a number of weeks over the financial year end the Board agreed that applying a 15% discount to the last quoted price represented fair value of the Greek holdings at the year end. Subsequent to the market reopening in July, both shares have been among the best performing stocks in Greece.

Gearing

Gearing levels varied between 5.5% and 18.1% over the course of the year and was at 12.5% at the close of the year. It should be remembered that just under 4% of the portfolio is in unquoted investments. We used the debt facility to maintain flexibility and freedom of action over the year as opportunities arose, rather than raising cash by selling assets quickly at bad prices. The gearing also offers the potential to enhance returns.

Market capitalisation range

We have continued to focus the portfolio towards small and medium sized companies, with a weighted average market capitalisation of £1.02bn as of 30 June 2015. The largest company in the portfolio was Imerys at £3.9bn and the smallest was Hi-Media at £34m.

Unquoted investments

The Company continues to have three legacy unquoted investments. Brainlab is a global leader in software for high precision radiotherapy and image-guided surgery. This is a good asset for which we continue to seek a fair value. We continue to maintain an extensive dialogue with management and have encouraged interest in the company from certain investment banks. We are also invested in a French private equity fund 21 Centrale Partners III. This is now in payback mode and will gradually decline in importance for the Company. The small holding in Doughty Hanson & Co. Fund III has been retained.

The unquoted holdings as at 30 June 2015 were:

These are good quality assets; however, going forward we will not be seeking unquoted opportunities.

Outlook

The political discord within the Eurozone has been a persistent feature of the news headlines in recent months and years, with the situation in Greece providing entertaining politicians and drama for journalists. Similarly, we are mindful of wild gyrations in the Chinese stock market and a slowing real economy. Russian aggression in Eastern Europe and the negative impact of economic sanctions make for a real economic headwind. The seemingly imminent rate rises by the Federal Reserve worry the market as potentially being premature. However, the fact that economic recovery in Europe is progressing, albeit at a relatively slow pace, is less frequently referred to. Economies that have put effort into restructuring such as Ireland and Spain have begun to see recovery. The changes brought about by Prime Minister Renzi in Italy came suddenly just as the market began to doubt his commitment to them. However they already seem to be bearing fruit. Striking ferry workers and militant taxi workers in Paris show an economy that is still in desperate need of reform, yet despite this there are even signs of life in France. The government's property incentives appear to have helped. Whilst still inadequate, the Eurozone focus on banking reform and banking union show that policymakers have begun to understand the problem.

While there continue to be risks, we remain cautiously optimistic and believe that things are getting better. We have no reason to change our central scenario of being at a mid-cycle point in what will be a long, drawn out and muted recovery in European economies. The euro has fallen as the ECB has commenced QE and the fall in the oil price is a big shot in the arm for the economy in general. The combination of these two factors has driven corporate earnings upgrades for the first time in many years. While the European stockmarket in aggregate has performed well, the fact is that European Smaller Companies remain the last undervalued asset that investors can pursue. Around 60% of the investments in the portfolio are in stocks under £1bn market cap where this valuation discrepancy is at its greatest. We have begun to see a pick-up in mergers and acquisitions ("M&A"), with the Company benefiting from Aerocrine being acquired last year and, subsequent to the year-end, benefiting from a bid for Faiveley Transport. Other corporate actions are beginning to benefit the Company with Italian online luxury retailer Yoox merging with Net-a-Porter and medical device manufacturer Sorin merging with US listed Cyberonics. We expect M&A activity to continue, with smaller companies providing inorganic growth for cash rich companies in the slow growth economic environment. The Company should benefit from the organic growth that can be found at the lower end of the market with stocks such as Comet with ebeam sterilisation, Criteo with targeted web marketing, Verkkokauppa and Yoox with online retail and SAFT with lithium ion batteries. This should be further supplemented by the rerating of the holdings that we firmly believe to be misunderstood by the market, such as OC Oerlikon.

We remain committed to uncovering gaps between the market's perception of companies and the underlying reality. Inevitably there will be volatility going forward, however, there are exciting opportunities in the European smaller company space and we persist in searching for these for our shareholders.

Ollie Beckett and Rory Stokes

Henderson Investment Funds Limited

29 September 2015

Sector exposure (% of portfolio excluding cash)

Geographical distribution (% of portfolio excluding cash)

Portfolio distribution by market capitalisation

Principal risks and uncertainties

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified, which have not changed from last year, and the steps taken by the Board to mitigate these, are as follows:

● Investment activity and performance risks

An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group. The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings.

● Portfolio and market price risks

Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. Investments in European stock markets may be impacted by political events. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. The Fund Manager seeks to maintain a diversified portfolio to mitigate against this risk. The Board regularly reviews the portfolio, activities and performance.

● Tax and regulatory risks

A breach of Section 1158 of the Corporation Tax Act 2010 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the Listing Rules of the Financial Conduct Authority could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage. Henderson Investment Funds Limited provides investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by Henderson on a quarterly basis, which confirm regulatory compliance.

● Operational risks

Disruption to, or failure of, Henderson's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its service providers may not provide the required level of service. The Board monitors the services provided by Henderson and its other service providers and receives reports on the key elements in place to provide effective internal control.

Related party transactions

The Company's transactions with related parties in the year were with the Directors, the subsidiary and Henderson. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. The Company has paid expenses on behalf of the subsidary.

In relation to the provision of services by Henderson, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services there have been

no material transactions with Henderson affecting the financial position of the Company during the year under review.

Statement of Directors' responsibilities under DTR 4.1.12

Each of the Directors confirms that, to the best of his or her knowledge:

● the Group financial statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

● the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Parent Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Christopher Casey

Director

29 September 2015

Consolidated Statement of Comprehensive Income

The total column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with IFRSs, as adopted by the European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All income is attributable to the equity holders of TR European Growth Trust PLC, the Parent Company.

The net profit of the Parent Company for the year was £16,565,000 (2014: £83,548,000).

Consolidated Statement of Changes in Equity

Parent Company Statement of Changes in Equity

Consolidated and Parent Company Balance Sheets

Consolidated and Parent Company Cash Flow Statements

Notes to the Financial Statements

5. Management and performance fee

7. Duration of the Company and going concern

The Company's articles of association require that at every third AGM of the Company an ordinary resolution be put to shareholders asking them to approve the continuation of the Company; the next such resolution will be proposed at the AGM in 2016.

The assets of the Company consist mainly of a portfolio of diversified securities that are readily realisable, and the Company has adequate financial resources to meet its liabilities and continue in operational existence for the foreseeable future. For these reasons, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this statement, the Board has considered "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009" published by the Financial Reporting Council.

8. 2015 financial information

The figures and financial information for 2015 are extracted from the Annual Report for the year ended 30 June 2015 and do not constitute the statutory accounts for the year. The Annual Report includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The Annual Report has not yet been delivered to the Registrar of Companies.

9. 2014 financial information

The figures and financial information for 2014 are extracted from the published Annual Report for the year ended 30 June 2014 and do not constitute the statutory accounts for that year. The Annual Report has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006.

10. Annual report

The Annual Report will be posted to shareholders in mid-October 2015 and will be available on the Company's website (www.treuropeangrowthtrust.com) or in paper copy format from the Company's registered office, 201 Bishopsgate, London EC2M 3AE thereafter.

11. Annual general meeting

The annual general meeting will be held on Monday 9 November 2015 at 12.30 pm at the registered office address.

For further information please contact:

Ollie Beckett Sarah Gibbons-Cook

Fund Manager Investor Relations and PR Manager

TR European Growth Trust PLC Henderson Global Investors

Telephone: 020 7818 4331 Telephone: 020 7818 3198

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.