TR European Growth Trust plc Financial Results June 2021

TR EUROPEAN GROWTH TRUST PLC

Financial results for the year ended 30 June 2021

This announcement contains regulated information

Investment Objective

The Company seeks capital growth by investing in smaller and medium sized companies which are quoted, domiciled, listed or have operations in Europe (ex UK).

Highlights

· Net asset value total return¹ per ordinary share of 63.5% compared to a total return from the benchmark² of 36.5%

· Share price total return³ per ordinary share of 79.5%

· Total dividend⁴ of 25.00p for the year, an increase of 13.6%

CHAIRMAN'S STATEMENT

Performance

Our Company has had a good year. The NAV total return per ordinary share was 63.5%, an outperformance against the benchmark of 27.0%, with a share price total return per ordinary share of 79.5%.

Our Fund Manager's long-held approach of finding high quality and growing businesses in which to invest, but also being valuation aware, was a key driver of performance over the year. The consistency of this approach throughout the market volatility that was caused by the Covid-19 pandemic, laid sound foundations for excellent performance through the recovery.

The revenue generated by the portfolio rose from £9.1m for the year ended 30 June 2020 to £13.5m for the year ended 30 June 2021, despite the European Central Bank continuing to restrict dividend payments from financial services companies. This restriction was lifted in October 2020, but investee companies must continue to seek consent from their respective central banks prior to making dividend payments.

Dividend

Following this performance, the Board is proposing a final dividend of 16.80p to shareholders at the annual general meeting later this year. Together with the interim dividend of 8.20p this brings the total dividend for the year to 25.00p, being an increase of 13.6% on the prior year total dividend.

If approved, the dividend will be paid on 3 December 2021, to shareholders on the register on 22 October 2021.

Strategic review

The Board has devoted considerable time this year to carrying out a strategic review of the Company's investment objective, operations and positioning in the market. Without any doubt, the review concluded that the investment objective and policy continued to meet investors' demands and the Fund Manager's approach to investing was well suited to the objective and the long-term nature of the Company.

However, the review did highlight that more could be done to improve the Company's positioning in relation to the retail investor market. To that end, the Board has decided to make a number of changes which we gauge will assist our marketing teams in bringing the Company's investment proposition to the attention of this growing section of the market. The first of these changes is to rename the Company The European Smaller Companies Trust PLC. The purpose of doing so is to make the Company's investment proposition immediately clear to potential investors. The second change, is to implement an 8:1 share split which will improve the liquidity of the Company's shares and enhance the ability of investors to make more efficient regular monthly investments on share dealing platforms. The third change, reduces the management fee from 0.6% of net assets up to £500m and 0.5% thereafter, to 0.55% of net assets up to £800m and 0.45% thereafter.

With this combination of changes, we aim to increase demand for the Company's shares which will, in turn, narrow the discount achieving a better alignment of the share price and NAV, and therefore be of benefit to all shareholders.

As a matter of operational efficiency, we will also replace the benchmark, currently the Euromoney Smaller European Companies (ex UK) Index with the MSCI Europe ex UK Small Cap Index. Our risk assessment of the two indices has indicated that the change is immaterial and the Fund Manager has confirmed it will have no impact on his investment approach. The change will, though, better align the Company with its peers and improve the quality of the data available to the fund management team on a day-to-day basis. This change will only become effective from 1 July 2022 and will not be retrospectively applied to any fee calculations.  The Company's Investment Policy will update in line with the change in benchmark from this date.

Succession planning

When I last provided an update to you on our succession planning, I explained that the Board had asked Andrew Martin Smith to remain as a director for a further year as the Covid-19 pandemic continued to wreak havoc on global economies. We wished to retain his knowledge and experience of the closed end sector as governments and companies navigated their way out of the crisis.

We took stock of the prevailing market conditions when we recently reviewed our succession planning and I can now report that Andrew will be retiring from the Board at the conclusion of the upcoming annual general meeting. I would like to thank Andrew sincerely for his guidance and wisdom. Throughout his time serving our Company, he has made a very significant contribution to important discussions on the Company's performance and the options available. His diligence and thoughtful challenge to the approach taken by the Fund Manager, and Janus Henderson Investors in their wider delivery of services to the Company, has been extremely valuable.

Looking further forward, I can also let you know that Alexander Mettenheimer has indicated his intention to retire from the Board at the annual general meeting due to be held in 2022. We will, of course, review these plans next year and report in more detail to you in due course.

Senior Independent Director

We were pleased to announce the appointment of Simona Heidempergher as the Company's senior independent director with effect from 26 July 2021.

She has a great wealth of asset management experience and is very familiar with the Company's portfolio. In addition, she brings, as do all of our European-based directors, insight into the prevailing sentiment in European markets.

Annual General Meeting

The Company's 31st Annual General Meeting is due to be held on Monday, 29 November 2021 and, Covid-19 restrictions permitting, we look forward to being able to report to our shareholders in person. The meeting will be held at the offices of our investment manager, Janus Henderson Investors, at 201 Bishopsgate, London, EC2M 3AE with proceedings commencing at 12.30 pm. As is our usual practice, voting will take place on a show of hands for those physically present at the meeting.

A copy of the Company's Notice of Meeting has been included with this annual report. We are proposing a number of additional resolutions for shareholder consideration this year which include the share split which I have already mentioned, and the adoption of new articles of association to facilitate the share split, as well as afford us the opportunity to bring them in line with current best practice.

For any shareholders unable to attend, we will be offering you the opportunity to join using the video conferencing software, Zoom. Due to technological restrictions, we are unable to offer voting to those attending via Zoom and therefore encourage all shareholders, particularly those who will not be present in person, to submit their votes by proxy ahead of the deadline to ensure their vote is taken into account.

Outlook

Equity markets and the Company more specifically have had an excellent year as economies bounced back from the darkest days of the Covid-19 pandemic. Our Fund Manager's investment approach – which emphasises the importance of valuation discipline in addition to seeking future growth – has been very beneficial, particularly when the vaccine roll out seemed to have delivered some semblance of normality. Over the summer, concern over Covid-19 variants and a belief that inflation is merely transitory, led to a fall in bond yields. This resulted in high multiple growth stocks providing market leadership again, leading to disappointing performance by the Company.

A global backdrop of increasing GDP and a pick-up in corporate earnings is supportive for European smaller companies. The Fund Manager and I would caution that, as growth inevitably slows post the Covid-19 recovery and the Central Bank liquidity fuelled re-rating wanes, it would be reasonable to expect more modest returns in the medium term.

With the backdrop outlined above and, we think, the heightened risk of inflation in the coming years, we believe the days of stocks trading on ever-higher valuation multiples, justified by no inflation and low bond yields, are coming to an end. Therefore, we remain supportive of our Fund Manager's valuation approach.

The fund management team believes that the growth opportunities offered in the European smaller company space – in areas such as energy transition, companies like Nexans and Friedrich Vorwerk – means that the asset class remains a very attractive investment area with the opportunity to uncover good investments in the years ahead.

Christopher Casey

Chairman

13 October 2021