PREMIER ENERGY AND WATER TRUST PLC
Annual report & accounts
for the year ended
31 December 2013
Investment Objectives
The Company's investment objectives are to achieve a high income and to realise
long term growth in the capital value of its portfolio. The Company will seek
to achieve these objectives by investing principally in the equity and
equity-related securities of companies operating primarily in the energy and
water sectors, as well as other infrastructure investments.
Contents
Investment Objectives 1
Company Summary 2
Financial Calendar 2
Company Highlights 4
Dividend Progression 5
Share Price Performance 5
Chairman's Statement 6
Investment Managers' Report 8
Twenty Largest Holdings 12
Review of Top Ten Holdings 13
Directors 15
Investment Managers 15
Strategic Report 16
Directors' Report 20
Statement of Corporate Governance 24
Directors' Remuneration Report 27
Audit Committee Report 30
Statement of Directors' 32
Responsibilities in respect of the
Financial Statements
Independent Auditor's Report 33
Income Statement 35
Balance Sheet 36
Reconciliation of Movements in 37
Shareholders' Funds
Cashflow Statement 38
Reconciliation of Net Cash Flow to 38
Movements in Net Debt
Notes to the Financial Statements 39
Glossary of Terms 54
Shareholder Information 55
Notice of Annual General Meeting 56
Notes to the Notice of Annual General 58
Meeting
Directors and Advisers 59
Company Summary
History
The Company, a UK investment trust listed on the main list of the London Stock
Exchange, was incorporated on 12 September 2003 and commenced its activities on
4 November 2003. The Company was established in connection with the scheme of
reconstruction of Legg Mason Investors International Utilities Trust PLC, with
18,143,433 Ordinary Shares and 19,143,433 Zero Dividend Preference Shares being
allotted at launch.
On 18 December 2009 shareholders approved special resolutions to implement
tender offers for Ordinary Shares and Zero Dividend Preference ("ZDP") Shares,
to extend the life of the Company until 31 December 2015 and to amend the final
entitlement per ZDP Share to 221.78p on 31 December 2015 (a gross redemption
yield of 6.53% on the ZDP Net Asset Value of 151.39p at 17 December 2009). On
15 December 2010 shareholders approved proposals to issue new shares in
connection with the reconstruction of Premier Renewable Energy Fund Limited.
Financial Calendar
Company's year end 31 December
Annual results announced March
Annual General Meeting 8 May 2014
Company's half year end 30 June
Half year results announced August
Dividend payments - 2014 At the end of March, June, September
and December
Capital Structure
Bank Loan As at 31 December 2013 the Company had
no bank loans outstanding (2012: nil).
Zero Dividend Preference Shares (1p 21,180,373
each)
The ZDP Shares will have a final
capital entitlement of 221.78p on 31
December 2015 subject to there being
sufficient capital in the Company. The
ZDP Shares are not entitled to any
dividends. The ZDP shareholders have
the right to receive notice of, to
attend and to vote at all general
meetings of the Company. The ZDP Shares
are qualifying investments for
Individual Savings Accounts ("ISAs")
only if they were purchased earlier
than 5 years before their final
redemption date of 31 December 2015.
Ordinary Shares (1p each) 17,068,480
The Ordinary Shares are entitled to all
of the Company's net income available
for distribution by way of dividends.
On a winding-up, they will be due any
undistributed revenue reserves and any
surplus assets of the Company after the
ZDPs have been paid in full. The
Ordinary shareholders have the right to
receive notice of, to attend and to
vote at all general meetings of the
Company. The Ordinary Shares are
qualifying investments for ISAs.
Company details
Investment Manager Premier Fund Managers Ltd ("PFM Ltd"),
is a subsidiary of Premier Asset
Management Ltd ("PAM Ltd"). PAM Ltd had
approximately £2.5bn of funds under
management at 31 December 2013. PFM Ltd
is authorised and regulated by the
Financial Conduct Authority. The
Company's portfolio is managed by James
Smith and Claire Long.
Secretary Premier Asset Management Ltd provides
the company secretarial and
administrative services.
Management Fee 1.0% per annum, charged 40% to revenue
and 60% to capital, plus performance
fee, allocated between capital and
revenue based on the outperformance
attributable to the capital and revenue
respectively. (See note 3 to the
accounts for full details.)
Company Highlights
for the year to 31 December 2013
31 December 31 December
2013 2012 % change
Total Return
Performance
Total Assets Total 24.5% 2.9%
Return 1
FTSE All-World 9.0% (1.9%)
Utilities Index
Total Return 2
(GBP)
FTSE All-World 20.8% 11.9%
Index Total Return
2 (GBP)
FTSE All-Share 20.8% 12.9%
Index Total Return
2 (GBP)
Ongoing charges 3 1.4% 1.6%
Ordinary Share
Returns
Net Asset Value per 167.55p 112.59p 48.8%
Ordinary Share (cum
income) 4
Mid-market price 157.25p 99.00p 58.8%
per Ordinary Share
2
Discount (6.1%) (12.1%)
Revenue return per 11.25p 11.10p 1.4%
Ordinary Share
Net dividends 12.25p 9.30p 31.7%
declared per
Ordinary Share
Net Asset Value 58.5% (4.0%)
Total Return 5
Share Price Total 71.8% 3.7%
Return 2
Zero Dividend
Preference Share
Returns
Net Asset Value per 195.42p 183.45p 6.5%
Zero Dividend
Preference Share 4
Mid Market Price 206.00p 186.50p 10.5%
per Zero Dividend
Preference Share 2
Premium 5.4% 1.7%
Hurdle Rates†
Ordinary Shares
Hurdle rate to 4.7%
return the share
price of 157.25p at
31 December 2013 6
Zero Dividend
Preference Shares
Hurdle rate to (14.8%)
return the
redemption share
price of 221.78p at
31 December 2015 6
Balance Sheet
Gross Assets less £70.0m £58.1m 20.5%
Current Liabilities
Zero Dividend (£41.5m) (£39.1m) (6.1%)
Preference Shares
Equity £28.5m £19.0m 50.0%
Shareholders' Funds
Gearing on Ordinary 2.46x 3.06x
Shares 7
Zero Dividend 1.42x 1.16x
Preference Share
Cover over accrued
entitlement 8
1 Based on opening and closing total assets plus dividends marked "ex-dividend"
within the period. Source: PFM Ltd.
2 Source: Bloomberg.
3 Ongoing charges have been based on the Company's management fees and other
operating expenses as a percentage of average gross assets less current
liabilities over the year.
4 Articles of Association basis.
5 Based on opening and closing NAVs plus dividends marked "ex-dividend" within
the period. Source: PFM Ltd.
6 Source: JP Morgan Cazenove.
7 Based on Gross Assets less Current Liabilities divided by Equity
Shareholders' Funds at the end of each year.
8 Source: JP Morgan Cazenove and PFM Ltd. Non-cumulative cover = Gross assets
at year end less estimated wind up costs less management charges to capital
divided by final repayment value of ZDPs.
† Hurdle rate definition can be found in the Glossary of Terms on page 54.
Dividend Progression
2004-2013
[GRAPHIC REMOVED]
Share Price Performance
2008-2013
ZDP Shares 5 year performance chart (rebased to 100)
[GRAPHIC REMOVED]
Ordinary Shares 5 year performance chart (rebased to 100)
[GRAPHIC REMOVED]
Chairman's Statement
for the year to 31 December 2013
Performance
2013 has been a good year for both equity markets and Premier Energy and Water
Trust ("PEWT"/"the Company"). Shareholders will be aware of the management
changes which took place in mid-2012, and the subsequent portfolio
restructuring in the second half of 2012. I am pleased to report that the new
portfolio has performed well, with PEWT recording a gross assets total return
of 24.5%. This was an out-performance of the FTSE All-World Index, which
returned 20.8%, and an even larger out-performance of the FTSE All-World
Utilities Index, which returned 9.0% (both these indices being stated in
Sterling and on a total return basis).
The Company's cum-income NAV per Ordinary Share increased from 112.59p at 31
December 2012 to 167.55p at 31 December 2013, a gain of 48.8%. In contrast to
recent years, the Company's split capital structure has been of benefit to the
Ordinary Shares in 2013. In addition to the strong NAV performance, I am
pleased to note that both classes of PEWT's shares have traded well. The
discount on which the Ordinary Share trades to NAV narrowed considerably during
the year, from 12.1% at December 2012 to 6.1% at December 2013. This, together
with the increasing dividend, has meant that a PEWT Ordinary Shareholder saw a
total return, based on share price and dividend, of 71.8% over the year. In
addition, the ZDP Shares benefited from increased cover, as a result of which
their price increased by 10.5%. Taken together, PEWT's two share classes closed
the year on a package premium of 0.7%.
Overview of the year
Many of the global economic issues we discussed last year remain with us. We
see these as being a mismatch in western markets between government spending
and revenue, substantial levels of both public and private debt, and lastly
trade imbalances. Three of the countries which appear to have the most severe
economic issues, the United States, the United Kingdom, and Japan, have
resorted to the printing press. The marginal benefit of this policy is now
being called into question in the US and UK, while Japan is just setting off
down this road. Money creation and equity market performance are obviously
linked, and this was surely one of the main factors behind strong equity market
performance in 2013. Markets now hope that underlying economic growth takes up
the baton from the central bankers.
Despite the utility sector's underperformance of the broader equity market
during the year, we believe that there are reasons to be optimistic as a
utility investor, namely that many of the issues that have held the sector back
are now in the early stages of being resolved. For instance, older and less
efficient power plants are being closed; larger diversified utilities are
selling off non-core assets and implementing efficiency programmes; wholesale
power prices appear to have reached a bottom in many markets following years of
decline; coal prices have fallen benefitting those utilities that use coal to
generate electricity; renewable energy has become increasingly mainstream and
"utility like", offering new opportunities; and finally, perhaps most
importantly for PEWT, many of the utilities in the emerging economies have
quietly got on with building assets and creating value.
Dividends
Revenue generation remained robust, with PEWT recording a revenue return of
11.25p per Ordinary Share. Your Board has declared a fourth interim dividend of
5.25p per Ordinary Share which will be paid on 31 March 2014 to shareholders on
the register at the close of business on 7 March 2014. This comprises a 4.50p
base dividend plus a further 0.75p additional dividend paid pursuant to PEWT's
announcement in August 2013 that your Board intends to run down the accumulated
revenue reserve by the scheduled wind up date of December 2015. Excluding the
additional dividends, the total base dividend paid in respect of the year is
therefore 10.00p per share, an increase of 7.5% over the 9.30p per share paid
in respect of 2012.
Regulatory Matters - the Alternative Investment Fund Managers Directive (the
"Directive")
The Directive (a European Union regulatory directive) was written into UK
legislation with effect from 22 July 2013. PEWT is an alternative investment
fund ("AIF") for the purposes of the Directive and therefore falls within the
scope of the Directive. It must therefore be managed by an alternative
investment fund manager ("AIFM") who will be required to comply with the
provisions of the Directive as relevant. In the case of investment trusts, this
may be an external AIFM, such as the investment trust's investment manager or
it may be the company itself as an internally managed AIF. An internally
managed AIF which is leveraged and has assets under management of €100m or
less, is able to take advantage of a lighter touch regulatory regime. PEWT, by
acting as its own AIFM, will fall below the €100m threshold and be able to take
advantage of the lighter touch and less costly regime. Accordingly, the Board
will be applying for PEWT to be an internally managed AIFM by requesting the
Financial Conduct Authority ("FCA") enter PEWT on the register of small
registered UK AIFMs. The Board will submit the application to the FCA prior to
the expiry of the transitional period under the Directive which ends on 21 July
2014. Adopting this approach will mean that a number of the Directive's
requirements will not apply in relation to PEWT, which the Board anticipates
will result in costs savings for PEWT including the avoidance of the costs of
appointing a depositary as well as the additional costs that might be involved
in complying with the reporting requirements under the full scope of the
Directive. The Board intends to monitor the level of PEWT's assets under
management in relation to the €100m threshold in accordance with the
requirements of the Directive.
Shareholder relations
The Board and investment managers welcome contact with existing and potential
new shareholders. The Company's AGM will be held on 8 May 2014 at 12:00 noon at
the offices of Maclay Murray & Spens LLP, One London Wall, London, EC2Y 5AB,
where a presentation will be given, and it is hoped that shareholders will be
able to attend on this date. Additionally, on 15 May 2014, Premier will be
hosting an investor day for existing and potential new PEWT shareholders.
Further details and registration instructions for this event are available,
together with monthly factsheets, on Premier's website at:
www.premierfunds.co.uk.
Outlook
This has been a good year for PEWT and several investments have performed
exceptionally well. We remain optimistic as we move forward into 2014, with the
portfolio containing a combination of defensive value and also growth oriented
investments. Your Company retains substantial weightings in emerging markets,
and while cognisant of the risks this may bring, including currency movements,
we remain excited for the prospects of these investments.
Geoffrey Burns
Chairman
11 March 2014
Investment Managers' Report
for the year to 31 December 2013
Performance
Premier Energy and Water Trust PLC ("PEWT"/"the Company") enjoyed a strong year
in 2013, out-performing the global equity market, and registering a very
substantial out-performance of the utility sector. PEWT's Ordinary Share NAV
(cum dividend) increased by 48.8%, and share price by 58.8%.
PEWT's portfolio, while containing a reasonable selection of the large
incumbent utility companies which form the bulk of market indices, is primarily
exposed to more specialist companies which are less well known to generalist
investors. It is not altogether surprising therefore to see a divergent
performance from the market.
As noted in the Chairman's statement, the utility sector under-performed the
wider equity markets. The sector has experienced headwinds such as
over-capacity, political tinkering, increased bond yields, and the effects of
historic poor management decisions. However, as the Chairman also notes, we
feel that on a global basis, the sector is beginning to look more attractive.
Looking back over the past 10 years, (using the Bloomberg World Utilities Index
for which we have data over the required
time period), it can be seen from the chart below that utility companies
enjoyed considerable out-performance between 2004 and 2008. This was reversed
from 2009 with a continuous period of under-performance. Taking the past 10
years as a whole, the sector has performed in line with the Bloomberg World
Index, showing a total return of 135.5% in Sterling terms, against 133.4% for
the Bloomberg World Index.
Looking forward we would be surprised if the sector were to continue to
under-perform. We have several reasons for believing this, not least that the
sector now trades on a similar earnings multiple to the wider market, and that
utilities have taken steps to adapt to a new world of scarce capital and low
growth. Balance sheets are being repaired, corporate activity is out, and cost
efficiencies are in. This bodes well for future performance.
In terms of specific markets, Europe performed relatively well following a
difficult 2012, as did the UK despite political risks coming to the fore in the
second half of the year. By contrast, Latin America, and particularly Brazil,
to which we increased PEWT's allocation during the year, performed relatively
poorly. PEWT's performance was broadly spread, mainly coming from stock
selection rather than asset allocation.
Finally, we should note that 2013 was, as they say, a year of two halves. The
bulk of the performance was taken in the first half, when PEWT's NAV (cum
income) increased by 44.7%, with a gain of only 4.1% in the second half
(measured against the December 2012 NAV), making 48.8% for the full year.
Although portfolio movements were undoubtedly stronger in the first half, a key
factor was the movement in Sterling, which fell by 6.4% against the US Dollar
in the first half, but rebounded by 8.8% in the second. In retrospect PEWT did
well to register an improved NAV in the second half of the year against such
strong currency headwinds.
PORTFOLIO CONCENTRATION 2013
[GRAPHIC REMOVED]
UTILITY INDICES RETURNS 2013
[GRAPHIC REMOVED]
Portfolio
Portfolio activity was much reduced in 2013 as compared to 2012, when the
portfolio was substantially restructured. Having said that, there has been
considerable movement within the larger holdings.
China remains the fund's largest geographic exposure, increasing to 28.1% from
24.3%. This has been driven by performance, and a number of the Chinese
positions have performed exceptionally well, especially when measured against a
rather lacklustre domestic equity market. PEWT is mainly exposed to themes such
as renewable energy, water treatment, and waste incineration. We expect the
Chinese Government to continue to prioritise the environment and as such,
companies operating in these areas should continue to perform well.
PEWT's largest Chinese investment, China Everbright International, is a waste
incineration and wastewater treatment company. It enjoyed an exceptional year,
and saw an increase in its share price of 164.8% on the back of several new
project wins and very strong financial results. It has moved up from third to
second place in the portfolio despite us taking profits (a little too early in
hindsight) on just over 40% of the position.
PEWT's two Chinese renewable energy companies, China Suntien Green Energy and
Huaneng Renewables, also performed well registering share price gains of 72.2%
and 169.6% respectively. Despite this, these companies remain good value in our
view.
Natural gas remains a relatively under-used fuel in China and as such has seen
very high levels of growth over recent years given its environmental benefits
when measured against alternatives such as coal. PEWT had rather contrasting
fortunes in this area however, with the largest position Kunlun Energy, seeing
a fall in its share price of 15.6% mainly, we feel, as a result of corporate
governance issues at PetroChina which owns 58.4% of Kunlun. However, the
investment in Fortune Oil was rather more successful. At the year end this
position was showing a gain of 33.2% on book cost, PEWT having received a
special dividend of £0.8 million in October. This was paid from the proceeds of
sale of one of Fortune's business units, and as such has been recorded as a
capital item.
PEWT's largest investment at the year-end was OPG Power Ventures, a UK listed
Indian power generation business. OPG had an encouraging twelve months,
commissioning new power capacity and reporting strong financial results. The
shares responded with a gain of 22.8% despite a sharp depreciation of the
Indian Rupee. 2014 looks set to be an important year for OPG, with the expected
commissioning of two large new power units, and we believe the shares more than
discount the risks of the Indian power market. Also in India, we sold the
position in Essar Energy equity, but retained the holding in the convertible
bond. This was well timed as we managed to come out of the equity at an average
price of 135p; it closed the year at 72.5p. The price of the bond, by contrast,
fell by only 3.1% over the year.
Staying with Asia, during the year PEWT made a successful investment in
Malaysia, buying shares in the incumbent electricity utility Tenaga Nasional.
We feel that electricity reforms in that country have made Tenaga fundamentally
more attractive than previously, and the position had recorded a 37.3% gain on
(Sterling) book cost by the year end.
Moving to Europe, specifically the UK, mention must be made of the mess that is
the UK power market. The UK faces a near term capacity crunch as a result of
the imminent closure of many coal fired power stations due to EU mandated
emissions legislation. While the UK has made significant progress in developing
renewable energy, this of itself is not sufficient to replace the retirement of
thermal capacity due to its lower levels of output and also its intermittency.
In order to avoid a "lights out" scenario, National Grid is increasingly
implementing less conventional demand management tools, such as offering
payments to large energy users should they agree to reduce offtake at certain
times of day.
Against this background we were rather surprised to see the Labour Party
proposing to freeze electricity tariffs should it be returned to power in 2015.
Labour appears to believe that energy supply companies are charging tariffs
that do not correctly reflect supply costs, although we note that it has not
actually offered any firm evidence in support of this allegation. The fact is
that much of the increase in unit prices has been as a result of government
policy such as subsidies for renewable energy and the costs of insulating older
houses.
Our largest exposure to the UK is through National Grid, which as a wholly
regulated entity is somewhat removed from current politics. It entered a new
regulatory period in the year, and saw a respectable 12.1% increase in share
price as a result. We reassessed the relative merits of SSE and Centrica
following the sharp correction in share prices seen post the Labour Party
conference, taking the decision to retain SSE but to sell the majority of the
Centrica holding. We believe that SSE, mainly regulated and with lower supply
margins, is a more robust business and has effectively less to lose from a
Labour Party election victory. SSE's share price fell by 3.4% during the year.
PEWT's European holdings had been scaled back in 2012, but those holdings that
were retained performed well. EDF had an excellent year, with tariff increases
resulting in a share price appreciation of 83.5%. We cut back the position in
GDF Suez, preferring EDF, however GDF's shares improved by 9.8% as it held
constant its high level of dividend. In Italy, the holding in the gas
transmission company, Snam, saw a share price increase of 15.7%, but remains
good value for a quality regulated exposure.
The main area of disappointment for the fund was the performance of the portion
of the portfolio held in Latin America, which was increased in the year. This
proved to be ill-judged, with regulatory changes and depreciating currencies
pushing these new investments into a loss. The largest investment in the area,
Enersis, saw its share price fall by 7.8% in local currency terms, although by
17.8% when measured in Sterling. However, these positions now offer excellent
value, and exposure to economies that remain fundamentally attractive.
Currency
PEWT's Ordinary Shares are relatively sensitive to currency movement given its
international portfolio and the large Sterling denominated prior charge in the
form of the ZDP Shares. As noted above, Sterling was weak in the first half but
came back strongly in the second as the UK Economy began to improve, and this
is one of the reasons for the Company having a much better performance in the
first half of the year than the second. For the year as a whole, Sterling
increased by 1.9% against the US Dollar. The same general pattern was seen
against the Euro, Sterling was weak in H1, strong in H2, but declined by 2.2%
over the full year.
As the Federal Reserve began to contemplate reducing its level of asset
purchases, emerging market currencies were notably weak. Against Sterling, the
Brazilian Real fell by 17.3% during 2013, most of which occurred in the second
half. Likewise the Indian Rupee, Chilean Peso and Malaysian Ringgit, all
important currencies for the Company, lost 14.8%, 11.8% and 9.5% respectively
against Sterling.
Although some hedging against the Euro had been carried out in the early part
of 2013, the Company was unhedged at the close of the year.
GEOGRAPHIC ALLOCATION 2013
[GRAPHIC REMOVED]
China 28.1% (24.3%)
Asia (ex China) 15.9% (17.6%)
United Kingdom 15.4% (15.8%)
Europe (ex UK) 10.2% (9.2%)
Latin America 9.1% (2.7%)
North America 7.6% (10.3%)
Global 7.4% (10.1%)
Middle East 3.1% (3.8%)
Eastern Europe 2.3% (4.8%)
Australasia 0.9% (1.4%)
SECTOR ALLOCATION 2013
[GRAPHIC REMOVED]
Electricity 44.5% (45.5%)
Multi Utilities 20.8% (26.3%)
Water & Waste 13.7% (12.5%)
Gas 12.7% (9.5%)
Renewable Energy 7.7% (5.0%)
Infrastructure 0.6% (1.2%)
The 2012 comparative % figures for both the Geographic and Sector Allocation
charts are shown as italic figures in brackets.
MARKET CAP DISTRIBUTION
2013
[GRAPHIC REMOVED]
Revenue
Income generation has continued to be healthy with revenue of £2.72 million in
the year. The revenue return per share was 11.25p, a marginal increase on 2012,
primarily as a result of lower overseas tax costs.
Balance sheet
The gearing of the Ordinary Shares to the market has fallen from 3.06x at
December 2012, to 2.46x at December 2013. Similarly the cover on the ZDP
Shares, based on final redemption value and taking into account costs charged
to capital, improved from 1.16x to 1.42x.
Outlook
The past year has seen the market enjoy a surge in which the utility sector has
not, to a large extent, participated. Some markets, notably the US, are looking
fully valued, and will require real earnings growth to justify further
performance, despite the fact that macro policies look set to remain
supportive. However, as a result of the utility sector's underperformance
discussed above, for the first time in some years our universe looks attractive
on a valuation basis against the wider market. In addition, with interest rates
looking likely to stay relatively low for the foreseeable future, yield assets
should continue to be in demand.
James Smith
Claire Long
Premier Fund Managers Limited
11 March 2014
Twenty Largest Holdings
at 31 December 2013
Value % total
Company Activity Country £000 investments 2013 2012
OPG Power Multi Utility India 4,340 6.2% 1 (7)
Ventures
China Everbright Water & Waste China 4,203 6.0% 2 (3)
Intl
China Suntien Renewable Energy China 3,447 4.9% 3 (4)
Green Energy
Kunlun Energy Gas Transmission China 3,138 4.5% 4 (11)
National Grid Electricity & Gas UK 2,640 3.8% 5 (10)
Transmission
Ecofin Water & Investment Company UK 2,563 3.7% 6 (5)
Power*
SSE Multi Utility UK 2,544 3.6% 7 (12)
Fortune Oil Gas Transmission China 2,537 3.6% 8 -
GDF Suez Multi Utility France 2,485 3.5% 9 (1)
Tenaga Nasional Electricity Integrated Malaysia 2,200 3.1% 10 -
Enersis Electricity Integrated Chile 2,176 3.1% 11 (16)
EDF Electricity Integrated France 2,137 3.0% 12 -
Qatar Electricity Multi Utility Qatar 2,111 3.0% 13 (9)
and Water
Snam Gas Transmission Italy 2,042 2.9% 14 (6)
Huaneng Renewable Energy China 2,017 2.9% 15 -
Renewables
China Power Intl Electricity Generation China 1,927 2.7% 16 (13)
Essar Energy* Electricity Generation India 1,782 2.6% 17 (2)*
& Oil Refining *
Tauron Polska Electricity Integrated Poland 1,614 2.3% 18 -
Energia
Renewable Energy Renewable Energy UK 1,569 2.2% 19 -
Generation
Nextera Energy Electricity Integrated USA 1,551 2.2% 20 -
49,023 69.8%
Other investments 19,346 30.2%
Total investments 68,369 100.0%
* Holding in convertible bonds
** Essar Energy investment at 31 December 2012 consisted of ordinary shares and
convertible bonds.
Review of Top Ten Holdings
at 31 December 2013
1. OPG Power Ventures
Market cap £204m
(www.opgpower.com)
OPG owns small coal fired power stations in the southern Indian state of Tamil
Nadu. The company commissioned its third power station, Chennai III, ahead of
schedule and on budget in June this year, and now has operational capacity of
270MW, with a further 460MW under development and due for completion during
2014. Tariffs were stable following their sharp increase in the second half of
2012, but the depreciation of the rupee against the dollar negatively impacted
the cost of coal imported from Indonesia. Despite this, OPG's capacity
expansion ensured strong interim results in September, with a 168% growth in
revenue and 241% growth in earnings. OPG's shares rose by 22.8% during 2013.
2. China Everbright International
Market cap £3.6bn
(www.ebchinaintl.com)
China Everbright is a leading waste-to-energy and waste water treatment company
operating in three key coastal regions of mainland China. The company is now
operating 49 projects, and has a further 20 projects under construction, 2013
having seen a constant stream of new project wins. Recurring net earnings in
the first half of 2013 grew by 79%. The holding has been progressively reduced
as the shares have risen, in total by 164.8%, over the past 12 months.
3. China Suntien Green Energy
Market cap £734m
(www.suntien.com)
China Suntien is a wind farm operator and distributor of natural gas in the
north eastern Chinese province of Hebei. Following strong wind capacity growth
in 2012, electricity output from wind grew by 27% in the first half of 2013,
while total gas volumes supplied were up 14%. Over the next two years, new wind
capacity under construction and in planning should increase total capacity by
80% from the current level of 1,346MW. The shares rose 72.2% during the year.
4. Kunlun Energy
Market cap £8.6bn
(www.kunlun.com.hk)
Kunlun is the separately listed mid and downstream gas arm of the Chinese oil
producer, Petrochina. In the first half of 2013 it derived 48% of its earnings
from long distance gas transmission, and 28% from its LNG activities. Demand in
China for cleaner fuels such as gas is growing strongly from the current level
of c.170bcm (a level about 70% higher than that of the UK). The switch by long
distance trucks from diesel to cleaner LNG is a key future driver for the
company that is just starting to gain traction. However, largely as a result of
corporate issues associated with their parent, the shares fell by 15.6% during
2013.
5. National Grid
Market cap £29.4bn
(www.nationalgrid.com)
National Grid operates the UK's electricity and gas transmission networks,
together with transmission assets in the north east of the US. In April the
group entered a new longer regulatory review period (2013-21) which provides
high visibility of returns. Although interim earnings were flat, due to the
higher finance costs associated with an increase in debt to fund new regulatory
capex, the management simultaneously reported that performance was ahead of the
regulator's assumptions. National Grid's shares rose by 12.1% during 2013.
6. Ecofin Water & Power Opportunities
£80m Convertible
(www.ecofin.co.uk)
Ecofin is a UK listed investment trust that invests in both listed and unlisted
stocks in the global utility and energy sectors. North American exposure,
including Lonestar Resources, the shale gas and liquids business in Texas,
remains the largest of the fund's investments. Ecofin's portfolio has
relatively little overlap with PEWT's. The convertibles are five times covered
by assets and mature in July 2016. Their yield at the end of 2013 was unchanged
from last year, at 5.1%. The bond's conversion price of 172.64p was a 2%
premium to Ecofin's Ordinary Share NAV at 31 December 2013, the NAV having
increased by 7.4% over 2013.
7. SSE
Market cap £13.2bn
(www.sse.co.uk)
SSE is involved in the generation, transmission and supply of electricity, and
the production, storage and supply of gas to 9.5m customers in the UK.
Approximately 50% of its earnings base derives from regulated operations, and
at the interim results (to September) the group reported a strong performance
from this side of the business. The holding was increased when the shares fell
in response to the Labour party proposals for a retail price freeze in
September, this despite the fact that SSE's retail energy supply business was
loss making at the interim stage. The shares ended the year down 3.4%.
8. Fortune Oil
Market cap £244m
(www.fortune-oil.com)
Fortune Oil is a UK listed company which, via a joint venture, has an 18% gross
interest in a much larger Chinese gas distribution company, China Gas Holdings.
During the year Fortune Oil sold its own gas distribution business to this
company for shares and cash, which resulted in the payment of a special
dividend to Fortune Oil shareholders. It also has a stake in a Chinese aviation
refuelling business in which BP is the major partner. After adding back the
special dividend paid in the second half of the year, the share price increased
by 12.5% during 2013.
9. GDF Suez
Market cap £34.3bn
(www.gdfsuez.com)
GDF is a French multinational gas and electricity company with operations in
almost 70 countries. It is the largest independent power producer in the world
with 117GW of installed capacity, and a further 7.2GW under construction as at
June 2013. In the first 6 months normalised earnings for the group fell 1.7%,
due, inter alia, to the unscheduled closure of a Belgian nuclear plant while
safety inspections were carried out. However the international business
continued to show strong growth. The shares rose by 9.8% over the course of
2013.
10. Tenaga Nasional
Market cap £11.9bn
(www.tnb.com.my)
Tenaga is an integrated Malaysian electricity company with 9GW of capacity
supplying 8.1m customers nationwide. The regulatory environment for the stock
has been improving over the last year. At the end of 2013 the Malaysian
government agreed an average 14.9% tariff increase, in the main to reflect
increased coal and gas input costs, and the shares responded strongly. This was
a new investment for PEWT during 2013, and recorded a 37.3% gain on book cost
by the end of the year.
Directors Report
for the year ended 31 December 2013
Directors
Geoffrey Burns - Chairman
Geoffrey Burns has worked in the investment fund industry for over thirty
years. From 1997 to 2000 he was a director of and head of investment trusts at
Murray Johnstone Ltd. Mr Burns is an adviser to a number of government and
multilateral agencies who make investments in private equity funds in emerging
markets, including the Swiss Investment Fund for Emerging Markets and the Asian
Development Bank. Mr Burns is Chairman of City Natural Resources High Yield
Trust PLC. Mr Burns was appointed as a non-executive director of the Company on
12 September 2003.
Ian Graham - Chairman of the Audit Committee
Ian Graham has over twenty years' experience as an investment analyst, more
than half of which were spent covering utilities, having worked at Scrimgeour
Kemp-Gee, Simon & Coates, Nat West Securities and Merrill Lynch until 2001. Mr
Graham was appointed as a non-executive director of the Company on 12 September
2003 and was appointed the Chairman of the Audit Committee on 1 August 2012.
Michael Wigley
Michael Wigley is a director of The Conygar Investment Company plc. He was
formerly a director of Matheson Investment Ltd and a non-executive director of
Development Securities PLC. He was deputy chairman of Legg Mason Investors
International Utilities Investment Trust, the predecessor company. Mr Wigley
was appointed as a non-executive director of the Company on 12 September 2003.
Charles Wilkinson
Charles Wilkinson is a solicitor and a resident of Guernsey. Until March 2005
he was a partner of Lawrence Graham LLP specialising in investment trusts and
funds. He is a non-executive director of Landore Resouces Ltd, which is quoted
on the AIM Market of the London Stock Exchange and of Doric Nimrod Air One Ltd,
Doric Nimrod Air Two Ltd and Doric Nimrod Air Three Ltd, all three of these are
listed on the Specialist Funds Market of the London Stock Exchange. Mr
Wilkinson was appointed as a non-executive director of the Company on 23
February 2011.
Investment Managers
James Smith
James joined Premier in June 2012, after spending fourteen years at Utilico,
specialising in the global utilities, transportation infrastructure, and
renewable energy sectors. During this time he gained extensive experience in
both developed and emerging markets. He was previously a director at Renewable
Energy Holdings PLC, and Indian Energy Ltd. James is a Chartered Accountant and
Barrister.
Claire Long
Claire joined Premier in December 2008. Previously she ran a UK smaller
companies fund at Rothschild Asset Management after spending four years at
Foreign and Colonial where she covered a range of markets, including the UK and
Japan. She is an Associate of the CFA UK.
Strategic Report
for the year ended 31 December 2013
The Directors submit to the shareholders their Strategic Report, Director's
Report and the Audited Financial Statements of the Company for the year ended
31 December 2013.
Business Model and Strategy
Business and tax status
In the opinion of the Directors, the Company has conducted its affairs during
the period under review, and subsequently, so as to maintain its status as an
investment trust for the purposes of Chapter 4 of Part 24 of the Corporation
Tax Act 2010. The Company has obtained written approval as an investment trust
from HM Revenue & Customs for all accounting periods up to the year ended 31
December 2011, and has made a successful application under Regulation 5 of the
Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust
status to apply to all accounting periods starting on or after 1 January 2012
subject to the Company continuing to meet the eligibility conditions contained
in Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements
outlined in Chapter 3 of Part 2 of the Regulations.
The Company is an investment company as defined in Section 833 of the Companies
Act 2006. The Company is not a close company for taxation purposes.
The Company's status as an investment trust allows it to obtain an exemption
from paying taxes on the profits made from the sale of its investments.
Investment trusts offer a number of other advantages for investors, including
access to investment opportunities that might not be open to private investors
and to professional stock selection skills at low cost.
As mentioned in the Chairman's Statement on page 6, the introduction of the
Alternative Investment Fund Managers Directive has implications for the
Company, as closed-ended investment companies fall within the scope of the
Directive as AIFs. The Directive requires an AIFM to be appointed in respect of
the Company which may be the Company itself as an internally managed AIF. The
AIFM will be subject to regulation by, or registration with, the FCA depending
on the application of the Directive to the AIFM. After careful consideration,
the Board has determined that the most appropriate option is for the Company to
undertake the new role and act as its own AIFM. Accordingly, the Board will be
applying to the FCA for the Company to be entered on the register of small
registered UK AIFMs. The Board will submit the application to the FCA prior to
the expiry of the transitional period under the Directive which ends on 21 July
2014.
Investment objectives
The Company's investment objectives are to achieve a high income from, and to
realise long-term growth in the capital value of its portfolio. The Company
will seek to achieve these objectives by investing principally in equity and
equity related securities of companies operating primarily in the energy and
water sectors, as well as other infrastructure investments.
Investment policy
The policy of the Directors is that, in normal market conditions, the portfolio
of the Company should consist primarily of a diversified portfolio of equity
and equity-related securities of companies operating in the energy and water
sectors, as well as other infrastructure investments. There are no restrictions
on the proportion of the portfolio of the Company which may be invested in any
one geographical area or asset class but no more than 15% of the Company's
assets, at the time of acquisition, will be invested in a single security. The
Company may also invest up to 15% of its gross assets in investment companies
provided they themselves invest in utilities and infrastructure. However, not
more than 10% of the Company's gross assets may be invested in other UK listed
closed-ended investment funds unless such funds themselves have published
investment policies to invest not more than 15% of their total assets in other
UK listed closed-ended investment funds (provided they themselves invest in
utilities and infrastructure). The Company may invest up to 15% of its gross
assets in unquoted securities. There are no borrowings under financial
instruments or the equivalent of financial instruments but investors should be
aware of the gearing effect of the ZDP Shares within the capital structure. The
Company's policy is not to employ any gearing through long-term bank borrowing.
The Company can, however, employ gearing through the issue of ZDP Shares.
The Company will manage and invest its assets in accordance with its published
investment policy. Any material change to this policy will only be made with
the approval of Shareholders by ordinary resolution unless otherwise permitted
by the Listing Rules.
Investment Restrictions
The Company will not:
(i) invest more than 10%, in aggregate, of the value of its gross assets at the
time the investment is made in other listed closed-ended funds, provided that
this restriction does not apply to investments in any such closed-ended funds
which themselves have stated investment policies to invest no more than 15% of
their total assets in other listed closed-ended funds;
(ii) invest more than 15% of its gross assets in listed closed-ended funds;
(iii) invest more than 20% (calculated at the time of any relevant investment)
of its gross assets in other collective investment undertakings (open-ended or
closed-ended);
(iv) expose more than 20% of its gross assets to the creditworthiness or
solvency of any one counterparty (including the counterparty's subsidiaries or
affiliates);
(v) invest in physical commodities;
(vi) cross-finance between the businesses forming part of its investment
portfolio including provision of undertakings or security for borrowings by
such businesses for the benefit of another;
(vii) operate common treasury functions as between the Company and an investee
company; or
(viii) conduct any significant trading activity.
In addition to the above restriction on investment in a single company the
Board seeks to achieve a spread of risk in the portfolio through monitoring the
country and sector weightings of the portfolio.
There will be a minimum of twenty stocks in the portfolio. The Company is
geared through zero dividend preference shares but does not use other gearing
on a long-term basis.
Return per share - basic
Total return per Ordinary Share is based on the net total return on ordinary
activities after taxation of £11,358,000 (31 December 2012: £(708,000)).
These calculations are based on the number of 17,068,480 Ordinary Shares in
issue during the year to 31 December 2013 (2012: 17,068,480 Ordinary Shares).
The return per Ordinary Share can be further analysed between revenue and
capital as below:
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2013 2013 2012 2012
Pence per £000 Pence per £000
Ordinary Share Ordinary Share
Net revenue 11.25p 1,921 11.10p 1,894
return
Net capital 55.29p 9,437 (15.25p) (2,602)
return
Net total 66.54p 11,358 (4.15p) (708)
return
The Company does not have any dilutive securities.
Dividends
During the year the following dividends were paid:
Payment date Dividend pence
(net per share)
Fourth Interim for the 28 March 2013 4.20p
year ended 31 December
2012
First Interim for the year 28 June 2013 1.70p
ended 31 December 2013
Second Interim for the 30 September 2013 1.90p
year ended 31 December
2013
Additional interim 30 September 2013 0.75p
dividend for the year
ended 31 December 2013
Third Interim for the year 31 December 2013 1.90p
ended 31 December 2013
Additional interim 31 December 2013 0.75p
dividend for the year
ended 31 December 2013
Subsequent to the year end but in respect of the year ended 31 December 2013
the Directors have declared a fourth interim dividend of 4.50p and an
additional interim dividend of 0.75p, payable on 31 March 2014 to members on
the register at the close of business on 7 March 2014. The shares were marked
ex-dividend on 5 March 2014. This dividend relates to the year ended 31
December 2013 but in accordance with the Company's accounting policies, it is
recognised in the period in which it is paid.
Net asset value
The net asset value per Ordinary Share, including revenue reserve, at 31
December 2013 was 167.55p† (31 December 2012: 112.59p†). The net asset value of
a Zero Dividend Preference Share at 31 December 2013 was 195.42p† (31 December
2012: 183.45p†).
Principal risks associated with the Company (see note 21 on pages 48 to 53)
Structure of the Company and gearing
The Company is a split-capital investment trust with two separate classes of
share, each with different characteristics. Returns generated by the Company's
underlying portfolio are apportioned in accordance with the respective
entitlements of each class of share. As the Ordinary Shares and Zero Dividend
Preference Shares have different rights both during the life of the Company and
on a winding-up, shareholders and prospective investors are advised to give
careful consideration to their choice of class or classes of share (see page 3
for details of these entitlements).
The Company employs no gearing in the form of bank loans. The Ordinary Shares
are geared by the entitlement of the prior ranking Zero Dividend Preference
Shares.
Dividend levels
Dividends paid on the Company's Ordinary Shares rely on receipt of dividends
and interest payments from the securities in which the Company invests. The
Company's revenue levels are monitored on a monthly basis by the Board and the
Investment Manager.
Currency risk
The Company invests in overseas securities and its assets are therefore subject
to currency exchange rate fluctuations. The Company may hedge against foreign
currency movements affecting the value of the investment portfolio where
adverse movements are anticipated but otherwise takes account of this risk when
making investment decisions.
Liquidity risk
The Company may invest up to 15% of its gross assets in unquoted securities.
These securities may have limited liquidity and be difficult to realise. The
investment limits set are monitored at each Board meeting.
Market price risk
Since the Company invests in financial instruments, market price risk is
inherent in these investments. In order to minimise this risk, a detailed
analysis of the risk/reward relationship of each investee company is undertaken
by the Investment Manager prior to making investments.
Discount volatility
Being a closed-ended company, the Company's shares may trade at a discount to
their net asset value. The magnitude of this discount fluctuates daily and can
vary significantly. Thus, for a given period of time, it is possible that the
market price could decrease despite an increase in the net asset value of the
Company's shares. The Directors review the discount levels regularly. The
Investment Manager actively communicate with the Company's major shareholders
and potential new investors, with the aim of managing discount levels.
Operational
Like most other investment trust companies, the Company has no employees. The
Company therefore relies upon the services provided by third parties and is
dependent on the control systems of the Investment Manager and the Company's
other service providers. The security, for example, of the Company's assets,
dealing procedures, accounting records and maintenance of regulatory and legal
requirements, depend on the effective operation of these systems. The Board
reviews, at least annually, the performance of all the Company's third party
service providers, as well as reviewing service providers' anti-bribery and
corruption policies to address the provision of the Bribery Act 2010. The Board
and Audit Committee regularly review statements on internal controls and
procedures provided by Premier Fund Managers Ltd and other third parties and
also subject the books and records of the Company to an annual external audit.
Accounting, legal and regulatory
In order to qualify as an investment trust, the Company must comply with
Section 1158 of the Corporation Tax Act 2010. A breach of Section 1158 could
lead to the Company being subject to capital gains tax on gains within the
Company's portfolio. Section 1158 qualification criteria are continually
monitored by Premier Fund Managers Limited and the results reported to the
Board at its regular meetings. The Company must also comply with the Companies
Act and the UKLA Listing Rules. The Board relies on the services of the
administrator, Premier Asset Management Limited and its professional advisers
to ensure compliance with the Companies Act and the UKLA Listing Rules.
Political and regulatory risk
The Company invests in regulated businesses which may be subject to political
or regulatory interference, and may be required to set pricing levels, or take
investment decisions, for political rather than commercial reasons. In some
less developed economies, including those in which the Company invests, there
are increased political and economic risks as compared to more developed
economies. These risks include the possibility of various forms of punitive
government intervention together with reduced levels of regulation, higher
brokerage commissions, less reliable settlement and custody practices, higher
market volatility and less reliable financial reporting. Such factors are out
of the control of the Board and the Investment Manager, the Board monitors the
performance of its investments at each Board meeting.
Analysis of the Company's performance
At each Board meeting, the Directors consider a number of performance measures
to assess the Company's success in achieving its objectives.
The key performance indicators used to measure the progress and performance of
the Company over time are as follows:
1) The performance against a set of reference points. The Investment Managers'
performance is not assessed against a formal benchmark but rather against a set
of reference points which are more general in nature and intended to be
representative of the broad spread of assets in which the portfolio invests.
These references include the FTSE All-World Utilities Total Return Index, FTSE
All-World Total Return Index and FTSE All-Share Total Return Index (see Company
highlights on page 4).
2) The performance against the peer group. The assessment of the Investment
Managers' performance against companies which invest in similar, but not
necessarily the same, securities allows the Board to evaluate the effectiveness
of the Company's investment strategy.
3) The performance of the Company at the net asset level. This shows how the
assets attributable to shareholders as a whole have performed.
4) The performance of the individual share classes, both in terms of share
price total return (i.e. accounting for dividends received) and in terms of net
asset value total return. The share price performance is the measure of the
return that shareholders have actually received and will reflect the impact of
widening or narrowing of discounts to NAV (see graphs on page 5).
5) Ongoing charges. The annualised ongoing charges figure for the year was 1.4%
(2012: 1.6%). This figure, which has been prepared in accordance with the
recommended methodology of the Association of Investment Companies represents
the annual percentage reduction in shareholder returns as a result of recurring
operational expenses excluding performance fee. No performance fee is payable
in respect of the year ended 31 December 2013 (2012: no performance fee was
paid). The Board reviews each year an analysis of the Company's ongoing charges
figure and a comparison with its peers.
Future prospects
The Board's main focus is the achievement of a high income from the portfolio
together with the generation of long-term capital growth. The future of the
Company is dependent upon the success of the investment strategy. The
investment outlook is discussed in both the Chairman's statement on page 7 and
the Investment Managers' report on page 11.
Board diversity
The Nomination Committee considers diversity, including the balance of skills,
knowledge, diversity (including gender) and experience, amongst other factors
when reviewing the composition of the Board and appointing new directors, but
does not consider it appropriate to establish targets or quotas in this regard.
The Board comprises four non-executive directors all of whom are male. The
Company has no employees.
Social, community and human rights
The Company does not have any specific policies on social, community or human
rights issues as it is an investment company which does not have any physical
assets, property, employees or operations of its own.
For and on behalf of the Board
Geoffrey Burns
Chairman
11 March 2014
Directors
The present Directors are listed below and on page 15. They are all
non-executive and have served throughout the year, the Board consists of four
males:
Geoffrey Burns - Chairman
Ian Graham - Chairman of the Audit Committee
Michael Wigley
Charles Wilkinson
None of the Directors, nor any persons connected with them, had a material
interest in any of the Company's transactions, arrangements or agreements
during the year. None of the Directors has, or has had, any interest in any
transaction which is, or was, unusual in its nature or conditions or
significant to the business of the Company, and which was effected by the
Company during the current financial year.
At the date of this report, there are no outstanding loans or guarantees
between the Company and any Director.
Mr Geoffrey Burns, Mr Michael Wigley and Mr Ian Graham are required to seek
annual re-election to the Board as they have all served for more than nine
years and being eligible, offer themselves for re-election. In accordance with
the Articles of Association Mr Charles Wilkinson retires by rotation and, being
eligible offers himself for re-election to the Board.
Corporate governance
The statement of Corporate Governance, as shown on pages 24 to 26, is
incorporated by cross reference into this report.
Socially responsible investment
The Board has delegated the investment management function to Premier Fund
Managers Limited.
The Investment Managers' primary objective is to produce superior financial
returns to investors. It believes that over the long-term sound social,
environmental and ethical policies make good business sense and takes these
issues into account, when, in its view, they have a material impact on either
the investment risk or the expected return from an investment.
Global greenhouse gas emissions for the year ended 31 December 2013
The Company has no greenhouse gas emissions to report from the operations of
the Company, nor does it have responsibility for any other emission producing
sources under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
Substantial shareholdings
As at the date of this report the Company had been notified of the following
substantial interests in the Ordinary and Zero Dividend Preference share
capital of the Company.
% of total % of total
Ordinary Shares Number of voting rights Number of voting rights
shares at 10 shares at 31
March 2014† December 2013
Premier Fund 3,965,389 10.4 3,206,822 8.4
Managers
Limited*
Philip J Milton 1,699,229 4.4 1,699,229 4.4
& Company Plc
Investec Wealth 106,112 0.3 106,112 0.3
& Investment
Limited
Zero Dividend
Preference
Shares
CG Asset 3,160,231 8.3 3,160,231 8.3
Management
Limited
Investec Wealth 1,801,454 4.7 1,801,454 4.7
& Investment
Limited
Premier Fund 1,487,829 3.9 855,291 2.2
Managers
Limited*
† The latest practicable date prior to the publication of this report.
* This includes 2,510,516 Ordinary Shares and 68,781 Zero Dividend Preference
Shares that are held in the ISA scheme that is administered by Premier Fund
Managers Limited on behalf of individual shareholders.
Going concern
The Directors believe that having considered the Company's investment
objectives (shown on page 1) risk management policies and procedures (pages 48
to 53), nature of portfolio and income and expense projections, that the
Company has adequate resources, an appropriate financial structure and suitable
management arrangements in place to continue in operational existence for the
foreseeable future. For these reasons, they consider that the use of the going
concern basis is appropriate.
Performance
An outline of the performance, market background, investment activity and
portfolio strategy during the period under review, as well as the investment
outlook, is provided in the Chairman's Statement and Investment Managers'
report.
Proxy voting as an institutional investor
Responsibility for actively monitoring the activities of companies in which the
Company is invested has been delegated by the Board to the Investment Manager.
The Investment Manager is responsible for reviewing, on a regular basis, the
annual reports, circulars and other publications produced by the investee
companies. The Investment Manager, in the absence of explicit instructions from
the Board, is empowered to exercise discretion in the use of the Company's
voting rights. Wherever practicable, the Investment Managers' policy is to vote
all shares held by the Company.
Annual General Meeting
THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to what action you should take or about the contents of this
document, you should immediately consult an independent financial adviser
authorised under the Financial Services and Markets Act 2000 (or in the case of
recipients outside the United Kingdom, a stockbroker, bank manager, solicitor,
accountant or other independent financial adviser).
If you have sold or otherwise transferred all of your shares in Premier Energy
and Water Trust PLC, please pass this document, together with the accompanying
Form of Proxy, as soon as possible to the purchaser or transferee or to the
stockbroker or other agent through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
The notice of the Annual General Meeting sets out the ordinary business and
special business to be conducted at the Meeting.
The following explains the resolutions to be considered at the Meeting as
special business.
RESOLUTION 9, 10 & 11:
Authority to allot shares
Under Resolution 9 of the Annual General Meeting ("AGM"), the Directors seek a
general power from shareholders to allot new shares up to an aggregate par
value of £38,249 representing approximately 10% of the issued Ordinary share
capital of the Company and approximately 10% of the issued Zero Dividend
Preference share capital, in each case as at 10 March 2014.
Resolution 10 of the AGM will, if passed, permit the Directors to allot
Ordinary Shares at a discount to the then prevailing net asset value of the
Ordinary Shares. The Directors will only utilise this authority to issue new
shares provided that the aggregate value of new Ordinary Shares and new Zero
Dividend Preference ("ZDP") Shares to be issued is at an overall premium to net
asset value. In any event, any new issue of shares would only be made in
accordance with the provisions of the Company's Articles of Association which
require existing ZDP Shares to have a cover of not less than 1.5 times
immediately following the issue of the new shares if any new shares are to rank
ahead of, or pari passu with, the existing ZDP Shares, or those ZDP Shares in
issue immediately thereafter would have a cover of not less than the cover of
the ZDP Shares in issue prior to the issue of new shares.
Resolution 11 of the AGM will, if passed, empower the Directors to make
allotments of Ordinary Shares for cash on a non pre-emptive basis up to an
aggregate of £17,068, being approximately 10% of the issued Ordinary share
capital of the Company.
These Resolutions will provide the Directors with flexibility to act in the
best interests of shareholders. These authorities, if granted, will expire at
the conclusion of the next Annual General Meeting.
RESOLUTION 12:
Purchase by the Company of its own shares
At the Annual General Meeting held on 23 April 2013 a special resolution was
passed, giving the Directors authority until the conclusion of the earlier of
the 2014 Annual General Meeting and 22 October 2014, to make market purchases
of up to a maximum of 2,558,565 Ordinary Shares and 3,174,937 Zero Dividend
Preference Shares. During the year to 31 December 2013 no shares were purchased
(during the year ended 31 December 2012 no shares were purchased).
The Board proposes that the Company should be given renewed general authority
to purchase Ordinary Shares and Zero Dividend Preference Shares in the market
for cancellation in accordance with the Companies Act 2006 but subject to the
provisos set out below. Resolution 12 of the AGM, which is a special
resolution, is being proposed for this purpose.
It is proposed that the Company be authorised to purchase on the London Stock
Exchange up to 2,558,565 Ordinary Shares and 3,174,937 Zero Dividend Preference
Shares (representing 14.99% of each class of the Company's issued share capital
as at 10 March 2014) provided that:
(a) Ordinary Shares will only be repurchased at a purchase price which is below
the prevailing Net Asset Value per Ordinary Share and where the cover on the
Zero Dividend Preference Shares is 1.5 times or above and, as a consequence of
the proposed repurchase, the cover on the Zero Dividend Preference Shares will
not reduce to below 1.5 times (having taking account of any Zero Dividend
Preference Shares to be purchased at or about the same time); and/or
(b) Ordinary Shares and Zero Dividend Preference Shares are only repurchased in
the ratio of Ordinary Shares to Zero Dividend Preference Shares of 0.802:1; and
/or
(c) Zero Dividend Preference Shares are purchased at a purchase price which is
below their prevailing accrued capital entitlement (as at the business day
immediately preceding the day on which the Zero Dividend Preference Share is
purchased).
Repurchases of shares will be made at the discretion of the Board within
guidelines set from time to time by the Board and only when market conditions
are considered by the Board to be appropriate and in accordance with the
Listing Rules. Repurchases will only be made when they result in an increase in
the fully diluted Net Asset Value per Ordinary Share. The Board remains
committed to exploring methods by which shareholder value can be enhanced. The
purchase for cancellation by the Company of its shares at a cost below the net
asset value of those shares enhances the net asset value of the remaining
shares. This additional demand for shares may reduce the discount at which the
shares trade. Any shares repurchased by the Company will be cancelled and will
not be held in treasury for resale.
Under London Stock Exchange rules, the maximum price to be paid on any exercise
of the authority in respect of Ordinary Shares must not exceed the higher of
(i) 105% of the average of the middle market quotations for a share for the
five business days immediately preceding the date of purchase and (ii) the
higher of the price of the last independent trade and the highest current bid.
Separately we have chosen to restrict our authority to purchase Zero Dividend
Preference Shares to a maximum price equivalent to their accrued capital
entitlement at the time of purchase. The minimum price paid for an Ordinary
Share or Zero Dividend Preference Share may not be below 1p per share.
The authority to purchase shares will last until the Annual General Meeting of
the Company in 2015, or 7 November 2015, whichever is the earlier. The
authority may be renewed by shareholders at a General Meeting.
Purchases will be funded either by using available cash resources or by selling
investments.
Recommendation
Your Board considers that the above resolutions are in the best interests of
the Company and its members as a whole and are likely to promote the success of
the Company for the benefit of its members as a whole. Accordingly, your Board
unanimously recommends that shareholders should vote in favour of the
resolutions as they intend to do in respect of their own beneficial
shareholdings amounting to 258,816 Ordinary Shares.
Companies Act 2006 Disclosures
In accordance with Section 992 of the Companies Act 2006 the Directors disclose
the following information:
• the Company's capital structure and voting rights are summarised on page 3,
and there are no restrictions on voting rights nor any agreement between
holders of securities that result in restrictions on the transfer of securities
or on voting rights;
• there exist no securities carrying special rights with regard to the control
of the Company;
• details of the substantial shareholders in the Company are listed on page 20;
• the Company does not have an employees' share scheme;
• the rules concerning the appointment and replacement of Directors, amendment
of the Articles of Association and powers to issue or buy back the Company's
shares are contained in the Articles of Association of the Company and the
Companies Act 2006;
• there exist no agreements to which the Company is party that may affect its
control following a takeover bid; and
• there exist no agreements between the Company and its Directors providing for
compensation for loss of office that may occur because of a takeover bid.
Auditor
Ernst & Young LLP have expressed their willingness to continue in office as
Auditor and a resolution proposing their reappointment and to authorise the
Board to determine their remuneration will be submitted at the Annual General
Meeting.
The Directors who held office at the date of approval of this Directors' Report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's Auditor is unaware; and each Director has
taken all the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
By Order of the Board
Premier Asset Management Limited
Secretary
11 March 2014
Statement of Corporate Governance
Introduction
The Board is accountable to the Company's shareholders for the governance of
the Company's affairs and this statement describes how the principles of the
Financial Reporting Council's UK Corporate Governance Code issued in 2012 ("the
Code") have been applied to the affairs of the Company. In applying the
principles of the Code, the Directors have also taken account of the Code of
Corporate Governance published by the Association of Investment Companies ("the
AIC Code") by reference to the AIC Corporate Governance Guide for Investment
Companies ("the AIC Guide") issued in February 2013, which has established a
framework of best practice specifically for the Boards of investment trust
companies. There is some overlap in the principles laid down by the two Codes
and there are some areas where the AIC Code is more flexible for investment
trust companies.
Board of Directors
The Board currently consists of four non-executive Directors all of whom are
independent of the Investment Manager. Their biographies are set out on page
15. Collectively the Board has the requisite range of business and financial
experience which enables it to provide clear and effective leadership and
proper stewardship of the Company.
The number of meetings of the Board, the Audit Committee and the Nomination
Committee held during the financial year and the attendance of individual
Directors are shown below:
Board Audit Committee Nomination
Committee
Number of meetings 4 2 1
in the year
Geoffrey Burns 4 2 1
Ian Graham 3 1 1
Michael Wigley 4 2 1
Charles Wilkinson 3 2 1
All of the Directors attended the Annual General Meeting held in April 2013.
The Board deals with the Company's affairs, including the setting of gearing
and investment policy parameters, the monitoring of gearing and investment
policy and the review of investment performance. The Investment Manager takes
decisions as to asset allocation and the purchase and sale of individual
investments. The Board papers circulated before each meeting contain full
information on the financial condition of the Company. Key representatives of
the Investment Manager attend most of the Board meetings, enabling Directors to
probe further or seek clarification on matters of concern.
Matters specifically reserved for discussion by the full Board have been
defined and a procedure adopted for the Directors to take independent
professional advice if necessary at the Company's expense.
The Chairman of the Company was independent of the Investment Manager at the
time of his appointment as an independent non-executive Director and is deemed
to be independent by the other Board members. A senior non-executive Director
has not been identified as the Board is comprised entirely of non-executive
Directors.
In accordance with the Articles of Association, new Directors stand for
election at the first Annual General Meeting following their appointment. The
Articles require that one third of the Directors retire by rotation each year
and seek re-election at the Annual General Meeting. In addition, all Directors
are required to submit themselves for re-election at least every three years
and will seek annual re-election if they have already served for more than nine
years.
Performance evaluation/re-election of Directors
An appraisal process has been established in order to review the effectiveness
of the Board, the Committees and individual Directors. This process involves
the consideration by the Chairman and the Board of responses from individual
Directors to a questionnaire which is completed on an annual basis. In
addition, the other Directors meet collectively once a year to evaluate the
performance of the Chairman. As a result of this appraisal process the
Nomination Committee recommends the re-election of Mr Geoffrey Burns, Mr
Michael Wigley,
Mr Ian Graham and Mr Charles Wilkinson.
Committees
The Board believes that the interests of shareholders in an investment trust
company are best served by limiting the size of the Board such that all
Directors are able to participate fully in all the activities of the Board. It
is for this reason that the membership of the Audit and Nomination Committees
is the same as that for the Board as a whole.
Audit Committee
Mr Ian Graham is the Chairman of the Audit Committee which operates within
defined terms of reference available from the Company Secretary. Further
details on the work of the Audit Committee are detailed in the Audit Committee
Report on pages 30 to 31.
Nomination Committee
Mr Burns is the Chairman of the Nomination Committee which operates within
defined terms of reference available from the Company Secretary, which is
responsible for the Board appraisal process, and reviews the Board's size and
structure and is responsible for succession planning. The Board has due regard
for the benefits of diversity in its membership and seeks to ensure that it's
structure, size and composition, including the skills, knowledge, diversity
(including gender) and experience of Directors, is sufficient for the effective
direction and control of the Company. In particular, the Board believes that
the Company benefits from a balance of Board members with different tenures.
The Board has not set any measurable objectives in respect of this policy. The
Nomination Committee meets at least annually and comprises of all the
non-executive directors of the Board.
Remuneration Committee
The Board as a whole considers Directors' remuneration and therefore has not
appointed a separate remuneration committee. As the Company is an investment
trust and all Directors are non-executive the Company is not required to comply
with the Code in respect of executive Directors' remuneration. Directors' fees
are detailed in the Directors' Remuneration Report on page 28.
Risk management and internal control
The UK Corporate Governance Code requires the Directors, at least annually, to
review the effectiveness of the Company's system of risk management and
internal control and to report to shareholders that they have done so. This
encompasses a review of all controls, which the Board has identified as
including business, financial, operational, compliance and risk management.
The Directors are responsible for the Company's system of risk management and
internal control which is designed to safeguard the Company's assets, maintain
proper accounting records and ensure that financial information used within the
business, or published, is reliable. However, such a system can only be
designed to manage rather than eliminate the risk of failure to achieve
business objectives and therefore can only provide reasonable, but not
absolute, assurance against fraud, material misstatement or loss.
The Board as a whole is primarily responsible for the monitoring and review of
risks associated with investment matters and the Audit Committee is primarily
responsible for other risks.
As the Board has contractually delegated to other companies the investment
management, the custodial services and the day-to-day accounting and company
secretarial requirements, the Company relies significantly upon the system of
risk management and internal controls operated by those companies. Therefore,
the Directors have concluded that the Company should not establish its own
internal audit function, but will review this decision annually. Investment
management is performed by Premier Fund Managers Limited and administration
services by Premier Asset Management Limited. Details of the agreement with the
Investment Manager and the administrator are given in notes 3 and 20 to the
financial statements. The custodian is Northern Trust Company Limited.
The risk map has been considered at all regular meetings of the Board and Audit
Committee. As part of the risk review process, regular reports are received
from the Investment Manager on all investment related matters including
compliance with the investment mandate, the performance of the portfolio
compared with relevant indices and compliance with investment trust status
requirements. The Board also receives and reviews reports from the custodian on
its internal controls and their operation.
The Board as a whole regularly reviews the terms of the management and
secretarial contracts.
The Board confirms that appropriate procedures to review the effectiveness of
the Company's system of risk management and internal control have been in
place, throughout the year and up to the date of this report, which cover all
controls including financial, operational and compliance controls and risk
management. An assessment of risk management and internal control, which
includes a review of the Company's risk map, an assessment of the quality of
reports on internal control from the service providers and the effectiveness of
the Company's reporting process, is carried out on an annual basis.
Evaluation of Investment Managers' performance
The investment performance is reviewed at each regular Board meeting at which
representatives of the Investment Manager are required to provide answers to
any questions raised by the Board. The Board has instigated an annual formal
review of the Investment Manager which includes consideration of:
• performance compared with relevant indices;
• investment resources dedicated to the Company;
• investment management fee arrangements and notice period compared with the
peer group; and
• the marketing effort and resources provided to the Company.
The Board believes that Premier Fund Managers Limited has served the Company
well in terms of investment performance and has no hesitation in continuing its
appointment.
The Company Secretary
The Board has direct access to the advice and services of the Company
Secretary, Premier Asset Management Limited, which is responsible for ensuring
that Board and Committee procedures are followed and that applicable
regulations are complied with. The Secretary is also responsible to the Board
for ensuring timely delivery of information and reports and that statutory
obligations of the Company are met.
Individual Directors may take independent professional advice on any matter
concerning them in the furtherance of their duties at the Company's expense.
The Company also maintains Directors' and Officers' liability insurance to
cover legal defence costs.
Relations with shareholders
Communication with shareholders is given a high priority by both the Board and
the Investment Manager and all Directors are available to enter into dialogue
with shareholders. Major shareholders of the Company are offered the
opportunity to meet with the Board. The Board regularly reviews any contact
with the Company's shareholders and monitors its shareholder register.
All shareholders are encouraged to attend and vote at the Annual General
Meeting, during which the Board and the Investment Manager are available to
discuss issues affecting the Company and shareholders have the opportunity to
address questions to the Investment Manager, the Board and the Chairmen of the
Board's standing committees.
Any shareholder who would like to lodge questions in advance of the Annual
General Meeting is invited to do so in writing to the Company Secretary at the
address detailed on page 59. The Company always responds to letters from
individual shareholders.
The Annual and Interim Reports of the Company present a full and readily
understandable review of the Company's performance. Copies are dispatched to
shareholders by mail and are also available for downloading from the Investment
Managers' website, found at www.premierfunds.co.uk .
A monthly fact sheet is produced by the Investment Manager and is also
available via it's website. If a shareholder would like to contact the Board
directly, they should write to the Chairman at c/o Premier Asset Management
Limited, Eastgate Court, High Street, Guildford, Surrey GU1 3DE, marking their
letter "Private and confidential".
Statement of compliance
The Board believes that it has complied with all the material provisions, in so
far as they apply to the Company's business, of the Code throughout the year
under review. It did not, however, comply with the following provisions, as
explained previously:
• due to the small size of the Board and nature of the business a separate
remuneration committee has not been established; and
• a senior non-executive Director has not been identified.
The Board has adhered to the principles of the AIC Code in all material
respects.
By Order of the Board
Premier Asset Management Limited
Secretary
11 March 2014
† Net asset values calculated in accordance with Articles of Association (see
note 17 on page 47).
Directors' Remuneration Report
Introduction
This report is prepared in accordance with Schedule 8 to The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 and in accordance with the Listing Rules of the Financial
Conduct Authority and the Companies Act 2006. An ordinary resolution for the
approval of this report will be put to the shareholders at the forthcoming
Annual General Meeting.
The Company's Remuneration Policy will be put to shareholders for approval by
ordinary resolution for the first time this year under Section 439 of the
Companies Act 2006 and the policy is expected to continue in force until the
Annual General Meeting in 2017.
The Directors' Remuneration Policy, if approved, will take effect from the date
of approval by shareholders and will apply until replaced by a new or amended
policy. Once the policy is effective, the Company will not be able to make
remuneration payments to a Director, or loss of office payments to a current or
past director, unless the payment is consistent with the approved policy or has
otherwise been approved by the shareholders.
The law requires your Company's Auditor to audit certain of the disclosures
provided. Where disclosures have been audited, they are indicated as such. The
Auditor's opinion is included in their report on page 34.
Remuneration Committee
The Board as a whole fulfils the function of a Remuneration Committee. All
Directors are non-executive, appointed under the terms of Letters of
Appointment, and none has a service contract. The Company has no employees. The
Company Secretary, Premier Asset Management Limited, will be asked to provide
advice when the Directors consider the level of Directors' fees. No
professional adviser was consulted in the year for setting the level of
Directors' fees and no services of recruitment consultants were used in the
year.
Directors' beneficial and family interests (audited)
The interests of the Directors and their families in the Ordinary Shares of the
Company were as follows (there were no interests in the Zero Dividend
Preference Shares of the Company):
Ordinary Shares at Ordinary Shares at Ordinary Shares at
10 March 2014† 31 December 2013 1 January 2013
Geoffrey Burns 80,411 80,411 80,411
Ian Graham 22,032 22,032 22,032
Michael Wigley 125,150 125,150 125,150
Charles Wilkinson 31,223 31,223 31,223
† The latest practicable date prior to the publication of this report.
Directors' remuneration policy (Resolution 2)
The Board's policy is that the remuneration of non-executive Directors should
reflect the experience of the Board as a whole and be fair and comparable to
that of other investment trusts that are similar in size, have a similar
capital structure and have similar investment objectives. It is intended that
this policy will continue in subsequent years.
The fees for the non-executive Directors are determined within the limits of £
150,000 set out in the Company's Articles of Association. The Directors are not
eligible for bonuses, pension benefits, share options, long-term incentive
schemes or other benefits. Directors are entitled to be reimbursed for any
reasonable expenses properly incurred by them in connection with the
performance of their duties and attendance at Board and general meetings and
committees.
Directors' service contracts
It is the Board's policy that none of the Directors have a service contract.
Letters confirming the terms of their appointment provide that a Director shall
retire and be subject to re-election at the first Annual General Meeting after
his/her appointment, and at least every three years and will seek annual
re-election if they have already served for more than nine years. The terms
also provide that a Director may be removed without notice and that
compensation will not be due on leaving office. Copies of the Letters of
Appointment are available for inspection at the registered office of the
Company. Directors and officers insurance is maintained and paid for by the
Company on behalf of the Directors.
Your Company's performance
For the purposes of this report the Board is required to select an index
against which the Company's performance can be measured. The Board has decided
it should be the FTSE All-World Utilities Total Return Index. This represents a
change from prior years, when the Board compared the Company's performance
against the Bloomberg World Utilities (total return) Index. It is felt that the
FTSE All-World Utilities index is a more widely used and recognised index to
use as a comparator, although has shown a very similar performance to the
Bloomberg World Utilities Index.
The graph below shows the five year total return (assuming all dividends are
reinvested) to Ordinary Shareholders against the FTSE All-World Utilities Index
on a total return basis, restated in GBP, from 31 December 2008 to 31 December
2013.
Five year share price performance (rebased to 100)
[GRAPHIC REMOVED]
Annual Report on Remuneration
Directors' emoluments for the year (audited)
The Directors who served in the year received the following emoluments in the
form of fees:
Fees Expenses Total Fees Expenses Total
Year Year Year Year Year Year
ended ended ended ended ended ended
31 31 31 31 31 31
December December December December December December
2013 2013 2013 2012 2012 2012
£ £ £ £ £ £
Geoffrey Burns 26,000 507 26,507 26,000 685 26,685
Ian Graham 20,000 514 20,514 18,833 622 19,455
Michael Wigley 18,000 385 18,385 18,000 612 18,612
Charles Wilkinson 18,000 723 18,723 18,000 703 18,703
Adam Cooke (resigned on 31 - - - 11,667 251 11,918
July 2012)
Total 82,000 2,129 84,129 92,500 2,873 95,373
During the year ended 31 December 2013 the Chairman received a fee of £26,000
per annum, the Chairman of the Audit Committee received a fee of £20,000 per
annum and other Directors £18,000 per annum.
Relative importance of spend on pay
The following table compares the remuneration paid to the Directors with
aggregate distributions to shareholders in the year to 31 December 2013 and the
prior year. This disclosure is a statutory requirement, however, the Directors
consider that comparison of Directors' remuneration with annual dividends does
not provide a meaningful measure relative to the Company's overall performance
as an investment trust with an objective of providing shareholders with
long-term capital growth.
Year ended Year ended Change
31 December 31 December £000
2013 2012
£000 £000
Aggregate 84 95 (11)
Directors'
emoluments plus
expenses
Aggregate 2,091 1,587 504
shareholder
distributions in
respect of the year
Voting at last Annual General Meeting
At the Annual General Meeting of the Company held on 23 April 2013 an advisory
resolution was put to shareholders to approve the remuneration report set out
in the 2012 annual financial report. This resolution was passed on a show of
hands. The proxy votes registered in respect of the resolution were:
For Against Withheld
Number of proxy 9,102,918 27,304 10,660
votes
Approval
Resolutions for the approval of the Directors' remuneration policy and the
Directors' Remuneration Report for the year ended 31 December 2013 will be
proposed at the Annual General Meeting.
By Order of the Board
Geoffrey Burns
Chairman
Signed on behalf of the Board of Directors
11 March 2014
Audit Committee Report
The composition and summary terms of reference of the Audit Committee are set
out on page 25. The Audit Committee comprises the whole Board, all of whom are
independent.
The Audit Committee met in July 2013 and considered the form and content of the
Company's half year report to 30 June 2013.
The Committee also reviewed the key risks of the Company and the Internal
control framework operating to control risk. The Committee also reviewed the
terms of engagement of the audit firm and its proposed programme for the year
end audit.
The Committee met again and reviewed the outcome of the audit work and the
final draft of the financial statements for the year ended 31 December 2013.
During this review the Audit Committee met with representatives of both the
Investment Manager and the Administrator and sought assurances where necessary.
The external Auditor attended the year end Audit Committee meeting and
presented a report on the audit findings which did not include any significant
matters of concern in relation to the financial statements.
Contracts for non-audit services must be notified to the Audit Committee who
consider any such engagement in the light of the requirement to maintain audit
independence. The Committee believes that all such appointments for non-audit
work were appropriate and unlikely to influence the audit independence. The
Auditor is responsible for the annual statutory audit and for certain
corporation tax compliance services which the Committee believes they are best
placed to undertake due to their position as Auditor. No other services are
provided by the Auditor and it is the Company's policy not to seek substantial
non-audit services from its Auditor.
During the year the value of non-audit services provided by Ernst & Young LLP
amounted to £6,000 (31 December 2012: £11,000). Whilst non-audit services as a
proportion of audit services amount to approximately 25%, the overall quantum
of non-audit services is not considered to be material and all of the non-audit
services provided relate to the provision of corporation tax compliance work.
Significant accounting matters
The Audit Committee in its work consider that the key accounting issues in
relation to the financial statements is the existence and valuation of investments
and assess annually whether it is appropriate to prepare the financial statements
on a going concern basis, and makes its recommendation to the Board.
In particular, the Committee shall review and challenge where necessary:
• the consistency of, and any changes to, accounting policies on a year on year
basis;
• the methods used to account for significant or unusual transactions where
different approaches are possible;
• whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the
external Auditor;
• the clarity of disclosure in the Company's financial reports and the context
in which statements are made; and
• all material information presented with the financial statements, such as the
Strategic Report and the Statement of Corporate Governance (insofar as it
relates to the audit and risk management).
The Committee is satisfied that the investments at the year ended 31 December
2013 exist and are correctly valued at fair value (which is the bid market
price for listed investments and Directors' valuation for unquoted investments
which is currently valued at nil).
The Audit Committee meets at least twice a year and is responsible for
reviewing the annual and interim reports, the nature and scope of the external
audit and the findings therefrom, and the terms of appointment of the Auditor,
including their remuneration and the provision of any non-audit services by
them. The Audit Committee has considered the independence of the Auditor and
the objectivity of the audit process and is satisfied that Ernst & Young LLP is
independent and has fulfilled its obligations to shareholders. The audit
partner has been rotated in compliance with prevailing audit guidance and the
Audit Committee has satisfied itself as to the Auditor's effectiveness,
objectivity, independence and the competitiveness of its fees before
recommending re-appointment each year. Ernst & Young LLP has been the Company's
Auditor for the last ten years and there has been no re-tendering of the Audit
in that time. To comply with the provision in the Code the Company will review
the option to re-tender the external audit on a regular basis.
The Audit Committee meets representatives of the Investment Manager and its
Compliance Officer who report as to the proper conduct of business in
accordance with the regulatory environment in which both the Company and the
Investment Manager operate and reviews the Investment Managers' internal
controls. The Company's external Auditor also attends this Committee at its
request and report on their findings in relation to the Company's statutory
audit.
As part of the day to day controls of the Company there are regular
reconciliations between the accounting records and the records kept by the
custodian of the assets they safeguard which are owned by the Company. During
the year and at the year-end there were no matters brought to light which call
in to question that the key controls in this area were not working, or that the
existence of assets recorded in the books of account are not held in safe
custody.
As more fully explained in note 1 (b) on page 39 at the year ended 31 December
2013 the Committee agreed that the fair value of investments is the bid market
price for listed investments and the unquoted investment, of which there is a
small holding which is currently valued at nil at 31 December 2013, is
appropriate. All unquoted investments are subject to review both by the
Investment Manager, the Audit Committee and the Auditor.
In finalising the financial statements for recommendation to the Board for
approval the Committee has considered whether the going concern principle is
appropriate (as described on page 21), and concluded that it is. The Audit
Committee has also satisfied itself that the Annual Report and financial
statements taken as a whole are fair, balanced and understandable, and provide
the information necessary for shareholders to assess the Company's performance,
business model and strategy. All of the above were satisfactorily addressed
through consideration of reports provided by, and discussed with, the
Investment Manager and the Auditor. The Board as a whole have approved the
conclusions arrived at by the Audit Committee as disclosed on page 32,
Statement of Directors' Responsibilities in respect of the annual report and
the financial statements.
Ian Graham
Chairman of the Audit Committee
11 March 2014
Statement of Directors' Responsibilities in Respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records which are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and which
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration Report
and Statement of Corporate Governance that complies with that law and those
regulations.
The financial statements are published on the www.premierfunds.co.uk website,
which is maintained by the Company's Investment Manager. The maintenance and
integrity of the website maintained by Premier Asset Management Limited is, so
far as it relates to the Company, the responsibility of Premier Asset
Management Limited. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and,
accordingly, the Auditor accepts no responsibility for any changes that have
occurred to the financial statements since they were initially presented on the
website. The financial statements are prepared in accordance with UK
legislation, which may differ from legislation in other jurisdictions.
Statement under the Disclosure & Transparency Rules 4.1.12
The Directors each confirm to the best of their knowledge that:
a) the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;
b) this Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces; and
c) the Annual Report and financial statements, taken as a whole, is fair,
balanced and understandable, and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy.
For and on behalf of the Board
Ian Graham
Director
11 March 2014
Independent Auditor's Report
to the members of Premier Energy and Water Trust PLC
We have audited the financial statements of Premier Energy and Water Trust PLC
for the year ended 31 December 2013 which comprise the Income Statement, the
Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash
Flow Statement and the related notes 1 to 21. The financial reporting framework
that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an Auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and Auditor
As explained more fully in the Directors' Responsibilities Statement set out on
page 32, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial
information in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications
for our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the company's affairs as at 31
December 2013 and of its return for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
Our assessment of risks of material misstatement
We identified the following risk of material misstatement that had the greatest
effect on the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team:
• The valuation of investments.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements on our audit and of uncorrected
misstatements, if any, on the financial statements and in forming our audit
opinion.
We determined materiality for the Company to be £284,000 which is 1% of total
equity. This provided a basis for determining the nature, timing and extent of
risk assessment procedures, identifying and assessing the risk of material
misstatement and determining the nature, timing and extent of further audit
procedures.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment, our judgment was that overall
performance materiality (i.e. our tolerance for misstatement in an individual
account or balance) for the Company should be 75% of materiality, namely £
213,000. Our objective in adopting this approach was to ensure that total
uncorrected and undetected audit differences in all accounts did not exceed our
planning materiality level.
We have agreed with the Audit Committee to report all audit differences in
excess of £14,000, as well as differences below that threshold that, in our
view, warrant reporting on qualitative grounds.
An overview of the scope of our audit
Our response to the risks identified above was as follows:
• We agreed the year end prices for Level 1 investments to an independent
source; and
• We considered the appropriateness of the valuation techniques applied to
Level 3 investments by reviewing the valuation methodology. We obtained and
reviewed information to support the valuations. Where possible we corroborated
this to publicly available information.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic Report and the Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our
opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially inconsistent with,
our knowledge of the company acquired in the course of performing our audit; or
• is otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
directors' statement that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately discloses those
matters that we communicated to the audit committee which we consider should
have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
• adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
• the financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit.
Under the Listing Rules we are required to review:
• the directors' statement, set out on page 21, in relation to going concern;
and
• the part of the Statement of Corporate Governance relating to the Company's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review.
Amarjit Singh (Senior statutory Auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
London
11 March 2014
Income Statement
for the year ended 31 December 2013
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2013 2013 2013 2012 2012 2012
Revenue Capital Total Revenue Capital Total
Notes £000 £000 £000 £000 £000 £000
Gains on
investments
held at
fair value 8 - 12,306 12,306 - 71 71
through profit
or loss
Revenue 2 2,719 - 2,719 2,859 - 2,859
Investment 3 (268) (398) (666) (230) (345) (575)
management fee
Other expenses 4 (375) - (375) (386) - (386)
Return before 2,076 11,908 13,984 2,243 (274) 1,969
finance costs
and taxation
Finance costs 5 - (2,471) (2,471) - (2,328) (2,328)
Return on 2,076 9,437 11,513 2,243 (2,602) (359)
ordinary
activities
before
taxation
Taxation on 6 (155) - (155) (349) - (349)
ordinary
activities
Return on
ordinary
activities
after taxation
attributable 1,921 9,437 11,358 1,894 (2,602) (708)
to equity
shares
Return per
Ordinary Share
(pence)
- basic 16 11.25 55.29 66.54 11.10 (15.25) (4.15)
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
The notes on pages 39 to 53 form part of these financial statements.
The supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above statement.
Balance Sheet
as at 31 December 2013
2013 2012
Notes £000 £000
Non current assets
Investments at fair 8 68,369 56,452
value through the
profit or loss
Current assets
Debtors 9 258 324
Cash at bank 1,529 1,480
1,787 1,804
Current liabilities
Creditors: amounts 10 (167) (184)
falling due within
one year
Net current assets 1,620 1,620
Total assets less 69,989 58,072
current liabilities
Creditors: amounts
falling due after
more than one year
Zero Dividend 11 (41,536) (39,065)
Preference shares
Total net assets 28,453 19,007
Capital and
reserves
Share capital 12 171 171
Share premium 13 6,884 6,884
Redemption reserve 88 88
Capital reserve 14 11,439 2,002
Special reserve 7,472 7,472
Revenue reserve 2,399 2,390
Total equity 28,453 19,007
shareholders' funds
Net asset value per 17 166.70 111.36
Ordinary Share
(pence) - UK
Accounting
Standards basis
Net asset value per 17 167.55 112.59
Ordinary Share
(pence) - Articles
of Association
basis
The financial statements on pages 35 to 53 of Premier Energy and Water Trust
PLC, company number 4897881, were approved by the Board and authorised for
issue on 11 March 2014 and were signed on its behalf by:
Ian Graham
Director
The notes on pages 39 to 53 form part of these financial statements.
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2013
Share
Share premium Redemption Capital Special Revenue
capital reserve reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
For the year ended
31 December 2013
Balance at 31 171 6,884 88 2,002 7,472 2,390 19,007
December 2012
Return on ordinary - - - 9,437 - 1,921 11,358
activities after
taxation
Dividends paid - - - - - (1,912) (1,912)
Balance at 31 171 6,884 88 11,439 7,472 2,399 28,453
December 2013
Share
Share premium Redemption Capital Special Revenue
capital reserve reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
For the year ended
31 December 2012
Balance at 31 171 6,884 88 4,604 7,472 2,049 21,268
December 2011
Return on ordinary - - - (2,602) - 1,894 (708)
activities after
taxation
Dividends paid - - - - - (1,553) (1,553)
Balance at 31 171 6,884 88 2,002 7,472 2,390 19,007
December 2012
The notes on pages 39 to 53 form part of these financial statements.
Cashflow Statement
for the year ended 31 December 2013
Year ended Year ended
31 December 31 December
2013 2012
Notes £000 £000
Net cash inflow from 18 1,676 2,062
operating activities
Taxation
Overseas tax paid (105) (379)
Financial investments
Purchases of (25,929) (48,526)
investments
Sales of investments 26,319 44,663
Net cash inflow/ 390 (3,863)
(outflow) from
financial investments
Equity dividends paid 7 (1,912) (1,553)
Net cash inflow/ 49 (3,733)
(outflow) before
financing
Increase/(decrease) 19 49 (3,733)
in cash
Reconciliation of Net Cash Flow to Movements in Net Debt
Year ended Year ended
31 December 31 December
2013 2012
Notes £000 £000
Increase/(decrease) 49 (3,733)
in cash as above
Net change in debt (2,471) (2,328)
due in more than one
year
Movements in net debt (2,422) (6,061)
for year
Net debt as at 1 19 (37,585) (31,524)
January
Net debt as at 31 19 (40,007) (37,585)
December
The notes on pages 39 to 53 form part of these financial statements.
Notes to the Financial Statements
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
consistently applied throughout the year and the preceding year is set out
below:
(a) Basis of accounting
The financial statements have been prepared in accordance with the applicable
UK Accounting Standards and with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
(issued in January 2009).
They have also been prepared on the assumption that approval as an investment
trust will continue to be granted. The financial statements have been prepared
on a going concern basis. The Directors believe this is appropriate for the
reasons outlined in the Directors' Report on page 21.
(b) Investments
Upon initial recognition investments are designated by the Company "at fair
value through profit or loss". They are accounted for on the date they are
traded and are included initially at fair value which is taken to be their
cost. Subsequently investments are valued at fair value which is the bid market
price for listed investments. Unquoted investments are valued at fair value by
the Board which is established with regard to the International Private Equity
and Venture Capital Valuation Guidelines by using, where appropriate, latest
dealing prices, valuations from reliable sources and other relevant factors.
Changes in the fair value of investments held at fair value through profit or
loss and gains or losses on disposal are included in the capital column of the
income statement within "gains/(losses) on investments held at fair value
through profit or loss".
(c) Foreign currency
Transactions denominated in foreign currencies are translated into sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the year end are reported at
the rates of exchange prevailing at the year end. Any gain or loss arising from
a change in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss to capital or revenue in the income
statement as appropriate. Foreign exchange movements on investments are
included in the Income Statement within gains on investments.
(d) income
Investment income has been accounted for on an ex-dividend basis or when the
Company's right to the income is established. Special dividends are credited to
capital or revenue in the Income Statement, according to the circumstances
surrounding the payment of the dividend. UK dividends are accounted for net of
any tax credits. Overseas dividends are included gross of withholding tax.
Interest receivable on deposits is accounted for on an accruals basis.
(e) Expenses
All expenses are accounted for on an accruals basis and are charged as follows:
• the basic investment management fee is charged 40% to revenue and 60% to
capital;
• any performance fee earned is allocated between capital and revenue based on
the out-performance attributable to capital and revenue respectively;
• investment transactions costs are allocated to capital; and
• other expenses are charged wholly to revenue.
(f) Zero Dividend Preference Shares
The Company's Zero Dividend Preference Shares are classified as a financial
liability and shown as a liability in the balance sheet.
The provision for compound growth entitlement of the Zero Dividend Preference
Shares is recognised through the income statement and analysed under the
capital column as a finance cost (as shown in note 5). The premium (net of
expenses) arising on the issue of the Zero Dividend Preference Shares will be
amortised over the life of the Zero Dividend Preference Shares and allocated
100% to capital.
(g) Special reserve
The special reserve is available for the repurchase by the Company of its own
Ordinary Shares.
(h) Taxation
The charge for taxation is based upon the net revenue for the year. The tax
charge is allocated to the revenue and capital accounts according to the
marginal basis whereby revenue expenses are first matched against taxable
income arising in the revenue account; the effect of this for the year ended 31
December 2013 was that all the deductions for tax purposes went to the revenue
account.
Deferred taxation will be recognised as an asset or a liability if transactions
have occurred at the balance sheet date that give rise to an obligation to pay
more taxation in the future, or a right to pay less taxation in the future. An
asset will not be recognised to the extent that the transfer of economic
benefit is uncertain.
Due to the Company's status as an Investment Trust, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided for deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
2. INCOME
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Income from investments:
UK franked investment 448 269
income
UK bond interest 128 76
Overseas dividends 1,729 2,407
Overseas interest 410 201
Bank interest 4 3
Sundry income (ITI Loan - (97)
interest)*
Total income 2,719 2,859
* ITI Loan interest was accrued income in the year ended 31 December 2011,
which was not received. This was written off in full in the year ended 31
December 2012.
3. INVESTMENT MANAGEMENT FEE
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Charged to Revenue:
Investment management fee 268 230
(40%)
Charged to Capital:
Investment management fee 398 345
(60%)
666 575
The Company's Investment Manager is Premier Fund Managers Limited under an
agreement terminable by either party giving not less than 12 months written
notice. Under the investment management agreement, the Investment Manager is
entitled to receive from the Company a management fee, payable monthly in
arrears, of 1% per annum of the gross assets of the Company.
In addition, the Investment Manager is entitled to a performance fee in respect
of each accounting year of the Company commencing with the period ended 31
December 2004 if (i) the dividends paid or proposed to be paid on each Ordinary
Share in respect of that accounting year (on an annualised basis in respect of
the first accounting period) equals at least 6.75p and (ii) the gross assets at
the end of the year exceed the highest level of gross assets at the end of any
previous accounting year or (if higher) the initial gross assets adjusted for
share buybacks or share issuance by more than 7.5%, subject to appropriate
adjustments for changes in capital and other conditions. In that event, the
performance fee will be equal to 15% of the excess. Any performance fee earned
is allocated between capital and revenue based on the out-performance
attributable to capital and revenue respectively. No performance fee is payable
in respect of the year ended 31 December 2013 (2012: nil).
4. OTHER EXPENSES
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Charged to Revenue:
Secretarial services 83 75
Administration expenses 178 182
Auditor's remuneration - 24 23
audit services
- other services relating 6 11
to taxation*
Directors' fees plus 84 95
expenses
375 386
*Auditor other services includes £6,000 for corporation tax compliance work
(2012: £11,000 for corporation tax compliance work).
5. FINANCE COSTS
Year ended Year ended Year ended Year ended Year ended Year ended
31 31 31 31 31 31
December December December December December December
2013 2013 2013 2012 2012 2012
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Provision for
compound growth
entitlement
of the Zero - 2,471 2,471 - 2,328 2,328
Dividend
Preference
Shares
- 2,471 2,471 - 2,328 2,328
6. TAXATION
(a) ANALYSIS OF CHARGE IN THE YEAR:
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2013 2013 2013 2012 2012 2012
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Overseas tax 155 - 155 349 - 349
Current tax 155 - 155 349 - 349
charge for the
year (see note 6
(b))
(b) FACTORS AFFECTING THE CURRENT TAX CHARGE FOR THE YEAR:
The current taxation charge for the year is lower than the standard rate of
corporation tax in the UK.
The differences are explained below:
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2013 2013 2013 2012 2012 2012
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Return on ordinary 2,076 9,437 11,513 2,243 (2,602) (359)
activities before
taxation
Return on ordinary 483 2,194 2,677 550 (637) (87)
activities multiplied by
the standard rate of
corporation tax of 23.25%
(2012: 24.50%)
Effects of:
Non-taxable UK dividends (104) - (104) (66) - (66)
Non-taxable overseas (402) - (402) (590) - (590)
dividends
Overseas tax 155 - 155 349 - 349
Capital gains not subject - (2,861) (2,861) - (17) (17)
to tax
Finance costs of ZDP - 575 575 - 570 570
Shares
Unrelieved expenses and 23 92 115 106 84 190
charges
Revenue current tax
charge for the year
(see note 6 (a)) 155 - 155 349 - 349
The Company is not liable to tax on capital gains due to its status as an
investment trust.
Due to the Company's status as an investment trust, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided for deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
After claiming relief against accrued income taxable on receipt, the Company
has a deferred tax asset of approximately £823,000
(31 December 2012: £787,000) relating to excess expenses of £3,922,000 (31
December 2012: £3,423,000). It is unlikely that the Company will generate
sufficient taxable profits in the future to utilise these expenses and
therefore no deferred tax asset in respect of these expenses has been
recognised.
7. DIVIDEND
Dividends relating to the year ended 31 December 2013 which is the basis on
which the requirements of Section 1159 of the Corporation Tax Act 2010 are
considered are detailed below:
Year ended
31 December
Per 2013
Ordinary Share £000
First interim dividend - 1.70p 291
paid on 28 June 2013
Second interim dividend - 1.90p 324
paid on 30 September 2013
Additional interim 0.75p 128
dividend - paid on 30
September 2013
Third interim dividend - 1.90p 324
paid on 31 December 2013
Additional interim 0.75p 128
dividend - paid on 31
December 2013
Fourth interim dividend - 4.50p 768
payable on 31 March 2014*
Additional interim 0.75p 128
dividend - payable on 31
March 2014*
12.25p 2,091
* Not included as a liability in the year ended 31 December 2013 accounts.
The fourth interim dividend and the additional dividend will be paid on 31
March 2014 to members on the register at the close of business on 7 March 2014.
The shares were marked ex-dividend on 5 March 2014.
Dividends relating to the year ended 31 December 2012 which is the basis on
which the requirements of Section 1159 of the Corporation Tax Act 2010 are
considered are detailed below:
Year ended
31 December
Per 2012
Ordinary Share £000
First interim dividend - 1.70p 290
paid on 30 June 2012
Second interim dividend - 1.70p 290
paid on 30 September 2012
Third interim dividend - 1.70p 290
paid on 31 December 2012
Fourth interim dividend - 4.20p 717
paid on 28 March 2013*
9.30p 1,587
* Not included as a liability in the year ended 31 December 2012 accounts.
Amounts recognised as distributions to equity holders in the year:
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Fourth interim dividend 717 683
for the year ended 31
December 2012 of 4.20p
(2011: 4.00p) per ordinary
share
First interim dividend for 291 290
the year ended 31 December
2013 of 1.70p (2012:
1.70p) per ordinary share
Second interim dividend 324 290
for the year ended 31
December 2013 of 1.90p
(2012: 1.70p) per ordinary
share
Additional interim 128 -
dividend for the year
ended 31 December 2013 of
0.75p (2012: nil) per
ordinary share
Third interim dividend for 324 290
the year ended 31 December
2013 of 1.90p (2012:
1.70p) per ordinary share
Additional interim 128 -
dividend for the year
ended 31 December 2013 of
0.75p (2012: nil) per
ordinary share
1,912 1,553
8. INVESTMENTS
(a) SUMMARY OF VALUATION
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Investments listed on a
recognised investment
exchange:
- UK 16,890 14,494
- Overseas 51,479 41,958
68,369 56,452
(b) MOVEMENTS
In the year ended 31 December 2013
Quoted Quoted Unquoted Total
UK Overseas UK 2013
£000 £000 £000 £000
Book cost at 14,175 40,473 1,661 56,309
beginning of
year
Gains/(losses) 318 1,486 (1,661) 143
on investments
held at
beginning of
year
Valuation at 14,493 41,959 - 56,452
beginning of
year
Purchases at 10,451 15,478 - 25,929
cost
Sales:
- proceeds (9,174) (17,144) - (26,318)
- gains on 526 3,406 - 3,932
investments sold
in the year
Movements in 594 7,780 _ 8,374
gains on
investments held
at end of year
Valuation at end 16,890 51,479 - 68,369
of year
Total Total
Year ended Year ended
31 December 31 December
2013 2012
Comprising: £000 £000
Book cost at end of year 59,852 56,309
Gains on investments held 8,517 143
at year end
Valuation at end of year 68,369 56,452
Transaction costs on purchases for the year ended 31 December 2013 amounted to
£73,000 (2012: £143,000) and on sales for the year amounted to £54,000 (2012: £
109,000).
(c) GAINS/(LOSSES) ON INVESTMENTS
Total Total
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Gains/(losses) on 3,932 (6,557)
investments sold in year
Movements in gains on 8,374 6,628
investments held at year
end
Total gains on investments 12,306 71
A list of the Company's 20 largest investments is shown on page 12; a sector
breakdown and a geographical allocation is shown on page 10.
9. DEBTORS
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Accrued income and 219 235
prepayments
Overseas tax recoverable 39 89
258 324
10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Other creditors 167 184
167 184
11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31 December 31 December
2013 2012
£000 £000
21,180,373 Zero Dividend 41,536 39,065
Preference Shares of £0.01
The allotted, issued and fully paid number of Zero Dividend Preference Shares
of £0.01 as at 31 December 2013 is 21,180,373
(31 December 2012: 21,180,373 Zero Dividend Preference Shares of £0.01).
On 17 December 2010 the Company issued 2,779,377 Zero Dividend Preference
Shares at 172.25p per share and 2,064,600 Zero Dividend Preference Shares at
168.00p per share. The accrued capital entitlement at that date was 161.25p per
share. The compound growth entitlement (net of expenses) of £330,000 will be
amortised over the life of the Zero Dividend Preference Shares and allocated to
capital. The final capital entitlement of the Zero Dividend Preference Shares
will be £46,974,000, which will be payable on 31 December 2015.
12. SHARE CAPITAL
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2013 2013 2012 2012
Number of £000 Number of £000
shares shares
Allotted,
issued and
fully paid:
Ordinary Shares 17,068,480 171 17,068,480 171
of £0.01
17,068,480 171 17,068,480 171
The allotted issued and fully paid Zero Dividend Preference Shares of the
Company at 31 December 2013 are disclosed in note 11.
13 SHARE PREMIUM
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Opening balance 6,884 6,884
Closing balance 6,884 6,884
14. CAPITAL RESERVE
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Opening balance 2,002 4,604
Gains on investments - 12,306 71
held at fair value through
profit or loss
Provision for compound (2,471) (2,328)
growth entitlement of Zero
Dividend Preference Shares
Investment management fee (398) (345)
charged to capital
Closing balance 11,439 2,002
15. FINANCIAL COMMITMENTS
At 31 December 2013 there were no commitments in respect of unpaid calls and
underwritings (31 December 2012: nil).
16. RETURN PER SHARE - BASIC
Total return per Ordinary Share is based on the net total return on ordinary
activities after taxation of £11,358,000 (31 December 2012: £(708,000)).
These calculations are based on the number of 17,068,480 Ordinary Shares in
issue during the year to 31 December 2013 (2012: 17,068,480 Ordinary Shares).
The return per Ordinary Share can be further analysed between revenue and
capital as below:
Year ended Year ended
31 December Year ended 31 December Year ended
2013 31 December 2012 31 December
Pence per 2013 Pence per 2012
Ordinary Share £000 Ordinary Share £000
Net revenue 11.25p 1,921 11.10p 1,894
return
Net capital 55.29p 9,437 (15.25p) (2,602)
return
Net total 66.54p 11,358 (4.15p) (708)
return
The Company does not have any dilutive securities.
17. NET ASSET VALUE PER SHARE
The difference between the figures reported below arises from the treatment of
the premium (net of expenses) from the issue of Zero Dividend Preference
("ZDP") shares in December 2010 of £330,000. In accordance with UK Accounting
Standards the unamortised portion of the premium has been included with the ZDP
liability and will be amortised over the life of the Zero Dividend Preference
Shares. In accordance with the Articles of Association the premium has been
included with shareholders equity and the ZDP liability reflects their accrued
capital entitlement at 31 December 2013 and 31 December 2012.
The net asset value per share and the net assets available to each class of
share calculated in accordance with UK Accounting Standards, are as follows:
Net asset value Net assets Net asset value Net assets
per share available per share available
31 December 31 December 31 December 31 December
2013 2013 2012 2012
Pence £000 Pence £000
17,068,480
Ordinary Shares
(2012: 166.70 28,453 111.36 19,007
17,068,480) in
issue
21,180,373 Zero
Dividend
Preference
Shares*
(2012: 196.11 41,536 184.44 39,065
21,180,373) in
issue
* Classified as a liability.
The net asset value per share and the net assets available to each class of
share calculated in accordance with the Articles of Association, are as
follows:
Net asset value Net assets Net asset value Net assets
per share available per share available
31 December 31 December 31 December 31 December
2013 2013 2012 2012
Pence £000 Pence £000
17,068,480
Ordinary Shares
(2012: 167.55 28,598 112.59 19,217
17,068,480) in
issue
21,180,373 Zero
Dividend
Preference
Shares*
(2012: 195.42 41,391 183.45 38,855
21,180,373) in
issue
* Classified as a liability.
18. RECONCILIATION OF TOTAL RETURN BEFORE FINANCE COSTS AND TAXATION
TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 December 31 December
2013 2012
£000 £000
Total return on ordinary 13,984 1,969
activities before finance
costs and taxation
Capital return before (11,908) 274
finance costs and taxation
Decrease in accrued income 15 112
and prepayments
(Decrease)/increase in (17) 52
other creditors
Investment management fee (398) (345)
taken to capital
Net cash inflow from 1,676 2,062
operating activities
19. ANALYSIS OF CHANGES IN NET DEBT
Year ended Year ended
31 December Non-cash 31 December
2012 Cashflow movements 2013
£000 £000 £000 £000
Cash at bank 1,480 49 - 1,529
Debt due after (39,065) - (2,471) (41,536)
more than one
year (ZDP's)
(37,585) 49 (2,471) (40,007)
20. RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE INVESTMENT MANAGER
Details of the investment management fee charged by Premier Fund Managers
Limited is set out in note 3. In addition, Premier Asset Management Limited
acts as Company Secretary and the fee for secretarial services is set out in
note 4. At 31 December 2013 £63,014 (31 December 2012: £52,083) of these fees
remained outstanding.
Fees paid to the Directors are disclosed in the Directors' Remuneration Report
on page 28.
Full details of Directors' interests are set out in the Directors' Remuneration
Report on page 27.
21. RISK MANAGEMENT POLICIES AND PROCEDURES
As an investment trust the Company invests in equities and other investments
for the long-term so as to secure its investment objectives stated on page 16.
In pursuing its investment objectives, the Company is exposed to a variety of
risks that could result in either a reduction in the Company's net assets or a
reduction of the profits available for dividends.
These risks, include market risk (comprising currency risk, interest rate risk,
and other price risk), liquidity risk, and credit risk, and the Directors'
approach to the management of them are set out below.
The objectives, policies and processes for managing the risks, and the methods
used to measure the risks, that are set out below, have not changed from the
previous accounting period.
(a) MARKET RISK
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements - currency risk (see (b) below), interest rate risk
(see (c) below) and other price risk (see (d) below). The Board of Directors
reviews and agrees policies for managing these risks, which have remained
substantially unchanged from those applying in the year ended 31 December 2012.
The Company's Investment Manager assesses the exposure to market risk when
making each investment decision, and monitors the overall level of market risk
on the whole of the investment portfolio on an ongoing basis.
(b) CURRENCY RISK
Certain of the Company's assets, liabilities, and income, are denominated in
currencies other than sterling (the Company's functional currency, in which it
reports its results). As a result, movements in exchange rates may affect the
sterling value of those items.
Management of the risk
The Investment Manager monitors the Company's exposure and reports to the Board
on a regular basis.
When appropriate the Investment Manager deploys active hedging against exchange
rate fluctuations where adverse movements are anticipated. This was not used in
the year.
Income denominated in foreign currencies is converted to sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that income is included in the
financial statements and its receipt.
Foreign currency exposures
An analysis of the Company's equity investments that are priced in a foreign
currency is:
As at As at
31 December 31 December
2013 2012
Investments Investments
£000 £000
Australian Dollar 605 762
Brazilian Real 2,361 -
Chinese Yuan 990 2,586
Czech Koruna - 982
Euro 9,497 8,332
Hong Kong Dollar 15,663 10,619
Indonesian Rupiah 441 661
Malaysian Ringgit 2,200 549
Philippine Peso 307 -
Polish Zloty 1,614 1,749
Qatari Riyal 2,111 2,125
Singapore Dollar 525 -
Thai Baht - 2,097
US Dollar 10,825 9,171
47,139 39,633
Foreign currency sensitivity
The following table illustrates the sensitivity of the return on ordinary
activities after taxation for the year and the equity in regard to the
Company's non-monetary financial assets to changes in the exchange rates for
the portfolio's significant currency exposures, these being Sterling/US Dollar,
Sterling/Euro and Sterling/Hong Kong Dollar.
It assumes the following changes in exchange rates:
Sterling/US Dollar +/- 4% (2012: 3%)
Sterling/Euro +/- 5% (2012: 3%)
Sterling/Hong Kong Dollar +/- 4% (2012: 2%)
These percentages have been determined based on the average market volatility
in exchange rates, in the previous 12 months.
If sterling had strengthened against the currencies shown, this would have had
the following effect:
2013 2013 2013 2012 2012 2012
US Euro HK US Euro HK
Dollar Dollar Dollar Dollar
£000 £000 £000 £000 £000 £000
Projected change 4% 5% 4% 3% 3% 2%
Impact on revenue return 9 31 11 16 42 3
Impact on capital return 433 475 627 275 250 212
Total return after taxation for 442 506 638 291 292 215
the year
Equity 442 506 638 291 292 215
If sterling had weakened against the currencies shown, this would have had the
following effect:
2013 2013 2013 2012 2012 2012
US Euro HK US Euro HK
Dollar Dollar Dollar Dollar
£000 £000 £000 £000 £000 £000
Projected change 4% 5% 4% 3% 3% 2%
Impact on revenue return (9) (31) (11) (16) (42) (3)
Impact on capital return (433) (475) (627) (275) (250) (212)
Total return after taxation for (442) (506) (638) (291) (292) (215)
the year
Equity (442) (506) (638) (291) (292) (215)
In the opinion of the Directors, the above sensitivity analyses are not
representative of the year as a whole, since the level of exposure changes
frequently as part of the currency risk management process used to meet the
Company's objectives.
(c) INTEREST RATE RISK
Interest rate movements may affect the level of income receivable on cash
deposits. The Company has no direct exposure to investments exposed to interest
rate fluctuations. Interest rate movements may affect the fair value of
investments in fixed-interest rate securities.
Cash at bank at 31 December 2013 (and 31 December 2012) was held at floating
interest rates, linked to current short-term market rates.
Due to the insignificant impact of fluctuations in interest rates no
sensitivity analysis is shown.
(d) OTHER PRICE RISK
Other price risks (i.e. changes in market prices other than those arising from
interest rate risk or currency risk) may affect the value of the quoted and
unquoted equity investments.
Management of the risk
The Board of Directors manages the market price risks inherent in the
investment portfolio by ensuring full and timely access to relevant information
from the Investment Manager. The Board meets regularly and at each meeting
reviews investment performance. The Board monitors the Investment Managers'
compliance with the Company's objectives.
When appropriate, the Company manages its exposure to risk by using futures
contracts or by buying put options on indices and on quoted equity investments
in its portfolio. This was not used in the year.
Concentration of exposure to other price risks
A sector breakdown and geographical allocation of the portfolio is contained in
the Investment Managers' Report on page 10.
Other price risk sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and the equity to an increase or decrease of 10% in the fair
values of the Company's equities (including equity through options). This level
of change is considered to be reasonably possible based on observation of
current market conditions. The sensitivity analysis is based on the Company's
equities and equity exposure through options at each balance sheet date, with
all other variables held constant.
Increase in Decrease in Increase in Decrease in
fair value fair value fair value fair value
2013 2013 2012 2012
£000 £000 £000 £000
Income statement -
return after
taxation:
Revenue return - 27 (27) 23 (23)
increase/(decrease)
Capital return - 6,837 (6,837) 5,645 (5,645)
increase/(decrease)
Total return after 6,864 (6,864) 5,668 (5,668)
taxation - increase/
(decrease)
Equity 6,864 (6,864) 5,668 (5,668)
(e) LIQUIDITY RISK
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company's assets are
investments in quoted equities that are readily realisable. The Company does
not have any borrowing facilities.
The investments in unquoted securities may have limited liquidity and be
difficult to realise. At 31 December 2013 the unquoted securities are valued at
nil (31 December 2012 the unquoted securities are valued at nil).
The Board gives guidance to the Investment Manager as to the maximum amount of
the Company's resources that should be invested in any one holding. The policy
is that the Company should remain fully invested in normal market conditions
and that short-term borrowing be used to manage short-term cash requirements.
(f) CREDIT RISK
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss. The
maximum exposure to credit risk at 31 December 2013 was £5,335,000 (2012: £
6,966,000). The calculation is based on the Company's credit exposure as at 31
December 2013 and may not be representative of the year as a whole.
Management of the risk
This risk is not significant, and is managed as follows:
• investment transactions are carried out with a large number of brokers, whose
credit-standing is reviewed periodically by the Investment Manager, and limits
are set on the amount that may be due from any one broker; and
• cash at bank is held only with reputable banks with high quality external
credit ratings. The Company does not generally hold significant cash balances,
but when it does it seeks to limit exposure to any one bank to 10% of net
assets.
None of the Company's financial assets are secured by collateral or other
credit enhancements.
(g) FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and liabilities are either carried in the balance sheet at
their fair value, or the balance sheet amount is a reasonable approximation of
fair value (due from brokers, dividends receivable, accrued income, due to
brokers, accruals and cash balances).
The table below sets out fair value measurements using the FRS29 fair value
hierarchy.
Financial assets at fair value through profit or loss at 31 December 2013
Level 1 Total
£000 £000
Equity investments 63,034 63,034
Fixed interest bearing 5,335 5,335
securities
Total 68,369 68,369
Financial assets at fair value through profit or loss at 31 December 2012
Level 1 Total
£000 £000
Equity investments 49,486 49,486
Fixed interest bearing 6,966 6,966
securities
Total 56,452 56,452
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1 (there were no Level 2
investments at 31 December 2013 and at 31 December 2012).
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data
(there were no Level 3 investments at 31 December 2013 and at 31 December 2012
with a market value).
The valuation techniques used by the Company are explained in the accounting
policies note on page 39.
Financial liabilities at fair value through profit or loss
The listed bid price has been used to determine the fair value of the Zero
Dividend Preference Shares:
As at 31 As at 31 As at 31 As at 31
December 2013 December 2013 December 2012 December 2012
Book value Level 1 Book value Level 1
£m £m £m £m
Zero Dividend 41.5 43.6 39.1 39.5
Preference
Shares
(h) CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's capital management objectives are:
• to ensure that the Company will be able to continue as a going concern; and
• to achieve a high income from its portfolio and to realise long-term growth
in the capital value of the portfolio.
The Company's capital at 31 December on a UK Accounting Standards basis
comprises:
2013 2012
£000 £000
Debt:
Zero Dividend Preference (41,536) (39,065)
Shares
Equity:
Equity share capital 171 171
Retained earnings and 28,282 18,836
other reserves
28,453 19,007
Total Capital 69,989 58,072
Debt as a percentage of 59.35% 67.27%
total capital
Contractual maturities of the financial liabilities at the year end, based on
the earliest date on which payment can be required are as follows:
As at 31 As at 31 As at 31 As at 31 As at 31 As at 31
December December December December December December
2013 2013 2013 2012 2012 2012
3 months More than 3 months More than
or less one year Total or less one year Total
£000 £000 £000 £000 £000 £000
Creditors: amounts
falling due within
one year
Other creditors 167 - 167 184 - 184
Creditors: amounts
falling due after
more
than one year
Accrued capital
entitlement of the
Zero Dividend - 46,974 46,974 - 46,974 46,974
Preference Shares
Premium (net of
expenses on placing
of Zero Dividend - 145 145 - 210 210
Preference Shares)
167 47,119 47,286 184 47,184 47,368
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
The Company is subject to several externally imposed capital requirements:
• As a public company, the Company has to have a minimum share capital of £
50,000.
• In order to be able to pay dividends out of profits available for
distribution by way of dividends, the Company has to be able to meet one of the
two capital restriction tests imposed on investment companies by company law.
These requirements are unchanged since last year and the Company has complied
with them.
Glossary of Terms
DISCOUNT/PREMIUM
If the share price of an investment trust is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
GEARING
Also known as leverage, particularly in the USA. Gearing is introduced when a
company borrows money or issues prior ranking share classes such as ZDPs, to
buy additional investments. The objective is to enhance returns to shareholders
but there is the risk of the opposite effect if the additional investments fall
in value.
GROSS REDEMPTION YIELD
The return on a fixed-interest security, or any investment with a known life,
expressed as an annual percentage and without any deduction for tax. Redemption
yield measures the capital as well as income return on investments with a fixed
life.
HURDLE RATE
The compound rate of growth of the total assets required each year until the
wind-up date for shareholders to receive either a predetermined redemption
price or, in some cases, a return of the amount originally invested. Any class
of share ranking for prior payment should be taken into account in this
calculation.
NET ASSET VALUE ("NAV")
The NAV is the assets attributable to shareholders expressed as an amount per
individual share. PEWT's Ordinary Share NAV is calculated as the total value of
all its assets, at current market value, having deducted all prior charges at
their par value (or at their asset value). The difference between the two NAV
figures reported on the Balance Sheet arises from the treatment of the premium
(net of expenses) from the issue of Zero Dividend Preference ("ZDP") shares in
December 2010 of £330,000. In accordance with UK Accounting Standards the
unamortised portion of the premium has been included with the ZDP liability and
will be amortised over the life of the Company. In accordance with the Articles
of Association the premium has been included with shareholders equity and the
ZDP liability reflects their accrued capital entitlement at 31 December 2013
and 31 December 2012.
SPLIT CAPITAL INVESTMENT TRUST
An investment trust with two or more classes of share in issue, each class
having specified entitlements to income or capital. Typical classes of share
include ordinary shares, capital shares, zero dividend preference shares and
income and residual capital (or geared ordinary) shares.
TOTAL RETURN
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV. Total return statistics enable the investor to make
performance comparisons between companies with different dividend policies. Any
dividends (after tax) received by a shareholder are assumed to have been
reinvested in either additional shares of the company at the time the shares go
ex-dividend (the share price total return) or in the assets of the company at
its NAV per share (the NAV total return).
Shareholder Information
SHARE PRICE AND PERFORMANCE INFORMATION
The Ordinary Shares and Zero Dividend Preference Shares are listed on the
London Stock Exchange. Information about the Company and that of the other
investment company managed by Premier, the Acorn Income Fund Limited, including
current share prices can be obtained directly from:
www.premierfunds.co.uk
Contact Premier on 01483 400 400, or by e-mail to premier@premierfunds.co.uk.
SHARE DEALING
Shares can be purchased through a stockbroker.
Information on the Premier ISA can be obtained by contacting Premier on 01483
400 400.
SHARE REGISTER ENQUIRIES
The register for the Ordinary Shares and Zero Dividend Preference Shares is
maintained by Capita Asset Services. In the event of queries regarding your
holding, please contact the Registrar on 0871 664 0300 (calls cost 10p per
minute plus network extras, lines are open Monday to Friday 9:00 a.m. to 5:30
p.m.); overseas +44 208 639 3399; or e-mail ssd@capitaregistrars.com. Changes
of name and/or address must be notified in writing to the Registrar.
STATEMENT REGARDING NON-MAINSTREAM INVESTMENT PRODUCTS
The Company currently conducts its affairs so that both the Ordinary Shares and
Zero Dividend Preference Shares issued by the Company can be recommended by
IFAs to retail investors in accordance with the FCA's rules in relation to
non-mainstream investment products and intends to continue to do so for the
foreseeable future.
Premier Energy and Water Trust's shares fall outside the restrictions which
apply to non-mainstream investment products because Premier Energy and Water
Trust is an investment trust.
A member of the Association of Investment Companies.
Notice of Annual General Meeting
to the members of Premier Energy and Water Trust PLC
Notice is hereby given that the Annual General Meeting of the Company will be
held at the offices of Maclay Murray & Spens LLP, One London Wall, London, EC2Y
5AB on Thursday, 8 May 2014, at 12:00 noon to consider and, if thought fit,
pass the following resolutions, which will be proposed as to resolutions 1, 2,
3, 4, 5, 6, 7, 8, 9 and 10 as ordinary resolutions and as to resolutions 11 and
12 as special resolutions:
ORDINARY RESOLUTIONS
1. To receive the Directors' Report and Financial Statements for the year ended
31 December 2013.
2. To approve the Directors' Remuneration Policy contained in the Directors'
Remuneration Report, for the financial year ended 31 December 2013.
3. To approve the Directors' Remuneration Report, other than the part
containing the Directors' Remuneration Policy, for the financial year ended 31
December 2013.
4. To re-elect Mr Geoffrey Burns as a Director of the Company.
5. To re-elect Mr Ian Graham as a Director of the Company.
6. To re-elect Mr Michael Wigley as a Director of the Company.
7. To re-elect Mr Charles Wilkinson as a Director of the Company.
8. To re-appoint Ernst & Young LLP as Auditor of the Company and to authorise
the Board to determine their remuneration.
9. Authority to allot new shares:
THAT, the Directors be and they are hereby generally and unconditionally
authorised, in accordance with section 551 of the Companies Act 2006, to allot
shares in the Company and to grant rights ("relevant rights") to subscribe for
or to convert any security into shares in the Company up to an aggregate
nominal amount of £38,249, representing 1,706,848 Ordinary Shares of 1p each
and 2,118,037 ZDP Shares of 1p each, (being approximately 10% of the issued
Ordinary share capital and 10% of the issued ZDP share capital of the Company
as at 10 March 2014 being the latest practicable date prior to the publication
of this Notice of Meeting) PROVIDED THAT this authority shall expire at the
conclusion of the next Annual General Meeting of the Company after the passing
of this resolution, save that the Company may, at any time prior to the expiry
of such authority, make an offer or agreement which would or might require
shares to be allotted or relevant rights to be granted after the expiry of such
authority and the Directors may allot shares or grant relevant rights in
pursuance of such an offer or agreement as if such authority had not expired.
10. Authority to allot Ordinary Shares at a discount:
THAT, subject to and conditional upon the passing of resolution 9 above (the
"Resolution"), the Directors be and they are hereby generally and
unconditionally authorised, in accordance with LR 15.4.11 of the United Kingdom
Listing Rules to allot Ordinary Shares for cash pursuant to the Resolution at a
price which represents a discount to the net asset value attributable to the
Ordinary Shares as at the date of such issue PROVIDED THAT (i) such issue is
simultaneous with an issue of new Zero Dividend Preference Shares and (ii) the
aggregate issue price shall represent a premium to the aggregate net asset
value attributable to the new Ordinary Shares and new Zero Dividend Preference
Shares as at the date of issue.
SPECIAL RESOLUTIONS
11. Authority to disapply pre-emption rights:
THAT, subject to the passing of resolution numbered 9 above ("Section 551
Resolution"), the Directors of the Company be empowered pursuant to section 570
of the Companies Act 2006 (the "Act") to allot equity securities (within the
meaning of section 560 of the Act) for cash pursuant to the Section 551
Resolution as if section 561(1) of the Act did not apply to such allotment,
provided that this power shall be limited to:
(a) the allotment of equity securities (otherwise than pursuant to
sub-paragraph (b) below) up to an aggregate nominal amount of £17,068; and
(b) the allotment of equity securities to (a) all holders of ordinary shares of
1p each in the capital of the Company ("Ordinary Shares") in proportion (as
nearly as may be) to the respective numbers of such Ordinary Shares held by
them and (b) to holders of other equity securities as required by the rights of
those securities (but subject to such exclusions, limits or restrictions or
other arrangements as the Directors of the Company may consider necessary or
appropriate to deal with fractional entitlements, record dates or legal,
regulatory or practical problems in or under the laws of, or requirements of,
any regulatory body or any stock exchange in any territory or otherwise
howsoever); and
such power shall expire at the conclusion of the next Annual General Meeting of
the Company to be held in 2015, but so that this power shall enable the Company
to make an offer or agreement before such expiry which would or might require
equity securities to be allotted after such expiry and the Directors of the
Company may allot equity securities in pursuance of any such offer or agreement
as if such expiry had not occurred.
12. Authority to repurchase the Company's shares:
THAT, the Company be and is hereby generally and unconditionally authorised in
accordance with Section 701 of the Companies Act 2006 ("the Act") to make
market purchases (within the meaning of Section 693(4) of the Act) of Ordinary
Shares of 1p each and of Zero Dividend Preference Shares of 1p each in the
capital of the Company (together the "Shares"), provided that:
(a) the maximum number of Shares hereby authorised to be purchased shall be
2,558,565 Ordinary Shares and 3,174,937 Zero Dividend Preference Shares;
(b) the minimum price which may be paid for a Share is 1 pence;
(c) the maximum price which may be paid for an Ordinary Share is an amount
equal to the highest of (i) 105% of the average of the middle market quotation
for an Ordinary Share taken from the London Stock Exchange Daily Official List
for the five business days immediately preceding the day on which the Ordinary
Share is purchased and (ii) the higher of the price of the last independent
trade and the highest current bid;
(d) the maximum price which may be paid for a Zero Dividend Preference Share is
its accrued capital entitlement as at the business day immediately preceding
the day on which the Zero Dividend Preference Share is purchased;
(e) the authority hereby conferred shall expire at the earlier of the
conclusion of the Annual General Meeting of the Company in 2015 or 7 November
2015 unless such authority is renewed prior to such time; and
(f) the Company may make a contract to purchase Shares under the authority
hereby conferred prior to expiry of such authority which will be or may be
executed wholly or partly after the expiration of such authority and may make a
purchase of Shares pursuant to any such contract.
Any shares so purchased will be cancelled in accordance with the provisions of
the Act.
By order of the Board
Premier Asset Management Limited
Secretary
11 March 2014
Notes to the Notice of Annual General Meeting
1. Members are entitled to appoint a proxy to exercise all or any of their
rights to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the Annual General
Meeting provided that each proxy is appointed to exercise the rights attached
to a different share or shares held by that shareholder. A shareholder may not
appoint more than one proxy to exercise the rights attached to any one share. A
proxy need not be a shareholder of the Company.
A proxy form which may be used to make such appointment and give proxy
instructions accompanies this notice. If you do not have a proxy form and
believe that you should have one, or if you require additional forms, please
contact the Company's registrars, Capita Asset Services (contact details can be
found on page 59).
2. To be valid any proxy form or other instrument appointing a proxy must be
received by post or (during normal business hours only) by hand at the offices
of the Company's registrars, Capita Asset Services, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU no later than 12:00 noon on Tuesday, 6 May 2014.
3. The return of a completed proxy form, other such instrument or any CREST
Proxy Instruction (as described in paragraph 9 below) will not prevent a
shareholder attending the Annual General Meeting and voting in person if he/she
wishes to do so.
4. Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated
Person") may, under an agreement between him/her and the shareholder by whom he
/she was nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the Annual General Meeting. If a Nominated Person has
no such proxy appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
5. The statement of the rights of shareholders in relation to the appointment
of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The
rights described in these paragraphs can only be exercised by shareholders of
the Company.
6. To be entitled to attend and vote at the Annual General Meeting (and for the
purpose of the determination by the Company of the votes they may cast),
shareholders must be registered in the Register of Members of the Company at 6:
00 p.m. on Tuesday, 6 May 2014 (or, in the event of any adjournment, on the
date which is two days before the time of the adjourned meeting for the
purposes of which no account is to be taken of any part of a day that is not a
working day). Changes to the Register of Members after the relevant deadline
shall be disregarded in determining the rights of any person to attend and vote
at the meeting.
7. As at 10 March 2014 (being the last business day prior to the publication of
this Notice) the Company's issued share capital consisted of 17,068,480
Ordinary Shares and 21,180,373 Zero Dividend Preference Shares, carrying one
vote each. Therefore, the total voting rights in the Company as at 10 March
2014 are 38,248,853.
8. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
9. In order for a proxy appointment or instruction made using the CREST service
to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must
be properly authenticated in accordance with Euroclear UK & Ireland Limited's
specifications, and must contain the information required for such instruction,
as described in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a proxy or is
an amendment to the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the issuer's agent
(ID RA10) by 12:00 noon on Tuesday, 6 May 2014. For this purpose, the time of
receipt will be taken to be the time (as determined by the time stamp applied
to the message by the CREST Application Host) from which the issuer's agent is
able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. After this time any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
10. CREST members and, where applicable, their CREST sponsors, or voting
service providers should note that Euroclear UK & Ireland Limited does not make
available special procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal member, or
sponsored member, or has appointed a voting service provider, to procure that
his or her CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
11. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
12. Any corporation which is a member can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a member
provided that they do not do so in relation to the same shares.
13. Under section 527 of the Companies Act 2006 members meeting the threshold
requirements set out in that section have the right to require the company to
publish on a website a statement setting out any matter relating to: (i) the
audit of the Company's accounts (including the Auditor's report and the conduct
of the audit) that are to be laid before the Annual General Meeting; or (ii)
any circumstance connected with an Auditor of the Company ceasing to hold
office since the previous meeting at which annual accounts and reports were
laid in accordance with section 437 of the Companies Act 2006. The Company may
not require the shareholders requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the Companies Act 2006. Where
the Company is required to place a statement on a website under section 527 of
the Companies Act 2006, it must forward the statement to the Company's Auditor
not later than the time when it makes the statement available on the website.
The business which may be dealt with at the Annual General Meeting includes any
statement that the Company has been required under section 527 of the Companies
Act 2006 to publish on a website.
14. Any member attending the meeting has the right to ask questions. The
Company must cause to be answered any such question relating to the business
being dealt with at the meeting but no such answer need be given if (a) to do
so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, (b) the answer has already been given
on a website in the form of an answer to a question, or (c) it is undesirable
in the interests of the Company or the good order of the meeting that the
question be answered.
15. A copy of this notice, and other information required by s311A of the
Companies Act 2006, is available at the Investment Managers' website:
www.premierfunds.co.uk
Directors and Advisers
Directors
Geoffrey Burns (Chairman)
Ian Graham (Chairman of the Audit Committee)
Michael Wigley
Charles Wilkinson
Investment Manager
Premier Fund Managers Limited
Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: 01483 306 090
www.premierfunds.co.uk
Authorised and regulated by the Financial Conduct Authority
Secretary and Registered Office
Premier Asset Management Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
Telephone: Mike Nokes 0207 982 1260
Company Number
4897881
Website
www.premierfunds.co.uk
Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Overseas: +44 208 639 3399
E-mail: ssd@capitaregistrars.com
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Stockbroker
N+1 Singer Advisory LLP
One Bartholomew Lane
London EC2N 2AX
Telephone: 0207 496 3000
Ordinary Shares
SEDOL 3353790GB
LSE PEW.L
ZDP Shares
SEDOL 3353820GB
LSE PEWZ.L