PREMIER ENERGY AND WATER TRUST PLC
Annual report & accounts
for the year ended
31 December 2014
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 22
Statement of Corporate Governance 26
Directors' Remuneration Report 29
Audit Committee Report 32
Statement of Directors'
Responsibilities
in Respect of the Financial Statements 34
Independent Auditor's Report 35
Consolidated Statement of Comprehensive 37
Income
Consolidated and Company Balance Sheets 38
Consolidated Statement of Changes in 39
Equity
Company Statement of Changes in Equity 40
Consolidated and Company Cash Flow 41
Statements
Notes to the Financial Statements 42
Glossary of Terms 61
Shareholder Information 62
Notice of Annual General Meeting 63
Notes to the Notice of Annual General 65
Meeting
Directors and Advisers 67
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.
On 27 August 2014 shareholders approved proposals to extend the life of the
Company and to implement a reorganisation of the Company through a scheme of
arrangement. The existing ZDP Shares were replaced with New ZDP Shares issued
by a newly incorporated subsidiary of the Company, PEWT Securities PLC and the
Articles were amended to allow the Company to continue without a fixed life
whilst including a provision to allow holders of ordinary shares an opportunity
to vote on the continued existence of the Company every five years from 2020.
In December 2014 the Company raised £1,361,931 (after expenses) through the
placing of 310,000 Ordinary Shares and 384,681 ZDP Shares (issued by PEWT
Securities PLC).
Financial Calendar
Company's year end 31 December
Annual results announced February
Annual General Meeting 21 April 2015
Company's half year end 30 June
Half year results announced August
Dividend payments - 2015 At the end of March, June, September
and December
Capital Structure
Zero Dividend Preference Shares (1p each)
issued by PEWT Securities PLC
21,565,054
The ZDP Shares ("ZDPs") will have a final capital entitlement of 221.78p on 31
December 2015 subject to there being sufficient capital in the Company. The
ZDPs are not entitled to any dividends. The ZDPs are qualifying investments for
Individual Savings Accounts ("ISAs") under the NEW ISA ("NISA") regime which
commenced on 1 July 2014.
Ordinary Shares (1p each)
17,378,480
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 entitled to
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 £3.2bn of funds under
management at 31 December 2014. PFM Ltd is authorised and regulated by the
Financial Conduct Authority. The Company's portfolio is managed by James Smith
and Claire Long. On 20 January 2015 the Company appointed Premier Portfolio
Managers Limited ("PPM") as its Alternative Investment Fund Manager. PPM has
delegated the portfolio management of the Company's portfolio of assets to PFM
Ltd.
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 2014
31 December 31 December
2014 2013 % change
Total Return
Performance
Total Assets Total 14.7% 24.5%
Return 1
FTSE All-World 20.5% 9.0%
Utilities Index
Total Return 2
(GBP)
FTSE All-World 11.3% 20.8%
Index Total Return
2 (GBP)
FTSE All-Share 1.2% 20.8%
Index Total Return
2 (GBP)
Ongoing charges 3 1.5% 1.4%
Ordinary Share
Returns
Net Asset Value per 196.23p 167.55p 17.1%
Ordinary Share (cum
income) 4
Mid-market price 192.50p 157.25p 22.4%
per Ordinary Share
2
Discount (1.9%) (6.1%)
Revenue return per 10.11p 11.25p (10.1%)
Ordinary Share
Net dividends 13.40p 12.25p 9.4%
declared per
Ordinary Share
Net Asset Value 26.6% 58.5%
Total Return 5
Share Price Total 31.6% 71.8%
Return 2
Zero Dividend
Preference Share
Returns
Net Asset Value per 208.18p 195.42p 6.5%
Zero Dividend
Preference Share4
Mid Market Price 215.00p 206.00p 4.4%
per Zero Dividend
Preference Share 2
Premium 3.3% 5.4%
Hurdle Rates†
Ordinary Shares
Hurdle rate to 4.5%
return the share
price of 192.50p at
31 December 2014 6
Zero Dividend
Preference Shares
Hurdle rate to (36.6%)
return the
redemption share
price of 221.78p at
31 December 2015 6
Balance Sheet
Gross Assets less £79.0m £70.0m 12.9%
Current Liabilities
(excluding Zero
Dividend Preference
Shares)
Zero Dividend (£45.0m) (£41.5m) 8.3%
Preference Shares
Equity £34.0m £28.5m 19.6%
Shareholders' Funds
Gearing on Ordinary 2.32x 2.46x
Shares7
Zero Dividend 1.61x 1.42x
Preference Share
Cover
(non-cumulative) 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
liabili-ties over the year.
4 Articles of Association basis.
5 Based on opening and closing NAVs with dividends marked "ex-dividend" within
the period reinvested. 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
2004-2014
Graphic removed
Share Price Performance
2009-2014
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 2014
Performance
2014 has been another successful year for the Premier Energy and Water Trust
("PEWT"/"Company"). The portfolio performed well, recording a gross assets
total return of 14.7%. This was behind the FTSE All-World Utility Index's total
return in Sterling of 20.5%, but ahead of the FTSE All-World Index which
returned 11.3% on the same basis.
It is worth mentioning that 2014 was definitely a year in which it paid to be a
global investor. In contrast to the strong returns seen in the global indices,
the FTSE All-Share index actually fell by 2.1% in 2014, and returned only 1.2%
when dividends are added in.
The Company's cum-income NAV per Ordinary Share increased from 167.55p at 31
December 2013 to 196.23p at 31 December 2014, a gain of 17.1%. Pleasingly,
PEWT's Ordinary Shares continued to trade at a tight discount to Net Asset
Value ("NAV"), from 6.1% at 31 December 2013 to just 1.9% at 31 December 2014.
As a result of both the growth in NAV and also a tightening discount, PEWT's
share price increased by 22.4%, reaching 192.50p by the end of the year. When
combined with dividends paid, an Ordinary Shareholder saw a total return of
31.6% in 2014, this coming on the back of a 71.8% return seen in 2013. In fact,
since the management and portfolio changed in June 2012, Ordinary Shareholders
have seen a total return of 139.9% to December 2014 (source: Bloomberg, from 31
May 2012 to 31 December 2014).
PEWT's Zero Dividend Preference Shares ("ZDP Shares") continued to trade at a
premium to their accrued NAV. The ZDPs' mid-market price was 215.00p at 31
December 2014 offering at that date a yield to maturity of 3.2% to their
221.78p final entitlement scheduled for 31 December 2015.
Overview
2014 was an eventful year for global equity markets and also your Company. Most
of the action came in the second half of the year as the US Federal Reserve
began to unwind its programme of quantitative easing. The Dollar strengthened
against developed and emerging currencies alike amid a widespread flight to
quality; with US utilities performing particularly well as investors sought out
safe havens.
At the same time as the US was beginning to look more attractive, the emerging
economies of Asia and South America were looking less promising. China's GDP
growth is now on a firm downward trend, and the result of Brazil's election was
not one which markets would have chosen. Commodity prices also pulled back
sharply, the oil price falling by over 50% in the second half of the year due
to a combination of growing supply and soft demand.
With hindsight your Company was a little too exposed to Latin America, and
could have done with larger weightings in the US, particularly in the second
half of the year. However, the portfolio performed exceptionally well in China
and India, and avoided the problems of the oil exposed economies such as
Russia, leading to a satisfactory performance overall.
Extension of life and renewal of ZDP Shares
Shareholders will be aware that at Shareholder meetings in August, subsequently
ratified by the High Court, proposals were approved to enable the Company to
continue with an indefinite life, subject to 5 yearly Shareholder continuation
votes, the first of which will be held in 2020. The respective economic rights
of each class of share remain unaltered.
I would like again to take this opportunity to thank Shareholders for their
support in approving the proposals. Removing the possibility of having to
liquidate the portfolio, as could have been the case with the previous fixed
wind up date of 31 December 2015, allows the manager to continue with the
successful portfolio strategy employed since 2012.
The Company's ZDP Shares mature on 31 December 2015 at which point their final
capital entitlement will become payable. Your Board will be considering the
options for refinancing the ZDP Shares having regard to investor demand,
prevailing required rates of return, the size of PEWT's capital base, and
timing.
As the Company now has a wholly owned subsidiary it is required to prepare
consolidated accounts under International Financial Reporting Standards (IFRS)
rather than individual company accounts under UK Generally Accepted Accounting
Principles (UK GAAP). There were however, no changes to the Company's other
accounting policies.
Income and dividends
Revenue from investments held increased by 12.8% to £3.1 million as a result of
both increased levels of dividend from portfolio investments and also the
recycling of capital gains into income producing assets. This performance was
especially encouraging after taking into account the fact that Sterling was
stronger against the US Dollar over the year, by some 5% on average. This
reduces the Sterling value of dividends paid by US companies, and by companies
operating in countries whose currencies are pegged to the US Dollar, such as
Hong Kong. Likewise the weakness of Sterling against the US Dollar seen in the
early part of 2015 should have a positive effect on PEWT's income in 2015.
The revenue return per Ordinary Share fell by 10.1% from 11.25p to 10.11p.
However this is entirely due to the costs incurred during the year in extending
the life of the Company and associated legal and transactional costs. These
totalled £417,000, or 2.44p per ordinary share, and are essentially one off in
nature. Adding these costs back to calculate a normalised or underlying
position, revenue return per Ordinary Share would have been 12.55p, a gain of
11.6% on 2013 and more reflective of the underlying strength of earnings within
the Company.
Your Board has declared a 4th interim dividend for the year ended 31 December
2014 of 5.45p per ordinary share which comprises a base dividend of 4.70p plus
a further 0.75p additional dividend paid in accordance with the policy to
distribute accumulated revenue reserves as previously announced. Excluding the
additional dividends, the total base dividend in respect of the year is
therefore 10.4p per Ordinary Share, an increase of 4.0% over the 10.0p per
Ordinary Share in respect of the year ended 31 December 2013. This fourth
interim dividend will be paid on 31 March 2015 to members on the register at
the close of business on 6 March 2015. The Ordinary shares will be marked
ex-dividend on 5 March 2015.
Share issue
In December PEWT issued a package of Ordinary and ZDP Shares, raising £1.3
million of fresh capital for the Company. Shares were issued at a price
calculated to avoid dilution to existing shareholders. The issue was made in
order to satisfy market demand for both classes of Shares.
The Board will consider issuing further shares, subject to Shareholder and
regulatory consents during 2015 should market demand be sufficient. Your Board
believes that existing Shareholders will benefit from growing the Company in
this way, which will allow for a more efficient cost base and improved trading
liquidity.
Regulatory Matters - the Alternative Investment Fund Managers Directive (the
"AIFMD").
The Alternative Investment Fund Managers Directive ("AIFMD") came into effect
during 2014. The Company initially entered into the register of small
registered UK Alternative Investment Fund Managers with the Board acting as the
Alternative Investment Fund Manager ("AIFM"). At that time the Company's total
assets were under the €100 million threshold which enabled the Company to take
advantage of the lighter touch regulatory regime for small funds with
beneficial cost savings to shareholders. However as a result of good
performance, weakness in the euro and the issue of new shares the Company's
total assets breached the €100 million threshold on 23 December 2014. At the
year-end total assets were valued at €102 million.
The obligation and reporting requirements for a full scope (over threshold)
AIFM are considerable and certainly more than can be managed by a non-executive
Board. The directors therefore appointed Premier Portfolio Managers Limited
("PPM") to act as its AIFM with effect from 20 January 2015. This involved the
transfer of the management contract from Premier Fund Managers Limited ("PFM")
to PPM, a sister company within the same group that is authorised by the
Financial Conduct Authority ("FCA") to act as an AIFM. PPM has delegated
investment management to PFM so the management of the portfolio remains
unchanged and there are no changes in the fees charged for investment
management. PPM will take on the risk monitoring and reporting obligations of
the AIFMD and the Board have agreed to a fee of £20,000 per annum for the
provision of this service.
One of the consequences of falling into the full scope of the AIFMD is the
requirement to appoint a depositary. A depositary takes all the functions of a
custodian but also has a broader role with regard to risk monitoring. The Board
have terminated the custody agreement with Northern Trust Global Services Ltd
("NT") and entered into a new agreement appointing NT as depositary. The
custody functions are supplied on broadly the same terms but the depositary
functions involve an additional charge of 0.02% per annum on the total value of
assets subject to a minimum of £25,000. Compliance with the AIFMD will
therefore involve some additional recurring annual costs to shareholders and
have involved one-off legal costs in terminating existing agreements and
redrafting new agreements with PPM and NT.
Shareholder relations
The Board and Investment Managers welcome contact with existing and potential
shareholders. The Company's AGM will be held on Tuesday, 21 April 2015, at 12:
15 p.m., at the offices of Premier Fund Managers Limited, Eastgate Court, High
Street, Guildford, Surrey GU1 3DE, where a presentation will be given followed
by light refreshments, and it is hoped that Shareholders will be able to attend
on this date.
Shareholders can find additional details regarding your Company including
factsheets and articles on topics relating to both the utility sector and the
Company on Premier's website at:
www.premierfunds.co.uk.
Outlook
The general consensus indicates that 2015 will likely be a tougher year for
equity investment than 2014. However, our manager does find some reasons for
optimism amongst the uncertainty. Firstly, we are yet to see the beneficial
impacts of a lower oil price filter through into the real economy although
markets have reacted swiftly in identifying those companies and countries which
will be the losers on this trade.
Secondly, our Sterling denominated portfolio has benefited from the recent
pullback in the value of Sterling. Our manager believes that the structural
weakness of the UK economy should see this trend continue, particularly if the
UK election is inconclusive in May.
Europe remains the odd man out among developed economies, as the European
Central Bank has arrived late to the money printing party. How the power
struggle between the Bundesbank and the ECB plays out during 2015 will be both
of general interest and also significant to equity market performance not only
in Europe but also in the UK and globally.
Shareholders can take some comfort from the excellent operational performances
seen in many of PEWT's larger investments during 2014, and the fact that our
manager expects this trend to continue enabling share prices to make further
progress.
Geoffrey Burns
Chairman
24 February 2015
Investment Managers' Report
for the year to 31 December 2014
Performance
2014 was, as they say, a year of two halves with the first half being
considerably more comfortable than the second. In this respect it bore many
similarities to 2013.
PEWT's cum income NAV began the year at 167.55p, gained over 20% to reach
202.05p by June, before falling back slightly during the second half to close
the year at 195.80p, an increase of 16.9% over the year. Volatility increased
sharply in the second half as markets digested the actions of central banks and
the implications for a slowing global economy.
In last year's annual report we noted how the utility sector had
under-performed the wider equity market in every year from 2009. We also said
that the sector's outlook was improving and that we would be surprised to see
it continue to under-perform as a result of utility companies taking steps to
improve their balance sheets and cost bases, and rationalise their business
models.
In the event, 2014 proved to be a year of strong out-performance for the
sector. This was particularly the case for US utilities which gained 37.1% when
adjusted into Sterling and taking dividends into account. It is worth noting
that the bulk of this gain in the US sector occurred in the 4th quarter of the
year, and we believe is largely technical in nature as US based investors
pulled money out of emerging markets and sought low risk high yield assets in
their domestic market.
Utilities out-performed parent market indices in most major markets. We felt
that investors had become over-pessimistic regarding prospects for the utility
sector, and with utilities being relatively under-owned a reversal was always a
possibility.
Utilities ended 2014 trading on similar earnings multiple to the wider market,
although paying a higher yield. With global growth prospects diminishing, the
more modest yet steady growth of the sector, combined with a yield that looks
attractive compared to alternatives, means the sector could well out-perform
again in 2015. We would be surprised however to see a level of performance in
line with that seen in 2014.
PEWT has been comparatively underweight US utilities on valuation grounds, and
this was a headwind to relative performance during the year. Likewise the
portfolio remains underweight European utilities, which performed well in the
first half but were fairly poor in the second half as concerns over the Euro
area resurfaced.
Individual stock selection was again a positive, particularly in China. During
2013 we had favoured Chinese renewable energy and also waste companies, a
strategy which paid off handsomely. In 2014 we switched much of the Chinese
exposure to coal fired energy generation companies, a move which worked well.
In India our investment in thermal electricity production performed even better
than in 2013, more of which below.
A clear negative, however, was the exposure to Latin America, which suffered
from a weak currency, particularly the Brazilian Real, an adverse Brazilian
election result, and also a prolonged and on-going drought. In local currency
terms the Brazilian Electric Energy Companies Index gained 3.5% in 2014,
although lost 2.1% when translated into Sterling. We do however feel that these
issues will ultimately be resolved, and as the sector looks attractively priced
it should recover in time.
Portfolio
Investment activity was at a similar level to 2013, with investment purchases
and sales of approximately £27 million representing some 40% of the opening
portfolio. The portfolio retained a similar character to the end of 2013,
although the geographic weightings changed a little. Chinese exposure was
reduced from 28.1% at 31 December 2013 to 23.4% at the end of 2014. China had
been a stand out sector for the Company in 2013, and some of these gains were
recycled elsewhere in 2014. Asia (ex-China) increased from 15.9% at the end of
2013 to 17.7% by December 2014, largely due to the excellent performance of OPG
Power Ventures. North American exposure also increased, to 12.7%, on both
performance grounds and also modest net investment. Eastern Europe is an area
that looks attractive, particularly compared to Western Europe, hence we
increased exposure to 4.9% by the year-end. The portfolio's exposure to Latin
America fell slightly to 8.3% as it under-performed the rest of the portfolio.
China
The previous year saw strong gains in the Company's Chinese waste to energy and
renewable energy companies. China Everbright International and China Suntien
Green Energy, which recorded share price gains of 164.8% and 72.2% respectively
during 2013, were the Company's second and third largest investments by the end
of 2013. In addition, gas company Kunlun Energy stood at number 4 in the
portfolio. During the first half of 2014 we cut the China Everbright position
by 50% as we felt it had reached fair value, sold all of Kunlun, and reduced
Suntien by 17%. This has proved to be a correct decision (although with
hindsight we should have sold some more of the Suntien stake) as of these three
only Everbright remained in modest positive territory during 2014, Kunlun and
Suntien both losing value in the year. Kunlun, which has some upstream gas
exposure, has been hit by the fall in the international oil and gas price,
while Suntien, a wind farm developer, suffered from project delays and low wind
speeds. The cash raised was re-invested into the Chinese thermal power
generation sector, and at the close of 2014 two of these companies featured in
PEWT's top 10 investments, China Power International Development and Huaneng
Power International. These companies are benefiting from having a largely fixed
tariff while their coal costs are falling, and as such they are seeing strong
growth in margins and earnings. By the end of 2014 PEWT was recording a gain on
book cost of 41.5% for China Power and 52.6% for Huaneng. In addition the
relatively high dividends paid by these companies have had a positive impact on
PEWTs income account.
We should also mention the stake in Fortune Oil, a company operating in the gas
distribution segment. This was held for its low valuation compared to the fair
value of its underlying investments. In December the major shareholder group
made an offer for the company at a level which we feel substantially
under-values the shares, but which (at the time of writing) looks almost
certain to succeed. Should the offer go through, PEWT will exit with a net gain
of at least 43% (there is an element of contingent consideration which may
increase the return), well below what we originally hoped for but still a
success.
India
The election of Narendra Modi as Indian Prime Minister in May 2014 has given
the country renewed hope for reform and growth. India is also now benefiting
from a favourable backdrop of declining commodity prices, particularly oil,
which should help the country's trade balance and budget.
PEWT's largest investment both at the end of 2013 and 2014 was OPG Power
Ventures, an Indian thermal power producer, listed on the AIM market in London.
OPG's share price gained 71.6% during 2014 as they made further progress on
their pipeline of new projects; their generation capacity should increase
almost threefold in the first half of 2015. OPG is benefiting from the
continued deficit of power generation capacity in India, which when coupled
with declining coal prices presents a favourable investment backdrop. We are
optimistic that the shares will make further upward progress during 2015 as
their new capacity is commissioned.
In May PEWT sold its investment in Essar Energy Convertible Bonds. The bonds
had become "puttable" back to the company as a result of the Essar Group making
an offer for the Essar Energy PLC minority interests. These bonds were a very
successful investment for your Company, not only paying a high coupon, but also
returning a capital gain (in US Dollars) of approximately 60%.
United Kingdom
Investors continue to be concerned by the potential impact of the Labour
Party's ill thought through plans for a 2 year energy price freeze should they
gain power in May's general election. There is no doubt that the very threat of
such a policy has caused companies to increase their forward hedging books,
particularly at SSE which implemented its own energy price freeze. This has
meant that the fall in gas prices seen in the second half of 2014 and early
2015 has not led to as great a reduction in tariffs as otherwise might have
been the case.
Labour has hastily reformulated its policy as a "price cap" rather than a
"price freeze". Should they not wish to expose their supply businesses to the
risk of bankruptcy, energy suppliers could only live with a price cap policy if
they could offset adverse commodity risks through complex and expensive
derivatives. Again this would add to the overall costs of energy supply, and
would inevitably mean higher tariffs overall.
Amidst the political positioning, the Competition and Markets Authority is
investigating the industry and should report preliminary findings shortly after
the election.
More importantly for PEWT, the completion of the electricity distribution and
water reviews, to be implemented in 2015, has removed two elements of
uncertainty. Together with the electricity and gas transmission reviews, and
gas distribution reviews in 2013, mean that the UK's regulated utilities now
have tariff certainty through to at least 2020, taking them to the other side
of the next Government and reducing the scope for politically induced
volatility.
We discussed last year that we had taken the decision in late 2013 to sell the
holding in Centrica but to retain SSE, which remains a substantial investment.
This has proved to be a sound decision with SSE's shares rising by 18.4% in
2014, whereas Centrica's shares fell by 19.8%. National Grid performed well as
the market reacted to the visibility of its earnings stream and the fact it
sits apart from the political debate. Its shares gained 16.5% during the year.
United States
US Utilities were a standout performer during 2014, the S&P 500 Utilities Index
gaining 24.3% during the year, although it is difficult to point to any
fundamental reason why this should have been the case. In fact the majority of
this gain came in the final third of the year, and we believe was more an
investor reaction to tightening monetary policy than to any investor
reassessment of the fundamental attractions of the sector.
PEWT's US investments performed well, although we continue to retain a relative
underweight position on valuation grounds.
Europe
PEWT's Continental European exposure remained focused on Italian utilities
where we feel the value on offer outweighs the difficult macro situation. This
is in contrast to France, Germany, and Spain, where valuations look stretched
and the investing environment is difficult. Modest gains were made on these
investments during the year, with the smaller municipal utilities
out-performing the larger companies. Those investments we do hold are almost
exclusively regulated in nature, the Italian regulator having a reputation for
a sensible and pragmatic regulatory approach.
Although Paris listed, our segmental analysis treats GDF Suez as "Global" given
its extensive global operations. Despite continued problems in its Belgian
nuclear business, and relatively high exposure to poorly performing Brazil, GDF
managed to record a creditable 13.7% share price gain in the year.
Currency
PEWT was unhedged through 2014, which hurt performance in the first half as
Sterling gained on the US Dollar, but was a positive when this situation
reversed in the second half. Sterling had started the year at $1.656, gained
3.3% during the first half, before losing 8.9% in the second half to close the
year at $1.558.
Sterling was however strong against the Euro, the Euro losing almost 7% against
Sterling over 2014, and also the Brazilian real, which lost almost 6% against
Sterling.
Balance sheet
The gearing of the Ordinary Shares to the market has again fallen as assets
have risen, falling to 2.32x at December 2014 from 2.46x at 31 December 2013.
For the same reason the cover on the ZDP Shares, based on final redemption
value, improved to 1.61x from 1.42x at 31 December 2013.
Outlook
2014 was a relatively tough year; currency swings were rapid and equity
volatility increased as we moved through the year. Our instincts are, as ever,
to select companies which we expect to perform well irrespective of short term
swings in commodities, interest rates, or other decisions by central banks.
Very often this leads us to favour regulated utilities rather than unregulated
utilities, particularly in developed markets.
However, the Company does hold unregulated power generation stocks operating in
China and India. Conventional wisdom might suggest that such investments sit
towards the more risky end of the investment spectrum. However, as we have
shown above, for specific reasons these companies have been excellent
performers in 2014, and we believe that conditions should remain favourable for
these companies in 2015.
James Smith
Claire Long
Premier Fund Managers Limited
24 February 2015
INDEX RETURNS, GBP ADJUSTED , TOTAL RETURN INCLUDING DIVIDENDS
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GEOGRAPHIC ALLOCATION 2014
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SECTOR ALLOCATION 2014
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MARKET CAP DISTRIBUTION 2014
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PORTFOLIO CONCENTRATION 2014
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Twenty Largest Holdings
at 31 December 2014
Value % total
Company Activity Country £000 investments 2014 2013
OPG Power Multi Utility India 7,401 9.6 1 (1)
Ventures
Renewable Energy Renewable Energy UK 4,666 6.0 2 (19)
Generation
China Power Intl Electricity Generation China 3,903 5.0 3 (16)
Huaneng Power Electricity Generation China 3,460 4.5 4 -
Intl
Fortune Oil Gas Transmission China 2,722 3.5 5 (8)
Ecofin Water & Investment Company UK 2,625 3.4 6 (6)
Power *
GDF Suez Multi Utility France 2,563 3.3 7 (9)
Enersis Electricity Integrated Chile 2,475 3.2 8 (11)
China Everbright Water & Waste China 2,434 3.2 9 (2)
Intl
SSE Multi Utility UK 2,336 3.0 10 (7)
Qatar Electricity Multi Utility Qatar 2,312 3.0 11 (13)
and Water
First Trust MLP & Multi Utility USA 2,211 2.9 12 -
Energy
EDP - Energias Do Electricity Generation Brazil 2,176 2.8 13 -
Brasil & Transmission
Tenaga Nasional Electricity Generation Malaysia 2,101 2.7 14 (10)
National Grid Electricity & Gas UK 2,019 2.6 15 (5)
Transmission
Greenko Group Renewable Energy India 1,734 2.2 16 -
Snam Gas Transmission Italy 1,730 2.2 17 (14)
Nextera Energy Electricity Generation USA 1,704 2.2 18 (20)
China Suntien Renewable Energy China 1,680 2.1 19 (3)
Green Energy
Huaneng Renewable Energy China 1,647 2.1 20 (15)
Renewables
53,899 69.5%
Other investments 23,487 30.5%
Total investments 77,386 100.0%
* Holding in convertible bonds
Review of Top Ten Holdings
at 31 December 2014
1. OPG Power Ventures
Market cap £325m
www.opgpower.com
OPG is a London listed developer of small to medium sized power stations in the
southern Indian state of Tamil Nadu, and also the north-western state of
Gujarat. Although 2014 did not see the commissioning of any new units, the
company reported excellent financial results throughout the year as a result of
the capacity brought online during 2013. 2015 will see an almost trebling of
capacity as they complete their current construction projects. Continued coal
price weakness, a chronic Indian power shortage, and a new reform minded
government proved a sound backdrop for OPG in the year, its shares gaining
71.6%.
2. Renewable Energy Generation
Market cap £67m
www.renewableenergygeneration.co.uk
Renewable Energy Generation ("REG") is a developer and owner of wind farms and
also electricity generation from recycled cooking oil. 2014 was a successful
year for REG, as they began to win planning permissions following several years
of effort preparing applications. Consents for over 30 MW of new wind capacity
were received in the year, although 8 MW of this was subsequently called in by
the Secretary of State for Communities for further consideration. In addition
REG sold 18 MW of completed projects for an excellent price, and built their
first large scale cooking oil generation facility. Despite this, REG's shares
fell by 9.1% during the year.
3. China Power International Development
Market cap £2.3bn
www.chinapower.hk
China Power International ("CPI") is an electricity generator utilising both
thermal coal and also hydro technology, profits being split approximately
equally between both. The company reported excellent results throughout 2014,
with 2013's earnings almost doubling, followed by a further 15% increase in the
first half of 2014 despite lower rainfall weighing on the hydro power business.
CPI, like other Chinese power companies, is benefiting from the surplus of coal
in China, which when set against a relatively static wholesale electricity
tariff, has had a beneficial effect on margins. CPI's shares gained 42.4%
during 2014.
4. Huaneng Power International
Market cap £12.5bn
www.hpi.com.cn
Huaneng Power is primarily a Chinese coal fired power generator, although it
has recently been building up a substantial renewables business. 2014 saw the
company report excellent 2013 results, with a doubling of earnings, followed by
growth of over 20% in the first half of 2014. As China's economy slows, the
Chinese coal surplus will continue to weigh on coal prices and form a positive
backdrop for the generation companies. Huaneng is one of the world's largest
power companies, its output of some 300 TWh per year being on a par with the
electricity demand for the entire United Kingdom. Huaneng's shares gained 49.5%
during 2014.
5. Fortune Oil
Market cap £247m
www.fortune-oil.com
Fortune Oil ("FTO") is a UK listed holding company with interests in Chinese
gas distribution, aviation refuelling, and oil terminal infrastructure. The
majority of its value is represented by its holding in China Gas Holdings
Limited ("CGH"), a Hong Kong listed gas distribution company operating in
mainland China. 2014 saw FTO's shares performing poorly until an offer to take
the company private was received towards the end of the year from FTO's major
shareholding group. In the event the offer is approved, PEWT will receive £2.8
million in March 2015, being a 43% gain on book cost. Should FTO subsequently
realise its stake in CGH in the 12 months following the completion of the FTO
offer, further consideration of up to 50% of the offer price could become
payable.
6. Ecofin Water & Power Opportunities
£80m 6% Convertible Loan Note
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, its shale gas and liquids business in Texas,
remains the largest of the trust's exposures. Ecofin's portfolio has relatively
little overlap with PEWT's. The Convertible Loan Notes are well covered by
assets, and have a conversion price of 172.64p with a maturity of July 2016.
Ecofin's ordinary shares closed 2014 with a NAV of 189.22p, a gain of 12.2% in
the year, and being above the Loan Notes' conversion price.
7. GDF Suez
Market cap £35.6bn
www.gdfsuez.com
GDF is a French multinational gas and electric utility company with operations
in almost 70 countries. It is the largest independent power producer in the
world and has almost 150,000 employees worldwide. 2014 was a relatively
difficult year for the company with the shutdown of two nuclear reactors in
Belgium pending safety related repairs and modifications, mild European winter
weather reducing demand in the early part of the year, and a continuing severe
drought in Brazil where GDF owns several hydroelectric dams. Having said this,
the company has made strides over recent years to diversify away from Europe
and towards higher growth locations, and has also now completed a substantial
disposal programme aimed at strengthening its balance sheet. GDF's shares
gained 13.7% during 2014.
8. Enersis
Market cap: £10.3bn
www.enersis.cl
Enersis is one of South America's largest electricity companies. It is
diversified geographically, having operations in Colombia, Chile, Brazil, Peru
and Argentina, the latter being a relatively small part of the whole. The
company generates electricity using a mixture of thermal and hydro technology,
and also owns regulated electricity distribution businesses. In 2014 Enersis
recorded excellent results in its Colombian and Peruvian electricity generation
businesses, offset to an extent by the continued drought in Brazil with reduced
hydro generation there. Enersis' shares gained 26.1% during 2014, although it
should be noted that the Chilean Peso lost 8.5% of its value against Sterling
in the year, so not all of the share price gain translated into a gain for
PEWT.
9. China Everbright International
Market cap £4.4bn
www.ebchinaintl.com
China Everbright International ("CEI") is a leading waste to energy and waste
water treatment company operating in mainland China. The company has seen
strong and consistent business growth over several years as the Chinese
Government prioritises the proper handling and disposal of waste. 2013 results
continued the trend with new projects driving an increase in waste volumes of
19.2% and a consequent improvement in earnings of 17.9%. Earnings increased by
a further 23.3% in the first half of 2014 following further expansion. CEI's
share price increased by 11.2% during 2014, having increased by 164.8% in 2013.
10. SSE PLC
Market cap £16.2bn
www.sse.com
SSE is involved in the generation, transmission and supply of electricity, and
the production, storage and supply of gas, to over 9 million customers. Almost
60% of its earnings base derives from regulated electricity and gas networks.
While recent results have shown that competitive UK utility activities such as
electricity generation and supply have been under pressure; SSE has managed to
offset much of this through strong growth in regulated network activities.
Energy supply has become a politically sensitive business in the UK since mid
2013, however in the financial year to March 2014, SSE derived only 17% of its
operating profit from this activity, and is regarded as having a leading
customer service position. SSE's shares gained 18.4% during 2014.
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 Asian Development Bank. Mr Burns is a director of the
Swiss Investment Fund for Emerging Markets AG and 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 and was appointed Chairman on 26
April 2005.
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 Resources 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 2014
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 2014.
Business Model and Strategy
Business and tax status
The Company is an investment trust and its principal activity is portfolio
investment. 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 2012, 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.
Following the incorporation of the Company's wholly-owned subsidiary, PEWT
Securities PLC, the Company is now required to prepare consolidated accounts
under IFRS (previously the accounts were prepared under UK GAAP).
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.
Reorganisation and extension of life
The Company was launched in 2003 with a planned winding-up date in 2010. In
2009 the Company's shareholders approved proposals, amongst other things, to
extend the life of the Company to 31 December 2015. Under the Company's then
structure the entitlement of the holders of Zero Dividend Preference Shares
("ZDP Shares") to receive their final capital entitlement of 221.78p in cash
per ZDP Share on the ZDP share repayment date could only be satisfied by way of
a winding up of the Company. The Company's articles of association ("Articles")
required the Board to put forward a resolution to the Company's shareholders on
31 December 2015 that the Company be wound up voluntarily.
In June 2012, the Company's Manager recruited and appointed James Smith to take
over management of the Company's portfolio, assisted by co-manager Claire Long.
Following a review and consequent changes to the Company's investment portfolio
undertaken by Mr Smith, performance has been strong with significant growth in
gross assets, a consequential improvement in cover on the ZDP Shares and a
significant increase in net asset value per ordinary share.
In the light of the strong performance of the Company, and after consulting
shareholders the Board put forward proposals on 25 July 2014 to the Company's
Shareholders by which the holders of ZDP Shares would continue to be entitled
to receive their final capital entitlement on 31 December 2015 but the Company
would continue without having to be wound up. Specifically the Proposals
envisaged:
• replacing the ZDP Shares with New ZDP Shares issued by a newly incorporated
subsidiary of the Company, PEWT Securities PLC;
• the rights of the New ZDP Shares being substantially similar to the rights
attached to the ZDP Shares;
• amending the Articles to allow the Company to continue without a fixed life
whilst including a provision to allow holders of Ordinary Shares an opportunity
to vote on the continued existence of the Company every five years (from 2020);
and
• the renewal of the Board's authority to issue new Ordinary Shares in the
Company on a non-pre-emptive basis, subject to certain parameters, to replace
the authorities granted by Shareholders at the Company's annual general meeting
held in May 2014.
The resolutions to implement the Proposals were duly passed at a Court Meeting,
ZDP Class Meeting, Ordinary Class Meeting and General Meeting ("the Meetings"),
all on 27 August 2014. On 16 September 2014 the Company announced that the
Court had approved the Scheme and Reduction of Capital and had issued Court
Orders confirming the same. The Scheme and Reduction of Capital became
effective on 17 September 2014.
Issue of Ordinary and Zero Dividend Preference Shares
The Company announced that it had allotted and issued, on 17 December 2014, by
way of a tap issue in response to market demand, 310,000 New Ordinary Shares of
1 pence each par value for cash, at a price of 178.25 pence per share (the "New
Shares"). The New Shares ranked pari passu with the existing Ordinary Shares.
On the same day the Company's subsidiary, PEWT Securities PLC announced that it
had allotted and issued, by way of a tap issue in response to market demand,
384,681 New Zero Dividend Preference Shares of 1 pence each par value for cash,
at a price of 214 pence per share (the "New Shares"), a premium to the current
net entitlement. The New Shares ranked pari passu with the existing Zero
Dividend Preferences Shares.
The above shares were issued pursuant to a resolution approved at a General
Meeting of Premier Energy and Water Trust PLC held on 27 August 2014 which
permitted the allotment provided that (i) such issue is simultaneous with an
issue of New Zero Dividend Preference Shares by PEWT Securities PLC ("New ZDP
Shares") and (ii) the combined effect of the issue of Ordinary Shares at a
discount to the prevailing net asset value per Ordinary Share and the issue of
New ZDP Shares at a premium to net asset value per New ZDP Share is that the
net asset value per Ordinary Share is thereby increased.
Following the issue of the Ordinary Shares, the issued share capital consists
of 17,378,480 Ordinary Shares.
Alternative Investment Fund Management Directive ("AIFMD")
The Company was entered in the register of small registered UK AIFMs with
effect from 23 June 2014, under the Alternative Investment Fund Managers
Regulations 2013 ("AIFMRs"). On 30 December 2014 the Company advised the
Financial Conduct Authority that the value of its assets under management had
exceeded the 100 million Euro threshold for the first time on 23 December 2014
and therefore it was the intention that the Company would be appointing Premier
Portfolio Managers Limited ("PPM") as its Alternative Investment Fund Manager
("AIFM") within 30 days commencing 23 December 2014.
On 20 January 2015 the Company announced that it had appointed PPM to act as
its Alternative Investment Fund Manager ("AIFM") pursuant to an Alternative
Investment Fund Management Agreement entered into by the Company and the AIFM
on 20 January 2015 (the "AIFM Agreement").
PPM has been approved as an AIFM by the UK's Financial Conduct Authority. The
investment management agreement entered into by the Company and Premier Fund
Managers Limited ("PFM") on 3 August 2011 (the "IMA") has been terminated
although PPM has delegated the portfolio management of the Company's portfolio
of assets to PFM. The AIFM Agreement is based on the IMA and differs to the
extent necessary to ensure that the relationship between the Company and PPM is
compliant with the requirements of AIFMD. The fees payable to PPM for acting as
the Investment Manager and the notice period under the AIFM Agreement are
unchanged from the IMA. PPM will receive a fixed fee of £20,000 per annum in
respect of its appointment as the AIFM.
The Company and PPM have also entered into a depositary agreement with Northern
Trust Global Services Limited ("NT") pursuant to which NT has been appointed as
the Company's depositary for the purposes of AIFMD.
In accordance with AIFMD regulations the Company has published a pre investment
disclosure document which can be found on the Company's website at
https://www.premierfunds.co.uk/media/59009/premier-energy-and-water-trust-pre-investment-disclosure-document-aifmd-.pdf
Foreign Account Tax Compliance Act ("FATCA")
The Company has registered with the US Internal Revenue Service as a Reporting
Financial Institution under the FATCA legislation and has been issued with a
Global Intermediary Identification Number ("GIIN") which is
W6S9MG.00000.LE.826.
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 £7,264,000 (31 December 2013: £11,358,000).
These calculations are based on the weighted average number of 17,080,370
Ordinary Shares in issue during the year to 31 December 2014 (2013: 17,068,480
number of Ordinary Shares).
The return per Ordinary Share can be further analysed between revenue and
capital as below:
Year ended 31 Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013 December 2013
Pence per £000 Pence per £000
Ordinary Share Ordinary Share
Net revenue 10.11p 1,727 11.25p 1,921
return
Net capital 32.42p 5,537 55.29p 9,437
return
Net total 42.53p 7,264 66.54p 11,358
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 31 March 2014 4.50p
year ended 31 December
2013
Additional interim 31 March 2014 0.75p
dividend for the year
ended 31 December 2013
First Interim for the year 30 June 2014 1.90p
ended 31 December 2014
Additional interim 30 June 2014 0.75p
dividend for the year
ended 31 December 2014
Second Interim for the 30 September 2014 1.90p
year ended 31 December
2014
Additional interim 30 September 2014 0.75p
dividend for the year
ended 31 December 2014
Third Interim for the year 31 December 2014 1.90p
ended 31 December 2014
Additional interim 31 December 2014 0.75p
dividend for the year
ended 31 December 2014
Subsequent to the year end but in respect of the year ended 31 December 2014
the Directors have declared a fourth interim dividend of 4.70p and an
additional interim dividend of 0.75p, payable on 31 March 2015 to members on
the register at the close of business on 6 March 2015. The shares will be
marked ex-dividend on 5 March 2015. This dividend relates to the year ended
31 December 2014 but in accordance with the International Financial Reporting
Standards, 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 2014 was 196.23p† (31 December 2013: 167.55p†). The net asset value of
a Zero Dividend Preference Share at 31 December 2014 was 208.18p† (31 December
2013: 195.42p†).
† Net asset values calculated in accordance with Articles of Association (see
note 18 on pages 52 to 53).
Principal risks associated with the Company (also see note 20 on pages 53 to
60)
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 issued by PEWT Securities PLC, its subsidiary.
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
Board monitors the income of the Company and reviews an income forecast for the
current financial year at its regular quarterly Board meetings.
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 invests principally in highly liquid securities listed on
recognised stock exchanges. 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 communicates 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 the Investment Manager 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. The Company is
also required to comply with the Alternative Investment Fund Management
Directive ("AIFMD") and was entered in to the register of small registered UK
AIFA's with effect from 23 June 2014. On 20 January 2015 however, the Company
announced that it had appointed Premier Portfolio Managers Limited ("PPM") as
its Alternative Investment Fund Manager and PPM is responsible for ensuring
compliance with AIFMD (see page 17).
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.
Key performance indicators
The Company's Directors meet regularly to review the performance of the Company
and its shares. The key performance indicators ("KPIs") 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 1.5%
(2013: 1.4%). 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 2014 (2013: 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.
All of these areas were examined throughout the year and the table below
summarises the results:
As at or year to: As at or year to:
31 December 31 December
2014 2013 % change
Total Return
Performance
Total Assets Total 14.7% 24.5%
Return 1
FTSE All-World 20.5% 9.0%
Utilities Index
Total Return 2
(GBP)
Ordinary Share
Performance
Net Asset Value per 196.23p 167.55p 17.1%
Ordinary Share (cum
income) 4
Revenue return per 10.11p 11.25p (10.1%)
Ordinary Share
Net dividends 13.40p 12.25p 9.4%
declared per
Ordinary Share
Discount (1.9%) (6.1%)
Zero Dividend
Preference Share
Performance
Premium 3.3% 5.4%
Ongoing charges 3 1.5% 1.4%
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.
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
Ian Graham
Director
24 February 2015
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.
Conflicts of interest
The Board has put in place a framework for Directors to report conflicts of
interest or potential conflicts of interest which it believes has worked
effectively during the year. All Directors are required to notify the Company
Secretary of any situations where they consider that they have a direct or
indirect interest, or duty that would conflict, or possibly conflict, with the
interests of the Company. No such situations however, have been identified.
There remains a continuing obligation to notify the Company Secretary of any
new situation that may arise, or any change to a situation previously notified.
It is the Board's intention to review all notified situations on a quarterly
basis.
Corporate governance
The statement of Corporate Governance, as shown on pages 26 to 28, is
incorporated by cross reference into this report.
Bribery prevention policy
The provision of bribes of any nature to third parties in order to gain a
commercial advantage is prohibited and is a criminal offence. The Board has a
zero tolerance policy towards bribery and a commitment to carry out business
fairly, honestly and openly. The Board takes its responsibility to prevent
bribery by the Company's Manager on its behalf very seriously and the
Investment Manager has anti-bribery policies and procedures in place. The
Company's other key service providers have also been contacted in respect of
their anti-bribery policies.
Global greenhouse gas emissions for the year ended 31 December 2014
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 share capital of the Company.
Number of % of total Number of % of total
shares at 23 voting rights shares at 31 voting rights
February 2015† December 2014
Premier Fund 3,999,796 23.0 3,999,796 23.0
Managers
Limited*
Philip J Milton 1,129,894 6.5 1,455,787 8.4
& Company Plc
† The latest practicable date prior to the publication of this report.
* This includes 2,411,579 Ordinary 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 53
to 60), 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 7, 8 and 9:
Authority to allot shares
At the Annual General Meeting, the Company is seeking approval from
Shareholders to renew the Board's authority to issue new Ordinary Shares on a
non-pre-emptive basis, subject to certain parameters. These authorities are
intended to replace the authorities granted by Shareholders at the Company's
General Meeting held in August 2014.
Until the ZDP Repayment Date, any new issue of Ordinary Shares may be made in
conjunction with a new issue of New ZDP Shares by the Company's subsidiary,
PEWT Securities PLC, in such numbers so as to retain the prevailing ratio of
Ordinary Shares and New ZDP Shares in issue and thereby maintain the level of
gearing utilised by the Group. Where the Board considers it in the best
interests of Shareholders to do so, Ordinary Shares and/or New ZDP Shares may
be issued on other bases.
PEWT Securities PLC has been incorporated with the necessary shareholder
authorities to allow it to issue New ZDP Shares. Without the previous sanction
of a special resolution of the holders of New ZDP Shares passed at a separate
meeting of such holders, neither the Company nor PEWT Securities PLC shall
issue any further shares which would rank in priority to, or pari passu with,
the New ZDP Shares unless (i) the New ZDP Shares would have a Cover of not less
than 1.5 times immediately following the issue of the new shares; or (ii) those
New ZDP Shares in issue immediately thereafter would have a Cover of not less
than the Cover of the New ZDP Shares in issue prior to the issue of new shares.
The Board does not currently intend to issue an additional zero dividend
preference share class prior to the ZDP Repayment Date.
Pursuant to RESOLUTION 7 to be proposed at the Annual General Meeting, which
will be proposed as an ordinary resolution, the Board is seeking a general
power from Shareholders to allot new Ordinary Shares up to an aggregate nominal
value of £17,068.40, representing approximately 10 per cent. of the issued
Ordinary Share capital of the Company as at the date of this document.
RESOLUTION 8 to be proposed at the Annual General Meeting, which will be
proposed as an ordinary resolution, will, if passed, permit the Board to allot
Ordinary Shares at a discount to the then prevailing Net Asset Value per
Ordinary Share. The Board will only utilise this authority to issue new
Ordinary Shares provided that the combined effect of the issue of both Ordinary
Shares at a discount to Net Asset Value per Ordinary Share and the issue of New
ZDP Shares at a premium to Net Asset Value per New ZDP Share is that the Net
Asset Value per Ordinary Share is increased.
RESOLUTION 9 to be proposed at the Annual General Meeting, which will be
proposed as a special resolution, will, if passed, empower the Board to make
allotments of Ordinary Shares for cash on a non-pre-emptive basis up to an
aggregate nominal value of £17,378, representing approximately 10 per cent. of
the issued Ordinary Share capital of the Company as at the date of this
document.
These authorities, if granted, will expire at the conclusion of the next Annual
General Meeting of each of the Company.
RESOLUTION 10: Purchase by the Company of its own shares
At the Annual General Meeting held on 8 May 2014 a special resolution was
passed, giving the Directors authority until the conclusion of the earlier of
the 2015 Annual General Meeting and 7 November 2015, 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 2014 no shares were purchased
(during the year ended 31 December 2013 no shares were purchased).
The Board proposes that the Company should be given renewed general authority
to purchase Ordinary Shares in the market for cancellation in accordance with
the Companies Act 2006 but subject to the provisos set out below. Resolution 10
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 2,605,034 Ordinary Shares (representing 14.99% of the Company's
issued share capital as at 23 February 2015) 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 (issued by PEWT Securities PLC) 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 (issued by PEWT
Securities PLC) 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 (issued by PEWT Securities PLC) 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 (issued by PEWT Securities PLC) 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 2016, or 7 November 2016, 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.
As the Zero Dividend Preference Shares are now issued by the Company's
subsidiary, PEWT Securities PLC, the authority to make market purchases of
those shares is dealt with by the subsidiary.
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 22;
• 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.
Financial statements
On 25 July 2014 PEWT Securities PLC, a wholly-owned subsidiary, was
incorporated. Therefore these financial statements have been prepared under
International Financial Reporting Standards as adopted by the European Union
("IFRS") for groups of companies. Previous financial statements were prepared
under UK GAAP.
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
Ian Graham
Director
24 February 2015
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 November 2014, 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 4 2 1
Michael Wigley 4 2 1
Charles Wilkinson 3 2 1
All of the Directors attended the Annual General Meeting held in April 2014.
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 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 and Mr Ian Graham.
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. The Audit Committee
reviews audit matters within clearly-defined written terms of reference (copies
of which are available upon request from the Company Secretary).
In particular, the Committee shall review and challenge where necessary:
• the consistency of, and any changes to, accounting policies both on a year on
year basis and across the Company;
• 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).
As the Company has no employees, section C.3.4 of the Code, which deals with
arrangements for staff to raise concerns in confidence about possible
improprieties in respect of financial reporting or other matters, is not
directly relevant to it. The Audit Committee has however, confirmed with the
Investment Manager and the administrator that they do have "whistle blowing"
policies in place for their staff.
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 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 30.
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 19 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 the 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 the Investment Manager 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 67. 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 download from the Investment
Managers' website: 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
Ian Graham
Director
24 February 2015
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 was put to shareholders and approved by
ordinary resolution at the Annual General Meeting held on 8 May 2014 under
Section 439 of the Companies Act 2006. There have been no changes to this
policy and it is expected to continue in force until the Annual General Meeting
in 2017.
The Company is not 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 36.
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:
Ordinary Shares at Ordinary Shares at Ordinary Shares at
23 February 2015† 31 December 2014 1 January 2014
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
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 has 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. Prior to 2013,
the Board compared the Company's performance against the Bloomberg World
Utilities (total return) Index.
The graph below shows the ten 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 2004 to 31 December
2014.
Ten 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 Year Expenses Total Year Fees Year Expenses Total Year
ended Year ended ended ended Year ended ended
31 31 December 31 31 31 December 31
December 2014 December December 2013 December
2014 2014 2013 2013
£ £ £ £ £ £
Geoffrey 26,000 2,111 28,111 26,000 507 26,507
Burns
Ian Graham 20,000 2,056 22,056 20,000 514 20,514
Michael 18,000 368 18,368 18,000 385 18,385
Wigley
Charles 18,000 979 18,979 18,000 723 18,723
Wilkinson
Total 82,000 5,514 87,514 82,000 2,129 84,129
During the year ended 31 December 2014 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 2014 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 both a
high income and long term capital growth.
Year ended Year ended Change
31 December 2014 31 December 2013
£000 £000 £000
Aggregate 88 84 5
Directors'
emoluments plus
expenses
Aggregate 2,303 2,092 211
shareholder
distributions in
respect of the year
Voting at last Annual General Meeting
At the Annual General Meeting of the Company held on 8 May 2014 an advisory
resolution was put to shareholders to approve the remuneration report set out
in the 2013 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 votes 12,707,967 99.8 21,173 0.2 2,662 0
At the Annual General Meeting of the Company held on 8 May 2014 a binding
resolution was put to shareholders to approve the Directors' remuneration
policy set out in the 2013 annual financial report. This resolution was passed
on a show of hands. The proxy votes registered in respect of the binding
resolution were:
For % Against % Withheld %
Number of proxy votes 12,679,191 99.6 50,565 0.4 2,046 0
Approval
A resolution for the approval of the Directors' Remuneration Report for the
year ended 31 December 2014 will be proposed at the Annual General Meeting.
By Order of the Board
Ian Graham
Director
Signed on behalf of the Board of Directors
24 February 2015
Audit Committee Report
The composition and summary terms of reference of the Audit Committee are set
out on page 27. The Audit Committee comprises the whole Board, all of whom are
independent.
The Audit Committee met in July 2014 and considered the form and content of the
Company's half year report to 30 June 2014.
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 2014.
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 2013: £6,000). Whilst non-audit services as a
proportion of audit services amount to approximately 21%, 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 issues for the Audit Committee
The Audit Committee identified the following significant issues:
1. The accuracy of the valuation of the investment portfolio.
2. The accuracy of the calculation of management and performance fees.
3. The risk that income is overstated, incomplete or inaccurate through failure
to recognise proper income entitlements or to apply the appropriate accounting
treatment for recognition of income.
4. Management Override of Controls.
The external audit plan was reviewed with the external auditor, and the
Committee concluded that suitable audit procedures had been implemented to
obtain reasonable assurance that the Financial Statements as a whole would be
free of material misstatements. Specifically with reference to the highlighted
issues:
1. The Committee was satisfied that the procedures put in place by the external
auditors allowed them to value independently the investment portfolio.
2. The investment management fee and any performance fee are calculated in
accordance with the contractual terms in the investment management agreement by
the administrator and are reviewed in detail by the Investment Manager and are
also subject to an analytical review by the Board. The external audit also
includes checks on the calculation of the investment management fee and any
performance fee to ensure that they are correctly calculated. Because the high
water mark test was not passed, no performance fee was paid for 2014.
3. The Board regularly reviews income forecasts, including special dividends,
and receives explanations from the Investment Manager and administrator for any
variations or significant movements from previous forecasts and prior year
figures. The audit includes checks on the completeness and accuracy of income,
and also checks that this has been recognised in accordance with stated
accounting policies.
4. The external auditor reviews terms of agreement with service providers,
Premier Fund Managers Limited*, Premier Asset Management Limited and Northern
Trust, to confirm their independence from the Company. They assess the ability
of any member of the Manager or Board to circumvent controls to fraudulently
alter company financial results or undertake fraudulent transactions.
Financial statements
On 25 July 2014, PEWT Securities PLC, a wholly-owned subsidiary, was
incorporated. Therefore these financial statements have been prepared under
International Financial Reporting Standards as adopted by the European Union
("IFRS") for groups of companies. Previous financial statements were prepared
under UK GAAP. Restatement of opening balances relating to equity values,
assets and liabilities and profits and losses of the Group and Company between
UK GAAP as previously reported and under IFRS as restated have not been
presented as there have been no required changes to these reported amounts.
Therefore restatement tables have not been prepared for any of the primary
statements.
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 thereon, 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 eleven years and there has been no re-tendering of the
Audit in that time although there has to be a re-tender by 2022. 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 (h) on page 44 at the year ended 31 December
2014 the Committee agreed that the fair value of investments is the bid market
price for listed investments and the unquoted investments together with the
wholly-owned subsidiary, PEWT Securities PLC, currently valued at £50,000 at 31
December 2014, 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 23), 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
24 February 2015
*On 20 January 2015 the Company appointed Premier Portfolio Managers Limited as
its Alternative Investment Fund Manager. Premier Portfolio Managers Limited has
delegated the portfolio management of the Company's portfolio of assets to
Premier Fund Managers Limited.
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 International Financial Reporting
Standards. 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 Group and Company and of the profit or loss of the
Group and 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 International Financial Reporting 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 Group and Company
and which enable them to ensure that the financial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulations. They are also
responsible for safeguarding the assets of the Group and 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.
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 Group and Company;
b) this Annual Report includes a fair review of the development and
performance of the business and the position of the Group and 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
24 February 2015
Independent Auditor's Report
to the members of Premier Energy and Water Trust PLC
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Group's and the Company's
affairs as at 31 December 2014 and of its return for the year then ended;
• have been properly prepared in accordance with International Financial
Reporting Standards as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
Overview of the scope of our audit
We have audited the financial statements of Premier Energy and Water Trust Plc
for the year ended 31 December 2014 which comprise the Consolidated Statement
of Comprehensive Income, Consolidated and Company Balance Sheets, Consolidated
Statement of Changes in Equity, Company Statement of Changes in Equity,
Consolidated and Company Cash Flow Statements, Reconciliation of Net Cash Flow
to Movement of Net Debt and the related notes 1 to 21. The financial reporting
framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards as adopted by the European Union.
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 34 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.
Our assessment of risks of material misstatement
We identified the following risks 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 table also
includes our response to the risks:
Risk Identified Our Response
The valuation of the assets held in the • We agreed the year end prices of the
investment portfolio is the key driver investments to an independent source.
of the company's investment return.
Incorrect asset pricing or a failure to • We agreed the number of shares held
maintain proper legal title of the in each security to a confirmation of
assets held by the company could have a legal title received from the Company's
significant impact on portfolio custodian.
valuation and, therefore, the return
generated for shareholders.
The fees payable by the company for • We used the terms contained in the
investment management services are a investment management agreement to
significant component of the company's perform a recalculation of the fees
cost base and, therefore, impact the payable.
company's total return. If the
management and performance fees are not • We agreed the inputs for the
calculated in accordance with the calculations to source data and agreed
methodology prescribed in the the cash payments made to bank
investment management agreement this statements.
could have a significant impact on both
costs and overall performance.
The investment income receivable by the • We agreed a sample of dividends to
company during the period directly the corresponding announcement made by
drives the company's ability to make a the investee company and agreed cash
dividend payment to shareholders. If received to bank statements.
the company is not entitled to receive
the dividend income recognised in the • For a sample of dividends accrued at
financial statements or the income year end, we reviewed the investee
recognised does not relate to the company announcements to assess whether
current financial year, this will the dividend obligation arose prior to
impact the extent of the profits 31 December 2014.
available to fund dividend
distributions to shareholders. • We agreed a sample of accrued
dividends to post year end bank
statements to assess the recoverability
of these amounts.
Our application of materiality
We determined planning materiality for the Company to be £340,000 which is 1%
of total equity. This provided a basis for determining the nature, timing and
extent of our risk assessment procedures, identifying and assessing the risk of
material misstatement and determining the nature, timing and extent of further
audit procedures. We have derived our materiality calculation based on a
proportion of total equity as we consider it to be the most important financial
metric on which shareholders would judge the performance of the Company.
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 planning materiality,
namely £255,000. Our objective in adopting this approach was to ensure that
total detected and undetected audit differences in all accounts did not exceed
our planning materiality level.
Given the importance of the distinction between revenue and capital for the
Company we have also applied a separate performance materiality of £97,000 for
the Income Statement, being 5% of the return on ordinary activities before
taxation.
We have reported to the Committee all audit differences in excess of £17,000 as
well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds.
Opinion on other matters 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 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
• 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 22 in relation to going concern;
and
• the part of the Corporate Governance Statement 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
24 February 2015
Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2014
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2014 2014 2014 2013 2013 2013
Revenue Capital Total Revenue Capital Total
Notes £000 £000 £000 £000 £000 £000
Gains on
investments
held at
fair value 8 - 8,627 8,627 - 12,306 12,306
through
profit or
loss
Income 2 3,067 - 3,067 2,719 - 2,719
Investment 3 (301) (455) (756) (268) (398) (666)
management
fee
Other 4 (817) - (817) (375) - (375)
expenses
Profit before 1,949 8,172 10,121 2,076 11,908 13,984
finance costs
and taxation
Finance costs 5 - (2,635) (2,635) - (2,471) (2,471)
Profit before 1,949 5,537 7,486 2,076 9,437 11,513
taxation
Taxation 6 (222) - (222) (155) - (155)
Total 1,727 5,537 7,264 1,921 9,437 11,358
comprehensive
income for
the year
Return per
Ordinary
Share (pence)
- basic 17 10.11 32.42 42.53 11.25 55.29 66.54
The notes on pages 42 to 60 form part of these financial statements.
The total column of this statement represents the Group's profit or loss,
prepared in accordance with IFRS.
As the parent of the Group, the Company has taken advantage of the exemption
not to publish its own separate Statement of Comprehensive Income. The
Company's total comprehensive income for the year ended 31 December 2014 was £
7,264,000.
The supplementary revenue and capital columns are prepared under guidance
published by the Association of Investment Companies ("AIC").
All items derive from continuing operations; the Group does not have any other
recognised gains or losses.
Consolidated and Company Balance Sheets
for the financial year ended 31 December 2014
Group Company Company
2014 2014 2013
Notes £000 £000 £000
Non current
assets
Investments at 8 77,336 77,386 68,369
fair value
through profit
or loss
Current assets
Debtors 10 1,658 1,658 258
Cash at bank 268 268 1,529
1,926 1,926 1,787
Total assets 79,262 79,312 70,156
Current
liabilities
Creditors: 11 (265) (315) (167)
amounts falling
due within one
year
Zero Dividend 11 (44,970) (44,970) -
Preference
shares
(45,235) (45,285) (167)
Total assets 34,027 34,027 69,989
less current
liabilities
Non-current 12 - - (41,536)
liabilities:
Zero Dividend
Preference
shares
Net assets 34,027 34,027 28,453
Equity
attributable to
Ordinary
Shareholders
Share capital 13 174 174 171
Share premium 14 7,444 7,444 6,884
Redemption 88 88 88
reserve
Capital reserve 15 16,976 16,976 11,439
Special reserve 7,472 7,472 7,472
Revenue reserve 1,873 1,873 2,399
Total equity 34,027 34,027 28,453
attributable to
Ordinary
Shareholders
Net asset value
per Ordinary
Share (pence)
- International 18 195.80 195.80 166.70
Financial
Reporting
Standards basis
Net asset value
per Ordinary
Share (pence)
- Articles of 18 196.23 196.23 167.55
Association
basis
The financial statements on pages 37 to 60 of Premier Energy and Water Trust
PLC, company number 4897881, were approved by the Board and authorised for
issue on 24 February 2015 and were signed on its behalf by:
Ian Graham
Director
The notes on pages 42 to 60 form part of these financial statements.
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2014
Ordinary 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 2014
Balance at 31 171 6,884 88 11,439 7,472 2,399 28,453
December 2013
Total comprehensive - - - 5,537 - 1,727 7,264
income for the
period
Tap issue of 3 560 - - - - 563
Ordinary Shares
during the year
Ordinary dividends - - - - - (2,253) (2,253)
paid
Balance at 31 174 7,444 88 16,976 7,472 1,873 34,027
December 2014
The notes on pages 42 to 60 form part of these financial statements.
Company Statement of Changes in Equity
for the financial year ended 31 December 2014
Ordinary 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 2014
Balance at 31 171 6,884 88 11,439 7,472 2,399 28,453
December 2013
Total comprehensive - - - 5,537 - 1,727 7,264
income for the
period
Tap issue of 3 560 - - - - 563
Ordinary Shares
during the year
Ordinary dividends - - - - - (2,253) (2,253)
paid
Balance at 31 174 7,444 88 16,976 7,472 1,873 34,027
December 2014
Ordinary 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
Total comprehensive - - - 9,437 - 1,921 11,358
income for the
period
Ordinary dividends - - - - - (1,912) (1,912)
paid
Balance at 31 171 6,884 88 11,439 7,472 2,399 28,453
December 2013
The notes on pages 42 to 60 form part of these financial statements.
Consolidated and Company Cashflow Statements
for the financial year ended 31 December 2014
Group Company Company
Year ended Year ended Year ended
31 December 31 December 31 December
2014 2014 2013
£000 £000 £000
Profit before finance costs and 10,121 10,121 13,984
taxation
Adjustments for
Movement in investments held at (8,627) (8,627) (12,306)
fair value through profit or
loss
(Increase)/decrease in trade and (28) (28) 15
other receivables
Increase/(decrease) in trade and 84 84 (17)
other payables
Net cash flows from operating 1,550 1,550 1,676
activities
Overseas taxation paid (217) (217) (105)
Investing activities
Purchases of investments (27,582) (27,582) (25,929)
Proceeds from sales of 27,241 27,241 26,319
investments
Net cash flows from investing (341) (341) 390
activities
Financing activities
Dividends paid (2,253) (2,253) (1,912)
Net cash used in financing (2,253) (2,253) (1,912)
activities
(Decrease)/increase in cash and (1,261) (1,261) 49
cash equivalents
Cash and cash equivalents, 1,529 1,529 1,480
beginning of period
Cash and cash equivalents at end 268 268 1,529
of period
The notes on pages 42 to 60 form part of these financial statements.
Notes to the Financial Statements
for the financial year ended 31 December 2014
1. ACCOUNTING POLICIES
1.1 Principal accounting policies adopted by the Company
(a) Basis of preparation
Following the incorporation of the Company's wholly-owned subsidiary, PEWT
Securities PLC, on 25 July 2014 the financial statements of the Group and
Company have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union, and as applied in
accordance with the provisions of the Companies Act 2006. These comprise
standards and interpretations of the International Accounting Standards and
Standing Interpretations Committee as approved by the International Accounting
Standards Committee ("IASC") that remain in effect, to the extent that IFRS
have been adopted by the European Union.
Previously, the financial statements were prepared in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP"). The transition to IFRS did
not result in any significant changes to the accounting polices.
The financial statements have also been prepared in accordance with the
Statement of Recommended Practice ("SORP") for investment trusts issued by the
Association of Investment Companies ("AIC") in November, 2014, where the SORP
is not inconsistent with IFRS.
The financial information for the year ended 31 December 2013 included in this
report has been taken from the Company's full accounts, as restated to comply
with IFRS from the transition date of 1 January 2013. Restatement of opening
balances relating to equity values, assets and liabilities and profits and
losses of the Group and Company between UK GAAP as previously reported and
under IFRS as restated have not been presented as there have been no required
changes to these reported amounts. Therefore restatement tables have not been
prepared for any of the primary statements.
The functional currency of the Group is UK pounds Sterling as this is the
currency of the primary economic environment in which the Group operates.
Accordingly, the financial statements are presented in UK pounds Sterling
rounded to the nearest thousand pounds.
(b) Basis of consolidation
IFRS 10 Consolidated Financial Statements (effective for periods beginning on
or after 1 January, 2014)
The financial statements presented in these accounts for the financial year to
31 December, 2014 reflect the adoption of IFRS 10 (including the Investment
Entities amendment, now adopted by the EU) which requires investment companies
to value subsidiaries (except for those providing investment related services)
at fair value through profit and loss rather than consolidate them. IFRS 10
(and the Investment Entities amendment) is effective for financial years
beginning on or after 1 January, 2014.
The consolidated financial statements are made up to 31 December each year and
incorporate the financial statements of the Company and its wholly-owned
subsidiary, PEWT Securities PLC. Subsidiaries are consolidated from the date of
their acquisition, being the date on which the Company obtains control, and
continue to be consolidated until the date that such control ceases. The
financial statements of subsidiaries used in the preparation of the
Consolidated Financial Statements are based on consistent accounting policies.
All intra-group balances and transactions, including unrealised profits arising
therefrom, are eliminated.
PEWT Securities PLC, the Company's wholly-owned subsidiary, incorporated on 25
July 2014, is being consolidated in the accounts for the first time in 31
December 2014 as it provides investment-related services.
Assessment of an investment entity
Entities that meet the definition of an investment entity within IFRS 10 are
permitted to measure their subsidiaries at fair value through profit or loss
rather than consolidate them. The criteria which define an investment entity
are as follows:
• an entity that obtains funds from one or more investors for the purpose of
providing those investors with investment services.
• an entity that commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income or
both.
• an entity that measures and evaluates the performance of substantially all of
its investments on a fair value basis.
The Board has agreed with the recommendation of the Audit Committee that the
Company meets the definition of an investment entity as it satisfies each of
the criteria above and that this accounting treatment better reflects the
Company's activities as an investment trust. Specifically, as an investment
trust, the Company's principal activity is portfolio investment and the
investment objectives of the Company (stated in the Strategic Report on page
16) 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.
The Group's investments have been designated as fair value through profit or
loss, and are evaluated on a fair value basis by the Board.
(c) Presentation of Statement of Comprehensive Income
In order to better reflect the activities of the Company as an investment trust
company, and in accordance with guidance issued by the AIC, supplementary
information which analyses the Consolidated Statement of Comprehensive Income
between items of a revenue and capital nature has been presented alongside the
Consolidated Statement of Comprehensive Income. In accordance with the
Company's Articles of Association, net capital returns can be distributed by
way of dividend. Additionally, net revenue is the measure the Directors believe
appropriate in assessing the Company's compliance with certain requirements set
out in Section 1158 of the Corporation Tax Act 2010.
As permitted by Section 408 of the Companies Act 2006, no Company Statement of
Comprehensive Income has been prepared.
The profit dealt with in the accounts of the parent Company was £1,727,000 (31
December, 2013: profit £1,921,000).
(d) Use of estimates
The preparation of financial statements requires the Company to make estimates
and assumptions that affect items reported in the Balance Sheet and Statement
of Comprehensive Income and the disclosure of contingent assets and liabilities
at the date of the financial statements. Although these estimates are based on
management's best knowledge of current facts, circumstances and, to some
extent, future events and actions, the Company's actual results may ultimately
differ from those estimates, possibly significantly. The investments in the
equity and fixed interest stocks of unquoted companies that the Group holds are
not traded and as such the prices are more uncertain than those of more widely
traded securities. The unquoted investments are valued by reference to
valuation techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital Valuation ("IPEV") guidelines
as described in note 1.1 (h). Please also refer to note 9 regarding investments
in subsidiaries.
(e) Income
Dividend income from investments is taken into account by reference to the date
the security becomes ex-dividend. Interest from short-term deposits is
accounted for on an accruals basis. The fixed return on a debt security is
recognised on a time apportionment basis so as to reflect the effective
interest rate on the debt security. Special dividends are credited to capital
or revenue in the Consolidated Statement of Comprehensive Income, according to
the circumstances surrounding the payment of the dividend. UK dividends are
accounted for net of any tax credits.
Overseas dividends and other income that are subject to withholding tax are
grossed up.
Interest receivable on deposits is accounted for on an accruals basis.
(f) 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;
• the finance costs representing the accrued capital entitlement of the Zero
Dividend Preference Shares is allocated to capital;
• investment transaction costs are allocated to capital; and
• other expenses are charged wholly to revenue.
(g) 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 2014 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.
(h) Investments held at fair value through profit or loss
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
Consolidated Statement of Comprehensive Income within "gains/(losses) on
investments held at fair value through profit or loss".
The investment in the Company's subsidiary, PEWT Securities PLC, is held at
fair value.
(i) Dividends
Interim and final dividends are recognised in the year in which they are paid.
(j) 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 Consolidated
Statement of Comprehensive Income as appropriate. Foreign exchange movements on
investments are included in the Consolidated Statement of Comprehensive Income
within gains on investments.
(k) Zero Dividend Preference Shares
The Zero Dividend Preference Shares are classified as a financial liability and
shown as a liability in the Group balance sheet.
The provision for compound growth entitlement of the Zero Dividend Preference
Shares is recognised through the Consolidated Statement of Comprehensive Income
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.
(l) Special reserve
The special reserve is available for the repurchase by the Company of its own
Ordinary Shares.
1.2 Accounting standards issued but not yet effective
At the date of authorisation of these Financial Statements, the following
standards were in issue but were not yet effective (and in some cases had not
yet been adopted by the EU) and therefore they have not been applied in these
Financial Statements.
Effective for periods
International Accounting beginning on or after
Standards (IAS/IFRSs)
IFRS 9 Financial Instruments 1 January, 2018
(early adoption permitted)
IFRS 14 Regulatory Deferral 1 January, 2016
Accounts
IFRS 15 Revenue from Contracts 1 January, 2017
with Customers
Amendments to standards
IFRS 11 Accounting for 1 January, 2016
Acquisitions of Interests
in Joint Operations
IAS 16 & IAS 38 Sale or Contribution of 1 January, 2016
Assets between an Investor
and its Associate or Joint
Venture
IAS 24 Related Party Disclosures 1 July, 2014
The Directors do not anticipate that the adoption of these standards will have
a material impact on the Financial Statements in the period of initial
application and have decided not to early adopt.
2. INCOME
Year ended 31 December Year ended 31 December
2014 2013
£000 £000
Income from investments:
UK franked investment income 502 448
UK bond interest 151 128
Overseas dividends 2,271 1,729
Overseas interest 138 410
Bank interest 5 4
Total income 3,067 2,719
3. INVESTMENT MANAGEMENT FEE
Year ended 31 December Year ended 31 December
2014 2013
£000 £000
Charged to Revenue:
Investment management fee 301 268
(40%)
Charged to Capital:
Investment management fee 455 398
(60%)
756 666
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 2014 (2013: nil).
† On 20 January 2015 the Company appointed Premier Portfolio Managers Limited
as its Alternative Investment Fund Manager. Premier Portfolio Managers Limited
has delegated the portfolio management of the Company's portfolio of assets to
Premier Fund Managers Limited.
4. OTHER EXPENSES
Year ended 31 December Year ended 31 December
2014 2013
£000 £000
Charged to Revenue:
Secretarial services 94 83
Administration expenses 184 178
Reorganisation costs (see 417 -
page 16)
Auditor's remuneration - 28 24
audit services#
- other services relating 6 6
to taxation*
Directors' fees plus 88 84
expenses
817 375
#The charge for audit services for 2014 includes £2,000 of non-recurring
charges.
*Auditor other services includes £6,000 for corporation tax compliance work
(2013: £6,000 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
2014 2014 2014 2013 2013 2013
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Provision for
compound growth
entitlement
of the Zero - 2,635 2,635 - 2,471 2,471
Dividend
Preference
Shares
- 2,635 2,635 - 2,471 2,471
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
2014 2014 2014 2013 2013 2013
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Overseas tax 222 - 222 155 - 155
Total tax charge 222 - 222 155 - 155
for the year
(see note 6 (b))
(b) FACTORS AFFECTING THE CURRENT TAX CHARGE FOR THE YEAR:
The tax assessed for the year is lower than the standard rate of corporation
tax in the UK for a large company of 21.50% (31 December 2013: 23.25%). The
differences are explained below:
Year ended 31 Year ended 31
December 2014 December 2013
£000 £000
Total return before taxation 7,486 11,513
UK corporation tax at 21.50% (31 1,609 2,677
December 2013: 23.25%)
Effects of:
Capital (gains)/losses not subject (1,854) (2,861)
to corporation tax
Finance costs of Zero Dividend 566 575
Preference Shares
UK dividends which are not taxable (108) (104)
Overseas tax suffered 222 155
Non-taxable overseas dividends (488) (402)
Movement in unutilised management 275 115
expenses
Total tax charge 222 155
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 £1,040,000 (31 December 2013: £
823,000) relating to excess expenses of £5,200,000 (31 December 2013: £
3,922,000). 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 2014 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
2014
Per Ordinary Share £000
First interim dividend - paid 1.90p 324
on 30 June 2014
Additional interim dividend - 0.75p 128
paid on 30 June 2014
Second interim dividend - 1.90p 324
paid on 30 September 2014
Additional interim dividend - 0.75p 128
paid on 30 September 2014
Third interim dividend - paid 1.90p 324
on 31 December 2014
Additional interim dividend - 0.75p 128
paid on 31 December 2014
Fourth interim dividend - 4.70p 817
payable on 31 March 2015*
Additional interim dividend - 0.75p 130
payable on 31 March 2015*
13.40p 2,303
* Not included as a liability in the year ended 31 December 2014 accounts.
The fourth interim dividend and the additional dividend will be paid on 31
March 2015 to members on the register at the close of business on 6 March 2015.
The shares will be marked ex-dividend on 5 March 2015.
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
2013
Per Ordinary Share £000
First interim dividend - paid 1.70p 291
on 28 June 2013
Second interim dividend - 1.90p 324
paid on 30 September 2013
Additional interim dividend - 0.75p 128
paid on 30 September 2013
Third interim dividend - paid 1.90p 324
on 31 December 2013
Additional interim dividend - 0.75p 128
paid on 31 December 2013
Fourth interim dividend - 4.50p 769
paid on 31 March 2014*
Additional interim dividend - 0.75p 128
paid on 31 March 2014*
12.25p 2,092
* Not included as a liability in the year ended 31 December 2013 accounts.
Amounts recognised as distributions to equity holders in the year:
Year ended 31 December Year ended 31 December
2014 2013
£000 £000
Fourth interim dividend 769 717
for the year ended 31
December 2013 of 4.50p
(2012: 4.20p) per ordinary
share
Additional interim 128 -
dividend for the year
ended 31 December 2014 of
0.75p (2013: nil) per
ordinary share
First interim dividend for 324 291
the year ended 31 December
2014 of 1.90p (2013:
1.70p) per ordinary share
Additional interim 128 -
dividend for the year
ended 31 December 2014 of
0.75p (2013: nil) per
ordinary share
Second interim dividend 324 324
for the year ended 31
December 2014 of 1.90p
(2013: 1.90p) per ordinary
share
Additional interim 128 128
dividend for the year
ended 31 December 2014 of
0.75p (2013: 0.75p) per
ordinary share
Third interim dividend for 324 324
the year ended 31 December
2014 of 1.90p (2013:
1.90p) per ordinary share
Additional interim 128 128
dividend for the year
ended 31 December 2014 of
0.75p (2013: 0.75p) per
ordinary share
2,253 1,912
8. INVESTMENTS
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Investments listed on a 77,336 77,336 68,369
recognised investment
exchange
Investments in subsidiaries - 50 -
Valuation at period end 77,336 77,386 68,369
Opening book cost 59,852 59,852 56,309
Opening investment holding 8,517 8,517 143
gains/(losses)
Opening valuation 68,369 68,369 56,452
Movements in the period:
Purchases at cost 27,583 27,633 25,929
Sales - proceeds (27,243) (27,243) (26,318)
- gains on sales 5,090 5,090 3,932
Movement in investment 3,537 3,537 8,374
holding gains/(losses) for
the period
Closing valuation 77,336 77,386 68,369
Closing book cost 65,282 65,332 59,852
Closing investment holding 12,054 12,054 8,517
gains/(losses)
Closing valuation 77,336 77,386 68,369
Gains on sales based on 5,090 5,090 3,932
historical cost
Movement in holding gains/ 3,537 3,537 8,374
(losses) for the period
Net gains on investments 8,627 8,627 12,306
attributable to Ordinary
Shareholders
Classification of assets
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Equities 74,711 74,761 64,024
Corporate bonds 2,625 2,625 4,345
Total investments 77,336 77,386 68,369
9. INVESTMENTS IN SUBSIDIARIES
As at 31 December 2014
Country of
% incorporation Capital and
Ordinary and reserves Profit &
Share loss
Entity Principal capital held registration £000 £000
activity
Investment in
subsidiaries:
PEWT Financing 100% England 50 -
Securities PLC
The Company owns the whole of the ordinary share capital (£50,000) of PEWT
Securities PLC a company which has issued the Group's New Zero Dividend
Preference Shares. The subsidiary is held at fair value of £50,000 (2013: nil).
10. RECEIVABLES AND OTHER FINANCIAL ASSETS
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Accrued income and 248 248 219
prepayments
Overseas 35 35 39
withholding tax
recoverable
Other debtors 1,375 1,375 -
1,658 1,658 258
11. OTHER FINANCIAL LIABILITIES
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Other creditors 265 315 167
21,565,054 Zero 44,970 44,970* -
Dividend Preference
Shares of £0.01
(2013: 21,180,373)
45,235 45,285 167
On 17 December 2014, by way of a tap issue in response to market demand, PEWT
Securities PLC allotted and issued 384,681 New Zero Dividend Preference Shares
of 1 pence each par value for cash, at a price of 214 pence per share. The
accrued capital entitlement at that date was 207.68 pence per share. The final
capital entitlement of all the Zero Dividend Preference Shares in issue will be
221.78 pence per share (total of £47,826,000), which will be payable on 31
December 2015.
*The Zero Dividend Preference Shares, are issued by the Company's wholly-owned
subsidiary, PEWT Securities PLC. The Company has entered into an undertaking
Agreement with PEWT Securities PLC to meet the repayment entitlement of the ZDP
Shares on 31 December 2015. The proposals to reorganise and extend the life of
the Company that were approved by shareholders on 25 July 2014 resulted in the
replacement of the existing ZDP Shares with New ZDP Shares issued by PEWT
Securities PLC (see page 16).
12. NON-CURRENT LIABILITIES
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
21,565,054 Zero - - 41,536
Dividend Preference
Shares of £0.01
(2013: 21,180,373)
The Zero Dividend Preference Shares of the Company at 31 December 2014 are now
shown in note 11.
13. SHARE CAPITAL
Group and Group and
Company Company Company Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2014 2014 2013 2013
Number of £000 Number of £000
shares shares
Allotted,
issued and
fully paid:
Opening balance 17,068,480 171 17,068,480 171
Ordinary Shares
of £0.01
Issued in year 310,000 3 - -
17,378,480 174 17,068,480 171
The allotted issued and fully paid Zero Dividend Preference Shares of the
Company at 31 December 2014 are disclosed in note 11.
14. SHARE PREMIUM
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Opening balance 6,884 6,884 6,884
Movement in year 560 560 -
Closing balance 7,444 7,444 6,884
15. CAPITAL RESERVE
Group Company Company
Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013
£000 £000 £000
Opening balance 11,439 11,439 2,002
Gains on 8,627 8,627 12,306
investments - held
at fair value
through profit or
loss
Provision for (2,635) (2,635) (2,471)
compound growth
entitlement of Zero
Dividend Preference
Shares
Investment (455) (455) (398)
management fee
charged to capital
Closing balance 16,976 16,976 11,439
16. FINANCIAL COMMITMENTS
At 31 December 2014 there were no commitments in respect of unpaid calls and
underwritings (31 December 2013: nil).
17. RETURN PER SHARE - BASIC
Total return per Ordinary Share is based on the total comprehensive income for
the year after taxation of £7,264,000 (31 December 2013: £11,358,000).
These calculations are based on the weighted average number of 17,080,370
Ordinary Shares in issue during the year to 31 December 2014 (2013: 17,068,480
number of Ordinary Shares).
The return per Ordinary Share can be further analysed between revenue and
capital as below:
Year ended 31 Year ended 31 Year ended 31 Year ended 31
December 2014 December 2014 December 2013 December 2013
Pence per £000 Pence per £000
Ordinary Share Ordinary Share
Net revenue 10.11p 1,727 11.25p 1,921
return
Net capital 32.42p 5,537 55.29p 9,437
return
Net total 42.53p 7,264 66.54p 11,358
return
The Company does not have any dilutive securities.
18. 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 International
Financial Reporting 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 2014 and 31 December
2013.
The net asset value per share and the net assets available to each class of
share calculated in accordance with International Financial Reporting
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
2014 2014 2013 2013
Pence £000 Pence £000
17,378,480 195.80 34,027 166.70 28,453
Ordinary Shares
in issue (2013:
17,068,480)
21,565,054 Zero 208.53 44,970 196.11 41,536
Dividend
Preference
Shares* in
issue (2013:
21,180,373)
* 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
2014 2014 2013 2013
Pence £000 Pence £000
17,378,480 196.23 34,102 167.55 28,598
Ordinary Shares
in issue (2013:
17,068,480)
21,565,054 Zero 208.18 44,895 195.42 41,391
Dividend
Preference
Shares* in
issue (2013:
21,180,373)
* Classified as a liability.
19. 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 2014 £149,200 (31 December 2013: £63,014) of these fees
remained outstanding.
Fees paid to the Directors are disclosed in the Directors' Remuneration Report
on page 30.
Full details of Directors' interests are set out in the Directors' Remuneration
Report on page 29.
20. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
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 2013.
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
2014 2013
Investments Investments
£000 £000
Australian Dollar 907 605
Brazilian Real 3,204 2,361
Chinese Yuan - 990
Euro 6,593 9,497
Hong Kong Dollar 15,862 15,663
Indonesian Rupiah - 441
Malaysian Ringgit 2,101 2,200
Norwegian Krone 355 -
Philippine Peso 773 307
Polish Zloty 2,354 1,614
Qatari Riyal 2,312 2,111
Romanian Leu 1,450 -
Singapore Dollar 935 525
US Dollar 13,040 10,825
49,886 47,139
(b) CURRENCY RISK continued
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 +/- 1% (2013: 4%)
Sterling/Euro +/- 4% (2013: 5%)
Sterling/Hong Kong Dollar +/- 1% (2013: 4%)
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:
2014 2014 2014 2013 2013 2013
US Euro HK US Euro HK
Dollar Dollar Dollar Dollar
£000 £000 £000 £000 £000 £000
Projected change 1% 4% 1% 4% 5% 4%
Impact on revenue return (3) (13) (6) (9) (31) (11)
Impact on capital return (130) (264) (159) (433) (475) (627)
Total return after taxation for (133) (277) (165) (442) (506) (638)
the year
Equity (133) (277) (165) (442) (506) (638)
If Sterling had weakened against the currencies shown, this would have had the
following effect:
2014 2014 2014 2013 2013 2013
US Euro HK US Euro HK
Dollar Dollar Dollar Dollar
£000 £000 £000 £000 £000 £000
Projected change 1% 4% 1% 4% 5% 4%
Impact on revenue return 3 13 6 9 31 11
Impact on capital return 130 264 159 433 475 627
Total return after taxation for 133 277 165 442 506 638
the year
Equity 133 277 165 442 506 638
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 2014 (and 31 December 2013) 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 9.
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. 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 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
2014 2014 2013 2013
£000 £000 £000 £000
Consolidated Statement of
Comprehensive Income -
return after taxation:
Revenue return - increase/ 30 (30) 27 (27)
(decrease)
Capital return - increase/ 7,734 (7,734) 6,837 (6,837)
(decrease)
Total return after 7,764 (7,764) 6,864 (6,864)
taxation - increase/
(decrease)
Equity 7,764 (7,764) 6,864 (6,864)
(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 2014 the unquoted securities are valued at
£50,000 which relates to the wholly-owned subsidiary, PEWT Securities PLC (31
December 2013 the unquoted securities were 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.
The Board will monitor the level of liquidity required to fund the repayment of
the Zero Dividend Preference Shares due on 31 December 2015.
The contractual maturities of the Group's financial liabilities at 31 December
2014, based on the earliest date on which payment can be required, were as
follows:
More than
3 months
but no
3 months more than
or less one year Total
At 31 December 2014 £000 £000 £000
Payables and other (265) - (265)
financial liabilities
Zero Dividend Preference - (47,826) (47,826)
Shares
(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 2014 (comprising of convertible
bonds, current assets and cash at bank) was £4,819,000 (2013: £8,651,000). The
calculation is based on the Company's credit exposure as at 31 December 2014
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 fair value hierarchy.
Financial assets at fair value through profit or loss at 31 December 2014
Level 1 Level 3 Total
£000 £000 £000
Equity investments 74,711 50 74,761
Fixed interest 2,625 - 2,625
bearing securities
Total 77,336 50 77,386
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
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 2014 and at 31 December 2013).
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 with a market value).
Level 3 fair values are determined by the Directors using valuation
methodologies in accordance with the IPEV Guidelines and as detailed in note
1.1 (h). Significant inputs include investment cost, the value of the most
recent capital raising, the adjusted net asset value of funds and the Pricing
Committee's valuations. In accordance with IPEV Guidelines, new investments are
carried at cost, the price of the most recent investment being a good
indication of fair value. Thereafter, fair value is the amount deemed to be the
price that would be received upon sale of an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. At 31 December 2014, the Company's Level 3 investments
related to the wholly-owned subsidiary, PEWT Securities PLC.
The valuation techniques used by the Company are explained in the accounting
policies note on page 44.
A reconciliation of fair value measurements in Level 3 is set out below.
Level 3 financial assets at fair value through profit or loss
As at
31 December
2014
£000
Opening fair value -
Investment in subsidiary 50
Closing fair value 50
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 2014 December 2014 December 2013 December 2013
Book value Level 1 Book value Level 1
£m £m £m £m
Zero Dividend 45.0 46.2 41.5 43.6
Preference
Shares
20. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES continued
(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 comprises:
2014 2013
£000 £000
Debt:
Zero Dividend Preference (44,970) (41,536)
Shares
Equity:
Equity share capital 174 171
Retained earnings and 33,853 28,282
other reserves
34,027 28,453
Total Capital 79,262 69,989
Debt as a percentage of 56.74% 59.35%
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 As at 31 As at 31
December December December December December December December December
2014 2014 2014 2014 2013 2013 2013 2013
More More
than than
3 months 3 months
but no but no
3 months more More 3 months more More
than than than than
or less one year one year Total or less one year one year Total
£000 £000 £000 £000 £000 £000 £000 £000
Creditors:
amounts
falling due
within one
year
Other 265 - - 265 167 - - 167
creditors
Accrued
capital
entitlement
of the
Zero - 47,826 - 47,826 - - - -
Dividend
Preference
Shares
Premium
(net of
expenses on
placing
of Zero - 75 - 75 - - - -
Dividend
Preference
Shares)
Creditors:
amounts
falling due
after more
than one
year
Accrued
capital
entitlement
of the
Zero - - - - - - 46,974 46,974
Dividend
Preference
Shares
Premium
(net of
expenses on
placing
of Zero - - - - - - 145 145
Dividend
Preference
Shares)
265 47,901 - 48,166 167 - 47,119 47,286
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.
21. SEGMENTAL REPORTING
The chief operating decision maker has been identified as the Board of Premier
Energy and Water Trust plc. The Board reviews the Company's internal management
accounts in order to analyse performance.
The Directors are of the opinion that the Company is engaged in one segment of
business, being the investment business.
Geographical segmental analysis pertaining to the Company has not been
disclosed because the Directors are of the opinion that as an investment
company the geographical sources of revenues received by the Company are
incidental to its investment activity. The geographical allocation of the
investments from which income is received and to which non-current assets
relate is given on page 54.
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 Zero
Dividend Preference ("ZDP") shares, 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 ZDP Shares in December 2010 of £330,000. In
accordance with International Financial Reporting 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 2014 and 31
December 2013.
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.
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 Premier Fund Managers Limited, Eastgate Court, High
Street, Guildford, Surrey GU1 3DE on Tuesday, 21 April 2015, at 12:15 p.m. to
consider and, if thought fit, pass the following resolutions, which will be
proposed as to resolutions 1, 2, 3, 4, 5, 6, 7 and 8 as ordinary resolutions
and as to resolutions 9 and 10 as special resolutions:
ORDINARY RESOLUTIONS
1. To receive the Directors' Report and Financial Statements for the year ended
31 December 2014.
2. To approve the Directors' Remuneration Report, other than the part
containing the Directors' Remuneration Policy, for the financial year ended 31
December 2014.
3. To re-elect Mr Geoffrey Burns as a Director of the Company.
4. To re-elect Mr Ian Graham as a Director of the Company.
5. To re-elect Mr Michael Wigley as a Director of the Company.
6. To re-appoint Ernst & Young LLP as Auditor of the Company and to authorise
the Board to determine their remuneration.
7. Authority to allot new shares:
THAT the Directors be and are hereby generally and unconditionally authorised,
in accordance with section 551 of the Companies Act 2006 (the "Act"), to allot
Ordinary Shares in the Company and to grant rights ("relevant rights") to
subscribe for or to convert any security into Ordinary Shares in the Company up
to an aggregate nominal amount of £17,378, representing 1,737,800 Ordinary
Shares of 1p each, (being approximately 10 per cent. of the issued Ordinary
Share capital of the Company as at the date of this notice) 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.
8. Authority to allot Ordinary Shares at a discount:
THAT, subject to and conditional upon the passing of resolution 7 above, the
Directors be and 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 that 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 by PEWT
Securities PLC ("New ZDP Shares") and (ii) the combined effect of the issue of
Ordinary Shares at a discount to the prevailing net asset value per Ordinary
Share and the issue of New ZDP Shares at a premium to net asset value per New
ZDP Share is that the net asset value per Ordinary Share is thereby increased.
SPECIAL RESOLUTIONS
9. Authority to disapply pre-emption rights:
THAT, subject to the passing of resolution numbered 7 above, the Directors of
the Company be empowered pursuant to section 570 of the Act to allot equity
securities (within the meaning of section 560 of the Act) for cash pursuant to
that 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 £17,378; and
(b) the allotment of equity securities to (i) all holders of Ordinary Shares of
1p each in the capital of the Company 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 2016, 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.
10. 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
2,605,034 Ordinary 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 authority hereby conferred shall expire at the earlier of the
conclusion of the Annual General Meeting of the Company in 2016 or 20 October
2016 unless such authority is renewed prior to such time; and
(e) 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
24 February 2015
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 notappoint 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 67).
2. To be valid any proxy form or other instrument appointing a proxy must be
received by post to Capita Asset Services, DXS1, 34 Beckenham Road, Beckenham,
Kent, BR3 42F 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 12:15 p.m. on Friday, 17 April 2015.
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 Friday, 17 April 2015 (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 23 February 2015 (being the last business day prior to the publication
of this Notice) the Company's issued share capital consisted of 17,378,480
Ordinary Shares, carrying one vote each. Therefore, the total voting rights in
the Company as at 23 February 2015 are 17,378,480.
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 6:00 p.m. on Friday, 17 April 2015. 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
GIIN W6S9MG.00000.LE.826
ZDP Shares (issued by PEWT Securities PLC)
SEDOL BPYP384GB
LSE PEWZ.L
GIIN W6S9MG.00001.LE.826
*On 20 January 2015 the Company appointed Premier Portfolio Managers Limited as
its Alternative Investment Fund Manager. Premier Portfolio Managers Limited has
delegated the portfolio management of the Company's portfolio of assets to
Premier Fund Managers Limited.