Final Results
Premier Energy and Water Trust PLC
annual report & accounts
for the year ended 31 December 2011
Investment objectives
The Company's investment objectives are to achieve a high income from its
portfolio and to realise long-term growth in the capital value of the
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.
WINNER OF THE BEST HIGH INCOME SECURITY AWARD IN THE
MONEY OBSERVER INVESTMENT TRUST AWARDS 2010
Contents
Investment objectives
Company highlights 1
Company summary 2
Financial calendar 2
Chairman's statement 3
Investment manager's report 5
Investment portfolio 8
Company details 9
Financial summary 12
Directors 14
Investment manager and secretary 14
Directors' report 15
Directors' remuneration report 29
Statement of directors' 31
responsibilities in respect of the
financial statements
Independent auditor's report 32
Income statement 34
Balance sheet 35
Reconciliation of movements in 36
shareholders' funds
Cash flow statement 37
Notes to the financial statements 38
Glossary of terms 54
Shareholder information 55
Notice of annual general meeting 56
Notes to the notice of annual general 59
meeting
Directors and advisers 61
Registered in England No. 4897881
A member of the Association of Investment Companies
Company highlights
Total return performance
% change
Total Assets -11.3%
Total Return 1
FTSE All World -6.6%
Total Return
Index 2 (£)
Bloomberg World -8.6%
Utilities Total
Return Index 2
(£)
FTSE 100 Total -2.2%
Return Index 2
Share price and
NAV 3 returns
31 December 31 December
2011 2010 % change
Zero Dividend NAV3 172.16p 161.64p +6.5%
Preference
share
Mid price 168.25p 173.50p -3.0%
Ordinary share NAV3 126.20p 190.81p -33.9%
Mid price 104.50p 155.75p -32.9%
Revenue return 10.90p 9.33p
per Ordinary
share
Net dividends 8.90p 8.10p
declared per
Ordinary share
Zero Dividend Preference shares Ordinary shares
5 Year Performance to 31 December 2011 (rebased to 100) 5 Year Performance to
31 December 2011 (rebased to 100)
[GRAPHS REMOVED]
1 Total return performance, adjusted for any dividends distributed and
declared.
2 Source: Bloomberg.
3 Calculated in accordance with the Articles of Association (see note 17 on
page 47).
Company summary
Launch Date 4 November 2003
Domiciled UK
Year-end 31 December
Shareholders' Funds £58.84 millionâ€
Market Capitalisation £53.47 million
Bank Loan Nil
Zero Dividend Preference 21,180,373: aiming to
shares redeem at 221.78p on 31
December 2015
Ordinary shares 17,068,480
Dividends Paid on Ordinary shares
Dividend History In respect of year
ended 31 December Total dividends declared
2011 8.90p
2010 8.10p
2009 9.40p#
2008 7.35p
2007 7.00p
2006 6.90p
2005 6.75p
2004 7.875p*
Investment Manager Premier Fund Managers
Limited
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 out-performance
attributable to capital
and revenue respectively.
AIC Member of the Association
of Investment Companies
†Adjusted for any dividends distributed.
# Includes a special dividend of 1.70p.
* This dividend was for the 14 month period from launch, representing an
annualised dividend of 6.75p.
Financial Calendar
Company's year-end 31 December
Annual results announced mid March
Annual General Meeting 25 April 2012
Company's half-year end 30 June
Half-year results announced early August
Dividend payments - 2012 at the end of March, June, September
and December
Chairman's statement
for year to 31 December 2011
Overview of the year
2011 provided a number of challenges to the global economy. Overall debt levels
remain excessively high (unsustainably so in many countries) whilst austerity
programmes, intended to stabilise debt levels, threaten to choke the feeble
economic growth still remaining. Debt levels will only be addressed by a
prolonged period of higher national savings, or severe restructuring. The
alternative is monetary expansion and currency devaluation, and western
economies appear to have chosen this path, although Europe has come late to
this particular party, and via the back door. The eventual consequence of
quantitative easing, however it occurs, is likely to be inflation, which will
pose a whole new challenge.
Over the course of the last twelve months the global energy and water sectors,
generally, performed poorly, a result of the gloomy outlook for electricity,
coupled with reduced regulatory returns notably in Europe.
Performance
The gross assets of Premier Energy and Water Trust PLC ("the Company") declined
by 13.2% over the year. When income generated over the period is taken into
account the fall in total return over the period was 11.3%. This compared with
a decline in the Bloomberg World Utilities Total Return Index of 8.6% while the
FTSE All World Total Return Index fell by 6.6% and the FTSE 100 Total Return
Index by 2.2%. Your Company does not have any formal benchmarks; however, we
have provided a range of indices against which performance over the period may
be assessed. These are shown on page 1 of the report and accounts. The Company
invests predominantly in the global energy and water sectors which, while
perceived as defensive, may not be well correlated with overall equity markets.
The Company's capital structure is comprised of Ordinary and Zero Dividend
Preference shares ("ZDP shares"). The ZDP shares are entitled to a
predetermined capital sum of 221.78p at the planned wind up date of 31 December
2015. As a consequence the assets attributable to the Company's Ordinary shares
are geared through this prior capital entitlement such that relatively small
rises and falls in the Company's total assets can lead to significantly greater
rises or falls in assets attributable to Ordinary shareholders. Thus the
decline in total assets of 11.3% (on a total return basis) led to a fall of
33.9% in Ordinary share assets.
Since the Company commenced its activities on the 4 November 2003 the FTSE 100
Index has produced a total return of 72.2% (source Bloomberg). Over the same
period the total assets of your Company have produced a total return of 87.3%
and the ordinary shares have produced a total return of 68.8%.
Dividends
Despite the difficult overall investment environment, the global energy and
water sectors provided healthy dividend income. The Company benefited from this
and generated a revenue return of 10.90p per Ordinary share (2010: 9.33p per
share). Your Board has declared a fourth interim dividend of 4.0p per Ordinary
share which will be paid on 30 March 2012 to shareholders on the register as at
the close of business on 2 March 2012. The shares were marked ex dividend on 29
February 2012. Total dividends paid in respect of the year were 8.9p per share,
an increase of 9.9% over the 8.1p per Ordinary paid in the previous year. The
8.9p per share dividend represents a yield of 8.5% on the closing Ordinary
share price on 31 December 2011. Your Board and Investment Manager are
committed to maintaining a progressive dividend policy.
Shareholder relations
The Board and the Investment Manager welcome contact both with the Company's
existing investors and with potential new shareholders. The Investment Manager
has met with the Company's larger shareholders during the year. The Company's
Annual General Meeting is on Wednesday 25 April 2012 at the offices of Premier
Asset Management Limited in Guildford and will commence at 2pm. It is hoped
that shareholders will be able to attend the meeting on this date.
Outlook
It would be satisfying to foresee a radical change in the fortunes of the
global energy and water sectors, but with growth expectations in emerging
markets in decline, and conditions at best stagnant in the mature world, the
vital component of demand is not there. With Western debt unsustainably high,
and sovereign defaults remaining a possibility, your Company continues to face
challenging conditions. In the light of this your Board and Investment Manager
have endeavoured to provide some relief through an ongoing emphasis on income
generation. With corporate balance sheets in reasonable health, we believe the
defensive and income producing qualities of utility companies should provide
relative attractions in a low growth, low income environment.
Geoffrey Burns
Chairman
13 March 2012
Investment manager's report
for the period 1 January to 31 December 2011
Overview
Stock markets generally performed poorly during 2011 as the European debt
crisis gathered momentum causing considerable uncertainty to the growth
outlook. The global energy and water sectors, generally a safe haven in times
of uncertainty, were not immune from this weakness although there was a wide
disparity in performance between US and European stocks.
Portfolio Activity
Following another period of poor performance by the European energy sector we
decided, towards the end of the period, to substantially increase investment
here. It seemed to us that the negative impact of political interference and
poor economic growth prospects were now outweighed by attractive long term
valuations and sustainable dividend yields. We added a new investment in
Enagas, the regulated Spanish utility, to the portfolio. Enagas pays a
sustainable dividend yield of 8% backed by a strong balance sheet and
attractive regulatory regime. We also substantially increased the Company's
exposure to the French electricity and gas company GDF Suez, now the Company's
largest investment. Like Enagas, GDF Suez pays a high and sustainable dividend
and through its acquisition of International Power in 2010 should provide
growth from its internationally diversified portfolio.
We also increased the Company's investment in the UK's National Grid. Changes
to regulation in the UK together with substantial increases to the investment
required to support new UK power plants should provide substantial growth over
the next few years.
One of the portfolio's most successful investments over the period proved to be
EDP in Portugal. The sale of a 20% stake in the company to Three Gorges, the
Chinese hydro electric company, prompted a significant rise in EDP's share
price. We took this opportunity to reduce the investment securing a sound
profit in so doing.
The performance of the portfolio's investments in the world's largest water and
sewerage companies, Suez Environnment and Veolia Environnment, have proved
disappointing. Cost competition in their domestic French market, exacerbated by
a lack of strategic focus, has adversely affected earnings, in turn causing
dividends to come under significant pressure. However, we think the decline in
share prices overdone and increased exposure to Veolia towards the end of the
period. This proved a sound investment as news of a strategic restructuring has
prompted a sharp revival in Veolia's share price post the end of the period.
Growth estimates for Latin America appear attractive compared with much of the
rest of the world, whilst the general political outlook for the region is more
stable than for some considerable time. We have added two of the most highly
regulated utility stocks in the region: CIA de Transmissao de Energia Eletrica
Paulista which transmits electricity within the state of Sao Paulo, and CIA de
Saneamento de Minas Gerais, which supplies water to the state of Minas Gerais.
Since making these investments the shares of both companies have performed
well.
The Chilean economy is forecast to grow strongly over the next few years and we
added Empresa Nacional de Electricidad, a hydroelectric generator. The stock
should benefit from the anticipated better rainfall in Chile during 2012 as La
Nina subsides.
We remain positive on the outlook for the Thai market where the Company has
investments totalling just over 6% of total assets in Thai Tap Water, EGCO and
Bangkok Expressway. Inflation in the country has peaked and interest rates are
being cut, an encouraging environment for these stocks. In Hong Kong and China
the Company's holdings are little changed, with the exception of some profits
taken in Guangdong Investments following a strong share price performance. Just
after the year end we visited most of our holdings in Hong Kong and China, and
it is clear that, despite some short term uncertainty, the longer term
opportunities, particularly in waste water and sewerage, are significant.
In the US we continue to prefer defensive stocks remaining biased towards the
network operators over pure generators and integrated plays. The sale of
Portland General Electric towards the end of the period under review was driven
by the announcement of changes to the regulatory regime in Oregon, which we
felt increased the risks to the company's growth profile.
Outlook
With global recovery looking increasingly precarious, the defensive qualities
of energy and water shares remain very attractive. The significant sector
underperformance of the last few years has reduced valuations to levels where,
notwithstanding anaemic short term economic growth, sound long term value
exists. Additionally, the changes we have made to the Company's investment
portfolio have increased income for an already healthy revenue account.
Therefore we remain positive for both income and capital returns over the next
few years.
Premier Fund Managers Limited
13 March 2012
Geographical allocation at 31 December 2011
Asset allocation at 31 December 2011
2010 comparative % figures shown in brackets.
2010 comparative % figures shown in brackets.
Investment manager's report
continued
Investment manager's report
continued
Investment portfolio
at 31 December 2011
Thirty largest holdings by value in descending order as at 31 December 2011
2011 Valuation 2010#
Company Activity Country £000 % of £000
total
1 GDF Suez Gas & electricity France 3,512 6.6% 1,610
supply
2 Enagas Gas producing and Spain 2,621 4.9% -
transmission
3 Fortum Electricity Finland 2,065 3.9% 1,834
generation &
supply
4 Duet Group Electricity Australia 1,732 3.3% -
generation &
supply
5 National Grid Electricity & gas UK 1,685 3.2% -
transmission
6 China Resources Electricity Hong Kong 1,605 3.0% 1,159
Power generation &
supply
7 UIL Holdings Electricity USA 1,592 3.0% 1,340
generation &
supply
8 PPL Electricity USA 1,515 2.8% 1,009
generation &
supply
9 Huaneng Power Electricity Hong Kong 1,502 2.8% 1,280
International generation &
supply
10 Veolia Water & waste France 1,415 2.7% 1,049
Environnement services
11 Terna Rete Electricity Italy 1,400 2.6% -
Elettrica transmission
12 Sound Global Water treatment Singapore 1,351 2.5% 1,613
13 CEZ Electricity Czech 1,354 2.5% -
generation Rep.
14 Thai Tap Water Water supply Thailand 1,318 2.5% 1,521
15 E.ON Electricity Germany 1,316 2.5% -
generation &
supply
16 First Energy Electricity USA 1,310 2.5% 946
generation &
supply
17 Suez Environnement Water & waste France 1,301 2.4% 1,218
services
18 EGCO Electricity Thailand 1,276 2.4% 1,419
generation &
supply
19 CIA de Transmissao Electricity Brazil 1,231 2.3% -
de Energia transmission
20 PG&E Gas & electricity USA 1,224 2.3% -
supply
21 China Water Water supply Hong Kong 1,160 2.2% 1,206
Affairs
22 United Utilities Electricity & UK 1,150 2.2% -
Water
distribution
23 York Water Water supply USA 1,129 2.1% 1,099
24 Severn Trent Water & waste UK 1,119 2.1% 1,433
services
25 Snam Rete Gas Gas production Italy 1,042 2.0% 1,594
and transmission
26 ENN Energy Gas distribution Hong Kong 1,025 1.9% -
27 China Power New Electricity Hong Kong 968 1.8% 1,735
Energy generation
28 Nextera Energy Electricity USA 940 1.8% -
generation
29 CIA de Saneamento Water treatment Brazil 922 1.7% -
de Minas Gerais
30 Bangkok Expressway Toll roads Thailand 919 1.7% 1,033
42,699 80.2%
Other holdings 10,549 19.8%
Total 53,248 100.0%
portfolio
# Values have been provided for holdings in the portfolio at both 31 December
2011 and 31 December 2010. Valuation movements between the two dates will
reflect market price changes and transactions.
Company details
HISTORY
The Company 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 LeggMason 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 ("NAV") 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.
CAPITAL STRUCTURE
Bank Loan
The Company's policy is not to employ any long-term gearing through bank loans.
21,180,373 Zero Dividend Preference shares of 1p each.
The Zero Dividend Preference shares will have a final capital entitlement of
221.78p on 31 December 2015 subject to there being sufficient capital in the
Company.
The Zero Dividend Preference shares are not entitled to any dividends.
The Zero Dividend Preference shareholders have the right to receive notice of,
to attend and to vote at all general meetings of the Company.
17,068,480 Ordinary shares of 1p each.
The Ordinary shares are entitled to all of the Company's net income available
for distribution by way of dividends. On a winding-up, they will be due any
undistributed revenue reserves and any surplus assets of the Company after the
Zero Dividend Preference shares 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.
Wind-up date 31 December 2015.
EXPENSE RECOGNITION POLICY
The basic management fee is charged 40% to revenue and 60% to capital, all
other expenses are charged wholly to revenue except when they directly relate
to the acquisition or disposal of an investment, in which case they are charged
to capital as investment transaction costs. The performance fee is allocated
between capital and revenue based on the out-performance attributable to
capital and revenue respectively.
RISK FACTORS
The Company concentrates on investments in the energy and water sectors and may
be regarded as representing a higher risk than that of a generalist fund.
Securities listed on a recognised stock exchange have been valued at bid-market
prices and exchange rates ruling at the close of business. In certain
circumstances, the market prices at which investments may be valued may not
represent the realisable value of those investments taking into account both
the size of the Company's holding and the frequency with which such investments
are traded.
The Company may invest up to 15% of its gross assets in unquoted securities
which may have limited liquidity and be difficult to realise.
The income and capital value of the Company's investments can be affected,
favourably or unfavourably, by currency movements as a proportion of the
Company's assets and income is denominated in currencies other than sterling.
The dividend on the Ordinary shares depends on receipt of interest payments and
dividends from securities in which the Company invests.
If on a wind-up of the Company the gross assets are insufficient to cover the
capital entitlement of the prior ranking Zero Dividend Preference shares, the
terminal asset value of the Ordinary shares could be zero and an investor could
lose all of the capital invested in those shares.
The Zero Dividend Preference shares rank ahead of the Ordinary shares for
repayment on a winding-up of the Company. A decline in the gross assets could
result in the Zero Dividend Preference shares failing to receive their full
redemption value on wind-up and if gross assets were equal to or less than the
amount required to pay liquidation costs, an investor would lose all of the
capital invested in the Zero Dividend Preference shares.
TOTAL NET ASSETS AND MARKET CAPITALISATION
As at 31 December 2011, the Company had a market capitalisation of £53.47
million (2010: £63.33 million) and assets attributable to shareholders amounted
to £58.84 million (2010: £66.36 million). The figures at 31 December 2010 are
after the issue of new shares on 17 December 2010.
MANAGEMENT FEE
During the year, the management fee was 0.0833% per month of the gross assets
(total assets less current liabilities). From 1 October 2008 no VAT has been
charged on the management fee. From 1 January 2010 it was decided to allocate
the management fees 60% to capital and 40% to revenue .
In addition, the Manager ("Premier Fund Managers Limited") is entitled to a
performance fee if in each Company year:
(i) the dividends paid are 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 Company year or the initial gross assets (if
higher) by more than 7.5% (on annualised basis) and adjusted for any repurchase
of shares and any issue of new shares. In that event the performance fee will
be equivalent to 15% of the excess.
The management contract is terminable by one year's written notice from either
party to expire at any time.
ISA STATUS
The Company's Ordinary shares and Zero Dividend Preference shares are
qualifying investments for Individual Savings Accounts ("ISAs"). Full details
can be obtained from Premier Fund Managers Limited.
Financial summary
TOTAL RETURN PERFORMANCE
Premium/
(discount) %
31 December 31 % 31
December December
2011 2010 change 2011
Total Assets Total 58,842 66,360 -11.3% -
Return (£000)*
SHARE PRICES AND NAVS
Net Asset Value per Preference 172.16p 161.64p +6.5% -
Zero Dividend share**
Mid-market price per Preference 168.25p 173.50p -3.0% (2.3%)
Zero Dividend share
Net Asset Value per 126.20p 190.81p -33.9% -
Ordinary share**
Mid-market price per 104.50p 155.75p -32.9% (17.2%)
Ordinary share
TOTAL RETURN PER ORDINARY SHARE***
Year ended Year ended
31 December 31 December
2011 2010
Net Asset Value -34.3% +8.7%
Share Price -30.7% -10.1%
REVENUE AND DIVIDENDS
31 December 31 December %
2011 2010 change
Revenue return per 10.90p 9.33p +16.8%
Ordinary share
Net dividend per 8.90p 8.10p +9.9%
Ordinary share
* Total assets less current liabilities, adjusted for any dividends
distributed.
** Net asset values calculated in accordance with Articles of Association (see
note 17 on page 47).
*** Source: AIC (using Morningstar).
HURDLE RATESâ€
31 December
2011
Zero Dividend Preference
shares:
Hurdle rate to redemption -4.1%
share price of 221.78p on
31 December 2015
Ordinary shares:
Hurdle rate to return the 3.1%
share price of 104.50p at
31 December 2011
Source: JP Morgan Cazenove.
†See page 54 for definition of hurdle rate.
TOTAL RETURN
Year to Year to
31 December 31 December
2011 2010
FTSE All World Total -6.6% +16.7%
Return Index1 (£)
Bloomberg World Utilities -8.6% +1.6%
Total Return Index1 (£)
FTSE 100 Total Return -2.2% +12.6%
Index1
Total expense ratio/cost 1.89% 1.91%
of running the Company2
1 Source: Bloomberg.
2 The expense ratio is based on average monthly total assets less current
liabilities over the year.
EXCHANGE RATES
At At
31 December 31 December
2011 2010
£/$ exchange rate 1.5541 1.5656
£/€ exchange rate 1.1972 1.1670
Directors
Geoffrey Burns - Chairman
Geoffrey Burns has worked in the investment fund industry for over twenty
years. From 1997 to 2000 he was a director of and head of investment trusts at
Murray Johnstone Limited. Mr Burns is an adviser to a number of government or
multilateral agencies who make investments in private equity funds in emerging
markets, including CDC Group plc, the Swiss Investment Fund for Emerging
Markets and the Asian Development Bank. Mr Burns is Chairman of City Natural
Resources High Yield Trust PLC. Mr Burns was appointed as a non-executive
director of the Company on 12 September 2003.
Adam Cooke
Adam Cooke was a global partner of INVESCO PLC (formerly AMVESCAP PLC), one of
the world's largest independent investment management organisations where he
worked for INVESCO UK. His experience includes the UK institutional business,
investment trusts and collective investments. Mr Cooke is a member of the
Chartered Institute of Bankers and is a non executive director of City Natural
Resources High Yield Trust PLC and Midas Income and Growth Trust PLC. Mr Cooke
was appointed as a non-executive director of the Company on 26 July 2005.
Ian Graham
Ian Graham has over 20 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.
Michael Wigley
Michael Wigley is a director of The Conygar Investment Company plc. He was
formerly a director of Matheson Investment Limited and a non-executive director
of Development Securities PLC. He was deputy chairman of LeggMason Investors
International Utilities Trust Plc, 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 with Lawrence Graham LLP specialising in investment trusts and
funds. He is a non-executive director of Landore Resources Limited, which is
quoted on the AIM Market of the London Stock Exchange and of Doric Nimrod Air
One Limited and Doric Nimrod Air Two Limited both of which 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 Manager and Secretary
Investment Manager: Premier Fund Managers Limited
Premier Fund Managers Limited is a subsidiary of Premier Asset Management
Limited. Premier Asset Management Limited had just under £2.0 billion of funds
under management at 31 December 2011. Premier Fund Managers Limited is
authorised and regulated by the Financial Services Authority. The Company's
portfolio is managed by Andrew Whalley and Claire Burgess.
Secretary: Premier Asset Management Limited
Premier Asset Management Limited provides the company secretarial and
administrative services.
Directors' report
The Directors have pleasure in submitting their Business Review, Report and
Financial Statements for the year ended 31 December 2011.
BUSINESS REVIEW
UK listed companies are required to include a business review within their
directors' reports or, should they prefer, a more detailed operating financial
review. Having considered the regulations and in view of the nature and the
size of the Company, the Board has chosen to include a business review in its
report to shareholders, rather than an operating financial review. This
business review is intended to enhance shareholders' understanding of the
development, performance and position of the Company through a combination of
narrative and financial performance measures.
Business and tax status
The Company is an investment company as defined in Section 833 of the Companies
Act 2006. The Company operates as an investment trust and directs its affairs
so as to enable it to seek approval as such by HM Revenue & Customs under
Section 1158 of the Corporation Tax Act 2010 for the year ended 31 December
2011. Approval has been obtained for the year ended 31 December 2010, which is
subject to there being no subsequent enquiry under Corporate Self Assessment.
In the opinion of the Directors, the Company has conducted its affairs for the
year ended 31 December 2011 so as to enable it to continue to seek such
approval under Section 1158 of the Corporation Tax Act 2010.
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.
Investment objectives
The Company's investment objectives are to achieve high income from its
portfolio and to realise long-term growth in the capital value of the
portfolio. The Company will seek to achieve these objectives by investing
principally in equity and equity related securities of companies operating
primarily in the energy and water sectors, as well as other infrastructure
investments.
Investment policy
The policy of the Directors is that, in normal market conditions, the portfolio
of the Company should consist primarily of a diversified portfolio of equity
and equity-related securities of companies operating in the energy and water
sectors, as well as other infrastructure investments. There are no restrictions
on the proportion of the portfolio of the Company which may be invested in any
one geographical area or asset class but no more than 15% of the Company's
assets, at the time of acquisition, will be invested in a single security. The
Company may also invest up to 15% of its gross assets in investment companies
provided they themselves invest in utilities and infrastructure. However, not
more than 10% of the Company's gross assets may be invested in other UK listed
closed-ended investment funds unless such funds themselves have published
investment policies to invest not more than 15% of their total assets in other
UK listed closed-ended investment funds (provided they themselves invest in
utilities and infrastructure). The Company may invest up to 15% of its gross
assets in unquoted securities. There are no borrowings under financial
instruments or the equivalent of financial instruments but investors should be
aware of the gearing effect of the ZDP shares within the capital structure. The
Company's policy is not to employ any gearing through long-term bank borrowing.
The Company can, however, employ gearing through the issue of ZDP shares.
The Company will manage and invest its assets in accordance with its published
investment policy. Any material change to this policy will only be made with
the approval of Shareholders by ordinary resolution unless otherwise permitted
by the Listing Rules.
Investment Restrictions
The Company will not:
(i) invest more than 10%, in aggregate, of the value of its gross assets at the
time the investment is made in other listed closed-ended funds, provided that
this restriction does not apply to investments in any such closed-ended funds
which themselves have stated investment policies to invest no more than 15% of
their total assets in other listed closed-ended funds;
(ii) invest more than 15% of its gross assets in listed closed-ended funds;
(iii) invest more than 20% (calculated at the time of any relevant investment)
of its gross assets in other collective investment undertakings (open-ended or
closed-ended);
(iv) expose more than 20% of its gross assets to the creditworthiness or
solvency of any one counterparty (including the counterparty's subsidiaries or
affiliates);
(v) invest in physical commodities;
(vi) cross-finance between the businesses forming part of its investment
portfolio including provision of undertakings or security for borrowings by
such businesses for the benefit of another;
(vii) operate common treasury functions as between the Company and an investee
company; or
(viii) conduct any significant trading activity.
In addition to the above restriction on investment in a single company the
Board seeks to achieve a spread of risk in the portfolio through monitoring the
country and sector weightings of the portfolio.
There will be a minimum of 20 stocks in the portfolio.
The Company is geared through zero dividend preference shares but does not use
other gearing.
Going concern
The Directors believe that having considered the Company's investment
objectives (shown on the inside front cover) risk management policies and
procedures (pages 48 to 53), nature of portfolio and income and expense
projections, that the Company has adequate resources, an appropriate financial
structure and suitable management arrangements in place to continue in
operational existence for the foreseeable future. For these reasons, they
consider that the use of the going concern basis is appropriate.
Performance
An outline of the performance, market background, investment activity and
portfolio strategy during the period under review, as well as the investment
outlook, is provided in the Chairman's Statement and Investment Manager's
report.
Dividends
During the year the following dividends were paid:
Dividend
pence
Payment date (net per share)
Fourth Interim for the year ended 31 January 2011 3.40p
31 December 2010
First Interim for the year ended 28 April 2011 1.60p
31 December 2011
Second Interim for the year ended 31 August 2011 1.60p
31 December 2011
Third Interim for the year ended 30 December 2011 1.70p
31 December 2011
Subsequent to the year end but in respect of the year ended 31 December 2011
the Directors have declared a fourth interim dividend of 4.0p, payable on 30
March 2012 to members on the register at the close of business on 2 March 2012.
The shares were marked ex-dividend on 29 February 2012. This dividend relates
to the year ended 31 December 2011 but in accordance with the Company's
accounting policies, it is recognised in the period in which it is paid.
Principal risks associated with the Company (see note 21)
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 9
for details of these entitlements).
The Company employs no gearing in the form of bank loans. The Ordinary shares
are geared by the payment of the prior ranking Zero Dividend Preference shares.
Dividend levels
Dividends paid on the Company's Ordinary shares rely on receipt of interest
payments and dividends from the securities in which the Company invests. The
Company's revenue levels are monitored on a monthly basis by the Board and the
Investment Manager.
Currency risk
The Company invests in overseas securities and its assets are therefore subject
to currency exchange rate fluctuations.
Liquidity risk
The Company may invest up to 15% of its gross assets in unquoted securities.
These securities may have limited liquidity and be difficult to realise.
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 Company's shares' net
asset value. 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.
Accounting, legal and regulatory
In order to qualify as an investment trust, the Company must comply with
Section 1158 of the Corporation Tax Act 2010. A breach of Section 1158 could
lead to the Company being subject to capital gains tax on gains within the
Company's portfolio. Section 1158 qualification criteria are continually
monitored by Premier Fund Managers Limited and the results reported to the
Board at its regular meetings. The Company must also comply with the Companies
Act and the UKLA Listing Rules. The Board relies on the services of the
administrator, Premier Asset Management Limited and its professional advisers
to ensure compliance with the Companies Act and the UKLA Listing Rules.
Analysis of the Company's performance
At each Board meeting, the Directors consider a number of performance measures
to assess the Company's success in achieving its objectives.
The key performance indicators used to measure the progress and performance of
the Company over time are as follows:
1) The performance against a set of reference points. The Investment Manager's
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 Bloomberg World Utilities Total Return Index, FTSE
All World Total Return Index and FTSE 100 Total Return Index (see financial
summary on pages 12 and 13).
2) The performance against the peer group. The assessment of the Investment
Manager's 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 1).
5) Total Expense Ratio ("TER"). The TER is an expression of the Company's
management fees and other operating expenses as a percentage of average total
assets less current liabilities over the year. The TER for the year ended 31
December 2011 was 1.89% (2010: 1.91%).
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 3 and
the Investment Manager's report on page 5.
DIRECTORS
The Directors, all of whom served throughout the year ended 31 December 2011,
apart from Mr Wilkinson who was appointed on 23 February 2011, were as follows:
Geoffrey Burns
Adam Cooke
Ian Graham
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.
In accordance with the Articles of Association Mr Adam Cooke and Mr Ian Graham
retire by rotation and, being eligible, offer themselves for re-election.
DIRECTORS' BENEFICIAL AND FAMILY INTERESTS
The interests of the Directors and their families in the Ordinary shares of the
Company were as follows (there were no interests in the Zero Dividend
Preference shares of the Company):
Ordinary shares Ordinary shares Ordinary shares at 1
at at January 2011 or date
of appointment if
later
12 March 2012†31 December 2011
Geoffrey Burns 80,411 80,411 80,411
Adam Cooke 37,000 37,000 37,000
Ian Graham 22,032 22,032 18,309
Michael Wigley 125,150 125,150 124,183
Charles Wilkinson* 31,223 31,223 31,223
* Appointed on 23 February 2011.
†The latest practicable date prior to the publication of this report.
SUBSTANTIAL SHAREHOLDINGS
As at the date of this report the Company had been notified of the following
substantial interests in the Ordinary and Zero Dividend Preference share
capital of the Company.
Number of % of total Number of % of total
shares at shares at
Ordinary shares date of this voting rights 31 December voting rights
report 2011
Premier Fund 3,431,287 9.0 3,431,287 9.0
Managers
Limited*
Philip J Milton 1,752,715 4.6 1,269,063 3.3
& Company Plc
Investec Wealth 367,389 1.0 367,389 1.0
& Investment
Limited
Zero Dividend
Preference
shares
Deutsche Bank 3,384,195 8.8 3,616,345 9.5
AG
Investec Wealth 3,432,917 9.0 3,432,917 9.0
& Investment
Limited
CG Asset 1,928,365 5.0 1,928,365 5.0
Management
Limited
Premier Fund 360,522 0.9 360,522 0.9
Managers
Limited*
* This includes 2,880,968 Ordinary shares and 85,137 Zero Dividend Preference
shares that are held in the ISA scheme that is administered by Premier Fund
Managers Limited on behalf of individual shareholders.
NET ASSET VALUE
The net asset value per Ordinary share, including revenue reserve, at 31
December 2011 was 126.20p†(31 December 2010: 190.81p†). The cumulative net
asset value of a Zero Dividend Preference share at 31 December 2011 was 172.16p
†(31 December 2010: 161.64p†).
†Net asset values calculated in accordance with Articles of Association (see
note 17 on page 47).
MANAGEMENT, SECRETARIAL AND ADMINISTRATION AGREEMENTS
The Company's portfolio is managed by Premier Fund Managers Limited under an
Investment Management Agreement dated 26 September 2003.
The management fee is 0.0833% per month of the gross assets (from 1 October
2008 no VAT has been charged).
In addition, the Investment Manager is entitled to a performance fee if in each
Company year:
(i) the dividends paid are 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 Company year or the initial gross assets (if
higher) by more than 7.5% (on annualised basis). In that event the performance
fee will be equivalent to 15% of the excess.
The Management Agreement is currently terminable on 12 months' notice.
Under the Administration Agreement dated 26 September 2003, company secretarial
services and the general administration of the Company are undertaken by
Premier Asset Management Limited. The Administration Agreement is currently
terminable on 12 months' notice.
The Board as a whole regularly reviews the terms of the management and
secretarial contracts.
CORPORATE GOVERNANCE
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 2010 ("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 October 2010, 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 five non-executive Directors all of whom are
independent of the Investment Manager. Their biographies are set out on page
14. 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:
Audit Nomination
Board Committee Committee
Number of meetings 5 2 1
in the year
Geoffrey Burns 4 2 1
Adam Cooke 4 2 1
Ian Graham 5 2 1
Michael Wigley 5 2 1
Charles Wilkinson 5 2 -
All of the Directors attended the Annual General Meeting held in April 2011.
The Board deals with the Company's affairs, including the setting of gearing
and investment policy parameters, the monitoring of gearing and investment
policy and the review of investment performance. The Investment Manager takes
decisions as to asset allocation and the purchase and sale of individual
investments. The Board papers circulated before each meeting contain full
information on the financial condition of the Company. Key representatives of
the Investment Manager attend most of the Board meetings, enabling Directors to
probe further or seek clarification on matters of concern.
Matters specifically reserved for discussion by the full Board have been
defined and a procedure adopted for the Directors to take independent
professional advice if necessary at the Company's expense.
The Chairman of the Company is a non-executive Director. 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 Adam Cooke and Mr Ian
Graham who retire by rotation.
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 Cooke is the Chairman of the Audit Committee which operates within defined
terms of reference available from the Company Secretary. The Audit Committee
meets at least twice a year and is responsible for reviewing the annual and
interim reports, the nature and scope of the external audit and the findings
therefrom, and the terms of appointment of the auditor, including their
remuneration and the provision of any non-audit services by them. The Audit
Committee has considered the independence of the auditor and the objectivity of
the audit process and is satisfied that Ernst & Young LLP is independent and
has fulfilled its obligations to shareholders. The Audit 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 Manager's 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.
Nomination Committee
Mr Burns is the Chairman of the Nomination Committee which is responsible for
the Board appraisal process, and reviews the Board's size and structure and is
responsible for succession planning. The Nomination Committee meets at least
annually.
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 pages 29 and 30.
Internal controls
The Board acknowledges that it is responsible for the Company's system of
internal controls and has established a process for identifying, evaluating and
managing significant risks faced by the Company. The process is subject to
regular review by the Board and accords with "Internal Control: Guidance for
Directors on the Combined Code" ("The Turnbull guidance") which was issued in
September 1999.
These internal control systems are designed to safeguard shareholders'
investment and the Company's assets. It should be recognised that such systems
provide reasonable but not absolute assurance against material misstatement or
loss.
Internal control process
The Turnbull guidance recommends a risk-based approach to the assessment of
internal controls. The Board has completed a risk map for the Company and
established procedures for the monitoring and review of the risks identified.
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 internal
controls operated by those companies. Therefore, the Directors have concluded
that the Company should not establish its own internal audit function.
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 on pages
20 and 21 and in notes 3 and 20 to the financial statements. The custodian is
Northern Trust Company Limited.
The risk map has been considered at all regular meetings of the Board and Audit
Committee. As part of the risk review process, regular reports are received
from the Investment Manager on all investment related matters including
compliance with the investment mandate, the performance of the portfolio
compared with relevant indices and compliance with investment trust status
requirements. The Board also receives and reviews reports from the custodian on
its internal controls and their operation.
The Board confirms that appropriate procedures to review the effectiveness of
the Company's system of 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 internal control, which includes a review of the Company's risk
map, an assessment of the quality of reports on internal control from the
service providers and the effectiveness of the Company's reporting process, is
carried out on an annual basis.
Evaluation of Investment Manager's 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
• marketing effort and resources provided to the Company.
The Board believes that Premier Fund Managers Limited has served the Company
well in terms of investment performance and has no hesitation in continuing its
appointment.
The Company Secretary
The Board has direct access to the advice and services of the Company
Secretary, Premier Asset Management Limited, which is responsible for ensuring
that Board and Committee procedures are followed and that applicable
regulations are complied with. The Secretary is also responsible to the Board
for ensuring timely delivery of information and reports and that statutory
obligations of the Company are met.
Individual Directors may take independent professional advice on any matter
concerning them in the furtherance of their duties at the Company's expense.
The Company also maintains Directors' and Officers' liability insurance to
cover legal defence costs.
Relations with shareholders
Communication with shareholders is given a high priority by both the Board and
the Investment Manager and all Directors are available to enter into dialogue
with shareholders. Major shareholders of the Company are offered the
opportunity to meet with the Board. The Board regularly reviews any contact
with the Company's shareholders and monitors its shareholder register.
All shareholders are encouraged to attend and vote at the Annual General
Meeting, during which the Board and the Investment Manager are available to
discuss issues affecting the Company and shareholders have the opportunity to
address questions to the Investment Manager, the Board and the Chairmen of the
Board's standing committees.
Any shareholder who would like to lodge questions in advance of the Annual
General Meeting is invited to do so in writing to the Company Secretary at the
address detailed inside the back cover. The Company always responds to letters
from individual shareholders.
The Annual and Interim Reports of the Company present a full and readily
understandable review of the Company's performance. Copies are dispatched to
shareholders by mail and are also available for downloading from the Investment
Manager's website.
A monthly fact sheet is produced by the Investment Manager and is also
available via their 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.
SOCIALLY RESPONSIBLE INVESTMENT
The Board has delegated the investment management function to Premier Fund
Managers Limited. The Investment Manager's primary objective is to produce
superior financial returns to investors. It believes that over the long-term
sound social, environmental and ethical policies make good business sense and
takes these issues into account, when, in its view, they have a material impact
on either the investment risk or the expected return from an investment.
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 Manager's policy is to vote
all shares held by the Company.
PAYMENT OF SUPPLIERS
It is the Company's payment policy to obtain the best possible terms for all
business and therefore there is no consistent policy as to the terms used. The
Company agrees with its suppliers the terms on which business will take place
and it is our policy to abide by these terms. There were no trade creditors at
31 December 2011 (2010: nil).
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 6, 7 & 8: Authority to allot shares
Under Resolution 6 of the Annual General Meeting ("AGM"), the Directors seek a
general power from shareholders to allot new shares up to an aggregate par
value of £38,249 representing approximately 10% of the issued Ordinary share
capital of the Company and approximately 10% of the issued Zero Dividend
Preference share capital, in each case as at 12 March 2012.
Resolution 7 of the AGM will, if passed, permit the Directors to allot Ordinary
shares at a discount to the then prevailing net asset value of the Ordinary
shares. The Directors will only utilise this authority to issue new shares
provided that the aggregate value of new Ordinary shares and new Zero Dividend
Preference ("ZDP") shares to be issued is at an overall premium to net asset
value. In any event, any new issue of shares would only be made in accordance
with the provisions of the Company's Articles of Association which require
existing ZDP shares to have a cover of not less than 1.5 times immediately
following the issue of the new shares if any new shares are to rank ahead of,
or pari passu with, the existing ZDP shares, or those ZDP shares in issue
immediately thereafter would have a cover of not less than the cover of the ZDP
shares in issue prior to the issue of new shares.
Resolution 8 of the AGM will, if passed, empower the Directors to make
allotments of Ordinary shares for cash on a non pre-emptive basis up to an
aggregate of £17,068, being approximately 10% of the issued Ordinary share
capital of the Company.
These Resolutions will provide the Directors with flexibility to act in the
best interests of shareholders.
These authorities, if granted, will expire at the conclusion of the next Annual
General Meeting.
RESOLUTION 9: Purchase by the Company of its own shares
At the Annual General Meeting held on 27 April 2011 a special resolution was
passed, giving the Directors authority until the conclusion of the earlier of
the 2012 Annual General Meeting and 26 October 2012, to make market purchases
of up to a maximum of 1,964,149 Ordinary shares and 2,448,826 Zero Dividend
Preference shares. During the year to 31 December 2011 no shares were purchased
(during the year ended 31 December 2010 no shares were purchased).
The Board proposes that the Company should be given renewed general authority
to purchase Ordinary shares and Zero Dividend Preference shares in the market
for cancellation in accordance with the Companies Act 2006 but subject to the
provisos set out below. Resolution 9 of the AGM, which is a special resolution,
is being proposed for this purpose.
It is proposed that the Company be authorised to purchase on the London Stock
Exchange up to 2,558,565 Ordinary shares and 3,174,937 Zero Dividend Preference
shares (representing 14.99% of each class of the Company's issued share capital
as at 12 March 2012) provided that:
(a) Ordinary shares will only be repurchased at a purchase price which is below
the prevailing Net Asset Value per Ordinary share and where the cover on the
Zero Dividend Preference shares is 1.5 times or above and, as a consequence of
the proposed repurchase, the cover on the Zero Dividend Preference shares will
not reduce to below 1.5 times (having taking account of any Zero Dividend
Preference shares to be purchased at or about the same time); and/or
(b) Ordinary shares and Zero Dividend Preference shares are only repurchased in
the ratio of Ordinary shares to Zero Dividend Preference shares of 0.802:1; and
/or
(c) Zero Dividend Preference shares are purchased at a purchase price which is
below their prevailing accrued capital entitlement (as at the business day
immediately preceding the day on which the Zero Dividend Preference share is
purchased).
Repurchases of shares will be made at the discretion of the Board within
guidelines set from time to time by the Board and only when market conditions
are considered by the Board to be appropriate and in accordance with the
Listing Rules. Repurchases will only be made when they result in an increase in
the fully diluted Net Asset Value per Ordinary share. The Board remains
committed to exploring methods by which shareholder value can be enhanced. The
purchase for cancellation by the Company of its shares at a cost below the net
asset value of those shares enhances the net asset value of the remaining
shares. This additional demand for shares may reduce the discount at which the
shares trade. Any shares repurchased by the Company will be cancelled and will
not be held in treasury for resale.
Under London Stock Exchange rules, the maximum price to be paid on any exercise
of the authority in respect of Ordinary shares must not exceed the higher of
(i) 105% of the average of the middle market quotations for a share for the
five business days immediately preceding the date of purchase and (ii) the
higher of the price of the last independent trade and the highest current bid.
Separately we have chosen to restrict our authority to purchase Zero Dividend
Preference shares to a maximum price equivalent to their accrued capital
entitlement at the time of purchase. The minimum price paid for an Ordinary
share or Zero Dividend Preference share may not be below 1p per share.
The authority to purchase shares will last until the Annual General Meeting of
the Company in 2013, or 26 October 2013, 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, debt or by
selling investments.
Recommendation
Your Board considers that the above resolutions are in the best interests of
the Company and its members as a whole and are likely to promote the success of
the Company for the benefit of its members as a whole. Accordingly, your Board
unanimously recommends that shareholders should vote in favour of the
resolutions as they intend to do in respect of their own beneficial
shareholdings amounting to 295,816 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 is summarised on page 2, voting rights are
summarised on page 9, and there are no restrictions on voting rights nor any
agreement between holders of securities that result in restrictions on the
transfer of securities or on voting rights;
• there exist no securities carrying special rights with regard to the control
of the Company;
• details of the substantial shareholders in the Company are listed on page 20;
• the Company does not have an employees' share scheme;
• the rules concerning the appointment and replacement of Directors, amendment
of the Articles of Association and powers to issue or buy back the Company's
shares are contained in the Articles of Association of the Company and the
Companies Act 2006;
• there exist no agreements to which the Company is party that may affect its
control following a takeover bid; and
• there exist no agreements between the Company and its Directors providing for
compensation for loss of office that may occur because of a takeover bid.
AUDITOR
Ernst & Young LLP have expressed their willingness to continue in office as
Auditor and a resolution proposing their reappointment and to authorise the
Board to determine their remuneration will be submitted at the Annual General
Meeting.
The Directors who held office at the date of approval of this Directors' Report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's Auditor is unaware; and each Director has
taken all the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
By Order of the Board
Premier Asset Management Limited
Secretary
13 March 2012
Directors' remuneration report
The Board has prepared this report, in accordance with Section 421 of the
Companies Act 2006. An ordinary resolution for the approval of this report will
be put to the members at the forthcoming Annual General Meeting.
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 pages 32 and 33.
Remuneration Committee
The Board as a whole fulfils the function of a Remuneration Committee. The
Company Secretary, Premier Asset Management Limited, will be asked to provide
advice when the Directors consider the level of Directors' fees. Following a
review of Director's fees it was agreed, with effect from 1 April 2011, to
increase the annual fees to £26,000 for the Chairman, £20,000 for the Chairman
of the Audit Committee and £18,000 for other Directors. This represents the
first increase in Director's fees since the Company's launch in November 2003.
Policy on Directors' fees
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' service contracts
It is the Board's policy that none of the Directors have a service contract.
Letters confirming the terms of their appointment provide that a Director shall
retire and be subject to re-election at the first Annual General Meeting after
his/her appointment, and at least every three years and will seek annual
re-election if they have already served for more than nine years. The terms
also provide that a Director may be removed without notice and that
compensation will not be due on leaving office.
Your Company's performance
For the purpose of this report the Board is required to select an index against
which the Company's performance can be measured. The performance of the FTSE
Global Utilities Index has previously been provided as one of the indices
against which the Company's performance may be assessed. This index has,
however, been withdrawn and following discussions with the Investment Manager,
the Board has decided it should be replaced with the Bloomberg World Utilities
Total Return Index. The graph overleaf shows the 5 year share price total
return (assuming all dividends are reinvested) to Ordinary shareholders against
the Bloomberg World Utilities Total Return Index on a total return basis from
31 December 2006 until 31 December 2011.
5 year share price performance
[Graph removed]
Directors' emoluments for the year (audited)
The Directors who served in the year received the following emoluments in the
form of fees:
Year ended Year ended
31 December 31 December
2011 2010
Geoffrey Burns 25,000 22,000
Adam Cooke 18,750 15,000
Ian Graham 17,250 15,000
Michael Wigley 17,250 15,000
Charles Wilkinson 15,020 -
(appointed on 23 February
2011)
Total 93,270 67,000
Approval
A resolution for the approval of the Directors' Remuneration Report for the
year ended 31 December 2011 will be proposed at the Annual General Meeting.
By Order of the Board
Premier Asset Management Limited
Secretary
13 March 2012
Statement of Directors' responsibilities in respect of the annual report and
the financial statements
The Directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records which are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and which
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement that complies with that law and those regulations.
The financial statements are published on the www.premierfunds.co.uk website,
which is maintained by the Company's Investment Manager. The maintenance and
integrity of the website maintained by Premier Asset Management Limited is, so
far as it relates to the Company, the responsibility of Premier Asset
Management Limited. The work carried out by the auditor does not involve
consideration of the maintenance and integrity of this website and,
accordingly, the auditor accepts no responsibility for any changes that have
occurred to the financial statements since they were initially presented on the
website. The financial statements are prepared in accordance with UK
legislation, which may differ from legislation in other jurisdictions.
Statement under the Disclosure & Transparency Rules 4.1.12
The Directors each confirm to the best of their knowledge that:
a) the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
b) this Annual Report includes a fair review of the development and performance
of the business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
For and on behalf of the Board.
Adam Cooke Director
13 March 2012
Independent auditor's report
to the members of Premier Energy and Water Trust PLC
We have audited the financial statements of Premier Energy and Water Trust PLC
for the year ended 31 December 2011 which comprise the Income Statement, the
Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash
Flow Statement and the related notes 1 to 21. The financial reporting framework
that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors' Responsibilities set out
on page 31, 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 and Accounts to identify material
inconsistencies with the audited financial statements. If we become aware of
any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company's affairs as at 31
December 2011 and of its net return for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
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 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 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 16, in relation to going concern;
• 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; and
• certain elements of the report to the shareholders by the Board on directors'
remuneration.
Caroline Gulliver (Senior Statutory Auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
London
13 March 2012
Income statement
for the year ended 31 December 2011
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
Notes £000 £000 £000 £000 £000 £000
(Losses)/gains on 8 - (9,005) (9,005) - 1,984 1,984
investments - held at
fair value through
profit or loss
Revenue 2 2,780 - 2,780 1,969 - 1,969
Investment management 3 (247) (371) (618) (201) (303) (504)
fee
Other expenses 4 (400) - (400) (323) - (323)
Return before finance 2,133 (9,376) (7,243) 1,445 1,681 3,126
costs and taxation
Finance costs 5 - (2,171) (2,171) (1) (1,637) (1,638)
Return on ordinary 2,133 (11,547) (9,414) 1,444 44 1,488
activities before
taxation
Taxation on ordinary 6 (272) - (272) (208) - (208)
activities
Return on ordinary 1,861 (11,547) (9,686) 1,236 44 1,280
activities after
taxation attributable
to equity shares
Return per Ordinary 16 10.90 (67.65) (56.75) 9.33 0.33 9.66
share (pence) - basic
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
The notes on pages 38 to 53 form part of these financial statements.
The supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above statement.
Balance sheet
as at 31 December 2011
Company 2011 2010
registration number
4897881
Notes £000 £000
Non current assets
Investments at fair 8 53,248 60,561
value through the
profit or loss
Current assets
Debtors 9 406 737
Cash at bank 5,213 6,427
5,619 7,164
Current liabilities
Creditors: amounts 10 (862) (920)
falling due within
one year
Net current assets 4,757 6,244
Total assets less 58,005 66,805
current liabilities
Creditors: amounts 11 (36,737) (34,566)
falling due after
more than one year
- Zero dividend
preference shares
Total net assets 21,268 32,239
Capital and
reserves
Share capital 12 171 171
Share premium 13 6,884 6,887
Redemption reserve 88 88
Capital reserve 14 4,604 16,151
Special reserve 7,472 7,472
Revenue reserve 2,049 1,470
Total equity 21,268 32,239
shareholders' funds
Net asset value per 17 124.60 188.88
Ordinary share
(pence) - UK
Accounting
Standards basis
Net asset value per 17 126.20 190.81
Ordinary share
(pence) - Articles
of Association
basis
The financial statements on pages 34 to 53 were approved by the Board and
authorised for issue on 13 March 2012 and were signed on its behalf by:
Adam Cooke
Director
The notes on pages 38 to 53 form part of these financial statements.
Reconciliation of movements in shareholders' funds
for the year ended 31 December 2011
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 2011
Balance at 31 171 6,887 88 16,151 7,472 1,470 32,239
December 2010
Return on ordinary - - - (11,547) - 1,861 (9,686)
activities after
taxation
Under accrued costs - (3) - - - - (3)
on issue of
Ordinary shares in
prior year
Dividends paid - - - - - (1,282) (1,282)
Balance at 31 171 6,884 88 4,604 7,472 2,049 21,268
December 2011
For the year ended
31 December 2010
Balance at 31 131 - 88 16,107 7,454 1,492 25,272
December 2009
Return on ordinary - - - 44 - 1,236 1,280
activities after
taxation
Issue of Ordinary 40 6,887 - - - - 6,927
shares
Over accrued Tender - - - - 18 - 18
transition costs
Dividends paid - - - - - (1,258) (1,258)
Balance at 31 171 6,887 88 16,151 7,472 1,470 32,239
December 2010
The notes on pages 38 to 53 form part of these financial statements.
Cash flow statement
for the year ended 31 December 2011
Year ended Year ended
31 December 31 December
2011 2010
Notes £000 £000
Net cash inflow from 18 1,560 1,042
operating activities
Servicing of finance
Interest paid - (1)
Taxation
Overseas tax paid (279) (159)
Financial investments
Purchases of (39,373) (34,486)
investments
Sales of investments 38,163 29,573
Net cash outflow from (1,210) (4,913)
financial investments
Equity dividends paid 7 (1,282) (1,258)
Net cash outflow (1,211) (5,289)
before financing
Financing
Issue of Ordinary and - 5,715
Zero Dividend
Preference shares
Costs on issue of (3) -
Ordinary shares in
prior year
Net cash (outflow)/ (3) 5,715
inflow from financing
(Decrease)/increase in 19 (1,214) 426
cash
Reconciliation of net cash flow to movements in net debt
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
(Decrease)/increase in (1,214) 426
cash as above
Net change in debt due (2,171) (9,779)
in more than one year
Movements in net debt (3,385) (9,353)
for year
Net debt as at 1 19 (28,139) (18,786)
January
Net debt as at 31 19 (31,524) (28,139)
December
The notes on pages 38 to 53 form part of these financial statements.
Notes to the financial statements
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
consistently applied throughout the year and the preceding year is set out
below:
(a) BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with the applicable
UK Accounting Standards and with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
(issued in January 2009).
They have also been prepared on the assumption that approval as an investment
trust will continue to be granted. The financial statements have been prepared
on a going concern basis. The Directors believe this is appropriate for the
reasons outlined in the Directors' Report on page 16.
(b) VALUATION OF INVESTMENTS
Upon initial recognition investments are designated by the Company "at fair
value through profit or loss". They are accounted for on the date they are
traded and are included initially at fair value which is taken to be their
cost. Subsequently investments are valued at fair value which is the bid market
price for listed investments. Unquoted investments are valued at fair value by
the Board which is established with regard to the International Private Equity
and Venture Capital Valuation Guidelines by using, where appropriate, latest
dealing prices, valuations from reliable sources and other relevant factors.
Changes in the fair value of investments held at fair value through profit or
loss and gains or losses on disposal are included in the capital column of the
income statement within "gains/(losses) on investments held at fair value
through profit or loss".
Gains and losses on sales of investments have been taken to the capital
reserve.
(c) FOREIGN CURRENCY
Transactions denominated in foreign currencies are translated into sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the year end are reported at
the rates of exchange prevailing at the year end. Any gain or loss arising from
a change in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss in the capital or revenue reserve as
appropriate. Foreign exchange movements on investments are included in the
Income Statement within gains on investments.
(d) INCOME
Investment income has been accounted for on an ex-dividend basis or when the
Company's right to the income is established. Special dividends are credited to
capital or revenue in the Income Statement, according to the circumstances
surrounding the payment of the dividend. UK dividends are accounted for net of
any tax credits. Overseas dividends are included gross of withholding tax.
Interest receivable on deposits is accounted for on an accruals basis.
(e) EXPENSES
All expenses are accounted for on an accruals basis and are charged as follows:
• the basic investment management fee is charged 40% to revenue and 60% to
capital;
• any performance fee earned is allocated between capital and revenue based on
the out-performance attributable to capital and revenue respectively;
• investment transactions costs are allocated to capital; and
• other expenses are charged wholly to revenue.
(f) ZERO DIVIDEND PREFERENCE SHARES
The Company's Zero Dividend Preference shares are classified as a financial
liability and shown as a liability in the balance sheet.
The provision for compound growth entitlement of the Zero Dividend Preference
shares is recognised through the income statement and analysed under the
capital column as a finance cost (as shown in note 5). The premium (net of
expenses) arising on the issue of the Zero Dividend Preference shares will be
amortised over the life of the Company and allocated 100% to capital.
(g) SPECIAL RESERVE
The special reserve is available for the repurchase by the Company of its own
Ordinary shares.
(h) TAXATION
The charge for taxation is based upon the net revenue for the year. The tax
charge is allocated to the revenue and capital accounts according to the
marginal basis whereby revenue expenses are first matched against taxable
income arising in the revenue account; the effect of this for the year ended 31
December 2011 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 Company, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided for deferred tax on any capital gains and
losses arising on the revaluation or disposal of Investments.
2. INCOME
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Income from investments:
UK franked investment 303 152
income
Overseas dividends 2,314 1,814
Overseas Bond interest 65 -
Loan interest 97 -
Deposit income 1 3
2,780 1,969
3. INVESTMENT MANAGEMENT FEE
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Charged to Revenue:
Investment management fee 247 201
(40%)
247 201
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Charged to Capital:
Investment management fee 371 303
(60%)
371 303
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 by more than
7.5% (again on an annualised basis) and adjusted for any repurchase of shares
and any issue of new shares. 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 2011 (2010: nil).
4.OTHER EXPENSES
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Charged to Revenue:
Secretarial services 79 75
Administration expenses 204 159
Auditor's remuneration - audit services 22 21
- other services relating
to taxation 2 1
Directors' fees 93 67
400 323
For the year ended 31 December 2010 the auditors were also paid £24,675,
including VAT of £3,675, for services in connection with the Prospectus issued
by the Company on 30 November 2010 and the associated issue of new shares.
These have been charged to the share premium reserve.
5. FINANCE COSTS
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Bank interest - - - 1 - 1
Provision for compound - 2,171 2,171 - 1,637 1,637
growth entitlement of
the Zero Dividend
Preference shares
- 2,171 2,171 1 1,637 1,638
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
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Current tax - - - - - -
Overseas tax 272 - 272 208 - 208
Current tax 272 - 272 208 - 208
charge for the
year (see note 6
(b))
(b) FACTORS AFFECTING THE CURRENT TAX CHARGE FOR THE YEAR:
The current taxation charge for the year is lower than the standard rate of
corporation tax in the UK.
The differences are explained below:
Year Year Year Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December December
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Return on ordinary 2,133 (11,605) (9,472) 1,444 44 1,488
activities before taxation
Return on ordinary 565 (3,075) (2,510) 404 12 416
activities multiplied by
the standard rate of
corporation tax of 26.49%
(2010: 28%)
Effects of: Non-taxable UK (80) - (80) (43) - (43)
dividends
Non-taxable overseas (600) - (600) (464) - (464)
dividends
Capital gains not subject - 2,385 2,385 - (555) (555)
to tax
Finance costs of ZDP shares - 590 590 - 458 458
Overseas tax 272 - 272 208 - 208
Unrelieved expenses and 115 100 215 103 85 188
charges
Revenue current tax charge 272 - 272 208 - 208
for the year (see note 6
(a))
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 £614,000 (31 December 2010: £461,000)
relating to excess expenses of £2,452,000 (31 December 2010: £1,707,000). 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 2011 are detailed below:
Year ended
31 December
Per 2011
Ordinary share £000
First interim dividend - 1.60p 273
paid on 28 April 2011
Second interim dividend - 1.60p 273
paid on 31 August 2011
Third interim dividend - 1.70p 291
paid on 30 December 2011
Fourth interim dividend - 4.00p 683
payable on 30 March 2012*
8.90p 1,520
* Not included as a liability in the year ended 31 December 2011 accounts.
The fourth interim dividend will be paid on 30 March 2012 to members on the
register at the close of business on 2 March 2012. The shares were marked
ex-dividend on 29 February 2012.
Dividends relating to the year ended 31 December 2010 are detailed below:
Year ended
31 December
Per 2010
Ordinary share £000
First interim dividend - 1.50p 198
paid on 30 June 2010
Second interim dividend - 1.60p 209
paid on 30 September 2010
Third interim dividend - 1.60p 209
paid on 31 December 2010
Fourth interim dividend -
declared on 2 December 3.40p 445
2010 and paid on 31
January 2011â€
8.10p 1,061
†Not included as a liability in the year ended 31 December 2010 accounts.
8. INVESTMENTS
(a) SUMMARY OF VALUATION
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Investments listed on a
recognised investment
exchange:
- UK 4,430 3,778
- Overseas 47,787 55,292
52,217 59,070
Unquoted investment - UK 343 701
Unquoted investment - 688 790
Overseas
53,248 60,561
(b) MOVEMENTS
In the year ended
31 December 2011
Quoted Quoted Unquoted Unquoted Total
UK Overseas UK Overseas 2011
£000 £000 £000 £000 £000
Book cost at 3,222 53,481 1,485 684 58,872
beginning of year
Gains/(losses) on 556 1,811 (784) 106 1,689
investments held
at beginning of
year
Valuation at 3,778 55,292 701 790 60,561
beginning of year
Purchases at cost 6,956 32,347 44 - 39,347
Sales:
- proceeds (5,138) (32,517) - - (37,655)
- losses on (133) (699) - - (832)
investments sold
in the year
Losses on (1,033) (6,636) (402) (102) (8,173)
investments held
at end of year
Valuation at end 4,430 47,787 343 688 53,248
of year
Comprising:
Total Total
year ended year ended
31 December 31 December
2011 2010
£000 £000
Book cost at end of year 59,732 58,872
(Losses)/gains on (6,484) 1,689
investments held at year
end
Valuation at end of year 53,248 60,561
Transaction costs on purchases for the year ended 31 December 2011 amounted to
£81,000 (2010: £84,000) and on sales for the year amounted to £79,000 (2010: £
66,000).
(c) GAINS/(LOSSES) ON INVESTMENTS
Total Total
year ended year ended
31 December 31 December
2011 2010
£000 £000
(Losses)/gains on (832) 2,955
investments sold in year
Losses on investments held (8,173) (971)
at year end
Total (losses)/gains on (9,005) 1,984
investments
A list of the Company's 30 largest investments is shown on page 8, a sector
breakdown and a geographical allocation is shown on page 5.
9. DEBTORS
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Amounts due from brokers - 508
Accrued income and 348 178
prepayments
Overseas tax recoverable 58 51
406 737
10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Purchases for future 731 757
settlement
Other creditors 131 163
862 920
11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31 December 31 December
2011 2010
£000 £000
21,180,373 Zero Dividend 36,737 34,566
Preference shares of £0.01
The allotted, issued and fully paid number of Zero Dividend Preference shares
of £0.01 as at 31 December 2011 is 21,180,373 (31 December 2010: 21,180,373
Zero Dividend Preference shares of £0.01).
On 17 December 2010 the Company issued 2,779,377 Zero Dividend Preference
shares at 172.25p per share and 2,064,600 Zero Dividend Preference shares at
168.00p per share. The accrued capital entitlement at that date was 161.25p per
share. The premium (net of expenses) of £330,000 will be amortised over the
life of the Company and allocated to capital.
12. SHARE CAPITAL
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2011 2011 2010 2010
Number of £000 Number of £000
shares shares
Allotted,
issued and
fully paid:
Ordinary shares 17,068,480 171 17,068,480 171
of £0.01
17,068,480 171 17,068,480 171
The allotted issued and fully paid Zero Dividend Preference shares of the
Company at 31 December 2011 are disclosed in note 11.
13. SHARE PREMIUM
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Opening balance 6,887 -
Premium arising on issue - 6,991
of 3,965,415 Ordinary
shares
Cost associated with the - (104)
issue of Ordinary shares
Under accurued costs on (3) -
the issue of Ordinary
shares in 2010
Closing balance 6,884 6,887
14. CAPITAL RESERVE
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Opening balance 16,151 16,107
(Losses)/gains on (9,005) 1,984
investments - held at fair
value through profit or
loss
Provision for premium on (2,171) (1,637)
redemption of Zero
Dividend Preference shares
Investment management fee (371) (303)
charged to capital
Closing balance 4,604 16,151
15. FINANCIAL COMMITMENTS
At 31 December 2011 there were no commitments in respect of unpaid calls and
underwritings (31 December 2010: nil).
16. RETURN PER SHARE - BASIC
Total return per Ordinary share is based on the net total return on ordinary
activities after taxation of £(9,744,000) (31 December 2010: £1,280,000).
These calculations are based on the number of 17,068,480 Ordinary shares in
issue during the year to 31 December 2011 (2010: 13,255,163 weighted average
number of Ordinary shares).
The return per Ordinary share can be further analysed between revenue and
capital as below:
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2011 2011 2010 2010
Pence £000 Pence £000
Net revenue 10.90p 1,861 9.33p 1,236
return per
Ordinary share
Net capital (67.65p) (11,547) 0.33p 44
return per
Ordinary share
Net total (56.75p) (9,686) 9.66p 1,280
return per
Ordinary share
The Company does not have any dilutive securities.
17. NET ASSET VALUE PER SHARE
The difference between the figures reported below arises from the treatment of
the premium (net of expenses) from the issue of Zero Dividend Preference
("ZDP") shares in December 2010 of £330,000. In accordance with UK Accounting
Standards this 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 2011 and 30 December
2010.
The net asset value per share and the net assets available to each class of
share calculated in accordance with UK Accounting Standards, are as follows:
Net Net
asset value Net assets asset value Net assets
per share available per share available
31 December 31 December 31 December 31 December
2011 2011 2010 2010
Pence £000 Pence £000
17,068,480 124.60 21,268 188.88 32,239
Ordinary shares
(2010:
17,068,480) in
issue
21,180,373 Zero 173.45 36,737 163.20 34,566
Dividend
Preference
shares* (2010:
21,180,373) in
issue
* Classified as a liability.
The net asset value per share and the net assets available to each class of
share calculated in accordance with the Articles of Association, are as
follows:
Net Net
asset value Net assets asset value Net assets
per share available per share available
31 December 31 December 31 December 31 December
2011 2011 2010 2010
Pence £000 Pence £000
17,068,480 126.20 21,540 190.81 32,569
Ordinary shares
(2010:
17,068,480) in
issue
21,180,373 Zero 172.16 36,465 161.64 34,236
Dividend
Preference
shares* (2010:
21,180,373) in
issue
* Classified as a liability.
18. RECONCILIATION OF TOTAL RETURN BEFORE FINANCE COSTS AND TAXATION TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 December 31 December
2011 2010
£000 £000
Total return on ordinary (7,243) 3,126
activities before finance
costs and taxation
Capital return before 9,376 (1,681)
finance costs and taxation
Increase in other debtors (5) (22)
Increase in accrued income (165) (12)
and prepayments
Decrease in other (32) (66)
creditors
Investment management fee (371) (303)
capitalised
Net cash inflow from 1,560 1,042
operating activities
19. ANALYSIS OF CHANGES IN NET DEBT
Year ended Year ended
31 December Non-cash 31 December
2010 Cashflow movements 2011
£000 £000 £000 £000
Cash at bank 6,427 (1,214) - 5,213
Debt due after (34,566) - (2,171) (36,737)
more than one
year (ZDP's)
(28,139) (1,214) (2,171) (31,524)
20. 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 2011 £55,375 (31 December 2010: £63,044) of these fees
remained outstanding.
21. RISK MANAGEMENT POLICIES AND PROCEDURES
As an investment trust the Company invests in equities and other investments
for the long-term so as to secure its investment objectives stated on page 15.
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 2010.
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.
The Investment Manager does not intend to deploy active hedging against
exchange rate fluctuations.
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
2011 2010
Investments Investments
£000 £000
Australian Dollar 3,810 2,116
Brazillian Real 2,153 -
Canadian Dollar 716 4,708
Chinese Yuan - 791
Czech Koruna 1,354 -
Euro 15,880 12,388
Hong Kong Dollar 7,833 9,346
Indian Rupee - 1,044
Malaysian Ringgit 1,338 1,584
Qatari Riyal 570 1,220
Singapore Dollar 1,351 823
Thailand Baht 3,513 3,972
US Dollar 9,957 17,982
48,475 55,974
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
and Sterling/Euro.
It assumes the following changes in exchange rates:
Sterling/US Dollar +/- 4% (2010: 4%)
Sterling/Euro +/- 4% (2010: 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:
2011 2011 2010 2010
US Dollar Euro US Dollar Euro
£000 £000 £000 £000
Projected 4% 4% 4% 4%
change
Impact on 21 36 25 26
revenue return
Impact on 421 635 719 684
capital return
Total return 442 671 744 710
after taxation
for the year
Equity 442 671 744 710
If sterling had weakened against the currencies shown, this would have had the
following effect:
2011 2011 2010 2010
US Dollar Euro US Dollar Euro
£000 £000 £000 £000
Projected 4% 4% 4% 4%
change
Impact on (21) (36) (25) (26)
revenue return
Impact on (421) (635) (719) (684)
capital return
Total return (442) (671) (744) (710)
after taxation
for the year
Equity (442) (671) (744) (710)
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.
Cash at bank at 31 December 2011 (and 31 December 2010) 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 Manager's
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.
Concentration of exposure to other price risks
A sector breakdown and geographical allocation of the portfolio is contained in
the Investment Manager's Report on page 5.
Other price risk sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and the equity to an increase or decrease of 10% in the fair
values of the Company's equities (including equity through options). This level
of change is considered to be reasonably possible based on observation of
current market conditions. The sensitivity analysis is based on the Company's
equities and equity exposure through options at each balance sheet date, with
all other variables held constant.
Increase in Decrease in Increase in Decrease in
fair value fair value fair value fair value
2011 2011 2010 2010
£000 £000 £000 £000
Income statement - return
after taxation:
Revenue return - increase/ 21 (21) 24 (24)
(decrease)
Capital return - increase/ 5,325 (5,325) 6,093 (6,093)
(decrease)
Total return after 5,346 (5,346) 6,117 (6,117)
taxation - increase/
(decrease)
Equity 5,346 (5,346) 6,117 (6,117)
(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 2011 unquoted securities represented 1.9%
of the total investment portfolio (31 December 2010: 2.5%).
The Board gives guidance to the Investment Manager as to the maximum amount of
the Company's resources that should be invested in any one holding. The policy
is that the Company should remain fully invested in normal market conditions
and that short-term borrowing be used to manage short-term cash requirements.
(f) CREDIT RISK
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss.
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, generally, does not hold significant cash
balances, but when it does it seeks to limit exposure to any one bank to 10% of
net assets.
None of the Company's financial assets are secured by collateral or other
credit enhancements.
(g) FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and liabilities are either carried in the balance sheet at
their fair value, or the balance sheet amount is a reasonable approximation of
fair value (due from brokers, dividends receivable, accrued income, due to
brokers, accruals and cash balances).
The table below sets out fair value measurements using the FRS29 fair value
hierarchy.
Financial assets at fair value through profit or loss at 31 December 2011
Level 1 Level 3 Total
£000 £000 £000
Equity investments 52,217 1,031 53,248
Total 52,217 1,031 53,248
Financial assets at fair value through profit or loss at 31 December 2010
Level 1 Level 3 Total
£000 £000 £000
Equity investments 59,070 1,491 60,561
Total 59,070 1,491 60,561
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 are no Level 2
investments at 31 December 2011 and at 31 December 2010)
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data
The valuation techniques used by the Company are explained in the accounting
policies note on page 38.
A reconciliation of fair value measurements in Level 3 is set out below:
Level 3 financial assets at fair value through profit or loss at 31 December
2011
Equity investments Total
£000 £000
Opening balance 1,491 1,491
Purchases at cost 44 44
Net losses included in (504) (504)
profit or loss for assets
held at the end of the
year
Closing balance 1,031 1,031
Level 3 financial assets at fair value through profit or loss at 31 December
2010
Equity investments Total
£000 £000
Opening balance 924 924
Purchases at cost 815 815
Net losses included in (248) (248)
profit or loss for assets
held at the end of the
year
Closing balance 1,491 1,491
Financial liabilities
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 2011 December 2011 December 2010 December 2010
Book value Level 1 Book value Level 1
£m £m £m £m
Zero Dividend 36.7 35.6 34.6 36.7
Preference
shares
21. RISK MANAGEMENT POLICIES AND PROCEDURES 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 on a UK Accounting Standards basis
comprises:
2011 2010
£000 £000
Debt:
Zero Dividend Preference (36,737) (34,566)
shares
Equity:
Equity share capital 171 171
Retained earnings and 21,097 32,068
other reserves
21,268 32,239
Total Capital 58,005 66,805
Debt as a percentage of 63.33% 51.74%
total capital
Contractual maturities of the financial liabilities at the year end, based on
the earliest date on which payment can be required are as follows:
As at 31 As at 31 As at 31 As at 31 As at 31 As at 31
December December December December December December
2011 2011 2011 2010 2010 2010
Three More Three More
months than months than
or less one year Total or less one year Total
£000 £000 £000 £000 £000 £000
Creditors: amounts
falling due within one
year
Purchases for future 731 - 731 757 - 757
settlement
Other creditors 131 - 131 163 - 163
Creditors: amounts
falling due after more
than one year
Accrued capital - 36,465 36,465 - 34,236 34,236
entitlement of the Zero
Dividend Preference
shares
Premium (net of expenses - 272 272 - 330 330
on placing of Zero
Dividend Preference
shares)
862 36,737 37,599 920 34,566 35,486
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
The Company is subject to several externally imposed capital requirements:
• As a public company, the Company has to have a minimum share capital of £
50,000.
• In order to be able to pay dividends out of profits available for
distribution by way of dividends, the Company has to be able to meet one of the
two capital restriction tests imposed on investment companies by company law.
These requirements are unchanged since last year and the Company has complied
with them.
Glossary of terms
DISCOUNT/PREMIUM
If the share price of an investment trust is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
GEARING
Also known as leverage, particularly in the USA. Gearing is introduced when a
company borrows money 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. The assets attributable to shareholders is the total value of
all a companies assets, at current market value, having deducted all prior
charges at their par value (or at their asset value). The difference between
the figures reported arises from the treatment of the premium (net of expenses)
from the issue of Zero Dividend Preference ("ZDP") shares in December 2010 of £
330,000. In accordance with UK Accounting Standards this 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 2011 and 30 December 2010.
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
FINANCIAL CALENDAR
Company's year-end 31 December
Annual results announced mid March
Annual General Meeting 25 April 2012
Company's half-year end 30 June
Half-year results announced early August
Dividend payments - 2012 at the end of March, June, September
and December
SHARE PRICE AND PERFORMANCE INFORMATION
The Ordinary shares and Zero Dividend Preference shares are listed on the
London Stock Exchange.
Information about the Company including current share prices, can be obtained
directly via www.premierfunds.co.uk. Any enquiries can also be e-mailed 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
400400.
SHARE REGISTER ENQUIRIES
The register for the Ordinary shares and Zero Dividend Preference shares is
maintained by Capita Registrars. 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 8.30 a.m. to 5.30
p.m.); overseas +44 208 639 3399; or e-mail
shareholder.services@capitaregistrars.com. Changes of name and/or address must
be notified in writing to the Registrar.
PREMIER FUND MANAGERS LIMITED
The other investment company managed by Premier is:
Acorn Income Fund Limited
Further details of this fund can be obtained from Premier on 01483 400400.
E-mail: premier@premierfunds.co.uk
www.premierfunds.co.uk
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 Asset Management Limited, Eastgate Court, High
Street, Guildford, Surrey GU1 3DE on Wednesday, 25 April 2012, at 2.00 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 and 7 as ordinary resolutions and
as to resolutions 8 and 9 as special resolutions:
ORDINARY RESOLUTIONS
1. To receive the Directors' Report and Financial Statements for the year ended
31 December 2011.
2. To approve the Directors' Remuneration Report for the year ended 31 December
2011.
3. To re-elect Mr Adam Cooke as a Director of the Company.
4. To re-elect Mr Ian Graham as a Director of the Company.
5. To re-appoint Ernst & Young LLP as Auditor of the Company and to authorise
the Board to determine their remuneration.
6. Authority to allot new shares:
THAT, the Directors be and they are hereby generally and unconditionally
authorised, in accordance with section 551 of the Companies Act 2006, to allot
shares in the Company and to grant rights ("relevant rights") to subscribe for
or to convert any security into shares in the Company up to an aggregate
nominal amount of £38,249, representing 1,706,848 Ordinary shares of 1p each
and 2,118,037 ZDP shares of 1p each, (being approximately 10% of the issued
Ordinary share capital and 10% of the issued ZDP share capital of the Company
as at 12 March 2012 being the latest practicable date prior to the publication
of this Notice of Meeting) PROVIDED THAT this authority shall expire at the
conclusion of the next Annual General Meeting of the Company after the passing
of this resolution, save that the Company may, at any time prior to the expiry
of such authority, make an offer or agreement which would or might require
shares to be allotted or relevant rights to be granted after the expiry of such
authority and the Directors may allot shares or grant relevant rights in
pursuance of such an offer or agreement as if such authority had not expired.
7. Authority to allot Ordinary shares at a discount:
THAT, subject to and conditional upon the passing of resolution 6 above (the
"Resolution"), the Directors be and they are hereby generally and
unconditionally authorised, in accordance with LR 15.4.11 of the United Kingdom
Listing Rules to allot Ordinary shares for cash pursuant to the Resolution at a
price which represents a discount to the net asset value attributable to the
Ordinary shares as at the date of such issue PROVIDED THAT (i) such issue is
simultaneous with an issue of new Zero Dividend Preference shares and (ii) the
aggregate issue price shall represent a premium to the aggregate net asset
value attributable to the new Ordinary shares and new Zero Dividend Preference
shares as at the date of issue.
SPECIAL RESOLUTIONS
8. Authority to disapply pre-emption rights:
THAT, subject to the passing of resolution numbered 6 above ("Section 551
Resolution"), the Directors of the Company be empowered pursuant to section 570
of the Companies Act 2006 (the "Act") to allot equity securities (within the
meaning of section 560 of the Act) for cash pursuant to the Section 551
Resolution as if section 561(1) of the Act did not apply to such allotment,
provided that this power shall be limited to:
(a) the allotment of equity securities (otherwise than pursuant to
sub-paragraph (b) below) up to an aggregate nominal amount of £17,068; and
(b) the allotment of equity securities to (a) all holders of ordinary shares of
1p each in the capital of the Company ("Ordinary shares") in proportion (as
nearly as may be) to the respective numbers of such Ordinary Shares held by
them and (b) to holders of other equity securities as required by the rights of
those securities (but subject to such exclusions, limits or restrictions or
other arrangements as the Directors of the Company may consider necessary or
appropriate to deal with fractional entitlements, record dates or legal,
regulatory or practical problems in or under the laws of, or requirements of,
any regulatory body or any stock exchange in any territory or otherwise
howsoever); and
such power shall expire at the conclusion of the next Annual General Meeting of
the Company to be held in 2013, 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.
9. Authority to repurchase the Company's shares:
THAT, the Company be and is hereby generally and unconditionally authorised in
accordance with Section 701 of the Companies Act 2006 ("the Act") to make
market purchases (within the meaning of Section 693(4) of the Act) of Ordinary
shares of 1p each and of Zero Dividend Preference shares of 1p each in the
capital of the Company (together the "Shares"), provided that:
(a) the maximum number of Shares hereby authorised to be purchased shall be
2,558,565 Ordinary shares and 3,174,937 Zero Dividend Preference shares;
(b) the minimum price which may be paid for a Share is 1 pence;
(c) the maximum price which may be paid for an Ordinary share is an amount
equal to the highest of (i) 105% of the average of the middle market quotation
for an Ordinary share taken from the London Stock Exchange Daily Official List
for the five business days immediately preceding the day on which the Ordinary
share is purchased and (ii) the higher of the price of the last independent
trade and the highest current bid;
(d) the maximum price which may be paid for a Zero Dividend Preference share is
its accrued capital entitlement as at the business day immediately preceding
the day on which the Zero Dividend Preference share is purchased;
(e) the authority hereby conferred shall expire at the earlier of the
conclusion of the Annual General Meeting of the Company in 2013, or 24 October
2013 unless such authority is renewed prior to such time; and
(f) the Company may make a contract to purchase Shares under the authority
hereby conferred prior to expiry of such authority which will be or may be
executed wholly or partly after the expiration of such authority and may make a
purchase of Shares pursuant to any such contract.
Any shares so purchased will be cancelled in accordance with the provisions of
the Act.
By order of the Board
Premier Asset Management Limited
Secretary
13 March 2012
Notes to the notice of annual general meeting
1. Members are entitled to appoint a proxy to exercise all or any of their
rights to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the Annual General
Meeting provided that each proxy is appointed to exercise the rights attached
to a different share or shares held by that shareholder. A shareholder may not
appoint more than one proxy to exercise the rights attached to any one share. A
proxy need not be a shareholder of the Company. A proxy form which may be used
to make such appointment and give proxy instructions accompanies this notice.
If you do not have a proxy form and believe that you should have one, or if you
require additional forms, please contact the Company's registrars, Capita
Registrars (contact details can be found on page 61).
2. To be valid any proxy form or other instrument appointing a proxy must be
received by post or (during normal business hours only) by hand at the offices
of the Company's registrars, Capita Registrars, PXS, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU no later than 2.00 p.m. on Monday, 23 April 2012.
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 Monday, 23 April 2012 (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 12 March 2012 (being the last business day prior to the publication of
this Notice) the Company's issued share capital consisted of 17,068,480
Ordinary shares and 21,180,373 Zero Dividend Preference shares, carrying one
vote each. Therefore, the total voting rights in the Company as at 12 March
2012 are 38,248,853.
8. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
9. In order for a proxy appointment or instruction made using the CREST service
to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must
be properly authenticated in accordance with Euroclear UK & Ireland Limited's
specifications, and must contain the information required for such instruction,
as described in the CREST Manual (available via www.euroclear.com/CREST). The
message, regardless of whether it constitutes the appointment of a proxy or is
an amendment to the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the issuer's agent
(ID RA10) by 2.00 p.m. on Monday, 23 April 2012. 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 Manager's website
www.premierfunds.co.uk.
Directors and advisers
Directors
Geoffrey Burns (Chairman)
Adam Cooke
Ian Graham
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 Services Authority
Secretary and Registered Office
Premier Asset Management Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
Telephone: Mike Nokes 020 7982 1260
Company Number 4897881
Website www.premierfunds.co.uk
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
(calls cost 10p per minute plus network extras, lines are open Monday to Friday
8.30 a.m. to 5.30 p.m.) Overseas: +44 208 639 3399
E-mail: ssd@capitaregistrars.com
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Joint stockbrokers
J.P. Morgan Cazenove
10 Aldermanbury
London EC2V 7RF
Telephone: 020 7325 1000
Fairfax I.S. PLC
46 Berkeley Square
Mayfair
London W1J 5AT
Telephone: 020 7598 5368