Final Results

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

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