Half-yearly Report

PREMIER ENERGY AND WATER TRUST PLC 2014 Half Year Report for the six months to 30 June 2014 Investment Objectives The Company's investment objectives are to achieve a high income and to realise long term growth in the capital value of its portfolio. The Company will seek to achieve these objectives by investing principally in the equity and equity-related securities of companies operating primarily in the energy and water sectors, as well as other infrastructure investments. Contents Investment Objectives 1 Company Highlights 2-3 Chairman's Statement 4-5 Investment Manager's Report 6-8 Ten Largest Holdings 9 Income Statement 10-11 Balance Sheet 12 Reconciliation of Movements in 13 Shareholders' Funds Cashflow Statement 14 Reconciliation of Net Cashflow to Movements in Net Debt 14 Notes to the Half Year Report 15-17 Interim Management Report 18 Shareholder Information 19 Directors and Advisers 20 Company Highlights for the six months to 30 June 2014 Six months to Year ended 30 June 31 December 2014 2013 Total Return Performance Total Assets Total Return  12.6% 24.5% 1 FTSE All-World Utilities 12.4% 9.0% Index Total Return (GBP) 2 FTSE All-World Index Total 3.1% 20.8% Return (GBP) 2 FTSE All-Share Index Total 1.6% 20.8% Return (GBP) 2 Ongoing charges 3 1.6% 1.4% Six months to Year ended 30 June 31 December 2014 2013 % change Ordinary Share Returns Net Asset Value per 202.05p 167.55p 20.6% Ordinary share (cum income) 4 Mid-market price 185.00p 157.25p 17.6% per Ordinary share  Discount (8.4%) (6.1%) Net Asset Value 26.8% 58.5% Total Return 5 Share Price Total 23.0% 71.8% Return 2 Six months to Six months to 30 June 30 June 2014 2013 % change Returns and Dividends Revenue Return per 6.90p 7.74p (10.9%) Ordinary share Net Dividends 5.30p 4.35p 21.8% declared per Ordinary share 6 Six months to Year ended 30 June 31 December 2014 2013 % change Zero Dividend Preference Share Returns Net Asset Value per 201.65p 195.42p 3.2% Zero Dividend Preference share 4 Mid-market price 210.88p 206.00p 2.4% per Zero Dividend Preference share Premium 4.6% 5.4% As at 30 June 2014 Hurdle Rates Ordinary shares Hurdle rate to return the share price of 185.0p at 30 June 2014 7 2.9% Zero Dividend Preference shares Hurdle rate to return the redemption entitlement of 221.78p at 31 December 2015 7 (25.8%) Six months to Year ended 30 June 31 December 2014 2013 % change Balance Sheet Gross Assets less £77.2m £70.0m 10.3% Current Liabilities Zero Dividend (£42.8m) (£41.5m) 3.1% Preference shares Equity £34.4m £28.5m 20.7% shareholders' funds Gearing on Ordinary 2.24x 2.46x shares 8 Zero Dividend 1.55x 1.42x Preference share cover 9 1 Based on opening and closing total assets plus dividends marked "ex-dividend" within the period. Source: Premier Fund Managers Limited. 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: Premier Fund Managers Limited. 6 In 2013 the Company commenced a policy of reducing the revenue reserve by the distribution of additional dividends of 0.75p per quarter. The six months to 30 June 2013 included one such payment, while the six months to June 2014 included two payments. Excluding additional dividends the percentage change in dividends declared was 5.6%. 7 Source: JP Morgan Cazenove. 8 Based on gross assets less current liabilities divided by equity shareholders' funds at the end of each year. 9 Non-cumulative cover = gross assets at year end less estimated wind up costs less management charges to capital divided by final repayment value of ZDP's. Source: JP Morgan Cazenove and Premier Fund Managers Limited. Chairman's Statement for the six months to 30 June 2014 Performance Following on from the strong gains recorded in 2013, I am pleased to report that the Premier Energy & Water Trust ("PEWT") has enjoyed an encouraging start to 2014. The first half of the year has seen further strength in the portfolio, partially offset by an increase in the value of Sterling. Over the six months to June 2014, PEWT's gross assets delivered a total return of 12.6%, being marginally ahead of the FTSE All-World Utilities Index which recorded a total return of 12.4%, and well ahead of the equity market generally, the FTSE All-World Index returning just 3.1% (all indices stated as total return, adjusted into Sterling). Pleasingly, the trend of under-performance by the utilities sector, which was discussed in the Investment Manager's Report in the 2013 Annual Report and Accounts, appears to have been broken. The growth in assets has been to the benefit of both classes of share. PEWT's Ordinary Share has seen an increase in NAV (excluding income) of 20.6%, benefiting from the Company's geared capital structure. Based on the Ordinary Share price, and including dividends, Ordinary Shareholders saw a total return on their investment of 23.0%. Likewise, the cover on the Zero Dividend Preference Shares (being the amount by which the ZDP Shares' final entitlements are covered by the portfolio) increased from 1.42x at December 2013 to 1.55x at June 2014. The ZDP Share increased in price by 2.4% over the period, and at the end of June traded on a yield to their 221.78p maturity value, of 3.4%. Overview of the period Global equity markets paused for breath in the first half of 2014. The well-known economic issues, which markets appear to be learning to live with, have been joined by war in Iraq, and a resurgent Russia annexing Crimea. While PEWT has no direct exposure to these locations, implications for energy prices arising from these events are an issue. A combination of factors led to utilities out-performing equity markets. These can be summarised as, firstly, a realisation that in many places interest rates will stay low for longer than originally expected, and that reliable yield is to be valued. Secondly, the myriad of conflicts and political disputes has encouraged investors to seek out sectors perceived as offering a measure of safety. Thirdly, the sector's under-performance since 2009 left it offering excellent relative value by the end of 2013. Those utilities that performed best tended therefore to be located in safe haven developed markets with low interest rate expectations. In Europe the Euro Stoxx 600 Utilities Index delivered 14.4%, and in the US the S&P 500 Utilities Index returned 14.9%. Emerging markets lagged slightly, the MSCI EM Utilities Index gaining 10.0%. The UK sector remained weighed down by political concerns and returned only 8.2% (all indices stated as total return, adjusted into Sterling). Dividends On 8 May 2014 the Company announced the first quarterly dividend of 2.65p per Ordinary share, comprising a base dividend of 1.9p, (an 11.8% increase when compared to the 1.7p per Ordinary share paid in the equivalent period in 2013) and an additional dividend of 0.75p per Ordinary share in accordance with the policy announced in August 2013 to run down the Company's revenue reserve, paid on 30 June 2014. On 24 July 2014 the Board declared a second interim dividend for the year ending 31 December 2014 of 2.65p per Ordinary share comprised of a base dividend of 1.9p and an additional dividend of. 0.75p. This second interim dividend will be paid on 30 September 2014 to members on the register at the close of business on 29 August 2014. The Ordinary shares will be marked ex-dividend on 27 August 2014. In common with all other UK based Global equity investment funds, the strength of Sterling will inevitably be to the detriment of the level of income generated by the portfolio when translated back into Sterling. However, it is expected that incremental dividend growth at stock specific level, plus the fact that some of the more recent investments are paying higher than average income, should ensure that income generation remains robust. Alternative Investment Fund Managers Directive (AIFMD) The Company has been entered into the register of small registered UK Alternative Investment Fund Managers (AIFMs) for the purpose of complying with the Alternative Investment Fund Managers Regulations 2013 (AIFMRs). If the Company breaches the €100 million threshold for eligibility to register as a small registered UK AIFM the directors have agreed to appoint Premier Portfolio Managers Limited (PPM) as its AIFM. PPM is a company in the same group as the Company's manager, Premier Fund Managers Ltd. Reorganisation of capital structure and extension of life On 25 July 2014 the Company announced proposals, recommended by the Board, to extend its life and to implement a reorganisation through a scheme of arrangement under Part 26 of the Companies Act 2006. Full details of the proposals are contained within a circular published on 1 August 2014. In summary the proposals envisage replacing the ZDP Shares with new ZDP Shares issued by a newly incorporated subsidiary of the Company, whilst at the same time maintaining the economic rights of the ZDP shares including the entitlement to a capital payment of 221.78p on 31 December 2015. Secondly, it is proposed to amend the Articles to allow the Company to continue without a fixed life whilst including a provision to allow holders of ordinary shares an opportunity to vote on the continued existence of the Company every five years from 2020. Lastly, it is proposed to renew the Board's authority to issue new ordinary shares in the Company on a non pre-emptive basis, subject to certain parameters, to replace the authorities granted by Shareholders at the Company's annual general meeting held in May 2014. Outlook After a period of unusually low volatility and steadily rising equity markets, commentary is increasingly focusing on equity valuation, mainly as a result of this strength. However, having missed out on much of the equity market performance, we feel that the global utility sector continues to offer attractive value, and that PEWT's portfolio is positioned to capture not only further sector performance, but also contains a number of specific situations that we expect to generate value irrespective of market movements. The strength of sterling remains a significant challenge both for asset and income growth given the overseas weighting of the portfolio, but your board is confident that, despite currency movements, our positioning is suited to long term performance. Geoffrey Burns Chairman 6 August 2014 Investment Manager's Report for the six months to 30 June 2014 Market review The first 6 months of 2014 has for the first time since 2007, seen the utilities sector outperform the wider equity market. This was the case globally, and even the somewhat challenged UK utilities sector was well ahead of its parent index. The Chairman's statement in the 2013 Annual Report mentioned several fundamental factors which should give encouragement to utility investors, such as improved balance sheets, increased efficiencies and falling prices of primary energy such as coal. While these internal factors remain important, they are undoubtedly long term in nature, and do not sufficiently explain the notable turnaround in the sector's fortunes so far this year. More importantly for 2014, several external factors as highlighted in the Chairman's statement, have played a perhaps more important role. These are interest rates, global risk, and valuation. The first half of 2014 has seen a continued reduction in market interest rates, reflecting the deflationary forces still present in the global economy despite unprecedented levels of money creation from central banks. Bond yields have fallen indiscriminately, including in those locations which might be considered higher risk such as Southern Europe. Many market participants see the utility sector as being something of a bond proxy, and the sector has therefore benefited from falling yields. While we can see the short term logic of this, we would highlight that for the utility sector, interest rates are mainly a pass through cost over time, and this is usually explicitly built into regulatory formulae for the regulated end of the sector. Therefore a permanent reduction in interest rates would, all else equal, lead to a reduction in allowed returns and earnings over time, offsetting the interest rate effect. For this reason it is common, we believe, for the market to over-state the effect that changes in interest rates have on the sector, and investors often tell us that they are concerned that the sector would fall in value should interest rates rise. We do not believe that there is any need to be overly concerned. In fact the utility sector trades at higher yields now than it did 10 years ago, despite interest rates having tumbled over that period. Portfolio The first half of 2014 has seen excellent performances from some of PEWT's larger holdings. The greatest gains have been seen in Indian power generator OPG Power, which has remained as the Company's largest holding. OPG's share price rose 75.0% over the six months as the market gained in confidence over its ability to deliver on its investment plan. Two new power stations are due to be commissioned in the second half of 2014, and should lead to a step change in earnings and value. Fortune Oil's share price gained 29.6%, an impressive performance. However the value of its associate company, China Gas Holdings Limited, which makes up the vast bulk of Fortune's value, gained in price by 41.1% over the six months. Therefore the valuation discount at which Fortune trades actually widened in the period, despite the strong performance. We substantially increased PEWT's holding in Renewable Energy Generation Limited ("REG") in the first half, with REG becoming PEWT's second largest position. We believe the shares are materially undervalued, becoming even more so given that the share price fell by 8.4% over the six months. We await further news on planning applications for the company's wind farm business, and are encouraged by the approval in June to build a relatively large new development in Cumbria. During the six months we changed the emphasis of PEWT's Chinese holdings. At December 2013 the three largest Chinese positions were China Everbright International, a waste to energy company, China Suntien Green Energy, a gas distribution and wind farm company, and Kunlun Energy, a gas infrastructure company. Together these represented 15.4% of PEWT's portfolio at the end of 2013. The first two of these performed exceptionally well during 2013, and we reduced these positions in early 2014 on valuation grounds. We have scaled back Kunlun as we expect its growth plans to be realised over a longer period than we originally anticipated. The proceeds from these sales have been largely reinvested into the Chinese thermal generation sector, with two new entries to the ten largest holdings, Huaneng Power and China Power International. These investments performed well during the period, rising 24.8% and 10.9% respectively during the period. The expansion of Chinese coal mines over many years is now leading to a surplus of coal as GDP growth slows. This has resulted in expanding margins and earnings for the generators as their costs fall. At one quarter of the portfolio, China remains PEWT's largest geographic exposure. Continental Europe performed well, with the share price of PEWT's largest European investment, GDF Suez, gaining 17.6%. GDF has now largely completed its disposal and deleveraging programme, and with the balance sheet looking healthier, has moved back onto a growth footing, albeit mainly organic rather than through acquisition. This strength came despite the company announcing a substantial rebasing of its dividend. The UK remains susceptible to political populism as we move towards the scheduled 2015 general election. However the referral of the energy sector to the Competition and Markets Authority is to be welcomed, and will hopefully depoliticise the situation. Our decision to retain SSE as PEWT's largest UK position was vindicated with a share price gain of 14.4%, well ahead of the UK utility sector. Furthermore the decision to exit Centrica in late 2013 was proved correct, with Centrica's shares falling by 10.1% over the six months. PEWT's Latin American investments generally performed well. The largest holding in this area, Enersis, operates across the continent, and recorded an 18.5% gain in its share price over the half year. Lastly, we would also mention the Essar Energy Convertible Bonds which were sold in the period, realising a USD capital gain of 61.6% on purchase cost. As a result of the takeover of Essar Energy PLC by majority shareholder Essar Global, the bonds became "puttable" back to the company, PEWT selling out early marginally below face value. The bonds had also been a strong contributor to income, the annual coupon being a 7.0% yield on the book cost. GEOGRAPHIC ALLOCATION 2014 30 June 2014 31 December 2013 China 22.4% 28.1% Asia (ex. China) 17.2% 15.9% United Kingdom 16.4% 15.4% Latin America 12.4% 9.1% Global 9.1% 7.4% North America 9.0% 7.6% Europe (excluding UK) 6.6% 10.2% Eastern Europe 3.0% 2.3% Middle East 2.6% 3.1% Australasia 1.3% 0.9% SECTOR ALLOCATION 2014 30 June 2014 30 June 2014 31 December 2013 Electricity 51.6% 44.5% Multi Utilities 20.3% 20.8% Renewable Energy 11.4% 7.7% Gas 8.5% 12.7% Water & Waste 8.2% 13.7% Infrastructure 0.0% 0.6% Currency Probably the largest single detractor from performance in the period was the strength of the Pound. Sterling rose by a further 3.3% against the US Dollar during the course of the first half of 2014, having strengthened by 1.9% over 2013. Aside from direct US investments, PEWT's portfolio is also exposed to this through the Chinese companies listed in Hong Kong, with the HK Dollar being pegged to the US Dollar. Sterling also rose by 3.8% against the Euro. PEWT remains unhedged against currency movements. Balance sheet We are pleased to report that, as a result of the strong investment performance of the past six months, the effective gearing on the ordinary shares has continued to fall from 2.46x at December 2013 to a slightly more comfortable 2.24x at June 2014. However, markets permitting, we would still hope to bring this level down further over the remainder of 2014. At the end of June, PEWT's Ordinary Shares represented £34.4 million out of the total gross assets of £ 77.2 million. The ZDP Shares also find themselves in a better position with higher asset cover as detailed in the Chairman's Statement, and as such continued to trade at a premium to accrued asset value. Outlook There was general strength in the portfolio during the first half of 2014 largely caused by macro factors. However we still believe that the sector stands up well against wider markets in terms of both prospects and valuation. Investors will be aware that in addition to the larger mature utilities, PEWT holds several smaller "special situations" such as OPG and Fortune Oil. The Essar Energy Convertible Bonds also fell into this category. This was a strong period for returns from these investments, but we remain convinced that the majority of their value is yet to be realised. James Smith Claire Long Premier Fund Managers Limited 6 August 2014 Investment Manager's Report for the six months to 30 June 2014 Ten Largest Holdings at 30 June 2014 Value % total June December Company/Activity Country £000 investments 2014 2013 OPG Power Ventures Electricity India 7,437 9.8% 1 1 Generation Renewable Energy Generation Renewable Energy UK 4,614 6.1% 2 19 Fortune Oil Gas Distribution China 3,288 4.3% 3 8 Huaneng Power International Electricity China 2,895 3.8% 4 44 Generation China Power International Electricity China 2,785 3.7% 5 16 Generation Ecofin Water & Power* Investment UK 2,650 3.5% 6 6 Company SSE Multi Utility UK 2,617 3.4% 7 7 GDF Suez Multi Utility France 2,576 3.4% 8 9 China Suntien Green Energy Renewable Energy China 2,405 3.2% 9 3 Enersis Electricity Chile 2,373 3.1% 10 11 Integrated 33,640 44.3% Other investments 42,224 55.7% Total investments 75,864 100.0% * Holding in convertible bonds Income Statement for the six months to 30 June 2014 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited) Six months Six months Six months Six months Six months Six months Year Year Year to 30 June to 30 June to 30 June to 30 June to 30 June to 30 June ended 31 ended 31 ended 31 2014 2014 2014 2013 2013 2013 December December December 2013 2013 2013 Revenue Capital Total Revenue Capital Total Revenue Capital Total Notes £000 £000 £000 £000 £000 £000 £000 £000 £000 Gains on investments held at fair value through - 7,604 7,604 - 9,703 9,703 - 12,306 12,306 profit or loss Revenue 1,740 - 1,740 1,708 - 1,708 2,719 - 2,719 Investment (148) (226) (374) (132) (198) (330) (268) (398) (666) management fee Other (278) - (278) (176) - (176) (375) - (375) expenses Return before finance costs and taxation 1,314 7,378 8,692 1,400 9,505 10,905 2,076 11,908 13,984 Finance - (1,284) (1,284) - (1,192) (1,192) - (2,471) (2,471) costs Return on ordinary activities before 1,314 6,094 7,408 1,400 8,313 9,713 2,076 9,437 11,513 taxation Taxation on (137) - (137) (78) - (78) (155) - (155) ordinary activities Return on ordinary activities after taxation attributable to equity 1,177 6,094 7,271 1,322 8,313 9,635 1,921 9,437 11,358 shares Return per Ordinary share (pence) - basic 4 6.90 35.70 42.60 7.74 48.71 56.45 11.25 55.29 66.54 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. 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 30 June 2014 (Unaudited) (Unaudited) (Audited) 30 June 30 June 31 December 2014 2013 2013 £000 £000 £000 Non current assets Investments at fair 75,864 66,650 68,369 value through the profit or loss Current assets Debtors 484 933 258 Cash at bank 1,286 834 1,529 1,770 1,767 1,787 Current liabilities Creditors: amounts (438) (525) (167) falling due within one year Net current assets 1,332 1,242 1,620 Total assets less 77,196 67,892 69,989 current liabilities Creditors: amounts falling due after more than one year Zero Dividend (42,820) (40,257) (41,536) Preference shares Total net assets 34,376 27,635 28,453 Capital and reserves Share capital 171 171 171 Share premium 6,884 6,884 6,884 Redemption reserve 88 88 88 Capital reserve 17,533 10,315 11,439 Special reserve 7,472 7,472 7,472 Revenue reserve 2,228 2,705 2,399 Total equity 34,376 27,635 28,453 shareholders' funds Net asset value per Ordinary share (pence) - UK Accounting 201.41 161.91 166.70 Standards basis Net asset value per Ordinary share (pence) - Articles of 202.05 162.95 167.55 Association basis Reconciliation of Movements in Shareholders' Funds for the six months to 30 June 2014 For the six months to 30 June 2014 (unaudited) Share Share premium Redemption Capital Special Revenue capital reserve reserve reserve reserve reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2014 171 6,884 88 11,439 7,472 2,399 28,453 Return on ordinary activities after taxation - - - 6,094 - 1,177 7,271 Dividends paid - - - - - (1,348) (1,348) Balance at 30 June 171 6,884 88 17,533 7,472 2,228 34,376 2014 For the six months to 30 June 2013 (unaudited) Share Share premium Redemption Capital Special Revenue capital reserve reserve reserve reserve reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2013 171 6,884 88 2,002 7,472 2,390 19,007 Return on ordinary activities after taxation - - - 8,313 - 1,322 9,635 Dividends paid - - - - - (1,007) (1,007) Balance at 30 June 171 6,884 88 10,315 7,472 2,705 27,635 2013 For the year ended 31 December 2013 (audited) Share Share premium Redemption Capital Special Revenue capital reserve reserve reserve reserve reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2013 171 6,884 88 2,002 7,472 2,390 19,007 Return on ordinary activities after taxation - - - 9,437 - 1,921 11,358 Dividends paid - - - - - (1,912) (1,912) Balance at 31 December 2013 171 6,884 88 11,439 7,472 2,399 28,453 Cashflow Statement for the six months to 30 June 2014 (Unaudited) (Unaudited) (Audited) Six months to Six months to Year ended 30 June 30 June 31 December 2014 2013 2013 Notes £000 £000 £000 Net cash inflow 7 929 962 1,676 from operating activities Taxation Overseas tax paid (135) (38) (105) Financial investments Purchases of (19,044) (16,802) (25,929) investments Sales of 19,355 16,239 26,319 investments Net cash inflow/ 311 (563) 390 (outflow) from financial investments Equity dividends (1,348) (1,007) (1,912) paid Net cash (outflow) (243) (646) 49 /inflow before financing (Decrease)/ (243) (646) 49 increase in cash Reconciliation of Net Cash Flow to Movements in Net Debt (Unaudited) (Unaudited) (Audited) Six months to Six months to Year ended 30 June 30 June 31 December 2014 2013 2013 £000 £000 £000 (Decrease)/increase in (243) (646) 49 cash as above Net change in debt due (1,284) (1,192) (2,471) in more than one year Movements in net debt (1.527) (1,838) (2,422) for year Net debt as at 1 (40,007) (37,585) (37,585) January Net debt as at end of (41,534) (39,423) (40,007) period Notes to the Half Year Report ACCOUNTING POLICIES 1. These financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in January 2009). The accounting policies applied to this half year report are consistent with those applied in the accounts for the year ended 31 December 2013. The accounts have been prepared on a going concern basis. 2. The figures and financial information for the year ended 31 December 2013 are an extract from the latest published accounts and do not constitute statutory accounts. Full accounts for that period have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The accounts for the six months ended 30 June 2014 and for the six months ended 30 June 2013 are unaudited and do not constitute statutory accounts. 3. On 24 July 2014 the Directors declared a second interim dividend of 2.65p per Ordinary share comprised of a base dividend of 1.9p and an additional dividend of 0.75p for the year ending 31 December 2014 to holders of Ordinary shares on the register on 29 August 2014. The Ordinary shares will be marked ex-dividend on 27 August 2014 and the dividend will be paid on 30 September 2014. 4. The total return per Ordinary share is based on the return on ordinary activities after taxation of £7,271,000 (six months ended 30 June 2013: £ 9,635,000; year ended 31 December 2013: £11,358,000) and on 17,068,480 Ordinary shares in issue during the six months ended 30 June 2014 (six months ended 30  June 2013: 17,068,480 shares; year ended 31 December 2013: 17,068,480 shares). 5. The Net Asset Value differences reported below arise from the treatment of the premium (net of expenses) from the issue of Zero Dividend Preference ("ZDP") shares in December 2011 of £330,000. In accordance with UK Accounting Standards this has been included with the ZDP liability and is being 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 30 June 2014 and 31 December 2013. The net asset value per share and the net assets available to each class of share calculated in accordance with UK Accounting Standards, are as follows: Net asset value Net assets Net asset value Net assets per share available per share available 30 June 30 June 31 December 31 December 2014 2014 2013 2013 Pence £000 Pence £000 17,068,480 Ordinary shares of £0.01 each in issue 201.41 34,376 166.70 28,453 21,180,373 Zero Dividend Preference shares of £0.01 each 202.17 42,820 196.11 41,536 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 30 June 30 June 31 December 31 December 2014 2014 2013 2013 Pence £000 Pence £000 17,068,480 Ordinary shares of £0.01 each in issue 202.05 34,486 167.55 28,598 21,180,373 Zero Dividend Preference shares of £0.01 each 201.65 42,710 195.42 41,391 in issue* * Classified as a liability. 6. The taxation charge of £137,000 (30 June 2013: £78,000 and 31 December 2013: £155,000) relates to irrecoverable overseas taxation. 7. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities: (Unaudited) (Unaudited) (Audited) Six months to Six months to Year ended 30 June 30 June 31 December 2014 2013 2013 £000 £000 £000 Total return on ordinary activities before finance costs and 8,692 10,905 13,984 taxation Capital return (7,378) (9,505) (11,908) before finance costs and taxation Accrued income and (226) (253) 15 prepayments Other creditors 67 13 (17) Investment (226) (198) (398) management fee capitalised Net cash inflow 929 962 1,676 from operating activities 8. Investment management fee charged by Premier Fund Managers Limited. (Unaudited) (Unaudited) (Audited) Six months to Six months to Year ended 30 June 30 June 31 December 2014 2013 2013 £000 £000 £000 Basic fee: 40% charged to 148 132 268 revenue 60% charged to 226 198 398 capital 374 330 666 9. It is the intention of the Directors to conduct the affairs of the Company so that they satisfy the conditions for approval as an investment trust company set out in section 1158 of the Income and Corporation Tax Act 2010. Interim Management Report Premier Energy and Water Trust PLC is required to make the following disclosures in its half year report: PRINCIPAL RISKS AND UNCERTAINTIES The Board believes that the principal risks and uncertainties faced by the Company continue to fall into the following categories: • Structure of the Company and gearing • Discount volatility • Dividend levels • Operational • Currency risk • Accounting, legal and regulatory • Liquidity risk • Political and regulatory • Market price risk Information on each of these is given in the Report of the Directors in the Annual Report for the year ended 31 December 2013. RELATED PARTY TRANSACTIONS There have been no related party transactions during the six months ended 30 June 2014. GOING CONCERN The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and income and expenditure 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 there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts. DIRECTORS' RESPONSIBILITY STATEMENT The Directors are responsible for preparing the half year report, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge: • The condensed set of financial statements within the half year report has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports"; and • The Interim Management Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FCA's Disclosure and Transparency Rules. For and on behalf of the Board. Geoffrey Burns Chairman 6 August 2014 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 306090, 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 306090. SHARE REGISTER ENQUIRIES The register for the Ordinary shares and Zero Dividend Preference shares is maintained by Capita Registrars. In the event of queries regarding your holding, please contact the Registrar on 0871 664 0300 (calls cost 10p per minute plus network extras, lines are open Monday to Friday 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. Directors and Advisers DIRECTORS Geoffrey Burns (Chairman) Ian Graham Michael Wigley Charles Wilkinson INVESTMENT MANAGER Premier Fund Managers Limited Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: 01483 306 090 www.premierfunds.co.uk Authorised and regulated by the Financial 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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