Annual Financial Report

Premier Energy and Water Trust PLC annual report & accounts for the year ended31 December 2010 In accordance with DTR6.3 the Company releases the full text of its Annual Report for the year ended 31 December 2010 (audited). The annual report will be available shortly on the website www.premierassetmanagement.co.uk Investment objectives The Company's investment objectives are to achieve a high income from its portfolio and to realise long-term growth in the capital value of the portfolio. The Company will seek to achieve these objectives by investing principally in the equity and equity related securities of companies operating primarily in the energy and water sectors, as well as other infrastructure investments. Contents Investment objectives Company highlights 1 Company summary 2 Financial calendar 2 Chairman's statement 3 Investment manager's report 5 Investment portfolio 8 Company details 9 Financial summary 12 Directors 14 Investment manager and secretary 14 Directors' report 15 Directors' remuneration report 33 Statement of directors' responsibilities in respect of the financial 35 statements Independent auditor's report 36 Income statement 38 Balance sheet 39 Reconciliation of movements in shareholders' funds 40 Cash flow statement 41 Notes to the financial statements 42 Glossary of terms 58 Shareholder information 59 Notice of annual general meeting 60 Notes to the notice of annual general meeting 63 Directors and advisers 65 Registered in England No. 4897881 A member of the Association of Investment Companies Company highlights Total return performance % change Total assets1 +3.9% FTSE Global Utilities Total Return Index2 (Â£) +2.5% FTSE All World Total Return Index2 (Â£) +16.7% FTSE 100 Total Return Index2 +12.6% Share price and NAV3 returns 31 December 31 December 2010 2009 % change Zero Dividend Preference share NAV3 161.64p 151.73p +6.5% Mid price 173.50p 156.25p +11.0% Ordinary share NAV3 190.81p 192.87p -1.1% Mid price 155.75p 187.25p -16.8% Revenue return per Ordinary 9.33p 10.19p share Net dividends declared per Base 8.10p 7.70p Ordinary share Special - 1.70p Total 8.10p 9.40p Zero Dividend Preference shares Ordinary shares 5 Year Performance to 31 December 2010 (rebased to 100) 5 Year Performance to 31 December 2010 (rebased to 100) [Graphic removed] 1 Total return performance, adjusted for any dividends distributed and declared and adjusted for the issue of new shares and associated costs in 2010. 2 Source: Bloomberg. 3 Calculated in accordance with the Articles of Association (see note 17 on page 51). Company summary Launch Date 4 November 2003 Domiciled UK Year-end 31 December Shareholders' Funds Â£66.36 million Market Â£63.33 million Capitalisation Bank Loan Nil Zero Dividend 21,180,373: aiming to redeem at 221.78p on 31 Preference shares December 2015 Ordinary shares 17,068,480 Dividends Paid on Ordinary shares Dividend History In respect of year ended 31 December Total dividends declared 2010 8.10p 2009 9.40p# 2008 7.35p 2007 7.00p 2006 6.90p 2005 6.75p 2004 7.875p* Investment Manager Premier Fund Managers Limited Management Fee 1.0% per annum, charged from 1 January 2010, 40% to revenue and 60% to capital, plus performance fee, allocated between capital and revenue based on the out-performance attributable to capital and revenue respectively (until 31 December 2009, 100% of the basic management fee was charged to revenue). AIC Member of the Association of Investment Companies * This dividend was for the 14 month period from launch, representing an annualised dividend of 6.75p. # Includes a special dividend of 1.70p. Financial Calendar Company's year-end 31 December Annual results announced mid March Annual General Meeting 27 April 2011 Company's half-year end 30 June Half-year results announced early August Dividend payments - 2011 at the end of January, April, August and December (Dividend payments thereafter will be at the end of March, June, September and December) Chairman's statement for year to 31 December 2010 Overview of the year In December 2010 shareholders of Premier Energy and Water Trust PLC (the "Company") approved the merger of the Company's portfolio with the portfolio of Premier Renewable Energy Fund ("PREF"). I would like to extend a warm welcome to our new shareholders. As a result of this transaction the Company issued 3,965,415 new Ordinary shares and 2,779,377 new Zero Dividend Preference shares to shareholders of PREF raising Â£11.6 million (net of expenses). In addition, in order to maintain broadly the same capital structure 2,064,600 new ZDP shares were placed for cash raising Â£3.5 million. This transaction has created a significantly larger Company that should benefit from a lower overall expense ratio and greater liquidity for its shares in the market. The global energy and water sectors generally underperformed the wider stockmarket during 2010, a result principally of investors focussing on those areas of the market more directly exposed to economic recovery such as commodities and banking. This report deals with the performance of the Company from 1 January 2010 to 31 December 2010 and all returns have been adjusted for the merger of your Company's portfolio with PREF. Over the period total return on portfolio assets was 3.9% (adjusted for dividends distributed and declared and for the issue of new shares and associated costs in December 2010) which compares to a total return from the FTSE Global Utilities Index of 2.5%. By contrast the FTSE 100 Index in the UK returned 12.6% and the FTSE All World Index 16.7%. Your Company does not have any formal benchmarks but rather provides investors with a range of indices against which performance may be assessed. These are shown on page 1 of the Report and Accounts. Shareholders should be aware that the Company invests in the energy and water sectors which are generally perceived as defensive and thus may not necessarily be well correlated with overall equity markets. The Company's capital structure is comprised of Ordinary and Zero Dividend Preference shares ("ZDP"). The ZDP shares are entitled to a predetermined capital sum of 221.78p at the planned wind up date of the Company on 31 December 2015. As a consequence the rise or fall in assets attributable to the Ordinary shares is geared by this prior capital entitlement. Over the period the accrued entitlement of the ZDP shares rose from 151.73p to 161.64p. Although the net assets attributable to the Ordinary shares fell marginally during the period from 192.87p to 190.81p3 the total return on the Ordinary shares was 5.4% (source: AIC). Since the Company commenced its activities on the 4 November 2003 the FTSE 100 Index has produced a total return of 76.0% (source: Bloomberg). Over the same period the total assets of your Company have produced a total return of 114.3% whilst total return on your Company's Ordinary shares (measured by increase in net asset value together with dividends paid) is 151.8%. Board of Directors I would like to welcome Charles Wilkinson, the former Chairman of PREF, onto the Company's Board. Charles has had a very eminent career as a lawyer and brings significant experience with him. Dividends The revenue return per Ordinary share for the year ended 31 December 2010 on a weighted average basis was 9.33p (2009: 10.19p per Ordinary share on a weighted average basis). Your Board declared a fourth interim dividend of 3.4p per Ordinary share which was paid on 31 January 2011 to shareholders on the register as at the close of business on 10 December 2010. The shares were marked ex-dividend on 8 December 2010. This means total dividends paid in respect of the year to 31 December 2010 were 8.1p per share, representing an increase of 5.2% over the 7.7p per Ordinary share paid in respect of the year to 31 December 2009 (excluding the special dividend of 1.7p paid in 2009). Your Board and Investment Manager are committed to continuing a progressive dividend policy. Shareholder relations The Board and our Investment Manager welcome contact with both the Company's existing shareholders and with potential new shareholders. The Investment Manager has met with the Company's larger shareholders during the process of change of capital structure and life extension. However, the Company's AGM is on Wednesday 27 April 2011 at 2.00pm at the offices of Premier Asset Management Limited in Guildford and it is hoped that shareholders will be able to attend on this date. Outlook The marked underperformance of the global energy and water sectors over the last two years has reduced sector valuations to attractive and sustainable levels. Inflation is likely to remain stubbornly high and within western utilities this should be captured by the regulated asset base, benefiting long term earnings and dividend growth. In Asia growing urbanisation should afford water and energy companies significant long term growth opportunities. The terrible earthquake in Japan is likely to have a negative impact on sentiment towards nuclear stocks but the trend towards sustainable carbon free generation is nonetheless continuing to produce exciting investment opportunities. Your Company is well placed therefore to exploit the global opportunity within the energy and water sectors. Geoffrey Burns Chairman 16 March 2011 3 Calculated in accordance with the Articles of Association (see note 17 on page 51). Investment manager's report for the period 1 January to 31 December 2010 Overview Weak margins in power generation and a relative lack of exposure to the global economic upturn lies behind the underperformance of the global utilities sector (+2.5%) when compared with the wider market in 2010, during which the FTSE100 returned +12.6% and the FTSE All World +16.7% on a total return basis. The Company outperformed the Global Utilities Index during the twelve month period by 1.4%. This was due in part to its high weighting in Asia. An overweight position in highly regulated stocks also contributed, as this sub sector outperformed when compared to pure generation stocks and the integrated players. Portfolio Activity The Asian portion of the portfolio (including Australia) has continued to increase, from 27% at the half year to 29% at the end of 2010. Increasing standards of living and a shortage of existing infrastructure have created a sustained demand for investment in the region, and as a result produced a large number of attractive investment opportunities. This regional shift in the portfolio has been at the expense of the UK and Europe, and reflects the relative attraction of these markets over many of the European markets in particular. Exposure to North America has remained stable over the period, but this hides a shift in emphasis towards Canada once more. The cash position appears higher than usual at the year end, the result of the inflow of cash from the successful rollover of the Premier Renewable Energy Fund into the Company, but this has since been substantially reinvested, the majority into new or existing North American and Asian stocks. Investment in Asian water remains a key theme. The holding in China Water Affairs has been increased, as the new Chinese five year plan guidance on tariffs for water supply is likely to provide support for the stock over the coming months. Exposure to Thai Tap Water has also been increased, both directly, and through Bangkok Expressway (BECL), which has a near 10% holding in the company. BECL should also be boosted by the anticipated resolution of a legal dispute with the Thai Expressway Authority. The dual listing of Sound Global in Hong Kong provided an opportunity to take some profit from a sharp rise in the ordinary shares. The position had been increased through the purchase of the 6% convertible which provides a higher yield than the ordinary shares. The Chinese sanitary ware company, Joyou, brings exposure to the Chinese residential water market, while another IPO during 2010, Halosource, gives an opening into the huge Indian residential drinking water market through its point of use water purification devices. The Indian water market is a new area of investment for the Company, since the majority of water supply there is state owned, but as in China demand for clean water is growing rapidly. We have added to the holding in Consolidated Water (desalination plant operator in the Caribbean) and the Company now has further exposure to this growing area of the water sector through the Qatar Electricity and Water Company. This is rapidly expanding its capacity to produce over 70% of the Emirate's water, together with nearly 60% of its total electricity output. As technological developments start to bring down the cost of desalination, we continue to look for exposure to this theme. The Company's holding in Aqua America has been reduced on valuation grounds, but its position in York Water retained, as the opportunities for consolidation in the highly fragmented US water market remain. Overall the water portion of the enlarged portfolio has remained relatively stable at around 21%. Fortum is now the largest stock in the portfolio, and has performed strongly over the last quarter (+17% in local currency/+16% in sterling). While power prices across Europe have been pushed up by rising raw material costs, in the Nordic market - which is more heavily influenced by the weather, and where hydro reservoir levels are unusually low - power prices have been particularly strong. With largely fixed input costs, as a nuclear/hydro generator, Fortum has been well placed to benefit. If the accompanying rally in commodity prices continues, clean generators such as Fortum and EDF should see further upside. Elsewhere in Europe, where the majority of generators have a balanced mix of generation capacity, generation spreads (the margin earned by gas and coal plants) remain under pressure, in part as a result of the overcapacity that has built up across the markets. We do not expect this oversupply position to reverse in 2011, and as a result the Company's exposure to these stocks is limited. The emphasis in the European portion of the portfolio remains on the regulated utilities that are net beneficiaries of higher capital expenditure as their returns are largely directly remunerated on investment. Our favoured "networks" play in Europe remains Snam Rete Gas which transports, distributes and stores gas in Italy and is a largely regulated business. With regulatory certainty through 2012, its secure and growing profit stream is still undervalued by the market in our opinion. Certain regulated utilities in the United States - PG&E (California), Portland General Electric (Oregon) and Scana Corp (South Carolina) - have superior earnings growth potential and attractive dividend yields. In terms of generation, NextEra Energy - which has high exposure to renewable energy, particularly wind power - is one of the few generation stocks expected to maintain positive earnings growth through the downturn in the power cycle. It was brought over from the Premier Renewable Energy Fund for this reason. Calpine, with its highly efficient gas plants displacing less efficient coal plants, should also benefit from new emissions regulations to be issued by the Environmental Protection Agency during 2011. Williams, the integrated natural gas group, has been a strong performer since its purchase at the end of the third quarter. The Company also holds Encana Corp. Based in Alberta but with operations throughout North America, it develops unconventional gas resources, such as coal bed methane and shale gas. Enviro Energy (Hong Kong) also adds to this theme in China. China Resources Power stands out amongst Chinese coal powered generators for its efficiency and earnings capability, and with a number of its plants located close to the prosperous coastal regions of China, we expect it to benefit from strong underlying demand for electricity there. A 5% tariff increase as a result of high coal prices is also likely during the next 12 months. The Australian utility market has been a strong performer in 2010, to which the Company has had exposure through two regulated stocks: SP Ausnet and Spark Infrastructure, which own transmission and distribution assets in Victoria, and distribution in South Australia and Victoria respectively. The outlook for both stocks looks encouraging following the regulatory review in the state of Victoria at the end of the year. Two global growth themes continued to prevail in 2010; the Company has retained its exposure to nuclear power - both generators (Entergy, Exelon, EDF and Fortum) and uranium mining stocks (Cameco replacing Uranium One). At the same time environmental drivers in the water and energy sectors continue to produce interesting growth opportunities around the world - illustrated by a number of examples here - and the search for further beneficiaries of these drivers therefore remains a focus. Outlook With reference to the recent tragic events in Japan, the Company has no direct holdings there, and limited indirect exposure throughout the portfolio. Its global nuclear exposure has inevitably been hit by negative sentiments towards the industry, and we shall keep those positions under close review. Conversely, several of the renewable energy holdings have rallied in the short term, and we expect these partially, if not wholly to redress the balance. A number of other stocks, in particular those involved in gas distribution may also be net beneficiaries in the short and medium term. Overall, prospects in many Asian countries over the next two or three years are excellent for power, water and other infrastructure and contrast sharply with those in certain of the developed markets. This therefore remains a key focus within the portfolio, enabling us to draw on our expertise in investing in Asia, as our enthusiasm for these markets remains strong. We welcome contact with existing and potential new investors. Further details of the Company may be found at www.premierfunds.co.uk Kevin Scutt Andrew Whalley Claire Burgess Premier Fund Managers Limited 16 March 2011 Geographical allocation at 31 December 2010 [Graphic removed] Asset allocation at 31 December 2010 [Graphic removed] Investment portfolio at 31 December 2010 Thirty largest holdings by value in descending order as at 31 December 2010 2010 Valuation 2009# Company Activity Country Â£000 % of total Â£000 1 Fortum Electricity Finland 1,834 3.0% - generation & supply 2 China Power Electricity Hong Kong 1,735 2.9% 1,318 New Energy generation 3 Calpine Gas USA 1,702 2.8% - production and transmission 4 Entergy Electricity USA 1,674 2.8% 1,875 generation & supply 5 Sound Global Water Singapore 1,613 2.7% - treatment 6 Gaz De France Gas France 1,610 2.7% 1,876 production and transmission 7 Snam Rete Gas Gas Italy 1,594 2.6% 1,533 production and transmission 8 Thai Tap Water Water Thailand 1,521 2.5% 825 treatment 9 Exelon Electricity USA 1,436 2.4% 1,089 generation & supply 10 Severn Trent Water & waste UK 1,433 2.4% - services 11 EDF Electricity France 1,426 2.4% 1,475 generation & supply 12 Greenko Group Renewable UK 1,425 2.4% 964 electricity generation 13 Electricity Electricity Thailand 1,419 2.3% 954 Generating generation & supply 14 UIL Holdings Electricity USA 1,340 2.2% 1,790 generation & supply 15 Guangdong Water supply Hong Kong 1,315 2.2% 1,444 Investment 16 Huaneng Power Electricity Hong Kong 1,280 2.1% 1,187 International generation & supply 17 Portland Electricity USA 1,220 2.0% - General generation & Electric supply 18 Suez Water & waste France 1,218 2.0% 1,318 services and electricity generation 19 China Water Water & waste Hong Kong 1,206 2.0% - Affairs services 20 Williams Gas & USA 1,184 2.0% - electricity supply 21 China Electricity Hong Kong 1,159 1.9% - Resources generation & Power supply 22 Encana Gas & Canada 1,120 1.8% - electricity supply 23 York Water Water supply USA 1,099 1.8% 895 24 Enbridge Gas & Canada 1,084 1.8% - electricity supply 25 Veolia Water & waste France 1,049 1.7% 1,027 Environnement services 26 Cameco Corp Electricity Canada 1,040 1.7% - generation & supply 27 SCANA Corp Electricity USA 1,037 1.7% - generation & supply 28 Bangkok Toll roads Thailand 1,033 1.7% 268 Expressway 29 PPL Corp Electricity USA 1,009 1.7% 900 generation & supply 30 First Energy Electricity USA 946 1.6% - generation & supply 39,761 65.8% Other holdings 20,800 34.2% Total 60,561 100.0% portfolio # Values have been provided for holdings in the portfolio at both 31 December 2010 and 31 December 2009. Valuation movements between the two dates will reflect market price changes and transactions. Company details HISTORY The Company was incorporated on 12 September 2003 and commenced its activities on 4 November 2003. The Company was established in connection with the scheme of reconstruction of LeggMason Investors International Utilities Trust Plc with 18,143,433 Ordinary shares and 19,143,433 Zero Dividend Preference shares being allotted at launch. On 18 December 2009 shareholders approved special resolutions to implement tender offers for Ordinary shares and Zero Dividend Preference ("ZDP") shares, to extend the life of the Company until 31 December 2015 and to amend the final entitlement per ZDP share to 221.78p on 31 December 2015 (a gross redemption yield of 6.53% on the ZDP Net Asset Value ("NAV") of 151.39p at 17 December 2009). On 15 December 2010 shareholders approved proposals to issue new shares in connection with the reconstruction of Premier Renewable Energy Fund Limited. CAPITAL STRUCTURE Bank Loan The Company's policy is not to employ any long-term gearing through bank loans. 21,180,373 Zero Dividend Preference shares of 1p each. The Zero Dividend Preference shares will have a final capital entitlement of 221.78p on 31 December 2015 subject to there being sufficient capital in the Company. The Zero Dividend Preference shares are not entitled to any dividends. The Zero Dividend Preference shareholders have the right to receive notice of, to attend and to vote at all general meetings of the Company. 17,068,480 Ordinary shares of 1p each. The Ordinary shares are entitled to all of the Company's net income available for distribution by way of dividends. On a winding-up, they will be due any undistributed revenue reserves and any surplus assets of the Company after the Zero Dividend Preference shares have been paid in full. The Ordinary shareholders have the right to receive notice of, to attend and to vote at all general meetings of the Company. Wind-up date 31 December 2015. EXPENSE RECOGNITION POLICY The basic management fee is charged 40% to revenue and 60% to capital (from 1 January 2010), all other expenses are charged wholly to revenue except when they directly relate to the acquisition or disposal of an investment, in which case they are charged to capital as investment transaction costs. The performance fee is allocated between capital and revenue based on the out-performance attributable to capital and revenue respectively. RISK FACTORS The Company concentrates on investments in the utility sector and may be regarded as representing a higher risk than that of a generalist fund. Securities listed on a recognised stock exchange have been valued at bid-market prices and exchange rates ruling at the close of business. In certain circumstances, the market prices at which investments may be valued may not represent the realisable value of those investments taking into account both the size of the Company's holding and the frequency with which such investments are traded. The Company may invest up to 15% of its gross assets in unquoted securities which may have limited liquidity and be difficult to realise. The income and capital value of the Company's investments can be affected, favourably or unfavourably, by currency movements as a proportion of the Company's assets and income is denominated in currencies other than sterling. The dividend on the Ordinary shares depends on receipt of interest payments and dividends from securities in which the Company invests. If on a wind-up of the Company the gross assets are insufficient to cover the capital entitlement of the prior ranking Zero Dividend Preference shares, the terminal asset value of the Ordinary shares could be zero and an investor could lose all of the capital invested in those shares. The Zero Dividend Preference shares rank ahead of the Ordinary shares for repayment on a winding-up of the Company. A decline in the gross assets could result in the Zero Dividend Preference shares failing to receive their full redemption value on wind-up and if gross assets were equal to or less than the amount required to pay liquidation costs, an investor would lose all of the capital invested in the Zero Dividend Preference shares. TOTAL NET ASSETS AND MARKET CAPITALISATION As at 31 December 2010, the Company had a market capitalisation of Â£63.33 million (2009: Â£50.06 million) and assets attributable to shareholders amounted to Â£66.36 million (2009: Â£50.06 million). The figures at 31 December 2010 are after the issue of new shares on 17 December 2010 and the figures at 31 December 2009 are after the tender offers for shares that were completed on 18 December 2009. MANAGEMENT FEE During the year, the management fee was 0.0833% per month of the gross assets (total assets less current liabilities). From 1 October 2008 no VAT has been charged on the management fee. Until 31 December 2009, 100% of the management fee was charged to revenue, from 1 January 2010 it was decided to allocate the management fees 60% to capital and 40% to revenue (see note 3 on page 44). In addition, the Manager ("Premier Fund Managers Limited") is entitled to a performance fee if in each Company year: (i) the dividends paid are at least 6.75p; and (ii) the gross assets at the end of the year exceed the highest level of gross assets at the end of any previous Company year or the initial gross assets (if higher) by more than 7.5% (on annualised basis). In that event the performance fee will be equivalent to 15% of the excess. The management contract is terminable by one year's written notice from either party to expire at any time. ISA STATUS The Company's Ordinary shares and Zero Dividend Preference shares are qualifying investments for Individual Savings Accounts ("ISAs"). Full details can be obtained from Premier Fund Managers Limited. Financial summary CAPITAL Premium/ (discount) % 31 December 31 December % 31 December 2010 2009 change 2010 Total Assets (Â£000)* 66,360 50,059 + 3.9% - Net Asset Value per Zero 161.64p 151.73p +6.5% - Dividend Preference share** Mid-market price per Zero 173.50p 156.25p +11.0% 7.3% Dividend Preference share Net Asset Value per Ordinary 190.81p 192.87p -1.1% - share** Mid-market price per Ordinary 155.75p 187.25p -16.8% (17.2%) share REVENUE 31 December 31 December % 2010 2009 change Revenue return per Ordinary 9.33p 10.19p -8.4% share Net dividend per Ordinary share: Base 8.10p 7.70p Special - 1.70p Total 8.10p 9.40p * Total assets less current liabilities, adjusted for any dividends distributed and declared and adjusted for the issue of new shares and associated costs in 2010. ** Net asset values calculated in accordance with Articles of Association (see note 17 on page 51). HURDLE RATESâ€ 31 December 2010 Zero Dividend Preference shares: Hurdle rate to redemption share price of -6.3% 221.78p on 31 December 2015 Ordinary shares: Hurdle rate return to current share price 2.0% of 155.75p Source: JP Morgan Cazenove. â€ See page 58 for definition of hurdle rate. TOTAL RETURN Year to Year to 31 December 31 December 2010 2009 Total return on gross assets1 +3.9% +12.7% FTSE Global Utilities Total Return Index2 (Â£) +2.5% -1.8% FTSE All World Total Return Index2 (Â£) +16.7% +21.2% FTSE 100 Total Return Index2 +12.6% +27.3% Total expense ratio/cost of running the Company3 1.91% 1.96% At At 31 December 31 December 2010 2009 Â£/$ exchange rate 1.5656 1.6148 Â£/â‚¬ exchange rate 1.1670 1.1255 1 Total return performance, adjusted for any dividends distributed and declared and adjusted for the issue of new shares and associated costs in 2010. 2 Source: Bloomberg. 3 The expense ratio, excluding any performance management fee and VAT recovered from HMRC in 2009, based on average monthly net asset value. Directors Geoffrey Burns - Chairman Geoffrey Burns has worked in the investment fund industry for over twenty years. From 1997 to 2000 he was a director of and head of investment trusts at Murray Johnstone Limited. Mr Burns is an adviser to a number of government or multilateral agencies who make investments in private equity funds in emerging markets, including CDC Group plc, the Swiss Investment Fund for Emerging Markets and the Asian Development Bank. Mr Burns is Chairman of City Natural Resources High Yield Trust PLC. Mr Burns was appointed as a non-executive director of the Company on 12 September 2003. Adam Cooke Adam Cooke was a global partner of INVESCO PLC (formerly AMVESCAP PLC), one of the world's largest independent investment management organisations where he worked for INVESCO UK. His experience includes the UK institutional business, investment trusts and collective investments. Mr Cooke is a member of the Chartered Institute of Bankers and is a non executive director of City Natural Resources High Yield Trust PLC and Midas Income and Growth Trust PLC. Mr Cooke was appointed as a non-executive director of the Company on 26 July 2005. Ian Graham Ian Graham has over 20 years experience as an investment analyst, more than half of which were spent covering utilities, having worked at Scrimgeour Kemp-Gee, Simon & Coates, Nat West Securities and Merrill Lynch until 2001. Mr Graham was appointed as a non-executive director of the Company on 12 September 2003. Michael Wigley Michael Wigley is a director of The Conygar Investment Company plc. He was formerly a director of Matheson Investment Limited and a non-executive director of Development Securities PLC. He was deputy chairman of LeggMason Investors International Utilities Trust Plc, the predecessor company. Mr Wigley was appointed as a non-executive director of the Company on 12 September 2003. Charles Wilkinson Charles Wilkinson is a solicitor and a resident of Guernsey. Until March 2005 he was a partner with Lawrence Graham LLP specialising in investment trusts and funds. He is a non-executive director of Landore Resources Limited, which is quoted on the AIM Market of the London Stock Exchange and a director of a number of London quoted companies and was chairman of Asset Management Investment Company PLC (a listed investment trust) until 31 January 2011. He was chairman of Premier Renewable Energy Fund Limited which was placed in to voluntary liquidation as part of a scheme of reconstruction on 17 December 2010 (see pages 15 and 16). Mr Wilkinson was appointed as a non-executive director of the Company on 23 February 2011. Investment Manager and Secretary Investment Manager: Premier Fund Managers Limited Premier Fund Managers Limited is a subsidiary of Premier Asset Management Limited. Premier Asset Management Limited had just under Â£2.5 billion of funds under management at 31 December 2010. Premier Fund Managers Limited is authorised and regulated by the Financial Services Authority. The Company's portfolio is managed by Andrew Whalley, Kevin Scutt and Claire Burgess. Secretary: Premier Asset Management Limited Premier Asset Management Limited provides the company secretarial and administrative services. Directors' report The Directors have pleasure in submitting their Business Review, Report and Financial Statements for the year ended 31 December 2010. BUSINESS REVIEW UK listed companies are required to include a business review within their directors' reports or, should they prefer, a more detailed operating financial review. Having considered the regulations and in view of the nature and the size of the Company, the Board has chosen to include a business review in its report to shareholders, rather than an operating financial review. This business review is intended to enhance shareholders' understanding of the development, performance and position of the Company through a combination of narrative and financial performance measures. Issue of new Premier Energy and Water Trust PLC ("PEWT") shares in connection with the proposed scheme of reconstruction of Premier Renewable Energy Fund Limited ("PREF") On 18 November 2010, your Board announced proposals relating to the issue of new PEWT Shares to shareholders of PREF as part of the proposed voluntary winding up of PREF by way of a scheme of reconstruction (the "Scheme"). Under the Proposals, the Company proposed to issue up to 6,500,000 new PEWT Ordinary shares and 8,100,000 new PEWT Zero Dividend Preference ("ZDP") shares to PREF Shareholders (depending upon elections made under the Scheme). The Proposals also included an amendment to the Articles of Association to permit the issue of new PEWT ZDP shares ranking pari passu with the existing PEWT ZDP shares notwithstanding that the cover on the existing PEWT ZDP shares would not be 1.5 times or more, provided that the cover on the existing PEWT ZDP shares was improved following the issue of such shares. The Board did not intend to use this power unless the overall effect of the issue would be to broadly maintain or enhance the net asset value per PEWT Ordinary share. On 15 December 2010 the Board announced that shareholders had voted in favour of the special resolutions put at a Class Meeting of the ZDP shareholders and the General Meeting of the Company and that each resolution had been duly passed. The proposals were approved by PREF shareholders on 17 December 2010. The proposals provided for PREF Ordinary shares to be exchanged for new PEWT Ordinary shares (the "Ordinary Rollover Option") or for PEWT Units comprising one new PEWT Ordinary share and one new PEWT ZDP share (the "Unit Rollover Option"). The exchange ratios of PEWT ordinary shares and PEWT Units for every PREF Ordinary share were determined by reference to the Formula Asset Value ("FAV") of a PEWT Ordinary share and of a PREF Ordinary share based on the closing prices of their respective portfolio investments on 14 December 2010. These FAVs amounted to 181.86p per PEWT Ordinary share and 71.32p per PREF Ordinary share. After deducting a 2.5% discount to the value of a PEWT Ordinary share and based on a valuation of 172.25p per PEWT ZDP share in accordance with the terms of the Proposals, it was determined that: â€¢ 0.4022 new PEWT Ordinary shares would be issued in respect of each PREF Ordinary share electing, or deemed to have elected, for the Ordinary Rollover Option; and â€¢ 0.2040 new PEWT Units would be issued in respect of each PREF Ordinary share electing for the Unit Rollover Option. The Board of PEWT allotted 3,965,415 new PEWT Ordinary shares and 2,779,377 new PEWT ZDP shares in respect of the portfolio of assets acquired from PREF. In order to maintain broadly the same proportion of PEWT Ordinary shares to PEWT ZDP shares, the Board also allotted 2,064,600 new PEWT ZDP shares, which had been placed for cash at a price of 168 pence each by Fairfax I.S. PLC. Following the above issue of new PEWT shares, the issued share capital of PEWT comprised: â€¢ 17,068,480 Ordinary shares of 1p each with ISIN GB0033537902; and â€¢ 21,180,373 Zero Dividend Preference shares of 1p each with ISIN GB0033538207. Business and tax status The Company is an investment company as defined in Section 833 of the Companies Act 2006. The Company operates as an investment trust and directs its affairs so as to enable it to seek approval as such by HM Revenue & Customs under Section 1158 of the Corporation Tax Act 2010 for the year ended 31 December 2010. Approval has been obtained for the year ended 31 December 2009, which is subject to there being no subsequent enquiry under Corporate Self Assessment. In the opinion of the Directors, the Company has conducted its affairs for the year ended 31 December 2010 so as to enable it to continue to seek such approval under Section 1158 of the Corporation Tax Act 2010. The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments. Investment trusts offer a number of other advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at low cost. Investment objectives The Company's investment objectives are to achieve high income from its portfolio and to realise long-term growth in the capital value of the portfolio. The Company will seek to achieve these objectives by investing principally in equity and equity related securities of companies operating primarily in the energy and water sectors, as well as other infrastructure investments. Investment policy The policy of the Directors is that, in normal market conditions, the portfolio of the Company should consist primarily of a diversified portfolio of equity and equity-related securities of companies operating in the energy and water sectors, as well as other infrastructure investments. There are no restrictions on the proportion of the portfolio of the Company which may be invested in any one geographical area or asset class but no more than 15% of the Company's assets, at the time of acquisition, will be invested in a single security. The Company may also invest up to 15% of its gross assets in investment companies provided they themselves invest in utilities and infrastructure. However, not more than 10% of the Company's gross assets may be invested in other UK listed closed-ended investment funds unless such funds themselves have published investment policies to invest not more than 15% of their total assets in other UK listed closed-ended investment funds (provided they themselves invest in utilities and infrastructure). The Company may invest up to 15% of its gross assets in unquoted securities. There are no borrowings under financial instruments or the equivalent of financial instruments but investors should be aware of the gearing effect of the ZDP shares within the capital structure. The Company's policy is not to employ any gearing through long-term bank borrowing. The Company can, however, employ gearing through the issue of ZDP shares. The Company will manage and invest its assets in accordance with its published investment policy. Any material change to this policy will only be made with the approval of Shareholders by ordinary resolution unless otherwise permitted by the Listing Rules. Investment Restrictions The Company will not: (i) invest more than 10%, in aggregate, of the value of its gross assets at the time the investment is made in other listed closed-ended funds, provided that this restriction does not apply to investments in any such closed-ended funds which themselves have stated investment policies to invest no more than 15% of their total assets in other listed closed-ended funds; (ii) invest more than 15% of its gross assets in listed closed-ended funds; (iii) invest more than 20% (calculated at the time of any relevant investment) of its gross assets in other collective investment undertakings (open-ended or closed-ended); (iv) expose more than 20% of its gross assets to the creditworthiness or solvency of any one counterparty (including the counterparty's subsidiaries or affiliates); (v) invest in physical commodities; (vi) cross-finance between the businesses forming part of its investment portfolio including provision of undertakings or security for borrowings by such businesses for the benefit of another; (vii) operate common treasury functions as between the Company and an investee company; or (viii) conduct any significant trading activity. In addition to the above restriction on investment in a single company the Board seeks to achieve a spread of risk in the portfolio through monitoring the country and sector weightings of the portfolio. There will be a minimum of 20 stocks in the portfolio. The Company is geared through zero dividend preference shares but does not use other gearing. Going concern The Directors believe that having considered the Company's investment objectives (shown on the inside front cover) risk management policies and procedures (pages 52 to 57), nature of portfolio and income and expense projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider that the use of the going concern basis is appropriate. Performance An outline of the performance, market background, investment activity and portfolio strategy during the period under review, as well as the investment outlook, is provided in the Chairman's Statement and Investment Manager's report. Dividends During the year the following dividends were paid: Dividend pence Payment date (net per share) Fourth Interim for the year ended 31 31 March 2010 4.90p December 2009 First Interim for the year ended 31 30 June 2010 1.50p December 2010 Second Interim for the year ended 31 30 September 2010 1.60p December 2010 Third Interim for the year ended 31 31 December 2010 1.60p December 2010 The Directors declared a fourth interim dividend of 3.4p, that was paid on 31 January 2011 to members on the register at the close of business on 10 December 2010. The shares were marked ex-dividend on 8 December 2010. Principal risks associated with the Company (see note 21) Structure of the Company and gearing The Company is a split-capital investment trust with two separate classes of share, each with different characteristics. Returns generated by the Company's underlying portfolio are apportioned in accordance with the respective entitlements of each class of share. As the Ordinary shares and Zero Dividend Preference shares have different rights both during the life of the Company and on a winding-up, shareholders and prospective investors are advised to give careful consideration to their choice of class or classes of share (see pages 9 to 10 for details of these entitlements). The Company employs no gearing in the form of bank loans. The Ordinary shares are geared by the payment of the prior ranking Zero Dividend Preference shares. Dividend levels Dividends paid on the Company's Ordinary shares rely on receipt of interest payments and dividends from the securities in which the Company invests. The Company's revenue levels are monitored on a monthly basis by the Board and the Investment Manager. Currency risk The Company invests in overseas securities and its assets are therefore subject to currency exchange rate fluctuations. Liquidity risk The Company may invest up to 15% of its gross assets in unquoted securities. These securities may have limited liquidity and be difficult to realise. Market price risk Since the Company invests in financial instruments, market price risk is inherent in these investments. In order to minimise this risk, a detailed analysis of the risk/reward relationship of each investee company is undertaken by the Investment Manager prior to making investments. Discount volatility Being a closed-end fund, the Company's shares may trade at a discount to their net asset value. The magnitude of this discount fluctuates daily and can vary significantly. Thus, for a given period of time, it is possible that the market price could decrease despite an increase in the Company's shares' net asset value. The Directors review the discount levels regularly. The Investment Manager actively communicates with the Company's major shareholders and potential new investors, with the aim of managing discount levels. Operational Like most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. Accounting, legal and regulatory In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010. A breach of Section 1158 could lead to the Company being subject to capital gains tax on gains within the Company's portfolio. Section 1158 qualification criteria are continually monitored by Premier Fund Managers Limited and the results reported to the Board at its regular meetings. The Company must also comply with the Companies Act and the UKLA Listing Rules. The Board relies on the services of the administrator, Premier Asset Management Limited and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules. Analysis of the Company's performance At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators used to measure the progress and performance of the Company over time are as follows: 1) The performance against a set of reference points. The Investment Manager's performance is not assessed against a formal benchmark but rather against a set of reference points which are more general in nature and intended to be representative of the broad spread of assets in which the portfolio invests. These references include the FTSE Global Utilities Total Return Index, FTSE All World Total Return Index and FTSE 100 Total Return Index (see financial summary on pages 12 and 13). 2) The performance against the peer group. The assessment of the Investment Manager's performance against companies which invest in similar, but not necessarily the same, securities allows the Board to evaluate the effectiveness of the Company's investment strategy. 3) The performance of the Company at the net asset level. This shows how the assets attributable to shareholders as a whole have performed. 4) The performance of the individual share classes, both in terms of share price total return (i.e. accounting for dividends received) and in terms of net asset value total return. The share price performance is the measure of the return that shareholders have actually received and will reflect the impact of widening or narrowing of discounts to NAV (see graphs on page 1). 5) Total Expense Ratio ("TER"). The TER is an expression of the Company's management fees and other operating expenses as a percentage of average net assets over the year. The TER for the year ended 31 December 2010 was 1.91% (2009: 1.96% excluding VAT recovered from HMRC in 2009). Future prospects The Board's main focus is the achievement of a high income from the portfolio together with the generation of long-term capital growth. The future of the Company is dependent upon the success of the investment strategy. The investment outlook is discussed in both the Chairman's statement on page 3 and the Investment Manager's report on page 5. DIRECTORS The Directors, all of whom served throughout the year ended 31 December 2010, apart from Mr Wilkinson who was appointed on 23 February 2011, were as follows: Geoffrey Burns Adam Cooke Ian Graham Michael Wigley Charles Wilkinson None of the Directors, nor any persons connected with them, had a material interest in any of the Company's transactions, arrangements or agreements during the year. None of the Directors has, or has had, any interest in any transaction which is, or was, unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the current financial year. At the date of this report, there are no outstanding loans or guarantees between the Company and any Director. In accordance with the Articles of Association Mr Geoffrey Burns retires by rotation and, being eligible, offers himself for re-election and Mr Charles Wilkinson who was appointed since the last Annual General Meeting offers himself for election. DIRECTORS' BENEFICIAL AND FAMILY INTERESTS The interests of the Directors and their families in the Ordinary shares of the Company were as follows (there were no interests in the Zero Dividend Preference shares of the Company): Ordinary Ordinary Ordinary shares at shares at shares at 15 March 2011â€ 31 December 2010 1 January 2010 Geoffrey Burns 80,411 80,411 80,411 Adam Cooke 37,000 37,000 37,000 Ian Graham 18,309 18,309 18,309 Michael Wigley 124,183 124,183 124,183 Charles Wilkinson* 31,223 - - * Appointed on 23 February 2011. â€ The latest practicable date prior to the publication of this report. SUBSTANTIAL SHAREHOLDINGS As at the date of this report the Company had been notified of the following substantial interests in the Ordinary and Zero Dividend Preference share capital of the Company. Ordinary shares Number of shares % of total voting rights Premier Fund Managers Limited* 3,663,858 9.6 NCL Smith & Williamson 1,416,180 3.7 Charles Stanley Group PLC 1,414,649 3.7 Philip J Milton & Company Plc 1,269,063 3.3 Rensburg Sheppards Investment 335,598 0.9 Management Ltd. Zero Dividend Preference shares Deutsche Bank AG/Tilney Group Limited 3,616,345 9.5 Rensburg Sheppards Investment 3,453,363 9.0 Management Ltd. Premier Fund Managers Limited* 512,710 1.3 Charles Stanley Group PLC 142,830 0.4 * This includes 3,015,121 Ordinary shares and 96,901 Zero Dividend Preference shares that are held in the ISA scheme that is administered by Premier Fund Managers Limited on behalf of individual shareholders. NET ASSET VALUE The net asset value per Ordinary share, including revenue reserve, at 31 December 2010 was 190.81pâ€ (31 December 2009: 192.87p). The cumulative net asset value of a Zero Dividend Preference share at 31 December 2010 was 161.64p â€ (31 December 2009: 151.73p). MANAGEMENT, SECRETARIAL AND ADMINISTRATION AGREEMENTS The Company's portfolio is managed by Premier Fund Managers Limited under an Investment Management Agreement dated 26 September 2003. The management fee is 0.0833% per month of the gross assets (from 1 October 2008 no VAT has been charged). In addition, the Investment Manager is entitled to a performance fee if in each Company year: (i) the dividends paid are at least 6.75p, and (ii) the gross assets at the end of the year exceed the highest level of gross assets at the end of any previous Company year or the initial gross assets (if higher) by more than 7.5% (on annualised basis). In that event the performance fee will be equivalent to 15% of the excess. The Management Agreement is currently terminable on 12 months' notice. Under the Administration Agreement dated 26 September 2003, company secretarial services and the general administration of the Company are undertaken by Premier Asset Management Limited. The Administration Agreement is currently terminable on 12 months' notice. The Board as a whole regularly reviews the terms of the management and secretarial contracts. CORPORATE GOVERNANCE The Board is accountable to the Company's shareholders for the governance of the Company's affairs and this statement describes how the principles of the Combined Code on Corporate Governance issued in 2008 ("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"), which has established a framework of best practice specifically for the Boards of investment trust companies. There is some overlap in the principles laid down by the two Codes and there are some areas where the AIC Code is more flexible for investment trust companies. Board of Directors The Board currently consists of five non-executive Directors all of whom are independent of the Investment Manager. Their biographies are set out on page 14. Collectively the Board has the requisite range of business and financial experience which enables it to provide clear and effective leadership and proper stewardship of the Company. The number of meetings of the Board, the Audit Committee and the Nomination Committee held during the financial year and the attendance of individual Directors are shown below: Audit Nomination Board Committee Committee Number of meetings in the year 7 2 1 Geoffrey Burns 7 2 1 Adam Cooke 7 2 1 Ian Graham 7 2 1 Michael Wigley 7 2 1 Charles Wilkinson - - - Apart from Mr Wilkinson, who was appointed on 23 February 2011, all of the Directors attended the Annual General Meeting held in April 2010. The Board deals with the Company's affairs, including the setting of gearing and investment policy parameters, the monitoring of gearing and investment policy and the review of investment performance. The Investment Manager takes decisions as to asset allocation and the purchase and sale of individual investments. The Board papers circulated before each meeting contain full information on the financial condition of the Company. Key representatives of the Investment Manager attend most of the Board meetings, enabling Directors to probe further or seek clarification on matters of concern. Matters specifically reserved for discussion by the full Board have been defined and a procedure adopted for the Directors to take independent professional advice if necessary at the Company's expense. The Chairman of the Company is a non-executive Director. A senior non-executive Director has not been identified as the Board is comprised entirely of non-executive Directors. In accordance with the Articles of Association, new Directors stand for election at the first Annual General Meeting following their appointment. The Articles require that one third of the Directors retire by rotation each year and seek re-election at the Annual General Meeting. In addition, all Directors are required to submit themselves for re-election at least every three years and will seek annual re-election if they have already served for more than nine years. Performance evaluation/re-election of Directors An appraisal process has been established in order to review the effectiveness of the Board, the Committees and individual Directors. This process involves the consideration by the Chairman and the Board of responses from individual Directors to a questionnaire which is completed on an annual basis. In addition, the other Directors meet collectively once a year to evaluate the performance of the Chairman. As a result of this appraisal process the Nomination Committee recommends the re-election of Mr Geoffrey Burns who retires by rotation. In addition the Nomination Committee recommends Mr Charles Wilkinson be elected to the Board. Committees The Board believes that the interests of shareholders in an investment trust company are best served by limiting the size of the Board such that all Directors are able to participate fully in all the activities of the Board. It is for this reason that the membership of the Audit and Nomination Committees is the same as that for the Board as a whole. Audit Committee Mr Cooke is the Chairman of the Audit Committee which operates within defined terms of reference. 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 auditors, including their remuneration and the provision of any non-audit services by them. The Audit Committee has considered the independence of the auditors and the objectivity of the audit process and is satisfied that Ernst & Young LLP is independent and has fulfilled its obligations to shareholders. The Audit Committee meets representatives of the Investment Manager and its Compliance Officer who report as to the proper conduct of business in accordance with the regulatory environment in which both the Company and the Investment Manager operate and reviews the Investment Manager's internal controls. The Company's external auditors also attend this Committee at its request and report on their findings in relation to the Company's statutory audit. Nomination Committee Mr Burns is the Chairman of the Nomination Committee which is responsible for the Board appraisal process, and reviews the Board's size and structure and is responsible for succession planning. The Nomination Committee meets at least annually. The Board appointed one new Director, Charles Wilkinson, on 23 February 2011. Mr Wilkinson was formerly chairman of Premier Renewable Energy Fund Limited ("PREF") and shares in the Company were offered to PREF shareholders as part of the reconstruction proposals of PREF in December 2010 (see pages15 and 16). The Committee concluded that Mr Wilkinson's investment trust experience and his involvement with PREF made him a suitable candidate for 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 pages 33 and 34. Internal controls The Board acknowledges that it is responsible for the Company's system of internal controls and has established a process for identifying, evaluating and managing significant risks faced by the Company. The process is subject to regular review by the Board and accords with "Internal Control: Guidance for Directors on the Combined Code" ("The Turnbull guidance") which was issued in September 1999. These internal control systems are designed to safeguard shareholders' investment and the Company's assets. It should be recognised that such systems provide reasonable but not absolute assurance against material misstatement or loss. Internal control process The Turnbull guidance recommends a risk-based approach to the assessment of internal controls. The Board has completed a risk map for the Company and established procedures for the monitoring and review of the risks identified. The Board as a whole is primarily responsible for the monitoring and review of risks associated with investment matters and the Audit Committee is primarily responsible for other risks. As the Board has contractually delegated to other companies the investment management, the custodial services and the day-to-day accounting and company secretarial requirements, the Company relies significantly upon the internal controls operated by those companies. Therefore, the Directors have concluded that the Company should not establish its own internal audit function. Investment management is performed by Premier Fund Managers Limited and administration services by Premier Asset Management Limited. Details of the agreement with the Investment Manager and the administrator are given on page 22 and in notes 3 and 20 to the financial statements. The custodian is Northern Trust Company Limited. The risk map has been considered at all regular meetings of the Board and Audit Committee. As part of the risk review process, regular reports are received from the Investment Manager on all investment-related matters including compliance with the investment mandate, the performance of the portfolio compared with relevant indices and compliance with investment trust status requirements. The Board also receives and reviews reports from the custodian on its internal controls and their operation. The Board confirms that appropriate procedures to review the effectiveness of the Company's system of internal control have been in place, throughout the year and up to the date of this report, which cover all controls including financial, operational and compliance controls and risk management. An assessment of internal control, which includes a review of the Company's risk map, an assessment of the quality of reports on internal control from the service providers and the effectiveness of the Company's reporting process, is carried out on an annual basis. Evaluation of Investment Manager's performance The investment performance is reviewed at each regular Board meeting at which representatives of the Investment Manager are required to provide answers to any questions raised by the Board. The Board has instigated an annual formal review of the Investment Manager which includes consideration of: 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€¢ marketing effort and resources provided to the Company. The Board believes that Premier Fund Managers Limited has served the Company well in terms of investment performance and has no hesitation in continuing its appointment. The Company Secretary The Board has direct access to the advice and services of the Company Secretary, Premier Asset Management Limited, which is responsible for ensuring that Board and Committee procedures are followed and that applicable regulations are complied with. The Secretary is also responsible to the Board for ensuring timely delivery of information and reports and that statutory obligations of the Company are met. Individual Directors may take independent professional advice on any matter concerning them in the furtherance of their duties at the Company's expense. The Company also maintains Directors' and Officers' liability insurance to cover legal defence costs. Relations with shareholders Communication with shareholders is given a high priority by both the Board and the Investment Manager and all Directors are available to enter into dialogue with shareholders. Major shareholders of the Company are offered the opportunity to meet with the Board. The Board regularly reviews any contact with the Company's shareholders and monitors its shareholder register. All shareholders are encouraged to attend and vote at the Annual General Meeting, during which the Board and the Investment Manager are available to discuss issues affecting the Company and shareholders have the opportunity to address questions to the Investment Manager, the Board and the Chairmen of the Board's standing committees. Any shareholder who would like to lodge questions in advance of the Annual General Meeting is invited to do so in writing to the Company Secretary at the address detailed inside the back cover. The Company always responds to letters from individual shareholders. The Annual and Interim Reports of the Company present a full and readily understandable review of the Company's performance. Copies are dispatched to shareholders by mail and are also available for downloading from the Investment Manager's website. A monthly fact sheet is produced by the Investment Manager and is also available via their website. If a shareholder would like to contact the Board directly, they should write to the Chairman at c/o Premier Asset Management Limited, Eastgate Court, High Street, Guildford, Surrey GU1 3DE, marking their letter "Private and confidential". Statement of compliance The Board believes that it has complied with all the material provisions, in so far as they apply to the Company's business, of the Code throughout the year under review. It did not, however, comply with the following provisions, as explained previously: 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. SOCIALLY RESPONSIBLE INVESTMENT The Board has delegated the investment management function to Premier Fund Managers Limited. The Investment Manager's primary objective is to produce superior financial returns to investors. It believes that over the long-term sound social, environmental and ethical policies make good business sense and takes these issues into account, when, in its view, they have a material impact on either the investment risk or the expected return from an investment. PROXY VOTING AS AN INSTITUTIONAL INVESTOR Responsibility for actively monitoring the activities of companies in which the Company is invested has been delegated by the Board to the Investment Manager. The Investment Manager is responsible for reviewing, on a regular basis, the annual reports, circulars and other publications produced by the investee companies. The Investment Manager, in the absence of explicit instructions from the Board, is empowered to exercise discretion in the use of the Company's voting rights. Wherever practicable, the Investment Manager's policy is to vote all shares held by the Company. PAYMENT OF SUPPLIERS It is the Company's payment policy to obtain the best possible terms for all business and therefore there is no consistent policy as to the terms used. The Company agrees with its suppliers the terms on which business will take place and it is our policy to abide by these terms. There were no trade creditors at 31 December 2010 (2009: nil). ANNUAL GENERAL MEETING THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take or about the contents of this document, you should immediately consult an independent financial adviser authorised under the Financial Services and Markets Act 2000 (or in the case of recipients outside the United Kingdom, a stockbroker, bank manager, solicitor, accountant or other independent financial adviser). If you have sold or otherwise transferred all of your shares in Premier Energy and Water Trust PLC, please pass this document, together with the accompanying Form of Proxy, as soon as possible to the purchaser or transferee or to the stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. The notice of the Annual General Meeting sets out the ordinary business and special business to be conducted at the Meeting. The following explains the resolutions to be considered at the Meeting as special business. RESOLUTION 6, 7 & 9: Authority to allot shares Under Resolution 6 of the Annual General Meeting ("AGM"), the Directors seek a general power from shareholders to allot new shares up to an aggregate par value of 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 15 March 2011. Resolution 7 of the AGM will, if passed, permit the Directors to allot Ordinary shares at a discount to the then prevailing net asset value of the Ordinary shares. The Directors will only utilise this authority to issue new shares provided that the aggregate value of new Ordinary shares and new Zero Dividend Preference ("ZDP") shares to be issued is at an overall premium to net asset value. In any event, any new issue of shares would only be made in accordance with the provisions of the Company's Articles of Association which require existing ZDP shares to have a cover of not less than 1.5 times immediately following the issue of the new shares if any new shares are to rank ahead of, or pari passu with, the existing ZDP shares, or those ZDP shares in issue immediately thereafter would have a cover of not less than the cover of the ZDP shares in issue prior to the issue of new shares. Resolution 9 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 8: Amending the Company's investment management arrangements with Premier Premier Fund Managers Limited ("Investment Manager") is currently appointed under an investment management agreement which was entered into in 2003 ("the IMA"). As part of their review of arrangements with the Investment Manager, the Directors have been considering the performance arrangements in place with Premier in light of the changes which have occurred to the issued share capital of the Company in both 2009 and 2010. As a consequence, the Directors are proposing to make some changes to the terms of the IMA by entering into a new investment management agreement ("New IMA"). The proposed changes are both to correct certain inconsistencies in the original drafting but also to ensure that Premier is appropriately incentivised. Under the IMA, Premier is entitled to receive from the Company a management fee, payable monthly in arrears, of 1% per annum of the gross assets of the Company. In addition, the Investment Manager is entitled to a performance fee in respect of each accounting year of the Company commencing with the period ended 31 December 2004 if (i) the dividends paid or proposed to be paid on each Ordinary share in respect of that accounting year (on an annualised basis in respect of the first accounting period) equals at least 6.75p and (ii) the gross assets at the end of the year exceed the highest level of gross assets at the end of any previous accounting year or (if higher) the initial gross assets by more than 7.5% (again on an annualised basis). In that event, the performance fee will be equal to 15% of the excess. When the IMA was originally drafted, the IMA did not envisage any downwards changes to the size of PEWT's issued share capital, and in particular, to the possibility that the Company could repurchase its shares as well as carry out further equity issues. Under the IMA, Premier's performance related targets are linked amongst other things to the number of shares in issue without adjustment for any decreases in the number of shares in issue (any upwards adjustment is provided for). The Board believes that the Investment Manager would be better incentivised if any performance targets were adjusted for any downwards movements in the numbers of shares in issue and has therefore made the corresponding changes to the IMA subject to a cap. Under the cap, any performance fee increase under the revised arrangements (being the difference between what would have been paid under the IMA and what is to be paid under the New IMA) will only be paid to the extent that it does not exceed 5% of the lower of (i) gross assets; or (ii) the market capitalisation; of the Company as at the end of the accounting period in respect of which the performance fee is to be paid. The New IMA also includes a number of changes to reflect the requirements of MiFID (such as dealing with conflicts of interest) and to reflect the changes in legislation which have occurred since the existing IMA was entered into. In all other respects, the terms of the IMA will remain unchanged. Under the Listing Rules, the Investment Manager is regarded as a related party of the Company, being the Company's Investment Manager. Entering into the New IMA constitutes a related party transaction and due to the fee cap which is proposed, is classified as a smaller transaction under those rules. In accordance with the Listing Rules for smaller transactions, Fairfax I.S. PLC have confirmed to the Financial Services Authority that, in their opinion, the terms of the New IMA are fair and reasonable as far as the shareholders of the Company are concerned. In addition, whilst the Company is not obliged to seek shareholder approval before entering into the New IMA (due to the fact that entering into the New IMA falls under the smaller transaction rules), the Board believes it is best practice to seek such approval and accordingly, an ordinary resolution is being proposed at the Annual General Meeting upon which shareholders are being asked to approve the Company entering into the New IMA. RESOLUTION 10: Purchase by the Company of its own shares At an Annual General Meeting held on 21 April 2010 a special resolution was passed, giving the Directors authority until the conclusion of the earlier of the 2011 Annual General Meeting and 20 October 2011, to make market purchases of up to a maximum of 1,964,149 Ordinary shares and 2,448,826 Zero Dividend Preference shares. During the year to 31 December 2010 no shares were purchased (during the year ended 31 December 2009 5,040,368 Ordinary shares and 2,807,037 Zero Dividend Preference shares were purchased for cancellation, following the tender offers which were implemented on 18 December 2009). 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 10 of the AGM, which is a special resolution, is being proposed for this purpose. It is proposed that the Company be authorised to purchase on the London Stock Exchange up to 2,558,565 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 15 March 2011) 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 2012, or 26 October 2012, whichever is the earlier. The authority may be renewed by shareholders at a General Meeting. Purchases will be funded either by using available cash resources, debt or by selling investments. RESOLUTION 11: Changes to the Articles of Association Your Board is also taking the opportunity to make some non-material changes to the Company's articles of association ("Articles") to ensure that certain changes in the accounting treatment of the Zero Dividend Preference shares, introduced since the Company was first established, are properly reflected in the Articles. These principally relate to the fact that Zero Dividend Preference shares are now accounted for as a liability whereas previously they were regarded as equity. Accordingly, the Board is proposing (a) to amend the Articles so that all defined terms used in the Articles are referenced to Article 2 of the Company's Articles by deleting the additional definition wording from Article 5.2.2(i) and (b) to amend the notes on the calculation of cover in Article 5.2.2(i) to clarify that any discretion the Board may exercise in connection with the calculation of cover is made by reference to the gross assets of the Company and not the net asset position (which would exclude the Zero Dividend Preference shares). These amendments will ensure that the Articles now reflect what occurs in practice under international financial reporting standards. No other changes are proposed. The proposed amendments to the articles of association are set out in resolution 11 of the notice of Annual General Meeting as set out at the end of this document. The proposed amendments will also be available for inspection, together with the existing articles of association, at the registered office of the Company from the date of this document until the end of the Annual General Meeting, and at the Annual General Meeting itself for the duration of the Meeting and for at least fifteen minutes prior to the start of the Meeting. Recommendation Your Board considers that resolutions 1 to 11 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 291,126 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 is summarised on page 2, voting rights are summarised on page 9, and there are no restrictions on voting rights nor any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights; 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 22; 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. AUDITORS 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 Auditors are 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 Auditors are aware of that information. By Order of the Board Premier Asset Management Limited Secretary 16 March 2011 â€ Net asset values calculated in accordance with Articles of Association (see note 17 on page 51). Directors' remuneration report The Board has prepared this report, in accordance with Section 421 of the Companies Act 2006. An ordinary resolution for the approval of this report will be put to the members at the forthcoming Annual General Meeting. The law requires your Company's auditors to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The auditors' opinion is included in their report on page 36. Remuneration Committee The Board as a whole fulfils the function of a Remuneration Committee. The Company Secretary, Premier Asset Management Limited, will be asked to provide advice when the Directors consider the level of Directors' fees. Following a review of Director's fees it was agreed that from 1 April 2011 to increase the annual fees to Â£26,000 for the Chairman, Â£20,000 for the Chairman of the Audit Committee and Â£18,000 for other Directors. This represents the first increase in Director's fees since the Company's launch in November 2003. Policy on Directors' fees The Board's policy is that the remuneration of non-executive Directors should reflect the experience of the Board as a whole and be fair and comparable to that of other investment trusts that are similar in size, have a similar capital structure and have a 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' 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 re-election if they have already served for more than nine years. The terms also provide that a Director may be removed without notice and that compensation will not be due on leaving office. Your Company's performance For the purpose of this report the Board is required to select an index against which the Company's performance can be measured. Although performance is not measured against a single benchmark the FTSE Global Utilities Total Return Index (sterling based) has been selected for this purpose. The graph overleaf shows the 5 year share price total return (assuming all dividends are reinvested) to Ordinary shareholders against the FTSE Global Utilities Total Return Index on a total return basis from 31 December 2005 until 31 December 2010. 5 year share price performance [Graphic removed] Directors' emoluments for the year (audited) The Directors who served in the year received the following emoluments in the form of fees: Year ended Year ended 31 December 31 December 2010 2009 Geoffrey Burns 22,000 22,000 Adam Cooke 15,000 15,000 Ian Graham 15,000 15,000 Michael Wigley 15,000 15,000 Total 67,000 67,000 Approval A resolution for the approval of the Directors' Remuneration Report for the year ended 31 December 2010 will be proposed at the Annual General Meeting. By Order of the Board Premier Asset Management Limited Secretary 16 March 2011 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 Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The financial statements are published on the www.premierassetmanagement.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 auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. The financial statements are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions. Statement under the Disclosure & Transparency Rules 4.1.12 The Directors each confirm to the best of their knowledge that: a) the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and b) this Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board. Adam Cooke Director 16 March 2011 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 2010 which comprise the Income Statement, the Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash Flow Statement and the related notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Statement of Directors' Responsibilities set out on page 35, 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. 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 2010 and of its net 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. Opinion on other matters 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 Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: 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 18, in relation to going concern; â€¢ the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the June 2008 Combined Code specified for our review; and â€¢ certain elements of the report to the shareholders by the Board on directors' remuneration. Caroline Gulliver (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP, Statutory Auditor London 16 March 2011 Income statement for the year ended 31 December 2010 Year Year Year Year Year Year ended 31 ended 31 ended 31 ended 31 ended 31 ended 31 December December December December December December 2010 2010 2010 2009 2009 2009 Revenue Capital Total Revenue Capital Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Gains on 8 - 1,984 1,984 - 3,691 3,691 investments - held at fair value through profit or loss Revenue 2 1,969 - 1,969 2,679 - 2,679 Investment 3 (201) (303) (504) (561) - (561) management fee VAT recovered 3 - - - 247 284 531 from HMRC on management and performance fees Other 4 (323) - (323) (297) - (297) expenses Return before 1,445 1,681 3,126 2,068 3,975 6,043 finance costs and taxation Finance costs 5 (1) (1,637) (1,638) (1) (2,005) (2,006) Return on 1,444 44 1,488 2,067 1,970 4,037 ordinary activities before taxation Taxation on 6 (208) - (208) (238) - (238) ordinary activities Return on 1,236 44 1,280 1,829 1,970 3,799 ordinary activities after taxation attributable to equity shares Return per 16 9.33 0.33 9.66 10.19 10.97 21.16 Ordinary share (pence) - basic The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The notes on pages 42 to 57 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 2010 Company registration number 4897881 2010 2009 Notes Â£000 Â£000 Non current assets Investments at fair value through the profit or 8 60,561 47,159 loss Current assets Debtors 9 737 244 Cash at bank 6,427 6,001 7,164 6,245 Current liabilities Creditors: amounts falling due within one year 10 (920) (3,345) Net current assets 6,244 2,900 Total assets less current liabilities 66,805 50,059 Creditors: amounts falling due after more than 11 (34,566) (24,787) one year Total net assets 32,239 25,272 Capital and reserves Share capital 12 171 131 Redemption reserve 88 88 Capital reserve 13 16,151 16,107 Special reserve 7,472 7,454 Share premium 14 6,887 - Revenue reserve 1,470 1,492 Total equity shareholders' funds 32,239 25,272 Net asset value per Ordinary share (pence) - UK 17 188.88 192.87 Accounting Standards basis Net asset value per Ordinary share (pence) - 17 190.81 192.87 Articles of Association basis The financial statements on pages 38 to 57 were approved by the Board and authorised for issue on 16 March 2011 and were signed on its behalf by: Adam Cooke Director The notes on pages 42 to 57 form part of these financial statements. Reconciliation of movements in shareholders' funds for the year ended 31 December 2010 Share Share Redemption Capital Special premium 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 2010 Balance at 131 88 16,107 7,454 - 1,492 25,272 31 December 2009 Return on - - 44 - - 1,236 1,280 ordinary activities after taxation Issue of 40 - - - 6,887 - 6,927 Ordinary shares Over - - - 18 - - 18 accrued Tender transition costs Dividends - - - - - (1,258) (1,258) paid Balance at 171 88 16,151 7,472 6,887 1,470 32,239 31 December 2010 Share Share Redemption Capital Special premium 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 2009 Balance at 31 181 10 14,137 17,474 - 997 32,799 December 2008 Return on - - 1,970 - - 1,829 3,799 ordinary activities after taxation Tender for (50) 50 - (9,992) - - (9,992) Ordinary shares for cancellation Cancellation - 28 - (28) - - - of Zero Dividend Preference shares Dividends - - - - - (1,334) (1,334) paid Balance at 31 131 88 16,107 7,454 - 1,492 25,272 December 2009 The notes on pages 42 to 57 form part of these financial statements. Cash flow statement for the year ended 31 December 2010 Year ended Year ended 31 December 31 December 2010 2009 Notes Â£000 Â£000 Net cash inflow from operating activities 18 1,042 2,595 Servicing of finance Interest paid (1) (1) Taxation Overseas tax paid (159) (289) Financial investments Purchases of investments (34,486) (40,634) Sales of investments 29,573 54,150 Net cash (outflow)/inflow from financial (4,913) 13,516 investments Equity dividends paid 7 (1,258) (1,334) Net cash (outflow)/inflow before financing (5,289) 14,487 Financing Issue of Ordinary and Zero Preference shares 5,715 - Tender for Ordinary shares and associated - (9,992) costs Tender for Zero Dividend Preference shares - (4,374) Net cash inflow/(outflow) from financing 5,715 (14,366) Increase in cash 19 426 121 Reconciliation of net cash flow to movements in net debt Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Increase in cash as above 426 121 Net change in debt due in more than one year (9,779) 2,369 Movements in net debt for year (9,353) 2,490 Net debt as at 1 January (18,786) (21,276) Net debt as at 31 December (28,139) (18,786) The notes on pages 42 to 57 form part of these financial statements. 1. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which, except for the change to the treatment of the basic management fee which from 1 January 2010 has been charged 40% to revenue and 60% to capital (prior to this it was charged 100% to revenue), 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 18. (b) VALUATION OF INVESTMENTS Upon initial recognition investments are designated by the Company "at fair value through profit or loss". They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost including expenses incidental to purchase. 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. Where no reliable fair value can be estimated for such unquoted investments, they are carried at cost, subject to any provision for impairment. Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the income statement within "gains/(losses) on investments held at fair value through profit or loss". Gains and losses on sales of investments have been taken to capital reserve. (c) FOREIGN CURRENCY Transactions denominated in foreign currencies are translated into sterling at actual exchange rates as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in capital reserve. Foreign exchange movements on investments are included in the Income Statement within gains on investments. (d) INCOME Investment income, which includes related taxation, 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. 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 from 1 January 2010 (prior to this it was charged 100% to revenue); 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 included within the book cost of the investments; 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 Directors have allocated 100% of the finance costs relating to the Zero Dividend Preference shares to capital. The provision for compound growth entitlement of the Zero Dividend Preference shares is recognised through the income statement and analysed under the capital column as a finance cost (as shown in note 5). The premium (net of expenses) arising on the issue of the Zero Dividend Preference shares will be amortised over the life of the Company and allocated 100% to capital. (g) SPECIAL RESERVE The special reserve is available for the repurchase by the Company of its own Ordinary shares. (h) TAXATION The charge for taxation is based upon the net revenue for the year. The tax charge is allocated to the revenue and capital accounts according to the marginal basis whereby revenue expenses are first matched against taxable income arising in the revenue account; the effect of this for the year ended 31 December 2010 was that all the deductions for tax purposes went to the revenue account. Deferred taxation will be recognised as an asset or a liability if transactions have occurred at the balance sheet date that give rise to an obligation to pay more taxation in the future, or a right to pay less taxation in the future. An asset will not be recognised to the extent that the transfer of economic benefit is uncertain. Due to the Company's status as an Investment Company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of Investments. 2. INCOME Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Income from investments: UK franked investment income 152 523 Overseas dividends 1,814 2,088 Deposit income 3 17 Interest on VAT recovered from HMRC - 51 1,969 2,679 3. INVESTMENT MANAGEMENT FEE Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Charged to Revenue: Investment management fee (40%) 201 561 201 561 Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Charged to Capital: Investment management fee (60%) 303 - 303 - The Company's Investment Manager is Premier Fund Managers Limited under an agreement terminable by either party giving not less than 12 months written notice. Under the investment management agreement, the Investment Manager is entitled to receive from the Company a management fee, payable monthly in arrears, of 1% per annum of the gross assets of the Company. Following a review of the expected future returns from the portfolio it was decided that from 1 January 2010 to allocate 40% of this fee to revenue and 60% to capital (for years prior to this 100% was charged to revenue). In addition, the Investment Manager is entitled to a performance fee in respect of each accounting year of the Company commencing with the period ended 31 December 2004 if (i) the dividends paid or proposed to be paid on each Ordinary share in respect of that accounting year (on an annualised basis in respect of the first accounting period) equals at least 6.75p and (ii) the gross assets at the end of the year exceed the highest level of gross assets at the end of any previous accounting year or (if higher) the initial gross assets by more than 7.5% (again on an annualised basis). 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 2010 (2009: nil). VAT recovered from HMRC on management fees: Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Recovered in respect of basic management fees - - 247 Revenue Recovered in respect of performance fees - Capital - 284 - 531 For the year ended 31 December 2009 the Company received Â£531,000 of VAT on management fees invoiced since its launch in November 2003 which has been credited to the Company's revenue and capital accounts in accordance with the Board's policy for allocation of management fees and finance costs at the time the fee was paid. 4. OTHER EXPENSES Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Charged to Revenue: Secretarial services 75 75 Administration expenses 159 132 Auditor's remuneration - audit services 21 21 - non audit 1 2 Directors' fees 67 67 323 297 For the year ended 31 December 2010 the auditors were also paid Â£24,675, including VAT of Â£3,675, for services in connection with the Prospectus issued by the Company on 30 November 2010 and the associated issue of new shares (see pages 15 and 16). These have been charged to the share premium reserve. For the year ended 31 December 2009 the auditors were also paid Â£33,350, including VAT of Â£4,350, for services in connection with the Prospectus issued by the Company on 24 November 2009 and the associated tender offer. These have been charged to special reserve in that year. 5. FINANCE COSTS Year ended Year ended Year ended Year ended Year ended Year ended 31 31 31 31 31 31 December December December December December December 2010 2010 2010 2009 2009 2009 Revenue Capital Total Revenue Capital Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Bank interest 1 - 1 1 - 1 Provision for - 1,637 1,637 - 2,005 2,005 compound growth entitlement of the Zero Dividend Preference shares 1 1,637 1,638 1 2,005 2,006 6. TAXATION (a) ANALYSIS OF CHARGE IN THE YEAR: Year ended Year ended Year ended Year ended Year ended Year ended 31 31 31 31 31 31 December December December December December December 2010 2010 2010 2009 2009 2009 Revenue Capital Total Revenue Capital Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Current tax - - - - - - Overseas 208 - 208 238 - 238 tax Current tax 208 - 208 238 - 238 charge for the year (see note 6 (b)) (b) FACTORS AFFECTING THE CURRENT TAX CHARGE FOR THE YEAR: The current taxation charge for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below: Year ended Year ended Year ended Year ended Year ended Year ended 31 31 31 31 31 31 December December December December December December 2010 2010 2010 2009 2009 2009 Revenue Capital Total Revenue Capital Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Return on 1,444 44 1,488 2,067 1,970 4,037 ordinary activities before taxation Return on 404 12 416 578 552 1,130 ordinary activities multiplied by the standard rate of corporation tax of 28% (2009: 28%) Effects of: (43) - (43) (146) - (146) Non-taxable UK dividends Non-taxable (464) - (464) (226) - (226) overseas dividends Capital gains - (555) (555) - (1,033) (1,033) not subject to tax Finance costs - 458 458 - 561 561 of ZDP shares Investment - 85 85 - - - management fee capitalised Capital costs - - - - (80) (80) of performance fee and VAT recovered from HMRC Expenses not - - - 1 - 1 deductible for tax purposes Overseas tax 208 - 208 238 - 238 Double tax - - - (207) - (207) relief Unrelieved 103 - 103 - - - expenses and charges Revenue 208 - 208 238 - 238 current tax charge for the year (see note 6 (a)) The Company is not liable to tax on capital gains due to its status as an investment trust. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. After claiming relief against accrued income taxable on receipt, the Company has a deferred tax asset of approximately Â£461,000 (31 December 2009: Â£130,000) relating to excess expenses. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset in respect of these expenses has been recognised. 7. DIVIDEND Dividends relating to the year ended 31 December 2010 are detailed below: Year ended 31 December Per 2010 Ordinary share Â£000 First interim dividend - 1.50p 198 paid on 30 June 2010 Second interim dividend - 1.60p 209 paid on 30 September 2010 Third interim dividend - 1.60p 209 paid on 31 December 2010 Fourth interim dividend - 3.40p 445 declared on 2 December 2010and paid on 31 January 2011â€ 8.10p 1,061 â€ Not included as a liability in the year ended 31 December 2010 accounts. The fourth interim dividend was paid on 31 January 2011 to members on the register at the close of business on 10 December 2010. The shares were marked ex-dividend on 8 December 2010. Dividends relating to the year ended 31 December 2009 are detailed below: Year ended 31 December Per 2009 Ordinary share Â£000 First interim dividend - paid on 30 June 2009 1.50p 272 Second interim dividend - paid on 30 September 1.50p 272 2009 Third interim dividend - paid on 31 December 1.50p 272 2009 Fourth interim dividend - paid on 31 March 2010* 4.90p 642 # 9.40p 1,458 * Not included as a liability in the year ended 31 December 2009 accounts. # Includes a special dividend of 1.70p. 8. INVESTMENTS (a) SUMMARY OF VALUATION Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Investments listed on a recognised investment exchange: - UK 2,353 4,349 - Overseas 56,717 41,886 59,070 46,235 Unquoted investment - UK 701 924 Unquoted investment - Overseas 790 - 60,561 47,159 (b) MOVEMENTS In the year ended 31 December 2010 Quoted Quoted Unquoted Unquoted Total UK Overseas UK Overseas 2010 Â£000 Â£000 Â£000 Â£000 Â£000 Book cost at beginning of 4,668 38,474 1,354 - 44,496 year Gains/(losses) on (319) 3,412 (430) - 2,663 investments held at beginning of year Valuation at beginning of 4,349 41,886 924 - 47,159 year Purchases at cost 3,777 36,907 131 684 41,499 Sales: - proceeds (4,370) (25,711) - - (30,081) - gains on investments 1 2,954 - - 2,955 sold in the year Gains/(losses) on 21 (744) (354) 106 (971) investments held at end of year Valuation at end of year 3,778 55,292 701 790 60,561 Comprising: Total Total year ended year ended 31 December 31 December 2010 2009 Â£000 Â£000 Book cost at end of year 58,872 44,499 Gains on investments held at year end 1,689 2,660 Valuation at end of year 60,561 47,159 Transaction costs on purchases for the year ended 31 December 2010 amounted to Â£84,000 (2009: Â£133,000) and on sales for the year they amounted to Â£66,000 (2009: Â£124,000). (c) GAINS/(LOSSES) ON INVESTMENTS Total Total year ended year ended 31 December 31 December 2010 2009 Â£000 Â£000 Gains/(losses) on investments sold in year 2,955 (3,001) (Losses)/gains on investments held at year end (971) 6,692 Total gains on investments 1,984 3,691 A list of the Company's 30 largest investments is shown on page 8, a sector breakdown and a geographical allocation is shown on page 5. 9. DEBTORS Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Amounts due from brokers 508 - Accrued income and prepayments 178 144 Overseas tax recoverable 51 100 737 244 10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Purchases for future settlement 757 3,116 Other creditors 163 229 920 3,345 11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 31 December 31 December 2010 2009 Â£000 Â£000 21,180,373 Zero Dividend Preference shares of Â£0.01 34,566 24,787 The allotted, issued and fully paid number of Zero Dividend Preference shares of Â£0.01 as at 31 December 2010 is 21,180,373 (31 December 2009: 16,336,396 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 premium (net of expenses) of Â£330,000 will be amortised over the life of the Company and allocated to capital. 12. SHARE CAPITAL Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2010 2010 2009 2009 Number of Â£000 Number of Â£000 shares shares Allotted, issued and fully paid: Ordinary shares of 17,068,480 171 13,103,065 131 Â£0.01 17,068,480 171 13,103,065 131 On 17 December 2010, 3,965,415 Ordinary shares were issued at 177.31p; (31 December 2009: 5,040,368 Ordinary shares were bought back for cancellation for Â£9,992,000). The shares were issued in connection with the reconstruction of Premier Renewable Energy Fund Limited (see pages 15 and 16) for gross proceeds of Â£7,031,000. The allotted issued and fully paid Zero Dividend Preference shares of the Company at 31 December 2010 are disclosed in note 11. 13. CAPITAL RESERVE Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Opening balance 16,107 14,137 Gains on investments - held at fair value through 1,984 3,691 profit or loss Provision for premium on redemption of Zero Dividend (1,637) (2,005) Preference shares Investment management fee charged to capital (303) - VAT received from HMRC in respect of performance - 284 fees Closing balance 16,151 16,107 14. SHARE PREMIUM Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Opening balance - - Premium arising on issue of 3,965,415 Ordinary 6,991 - shares Cost associated with the issue of Ordinary shares (104) - Closing balance 6,887 - 15. FINANCIAL COMMITMENTS At 31 December 2010 there were no commitments in respect of unpaid calls and underwritings (31 December 2009: nil). 16. RETURN PER SHARE- BASIC Total return per Ordinary share is based on the net total return on ordinary activities after taxation of Â£1,280,000 (31 December 2009: Â£3,799,000). These calculations are based on the weighted average number of 13,255,163 Ordinary shares in issue during the year to 31 December 2010 (2009: 17,950,104 weighted average number of Ordinary shares). The return per Ordinary share can be further analysed between revenue and capital as below: Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Net revenue return 1,236 1,829 Net capital return 44 1,970 Net total return 1,280 3,799 The Company does not have any dilutive securities. 17. NET ASSET VALUE PER SHARE The difference between the figures reported below arises from the treatment of the premium (net of expenses) from the issue of Zero Dividend Preference ("ZDP") shares in December 2010 of Â£330,000 (2009: nil). In accordance with UK Accounting Standards this has been included with the ZDP liability and will be amortised over the life of the Company. In accordance with the Articles of Association the premium has been included with shareholders equity and the ZDP liability reflects their accrued capital entitlement at 31 December 2010. The net asset value per share and the net assets available to each class of share calculated in accordance with UK Accounting Standards, are as follows: Net Net asset value Net assets asset value Net assets per share available per share available 31 December 31 December 31 December 31 December 2010 2010 2009 2009 Pence Â£000 Pence Â£000 17,068,480 Ordinary shares 188.88 32,239 192.87 25,272 (2009: 13,103,065) in issue 21,180,373 Zero Dividend 163.20 34,566 151.73 24,787 Preference shares* (2009: 16,336,396) in issue * Classified as a liability. The net asset value per share and the net assets available to each class of share calculated in accordance with the Articles of Association, are as follows: Net Net asset value Net assets asset value Net assets per share available per share available 31 December 31 December 31 December 31 December 2010 2010 2009 2009 Pence Â£000 Pence Â£000 17,068,480 Ordinary shares 190.81 32,569 192.87 25,272 (2009: 13,103,065) in issue 21,180,373 Zero Dividend 161.64 34,236 151.73 24,787 Preference shares* (2009: 16,336,396) in issue * Classified as a liability. 18. RECONCILIATION OF TOTAL RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES Year ended Year ended 31 December 31 December 2010 2009 Â£000 Â£000 Total return on ordinary activities before finance 3,126 6,043 costs and taxation Capital return before finance costs and taxation (1,681) (3,975) Increase in other debtors (22) 5 Increase in accrued income and prepayments (12) 130 Increase in other creditors (66) 108 Investment management fee capitalised (303) - VAT recovered from HMRC in respect of performance - 284 fees capitalised Net cash inflow from operating activities 1,042 2,595 19. ANALYSIS OF CHANGES IN NET DEBT Year ended Year ended 31 December Non-cash 31 December 2009 Cashflow movements 2010 Â£000 Â£000 Â£000 Â£000 Cash at bank 6,001 426 - 6,427 Debt due after more than one (24,787) (8,142) (1,637) (34,566) year (ZDP's) (18,786) (7,716) (1,637) (28,139) 20. TRANSACTIONS WITH THE INVESTMENT MANAGER Details of the investment management fee charged by Premier Fund Managers Limited is set out in note 3. In addition, Premier Asset Management Limited acts as Company Secretary and the fee for secretarial services is set out in note 4. At 31 December 2010 Â£63,044 (31 December 2009: Â£48,688) of these fees remained outstanding. 21. RISK MANAGEMENT POLICIES AND PROCEDURES As an investment trust the Company invests in equities and other investments for the long-term so as to secure its investment objectives stated on page 16. In pursuing its investment objectives, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends. These risks, include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, and credit risk, and the Directors' approach to the management of them are set out below. The objectives, policies and processes for managing the risks, and the methods used to measure the risks, that are set out below, have not changed from the previous accounting period. (a) MARKET RISK The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk (see (b) below), interest rate risk (see (c) below) and other price risk (see (d) below). The Board of Directors reviews and agrees policies for managing these risks, which have remained substantially unchanged from those applying in the year ended 31 December 2009. The Company's Investment Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis. (b) CURRENCY RISK Certain of the Company's assets, liabilities, and income, are denominated in currencies other than sterling (the Company's functional currency, in which it reports its results). As a result, movements in exchange rates may affect the sterling value of those items. Management of the risk The Investment Manager monitors the Company's exposure and reports to the Board on a regular basis. The Investment Manager does not intend to deploy active hedging against exchange rate fluctuations. Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt. Foreign currency exposures An analysis of the Company's equity investments that are priced in a foreign currency is: As at As at 31 December 31 December 2010 2009 Investments Investments Â£000 Â£000 Australian dollar 2,116 - Canadian Dollar 4,708 1,220 Chinese Yuan 791 - Euro 12,388 14,261 Hong Kong Dollar 9,346 5,107 Indian Rupee 1,044 - Malaysian Ringgit 1,584 538 Qatari Riyal 1,220 - Singapore Dollar 823 1,920 Thailand Bahts 3,972 2,687 US Dollar 17,982 15,253 55,974 40,986 There were no non-monetary items that have foreign currency exposure at 31 December 2010 (31 December 2009: nil). 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 monetary financial assets to changes in the exchange rates for the portfolio's significant currency exposures, these being Sterling/US Dollar and Sterling/Euro. It assumes the following changes in exchange rates: Sterling/US Dollar +/- 4% (2009: 9%) Sterling/Euro +/- 4% (2009: 9%) 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: 2010 2010 2009 2009 US Dollar Euro US Dollar Euro Â£000 Â£000 Â£000 Â£000 Projected change 4% 4% 9% 9% Impact on revenue return 25 26 54 23 Impact on capital return 719 684 1,373 1,283 Total return after taxation for the year 744 710 1,427 1,306 Equity 744 710 1,427 1,306 If sterling had weakened against the currencies shown, this would have had the following effect: 2010 2010 2009 2009 US Dollar Euro US Dollar Euro Â£000 Â£000 Â£000 Â£000 Projected change 4% 4% 9% 9% Impact on revenue return (25) (26) (54) (23) Impact on capital return (719) (684) (1,373) (1,283) Total return after taxation for the (744) (710) (1,427) (1,306) year Equity (744) (710) (1,427) (1,306) In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the currency risk management process used to meet the Company's objectives. (c) INTEREST RATE RISK Interest rate movements may affect the level of income receivable on cash deposits. The Company has no direct exposure to investments exposed to interest rate fluctuations. Cash at bank at 31 December 2010 (and 31 December 2009) was held at floating interest rates, linked to current short-term market rates. Due to the insignificant impact of fluctuations in interest rates no sensitivity analysis is shown. (d) OTHER PRICE RISK Other price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the quoted and unquoted equity investments. Management of the risk The Board of Directors manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the Investment Manager's compliance with the Company's objectives. When appropriate, the Company manages its exposure to risk by using futures contracts or by buying put options on indices and on quoted equity investments in its portfolio. Concentration of exposure to other price risks A sector breakdown and geographical allocation of the portfolio is contained in the Investment Manager's Report on page 5. Other price risk sensitivity The following table illustrates the sensitivity of the return after taxation for the year and the equity to an increase or decrease of 10% in the fair values of the Company's equities (including equity through options). This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company's equities and equity exposure through options at each balance sheet date, with all other variables held constant. Increase in Decrease in Increase in Decrease in fair value fair value fair value fair value 2010 2010 2009 2009 Â£000 Â£000 Â£000 Â£000 Income statement - return after taxation: Revenue return - increase/ 24 (24) 47 (47) (decrease) Capital return - increase/ 6,093 (6,093) 4,716 (4,716) (decrease) Total return after taxation - 6,117 (6,117) 4,763 (4,763) increase/(decrease) Equity 6,117 (6,117) 4,763 (4,763) (e) LIQUIDITY RISK This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Management of the risk Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities that are readily realisable. The Company does not have any borrowing facilities. The investments in unquoted securities may have limited liquidity and be difficult to realise. At 31 December 2010 unquoted securities represented 2.5% of the total investment portfolio (31 December 2009: 2.0%). The Board gives guidance to the Investment Manager as to the maximum amount of the Company's resources that should be invested in any one holding. The policy is that the Company should remain fully invested in normal market conditions and that short-term borrowing be used to manage short-term cash requirements. (f) CREDIT RISK The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss. Management of the risk This risk is not significant, and is managed as follows: 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, generally, does not hold significant cash balances, but when it does it seeks to limit exposure to any one bank to 10% of net assets. None of the Company's financial assets are secured by collateral or other credit enhancements. (g) FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES The fair values of 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 2010 Level 1 Level 3 Total Â£000 Â£000 Â£000 Equity investments 59,070 1,491 60,561 Total 59,070 1,491 60,561 Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1 - valued using quoted prices in active markets for identical assets Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1 (there are no Level 2 investments at 31 December 2010) Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data The valuation techniques used by the Company are explained in the accounting policies note on page 42. A reconciliation of fair value measurements in Level 3 is set out below: Level 3 financial assets at fair value through profit or loss at 31 December 2010 Equity investments Total Â£000 Â£000 Opening balance 924 924 Purchases at cost 815 815 Net losses included in profit or loss for assets (248) (248) held at the end of year Closing balance 1,491 1,491 Financial liabilities The listed bid price has been used to determine the fair value of the Zero Dividend Preference shares: As at 31 As at 31 As at 31 As at 31 December 2010 December 2010 December 2009 December 2009 Book value Level 1 Book value Level 1 Â£m Â£m Â£m Â£m Zero Dividend 34.6 36.7 24.8 25.5 Preference shares (h) 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: 2010 2009 Â£000 Â£000 Debt: Zero Dividend Preference shares (34,566) (24,787) Equity: Equity share capital 171 131 Retained earnings and other reserves 32,068 25,141 32,239 25,272 Total Capital 66,805 50,059 Debt as a percentage of total capital 51.74% 49.5% 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 2010 2010 2010 2009 2009 2009 Three More Three More months than months 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 Purchases for 757 - 757 3,116 - 3,116 future settlement Other 163 - 163 229 - 229 creditors Creditors: amounts falling due after more than one year Accrued - 34,236 34,236 - 24,787 24,787 capital entitlement of the Zero Dividend Preference shares Premium (net - 330 330 - - - of expenses on placing of Zero Dividend Preference shares) 920 34,566 35,486 3,345 24,787 28,132 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 to buy additional investments. The objective is to enhance returns to shareholders but there is the risk of the opposite effect if the additional investments fall in value. GROSS REDEMPTION YIELD The return on a fixed-interest security, or any investment with a known life, expressed as an annual percentage and without any deduction for tax. Redemption yield measures the capital as well as income return on investments with a fixed life. HURDLE RATE The compound rate of growth of the total assets required each year until the wind-up date for shareholders to receive either a predetermined redemption price or, in some cases, a return of the amount originally invested. Any class of share ranking for prior payment should be taken into account in this calculation. NET ASSET VALUE ("NAV") The NAV is the assets attributable to shareholders expressed as an amount per individual share. The assets attributable to shareholders is the total value of all a companies assets, at current market value, having deducted all prior charges at their par value (or at their asset value). SPLIT CAPITAL INVESTMENT TRUST An investment trust with two or more classes of share in issue, each class having specified entitlements to income or capital. Typical classes of share include ordinary shares, capital shares, zero dividend preference shares and income and residual capital (or geared ordinary) shares. TOTAL RETURN The combined effect of any dividends paid, together with the rise or fall in the share price or NAV. Total return statistics enable the investor to make performance comparisons between companies with different dividend policies. Any dividends (after tax) received by a shareholder are assumed to have been reinvested in either additional shares of the company at the time the shares go ex-dividend (the share price total return) or in the assets of the company at its NAV per share (the NAV total return). Shareholder information FINANCIAL CALENDAR Company's year-end 31 December Annual results announced mid March Annual General Meeting 27 April 2011 Company's half-year end 30 June Half-year results announced early August Dividend payments - 2011 at the end of January, April, August and December (Dividend payments thereafter will be at the end of March, June, September and December) SHARE PRICE AND PERFORMANCE INFORMATION The Ordinary shares and Zero Dividend Preference shares are listed on the London Stock Exchange. The mid-market prices are quoted daily in the Financial Times and The Daily Telegraph. Information about the Company can be obtained directly via www.premierassetmanagement.co.uk. Any enquiries can also be e-mailed to premier@premierfunds.co.uk. SHARE DEALING A share dealing service is available through Premier on 01296 390408, or alternatively shares can be purchased through your usual stockbroker. Information on the Premier ISA can be obtained by contacting Premier on 01483 400400. SHARE REGISTER ENQUIRIES The register for the Ordinary shares and Zero Dividend Preference shares is maintained by Capita Registrars. In the event of queries regarding your holding, please contact the Registrar on 0871 664 0300 (calls cost 10p per minute plus network extras, lines are open Monday to Friday 8.30 a.m. to 5.30 p.m.); overseas +44 208 639 3399; or e-mail shareholder.services@capitaregistrars.com. Changes of name and/or address must be notified in writing to the Registrar. PREMIER FUND MANAGERS LIMITED Other investment companies managed by Premier are: Acorn Income Fund Limited Global Special Opportunities Trust PLC Further details of these funds can be obtained from Premier on 01483 400400. E-mail: premier@premierfunds.co.uk www.premierassetmanagement.co.uk A member of the Association of Investment Companies. Notice of annual general meeting to the members of Premier Energy and Water Trust PLC Notice is hereby given that the Annual General Meeting of the Company will be held at the offices of Premier Asset Management Limited, Eastgate Court, High Street, Guildford, Surrey GU1 3DE on Wednesday, 27 April 2011, at 2.00 p.m. to consider and, if thought fit, pass the following resolutions, which will be proposed as to resolutions 1, 2, 3, 4, 5, 6, 7 and 8 as ordinary resolutions and as to resolutions 9, 10 and 11 as special resolutions: ORDINARY RESOLUTIONS 1. To receive the Directors' Report and Financial Statements for the year ended 31 December 2010. 2. To approve the Directors' Remuneration Report for the year ended 31 December 2010. 3. To re-elect Mr Geoffrey Burns as a Director of the Company. 4. To elect Mr Charles Wilkinson as a Director of the Company. 5. To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the Board to determine their remuneration. 6. Authority to allot new shares: THAT, the Directors be and they are hereby generally and unconditionally authorised, in accordance with section 551 of the Companies Act 2006, to allot shares in the Company and to grant rights ("relevant rights") to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of 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 15 March 2011 being the latest practicable date prior to the publication of this Notice of Meeting) PROVIDED THAT this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that the Company may, at any time prior to the expiry of such authority, make an offer or agreement which would or might require shares to be allotted or relevant rights to be granted after the expiry of such authority and the Directors may allot shares or grant relevant rights in pursuance of such an offer or agreement as if such authority had not expired. 7. Authority to allot Ordinary shares at a discount: THAT, subject to and conditional upon the passing of resolution 6 above (the "Resolution"), the Directors be and they are hereby generally and unconditionally authorised, in accordance with LR 15.4.11 of the United Kingdom Listing Rules to allot Ordinary shares for cash pursuant to the Resolution at a price which represents a discount to the net asset value attributable to the Ordinary shares as at the date of such issuePROVIDED 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. 8. Amending the Company's investment management arrangements with Premier: THAT, the new investment management agreement proposed between the Company and Premier Fund Managers Limited in the form produced to the meeting and signed for the purpose of identification by the chairman of the meeting (together with any non-material amendments thereto that the Directors may consider to be necessary or desirable), the purpose of which is to effect the amendments to the Investment Management Agreement dated 26 September 2003 between the Company (formerly known as Premier Utilities Trust PLC) described under the heading "Amending the Company's investment management arrangements with Premier" in the Directors Report included in the Report and Accounts of the Company for the year ended 31 December 2010 and of which this notice of meeting forms part, be and is hereby approved. SPECIAL RESOLUTIONS 9. Authority to disapply pre-emption rights: THAT, subject to the passing of resolution numbered 6 above ("Section 551 Resolution"), the Directors of the Company be empowered pursuant to section 570 of the Companies Act 2006 (the "Act") to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the Section 551 Resolution as if section 561(1) of the Act did not apply to such allotment, provided that this power shall be limited to: (a) the allotment of equity securities (otherwise than pursuant to sub-paragraph (b) below) up to an aggregate nominal amount of 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 2012, but so that this power shall enable the Company to make an offer or agreement before such expiry which would or might require equity securities to be allotted after such expiry and the Directors of the Company may allot equity securities in pursuance of any such offer or agreement as if such expiry had not occurred. 10. Authority to repurchase the Company's shares: THAT, the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 ("the Act") to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of 1p each and of Zero Dividend Preference shares of 1p each in the capital of the Company (together the "Shares"), provided that: (a) the maximum number of Shares hereby authorised to be purchased shall be 2,558,565 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 2012, or 26 October 2012 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. 11. Changes to the Articles of Association: THAT the Company's Articles of Association be and are hereby amended as follows: 11.1 Article 2.1 shall be amended by the deletion of the definition of "Gross Assets" in its entirety and be replaced by the following in substitution therefor: " "Gross Assets" means the aggregate value of all the assets of PEWT including net distributable but undistributed income, less current liabilities (excluding from current liabilities (i) any proportion of monies borrowed for investment whether or not treated under accounting rules as current liabilities and (ii) in respect of the twelve months prior to the Planned Winding Up Date, the amount outstanding in respect of the ZDP Shares);" 11.2 Article 5.2.2(i) be amended by: (a) the deletion of the following words: "For the purposes of this Article 5.2.2, the cover of the ZDP Shares shall represent a fraction where the numerator is equal to the Net Assets of the Company on the NAV Calculation Date and the denominator is equal to the amount which would be paid on the ZDP Shares in issue on the NAV Calculation Date as a class (and on all shares ranking as to capital in priority thereto or pari passu therewith, save to the extent already taken into account in the calculation of the total of share capital and reserves) in a winding up of the Company on the Planned Winding Up Date."; (b) the deletion of the word "Net" appearing between the words "use the" and "Assets of the Company" in paragraph `A.' and replacement by the word "Gross"; and (c) the deletion of the word "Net" appearing between the words "adjust the" and "Assets of the Company" in paragraph `C.' and replacement by the word "Gross". By order of the Board Premier Asset Management Limited Secretary 16 March 2011 Notes to the notice of annual general meeting 1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A shareholder may not appoint more than one proxy to exercise the rights attached to any one share. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact the Company's registrars, Capita Registrars (contact details can be found on page 65). 2. To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand at the offices of the Company's registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU no later than 2.00 p.m. on Monday, 25 April 2011. 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 Thursday, 21 April 2011 (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 15 March 2011 (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 15 March 2011 are 38,248,853. 8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 9. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA10) by 2.00 p.m. on Monday, 25 April 2011. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 10. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 12. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares. 13. Under section 527 of the Companies Act 2006 members meeting the threshold requirements set out in that section have the right to require the company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company's accounts (including the auditor's report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website. 14. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 15. A copy of this notice, and other information required by s311A of the Companies Act 2006, is available at the Investment Manager's website www.premierassetmanagement.co.uk Directors and advisers Directors Geoffrey Burns (Chairman) Adam Cooke Ian Graham Michael Wigley Charles Wilkinson (appointed on 23 February 2011) Investment Manager Premier Fund Managers Limited Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: 01483 306 090 www.premierassetmanagement.co.uk Authorised and regulated by the Financial Services Authority Secretary and Premier Asset Management Limited Registered Office Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: Mike Nokes 020 7982 1260 Company Number 4897881 Website www.premierassetmanagement.co.uk Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0871 664 0300 (calls cost 10p per minute plus network extras, lines are open Monday to Friday 8.30 a.m. to 5.30 p.m.) Overseas: +44 208 639 3399 E-mail: ssd@capitaregistrars.com Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Joint stockbrokers J.P. Morgan Cazenove 10 Aldermanbury London EC2V 7RF Telephone: 020 7325 1000 Fairfax I.S. PLC 46 Berkeley Square Mayfair London W1J 5AT Telephone: 020 7598 5368

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