PEWT SEC. ZDP ZERO DIV PREF 1P
PREMIER ENERGY AND
WATER TRUST PLC
2015
Half Year Report
for the six months
to 30 June 2015
Investment Objectives
The Company's investment objectives are to achieve a high income and to realise
long term growth in the capital value of its portfolio. The Company will seek
to achieve these objectives by investing principally in the equity and
equity-related securities of companies operating primarily in the energy and
water sectors, as well as other infrastructure investments.
Contents
Shareholder Information ifc
Investment Objectives 1
Company Highlights 2-3
Chairman's Statement 4-5
Investment Manager's Report 6-8
Investment Portfolio 9
Consolidated Statement
of Comprehensive Income 10-11
Consolidated and Company
Balance Sheets 12
Consolidated Statement
of Changes in Equity 13
Consolidated and Company
Cashflow Statements 14
Notes to the Half Year Report 15-18
Interim Management Report 19-20
Directors and Advisers 21
Company Highlights
for the six months to 30 June 2015
Six months to Year ended
30 June 31 December
2015 2014
Total Return Performance
Total Assets Total Return1 (0.3%) 14.7%
FTSE All-World Utilities Index Total Return (GBP)2 (7.5%) 20.5%
FTSE All-World Index Total Return (GBP)2 2.1% 11.3%
FTSE All-Share Index Total Return (GBP)2 3.0% 1.2%
Ongoing charges3 1.6% 1.5%
Six months to Year ended
30 June 31 December
2015 2014 % change
Ordinary Share
Returns
Net Asset Value per 177.83p 196.23p (10.9%)
Ordinary share (cum
income)4
Mid-market price per 178.75p 192.50p (9.4%)
Ordinary share
Premium/(discount) 0.5% (1.9%)
Net Asset Value Total (5.4%) 26.6%
Return5
Share Price Total (3.0%) 71.8%
Return2
Six months to Six months to
30 June 30 June
2015 2014 % change
Returns and Dividends
Revenue Return per 6.15p 6.90p (10.8%)
Ordinary share
Net Dividends 5.30p 5.30p -
declared per Ordinary
share
Six months to Year ended
30 June 31 December
2015 2014 % change
Zero Dividend
Preference Share
Returns
Net Asset Value per 214.82p 208.18p 3.2%
Zero Dividend
Preference share4
Mid-market price per 216.75p 215.00p 0.8%
Zero Dividend
Preference share
Premium 0.9% 3.3%
As at
30 June
2015
Hurdle Rates
Ordinary shares
Hurdle rate to return the share price of
185.0p
at 30 June 20156 2.4%
Zero Dividend Preference shares
Hurdle rate to return the redemption
entitlement
of 221.78p at 31 December 20156 (37.8%)
Six months to Year ended
30 June 31 December
2015 2014 % change
Balance Sheet
Gross Assets less £78.6m £79.0m (0.5%)
Current Liabilities
Zero Dividend (£47.2m) (£45.0m) 5.6%
Preference shares
Equity shareholders' £31.4m £34.0m (7.6%)
funds
Gearing on Ordinary 2.50 x 2.32 x
shares7
Zero Dividend 1.57 x 1.58 x
Preference share
cover
(non-cumulative)8
1 Based on opening and closing total assets plus dividends marked "ex-dividend"
within the period. Source: Premier Fund Managers Limited ("PFM Ltd").
2 Source: Bloomberg.
3 Ongoing charges have been based on the Company's management fees and other
operating expenses as a percentage of average gross assets less current
liabilities over the year.
4 Articles of Association basis.
5 Based on opening and closing NAVs with dividends marked
"ex-dividend" within the period reinvested. Source: PFM Ltd.
6 Source: JP Morgan Cazenove. The Hurdle Rate is the compound rate of growth or
decline of the total assets required each year to meet in the case of the
Ordinary shares, the share price at 30 June 2015, and in the case of the ZDP
shares the predetermined redemption price.
7 Based on Gross Assets less Current Liabilities divided by Equity
Shareholders' Funds at the end of each year.
8 Non-cumulative cover = Gross assets at year end less estimated wind up costs
less management charges to capital divided by final repayment value of ZDP's.
Source: JP Morgan Cazenove and PFM Ltd.
Chairman's Statement
for the six months to 30 June 2015
Performance
After a very strong showing in 2014 the utilities sector has had a
disappointing start to 2015. The sector, viewed by many as a bond proxy, has
been sold down on expectations that the US Federal Reserve and The Bank of
England will commence interest rate increases later this year or early next, a
topic explored more fully in the Investment Manager's Report.
Over the six months to 30 June 2015, Premier Energy and Water Trust's ("PEWT"/
the "Company") gross assets delivered a negative total return of 0.3%. This
represents a substantial out-performance of the FTSE All-World Utilities Index
which recorded a negative total return of 7.5%, although was behind equities
generally, the FTSE All-World Index returning 2.1% (all indices stated as total
return including dividends, Sterling adjusted).
PEWT's Net Asset Value per ordinary share ("NAV") fell by 9.4%. However, the
total return to an ordinary shareholder including dividends paid and movement
in the NAV, was a negative 5.4%. The difference between this return and the
gross assets total return above is attributable to the financing cost of the
ZDP shares, which is of course still incurred regardless of performance.
Overview of the period
Equity markets were confronted with a myriad of issues during the half, not
least a sharp slowdown in the Chinese economy, the on-going saga of Greece, and
the prospect of interest rate increases following over 6 years of emergency
rates. In the short term at least, the market consensus is that the utilities
sector is particularly at risk from the last of these.
In this light, the utilities in those economies where interest rates are
closest to beginning their upward cycle, namely the US and the UK, came under
some pressure. The S&P 500 Utilities Sector Index and FTSE Utilities Index both
lost value, UK utilities falling in spite of the election of what should in
theory be a benign Conservative government. Europe was also a difficult
investing environment for the utility investor with geopolitical concerns
outweighing accommodating monetary policy.
The portfolio's out-performance against these indices in the half year can
largely be ascribed to an underweight position in European and US utilities,
and the performance of its emerging market investments, with some excellent
returns achieved by the Hong Kong listed Chinese utilities in particular.
PEWT's Chinese investments are all Hong Kong listed, a market dominated by
institutions rather than retail investors, which has shielded the portfolio
from some but not all of the volatility.
Dividends
On 22 April 2015 the Company announced the first quarterly dividend of 2.65p
per Ordinary share in respect of 2015, unchanged on the equivalent period in
2014, which was paid on 30 June 2015. The dividend comprised a base dividend of
1.90p plus an additional dividend of 0.75p paid in accordance with the
Company's policy announced in August 2013, to run down substantially the
Company's revenue reserve. It is intended that additional dividends will be
paid with all dividends paid in respect of 2015, finishing with the fourth
interim dividend expected to be paid in March 2016.
On 28 July 2015 the Company declared an unchanged second interim dividend for
the 2015 financial year of 2.65p, which comprised a 1.90p base dividend plus
0.75p additional dividend. This second interim dividend will be paid on 30
September 2015 to members on the register at the close of business on 28 August
2015. The Ordinary shares will be marked ex-dividend on 27 August 2015.
Refinancing of ZDP Shares
Shareholders will be aware that the Company's ZDP shares mature at the end of
2015, with a capital entitlement payable to ZDP shareholders of 221.78p per ZDP
share. On the maturity date the ZDP share issue will have a value of £48.7
million, based on the number in issue on 30 June 2015.
During the second half of 2015, your Board and Investment Manager will be
meeting with ZDP shareholders with the intention of putting in place a
follow-on instrument into which existing ZDP shareholders can transfer their
current investment if they so choose. The nature, size, and pricing of the
follow-on instrument will be determined by investor demand and market
conditions as we progress through the second half of 2015.
Outlook
PEWT has experienced a testing start to the year, even though on a gross assets
level the portfolio has significantly out-performed the utilities sector. Since
the interim period end, the outlook for equities has become more difficult,
with the Eurozone continuing to be weighed down by the Greek issue, the full
implications of which are unknown. In addition the Chinese domestic equity
market has seen a period of extreme volatility, which has been felt to an
extent in the Company's Hong Kong listed investments. On the positive side, the
recent weakness of the utilities sector has resulted in the portfolio looking
even more attractively valued, and has created some investment opportunities.
Maintaining a robust investment portfolio able to withstand short-term
volatility, whilst at the same time retaining the ability to capture longer
term growth and income development, will remain key to PEWT's investment
policy.
Geoffrey Burns
Chairman
11 August 2015
Investment Manager's Report
for the six months to 30 June 2015
Market review
The first half of 2015 has seen an excellent operational performance by many of
PEWT's investments. However, as highlighted in the Chairman's statement, the
external environment has been difficult with a mixture of geopolitical risks
and concerns over interest rates holding back valuations to produce a
disappointing overall performance.
As we have said previously, the evidence for medium to long-term correlation
between the utilities sector and interest rates is unconvincing. Unfortunately,
this does not prevent the sector from being sold down in the short term when
the market is concerned about interest rates. We would again re-iterate that
for a typical regulated utility, interest costs are a pass through element of
the regulatory model, and that over time interest rate increases result in
higher allowed returns, offsetting any element of discounting on the value of
the company itself.
Against this background, utilities in some of the larger equity markets
performed poorly over the six months; the S&P 500 Utilities Index returned a
negative 11.5%, well below its parent index, the S&P 500, which had a positive
return of 0.3% (total return based on net dividends, Sterling adjusted).
Likewise the FTSE Utilities Index showed a negative total return of 5.3%, well
below the FTSE All-Share which managed a creditable positive total return of
3.0%. Under-performance in European utilities was even more pronounced, with
the EuroStoxx Utilities Index losing 8.5% (total return, net dividends,
Sterling adjusted) against a positive return on the same basis of 3.7% for the
EuroStoxx itself.
As a result of the under-performance, the utilities sector is now trading at an
attractive valuation, particularly when considered relative to wider market
indices.
Portfolio highlights
OPG Power completed its capacity expansion programme in the period,
commissioning a new unit at its Chennai facility, plus a whole new power
station in Gujarat, its largest to date. Barring the announcement of any new
projects, the company should become very cash flow generative from here, and
management have indicated a maiden dividend will be paid in respect of the
financial year to March 2016. Its shares rose in value by 3.9% in the half
following their very strong performance in 2014. Unfortunately, further down
the portfolio, the performance of Indian renewable energy company Greenko has
been a concern. While the business itself is performing well, the company has
in the past signed dilutive mezzanine financing deals, about which the market
has become increasingly concerned. We are looking to management not only to
restructure these deals to put a cap on dilution, but also to improve the
quality of the company's corporate governance.
PEWT's Chinese investments generally performed well during the half. The
largest position, hydro and thermal generation company China Power
International, saw its shares gain 50.4% over the six months, with the company
recording a 20.8% growth in earnings for 2014. Waste incineration company China
Everbright International was also a strong performer, its shares gaining 20.5%
and the company recording 2014 earnings growth of 28.6%.
Staying in China, the position in Fortune Oil was sold in the period with the
company being taken-over by its main shareholder / management group. While the
price offered was below what we felt the company was worth, the gain of 43% on
cost was, nonetheless, a satisfactory result.
The holding in Renewable Energy Generation Limited ("REG") was a
disappointment, its shares losing 19.2% over the first half. However, the
fundamental valuation remains intact, and if anything, recent changes to UK
renewables subsidy legislation should hasten REG's move toward a cash
generative "utility" business model, which we believe the market will reward
with a higher valuation than their current developer model.
The pullback in US utility valuations has allowed us to build positions in some
new US names. TECO Energy is a Florida based utility serving an affluent and
growing population with a lower than average tariff. It therefore presents a
relatively low regulatory risk, and its high yield should also enhance PEWT's
revenue earnings. The holding in the First Trust MLP & Energy Income Fund has
also been increased, offering an enhanced yield and a diversified exposure to
US utilities and pipelines.
Shortly after the period end, the holding in Ecofin Convertible Loan Notes was
sold. While the notes had paid a high coupon, the potential conversion upside
has not materialised, and appears unlikely to do so before the notes' maturity
in July 2016.
Currency
A significant negative factor over the first half of the year was the weakness
of many currencies in which PEWT invests. Measured against Sterling, the Euro
fell by 9.5%, the Polish Zloty by 7.0%, the Brazilian Real fell 17.7%, the
Malaysian Ringgit by 8.9%, and the Chilean Peso by 8.9%. While the portfolio
was hedged against the declining Euro for some of the period, the weakness in
emerging market currencies was unhedged.
Sterling also strengthened marginally against the US Dollar, by 0.9%, in part
buoyed by the decisive result of the general election.
Balance sheet and gearing
The combination of a reduction in portfolio value and compounding of ZDP shares
has led to an increase in gearing for the Ordinary shares from 2.32x at 31
December 2014 to 2.5x at 30 June 2015. ZDP cover fell for the same reason.
Outlook
Considering the weakness in many emerging currencies, and poor performance in
many of the developed market utility sectors, the Company's performance looks
relatively strong. However, the overall result is still disappointing.
Having said this, the market movements have presented the opportunity to add
some new holdings at attractive levels with the sector now trading at a marked
discount.
James Smith
Claire Long
Premier Fund Managers Limited
11 August 2015
GEOGRAPHIC ALLOCATION 2015
30 June 2015
SECTOR ALLOCATION 2015
30 June 2015
Investment
Portfolio
at 30 June 2015
Value % total June December
Company Activity Country £000 investments 2015 2014
OPG Power Multi Utility India 7,828 10.1 1 (1)
Ventures
China Power Electricity China 6,197 8.0 2 (3)
International Generation
Renewable Energy Renewable UK 3,791 4.9 3 (2)
Generation Energy
Huaneng Power Electricity China 3,183 4.1 4 (4)
International Generation
First Trust MLP Multi Utility USA 2,808 3.6 5 (12)
& Energy
TECO Energy Multi Utility USA 2,804 3.6 6 (46)
Ecofin Water & Investment UK 2,722 3.5 7 (6)
Power* Company
Qatar Multi Utility Qatar 2,574 3.3 8 (11)
Electricity and
Water
National Grid Electricity & UK 2,492 3.2 9 (15)
Gas
Transmission
China Everbright Water & Waste China 2,490 3.2 10 (9)
International
Enersis Electricity Chile 2,419 3.1 11 (8)
Integrated
EDP - Energias Electricity Brazil 2,371 3.1 12 (13)
do Brasil Generation &
Transmission
Nextera Energy Electricity USA 2,244 2.9 13 (18)
Generation
GDF Suez Multi Utility France 2,180 2.8 14 (7)
SSE Multi Utility UK 2,004 2.6 15 (10)
Huaneng Renewable China 1,849 2.4 16 (20)
Renewables Energy
Tenaga Nasional Electricity Malaysia 1,765 2.3 17 (14)
Generation
Beijing Gas China 1,529 2.0 18 -
Enterprises Transmission
Holdings
Infinis Energy Renewable UK 1,512 2.0 19 (33)
Energy
Acea Multi Italy 1,485 2.0 20 (25)
Utilities
China Resources Electricity China 1,464 1.9 21 (23)
Power Holdings Generation
Hera Multi Utility Italy 1,461 1.9 22 (27)
Pennon Group Water & Waste UK 1,401 1.8 23 (31)
Greenko Group** Renewable India 1,307 1.6 24 (16)
Energy
GCP Multi Utility UK 1,183 1.5 25 -
Infrastructure
Investments
Transelectrica Electricity Romania 1,182 1.5 26 (29)
Generation
Consolidated Electricity USA 1,104 1.4 27 (28)
Edison Generation
Energa Electricity Poland 1,067 1.4 28 (24)
Generation
Ausnet Services Electricity Australia 1,023 1.3 29 (32)
Generation
Keppel Multi Utility Singapore 995 1.3 30 -
Infrastructure
Trust
The Southern Electricity USA 932 1.2 31 -
Company Generation
Metro Pacific Multi Utility Philippines 928 1.2 32 (35)
Investments
Snam Gas Italy 889 1.2 33 (17)
Transmission
Sembcorp Multi Utility Singapore 801 1.0 34 (30)
Industries
AES Tiete Electricity Brazil 663 0.9 35 (38)
Generation
Cia Energetica Electricity Brazil 595 0.8 36 (34)
de Minas Gerais Generation
Transgaz Gas Romania 590 0.8 37 (50)
Transmission
China Power New Renewable China 517 0.7 38 (45)
Energy Energy
Development
Beijing Jingneng Electricity China 483 0.6 39 (43)
Clean Energy Generation
CMS Energy Multi Utility USA 466 0.6 40 -
Hafslund Electricity Norway 462 0.5 41 (44)
Generation
Enea Electricity Poland 320 0.4 42 -
Generation
Fondul Multi Utility Romania 314 0.4 43 (48)
Proprietatea
Consolidated Water & Waste USA 304 0.4 44 (47)
Water
Edison Electricity USA 247 0.3 45 -
International Generation
Tractebel Electricity Brazil 174 0.2 46 (49)
Energia Generation
Cia de Water & Waste Brazil 172 0.2 47 (51)
Saneamento do
Parana
Polenergia Electricity Poland 151 0.1 48 -
Generation
Cia de Water & Waste Brazil 70 0.1 49 -
Saneamento de
Minas Gerais
77,512 99.9
PEWT Securities 50 0.1
PLC
Total 75,562 100.0
investments
* Holding in convertible bonds and ordinary shares
** Holding in bonds and ordinary shares
Consolidated Statement of Comprehensive Income
for the six months to 30 June 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited)
Six months Six months Six months Six months Six months Six months Year Year Year
to 30 June to 30 June to 30 June to 30 June to 30 June to 30 June ended 31 ended 31 ended 31
2015 2015 2015 2014 2014 2014 December December December
2014 2014 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes £000 £000 £000 £000 £000 £000 £000 £000 £000
(Losses)/
gains on
investments
held at fair
value
through - (1,274) (1,274) - 7,604 7,604 - 8,627 8,627
profit or
loss
Income 1,636 - 1,636 1,740 - 1,740 3,067 - 3,067
Investment (156) (235) (391) (148) (226) (374) (301) (455) (756)
management
fee
Other (241) - (241) (278) - (278) (817) - (817)
expenses
Profit before 1,239 (1,509) (270) 1,314 7,378 8,692 1,949 8,172 10,121
finance costs
and taxation
Finance costs - (1,352) (1,352) - (1,284) (1,284) - (2,635) (2,635)
Profit before 1,239 (2,861) (1,622) 1,314 6,094 7,408 1,949 5,537 7,486
taxation
Taxation (166) - (166) (137) - (137) (222) - (222)
Total 1,073 (2,861) (1,788) 1,177 6,094 7,271 1,727 5,537 7,264
comprehensive
income for
the period
Return per
Ordinary
share (pence)
- basic 3 6.15 (16.38) (10.23) 6.90 35.70 42.60 10.11 32.42 42.53
The total column of this statement represents the Group's profit or loss,
prepared in accordance with IFRS.
As the parent of the Group, the Company has taken advantage of the exemption
not to publish its own separate Statement of Comprehensive Income. The
Company's total comprehensive income for the half year ended 30 June 2015 was £
(1,788,000).
The supplementary revenue and capital columns are prepared under guidance
published by the Association of Investment Companies ("AIC").
All items derive from continuing operations; the Group does not have any other
recognised gains or losses.
Consolidated and Company Balance Sheets
for the financial year ended 30 June 2015
(Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Group Company Company Group Company
30 June 30 June 30 June 31 31
December December
2015 2015 2014 2014 2014
Notes £000 £000 £000 £000 £000
Non current
assets
Investments at 77,512 77,562 75,864 77,336 77,386
fair value
through profit
or loss
Current assets
Debtors 685 685 484 1,658 1,658
Cash at bank 1,075 1,075 1,286 268 268
1,760 1,760 1,770 1,926 1,926
Total assets 79,272 79,322 77,634 79,262 79,312
Current
liabilities
Creditors:
amounts falling
due
within one year (664) (714) (438) (265) (315)
Zero Dividend (47,190) (47,190) (42,820) (44,970) (44,970)
Preference
shares
(47,854) (47,904) (43,258) (45,235) (45,285)
Net assets 31,418 31,418 34,376 34,027 34,027
Equity
attributable to
Ordinary
Shareholders
Share capital 177 177 174 174 174
Share premium 8,036 8,036 6,884 7,444 7,444
Redemption 88 88 88 88 88
reserve
Capital reserve 14,115 14,115 17,533 16,976 16,976
Special reserve 7,472 7,472 7,472 7,472 7,472
Revenue reserve 1,530 1,530 2,228 1,873 1,873
Total equity
attributable to
Ordinary 31,418 31,418 34,376 34,027 34,027
Shareholders
Net asset value
per Ordinary
share (pence)
- International
Financial
Reporting 4 177.63 177.63 201.41 195.80 195.80
Standards basis
Net asset value
per Ordinary
share (pence)
- Articles of 4 177.83 177.83 202.05 196.23 196.23
Association
basis
Consolidated Statement of Changes in Equity
For the six
months to 30
June 2015
(unaudited)
Ordinary Share
share premium Redemption Capital Special Revenue
capital reserve reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
Balance at 1 174 7,444 88 16,976 7,472 1,873 34,027
January 2015
Total
comprehensive
income
for the - - - (2,861) - 1,073 (1,788)
period
Tap issue of
Ordinary
shares
during the 3 592 - - - - 595
period
Ordinary - - - - - (1,416) (1,416)
dividends
paid
Balance at 30 177 8,036 88 14,115 7,472 1,530 31,418
June 2015
For the six
months to 30
June 2014
(unaudited)
Ordinary Share
share premium Redemption Capital Special Revenue
capital reserve reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
Balance at 1 171 6,884 88 11,439 7,472 2,399 28,453
January 2014
Total
comprehensive
income
for the - - - 6,094 - 1,177 7,271
period
Ordinary - - - - - (1,348) (1,348)
dividends
paid
Balance at 30 171 6,884 88 17,533 7,472 2,228 34,376
June 2014
For the
financial
year ended 31
December 2014
(audited)
Ordinary Share
share premium Redemption Capital Special Revenue
capital reserve reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
Balance at 1 171 6,884 88 11,439 7,472 2,399 28,453
January 2014
Total
comprehensive
income
for the year - - - 5,537 - 1,727 7,264
Tap issue of
Ordinary
shares
during the 3 560 - - - - 563
year
Ordinary - - - - - (2,253) (2,253)
dividends
paid
Balance at
31 December 174 7,444 88 16,976 7,472 1,873 34,027
2014
Consolidated and Company Cashflow Statements
for the six months ended 30 June 2015
(Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
Group Company Company Group Company
Six months Six months Six months Year ended Year ended
ended 30 June ended 30 June ended 30 June 31 December 31 December
2015 2015 2014 2014 2014
£000 £000 £000 £000 £000
(Loss)/profit
before finance
costs and (270) (270) 8,692 10,121 10,121
taxation
Adjustments for
Movement in
investments
held at
fair value 1,509 1,509 (7,378) (8,627) (8,627)
through profit
or loss
(Increase)/
decrease in
trade and
other 972 972 (226) (28) (28)
receivables
Increase/
(decrease) in
trade and
other payables 44 44 (159) 84 84
Net cash flows 2,255 2,255 929 1,550 1,550
from operating
activities
Overseas (143) (143) (135) (217) (217)
taxation paid
Investing
activities
Purchases of (18,094) (18,094) (19,044) (27,582) (27,582)
investments
Proceeds from 17,088 17,088 19,355 27,241 27,241
sales of
investments
Net cash flows (1,006) (1,006) 311 (341) (341)
from investing
activities
Financing
activities
Proceeds from 1,117 1,117 - - -
issue of shares
Dividends paid (1,416) (1,416) (1,348) (2,253) (2,253)
Net cash used (299) (299) (1,348) (2,253) (2,253)
in financing
activities
(Decrease)/
increase in
cash
and cash 807 807 (243) (1,261) (1,261)
equivalents
Cash and cash
equivalents,
beginning of 268 268 1,529 1,529 1,529
period
Cash and cash
equivalents
at end of 1,075 1,075 1,286 268 268
period
Notes to the Half Year Report
ACCOUNTING POLICIES
1.1 Basis of preparation
Following the incorporation of the Company's wholly-owned subsidiary, PEWT
Securities PLC, on 25 July 2014 the financial statements of the Group and
Company have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union, and as applied in
accordance with the provisions of the Companies Act 2006. These comprise
standards and interpretations of the International Accounting Standards and
Standing Interpretations Committee as approved by the International Accounting
Standards Committee ("IASC") that remain in effect, to the extent that IFRS
have been adopted by the European Union. Previously, the financial statements
were prepared in accordance with UK Generally Accepted Accounting Practice ("UK
GAAP"). The transition to IFRS did not result in any significant changes to the
accounting polices.
The Half-year Financial Statements have been prepared in accordance with
International Accounting Standard ("IAS") 34 "Interim Financial Reporting" and
in accordance with the Statement of Recommended Practice ("SORP") for
investment trusts issued by the Association of Investment Companies ("AIC") in
November 2014, where the SORP is not inconsistent with IFRS.
The financial information contained in this Half-year Report does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. The financial information for the periods ended 30 June, 2015 and 30
June, 2014 have not been audited. The financial information for the year ended
31 December, 2014 has been extracted from the latest published audited
accounts. Those accounts have been filed with the Registrar of Companies and
included the Independent Auditor's Report which, in respect of both sets of
accounts, was unqualified, did not contain an emphasis of matter reference, and
did not contain a statement under Section 498(2) or (3) of the Companies Act
2006. Those statutory accounts were prepared in accordance with IFRS, as
adopted by the European Union.
The functional currency of the Company is Sterling as this is the currency of
the primary economic environment in which the Company operates. Accordingly,
the Financial Statements are presented in Sterling rounded to the nearest
thousand pounds.
The same accounting policies, presentation and methods of computation have been
followed in these Financial Statements as were applied in the preparation of
the Company's Financial Statements for the previous accounting periods.
IFRS 10 Consolidated Financial Statements
The Financial Statements in these accounts reflect the adoption of IFRS 10
(including the Investment Entities amendment) which requires investment
companies to value subsidiaries (except for those providing investment related
services) at fair value through profit and loss rather than consolidate them.
The Directors, having assessed the criteria, believe that the Group meets the
criteria to be an investment entity under IFRS 10 and that this accounting
treatment better reflects the Company's activities as an investment trust.
Therefore all investments in subsidiaries (with the exception of PEWT
Securities PLC) are carried at fair value through profit and loss in accordance
with IAS 39.
PEWT Securities PLC, which is controlled by the Company, holds the ZDP shares
and has lent the proceeds to the Company. It is considered to provide
investment related services to the Group and is therefore required to be
consolidated under the IFRS 10 Investment Entities amendment. PEWT Securities
PLC has been consolidated in these Financial Statements using consistent
accounting policies to those applied by the Company.
1.2 Presentation of Statement of Comprehensive Income
In order to better reflect the activities of the Company as an investment trust
company, and in accordance with guidance issued by the AIC, supplementary
information which analyses the Consolidated Statement of Comprehensive Income
between items of a revenue and capital nature has been presented alongside the
Consolidated Statement of Comprehensive Income.
1.3 Use of estimates
The preparation of Financial Statements requires the Company to make estimates
and assumptions that affect the items reported in the Balance Sheet and
Statement of Comprehensive Income and the disclosure of contingent assets and
liabilities at the date of the Financial Statements. Although these estimates
are based on management's best knowledge of current facts, circumstances and,
to some extent, future events and actions, the Company's actual results may
ultimately differ from those estimates, possibly by a significant amount. The
investments in the equity of unquoted companies that the Company holds are not
traded and as such the prices are more uncertain than those of more widely
traded securities. The unquoted investments are valued by reference to
valuation techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital Valuation ("IPEV") Guidelines
and IFRS 13.
1.4 Segmental reporting
The chief operating decision maker has been identified as the Board of the
Company. The Board reviews the Company's internal management accounts in order
to analyse performance. The Directors are of the opinion that the Company is
engaged in one segment of business, being the investment business. Geographical
segmental analysis has not been disclosed because the Directors are of the
opinion that as an investment company the geographical sources of revenues
received by the Company are incidental to its investment activity. The
geographical allocation of the investments from which income is received and to
which non-current assets relate is given on page 7.
2. Dividend
On 28 July 2015 the Directors declared a second interim dividend of 2.65p per
Ordinary share comprised of a base dividend of 1.9p and an additional dividend
of 0.75p for the year ending 31 December 2015 to holders of Ordinary shares on
the register on 28 August 2015. The Ordinary shares will be marked ex-dividend
on 27 August 2015 and the dividend will be paid on 30September 2015.
3. Total return per Ordinary share
The total return per Ordinary share is based on the total comprehensive income
for the half year after taxation of £(1,788,000) (six months ended 30 June
2014: £7,271,000; year ended 31 December 2014: £7,264,000) and on the weighted
average of 17,460,690 Ordinary shares in issue during the six months ended 30
June 2015 (six months ended 30 June 2014: 17,068,480 Ordinary shares; year
ended 31 December 2014: weighted average of 17,080,370 Ordinary shares).
During the six months to 30 June 2015 the Company allotted and issued 310,000
Ordinary shares by way of a tap issue at a price of 191.75 pence per share.
PEWT Securities PLC allotted and issued 384,681 New Zero Dividend preference
shares of 1 pence each par value for cash, at a price of 216 pence per share.
The accrued capital entitlement at that date was 213.04 pence per share.
4. Net Asset Value
The Net Asset Value differences reported below arise from the treatment of the
premium (net of expenses) from the issue of Zero Dividend Preference ("ZDP")
shares in December 2011 of £330,000. In accordance with UK Accounting Standards
this has been included with the ZDP liability and is being amortised over the
life of the ZDP shares. In accordance with the Articles of Association the
premium has been included with shareholders equity and the ZDP liability
reflects their accrued capital entitlement at 30 June 2015 and 31 December
2014.
The net asset value per share and the net assets available to each class of
share calculated in accordance with International Financial Reporting
Standards, are as follows:
Net asset value Net assets Net asset value Net assets
per share available per share available
30 June 30 June 31 December 31 December
2015 2015 2014 2014
Pence £000 Pence £000
17,688,480 Ordinary
shares of £0.01
each
in issue (2014: 177.63 31,418 195.80 34,027
17,378,480)
21,949,735 Zero
Dividend Preference
shares
of £0.01 each in 214.99 47,190 208.53 44,970
issue* (2014:
21,565,054)
*Classified as a liability.
The net asset value per share and the net assets available to each class of
share calculated in accordance with the Articles of Association, are as
follows:
Net asset value Net assets Net asset value Net assets
per share available per share available
30 June 30 June 31 December 31 December
2015 2015 2014 2014
Pence £000 Pence £000
17,688,480 Ordinary
shares of £0.01 each
in issue (2014: 177.83 31,455 196.23 34,102
17,378,480)
21,949,735 Zero
Dividend Preference
shares
of £0.01 each in 214.82 47,153 208.18 44,895
issue* (2014:
21,565,054)
*Classified as a liability.
5. Taxation charge
The taxation charge of £166,000 (30 June 2014: £137,000 and 31 December 2014: £
222,000) relates to irrecoverable overseas taxation.
6. Investment management fee charged by Premier Fund Managers Limited
(Unaudited) (Unaudited) (Audited)
Six months to Six months to Year ended
30 June 30 June 31 December
2015 2014 2014
£000 £000 £000
Basic fee:
40% charged to 156 148 301
revenue
60% charged to 235 226 455
capital
391 374 756
7. Section 1158 of the Income and Corporation Tax Act 2010
It is the intention of the Directors to conduct the affairs of the Company so
that they satisfy the conditions for approval as an investment trust company
set out in section 1158 of the Income and Corporation Tax Act 2010.
8. Post balance sheet event.
On 28 July 2015, by way of a tap issue in response to market demand, PEWT
Securities PLC allotted and issued 496,364 New Zero Dividend Preference shares
of 1 pence each par value for cash, at a price of 217 pence per share. On the
same day Premier Energy and Water Trust PLC allotted and issued 400,000 New
Ordinary shares of 1 pence each par value for cash, at a price of 169.75 pence
per share.
Interim Management Report
Premier Energy and Water Trust PLC is required to make the following
disclosures in its half year report:
PRINCIPAL RISKS AND UNCERTAINTIES
The Board believes that the principal risks and uncertainties faced by the
Company continue to fall into the following categories:
• Structure of the Company and gearing • Discount volatility
• Dividend levels • Operational
• Currency risk • Accounting, legal and regulatory
• Liquidity risk • Political and regulatory
• Market price risk
Information on each of these is given in the Strategic Report in the Annual
Report for the year ended 31 December 2014.
Alternative Investment Fund Management Directive ("AIFMD")
The Company was entered in the register of small registered UK AIFMs with
effect from 23 June 2014, under the Alternative Investment Fund Managers
Regulations 2013 ("AIFMRs"). On 30 December 2014 the Company advised the
Financial Conduct Authority that the value of its assets under management had
exceeded the 100 million Euro threshold for the first time on 23 December 2014
and therefore it was the intention that the Company would be appointing Premier
Portfolio Managers Limited ("PPM") as its Alternative Investment Fund Manager
("AIFM") within 30 days commencing 23 December 2014.
On 20 January 2015 the Company announced that it had appointed PPM to act as
its Alternative Investment Fund Manager ("AIFM") pursuant to an Alternative
Investment Fund Management Agreement entered into by the Company and the AIFM
on 20 January 2015 (the "AIFM Agreement").PPM has been approved as an AIFM by
the UK's Financial Conduct Authority. The investment management agreement
entered into by the Company and Premier Fund Managers Limited ("PFM") on 3
August 2011 (the "IMA") has been terminated although PPM has delegated the
portfolio management of the Company's portfolio of assets to PFM. The AIFM
Agreement is based on the IMA and differs to the extent necessary to ensure
that the relationship between the Company and PPM is compliant with the
requirements of AIFMD. The fees payable to PPM for acting as the Investment
Manager and the notice period under the AIFM Agreement are unchanged from the
IMA. PPM will receive a fixed fee of £20,000 per annum in respect of its
appointment as the AIFM.
The Company and PPM have also entered into a depositary agreement with Northern
Trust Global Services Limited ("NT") pursuant to which NT has been appointed as
the Company's depositary for the purposes of AIFMD.
In accordance with AIFMD regulations the Company has published a pre investment
disclosure document which can be found on the Company's website at https://
www.premierfunds.co.uk/media/59009/
premier-energy-and-water-trust-pre-investment-disclosure-document-aifmd-.pdf.
RELATED PARTY TRANSACTIONS
The Directors are recognised as a related party under the Listing Rules and
during the six months to 30 June 2015 fees paid to Directors of the Company
totalled £41,000 (six months ended 30 June 2014 : £41,000 and year to 31
December 2014: £82,000).
GOING CONCERN
The Directors believe, having considered the Company's investment objectives,
risk management policies, capital management policies and procedures, nature of
the portfolio and income and expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future. For these reasons, they consider there is reasonable evidence to
continue to adopt the going concern basis in preparing the accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the half year report, in accordance
with applicable law and regulations. The Directors confirm that, to the best of
their knowledge:
• The condensed set of Financial Statements within the Half-year Report has
been prepared in accordance with IAS 34, "Interim Financial Reporting", as
adopted by the European Union; and
• The Interim Management Report includes a fair review of the information
required by 4.2.7R (indication of important events during the first six months
of the year) and 4.2.8R (disclosure of related party transactions and changes
therein) of the FCA's Disclosure and Transparency Rules.
For and on behalf of the Board.
Geoffrey Burns
Chairman
11 August 2015
Shareholder Information
SHARE PRICE AND PERFORMANCE INFORMATION
The Ordinary shares and Zero Dividend Preference shares are listed on the
London Stock Exchange. Information about the Company and that of the other
investment company managed by Premier, the Acorn Income Fund Limited, including
current share prices can be obtained directly from:
www.premierfunds.co.uk
Contact Premier on 01483 400 400, or by e-mail to premier@premierfunds.co.uk.
SHARE DEALING
Shares can be purchased through a stockbroker.
Information on the Premier ISA can be obtained by contacting Premier on 01483
400 400.
SHARE REGISTER ENQUIRIES
The register for the Ordinary shares and Zero Dividend Preference shares is
maintained by Capita Registrars. In the event of queries regarding your
holding, please contact the Registrar on 0871 664 0300 (calls cost 10p per
minute plus network extras, lines are open Monday to Friday 9.00 a.m. to 5.30
p.m.); overseas +44 208 639 3399; or e-mail ssd@capitaregistrars.com. Changes
of name and/or address must be notified in writing to the Registrar.
STATEMENT REGARDING NON-MAINSTREAM INVESTMENT PRODUCTS
The Company currently conducts its affairs so that both the Ordinary shares
issued by the Company and the Zero Dividend Preference shares issued by the
Company's wholly-owned subsidiary PEWT Securities PLC can be recommended by
IFAs to retail investors in accordance with the FCA's rules in relation to
non-mainstream investment products and intends to continue to do so for the
foreseeable future.
The Ordinary shares and the Zero Dividend Preference shares fall outside the
restrictions which apply to non-mainstream investment products because they are
excluded securities.
A member of the Association of Investment Companies.
Directors and Advisers
DIRECTORS
Geoffrey Burns (Chairman)
Ian Graham
Michael Wigley
Charles Wilkinson
INVESTMENT MANAGER*
Premier Fund Managers Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
Telephone: 01483 306 090
www.premierfunds.co.uk
Authorised and regulated by the
Financial Conduct Authority
SECRETARY AND REGISTERED OFFICE
Premier Asset Management Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
Telephone: Mike Nokes 0207 982 1260
COMPANY NUMBER
4897881
WEBSITE
www.premierfunds.co.uk
REGISTRAR
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Overseas: +44 208 639 3399
E-mail: ssd@capitaregistrars.com
AUDITOR
Ernst & Young LLP
1 More London Place
London SE1 2AF
STOCKBROKER
N+1 Singer Advisory LLP
One Bartholomew Lane
London EC2N 2AX
Telephone: 0207 496 3000
ORDINARY SHARES
SEDOL 3353790GB
LSE PEW.L
GIIN W6S9MG.00000.LE.826
ZDP SHARES (issued by PEWT Securities PLC)
SEDOL BPYP384GB
LSE PEWZ.L
GIIN W6S9MG.00001.LE.826
* On 20 January 2015 the Company appointed Premier Portfolio Managers Limited
as its Alternative Investment Fund Manager. Premier Portfolio Managers Limited
has delegated the portfolio management of the Company's portfolio of assets to
Premier Fund Managers Limited.
PREMIER ENG ZPF ZERO DIV PREF 1P : ENERGY AND WATER TRUST PLC - Half-yearly Report
August 11, 2015 at 05:35 am EDT
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