Final Results

The following represents extracts from the Company's Annual Report & the Financial Statements for the year to 31 December 2008. The full Annual Report and Financial Statements will shortly be available at www.premierassetmanagement.co.uk and will shortly be available. Copies will be mailed to shareholders on or around the 18 March 2009. Premier Energy and Water Trust PLC (formerly Premier Utilities Trust plc) annual report & accounts for the year ended 31 December 2008 Investment objectives and policy 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. In seeking to achieve its investment objectives, the Company may invest up to 15% in other investment companies provided they themselves invest in the same sectors, and up to 15% of its gross assets in unquoted securities. The Company's accounts will be maintained in sterling. Whilst many of the Company's investments are likely to be denominated in currencies other than sterling, the Investment Manager does not intend to deploy active hedging against exchange rate fluctuations. Derivative instruments may be used for the purpose of efficient portfolio management. Contents Investment objectives and policy Company highlights 1 Company summary 2 Financial calendar 2 Chairman's statement 3 Investment manager's report 6 Investment portfolio 8 Company details 9 Financial summary 11 Directors 13 Investment manager and secretary 14 Directors' report 15 Directors' remuneration report 29 Statement of directors' 30 responsibilities in respect of the financial statements Independent auditors' report 32 Income statement 34 Balance sheet 35 Reconciliation of movements in 36 shareholders' funds Cash flow statement 37 Notes to the financial statements 38 Glossary of terms 52 Shareholder information 53 Notice of annual general meeting 54 Notes to the notice of annual general 56 meeting Appendix 58 Directors and advisers 61 Registered in England No. 4897881 A member of the Association of Investment Companies Company highlights Total return performance % change Total assets* -20.5% FTSE Global Utilities Total Return -6.2% Index (Â£) FTSE All World Total Return Index (Â£) -19.4% FTSE 100 Total Return Index -28.3% Share price and NAV** returns 31 December 31 December 2008 2007 % change Zero Dividend NAV 141.86p 132.57p +7.0% Preference share Mid price 142.25p 137.50p +3.5% Ordinary share NAV 180.78p 275.60p -34.4% Mid price 126.00p 236.00p -46.6% Net revenue per 8.46p 7.40p Ordinary share Net dividends 7.35p 7.00p declared per Ordinary share Zero Dividend Preference shares 5 Year Performance to 31 December 2008 (rebased to 100) GRAPHIC REMOVED Ordinary shares 5 Year Performance to 31 December 2008 (rebased to 100) GRAPHIC REMOVED Source: Fundamental Data (all rights reserved). * Total return performance, adjusted for any dividends distributed. ** Calculated in accordance with FRS21. Company summary Launch Date 4 November 2003 Domiciled UK Year-end 31 December Shareholders' Funds Â£59.96 million Market Capitalisation Â£50.09 million Bank Loan Nil Zero Dividend Preference 19,143,433: aiming to shares redeem at 162.41p on 31 December 2010 Ordinary shares 18,143,433 Dividends Paid on Ordinary shares Dividend History In respect of year ended 31 December Total dividends declared 2008 7.35p 2007 7.00p 2006 6.90p 2005 6.75p 2004 7.875p* Investment Manager Premier Fund Managers Limited Management Fee â€“1.0% per annum, charged 100% to revenue, plus performance fee, allocated between capital and revenue based on the out-performance attributable to capital and revenue respectively AIC Member of the Association of Investment Companies * This dividend was for the 14 month period from launch, representing an annualised dividend of 6.75p. Financial Calendar Company's year-end 31 December Annual results announced early March Annual General Meeting 22 April 2009 Company's half-year end 30 June Half-year results announced early August Dividend payments quarterly at the end of March, June, September and December Chairman's statement Dear Shareholder, Overview of the year The last twelve months have seen momentous events and changes, unprecedented in the working lives of most of us, with far reaching consequences for global financial markets and economies. The seeds of this dramatic correction were sown in the early and mid 2000s when the global economy enjoyed a strong period of growth accompanied by relatively low volatility, cheap credit, and high commodity inflation. This growth and low volatility led investors, financial institutions and consumers to become comfortable with greater leverage fuelled by unparalleled availability of debt. The current issue facing the world economy is a direct consequence of that leverage reaching unsustainable proportions, a situation most acute within the US housing market. The global economy is now in a substantial unwinding process which has directly led to a collateral based crisis. The combination of deleveraging and asset value reductions has led to the failure of many financial sector participants and an extraordinary nationalisation process (in all likelihood as yet unfinished), in two major bastions of free market economics. Conventionally a liquidity crisis can be solved by massive injections of liquidity or government cash as we saw in 1987 after the stock market crash and in 1998 after the fall of Long Term Capital Management. However, these mechanisms are no longer guaranteed to work in the case of collateral crises which are generally much more destructive and prolonged than liquidity crises. At this moment it is hard to see a floor to the substantial downturn in economic activity, the tentacles of which are still encircling the emerging economies. After a tumultuous 2008 for most equity markets the uncertainty has continued into 2009 as confidence in the actions of governments remains weak. However, there are a few bright pin pricks of light on the horizon which may provide some comfort that 2009 will be a better year than 2008. Firstly, corporate balance sheets, outside of the banks, remain in reasonable health, never more so than in the energy and water sectors. This factor, together with cost cutting, should mean that corporate earnings in 2009 do not collapse. In the light of this the current market rating for shares is actually quite cheap. In addition, many companies, outside the banking sector, will maintain or even increase dividends in 2009 and that too provides a reasonably strong underpinning for markets. Factor in that equity markets tend to look between six and twelve months ahead of actual events and it is possible, albeit at a time of maximum gloom, to divine some potential for stockmarkets to improve in 2009. Performance This report deals with the performance of the Company from 1 January 2008 to 31 December 2008. Whilst the fall in assets and the share price is disappointing this should be set in context of the performance of the general stock market. Your Company does not have a formal benchmark against which performance is assessed but rather provides investors with a range of indices. Over the period the FTSE 100 Index in the UK fell by 28.3% whilst the FTSE World Index fell by 19.4%. The extent of the fall in the Ordinary share NAV is partly the consequence of the gearing provided by the ZDP shares. Total or gross assets of the Company fell by 21% during the period. The Company's capital structure includes both Ordinary shares and Zero Dividend Preference shares ("ZDP"). The ZDP shares are entitled to a predetermined capital entitlement of 162.41p at their anticipated wind up date being 31 December 2010 and thus the impact on the net asset value of the Ordinary shares is amplified by this prior entitlement to capital. Over the period the net asset value per Ordinary share has fallen from 275.60p to 180.78p, a decline of 34.4% and the Ordinary share price has fallen from 236.0p to 126.0p, a decline of 46.6%. At 31 December 2008 the Ordinary shares traded at a 30.3% discount to their net asset value; subsequent to the year end they have traded close to net asset value. Over the period the net asset value per ZDP share has increased from 132.57p to 141.86p, whilst the share price of the ZDP shares has risen from 137.50p to 142.25p. The ZDP shares remain one of the best covered issues in the market and as at 31 December had a terminal asset cover of 1.93 times. Since the Company's inception on 4 November 2003 the FTSE 100 Index has produced a total return of +22.7% (source: Bloomberg). During the same period the total assets of the Company adjusted for dividends distributed have increased by +47.0%. Dividends During the course of the year the increased focus on investments in the energy and water sectors has been continued. This had the effect of increasing the portfolio's dividend income and revenue for the period totalled Â£1.5m or 8.46p per Ordinary share compared to revenue of Â£1.3m for the year ended 31 December 2007 (7.4p per Ordinary share). In addition the revenue reserve carried forward from prior years totals Â£278,000 (excluding the fourth interim dividend for 2007 that was paid on 31 March 2008). Accordingly your Board has decided to declare a fourth interim dividend of 2.85p per share which will be paid on 31 March 2009 to shareholders on the register as at the close of business on 13 March 2009. The shares will be marked ex-dividend on 11 March 2009. This payment will mean total dividends paid in respect of the year to 31 December 2008 will be 7.35p per share which represents an increase of 5.0% compared to the 7.00p per share paid for the year ended 31 Decmber 2007. In an environment where dividend cuts are occurring or feared across many sectors, your Board and Investment Manager are committed to continuing a progressive income policy. Change of Company Name At the Annual General Meeting held on 29 April 2008 shareholders approved the change of the name of the Company to Premier Energy and Water Trust PLC (formerly Premier Utilities Trust plc). The name change became effective on 2 May 2008 when the Registrar of Companies issued the Certificate of Incorporation on Change of Name. The intention is that the new name should reflect the prime focus of the trust more accurately. VAT In 2007 the European Court of Justice ruled that VAT should not be levied on the management and performance fees of investment trust companies and with effect from 1 October 2007, VAT is no longer payable on these fees. The Company also has the right to reclaim VAT it has paid on these fees since its launch in November 2003. The Board is in discussion with the Investment Manager about the recovery of this VAT and although progress has been made the amount of the reclaim has still to be agreed with HM Customs and Revenue. Therefore no amount is, as yet, being recognised in the net asset value. Further information can be found in note 22 to the financial statements. Shareholder relations The Board and our Investment Manager welcome contact not only with the Company's existing investors but also potential new investors. Our Investment Manager has met with many of the Company's investors over the period as well as a number of potential investors. Outlook The last year could scarcely have been worse for global stock markets. Not only has the global credit crisis affected the ability of companies generally to finance their activities but the price of crude oil has dropped from around $147/barrel to under $40/barrel thus impacting the value of energy companies particularly those with embedded fuel sources. Despite the fact that our asset value has clearly been affected by this your Company remains in a strong position. Whilst the action that is being taken by governments and central banks can hardly be called concerted, the division of banks into good and bad institutions allied to other reflationary measures including massive interest rate cuts should start to prompt a slow recovery towards the end of 2009. The renewables sector too should continue to benefit from both strong policy support and a desire to try and stimulate construction markets. In any event companies in the energy and water sectors are generally less sensitive than others to the current economic turbulence. With sound balance sheets our investments should be able to continue growing earnings and dividends. Geoffrey Burns Chairman 10 March 2009 Investment manager's report Overview The sharp downturn in global economies was reflected in equity market returns. The FTSE Global Utilities Index returned a negative 6.2%, in sterling terms, and the UK equity FTSE 100 Index fell 28.3%. Against this background your Company's total asset return was minus 20.5%. The underperfromance relative to the Global Utilities Index can be substantially explained by the weakness of sterling against most foreign currencies. Whilst our portfolio has tended to have over one third in UK investments or sterling cash the index has only around 10% sterling exposure. Asset Allocation The tables below show how the Company's assets are spread across countries and industries. The main change during the year was an increase in exposure to the global water sector at the expense of other infrastructure stocks, which includes toll roads and telecoms. The electricity weighting was broadly maintained although the mix within this area was shifted to the more highly regulated stocks, and away from those companies focussing on traditional (fossil fuel) generation. However, as we expect power generation from renewable sources to be a relatively attractive area for investment over the coming years, we have made additions to that part of the portfolio. Geographical allocation at December 2008 The assets of the Company are spread globally. Portfolio Activity The defensive nature of utility profitability gave some limited protection to the sector's value, but there were still sharp falls in the vast majority of shares in the portfolio. The worldwide economic downturn and the credit crunch is affecting all industries, but utility companies, as providers of essential services, are less affected than many other industries. With relatively predictable earnings, utilities are able to support existing levels of debt and seem to have had little problem in refinancing debt facilities to date. In addition, falling general interest rate levels serve to offset the impact of higher corporate bonds spreads, so any negative earnings impact for the sector of servicing its debt should be limited. Many governments have economic stimulus strategies for 2009 that incorporate major infrastructure spending programmes. These include the development of road and rail networks, power generation (particularly renewables) and transmission, and water supply and waste treatment. Population growth and historic underinvestment is putting severe pressure on water resources in many parts of the world, and companies operating in global water services are well positioned to benefit from the growing requirement for clean water supply and improved sanitation worldwide. Exposure to this area has been boosted through purchases of Epure International, Hyflux, Puncak Niaga and Guangdong Investments, all of which are based in Asia. While the fund holds a number of pure renewable plays, such as Greenko PLC and Iberdrola Renovables, there is also a non-fossil fuel bias to several other stocks in the portfolio: Florida Power & Light owns 6,300 megawatts of installed wind powered generating capacity in North America, representing more than twice that installed in the whole of the UK at present. Exelon, also operating in the US, is focussed on nuclear electricity generation. As the changing and increasingly diverse sources of power generation put new strains on transmission networks, ITC Corp, as an independent transmission company in the US, is well placed to benefit from the growth in investment in this area. Not surprisingly, merger and acquisition activity has virtually come to a standstill although one stock held, Loh & Loh, was in receipt of a cash bid early in 2008. Meanwhile the current portfolio strategy remains unchanged, namely to continue to focus on water and electricity companies operating in countries where significant investment is likely to take place. Outlook Uncertainties faced by global economies and capital markets, and 2009 is set to be another difficult year for most businesses. However, with uncertainty comes opportunity and we see many excellent businesses in the utility sector trading at low valuations, often offering significant dividend yields. 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 Premier Fund Managers Limited 10 March 2009 Investment portfolio at 31 December 2008 Holdings in descending order as at 31 December 2008 2008 Valuation 2007# Company Activity Country Â£000 % of Â£000 total 1 Enel Electricity Italy 3,084 5.7% 2,808 generation & supply 2 Centrica Gas and UK 2,979 5.5% 3,018 electricity supply 3 EDF Electricity France 2,731 5.1% - generation & supply 4 Scottish & Electricity UK 2,653 4.9% - Southern generation & Energy supply 5 FPL Group Electricity USA 2,625 4.9% 1,700 generation & supply 6 E.ON Electricity Germany 2,585 4.8% 4,296 generation & supply 7 United Electricity & UK 2,522 4.7% 2,889 Utilities water distribution 8 Veolia Water & waste France 2,246 4.2% - Environnement services 9 FirstEnergy Electricity USA 2,024 3.8% 727 Corp generation & supply 10 Bangkok Toll Roads Thailand 1,751 3.3% - Expressway 11 Northeast Electricity & gas USA 1,672 3.1% 1,570 Utilities distribution 12 Puncak Niaga Water Malaysia 1,561 2.9% 1,815 Infrastructure 13 Telefonica Telecommunication Spain 1,531 2.8% 2,936 Services 14 Guangdong Water supply Hong Kong 1,530 2.8% 1,433 Investment 15 Snam Rete Gas Gas production and Italy 1,529 2.8% - transmission 16 Pennon Group Water & waste UK 1,493 2.8% - services 17 Electricity Electricity Thailand 1,370 2.5% - Generating generation & supply 18 Gaz de France Gas production and France 1,366 2.5% - transmission 19 Kyushu Electricity Japan 1,281 2.4% - Electric Power generation & supply 20 Iberdrola Electricity Spain 1,265 2.3% - generation & supply 21 KSK Emerging Electricity UK 1,212 2.2% - India Energy generation & Fund supply 22 Embarq Corp Telecommunication USA 1,191 2.2% 1,689 Services 23 BT Group Telecommunication UK 1,183 2.2% 3,205 Services 24 DE Indian Renewable India 1,000 1.9% 1,000 Energy* electricity generation 25 ITC Holdings Electricity USA 908 1.7% - Corporation distribution 26 Datang Electricity gen. & China 736 1.4% - International supply Power Generation 27 Wisconsin Gas and USA 730 1.4% - Energy electricity supply 28 China Power Electricity Hong Kong 706 1.3% 2,228 New Energy generation 29 Hyflux Water treatment Singapore 595 1.1% - 30 Harbin Power Power equipment China 566 1.1% - Equipment manufacturers 31 Hydrodec Transformer oil UK 528 1.0% 486 Convertible recycling Loanstock* 32 Iberdrola Renewable Spain 527 1.0% 227 Renovables electricity generation 33 Thai Tap Water Water treatment Thailand 518 1.0% - 34 ITI Energy* Renewable UK 504 0.9% - electricity generation 35 Independent Gas storage UK 500 0.9% - Resources 36 Freepower* Renewable UK 420 0.8% 420 electricity generation 37 Epure Water treatment Singapore 382 0.7% - International 38 Renewable Renewable UK 373 0.7% 859 Energy electricity Generation generation 39 Energybuild Coal production UK 336 0.6% 350 Group 40 Greenko Group Renewable UK 325 0.6% 284 electricity generation 41 Novera Energy Renewable UK 263 0.5% 423 electricity generation 42 Premier Renewable UK 263 0.5% - Renewable electricity generation 43 SUEZ Water & waste France 233 0.4% 2,736 services and electricity generation 44 Hydrodec Transformer oil UK 71 0.1% 71 recycling * Unquoted investment.# Comparative values have been provided for holdings in the portfolio at both 31 December 2008 and 31 December 2007. 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. CAPITAL STRUCTURE Bank Loan The Company's policy is not to employ any long-term gearing. 19,143,433 Zero Dividend Preference shares of 1p each. â€“The Zero Dividend Preference shares will have a final capital entitlement of 162.41p on 31 December 2010 subject to there being sufficient capital in the Company. The Zero Dividend Preference shares are not entitled to any dividends. â€“The Zero Dividend Preference shareholders have the right to receive notice of, to attend and to vote at all general meetings of the Company. 18,143,433 Ordinary shares of 1p each. â€“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 rank after the Zero Dividend Preference shares. They will also be due any undistributed revenue reserves. â€“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 2010. EXPENSE RECOGNITION POLICY 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 2008, the Company had a market capitalisation of Â£50.09 million (2007: Â£69.14 million) and assets attributable to shareholders amounted to Â£59.96 million (2007: Â£75.38 million). 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 2007 no VAT has been charged on the management fee. 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) â€“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 (if higher) assets 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 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 2008 2007 change 2008 Total Assets 59,955 75,383 -20.5 - (Â£,000)* Net Asset Preference 141.86p 132.57p +7.0 - Value per share ** Zero Dividend Mid-market Preference 142.25p 137.50p +3.5 0.3 price per share Zero Dividend Net Asset 180.78p 275.60p -34.4 - Value per Ordinary share ** Mid-market 126.00p 236.00p -46.6 (30.3) price per Ordinary share REVENUE 31 December 31 December % 2008 2007 change Return per Ordinary (87.83)p 75.40p -216.5 share Net dividend per 7.35p 7.00p +5.0 Ordinary share * Total assets less current liabilities. ** Net asset values calculated in accordance with Articles of Association. HURDLE RATESâ€ 31 December 2008 Zero Dividend Preference shares: Hurdle rate to redemption -30.3% share price of 162.41p on 31 December 2010 Ordinary shares: Hurdle rate return to -4.4% current share price of 126.0p Source: Fundamental Data Limited (all rights reserved). â€ See page 52 for definition of hurdle rates. TOTAL RETURN Year to Year to 31 December 31 December 2008 2007 Total return on gross -20.5% +25.0% assets* FTSE Global Utilities -31.0% +24.6% Index ($)** FTSE Global Utilities -6.2% +22.5% Index (Â£)** FTSE All World Index (Â£)** -19.4% +10.9% * FTSE 100 Index*** -28.3% +7.4% Total expense ratio/cost 1.85% 2.06% of running the Companyâ€ At At 31 December 31 December 2008 2007 Â£/$ exchange rate 1.4378 1.9906 Â£/â‚¬ exchange rate 1.0343 1.3615 * Total return performance calculated, adjusted for any dividends distributed. ** Source: FTSE. *** Source: Bloomberg. â€ The expense ratio, excluding the performance management fee, based on average monthly net asset value. Directors Geoffrey Burns - Chairman Geoffrey Burns (55) 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. Adam Cooke Adam Cooke (49) 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, Midas Income and Growth Trust PLC and New City Investment Managers Limited. Ian Graham Ian Graham (55) 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. Michael Wigley Michael Wigley (69) 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. Investment Manager and Secretary Investment Manager: Premier Fund Managers Limited Premier Fund Managers Limited is a subsidiary of Premier Asset Management Limited. Following a successful management buyout by the senior management, backed by Electra Partners, Premier Asset Management plc delisted from the AIM market on 8 October 2008 and subsequently became a limited company. Premier Asset Management Limited had just under Â£1.3 billion of funds under management at 31 December 2008. Premier Fund Managers Limited is authorised and regulated by the Financial Services Authority. The Company's portfolio is managed by Andrew Whalley and Kevin Scutt. 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 2008. 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. Change of Company Name At the Annual General Meeting held on 29 April 2008 shareholders approved the change of the name of the Company to Premier Energy and Water Trust PLC (formerly Premier Utilities Trust plc). The name change became effective on 2 May 2008 when the Registrar of Companies issued the Certificate of Incorporation on Change of Name. 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 the Inland Revenue under Section 842 of the Income and Corporation Taxes Act 1988. Approval for the year ended 31 December 2007 is subject to there being no subsequent enquiry under Corporate Self Assessment. In the opinion of the Directors, the Company has subsequently directed its affairs so as to enable it to continue to seek such approval. 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. 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. The Company may invest up to 15% of its gross assets in unquoted securities. In order to comply with the provisions contained in Section 842 of the Income and Corporation Taxes Act 1988 no investment in a company should represent more than 15% by the value of the Company's total portfolio except for subsequent market movements in the value of that investment. 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 it is appropriate to continue to adopt the going concern basis in preparing the accounts as the assets of the Company consist mainly of securities which are readily realisable. Dividends During the year the following dividends were paid: Dividend pence Payment date (net per share) Fourth Interim for the year ended 31 March 2008 2.5p 31 December 2007 First Interim for the year ended 30 June 2008 1.5p 31 December 2008 Second Interim for the year ended 30 September 2008 1.5p 31 December 2008 Third Interim for the year ended 31 December 2008 1.5p 31 December 2008 Subsequent to the year-end but in respect of the year ended 31 December 2008, the Directors have declared a fourth interim dividend of 2.85p, payable on 31 March 2009 to members on the register at the close of business on 13 March 2009. The shares were marked ex-dividend on 11 March 2009. This dividend relates to the year ended 31 December 2008 but in accordance with the Company's accounting policies, it is recognised in the period in which it is paid. Principal risks associated with the Company (see note 21) Structure of the Company and gearing The Company is a split-capital investment trust with two separate classes of share, each with different characteristics. Returns generated by the Company's underlying portfolio are apportioned in accordance with the respective entitlements of each class of share. As the Ordinary shares and Zero Dividend Preference shares have different rights both during the life of the Company and on a winding-up, shareholders and prospective investors are advised to give careful consideration to their choice of class or classes of share (see pages 9 to 10 for details of these entitlements). The Company employs no gearing in the form of a bank loan. 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. These are regulary tested and monitored. Accounting, legal and regulatory In order to qualify as an investment trust, the Company must comply with Section 842 of the Income and Corporation Taxes Act 1988 ("Section 842"). A breach of Section 842 could lead to the Company being subject to capital gains tax on gains within the Company's portfolio. Section 842 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 Acts 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 Acts 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 Index, FTSE World Index and FTSE 100 Index. 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. 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 2008 was 1.85% excluding performance fee (2007: 2.06%). 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 the Investment Manager's report on page 7. DIRECTORS Directors serving throughout the year ended 31 December 2008 were as follows: Geoffrey Burns Adam Cooke Ian Graham Michael Wigley None of the Directors, nor any persons connected with them, had a material interest in any of the Company's transactions, arrangements or agreements during the year. None of the Directors has, or has had, any interest in any transaction which is, or was, unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the current financial year. At the date of this report, there are no outstanding loans or guarantees between the Company and any Director. In accordance with the Articles of Association Mr Adam Cooke and Mr Ian Graham retire by rotation and, being eligible, offer themselves for re-election. DIRECTORS' BENEFICIAL AND FAMILY INTERESTS The interests of the Directors and their families in the shares of the Company are as follows: Ordinary Zero Dividend Ordinary Zero Dividend shares at Preference shares at Preference shares at shares at 31 December 1 January 2008 1 January 2008 31 December 2008 2008 Geoffrey Burns 69,500 - 69,500 - Adam Cooke 32,000 - 27,000 - Ian Graham 10,126 - 10,126 - Michael Wigley 116,000 - 116,000 - There have been no changes in any of the above holdings up to the date of this report. 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. SUBSTANTIAL SHAREHOLDINGS As at the date of this report the Company had been notified of the following substantial interests in the Ordinary and Zero Dividend Preference share capital of the Company. % of share Ordinary shares Number of shares capital Premier Fund Managers 2,135,273 11.8 Limited* NCL Smith & Williamson 1,416,180 7.8 Zero Dividend Preference shares Deutsche Bank AG/Tilney 4,127,799 21.6 Group Limited Rensburg Sheppards PLC 3,038,258 15.9 CG Asset Management 2,150,000 11.2 Limited * This includes 2,119,697 Ordinary 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 2008 was 180.78p (31 December 2007: 275.60p). The cumulative net asset value of the Zero Dividend Preference share at 31 December 2008 was 141.86p (31 December 2007: 132.57p). 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 2007 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 (if higher) assets 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 2006 ("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 four non-executive Directors all of whom are independent of the Investment Manager. Their biographies are set out on page 13. 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 6 2 1 in the year Geoffrey Burns 6 2 1 Adam Cooke 6 2 1 Ian Graham 6 2 1 Michael Wigley 6 2 1 All of the Directors attended the Annual General Meeting held in April 2008. 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 or are aged over 70. Performance evaluation/re-election of Directors An appraisal process has been established in order to review the effectiveness of the Board, the Committees and individual Directors. This process involves the consideration by the Chairman and the Board of responses from individual Directors to a questionnaire which is completed on an annual basis. In addition, the other Directors meet collectively once a year to evaluate the performance of the Chairman. As a result of this appraisal process the Nomination Committee recommends the re-election of Mr Adam Cooke and Mr Ian Graham who retire by rotation. The performance of the Company is considered in detail at each Board meeting. Committees The Board believes that the interests of shareholders in an investment trust company are best served by limiting its size 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. Remuneration Committee The Board as a whole considers Directors' remuneration and therefore has not appointed a separate remuneration committee. As the Company is an investment trust and all Directors are non-executive the Company is not required to comply with the Code in respect of executive Directors' remuneration. Directors' fees are detailed in the Directors' Remuneration Report on page 29. Internal controls The Board acknowledges that it is responsible for the Company's system of internal controls and has established a process for identifying, evaluating and managing significant risks faced by the Company. The process is subject to regular review by the Board and accords with "Internal Control: Guidance for Directors on the Combined Code" ("The Turnbull guidance") which was issued in September 1999. These internal control systems are designed to safeguard shareholders' investment and the Company's assets. It should be recognised that such systems provide reasonable but not absolute assurance against material misstatement or loss. Internal control process The Turnbull guidance recommends a risk-based approach to the assessment of internal controls. The Board has completed a risk map for the Company and established procedures for the monitoring and review of the risks identified. The Board as a whole is primarily responsible for the monitoring and review of risks associated with investment matters and the Audit Committee is primarily responsible for other risks. As the Board has contractually delegated to other companies the investment management, the custodial services and the day-to-day accounting and company secretarial requirements, the Company relies significantly upon the internal controls operated by those companies. Therefore, the Directors have concluded that the Company should not establish its own internal audit function. Investment management is performed by Premier Fund Managers Limited and administration services by Premier Asset Management Limited. Details of the agreement with the Investment Manager and the administrator are given on pages 19 and 20 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 are prepared by the Board and its advisers to 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. EXERCISE OF VOTING POWERS The Board has delegated authority to the Investment Manager to vote the shares held by the Company in accordance with current best practice. Wherever practical, the Investment Manager does vote the shares but in the markets where the Company invests this is not always the case. The Investment Manager will refer to the Board on any matters of a contentious nature. 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 2008 (2007: 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: Authority to allot shares Under Resolution 6 of the Annual General Meeting ("AGM"), the Directors seek a general power from shareholders to allot new securities up to an aggregate par value of Â£18,143 representing approximately 10% of the issued Ordinary share capital of the Company as at 10 March 2009. Such authority, if granted, will expire at the conclusion of the next Annual General Meeting. Resolution 7 of the AGM will, if passed, empower the Directors to make allotments of shares (including sales of shares held in treasury) for cash on a non pre-emptive basis up to an aggregate of 10% of the issued Ordinary share capital of the Company as at the date of this document. These Resolutions will provide the Directors with flexibility to act in the best interests of shareholders. RESOLUTION 8: Purchase by the Company of its own shares At an Annual General Meeting held on 29 April 2008 a special resolution was passed, giving the Directors authority until the conclusion of the earlier of the 2009 Annual General Meeting and 29 October 2009, to make market purchases of up to a maximum of 2,719,700 Ordinary shares and 2,869,600 Zero Dividend Preference shares. During the year ended 31 December 2008 no shares were purchased (31 December 2007: no shares were purchased). The Board proposes that the Company should be given renewed authority to purchase Ordinary shares and Zero Dividend Preference shares in the market either for cancellation or to be held, sold, transferred or otherwise dealt with as treasury shares in accordance with the Companies Act 1985. Resolution 8 of the Annual General Meeting, which is a special resolution, is being proposed for this purpose. The Board remains committed to exploring methods by which shareholder value can be enhanced. The purchase and cancellation or holding in treasury 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. It is proposed that the Company be authorised to purchase on the London Stock Exchange up to 2,719,700 Ordinary shares and 2,869,600 Zero Dividend Preference shares (representing 14.99% of each class of the Company's issued share capital as at 10 March 2009). Any such purchases will be completed by the delivery to the Company of shares which will then be cancelled immediately or held, sold, transferred or otherwise dealt with as treasury shares in accordance with the Companies Act. 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. Purchases of shares will be made within guidelines set from time to time by the Board. Purchases of Ordinary shares will only be made in the market at prices below the prevailing net asset value attributable to an Ordinary share (as determined by the Directors on a date not falling more than 10 days before any intended purchase) and no purchases of Zero Dividend Preference shares will be made at a price in excess of their accrued capital entitlement (as at the business day immediately preceding the day on which the Zero Dividend Preference share is purchased). In addition, no Ordinary shares will be purchased at a price where, immediately following such purchase and on the basis of the Company's net asset value (as determined by the Directors on a date not falling more than 10 days before any intended purchase), the cover on the Zero Dividend Preference shares (on that date as determined by the Directors and taking into account any related purchase of Zero Dividend Preference shares) will be less than 1.1 times. In any event, the minimum price paid may not be below 1p per share. The Board will generally endeavour to make any purchases of shares in equal proportions of Ordinary shares and Zero Dividend Preference shares in order to maintain the Company's capital structure. However, there may be timing differences in such purchases or it may prove impracticable to purchase sufficient (or any) shares of the relevant class which may lead to short or longer imbalances in the Company's structure. Any exercise by the Company of the authority to purchase shares will occur only when market conditions are appropriate. The authority to purchase shares will last until the Annual General Meeting of the Company in 2010, or 22 October 2010, 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. Effect on shareholders The effect of the implementation of this proposal will generally be to enhance the net asset value of the remaining shares, as Ordinary shares will only be acquired in the market for less than their underlying net asset value and Zero Dividend Preference shares will only be acquired at a price equal to or less than their accrued capital entitlement. RESOLUTION 9: Adoption of new Articles of Association The law in relation to companies is currently undergoing a number of changes following the introduction of new companies legislation in the United Kingdom under the Companies Act 2006 ("2006 Act"). The changes are being implemented in stages, with some parts already in force and the final parts due to be implemented in October 2009. Some of the changes will apply automatically to the Company, whilst others will require the Company to take specific steps to take advantage of, or exclude, as the case may be, the effect of the changes. In order to accommodate all the proposed changes to the Company's existing articles of association ("Existing Articles") to reflect those provisions of the 2006 Act which are currently in force, your Board is proposing that new articles of association ("New Articles") are adopted at this year's Annual General Meeting. In addition, the New Articles also contain a number of changes which generally update the Articles bringing the provisions into line with current market practice. Accordingly, Resolution 9 is a special resolution relating to the adoption of the New Articles. Shareholders should note that since it is expected that the 2006 Act will not be fully in force until October 2009 at the earliest, there may be further changes to be made to the New Articles at the Company's Annual General Meeting in 2010 to ensure full compliance with the 2006 Act. The principal changes proposed to be made to the Existing Articles at the Company's Annual General Meeting this year are detailed in the Appendix at the back of this Annual Report. The proposed New Articles are available for inspection at the Company's registered office from the date of this Annual Report until the close of the Annual General Meeting and will also be available at Eastgate Court, High Street, Guildford, Surrey GU1 3DE fifteen minutes before and during the Annual General Meeting. Recommendation Your Board considers that resolutions 1 to 9 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 227,626 ordinary shares. AUDITORS Ernst & Young LLP have expressed their willingness to continue in office as Auditor and a resolution proposing their reappointment 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 10 March 2009 Directors' remuneration report The Board has prepared this report, in accordance with the requirements of Schedule 7A to the Companies Act 1985. 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 32. 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. 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 objective. 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. 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 or are aged over 70. 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 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 Index on a total returnâ€ basis from 31 December 2003 until 31 December 2008. 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 2008 2007 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 2008 will be proposed at the Annual General Meeting. By Order of the Board Premier Asset Management Limited Secretary 10 March 2009 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). The financial statements are required by law to 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; â€¢ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and â€¢ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors confirm that they comply with these requirements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. 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 10 March 2009 Income statement For the year ended 31 December 2008 Year Year Year Year Year Year ended 31 ended 31 ended 31 ended 31 ended 31 ended 31 December December December December December December 2008 2008 2008 2007 2007 2007 Revenue Capital Total Revenue Capital Total Notes Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 (Losses)/gains 13 - (15,828) (15,828) - 15,659 15,659 on investments -held at fair value through profit or loss Income 2 2,798 - 2,798 2,618 - 2,618 Investment 3 (636) (15) (651) (733) (1,661) (2,394) management and performance fee Other expenses 4 (296) - (296) (337) - (337) Return before 1,866 (15,843) (13,977) 1,548 13,998 15,546 finance costs and taxation Finance costs 5 (1) (1,777) (1,778) (19) (1,660) (1,679) Return on 1,865 (17,620) (15,755) 1,529 12,338 13,867 ordinary activities before taxation Taxation on 6 (330) 150 (180) (186) - (186) ordinary activities Return on 1,535 (17,470) (15,935) 1,343 12,338 13,681 ordinary activities after taxation attributable to equity shares Return per 16 (87.83) 75.40 Ordinary share (pence) Return per Zero 16 9.28 8.67 Dividend Preferenceshare (pence) The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The notes on pages 38 to 51 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 2008 2008 2007 Notes Â£000 Â£000 Non current assets Investments at fair 8 53,868 71,758 value through the profit or loss Current assets Debtors 9 328 413 Cash at bank 5,880 6,139 6,208 6,552 Current liabilities Creditors: amounts 10 (121) (2,927) falling due within one year Net current assets 6,087 3,625 Total assets less 59,955 75,383 current liabilities Creditors: amounts 11 (27,156) (25,379) falling due after more than one year Total net assets 32,799 50,004 Capital and reserves Share capital 12 181 181 Redemption reserve 10 10 Capital reserve - 13 14,137 17,658 realised Capital reserve - 14 - 13,949 unrealised Special reserve 17,474 17,474 Revenue reserve 997 732 Total equity 32,799 50,004 shareholders' funds Net asset value per 17 141.86 132.57 Zero Dividend Preference share (pence) (Zero Dividend Preference shares are classified as financial liabilities) Net asset value per 17 180.78 275.60 Ordinary share (pence) The financial statements on pages 34 to 51 were approved by the Board and authorised for issue on 10 March 2009 and were signed on its behalfâ€ by: Adam Cooke Director The notes on pages 38 to 51 form part of these financial statements. Reconciliation of movements in shareholders' funds for the year ended 31 December 2008 Capital Capital Share Redemption reserve - reserve - Special Revenue capital reserve realised unrealised reserve reserve Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 For the year ended 31 December 2008 Balance at 181 10 17,658 13,949 17,474 732 50,004 31 December 2007 Transfer - - 13,949 (13,949) - - - to capital reserves* Return on - - (17,470) - - 1,535 (15,935) ordinary activities after taxation Dividends - - - - - (1,270) (1,270) paid Balance at 181 10 14,137 - 17,474 997 32,799 31 December 2008 Capital Capital Share Redemption reserve reserve - Special Revenue - capital reserve realised unrealised reserve reserve Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 For the year ended 31 December 2007 Balance at 181 10 10,681 8,588 17,474 641 37,575 31 December 2006 Return on - - 6,977 5,361 - 1,343 13,681 ordinary activities after taxation Dividends - - - - - (1,252) (1,252) paid Balance at 181 10 17,658 13,949 17,474 732 50,004 31 December 2007 * With effect from 1 January 2008, changes in fair value of investments which are readily convertible to cash, without accepting adverse terms held at the balance sheet date are included in realised rather than unrealised, capital reserves. The balance on both capital reserves at 1 January 2008 has been amended by a revenue transfer to reflect this change. The notes on pages 38 to 51 form part of these financial statements. Cash flow statement for the year ended 31 December 2008 Year ended Year ended 31 December 31 December 2008 2007 Notes Â£000 Â£000 Operating activities Income received from 2,634 2,230 investments Interest received 286 173 Investment (2,448) (2,095) management fees and performance fees paid Other cash payments (302) (254) Net cash inflow from 18 170 54 operating activities Servicing of finance Interest paid (1) (19) Taxation Overseas tax paid (215) (190) Financial investments Purchases of (46,219) (47,667) investments Sales of investments 47,276 53,558 Futures and options - 462 Net cash inflow from 1,057 6,353 financial investments Equity dividends 7 (1,270) (1,524) paid (Decrease)/increase 19 (259) 4,674 in cash for the year The notes on pages 38 to 51 form part of these financial statements. 1. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below: (a) BASIS OF ACCOUNTING These financial statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") and with the Statement of Recommended Practice 2003 (revised 2005) regarding the Financial Statements of Investment Trust Companies ("SORP") issued by the AIC. (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) from investments held at fair value through profit or loss". All purchases are accounted for on a trade date basis. Profits and losses on realisation of fixed asset investments have been taken to capital reserve - realised. (c) FOREIGN CURRENCY Transactions denominated in foreign currencies are translated into sterling at actual exchange rates as at the date of the transaction or, where appropriate, at the rate of exchange in a related forward exchange contract. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end or where appropriate, at the rate of exchange in a related forward exchange contract. 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 - realised. 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. 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 wholly 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. Accordingly, a redemption reserve has been set up to provide for the repayment entitlements attached to the Zero Dividend Preference shares which accrue on a daily basis to the date of the Company's winding up on 31 December 2010. These shares are entitled to a repayment of 162.41p initially on the planned winding up date, equivalent to a redemption yield of 7% per annum on the 100p issue price. (g) CAPITAL RESERVE - REALISED With effect from 1 January 2008, changes in fair value of investments which are readily convertible to cash, without accepting adverse terms held at the balance sheet date are included in realised rather than unrealised, capital reserves. The prior year figures have not been changed to take into effect this change in treatment. (h) SPECIAL RESERVE The special reserve is available for the repurchase by the Company of its own shares. 2. INCOME Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Income from investments: UK franked investment 820 619 income Overseas dividends 1,729 1,805 Other income 249 194 2,798 2,618 3. INVESTMENT MANAGEMENT FEE Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Charged to Revenue: Investment management fee 636 673 Irrecoverable VAT thereon - 60 636 733 Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Charged to Capital: Performance fee - 1,661 Under accrual for the year 15 - ending 31 December 2007 15 1,661 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. This fee is 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. 4. OTHER EXPENSES Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Secretarial services 81 84 Administration expenses 127 167 Auditor's remuneration - 21 19 audit services Directors' fees 67 67 296 337 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 2008 2008 2008 2007 2007 2007 Revenue Capital Total Revenue Capital Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Bank interest 1 - 1 19 - 19 Appropriations - 1,777 1,777 - 1,660 1,660 in respect of Zero Dividend Preference shares 1 1,777 1,778 19 1,660 1,679 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 2008 2008 2008 2007 2007 2007 Revenue Capital Total Revenue Capital Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Current 150 (150) - - - - tax Overseas 180 - 180 186 - 186 tax Current 330 (150) 180 186 - 186 tax charge for the year (see note 6 (b)) (b) FACTORS AFFECTING CURRENT TAX CHARGE FOR THE YEAR: The current taxation charge for the year is different from the standard rate of corporation tax in the UK. With effect from 1 April 2008 the standard rate of corporation tax in the UK became 28%. Prior to 1 April 2008 the rate was 30% (2007: 30%). The differences are explained below: Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Net income before taxation 1,865 1,529 Return on ordinary 532 459 activities multiplied by the standard theoretical rate of corporation tax Effects of: Non-taxable UK dividends (234) (186) Expenses not deductible 1 1 for tax purpose Movement in overseas 31 (4) dividends taxable on receipt Allowable expenses in - (498) capital Movement in excess - 228 expenses Overseas tax 180 186 Double tax relief (180) - (202) (273) Revenue current tax charge 330 186 for the year (see note 6 (a)) 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£90,000 (31 December 2007: Â£404,000) 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 Year ended 31 December 2008 Per Ordinary share Â£000 First interim dividend - 1.50p 272 paid on 30 June 2008 Second interim dividend - 1.50p 272 paid on 30 September 2008 Third interim dividend - 1.50p 272 paid on 31 December 2008 Fourth interim dividend - 2.85p 517 payable on 31 March 2009* 7.35p 1,333 * Not included as a liability in the year ended 31 December 2008 accounts. The fourth interim dividend will be paid on 31 March 2009 to members on the register at the close of business on 13 March 2009. The shares were marked ex-dividend on 11 March 2009. In accordance with FRS21 the proposed fourth interim dividend has not been included as a liability in these accounts. Dividends relating to the year ended 31 December 2007 are detailed below: Year ended 31 December 2007 Per Ordinary share Â£000 First interim dividend - 1.50p 272 paid on 29 June 2007 Second interim dividend - 1.50p 272 paid on 28 September 2007 Third interim dividend - 1.50p 272 paid on 31 December 2007 Fourth interim dividend - 2.50p 454 paid on 31 March 2008* 7.00p 1,270 * Not included as a liability in the year ended 31 December 2007 accounts. 8. INVESTMENTS (a) SUMMARY OF VALUATION Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Investments listed on a recognised investment exchange: - UK 13,849 18,121 - Overseas 37,567 51,731 51,416 69,852 Unquoted investment - UK 1,452 906 Unquoted investment - 1,000 1,000 Overseas 53,868 71,758 (b) MOVEMENTS (i) In the year ended 31 December 2008 Quoted Quoted Unquoted Unquoted Total UK Overseas UK Overseas 2008 Â£000 Â£000 Â£000 Â£000 Â£000 Book cost at beginning of 17,325 38,759 725 1,000 57,809 year Appreciation/ 1,078 12,690 181 - 13,949 (depreciation) oninvestments held Valuation at beginning of 18,403 51,449 906 1,000 71,758 year Purchases at cost 13,024 31,186 1,004 - 45,214 Sales: - proceeds (12,241) (35,035) - - (47,276) - realised gains 3 2,148 - - 2,151 (Depreciation)/ (5,340) (12,181) (458) - (17,979) appreciation oninvestments held Valuation at end of year 13,849 37,567 1,452 1,000 53,868 (ii) In the year ended 31 December 2007 Quoted Quoted Unquoted Unquoted Total UK Overseas UK Overseas 2007 Â£000 Â£000 Â£000 Â£000 Â£000 Book cost at beginning of 9,980 40,673 350 - 51,003 year Unrealised appreciation 1,719 7,997 70 - 9,786 Valuation at beginning of 11,699 48,670 420 - 60,789 year Purchases at cost 16,400 31,211 375 1,000 48,986 Sales: - proceeds (10,572) (41,906) - - (52,478) - realised gains 1,517 8,781 - - 10,298 (Depreciation)/ (641) 4,693 111 - 4,163 appreciation oninvestments held Valuation at end of year 18,403 51,449 906 1,000 71,758 Comprising: Total Total year ended year ended 31 December 31 December 2008 2007 Â£000 Â£000 Book cost at end of year 57,898 57,809 (Depreciation)/appreciation (4,030) 13,949 on investments held Valuation at end of year 53,868 71,758 The purchases and sales proceeds figures above for the year ended 31 December 2008 include transaction costs of Â£249,000 (2007: Â£320,000). (c) GAINS ON INVESTMENTS Total Total year ended year ended 31 December 31 December 2008 2007 Â£000 Â£000 Realised gains on sales 2,151 10,298 (Depreciation)/appreciation on (17,979) 4,163 investments held (15,828) 14,461 A list of the Company's investments is shown on page 8, a sector breakdown and a geographical allocation is shown on page 6. 9. DEBTORS Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Accrued income and 279 396 prepayments Overseas tax recoverable 49 14 Other - 3 328 413 10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Purchases for future - 1,005 settlement Performance fee payable - 1,661 Other creditors 121 261 121 2,927 11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 31 December 31 December 2008 2007 Â£000 Â£000 19,143,433 Zero Dividend 191 191 Preference shares of Â£0.01 Redemption reserve 8,013 6,236 Allocation of special 18,952 18,952 reserve 27,156 25,379 The authorised number of Zero Dividend Preference shares of Â£0.01 as at 31 December 2008 is 105,000,000 (31 December 2007: 105,000,000). The allotted, issued and fully paid number of Zero Dividend Preference shares of Â£0.01 as at 31 December 2008 is 19,143,433 (31 December 2007: 19,143,433). 12. SHARE CAPITAL Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2008 2008 2007 2007 Number of Â£000 Number of Â£000 shares shares Authorised: Ordinary shares 105,000,000 1,050 105,000,000 1,050 of Â£0.01 105,000,000 1,050 105,000,000 1,050 Allotted, issued and fully paid: Ordinary shares 18,143,433 181 18,143,433 181 of Â£0.01 18,143,433 181 18,143,433 181 No shares were bought back in the year to 31 December 2008 (31 December 2007: nil). 13. CAPITAL RESERVE - REALISED Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Opening balance 17,658 10,681 Transfer from capital 13,949 - reserve - unrealised Net (loss)/gain on (15,828) 10,298 realisation of investments Provision for premium on (1,777) (1,660) redemption of Zero Dividend Preference shares Tax relief on expenses 150 - charged to capital Performance fee (15) (1,661) Closing balance 14,137 17,658 14. CAPITAL RESERVE - UNREALISED Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Opening balance 13,949 8,588 Movement in unrealised appreciation: Transfer to capital (13,949) - reserve - realised Investments - 4,163 Futures and options - 1,198 Closing balance - 13,949 15. FINANCIAL COMMITMENTS At 31 December 2008 there were no commitments in respect of unpaid calls and underwritings (31 December 2007: nil). 16. RETURN PER SHARE Ordinary shares Total return per Ordinary share is based on the net total return on ordinary activities after taxation of Â£(15,935,000) (31 December 2007: Â£13,681,000). These calculations are based on 18,143,433 Ordinary shares in issue during the year to 31 December 2008 (2007: 18,143,433). Zero Dividend Preference shares The return per Zero Dividend Preference share is based on the annualised gross redemption yield of 7.0%. This calculation is based on the 19,143,433 Zero Dividend Preference shares in issue during the year (2007: 19,143,433). 17. NET ASSET VALUE PER SHARE The net asset value per share and the net assets available to each class of share, 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 2008 2008 2007 2007 Pence Â£000 Pence Â£000 Ordinary shares 180.78 32,799 275.60 50,004 (18,143,433 shares in issue) Zero Dividend 141.86 27,156 132.57 25,379 Preference shares* (19,143,433 shares in issue) * Classed 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 2008 2007 Â£000 Â£000 Total return on ordinary (13,977) 15,546 activities before finance costs and taxation Capital return before 15,843 (13,998) finance costs and taxation Other debtors (2) 72 Accrued income and 122 (215) prepayments Other creditors (1,801) 310 Performance fee (15) (1,661) capitalised Net cash inflow from 170 54 operating activities 19. ANALYSIS OF CHANGES IN CASH DURING THE YEAR Year ended Year ended 31 December 31 December 2008 2007 Â£000 Â£000 Beginning of year 6,139 1,465 Net cash (outflow)/inflow (259) 4,674 Analysis of balance: Bank balance 5,880 6,139 20. RELATED PARTY DISCLOSURES Under FRS 8, the Company is required to provide additional information concerning its relationship with the Investment Manager, Premier Fund Managers Limited ("PFM"), and other transactions with companies within the Premier Group. Details of the investment management fee charged by PFM 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 2008 Â£56,358 (31 December 2007: Â£1,863,705) of these fees remained outstanding. 21. RISK MANAGEMENT POLICIES AND PROCEDURES As an investment trust the Company invests in equities and other investments for the long-term so as to secure its investment objectives stated on page 15. In pursuing its investment objectives, the Company is exposed to a variety of risks that could result in either a reduction in the Company's net assets or a reduction of the profits available for dividends. These risks, include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, and credit risk, and the Directors' approach to the management of them are set out below. The objectives, policies and processes for managing the risks, and the methods used to measure the risks, that are set out below, have not changed from the previous accounting period. (a) MARKET RISK The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk (see (b) below), interest rate risk (see (c) below) and other price risk (see (d) below). The Board of Directors reviews and agrees policies for managing these risks, which have remained substantially unchanged from those applying in the year ended 31 December 2007. 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, and 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 There were no monetary items that have foreign currency exposure at 31 December 2008 (31 December 2007: nil). An analysis of the Company's equity investments that are priced in a foreign currency is: As at As at 31 December 31 December 2008 2007 Investments Investments Â£000 Â£000 Australian Dollar - 1,330 Canadian Dollar - 825 Czech Koruna - 1,052 Euro 17,096 20,389 Hong Kong Dollar 3,538 4,597 Japanese Yen 1,281 - Malaysian Ringgit 1,561 2,939 New Zealand Dollar - 869 Singapore Dollar 977 829 Thailand Bhats 3,639 - US Dollar 9,150 18,619 37,242 51,449 Foreign currency sensitivity The following table illustrates the sensitivity of the profit 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 +/- 8% (2007: 3%) Sterling/Euro +/- 8% (2007: 2%) These percentages have been determined based on the average market volatility in exchange rates, in the previous 12 months. If sterling had strengthened against the currencies shown, this would have had the following effect: 2008 2008 2007 2007 US Dollar Euro US Dollar Euro Â£000 Â£000 Â£000 Â£000 Projected 8% 8% 3% 2% change Impact on 23 77 9 19 revenue return Impact on 732 1,368 559 408 capital return Total return 755 1,445 568 427 after taxation for the year Equity 755 1,445 568 427 If sterling had weakened against the currencies shown, this would have had the following effect: 2008 2008 2007 2007 US Dollar Euro US Dollar Euro Â£000 Â£000 Â£000 Â£000 Projected 8% 8% 3% 2% change Impact on (23) (77) (9) (19) revenue return Impact on (732) (1,368) (559) (408) capital return Total return (755) (1,445) (568) (427) after taxation for the year Equity (755) (1,445) (568) (427) 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, 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. Cash at bank at 31 December 2008 (and 31 December 2007) was held at floating interesting rates, linked to current short-term market rates. (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 portfolios 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 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 6. Other price risk sensitivity The following table illustrates the sensitivity of the profit 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. The impact on the revenue return relates to the change in performance fee accrued which is charged at 15% to any outperformance (see note 3). Increase in Decrease in Increase in Decrease in fair value fair value fair value fair value 2008 2008 2007 2007 Â£000 Â£000 Â£000 Â£000 Income statement - profit after taxation: Revenue return - - - (1,076) 1,076 (decrease)/increase Capital return - increase 5,387 (5,387) 7,176 (7,176) /(decrease) â€“Total profit after 5,387 (5,387) 6,100 (6,100) taxation - increase/ (decrease) Equity 5,387 (5,387) 6,100 (6,100) (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 2008 unquoted securities represented 4.6% of the total investment portfolio (31 December 2007: 2.7%). 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 manager 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€¢ 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€¢ â€“cash at bank is held only with reputable banks with high quality external credit ratings. None of the Company's financial assets are secured by collateral or other credit enhancements. (g) FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Except for the Company's Zero Dividend Preference shares, the fair values of the financial assets and liabilities are either carried in the balance sheet at their fair value (investments and derivatives), 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 market value 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 2008 December 2008 December 2007 December 2007 Book value Fair value Book value Fair value Â£m Â£m Â£m Â£m Zero Dividend 27.1 27.2 25.4 26.3 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 maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Company's capital at 31 December comprises: 2008 2007 Â£000 Â£000 Debt: Zero Dividend Preference (27,156) (25,379) shares Equity: Equity share capital 181 181 Retained earnings and 32,618 49,823 other reserves 32,799 50,004 Total Capital 59,955 75,383 Debt as a % of total 45.3% 33.7% capital 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. 22. CONTINGENT ASSET On 28 June 2007 the European Court of Justice announced that it had found in favour of the Association of Investment Companies and JPMorgan Claverhouse Trust plc in declaring that management expenses of investment trusts should be exempt from VAT. Her Majesty's Customs and Revenue ("HMRC") subsequently announced that it had accepted that fund management services are exempt from VAT and it has withdrawn from the appeal in the JPMorgan Claverhouse Investment Trust case. The Company is therefore no longer charged VAT on management expenses and it is expected that it will be able to recover some or all of the VAT previously charged on management fees. Clarification as to how claims for past VAT will be processed is awaited from HMRC. Since its launch in November 2003 the Company has paid approximately Â£750,000 of VAT on its management expenses and recovered approximately Â£215,000 of this through its quarterly VAT returns. There is therefore a potential additional recovery of Â£535,000 of VAT on these fees. This potential recovery of VAT has not been recognised in the financial statements for the year ended 31 December 2008, as no agreement has been finalised with the Manager. 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 early March Annual General Meeting 22 April 2009 Company's half-year end 30 June Half-year results announced early August Dividend payments quarterly 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) overseas: +44 208 639 3399 or visit www.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 Premier Renewable Energy 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, 22 April 2009, at 2.00 pm to consider and, if thought fit, pass the following resolutions, which will be proposed as to resolutions 1, 2, 3, 4, 5 and 6 as ordinary resolutions and as to resolutions 7, 8 and 9 as special resolutions: ORDINARY RESOLUTIONS 1. To approve the Directors' Remuneration Report for the year ended 31 December 2008. 2. To receive the Directors' Report and Financial Statements for the year ended 31 December 2008. 3. To re-elect Mr Adam Cooke as a Director of the Company. 4. To re-elect Mr Ian Graham as a Director of the Company. 5. To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the Board to determine their remuneration. 6. Authority to allot relevant securities: That, the Board be and it is hereby generally and unconditionally authorised to exercise all powers of the Company to allot relevant securities (within the meaning of Section 80 of the Companies Act 1985 (the "Act")) up to an aggregate nominal amount of Â£18,143 (being approximately 10% of the issued Ordinary share capital of the Company as at 10 March 2009) provided that this authority shall, unless renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Board may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. SPECIAL RESOLUTIONS 7. Authority to disapply pre-emption rights:That subject to the passing of Resolution 6 set out above, the Directors of the Company be and they are hereby empowered pursuant to Section 95 of the Act to allot equity securities (within the meaning of Section 94(2) and Section 94(3A) of the Act) wholly for cash as if Section 89(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities (including any issue of shares for cash out of treasury) for cash: a) in connection with a rights issue in favour of shareholders where the equity securities respectively attributable to the interests of all shareholders are proportionate (as nearly as may be to the respective numbers of shares held by them); and b) up to an aggregate nominal amount of Â£18,143, representing approximately 10% of the Company's Ordinary share capital in issue as at 10 March 2009; â€“ and shall expire on the conclusion of the Annual General Meeting of the Company to be held in 2010, save that the Company may before such expiry make offers, agreements or arrangements which would or might require equity securities to be allotted after such expiry and so that the Directors of the Company may allot equity securities in pursuance of such offers, agreements or arrangements as if the power conferred hereby had not expired. 8. Authority to repurchase the Company's shares: â€“That, the Company be and is hereby generally and unconditionally authorised in accordance with Section 166 of the Act to make market purchases (within the meaning of Section 163 of the Act) of Ordinary shares and of Zero Dividend Preference shares in the capital of the Company (together the "Shares"), provided that: (a) the maximum number of Shares hereby authorised to be purchased shall be 2,719,700 Ordinary shares and 2,869,600 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 as stipulated by Article 5(1) of Commission Regulation (EC) 22 December 2003 implementing the Market Abuse Directive as regards exemptions for buy back programmes and stabilisation of financial markets (No. 2273/2003) and 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; (d) the authority hereby conferred shall expire at the earlier of the conclusion of the Annual General Meeting of the Company in 2010 and 22 October 2010 unless such authority is renewed prior to such time; and (e) 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 may be cancelled or (where purchased out of distributable profits and subject to the limitations set out in the Act) held in treasury and dealt with in accordance with the provisions of the Act as the Directors may determine. 9. Adoption of new Articles of Association: That the Articles of Association in the form produced to the Annual General Meeting and initialled by the Chairman of the Meeting for identification purposes be adopted as the Articles of Association of the Company, in substitution for and to the exclusion of, the existing Articles of Association. By order of the Board Premier Asset Management Limited Secretary 10 March 2009 Notes to the notice of annual general meeting 1. A member of the Company entitled to attend and vote at the meeting may appoint one or more proxies to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A proxy need not be a shareholder of the Company. 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. 2. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company gives notice that only those shareholders entered on the register of members of the Company at 6.00 pm on 20 April 2009 will be entitled to attend and vote at the aforesaid meeting in respect of the number of shares registered in their name at that time. Changes to the entries on the register after that time will be disregarded in determining the rights of any person to attend or vote at the meeting. 3. A form of proxy is enclosed for use by shareholders. To be effective, the form of proxy for use at the meeting and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be deposited at the office of the Company's registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. 4. Completion and return of the form of proxy, other such instrument or CREST Proxy Instruction (as described in note 8) will not preclude shareholders from attending and voting in person at the meeting or adjournment of the meeting. 5. The register of interests of the Directors and connected persons in the share capital of the Company, giving details of all transactions of each Director and his family interests in the shares of the Company, will be available for inspection at Eastgate Court, High Street, Guildford, Surrey, GU1 3DE during usual business hours on any weekday (Saturdays and public holidays excepted). It will also be available for inspection at the Annual General Meeting. 6. No Director has any contract of service with the Company. 7. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate shareholder has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the Chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to â€“that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives - www.icsa.org.uk - for further details of this procedure. The guidance includes a sample form of letter if the Chairman is being appointed as described in (i) above. 8. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer's agent RA10 by 2.00 pm on 20â€ April 2009. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35 (5) (a) of the Uncertificated Securities Regulations 2001. In any case your proxy form must be received by the Company's registrars no later than 2.00 pm on 20 April 2009. 9. At 9 March 2009 (being the last business day prior to the date of this Notice) the Company's issued share capital consists of 18,143,433 Ordinary shares and 19,143,433 Zero Dividend Preference shares carrying one vote each. Therefore, the total voting rights in the Company as at 9 March 2009 are 37,286,866. 10. Any person to whom this Notice is sent who is a person nominated under Section 146 of the CA 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. Appendix EXPLANATORY NOTES TO RESOLUTION 9 PRINCIPAL CHANGES TO THE COMPANY'S ARTICLES OF ASSOCIATION This summary sets out the principal differences between the Existing Articles and the New Articles. Those differences set out in paragraphs 1 to 7 are recommended as a result of the implementation of the 2006 Act. The remainder are consequential changes which have arisen as a result of the Directors electing to adopt a new style of articles. The New Articles also contain a number of non-material differences to reflect changes in general law and market practice since the date the Existing Articles were adopted. 1. Directors' Conflicts of Interests The 2006 Act sets out directors' general duties. The provisions largely codify the existing law, but with some changes. Under the 2006 Act, a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the Company's interests, or otherwise ensure that such conflict is approved by shareholders in general meeting. This requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The 2006 Act allows directors of public companies to authorise conflicts and potential conflicts of other directors where the articles of association contain a provision to this effect. It is therefore proposed that the New Articles will have an effective provision which will give the directors authority to approve such conflicts of interest. There are safeguards which will apply when directors decide whether to authorise a conflict or potential conflict. First, only independent directors (i.e. those who have no interest in the matter being considered) will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the company's success. The independent directors will be able to impose limits or conditions when giving authorisation of which they think is appropriate. The New Articles contain provisions to ensure that a director must not impart confidential information in respect of the matter which gives rise to a conflict of interest or potential conflict of interest, if under a duty of confidentiality to another company. They also contain provisions stating that a director need not participate in board discussions or consider board papers in respect of the matter which gives rise to a conflict of interest or potential conflict of interest. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the directors in accordance with the 2006 Act. 2. Electronic Communications The 2006 Act provisions governing communications in electronic form with shareholders came into force in January 2007. As a consequence, a company may communicate with shareholders using electronic and/or website communications to send or supply documents or information to its shareholders. The provisions in the 2006 Act relating to electronic communications apply automatically to all types of company communications made pursuant to the 2006 Act provided there is provision in the relevant company's articles of association or if shareholders have specifically resolved that the company may send or supply documents or information via a website. In order to communicate by electronic means as a default option, Shareholders must also have been asked individually by the Company to agree that the Company may send or supply documents or information to them by means of a website and the Company must have also either received a positive response or received no response from the Shareholder within the period of 28 days from when the request was made by the Company. Whilst the Company does not have immediate plans to communicate electronically with Shareholders, the Directors would like to take full advantage of the freedom to use electronic communications with Shareholders in the future. This will enable the Company to reduce costs, reduce the environmental impact of the business and generally enhance the level and quality of communications with Shareholders. As a consequence, the New Articles contain provisions enabling the Company to implement the electronic communications regime contained in the 2006 Act at some future date. Therefore the authority in the New Articles will not force either the Company or any individual Shareholders to send or receive notices, documents or information (including annual accounts and circulars) by electronic means. It will, however, allow the Company to approach Shareholders in the future for their individual agreement to use electronic mail and/or publication on its website for Company communications. It is the Board's intention that it will, in due course, approach Shareholders for their individual agreement to use either electronic mail and/or publication on the Company's website of Company communications. At such time, Shareholders should ensure that they read any such request letter carefully and follow the instructions set out in it. Although the application of the new regime would mean that in certain circumstances Shareholders would be deemed to have opted-in to the regime, the Directors would prefer that the Shareholders opt-in voluntarily to the regime, and therefore intend to send documentation to Shareholders on this basis. 3. Shareholder Meetings 3.1 The New Articles reflect the fact that the 2006 Act does not contain any references to extraordinary general meetings of Shareholders. Under the 2006 Act, any meeting other than an annual general meeting is simply classified as a general meeting. 3.2 The provisions in the Existing Articles dealing with the convening of general meetings and length of notice required to convene general meetings have now been amended to conform to new provisions in the 2006 Act. In particular, a general meeting to consider a special resolution may be convened on 14 days clear notice whereas previously, 21 clear days notice was required. 3.3 Under the new EU Shareholder Rights directive, to be implemented in the UK by 3 August 2009, main market companies wishing to take advantage of this shorter notice period are likely to be required to pass an enabling resolution. However, the precise recommendations for implementation in the UK are not yet confirmed and therefore the Directors intend to seek any further authorisation from Shareholders (if necessary) at the Company's Annual General Meeting in 2010. 4. Form of Resolution References in the Existing Articles to "extraordinary resolutions" have been replaced by references to "special resolutions" in the New Articles. The distinction between special and extraordinary resolutions under the old law, that 21 days' notice was required for a special resolution and only 14 days' notice for an extraordinary resolution, has been removed. The concept of extraordinary resolutions has not been retained under the 2006 Act. 5. Proxies The 2006 Act now provides that Shareholders can appoint multiple proxies provided that each proxy is appointed to exercise the rights attached to a different share or shares held by the Shareholder. Proxies can also speak at general meetings. In addition, the 2006 Act provides that proxies have the same right to vote on a show of hands as Shareholders. The New Articles therefore contain amendments to reflect these provisions. 6. Transfers of Shares The 2006 Act provides that if the Directors refuse to register a transfer, then in addition to sending the purported transferee notice of refusal, the Directors must also give reasons for the refusal and any further information about such reasons that the purported transferee may reasonably request. The Existing Articles have therefore been amended in this regard. 7. Directors Indemnities 7.1 The New Articles propose to widen the scope of the previous indemnity provisions of the Articles of Association to reflect the Companies (Audit, Investigations and Community Enterprise) Act 2004. The Existing Articles previously allowed the Company to provide an indemnity to cover directors' or other officers liabilities incurred in defending any proceedings relating to an act or omission of such director where judgment is then given in such director's favour or he is acquitted. The New Articles now widen the scope of the indemnity so that an indemnity can be given to directors (or other officers) in respect of any proceedings, provided that certain conditions are satisfied, and the Company can pay directors costs of defending proceedings as they are incurred. If a director is convicted in criminal proceedings or judgement is given against him in civil proceedings then the director is liable to repay the monies advanced by the Company. 7.2 The reference to the indemnification and purchase of insurance for Auditors has been removed in the New Articles, in line with best practice. 8. Uncertificated Securities The Company has previously implemented arrangements for the Company's securities to be issued and transferred in uncertificated form through CREST where such securities remain a participating security in terms of the Uncertificated Securities Regulations 2001. The New Articles reflect these Regulations and therefore provide that the Company can issue and transfer such uncertificated shares through CREST or any other such system as the Company in its discretion should choose. 9. General Meetings The New Articles propose that Directors may resolve to enable shareholders to attend general meetings by satellite and be counted in the relevant quorum therefore ensuring that general meetings can be held in one place. There is also a new article stating that if after giving notice of a general meeting it is impracticable or unreasonable to hold such meeting at the declared place, the Directors may postpone and change the place of the meeting without having to issue a new notice if they advertise the new arrangements in a UK national newspaper. 10. Summary Financial Statements The New Articles provide (as is stated in the Existing Articles) that the Company must send its Annual Report to shareholders and others entitled to receive the document (subject to such shareholder electing to receive the Annual Report electronically). However, the New Articles propose that the Directors may instead decide to send a summary financial statement to shareholders rather than forwarding a copy of the Annual Report. If shareholders who have received a summary financial statement then wish to receive the full version of the Annual Report then the Company must provide them with a copy. Directors and advisers Directors Geoffrey Burns (Chairman) Adam Cooke Ian Graham Michael Wigley 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 Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA Telephone: 0871 664 0300 (calls cost 10p per minute plus network extras) Overseas: +44 208 639 3399 Email: shareholder.services@capitaregistrars.com Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Stockbroker and JPMorgan Cazenove Limited Financial Adviser 20 Moorgate London EC2R 6DA Telephone: 020 7155 5000 www.cazenove.com

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