Half-yearly Report

Premier Energy and Water Trust PLC Half year report 30 June 2011 Investment objectives The Company's investment objectives are to achieve a high income from its portfolio and to realise long-term growth in the capital value of the portfolio. The Company will seek to achieve these objectives by investing principally in the equity and equity related securities of companies operating primarily in the energy and water sectors, as well as other infrastructure investments. WINNER OF THE BEST HIGH INCOME SECURITY AWARD IN THE MONEY OBSERVER INVESTMENT TRUST AWARDS 2010 Contents Investment objectives Company highlights 1 Company summary 2 Financial calendar 2 Chairman's statement 3 Investment manager's report 5 Investment portfolio 8 Financial summary 9 Income statement 10 Balance sheet 12 Reconciliation of movements in 13 shareholders' funds Cashflow statement 14 Reconciliation of net cashflow to 14 movements in net debt Notes to the half year report 15 Interim management report 17 Shareholder information 18 Directors and advisers 19 Registered in England No. 4897881 A member of the Association of Investment Companies Company highlights Total return performance Six months to 30 June 2011 % change Total assets1 -2.1% Bloomberg World Utilities Index (£)2 +0.6% FTSE 100 Total Return Index2 +2.7% Share price and NAV3 returns 30 June 31 December 2011 2010 % change Zero Dividend NAV3 166.79p 161.64p +3.2% Preference share Mid price 177.75p 173.50p +2.4% Ordinary share NAV3 175.84p 190.81p -7.8% Mid price 138.75p 155.75p -10.9% Six months to Year to 30 June 31 December 2011 2010 Net revenue per 6.87p 9.33p Ordinary share Net dividends 3.20p 8.10p per Ordinary share Zero Dividend Preference shares4 Ordinary shares4 5 Year Performance to 30 June 2011 (rebased to 100) [Graphic removed] Ordinary shares4 5 Year Performance to 30 June 2011 (rebased to 100) [Graphic removed] Further information can be found in the Financial Summary on page 9. 1 Total return performance, adjusted for any dividends distributed and declared and adjusted for the issue of new shares and associated costs in 2010. 2 Source: Bloomberg. 3 Calculated in accordance with the Articles of Association. 4 Source: AIC using Morningstar. Company summary Launch Date 4 November 2003 Domiciled UK Year-end 31 December Shareholders' Funds £65.3 million Market £61.3 million Capitalisation Bank Loan Nil Zero Dividend 21,180,373: aiming to be redeemed at 221.78p on 31 December Preference shares 2015 Ordinary shares 17,068,480 Dividends Paid on Ordinary shares Dividend History In respect of year ended 31 December Total dividends declared 2010 8.10p 2009 9.40p# 2008 7.35p 2007 7.00p 2006 6.90p 2005 6.75p 2004 7.875p* Investment Manager Premier Fund Managers Limited Management Fee 1.0% per annum, charged 40% to revenue and 60% to capital, plus performance fee, allocated between capital and revenue based on the out-performance attributable to capital and revenue respectively AIC Member of the Association of Investment Companies # Includes a special dividend of 1.70p. * 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 late April Company's half-year end 30 June Half-year results announced early August Dividend payments - 2011 at the end of January, April, August and December (Dividend payments thereafter will be at the end of March, June, September and December.) Chairman's statement for the for six months to 30 June 2011 Overview of the period World stock markets have been unusually volatile during the period reflecting continuing unease of investors over the pace of the global economic recovery. Of particular concern at present is the economic health of Europe and the US where governments continue to wrestle with over indebtedness. It is clear that if the Euro is to survive in the longer term some sort of closer political and legal harmonisation will need to take place. Certainly it would now seem difficult to abandon the Euro as the region is so financially interdependent on the currency. This may result in an extended period of low growth coupled to artificially low interest rates. In this environment there is likely to be an inflation risk and in this context energy and water shares, which have, through their various regulatory mechanisms, a degree of "inflation proofing", would seem to represent good value. The impact of the terrible Japanese earthquake and subsequent tsunami is still reverberating through power markets globally. We were fortunate not to have any significant exposure to the nuclear sector and to Japanese nuclear stocks in particular. However, many countries around the world have either abandoned their nuclear ambitions (for example Germany), or have put them on hold while further testing and public consultation takes place. A direct consequence of the abandonment of Germany's nuclear programme has been a significant rise in European power prices. In the long term this augurs well for non nuclear energy generators since it is difficult to see how the energy intensity of nuclear power plants can be replaced in time to prevent a significant rise in power prices over the next few years. Performance Your Company does not have any formal benchmarks but rather provides investors with a range of indices against which performance may be assessed. The performance of the FTSE Global Utilities Index has previously been provided as one of the indices against which the Company's performance may be assessed. This index however, has been withdrawn and following discussions with the investment manager the Board has decided it should be replaced with the Bloomberg World Utilities Index. This report deals primarily with the performance of the Company from 1 January to 30 June 2011. Over this period the total or gross asset return for your Company was -2.1% compared to a return for the Bloomberg World Utilities Index of +0.6%. Over the same period the FTSE 100 Index rose by 2.7% while the FTSE World Index rose by 2.3%. Since the Company's life was extended at the end of December 2009, there has been a marked divergence of the utilities index from the broader market indices: +2.4% for the Bloomberg World Utilities Index compared with +15.7% and +19.5% for the FTSE 100 Index and the FTSE World Index respectively. This is largely due to investors' emphasis on more cyclical stocks, which are deemed to benefit most from the post credit crunch recovery, (all the above figures are quoted on a total return basis). The Company's capital structure is comprised of Ordinary and Zero Dividend Preference shares ("ZDP"). The ZDP shares are entitled to a predetermined capital sum of 221.78p at the anticipated wind up date of the Company, 31 December 2015. As a consequence the rise or fall in assets attributable to the Ordinary shares is geared by this prior entitlement. Over the period net assets attributable to Ordinary shares fell, and as a result the net asset value per Ordinary share also fell from 189.5p to 170.8p. Once this has been adjusted for dividends paid, it amounts to a decline in percentage terms of 7.4%. The net asset value per ZDP share rose from 161.6p to 166.8p. Since the Company's inception on 4 November 2003 the FTSE 100 Index has produced a total return of 80.7% (source: Bloomberg). Over the same period the total assets of your Company have produced a total return of 109.8% whilst total return on your Company's Ordinary shares (measured by increase in net asset value together with dividends paid) is 133.2%. Dividends It is important during periods of fluctuating asset values that your Company ensures dividend income is healthy and that this income is paid promptly to investors. In this regard the revenue account of your Company is in excellent health with net revenue per ordinary share over the six month period of 6.87p. Accordingly your Board has declared a second interim dividend of 1.6p per Ordinary share. This will be paid on 31 August 2011 to shareholders on the register as at 29 July 2011. Shareholder relations The Board and our investment Manager welcome contact with both the Company's existing shareholders and with potential new shareholders. The Investment Manager has met with many of the Company's larger shareholders during the last year. Outlook The last two years or so have seen defensive stocks such as utilities substantially underperform the main stock market indices. Despite this the assets of your Company have been relatively stable while dividend income has been strong. With shares in the global utility sector, and particularly Europe now trading at historically attractive earnings multiples (9-11x, compared with a 5 year average of 15x) with high and largely sustainable dividend yields of 6% or more, we believe that your Company is well positioned to deliver growth in both capital and income. Geoffrey Burns Chairman 9 August 2011 Investment manager's report for the six months to 30 June 2011 Portfolio Activity Political decisions in response to public opinion in the aftermath of the Tohoku earthquake have weighed on the Company during the period under review. We sold the portfolio's holding in Cameco shortly after the earthquake, anticipating a softening of global demand for uranium. We also sold the investments in the two US nuclear generators, Entergy and Exelon, believing that both were likely to see significantly increased safety-related unrecoverable capital expenditure driven by the Environmental Protection Agency. We also took profits in SCANA Corp, differing from the management's view that delays in the award of the Combined Construction and Operating Licence from the Nuclear Regulatory Commission for the first of its two new Westinghouse AP1000 nuclear reactors, due to come on line in 2016, would be limited. In Europe the announcement by the German Federal Cabinet at the beginning of June to accelerate the nuclear phase out to 2022, but, perversely, not to reduce the nuclear fuel tax, affected the share prices of both integrated operators, RWE (not held) and E.On. The German government is effectively proposing a sharper capacity reduction than previously expected. However, we believe markets have not considered that this capacity reduction is very beneficial to power prices and thus to generation margins. E.On has a strong balance sheet following a series of disposals, and while there is likely to be some short term volatility of earnings and dividends, its current share price now seems to us to ascribe no value to its significant generation assets. Elsewhere in Europe, the risk of a nuclear windfall tax in both the UK and France is limited, and so the Company's holding in EDF has been retained. In Asia we continue to hold KEPCO, which operates nuclear power units in Korea, and is building new plant in the UAE, and Dongfang Electric, which manufactures nuclear power generators alongside conventional generation equipment in China, where officials have confirmed that nuclear expansion plans remain on track, with new nuclear approvals likely to resume by early 2012. Fundamentals for natural gas look increasingly attractive, despite the growth in North American supply and in Middle Eastern LNG capacity. Global demand for gas is likely to be strong in the coming years, driven by emerging markets, in particular China, which currently lags OECD per capita gas consumption significantly. Here demand could double over the next 5 years, supported by the target in the latest 5 year plan to increase gas consumption as a proportion of the energy mix from 6% to 8%. We have added to our position in Enviro Energy (coal bed methane in China) following a meeting with the company management when they reported good results from the wells drilled to date, in partnership with Petrochina. On the other side of the equation, the gas distributor ENN Energy is geographically well positioned for demand growth in China. We are also looking at other parts of Asia, notably India and Australia, where there are opportunities to gain exposure to gas. Premier Energy and Water Trust PLC Sector Breakdown 30 June 2011 [Graphic removed] In the last report we emphasised the attractions of the Asian water market, a theme that remains intact. We have had encouraging meetings during the past 6 months with the management of a diverse range of US water stocks held in the portfolio. York Water supplies water to 33 municipalities in York County, Pennsylvania, and is well placed to benefit from organic growth in one of the fastest growing counties in that state, and has an industry leading efficiency ratio as a result of its concentrated customer base. We have also sold the Company's investment in Aqua America, reinvesting the proceeds into American Water Works. Aqua America's successful rate cases, where the utility negotiates with the local regulator over allowed rates of return on new and existing plant, together with its ongoing cost efficiencies continue to deliver strong earnings, but this was fully priced into the shares. The growth and return prospects of American Water Works are improving as agreed rate cases coupled with cost efficiencies start to benefit earnings, yet in our opinion these prospects are not fully reflected in the price of the shares. The portfolio's investment in Calgon Carbon has performed well over the period. Calgon Carbon manufactures activated and reactivated carbon which is used in water and waste water treatment - such as ship ballast, and cryptosporidium control in drinking water - as well as in air purification, most notably the removal of mercury from power station flue gas. These areas are likely to see strong growth, driven primarily by environmental legislation. In addition, Calgon Carbon successfully implemented a price increase at the end of last year and is the largest participant both domestically, and in Asia (albeit a more fragmented marketplace) and a strong number two manufacturer in Europe. We have added to the position. Consolidated Water is currently focused on small scale desalination plants in the Caribbean, each producing between 1 and 10 million gallons of water a day. There is limited competition at this smaller end of the market, thus the group has developed considerable expertise in constructing and operating plant of that size. Their portfolio produces 25 million gallons daily based on well-established reverse osmosis technology across ten sites. The company is now looking to expand into Asian markets, using local partners, where the management (who has previous experience in the region) has identified areas where desalination is the only realistic option for water supply. While this potentially increases the risk profile of the company, it will also bring exposure to a number of Asian growth markets. Just after the end of the period Northumbrian Water, the smallest of the regulated UK water stocks, which we added to the portfolio in March, confirmed that it had received a 465p cash offer from the Hong Kong listed infrastructure group, Cheung Kong Infrastructure Holdings. The price, together with the final dividend, payable in early September, equates to a 32% premium to its historic regulated asset base and is 26% higher than the share price prior to the bid. The other two water stocks held by the trust - Severn Trent and United Utilities - have also risen, although both are twice the size of Northumbrian Water, so a bid for either is less likely. Nonetheless, this highlights the UK water sector as an attractive long term investment which will benefit from rising rates of inflation. Premier Energy and Water Trust PLC Geographical Allocation at 30 June 2011 [Graphic removed] Outlook The global energy and water sector has continued to underperform the wider stock market, principally because of its relative lack of direct exposure to the global economic recovery when compared to other more cyclical sectors. However, with this recovery looking increasingly precarious, valuations of utility stocks now appear very attractive and we believe that these, together with high and sustainable dividends, should lead to outperformance by the sector over the next few years. We welcome contact with existing and potential new investors. Further details of the Company may be found at www.premierfunds.co.uk Kevin Scutt Andrew Whalley Claire Burgess Premier Fund Managers Limited 9 August 2011 Investment portfolio at 30 June 2011 Holdings in descending order as at 30 June 2011. 2011 Valuation Company Activity Country £000 % of total 1 Snam Rete Gas Gas Italy 2,728 4.3% production and transmission 2 Suez Water & France 2,174 3.5% waste services and electricity generation 3 Veolia Water & France 2,125 3.4% Environnement waste services 4 Calpine Electricity USA 2,009 3.2% generation 5 Guangdong Water supply Hong Kong 1,727 2.7% Investment 6 Sound Global Water Singapore 1,611 2.6% treatment 7 GDF Suez Gas France 1,595 2.5% production and transmission 8 China Electricity Hong Kong 1,569 2.5% Resources generation & Power supply 9 Enbridge Gas & Canada 1,495 2.4% electricity supply 10 China Water Water & Hong Kong 1,446 2.3% Affairs waste services 11 Huaneng Power Electricity Hong Kong 1,437 2.3% International generation & supply 12 Severn Trent Water & UK 1,427 2.3% waste services 13 UIL Holdings Electricity USA 1,410 2.2% generation & supply 14 Thai Tap Water Water supply Thailand 1,404 2.2% 15 Duet Group Electricity Australia 1,392 2.2% generation & supply 16 PPL Corp Electricity USA 1,387 2.2% generation & supply 17 Portland Electricity USA 1,384 2.2% General generation & Electric supply 18 EDF Electricity France 1,327 2.1% generation & supply 19 China Power Electricity Hong Kong 1,306 2.1% New Energy generation 20 Centrica Gas & UK 1,293 2.1% electricity supply 21 CEZ Electricity Czech 1,277 2.0% generation Republic 22 First Energy Electricity USA 1,265 2.0% generation & supply 23 Fortum Electricity Finland 1,260 2.0% generation & supply 24 Electricity Electricity Thailand 1,219 1.9% Generating generation & supply 25 Pacific Gas & Electricity USA 1,209 1.9% Electric generation & supply 26 Encana Gas & Canada 1,150 1.8% electricity supply 27 United Electricity UK 1,137 1.8% Utilities & water distribution 28 International Electricity UK 1,126 1.8% Power generation 29 Calgon Carbon Water USA 1,058 1.7% treatment 30 ENN Energy Gas Hong Kong 1,049 1.7% Holdings distribution 43,996 70.0% Other 18,850 30.0% holdings Total 62,846 100.0% Portfolio Financial summary CAPITAL Premium/ (discount) % 30 June 31 December % 30 June 2011 2010 change 2011 Net Asset Preference 166.79p 161.84p +3.2% - Value per share* Zero Dividend Mid-market Preference 177.75p 173.50p +2.4% 6.6% price per share Zero Dividend Net Asset 175.84p 190.81p -7.8% - Value per Ordinary share* Mid-market 138.75p 155.75p -10.9% (21.1)% price per Ordinary share * Net asset values calculated in accordance with Articles of Association. REVENUE Six months to Six months to 30 June 30 June % 2011 2010 change Net revenue per 6.87p 6.34p +8.4% Ordinary share Net dividends per 3.20p 3.10p +3.2% Ordinary share HURDLE RATES† 30 June 2011 Zero Dividend Preference Hurdle rate to redemption -6.0% shares: price of 221.78p on 31 December 2015 Ordinary shares: Hurdle rate return to +2.3% current share price of 138.75p † 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. Source: J.P. Morgan Cazenove. TOTAL RETURN PERFORMANCE Six months to Year to 30 June 31 December 2011 2010 Total return on gross -2.1% +3.9% assets* Bloomberg World Utilities +0.6% +16.7% Index (£)** FTSE 100 Total Return +2.7% +12.6% Index** At At 30 June 31 December 2011 2010 £/$ exchange rate 1.6055 1.5656 £/€ exchange rate 1.1073 1.1670 * Total return performance calculated, adjusted for any dividends and declared and adjusted for the issue of new shares and associated costs in 2010. ** Source: Bloomberg. Income statement for the six months ended 30 June 2011 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited) Six months Six months Six months Six months Six months Six months Six Year Year ended ended ended ended ended ended months ended ended ended 30 June 30 June 30 June 30 June 30 June 30 June 31 31 31 2011 2011 2011 2010 2010 2010 December December December 2010 2010 2010 Revenue Capital Total Revenue Capital Total Revenue Capital Total Notes £000 £000 £000 £000 £000 £000 £000 £000 £000 (Losses)/ - (1,720) (1,720) - (2,351) (2,351) - 1,984 1,984 gains on investments - held at fair value through profit or loss Revenue 1,638 - 1,638 1,191 - 1,191 1,969 - 1,969 Investment (130) (196) (326) (99) (149) (248) (201) (303) (504) management fee Other (188) - (188) (156) - (156) (323) - (323) expenses Return 1,320 (1,916) (596) 936 (2,500) (1,564) 1,445 1,681 3,126 before finance costs and taxation Finance - (1,091) (1,091) (1) (790) (791) (1) (1,637) (1,638) costs Return on 1,320 (3,007) (1,687) 935 (3,290) (2,355) 1,444 44 1,488 ordinary activities before taxation Taxation on (147) - (147) (105) - (105) (208) - (208) ordinary activities Return on 1,173 (3,007) (1,834) 830 (3,290) (2,460) 1,236 44 1,280 ordinary activities after taxation attributable to equity shares Total Total Total Total Total Total Total Total Total Return per 4 6.87 (17.62) (10.75) 6.34 (25.11) (18.77) 9.33 0.33 9.66 Ordinary share (pence) - basic The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement. Balance sheet as at 30 June 2011 (Unaudited) (Unaudited) (Audited) 30 June 30 June 31 December 2011 2010 2010 £000 £000 £000 Non current assets Investments held at 62,846 46,107 60,561 fair value through profit or loss Current assets Debtors 1,169 780 737 Cash at bank 2,485 1,753 6,427 3,654 2,533 7,164 Current liabilities Creditors - amounts (1,159) (1,089) (920) falling due within one year Net current assets 2,495 1,444 6,244 Total assets less 65,341 47,551 66,805 current liabilities Creditors - amounts falling due after more than one year Zero Dividend (35,628) (25,577) (34,566) Preference shares Total net assets 29,713 21,974 32,239 Capital and reserves Equity share capital 171 131 171 Redemption reserve 88 88 88 Capital reserve 13,144 12,817 16,151 Special reserve 7,469 7,454 7,472 Share premium 6,916 - 6,887 Revenue reserve 1,925 1,484 1,470 Total equity 29,713 21,974 32,239 shareholders' funds NAV per share - 174.08 167.70 188.88 Ordinary shares (pence) - UK Accounting Standards basis NAV per share - 175.84 167.70 190.81 Ordinary shares (pence) - Articles of Association basis Reconciliation of movements in shareholders' funds for the six months ended 30 June 2011 (Unaudited) Share Redemption Capital Special Share Revenue capital reserve reserve reserve premium reserve Total £000 £000 £000 £000 £000 £000 £000 For the six months ended30 June 2011 Balance at 1 171 88 16,151 7,472 6,887 1,470 32,239 January 2011 Return on - - (3,007) - - 1,173 (1,834) ordinary activities after taxation Under accrued - - - (3) - - (3) transaction costs Release of - - - - 29 - 29 premium on issuance of Zero Dividend Preference shares Dividends paid - - - - - (718) (718) Balance at 30 171 88 13,144 7,469 6,916 1,925 29,713 June 2011 (Unaudited) Share Redemption Capital Special Share Revenue capital reserve reserve reserve premium reserve Total £000 £000 £000 £000 £000 £000 £000 For the six months ended30 June 2010 Balance at 1 131 88 16,107 7,454 - 1,492 25,272 January 2010 Return on - - (3,290) - - 830 (2,460) ordinary activities after taxation Dividends paid - - - - - (838) (838) Balance at 30 131 88 12,817 7,454 - 1,484 21,974 June 2010 (Audited) Share Redemption Capital Special Share Revenue capital reserve reserve reserve premium reserve Total £000 £000 £000 £000 £000 £000 £000 For the year ended 31 December 2010 Balance at 1 131 88 16,107 7,454 - 1,492 25,272 January 2010 Return on - - 44 - - 1,236 1,280 ordinary activities after taxation Issue of 40 - - - 6,887 - 6,927 Ordinary shares Over accrued - - - 18 - - 18 transaction costs Dividends paid - - - - - (1,258) (1,258) Balance at 31 171 88 16,151 7,472 6,887 1,470 32,239 December 2010 Cashflow statement for the six months ended 30 June 2011 (Unaudited) (Unaudited) Six months Six months (Audited) ended ended Year ended 30 June 30 June 31 December 2011 2010 2010 Notes £000 £000 £000 Net cash inflow 7 796 475 1,042 from operating activities Servicing of finance Interest paid - (1) (1) Taxation Overseas tax paid (155) (54) (159) Financial investments Purchases of (17,909) (19,208) (34,486) investments Sales of 14,047 15,378 29,573 investments Net cash outflow (3,862) (3,830) (4,913) from financial investments Equity dividends (718) (838) (1,258) paid Net cash outflow (3,939) (4,248) (5,289) before financing Financing Issue of Ordinary (3) - 5,715 shares and Zero Dividend Preference shares and associated costs Net cash (outflow)/ (3) - 5,715 inflow from financing (Decrease)/increase (3,942) (4,248) 426 in cash Reconciliation of net cashflow to movements in net debt (Unaudited) (Unaudited) Six months Six months (Audited) ended ended Year ended 30 June 30 June 31 December 2011 2010 2010 £000 £000 £000 (Decrease)/increase (3,942) (4,248) 426 in cash as above Net change in debt (1,062) (790) (9,779) due in more than one year Movement in net debt (5,004) (5,038) (9,353) for year Net debt as at 1 (28,139) (18,786) (18,786) January Net debt as at 30 (33,143) (23,824) (28,139) June Notes to the half year report 1. These financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (issued in January 2009). The accounting policies applied to this half year report are consistent with those applied in the accounts for the year ended 31 December 2010. 2. The figures and financial information for the year ended 31 December 2010 are an extract from the latest published accounts and do not constitute statutory accounts. Full accounts for that period have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The accounts for the six months ended 30 June 2011 and for the six months ended 30 June 2010 are unaudited and do not constitute statutory accounts. 3. On 19 July 2011 the Directors declared a second interim dividend of 1.6p per Ordinary share for the year ending 31 December 2011 to holders of Ordinary shares on the register on 29 July 2011. The Ordinary shares will be marked ex-dividend on 27 July 2011 and the dividend will be paid on 31 August 2011. 4. The total return per Ordinary share is based on the return on ordinary activities after taxation of £(1,834,000) (six months ended 30 June 2010: £ (2,460,000); year ended 31 December 2010 £1,280,000) and on 17,068,480 Ordinary shares in issue during the six months ended 30 June 2011 (six months ended 30 June 2010: 13,103,065 shares; year ended 31 December 2010 weighted average: 13,255,163 shares). 5. The Net Asset Value differences reported below arise from the treatment of the premium (net of expenses) from the issue of Zero Dividend Preference ("ZDP") shares in December 2010 of £330,000. In accordance with UK Accounting Standards this has been included with the ZDP liability and is being amortised over the life of the Company. In accordance with the Articles of Association the premium has been included with shareholders equity and the ZDP liability reflects their accrued capital entitlement at 30 June 2011 and 31 December 2010. The net asset value per share and the net assets available to each class of share calculated in accordance with UK Accounting Standards, are as follows: Net Net asset value Net assets asset value Net assets per share available per share available 30 June 30 June 31 December 31 December 2011 2011 2010 2010 Pence £000 Pence £000 17,068,480 174.08 29,713 188.88 32,239 Ordinary shares of £0.01 each in issue 21,180,373 Zero 168.21 35,628 163.20 34,566 Dividend Preference sharesof £0.01 each in issue* * Classified as a liability. The net asset value per share and the net assets available to each class of share calculated in accordance with the Articles of Association, are as follows: Net Net asset Net assets asset Net assets value value per share available per share available 30 June 30 June 31 31 December December 2011 2011 2010 2010 Pence £000 Pence £000 17,068,480 Ordinary shares of £0.01 175.84 30,014 190.81 32,569 each in issue 21,180,373 Zero Dividend Preference 166.79 35,327 161.64 34,236 shares of £0.01 each in issue* * Classified as a liability. 6. The taxation charge of £147,000 (30 June 2010: £105,000 and 31 December 2010: £208,000) relates to irrecoverable overseas taxation. 7. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities: (Unaudited) (Unaudited) Six months Six months (Audited) ended ended Year ended 30 June 30 June 31 December 2011 2010 2010 £000 £000 £000 Total return on (1,687) (1,564) 3,126 ordinary activities before finance costs and taxation Capital return 3,007 2,500 (1,681) before finance costs and taxation Other debtors 13 5 (22) Accrued income and (297) (207) (12) prepayments Other creditors (44) (110) (66) Investment (196) (149) (303) management fee capitalised Net cash inflow 796 475 1,042 from operating activities 8. Investment management fee charged by Premier Fund Managers Limited. (Unaudited) (Unaudited) Six months Six months (Audited) ended ended Year ended 30 June 30 June 31 December 2011 2010 2010 £000 £000 £000 Basic fee: 40% 130 99 201 charged to revenue 60% charged to 196 149 303 capital 326 248 504 9. It is the intention of the Directors to conduct the affairs of the Company so that they satisfy the conditions for approval as an investment trust company set out in section 1158 of the Income and Corporation Tax Act 2010. 10. The report will be mailed to shareholders on or around the 19 August 2011. Interim management report Premier Energy and Water Trust PLC is required to make the following disclosures in its half year report: Principal Risks and Uncertainties The Board believes that the principal risks and uncertainties faced by the Company continue to fall into the following categories: • Structure of the Company and gearing. • Dividend levels. • Currency risk. • Liquidity risk. • Market price risk. • Discount volatility. • Operational. • Accounting, legal and regulatory. Information on each of these is given in the Report of the Directors in the Annual Report for the year ended 31 December 2010. Related Party Transactions There have been no related party transactions during the six months ended 30 June 2011. Directors' Responsibility Statement The Directors are responsible for preparing the half year report, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge: • The condensed set of financial statements within the half year report has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports"; and • The Interim Management Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FSA's Disclosure and Transparency Rules. For and on behalf of the Board. Geoffrey Burns Chairman 9 August 2011 Shareholder information 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. 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 Shares can be purchased through your usual stockbroker. The monthly fact sheet, displaying current holdings and fund managers' commentary, and information on the Premier ISA can be obtained at www.premierassetmanagement.co.uk, by emailing marketing@premierfunds.co.uk or by calling 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. Directors and advisers Directors Geoffrey Burns (Chairman) Adam Cooke Ian Graham Michael Wigley Charles Wilkinson (appointed 23 February 2011) Investment Manager Premier Fund Managers Limited Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: 01483 306 090 www.premierassetmanagement.co.uk Authorised and regulated by the Financial Services Authority Secretary and Premier Asset Management Limited Registered Office Eastgate Court High Street Guildford Surrey GU1 3DE Telephone: Mike Nokes 020 7982 1260 Company Number 4897881 Website www.premierassetmanagement.co.uk Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0871 664 0300 (calls Overseas: +44 208 639 cost 10p per minute plus network 3399 extras) Email: ssd@capitaregistrars.com Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Joint Stockbrokers J.P. Morgan Cazenove Fairfax I.S. PLC 10 Aldermanbury 46 Berkeley Square London EC2V 7RF Mayfair Telephone: 020 7325 1000 London W1J 5AT Telephone: 020 7598 5368

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