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Menhaden PLC
Annual Report for the year ended 31 December 2020
Menhaden PLC – Annual Report
Menhaden PLC – Annual Report
Menhaden PLC – Annual Report
Menhaden Capital PLC
Menhaden Capital PLC
Menhaden Capital PLC
Company Summary
Company Summary
Company Summary
Annual Report for the period from incorporation on
Annual Report for the period from incorporation on
Annual Report for the period from incorporation on
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official List
30 September 2014 to 31 December 2015
30 September 2014 to 31 December 2015
30 September 2014 to 31 December 2015
List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of
List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of
and traded on the main market of the London Stock Exchange. The Company is a London Stock Exchange’s Green
Investment Companies.
Investment Companies.
Economy Mark issuer. The Company is also a member of the Association of Investment Companies.
Investment Objective
Investment Objective
Investment Objective
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
in businesses and opportunities delivering or benefiting from the efficient use of energy and resources irrespective of
in businesses and opportunities that are demonstrably delivering or benefiting significantly from the efficient use of
in businesses and opportunities delivering or benefiting from the efficient use of energy and resources irrespective of
their size, location or stage of development.
energy and resources irrespective of their size, location or stage of development.
their size, location or stage of development.
Management
Management
Management
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
provided on pages 25 and 26.
provided on pages 23 and 24.
provided on pages 25 and 26.
Capital Structure
Capital Structure
Capital Structure
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 36 and in note 12
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 37 and in note 12
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 36 and in note 12
to the financial statements on page 75.
to the financial statements on page 75.
to the financial statements on page 75.
ISA Status
ISA Status
ISA Status
The Company’s shares are eligible for Stocks and Shares ISAs.
The Company’s shares are eligible for Stocks and Shares ISAs.
The Company’s shares are eligible for Stocks and Shares ISAs.
Retail Investors advised by IFAs
Retail Investors advised by IFAs
Retail Investors advised by IFAs
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
trust.
trust.
trust.
Menhaden
Menhaden
Menhaden
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
A member of the Association of Investment Companies
A member of the Association of Investment Companies
A member of the Association of Investment Companies
Disability Act
Disability Act
Disability Act
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
without the need for an intermediate operator, for this service please call 0800 731 1888.
without the need for an intermediate operator, for this service please call 0800 731 1888.
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
without the need for an intermediate operator, for this service please call 0800 731 1888.
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
Environment
Environment
Environment
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
the ISO 14001 certificate for environmental management.
the ISO 14001 certificate for environmental management.
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
The pulp is bleached using a totally chlorine free (TCF) process.
The pulp is bleached using a totally chlorine free (TCF) process.
Menhaden PLC
Menhaden PLC
Menhaden PLC
25 Southampton Buildings
25 Southampton Buildings
25 Southampton Buildings
London WC2A 1AL
London WC2A 1AL
London WC2A 1AL
www.menhaden.com
www.menhaden.com
Tel +44(0) 203 008 4910
Tel +44(0) 203 008 4910
www.menhaden.com
Tel +44(0) 203 008 4910
Perivan 260498
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1
Strategic Report
2
4
5
8
10
11
12
14
18
22
Company Performance
Company Summary
Chairman’s Statement
Investment Objective and Policy
Investment Committee
Investment Process
Portfolio
Portfolio Manager’s Review
Environmental Impact Statement
Business Review
3
Financial Statements
63
64
65
66
67
Income Statement
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
2
Governance
35
37
41
Board of Directors
Directors’ Report
Statement of Directors’
Responsibilities
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Directors’ Remuneration Policy
Independent Auditor’s Report
42
48
52
54
55
4
Further Information
83
84
85
87
89
94
Shareholder Information
AIFMD Disclosures
Glossary of Terms
How to Invest
Notice of Annual General Meeting
Explanatory Notes to the
Resolutions
Company Information
96
Menhaden PLC
Annual Report for the year ended 31 December 2020
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Strategic Report
Company Performance
As at
31 December 2020
132.7p
For the year ended
31 December 2020
13.2%
NAV per share
NAV per share
(total return)*
2019: 117.5p
2019: 30.5%
99.0p
Share price
3.0%
Share price
(total return)*
2019: 96.5p
2019: 45.3%
25.4%
Share price discount
to NAV per share*
2.0%
Total ongoing charges*
2019: 17.9%
2019: 2.0%
This report contains terminology that may be unfamiliar to some readers. The Glossary on pages 85 to 86 gives definitions
for frequently used terms.
*Alternative performance measures (APMs)
02 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Total Return Performance – One Year
%
120.0
110.0
100.0
90.0
80.0
70.0
60.0
Dec 19
Mar 20
RPI +3%
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2019
June 20
Menhaden PLC
Share Price Total Return
Sep 20
Dec 20
Menhaden PLC
NAV Total Return
Total Return Performance – Three Years
%
150.0
140.0
130.0
120.0
110.0
100.0
90.0
80.0
Dec 17
Jun 18
Dec 18
RPI +3%
Jun 19
Menhaden PLC
Share Price Total Return
Dec 19
Jun 20
Menhaden PLC
NAV Total Return
Dec 20
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2017
To better reflect our non-benchmarked total return investment strategy, the Board has decided to use Retail Price Index
(“RPI”) plus 3% as its primary long term financial performance comparator and to remove reference to the MSCI World
Total Return Index from the investment objective. This more meaningfully aligns with the Company’s investment strategy
which does not consider any stock market index weightings.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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Strategic Report
Company Summary
Portfolio Distribution
By Asset Allocation
2.9%
2.1%
16.2%
By Geography
5.9%
3.2%
27.5%
78.8%
63.4%
Public Equities
Liquidity
Private Investments
Yield Investments
North America
UK
Europe
Asia & Emerging Markets
By Theme
1.8%
10.8%
29.2%
58.2%
Resource & Energy Efficiency
Clean Energy
Sustainable Transport
Water & Waste
Investment Themes
Theme
Description
Clean energy production
Companies producing power from clean sources such as solar or wind
Resource and energy efficiency
Sustainable transport
Water and waste management
Companies focused on improving energy efficiency (e.g. in buildings or
manufacturing processes) or creating emissions reduction products or
services
Companies in the transport sector focused on helping to reduce harmful
air emissions/distance travelled
Companies with products or services that enable reductions in
usage/volumes and/or smarter ways to manage water and waste
04 Menhaden PLC
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Chairman’s Statement
Sir Ian Cheshire
I am pleased to present our sixth annual report since the
launch of the Company in July 2015. This report covers
the year ended 31 December 2020.
Our Portfolio Manager has provided a full description of
the development and performance of the portfolio over the
fifth full year of your Company’s operation in the Portfolio
Manager’s Review on pages 14 to 17.
Performance
The Company’s net asset value (“NAV”) per share total
return* for the year was 13.2%, adjusted for the dividend
paid (2019: 30.5%) and the share price total return* was
3.0% (2019: 45.3%).
The Company does not have a formal benchmark and our
Portfolio Manager does not invest by reference to an index
and instead, to reflect our non-benchmarked total return
strategy more meaningfully, the Company uses RPI+3%
as its primary performance comparator. The year under
review saw a RPI+3% total return of 4.2%. By way of
additional comparison, the AIC Environmental Sector rose
by 23.7% (2019: 27.4%).
Following a difficult start to the year, most asset classes
in the Company’s portfolio have recovered from the impact
of the Covid-19 pandemic and provided good returns in
the second half of the year. As the pandemic led to
countries adopting varying degrees of social distancing,
one of our largest holdings in the portfolio, Charter
Communications now
the
Company’s NAV having benefitted from the favourable
market conditions for that business. Brazilian ports
operator, Ocean Wilson, was a detractor
from
performance and suffered during the market turmoil
brought about by the pandemic. It has yet to recover,
although our Portfolio Managers remain optimistic for the
long-term prospects for the business.
represents 19.4% of
Overall, the Board remains encouraged by the positive
performance of the portfolio which validates the Portfolio
Manager’s investment strategy of selecting competitively
advantaged businesses
are demonstrably
delivering or benefiting significantly from the efficient use
of resources.
that
Environmental Impact
This year we have again integrated the Company’s impact
reporting within the annual report. The report will also be
made available as a separate document, which will include
the website
detail,
the methodological
www.menhaden.com. This Impact Statement shows the
Company’s holdings helped save 32,000 MWh of electricity
in 2020, equivalent to powering roughly 10,850 houses for
one year, and 30,000 tonnes of CO2e emissions, equivalent
to taking over 19,800 cars off the road.
on
2020 Continuation Vote
As already noted at the interim stage, the Board was
pleased to see shareholders’ strong support of the
Company and its investment proposition at our last Annual
General Meeting in June 2020. With 98% of votes cast in
favour of the Company continuing as an investment trust
for a further five years, we are delighted to have received
a solid mandate to continue with our long-term plans for
the development of the Company.
Following the successful continuation vote, the Board
reviewed its future strategy for the Company in December
2020 and looks forward to implementing that strategy in
the coming years.
Share Price Discount
At the year-end, the discount* to the NAV per share at which
to
the Company’s shares
25.4% (2019: 17.9%) and the discount currently remains at
this level.
trade had widened
*Alternative Performance Measure (see Glossary beginning on page 85)
Menhaden PLC
Annual Report for the year ended 31 December 2020
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Strategic Report
Chairman’s Statement
continued
The Company’s share price discount continues to be a
matter that the Board monitors closely.
The Board’s aim is for the Company to eventually be in a
position to grow through the issuance of new shares and
the Board has asked shareholders to renew the Directors’
share issuance authorities at this year’s Annual General
Meeting. Enlarging the capital base will reduce the annual
ongoing charges and enhance the secondary market
liquidity of the Company’s shares, which the Board believes
is in the interests of all shareholders. However, the Company
can only issue new shares at a price representing a premium
to the NAV per share and therefore the Board remains
focused on improving the Company’s share rating through
investment performance and an effective marketing strategy.
to the arrangements for the AGM should infection levels or
continuing government restrictions dictate. In that case, the
Board may decide to hold a truncated meeting or postpone
the meeting to a later date. The situation will be kept under
constant review and any changes to the AGM will be
communicated on the Company’s website. Shareholders
are encouraged to consult the Company’s website at
www.menhaden.com for any final arrangements.
In case no physical AGM will be possible, the Board intends
to host a webinar in addition of the AGM to enable the
Portfolio Manager
to give a presentation online.
Shareholders should send any questions they may have to
the Company Secretary at info@frostrow.com. Further
details will be made available nearer the time.
by
can
online
The Board strongly encourages all shareholders to exercise
their votes in respect of the meeting in advance.
Shareholders
visiting
vote
www.signalshares.com and following instructions. Any
shareholders who require a hard copy form of proxy may
request one from the registrar, Link Group. Voting by proxy
will ensure that your votes are registered in the event that
attendance at the AGM is not possible or restricted, or if the
meeting is postponed (your votes will still be valid when the
meeting is eventually held). The Board will continue to
monitor the Government’s advice and urges all shareholders
to comply with any restrictions in place at the time of
the AGM.
Dividend
The Company complies with the United Kingdom’s
investment trust rules regarding distributable income and
the Company’s dividend policy is that the Company will
only pay dividends sufficient to maintain investment trust
status. Consequently, the Board is not recommending a
final dividend for the year.
As reported previously, the Board has been of the opinion
that share buybacks are not always in the interests of
shareholders, as this would reduce the size of the Company
and increase the ongoing charges ratio. Instead, and in
addition to monitoring the Portfolio Manager’s performance,
the Board and the AIFM have focused on the Company’s
marketing and distribution strategy. However, the Board
keeps the possibility of share buybacks under continuous
review. Accordingly, the Board has asked shareholders to
renew the authority to repurchase existing shares in the
market at the forthcoming Annual General Meeting.
Annual General Meeting
The Company’s sixth Annual General Meeting (“AGM”) will
be held at the offices of Frostrow Capital LLP, 25
Southampton Buildings, London WC2A 1AL on Thursday,
3 June 2021 at 12 noon. The Notice convening the AGM
together with explanations of the proposed resolutions can
be found on pages 89 to 95.
At the time of writing, it is hoped that it will be possible to
hold the AGM in its normal format at the venue set out
above. The Board will keep the impact of the Covid-19
pandemic under review and will make necessary changes
06 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Outlook
The full extent of the economic and social impact of the
pandemic is as yet unclear, with effective vaccines against
Covid-19 having been administered to some of the most
vulnerable in a number of countries. Progress with the roll
out of the vaccines remains encouraging.
Meanwhile, focus continues to be placed on addressing the
global climate crisis and consumer behaviour continues to
evolve in response. The Board remains confident of the
resilience and long-term prospects of the portfolio as
well as
the environmental and
resource-efficiency sectors.
the prospects of
Sir Ian Cheshire
Chairman
8 April 2021
Menhaden PLC
Annual Report for the year ended 31 December 2020
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Strategic Report
Investment Objective and Policy
present an attractive risk and reward profile are available in
emerging markets then these may also be pursued.
While many of the companies forming the portfolio are
headquartered in the UK, USA or Europe, it should be
noted that many of those companies are global in nature,
so their reporting currency may not reflect their actual
geographic or currency exposures.
Investment Restrictions
Subject to any applicable investment restrictions contained
in the Listing Rules from time to time, the Portfolio Manager
will not make an investment if it would cause the Company
to breach any of the following limits at the point of
investment:
• no more than 20% of the Company’s gross assets may
be invested, directly or indirectly through external funds,
in the securities of any single entity; and
• no more than 20% of the Company’s gross assets may
be invested in a single external fund.
Hedging
The Company may enter into any hedging or other
derivative arrangements which the Portfolio Manager
(within such parameters as are approved by the Board and
the AIFM and in accordance with the Company’s
investment policy) may from time to time consider
appropriate
the purpose of efficient portfolio
management, and the Company may for this purpose
leverage through the use of options, futures, options on
futures, swaps and other synthetic or derivative financial
instruments.
for
Cash Management
There is no restriction on the amount of cash or cash
equivalent instruments that the Company may hold and
there may be times when it is appropriate for the Company
to have a significant cash position instead of being fully or
near fully invested.
Investment Objective
The Company’s investment objective is to generate long-
term shareholder returns, predominantly in the form of
capital growth, by
in businesses and
investing
opportunities
that are demonstrably delivering or
benefitting significantly from the efficient use of energy and
resources irrespective of their size, location or stage of
development.
To reflect its non-benchmarked total return investment
strategy, the Company uses RPI+3% (previously MSCI
World Total Return Index in sterling) as its primary long term
financial performance comparator. In addition to this
absolute return performance measure, the Company also
uses a range of specialist, sectoral and peer group
benchmarks to assess its relative performance.
Investment Policy
The Company’s investment objective is pursued through
constructing a conviction-driven portfolio consisting
primarily of direct listed and unlisted holdings across asset
classes and geographies.
Asset Allocation
The Company invests, either directly or through external
funds, in a portfolio that is comprised of three main
allocations:
• listed equity;
• yield assets; and
• special situations.
The flexibility to invest across asset classes affords the
Company two main benefits:
• it enables construction of a portfolio based on an
assessment of market cycles; and
• it enables investment in all opportunities which benefit
from the investment theme.
It is expected that the portfolio will comprise approximately
15 to 30 positions.
Geographic Focus
Although the portfolio is predominantly focused on
investments in developed markets, if opportunities that
08 Menhaden PLC
Annual Report for the year ended 31 December 2020
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The Listing Rules restrict the Company from investing more
than 10% of its total assets in other listed closed-ended
investment funds, save that this restriction does not apply
to investments in closed-ended investment funds which
themselves have published investment policies to invest no
more than 15% of their total assets in other listed closed-
ended investment funds. The Company will comply with
this investment restriction (or any variant thereof) for so long
as such restriction remains applicable.
At the date of this report, the Company was not invested
in any closed-ended investment funds.
In the event of any material breach of the investment
restrictions applicable to the Company, shareholders will
be informed of the actions to be taken by the AIFM through
an announcement to the Stock Exchange.
Borrowing and Leverage Limits
The Company may incur indebtedness for working capital
and investment purposes, up to a maximum of 20% of the
net asset value at the time of incurrence. The decision on
whether to incur indebtedness may be taken by the
Portfolio Manager within such parameters as are approved
by the AIFM and the Board from time to time. There will be
no limitations on indebtedness being incurred at the level
of the Company’s underlying investments (and measures of
indebtedness for these purposes accordingly exclude debt
in place at the underlying investment level).
At the date of this report, the Company had no borrowings.
In addition, under the AIFMD rules, the Company is required
to set maximum leverage limits. Leverage is defined under
the AIFMD as any method by which the total exposure of
an AIF is increased. Further explanations are provided in
the AIFMD Disclosures on page 84 and in the Glossary on
pages 85 and 86.
Other Investment Restrictions
The Company will at all times invest and manage its assets
with the objective of spreading risk and in accordance with
its published investment policy.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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Strategic Report
Investment Committee
Menhaden Capital Management LLP has been appointed as the Company’s Portfolio Manager. The Portfolio Manager’s
Investment Committee makes all investment and disinvestment decisions in respect of the Company.
Graham Thomas
Graham is the non-executive chairman of the Investment Committee. Before founding Menhaden
Capital Management LLP with Ben Goldsmith, Graham chaired the Executive Committee of RIT
Capital Partners plc. Prior to this, Graham was the head of the Standard Bank Group’s US$3 billion
Principal Investment Management division, which was established in 2008 under his leadership. He
joined Standard Bank from MidOcean Partners in London, where he was a founding partner. Before
MidOcean Partners, he was an Executive Director in the Investment Banking division of Goldman
Sachs & Co.
Graham is currently CEO of private equity firm, Stage Capital, and on the investment committee of
Apis Partners. He is a Rhodes Scholar with degrees from Oxford and the University of Cape Town.
Ben Goldsmith
Ben is the chief executive officer of Menhaden Capital Management LLP. Before co-founding
Menhaden, Ben co-founded WHEB Asset Management, one of Europe’s leading sustainability-
focused investment management firms. Ben is a director of Cavamont Holdings, the Goldsmith family
investment vehicle.
Ben chairs the UK Conservative Environment Network, and is a Trustee of The Children’s Investment
Fund Foundation, a globally leading climate and health focused philanthropic foundation. Ben is a
non-executive director of the UK Government’s Department for Environment, Food and Rural Affairs.
Luciano Suana
Luciano is the chief investment officer at Menhaden Capital Management LLP. Before joining
Menhaden Capital Management LLP, Luciano was a Director of Barclays Capital in the Capital
Markets division where he ran the credit trading operations for Brazil out of São Paulo. Before
Barclays, Luciano was a Director of Dresdner Kleinwort in London. There he focused mainly on
Infrastructure, Utilities and Real Estate assets as head of the Illiquids Credit group.
Luciano holds a Licenciatura in business administration from Universitat Autònoma de Barcelona and
was granted the Premio Extraordinario de Fin de Carrera for outstanding academic performance.
10 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Investment Process
Investment Process
The portfolio management team, which has day to day
responsibility for managing the portfolio, is led by Luciano
Suana, and comprises Ben Goldsmith and Edward Pybus.
The portfolio management team presents investment
opportunities to the Investment Committee, which is
chaired by Graham Thomas.
Thematically, the team seeks to invest in opportunities,
publicly traded or private, which either demonstrably
deliver or benefit significantly from the more efficient use
of energy and resources. All investment opportunities are
assessed through a value lens, with the aim of acquiring
investments with low downside risk, backed by identifiable
assets and cash flows, at attractive valuations. The team
seeks to invest with a long-term perspective, and with high
conviction. Consequently, the portfolio comprises around
20 positions and the team aims for portfolio turnover to
be low.
When identifying suitable investment opportunities, the
portfolio management team is cognisant of the UK
Stewardship Code and the UN Principles of Responsible
Investment.
Investment Committee
The Investment Committee meets weekly in order to
consider the investment opportunities presented by the
portfolio management team. All investment decisions must
be made with the unanimous consent of all members of
the Investment Committee unless one of the members has
a potential conflict of interest, in which case that member
will excuse himself from that particular decision.
Investment Network
The portfolio management team has access to a
proprietary investment network, which includes a group of
investment managers of external funds and, from time to
time, external experts and advisers. The portfolio
management team believe that this is of benefit to the
investment process and helps to source opportunities that
they believe would not otherwise be available to the
Company.
Menhaden PLC
Annual Report for the year ended 31 December 2020
11
260498 Menhaden 01pp-34pp.qxp 13/04/2021 19:32 Page 12
1
Strategic Report
Portfolio
Investments held as at 31 December 2020
Investment
Alphabet
Country/region
United States
Fair
Value
£’000
20,813
% of
Total Net
Assets
19.6
Charter Communications
United States
20,641
19.4
Safran
X-ELIO*1
Canadian Pacific Railway
Calisen PLC*2
Canadian National Railway
Microsoft
Airbus
Ocean Wilsons Holdings
Top Ten investments
TCI Real Estate*
Waste Management
Union Pacific
ASML Holding
LAM Research
KLA
WCP Growth Fund LP*3
Total investments
Net Current Assets
Total Net assets
France
11,354
10.7
Spain
Canada
UK
Canada
United States
France
Bermuda
United States
United States
United States
Netherlands
United States
United States
UK
11,120
7,860
6,019
5,141
4,665
4,340
3,258
95,211
2,235
1,898
1,369
889
725
682
26
10.5
7.4
5.7
4.8
4.4
4.1
3.1
89.7
2.1
1.8
1.3
0.8
0.7
0.7
–
103,035
3,097
106,132
97.1
2.9
100.0
1 Investment made through Helios Co-Invest L.P.
2 Investment made through KKR Evergreen Co-Invest L.P.
3 The data regarding the WCP Growth Fund LP (the “Partnership”) does not necessarily reflect the current or expected future performance of the Partnership and should
not be used to compare returns of the Partnership against returns of other private equity funds.
* Unquoted
12 Menhaden PLC
Annual Report for the year ended 31 December 2020
260498 Menhaden 01pp-34pp.qxp 13/04/2021 19:32 Page 13
Business Description Theme
Delivers a range of internet based products and services for users and advertisers, Resource & energy efficiency
which are powered by renewable energy with the group being the largest corporate
buyer of renewable power worldwide
Owns and operates telecommunications infrastructure across the USA, Resource & energy efficiency
which will underpin the Internet of Things
Designs, manufactures and services next generation aircraft engines which Sustainable transport
offer significant fuel efficiency savings
Develops and operates solar energy assets Clean energy production
Owns and operates (fuel-efficient) freight railways in Canada and the USA Sustainable transport
Invests in utility infrastructure assets including smart meters Resource & energy efficiency
Operates rail freight services across North America, which represent the most Sustainable transport
environmentally friendly way to transport freight over land
Provides cloud infrastructure and software services which deliver energy Resource & energy efficiency
efficiency savings for customers versus legacy solutions
Designs and manufactures next generation commercial aircraft which Sustainable transport
offer significant fuel efficiency savings
Operates ports and provides (lower climate impact) maritime services in Brazil Resource & energy efficiency
Invests in energy-efficient real estate projects Resource & energy efficiency
Provides waste management and environmental services in North America Water & waste management
Operates rail freight services across North America, which represent the most Sustainable transport
environmentally friendly way to transport freight over land
Develops, manufactures & services advanced lithography systems used to Resource and energy
produce more energy efficient semiconductor chips
Develops, manufactures & services etching & deposition equipment used to Resource and energy
produce more energy efficient semiconductor chips
Develops, manufactures & services inspection and metrology equipment used Resource and energy
to increase the efficiency of semiconductor manufacturing
Growth capital fund managed by specialist environmental PE firm, Alpina Partners Resource & energy efficiency
Menhaden PLC
Annual Report for the year ended 31 December 2020
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1
Strategic Report
Portfolio Manager’s Review
Performance
During 2020, the Company’s NAV per share increased
from 117.5p to 132.7p. This represents a total return of
13.2%, adjusted for the dividend paid, and compares to
the RPI +3% total return of 4.2%. The Company’s share
price traded at a 25.4% discount to NAV as at
31 December 2020, having widened from 17.9% at the
end of 2019. The contribution to the 13.2% NAV per share
total return over the period is summarised below:
31 December Contribution
to
NAV %
2020
NAV %
Quoted Equities
Quoted equities represented 78.8% of total NAV at
31 December 2020, and delivered a total return of 17.9%
during the period, adding 13.5% to our NAV. Quoted
equities currently represent more of our portfolio than we
aim for over the long run, due largely to our success in
realising some of our private positions. We are actively
looking for new private investments, but while we do so, we
are pleased to be able to keep the Company’s cash
deployed in attractive investments in public equities.
Investment
Increase/ Contribution
to NAV %
(Decrease) %
Asset Category
Public Equities
Private Investments
Yield Investments
Liquidity
Foreign exchange forwards
Dividend Paid
Expenses
Net Assets
Net Return
78.8
16.2
2.1
1.1
1.8
13.5
Charter Communications
0.7
0.3
0.0
0.5
Alphabet
Canadian Pacific
Microsoft Corp
Canadian National
(0.3)
ASML
(1.8)
Union Pacific
100.0
Lam Research
12.9
KLA
Reinvested Dividend
0.3
Waste Management Inc
Total Return
Net Assets
13.2
Safran
100.0
Ocean Wilsons Holdings
31.1
26.0
33.2
35.9
22.2
23.2
12.7
22.0
19.0
4.8
(0.5)
(7.2)
(17.8)
5.2
4.6
2.1
1.3
1.0
0.2
0.2
0.1
0.1
0.1
(0.1)
(0.3)
(1.0)
Despite the coronavirus pandemic remaining a very real
issue, equity markets in general still finished the calendar
year higher than where they started. We were pleased to be
able to deploy a significant portion of the crystallised gains
from our private investments across our existing public
equities portfolio in March and April. These investments
helped the portfolio generate positive performance during
this calendar year, and we believe are well positioned to
continue to deliver good returns. In the second half of the
year, we initiated positions in three new semiconductor
capital equipment companies, ASML, Lam Research and
KLA, which meet our strict resource efficiency and
fundamental criteria.
14 Menhaden PLC
Annual Report for the year ended 31 December 2020
Airbus
Charter Communications’ underlying business has
remained relatively resilient throughout the coronavirus
pandemic and it remains one of our largest holdings,
representing 19.4% of NAV. The enforced lockdown and
quarantine measures have only served to emphasise
reliance on broadband connectivity as an essential service,
as people have been working and learning remotely. Since
we initiated a position in April 2019, the shares had risen by
approximately 85% by the end of the period. In our view
Charter’s hybrid fibre coax network will serve as a key piece
of infrastructure in the ongoing digital transformation, with
the company’s moves to secure valuable wireless spectrum
in recent auctions only set to further increase its importance.
The Internet of Things (IoT) has the potential to drive
significant energy efficiency savings across residential and
commercial buildings, estimated by McKinsey to be worth
260498 Menhaden 01pp-34pp.qxp 13/04/2021 19:32 Page 15
US$540 billion annually. We remain optimistic on the
company’s prospects and were also pleased to see that the
CEO, Tom Rutledge, extended his contract until 2024.
Despite a coronavirus induced advertising slowdown,
Alphabet’s core business units continued to grow. The
company remains one of the largest holdings in the portfolio,
representing 19.6% of NAV, and we were able to take
advantage of the lower share price to add to the position in
March and April. Since we initiated a position in January
2018, the shares had risen by over 50% by the end of the
period. We remain confident on the company’s prospects,
given its leading position in search and its ability to further
monetise its unparalleled levels of user interaction, but we
do continue to carefully monitor the various antitrust cases
against it. Meanwhile Alphabet continues to push forward
its sustainability agenda and remains one of the largest
corporate buyers of renewable power worldwide, with
agreements covering 5.5GW of wind and solar capacity, and
we are pleased to see that it now aims to run on carbon-
free energy everywhere, at all times, by 2030.
The North American freight rail operators, Canadian
National, Canadian Pacific and Union Pacific,
collectively represent 13.5% of the portfolio. These
businesses possess strong competitive positions and
benefit from genuine pricing power. Railroad traffic volumes
in 2020 were naturally impacted by the economic slowdown
but had mostly recovered on a weekly basis in the fourth
quarter of 2020. Rail is the most environmentally friendly way
to transport freight over land, with current locomotives four
times more fuel efficient than trucking on a per unit basis,
and we believe these companies can continue to take share
from the trucking sector, especially on long distance routes.
Furthermore, the ongoing application of technology to the
railroad, such as autonomous track inspection vehicles,
holds potential to drive further operational efficiencies over
time.
Microsoft was a strong performer this year and we were
happy to take advantage of the market dislocation to
significantly add to our position in March. The holding now
represents 4.4% of our NAV. Whilst, after an initial bounce,
the shares remained flat to the end of the year, Microsoft
continued to gain ground on Amazon, the market leader in
cloud services. The company’s Azure Cloud is at the
forefront of putting the growth of data (and data centres) on
a sustainable footing, with its services being up to 93% more
traditional, onsite enterprise
energy efficient
than
datacentres. Meanwhile the rapid deployment of the
company’s Teams product also continued, with the product
reaching more than 115m daily users during the year. As the
key technology partner for nearly all enterprises, we expect
the group to continue benefiting from the secular digitisation
theme for many years.
We initiated positions in a small basket of semiconductor
capital equipment companies, comprising ASML, Lam
Research and KLA in October 2020. In aggregate, these
companies represent 2.2% of NAV. These companies
provide specialised tools which are used in different stages
of
the semiconductor manufacturing process. The
semiconductor industry’s focus on productivity and
efficiency is well documented. Over the last fifty years
Moore’s Law has foretold the doubling of computing power
approximately every 2 years, whilst Koomey’s law describes
how energy efficiency has doubled every approximately
1.6 years, in terms of computations per unit of electricity
(kWh). With the adoption of artificial intelligence accelerating
demand growth for computational power, the onus remains
on the semiconductor industry to continue developing and
manufacturing more advanced and energy efficient chips.
We believe these companies are an excellent way to obtain
exposure to this resource efficient theme. Each of them has
come to effectively dominate its respective niche and is
tightly integrated with its customers’ operations.
Waste Management was finally able to complete its
acquisition of smaller peer Advanced Disposal Services in
November 2020, more than 18 months after the transaction
was announced, after agreeing to divest certain business
units. The company is constantly working to improve the
sustainability of its operations and opened two new fully
automated recycling plants in Salt Lake City and Raleigh,
in Chicago. Waste
complementing
Management’s leadership team hopes that automation will
significantly improve the economics of the recycling
business. We continue to believe that the company offers
an appealing combination of predictable free cash flow
generation, solid competitive position and a shareholder
friendly management team.
facility
first
its
Whilst Safran and Airbus have suffered this year from the
coronavirus epidemic’s impact on the commercial aviation
industry, we believe that both have responded positively.
Each management team has reacted quickly to ensure their
respective business can weather the current difficulties. We
expect Safran’s aftermarket services and sales to recover
Menhaden PLC
Annual Report for the year ended 31 December 2020
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1
Strategic Report
Portfolio Manager’s Review
continued
first as airlines resume operations and consequently chose
to materially increase our position in May. Safran represents
10.7% of NAV, whilst Airbus represents 4.1% of NAV. Longer
term, we do not believe that the current market turmoil
fundamentally alters the drivers underpinning the secular
growth of aviation, with an estimated 75% of the global
population believed to have never flown. We still believe that
Airbus and Safran have important roles to play in helping the
industry transition to a more sustainable footing. Current
industry targets include stabilising carbon emissions from
2020 to 2035 and then reducing emissions to half of 2005
levels by 2050, under the Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA). Both Airbus and
Safran are working to realise the goal of presenting the first
zero-emission commercial aircraft by 2035 as part of the
French government’s plan.
Brazilian ports operator, Ocean Wilson, suffered during the
market turmoil and has yet to recover. Whilst container and
towage volumes at its ports have been negatively impacted,
we expect this to reverse as the Brazilian economy reopens.
Longer term we still believe a growing Brazilian market will
drive a significant improvement in the group’s financial
performance. Furthermore, we believe that there is
significant value in the shares, with the current price implying
a value
for the ports business of only circa 3x
normalised EBITDA.
Yield Investments
Our portfolio of yield investments represented 2.1% of our
total NAV as at 31 December 2020, and delivered total
returns of 15.1% during the period, adding 0.3% to our NAV.
Investment
Brookfield Renewable Partners
TCI Real Estate
Increase/ Contribution
to NAV %
(Decrease) %
11.5
5.6
0.2
0.1
We continue to search for attractive yield investments in the
current low interest rate environment, with prospective
returns not suitably compensating investors for the
associated risk. Whilst we did expect the TCI Real Estate
Partners Fund III, which currently represents 2.1% of NAV,
to draw down additional capital from our commitment over
the coming year, the economic impact of the pandemic has
made that less certain. Our current undrawn commitment
stands at approximately US$12.0 million at the end of the
period. This fund provides asset-backed loans to prime real
16 Menhaden PLC
Annual Report for the year ended 31 December 2020
estate development projects that are best in class in terms
of energy efficiency and environmental standards.
We believe these loans offer an outstanding risk-reward
proposition with multiple layers of downside protection
including seniority in the capital structure, loan-to-value ratios
of below 65% and third party guarantees as additional
collateral where required. The strategy has historically
generated returns of circa 11% annually since inception.
We opted to sell all of our remaining stake in Brookfield
Renewable Partners on valuation grounds during the
period and in order to redeploy the proceeds into Safran.
Since initiating this position in January 2016, and
subsequently adding during periods of weakness, our
investment in Brookfield delivered a total return (including
dividends) of 1.8x over a period of just over four years.
Private Investments
Our portfolio of private investments represented 16.2% of
our total NAV as at 31 December 2020, and delivered total
returns of 4.2% during the period, adding 0.7% to our NAV.
Investment
Calisen Group
Perfin Apollo 12
X-ELIO
WCP Growth Fund LP
Increase/ Contribution
to NAV %
(Decrease) %
32.5
(2.2)
(2.5)
(94.2)
1.6
(0.1)
(0.3)
(0.4)
After completing an initial public offering in February 2020,
Calisen Group (formerly known as Calvin Capital), the
smart meter operator, received a takeover offer from a
consortium of infrastructure investors led by BlackRock in
December. The takeover is expected to complete in April
2021, with the bid of 261p per share representing a
premium of approximately 9% compared to its initial public
offering price. This transaction marked the end of our original
co-investment in Calvin Capital, which was made alongside
KKR in January 2017, and generated a return on investment
of approximately 1.7x over four years.
transmission
Electricity
infrastructure developer and
operator, Perfin Apollo 12, completed its initial public
offering in January. We received the cash proceeds arising
from the sale of our entire holding. This completed a
successful investment which has generated a return of
nearly four times our initial sterling investment in just two and
a half years.
260498 Menhaden 01pp-34pp.qxp 13/04/2021 19:32 Page 17
From our private portfolio, we can now point to three
successful full exits, and one partial. However, the presence
of better opportunities within public markets has meant that
both our yield and private buckets have remained below
their target allocations. Whilst we continue to search
diligently for suitable yield and private investments, which
offer an attractive balance between risk and reward, we
intend to make sure they only improve the quality of the
portfolio.
The Company’s net asset value has now successfully
compounded at circa 9.6% annually, after fees, for over five
years and we remain optimistic on both our current
portfolio’s prospects and the broader resource efficiency
theme.
NAV
per share
pence
83.9
132.7
9.6%
31 December 2015
31 December 2020
Annualised Net Return
Menhaden Capital Management LLP
Portfolio Manager
8 April 2021
X-ELIO, the Spanish solar operator and developer, remains
our single largest private holding, representing 10.5% of NAV
at the year end. This is after we received cash proceeds from
the partial sale of our investment to Brookfield. We sold 30%
of our holding, and approximately 20% of the proceeds from
the sale were retained by the KKR-managed holding entity
for the purpose of funding X-ELIO’s near term growth,
resulting in a distribution to Menhaden of $4.9 million. The
transaction was completed in line with carrying value. X-Elio
also successfully sold a portfolio of more than 500MW of
Spanish solar assets to China Three Gorges Europe in
August 2020.
The WCP Growth Fund continues to progress towards its
full liquidation. We received a small distribution following the
sale of one of its penultimate business interests, leaving
Resysta, which produces an ecologically friendly wood
replacement, as the one remaining asset. We continue to
hold the position at a 50% discount to the manager’s
valuation. Subsequent to the period ended 31 December
2020, the Company's investment in WCP Growth Fund has
been written off.
FX Hedges
The sole aim of our currency hedging is to lower the volatility
of our sterling denominated returns by reducing our non-
sterling exposure related to our investments denominated
in other currencies. We have been using currency forward
contracts to hedge between half and two thirds of our EUR
and USD denominated exposures. The appreciation of
sterling during the period meant that we benefited from
a small gain on these currency forward contracts on a
standalone basis, which added 0.5% to the NAV.
Outlook
The full impacts of record fiscal and monetary actions to
protect against economic collapse remain unclear. Near
term, with the United States Senate now controlled by the
Democrats, and the likelihood of higher fiscal spending,
inflation expectations appear to be rising. In our view, this
provides further justification for our decision to focus on high
quality companies which demonstrably deliver or significantly
benefit from the efficient use of resources, have predictable
financial performance and a reasonable valuation.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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1
Strategic Report
Environmental Impact Statement
Foreword
This Impact Report comes at a unique and testing time for investors and firms across the economy. Society as a whole is
reckoning with the need to address not just a global pandemic, but also the intersecting crises of a warming planet and
widespread biodiversity loss. As we approach the UN’s COP26 conference in November 2021, there has never been a
more important time for investors to prioritise sustainability returns alongside financial ones.
That is why, at Menhaden Capital Management LLP (Menhaden), our main objective is to generate long-term profits for our
shareholders by investing in high-quality businesses that have a positive impact on society and our natural environment. In
particular, as highlighted in this report, the theme of resource and energy efficiency underpins our approach. An analysis of
whether investees and potential investees are embedding energy efficiency into their business models, reducing reliance
on natural resources and promoting reuse is at the heart of our investment process. We also consider our holdings’ approach
to environmental commitments and reporting.
We are proud to be making investments that contribute to the circular economy and the low-carbon transition, including
new portfolio additions in innovative firms like ASML and LAM Research which are at the forefront of semiconductor
manufacturing technology. Their contribution to more energy-efficient technology and devices is particularly timely in a year
of increased and accelerated digitisation.
This Impact Statement shows Menhaden’s holdings helped save 32,000 MWh of electricity in 2020, equivalent to powering
roughly 10,850 houses for one year, and 30,000 tonnes of CO2e emissions, equivalent to taking over 19,800 cars off the road.
This is an approach which has brought strong financial performance too. At our AGM in April 2020, we achieved a
resounding vote in favour of continuation, a testament to our five-year track record of sustained and sustainable returns.
Our portfolio has produced net investment performance of 9.6% annualised over the last 5 years, and 13.0% over the last
year. Our share price has also now breached 100p.
Finally, in 2020, we were delighted to step up our active ownership activities. We engaged with several holdings in sectors
from aviation to communications to encourage improved emissions disclosure, performance and target-setting. We look
forward to continuing our dialogue with these companies into 2021 on how they can mitigate climate risks and reduce their
carbon footprint in this all-important year for climate action. We encourage our investee companies to commit to the Net
Zero Carbon Initiative.
Ben Goldsmith
Menhaden Capital Management LLP
Portfolio Manager
“By looking at environmental factors in its fundamental, research-
oriented approach and by actively engaging with companies on
climate risk, Menhaden is protecting value today and helping build
the low carbon economy of tomorrow”
18 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Our approach to impact
Our core mission, as a publicly-listed investment trust, is
to generate long-term profits for shareholders by investing
in opportunities that deliver, or benefit from, the efficient
use of energy and resources.
Our hard-headed approach seeks to invest in those
companies facilitating the transition to a more resource-
efficient economy. Companies that help us do more with
less, and protect our finite natural resources.
This includes investments such as X-ELIO, a global leader
in renewable energy which currently has 25 solar plants in
operation across 10 countries, and Calisen Group
(formerly known as Calvin Capital), a provider of energy
infrastructure that is playing a central role in helping the UK
roll out smart metering across its energy network.
We see smart meters as crucial enablers of a more efficient
future energy system. They empower end-users to
manage their energy usage and are helping to unlock
‘smart grid’ predictive technology so energy companies
can better build-in efficiency. Similarly, we invest in leading
semiconductor firms (see case study below) that are
supplying the tools to enable more efficiency in the way the
world runs its devices, solar panels and data centres.
Driving efficiency in transportation
We take a similar future-focused approach to our analysis
of the transport sector. We recognise that there will be
continued demand for aviation, and therefore seek to
support those companies facilitating the most low-carbon
ways in which to meet that demand.
Our investee Airbus, for example, recently announced its
ambition to develop the world’s first zero-emission
commercial aircraft by 2025 by exploring hydrogen
propulsion, which they estimate has the potential to reduce
the CO2 emissions of the aviation sector by up to 50%.
The high energy density of hydrogen means it carries more
energy per unit of weight than other fuels, such as
kerosene, this innovation presents real energy-saving
opportunities compared to electricity being stored in heavy
batteries which produce less energy for their relative
weight.
By investing in transport companies with best-in-class
approaches to sustainability, we calculate that Menhaden’s
transport investments have helped save over 12,800
tCO2e of carbon emissions in 2020.
Powering sustainable digitisation with
semiconductor technology
This year, remote working has increased our reliance on
technology and accelerated the digitalisation of the global
economy. This provokes an important question: How can
we make the digital transition a sustainable one?
Remote data centres required to run our interconnected
devices are thought to use more than 2% of the world’s
electricity and generate the same amount of carbon
emissions as the global airline industry. One study
suggested that if each person in the UK sent one fewer
email a day it could cut carbon output by more than
16,000 tonnes a year. So improving the efficiency of the
electronic devices at the heart of our ever more connected
lives is therefore a crucial element of global attempts to
reduce emissions.
to
the drive
Menhaden invests in three companies that are pre-eminent
in
increase energy efficiency using
semiconductor chips. Semiconductors are used in the
from
manufacturing of a wide range of devices
smartphones, to data centres to solar panels, to televisions
and underpin artificial intelligence, 5G and connected
internet technology.
Innovation in the semiconductor sector is already delivering
reductions in the amount of energy needed to run these
devices and process data. This has contributed to the
trend known as Koomey’s Law, that states that the energy
efficiency of computers doubles roughly every 18 months.
ASML Corp is at the forefront of lithography printing for
integrated circuits, KLA Corp is a leader in process control
solutions for semiconductor manufacturing and LAM
Research Group is a manufacturer of semiconductor
chips that leverages advanced etching technology to make
chips more energy efficient. These three new additions to
our portfolio in 2020 are helping make the fundamental
building blocks of digitisation and computing more efficient,
and therefore greener too.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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1
Strategic Report
Environmental Impact Statement
continued
Active ownership: Leveraging our voice on
climate
As a responsible steward of our shareholders’ capital,
Menhaden is committed to using its voice to influence
more sustainable industry practices, both by engaging
directly with companies in our portfolio and working in
collaboration with other investors and initiatives.
In particular, we believe climate-change related risks,
including a company’s greenhouse gas emissions, will have
an increasingly material effect on long-term profitability.
Therefore, we are keen to see management teams
proactively managing climate change risks like regulation,
taxation, competitive advantage, brand impairment and
physical asset impairment. In 2020, for the first time, the
Company actively engaged with several holdings in our
portfolio to help us understand their exposure to those
risks, as well as try to influence more thorough climate risk
management via disclosure and emissions reductions
targets.
In 2020, Menhaden supported the Children’s Investment
Fund (TCI)’s ‘Say on Climate’ campaign, which filed
resolutions at seven US-listed issuers: Moody’s Corp, S&P
Global, Union Pacific Railroad, Charter Communications,
Alphabet, Canadian Pacific Railway and Canadian
National. TCI outlined its expectation for companies to
have a credible, publicly-disclosed plan to reduce
greenhouse gas emissions, including science-based
targets that align with the Paris Agreement. TCI also
requested that its portfolio companies disclose their current
greenhouse gas emissions in a manner consistent with the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD).
Menhaden is an investor signatory to CDP, a public
recognition of our commitment
to engaging with
companies on environmental issues and part of our efforts
to promote industrial scale environmental disclosure
aligned with the TCFD. Menhaden is also a member of the
FAIRR investor network, which is helping promote greener
practices in global animal agriculture, and has gained the
London Stock Exchange Green Economy Mark.
Engaging Airbus on climate risks
In February 2020, Menhaden engaged with Airbus on its
climate risk management, disclosure and target-setting.
The Portfolio Manager recommended that Airbus upgrade
their GHG emissions targets to measurable science-based
targets that align with the Paris Agreement, disclose their
Scope 3 emissions fully, make public its disclosure to CDP,
engage in carbon offsetting to mitigate its footprint, and
implement best practices for the sourcing and managing
of energy across all its buildings.
These steps will help Airbus continue to play a leading role
in establishing industry best practices and rapidly de-
carbonize aviation given the industry estimates for growth
in air passenger traffic in the coming years.
Since our engagement started, Airbus has made its 2019
CDP disclosure public and followed the recommendation
to define their emissions commitments against Science
Based Targets methodology, in line with a pathway of well
below 2°C. Airbus has committed to reassess these
targets at least every five years to ensure it remains
consistent with the most recent climate science.
SDG Impacts
The Menhaden Board and the Portfolio Manager support
the UN Sustainable Development Goals (SDGs) and many
of the Company’s holdings contribute to the challenge of
achieving them. The examples below offer a snapshot of
how the Company’s investments contribute to at least six
SDGs:
About this report
All impact data in this report is based on the proportion that Menhaden holds of each entity as of 31 December 2020.
Analysis refers to the Company’s listed portfolio and the biggest private holding, X-ELIO. It is calculated on best estimates
using publicly disclosed data and full details of our methodology can be found in the Impact Report Appendix on our
website.
20 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Our global water crisis is an urgent one and increased water demand and rising temperatures
could reduce water availability in cities by more than 66% in 2050. Microsoft has pledged to
replenish water levels, by putting back more water into stressed basins than it consumes as a
company. Freight train company Canadian Pacific has reported a decrease in water
consumption by 59% since 2015, a significant contribution to reducing the water intensity of its
transportation operations.
In 2020, Google, part of Alphabet Inc, announced its ambition to power its data centres with
solely carbon-free electricity by 2030, building on its previous goal of matching its energy use with
100% renewable energy. Waste Management Inc turns waste at 124 of its active landfill sites
into biogas which is then used as a renewable energy resource, creating economic and
environmental value from waste. X-Elio has begun construction of its largest solar farm in Australia
which, once complete, will generate 420 GWh of green energy every year.
Canadian National’s network of 20,000 route miles of rail track is building long-haul freight
infrastructure that is four times more fuel-efficient than trucks. KLA Corp’s advanced
semiconductor technologies are contributing to the Internet of Things megatrend that is expected
to exceed $500 billion by 2021, embedding connectivity into digital infrastructure to help achieve
SDG 9.
Charter Communications, a connectivity company, coordinates recycling schemes for
electronic equipment like batteries, network hardware and mobile equipment. To date, 77 million
pounds of materials have been either responsibly recycled or sold through their Product Life
Management initiative. ASML plans to cut its amount of waste per revenue by 50% by 2025
as part of their ambition to extract maximum value from the materials used and repurpose
where possible.
Maritime services firm Ocean Wilsons Holdings is reducing its GHG emissions by using rubber-
tyre gantry (RTG) electric cranes with lower environmental impact in container terminals. Airbus
has announced an ambition to develop the world’s first zero-emission commercial aircraft by 2035.
Waste Management Inc is working to reduce the quantity of plastics entering rivers, waterways
and oceans by recycling materials with responsible end-markets and educating consumers on
recycling best practices. Alphabet recently revealed Tidal, a team developing AI technologies to
track and monitor marine life, with the aim of understanding the impact of fish farming on
our oceans.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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1
Strategic Report
Business Review
The Strategic Report on pages 2 to 34 has been prepared
to provide information to shareholders to assess how the
Directors have performed their duty to promote the
success of the Company.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors
in good faith based on the information available to them up
to the date of this report and such statements should be
treated with caution due to the inherent uncertainties,
including both economic and business risk factors,
underlying any such forward-looking information.
Business Model
The Company is an externally managed investment trust
and its shares are listed on the premium segment of the
Official List and traded on the main market of the London
Stock Exchange.
The purpose of the Company is to provide a vehicle for
investors to gain exposure to a portfolio of companies that
are demonstrably delivering or benefiting significantly from
the efficient use of energy or resources irrespective of their
size, location or stage of development, through a single
investment.
The Company is an Alternative Investment Fund (“AIF”)
under the UK’s Alternative Investment Fund Managers
Regulation (“AIFMD UK Regulation”) and Frostrow Capital
LLP is the appointed Alternative Investment Fund Manager.
As an externally managed investment trust, all of the
Company’s day-to-day management and administrative
functions are outsourced to service providers. As a result,
the Company has no executive directors, employees or
internal operations.
The Board is responsible for all aspects of the Company’s
affairs, including setting the parameters for asset allocation,
monitoring the investment strategy and the review of
investment performance and policy.
It also has
responsibility for all strategic policy issues, including share
issuance
and
discount/premium monitoring, corporate governance
matters, investor relations, dividends and gearing.
and buy backs,
share price
Further information on the Board’s role and the topics it
discusses with the AIFM and the Portfolio Manager is
provided
in the Corporate Governance Statement
beginning on page 42.
22 Menhaden PLC
Annual Report for the year ended 31 December 2020
Investment Strategy
The implementation of the Company’s investment objective
has been delegated to Frostrow Capital LLP (“Frostrow” or
the “AIFM”) by the Board. Frostrow has, in turn and jointly
with
the Company, appointed Menhaden Capital
Management LLP as the Portfolio Manager.
Details of the Portfolio Manager’s approach are set out in
the Investment Process section on page 11 and in their
review beginning on page 14.
While the Board’s strategy is to allow flexibility in managing
the investments, in order to manage investment risk it has
imposed various investment, gearing and derivative
guidelines and limits, within which Frostrow and the
Portfolio Manager are required to manage the investments,
as set out on pages 8 and 9.
Any material changes to the investment objective or policy
require approval from shareholders.
The Board
Details of the Board of Directors of the Company are set
out on pages 35 and 36.
All Directors will seek re-election by shareholders at the
Annual General Meeting to be held on 3 June 2021.
Dividend Policy
The Company complies with the United Kingdom’s
investment trust rules regarding distributable income which
require investment trusts to retain no more than 15% of
their income from shares and securities each year. The
Company’s dividend policy is that the Company will only
pay dividends sufficient to maintain investment trust status.
No dividend was declared this year.
Key Performance Indicators (“KPIs”)
The Board of Directors reviews performance against the
following Key Performance Indicators (KPIs). They comprise
both specific financial and shareholder-related measures
and the results for the year can be found on page 2. To
better reflect our non-benchmarked total return investment
strategy, the Board has decided to use RPI+3% as its
primary long term financial performance comparator and to
remove reference to the MSCI World Total Return Index
from the investment objective. This more meaningfully aligns
with the company’s investment strategy which does not
260498 Menhaden 01pp-34pp.qxp 13/04/2021 19:32 Page 23
consider any stock market index weightings. The KPIs for
the Company are:
• Net asset value (“NAV”) per share total return;
• Share price total return;
• Discount/premium of the share price to the NAV per
share;
• Ongoing charges ratio; and
• RPI+3% (4.2% for the year to 31 December 2020)
Please refer to the Glossary beginning on page 85 for
definitions of these terms and an explanation of how they
are calculated.
NAV per share total return
The Directors regard the Company’s NAV per share total
return as being the overall measure of value delivered to
shareholders over the long term. This reflects both the net
asset value growth of the Company and any dividends paid
to shareholders.
Share price total return
The Directors regard the Company’s share price total return
to be a key indicator of performance and monitor this
closely. This measure reflects the return to the investor on
last traded market prices, assuming any dividends paid are
reinvested.
Share price discount/premium to NAV per share
The share price discount/premium to the NAV per share is
considered a key indicator of performance as it impacts
the share price total return and can provide an indication
of how investors view the Company’s performance and its
investment objective. The Chairman’s Statement, beginning
on page 5, describes the approach the Board took to
address share price performance during the year.
Ongoing charges ratio
Ongoing charges represent the costs that shareholders
can reasonably expect to pay from one year to the next,
under normal circumstances. The Board continues to be
conscious of expenses and works hard to maintain a
sensible balance between good quality service and costs.
The Board therefore considers the ongoing charges ratio
to be a KPI and reviews the figure both in absolute terms
and in comparison to the Company’s peers.
The Board also monitors the Company’s NAV return
against its peer group and other relevant indices such as
the AIC Global Sector and the AIC Environmental Sector.
Details are given in the Chairman’s Statement on page 5.
A full description of the portfolio and performance during
the year under review is contained in the Portfolio
Manager’s Review commencing on page 14 of this report.
Principal Service Providers
The principal service providers to the Company are
Frostrow Capital LLP
the “AIFM”),
Menhaden Capital Management LLP (“MCM” or the
“Portfolio Manager”) and J.P. Morgan Europe Limited (the
“Depositary”). Details of their key responsibilities and their
contractual arrangements with the Company follow.
(“Frostrow” or
the Company and Frostrow
AIFM
The Board has appointed Frostrow as the designated AIFM
of the Company on the terms and subject to the conditions
of the alternative investment fund management agreement
between
(the “AIFM
Agreement”). The AIFM Agreement assigns to Frostrow
overall responsibility to manage the Company, subject to
the supervision, review and control of the Board, and
ensures that the relationship between the Company and
Frostrow is compliant with the requirements of the AIFMD.
Frostrow, under the terms of the AIFM Agreement
provides, inter alia, the following services:
• risk management services;
• marketing and shareholder services;
• administrative and secretarial services;
• advice and guidance
in
respect of corporate
governance requirements;
• maintenance of the Company’s accounting records;
• preparation and dispatch of the annual and half yearly
reports and monthly factsheets; and
• ensuring compliance with applicable tax, legal and
regulatory requirements.
Menhaden PLC
Annual Report for the year ended 31 December 2020
23
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Strategic Report
Business Review
continued
AIFM Fee
Under the terms of the AIFM Agreement, Frostrow receives
a periodic fee equal to 0.225% per annum of the
Company’s net assets up to £100 million, 0.20% per
annum of the net assets in excess of £100 million and up
to £500 million, and 0.175% per annum of the net assets
in excess of £500 million.
The AIFM Agreement is terminable on six months’ notice
given by either party.
return)* on the gross proceeds of the IPO of 5% per
annum; and (b) a high watermark (the highest net asset
value that the Company has reached on which a
performance fee has been paid)*. The performance fee is
subject to a cap in each performance period of an amount
equal to the aggregate of 1.5% of the weighted average
NAV in each year (or part year, as applicable) of that
performance period.
*see Glossary for further details
Portfolio Manager
MCM is responsible for the management of the Company’s
portfolio of investments under a delegation agreement
between MCM, the Company and Frostrow (the “Portfolio
Management Agreement”). Under the terms of the Portfolio
Management Agreement, MCM provides, inter alia, the
following services:
• seeking out and evaluating investment opportunities;
• recommending the manner by which cash should be
invested, divested, retained or realised;
• advising on how rights conferred by the investments
should be exercised;
• analysing the performance of investments made; and
• advising the Company in relation to trends, market
movements and other matters which may affect the
investment objective and policy of the Company.
Portfolio Management Fee
MCM receives a periodic fee equal to 1.25% of the
Company’s net assets up to £100 million and 1.00% of the
Company’s net assets in excess of £100 million.
The Portfolio Management Agreement is terminable on
six months’ notice given by any of the three parties.
Performance Fee
MCM is entitled to a performance fee which is dependent
on the level of the long-term performance of the Company.
In respect of a given three year performance period, a
performance fee may be payable equal to 10% of the
amount, if any, by which the Company’s adjusted NAV at
the end of that performance period exceeds the higher of
(a) a compounding hurdle (an annualised compound
24 Menhaden PLC
Annual Report for the year ended 31 December 2020
Depositary
The Company has appointed J.P. Morgan Europe Limited
as its Depositary in accordance with the AIFMD on the terms
and subject to the conditions of an agreement between the
Company, Frostrow and the Depositary (the “Depositary
Agreement”). The Depositary provides the following services,
inter alia, under its agreement with the Company:
• safekeeping and custody of the Company’s custodial
investments and cash;
• processing of transactions; and
• foreign exchange services.
The Depositary must take reasonable care to ensure that
the Company is managed in accordance with the Financial
Conduct Authority’s Investment Funds Sourcebook, the
AIFMD and the Company’s Articles of Association.
Under the terms of the Depositary Agreement, the
Depositary is entitled to receive an annual fee of the higher
of £40,000 or 0.0175% of the net assets of the Company
up to £150 million, 0.015% of the net assets in excess of
£150 million and up to £300 million, 0.01% of the net
assets in excess of £300 million and up to £500 million and
0.005% of the net assets in excess of £500 million. In
addition, the Depositary is entitled to a variable custody fee
which depends on the type and location of the custodial
assets of the Company.
the custody and
The Depositary has delegated
safekeeping of the Company’s assets to JPMorgan Chase
Bank N.A., London branch (the “Custodian”).
The notice period on the Depositary Agreement is 90 days
if terminated by the Company and 120 days if terminated
by the Depositary.
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Evaluation of the AIFM and the Portfolio
Manager
The performance of the AIFM and the Portfolio Manager is
reviewed continuously by the Board and the Company’s
Management Engagement Committee (the “MEC”) with a
formal evaluation process being undertaken each year. As
part of this process, the Board monitors the services
provided by the AIFM and the Portfolio Manager and
receives regular reports from them. The MEC reviewed the
appropriateness of the appointment of the AIFM and the
Portfolio Manager
in December 2020 with a
recommendation being made to the Board.
The Board believes the continuing appointment of the
AIFM and the Portfolio Manager, under the terms
described on page 24, is in the interests of shareholders
as a whole. In coming to this decision, the MEC and the
Board took into consideration, inter alia, the following:
• the terms of the AIFM Agreement and the Portfolio
Management Agreement, in particular the level and method
of remuneration, the notice period and the comparable
arrangements of a group of the Company’s peers;
• the quality of the service provided and the quality and
depth of experience of the company management,
company secretarial, administrative and marketing
teams that the AIFM allocates to the management of the
Company; and
• the quality of service provided by the Portfolio Manager
in the management of the portfolio; and the level of
performance of the portfolio in absolute terms and by
reference to the RPI+3% and other relevant indices.
Risk Management
In fulfilling its oversight and risk management responsibilities,
the Board maintains a framework of key risks which affect
the Company and the related internal controls designed to
enable the Directors to manage/mitigate these risks as
appropriate. The Directors have carried out a robust
assessment of the emerging and principal risks facing the
Company, including those that would threaten its business
model, future performance, solvency or liquidity.
The principal risks can be categorised under the following
broad headings:
• Corporate Risks
• Investment Risks
• Operational Risks
• Financial Risks
• Legal and Regulatory Risks
The following sections detail the risks the Board considers to
be the most significant to the Company under these headings.
The risks are broadly unchanged from the prior year.
Principal Risks and Uncertainties
Management and Mitigation
Corporate Risks
The share price return may differ materially from
the NAV per share i.e. the shares may trade at a
material discount to the NAV per share.
At each meeting, the Board:
• reviews the Company’s investment objective in relation to the
market, economic conditions and the operation of the
Company’s peers;
• discusses the Company’s future development and strategy;
• reviews an analysis of the shareholder register and reports on
investor sentiment from the Company’s corporate stockbroker
and AIFM;
• reviews the level of the share price discount to the NAV per
share and, in consultation with its advisers, considers ways in
which share price performance may be enhanced; and
• reviews the Company promotional activities and distribution
strategy, which have been delegated to Frostrow, to ensure the
Company is promoted to current and potential investors.
Menhaden PLC
Annual Report for the year ended 31 December 2020
25
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1
Strategic Report
Business Review
continued
Principal Risks and Uncertainties
Management and Mitigation
Investment Risks
The implementation of the investment strategy
adopted by the Portfolio Manager may be
unsuccessful and result in underperformance
against the Company’s principal performance
comparators and peer companies.
The portfolio may be affected by market risk,
that is volatile market movements (in both equity
and foreign exchange markets) in the sectors
and regions in which it invests. The Company is
also exposed to concentration risk, which is the
potentially higher volatility arising from its
relatively concentrated portfolio and sector-
specific risks such as global energy and
commodity prices or withdrawal of government
subsidies for renewable energy.
The departure of a key member of the portfolio
management team may affect the Company’s
performance.
for dealing,
Operational Risks
As an externally managed investment trust, the
Company is reliant on the systems of its service
trade processing,
providers
administrative services, financial and other
functions. If such systems were to fail or be
disrupted (including as a result of cyber crime or
a pandemic) this could lead to a failure to comply
regulations and
with applicable
laws,
governance
to a
financial loss.
requirements and/or
The Board regularly reviews the Company’s investment mandate
and MCM’s long-term investment strategy in relation to market and
economic conditions, and the performance of the Company’s peers.
The Portfolio Manager provides an explanation of stock selection
decisions and an overall rationale for the make-up of the portfolio,
including the resource-efficiency credentials of the portfolio holdings.
MCM discuss current and potential investment holdings with the
Board on a regular basis.
While market risk cannot be eliminated through diversification, it can
be potentially reduced through hedging. The Board sets the
Company’s policy on hedging, which is detailed on page 8 and
details of the foreign exchange forwards in place are set out in the
Portfolio Manager’s Review beginning on page 14.
To manage concentration risk, the Board has appointed the AIFM
and the Portfolio Manager to manage the portfolio within the remit
of the investment objective and policy, set out on pages 8 and 9.
The investment policy limits ensure that the portfolio is diversified,
reducing the risks associated with individual stocks and markets.
Compliance with the investment restrictions is monitored daily by
the AIFM and reported to the Board on a monthly basis.
As part of its review of the going concern and longer-term viability
of the Company, the Board also considers the sensitivity of the
Company to changes in market prices and foreign exchange rates
(see note 16 to the financial statements beginning on page 77), an
analysis of how the portfolio would perform during a market crisis,
and the ability of the Company to liquidate its portfolio if the need
arose. Further details are included in the Going Concern and Viability
Statements on pages 38 and 28 respectively.
The Portfolio Manager reports to the Board on developments at
MCM at each Board meeting. All investment decisions are made by
an Investment Committee, reducing reliance on a single individual.
The Board continuously monitors the performance of all the principal
service providers with a formal evaluation process being taken each
year. The Audit Committee reviews the internal controls reports and
key policies (including measures taken to mitigate cyber risks and
disaster recovery procedures) put in place by its principal service
providers. Both Frostrow and MCM provide a quarterly compliance
report to the Audit Committee, which details their compliance with
applicable laws and regulations. The Audit Committee maintains the
Company’s risk matrix which details the risks to which the Company
is exposed, the approach to managing those risks, the key controls
relied upon and the frequency of the controls operation. Further
details are set out in the Audit Committee Report on page 49.
26 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Principal Risks and Uncertainties
Management and Mitigation
Financial Risks
The Company is exposed to liquidity risk and
credit risk arising from the use of counterparties.
If a counterparty were to fail, it could adversely
affect the Company through either delay in
settlement or loss of assets. The most significant
counterparty to which the Company is exposed
is the Depositary, which is responsible for the
safekeeping of the Company’s custodial assets.
Legal and Regulatory Risks
The regulatory or political environment in which
the Company operates could change to the
extent that it affects the Company’s viability.
The Company’s assets include liquid securities which can be sold
to meet funding requirements, if necessary. Further information on
financial instruments and risk can be found in note 16 to the financial
statements beginning on page 77. Details of the work undertaken
in regard to verifying ownership and the valuation of unquoted (non-
custodial) assets is set out on page 56.
The Board reviews the services provided by the Depositary and the
internal controls report of the Custodian to ensure that the security
of the Company’s custodial assets is maintained. The Portfolio
Manager is responsible for undertaking reviews of the credit
worthiness of the counterparties that it uses. The Board reviews the
Portfolio Manager’s approved list of counterparties and the
Company’s use of those counterparties.
The Board monitors regulatory developments but relies on the
services of its external advisers to ensure compliance with applicable
law and regulations. The Board has appointed a specialist
investment trust company secretary who provides industry and
regulatory updates at each Board meeting.
The Board has considered whether the UK’s exit from the European
Union (‘Brexit’) poses a discrete risk to the Company. At the date of
this report, the UK has left the EU and has emerged from the
transition period with a trade and security deal finalised with the EU
on 24 December 2020. The impact and implications of this remain
to be seen.
While movements in exchange rates can affect the Company’s net
asset value, and sharp or unexpected changes in investor
sentiment, or tax and regulatory changes, can lead to short term
selling pressure on the Company’s shares, the Board believes that
Brexit is unlikely to affect the Company’s business model or share
price performance over the longer term. However, Brexit may have
an adverse impact on some of the Company’s portfolio companies
which have an exposure to the UK and/or European markets, both
in terms of their operations and the manner in which their
distributions are treated for tax purposes. The Board, the AIFM and
the Portfolio Manager will continue to monitor developments as
they occur.
Menhaden PLC
Annual Report for the year ended 31 December 2020
27
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1
Strategic Report
Business Review
continued
Impact of COVID 19
The Board recognises that the emergence and spread of
the new coronavirus (Covid-19) represents a new area of
risk, both to the Company’s investment performance and to
its operations. In recent months the Portfolio Manager
successfully continued dialogue with investee companies
and the Board has stayed in close contact with the Portfolio
Manager and has been continuously monitoring portfolio
and share price developments. The Board has also received
assurances from all of the Company’s service providers in
respect of:
• their business continuity plans and the steps being taken
to guarantee the ongoing efficiency of their operations
while ensuring the safety and well-being of their
employees;
• their cyber security measures including improved user-
access controls, safe remote working and evading
malicious attacks; and
• any increased risks of fraud as a result of decreased
operations and possible employee terminations and
weakness in user access controls resulting in the potential
for management overrides.
With the emergence of several vaccines, the outlook is
cautiously positive, but the Board will continue to monitor
developments as they occur.
Longer Term Viability Statement
In accordance with the UK Corporate Governance Code,
the Directors have carefully assessed the Company’s
position and prospects as well as the principal risks and
have formed a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the next five financial years. The Board has
chosen a five year horizon in view of the long term nature
and outlook adopted by the Portfolio Manager when making
investment decisions.
To make this assessment and in reaching this conclusion,
the Audit Committee has considered the Company’s
financial position and its ability to liquidate its portfolio and
meet its liabilities as they fall due:
• The portfolio is principally comprised of investments
traded on major international stock exchanges. Based on
historic analysis 81% of the current portfolio could be
liquidated within 30 trading days with 78% in seven days
and there is no expectation that the nature of the
investments held within the portfolio will be materially
different in future;
• The expenses of the Company are predictable and
modest in comparison with the assets and there are no
capital commitments foreseen which would alter that
position; and
• The Company has no employees, only its non-executive
Directors. Consequently it does not have redundancy or
other employment related liabilities or responsibilities.
The Audit Committee, as well as considering the potential
impact of its principal risks and various severe but plausible
downside scenarios, has also considered the following
assumptions in considering the Company’s longer-term
viability:
• There will continue to be demand for investment trusts;
• The Board and the Portfolio Manager will continue to
adopt a long-term view when making investments, and
anticipated holding periods will be at least five years;
• The Company invests principally in the securities of listed
international stock
companies
exchanges to which investors will wish to continue to
have exposure;
traded on major
• The closed ended nature of the Company means that,
unlike open ended funds, it does not need to realise
investments when shareholders wish to sell their shares;
• Regulation will not increase to a level that makes running
the Company uneconomical; and
• The performance of the Company will continue to be
satisfactory.
COVID-19 was also factored into the key assumptions made
by assessing its impact on the Company’s key risks and
whether the key risks had increased in their potential to affect
the normal, favourable and stressed market conditions. As
part of this review the Board considered the impact of a
significant and prolonged decline in the Company’s
performance and prospects. This included a range of
plausible downside scenarios such as reviewing the effects
28 Menhaden PLC
Annual Report for the year ended 31 December 2020
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of substantial falls in investment values and the impact of
the Company’s ongoing charges ratio, which were the
subject of stress testing.
Company Promotion
The Company has appointed Frostrow to promote the
Company’s shares to professional investors in the UK and
Ireland. As investment company specialists, the Frostrow
team provides a continuous, proactive marketing,
distribution and investor relations service that aims to grow
the Company by encouraging demand for the shares.
Frostrow actively engages with professional investors,
typically discretionary wealth managers, some institutions
and a range of execution-only platforms. Regular
engagement helps to attract new investors and retain
existing shareholders, and over time results in a stable
share register made up of diverse, long-term holders.
Frostrow, in turn, provides the Board with up-to-date and
accurate information on the latest shareholder and market
developments.
organisations’
Frostrow arranges and manages a continuous programme
of one-to-one meetings with professional investors around
the UK. These include regular meetings with ‘gate
keepers’, the senior points of contact responsible for their
respective
and
recommended lists. The programme of regular meetings
also includes autonomous decision makers within large
multi-office groups, as well as small independent
organisations. Some of these meetings involve MCM, but
most of the meetings do not, which means the Company
is being actively promoted while MCM focuses on
managing the portfolio.
research
output
The Company also benefits from involvement in the regular
professional investor seminars run by Frostrow in major
centres, notably London and Edinburgh, which are
focused on buyers of investment companies.
The creation and dissemination of information on the
Company is also overseen by Frostrow. Frostrow produces
all key corporate documents, monthly factsheets, annual
reports and manages
the Company’s website
www.menhaden.com. All Company information and
invitations to investor events, including updates from MCM
on the portfolio and market developments, are regularly
emailed to a growing database, overseen by Frostrow,
consisting of professional investors across the UK and
Ireland.
Frostrow maintains close contact with all the relevant
investment trust broker analysts, particularly those from
Numis Securities Limited, the Company’s corporate broker,
but also others who publish and distribute research on the
Company to their respective professional investor clients.
Anti-Bribery and Corruption Policy
The Board has adopted a zero-tolerance approach to
instances of bribery and corruption. Accordingly it
expressly prohibits anyone performing services or acting
on behalf of the Company from accepting, soliciting,
paying, offering or promising to pay or authorise any
payment, public or private, in the United Kingdom or
abroad, to secure any improper benefit for themselves or
for the Company.
A copy of the Company’s Anti Bribery and Corruption
Policy
at
www.menhaden.com. The policy is reviewed regularly by
the Audit Committee.
its website
found
can
be
on
Prevention of the Facilitation of Tax
Evasion
In response to the implementation of the Criminal Finances
Act 2017, the Board has adopted a zero-tolerance
approach to the criminal facilitation of tax evasion. A copy
of the Company’s policy on preventing the facilitation of
tax evasion can be found on the Company’s website
www.menhaden.com. The policy is reviewed annually by
the Audit Committee.
Stakeholder Interests and Board Decision-
Making
Under new reporting regulations and the new AIC Code
of Corporate Governance, the Directors must now explain
more fully how they have discharged their duty under s172
of the Companies Act 2006 in promoting the success of
the Company for the benefit of the members as a whole.
This includes the likely consequences of the Directors’
decisions in the long-term and how they have taken wider
stakeholders’ needs into account.
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Strategic Report
Business Review
continued
falls outside the scope of the Modern Slavery Act 2015.
The Company’s suppliers are typically professional advisers
and the Company’s supply chains are considered to be low
risk in this regard.
The Board believes that the integration of financially
material environmental, social and governance (“ESG”)
factors into investment decision-making can reduce risk
and enhance returns. In addition, the ongoing engagement
and dialogue with investee companies, including through
proxy voting, are key parts of an asset stewardship role.
Accordingly, the Directors encourage the Portfolio Manager
to ensure the Company’s investments adhere to best
practice in the management of ESG issues, and encourage
them to have due regard to the UN Global Compact and
UN Principles of Responsible Investment. The Portfolio
Manager’s statement of compliance with the Financial
Reporting Council UK Stewardship Code is available at
www.frc.org.uk. The Board has reviewed this statement as
well as the voting decisions made on the Company’s
behalf.
The Directors aim to act fairly as between the Company’s
shareholders. The Board’s approach to shareholder relations
is summarised in the Corporate Governance Statement
beginning on page 42. The Chairman’s Statement
beginning on page 5 also provides an explanation of the
approach taken by the Directors during the year to achieve
the Board’s long-term aim of ensuring that the Company’s
shares trade at a price close to the NAV per share, as well
as steps that the Board has taken to reduce the
Company’s own impact on the environment.
Social, Human Rights and Environmental
Matters
The Company is an externally managed investment trust
within the AIC Environmental Sector and invests in
companies and markets that are demonstrably delivering
or benefiting significantly from the efficient use of energy
or resources. It does not have any employees or premises,
nor does it undertake any manufacturing or other
operations. All its functions are outsourced to third party
service providers and therefore the Company itself does
not have any employee or direct human rights issues, nor
does it have any direct, material environmental impact. The
Company therefore has no environmental, human rights,
social or community policies.
As an investment company, the Company does not
provide goods or services in the normal course of business
and does not have customers. Accordingly, the Company
30 Menhaden PLC
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Engaging with The Company’s Stakeholders
The following ‘Section 172’ disclosure, required by the Companies Act 2006 and the AIC Code, describes
how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.
Who?
Why?
STAKEHOLDER
GROUP
THE BENEFITS OF ENGAGEMENT WITH
THE COMPANY’S STAKEHOLDERS
Investors
Clear communication of the Company’s
strategy and the performance against the
Company’s objective can help the share
price trade at a narrower discount or a wider
premium to its net asset value which
benefits shareholders.
Who?
HOW THE BOARD, THE AIFM AND THE
PORTFOLIO MANAGER HAVE ENGAGED
WITH THE COMPANY’S
STAKEHOLDERS
Frostrow as AIFM, the Portfolio Manager and
the Company’s broker, on behalf of the
Board, complete a programme of investor
relations throughout the year.
An analysis of the Company’s shareholder
register is provided to the Directors at each
Board meeting along with marketing reports
from Frostrow. The Board reviews and
considers the marketing plans on a regular
basis. Reports from the Company’s broker
are submitted to the Board on investor
sentiment and industry issues.
Key mechanisms of engagement include:
l The Annual General Meeting
l The Company’s website which hosts
reports, video interviews with the portfolio
manager and monthly factsheets
l One-on-one investor meetings
l Should any significant votes be cast
against a resolution, proposed at the
Annual General Meeting the Board will
engage with Shareholders.
l The Board will explain in its
announcement of the results of the AGM
the actions it intends to take to consult
Shareholders in order to understand the
reasons behind the votes against.
l Following the consultation, an update will
be published no later than six months
after the AGM and the Annual Report will
detail the impact the Shareholder
feedback has had on any decisions the
Board has taken and any actions or
resolutions proposed.
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Strategic Report
Business Review
continued
Who?
HOW THE BOARD, THE AIFM AND THE
PORTFOLIO MANAGER HAVE ENGAGED
WITH THE COMPANY’S
STAKEHOLDERS
The Board meets regularly with the
Company’s Portfolio Manager throughout
the year both formally at the quarterly Board
meetings and informally as needed. The
Board also receives monthly performance
and compliance reporting.
The Portfolio Manager’s attendance at each
Board meeting provides the opportunity for
the Portfolio Manager and Board to further
reinforce their mutual understanding of what
is expected from both parties.
Who?
Why?
STAKEHOLDER
GROUP
THE BENEFITS OF ENGAGEMENT WITH
THE COMPANY’S STAKEHOLDERS
Portfolio Manager
Engagement with the Company’s Portfolio
Manager is necessary to evaluate their
performance against the Company’s stated
strategy and to understand any risks or
opportunities this may present. The Board
ensures that the Portfolio Manager’s
environmental, social and governance
(“ESG”) approach is in line with standards
elsewhere and is in line with the Board’s
expectations.
The Company produces an annual
environmental impact statement setting out
the environmental purpose of the Company
and the impact its investments have, or
intend to deliver. The report is included
within this Annual Report on pages 18 to 21
and is published as a separate document
on www.menhaden.com.
Engagement also helps ensure that Portfolio
Management costs are closely monitored
and remain competitive.
Service Providers
The Company contracts with third parties
for other services including: depositary,
investment accounting & administration as
well as company secretarial and registrars.
The Company ensures that the third parties
to whom the services have been
outsourced complete their roles in line with
their service level agreements thereby
supporting the Company in its success and
ensuring compliance with its obligations.
The Covid-19 pandemic has meant that it
was vital to make certain there were
adequate procedures in place at the
Company’s key service providers to ensure
safety of their employees and the continued
high quality service to the Company.
The Board and Frostrow engage regularly
with other service providers both in one-to-
one meetings and via regular written
reporting. This regular interaction provides
an environment where topics, issues and
business development needs can be dealt
with efficiently and collegiately.
The Board together with Frostrow have
maintained regular contact with the
Company’s key service providers during the
pandemic, as well as carrying out a review of
the service providers’ business continuity
plans and additional cyber security
provisions.
It is the Board’s belief that Frostrow and
Menhaden Capital Management LLP are the
most important service providers with
relation to the success of the Company.
32 Menhaden PLC
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Who?
Why?
STAKEHOLDER
GROUP
THE BENEFITS OF ENGAGEMENT WITH
THE COMPANY’S STAKEHOLDERS
Portfolio companies
Gaining a deeper understanding of the
portfolio companies and their strategies as
well as incorporating consideration of ESG
factors into the investment process assists
in understanding and mitigating risks of an
investment as well as identifying future
potential opportunities.
Who?
HOW THE BOARD, THE AIFM AND THE
PORTFOLIO MANAGER HAVE ENGAGED
WITH THE COMPANY’S
STAKEHOLDERS
The Board encourages the Company’s
Portfolio Manager to engage with companies
and in doing so expects ESG issues to be a
key consideration.
The Board receives an update on MCM’s
engagement activities quarterly.
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Key topics of engagement with investors
l Ongoing dialogue with shareholders concerning the
strategy of the Company, performance and the
portfolio.
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
l The Portfolio Manager, Frostrow and the broker meet
regularly with shareholders and potential investors to
discuss the Company’s strategy, performance and
portfolio.
In December 2020, The Board held a dedicated
strategy session which reviewed 2015 to 2020 and
the future strategy of the Company including an
enhanced communication strategy with the Portfolio
Manager, Frostrow and the broker in attendance.
To further aid the Board in the monitoring of the share
price discount, the Board agreed at the strategy
session to change the Company’s NAV per share
announcement from a monthly basis to a daily basis.
Key topics of engagement with the external
Portfolio Manager on an ongoing basis are
portfolio composition, performance, outlook and
business updates.
l The impact of Brexit upon their business and the
portfolio.
l The impact of COVID-19 upon their business and
how components in the portfolio have sought to take
advantage of the pandemic, in particular through
increased digitalisation.
l No specific action required.
l The Board has received regular updates from the
Portfolio Manager throughout the COVID 19 pandemic
and its impact on investment decision making. In
addition, the impact of new working practices
adopted by the Portfolio Manager as a consequence
of the pandemic have been reviewed by the Board.
Menhaden PLC
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Strategic Report
Business Review
continued
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
l The integration of ESG into the Portfolio Manager’s
investment processes.
l The Portfolio Manager reports regularly any ESG
issues in the portfolio companies to the Board.
Other Service Providers
l The Directors have frequent engagement with the
Company’s other service providers through the
annual cycle of reporting and due diligence meetings
or site visits by Frostrow. This engagement is
completed with the aim of maintaining an effective
working relationship and oversight of the services
provided.
Performance and Future Developments
An outline of performance, investment activity and strategy,
market background during the year and the future outlook,
is provided in the Chairman’s Statement beginning on
page 5 and the Portfolio Manager’s Review on pages 14
to 17.
The Portfolio Manager believes that companies which
supply products and services that help to conserve scarce
resources, reduce negative environmental impacts and
improve resource efficiency are likely to enjoy faster growing
end markets. The Directors continue to believe that
environmental and resource-efficiency solutions, together
with the Portfolio Manager’s investment strategy, should
provide good returns for the long-term investor.
l No specific action required as the reviews of the
Company’s service providers, have been positive and
the Directors believe their continued appointment is in
the best interests of the Company.
It is expected that the Company’s investment strategy in
the coming year will remain largely unchanged.
This Strategic Report on pages 2 to 34 has been signed
for and on behalf of the Board.
Sir Ian Cheshire
Chairman
8 April 2021
34 Menhaden PLC
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Board of Directors
Sir Ian Cheshire (Chairman)
Sir Ian Cheshire was the Group Chief Executive of
Kingfisher plc from January 2008 until February 2015. Prior
to that he was Chief Executive of B&Q Plc from June 2005.
Sir Ian was the Chairman of Barclays UK, the ring-fenced
retail bank until December 2020. He was also previously
the Government lead non-executive.
Sir Ian is a non-executive director of Barclays PLC and
BT Group plc and chairman designate of Spire Healthcare
Group plc. In addition, he is Chair of the Prince of Wales
Charitable Fund and President of the Business Disability
Forum.
Sir Ian was knighted in the 2014 New Year Honours for
services to Business, Sustainability and the Environment.
Duncan Budge
Duncan Budge is Chairman of Dunedin Enterprise
Investment Trust plc and Artemis Alpha Trust plc, and a
non-executive director of Lowland Investment Company
plc, Biopharma Credit plc and Asset Value Investors Ltd.
He was previously a director of J. Rothschild Capital
Management from 1988 to 2012 and a director and chief
operating officer of RIT Capital Partners plc from 1995 to
2011. Between 1979 and 1985 he was with Lazard
Brothers & Co. Ltd.
Meeting Attendance
The number of scheduled meetings of the Board and its committees held during the year and each Director’s
attendance, is shown below:
Type and number of meetings
held in 2020
Sir Ian Cheshire
Duncan Budge
Emma Howard Boyd
Howard Pearce
Board
(4)
4
4
4
4
Audit Committee
(3)
N/A
3
3
3
Management
Engagement
Committee
(1)
1
1
1
1
In addition to the normal, quarterly Board meetings, a Strategy meeting was held in December 2020.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Board of Directors
continued
Emma Howard Boyd
Emma Howard Boyd has been the Chair of the
Environment Agency since 2016. The Agency is a public
body responsible for the protection and enhancement of
the environment in England.
She is also an ex-officio board member of the Department
for Environment, Food & Rural Affairs (DEFRA) and an
Advisor to the Board of Trade. Emma, with a background
in finance, is a board member or advisor to many
organisations which include The Prince’s Accounting for
Sustainability Project, the Green Finance Institute, the
Coalition for Climate Resilient Investment, the Centre for
Greening Finance and Investment, the Council for
Sustainable Business, the European Climate Foundation,
and Menhaden PLC. Emma was the UK Commissioner to
the Global Commission on Adaptation from 2018 until its
sunset in January 2021.
Past roles include being the Chair of Trustees at Share
Action, Vice Chair of Future Cities Capital, and
non-executive director of the Aldersgate Group and
Thrive Renewables.
Howard Pearce
Howard Pearce is the founder of HowESG Ltd, a specialist
environmental, asset stewardship, and corporate
governance consultancy business. His non-executive roles
include independent Chair of the Bank of Montreal Global
Asset Management
Investment
Advisory Council and Non-Executive Director of Response
Global Media Limited the publishers of Responsible Investor
and Responsible Company.
(EMEA) Responsible
Previously he was Chair of the Pension Board of Avon and
Wiltshire Pension Funds, Board member and Chair of the
Audit Committee of Cowes Harbour Commission, and a
Trustee and Chair of the Investment and Audit Committees
of the NHS ‘Above and Beyond’ charity. Between 2003 and
2013 Howard was the Head of the Environment Agency
pension fund and a member of its Pensions and Investment
Committee. Under his leadership, the fund won over
30 awards in the UK, Europe and globally for its financially
and environmentally responsible investment, best practice
fund governance, public reporting and e-communications.
Directors’ Interests
The Directors’ beneficial interests in the Company’s shares, together with those of their families, are set out below.
Ordinary shares of 1p each
31 December
2020
115,000
10,000
23,000
40,000
188,000
31 December
2019
115,000
10,000
23,000
35,000
183,000
Sir Ian Cheshire
Duncan Budge
Emma Howard Boyd
Howard Pearce
Total
No changes have been notified to the date of this report.
36 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Directors’ Report
The Directors present their annual report on the affairs of
financial
the Company together with the audited
statements and the Independent Auditor’s Report for the
year ended 31 December 2020. Disclosures relating to
performance, future developments and risk management
can be found within the Strategic Report on pages 2 to 34.
Business and Status of the Company
The Company is registered as a public limited company
in England and Wales (registered number 09242421) and
is an investment company within the terms of Section 833
of the Companies Act 2006 (the “Act”). Its shares are
traded on the main market of the London Stock
Exchange, which is a regulated market as defined in
Section 1173 of the Act.
The Company has received approval from HM Revenue &
Customs as an investment trust under Sections 1158 and
1159 of the Corporation Tax Act 2010. In the opinion of the
Directors, the Company continues to direct its affairs so as
to qualify for such approval.
Continuation of the Company
In accordance with the Company's Articles of Association,
a continuation vote was offered to shareholders at the
AGM held on 9 June 2020 and was voted for by an
overwhelming majority of 98%. The next opportunity for
shareholders to vote on the continuation of the Company
will be at the 2025 AGM and every five years thereafter.
Results and Dividends
The results attributable to shareholders for the year are
shown on page 2.
An interim dividend of 0.4p per share in relation to the year
ended 31 December 2019 was paid on 12 June 2020 to
shareholders on the register on 15 May 2020.
No dividends were declared during the year ended
31 December 2020 and the Directors have not
recommended a final dividend for the year. It is expected
that the Board will revert to recommending a final dividend
(if required to maintain investment trust status) for
shareholders’ approval next year.
Alternative Performance Measures
The Financial Statements (on pages 63 to 82) set out the
required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which
are viewed as particularly relevant for investment trusts,
which are summarised on page 2 and explained in greater
detail in the Strategic Report, under the heading ‘Key
Performance Indicators’ on page 22. The Directors believe
that these measures enhance the comparability of
information between reporting periods and investors in
understanding
the Company’s performance. The
measures used for the year under review have remained
consistent with the prior year.
Definitions of the terms used and the basis of calculation
are set out in the Glossary on pages 85 and 86.
Capital Structure
The Company’s capital structure at the end of the year
under review and to the date of this report was comprised
of 80,000,001 ordinary shares of 1p nominal value each.
The voting rights of the ordinary shares on a poll are one
vote for each share held.
No shares were issued or repurchased during the year and
to the date of this report.
There are no:
• restrictions on transfer of, or in respect of the voting or
dividend rights of, the Company’s ordinary shares;
• agreements, known to the Company, between holders
of securities regarding the transfer of ordinary shares;
or
• special rights with regard to control of the Company
attaching to the ordinary shares.
At the end of the year under review and to the date of this
report, the Directors had shareholder authority to issue a
further 919,999,999 ordinary shares and to repurchase no
more than 14.99% of the Company’s issued share capital
per annum. These authorities will expire at the forthcoming
annual general meeting. Proposals to renew the Board’s
powers to issue and buy back shares are set out in the
Notice of Annual General Meeting beginning on page 89.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Directors’ Report
continued
Substantial Interests in Share Capital
The Company was aware of the following substantial interests of 3% or more in the voting rights of the Company as at
31 December 2020 and 28 February 2021, the latest practicable date before publication of this Annual Report.
28 February 2021
31 December 2020
Shareholder
Cavenham Private Equity
Aachen Muenchener Versicherung
Kendall Family Investments
Ravenscroft
Charles Stanley
Armstrong Investments
The Grantham Foundation
Number
of
Ordinary
shares
15,185,000
10,000,000
3,069,000
2,891,550
2,879,147
2,780,000
2,600,000
% of
issued
share
capital
18.98
12.50
3.84
3.61
3.60
3.48
3.25
Number
of
Ordinary
shares
15,185,000
10,000,000
5,000,000
2,929,050
2,821,989
2,780,000
2,600,000
% of
issued
share
capital
18.98
12.50
6.25
3.66
3.53
3.47
3.25
As at 31 December 2020 and to the date of this report, the Company had 80,000,001 ordinary shares in issue.
investment activity,
Going Concern
the
The Company’s portfolio,
Company’s cash balances and revenue forecasts, and the
trends and factors likely to affect the Company’s
performance are reviewed and discussed at each Board
meeting. The Board has considered a detailed
assessment of the Company's ability to meet its liabilities
as they fall due, including stress tests which modelled the
effects of substantial falls in portfolio valuations and
liquidity constraints, on the Company’s NAV, cash flows
and expenses. Based on the information available to the
Directors at the date of this report, including the results of
these stress tests, the conclusions drawn in the Viability
Statement in the Strategic Report on page 28 and the
Company’s cash balances, the Directors are satisfied that
the Company has adequate financial resources to
continue in operation for at least the next 12 months and
that, accordingly, it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
In reaching these conclusions and those in the Longer-
Term Viability Statement, the stress testing conducted also
featured consideration of the effects of Covid-19
and Brexit.
Beneficial Owners of Shares – Information
Rights
Beneficial owners of shares who have been nominated by
the registered holder of those shares to receive information
rights under section 146 of the Companies Act 2006 are
required to direct all communications to the registered
holder of their shares rather than to the Company’s
registrar or to the Company directly.
Greenhouse Gas Emissions
As the Board has engaged external firms to undertake the
Company’s
company
investment management,
management and custodial activities, the Company is
exempt from the requirements to report on greenhouse
gas emissions from its operations, and it has no
responsibility for any other emissions-producing sources
under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013 or the Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
The Company produces an annual environmental impact
statement which is included within this Annual Report on
pages 18 to 21 and also published separately on
www.menhaden.com. The impact report provides further
detail on the environmental goals and impact of the
Company’s portfolio holdings.
38 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Directors’ & Officers’ Liability Insurance
Cover
Directors’ and officers’ liability insurance cover was
maintained by the Company during the year ended
31 December 2020. It is intended that this cover will
continue for the year ending 31 December 2021 and
subsequent years.
Directors’ Indemnities
During the year under review and to the date of this report,
indemnities were in force between the Company and each
of its Directors under which the Company has agreed to
indemnify each Director, to the extent permitted by law, in
respect of certain liabilities incurred as a result of carrying
out his or her role as a director of the Company. The
Directors are also indemnified against the costs of
defending criminal or civil proceedings or any claim by the
Company or a regulator as they are incurred provided that
where the defence is unsuccessful the Director must repay
those defence costs to the Company. The indemnities are
qualifying third party indemnity provisions for the purposes
of the Companies Act 2006.
A copy of each deed of indemnity is available for
inspection at the Company’s registered office during
normal business hours and will be available for inspection
at the Annual General Meeting.
Other Statutory Information
The following information is disclosed in accordance with
the Companies Act 2006:
issue and buy back shares, in force at the end of the
year, are recorded on page 37.
• there are no agreements:
(i)
to which the Company is a party that might affect its
control following a takeover bid; and/or
(ii) between the Company and its directors concerning
compensation for loss of office.
and Development
Common Reporting Standard (CRS)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for
and
Economic Cooperation
incorporated into UK law by the International Tax
Compliance Regulations 2015. CRS
the
Company to provide certain additional details to HMRC in
relation to certain shareholders. The reporting obligation
began in 2016 and is an annual requirement. The
Company’s registrar, Link Group, has been engaged to
collate such information and file the reports with HMRC
on behalf of the Company.
requires
Political Donations
The Company has not made, and does not intend to
make, any political donations.
Disclosure of Information to Auditors
The Directors at the time of approving the Directors’
Report are listed on pages 35 and 36. Each Director in
office at the date of this report confirms that:
• the rules on the appointment and replacement of
directors are set out in the Company’s articles of
association (the “Articles”). Any change to the Articles
would be governed by the Companies Act 2006.
• to the best of each Director’s knowledge and belief,
there is no information relevant to the preparation of
their report of which the Company’s Auditor is unaware;
and
• subject to the provisions of the Companies Act 2006,
to the Articles, and to any directions given by special
resolution, the business of the Company shall be
managed by the Directors who may exercise all the
powers of the Company. The powers shall not be
limited by any special powers given to the Directors by
the Articles and a meeting of the Directors at which a
quorum is present may exercise all the powers
exercisable by the Directors. The Directors’ powers to
• each Director has taken all the steps a director might
reasonably be expected to have taken to be aware of
relevant audit information and to establish that the
Company’s Auditor is aware of that information.
This information is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Directors’ Report
continued
Nominee Share Code
Where the Company’s shares are held via a nominee
company name, the Company undertakes:
• to provide the nominee company with multiple copies
of shareholder communications, so long as an
indication of quantities has been provided in advance;
and
• to allow investors holding shares through a nominee
company to attend general meetings, provided the
correct authority from the nominee company is
available.
Nominee companies are encouraged to provide the
necessary authority to underlying shareholders to attend
the Company’s general meetings.
40 Menhaden PLC
Annual Report for the year ended 31 December 2020
Annual General Meeting
The Company’s Annual General Meeting (“AGM”) will be
held on 3 June 2021 at 12 noon. Please refer to the
Chairman’s Statement beginning on page 5 for details of
this year’s arrangements.
Resolutions relating to the following items of special
business will be proposed at the AGM:
Resolution 8 Authority to allot shares
Resolution 9 Authority to disapply pre-emption rights
Resolution 10 Authority to repurchase shares
Resolution 11 Authority to hold General Meetings (other
than the AGM) on at least 14 clear days notice.
The full text of the resolutions and the explanatory notes
to the proposed resolutions can be found in the Notice of
AGM beginning on page 89.
The Board considers that the proposed resolutions are in
the best interests of the shareholders as a whole.
Accordingly, the Board unanimously recommends to
shareholders that they vote in favour of the resolutions to
be proposed at the forthcoming AGM, as the Directors
intend to do in respect of their own beneficial holdings.
By order of the Board
Frostrow Capital LLP
Company Secretary
8 April 2021
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Statement of Directors’ Responsibilities
Company law in the United Kingdom requires the
Directors to prepare financial statements for each financial
year. The Directors are responsible for preparing the
financial statements in accordance with applicable law and
regulations. In preparing these financial statements, the
Directors have:
Responsibility Statement of the Directors
in respect of the Annual Report
The Directors, whose details can be
found on
pages 35 and 36, confirm to the best of their
knowledge that:
• the financial statements within this Annual Report,
prepared in accordance with applicable accounting
standards, give a true and fair view of the assets,
liabilities, financial position and the return for the year
ended 31 December 2020; and
• the Chairman’s Statement, Strategic Report and the
Directors’ Report include a fair review of the information
required by 4.1.8R to 4.1.11R of the FCA’s Disclosure
Guidance and Transparency Rules.
The Directors consider that the Annual Report taken as a
whole is fair, balanced and understandable and provides
the information necessary to assess the Company’s
position, performance, business model and strategy.
On behalf of the Board
Sir Ian Cheshire
Chairman
8 April 2021
• selected suitable accounting policies and applied them
consistently;
• made judgements and estimates that are reasonable
and prudent;
• followed applicable UK accounting standards; and
• prepared the financial statements on a going concern
basis.
The Directors are responsible for keeping adequate
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 2006. They are also
responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the
Directors’ Report and other information included in the
Annual Report is prepared in accordance with company
law in the United Kingdom. They are also responsible for
ensuring that the Annual Report includes information
required by the Listing Rules of the FCA.
The financial statements are published on the Company’s
website www.menhaden.com and via Frostrow’s website
www.frostrow.com. The maintenance and integrity of
these websites, so far as it relates to the Company, is the
responsibility of Frostrow. The work carried out by the
Auditor does not involve consideration of the maintenance
and integrity of these websites and, accordingly, the
Auditor accepts no responsibility for any changes that
have occurred to the financial statements since they were
initially presented on these websites. Visitors to the
websites need to be aware that legislation in the United
Kingdom governing the preparation and dissemination of
the financial statements may differ from legislation in their
jurisdiction.
Menhaden PLC
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2
Governance
Corporate Governance Statement
The Board and Committees
Responsibility for effective governance lies with the Board whose role is to promote the long-term success of the
Company. The governance framework of the Company reflects the fact that as an externally managed investment
company, it has no employees and outsources portfolio management services to Menhaden Capital Management LLP
and risk management, company management, company secretarial, administrative and marketing services to Frostrow
Capital LLP. The Board generates value for shareholders through its oversight of the service providers and management
of costs associated with running the Company.
The Board
Chairman – Sir Ian Cheshire
Three additional non-executive Directors, all considered independent.
Key roles and responsibilities:
– to provide leadership and set strategy within a framework of effective controls which enable risk to be assessed
and managed;
– to ensure that a robust corporate governance framework is implemented; and
– to challenge constructively and scrutinise performance of all outsourced activities.
Management Engagement
Committee
Chairman – Sir Ian Cheshire
All Directors
Key roles and responsibilities:
– to review the contracts, the performance and the
remuneration of the Company’s principal service
providers; and
– to make recommendations to the Board regarding
the continuing appointment of the AIFM and the
Portfolio Manager.
Audit Committee
Chairman – Howard Pearce
Duncan Budge, Emma Howard Boyd
Key roles and responsibilities:
– to review the Company’s financial reports;
– to oversee the risk and control environment; and
– to review the performance of the Company’s
external Auditors.
Copies of the full terms of reference, which clearly define the responsibilities of each committee, can be obtained from
the Company Secretary, will be available for inspection at the Annual General Meeting, and can be found on the Company’s
website www.menhaden.com.
The Directors have decided that, given the size of the Board and the fact that all Directors are considered to be
independent, it is unnecessary to form separate remuneration and nomination committees; the duties that would fall to
those committees are carried out by the Board as a whole. However, the Chairman takes no part in discussions
regarding his own remuneration and will not chair any discussions relating to the appointment of his successor.
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The Board has considered
the principles and
recommendations of the AIC Code of Corporate
Governance published in February 2019 (the “AIC Code”).
The AIC Code addresses all the principles set out in the
UK Corporate Governance Code (the “UK Code”), as well
as setting out additional provisions on issues that are of
specific relevance to the Company.
The Board considers that reporting against the principles
and provisions of the AIC Code (which has been endorsed
by the Financial Reporting Council) will provide better
information to shareholders. By reporting against the AIC
Code, the Company meets its obligations under the UK
Code (and associated disclosure requirements under
paragraph 9.8.6 of the Listing Rules) and as such does
not need to report further on issues contained in the UK
Code which are irrelevant to the Company.
The AIC Code is available on the AIC’s website
www.theaic.co.uk and the UK Code can be viewed on the
Financial Reporting Council website www.frc.org.uk.
The Company has complied with the principles and
provisions of the AIC Code with one exception: the Board
has not appointed a senior independent director. The
Board considers that this is not necessary given the small
size of the Board and the Company’s shareholder register.
The AIC Code includes an explanation of how the AIC
Code adapts the principles and provisions set out in the
UK Code to make them relevant for investment
companies.
Board Leadership and Purpose
Purpose and Strategy
The purpose and strategy of the Company are described
in the Strategic Report on page 22.
Board Culture
The Board aims to fully enlist differences of opinion, unique
vantage points and areas of expertise. The Chairman
encourages open debate to foster a supportive and co-
operative approach for all participants. Strategic decisions
are discussed openly and constructively. The Board aims
to be open and transparent with shareholders and other
stakeholders and for the Company to conduct itself
responsibly, ethically and fairly in its relationships with
service providers.
The Board has gained assurance on whistleblowing
procedures at the Company’s principal service providers
to ensure employees at those companies are supported
in speaking up and raising concerns. No concerns relating
to the Company were raised during the year.
Shareholder Relations
During the year, representatives of Frostrow, MCM and
Numis Securities Limited (the Company’s corporate
stockbroker) regularly met with institutional shareholders
and private client asset managers to understand their
views on governance and the Company’s performance.
Reports on investor sentiment and the feedback from
investor meetings were discussed with the Directors at the
following Board meeting. The Chairman is available to
meet with investors on request.
Shareholder Communications
The Directors welcome the views of all shareholders and
place considerable importance on communications with
them. Shareholders wishing to communicate with the
Chairman, or any other member of the Board, may do so
by writing to the Company Secretary.
The Board supports the principle that the AGM be used
to communicate with private investors, in particular.
Shareholders are usually encouraged to attend the Annual
General Meeting, where they are normally given the
opportunity to question the Chairman, the Board and
representatives of the Portfolio Manager. In addition, the
Portfolio Manager usually makes a presentation to
shareholders covering the investment performance and
strategy of the Company at the Annual General meeting.
However, in view of the ongoing Covid-19 pandemic, the
Board might need to make changes to the arrangements
for the forthcoming AGM. These are explained in the
Chairman’s Statement beginning on page 5. Details of the
proxy votes received in respect of each resolution will be
published on the Company’s website.
Significant Holdings and Voting Rights
Details of the shareholders with substantial interests in the
Company’s shares, the Directors’ authorities to issue and
repurchase the Company’s shares, and the voting rights
of the shares are set out in the Directors’ Report on
pages 37 to 40.
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2
Governance
Corporate Governance Statement
continued
Conflicts of Interest
In line with the Companies Act 2006, the Board has the
power to authorise any potential conflicts of interest that
may arise and impose such limits or conditions as it thinks
fit. A register of interests and potential conflicts is
maintained and is reviewed at every Board meeting. It was
resolved at each Board meeting during the year that there
were no direct or indirect interests of a Director that
conflicted with the interests of the Company. Appropriate
authorisation will be sought prior to the appointment of
any new director or if any new conflicts or potential
conflicts arise.
Director Independence
The Board consists of four non-executive Directors, each
of whom is independent of the AIFM and the Portfolio
Manager. Each of the Directors, including the Chairman,
was independent on appointment and continues to be
independent when assessed against the circumstances
set out in Provision 13 of the AIC Code (and Provision 12
of the AIC Code which relates specifically to the
Chairman). Accordingly, the Board considers that all of
the Directors are
independent and there are no
relationships or circumstances which are likely to impair
or could appear to impair their judgement.
Division of Responsibilities
Responsibilities of the Chairman
The Chairman’s primary role is to provide leadership to the
Board, assuming responsibility for its overall effectiveness
in directing the company. The Chairman is responsible for:
• ensuring that the Board is effective in its task of setting
and implementing the Company’s direction and
strategy;
• taking the chair at general meetings and Board
meetings, conducting meetings effectively and ensuring
all Directors are involved in discussions and decision-
making;
• setting the agenda for Board meetings and ensuring the
Directors receive accurate, timely and clear information
for decision-making;
• taking a leading role in determining the Board’s
composition and structure;
• overseeing the induction of new directors and the
development of the Board as a whole;
Directors’ Other Commitments
Each of the Directors has assessed the overall time
commitment of their external appointments and it has
been concluded that they have sufficient time to discharge
their duties.
Board Meetings
The primary focus at regular Board meetings is the review
of investment performance and associated matters,
including asset allocation, marketing/investor relations,
gearing, peer group information and industry issues. The
Board reviews key investment and financial data, revenue
and expenses projections, analyses of asset allocation,
transactions, performance comparisons, share price and
net asset value performance. The Board’s approach to
addressing share price performance during the year is
described in the Chairman’s Statement beginning on
page 5.
The Board is responsible for setting the Company’s
corporate strategy and
the continued
appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at each
meeting.
reviews
• leading the annual board evaluation process and
assessing the contribution of individual Directors;
The number of meetings and the individual attendance by
directors is set out on page 35.
• supporting and also challenging the AIFM and the
(and other suppliers where
Portfolio Manager
necessary);
Matters Reserved for Decision by the Board
The Board has adopted a schedule of matters reserved
for its decision. This includes, inter alia, the following:
• ensuring effective communications with shareholders
and, where appropriate, stakeholders; and
• engaging with shareholders to ensure that the Board
has a clear understanding of shareholder views.
• requirements under the Companies Act 2006, including
approval of the half yearly and annual financial
statements, recommendation of the final dividend (if
any), declaration of any
the
appointment or removal of the Company Secretary, and
determining the policy on share issuance and buybacks;
interim dividends,
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• matters
relating
to certain Stock Exchange
requirements and announcements, the Company’s
internal controls, and the Company’s corporate
governance structure, policy and procedures;
• decisions relating to the strategic objectives and overall
management of
the
appointment or removal of the AIFM and other service
providers, and review of the Investment Policy; and
the Company,
including
• matters relating to the Board and Board committees,
including the terms of reference and membership of the
committees, the appointment of directors (including the
Chairman) and
the determination of Directors’
remuneration.
Day-to-day operational and portfolio management is
delegated to Frostrow and MCM respectively.
The Board takes responsibility for the content of
communications regarding major corporate issues, even
if Frostrow or MCM act as spokesmen. The Board is kept
informed of relevant promotional material that is issued by
Frostrow.
Relationship with the AIFM and the Portfolio Manager
Representatives
in
from Frostrow and MCM are
attendance at each Board meeting to address questions
on specific matters and seek approval for specific
transactions which they are required to refer to the Board.
There is a respectful and constructive partnership between
the Board, the AIFM and the Portfolio Manager, and the
three parties worked closely together throughout the year.
The Management Engagement Committee evaluates
Frostrow and MCM’s performance and reviews the terms
of the AIFM and Portfolio Management Agreements at
least annually. The outcome of this year’s review is
described on page 25.
Relationship with Other Service Providers
The Management Engagement Committee monitors and
evaluates all of the Company’s other service providers,
including the Depositary, Registrar and Broker. At the most
recent review in December 2020, the Committee
concluded that all the service providers were performing
well and should be retained on their existing terms and
conditions.
Stewardship and the Exercise of Voting Powers
The Board has delegated authority to MCM (as Portfolio
Manager) to engage with companies held in the portfolio
and to vote the shares owned by the Company. The Board
has instructed that MCM submit votes for such shares
wherever possible. MCM may refer to the Board on any
matters of a contentious nature.
The Portfolio Manager’s approach to stewardship,
including their consideration of environmental, social
and governance issues, is set out in their stewardship
policy which can be found on the FRC’s website
www.frc.org. Details of the Company’s voting record
can be found in the Portfolio Manager’s Stewardship
Report which is published on the Company’s website
www.menhaden.com.
Independent Professional Advice
The Board has formalised arrangements under which the
Directors, in the furtherance of their duties, may seek
independent professional advice at the Company’s
expense. No such advice was sought during the year.
Company Secretary
The Directors have access to the advice and services of
an investment trust specialist Company Secretary through
its appointed representative, which is responsible for
advising the Board on all governance matters. The
Company Secretary ensures governance procedures are
followed and that the Company complies with applicable
statutory and regulatory requirements.
Composition, Succession and Evaluation
Board Evaluation
During the course of 2020, the performance of the Board,
its committees and the individual Directors (including each
Director’s independence) was evaluated through a formal
assessment process led by the Chairman. Mr Pearce led
the assessment of the Chairman’s performance.
The Chairman is satisfied that the structure and operation
of the Board continues to be effective and that there is a
satisfactory mix of skills, experience and knowledge. This
year, board succession was identified as an area requiring
further consideration and this is discussed in the following
section.
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2
Governance
Corporate Governance Statement
continued
All Directors submit themselves for annual re-election by
shareholders. Further information on the contribution of
each individual Director can be found in the explanatory
notes to the notice of the AGM on page 94. Following the
evaluation process,
that
the Board
shareholders vote in favour of the Directors’ re-election at
the forthcoming AGM.
recommends
Succession Planning
The Board regularly considers its structure and recognises
the need for progressive refreshment.
The Board has an approved succession planning policy
to ensure that (i) there is a formal, rigorous and transparent
procedure for the appointment of new directors; and (ii)
the Board is comprised of members who collectively
display the necessary balance of professional skills,
experience, length of service and industry/Company
knowledge.
During the year, the Board reviewed the policy on
Directors’ tenure and considered the overall length of
service of the Board as a whole. As all of the Directors
have been appointed since the launch of the Company,
the Board committed to review the long-term succession
plan, to ensure that there is an orderly succession when
the time comes for the Directors to retire from the Board.
Policy on the Tenure of the Chairman and other Non-
Executive Directors
The tenure of each independent, non-executive director,
including the Chairman, is not ordinarily expected to
exceed nine years. However, the Board has agreed that
the tenure of the Chairman may be extended for a limited
time provided such an extension is conducive to the
Board’s overall orderly succession. The Board believes
that this more flexible approach to the tenure of the
Chairman is appropriate in the context of the regulatory
rules that apply to investment companies, which ensure
that the chair remains independent after appointment,
while being consistent with the need for regular
refreshment and diversity.
Appointments to the Board
The rules governing the appointment and replacement of
directors are set out in the Company’s articles of
association and the aforementioned succession planning
policy. Where the Board appoints a new director during
the year, that director will stand for election by
shareholders at the next AGM. Subject to there being no
conflict of interest, all Directors are entitled to vote on
candidates for the appointment of new directors and on
the recommendation for shareholders’ approval for the
Directors seeking re-election at the Annual General
Meeting. When considering new appointments, the Board
endeavours to ensure that it has the capabilities required
to be effective and oversee the Company’s strategic
priorities. This will include an appropriate range, balance
and diversity of skills, experience and knowledge. The
Company is committed to ensuring that any vacancies
arising are filled by the most qualified candidates.
No new appointments were made during the year.
Diversity Policy
The Board supports the principle of Boardroom diversity,
of which gender is one important aspect. The Company’s
policy is that the Board should be comprised of directors
who collectively display the necessary balance of
professional skills, experience, length of service and
industry knowledge and that appointments to the Board
should be made on merit, against objective criteria,
including diversity in its broadest sense.
The objective of the policy is to have a broad range of
approaches, backgrounds, skills, knowledge and
experience represented on the Board. The Board believes
that this will make the Board more effective at promoting
the long-term sustainable success of the company and
generating value for all shareholders by ensuring there is
a breadth of perspectives among the directors and the
challenge needed to support good decision-making. To
this end achieving a diversity of perspectives and
backgrounds on the Board will be a key consideration in
any Director search process.
Notwithstanding this expectation, the Board considers
that a director’s tenure does not necessarily reduce his or
her ability to act independently and will continue to assess
each Director’s independence annually, through a formal
performance evaluation.
The gender balance of three men and one woman meets
the original recommendation of Lord Davies’ report on
Women on Boards. The Board is aware that new gender
representation objectives have been set for FTSE 350
companies and that targets concerning ethnic diversity
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have been recommended for FTSE 250 companies. While
the Company is not a FTSE 350 constituent and the Board
is small in size, the Board will continue to monitor
developments in this area and will consider diversity during
any director search process.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 41
describes the Directors’ responsibility for preparing this
report.
The Audit Committee Report, beginning on page 48,
explains the work undertaken to allow the Directors to
make this statement and to apply the going concern basis
of accounting. It also sets out the main roles and
responsibilities and the work of the Audit Committee and
describes the Directors’ review of the Company’s risk
management and internal control systems.
A description of the principal risks facing the Company
and an explanation of how they are being managed is
provided in the Strategic Report on pages 25 to 27.
The Board’s assessment of the Company’s longer-term
viability is set out in the Strategic Report on page 28.
Remuneration
The Directors’ Remuneration Report beginning on
page 52 and the Directors’ Remuneration Policy on
page 54 set out the levels of remuneration for each
Director and explain how Directors’ remuneration
is determined.
By order of the Board
Frostrow Capital LLP
Company Secretary
8 April 2021
Menhaden PLC
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2
Governance
Audit Committee Report
Statement from the Chairman
I am pleased to present the Audit Committee report for
the year ended 31 December 2020. The Committee met
three times during the year under review.
The role of the Committee is to ensure that shareholder
interests are properly protected in relation to the
application of financial reporting and internal control
principles and to assess the effectiveness of the audit. The
Committee’s roles and responsibilities are set out in full in
its terms of reference which are available on request from
the Company Secretary and can be seen on the
Company’s website (www.menhaden.com). A summary
of the Committee’s main responsibilities and how it has
fulfilled them is set out below.
Composition
The Audit Committee comprises Howard Pearce
(Chairman of the Committee), Duncan Budge and Emma
Howard Boyd whose biographies are set out on pages 35
and 36. The Committee as a whole has experience
relevant to the investment trust industry with Committee
members having a range of financial and investment
experience. Mr Pearce has extensive experience in audit,
having chaired the audit committees of numerous
organisations as outlined on page 36. Mr Budge serves
on the audit committees of the three other investment
trusts of which he is a non-executive director.
Responsibilities
In summary, the Committee’s principal functions are:
• to monitor the integrity of the Company’s annual and
half-year financial statements and any announcements
relating to the Company’s financial performance;
• to review the internal controls and risk management
systems of the Company and its third-party service
providers;
• to make recommendations to the Board regarding the
appointment, re-appointment or removal of the external
Auditor, and to be responsible for leading an audit
tender process at least once every ten years;
• to have primary responsibility for the Company’s
relationship with
including
reviewing the external Auditor’s independence and
objectivity as well as the effectiveness of the external
audit process;
the external Auditor,
48 Menhaden PLC
Annual Report for the year ended 31 December 2020
• to agree the scope of the external Auditor’s work and
to approve their remuneration; and
• to develop and implement policy on the engagement of
the external Auditor to supply non-audit services and
to review and approve any non-audit work to be carried
out by the external Auditor.
Meetings and Business
The following matters were dealt with at the Committee’s
meetings:
March 2020
• Review of the Company’s annual results;
• Approval of
the
the Annual Report,
Environmental Impact Statement and the unquoted
investment valuations;
including
• Review of risk management, internal controls and
compliance;
• Review of the outcome and effectiveness of the audit
and any matters arising; and
• Review of the need for an internal audit function.
September 2020
• Review of the Company’s terms of reference, non-audit
services policy and audit tender guidelines;
• Review of the Company’s half yearly results;
• Approval of the Half Yearly Report and financial
statements, and the unquoted investment valuations;
• Review of risk management, internal controls and
compliance; and
• Review of the Company’s anti bribery and corruption
policy and the policy on the prevention of the facilitation
of tax evasion, and the measures put in place by the
Company’s service providers.
December 2020
• Review of the Auditor’s plan and terms of engagement
for the 2020 audit;
• Review of new or revised reporting requirements and
audit standards;
• Review of the valuation methodology for the unquoted
investments; and
• Review of risks, internal controls and compliance.
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A summary of the principal risks facing the Company is
provided in the Strategic Report on pages 25 to 27.
Against this background, a risk matrix has been developed
which covers all key risks that the Company faces, the
likelihood of their occurrence and their potential impact,
how these risks are monitored and the mitigating controls
in place.
The Board has delegated to the Audit Committee
responsibility for the review and maintenance of the risk
matrix and it reviews, in detail, the risk matrix each time it
meets, bearing in mind any changes to the Company, its
environment or service providers since the last review. Any
significant changes to the risk matrix are discussed with
the whole Board. There were no changes to the
Company’s risk management processes during the year
and no significant failings or weaknesses were identified
from the Committee’s most recent risk review.
The Committee reviews internal controls reports from its
principal service providers on an annual basis. The
Committee is satisfied that appropriate systems have
been in place for the year under review and up to the date
of approval of this report.
Performance Evaluation
The Committee reviewed the results of the annual
evaluation of its performance during the year. As part of
the evaluation, the Committee reviewed the following:
• the composition of the Committee;
• the performance of the Committee Chairman;
• how the Committee had monitored compliance with
corporate governance regulations;
• how the Committee had considered the quality and
appropriateness of financial accounting and reporting;
• the Committee’s review of significant risks and internal
controls; and
• the Committee’s assessment of the independence,
competence and effectiveness of the Company’s
external Auditor.
It was concluded that the Committee was performing
satisfactorily and there were no formal recommendations
made to the Board.
Internal Controls and Risk Management
The Board has overall responsibility for risk management
and for the review of the internal controls of the Company,
undertaken in the context of its investment objective.
The review covers the key business, operational,
compliance and financial risks facing the Company. In
arriving at its judgement of what risks the Company faces,
the Board has considered the Company’s operations in
light of the following factors:
• the nature of the Company, with all management
functions outsourced to third party service providers;
• the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
investment objective;
• the likelihood of such risks becoming a reality; and
• the Company’s ability to reduce the likelihood and
impact of such risk.
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2
Governance
Audit Committee Report
continued
Significant Reporting Matters
The Committee considered the significant issues in respect of the Annual Report, including the financial statements.
The table below sets out the key areas of audit risk identified and also explains how these were addressed.
Significant risk
How the risk was addressed
existence
Valuation,
and
ownership of investments, in
particular unquoted investments
Risk of revenue being misstated
due to the improper recognition
of revenue.
The valuation of investments is undertaken in accordance with the accounting
policies in note 1 to the financial statements beginning on page 67. Controls are in
place to ensure that valuations are appropriate and existence is verified through
reconciliations with the Depositary. The Committee discussed with Frostrow and
MCM the process by which the unquoted investments are valued, and ownership
documented, including the reconciliation process with the Depositary. They also
reviewed the valuation of the unquoted investments as at 31 December 2020,
including the level of any discounts to net asset value applied to the unquoted
valuations, to ensure that they were carried out in accordance with the accounting
policy set out in note 1(b) on page 68. Having reviewed the valuations, the Committee
confirmed that they were satisfied that the investments had been valued correctly.
The Committee took steps to gain an understanding of the processes in place to
record investment income and transactions.
Financial Statements
The Board has asked the Committee to confirm that in its
opinion the Board can make the required statement that
the Annual Report taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position,
performance, business model and strategy. The
Committee has given this confirmation on the basis of:
• the procedures followed in the production of the Annual
Report, including the processes in place to assure the
accuracy of factual content;
• the extensive levels of review that were undertaken in
the production process, by Frostrow and also by the
Committee; and
• the internal control environment operated by Frostrow
Capital LLP (the AIFM), Menhaden Capital Management
LLP (the Portfolio Manager), JP Morgan (the Depositary)
and other service providers.
The Committee is satisfied that it is appropriate for the
Board to prepare the financial statements on the going
concern basis. Further detail can be found on page 38.
The financial statements can be found on pages 63 to 82.
The Committee also considered the longer-term viability
of the Company in connection with the Board’s statement
in the Strategic Report on page 28. The Committee
reviewed the Company’s financial position (including its
cash flows and liquidity position), the principal risks and
uncertainties and the results of stress tests and scenarios
which considered the impact of severe stock market
volatility on shareholders’ funds. This included modelling
further substantial market falls, and significantly reduced
market liquidity, to that experienced recently in connection
with the coronavirus pandemic. The scenarios assumed
that there would be significant falls in asset prices, that the
Company’s existing capital commitments would be drawn
down rapidly and in large instalments, that there would be
no sales of or distributions from private investments, and
that listed portfolio companies which have cut or cancelled
their dividends since the coronavirus outbreak would not
reinstate them.
The results demonstrated the impact on the Company’s
NAV, its expenses, its cash flows and its ability to meet its
liabilities including its capital commitments. In even the
most stressed scenario, the Company was shown to have
sufficient cash, or to be able to liquidate a sufficient portion
of its listed holdings, in order to be able to meet its
liabilities as they fall due. Based on the information
available to the Directors at the time, the Committee
therefore concluded it was reasonable for the Board to
expect that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
next five financial years.
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The Audit Committee will also seek assurances from the
Auditor that they maintain suitable policies and procedures
ensuring independence, and monitor compliance with the
relevant regulatory requirements on an annual basis.
Auditor Reappointment
Stephen Eames was the audit partner for the financial year
under review and he has confirmed Mazars’ willingness to
continue to act as Auditor to the Company for the
forthcoming financial year. Mazars’ appointment is subject
to shareholder approval at the next Annual General
Meeting to be held on 3 June 2021, and details can be
found in the Notice of AGM beginning on page 89.
As a public company listed on the London Stock
Exchange, the Company is subject to mandatory auditor
rotation requirements. Based on these requirements,
another tender process will be conducted no later than
2029. The Committee will, however, continue to consider
annually the need to go to tender for audit quality,
remuneration or independence reasons.
Howard Pearce
Chairman of the Audit Committee
8 April 2021
External Auditor
In addition to the reviews undertaken at Committee
meetings, I met with Mazars LLP (“Mazars”) on 10 March
2021 to discuss the progress of the audit and the draft
Annual Report.
In order to fulfil the Committee’s responsibility regarding
the independence of the Auditor, the Committee reviewed:
• the senior audit personnel in the audit plan, in order to
ensure that there were sufficient, suitably experienced
staff with knowledge of the investment trust sector
working on the audit;
• the steps the Auditor takes to ensure its independence
and objectivity;
• the statement by the Auditor that they remain
independent within the meaning of the relevant
regulations and their professional standards; and
• the need for any non-audit services to be performed by
the Auditor (there were none during the year under
review).
In order to consider the effectiveness of the audit process,
we reviewed:
• the Auditor’s execution and fulfilment of the agreed
audit plan, including their ability to communicate with
management and to resolve any issues promptly and
satisfactorily, and the audit partner’s leadership of the
audit team;
• the quality of the report arising from the audit itself; and
• feedback from the Auditor and also Frostrow as the
AIFM on the conduct of the audit and their working
relationship.
is satisfied with
the Auditor’s
The Committee
independence and the effectiveness of the audit process,
together with the degree of diligence and professional
scepticism brought to bear.
Non-Audit Services
The Auditor did not carry out any non-audit work during
the year. The Audit Committee will monitor the need for
non-audit work to be performed by the Auditor, if any, in
accordance with the Company’s non-audit services policy
which was updated in September 2020 to take the FRC’s
revised Ethical and Auditing Standards into consideration.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Directors’ Remuneration Report
Statement from the Chairman
I am pleased to present the Directors’ Remuneration
Report to shareholders. An ordinary resolution for the
approval of this report will be put to shareholders at the
Company’s forthcoming Annual General Meeting. The law
requires the Company’s Auditor to audit certain disclosures
provided in this report. Where disclosures have been
audited, they are indicated as such and the Auditor’s
opinion is included in their report to shareholders on
pages 55 to 62.
The Board considers the framework for the remuneration
of the Directors on an annual basis. It reviews the ongoing
appropriateness of the Company’s remuneration policy
and the individual remuneration of the Directors by
reference to the activities and particular complexities of
the Company and in comparison with other companies of
a similar structure and size. This is in line with the
AIC Code.
Directors’ fees during the year were unchanged from the
previous year: £50,000 per annum for the Chairman and
£25,000 per annum for Directors, with Directors who
serve on the Audit Committee receiving an additional
£15,000 per annum. Directors’ fees have remained
unchanged since the Company’s launch in 2015. The
Board as a whole reviewed the fee levels at a meeting held
on 2 December 2020 and it was decided that they would
remain unchanged for the year ending 31 December
2021. The projected fees for 2021 are set out on page 54.
No remuneration consultants were appointed during the
year (2019: none).
Levels of remuneration reflect both the time commitment
and responsibility of the role. The Directors are
remunerated exclusively by fixed fees in cash and do not
receive bonus payments or pension contributions from the
Company, hold options to acquire shares in the Company,
or other benefits. All Directors are entitled to the
reimbursement of reasonable out of pocket expenses
incurred by them in order to perform their duties as
directors of the Company.
The simple fee structure reflects the non-executive nature
of the Board, which itself reflects the Company’s business
model as an externally managed investment trust (please
refer to the Business Review beginning on page 22 for
more information). Accordingly, statutory disclosure
to executive directors’ and
requirements
employees’ pay do not apply.
relating
Single total figure of remuneration (audited)
Director
Date of
appointment
to the Board
Sir Ian Cheshire
3 October 2014
Duncan Budge
3 October 2014
Emma Howard Boyd
3 October 2014
Howard Pearce
3 October 2014
TOTAL
2020
Taxable
expenses
–
–
–
580
580
Fees
50,000
40,000
40,000
40,000
170,000
Total
50,000
40,000
40,000
40,580
Fees
50,000
40,000
40,000
40,000
2019
Taxable
expenses
–
–
–
Total
50,000
40,000
40,000
2,683
42,683
Percentage
change in
fees (%)
0
0
0
0
170,580
170,000
2,683
172,683
No payments have been made to any former directors. It is the Company’s policy not to pay compensation upon leaving
office for whatever reason. None of the fees referred to in the above table were paid to any third party in respect of the
services provided by any of the Directors.
52 Menhaden PLC
Annual Report for the year ended 31 December 2020
260498 Menhaden 35pp-62pp new.qxp 13/04/2021 19:33 Page 53
Directors’ Interests in the Company’s
Shares (audited)
Ordinary
shares
of 1p each
as at
31 Dec 2020
Ordinary
shares
of 1p each
as at
31 Dec 2019
115,000
10,000
23,000
40,000
188,000
115,000
10,000
23,000
35,000
183,000
Sir Ian Cheshire
Duncan Bridge
Emma Howard Boyd
Howard Pearce
Total
No changes have been notified to the date of this report.
The Company does not have share options or a share
scheme, and does not operate a pension scheme. None
of the Directors are required to own shares in the
Company.
Performance
The graph below shows the total shareholder return of the
Company since its launch on 31 July 2015 against the RPI
plus 3% over the same period.
%
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jan18
Jul 18
Jan 19
Jul 19
Jan 20
Jul 20
RPI+3%
Menhaden PLC Share Price Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 July 2015
Relative Cost of Directors’ Remuneration
The bar chart below shows the comparative cost of
Directors’ fees compared with the level of dividend
distribution and Company expenses for the years ended
31 December 2019 and 2020.
£m
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Directors’ Fees
2020
Expenses
2020
Dividends
2020
Directors’ Fees
2019
Expenses
2019
Dividends
2019
Statement of Voting at the AGM
At the Annual General Meeting held on 9 June 2020 the
results in respect of the resolution to approve the
Directors’ Remuneration Report were as follows:
Votes cast
for
Votes cast
against
Votes
withheld
55,358,780
99.8%
10,000 2,000,000*
0.02%
*Votes withheld are not votes by law and are therefore not counted in the
calculation of votes for or against a resolution.
By order of the Board
Sir Ian Cheshire
Chairman
8 April 2021
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Directors’ Remuneration Policy
is
that
remuneration policy
The Company’s
the
remuneration of each Director should be commensurate
with the duties, responsibilities and time commitment of
each respective role and consistent with the requirement
to attract and retain directors of appropriate quality and
experience. The remuneration should also be comparable
to that of investment trusts of similar size and structure.
Directors are remunerated in the form of fixed fees payable
monthly in arrears. There are no long or short-term
incentive schemes, share option schemes or pension
arrangements and the fees are not specifically related to
the Directors’ performance, either
individually or
collectively.
The Directors’ remuneration is determined within the limits
set out in the Company’s Articles of Association. The
present limit is £500,000 in aggregate per annum.
It is the Board’s intention that the remuneration policy will
be considered by shareholders at the annual general
meeting at least once every three years. If, however, the
remuneration policy is varied, shareholder approval will be
sought at the AGM following such variation. The Board will
formally review the remuneration policy at least once a
year to ensure that it remains appropriate.
This policy was last approved by shareholders at the AGM
held in 2019. Accordingly, unless there are material
changes, an ordinary resolution for the approval of this
policy will next be considered by shareholders at the
Annual General Meeting to be held in 2022. It is intended
that this policy will remain in place for the following financial
year and subsequent financial periods.
No communications have been
from
shareholders regarding Directors’ remuneration. The
Board will consider any comments received from
shareholders on the remuneration policy.
received
This policy, together with the Directors’ letters of
appointment, may be inspected at the Company’s
registered office.
54 Menhaden PLC
Annual Report for the year ended 31 December 2020
The Directors’ fees for 2020 and 2021 are shown in the
table below. The Company does not have any employees.
Directors’ Fees Current and Projected
Sir Ian Cheshire
Duncan Budge
Howard Pearce
Emma Howard Boyd
Fees (£)
2021
50,000
40,000
40,000
40,000
170,000
Fees (£)
2020
50,000
40,000
40,000
40,000
170,000
Any new director appointed to the Board will, under
current remuneration levels, receive a fee of £25,000 per
annum. Directors who serve on the Audit Committee
receive an additional fee of £15,000 per annum. The
fee of £25,000
Chairman receives an additional
per annum.
All Directors are non-executive, appointed under the terms
of letters of appointment and none has a service contract.
The terms of their appointment provide that Directors shall
retire and be subject to election at the first annual general
meeting after their appointment and to re-election every
three years thereafter. However, the Directors submit
themselves for annual re-election by shareholders, in line
with the AIC Code of Corporate Governance. The terms
also provide that a Director may be removed without
notice and that compensation will not be due on leaving
office.
260498 Menhaden 35pp-62pp new.qxp 13/04/2021 19:33 Page 55
Independent Auditor’s Report to the
Members of Menhaden PLC
Opinion
We have audited the financial statements of Menhaden PLC (the ‘Company’) for the year ended 31 December 2020
which comprise the Income Statement, the Statement of Changes in Equity, the Statement of Financial Position, the
Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards, including FRS 102, “The Financial Reporting Standard applicable in the UK and Republic of
Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2020 and of its return for the year
then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, as applied to listed entities
and public interest entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our audit procedures to evaluate the directors’ assessment of the Company’s ability to continue to adopt the going
concern basis of accounting included but were not limited to:
• Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern;
• Reviewing the directors’ going concern assessment including COVID-19 implications based on a ‘most likely’ (base
case) scenario and a ‘worst case scenario’ as approved by the board of directors on 30 March 2021;
• Making enquiries of directors to understand the period of assessment considered by the Directors, the completeness
of the adjustments taken into account and implication of those when assessing the ‘most likely’ scenario and the
‘worst case scenario’. This included examining the minimum cash inflow and committed outgoings under the ‘base
case’ cash flow forecasts and evaluated whether the directors’ conclusion that liquidity headroom remained in all
events was reasonable;
• Assessing and challenging the appropriateness of the directors’ key assumptions in their cashflow forecasts, by
reviewing supporting and contradictory evidence in relation to these key assumptions and assessing the directors’
consideration of severe but plausible scenarios;
• Testing the accuracy and functionality of the model used to prepare the directors’ forecasts; and
• Evaluating the appropriateness of the directors’ disclosures in the financial statements on going concern.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Independent Auditor’s Report
continued
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for
a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
director’s considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
We summarise below the key audit matter in forming our audit opinion above, together with an overview of the principal
audit procedures performed to address each matter and key observations arising from those procedures.
This matter, together with our findings, were communicated to those charged with governance through our Audit
Completion Report.
Key Audit Matter
How our scope addressed this matter
the
Valuation, existence and ownership of
investment portfolio
The Company has a significant portfolio of quoted and
unquoted investments, these are measured in
accordance with the requirements under FRS102 and
the Statement of Recommended Practice issued by
the Association of Investment Companies.
Investments make up 97% of total net assets by value
and are considered to be the key driver for the
Company. The investments are made of unquoted
investments and quoted investments.
There are a significant level of judgements made in
ascertaining the fair value of these unquoted
investments. There is a risk that judgements made
when valuing the unquoted investments may lead to
a misstatement in the value recorded in the Statement
of Financial Position.
Unquoted investments
• understanding management’s process to value unquoted
investments through discussions with management and
examination of control reports on the third party service
organisations;
• obtaining and agreeing confirmation of investments held in
order to obtain comfort over existence and ownership;
• we engaged our valuation specialist in considering whether
the techniques applied for valuing unquoted investments
were in accordance with published guidance, principally the
International Private Equity and Venture Capital Valuation
Guidelines. This included reviewing the investment valuation
policies of the private equity funds, reviewing the fund’s
latest available audited financial statements, reviewing the
fund’s latest valuation statements, reviewing any recent
transactions and discussion with the fund’s management
where applicable;
56 Menhaden PLC
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Key Audit Matter
How our scope addressed this matter
The quoted investments are included initially at fair
value which is taken to be their cost and subsequently
valued at fair value which are quoted bid prices for
investments traded in active markets. Although the
quoted investments are valued at quoted bid prices,
there is a risk that errors in valuation can have a
significant impact on the numbers presented.
See pages 68 to 69 for further details on the accounting
policy for investments and page 68 for key judgements
made.
There is also a risk that investments recorded might
not exist or might not be owned by the Company.
We therefore identified valuation, existence and
ownership of investments as a key audit matter as it
had the greatest effect on our overall audit strategy
and allocation of resources.
• reviewing whether there are any going concern issues and
uncertainties in relation to Covid-19 for the actual portfolio
companies as well as their underlying investments;
• agreeing valuation of unquoted investments to year end fair
values as reported in valuation statements received directly
from the investee funds; and
• reviewing the adequacy of the disclosure in the financial
statements including valuation methodology, assumptions
and fair value hierarchy used. Ensuring that the methodology
applied is in accordance with FRS102 and the Statement of
Recommended Practice issued by the Association of
Investment Companies.
Quoted investments
• understanding management’s process to value quoted
investments through discussions with management and
third party
examination of control reports on
administrator;
the
• agreeing the valuation of quoted investments to an
independent source of market prices;
• analysing the trading history of securities to see whether
they have been traded frequently and valued at which they
have been traded to ensure there are no unusual price
movements indicating the year end prices are stale;
• obtaining and agreeing confirmation from the custodian of
investments held in order to obtain comfort over existence
and ownership; and
• reviewing the adequacy of the disclosure in the financial
statements and ensure that the methodology applied is in
accordance with FRS102 and
the Statement of
Recommended Practice issued by the Association of
Investment Companies.
Our observations
Based on the work performed and evidence obtained, we
consider the methodology and assumptions used to value the
investments as appropriate. We did not note any issues with
regard to the existence or the ownership of the investments
held as at 31 December 2020.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Independent Auditor’s Report
continued
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our
professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
£1,059,000
This has been calculated with reference to the Company’s net assets, of which
it represents approximately 1%.
Rationale for benchmark applied
Net assets have been identified as the principal benchmark within the financial
statements as it is considered to be the focus of the shareholders.
Performance materiality
Reporting threshold
Approximately 1% of net assets have been chosen to reflect the level of
understanding of the stakeholders of the Company in relation to the inherent
uncertainties around accounting estimates and judgements.
Performance materiality is set to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
in the financial statements exceeds materiality for the financial statements as a
whole.
On the basis of our risk assessments, together with our assessment of the
overall control environment, our judgement was that performance materiality
was £794,000 which is approximately 75% of overall materiality.
At planning stage, we agreed with the directors that we would report to them
misstatements identified during our audit above £29,000 as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons. This threshold has increased to £32,000 following our
revised materiality using net assets as at 31 December 2020.
Other information
The other information comprises the information included in the annual report other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
58 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements and those reports have been prepared in
accordance with applicable legal requirements;
• the information about internal control and risk management systems in relation to financial reporting processes and
about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and
Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the
financial statements and has been prepared in accordance with applicable legal requirements; and
• information about the Company’s corporate governance code and practices and about its administrative,
management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA
rules.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we have not identified material misstatements in;
• the Strategic Report or the Directors’ Report; or
• the information about internal control and risk management systems in relation to financial reporting processes and
about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Company financial statements and the part of the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the Company.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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2
Governance
Independent Auditor’s Report
continued
Corporate governance statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK
Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained
during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 38;
• Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why the
period is appropriate set out on pages 28 to 29;
• Directors’ statement on fair, balanced and understandable set out on page 41;
• Board’s confirmation that it has carried out a robust assessment of the e-merging and principal risks set out on pages
25 to 27;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 47 and;
• The section describing the work of the audit committee set out on pages 48 to 51.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 41, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
60 Menhaden PLC
Annual Report for the year ended 31 December 2020
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Based on our understanding of the Company and its industry, we identified that the principal risks of non-compliance
with laws and regulations related to breaches of regulatory requirements of the HMRC Investment Trust conditions and
we considered the extent to which non-compliance might have a material effect on the financial statements.
In identifying and assessing risks of material misstatement in respect to irregularities including non-compliance with
laws and regulations, our procedures included but were not limited to:
• At the planning stage of our audit, gaining an understanding of the legal and regulatory framework applicable to the
Company and the industry in which it operates and considered the risk of acts by the Company which were contrary
to the applicable laws and regulations;
• Discussing with the directors and management the policies and procedures in place regarding compliance with laws
and regulations;
• Discussing amongst the engagement team the identified laws and regulations, and remaining alert to any indications
of non-compliance; and
• During the audit, focusing on areas of laws and regulations that could reasonably be expected to have a material
effect on the financial statements from our general commercial and sector experience and through discussions with
the directors (as required by auditing standards), from inspection of the Company’s regulatory and legal
correspondence and review of minutes of directors’ meetings in the year we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory requirements of the HMRC Investment Trust
conditions. We also considered those other laws and regulations that have a direct impact on the preparation of
financial statements, such as the Companies Act 2006 and UK tax legislation.
Our procedures in relation to fraud included but were not limited to:
• Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or
alleged fraud;
• Gaining an understanding of the internal controls established to mitigate risks related to fraud;
• Discussing amongst the engagement team the risks of fraud such as opportunities for fraudulent manipulation of
financial statements, and determined that the principal risks were related to posting manual journal entries to
manipulate financial performance, management bias through judgements and assumptions in significant accounting
estimates, in particular in relation to investment valuations, and significant one-off or unusual transactions; and
• Addressing the risks of fraud through management override of controls by performing journal entry testing.
The primary responsibility for the prevention and detection of irregularities including fraud rests with both those charged
with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these
may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
As a result of our procedures, we did not identify any key audit matters relating to irregularities. The risks of material
misstatement that had the greatest effect on our audit, including fraud, are discussed under “Key audit matters” within
this report.
A further description of our responsibilities is available on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities.
Menhaden PLC
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2
Governance
Independent Auditor’s Report
continued
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the Audit Committee on 02 December
2020 to audit the financial statements for the year ending 31 December 2020 and subsequent financial periods. The
period of total uninterrupted engagement is two years, covering the years ending 31 December 2019 to 31 December
2020.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain
independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of the audit report
This report is made solely to the Company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members
as a body for our audit work, for this report, or for the opinions we have formed.
Stephen Eames (Senior Statutory Auditor) for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
8 April 2021
62 Menhaden PLC
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Income Statement
Notes
Revenue
£’000
For the year ended
31 December 2020
Capital
£’000
Total
£’000
For the year ended
31 December 2019
Capital
£’000
Revenue
£’000
Total
£’000
Gains on investments held at fair value
through profit or loss
Income from investments held at fair value
through profit or loss
Management and performance fees
Other expenses
Net (loss)/return before taxation
Taxation on net return
Net (loss)/return after taxation
(Loss)/return per ordinary share
– basic and diluted (pence)
8
2
3
4
5
6
–
13,803
13,803
–
22,720
22,720
577
(276)
(454)
(153)
(14)
(167)
–
577
1,087
(1,183)
(1,459)
–
(454)
12,620
12,467
–
(14)
12,620
12,453
(248)
(437)
402
(78)
324
–
(993)
–
1,087
(1,241)
(437)
21,727
22,129
–
(78)
21,727
22,051
(0.2)
15.8
15.6 0.4
27.2 27.6
The “Total” column of this statement is the Income Statement of the Company. The “Revenue” and “Capital” columns
are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The Company has no recognised gains and losses other than those shown above and therefore no separate Statement
of Total Comprehensive Income has been presented.
The accompanying notes on pages 67 to 82 are an integral part of these financial statements.
Menhaden PLC
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3
Financial Statements
Statement of Changes in Equity
For the year ended 31 December 2020
Ordinary
share
capital
Notes £’000
Special
reserve
£’000
At 31 December 2019 800
77,371
Net return/(loss) from after taxation –
Dividends paid – revenue 7 –
–
–
Capital
reserve
£’000
15,280
12,620
–
Revenue
£’000
548
(167)
(320)
Total
£’000
93,999
12,453
(320)
At 31 December 2020 800
77,371
27,900
61
106,132
For the year ended 31 December 2019
Ordinary
share
capital
Notes £’000
Special
reserve
£’000
At 31 December 2018 800
77,371
Net return from after taxation –
Dividends paid – revenue 7 –
–
–
Capital
reserve
£’000
(6,447)
21,727
–
At 31 December 2019 800
77,371
15,280
Revenue
£’000
784
324
(560)
548
Total
£’000
72,508
22,051
(560)
93,999
The accompanying notes on pages 67 to 82 are an integral part of these financial statements.
64 Menhaden PLC
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Statement of Financial Position
Fixed assets
Investments held at fair value through profit or loss
Current assets
Debtors
Derivative financial instruments at fair value through profit or loss
Cash
Creditors: amounts falling due within one year
Other creditors
Net current assets
Total net assets
Capital and reserves
Ordinary share capital
Special reserve
Capital reserve
Revenue reserve
Total shareholders’ funds
Net asset value per share – basic and diluted (pence)
Notes
8
10
9
11
12
17
13
As at
31 December
2020
£’000
As at
31 December
2019
£’000
103,035
76,847
105
1,930
1,413
3,448
(351)
3,097
106,132
800
77,371
27,900
61
106,132
132.7
108
1,393
15,879
17,380
(228)
17,152
93,999
800
77,371
15,280
548
93,999
117.5
The financial statements on pages 63 to 82 were approved by the Board of Directors and authorised for issue on
8 April 2021 and were signed on its behalf by:
Sir Ian Cheshire
Chairman
The accompanying notes on pages 67 to 82 are an integral part of these financial statements.
Menhaden PLC – Company Registration Number 09242421 (Registered in England and Wales)
Menhaden PLC
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3
Financial Statements
Statement of Cash Flows
Net cash outflow from operating activities
Cash flows from investing activities
Purchases of investments
Sales of investments
Settlement of derivatives
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Equity dividends paid
Net cash outflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Cash and cash equivalents at the end of the year
For the
year ended
31 December
2020
£’000
For the
year ended
31 December
2019
£’000
(1,225)
(601)
Notes
14
(26,096)
13,071
104
(12,921)
(320)
(320)
(14,466)
15,879
1,413
(28,275)
37,823
(240)
9,308
(560)
(560)
8,147
7,732
15,879
The accompanying notes on pages 67 to 82 are an integral part of these financial statements.
66 Menhaden PLC
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Notes to the Financial Statements
For the year ended 31 December 2020
1.
ACCOUNTING POLICIES
The principal accounting policies, all of which have been applied consistently throughout the year in the
preparation of these financial statements, are set out below:
(a) Basis of Preparation
The financial statements have been prepared in accordance with United Kingdom company law, FRS 102 ‘The
Financial Reporting Standard applicable in the UK and Ireland’, the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued in October 2019 (the
‘SORP’), and the historical cost convention, as modified by the valuation of investments at fair value through
profit or loss. The Board has considered a detailed assessment of the Company’s ability to meet its liabilities as
they fall due, including stress and liquidity tests which modelled the effects of substantial falls in markets and
significant reductions in market liquidity (including consideration of the effect of Covid 19 and Brexit) on the
Company’s financial position and cash flows. Further information on the assumptions used in the stress scenarios
is provided in the Audit Committee report on page 50. The results of the tests showed that the Company would
have sufficient cash, or the ability to liquidate a sufficient proportion of its listed holdings, to meet its liabilities as
they fall due. Based on the information available to the Directors at the time of this report, including the results
of the stress tests, the Company’s cash balances, and the liquidity of the Company’s listed investments, the
Directors are satisfied that the Company has adequate financial resources to continue in operation for at least
the next 12 months and that, accordingly, it is appropriate to adopt the going concern basis in preparing these
financial statements.
The Company’s financial statements are presented in sterling, being the functional and presentational currency
of the Company. All values are rounded to the nearest thousand pounds (£’000) except where otherwise
indicated.
Fair value measurements are categorised into a fair value hierarchy based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
•
•
•
Level 1 – Quoted prices in active markets;
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (ie developed using
market data), either directly or indirectly;
Level 3 – Inputs are unobservable (ie for which market data is unavailable).
Presentation of the Income Statement
In order to reflect better the activities of an investment trust company and in accordance with the SORP,
supplementary information which analyses the Income Statement between items of a revenue and capital nature
has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain requirements set out in Sections 1158 and
1159 of the Corporation Tax Act 2010.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial
information are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable. The resulting estimates will, by definition, seldom
equal the related actual results.
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3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities relate to the valuation of the Company’s unquoted (Level 3) investments.
£13,380,000 or 13.0% (2019: £27,287,000 or 29.1%) of the Company’s portfolio is comprised of unquoted
investments. These are all valued in line with accounting policy 1(b) below. Under the accounting policy the
reported net asset value or price of recent transactions methodologies have been adopted in valuing those
investments, as set out on page 80.
As the Company has judged that it is appropriate to use reported NAVs in valuing unquoted investments as set
out in Note 16 (vi), the Company does not have any key assumptions concerning the future, or other key sources
of estimation uncertainty in the reporting period, which may have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year.
Whilst the Board considers the methodologies and assumptions adopted in the valuation of unquoted
investments are supportable, reasonable and robust, because of the inherent uncertainty of valuation, the values
used may differ significantly from the values that would have been used had a ready market for the investment
existed. These values may need to be revised as circumstances change and material adjustments may still arise
as a result of a reappraisal of the unquoted investments’ fair value within the next year.
In using a figure of 25% in the disclosures, set out on page 80, in relation to unquoted investments the Directors
had regard to the nature of the investments, the wide range of possible outcomes, and public information on
secondary market transactions in private equity funds.
Segmental Analysis
The Board is of the opinion that the Company is engaged in a single segment of business, namely investing in
accordance with the Company’s Investment Objective, and consequently no segmental analysis is provided.
(b) Investments Held at Fair Value Through Profit or Loss
All investments are measured on initial recognition and at subsequent reporting dates at fair value in accordance
with FRS 102 Section 11: Basic Financial Instruments and Section 12: Other Financial Instruments Issues.
Purchases and sales of quoted investments are recognised on the trade date where a contract exists whose
terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted
investments are recognised when the contract for acquisition or sale becomes unconditional.
Changes in the fair value of investments and gains and losses on disposal are recognised in the Income
Statement as ‘gains or losses on investments’. Also included within this caption are transaction costs in relation
to the purchase or sale of investments. The fair value of the different types of investment held by the Company
is determined as follows:
• Quoted Investments
Fair value is deemed to be bid or last trade price depending on the convention of the exchange on which it
is quoted.
• Unquoted Investments
Unquoted investments are fair valued using recognised valuation methodologies in accordance with the
International Private Equity and Venture Capital Association valuation guidelines (IPEVCA Guidelines).
68 Menhaden PLC
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1.
ACCOUNTING POLICIES continued
Where an investment has been made recently, or there has been a transaction in an investment, the Company
may use the transaction price as the best indicator of fair value. In such a case changes or events subsequent
to the relevant transaction date would be assessed to ascertain if they imply a change in the investment’s fair
value.
The Company’s unquoted investments comprise of limited partnerships or other entities set up by third parties
to invest in a wider range of investments, or to participate in a larger investment opportunity than would be
feasible for an individual investor, and to share the costs and benefits of such investment.
For these investments, in line with the IPEVCA Guidelines, and in the absence of transactions in the investments,
the fair value estimate is based on the attributable proportion of the reported net asset value of the unquoted
investment derived from the fair value of underlying investments. Valuation reports provided by the manager or
general partner of the unquoted investments are used to calculate fair value where there is evidence that the
valuation is derived using fair value principles that are consistent with the Company’s accounting policies and
valuation methods. Such valuation reports may be adjusted to take account of changes or events to the reporting
date, or other facts and circumstances which might impact the underlying value.
If a decision to sell an unquoted investment or portion thereof has been made then the fair value would be the
expected sales price where this is known or can be reliably estimated.
Where a portion of an unquoted investment has been sold the level of any discount, implicit in the sale price, will
be reviewed at each measurement date for that unquoted investment taking account of the performance of the
unquoted investment, as well as any other factors relevant to the value of the unquoted investment.
(c) Derivatives
Derivatives comprise foreign currency forwards used to hedge the Company’s foreign currency exposure. The
forwards comprise sterling receivable and a foreign currency deliverable. The fair value of the forwards is the
receivable ‘leg’ less the deliverable ‘leg’ translated at the exchange rate at the date of the Statement of Financial
Position.
(d) Investment Income
Dividends receivable are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends
are recognised when the Company’s right to receive payment is established. UK dividends are shown net of tax
credits and foreign dividends are gross of the appropriate rate of withholding tax.
Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to
reflect the effective yield when it is probable that economic benefit will flow to the Company. Where income
accruals previously recognised, but not received, are no longer considered to be reasonably expected to be
received, due to doubt over their receipt, then these amounts are reversed through expenses.
Income distributions from limited partnership funds are recognised when the right to the distribution is established.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the
Income Statement except as follows:
•
expenses which are incidental to the acquisition or disposal of an investment are charged to the capital
column of the Income Statement; and
Menhaden PLC
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3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(e) Expenses continued
•
expenses are charged to the capital column of the Income Statement where a connection with the
maintenance or enhancement of the value of the investments can be demonstrated. In this respect the
portfolio management and AIFM fees have been charged to the Income Statement in line with the Board’s
expected long-term split of returns, in the form of capital gains and income, from the Company’s portfolio.
As a result 20% of the portfolio management and AIFM fees are charged to the revenue column of the Income
Statement and 80% are charged to the capital column of the Income Statement.
Any performance fee accrued or paid is charged in full to the capital column of the Income Statement.
(f) Taxation
The tax effect of different items of expenditure is allocated between capital and revenue using the marginal basis.
Deferred taxation is provided on all timing differences that have originated but not been reversed by the Statement
of Financial Position date other than those differences regarded as permanent. This is subject to deferred tax
assets only being recognised if it is considered more likely than not that there will be suitable profits from which
the reversal of timing differences can be deducted. Any liability to deferred tax is provided for at the rate of tax
enacted or substantively enacted.
(g) Foreign Currency
Transactions recorded in overseas currencies during the year are translated into sterling at the exchange rate
ruling on the date of the transaction. Assets and liabilities denominated in overseas currencies are translated into
sterling at the exchange rates ruling at the date of the Statement of Financial Position.
Any gains or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to
the capital or the revenue column of the Income Statement, depending on whether the gain or loss is of a capital
or revenue nature.
(h) Cash and Cash Equivalents
Cash and cash equivalents are defined as cash and demand deposits readily convertible to known amounts of
cash and subject to insignificant risk of changes in value.
(i ) Capital Reserves
The following are transferred to this reserve: gains and losses on the realisation of investments; changes in the
fair values of investments; and expenses, together with the related taxation effect, charged to capital in
accordance with the Expenses Policy.
Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains
in the capital reserve.
(j) Special Reserve
During 2016, in order to enable the Company to make share repurchases out of distributable reserves and to
increase the distributable reserves available to facilitate the payment of future dividends, following the approval
of the Court, the share premium account was cancelled and the balance of the account was transferred to the
Special Reserve.
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2.
INCOME FROM INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Income from investments
Unquoted distributions
Overseas dividends
Fixed interest income
Total income comprises:
Dividends
Interest
2020
£’000
90
487
–
577
577
–
577
3.
AIFM AND PORTFOLIO MANAGEMENT FEES
AIFM fee
Portfolio management fee
Performance fee
4.
OTHER EXPENSES
Revenue
£’000
Capital
£’000
42
234
–
168
936
79
276
1,183
Revenue
£’000
Capital
£’000
Directors’ remuneration
Employers NIC on directors’s remuneration
Auditors’ remuneration for the audit of
the Company’s financial statements
Registrar fee
Broker retainer
Legal and professional costs
Custody fees
Other costs
Total expenses
171
18
41
17
30
8
46
123
454
–
–
–
–
–
–
–
–
–
2020
Total
£’000
210
1,170
79
1,459
2020
Total
£’000
171
18
41
17
30
8
46
123
454
Revenue
£’000
Capital
£’000
38
210
–
248
151
842
–
993
Revenue
£’000
Capital
£’000
170
19
33
17
30
9
50
109
437
–
–
–
–
–
–
–
–
–
2019
£’000
114
966
7
1,087
1,080
7
1,087
2019
Total
£’000
189
1,052
–
1,241
2019
Total
£’000
170
19
33
17
30
9
50
109
437
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report beginning on
page 52.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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3
Financial Statements
Notes to the Financial Statements
continued
5.
TAXATION ON NET RETURN
(a) Analysis of charge in period
UK corporation tax
Overseas taxation
Revenue
£’000
Capital
£’000
2020
Total
£’000
Revenue
£’000
Capital
£’000
2019
Total
£’000
14
–
14
78
–
78
(b) Factors affecting current tax charge for the year
Approved investment trusts are exempt from tax on capital gains made within the Company.
The tax charged for the period is lower than the standard rate of corporation tax in the UK of 19.0%
(2019: 19.0%). The difference is explained below.
Net (loss)/return before taxation
Corporation tax at 19.0% (2019: 19.0%)
Non-taxable gains on investments held
at fair value through profit or loss
Overseas withholding taxation
Non-taxable overseas dividends
Excess management expenses*
Current tax charge for the year
Revenue
£’000
(153)
(29)
Capital
£’000
12,620
2,398
2020
Total
£’000
12,467
2,369
–
(2,623)
(2,623)
14
(110)
139
14
–
-
225
–
14
(110)
364
14
Revenue
£’000
402
76
–
78
(205)
129
78
Capital
£’000
21,727
4,128
2019
Total
£’000
22,129
4,204
(4,317)
(4,317)
–
–
189
–
78
(205)
318
78
*Excess management expenses are expenses that are not relieved in full against income generated by the Company.
(c) Provision for deferred tax
No provision for deferred taxation has been made in the current period. The Company has not provided for
deferred tax on capital profits and losses arising on the revaluation or disposal of investments, as it is exempt
from tax on these items because of its status as an investment trust company.
The Company has not recognised a deferred tax asset of £1,527,000 (19% tax rate) (2019: £1,084,000, 17%)
as a result of excess management expenses. It is not anticipated that these excess expenses will be utilised in
the foreseeable future. Following the Budget in March 2020 the UK corporation tax rate remained at 19% from
April 2020.
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6.
7.
(LOSS)/RETURN PER SHARE
The capital, revenue and total return per ordinary share are based on the net (loss)/return shown in the
Income Statement on page 63 and the weighted average number of ordinary shares in issue 80,000,001
(2019: 80,000,001).
There are no dilutive instruments issued by the Company.
The calculation of the total, revenue and capital returns/(losses) per ordinary share is carried out in accordance
with IAS 33 Earnings per share.
DIVIDENDS PAID
Under UK GAAP, final dividends are not recognised until they are approved by shareholders and interim dividends
are not recognised until they are paid. They are also debited directly from reserves. Amounts recognised as
distributable in these financial statements were as follows:
2019 interim dividend of 0.4p per share
2018 final dividend of 0.7p per share
2020
£’000
320
–
2019
£’000
–
560
The Board’s current policy is to only pay dividends out of revenue reserves except where payment from a capital
reserve is required to maintain investment trust status. Therefore the amount available for distribution as at
31 December 2020 is £61,000 (2019: £548,000). The Company generated a revenue loss in the year ended
31 December 2020 of £167,000 (2019: £324,000).
The dividends payable in respect of both the current and the previous financial year, which meet the requirements
of Section 1158 CTA 2010, are set out below:
Revenue (loss)/available for distribution by way of dividend for the year
2019 interim dividend of 0.4p per share
Transfer to revenue reserves
2020
£’000
(167)
–
(167)
2019
£’000
324
(320)
4
Menhaden PLC
Annual Report for the year ended 31 December 2020
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3
Financial Statements
Notes to the Financial Statements
continued
8.
INVESTMENTS
2020 2019
Quoted Unquoted Quoted Unquoted
Investments Investments Total Investments Investments Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening balance
Cost at 1 January 38,258 22,922 61,180 38,711 22,439 61,150
Investment holdings gains at 1 January 11,302 4,365 15,667 4,262 199 4,461
Valuation at 1 January 49,560 27,287 76,847 42,973 22,638 65,611
Movement in the year:
Purchases at cost 25,537 559 26,096 19,518 8,759 28,277
Sales – proceeds received (3,903) (9,272) (13,175) (27,681) (10,142) (37,823)
Net movement in investment
holdings gains 12,441 826 13,267 14,750 6,032 20,782
Valuation at 31 December 83,635 19,400 103,035 49,560 27,287 76,847
Closing balance
Cost at 31 December 60,672 18,758 79,430 38,258 22,922 61,180
Investment holding gains
at 31 December 22,963 642 23,605 11,302 4,365 15,667
Valuation at 31 December 83,635 19,400 103,035 49,560 27,287 76,847
The Company received £13,175,000 (2019: £37,823,000) from investments sold in the year. The book cost of
these investments was £7,846,000 (2019: £28,247,000). These investments have been revalued over time and
until they were sold any unrealised gains/losses were included in the fair value of the investments.
Gains on investments
Net movement in investment holding gains in the year
Net movement in derivative holding gains in the year
Gains on investments
2020
£’000
13,267
536
13,803
2019
£’000
20,782
1,938
22,720
Purchase transaction costs were £17,000 (2019: £3,000). These comprise mainly commission and stamp duty.
Sales transaction costs were £2,000 (2019: £17,000). These comprise mainly commission.
74 Menhaden PLC
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9.
DERIVATIVES
Fair value of FX forwards
2020
£’000
1,930
2019
£’000
1,393
FX forwards are currently used to hedge the Company’s exposure to the Euro and US Dollar. See note 16(ii) for
further details. The Company received £104,000 (2019: paid £240,000) on FX forwards closed during the year.
The FX forwards are revalued over time and any gains/losses (both realised and unrealised) are included in
Gains/(losses) on investments in the capital column of the Income Statement.
10. DEBTORS
VAT recoverable
Withholding tax recoverable
Prepayments and accrued income
11. OTHER CREDITORS
Performance fees
Other creditors and accruals
2020
£’000
8
70
27
105
2020
£’000
79
272
351
2019
£’000
10
78
20
108
2019
£’000
–
228
228
The mechanism for performance fee is explained on page 24. The full amount of £79,000 was expensed during
the year ended 31 December 2020 and will be fully payable upon approval of this annual report.
12. SHARE CAPITAL
Issued and fully paid:
80,000,001 ordinary shares of 1p per share
2020
£’000
2019
£’000
800
800
There is a single class of ordinary shares. The voting rights of the ordinary shares on a poll are one vote for each
share held. There are no:
restrictions on transfer of, or in respect of the voting or dividend rights of, the Company’s ordinary shares;
agreements, known to the Company, between holders of securities regarding the transfer of ordinary shares;
•
•
or
•
special rights with regard to control of the Company attaching to the ordinary shares
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3
Financial Statements
Notes to the Financial Statements
continued
13. NET ASSET VALUE PER SHARE
Net asset value per share
2020
132.7p
2019
117.5p
The net asset value per share is based on the assets attributable to equity shareholders of £106,132,000
(2019: £93,999,000) and on the number of ordinary shares in issue at the year end of 80,000,001.
There are no dilutive instruments issued by the Company.
14. RECONCILIATION OF NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Gains before finance costs and taxation
Gains made on investments
(Increase)/decrease in other debtors
Increase in creditors and accruals
Effective interest rate amortisation
Net taxation suffered on investment income
Net cash outflow from operating activities
15. RELATED PARTIES
The following are considered to be related parties:
•
•
Frostrow Capital LLP
The Directors of the Company
2020
£’000
12,467
(13,803)
(1,336)
(5)
123
–
(7)
(1,225)
2019
£’000
22,129
(22,720)
(591)
26
46
(2)
(80)
(601)
Details of the relationship between the Company and the Company’s AIFM are disclosed in the Strategic Report
on pages 23 to 24. Details of fees paid to Frostrow by the Company can be found in note 3 on page 71. All material
related party transactions have been disclosed in note 3 on page 71. Details of the remuneration of all Directors
can be found in note 4. Details of the Directors’ interests in the capital of the Company can be found on page 53.
The balance outstanding to Frostrow at the year end was £20,000 (2019: £18,000). No balances were due to
the Directors (2019: nil).
Ben Goldsmith, a member of the Portfolio Manager, holds a minority membership interest in Alpina Partners LLP
(formerly WHEB Capital Partners LLP), the investment manager of the WCP Growth Fund LP. He also has a
small carried interest participation in this fund.
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16.
FINANCIAL INSTRUMENTS
Risk management policies and procedures
The Company’s financial instruments comprise securities and other investments, cash balances and certain
debtors and creditors that arise directly from its operations.
As an investment trust, the Company invests in equities and other investments for the long term so as to achieve
its Investment Objective as stated on pages 8 and 9. In pursuing its Investment Objective, the Company is
exposed to a variety of risks that could result in a reduction in the Company’s net assets.
The main risks that the Company faces arising from its use of financial instruments are:
(i) market risk (including foreign currency risk, interest rate risk and other price risk)
(ii)
liquidity risk
(iii) credit risk
These risks, with the exception of liquidity risk, and the Directors’ approach to the management of them, are set
out in the Strategic Report on pages 25 to 27. The AIFM, in close co-operation with the Board and the Portfolio
Manager, co-ordinates the Company’s risk management.
(i) Other price risk
In pursuance of the Investment Objective, the Company’s portfolio is exposed to the risk of fluctuations in market
prices and foreign exchange rates.
The Board manages these risks through the use of investment limits and guidelines as set out on pages 8 and 9,
and monitors the risks through monthly compliance reports from Frostrow, with reports from Frostrow and the
Portfolio Manager also presented at each Board meeting. In addition, Frostrow monitors the exposure of the
Company and compliance with the investment limits and guidelines on a daily basis.
Other price risk sensitivity
Other price risk may affect the value of the quoted investments.
If market prices at the date of the Statement of Financial Position had been 25% higher or lower while all other
variables had remained constant: the revenue return would have decreased/increased by £62,000
(2019: £283,000); the capital return would have increased/decreased by £18,571,000 (2019: £19,212,000); and,
the return on equity would have increased/decreased by £18,509,000 (2019: £18,929,000). The calculations are
based on the portfolio as at the respective dates of the Statement of Financial Position and are not representative
of the year as a whole.
(ii) Foreign currency risk
A significant proportion of the Company’s portfolio positions are denominated in currencies other than sterling
(the Company’s functional currency, and the currency in which it reports its results). As a result, movements in
exchange rates can significantly affect the sterling value of those items.
Foreign currency risk is monitored in conjunction with other price risk as described above. The Portfolio Manager
uses foreign currency forwards to hedge the foreign currency risk. Currently, approximately two thirds of the
Company’s euro and US dollar exposures are hedged.
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3
Financial Statements
Notes to the Financial Statements
continued
16.
FINANCIAL INSTRUMENTS continued
Foreign currency exposure
The fair values of the Company’s assets and liabilities that are denominated in foreign currencies are shown
below:
2020 2019
Current Current
Investments Derivatives* assets Net Investments Derivatives assets
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Net
£’000
U.S. dollar 77,148 (39,860) 2 37,290 52,583 (37,704) 17
14,896
Euro 16,584 (8,956) 70 7,698 11,528 (14,422) 9,950
Other – – 31 31 3,621 – 9
7,056
3,630
93,732 (48,816) 103 (45,019) 67,732 (52,126) 9,976
25,582
*Derivatives comprise foreign currency forwards used to partially hedge the Company’s exposure to overseas currencies.
Foreign currency sensitivity
The following table details the sensitivity of the Company’s net return for the year and shareholders’ funds to a
10% increase and decrease in sterling against the relevant currency.
These percentages have been determined based on market volatility in exchange rates over the period since
launch. The sensitivity analysis is based on the Company’s significant foreign currency exposures at each
Statement of Financial Position date.
USD
£’000
4,143
(3,390)
2020
EUR
£’000
855
(700)
Other
£’000
3
(3)
USD
£’000
1,655
(1,354)
2019
EUR
£’000
784
(641)
Other
£’000
403
(330)
Sterling depreciates
Sterling appreciates
(iii) Interest rate risk
Interest rate changes may affect:
–
–
the level of income receivable from floating and fixed rate securities and cash at bank and on deposit; and
the fair value of investments in fixed interest securities.
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16.
FINANCIAL INSTRUMENTS continued
Interest rate exposure
The exposure of financial assets and liabilities to fixed and floating interest rates, is shown below.
Cash
2020
2019
Fixed
rate
£’000
–
–
Floating
rate
£’000
1,413
1,413
Fixed
rate
£’000
–
–
Floating
rate
£’000
15,879
15,879
Interest rate sensitivity
If interest rates had been 1% higher or lower and all other variables were held constant, the Company’s net return
for the year ended 31 December 2020 and the net assets would increase/decrease by £14,000 (2019: £159,000).
(iv) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
The main liquidity requirements the Company may face are its commitments to the investments in limited
partnership funds, as set out in Note 18 on page 82. These commitments can be drawn down on 3 or 10 days
notice. Having reviewed the nature of the investment and the track record of the underlying mandate for the
most significant commitment, to TCI Real Estate Fund III Limited, the Board consider that it will be drawn down
gradually over the life of the investment and as such poses a low risk to the liquidity of the Company. Frostrow
and/or the Portfolio Manager are in regular contact with the managers of the limited partnership funds, as a part
of which they would be made aware of, and plan accordingly for any drawdowns under those commitments.
The Company’s assets comprise quoted securities (equity shares, fixed income and fund investments), cash,
and unquoted limited partnership funds and investments. Whilst the unquoted investments are illiquid, short-
term flexibility is achieved through the quoted securities, which are liquid, and cash which is available on demand.
The liquidity of the quoted securities is monitored on at least a monthly basis to ensure that there is sufficient
liquidity to meet the company’s liabilities and any forthcoming drawdowns.
(v) Credit risk
Credit risk is the risk of failure of a counterparty to discharge its obligations resulting in the Company suffering a
financial loss. The quoted debt investments are managed as part of an investment portfolio, and their credit risk
is considered in the context of their overall investment risk.
Credit risk exposure
Derivative financial instruments
Current assets:
Other receivables (amounts due from brokers, dividends and interest receivable)
Cash
2020
£’000
1,930
105
1,413
2019
£’000
1,393
94
15,879
(vi) Hierarchy of investments
The Company’s investments are valued within a fair value hierarchy that reflects the significance of the inputs
used in making the fair value measurements as described in the accounting policies beginning on page 67.
Menhaden PLC
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3
Financial Statements
Notes to the Financial Statements
continued
16.
FINANCIAL INSTRUMENTS continued
As of 31 December 2020
Investments
Derivatives
As of 31 December 2019
Investments
Derivatives
Level 1
£’000
89,655
Level 2
£’000
Level 3
£’000
Total
£’000
–
13,380
103,035
–
1,930
–
1,930
Level 1
£’000
49,560
Level 2
£’000
–
Level 3
£’000
27,287
Total
£’000
76,847
–
1,393
–
1,393
Level 3 investments as of 31 December 2020
Cost
’000
Value
£’000
Ownership
Valuation basis
Helios Co-Invest LP 1 US$8,221
11,120
4.73%
NAV
WCP Growth Fund LP £7,447
TCI Real Estate Partners Fund III Ltd US$2,713
26
2,235
10.30%
Discount to adjusted NAV
1.18%
NAV
1 Described as X-ELIO in the portfolio statement
The Company has a 1.25% holding in KKR Evergreen Co-Invest LP, whose NAV is 99.8% represented by the
valuation of Calisen PLC. Following the successful IPO of Calisen PLC during the year, its share price is now
publicly available on a recognised stock exchange. As such, the Company now classifies KKR Evergreen
Co-Invest LP (fair value: £6,020,000) as a level 1 investment (2019: level 3 investment).
During the year, the Company realised a gain of £1,267,000 after receiving £5,017,000 distribution from Helios
Co-Invest LP, following the sale of its 30% stake in X-ELIO. Helios Co-Invest LP remains the largest unquoted
investment for the Company as at 31 December 2020.
The Company also received a cash proceed of £3,540,000 from the disposal of its investment in Perfin Apollo
12 FIP. This represents a loss of £81,000, due to changes in FX, from its carrying value of £3,621,000 at the end
of 2019.
The fair value WCP Growth Fund LP was written down by £416,000 during the year.
If a 25% discount to NAV was applied to the NAV of the level 3 investments as at 31 December 2020, or the
discount already applied was increased by 25%, the impact would have been a decrease of £3,217,000 in net
assets and the net return for the year.
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16.
FINANCIAL INSTRUMENTS continued
Level 3 investments as of 31 December 2019
Cost
‘000
KKR Evergreen Co-Invest LP 1 £3,518
Perfin Apollo 12 FIP BRL3,937
Value
£‘000
4,701
3,621
Helios Co-Invest LP 2 US$13,116
16,419
Ownership
1.25%
5.80%
4.73%
Valuation basis3
Calibrated PORT
PORT
PORT/NAV
WCP Growth Fund LP £7,904
TCI Real Estate Partners Fund III Ltd US$1,978
899
1,648
10.30%
Discount to adjusted NAV
1.18%
NAV
1 Described as Calisen PLC in the portfolio statement
2 Described as X-ELIO in the portfolio statement
3 PORT = price of recent transaction
Perfin Apollo 12 FIP’s fair value was written up by £2,837,000 and Helios Co-Invest LP’s fair value increased by
£825,000 in 2019.
In addition, one unquoted investment was bought and realised in 2019. A stake in CGE Investments (“CGE”)
was acquired for €9,870,000 in the first quarter of 2019. The underlying investment in CGE was subject to a
takeover offer that was accepted and completed in the final quarter of 2019. Following completion, CGE made
a return of capital of €11,652,000.
If a 25% discount to NAV was applied to the NAV of the level 3 investments as at 31 December 2019, or the
discount already applied was increased by 25%, the impact would have been a decrease of £637,000 in net
assets and the net return for the year.
(vii) Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be able to continue as a going concern
and to maximise the income and capital return to its equity shareholders through an appropriate level of gearing.
The Board’s policy is to limit gearing to a maximum of 20% of the Company’s net assets. Currently the Company
does not have any gearing and there are no facilities in place.
The capital structure of the Company consists of the equity share capital, retained earnings and other reserves
as disclosed on the Statement of Financial Position on page 65.
The Board, with the assistance of the AIFM and the Portfolio Manager, monitors and reviews the broad structure
of the Company’s capital on an ongoing basis. This includes a review of:
–
–
–
–
the planned level of gearing, which takes into account the Portfolio Manager’s view of the market;
the need to buy back equity shares, either for cancellation or to hold in treasury, in light of any share price
discount to net asset value per share;
the need for new issues of equity shares; and,
the extent to which revenue in excess of that which is required to be distributed should be retained.
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3
Financial Statements
Notes to the Financial Statements
continued
17. CAPITAL RESERVE
At 1 January
Net gains on investments
Expenses charged to capital
At 31 December
2020
Capital Reserves
2019
Capital Reserves
Investment
Holding
Gains
£’000
Other
£’000
Total
£’000
Other
£’000
Investment
Holding
(Losses)
/Gains
£’000
Total
£’000
(1,780)
17,060
15,280
(10,124)
3,677
(6,447)
5,329
(1,183)
8,474
13,803
9,337
13,383
22,720
–
(1,183)
(993)
–
(993)
2,366
25,534
27,900
(1,780)
17,060
15,280
Sums within the Total Capital Reserve less unrealised gains (those on investments not readily convertible to cash)
are available for distribution. In addition, the Revenue Reserve is available for distribution.
18.
FINANCIAL COMMITMENT
The Company has made commitments to provide additional funds to the following investments:
KKR Evergreen Co-Invest LP
WCP Growth Fund LP
Helios Co-Invest LP
Sterling
Commitment
£18,000
£52,000
£45,000
Local currency
Commitment
Notice of
drawdown
–
–
10 business days
10 business days
US$62,000
3 business days
TCI Real Estate Partners Fund III Limited
£9,000,000
US$12,303,000
10 business days
19.
THE COMPANY
The Company is a public limited company (PLC) incorporated in England and Wales. Its principal activity is that
of an investment trust company within the meaning of sections 1158/1159 of the Corporation Tax Act 2010 and
its registered office and principal place of business is 25 Southampton Buildings, London, WC2A 1AL.
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Shareholder Information
Financial Calendar
31 December
Financial Year End
March/April
Final Results Announced
June
30 June
Annual General Meeting, Dividend Payable (if any)
Half Year End
September
Half Year Results Announced
Annual General Meeting
The Annual General Meeting of Menhaden PLC will be held at the offices of Frostrow Capital LLP, 25 Southampton
Buildings, London WC2A 1AL on 3 June 2021 at 12 noon. Please refer to the Chairman’s Statement on page 6 for
details of this year’s arrangements.
Share Prices
The Company’s ordinary shares are listed on the London Stock Exchange under ‘Investment Companies’. The price is
given daily in the Financial Times and other newspapers.
Change of Address
Communications with shareholders are mailed to the address held on the share register. In the event of a change of
address or other amendment this should be notified to the Company’s Registrar, Link Group, under the signature of
the registered holder.
Net Asset Value
The net asset value of the Company’s shares can be obtained on the Company’s website at www.menhaden.com and
is published monthly via the London Stock Exchange.
Profile of the Company’s Ownership
% of ordinary shares held at:
31 December 2020
31 December 2019
10.2%10 2%
10.9%10 9%
%
%
16.8%
%
5%29.5
43.5%
4
4
%
%
15.3%
%
2%25.2
48.6%
4
4
Family
Offffices
Wealth Mana
agers & Private Banks
Family
Offffices
Wealth Mana
agers & Private Banks
Institutions
Retail Platform
ms
Institutions
Retail Platform
ms
Menhaden PLC
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4
Further Information
AIFMD Disclosures
The Company’s AIFM, Frostrow Capital LLP, and the Company are required to make certain disclosures available to
investors in accordance with the UK’s Alternative Investment Fund Managers Regulation (“AIFMD UK Regulation”).
Those disclosures that are required to be made pre-investment are included within an Investor Disclosure Document
which can be found on the Company’s website www.menhaden.com.
The periodic disclosures to investors are made below:
• Information on the investment strategy, sector investment focus and principal stock exposures are included in the
Strategic Report.
• None of the Company’s assets are subject to special arrangements arising from their illiquid nature.
• There are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by Frostrow.
• The Strategic Report and note 16 to the Financial Statements set out the risk profile and risk management systems
in place. There have been no changes to the risk management systems in place during the year under review and
no breaches of the risk limits set, with no breach expected.
• At the start of the year under review, the maximum leverage limits were 200% both on a gross and on a commitment
basis (see Glossary on page 85 for further details). As at 31 December 2020, gross leverage was 144.9%
(2019: 137.6%) and commitment leverage was 100.2% (2019: 100.2%).
• No right of re-use of collateral or any guarantee granted under the leveraging arrangement has arisen during the
period.
• Following completion of an assessment of the application of the proportionality principle to the FCA’s AIFM
Remuneration Code, the AIFM has disapplied the pay-out process rules with respect to it and any of its delegates.
This is because the AIFM considers that it carries out non-complex activities and is operating on a small scale.
Note: These disclosures are not audited by the Company’s statutory auditor.
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Glossary
Alternative Investment Fund Managers Directive (AIFMD)
Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the
AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs)
and requires them to appoint an Alternative Investment Fund Manager (AIFM) and depositary to manage and oversee
the operations of the investment vehicle. The Board of the Company retains responsibility for strategy, operations and
compliance and the Directors retain a fiduciary duty to shareholders.
Compounding Hurdle
The payment of a performance fee is conditional on the Company’s NAV being above the high watermark and the
return on the gross proceeds from the IPO of the Company exceeding an annualised compound return of 5%.
Discount or Premium
A description of the difference between the share price and the net asset value per share. The size of the discount or
premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result
is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.
Gearing
In simple terms gearing is borrowing. An investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on shareholders’ funds is called ‘gearing’. If the Company’s assets grow,
shareholders’ funds grow proportionately more because the debt remains the same. But if the value of the Company’s
assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely
impact performance in falling markets.
Gearing represents borrowings at par less cash and cash equivalents expressed as a percentage of shareholders’
funds. Potential gearing is the company’s borrowings expressed as a percentage of shareholders’ funds.
High Watermark
The high watermark is the highest net asset value that the Company has reached on which a performance fee has
been paid. Its initial level was set at 100p on the launch of the Company.
Leverage
For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases
the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between
the Company’s exposure and its net asset value and can be calculated on a gross and a commitment method.
Under the gross method, exposure represents the sum of the Company’s positions after the deduction of sterling cash
balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure
is calculated without the deduction of sterling cash balances and after certain hedging and netting positions (as detailed
in the AIFMD) are offset against each other.
Net Asset Value (NAV)
The value of the Company’s assets, principally investments made in other companies and cash being held, minus any
liabilities. The NAV per share is also described as ‘shareholders’ funds’ per share. The NAV is often expressed in pence
per share after being divided by the number of shares which are in issue. The NAV per share is unlikely to be the same
as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share
price is determined by the relationship between the demand and supply of the shares.
Menhaden PLC
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4
Further Information
Glossary
continued
NAV Total Return
The theoretical total return on shareholders’ funds per share, reflecting the change in NAV assuming that any dividends
paid to shareholders were reinvested at NAV at the time the shares were quoted ex-dividend. A way of measuring
investment management performance of investment trusts which is not affected by movements in the share price.
31 December 31 December
2020 2019
Opening NAV 117.5p 90.6p
Increase in NAV 15.2p 26.9p
Closing NAV 132.7p 117.5p
% increase in NAV 12.9% 29.7%
Impact of dividend reinvested 0.3% 0.8%
NAV total return 13.2% 30.5%
Share Price Total Return
The return to the investor, on a last traded price to a last traded price basis, assuming that all dividends paid were
reinvested, without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
31 December 31 December
2020 2019
Opening share price 96.5p 67.0p
Increase in share price 2.5p 29.5p
Closing share price 99.0p 96.5p
% increase in share price 2.6% 44.0%
Impact of dividend reinvested 0.4% 1.3%
Share price total return 3.0% 45.3%
Ongoing Charges
Ongoing charges are calculated by taking the Company’s annualised operating expenses and expressing them as a
percentage of the average daily net asset value of the Company over the year. The costs of buying and selling
investments are excluded, as are interest costs, taxation, costs of buying back or issuing shares and other non-recurring
costs. These items are excluded because if included, they could distort the understanding of the Company’s
performance for the year and the comparability between periods.
31 December 31 December
2020 2019
£’000 £’000
Total Expenses 1,913 1,678
Average NAVs 93,724 83,249
Ongoing charge ratio 2.0% 2.0%
86 Menhaden PLC
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How to Invest
Retail Investors Advised by IFAs
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
(IFAs) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (FCA) rules in relation to
non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
restrictions which apply to non-mainstream investment products because they are shares in an investment trust.
Investment Platforms
The Company’s shares are traded openly on the London Stock Exchange and can be purchased through a stock
broker or other financial intermediary. The shares are available through savings plans (including Investment Dealing
Accounts, ISAs, Junior ISAs and SIPPs) which facilitate both regular monthly investments and lump sum investments
in the Company’s shares. There are a number of investment platforms that offer these facilities. A list of some of them,
that is not comprehensive nor constitutes any form of recommendation, can be found below:
AJ Bell Youinvest
Barclays Stockbrokers
Bestinvest
Charles Stanley Direct
EQi
FundsDirect
Halifax Investing
Hargreaves Lansdown
HSBC
iDealing
interactive investor
IWEB
Saga Share Dealing
The Share Centre
Saxo Markets
Wealth Club
http://www.youinvest.co.uk
https://www.barclays.co.uk/smart-investor
http://www.bestinvest.co.uk
https://www.charles-stanley-direct.co.uk
https://www.eqi.co.uk
http://www.fundsdirect.co.uk
http://www.halifax.co.uk/investing.html
http://www.hl.co.uk
https://hsbc.co.uk/investments
http://www.idealing.com
http://www.ii.co.uk
http://www.iweb-sharedealing.co.uk
https://www.saga.co.uk/money/share-dealing
https://www.share.com
https://www.home.saxo
https://www.wealthclub.co.uk
Menhaden PLC
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4
Further Information
How to Invest
continued
Link Group – Share Dealing Service
A quick and easy share dealing service is available to existing shareholders through the Company’s Registrars,
Link Group, to either buy or sell shares. An online and telephone dealing facility provides an easy to access and simple
to use service.
There is no need to pre-register and there are no complicated forms to fill in. The online and telephone dealing service
allows you to trade ‘real time’ at a known price which will be given to you at the time you give your instruction.
To deal online or by telephone all you need is your surname, investor code, full postcode and your date of birth. Your
investor code can be found on your share certificate. Please have the appropriate documents to hand when you log
on or call, as this information will be needed before you can buy or sell shares.
For further information on this service please contact: ww2.linkgroup.eu/share-deal (online dealing) or +44 (0) 371 664
0445 (telephone dealing).
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the
applicable international rate. Lines are open 8.00 am to 4.30 pm Monday to Friday excluding public holidays in England
and Wales.
Risk warnings
– Past performance is no guarantee of future performance.
– The value of your investment and any income from it may go down as well as up and you may not get back the
amount invested. This is because the share price is determined by the changing conditions in the relevant
stockmarkets in which the Company invests and by the supply and demand for the Company’s shares.
– As the shares in an investment trust are traded on a stock market, the share price will fluctuate in accordance with
supply and demand and may not reflect the underlying net asset value of the shares; where the share price is less
than the underlying value of the assets, the difference is known as the ‘discount’. For these reasons, investors may
not get back the original amount invested.
– Although the Company’s financial statements are denominated in sterling, it may invest in stocks and shares that
are denominated in currencies other than sterling and to the extent they do so, they may be affected by movements
in exchange rates. As a result, the value of your investment may rise or fall with movements in exchange rates.
– Investors should note that tax rates and reliefs may change at any time in the future.
– The value of ISA and Junior ISA tax advantages will depend on personal circumstances. The favourable tax treatment
of ISAs and Junior ISAs may not be maintained.
88 Menhaden PLC
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Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Menhaden PLC will be held at the offices of Frostrow Capital
LLP, 25 Southampton Buildings, London WC2A 1AL on Thursday, 3 June 2021 at 12 noon for the following purposes:
Ordinary Business
To consider and, if thought fit, pass the following as ordinary resolutions:
1.
2.
3.
4.
5.
6.
7.
To receive and accept the Annual Report for the year ended 31 December 2020, including the financial statements
and the directors’ and auditor’s reports thereon.
To receive and approve the Directors’ Remuneration Report for the year ended 31 December 2020.
To re-elect Sir Ian Cheshire as a Director of the Company.
To re-elect Duncan Budge as a Director of the Company.
To re-elect Emma Howard Boyd as a Director of the Company.
To re-elect Howard Pearce as a Director of the Company.
To re-appoint Mazars LLP as the Company’s Auditor to hold office from the conclusion of the meeting to the
conclusion of the next Annual General Meeting at which accounts are laid, and to authorise the Audit Committee
to determine their remuneration.
Special Business
To consider and, if thought fit, pass the following resolutions of which resolutions 9, 10 and 11 will be proposed as
special resolutions:
Authority to Issue Shares
8.
THAT, in substitution for all existing authorities, the Directors be and are hereby generally and unconditionally
authorised in accordance with Section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the
Company to allot relevant securities (within the meaning of section 551 of the Act) up to a maximum aggregate
nominal amount of £80,000 (being 10% of the issued share capital of the Company at the date of the notice
convening the meeting at which this resolution is proposed) and representing 8,000,000 shares of 1 penny each,
provided that this authority shall expire at the conclusion of the Annual General Meeting of the Company to be
held in 2022 or 15 months from the date of passing this resolution, whichever is the earlier, unless previously
revoked, varied or renewed by the Company in general meeting and provided that the Company shall be entitled
to make, prior to the expiry of such authority, an offer or agreement which would or might require relevant securities
to be allotted after such expiry and the Directors may allot relevant securities pursuant to such offer or agreement
as if the authority conferred hereby had not expired.
Menhaden PLC
Annual Report for the year ended 31 December 2020
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4
Further Information
Notice of the Annual General Meeting
continued
Disapplication of Pre-emption Rights
9.
THAT, in substitution of all existing powers, the Directors be and are hereby generally empowered pursuant to
sections 570 and 573 of the Companies Act 2006 (the “Act”) to allot equity securities (within the meaning of
section 560 of the Act) for cash pursuant to the authority conferred on them by resolution 8 set out in the notice
convening the Annual General Meeting at which this resolution is proposed or otherwise as if section 561(1) of
the Act did not apply to any such allotment and to sell relevant shares (within the meaning of section 560 of the
Act) for cash as if section 561(1) of the Act did not apply to any such sale, provided that this power shall be limited
to the allotment of equity securities pursuant to:
(a) an offer of equity securities open for acceptance for a period fixed by the Directors where the equity securities
respectively attributable to the interests of holders of shares of 1 penny each in the Company (“Shares”) are
proportionate (as nearly as may be) to the respective numbers of Shares held by them but subject to such
exclusions or other arrangements in connection with the issue as the Directors may consider necessary,
appropriate, or expedient to deal with equity securities representing fractional entitlements or to deal with legal
or practical problems arising in any overseas territory, the requirements of any regulatory body or stock
exchange, or any other matter whatsoever; and
(b) (otherwise than pursuant to sub-paragraph (a) above) an offer or offers of equity securities of up to an
aggregate nominal value of £80,000 and expires at the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution or 15 months from the date of passing this resolution, whichever
is the earlier, unless previously revoked, varied or renewed by the Company in general meeting and provided
that the Company shall be entitled to make, prior to the expiry of such authority, an offer or agreement which
would or might require equity securities to be allotted after such expiry and the Directors may allot equity
securities pursuant to such offer or agreement as if the power conferred hereby had not expired.
Authority to Repurchase ordinary shares
10. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of
the Companies Act 2006 (the “Act”) to make one or more market purchases (within the meaning of section 693(4)
of the Act) of ordinary shares of 1 penny each in the capital of the Company (“Shares”) (either for retention as
Treasury Shares for future reissue, resale, transfer or cancellation) provided that:
(a) the maximum aggregate number of Shares authorised to be purchased is 11,992,000 or, if changed, the
number representing approximately 14.99% of the issued share capital of the Company at the date of the
meeting at which this resolution is proposed;
(b) the minimum price (exclusive of expenses) which may be paid for a Share is 1 penny;
(c) the maximum price (exclusive of expenses) which may be paid for a Share is an amount equal to the greater
of (i) 105% of the average of the middle market quotations for a Share as derived from the Daily Official List
of the London Stock Exchange for the five business days immediately preceding the day on which that Share
is purchased and (ii) the higher of the price of the last independent trade in shares and the highest then current
independent bid for shares on the London Stock Exchange;
(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company
to be held in 2022 or, if earlier, on the expiry of 15 months from the date of the passing of this resolution unless
such authority is renewed prior to such time; and
(e) the Company may make a contract to purchase Shares under this authority before the expiry of such authority
which will or may be executed wholly or partly after the expiration of such authority, and may make a purchase
of Shares in pursuance of any such contract.
90 Menhaden PLC
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General Meetings
11. THAT the Directors be authorised to call general meetings (other than the Annual General Meeting of the Company)
on not less than 14 clear days’ notice, such authority to expire on the conclusion of the next Annual General
Meeting of the Company or if earlier, on the expiry 15 months from the date of the passing of the resolution.
Shareholders should note that, should ongoing restrictions in view of the Covid-19 pandemic make it
impossible to hold a physical meeting, without endangering the wellbeing of shareholders and other
attendees, then the Board will only conduct the statutory, formal business this year in order to meet the
minimum legal requirements. In that case arrangements will be made for shareholders to attend via a
webinar, view a presentation by the Portfolio Manager and ask questions in advance. Shareholders are
encouraged to view the Company’s website, www.menhaden.com for further information nearer the time.
Questions to the Board and the Portfolio Manager can be submitted to the Company Secretary at
info@frostrow.com. Should time pressures make it impossible to answer all questions during the webinar,
then an effort will be made to answer them on the website afterwards.
All shareholders should look on the Company’s website, www.menhaden.com for any late changes to the
AGM arrangements and whether attendance will be possible.
In any case, all shareholders are strongly advised to exercise their votes in advance of the meeting by proxy,
by following the voting instructions overleaf.
By order of the Board
Frostrow Capital LLP
Company Secretary
8 April 2021
Registered Office:
25 Southampton Buildings
London WC2A 1AL
Menhaden PLC
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4
Further Information
Notice of the Annual General Meeting
continued
Notes
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the
meeting. A shareholder may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise
the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company.
2.
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolutions.
If no voting indication is given, a proxy may vote or abstain from voting at his/her discretion. A proxy may vote (or abstain from voting)
as he or she thinks fit in relation to any other matter which is put before the meeting.
3. Hard copy forms of proxy have not been included with this notice. Members can vote by: logging onto www.signalshares.com and
following instructions, requesting a hard copy form of proxy directly from the registrars, Link Group, by emailing
enquiries@linkgroup.co.uk; or, in the case of CREST members, utilising the CREST electronic proxy appointment service in accordance
with the procedures set out below. To be valid any appointment of a proxy must be completed, signed and received at Link Group,
PXS 1, Central Square, 29 Wellington Street, Leeds LS1 4DL no later than 12 noon on 1 June 2021.
4.
5.
6.
7.
8.
In the case of a member which is a company, the instrument appointing a proxy must be executed under its seal or signed on its behalf
by a duly authorised officer or attorney or other person authorised to sign. Any power of attorney or other authority under which the
instrument is signed (or a certified copy of it) must be included with the instrument.
The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described below) will not prevent a
shareholder attending the meeting and voting in person if he/she wishes to do so.
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information
rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have
a right to be appointed (or have someone else appointed) as a proxy for the 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.
The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 3 above does not apply to
Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only shareholders registered on the register of members
of the Company (the “Register of Members”) at close of business on 1 June 2021 (or, in the event of any adjournment, on the date which
is two business days before the time of the adjourned meeting) will be entitled to attend and vote or be represented at the meeting in
respect of shares registered in their name at that time. Changes to the Register of Members after that time will be disregarded in
determining the rights of any person to attend and vote at the meeting.
9.
As at 8 April 2021 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of
80,000,001 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 8 April 2021 are 80,000,001.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using
the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST
members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able
to take the appropriate action on their behalf.
11.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with the specifications of Euroclear UK and Ireland Limited
(“CRESTCo”), and must contain the information required for such instruction, as described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA10) no later than 48 hours before the
time appointed for holding the meeting, excluding non-business days. 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 Application Host) from which the issuer’s agent is able to retrieve
the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed
through CREST should be communicated to the appointee through other means.
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make
available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or
voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system
providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and
timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
92 Menhaden PLC
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14.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Register
of Members in respect of the joint holding (the first named being the most senior).
15. Members who wish to change their proxy instructions should submit a new proxy appointment using the methods set out above. Note
that the cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
16. Members who have appointed a proxy using a hard-copy proxy form and who wish to change the instructions using another hard-copy
form, should contact Link Group on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international rate. Lines are open between 9.00 a.m. to 5.30 p.m., Monday
to Friday excluding public holidays in England and Wales.
17.
18.
If a member submits more than one valid proxy appointment, the appointment received last before the latest time for the receipt of
proxies will take precedence.
In order to revoke a proxy instruction, members will need to inform the Company. Members should send a signed hard copy notice
clearly stating their intention to revoke a proxy appointment to Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds LS1 4DL.
In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by
an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice
is signed (or a duly certified copy of such power of attorney) must be included with the revocation notice. If a member attempts to revoke
their proxy appointment but the revocation is received after the time for receipt of proxy appointments then, subject to paragraph 4, the
proxy appointment will remain valid.
19. Given the risks posed by the spread of Covid-19 and in accordance with the Articles and Government guidance, the Company may
impose restrictions on shareholders wishing to attend the AGM. Such restrictions may include limiting the number of shareholders
permitted to attend the AGM in person. Other restrictions may be imposed as the chairman of the meeting may specify in order to ensure
the safety of those attending the AGM.
Menhaden PLC
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4
Further Information
Explanatory Notes to the Resolutions
Resolution 1 – To receive the Annual Report
The Annual Report for the year ended 31 December 2020
will be presented to the Annual General Meeting (AGM).
The financial statements accompany this Notice of
Meeting.
Resolutions 2 – Directors’ Remuneration Report
It is mandatory for all listed companies to put their report
on Directors’ remuneration to a shareholder vote every
year. The Directors’ Remuneration Report is set out in full
in the Annual Report on pages 52 and 53.
Resolutions 3 to 6 – Re-election of Directors
Resolutions 3 to 6 deal with the re-election of each
Director. Biographies of each of the Directors can be found
on pages 35 and 36 of the Annual Report.
The specific reasons why (in the Board’s opinion) each
Directors’ contribution is, and continues to be, important
to the Company’s long-term sustainable success are as
follows:
Sir Ian Cheshire
Sir Ian’s leadership of the Board draws on 30 years’
experience in the retail, charity, and banking sectors. His
focus is on long-term strategic issues, including the
sustainability and environmental impact of the portfolio.
Duncan Budge
Duncan has over 35 years’ experience from his career in
the city and the investment trust sector, and his first-hand
knowledge enables the Board to engage authoritatively
with the Portfolio Manager on their investment strategy.
Emma Howard Boyd
Emma has over 25 years’ experience in various Board
level roles in the asset management, charity, and public
sectors and brings deep expertise
in corporate
governance, asset stewardship, and climate change
matters.
Howard Pearce
Howard has over 30 years’ experience advising at Board
level on green investment and significant expertise of audit
committee chairmanship which aids the Company’s
financial and environmental impact reporting.
94 Menhaden PLC
Annual Report for the year ended 31 December 2020
Resolution 7 – Re-appointment of Auditor and the
determination of their remuneration
Resolution 7 relates to the re-appointment of Mazars LLP
as the Company’s independent Auditor to hold office until
the next AGM of the Company and also authorises the
Audit Committee to set their remuneration. Following the
implementation of the Competition and Markets Authority
order on Statutory Audit Services, only the Audit
Committee may negotiate and agree the terms of the
Auditor’s service agreement.
Resolutions 8 and 9 – Issue of Shares
Ordinary Resolution 8 in the Notice of Annual General
Meeting will renew the authority to allot unissued share
capital up to an aggregate nominal amount of £80,000
(equivalent to 8,000,000 shares, or 10% of the Company’s
existing issued share capital on 8 April 2021, being the
nearest practicable date prior to the signing of this Annual
Report). Such authority will expire on the date of the next
Annual General Meeting or after a period of 15 months
from the date of the passing of the resolution, whichever
is earlier. This means that the authority will have to be
renewed at the next Annual General Meeting unless
previously renewed.
When shares are to be allotted for cash, Section 551 of the
Companies Act 2006 (the “Act”) provides that existing
shareholders have pre-emption rights and that the new
shares must be offered first to such shareholders in
proportion to their existing holding of shares. However,
shareholders can, by special resolution, authorise the
Directors to allot shares otherwise than by a pro rata issue
to existing shareholders. Special Resolution 9 will, if passed,
give the Directors power to allot for cash equity securities
up to 10% of the Company’s existing share capital on
8 April 2021, as if Section 551 of the Act does not apply.
This is the same nominal amount of share capital which the
Directors are seeking the authority to allot pursuant to
Resolution 8. This authority will also expire on the date of
the next Annual General Meeting or after a period of
15 months, whichever is earlier. This authority will not be
used in connection with a rights issue by the Company.
The Directors intend to use the authority given by
Resolutions 8 and 9 to allot shares and disapply pre-
emption rights only in circumstances where this will be
clearly beneficial to shareholders as a whole. The issue
proceeds would be available for investment in line with the
Company’s investment policy. No issue of shares will be
made which would effectively alter the control of the
Company without the prior approval of shareholders in
general meeting.
260498 Menhaden 83pp-end.qxp 13/04/2021 19:36 Page 95
Resolution 11 – General Meetings
Special Resolution 11 seeks shareholder approval for the
Company to hold General Meetings (other than the AGM)
on 14 clear days’ notice.
The Company will only use this shorter notice period
where it is merited by the purpose of the meeting and will
endeavour to give at least 14 working days’ notice if
possible.
Recommendation
The Board considers that the resolutions relating to the
above items are in the best interests of shareholders as a
whole. Accordingly, the Board unanimously recommends
to the shareholders that they vote in favour of the above
resolutions to be proposed at the forthcoming AGM as the
Directors intend to do in respect of their own beneficial
holdings totalling 188,000 shares.
Resolution 10 – Share Repurchases
The principal aim of a share buy-back facility is to enhance
shareholder value by acquiring shares at a discount to net
asset value, as and when the Directors consider this to be
appropriate. The purchase of shares, when they are trading
at a discount to net asset value per share, should result in
an increase in the net asset value per share for the
remaining shareholders. This authority, if conferred, will only
be exercised if to do so would result in an increase in the
net asset value per share for the remaining shareholders
and if it is in the best interests of shareholders generally.
Any purchase of shares will be made within guidelines
established from time to time by the Board.
Under the current Listing Rules, the maximum price that
may be paid on the exercise of this authority must not
exceed the higher of (i) 105% of the average of the middle
market quotations for the shares over the five business
days immediately preceding the date of purchase and (ii)
the higher of the last independent trade and the highest
current independent bid on the trading venue where the
purchase is carried out. The minimum price which may be
paid is 1 penny per share.
Special Resolution 10 in the Notice of Annual General
Meeting will renew the authority to purchase in the market
a maximum of 14.99% of shares in issue on 8 April 2021,
being the nearest practicable date prior to the signing of
this Annual Report, (amounting to 11,952,000 shares).
Such authority will expire on the date of the next Annual
General Meeting or after a period of 15 months from the
date of passing of the resolution, whichever is earlier. This
means in effect that the authority will have to be renewed
at the next Annual General Meeting or earlier if the
authority has been exhausted.
Menhaden PLC
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4
Further Information
Company Information
Directors
Sir Ian Cheshire (Chairman)
Duncan Budge
Emma Howard Boyd
Howard Pearce
Auditor
Mazars LLP
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
Company Registration Number
09242421 (Registered in England and Wales)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006
The Company was incorporated on 30 September 2014. The
Company was incorporated as BGT Capital PLC.
Corporate Broker
Numis Securities Limited
London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Website
Website: www.menhaden.com
Registered Office
25 Southampton Buildings
London WC2A 1AL
Alternative Investment Fund Manager,
Company Secretary and Administrator
Frostrow Capital LLP
25 Southampton Buildings, London WC2A 1AL
Telephone: 0203 008 4910
E-mail: info@frostrow.com
Website: www.frostrow.com
Authorised and regulated by the Financial Conduct Authority
If you have an enquiry about the Company or if you would like
to receive a copy of the Company’s monthly fact sheet by
e-mail, please contact Frostrow Capital using the above e-mail
address.
Portfolio Manager
Menhaden Capital Management LLP
2nd Floor
Heathmans House
19 Heathmans Road
London
SW6 4TJ
Authorised and regulated by the Financial Conduct Authority
Depositary
J.P. Morgan Europe Limited
25 Bank Street
London E14 5JP
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone + 44 371 664 0300
E-mail: enquiries@linkgroup.co.uk
Shareholder Portal: www.signalshares.com
Website: www.linkassetservices.com
Please contact the Registrars if you have a query about a
certificated holding in the Company’s shares.
†Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the UK will be charged at the applicable international rate. Lines are open
from 9.00 a.m. to 5.30 p.m. Monday to Friday excluding public holidays in England
and Wales.
Share Price Listings
The price of your shares can be found in various publications
including the Financial Times, The Daily Telegraph, The Times
and The Scotsman.
The Company’s net asset value per share is announced daily
and is available, together with the share price, on the TrustNet
website at www.trustnet.com.
Identification Codes
Shares:
SEDOL
ISIN
BLOOMBERG
EPIC
Legal Entity Identifier
2138004NTCUZTHFWXS17
: BZ0XWD0
: GB00BZ0XWD04
: MHN LN
: MHN
96 Menhaden PLC
Annual Report for the year ended 31 December 2020
Menhaden PLC – Annual Report
Menhaden PLC – Annual Report
Menhaden PLC – Annual Report
Menhaden Capital PLC
Menhaden Capital PLC
Menhaden Capital PLC
Company Summary
Company Summary
Company Summary
Annual Report for the period from incorporation on
Annual Report for the period from incorporation on
Annual Report for the period from incorporation on
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official List
30 September 2014 to 31 December 2015
30 September 2014 to 31 December 2015
30 September 2014 to 31 December 2015
List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of
List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of
and traded on the main market of the London Stock Exchange. The Company is a London Stock Exchange’s Green
Investment Companies.
Investment Companies.
Economy Mark issuer. The Company is also a member of the Association of Investment Companies.
Investment Objective
Investment Objective
Investment Objective
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
in businesses and opportunities delivering or benefiting from the efficient use of energy and resources irrespective of
in businesses and opportunities that are demonstrably delivering or benefiting significantly from the efficient use of
in businesses and opportunities delivering or benefiting from the efficient use of energy and resources irrespective of
their size, location or stage of development.
energy and resources irrespective of their size, location or stage of development.
their size, location or stage of development.
Management
Management
Management
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
The Company employs Frostrow Capital LLP as its Alternative Investment Fund Manager (“AIFM”) to provide company
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
management, company secretarial, administrative and marketing services. Frostrow and the Company have jointly
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
provided on pages 25 and 26.
provided on pages 23 and 24.
provided on pages 25 and 26.
Capital Structure
Capital Structure
Capital Structure
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 36 and in note 12
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 37 and in note 12
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 36 and in note 12
to the financial statements on page 75.
to the financial statements on page 75.
to the financial statements on page 75.
ISA Status
ISA Status
ISA Status
The Company’s shares are eligible for Stocks and Shares ISAs.
The Company’s shares are eligible for Stocks and Shares ISAs.
The Company’s shares are eligible for Stocks and Shares ISAs.
Retail Investors advised by IFAs
Retail Investors advised by IFAs
Retail Investors advised by IFAs
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
(“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
restrictions which apply to non-mainstream pooled investment products because they are shares in an investment
trust.
trust.
trust.
Menhaden
Menhaden
Menhaden
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
Menhaden are forage fish that occur in great abundance in the West Atlantic Ocean. The name, Menhaden, is derived
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
from the Native American expression “he fertilises” referring to the wide spread use of the fish as a fertiliser. Menhaden
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
filter vast quantities of water and play a key role in the food chain. It has been argued that the environmental movement
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
and fisheries ecology rose from the first collapse in the population of Menhaden in the 1860s as this was used as a
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
prominent example of mankind’s impact on the oceans and the importance of using resources sustainably.
A member of the Association of Investment Companies
A member of the Association of Investment Companies
A member of the Association of Investment Companies
Disability Act
Disability Act
Disability Act
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
without the need for an intermediate operator, for this service please call 0800 731 1888.
without the need for an intermediate operator, for this service please call 0800 731 1888.
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
Copies of this annual report and other documents issued by the Company are available from the Company Secretary. If needed, copies can be
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
without the need for an intermediate operator, for this service please call 0800 731 1888.
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
Environment
Environment
Environment
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
the ISO 14001 certificate for environmental management.
the ISO 14001 certificate for environmental management.
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
The pulp is bleached using a totally chlorine free (TCF) process.
The pulp is bleached using a totally chlorine free (TCF) process.
Menhaden PLC
Menhaden PLC
Menhaden PLC
25 Southampton Buildings
25 Southampton Buildings
25 Southampton Buildings
London WC2A 1AL
London WC2A 1AL
London WC2A 1AL
www.menhaden.com
www.menhaden.com
Tel +44(0) 203 008 4910
Tel +44(0) 203 008 4910
www.menhaden.com
Tel +44(0) 203 008 4910
Perivan 260498
Perivan 257636
Perivan 257636
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Menhaden PLC
Annual Report for the year ended 31 December 2020