Menhaden Resource
Efficiency
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Menhaden Resource Efficiency PLC – Annual Report
Company Summary
Menhaden Resource Efficiency PLC (formerly Menhaden PLC) (the “Company”) is an investment trust. Its shares are
listed on the premium segment of the Official List and traded on the main market of the London Stock Exchange. The
Company is a member of the Association of Investment Companies (“AIC”).
Menhaden Capital PLC
Annual Report for the period from incorporation on
30 September 2014 to 31 December 2015
Investment Objective
The Company aims to generate long-term shareholder returns, predominantly in the form of capital growth, by investing
in businesses and opportunities that are demonstrably delivering or benefiting significantly from the efficient use of
energy and resources irrespective of their size, location or stage of development.
Management
The Company employs Frostrow Capital LLP (“Frostrow”) as its Alternative Investment Fund Manager (“AIFM”) to provide
company 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 provided on pages 23 and 24.
Capital Structure
The Company’s capital is composed solely of ordinary shares. Details are given on page 36 and in note 13 to the
financial statements on page 74.
ISA Status
The Company’s shares are eligible for Stocks and Shares ISAs.
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 pooled investment products because they are shares in an investment
trust.
Menhaden
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 widespread 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
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.
1
Strategic Report
2
4
5
8
10
11
12
14
18
22
Company Performance
Portfolio Profile
Chairman’s Statement
Investment Objective and Policy
Investment Committee
Investment Process
Portfolio
Portfolio Manager’s Review
Environmental Impact Statement
Business Review
3
Financial Statements
62
63
64
65
66
Income Statement
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
2
Governance
34
36
40
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
41
47
51
53
54
4
Further Information
81
82
84
86
91
Shareholder Information
Glossary
How to Invest
Notice of Annual General Meeting
Explanatory Notes to the
Resolutions
Company Information
93
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Company Performance
As at
31 December 2021
For the year ended
31 December 2021
155.7p
17.3%
NAV per share
NAV per share
(total return)*
2020: 132.7p
2020: 13.2%
112.0p
13.1%
Share price
Share price
(total return)*
2020: 99.0p
2020: 3.0%
28.1%
1.8%
Share price discount
to NAV per share*
Total ongoing charges*
2020: 25.4%
2020: 2.0%
This report contains terminology that may be unfamiliar to some readers. The Glossary on pages 82 and 83 gives
definitions for frequently used terms.
*Alternative performance measures (“APMs”)
02 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Total Return Performance – One Year
%
130.0
120.0
110.0
100.0
90.0
80.0
Dec 20
Mar 21
June 21
Sep 21
Dec 21
RPI+3%
Company Share Price Total Return
Company NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2020
Total Return Performance – Three Years
%
200.0
180.0
160.0
140.0
120.0
100.0
80.0
Dec 18
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
Dec 21
RPI+3%
Company Share Price Total Return
Company NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2018
Total Return Performance – Five Years
%
200.0
180.0
160.0
140.0
120.0
100.0
80.0
Dec 16
Jun 17
Dec 17
Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
Dec 20
Jun 21
Dec 21
RPI+3%
Company Share Price Total Return
Company NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2016
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Portfolio Profile
Portfolio Distribution
By Asset Allocation
0.7%
12.5%
By Geography
3.2%
2.9%
21.3%
86.8%
Public Equities
Liquidity
Private Investments
72.6%
Europe
Asia & Emerging Markets
North America
UK
By Theme
6.5% 0.9%
8.1%
42.4%
42.1%
Sustainable Infrastructure
and Transportation
Digitisation
Clean Energy
Industrial Emissions Reduction
Water and Waste Management
Investment Themes
Theme
Clean energy
Industrial emissions reduction
Sustainable infrastructure and
transportation
Water and waste management
Digitisation
Reporting
Description
Companies involved in the production and transmission of power from clean
sources such as solar or wind.
Companies focused on improving energy efficiency (e.g. in buildings or
manufacturing processes) or creating emissions reduction products or services.
Companies in the infrastructure and transport sectors helping to reduce
harmful emissions.
Companies with products or services that enable reductions in usage/volumes
and/or smarter ways to manage water and waste.
Companies that facilitate reduced resource consumption through digital technology.
Companies providing the means for environmental reporting and evaluation.
04 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Chairman’s Statement
Sir Ian Cheshire
I am pleased to present our seventh annual report since the
launch of the Company in July 2015. This report covers the
year ended 31 December 2021.
ownership levels in each company) almost double to over
58,000 tonnes. The amount of clean electricity generated by
the portfolio almost tripled to over 94,000 megawatt hours.
Performance
The Company’s net asset value (“NAV”) per share total
return* for the year was 17.3% (2020: 13.2%), which
compares favourably with the 10.5% (2020: 4.2%) increase
of our RPI+3% primary performance comparator and
reflects good portfolio performance over the period. Indeed,
this brings the compound NAV performance over the last
five years to approximately 13% per annum.
However, it is disappointing that this did not translate into
stronger market demand for the shares and, consequently,
the price at which they trade. The price lagged the NAV,
resulting in a less impressive, though still respectable, share
price total return* of 13.1% (2020: 3.0%).
Albeit with some bouts of volatility along the way, equity
markets made positive progress through 2021 and this was
reflected in the Company’s performance. The leading
contributors to performance in the year were the holdings in
the digitisation space, notably Alphabet and Microsoft
because of the holding sizes, but all of the holdings within
that
the accelerated digital
from
transformation being driven along by the evolution of
working practices and consumer behaviour during
the pandemic.
theme benefited
The Board is reassured by the positive performance of the
portfolio and the disciplined approach of our Portfolio
Manager in pursuit of their investment strategy: selecting
competitively advantaged businesses that are demonstrably
delivering or benefiting significantly from the efficient use
of resources.
Our Portfolio Manager has provided a full description of the
development and performance of the portfolio over the year
in the Portfolio Manager’s Review on pages 14 to 17.
Environmental Impact
As in past years, we have integrated the Company’s
Environmental Impact Report within the annual report. It can
be found on pages 18 to 21. This year saw the total tonnes
of greenhouse gas (“GHG”) emissions avoided by our
investments (as a proportion based on the portfolio’s
*Alternative Performance Measure (see Glossary beginning on page 82)
During 2021 the commitments of the portfolio’s listed equity
holdings were assessed against the Paris Agreement. While
most are working towards the target 2°C limit by 2050, we
have reservations about two investee companies. Our
Portfolio Manager will increase engagement with them in
2022 in pursuit of a lowering of their future climate impact.
We are pleased that a third of the portfolio’s equity holdings
have now set targets that have been independently validated
by the Science Based Targets initiative. This means they
have a clearly defined pathway to reduce their GHG
emissions in line with the goals of the Paris Agreement.
We are aware that the sectors represented in the portfolio,
including transport, infrastructure and waste management,
intersect closely with natural environments, so we are keen
to see the companies we invest in actively reporting on the
impacts of their activities upon local flora and fauna, soil
quality and natural environments. Therefore, a focus for 2022
is to encourage more investee companies to take action on
protecting nature and biodiversity.
The report is also made available as a separate document,
which includes the methodological detail, on our website
www.menhaden.com.
Investment Policy
When the Company was launched in 2015 the investment
policy, as set out in the IPO prospectus, reflected the
intention that the portfolio would be comprised of three main
allocations: listed equity; yield assets; and special situations
(the last being private equity investments). Since then, the
Company has consistently disclosed
the portfolio
composition according to those three categories. However,
in the current economic environment it has proven to be very
difficult to find investments suitable for the portfolio with
attributes that would cause them to be identified as yield
assets. Additionally, those that were identified have tended
to also fall into the special situations (private equity) category.
Accordingly, we have concluded that the yield assets
description is superfluous and, therefore, have made a minor
change to the Company’s investment policy to remove the
reference to a yield assets allocation. The investment policy,
which is set out on page 8, now says: “The Company
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Chairman’s Statement
continued
invests, either directly or through external funds, in a portfolio
that is comprised predominantly of a combination of listed
equities and private equity investments”. There is no change
to the way investments are selected for the portfolio.
Investment Themes
We also reviewed the investment themes by which the
Company’s investments are categorised and concluded that
it would be helpful to redefine these in order to provide
investors with a more meaningful profile of the portfolio. In
particular, we noted that most of the investments tended to
fall into the “resource and energy efficiency” theme and
considered that it would be helpful to break this down
further. The revised themes, together with their definitions,
are set out on page 4.
The Board
The Board announced in January the appointment of
Barbara Donoghue as a non-executive Director, with effect
from 1 February 2022. She has a wealth of entrepreneurial
and corporate experience and I am confident she will be an
asset to the Board. In making this appointment the Board
took due consideration of its balance of skills, experience,
knowledge and diversity and we recommend that
shareholders support her election at the forthcoming Annual
General Meeting (“AGM”).
The Board also announced in January that Emma Howard
Boyd will be stepping down from the Board at the
conclusion of this year’s AGM. I would like to take this
opportunity to thank her for her contribution to the Board
since the Company’s launch.
We will continue to explore Board refreshment opportunities
to ensure an orderly Board succession in line with corporate
governance guidelines and the Company’s policy on
Directors’ tenure, and also with an eye on diversity.
Share Price Discount
The Company’s share price discount continues to be a
matter that the Board monitors closely. At the year-end, the
discount* to the NAV per share at which the Company’s
shares trade had widened to 28.1% (2020: 25.4%) and the
discount currently remains around this level.
asking shareholders to renew the Directors’ share issuance
authorities at this year’s AGM. 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.
Reiterating previous statements on share buybacks, the
Board continues to be of the opinion that buybacks are not
always in the interests of shareholders, since this would
reduce the size of the Company and increase the ongoing
charges ratio. Instead, as mentioned above, 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 is asking shareholders to renew the
authority to repurchase existing shares in the market at the
forthcoming AGM.
Annual General Meeting
The Company’s seventh AGM will be held at the offices of
Frostrow Capital LLP, 25 Southampton Buildings, London
WC2A 1AL on Wednesday, 22 June 2022 at 12 noon. The
Notice convening the AGM together with explanations of the
proposed resolutions can be found on pages 86 to 92.
It is hoped that this year it will be possible to hold the AGM
in its normal format at the venue set out above. However, in
case Government guidance once again restricts attendance
the Board strongly encourages shareholders to register their
votes online in advance by visiting www.signalshares.com
and following the instructions on the site. Appointing a proxy
online will not restrict shareholders from attending the
meeting in person should they wish to do so, subject to any
Government guidance to the contrary. The Board will keep
the situation under review and should it be necessary to
restrict attendance this will be communicated via the
Company’s website. Shareholders are encouraged to
consult the Company’s website at www.menhaden.com for
any late changes to the arrangements.
As was expressed last year, 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 is, accordingly,
Should it not be possible to hold the AGM in the normal
format, the Board currently expects to adopt the same
approach as last year, combining a closed AGM with a
06 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
webinar to enable the Portfolio Manager to give a
presentation online. Shareholders should send any
questions they may have to the Company Secretary by
email to info@frostrow.com ahead of the meeting. Details on
registering for the webinar will be made available nearer the
time if this alternative becomes necessary.
Dividend
The Company’s dividend policy is that the Company will only
pay dividends sufficient for it to maintain investment trust
status. The revenue return for the year to 31 December
2021 means that a dividend must be paid to meet this
requirement. Consequently, the Board is recommending to
shareholders that a final dividend of 0.2p (amounting to
£160,000 in total) be declared in respect of the year ended
31 December 2021 and a corresponding resolution has
been included in the Notice of Meeting for the AGM. If this
resolution is passed the dividend will be payable on 29 June
2022 to shareholders on the register on 6 June 2022. The
shares will be marked ex-dividend on 1 June 2022.
Outlook
It is apparent from our primary performance comparator that
inflation increased significantly in the year to December
2021. This is principally a consequence of the increased
money supply from Government and central bank policy
responses to Covid-19. It has manifested particularly in
energy prices and where supply chain shortages have
arisen, but it can be expected to continue more broadly. It is
unlikely that this is a short-term transitory effect. On the plus
side, equities kept ahead of inflation in the year and
historically have been proven to be a good place to be
invested during inflationary times.
Our portfolio is well placed, with pricing power being a key
attribute that our Portfolio Manager looks for in investment
propositions.
Following COP26 in November 2021 progress on the
transition to net zero appears to be an increasing investor
priority as well as being a political focus, which corresponds
well with the Company’s resource efficiency investment
thesis.
Whilst the Board shares global concern about the Russian
aggression in Ukraine, to the best of our current knowledge
the situation should have no direct impact on the Company
and while one portfolio company is affected by the Russian
sanctions, Safran, its share price has recovered to
December levels after initial volatility. As far as we are aware
there are no Russian shareholders and services provided to
the Company are not affected by any sanctions.
The Board remains confident about the resilience and
long-term prospects of the portfolio as well as the prospects
of the environmental and resource-efficiency sectors.
Sir Ian Cheshire
Chairman
20 April 2022
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Investment Objective and Policy
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% 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 predominantly of a
combination of
listed equities and private equity
investments.
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
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
the purpose of efficient portfolio
appropriate
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.
08 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 listed 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 Alternative
Investment Fund Manager (“AIFM”) through a Regulatory
Information Service announcement.
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, the Alternative Investment Fund Managers
Regulations (“UK AIFMD”) require the Company, which is
an Alternative Investment Fund (“AIF”) under the regulations,
to set maximum leverage limits corresponding to the
UK AIFMD leverage definition. The UK AIFMD defines
leverage as any method by which the total exposure of an
AIF is increased and provides two calculation methods
(gross and commitment), as further explained in the
Glossary on page 82 and in the separate UK AIFMD
periodic disclosures document on the Company’s website.
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 Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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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, acting under delegated authority, 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 chief executive officer 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 Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 himself, 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 Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Portfolio
Investments held as at 31 December 2021
Investment
Alphabet
Country/region
United States
Fair
Value
£’000
34,757
% of
Total Net
Assets
27.9
Charter Communications
United States
21,974
17.6
United States
15,390
12.4
Spain
10,174
8.2
Microsoft
X-ELIO*1
Canadian Pacific Railway
Safran
VINCI
Canadian National Railway
John Laing*2
Ocean Wilsons
Top Ten Investments
TCI Real Estate*
ASML
Canada
France
France
Canada
UK
Bermuda
United States
Netherlands
9,273
8,117
6,502
6,258
4,000
3,650
7.5
6.5
5.2
5.0
3.2
2.9
120,095
1,602
96.4
1.3
1,187
1,109
826
796
125,615
(1,084)
124,531
1.0
0.9
0.7
0.6
100.9
(0.9)
100.0
Waste Management
United States
KLA
LAM Research
Total Investments
Other Liabilities
Total Net Assets
United States
United States
1 Investment made through Helios Co-Invest L.P. 2 Investment made through KKR Aqueduct Co-Invest L.P. * Unquoted
12 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Business Description Theme
Delivers a range of internet based products and services for users and advertisers,
which are powered by renewable energy with the group being the largest corporate
buyer of renewable power worldwide
Digitisation
Owns and operates telecommunications infrastructure across the USA, which will
underpin the Internet of Things
Sustainable infrastructure and
transportation
Provides cloud infrastructure and software services which deliver energy efficiency
savings for customers versus legacy solutions
Digitisation
Develops and operates solar energy assets Clean energy
Owns and operates (fuel-efficient) freight railways in Canada and the USA
Designs, manufactures and services next generation aircraft engines which offer
significant fuel efficiency savings
Builds and operates energy efficient critical infrastructure assets
Sustainable infrastructure and
transportation
Industrial emissions reduction
Sustainable infrastructure and
transportation
Operates rail freight services across North America, which represent the most
environmentally friendly way to transport freight over land
Sustainable infrastructure and
transportation
Portfolio of mostly renewable, rail and social infrastructure assets
Operates ports and provides (lower climate impact) maritime services in Brazil
Invests in energy-efficient real estate projects
Sustainable infrastructure and
transportation
Sustainable infrastructure and
transportation
Sustainable infrastructure and
transportation
Develops, manufactures & services advanced lithography systems used to produce
more energy efficient semiconductor chips
Digitisation
Provides waste management and environmental services in North America Water & waste management
Develops, manufactures & services inspection and metrology equipment used to
increase the efficiency of semiconductor manufacturing
Digitisation
Develops, manufactures & services etching & deposition equipment used to produce
more energy efficient semiconductor chips
Digitisation
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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Strategic Report
Portfolio Manager’s Review
Performance
During 2021, the Company’s NAV per share increased
from 132.7p to 155.7p. This represents a total return of
17.3% and compares to the RPI+3% total return of 10.5%.
The price at which the Company’s shares traded was at a
28.1% discount to NAV at 31 December 2021, having
widened from 25.4% at the end of 2020. The contributions
to the 17.3% NAV per share total return over the period
are summarised below:
However, we were pleased to announce the completion of
a new private investment in infrastructure operator and
developer, John Laing, in December 2021. This is our third
co-investment with KKR.
Quoted Equities
Our portfolio of quoted equities represented 88.2% of net
assets at 31 December 2021, and delivered a total return of
24.9% over the period, adding 20.6% to our NAV.
31 December
2021 Contribution
%
NAV %
Asset Category
Public Equities
Private Investments
Cash
Foreign Exchange Forwards
Performance Fee & Other Accruals
Expenses
Net Assets
Net Return
88.2
12.7
0.7
(0.1)
(1.5)
100.0
Financial conditions remained benign during 2021 but
central banks, led by the US Federal Reserve, latterly
signalled their intention to gradually tighten monetary policy,
given inflation concerns. Equity markets stayed buoyant,
albeit with significant dispersion between sectors and
individual companies.
Given the successful exits of private investments over the
last few years, our portfolio is overweight public equities.
Alphabet and Microsoft both performed exceptionally
well, accounting for the majority of our investment
performance. Waste Management
our
semiconductor capital equipment companies were also
notable contributors. Charter Communications ended
the year approximately flat, whilst Safran was the single
largest detractor. Key investment decisions included exits
from both Airbus and Union Pacific, the material increase
of our position in Microsoft and the initiation of a new
position in French infrastructure group, VINCI.
and
Our private investment activity was limited, with X-ELIO and
TCI Real Estate Partners III each making a return of
capital payment and the completion of the sale of Calisen.
14 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Investment
Alphabet
Microsoft
Waste Management
Canadian National
Ocean Wilsons
ASML
Canadian Pacific
KLA
20.6
1.3
–
(1.1)
(1.7)
(1.8)
17.3
LAM Research
Airbus
Charter Communications
Union Pacific
VINCI
Safran
Increase/ Contribution
to NAV %
(Decrease) %
65.3
51.2
41.5
11.8
10.4
77.8
3.8
66.1
52.3
11.4
(1.4)
1.7
3.1
(7.1)
13.1
4.4
0.8
0.7
0.6
0.6
0.4
0.4
0.4
0.3
–
–
(0.1)
(1.0)
Note: Percentage increase/decrease for individual holdings is calculated
on their local currency and based over the holding period if bought or
sold during the year.
Alphabet was the standout contributor to our performance
and was our largest holding at 31 December 2021,
representing 27.9% of NAV. In our view the shares continue
to offer one of the most attractive risk-rewards in the market.
We believe Alphabet has a formidable business model and
market position and yet it traded on a similar multiple to the
S&P 500 market at 31 December 2021. Whilst we continue
to carefully monitor the various antitrust cases against the
company, we remain confident about Alphabet’s prospects
and believe that the secular growth of digital advertising,
successful scaling of the Google Cloud business and
improving capital allocation will continue to drive significant
earnings growth in the years ahead. Importantly, Alphabet
continues to set new sustainability targets. Building on its
pledge to operate on carbon-free energy everywhere, at all
times, by 2030, we were also pleased to see, in September
2021, that the company aims to replenish 120% of the water
it consumes across its datacentres and offices.
Microsoft was also a very strong contributor, validating our
decision to materially increase our position in late April and
early May. Following these additional purchases, the shares
rose more than 30% over the remainder of the calendar year.
The holding represented 12.4% of NAV at 31 December
2021. We expect the group to continue benefiting from the
secular digitisation theme for many years. CEO Satya Nadella
expects IT spending to increase from 5% to 10% of GDP by
the end of the decade. The company is the key technology
partner for all enterprises and its software products are
ubiquitous. Following Alphabet’s lead, Microsoft now also
aims to operate on carbon-free energy everywhere, at all
times, by 2030. Furthermore, the company wants to be
carbon negative in the same timeframe and to have removed
all carbon it has emitted since its founding by 2050. During
the calendar year, Microsoft announced a 15% blended
average price increase for Office 365, the largest since its
launch a decade ago. We do not expect the move to have
any material impact on customer retention and believe it
clearly demonstrates the group’s pricing power. In our mind
this is emblematic of the type of company we want to hold
in the portfolio.
Following a period of moving sideways in the prior year,
Waste Management shares delivered robust performance
in 2021. The company benefited from both the recovery in
economic activity and its successful integration of Advanced
Disposal Services, which included upgraded synergy
targets. With the share price multiple at an all-time high, we
opted to realise some profits in December and sold a portion
of our holding. We continue to expect the shares to deliver
steady performance over time, with the company offering
an appealing combination of predictable free cash flow
generation, solid competitive position and a shareholder
friendly management team. We are also pleased with the
company’s progress on its environmental goals. Whilst
Waste Management’s services currently avoid three times
more emissions than are generated by its operations,
management is aiming to increase this figure to four times
by 2038. The company is increasingly harnessing the
methane gas emitted from its landfill facilities by transforming
it into renewable natural gas and is currently using it to power
approximately one quarter of its vehicle fleet.
Consolidation surged back onto the North American
railroad industry agenda, with both Canadian National
and Canadian Pacific making bids to buy Kansas City
Southern. The well reported tussle between the two
companies ended with Canadian Pacific as the only
viable acquirer, after regulatory uncertainty effectively
stymied Canadian National’s bid. Canadian Pacific
announced the completion of its acquisition in December
2021, but it remains subject to the merger being approved
by the United States Surface Transportation Board.
Canadian Pacific expects to be able to start integrating
Kansas City Southern in late 2022. However, if the Surface
Transportation Board does not approve the transaction,
Canadian Pacific will have to sell the business, possibly
at a loss. We think this is unlikely due to the transaction’s
procompetitive characteristics and the regulator’s positive
reception so far, in contrast to its opposition to Canadian
National’s bid.
Our thesis for both companies is unchanged, with rail as the
most environmentally friendly way of transporting freight over
land. Current locomotives are four times more fuel efficient
than trucking on a per unit basis. Both businesses possess
very strong competitive positions, which we believe provides
them with real pricing power. We are also optimistic on the
Canadian Pacific-Kansas City Southern combination,
which will create a unique network spanning three North
American countries. There will be a significant opportunity
to grow volumes by converting road freight to new rail
services between Mexico, Texas and the Upper Midwest.
Separately, we opted to exit our position in the Canadian
railroads’ peer, Union Pacific, in March and reallocate the
proceeds within the portfolio to opportunities offering a
better balance between risk and reward.
The global semiconductor shortage seems to be persisting
due to rapid demand growth driven by cloud computing,
artificial intelligence, 5G, the Internet of Things and the
digitisation of the automotive industry. Significant capital
investments by the industry to expand capacity have proven
a boon
for our semiconductor capital equipment
companies, ASML, Lam Research and KLA. Since our
initial purchases in October 2020, each company’s share
price had more than doubled at the year end. They each
dominate their respective niche and play a critical role in
helping the wider industry both maximise semiconductor
production from finite resources and develop and produce
more advanced and energy efficient chips. Whilst
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
15
1
Strategic Report
Portfolio Manager’s Review
continued
semiconductors remain a secular growth story, we are
aware that the path forward is likely to include ups and
downs. We opted to trim each position towards the end of
the year.
During the year Ocean Wilsons subsidiary, Wilson Sons,
announced a corporate restructuring which transferred its
listing to the Brazilian market. This process was completed
in October and should enable Wilson Sons' shares to be
included in Brazilian and Latin American stock market
indices. Whilst investors initially reacted favourably to the
news, the shares gave up some of the gains towards the
year end. Operationally, container and towage volumes are
recovering at the ports in Brazil and longer term we believe
a growing Brazilian market will drive a significant
improvement
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 3.5 times normalised EBITDA.
the group’s
in
Charter Communications remains our second largest
holding, representing 17.6% of NAV. The shares reversed
their strong performance in the first eight months of the year
to end it approximately flat. This was driven by investors'
concerns around future broadband subscriber growth, with
the rate of quarterly net additions slowing. We believe this
only natural following a Covid-19 induced pull forward of
demand. Charter Communications offers consumers an
attractive value proposition through the bundling of
broadband and mobile services, which we believe other
providers will struggle to match. Our thesis remains that
Charter Communications’ 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 set to further
increase its importance. Whilst we are aware of growing
competition from new fibre buildouts and fixed wireless, we
currently believe the company can continue to raise
penetration across its footprint in both broadband and
mobile, supporting growing free cash flow and higher capital
returns.
We initiated a new position in French infrastructure group
VINCI in April 2021. The company has a strong track record
of building and operating critical infrastructure assets around
the world and is currently transforming its business, with the
aim of achieving a 40% reduction in carbon emissions by
2030. Last year the group successfully raised its inaugural
green bond of €500 million, and the recently announced deal
16 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
to acquire the ACS Energy business provides it with a best
in class renewable energy development platform. We believe
the company is extremely well placed for an inflationary
environment, with its infrastructure concessions being
government authorised monopolies that benefit from
inflation-linked pricing power. The position represented 5.2%
of NAV at 31 December 2021.
Airbus and Safran continue to work diligently to help
aviation transition to a more sustainable footing, with the
industry targeting a 50% reduction in carbon emissions by
2050 under the Carbon Offsetting and Reduction Scheme
for International Aviation. 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. Commercial air travel continued to
rebound over the year. There are significant disparities
between different regions and countries but people are flying
again when and where permitted. There is still uncertainty
as to when international travel will fully recover, especially
with China’s borders remaining effectively closed. With both
companies’ share prices having recovered significantly from
their lows, we opted to take some profits in April 2021. We
chose to fully exit our position in Airbus and to trim our
position in Safran, which represented 6.5% of NAV at
31 December 2021. Since our original investment in Airbus
in May 2016, we have generated an IRR of 28%.
Private Investments
Our portfolio of private investments represented 12.7% of
our total NAV at 31 December 2021, and delivered total
returns of 8.9% during the period, adding 1.3% to our NAV.
Investment
X-ELIO
TCI Real Estate
Calvin Capital
John Laing
Increase/ Contribution
to NAV %
(Decrease) %
9.8
21.9
–
–
1.0
0.2
0.1
–
Note: Percentage increase/decrease for individual holdings is calculated
on their local currency and based over the holding period if bought or
sold during the year.
X-ELIO, the Spanish solar operator and developer,
continues to execute well. In Spain, the company was
recently successful in bidding for 315 megawatts of new
development and announced a partnership with integrated
to
jointly develop a
energy company ENI
further
140 megawatts of capacity. The value of our holding was
marked up according to the co-investment manager’s latest
valuation in May and we subsequently received a £2 million
cash distribution from the company, in relation to proceeds
from the sale of assets. This reduced the value of our holding
and left X-ELIO representing 8.2% of our NAV at the
period end.
Our original investment in TCI Real Estate Partners
Fund III in 2018 incorporated a commitment to invest
additional follow-on amounts to support further fund
investments. Whilst we had hoped they would draw down
additional capital from our commitment over the year under
review, the opposite occurred with our receipt of a
US$2.2 million distribution in June. This reflected the return
of capital and income proceeds realised after David Lloyd
Leisure repaid the fund following a successful refinancing.
Following the completion of the sale of Calisen we received
cash proceeds of £6.1 million. We were pleased with this
result, with the transaction representing a return on
investment of approximately 1.8 times over four years,
equivalent to a net IRR of approximately 15%.
We were also pleased to complete a new co-investment
with KKR in John Laing in December 2021. Our initial
£4 million investment equated to 3.2% of our NAV at
31 December 2021 and was funded from cash on hand and
partial sales of existing quoted equity positions. The
company is an originator, developer and owner of core
mid-market infrastructure assets primarily across Europe,
North America and Australia. The company works to
mitigate the environmental impact of its operations on an
asset by asset basis and has committed itself to the net zero
transition for its business, with an aim to complete this for
direct operations ahead of the collective 2050 target. We
expect the development pipeline of infrastructure assets to
provide us with opportunities to commit additional capital
over time.
FX Hedges
Our currency hedges are in place to lower the volatility of our
sterling reporting currency returns by reducing non-sterling
exposure related to investments that are 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 depreciation of
sterling during the period meant that we incurred a small loss
on these currency forward contracts on a standalone basis,
equivalent to 1.1% of the NAV.
Outlook
Forecasting the future is fraught with difficulty and so we
focus on investments which require us to make as few
predictions as possible. We believe our criteria of resource
efficiency, quality and value should leave our portfolio well
placed to generate superior returns over time relative to the
risk taken, in most market conditions. Whilst the prospect
of tightening monetary policy has had a significant impact
on valuations in certain pockets of the market, our quoted
equities have been less affected. If current rates of inflation
remain high, and real interest rates negative, we believe our
focus on companies with pricing power will keep us in good
stead. The presence of better opportunities within public
markets has limited our private investment activity after a
series of successful realisations. We continue to search
diligently for suitable private investments that offer an
attractive balance between risk and reward, but intend to
make sure we only make investments that improve the
quality of the portfolio. We are pleased to report that the
Company’s net asset value has now successfully
compounded at circa 13% annually, after fees, for over five
years.
31 December 2016
31 December 2021
Annualised Net Return
Net Asset
Value
£’000
68,283
124,531
NAV
per share
pence
85.4
155.7
12.9%
Menhaden Capital Management LLP
Portfolio Manager
20 April 2022
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
17
1
Strategic Report
Environmental Impact Statement
Foreword
2021 was a landmark year for climate conscious investors. The latest IPCC assessment report demonstrated without a
shadow of a doubt the connection between human activity and emerging climate chaos. At the COP26 climate conference
world leaders made ambitious pledges to accelerate the transition to a net zero global economy by 2050. It is becoming
increasingly obvious that climate and other environmental risks and opportunities are having a material effect on
investment returns.
Menhaden Resource Efficiency PLC’s (the “Company’s”) objective is to generate long-term returns for shareholders by
investing in businesses and opportunities that demonstrably deliver, or benefit significantly from, the efficient use of energy
and other resources.
The companies held in the portfolio are leading their respective fields in embedding resource efficiency into their operations,
not least through the implementation of circular economy initiatives which emphasise reuse and recycling.
In this Impact Statement we report how the Company’s holdings helped to reduce their environmental footprint, including
their CO2e emissions, in 2021 through measures such as energy saving initiatives and use of resource efficient technologies.
By way of illustration, renewable power giant X-ELIO delivered over 94,000 megawatt hours of clean electricity in 2021.
In 2021 we also received positive responses to our direct engagements with portfolio companies on these matters,
encouraging several to step up their environmental reporting and targets. Canadian Pacific and Safran both improved
their climate reporting scores on the CDP global disclosure system during the period, while others committed to science-
based targets for emissions reductions.
Our investment performance has been good during the year. The Company’s net asset value rose by 17.3% in 2021,
signalling that there is financial opportunity in applying an environmental mindset to investment decision-making.
Ben Goldsmith
CEO, Menhaden Capital Management LLP
Impact Data1
1 All impact data in this report refers to the Company’s listed portfolio and the biggest private holding, X-ELIO, and is based on the proportion of each
entity held at 31 December 2021. Analysis 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.
18 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Our approach and developments in 2021
Menhaden Capital Management LLP (“MCM”) continued to
apply
research-oriented approach
throughout 2021 aiming to find the innovation, products and
services that show corporate best practice when it comes
to energy and resource efficiency.
fundamental,
its
technology
There was relatively little turnover in the portfolio during the
year, but we made some changes to our investment
themes, which
to
included broadening
digitisation, opening up themes on ‘environmental reporting’
and ‘industrial emissions reduction’ and expanding our
transport theme to encompass sustainable transport and
infrastructure. The latter saw the Company complete a new
co-investment with KKR in John Laing Group. The group
is committed to responsible investment and decreased
direct emissions by 48% and Scope 3 emissions by 89% in
their last year reported. We also invested in VINCI who are
transforming their business around achieving a 40%
reduction in emissions by 2030 (compared to 2018).
Total tonnes of greenhouse gas (“GHG”) emissions avoided
by the Company’s investments (as a proportion based on
the portfolio’s ownership levels in each company) almost
doubled this year to over 58,000 tonnes. The amount of
clean electricity generated by the portfolio almost tripled to
over 94,000 MWh, with X-ELIO being the main generator.
We accept that high-emitting sectors like aviation and
construction contribute greatly to climate change but rather
than avoid the sector entirely we want to reward those
players leading the way in efficient and environmentally-
friendly practices. For example, VINCI’s construction arm
launched its Exegy low carbon concrete range in September
2020, which reduces C02 emissions by up to 70%
compared with traditional concretes.
We take a similar future-focused approach to the transport
sector, which is responsible for 24% of direct CO2
emissions. The transport industry has been slow to
decarbonise, so we look to support companies such as
Safran which launched a new project in partnership with
GE Aviation in June 2021 called the CFM Rise (Revolutionary
Innovation for Sustainable Engines), a low-carbon aircraft
technology that targets a 20% reduction in fuel consumption
and CO2 emissions in comparison to current jet engines. In
2021 we divested from Airbus, which despite offering a
more energy efficient option than peers, was one of the most
carbon-intensive stocks in the portfolio. We took an
opportunity to sell following the significant recovery of its
share price after the Covid-19 pandemic.
Railways represent the most energy efficient method of
moving freight over land. Investee companies Canadian
Pacific and Canadian National have both implemented
robust climate actions plans to minimise emissions released
from rail freight. Canadian Pacific has committed to reduce
Scope 1, 2 and 3 GHG emissions intensity of its locomotives
in excess of 38% by 2030. The company also installed solar
capacity at its Calgary headquarters, and announced its
Hydrogen Locomotive Programme to create north America’s
first line-haul hydrogen locomotive prototype.
Finally, perhaps one of our most impressive environmental
performers in 2021 was Waste Management, a US waste
and environmental services company. Services the company
provides, such as turning gas from its landfills into energy,
help it avoid three times the GHG emissions it generates
from its operations, and it is aiming to increase this to
four times by 2038.
Active ownership: Leveraging our voice
on climate
As responsible stewards of shareholders’ capital, we are
committed to using our voice to foster best practice, both
by engaging directly with companies in the portfolio and
working in collaboration with other investors and initiatives.
In 2021 we began an organised programme of engagement
to move the portfolio’s holdings forward on environmental
reporting and target setting. We believe that the setting of
emissions reduction plans in line with what climate science
says is required for a net zero economy and regular
disclosure on performance against these targets is a vital
first step to driving energy and resource efficiency.
Thus, it was encouraging to see Safran improve their CDP
environmental reporting platform score from a ‘C’ to a ‘B’
last year, and for Canadian Pacific to improve from a ‘B’ to
an ‘A-‘ following our engagements on this issue. We are
pleased to note that a third of the portfolio’s equity holdings
have established clearly-defined pathways to reduce their
GHG emissions in line with the goals of the Paris Agreement,
with targets that have been independently validated by the
Science Based Targets initiative.
We will continue to engage with portfolio companies this
year in our quest to raise standards of environmental
disclosure and action.
As long-term investors, we also believe that mitigating
environmental risks involves an active approach to the
preservation of biodiversity and are proud to be signatories
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
19
1
Strategic Report
Environmental Impact Statement
continued
of the Financial Sector Commitment Letter on Eliminating
Commodity Driven Deforestation. We are cognisant that the
sectors represented in the portfolio, including transport,
infrastructure and waste management, intersect closely with
natural environments, and keenly interested to see the
companies we invest in actively reporting on the impacts of
their activities upon local flora and fauna, soil quality and
natural environments. Therefore, a focus for 2022 is to
encourage more investee companies to take action on
protecting nature and biodiversity.
Portfolio Company Alignment with Paris Agreement Goals
The figure below shows our assessment of the commitments of the portfolio’s listed equity holdings against the Paris
Agreement. It indicates that most are working towards the target 2°C limit by 2050, but we have concerns about LAM
Research and ASML. We will increase our engagement with these in 2022 with a view to encouraging improvements in
their future climate impact.
INVESTING IN BIG TECH SOLUTIONS FOR NATURE
There is growing awareness about the interlinked crises of climate change and biodiversity and this is creating opportunity
for several firms, including portfolio constituents Microsoft and Alphabet, to explore how they can help restore and
preserve the natural environment.
Microsoft recently committed to building a Planetary Computer to help protect the earth’s ecosystems. The platform
will provide scientists, sustainability practitioners and conservation stakeholders with global environmental data to help
them identify the impacts climate change is having on biodiversity, and enable them to work with the data to support
environmental monitoring, forecasting, planning, and attribution.
At Alphabet, a new initiative using Google Earth technology has been designed to promote ecosystem restoration
across the world. Restor, a science-based open data platform developed by Google Creative Lab, launched in November
2021 and shows data on local biodiversity, current and potential soil carbon and other variables like annual rainfall, soil
PH and land cover.
Last year, Google also announced it would make AI-powered improvements to its Maps application to direct drivers along
more environmentally friendly routes, focusing on reducing emissions by avoiding traffic and limiting fuel consumption.
20 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Alignment with SDGs
MCM and the Company’s Board support the UN Sustainable Development Goals (“SDGs”) and many of the portfolio’s
holdings contribute to the challenge of achieving them. We mapped our investment themes against the SDGs and
concluded that our contributions focus on six of the goals:
2021 saw record levels of extreme weather events and the IPCC warned temperature increases
will likely impact the global water cycle. The state of California, home to Alphabet, headquarters,
recorded a severe drought and the company has committed to replenish 20% more water than
it uses by 2030 to help return regions with high or extremely high-water scarcity to a normal level.
Our portfolio companies have a significant role to play in both supply and creating demand for
renewable energy. X-ELIO is a global leader in the development of photovoltaics while Microsoft
has set a goal to be carbon negative by 2030 and to remove from the environment all the carbon
the company emitted since its founding by 2050. Encouragingly semi-conductor company ASML
has already reached its goal to use 100% renewable electricity across all of its operations.
We invest in companies helping build the infrastructure needed to transition to a low-carbon future.
Electric Vehicles (EVs) will help reduce transport emissions by 31% compared to petrol cars and
to support their roll out VINCI Autoroutes is aiming for all its service areas to have electric charging
stations by 2023. Charter Communications is also investing in innovative technologies to
support the transition, including 10G connectivity for the Internet of Things and smart cities.
Building a more circular economy is an important opportunity for sustainable investors and in the
US more than 75 billion pounds of food is wasted each year. Waste Management has invested
in technology to recycle food waste from residential, commercial and industrial sources and turn
it into energy or compost. Semiconductor supplier ASML also has a range of waste management
initiatives such as the Return4Reuse programme. From 2019 to 2020, the company’s total waste
generated per €1 million reduced from 417 kg to 360 kg.
This is a key theme across our portfolio. In the transport sector, for example, Safran is focusing
its research on breakthrough aircraft, to reach low carbon aviation by 2030-35 and move towards
carbon neutrality around 2050. Canadian National has set a target in line with achieving net zero
carbon emissions by 2050. By doing so, it is the first North American railroad to formally commit
to join the Business Ambition for 1.5°C and the United Nations’ Race to Zero campaign.
Since 2002, Oceans Wilson maritime services company, Wilson Sons, has been donating
deactivated tugboats to the award-winning Pernambuco Artificial Reefs Project, which works to
help the recovery of damaged marine ecosystems and serves as a living laboratory for studies on
marine biology.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
21
1
Strategic Report
Business Review
The Strategic Report on pages 2 to 33 has been prepared
to provide information to enable 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
Regulations (“UK AIFMD”) 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
and
issuance
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 41.
22 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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.
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 for it to maintain investment trust
status.
The Board
The Board is currently constituted of three male Directors
(60%) and two female Directors (40%). The Company has
no employees.
Biographical details of the Directors are set out on
pages 34 and 35 and information on the workings of the
Board and its Committees is set out in the Corporate
Governance Statement on pages 41 to 46.
Emma Howard Boyd will step down from the Board and
all other Directors will seek re-election by shareholders at
the Annual General Meeting to be held on 22 June 2022.
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
(“Frostrow” or
“Depositary”). Details of their key responsibilities and their
contractual arrangements with the Company follow.
Management Agreement, MCM provides, inter alia, the
following services:
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 UK 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.
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.
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
• 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% per annum
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 also entitled to a performance fee which is
dependent on the level of the long-term performance of
the Company.
The performance fee is calculated for discrete three year
performance periods. In respect of a given 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 return)* on the gross proceeds of the IPO
issues and
(adjusted
repurchases) 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.
for any subsequent share
*see Glossary for further details
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
23
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Strategic Report
Business Review
continued
Portfolio Manager in November 2021, following which it
made a recommendation to the Board.
The Board believes the continuing appointment of the
AIFM and the Portfolio Manager, under the terms
described on page 23, 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 RPI+3% and other relevant indices.
Position, Performance and Future
Developments
The Statement of Financial Position on page 64 shows the
Company’s financial position at the year end. Performance
in the year relative to the Company’s key performance
indicators is set out below and further outlined, together
with investment activity and strategy, market background
and the future outlook, 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.
It is expected that the Company’s investment strategy in
the coming year will remain largely unchanged.
Depositary
The Company has appointed J.P. Morgan Europe Limited
as its Depositary in accordance with UK 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,
UK 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 Depositary has delegated
the custody and
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.
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
24 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Key Performance Indicators (“KPIs”)
The Board of Directors reviews performance against the
following KPIs. They comprise both specific financial and
shareholder-related measures. The results for the year are
summarised in the Chairman’s Statement on page 5.
The KPIs for the Company are:
• Net asset value (“NAV”) per share total return;
• Share price total return;
• Discount/premium of
NAV per share; and
• Ongoing charges ratio.
the share price
to
the
Please refer to the Glossary beginning on page 82 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. The Board monitors the Company’s
NAV total return against its benchmark and peers in the
AIC Global Sector and the AIC Environmental Sector. The
Company’s NAV per share total return over the year to
31 December 2021 was 17.3% (2020: 13.2%). To reflect
the Company’s non-benchmarked total return investment
strategy, the Board uses RPI+3% as its primary long-term
financial performance comparator. RPI+3% over the year
was 10.5% (2020: 4.2%).
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.
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. The Company’s share price total return over the
year to 31 December 2021 was 13.1% (2020: 3.0%).
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. At 31 December 2021 the discount
(2020: 25.4%). The Chairman’s
stood at 28.1%
Statement, on page 6, addresses the discount and the
approach of the Board. The discount remained stubbornly
wide throughout the year, notwithstanding the Company’s
positive performance.
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 ongoing
charges ratio for the year to 31 December 2021 was 1.8%
(2020: 2.0%).
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
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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continued
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. A
widening discount affects shareholder returns
and satisfaction and, as such, could influence
the outcome of the next continuation vote or, in
extremis, precipitate the requisitioning of a
general meeting to wind-up the Company.
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.
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’s promotional activities and distribution
strategy, which have been delegated to Frostrow, to ensure the
Company is promoted to current and potential investors.
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 17 to the financial statements beginning on page 75), an
analysis of how the portfolio would perform during a market crisis,
26 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Principal Risks and Uncertainties
Management and Mitigation
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
providers
trade processing,
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
laws,
with applicable
governance
to a
financial loss.
requirements and/or
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.
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 36 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 undertaken
each year. The Audit Committee reviews 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 48.
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 17 to the financial
statements beginning on page 75.
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. Appropriate due diligence
is undertaken to verify the existence and ownership of unquoted
(non-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 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.
Impact of Covid-19
The Board continues to monitor developments with respect
to Covid-19. Restrictions imposed because of the pandemic
have challenged operations, but the Portfolio Manager
successfully continued dialogue with investee companies
and the Board has stayed in close contact with the Portfolio
Manager and has continuously monitored portfolio and
share price developments. All of the Company’s service
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
27
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Strategic Report
Business Review
continued
providers have continued to provide as-normal services
throughout, notwithstanding adopting remote working
during the lockdowns.
the following assumptions in assessing the Company’s
longer-term viability:
• There will continue to be demand for investment trusts;
Impact of Ukraine Situation
The Board is monitoring the events in Ukraine and related
sanctions. To the best of the Board’s current knowledge the
situation should have no direct impact on the Company and
while one portfolio company is affected by the Russian
sanctions, Safran, its share price has recovered to
December levels after initial volatility.
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 86.7% of the current portfolio could be
liquidated within 30 trading days with 83.5% 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 the Company’s principal risks and various
severe but plausible downside scenarios, has also made
28 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
• 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
companies
international stock
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
of substantial falls in investment values and the impact of the
Company’s ongoing charges ratio, which were the subject
of stress testing.
Board’s Duty to Promote the Success of
the Company (s172)
The Directors have a statutory duty to promote the
success of the Company for the benefit of its members as
a whole, whilst also having regard to certain broader
matters. These include taking into consideration the likely
consequences of any decision in the long-term; the need
to foster the Company’s business relationships with its
Portfolio Manager and other service providers; the impact
of the Company’s operations on the community and the
environment; the desire for the Company to maintain a
reputation for high standards of business conduct; and
the need to act fairly between members of the Company
(s172 Companies Act 2006).
The Board seeks to comply with these and the following 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 (see also the
following section on Company Promotion).
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 As reported in the half year report, there
was a significant vote against the re-
election of the Chairman at the last
annual general meeting. Following
engagement it was determined this was
because his external appointments
exceeded the internal corporate
governance guidelines of a particular
large shareholder. This shareholder did
not engage before voting. The regular
Board evaluation exercise already
includes a review of Directors’ other time
commitments (see page 43), but this was
given greater emphasis at the latest
review because of this vote;
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
any significant votes against;
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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continued
Who?
Why?
STAKEHOLDER
GROUP
THE BENEFITS OF ENGAGEMENT WITH
THE COMPANY’S STAKEHOLDERS
Who?
HOW THE BOARD, THE AIFM AND THE
PORTFOLIO MANAGER HAVE ENGAGED
WITH THE COMPANY’S
STAKEHOLDERS
l Following engagement, an update will be
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.
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;
company secretarial; and share registration.
The Board 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.
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.
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 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.
It is the Board’s belief that Frostrow and
Menhaden Capital Management LLP are the
most important service providers in relation
to the success of 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 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.
30 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Who?
Why?
STAKEHOLDER
GROUP
THE BENEFITS OF ENGAGEMENT WITH
THE COMPANY’S STAKEHOLDERS
Who?
HOW THE BOARD, THE AIFM AND THE
PORTFOLIO MANAGER HAVE ENGAGED
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.
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 the future strategy of
the Company including an enhanced communication
strategy with the Portfolio Manager, Frostrow and the
broker in attendance. Strategy discussions continued
as a constituent of the scheduled Board meetings
during the last year.
To further aid the Board and investors in the
monitoring of the NAV and the share price discount,
the Board agreed that the Company’s NAV per share
be announced daily rather than monthly from the start
of 2021.
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 Covid-19 upon their business and how
components in the portfolio have been able to benefit
during the pandemic, in particular through increased
digitalisation.
l The Board received regular updates from the Portfolio
Manager throughout the Covid-19 pandemic,
including its impact on investment decision making.
Working practices adopted by the Portfolio Manager
to cope with restrictions imposed because of the
pandemic were also reviewed. No further action was
considered necessary in this regard.
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Annual Report for the year ended 31 December 2021
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continued
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
l The integration of ESG into the Portfolio Manager’s
investment processes and their engagement with
investee companies on ESG.
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.
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
range of execution-only platforms. Regular
and a
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.
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
organisations’ research output 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.
The Chairman is also available to engage with shareholders.
32 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
l The Portfolio Manager reports regularly any ESG issues
in the portfolio companies to the Board and the Board
encourages the Portfolio Manager to engage with
investee companies on climate change mitigation and
reporting, which is expanded upon in the Impact
Statement starting on page 18.
l No specific action was 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.
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
the Company’s website
reports
and manages
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.
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. The Board is responsible for oversight of the
Portfolio Manager and consequently for the risks and
opportunities that derive from their management of the
Company’s portfolio, including any considered to be
climate related. The Company’s resource efficiency
mandate is consistent with the drive towards net zero so
the Company is well placed to benefit as investor focus
evolves. The Company 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.
The Company recognises risks from climate change
regulation, such as potential impacts on investee
companies, portfolio construction, marketing and
reputation. It also recognises the opportunity provided by
the alignment of its investment objective and policy with
the net zero agenda.
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. The Portfolio Manager uses CDP ratings data as a
basis for engagement with investee companies on
ESG issues, including any considered to be climate related.
More detail is included in the Company’s Environmental
Impact Statement set out on pages 18 to 21.
The ongoing engagement and dialogue with investee
companies, including through proxy voting, are key parts
of an asset stewardship role.
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 was a
signatory to the Financial Reporting Council 2012 UK
Stewardship Code and is reviewing its position against the
requirements of the 2020 Code.
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
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.
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.
This Strategic Report on pages 2 to 33 has been approved
by the Board.
Sir Ian Cheshire
Chairman
20 April 2022
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
33
2
Governance
Board of Directors
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 and an advisor to
the Board of Trade. Emma, with a background in finance,
is a trustee, board member or advisor of a number of
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 recently became a non-executive director of Liontrust
Asset Management 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.
Emma will step down from the Board at the conclusion of
this year’s Annual General Meeting on 22 June 2022.
Sir Ian Cheshire (Chairman)
Sir Ian Cheshire is the chairman of Spire Healthcare Group
plc, a non-executive director of BT Group plc and was
appointed as the chairman of Channel 4 on 11 April 2022.
In addition, he is chair of the Prince of Wales Charitable
Fund and of the We Mean Business Coalition.
Sir Ian was the chairman of Barclays UK, the ring-fenced
retail bank, until December 2020. He was the group chief
executive of Kingfisher plc from January 2008 until
February 2015 and prior to that he was chief executive of
B&Q Plc from June 2005.
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.
The Directors’ beneficial interests in the Company’s shares are set out in the Directors’ Remuneration Report on page 52.
34 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Barbara Donoghue
Barbara Donoghue (also known as Barbara Donoghue
Vavalidis) is a non-executive director of Byredo AB, a
Stockholm based luxury fragrance company, having been
its chair for the six years to 2020.
Until 2020 she was also a partner in London based
Manzanita Capital, a private equity partnership specialising
in the beauty and personal care industry. Other past
appointments include chair of Susanne Kaufmann Ltd, an
Austrian based beauty company, director and audit
committee chair of Eniro AB, a Stockholm listed media
company, member of the Competition Commission and
Competition and Markets Authority and member of the
board of the Independent Television Commission. She had
a previous career in finance in Toronto, New York and
London advising companies on raising debt and equity
financing and on executing mergers and acquisitions,
during which she worked at Bank of Nova Scotia, Bankers
Trust and NatWest Markets.
Howard Pearce
Howard Pearce is the founder of HowESG Ltd, a specialist
environmental, asset stewardship, and corporate
governance consultancy business. He is also chairman of
the Bank of Montreal Global Asset Management (EMEA)
Responsible Investment Advisory Council.
Previously he has been a non executive director of
Response Global Media Limited, 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.
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 2021
Sir Ian Cheshire
Duncan Budge
Emma Howard Boyd
Howard Pearce
Barbara Donoghue2
Board
(4)
4
4
4
4
–
Audit Committee
(3)
31
3
3
3
–
Management
Engagement
Committee
(1)
1
1
1
1
–
1 Sir Ian Cheshire is not a member of the Audit Committee but attended by invitation.
2 Barbara Donoghue was appointed as a Director after the end of the financial year, on 1 February 2022.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
35
2
Governance
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 2021. Disclosures relating to
performance, future developments and risk management
can be found within the Strategic Report on pages 2 to 33.
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 put to shareholders at the AGM
held on 9 June 2020 and an overwhelming majority of
98% of the votes cast were in favour of the Company’s
continuation. The next opportunity for shareholders to vote
on the continuation of the Company will be at the 2025
AGM and there will be opportunities every five years
thereafter.
Results and Dividends
The results attributable to shareholders for the year are
shown on page 2 and incorporated in this Directors’
Report by reference.
In accordance with the dividend policy set out on page 22
the Board is recommending a final dividend, of 0.2p per
ordinary share in respect of the year ended 31 December
2021, to be payable on 29 June 2022 to shareholders on
the register on 6 June 2022, with the shares marked ex-
dividend on 1 June 2022. An ordinary resolution to this
effect is included in the AGM notice of meeting on page 86
of this annual report.
No dividends were declared in respect of the year ended
31 December 2020.
36 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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.
Alternative Performance Measures
The Financial Statements (on pages 62 to 80) set out the
required statutory reporting measures of the Company’s
financial performance. The Board additionally assesses
the Company’s performance against a range of criteria
that are viewed as particularly relevant for investment
trusts. These are summarised on page 2, explained in
greater detail in the Strategic Report under the heading
‘Key Performance Indicators’ on page 25 and defined
more fully, including the basis of calculation, in the
Glossary on pages 82 and 83. These alternative
performance measures are widely used in reporting within
the investment company sector and the Directors believe
they enhance the comparability of information and assist
investors in understanding the Company’s performance.
Capital Structure
The Company has a single share class, being ordinary
shares of 1p nominal value each, and has not issued any
other forms of security. At 31 December 2021 the
Company had 80,000,001 ordinary shares in issue and
there has been no change up to the date of this report.
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 2021 and 31 March 2022.
31 March 2022
31 December 2021
Shareholder
Cavenham Private Equity
Generali Deutschland Versicherung
Ravenscroft
Charles Stanley
Armstrong Investments
Rath Dhu
Number
of
Ordinary
shares
15,635,000
10,000,000
5,339,950
3,417,793
2,600,000
2,400,000
% of
issued
share
capital
19.5
12.5
6.7
4.3
3.2
3.0
Number
of
Ordinary
shares
15,635,000
10,000,000
5,339,950
3,341,855
2,600,000
2,400,000
% of
issued
share
capital
19.5
12.5
6.7
4.2
3.2
3.0
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 or
to the date of this report.
There are no:
• restrictions on transfers of the Company’s ordinary
shares, or in respect of their voting and dividend rights;
• agreements, known to the Company, between holders
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 800,000 ordinary shares and to repurchase no
more than 14.99% of the Company’s issued share capital.
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 86.
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.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
37
2
Governance
Directors’ Report
continued
Other Statutory Information
The following information is disclosed in accordance with
the Companies Act 2006:
• 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 and
would be subject to a shareholder vote.
• 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 Directors’ authorities to
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; or
(ii) between the Company and its Directors concerning
compensation for loss of office.
Greenhouse Gas Emissions
As the Company has no executive employees or premises
and has engaged external firms to undertake investment
management, company 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.
and Development
Common Reporting Standard (“CRS”)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for
Economic Cooperation
and
incorporated into UK law by the International Tax
the
Compliance Regulations 2015. CRS
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
Directors’ & Officers’ Liability Insurance
Cover
Directors’ and officers’ liability insurance cover was
maintained by the Company during the year ended
31 December 2021. It is intended that this cover will
continue for the year ending 31 December 2022 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.
38 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Political Donations
The Company has not made, and does not intend to
make, any political donations.
Disclosure of Information to the Auditor
The Directors are listed on pages 34 and 35. Each Director
confirms that:
• to the best of each Director’s knowledge and belief,
there is no information relevant to the preparation of the
audit report of which the Company’s Auditor is
unaware; and
• 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.
Annual General Meeting
The Company’s Annual General Meeting (“AGM”) will be
held at 25 Southampton Buildings, London WC2A 1AL on
22 June 2022 at 12 noon.
The business of the meeting is summarised in some detail
in the Explanatory Notes to the Resolutions on pages 91
to 92 of this Annual Report.
The AGM resolutions include the following items of special
business:
Resolution 10 Authority to allot shares
Resolution 11 Authority to disapply pre-emption rights
Resolution 12 Authority to repurchase shares
Resolution 13 Authority to hold General Meetings (other
than the AGM) on at least 14 clear days’ notice.
The full text of the resolutions can be found in the Notice
of AGM beginning on page 86.
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
20 April 2022
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
39
2
Governance
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 34 and 35, confirm to the best of their
knowledge that:
• 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 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 2021; 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
20 April 2022
The financial statements are published on the Company’s
website www.menhaden.com. The maintenance and
integrity of this website, is the responsibility of Frostrow.
The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this
website and, accordingly, the Auditor accepts no
responsibility for any changes that have occurred to the
financial statements since they were initially presented on
the website. Visitors to the website need to be aware that
legislation
the
preparation and dissemination of the financial statements
may differ from legislation in their jurisdiction.
the United Kingdom governing
in
40 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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
Four 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, Barbara Donoghue,
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 Auditor.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
41
2
Governance
Corporate Governance Statement
continued
The Board has considered the AIC Code of Corporate
Governance (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
investment companies.
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 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.
The Company has complied with the principles and
provisions of the AIC Code with the exception that 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.
Purpose and Strategy
The purpose and strategy of the Company are described
in the Strategic Report on page 22.
The Board
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.
42 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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;
• leading the annual board evaluation process and
assessing the contribution of individual Directors;
• supporting and also challenging the AIFM and the
(and other suppliers where
Portfolio Manager
necessary);
• 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.
Director Independence
The Board is comprised of five 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.
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.
Directors’ Other Commitments
As part of the annual Board evaluation process, each of
the Directors assessed the overall time commitment of
their external appointments and it was concluded that
they all 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 on page 6.
The Board is responsible for setting the Company’s
the continued
corporate strategy and
appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at each
meeting.
reviews
The number of meetings and the individual attendance by
directors is set out on page 35.
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:
• requirements under the Companies Act 2006, including
approval of the half yearly and annual financial
statements, recommendation of the final dividend (if
the
any), declaration of any
interim dividends,
appointment or removal of the Company Secretary, and
determining the policy on share issuance and buybacks;
• 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.
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 UK Stewardship
Code (2012) Compliance Statement which can be found
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
43
2
Governance
Corporate Governance Statement
continued
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.
Board Tenure, Succession and Evaluation
Tenure
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.
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.
Board Evaluation
During the course of 2021, the performance of the Board,
its committees and the individual Directors (including each
Director’s independence and time commitments) 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 Directors are all
independent, the structure and operation of the Board
continues to be effective and that there is a satisfactory
mix of skills, experience and knowledge. Board
succession was identified as an area to be addressed and
progress on this is discussed in following sections.
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
44 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
notes to the notice of the AGM on page 91. Following the
that
the Board
evaluation process,
shareholders vote in favour of the Directors’ re-election at
the forthcoming AGM.
recommends
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.
The current gender balance of three men and two women
meets the recommendation of Lord Davies’ report on
Women on Boards. The Board is aware that targets
concerning ethnic diversity have been recommended for
FTSE 250 companies. While the Company is not a
constituent and the Board is small in size, the Board will
continue to monitor developments in this area and will
consider diversity during future director search processes.
Succession
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.
All of the Directors who served during the financial year
were appointed when the Company was established and
consequently their tenures coincide. The Board is
committed to ensuring that there is an orderly succession
with appropriate overlap of new Directors and, with that
in mind, scouted for prospective candidates during
the year.
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.
Following a scouting exercise during the course of the year
the Board appointed Barbara Donoghue as a new
non-executive Director with effect from 1 February 2022.
The Board did not utilise the services of an external
agency or advertise the position as it was considered that
the Board’s contacts were sufficient to identify candidates
of high quality with relevant skills and experience.
Ms Donoghue will offer herself for election by shareholders
at the forthcoming AGM.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 40
describes the Directors’ responsibility for preparing
this report.
The Audit Committee Report, beginning on page 47,
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 51 and the Directors’ Remuneration Policy on
page 53 set out the levels of remuneration for each
Director and explain how Directors’ remuneration
is determined.
Service Providers
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 that 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 24.
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 November 2021, the Committee
concluded that all the service providers were performing
well and should be retained on their existing terms and
conditions.
Whistleblowing
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
45
2
Governance
Corporate Governance Statement
continued
Shareholders
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 Annual General
Meeting (“AGM”) be used to communicate with private
investors. In particular, shareholders are encouraged to
attend the AGM, where they are given the opportunity to
question the Chairman, the Board and representatives of
the Portfolio Manager. In addition, the Portfolio Manager
makes a presentation to shareholders covering the
investment performance and strategy of the Company at
the AGM. Whilst it is hoped that it will be possible to hold
the forthcoming AGM in a normal in-person format, the
Board may need to make changes to the arrangements if
the Government imposes restrictions on such gatherings.
Accordingly, shareholders are encouraged to register their
votes on our registrar’s website (www.signalshares.com)
ahead of the meeting and to check the Company’s
website (www.menhaden.com) near the meeting date,
where any changes to arrangements will be posted.
Details of the votes in respect of each resolution will be
announced to the market and published on the
Company’s website after the meeting.
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
page 37.
By order of the Board
Frostrow Capital LLP
Company Secretary
20 April 2022
46 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Audit Committee Report
Statement from the Audit Committee
Chairman
I am pleased to present the Audit Committee report for
the year ended 31 December 2021. 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.
objectivity as well as the effectiveness of the external
audit process;
• 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 2021
• Review of the Company’s annual results, including
review of the Auditor’s report to the Committee;
Composition
The Audit Committee comprises Howard Pearce
(Chairman of the Committee), Duncan Budge, Barbara
Donoghue and Emma Howard Boyd whose biographies
are set out on pages 34 and 35. 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 35. Mr Budge serves on the audit committees of the
three other
is a
non-executive director.
trusts of which he
investment
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
the external Auditor,
• Approval of
the
the Annual Report,
Environmental Impact Statement and the unquoted
investment valuations;
including
• Review of risk management, internal controls and
compliance; and
• Review of the need for an internal audit function.
September 2021
• Review of the Company’s terms of reference, non-audit
services policy and audit tender guidelines;
• Review of the outcome and effectiveness of the 2020
year end audit and any matters arising;
• Review of the Company’s half year results;
• Approval of the Half Year 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.
November 2021
• Review of the Auditor’s plan and terms of engagement
for the 2021 year end 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
47
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 emerging risks and 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.
2
Governance
Audit Committee Report
continued
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 Audit Committee, on behalf of the Board, reviews the
key business, operational, compliance and financial risks
facing the Company. In arriving at its judgement of what
risks the Company faces, the Committee and the Board
have 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.
48 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 66. 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 2021,
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 36.
The financial statements can be found on pages 62 to 80.
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 would cut their dividends.
The results illustrated the potential impact on the
Company’s NAV, expenses, cash flows and ability to meet
its liabilities and 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
49
2
Governance
Audit Committee Report
continued
External Auditor
In addition to the reviews undertaken at Committee
meetings, I met with Mazars LLP (“Mazars”) on 9 March
2022 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.
50 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 22 June 2022 and the resolution
can be found in the Notice of AGM on page 86.
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
20 April 2022
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 54 to 61.
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 16 November 2021 and it was decided that they would
remain unchanged for the year ending 31 December
2022. The projected fees for 2022 are set out on page 53.
No remuneration consultants were appointed during the
year (2020: 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
Barbara Donoghue^
1 February 2022
2021
Taxable
expenses
–
–
–
Total
50,000
40,000
40,000
2,464
42,464
n/a
n/a
Fees
50,000
40,000
40,000
40,000
n/a
Fees
50,000
40,000
40,000
40,000
n/a
TOTAL
170,000
2,464
172,464
170,000
2020
Taxable
expenses
–
–
–
580
n/a
580
Total
50,000
40,000
40,000
40,580
n/a
170,580
Percentage
change in
fees (%)
0
0
0
0
n/a
^ Barbara Donoghue was appointed as a Director after the end of the financial year.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
51
2
Governance
Directors’ Remuneration Report
continued
Directors’ Interests in the Company’s
Shares (audited)
Ordinary
shares
of 1p each
as at
31 Dec 2021
Ordinary
shares
of 1p each
as at
31 Dec 2020
115,000
10,000
23,000
40,000
n/a
188,000
115,000
10,000
23,000
40,000
n/a
188,000
Sir Ian Cheshire
Duncan Bridge
Emma Howard Boyd
Howard Pearce
Barbara Donoghue^
Total
^ Barbara Donoghue was appointed as a Director with effect from
1 February 2022. She holds 216,693 shares in the Company, which she
held on appointment.
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.
Directors are not 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
Jan 21
Jul 21
RPI+3%
Company Share Price Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 July 2015
52 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Relative Cost of Directors’ Remuneration
The table below shows the comparative cost of Directors’
fees compared with the level of dividend distribution and
Company expenses for the years ended 31 December
2020 and 2021.
Total returns
Directors’ fees
Dividends paid
Total ongoing
expenses
2021
£’000
18,399
194
–
2020
£’000
12,453
189
–
Change
%
48%
3%
–
2,139
1,913
12%
Statement of Voting at the AGM
At the Annual General Meeting held on 3 June 2021 the
results in respect of the resolution to approve the
Directors’ Remuneration Report were as follows:
Votes cast
for
Votes cast
against
36,667,870
100.0%
–
–
Votes
withheld
3,303*
*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
20 April 2022
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.
The Directors’ fees for 2021 and 2022 are shown in the
table below. The Company does not have any employees.
Directors’ Fees Current and Projected
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.
Sir Ian Cheshire
Duncan Budge
Howard Pearce
Emma Howard Boyd1
Barbara Donoghue2
Fees (£)
2022
50,000
40,000
40,000
19,111
36,667
185,778
Fees (£)
2021
50,000
40,000
40,000
40,000
n/a
170,000
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
Annual General Meeting held in 2019. Accordingly, an
ordinary resolution for the approval of this policy will be
put to shareholders at the Annual General Meeting to be
held on 22 June 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
1 Emma Howard Boyd will step down from the Board on 22 June 2022.
2 Barbara Donoghue was appointed as a Director with effect from
1 February 2022.
Any new director appointed to the Board will, at the
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 Directors’ letters of appointment may be inspected at
the Company’s registered office. 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
53
2
Governance
Independent Auditor’s Report to the
Members of Menhaden Resource Efficiency PLC
Opinion
We have audited the financial statements of Menhaden Resource Efficiency PLC (the “Company”) for the year ended
31 December 2021 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 2021 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 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 20 April 2022;
• 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.
54 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
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.
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 matters in forming our 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 101% of total net assets by
value and are considered to be the key driver for the
Company. The investments are made up of unquoted
investments and quoted investments.
There is 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 experts in considering whether
the methodology and assumptions 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;
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
55
2
Governance
Independent Auditor’s Report
continued
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 67 and 68 for further details on the
accounting policy for investments and page 67 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 2021.
56 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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
£1,245,000
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 £933,000 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 £36,000 as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons. This threshold has increased to £37,000 following our
revised materiality using net assets as at 31 December 2021.
As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due
to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked
at where the directors made subjective judgements, such as assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the
financial statements as a whole. We used the outputs of our risk assessment, our understanding of the Company, its
environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained
sufficient coverage across all financial statement line items.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
57
2
Governance
Independent Auditor’s Report
continued
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 this gives rise to a material misstatement in the financial statements themselves. 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.
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.
58 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 Code 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 36;
• 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 page 28;
• Directors’ statement on fair, balanced and understandable set out on page 40;
• 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 48 and;
• The section describing the work of the audit committee set out on pages 47 to 50.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 40, 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.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
59
2
Governance
Independent Auditor’s Report
continued
Based on our understanding of the Company and its industry, we considered that non-compliance with the following
laws and regulations might have a material effect on the financial statements: HMRC Investment Trust conditions.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the
risks of material misstatement in respect to non-compliance, 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.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements,
such as the Companies Act 2006.
In addition, we evaluated the directors' and management's incentives and opportunities for fraudulent manipulation of
the financial statements, including the risk of management override of controls, and determined that the principal risks
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 unquoted investment valuation and
significant one-off or unusual transactions.
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.
60 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters”
section of this report.
A further description of our responsibilities is available on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the Audit Committee on 25 November
2021 to audit the financial statements for the year ending 31 December 2021 and subsequent financial periods. The
period of total uninterrupted engagement is three years, covering the years ending 31 December 2019 to 31 December
2021.
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
20 April 2022
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
61
3
Financial Statements
Income Statement
Notes
Revenue
£’000
For the year ended
31 December 2021
Capital
£’000
Total
£’000
For the year ended
31 December 2020
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 fees and
performance fee provisions
Other expenses
Net return/(loss) before taxation
Taxation
Net return/(loss) after taxation
Return/(loss) per ordinary share
– basic and diluted (pence)
8
2
3
4
5
6
–
21,124
21,124
–
13,803
13,803
1,156
–
1,156
577
–
577
(338)
(450)
368
(65)
303
(3,028)
(3,366)
–
(450)
18,096
18,464
–
(65)
18,096
18,399
(276)
(454)
(153)
(14)
(167)
(1,183)
(1,459)
–
(454)
12,620
12,467
–
(14)
12,620
12,453
0.4
22.6
23.0 (0.2)
15.8 15.6
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 AIC.
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 66 to 80 are an integral part of these financial statements.
62 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Statement of Changes in Equity
For the year ended 31 December 2021
Ordinary
share
capital
Notes £’000
Special
reserve
£’000
At 31 December 2020 800
77,371
Net return after taxation –
–
At 31 December 2021 800
77,371
Capital
reserve
£’000
27,900
18,096
45,996
Revenue
reserve
£’000
61
303
364
Total
£’000
106,132
18,399
124,531
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) after taxation –
Dividends paid – revenue 7 –
–
–
Capital
reserve
£’000
15,280
12,620
–
Revenue
reserve
£’000
548
(167)
(320)
Total
£’000
93,999
12,453
(320)
At 31 December 2020 800
77,371
27,900
61
106,132
The accompanying notes on pages 66 to 80 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
63
3
Financial Statements
Statement of Financial Position
Fixed assets
Investments
Current assets
Debtors
Derivative financial instruments
Cash
Current liabilities
Creditors
Derivative financial instruments
Net current assets
Non-current liabilities
Performance fee provisions
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
9
12
13
18
14
As at
31 December
2021
£’000
As at
31 December
2020
£’000
125,615
103,035
218
–
878
1,096
(404)
(99)
593
(1,677)
124,531
800
77,371
45,996
364
124,531
155.7
105
1,930
1,413
3,448
(351)
–
3,097
–
106,132
800
77,371
27,900
61
106,132
132.7
The financial statements on pages 62 to 80 were approved by the Board of Directors and authorised for issue on
20 April 2022 and were signed on its behalf by:
Sir Ian Cheshire
Chairman
The accompanying notes on pages 66 to 80 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC – Company Registration Number 09242421 (Registered in England and Wales)
64 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 inflow/(outflow) from investing activities
Cash flows from financing activities
Equity dividends paid
Net cash outflow from financing activities
Decrease 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
2021
£’000
For the
year ended
31 December
2020
£’000
(1,108)
(1,225)
Notes
15
(20,492)
20,163
902
573
–
–
(535)
1,413
878
(26,096)
13,071
104
(12,921)
(320)
(320)
(14,466)
15,879
1,413
The accompanying notes on pages 66 to 80 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
65
3
Financial Statements
Notes to the Financial Statements
For the year ended 31 December 2021
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’ (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, 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 49. 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 – fair values measured using quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 – fair values measured using valuation techniques for all inputs significant to the measurement other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices);
Level 3 – fair values measured using valuation techniques for which any significant input to the valuation is
not based on observable market data (unobservable inputs).
Details in respect of the fair value of the Company's financial assets and liabilities are disclosed in note 17 to the
Financial Statements.
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. Refer to 1(e) for details on how expenses are allocated to revenue and
capital.
66 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
1.
ACCOUNTING POLICIES continued
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.
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.
£15,776,000 or 12.6% (2020: £13,380,000 or 13.0%) 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 68.
As the Company has judged that it is appropriate to use reported NAVs in valuing unquoted investments as set
out in note 17 (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 to be 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 79, 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’. 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
67
3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(b) Investments Held at Fair Value Through Profit or Loss continued
• Unquoted Investments
Fair value is determined using recognised valuation methodologies in accordance with the International
Private Equity and Venture Capital Association valuation guidelines (IPEVCA Guidelines**).
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 and 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. Derivatives are classified as financial
assets or financial liabilities at fair value through profit or loss. Gains or losses are recognised as capital income
or expense in the Income Statement. 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.
68 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
1.
ACCOUNTING POLICIES continued
(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
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) Share Capital
Ordinary shares issued by the Company are recognised at the proceeds or fair value received with the excess
of the amount received over nominal value being credited to the share premium account. Direct issue costs net
of tax are deducted from equity.
(j) 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 Company's accounting policy on expenses in 1(e).
Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains
in the capital reserve. The amounts within capital reserve less unrealised gains are available for distribution.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
69
3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(k) Special Reserve
The special reserve arose following court approval in 2016 to cancel the share premium account. This reserve
is distributable and can be used to fund share repurchases.
(l) Revenue Reserve
The revenue reserve represents the surplus of accumulated revenue profits being the excess of income derived
from holding investments less the costs associated with running the Company. This reserve may be distributed
by way of dividends, when positive.
2.
INCOME FROM INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Income from investments
Unquoted distributions
Dividends from quoted investments
3.
AIFM AND PORTFOLIO MANAGEMENT FEES
AIFM fee
Portfolio management fee
Performance fee provisions
4.
OTHER EXPENSES
Revenue
£’000
Capital
£’000
52
286
–
338
208
1,143
1,677
3,028
Revenue
£’000
Capital
£’000
Directors’ remuneration
Employers NIC on directors’ remuneration
Auditor’s remuneration for the audit of
the Company’s financial statements
Registrar fee
Broker retainer
Legal and professional costs
Custody fees
Other costs
Total expenses
176
18
44
17
30
10
47
108
450
–
–
–
–
–
–
–
–
–
2021
Total
£’000
260
1,429
1,677
3,366
2021
Total
£’000
176
18
44
17
30
10
47
108
450
2021
£’000
550
606
1,156
Revenue
£’000
Capital
£’000
42
234
–
276
168
936
79
2020
£’000
90
487
577
2020
Total
£’000
210
1,170
79
1,183
1,459
Revenue
£’000
Capital
£’000
171
18
41
17
30
8
46
123
454
–
–
–
–
–
–
–
–
–
2020
Total
£’000
171
18
41
17
30
8
46
123
454
The Company has no employees and details of the amounts paid to Directors are included in the Directors’
Remuneration Report beginning on page 51.
70 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
5.
TAXATION ON NET RETURN
(a) Analysis of charge in period
UK corporation tax
Overseas taxation
Revenue
£’000
Capital
£’000
2021
Total
£’000
Revenue
£’000
Capital
£’000
2020
Total
£’000
65
–
65
14
–
14
(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%
(2020: 19.0%). The difference is explained below.
Net return/(loss) before taxation
Corporation tax at 19.0% (2020: 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
368
70
–
65
(220)
150
65
Capital
£’000
18,096
3,438
2021
Total
£’000
18,464
3,508
(4,013)
(4,013)
–
–
575
–
65
(220)
725
65
Revenue
£’000
(153)
(29)
–
14
(110)
139
14
Capital
£’000
12,620
2,398
2020
Total
£’000
12,467
2,369
(2,623)
(2,623)
–
–
225
–
14
(110)
364
14
*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 UK Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the
United Kingdom will increase from 19% to 25%. Companies with profits of £50,000 or less will continue to be
taxed at 19%, which is a new small profits rate. Where taxable profits are between £50,000 and £250,000, the
higher 25% rate will apply but with a marginal relief applying as profits increase. The Company has not recognised
a deferred tax asset of £2,950,000 (25% tax rate) (2020: £1,527,000, 19% tax rate) as a result of excess
management expenses. It is not anticipated that these excess expenses will be utilised in the foreseeable future.
6.
RETURN/(LOSS) PER SHARE
The capital, revenue and total return per ordinary share are based on the net return/(loss) shown in the
Income Statement on page 62 and the weighted average number of ordinary shares in issue 80,000,001
(2020: 80,000,001).
There are no dilutive instruments issued by the Company.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
71
3
Financial Statements
Notes to the Financial Statements
continued
7.
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
2021
£’000
–
2020
£’000
320
In respect of the year ended 31 December 2021, a final dividend of 0.2p per share or £160,000 in total has been
recommended to shareholders and, if the resolution is passed at the AGM, will be reflected in the Annual Report
for the year ending 31 December 2022. Details of the ex-dividend and payment dates are shown on page 7.
The Board’s current policy is to only pay dividends out of revenue reserves, if the need arises in order to maintain
investment trust status. The amount of revenue reserves available for distribution as at 31 December 2021 is
£364,000 (2020: £61,000). The Company generated a revenue profit in the year ended 31 December 2021 of
£303,000 (2020: £167,000 loss).
8.
INVESTMENTS
2021 2020
Quoted Unquoted Quoted Unquoted
Investments Investments Total Investments Investments Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening balance
Cost at 1 January 60,672 18,758 79,430 38,258 22,922 61,180
Investment holdings gains at 1 January 22,963 642 23,605 11,302 4,365 15,667
Valuation at 1 January 83,635 19,400 103,035 49,560 27,287 76,847
Movement in the year:
Purchases at cost 15,503 4,989 20,492 25,537 559 26,096
Sales – proceeds received (11,579) (9,486) (21,065) (3,903) (9,272) (13,175)
Net movement in investment
holdings gains/(losses) 22,280 873 23,153 12,441 826 13,267
Valuation at 31 December 109,839 15,776 125,615 83,635 19,400 103,035
Closing balance
Cost at 31 December 68,965 17,901 86,866 60,672 18,758 79,430
Investment holding gains/(losses)
at 31 December 40,874 (2,125) 38,749 22,963 642 23,605
Valuation at 31 December 109,839 15,776 125,615 83,635 19,400 103,035
The Company received £21,065,000 (2020: £13,175,000) from investments sold in the year. The book cost of
these investments was £13,056,000 (2020: £7,846,000). 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.
72 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
8.
INVESTMENTS continued
Gains on investments
Net movement in investment holding gains in the year
Net movement in derivative holding (losses)/gains in the year
Gains on investments
2021
£’000
23,153
(2,029)
21,124
2020
£’000
13,267
536
13,803
Total unrealised gains, including transfers, during the year were £15,144,000 (2020: £7,937,000).
Purchase transaction costs were £28,000 (2020: £17,000). These comprise mainly commission and stamp duty.
Sales transaction costs were £5,000 (2020: £2,000). These comprise mainly commission.
9.
DERIVATIVES
Fair value of FX forwards
2021
£’000
(99)
2020
£’000
1,930
FX forwards are currently used to hedge the Company’s exposure to the euro and US dollar. See note 17(ii) for
further details. The Company received £902,000 (2020: received £104,000) 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. CREDITORS
Performance fees
Other creditors and accruals
The performance fee mechanism is explained on page 23.
2021
£’000
2
49
167
218
2021
£’000
–
404
404
2020
£’000
8
70
27
105
2020
£’000
79
272
351
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
73
3
Financial Statements
Notes to the Financial Statements
continued
12. PERFORMANCE FEE PROVISIONS
Performance fee provisions are recognised when a present obligation arises from past events, it is probable that
the obligation will materialise and it is possible for a reliable estimate to be made, but the timing of settlement or
the exact amount is uncertain.
The Company has provided for the performance fee obligation to its Portfolio Manager that has arisen in the
reporting period, being the first year of the three-year performance period that commenced on 1 January 2021.
This amounted to £1,677,000 in performance fee provisions as at 31 December 2021 (2020: payable of £79,000
as disclosed in note 11 above). The amount provided is the Directors’ best estimate of the obligation based on
the NAV as at 31 December 2021 and has been charged to the capital column of the Income Statement. If
crystalised, settlement of performance fee provisions will take place following approval of the annual results for
the year ended 31 December 2023, during financial year 2024. Incremental changes to the provision will be
recognised in each subsequent period until crystallisation.
Full details of the performance fee arrangement can be found in the Performance Fee section in the Strategic
Report.
13. SHARE CAPITAL
Issued and fully paid:
80,000,001 ordinary shares of 1p per share
2021
£’000
2020
£’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
14. NET ASSET VALUE PER SHARE
Net asset value per share
2021
155.7p
2020
132.7p
The net asset value per share is based on the assets attributable to equity shareholders of £124,531,000
(2020: £106,132,000) 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.
74 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
15. RECONCILIATION OF NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Gains before finance costs and taxation
Gains made on investments
Increase in other debtors
Increase in creditors, accruals and performance fee provisions
Net taxation suffered on investment income
Net cash outflow from operating activities
16. RELATED PARTIES
The following are considered to be related parties:
•
•
Frostrow Capital LLP
The Directors of the Company
2021
£’000
18,464
(21,124)
(2,660)
(134)
1,730
(44)
(1,108)
2020
£’000
12,467
(13,803)
(1,336)
(5)
123
(7)
(1,225)
Details of the relationship between the Company and the Company’s AIFM are disclosed in the Strategic Report
on page 23. Details of fees paid to Frostrow by the Company can be found in note 3 on page 70. All material
related party transactions have been disclosed in note 3 on page 70. Details of the remuneration of the Directors
can be found in note 4 and in the Directors’ Remuneration Report starting on page 51. Details of the Directors’
interests in the capital of the Company can be found on page 51.
The balance outstanding to Frostrow at the year end was £23,000 (2020: £20,000). No balances were due to
the Directors (2020: nil).
17.
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 page 8. 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
75
3
Financial Statements
Notes to the Financial Statements
continued
17.
FINANCIAL INSTRUMENTS continued
(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 £66,000 (2020:
£62,000); the capital return would have increased/decreased by £24,450,000 (2020: £18,571,000); and, the
return on equity would have increased/decreased by £24,384,000 (2020: £18,509,000). 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.
Foreign currency exposure
The fair values of the Company’s assets and liabilities that are denominated in foreign currencies are shown
below:
2021 2020
Current Current
Investments Derivatives* assets Net Investments Derivatives assets
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Net
£’000
U.S. dollar 102,158 (48,015) 1 54,144 77,148 (39,860) 2
37,290
Euro 15,806 (8,400) 49 7,455 16,584 (8,956) 70
7,698
Other – – 38 38 – – 31
31
117,964 (56,415) 88 61,637 93,732 (48,816) 103
(45,019)
*Derivatives comprise foreign currency forwards used to partially hedge the Company’s exposure to overseas currencies.
76 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
17.
FINANCIAL INSTRUMENTS continued
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
6,016
(4,922)
2021
EUR
£’000
828
(678)
Other
£’000
4
(3)
USD
£’000
4,143
(3,390)
2020
EUR
£’000
855
(700)
Other
£’000
3
(3)
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.
Interest rate exposure
The exposure of financial assets and liabilities to fixed and floating interest rates, is shown below.
Cash
2021
2020
Fixed
rate
£’000
–
–
Floating
rate
£’000
878
878
Fixed
rate
£’000
–
–
Floating
rate
£’000
1,413
1,413
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 2021 and the net assets would increase/decrease by £9,000 (2020: £14,000).
(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 19 on page 80. 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
77
3
Financial Statements
Notes to the Financial Statements
continued
17.
FINANCIAL INSTRUMENTS continued
(iv) Liquidity risk (continued)
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
2021
£’000
224
218
878
2020
£’000
1,930
105
1,413
(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 66.
At 31 December 2021
Investments
Derivatives
At 31 December 2020
Investments
Derivatives
Level 3 investments at 31 December 2021
Cost
’000
Value
£’000
Helios Co-Invest LP1 US$6,084
10,174
KKR Aqueduct Co-Invest LP2 £4,000
TCI Real Estate Partners Fund III Ltd US$2,169
WCP Growth Fund LP £7,447
4,000
1,602
–
1 Described as X-ELIO in the portfolio statement
2 Described as John Laing in the portfolio statement
Level 1
£’000
109,839
Level 2
£’000
Level 3
£’000
Total
£’000
–
15,776
125,615
–
(99)
–
(99)
Level 1
£’000
89,655
Level 2
£’000
Level 3
£’000
Total
£’000
–
13,380
103,035
–
1,930
–
1,930
Ownership
4.73%
Valuation basis
NAV
1.23%
Price of recent transactions
1.18%
NAV
10.30%
Discount to adjusted NAV
78 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
17.
FINANCIAL INSTRUMENTS continued
Level 3 investments at 31 December 2020
Cost
’000
Value
£’000
Ownership
Valuation basis
Helios Co-Invest LP1 US$7,484
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
During the year, the Company realised a gain of £996,000 on Helios Co-Invest LP after receiving a distribution
of £2,034,000, which followed the disposal of a portfolio of X-ELIO’s operating assets in Spain (2020: the
Company realised a gain of £1,267,000 after receiving a £5,017,000 distribution from Helios Co-Invest LP,
following the sale of its 30% stake in X-ELIO). Helios Co-Invest LP remained the largest unquoted investment of
the Company as at 31 December 2021.
In December 2021, the Company completed a new co-investment with KKR in John Laing with an initial
investment of £4 million. It is expected that the development pipeline of infrastructure assets developed by John
Laing will provide the Company with opportunities to commit additional capital over time.
The fair value WCP Growth Fund LP was written down by £26,000 during the year (2020: £416,000).
If a 25% discount to NAV was applied to the NAV of the level 3 investments as at 31 December 2021, or the
discount already applied was increased by 25%, the impact would have been a decrease of £3,512,000
(2020: £3,217,000) 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 comprises the equity share capital (ordinary shares), retained earnings and
other reserves as disclosed on the Statement of Financial Position on page 64.
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;
– whether 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;
– whether to issue new equity shares; and,
–
the extent to which revenue in excess of that required for distributions should be retained.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
79
3
Financial Statements
Notes to the Financial Statements
continued
18. CAPITAL RESERVE
2021
Capital Reserves
2020
Capital Reserves
At 1 January
Net gains on investments
Investment
Holding
Gains
£’000
25,534
13,115
Other
£’000
2,366
8,009
Total
£’000
27,900
21,124
Expenses charged to capital
(3,028)
–
(3,028)
Investment
Holding
(Losses)
/Gains
£’000
Other
£’000
Total
£’000
(1,780)
17,060
15,280
5,329
(1,183)
8,474
13,803
–
(1,183)
At 31 December
7,347
38,649
45,996
2,366
25,534
27,900
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.
19.
FINANCIAL COMMITMENT
The Company has made commitments to provide additional funds to the following investments:
WCP Growth Fund LP
Helios Co-Invest LP
Sterling
Commitment
£52,000
£46,000
Local currency
Commitment
Notice of
drawdown
–
10 business days
US$62,000
3 business days
TCI Real Estate Partners Fund III Limited
£3,140,000
US$4,253,000
10 business days
20.
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. The
Company’s name changed from Menhaden PLC to Menhaden Resource Efficiency PLC with effect from
23 June 2021.
80 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 Resource Efficiency PLC will be held at the offices of Frostrow Capital LLP,
25 Southampton Buildings, London WC2A 1AL on 22 June 2022 at 12 noon.
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 daily via the London Stock Exchange.
Profile of the Company’s Ownership
% of ordinary shares held at:
31 December 2021
31 December 2020
13.0%
10.2%
34.0%
33.1%
29.5%
43.5%
Family Offices
Wealth Managers & Private Banks
Family Offices
Wealth Managers & Private Banks
19.9%
16.8%
Institutions
Retail Platforms
Institutions
Retail Platforms
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
81
4
Further Information
Glossary
Alternative Investment Fund Managers Regulations (“UK AIFMD”)
Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the UK
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 UK AIFMD, 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 using gross and commitment methods. 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 UK 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 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 principally by the relationship between the demand for and supply of the shares.
82 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
NAV Total Return (APM)
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
2021 2020
Opening NAV 132.7p 117.5p
Increase in NAV 23.0p 15.2p
Closing NAV 155.7p 132.7p
% increase in NAV 17.3% 12.9%
Impact of dividend reinvested – 0.3%
NAV total return 17.3% 13.2%
Share Price Total Return (APM)
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
2021 2020
Opening share price 99.0p 96.5p
Increase in share price 13.0p 2.5p
Closing share price 112.0p 99.0p
% increase in share price 13.1% 2.6%
Impact of dividend reinvested – 0.4%
Share price total return 13.1% 3.0%
Ongoing Charges (APM)
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
2021 2020
£’000 £’000
Total Expenses 2,138 1,913
Average NAVs 117,721 93,724
Ongoing charge ratio 1.8% 2.0%
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
83
4
Further Information
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
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.home.saxo
https://www.wealthclub.co.uk
84 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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 stock
markets 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
85
4
Further Information
Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Menhaden Resource Efficiency PLC will be held at the offices
of Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL on Wednesday, 22 June 2022 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.
To receive and accept the Annual Report for the year ended 31 December 2021, 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 2021.
To approve the Company's Remuneration Policy.
To declare a final dividend of 0.2p per ordinary share for the year ended 31 December 2021.
To re-elect Sir Ian Cheshire as a Director of the Company.
To re-elect Duncan Budge as a Director of the Company.
7.
To re-elect Howard Pearce as a Director of the Company.
8.
9.
To elect Barbara Donoghue 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 11,12 and 13 will be proposed as
special resolutions:
Authority to Issue Shares
10. 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 (or if changed, the number representing 10% of the issued share capital of the
Company at the date of the meeting at which this resolution is proposed) provided that this authority shall expire
at the conclusion of the Annual General Meeting of the Company to be held in 2023 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.
Disapplication of Pre-emption Rights
11. 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
86 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
section 560 of the Act) for cash pursuant to the authority conferred on them by resolution 10 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, which includes the sale of relevant shares which, immediately before the sale, were held by the Company as
treasury shares) 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 (or if changed, the number representing 10% of the issued share capital
of the Company at the date of the meeting at which this resolution is proposed) 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
12. 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 cancellation or
to be held, sold or otherwise dealt with as treasury shares in accordance with the Act) 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 2023 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
87
4
Further Information
Notice of the Annual General Meeting
continued
General Meetings
13. 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 Government restrictions make it impossible to hold a physical
meeting 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 by email 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 restricted.
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. Subject to any Government restrictions on meeting attendance
generally, registering proxy votes online will not restrict attendance of the AGM in person.
By order of the Board
Frostrow Capital LLP
Company Secretary
20 April 2022
Registered Office:
25 Southampton Buildings
London WC2A 1AL
88 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
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. However,
if you appoint the Chairman of the AGM as your proxy, this will ensure that your votes are cast in accordance with your wishes in the
event that restrictions on attendance are imposed by the Government at the time of the meeting. In such an eventuality, if any other
person is appointed as your proxy, they may not be able to attend the meeting to vote on your behalf.
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 20 June 2022.
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 20 June 2022 (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 19 April 2022 (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 19 April 2022 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
89
4
Further Information
Notice of the Annual General Meeting
continued
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.
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.
It is possible that Government guidance could require the Company to 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.
90 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Explanatory Notes to the Resolutions
Resolution 1 – To receive the Annual Report
The Annual Report for the year ended 31 December 2021,
incorporating the financial statements and this Notice of
Meeting, will be presented to the Annual General
Meeting (AGM).
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.
Resolution 2 – Directors’ Remuneration Report
It is mandatory for listed companies to put their report on
Directors’ remuneration to an advisory shareholder vote
every year. The Directors’ Remuneration Report is set out
on pages 51 and 52 of this Annual Report.
Resolution 3 – Directors' Remuneration Policy
It is mandatory for listed companies to put their Directors'
remuneration policy to a binding shareholder vote at least
every three years. The Directors' Remuneration Policy is
set out on page 53 of this Annual Report.
Resolution 4 – Dividend
It is necessary for the Company to pay a dividend in
respect of the year ended 31 December 2021 in order for
it to retain investment trust status. Accordingly, the Board
is recommending the declaration of a dividend of 0.2p per
ordinary share, payment of which will afford compliance
with the requirement for the Company to retain no more
than 15% of the income from shares and securities in the
year.
Resolutions 5 to 8 – Re-election and Election of Directors
Resolutions 5 to 8 deal with the re-election and election
of the Directors. Biographies of each of the Directors can
be found on pages 34 and 35 of this 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.
Barbara Donoghue
Barbara has a wealth of experience gained over more than
30 years to contribute to Board and Committee decision
making, including from past board room appointments,
corporate finance and private equity.
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.
Resolution 9 – Re-appointment of Auditor and the
determination of their remuneration
Resolution 9 is for 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 10 and 11 – Issue of Shares
Ordinary Resolution 10 in the Notice of Annual General
Meeting is to renew the authority to allot new ordinary
shares up to an aggregate of 10% of the Company’s
existing issued share capital at the date of the Annual
General Meeting). This authority (if granted) 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, 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
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
91
4
Further Information
Explanatory Notes to the Resolutions
continued
to existing shareholders. Special Resolution 11 will, if
passed, give the Directors power to allot (and/ or sell from
treasury) for cash equity securities up to the equivalent of
10% of the Company’s existing share capital, as if
Section 551 of the Act does not apply. This is the same
nominal amount of share capital that the Directors are
seeking the authority to allot pursuant to Resolution 10. 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 10 and 11 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.
Resolution 12 – 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 considered to be 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.
92 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
Special Resolution 12 in the Notice of Annual General
Meeting seeks to renew the authority to purchase in the
market a maximum of 14.99% of shares in issue
(amounting to 11,952,000 shares at the date of this
Annual Report). The authority (if granted) 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.
Resolution 13 – General Meetings
Special Resolution 13 seeks shareholder approval for the
Company to hold General Meetings (other than the AGM)
on 14 clear days’ notice, which is the minimum notice
period permitted by the Companies Act 2006. This is a
routine resolution necessitated by the EU Shareholder
Rights Directive, which has been transcribed into UK law.
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 shareholders that they vote in favour of the above
resolutions, as the Directors intend to do in respect of their
own beneficial holdings totalling 404,693 shares.
Company Information
Directors
Sir Ian Cheshire (Chairman)
Duncan Budge
Barbara Donoghue (with effect from 1 February 2022)
Emma Howard Boyd
Howard Pearce
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.
Auditor
Mazars LLP
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
Corporate Broker
Numis Securities Limited
45 Gresham St
London
EC2V 7BF
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.linkgroup.eu
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
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2021
93
Menhaden PLC – Annual Report
Company Summary
Menhaden PLC (the “Company”) is an investment trust. Its shares are listed on the premium segment of the Official
List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of
30 September 2014 to 31 December 2015
Annual Report for the period from incorporation on
Menhaden Capital PLC
Investment Companies.
Investment Objective
Management
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
their size, location or stage of development.
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
appointed Menhaden Capital Management LLP as the Portfolio Manager. Further details of these appointments are
The Company’s capital structure is composed solely of Ordinary Shares. Details are given on page 36 and in note 12
provided on pages 25 and 26.
Capital Structure
to the financial statements on page 75.
ISA Status
The Company’s shares are eligible for Stocks and Shares ISAs.
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 pooled investment products because they are shares in an investment
trust.
Menhaden
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
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
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
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.
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.
The pulp is bleached using a totally chlorine free (TCF) process.
The pulp is bleached using a totally chlorine free (TCF) process.
Menhaden Resource Efficiency PLC
Menhaden PLC
25 Southampton Buildings
25 Southampton Buildings
London WC2A 1AL
London WC2A 1AL
www.menhaden.com
www.menhaden.com
Tel +44(0) 203 008 4910
Tel +44(0) 203 008 4910
Perivan 262674
Perivan 257636
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