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Menhaden Resource
Efficiency
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
Menhaden Resource Efficiency PLC – Annual Report
Company Summary
Menhaden Resource Efficiency 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 page 26.
Capital Structure
The Company’s capital is composed solely of ordinary shares. Details are given on page 40 and in note 13 to the
financial statements on page 81.
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.
Resource Efficiency
Resource efficiency means using the Earth’s limited resources in a sustainable manner, whilst minimising impacts on
the environment. The resources we rely on are finite, meaning they will eventually run out, or can only be replenished at
a certain rate. If we exceed this rate the resource becomes depleted. Resource efficiency is a way to deliver more with
less.
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.
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 01
1
Strategic Report
2
4
8
10
11
12
14
15
20
25
Company Performance
Chairman’s Statement
Investment Objective and Policy
Investment Committee
Investment Process
Portfolio
Portfolio Profile
Portfolio Manager’s Review
Environmental Impact Statement
Business Review
3
Financial Statements
68
69
70
71
72
Income Statement
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
2
Governance
37
39
43
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
44
51
56
59
60
4
Further Information
88
90
92
94
99
Shareholder Information
Glossary
How to Invest
Notice of Annual General Meeting
Explanatory Notes to the
Resolutions
101 Company Information
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
01
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1
Strategic Report
Company Performance
As at
31 December 2023
£126.7m
Net asset value (“NAV”)
For the year ended
31 December 2023
23.8%
NAV per share
total return*
2022: £103.8 million
2022: (16.5%)
160.3p
NAV per share
13.6%
Share price
total return*
2022: 129.8p
2022: (20.3%)
100.8p
0.9p**
Share price
Dividend
2022: 89.0p
2022: 0.4p
37.2%
Share price discount
to NAV per share*
1.7%
Ongoing charges ratio*
2022: 31.4%
2022: 1.8%
This report contains terminology that may be unfamiliar to some readers. The Glossary on pages 90 and 91 provides
definitions for frequently used terms.
*Alternative performance measures (“APMs”)
**Subject to shareholder approval
02 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 03
Total Return Performance – One Year
%
140.0
130.0
120.0
110.0
100.0
90.0
80.0
70.0
Dec 22
Mar 23
June 23
Sep 23
Dec 23
RPI +3%
Share Price Total Return
NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2022
Total Return Performance – Three Years
%
140.0
120.0
100.0
80.0
60.0
Dec 20
Jun 21
Dec 21
Jun 22
Dec 22
Jun 23
Dec 23
RPI +3%
Share Price Total Return
NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2020
Total Return Performance – Five 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
Jun 22
Dec 22
Jun 23
Dec 23
RPI +3%
Share Price Total Return
NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 December 2018
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
03
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Strategic Report
Chairman’s Statement
Howard Pearce
Introduction
After becoming Chair in May 2023, I am pleased to present
our ninth annual report since our launch in July 2015. It
covers the calendar year ended 31 December 2023. By way
of reminder, 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 benefitting significantly from
the efficient use of energy and natural resources, irrespective
of their size, location or stage of development. We are a high
conviction long term patient capital investment.
Financial performance
Short term
The overall performance in 2023 has been encouraging, and
it was pleasing to be short listed for specialist investment
company of 2023 by ‘Investment Week’.
The Company’s total net asset value (“NAV”) increased
21.9% from £103.8 million to £126.7 million, and the
Company’s share price increased 13.2% from 89.0p per
share to 100.8p.
The NAV per share increased by 16.6% from 129.8p to
160.3p in 2023 giving a NAV per share total return* of 23.8%
(2022: -16.5%). This is a 15.6% outperformance over the
Company’s performance benchmark, RPI+3% (compound),
which returned 8.4%, and a 15.0% outperformance over
the AIC environmental sector which returned 8.8%.
Although the Company’s share price discount to NAV
increased to -37.2% (2022: -31.4%), the share price total
return* was a respectable 13.6% (compared to 2022: -0.3%).
Notwithstanding this, the Board continues to try to reduce the
discount and actions it is taking are outlined below.
Longer term
In line with our aim to generate long term shareholder
returns, predominantly in the form of capital growth, the
Company’s compound NAV performance over the last
5 years of 12.3% per annum in 2023 (2022: 7.3% per
annum) outperformed by 5.6%, the compound return for
our RPI +3% benchmark of 6.7% per annum (2022: 5.3%
per annum).
Moreover, the Company’s NAV performance has been
ranked 1st in the AIC environmental sector over the last 1,
3, and 5 years. The Company aims, wherever it can to
reduce on-going charges, and over the last 5 years they
have reduced by nearly 20% from 2.1% to 1.7% in 2023
(2022:1.8%). A small shareholder dividend has been paid
annually since 2018, the exception being 2020 during the
global pandemic.
*Alternative Performance Measure (see Glossary)
04 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
Further information and performance metrics that describe
the development of the Company over the last 9 years
between 2015 and 2023 is presented on page 89.
Investment strategy
2023 saw the global demand for energy and resources
continue to rise. The World Meteorological Association
stated that 2023 was the hottest year ever recorded and
the International Monetary Fund reported that financial
markets were underpricing climate related risk. The need
for businesses to progressively reduce their use of fossil
fuels and greenhouse gas emissions has never been so
critical as part of the green industrial shift mega trend.
We have continued to invest in a concentrated portfolio of
high quality largely global businesses, the majority of which
have a key role in enabling the transition to a lower-carbon
future. 2023 saw a moderate reweighting towards
sustainable infrastructure and transportation, leading to a
commensurate decrease towards our digitalisation,
industrial emissions
reduction, water and waste
management, and clean energy themes.
Our public equity investments, comprising 77.2% of our
portfolio, performed well during the year delivering a total
return of 29.0%, and adding 21.6% to the NAV per share.
The largest contributions came from our digitalisation
themed investments (Alphabet, Microsoft, Amazon) and
sustainable transport companies (VINCI, Safran and
Airbus). The weakest contributors were our investments
in North American railway companies.
Our unique private equity co-investments, which at the
end of 2023 comprised 9.7% of our portfolio, also
performed well in 2023 delivering a total return of 32.3%,
adding 2.9% to the NAV per share. We made a successful
exit from our largest ever co-investment (£9.1 million) in a
clean energy developer, X-ELIO with Kohlberg Kravis
Roberts (KKR). It delivered a 2.6x return (in sterling terms)
following its acquisition in November 2023 by Brookfield
Renewables. Following on from our US$15 million
commitment to The Children’s Investment Trust (TCI) Real
Estate Partners Fund III, which finances the development
of best in class energy efficient buildings, during 2023 we
made a further US$25 million commitment to TCI Real
Estate Partners Fund IV.
In addition to the investments, our net assets as at
31 December 2023 predominantly comprised 1.5% FX
hedge and 11.8% cash. In early 2024 FX hedging was
discontinued and a proportion of the cash proceeds
deployed to increase our public equity positions. In March
2024 we have made a new US$17.5 million clean energy
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 05
co-investment commitment with KKR in Avantus (a USA
solar and energy storage developer), further increasing our
strategic asset allocation to private equity. Further details
and commentary about
the performance and
development of the Company’s investment portfolio can
be found in the Portfolio Manager’s report (pages 15 to 19).
technological solutions
Environmental performance
In 2023, the energy use disclosures from our listed equities
reported a 7% uplift in the renewable energy they generated
and 36% increase in renewable energy consumed, so
reducing emissions from their use of fossil fuel energy. Some
75% of our listed equities have committed to, or set science-
based targets for emissions reductions in line with the goals
of the Paris global climate agreement.
Whilst some companies in which the Company’s portfolio is
invested, such as in transport infrastructure, use fossil fuels,
our Portfolio Manager only invests in those that are using
innovative, best practice
to
significantly reduce their emissions and become more
climate friendly. For example, Airbus is global leader in
decarbonising and improving the efficiency of aircraft with a
target that 50% will use sustainable aviation fuel by 2030.
E-commerce is also a key driver of decarbonisation and
companies like Microsoft and Amazon are essential utilities
for millions of businesses and consumers. Microsoft is
committed to be carbon negative by 2030. Amazon has an
ambition to reach 100% renewable energy usage across its
business by 2025 and at the end of 2022 used 85%
renewable energy.
The Company is a supporter of the UN Sustainable
Development Goals (SDGs) and a snapshot of how our
portfolio companies contribute to seven key goals can be
found within the Company’s Environmental Impact Report
on pages 20 to 24. It is also made available as a separate
document on our website www.menhaden.com, including
methodological details that are not included within this
annual report.
Share price discount to NAV per share
At the end of 2023 the shares of over 90% of the London
Stock Exchange listed investment company sector were
trading at a discount, including this Company. It is the
Board’s view that this metric is not necessarily a fair reflection
of the value of our assets and overall financial performance.
However, the Company’s share price discount continues to
be a metric that concerns the Board and which it monitors
extremely closely. The Board has not previously favoured
share buy backs as a means for mitigation of the share price
discount. It remains our view that share buybacks are not
in
the
inherent
value of
usually in the best long-term interest of shareholders taken a
whole as they reduce the size of the Company and increase
the ongoing charges ratio.
However, after a step-down in the share price in January
2023 the Board decided it would undertake a modest
programme of share buybacks. We considered that this
might reduce the volatility of the share price at that time, take
advantage of the accretion to NAV that buying back shares
at a discount achieves, and provide a signal to the market of
our confidence
the
Company’s portfolio. 975,000 shares (1.2% of total issuance)
were bought back between February and April 2023. While
this provided some additional share liquidity in the volatile
market conditions at that time, the buybacks resulted in no
discernible short-term or longer-term impact on the discount.
For small investment companies, there is scant published
evidence that share buybacks can deliver any sustainable
discount reduction.
During late 2023 the Board approved an enhanced
marketing and communications plan which is being
implemented by our AIFM and Portfolio Manager with the
aim to influence investor sentiment and develop new demand
for our shares to try and reduce the discount. The efficacy of
these actions, which together with the relentless efforts of the
Portfolio Manager to continue to generate strong investment
returns should help to narrow the share price discount over
time, will be continuously assessed during 2024.
While further buybacks to help stabilise a falling share price
are not ruled out, any future decision will be dependent on
the prevailing market conditions, the Company’s available
liquid resources, and the potential conflict between accretive
share buybacks and the availability of more attractive portfolio
investment opportunities offering a greater return on capital.
Additionally, in the course of the Board’s considerations of
the impact of any such further action, the Company, in
consultation with the Takeover Panel, identified that in the
context of any such buybacks Ben Goldsmith, the CEO of
the Portfolio Manager (Menhaden Capital Management
LLP), together with persons who are, or may be presumed
to be, acting in concert with him, hold a significant
percentage of the voting rights of the Company (27.9% of
the Company’s issued share capital as at 31 March 2024).
Under Rule 37 of the Takeover Code, any increase in the
percentage of shares carrying voting rights held by a
shareholder or group of persons acting in concert with that
shareholder resulting from the purchase by a company of its
own shares will be treated as an acquisition for the purpose
of Rule 9 of the Takeover Code.
Annual Report for the year ended 31 December 2023 05
Menhaden Resource Efficiency PLC
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Strategic Report
Chairman’s Statement
continued
The identification of this concert party and the level of its
aggregate interests in the Company’s shares is likely to
have the effect of limiting any share buybacks. The
Company and the members of the concert party are keen
to avoid inadvertently triggering Rule 9.1(a) of the Takeover
Code, which requires a mandatory offer to be made for the
entire issued share capital of the Company in the event that
any person acquires an interest (taken together with shares
in which other persons deemed to be acting in concert are
interested) of 30% or more of the voting rights of the
Company.
The Board has instructed the Company Secretary to monitor
the interests and dealings of the members of the concert
party and has requested that the Portfolio Manager keep the
Board and the Company Secretary updated with the details
of any changes to the composition of the concert party and
its interests in the Company in order for the Board to be
informed of the concert party’s position prior to considering
any future share buybacks.
The Board is asking shareholders to renew the authority to
repurchase the Company’s shares in the market at the
forthcoming AGM. Buybacks will remain at the discretion of
the Board.
It remains our aim for the Company to be in a position to
enlarge its capital base through the issuance of new shares.
This would reduce the annual ongoing charges and enhance
the secondary market liquidity of the Company’s shares,
which the Board believes is in the best interest of all
shareholders. As the Company can only issue new shares
when the share price is at a premium to NAV, our
fundamental aim is to improve the share price through
enhanced investment performance supported by effective
marketing strategies and informative communications to
potential new investors who are attracted by our investment
thesis and track record.
Shareholder dividend
While income generation, via the payment of annual
shareholder dividends, is not one of our primary investment
aims, such payments are an important shareholder benefit.
The Company’s dividend policy is to pay a dividend sufficient
for it to maintain compliance with its investment trust legal
status. The revenue return for the year to 31 December
2023 of £894,000 means that the legal threshold requiring
a dividend payment has been exceeded and so, subject to
shareholder approval, a dividend will be paid for 2023, as it
has been four times previously. The Board is recommending
to shareholders that a final dividend of 0.9p per share (0.4p
in 2022) be declared in respect of the year ended
31 December 2023 and a corresponding resolution has
been included in the Notice of Meeting for the AGM. If this
resolution is passed, the dividend will be paid on 5 July 2024
to shareholders on the register on 7 June 2024. The shares
will be marked ex-dividend on 6 June 2024.
Board developments
There have been a number of changes to the Board during
2023. In May 2023 Ian Cheshire stepped down as Chair
and became an independent non-executive Director and
Barbara Donoghue became Chair of the Audit Committee.
Later, in December, Barbara succeeded Ian Cheshire as
Chair of the Management Engagement Committee and
was also appointed as Senior Independent Director.
Following a competitive recruitment process, I am
delighted that Soraya Charabak joined the Board in March
2023. Duncan Budge retired from the Board at our last
AGM. We are exceedingly grateful for his valuable
contributions to our Board and Committee meetings.
Strategic outlook
Looking ahead further, continued geo-political tensions
and economic uncertainties, with potential disruption to
global supply chains, are quite likely. For example, arising
from the continuing conflicts in the Ukraine and Gaza;
tensions between America and China over trade; and
volatility in the price of energy and natural resources. Also
the impact of climate change, and increasing incidence of
extreme weather events, has increasing financially material
consequences. All these macro-factors have significant
impacts on millions of people, financial markets and on
investor sentiment.
Notwithstanding these challenges, the Board considers
the Company’s unique strategy and high conviction
portfolio to be well placed for further capital growth
because of the high quality and the defensive and inflation
resistant properties of our investment holdings. Moreover,
the Board remains convinced all businesses must respond
to climate change by navigating the energy transition from
fossil fuels to more renewable sources and the need to be
ever more energy and resource efficient becomes even
more critical to their on-going sustainability and success.
Accordingly, the Company’s investment thesis should
continue to provide long-term benefits for our investors.
The next five-yearly continuation vote for the Company will
be in July 2025.
06 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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Annual General Meeting
The Company’s AGM will be held at the offices of Frostrow
Capital LLP, 25 Southampton Buildings, London
WC2A 1AL on Thursday, 27 June 2024 at 11.30 a.m. The
Notice convening the AGM together with explanations of
the proposed resolutions can be found on pages 94 to 99
of the Annual Report. The Board considers that all the
resolutions are in the best interests of the Company and
the shareholders taken as a whole and unanimously
recommend they be approved.
The Board strongly encourages shareholders to register
their votes online in advance of the meeting 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 and will ensure their votes are counted
if they are not able to attend. Shareholders are encouraged
to consult the Company’s website at www.menhaden.com
for any late changes to the arrangements. Shareholders,
especially if they are unable to attend, are invited to send
any questions they may have to the Company Secretary
by email to info@frostrow.com ahead of the meeting.
Howard Pearce
Chairman
19 April 2024
Annual Report for the year ended 31 December 2023 07
Menhaden Resource Efficiency PLC
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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 investing in businesses and
that are demonstrably delivering or
opportunities
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% (compound) 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
appropriate
the purpose of efficient portfolio
management, and the Company may for this purpose
leverage through the use of options, futures, options on
futures, swaps and other synthetic or derivative financial
instruments.
for
Cash Management
There is no restriction on the amount of cash or cash
equivalent instruments that the Company may hold and
there may be times when it is appropriate for the Company
to have a significant cash position instead of being fully or
near fully invested.
08 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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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 has 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 90 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.
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 AIFM through
a Regulatory Information Service announcement.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
09
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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 Capital Management LLP, 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.
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 2023
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 11
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 usually 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 Risk Approach
The Portfolio Manager uses bottom-up fundamental
analysis to select companies with high quality cash flows
that demonstrate persistent and predictable performance
due to successful business models. Such companies
typically exhibit high profitability and pricing power and
have often won commanding positions in their respective
competitive landscapes. Together, these characteristics
serve to mitigate external risks such as those associated
with technological, regulatory and climate change. The
management team continuously monitors the impact of
these risks on company terminal values.
This approach precludes the Portfolio Manager from
investing in highly leveraged companies or those in the
early stage of development. It limits private equity
investments to those with experienced sponsors who
enjoy a solid track record.
Within this framework, the Portfolio Manager will run a
investments,
concentrated portfolio of 15
predominantly in developed markets. Position sizing takes
place within stated limits and is dependent on the Portfolio
Manager's level of conviction regarding the prospects of
each individual company.
to 30
Portfolio turnover is moderate, in keeping with the longer
hold periods inherent in this approach.
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 2023
11
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1
Strategic Report
Portfolio
Investments held as at 31 December 2023
Investment
Airbus
Alphabet
Microsoft
Safran
VINCI
Country
France
Fair
Value
£’000
15,858
% of
Total Net
Assets
12.5
United States
15,342
12.1
United States
13,269
10.5
France
11,329
8.9
France
10,345
8.2
Canadian Pacific Kansas City
Canadian National Railway
Canada
Canada
Amazon
United States
TCI Real Estate Partners Fund IV*
United States
John Laing Group*1
Ten Largest Investments
Ocean Wilsons
UK
Bermuda
9,181
8,536
6,198
6,021
4,503
7.2
6.7
4.9
4.8
3.6
100,582
4,320
79.4
3.4
TCI Real Estate Partners Fund III*
United States
1,736
1.4
Waste Management
Union Pacific
ASML
KLA
Lam Research
Total Investments
Net Current Assets (including cash)
Total Net Assets
12 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
United States
United States
Netherlands
United States
United States
886
771
709
593
430
0.7
0.6
0.6
0.5
0.3
110,027
16,652
126,679
86.9
13.1
100.0
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 13
Business Description Investment Theme
Designs and manufactures next generation commercial aircraft which offer significant fuel
efficiency savings
Sustainable infrastructure and
transportation
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
Digitalisation
Provides cloud infrastructure and software services which deliver energy efficiency savings for
customers versus legacy solutions
Digitalisation
Designs, manufactures and services next generation aircraft engines which offer significant
fuel efficiency savings
Industrial emissions reduction
Builds and operates energy efficient critical infrastructure assets
Owns and operates fuel-efficient freight railways in Canada and the USA
Sustainable infrastructure and
transportation
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
An energy efficient ecommerce and cloud computing business aiming to use only renewable
energy by 2030
Digitalisation
Invests in energy-efficient real estate projects
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
Sustainable infrastructure and
transportation
Provides waste management and environmental services in North America Water and waste management
Provides fuel-efficient rail freight services across the USA
Sustainable infrastructure and
transportation
Develops, manufactures and services advanced lithography systems used to produce more
energy efficient semiconductor chips
Digitalisation
Develops, manufactures and services inspection and metrology equipment used to increase
the efficiency of semiconductor manufacturing
Digitalisation
Develops, manufactures and services etching and deposition equipment used to produce
more energy efficient semiconductor chips
Digitalisation
1
Investment made through KKR Aqueduct Co-Invest L.P. * Unquoted
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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1
Strategic Report
Portfolio Profile
Portfolio Distribution
By Asset Allocation
13.1%
9.7%
By Geography
4.1%
3.9%
34.8%
77.2%
57.2%
Public Equities
Liquidity
Private Investments
Europe
Emerging Markets
North America
UK
By Theme
10.3% 0.8%
55.7%
33.2%
Sustainable Infrastructure
and Transportation
Digitalisation
Industrial Emissions Reduction
Water and Waste Management
Investment Themes
Theme
Clean energy
Industrial emissions reduction
Sustainable infrastructure and
transportation
Water and waste management
Digitalisation
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.
14 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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Portfolio Manager’s Review
Performance
During 2023, the Company’s NAV per share increased from
129.8p to 160.3p. Together with the 0.4p per share dividend
paid in the year, this represents a total return of 23.8% and
compares to the benchmark (RPI+3%) return of 8.4%.
Importantly, this level of performance has been achieved
with no change in our appetite for, and attitude towards, risk.
The contributions to the NAV per share total return over the
period are summarised below:
Quoted Equities
Private Investments
FX Hedges
Cash
Other net current liabilities
Expenses
Dividend Paid
Net Assets
Net Return
Impact of dividend reinvestment
Total Return
31 December 2023
NAV Contribution
%
21.6
%
77.2
9.7
1.5
11.8
(0.2)
100.0
2.9
2.2
0.0
(1.2)
(1.7)
(0.4)
23.4
0.4
23.8
The drive for resource efficiency continues to accelerate, with
the US and China restarting a joint effort to tackle climate
change in November 2023 and then nearly every country in
the world agreeing to transition away from fossil fuels at the
COP28 summit in December 2023. More than 100 countries
also signed pledges to triple global renewable power capacity
by 2030 and double the annual rate of energy efficiency
improvements every year to 2030. Our approach of pairing
this theme with a strict focus on quality and valuation was
once again fundamental to generating good investment
returns. This preference for businesses which benefit from
barriers to entry, and which trade at reasonable valuations has
led us to invest primarily within the sustainable infrastructure
and transportation and digitalisation themes, and has mainly
been expressed in quoted equities where the return relative
to risk has been more favourable.
Investment performance was led by the portfolio’s
digitalisation holdings (Microsoft, Alphabet and Amazon), in
a reversal of their poor performance in 2022. Safran, VINCI
and Airbus performed strongly following the aviation
industry’s post Covid resurgence. Within the private portfolio,
KKR agreed a deal to sell its 50% stake (in which the
Company participated) in Spanish solar developer, X-ELIO,
to joint venture partner, Brookfield Renewable. The
transaction completed in November and crystallized an
aggregate return on invested capital of 2.15x in US dollars,
equivalent to an IRR of ~13% over 8 years. This was our
fourth successful exit from a private investment since
inception. In aggregate, these have generated realised gains
of approximately £21 million (and 2.0x cost).
rising competition, and
Key portfolio decisions during the period included the
reduction of the Alphabet position by one half, due to
concerns over
the partial
redeployment of the proceeds into re-establishing a position
in Airbus in February 2023. Airbus has the leading narrow
body aircraft franchise and in our view is best placed to help
airlines meet their growing needs for fleet renewals and
decarbonisation. We continued to increase the size of the
Airbus position over the subsequent months. We always
monitor valuations and adjust positions accordingly where
appropriate. In this vein, we opted to take some profits on the
Microsoft holding in June, following very strong performance.
We then added the proceeds, and some excess cash, to the
portfolio’s Airbus, Canadian National Railway and VINCI
holdings. We believed these investments offered similar
returns premised on less demanding valuations.
Within the Company’s private portfolio, we made a
US$25 million commitment to the fourth vintage of the TCI
Real Estate Partners strategy in March 2023. This fund will
follow the same strategy, and offer similar environmental
benefits, as the TCI Real Estate Partners Fund III. The Fund
helps to finance developments which are best in class in
terms of energy efficiency and environmental standards. The
first drawdown was called in October 2023, which was
funded from cash on hand and by partial sales of quoted
equity holdings.
Following the year end and the settlement of outstanding
currency hedges, we decided to cease partly hedging US
dollar and Euro currency exposures due to changes in the
outlook for currencies and a new requirement to cash
collateralise forward exposures on a daily basis.
In February 2023, following a widening of the discount of the
price at which the Company’s shares traded relative to their
NAV, the Board of Directors authorised the deployment of
up to £1 million for a share buyback programme. 975,000
shares (1.2% of the total issued) were purchased between
mid-February to early April at a cost of £920,000.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
15
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1
Strategic Report
Portfolio Manager’s Review
continued
We maintain a proactive stance on stewardship. We carefully
assess shareholder resolutions and engage with portfolio
companies on environmental issues. We seek to promote
energy transition plans to progress towards net zero targets
and greater disclosure of greenhouse gas emission
reduction and mitigation strategies. During the period we
voted against the recommendation of both Amazon’s and
Microsoft’s management on
requesting
disclosure on how the company is protecting the retirement
plan’s beneficiaries from climate risk.
resolutions
Quoted Equities
Quoted equities represented 77.2% of total NAV at
31 December 2023, and delivered a total return of 29.0%
over the period, adding 21.6% to the NAV per share.
Investment
Alphabet
Microsoft
Safran
Amazon
VINCI
Airbus
Ocean Wilsons
KLA
Lam Research
ASML
Canadian National Railway
Union Pacific
Waste Management
Canadian Pacific Kansas City
Increase/ Contribution
to NAV %
5.7
(Decrease) %
72.2
78.5
39.4
90.1
21.2
11.7
46.3
55.6
89.1
36.7
6.8
20.7
16.0
6.2
5.1
2.9
2.7
1.6
1.4
1.3
0.2
0.2
0.2
0.1
0.1
0.1
0.0
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 is the market leader in search. The company’s
market share (>90%) has not materially changed following
the launch of Open AI’s ChatGPT and the proliferation of large
language models. Ecommerce still represents only a fraction
of total retail sales and we believe Google’s Search business
can continue to generate healthy revenue growth going
forward. The company continues to drive its sustainability
agenda with aims to achieve net-zero emissions, run on 24/7
carbon-free energy and to replenish more water than it
consumes. Progress is also being made on costs, with
management continuing to restructure business units and
16 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
reduce headcount. Core operating margins are improving.
Alphabet remains focused on using Generative AI to enhance
Google’s products and services for both users and
advertisers and launched its Gemini AI model in December
2023, followed by full release in February 2024.
That said, we reduced the position materially in February 2023
in the face of rising competition in Search, following Microsoft’s
launch of its new Bing search engine. Whilst we thought that
Alphabet was well positioned to fend off this new challenge, we
believed that the range of outcomes had widened and
associated risk increased. We sold approximately one half of
the position. We also continue to monitor the various anti-trust
actions against the company. The evidentiary phase of the US
Department of Justice’s antitrust trial against Google concluded
during 2023 and closing arguments are set for May 2024.
Microsoft is the key technology partner for enterprise and its
software products are ubiquitous. More than 95% of Fortune
500 companies are customers of the Azure cloud business
and four out of every five use Office 365. Microsoft strives to
ensure their technology infrastructure is fully sustainable,
aiming to operate on carbon-free energy everywhere, at all
times, by 2030. Azure continues to gain share, with growth
rates materially outpacing both Amazon Web Services and
Google Cloud. Microsoft’s CFO expects the growth rate to
remain in the high 20s for the first half of 2024. Office 365 is
approaching 500 million users across Commercial and
Consumer platforms and continues to grow. The company
fully launched its Microsoft 365 Copilot product at the start of
November. Whilst the rate of adoption may be gradual, we
believe that the end productivity gains will support significant
future revenue growth. We opted to take some profits in June,
with the shares then up more than 40% year-to-date in US
dollars, and reduced the position by 2.0% of NAV.
French aircraft engine manufacturer Safran continues to
lead the way towards the decarbonisation of the aviation
sector. The company has committed to reduce absolute
Scope 1 and 2 emissions (see page 20) by 50% by 2030
and reduce Scope 3 emissions by 42.5% per available seat
kilometre by 2035 (versus 2018). These targets were
independently approved by the SBTi in January 2023.
Renewal of the existing fleet with the latest generation of
aircraft powered by Safran’s LEAP engine should reduce the
carbon emissions per passenger mile by 1-2% per year over
the next 15 years. Safran and GE also launched the RISE
(Revolutionary
for Sustainable Engines)
programme in 2021. This engine programme targets further
fuel efficiency improvements of more than 20% and full
compatibility with sustainable aviation fuels. The commercial
launch is scheduled for the mid-2030s.
Innovation
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 17
Safran has profited from the commercial aviation industry’s
resurgence. Flight cycles are the key driver of the company’s
financial performance, with most of its earnings coming from
aftermarket sales of spare parts. We believe air travel
remains a secular growth story, with most people still never
having travelled on a plane. Growing aftermarket volumes
should be augmented by a benign pricing environment,
following difficulties encountered by engine manufacturer
rivals, Pratt & Whitney and Rolls Royce.
Amazon aims to reach net zero carbon emissions by 2040.
Progress so far includes the company’s carbon intensity
falling 7% from 2021 to 2022 and 90% of electricity
consumed attributable to renewable energy sources, with a
path to 100% by 2025. Profitability and free cash flow
generation have meaningfully recovered and we expect both
to continue growing well. The retail business’ operating
margins are benefiting from the switch to a regional fulfilment
model in the US. This translates into shorter delivery
distances and faster delivery speeds. New robotics initiatives
could further boost productivity in the coming years. Amazon
Web Services’ growth rate is picking up following a softer
Cloud environment focused on workload optimisations. CEO
Jassy is still keen to highlight the remaining opportunity, with
90% of IT spend still on-premises. Capital investment is also
moderating, following the expansion of the fulfilment network.
French infrastructure group, VINCI, aims to reduce Scope 1
and 2 emissions by 40% and Scope 3 emissions by 20% by
2030. These are notable goals for a construction company
and include increasing the use of low carbon concrete for
90% of its needs. The airports segment has recovered
strongly in 2023. Traffic is now above 95% of 2019 levels but
there are considerable differences between regions. Neither
France nor the UK, two of the most important countries, have
yet returned to 2019 levels. VINCI’s management team
continues to deploy capital in a measured way and outlined
plans to build and operate a portfolio of renewable energy
assets through its Cobra IS business unit at its Investor Day
in December 2023. The team is aiming to have 5 GW of
capacity in operation or under construction by 2025 and 12
GW by 2030. The company started operating its first
renewable energy asset last year, with the commissioning of
the Brazilian Belmonte solar farm (0.6 GW) in July 2023.
We renewed a position in aircraft manufacturer Airbus in
February and repeatedly increased its size over the next
six months. This was the portfolio’s largest holding at 12.5%
of NAV at the year end. The company’s shares had
previously been held in the portfolio but we exited in April
2021, believing that the post-Covid recovery would take
significantly longer than implied by the price. Now
commercial aviation’s recovery is nearly complete and the
secular growth of air travel appears set to resume. Fleet
renewal requirements and the need for the global aviation
sector to accelerate their decarbonisation are key drivers.
By upgrading to Airbus’ latest generation aircraft, customers
can reduce carbon emissions by 20-30%. Airbus’ aircraft
are also certified to operate on 50% sustainable aviation fuel
(SAF), with a target to reach 100% by the end of the decade.
Airbus plans to reduce scope 1 and 2 emissions by 63% by
2030 and reduce scope 3 emissions by 46% by 2035.
Their management team remains focused on ramping A320
production. This programme is sold out until 2029.
Personnel hiring ahead of current manufacturing needs and
the building of certain key inventories should help to ensure
a successful ramp up. Engine deliveries remain a bottleneck
but both CFM (Safran and GE) and Pratt & Whitney have
reaffirmed their commitments for 2024. Deliveries of aircraft
should increase from 735 in 2023 to more than 1,000
annually in the coming years and underpin significant
earnings growth. This profile is well supported by the current
backlog of nearly 8,600 aircraft.
Holding company, Ocean Wilsons, comprises a controlling
interest in publicly listed Brazilian port operator, Wilson Sons,
and a diversified investment portfolio. Shipping has the lowest
climate impact of any freight method, on a per unit basis,
producing between 10-40 grams of CO2 per metric ton of
freight per kilometre of transportation, which is around half
that even of rail freight. Wilson Sons’ asset base enjoys high
barriers to entry and substantial operating leverage for growth
in Brazil’s international trade shipping sector. Following a
strategic review in June, Ocean Wilsons confirmed the receipt
of several indicative non-binding offers for its investment in
Wilson Sons. The company could unlock significant value,
with the shares trading at more than a 50% discount to NAV.
The semiconductor industry appears to have passed the
bottom of its sales cycle. Whilst the profile of any recovery
is uncertain, a return to growth should translate into higher
capital spending. This should benefit the semiconductor
capital equipment companies in the portfolio, ASML,
Lam Research and KLA. Each company dominates its
respective niche in the value chain and plays 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. We believe the
fundamental drivers of semiconductor demand remain as
clear as ever: cloud computing, artificial intelligence, 5G, the
Internet of Things (IoT) and the digitalisation of the
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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1 Strategic Report
Portfolio Manager’s Review
continued
automotive industry. Semiconductor manufacturers’ capital
intensity also continues to increase. We expect all these
companies to have very bright futures.
The Company’s North American railroad holdings, Canadian
National Railway, Canadian Pacific Kansas City and
Union Pacific, have contended with a slowing economy
and a period of inventory destocking in 2023. We view these
headwinds as only cyclical in nature. Rail retains a significant
cost advantage over trucks on longer haul routes and no one
is building railroads
the most
environmentally friendly way of transporting freight over land,
with current locomotives four times more fuel efficient than
trucking on a per unit basis. Furthermore, these companies
continue to evaluate and trial new technologies to move
beyond the internal combustion engine.
today. Rail remains
We opted to add incrementally to the portfolio’s position in
Canadian National Railway in June. We believed the shares
offered good value compared to the company’s midterm
organic growth profile. Canadian Pacific finally completed its
merger with Kansas City Southern in April 2023. The combined
entity has multiple opportunities to grow volumes, including by
converting truck traffic to rail. We believe the company can
outperform its published earnings per share guidance. New
Union Pacific CEO, Jim Vena, has embarked upon a
programme of decentralisation as he aims for the company to
grow faster than the economy with industry leading margins.
Waste Management provides essential services and
benefits from a high proportion of annuity-like revenue
streams, with the cost of its services representing a very
small portion (circa 0.5%) of customers’ total expenses.
Solid waste pricing has now moved ahead of cost inflation
and the company should be able to regain some of the lost
ground over the past two years. Progress is also being made
on
labour
requirements by 5,000-7,000 roles, equivalent to more than
10% of headcount. Growth investments in new automated
recycling facilities and renewable natural gas plants at landfill
sites continue, although certain of the latter projects have
been hampered by interconnection and permission issues.
We believe these will ultimately be resolved and underpin
sustained double digit earnings growth going forward.
the automation programme
reduce
to
Private Investments
The Company’s portfolio of private investments represented
9.7% of the total NAV as at 31 December 2023, and
delivered a total return of 32.3% over the period, adding
2.9% to the NAV per share.
18 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
Investment
X-ELIO
TCI REP Fund III
John Laing
TCI REP Fund IV
Increase/ Contribution
to NAV %
3.0
(Decrease) %
31.3
(1.9)
3.2
1.6
(0.1)
0.1
(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. Excludes distributions received.
As noted above, KKR completed the sale of its 50% stake
(incorporating the Company’s co-investment) in Spanish solar
energy developer, X-ELIO, in November. This crystallised an
aggregate return on invested capital of 2.6x in Sterling terms,
equivalent to an IRR of ~16% over 8 years. The increase and
contribution to NAV in the table above represent percentages
for the period until X-ELIO's disposal in November.
The remaining investments in TCI Real Estate Partners
Fund III are three
loans to separate real estate
developments in the United States. They are first mortgages
and have low loan-to-value ratios (less than 60%). These
developments are best in class in terms of energy efficiency
and environmental standards. Buildings contribute more
than 30% of GHG emissions in the United States and raising
their efficiency levels is vital to reducing emissions. Whilst the
Fund did not manage to commit the level of capital we
originally hoped, investment returns have remained in line
with expectations. The Fund has continued to draw down
from its remaining commitment (circa US$3.2 million) in line
with the schedules of its existing loans. We expect two loans
to be repaid this year and the last one to be repaid in 2026.
We finalised a new US$25 million commitment to the TCI Real
Estate Partners Fund IV in March 2023. This fund will follow
the same strategy, and offer similar environmental benefits, as
the TCI Real Estate Partners Fund III. The coronavirus
epidemic provided a stress test for Fund III. We were very
pleased that while certain developments were affected by
construction delays, return expectations on the loans remained
unchanged. Each loan has several elements of downside
protection such as credit seniority, loan-to-value ratios of up
to 65% and completion and carry guarantees. The strategy
has only ever recorded one loss out of 37 loans. The manager
believes that stress is starting to permeate real estate credit
markets and that the emerging conditions should underpin
strong demand for its differentiated financing. Furthermore, the
rise in interest rates has increased the relative attractiveness of
their traditionally premium rates. The manager is targeting
gross returns of 11-14%. We believe this level of return
267539 Menhaden Resource Efficiency 01pp-36pp.qxp 22/04/2024 16:26 Page 19
represents an exceptional balance between risk and reward.
The fund made its first drawdown in October 2023, which was
funded from cash on hand and by partial sales of quoted
equity holdings. We expect the Company’s net invested
amount, on a cost basis, to peak at approximately 70% of the
total commitment in mid-2026. This will significantly increase
the portfolio’s exposure to real estate and the sustainable
infrastructure and transportation theme.
John Laing is an active manager of public-private
partnerships and similar concession-based assets. The
company makes both green and brownfield investments. The
management team launched a new sustainability strategy in
August 2023 and is aiming to reach net zero by 2050, with an
interim target for 70% of assets to align with net zero by 2030.
John Laing completed its largest ever investment with the
purchase of three Irish infrastructure assets from AMP Capital
in 2023. These consisted of Valley Healthcare, a portfolio of
primary care centres, the Convention Centre Dublin and
Towercom, a mobile tower operator. Then the purchase of
equity interests in four UK Public-Private Partnerships and a
stake in the Hornsea II offshore transmission assets from HICL
Infrastructure PLC was agreed in September 2023. Finally, the
sale of the Clarence Correctional Centre in Australia, which
was planned as part of KKR’s acquisition, was also agreed.
FX Hedges
We first hedged currency exposure in November 2017, after
a prolonged phase of Sterling weakness. This had benefitted
the portfolio, which was heavily weighted to assets
denominated in US dollars and Euros. We sought to protect
some of these gains by hedging approximately half of the
portfolio’s currency exposures. With the benefit of hindsight,
we can see our concerns that these Sterling currency gains
might be substantially given back were unfounded. Following
the settlement of the outstanding currency forward contracts
in early January 2024 we have ceased to hedge the
Company’s currency exposures, due to a new requirement
to cash collateralise the forward exposures on a daily basis
(whereas in the past these were only cash settled, or paid
out, on expiry). Since inception, the cumulative net losses
from our hedging strategy amounted to £5.3 million. It should
be noted that, as a hedge, this loss has been more than
offset by the currency gains on non-Sterling holdings.
Outlook
We keep focusing on what we can control. Our preference
remains for investments that require us to make as few
predictions as possible. We believe our criteria of investing
in energy and resource efficiency businesses offering quality
and value results in a portfolio well placed to generate
superior returns over time relative to the level of risk taken,
in most market conditions.
The completion of the sale of X-ELIO meant we finished the
year with a high cash balance. Following the year end, we
deployed a portion of the cash, equivalent to 5.8% of NAV,
across the portfolio’s existing quoted equity holdings in January.
Since then, we were pleased to agree a new co-investment
with KKR in a solar developer in the United States, Avantus, in
March. This company has one of the largest development
pipelines across California and the Southwest. We believe the
deal is highly opportunistic and at an attractive valuation. As
always, we only make private investments when they offer a
more attractive balance between risk and reward compared to
public markets. We believe this transaction met this criterion
and we expect it to produce returns significantly in excess of
public equity markets. Our initial US$17.5 million investment
equates to ~10% of the Company’s NAV and was funded from
cash on hand and the partial sales of existing quoted equities.
We expect this transaction and further drawdowns on our
commitment to TCI Real Estate Partners Fund IV to significantly
increase the portfolio’s allocation to private investments.
Following the strong performance in 2023, the Company’s
net asset value per share has now compounded at over
12.3%, after fees, for the five years ended 31 December
2023 compared to our benchmark RPI+3% return of 6.7%.
Share price performance continues to trail the Company’s
net asset value returns, resulting in a widening discount to
net asset value. We believe this is primarily due to the size
of the Company and a corresponding lack of liquidity in the
shares. We intend to keep our relentless focus on
investment performance to deliver growth, and a reduction
in the discount, as both the performance and growth are
recognised by the market. With all members of the
Portfolio Manager owning significant equity stakes in the
Company, our
full alignment with
shareholders. Below is a summary of the Company’s
compound annual growth rate on total return basis:
interests are
in
To 31 December
2023 1 year 3 years 5 years 7 years Inception
6.7%
NAV per share 23.8% 6.6% 12.3% 9.6%
Share price 13.6% 0.7% 8.8% 6.4%
RPI+3% 8.4% 11.2% 6.7% 7.2%
0.0%
6.7%
Menhaden Capital Management LLP
Portfolio Manager
19 April 2024
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Strategic Report
Environmental Impact Statement
Foreword
The extreme weather of 2023 was a powerful reminder of the need for capital markets, policymakers and civil society to
adapt to a changing world. The World Meteorological Organization confirmed it was the hottest year on record, with the
highest levels of carbon dioxide in the atmosphere for at least 2 million years. So it was fitting the year ended with the
landmark commitment from over 100 governments at COP28 to accelerate energy efficiency and renewable use.
That is a commitment that chimes with our core objective at Menhaden Capital Management LLP – to generate long-term
outperformance for Menhaden Resource Efficiency PLC’s shareholders by investing in businesses that deliver, or materially
benefit from, the efficient and responsible use of energy and other resources.
We can reflect on an encouraging year, where Menhaden Resource Efficiency PLC’s net asset value per share was up
23.8%, and companies in its portfolio showed leadership in developing solutions that drive value by addressing energy
efficiency and climate challenges. Alphabet continues to take major strides to reduce operational waste and promote a
more circular consumption cycle, and Waste Management is breaking new ground in the production of biogas and
renewables by repurposing closed landfill sites into solar farms. VINCI is working to reduce its emissions by replacing its
fleet of vehicles with electric, hybrid or hydrogen models, and gradually mainstreaming low-carbon concretes across all
VINCI Construction and VINCI Autoroutes worksites.
We are highly encouraged that over three quarters (11/14) of the portfolio’s listed holdings have committed to, or set,
science-based targets for emissions reductions, and that nearly all (13/14) responded to CDP’s 2023 climate questionnaire.
We continue to engage with the companies in the portfolio to encourage further disclosure including on nature, as-well as
climate risk.
In a rapidly changing world there remains enormous opportunity in applying an energy and resource-efficient mindset to
investment decision-making, and we look forward to continuing this approach to value creation in 2024 and beyond.
Ben Goldsmith
CEO, Menhaden Capital Management LLP
About this impact statement
Many of the assets in which Menhaden Resource Efficiency PLC invests have the potential to become more sustainable
over time and in this Impact Statement we aim to provide some insight on how we monitor environmental risk and
opportunity. Data on renewable energy consumed, renewable energy generated and total scope 1 and scope 2 (location
based) emissions is based on listed equity holdings only, and is taken from each entity’s 2023 CDP disclosure and
therefore relates to 2022 data, unless otherwise stated. The status of the portfolio, and of relevant environmental targets
set, is as of 31 December 2023. A full methodology is published in the Appendix to the separate version of this Impact
Statement on the Company’s website www.menhaden.com.
Scope 1, 2 and 3 emissions:
Scope 1 emissions are direct emissions from a company's own operations.
Scope 2 emissions are indirect emissions from the generation of purchased electricity, heat, or steam that a company
uses.
Scope 3 emissions are all other indirect emissions that occur in a company's value chain, including upstream and
downstream emissions.
20 Menhaden Resource Efficiency PLC
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Impact Data
Menhaden Resource Efficiency PLC’s share of the portfolio companies contributed:
Approach and developments in 2023
Throughout 2023 Menhaden Capital Management LLP
continued to apply a fundamental, research-oriented
approach across key themes including digitalisation,
sustainable infrastructure and transportation.
The data from the listed elements of the Menhaden
Resource Efficiency PLC portfolio show there has been a
36% increase in the amount of renewable energy consumed
across the portfolio compared to last year, and a 7%
increase in the amount of renewable energy generated.
find companies pioneering solutions
Industries such as transport and technology form the
backbone of the global economy and play a crucial role in
the transition to a low-carbon future, which is why we seek
to drive
to
decarbonisation in their sector. This approach in 2023 saw
Menhaden Resource Efficiency PLC continue to hold several
railroad firms (including Union Pacific, Canadian National
Railway and the recently combined Canadian Pacific
Kansas City (CPKC)), as rail presents the most fuel-
efficient method for transporting freight over land. CPKC’s
new single line rail network has become the first to connect
Canada, the US and Mexico, with reported environmental
benefits of avoiding up to 1.9 million tons of GHG emissions
in improved operational efficiency over the next five years,
as the company converts truck transported freight to rail.
In the digitalisation space, the portfolio’s holdings continue
to implement reuse and recycling initiatives to reduce
operational waste and preserve resources. Alphabet has
diverted 86% of operational waste away from landfill across
Google-owned and operated data centres, reselling
37 million hardware components into the secondary reuse
market. Microsoft aims to have a zero waste footprint by
2030, and in 2022 diverted 12,159 metrics tons of solid
waste from its data centres and campuses from landfills and
incinerators. It also achieved an 82% reuse and recycle rate
of its servers and components, as well as opening four new
‘Circular Centres’ which process decommissioned cloud
servers and hardware.
A new position was opened in aircraft manufacturer Airbus
in February 2023, following the exit of an earlier position in
April 2021. Given aviation accounts for approximately 2.5%
of global CO2 emissions, there is an urgent need for the
industry to decarbonise and we believe Airbus is
demonstrating a strong approach with approved science-
based targets for its plans to reduce Scope 1 & 2 emissions
by 63% by 2030 and reduce Scope 3 emissions by 46% by
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Strategic Report
Environmental Impact Statement
continued
2035. This target is in line with a 1.5°C pathway according
to the Science-Based Targets Initiative (SBTi). We will
monitor the firm’s ambition to develop its first hydrogen-
powered commercial aircraft by 2035 and to continuously
improve the efficiency of the next generation of aircraft. Also
in the aviation sector, Safran is engaged in positive recycling
and reuse practices as a founding member of TARMAC
Aerosave: a company focused on improving the process to
recondition or recycle aircraft materials and engines. For
example, non-repairable aircraft windows have been used
by the interior design industry, and plastic components are
used to create clothing or blankets. Whilst Safran’s work in
promoting resource efficiency through its recycling and reuse
programme is a positive step, it is concerning to see its
significant misalignment with a 1.5°C target as per MSCI’s
implied temperature rise, and this issue will be raised with
them through our engagement programme this year.
In April 2023, a new US$25 million commitment to the TCI
Real Estate Partners (REP) Fund IV was finalised. This
fund will follow the same strategy as the previously invested
in TCI REP Fund III, delivering asset-backed loans to real
estate development projects. Buildings contribute an
estimated 30% of GHG emissions in the United States, and
improving energy efficiency levels will be an important driver
for emissions reduction. TCI’s projects include Six Senses
Rome. This property has achieved a Gold Leadership in
Energy and Environmental Design (LEED) certification and
buys 100% renewable energy, has installed heat recovery
and rainwater harvesting systems and water efficient taps
and showers.
We track whether portfolio companies’ emission reduction
plans are aligned with a pathway to fulfil the Paris
Agreement, using MSCI data. Eleven of 14 publicly-traded
investees have now committed to or been approved for
science-based targets (see Figure 2), and as shown in Figure
1 we are encouraged by MSCI data that shows 10/14 listed
equity holdings are aligned with a pathway to 2°C or lower
by 2050. We will continue to raise the importance of
managing this risk through our engagement programme
with companies currently misaligned.
Figure 1: Portfolio company alignment with Paris Agreement goals
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Exit from X-ELIO leaves bright prospects for clean energy growth
Menhaden Resource Efficiency PLC has held a position in global renewables leader X-ELIO since 2015 via a co-investment with KKR, with the
decision to invest driven by strong policy support at the time to reduce emissions and reductions in the manufacturing costs of solar photovoltaic
panels.
Since KKR’s investment in 2015, and new owner Brookfield’s acquisition of the remaining 50% stake in 2019, X-ELIO has benefited from over
US$2 billion of investment, enabling the company to increase its development pace and expand its project pipeline. X-ELIO now operates across five
continents and has built or developed nearly 3 GW of renewables projects, avoiding over 600,000 tons of CO2. This is equivalent to avoiding emissions
from over 1.2 million barrels of oil. The company has also continued to seize new business opportunities in addition to solar energy through the
development of hydrogen plants, batteries and energy storage.
Menhaden Resource Efficiency PLC no longer holds a position in X-ELIO following KKR’s exit in March 2023, but the Company is delighted to have
played a part in its growth, with over 10 GW of projects now in X-ELIO’s advanced near-term pipeline.
Active ownership: Leveraging our voice on
climate and nature
As a responsible steward of Menhaden Resource Efficiency
PLC shareholders’ capital, Menhaden Capital Management
LLP is committed to engaging directly with portfolio
companies to encourage them to manage climate risks and
take sustainability opportunities. We engage both directly
and in collaboration with other investors and initiatives, and
endeavour to exercise voting rights in line with our
investment objectives.
As part of this we want to ensure all the portfolio holdings
report on their climate risk management and it is
encouraging that 90% of the companies held responded to
the 2023 CDP climate questionnaire. In 2023 we also
participated in CDP’s ‘non-disclosure campaign’, writing to
Safran to encourage them to disclose to the CDP water
request.
We are also encouraged by the number of individual
holdings that have set or committed to emissions reduction
targets verified by the highly respected SBTi. This trend has
continued to increase over the past five years as
demonstrated in Figure 2, rising from one company in 2019
to eleven in 2023. As of 31 December 2023, 78% of the
portfolio’s listed holdings (11 firms) have committed to or set
targets verified by the SBTi. This does not include Amazon
which was removed from the SBTi list of companies acting
on climate goals in August 2023 due to the company’s
‘expired commitment’. Amazon stated on its website that
it is continuing to work with the SBTi to establish a path
forward, and we will continue to monitor this situation.
Figure 2: Listed portfolio companies
setting science-based targets
We believe that the degradation of global biodiversity poses
a long-term financial risk, and are concerned by research
showing six of the nine ‘planetary boundaries’ – which are
critical to sustain the planet’s resilience – have been
breached. That is why in 2023, we wrote to all listed portfolio
companies requesting information on how they assess
biodiversity risk and what practical actions they are taking
to minimise negative impacts. Some positive responses
were received, and where a weak or no response was
received further follow-up engagement is planned. Union
Pacific shared details of its habitat conservation plan to
protect ecosystems and endangered species including a
partnership with The Nature Conservancy to support nature-
based solutions such as restored grasslands and wetlands.
Safran also shared information on several initiatives
including the creation of ecological corridors in Belgium and
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Strategic Report
Environmental Impact Statement
continued
a qualitative study the company has carried out to assess
the main impacts of its activities on biodiversity to identify
priority areas.
Menhaden Capital Management LLP is a signatory to the
Finance Sector Commitment to Eliminate Commodity-
Driven Deforestation. In line with this commitment, we can
confirm that Menhaden Resource Efficiency PLC’s portfolio
(as of 31 December 2023), does not include investment in
any holdings that focus on forest risk commodities (FRCs)
such as palm oil, soy or beef. We are committed to the
consideration of deforestation risk in our due diligence and
pre-investment processes, and to engagement to mitigate
deforestation should a relevant investment take place.
Alignment with SDGs
Menhaden Capital Management LLP is a supporter of the UN Sustainable Development Goals (SDGs), and a snapshot of
how portfolio companies contribute to seven of the goals is included here:
Microsoft’s partnership with Water.org is helping more than 550,000 people in Brazil, India, Indonesia and Mexico1 to access clean water and sanitation
solutions; and Alphabet is finding ways to use reclaimed wastewater and seawater in its data centres rather than freshwater – with almost a quarter (23%) of
the firm’s total data centre water withdrawal (excluding seawater) now from non-potable water2. Amazon has announced a US$10 million planned contribution
to help launch the Water.org ‘Water & Climate Fund’ to empower a million people with water access by 2025 and provide 3 billion litres of water per year in
areas facing water scarcity3.
Amazon is on track to power operations with 100% renewable energy by 2025, five years ahead of its original 2030 target. In 2022, 90% of electricity consumed
by Amazon was attributable to renewable energy sources, up from 85% in 20213. John Laing is investing in a wide range of renewable energy projects, such
as the Klettwitz wind farm in Germany – a large project transforming a former open cast lignite mine into a site with 27 wind turbines on the farm, which produce
up to 89 MWh of clean electricity on peak days. Enough to power thousands of homes4.
In total, 36% of John Laing’s portfolio value6 is currently in low-carbon investments such as renewable infrastructure, electric buses and electric rail transport.
LAM research is developing smarter, more efficient products and processes to measure and reduce the GHG emissions footprint of its products. In the
maritime sector, Ocean Wilsons has replaced diesel operated cranes with electric cranes and has created a towage operations centre to optimise navigation
routes and reduce the use of maritime fuel. Wilson Sons, the subsidiary company of Ocean Wilsons, monitors tide and metocean data to manage the long
term sustainability of port infrastructure.
Alphabet continues to take major strides to prevent operational waste and has diverted 86% of operational waste away from landfill across Google-owned
and – operated data centres – reselling 37 million hardware components into the secondary reuse market5. Similarly, Amazon has reported a 41% reduction
in per-shipment packaging weight on average since 2015, representing more than 2 million tons of packaging materials avoided6. Safran utilises ecodesign
and Technology Readiness Level (TRL) standards to ensure compliance with regulation, customer needs and to mitigate lifecycle impacts as its technology
advances. Safran's TRL standard was awarded Best Business Practice at the 2022 International Conference on EcoBalance7.
Microsoft has robust programmes to meet its commitment to be carbon negative by 2030, utilising carbon removal projects like reforestation and direct air
capture to remove all historical emissions by 2050. In the transport sector, Canadian Pacific Kansas City has made significant strides to increase fuel
efficiency and reduce GHG emissions by investing in new technology to modernise 450 locomotives, representing 46% of its active line-haul fleet8. These
upgrades are expected to improve fuel economy by a minimum of 2.7%8.
Founded by Alphabet, X is a diverse group of inventors and entrepreneurs who built and launched ‘Tidal’ to protect the ocean with underwater sensory
technology systems and machine perception tools. Tidal’s first product monitors fish and environmental conditions underwater to detect and interpret fish
behaviour, feeding and health. These insights help fish farmers make more sustainable and cost-effective decisions whilst reducing their impact on life below
water. Since 2002, Ocean Wilsons’ maritime services company, Wilson Sons, has donated deactivated tugboats to the award-winning Pernambuco Artificial
Reefs Project, which seeks to help the recovery of damaged marine ecosystems and serves as a living laboratory for studies on marine biology.
VINCI applies its engineering expertise to design and build structures to maintain or restore ecological connectivity, re-naturalise habitats, and manage plant
species. For example, the western Strasbourg bypass project encourages wildlife crossings every 200 metres9. Microsoft is contracted to protect 17,268
acres of land, and made an additional contribution to the TNC Belize Maya Forest Project to protect 236,000 acres in a global biodiversity hotspot10. Safran
is developing a global biodiversity strategy, integrating the various challenges faced by its business and value chain, and launched a study to examine its main
biodiversity impacts and dependencies. As part of this plan, its Milmort site in Belgium was awarded a Nature Network label in 2021.7
1 Microsoft 2022 Environmental Sustainability Report
2 Google Environmental Report 2023
3 Building a Better Future Together 2022 Amazon Sustainability Report
4 Investing in tomorrow sustainability report 2022
5 Google Environmental Report 2023
6 Building a Better Future Together 2022 Amazon Sustainability Report
7. Safran 2022 Integrated Report
8 CP Climate Action
9 VINCI Preserving Natural Environments
10 Microsoft 2022 Environmental Sustainability Report
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Business Review
The Strategic Report on pages 2 to 36 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
(“Frostrow”) is the appointed Alternative Investment Fund
Manager (“AIFM”).
As an externally managed investment trust, all of the
Company’s day-to-day management and administrative
functions are outsourced to third party 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 44.
Investment Strategy
The implementation of the Company’s investment objective
has been delegated to Frostrow 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 15.
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 pay a
dividend as a minimum to maintain investment trust status.
The Board
Biographical details of the Directors are set out on
pages 37 and 38 and information on the workings of the
Board and its Committees is set out in the Corporate
Governance Statement on pages 44 to 50.
All of the Directors will seek re-election by shareholders at
the Annual General Meeting to be held on 27 June 2024.
Principal Service Providers
The principal service providers to the Company are
Frostrow, Menhaden Capital Management LLP (“MCM” or
the “Portfolio Manager”) and J.P. Morgan Europe Limited
(the “Depositary”). Details of their key responsibilities and
their contractual arrangements with the Company follow.
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continued
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 an alternative investment fund management agreement
(the “AIFM
between
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
Management Agreement, MCM provides, inter alia, the
following services:
• seeking out and evaluating investment opportunities;
• recommending the manner by which cash should be
invested, divested, retained or realised;
• advising on how rights conferred by the investments
should be exercised;
• analysing the performance of investments made; and
• advising the Company in relation to trends, market
movements and other matters which may affect the
investment objective and policy of the Company.
Portfolio Management Fee
MCM receives a periodic fee equal to 1.25% 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
(adjusted
issues and
repurchases) of 5% per annum; and (b) a high-water mark
(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
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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
Portfolio Manager in December 2023, following which it
made a recommendation for continuation to the Board.
The Board believes the continuing appointment of the
AIFM and the Portfolio Manager, under the terms
described on page 26, 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.
Foreign Exchange Exposure
As explained in the Portfolio Manager's Review on
page 19, the Portfolio Manager has sought to reduce the
volatility in returns caused by currency movements in
respect of the portfolio’s non-sterling denominated
investments through the use of currency forward
contracts. For much of the year approximately 50% of the
Company’s US dollar and euro exposures were hedged in
this manner using 3-month contracts. However, following
a review near the year end it was concluded that the
combination of exchange rate volatility and the relatively
short forward contract periods not matching the longer
term nature of the portfolio created a non-correlated risk
of crystallising currency losses on the rollover of the
contracts. Additionally, it has become necessary for the
Company to lodge cash collateral for such contracts,
making them less economic, and the decision has been
taken to discontinue such hedging transactions for the
foreseeable future.
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continued
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 2023 was 23.8% (2022: -16.5%). To reflect
the Company’s total return investment strategy, the Board
uses RPI+3% as
financial
its primary
performance benchmark. RPI+3% over the year was 8.4%
(2022: 16.4%).
long-term
A full description of the portfolio and performance during
the year under review is contained in the Portfolio
Manager’s Review commencing on page 15 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 2023 was 13.6% (2022: -20.3%).
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 2023 the discount
stood at 37.2% (2022: 31.4%). The Chairman’s Statement
beginning on page 4, addresses the discount and the
approach of the Board. The discount continued to remain
disappointingly wide throughout the year.
Ongoing charges ratio
Ongoing charges represent the costs that shareholders
can reasonably expect to pay from one year to the next,
under normal circumstances. The Board continues to be
conscious of expenses and works hard to maintain a
sensible balance between good quality services 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 2023 was 1.7%
(2022: 1.8%).
Position, Performance and Future
Developments
The Statement of Financial Position on page 70 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 4 and the Portfolio Manager’s Review
on pages 15 to 19.
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 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.
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 beginning on
page 4.
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
These are all Alternative Performance Measures. Please
refer to the Glossary beginning on page 90 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
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Risk Management
In fulfilling its oversight and risk management responsibilities, the Board maintains a framework of the key risks that
may affect the Company and the related internal controls designed to enable the Directors to manage/mitigate these
risks as appropriate. The key risks are registered in the Company's risk matrix, which the Audit Committee has been
delegated to maintain and review at regular intervals. The risk matrix covers all key risks the Directors believe the
Company faces, the likelihood of their occurrence and their potential impact, how these risks are monitored and the
mitigating controls in place. 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:
• Legal and Regulatory Risks
• Investment Risks
• Geopolitical and other Macro Risks
• Corporate Risks
• Operational Risks
• Financial Risks
The following sections detail the risks the Board considers to be the most significant to the Company under these
headings.
The main change from last year is an acceptance, and hence reduced risk rating, that investment risks are largely
inherent in the investment strategy, and investing generally, and that these have been mitigated so far as practical.
It is considered that potential impacts from regulation, including on portfolio companies, related to climate change and
Paris Accord undertakings are tangible and this is recognised below, albeit that the Company’s resource efficiency
theme ought to position it as a beneficiary of related policies.
Principal Risks and Uncertainties
Management and Mitigation
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.
Climate change regulations could affect portfolio
companies and portfolio construction.
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.
Generally, the Company's resource efficiency theme should tend to
align with climate change regulation. The Portfolio Manager also
corresponds with portfolio companies on environmental matters.
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 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.
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Strategic Report
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continued
Principal Risks and Uncertainties
Management and Mitigation
The portfolio may be affected by market risk,
that is volatile market movements (in both equity
and foreign exchange markets) in the sectors
and regions in which it invests. The Company is
also exposed to concentration risk, which is the
potentially higher volatility arising from its
relatively concentrated portfolio, and sector-
specific risks such as global energy and
commodity prices or withdrawal of government
subsidies for renewable energy.
The departure of a key member of the portfolio
management team may affect the Company’s
performance.
Geopolitical and other Macro Risks
Portfolio constituents may be affected by
regional events or politics. Examples are the
conflicts in Ukraine, and related sanctions, and
the Middle East, with their potential impacts on
supply chains.
Corporate Risks
The share price 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.
30 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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 82),
an analysis of how the portfolio would perform during a market
crisis, and the ability of the Company to liquidate its portfolio if
the need arose. Further details are included in the Going Concern
and Viability Statements on pages 39 and 31 respectively.
Whilst market risk can be reduced through diversification,
prospects for this are limited by the requirement to comply with
the Company’s resource efficiency theme and its concentrated
portfolio strategy. 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 a
reasonable amount of portfolio diversification, reducing the risks
associated with individual stocks and markets. The Portfolio
Manager’s approach to investment risk is set out on page 11.
Compliance with the investment restrictions is monitored daily by
the AIFM and reported to the Board on a monthly basis.
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 has no control over such macro events. The vast majority
of the Company’s investments, both quoted and unquoted, are in
developed markets which are expected to be more stable. The
Company has no investments located in or exposed to Russia or
Ukraine, but the Board continues to monitor developments.
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.
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Principal Risks and Uncertainties
Management and Mitigation
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
with applicable
laws,
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.
The Board continuously monitors the performance of all the principal
service providers, with a formal evaluation process also being
undertaken each year. The Audit Committee reviews internal controls
reports and key policies put in place by its principal service providers.
This includes reports on service providers' cyber security measures
and disaster recovery procedures. 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 considered to be exposed, the
approach to managing those risks, the key controls relied upon and
the frequency of their operation. Further details are set out in the
Audit Committee Report on page 52.
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 82.
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.
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 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, including unfunded commitments on
unquoted investments, as they fall due:
• The portfolio is principally comprised of investments
traded on major international stock exchanges. Based
on the Company’s latest available financial positions, it
is estimated that 86% of the current portfolio could be
liquidated within 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.
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continued
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 the
following assumptions in assessing the Company’s
longer-term viability:
• There will continue to be demand for investment trusts;
• The Board and the Portfolio Manager will continue to
adopt a long-term view when making investments, and
anticipated holding periods will be at least five years;
• The Company invests principally in the securities of
listed companies traded on major international stock
exchanges to which investors will wish to continue to
have exposure;
• 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 be satisfactory.
As part of its 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 on the Company’s ongoing charges.
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
improve the share price and grow the Company by
encouraging demand for the shares.
Frostrow actively engages with professional investors,
typically discretionary wealth managers, some institutions
and a range of execution-only platforms. Regular
engagement helps to attract new investors and retain
existing shareholders, and over time results in a stable
share register made up of diverse, long-term holders.
Frostrow, in turn, provides the Board with up-to-date and
accurate information on the latest shareholder and
market developments.
research output
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’
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.
The Company also benefits from involvement in the regular
professional investor seminars run by Frostrow in major
centres, notably London and Edinburgh, which are
focused on buyers of investment companies.
The creation and dissemination of information on the
Company is also overseen by Frostrow. Frostrow
produces all key corporate documents, monthly
factsheets, annual reports and manages the Company’s
website www.menhaden.com. All Company information
and invitations to investor events, including updates from
MCM on the portfolio and market developments, are
regularly emailed to a growing database, overseen by
Frostrow, consisting of professional investors across the
UK and Ireland.
Frostrow maintains close contact with all the relevant
investment trust broker analysts, particularly those from
Deutsche Numis, the Company’s corporate broker, but
also others who publish and distribute research on the
Company to their respective professional investor clients.
32
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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).
Stakeholder group How the Board engaged with the Company’s stakeholders
Investors The Board’s key mechanisms of engagement with investors include:
l The Annual General Meeting.
l The Company’s website which hosts reports, articles and insights, and monthly factsheets.
l One-to-one investor meetings.
l Group meetings with professional investors.
l The Annual and Half yearly Reports.
The AIFM and the Portfolio Manager, on behalf of the Board, complete a programme of investor relations
throughout the year, reporting to the Board on the feedback received. The Company’s broker also reports
to the Board on investor sentiment and industry issues. In addition, the Chairman has been available to
engage with the Company’s shareholders where required.
Portfolio Manager The Board met regularly with the Portfolio Manager throughout the year, both formally at quarterly Board
meetings and informally, as needed. The Board discussed the Company’s overall performance, including
against the benchmark and the KPIs, as well as developments in individual portfolio companies and wider
macroeconomic developments. The Board also received monthly performance and compliance reports.
Service Providers The Board met regularly with the AIFM, representatives of which attend every quarterly Board meeting to
provide updates on risk management, accounting, administration and corporate governance matters.
The Management Engagement Committee reviewed the performance of all the Company’s service providers,
receiving feedback from Frostrow in their capacity as AIFM and Company Secretary. The AIFM, which is
responsible for the day-to-day operational management of the Company, meets and interacts with the other
service providers including the Depositary, Custodian, and Registrar, on behalf of the Board, on a daily basis.
This can be through email, one-to-one meetings and/or regular written reporting.
The Audit Committee met with Mazars LLP to review the audit plan, the outcome of the annual audit
and to assess the quality and effectiveness of the audit process.
Portfolio companies The Portfolio Manager, on behalf of the Board, engaged with a number of portfolio companies on a range
of issues. Environmental issues were a key topic of engagement. The Board received a quarterly update
on the Portfolio Manager’s engagement activities.
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Strategic Report
Strategic Report
Business Review
continued
The Board seeks to comply with these and the following table sets out how the Directors have had regard to the views
of the Company’s stakeholders in their decision-making.
Key areas of engagement
Main decisions and actions taken
l Ongoing dialogue with shareholders concerning the
strategy of the Company, performance and the portfolio.
l Share price performance.
l The Portfolio Manager’s investment approach.
l Portfolio composition, performance, outlook and business
updates.
l The suitability of new investments with respect to the
Company’s resource efficiency theme.
l The Portfolio Manager’s engagement with investee
companies on ESG matters.
l The Portfolio Manager’s system of internal controls and
investment risk management.
l The Company’s management fee structure.
l The quality of service provision and the terms and
conditions under which service providers are engaged.
l The assessment of the effectiveness of the audit and the
Auditor’s reappointment.
l The terms and conditions under which the Auditor is
engaged.
l Environmental reporting and target setting.
The Board and the Portfolio Manager provided updates via
RNS, the Company’s website and the usual financial reports
and monthly fact sheets.
The Board continued to monitor share price movements
closely, both in absolute terms and in relation to the Company’s
peer group. The actions the Board has taken to address the
share price discount to the NAV per share are described in the
Chairman’s Statement beginning on page 4.
The Board concluded that it was in the interests of
shareholders for MCM to continue in their role as Portfolio
Manager on the same terms and conditions. Further
information is provided on page 27.
The Audit Committee concluded that the Portfolio Manager’s
internal controls were satisfactory. See the Audit Committee
Report, beginning on page 51, for further information.
The Board concluded that it was in the interests of shareholders
for Frostrow to continue in their role as AIFM on the same terms
and conditions. See page 27 for further details.
The Board approved the Audit Committee’s recommendation
that it would be in the interests of shareholders for Mazars to
be re-appointed as the Company’s auditor for a further year.
See the Audit Committee Report beginning on page 51 and
the Notice of AGM beginning on page 94 for further
information.
The Board worked with the Portfolio Manager to produce the
Company’s annual environmental impact statement, which
outlines the impact the Company’s investments have delivered,
or intend to deliver. The report outlines the subjects on which
the Portfolio Manager, with the support of the Board, engaged
with portfolio companies. The report is on pages 20 to 24 and
is published as a separate document on www.menhaden.com
34 Menhaden Resource Efficiency PLC
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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 notes the Task Force on Climate-Related
Financial Disclosures (“TCFD”) recommendations. As
noted above, the Company is an investment trust with no
employees, internal operations or property and, as such,
it is exempt from the Listing Rules requirement to report
against the TCFD framework. The Company recognises
risks from climate change regulation, such as potential
impacts on investee companies, portfolio construction,
marketing and reputation.
the
opportunity provided by the alignment of its investment
objective and policy with the net zero agenda.
It also recognises
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 20 to 24.
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. Whilst MCM is not a formal signatory
to the 2020 Stewardship Code, it adheres to the
12 principles as closely as possible.
As an investment trust, 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.
Menhaden Resource Efficiency PLC
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continued
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
on
be
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 36 has been
approved by the Board.
Howard Pearce
Chairman
19 April 2024
36 Menhaden Resource Efficiency PLC
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Board of Directors
Howard Pearce (Chairman)
Howard Pearce was appointed as Chairman of the
Company on 16th May 2023, having previously been
Chairman of the Audit Committee, a position he had held
since joining the Board as a non-executive Director shortly
before the Company’s IPO in 2015.
In 2023 he also became a non-executive director and chair
of the audit committee of Ashoka White Oak Emerging
Markets PLC.
Previous roles include being a non executive director of
Response Global Media Limited, chair of the Pension Board
of Avon, Berkshire, and Wiltshire Pension Funds, board
member and chair of the audit committee of a UK Port
Authority, and a trustee and chair of the Investment and
Audit Committees of an NHS charity. He is the founder of
HowESG Ltd, a specialist environmental, asset stewardship,
and corporate governance consultancy business. 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.
Barbara Donoghue
Barbara Donoghue (also known as Barbara Donoghue
Vavalidis) joined the Board as a non-executive Director on
1 February 2022. She became Chair of the Audit
Committee on 16 May 2023 and on 12 December 2023
was appointed as Chair of the Management Engagement
Committee and Senior Independent Director.
She was a non-executive director of Byredo AB, a
Stockholm based
fragrance company, until
June 2022, having been its chair for the six years to 2020.
luxury
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.
The Directors’ beneficial interests in the Company’s shares are set out in the Directors’ Remuneration Report on page 57.
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2
Governance
Board of Directors
continued
Sir Ian Cheshire
Sir Ian Cheshire joined the Board shortly before its IPO in
2015. He was Chairman of
the Company from
appointment, but stepped aside from that position, though
remaining a non-executive Director of the Company, on
16 May 2023.
He is the chairman of Spire Healthcare Group plc, Land
Securities Group PLC and Channel 4. He additionally chairs
the King Charles III Charitable Fund and the We Mean
Business Coalition.
Sir Ian was the chairman of Barclays UK, the ring-fenced
retail bank from 2017 to 2020 and of BT Group PLC from
2020 until May 2023. 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 2014 for services to Business,
Sustainability and the Environment.
Soraya Chabarek
Soraya Chabarek joined the Board as a non-executive
Director on 1 March 2023.
She is CEO at Manulife | CQS Investment Management. She
is also a senior partner, chair of the board of CQS
Management Limited, a member of the board of Manulife
Investment Management (Europe) Limited and a member of
the Asset Advisory Committee for Multi Asset Credit.
Since joining CQS in 2013, Soraya has been instrumental in
the firm’s transformation from a hedge fund manager into a
multi-sector alternative credit platform, leading the growth of
the Firm’s core credit strategies to reach a broader client base
of institutional investors and private wealth channels globally.
During her career, Soraya has had exposure to a broad
range of fund strategies including global macro, equities,
emerging markets, credit and convertibles.
She was previously at Moore Europe Capital Management,
from 2008 to 2013, where she was head of marketing for
emerging macro strategies and a partner. From 2004 to
2008 she was a principal and partner at GLG Partners and
from 2000
Investment
to 2004 was with Permal
Management, having previously started her career at HSBC
Private Bank.
38 Menhaden Resource Efficiency PLC
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Directors’ Report
The Directors present their annual report on the affairs of
the Company together with the audited
financial
statements and the Independent Auditor’s Report for the
year ended 31 December 2023. Disclosures relating to
performance, future developments and risk management
can be found within the Strategic Report on pages 2 to 36.
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 is put to shareholders every five years.
The last such occasion was 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.
Performance and Future Developments
Details of the Company’s and its Portfolio’s performance
and prospects are included in the Strategic Report, on
pages 2 to 36, and incorporated in this Directors’ Report
by reference.
Dividends
In accordance with the dividend policy set out on page 25
the Board is recommending a final dividend of 0.9p per
ordinary share in respect of the year ended 31 December
2023, to be paid on 5 July 2024 to shareholders on the
register on 7 June 2024, with the shares marked
ex-dividend on 6 June 2024. An ordinary resolution to this
effect is included in the AGM notice of meeting on page 94
of this annual report.
A dividend of 0.4p per ordinary share was paid on 30 June
2023 in respect of the year ended 31 December 2022,
following approval by shareholders at the 2022 AGM.
Going Concern
The Company’s portfolio, investment activity, cash
balances, 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 pages 31 and 32, together with 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.
Alternative Performance Measures
The Financial Statements (on pages 68 to 87) 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 28 and defined
more fully, including the basis of calculation, in the
Glossary on pages 90 and 91. 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
39
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2
Governance
Directors’ Report
continued
Substantial Interests in Share Capital
The Company was aware of the following substantial interests of 3% or more in the voting rights of the Company as at
31 December 2023 and 31 March 2024.
31 March 2024
31 December 2023
Shareholder
Cavenham Private Equity*
Generali Deutschland Versicherung
First Equity, stockbrokers
Ravenscroft
Charles Stanley
UBS Wealth Management
Number
of
Ordinary
shares
15,554,621
9,050,000
6,550,000
5,023,956
3,085,933
2,564,435
% of
issued
share
capital
19.7
11.5
8.3
6.4
3.9
3.3
Number
of
Ordinary
shares
15,554,621
10,000,000
6,350,000
4,460,456
3,186,804
2,616,500
% of
issued
share
capital
19.7
12.7
8.0
5.6
4.0
3.3
*Goldsmith family investment vehicle and member of the concert party referred to in the Chairman's Statement on pages 5 and 6.
The number of shares in issue on 31 December 2023 and 31 March 2024 was 79,025,001.
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.
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 2023 the
Company had 79,025,001 ordinary shares in issue. During
the year the Board initiated a limited share buyback
programme and a total of 975,000 shares were bought
back in the market and subsequently cancelled. No further
shares have been bought back since the year end to the
date of this report.
The voting rights of the ordinary shares on a poll are one
vote for each share held.
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, the Directors had
shareholder authority to issue up to 7,902,500 ordinary
shares and to repurchase 11,845,847 shares. 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 94.
40 Menhaden Resource Efficiency PLC
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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
Compliance Regulations 2015. CRS
the
Company to provide certain additional details to HMRC in
relation to certain shareholders. The reporting obligation
began in 2016 and is an annual requirement. The
Company’s registrar, Link Group, has been engaged to
collate such information and file the reports with HMRC
on behalf of the Company.
requires
Directors’ & Officers’ Liability Insurance
Cover
Directors’ and officers’ liability insurance cover was
maintained by the Company during the year ended
31 December 2023. It is intended that this cover will
continue for the year ending 31 December 2024 and
subsequent years.
Directors’ Indemnities
During the year under review and to the date of this report
indemnities were in force between the Company and each
of its Directors under which the Company has agreed to
indemnify each Director, to the extent permitted by law, in
respect of certain liabilities incurred as a result of carrying
out his or her role as a director of the Company. The
Directors are also indemnified against the costs of
defending criminal or civil proceedings or any claim by the
Company or a regulator as they are incurred provided that
where the defence is unsuccessful the Director must repay
those defence costs to the Company. The indemnities are
qualifying third party indemnity provisions for the purposes
of the Companies Act 2006.
A copy of each deed of indemnity is available for
inspection at the Company’s registered office during
normal business hours and will be available for inspection
at the Annual General Meeting.
Other Statutory Information
The following information is disclosed in accordance with
the Companies Act 2006:
• 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
is 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 40.
• 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 20 to 24 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
41
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2
Governance
Directors’ Report
continued
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 37 and 38. 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.
Corporate Governance
The Corporate Governance Statement set out on
pages 44 to 50 is included in this Directors’ Report by
reference.
Financial Instruments
The Company’s financial instruments comprise securities
and other investments, cash balances and certain debtors
and creditors that arise directly from its operations. The
financial risk management objectives and policies arising
from its financial instruments and the exposure of the
Company to risk are disclosed in note 17 to the financial
statements, beginning on page 82.
Annual General Meeting
The Company’s Annual General Meeting (“AGM”) will be
held at 25 Southampton Buildings, London WC2A 1AL on
Thursday, 27 June 2024 at 11.30 a.m.
The business of the meeting is explained in some detail in
the Explanatory Notes to the Resolutions on pages 99
and 100 of this Annual Report.
The AGM resolutions include the following items of special
business:
Resolution 9 Authority to allot shares
Resolution 10 Authority to disapply pre-emption rights
Resolution 11 Authority to repurchase shares
Resolution 12 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 94.
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
19 April 2024
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Statement of Directors’ Responsibilities
Company law in the United Kingdom requires the
Directors to prepare financial statements for each financial
year. The Directors are responsible for preparing the
financial statements in accordance with applicable law and
regulations. In preparing these financial statements, the
Directors have:
• 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.
Responsibility Statement of the Directors
in respect of the Annual Report
The Directors, whose details can be
found on
pages 37 and 38, confirm to the best of their
knowledge that:
• the financial statements within this Annual Report,
prepared in accordance with applicable accounting
standards, give a true and fair view of the assets,
liabilities, financial position and the return for the year
ended 31 December 2023; 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
Howard Pearce
Chairman
19 April 2024
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
the
legislation
preparation and dissemination of the financial statements
may differ from legislation in their jurisdiction.
the United Kingdom governing
in
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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2
Governance
Corporate Governance Statement
The Board and Committees
Responsibility for effective governance lies with the Board whose role is to promote the long-term success of the
Company. The governance framework of the Company reflects the fact that as an externally managed investment
company, it has no employees and outsources portfolio management services to Menhaden Capital Management LLP
and risk management, company management, company secretarial, administrative and marketing services to Frostrow
Capital LLP. The Board generates value for shareholders through its oversight of the service providers and management
of costs associated with running the Company.
Chairman – Howard Pearce (from 16 May 2023)
Three additional non-executive Directors, all considered independent.
The Board
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
Chair – Barbara Donoghue (from 12 December 2023)
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
Chair – Barbara Donoghue (from 16 May 2023)
All Directors
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.
Barbara Donoghue is the Company’s nominated Senior Independent Director, who can be contacted through the
Company Secretary on issues for which normal communication channels are considered to be inappropriate.
44 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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The Board has considered the AIC Code of Corporate
Governance (the “AIC Code”). The AIC Code addresses
all the principles set out in the 2018 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 established a remuneration committee or
a nomination committee. In each case the Board
considers that this is not necessary given the small size of
the Board and duties that would otherwise fall to these
committees are instead dealt with by the full Board.
Purpose and Strategy
The purpose and strategy of the Company are described
in the Strategic Report on page 25.
The Board
Board Membership
The Company has a Board of four non-executive
Directors, including the Chairman. Howard Pearce
(Chairman), Barbara Donoghue and Sir Ian Cheshire
served throughout the year. Soraya Chabarek was
appointed to the Board with effect from 1 March 2023.
The Directors’ biographies can be found on pages 37
and 38. Further information on the Board and its operation
follows:
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.
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
Portfolio Manager (and other suppliers where necessary);
• ensuring effective communications with shareholders
and, where appropriate, other stakeholders; and
• engaging with shareholders to ensure that the Board
has a clear understanding of shareholder views.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
45
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2
Governance
Corporate Governance Statement
continued
Director Independence
The Board is comprised of four non-executive Directors,
each of whom is independent of the AIFM and the
Portfolio Manager. Each of the Directors, including the
independent on appointment and
Chairman, was
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 beginning on
page 4. Additional ad hoc Board and committee meetings
are convened from time to time to deal with certain
administrative and time sensitive matters that arise.
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:
Board
Type and number of meetings (scheduled) Audit Committee
held in 2023 (4) (3)
Howard Pearce 4 3
Sir Ian Cheshire 4 3
Barbara Donoghue 4 3
Soraya Chabarek1 4 2
Duncan Budge2 2 1
Management
Engagement
Committee
(1)
1
1
1
1
–
Ad hoc Board
and Committee
(4)
4
4
4
2
2
1 Soraya Chabarek was appointed as a Director on 1 March 2023.
2 Duncan Budge retired from the Board on 21 June 2023.
The Board is responsible for setting the Company’s
corporate strategy and
the continued
appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at each
meeting.
reviews
46 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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
appointment or removal of the Company Secretary, and
determining the policy on share issuance and buybacks;
interim dividends,
267539 Menhaden Resource Efficiency 37pp-67pp.qxp 22/04/2024 16:29 Page 47
• matters
relating
to certain Stock Exchange
requirements and announcements, the Company’s
internal controls, and the Company’s corporate
governance structure, policy and procedures;
including
the Company,
• 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
• 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 is not a signatory to the latest
iteration of the Stewardship Code, but seeks to adhere to
the Code’s principles as closely as possible. Their
approach to stewardship, including their consideration of
environmental, social and governance issues, is set out in
their UK Stewardship Code 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.
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
The 2022 Board and committees evaluation process did
not identify any new areas to be addressed, but the Board
continued to monitor particular areas of relevance that had
been highlighted during it. These included the discount at
which the Company’s shares trade, the resource efficiency
credentials of the portfolio and risks to which the
Company is exposed. As described in the Chairman’s
Statement, the Board became concerned about a further
widening of the discount in the first half of 2023 and
decided it would be in shareholders’ interest to try a
modest programme of share buy backs to signal to the
market the Board’s confidence in the value of the
Company’s portfolio and take advantage of the marginal
accretion to NAV this would garner. The Board also
challenged the resource efficiency credentials of new
additions to the portfolio in 2023 and the Audit Committee
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47
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2
Governance
Corporate Governance Statement
continued
reviewed the Company’s risk matrix at each of its
meetings.
should be made on merit, against objective criteria,
including diversity in its broadest sense.
During the course of 2023, the performance of the Board,
its committees and the individual Directors (including each
Director’s independence and time commitments) were
evaluated again through a questionnaire-based internal
assessment process led by the Chairman.
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. The latest
evaluation once again did not identify any new areas to be
addressed, but the Board resolved to try to enhance
communications
to shareholders and prospective
investors, this having been an avenue highlighted in the
process that might enhance interest in the Company's
shares, and it has formulated a communication plan. As a
matter of course and as set out above, the Board
continues to monitor other areas of relevance highlighted
in the evaluation process, which again included the
discount at which the Company’s shares trade, the
resource efficiency credentials of the portfolio and risks to
which the Company is exposed.
All Directors submit themselves for annual re-election by
shareholders. Further information on the contribution of
each individual Director can be found in the explanatory
notes to the notice of the AGM on page 99. Following the
that
the Board
evaluation process,
shareholders vote in favour of the Directors’ re-election at
the forthcoming AGM.
recommends
Board Diversity
The Board supports the principle of Boardroom diversity,
of which gender is one important aspect. The Company’s
policy is that the Board and its Committees should be
comprised of directors who collectively display the
necessary balance of professional skills, experience, length
of service and industry knowledge and that appointments
(a) Table for reporting on gender identity or sex
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 Board has noted the FCA’s listing rules LR 9.8.6R(9)
to (11) which require companies to report against the
following diversity targets:
(a) At least 40% of individuals on the board are women;
(b) At least one of the senior board positions is held by a
woman; and
(c) At least one individual on the board is from a minority
ethnic background.
The following tables set out the Company’s positions
against these targets in compliance with the rules. Being
an externally managed investment company, the Company
does not have any executive officers such as CEO or CFO.
However, the Board considers the non-executive position
of Audit Committee Chair to be a senior position and has
treated it as such in the tables, albeit this is inconsistent
with the mandated column headings. The Audit
Committee Chair has also been appointed as the Senior
Independent Director. Although these positions are
occupied by the same person, they have been counted
separately in the tables. Each Director volunteered how
they wished to be included in the tables. The Board has
chosen to align its diversity reporting reference date with
the Company’s financial year end and proposes to maintain
this alignment for future reporting periods.
Men
Women
Not specified/prefer not to say
48 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
Number of
board
members
2
2
–
Percentage of
Number of senior
positions on
the board (CEO,
the board CFO, SID and Chair)
1
2
–
50
50
–
267539 Menhaden Resource Efficiency 37pp-67pp.qxp 22/04/2024 16:29 Page 49
(b) Table for reporting on ethnic background
White British or other White (including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of
board
members
3
–
–
–
1
–
Percentage of
Number of senior
positions on
the board (CEO,
the board CFO, SID and Chair)
3
–
–
–
–
–
75
–
–
–
25
–
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.
Two of the Directors in office at the year end 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 continued
its refreshment process with the appointment of
Soraya Chabarek as a new non-executive Director on
1 March 2023 following an externally advertised and
competitive recruitment process in late 2022. Duncan
Budge retired from the Board on 21 June 2023. It is
currently intended that the next new appointment to the
Board in connection with the ongoing Board succession
process will be in 2025.
Also in relation to succession, Howard Pearce succeeded
Sir Ian Cheshire as Chair of the Board on 16 May 2023,
with Sir Ian remaining as a Board member for the time
being.
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. The
Board may engage an independent search agency to
assist in the recruitment process.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 43
describes the Directors’ responsibility for preparing
this report.
The Audit Committee Report, beginning on page 51,
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 29 to 31.
The Board’s assessment of the Company’s longer-term
viability
the Strategic Report on
pages 31 and 32.
is set out
in
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
49
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2
Governance
Corporate Governance Statement
continued
Remuneration
The Directors’ Remuneration Report beginning on page 56
and the Directors’ Remuneration Policy on page 59 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 27.
Relationship with Other Service Providers
The Management Engagement Committee monitors and
evaluates all of the Company’s other service providers,
including the Depositary, Registrar and Broker. At the most
recent review in December 2023, 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.
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
50 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
investor meetings were discussed with the Directors at the
next 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. 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 beginning
on page 40.
By order of the Board
Frostrow Capital LLP
Company Secretary
19 April 2024
267539 Menhaden Resource Efficiency 37pp-67pp.qxp 22/04/2024 16:29 Page 51
Audit Committee Report
Statement from the Audit Committee Chair
I am pleased to present the Audit Committee report for
the year ended 31 December 2023. The Committee met
three times during the year under review.
The role of the Committee is to ensure that shareholder
interests are properly protected in relation to the
application of financial reporting and internal control
principles and to assess the effectiveness of the audit. The
Committee’s roles and responsibilities are set out in full in
its terms of reference which are available on request from
the Company Secretary and can be seen on the
Company’s website (www.menhaden.com). A summary
of the Committee’s main responsibilities and how it has
fulfilled them is set out below.
Composition
The Audit Committee comprises Barbara Donoghue
(Chair of the Committee), Howard Pearce, Sir Ian Cheshire
and Soraya Chabarek whose biographies are set out on
pages 37 and 38.
The Committee as a whole has experience relevant to the
investment trust industry with Committee members having
a range of financial and investment experience. Barbara
Donoghue and Howard Pearce have previous experience
of chairing audit committees. Although he is Chairman of
the Company, Mr Pearce sits on the Committee as
permitted by the Committee's terms of reference and the
AIC Code, since he is considered to be independent, has
relevant past experience and to expand the capacity of
the Committee given the small size of the Board.
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 and to
challenge judgements and assumptions made in their
construction;
• to review the internal controls and risk management
systems of the Company and its third-party service
providers;
• to make recommendations to the Board regarding the
appointment, re-appointment or removal of the external
Auditor, and to be responsible for leading an audit
tender process at least once every ten years;
• to have primary responsibility for the Company’s
relationship with
including
reviewing the external Auditor’s independence and
objectivity as well as the effectiveness of the external
audit process;
the external Auditor,
• 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:
April 2023
• Review of the Company’s annual results, including
review of the Auditor’s report to the Committee;
• 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 2023
• Review of the Company’s terms of reference, non-audit
services policy and audit tender guidelines;
• Review of the outcome and effectiveness of the 2022
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
51
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2
Governance
Audit Committee Report
continued
December 2023
• Review of the Auditor’s plan and terms of engagement
have considered the Company’s operations in light of the
following factors:
for the 2023 year end audit;
• Review of new or revised reporting requirements and
audit standards;
• Review of the valuation methodology for the unquoted
investments; and
• the nature of the Company, with all management
functions outsourced to third party service providers;
• the nature and extent of risks it regards as acceptable
for the Company to bear within its overall investment
objective;
• Review of risks, internal controls and compliance.
• the likelihood of such risks occurring; and
• the Company’s ability to reduce the likelihood and
impact of such risks.
A summary of the principal risks facing the Company is
provided in the Strategic Report on pages 29 to 31.
Against this background, a risk matrix has been developed
which covers all key risks the Directors believe 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. Potential impacts related to climate change
are also considered in this review. Any significant changes
to the risk matrix are discussed with the whole Board.
risk
There were no changes
management processes during the year and no significant
failings or weaknesses were
the
Committee’s most recent risk review.
the Company’s
identified
from
to
The Committee reviews internal controls reports from its
principal service providers on an annual basis. The
Committee is satisfied that appropriate systems have
been in place for the year under review and up to the date
of approval of this report.
Performance Evaluation
The Committee reviewed the results of the annual
evaluation of its performance during the year. As part of
the evaluation, the Committee reviewed the following:
• the composition of the Committee;
• the performance of the Committee Chair;
• how the Committee had monitored compliance with
corporate governance regulations;
• how the Committee had considered the quality and
appropriateness of financial accounting and reporting
and challenged the judgements and assumptions
involved;
• 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
52 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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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. The
Committee notes that these had also been identified by the Auditor as key audit risk areas and that it had discussed
with them their approach and conclusions.
Significant risk
How the risk was addressed
existence
Valuation,
and
ownership of investments, in
particular unquoted investments
The valuation of investments is undertaken in accordance with the accounting policies
in note 1 to the financial statements beginning on page 72. 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 and challenged the
valuation of the unquoted investments as at 31 December 2023, 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 74. The Committee asked the Auditor to focus on this area (as it did last year)
given the judgement involved. Having reviewed the valuations, the Committee
confirmed its satisfaction that the investments had been valued correctly. The
Committee also noted the Auditor's report on the challenge they had applied and
their findings.
Risk of revenue being misstated
due to the improper recognition
of revenue
The Committee took steps to gain an understanding of the processes in place to
record investment income and transactions and also noted that this was an area
that the Auditor had identified as a particular area of risk that they would review.
Risk of miscalculating
performance fee
the
This being the third year of the three year performance period, following which the
performance fee crystallises, its calculation was considered to be a particularly
sensitive area this year. The Committee highlighted to the Auditor that payment of
the performance fee was subject to completion of the audit. The Committee
reviewed the calculation and is satisfied that it is in accordance with the Investment
Management Agreement. The Committee also noted the Auditor's findings from
their testing.
Financial Statements
The Board 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, together with the
Committee’s own review and the challenges it made
with respect to judgements and assumptions applied
and the disclosures included; and
• the internal control environment operated by Frostrow,
MCM, 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 39.
The financial statements can be found on pages 68 to 87.
The Committee also considered the longer-term viability
of the Company in connection with the Board’s statement
in the Strategic Report on pages 31 and 32. The
Committee reviewed the Company’s financial position
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
53
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2
Governance
Audit Committee Report
continued
(including its cash flows and liquidity position), the principal
risks and uncertainties (including any potential impacts
related to climate change) 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 war in Ukraine and any tail
risks from the coronavirus pandemic, as well as Brexit. 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.
Withholding Tax
The Committee monitored the reclamation of withholding
tax, receiving updates from Frostrow on the process.
Internal Audit
The Committee considered whether there was a need for
the Company to have an internal audit function. As the
Company delegates its day-to-day operations to third
parties and has no employees, the Committee concluded
that there was no such need.
External Auditor
In addition to the reviews undertaken at Committee
meetings, I met with Mazars LLP (“Mazars”) on 12 April
2024 to discuss the progress of the audit and the draft
Annual Report. During each of these meetings and in their
report to the Committee the Auditor demonstrated
professional scepticism, outlining where they had
challenged particular assumptions and judgements,
particularly with respect to the valuations of unquoted
investments, and the resolutions of these.
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, both informally and via a formal questionnaire, on
the conduct of the audit and their working relationship.
is satisfied with
The Committee
the Auditor’s
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.
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.
54 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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Auditor Reappointment
Mazars LLP was appointed as the Company’s external
auditor following an audit tender process conducted in
2019. The audit of the financial statements for the year
ended 31 December 2023 is their fifth audit of the
Company since appointment. Accordingly, Stephen
Eames, who was the audit partner for all of these audits
will rotate off the assignment for the 2024 year end.
Mazars has confirmed their 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
Thursday, 27 June 2024 and the resolution can be found
in the Notice of AGM on page 94.
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.
Barbara Donoghue
Chair of the Audit Committee
19 April 2024
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
55
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2
Governance
Directors’ Remuneration Report
Statement from the Chairman
I am pleased to present the Directors’ Remuneration
Report to shareholders. An ordinary resolution for the
approval of this report will be put to shareholders at the
Company’s forthcoming Annual General Meeting. The law
requires the Company’s Auditor to audit certain disclosures
provided in this report. Where disclosures have been
audited, they are indicated as such and the Auditor’s
opinion is included in their report to shareholders on
pages 60 to 67.
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 reviewed the fee levels at a meeting held on
12 December 2023 and it was decided that they would
remain unchanged for the year ending 31 December
2024. No remuneration consultants were appointed
during the year (2022: 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 25 for
more information). Accordingly, statutory disclosure
requirements
to executive directors’ and
employees’ pay do not apply.
relating
Changes in Directors’ Remuneration
2024 2024 2023 2023 2022 2022 2021 2021 2020
Fee level Change Fee level Change Fee level Change Fee level Change Fee level
Director (projected)
Howard Pearce1 £50,000 +8% £46,500 +16% £40,000 – £40,000 – £40,000
Sir Ian Cheshire2 £40,000 -8% £43,692 -12% £50,000 – £50,000 – £50,000
Barbara Donoghue3 £40,000 – £40,000 +9% £36,667 n/a n/a n/a n/a
Soraya Chabarek4 £40,000 +20% £33,333 n/a n/a n/a n/a n/a n/a
Duncan Budge5 n/a n/a £18,974 -53% £40,000 – £40,000 – £40,000
1 Howard Pearce succeeded Sir Ian as Chairman of the Board on 16 May 2023.
2 Sir Ian stepped down as Chairman on 16 May 2023 but will continue as a non-executive Director for the time being.
3 Barbara Donoghue was appointed as a Director with effect from 1 February 2022.
4 Soraya Chabarek was appointed as a Director with effect from 1 March 2023.
5 Duncan Budge retired at the 2023 AGM.
56 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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Single Total Figure of Remuneration (audited)
Director
Howard Pearce
Sir Ian Cheshire
Barbara Donoghue1
Soraya Chabarek2
Duncan Budge3
Emma Howard Boyd4
TOTAL
2023
Taxable
expenses
£
Fees
£
46,500
2,859
43,692
40,000
33,333
18,974
–
–
–
–
n/a
n/a
2022
Taxable
expenses
£
Total
£
2,677
42,677
–
–
50,000
36,667
Fees
£
40,000
50,000
36,667
n/a
n/a
n/a
40,000
19,128
–
–
40,000
19,128
Total
£
49,359
43,692
40,000
33,333
18,974
n/a
182,499
2,859
185,358 185,795
2,677
188,472
1 Barbara Donoghue was appointed as a Director with effect from 1 February 2022.
2 Soyara Chabarek was appointed as a Director with effect from 1 March 2023.
3 Duncan Budge retired from the Board on 21 June 2023.
4 Emma Howard Boyd retired from the Board on 22 June 2022.
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. No signing-on bonuses or pay supplements are made when directors are recruited. 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.
Directors’ Interests in the Company’s
Shares (audited)
Ordinary
shares
of 1p each
as at
31 Dec 2023
50,062
115,000
216,693
45,000
n/a
426,755
Ordinary
shares
of 1p each
as at
31 Dec 2022
40,000
115,000
216,693
n/a
10,000
381,693
Howard Pearce
Sir Ian Cheshire
Barbara Donoghue
Soraya Chabarek
Duncan Budge3
Total
No changes have been notified to the date of this report.
The Company does not have share options or a share
scheme, and does not operate a pension scheme.
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.
%
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
July
15
July
16
July
17
July
18
July
19
July
20
July
21
July
22
July
23
Dec
23
RPI +3%
Share Price Total Return
NAV Total Return
Source: Frostrow Capital LLP, Office for National Statistics
Rebased to 100 as at 31 July 2015
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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2
Governance
Directors’ Remuneration Report
continued
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 2023 and 2022.
Total returns
Directors’ fees
Dividends paid
Total ongoing expenses
2023
£’000
24,093
182
316
2,040
2022
£’000
(20,540)
186
160
2,018
Change
%
217.3
(2.2)†
97.6
1.1
† There have been no changes in the annual fee rates payable to directors from 2022 to 2023. The change in total fees reflects the recruitments and
retirements of Directors during 2022 and 2023.
Statement of Voting at the AGM
At the Annual General Meeting held on 21 June 2023 the results of voting on the resolution to approve the Directors’
Remuneration Report were as follows:
Resolution
Directors’ Remuneration Report
Votes cast Votes cast
against
7,394
0.0%
for
34,515,221
100.0%
Votes
withheld*
11,813
*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
Howard Pearce
Chairman
19 April 2024
58 Menhaden Resource Efficiency PLC
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Directors’ Remuneration Policy
is
that
remuneration policy
the
The Company’s
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 a similar size and structure.
Directors are remunerated in the form of fixed fees payable
monthly in arrears. There are no long or short-term
incentive schemes, share option schemes or pension
arrangements and the fees are not specifically related to
individually or
the Directors’ performance, either
collectively.
The Directors’ remuneration is determined within the limits
set out in the Company’s Articles of Association. The
present limit is £500,000 in aggregate per annum.
It is the Board’s intention that the remuneration policy will
be considered by shareholders at the annual general
meeting at least once every three years. If, however, the
remuneration policy is varied, shareholder approval will be
sought at the AGM following such variation. The Board will
formally review the remuneration policy at least once a
year to ensure that it remains appropriate.
The above policy will also apply to new Directors.
This policy was last approved by shareholders at the
Annual General Meeting held on 22 June 2022.
No communications have been
from
shareholders regarding Directors’ remuneration. The
Board will consider any comments received from
shareholders on the remuneration policy.
received
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. No notice
period is stipulated for resignations.
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Annual Report for the year ended 31 December 2023
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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 PL (the ‘company’) for the year ended
31 December 2023 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 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 2023 and of its profit 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 based on a ‘most likely’ (base case) scenario and a ‘worst case
scenario’ as approved by the board of Directors on the 16 April 2024.
• Making enquiries of the directors to understand the period of assessment considered by the Directors, the
completeness of the adjustments taken into account and the 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’ conclusions that liquidity headroom
remained in all events was reasonable.
• Challenging the appropriateness of the directors’ key assumptions in their cash flow 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.
• Evaluating the appropriateness of the directors’ disclosures in the financial statements on going concern.
60 Menhaden Resource Efficiency PLC
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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 AIC Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors 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 our key observations arising from those procedures.
These matters, 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 of FRS 102, “The
Financial Reporting Standard applicable in the UK and
Republic of Ireland” (United Kingdom Generally
Accepted Accounting Practice) and the Statement of
Recommended Practice issued by the Association of
Investment Companies.
The investments are made up of quoted and
unquoted investments and there are different valuation
approaches applied across the portfolio. Within these
valuations there are a significant level of judgements
made in ascertaining the fair value.
There is a risk that the judgements made in the
valuation approaches may lead to a misstatement in
the value recorded in the Statement of Financial
Position. There is also a risk that investments recorded
might not exist or might not be owned by the
Company.
Our audit procedures included, but were not limited to:
Quoted investments
• understanding management’s process to value quoted
investments through discussions with management and
examination of control reports on the third-party administrator;
• agreeing the valuation of quoted investments to an
independent source of market prices;
• obtaining and agreeing confirmation from the custodian of
investments held in order to obtain comfort over existence
and ownership;
• testing on a sample basis additions and disposals of
investments throughout the year back to supporting
documentation
trade
(bank statements and
confirmations); and
list of
• reviewing the adequacy of the disclosure in the financial
statements and ensuring that the methodology applied is in
accordance with FRS 102, “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”
(United Kingdom Generally Accepted Accounting Practice)
and the Statement of Recommended Practice issued by the
Association of Investment Companies.
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2
Governance
Independent Auditor’s Report
continued
Key Audit Matter
How our scope addressed this matter
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;
• engaging with our valuation expert 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 funds’ latest available audited financial
statements, reviewing the funds’ latest reports and
discussion with the funds’ management where applicable;
• reviewing whether there are any going concern issues and
uncertainties in relation to market factors for the actual
portfolio companies as well as their underlying investments
and agreeing the valuation of unquoted investments to year
end fair values as reported in valuation statements received
directly from the investee funds;
• testing on a sample basis additions and disposals of
investments throughout the year back to supporting
documentation (bank statements and notifications from the
investee funds); and
• reviewing the adequacy of the disclosure in the financial
statements including valuation methodology, assumptions
and fair value hierarchy used, taking into account market
factors. Ensuring the methodology applied is in accordance
with FRS 102, “The Financial Reporting Standard applicable
in the UK and Republic of Ireland” (United Kingdom
Generally Accepted Accounting Practice) 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 are appropriate. We did not note any issues with
regard to the existence or the ownership of the investments
held as at 31 December 2023.
62 Menhaden Resource Efficiency PLC
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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
£1,266,000
This has been calculated with reference to the Company’s net assets, of which
it represents approximately 1%.
Rationale for benchmark applied
Net assets has 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 has 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 £950,000, which is approximately 75% of overall materiality.
We agreed with the directors that we would report to them misstatements
identified during our audit above £38,000 as well as misstatements below that
amount that, in our view, warranted reporting for qualitative reasons.
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
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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;
• the strategic report and the directors’ report 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
• 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 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.
• a corporate governance statement has not been prepared by the Company.
64 Menhaden Resource Efficiency PLC
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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 AIC
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 to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified, set out on page 39;
• Directors’ explanation as to their assessment of the entity’s prospects, the period this assessment covers and why
the period is appropriate, set out on pages 31 and 32;
• Directors’ statement on fair, balanced and understandable, set out on page 43;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 29;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems, set out on page 52; and;
• The section describing the work of the audit committee, set out on page 51.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 43, 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.
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.
Menhaden Resource Efficiency PLC
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2
Governance
Independent Auditor’s Report
continued
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:
• Gaining an understanding of the legal and regulatory framework applicable to the company and the industry in which
it operates, and considering the risk of acts by the company which were contrary to the applicable laws and
regulations, including fraud;
• Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether the
company is in compliance with laws and regulations, and discussing their policies and procedures regarding
compliance with laws and regulations;
• Reviewing minutes of directors’ meetings in the year; and
• Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any
indications of non-compliance.
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; 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.
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.
66 Menhaden Resource Efficiency PLC
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Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the audit committee on 12 December 2023
to audit the financial statements for the year ending 31 December 2023 and subsequent financial periods. The period of
total uninterrupted engagement is five years, covering the years ending 31 December 2019 to 31 December 2023.
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 our 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.
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules, these financial statements
will form part of the electronic reporting format prepared annual financial report filed on the National Storage Mechanism
of the Financial Conduct Authority. This auditor’s report provides no assurance over whether the annual financial report
will be prepared using the correct electronic format.
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
19 April 2024
Menhaden Resource Efficiency PLC
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3
Financial Statements
Income Statement
Notes
Revenue
£’000
For the year ended
31 December 2023
Capital
£’000
Total
£’000
For the year ended
31 December 2022
Capital
£’000
Revenue
£’000
Total
£’000
Gains/(losses) on investments held at
fair value through profit or loss
Income from investments held at fair
value through profit or loss
Investment and portfolio management
fees
Other expenses
Net income/(loss) before taxation
Taxation
Net income/(loss) after taxation
Income/(loss) per share – basic
and diluted (pence)
8
2
3
4
5
6
–
25,374
25,374
–
(21,413)
(21,413)
1,692
–
1,692
1,309
–
1,309
(336)
(319)
(2,175)
(2,511)
–
(319)
1,037
23,199
24,236
(143)
894
–
(143)
23,199
24,093
(323)
(404)
582
(96)
486
387
–
64
(404)
(21,026)
(20,444)
–
(96)
(21,026)
(20,540)
1.1
29.3
30.4 0.6
(26.3) (25.7)
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 72 to 87 are an integral part of these financial statements.
68 Menhaden Resource Efficiency PLC
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Statement of Changes in Equity
For the year ended 31 December 2023
Ordinary
share Special
capital reserve
Notes £’000 £’000
Capital
redemption
reserve
£’000
At 31 December 2022 800 77,371
Net income after taxation – –
Repurchase of ordinary shares for cancellation (10) (929)
Dividends paid 7 – –
At 31 December 2023 790 76,442
–
–
10
–
10
Capital
reserve
£’000
24,970
23,199
–
–
Revenue
reserve
£’000
690
894
–
(316)
Total
£’000
103,831
24,093
(929)
(316)
48,169
1,268
126,679
For the year ended 31 December 2022
Ordinary
share
capital
Notes £’000
Special
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
At 31 December 2021 800
77,371
45,996
Net (loss)/income after taxation –
Dividends paid 7 –
–
–
(21,026)
–
At 31 December 2022 800
77,371
24,970
364
486
(160)
690
Total
£’000
124,531
(20,540)
(160)
103,831
The accompanying notes on pages 72 to 87 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
69
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3
Financial Statements
Statement of Financial Position
Fixed assets
Investments
Current assets
Debtors
Derivative financial instruments
Cash
Current liabilities
Performance fee payable
Creditors
Net current assets
Net assets
Capital and reserves
Ordinary share capital
Special reserve
Capital redemption reserve
Capital reserve
Revenue reserve
Total shareholders’ funds
Net asset value per share – basic and diluted (pence)
Notes
8
10
9
12
11
13
13
18
14
As at
31 December
2023
£’000
As at
31 December
2022
£’000
110,027
93,809
928
1,917
14,898
17,743
(829)
(262)
16,652
126,679
790
76,442
10
48,169
1,268
126,679
160.3
104
4,200
6,061
10,365
–
(343)
10,022
103,831
800
77,371
–
24,970
690
103,831
129.8
The financial statements on pages 68 to 87 were approved by the Board of Directors and authorised for issue on
19 April 2024 and were signed on its behalf by:
Howard Pearce
Chairman
The accompanying notes on pages 72 to 87 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC – Company Registration Number 09242421 (Registered in England and Wales)
70 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
267539 Menhaden Resource Efficiency 68pp-71pp.qxp 22/04/2024 16:30 Page 71
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 from investing activities
Cash flows from financing activities
Repurchase of ordinary shares for cancellation
Dividends paid
Net cash outflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Exchange rate movement
Cash and cash equivalents at the end of the year
Notes
15
9
7
For the
year ended
31 December
2023
£’000
For the
year ended
31 December
2022
£’000
(489)
(751)
(27,624)
33,684
4,497
10,557
(929)
(316)
(1,245)
8,823
6,061
14
14,898
(10,321)
28,903
(12,488)
6,094
–
(160)
(160)
5,183
878
–
6,061
The accompanying notes on pages 72 to 87 are an integral part of these financial statements.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
71
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3
Financial Statements
Notes to the Financial Statements
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 pages 53 and 54. 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(d) for details on how expenses are allocated to revenue and
capital.
72 Menhaden Resource Efficiency PLC
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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.
£12,260,000 or 11.1% (2022: £16,864,000 or 18.0%) 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 86.
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. As set out
on page 86, a 25% discount to NAV has been employed by the Company as a sensitivity test for the impact of
the inherent valuation risk associated with its unquoted investments.
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) Financial Instruments
The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.
Basic financial assets:
The Company’s basic financial assets include cash at bank and debtors. These financial assets are initially
recognised at fair value and subsequently measured at amortised costs using the effective interest method.
Investments held at fair value through profit or loss:
Investments are initially measured and subsequently remeasured at fair value as at the reporting dates.
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. Transaction costs
associated with purchases and sales of investments are charged in the capital column in the Company’s
Income Statement.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
73
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3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(b) Financial Instruments continued
Changes in the fair value of investments and gains and losses on disposal are recognised in the capital column
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.
• 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 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.
Derivatives
Derivatives comprise foreign currency forwards that were 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, initially recognised at fair value on the date derivative
contracts are entered into and are subsequently remeasured at their fair value as at the reporting date. Changes
in the fair value of derivative contracts are recognised as capital income or expense in the Income Statement.
(c) 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.
74 Menhaden Resource Efficiency PLC
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1.
ACCOUNTING POLICIES continued
(c) Investment Income continued
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.
(d) 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.
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. Any performance fee accrued or paid is charged in full to the capital column of
the Income Statement.
(e) 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.
(f) 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.
(g) 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
75
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3
Financial Statements
Notes to the Financial Statements
continued
1.
ACCOUNTING POLICIES continued
(h) 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.
(i) Capital Reserves
The following are transferred to this reserve: gains and losses on the realisation of investments; changes in the
fair values of investments; and expenses, together with the related taxation effect, charged to capital in
accordance with the Company's accounting policy on expenses in 1(d).
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.
(j) Special Reserve
The special reserve arose following court approval in 2016 to cancel the share premium account. This reserve
is distributable.
(k) 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
Bank interest
Total income
2023
£’000
469
1,175
1,644
48
1,692
3.
INVESTMENT AND PORTFOLIO MANAGEMENT FEES
AIFM fee
Portfolio management fee
Performance fee provisions
Revenue
£’000
Capital
£’000
52
284
–
336
208
1,138
829
2,175
2023
Total
£’000
260
1,422
829
2,511
Revenue
£’000
50
273
–
323
Capital
£’000
198
1,092
(1,677)
(387)
2022
£’000
419
883
1,302
7
1,309
2022
Total
£’000
248
1,365
(1,677)
(64)
76 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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4.
OTHER EXPENSES
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
Custody and depositary fees
Other expenses
Total expenses
182
14
46
18
30
43
(14)
319
–
–
–
–
–
–
–
–
2023
Total
£’000
182
14
46
18
30
43
(14)
319
Revenue
£’000
Capital
£’000
186
18
41
18
30
47
64
404
–
–
–
–
–
–
–
–
2022
Total
£’000
186
18
41
18
30
47
64
404
The Company has no employees and details of the amounts paid to Directors are included in the Directors’
Remuneration Report beginning on page 56. Other expenses balance for the year ended 31 December 2023
includes non-recurring credits of £39,000 relating to historic periods.
5.
TAXATION ON NET RETURN
(a) Analysis of charge in period
UK corporation tax
Overseas withholding tax
Revenue
£’000
Capital
£’000
–
143
–
–
2023
Total
£’000
–
143
Revenue
£’000
Capital
£’000
–
96
–
–
2022
Total
£’000
–
96
(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 23.25% (2022: 19%).
The difference is explained below.
Net income/(loss) before taxation
Corporation tax at 23.25% (2022: 19%)
Non-taxable gains on investments held
at fair value through profit or loss
Overseas withholding tax
Non-taxable overseas dividends
Excess management expenses*
Tax charge for the year
Revenue
£’000
1,037
244
Capital
£’000
23,199
5,457
2023
Total
£’000
24,236
5,701
–
(5,969)
(5,969)
143
(387)
143
143
–
–
512
–
143
(387)
655
143
Revenue
£’000
Capital
£’000
2022
Total
£’000
582
110
–
96
(247)
137
96
(21,026)
(20,444)
(3,995)
(3,885)
4,068
4,068
–
–
(73)
–
96
(247)
64
96
*Excess management expenses are expenses that are not relieved in full against income generated by the Company.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
77
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3
Financial Statements
Notes to the Financial Statements
continued
5.
TAXATION ON NET RETURN continued
(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 would increase from 19% to 25% for companies with taxable profits between £50,000 and
£250,000, but with a marginal relief applying as profits increase. The Company has not recognised a deferred
tax asset of £3,725,000 (25% tax rate) (2022: £3,042,000, 25% tax rate) as a result of unutilised excess
management expenses of £14,900,000 (2022: £12,168,000). It is not anticipated that these excess expenses
will be utilised in the foreseeable future.
INCOME/(LOSS) PER SHARE
The capital, revenue and total return per ordinary share are based on the net income/(loss) shown in the
Income Statement on page 68 and the weighted average number of ordinary shares in issue 79,199,042
(2022: 80,000,001).
No dilutive instruments have been issued by the Company.
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:
6.
7.
2022 final dividend of 0.4p per share
2021 final dividend of 0.2p per share
2023
£’000
316
–
2022
£’000
–
160
In respect of the year ended 31 December 2023, a final dividend of 0.9p per share or £711,000 (2022: 0.4p per
share or £316,100) 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 2024. Details of the ex-dividend and
payment dates are shown on page 39.
The Board’s current policy is to only pay dividends out of revenue reserves. The amount of revenue reserve available
for distribution as at 31 December 2023 is £1,268,000 (2022: £690,000). The Company generated a revenue profit
in the year ended 31 December 2023 of £894,000 (2022: £486,000).
78 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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8.
INVESTMENTS
2023 2022
Quoted Unquoted Quoted Unquoted
Investments Investments Total Investments Investments Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening balance
Cost at 1 January 58,985 9,132 68,117 68,965 17,901 86,866
Investment holdings gains/(losses)
at 1 January 17,960 7,732 25,692 40,874 (2,125) 38,749
Valuation at 1 January 76,945 16,864 93,809 109,839 15,776 125,615
Movement in the year:
Purchases at cost 20,084 7,540 27,624 9,669 652 10,321
Sales proceeds (20,204) (14,347) (34,551) (13,197) (3,218) (16,415)
Net movement in investment
holdings gains/(losses) 20,942 2,203 23,145 (29,366) 3,654 (25,712)
Valuation at 31 December 97,767 12,260 110,027 76,945 16,864 93,809
Closing balance
Cost at 31 December 66,263 12,088 78,351 58,985 9,132 68,117
Investment holding gains
at 31 December 31,504 172 31,676 17,960 7,732 25,692
Valuation at 31 December 97,767 12,260 110,027 76,945 16,864 93,809
Proceeds from investments sold during the year were £34,551,000 (2022: £16,415,000), of which £867,000
were receivable as at 31 December 2023 (2022: £nil). The book cost of these investments was £17,390,000
(2022: £29,070,000). 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.The Company also received £4,497,000
(2022: paid £12,488,000) in cash on currency forward contracts (Note 9) expired during the period.
Net movement in investment holding gains/(losses) on investments
Net movement in investment holding gains/(losses) in the year
Net movement in derivative holding (losses)/gains in the year
Gains/(losses) on investments
2023
£’000
23,145
2,229
25,374
2022
£’000
(25,712)
4,299
(21,413)
Total unrealised gains, including transfers, during the year were £5,984,000 (2022: £13,057,000).
Purchase transaction costs were £27,000 (2022: £3,000). These comprise mainly commission and stamp duty.
Sales transaction costs were £5,000 (2022: £3,000). These comprise mainly commission.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
79
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3
Financial Statements
Notes to the Financial Statements
continued
9.
DERIVATIVES
Fair value of currency forward contracts
2023
£’000
1,917
2022
£’000
4,200
Forward contracts were used during the year to hedge the Company’s exposure to the euro and US dollar. See
note 17(ii) for further details. The Company received £4,497,000 (2022: paid £12,488,000) on contracts closed
during the year. The forward contracts are revalued over time and any gains or losses (both realised and
unrealised) are included in gains/(losses) on investments in the capital column of the Income Statement.
The currency forward contracts expired post year end and the Company received £1,614,000 in cash on expiry.
As disclosed in the Portfolio Manager’s Review and the Business Review in the Strategic Report, the Company
has discontinued hedging activities since the year end.
10. DEBTORS
Amounts due from brokers
Withholding tax recoverable
Prepayments and accrued income
11. CREDITORS
Performance fees payable
Other creditors and accruals
2023
£’000
867
29
32
928
2023
£’000
829
262
1,091
2022
£’000
–
68
36
104
2022
£’000
–
343
343
12. PERFORMANCE FEE PROVISIONS
The three-year performance period that commenced on 1 January 2021 ended on 31 December 2023 and
£829,000 has been charged in the Income Statement with a corresponding payable balance in the Statement
of Financial Position. Settlement of performance fee provisions will take place following approval of the annual
results for the year ended 31 December 2023, in April 2024.
Full details of the performance fee arrangement can be found in the Performance Fee section in the
Strategic Report.
80 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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13. SHARE CAPITAL
Issued and fully paid:
2023
£’000
2022
£’000
79,025,001 (2022: 80,000,001) ordinary shares of 1p per share
790
800
There is a single class of shares in issue, being 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
The Company repurchased 975,000 ordinary shares during the year ended 31 December 2023 (2022: none)
and all repurchased ordinary shares were subsequently cancelled. The nominal amount of £9,750 related to
these cancelled shares was credited to the capital redemption reserve.
14. NET ASSET VALUE PER SHARE
Net asset value per share
2023
160.3p
2022
129.8p
The net asset value per share is based on the assets attributable to equity shareholders of £126,679,000
(2022: £103,831,000) and on the number of ordinary shares in issue at the year end of 79,025,001.
No dilutive instruments have been issued by the Company.
15. RECONCILIATION OF NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Gains/(losses) before taxation
(Gains)/losses on investments
Decrease in other debtors
Increase/(decrease) in creditors
Withholding taxation suffered on investment income
Net cash outflow from operating activities
2023
£’000
24,236
(25,374)
(1,138)
5
748
(104)
(489)
2022
£’000
(20,444)
21,413
969
133
(1,738)
(115)
(751)
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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3
Financial Statements
Notes to the Financial Statements
continued
16. RELATED PARTIES
The following are considered to be related parties:
•
•
Frostrow Capital LLP; and
The Directors of the Company.
Details of the relationship between the Company and the Company’s AIFM are disclosed in the Strategic Report
on page 27. Details of fees paid to Frostrow by the Company can be found in note 3 on page 76. All material
related party transactions have been disclosed in note 3 on page 76. Details of the remuneration of the Directors
can be found in note 4 and in the Directors’ Remuneration Report starting on page 56. Details of the Directors’
interests in the capital of the Company can be found on page 57.
The balance outstanding to Frostrow at the year end was £24,000 (2022: £20,000). No balances were due to
the Directors (2022: 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 and the Directors’ approach to the management of them, are set out in the Strategic Report on
pages 29 to 31. The AIFM, in close co-operation with the Board and the Portfolio Manager, co-ordinates the
Company’s risk management.
(i) Other price risk
In pursuance of the Investment Objective, the Company’s portfolio is exposed to the risk of fluctuations in market
prices and foreign exchange rates.
The Board manages these risks through the use of investment limits and guidelines as set out on pages 8 and 9,
and monitors the risks through monthly compliance reports from Frostrow, with reports from Frostrow and the
Portfolio Manager also presented at each Board meeting. In addition, Frostrow monitors the exposure of the
Company and compliance with the investment limits and guidelines on a daily basis.
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17.
FINANCIAL INSTRUMENTS continued
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 £59,000 and £72,000
respectively (2022: decreased/increased by £46,000 and £81,000 respectively); the capital return would have
increased/decreased by £21,763,000 and £23,324,000 respectively (2022: increased/decreased by £18,199,000
and £19,009,000 respectively); and, the return on equity would have increased/decreased by £21,704,000 and
£23,252,000 respectively (2022: increased/decreased by £18,152,000 and £18,953,000 respectively). 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
used foreign currency forwards to hedge some of the foreign currency risk historically, but as disclosed in the
Manager’s Review and the Business Review in the Strategic Report hedging activities ceased post the year
ended 31 December 2023.
Foreign currency exposure
The fair values of the Company’s assets and liabilities that are denominated in foreign currencies are shown
below:
2023 2022
Current Current
Investments Derivatives* assets Net Investments Derivatives assets
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Net
£’000
US dollar 62,963 (33,339) 868 30,492 69,885 (37,329) 2,003
34,559
Euro 38,242 (17,331) 29 20,940 16,074 (6,680) 68
9,462
Other – – 49 49 – – 44
44
101,205 (50,670) 946 51,481 85,959 (44,009) 2,115
44,065
* Derivatives comprise foreign currency forward contracts used to partially hedge the Company’s exposure to the euro and US dollar. As at 31 December 2023,
the fair value of the US dollar forward contract was £1,827,000 (2022: £4,096,000) and of the Euro forward contract was £90,000 (2022: £103,000).
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 on the Company's net currency exposures after hedging.
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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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3
Financial Statements
Notes to the Financial Statements
continued
17.
FINANCIAL INSTRUMENTS continued
2023 2022
USD EUR Other Impact on NAV USD EUR Other Impact on NAV
£’000 £’000 £’000 £’000 % £’000 £’000 £’000 £’000 %
Sterling depreciates 3,388 2,327 5 5,720 5% 3,840 1,051 5 4,896 5%
Sterling appreciates (2,772) (1,904) (4) (4,680) (4%) (3,142) (860) (4) (4,006) (4%)
(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
2023
2022
Fixed
rate
£’000
–
–
Floating
rate
£’000
14,898
14,898
Fixed
rate
£’000
–
–
Floating
rate
£’000
6,061
6,061
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 2023 and the net assets would increase/decrease by £149,000 (2022: £61,000).
(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 87. 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 and TCI Real Estate Fund IV Limited, the Board
expects that it will be drawn down gradually over the life of the investment and as such poses a low risk to the
liquidity of the Company. Frostrow and/or the Portfolio Manager are in regular contact with the managers of the
limited partnership funds, as a part of which they would be made aware of, and plan accordingly for any
drawdowns under those commitments.
The Company’s assets comprise quoted securities (equity shares, fixed income and fund investments), cash,
and unquoted limited partnership funds and investments. Whilst the unquoted investments are illiquid, short-
term flexibility is achieved through the quoted securities, which are liquid, and cash which is available on demand.
The liquidity of the quoted securities is monitored on at least a monthly basis to ensure that there is sufficient
liquidity to meet the company’s liabilities and any forthcoming drawdowns.
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17.
FINANCIAL INSTRUMENTS continued
(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 Company invests in both quoted and unquoted equities in line with its investment objective and
policy. The Company’s investments are held by J.P. Morgan Europe Limited(“the Depositary”), which is a large and
reputable international banking institution. The Depositary is liable for the loss of any financial assets under its custody,
and in accordance with its agreement with the Company, is required to segregate such assets from its own assets.
Credit risk exposure
Derivative financial instruments
Current assets:
Other receivables
Cash
2023
£’000
1,917
928
14,898
2022
£’000
4,200
104
6,061
(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 72.
At 31 December 2023
Investments
Derivatives
At 31 December 2022
Investments
Derivatives
Level 1
£’000
97,767
Level 2
£’000
Level 3
£’000
Total
£’000
–
12,260
110,027
–
1,917
–
1,917
Level 1
£’000
76,945
Level 2
£’000
–
Level 3
£’000
16,864
Total
£’000
93,809
–
4,200
–
4,200
Level 3 investments at 31 December 2023
Cost Value
’000 £’000 Ownership
TCI Real Estate Partners Fund IV Limited US$7,849 6,021 5.72%
KKR Aqueduct Co-Invest LP1 £4,000 4,504 1.12%
TCI Real Estate Partners Fund III Limited US$2,461 1,736 1.18%
1 Described as John Laing Group in the portfolio statement
Level 3 investments at 31 December 2022
Cost Value
’000 £’000 Ownership
KKR Aqueduct Co-Invest LP1 £4,000 4,646 1.15%
Helios Co-Invest LP2 US$4,458 10,672 4.73%
TCI Real Estate Partners Fund III Ltd US$1,715 1,546 1.18%
Valuation basis
NAV
NAV
NAV
Valuation basis
NAV
NAV
NAV
1 Described as John Laing Group in the portfolio statement
2 Described as X-ELIO in the portfolio statement
Menhaden Resource Efficiency PLC
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3
Financial Statements
Notes to the Financial Statements
continued
17.
FINANCIAL INSTRUMENTS continued
In November 2023, the Company received a final distribution of US$16.9 million (£13.8 million) from its investment
in Helios Co-Invest LP, following the disposal of the partnership’s remaining holding in X-ELIO.
Unquoted investment valuations are provided by the underlying investment managers, who follow industry
recognised guidelines and a stringent valuation process, which includes independent review by third parties.
The Company is satisfied that the valuations received represent fair value of the investments it holds, but retains
the discretion to make adjustments if there are indicators that suggest otherwise.
If a 25% discount to NAV was applied to the NAV of the level 3 investments as at 31 December 2023, the impact
would have been a decrease of £2,191,000 (2022: £4,154,000) 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 70.
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.
18. CAPITAL RESERVE
2023
Capital Reserve
2022
Capital Reserve
At 1 January
Realised Unrealised
gains/
(losses)
£’000
gains/
(losses)
£’000
(4,921)
29,891
Net gains/(losses) on investments
Expenses charged to capital
17,161
(2,175)
8,213
Realised Unrealised
gains/
(losses)
£’000
gains/
(losses)
£’000
Total
£’000
7,347
38,649
45,996
(12,655)
(8,758)
(21,413)
Total
£’000
24,970
25,374
–
(2,175)
387
–
387
At 31 December
10,065
38,104
48,169
(4,921)
29,891
24,970
Realised capital reserve and revenue reserve are available for distribution. Unrealised gains, which are not readily
convertible to cash are not considered distributable.
86 Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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19.
FINANCIAL COMMITMENT
The Company has made commitments to provide additional funds to the following investments:
TCI Real Estate Partners Fund IV Limited
TCI Real Estate Partners Fund III Limited
Sterling
Commitment
£13,664,000
£2,200,000
Local currency
Commitment
Notice of
drawdown
US$17,419,000
10 business days
US$2,805,000
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.
21. POST BALANCE SHEET EVENT
As disclosed in the Portfolio Manager’s Review on page 19, in January 2024 the Company ceased to hedge its
currency exposures. There are no other post balance sheet events which would require adjustment of or
disclosure in the financial statements.
Menhaden Resource Efficiency PLC
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4
Further Information
Shareholder Information
Financial Calendar
31 December
March/April
June/July
30 June
September
Financial Year End
Final Results Announced
Annual General Meeting, Dividend Payable (if any)
Half Year End
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 27 June 2024 at 11.30 a.m.
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 (contact details on
page 101), 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 2023
31 December 2022
15.7%
15.2%
32.3%
30.5%
36.0%
34.9%
16.0%
19.4%
Family Offices
Wealth Managers & Private Banks
Family Offices
Wealth Managers & Private Banks
Institutions
Retail Platforms
Institutions
Retail Platforms
88 Menhaden Resource Efficiency PLC
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Menhaden Resource Efficiency PLC trends 2015-2023
9 year
Annual data at 31 December (note 1) Units 2015 2016 2017 2018 2019 2020 2021 2022 2023 Trend
Share Ownership
Family offices % – – 41.6 47.1 48.6 43.5 34.0 30.5 32.3 Falling (cid:2)
Wealth managers & private banks % – – 26.9 24.7 25.2 29.5 33.1 34.9 36.0 Rising (cid:3)
Institutions % – – 21.3 19.5 15.3 16.8 19.9 19.4 16.0 Falling (cid:2)
Retail platforms % – – 10.2 8.7 10.9 10.2 13.0 15.2 15.7 Rising (cid:3)
Financial performance
Net asset value (NAV) £m 67.1 68.3 73.7 72.5 94.0 106.1 124.5 103.8 126.7 Rising (cid:3)
Share price Pence 77 66.4 68.5 67.0 96.5 99.0 112.0 89.0 100.8 Rising (cid:3)
NAV per share Pence 83.9 85.4 92.1 90.6 117.5 132.7 155.7 129.8 160.3 Rising (cid:3)
Share price discount to NAV % -8.2 -22.2 -25.6 -26.1 -17.9 -25.4 -28.1 -31.4 -37.2 Falling (cid:2)
Investment return (Nav per share total return) % -14.1 1.8 7.8 -1.6 30.5 13.2 17.3 -16.5 23.8 Rising (cid:3)
Share price return % -23 -13.8 3.2 -2.2 45.3 3.0 13.1 -20.3 13.6 Rising (cid:3)
Dividend per share Pence 0 0.0 0.0 0.7 0.4 0.0 0.2 0.4 0.9 Rising (cid:3)
Ongoing charges % 2.1 2.1 2.1 2.1 2.0 2.0 1.8 1.8 1.7 Falling (cid:2)
Relative financial performance
Absolute benchmark UK RPI+3% % 2.4 5.7 7.4 5.9 5.5 4.4 10.8 13.7 8.4
MHN NAV total return relative to UK RPI+3% % -16.5 -3.9 0.4 -7.5 25.0 8.8 6.5 -30.2 15.4 Rising (cid:3)
AIC Environmental Sector benchmark return % -2.8 21.0 13.0 -8.0 33.1 23.7 16.1 -15.9 8.8
MHN NAV total return relative to AIC Environmental
Sector % -11.3 -19.2 -1.3 6.4 -2.6 -10.5 1.2 -0.6 15.0 Rising (cid:3)
AIC Global sector return benchmark % 0.1 23.6 20.7 -2.8 23.8 21.0 13.8 -14.8 16.0
MHN NAV total return relative to AIC Global Sector % -14 -21.8 -12.9 1.2 6.7 -7.8 3.5 -1.7 7.8 Rising (cid:3)
Portfolio size
Number of investment holdings Number 24 24 20 19 15 17 15 16 – Falling (cid:2)
Top 5 investments relative % to total assets % 44.4 37.6 46.3 55.7 53.8 67.6 73.6 61.2 – Rising (cid:3)
Asset Allocation
Public equity % 57.2 35.0 44.8 48.2 51.3 78.8 86.8 77.3 77.2 Rising (cid:3)
Private equity % 27.1 23.3 27.8 29.1 27.3 16.2 12.5 16.9 13.1 Falling (cid:2)
Cash and equivalents % 5.1 23.0 14.1 9.5 18.2 2.9 0.7 5.8 9.7 Falling (cid:2)
Yield (excluded from allocation criteria from 2021) % 10.6 18.7 13.3 13.2 3.2 2.1 – – – Falling (cid:2)
Geographic split
North America % 44.5 38.8 21.2 39.6 47.1 63.4 72.6 63.1 56.7 Rising (cid:3)
Europe % 38.7 39 52.5 45.1 36.3 27.5 21.3 28.5 35.3 No trend –
UK (* note 2) % 8.4 * 15.8 16.2 8 7.3 5.9 3.2 5 4.1 Falling (cid:2)
Emerging Markets % 8.4 6.4 10.1 7.3 9.3 3.2 2.9 3.4 3.9 Falling (cid:2)
Thematic split (note 3)
Resources and energy efficiency (theme revised 2021) % 50.3 29.1 18.3 29.4 49.2 58.2 – – 0 Falling (cid:2)
Clean energy % 34.6 43.6 44.8 38 23.1 10.8 8.1 11.4 0 Falling (cid:2)
Water and waste management % 6.7 4.3 1.6 2.6 2.1 1.8 0.9 0.9 0.8 Falling (cid:2)
Sustainable Infrastructure and Transportation (new 2021) % 8.4 23 35.3 30 25.6 29.2 42.4 36.5 55.7 Rising (cid:3)
Digitalisation (new 2021) % _ _ _ _ _ _ 42.1 41.7 33.2 Falling (cid:2)
Industrial emissions reduction (new 2021) % _ _ _ _ _ _ 6.5 9.5 10.3 Rising (cid:3)
Environmental performance (note 4)
Renewable energy consumed MWh – – – – – – – 596 832 Rising (cid:3)
Renewable energy generated MWh – – 69 54 47 – 94 87.6 58 No trend –
Carbon Dioxide emissions (Scope 1 and 2) tCo2e – – – – – – – 2,233 2,329 No trend –
Notes
Note 1. Data extracted from Menhaden Resource Efficiency PLC (“MHN”) annual reports
Note 2. In 2015 labelled global, since then UK
Note 3. Two new themes added 2021 and Resources and energy efficiency theme discontinued.
Note 4. New methodology adopted 2022 and 2023. Prior year data not shown as it was calculated on different methodology
Menhaden Resource Efficiency PLC
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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-water mark 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.
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.
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NAV Total Return (APM)
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
2023 2022
Opening NAV 129.8p 155.7p
Increase/(decrease) in NAV 30.5p (25.9)p
Closing NAV 160.3p 129.8p
% increase/(decrease) in NAV 23.4% (16.6%)
Impact of dividend reinvested 0.4% 0.1%
NAV total return/(loss) 23.8% (16.5%)
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
2023 2022
Opening share price 89.0p 112.0p
Increase/(decrease) in share price 11.8p (23.0)p
Closing share price 100.8p 89.0p
% increase/(decrease) in share price 13.2% (20.5%)
Impact of dividend reinvested 0.4% 0.2%
Share price total return/(loss) 13.6% (20.3%)
Ongoing Charges Ratio (APM)
Ongoing charges ratio is 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. Performance fees are also excluded from the ongoing
charges ratio calculation.
31 December 31 December
2023 2022
£’000 £’000
Total Expenses 2,040 2,018
Average NAVs 117,147 111,560
Ongoing charge ratio 1.7% 1.8%
Menhaden Resource Efficiency PLC
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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
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
92 Menhaden Resource Efficiency PLC
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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 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 2023
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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 Thursday, 27 June 2024 at 11.30 a.m. for
the following purposes:
Ordinary Business
To consider and, if thought fit, pass the following as ordinary resolutions:
1.
2.
3.
4.
5.
6.
7.
8.
To receive the Annual Report for the year ended 31 December 2023, including the financial statements and the
directors’ and auditor’s reports therein.
To receive and approve the Directors’ Remuneration Report for the year ended 31 December 2023.
To declare a final dividend of 0.9p per ordinary share for the year ended 31 December 2023.
To re-elect Soraya Chabarek as a Director of the Company.
To re-elect Sir Ian Cheshire as a Director of the Company.
To re-elect Barbara Donoghue as a Director of the Company.
To re-elect Howard Pearce as a Director of the Company.
To re-appoint Mazars LLP as the Company’s Auditor to hold office from the conclusion of the meeting to the
conclusion of the next Annual General Meeting at which accounts are laid, and to authorise the Audit Committee
to determine their remuneration.
Special Business
To consider and, if thought fit, pass the following resolutions of which resolutions 10, 11 and 12 will be proposed as
special resolutions:
Authority to Issue Shares
9.
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 £79,025 (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 2025 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
10. THAT, in substitution of all existing powers, the Directors be and are hereby generally empowered pursuant to
sections 570 and 573 of the Companies Act 2006 (the “Act”) to allot equity securities (within the meaning of
section 560 of the Act) for cash pursuant to the authority conferred on them by resolution 9 set out in the notice
94 Menhaden Resource Efficiency PLC
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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 £79,025 (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
11. 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 11,845,847 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 2025 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 2023
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4
Further Information
Notice of the Annual General Meeting
continued
General Meetings
12. 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.
By order of the Board Registered Office:
25 Southampton Buildings
London WC2A 1AL
Frostrow Capital LLP
Company Secretary
19 April 2024
96 Menhaden Resource Efficiency PLC
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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, but must
attend the meeting for your votes to be counted. Appointing the Chairman of the AGM as your proxy will ensure that your votes are
cast in accordance with your wishes.
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, via telephone on +44 (0) 371 664 0300 or by
emailing shareholderenquiries@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 11.30 a.m. on 25 June 2024.
4.
5.
6.
7.
8.
9.
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.
If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a process which has
been agreed by the Company and approved by Link. For further information regarding Proxymity, please go to www.proxymity.io. Your
proxy must be lodged by the latest time(s) for receipt of proxy appointments specified in this Notice in order to be considered valid or,
if the meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy
via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully
as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the
Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing the removal of your
proxy vote.
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 25 June 2024 (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.
10. As at 19 April 2024 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of
79,025,001 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 19 April 2024 are 79,025,001.
11. 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.
12.
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 International 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.
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
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4
Further Information
Notice of the Annual General Meeting
continued
13. 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.
14. 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.
15.
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).
16. 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. 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.
17.
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.
98 Menhaden Resource Efficiency PLC
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Explanatory Notes to the Resolutions
Resolution 1 – To receive the Annual Report
The Annual Report for the year ended 31 December 2023,
incorporating the financial statements and this Notice of
Meeting, will be presented to the Annual General
Meeting (AGM).
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.
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 56 to 58 of this Annual Report.
Resolution 3 – Dividend
It is necessary for the Company to pay a dividend in
respect of the year ended 31 December 2023 in order for
it to retain investment trust status. Accordingly, the Board
is recommending the declaration of a dividend of 0.9p 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.
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 8 – Re-appointment of the Auditor and the
determination of their remuneration
Resolution 8 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 4 to 7 – Re-election of Directors
Resolutions 4 to 7 deal with the re-election of the
Directors. Biographies of each of the Directors can be
found on pages 37 and 38 of this Annual Report.
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:
Soraya Chabarek
Soraya brings leadership experience in asset management
and broad exposure to fund strategies including global
macro, equities, emerging markets, credit and
convertibles, providing a strong basis for portfolio
management challenge.
Sir Ian Cheshire
Sir Ian draws on more than 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.
Resolutions 9 and 10 – Issue of Shares
Ordinary Resolution 9 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
to existing shareholders. Special Resolution 10 will, if
passed, give the Directors power to allot (and/ or sell from
treasury) for cash equity securities up to the equivalent of
Menhaden Resource Efficiency PLC
Annual Report for the year ended 31 December 2023
99
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4
Further Information
Explanatory Notes to the Resolutions
continued
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 9. 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 9 and 10 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 11 – 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.
Special Resolution 11 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 11,845,847 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 12 – General Meetings
Special Resolution 12 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 426,755 shares.
100 Menhaden Resource Efficiency PLC
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Company Information
Directors
Howard Pearce (Chairman)
Barbara Donoghue
Soraya Chabarek
Sir Ian Cheshire
Auditor
Mazars LLP
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
Company Registration Number
09242421 (Registered in England and Wales)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006
The Company was incorporated on 30 September 2014. The
Company was incorporated as BGT Capital PLC.
Corporate Broker
Deutsche Numis
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
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone: + 44 371 664 0300
E-mail: shareholderenquiries@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 2023
101
A member of the Association of Investment Companies
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
made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Asset Services, which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact them directly,
without the need for an intermediate operator, for this service please call 0800 731 1888.
Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through
a ‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
Environment
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded
the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
Menhaden Resource Efficiency PLC
25 Southampton Buildings
London WC2A 1AL
www.menhaden.com
Tel +44(0) 203 008 4910
Perivan.com