MENHADEN RESOURCE EFFICIENCY PLC
Menhaden Capital PLC
(the "Company")
HALF YEAR REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2017
FINANCIAL HIGHLIGHTS
Performance As at 30 June 2017 As at 31 December
2016
Net asset value per share 87.6p 85.4p
Share price 65.5p 66.4p
Discount 25.2% 22.2%
Total returns Six months to 30 June Year to 31 December
2017 2016
Net asset value per share 2.6% 1.8%
Share price (1.4%) (13.8)%
MSCI World Index (sterling adjusted) 5.3% 28.2%
Six months to 30 June Year to 31 December
2017 2016
Ongoing charges* 2.1% 2.1%
Source: Frostrow Capital LLP
* Ongoing charges are calculated as a percentage of shareholders' funds using
average net assets over the period and calculated in line with the AIC's
recommended methodology.
CHAIRMAN'S STATEMENT
This report covers your Company's progress in the six months to 30 June 2017
and its financial position as at that date, almost two years since its launch.
Performance
During the first half of the year, the Company's net asset value ("NAV") per
share grew by 2.6% (2016: -4.2%). The increase in the NAV was primarily due to
the good performance of the public equities component of the portfolio. The
market value of the Company's shares decreased by 1.4% over the period (2016:
-19.5%) at the end of which the share price stood at a 25.2% discount to the
NAV per share.
While the Company does not have a formal benchmark and our Portfolio Manager
does not invest by reference to an index, over the same period the MSCI World
Total Return Index (in sterling), rose by 5.3% (2016: +11.0%). By way of
additional comparison, the WilderHill New Energy Global Innovation Index (in
sterling) rose by 8.3% and the AIC Environmental Sector rose by 5.4%.
Our Portfolio Manager has provided a comprehensive analysis of all the factors
contributing to the Company's performance during the period later in this
report.
Discount
The Board remains conscious of the level of the share price discount to NAV per
share and reviews the situation at each Board meeting. As I stated in the last
Annual Report, the Board has considered the possibility of share buybacks but
has decided that it would not be in the interests of shareholders to reduce the
size of the Company at this stage of its development. Instead, the Board will
continue to focus on the Portfolio Manager's performance and the effectiveness
of marketing and distribution.
Dividend
The Board's policy is to pay dividends as required to maintain UK investment
trust status; thus no interim dividend will be declared for this period.
The Company's prospectus contains an undertaking to target an annual dividend
yield of 2% of the average NAV by a target implementation date of 31 December
2017. Having reviewed the Company's income forecasts the Board believes that
it will not achieve the target dividend without paying a significant portion
out of capital. The Board does not believe that this would be appropriate
under current circumstances. The Board will keep the dividend target under
close review and continue to advise shareholders accordingly.
Management
Since the Company's launch in 2015, the partners of Menhaden Capital Management
LLP ("MCM") have been seconded to the Company's AIFM, Frostrow Capital LLP
("Frostrow"), in order to carry out the Company's portfolio management
responsibilities. In the Company's last Annual Report, it was stated that the
Menhaden Team had applied to the Financial Conduct Authority for MCM to be
authorised to perform portfolio management activities in its own right and the
Board is pleased to report that such authorisation was granted by the FCA on 11
August.
As a result, the secondment of the Menhaden Team to Frostrow has now ended and
Frostrow has, with the Board's consent, delegated the Company's day-to-day
portfolio management activities to MCM by way of a portfolio management
agreement. The portfolio management and performance fees have not been
affected.
Outlook
Our Portfolio Manager firmly believes that the long-term prospects for
companies delivering or benefiting from the efficient use of energy and
resources remain good. The Board has been encouraged by steady improvements in
the Company's NAV per share over the past year and believes that the premise on
which the Company was launched and its underlying investment strategy remain
valid.
Sir Ian Cheshire
Chairman
20 September 2017
Investment Themes
Theme Description
Clean energy production Companies producing power from clean sources such
as solar or wind
Resource and energy Companies focused on improving energy efficiency
efficiency (e.g. in buildings or manufacturing processes) or
creating emissions reduction products or services
Sustainable transport Companies in the transport sector focused on
helping to reduce harmful air emissions / distance
travelled
Water and waste management Companies with products or services that enable
reductions in usage / volumes and / or smarter
ways to manage water and waste
PORTFOLIO SUMMARY as at 30 June 2017
Investment Country Fair Value % of
£'000 net assets
X-ELIO*1 Spain 10,633 15.2
Airbus France 5,754 8.2
Terraform Power United States 4,813 6.9
Volkswagen Germany 3,890 5.5
Red Electrica De Espana Spain 3,519 5.0
Safran France 3,501 5.0
Calvin Capital*2 UK 3,500 5.0
Brookfield Renewable Energy Canada 3,153 4.5
Terraform Global Emerging Markets 2,895 4.1
Senvion Luxembourg 2,799 4.0
Top 10 investments 44,457 63.4
Atlantica Yield United States 2,533 3.6
FirstGroup UK 2,399 3.4
Alpina Partners Fund LP* UK 2,226 3.2
Air Products & Chemicals United States 2,157 3.1
Abengoa - Bonds Spain 1,356 2.0
WCP Growth Fund LP* UK 1,204 1.7
Rockwell Automation United States 1,170 1.7
Adient Ireland 1,052 1.5
Stericycle United States 967 1.4
Atlantica Yield - Bonds United States 163 0.2
Top 20 investments 59,684 85.2
Terra Santa Agro Brazil 125 0.2
Perfin Apollo* Brazil 97 0.1
Grivalia Properties Greece 75 0.1
Total investments 59,981 85.6
Net current assets (including cash) 10,111 14.4
Total net assets 70,092 100.0
1 Investment made through Helios Co-Invest L.P.
2 Investment made through KKR Evergreen Co-Invest L.P.
* Unquoted
Investment Business Description Theme
X-ELIO*1 Develops and operates solar energy projects Clean energy
production
Airbus Designs and manufactures aircraft Sustainable
transport
Terraform Power Operates contracted renewable energy assets Clean energy
production
Volkswagen Designs and manufactures cars and light commercial Sustainable
vehicles transport
Red Electrica Operates the national electricity grid in Spain Resource and energy
efficiency
Safran Supplies systems and equipment for aerospace, Sustainable
defence and security transport
Calvin Capital Invests in utility infrastructure assets Resource and energy
efficiency
Brookfield Renewable Open-ended fund investing in hydroelectric and wind Clean energy
Energy facilities production
Terraform Global Operates contracted renewable energy assets in Resource and energy
emerging markets efficiency
Senvion Manufactures wind turbines Clean energy
production
Atlantica Yield Owns and manages contracted renewable energy assets Resource and energy
efficiency
Firstgroup Operates transport services in the UK, Ireland, Sustainable
Canada and United States transport
Alpina Partners Fund Growth capital fund managed by specialist Resource and energy
LP* environmental PE firm, Alpina Partners efficiency
Air Products & Sells gases and chemicals for industrial uses Resource and energy
Chemicals efficiency
WCP Growth Fund LP* Growth capital fund managed by specialist Resource and energy
environmental PE firm, Alpina Partners efficiency
Abengoa - Bonds Operates and develops renewable energy assets Clean energy
production
Rockwell Automation Provides integrated systems for process Resource and energy
manufacturing efficiency
Adient Manufacturer of lightweight automotive seating Sustainable
components transport
Stericycle Provides medical and pharmaceutical waste management Water and waste
management
Atlantica Yield - Owns and manages contracted renewable energy assets Clean energy
Bonds production
Terra Santa Agro Brazilian agricultural production and land Resource and energy
development company efficiency
Perfin Apollo* Builds and operates energy transmissions lines in Resource and energy
Brazil efficiency
Grivalia Properties Real estate investment company in Greece Resource and energy
efficiency
PORTFOLIO MANAGER'S REVIEW
Performance
For the half year under review, the Company's NAV per share increased by 2.6%
to 87.6p. Total net assets increased by £1.8 million to £70.1 million during
the period.
The contribution to the increase over the year is summarised below:
30 June
2017
Asset Category NAV % Contribution
%
Public Equities 34.0 4.1
Private Investments 25.2 (1.5)
Yield Investments 26.4 1.1
Liquidity 14.4 -
Gross Return 3.7
Expenses (1.1)
Net Assets 100.0 2.6
Public Equities
Most of the gain in NAV during the period came from the public equities
component of our portfolio, of which the largest contributors to performance
for the quarter were Airbus, contributing 1.4%, Safran, 0.9%, and Senvion,
0.6%. There were no detractors of note amongst our public equity positions.
Airbus shares rose 20% over the period. First quarter revenues at Airbus
Commercial rose 13% year-over-year driven by a 9% increase in aircraft
deliveries. Year-to-date, global airline passenger growth is running well above
trend at 8% and load factors (capacity utilisation) are at a record high.
Airlines require new aircraft to support this growth and both Airbus and Boeing
are planning to increase production rates to fulfil the demand. Airbus now has
an order book of over 6,700 aircraft which is 10 years of current production.
Airbus Commercial margins were weak due to fewer than expected deliveries of
A320neos. Pratt & Whitney ("P&W") are having to change the design of the GTF
(one of the engines that powers the aircraft) due to problems discovered since
the engine entered into service last year. Customers are unwilling to take the
aircraft before P&W has introduced a permanent solution to the problems, which
means that deliveries of A320neos will be heavily weighted to Q4. Airbus
currently has about 30 A320neos in Toulouse without engines that cannot be
delivered and this will negatively impact margins and cash flow in Q2 and Q3.
Nevertheless, the A320neo delivers a 15% fuel burn saving compared to current
single aisle aircraft operations, with targets to achieve a 20% reduction in
fuel burn and CO2 emissions by 2020. The A350 ramp-up is on track and Airbus is
optimistic that 2017 will be a much better year for the programme. The A350 is
still expected to break even in 2019, with price escalation being the main
driver of this profit growth as launch pricing rolls off in 2018/2019.
Airbus' key engines supplier, Safran reported very strong first quarter
revenues with civil aftermarket sales up 18% year-over-year. Safran is focused
on producing engines that are significantly more efficient and less polluting.
The company delivered 81 LEAP engines in the quarter, up from 44 in Q4 2016,
which indicates that the ramp-up is progressing well. LEAP production is on
track to reach 500 engines in 2017. The LEAP-1A (which powers the Airbus
A320neo) is now in operation with nine airlines, with 80,000 flight hours
accumulated to date. It is meeting all performance specifications. The strong
aftermarket growth and steady production ramp-up suggests profit growth should
be very good this year.
The activist campaign by The Children's Investment Fund against the proposed
acquisition of Zodiac by Safran led to better proposed terms for the deal.
Safran is financing the transaction mostly with low cost debt so the deal will
be extremely accretive to earnings per share. Zodiac has two divisions: a)
Aerosystems, which makes equipment such as power distribution and safety
systems with substantial overlap with Safran's Aircraft Equipment business.
Most of the targeted synergies of €200 million will come from this division;
and b) Aircraft Interiors, which makes cabin equipment (such as galleys and
toilets) and seats. Revenues are over €3 billion but due to poorly priced,
overly complex contracts and poor execution this division is currently making
losses. If the deal with Zodiac closes, the combined company will be
approximately 50% engines and 50% aircraft equipment and the business mix will
remain extremely attractive.
Over the half year we initiated three new positions. We remain cautious over
heady valuations in the public equity markets and when we initiate new
positions it is where we believe they are positioned to benefit from changed
circumstances.
Senvion, a German wind turbine manufacturer with a particularly strong position
in turbines suited to high wind speed locations, is an example of this. Senvion
is, we believe, well positioned for growth given the lifting of significant
constraints placed on the business by the previous owners, and the recent
appointment of a world-class management team from the German automotive sector.
Senvion has significant cost cutting opportunities and is trading at a healthy
discount to peers. Year-to-date, Senvion has shown significant progress. First
quarter financials showed 8% growth year-over-year and disciplined working
capital. Two orders from new markets (Ireland and the Czech Republic) came
through and significant interest savings were achieved in a recently completed
refinancing.
Adient, a position we initiated in Q2, is one of the world's largest automotive
seating suppliers, spun out of Johnson ControIs late last year. Adient's
innovative weight optimized components contribute to reduced fuel consumption
and thus allow for lower greenhouse gas emissions. We like Adient in part
because the business is part of a rational, oligopolistic market that possesses
significant barriers to entry. Moreover, Adient has a clear path to improving
operating performance (Adient's expenses as a percentage of revenue are
approximately 200bps higher than its nearest competitor).
In May we initiated a position in Terra Santa Agro, a Brazil-based company
primarily involved in the agricultural sector. Terra Santa focuses on the
cultivation of soybean, cotton and corn and owns approximately 89,000 hectares
in the state of Mato Grosso. Brazil has one of the strictest environmental
frameworks for land ownership, in the case of Terra Santa, 47,000 hectares are
environmental reserves. 70% of the soy produced by Terra Santa Agro has the
RTRS certification (Roundtable on Responsible Soy Association) with the
intention to achieve 100% in the next 5-8 years. 100% of the cotton produced by
Terra Santa has the Better Cotton Initiative certification. We believe the
company is currently trading with a discount to NAV of approximately 70%.
During the period we divested a number of positions. In January we sold our
position in Acuity Brands, a leading provider of LED lighting solutions. Acuity
posted double digit volume growth for 14 consecutive quarters ending in
November of last year. At 31 December, Acuity was trading at 16x forward EBITDA
estimates and was starting to show signs of slowing growth. At this point we
felt the risk of loss outweighed the expectation of gain and so we sold the
entire position. Since that point the share price has fallen by 20% on the back
of further disappointing operational news. In the same vein, we also divested
positions in Shimano, Wabtec Corporation, Roper Technologies, BorgWarner and
Johnson Matthey.
Private Investments
In January we completed our second direct private equity investment of £3.5
million in one of the largest independent smart electricity meter providers in
the UK, Calvin Capital, alongside the infrastructure arm of global investment
firm KKR. Calvin Capital's business model is to purchase smart meters on behalf
of energy suppliers, fund and pay for their installation and manage the billing
process throughout their expected operating life of over 20 years. Given
Calvin's market leading position, we believe the business is well placed to
capture the further rollout of smart meters in the UK over the next five years.
X-Elio, the solar developer and operator which represents our largest single
position in the portfolio, is performing to expectations. Operating performance
has been slightly above budget and we remain optimistic that X-Elio's
management team has the capability to take advantage of the burgeoning global
solar opportunity. Our X-Elio position contributed 0.8% in the quarter, largely
due to a revaluation of the portfolio.
As set out in the Company's annual report for the year ended 31 December 2016
(the "Annual Report"), in March 2017 we divested half of our limited partner
stake in Alpina Partners Fund LP* to limit the Company's potential exposure to
this fund, as once fully invested it would have represented nearly 15% of the
Company's NAV. The stake was sold at a discount to invested capital and was
valued in the Annual Report using the sale price. The level of discount applied
to the retained portion will be assessed on a quarterly basis, following review
of the valuation report received from the fund's general partner.
Meanwhile, our stake in the WCP Growth Fund LP* was the greatest detractor in
the period, with a 2.4% negative impact on NAV; one portfolio company was
written down to zero and another was sold at below holding value.
In Q2 we completed our third direct private equity investment in Perfin Apollo
12, with a total commitment of approximately £4.4 million. Perfin is an
investment vehicle focused on the development of Brazilian electricity
transmission assets, alongside one of the largest public transmission companies
in Brazil, Alupar. Brazil is the second largest producer of hydroelectric power
in the world, trailing only China, and the country depends on hydroelectricity
for more than 75% of its electric power supply. Perfin Apollo 12 participated
in the latest round of government auctions for transmission licences and will
hold 49% of the equity of each individual transmission asset with Alupar
holding the rest. The expected returns for the transmission assets in Brazilian
Reals are inflation plus 10-12%. Perfin Apollo 12 also holds a put option that
allows it to sell the assets back to Alupar, regardless of performance, at
inflation plus 5% nine years after deployment.
Yield Investments
The main positive contributor for the period was Terraform Global after the
announcement that its board had initiated an exploration of strategic
alternatives and the subsequent acquisition of the company by Brookfield Asset
Management at $5.10 per share, a 50% premium to the September 2016 price prior
to the board announcement. This is expected to complete in the second half of
2017. Brookfield is also assuming the sponsor position from (now bankrupt)
SunEdison for Terraform Power and will keep the company listed whilst providing
the resources to expand the operating portfolio. We hold Brookfield in high
esteem and believe their expertise in asset management will enable Terraform
Power to grow in a sustainable, profitable manner.
We added two positions in the quarter. The first, Red Electrica, is sizeable at
nearly 5% of NAV. Red Electrica is the monopoly owner of the Spanish
transmission grid. The company develops the necessary infrastructure to
facilitate the integration of renewable energy and implements demand-side
management initiatives aimed at achieving greater electricity system
efficiency. Red Electrica possesses an irreplaceable and essential asset base
and a highly visible business model. We started building a position in the
second, Grivalia, a Greek commercial real estate company, but stopped as
political turmoil in Greece increased. Grivalia is the market leader in energy
efficient buildings in Greece. So much so that the IFC, the financing arm of
the World Bank, provided a loan to the company to help boost energy efficiency
in the sector. This position represents less than 0.5% of NAV.
Lastly, Abengoa's debt restructuring plan was approved and creditors injected
over €1 billion into the company to enable it to continue operations and
complete some late stage projects. We subscribed to the Company's portion of
this capital injection, which was well collateralised by a stake in Atlantica
Yield, at just over €1 million. After the restructuring the bonds increased in
value and, after the half-year end, we decided to exit the position as we felt
the bonds no longer offered a material upside at their new level.
Personnel
In terms of our portfolio management team, as previously announced by the
Company, Alexander Vavalidis resigned as a partner of Menhaden Capital
Management LLP and consequently his membership of the Investment Committee
ceased with effect from 15 September 2017. Ben Goldsmith and Luciano Suana
will continue to carry out the day to day portfolio management activities of
the Company, identifying and presenting investment opportunities to the
Investment Committee, which is chaired by Graham Thomas. The Investment
Committee makes all investment and divestment decisions in respect of the
Company. We are also actively recruiting to strengthen the team.
We would like to express our appreciation to Alexander for his contribution
since the Company's launch in July 2015.
Outlook
We remain cautious in respect of markets generally, given high levels of
private and public debt globally, sluggish earnings growth across sectors and
generally exuberant valuations. We are therefore very focused on looking for
value, in the form of opportunities to acquire clearly identifiable assets and
cash flows at attractive prices. The energy and resource efficiency theme, and
particularly renewable energy, continues to mature and grow, and yet within it
remain pockets of value. We benefit from an exceptional origination capability
and as such we have a pipeline of potentially attractive ideas under review.
Menhaden Capital Management LLP
Portfolio Manager
20 September 2017
*The data regarding Alpina Partners Fund LP and WCP Growth Fund LP (together,
the "Partnerships") does not necessarily reflect the current or expected future
performance of the Partnerships and should not be used to compare returns of
the Partnerships against returns of other private equity funds.
REGULATORY DISCLOSURES
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company were explained in
detail within the Company's prospectus issued in July 2015 (the "Prospectus")
and the Annual Report for the year ended 31 December 2016 (the "Annual
Report"). The Directors are not aware of any new risks or uncertainties for the
Company and its investors for the period under review and moving forward,
beyond those stated within the Prospectus and the Annual Report.
Related Parties Transactions
During the first six months of the current financial year, no transactions with
related parties have taken place which have materially affected the financial
position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company's investment objective,
risk management policies, capital management policies and procedures, the
nature of the portfolio and the expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future and, more specifically, that there are no material uncertainties
pertaining to the Company that would prevent its ability to continue in such
operational existence for at least twelve months from the date of the approval
of this half year report. For these reasons, the Directors consider there is
reasonable evidence to continue to adopt the going concern basis in preparing
the accounts.
Directors' Responsibilities Statement
The Board of Directors confirms that, to the best of its knowledge:
i. the condensed set of financial statements contained within the half year
report has been prepared in accordance with FRS 104 'Interim Financial
Reporting' and gives a true and fair view of the assets, liabilities,
financial position and return of the Company; and
ii. the interim management report includes a fair review of the information
required by sections 4.2.7R and 4.2.8R of the UK Listing Authority
Disclosure and Transparency Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and accounting estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
Sir Ian Cheshire
Chairman
20 September 2017
CONDENSED INCOME STATEMENT
Six months to 30 June 2017 Six months to 30 June 2016
(unaudited) (unaudited)
(unaudited)
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains/(Losses) on investments - 2,074 2,074 - (2,421) (2,421)
at fair value through profit or
loss
Income from investments 5 570 - 570 309 - 309
AIFM and portfolio management 6 (103) (412) (515) (93) (369) (462)
fees
Other expenses (251) (35) (286) (192) - (192)
Net return / (loss) before 216 1,627 1,843 24 (2,790) (2,766)
taxation
Taxation on net return (34) - (34) (24) - (24)
Net return / (loss) after 182 1,627 1,809 - (2,790) (2,790)
taxation
Return / (loss) per share 7 0.2p 2.0p 2.2p 0.0p (3.5)p (3.5)p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital columns are prepared under
guidance issued by the Association of Investment Companies' Statement of
Recommended Practice.
All revenue and capital items in the above statement derive from continuing
operations.
There are no recognised gains or losses other than those shown above and
therefore no Statement of Total Comprehensive Income has been presented.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Share Special Capital Revenue Total £
capital premium reserve reserve reserve '000
£'000 account £'000 £'000 £'000
£'000
Six months to 30 June 2016
(unaudited)
Balance at 31 December 2015 800 77,371 - (11,129) 73 67,115
Conversion of share premium - (77,371) 77,371 - - -
account*
Net (loss) after taxation - - - (2,790) - (2,790)
Balance at 30 June 2016 800 - 77,371 (13,919) 73 64,325
Six months to 30 June 2017
(unaudited)
Balance at 31 December 2016 800 - 77,371 (9,831) (57) 68,283
Net return after taxation - - - 1,627 182 1,809
Balance at 30 June 2017 800 - 77,371 (8,204) 125 70,092
* The share premium account was cancelled in June 2016 and the 'Special
Reserve' created.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017 As at 31 December
(unaudited) 2016
£'000 (audited)
£'000
Note
Fixed assets
Investments at fair value through profit or 59,981 52,547
loss
Current assets
Debtors 166 65
Cash 10,087 15,872
10,253 15,937
Current liabilities
Creditors: amounts falling due within one (142) (201)
year
Net current assets 10,111 15,736
Net assets 70,092 68,283
Capital and reserves
Ordinary share capital 800 800
Special reserve 77,371 77,371
Capital reserve (8,204) (9,831)
Revenue reserve 125 (57)
Equity shareholders' funds 70,092 68,283
Net asset value per share 87.6p 85.4p
8
CONDENSDED CASH FLOW STATEMENT
Six months to Six months to
30 June 2017 30 June 2016
(unaudited) (unaudited)
£'000 £'000
Net cash (outflow) from operating activities (451) (386)
Investing activities
Purchases of investments (15,429) (8,605)
Sales of investments 10,095 14,902
Net cash (outflow) / inflow from investing (5,334) 6,297
activities
(Decrease) / Increase in cash and cash (5,785) 5,911
equivalents
Cash and cash equivalents at beginning of 15,872 3,371
period
Cash and cash equivalents at end of period 10,087 9,282
Notes to the Condensed Interim Financial Statements
1. Financial Statements
The condensed financial statements contained in this interim financial report
do not constitute statutory accounts as defined in s434 of the Companies Act
2006. The financial information for the six months to 30 June 2017 and 30 June
2016 has not been audited or reviewed by the Company's external auditors.
The information for the year ended 31 December 2016 has been extracted from the
latest published audited financial statements. Those statutory financial
statements have been filed with the Registrar of Companies and included the
report of the auditors, which was unqualified and did not contain a statement
under Sections 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
These condensed financial statements have been prepared on a going concern
basis in accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority, FRS 104 'Interim Financial Reporting', the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued in November 2014 and updated in
January 2017 and using the same accounting policies as set out in the Company's
Annual Report for the year ended 31 December 2016.
3. Going concern
After making enquiries, and having reviewed the investments, Statement of
Financial Position and projected income and expenditure for the next 12 months,
the Directors have a reasonable expectation that the Company has adequate
resources to continue in operation for the foreseeable future. The Directors
have therefore adopted the going concern basis in preparing these financial
statements.
4. Principal Risks and Uncertainties
The principal risks facing the Company together with an explanation of these
risks and how they are managed is contained in the Strategic Report and note 14
of the Company's Annual Report for the year ended 31 December 2016.
5. Income
Six months to Six months to
30 June 2017 30 June 2016
£'000 £'000
Income from investments
UK listed dividends 62 37
Overseas dividends 462 269
Fixed interest income 46 3
Total income 570 309
6. AIFM and portfolio management fees
Six months to 30 June 2017 Six months to 30 June 2016
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
AIFM fee 16 63 79 14 56 70
Portfolio management 87 349 436 79 313 392
fee
103 412 515 93 369 462
7. Return per share
The revenue and capital returns per share are based on 80,000,001 shares, being
the weighted average number of Ordinary shares in issue during the six months
to 30 June 2017 and 30 June 2016.
The calculation of the total, revenue and capital losses per share is carried
out in accordance with IAS 33, "Earnings per Share".
8. Net asset value per share
The net asset value per share is based on the number of shares in issue at 30
June 2017 and 31 December 2016 of 80,000,001.
9. Transaction Costs
Purchase transaction costs for the six months ended 30 June 2017 were £9,000
(six months ended 30 June 2016: £4,000). These comprise mainly commission and
stamp duty. Sales transaction costs for the six months ended 30 June 2017 were
£27,000 (six months ended 30 June 2016: £24,000). These comprise mainly
commission.
10. Fair value hierarchy
The methods of fair value measurement are classified into a hierarchy based on
reliability of the information used to determine the valuation.
Level 1 - Quoted prices in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data), either directly or
indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable)
The table below sets out the Company's fair value hierarchy investments as at
30 June 2017.
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
As at 30 June 2017
Investments 40,966 1,355 17,660 59,981
As at 31 December 2016
Investments 36,292 314 15,941 52,547
For further information please contact:
Frostrow Capital LLP
Company Secretary
0203 709 8734
www.frostrow.com
A copy of the Half Year Report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at http://
www.morningstar.co.uk/uk/NSM
The Half Year Report will also shortly be available on the Company's website at
www.menhaden.com where up to date information on the Company, including NAV,
share prices and fact sheets, can also be found.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into or forms part of this announcement.
ENDS
Menhaden Capital : Half-year Report
September 20, 2017 at 06:32 am
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