JZ CAPITAL
PARTNERS LIMITED (the "Company" or "JZCP")
(a closed-end investment company
incorporated with limited liability under the laws of Guernsey with registered number 48761)
INTERIM RESULTS
FOR THE SIX-MONTH PERIOD ENDED
31 AUGUST 2021
LEI: 549300TZCK08Q16HHU44
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 WHICH FORMS PART
OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
("MAR").
11 November
2021
JZ Capital Partners, the London
listed fund that has investments in US and European micro-cap
companies and US real estate, announces its interim results for the
six-month period ended 31 August 2021.
Investment Policy and Liquidity
- The Company continues to focus on implementing its New
Investment Policy whereby the Company will make no further
investments outside of its existing obligations or to the extent
which an investment may be made to support an existing portfolio
company.
- The Company’s objective continues to be realizing the maximum
value from its investment portfolio and, after repaying its debt
obligations (including the approx. $79.3
million of Zero Dividend Preference Shares (“ZDPs”) due
1 October 2022), returning capital to
shareholders.
- The US and European micro-cap portfolios have continued to
perform solidly, delivering a net increase of 10 and 3 cents per share, respectively, and both
portfolios are working towards several realizations.
- To meet this challenge and afford the Company more time to
maximise the value of its portfolio and bring these businesses to
market, the following transactions have taken place in regard to
the Company’s indebtedness:
- The Company
realized its investment in Salter Labs for net proceeds of approx.
$41 million, of which
approx.$33 million was applied in
reduction of the Senior Debt;
- In consequence, the amount outstanding in respect of the Senior
Debt (owned by clients and funds advised and sub-advised by
Cohanzick Management, LLC and CrossingBridge Advisors, LLC
(“Cohanzick”) was reduced from $68.7
million to $36.6 million
during the period. The remaining balance of the Senior Debt is
currently due on 12 June 2022;
- The Company has drawn down $31.5
million of subordinated notes maturing on 11 September 2022 under the Note Purchase
Agreement Facility (“NPA”) made available by affiliates of
Jay Jordan and David Zalaznick, as approved by shareholders;
and
- £38.8 million of Convertible Unsecured Loan Stock (“CULS”) was
redeemed on their maturity date of 30 July
2021.
- In addition, on 7 October 2021
(post-period end), the Company agreed with Cohanzick to borrow a
further $16 million under the Senior
Debt facility to provide additional liquidity to help the Company
deliver on its New Investment Policy.
Outlook
- The Board believes that the restructuring of JZCP’s Senior Debt
and liquidity facility agreed with the JZAI Founders will
significantly increase the Company’s ability to execute its New
Investment Policy.
- However, JZCP’s Senior Debt and the new liquidity facility
mature prior to the 1 October 2022
redemption date of the Company's zero dividend preference shares.
Unless these instruments are refinanced, extended, or, as
realisations permit, paid off, continued uncertainty will exist
with regards to their redemption. Several realisations are being
worked on, but there is no certainty as to their likely result or
timing.
- As a result of JZCP's continued potential inability to redeem
its debt on its stated maturities, the Directors’ report
accompanying these results disclose a material uncertainty as to
the Company’s ability to continue as a going concern.
David Macfarlane, Chairman of
JZCP, said: “We have worked hard during the period to execute
the New Investment Policy, intending to realise the maximum value
of the Company’s investments and, after repaying its debt
obligations, returning capital to shareholders.
The realisation of our investment in Salter Labs above NAV was a
good result for the Company, and we continue to see good underlying
performance from our US and European micro-cap portfolios, which
are both working towards several realisations. However, the
successful execution of the New Investment Policy remains dependent
upon the timing, quantum and ultimate success of future
realisations. As a result, additional time is needed to maximise
the value of these realisations, which contributes to continued
uncertainty regarding the Company’s ability to meet its debt
maturities.
However, the Board firmly believes that the combination of the
restructuring of the Company’s Senior Debt, the new facility from
the JZAI Founders, the repayment of the CULS, and the successful
realisation of Salter Labs, represent a step forward in enabling
the Company to maximise the value of its portfolio.
The Board continues to be optimistic that all the Company’s
obligations will be repaid in full and that ultimately a
significant amount of capital will be returned to
shareholders.”
Market Abuse Regulation:
The information contained within this
announcement is inside information as stipulated under MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain. The person responsible
for arranging the release of this announcement on behalf of the
Company is David Macfarlane,
Chairman.
For further information:
Ed Berry / Kit Dunford
+44
(0)7703 330 199 / +44 (0)7717 417 038
FTI Consulting
David Zalaznick
+1 212 485
9410
Jordan/Zalaznick Advisers, Inc.
Sam Walden
+44 (0) 1481 745385
Northern Trust International Fund Administration Services
(Guernsey) Limited
About JZ Capital Partners
JZCP has investments in US and European micro-cap companies, as
well as real estate properties in the US.
JZCP’s Investment Adviser is Jordan/Zalaznick Advisers, Inc.
(“JZAI”) which was founded by David
Zalaznick and Jay Jordan in
1986. JZAI has investment professionals in New York, Chicago, London and Madrid.
In August 2020, the Company's
shareholders approved changes to the Company’s investment policy.
Under the new policy, the Company will make no further investments
except in respect of which it has existing obligations and to
continue selectively to support the existing portfolio. The
intention is to realise the maximum value of the Company's
investments and, after repayment of all debt, to return capital to
shareholders.
JZCP is a Guernsey domiciled
closed-ended investment company authorised by the Guernsey
Financial Services Commission. JZCP's shares trade on the
Specialist Fund Segment of the London Stock Exchange.
For more information please visit www.jzcp.com.
Important Notice:
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will" or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements relate to matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance. The Company's actual investment performance, results
of operations, financial condition, liquidity, policies and the
development of its strategies may differ materially from the
impression created by the forward-looking statements contained in
this announcement. In addition, even if the investment performance,
result of operations, financial condition, liquidity and policies
of the Company and development of its strategies, are consistent
with the forward-looking statements contained in this announcement,
those results or developments may not be indicative of results or
developments in subsequent periods. These forward-looking
statements speak only as at the date of this announcement. Subject
to their legal and regulatory obligations, each of the Company, the
Investment Adviser and their respective affiliates expressly
disclaims any obligations to update, review or revise any
forward-looking statement contained herein whether to reflect any
change in expectations with regard thereto or any change in events,
conditions or circumstances on which any statement is based or as a
result of new information, future developments or otherwise.
Chairman's Statement
We present the results of the Company for the six-month period
ended 31 August 2021, which show that
the Company’s NAV fell from $4.25 at
year-end 28 February 2021 to
$4.08 at 31
August 2021 ($4.60 at
31 August 2020). After finance and
administration costs, this decrease is primarily attributable to a
loss on our Esperante property, following the joint venture
purchase price negotiated with affiliates of The Related Companies
(“Related”). This write-down at Esperante and write-downs at two US
micro-cap investments, Deflecto and New Vitality, were offset by
the realisation of Salter Labs above NAV and continuing strong
performance from the underlying portfolio investments in the JZHL
Secondary Fund.
Investment Policy and Liquidity
The Company continues to focus on implementing its New
Investment Policy, which is to say that the Company will make no
further investments outside its existing obligations or to the
extent that investments may be made to support certain selected
portfolio companies. The Company’s objective continues to be the
realisation of the maximum value from its investment portfolio and,
after repaying its debt obligations (including the £57.6 million
(approximately $79.3 million) of Zero
Dividend Preference Shares (“ZDPs”) due 1
October 2022), the return of capital to its
shareholders.
Following the arrangements described in my statement dated
18 May 2021 accompanying the year-end
results, the following transactions have taken place in regard to
the Company’s indebtedness:
- The Company realised its investment in Salter Labs for net
proceeds of approximately $41
million, of which approximately $33
million was applied in reduction of the Senior Debt;
- In consequence, the amount outstanding in respect of the Senior
Debt (owned by clients and funds advised and sub-advised by
Cohanzick Management LLC and CrossingBridge Advisors LLC
(“Cohanzick”)) was reduced from $68.7
million at 28 February 2021 to
$36.6 million at 31 August 2021. The remaining balance of the
Senior Debt is currently due on 12 June
2022;
- The Company has drawn down $31.5
million of subordinated notes payable on 11 September 2022 under the Note Purchase
Agreement (“NPA”) facility made available by affiliates of
Jay Jordan and David Zalaznick, as approved by shareholders;
and
- £38.8 million (appx. $54.1
million) of Convertible Unsecured Loan Stock (“CULS”) was
redeemed on their maturity date of 30 July
2021
In addition, as announced on 7 October
2021, the Company agreed with Cohanzick to borrow a further
amount of $16 million under the
Senior Debt facility. Whilst the Company's intention remains as
being to realise the maximum value of its investments and, after
repaying its debt obligations, to return capital to shareholders,
the Company acknowledges that this is likely to be contingent on
its ability to implement an alternative debt restructuring plan
over an appropriate timeframe and, as a result, considers it
prudent given the potential relative illiquidity of its investments
to maintain sufficient cash liquidity to support its existing
portfolio investments and obligations as they fall due, including
the Senior Debt which remains as maturing on 12 June 2022, the subordinated loan notes which
mature on 11 September 2022 and the
redemption of its ZDPs which fall due on 1
October 2022.
Accordingly, the increase in the amount of the Senior Debt is
intended to provide such liquidity to help enable the Company to
maximise the value of its investments and to meet its obligations
as they fall due. The Company remains committed to the delivery of
its investment policy and has confirmed that the increase in the
loan amount will be used in a manner consistent with that
policy.
However, at this time, the Senior Debt and the subordinated
notes payable under the NPA facility mature prior to the redemption
date of the ZDPs. Unless these three instruments are refinanced,
extended, or, as realisations permit, paid off, continued
uncertainty will exist with regards to their redemption. Several
potential realisations are being worked on, but there is no
certainty as to their likely result or timing. As a result of the
Company’s continued potential inability to redeem its debt
securities on their respective maturity dates, the Report of the
Directors accompanying these results discloses a material
uncertainty as to the Company’s ability to continue as a going
concern.
US and European Micro-cap
Portfolios
Our US and European micro-cap portfolios continue to perform
solidly and we are working towards several realizations in both
portfolios. During the period, the Company realised its investment
in Salter Labs well above NAV, netting the Company $41 million in proceeds. Also during the period,
JZCP received approximately $6.2
million in proceeds from selling down the “funded portion”
of its commitment to the Orangewood Fund as well as from investor
re-allocations from the final close of the Orangewood Fund. JZCP
has now sold down its entire commitment to the Orangewood Fund.
Real Estate Portfolio
As previously discussed, the Company’s two remaining real estate
assets that have equity value are 247 Bedford Avenue in
Brooklyn, New York (where Apple is
the principal tenant), and the Esperante office building in
West Palm Beach, Florida.
With regards to Esperante, we are pleased to have closed a joint
venture agreement with Related, led by Stephen Ross; we continue to believe that a
partnership with Related will create significant additional value
for JZCP at Esperante going forward. As part of the joint venture,
Related purchased 49.9% of the equity of Esperante, while the
current ownership (which includes JZCP) retained 50.1% of the
equity. In the context of this transaction, JZCP realised a loss
based on the joint venture purchase price negotiated with Related.
We will be commissioning a new appraisal for Esperante at year-end
(28 February 2022), which we expect
will reflect the continuously improving market environment in
West Palm Beach, Florida, and look
forward to reporting on our progress with Related in the coming
months.
Outlook
The outlook remains similar, albeit improved, to when we
reported at the time of the annual results. The realisation of our
investment in Salter Labs was a very successful result; however,
the execution of the New Investment Policy depends upon the timing
and quantum of further realisations. The Board believes that the
arrangements described above represent a step forward in enabling
the Company to maximise the value of and to realise its investment
portfolio. The Board continues to be optimistic that all the
Company’s obligations will be repaid in full and that ultimately a
significant amount of capital will be returned to shareholders.
David
Macfarlane
Chairman
10 November
2021
Investment Adviser's Report
Dear Fellow Shareholders,
We continue to make substantial progress towards our stated goal
of realizing investments to generate cash to pay debt, relieving
JZCP of unfunded commitments and supporting our existing portfolio
to maximize returns to shareholders.
Specifically, we agreed the extension of JZCP’s remaining senior
debt through June 2022. Furthermore,
we agreed to personally provide a $31.5
million liquidity facility at 6.0% interest to JZCP (i.e.,
at the same rate as the CULS), which was approved by shareholders.
Along with $41 million in net
proceeds from the successful Salter realization in June 2021, these two transactions enabled JZCP to
pay off its CULS in full and on their stated due date while at the
same time maintaining a cash cushion. Most recently, in
October 2021, we increased our credit
facility with clients and funds advised and sub-advised by
Cohanzick Management LLC and CrossingBridge Advisors LLC
(“Cohanzick”) by an additional $16
million. Taken together, these transactions will help afford
us further time to maximize the value of our portfolio as we
approach the extended maturity of the balance of our senior debt as
well as the stated maturities of our subordinated notes and
ZDPs.
Our US and European micro-cap portfolios continue to perform
solidly and we are working towards several realizations in both
portfolios.
With regards to our West Palm
Beach office tower, Esperante, we are pleased to have closed
a joint venture agreement with affiliates of The Related Companies
(“Related”); we continue to believe that a partnership with Related
will create significant additional value for JZCP at Esperante
going forward.
As of 31 August 2021, our US
micro-cap portfolio consisted of 15 businesses, which includes four
‘verticals’ and eight co-investments, across nine industries. Our
European micro-cap portfolio consisted of 17 companies across six
industries and seven countries.
Net
Asset Value (“NAV”) |
|
JZCP’s NAV per share
decreased by 17 cents. or 4%, during the six-month period. |
|
NAV per Ordinary
share as of 28 February 2021 |
$4.25 |
Change in NAV due
to capital gains and accrued income |
|
+ US Micro-cap |
0.10 |
+ European
Micro-cap |
0.03 |
- Real estate |
(0.06) |
Other decreases in
NAV |
|
- Change in fair value
of CULS |
(0.03) |
- Net foreign exchange
effect |
(0.03) |
- Finance costs |
(0.10) |
- Expenses and
taxation |
(0.08) |
NAV per Ordinary
share as of 31 August 2021 |
$4.08 |
The US micro-cap portfolio continued to perform well during the
six-month period, delivering a net increase of 10 cents per share. This was primarily due to net
accrued income of 4 cents and
write-ups at co-investment Salter Labs (3
cents) and the JZHL Secondary Fund portfolio (11 cents). Offsetting these increases were
decreases at co-investments George Industries, New Vitality and
Deflecto (1 cent, 1 cent and 6 cents,
respectively).
Our European portfolio also performed well during the period,
posting an increase of 3 cents, due
to net write-ups at European portfolio companies.
The real estate portfolio experienced a decrease of 6 cents, primarily due to a one-time write-down
occasioned by the difference between the Esperante property’s last
appraised value (August 31, 2020) and
the implied joint venture purchase price negotiated with Related.
We will be commissioning a new appraisal for Esperante at year- end
(February 28, 2022), which we expect
will reflect the continuously improving market environment in
West Palm Beach, Florida.
Returns
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
31.8.2020 |
|
31.8.2018 |
|
31.8.2016 |
Share
price (in GBP) |
|
|
|
£1.20 |
|
£0.78 |
|
£0.89 |
|
£4.44 |
|
£4.53 |
NAV per
share (in USD) |
|
|
|
$4.08 |
|
$4.25 |
|
$4.60 |
|
$9.82 |
|
$10.40 |
NAV to
market price discount |
|
|
|
59.5% |
|
74.3% |
|
74.1% |
|
41.2% |
|
43.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
month return |
|
1 year
return |
|
3 year
return |
|
5 year
return |
Dividends
paid (in USD) |
|
|
|
|
|
- |
|
- |
|
- |
|
$0.155 |
Total
Shareholders' return (GBP)1 |
|
|
|
|
|
53.8% |
|
34.8% |
|
(73.0%) |
|
(72.8%) |
Total NAV
return per share (USD)1 |
|
|
|
|
|
(4.0%) |
|
(11.3%) |
|
(58.5%) |
|
(60.2%) |
Total
Adjusted NAV return per share (USD)1 |
|
|
|
(4.0%) |
|
(11.3%) |
|
(59.0%) |
|
(60.9%) |
1 Total returns are cumulative and assume
that dividends were reinvested.
Portfolio Summary
Our portfolio is well-diversified by asset type and geography,
with 32 US and European micro-cap investments across eleven
industries. The European portfolio itself is well-diversified
geographically across Spain,
Italy, Portugal, Luxembourg, Scandinavia and the UK.
Below is a summary of JZCP’s assets and liabilities at
31 August 2021 as compared to
28 February 2021. An explanation of
the changes in the portfolio follows:
US microcap
portfolio |
31.08.2021
US$'000
254,356 |
|
28.02.2021
US$'000
299,339 |
European microcap
portfolio |
119,545 |
|
117,781 |
Real estate
portfolio |
18,788 |
|
23,376 |
Other investments |
23,147 |
|
23,147 |
Total
investments |
415,836 |
|
463,643 |
Treasury bills |
3,395 |
|
3,394 |
Cash |
41,187 |
|
59,784 |
Total cash
equivalents |
44,852 |
|
63,178 |
Other assets |
389 |
|
22 |
Total
assets |
460,807 |
|
526,843 |
Zero Dividend
Preference shares |
75,014 |
|
74,303 |
Senior debt
facility |
36,629 |
|
68,694 |
Loans Notes |
31,669 |
|
- |
Convertible Unsecured
Loan Stock |
- |
|
52,430 |
Other liabilities |
1,244 |
|
1,857 |
Total
liabilities |
144,556 |
|
197,284 |
Net Asset
Value |
316,251 |
|
329,559 |
US microcap portfolio
As you know from previous reports, our US portfolio is grouped
into industry ‘verticals’ and co-investments. As of December 4, 2020, certain of our verticals and
co-investments are now grouped under JZHL Secondary Fund, LP
(“JZHL” or the “Secondary Fund”). JZCP has a continuing interest in
the Secondary Fund through a special limited partnership interest,
which entitles JZCP to certain distributions from the Secondary
Fund.
Our ‘verticals’ strategy focuses on consolidating businesses
under industry executives who can add value via organic growth and
cross company synergies. Our co-investments strategy allows for
greater diversification of our portfolio by investing in larger
companies alongside well-known private equity groups.
The US micro-cap portfolio continued to perform well during the
six-month period, delivering a net increase of 10 cents per share. This was primarily due to net
accrued income of 4 cents and
write-ups at co-investment Salter Labs (3
cents) and the JZHL Secondary Fund portfolio (11 cents).
Offsetting these increases were decreases at co-investments
George Industries, New Vitality and Deflecto (1 cent, 1 cent and
6 cents, respectively).
European microcap portfolio
Our European portfolio also performed well during the period,
posting an increase of 3 cents, due
to net write-ups at European portfolio companies.
JZCP invests in the European micro-cap sector through its
approximately 18.8% ownership of Fund III. As of 31 August 2021, Fund III held 13 investments:
five in Spain, two in Scandinavia,
two in Italy, two in the UK and
one each in Portugal and
Luxembourg. JZCP held direct loans
to a further three companies in Spain: Docout, Xacom and Toro Finance.
JZAI has offices in London and
Madrid and an outstanding team
with over fifteen years of experience investing together in
European micro-cap deals.
Real estate portfolio
The Company’s two remaining real estate assets that have equity
value are 247 Bedford Avenue in Brooklyn,
New York (where Apple is the principal tenant), and the
Esperante office building in West Palm
Beach, Florida.
With regards to our real estate property, Esperante, we are
pleased to have closed a joint venture agreement with affiliates of
Related, led by Stephen Ross; we
continue to believe that a partnership with Related will create
significant additional value for JZCP at Esperante going
forward.
As part of the joint venture, Related purchased 49.9% of the
equity of Esperante, while the current ownership (which includes
JZCP) retained 50.1% of the equity. In the context of this
transaction, JZCP experienced a one- time write-down occasioned by
the difference between the property’s last appraised value
(August 31, 2020) and the implied
joint venture purchase price negotiated with Related. We will be
commissioning a new appraisal for Esperante at year-end
(February 28, 2022), which we expect
will reflect the continuously improving market environment in
West Palm Beach, Florida, and look
forward to reporting on our progress with Related in the coming
months.
Other investments
Our asset management business in the US, Spruceview Capital
Partners, has continued to make encouraging progress since our last
report to you. Spruceview addresses the growing demand from
corporate pensions, endowments, family offices and foundations for
fiduciary management services through an Outsourced Chief
Investment Officer (“OCIO”) model as well as customized
products/solutions per asset class.
Spruceview’s third private markets fund, focused on
co-investment opportunities in the US, ended the period with
commitments of over $70 million. The
firm also received additional commitments to its second private
markets fund, bringing total commitments to $85 million, as well as additional contributions
to the pension plans to which it provides advisory services.
During the period, Spruceview also maintained a pipeline of
potential client opportunities and continued to provide investment
management oversight to the pension funds of the Mexican and
Canadian subsidiaries of an international packaged foods company,
as well as portfolios for family office clients, and a growing
series of private market funds.
As previously reported, Richard
Sabo, former Chief Investment Officer of Global Pension and
Retirement Plans at JPMorgan and a member of that firm’s executive
committee, is leading a team of 17 investment, business and product
development, legal and operations professionals.
Realisations
Orangewood Fund
During the six-month period, JZCP received approximately
$6.2 million in proceeds from selling
down the “funded portion” of its commitment to the Orangewood Fund
as well as from investor re-allocations from the final close of the
Orangewood Fund. JZCP has now sold down its entire commitment to
the Orangewood Fund.
Salter Labs
In June 2021, JZCP received a
$41 million distribution from the
sale of Salter.
George
In April 2021, JZCP sold its
investment in George, receiving
approximately $9.5 million in sale
proceeds.
Outlook
We believe that JZCP’s outlook continues to improve
significantly. The US and European microcap portfolios have
performed well and our expectation remains that they will
contribute to future NAV growth of the Company.
We have restructured JZCP’s senior debt to allow for the
repayment of the CULS. This was accomplished by extending the
maturity of our senior loan by one year and by affiliates of the
Investment Adviser making available a $31.5
million credit facility at 6.0% interest (i.e., the same
rate as the CULS) to the Company. This facility matures behind the
extended senior debt and in front of the ZDPs.
We see significant value to be realized from our US and European
microcap portfolios and will continue to selectively invest in
these portfolios, in accordance with the new investment policy, to
maximize their values. We believe this is the most effective way
for us to be able to return significant capital to our ordinary
shareholders. We continue to pursue several realizations and look
forward to making announcements regarding these potentially
significant liquidity events in the near future.
Thank you again for your continued support through a difficult
period. We remain dedicated to maximizing value for our fellow
shareholders.
Yours faithfully,
Jordan/Zalaznick Advisers, Inc.
10 November 2021
Board of Directors
David
Macfarlane (Chairman)1
Mr Macfarlane was appointed to the
Board of JZCP in 2008 as Chairman and a non-executive Director.
Until 2002 he was a Senior Corporate Partner at Ashurst. He was a
non-executive director of the Platinum Investment Trust Plc from
2002 until January 2007.
James
Jordan
Mr Jordan is a private investor who
was appointed to the Board of JZCP in 2008. He is a director of the
First Eagle family of mutual funds, and of Alpha Andromeda
Investment Trust Company, S.A. Until 30 June
2005, he was the managing director of Arnhold and S.
Bleichroeder Advisers, LLC, a privately owned investment bank and
asset management firm; and until 25 July
2013, he was a non-executive director of Leucadia National
Corporation. He is an Overseer of the Gennadius Library of the
American School of Classical Studies in Athens, and a Director of Pro Natura de
Yucatan.
Sharon
Parr2
Mrs Parr was appointed to the Board of
JZCP in June 2018. In 2003 she
completed a private equity backed MBO of the trust and fund
administration division of Deloitte and Touche, called Walbrook,
selling it to Barclays Wealth in 2007. As a Managing Director of
Barclays, she ultimately became global head of their trust and fund
administration businesses, comprising over 450 staff in 10
countries. She stepped down from her executive roles in 2011 to
focus on other areas and interests but has maintained directorships
in several companies. She is a Fellow of the Institute of Chartered
Accountants in England and
Wales and a member of the Society
of Trust and Estate Practitioners, and is a resident of
Guernsey.
Ashley
Paxton
Mr Paxton was appointed to the board in August 2020. He has more than 25 years of funds
and financial services industry experience, with a demonstrable
track record in advising closed-ended London listed boards and their audit
committees on IPOs, capital market transactions, audit and other
corporate governance matters. He was previously C.I. Head of
Advisory for KPMG in the Channel
Islands, a position he held from 2008 through to his
retirement from the firm in 2019. He is a Fellow of the Institute
of Chartered Accountants in England and Wales and a resident of Guernsey. Amongst other appointments he is
Chairman of the Youth Commission for Guernsey & Alderney, a
locally based charity whose vision is that all children and young
people in the Guernsey Bailiwick are ambitious to reach their full
potential.
1Chairman of the nominations committee of
which all Directors are members.
2Chairman of the audit committee of which
all Directors are members.
Report of the Directors
Statement of Directors'
Responsibilities
The Directors are responsible for preparing the Interim Report
and Financial Statements comprising the Half-yearly Interim Report
(the "Interim Report") and the Unaudited Condensed Interim
Financial Statements (the "Interim Financial Statements") in
accordance with applicable law and regulations.
· the Interim Financial Statements
have been prepared in accordance with IAS 34, "Interim Financial
Reporting" as adopted in the European Union and give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company; and
· the Chairman’s Statement and
Investment Adviser’s Report include a fair review of the
information required by:
(i) DTR 4.2.7R of the Disclosure Guidance and
Transparency Rules of the United
Kingdom's Financial Conduct Authority, being an indication
of important events that have occurred during the first six months
of the financial year and their impact on the Interim Financial
Statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and
Transparency Rules of the United
Kingdom's Financial Conduct Authority, being related party
transactions that have taken place in the first six months of the
financial year and that have materially affected the financial
position or the performance of the entity during that period; and
any changes in the related party transactions described in the 2021
Annual Report and Financial Statements that could do so.
Principal Risks and Uncertainties
The Company's Board believes the principal risks and
uncertainties that relate to an investment in JZCP are as
follows:
Portfolio Liquidity
The Company invests predominantly in unquoted companies and real
estate. Therefore, this potential illiquidity means there can be no
assurance investments will be realised at their latest valuation or
on the timing of such realisations. The Board considers this
illiquidity when planning to meet its future obligations, whether
committed investments or the repayment of the Senior Debt Facility,
Loan Notes and Zero Dividend Preference ("ZDP") shares. On a
quarterly basis, the Board reviews a working capital model produced
by the Investment Adviser which highlights the Company's projected
liquidity and financial commitments.
COVID-19
Whilst reporting its annual results for the year ended
28 February 2021, the Board disclosed
in its Going Concern Assessment, that the encouraging performance
of the micro-cap portfolios in the face of unprecedented
circumstances gave the Board confidence in the valuation of the
portfolios and the potential for growth and future valuation
uplifts. The Board has confidence that the micro-cap portfolios are
continuing to perform robustly but are mindful that market
conditions mean that realisations may be delayed or become more
difficult.
NAV Factors
(i) Macroeconomic Risks
The Company's performance, and underlying NAV, is influenced by
economic factors that affect the demand for products or services
supplied by investee companies and the valuation of Real Estate
interests held. Economic factors will also influence the Company's
ability to realise investments and the level of realised returns.
As at 31 August 2021, 28.5%
(28 February 2021: 25.2%) of the
Company's investments are denominated in non- US dollar currencies,
primarily the Euro. Also, the Company's ZDP shares are denominated
in Sterling. Fluctuations to these exchange rates will affect the
NAV of the Company.
(ii) Underlying Investment Performance
The Company is reliant on the Investment Adviser to support the
Company's investment portfolio by executing suitable investment
decisions. The Investment Adviser provides the Board with an
explanation of all investment decisions and also provides quarterly
investment reports and valuation proposals of investee companies.
The Board reviews investment performance quarterly and investment
decisions are checked to ensure they are consistent with the agreed
investment strategy.
Share Price Trading at Discount to NAV
JZCP's share price is subject to market sentiment and will also
reflect any periods of illiquidity when it may be difficult for
shareholders to realise shares without having a negative impact on
share price. The Directors review the share price in relation to
Net Asset Value on a regular basis and determine whether to take
any action to manage the discount. The Directors, with the support
of the Investment Adviser, work with brokers to maintain interest
in the Company’s shares through market contact and research
reports.
Gearing and Financing Costs in the Real Estate Portfolio
The cost of servicing debt in the underlying real estate
structures may impact the net valuation of the real estate
portfolio and subsequently the Company's NAV. Gearing in the
underlying real estate structures will increase any losses arising
from a downturn in property valuations.
Operational and Personnel
Although the Company has no direct employees, the Company
considers what dependence there is on key individuals within the
Investment Adviser and service providers that are key to the
Company meeting its operational and control requirements.
The Board considers the principal risks and uncertainties above
are broadly consistent with those reported at the prior year end,
but wish to note the following:
- The Board recognises the Company will have an increased
exposure to liquidity risk as future debt obligations near
maturity.
- Gearing and the finance costs within the real estate portfolio
have become less of a future risk to the Company as the current
valuation of $18.8 million
(28 February 2021: $23.4 million) now reflects the majority of write
downs that could be attributed by the gearing structure and costs
incurred.
- The effect of COVID-19 on market conditions means that there
are challenges to completing corporate transactions and planned
realisations may be delayed. This uncertainty is considered when
the Board assesses the Company’s ability to generate
sufficient realisation proceeds to meet its financial
obligations.
Going Concern
A fundamental principle of the preparation of financial
statements in accordance with IFRS is the judgement that an entity
will continue in existence as a going concern for a period of at
least 12 months from signing of the Interim Financial Statements,
which contemplates continuity of operations and the realisation of
assets and settlement of liabilities occurring in the ordinary
course of business.
Due to the uncertainties that the Company will not have
sufficient liquidity to repay its Senior Debt Facility (due
12 June 2022), Loan Notes (due
11 September 2022) and redeem its ZDP
shares (due 1 October 2022) there are
material uncertainties which cast significant doubt on the ability
of the Company to continue as a going concern. However, the Interim
Financial Statements for the period ended 31
August 2021 have been prepared on a going concern basis
given the Board's assessment of future realisations and the
Company's expected ability to restructure and extend the maturity
of debt obligations in line with forecasted cash flows. The Board,
with recommendation from the Audit Committee, has a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future.
In reaching its conclusion, the Board has considered the risks
that could impact the Company’s liquidity over the period from
10 November 2021 to 10 November 2022 (the "going concern period")
being 12 months from the signing of the Interim Financial
Statements.
As part of their assessment, the Audit Committee highlighted the
following key consideration:
Whether if required, the Company can implement an alternative
debt restructuring plan that will enable the Company to repay its
debt obligations, including the redemption of its ZDP shares, over
an extended timeframe. The extent of the debt restructuring will be
dependent on the cash amounts generated through realisations of its
underlying investments throughout the going concern period.
Recent events impacting liquidity
- The repayment of $33.3 million of
the Senior Debt Facility following a material realisation and the
lenders also agreed to the extension of the maturity date of the
Senior Debt Facility to 12 June
2022.
- The issue of Loan Notes totalling $31.5
million repayable 11 September
2022.
- The redemption of the Company's CULS (£38.8 million) on
30 July 2021.
- Post period end, the Company agreed with its existing senior
lenders to borrow a further amount of $16.0
million under its Senior Debt Facility. Following the
increase, the total amount outstanding under the Senior Debt
Facility is approx.$52.6
million.
Update on material liabilities due for settlement
The below table shows the Company's net debt position at
31 October 2021 versus the prior year
end and interim reporting date.
|
31.10.2021 |
28.2.2021 |
31.8.2020 |
|
$'000 |
$'000 |
$'000 |
ZDP Shares - maturity
date 1 October 2022 - redemption amount of £57.6
million1 |
|
78,951 |
80,527 |
76,610 |
Loan Notes – maturity
date 11 September 20222 |
|
31,673 |
- |
- |
Senior Debt Facility -
extended maturity date 12 June 2022 |
|
52,563 |
68,694 |
150,355 |
CULS - maturity date
30 July 2021 - redemption amount of £38.8 million |
|
- |
54,332 |
52,033 |
Total debt |
|
163,187 |
203,553 |
278,998 |
Cash and cash
equivalents held |
|
62,553 |
63,178 |
39,051 |
Net debt position |
|
100,634 |
140,375 |
239,947 |
1ZDP and CULS maturity dollar amount translated using
the relevant period end exchange rate.
2Includes accrued interest
Realisations
The below table shows the Company's realisations over the twelve
month period ending 31 August
2021:
Asset |
Portfolio |
Proceeds ($ millions) |
Secondary Sale |
US |
87.7 |
Salter Labs (includes
$4.4 million from refinancing in September 2020) |
US |
45.5 |
Greenpoint |
Real estate |
13.6 |
George Industries |
US |
9.5 |
Orangewood Fund |
US |
6.2 |
Fund III
distributions |
European |
0.7 |
Total |
|
163.2 |
The Company continues to work on the realisation of various
investments within a timeframe that will enable the Company to
maximise the value of its investment portfolio. If it becomes
apparent during quarter 1 of 2022 that realisation amounts, over
the going concern period, will be insufficient to meet the
Company’s debt obligations, then the Company will look at
opportunities to restructure its debt, to enable returns to be
maximised and for debt obligations to be met over an extended
timeframe.
The Board continues to consider the levels of realisation
proceeds historically generated by the Company’s micro- cap
portfolios as well as the accuracy of previous forecasts whilst
concluding on the predicted accuracy of forecasts presented.
The Board acknowledges that the new maturity date of the Senior
Debt Facility and the Loan Notes still fall within the going
concern period and therefore the Company will still need to
generate sufficient realisation proceeds, within the period, to
repay its debt obligations or make alternative debt arrangements
with lenders.
Considering the Company’s projected cash position, ongoing
operating costs, and the anticipated further investment required to
support the Company’s portfolio, the Board anticipates further
proceeds of approx. $150 million are
required to enable the Company to settle its debts as they fall
due.
Going Concern Conclusion
After careful consideration and based on an assessment of future
realisations, the Board is satisfied, as of today’s date, that it
is appropriate to adopt the going concern basis in preparing the
financial statements and they have a reasonable expectation that
the Company will continue in existence as a going concern for the
period to 10 November 2022.
However, the Board has determined that there is a material
uncertainty surrounding the Company's ability to generate
sufficient liquidity to repay its Senior Debt Facility (due
12 June 2022), Loan Notes (due
11 September 2022) and repay its ZDP
shares (due 1 October 2022) which
casts significant doubt over the ability of the Company to continue
as a Going Concern, based on the following key consideration:
Whether if required, the Company can implement an alternative
debt restructuring plan that will enable the Company to repay its
debt obligations, including the redemption of its ZDP shares, over
an extended timeframe. The extent of the debt restructuring will be
dependent on the cash amounts generated through realisations of its
underlying investments throughout the going concern period.
The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Approved by the Board of Directors and agreed on behalf of the
Board on 10 November 2021.
David
Macfarlane
Chairman
Sharon
Parr
Director
Investment Portfolio
|
|
|
|
|
|
|
|
|
31 August 2021 |
|
Percentage |
|
|
Cost1 |
|
Value |
|
of
Portfolio |
|
|
US$'000 |
|
US$'000 |
|
% |
|
|
|
|
|
|
|
US Micro-cap
portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
US Micro-cap
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
JZHL Secondary Fund
L.P.2 |
|
|
|
|
|
|
JZHL Secondary Fund
L.P.
JZCP's investment in the JZHL Secondary Fund is further detailed
below. |
|
|
|
|
|
|
Total JZHL
Secondary Fund L.P. valuation |
|
40,965 |
|
80,839 |
|
19.3 |
|
|
|
|
|
|
|
US Micro-cap
(Vertical) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Services
Solutions3 |
|
|
|
|
|
|
INDUSTRIAL SERVICES
SOLUTIONS (“ISS”)
Provider of aftermarket maintenance, repair, and field services for
critical process equipment throughout the US |
|
|
|
|
|
|
Total Industrial
Services Solutions valuation |
|
48,250 |
|
95,889 |
|
22.9 |
|
|
|
|
|
|
|
US Micro-cap
(Co-investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFLECTO
Deflecto designs, manufactures and sells innovative plastic
products to multiple industry segments |
|
45,010 |
|
40,923 |
|
9.7 |
IGLOO3
Designer, manufacturer and marketer of coolers and outdoor
products |
|
6,040 |
|
329 |
|
0.1 |
NEW
VITALITY3
Direct-to-consumer provider of nutritional supplements and personal
care products |
|
3,354 |
|
10,958 |
|
2.6 |
ORIZON
Manufacturer of high precision machine parts and tools for
aerospace and defence industries |
|
3,899 |
|
7,000 |
|
1.7 |
VITALYST3
Provider of outsourced IT support and training services |
|
9,020 |
|
6,192 |
|
1.5 |
Total US
Micro-cap (Co-investments) |
|
67,323 |
|
65,402 |
|
15.6 |
|
|
|
|
|
|
|
US Micro-cap
(Other) |
|
|
|
|
|
|
|
|
|
|
|
|
|
AVANTE HEALTH
SOLUTIONS
Provider of new and professionally refurbished healthcare
equipment |
|
7,823 |
|
11,226 |
|
2.7 |
HEALTHCARE PRODUCTS
HOLDINGS
Designer and manufacturer of motorised vehicles |
|
17,636 |
|
- |
|
- |
NATIONWIDE STUDIOS
Processor of digital photos for pre-schoolers |
|
26,324 |
|
1,000 |
|
0.2 |
Total US
Micro-cap (Other) |
|
51,783 |
|
12,226 |
|
2.9 |
|
|
|
|
|
|
|
Total US Micro-cap
portfolio |
|
208,321 |
|
254,356 |
|
60.7 |
|
|
|
|
|
|
|
European Micro-cap
portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
EUROMICROCAP FUND
2010, L.P.
Invested in European Micro-cap entities |
|
169 |
|
3,279 |
0.8 |
JZI FUND
III, L.P.
JZCP's investment in JZI Fund III is further detailed below. |
51,006 |
|
83,382 |
19.9 |
Total European
Micro-cap (measured at Fair Value) |
|
51,175 |
|
86,661 |
20.7 |
|
|
|
|
|
|
Debt
Investments |
|
|
|
|
|
|
|
|
|
|
|
DOCOUT
Provider of digitalisation, document processing and storage
services |
|
2,777 |
|
4,113 |
1.0 |
TORO FINANCE
Provides short term receivables finance to the suppliers of major
Spanish companies |
|
21,619 |
|
25,938 |
6.2 |
XACOM
Supplier of telecom products and technologies |
|
2,055 |
|
2,833 |
0.6 |
Debt Investments
(classified at amortised cost) |
|
26,451 |
|
32,884 |
7.8 |
|
|
|
|
|
|
Total European
Micro-cap portfolio |
|
77,626 |
|
119,545 |
28.5 |
|
|
|
|
|
|
Real Estate
portfolio |
|
|
|
|
|
|
|
|
|
|
|
247 BEDFORD AVENUE
Prime retail asset in northern Brooklyn, NY |
|
17,717 |
|
6,973 |
1.7 |
ESPERANTE
An iconic building on the downtown, West Palm Beach skyline |
|
14,158 |
|
11,815 |
2.8 |
JZCP REALTY
Other Properties held - no equity value |
|
53,266 |
|
- |
- |
Total Real Estate
portfolio |
|
85,141 |
|
18,788 |
4.5 |
|
|
|
|
|
|
Other
investments |
|
|
|
|
|
|
|
|
|
|
|
BSM ENGENHARIA
Brazilian-based provider of supply chain logistics, infrastructure
services and equipment rental |
|
6,115 |
|
459 |
0.1 |
JZ INTERNATIONAL
Fund of European LBO investments |
|
- |
|
750 |
0.2 |
SPRUCEVIEW CAPITAL
Asset management company focusing primarily on managing endowments
and pension funds |
|
31,955 |
|
21,938 |
5.2 |
Total Other
investments |
|
38,070 |
|
23,147 |
5.5 |
|
|
|
|
|
|
Listed
investments |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bill -
Maturity 7 October 2021 |
|
3,393 |
|
3,395 |
0.8 |
Total Listed
investments |
|
3,393 |
|
3,395 |
0.8 |
|
|
|
|
|
|
Total –
portfolio |
|
412,551 |
|
419,231 |
100.0 |
|
|
|
|
|
|
|
|
|
¹Original book cost incurred by JZCP adjusted for subsequent
transactions. Other than JZHL Secondary Fund (see
foot note 2),the book cost represents cash outflows
and excludes PIK investments.
2 Notional cost of the Company's interest
in JZHL Secondary Fund being $40.965
million which is calculated in accordance with
IFRS, and represents the fair value of the Company's LP
interest on recognition.
3 Co-investment with Fund A, a Related
Party (Note 19).
Summary of JZCP's investments in JZHL
Secondary Fund
|
JZHL
Cost1
As at 31.8.2021
$'000s |
|
JZHL
Valuation
As at 31.8.2021
$'000s |
US Micro-cap
(Verticals) |
|
|
|
ACW FLEX PACK, LLC
Provider of a variety of custom flexible packaging solutions to
converters and end-users |
11,205 |
|
10,000 |
FLOW CONTROL, LLC
Manufacturer and distributor of high-performance, mission-critical
flow handling |
15,115 |
|
25,839 |
TESTING SERVICES
HOLDINGS
Provider of safety focused solutions for the industrial,
environmental and life science related markets, and testing,
certification and validation services for cleanroom, critical
environments and containment systems |
23,426 |
|
35,000 |
|
|
|
|
US
Micro-cap (Co-investments) |
|
|
|
FELIX STORCH
Supplier of specialty, professional, commercial, and medical
refrigerators and freezers,and cooking appliances |
24,500 |
|
81,000 |
PEACEABLE STREET
CAPITAL
Specialty finance platform focused on commercial real estate |
36,541 |
|
36,541 |
TIERPOINT
Provider of cloud computing and colocation data centre
services |
46,813 |
|
46,813 |
|
157,600 |
|
235,193 |
Less interest of Hamilton Lane and
other secondary investments |
|
|
(154,354) |
JZCP's interest in JZHL Secondary
Fund |
|
|
80,839 |
1The cost of the JZHL's investments represent the
agreed transfer value from JZCP to JZHL.
Summary of JZCP's investments in
JZI Fund III
|
Country |
JZCP Cost
(EURO)
As at 31.8.2021
€'000s |
|
JZCP Value
(EURO)
As at 31.8.2021
€'000s |
|
JZCP Value
(USD)
As at 31.8.2021
€'000s |
ALIANZAS EN ACEROS
Steel service center |
Spain |
4,388 |
|
4,538 |
|
5,357 |
BLUESITES
Build-up in cell tower land leases |
Portugal |
3,140 |
|
4,594 |
|
5,423 |
COLLINGWOOD
Niche UK motor insurer |
UK |
3,014 |
|
3,038 |
|
3,586 |
ERSI
Reinforced steel modules |
Lux |
8,503 |
|
2,456 |
|
2,899 |
FACTOR ENERGIA
Electricity supplier |
Spain |
3,653 |
|
10,162 |
|
11,996 |
FINCONTINUO
Niche consumer lender |
Italy |
5,075 |
|
8,287 |
|
9,782 |
GUANCHE
Build-up of petrol stations |
Spain |
3,625 |
|
3,627 |
|
4,282 |
KARIUM
Personal care consumer brands |
UK |
4,321 |
|
11,006 |
|
12,992 |
LUXIDA
Build-up in electricity distribution |
Spain |
3,315 |
|
4,781 |
|
5,644 |
MY LENDER
Niche consumer lender |
Finland |
4,861 |
|
4,500 |
|
5,312 |
S.A.C
Operational van leasing |
Denmark |
3,487 |
|
7,725 |
|
9,119 |
TREEE
e-waste recycling |
Italy |
3,159 |
|
9,544 |
|
11,266 |
UFASA
Niche consumer lender |
Spain |
5,108 |
|
6,574 |
|
7,760 |
Other net Liabilities |
|
|
|
|
|
(12,036) |
Total valuation |
|
|
|
|
|
83,382 |
1Represents JZCP's 18.75% of Fund III's investment
portfolio
Independent Review Report to JZ
Capital Partners Limited
Conclusion
We have been engaged by the Company to review the Unaudited
Condensed Interim Financial Statements (“Interim Financial
Statements”) for the six months ended 31
August 2021 which comprises the Statement of Comprehensive
Income (Unaudited), Statement of Financial Position (Unaudited),
Statement of Changes in Equity (Unaudited), Statement of Cash Flows
(Unaudited) and related Notes 1 to 22. We have read the other
information contained in the Interim Report and considered whether
it contains any apparent misstatements or material inconsistencies
with the information in the Interim Financial Statements.
Based on our review, nothing has come to our attention that
causes us to believe that the Interim Financial Statements for the
six months ended 31 August 2021 are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, “Interim Financial
Reporting”, as adopted by the European Union (“IAS 34”), and the
Disclosure Guidance and Transparency Rules of the United Kingdom’s
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in Note 2, the annual financial statements of the
Company are prepared in accordance with IFRS as adopted by the
European Union. The Interim Financial Statements have been prepared
in accordance with IAS 34.
Material Uncertainty Related to Going
Concern
We draw your attention to Note 3 in the Interim Financial
Statements, which states that there is material uncertainty
surrounding the Company's ability to generate sufficient liquidity
to repay its Senior Debt Facility (due 12
June 2022) and Loan Notes (due 11
September 2022) and to redeem its ZDP shares (due
1 October 2022) based on the
following key considerations: i.) Whether the Company can generate
sufficient cash through realisations of its underlying investments
to discharge its liabilities over the period to 10 November 2022 and ii.) Whether, in the event
that sufficient realisation proceeds referenced above are not
generated by the Company before the maturity dates of the debt
obligations, including the redemption of the ZDP shares, the
Company is able to implement an alternative debt restructuring plan
to repay its debt obligations, including the redemption of the ZDP
shares, over an extended timeframe.
Our conclusion on the Interim Financial Statements based on our
review is not modified in respect of this matter.
Responsibilities of the Directors
The Directors are responsible for preparing the Interim Report
and Interim Financial Statements in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor’s responsibilities for the
review of the financial information
In reviewing the Interim Report and Interim Financial
Statements, we are responsible for expressing to the Company a
conclusion on the Interim Financial Statements. Our conclusion is
based on procedures that are less extensive than audit procedures,
as described in the Basis for Conclusion paragraph of this
report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for
this report, or for the conclusions we have formed.
Ernst & Young LLP
Guernsey, Channel
Islands
10 November
2021
Notes
- The Interim Report and Financial Statements are published on
websites maintained by the Investment Adviser.
- The maintenance and integrity of these websites are the
responsibility of the Investment Adviser; the work carried out by
the Auditors does not involve consideration of these matters and,
accordingly, the Auditor accepts no responsibility for any changes
that may have occurred to the Condensed Interim Financial
Statements since they were initially presented on the website.
- Legislation in Guernsey
governing the preparation and dissemination of Condensed Interim
Financial Statements may differ from legislation in other
jurisdictions.
Statement of Comprehensive Income
(Unaudited)
For the Period from 1 March 2021
to 31 August 2021
|
|
|
Six
Month |
|
|
Six
Month |
|
|
|
Period Ended |
|
|
Period Ended |
|
|
|
31
August 2021 |
|
|
31
August 2020 |
|
Note |
|
US$'000 |
|
|
US$'000 |
|
|
|
|
|
|
|
Income and
investment and other gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income |
8 |
|
9,119 |
|
|
12,697 |
Bank and deposit
interest |
|
|
75 |
|
|
124 |
Realisations from
investments held in escrow accounts |
21 |
|
- |
|
|
801 |
|
|
|
9,194 |
|
|
13,622 |
|
|
|
|
|
|
|
Expenses and
losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on
investments at fair value through profit or loss |
6 |
|
(4,809) |
|
|
(114,089) |
Expected credit
losses |
7 |
|
(1,405) |
|
|
(560) |
Loss on financial
liabilities at fair value through profit or loss |
15 |
|
(1,869) |
|
|
(2,836) |
Net foreign currency
exchange losses |
|
|
(202) |
|
|
(2,035) |
Investment Adviser's
base fee |
10 |
|
(3,888) |
|
|
(5,359) |
Administrative
expenses |
|
|
(2,154) |
|
|
(2,151) |
Directors'
remuneration |
|
|
(145) |
|
|
(150) |
|
|
|
(14,472) |
|
|
(127,180) |
Operating
loss |
|
|
(5,278) |
|
|
(113,558) |
Finance
costs |
9 |
|
(6,981) |
|
|
(9,190) |
Loss for the
period |
|
|
(12,259) |
|
|
(122,748) |
|
|
|
|
|
|
|
Other
comprehensive (loss)/income that will not be reclassified to the
Income Statement |
|
|
|
|
|
|
|
|
(Loss)/gain on
financial liabilities due to change in credit risk |
15 |
|
(1,074) |
|
|
3,290 |
Total comprehensive
loss for the period |
|
|
(13,333) |
|
|
(119,458) |
|
|
|
|
|
|
|
Weighted average
number of Ordinary shares in issue during the period |
20 |
77,474,670 |
|
77,474,175 |
|
|
|
|
|
|
|
Basic loss per
Ordinary share |
20 |
|
(15.82)c |
|
|
(158.44)c |
|
|
|
|
|
|
|
Diluted loss per
Ordinary share |
20 |
|
(15.82)c |
|
|
(158.44)c |
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Financial Position
(Unaudited)
As at 31 August 2021
|
|
|
31
August |
|
28
February |
|
|
|
2021 |
|
2021 |
|
Note |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Investments at fair
value through profit or loss |
11 |
|
386,347 |
|
433,224 |
Loans at amortised
cost |
11 |
|
32,884 |
|
33,813 |
Other receivables |
|
|
389 |
|
22 |
Cash at bank |
|
|
41,187 |
|
59,784 |
Total
assets |
|
|
460,807 |
|
526,843 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Zero Dividend
Preference shares |
12 |
|
75,014 |
|
74,303 |
Loan notes |
13 |
|
31,669 |
|
- |
Senior debt
facility |
14 |
|
36,629 |
|
68,694 |
Other payables |
16 |
|
1,244 |
|
1,284 |
Investment Adviser's
base fee |
10 |
|
- |
|
573 |
Convertible Unsecured
Loan Stock |
15 |
|
- |
|
52,430 |
Total
liabilities |
|
|
144,556 |
|
197,284 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
|
|
216,650 |
|
216,625 |
Other reserve |
|
|
353,528 |
|
354,602 |
Retained deficit |
|
|
(253,927) |
|
(241,668) |
Total
equity |
|
|
316,251 |
|
329,559 |
|
|
|
|
|
|
Total liabilities
and equity |
|
|
460,807 |
|
526,843 |
|
|
|
|
|
|
Number of Ordinary
shares in issue at period/year end |
17 |
|
77,477,214 |
|
77,474,175 |
|
|
|
|
|
|
Net asset value per
Ordinary share |
|
|
$4.08 |
|
$4.25 |
These Interim Financial Statements were approved by the Board of
Directors and authorised for issuance on 10
November 2021. They were signed on its behalf by:
David
Macfarlane
Chairman
Sharon
Parr
Director
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Changes in Equity
(Unaudited)
For the Period from 1 March 2021
to 31 August 2021
|
|
|
Share |
Other |
Retained |
|
|
|
|
Capital |
Reserve |
Deficit |
Total |
|
|
Note |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
Balance as at 1
March 2021 |
|
|
216,625 |
354,602 |
(241,668) |
329,559 |
|
|
|
|
|
|
|
Loss for the
period |
|
|
- |
- |
(12,259) |
(12,259) |
Loss on
financial liabilities due to change in credit risk |
15 |
- |
(1,074) |
- |
(1,074) |
|
Issue of Ordinary
shares |
|
17 |
25 |
- |
- |
25 |
Balance at 31
August 2021 |
|
|
216,650 |
353,528 |
(253,927) |
316,251 |
|
|
|
|
|
|
|
Comparative for the Period from 1 March 2020 to 31 August
2020 |
|
|
|
|
Share |
Other |
Retained |
|
|
|
|
Capital |
Reserve |
Deficit |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
Balance at 1 March
2020 |
|
|
216,625 |
353,528 |
(94,419) |
475,734 |
|
|
|
|
|
|
|
Loss for the
period |
|
|
- |
- |
(122,748) |
(122,748) |
Gain on
financial liabilities due to change in credit risk |
- |
3,290 |
- |
3,290 |
|
Balance at 31
August 2020 |
|
|
216,625 |
356,818 |
(217,167) |
356,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Cash Flows
(Unaudited)
For the Period from 1 March 2021
to 31 August 2021
|
|
Six
Month |
|
Six
Month |
|
|
Period Ended |
|
Period Ended |
|
|
31
August 2021 |
|
31
August 2020 |
|
Note |
US$'000 |
|
US$'000 |
|
|
|
|
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
|
Cash
inflows |
|
|
|
|
Realisation of
investments1 |
11 |
56,929 |
|
3,016 |
Maturity of treasury
bills |
11 |
- |
|
3,395 |
Escrow receipts
received |
21 |
- |
|
801 |
Interest received from
unlisted investments |
|
- |
|
249 |
Income distributions
received from investments |
|
234 |
|
- |
Bank interest
received |
|
75 |
|
124 |
|
|
|
|
|
Cash
outflows |
|
|
|
|
Direct investments and
capital calls1 |
11 |
(7,381) |
|
(5,714) |
Purchase of treasury
bills |
11 |
- |
|
(3,394) |
Investment Adviser's
base fee paid |
10 |
(4,652) |
|
(2,000) |
Investment Adviser's
incentive fee paid |
10 |
- |
|
(2,307) |
Other operating
expenses paid |
|
(2,515) |
|
(2,204) |
Net cash
inflow/(outflow) before financing activities |
|
42,690 |
|
(8,034) |
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
|
Repayment of Senior
Debt Facility |
|
(33,264) |
|
- |
Redemption of
Convertible Unsecured Loan Stock |
|
(54,005) |
|
- |
Issue of Loan
Notes |
|
31,500 |
|
- |
Finance costs
paid: |
|
|
|
|
• Convertible
Unsecured Loan Stock |
|
(2,679) |
|
(1,445) |
• Senior Debt
Facility |
|
(2,385) |
|
(7,863) |
Net cash outflow from
financing activities |
|
(60,833) |
|
(9,308) |
|
|
|
|
|
Decrease in cash at
bank |
|
(18,143) |
|
(17,342) |
|
|
|
|
|
Reconciliation of
net cash flow to movements in cash at bank |
|
|
|
|
|
|
US$'000 |
|
US$'000 |
Cash and cash
equivalents at 1 March |
|
59,784 |
|
52,912 |
Decrease in cash at
bank |
|
(18,143) |
|
(17,342) |
Foreign exchange
movements on cash at bank |
|
(454) |
|
86 |
Cash and cash
equivalents at period end |
|
41,187 |
|
35,656 |
¹Proceeds from realisations and cash outflows from investments
and capital calls exclude $0.6
million being distributions from JZI Fund III netted off
capital calls.
The accompanying notes form an integral part of the Interim
Financial Statements.
Notes to the Interim Financial
Statements (Unaudited)
1. General Information
JZ Capital Partners Limited ("JZCP" or the "Company") is a
Guernsey domiciled closed-ended
investment company which was incorporated in Guernsey on 14 April
2008 under the Companies (Guernsey) Law, 1994. The Company is now
subject to the Companies (Guernsey) Law, 2008. The Company is classified
as an authorised fund under the Protection of Investors (Bailiwick
of Guernsey) Law 1987. The
Company's Capital consists of Ordinary shares and Zero Dividend
Preference ("ZDP") shares. The Company had issued Convertible
Unsecured Loan Stock ("CULS"), which were redeemed on 30 July 2021. The Company's shares trade on the
London Stock Exchange's Specialist Fund Segment ("SFS").
The Company's new investment policy, adopted in August 2020, is for the Company to make no
further investments outside of its existing obligations or to the
extent that investment may be made to support selected existing
portfolio investments. The intention is to realise the maximum
value of the Company’s investments and, after repayment of all
debt, to return capital to shareholders. The Company’s previous
Investment Policy was to target predominantly private investments
and back management teams to deliver on attractive investment
propositions. In executing this strategy, the Company took a long
term view. The Company looked to invest directly in its target
investments and was able to invest globally but with a particular
focus on opportunities in the United
States and Europe.
The Company is currently mainly focused on supporting its
investments in the following areas:
(a) small or micro-cap buyouts in the form of debt
and equity and preferred stock in both the US and Europe; and
(b) real estate interests.
The Company has no direct employees. For its services, the
Investment Adviser receives a management fee as described in Note
10. The Company has no ownership interest in the Investment
Adviser. During the period under review, the Company was
administered by Northern Trust International Fund Administration
Services (Guernsey) Limited.
The Unaudited Condensed Interim Financial Statements (the
"Interim Financial Statements") are presented in US$'000 except
where otherwise indicated.
2. Significant Accounting
Policies
The accounting policies adopted in the preparation of these
Interim Financial Statements have been consistently applied during
the period, unless otherwise stated.
Statement of
Compliance
The Interim Financial Statements of the Company for the period
1 March 2021 to 31 August 2021 have been prepared in accordance
with IAS 34, "Interim Financial Reporting" as adopted in the
European Union, together with applicable legal and regulatory
requirements of the Companies (Guernsey) Law, 2008 and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
The Interim Financial Statements do not include all the information
and disclosure required in the Annual Audited Financial Statements
and should be read in conjunction with the Annual Report and
Financial Statements for the year ended 28
February 2021.
Basis of
Preparation
The Interim Financial Statements have been prepared under the
historical cost basis, except for financial assets and financial
liabilities held at fair value through profit or loss ("FVTPL").
The principal accounting policies adopted in the preparation of
these Interim Financial Statements are consistent with the
accounting policies stated in Note 2 of the Annual Financial
Statements for the year ended 28 February
2021. The preparation of these Interim Financial Statements
are in conformity with IAS 34, "Interim Financial Reporting" as
adopted in the European Union, and requires the Company to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the Interim Financial
Statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could materially differ from
those estimates.
New standards,
interpretations and amendments adopted by the
Company
The accounting policies adopted in the preparation of the
Interim Financial Statements are consistent with those followed in
the preparation of the Company’s Annual Financial Statements for
the year ended 28 February 2021,
which were prepared in accordance with IFRS as adopted by the
European Union. There has been no early adoption, by the Company,
of any other standard, interpretation or amendment that has been
issued but is not yet effective.
3. Estimates and
Judgements
The estimates and judgements made by the Board of Directors are
consistent with those made in the Audited Financial Statements for
the year ended 28 February 2021.
Directors’ Assessment of Going
Concern
A fundamental principle of the preparation of financial
statements in accordance with IFRS is the judgement that an entity
will continue in existence as a going concern for a period of at
least 12 months from signing of the Interim Financial Statements,
which contemplates continuity of operations and the realisation of
assets and settlement of liabilities occurring in the ordinary
course of business.
Due to the uncertainties that the Company will not have
sufficient liquidity to repay its Senior Debt Facility (due
12 June 2022), Loan Notes (due
11 September 2022) and redeem its ZDP
shares (due 1 October 2022) there are
material uncertainties which cast significant doubt on the ability
of the Company to continue as a going concern. However, the Interim
Financial Statements for the period ended 31
August 2021 have been prepared on a going concern basis
given the Board's assessment of future realisations and the
Company's expected ability to restructure and extend the maturity
of debt obligations in line with forecasted cash flows. The Board,
with recommendation from the Audit Committee, has a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future.
In reaching its conclusion, the Board has considered the risks
that could impact the Company’s liquidity over the period from
10 November 2021 to 10 November 2022 (the "going concern period")
being 12 months from the signing of the Interim Financial
Statements.
As part of their assessment, the Audit Committee highlighted the
following key consideration:
Whether if required, the Company can implement an alternative
debt restructuring plan that will enable the Company to repay its
debt obligations, including the redemption of its ZDP shares, over
an extended timeframe. The extent of the debt restructuring will be
dependent on the cash amounts generated through realisations of its
underlying investments throughout the going concern period.
Recent events impacting liquidity
· The repayment of $33.3 million of the Senior Debt Facility
following a material realisation and the lenders also agreed to the
extension of the maturity date of the Senior Debt Facility to
12 June 2022.
· The issue of Loan Notes
totalling $31.5 million repayable
11 September 2022.
· The redemption of the Company's
CULS (£38.8 million) on 30 July
2021.
· Post period end, the Company
agreed with its existing senior lenders to borrow a further amount
of $16.0 million under its Senior
Debt Facility. Following the increase, the total amount outstanding
under the Senior Debt Facility is approx. $52.6 million.
Update on material liabilities due for settlement
The below table shows the Company's net debt position at
31 October 2021 versus the prior year
end and interim reporting date:
|
31.10.2021 |
|
28.2.2021 |
|
31.8.2020 |
|
$'000 |
|
$'000 |
|
$'000 |
ZDP Shares - maturity
date 1 October 2022 - dollar equivalent of £57.6 million¹ |
78,951 |
|
80,527 |
|
76,610 |
Loan Notes - maturity
date 11 September 2022² |
31,673 |
|
- |
|
- |
Senior Debt Facility -
extended maturity date 12 June 2022² |
52,563 |
|
68,694 |
|
150,355 |
CULS - maturity date
30 July 2021 - redemption amount of £38.8 million¹ |
- |
|
54,332 |
|
52,033 |
Total debt |
163,187 |
|
203,553 |
|
278,998 |
Cash and cash
equivalents held |
62,553 |
|
63,178 |
|
39,051 |
Net debt position |
100,634 |
|
140,375 |
|
239,947 |
¹ZDP and CULS maturity dollar amount translated using the
relevant period end exchange rate.
²Includes accrued interest
Realisations
The below table shows the Company’s realisations over the twelve
month period ending 31 August
2021:
Asset |
Portfolio |
Proceeds |
|
|
($
millions) |
Secondary Sale |
US |
87.7 |
Salter Labs (includes $4.4 million
from refinancing in September 2020) |
US |
45.5 |
Greenpoint |
Real estate |
13.6 |
George Industries |
US |
9.5 |
Orangewood Fund |
US |
6.2 |
Fund III distributions |
European |
0.7 |
Total |
|
163.2 |
The Company continues to work on the realisation of various
investments within a timeframe that will enable the Company to
maximise the value of its investment portfolio. If it becomes
apparent during quarter 1 of 2022 that realisation amounts, over
the going concern period, will be insufficient to meet the
Company’s debt obligations, then the Company will look at
opportunities to restructure its debt, to enable returns to be
maximised and for debt obligations to be met over an extended
timeframe.
The Board continues to consider the levels of realisation
proceeds historically generated by the Company’s micro-cap
portfolios as well as the accuracy of previous forecasts whilst
concluding on the predicted accuracy of forecasts presented.
The Board acknowledges that the new maturity date of the Senior
Debt Facility and the Loan Notes still fall within the going
concern period and therefore the Company will still need to
generate sufficient realisation proceeds, within the period, to
repay its debt obligations or make alternative debt arrangements
with lenders post relevant maturity dates.
Considering the Company’s projected cash position, ongoing
operating costs, and the anticipated further investment required to
support the Company’s portfolio, the Board anticipates further
proceeds of approx. $150 million are
required to enable the Company to settle its debts as they fall
due.
Going Concern Conclusion
After careful consideration and based on an assessment of future
realisations, the Board is satisfied, as of today’s date, that it
is appropriate to adopt the going concern basis in preparing the
financial statements and they have a reasonable expectation that
the Company will continue in existence as a going concern for the
period to 10 November 2022.
However, the Board has determined that there is a material
uncertainty surrounding the Company's ability to generate
sufficient liquidity to repay its Senior Debt Facility (due
12 June 2022), Loan Notes (due
11 September 2022) and repay its ZDP
shares (due 1 October 2022) which
casts significant doubt over the ability of the Company to continue
as a Going Concern, based on the following key consideration:
Whether if required, the Company can implement an alternative
debt restructuring plan that will enable the Company to repay its
debt obligations, including the redemption of its ZDP shares, over
an extended timeframe. The extent of the debt restructuring will be
dependent on the cash amounts generated through realisations of its
underlying investments throughout the going concern period.
The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
4. Segment Information
The Investment Manager is responsible for allocating resources
available to the Company in accordance with the overall business
strategies as set out in the Investment Guidelines of the Company.
The Company is organised into the following segments:
· Portfolio of US Micro-cap
investments
· Portfolio of European Micro-cap
investments
· Portfolio of Real Estate
investments
· Portfolio of Other Investments -
(not falling into above categories)
Investments in treasury bills are not considered as part of the
investment strategy and are therefore excluded from this segmental
analysis.
The investment objective of each segment is to achieve
consistent medium-term returns from the investments in each segment
while safeguarding capital by investing in a diversified
portfolio.
Segmental operating profit/(loss)
For the period from 1 March 2021
to 31 August 2021
|
|
|
|
|
|
|
US
Micro-cap |
|
European
Micro-cap |
|
Real
Estate |
|
Other
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
revenue |
|
|
|
|
|
7,479 |
|
1,405 |
|
- |
|
- |
|
8,884 |
Dividend
revenue |
|
|
|
|
|
234 |
|
- |
|
- |
|
- |
|
234 |
Total
segmental revenue |
|
|
|
7,713 |
|
1,405 |
|
- |
|
- |
|
9,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/gain on investments at FVTPL |
(570) |
|
349 |
|
(4,588) |
|
- |
|
(4,809) |
Expected
credit losses |
|
- |
|
(1,405) |
|
- |
|
- |
|
(1,405) |
Investment
Adviser's base fee |
|
|
|
(2,156) |
|
(899) |
|
(167) |
|
(174) |
|
(3,396) |
Total
segmental operating profit/(loss) |
|
|
|
4,987 |
|
(550) |
|
(4,755) |
|
(174) |
|
(492) |
For the period from 1 March 2020
to 31 August 2020
|
|
|
|
|
|
|
US
Micro-Cap |
|
European
Micro-Cap |
|
Real
Estate |
|
Other
Investments |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
Interest
revenue |
|
|
|
|
|
11,443 |
|
1,245 |
|
- |
|
- |
|
12,688 |
Total
segmental revenue |
|
|
|
11,443 |
|
1,245 |
|
- |
|
- |
|
12,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/gain on investments at FVTPL |
(8,074) |
|
7,034 |
|
(113,049) |
|
- |
|
(114,089) |
Expected
credit losses |
|
- |
|
(560) |
|
- |
|
- |
|
(560) |
Realisations from investments held in Escrow |
801 |
|
- |
|
- |
|
- |
|
801 |
Investment
Adviser's base fee |
|
|
|
(3,087) |
|
(785) |
|
(968) |
|
(175) |
|
(5,015) |
Total
segmental operating profit/(loss) |
|
1,083 |
|
6,934 |
|
(114,017) |
|
(175) |
|
(106,175) |
Certain income and expenditure is not considered part of the
performance of an individual segment. This includes net foreign
exchange gains, interest on cash, finance costs, management fees,
custodian and administration fees, directors’ fees and other
general expenses.
The following table provides a reconciliation between total
segmental operating loss and operating loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
|
31.8.2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental operating loss |
|
|
|
|
|
(492) |
|
(106,175) |
Loss on
financial liabilities at fair value through profit or loss |
|
|
|
(1,869) |
|
(2,836) |
Net
foreign exchange loss |
|
|
|
|
|
(202) |
|
(2,035) |
Bank and
deposit interest |
|
|
|
75 |
|
124 |
Expenses
not attributable to segments |
|
|
|
(2,299) |
|
(2,301) |
Fees
payable to investment adviser based on non-segmental assets |
|
(492) |
|
(344) |
Interest
on US treasury bills |
|
|
|
|
|
1 |
|
9 |
Operating loss |
|
|
|
|
|
|
|
|
|
(5,278) |
|
(113,558) |
The following table provides a reconciliation between total
segmental revenue and Company revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
|
31.8.2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Total
segmental revenue |
|
|
|
|
|
|
|
|
|
9,118 |
|
12,688 |
Non-segmental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Bank and
deposit interest |
|
|
|
|
|
|
|
|
|
75 |
|
124 |
Interest
on US treasury bills |
|
|
|
|
|
1 |
|
9 |
Total
revenue |
|
|
|
|
|
|
|
|
|
|
|
|
9,194 |
|
12,821 |
Segmental Net Assets
At 31 August 2021
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-cap |
|
Micro-cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
Segmental assets |
|
|
|
|
|
|
|
|
|
|
|
Investments at FVTPL |
|
254,356 |
|
86,661 |
|
18,788 |
|
23,147 |
|
382,952 |
|
Loans at
amortised cost |
|
- |
|
32,884 |
|
- |
|
- |
|
32,884 |
|
Prepaid
Investment Advisor fees |
106 |
|
19 |
|
8 |
|
9 |
|
142 |
|
Total
segmental assets |
|
254,462 |
|
119,564 |
|
18,796 |
|
23,156 |
|
415,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables
and accrued expenses |
(398) |
|
- |
|
- |
|
- |
|
(398) |
|
Total
segmental liabilities |
|
(398) |
|
- |
|
- |
|
- |
|
(398) |
Total
segmental net assets |
|
254,064 |
|
119,564 |
|
18,796 |
|
23,156 |
|
415,580 |
At 28 February 2021
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-cap |
|
Micro-cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
Segmental assets |
|
|
|
|
|
|
|
|
|
|
|
Investments at FVTPL |
|
299,339 |
|
83,968 |
|
23,376 |
|
23,147 |
|
429,830 |
|
Loans at
amortised cost |
|
- |
|
33,813 |
|
- |
|
- |
|
33,813 |
|
Total
segmental assets |
|
299,339 |
|
117,781 |
|
23,376 |
|
23,147 |
|
463,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables
and accrued expenses |
(771) |
|
(101) |
|
(43) |
|
(21) |
|
(936) |
|
Total
segmental liabilities |
|
(771) |
|
(101) |
|
(43) |
|
(21) |
|
(936) |
Total
segmental net assets |
|
298,568 |
|
117,680 |
|
23,333 |
|
23,126 |
|
462,707 |
The following table provides a reconciliation between total
segmental assets and total assets and total segmental liabilities
and total liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental assets |
|
|
|
|
|
|
|
415,978 |
|
463,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
segmental assets |
|
|
|
|
|
|
|
|
|
|
Cash at
bank |
|
|
|
41,187 |
|
59,784 |
Treasury
Bills |
|
|
|
|
|
|
|
|
|
3,395 |
|
3,394 |
Other
receivables |
|
|
|
|
|
|
|
|
247 |
|
22 |
Total
assets |
|
|
|
|
|
|
|
460,807 |
|
526,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental liabilities |
|
|
|
|
|
|
|
|
|
(398) |
|
(936) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
segmental liabilities |
|
|
|
|
|
|
|
|
|
|
Zero
Dividend Preference shares |
|
|
|
(75,014) |
|
(74,303) |
Loan notes |
|
|
|
|
|
|
|
|
|
|
|
|
(31,669) |
|
- |
Senior
debt facility |
|
|
|
|
|
|
|
|
|
(36,629) |
|
(68,694) |
Convertible Unsecured Loan Stock |
|
|
|
- |
|
(52,430) |
Other
payables |
|
|
|
(846) |
|
(921) |
Total
liabilities |
|
|
|
|
|
|
|
(144,556) |
|
(197,284) |
Total
net assets |
|
|
|
|
|
|
|
316,251 |
|
329,559 |
Other receivables (other than the Investment Adviser fee
prepayment) are not considered to be part of individual segment
assets. Certain liabilities are not considered to be part of the
net assets of an individual segment. These include custodian and
administration fees payable, directors’ fees payable and other
payables and accrued expenses.
5. Fair Value of Financial
Instruments
The Company classifies fair value measurements of its financial
instruments at FVTPL using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The
financial instruments valued at FVTPL are analysed in a fair value
hierarchy based on the following levels:
Level 1
Quoted prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2
Those involving inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices). For example, investments which are valued based on quotes
from brokers (intermediary market participants) are generally
indicative of Level 2 when the quotes are executable and do not
contain any waiver notices indicating that they are not necessarily
tradeable. Another example would be when assets/liabilities with
quoted prices, that would normally meet the criteria of Level 1, do
not meet the definition of being traded on an active market.
Level 3
Those involving inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs).
Investments in JZCP's portfolio valued using unobservable inputs
such as multiples, capitalisation rates, discount rates fall within
Level 3.
Differentiating between Level 2 and Level 3 fair value
measurements i.e., assessing whether inputs are observable and
whether the unobservable inputs are significant, may require
judgement and a careful analysis of the inputs used to measure fair
value including consideration of factors specific to the asset or
liability.
The following table shows financial instruments recognised at
fair value, analysed between those whose fair value is based
on:
Financial assets at 31 August 2021
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
254,356 |
|
254,356 |
European
micro-cap |
|
|
|
|
|
- |
|
- |
|
86,661 |
|
86,661 |
Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
18,788 |
|
18,788 |
Other
investments |
|
|
|
|
|
- |
|
- |
|
23,147 |
|
23,147 |
Listed
investments |
|
|
|
|
|
3,395 |
|
- |
|
- |
|
3,395 |
|
|
|
|
|
|
|
|
|
3,395 |
|
- |
|
382,952 |
|
386,347 |
Financial assets at 28 February 2021
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
299,339 |
|
299,339 |
European
micro-cap |
|
|
|
|
|
- |
|
- |
|
83,968 |
|
83,968 |
Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
23,376 |
|
23,376 |
Other
investments |
|
|
|
|
|
- |
|
- |
|
23,147 |
|
23,147 |
Listed
investments |
|
|
|
|
|
3,394 |
|
- |
|
- |
|
3,394 |
|
|
|
|
|
|
|
|
|
3,394 |
|
- |
|
429,830 |
|
433,224 |
Valuation techniques
The same valuation methodology and process was deployed as for
the year ended 28 February 2021.
Financial liabilities designated at
fair value through profit or loss at inception
Financial liabilities at 31 August 2021 |
|
Level
1 |
Level
2 |
Level
3 |
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
Convertible Unsecured Loan Stock - Redeemed 30.7.2021 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
- |
- |
- |
- |
Financial liabilities at 28 February 2021 |
|
Level
1 |
Level
2 |
Level
3 |
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
Convertible Unsecured Loan Stock |
- |
52,430 |
- |
52,430 |
|
|
|
|
|
|
|
|
|
- |
52,430 |
- |
52,430 |
Market transactions for the CULS did not take place with
sufficient frequency and volume to provide adequate pricing
information on an ongoing basis and therefore it was considered the
CULS were not traded in an active market and were therefore
categorised at Level 2 as defined by IFRS.
Quantitative information of
significant unobservable inputs and sensitivity analysis to
significant changes in unobservable inputs within Level 3
hierarchy
The significant unobservable inputs used in fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity as at 31 August 2021 and 28
February 2021 are shown below:
|
Value
31.8.2021 |
Valuation |
Unobservable |
Range
(weighted |
Sensitivity |
Effect on Fair
Value |
|
|
US$'000 |
Technique |
input |
average) |
used |
US$'000 |
|
US
micro-cap investments |
254,356 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers |
7.0x -
13.5x
(9.0x) |
-0.5x
/+0.5x |
(22,387) |
22,141 |
|
|
|
Discount
to Average Multiple |
10% -
30%
(17%) |
+5% /
-5% |
(31,506) |
30,503 |
|
European
micro-cap investments |
119,545 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers |
6.6x -
13.9x
(10.4x) |
-0.5x
/+0.5x |
(4,813) |
4,813 |
|
|
|
Discount
to Average Multiple |
12% -
57%
(22%) |
+5% /
-5% |
(4,507) |
4,507 |
|
Real
estate1,2 |
18,788 |
Cap Rate/ Income Approach |
Capitalisation Rate |
5.25% -
6.25% (5.9%) |
+50bps/-50bps |
(4,822) |
5,885 |
|
Other
investments3 |
21,938 |
|
Forward looking Revenue Approach |
Revenue
Multiple |
$8.3 million
5.3x |
-10%/+10%
-10%/+10% |
(2,194)
(2,194) |
1,558
1,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
28.2.2021 |
Valuation |
Unobservable |
Range
(weighted |
Sensitivity |
Effect on Fair
Value |
|
|
US$'000 |
Technique |
input |
average) |
used |
US$'000 |
|
US micro-cap
investments |
299,339 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers
Discount to Average Multiple |
7.5% -
13.5% (9.6x)
10% - 30% (17%) |
-0.5x/+0.5x
+5%/-5% |
(26,888)
(36,420) |
22,859
35,604 |
European micro-cap
investments |
80,689 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers
Discount to Average Multiple |
7.4x -
14.0x (10.0x) |
-0.5x/+0.5x |
(4,615) |
4,597 |
Real estate1,2 |
23,376 |
Cap Rate/Income Approach |
|
11% - 69%
(29%) |
+5%/-5% |
(4,225) |
4,205 |
Capitalisation Rate |
5.25% -
6.25% (5.94%) |
+50bps/-50bps |
(7,925) |
9,834 |
Other
investments3 |
21,938 |
AUM Approach |
AUM |
$3.8Bn |
-10%/+10% |
(4,989) |
4,989 |
|
|
|
% Applied
to AUM |
2.3% |
-10%/+10% |
(2,194) |
2,194 |
|
|
|
|
|
|
|
|
|
|
|
¹The Fair Value of JZCP's investment in financial interests in
Real Estate is measured as JZCP's percentage interest in the value
of the underlying properties.
²Sensitivity is applied to the property value and then the debt
associated to the property is deducted before the impact to JZCP's
equity value is calculated. Due to gearing levels in the property
structures, an increase in the sensitivity of measurement metrics
at property level will result in a significantly greater impact at
JZCP's equity level.
3 JZCP's investment in Spruceview.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and the end of the reporting period/year.
Period ended 31 August 2021
|
|
US |
European |
Real |
Other |
|
|
|
|
|
|
|
|
Micro-Cap |
Micro-Cap |
Estate |
Investments |
Total |
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 March 2021 |
|
|
|
|
|
|
299,339 |
83,968 |
23,376 |
23,147 |
429,830 |
Investments in year including capital calls |
4,898 |
3,044 |
- |
- |
7,942 |
Payment in
kind ("PIK") |
|
|
|
3,163 |
- |
- |
- |
3,163 |
Proceeds
from investments realised |
|
(56,790) |
(700) |
- |
- |
(57,490) |
Net
(loss)/gain on investments |
|
(570) |
349 |
(4,588) |
- |
(4,809) |
Movement
in accrued interest |
|
4,316 |
- |
- |
- |
4,316 |
At 31
August 2021 |
|
|
|
254,356 |
86,661 |
18,788 |
23,147 |
382,952 |
Year ended 28 February 2021
|
|
US |
European |
Real |
Other |
|
|
|
|
|
|
|
|
Micro-Cap |
Micro-Cap |
Estate |
Investments |
Total |
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 March 2020 |
|
|
|
|
|
|
404,880 |
71,619 |
158,712 |
22,603 |
657,814 |
Investments in year including capital calls |
3,629 |
9,858 |
2,639 |
1,840 |
17,966 |
Payment in
kind ("PIK") |
|
|
|
20,027 |
- |
- |
- |
20,027 |
Proceeds
from investments realised |
|
(114,170) |
(9,328) |
(13,555) |
(1,283) |
(138,336) |
Net
(loss)/gain on investments |
|
(13,772) |
11,819 |
(124,420) |
(13) |
(126,386) |
Movement
in accrued interest |
|
(1,255) |
- |
- |
- |
(1,255) |
At 28
February 2021 |
|
|
|
299,339 |
83,968 |
23,376 |
23,147 |
429,830 |
Fair value of Zero Dividend Preference
("ZDP") shares
The fair value of the ZDP shares is deemed to be their quoted
market price. As at 31 August 2021,
the ask price for the ZDP (2022) shares was £4.40 (28 February 2021: £3.80 per share) and the total
fair value of the ZDP shares was $72,107,000 (28 February
2021: $63,263,000) which is
$2,907,000 lower (28 February 2021: $11,040,000 lower) than the liability recorded in
the Statement of Financial Position.
ZDP shares are recorded at amortised cost and would fall in to
the Level 2 hierarchy if valued at FVTPL.
6. Net Loss on Investments
at Fair Value Through Profit or Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
|
31.8.2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$ '000 |
Loss
on investments held in investment portfolio at period end |
|
|
|
|
|
|
|
Net
movement in period end unrealised gain position |
|
|
|
|
|
18,315 |
|
(111,517) |
|
Unrealised net (loss)/gain in prior periods now realised |
|
|
|
|
|
(24,765) |
|
9,128 |
|
Net
unrealised loss in the period |
|
|
|
|
|
|
|
(6,450) |
|
(102,389) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain/(loss) on investments realised in the period |
|
|
|
|
|
|
|
|
|
Proceeds
from investments realised |
|
|
|
|
|
|
|
57,490 |
|
6,411 |
|
Cost of
investments realised |
|
|
|
|
|
|
|
|
|
(80,614) |
|
(8,983) |
|
Unrealised net loss/(gain) in prior periods now realised |
|
|
|
|
|
24,765 |
|
(9,128) |
|
Total net
gain/(loss) in the period on investments realised in the
period |
|
|
|
1,641 |
|
(11,700) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
on investments in the period |
|
|
|
|
|
|
|
(4,809) |
|
(114,089) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Expected Credit
Losses
Expected Credit Losses ("ECLs") are recognised in three stages.
Stage one being for credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that
are possible within the next 12-months (a 12-month ECL). Stage two
being for those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL). Stage three being credit exposures which
are considered credit-impaired, interest revenue is calculated
based on the amortised cost (i.e. the gross carrying amount less
the loss allowance). Financial assets in this stage will generally
be assessed individually. Lifetime expected credit losses are
recognised on these financial assets.
|
|
|
|
|
|
|
|
|
|
|
|
Period ended |
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
31.8.2020 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on loans classified as Stage 1 |
|
|
987 |
560 |
Impairment
on loans classified as Stage 2 |
|
|
|
|
|
|
418 |
- |
Impairment
on loans classified as Stage 3 |
|
|
|
|
|
|
- |
- |
Total impairment on
loans during the period |
|
|
|
|
|
|
|
|
|
|
|
1,405 |
560 |
8. Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
Period ended |
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2021 |
31.8.2020 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
calculated using the effective interest rate method |
|
|
1,405 |
1,245 |
Other
interest and similar income |
|
|
|
|
|
|
7,714 |
11,452 |
|
|
|
|
|
|
|
|
|
|
|
|
9,119 |
12,697 |
Income for the period ended 31 August
2021
|
|
|
|
Preferred |
|
Loan note Interest |
|
|
|
Other |
|
|
|
|
|
|
Interest |
|
PIK |
|
Cash |
|
Dividend |
|
Interest |
|
Total |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US micro-cap |
|
|
|
7,479 |
|
- |
|
- |
|
234 |
|
- |
|
7,713 |
European
micro-cap |
|
|
|
- |
|
1,405 |
|
- |
|
- |
|
- |
|
1,405 |
Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
|
|
7,479 |
|
1,405 |
|
- |
|
234 |
|
1 |
|
9,119 |
Income for the period ended 31 August
2020
|
|
|
|
Preferred |
|
Loan note Interest |
|
|
|
Other |
|
|
Portfolio |
|
|
|
Interest |
|
PIK |
|
Cash |
|
Dividend |
|
Interest |
|
Total |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US micro-cap |
|
|
|
11,035 |
|
154 |
|
254 |
|
- |
|
- |
|
11,443 |
European
micro-cap |
|
|
|
- |
|
1,245 |
|
- |
|
- |
|
- |
|
1,245 |
Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
9 |
|
9 |
|
|
|
|
11,035 |
|
1,399 |
|
254 |
|
- |
|
9 |
|
12,697 |
9. Finance Costs
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
31.8.2021 |
|
31.8.2020 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Interest expense calculated using the effective interest
method |
|
|
|
|
ZDP shares
(Note 12) |
1,892 |
|
1,636 |
Loan Notes (Note
13) |
|
|
|
|
|
|
169 |
|
- |
Senior
Debt Facility (Note 14) |
3,584 |
|
6,109 |
|
|
|
|
|
|
|
5,645 |
|
7,745 |
Other
interest and similar expense |
|
|
|
|
CULS
interest paid1 (Note 15) |
2,679 |
|
1,445 |
|
|
|
|
|
|
|
8,324 |
|
9,190 |
10. Fees Payable to the Investment
Adviser
Investment Advisory and Performance
fees
The Company entered into the amended and restated investment
advisory and management agreement with Jordan/Zalaznick Advisers,
Inc. (the "Investment Adviser") on 23
December 2010 (the ”Advisory Agreement”).
Pursuant to the Advisory Agreement, the Investment Adviser is
entitled to a base management fee and to an incentive fee. The base
management fee is an amount equal to 1.5 per cent per annum of the
average total assets under management of the Company less those
assets identified by the Company as being excluded from the base
management fee, under the terms of the agreement. The base
management fee is payable quarterly in arrears; the agreement
provides that payments in advance on account of the base management
fee will be made.
For the six-month period ended 31 August
2021, total investment advisory and management expenses,
based on the average total assets of the Company, were included in
the Statement of Comprehensive Income of $3,888,000 (period ended 31 August 2020: $5,359,000). Of this amount, $191,000 was prepaid (28
February 2021: $573,000 was
due and payable) at the period end.
During the year ended 29 February
2020, the Investment Adviser agreed to waive incentive fees
payable by the Company relating to realised gains in the years
ended February 2019 and 2020. No
further incentive fees will be paid to the Investment Adviser until
the Company and Investment Adviser have mutually agreed to
reinstate such payments.
11. Investments
|
|
|
Listed |
Unlisted |
Unlisted |
Carrying Value |
|
|
|
FVTPL |
FVTPL |
Loans |
Total |
|
|
|
31.8.2021 |
31.8.2021 |
31.8.2021 |
31.8.2021 |
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
Book cost at 1 March
2021 |
|
|
3,393 |
543,740 |
74,651 |
621,784 |
Investments in period including capital calls |
- |
7,942 |
- |
7,942 |
Payment in kind
("PIK")1 |
|
|
- |
3,163 |
633 |
3,796 |
Proceeds from
investments realised |
|
|
- |
(57,490) |
- |
(57,490) |
Net realised loss |
|
|
- |
(23,124) |
- |
(23,124) |
Realised impairment
loss² |
|
|
- |
- |
(31,757) |
(31,757) |
Realised currency
loss² |
|
|
- |
- |
(2,674) |
(2,674) |
Book cost at 31 August
2021 |
|
|
3,393 |
474,231 |
40,853 |
518,477 |
Unrealised
investment and foreign exchange loss |
- |
(98,119) |
(3,364) |
(101,483) |
Impairment
on loans at amortised cost |
|
- |
- |
(5,835) |
(5,835) |
Accrued interest |
|
|
2 |
6,840 |
1,230 |
8,072 |
Carrying value at 31
August 2021 |
|
|
3,395 |
382,952 |
32,884 |
419,231 |
1The cost of PIK investments is deemed to be interest
not received in cash but settled by the issue of further securities
when that interest has been recognised in the Statement of
Comprehensive Income.
2Realised impairment loss is due to the Company's
direct loan in Ombuds (European micro-cap). The loss was recognised
in prior periods and was included within the comparative number for
Impairment on loans at amortised cost.
|
|
|
Listed |
Unlisted |
Unlisted |
Carrying Value |
|
|
|
FVTPL |
FVTPL |
Loans |
Total |
|
|
|
28.2.2021 |
28.2.2021 |
28.2.2021 |
28.2.2021 |
|
|
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
Book cost at 1 March
2020 |
|
|
3,385 |
970,184 |
71,939 |
1,045,508 |
Investments in year including capital calls |
6,787 |
58,931 |
- |
65,718 |
Payment in kind
("PIK")1 |
|
|
- |
20,027 |
2,712 |
22,739 |
Proceeds
from investments matured/realised |
(6,790) |
(179,301) |
- |
(186,091) |
Interest received on
maturity |
|
|
11 |
- |
- |
11 |
Net
realised investment and foreign exchange loss |
- |
(326,101) |
- |
(326,101) |
Book cost at 28
February 2021 |
|
|
3,393 |
543,740 |
74,651 |
621,784 |
Unrealised
investment and foreign exchange loss |
- |
(116,434) |
(7,973) |
(124,407) |
Impairment
on loans at amortised cost² |
|
- |
- |
(33,323) |
(33,323) |
Accrued interest |
|
|
1 |
2,524 |
458 |
2,983 |
Carrying value at 28
February 2021 |
|
|
3,394 |
429,830 |
33,813 |
467,037 |
1The cost of PIK investments is deemed to be interest
not received in cash but settled by the issue of further securities
when that interest has been recognised in the Statement of
Comprehensive Income.
2Includes unrealised impairment loss of the Company's
direct loan in Ombuds (European micro-cap) which has been realised
during the current interim period.
Loans at amortised cost
Interest on the loans accrues at the
following rates:
|
As at
31 August 2021 |
As at 28
February 2021 |
|
8% |
10% |
14% |
Total |
8% |
10% |
14% |
Total |
Loans at amortised cost |
27,780 |
2,271 |
2,833 |
32,884 |
28,652 |
2,247 |
2,914 |
33,813 |
|
|
|
|
|
|
|
|
|
|
Maturity dates are as follows:
|
As at
31 August 2021 |
As at 28
February 2021 |
|
0-6 months |
7-12
months |
1-2
years |
Total |
0-6 months |
7-12 months |
1-2
years |
Total |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
Loans at amortised cost |
- |
- |
32,884 |
32,884 |
- |
- |
33,813 |
33,813 |
|
|
|
|
|
|
|
|
|
|
12. Zero Dividend Preference ("ZDP")
shares
On 1 October 2015, the Company
rolled over 11,907,720 existing ZDP (2016) shares into new ZDP
shares with a 2022 maturity date. The new ZDP shares (ZDP 2022)
have a gross redemption yield of 4.75% and a total redemption value
of £57,597,000 (approximately $77,121,000 using the period end exchange
rate).
ZDP shares are designed to provide a pre-determined final
capital entitlement which ranks behind the Company's creditors but
in priority to the capital entitlements of the Ordinary shares. The
ZDP shares carry no entitlement to income and the whole of their
return will therefore take the form of capital. In certain
circumstances, ZDP shares carry the right to vote at general
meetings of the Company as detailed in the Company's Memorandum and
Articles of Incorporation. Issue costs are deducted from the cost
of the liability and allocated to the Statement of Comprehensive
Income over the life of the ZDP shares.
ZDP (2022) shares
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Amortised
cost at 1 March |
74,303 |
|
64,510 |
Finance
costs allocated to Statement of Comprehensive Income |
1,892 |
|
3,441 |
Unrealised
currency (gain)/loss on translation |
|
(1,181) |
|
6,352 |
Amortised
cost at period/year end |
|
75,014 |
|
74,303 |
Total
number of ZDP shares in issue |
|
11,907,720 |
|
11,907,720 |
13. Loan Notes
During the period, the Company entered into a note purchase
agreement with David Zalaznick and
John (Jay) Jordan, the founders and
principals of the Company's investment adviser, Jordan/Zalaznick
Advisers, Inc. ("JZAI"), pursuant to which they have agreed to
purchase directly or through their affiliates, subordinated, second
lien loan notes totalling $31.5
million, with a maturity date of 11
September 2022 (the “Loan Notes”).
The interest rate on the Loan Notes will be 6 per cent. per
annum payable semi-annually on each of 31 March and 30 September of
each year, commencing on the first such date to occur after the
issuance of the Loan Notes.
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Loan notes issued in
period |
|
|
|
|
|
|
31,500 |
|
- |
Finance
costs charged to Statement of Comprehensive Income |
|
169 |
|
- |
Amortised
cost at period/year end |
|
31,669 |
|
- |
14. Senior Debt Facility
On 12 June 2015, JZCP entered into
a Senior Secured Debt Facility agreement with Guggenheim Partners
Limited (the "Original Lenders"). The original facility was
structured as $80 million and €18
million and increased by a further $50
million in April 2017. The
original maturity date of the facility being on 12 June 2021 (6 year term).
On 23 October 2020, the Company
announced that it has agreed amended terms of the Senior Debt
Facility. Under the terms of the Amended Senior Facility,
$40 million of the outstanding
principal amount was assigned from the original lenders to clients
and funds advised by Cohanzick Management, LLC and CrossingBridge
Advisors, LLC (the “Replacement Lenders”). Subsequent to entering
into the amended agreement and following investment realisations,
the Company repaid a total of $82.9
million of the outstanding principal amount.
On 23 February 2021, the Company
announced that Guggenheim Partners Europe Limited had sold its
remaining interest in the Company’s senior debt facility (the
“First Out Loan”) to the Replacement Lenders. There were no further
changes to the quantum or terms of the existing First Out Loan as a
result of this transaction.
On 14 May 2021, the Company
entered into an amendment agreement with its senior lenders to
further amend the terms of its senior debt facility which will,
among other things, extend the maturity date of the senior debt
facility by one year until 12 June
2022. The interest rate charges under the amended agreement
for the First Out Loans will be amended from a rate of LIBOR¹ +
5.75 per cent. to a rate of LIBOR + 9.75 per cent. (with a 1 per
cent. floor). The interest rate charges under the amended agreement
for the Last Out Loans will be amended from a rate of LIBOR + 11
per cent. to a rate of LIBOR + 15 per cent. (with a 1 per cent.
floor), of which 4 per cent. shall be charged as payment-in-kind
interest.
The modified terms of the loan are not deemed to be
substantially different from the original terms. Therefore, as per
IFRS 9, the senior debt facility is accounted for as a continuation
of the original facility rather than an extinguishment of the
original facility and the recognition of a new facility.
On 18 June 2021, the Company
repaid a further $33.3 million of the
outstanding principal amount following a material investment
realisation.
At 31 August 2021, investments and
cash valued at $438,480,000²
(28 February 2021: $504,883,000) were held as collateral on the
loan. A covenant on the loan states the fair value of the
collateral must be 3.5.x the loan value. The Company is also
required to hold a minimum cash balance of $15 million. At 31 August
2021 and during the six-month interim period, the Company
was in full compliance with covenant terms.
¹There is an interest rate floor that stipulates LIBOR will not
be lower than 1%. In this agreement, the presence of the floor does
not significantly alter the amortised cost of the instrument,
therefore separation is not required and the loan is valued at
amortised cost using the effective interest rate method. During the
year the relevant 3 month LIBOR rates were below 1%. LIBOR
regulators (including the UK Financial Conduct Authority and the US
Commodity Futures Trading Commission) have announced a transition
away from LIBOR, however it is expected that the 3 month USD LIBOR
which is relevant to the Company will continue to be available
until the end of June 2023.
²Investments held as collateral exclude the Company's investment
in Spruceview Capital.
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Amortised
cost (US$ drawdown) - 1 March |
|
68,694 |
|
130,523 |
Amortised
cost (Euro drawdown) - 1 March |
|
- |
|
19,839 |
Loan repayments |
|
|
|
|
|
|
(33,264) |
|
(82,912) |
Finance
costs charged to Statement of Comprehensive Income |
|
3,584 |
|
11,797 |
Interest and finance
costs paid |
|
|
|
|
|
|
(2,385) |
|
(12,331) |
Unrealised
currency gain on translation of Euro drawdown |
|
- |
|
1,778 |
Amortised
cost at period/year end |
|
36,629 |
|
68,694 |
The carrying value of the loans approximates to fair value.
On 7 October 2021, the Company
announced that it had agreed with its existing senior lenders to
borrow a further amount of $16.0
million under its Senior Debt Facility. Following the
increase, the total amount outstanding under the Senior Debt
Facility at 31 October 2021, is
$52.6 million, of which $16.1 million will be 'First Out loans' and
$36.5 million will be 'Last Out
loans'.
15. Convertible Subordinated Unsecured
Loan Stock ("CULS")
On 30 July 2021, JZCP redeemed
3,884,279 £10 CULS and converted on request, 1,835 £10 CULS into
3,039 Ordinary Shares at the agreed conversion price.
JZCP issued £38,861,140 6% CULS on 30
July 2014. The holders of the CULS had the option to convert
the whole or part (being an integral multiple of £10 in nominal
amount) of their CULS into Ordinary Shares at the agreed conversion
price of £6.0373 per Ordinary Share, which was subject to
adjustment to deal with certain events which would otherwise dilute
the conversion of the CULS.
CULS bore interest on their nominal amount at the rate of 6.00
per cent. per annum, payable semi-annually in arrears. During the
six-month period ended 31 August
2021: $2,679,000 (31 August 2020: $1,445,000) of interest was paid to holders of
CULS and $1,336,000 (31 August 2020: $1,445,000) is shown as a finance cost in the
Statement of Comprehensive Income.
In accordance with IFRS, the Company has calculated the movement
in fair value due to the change in the credit risk of the CULS
which is allocated as Other Comprehensive Income in the Statement
of Comprehensive Income. The loss on financial liabilities at fair
value through profit or loss comprises the movement in the fair
value attributable to the change in the benchmark interest rate and
the movement attributable to foreign exchange gain/loss on
translation.
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Fair Value of CULS at
1 March |
|
|
|
|
|
|
52,430 |
|
49,886 |
|
|
|
|
|
|
|
|
|
|
Interest
expense |
1,336 |
|
2,953 |
Coupon
paid |
(2,679) |
|
(2,953) |
Unrealised
movement in value of CULS due to change in Company's Credit
Risk |
1,074 |
|
(1,074) |
Unrealised
movement in the fair value of CULS allocated to change in observed
(benchmark) interest rate |
2,170 |
|
(912) |
Unrealised
currency (gain)/loss on translation during the period/year |
|
(301) |
|
4,530 |
Loss to
the Company on movement in the fair value of CULS |
|
|
|
1,869 |
|
3,618 |
Redemption of
CULS |
|
|
|
|
|
|
(54,005) |
|
- |
Conversion
of CULS into Ordinary Shares |
|
|
|
|
(25) |
|
- |
Fair Value
of CULS based on offer price |
|
|
|
|
|
- |
|
52,430 |
16. Other Payables
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Provision
for tax on dividends received not withheld at source |
|
|
|
398 |
|
398 |
Audit fees |
|
|
|
|
|
|
292 |
|
363 |
Legal fees
provision |
|
|
|
|
|
|
250 |
|
250 |
Directors'
remuneration |
|
|
|
|
|
|
47 |
|
48 |
Other expenses |
|
|
|
|
|
|
257 |
|
225 |
|
|
|
|
|
|
|
1,244 |
|
1,284 |
17. Ordinary shares - Issued
Capital
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
Number
of shares |
|
Number
of shares |
|
|
|
|
|
|
|
|
|
|
Balance at
1 March |
|
|
|
|
|
77,474,175 |
|
77,474,175 |
Ordinary
shares issued during period/year |
|
|
|
|
|
3,039 |
|
- |
Total Ordinary
shares in issue |
|
|
|
|
|
|
77,477,214 |
|
77,474,175 |
The Company's shares trade on the London Stock Exchange's
Specialist Fund Segment.
On 2 August 2021, the Company
issued 3,039 Ordinary shares resulting from the conversion of 1,835
CULS. The conversion price was £6.0373 per Ordinary Share,
resulting in a credit to the Share capital account of £18k
($25k).
18. Commitments
At 31 August 2021 and 28 February 2021, JZCP had the following
financial commitments outstanding in relation to fund
investments:
|
|
|
|
|
Expected date |
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
of
Call |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
JZI Fund
III GP, L.P. €17,660,911 (28.2.2021: €19,628,404) |
|
over 3
years |
|
20,848 |
|
23,825 |
Spruceview Capital
Partners, LLC1 |
|
|
|
|
over 1
year |
|
900 |
|
900 |
Orangewood Partners
II-A LP2 |
|
|
|
|
see
footnote |
|
- |
|
6,932 |
Igloo Products
Corp |
|
|
|
|
|
|
- |
|
240 |
|
|
|
|
|
|
|
21,748 |
|
31,897 |
1As approved by a shareholder vote on 12 August 2020, JZCP has the ability to make up
to approximately $4.1 million in
further commitments to Spruceview, above the $0.9 million unfunded commitments as at
31 August 2021.
2During the period, the Company received shareholder
approval for Jay Jordan and
David Zalaznick to relieve the
Company of all of its remaining commitments to the Orangewood Fund
being $12.35 million, of which
approximately $3 million of this
commitment was “funded” and $9.35
million “unfunded” (following the Orangewood Fund's final
close in April 2021 which resulted in
a reallocation of unfunded commitments).
19. Related Party Transactions
JZAI is a US based company founded by David Zalaznick and John ("Jay") Jordan II, that
provides advisory services to the Company in exchange for
management fees, paid quarterly. Fees paid by the Company to the
Investment Adviser are detailed in Note 10. JZAI and various
affiliates provide services to certain JZCP portfolio companies and
may receive fees for providing these services pursuant to the
Advisory Agreement.
JZCP invests in European micro-cap companies through JZI Fund
III, L.P. (“Fund III”). Previously investments were made via the
EuroMicrocap Fund 2010, L.P. ("EMC 2010"). Fund III and EMC 2010
are managed by an affiliate of JZAI. At 31
August 2021, JZCP's investment in Fund III was valued at
$83.4 million (28 February 2021: $80.7
million). JZCP's investment in EMC 2010 was valued at
$3.3 million (28 February 2021: $3.3
million).
JZCP has invested in Spruceview Capital Partners, LLC on a 50:50
basis with Jay Jordan and
David Zalaznick (or their respective
affiliates). The total amount committed by JZCP to this investment
at 31 August 2021, was $33.5 million with $0.9
million of this amount remaining unfunded and outstanding.
As approved by a shareholder vote on 12
August 2020, JZCP has the ability to make up to
approximately $4.1 million in further
commitments to Spruceview, above the $33.5
million committed as of 31 August
2021. Should this approved capital be committed to
Spruceview, it would be committed on the same 50:50 basis with
Jay Jordan and David Zalaznick (or their respective
affiliates).
During the year ended 28 February
2021, the Company announced that it had agreed and received
shareholder approval to sell its interests in certain US microcap
portfolio companies (the "Secondary Sale") to a secondary fund led
by Hamilton Lane Advisors, L.L.C. The Secondary Sale was structured
as a sale and contribution to a newly formed fund, JZHL Secondary
Fund LP, managed by an affiliate of JZAI. At 31 August 2021, JZCP's investment in Fund III was
valued at $80.8 million (28 February 2021: $72.2
million).
JZCP has co-invested with Fund A, Fund A Parallel I, II and III
Limited Partnerships in a number of US micro-cap buyouts. These
Limited Partnerships are managed by an affiliate of JZAI. JZCP
invested in a ratio of 82%/18% with the Fund A entities. At
31 August 2021, these co-investments,
with Fund A, were in the following portfolio companies: Igloo,
Industrial Services Solutions, New Vitality, Testing Services
Holdings, Tierpoint and Vitalyst. JZCP's investments in Testing
Services Holdings and Tierpoint have subsequently been transferred
to JZHL Secondary Fund LP (mentioned above).
During the period, following shareholder approval, JZAI Founders
Jay Jordan and David Zalaznick
relieved the Company of $12.35
million of its remaining commitments to the Orangewood Fund
(approximately $3 million of this
commitment being “funded” and $9.35
million “unfunded”).
During the period, the Company entered into a note purchase
agreement with David Zalaznick and
Jay Jordan, pursuant to which they
have purchased directly or through their affiliates, subordinated,
second lien loan notes in the amount of $31.5 million, with an interest rate of 6 per
cent. per annum and maturing on 11 September
2022 (the “Loan Notes”). The issuance of the Loan Notes was
subject to a number of conditions, including shareholder
approval.
Total Directors' remuneration for the six-month period ended
31 August 2021 was $145,000 (31 August
2020: $150,000). During the
period, the Company was notified that Sharon Parr acquired 10,000 of the Company's
Ordinary shares and also Ashley
Paxton acquired 12,250 Ordinary shares and 4,250 Zero
Dividend Preference shares.
20. Basic and Diluted Loss per
Share
Basic loss per share is calculated by dividing the loss for the
period by the weighted average number of Ordinary shares
outstanding during the period.
For the period ended 31 August
2021, the weighted average number of Ordinary shares
outstanding during the period was 77,474,670 (31 August 2020: 77,474,175).
The diluted loss per share is calculated by considering
adjustments required to the loss and weighted average number of
shares for the effects of potential dilutive Ordinary shares.
Following the redemption of the Company's CULS during the period,
there are no longer any potential dilutive events to the Ordinary
shares.
The comparative diluted earnings per share considered the impact
of adjusting the weighted average of the number of Ordinary shares
for the conversion of the CULS ("If-converted method"). Conversion
was assumed even though at 31 August
2020 the exercise price of the CULS was higher than the
market price of the Company's Ordinary shares and are therefore
deemed 'out of the money'. Earnings were adjusted to remove the
fair value loss recorded of $2,836,000 and finance cost attributable to CULS
$1,445,000. For the period ended
31 August 2020, the potential
conversion of the CULS would have been anti-dilutive to the total
loss per share, therefore the diluted loss per share is presented
as per the basic loss per share calculation.
21. Contingent Assets
Amounts held in escrow accounts
When investments have been disposed of by the Company, proceeds
may reflect contractual terms requiring that a percentage is held
in an escrow account pending resolution of any indemnifiable claims
that may arise.
At 31 August 2021 and 28 February 2021, the Company has assessed that
the likelihood of the recovery of these escrow accounts cannot be
determined and has therefore disclosed the escrow accounts as a
contingent asset.
As at 31 August 2021 and
28 February 2021, the Company had the
following contingent assets held in escrow accounts which had not
been recognised as assets of the Company:
|
|
|
|
|
|
|
Amount in Escrow |
|
|
|
|
|
|
|
31.8.2021 |
|
28.2.2021 |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Triwater Holdings |
|
|
|
|
|
|
309 |
|
309 |
Xpress
Logistics (AKA Priority Express) |
|
|
|
|
|
19 |
|
19 |
|
|
|
|
|
|
|
328 |
|
328 |
During the period ended 31 August
2021, proceeds of $nil (31 August
2020: $801,000) were realised
and recorded in the Statement of Comprehensive Income.
22. Subsequent Events
These Interim Financial Statements were approved by the Board on
10 November 2021. Events subsequent
to the period end 31 August 2021 have
been evaluated until this date.
On 7 October 2021, the Company
announced that it had agreed with its existing senior lenders to
borrow a further amount of $16.0
million under its Senior Debt Facility. Following the
increase, the total amount outstanding under the Senior Debt
Facility as at 31 October 2021 is
approx. $52.6 million (including
accrued interest).
Post period-end, the Company received $3.7 million from the realisation of its
portfolio company Igloo. The proceeds represent an approx.
$3.4 million write up on the
$0.3 million valuation at period end.
The Directors have assessed that this is a non-adjusting post
balance sheet event.
Post period-end, the Company received a $2.2 million distribution from EuroMicrocap Fund
2010, L.P. ("EMC 2010"), relating to deferred income from the
realisation, in 2017, of EMC 2010's investment in Factor Energia.
The Company continues to hold an interest in Factor Energia through
its investment in JZI Fund III.
Company Advisers
Investment Adviser
The Investment Adviser to JZ Capital Partners Limited (“JZCP”) is
Jordan/Zalaznick Advisers, Inc., (“JZAI”) a company beneficially
owned by John (Jay) W Jordan II and David W Zalaznick. The company
offers investment advice to the Board of JZCP. JZAI has offices in
New York and Chicago.
Jordan/Zalaznick Advisers, Inc.
9 West, 57th Street
New York NY 10019
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
JZ Capital Partners Limited is registered in Guernsey Number
48761
Administrator, Registrar and Secretary
Northern Trust International Fund Administration
Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
UK Transfer and Paying Agent
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
US Banker
HSBC Bank USA NA
452 Fifth Avenue
New York NY 10018
(Also provides custodian services to JZ Capital Partners
Limited under the terms of a Custody Agreement).
Guernsey Banker
Northern Trust (Guernsey)
Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3DA
Independent Auditor
Ernst & Young LLP
PO Box 9
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4AF
UK Solicitor
Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London E1 6PW
US Lawyers
Monge Law Firm, PLLC
435 South Tryon Street, Suite 711
Charlotte, NC 28202
Mayer Brown LLP
214 North Tryon Street
Suite 3800
Charlotte NC 28202
Winston & Strawn LLP
35 West Wacker Drive
Chicago IL 60601-9703
Guernsey Lawyer
Mourant
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4HP
Financial Adviser and Broker
JP Morgan Cazenove Limited
20 Moorgate
London EC2R 6DA
Useful Information for Shareholders
Listing
JZCP Ordinary and Zero Dividend Preference ("ZDP") shares are
listed on the Official List of the Financial Services Authority of
the UK, and are admitted to trading on the London Stock Exchange
Specialist Fund Segment for listed securities.
The price of the Ordinary shares are shown in the Financial
Times under "Conventional Private Equity" and can also be found at
https://markets.ft.com along with the prices of the ZDP shares.
ISIN/SEDOL numbers
|
|
Ticker
Symbol |
|
ISIN
Code |
|
Sedol
Number |
|
|
|
|
|
|
|
Ordinary shares |
|
JZCP |
|
GG00B403HK58 |
|
B403HK5 |
ZDP (2022) shares |
|
JZCZ |
|
GG00BZ0RY036 |
|
BZ0RY03 |
Key Information Documents
JZCP produces Key Information Documents to assist investors'
understanding of the Company's securities and to enable comparison
with other investment products. These documents are found on the
Company's website -
www.jzcp.com/investor-relations/key-information-documents.
Alternative Performance Measures
In accordance with ESMA Guidelines on Alternative Performance
Measures ("APMs"), the Board has considered what APMs are included
in the Interim Report and Financial Statements which require
further clarification. An APM is defined as a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs included in the
Interim Report and Financial Statements, which are unaudited and
outside the scope of IFRS, are deemed to be as follows:
Total NAV Return
The Total NAV Return measures how the net asset value ("NAV")
per share has performed over a period of time, taking into account
both capital returns and dividends paid to shareholders. JZCP
quotes NAV total return as a percentage change from the start of
the period (one year) and also three-month, three-year, five-year
and seven year periods. It assumes that dividends paid to
shareholders are reinvested back into the Company therefore future
NAV gains are not diminished by the paying of dividends. JZCP also
produces an adjusted Total NAV Return which excludes the effect of
the appreciation/dilution per share caused by the buy back/issue of
shares at a discount to NAV, the result of the adjusted Total NAV
return is to provide a measurement of how the Company's Investment
portfolio contributed to NAV growth adjusted for the Company's
expenses and finance costs. The Total NAV Return for the period
ended 31 August 2021 was -4%, which
only reflects the change in NAV as no dividends were paid during
the year. The Total NAV Return for the year ended 28 February 2021 was -30.8%.
Total Shareholder Return (Ordinary
shares)
A measure showing how the share price has performed over a
period of time, taking into account both capital returns and
dividends paid to shareholders. JZCP quotes shareholder price total
return as a percentage change from the start of the period (one
year) and also three-month, three-year, five-year and seven-year
periods. It assumes that dividends paid to shareholders are
reinvested in the shares at the time the shares are quoted ex
dividend. The Shareholder Return for the period ended 31 August 2021 was +53.8%, which only reflects
the change in share price as no dividends were paid during the
year. The Shareholder Return for the year ended 28 February 2021 was -69.8%.
NAV to market price discount
The NAV per share is the value of all the company’s assets, less
any liabilities it has, divided by the number of shares. However,
because JZCP shares are traded on the London Stock Exchange's
Specialist Fund Segment, the share price may be higher or lower
than the NAV. The difference is known as a discount or premium.
JZCP's discount is calculated by expressing the difference between
the period end dollar equivalent share price and the period end NAV
per share as a percentage of the NAV per share.
At 31 August 2021, JZCP's Ordinary
shares traded at £1.20 (28 February
2021: £0.78) or $1.65
(28 February 2021: $1.09) being the dollar equivalent using the
period end exchange rate of £1:1.38 (28
February 2021 £1: $1.40). The
shares traded at a 60% (28 February
2021: 74%) discount to the NAV per share of $4.08 (28 February
2021: $4.25).
Criminal Facilitation of Tax
Evasion
The Board has approved a policy of zero tolerance towards the
criminal facilitation of tax evasion, in compliance with the
Criminal Finances Act 2017.
Non-Mainstream Pooled Investments
From 1 January 2014, the FCA rules
relating to the restrictions on the retail distribution of
unregulated collective investment schemes and close substitutes
came into effect. JZCP's Ordinary shares qualify as an ‘excluded
security’ under these rules and will therefore be excluded from the
FCA’s restrictions which apply to non-mainstream investment
products. Therefore, Ordinary shares issued by JZ Capital Partners
can continue to be recommended by financial advisers as an
investment for UK retail investors.
Internet Address
The Company: www.jzcp.com
Financial Diary
Results
for the year ended 28 February 2022 |
|
May 2022 (date to be
confirmed) |
Annual General
Meeting |
|
|
|
June/July 2022 (date
to be confirmed) |
Interim
report for the six months ended 31 August 2022 |
|
November 2022 (date to
be confirmed) |
|
|
|
|
|
Payment of Dividends
In the event of a cash dividend being paid, the dividend will be
sent by cheque to the first-named shareholder on the register of
members at their registered address, together with a tax voucher.
At shareholders' request, where they have elected to receive
dividend proceeds in Sterling, the dividend may instead be paid
direct into the shareholder's bank account through the Bankers'
Automated Clearing System. Payments will be paid in US dollars
unless the shareholder elects to receive the dividend in Sterling.
Existing elections can be changed by contacting the Company's
Transfer and Paying Agent, Equiniti Limited on +44 (0) 121 415
7047.
Share Dealing
Investors wishing to buy or sell shares in the Company may do so
through a stockbroker. Most banks also offer this service.
Foreign Account Tax Compliance Act
The Company is registered (with a Global Intermediary
Identification Number CAVBUD.999999.SL.831) under The Foreign
Account Tax Compliance Act ("FATCA").
Share Register Enquiries
The Company's UK Transfer and Paying Agent, Equiniti Limited,
maintains the share registers. In event of queries regarding your
holding, please contact the Registrar on 0871 384 2265, calls to
this number cost 8p per minute from a BT landline, other providers'
costs may vary. Lines are open 8.30 a.m. to
5.30 p.m., Monday to Friday, If calling from overseas +44
(0) 121 415 7047 or access their website at www.equiniti.com.
Changes of name or address must be notified in writing to the
Transfer and Paying Agent.
Nominee Share Code
Where notification has been provided in advance, the Company
will arrange for copies of shareholder communications to be
provided to the operators of nominee accounts. Nominee investors
may attend general meetings and speak at meetings when invited to
do so by the Chairman.
Documents Available for Inspection
The following documents will be available at the registered
office of the Company during usual business hours on any weekday
until the date of the Annual General Meeting and at the place of
the meeting for a period of fifteen minutes prior to and during the
meeting:
(a) the Register of Directors' Interests in the stated capital
of the Company;
(b) the Articles of Incorporation of the Company; and
(c) the terms of appointment of the Directors.
Warning to Shareholders – Boiler Room
Scams
In recent years, many companies have become aware that their
shareholders have been targeted by unauthorised overseas-based
brokers selling what turn out to be non-existent or high risk
shares, or expressing a wish to buy their shares. If you are
offered, for example, unsolicited investment advice, discounted
JZCP shares or a premium price for the JZCP shares you own, you
should take these steps before handing over any money:
• Make sure you get the correct name of
the person or organisation
• Check that they are properly
authorised by the FCA before getting involved by visiting
http://www.fca.org.uk/firms/systems-reporting/register
• Report the matter to the FCA by
calling 0800 111 6768
• If the calls persist, hang up
• More detailed information on this can
be found on the Money Advice Service website
www.moneyadviceservice.org.uk
US Investors
General
The Company's Articles contain provisions allowing the Directors
to decline to register a person as a holder of any class of
ordinary shares or other securities of the Company or to require
the transfer of those securities (including by way of a disposal
effected by the Company itself) if they believe that the
person:
(a) is a "US person" (as defined in Regulation S under the US
Securities Act of 1933, as amended) and not a "qualified purchaser"
(as defined in the US Investment Company Act of 1940, as amended,
and the related rules thereunder);
(b) is a "Benefit Plan Investor" (as described under
"Prohibition on Benefit Plan Investors and Restrictions on
Non-ERISA Plans" below); or
(c) is, or is related to, a citizen or resident of the United States, a US partnership, a US
corporation or a certain type of estate or trust and that ownership
of any class of ordinary shares or any other equity securities of
the Company by the person would materially increase the risk that
the Company could be or become a "controlled foreign corporation"
(as described under "US Tax Matters").
In addition, the Directors may require any holder of any class
of ordinary shares or other securities of the Company to show to
their satisfaction whether or not the holder is a person described
in paragraphs (A), (B) or (C) above.
US Securities
Laws
The Company (a) is not subject to the reporting requirements of
the US Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and does not intend to become subject to such reporting
requirements and (b) is not registered as an investment company
under the US Investment Company Act of 1940, as amended (the "1940
Act"), and investors in the Company are not entitled to the
protections provided by the 1940 Act.
Prohibition on
Benefit Plan Investors and Restrictions on Non-ERISA Plans
Investment in the Company by "Benefit Plan Investors" is
prohibited so that the assets of the Company will not be deemed to
constitute "plan assets" of a "Benefit Plan Investor". The term
"Benefit Plan Investor" shall have the meaning contained in 29
C.F.R. Section 2510.3-101, as modified by Section 3(42) of the US
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and includes (a) an "employee benefit plan" as defined
in Section 3(3) of ERISA that is subject to Part 4 of Title I of
ERISA; (b) a "plan" described in Section 4975(e)(1) of the US
Internal Revenue Code of 1986, as amended (the "Code"), that is
subject to Section 4975 of the Code; and (c) an entity whose
underlying assets include "plan assets" by reason of an employee
benefit plan's or a plan's investment in such entity. For purposes
of the foregoing, a "Benefit Plan Investor" does not include a
governmental plan (as defined in Section 3(32) of ERISA), a non-US
plan (as defined in Section 4(b)(4) of ERISA) or a church plan (as
defined in Section 3(33) of ERISA) that has not elected to be
subject to ERISA.
Each purchaser and subsequent transferee of any class of
ordinary shares (or any other class of equity interest in the
Company) will be required to represent, warrant and covenant, or
will be deemed to have represented, warranted and covenanted, that
it is not, and is not acting on behalf of or with the assets of, a
Benefit Plan Investor to acquire such ordinary shares (or any other
class of equity interest in the Company).
Under the Articles, the directors have the power to require the
sale or transfer of the Company's securities in order to avoid the
assets of the Company being treated as "plan assets" for the
purposes of ERISA.
The fiduciary provisions of laws applicable to governmental
plans, non-US plans or other employee benefit plans or retirement
arrangements that are not subject to ERISA (collectively,
"Non-ERISA Plans") may impose limitations on investment in the
Company. Fiduciaries of Non-ERISA Plans, in consultation with their
advisers, should consider, to the extent applicable, the impact of
such fiduciary rules and regulations on an investment in the
Company.
Among other considerations, the fiduciary of a Non-ERISA Plan
should take into account the composition of the Non- ERISA Plan's
portfolio with respect to diversification; the cash flow needs of
the Non-ERISA Plan and the effects thereon of the illiquidity of
the investment; the economic terms of the Non- ERISA Plan's
investment in the Company; the Non- ERISA Plan’s funding
objectives; the tax effects of the investment and the tax and other
risks associated with the investment; the fact that the investors
in the Company are expected to consist of a diverse group of
investors (including taxable, tax-exempt, domestic and foreign
entities) and the fact that the management of the Company will not
take the particular objectives of any investors or class of
investors into account.
Non-ERISA Plan fiduciaries should also take into account the
fact that, while the Company's board of directors and its
investment adviser will have certain general fiduciary duties to
the Company, the board and the investment adviser will not have any
direct fiduciary relationship with or duty to any investor, either
with respect to its investment in Shares or with respect to the
management and investment of the assets of the Company. Similarly,
it is intended that the assets of the Company will not be
considered plan assets of any Non-ERISA Plan or be subject to any
fiduciary or investment restrictions that may exist under laws
specifically applicable to such Non-ERISA Plans. Each Non-ERISA
Plan will be required to acknowledge and agree in connection with
its investment in any securities to the foregoing status of the
Company, the board and the investment adviser that there is no
rule, regulation or requirement applicable to such investor that is
inconsistent with the foregoing description of the Company, the
board and the investment adviser.
Each purchaser or transferee that is a Non-ERISA Plan will be
deemed to have represented, warranted and covenanted as
follows:
(a) The Non-ERISA Plan is not a Benefit Plan Investor;
(b) The decision to commit assets of the Non-ERISA Plan for
investment in the Company was made by fiduciaries independent of
the Company, the Board, the Investment adviser and any of their
respective agents, representatives or affiliates, which fiduciaries
(i) are duly authorized to make such investment decision and have
not relied on any advice or recommendations of the Company, the
Board, the Investment adviser or any of their respective agents,
representatives or affiliates and (ii) in consultation with their
advisers, have carefully considered the impact of any applicable
federal, state or local law on an investment in the Company;
(c) The Non-ERISA Plan’s investment in the Company will not
result in a non-exempt violation of any applicable federal, state
or local law;
(d) None of the Company, the Board, the Investment adviser or
any of their respective agents, representatives or affiliates has
exercised any discretionary authority or control with respect to
the Non-ERISA Plan’s investment in the Company, nor has the
Company, the Board, the Investment adviser or any of their
respective agents, representatives or affiliates rendered
individualized investment advice to the Non-ERISA Plan based upon
the Non-ERISA Plan’s investment policies or strategies, overall
portfolio composition or diversification with respect to its
commitment to invest in the Company and the investment program
thereunder; and
(e) It acknowledges and agrees that it is intended that the
Company will not hold plan assets of the Non-ERISA Plan and that
none of the Company, the Board, the Investment adviser or any of
their respective agents, representatives or affiliates will be
acting as a fiduciary to the Non-ERISA Plan under any applicable
federal, state or local law governing the Non- ERISA Plan, with
respect to either (i) the Non-ERISA Plan’s purchase or retention of
its investment in the Company or (ii) the management or operation
of the business or assets of the Company. It also confirms that
there is no rule, regulation, or requirement applicable to such
purchaser or transferee that is inconsistent with the foregoing
description of the Company, the Board and the Investment
adviser.
US Tax Matters
This discussion does not constitute
tax advice and is not intended to be a substitute for tax advice
and planning. Prospective holders of the Company's securities must
consult their own tax advisers concerning the US federal, state and
local income tax and estate tax consequences in their particular
situations of the acquisition, ownership and disposition of any of
the Company's securities, as well as any consequences under the
laws of any other taxing jurisdiction.
The Board may decline to register a person as, or to require
such person to cease to be, a holder of any class of ordinary
shares or other equity securities of the Company because of, among
other reasons, certain US ownership and transfer restrictions that
relate to “controlled foreign corporations” contained in the
Articles of the Company. A Shareholder of the Company may be
subject to forced sale provisions contained in the Articles in
which case such shareholder could be forced to dispose of its
securities if the Company’s directors believe that such shareholder
is, or is related to, a citizen or resident of the United States, a US partnership, a US
corporation or a certain type of estate or trust and that ownership
of any class of ordinary shares or any other equity securities of
the Company by such shareholder would materially increase the risk
that the Company could be or become a "controlled foreign
corporation" within the meaning of the Code (a "CFC"). Shareholders
of the Company may also be restricted by such provisions with
respect to the persons to whom they are permitted to transfer their
securities.
In general, a foreign corporation is treated as a CFC if, on any
date of its taxable year, its "10% US Shareholders" collectively
own (directly, indirectly or constructively within the meaning of
Section 958 of the Code) more than 50% of the total combined voting
power or total value of the corporation's stock. For this purpose,
a "10% US Shareholder" means any US person who owns (directly,
indirectly or constructively within the meaning of Section 958 of
the Code) 10% or more of the total combined voting power of all
classes of stock of a foreign corporation or 10% or more of the
total value of shares of all classes of stock of a foreign
corporation. The Tax Cuts and Jobs Act (the “Tax Act”) eliminated
the prohibition on “downward attribution” from non-US persons to US
persons under Section 958(b)(4) of the Code for purposes of
determining constructive stock ownership under the CFC rules. As a
result, the Company’s US subsidiary will be deemed to own all of
the stock of the Company’s non-US subsidiaries held by the Company
for purposes of determining such foreign subsidiaries’ CFC status.
The legislative history under the Tax Act indicates that this
change was not intended to cause the Company’s non-US subsidiaries
to be treated as CFCs with respect to a 10% US Shareholder that is
not related to the Company’s US subsidiary. However, the IRS has
not yet issued any guidance confirming this intent and it is not
clear whether the IRS or a court would interpret the change made by
the Tax Act in a manner consistent with such indicated intent. The
Company's treatment as a CFC as well as its foreign subsidiaries’
treatment as CFCs could have adverse tax consequences for 10% US
Shareholders.
The Company has been advised that it is NOT a passive foreign
investment company ("PFIC") for the fiscal years ended February 2020 and 2019. An analysis for the
financial year ended 28 February 2021
is currently being undertaken. A classification as a PFIC would
likely have adverse tax consequences for US taxpayers.
The taxation of a US taxpayer's
investment in the Company's securities is highly complex.
Prospective holders of the Company's securities must consult their
own tax advisers concerning the US federal, state and local income
tax and estate tax consequences in their particular situations of
the acquisition, ownership and disposition of any of the Company's
securities, as well as any consequences under the laws of any other
taxing jurisdiction.
Investment
Adviser's ADV Form
Shareholders and state securities authorities wishing to view
the Investment Adviser's ADV form can do so by following the link
below:
https://adviserinfo.sec.gov/firm/summary/160932