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 2022
LEI: 549300TZCK08Q16HHU44
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
ANNOUNCEMENT –
CORRECTION
10 NOVEMBER 2022
THE FOLLOWING ANNOUCEMENT CONTAINS THE FOLLOWING CHANGES TO THE
INITIAL ANNOUCEMENT, RELEASED AT 07:00 ON 10
NOVEMBER 2022.
- The removal of ‘Salter Labs’ from the third point in the
‘Financial and Operational Highlights’ section;
- The inclusion of ‘Cash and cash equivalents balance currently
amounts to approximately $64 million’
in the ‘Investment Policy and Liquidity’ section.
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").
10 November
2022
JZ Capital Partners, the London
listed fund that invests in US and European microcap companies and
US real estate, announces its interim results for the six-month
period ended 31 August 2022.
Financial and Operational
Highlights
- NAV per share of $4.71 (FYE
28/02/22: $4.29), representing an
increase of 10%
- NAV of $365.1 million (FYE
28/02/22: $332.3 million)
- Total realisation and distribution proceeds of $106 million, including the sale of JZCP’s
investments in Flow Control and Testing Services, and its
co-investment in New Vitality.
- Despite economic headwinds, the US and European micro-cap
portfolios have generally performed well, and both portfolios are
working towards several realisations.
Investment Policy and Liquidity
- The Company remains focused on the implementation of its New
Investment Policy. This policy focuses on realising the maximum
value from the Company’s investment portfolio and, after repaying
its debt obligations, returning capital to shareholders.
- The Company drew down $31.5
million of Subordinated Notes under a facility made
available by affiliates of Jay
Jordan and David Zalaznick,
which maturity was recently extended to 30
September 2023.
- The Company redeemed in full its £38.8 million of Convertible
Unsecured Loan Stock (CULS) and £57.6 million of Zero Dividend
Preference Shares (ZDPs) on their respective maturity dates.
- In summary, the Company’s outstanding debt has been reduced to
(i) $45.0 million Senior Term Loan
Facility due 26 January 2027 and (ii)
$31.5 million of Subordinated Notes
due 30 September 2023.
- Cash and cash equivalents balance currently amounts to
approximately $64 million.
David Macfarlane, Chairman of
JZCP, said: “The past year and a half have been
transformational for the Company. The successful realization of
several investments has increased the Company’s NAV and generated
substantial liquidity, allowing it to dramatically reduce its debt
obligations and achieve financial stability.
Whilst it may take more time than anticipated due to the
economic downturn, the Board is confident that the New Investment
Policy will be implemented in an orderly manner and that, in due
course, a significant amount of capital will be able to 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.
Hannah
Hayward
+44 (0) 1481 745 417
Northern Trust International Fund
Administration Services (Guernsey) Limited
About JZ Capital Partners Limited
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
The Directors are pleased to present the Interim Results of the
Company for the six-month period ended 31
August 2022, which show that the NAV per share of the
Company has increased approximately 10%, from $4.29 as of 28 February
2022 to $4.71 as of
31 August 2022.
This substantial increase is in large part due to write-ups and
realisations above NAV in the JZHL Secondary Fund LP portfolio (the
“Secondary Fund”), in which the Company holds a Special Limited
Partnership interest.
Investment Policy and Liquidity
The past year and a half have been transformational for the
Company. Major realisations, notably those of Salter Labs, Flow
Control and Testing Services (the latter two in the Secondary
Fund), increased the Company’s NAV and generated substantial
liquidity.
In addition to these realisations, affiliates of David Zalaznick and Jay
Jordan provided the Company with a $31.5 million facility of Subordinated Notes, of
which the maturity was recently extended to 30 September 2023.
The Company redeemed in full its £38.8 million of Convertible
Unsecured Loan Stock and £57.6 million of Zero Dividend Preference
Shares on their respective maturity dates. Consequently, the
Company’s outstanding debt has been reduced to a $45 million senior term loan facility (the
“Senior Term Loan Facility”) due 26 January
2027 and the $31.5 million of
Subordinated Notes due 30 September
2023. The Senior Term Loan Facility may be repaid early
without penalty once the senior lender has received an aggregate
return of 15%. No early repayment charges apply to the Subordinated
Notes. In addition, the Senior Credit Facility provides for up to
an additional $25 million in first
lien delayed draw term loan, none of which has been drawn on so
far. The Company’s cash and cash equivalents balance currently
amounts to approximately $64
million.
The Company remains focused on the implementation of its
investment policy (the “New Investment Policy”), which was adopted
by shareholders in August 2020. This
policy is to realise the maximum value from the Company’s
investment portfolio and, after repaying the remainder of the
Company’s debt, to return capital to shareholders. The Company is
only making investments where it has existing obligations or to
selectively support its existing portfolio to maximise value.
While the events of the past year represent tremendous progress
in meeting the goals of the New Investment Policy, the timeline to
begin returning capital to shareholders remains uncertain. The
climate for achieving realisations is substantially more
challenging and time consuming than it was just several months ago.
The Board would also like to note that in cases where the Company
is a co-investor in a portfolio asset, decisions regarding
realisations and their timing is not under the control of the
Company. However, once the Company’s debt is paid off, it remains
the Company’s intention to begin making interim distributions of
capital as liquidity permits.
US and European Micro-cap Portfolios
Our US and, in context of difficulties in Europe, our European micro-cap portfolios have
generally performed well, and we continue to work towards several
realisations in both portfolios. The Board looks forward to
reporting on further potential realisations at the year-end
period.
Real Estate Portfolio
The Company has two remaining properties with equity value:
Esperante, an office building in West
Palm Beach, Florida, and 247 Bedford Avenue, a retail
building with Apple as the primary tenant, in Williamsburg,
Brooklyn. The Board looks forward
to reporting further on these properties when there is an updated
appraisal done for each at the year-end period.
Outlook
Due to the transformational events of the past year, the Company
has achieved financial stability; heading towards year-end, the
Board believes the Company is well-positioned to weather the
current economic headwinds. Although it may take more time than
might have seemed possible prior to the economic downturn, the
Directors are confident that the New Investment Policy will be
implemented in an orderly manner and that in due course a
significant amount of capital will be able to be returned to
shareholders.
David Macfarlane Chairman
9 November 2022
Investment Adviser's Report
Dear Fellow Shareholders,
We are pleased to report that our Company has achieved some
significant milestones recently, most notably the recent redemption
of the Zero Dividend Preference Shares (“ZDPs”) at their stated
maturity in early October. JZCP heads into its fiscal year-end
(February 28, 2023) with a strong
balance sheet, which will provide the foundation for completing the
build-out of existing assets, realizing investments, paying down
debt and returning capital to shareholders.
With regards to our efforts to fortify JZCP’s balance sheet over
the past year and half, we successfully executed the following
transactions, among others:
- We agreed to provide through our affiliates 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.
- JZCP paid off its CULS (£38.8 million) in full and on their
stated due date while at the same time maintaining a cash
cushion.
- The Company repaid its previous senior facility (the “Previous
Senior Facility”) with clients and funds managed by Cohanzick
Management, LLC and CrossingBridge Advisors, LLC in an amount of
approximately $52.9 million, prior to
such facility’s maturity date of 12 June
2022.
- On 26 January 2022, the Company
entered into a new five-year term senior secured loan facility (the
“New Senior Facility”) with WhiteHorse Capital Management LLC. The
New Senior Facility consists of a $45.0
million first lien term loan (which was drawn at close) and
up to an additional $25.0 million in
first lien delayed draw term loan (which remains undrawn). The
terms of the New Senior Facility represent a substantial
improvement to those of the Previous Senior Facility, including a
lower interest cost and longer maturity – the New Senior Facility
is due on 26 January 2027.
- In June and August 2022, the JZHL
Secondary Fund LP (the “Secondary Fund”) made two distributions to
JZCP, totaling approximately $97.4
million. Pursuant to the Secondary Fund’s waterfall, in
which JZCP has a Special LP Interest, the Company expects to
receive approximately 37.5% of all further distributions received
by the Secondary Fund. As of 31 August
2022, JZCP still has approximately $74.5 million of remaining value in the Secondary
Fund.
- In October 2022, JZCP paid off
its ZDPs (£57.6 million) in full and on their stated maturity while
maintaining a significant cash cushion.
While our US micro-cap portfolio has overall performed well, our
European portfolio has been challenged by the economic effects of
the recession in Europe, including
soaring energy prices, falling commodity prices and the impact of
the war in the Ukraine.
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. We look forward to receiving new appraisals
for both properties at the year-end.
As of 31 August 2022, our US
micro-cap portfolio consisted of 12 businesses, which includes
three ‘verticals’ and five 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 increased 42
cents, or approximately 9.8%, during the six-month
period.
| NAV per
Ordinary share as of 28 February 2022 |
|
|
|
|
|
|
|
$4.29 |
| Change
in NAV due to capital gains and accrued income |
|
|
|
|
|
|
| + US micro-cap |
|
|
|
|
|
|
|
|
|
|
|
0.66 |
| - European
micro-cap |
|
|
|
|
|
|
|
|
|
|
|
(0.03) |
| - Real estate |
|
|
|
|
|
|
|
|
|
|
|
(0.01) |
| - Other
investments |
|
|
|
|
|
|
|
|
|
|
|
(0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other decreases in
NAV |
|
|
|
|
|
|
|
|
|
|
|
|
| - Net foreign exchange
effect |
|
|
|
|
|
|
|
|
|
|
|
(0.06) |
| - Finance costs |
|
|
|
|
|
|
|
|
|
|
|
(0.06) |
| - Expenses and
taxation |
|
|
|
|
|
|
|
|
|
|
|
(0.07) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAV per
Ordinary share as of 31 August 2022 |
|
|
|
|
|
|
|
$4.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The US micro-cap portfolio continued to perform well during the
six-month period, delivering a net increase of 66 cents per share. This was primarily due to net
accrued income of (4) cents and
write-ups at co-investment Deflecto (3
cents) and the JZHL Secondary Fund portfolio (71 cents).
Offsetting these increases were decreases at co-investment New
Vitality and another US micro-cap portfolio company Avante
(5 cents and 7
cents respectively).
Our European portfolio decreased 3
cents during the six-month period, due to net write downs at
European portfolio companies in our JZI Fund III, L.P.
portfolio.
The real estate portfolio was mostly flat for the six-month
period.
Returns
The chart below summarises cumulative total shareholder returns
and total NAV returns for the most recent six- month, one-year,
three-year and five-year periods.
|
31.8.2022 |
28.2.2022 |
31.8.2021 |
31.8.2019 |
31.8.2017 |
| Share price (in
GBP) |
£1.71 |
£1.05 |
£1.20 |
£4.82 |
£5.16 |
| NAV per share (in
USD) |
$4.71 |
$4.29 |
$4.08 |
$9.66 |
$9.88 |
| NAV to market price
discount |
57.8% |
67.2% |
59.5% |
39.2% |
32.8% |
|
|
6-
month return |
1
year
return |
3
year return |
5
year
return |
| Dividends paid (in
USD) |
|
- |
- |
- |
$0.155 |
| Total Shareholders'
return (GBP)1 |
|
62.9% |
42.5% |
(64.5%) |
(66.0%) |
| Total NAV return per
share (USD)1 |
|
9.8% |
15.4% |
(51.2%) |
(52.3%) |
1 Total returns are cumulative and assume
that dividends were reinvested.
Portfolio Summary
Our portfolio is well-diversified by asset type and geography,
with 29 US and European micro-cap investments across eleven
industries. The European portfolio itself is well-diversified
geographically across Spain,
Italy, Portugal, Luxembourg, Scandinavia and the UK.
Below is a summary of JZCP’s assets and liabilities at
31 August 2022 as compared to
28 February 2022. An explanation of
the changes in the portfolio follows:
|
31.8.2022 |
|
28.2.2022 |
|
US$’000 |
|
US$’000 |
| US micro-cap portfolio |
228,386 |
|
284,162 |
| European micro-cap portfolio |
96,624 |
|
105,475 |
| Real estate portfolio |
23,075 |
|
23,597 |
| Other investments |
23,279 |
|
23,533 |
| Total Private
Investments |
371,364 |
|
436,767 |
Treasury bills |
53,340 |
|
3,394 |
| UK gilt |
67,105 |
|
- |
| Cash |
15,953 |
|
43,656 |
| Total cash and cash
equivalents |
136,398 |
|
47,050 |
Other assets |
310 |
|
70 |
Total Assets |
508,072 |
|
483,887 |
|
|
|
|
| Senior Credit Facility |
42,804 |
|
42,573 |
| Subordinated Notes |
32,296 |
|
32,293 |
| Zero Dividend Preferred shares |
66,740 |
|
75,038 |
| Other liabilities |
1,170 |
|
1,719 |
| Total
Liabilities |
143,010 |
|
151,623 |
|
|
|
|
| Total Net Assets |
365,062 |
|
332,264 |
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 LP 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 66 cents per share. This was primarily due to net
accrued income of (4) cents and
write-ups at co-investment Deflecto (3
cents) and the JZHL Secondary Fund portfolio (71 cents).
Offsetting these increases were decreases at co-investment New
Vitality and another US micro-cap portfolio company Avante
(5 cents and 7
cents respectively).
European microcap portfolio
Our European portfolio decreased 3
cents during the six-month period, due to net write downs at
European portfolio companies in our JZI Fund III, L.P. portfolio.
Given the ongoing challenges of the recession in Europe and the war in Ukraine, we expect there to be further
write-downs in the European portfolio by our fiscal year-end.
JZCP invests in the European micro-cap sector through its
approximately 18.8% ownership of JZI Fund III, L.P. As of
31 August 2022, 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 two companies in Spain: Docout and Toro Finance.
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.
We look forward to reporting on our progress at both properties
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.
During the period, Spruceview’s mandate for a portfolio of
alternative investments for a Mexican trust (or “CERPI”) was
increased by $200 million, bringing
total assets to $1.2 billion, with
the potential to further increase the size of the CERPI to
$1.5 billion, pending regulatory
approvals, over the coming year. In addition, Spruceview won
a $200 million advisory mandate for a
portfolio of alternative investments sponsored by a Colombian
public pension fund administrator. Further, the firm received
over $31 million in additional
contributions to the pension plans to which it provides advisory
services.
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 22 investment, business and product
development, legal and operations professionals.
Realisations
New Vitality
In July 2022, JZCP received a
distribution from the sale of co-investment New Vitality totaling
approximately $7.4 million.
JZHL Secondary Fund LP
In June and August 2022, the
Secondary Fund made two distributions to JZCP, totaling
approximately $97.4 million. Pursuant
to the Secondary Fund’s waterfall, in which JZCP has a Special LP
Interest, the Company expects to receive approximately 37.5% of all
further distributions received by the Secondary Fund.
Outlook
We believe that 2022 has been a transformational year for JZCP.
Having now paid off the CULS and ZDPs in full and at their stated
maturities, the Company has the ability to continue to build-out
and maximize the value of its remaining portfolio.
As a result of the payoff of the CULS and ZDPs, our current
balance sheet is in a much stronger position than previously
reported, with key outstanding debt obligations of just
$45.0 million outstanding on the New
Senior Facility due 26 January 2027
and $31.5 million of Subordinated
Notes due 30 September 2023.
Fortunately, we had significant realizations in the Secondary
Fund portfolio in the past year which provided much needed
liquidity to pay down debt. However, since the world has changed
dramatically in the past six months – with rising interest rates
and macroeconomic challenges – asset values cannot be realized as
easily as in the recent past. Furthermore, we may see asset values
decline before they go up again.
We will take advantage of realization opportunities as market
conditions permit. In the meantime, we will continue to build our
existing portfolio companies which we believe is the most effective
way to return significant capital to our ordinary shareholders.
Thank you again for your continued support through a difficult
period. We firmly believe that the Company is in a much stronger
position than at any point in the past three years.
As always, we remain dedicated to maximizing value for our
fellow shareholders.
Yours faithfully, Jordan/Zalaznick Advisers, Inc.
9 November 2022
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 Directors confirm that to the best of their knowledge:
- 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 2022 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 ZDP shares (redeemed
post period-end), Senior Credit Facility and subordinated, second
lien Subordinated Notes (the “Subordinated Notes”). 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.
Investment Performance and Impact on NAV
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.
Macroeconomic Risks and Impact on NAV
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 invest and realise investments and the level of realised
returns. Approximately 20% (28 February
2022: 24%) of the Company's investments are
denominated in non-US dollar currencies, primarily the euro.
Fluctuations to these exchange rates will affect the NAV of the
Company.
Uncertainties in today's world that influence economic factors
include:
(i) COVID-19
Whilst the Company's portfolio has performed robustly throughout
the pandemic, the Board acknowledge world economies face lasting
challenges as they emerge from the pandemic.
(ii) War in Ukraine and resulting energy crisis
The Board strongly condemn the actions of the Russian government
and the devastating events that have unfolded since Russia’s
unprovoked invasion of Ukraine.
JZCP's investments are predominantly focused in the U.S. and
Western Europe, and as such, the
portfolio has no direct exposure to the affected regions. However,
certain portfolio companies have exposure to the rising energy
costs resulting from the conflict. The Board continue to receive
reports from the Investment Adviser on the impact of these
increased costs. The Board is not aware that the Company has any
Russian investors.
(iii) Global warming
The Board considers the impact of climate change on the firm’s
business strategy and risk profile and, where appropriate will make
timely climate change related disclosures. Regular updates, given
by the Investment Adviser on portfolio companies and properties
will include potential risk factors pertaining to climate change
and how/if these risks are to be mitigated.
The Board also has regard to the impact of the Company’s
operations on the environment and other stakeholders. There are
expectations that portfolio companies operate is a manner that
contributes to sustainability by considering the social,
environmental, and economic impacts of doing business. The Board
requests the Investment Adviser report on any circumstances where
expected standards are not met.
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.
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.
- The effect of the war in Ukraine on market conditions means that there
are challenges to completing corporate transactions within the
European micro-cap portfolio and planned realisations may be
delayed.
- The Board deems the risks posed by COVID-19 to the Company’s
investment portfolio, in terms of valuation and ability to complete
realisations continue to lessen as economies learn to live and
adapt to the virus.
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 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.
In reaching its conclusion, the Board has considered the risks
that could impact the Company’s liquidity over the period from
9 November 2022 to 30 November 2023 (the "Going Concern
period").
As part of their assessment, the Board considered whether there
was a reasonable expectation that the Company has and will generate
adequate liquidity to meet its debt obligations over the
Going Concern period including the redemption of its Subordinated
Notes payable 30 September 2023.
Recent events impacting liquidity
- realisation proceeds during the interim period in excess of
$100 million;
- post period end, the extension of the maturity date of the
Subordinated Notes to 30 September
2023; and
- post period end, the redemption and cancellation of the
Company's ZDP shares.
Update on material liabilities due for settlement and the
Company's net debt position
The below table shows the Company's improved net debt position
as at 1 October 2022 (reflecting the
post-period redemption of the ZDP shares) compared to previous
period ends:
|
1.10.2022
$'000 |
31.8.2022
$'000 |
28.2.2022
$'000 |
31.8.2021
$'000 |
28.2.2021
$’000 |
| Senior Credit
Facility |
43,271 |
42,804 |
42,573 |
36,629 |
68,694 |
| Subordinated
Notes |
31,505 |
32,296 |
32,293 |
31,669 |
- |
| ZDP Shares |
- |
66,740 |
77,281 |
75,014 |
80,527 |
| CULS |
- |
- |
- |
- |
54,322 |
| Total debt |
74,776 |
141,840 |
152,147 |
143,312 |
203,553 |
| Cash and cash
equivalents held1 |
65,672 |
136,398 |
47,050 |
44,582 |
63,178 |
| Net debt position |
9,104 |
5,442 |
105,097 |
98,730 |
140,375 |
1Includes investments in Treasury Bills and UK
Gilts
Realisations and refinancings during the interim period and
previous two fiscal years
Period End
31.8.2022
$ million |
Year End
28.2.2022
$ million |
Year End
28.2.2021
$ million |
|
|
|
|
|
|
|
|
|
| JZHL Secondary
Fund |
U.S. |
97.4 |
Salter Labs |
U.S. |
41.1 |
Secondary
Sale |
U.S |
87.7 |
| New Vitality |
U.S. |
7.4 |
George
Industries |
U.S. |
9.5 |
Real estate |
|
13.6 |
| Fund III |
Euro |
0.2 |
Orangewood
Fund |
U.S. |
6.2 |
ABTA |
U.S |
9.4 |
|
|
|
Igloo |
U.S. |
3.8 |
Eliantus |
Euro |
9.4 |
|
|
|
Vitalyst |
U.S. |
1.9 |
K2 Towers
II |
Euro |
9.2 |
|
|
|
EMC 2010 |
Euro |
2.2 |
Other |
U.S |
9.0 |
|
|
|
|
|
1.1 |
Cerpi |
Other |
1.2 |
|
|
105.0 |
|
|
65.8 |
|
|
139.5 |
The Board takes account of the levels of realisation proceeds
historically generated by the Company’s micro-cap portfolios as
well as the accuracy of previous forecasts to assess the predicted
accuracy of forecasts presented. 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.
Going Concern Conclusion
Considering the Company’s projected cash position, including the
Company's ongoing operating costs and the anticipated further
investment required to support the Company’s portfolio, 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 30 November 2023.
Approved by the Board of Directors and agreed on behalf of the
Board on 9 November 2022.
David
Macfarlane
Sharon Parr
Chairman
Director
Investment Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 August 2022 |
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 |
|
|
|
34,876 |
74,470 |
15.2 |
|
|
|
|
|
|
|
| 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 |
95,944 |
19.5 |
|
|
|
|
|
|
|
| US Micro-cap
(Co-investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFLECTO
Deflecto designs, manufactures and sells innovative plastic
products to multiple industry segments |
|
|
|
45,010 |
45,384 |
9.2 |
ORIZON
Manufacturer of high precision machine parts and tools for
aerospace and defence industries |
|
|
|
3,899 |
7,000 |
1.4 |
| Total US
Micro-cap (Co-investments) |
|
|
|
48,909 |
52,384 |
10.6 |
|
|
|
|
|
|
|
US Micro-cap (Other) |
|
|
|
|
|
|
|
|
|
|
|
|
|
AVANTE HEALTH
SOLUTIONS
Provider of new and professionally refurbished healthcare
equipment |
|
|
|
8,140 |
4,588 |
0.9 |
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) |
|
|
|
52,100 |
5,588 |
1.1 |
|
|
|
|
|
|
|
| Total US Micro-cap
portfolio |
|
|
|
184,135 |
228,386 |
46.4 |
European Micro-cap portfolio |
|
|
|
|
|
|
EUROMICROCAP FUND 2010, L.P. |
|
|
|
|
|
| Invested
in European Micro-cap entities |
1 |
|
596 |
|
0.1 |
| JZI FUND
III, L.P. |
|
|
|
|
|
| JZCP's
investment in JZI Fund III is further detailed below |
59,316 |
|
70,430 |
|
14.4 |
| Total
European Micro-cap (measured at Fair Value) |
59,317 |
|
71,026 |
|
14.5 |
| Debt
Investments |
|
|
|
|
|
|
DOCOUT |
|
|
|
|
|
| Provider
of digitalisation, document processing and storage services |
2,777 |
|
3,503 |
|
0.7 |
| TORO
FINANCE |
|
|
|
|
|
| Provides
short term receivables finance to the suppliers of major Spanish
companies |
21,619 |
|
22,095 |
|
4.5 |
| XACOM |
|
|
|
|
|
| Supplier
of telecom products and technologies |
2,055 |
|
- |
|
- |
| Debt
Investments (classified at amortised cost) |
26,451 |
|
25,598 |
|
5.2 |
| Total
European Micro-cap portfolio |
85,768 |
|
96,624 |
|
19.7 |
| Real
Estate portfolio |
|
|
|
|
|
| 247
BEDFORD AVENUE |
|
|
|
|
|
| Prime
retail asset in northern Brooklyn, NY |
17,717 |
|
8,832 |
|
1.8 |
|
ESPERANTE |
|
|
|
|
|
| An iconic
building on the downtown, West Palm Beach skyline |
14,158 |
14,243 |
2.9 |
JZCP REALTY
Other Properties held - no equity value |
8,409 |
|
- |
|
- |
| Total
Real Estate portfolio |
40,284 |
|
23,075 |
|
4.7 |
| 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 |
|
0.1 |
| SPRUCEVIEW
CAPITAL |
|
|
|
|
|
| Asset
management company focusing primarily on managing |
|
|
|
|
|
| endowments
and pension funds |
32,605 |
|
22,070 |
|
4.5 |
| Total
Other investments |
38,720 |
|
23,279 |
|
4.7 |
| Listed
investments |
|
|
|
|
|
| U.S.
Treasury Bill - Maturity 16 February 2023 |
16,646 |
|
16,648 |
|
3.4 |
| U.S.
Treasury Bill - Maturity 17 November 2022 |
33,285 |
|
33,308 |
|
6.8 |
| U.S.
Treasury Bill - Maturity 20 October 2022 |
3,393 |
|
3,384 |
|
0.7 |
| UK Gilt -
Maturity 7 September 2022 |
69,824 |
|
67,105 |
|
13.6 |
| Total
Listed investments |
123,148 |
|
120,445 |
|
24.5 |
| Total -
portfolio |
472,055 |
|
491,809 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
1 Original 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 is calculated in accordance with IFRS, and
represents the fair value of the Company's LP interest on
recognition adjusted for subsequent distributions.
3 Co-investment with Fund A, a Related
Party (Note 19).
Summary of JZCP's investments in JZHL
Secondary Fund
|
|
|
JZHL
Valuation1
As at 31.8.2022
$'000s |
| US Micro-cap
investments |
|
|
|
ACW FLEX
PACK, LLC
Provider of a variety of custom flexible packaging solutions to
converters and end-users |
|
|
5,568 |
FLOW CONTROL, LLC
Manufacturer and distributor of high-performance, mission-critical
flow handling products and components utilized to connect
processing fine equipment |
|
|
17 |
SAFETY SOLUTIONS 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 |
|
|
3,051 |
|
|
|
|
FELIX
STORCH
Supplier of specialty, professional, commercial, and medical
refrigerators and freezers, and cooking appliances |
|
|
41,625 |
PEACEABLE STREET CAPITAL
Specialty finance platform focused on commercial real estate |
|
|
13,703 |
TIERPOINT
Provider of cloud computing and colocation data centre
services |
|
|
11,112 |
|
|
|
75,076 |
| Hurdle amount due to
Secondary Investors |
|
|
(606) |
| JZCP's interest in
JZHL Secondary Fund |
|
|
74,470 |
1JZCP’s valuation being the 37.5% Special L.P
interest in the underlying investment in JZHL Secondary Fund.
Summary of JZCP's investments in
JZI Fund III
|
Country |
JZCP Cost
(EURO)1
As at 31.8.2022
€'000s |
|
JZCP Value
(EURO)1
As at 31.8.2022
€'000s |
|
JZCP Value
(USD)
As at 31.8.2022
€'000s |
ALIANZAS EN ACEROS
Steel service center |
Spain |
4,354 |
|
4,652 |
|
4,678 |
BLUESITES
Build-up in cell tower land leases |
Portugal |
3,615 |
|
5,512 |
|
5,543 |
COLLINGWOOD
Niche UK motor insurer |
UK |
3,014 |
|
3,038 |
|
3,054 |
ERSI
Reinforced steel modules |
Lux |
8,544 |
|
1,861 |
|
1,871 |
FACTOR ENERGIA
Electricity supplier |
Spain |
3,281 |
|
8,063 |
|
8,107 |
FINCONTINUO
Niche consumer lender |
Italy |
4,762 |
|
5,473 |
|
5,504 |
GUANCHE
Build-up of petrol stations |
Spain |
4,590 |
|
4,983 |
|
5,011 |
KARIUM
Personal care consumer brands |
UK |
4,321 |
|
9,712 |
|
9,767 |
LUXIDA
Build-up in electricity distribution |
Spain |
3,315 |
|
4,969 |
|
4,966 |
MY LENDER
Niche consumer lender |
Finland |
4,865 |
|
1,411 |
|
1,419 |
S.A.C
Operational van leasing |
Denmark |
3,487 |
|
8,100 |
|
8,145 |
TREEE
e-waste recycling |
Italy |
3,818 |
|
9,581 |
|
9,634 |
UFASA
Niche consumer lender |
Spain |
5,119 |
|
6,810 |
|
6,847 |
| Other net Liabilities |
|
|
|
|
|
(4,146) |
| Total valuation |
|
|
|
|
|
70,430 |
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
Interim Financial Statements (“Interim Financial Statements”) for
the six months ended 31 August 2022
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 Unaudited Interim Financial
Statements for the six months ended 31
August 2022 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 (“DTR”).
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. 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.
Conclusion relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with International Standard on Review Engagements 2410
(UK) “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Financial
Reporting Council, however future events or conditions may cause
the entity to cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the Interim Report
and Interim Financial Statements in accordance with Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the Interim Report and Interim Financial
Statements, the Directors are responsible for assessing the
company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the 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,
including our Conclusions relating to going concern, 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) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. 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
9 November 2022
Notes
1. The Interim Report and Financial Statements are
published on websites maintained by the Investment Adviser.
2. 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.
3. 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 2022 to
31 August 2022
|
|
|
Six
Month |
|
|
Six
Month |
|
|
|
Period Ended |
|
|
Period Ended |
|
|
|
31
August 2022 |
|
|
31
August 2021 |
|
Note |
|
US$'000 |
|
|
US$’000 |
|
|
|
|
|
|
|
| Income, investment
and other gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net gain on
investments at fair value through profit or loss |
6 |
|
27,671 |
|
|
- |
|
|
|
|
|
|
|
| Investment income |
8 |
|
8,607 |
|
|
9,119 |
|
|
|
|
|
|
|
| Bank and deposit
interest |
|
|
85 |
|
|
75 |
|
|
|
|
|
|
|
| Realisations from
investments held in escrow accounts |
21 |
|
999 |
|
|
- |
|
|
|
|
|
|
|
| Net foreign currency
exchange gains |
|
|
6,108 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,470 |
|
|
9,194 |
|
|
|
|
|
|
|
| Expenses and
losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expected credit
losses |
7 |
|
(916) |
|
|
(1,405) |
|
|
|
|
|
|
|
| Investment Adviser's
base fee |
10 |
|
(3,872) |
|
|
(3,888) |
|
|
|
|
|
|
|
| Administrative
expenses |
|
|
(1,331) |
|
|
(2,154) |
|
|
|
|
|
|
|
| Directors'
remuneration |
|
|
(145) |
|
|
(145) |
|
|
|
|
|
|
|
| Net loss on
investments at fair value through profit or loss |
6 |
|
- |
|
|
(4,809) |
|
|
|
|
|
|
|
| Loss on financial
liabilities at fair value through profit or loss |
15 |
|
- |
|
|
(1,869) |
|
|
|
|
|
|
|
| Net foreign currency
exchange losses |
|
|
- |
|
|
(202) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,264) |
|
|
(14,472) |
|
|
|
|
|
|
|
| Operating
profit/(loss) |
|
|
37,206 |
|
|
(5,278) |
|
|
|
|
|
|
|
| Finance
costs |
9 |
|
(4,806) |
|
|
(6,981) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss)
before taxation |
|
|
32,400 |
|
|
(12,259) |
|
|
|
|
|
|
|
| Withholding Tax |
|
|
398 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit/(loss) for
the period |
|
|
32,798 |
|
|
(12,259) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive
loss that will not be reclassified to the Income Statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on financial
liabilities due to change in credit risk |
15 |
|
- |
|
|
(1,074) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive
profit/(loss) for the period |
|
|
32,798 |
|
|
(13,333) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average
number of Ordinary shares in issue during the period |
20 |
77,477,214 |
|
77,474,670 |
|
|
|
|
|
|
|
| Basic and diluted
earnings/(loss) per Ordinary share |
20 |
|
42.33c |
|
|
(15.82)c |
|
|
|
|
|
|
|
The profits for the period all derive from continuing
operations.
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Financial Position
(Unaudited)
As at 31 August 2022
Assets |
Note |
31
August
2022
US$'000 |
|
28
February
2022
US$'000 |
| Investments at fair
value through profit or loss |
11 |
466,211 |
|
411,568 |
| Loans at amortised
cost |
11 |
25,598 |
|
28,593 |
| Other receivables |
|
310 |
|
70 |
| Cash at bank |
|
15,953 |
|
43,656 |
| Total
assets |
|
508,072 |
|
483,887 |
Liabilities
Senior Credit Facility |
12 |
42,804 |
|
42,573 |
| Zero Dividend
Preference Shares |
13 |
66,740 |
|
75,038 |
| Subordinated
Notes |
14 |
32,296 |
|
32,293 |
| Other payables |
16 |
713 |
|
1,443 |
| Investment Adviser's
base fee |
10 |
457 |
|
276 |
| Total
liabilities |
|
143,010 |
|
151,623 |
Equity
Share capital |
|
216,650 |
|
216,650 |
| Other reserve |
|
353,528 |
|
353,528 |
| Retained deficit |
|
(205,116) |
|
(237,914) |
| Total
equity |
|
365,062 |
|
332,264 |
| Total liabilities
and equity |
|
508,072 |
|
483,887 |
|
|
|
|
|
Number of Ordinary shares in issue at period/year end |
17 |
77,477,214 |
|
77,477,214 |
| Net asset value per
Ordinary share |
|
$4.71 |
|
$4.29 |
These Interim Financial Statements were approved by the Board of
Directors and authorised for issuance on 9
November 2022. They were signed on its behalf by:
David
Macfarlane
Sharon Parr
Chairman
Director
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Changes in Equity
(Unaudited)
For the Period from 1 March 2022 to
31 August 2022
|
Share
Capital |
Other
Reserve |
Retained
Deficit |
Total |
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
| Balance as at 1
March 2022 |
216,650 |
353,528 |
(237,914) |
332,264 |
| Profit for the
period |
- |
- |
32,798 |
32,798 |
| Balance at 31
August 2022 |
216,650 |
353,528 |
(205,116) |
365,062 |
Comparative for the Period from 1 March
2021 to 31 August 2021
|
Share
Capital |
Other
Reserve |
Retained
Deficit |
Total |
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
| Balance as at 1
March 2021 |
216,625 |
354,602 |
(241,668) |
329,559 |
| Loss for the
period |
- |
- |
(12,259) |
(12,259) |
| Loss on financial
liabilities due to change in credit risk |
- |
(1,074) |
- |
(1,074) |
| Issue of Ordinary
shares |
25 |
- |
- |
25 |
| Balance at 31
August 2021 |
216,650 |
353,528 |
(253,927) |
316,251 |
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Cash Flows
(Unaudited)
For the Period from 1 March 2022 to
31 August 2022
|
|
|
|
|
|
|
Period
Ended |
|
Period
Ended |
|
|
31
August 2022 |
|
31
August 2021 |
| Cash flows from
operating activities |
Note |
US$'000 |
|
US$'000 |
| Cash
inflows |
|
|
|
|
| Realisation of
investments |
11 |
105,024 |
|
56,929 |
| Maturity of treasury
bills |
11 |
3,395 |
|
- |
| Escrow receipts
received |
21 |
999 |
|
- |
| Income distributions
received from investments |
|
372 |
|
234 |
| Bank interest
received |
|
85 |
|
75 |
| Cash
outflows |
|
|
|
|
| Direct investments and
capital calls1 |
11 |
(4,945) |
|
(7,381) |
| Purchase of Treasury
Bills and UK Gilts1 |
11 |
(123,132) |
|
- |
| Investment Adviser's
base fee paid |
10 |
(3,691) |
|
(4,652) |
| Other operating
expenses paid |
|
(2,048) |
|
(2,515) |
| Net cash
(outflow)/inflow before financing activities |
|
(23,941) |
|
42,690 |
Financing activities |
|
|
|
|
| Repayment
of Senior Credit Facility |
- |
|
(33,264) |
| Redemption
of Convertible Unsecured Loan Stock |
- |
|
(54,005) |
| Issue of
Subordinated Notes |
- |
|
31,500 |
| Finance
costs paid: |
|
|
|
| - Senior
Credit Facility |
(1,834) |
|
(2,385) |
| -
Subordinated Notes |
(945) |
|
- |
| -
Convertible Unsecured Loan Stock |
- |
|
(2,679) |
| Net cash
outflow from financing activities |
(2,779) |
|
(60,833) |
| Decrease
in cash at bank |
(26,720) |
|
(18,143) |
Reconciliation of net cash flow to movements in cash at
bank |
|
|
|
|
US$'000 |
|
US$'000 |
| Cash and
cash equivalents at 1 March |
43,656 |
|
59,784 |
| Decrease
in cash at bank |
(26,720) |
|
(18,143) |
| Foreign
exchange movements on cash at bank |
(983) |
|
(454) |
| Cash and
cash equivalents at period end |
15,953 |
|
41,187 |
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. As at 31 August 2022, the Company's capital consisted
of Ordinary shares and Zero Dividend Preference ("ZDP") shares.
Post period end, the Company redeemed and cancelled the ZDP shares.
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 2022 to 31 August 2022 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 2022.
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
2022. The preparation of these Interim Financial Statements
is 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 2022,
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 2022.
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 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.
In reaching its conclusion, the Board has considered the risks
that could impact the Company’s liquidity over the period from
9 November 2022 to 9 November 2023 (the "Going Concern Period").
As part of their assessment, the Board considered whether there
was a reasonable expectation that the Company has and will generate
adequate liquidity to meet its debt obligations over the
Going Concern Period including the redemption of its Subordinated
Notes payable 30 September 2023.
Recent events impacting liquidity
- realisation proceeds during the interim period in excess of
$100 million;
- post period end, the extension of the maturity date of the
Subordinated Notes to 30 September
2023; and
- post period end, the redemption and cancellation of the
Company's ZDP shares.
The below table shows the Company's improved net debt position
as at 1 October 2022 (reflecting the
post-period redemption of the ZDP shares) compared to previous
period ends:
|
1.10.2022
$'000 |
31.8.2022
$'000 |
28.2.2022
$'000 |
31.8.2021
$'000 |
28.2.2021
$'000 |
| Senior Credit
Facility |
43,271 |
42,804 |
42,573 |
36,629 |
68,694 |
| Subordinated
Notes |
31,505 |
32,296 |
32,293 |
31,669 |
- |
| ZDP Shares |
- |
66,740 |
77,281 |
75,014 |
80,527 |
| CULS |
- |
- |
- |
- |
54,332 |
| Total debt |
74,776 |
141,840 |
152,147 |
143,312 |
203,553 |
| Cash and cash
equivalents held1 |
65,672 |
136,398 |
47,050 |
44,582 |
63,178 |
| Net debt position |
9,104 |
5,442 |
105,097 |
98,730 |
140,375 |
1Includes investments in Treasury Bills and UK
Gilts
Realisations and refinancings during the interim period and
previous two fiscal years
| Period End |
Year End |
Year End |
| 31.8.2022 |
28.2.2022 |
28.2.2022 |
| $ million |
$ million |
$ million |
|
|
|
|
|
|
|
|
|
| JZHL Secondary
Fund |
U.S. |
97.4 |
Salter Labs |
U.S. |
41.1 |
Secondary
Sale |
U.S |
87.7 |
| New Vitality |
U.S. |
7.4 |
George
Industries |
U.S. |
9.5 |
Real estate |
|
13.6 |
| Fund III |
Euro |
0.2 |
Orangewood
Fund |
U.S. |
6.2 |
ABTA |
U.S |
9.4 |
|
|
|
Igloo |
U.S. |
3.8 |
Eliantus |
Euro |
9.4 |
|
|
|
Vitalyst |
U.S. |
1.9 |
K2 Towers
II |
Euro |
9.2 |
|
|
|
EMC 2010 |
Euro |
2.2 |
Other |
U.S |
9.0 |
|
|
|
|
|
1.1 |
Cerpi |
Other |
1.2 |
|
|
105.0 |
|
|
65.8 |
|
|
139.5 |
The Board takes account of the levels of realisation proceeds
historically generated by the Company’s micro-cap portfolios as
well as the accuracy of previous forecasts to assess the predicted
accuracy of forecasts presented. 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.
Going concern conclusion
Considering the Company’s projected cash position, including the
Company's ongoing operating costs and the anticipated further
investment required to support the Company’s portfolio, 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 9 November 2023.
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:
(a) Portfolio of
US Micro-cap investments
(b) Portfolio of
European Micro-cap investments
(c) Portfolio of
Real Estate investments
(d) Portfolio of
Other Investments - (not falling into above categories)
Investments in treasury bills and UK gilts 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 2022
to 31 August 2022
|
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-cap |
|
Micro-cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
|
US$ '000 |
|
US$ '000 |
|
US$ '000 |
|
US$ '000 |
|
US$ '000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
revenue |
|
7,081 |
|
916 |
|
- |
|
- |
|
7,997 |
|
Dividend
revenue |
|
372 |
|
- |
|
- |
|
- |
|
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental revenue |
|
7,453 |
|
916 |
|
- |
|
- |
|
8,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain/(loss) on investments at FVTPL |
|
41,604 |
|
(9,988) |
|
(522) |
|
(504) |
|
30,590 |
|
Expected credit losses |
|
- |
|
(916) |
|
- |
|
- |
|
(916) |
|
Realisations from investments held in Escrow |
|
999 |
|
- |
|
- |
|
- |
|
999 |
|
Investment
Adviser's base fee |
|
|
|
(2,237) |
|
(776) |
|
(179) |
|
(178) |
|
(3,370) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental operating profit/(loss) |
|
47,819 |
|
(10,764) |
|
(701) |
|
(682) |
|
35,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the
period from 1 March 2021 to 31 August 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-cap |
|
Micro-cap |
|
Estate |
|
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) |
|
Realisations from investments held in Escrow |
- |
|
- |
|
- |
|
- |
|
- |
|
Investment
Adviser's base fee |
|
|
|
(2,156) |
|
(899) |
|
(167) |
|
(174) |
|
(3,396) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental operating profit/(loss) |
|
4,987 |
|
(550) |
|
(4,755) |
|
(174) |
|
(492) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 segmental allocation is consistent with that
of the previous year end.
The following table provides a reconciliation between total
segmental operating profit/(loss) and operating profit/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
|
31.8.2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
segmental operating profit/(loss) |
|
|
|
|
|
35,672 |
|
(492) |
| Net loss
on non-segmental investments at FVTPL |
|
|
|
(2,919) |
|
- |
| Net
foreign exchange gain/(loss) |
|
|
|
|
|
6,108 |
|
(202) |
| Bank and
deposit interest |
|
|
|
85 |
|
75 |
| Other interest |
|
|
|
|
|
|
|
|
|
|
|
|
238 |
|
1 |
| Expenses
not attributable to segments |
|
|
|
(1,476) |
|
(2,299) |
| Fees
payable to investment adviser based on non-segmental assets |
|
(502) |
|
(492) |
| Loss on
financial liabilities at fair value through profit or loss |
|
|
|
- |
|
(1,869) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
|
|
|
|
|
|
|
|
37,206 |
|
(5,278) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation between total
segmental revenue and Company revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
|
31.8.2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
Total
segmental revenue |
|
|
|
|
|
|
|
|
|
8,369 |
|
9,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-segmental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank and
deposit interest |
|
|
|
|
|
|
|
|
|
85 |
|
75 |
|
Other
interest |
|
|
|
|
|
238 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue |
|
|
|
|
|
|
|
|
8,692 |
|
9,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental Net Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 31
August 2022 |
|
|
|
|
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 |
|
228,386 |
|
71,026 |
|
23,075 |
|
23,279 |
|
345,766 |
|
Loans at
amortised cost |
|
|
|
- |
|
25,598 |
|
- |
|
- |
|
25,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental assets |
|
228,386 |
|
96,624 |
|
23,075 |
|
23,279 |
|
371,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables and accrued expenses |
(205) |
|
(87) |
|
(21) |
|
(21) |
|
(334) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental liabilities |
|
(205) |
|
(87) |
|
(21) |
|
(21) |
|
(334) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
segmental net assets |
|
228,181 |
|
96,537 |
|
23,054 |
|
23,258 |
|
371,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 28 February 2022 |
|
|
|
|
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 |
|
284,162 |
|
76,882 |
|
23,597 |
|
23,533 |
|
408,174 |
|
Loans at
amortised cost |
|
|
|
- |
|
28,593 |
|
- |
|
- |
|
28,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental assets |
|
284,162 |
|
105,475 |
|
23,597 |
|
23,533 |
|
436,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables
and accrued expenses |
|
(551) |
|
(72) |
|
(11) |
|
(14) |
|
(648) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental liabilities |
|
(551) |
|
(72) |
|
(11) |
|
(14) |
|
(648) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
segmental net assets |
|
283,611 |
|
105,403 |
|
23,586 |
|
23,519 |
|
436,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation between total
segmental assets and total assets and total segmental liabilities
and total liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
segmental assets |
|
|
|
|
|
|
|
371,364 |
|
436,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non
segmental assets |
|
|
|
|
|
|
|
|
|
|
|
| Cash at
bank |
|
|
|
15,953 |
|
43,656 |
|
| Listed
investments - cash equivalents |
|
|
|
120,445 |
|
3,394 |
|
| Other
receivables |
|
|
|
|
|
|
|
|
310 |
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
assets |
|
|
|
|
|
|
|
508,072 |
|
483,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
segmental liabilities |
|
|
|
|
|
|
|
|
|
(334) |
|
(648) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non
segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
| Senior
Credit Facility |
|
|
|
(42,804) |
|
(42,573) |
|
| Zero
Dividend Preference Shares |
|
|
|
(66,740) |
|
(75,038) |
|
|
Subordinated Notes |
|
|
|
(32,296) |
|
(32,293) |
|
| Other
payables |
|
|
|
(836) |
|
(1,071) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
liabilities |
|
|
|
|
|
|
|
(143,010) |
|
(151,623) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
net assets |
|
|
|
|
|
|
|
365,062 |
|
332,264 |
|
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 (see below)
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 by the fair value hie that the fair value is
based on:
Financial assets at 31 August 2022
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
228,386 |
|
228,386 |
| European
micro-cap |
|
|
|
|
|
- |
|
- |
|
71,026 |
|
71,026 |
| Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
23,075 |
|
23,075 |
| Other
investments |
|
|
|
|
|
- |
|
- |
|
23,279 |
|
23,279 |
| Listed
investments |
|
|
|
|
|
120,445 |
|
- |
|
- |
|
120,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,445 |
|
- |
|
345,766 |
|
466,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at 28 February 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
284,162 |
|
284,162 |
| European
micro-cap |
|
|
|
|
|
- |
|
- |
|
76,882 |
|
76,882 |
| Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
23,597 |
|
23,597 |
| Other
investments |
|
|
|
|
|
- |
|
- |
|
23,533 |
|
23,533 |
| Listed
investments |
|
|
|
|
|
3,394 |
|
- |
|
- |
|
3,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,394 |
|
- |
|
408,174 |
|
411,568 |
Valuation techniques
In valuing investments in accordance with IFRS, the Board
follows the principles as detailed in the IPEVCA guidelines.
When fair values of listed equity and debt securities at the
reporting date are based on quoted market prices or binding dealer
price quotations (bid prices for long positions), without any
deduction for transaction costs, the instruments are included
within Level 1 of the hierarchy.
Investments for which there are no active markets are valued
according to one of the following methods:
Real estate
JZCP makes its real estate investments through a wholly-owned
subsidiary, which in turn owns interests in various residential,
commercial, and development real estate properties. The net asset
value of the subsidiary is used for the measurement of fair value.
The underlying fair value of JZCP’s Real Estate holdings, however,
is represented by the properties themselves. The Company's
Investment Adviser and Board review the fair value methods and
measurement of the underlying properties on a quarterly basis.
Where available, the Company will use third party appraisals on the
subject property, to assist the fair value measurement of the
underlying property. Third-party appraisals are prepared in
accordance with the Appraisal and Valuation Standards (6th edition)
issued by the Royal Institution of Chartered Surveyors. Fair value
techniques used in the underlying valuations are:
- Use of comparable market values per square foot of properties
in recent transactions in the vicinity in which the property is
located, and in similar condition, of the relevant property,
multiplied by the property’s square footage.
- Discounted Cash Flow ("DCF") analysis, using the relevant
rental stream, less expenses, for future periods, discounted at a
Market Capitalisation ("MC") rate, or interest rate.
- Relevant rental stream less expenses divided by the market
capitalization rate; this method approximates the enterprise value
construct used for non-real estate assets.
- Income capital approach using the relevant sell out analysis,
less expenses and costs.
For each of the techniques third party debt is deducted to
arrive at fair value.
The valuations obtained in relation to the real estate portfolio
are dated 31 December 2021.
Subsequent discussions with appraisers indicate there would be no
significant change in property values between 31 December 2021 and 31
August 2022. Due to the inherent uncertainties of real
estate valuation, the values reflected in the financial statements
may differ significantly from the values that would be determined
by negotiation between parties in a sales transaction and those
differences could be material.
Unquoted preferred shares, unquoted equities and equity related
securities
Unquoted equities and equity related securities investments are
classified in the Statement of Financial Position as Investments at
fair value through profit or loss. These investments are typically
valued by reference to their enterprise value, which is generally
calculated by applying an appropriate multiple to the last twelve
months' earnings before interest, tax, depreciation and
amortisation ("EBITDA"). In determining the multiple, the Board
consider inter alia, where practical, the multiples used in recent
transactions in comparable unquoted companies, previous valuation
multiples used and where appropriate, multiples of comparable
publicly traded companies. In accordance with IPEVCA guidelines, a
marketability discount is applied which reflects the discount that
in the opinion of the Board, market participants would apply in a
transaction in the investment in question. The increase of the fair
value of the aggregate investment is reflected through the unquoted
equity component of the investment and a decrease in the fair value
is reflected across all financial instruments invested in an
underlying company.
In respect of unquoted preferred shares the Company values these
investments at fair value by reference to the attributable
enterprise value as the exit strategy in respect to these
investments would be a one tranche disposal together with the
equity component. The fair value of the investment is determined by
reference to the attributable enterprise value reduced by senior
debt and marketability discount.
Micro-cap loans
Investments in micro-cap debt are valued at fair value by
reference to the attributable enterprise value when the Company
also holds an equity position in the investee company.
When the Company invests in micro-cap loans and does not hold an
equity position in the underlying investee company these loans are
valued at amortised cost in accordance with IFRS 9 (Note 2). The
carrying value at amortised cost is considered to approximate to
fair value.
Other Investments
Other investments at year end, comprise of mainly the Company's
investment in the asset management business -Spruceview Capital
Partners ("Spruceview"). Spruceview is valued using a valuation
model which considers a forward looking revenue approach.
Previously, Spruceview was valued using a valuation model which
considers both current assets under management ("AUM") and the
potential for new AUM. The Board considers the new approach to be
more consistent with the valuation methods used by peer
companies.
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 2022 and 28
February 2022 are shown below:
|
Value
31.8.2022 |
Valuation |
Unobservable |
Range
(weighted |
Sensitivity |
Effect on Fair
Value |
|
US$'000 |
Technique |
input |
average) |
used |
US$'000 |
| US
micro-cap investments |
228,386 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers |
6.5x -
13.5x
(8.3x) |
-0.5x
/+0.5x |
(21,959) |
20,354 |
|
|
Discount
to Average Multiple |
5% -
30%
(13%) |
+5% /
-5% |
(27,223) |
30,503 |
| European
micro-cap investments |
71,026 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers |
5.0x –
14.3x
(8.8x) |
-0.5x
/+0.5x |
(4,399) |
4,399 |
|
|
Discount
to Average Multiple |
1% -
50%
(18%) |
+5% /
-5% |
(3,590) |
3,590 |
| Real
estate1,2 |
23,075 |
Cap Rate/ Income Approach |
Capitalisation Rate |
5.25% -
6.25% (5.9%) |
+50bps/-50bps |
(5,338) |
6,552 |
| Other
investments3 |
22,070 |
Forward looking
Revenue Approach |
Revenue
Multiple |
$8.3
million
5.3x |
-10%/+10%
-10%/+10% |
(2,206)
(2,206) |
2,163
2,163 |
|
|
|
|
|
|
|
|
|
|
Value
28.2.2022 |
Valuation |
Unobservable |
Range
(weighted |
Sensitivity |
Effect on Fair
Value |
|
US$'000 |
Technique |
input |
average) |
used |
US$'000 |
| US micro-cap
investments |
284,162 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers
Discount to Average Multiple |
7.0% -
13.5% (9.0x)
5% - 30% (14.7%) |
-0.5x/+0.5x
+5%/-5% |
(23,876)
(32,217) |
23,998
31,887 |
| European micro-cap
investments |
76,286 |
EBITDA Multiple |
Average
EBITDA Multiple of Peers
Discount to Average Multiple |
5.5% -
14.2% (9.4x)
2% - 50% (23%) |
-0.5x/+0.5x
+5%/-5% |
(5,293)
(4,533) |
5,293
4,533 |
Real estate1,2 |
23,597 |
Cap Rate/Income Approach |
Capitalisation Rate |
5.25% - 5.75% (5.56%) |
+50bps/-50bps |
(5,388) |
6,552 |
|
|
|
|
|
| Other
investments3 |
22,324 |
Forward looking revenue approach |
Revenue
multiple |
$8.3million 5.3x |
-10%/+10%
-10%/+10% |
(2,187)
(2,206) |
1,824
1,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The Fair Value of JZCP's investment in financial
interests in Real Estate is measured as JZCP's percentage interest
in the value of the underlying properties.
2 Sensitivity is applied to the property value and
then the debt associated to the property is deducted before the
impact to JZCP's equity value is calculated. Due to gearing levels
in the property structures, an increase in the sensitivity of
measurement metrics at property level will result in a
significantly greater impact at JZCP's equity level.
3 JZCP's investment in Spruceview.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and the end of the reporting period/year.
| Period ended 31 August
2022 |
US |
European |
Real |
Other |
|
|
Micro-Cap |
Micro-Cap |
Estate |
Investments |
Total |
|
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
US$
'000 |
| At 1 March 2022 |
284,162 |
76,882 |
23,597 |
23,533 |
408,174 |
| Investments in year
including capital calls |
317 |
4,378 |
- |
250 |
4,945 |
| Payment in kind
("PIK") |
2,086 |
- |
- |
- |
2,086 |
| Proceeds from
investments realised |
(104,778) |
(246) |
- |
- |
(105,024) |
| Net gains/(losses) on
investments |
41,604 |
(9,988) |
(522) |
(504) |
30,590 |
| Movement in accrued
interest |
4,995 |
- |
- |
- |
4,995 |
| At 31 August 2022 |
228,386 |
71,026 |
23,075 |
23,279 |
345,766 |
Year ended 28 February 2022 |
|
|
|
|
|
|
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 |
7,647 |
- |
400 |
12,945 |
| Payment in kind
("PIK") |
14,190 |
- |
- |
- |
14,190 |
| Proceeds from
investments realised |
(62,466) |
(3,333) |
- |
- |
(65,799) |
| Net gains/(losses) on
investments |
28,723 |
(11,400) |
221 |
(14) |
17,530 |
| Movement in accrued
interest |
(522) |
- |
- |
- |
(522) |
| At 28 February
2022 |
284,162 |
76,882 |
23,597 |
23,533 |
408,174 |
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 2022,
the ask price for the ZDP (2022) shares was £4.84 (28 February 2022: £4.74 per share) and the total
fair value of the ZDP shares was $67,062,000 (28 February
2022: $75,732,000) which is
$322,000 higher (28 February 2022: $694,000 higher) than the liability recorded in
the Statement of Financial Position.
ZDP shares are recorded at amortised cost and would fall into
the Level 2 hierarchy if valued at FVTPL.
6. Net Profit/(Loss) on Investments at
Fair Value Through Profit or Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
|
31.8.2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
| Loss
on investments held in investment portfolio at period end |
|
|
|
|
|
|
| Net
movement in period end unrealised gain position |
|
|
|
|
|
(31,737) |
|
18,315 |
| Unrealised
net loss in prior periods now realised |
|
|
|
|
|
(15,265) |
|
(24,765) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
unrealised loss in the period |
|
|
|
|
|
|
|
(47,002) |
|
(6,450) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
profit on investments realised in the period |
|
|
|
|
|
|
|
|
| Proceeds
from investments realised |
|
|
|
|
|
|
|
108,419 |
|
57,490 |
| Cost of
investments realised |
|
|
|
|
|
|
|
|
|
(49,011) |
|
(80,614) |
| Unrealised
net loss in prior periods now realised |
|
|
|
|
|
15,265 |
|
24,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total net
profit in the period on investments realised in the period |
|
|
|
74,673 |
|
1,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
profit/(loss) on investments in the period |
|
|
|
|
|
27,671 |
|
(4,809) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
31.8.2022 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment on loans classified as Stage 1 |
|
|
916 |
987 |
| Impairment
on loans classified as Stage 2 |
|
|
|
|
|
|
- |
418 |
| Impairment
on loans classified as Stage 3 |
|
|
|
|
|
|
- |
- |
| Total impairment on
loans during the period |
|
|
|
|
|
|
|
|
|
|
|
916 |
1,405 |
8. Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
Period ended |
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2022 |
31.8.2022 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
calculated using the effective interest rate method |
|
|
916 |
1,405 |
| Other
interest and similar income |
|
|
|
|
|
|
7,691 |
7,714 |
|
|
|
|
|
|
|
|
|
|
|
|
8,607 |
9,119 |
Income for the period ended 31 August
2022
|
|
|
|
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 |
|
|
|
7,081 |
|
- |
|
- |
|
372 |
|
- |
|
7,453 |
| European
micro-cap |
|
|
|
- |
|
916 |
|
- |
|
- |
|
- |
|
916 |
| Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
238 |
|
238 |
|
|
|
|
7,081 |
|
916 |
|
- |
|
372 |
|
1 |
|
8,607 |
Income for the period ended 31 August
2021
|
|
|
|
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 |
|
|
|
7,479 |
|
- |
|
- |
|
234 |
|
- |
|
7,713 |
| European
micro-cap |
|
|
|
- |
|
1,405 |
|
- |
|
- |
|
- |
|
1,405 |
| Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
|
|
7,479 |
|
1,405 |
|
- |
|
234 |
|
1 |
|
9,119 |
9. Finance Costs
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
31.8.2022 |
|
31.8.2021 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense calculated using the effective interest
method |
|
|
|
|
| ZDP shares
(Note 12) |
2,065 |
|
3,584 |
| Loan Notes (Note
13) |
|
|
|
|
|
|
1,793 |
|
1,892 |
| Senior
Debt Facility (Note 14) |
948 |
|
169 |
|
|
|
|
|
|
|
5,645 |
|
5,645 |
| Other
interest and similar expense |
|
|
|
|
| CULS
interest (Note 15) |
- |
|
1,336 |
|
|
|
|
|
|
|
4,806 |
|
6,981 |
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
2022, total investment advisory and management expenses,
based on the average total assets of the Company, were included in
the Statement of Comprehensive Income of $3,872,000 (period ended 31 August 2021: $3,888,000). Of this amount, $457,000 (28 February
2022: $276,000) was due and
payable at the period end.
During the year ended 29 February
2020, the Investment Adviser agreed to waive incentive fees
payable by the Company relating to realised gains in the years
ended February 2019 and 2020. No
further incentive fees will be paid to the Investment Adviser until
the Company and Investment Adviser have mutually agreed to
reinstate such payments.
11. Investments
|
|
Listed |
Unlisted |
Unlisted |
|
Carrying Value |
|
|
FVTPL |
FVTPL |
Loans |
|
Total |
|
|
31.8.2022
US$ '000 |
31.8.2022
US$ '000 |
31.8.2022
US$ '000 |
|
31.8.2022
US$ '000 |
|
Book cost at 1 March
2022 |
3,395 |
451,364 |
43,097 |
|
497,856 |
|
Investments in period
including capital calls |
123,132 |
4,945 |
- |
|
128,077 |
|
Payment in kind
("PIK")1 |
- |
2,086 |
219 |
|
2,305 |
|
Proceeds from
investments matured/realised |
(3,395) |
(105,024) |
- |
|
(108,419) |
|
Net realised gain |
- |
59,408 |
- |
|
59,408 |
|
Book cost at 31 August
2022 |
123,132 |
412,779 |
43,316 |
|
579,227 |
|
Unrealised investment
and foreign exchange loss |
(2,919) |
(74,010) |
(7,586) |
|
(84,515) |
|
Impairment on loans at
amortised cost |
- |
- |
(11,064) |
|
(11,064) |
|
Accrued interest |
232 |
6,997 |
932 |
|
8,161 |
|
Carrying value at 31
August 2022 |
120,445 |
345,766 |
25,598 |
|
491,809 |
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
|
|
Listed |
Unlisted |
Unlisted |
|
Carrying Value |
|
|
FVTPL |
FVTPL |
Loans |
|
Total |
|
|
28.2.2022
US$ '000 |
28.2.2022
US$ '000 |
28.2.2022
US$ '000 |
|
28.2.2022
US$ '000 |
|
Book cost at 1 March
2021 |
3,393 |
543,740 |
74,651 |
|
621,784 |
|
Investments in year
including capital calls |
3,395 |
12,945 |
- |
|
16,340 |
|
Payment in kind
("PIK")1 |
- |
14,190 |
2,877 |
|
17,067 |
|
Proceeds from
investments matured/realised |
(3,395) |
(65,799) |
- |
|
(69,194) |
|
Interest received on
maturity |
2 |
- |
- |
|
2 |
|
Net realised loss |
- |
(53,712) |
- |
|
(53,712) |
|
Realised impairment
loss2 |
- |
- |
(31,757) |
|
(31,757) |
|
Realised currency
loss2 |
- |
- |
(2,674) |
|
(2,674) |
|
Book cost at 28
February 2022 |
3,395 |
451,364 |
43,097 |
|
497,856 |
|
Unrealised investment
and foreign exchange loss |
- |
(45,192) |
(4,664) |
|
(49,856) |
|
Impairment on loans at
amortised cost |
- |
- |
(10,148) |
|
(10,148) |
|
Accrued interest |
(1) |
2,002 |
308 |
|
2,309 |
|
Carrying value at 28
February 2022 |
3,394 |
408,174 |
28,593 |
|
440,161 |
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 and realised currency 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.
Loans at amortised cost
Interest on the loans accrues at the
following rates:
|
As At 31 August 2022 |
As At 28 February 2022 |
|
8% |
10% |
Total |
8% |
10% |
Total |
|
|
|
|
|
|
|
| Loans at amortised
cost |
23,530 |
2,068 |
25,598 |
26,357 |
2,236 |
28,593 |
The Company has extended the maturity date of all loans to
European micro-cap companies to 31 December
2022.
12. Senior Credit Facility
On 26 January 2022, JZCP entered
into an agreement with WhiteHorse Capital Management, LLC (the "New
Senior Lender") providing for a new five year term senior secured
loan facility (the "New Senior Credit Facility"). The New Senior
Credit Facility matures on 26 January
2027 and replaced the Company's Previous Senior Secured Loan
Facility with clients and funds advised and sub-advised by
Cohanzick Management, LLC and CrossingBridge Advisors, LLC (the
"Previous Senior Lenders").
The New Senior Credit Facility consists of a $45.0 million first lien term loan (the "Closing
Date Term Loan"), fully funded as of the closing date (being
26 January 2022), and up to
$25.0 million in first lien delayed
draw term loans (the "DDT Loans"), which remain undrawn as of the
closing date and the year end. The Company can draw down the DDT
Loans from time to time in its discretion in the 24 month period
following the closing date. Customary fees and expenses were
payable upon the drawing of the Closing Date Term Loan. The
proceeds of the Closing Date Term Loan, together with cash at hand,
were used by the Company to repay the Previous Senior Secured
Facility of approximately $52.9
million due 12 June 2022 and
for the payment of fees and expenses related to the New Senior
Facility.
The interest rate charged to The New Senior Facility during the
period, is the LIBOR Rate plus 7.001 per cent., or if the Company
elects for a portion of the interest to be paid in kind, the LIBOR
Rate plus 9.00 per cent., of which 4.00 per cent. would be charged
as payment-in kind (PIK) interest. The Closing Date Term Loans are
subject to a prepayment penalty if they are repaid before yielding
an aggregate 15 per cent. The prepayment penalty ranges from 3.00
per cent. to 1.00 per cent. depending on whether it is repaid
within 1 year, 2 years or 3 years of funding.
The New Senior Credit Facility Agreement includes covenants from
the Company customary for an agreement of this nature, including
(a) maintaining a minimum asset coverage ratio (calculated by
reference to eligible assets, subject to customary ineligibility
criteria and concentration limits, plus unrestricted cash) of not
less than 4.00 to 1.00, and (b) ensuring the Company retains an
aggregate amount of unrestricted cash and cash equivalents of not
less than $12.5 million. As at
31 August 2022, eligible assets of
$488.0 million adjusted to
$393.1 million (28 February 2022: $471.0
million adjusted to $351.9
million) were held as collateral. The New Senior Facility
allows for the repayment of the Company's other debt obligations
assuming the above covenants are not breached as a result of
repayment.
1There is an interest rate floor that stipulates LIBOR will not
be lower than 1%. In this agreement, the presence of the floor does
not significantly alter the amortised cost of the instrument,
therefore separation is not required and the loan is valued at
amortised cost using the effective interest rate method. During the
year, the relevant 3 month LIBOR rates were below 1%. LIBOR
regulators (including the UK Financial Conduct Authority and the US
Commodity Futures Trading Commission) have announced a transition
away from LIBOR, however it is expected that the 3 month USD LIBOR
which is relevant to the Company will continue to be available
until the end of June 2023.
| New Senior Term
Loan Facility |
|
|
31.8.2022 |
|
28.2.2022 |
|
US$
'000 |
|
US$
'000 |
| Principal - drawdown
26 January 2022 |
- |
|
45,000 |
| Issue costs |
- |
|
(2,787) |
| Amortised cost - 26
January 2022 |
- |
|
42,213 |
| Amortised cost at 1
March |
42,573 |
|
- |
| Finance costs charged
to Statement of Comprehensive Income |
2,065 |
|
360 |
| Interest and finance
costs paid |
(1,834) |
|
- |
| Amortised cost at
period/year end |
42,804 |
|
42,573 |
Previous Senior Term Loan
Facility |
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
US$
'000 |
|
US$
'000 |
| Amortised cost - 1
March |
- |
|
68,694 |
| Loan advance |
- |
|
16,000 |
| Loan repayments |
- |
|
(85,585) |
| Finance costs charged
to Statement of Comprehensive Income |
- |
|
6,483 |
| Interest and finance
costs paid |
- |
|
(5,592) |
| Amortised cost at
period/year end |
- |
|
- |
The carrying value of the loans approximates to fair value. |
|
|
|
13. Zero Dividend Preference ("ZDP") shares
Post period end (3 October 2022),
the Company redeemed the ZDP shares on their maturity date.
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 $67,021,000 using the period end exchange
rate).
ZDP shares are designed to provide a pre-determined final
capital entitlement which ranks behind the Company's creditors but
in priority to the capital entitlements of the Ordinary shares. The
ZDP shares carry no entitlement to income and the whole of their
return will therefore take the form of capital. In certain
circumstances, ZDP shares carry the right to vote at general
meetings of the Company as detailed in the Company's Memorandum and
Articles of Incorporation. Issue costs are deducted from the cost
of the liability and allocated to the Statement of Comprehensive
Income over the life of the ZDP shares.
ZDP (2022) shares
|
|
|
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
| Amortised
cost at 1 March |
75,038 |
|
74,303 |
| Finance
costs allocated to Statement of Comprehensive Income |
1,793 |
|
3,807 |
| Unrealised
currency gain on translation |
|
(10,091) |
|
(3,072) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortised
cost at period/year end |
|
66,740 |
|
75,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
number of ZDP shares in issue |
|
11,907,720 |
|
11,907,720 |
14. Subordinated Notes
In July 2021, 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 purchased directly or through their
affiliates, subordinated, second lien Subordinated Notes totalling
$31.5 million, with a maturity date
of 11 September 2022 (the
“Subordinated Notes”). In August
2022, the Company announced the extension of the maturity
date of the Subordinated Subordinated Notes through to 30 September 2023.
The interest rate on the Subordinated Notes is 6 per cent. per
annum payable semi-annually on each of 31 March and 30 September of
each year, commencing on the first such date to occur after the
issuance of the Subordinated Notes.
|
|
31.8.2022
US$ '000 |
|
28.2.2022
US$ '000 |
Subordinated Notes issued in period
Amortised cost at 1 March |
-
32,293 |
|
31,500 |
| Finance costs charged
to Statement of Comprehensive Income |
948 |
|
1,108 |
| Interest and finance
costs paid |
(945) |
|
(315) |
| Amortised cost at
period/year end |
32,296 |
|
32,293 |
|
|
|
|
|
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. CULS bore
interest on their nominal amount at the rate of 6.00 per cent. per
annum, payable semi-annually in arrears.
|
31.8.2022
US$ '000 |
|
28.2.2022
US$ '000 |
| Fair Value of CULS at
1 March |
- |
|
52,430 |
| Interest expense |
- |
|
1,336 |
| Coupon paid |
- |
|
(2,679) |
| Unrealised movement in
value of CULS due to change in Company's Credit Risk |
- |
|
1,074 |
| Unrealised movement in
the fair value of CULS allocated to change in observed (benchmark)
interest rate |
- |
|
2,170 |
| Unrealised currency
gain on translation during the period/year |
- |
|
(301) |
| Loss to the Company on
movement in the fair value of CULS |
- |
|
1,869 |
| Redemption of
CULS |
- |
|
(54,005) |
| Conversion of CULS
into Ordinary Shares |
- |
|
(25) |
| Fair Value of CULS
based on offer price |
- |
|
- |
16. Other Payables
|
|
|
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
| Audit fees |
|
|
|
|
|
|
150 |
|
325 |
| Legal fees
provision |
|
|
|
|
|
|
200 |
|
505 |
| Directors'
remuneration |
|
|
|
|
|
|
48 |
|
47 |
| Other expenses |
|
|
|
|
|
|
315 |
|
168 |
| Provision
for tax on dividends received not withheld at source |
|
|
|
- |
|
398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
713 |
|
1,443 |
17. Ordinary shares - Issued Capital
|
|
|
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
|
|
Number
of shares |
|
Number
of shares |
|
|
|
|
|
|
|
|
|
|
| Balance at
1 March |
|
|
|
|
|
77,477,214 |
|
77,474,175 |
| Ordinary
shares issued during period/year |
|
|
|
|
|
- |
|
3,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Ordinary
shares in issue |
|
|
|
|
|
|
77,477,214 |
|
77,477,214 |
|
|
|
|
|
|
|
|
|
|
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
($25k).
18. Commitments
At 31 August 2022 and 28 February 2022, JZCP had the following
financial commitments outstanding in relation to fund
investments:
|
|
|
|
|
Expected date |
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
of
Call |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
| JZI Fund
III GP, L.P. €10,160,906 (28.2.2022: €13,967,295) |
|
over 3
years |
|
10,217 |
|
15,688 |
| Spruceview Capital
Partners, LLC1 |
|
|
|
|
over 1
year |
|
250 |
|
500 |
|
|
|
|
|
|
|
10,467 |
|
16,188 |
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 $0.25 million unfunded commitments as at
31 August 2022.
19. Related Party Transactions
JZAI is a US based company founded by David Zalaznick and Jay
Jordan, 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 2022, JZCP's investment in Fund III was valued at
$70.4 million (28 February 2022: $76.3
million). JZCP's investment in EMC 2010 was valued at
$0.6 million (28 February 2022: $0.6
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 2022, was $33.5 million with $0.25
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
2022. 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 sold 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 2022, JZCP's investment in JZHL
Secondary Fund LP was valued at $74.5
million (28 February 2022:
$99.2 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 2022, these co-investments,
with Fund A, were in the following portfolio companies: Industrial
Services Solutions, Safety Solutions Holdings and Tierpoint. JZCP's
investments in Safety Solutions Holdings and Tierpoint have
subsequently been transferred to JZHL Secondary Fund LP (mentioned
above).
During the prior year, 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 Subordinated 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
“Subordinated Notes”). The issuance of the Subordinated Notes was
subject to a number of conditions, including shareholder approval.
On 26 August 2022, the maturity date
of the Subordinated Notes was extended to 30
September 2022 and subsequently after certain criteria was
met extended for a further 12 months to 30
September 2023.
Total Directors' remuneration for the six-month period ended
31 August 2022 was $145,000 (31 August
2021: $145,000).
20. Basic and Diluted Earnings/(Loss) per
Share
Basic loss per share is calculated by dividing the loss for the
period by the weighted average number of Ordinary shares
outstanding during the period.
For the period ended 31 August
2022, the weighted average number of Ordinary shares
outstanding during the period was 77,477,214 (31 August 2021: 77,474,670).
The diluted loss per share is calculated by considering
adjustments required to the loss and weighted average number of
shares for the effects of potential dilutive Ordinary shares.
Following the redemption of the Company's CULS during the prior
period, there are no longer any potential dilutive events to the
Ordinary shares.
21. Contingent Assets
Amounts held in escrow accounts
When investments have been disposed of by the Company, proceeds
may reflect contractual terms requiring that a percentage is held
in an escrow account pending resolution of any indemnifiable claims
that may arise.
At 31 August 2022 and 28 February 2022, the Company has assessed that
the likelihood of the recovery of these escrow accounts cannot be
determined and has therefore disclosed the escrow accounts as a
contingent asset.
As at 31 August 2022 and
28 February 2022, the Company had the
following contingent assets held in escrow accounts which had not
been recognised as assets of the Company:
|
|
|
|
|
|
|
Amount in Escrow |
|
|
|
|
|
|
|
|
31.8.2022 |
|
28.2.2022 |
|
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JZHL Secondary Fund (being 37.5% of the total amount
held in escrow)1
New Vitality – added on realisation of investment |
|
411 |
|
202 |
|
|
152 |
|
- |
|
| Igloo |
|
|
|
|
|
|
49 |
|
49 |
|
| Salter Labs ($528,000
received) |
|
|
|
|
|
|
- |
|
536 |
|
| Southern
Petroleum Laboratories ($509,000 received) |
|
- |
|
509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
612 |
|
1,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the period ended 31 August
2022, net proceeds including a minor refund of an escrow
receipt, totalled $999,000
(31 August 2021: $nil) were realised
and recorded in the Statement of Comprehensive Income.
1 During the period, the JZHL Secondary Fund received
an Escrow of $723,000 which was
distributed to its limited partners. On the closing of JZHL
Secondary Fund's realisation of Testing Services $1,096,000 was placed in Escrow.
22. Subsequent Events
These Interim Financial Statements were approved by the Board on
9 November 2022. Events subsequent to
the period end 31 August 2022 have
been evaluated until this date.
On 30 September 2022, the Company
announced the further extension of the maturity date of the
Subordinated Notes through to 30 September
2023.
On 3 October 2022, the Company
announced the redemption and cancellation of its ZDP shares.
Company Advisers
| Investment
Adviser |
|
Independent
Auditor |
| 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. |
|
Ernst & Young
LLP |
|
PO Box 9 |
|
Royal Chambers |
|
St Julian's
Avenue |
|
St Peter Port |
|
Guernsey GY1 4AF |
|
|
|
| Jordan/Zalaznick
Advisers, Inc. |
|
UK
Solicitor |
| 9 West, 57th
Street |
|
Ashurst LLP |
| New York NY 10019 |
|
London Fruit &
Wool Exchange |
|
|
1 Duval Square |
| Registered
Office |
|
London E1 6PW |
| PO Box 255 |
|
|
| Trafalgar Court |
|
US Lawyers |
| Les Banques |
|
Monge Law Firm,
PLLC |
| St Peter Port |
|
435 South Tyron
Street, Suite 711 |
| Guernsey GY1 3QL |
|
Charlotte, NC
28202 |
|
|
|
| JZ Capital Partners
Limited is registered in Guernsey |
|
Mayer Brown LLP |
| Number 48761 |
|
214 North Tryon
Street |
|
|
Suite 3800 |
| Administrator,
Registrar and Secretary |
|
Charlotte NC
28202 |
| Northern Trust
International Fund Administration |
|
|
| Services (Guernsey)
Limited |
|
Winston & Strawn
LLP |
| PO Box 255 |
|
35 West Wacker
Drive |
| Trafalgar Court |
|
Chicago IL
60601-9703 |
| Les Banques |
|
|
| St Peter Port |
|
Guernsey
Lawyer |
| Guernsey GY1 3QL |
|
Mourant |
|
|
Royal Chambers |
| UK Transfer and
Paying Agent |
|
St Julian's
Avenue |
| Equiniti Limited |
|
St Peter Port |
| Aspect House |
|
Guernsey GY1 4HP |
| Spencer Road |
|
|
| Lancing |
|
Financial Adviser
and Broker |
| West Sussex BN99
6DA |
|
JP Morgan Cazenove
Limited |
|
|
20 Moorgate |
| US Banker |
|
London EC2R 6DA |
| 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 |
|
|
Useful Information for
Shareholders
Listing
JZCP Ordinary 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 is 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 |
Key Information Documents
JZCP produces a Key Information Documents to assist investors'
understanding of the Company's securities and to enable comparison
with other investment products. This document is 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 2022 was 15.4%, 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 2022 was 0.9%.
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 2022 was 42.5%, 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 2022 was 34.6%.
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 2022, JZCP's Ordinary
shares traded at £1.71 (28 February
2022: £1.05) or $1.99
(28 February 2022: $1.41) being the dollar equivalent using the
period end exchange rate of £1:$1.16
(28 February 2022
£1: $1.34). The shares traded at a
57.8% (28 February 2022: 67.2%)
discount to the NAV per share of $4.71 (28 February
2022: $4.29)
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
2023
May 2023 (date to be confirmed)
Annual General
Meeting
June/July 2022 (date to be
confirmed)
Interim report for the six months ended 31 August
2023
November 2023 (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" below).
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 be treated as a "passive
foreign investment company" ("PFIC") for the fiscal year ended
February 2021. The Company's
treatment as a PFIC is likely to have adverse tax consequences for
US taxpayers. Previously, for the fiscal year ended February 2020 the Company was found NOT to be a
PFIC. An analysis for the financial year ended 28 February 2022 will be undertaken this
year.
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