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 2019
LEI: 549300TZCK08Q16HHU44
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
27 November
2019
JZ Capital Partners, the London
listed fund that invests in US and European micro-cap companies and
US real estate, announces its interim results for the six-month
period ended 31 August 2019.
Results and Portfolio Highlights
- NAV of $748.2 million (FYE
28/02/19: $810.2 million)
- NAV per share of $9.66 (FYE
28/02/19: $10.04)
- Total realisations and refinancings of $121.2 million, including: the sale of JZCP’s 80%
stake in Avante & Orizon for gross proceeds of approximately
$65.5 million, and the sale of
Waterline Renewal for gross proceeds of approximately $24.6 million (including escrows).
- JZCP made one post-period realisation (October 2019), selling Priority Express for
$18.8 million in gross proceeds
(including escrows and a potential earn-out), a 60% uplift to
NAV.
- As of 31 August 2019, the
portfolio comprised:
- US micro-cap: 23 businesses, which includes four
‘verticals’ and 14 co-investments, across nine industries.
- European micro-cap: 17 companies across six industries
and seven countries.
- US real estate: 61 properties across five major
assemblages in New York and
South Florida all in various
stages of (re)/development.
Appraisal of Real Estate Portfolio
- Further to the announcement of 30
October 2019, the Company asked its independent third-party
appraiser to accelerate the annual appraisal process and update its
valuations for the real estate portfolio.
- The reports received indicate minimal differences from the
appraiser’s year-end values as at 28
February 2019; however, the fair value of JZCP’s real estate
investments at 31 August 2019
decreased to $422.7 million from
$443.1 million at 28 February 2019. The net movement in unrealised
losses between the fair value and cost of JZCP’s real estate
investment between 28 February 2019
and 31 August 2019 totalled
$64 million, largely due to the
carrying costs of the portfolio.
- The Board believes that significant uncertainty remains as to
whether the real estate portfolio could be realised at these
values. Due to financing constraints and the requirement to
generate liquidity in line with the Company’s recently approved
investment policy, this will likely require assets to be realised
on an accelerated basis.
Strategic Initiatives
- On 24 October 2019 (post-period),
the Board received shareholder approval for the adoption of a
revised investment policy, whereby JZCP will look to realise
investments and materially reduce commitments to new investments in
order to return a substantial amount of capital to shareholders and
pay down a substantial amount of debt.
- The Company’s focus continues to be its revised investment
policy; however, potential impairment to the value of the real
estate portfolio dictates that the Company must protect its balance
sheet in the near term by prioritizing debt repayment over the
return of capital to shareholders.
- In the past eighteen months, the Company has returned
approximately $50 million to
shareholders in a combination of open market purchases and a tender
offer at close to NAV.
- JZCP is currently in the market with a portfolio of certain US
microcap assets and expects to realise $150–170 million in gross
proceeds from this transaction before 29
February 2020.
Outlook
- Strong pipeline of realisations and refinancings in JZCP’s
overall portfolio.
- JZCP expects to pay down a significant amount of debt in the
near term upon completion of the secondary sale of a portfolio of
certain US microcap assets.
David Macfarlane, Chairman of
JZCP, said: “The Board regrets the delay in publication of the
Company’s results as well as the uncertainty regarding the value of
the real estate portfolio.
The Company remains focused on implementing its revised
investment policy; however, due to potential provisions against the
real estate portfolio, the Company must protect its balance sheet
in the near term by prioritizing debt repayment over the return of
capital to shareholders. Consequently, new capital allocations will
be largely limited to follow-on investments in existing portfolio
companies as well as other existing obligations.
The Board is confident in the Investment Adviser’s ability to
execute on the strategic initiatives announced today, which have
been designed to maximise value for JZCP’s shareholders.”
Presentation details:
There will be an audiocast presentation for investors and
analysts at 3.30pm London time / 10.30am New York
time on 27 November 2019. The
presentation can be accessed here and by dialing +44 (0)330 336
9411 (UK) or +1 323-994-2093 (US) with the
participant access code 2869534.
__________________________________________________________________________________
The information contained within this
announcement is considered by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014. 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)20 3727 1143
FTI Consulting
David Zalaznick
+1 212 485 9410
Jordan/Zalaznick Advisers, Inc.
Sam Walden
+44 (0) 1481 745385
Northern Trust International Fund
Administration Services (Guernsey) Limited
About JZ Capital Partners
JZ Capital Partners (“JZCP”) is one of the oldest closed-end
investment companies listed on the London Stock Exchange. It seeks
to provide shareholders with a return by investing selectively in
US and European microcap companies and US real estate. JZCP
receives investment advice from Jordan/Zalaznick Advisers, Inc.
(“JZAI”) which is led by David
Zalaznick and Jay Jordan.
They have worked together for more than 35 years and are supported
by teams of investment professionals in New York, Chicago, London and Madrid. JZAI’s experts work with the existing
management of micro-cap companies to help build better businesses,
create value and deliver strong returns for investors. For more
information please visit www.jzcp.com.
About JZ Capital Partners
JZ Capital Partners (“JZCP”) is one of the oldest closed-end
investment companies listed on the London Stock Exchange. It seeks
to provide shareholders with a return by investing selectively in
US and European microcap companies and US real estate. JZCP
receives investment advice from Jordan/Zalaznick Advisers, Inc.
(“JZAI”) which is led by David
Zalaznick and Jay Jordan.
They have worked together for more than 35 years and are supported
by teams of investment professionals in New York, Chicago, London and Madrid. JZAI’s experts work with the existing
management of micro-cap companies to help build better businesses,
create value and deliver strong returns for investors. For more
information please visit www.jzcp.com.
Chairman’s Statement
I am now able to report the results of JZ Capital Partners
("JZCP" or the "Company") for the six-month period ended
31 August 2019. The Board regrets the
delay in publication of JZCP’s results as well as the uncertainty
created by the announcement of the delay made on 30 October 2019. As described further in that
announcement, discussions in the ordinary course of business
between the Company’s Investment Adviser and certain third-party
real estate brokers gave rise to questions as to whether the
Company’s real estate portfolio was overvalued. The Board therefore
came to the view that a delay in publication of the results and an
announcement to the market were necessary while the situation was
further assessed.
Immediately, the Company asked its independent third-party
appraiser to accelerate the annual appraisal process and update its
valuations as at 31 August 2019. The
reports received were in accordance with the Company’s accounting
policies as per the financial statements at 28 February 2019 and indicate minimal differences
from the appraiser’s year-end values at 28
February 2019; however, the fair value of JZCP’s real estate
investments at 31 August 2019
decreased to $422.7 million from
$443.1 million at 28 February 2019. The net movement in unrealised
losses between the fair value and cost of JZCP’s real estate
investment between 28 February 2019
and 31 August 2019 totalled
$64 million. Notwithstanding the
revised appraisals, the Board believes that significant uncertainty
remains as to whether the real estate portfolio could be realised
at these values. This uncertainty results from both financing
constraints at the underlying property level and the requirement to
generate liquidity in line with the Company’s recently approved
investment policy, which will likely require assets to be realised
on an accelerated basis. As disclosed in the Company’s published
financial statements historically, 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 sale
transaction and those differences could be material.
Not publishing the Company’s interim results by 30 November 2019 would have resulted in the
temporary suspension of the listing of JZCP’s securities (until the
actual date of publication). In the short period between the
availability of the appraiser’s report and the deadline for
publication it would not have been possible for the Company’s
auditors to have been able to complete their customary review of
the interim results and related report. While best practice for the
publication of interim results contemplates an interim auditor
review, it is not a regulatory requirement; under these unusual
circumstances, the Board has determined that shareholders would be
better served by avoiding a temporary suspension and accordingly
did not ask the auditors to review these interim results.
Strategic Initiatives
On 24 October 2019 (post-period),
the Board received shareholder approval for the adoption of a
revised investment policy, whereby JZCP will look to realise
investments and materially reduce commitments to new investments in
order to return a substantial amount of capital to shareholders and
pay down a substantial amount of debt.
As part of this strategy, the Company announced that it planned
to raise approximately $400-500
million in liquidity by the end of the fiscal year ending
February 2023, through realisations,
the secondary sale of certain asset portfolios, the formation of
joint venture partnerships and the US Side-Car Fund, in which the
Company would be an initial investor.
Return of capital
In the past eighteen months, the Company has returned approximately
$50 million to shareholders in a
combination of open market purchases and a tender offer at close to
NAV. Subject to the achievement of liquidity objectives, the
Company expects to continue to return capital to shareholders;
however, the near term priority is debt repayment.
Realisations
In August 2019, JZCP finalized the
sale of 80% of its interest in portfolio companies Orizon and
Avante for $65.5 million in gross
proceeds, a 23% uplift to the July
2019 NAV of those assets. In October
2019 (post-period), JZCP closed the sale of its portfolio
company Priority Express for $18.8
million in gross proceeds (including escrows and a potential
earn out), a 60% uplift to the July
2019 NAV.
These transactions, together with others, bring total gross
proceeds realised this fiscal year through November 2019 to more than $135 million. A process is currently underway for
the sale of a portfolio of US microcap assets, which is expected to
generate between $150-170 million in
gross proceeds to JZCP by 29 February
2020.
Alterations to the investment policy
The Company’s focus continues to be its revised investment policy;
however, potential impairment to the value of the real estate
portfolio dictates that the Company must protect its balance sheet
in the near term by prioritizing debt repayment over the return of
capital to shareholders. Consequently, new capital allocations will
be largely limited to follow-on investments in existing portfolio
companies as well as other existing obligations.
As part of curtailing new investments, the Company will not
proceed to make a commitment to the recently announced US Side-Car
Fund, which was approved by shareholders to be up to $25 million. Furthermore, JZCP’s commitment to
JZI Fund IV, L.P. (“Fund IV”), which shareholders previously
approved at up to €64 million, is intended to be limited to a
maximum of €15 million. The Board expects this contribution to be
made over a period of five years. Because of JZCP’s commitment
reduction, Jay Jordan and
David Zalaznick expect to increase
their aggregate commitment to Fund IV by up to approximately €10
million.
Additionally, the Board has requested that the Investment
Adviser relieve the Company of its future subscription obligations
to certain managed funds where the Company has current and
projected future commitments of approximately up to $44 million. In consultation with the Board,
Jay Jordan and David Zalaznick have agreed in principle to
provide for or replace these commitments to certain managed funds
in an amount of up to approximately $50-60 million, including the increased
commitment to Fund IV.
Over time, the Board believes that the above measures will
conserve cash of up to approximately $100
million.
In addition, the Investment Adviser has volunteered to forego
payment of the remainder of its currently earned capital incentive
fee on the basis that (i) $3.9
million of it can be immediately paid to the members of the
JZAI team other than Jay Jordan and
David Zalaznick and (ii) the net
gains underpinning the realised incentive fee are rolled forward
and netted against future losses. Additionally, the Investment
Adviser has volunteered to forego future capital incentive fees
until the Company and the Investment Adviser mutually agree to
reinstate such payments.
Following the implementation of the above strategic initiatives,
the Board will consider the Company’s strategy in light of the
circumstances prevailing at that time. The Board believes that a
continuation of the aforementioned policy changes will likely be
adopted, involving further realisations, limited investment
activity, remaining debt repayments and the return of further
capital to shareholders.
Shareholders owning more than 50% of the Company’s ordinary
shares have confirmed to the Board that they support continuance
based on the repayment of debt and capital detailed above.
Portfolio Update
At the end of the period, the Company’s portfolio consisted of
24 US microcap businesses (including four ‘verticals’ and 15
co-investments) across nine industries, 17 European microcap
companies across six industries and seven countries, and five major
real estate assemblages (61 properties in total) located across
Brooklyn, New York and
South Florida.
US and European Microcap
The US microcap portfolio performed very well during the period,
delivering a net increase in NAV per share of 63 cents, primarily due to net accrued income of
11 cents per share and increased
earnings at the Company’s co-investments Peaceable Street Capital
(11 cents), New Vitality
(3 cents) and K2 Towers II
(3 cents) as well as writing the
Orizon, Avante and Logistics investments up to their respective
sale values (18, 7 and 6 cents per
share, respectively).
The European microcap portfolio (via JZI Fund III, L.P. or “Fund
III”) delivered a net increase of 9
cents per share during the period, due to write-ups at
S.A.C, My Lender, Treee, Eliantus, Factor Energia, BlueSites,
Luxida and Karium. However, these gains were offset by a write-down
on the Company’s direct loan to Ombuds (16
cents).
As of 31 August 2019, Fund III
held 12 investments: four 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 four companies in Spain:
Ombuds, Docout, Xacom and Toro Finance.
Real Estate
The real estate portfolio experienced a net decrease of
82 cents during the period, primarily
due to operating expenses and debt service at the property level.
As of 31 August 2019, the Company has
approximately $416 million invested
in a portfolio of retail, office and residential properties in
Brooklyn, New York, and
South Florida, alongside its real
estate partner, RedSky Capital. The total portfolio is comprised of
61 properties, which, following the newly received appraisals
mentioned above, is valued at $422.7
million, subject to the reservations of the Board and
Investment Adviser regarding the realisable value of the portfolio
as discussed above. During the period, JZCP made follow-on
investments and paid expenses totalling approximately $43 million.
As part of its focus on liquidity, the Company does not expect
to make any new investments in the real estate sector other than in
its existing portfolio, primarily where additional capital is
required for debt service payments, accretive pre-development
expenditures or the acquisition of a remaining property to complete
an assemblage. The Board, Investment Adviser and RedSky Capital are
working closely to establish the best course of action
(development, sale or joint venture) to maximise value and
liquidity from each real estate asset. The Investment Adviser has
taken a much more direct role in the day-to-day management of both
Redsky Capital and the real estate portfolio.
Spruceview Capital Partners
Spruceview Capital Partners (“Spruceview”), the Company’s asset
management business in the US, continues to make progress.
Spruceview looks to address 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.
After successfully deploying an initial committed amount of
$300 million for a portfolio of
alternative investments for a Mexican trust (or “CERPI”),
Spruceview’s mandate was extended in August by an additional
commitment of $400 million, with the
potential remaining to increase the size of the CERPI to up to
$1.0 billion over the coming years.
Spruceview continues to have a healthy pipeline of potential client
opportunities.
The Board
As previously announced, the Board intends to seek new
appointments and this process has begun. I must report, however,
that Chris Waldron has indicated his
wish to step down. He does so with our thanks for his contribution
and our best wishes for the future.
Outlook
The Board regrets the uncertainty regarding the realisable value
of the real estate portfolio but can reaffirm that the Investment
Adviser is committed to the strategy of maximising value for JZCP’s
shareholders by realising assets, paying down a substantial amount
of debt and continuing to return capital to shareholders.
David Macfarlane
Chairman
26 November 2019
Investment Adviser’s Report
Dear Fellow Shareholders,
On 24 October 2019, shareholders
voted to approve a revised investment policy, whereby JZCP will
look to realise investments and materially reduce commitments to
new investments in order to return capital to shareholders and pay
down debt. We have achieved several realisations and are making
progress on many more.
In August 2019, JZCP finalized the
sale of 80% of its interest in portfolio companies Orizon and
Avante for $65.5 million in gross
proceeds, a 23% uplift to the July
2019 NAV of those assets. In October
2019 (post- period), JZCP closed the sale of its portfolio
company Priority Express for $18.8
million in gross proceeds (including escrows and a potential
earn out), a 60% uplift to the July
2019 NAV of that asset. These transactions bring total gross
proceeds realised this fiscal year through November 2019 to more than $135 million.
In addition to realisations, we plan to raise liquidity for JZCP
from secondary sales of certain asset portfolios and joint venture
partnerships. We are currently in the market with a portfolio of
select US microcap assets and expect to realise between
$150-170 million in gross proceeds
prior to 29 February 2020 from these
transactions.
As of 31 August 2019, our US
micro-cap portfolio consisted of 23 businesses, which includes four
‘verticals’ and 14 co-investments, across nine industries; this
portfolio was valued at 8.2x EBITDA, after applying an average 23%
marketability discount to public comparables. The average
underlying leverage senior to JZCP’s position in our US micro-cap
portfolio is 4.4x EBITDA. Consistent with our value-oriented
investment strategy, we have acquired our current US micro-cap
portfolio at an average 6.0x EBITDA.
Our European micro-cap portfolio consisted of 17 companies
across six industries and seven countries. The European micro-cap
portfolio has low leverage senior to JZCP’s position, of under 2.0x
EBITDA.
As of the same date, our US real estate portfolio consisted of
61 properties and can be grouped primarily into five major
‘assemblages’, located in the Williamsburg, Greenpoint and
Downtown/Fulton Mall neighbourhoods of Brooklyn, New York, and the Wynwood and Design
District neighbourhoods of Miami,
Florida. Our assemblages are comprised of adjacent or
concentrated groupings of properties that can be developed,
financed and/or sold together at a higher valuation than on a
stand-alone basis.
Net Asset Value (“NAV”)
JZCP’s NAV per share decreased 38
cents, or 3.8%, during the six-month period from
28 February 2019 to 31 August 2019.
NAV per
Ordinary share as of 28 February 2019 |
|
|
|
|
|
$10.04 |
Change
in NAV due to capital gains and accrued income |
|
|
|
|
|
|
+ US Micro-cap |
|
|
|
|
|
|
|
|
|
|
|
0.63 |
- European
Micro-cap |
|
|
|
|
|
|
|
|
|
(0.07) |
- Real estate |
|
|
|
|
|
|
|
|
|
|
|
(0.82) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
increases/(decreases) in NAV |
|
|
|
|
|
|
|
|
+ Net
foreign exchange effect |
|
|
|
|
|
|
|
|
|
0.08 |
- Finance costs |
|
|
|
|
|
|
|
|
|
|
|
(0.13) |
- Expenses
and taxation |
|
|
|
|
|
|
|
|
|
(0.09) |
+
Appreciation from share buybacks |
|
|
|
|
|
|
|
0.02 |
NAV per
Ordinary share as of 31 August 2019 |
|
|
|
|
|
$9.66 |
The US micro-cap portfolio performed well during the period,
delivering a net increase of 63 cents
per share. This was primarily due to net accrued income of
11 cents, increased earnings at
co-investments Peaceable Street Capital (11
cents), New Vitality (3 cents)
and K2 Towers II (3 cents) as well as
writing our Orizon, Avante and Logistics investments up to their
respective sale values (18, 7 and 6
cents, respectively). We also received 4 cents of escrow payments during the period.
Our JZI Fund III, L.P. (“Fund III”) portfolio performed very
well during the period, posting a net increase of 9 cents, primarily due to write-ups at Fund III
portfolio companies S.A.C, My Lender, Treee, Eliantus, Factor
Energia, BlueSites, Luxida and Karium. Gains at our Fund III
portfolio companies were offset by a write-down on our direct loan
to Ombuds (16 cents).
The real estate portfolio experienced a net decrease of
82 cents, primarily due to operating
expenses and debt service at the property level.
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.
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
31.8.2018 |
|
31.8.2016 |
|
31.8.2014 |
Share
price (in GBP) |
|
|
|
£4.82 |
|
£4.35 |
|
£4.44 |
|
£4.53 |
|
£4.34 |
NAV per
share (in USD) |
|
|
|
$9.66 |
|
$10.04 |
|
$9.82 |
|
$10.40 |
|
$10.11 |
NAV to
market price discount |
|
39.2% |
|
42.4% |
|
41.2% |
|
43.0% |
|
28.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
month return |
|
1 year
return |
|
3 year
return |
|
5 year
return |
Dividends
paid (in USD) |
|
|
|
- |
|
- |
|
$0.155 |
|
$0.790 |
Total
Shareholders' return (GBP)1 |
|
|
|
|
10.8% |
|
8.6% |
|
9.1% |
|
25.8% |
Total NAV
return per share (USD)1 |
|
|
-3.8% |
|
-1.6% |
|
-5.7% |
|
3.3% |
Total
Adjusted NAV return per share (USD)1,2 |
|
|
0.2% |
|
1.3% |
|
-3.4% |
|
16.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Total returns are cumulative and assume that
dividends were reinvested.
2 Adjusted NAV returns reflect the return
per share before (i) the dilution resulting from the issue of
18,888,909 ordinary shares at a discount to NAV on 30 September 2015 and (ii) subsequent
appreciation from the buyback of ordinary shares at a
discount.
Portfolio Summary
Our portfolio is well-diversified by asset type and geography,
with 40 US and European micro-cap investments across eleven
industries and five primary real estate ‘assemblages’ (61 total
properties) located in Brooklyn, New
York and South Florida. The
portfolio continues to become more diversified geographically
across Western Europe with
investments in Spain, Italy, Portugal, Luxembourg, Scandinavia and the UK.
Below is a summary of JZCP’s assets and liabilities at
31 August 2019 as compared to
28 February 2019. An explanation of
the changes in the portfolio
follows:
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
US
microcap portfolio |
|
|
|
|
|
424,913 |
|
478,970 |
European
microcap portfolio |
|
|
|
104,863 |
|
128,698 |
Real
estate portfolio |
|
|
|
|
|
422,656 |
|
443,044 |
Other
investments |
|
|
|
|
|
20,916 |
|
18,302 |
Total
investments |
|
|
|
|
|
973,348 |
|
1,069,014 |
Treasury
bills |
|
|
|
|
|
3,323 |
|
3,314 |
Cash |
|
|
|
|
|
71,686 |
|
50,994 |
Total
cash equivalents |
|
|
|
|
|
75,009 |
|
54,308 |
Other
assets |
|
|
|
|
|
623 |
|
1,286 |
Total
assets |
|
|
|
|
|
1,048,980 |
|
1,124,608 |
|
|
|
|
|
|
|
|
|
|
Zero
Dividend Preference shares |
|
|
|
59,946 |
|
63,838 |
Convertible Unsecured Loan Stock |
|
|
|
50,167 |
|
54,274 |
Loans
payable |
|
|
|
|
|
149,490 |
|
149,227 |
Other
liabilities |
|
|
|
|
|
41,151 |
|
47,007 |
Total
liabilities |
|
|
|
|
|
300,754 |
|
314,346 |
Net
Asset Value |
|
|
|
|
|
748,226 |
|
810,262 |
JZCP’s loan facility with Guggenheim Partners may be repaid, in
whole or in part, at any time, without any prepayment
penalties.
US microcap
portfolio
As you know from previous reports, our US portfolio is grouped into
industry ‘verticals’ and co-investments. 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 performed well during the period,
delivering a net increase of 63 cents
per share. This was primarily due to net accrued income of
11 cents, increased earnings at
co-investments Peaceable Street Capital (11 cents), New Vitality (3
cents) and K2 Towers II (3
cents) as well as writing our Orizon, Avante and Logistics
investments up to their respective sale values (18, 7 and
6 cents, respectively). We also
received 4 cents of escrow payments during the
period.
European microcap
portfolio
Our Fund III portfolio performed very well during the period,
posting a net increase of 9 cents,
primarily due to write- ups at Fund III portfolio companies S.A.C,
My Lender, Treee, Eliantus, Factor Energia, BlueSites, Luxida
and Karium. Gains at our Fund III portfolio companies were offset
by a write-down on our direct loan to Ombuds (16 cents).
JZCP invests in the European micro-cap sector through its
approximately 18.8% ownership of Fund III. As of 31 August 2019, Fund III held 12 investments:
four 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 four companies in Spain: Ombuds, Docout, Xacom and Toro
Finance.
JZAI has offices in London and
Madrid and an outstanding team
with over fifteen years of experience investing together in
European micro-cap deals.
During the period, JZCP received distributions totaling
approximately €12.5 million (approximately $14.1 million) from its investments
in: (i) Petrocorner, a network of petrol stations throughout
Spain; (ii) Collingwood, a niche
auto insurance business in the UK; and (iii) Fincontinuo, a niche
consumer lender in Italy.
The proceeds included above from Petrocorner represent the first
tranche of proceeds from the sale of Petrocorner by Fund III
to British Petroleum. Headquartered in Madrid, Petrocorner is a strategic build-up in
the Spanish retail petrol station market, comprised of 65 petrol
stations located across Spain with
annualized sales volume of approximately 250 million litres of
petrol. JZCP expects to receive cumulative gross proceeds of €12.1
million from the sale (including interim proceeds and
escrows), which represents a gross multiple of invested capital
(“MOIC”) of approximately 2.0x and a gross internal rate of return
(“IRR”) of approximately 23.0%.
Real estate
portfolio
As discussed in the Chairman’s Statement and below in the Outlook
section, we believe the valuations are high for several of our real
estate sites and assemblages. Accordingly, we expect to see lower
valuations for the fiscal year ending 29
February 2020 beyond the approximately $64 million that the NAV has been marked down to
reflect the carrying costs for the six months ending 31 August 2019.
As of 31 August 2019, JZCP had
approximately $416 million invested
in a portfolio of retail, office and residential properties in
Brooklyn, New York, and
South Florida, which is valued at
$422.7 million as of that date. We
have made these investments alongside our real estate
partner, RedSky Capital.
Since we began investing in real estate in April 2012, we have acquired a total of 61
properties, all currently in various stages of development
and
re-development.
Follow-on real estate investments |
|
|
JZCP Investment
($ millions) |
|
|
Follow-ons
and expenses |
|
|
|
|
43.6 |
|
|
|
|
|
|
|
|
|
|
|
Other
investments
Our asset management business in the US, Spruceview Capital
Partners, has continued to make encouraging progress since we last
reported 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.
After the successful deployment during the period of an initial
committed amount of $300 million for
a portfolio of alternative investments for a Mexican trust (or
“CERPI”), Spruceview’s mandate was extended in August by an
additional commitment of $400
million, with the potential remaining to increase the size
of the CERPI to up to $1.0 billion
over the coming years.
During the period, Spruceview maintained a pipeline of potential
client opportunities and continued to provide investment oversight
to the pension funds of the Mexican and Canadian subsidiaries of an
international packaged foods company, as well as a European private
credit fund-of-funds, a US middle market private equity
fund-of-funds, and portfolios for family office clients.
As previously reported, Richard
Sabo, former Chief Investment Officer of Global Pension and
Retirement Plans at JPMorgan and a member of that firm’s executive
committee, is leading a team of 14 investment, business
development, legal and operations professionals.
Realisations
Asset |
|
|
Portfolio |
|
|
|
Proceeds ($millions) |
Avante -
Sale of 80% of JZCP's stake |
US microcap |
|
|
|
37.5 |
Orizon -
Sale of 80% of JZCP's stake |
US microcap |
|
|
|
28.0 |
Waterine
Renewal -Sale |
US microcap |
|
|
|
23.3 |
Fund III –
Proceeds from Sale of Petrocorner / Refinancing of Collingwood
& Fincontinuo |
European
microcap |
|
|
14.5 |
Felix
Storch - Refinancing |
US microcap |
|
|
|
14.0 |
Receipt of
Escrow Balances |
US microcap |
|
|
|
3.9 |
|
|
|
|
|
|
|
121.2 |
Avante &
Orizon
In August 2019, JZCP sold 80% of its
stake in US micro-cap investments Avante and Orizon to Edgewater
Growth Capital Partners for $65.5
million in gross proceeds, a 23% uplift to July 2019 NAV of those assets.
Avante is a single source provider of medical, surgical,
diagnostic imaging and radiation oncology equipment, including
sales, service, repair, parts, refurbishing and installation in
over 150 countries. Orizon is a manufacturer of integral aerospace
assemblies for original equipment manufacturers and tier one
suppliers to original equipment manufacturers.
Waterline
Renewal
In April 2019, Waterline Renewal was
acquired by Behrman Capital, a private equity investment firm based
in New York and San Francisco.
Waterline Renewal is a leading provider of engineered products
used in the trenchless rehabilitation of wastewater infrastructure
for municipal, commercial, industrial, and residential
applications. The company's patented line of products and
technologies allows its customers to deliver long-lasting solutions
that repair sewer systems and wastewater lines without the need for
excavation or property damage, and prevent overflow created by
excess inflow and infiltration of ground water into the wastewater
system.
JZCP expects to realise approximately $24.6 million in gross proceeds (including
escrows) from the sale.
Felix
Storch
In March 2019, JZCP refinanced
Felix Storch, its manufacturer of
small and custom refrigeration appliances. This refinancing
resulted in gross proceeds to JZCP of approximately $14.0 million, which returned JZCP’s entire
March 2017 investment in Felix Storch of $12.0
million. Felix Storch has
continued to exhibit strong growth and we expect
it to return more capital in the future.
Priority
Express
In October 2019 (post-period),
Priority Express was acquired by Capstone Logistics, a leading
North American supply chain solutions partner.
Priority Express was founded in 2005 and provides over 500
customers in the healthcare and e-commerce end markets with
expedited freight and distribution services, scheduled routed
delivery services and on-demand delivery services.
JZCP expects to realise approximately $18.8 million in gross proceeds (including
escrows and a potential earn-out) from the sale, a 60% uplift to
July 2019 NAV.
Outlook
As discussed in the Chairman’s Statement, we as the Investment
Adviser have been working with the Board to alleviate many of
JZCP’s commitments which would require considerable cash resources.
We are taking on the responsibility to provide or procure these
commitments, either through increased personal investment or other
avenues. Most importantly, JZCP will have up to approximately
$100 million less in cash
requirements to fulfill these existing commitments, which will be
money that can be dedicated to debt repayment and return of capital
to shareholders.
Subject to achieving our liquidity objectives, our near and
medium term priority is debt repayment, including the Zero Dividend
Preference Shares and Convertible Unsecured Loan Stock. After that,
we will endeavor to continue to return capital to
shareholders.
One near term initiative to achieve liquidity is through the
secondary sale of certain of our US micro-cap assets. Hopefully,
this will yield prices at or above our NAV, similar to our
realisations already achieved this year. At the same time, we are
minimizing the amount of capital JZCP invests in new acquisitions
to preserve cash for near and medium term debt repayment and,
ultimately, return of capital to shareholders.
Realising liquidity for our real estate portfolio is also an
objective. We are currently evaluating the best course of action
(development, sale or joint venture) to maximize value. Toward that
end, we will be putting several of our properties up for sale in
the next 60-90 days. It is important to note that we must support
the business plan for certain of our respective
assemblages and build-outs in order to complete the job and
maximize value. These are the only new investments we will be
making in real estate; we expect it will take 24 to 36 months to
maximize the value of our current portfolio.
With regard to valuation of our real estate portfolio, we
believe the valuations are high for several of the sites and
assemblages. Accordingly, we expect to see lower valuations for the
fiscal year ending 29 February
2020 beyond the approximately $64
million that the NAV has been marked down to reflect the
carrying costs for the six months ending 31
August 2019.
We thank the Board and shareholders for their support of the
revised investment strategy and we are confident that we can
execute the strategy. In the coming months, we will be reporting to
you how we are progressing with realisations to raise cash for debt
repayment. We anticipate the next event will be the pay down of a
significant amount of debt upon the successful completion of the
secondary sale.
Yours faithfully,
Jordan/Zalaznick Advisers, Inc.
26 November 2019
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 as Director of Pro
Natura de Yucatan.
Sharon
Parr2
Mrs Parr was appointed to the Board of JZCP in 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.
Tanja
Tibaldi
Ms Tibaldi was appointed to the Board of JZCP in 2008. She was on
the board of JZ Equity Partners Plc from January 2005 until the company's liquidation on
1 July 2008. She was managing
director at Fairway Investment Partners, a Swiss asset management
company where she was responsible for the Group's marketing and co-
managed two fund of funds. Previously she was an executive at the
Swiss Stock Exchange and currently serves on the board of several
private companies.
Christopher Waldron3,
4
Mr Waldron was appointed to the Board of JZCP in 2013. He has more
than thirty years’ experience as an asset manager and director of
investment funds. He is Chairman of UK Mortgages Limited and
Crystal Amber Fund Limited. He began his career with James Capel and subsequently held investment
management positions with Bank of Bermuda, the Jardine Matheson Group and Fortis
prior to joining the Edmond de Rothschild Group in Guernsey as
Investment Director in 1999. He was appointed Managing Director of
the Edmond de Rothschild companies in Guernsey in 2008, a position
he held until 2013, when he stepped down to concentrate on non-
executive work and investment consultancy. He is a member of the
States of Guernsey’s Investment and Bond Management Sub-Committee
and a Fellow of the Chartered Institute for Securities and
Investment. He is a resident of Guernsey.
Patrick Firth
Mr Firth resigned from the Board and as Chairman of the Audit
Committee in June 2019.
1Chairman of the nominations committee of
which all Directors are members.
2Mrs Parr was appointed Chairman of the Audit Committee
in June 2019. All Directors are
members of the Audit Committee.
3Chairman of the management engagement committee of
which all Directors are members. Mr Waldron was appointed as Senior
Independent Director in May
2019.
4Mr Waldron proposed to resign from the
Board on 26 November 2019.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Interim Report and
Unaudited Condensed Interim Financial Statements (the "Interim
Report and Financial Statements") in accordance with applicable law
and regulations.
The Directors confirm that to the best of their knowledge:
- the Unaudited and Condensed Interim Financial Statements (the
"Interim Financial Statements") have been prepared in accordance
with IFRS 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, 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, 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 2019 Annual Report and Financial
Statements that could do so.
Going concern and principal risks and
uncertainties
As an investment fund, the Company's principal risks are those that
are associated with its investment portfolio. Given the nature of
the portfolio, the principal risks are associated with the
financial and operating performance of the underlying
investments.
The Directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report and Financial Statements for the year ended 28 February 2019 (as explained annual report).
The Directors continue to monitor the risks to the Company.
The Directors consider the Company has adequate financial
resources, in view of its holding in cash and cash equivalents and
liquid investments, and the income streams deriving from its
investments and believe that the Company is well placed to manage
its business risks successfully to continue in operational
existence for the foreseeable future and that it is appropriate to
prepare the interim financial statements on the going concern
basis.
Approved by the Board of Directors and agreed on behalf of the
Board on 26 November 2019.
David Macfarlane
Chairman
Sharon Parr
Director
Investment Portfolio
|
|
|
|
|
|
Percentage of Portfolio |
|
|
31 August 2019 |
|
|
|
Cost1 |
|
Value |
|
|
|
US$'000 |
|
US$'000 |
|
|
% |
|
|
|
|
|
|
|
|
US Microcap
portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Microcap
(Verticals) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Services
Solutions2 |
|
|
|
|
|
|
|
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 |
|
95,893 |
|
|
9.8 |
|
|
|
|
|
|
|
|
Testing Services
Holdings2 |
|
|
|
|
|
|
|
TECHNICAL SOLUTIONS
AND SERVICES
Provider of safety focused solutions for the industrial,
environmental and life science related markets |
|
|
|
|
|
|
|
CONTAMINATION CONTROL
& CERTIFICATION
Provider of testing, certification and validation services for
cleanroom, critical environments and containment systems |
|
|
|
|
|
|
|
Total Technical
Solutions and Services Vertical valuation |
|
23,731 |
|
23,210 |
|
|
2.4 |
|
|
|
|
|
|
|
|
Flexible Packaging
Vertical |
|
|
|
|
|
|
|
ACW FLEX PACK, LLC
Provider of a variety of custom flexible packaging solutions to
converters and
end-users |
|
|
|
|
|
|
|
Total Flexible
Packaging Vertical valuation |
|
10,033 |
|
11,064 |
|
|
1.1 |
|
|
|
|
|
|
|
|
Flow
Controls |
|
|
|
|
|
|
|
FLOW CONTROL, LLC
Manufacturer and distributor of high-performance, mission-critical
flow handling products and components utilized to connect
processing line equipment |
|
|
|
|
|
|
|
Total Flow Control
Vertical valuation |
|
14,040 |
|
14,924 |
|
|
1.5 |
Total US
Microcap (Verticals) |
|
96,054 |
|
145,091 |
|
|
14.8 |
|
|
|
|
|
|
|
|
US
Microcap (Co-investments)
ABTB
Acquirer of franchises within the fast-casual eateries and
quick-service restaurants sector |
|
8,760 |
|
8,760 |
|
|
0.9 |
DEFLECTO
Deflecto designs, manufactures and sells innovative plastic
products to multiple industry segments |
|
40,112 |
|
44,334 |
|
|
4.5 |
EXER URGENT CARE
Emergency Room alternative that combines clinical expertise, care
& convenience |
|
2,400 |
|
2,400 |
|
|
0.3 |
GEORGE INDUSTRIES
Manufacturer of highly engineered, complex and high tolerance
products for the aerospace, transportation, military and other
industrial markets |
|
12,683 |
|
12,681 |
|
|
1.3 |
IGLOO2
Designer, manufacturer and marketer of coolers and outdoor
products |
|
6,572 |
|
6,450 |
|
|
0.7 |
K2 TOWERS II
Acquirer of wireless communication
towers
|
|
8,463 |
|
10,963 |
|
|
1.1 |
NEW
VITALITY2
Direct-toconsumer provider of nutritional supplements and personal
care products |
|
3,431 |
|
6,303 |
|
|
0.7 |
ORIZON
Manufacturer of high precision machine parts and tools for
aerospace and defence industries |
|
4,127 |
|
7,000 |
|
|
0.7 |
PEACEABLE STREET
CAPITAL
Specialty finance platform focused on commercial real estate
|
|
28,041 |
|
36,541 |
|
|
3.8 |
SALTER
LABS2
Developer and manufacturer of respiratory medical products and
equipment for the homecare, hospital, and sleep disorder
markets |
|
16,762 |
|
21,717 |
|
|
2.2 |
SLOAN
LED2
Designer and manufacturer of LED lights and lighting systems |
|
6,030 |
|
452 |
|
|
0.0 |
SUZO HAPP
GROUP2
Designer, manufacturer and distributor of components for the global
gaming, amusement and industrial markets |
|
2,572 |
|
11,700 |
|
|
1.2 |
TIERPOINT2
Provider of cloud computing and collocation data centre
services |
|
44,313 |
|
46,813 |
|
|
4.8 |
VITALYST2
Provider of outsourced IT support and training services |
|
9,020 |
|
8,192 |
|
|
0.8 |
Total US
Microcap (Co-investments) |
|
193,286 |
|
224,306 |
|
|
23.0 |
|
|
|
|
|
|
|
|
US Microcap
(Other) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVANTE HEALTH
SOLUTIONS
Provider of new and professionally refurbished healthcare
equipment |
|
7,178 |
|
9,375 |
|
|
1.0 |
FELIX STORCH
Supplier of specialty, professional, commercial, and medical
refrigerators and freezers, and cooking appliances |
|
50 |
|
24,500 |
|
|
2.5 |
HEALTHCARE PRODUCTS
HOLDINGS3
Designer and manufacturer of motorised vehicles |
|
17,636 |
|
- |
|
|
0.0 |
NATIONWIDE
STUDIOS
Processor of digital photos for pre-schoolers |
|
26,324 |
|
5,000 |
|
|
0.5 |
PRIORITY
EXPRESS2
Provider of same day express courier services to various companies
located in north-eastern USA. Priority Express is a subsidiary of
US Logistics |
|
13,200 |
|
16,641 |
|
|
1.7 |
Total US
Microcap (Other) |
|
64,388 |
|
55,516 |
|
|
5.7 |
|
|
|
|
|
|
|
|
Total US Microcap
portfolio |
|
353,728 |
|
424,913 |
|
|
43.5 |
European Microcap portfolio |
|
|
|
|
|
|
|
EUROMICROCAP FUND
2010, L.P.
Invested in European Microcap
entities |
|
- |
|
3,854 |
|
|
0.4 |
JZI FUND III, L.P.
At 31 August 2019, was invested in twelve companies in the European
microcap sector: Fincontinuo, S.A.C, Collingwood, My Lender,
Alianzas en Aceros, ERSI, Treee, Eliantus, Factor Energia,
BlueSites, Luxida and Karium |
|
35,200 |
|
57,010 |
|
|
5.8 |
Total European
Microcap (measured at Fair Value) |
|
35,200 |
|
60,864 |
|
|
6.2 |
|
|
|
|
|
|
|
|
Direct
Investments |
|
|
|
|
|
|
|
DOCOUT4
Provider of digitalisation, document processing and storage
services |
|
2,777 |
|
3,836 |
|
|
0.4 |
OMBUDS4
Provider of personal security, asset protection and facilities
management services |
|
17,198 |
|
13,650 |
|
|
1.4 |
TORO
FINANCE4
Provides short term receivables finance to the suppliers of major
Spanish companies |
|
21,619 |
|
22,436 |
|
|
2.3 |
XACOM4
Supplier of telecom products and technologies |
|
2,055 |
|
4,077 |
|
|
0.4 |
Total European
Microcap (Direct Investments) |
|
43,649 |
|
43,999 |
|
|
4.5 |
Total European
Microcap portfolio |
|
78,849 |
|
104,863 |
|
|
10.7 |
|
|
|
|
|
|
|
|
Real Estate
portfolio |
|
|
|
|
|
|
|
JZCP
REALTY5
Facilitates JZCP's investment in US real estate |
|
437,577 |
|
422,656 |
|
|
43.3 |
Total Real Estate
portfolio |
|
437,577 |
|
422,656 |
|
|
43.3 |
|
|
|
|
|
|
|
|
Other
investments |
|
|
|
|
|
|
|
BSM
ENGENHARIA2
Brazilian-based provider of supply chain logistics, infrastructure
services and equipment rental |
|
6,115 |
|
459 |
|
|
0.0 |
CERPI
Spruceview managed investment product |
|
619 |
|
619 |
|
|
0.1 |
JZ
INTERNATIONAL3
Fund of European LBO investments |
|
- |
|
750 |
|
|
0.1 |
SPRUCEVIEW CAPITAL
Asset management company focusing primarily on managing
endowments and pension funds |
|
30,005 |
|
19,088 |
|
|
2.0 |
Total Other
investments |
|
36,739 |
|
20,916 |
|
|
2.2 |
|
|
|
|
|
|
|
|
Listed
investments |
|
|
|
|
|
|
|
U.S. Treasury Bill
0.00% Maturity 6th-February-2020 |
|
3,321 |
|
3,323 |
|
|
0.3 |
Total Listed
investments |
|
3,321 |
|
3,323 |
|
|
0.3 |
|
|
|
|
|
|
|
|
Total -
portfolio |
|
910,214 |
|
976,671 |
|
|
100.0 |
1Original book cost incurred by JZCP adjusted
for subsequent transactions. The book cost represents cash outflows
and excludes PIK
investments.
2Co-investment with Fund A, a Related Party (Note
19) .
3Legacy Investments. Legacy investments are excluded
from the calculation of capital and income incentive
fees.
4Classified as Loans at Amortised Cost .
5JZCP invests in real estate indirectly through its
investments in JZCP Realty Ltd. JZCP owns 100% of the shares and
voting rights of JZCP Realty, Ltd.
Statement of Comprehensive Income (Unaudited)
For the Period from 1 March 2019 to
31 August 2019
|
|
Six Month Period Ended |
|
Six Month Period Ended |
|
|
|
|
31 August 2019 |
31 August 2018 |
|
Note |
|
US$'000 |
|
|
US$'000 |
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
Realisations from
investments held in escrow accounts |
21 |
|
3,923 |
|
|
2,085 |
Net foreign currency
exchange gains |
|
|
3,765 |
|
|
1,045 |
Gain on financial
liabilities at fair value through profit or loss |
|
|
4,107 |
|
|
5,925 |
Investment Income |
8 |
|
19,984 |
|
|
14,300 |
Bank and deposit
interest |
|
|
225 |
|
|
289 |
|
|
|
32,004 |
|
|
23,644 |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
Net loss on
investments at fair value through profit or loss |
6 |
|
(31,575) |
|
|
(25,720) |
Expected credit
losses |
7 |
|
(14,727) |
|
|
- |
Investment Adviser's
base fee |
10 |
|
(8,301) |
|
|
(8,498) |
Investment Adviser's
incentive fee |
10 |
|
2,895 |
|
|
3,843 |
Administrative
expenses |
|
|
(1,660) |
|
|
(1,423) |
Directors'
remuneration |
|
|
(230) |
|
|
(219) |
|
|
|
(53,598) |
|
|
(32,017) |
|
|
|
|
|
|
|
Operating
loss |
|
|
(21,594) |
|
|
(8,373) |
|
|
|
|
|
|
|
Finance
costs |
9 |
|
(10,463) |
|
|
(9,126) |
|
|
|
|
|
|
|
Loss for the
period |
|
|
(32,057) |
|
|
(17,499) |
Weighted average
number of Ordinary shares in issue during the period |
20 |
80,614,784 |
|
83,456,487 |
|
|
|
|
|
|
|
Basic loss per
Ordinary share |
20 |
|
(39.77)c |
|
|
(20.97)c |
|
|
|
|
|
|
|
Diluted loss per
Ordinary share |
20 |
|
(39.84)c |
|
|
(24.27)c |
The format of the Statement of Comprehensive Income (Unaudited) has
changed from prior periods in that it now presents income in one
column format rather than a split between capital and revenue.
The accompanying notes form an integral part of the Interim
Financial Statements.
Statement of Financial Position
(Unaudited)
As at 31 August 2019
|
|
|
31
August |
|
28
February |
|
|
|
2019 |
|
2019 |
|
Note |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Investments at fair
value through profit or loss |
11 |
|
932,672 |
|
1,014,316 |
Loans at amortised
cost |
11 |
|
43,999 |
|
58,012 |
Other receivables |
12 |
|
623 |
|
1,286 |
Cash at bank |
|
|
71,686 |
|
50,994 |
Total
assets |
|
|
1,048,980 |
|
1,124,608 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Zero Dividend
Preference shares |
13 |
|
59,946 |
|
63,838 |
Convertible Unsecured
Loan Stock |
14 |
|
50,167 |
|
54,274 |
Loan payable |
15 |
|
149,490 |
|
149,227 |
Investment Adviser's
incentive fee |
10 |
|
36,876 |
|
42,771 |
Investment Adviser's
base fee |
10 |
|
2,079 |
|
2,102 |
Other payables |
16 |
|
2,196 |
|
2,134 |
Total
liabilities |
|
|
300,754 |
|
314,346 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
|
|
216,625 |
|
246,604 |
Other reserve |
|
|
353,528 |
|
353,528 |
Retained earnings |
|
|
178,073 |
|
210,130 |
Total
equity |
|
|
748,226 |
|
810,262 |
|
|
|
|
|
|
Total liabilities
and equity |
|
|
1,048,980 |
|
1,124,608 |
|
|
|
|
|
|
Number of Ordinary
shares in issue at period/year end |
17 |
|
77,474,175 |
|
80,666,838 |
|
|
|
|
|
|
Net asset value per
Ordinary share |
|
|
$9.66 |
|
$10.04 |
These Interim Financial Statements were approved by the Board of
Directors and authorised for issue on 26
November 2019. They were signed on its behalf by:
David
Macfarlane
Chairman
Sharon
Parr
Director
The accompanying notes form an integral part of the interim
financial statements.
Statement of Changes in Equity
(Unaudited)
For the Period from 1 March 2019 to
31 August 2019
|
|
|
|
Share |
|
Other |
|
Retained |
|
|
|
|
|
|
Capital |
|
Reserve |
|
Earnings |
|
Total |
|
Note |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1
March 2019 |
|
|
|
246,604 |
|
353,528 |
|
210,130 |
|
810,262 |
Loss for the
period |
|
|
|
- |
|
- |
|
(32,057) |
|
(32,057) |
Buy back of Ordinary
shares |
|
17 |
|
(29,979) |
|
- |
|
- |
|
(29,979) |
Balance at 31
August 2019 |
|
|
|
216,625 |
|
353,528 |
|
178,073 |
|
748,226 |
Comparative for the period from 1 March
2018 to 31 August 2018
|
|
|
|
Share |
|
Other |
|
Retained |
|
|
|
|
|
|
Capital |
|
Reserve |
|
Earnings |
|
Total |
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 March
2018 |
|
|
|
265,685 |
|
353,528 |
|
218,360 |
|
837,573 |
Impact of adoption of
IFRS 9 |
|
|
|
- |
|
- |
|
(1,395) |
|
(1,395) |
Adjusted Balance at
1 March 2018 |
|
|
|
265,685 |
|
353,528 |
|
216,965 |
|
836,178 |
Loss for the
period |
|
|
|
- |
|
- |
|
(17,499) |
|
(17,499) |
Buy back of Ordinary
shares |
|
|
|
(6,707) |
|
- |
|
- |
|
(6,707) |
Balance at 31
August 2018 |
|
|
|
258,978 |
|
353,528 |
|
199,466 |
|
811,972 |
The accompanying notes form an integral part of the Interim
Financial Statements.
The format of the Statement of Changes in Equity has changed
from prior periods in that it now reflects the one column income
presentation in the Statement of Comprehensive Income format. The
Company's profit/loss are now posted to retained earnings rather
than individual revenue/capital reserves.
Statement of Cashflows (Unaudited)
For the Period from 1 March 2019 to
31 August 2019
|
|
|
Six
Month |
|
Six
Month |
|
|
|
Period Ended |
|
Period Ended |
|
|
|
31
August 2019 |
|
31
August 2018 |
|
|
Note |
US$'000 |
|
US$'000 |
|
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
Cash
inflows |
|
|
|
|
|
Realisation of
investments1 |
11 |
117,341 |
|
159,385 |
|
Maturity of treasury
bills2 |
11 |
3,350 |
|
49,845 |
|
Escrow receipts
received |
21 |
3,923 |
|
2,085 |
|
Interest received from
unlisted investments |
|
677 |
|
1,103 |
|
Income distributions
received from investments |
|
1,192 |
|
- |
|
Bank Interest
received |
|
225 |
|
289 |
|
|
|
|
|
|
|
Cash
outflows |
|
|
|
|
|
Direct investments and
capital calls3 |
11 |
(51,228) |
|
(131,482) |
|
Purchase of treasury
bills |
11 |
(3,321) |
|
(3,267) |
|
Investment Adviser's
base fee paid |
10 |
(8,324) |
|
(8,513) |
|
Investment Adviser's
incentive fee paid |
10 |
(3,000) |
|
(996) |
|
Other operating
expenses paid |
|
(1,865) |
|
(1,641) |
|
Foreign exchange
(loss)/gain realised |
|
(306) |
|
17 |
|
Net cash inflow before
financing activities |
|
58,664 |
|
66,825 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Finance costs
paid: |
|
|
|
|
|
- Convertible
Unsecured Loan Stock |
|
(1,515) |
|
(1,631) |
|
- Loan Payable |
|
(6,453) |
|
(5,720) |
|
Payments to buy back
Company's Ordinary shares |
|
(29,979) |
|
(6,707) |
|
Net cash outflow from
financing activities |
|
(37,947) |
|
(14,058) |
|
Increase in cash at
bank |
|
20,717 |
|
52,767 |
|
|
|
|
|
|
Reconciliation of net cash flow to movements in cash at
bank |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
Cash and cash
equivalents at 1 March |
|
50,994 |
|
9,000 |
|
Increase in cash at
bank |
|
20,717 |
|
52,767 |
|
Unrealised foreign
exchange movements on cash at bank |
|
(25) |
|
(213) |
|
|
|
|
|
|
|
Cash and cash
equivalents at period end |
|
71,686 |
|
61,554 |
1Total realisations quoted in the interim
report of $121.2 million, include
escrow receipts of $3.9 million and
income distributions received of $1.2
million and exclude a short term debt repayment of
$1.2 million.
2Includes $38,000 of
treasury bill interest received on
maturity.
3Total investments in period include $0.7 million of deposits held at 28 February 2019.
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, 2008 (as amended). The Company is classed
as an authorised fund under the Protection of Investors (Bailiwick
of Guernsey) Law 1987. The Company's Capital consists of Ordinary
shares, Zero Dividend Preference ("ZDP") shares and Convertible
Unsecured Loan Stock ("CULS"). The Company's shares trade on the
London Stock Exchange's Specialist Fund Segment.
The Company’s Investment Policy is to target predominantly
private investments, seeking to back management teams to deliver on
attractive investment propositions. In executing its strategy, the
Company takes a long term view. The Company seeks to invest
directly in its target investments, although it may also invest
through other collective investment vehicles. The Company may also
invest in listed investments, whether arising on the listing of its
private investments or directly. The Investment Adviser is able to
invest globally but with a particular focus on opportunities in
the United States and Europe.
The Company is currently mainly focused on investing 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.
Jordan/Zalaznick Advisers, Inc. (the "Investment Adviser") takes
a dynamic approach to asset allocation and, though it doesn’t
expect to, in the event that the Company were to invest 100% of
gross assets in one area, the Company will, nevertheless, always
seek to maintain a broad spread of investment risk. Exposures are
monitored and managed by the Investment Adviser under the
supervision of the Board.
The Company has no direct employees. For its services the
Investment Adviser receives a management fee and is also entitled
to performance related fees (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 2019 to 31 August 2019 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. 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
2019.
Independent Review of Interim Financial Statements
These Interim Financial Statements and information in the
accompanying Interim Report have not been audited or reviewed by
the Company's Auditor.
Basis of Preparation
The interim financial statements have been prepared under the
historical cost basis, modified by the revaluation of financial
instruments designated at fair value through profit or loss
("FVTPL") upon initial recognition. 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 2019. The preparation of
these Interim Financial Statements are in conformity with IAS 34,
"Interim Financial Reporting" as adopted in the European Union, and
requires the Company to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
interim financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
materially differ from those estimates.
The Statement of Comprehensive Income is now presented in a one
column format rather than AIC SORP recommended presentation which
allocated profit/loss between capital and revenue.
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 2019. The has
been no early adoption, by the Company, of any other standard,
interpretation or amendment that has been issued but is not yet
effective.
Several amendments and interpretations to standards apply for
the first time in 2019, but do not have an impact on the interim
financial statements of the Company.
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 2019.
4. Segment
Information
The Investment Manager is responsible for allocating resources
available to the Company in accordance with the overall business
strategies as set out in the Investment Guidelines of the Company.
The Company is organised into the following segments:
• Portfolio of US micro-cap investments
• Portfolio of European micro-cap
investments
• Portfolio of Real estate
investments
• Portfolio of Other investments - (not falling into above
categories)
Investments in treasury bills are not considered as part of the
investment strategy and are therefore excluded from
this segmental analysis.
The investment objective of each segment is to achieve
consistent medium-term returns from the investments in each segment
while safeguarding capital by investing in a diversified
portfolio.
Segmental operating
profit/(loss)
For the period from 1 March 2019 to
31 August 2019
|
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-Cap |
|
Micro-Cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
revenue |
|
|
|
|
|
15,980 |
|
2,742 |
|
32 |
|
- |
|
18,754 |
|
Dividend
revenue |
|
|
|
|
- |
|
1,192 |
|
- |
|
- |
|
1,192 |
|
Total
segmental revenue |
|
|
|
15,980 |
|
3,934 |
|
32 |
|
- |
|
19,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain/(loss) on investments at FVTPL |
|
29,331 |
|
3,097 |
|
(64,003) |
|
- |
|
(31,575) |
|
Expected
credit losses |
|
- |
|
(14,727) |
|
- |
|
- |
|
(14,727) |
|
Realisations from investments held in Escrow |
3,923 |
|
- |
|
- |
|
- |
|
3,923 |
|
Investment
Adviser's base fee |
|
|
|
(3,420) |
|
(827) |
|
(3,379) |
|
(147) |
|
(7,773) |
|
Investment
Adviser's capital incentive fee1 |
|
(10,074) |
|
240 |
|
12,729 |
|
- |
|
2,895 |
Total
segmental operating profit/(loss) |
|
35,740 |
|
(8,283) |
|
(54,621) |
|
(147) |
|
(27,311) |
For the period from 1 March 2018 to
31 August 2018
|
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
|
Micro-Cap |
|
Micro-Cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
revenue |
|
|
|
|
|
10,649 |
|
3,565 |
|
59 |
|
- |
|
14,273 |
|
Total
segmental revenue |
|
|
|
10,649 |
|
3,565 |
|
59 |
|
- |
|
14,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realisations from investments held in Escrow |
2,085 |
|
- |
|
- |
|
- |
|
2,085 |
|
Net
gain/(loss) on investments at FVTPL |
|
8,152 |
|
2,778 |
|
(36,650) |
|
- |
|
(25,720) |
|
Investment
Adviser's base fee |
|
|
|
(3,311) |
|
(859) |
|
(3,501) |
|
(122) |
|
(7,793) |
|
Investment
Adviser's capital incentive fee1 |
|
(3,922) |
|
435 |
|
7,330 |
|
- |
|
3,843 |
Total
segmental operating profit/(loss) |
|
13,653 |
|
5,919 |
|
32,762) |
|
(122) |
|
(13,312) |
1The capital incentive fee is allocated across segments
where a realised or unrealised gain or loss has occurred. Segments
with realised or unrealised losses are allocated a credit pro rata
to the size of the loss and segments with realised or unrealised
gains are allocated a charge pro rata to the size of the gain.
Certain income and expenditure is not considered part of the
performance of an individual segment. This includes net
foreign exchange gains, interest on cash, finance costs, management
fees, custodian and administration fees, directors’ fees and other
general expenses.
The following table provides a reconciliation between total
segmental operating profit/(loss) and operating profit/(loss):.
|
|
|
|
|
|
|
|
|
|
|
|
Period ended |
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental operating loss |
|
|
|
|
|
(27,311) |
|
(13,312) |
Gain on
financial liabilities at fair value through profit or loss |
|
|
|
4,107 |
|
5,925 |
Net
foreign exchange gain |
|
|
|
|
|
3,765 |
|
1,045 |
Bank and
deposit interest |
|
|
|
225 |
|
289 |
Expenses
not attributable to segments |
|
|
|
(1,890) |
|
(1,642) |
Fees
payable to investment adviser based on non-segmental assets |
|
(528) |
|
(705) |
Interest
on US treasury bills |
|
|
|
|
|
38 |
|
27 |
Operating loss |
|
|
|
|
|
|
|
|
|
(21,594) |
|
(8,373) |
The following table provides a reconciliation between total
segmental revenue and Company revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Period ended |
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Total
segmental revenue |
|
|
|
|
|
|
|
|
|
19,946 |
|
14,273 |
Non-segmental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Bank and
deposit interest |
|
|
|
|
|
|
|
|
|
225 |
|
289 |
Interest
on US treasury bills |
|
|
|
|
|
38 |
|
27 |
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
20,209 |
|
14,589 |
Segmental Net Assets
At 31 August 2019
|
|
|
|
|
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 |
|
424,913 |
|
60,864 |
|
422,656 |
|
20,916 |
|
929,349 |
|
Loans at
amortised cost |
|
|
|
- |
|
43,999 |
|
- |
|
- |
|
43,999 |
|
Other
receivables |
|
- |
|
- |
|
495 |
|
- |
|
495 |
|
Total
segmental assets |
|
424,913 |
|
104,863 |
|
423,151 |
|
20,916 |
|
973,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables
and accrued expenses |
|
(45,805) |
|
1,594 |
|
2,146 |
|
3,259 |
|
(38,806) |
|
Total
segmental liabilities |
|
(45,805) |
|
1,594 |
|
2,146 |
|
3,259 |
|
(38,806) |
Total
segmental net assets |
|
379,108 |
|
106,457 |
|
425,297 |
|
24,175 |
|
935,037 |
At 28 February 2019
|
|
|
|
|
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 |
|
478,970 |
|
70,686 |
|
43,044 |
|
18,302 |
|
1,011,002 |
|
Loans at
amortised cost |
|
|
|
- |
|
58,012 |
|
- |
|
- |
|
58,012 |
|
Other
receivables |
|
- |
|
- |
|
1,275 |
|
- |
|
1,275 |
|
Total
segmental assets |
|
478,970 |
|
128,698 |
|
444,319 |
|
18,302 |
|
1,070,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental liabilities |
|
|
|
|
|
|
|
|
|
|
|
Payables
and accrued expenses |
|
(38,768) |
|
1,321 |
|
(10,573) |
|
1,850 |
|
(46,170) |
|
Total
segmental liabilities |
|
(38,768) |
|
1,321 |
|
(10,573) |
|
1,850 |
|
(46,170) |
Total
segmental net assets |
|
440,202 |
|
130,019 |
|
433,746 |
|
20,152 |
|
1,024,119 |
The following table provides a reconciliation between total
segmental assets and total assets and total segmental liabilities
and total liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Total
segmental assets |
|
|
|
|
|
|
|
973,843 |
|
1,070,289 |
Non
segmental assets |
|
|
|
|
|
|
|
|
|
|
Treasury Bills |
|
|
|
|
|
|
|
|
|
|
|
|
3,323 |
|
3,314 |
Cash at
bank |
|
|
|
71,686 |
|
50,994 |
Other
receivables |
|
|
|
|
|
|
|
|
128 |
|
11 |
Total
assets |
|
|
|
|
|
|
|
1,048,980 |
|
1,124,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segmental liabilities |
|
|
|
|
|
|
|
|
|
(38,806) |
|
(46,170) |
Non
segmental liabilities |
|
|
|
|
|
|
|
|
|
|
Zero
Dividend Preference shares |
|
|
|
(59,946) |
|
(63,838) |
Convertible Unsecured Loan Stock |
|
|
|
(50,167) |
|
(54,274) |
Loans
payable |
|
|
|
|
|
|
|
|
|
(149,490) |
|
(149,227) |
Other
payables |
|
|
|
(2,345) |
|
(837) |
Total
liabilities |
|
|
|
|
|
|
|
(300,754) |
|
(314,346) |
Total
net assets |
|
|
|
|
|
|
|
748,226 |
|
810,262 |
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. At the
period end, the Company had assessed that the liabilities valued at
FVTPL being the CULS and valued using the quoted ask price, would
be classified as level 2 within the valuation method as they are
not regularly traded.
Level 3
Those involving inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs).
Investments in JZCP's portfolio valued using unobservable inputs
such as multiples, capitalisation rates, discount rates fall within
Level 3.
Differentiating between Level 2 and Level 3 fair value
measurements i.e., assessing whether inputs are observable and
whether the unobservable inputs are significant, may require
judgement and a careful analysis of the inputs used to measure fair
value including consideration of factors specific to the asset or
liability.
The following table shows financial instruments recognised at
fair value, analysed between those whose fair value is based
on:
Financial assets at 31 August 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$'000 |
|
US$
'000 |
|
US$ '000 |
US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
424,913 |
|
424,913 |
European
micro-cap |
|
|
|
|
|
- |
|
- |
|
60,864 |
|
60,864 |
Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
422,656 |
|
422,656 |
Other
investments |
|
|
|
|
|
- |
|
- |
|
20,916 |
|
20,916 |
Listed
investments |
|
|
|
|
|
3,323 |
|
- |
|
- |
|
3,323 |
|
|
|
|
|
|
|
|
|
|
3,323 |
|
- |
|
929,349 |
|
932,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at 28 February 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$'000 |
|
US$
'000 |
|
US$ '000 |
US micro-cap |
|
|
|
|
|
|
|
|
- |
|
- |
|
478,970 |
|
478,970 |
European
micro-cap |
|
|
|
|
|
- |
|
- |
|
70,686 |
|
70,686 |
Real estate |
|
|
|
|
|
|
|
|
- |
|
- |
|
443,044 |
|
443,044 |
Other
investments |
|
|
|
|
|
- |
|
- |
|
18,302 |
|
18,302 |
Listed
investments |
|
|
|
|
|
3,314 |
|
- |
|
- |
|
3,314 |
|
|
|
|
|
|
|
|
|
|
|
|
3,314 |
|
- |
|
1,011,002 |
|
1,014,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities designated at fair value through profit or
loss at inception |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at 31 August 2019 |
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$'000 |
|
US$
'000 |
|
US$ '000 |
CULS |
|
|
|
|
|
|
|
|
- |
|
50,167 |
|
- |
|
50,167 |
|
|
|
|
|
|
|
|
|
- |
|
50,167 |
|
- |
|
50,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at 28 February 2019 |
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$'000 |
|
US$
'000 |
|
US$ '000 |
CULS |
|
|
|
|
|
|
|
|
54,274 |
|
- |
|
- |
|
54,274 |
|
|
|
|
|
|
|
|
|
54,274 |
|
- |
|
- |
|
54,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers between
levels
Transactions for the CULS do not take place with sufficient
frequency and volume to provide adequate pricing information on an
ongoing basis, as defined by IFRS. Therefore, it is considered the
CULS' are not traded in an active market and are therefore
categorised at level 2.
Valuation techniques
The same valuation methodology and process was deployed as for the
year ended 28 February 2019.
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 2019 and 28 February
2019 are shown below:
|
|
|
|
|
Range (weighted average) |
|
|
|
|
Value
31.8.2019 |
Valuation |
|
Unobservable |
Sensitivity |
Approx. Impact on
Fair Value |
|
US$'000 |
Technique |
|
input |
used 1 |
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
micro-cap investments |
424,913 |
EBITDA
Multiple |
Average EBITDA Multiple of Peers |
6.0x -
12.6x
(8.4x) |
-0.5x
/+0.5x |
(32,697) |
34,114 |
|
|
Discount to Average Multiple |
15% -
35%
(22.5%) |
+5% /
-5% |
(43,856) |
42,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European
micro-cap investments |
60,864 |
EBITDA
Multiple |
Average EBITDA Multiple of Peers |
6.0x-13.8x
(9.7x) |
-0.5x
/+0.5x |
(4,143) |
4,131 |
|
|
Discount to Average Multiple |
-31.4% -
33.9%
(-0.7%) |
+5% /
-5% |
(3,910) |
3,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate2 |
273,538 |
Comparable Sales |
Market Value Per Square Foot |
$324 -
$3,113 per sq ft($1,598) |
-5% /
+5% |
(30,902) |
30,902 |
|
|
|
|
|
|
|
|
42,313 |
DCF Model
/Income Approach3 |
|
Discount
Rate |
5.5% -
6.5%
(6.15%) |
+25bps
/-25bps |
(3,544) |
3,544 |
|
|
|
|
|
|
|
|
106,805 |
Cap Rate/
Income Approach |
|
Capitalisation Rate |
3.25 -
5.5% (3.9%) |
+25bps
/-25bps |
(20,292) |
20,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
19,088 |
AUM
Approach |
|
AUM |
$3.0 Bn -
$3.7 Bn |
+10%/-10% |
4,503 |
(4,234) |
|
|
|
|
% Applied
to AUM |
2.3% |
+10%/-10% |
1,921 |
(1,921) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range (weighted average) |
|
|
|
|
Value
28.2.2019 |
Valuation |
|
Unobservable |
Sensitivity |
Approx. Impact on
Fair Value |
|
US$'000 |
Technique |
|
input |
used 1 |
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
micro-cap investments |
478,970 |
EBITDA
Multiple |
Average EBITDA Multiple of Peers |
6.0x -
16.3x
(8.5x) |
-0.5x
/+0.5x |
(37,624) |
39,780 |
|
|
Discount to Average Multiple |
15% -
35%
(23%) |
+5% /
-5% |
(47,352) |
49,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
European
micro-cap investments |
70,686 |
EBITDA
Multiple |
Average EBITDA Multiple of Peers |
5.2x -
12.1x (8.7x) |
-0.5x
/+0.5x |
(8,934) |
8,934 |
|
|
Discount to Average Multiple |
0% -
29%
(19%) |
+5% /
-5% |
(7,316) |
7,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate2 |
271,863 |
Comparable Sales |
Market Value Per Square Foot |
$324 -
$3,113 ($1,441)per sq ft |
-5% /
+5% |
(30,902) |
30,902 |
43,954 |
DCF Model
/Income Approach3 |
|
Discount
Rate |
5.5% -
6.5%
(6.2%) |
+25bps
/-25bps |
(3,544) |
3,544 |
|
|
|
|
|
|
|
|
127,226 |
Cap Rate/
Income Approach |
|
Capitalisation Rate |
3.25 -
5.5% (4.5%) |
+25bps
/-25bps |
(20,292) |
20,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
17,093 |
AUM
Approach |
|
AUM |
$2.0 Bn -
$2.6 Bn |
+10%/-10% |
3,294 |
3,112 |
|
|
|
|
% Applied
to AUM |
2.5% |
+10%/-10% |
1,727 |
(1,727) |
1The sensitivity analysis refers to a
percentage amount added or deducted from the average input and the
effect this has on the fair value.
2The Fair Value of JZCP's investment in financial
interests in real estate, is measured as JZCP's percentage interest
in the value of the underlying
properties.
3Certain investments in the Roebling, Williamsburg and
Wynwood real estate portfolios are valued using an
income capitalisation approach.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and the end of the reporting period.
Period ended 31 August 2019
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
Micro-Cap |
|
Micro-Cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 March
2019 |
|
|
|
478,970 |
|
70,686 |
|
443,044 |
|
18,302 |
|
1,011,002 |
Investments in year including capital calls |
5,305 |
|
394 |
|
43,615 |
|
2,614 |
|
51,928 |
Payment in
kind ("PIK") |
|
|
|
5,618 |
|
- |
|
- |
|
- |
|
5,618 |
Proceeds
from investments realised |
|
(104,028) |
|
(13,313) |
|
- |
|
- |
|
(117,341) |
Net
gain/(loss) on investments |
|
29,331 |
|
3,097 |
|
(64,003) |
|
- |
|
(31,575) |
Movement
in accrued interest |
|
9,717 |
|
- |
|
- |
|
- |
|
9,717 |
At 31
August 2019 |
|
|
|
424,913 |
|
60,864 |
|
422,656 |
|
20,916 |
|
929,349 |
Post period end, the Company requested a full appraisal of its real
estate portfolio. The net loss above of $64
million is mainly attributable to carrying costs of the
properties.
Year ended 28 February 2019
|
|
|
|
|
|
|
US |
|
European |
|
Real |
|
Other |
|
|
|
|
|
|
|
|
|
Micro-Cap |
|
Micro-Cap |
|
Estate |
|
Investments |
|
Total |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 March
2018 |
|
|
|
488,258 |
|
46,108 |
|
463,391 |
|
15,302 |
|
1,013,059 |
Investments in year including capital calls |
106,540 |
|
18,388 |
|
57,965 |
|
3,000 |
|
185,893 |
Payment in
kind ("PIK") |
|
|
|
20,514 |
|
- |
|
- |
|
- |
|
20,514 |
Proceeds
from investments realised |
|
(153,371) |
|
(863) |
|
(51,800) |
|
- |
|
(206,034) |
Net
gain/(loss) on investments |
|
16,686 |
|
7,053 |
|
(26,512) |
|
- |
|
(2,773) |
Movement
in accrued interest |
|
343 |
|
- |
|
- |
|
- |
|
343 |
At 28
February 2019 |
|
|
|
478,970 |
|
70,686 |
|
443,044 |
|
18,302 |
|
1,011,002 |
The fair value of the ZDP shares is deemed to be their quoted
market price. As at 31 August 2019
the ask price for the ZDP (2022) shares was £4.46 (28 February 2019: £4.36 per share) the total fair
value of the ZDP shares was $64,678,000 (28 February
2019: $69,056,000) which is
$4,732,000 (28
February 2019: $5,218,000)
higher than the liability recorded in the Statement of Financial
Position.
ZDP shares are recorded at amortised cost and would fall in to
the Level 2 hierarchy if valued at FVTPL.
6. Net loss on Investments at Fair
Value Through Profit or Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Loss
on investments held in investment portfolio at period end |
|
|
|
|
|
|
Net
movement in period end unrealised gain position |
|
|
|
|
|
(55,727) |
|
(91,838) |
Unrealised
gains in prior periods now realised |
|
|
|
|
|
13,259 |
|
66,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealised losses in the period |
|
|
|
|
|
|
|
(42,468) |
|
(25,085) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gains/(losses) on investments realised in the period |
|
|
|
|
|
|
|
Proceeds
from investments realised |
|
|
|
|
|
|
|
120,691 |
|
172,523 |
Cost of
investments realised |
|
|
|
|
|
|
|
(96,539) |
|
(106,405) |
Unrealised
gains in prior periods now realised |
|
|
|
|
|
(13,259) |
|
(66,753) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
gain/(loss) in the period on investments realised in the
period |
|
10,893 |
|
(635) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
on investments in the period |
|
|
|
|
|
|
|
(31,575) |
|
(25,720) |
7. Expected Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Impairment
on loans during period |
|
|
|
|
|
|
14,727 |
|
- |
Total Expected Credit Losses ("ECL") at 31 August 2019 are $16,197,000 (28 February
2019: $1,470,000).
During the period, JZCP's portfolio company Ombuds entered
administration. JZCP acting as lender, has a direct holding of debt
in Ombuds. At 31 August 2019, JZCP's
had invested a total of €12.4 million and had subsequently
accumulated interest totalling. An ECL calculation for the
investment in Ombuds, prepared in accordance with IFRS 9 has
supported a total impairment of €14.0 ($15.4) million and is included in the
portfolio's total ECL of €14.7 ($16.2)
million.
8. Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Interest
calculated using the effective interest rate method |
|
|
2,742 |
|
3,565 |
Other
interest and similar income |
|
|
|
|
|
|
17,242 |
|
10,735 |
|
|
|
|
|
|
|
|
|
|
|
|
19,984 |
|
14,300 |
Income for the period ended 31 August
2019
|
|
|
|
Preferred |
|
Loan note Interest |
|
|
|
Other |
|
|
|
|
|
|
Interest1 |
|
PIK |
|
Cash |
|
Dividend |
|
Interest |
|
Total |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
US micro-cap |
|
|
|
15,231 |
|
104 |
|
645 |
|
- |
|
- |
|
15,980 |
European
micro-cap |
|
|
|
- |
|
2,742 |
|
- |
|
1,192 |
|
- |
|
3,934 |
Real estate |
|
|
|
- |
|
- |
|
- |
|
- |
|
32 |
|
32 |
Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
38 |
|
38 |
|
|
|
|
15,231 |
|
2,846 |
|
645 |
|
1,192 |
|
70 |
|
19,984 |
1Preferred accumulated interest recognised
in the period includes $5,139,000
realised on the disposal of investments.
Income for the period ended 31 August
2018
|
|
|
|
Preferred |
|
Loan note Interest |
|
|
|
Other |
|
|
Portfolio |
|
|
|
Interest |
|
PIK |
|
Cash |
|
Dividend |
|
Interest |
|
Total |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
US micro-cap |
|
|
|
9,899 |
|
112 |
|
638 |
|
- |
|
- |
|
10,649 |
European
micro-cap |
|
|
|
- |
|
3,159 |
|
406 |
|
- |
|
- |
|
3,565 |
Real estate |
|
|
|
- |
|
- |
|
- |
|
- |
|
59 |
|
59 |
Listed
investments |
|
|
|
- |
|
- |
|
- |
|
- |
|
27 |
|
27 |
|
|
|
|
9,899 |
|
3,271 |
|
1,044 |
|
- |
|
86 |
|
14,300 |
9. Finance
Costs
|
|
|
|
|
|
|
|
|
|
|
|
Period
ended |
|
Period
ended |
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
31.8.2018 |
|
|
|
|
|
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Interest expense calculated using the effective interest
method |
|
|
|
|
|
ZDP shares
(Note 13) |
|
|
|
|
|
|
1,563 |
|
1,572 |
Loan
payable - (Note 15) |
|
|
|
|
|
|
7,385 |
|
5,923 |
|
|
|
|
|
|
|
|
|
|
|
|
8,948 |
|
7,495 |
Other
interest and similar expense |
|
|
|
|
|
|
|
|
|
|
CULS
interest paid (Note 14) |
|
|
|
|
|
|
1,515 |
|
1,631 |
|
|
|
|
|
|
|
|
|
|
|
|
10,463 |
|
9,126 |
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
2019, total investment advisory and management expenses,
based on the average total assets of
the Company, were included in
the Statement of Comprehensive Income
of $8,301,000 (period
ended 31 August 2018: $8,498,000). Of this amount $2,079,000 (28 February
2019: $2,102,000) was due and
payable at the period end.
The incentive fee has two parts. The first part is calculated by
reference to the net investment income of the Company ("Income
Incentive fee") and is payable quarterly in arrears provided that
the net investment income for the quarter exceeds 2 per cent of the
average of the net asset value of the Company for that quarter (the
"hurdle") (8 per cent. annualised). The fee is an amount equal to
(a) 100 per cent of that proportion of the net investment income
for the quarter as exceeds the hurdle, up to an amount equal to a
hurdle of 2.5%, and (b) 20 per cent of the net investment income of
the Company above a hurdle of 2.5% in any quarter. Investments
categorised as legacy investments and other assets identified by
the Company as being excluded are excluded from the calculation of
the fee. A true-up calculation is also prepared at the end of each
financial year to determine if further fees are payable to the
Investment Adviser or if any amounts are recoverable from future
income incentive fees.
For the periods ended 31 August
2019 and 31 August 2018 there
was no income incentive fee payable.
The second part of the incentive fee is calculated by reference
to the net realised capital gains ("Capital Gains Incentive fee")
of the Company and is equal to: (a) 20 per cent. of the realised
capital gains of the Company for each financial year less all
realised capital losses of the Company for the year less (b) the
aggregate of all previous capital gains incentive fees paid by the
Company to the Investment Adviser. The capital gains incentive is
payable in arrears within 90 days of the fiscal year end.
Investments categorised as legacy investments are excluded from the
calculation of the fee. Assets of JZI Fund III and EuroMicrocap
Fund 2010, L.P. are also excluded from the Capital Gains Incentive
fee ("CGIF"). Carried interest, of an amount equivalent to the CGIF
payable under the Advisory Agreement, is payable by the funds to an
affiliate of JZAI.
For the purpose of calculating incentive fees cumulative
preferred dividends received on the disposal of an investment are
treated as a capital return rather than a receipt of income.
At 31 August 2019, a CGIF of
$27,444,000 (28 February 2019: $21,429,000) based on net realised gains was
payable. The Investment Adviser has agreed to defer the receipt of
$23,544,000 of the total provision
and also any further fee becoming payable for the current fiscal
year. Any future realised gains/losses will be added/offset
to/against the deferred net realised gains of $117,720,000 and the applicable incentive fee
will be paid once the Company and Investment Advisor have mutually
agreed to reinstate such payments.
The Company also provides for a CGIF based on unrealised gains,
calculated on the same basis as that of the fee on realised
gains/losses. For the period ended 31 August
2019 a provision of $9,432,000
(28 February 2019: $21,342,000) has been included.
|
|
|
Provision At |
|
Provision At |
|
Paid
during period |
Expense for the period ended |
|
|
|
31.8.2019 |
|
28.2.2019 |
|
31.8.2019 |
|
31.8.2019 |
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
CGIF on realised
investments |
|
|
27,444 |
|
21,429 |
|
(3,000) |
|
9,015 |
Provision
for CGIF on unrealised investments |
9,432 |
|
21,342 |
|
n/a |
|
(11,910) |
|
|
|
36,876 |
|
42,771 |
|
(3,000) |
|
(2,895) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision At |
|
Provision At |
|
Paid
during period |
Expense for the period ended |
|
|
|
31.8.2018 |
|
28.2.2018 |
|
31.8.2018 |
|
31.8.2018 |
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
CGIF on realised
investments |
|
|
16,584 |
|
996 |
|
(996) |
|
16,584 |
Provision
for CGIF on unrealised investments |
20,183 |
|
40,610 |
|
n/a |
|
(20,427) |
|
|
|
36,767 |
|
41,606 |
|
(996) |
|
(3,843) |
11. Investments
|
|
|
Listed |
|
Unlisted |
|
Unlisted |
|
Carrying Value |
|
|
|
FVTPL |
|
FVTPL |
|
Loans |
|
Total |
|
|
|
31.8.2019 |
|
31.8.2019 |
|
31.8.2019 |
|
31.8.2019 |
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
Book cost at 1 March
2019 |
|
|
3,312 |
|
980,120 |
|
66,849 |
|
1,050,281 |
Investments in period including capital calls |
|
3,321 |
|
51,928 |
|
- |
|
55,249 |
Payment in kind
("PIK") |
|
|
- |
|
5,618 |
|
2,294 |
|
7,912 |
Proceeds
from investments matured/realised |
(3,350) |
|
(117,341) |
|
- |
|
(120,691) |
Income received on
maturity |
|
|
38 |
|
- |
|
- |
|
38 |
Net realised gain |
|
|
- |
|
24,152 |
|
- |
|
24,152 |
Book cost at 31 August
2019 |
|
|
3,321 |
|
944,477 |
|
69,143 |
|
1,016,941 |
Unrealised
investment and foreign exchange gain/(loss) |
- |
|
(29,025) |
|
(10,358) |
|
(39,383) |
Impairment on loans at
amortised cost |
|
|
- |
|
- |
|
(16,197) |
|
(16,197) |
Accrued interest |
|
|
2 |
|
13,897 |
|
1,411 |
|
15,310 |
Carrying value at 31
August 2019 |
|
|
3,323 |
|
929,349 |
|
43,999 |
|
976,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
Unlisted |
|
Unlisted |
|
Carrying Value |
|
|
|
FVTPL |
|
FVTPL |
|
Loans |
|
Total |
|
|
|
28.2.2019 |
|
28.2.2019 |
|
28.2.2019 |
|
28.2.2019 |
|
|
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
|
US$
'000 |
Book cost at 1 March
2018 |
|
|
49,845 |
|
895,680 |
|
60,956 |
|
1,006,481 |
Investments in year including capital calls |
|
6,579 |
|
183,722 |
|
12,304 |
|
202,605 |
Payment in kind
("PIK") |
|
|
- |
|
20,514 |
|
5,893 |
|
26,407 |
Proceeds
from investments matured/realised |
(53,112) |
|
(203,862) |
|
(11,720) |
|
(268,694) |
Net realised
gain/(loss) |
|
|
- |
|
84,066 |
|
(584) |
|
83,482 |
Book cost at 28
February 2019 |
|
|
3,312 |
|
980,120 |
|
66,849 |
|
1,050,281 |
Unrealised
investment and foreign exchange gain/(loss) |
- |
|
26,702 |
|
(8,389) |
|
18,313 |
Impairment on loans at
amortised cost |
|
|
- |
|
- |
|
(1,470) |
|
(1,470) |
Accrued interest |
|
|
2 |
|
4,180 |
|
1022 |
|
5,204 |
Carrying value at 28
February 2019 |
|
|
3,314 |
|
1,011,002 |
|
58,012 |
|
1,072,328 |
The 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.
Loans at amortised
cost
Interest on the loans accrues at the following rates:
|
|
|
As at 31
August 2019 |
|
As At 28
February 2019 |
|
|
|
|
|
8% |
|
8.9%1 |
|
14%2 |
|
Total |
|
8% |
|
10% |
|
14%2 |
|
Total |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
Loans at
amortised cost |
22,436 |
|
3,760 |
|
17,803 |
|
43,999 |
|
24,902 |
|
1,528 |
|
31,528 |
|
58,012 |
Maturity dates are as follows:
|
|
|
As at 31
August 2019 |
|
As At 28
February 2019 |
|
|
|
|
|
<1
year |
|
1-2
years |
|
Past
due |
|
Total |
|
0-6
months |
|
7-12
months |
|
1-2
years |
|
Total |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
Loans at
amortised cost |
3,760 |
|
26,513 |
|
13,726 |
|
43,999 |
|
35,550 |
|
- |
|
22,462 |
|
58,012 |
1Weighted average of interest accruing at
8% on the principal amount and 10% on the deferred interest
amount.
2Throughout the duration of the loan the borrower can
elect to pay interest when due at 12% or to add the amount to the
principal and have interest accrue at the higher rate of
14%.
12. Other Receivables
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Accrued
interest due from JZCP Realty, Ltd |
|
|
|
|
495 |
|
495 |
Other receivables and
prepayments |
|
|
|
|
|
|
128 |
|
91 |
Deposits
paid on behalf of JZCP Realty, Ltd |
|
|
|
|
- |
|
700 |
|
|
|
|
|
|
|
623 |
|
1,286 |
13. Zero Dividend Preference ("ZDP") shares
On 1 October 2015, the Company
rolled over 11,907,720 existing ZDP (2016) shares into new ZDP
shares with a 2022 maturity date. The new ZDP shares (ZDP 2022)
have a gross redemption yield of 4.75% and a total redemption value
of £57,598,000 (approximately $70,146,000 using the period end exchange
rate).
ZDP shares are designed to provide a pre-determined final
capital entitlement which ranks behind the Company's creditors but
in priority to the capital entitlements of the Ordinary shares. The
ZDP shares carry no entitlement to income and the whole of their
return will therefore take the form of capital. In certain
circumstances, ZDP shares carry the right to vote at general
meetings of the Company as detailed in the Company's Memorandum and
Articles of Incorporation. Issue costs are deducted from the cost
of the liability and allocated to the Statement of Comprehensive
Income over the life of the ZDP shares.
ZDP (2022)
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Amortised
cost at 1 March |
63,838 |
|
62,843 |
Finance
costs allocated to Statement of Comprehensive Income |
1,563 |
|
3,148 |
Unrealised
currency gain on translation |
|
(5,455) |
|
(2,153) |
Amortised
cost at period/year end |
|
59,946 |
|
63,838 |
Total
number of ZDP shares in issue |
|
11,907,720 |
|
11,907,720 |
14. Convertible Subordinated Unsecured Loan Stock
("CULS")
On 30 July 2014, JZCP issued
£38,861,140 6% CULS. Holders of CULS may convert the whole or part
(being an integral multiple of £10 in nominal amount) of their CULS
into Ordinary Shares. Conversion Rights may be exercised at any
time during the period from 30 September
2014 to 10 business days prior to the Maturity date being
the 30 July 2021. The initial
conversion price is £6.0373 per Ordinary Share, which shall be
subject to adjustment to deal with certain events which would
otherwise dilute the conversion of the CULS. These events include
consolidation of Ordinary Shares, dividend payments made by the
Company, issues of shares, rights, share-related securities and
other securities by the Company and other events as detailed in the
Prospectus.
CULS bear interest on their nominal amount at the rate of 6.00
per cent. per annum, payable semi-annually in arrears. During the
six-month period ended 31 August
2019: $1,515,000 (31 August 2018: $1,631,000) of interest was paid to holders of
CULS and is shown as a finance cost in the Statement of
Comprehensive Income.
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Fair Value of CULS at
1 March |
|
|
|
|
|
|
54,274 |
|
59,970 |
Unrealised
movement in fair value of CULS |
|
|
|
|
517 |
|
(3,748) |
Unrealised
currency gain on translation during the period/year |
|
|
|
(4,624) |
|
(1,948) |
Total gain
to the Company on movement in the fair value of CULS |
|
(4,107) |
|
(5,696) |
Fair Value
of CULS based on offer price |
|
|
|
|
|
50,167 |
|
54,274 |
15. Loan Payable
Guggenheim Partners Limited
On 12 June 2015, JZCP entered into
a loan agreement with Guggenheim Partners Limited. The agreement
was structured so that part of the proceeds (€18 million) were
received and will be repaid in Euros and the remainder of the
facility was received in US dollars ($80
million). During April 2017,
JZCP increased its credit facility with Guggenheim Partners by
$50 million.
The loan matures on 12 June 2021
(6 year term) and interest is payable at 5.75% + LIBOR(1). There 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. The loan may be repaid,
in full or in part, with no penalty.
At 31 August 2019, investments
valued at $881,339,000 (28 February 2019: $951,164,000) were held as collateral for the
loan. A covenant on the loan states the fair value of the
collateral must be 4x the loan value and the cost of collateral
must be at least 57.5% of total assets. The Company is also
required to hold a minimum cash balance of $15 million plus 50% of interest on any new debt.
At 31 August 2019 and throughout the
period, the Company was in full compliance with covenant terms.
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
|
|
|
|
|
|
|
|
|
|
Amortised
cost (US$ drawdown) - 1 March |
|
128,838 |
|
128,407 |
Amortised
cost (Euro drawdown) - 1 March |
|
20,389 |
|
21,718 |
Finance
costs charged to Statement of Comprehensive Income |
|
|
|
7,385 |
|
12,684 |
Interest and finance
costs paid |
|
|
|
|
|
|
(6,453) |
|
(12,142) |
Unrealised
currency gain on translation of Euro drawdown |
|
(669) |
|
(1,440) |
Amortised
cost at period/year end |
|
149,490 |
|
149,227 |
Amortised
cost (US$ drawdown) |
|
129,679 |
|
128,838 |
Amortised
cost (Euro drawdown) |
|
19,811 |
|
20,389 |
|
|
|
|
|
|
|
149,490 |
|
149,227 |
The carrying value of the loans approximates to fair value.
(1) LIBOR rates applied are the
US dollar 3 month rate ($130 million) and the Euro
3-month rate (€18 million).
16. Other Payables
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
Provision
for tax on dividends received not withheld at source |
|
|
|
1,401 |
|
1,401 |
Audit fees |
|
|
|
|
|
|
186 |
|
185 |
Legal fees
provision |
|
|
|
|
|
|
250 |
|
250 |
Directors'
remuneration |
|
|
|
|
|
|
70 |
|
80 |
Other expenses |
|
|
|
|
|
|
289 |
|
218 |
|
|
|
|
|
|
|
2,196 |
|
2,134 |
17. Ordinary shares - Issued
Capital
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
Number of shares |
|
Number of shares |
Total Ordinary
shares in issue |
|
|
|
|
|
|
77,474,175 |
|
80,666,838 |
The Company's shares trade on the London Stock Exchange's
Specialist Fund Segment.
During the period, the Company bought back 3,192,663 of its own
Ordinary shares as part of a tender offer. The shares were
purchased at a price of $9.39 (£7.67)
per share being a 5% discount to the NAV at 31 July 2019, the total cost of the repurchase of
the shares was $29.979 million. The
shares have subsequently been cancelled.
18. Commitments
At 31 August 2019 and 28 February 2019, JZCP had the following
financial commitments outstanding in relation to fund
investments:
|
|
|
|
|
Expected date of Call |
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
US$
'000 |
|
US$
'000 |
JZI Fund
III GP, L.P. €34,326,905 (28.2.2019: €31,936,400) |
|
< 2
years |
|
37,803 |
|
36,366 |
JZI Fund IV GP, L.P.
€15,000,000 |
|
|
|
|
Over 5
years |
|
16,519 |
|
- |
Suzo Happ Group |
|
|
|
|
Over 3
years |
|
4,491 |
|
4,491 |
Spruceview Capital
Partners, LLC1 |
|
|
|
|
< 1
year |
|
1,470 |
|
1,990 |
Igloo Products
Corp |
|
|
|
|
Over 3
years |
|
240 |
|
771 |
|
|
|
|
|
|
|
60,523 |
|
43,618 |
1During the period, JZCP increased its commitment by
$1.475 million and $1.995 million was called.
19. Related Party
Transactions
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") and EuroMicrocap Fund-C,
L.P. ("EMCC"). Fund III, EMC 2010 and EMCC are managed by an
affiliate of JZAI, JZCP's investment manager. JZAI was founded by
David Zalaznick and John ("Jay")
Jordan, II. At 31 August 2019, JZCP's
investment in Fund III was valued at $57.0
million (28 February 2019:
$66.8million). JZCP's investment in
EMC 2010 was valued at $3.9 million
(28 February 2019: $3.9 million). EMCC was liquidated in
December 2018 and its remaining
assets were transferred to EMC 2010.
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 2019, was $31.475 million (28
February 2019 $30.0 million),
with $1.5 million (28 February 2019: $2.0
million) of commitments outstanding.
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 2019, the
total value of JZCP's investment in these co-investments was
$233.0 million (28 February 2019: $251.5
million). Fund A, Fund A Parallel I, II and III Limited
Partnerships are no longer making platform investments alongside
JZCP.
JZAI is a US based company 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 is able to invest up to $75
million in "New JI Platform Companies". The platform
companies are being established to invest primarily in buyouts and
build-ups of companies and in growth company platforms in the US
micro-cap market, primarily healthcare equipment companies. At
31 August 2019 and 28 February
2019, JZCP had invested (before returns of capital)
$41.3 million in Avante (formerly
named Jordan Health Products) and is therefore able to invest a
further $33.7 million. JZCP
co-invests 50/50 in the platform companies with other investors
(“JI members”). David Zalaznick and
an affiliated entity of Jay Jordan
own approximately 33.7% of the JI members' ownership interests.
During the period, JZCP obtained shareholder approval for the
sale of 80% of its holdings in both Avante and Orizon to Edgewater
Growth Capital Partners ("Edgewater"). Edgewater is a substantial shareholder of JZCP
and therefore a related party of the Company. JZCP received
proceeds of $37.5 million for the
Avante realisation and $28.0 million
for Orizon.
Post period end, JZCP obtained shareholder approval for the
merger of Priority Express with Capstone Logistics. The Merger has
resulted in the Company realising its investment in Priority
Express by disposing of its entire ownership interests as well as
its debt investments therein. Capstone Logistics is a portfolio
company of Resolute Fund III.
Total Directors' remuneration for the six-month period ended
31 August 2019 was $230,000 (31 August 2018:$219,000).
20. Basic and Diluted Earnings/(Loss)
per Share
Basic loss per share are 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
2019 the weighted average number of Ordinary shares
outstanding during the period was 80,614,784 (31 August 2018: 83,456,487).
The diluted earnings per share are calculated by considering
adjustments required to the earnings and weighted average number of
shares for the effects of potential dilutive Ordinary shares. The
weighted average of the number of Ordinary shares is adjusted
assuming the conversion of the CULS ("If-converted method").
Conversion is assumed even though at 31 August 2019 and 31
August 2018 the exercise price of the CULS is higher than
the market price of the Company's Ordinary shares and are therefore
deemed 'out of the money'. Earnings are adjusted to remove the fair
value gain recorded $4,107,000
(31 August 2018: $5,925,000) and finance cost attributable to CULS
$1,515,000 (31
August 2018: $1,631,000).
21. Contingent Assets
Amounts held in escrow
accounts
When investments have been disposed of by the Company, proceeds may
reflect contractual terms requiring that a percentage
is held in an escrow account pending resolution of any
indemnifiable claims that may arise. At 31
August 2019 and 28 February
2019, the Company has assessed that the likelihood of the
recovery of these escrow accounts cannot be determined and has
therefore disclosed the escrow accounts as a contingent asset.
As at 31 August 2019 and
28 February 2019, the Company had the
following contingent assets held in escrow accounts which had not
been recognised as assets of the Company:
|
|
|
|
|
|
|
Amount in Escrow |
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$'000 |
|
US$'000 |
Bolder Healthcare
Solutions |
|
|
|
|
|
|
2,164 |
|
3,090 |
Waterline Renewal
Technologies |
|
|
|
|
|
|
431 |
|
- |
Water Treatment
Systems |
|
|
|
|
|
|
213 |
|
6,051 |
Water Filtration
Systems |
|
|
|
|
|
|
- |
|
120 |
|
|
|
|
|
|
|
2,808 |
|
9,261 |
During the period ended 31 August
2019, proceeds of $3,923,000
(31 August 2018: $2,085,000) were realised and
recorded in the Statement of Comprehensive Income. Escrows of
$431,000 became potentially payable
on the realisation of Waterline Renewal
Technologies. Potential escrow proceeds recorded at 28 February 2019, totalling $2,961,000, from the future earnings of Water
Treatment Systems are no longer receivable.
22. Reconciliation of Published NAV
Per Share to NAV Per Share Per Financial Statements
|
|
|
|
|
|
|
31.8.2019 |
|
28.2.2019 |
|
|
|
|
|
|
|
US$ |
|
US$ |
Estimated
NAV per share (published 23 September 2019) |
|
10.03 |
|
10.04 |
Revaluation of Priority Express (net of fees) |
|
0.05 |
|
- |
Revaluation of JZCP Realty, Ltd (net of fees) |
|
(0.42) |
|
- |
NAV per
share per financial statements |
|
|
|
|
|
9.66 |
|
10.04 |
23. Subsequent Events
These interim financial statements were approved by the Board on
26 November 2019. Events subsequent
to the period end (31 August 2019)
have been evaluated until this date.
Post period-end, the Board received shareholder approval for the
adoption of a revised investment policy, whereby
JZCP will look to realise investments and materially reduce
commitments to new investments in order to return capital to
shareholders and pay down debt.
Post period-end, JZCP realised its investment in Priority
Express and expects to receive approximately $18.5 million in gross proceeds (including
escrows and a potential earn-out).
Post period-end, the Company accelerated the annual appraisal
process of its real estate investments in order for updated
valuations to be included within the Interim Financial Statements.
These updated valuations are reflected in a reduction of value of
$40.7 million as from what was
reported in the Interim Financial Statements.
Company Advisers
Investment Adviser
The Investment Adviser to JZ Capital Partners Limited
(“JZCP”) is Jordan/Zalaznick Advisers, Inc., (“JZAI”) a
company 4 beneficially owned by John (Jay) W Jordan II and
David W Zalaznick. The company offers investment advice to the
Board ( of JZCP. JZAI has offices in
New York and Chicago.
Jordan/Zalaznick Advisers,
Inc.
9 West, 57th Street
New York NY 10019
JZ Capital Partners Limited is registered in Guernsey
-
Number 48761
Registered
Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Administrator and Secretary
Northern Trust International Fund Administration Services
(Guernsey)
Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
UK Transfer and Paying
Agent
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Independent Auditor
Ernst & Young LLP
PO Box 9
Royal
Chambers
St Julian's
Avenue
St Peter Port
Guernsey GY1 4AF
Financial Adviser and Broker
JP Morgan Cazenove Limited
25 Bank Street
London E14 5JP
US Bankers
HSBC Bank USA
NA
52 Fifth Avenue New York NY
10018
(Also provides custodian services to JZ Capital Partners Limited
under the terms of a Custody Agreement).
Guernsey Bankers
Northern Trust (Guernsey)
Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3DA
UK Solicitors
Ashurst LLP
Broadwalk
House
5 Appold Street
London EC2A 2HA
US Lawyers
Monge Law Firm, PLLC
333 West Trade Street
Charlotte, NC
28202
Mayer Brown
LLP
214 North Tryon Street
Suite 3800
Charlotte NC 28202
Winston & Strawn LLP
35 West Wacker Drive
Chicago IL 60601-9703
Guernsey Lawyers
Mourant
Royal
Chambers
St Julian's
Avenue
St Peter Port
Guernsey GY1 4HP
Useful Information for
Shareholders
Internet Address
The Company: www.jzcp.com
Listing
JZCP Ordinary, Zero Dividend Preference ("ZDP") shares and
Convertible Unsecured Loan Stock ("CULS") are listed on
the Official List of the Financial Services Authority of the
UK, and are admitted to trading on the London Stock Exchange
Specialist Fund Segment for listed
securities.
The price of the Ordinary shares are shown in the Financial
Times under "Conventional Private Equity" and can also be found at
https://markets.ft.com along with the prices of the ZDP shares and
CULS.
ISIN/SEDOL numbers
|
|
Ticker
Symbol |
|
ISIN
Code |
|
Sedol
Number |
|
|
|
|
|
|
|
Ordinary shares |
|
JZCP |
|
GG00B403HK58 |
|
B403HK5 |
ZDP (2022) shares |
|
JZCZ |
|
GG00BZ0RY036 |
|
Z0RY03 |
CULS |
|
JZCC |
|
GG00BP46PR08 |
|
BP46PR0 |
Key Information Documents
JZCP produces Key Information Documents to assist investors'
understanding of the Company's securities and to enable comparison
with other investment products. These documents are found on the
Company's website - www.jzcp.com/investor-
relations/key-information-documents.
Alternative Performance Measures
In accordance with ESMA Guidelines on Alternative Performance
Measures ("APMs") the Board has considered what APMs are included
in the annual 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 annual 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 2019 was -3.8%, which
only reflects the change in NAV as no dividends were paid during
the period. The Total NAV Return for the year ended 28 February 2019 was 0.6%.
Total Shareholder
Return
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 the
shareholder sterling 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
six month period ended 31 August 2019 was 10.8%, which only reflects the
change in share price as no dividends were paid
during the period. The Shareholder Return for the
year ended 28 February 2019 was
-3.5%.
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 2019, JZCP's Ordinary
shares traded at £4.82 (28 February
2019: £4.35) or $5.87
(28 February 2019: $5.79) being the dollar equivalent using
the year end exchange rate of £1: $1.21785 (28 February
2019 £1: $1.33). The
shares traded at a 39.2% (28 February
2019: 42.4%) discount to the NAV per share of $9.66 (28 February
2019: $10.04).
Criminal Facilitation of Tax
Evasion
The Board have 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 advisors as an investment for UK retail investors.
Financial
Diary
Results for the year
ended 29 February 2020 |
|
|
|
May 2020
(date to be confirmed) |
Annual General
Meeting |
|
|
|
June/July
2020 (date to be confirmed) |
Interim
report for the six months ended 31 August 2020 |
|
November
2020 (date to be confirmed) |
|
|
|
|
|
|
|
JZCP does not plan to issue an Interim Management Statement for
the quarter ended 30 November 2019
due to the late announcement of the 31
August 2019 Interim Report and Financial Statements. A
statement for the quarter ending 31 May
2020 will be sent to the market via RNS within six weeks
from the end of the quarter, and will be posted on JZCP's website
at the same time, or soon thereafter.
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
organization
•Check that they are properly authorised by the FCA before getting
involved by visiting
http://www.fca.org.uk/firms/systems-reporting/register
• Report the matter to the FCA by calling 0800 111
6768
• If the calls persist, hang
up
• More detailed information on this can be found on the Money
Advice Service website www.moneyadviceservice.org.uk
US Investors
General
The Company's Articles contain provisions allowing the Directors to
decline to register a person as a holder of
any class of ordinary shares or other securities of the
Company or to require the transfer of those securities (including
by way of a disposal effected by the Company itself) if they
believe that the person:
(a) is a "US person" (as defined in Regulation S under the US
Securities Act of 1933, as amended) and
not a "qualified purchaser" (as defined in the US
Investment Company Act of 1940, as amended, and the related rules
thereunder);
(b) is a "Benefit Plan Investor" (as described under "Prohibition
on Benefit Plan Investors and Restrictions on Non-ERISA Plans"
below); or
(c) is, or is related to, a citizen or resident of the United States, a US partnership, a US
corporation or a certain type of estate or trust and
that ownership of any class of ordinary shares or any other equity
securities of the Company by the person would materially increase
the risk that the Company could be or become a "controlled foreign
corporation".as described under "US Tax Matters”).
In addition, the Directors may require any holder of
any class of ordinary shares or other securities of the
Company to show to their satisfaction whether or not
the holder is a person described in paragraphs (A), (B) or (C)
above.
US Securities
Laws
The Company (a) is not subject to the reporting requirements of the
US Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and does not intend to become subject to such reporting
requirements and (b) is not registered
as an investment company under the US Investment
Company Act of 1940, as amended (the "1940 Act"), and investors in
the Company are not entitled to the protections provided by the
1940 Act.
Prohibition on Benefit Plan Investors and Restrictions on
Non-ERISA Plans
Investment in the Company by "Benefit Plan Investors" is prohibited
so that the assets of the Company will not be deemed to constitute
"plan assets" of a "Benefit Plan Investor". The term "Benefit Plan
Investor" shall have the meaning contained in 29 C.F.R. Section
2510.3-101, as modified by Section 3(42) of the US Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and includes (a) an "employee benefit plan" as
defined in Section 3(3) of ERISA that is subject to
Part 4 of Title I of ERISA; (b) a "plan" described in Section
4975(e)(1) of the US Internal Revenue Code
of 1986, as amended (the "Code"), that is subject
to Section 4975 of the Code; and (c) an entity whose underlying
assets include "plan assets" by reason of an employee
benefit plan's or a plan's investment in such entity. For purposes
of the foregoing, a "Benefit Plan Investor" does
not include a governmental plan (as defined in
Section 3(32) of ERISA), a non-US plan (as defined in Section
4(b)(4) of ERISA) or a church plan (as defined in Section 3(33) of
ERISA) that has not elected to be subject to ERISA.
Each purchaser and subsequent transferee of any class of
ordinary shares (or any other class of equity interest in the
Company) will be required to represent, warrant and covenant, or
will be deemed to have represented, warranted and covenanted, that
it is not, and is not acting on behalf of or with the
assets of, a Benefit Plan Investor to acquire such ordinary shares
(or any other class of equity interest in the Company).
Under the Articles, the directors have the power to require the
sale or transfer of the Company's securities in order to avoid the
assets of the Company being treated as "plan assets" for the
purposes of ERISA.
The fiduciary provisions of laws applicable to governmental
plans, non-US plans or other employee benefit plans or retirement
arrangements that are not subject to ERISA (collectively,
"Non-ERISA Plans") may impose limitations on investment in
the Company. Fiduciaries of Non-ERISA Plans, in consultation with
their advisors, 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 advisor will have certain general fiduciary duties to
the Company, the board and the investment advisor 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 advisor 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 advisor.
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 Advisor 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
Advisor 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 Advisor 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 Advisor 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 Advisor 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 Advisor.
US Tax Matters
This discussion does not constitute tax advice and is not intended
to be a substitute for tax advice and planning. Prospective holders
of the Company's securities must consult their own tax advisers
concerning the US federal, state and local income tax
and estate tax consequences in their particular situations of the
acquisition, ownership and disposition of any of the Company's
securities, as well as any consequences under the laws of any other
taxing jurisdiction.
The Board may decline to register a person as, or to require
such person to cease to be, a holder of any class of ordinary
shares or other equity securities of the
Company because of, among other reasons, certain US ownership and
transfer restrictions that relate to “controlled foreign
corporations” contained in the Articles of the Company. A
Shareholder of the Company may be subject to forced sale
provisions contained in the Articles in which case such shareholder
could be forced to dispose of its securities if
the Company’s directors believe that such shareholder is, or is
related to, a citizen or resident of the United States,
a US partnership, a US corporation or a certain type of estate or
trust and that ownership of any class of ordinary
shares or any other equity securities of the Company by
such shareholder would materially increase the risk that the
Company could be or become a "controlled foreign
corporation" within the meaning of the Code (a "CFC"). Shareholders
of the Company may also be restricted by such provisions with
respect to the persons to whom they are permitted to transfer their
securities.
In general, a foreign corporation is treated as a CFC if, on any
date of its taxable year, its "10% US Shareholders"collectively own
(directly, indirectly or constructively within the meaning of
Section 958 of the Code) more than 50% of the total
combined voting power or total value of the corporation's
stock. For this purpose, a "10% US
Shareholder" means any US person who owns
(directly, indirectly or constructively within the meaning of
Section 958 of the Code) 10% or more of the
total combined voting power of all classes of stock of a
foreign corporation or 10% or more of the total value of shares of
all classes of stock of a foreign corporation. The Tax Cuts and
Jobs Act (the “Tax Act”) eliminated the prohibition on “downward
attribution” from non-US persons to US persons under Section
958(b)(4) of the Code for purposes of determining constructive
stock ownership under the CFC rules. As a result, the
Company’s US subsidiary will be deemed to own all of the
stock of the Company’s non-US
subsidiaries held by the Company for purposes of determining
such foreign subsidiaries’ CFC
status. The legislative history under the Tax Act
indicates that this change was not intended to cause the
Company’s non-US subsidiaries to be treated
as CFCs with respect to a 10% US Shareholder that is not
related to the Company’s US subsidiary. However, the IRS has not
yet issued any guidance confirming this intent and it is not clear
whether the IRS or a court would interpret the change made by the
Tax Act in a manner consistent with such indicated intent. The
Company's treatment as a CFC as well as its foreign subsidiaries’
treatment as CFCs could have adverse tax consequences for 10% US
Shareholders.
The Company has been advised that it is NOT a passive foreign
investment company ("PFIC") for the fiscal years ended February 2018 and 2017. An analysis for the
financial year ended February 2019 is
currently being undertaken. A classification as a PFIC would
likely have adverse tax consequences for US taxpayers.
The taxation of a US taxpayer's investment in the Company's
securities is highly complex. Prospective holders of the Company's
securities must consult their own tax advisers concerning the US
federal, state and local income tax and estate tax consequences in
their particular situations of the acquisition, ownership and
disposition of any of the Company's securities, as well as any
consequences under the laws of any other taxing jurisdiction.
Investment Adviser's ADV
Form
Shareholders and state securities authorities wishing to view the
Investment Adviser's ADV form can do so by following the link
below:
https://adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=160932