JZCC.L Regulatory News (JZCC)

JZ Capital Partners Ltd - Annual Report and Financial Statements to 28.02.21

PR Newswire

London, May 18

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)

ANNUAL RESULTS FOR THE YEAR ENDED

28 FEBRUARY 2021

LEI: 549300TZCK08Q16HHU44

(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 WHICH FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR").

19 May 2021

JZ Capital Partners, the London listed fund that has investments in US and European micro-cap companies and US real estate, announces its preliminary results for the year ended 28 February 2021. 

Financial Highlights

· NAV per share of $4.25 (FYE 29/02/20: $6.14)

· NAV of $329.5 million (FYE 29/02/20: $475.7 million)

Investment Policy and Liquidity

· Following the Company’s losses in its real estate portfolio, the shareholders adopted a new investment policy whereby the Company agreed to make no further investments outside of its existing obligations or to the extent which an investment may be made to support an existing portfolio company. 

· The US and European micro-cap portfolios have continued to navigate well through the Covid-19 pandemic, delivering a net increase of 8 and 6 cents per share, respectively. However, lingering uncertainty in the market has delayed realisations.

· To meet this challenge and afford the Company more time to maximise the value of its portfolio and bring these businesses to market, the following has been arranged:

o The remaining balance of the Company’s Senior Debt with Guggenheim was acquired by clients and funds advised and sub-advised by Cohanzick Management, LLC and CrossingBridge Advisors, LLC (“Cohanzick”).

o Subsequently, in a signed amendment, dated 14th May 2021 (post-period end), to the Senior Debt agreement, Cohanzick agreed with the Company that, subject to the satisfaction of certain conditions precedent (including shareholder approval) by 25 June 2021 of the $31.5 million facility with Jay Jordan and David Zalaznick referred to below:

o the maturity date of the Senior Debt would be deferred by one year until 12 June 2022; and

o the Company would be permitted to redeem the CULS in full on their maturity date of 30 July 2021 (albeit the CULS are a subordinate security to the Senior Debt).

o On 14 May 2021 (post-period end), David Zalaznick and Jay Jordan (the “JZAI Founders”) signed an agreement to make available to the Company, directly or through their affiliates, a facility of $31.5 million, bearing interest at 6% (the same rate payable on the CULS), and maturing on 11 September 2022, which is subject to shareholder approval.

o In addition, on 14 May 2021 (post-period end), the JZAI Founders agreed to assume all of the Company's remaining commitments to Orangewood Partners II-A, L.P. (the “Orangewood Fund”) in the amount of US$12.35 million, and which is also subject to shareholder approval.

Outlook

· The Board believes that, subject to shareholder approval, the restructuring of JZCP’s Senior Debt and liquidity facility agreed with the JZAI Founders will significantly increase the Company’s ability to execute its new investment policy.

· However, JZCP’s senior debt and the new liquidity facility mature prior to the 1 October 2022 redemption date of the Company's zero dividend preference shares. Unless these instruments are refinanced, extended, or, as realisations permit, paid off, continued uncertainty will exist with regards to their redemption. As a result of JZCP's potential inability to redeem its debt on its stated maturities, the Directors’ report accompanying these results disclose a material uncertainty as to the Company’s ability to continue as a going concern.

· Several realisations are expected during the coming financial year; however, the Board remains cautious as uncertainties related to Covid-19 are still prevalent in the market, the realisation of assets in the Company’s co-investment portfolio is controlled by third parties and certain portfolio investments may require more time to achieve their maximum realisable values.

· That being said, the Board would like shareholders and the market to be aware that it understands conditional agreement subject to closing has been reached in relation to the sale of one of its portfolio companies which would, if its conditions are satisfied, result in the Company receiving consideration of approximately US$40 million and which reflects a premium to carrying asset value.

David Macfarlane, Chairman of JZCP, said: “We continue to remain focused on executing the new Investment Policy, with the intention of realising the maximum value of the Company’s investments and, after repaying its debt obligations, returning capital to shareholders.

However, the successful execution of the new Investment Policy remains dependent upon the timing, quantum and ultimate success of future realisations. Further time is needed to maximise the value of these realisations, which contributes to uncertainty regarding the Company’s ability to meet its debt maturities. However, the Board firmly believes that the extension of the Company’s Senior Debt, the new facility from the JZAI Founders, and the assumption of the Company’s remaining commitment to the Orangewood Fund go a long way in buying the time for the Company to maximise the value of its portfolio.

The Board and the Investment Adviser are optimistic that the Company is set to continue on a positive trajectory over the coming year and that its obligations will be repaid in full, with a significant amount of capital ultimately returned to shareholders.”

Listing Rule 9.6.11R(3) disclosure:

In accordance with Listing Rule 9.6.11(3), JZCP announces a change to Ms Sharon Parr's director responsibilities, having been appointed as a member of JZCP's Disclosure Team.

Market Abuse Regulation:

The information contained within this announcement is inside information as stipulated under MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain. The person responsible for arranging the release of this announcement on behalf of the Company is David Macfarlane, Chairman.

For further information:

Ed Berry / Kit Dunford +44 (0)7703 330 199 / +44 (0)7717 417 038

FTI Consulting

David Zalaznick +1 212 485 9410

Jordan/Zalaznick Advisers, Inc.

Sam Walden +44 (0) 1481 745385

Northern Trust International Fund

Administration Services (Guernsey) Limited

About JZ Capital Partners

JZCP has investments in US and European micro-cap companies, as well as real estate properties in the US.

JZCP’s Investment Adviser is Jordan/Zalaznick Advisers, Inc. (“JZAI”) which was founded by David Zalaznick and Jay Jordan in 1986. JZAI has investment professionals in New York, Chicago, London and Madrid.

In August 2020, the Company's shareholders approved changes to the Company’s investment policy. Under the new policy, the Company will make no further investments except in respect of which it has existing obligations and to continue to selectively supporting the existing portfolio. The intention is to realise the maximum value of the Company's investments and, after repayment of all debt, to return capital to shareholders.

JZCP is a Guernsey domiciled closed-ended investment company authorised by the Guernsey Financial Services Commission. JZCP's shares trade on the Specialist Fund Segment of the London Stock Exchange.

For more information please visit www.jzcp.com.

Important Notice:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements relate to matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition, liquidity, policies and the development of its strategies may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the investment performance, result of operations, financial condition, liquidity and policies of the Company and development of its strategies, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. These forward-looking statements speak only as at the date of this announcement. Subject to their legal and regulatory obligations, each of the Company, the Investment Adviser and their respective affiliates expressly disclaims any obligations to update, review or revise any forward-looking statement contained herein whether to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based or as a result of new information, future developments or otherwise.

Chairman’s Statement

We present the results of the Company for the financial year ended 28 February 2021, which show that the Company’s NAV fell from $4.60 at 31 August 2020 (the half-year end) to $4.25 at 28 February 2021 (as a further comparison, the Company’s NAV at 29 February 2020 was $6.14).

As announced in the Interim Results, the reduction in NAV during the first six months of the financial year was mainly due to large losses in the real estate portfolio. The much smaller write-down during the second six- month period of the financial year is primarily attributable to the Company recognizing its last remaining losses in the real estate portfolio, offset partially by strong performance in certain US and European micro-cap investments.

Investment Policy and Liquidity

Following the Company’s losses in its real estate portfolio, the shareholders adopted a new investment policy whereby the Company agreed to make no further investments outside of its existing obligations or to the extent which an investment may be made to support an existing portfolio company. The intention of this policy change was for the Company to realise the maximum value of its investments and, after repaying its debt obligations, to return capital to shareholders.

As of 28 February 2021, the Company’s debt obligations are: (i) senior debt (“Senior Debt”) of $68.5m (originally due 12 June 2021); (ii) Convertible Unsecured Loan Stock (“CULS”) of £38.9m (~$54.1m) due 30 July 2021; and (iii) Zero Dividend Preference Shares (“ZDPs”) of £57.6m (~$80.2m) (due 1 October 2022).

While our US and European micro-cap portfolios have continued to navigate well through the COVID-19 pandemic, as we foreshadowed in the Interim Results, lingering uncertainty in the market has delayed realisations. To meet this challenge and afford the Company more time to maximise the value of its portfolio and bring these businesses to market, the following has been arranged:

· The remaining balance of the Company’s Senior Debt with Guggenheim was acquired by clients and funds advised and sub-advised by Cohanzick Management, LLC and CrossingBridge Advisors, LLC (“Cohanzick”); and

· Subsequently, in a signed amendment, dated 14 May 2021 and announced to the market on 17 May 2021, to the Senior Debt agreement, Cohanzick agreed with the Company that, subject to the satisfaction of certain conditions precedent (including shareholder approval by 25 June 2021 of the $31.5 million facility with Jay Jordan and David Zalaznick referred to below):

· the maturity date of the Senior Debt would be deferred by one year until 12 June 2022; and

· the Company would be permitted to redeem the CULS in full on their maturity date of 30 July 2021 (albeit the CULS are a subordinate security to the Senior Debt).

Although this amendment with Cohanzick comes at an increased interest cost, it is one that the Investment Adviser and Board believe to be compensated by the additional time afforded to maximise the value of the portfolio.

In addition, Jay Jordan and David Zalaznick signed an agreement, dated 14 May 2021 which was also announced to the market on 17 May 2021, to make available to the Company, directly or through their affiliates, a facility of $31.5 million, bearing interest at 6% (the same rate payable on the CULS), and maturing on 11 September 2022. As a related party transaction, this facility will require shareholder approval, following a circular, to be posted to shareholders before no later than early June, setting out the particulars of the transaction. Contemplated within this circular will be another proposal for Jay Jordan and David Zalaznick (or their affiliates) to relieve the Company of its remaining $12.35 million commitment to the Orangewood Fund (approximately $2.99 million of this commitment is “funded” and approximately $9.36 million is “unfunded”).

Further details of these plans were set out in an announcement issued by the Company on 17 May 2021. The Board believes that these plans significantly increase the Company’s ability to execute its new investment policy. However, the Senior Debt and new facility from Jay Jordan and David Zalaznick mature prior to the 1 October 2022 redemption date of the ZDPs. Unless these three instruments are refinanced, extended, or, as realisations permit, paid off, continued uncertainty will exist with regards to their redemption. As a result of the Company’s potential inability to redeem its debt on its stated maturities, the Directors’ report accompanying these results disclose a material uncertainty as to the Company’s ability to continue as a going concern.

US and European Micro-cap Portfolios

Our US and European micro-cap portfolio companies have continued to perform well throughout the COVID-19 pandemic and our expectation remains that no lasting damage will have been done to any of these businesses.

Although certain portfolio investments have been set back temporarily, others, including Felix Storch, have experienced record performance (the Company remains interested in Felix Storch through its Special LP interest in the Secondary Fund). During the second half of the financial year, the Company realised its interest in Eliantus, a build-up of solar power plants in Spain, at a 2.0x gross multiple of invested capital. As previously reported, the Company also partially realised six US micro-cap portfolio assets through the secondary sale in December 2020 and remains invested in the continuing performance of these assets through the Company’s Special LP interest in the Secondary Fund.

Several realisations are expected during the coming financial year; however, the Board remains cautious as uncertainties related to COVID-19 are still prevalent in the market, the realisation of assets in the Company’s co-investment portfolio is controlled by third parties and certain portfolio investments may require more time to achieve their maximum realisable values. That being said, the Board would like shareholders and the market to be aware that it understands conditional agreement subject to closing has been reached in relation to the sale of one of its portfolio companies which would, if its conditions are satisfied, result in the Company receiving consideration of approximately $40 million and which reflects a premium to carrying asset value. The Company will of course make further announcements as required in relation to the status of the transaction.

Real Estate portfolio

The Company’s two remaining real estate assets that have equity value are 247 Bedford Avenue in Brooklyn, New York (where Apple is the principal tenant), and the Esperante office building in West Palm Beach, Florida.

Each asset continues to be held on the Company’s balance sheet at the last appraised value (i.e., as of 31 August 2020), which implies approximate equity value to the Company of $22.5 million in aggregate. The difference from the real estate equity value of $47.4 million on the Company’s balance sheet at 31 August 2020 is largely due to the sale of the Greenpoint asset and the full write-down of two other properties.

With regards to Esperante, the Board is pleased to report that post year end the Company closed a joint venture agreement with affiliates of the Related Companies (“Related”); we believe that a partnership with Related will create significant additional value for the Company at Esperante going forward. As part of the joint venture, Related purchased approximately 49.9% of the equity of Esperante while the current ownership (which includes the Company) retained approximately 50.1% of the equity.

Outlook

The successful execution of the new Investment Policy remains dependent upon the timing, quantum and ultimate success of future realisations. As stated above, further time is needed to maximise the value of these realisations, which contributes to uncertainty regarding the Company’s ability to meet its impending debt maturities. However, the Board firmly believes that the extension of the Company’s Senior Debt, the new facility from Jay Jordan and David Zalaznick, and the relief of the Company’s remaining commitment to the Orangewood Fund go a long way in buying the time for the Company to maximise the value of its portfolio. The Board remains optimistic that all the Company’s obligations will be repaid in full and that ultimately a significant amount of capital will be returned to shareholders.

David Macfarlane

Chairman

18 May 2021

Investment Adviser's Report

Dear Fellow Shareholders,

We have made substantial progress towards our stated goal of realizing investments to generate cash to pay debt, relieving JZCP of unfunded commitments and supporting our existing portfolio to maximize returns to shareholders. As you will read in the Chairman’s Statement, we have amended our credit agreement to extend its maturity in addition to personally extending additional credit to JZCP to enable the Company to repay its CULS on time.

Specifically, we agreed the extension of JZCP’s remaining senior debt through June 2022 and agreed to provide a $31.5 million liquidity facility at 6.0% interest to JZCP (i.e., at the same rate as the CULS), subject to shareholder approval. These transactions will enable JZCP to pay off its CULS in full and on their stated due date, affording us further time to maximize the value of our portfolio as we approach the extended maturity of the balance of our senior debt and the maturity of the ZDPs.

Our US and European micro-cap portfolios continue to perform solidly through COVID-19, and, as previously announced, several of our assets have even outperformed in the current climate, hitting record monthly sales and EBITDA figures.

As discussed in the interim financials, most of our real estate portfolio was in a precarious position pre- COVID-19 and has now been written down to zero. The Company’s two remaining real estate assets that have equity value are 247 Bedford Avenue in Brooklyn, New York (where Apple is the principal tenant), and the Esperante office building in West Palm Beach, Florida. As previously reported, in October 2020, JZCP sold its investment in the Greenpoint property, receiving approximately $13.6 million in sale proceeds.

With regards to Esperante, we are pleased to report that post-period we closed a joint venture agreement with affiliates of the Related Companies (“Related”); we believe that a partnership with Related will create significant additional value for JZCP at Esperante going forward. As part of the joint venture, Related purchased approximately 49.9% of the equity of Esperante while the current ownership (which includes JZCP) retained approximately 50.1% of the equity. We look forward to reporting further on our progress with Related in the coming months.

As of 28 February 2021, our US micro-cap portfolio consisted of 18 businesses, which includes four ‘verticals’ and 10 co-investments, across nine industries. Our European micro-cap portfolio consisted of 17 companies across six industries and seven countries.

Net Asset Value ("NAV")

JZCP’s NAV per share decreased $1.89, or 30.8%, during the twelve-month period.

The US micro-cap portfolio navigated the COVID-19 environment well during the twelve-month period, delivering a net increase of 8 cents per share. This was primarily due to net accrued income of 8 cents, increased earnings at Felix Storch (10 cents, prior to being sold into the Secondary Fund) and co- investments Salter (26 cents) and New Vitality (3 cents). We also received 1 cent of escrow payments during the year.

Offsetting these increases were decreases at Nationwide (5 cents), co-investments Igloo, Suzo Happ and Vitalyst (2 cents, 16 cents and 3 cents, respectively), an aggregate write-down upon the sale of JZCP’s interest in three Orangewood assets (K2 II, Taco Bell and George) of 3 cents and the net write down of 11 cents on the sale of six US microcap assets into the Secondary Fund (as previously reported, JZCP experienced a 52 cent write down upon finalizing the secondary sale in December 2020. At 28 February 2021, the assets within the Secondary Fund have been written up, with JZCP’s special limited partnership interest increasing in value by 41 cents per share to JZCP).

Our European portfolio also performed well through COVID-19 during the year, posting a net increase of 6 cents, primarily due to net accrued income of 4 cent and net write-ups at European portfolio companies of 2 cents.

The real estate portfolio experienced a net decrease of $1.60, due to the write-off of large portions of our Brooklyn portfolio and a significant portion of our Wynwood portfolio. The Company’s two remaining real estate assets that have equity value are 247 Bedford Avenue in Brooklyn, New York (where Apple is the principal tenant), and the Esperante office building in West Palm Beach, Florida.

Returns

The chart below summarizes cumulative total shareholder returns and total NAV returns for the most recent six-month, one-year, three-year and five-year periods.

1Total returns are cumulative and assume that dividends were reinvested.

2Adjusted NAV returns reflect the return per share before the subsequent appreciation from the buyback of ordinary shares at a discount .

Portfolio Summary

Our portfolio is well-diversified by asset type and geography, with 35 US and European micro-cap investments across eleven industries. The European portfolio itself is well-diversified geographically across Spain, Italy, Portugal, Luxembourg, Scandinavia and the UK.

Below is a summary of JZCP’s assets and liabilities at 28 February 2021 as compared to 29 February 2020. An explanation of the changes in the portfolio follows:

US Micro-Cap Portfolio

As you know from previous reports, our US portfolio is grouped into industry ‘verticals’ and co-investments. As of December 4, 2020, certain of our verticals and co-investments are now grouped under JZHL Secondary Fund, LP (“JZHL” or the “Secondary Fund”). JZCP has a continuing interest in the Secondary Fund through a special limited partnership interest, which entitles JZCP to certain distributions from the Secondary Fund.

Our ‘verticals’ strategy focuses on consolidating businesses under industry executives who can add value via organic growth and cross company synergies. Our co-investments strategy allows for greater diversification of our portfolio by investing in larger companies alongside well-known private equity groups.

The US micro-cap portfolio navigated the COVID-19 environment well during the twelve-month period, delivering a net increase of 8 cents per share. This was primarily due to net accrued income of 8 cents, increased earnings at Felix Storch (10 cents, prior to being sold into the Secondary Fund) and co-investments Salter (26 cents) and New Vitality (3 cents). We also received 1 cent of escrow payments during the year.

Offsetting these increases were decreases at Nationwide (5 cents), co-investments Igloo, Suzo Happ and Vitalyst (2 cents, 16 cents and 3 cents, respectively), an aggregate write-down upon the sale of JZCP’s interest in three Orangewood assets (K2 II, Taco Bell and George) of 3 cents and the net write down of 11 cents on the sale of six US microcap assets into the Secondary Fund (as previously reported, JZCP experienced a 52 cent write down upon finalizing the secondary sale in December 2020. At 28 February 2021, the assets within the Secondary Fund have been written up, with JZCP’s special limited partnership interest increasing in value by 41 cents per share to JZCP).

European Micro-Cap Portfolio

Our European portfolio also performed well through COVID-19 during the year, posting a net increase of 6 cents, primarily due to net accrued income of 4 cent and net write-ups at European portfolio companies of 2 cents.

JZCP invests in the European micro-cap sector through its approximately 18.8% ownership of Fund III. As of 28 February 2021, Fund III held 13 investments: five in Spain, two in Scandinavia, two in Italy, two in the UK and one each in Portugal and Luxembourg. JZCP held direct loans to a further three companies in Spain: Docout, Xacom and Toro Finance.

JZAI has offices in London and Madrid and an outstanding team with over fifteen years of experience investing together in European micro-cap deals.

During the year, JZCP received distributions totaling approximately €8.0 million (approximately $9.4 million) from the refinancing and sale of Fund III portfolio company Eliantus (see below).

In April 2020, JZCP received €2.7 million in proceeds from the refinancing of Fund III portfolio company, Eliantus, which issued its second project bond backed by solar power plants in Spain. In September 2020, JZCP received a further €5.3 million in proceeds from the sale of Eliantus to Sonnedix, an independent solar power producer which develops, builds, owns and operates solar power plants globally, including in Italy, France, Spain, USA/Puerto Rico, Chile, South Africa and Japan. Including previously distributed proceeds and future escrows/earn-outs, Fund III has realized a gross multiple of invested capital (“MOIC”) of approximately 2.0x.

In May 2021 (post year-end), JZCP received approximately $2.3 million in deferred gross proceeds from its sale of Factor Energia in November 2017.

Real estate Portfolio

As discussed in the interim financials, most of our real estate portfolio was in a precarious position pre-COVID-19 and has now been written down to zero. The Company’s two remaining real estate assets that have equity value are 247 Bedford Avenue in Brooklyn, New York (where Apple is the principal tenant), and the Esperante office building in West Palm Beach, Florida. As previously reported, in October 2020, JZCP sold its investment in the Greenpoint property, receiving approximately $13.6 million in sale proceeds.

With regards to Esperante, we are pleased to report that post-period we closed a joint venture agreement with affiliates of the Related Companies (“Related”); we believe that a partnership with Related will create significant additional value for JZCP at Esperante going forward. As part of the joint venture, Related purchased approximately 49.9% of the equity of Esperante while the current ownership (which includes JZCP) retained approximately 50.1% of the equity. We look forward to reporting further on our progress with Related in the coming months.

Other investments

Our asset management business in the US, Spruceview Capital Partners, has continued to make encouraging progress since our last report to you. Spruceview addresses the growing demand from corporate pensions, endowments, family offices and foundations for fiduciary management services through an Outsourced Chief Investment Officer (“OCIO”) model as well as customized products/solutions per asset class.

During the last fiscal year, Spruceview received a commitment of $124 million, the first tranche of an anticipated total additional commitment of $800 million, for a portfolio of alternative private equity investments for a Mexican trust (or “CERPI”). In addition, the firm launched a third private markets fund, focused on co-investment opportunities in the US, with current commitments of $49 million. The firm also received additional commitments to its second private markets fund, as well as additional contributions to the pension plans to which it provides advisory services.

During the period, Spruceview also maintained a pipeline of potential client opportunities and continued to provide investment management oversight to the pension funds of the Mexican and Canadian subsidiaries of an international packaged foods company, as well as portfolios for family office clients, a European private credit fund-of-funds, and a US middle market private equity fund-of-funds.

As previously reported, Richard Sabo, former Chief Investment Officer of Global Pension and Retirement Plans at JPMorgan and a member of that firm’s executive committee, is leading a team of 17 investment, business and product development, legal and operations professionals.

Realisations

Secondary Sale

On December 4, 2020, JZCP closed the sale of its interests in certain US microcap portfolio companies (the "Secondary Sale") to a secondary fund led by Hamilton Lane Advisors, LLC. ("Hamilton Lane"), one of the world's largest asset management firms.

The Secondary Sale marked a significant milestone towards the delivery of the Company's previously announced strategy of realizing value from its investment portfolio and paying down a substantial portion of its senior debt.

The US microcap assets sold as part of the Secondary Sale include JZCP’s interests in each of Flex Pack, Flow Controls, Testing Services, Felix Storch, Peaceable and TierPoint (together, the "US Microcap Portfolio Companies"). In return, JZCP received aggregate consideration of: (i) $90 million in cash (less fees and expenses) and (ii) a special limited partner interest in the Secondary Fund. After Hamilton Lane receives a 1.4x preferred return on its invested capital, JZCP’s special limited partner interest entitles JZCP to receive (i) 95% of all distributions until receiving an additional $67.6 million in proceeds and (ii) 37.5% of any upside thereafter.

The full potential commitment by the Secondary Investors to the Secondary Fund is $110 million in aggregate. Of this $110 million commitment, $90 million was funded at close in December 2020 to facilitate the Secondary Fund’s acquisition of the US Microcap Portfolio Companies from JZCP.

As the balance of the $20 million in remaining committed capital is deployed to execute the respective acquisition strategies of the US Microcap Portfolio Companies, JZCP expects that the value of its special limited partner interest should increase in the near to medium term. As mentioned above, once Hamilton Lane’s preferred return of 1.4x is met, 95% of all value (up to $67.6 million in additional proceeds) accrues to JZCP. Thereafter, the Company continues to benefit by sharing in 37.5% of any remaining upside.

K2 II and ABTB (Taco Bell)

In June 2020, JZCP sold its interests in K2 II and ABTB at approximately NAV, receiving approximately $18.6 million in net proceeds.

Orangewood Fund

During the year and post year-end, JZCP was relieved of $11.65 million of its original $24 million commitment to the Orangewood Fund. JZCP received approximately $6.9 million in proceeds from selling down the “funded portion” of this $11.65 million commitment as well as from investor re-allocations from the final close of the Orangewood Fund (the $6.9 million represents a portion of JZCP’s funded cost plus 8.0% “cost to carry”). Subject to shareholder approval, JZCP intends to sell down in full its remaining $12.35 million commitment to the Orangewood Fund in the very near term.

CERPI

In August 2020, JZCP received approximately $1.3 million in proceeds from selling its interest in the CERPI, a fund managed by Spruceview. In addition to having received back its approximate cost in the CERPI, JZCP was relieved of up to approximately $7.3 million in unfunded commitments and potential future commitments to the CERPI.

Salter Labs

In September 2020, JZCP received a $4.4 million distribution of refinancing proceeds from Salter.

Eliantus

During the year, JZCP received distributions totaling approximately €8.0 million (approximately $9.4 million) from the refinancing and sale of Fund III portfolio company Eliantus (see below).

In April 2020, JZCP received €2.7 million in proceeds from the refinancing of Fund III portfolio company, Eliantus, which issued its second project bond backed by solar power plants in Spain. In September 2020, JZCP received a further €5.3 million in proceeds from the sale of Eliantus to Sonnedix, an independent solar power producer which develops, builds, owns and operates solar power plants globally, including in Italy, France, Spain, USA/Puerto Rico, Chile, South Africa and Japan. Including previously distributed proceeds and future escrows/earn-outs, Fund III has realized a gross multiple of invested capital (“MOIC”) of approximately 2.0x.

Greenpoint

In October 2020, JZCP sold its investment in the Greenpoint property, receiving approximately $13.6 million in sale proceeds.

George Industries

In April 2021, JZCP sold its investment in George, receiving approximately $9.5 million in sale proceeds.

Factor Energia

In May 2021 (post year-end), JZCP received approximately $2.3 million in deferred gross proceeds from its sale of Factor Energia in November 2017.

Outlook

While it has been a challenging year, especially for the real estate portfolio, we believe that JZCP’s outlook has improved significantly and will continue to get better over the course of 2021. The US and European microcap portfolios have performed well and our expectation is that they will continue to contribute to NAV growth.

We have restructured JZCP’s senior debt to allow for the repayment of the CULS. This was accomplished by extending the maturity of our senior loan by one year and by affiliates of the Investment Adviser making available a $31.5 million credit facility at 6.0% interest (i.e., the same rate as the CULS) to the Company. This facility matures behind the extended senior debt and in front of the ZDPs.

We see significant value to be realized from our US and European microcap portfolios and will continue to selectively invest in these portfolios, in accordance with the new investment policy, to maximize their values. We believe this is the most effective way for us to be able to return significant capital to our ordinary shareholders. We continue to pursue several realizations and look forward to making announcements regarding these potentially significant liquidity events in the near future.

Thank you again for your continued support through a difficult period. We remain dedicated to maximizing value for our fellow ordinary shareholders.

Yours faithfully,

Jordan/Zalaznick Advisers, Inc.

18 May 2021

Investment Review

The following investment review focuses on JZCP's largest investments (by value) in the US micro-cap and also provides further analysis of the European micro-cap and real estate portfolios.

US MICRO-CAP

Industrial Service Solutions (“ISS”)

Portfolio: US Micro-cap (Vertical)

Date of Initial Investment: June 2011

Website: www.iss-na.com

The investment strategy for Industrial Service Solutions (“ISS”) is to build a uniquely positioned industrial repair, service and manufacturing holding company with multiple value propositions across diversified industries.

ISS provides a broad set of services to critical-to-process equipment. These services include: on-site mechanical and repair, regionally based shop services, quality assurance and quality control inspection, testing, and parts supply, rental and remanufacturing. The company also sells parts and supplies for the products it services.

ISS serves a wide variety of industries, such as pulp and paper; petrochemical; tire and rubber; oil and gas; power generation; cement; metals and mining; water and waste water; and other industrial and commercial markets.

With hundreds of dedicated and skilled technicians, machinists, craftsmen, project leaders and application engineers, ISS has the experience and talent to deliver high-quality work on schedule and on budget. The increasing complexity of equipment in industrial settings, along with fewer maintenance staff at these plants, should encourage growth in ISS’ customers’ needs. This large and very fragmented industry is well suited for a consolidation strategy.

JZHL Secondary Fund LP

In December 2020, the Company completed the sale its of its interests in certain US microcap portfolio companies (the "Secondary Sale") to a secondary fund led by Hamilton Lane Advisors, L.L.C. ("Hamilton Lane"), one of the world's largest allocators and managers of private markets capital. The Secondary Sale was structured as a sale to a newly formed fund, JZHL Secondary Fund LP (the "Secondary Fund"), managed by an affiliate of JZAI.

The US microcap assets (detailed below) were sold to the Secondary Fund at their agreed valuation. In return, the Company received cash consideration and a special limited partner interest in the Secondary Fund entitling the Company to certain distributions from the Secondary Fund.

The Company's limited partner interest in the Secondary Fund's year-end valuation is $72.2 million and is valued by considering the valuation of the underlying investments and the order of returning capital to investors being:

i) First, 100 per cent. will be distributed to Hamilton Lane and various members of the Fund's management team (the "Other Investors" pro rata in accordance with their respective contributions until each Other Investor has received distributions equal to its total aggregate contributions to the Secondary Fund (amounting in total to US$90 million plus any further contributions made thereafter, expected to be in the aggregate of up to an additional US$20 million);

ii) Second, 100 per cent. to the Other Investors pro rata in accordance with their respective contributions until each other investor has realised the greater of a 15 per cent. net internal rate of return on its total aggregate contributions or an amount equal to 140 per cent. of its total aggregate contributions.

iii) Third, 95 per cent. to the Company (in its capacity as the special limited partner of the Secondary Fund) and 5 per cent. to the Other Investors until the Company has received distributions equal to US$67.6 million; and

iv) Fourth, 62.5 per cent. to the Other Investors (pro rata in accordance with their respective contributions) and 37.5

per cent. to the Company.

JZHL Secondary Fund LP includes investments in the following companies:

ACW Flex Pack, LLC

Flex Pack is a provider of a variety of custom flexible packaging solutions to converters and end-users. Further information can be found at www.flex-pack.com

Felix Storch

Felix Storch is a leading provider of specialty refrigeration and custom appliances to residential small kitchen, professional, life sciences, food service and hospitality markets. Felix Storch is a second generation family business, founded in 1969 and based in The Bronx, NY. Felix Storch’s products now include a wide range of major appliances sold both nationally and internationally.

Further information can be found at www.felixstorchinc.com.

Flow Control, LLC

Flow Controls is incorporated in Delaware and is a manufacturer and distributor of high-performance, mission-critical flow handling products and components utilised to connect processing line equipment.

Further information can be found at www.flowcontrolinc.com

Peaceable Street Capital

Peaceable is a specialty finance platform focused on making structured investments in small and mid-sized income producing commercial real estate. The company is built on a foundation of know-how, creatively structuring preferred equity to provide senior equity in complex situations. With extensive investment experience throughout the United States and Canada, Peaceable's underwriting and decision making process is designed to deliver creative, flexible and dependable solutions quickly. Peaceable focuses on a diverse portfolio of property types including multi-family, office, self-storage, industrial, retail, RV parks, mobile home parks, parking health care and hotels.

Further information can be found at www.peaceablestreet.com

Testing Services Holdings

Testing Services is a provider of safety focused solutions for the industrial, environmental and life science related markets, and testing, certification and validation services for cleanroom, critical environments and containment systems.

Further information can be found at www.techholdings.com

Tierpoint

TierPoint is incorporated in Delaware and is a leading provider of information technology and data centre services, including colocation, cloud computing, disaster recovery and managed IT services. TierPoint’s hybrid IT solutions help clients increase business agility, drive performance and manage risk. TierPoint operates via a network of 43 data centres in 20 markets across the United States.

Further information can be found at www.tierpoint.com

JZHL Secondary Fund Valuation As At 28 February 2021:

1The cost of the JZHL's investments represent the agreed transfer value from JZCP to JZHL.

Deflecto

Portfolio: US Micro-cap (Co-investments)

Sector: Consumer Products

Acquisition Date: July 2018

Website: www.deflecto.com

Deflecto is a diversified designer, distributor and manufacturer of consumer and commercial products operating across five industry segments. The company's customers include major retailers, wholesalers and OEMs including major big box and online retailers.

Deflecto is the world’s largest chair mat, bicycle reflector and dryer venting manufacturer and a global leader in sign and literature holders and office workspace accessories.

Added value is expected from the implementation of business processes to simplify operations and improve profitability. Increased revenues and lower costs are expected by focusing on largest customers and most popular products.

In 2018, Deflecto completed the acquisition of Evriholder Products which is currently run as a standalone operating company. Evriholder has expertise in managing retail relationships, new product introductions and has an international supply chain.

Salter Labs (incorporating SunMed)

Portfolio: US Micro-cap (Co-investments)

Sector: Respiratory medical products

Acquisition Date: October 2010

Website: salterlabs.com, sun-med.com

Salter Labs (incorporating SunMed) is a manufacturer and distributor of high quality medical devices for use in hospitals and healthcare facilities worldwide. SunMed's products includes airway management, anaesthesia, respiratory, resuscitation/ ventilation, diagnostics, oxygen delivery and surgical care products. In addition to the SunMed brand, Ventlab and Ethox Medical branded products are part of the product range.

The company's headquarters in West Michigan, include a warehouse and distribution center, production space, cleanroom, and administrative offices for over 140 staff. Its overseas facility is their manufacturing hub featuring even greater capacity. The company is rapidly growing with new, innovative products that promote better patient care, and serves the healthcare industry in over 40 countries.

Business Update

During a successful 2020 for Salter Labs, total value of sales increased by approx. 47% from 2019 and adjusted EBITDA by approx. 36%.

EUROPEAN MICRO-CAP

JZCP currently invests in the European micro-cap sector through its 18.75% stake in JZI Fund III, which completed its final fund raising in December 2015. Previously, JZCP's investments were made through EuroMicrocap Fund 2010, L.P. The European investment team has worked together for over ten years and has a proprietary network of intermediaries to deliver micro-cap buy-and-build opportunities throughout the continent.

As at 28 February 2021, JZI Fund III was invested in 13 European micro-cap companies. The portfolio has five investments in Spain, two in Scandinavia, UK and Italy and one each in PortugaI and Luxembourg.

Summary of JZCP's investments in JZI Fund III's Investment Portfolio at 28 February 2021

1JZCP's 18.75% share of Fund III gross investment valuation.

Fund III realisation - Eliantus Energy

During Q3 2020, Fund III realised its portfolio company, Eliantus, to Sonnedix, a leading independent Solar Power Producer. The management team managed to acquire enough small individually owned solar power producing plants to create a portfolio of 22 ground mounted solar plants with a combined 74.7 Megawatts.

The Company received realisation proceeds of €8.0 million, which represents a gross multiple on invested capital of approximately 2.0x.

European Micro-Cap Debt Investments

The Company has invested in the debt of European micro-cap companies. The total valuation of these investments at 28 February 2021 are $33.8 million.

REAL ESTATE

JZCP invests in properties through JZCP Realty Fund, a wholly owned subsidiary. At the year-end, JZCP owns two properties with equity value, being:

Bedford Ave, Williamsburg

JZ Realty's first acquisition. A prime retail asset in northern Brooklyn. In 2016, Apple opened its first Brooklyn store occupying the prime corner retail unit.

Esperante, West Palm Beach Florida

Esperante Corporate Center is an iconic building on the downtown West Palm Beach skyline. The building is approximately 85% leased and the intention is to market this property in the near/medium future.

At 28 February 2021, JZCP's real estate portfolio was valued at $23.4 million (29 February 2020: $158.7 million).

1Cost represents JZCP Realty's initial investment plus follow-on property additions and development costs.

2Year-end valuations are based on property appraisals dated 31 August 2020, rather than the usual 31 December date. The Board, commissioned updated appraisals in order to take into account the effect of COVID-19 whilst releasing the interim results. Subsequent discussions with appraisers indicate there would be no significant change in property values between 31 August 2020 and 28 February 2021.

3Third party debt is deducted to arrive at the fair value of JZCP's equity interests.

Investment Portfolio

1 Original book cost incurred by JZCP adjusted for subsequent transactions. Other than JZHL Secondary Fund (see foot note 2), the book cost represents cash outflows and excludes PIK investments.

2 Notional cost of the Company's interest in JZHL Secondary Fund being $40.965 million which is calculated in accordance with IFRS, and represents the fair value of the Company's LP interest on recognition.

3 Co-investment with Fund A, a Related Party (Note 23).

4 JZCP 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.

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 June 2018. In 2003 she completed a private equity backed MBO of the trust and fund administration division of Deloitte and Touche, called Walbrook, selling it to Barclays Wealth in 2007. As a Managing Director of Barclays, she ultimately became global head of their trust and fund administration businesses, comprising over 450 staff in 10 countries. She stepped down from her executive roles in 2011 to focus on other areas and interests but has maintained directorships in several companies. She is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Society of Trust and Estate Practitioners, and is a resident of Guernsey.

Ashley Paxton

Mr Paxton was appointed to the board in August 2020. Ashley has more than 25 years of funds and financial services industry experience, with a demonstrable track record in advising closed-ended London listed boards and their audit committees on IPOs, capital market transactions, audit and other corporate governance matters. Ashley was previously C.I. Head of Advisory for KPMG in the Channel Islands, a position he held from 2008 through to his retirement from the firm in 2019. Ashley is a Fellow of the Institute of Chartered Accountants in England and Wales and a resident of Guernsey. Amongst other appointments he is Chairman of the Youth Commission for Guernsey & Alderney, a locally based charity whose vision is that all children and young people in the Guernsey Bailiwick are ambitious to reach their full potential.

Tanja Tibaldi

Ms Tibaldi resigned from the Board on 12 August 2020.

1Chairman of the nominations committee of which all Directors are members.

2Chairman of the audit committee of which all Directors are members.

Report of the Directors

The Directors present their annual report together with the audited financial statements of JZ Capital Partners ("JZCP" or the "Company") for the year ended 28 February 2021.

Principal Activities

JZ Capital Partners Limited is a closed-ended investment company with limited liability which was incorporated in Guernsey on 14 April 2008 under the Companies (Guernsey) Law, 1994. The Company is subject to the Companies (Guernsey) Law, 2008. The Company's Capital consists of Ordinary shares, Zero Dividend Preference ("ZDP") shares and Convertible Unsecured Loan Stock ("CULS"). The Company's Ordinary shares, ZDP Shares and CULS are traded on the London Stock Exchange's Specialist Fund Segment.

The Company’s Investment Policy has been to target predominantly private investments, seeking to back exceptional management teams to deliver on attractive investment propositions. In executing its strategy, the Company takes a long term view.

The Company focused on investing in the following areas, and is now focused on supporting these investments:

(a) small or micro-cap buyouts in the form of debt and equity and preferred stock in both the US and Europe; and

(b) US real estate interests.

The Company's shareholders agreed changes to the Company’s investment policy on 12 August 2020. In line with the new investment policy, the Company will make no further investments except in respect of which it has existing obligations or to the extent that investment is required to support existing investments. The intention is to realise the maximum value of its investments and, after repayment of all debt, to return capital to shareholders.

Business Review

The total comprehensive loss attributable to Ordinary shareholders for the year ended 28 February 2021 was $146,175,000 (year ended 29 February 2020: loss of $304,549,000). The net asset value ("NAV") of the Company at the year end was $329,559,000 (29 February 2020: $475,734,000) equal to $4.25 (29 February 2020: $6.14) per Ordinary share. The losses recorded for the years ended 28 February 2021 and 29 February 2020 are predominantly attributable to valuation write downs in the Company's real estate portfolio.

A review of the Company's activities and performance is detailed in the Chairman's Statement and the Investment Adviser's Report. The valuations of the unlisted investments are detailed in Investment Portfolio.

Principal Risks and Uncertainties

The Company's Board believes the principal risks and uncertainties that relate to an investment in JZCP are as follows:

Portfolio Liquidity

The Company invests predominantly in unquoted companies and real estate. Therefore, this potential illiquidity means there can be no assurance investments will be realised at their latest valuation. The Board considers this illiquidity when planning to meet its future obligations, whether committed investments or the repayment of the debt facility or the future repayment of CULS and ZDP shares. On a quarterly basis, the Board reviews a working capital model produced by the Investment Adviser which highlights the Company's projected liquidity and financial commitments.

COVID-19

Whilst reporting its annual results for the year ended 29 February 2020 the Board disclosed in its Going Concern Assessment that the market conditions generated by COVID-19 had resulted in uncertainties that, at that juncture cast significant doubt on the Company’s ability to continue as a going concern and that they were unable to estimate the full extent and duration of the impact on the Company.

The Board are now able to better assess how COVID-19 has impacted the Company’s investment portfolio and to assess the risks and uncertainties that the pandemic still poses. The Board are pleased that the Company’s micro-cap portfolios have generally continued to perform well throughout the year. This encouraging performance in the face of unprecedented circumstances gives the Board confidence in the valuation of the portfolios and the potential for growth and future valuation uplifts. The Real Estate portfolio has seen further significant write downs in value in the year which can be attributed in the main to the challenges retail real estate has faced resulting from the pandemic.

The Board has confidence that the micro-cap portfolios will continue to perform robustly but are mindful that prevailing market conditions may delay the timeframe for realisations.

NAV Factors

(i) Macroeconomic Risks

The Company's performance, and underlying NAV, is influenced by economic factors that affect the demand for products or services supplied by investee companies and the valuation of Real Estate interests held. Economic factors will also influence the Company's ability to invest and realise investments and the level of realised returns. Approximately 25% (29 February 2020: 15%) of the Company's investments are denominated in non-US dollar currencies, primarily the euro. Also, the Company has issued debt denominated in sterling. Fluctuations to these exchange rates will affect the NAV of the Company.

(ii) Underlying Investment Performance

The Company is reliant on the Investment Adviser to support the Company's investment portfolio by executing suitable investment opportunities. The Investment Adviser provides to the Board an explanation of all investment decisions and also quarterly investment reports and valuation proposals of investee companies. The Board reviews investment performance quarterly and investment decisions are checked to ensure they are consistent with the agreed investment strategy.

Share Price Trading at Discount to NAV

JZCP's share price is subject to market sentiment and will also reflect any periods of illiquidity when it may be difficult for shareholders to realise shares without having a negative impact on share price. The Directors review the share price in relation to Net Asset Value on a regular basis and determine whether to take any action to manage the discount. The Directors, with the support of the Investment Adviser, work with brokers to maintain interest in the Company’s shares through market contact and research reports.

Gearing and Financing Costs in the Real Estate Portfolio

The cost of servicing debt in the underlying real estate structures may impact the net valuation of the real estate portfolio and subsequently the Company's NAV. Gearing in the underlying real estate structures will increase any losses arising from a downturn in property valuations.

Operational and Personnel

Although the Company has no direct employees, the Company considers what dependence there is on key individuals within the Investment Adviser and service providers that are key to the Company meeting its operational and control requirements.

The Board considers the principal risks and uncertainties above are broadly consistent with those reported at the prior year end, but wish to note the following:

· The Board recognises the Company will have an increased exposure to liquidity risk as future debt obligations near maturity;

· Gearing and the finance costs within the real estate portfolio have become less of a future risk to the Company as the current valuation of $23.4 million (29 February 2020: $158.7 million) now reflects the majority of write downs that could be generated by the gearing structure and costs incurred; and

· The effect of COVID-19 on market conditions means that there are challenges to completing corporate transactions and planned realisations may be delayed. However, the impact of COVID-19 on the valuation of the Company's investment portfolio valuation and the related loan covenants is considered less of a future risk than at this juncture at the prior year end.

Going Concern

A fundamental principle of the preparation of financial statements in accordance with IFRS is the judgement that an entity will continue in existence as a going concern for a period of at least 12 months from signing of the financial statements, which contemplates continuity of operations and the realisation of assets and settlement of liabilities occurring in the ordinary course of business.

Due to the uncertainty that the Company will not have sufficient liquidity to repay its outstanding debt on maturity, including the redemption of its ZDP shares (due 1 October 2022), nor be able to restructure/extend the debt for redemption beyond the going concern period, there is a material uncertainty which casts significant doubt on the ability of the Company to continue as a going concern. However, the Financial Statements for the year ended 28 February 2021 have been prepared on a going concern basis given the Board's assessment set out below and as the Board, with recommendation from the Audit Committee, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

In reaching its conclusion, the Board have considered the risks that could impact the Company’s liquidity over the period to 1 October 2022. This period, which is longer than the required period of 12 months, has been considered to be relevant due to the repayment date for the Company’s ZDP shares being approximately 4 months after the 12-month period.

As part of their assessment the Audit Committee highlighted the following key consideration:

Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

Update on material liabilities due for settlement and post year-end restructure

The Company's material debt obligations and cash and cash equivalents at the year end, prior year end and a forecasted position post the proposed debt restructure (detailed below) are as follows:

1Forecast cash position assumes no material realisation proceeds received prior to the CULS redemption.

2Forecast ZDP maturity Dollar amount translated using the 28.2.2021 year end rate being £1/$1.3981.

During the year ended 28 February 2021, the Company had realisations of investments totalling $139.5 million, this included $87.7 million from the successfully concluded Secondary Sale of interests in certain US microcap portfolio companies. Following these investment realisations, the Company has repaid a total of $82.9 million of the senior debt’s outstanding principal amount.

On 23 October 2020, the Company announced that it had agreed with its senior lenders, Guggenheim Partners (the "Original lenders") amended terms of the senior debt facility. Under the terms of those amendments to the senior debt facility, $40 million of the outstanding principal amount was assigned from the original lenders to clients and funds advised by Cohanzick Management, LLC and CrossingBridge Advisors, LLC (the “Replacement lenders”). As part of this transaction, and at an increased interest cost, the Company secured more advantageous covenant terms for itself, including the minimum asset coverage covenant being reset (from not less than 4x to a lower requirement of 3.5x) and a relaxation of rating requirements, removal of certain concentration limits, updates to the use of proceeds requirements pertaining to asset sales to preserve liquidity, and reduced requirements related to its real estate collateral and reporting on investments. On 23 February 2021, the Company then announced that the replacement lenders had acquired the remaining interest in the Company’s senior debt facility from the Original Lenders.

Post year end, the Company entered into an amendment agreement with its replacement lenders to amend the terms of its senior debt facility which will, among other things, extend (subject to certain conditions including shareholder approval of the Loan Note proposal referred to below) the maturity date of the senior debt facility by one year until 12 June 2022 and permit JZCP to repay its CULS when they become due on their maturity date of 30 July 2021, notwithstanding that the CULS are subordinated to the senior debt facility.

Post year end, the Company also entered into a note purchase agreement with David W. Zalaznick and John (Jay) Jordan II, the founders and principals of the Company's investment adviser, Jordan/Zalaznick Advisers, Inc. ("JZAI"), pursuant to which they have agreed to purchase directly or through their affiliates, subordinated, second lien loan notes totalling $31.5 million, with an interest rate of 6 per cent. per annum and maturing on 11 September 2022 (the “Loan Notes”).

Their purchase of the Loan Notes is subject to a number of conditions, including shareholder approval of both the Loan Note proposal and a proposal for Jay Jordan and David Zalaznick or their affiliates to assume the Company’s remaining commitment to the Orangewood Fund, with the latter also being a requirement of the amendments to the senior debt facility.

The Board acknowledges that the new maturity date of the senior debt facility and the Loan Notes still fall within the going concern period and therefore the Company will still need to generate sufficient realisation proceeds, within the period, to repay its debt obligations or make alternative debt arrangements with lenders post 1 October 2022.

Considering the Company’s projected cash position, ongoing operating costs and the anticipated further investment required to support the Company’s portfolio the Board anticipate further proceeds of approx. $185 million are required from the realisation of investments to enable the Company to settle its debts as they fall due.

It is anticipated that the liquidity required to settle the debt obligations mentioned above, and other ongoing obligations in 2022, will be generated from realisations within the 16 month going concern period. The Company's investment adviser, JZAI, is currently pursuing various opportunities to realise value, these forecast realisations include several anticipated sales of micro-cap companies. Total realisation proceeds of approximately $275 million are forecast, over the going concern period, from the aforementioned events.

The Board continue to consider the levels of realisation proceeds historically generated by the Company’s micro-cap portfolios as well as the accuracy of previous forecasts whilst concluding on the predicted accuracy of forecasts presented.

The Board recognise, under current market conditions, the raising of the required total realisation amount is a considerable task but remains confident in the value of its underlying micro-cap investments and are buoyed by their post COVID-19 performance.

The restructuring of the Company's debt structure, following satisfaction of closing conditions, will enable the Company to realise investments in a timeframe that will help maximise the portfolio's value. In the instance that sufficient realisations proceeds are not raised, in the going concern period, to meet the Company's debt liabilities, the Board are confident the Company can work to ensure alternative financing plans are in place.

Going Concern Conclusion

After careful consideration and based on the reasons outlined above, the Board are satisfied, as at the date of the signing of the Annual Report and Financial Statements, that it is appropriate to adopt the going concern basis in preparing the financial statements and they have a reasonable expectation that the Company will continue in existence as a going concern for the period ending 1 October 2022.

However, the Board have concluded that the following consideration creates a material uncertainty which casts significant doubt over the ability of the Company to continue as a Going Concern, being:

· Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

The Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

Viability Statement

In accordance with the UK Corporate Governance Code (the "UK Code"), the Board has assessed the expectations that the Company will be able to continue in operation and meet ongoing debt obligations. In order to make the assessment, the Board has carried out a robust review of the Company's principal risks and uncertainties, as noted above, to which the Company is exposed and that potentially threaten future performance and liquidity and has assessed the Company's current position and prospects as detailed in the Chairman's Statement and Investment Adviser's Report. The period covered by the viability statement is the next three financial years to 29 February 2024.

As set out in the going concern statement, the viability of the Company is dependent entirely on actions that are being and will be taken over the course of the going concern period ended 1 October 2022. However, there is a material uncertainty which casts significant doubt over the ability of the Company to continue as a going concern and its longer-term viability, being:

· Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

The Directors have continued to use the period of three years to assess viability that has been used historically. This period is considered appropriate as the actions will be directed at achieving liquidity from sales of investments at a level that will reasonably ensure the longer-term viability of the operations of the Company. The Board will continue to review the period of assessment on an annual basis and may in future adjust if considered appropriate.

In reaching its conclusion on the Company’s viability, the Directors have considered the following:

(i) Recent Events

Reduction in Company's Net Asset Value

During the February 2021 fiscal year, the Company suffered valuation losses with its NAV being decreased by approx. 31% (2020: 41%) over the year. This reduction during the last two fiscal years has weakened the Company’s balance sheet and the Board have subsequently had to consider the impact on the liquidity of the Company.

The NAV reduction noted above, was predominantly due to losses in the Company's real estate portfolio. The Board have confidence in the valuation of the Company's micro-cap portfolios, which is backed up by historic realisations and current performance.

In order to stabilise the Company's balance sheet, the Board are focused on repaying debt. Investment is being curtailed to commitments and what is necessary to maximise the value of the existing portfolio. No repayment of capital will be made to shareholders until debt obligations have been met.

COVID-19

The Board and Investment Adviser are continuing to monitor the impact and consequences of the virus on the Company and its investments. The Board are pleased that the Company’s micro-cap portfolios have generally continued to perform well throughout the year. This encouraging performance in the face of unprecedented circumstances gives the Board confidence in the valuation of the portfolios and the potential for growth and future valuation uplifts. The Board has confidence that the micro-cap portfolios will continue to perform robustly but are mindful that current market conditions may delay the timeframe for realisations.

(ii) Financing obligations

Senior Debt Facility

The current debt facility has a maturity date of June 2021, the balance outstanding at 28 February 2021 was approximately

$69 million. As noted in the ‘Going Concern’ section of the Report of the Directors, lenders have agreed, subject to shareholder approval of the Loan Note proposal (below), to amend the terms of its senior debt facility which will, among other things, extend the maturity date of the senior debt facility by one year until 12 June 2022. It is expected the extended debt facility will be repaid from the proceeds of realisations and/or refinancing of investments.

Convertible Unsecured Loan Stock - Maturity date 30 July 2021

The Company will redeem CULS in July 2021 amounting to £38.9 million (approx. $54 million at the year-end exchange rate). It is expected the redemption of the CULS will be met from existing cash held and liquidity provided by the proposed loan facility described below.

Loan Notes - Maturity date 11 September 2022

As noted in Subsequent Events (Note 31), the Company entered into a note purchase agreement with David W. Zalaznick and John (Jay) Jordan II, the founders and principals of the Company's investment adviser, Jordan/Zalaznick Advisers, Inc., pursuant to which they have agreed to purchase directly or through their affiliates, Loan Notes in the amount of $31.5 million, with an interest rate of 6 per cent. per annum and maturing on 11 September 2022 (the “Loan Notes”). It is expected the Loan Notes will be repaid from the proceeds of realisations and/or refinancing of investments.

Zero Dividend Preference (2022) shares - Maturity date 1 October 2022

JZCP is due to redeem £57.6 million (est. $80.5 million at year end exchange rate), of ZDP shares on 1 October 2022, again it is expected the redemption of the ZDPs will be met from the proceeds of realisations and/or refinancing of investments.

Commitments

At 28 February 2021, JZCP had financial commitments of $31.9 million outstanding in relation to fund investments.

(iii) Investment performance and portfolio liquidity

The Board reviews, on a quarterly basis, the valuation and prospects of all underlying investee companies. The performance of JZCP's real estate portfolio has limited the potential to realise liquidity from this portfolio and therefore increased the risk to both liquidity and therefore viability. However, the Board are satisfied in large with the performance of the JZCP's micro- cap portfolios and believe there will be suitable realisation opportunities and proceeds in order for the Company to meet its debt and other obligations. JZCP's micro-cap portfolio has averaged annual realisations of $124 million over the five years ending 28 February 2021. JZAI is currently pursuing various opportunities to realise value, whilst COVID-19 has not provided ideal market conditions and has delayed both the investment and realisation activity, the Board have concluded that they have a reasonable expectation that forecast realisations will be completed.

(iv) Loan covenants

At 28 February 2021, investments and cash valued at $504.9 million were held as collateral on the senior debt facility. A covenant on the loan states the fair value of the collateral must be 3.5x the loan value (which equates to approximately $240 million at the year end) and the Company is also required to hold a minimum cash balance of $15 million. The Board are confident the loan covenants will not be breached.

(v) Mitigation of other risks as outlined in the Principal Risks and Uncertainties above.

Conclusion

In concluding on the viability of the Company, the Directors have concluded that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period ended 29 February 2024, being the period of the assessment. They consider the going concern assumptions, material uncertainties and conclusion set out above to be relevant.

Dividends

No dividends were paid or proposed for the years ended 28 February 2021 and 29 February 2020.

Ongoing Charges

Ongoing charges for the years ended 28 February 2021 and 29 February 2020 have been prepared consistently with the methodology used in the previous year. The ongoing charges ratio represents annualised recurring operational expenses as a percentage of the average net asset value. The Ongoing charges for the year ended 28 February 2021 were 3.52% (29 February 2020: 2.71%).

Directors

The Directors listed below, who served on the Board during the year are all deemed independent and non-executive, other than Tanja Tibaldi they were in office at the end of the year and subsequent to the date of this report. The biographical details of the Directors are shown in Board of Directors.

David Macfarlane (Chairman)

James Jordan

Sharon Parr

Ashley Paxton (appointed 12 August 2020)

Tanja Tibaldi (resigned 12 August 2020)

Substantial Shareholders

As at 18 May 2021, the Company has been notified in accordance with the Disclosure Guidance and Transparency Rules of the following interests of 5% or more of the total Ordinary share capital of the Company. The number and percentage of Ordinary shares relate to the number informed by shareholders on the relevant notification rather than the current share register. The number and percentage of Ordinary shares set out below for each substantial shareholder will therefore not take account of any Ordinary shares bought or sold by them or the effect of any share buy backs undertaken by the Company on their shareholdings, in each case, not so notified as required by, or in accordance with, the Disclosure Guidance and Transparency Rules.

For the avoidance of doubt, the number and percentage of Ordinary shares set out below should not therefore be used for the purposes determining if the Company is or is to become a controlled foreign corporation within the meaning of The United States Internal Revenue Code of 1986, as amended (further information on the Company's controlled foreign corporation status can be found in US Tax Matters under the section Useful Information for Shareholders). Shareholders and prospective shareholders must consult their own tax advisers concerning US tax laws.

The percentage of Ordinary shares shown above represents the ownership of voting rights at the year end, before weighting for votes on Directors.

It is the responsibility of the shareholders to notify the Company of any change to their shareholdings when it reaches 5% of shares in issue and any subsequent change when the shareholding increases or decreases by a further 5% (up to 30% of shares in issue i.e. 10%, 15%, 20%, 25% and 30%) and thereafter 50% and 75%.

Share Capital, Purchase of Own Shares and Convertible Unsecured Loan Stock "CULS"

The beneficial interests of the Directors in the Ordinary shares of the Company are shown below:

1Tanja Tibaldi held 2,720 shares at 1 March 2020 and on her retirement from the board at 12 August 2020.

The beneficial interests of the Directors in the CULS of the Company are shown at 28 February 2021 (no change from 29 February 2020 position):

1Tanja Tibaldi held 367 CULS at 1 March 2020 and on her retirement from the board at 12 August 2020.

None of the Directors held any interest in the Zero Dividend Preference shares during the year. There have been no changes in the Directors' interests of any share class between 28 February 2021 and the date of this report.

Details of the ZDP shares and the Ordinary shares can be found in Notes 14 and 18. Details of the CULS can be found in Note 15.

Annual General Meeting

The Company's Annual General Meeting is due to be held on 6 July 2021.

Engaging with Stakeholders

In line with best practice the Board is required to ensure effective engagement with, and participation from, its shareholders and stakeholders. The Board should also understand the views of the Company’s key stakeholders and describe in the annual report how their interests and the matters set out in Section 172 of the Companies Act 2006 have been considered in board discussions and decision-making.

The Board identifies its key stakeholders as the following:

· Shareholders and prospective investors

· JZAI, the Investment Adviser of its portfolio investments and other service providers The Company has no employees

Engaging with Shareholders

The Directors believe that the maintenance of good relations with both institutional and retail shareholders is important for the prospects of the Company. It therefore seeks active engagement with investors, bearing in mind the duties regarding equal treatment of shareholders and the dissemination of inside information. The Board receives feedback on shareholder views from its Corporate Broker and Investment Adviser, and is circulated with Broker reports on the Company.

The Board believes that the Annual General Meeting, a meeting for all shareholders, is the key point in the year when the Board of Directors accounts to all shareholders for the performance of the Company. In usual circumstances the Directors encourage all shareholders to attend where Directors will be present and available to engage with shareholders. In light of COVID-19, shareholders should refer to the Notice of AGM for guidance on physical attendance at this year's meeting.

The Board believes that the Company policy of reporting to shareholders as soon as possible after the Company's year end and the holding of the Annual General Meeting at the earliest opportunity is valuable.

The Company, provides an Interim Report and Accounts in accordance with IAS 34 and will aim to issue monthly NAV announcements within 21 day of the month end, these announcements will be posted on JZCP's website at the same time, or soon thereafter.

Engaging with Service Providers

In usual 'non-COVID-19' circumstances, the Board visits the Investment Adviser at least annually for a comprehensive review of the portfolio, its valuation methodology and general strategy. The Board are also in regular communication with the Investment Adviser to discuss the Company’s strategy as well as being kept up to date with portfolio matters.

A Management Engagement Committee, was established in 2018, to review the performance and contractual arrangements of the Company’s service providers. The Board look to engage with service providers and encourage communication of any concerns of matters arising and deal with them appropriately.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable laws and regulations. Guernsey Company Law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss for that year.

In preparing Financial Statements the Directors are required to:

· select suitable accounting policies and apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements;

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

· confirm that there is no relevant audit information of which the Company’s Auditor is unaware; and

· confirm that they have taken all reasonable steps which they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements have been properly prepared in accordance with the Companies (Guernsey) Law, 2008 and International Financial Reporting Standards as adopted by the European Union (“IFRS”). They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with these requirements in preparing the Financial Statements.

Responsibility Statement of the Directors in respect of the Financial Statements

The Directors confirm that to the best of their knowledge:

· the Financial Statements have been prepared in accordance with IFRS and give a true and fair view of the assets, liabilities and financial position, and profit or loss of the Company;

· the Annual Report includes a fair review of the development and performance of the business and position of the Company together with the description of the principal risks and uncertainties that the Company faces, as required by the Disclosure Guidance and Transparency Rules of the UK Listing Authority; and

· the Directors confirm that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance and strategy.

Directors’ Statement

So far as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Approved by the Board of Directors and signed on behalf of the Board on 18 May 2021.

David Macfarlane

Chairman

Sharon Parr

Director

Corporate Governance

Introduction

As a Guernsey incorporated company with a UK listing, JZCP’s governance policies and procedures are based on the principles of the UK Corporate Governance Code (the "UK Code") as required under the Disclosure Guidance and Transparency Rules. The UK Code is available on the Financial Reporting Council’s website, www.frc.org.uk. The Company is subject to the GFSC Code, which applies to all companies registered as collective investment schemes in Guernsey. The GFSC has also confirmed that companies that report against the UK Code are deemed to meet the GFSC Code. In prior years the Company reported against the AIC Code of Corporate Governance (the "AIC Code"), which addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies. The Company is no longer a member of the AIC.

Throughout the accounting period the Company has complied with the recommendations of the UK Code and thus the relevant provisions of the UK Corporate Governance Code, except as set out below.

- the tenure of the Chairman (see Corporate Governance).

- the Chairman serving as a member of the Audit Committee.

The Board considers the following UK Code provisions are not relevant to the position of JZ Capital Partners Limited, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions.

- the role of the chief executive;

- executive directors remuneration; and

- appointment of a senior independent director.

There have been no other instances of non-compliance, other than those noted above.

Guernsey Code of Corporate Governance

The Guernsey Financial Services Commission’s (the "GFSC") “Finance Sector Code of Corporate Governance” (the "Guernsey Code") came into effect on 1 January 2012 and was subsequently amended on 18 February 2016. The introduction to the Guernsey Code states that companies which report against the UK Corporate Governance Code or the AIC’s Code of Corporate Governance are deemed to meet the Guernsey Code.

The Board

Corporate Governance of JZCP is monitored by the Board which at the end of the year comprised four Directors, all of whom are non-executive. Biographical details of the Board members at the date of signing these Financial Statements are shown in Board of Directors and their interests in the shares of JZCP are shown in the Report of the Directors. The Directors' biographies highlight their wide range of relevant financial and sector experience.

Directors' Independence

The Board continually considers the independence of the Directors, including in light of the circumstances which are set out in the UK Code as likely to impair a director's independence.

There are no circumstances that exist, including those under the UK Code, which the Board considers likely to impair the independence of any of the Directors.

Two Board members (David Macfarlane and James Jordan) have, however, served on the Board for a period of longer than nine years which is one of those circumstances set out in the UK Code. The conclusion the Board has reached is that despite having served on the Board for more than nine years, this has not impacted the independence of such Directors. However, the Board will continue to assess on an annual basis how length of service could impair judgement and decision making both on the basis of an individual Director and the Board as a whole.

Previously, each Director having served longer than nine years was subject to annual re-election and each Director having served less than nine years was subject to re-election at the third annual general meeting after appointment or (as the case may be) the general meeting at which he or she was last appointed. In line with best practice, all Directors are now subject to annual re-election.

Further details on the Board’s processes and criteria for the appointment of directors can be found under the section of this Annual Report detailing the work of the Nomination Committee (see Board Committees below).

Succession Planning

The Board acknowledges that the Board and its Committees should have a combination of skills, experience and knowledge and that membership should be regularly refreshed. The Board annually evaluates its composition, diversity and how effectively each member contributes and how they work together to achieve objectives. Further details on the evaluation of the Board and its Committees can be found below in this section of the Annual Report.

During the fiscal year, Tanja Tibaldi resigned from the Board and Ashley Paxton was recruited.

Chairman Tenure

The UK Code, states the Chairman should not remain in post beyond nine years from the date of their first appointment to the Board. However, to facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time.

The Board’s policy on the Chairman’s tenure is that continuity and experience are considered to add significantly to the strength of the Board and as such these attributes need to be weighed against any advantages that a new appointment may bring. Therefore, no limit on the overall length of service of the Chairman is imposed.

The Chairman has served on the Board since the Company’s inception (April 2008) and the Board therefore acknowledges that succession to the role needs to be anticipated in line with effective succession planning. In the 2019 Annual Report, it was noted a substantial refreshment of the board was planned to take place in 2021, including the appointment of a new Chairman. In the light of the events of the last two fiscal years the Chairman will continue to oversee of the stabilisation of the Company and will therefore continue to seek re-election to the Board annually.

Proceedings of the Board

The Directors have overall responsibility for the Company's activities and the determination of its investment policy and strategy. The Company has entered into an investment advisory and management agreement with its Investment Adviser, JZAI, pursuant to which, subject to the overall supervision of the Directors, the Investment Adviser acts as the investment manager to the Company and manages the investment and reinvestment of the assets of the Company in pursuit of the investment objective of the Company and in accordance with the investment policies and investment guidelines from time to time of the Company and any investment limits and restrictions notified by the Directors (following consultation with the Investment Adviser). Within its strategic responsibilities, the Board regularly considers corporate strategy as well as dividend policy, the policy on share buy backs and corporate governance issues.

The Directors meet at least quarterly to direct and supervise the Company’s affairs. This includes reviewing the investment strategy, risk profile, gearing strategy and performance of the Company and the performance of the Company’s functionaries, and monitoring compliance with the Company's objectives.

In usual circumstances, the Directors visit the Investment Adviser at least annually for a comprehensive review of the portfolio, its valuation methodology and general strategy. The Directors deem it appropriate to review the valuations of the investment portfolio on a quarterly basis. The schedule of Board and Committee meetings is shown below.

Continuing terms of Investment Adviser agreement

In the opinion of the Directors, the continuing appointment of the Investment Adviser on the terms agreed continues to be in the interests of Shareholders. In reaching its conclusion the Board considers the Investment Adviser's performance, expertise and ability in effectively assisting the management of portfolio companies.

Supply of information

The Chairman ensures that all Directors are properly briefed on issues arising at, and when necessary in advance of, Board meetings. The Company's advisers provide the Board with appropriate and timely information in order that the Board may reach proper decisions. Directors can, if necessary, obtain independent professional advice at the Company's expense.

Directors' training

The Board is provided with information concerning changes to the regulatory or statutory regimes as they may affect the Company, and are offered the opportunity to attend courses or seminars on such changes, or other relevant matters. An induction programme is available for any new Director appointments. The induction programme offers training about the Company, its managers, their legal responsibilities and investment company industry matters.

Chairman and Senior Independent Director

The Chairman is a non-executive Director, together with the rest of the Board. There is no executive Director position within the Company. Day-to-day management of the Company's affairs has been delegated to third party service providers. Currently there is no appointment of a Senior Independent Director.

Board diversity

The Board has also given careful consideration to the recommendations of the Davies Review and the findings of the Hampton-Alexander Review on the evolving gender diversity debate. The Board continues to review its composition in terms of diversity, appropriate range of skills and experience and the Board is committed to ensuring that diversity is considered when appointments to the Board are under consideration – as indeed has always been its practice.

The Board's evaluation

The Board, Audit Committee, and Nomination Committee undertake an evaluation of their own performance and that of individual Directors on an annual basis. In order to review their effectiveness, the Board and its Committees carry out a process of formal self-appraisal. The Board and Committees consider how they function as a whole and also review the individual performance of its members. This process is conducted by the Chairman reviewing each member’s performance, contribution and their commitment to the Company. The Board, as a whole, reviews the performance of the Chairman. Each Board member is also required to submit details of training they have undertaken on an annual basis. Currently, no third party evaluation of the Directors effectiveness is undertaken. The results of the evaluation process concluded the Board was functioning effectively and the Board and its committees provided a suitable mix of skills and experience.

Board Committees

In accordance with the UK Code, the Board has established an Audit Committee and a Nomination Committee, in each case with formally delegated duties and responsibilities within written terms of reference. The identity of each of the Chairmen of the committees referred to below is reviewed on an annual basis. The Board, consisting of all non-executive Directors, has decided that the entire Board should fulfil the role of the Audit and Nomination Committees. The terms of reference of the committees are kept under review and can be viewed on the Company's website www.jzcp.com.

Nomination Committee

In accordance with the Code, the Company has established a Nomination Committee. The Nomination Committee leads the process for all board appointments, oversees the development of and reports on, amongst other things, its approach to a diverse pipeline for succession.

The Nomination Committee takes into consideration the Code’s rules on independence of the Board in relation to the Company, its senior management and major shareholders. The Nomination Committee is chaired by David Macfarlane, and each of the other Directors is also a member. The members of the committee are independent of the Investment Adviser. The Nomination Committee has responsibility for considering the size, structure and composition of the Board, retirements and appointments of additional and replacement Directors and making appropriate recommendations to the Board.

Due to the nature of the Company being a listed investment company investing in private equity with an international shareholder base, the Company needs Directors with a broad range of financial experience. For this reason, Directors use external consultants as well as using their own contacts to identify suitable candidates.

The final decision with regard to appointments always rests with the Board and all such appointments are subject to confirmation by shareholders.

In August 2020, Ashley Paxton was appointed to the Board following a proposal by the Nomination Committee. Ashley was recommended as a suitable candidate, by an external consultant, due to his wealth of industry experience and his demonstrable track record in advising closed-ended London listed boards and their audit committees.

Audit Committee

The Audit Committee is chaired by Sharon Parr and all other Directors are members. Contrary to the recommendations of the UK Code, the Board consider it is appropriate for the Company's Chairman to serve as a member of the Audit Committee due his considered independence and the skills/experience contributed. The Board also notes the AIC Code, previously followed by the Company, permits a chairman to be a member of an audit committee if independent on appointment. Members of the Committee are independent of the Company’s external auditors and the Investment Adviser. All members have the necessary financial and sector experience to contribute effectively to the Committee. The Audit Committee meets at least twice a year and meets the external auditors at least twice a year. The Audit Committee is responsible for overseeing the Company’s relationship with the external auditors, including making recommendations to the Board on the appointment of the external auditors and their remuneration. The Committee also considers the nature, scope and results of the auditors’ work and reviews, and develops and implements policies on the supply of any non-audit services that are to be provided by the external auditors.

Post year end, the Audit Committee has re-considered whether the Company is able to continue as a going concern for the period ending 1 October 2022 and whether it considers it appropriate to adopt the going concern basis of accounting in preparing them, and identify any material uncertainties to the company’s ability to continue to do so. Also, the Audit Committee, has considered the Company’s current position and principal risks, and assessed the prospects of the Company, over the viability period of three years to 29 February 2024.

The activities and responsibilities of the Audit Committee are further described in the Audit Committee Report and the recommendations to the Board made by the Audit Committee, regarding the going concern and viability of the Company are detailed in the Report of the Directors.

Management Engagement Committee

The Management Engagement Committee is chaired by David Macfarlane and comprises the entire Board. Responsibilities include reviewing the performance and contractual arrangements of the Company’s service providers.

Remuneration Committee

In view of its non-executive and independent nature, the Board considers that it is not appropriate for there to be a separate Remuneration Committee as prescribed by the UK Code. The process for agreeing the non-executive Directors' fees is set out in the Directors' Remuneration Report.

Board and Committee meeting attendance

The number of formal meetings of the Board and its committees held during the fiscal year and the attendance of individual Directors at these meetings was as follows:

The main Board meetings are held to agree the Company's valuation of its investments, agree the Company's financial statements and discuss and agree other strategic issues. Other meetings are held when required to agree board decisions on ad-hoc issues.

UK Criminal Finances Act 2017

In respect of the UK Criminal Finances Act 2017 which has introduced a new Corporate Criminal Offence of 'failing to take reasonable steps to prevent the facilitation of tax evasion', the Board confirms that it is committed to zero tolerance towards the criminal facilitation of tax evasion.

The Board also keeps under review developments involving other social and environmental issues, such as Modern Slavery and General Data Protection Regulation, and will report on those to the extent they are considered relevant to the Company's operations.

Internal Controls

The Board is ultimately responsible for establishing and maintaining the Company’s system of internal financial and operating control and for maintaining and reviewing its effectiveness on an annual basis. The Company's risk matrix continues to be the core element of the Company's risk management process in establishing the Company's system of internal financial and reporting control. The risk matrix is prepared and maintained by the Board which initially identifies the risks facing the Company and then collectively assesses the likelihood of each risk, the impact of those risks and the strength of the controls operating over each risk. The system of internal financial and operating control is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.

These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable. The Board confirms that there is an ongoing process for identifying, evaluating and managing the principal risks faced by the Company.

This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements and is reviewed by the Board and is in accordance with the Internal controls: Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

The Board has evaluated the systems of internal controls of the Company. In particular, it has prepared a process for identifying and evaluating the principal risks affecting the Company and the policies by which these risks are managed.

The Board has delegated the day to day responsibilities for the management of the Company’s investment portfolio, the provision of depositary services and administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Report and Financial Statements which are independently audited.

Formal contractual agreements have been put in place between the Company and providers of these services.

Even though the Board has delegated responsibility, it retains accountability for these functions and is responsible for the systems of internal control. At each quarterly board meeting, compliance reports are provided by the Administrator, Company Secretary and Portfolio Manager. The Board also receives confirmation from the Administrator of its accreditation under its Service Organisation Controls 1 report.

The Company’s risk exposure and the effectiveness of its risk management and internal control systems are reviewed by the Audit Committee at its quarterly meetings and annually by the Board.

The Board believes that the Company has adequate and effective systems in place to identify, mitigate and manage the risks to which it is exposed.

Whistle Blowing Policy

The Directors are non-executive and the Company does not have employees, hence no whistle blowing policy is required. However, the Directors have satisfied themselves that the Company's service providers have appropriate whistle blowing policies and procedures and have received confirmation from the service providers that nothing has arisen under those policies and procedures which should be brought to the attention of the Board.

International Tax Reporting

For purposes of the US Foreign Account Tax Compliance Act (“FATCA”), the Company registered with the US Internal Revenue Services (“IRS”) as a Guernsey reporting Foreign Financial Institution (“FFI”), received a Global Intermediary Identification Number CAVBUD.999999.SL.831, and can be found on the IRS FFI list.

The Common Reporting Standard (“CRS”) is a global standard for the automatic exchange of financial account information developed by the Organisation for Economic Co-operation and Development (“OECD”), which has been adopted by Guernsey and which came into effect on 1 January 2016. The CRS replaced the intergovernmental agreement between the UK and Guernsey to improve international tax compliance that had previously applied.

The Board will take necessary actions to ensure that the Company is compliant with Guernsey regulations and guidance in this regard.

Directors’ Remuneration Report

The Company's policy in regard to Directors' remuneration is to ensure that the Company maintains a competitive fee structure in order to recruit, retain and motivate non-executive Directors of excellent quality in the overall interests of shareholders.

Remuneration Policy

The Directors do not consider it necessary for the Company to establish a separate Remuneration Committee. All of the matters recommended by the Code that would be delegated to such a committee are considered by the Board as a whole.

It is the responsibility of the Board as a whole to determine and approve the Directors' fees, following a recommendation from the Chairman who will have given the matter proper consideration, having regard to the level of fees payable to non-executive Directors in the industry generally, the role that individual Directors fulfil in respect of Board and Committee responsibilities and the time committed to the Company's affairs. The Chairman's remuneration is decided separately and is approved by the Board as a whole.

The Company's Articles state that Directors' remuneration payable in any accounting year shall not exceed in the aggregate an annual sum of US$650,000. Each Director is also entitled to reimbursement of their reasonable expenses. There are no commission or profit sharing arrangements between the Company and the Directors. Similarly, none of the Directors is entitled to pension, retirement or similar benefits. No element of the Directors' remuneration is performance related.

.

The remuneration policy set out above is the one applied for the year ended 28 February 2021 and is not expected to change in the foreseeable future.

Directors' and Officers' liability insurance cover is maintained by the Company on behalf of the Directors.

As from 1 March 2020, fees payable to the Chairman and Directors (excluding Ms Tibaldi) were reduced to $120,000 per annum and $50,000 per annum respectively. The Chairman of the Audit Committee will receive an additional amount of $20,000 per annum and in the year received a further fee of $25,000 for additional work relating to events in the prior year.

No Director has a service contract with the Company, nor are any such contracts proposed.

Directors' Term of Appointment

In line with the UK Code of Corporate Governance, all Directors seeking re-election to the Board will do so on an annual basis regardless of their tenure not yet exceeding nine years.

The Directors were appointed as non-executive Directors by letters issued in April 2008, June 2018 and August 2020 which state that their appointment and any subsequent termination or retirement shall be subject to three-months’ notice from either party in accordance with the Articles. Each Director’s appointment letter provides that, upon the termination of his/her appointment, that he/she must resign in writing and all records remain the property of the Company. The Directors’ appointments can be terminated in accordance with the Articles and without compensation. There is no notice period specified in the Articles for the removal of Directors. The Articles provide that the office of director shall be terminated by, among other things: (a) written resignation; (b) unauthorised absences from board meetings for six months or more; (c) unanimous written request of the other directors; and (d) an ordinary resolution of the Company.

Signed on behalf of the Board of Directors on 18 May 2021 by:

David Macfarlane

Chairman

Sharon Parr

Director

Audit Committee Report

Dear Shareholder,

We present the Audit Committee's Report, setting out the responsibilities of the Audit Committee and its key activities during the year ended 28 February 2021. The Audit Committee has reviewed the Company's financial reporting, the independence and effectiveness of the external auditor and the internal control and risk management systems of the Company's service providers. In order to assist the Audit Committee in discharging these responsibilities, regular reports are received and reviewed from the Investment Manager, Administrator and external auditor.

A member of the Audit Committee will continue to be available at each Annual General Meeting to respond to any shareholder questions on the activities of the Audit Committee.

Responsibilities

The terms of reference of the Audit Committee include the requirement to:

· monitor the integrity of the published Financial Statements of the Company;

· review and report to the Board on the significant issues and judgements made in the preparation of the Company's published Financial Statements, (having regard to matters communicated by the external Auditors) and other financial information;

· monitor and review the quality and effectiveness of the external Auditors and their independence;

· consider and make recommendations to the Board on the appointment, reappointment, replacement and remuneration of the Company's external Auditor;

· advise the Board that the annual report and accounts, taken as a whole, is fair, balanced and understandable;

· review and consider the Company's Principal risks and uncertainties;

· consider the long-term viability of the Company;

· review the Company's procedures for prevention, detection and reporting of fraud, bribery and corruption;

· monitor and review the internal control and risk management systems of the service providers; and

· consider and make representations to the Board regarding Directors' remuneration.

The Audit Committee's full terms of reference can be viewed on the Company's website www.jzcp.com

Key Activities of the Audit Committee

The following sections discuss the assessments made by the Audit Committee during the year:

Financial Reporting:

The Audit Committee's review of the Annual Financial Statements focused on the following significant areas:

· COVID-19

During the year, the Audit Committee received regular updates from the Investment Adviser of the impact of COVID-19 on the Company's investment portfolio. Information was provided on the following business aspects of portfolio companies/properties, to enable the Board to assess the ongoing risk to the Company and also any impact COVID-19 may have had on the reporting year ended 28 February 2021:

i) Demand for product/service;

ii) Supply Chain & operational issues;

iii) Flexibility and adaptability of workforce to perform duties;

iv) Financial Strength of Company – Liquidity Issues;

v) Support received from Government programmes; and

vi) Real estate markets.

The Audit Committee have also been regularly updated on scheduled realisations and liquidity projections in light of the COVID-19 lockdowns and delays in corporate transactions.

· Assessment of Going Concern and Viability

The Audit Committee has considered the ability of the Company to continue as a going concern over the period ending 1 October 2022. After careful consideration the Committee have recommended to the Board that it is satisfied that it is appropriate to adopt the going concern basis in preparing these Financial Statements and they have a reasonable expectation that the Company will continue in existence as a going concern for the period ending 1 October 2022. The reasons for reaching this judgement are detailed in the Report of the Directors. However, there is a material uncertainty which casts significant doubt over the ability of the Company to continue as a Going Concern, being:

Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

For the viability assessment, the Audit Committee has assessed the expectations that the Company will be able to continue in operation and meet ongoing debt obligations over the period ending 29 February 2024. In making its recommendation to the Board the Committee has carried out a robust review of the Company's principal risks and uncertainties to which the Company is exposed and that potentially threaten future performance and liquidity and has assessed the Company's current position and prospects as detailed in the Chairman's Statement and Investment Adviser's Report.

The key factors considered by the Committee are detailed in the Report of the Directors.

The Committee have concluded that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of the assessment. They consider the going concern assumptions, material uncertainty and conclusion set out above to be relevant.

The Audit Committee was also satisfied that the disclosures in the basis of preparation note and the viability statement, relating to the going concern assessment of the Company, were appropriately clear and transparent. In particular that the material uncertainty prevalent in the going concern basis of preparation is disclosed in a fair, balanced and understandable manner.

· Valuation of Unquoted Investment Fair Values including the impact on management fees

The fair value of the Company’s unquoted securities at 28 February 2021, which are valued using techniques detailed in Note 5 of the financial statements, was $433,224,000 accounting for 92.8% of the Company's investment portfolio. The Committee has concentrated on ensuring the Investment Manager has applied appropriate valuation methodologies to these investments in producing the net asset value of the Company.

Members of the Audit Committee, discuss the valuation process with the Investment Adviser on a quarterly basis. The Audit Committee gains comfort in the valuations produced by reviewing the methodologies used and challenging the recommendations of the Investment Adviser. The Audit Committee are thus satisfied that the valuation techniques are appropriate and represent fair value.

The valuation of the unquoted investments is the key driver of the Company’s gross asset value and the basis of the management fees payable to the Investment Adviser and therefore the management fees payable could potentially be misstated if there were to be an error in the calculation of the gross assets. However, as each monthly NAV calculation is approved by the Investment Adviser and the year-end NAV has been audited, the Audit Committee is satisfied that the fees have been correctly calculated as stated in the Annual Report and Financial Statements.

· Impairment of Direct Loans Measured at Amortised Cost

Risk that the carrying value of the direct loans might be misstated due to application of inappropriate methodologies, inputs and/or judgemental factors determining the expected credit loss in accordance with IFRS9 - "Financial Instruments".

Risk Management:

The Audit Committee continued to consider the process for managing the risk of the Company and its service providers. Risk management procedures for the Company, as detailed in the Company's risk assessment matrix, were reviewed and approved by the Audit Committee. New risks are added to the matrix when deemed appropriate.

Fraud, Bribery and Corruption:

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Company. The Board receives a confirmation from all service providers that there have been no instances of fraud, bribery or corruption.

The External Auditor

Ernst & Young LLP have acted as external auditor since the Company's inception in April 2008. This is the third year of Andrew Dann’s anticipated five year tenure as audit partner. A full tender process was undertaken during December 2018 and January 2019 resulting in Ernst & Young LLP being reappointed.

Independence, objectivity and fees:

The independence and objectivity of the external auditor is reviewed by the Audit Committee which also reviews the terms under which the external auditor is appointed to perform non-audit services.

In line with the historic policies, the Audit Committee does not consider that the provision of non-audit services, which includes determining whether the Company is a passive foreign investment company as defined by the U.S. Internal Revenue Code, to have been a threat to the objectivity and independence of the external auditor. However, following the introduction of the UK FRC Revised Ethical Standard (effective on 15 March 2020), the Audit Committee has introduced a general prohibition on the external auditor providing non-audit services to the Company. This general prohibition will commence for periods on and after the year ended 28 February 2021 but will not extend to an interim review report providing the fee for such interim review is subject to a 70% fee cap when compared to the audit fee.

The following table summarises the remuneration paid and payable by the Company to Ernst & Young LLP and to other Ernst & Young LLP member firms for audit and other services during the years ended 28 February 2021 and 29 February 2020.

1JZCP incurred additional audit fees resulting from the real estate property portfolio valuation issues as well as going concern considerations, including COVID-19.

2The Interim Report and Financial Statements for the six-month period ended 31 August 2019 were not reviewed by EY. Due to further requested information provided by real estate appraisers it would not have been possible for EY to have been able to complete their customary review of the interim results and related report within the regulatory timeframe.

Performance and effectiveness:

During the year, when considering the effectiveness of the external auditor, the Audit Committee has taken into account the following factors:

· the audit plan presented to them before each audit;

· the post audit report including variations from the original plan;

· changes in audit personnel;

· the external auditor's own internal procedures to identify threats to independence; and

· feedback received from both the Investment Adviser and Administrator.

The Audit Committee reviewed and challenged the audit plan and the post audit report of the external auditor and concluded that audit risks had been sufficiently identified and were sufficiently addressed. The Audit Committee considered reports from the external auditor on their procedures to identify threats to independence and concluded that the procedures were sufficient to identify potential threats to independence.

There were no significant adverse findings from this evaluation.

The Audit Committee has examined the scope and results of the audit, its cost effectiveness and the independence and objectivity of the external auditor and considers Ernst & Young LLP, as external auditor, to be independent of the Company.

Internal control and risk management systems:

Additional work performed by the Audit Committee in the areas of internal control and risk management are disclosed in Corporate Governance.

The Audit Committee has also reviewed the need for an internal audit function. The Audit Committee has decided that the systems and procedures employed by the Investment Adviser and the Administrator, including the Administrator's internal audit function, provide sufficient assurance that a sound system of internal control, which safeguards the Company’s assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

In finalising the Annual Report and Accounts for recommendation to the Board for approval, the Audit Committee has also recommended to the Board that the Annual Report and Accounts should be considered fair, balanced and understandable.

Sharon Parr

Chairman, Audit Committee

18 May 2021

Independent Auditor's Report

To The Members of JZ Capital Partners Limited

Opinion

We have audited the Financial Statements of JZ Partners Capital Limited (the ’Company”) for the year ended 28 February 2021 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 31, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union (“IFRS”).

In our opinion, the financial statements:

· give a true and fair view of the state of the Company’s affairs as at 28 February 2021 and of its loss for the year then ended;

· have been properly prepared in accordance with IFRS; and

· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report below. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the Financial Statements, including the UK FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty relating to going concern

We draw your attention to Note 3 in the Financial Statements, which indicates that there is a material uncertainty as to whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe, which casts significant doubt over the ability of the Company to continue as a Going Concern. Our opinion is not modified in respect of this matter.

We draw attention to the viability statement in the Report of the Directors, which indicates that the viability of the Company is dependent entirely on actions that are being and will be taken over the course of the going concern period ending 1 October 2022. The Directors consider that the material uncertainty referred to in respect of going concern may cast significant doubt over the future viability of the Company should these events not complete. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included:

We describe below how our audit responded to the risk relating to going concern:

1. The audit engagement partner directed and supervised the audit procedures on going concern;

2. We obtained the cash flow forecasts prepared by the Investment Adviser, Jordan/Zalaznick Advisers, Inc (“JZAI”) and tested the arithmetical accuracy of the models including reperforming the covenant tests therein;

3. We obtained the agreements and enquired of management to understand the Cohanzick loan facility and associated agreement amendments, including the nature of facilities, repayment terms and covenants;

4. We performed a reverse-stress test for covenant compliance to assess the likelihood of a reduction in fair value and/ or cash balance, triggering a covenant breach;

5. We challenged the appropriateness of management’s forecasts by assessing historical forecasting accuracy, challenging management’s consideration of downside sensitivity analysis and applied further stress testing to understand the sensitivity of the assessment to the timing and quantum of asset realisations;

6. We assessed whether available funds are sufficient to cover commitments made to underlying investments and other ongoing commitments including investment adviser and other expenses, cast significant doubt over the going concern status of the Company;

7. We held discussions with the Investment Adviser and the Audit Committee in relation to the status of the asset realisations and renegotiation of the Cohanzick loan facility;

8. We assessed the likely success and risk factors of the Company’s alternative investing and financing plans with its Investment Adviser; and

9. We assessed the disclosures in the Annual Report and Financial Statements relating to going concern, including the material uncertainties, to ensure they were fair, balanced and understandable and in compliance with IAS 1.

In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in respect of the directors' identification in the financial statements of any material uncertainties to the Company’s ability to continue for the period ending 1 October 2022.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.

Overview of our audit approach

An overview of the scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. This enables us to form an opinion on the Financial Statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainties related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined planning materiality for the Company to be $3.3 million (2020: $4.8 million), which is 1% (2020: 1%) of Total Equity. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures. We believe that Total Equity provides us with the best measure of planning materiality as the Company’s primary performance measures for internal and external reporting are based on Total Equity.

During the course of our audit, we reassessed initial materiality and updated its calculation to align with the year-end Total Equity figure.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgement was that performance materiality was 50% (2020: 50%) of our planning materiality, namely $1.65 million (2020: $2.4 million). Although there is no history of material misstatements, based on which our expectation of the likelihood of misstatement in the future is low and we have a strong understanding of the control environment, there were changes in circumstances or events outside the normal course of business during the prior year’s audit for which the performance materiality was reduced to 50%. This has been maintained at the same level. Our objective in adopting this approach was to ensure that total uncorrected and undetected audit differences in the Financial Statements did not exceed our materiality level.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $0.17 million (2020: $0.24 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluated any uncorrected misstatements against both the quantitative measures of materiality discussed above and considering other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the Annual Report, other than the Financial Statements and our auditor’s report thereon. The Directors are responsible for the other information.

Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept by the Company; or

· the financial statements are not in agreement with the Company’s accounting records and returns; or

· we have not received all the information and explanations we require for our audit.

Corporate Governance Statement

ISAs (UK) require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

· Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out in the Report of the Directors;

· Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate, set out in the Report of the Directors;

· Directors’ statement on fair, balanced and understandable, set out in the Report of the Directors;

· Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out in the Report of the Directors;

· The section of the annual report that describes the review of effectiveness of risk management and internal control systems, set out in the Corporate Governance Report; and;

· The section describing the work of the audit committee set out in the Audit Committee Report.

Responsibilities of Directors

As explained more fully in the Directors’ responsibilities statement set out in the Report of the Directors, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal controls as the Directors determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and the Investment Adviser. Our approach was as follows:

· We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are the Companies (Guernsey) Law, 2008, the 2018 UK Corporate Governance Code and the listing requirements of London Stock Exchange and the Disclosure Guidance and Transparency Rules of the UK Listing Authority.

· We understood how the Company is complying with those frameworks by making enquiries of the Investment Adviser and those charged with governance regarding:

- their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the Financial Statements;

- the Company’s methods of enforcing and monitoring non-compliance with such policies;

- management’s process for identifying and responding to fraud risks, including programs and controls the Company has established to address risks identified by the entity, or that otherwise prevent, deter and detect fraud; and

- how management monitors those programs and controls.

· Administration and maintenance of the Company’s books and records is performed by Northern Trust International Fund Administration Services (Guernsey) Limited which is a regulated firm, independent of the Investment Adviser. We corroborated our enquiries through our review of Board minutes and any correspondence received from regulatory bodies. We also obtained their SOC1 controls report and reviewed it for findings relevant to the Company. We noted no contradictory evidence during these procedures.

· We assessed the susceptibility of the Company’s Financial Statements to material misstatement, including how fraud might occur by:

- obtaining an understanding of entity-level controls and considering the influence of the control environment;

- obtaining management’s assessment of fraud risks including an understanding of the nature, extent and frequency of such assessment documented in the Board’s risk matrix;

- making inquiries with those charged with governance as to how they exercise oversight of management’s processes for identifying and responding to fraud risks and the controls established by management to mitigate specifically those risks the entity has identified, or that otherwise help to prevent, deter and detect fraud;

- making inquiries with management and those charged with governance regarding how they identify related parties including circumstances related to the existence of a related party with dominant influence; and

- making inquiries with management and those charged with governance regarding their knowledge of any actual or suspected fraud or allegations of fraudulent financial reporting affecting the Company.

· Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations identified above. Our procedures involved a review of Board minutes and inquiries of the Investment Adviser and those charged with governance including:

- Through discussion, gaining an understanding of how those charged with governance, the Investment Adviser and Administrator identify instances of non-compliance by the Company with relevant laws and regulations;

- Inspecting the relevant policies, processes and procedures to further our understanding;

- Reviewing Board minutes and internal compliance reporting;

- Inspecting correspondence with regulators; and

- Obtaining relevant written representations from the Board of Directors.

A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Andrew Jonathan Dann, FCA

for and on behalf of Ernst & Young LLP

Guernsey, Channel Islands

18 May 2021

1. The maintenance and integrity of the JZ Capital Partners Limited website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the website.

2. Legislation in Guernsey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Independent Auditors Report for audit conducted in accordance with auditing standards generally

accepted in the United States1

To The Directors of JZ Capital Partners Limited

We have audited the accompanying financial statements of JZ Capital Partners Limited (the “Company”), which comprise the statement of financial position as of 28 February, 2021, and the related statements of comprehensive income, changes in equity and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with International Financial Reporting Standards as adopted by the European Union (“IFRS”); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JZ Capital Partners Limited at 28 February 2021, and the results of its operations, changes in its equity, and its cash flows for the year then ended, in conformity with IFRS.

Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 in the financial statements, the Company has stated that there is a material uncertainty relating to whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe, which casts significant doubt over the ability of the Company to continue as a Going Concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified in respect of this matter.

Ernst & Young LLP

Guernsey, Channel Islands

18 May 2021

1In order to comply with the U.S. Securities and Exchange Commission's custody rule, an audit opinion was requested, by the Company's Investment Adviser, which satisfies the requirements of auditing standards generally accepted in the United States.

Statement of Comprehensive Income

For the Year Ended 28 February 2021

The accompanying notes form an integral part of the Audited Financial Statements.

Statement of Financial Position

As at 28 February 2021

These Audited Financial Statements were approved by the Board of Directors and authorised for issuance on 18 May 2021. They were signed on its behalf by:

David Macfarlane

Chairman

Sharon Parr

Director

The accompanying notes form an integral part of the Audited Financial Statements.

Statement of Changes in Equity

For the Year Ended 28 February 2021

Comparative for the Year ended 29 February 2020

The accompanying notes form an integral part of the Audited Financial Statements.

Statement of Cash Flows

For the Year Ended 28 February 2021

The accompanying notes form an integral part of the Audited Financial Statements.

Notes to the Annual Financial Statements

1. General Information

JZ Capital Partners Limited ("JZCP" or the "Company") is a Guernsey domiciled closed-ended investment company which was incorporated in Guernsey on 14 April 2008 under the Companies (Guernsey) Law, 1994. The Company is now subject to the Companies (Guernsey) Law, 2008. The Company is classified as an authorised fund under the Protection of Investors (Bailiwick of Guernsey) Law 1987. The Company's Capital consists of Ordinary shares, 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 ("SFS").

The Company's new investment policy, adopted in August 2020, is for the Company to make no further investments outside of its existing obligations or to the extent that investment may be made to support selected existing portfolio investments. The intention is to realise the maximum value of the Company’s investments and, after repayment of all debt, to return capital to shareholders. The Company’s previous Investment Policy was to target predominantly private investments and back management teams to deliver on attractive investment propositions. In executing this strategy, the Company took a long term view. The Company looked to invest directly in its target investments and was able to invest globally but with a particular focus on opportunities in the United States and Europe.

The Company is currently mainly focused on supporting its investments in the following areas:

(a) small or micro-cap buyouts in the form of debt and equity and preferred stock in both the US and Europe; and

(b) real estate interests.

The Company has no direct employees. For its services the Investment Adviser receives a management fee 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.

2. Basis of Accounting and Significant Accounting Policies

Statement of compliance

The Financial Statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") together with applicable legal and regulatory requirements of Guernsey Law, and the SFS.

Basis of preparation

The Financial Statements of the Company have been prepared in accordance with IFRS. The Financial Statements have been prepared on a historical-cost basis, except for financial assets and financial liabilities held at fair value through profit or loss ("FVTPL").

The Financial Statements are presented in US dollars, which is the functional currency of the Company, and all values are presented to the nearest thousand dollars ($000), except where otherwise indicated.

The Company presents its Statement of Cash Flows statement on a direct-basis.

The Company's Statement of Financial Position's is presented in order of liquidity, which provides information in a format that is deemed relevant to the Company.

New and amended standards and interpretations

The Company applied, for the first time, certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2020. The new standards or amendments to existing standards and interpretations, effective from 1 March 2020, did not have a material impact of the Company’s Financial Statements. The Company has assessed the impact of standards issued but not yet applicable, and have concluded that they will not have a material impact on the Financial Statements.

Changes in accounting policy and disclosure

The accounting policies adopted in the preparation of these Audited Annual Financial Statements have been consistently applied during the year and are consistent with those of the previous year, unless otherwise stated.

Significant Accounting Policies

Financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is generally not the case with master netting agreements unless one party to the agreement defaults and the related assets and liabilities are presented gross in the Statement of Financial Position.

In accordance with IFRS 9 - "Financial Instruments", the Company classifies its financial assets and financial liabilities at initial recognition into the categories of financial assets and financial liabilities discussed below.

Financial assets

The Company classifies its financial assets as subsequently measured at amortised cost or measured at FVTPL on the basis of both:

· The entity’s business model for managing the financial assets; and

· The contractual cash flow characteristics of the financial asset.

i) Financial assets measured at amortised cost

A debt instrument is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal (“SPPI”) amount outstanding. The Company includes in this category loans at amortised cost, short-term non-financing receivables and other receivables.

ii) Financial assets measured at FVTPL

A financial asset is measured at fair value through profit or loss if:

· Its contractual terms do not give rise to cash flows on specified dates that are SPPI on the principal amount outstanding; or

· It is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or

· At initial recognition, it is irrevocably designated as measured at FVPL when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ii a) Classification

Financial assets classified at FVTPL are those that are managed and their performance evaluated on a fair value basis in accordance with the Company’s investment strategy as documented in its prospectus.

The Company includes in this category:

Investments in the equity and preferred stock of micro cap, real estate and other investments;

Investments in subsidiaries and associates:

· Investment in subsidiaries: In accordance with the exception under IFRS 10 - "Consolidated Financial Statements", the Company does not consolidate subsidiaries in the financial statements unless the subsidiary is not itself an investment entity and its main purpose and activities are providing services that relate to the Company’s investment activities. The Company has no consolidated subsidiaries.

· Investment in associates: In accordance with the exemption in IAS28 - "Investments in Associates and Joint Ventures", the Company does not account for its investments in associates using the equity method. Instead, the Company has elected to measure its investments in associates at FTVPL.

· Investments in debt instruments which include investments that are held under a business model to manage them on a fair value basis for investment income and fair value gains.

ii b) Measurement

Investments made by the Company are measured initially and subsequently at fair value, with changes in fair value taken to the Statement of Comprehensive Income. Transaction costs are expensed in the year in which they arise for those financial instruments classified at FVTPL.

ii c) Fair value estimate

The fair value of financial assets traded in active markets (such as publicly traded securities) is based on quoted market prices at the Statement of Financial Position date. The quoted market price used for financial assets held by the Company is the bid price.

Unquoted preferred shares, micro cap loans, unquoted equities and equity related securities investments are typically valued by reference to their enterprise value, which is generally calculated by applying an appropriate multiple to the last twelve months’ earnings before interest, tax, depreciation and amortisation (“EBITDA”). In determining the multiple, the Directors consider inter alia, where practical, the multiples used in recent transactions in comparable unquoted companies, previous valuation multiples used and where appropriate, multiples of comparable publicly traded companies. In accordance with the International Private Equity and Venture Capital Association (“IPEVCA”) valuation guidelines, a marketability discount is applied which reflects the discount that in the opinion of the Directors, market participants would apply in a transaction in the investment in question.

The valuation techniques to derive the fair value of real estate interests and other investments are detailed in Note 5.

iii) Other receivables

Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

iv) Cash on deposit and cash and cash equivalents

Cash on deposit comprises bank deposits with an original maturity of three months or more. Cash and cash equivalents comprise bank balances and cash held by the Company, including short-term bank deposits with a maturity of three months or less. Cash also includes amounts held in interest-bearing overnight accounts.

Financial liabilities

For financial liabilities designated as FVTPL using the fair value option ("FVO"), the amount of change in the fair value of such financial liabilities that is attributable to changes in the Company's credit risk must be presented in Other Comprehensive Income ("OCI"). The remainder of the change in fair value is presented in profit or loss, unless presentation in OCI of the fair value change in respect of the liability’s credit risk would create or enlarge an accounting mismatch in profit or loss.

Financial liabilities are classified according to the substance of the contractual arrangements entered into. Financial liabilities, other than CULS (see below) are recorded at the amount of proceeds received, net of issue costs.

Financial liabilities may be designated at fair value through profit or loss rather than stated at amortised cost, when the Board have considered the appropriate accounting treatment for the specific liability.

i) Financial liabilities measured at FVTPL

Convertible Unsecured Loan Stock (“CULS”)

The CULS issued by the Company is denominated in a currency (GBP) other than the Company’s functional currency and hence fails the ‘fixed-for-fixed’ criteria for equity classification. Rather than account for the host debt and embedded conversion element separately, the Company elects to account for the CULS in its entirety in accordance with the IFRS 9 ‘Fair Value Option’.

The CULS’ fair value is deemed to be the listed offer price at the year end. CULS is translated at the exchange rate at the reporting date and both differences in fair value due to the listed offer price and exchange rates are recognised in the Statement of Comprehensive Income. Changes in fair value due to changes in credit risk are presented as Other Comprehensive Income.

ii) Financial liabilities measured at amortised cost

This category includes all financial liabilities, other than those measured at fair value through profit or loss. The Company includes in this category, Zero Dividend Preference (“ZDP”) shares, senior debt facility and other short-term payables.

a) Zero Dividend Preference (“ZDP”) shares

ZDP shares meet the definition of a financial liability in accordance with IAS 32 - "Financial Instruments: Presentation", as the shares are redeemable at a fixed date and holders are entitled to a fixed return. ZDP shares are recorded at amortised cost using the effective interest rate method.

b) Senior debt facility

The loan is recorded at amortised cost using the effective interest rate method.

c) Other payables

Other payables (include the accrual of Investment Adviser’s fees) are classified as financial liabilities at amortised cost. Other payables are not interest-bearing and are stated at their nominal value.

Equity

Equity is classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity are recorded at the amount of proceeds received, net of issue costs. Ordinary Shares are classified as equity in accordance with IAS 32 – “Financial Instruments: Presentation” as these instruments include no contractual obligation to deliver cash and the redemption mechanism is not mandatory.

Interest revenue

Interest revenues are recognised in the Statement of Comprehensive Income for all interest-bearing financial instruments using the effective interest method.

Dividend income

Dividend income is recognised when the Company's right to receive payment is established. When there is reasonable doubt that income due to be received will actually be received, such income is not accrued until it is clear that its receipt is probable. Where, following an accrual of income, receipt becomes doubtful, the accrual is either fully or partly written off until the reasonable doubt is removed.

Escrow accounts

Where investments are disposed of, the consideration given may include contractual terms requiring that a percentage of the consideration is held in an escrow account pending resolution of any indemnifiable claims that may arise and as such the value of these escrow amounts is not immediately known. The Company records gains realised on investments held in escrow in the Statement of Comprehensive Income following confirmation that any such indemnifiable claims have been resolved and none is expected in the future.

Taxation

The Company has been granted Guernsey tax exempt status in accordance with The Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (as amended). However, in some jurisdictions, investment income and capital gains are subject to withholding tax deducted at the source of the income. The Company presents the withholding tax separately from the gross investment income in the Statement of Comprehensive Income.

3. Estimates and Judgements

The preparation of the Company’s financial statements requires management to make estimates, judgements, and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The following are the key judgements and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimates

Fair Value of Investments at Fair Value Through Profit or Loss

Certain investments are classified as FVTPL, and valued accordingly, as disclosed in Note 2. The key source of estimation uncertainty is on the valuation of unquoted equities, equity-related securities and real estate investments.

In reaching its valuation of the unquoted equities, equity-related securities and real estate investments the key estimates management has to make are those relating to the multiples, discount factors and real estate valuation factors (Note 5) used in the valuation models.

Expected Credit Losses ("ECL")

Certain financial assets are classified as Loans at Amortised cost, and valued accordingly as disclosed in Note 2. The key source of estimation uncertainty is on the various default scenarios for prescribed future periods and the probability of each scenario occurring which are considered when estimating the ECLs.

Judgements

Assessment as an Investment Entity

Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are as follows:

• An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

• An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

• An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company has a wide range of investors; through its Investment Adviser management services it enables investors to access private equity, real estate and similar investments.

The Company’s objective to provide a “significant capital appreciation” is consistent with that of an investment entity. The Company has clearly defined exit strategies for each of its investment classes, these strategies are again consistent with an investment entity.

In determining the fair value of unlisted investments JZCP follows the principles of IPEVCA valuation guidelines. The Valuation Guidelines have been prepared with the goal that Fair Value measurements derived when using these Valuation Guidelines are compliant with IFRS. The Board of JZCP evaluates the performance of unlisted investments quarterly on a fair value basis. Listed investments are recorded at Fair Value in accordance with IFRS being the last traded market price where this price falls within the bid-ask spread.

The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities and it has more than one investor.

Investment in Associates

An associate is an entity over which the Company has significant influence. An entity is regarded as a subsidiary only if the Company has control over its strategic, operating and financial policies and intends to hold the investment on a long- term basis for the purpose of securing a contribution to the Company’s activities.

In accordance with the exemption within IAS 28 - "Investments in Associates and Joint Ventures", the Company does not account for its investment in EuroMicrocap Fund 2010 L.P., JZHL Secondary Fund, JZI Fund III GP, L.P., Spruceview Capital Partners, LLC and Orangewood Partners Platform LLC using the equity method. Instead, the Company has elected to measure its investment in its associates at FVTPL.

The Directors have determined that although the Company has over 50% economic interest in EuroMicrocap Fund 2010, L.P., JZI Fund III GP, L.P. and Orangewood Partners Platform LLC, it does not have the power to govern the financial and operating policies of the entities, but does have significant influence over the strategic, operating and financial policies.

Going Concern

A fundamental principle of the preparation of financial statements in accordance with IFRS is the judgement that an entity will continue in existence as a going concern for a period of at least 12 months from signing of the financial statements, which contemplates continuity of operations and the realisation of assets and settlement of liabilities occurring in the ordinary course of business.

Due to the uncertainty that the Company will not have sufficient liquidity to repay its outstanding debt on maturity, including the redemption of its ZDP shares (due 1 October 2022), nor be able to restructure/extend the debt for redemption beyond the going concern period, there is a material uncertainty which casts significant doubt on the ability of the Company to continue as a going concern. However, the Financial Statements for the year ended 28 February 2021 have been prepared on a going concern basis given the Board's assessment set out below and as the Board, with recommendation from the Audit Committee, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

In reaching its conclusion, the Board have considered the risks that could impact the Company’s liquidity over the period to 1 October 2022. This period, which is longer than the required period of 12 months, has been considered to be relevant due to the repayment date for the Company’s ZDP shares being approximately 4 months after the 12-month period.

As part of their assessment the Audit Committee highlighted the following key consideration:

Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

Update on material liabilities due for settlement and post year-end restructure

The Company's material debt obligations and cash and cash equivalents at the year end, prior year end and a forecasted position post the proposed debt restructure (detailed below) are as follows:

1Forecast cash position assumes no material realisation proceeds received prior to the CULS redemption.

2Forecast ZDP maturity Dollar amount translated using the 28.2.2021 year end rate being £1/$1.3981.

During the year ended 28 February 2021, the Company had realisations of investments totalling $139.5 million, this included $87.7 million from the successfully concluded Secondary Sale of interests in certain US microcap portfolio companies. Following these investment realisations, the Company has repaid a total of $82.9 million of the senior debt’s outstanding principal amount.

On 23 October 2020, the Company announced that the Company agreed with its senior lenders, Guggenheim Partners (the "Original lenders") amended terms of the senior debt facility. Under the terms of those amendments to the senior debt facility, $40 million of the outstanding principal amount was assigned from the original lenders to clients and funds advised by Cohanzick Management, LLC and CrossingBridge Advisors, LLC (the “Replacement lenders”). As part of this transaction, and at an increased interest cost, the Company secured more advantageous covenant terms for itself, including the minimum asset coverage covenant being reset (from not less than 4x to a lower requirement of 3.5x) and a relaxation of rating requirements, removal of certain concentration limits, updates to the use of proceeds requirements pertaining to asset sales to preserve liquidity, and reduced requirements related to its real estate collateral and reporting on investments. On 23 February 2021, the Company then announced that the replacement lenders had acquired the remaining interest in the Company’s senior debt facility from the Original Lenders.

Post year end, the Company also entered into an amendment agreement with its replacement lenders to amend the terms of its senior debt facility which will, among other things, extend (subject to certain conditions including shareholder approval of the Loan Note proposal referred to below) the maturity date of the senior debt facility by one year until 12 June 2022 and permit JZCP to repay its CULS when they become due on their maturity date of 30 July 2021, notwithstanding that the CULS are subordinated to the senior debt facility.

Post year end, the Company also entered into a note purchase agreement with David W. Zalaznick and John (Jay) Jordan II, the founders and principals of the Company's investment adviser, Jordan/Zalaznick Advisers, Inc. ("JZAI"), pursuant to which they have agreed to purchase directly or through their affiliates, subordinated, second lien loan notes in the amount of $31.5 million, with an interest rate of 6 per cent. per annum and maturing on 11 September 2022 (the “Loan Notes”).

Their purchase of the Loan Notes is subject to a number of conditions, including shareholder approval of both the Loan Note proposal and a proposal for Jay Jordan and David Zalaznick or their affiliates to assume the Company’s remaining commitment to the Orangewood Fund, with the latter also being a requirement of the amendments to the senior debt facility.

The Board acknowledges that the new maturity date of the senior debt facility and the Loan Notes still fall within the going concern period and therefore the Company will still need to generate sufficient realisation proceeds, within the period, to repay its debt obligations or make alternative debt arrangements with lenders post 1 October 2022.

Considering the Company’s projected cash position, ongoing operating costs and the anticipated further investment required to support the Company’s portfolio the Board anticipate further proceeds of approx. $185 million are required from the realisation of investments to enable the Company to settle its debts as they fall due.

It is anticipated that the liquidity required to settle the debt obligations mentioned above, and other ongoing obligations in 2022, will be generated from realisations within the 16 month going concern period. The Company's investment adviser, JZAI, is currently pursuing various opportunities to realise value, these forecast realisations include several anticipated sales of micro-cap companies. Total realisation proceeds of approximately $275 million are forecast, over the going concern period, from the aforementioned events.

The Board continue to consider the levels of realisation proceeds historically generated by the Company’s micro-cap portfolios as well as the accuracy of previous forecasts whilst concluding on the predicted accuracy of forecasts presented.

The Board recognise, under current market conditions, the raising of the required total realisation amount is a considerable task but remains confident in the value of its underlying micro-cap investments and are buoyed by their post COVID performance.

The restructuring of the Company's debt structure, following satisfaction of closing conditions, will enable the Company to realise investments in a timeframe that will help maximise the portfolio's value. In the instance that sufficient realisations proceeds are not raised, in the going concern period, to meet the Company's debt liabilities, the Board are confident the Company can work to ensure alternative financing plans are in place.

Going Concern Conclusion

After careful consideration and based on the reasons outlined above, the Board are satisfied, as at the date of the signing of the Annual Report and Financial Statements, that it is appropriate to adopt the going concern basis in preparing the financial statements and they have a reasonable expectation that the Company will continue in existence as a going concern for the period ending 1 October 2022.

However, the Board have concluded that the following consideration creates a material uncertainty which casts significant doubt over the ability of the Company to continue as a Going Concern, being:

Whether the Company can generate sufficient cash through realisations of its underlying investments to discharge its liabilities over the period to 1 October 2022 or failing to do so can implement an alternative debt restructuring plan that will enable the Company to repay all of its debt obligations, including the redemption of its ZDP shares, over an extended timeframe.

The Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

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)

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.

Investments in treasury bills and corporate bonds are not considered as part of the investment strategy and are therefore excluded from this segmental analysis.

Segmental Profit/(Loss)

For the year ended 28 February 2021

For the year ended 29 February 2020

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, and expenses other than the Investment Adviser fees which can be allocated to an individual segment.

The following table provides a reconciliation between total segmental operating loss and operating loss.

The following table provides a reconciliation between total segmental revenue and Company revenue.

Segmental Net Assets

At 28 February 2021

At 29 February 2020

Other receivables and prepayments are not considered to be part of individual segment assets. Certain liabilities are not considered to be part of the net assets of an individual segment. These include custodian and administration fees payable, directors’ fees payable and other payables and accrued expenses.

The following table provides a reconciliation between total segmental assets/liabilities and total assets/liabilities.

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 assets 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 tradable. Another example would be derivatives such as interest rate swaps or forward currency contracts where inputs are observable and therefore may also fall into Level 2.

Level 3

Those involving inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). Investments in JZCP's portfolio valued using unobservable inputs such as multiples, capitalisation rates, discount rates (see Quantitative information of significant unobservable inputs and sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy table below) fall within Level 3.

Differentiating between Level 2 and Level 3 fair value measurements i.e., assessing whether inputs are observable and whether the unobservable inputs are significant, may require judgement and a careful analysis of the inputs used to measure fair value including consideration of factors specific to the asset or liability.

The following table shows financial instruments recognised at fair value, analysed between those whose fair value is based on:

Financial assets at 28 February 2021

Financial assets at 29 February 2020

Financial liabilities designated at fair value through profit or loss at inception

Financial liabilities at 28 February 2021

Financial liabilities at 29 February 2020

Valuation techniques

In valuing investments in accordance with IFRS, the Board follows the principles as detailed in the IPEVCA guidelines.

When fair values of listed equity and debt securities at the reporting date are based on quoted market prices or binding dealer price quotations (bid prices for long positions), without any deduction for transaction costs, the instruments are included within Level 1 of the hierarchy.

Investments for which there are no active markets are valued according to one of the following methods:

Real estate

JZCP makes its real estate investments through a wholly-owned subsidiary, which in turn owns interests in various residential, commercial, and development real estate properties. The net asset value of the subsidiary is used for the measurement of fair value. The underlying fair value of JZCP’s Real Estate holdings, however, is represented by the properties themselves. The Company's Investment Adviser and Board review the fair value methods and measurement of the underlying properties on a quarterly basis. Where available, the Company will use third party appraisals on the subject property, to assist the fair value measurement of the underlying property. Third-party appraisals are prepared in accordance with the Appraisal and Valuation Standards (6th edition) issued by the Royal Institution of Chartered Surveyors. Fair value techniques used in the underlying valuations are:

- Use of comparable market values per square foot of properties in recent transactions in the vicinity in which the property is located, and in similar condition, of the relevant property, multiplied by the property’s square footage.

- Discounted Cash Flow ("DCF") analysis, using the relevant rental stream, less expenses, for future periods, discounted at a Market Capitalisation ("MC") rate, or interest rate.

- Relevant rental stream less expenses divided by the market capitalization rate; this method approximates the enterprise value construct used for non-real estate assets.

- Income capital approach using the relevant sell out analysis, less expenses and costs.

For each of the above techniques third party debt is deducted to arrive at fair value.

The valuations obtained in relation to the real estate portfolio are dated 31 August 2020, rather than the usual 31 December date. The Board, commissioned updated appraisals in order to take into account the effect of COVID-19 whilst releasing the interim results. Subsequent discussions with appraisers indicate there would be no significant change in property values between 31 August 2020 and 28 February 2021. Due to the inherent uncertainties of real estate valuation, the values reflected in the financial statements may differ significantly from the values that would be determined by negotiation between parties in a sales transaction and those differences could be material.

Unquoted preferred shares, unquoted equities and equity related securities

Unquoted equities and equity related securities investments are classified in the Statement of Financial Position as Investments at fair value through profit or loss. These investments are typically valued by reference to their enterprise value, which is generally calculated by applying an appropriate multiple to the last twelve months' earnings before interest, tax, depreciation and amortisation ("EBITDA"). In determining the multiple, the Board consider inter alia, where practical, the multiples used in recent transactions in comparable unquoted companies, previous valuation multiples used and where appropriate, multiples of comparable publicly traded companies. In accordance with IPEVCA guidelines, a marketability discount is applied which reflects the discount that in the opinion of the Board, market participants would apply in a transaction in the investment in question. The increase of the fair value of the aggregate investment is reflected through the unquoted equity component of the investment and a decrease in the fair value is reflected across all financial instruments invested in an underlying company.

In respect of unquoted preferred shares the Company values these investments at fair value by reference to the attributable enterprise value as the exit strategy in respect to these investments would be a one tranche disposal together with the equity component. The fair value of the investment is determined by reference to the attributable enterprise value reduced by senior debt and marketability discount.

Micro-cap loans

Investments in micro-cap debt are valued at fair value by reference to the attributable enterprise value when the Company also holds an equity position in the investee company.

When the Company invests in micro-cap loans and does not hold an equity position in the underlying investee company these loans are valued at amortised cost in accordance with IFRS 9 (Note 2). The carrying value at amortised cost is considered to approximate to fair value.

Other Investments

Other investments at year end, comprise of mainly the Company's investment in the asset management business - Spruceview Capital Partners ("Spruceview"). Spruceview is valued using a valuation model which considers both current assets under management ("AUM") and the potential for new AUM.

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 28 February 2021 and 29 February 2020 are shown below:

1 The Fair Value of JZCP's investment in financial interests in Real Estate is measured as JZCP's percentage interest in the value of the underlying properties.

2 Sensitivity is applied to the property value and then the debt associated to the property is deducted before the impact to JZCP's equity value is calculated. Due to gearing levels in the property structures an increase in the sensitivity of measurement metrics at property level will result in a significantly greater impact at JZCP's equity level.

3 JZCP's investment in Spruceview.

The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the reporting year.

Year ended 28 February 2021

Year ended 29 February 2020

Fair value of Zero Dividend Preference ("ZDP") shares

The fair value of the ZDP shares is deemed to be their quoted market price. As at 28 February 2021, the offer price for the ZDP (2022) shares was £3.80 (29 February 2020: £4.34) the total fair value of the ZDP shares was $63,263,000 (29 February 2020: $66,010,000) which is $11,040,000 lower (29 February 2020: $1,500,000 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 1 hierarchy if valued at FVTPL.

6. Net Loss on Investments at Fair Value Through Profit or Loss