JZ Capital Partners Ltd - Half-year Report

JZ CAPITAL PARTNERS LIMITED (the "Company" or "JZCP")

(a closed-end investment company incorporated with limited liability under the laws of Guernsey with registered number 48761)

INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDED

31 AUGUST 2023

LEI: 549300TZCK08Q16HHU44

(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)

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

9 November 2023

JZ Capital Partners Limited, the London listed fund that has investments in US and European micro-cap companies and US real estate, announces its interim results for the period ended 31 August 2023. 

Financial and Operational Highlights

• NAV per share of $4.04 (FYE 28/02/23: $4.06).
• NAV of $312.7 million (FYE 28/02/22: $314.5 million).
• Total realisation and distribution proceeds of $9.9 million.
• The US micro-cap portfolio has overall performed well, delivering a net increase of 7 cents per share, while the European portfolio remained flat for the six-month period and continues to be challenged by the economic headwinds in Europe and war in Ukraine.  However, both portfolios are working towards several realisations.
• The Company has two remaining properties with equity value: Esperante, an office building in West Palm Beach, Florida, and 247 Bedford Avenue, a retail building with Apple as the primary tenant, in Williamsburg, Brooklyn.

Investment Policy and Liquidity

• The Company remains focused on the implementation of its New Investment Policy. This policy focuses on realising the maximum value from the Company’s investment portfolio and, after repaying its debt obligations, returning capital to shareholders.
• Since the Company adopted its New Investment Policy in August 2020, the Company has achieved realisations in excess of $395 million and repaid approximately $225 million of debt.
• The Company’s outstanding debt is limited to its $45 million Senior Credit Facility due 26 January 2027.
• Although no significant realisations have been achieved in the period under review, the Board anticipates potential near-term realisations that would enable the Company to repay its Senior Credit Facility and, subject to retaining sufficient funds to cover existing obligations and support certain existing investments to maximise their value, to plan to commence to make distributions to shareholders.

David Macfarlane, Chairman of JZCP, said: “Our view of the outlook for the Company remains substantially unchanged to that reported at year-end. The Company is committed to delivering on the New Investment Policy and is well-positioned to weather potential financial pressures from an economic downturn or period of volatility in financial markets.

The stability of the Company’s balance sheet should allow the Investment Adviser the time needed to maximise the value of the portfolio and implement the policy in an orderly manner. The Board continues to expect that in due course a significant amount of capital will be returned to shareholders.”

Market Abuse Regulation:

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

For further information:

Kit Dunford                +44 (0)7717 417 038

FTI Consulting

David Zalaznick                                                                         +1 212 485 9410

Jordan/Zalaznick Advisers, Inc.

Matt Smart                                                                             +44 (0) 1481 745 228

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.

The Directors present the results for the Company for the six-month period ended 31 August 2023. The NAV per share of the Company has declined from $4.06 as at 28 February 2023 to $4.04 as at 31 August 2023.

This decline results mainly from a modest excess of finance and administrative costs over net write-ups of some investments during the period.

Investment Policy and Liquidity

The financial position of the Company is stable and strong as at 31 August 2023; cash and treasuries were approximately $103.7 million while the Company’s outstanding debt is limited to its $45 million senior credit facility (the “Senior Credit Facility”) due 26 January 2027 (which may be repaid early without penalty at any time).

The Board and the Investment Adviser remain focused on the implementation of the new investment policy (the “New Investment Policy”) to realise maximum value from the Company’s investments and, after the repayment of all debt, to return capital to shareholders. Under the New Investment Policy, the Company will limit further investment to where it has existing obligations or selectively to support the existing portfolio.

As we said upon the publication of the results for the year-end, although the Investment Adviser had achieved several significant realisations in the portfolio over the previous two years, the Board believed that in the current climate, it might be difficult to maintain that pace. So in the period under review it has proved to be the case, no significant new realisations having been achieved. However, the Board anticipates potential near-term realisations that would enable the Company to repay its Senior Credit Facility and, subject to retaining sufficient funds to cover existing obligations and support certain existing investments to maximise their value, to plan to commence to make distributions to shareholders.

US and European Micro-cap Portfolios

While our US micro-cap portfolio has overall performed well, with several material realisations in the US portfolio over the past 18 months, our European portfolio continues to be challenged by the economic headwinds in Europe and wars in Ukraine and the Middle East. We continue to work towards several realisations in both portfolios.

Real Estate Portfolio

The Company has two remaining properties with equity value: Esperante, an office building in West Palm Beach, Florida, and 247 Bedford Avenue, a retail building with Apple as the primary tenant, in Williamsburg, Brooklyn.

Outlook

Our view of the outlook for the Company remains substantially unchanged to that reported at year-end. The Company is committed to delivering on the New Investment Policy and is well-positioned to weather potential financial pressures from an economic downturn or period of volatility in the financial markets. The stability of the Company’s balance sheet should allow the Investment Adviser the time needed to maximise the value of the portfolio and implement the New Investment Policy in an orderly manner. The Board continues to expect that in due course a significant amount of capital will be returned to shareholders.

David Macfarlane

Chairman

8 November 2023

Investment Adviser's Report

Dear Fellow Shareholders,

JZCP is in a strong financial position, having achieved several successful realizations over the past eighteen months. The proceeds from the realizations were used to repay the ZDPs, CULS and Subordinated Notes, leaving the Company with a healthy cash balance. We need a significant amount of cash to support our existing portfolio – as all our investments are illiquid assets, it is crucial to have a strong cash position, especially after the Senior Credit Facility is repaid. As we have further realizations, we will prioritize repaying remaining debt and returning capital to shareholders.

While our remaining US micro-cap portfolio showed a gain for the past six months, our European portfolio continues to be challenged by high interest rates and a gathering recession in Europe. Notwithstanding these challenges, we are pursuing several significant realizations in our European portfolio which, if consummated, will return capital to JZCP.

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 of 31 August 2023, our US micro-cap portfolio consisted of 12 businesses, which includes three ‘verticals’ and five co-investments, across nine industries. Our European micro-cap portfolio consisted of 17 companies across six industries and seven countries.

Net Asset Value (“NAV”)

JZCP’s NAV per share decreased 2 cents, or approximately 0.5%, during the six-month period.

The US micro-cap portfolio continued to perform well during the six-month period, delivering a net increase of 7 cents per share. This was primarily due to net accrued income of 2 cents and write-ups at ISS (4 cents) and co-investment Deflecto (3 cents). Offsetting these increases was a decrease at US micro-cap portfolio company Avante (2 cents).

Our European portfolio was flat for the six-month period.

Our real estate portfolio experienced a net write-down of 2 cents per share.

Returns

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

1 The NAV per share at 31 August 2022, after a prior period adjustment was restated from $4.71 per share to $4.45 per share and the respective total NAV return per share for the 12-month period ended 31 August 2023 from -14.2% to -9.2%.

Portfolio Summary

Our portfolio is well-diversified by asset type and geography, with 29 US and European micro-cap investments across eleven industries. The European portfolio itself is well-diversified geographically across Spain, Italy, Portugal, Luxembourg, Scandinavia and the UK.

Below is a summary of JZCP’s assets and liabilities at 31 August 2023 as compared to 28 February 2023. An explanation of the changes in the portfolio follows:

US microcap portfolio

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

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

The US micro-cap portfolio continued to perform well during the six-month period, delivering a net increase of 7 cents per share. This was primarily due to net accrued income of 2 cents and write-ups at ISS (4 cents) and co-investment Deflecto (3 cents). Offsetting these increases was a decrease at US micro-cap portfolio company Avante (2 cents).

European microcap portfolio

Our European portfolio remained flat for the six-month period ended 31 August 2023. As stated in the Investment Adviser’s Report as of 28 February 2023, our European portfolio continues to be challenged by the ongoing economic difficulties in Europe. We expect further write downs in the European portfolio if the current trend continues.

JZCP invests in the European micro-cap sector through its approximately 18.8% ownership of JZI Fund III, L.P. As of 28 February 2023, Fund III held 13 investments: five in Spain, two in Scandinavia, two in Italy, two in the UK and one each in Portugal and Luxembourg. JZCP held direct loans to a further two companies in Spain: Docout and Toro Finance.

Real estate portfolio

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

The real estate portfolio experienced a net write-down of 2 cents per share, largely due to small balance sheet changes at the two properties from the year-end. Consistent with prior years, the Company will be engaging an appraisal firm to value the two properties again at the year-end. Discussions with appraisers indicate there would be no significant change in property values between 31 December 2022 and 31 August 2023.

Other investments

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

During the period, Spruceview undertook the development of its fifth private markets fund, which is focused on growth buyout co-investments in the U.S. The fund is expected to begin receiving commitments in the fourth quarter of 2023. We expect Spruceview assets under management to continue to grow with increasing indications of investor interest.

Spruceview also maintained a pipeline of potential client opportunities and continued to provide investment management oversight to the pension funds of the Mexican and Canadian subsidiaries of an international packaged foods company, as well as portfolios for family office clients, and a growing series of private market funds.

As previously reported, Richard Sabo, former Chief Investment Officer of Global Pension and Retirement Plans at JPMorgan and a member of that firm’s executive committee, is leading a team of 23 investment, business and product development, legal and operations professionals.

Outlook

Our priority now is to realize current investments and finish building the portfolio that is not yet ready for sale. Our goal is to repay the Company’s remaining debt and then return capital to shareholders.

Thank you for your continued support.

Yours faithfully,

Jordan/Zalaznick Advisers, Inc.

8 November 2023

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. 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.

Sharon Parr2

Ms Parr was appointed to the Board of JZCP in June 2018. She has over 35 years in the finance industry and spent a significant portion of her professional career with Deloitte and Touche in a number of different countries. After a number of years in the audit department, on relocating to Guernsey in 1999 she transferred into their fiduciary and fund management business and, after completing a management buyout and subsequently selling to Barclays Wealth in 2007, she ultimately retired from her role there as Global Head of Wealth Structuring in 2011. Ms Parr holds a number of Non-Executive Directorships across the financial services sector including in other listed funds. Ms Parr is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Society of Trust and Estate Practitioners, and is a resident of Guernsey.

Ashley Paxton

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

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

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

Report of the Directors

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Interim Report and Financial Statements comprising the Half- yearly Interim Report (the "Interim Report") and the Unaudited Condensed Interim Financial Statements (the "Interim Financial Statements") in accordance with applicable law and regulations.

The Directors confirm that to the best of their knowledge:

• the Interim Financial Statements have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted in the European Union and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Chairman’s Statement and Investment Adviser’s Report include a fair review of the information required by:

(i)                   DTR 4.2.7R of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)                 DTR 4.2.8R of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or the performance of the entity during that period; and any changes in the related party transactions described in the 2023 Annual Report and Financial Statements that could do so.

Principal Risks and Uncertainties

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

Portfolio Liquidity

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

Investment Performance and Impact on NAV

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

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.

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.

Macroeconomic Risks and Impact on NAV

The Company's performance, and underlying NAV, is influenced by economic factors that affect the demand for products or services supplied by investee companies and the valuation of Real Estate interests held. Economic factors will also influence the Company's ability to invest and realise investments and the level of realised returns. Approximately 24% (28 February 2023: 21%) of the Company's investments are denominated in non-US dollar currencies, primarily the euro and also sterling. Fluctuations to these exchange rates will affect the NAV of the Company.

Uncertainties in today's world that influence economic factors include:

(i) War in Ukraine and resulting energy crisis

The Board strongly condemns the actions of the Russian government and the devastating events that have unfolded since Russia’s unprovoked invasion of Ukraine.

JZCP's investments are predominantly focused in the U.S. and Western Europe, and as such, the portfolio has no direct exposure to the affected regions. However, certain portfolio companies have exposure to the volatility in energy costs resulting from the conflict. The Board continue to receive reports from the Investment Adviser on the impact of these increased costs. The Board is not aware that the Company has any Russian investors.

(ii) Conflict in the Middle East

The Board does not consider the Israel-Hamas conflict will directly impact its investment portfolio. However, the Board notes an escalation of the conflict in the Middle East could further increase volatility in energy cost and financial markets.

(iii) Climate Change

JZCP does not have a sustainability-driven investment strategy, nor is its intention to do so, but the Board believes that considering the principle of being environmentally responsible is important in realising the maximum value of the Company's investments.

JZCP only invests where it has existing obligations or to continue selectively to support the existing portfolio. JZAI where possible plans to use its influence as an investor to ensure investee businesses and funds have a cautious and responsible approach to environmental management of their business operations. JZCP invests across a wide range of businesses but has limited exposure to those that create high levels of emissions.

The Board considers the impact of climate change on the firm’s business strategy and risk profile and, where appropriate will make timely climate change related disclosures. Regular updates, given by the Investment Adviser on portfolio companies and properties will include potential risk factors pertaining to climate change and how/if these risks are to be mitigated. The Board receives a report from the Investment Adviser categorising the Company's investments according to their level of exposure to climate-related risks. These climate-related risks can be categorised as either physical (impact of extreme weather, rising sea levels) or transitional (impact of the transition to a lower-carbon economy).

The Board also has regard to the impact of the Company’s own operations on the environment and other stakeholders. There are expectations that portfolio companies operate in a manner that contributes to sustainability by considering the social, environmental, and economic impacts of doing business. The Board requests the Investment Adviser report on any circumstances where expected standards are not met.

The Board has assessed the impact of climate change and has judged that the Company's immediate exposure to the associated risks are low and therefore there is no material impact on the fair value of investments and the financial performance reported in these Interim Financial Statements.

The Board considers the impact of climate change on the firm’s business strategy and risk profile and, where appropriate will make timely climate change related disclosures. Regular updates, given by the Investment Adviser on portfolio companies and properties will include potential risk factors pertaining to climate change and how/if these risks are to be mitigated.

The Board 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 effect of the uncertainty, primarily as a result of the war in Ukraine on market conditions means that there are challenges to completing corporate transactions within the European micro-cap portfolio and planned realisations may take longer than initially anticipated. The potential escalation of the conflict in the Middle East could further increase volatility in financial markets.
• The World Health Organization has now declared that COVID-19 no longer represents a "global health emergency". The Board no longer considers COVID-19 a principal risk.

Going Concern

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

In reaching its conclusion, the Board has considered the risks that could impact the Company’s liquidity over the period from 8 November 2023 to 30 November 2024 (the "Going Concern Period"). There were no events or conditions identified beyond this period which may cast significant doubt on the company's ability to continue as a going concern.

Going Concern Assessment

In June 2023, the Company reported on its much-improved liquidity following a period of material realisations and the subsequent repayment of the Company’s Subordinated Notes and ZDP shares.

During the six-month period ended 31 August 2023, the Company received approximately $9.9 million from realisations and distributions and had cash outflows relating to follow-on investments, expenses and finance costs of $10.1 million. Therefore, there has been no material change to the Company’s liquidity position since 28 February 2023 of approximately $100 million, comprising cash of $45 million (28 February 2023: $11 million) and treasuries of $58 million (28 February 2023: $91 million). There has been no material change in liquidity subsequent to 31 August 2023. The Company's remaining material debt obligation is its $45 million Senior Credit Facility (28 February 2023: $45 million) which matures in January 2027. The Company continues to comply with the covenants attached to the Senior Credit Facility and the Board expect full compliance throughout the going concern period.

As reported in the Chairman's Statement and the Investment Advisors report, the Company anticipates potential near-term realisations that would enable the Company to repay its Senior Credit Facility.

The Board takes account of the levels of realisation proceeds historically generated by the Company’s micro-cap portfolios, the level of funding obligations the Company could be called on through capital calls on existing investments, as well as the accuracy of previous forecasts to assess the predicted accuracy of forecasts presented. The Company continues to work on the realisation of various investments within a timeframe that will enable the Company to maximise the value of its investment portfolio. Due to the Company's strong liquidity, the timeframe to realise investments is not determined by the need to repay debt and the Company is able to mitigate any downturn in the wider economy which might influence the ability to exit investments.

Going Concern Conclusion

After careful consideration and based on the reasons outlined above, the Board have not identified any material uncertainties which may cast significant doubt on the Company's ability to continue as a going concern for the duration of the going concern period. As such the Board is satisfied that it is appropriate to adopt the going concern basis in preparing the Interim Financial Statements and they have a reasonable expectation that the Company will continue in existence as a going concern for the period to 30 November 2024.

Approved by the Board of Directors and agreed on behalf of the Board on 8 November 2023.

David Macfarlane   Sharon Parr

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.

2Notional cost of the Company's interest in JZHL Secondary Fund is calculated in accordance with IFRS, and represents the fair value of the Company's LP interest on recognition adjusted for subsequent distributions.

3Co-investment with Fund A, a Related Party (Note 18).

4 Classified as loan at amortised cost.

Summary of JZCP's investments in JZHL Secondary Fund

1JZCP's valuation being the 37.5% Special L.P. interest in the underlying investment in JZHL Secondary Fund.

Summary of JZCP's investments in JZI Fund III

1Represents JZCP's 18.75% of Fund III's  investment portfolio.

Independent Review Report to JZ Capital Partners Limited

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 August 2023 which comprises the Statement of Comprehensive Income (Unaudited), Statement of Financial Position (Unaudited), Statement of Changes in Equity (Unaudited), Statement of Cash Flows (Unaudited) and related Notes 1 to 23. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 August 2023 are not prepared, in all material respects, in accordance with International Accounting Standard 34 “Interim Financial Reporting”, as adopted by the European Union (“IAS 34”), and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE) issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in Note 2, the annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with IAS 34 “Interim Financial Reporting” as adopted by the European Union.

Conclusion relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with the ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the Directors

The Directors are responsible for preparing the half-yearly financial report in accordance with Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

Guernsey, Channel Islands

8 November 2023

Notes

1. The Interim Report and Financial Statements are published on websites maintained by the Investment Adviser.
2. The maintenance and integrity of these websites are the responsibility of the Investment Adviser; the work carried out by the Auditors does not involve consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Condensed Interim Financial Statements since they were initially presented on the website.
3. Legislation in Guernsey governing the preparation and dissemination of Condensed Interim Financial Statements may differ from legislation in other jurisdictions.

Statement of Comprehensive Income (Unaudited)

For the Period from 1 March 2023 to 31 August 2023

The (loss)/profit for the period all derive from continuing operations.

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

Prior period balances have been restated to present an investment which has been reclassified to fair value through profit or loss from amortised cost as at 31 August 2022 and 1 March 2022, leading to the loan being remeasured on these dates (see Note 2 to the Financial Statements).

Statement of Financial Position (Unaudited)

As at 31 August 2023