Half Yearly Report

RNS Number : 1256V
JZ Capital Partners Ltd
28 October 2010
 



28 October 2010

 

JZ Capital Partners Limited ("JZCP")

Interim Results for the six months ended 31 August 2010

JZCP exists to create a portfolio of investments in businesses primarily in the United States, but also in Europe, providing a superior overall return comprised of a current yield and significant capital appreciation.

Highlights

·      NAV of US$7.62 per share - up 8.2% over the prior period

·      Special Dividend of 10.0c per share - in addition to interim dividend of 5.0c per share

·      Realisation of two investments post period:

Disposal of Apparel Ventures creating a US$11.5m gain

Redeemed in full US$14.8m first and second  lien loans in Harrington Holdings

·      JZ Europe Fund acquired 65% in Factor Energia - a leading energy services business enjoying strong growth in the recently deregulated electricity market in Spain

·      Financial strength to take advantage of investment opportunities both in the US and Europe

 

Commenting on the results, David Macfarlane, Chairman of JZCP, said:

"It is hoped that the sale of Apparel Ventures is indicative of the M&A markets easing up and making for more active investment conditions as well as facilitating the realisation of JZCP's mature investments.

"We are encouraged by the opportunities in the United States and by the opportunity to diversify and spread our risk into Europe and by the quality of our first investment there. In addition to underlying investment growth we expect that there will be more occasions as we realise or refinance investments when we can make special distributions."

For further information:

JZCP

+44 (0)20 7360 4900

David Macfarlane, Chairman




Jordan/Zalaznick Advisers, Inc.

+1 212 572 0800

David Zalaznick




Smithfield

+44 (0)20 7360 4900

Will Swan


 

JZ Capital Partners Limited

(Registration No. 48761)

Registered Office:

 

2nd Floor

Regency Court

Glategny Esplanade

St Peter Port

Guernsey GY1 3NQ

 

Tel:  01481 720321

Fax:  01481 716117

E-MAIL: JZCP@bfgl.com

 

                  

                                                                                                   

Chairman's Statement

 

In the period under review JZCP has been able to invest some of its cash, as well as realize cash from the repayment of debt securities in its portfolio.  In addition since 31 August, our Advisers were able to complete the sale of one of our legacy holdings that returned almost 2x our original investment. The microcap investments continue to perform well, and our publicly traded equities have also appreciated with the result being our NAV is up 8.2% over the prior period. Your Directors are able to declare a Special Dividend in addition to the normal interim dividend. 

 

Post Period Realisations

We are pleased to report the realisation of two of our investments, although both transactions closed after this reporting period. The first is a long-term legacy investment - Apparel Ventures. We had purchased US$12.1 million of common stock in this women's apparel manufacturer. Our portion of this investment sold for US$22.6 million on 6 October 2010, creating an US$11.5 million gain. In addition, Harrington Holdings, a home healthcare supply company, was sold on 29 September 2010. We had a US$14.8 million investment in first and second lien loans; they were redeemed at par.

 

European Investment Opportunities

In addition to realisations, another significant matter to report for the last six months concerns JZCP's ambition to invest in European microcap companies and build a European portfolio. As was approved by shareholders at the AGM, there is a mandate from shareholders to vary the investment strategy and invest up to 20 per cent of its portfolio outside of the United States, specifically so as to allow investment in JZ Europe Fund 2010 LP ("JZ Europe Fund"), a new fund then being promoted by the principals of JZ International Limited ("JZI"), the European private equity platform founded in 1999 by David Zalaznick, Jay Jordan and Jock Green-Armytage. JZI has found that the fund raising process has been much slower than expected. In the meantime, the deal flow from JZI has been very robust and the opportunities very compelling.

 

In July, the first investment proposed for the JZI Europe Fund needed to be made or the opportunity would have been lost and thus JZCP came to invest in the fund ahead of its full capitalisation. The fund is constituted as an LLP in which the partners will be JZCP as to 75 per cent and David Zalaznick and Jay Jordan as to 25 per cent. JZ Europe Fund acquired a 65 per cent interest in Factor Energia, a leading energy services business in the recently deregulated electricity market in Spain.  Based on the maximum consideration the historic transaction multiple is 6.5x 2009 EBITDA, a very reasonable multiple for a business enjoying strong growth. 

 

A number of other investment opportunities in Spain are under letter of intent to JZI and likely to require funding  before there can be any certainty that the JZ Europe Fund will be fully capitalised and in a position to invest in these deals. Fortunately, JZCP can participate in these investments as it had planned, notwithstanding that the fund has not closed.

 

It is therefore proposed that JZCP will invest in European investments introduced and managed by our investment adviser, JZAI and its affiliates, through the JZ Europe Fund with our advisers David Zalaznick and Jay Jordan co-investing (participation limited to 25 per cent of the fund) on identical terms to those on which JZCP invests. Other investors may be invited to co-invest if and when it is felt appropriate to spread risk or size demands it.

 

JZ Europe Fund will be managed by an affiliate of JZAI on the footing that JZCP will not suffer double or additional fees. There will be no change to the amount or incidence of the regular 1.5% management fee or to the rate of the 20% carry.  JZCP pays a carried interest fee to the Adviser based on net realized gains and losses.  But a variation is required to the incidence of the carry in the light of the proposed arrangements and the practical consideration of having two separate teams running two similar but independent micro-cap portfolios; by investing through the JZ Europe fund there is a way to ring fence the two parts of the investment portfolio which will avoid rewarding or penalising the respective teams and their respective portfolios.  This arrangement would be a change to the management agreement and would require shareholders approval. The Directors believe that the opportunity to participate in the investment opportunities in Europe that JZI can make available as well as the opportunity to spread risk from the US comfortably justify the proposed change. I shall write to you shortly setting out the proposals in greater detail and seeking your approval.

 

 

Other Investments

As noted in greater detail in the Investment Adviser's Letter we have also during the period under review invested some US$30.5 million in a follow-up acquisition for Dantom Systems, China Dental Holdings (Dental Services Group), Galson Laboratories (one of our new verticals) and New Vitality.

 

Net Asset Value

At the end of the period under review, 31st August 2010, the NAV of JZCP was US$495.4 million ($7.62 per share) against US$457.5 million (US$7.04 per share) on 28th February 2010. The published NAV for the period ended 31 August 2010 was US$483.9 million (US$7.44 per share). The adjusted NAV per the interim financial statements reflects the post period end disposal value of Apparel Ventures, Inc.

 

The principal contributions to this movement have come from the revaluation of Apparel Ventures, Inc., 18c per share, the listed investments, 12c per share, and the bank debt, 15c per share. Overall the microcap portfolio is marginally increased in the directors' valuation, 4c per share, with increases in G & H Wire and the Woundcare companies, 18c per share, exceeding a write down of Dental Services of 14c per share.

 

Income and Dividends

It is the Directors' policy to distribute substantially all net cash income to shareholders. Like its predecessor, JZCP has followed the policy of allocating the Investment Advisers' fee between capital (65%) and income (35%). Over time this has had the effect of permitting the distribution of more cash than we generate from investment income and thus distorting reported net revenue. We propose to change that policy and to charge the whole investment advisory fee to revenue. The Directors have determined this in the confidence that investment conditions will lead to a rising income and in the expectation that conditions that will allow the payment of further Special dividends will be repeated, albeit not at regular intervals.

 

On that basis therefore, revenue return for the six months ended 31st August 2010 was 22.2c per share and adjusted for non-cash income, being paid in kind securities and preference dividends, and for an amount of some US$1.5 million of irregular income which is however included in the Special Dividend below, was 6.6c per share. Accordingly the Directors have declared an interim dividend of 5.0c per share (interim for year to 28th February 2010 when income was untypically skewed to the first half was 9c per share).

 

It is the policy of the Directors not to make distributions of non cash income unless and until it is converted into cash when it is policy that the Directors would return substantially all such cash to shareholders. Transactions have occurred principally concerning Woundcare, Continental Cement, and Roofing Supply, whereby an amount of US$7.5 million that had been recognised as non-cash income was converted into cash. The Directors have therefore in addition to the interim dividend declared a Special Dividend of 10.0c per share.

 

Share Buybacks

The Directors' attitude remains unchanged. They do not think that for a listed private equity investment company there is any evidence to show that buying back shares has anything other than a temporary effect on the share discount. They will continue to be alert to opportunities to buy back shares on investment grounds but having raised significant new capital as recently as 2009 they see their priority to concentrate on investment in the microcap sector.

 

Incentive Fees

It is the policy of the Directors to provide where appropriate for the capital and income incentive fees to which JZAI becomes entitled under the Advisory Agreement. At 31st August 2010, no provision was taken for either a capital or income incentive fee.

 

Outlook

JZCP is in a strong financial position. It is hoped that the sale of Apparel Ventures is indicative of the M&A markets easing up and making for more active investment conditions as well as facilitating the realisation of our mature investments. We are encouraged by the opportunities in the United States particularly through the five vertical investment sectors and vehicles established by JZAI, by the opportunity to diversify and spread our risk into Europe and by the quality of our first investment there. In addition to underlying investment growth we expect that there will be more occasions as we realise or refinance investments when we can make additional special distributions.

 

 

David Macfarlane

 

Chairman

27 October 2010

 

 

Investment Adviser's Report

 

Dear fellow shareholders:

 

We are pleased to report that JZCP's financial condition for the first six months ended on 31 August 2010 is excellent.  During this period, JZCP's NAV per share increased by 8.2% and your company continues to be highly liquid with 43% of our assets in cash, listed equities, treasury notes or publicly traded bank debt.  Our respective portfolios of investments - micro-cap buyouts, mezzanine investments, and listed equities, legacy and bank debt portfolio - have performed well. In addition, JZCP has, post 31 August, realised significant cash from the repayment of bank debt we held, as well as a realisation of one of our "legacy" companies - all enhancing the liquidity of JZCP. We also realised a US$1.5 million gain on the sale of our U.S Treasuries.

 

Portfolio Summary

Here is a "snapshot" of JZCP at 31 August 2010 compared with the position at our 28 February 2010 fiscal year end six months ago:

 


31.08.2010


28.02.2010


Change


US$'000


US$'000


US$'000







Micro-Cap portfolio

201,680


171,903


29,777

Mezzanine portfolio

84,855


85,696


(841)

Legacy portfolio

43,663


31,845


11,818

Total private investments

330,198


289,444


40,754





Listed equity

77,547


69,642


7,905

Bank debt

45,291


35,589


9,702

Treasury notes

101,459


-


101,459

Cash

15,668


134,867


(119,199)

Total listed investments (including cash)

239,965


240,098


(133)





Total investments (including cash)

570,163


529,542


40,621







Other current assets

1,151


682


469







Total assets

571,314


530,224


41,090

 

Micro-Cap Portfolio

Our microcap portfolio is the growth engine of JZCP's NAV.  In our Adviser's letter in May 2010, we wrote to you about setting up five new verticals for strategic build-ups.  We have now completed our research showing that there are many acquisition candidates that meet our investment criteria - high margin, non-capital or technology intensive businesses in highly fragmented industries that are scalable - and have secured the services of extremely accomplished industry executives to oversee each of the new verticals, and acquisitions into them.

 

The new verticals are as follows:

 

1.    Testing Services Holdings, Inc. was created to build a full-line of speciality testing services businesses, which provide testing, inspection and certification services to various end-markets, including medical, aerospace, power generation, petro-chemical, environmental and other specialty niches.  Our business executive overseeing this "vertical" is Phil Rooney, former CEO of Waste Management and contributor to JZCP's successful sale of Mid-American Recycling.

We made our first acquisition, Galson Laboratories, in the testing services business in May 2010.  Galson is a full service provider of analytical testing. Galson has revenue of $11.2 million and was purchased for an enterprise value of $10 million; JZCP purchased approximately $2.7 million in preferred stock and $2.5 million in senior debt and owns 45% of the business.  We are excited about the opportunity that Galson Labs creates for us in the fast-growing industrial hygiene sector.

 

2.    Industrial Services Solutions Holdings Corporation was created to build a diversified industrial services and manufacturing business, centered around critical-to-process industrial applications, including turbines, pumps, filtration, air pollution control and industrial automation equipment.  Our executive involved in this entity is Jim Rodgers, former CEO of Industrial Control Systems at General Electric and an operating partner at Clayton, Dubilier and Rice, a well-regarded private equity firm.

3.    Sensors Solutions Holdings Corporation was created to build a diversified business in the growing and fragmented sensors and transmitters industry.  The focus is on value-added sensing and transmitting products used by high-growth market sectors.  Targeted applications include high-cost of failure environmental monitoring and industrial process controls.  Gerry Posner, former CEO of Mikron and Electronic Measurement Inc., is our industry executive.

 

4.    Specialty Foods is the vertical managed by Bob Aiken, former CEO of US First Food Service, which has the mandate to create a nationwide specialty foods holding company with both distribution and production capabilities.  The focus of the strategy centers around specialty, ethnic and gourmet niches that are highly fragmented and protected from large industry competitors.

 

5.    Tri-Water Holdings Corporation, where we have partnered with Mike Reardon, former CEO of U.S. Filter, is focused on building a portfolio of water treatment and process companies, both industrial and consumer driven.

 

We look forward to reporting on these respective verticals as we make new acquisitions.

 

We have made an add-on acquisition in our collection management company-Dantom Systems.  This is the third acquisition we have made in Dantom in the last 24 months.  We invested US$10.7 million of senior subordinated notes, our 50% share of the US$21 million purchase price, to help fund the acquisition of Data Image, a healthcare driven collections and statement processing business.  The Dantom management team has proven its ability to professionally integrate these acquisitions into its core business.  We are already seeing progress and the earning performance is good.

 

We also invested in a new micro-cap business, New Vitality, in partnership with Baird Capital Partners; JZCP invested US$4 million for a 9.2% ownership stake.  New Vitality is a leader in the direct to consumer nutritional supplement and personal care product market and is very profitable - sales of US$45 million with EBITDA margins 20% plus; our investment was made at 6.7x EBITDA.  We anticipate more opportunities to increase our investment in New Vitality as it identifies both product line extensions and competitors to acquire.  This is an exciting growth company and its performance has already exceeded expectations.

 

We have also set up an affiliate for one of our existing portfolio companies, Dental Services Group, in China.  We have extensive experience in China having been active there for the past 15 years. DSG will benefit greatly by being able to source low-cost labor and ultimately to service the great China market.

 

Post 31 August, we made a US$10 million commitment to Milestone Aviation, a new specialty finance business which focuses exclusively on civil helicopters and private jets.  JZCP is participating in a US$300 million plus equity strategy being led by The Jordan Company.  We think the returns will be excellent without great risk and we have known the CEO for over 20 years.  We will keep you posted on Milestone's progress.

 

Our microcap portfolio is modestly leveraged, at 1.2 times trailing EBITDA.  This is after adding $75 million of bank debt at our woundcare portfolio companies, allowing them to repay US$15.7 million back to JZCP of our investment in this sub-debt capital.  Our Board has continued to value the micro-cap portfolio at very reasonable multiples.  The effective EBITDA multiple continues to be 5.8x.  We foresee no immediate refinancing risks on the microcap portfolio.

 

European Micro-Cap

We have embarked on building a European micro-cap portfolio for JZCP, as discussed in the Chairman's statement.

 

We purchased the first business, Factor Energia ("FE"), in July 2010.  FE is in the energy distribution business for energy distribution business serving small and medium sized companies, a recently de-regulated part of the electric utility industry in Spain.  There is a fast growing segment of the market - FE had 4,000 clients a year ago, 10,000 when we bought it and is projected to have 20,000 by December.

 

We purchased FE at 6.5x 2009 EBITDA from its parent company which was experiencing financial difficulties.  Our JZ International team with our existing infrastructure in Spain in the financial distribution and credit management sectors will help Factor Energia's management to realize their growth plans.  We expect the company to continue its fast growth and produce excellent results.

 

We have secured additional acquisition prospects under Letter of Intent and look forward to reporting on our progress in the near future.

 

Mezzanine Portfolio

Our Mezzanine Portfolio consists of six investments which have attributable value. The largest of these investments is Continental Cement, which has a carrying value of $29.4 million; the company was recently recapitalised with a large equity investment that is subordinate to JZCP's debt.  Given their size, these businesses have more leverage on them than our microcap portfolio with a debt senior to JZCP of 3.5 times trailing EBITDA.  We have made no new investments in our Mezzanine Portfolio in the past six months.

 

Legacy Investments/Realisations

The legacy investments are those that were in the JZEP portfolio prior to 2002 and were transferred to JZCP upon the liquidation of JZEP in July 2008.  Almost all this segment's value on JZCP's books is in two companies-Healthcare Products Holdings,Inc. ($13.2 million) and Apparel Ventures ($12.1 million).  We are delighted to report that, subsequent to the end of August, Apparel Ventures was sold and JZCP has realized $22.0 million in cash and has a $3.0 million stake in two escrow accounts - almost a 2x return on our investment today and hopefully exceeding 2x if escrows are paid in full - after sixteen years of ownership this is a very satisfactory result.

 

Listed Equities

Listed equities consist of three companies in which JZCP had a significant investment which were partially redeemed via an IPO.  The largest portion of this portfolio is Safety Insurance, representing 61% of the listed equities, followed by TAL at 38%.  The underlying economics of both these companies continues to be very positive; the respective stocks have performed well.

 

Bank Debt

Of the ten investments in this portfolio, nine are publicly traded; the tenth is a small bank facility.  42% of the bank debt is in first lien loans, while 58% is in second lien loans.  Secondary trading in the bank market continues to be a challenge, as bank specific issues still seem to create a negative overhang on underlying portfolio investment values.  All that being said; the bank portfolio has risen from 63%, as a percentage of par at the beginning of this year to 79%, at the end of this six month period.  On October 1, 2010, $14.5 million of this portfolio was redeemed at 100% of par via a sale of Harrington Holdings, a home healthcare related business that was a Resolute Fund transaction.

 

New Opportunities

We have closed on $45 million in commitments on new and private "side car" fund, "Fund A," which will fund pro rata with JZCP on each of our new U.S. microcap buyouts.  The funding ratio at present will be $150 million from JZCP and $45 million from the "side car" fund, or approximately a 3:1 ratio.  This additional capital resource will provide JZCP with a larger and more diverse portfolio than it could achieve on its own.  We may add additional investors to "Fund A" in due course, however, no assurances can be made given the challenging fundraising environment.

 

We have a robust perspective with our five new verticals and anticipate being very actively investing money in the U.S. during the next six months.  Likewise, our European perspective is extremely strong.  As JZCP's liquidity is invested, we anticipate it will be replenished with the proceeds from realisations.  We may also consider entering into a line of credit facility to help balance JZCP's realisation and investment cycles.

 

Principal Risks and Uncertainties

As a fund, our risks are those associated with our investment portfolio.  Given the nature of this portfolio, the principal risks are associated with the financial and operating performance of the underlying investments, along with some market risks associated with a publicly listed bank and equity portfolios. The Company's risk management processes are described on pages 52 to 59 of the Company's audited financial statements for the year ended 28 February 2010.

 

Outlook

We believe JZCP has the right ingredients with two superb investment teams (U.S. and Europe) and the liquidity to become a larger more diversified investment company. We hope to offer our fellow shareholders the same type of superior returns as we have in the past - just more of them.

 

As always, we appreciate your support and do not take it for granted.  If you have any investment ideas you think may qualify as a JZCP opportunity, please do not hesitate to contact us.

 

Best wishes for a happy and healthy holiday season.

 

Yours faithfully,

 

David W. Zalaznick

John W. Jordan II

 

Jordan/Zalaznick Advisers, Inc.

27 October 2010

 

 



Investment Review

 

Company

Book

cost*

US$'000


Original

JZEP

Historical

cost**

US$'000


Directors Valuation at

31 August 2010 US$'000


Carrying Value

Including

Accrued

Interest

31 August

2010

US$'000


Percentage of portfolio

%










 


Bank Debt: First Lien Portfolio









 


EMDEON BUSINESS SERVICES, LLC

Healthcare service provider

2,549


2,713


2,622


2,622


0.5

HARRINGTON HOLDINGS, INC.***

Distributor of healthcare products

4,505


4,838


4,717


4,717


0.9

INFONXX INC.

Worldwide provider of directory assistance

2,762


2,895


2,745


2,745


0.5

INTERGRAPH CORPORATION

Designer and provider of SIM software

801


837


832


832


0.2

KINETEK, INC.***

Manufacturer of electric motors and gearboxes

4,329


4,723


3,978


3,978


0.7

PETCO ANIMAL SUPPLIES, INC

Retailer of pet food, supplies and services

1,774


1,931


1,852


1,855


0.3

SCS HOLDINGS II, INC.

IT solutions provider

671


858


821


833


0.2

TOTES ISOTONER CORPORATION

Leading designer and retailer of cold weather and rain products

585


782


710


710


0.1

WP EVENFLO HOLDINGS, INC.

Manufacturer of children's products

809


943


830


838


0.2











Bank Debt: Second Lien Portfolio










DEKKO TECHNOLOGIES, LLC

Distributor of electrical sub-components

11,418


11,368


4,593


4,672


0.8

EMDEON BUSINESS SERVICES, LLC

Healthcare service provider

465


500


484


484


0.1

HARRINGTON HOLDINGS, INC.

Distributor of healthcare products

9,300


10,000


10,000


10,000


1.8

KINETEK, INC.***

Manufacturer of electric motors and gearboxes

13,425


15,000


10,875


11,005


2.0

Total Bank Debt

53,393


57,388


45,059


45,291


8.3











Mezzanine Portfolio









 


BRAXTON-BRAGG CORPORATION

Distributor of equipment to stone fabricators

1,324


1,324


66


66


-

CONTINENTAL CEMENT COMPANY, LLC

Mines and processes limestone

28,082


28,082


28,082


29,352


5.3

GED HOLDINGS, INC.

Manufacturer of windows

4,064


10,164


305


325


-

HAAS TCM GROUP, INC

Speciality chemical distribution

7,584


7,584


7,584


7,766


1.4

M/C COMMUNICATIONS, LLC

Provision of marketing services to the medical profession

800


800


-


-


-

METPAR INDUSTRIES, INC.

Manufacturer of restroom partitions

7,348


8,653


1,600


1,733


0.3

PETCO ANIMAL SUPPLIES, INC.

Retailer of pet food, supplies and services

17,508


17,508


17,508


18,066


3.3

ROOFING SUPPLY GROUP, INC.

Distributor of roofing products

13,006


19,125


18,550


18,989


3.4

TTS, LLC

Provider of technical facilities for mechanical services

8,571


8,411


8,411


8,558


1.5

Total Mezzanine Porfolio

88,287


101,651


82,106


84,855


15.2











Micro Cap Portfolio










ACCUTEST HOLDINGS, INC.

Provision of environmental testing laboratories to the US market

41,991


38,530


33,816


35,826


6.5

BG Holdings, INC.

Manufacturer of industrial gears

25,354


25,352


23,247


24,769


4.5

CHINA DENTAL HOLDINGS, INC.

Potential acquiror of China-based labratories

601


601


601


610


0.1

DANTOM SYSTEMS, INC.

Outsourcing of debt collection

32,563


34,612


34,563


35,421


6.4

DENTAL SERVICES, INC.

Manufacturer of dental services

30,805


25,043


18,154


18,934


3.4

GHW HOLDINGS, INC.

Manufacturer and distributor of orthodontic products

15,099


8,640


22,498


22,934


4.1

IND SERVICES SOLUTIONS, INC

Potential acquiror of industrial equipment service businesses

792


792


792


824


0.1

JZ EUROPE FUND

Acquiror of Europe-based microcap companies

13,935


13,935


13,935


14,116


2.5

NATIONWIDE STUDIOS, INC.

Processer of digital photos for preschoolers

17,647


18,632


4,600


4,786


0.9

NEW VITALITY HOLDINGS, INC.

 Direct-to-consumer provider of nutritional supplements and personal care products

4,000


4,000


4,000


4,135


0.7

SECHRIST INDUSTRIES, INC.***

Manufacturer of oxygen chambers and other respiratory products

12,905


3,428


9,805


9,989


1.8

SENSORS SOLUTIONS, INC Potential acquiror of businesses affiliated with sensor devices or systems

192


192


192


198


-

TAP HOLDINGS, INC

Potential acquiror of food product manufacturers or distributors

492


492


492


511


0.1

TESTING SERVICES HOLDINGS

Acquiror of laboratory testing businesses. Its first acquisition was Galson Holdings, Inc. a provider of industrial hygiene testing services

5,590


5,590


5,590


5,748


1.0

TRIWATER HOLDINGS CORPORATION

Potential acquiror of water treatment businesses

342


342


342


355


0.1

WOUND CARE SOLUTIONS, LLC***

Chronic wound care treatment

37,870


53,465


22,000


22,524


4.1

Total Micro Cap Portfolio

240,178


233,646


194,627


201,680


36.3











Legacy Portfolio:










ADVANCED CHEMISTRY & TECHNOLOGY, INC. Manufacturer of aircraft sealants

3,471


3,471


3,471


3,505


0.6

APPAREL VENTURES, INC. Swimwear designer, manufacturer and marketeer

12,087


12,087


12,087


23,587


4.3

ETX HOLDINGS, INC

Provider of services to the auto after sales market

474


474


474


499


0.1

GEAR FOR SPORTS, INC.

Sports and active-wear designer and manufacturer

-


1,495


-


-


-

HEALTHCARE PRODUCTS HOLDINGS, INC.

Designer and manufacturer of motorised vehicles

23,108


31,303


13,189


14,014


2.5

JORDAN INDUSTRIES, INC.

Conglomerate

-


21


-


-


-

JZ INTERNATIONAL LLC

Fund of European LBO investments

1,684


724


1,684


1,706


0.3

NTT ACQUISITION CORP

Technical education and training

52


946


52


52



TIGER INFORMATION SYSTEMS, INC.

Provider of temporary staff and computer training

300


400


300


300


0.1

Total Legacy Portfolio

41,176


50,921


31,257


43,663


7.9











Listed Investments










Equities










SAFETY INSURANCE GROUP, INC.

Provider of automobile insurance

42,223


6,816


47,153


47,153


8.5

TAL INTERNATIONAL GROUP, INC.***

Lessor of intermodal shipping containers

31,959


13,798


29,363


29,363


5.3

UNIVERSAL TECHNICAL INSTITUTE, INC.

Vocational training in the automotive and marine fields

835


15


1,031


1,031


0.2

Total Listed Investments

75,017


20,629


  77,547


77,547


14.0











Treasury Notes










US Treasury note 1 1/8% maturity 15 June 2013

99,695


99,695


101,219


101,459


18.3

Total - Portfolio

597,746


563,930


531,815


554,495


100.0











Zero Dividend Preference shares







(74,723)



Cash and other net assets







15,619



Net assets attributable to Ordinary shares







495,391



 

 

* Book cost to JZCP equating to transfer value as at 1 July 2008 upon the liquidation of JZEP and adjusted for subsequent transactions.

**Original book cost incurred by JZEP adjusted for subsequent transactions.

*** Invested in deals with the Resolute Fund - see note 19.

Mezzanine Portfolio includes common stock with a carrying value of US$2,457,000 and prefered shares with a carrying value of US$142,279, these investments are classified as  Investments at fair value through profit or loss.

Legacy Portfolio - Investments not subject to capital incentive fee

 

 

 

 



Unaudited Statement of Comprehensive Income

 

For the Period from 1 March 2010 to 31 August 2010

 

 



Six month period from 1 March 2010

to 31 August 2010


Six month period from 1 March 2009

to 31 August 2009



Revenue


Capital




Revenue


Capital





return


return


Total


return


return


Total


Notes

US$'000


US$'000


US$'000


US$'000


US$'000


US$'000

Income













Net gain on investments at fair value through profit or loss

 

5

 

-


 

32,602


 

32,602


 

-


 

14,276


 

14,276

(Impairments)/Write back of Impairments on loans and receivables

 

 

6

 

 

-


 

 

(2,439)


 

 

(2,439)


 

 

-


 

 

2,918


 

 

2,918

Net foreign currency exchange losses

 

7

 

-


 

(507)


 

(507)


 

-


 

(1,108)


 

(1,108)

Realised gains on investments held in escrow accounts


 

 

-


 

 

801


 

 

801


 

 

-


 

 

-


 

 

-

Investment income

8

20,074


-


20,074


19,554


-


19,554

Bank and deposit interest


141


-


141


103


-


103

Total income


20,215


30,457


50,672


19,657


16,086


35,743














Expenses













Investment Adviser's base fee

10

(2,725)


(1,467)


(4,192)


(2,310)


(1,244)


(3,554)

Administrative expenses

10

(1,075)


-


(1,075)


(1,359)


-


(1,359)

Total expenses


(3,800)


(1,467)


(5,267)


(3,669)


(1,244)


(4,913)














Operating profit


16,415


28,990


45,405


15,988


14,842


30,830














Finance costs













Finance costs in respect of Zero Dividend Preference shares

 

 

9

 

 

-


 

 

(2,823)


 

 

(2,823)


 

 

-  


 

 

(4,772)


 

 

(4,772)

Profit before taxation


16,415


26,167


42,582


15,988


10,070


26,058














Withholding taxes

11

(487)


-


(487)


(286)


-


(286)














Profit for the period


15,928


26,167


42,095


15,702


10,070


25,772



























Weighted average number of Ordinary shares in issue during period*

 

 

16




 

 

65,018,610





 

 

38,124,240














Basic and diluted gain per Ordinary share using the weighted average number of Ordinary shares in issue during the period

 

 

 

 

16

 

 

 

 

24.50c


 

 

 

 

40.25c


 

 

 

 

64.74c


 

 

 

 

41.19c


 

 

 

 

26.41c


 

 

 

 

67.60c

 

 

 

*Comparative figures for weighted average number of Ordinary shares in issue during the period and basic and diluted gain per Ordinary share have been restated to reflect the one share for five consolidation on 22 June 2009 and the bonus element of new shares issued on 22 June 2009.

All items in the above statement are derived from continuing operations.

All profit for the period is attributable to the Ordinary shareholders of the Company.

The Company's investment activities commenced on 1 July 2008 upon transfer of investments following the liquidation of JZEP.

The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice.



 

 

 

Unaudited Statement of Financial Position

 

As at 31 August 2010

 

 




31 August


28 February





2010


2010



Notes


US$'000


US$'000


Assets







Investments at fair value through profit or loss

12


472,239


311,436


Investments classified as loans and receivables

12


82,256


83,239


Other receivables



1,151


682


Cash and cash equivalents



15,668


134,867


Total Assets



571,314


530,224









Liabilities







Zero Dividend Preference shares

13


74,723


71,399


Other payables



1,200


1,312


Total liabilities



75,923


72,711









Equity

15






Share capital account



149,269


149,269


Distributable reserve



353,526


353,517


Capital reserve



(59,023)


(85,190)


Revenue reserve



51,619


39,917


Total equity



495,391


457,513









Total liabilities and equity



571,314


530,224









Number of Ordinary shares in issue at period/year end

14


65,018,610


65,018,610









Net asset value per Ordinary share

17


US$ 7.62


US$ 7.04


 

 

 

These unaudited financial statements were approved by the Board of Directors and authorised for issue on 27 October 2010.  They were signed on its behalf by:

 

 

 

 

David Macfarlane

Patrick Firth

Chairman

Director

 

 

 



 

Unaudited Statement of Changes in Equity

 

For the Period from 1 March 2010 to 31 August 2010

 



Share











 



Capital




Distributable


Capital Reserve


Revenue



 


Notes

Account




Reserve


Realised


Unrealised


Reserve


Total



US$'000




US$'000


US$'000


US$'000


US$'000


US$'000
















Balance as at 1 March 2010


 

149,269




 

353,517


 

(20,617)


 

(64,573)


 

39,917


 

457,513
















(Loss)/profit for the period


 

-




 

-


 

(3,424)


 

29,591


 

15,928


 

42,095
















Dividend paid

15

-




-


-


-


(4,226)


(4,226)
















Increase in receivables relating to JZ Equity Partners Plc


 

 

 

-




 

 

 

9


 

 

 

-


 

 

 

-


 

 

 

-


 

 

 

9
















Balance as at 31 August 2010


 

149,269




 

353,526


 

(24,041)


 

(34,982)


 

51,619


 

495,391

 

 

Comparative for the period from 1 March 2009 to 31 August 2009

 



Share


Share









 



Capital


Premium


Distributable


Capital Reserve


Revenue



 


Notes

Account


Account


Reserve


Realised


Unrealised


Reserve


Total



US$'000


US$'000


US$'000


US$'000


US$'000


US$'000


US$'000
















Balance as at 1 March 2009


 

-


 

353,365


 

-


 

(5,758)


 

(105,822)


 

15,199


 

256,984
















(Loss)/profit for the period


 

-


 

-


 

-


 

(10,577)


 

20,647


 

15,702


 

25,772
















Issue of Ordinary shares


 

77,008


 

-


 

-


 

-


 

-


 

-


 

77,008
















Issue of Limited Voting Ordinary shares


 

 

72,261


 

 

-


 

 

-


 

 

-


 

 

-


 

 

-


 

 

72,261
















Transfer of Share Premium to distributable reserve


 

 

 

-


 

 

 

(353,365)


 

 

 

353,365


 

 

 

-


 

 

 

-


 

 

 

-


 

 

 

-
















Increase in receivables relating to JZ Equity Partners Plc


 

 

 

-


 

 

 

-


 

 

 

232


 

 

 

-


 

 

 

-


 

 

 

-


 

 

 

232
















Balance as at 31 August 2009


 

149,269


 

-


 

353,597


 

(16,335)


 

(85,175)


 

30,901


 

432,257

 

 

 



Unaudited Statement of Cash flows

 

For the Period from 1 March 2010 to 31 August 2010

 

 




Six month


Six month





period from


period from





1 March 2010 to 31 August 2010


1 March 2009 to 31 August 2009



Notes


US$'000


US$'000


Operating activities







Net cash inflow from operating activities

18


5,482


6,362


Cash outflow for purchase of investments



(37,026)


(7,847)


Cash outflow from purchase of US treasury notes



(99,695)


-


Cash inflow from repayment of investments



16,266


1,745


Net cash (outflow)/inflow before financing activities



(114,973)


260









Financing activity







Net cash proceeds received in consideration for Ordinary shares



 

-  


80,567


Net cash received in consideration for Limited Voting Ordinary shares



 

-


76,086


Issue costs



-


(7,096)


Net cash received for issue of new Zero Dividend Preference shares less issue costs



 

-


16,241


Cash paid for redemption of old Zero Dividend Preference shares



 

-


(104,739)


Settlement of forward currency derivative contract



-


(26,923)


Proceeds relating to the liquidation of JZ Equity Partners Plc



-


292


Distributions paid to shareholders

23


(4,226)


-


Net cash (outflow)/inflow from financing activities



(4,226)


34,428









(Decrease)/increase in cash and cash equivalents



(119,199)


34,688









Reconciliation of net cash flow to movements in cash and cash equivalents




Cash and Cash Equivalents as at 1 March



134,867


104,728


(Decrease)/increase in cash and cash equivalents as above



(119,199)


34,688


Cash and Cash Equivalents as at 31 August



15,668


139,416


 

 

 

 

 

 

 

 

 

 

 



Notes to the Condensed Interim Financial Statements

 

 

1.   General Information

JZ Capital Partners Limited (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, which came in to effect on 1 July 2008. The Company's Share Capital consists of Ordinary shares and Zero Dividend Redeemable Preference ("ZDP") shares.  The Ordinary shares and ZDP shares were admitted to the official list of the London Stock Exchange on 1 July 2008.

 

The Company was granted consent on 8 May 2008 by the Guernsey Financial Services Commission under The Control of Borrowing (Bailiwick of Guernsey) Ordinance,1959 to raise up to £300,000,000 by the issue of shares.

 

The Company was launched in connection with a scheme of reconstruction and voluntary winding up of JZ Equity Partners Plc ("JZEP") under section 110 of the Insolvency Act 1986. JZEP's assets, after providing for its liabilities were transferred in specie to the Company on 1 July 2008 and the Company issued to JZEP Shareholders (other than those who opted against the new scheme) one Ordinary Share for each JZEP Ordinary Share and one Zero Dividend Preference ("ZDP") Share for each JZEP ZDP Share that they held.

 

On 22 June 2009 a Placing and open offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. The Ordinary shares were subsequently consolidated on the basis that all holders of Ordinary shares will hold one Ordinary share for every five Ordinary Shares held immediately prior to the share consolidation. New ZDP shares were also issued following the redemption of the old ZDP shares (note 13).

 

Limited Voting Ordinary Shares ("LVO") were issued so that certain of the Company's existing Shareholders and certain new investors that are Qualifying US Persons could participate in the Ordinary Share Issue without causing the Company to be treated as a US domestic company for the purposes of US securities laws and/or a CFC for US tax purposes. Limited Voting Ordinary Shares are identical to, and rank pari passu in all respects with, the New Ordinary shares except that the Limited Voting Ordinary Shares will only carry a limited entitlement to vote in respect of the appointment or removal of Directors and will not carry any entitlement to vote in respect of certain other matters. The LVO shares are not listed and are not admitted to trade on or through the facilities of the London Stock Exchange.

 

In 2009, the Guernsey Financial Services Commission (GFSC) amended the rules in respect of closed ended funds formerly authorised under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989 to bring all such funds under the Protection of Investors (Bailiwick of Guernsey) Law 1987. This amendment requires the closed ended funds to elect to be either a registered or authorised fund. The Company has elected to remain an authorised fund as there were no real benefits to seeking Registered Fund status.

 

The Company's corporate objective is to create a portfolio of investments in businesses primarily in the United States, providing a superior overall return comprised of a current yield and significant capital appreciation. The Company's present strategies include investments in micro-cap buyouts, mezzanine loans (sometimes with equity participations) and high yield securities, senior secured debt and second lien loans and other debt and equity opportunities, including distressed debt and structured financings, derivatives and opportunistic purchase of publicly traded securities.

 

The Company has no direct employees. For its services the Investment Adviser receives a monthly management fee and may also be entitled to a performance-related fee (note 10). The Company has no ownership interest in the Investment Adviser. The Company is administered by Butterfield Fulcrum Group (Guernsey) Limited (note 10).

 

2.   Significant Accounting Policies

The accounting policies adopted in the preparation of these condensed interim financial statement have been consistently applied during the period of this statement, unless otherwise stated.

 

Statement of Compliance

The condensed interim financial statements of the Company for the period 1 March 2010 to 31 August 2010 have been prepared in accordance with IAS 34, "Interim Financial Reporting" together with applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the London Stock Exchange. The condensed interim financial statements do not include all the information and disclosure required in the annual financial statements and should be read in conjunction with the annual report and audited financial statements at 28 February 2010.

 

Basis of Preparation

The condensed interim financial statements have been prepared under the historical cost or amortised cost basis, modified by the revaluation of certain financial instruments designated at Fair value through Profit or Loss upon initial recognition.  The principal accounting policies adopted are set out below.  The preparation of condensed interim financial statements in conformity with IAS 34, "Interim Financial Reporting" requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

3.   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 has been organised into the following segments:

 

• Portfolio of Bank debt         .

• Portfolio of Mezzanine investments.

• Portfolio of Micro Cap investments.

• Portfolio of Legacy investments.

• Portfolio of Listed investments.

 

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 diversified portfolios.

 

There have been no changes in reportable segments during the course of the year. The segment information provided is also presented to the board of the Company.

 

For the period ended 31 August 2010

 


Bank


Mezzanine


Micro Cap


Legacy


Listed




Debt


Portfolio


Portfolio


Portfolio


Investments


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000













Interest revenue

1,473


5,890


8,645


1,344


-


17,352

Dividend revenue

-


-


-


-


2,384


2,384

Other revenue

54


-


-


23


-


77

Net gain/(loss) on investments at fair value through profit or loss

 

10,057


 

-


 

2,596


 

10,544


 

7,904


 

31,101

Impairments on loans and receivables

 

-


 

(2,439)


 

-


 

-


 

-


 

(2,439)

Investment Adviser's base fee

-


-


-


-


-


(4,192)

Total segmental operating profit

11,584


3,451


11,241


11,911


10,288


44,283

 

For the period ended 31 August 2009

 


Bank


Mezzanine


Micro Cap


Legacy


Listed




Debt


Portfolio


Portfolio


Portfolio


Investments


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000













Interest revenue

1,369


5,825


8,213


1,141


-


16,548

Dividend revenue

-


-


-


-


1,295


1,295

Other revenue

-


-


-


1,711


-


1,711

Net gain/(loss) on investments at fair value through profit or loss

 

6,872


 

-


 

(1,551)


 

766


 

8,189


 

14,276

Net write back of impairments on loans and receivables

 

-


 

2,918


 

-


 

-


 

-


2,918

Investment Adviser's base fee

(349)


(772)


(1,591)


(305)


(537)


(3,554)

Total segmental operating profit

7,892


7,971


5,071


3,313


8,947


33,194

 

At 31 August 2010

 


Bank


Mezzanine


Micro Cap


Legacy


Listed




Debt


Portfolio


Portfolio


Portfolio


Investments


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000

Investments at fair value through profit or loss

 

45,291


 

2,599


 

201,680


 

43,663


 

77,547


 

370,780

Investments classified as loans and receivables

 

-


 

82,256


 

-


 

-


 

-


82,256

Total segmental assets

45,291


84,855


201,680


43,663


77,547


453,036

 

At 28 February 2010

 


Bank


Mezzanine


Micro Cap


Legacy


Listed




Debt


Portfolio


Portfolio


Portfolio


Investments


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000

Investments at fair value through profit or loss

 

35,589


 

2,457


 

171,903


 

31,845


 

69,642


 

311,436

Investments classified as loans and receivables

 

-


 

83,239


 

-


 

-


 

-


 

83,239

Total segmental assets

35,589


85,696


171,903


31,845


69,642


394,675

 

Certain income and expenditure is not considered part of the performance of an individual segment. This includes net foreign exchange gains, interest on cash, finance costs, management fees, custodian and administration fees, directors' fees and other general expenses.

 

The following table provides a reconciliation between net reportable segment income and operating profits.

 



Period ending


Period ending




31/08/2010


31/08/2009




US$'000


US$'000








Net reportable segment profit


44,283


33,194


Net unrealised gains on treasury notes


1,501


-


Realised gains on investments held in escrow accounts


801


-


Net foreign exchange losses


 (507)


(1,108)


Interest on treasury notes


261


-


Interest on cash


141


103


Expenses not attributable to segments


(1,075)


(1,359)


Operating profit


45,405


30,830


 

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 net total segment assets and liabilities and total assets and liabilities.

 



31/08/2010


28/02/2010




US$ '000


US$ '000








Total segmental assets


453,036


394,675


Treasury notes


101,459


-


Cash and cash equivalents


15,668


134,867


Other receivables and prepayments


1,151


682


Total assets


571,314


530,224


 

Other Information

Geographical Segment

For the current period the Directors are of the opinion that the Company is now engaged in two geographical segments. as the Company now has an investment in the European Micro-Cap sector. However due to the current level of investment in this sector no geographical segment analysis is provided. For the current period, a majority of the investments are issued by the companies operating and generating revenue in the United States.

     

4.   Critical Accounting Judgements and Key Sources of Estimation Uncertainty

In the application of the Company's accounting policies, which are described in note 2 to the annual financial statements for the year ended 28 February 2010, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from their sources.  The estimates and associated assumptions are based on historical experience of JZCP and other factors that are considered to be relevant.  Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

Key sources of estimation uncertainty

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

 

Fair value of investments at fair value through profit or loss ("FVTPL")

Certain investments are classified as FVTPL, and valued accordingly, as disclosed in note 2 of the annual financial statements for the year ended 28 February 2010 and the valuation policy. The key source of estimation uncertainty is on the valuation of unquoted equities and equity-related securities.

 

Loans and receivables

Certain investments are classified as loans and receivables, and valued accordingly, as disclosed in note 2 of the annual financial statements and the valuation policy.  The key estimation is the impairment review and the key assumptions as disclosed in note 2 of the annual financial statements for the year ended 28 February 2010.

 

5.   Net gain on investments at fair value through profit or loss

 



Period ended


Period ended




31/08/2010


31/08/2009




US$ '000


US$ '000








Net unrealised gain in period


32,537


13,508








Proceeds from investments repaid


16,266


3,509


Cost of investments repaid


(16,201)


 (2,741)


Net realised gain in period


65


768








Net gain on investments in period


32,602


14,276


 

6.    (Impairments)/net write back of impairments on loans and receivables

 



Period ended


Period ended




31/08/2010


31/08/2009




US$ '000


US$ '000


Net (impairments)/write back of impairments on loans and receivables


 

(2,439)


2,918








Proceeds from investments repaid


-


85


Cost of investments repaid


-


(85)


Net realised gain


-


-


Net (impairments)/write back of impairments on loans and receivables


 

(2,439)


2,918


 

7.    Net foreign currency exchange losses

 



Period ended


Period ended




31/08/2010


31/08/2009




US$ '000


US$ '000


Net movement in foreign exchange losses on derivative financial instrument


 

-


18,443


Net movement in  losses on foreign currency translations


(507)


(19,551)




(507)


(1,108)


 

8.    Investment income

 



Period ended


Period ended




31/08/2010


31/08/2009




US$ '000


US$ '000








Income from investments classified as FVTPL


14,195


13,729


Income from investments classified as loans and receivables


5,879


5,825




20,074


19,554


 

Income for the six month period ended 31 August 2010

 




Preference


Loan note


Loan note


Other






Dividends


Dividends


PIK


Cash


Interest


Other


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000















1st and 2nd Lien bank debt

-


-


-


-


1,473


54


1,527

Mezzanine portfolio

-


11


1,081


4,798


-


-


5,890

Micro Cap portfolio

-


5,387


905


2,353


-


-


8,645

Legacy portfolio

-


35


1,251


58


-


23


1,367

Listed Investments

2,384


-


-


-


-


-


2,384

Treasury notes

-


-


-


-


261


-


261


2,384


5,433


3,237


7,209


1,734


77


20,074

 

Income for the six month period ended 31 August 2009

 




Preference


Loan note


Loan note


Other






Dividends


Dividends


PIK


Cash


Interest


Other


Total


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000


US$ '000















1st and 2nd Lien bank debt

-


-


-


-


1,369


-


1,369

Mezzanine portfolio

-


-


3,063


2,762


-


-


5,825

Micro Cap portfolio

-


3566


1,895


2,752


-


-


8,213

Legacy portfolio

-


12


1,077


52


-


1,711


2,852

Listed Investments

1,295


-


-


-


-


-


1,295


1,295


3,578


6,035


5,566


1,369


1,711


19,554

 

9.    Finance costs

 



Period from


Period from




01/03/10 to


01/03/09 to




31/08/10


31/08/09




US$ '000


US$ '000


Finance costs arising on financial liabilities measured at amortised cost:




Finance costs on old Zero Dividend Preference shares redeemed on 22 June 2009


 

-


3,784


Finance costs on new Zero Dividend Preference shares issued on 22 June 2009


 

2,823


988




2,823


4,772


 

10.   Expenses

 

 

 


Period from


Period from




01/03/10 to


01/03/09 to




31/08/10


31/08/09




US$ '000


US$ '000








Investment Adviser's base fee


4,192


3,554








Legal and professional fees


374


505


Other expenses


227


374


Directors' remuneration


163


163


Accounting, secretarial and administration fees


200


202


Auditors' remuneration for audit services


110


114


Custodian fees


1


1




1,075


1,359


Total expenses


5,267


4,913


 

Directors fees

The Chairman is entitled to a fee of US$85,000 per annum. Each of the other Directors are entitled to a fee of US$60,000 per annum.  For the period 1 March 2010 to 31 August 2010, the total expense included in the statement of comprehensive income was US$163,000 (31 August 2009: US$163,000) of this amount US$54,000 (28 February 2010: US$54,000) was outstanding at the period end and included within Other payables.

 

Administration fees

Butterfield Fund Services (Guernsey) Limited was appointed on 12 May 2008 under an Administration, Secretarial and Registrar Agreement. Butterfield Fund Services and Fulcrum Group merged during September 2008 forming Butterfield Fulcrum Group (Guernsey) Limited (the "Administrator").

 

The Administrator is entitled to a quarterly fee of US$100,000 payable quarterly (monthly post 1 October 2010) in arrears. Fees payable are subject to an annual fee review. For the period 1 March 2010 to 31 August 2010 total expenses payable to the Administrator of US$200,000 (31 August 2009: US$202,000) were included in the statement of comprehensive income. Of this amount US$67,000 (28 February 2010: US$67,000) was outstanding at the period end and included within Other payables.

 

Investment Advisory and Performance fees

The Company entered into an investment advisory and management agreement with Jordan/Zalaznick Advisers, Inc (the "Investment Adviser") in May 2009.

 

Pursuant to the Advisory Agreement the Investment Adviser is entitled to a base management fee and to an incentive fee.  The base management fee is an amount equal to 1.5 per cent. per annum of the average total assets under management of the Company, payable quarterly in arrears; the agreement provides that payments in advance on account of the base management fee will be made.

 

The incentive fee has two parts.  The first part is calculated by reference to the net investment income of the Company and is equal to up to 20 per cent. of such income, payable quarterly in arrears provided that the net investment income for the quarter exceeds 2 per cent of the average of the net asset value of the Company for that quarter and the preceding quarter (the "hurdle") (8 per cent. annualised).  The fee is an amount equal to (a) 100 per cent of that proportion of the net investment income for the quarter as exceeds the hurdle, up to an amount equal to 25 per cent. of the hurdle, and (b) 20 per cent. of the net investment income of the Company above 125 per cent. of the hurdle. 

 

The second part of the incentive fee is calculated by reference to the net realised capital gains of the Company and is equal to: (a) 20 per cent. of (x) the realised capital gains of the Company for each financial year less (y) all realised capital losses on Investments for the year less (b) the excess (for prior years since the Effective Date) (if any) of (i) the aggregate of all previous capital gains incentive fees paid by the Company to the Investment Adviser over (ii) 20 per cent. of (x) all realised capital gains of the Company less (y) all realised capital losses of the Company, payable annually in arrears.

 

For the period 1 March 2010 to 31 August 2010 total Investment advisory and management expenses were included in the statement of comprehensive income of US$4,192,000 (31 August 2009: US$3,554,000) of this amount US$618,000 was outstanding at the period end and included within Other payables. At 28 February 2010 the Company had prepaid the Investment Adviser by US$484,000 and this amount was included within Other receivables.

 

Custodian fees

HSBC Bank (USA) N.A (the "Custodian") was appointed on 12 May 2008 under a custodian agreement. The Custodian is entitled to receive an annual fee of $2,000 and a transaction fee of $50 per transaction. For the period 1 March 2010 to 31 August 2010 total expenses were included in the statement of comprehensive income of US$1,000 (31 August 2009: US$1,000) of which nil (28 February 2010: nil) was outstanding at the period end.

 

Taxation

The Company suffered withholding tax of US$487,000 (31 August 2009: US$286,000), on income from listed investments, for the period 1 March 2010 to 31 August 2010.

 

With effect from 1 January 2008, the standard rate of income tax for companies in Guernsey moved from 20% to 0% under the Income Tax (Zero Ten) (Guernsey) Law, 2007 passed by the States of Guernsey on 26 September 2007. Closed-ended investment vehicles such as the Company can continue to apply for exempt status for Guernsey tax purposes.  Alternatively they may choose to automatically become tax resident, paying the nil rate.  The Company elected for exempt status on incorporation.

 

12.  Investments

Categories of financial instruments


 

Listed


 

Unlisted


Carrying Value


31/8/2010


31/8/2010


31/8/2010


US$ '000


US$ '000


US$ '000







Fair value through profit or loss (FVTPL) (excluding US treasury notes)

 

77,547


 

293,233


 

370,780

FVTPL - US treasury notes

101,459


-


101,459

Loans and receivables

-


82,256


82,256


77,547


476,948


554,495

 


 

Listed


 

Unlisted


Carrying Value


28/2/2010


28/2/2010


28/2/2010


US$ '000


US$ '000


US$ '000







Fair value through profit or loss (FVTPL)

69,642


241,794


311,436

Loans and receivables

-


83,239


83,239


69,642


325,033


394,675

 

13. Zero Dividend Preference ("ZDP") shares

Authorised Capital

Unlimited number of ZDP shares of no par value.

 



31/08/2010


28/02/2010




US$ '000


US$ '000


ZDP shares issued 22 June 2009






Amortised cost at 1 March


71,399


-


Issued during period - cash received


-


16,590


Issued during period - rollover from old ZDP shares


-


56,516


Issue costs


-


(348)


Finance costs


2,823


3,888


Unrealised currency loss/(gain) on translation at period end


501


(5,247)


Attributable net assets at 31 August 2010 / 28 February 2010


74,723


71,399








Total number of ZDP shares in issue


20,707,141


20,707,141








Price per ZDP share US$


US$ 3.6226


US$ 3.4633








Price per ZDP share GBP


GBP 2.3617


GBP 2.2731








ZDP shares redeemed 22 June 2009






Amortised cost at 1 March


-


137,858


Finance costs


-


3,780


Redemption of ZDP shares - cash


-


(104,739)


Redemption of ZDP shares - rollover to new ZDP shares


-


(56,516)


Currency gain on redemption of ZDP shares


-


19,617


Attributable net assets at 31 August 2010 / 28 February 2010


-


-


 

On 1 July 2008, a total of 45,662,313 ZDP shares were issued on a one-to-one basis to holders of old JZ Equity Partners Plc  ZDP shares under the terms of the reconstruction scheme. Of these shares 29,654,417 were redeemed on 22 June 2009 at a price of 215.80 pence and 16,007,896 which were rolled over in to new ZDP shares.

 

Further ZDP shares were issued on 22 June 2009 at a price of 215.80 pence and are designed to provide a pre-determined final capital entitlement of 369.84 pence on 22 June 2016 which ranks behind the Company's creditors but in priority to the capital entitlements of the Ordinary shares. The new ZDP shares issued comprised 16,007,896 shares from the rollover of old ZDP shares and 4,699,245 which were issued for cash. They carry no entitlement to income and the whole of their return will therefore take the form of capital. The capital appreciation of approximately  8% per annum is calculated monthly. In certain circumstances, ZDP shares will carry the right to vote at general meetings of the Company as detailed in the Company's Memorandum of Articles and Association. Issue costs are deducted from the cost of the liability and allocated to the statement of comprehensive income over the life of the ZDP shares.

 

14.  Share Capital

Authorised Capital

Unlimited number of ordinary shares of no par value.

 

Ordinary shares - Issued Capital

 


31/08/2010


31/08/2010


28/02/2010


28/02/2010


Number of shares


 

US$ '000


Number of shares


 

US$ '000









Balance at 1 March

42,913,132


-


97,527,916


-

Issued during period

-


-


117,037,749


-

Share consolidation 1 for 5

-


-


(171,652,533)


-

Balance at 1 March

42,913,132


-


42,913,132


-

 

Limited Voting Ordinary shares - Issued Capital

 


31/08/2010


31/08/2010


28/02/2010


28/02/2010


Number of shares


 

US$ '000


Number of shares


 

US$ '000









Balance at 1 March

22,105,478


-


-


-

Issued during period

-


-


110,527,388


-

Share consolidation 1 for 5

-


-


(88,421,910)


-

Balance at 31 August 2009/ 28 February 2009

 

22,105,478


 

-


 

22,105,478


 

-

Total shares in issue

65,018,610


-


65,018,610


-

 

The Company's Ordinary shares were listed on the London  Stock Exchange on 1 July 2008 in connection with a scheme of reconstruction and voluntary winding up of JZ Equity Partners Plc ("JZEP") under section 110 of the Insolvency Act 1986 (UK law). JZEP's assets, after providing for its liabilities were transferred in specie to the Company and the Company issued to JZEP shareholders (other than those who opted against the new scheme) one Ordinary share for each JZEP Ordinary share that they held.

 

On 22 June 2009 a Placing and open offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. Both Ordinary and Limited Voting Ordinary shares were subsequently consolidated on the basis all holders of shares will hold one share for every five shares held immediately prior to the share consolidation.

 

Limited Voting Ordinary Shares ("LVO") were issued so that certain of the Company's existing Shareholders and certain US new investors could participate in the Ordinary Share issue without causing the Company to be treated as a US domestic company for the purposes of US securities laws and/or a CFC for US tax purposes. Limited Voting Ordinary Shares are identical to, and rank pari passu in all respects with, the Ordinary shares except that the Limited Voting Ordinary Shares will only carry a limited entitlement to vote in respect of the appointment or removal of Directors and will not carry any entitlement to vote in respect of certain other matters. The LVO shares are not listed and are not admitted to trade on or through the facilities of the London Stock Exchange.

 

The Ordinary shares and LVO shares carry a right to receive the profits of the Company available for distribution by dividend and resolved to be distributed by way of dividend to be made at such time as determined by the Directors.

 

In addition to receiving the income distributed, the Ordinary shares and LVO shares are entitled to the net assets of the Company on a winding up, after all liabilities have been settled and the entitlement of the ZDP shares have been met.  In addition, holders of Ordinary shares and LVO shares will be entitled on a winding up to receive any accumulated but unpaid Revenue reserves of the Company, subject to all creditors having been paid out in full but in priority to the entitlements of the ZDP shares.  Any distribution of Revenue reserves on a winding up is currently expected to be made by way of a final special dividend prior to the Company's eventual liquidation.

 

Holders of Ordinary shares shall have the rights to receive notice of, to attend and to vote at all general meeting of the Company.

 

Further issue of shares

Under the Articles, the Directors have the power to issue new shares on a non pre-emptive basis. The Directors have resolved, however, that new shares will not be issued at a discount to the prevailing Net Asset Value per Ordinary share other than where shareholders are permitted to participate in the issue pro rata to their existing holding in the Company and, therefore, will not be disadvantageous to existing shareholders.  Future issues of shares will be carried out in accordance with the Listing Rules.

 

The Directors will consider issuing new shares at not less than the prevailing Net Asset Value per Ordinary share where there is a significant demand for further shares.

 

Purchase of own shares by the Company

It is the intention of the Directors to seek authority from shareholders on a regular basis to allow the Company to repurchase shares in the market to prevent the emergence of a significant discount on the Company's market price to the Company's Net Asset Value.

 

15.  Reserves

The Royal Court of Guernsey granted that on the admission of the Company's shares to the official list and to trading on the London Stock Exchange's market, the amount credited to the share premium account of the Company immediately following the admission of such shares be cancelled and any surplus thereby created accrue to the Company's distributable reserves to be used for all purposes permitted by the Companies Law, including the purchase of shares and the payment of dividends. Subject to satisfaction of the solvency test, all of the company's capital and reserves are distributable in accordance with the Companies (Guernsey) Law, 2008.

 

Share Capital Account

 



31/08/2010


28/02/2010




US$ '000


US$ '000








At 1 March


149,269


-


New Ordinary shares issued in period


-


80,419


Limited Voting Shares issued in period


-


75,946


Issue costs


-


(7,096)


At 31 August 2010 / 28 February 2010


149,269


149,269


 

Share Premium Account

 



31/08/2010


28/02/2010




US$ '000


US$ '000








At 1 March


-


353,365


Transfer to distributable reserve


-


(353,365)


At 31 August 2010 / 28 February 2010


-


-


 

Distributable Reserve

 



31/08/2010


28/02/2010




US$ '000


US$ '000








At 1 March


353,517


-


Transfer from Share Premium


-


353,365


Increase in provisions/receivables relating to JZ Equity Partners Plc

9


152


At 31 August 2010 / 28 February 2010

353,526


353,517


 

Capital reserve

All surpluses arising from the realisation or revaluation of investments and all other capital profits and accretions of capital shall be credited to the Capital reserve. Any loss arising from the realisation or revaluation of investments or any expense, loss or liability classified as capital in nature may be debited to the Capital reserve.

 


Capital reserve


Realised


Unrealised


Total


31/08/2010


31/08/2010


31/08/2010


US$ '000


US$ '000


US$ '000







At 1 March 2010

(20,617)


(64,573)


(85,190)

Net gains on investments

65


30,098


30,163

Unrealised net foreign exchange losses

-


(507)


(507)

Realised gains on investments held in escrow accounts

 

801


 

-


 

801

Expenses charged to capital

(1,467)


-


(1,467)

Finance costs in respect of Zero Dividend Preference shares

 

(2,823)


 

-


 

(2,823)

At 31 August 2010

(24,041)


(34,982)


(59,023)

 


Capital reserve


Realised


Unrealised


Total


28/02/2010


28/02/2010


28/02/2010


US$ '000


US$ '000


US$ '000







At 1 March 2009

(5,758)


(105,822)


(111,580)

Net gains on investments

768


32,071


32,839

Unrealised net foreign exchange losses

-


9,178


9,178

Realised net foreign currency exchange losses

(5,339)


-


(5,339)

Expenses charged to capital

(2,620)


-


(2,620)

Finance costs in respect of Zero Dividend Preference shares

 

(7,668)


 

-


 

(7,668)

At 28 February 2010

(20,617)


(64,573)


(85,190)

 

Revenue reserve


31/08/2010


28/02/2010




US$ '000


US$ '000








At 1 March


39,917


15,199


Profit and loss for the period attributable to revenue


15,928


30,569


Dividend paid


(4,226)


(5,851)


At 31 August 2010 / 28 February 2010


51,619


39,917


 

Summary of reserves attributable to Ordinary shareholders

 



31/08/2010


28/02/2010




US$ '000


US$ '000








Share Premium Account


-


-


Distributable Reserve


353,526


353,517


Share Capital Account


149,269


149,269


Capital reserve


(59,023)


(85,190)


Revenue Reserve


51,619


39,917




495,391


457,513


 

16.   Basic and Diluted Earnings per share

Basic and diluted earnings per share are calculated by dividing the earnings for the period by the weighted average number of Ordinary shares outstanding during the period.

 

For the period ended 31 August 2010 the weighted average number of Ordinary shares (including Limited voting ordinary shares) outstanding during the period was 65,018,610.

 

The weighted average number for the comparative period ending 31 August 2009 was calculated as follows:

      


31/08/2009


Qualifying shares at beginning of the period before the 1 for 5 share consolidation (See Note 14)

325,093,053


Qualifying shares at beginning of the period after the  1 for 5 share consolidation and after time apportionment.

37,067,675


Effect of the bonus element of the new shares issued

1,056,565


Weighted average number of Ordinary shares

38,124,240


 

The weighted average number of Ordinary shares is based on the average number of Ordinary shares in issue during that period. On 22 June 2009 a Placing and Open Offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. The Ordinary shares were subsequently consolidated on the basis all holders of Ordinary shares will hold one Ordinary share for every five Ordinary Shares held immediately prior to the share consolidation.

 

The weighted average number of shares for the period ended 31 August 2009 has been computed assuming the shares in issue for the period 1 March 2009 to 22 June 2009 had also been subject to the 1 for 5 share consolidation and adjusted by a 1.09 adjustment factor in respect of the bonus element of new shares issued*.

 

*Adjustment factor is calculated using the fair value (47.5 pence) per share at issue date as the numerator and the theoretical ex-right price (43.7 pence) per share as a denominator.

 

17.   Net Asset Value Per Share

The net asset value per Ordinary share of US$7.62 is based on the net assets at the period end of US$495,391,000 and on 65,018,610 Ordinary shares, being the number of Ordinary shares in issue at the period end. The net asset value per share at 28 February 2010 of US$7.04 is based on the net assets at the period end of US$457,513,000 and on 65,018,610 Ordinary shares, being the number of Ordinary shares in issue at 28 February 2010.

 

18.   Notes to the Cash Flow Statement

Reconciliation of the profit for the period to net cash from operating activities

 



31/08/2010


31/08/09




US$ '000


US$ '000








Profit for the period


42,095


25,772


(Increase)/decrease in other receivables


(460)


1,215


(Decrease)/increase in other payables


(112)


568


Net unrealised (gains)/ losses on investments


(30,098)


(13,508)


Net foreign currency exchange losses/(gains)


507


(125)


Realised gain on investments


(65)


(768)


Increase in accrued interest on investments and adjustment for interest received as PIK


 

(8,949)


(11,662)


Interest accrued on Treasury notes


(261)


-


Finance costs in  respect of Zero Dividend Preference shares


2,823


4,803


Unrealised currency gain on foreign cash


2


67


Net cash from operating activities


5,482


6,362


Purchases and sales of investments are considered to be operating activities of the Company, given its purpose, rather than investing activities.  The cash flows arising from these activities are shown in the Cash Flow Statement.

 

19.  Controlling Party

The issued shares of the Company are owned by a number of parties, and therefore, in the opinion of the Directors, there is no ultimate controlling party of the Company, as defined by IAS 24 - Related Party Disclosures.

 

20.  Related Party Transactions

The remuneration of the Directors is disclosed in Note 10.

In July 1998, JZEP invested US$114,000 in the Common Stock of Gramtel, LLC., Jordan Industries, Inc., Jordan Speciality Plastics, Inc., Jordan Aftermarkets, Inc. and Motors & Gears Holdings, Inc., which are affiliates of Jordan/Zalanick Advisers, Inc.  The investments were subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008.  The Company has not received any income from these investments during the period and the investments in the portfolio were valued at US$ nil.

 

In November 2001, JZEP invested US$15,279 in the Common Stock of JZI.  In 2007, a further investment was made by JZEP in JZI of US$ 424,417 in Convertible Senior Preferred Units.  The investment was subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008. At 28 February 2010 the investment was valued at US$1,684,000 (28 February 2010: US$1,684,000).

 

In March 2004, JZEP invested US$17,500 in shares of JII Holdings LLC, a subsidiary of Jordan Industries, Inc (Transferred to JZCP on 1 July 2008). The Company did not receive any income from this investment during the six months ended 31 August 2010.

 

In 2007, JZEP invested US$ 250,000 in ETX Holdings, Inc. which was a spin off of Jordan Auto Aftermarket Holdings, Inc., a former co-investment with The Jordan Company.  The investment was subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008. A further investment of US$50,000 was made in ETX Holdings, Inc during the year ended 28 February 2010 the Company did not receive any income from this investment during the period. At 31 August 2010 the investment was valued at US$474,000 (28 February 2010: US$463,000).

 

Jay Jordan and David Zalaznick each purchased a further 9,020,099 Ordinary shares and 10,304,708 Limited Voting Ordinary shares on 22 June 2009. These shares were subsequently consolidated at 1 share for every 5. The share acquisition by David Zalaznick and Jay Jordan was approved by the Ordinary Shareholders at the EGM held on 18 June 2009.

 

In July 2010, JZCP made an initial investment of €11.1m  in  the JZ Europe Fund. JZ Europe Fund will be managed by JZ International LLC ("JZI"), an affiliate of JZAI, JZCP's investment manager. JZAI and JZI were each founded by David Zalaznick and Jay Jordan. JZCP has an investment in JZI detailed below.

The Company has invested with The Resolute Fund, which is managed by the Jordan Company, a company in which David Zalaznick and Jay Jordan are Managing Principals.  These investments include:  Harrington Holdings, Inc.; Kinetek, Inc.; Sechrist Industries, Inc.; TAL International Group, Inc.; and Woundcare Services, Inc. and represent an aggregate value of US$90,738,000 at 31 August 2010 (28 February 2010: US$76,688,000).

 

Jordan/Zalaznick Advisers, Inc. (JZAI), a US based company, provides advisory services to the board of Directors of the Company in exchange for management fees, paid quarterly.  Fees paid by the Company to the Investment Advisor are detailed in Note 10.

 

During the six months ended 31 August 2010, the Company retained Ashurst LLP, a UK based law firm.  David Macfarlane was a former Senior Corporate Partner at Ashurst until 2002.

 

Patrick Firth is a Director of the Company and was formerly Managing Director of Butterfield Fulcrum Group (Guernsey) Limited until 2009. Fees paid by the Company to the Administrator are detailed in Note 10.

 

21.  Commitments and Contingent Liabilities

The Company has no financial commitments or contingent liabilities as at 31 August 2010 and 28 February 2010.

 

 

22.  Contingent Assets

As at 31 August 2010, the Company had contingent assets of US$2,076,000 representing escrow accounts which have not been recognised as assets of the Company as it is not reasonably probable that these investments will be realised by the Company.

 

At 31 August 2010, the Company had the following contingent assets held in Escrow accounts which had not been recognised as assets of the Company:

 

Company


Amount in Escrow




31/08/2010


28/02/2010




US$ '000


US$ '000








Lincoln Holdings, Inc.


-


995


N&B Industries, Inc.


776


776


Recycled Holdings Corporation


1,300


1,300




2,076


3,071


 

During the period US$801,000 was realised relating to the Escrow account of Lincoln Holdings, Inc.

 

23.   Dividends paid and proposed

In accordance with the Prospectus, it is the Directors' intention to distribute substantially all of the Company's net cash income (after expenses) in the form of dividends paid in US dollars (Shareholders can elect to receive dividends in Sterling).

 

A second interim dividend, relating to the year ended 28 February 2010, of 6.5c per Ordinary share (total US$4,226,210) was declared by the Board on 4 March 2010 and paid on 1 April 2010.

 

An interim dividend of 0.5c per Ordinary share (total US$3,250,930) and a special dividend of 0.10c per share (total US$6,501,861) was declared by the Board on 27 October 2010 and will be paid on 3 December 2010.

 

24.   Subsequent events

Post 31 August, JZCP made a $10,000,000 commitment to Milestone Aviation, a new specialty finance business which focuses exclusively on civil helicopters and private jets.

 

Apparel Ventures, a legacy investment was sold on 6 October 2010 for US$22,600,000 realising a US$11,500,000 gain.

 

First and second lien loans in Harrington Holdings, totalling US$14,800,000 were sold on 29 September 2010. They were redeemed at par.

 

25.   Reconciliation of published net asset value to net asset value per the financial statements

      


NAV


NAV per share


NAV


NAV per share


31/08/2010


31/08/2010


28/02/2010


28/02/2010


US$'000


US$


US$'000


US$









Published net asset value

483,891


7.44


457,513


7.04

Revaluation of Apparel Ventures, Inc. common stock in line with proceeds from post period disposal

 

 

11,500


 

 

0.18


 

 

-


 

 

-

Net asset value per financial statements

 

495,391


 

7.62


 

457,513


 

7.04

 

 

 

 

 

 

Valuation Policy

 

Principles of valuation

In valuing investments in accordance with International Financial Reporting Standards, the Directors follow a number of general principles as detailed in the International Private Equity and Venture Capital Association ("IPEVCA") guidelines.

 

Investments are valued according to one of the following methods:

i)     Mezzanine loans

       Investments are generally valued at amortised cost except where there is deemed to be impairment in value which indicates that a provision should be made. Mezzanine loans are classified in the Statement of Financial Position as Loans and receivables and are accounted for at amortised cost using the effective interest method less accumulated impairment allowances in accordance with IFRS.

 

       The Company assesses at each reporting date whether a financial asset or group of financial assets classified as loans and receivables is impaired. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the net present value of expected cash flows discounted at original effective interest rate.

 

ii)     Unquoted preferred shares, micro cap loans, unquoted equities and equity related securities

       Unquoted preferred shares, micro cap loans, 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 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 IPEVCA 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.

 

       In respect of unquoted preferred shares and micro cap loans the Company values these investments 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 (this is calculated by a multiple of EBITDA reduced by senior debt and marketability discount) covering the aggregate of the unquoted equity, unquoted preferred shares and debt instruments invested in the underlying company. 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 would be reflected across all financial instruments invested in an underlying company.

 

(iii)   Traded loans

       Traded loans including first and second lien term securities are valued by reference to the last indicative bid price from recognised market makers. These investments are classified in the Statement of Financial Position as Investments at fair value through profit or loss.

 

(iv)   Listed investments and Treasury notes

       Listed investments and Treasury notes are valued at the last quoted bid price. These investments are classified in the Statement of Financial Position as Investments at fair value through profit or loss.

 

 

 

 

 

 

 

Independent Review Report

 

Introduction

 

We have been engaged by the company to review the condensed set of interim financial statements for the six month period ended 31 August 2010 which comprises the unaudited statement of comprehensive income, unaudited statement of financial position, unaudited statement of changes in equity, unaudited statement of cash flows and the related notes 1 to 25. We have read the other information contained in the condensed interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of interim financial statements.

 

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

 

Directors' Responsibilities

 

The condensed interim financial report for the period 1 March 2010 to 31 August 2010 is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the condensed interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

The condensed set of interim financial statements included in this condensed interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim financial reporting' as adopted by the European Union.

 

Our Responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of interim financial statements in the condensed interim financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. 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 Ireland) 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.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the condensed interim financial report for the period 1 March 2010 to 31 August 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

Ernst & Young LLP

Guernsey, Channel Islands

 

Date: 27 October 2010

 



Useful Information for Shareholders

 

Listing

JZCP Ordinary and Zero Dividend Preference shares are listed on the Official List of the Financial Services Authority of the UK, and are admitted to trading on the London Stock Exchanges market for listed securities. The ticker symbols are "JZCP" and "JZCN" respectively.

 

The prices of the Ordinary and Zero Dividend Preference shares are shown in the Financial Times under "Investment Companies - Ordinary Income Shares" and "Investment Companies - Zero Dividend Preference Shares" as "JZ Capital" respectively.

 

Financial diary


Results for the year ending 28 February 2011

May 2011

Annual General Meeting

June 2010

Interim report for the six months to 31 August 2011

October 2011

 

In accordance with the Transparency Directive JZCP will be issuing an Interim Management Statement for the quarters ended 31 May 2010 and 30 November 2010. These Statements will be sent to the market via RNS within six weeks from the end of the appropriate quarter, and will be posted on JZCP's website at the same time, or soon thereafter.

 

Payment of dividends    

Cash dividends will be sent by cheque to the first-named shareholder on the register of members at their registered address, together with a tax voucher. At shareholders' request, where they have elected to receive dividend proceeds in GBP Sterling. The dividend may instead be paid direct into the shareholder's bank account through the Bankers' Automated Clearing System. Payments will be paid in US dollars unless the shareholder elects to receive the dividend in Sterling. Existing elections can be changed by contacting the Company's Transfer and Paying Agent, Equiniti Limited on +44 (0) 121 415 7047.

 

Dividend timetable


Ex-dividend date

10 November 2010

Record date

12 November 2010

Payment date

3 December 2010

 

Share dealing

Investors wishing to buy or sell shares in the Company may do so through a stockbroker. Most banks also offer this service.

 

Internet address

The Company: www.jzcp.com

 

ISIN/SEDOL numbers

The ISIN code/SEDOL (Stock Exchange Daily Official List) numbers of the Company's Ordinary shares are GC00B2RK0R31/B2RK0R3 and the numbers of the Zero Dividend Preference shares are GC00B40D7X85/B40D7X8.

 

Share register enquiries

The Company's UK Transfer and Paying Agent, Equiniti Limited, maintains the share registers. In event of queries regarding your holding, please contact the Registrar on +44 (0) 121 415 7047 or access their website at www.equiniti.com. Changes of name or address must be notified in writing to the Transfer and Paying Agent.

 

Nominee share code

Where notification has been provided in advance, the Company will arrange for copies of shareholder communications to be provided to the operators of nominee accounts. Nominee investors may attend general meetings and speak at meetings when invited to do so by the Chairman.

 

Documents available for inspection

The following documents will be available at the registered office of the Company during usual business hours on any weekday until the date of the Annual General Meeting and at the place of the meeting for a period of fifteen minutes prior to and during the meeting:

 

(a) the Register of Directors' Interests in the share capital of the Company;

(b) the Articles of Association of the Company; and

(c) the terms of appointment of the Directors.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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