Interim Results - Replacement

RNS Number : 4262J

JZ Capital Partners Ltd

02 December 2008

 



This further announcement is made in order to correct the Interim Results announcement (no.2374J), which contained a clerical error. Specifically in the section titled Financial Highlights the figure of US $3.48 was described as being 'Earnings per share' but should have correctly been described as 'Net asset value per share', as was apparent from the main text. 

Butterfield Fulcrum Group (Guernsey) Limited

Company Secretary

Tel: [phone]

Financial Highlights

JZ Capital Partners Limited ('the Company') , a closed-ended investment company based in Guernsey, today announce interim results for the period from incorporation on 14 April 2008 to 30 September 2008.

		Unaudited For the period from incorporation 14 April 2008 to 30 September 2008 US$'000
Revenue return		6,828
Capital return		(21,101)
Investments		405,972
Cash and cash equivalents		112,199
Net assets		339,649
Net asset value per share		US$ 3.48
Dividend per share		US$ 0.045

For further information contact:

JZ Capital Partners Limited

Company Secretary, Butterfield Fulcrum Group (Guernsey) Limited

Tel: [phone]

Chairman's Statement

The interim results of JZ Capital Partners Limited ('JZCP') are from the period of incorporation 14th April 2008 to 30th September 2008. JZCP acquired the portfolio of investments undertaken by JZ Equity Partners PLC ('JZEP') on 1 July 2008. As a consequence this report covers the first three months of trading from 1st July 2008 to 30th September 2008. This period and the weeks following it have seen extraordinary and volatile conditions in the world's credit and stock markets. They have also seen a substantial and rapid increase in the strength of the US dollar against sterling. JZCP now accounts and reports in US dollars. JZCP's core investments in the US small capitalisation private company buy out market have demonstrated their strength and we are confident that current market conditions will present significant opportunities in all areas of its investment strategy.

NET ASSET VALUE ('NAV') AND VALUATION

At the end of the period under review, 30th September 2008, the NAV of JZCP fell by $0.14 to $3.48 (3.9%) compared to a fall of 9% in the Standard and Poors 500 Index and a fall of 1.48% in the Russell 2000 Index. However at 31st October 2008 the NAV of JZCP stood at $3.34. In these volatile markets it is appropriate to be reminded of the valuation policy and the principles of valuation that the Directors, consistently with the practice of the funds predecessor JZEP, must apply. The performance of JZCP's microcap investments and the application of this policy has not indicated the need to alter from previously used comparable multiples or, on the whole, given rise to substantial movements in their value. Our valuation of Accutest Holdings Inc. and Woundcare Solutions LLC gave rise to the most significant negative impact on NAV, of $0.04 and $0.07 per Ordinary share respectively. In these times realisation of any of JZCP's microcap investments might be challenging but only one has reached the stage of development where realisation is being marketed.

It is policy to value JZCP's microcap investments at least twice yearly as at the interim and year end dates. Such values plus accrued interest and/or dividends are applied in subsequent NAV calculations and in the Interim Management Statement ('IMS') until the next half year valuation unless the Directors become aware of any particular new factor that affects the valuation of any particular investment. Thus, in the absence of any such factor, the values attributed to the microcap investments are the same in the NAV at 31st October 2008 as they are in the NAV at 30th September 2008 plus accrued interest and/or dividends. Unless there is impairment, mezzanine investments are valued at amortised cost but trade loans and listed investments are valued by reference to their market quotes and accordingly the difference between the NAV at 30th September and 31st October principally reflects changes in the quoted prices of JZCP's publicly traded securities.

JZCP's listed investments result from earlier successful flotations of unlisted investments. There are still partial restrictions on the saleability of these investments but, whilst the majority of the investment in Universal Technical Institute, Inc. has been sold, Jordan/Zalaznick Advisers, Inc. ('JZAI') is looking for the opportunity to realise the others, Safety Insurance and TAL International Group, Inc. subject to market conditions. During the period under review, the net movement in the values of the listed investments impacted negatively NAV by $0.04 as at 30th September 2008 ($0.08 as at 31st October 2008).

The strength of the US dollar against sterling has reduced significantly the prospective dollar cost of the sterling obligation to redeem the Zero Dividend Preference shares, resulting in a positive effect on NAV at 30th September 2008 of $0.20 per share (31st October 2008 $0.36), but correspondingly JZCP is showing a loss on the forward exchange contract that it took out to cover that liability resulting in a negative effect on NAV at 30th September 2008 of $0.23 per share (31st October 2008 $0.40).

INCOME AND DIVIDENDS

Income per share for the three month period to 30th September 2008 was 7.00c per share. This has been significantly reduced by the Woundcare Solutions write down. Whilst income is enhanced by the fact that the Revenue Return is not subject, as had been that of its predecessor, JZEP, to UK corporation tax, falling interest rates have had, and are expected to continue to have, a significant downward effect on it. The Directors will pay an interim dividend of 4.5c per share (3.04p)* which taken together with the special dividend of 2.5p paid by JZEP in respect of the three months ended 30th June 2008, giving a total of 5.54p (8.20c) compares with the dividend paid by JZEP in respect of its six months ended 30th September 2007 of 4.6p per share.

Holders of Ordinary shares will have received notification that they can elect to receive dividends in sterling rather than in US dollars. The rate of exchange will be that applicable and not necessarily that used for illustration above which has been taken as £1:$1.4813, the rate prevailing at 20 November 2008.*

ZERO DIVIDEND PREFERENCE SHARES

The Zero Dividend Preference shares are due for redemption on 24th June 2009. The cover for the Zero Dividend Preference shares is 3.08 times and the obligation to redeem is currently covered by cash, short term deposits and realisable securities (trade loans and listed investments). The Directors are however actively considering ways to refinance the Zero Dividend Preference shares, including the possibility that in less volatile markets similar securities, in the changed regime for the taxation in the UK of capital gains and given the amount of cover available, may prove attractive to investors.

SHARE BUYBACKS

Your Directors continue to keep under review opportunities to buy back Ordinary or Zero Dividend Preference shares but their readiness to do so in respect of the Ordinary shares is tempered by the forthcoming redemption date of the Zero Dividend shares and uncertainty as to the effect of such an exercise in recent market conditions.

INCENTIVE FEE

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 terms of the Advisory Agreement dated May 2008. At 30 September 2008, no provision was taken in respect of a capital incentive fee but a provision of US$1,693,236 had been taken for an income incentive fee.

OUTLOOK

The Directors are confident that JZCP's strategy of investment in microcap investments, small capitalisation US private company investments and the experience of JZAI should continue to provide good long term returns. It will be the performance of these investments that in due course should narrow or eliminate the share price discount to NAV. Whilst market conditions have been extraordinary and volatile, the Directors believe that such conditions should offer attractive investment opportunities to JZCP.

David Macfarlane

Chairman

November 2008

Investment Adviser's Report

To JZCP Shareholders: 

We are pleased to report that JZCP has weathered the 'meltdown' of the past few months in very good shape. Your company is highly liquid and has had a modest (3.9%) decline in NAV, since July 1st as compared with a decline in the Dow of 4.4% and S&P of 9.0%. Most importantly, we are pleased with the quality of our portfolio and feel we are building good NAV growth. 

JZCP is well positioned to take advantage of the opportunities that will inevitably emerge from the carnage of the current financial crisis. Our job is to invest your money in high quality businesses at reasonable enough prices to earn a total return on the underlying investments of over 15%. We invest up and down the capital structure from senior bank debt down to equity to achieve a significant current yield as well as capital appreciation. We strive to have a diverse portfolio in terms of the number of companies, size of underlying businesses, industrial spread as well as the risk implied by investing in different layers of the respective capital structures. Our aim is that JZCP will, over time, have an increasing dividend and substantial consistent NAV growth. Historically, the returns have exceeded a 15% total return on the underlying investments. 

Our investment team has been very busy during the last six months, actively reviewing more than 200 investment opportunities. We have been, and will continue to be, very cautious for the rest of 2008 because of the deepening credit crisis and impending world-wide recession. In addition, it has been our plan to maintain a significant amount of liquidity until the zero dividend preference shares are repaid or refinanced. 

We currently have a portfolio of investments at 30 September which is comprised of 22% liquid investments (which includes cash and deposits), 15% publicly traded equity and 10% publicly traded debt. Therefore, 47% of the total portfolio is invested in 'liquid' assets, cash or publicly traded debt and equity securities. 

To view pie chart please copy and paste the following link into your browser 

http://www.rns-pdf.londonstockexchange.com/rns/4262J_1-2008-12-2.pdf

Percentages shown relate to total assets as per the Directors' Valuation attributable to Ordinary shareholders and Zero Dividend Preference shareholders. 

Since the end of JZEP's fiscal year, 31 March 2008, we have made the follow-on investments in portfolio companies: $2.5 million in H&S, our gear manufacturer, to build out its capacity in gears for windmills and a further $2.45 million in health care holdings, our electric wheelchair manufacturer, for working capital. We have had two small realizations as publicly traded bank debt in Thompson Creek and TTM Technologies repaid their loans totally approximating $3.6 million. 

Focusing on the more recent micro-cap investments, six out of the eight recent Bolder-generated company investments continue to show earnings growth despite the challenging economic times. One company is flat and the last company is down against a record 2007; we expected that decline. Overall, we are fortunate in seeing no impending liquidity issues. 

We attribute JZCP's performance to buying good quality businesses at mid-single digit multiples, not overleveraging them and, most importantly, choosing the right managing partners. In addition, our team at JZAI and our affiliate Bolder Capital has done an excellent job helping the portfolio companies navigate through troubled waters. 

We are looking forward, again cautiously and patiently, for the opportunities that will come out of the current dislocation. As many of you know, we are the largest individual shareholders of JZCP. Since we 'eat our own cooking,' you can be assured that we invest your money as if it were our own. In this serious financial crisis, our number one priority is to not lose money. For our advisory team at JZAI, that means maintaining our discipline on quality and price. 

OUTLOOK

As we all know, the debt, equity and private equity markets have been extremely volatile over the past six months, most recently showing significant deterioration. Related is the negative impact of the credit crunch, significantly reducing access to senior capital. Finally, we feel the recession we are in currently will be a particularly deep one. All these factors affect both the acquisition and realization markets. 

Although the underlying health of our portfolio appears sound, some companies' future performance is at risk, especially those with exposure to the housing market and those to general manufacturing business. 

In conclusion, we think JZCP is well-positioned to take advantage of the opportunities coming out of the financial crisis. We are committed to maintaining our discipline and adherence to the basic fundamentals of our investment strategy. We think it will be a great time to be a buyer and cash is king.

We appreciate your support and will endeavor to achieve superior returns and avoid losing money.

Yours faithfully,

David W. Zalaznick

John W. Jordan II  

Unaudited Income Statement

For the period from incorporation 14 April 2008 to 30 September 2008

	Notes	Revenue Return US$'000	Capital Return US$'000	Total US$'000
Net unrealised losses on investments at fair value through profit or loss		-	(9,413)	(9,413)
Net unrealised losses on loans and receivables		-	(5,085)	(5,085)
Other foreign currency losses		-	(2,414)	(2,414)
Income
Investment Income	3	10,141	-	10,141
Bank and deposit interest		575	-	575
Miscellaneous income		59	-	59
Total Income		10,775	-	10,775
Expenses
Formation costs		-	(267)	(267)
Investment Adviser's base fee		(1,293)	(697)	(1,990)
Investment Adviser's income incentive fee		(1,693)	-	(1,693)
Administrative expenses		(651)	-	(651)
Total Expense		(3,637)	(964)	(4,601)
Finance costs
Finance costs in respect of Zero Dividend Preference Shares		-	(3,225)	(3,225)
Net Income/(loss) before taxation		7,138	(4,189)	2,949
Taxation	4	(310)	-	(310)
Net income/(loss) after taxation		6,828	(4,189)	2,639
Profit/(loss) for the period		6,828	(21,101)	(14,273)

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

All income is attributable to the Ordinary shareholders of the Company.

The Company's investment activities commenced 1 July 2008 upon transfer of investments under the restructuring scheme of JZEP.

Unaudited Balance Sheet

As at 30 September 2008

	Notes	Unaudited As at 30 September 2008 US$'000
Non-current assets
Investments
Investments at fair value through profit or loss	7	162,311
Investments classified as loans and receivables	7	243,661
		405,972
Current assets
Other receivables		1,322
Cash and cash equivalents		112,199
Total assets		519,493
Current liabilities
Zero Dividend Preference shares	8	(165,643)
Forward currency derivative contract		(11,519)
Other payables		(2,682)
Net current liabilities		(179,844)
Net assets		339,649
Capital and reserves
Share premium account		353,922
Other reserves		(14,273)
Total shareholders' equity		339,649
Net asset value per ordinary share	10	US$ 3.48

Unaudited Statement of Changes in Shareholders' Equity

For the period from incorporation 14 April 2008 to 30 September 2008

	Share Premium Account US$'000	Capital Reserve Realised US$'000	Capital Reserve Unrealised US$'000	Revenue Reserve US$'000	Total US$'000
Issue of Ordinary shares	353,863	-	-	-	353,863
Unrealised losses on investments	-	-	(14,498)	-	(14,498)
Unrealised loss on derivative financial instrument	-	-	(22,209)	-	(22,209)
Unrealised gain on translation of foreign currency	-	-	19,795	-	19,795
Finance costs in respect of Zero Dividend Preference shares	-	(3,225)	-	-	(3,225)
Increase in provision of proceeds to be received from the liquidator of JZ Equity Partner Plc	59	-	-	-	59
Formation costs	-	(267)	-	-	(267)
Profit retained for the period	-	-	-	6,828	6,828
Expenses charged to capital	-	(697)	-	-	(697)
Balance as at 30 September 2008	353,922	(4,189)	(16,912)	6,828	339,649

Unaudited Cash Flow Statement

 For the period from incorporation 14 April 2008 to September 2008

	Notes	Unaudited As at 30 September 2008 US$'000
Operating activities
Net cash inflow from operating activities	5	1,223
Cash inflow for sales of investments		584
Net cash inflow before financing		1,807
Financing activity
Cash received in consideration for Ordinary and Zero Dividend Preference shares		110,392
Increase in cash and cash equivalents		112,199
Reconciliation of net cash flow movements in net funds
Increase in cash and cash equivalents as above		112,199
Cash and cash equivalents as at 30 September 2008		112,199

		US$'000
Net Assets of JZEP transferred to JZCP upon the restructuring scheme on 1 July 2008
Investments (including derivatives)		425,195
Cash transferred		110,392
Zero dividend preference share		(182,214)
Other net assets		490
		353,863

Notes to the Unaudited Financial Statements

1 General information

JZ Capital Partners Limited (the 'Company') is a closed-ended investment company which was incorporated in Guernsey on 14 April 2008 under The Companies (Guernsey) Law, 1994. The Company is also now subject to the Companies (Guernsey) Law, 2008, which came in to affect 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 listed on 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.

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 will 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. The Company has no ownership interest in the Investment Adviser. The Company is administered by Butterfield Fulcrum Group (Guernsey) Limited.

2 Significant accounting policies

The accounting policies adopted in the preparation of this 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 from incorporation 14 April 2008 to 30 September 2008 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.  

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.

Functional and presentational currency 

Items included in the condensed interim financial statements of the Company are measured in the currency of the primary economic environment in which the Company operates ('the functional currency'). The functional currency of the Company as determined in accordance with IFRS is US dollar because this is the currency that best reflects the economic substance of the underlying events and circumstances of the Company. The condensed interim financial statements are presented in US dollar, as the Company has chosen US dollar as its presentation currency, and all values were presented to the nearest thousand except where otherwise stated.

Foreign exchange

Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies during the course of the period are translated at the rate of exchange ruling at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities and non-monetary assets and liabilities that are denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses on financial assets and financial liabilities at fair value through profit or loss are recognised together with other changes in the fair value. Net foreign exchange gains or losses on monetary financial assets and liabilities other than those classified as at fair value through profit or loss are included in the line item 'Other losses'.

Derivatives

The Company may use derivatives for the purpose of efficient portfolio management, including for hedging purposes and potentially in order to take a synthetic exposure to an investment position in circumstances where the derivative contract is more efficient than a position would be in the underlying security. Open forward currency contracts are valued at the relevant exchange rate on that day. Warrants are only assigned a value where there is a clear price that exceeds the cost of exercising the warrant. No value is given to warrants which are out-of-the-money or where there is no clear price.

Financial assets and financial liabilities

(a)     Financial assets and liabilities at fair value through profit or loss

(i)        Classification

The Company classifies its investments in listed investments, investments in first and second lien term securities and other equity opportunities as financial assets at fair value through profit or loss. These financial assets are designated by the Board of Directors at fair value through profit or loss at inception. Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short term. All derivatives are included in this category.

Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company's investment strategy as documented in its prospectus. Information about these financial assets and financial liabilities are evaluated by the management of the Company on a fair value basis together with other relevant financial information.

(ii)       Recognition/derecognition

Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. Financial liabilities at fair value through profit or loss are derecognised when the obligation specified in the contract is discharged, cancelled or expires.

(iii)       Measurement

Financial assets and liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Income Statement. Subsequent to initial recognition, all financial assets and liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Income Statement in the year in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the Income Statement within gross income when the Company's right to receive payments is established.

(iv)       Fair value estimation

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

Realised surpluses and deficits on the partial sale of investments are arrived at by deducting the average cost of such investments from the sales proceeds.

(b)     Loans and receivables

(i)       Classification

The Company classifies unquoted preferred shares and unquoted senior secured debt within Mezzanine and Micro Buyout investments as Loans and Receivables. 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.

(ii)       Recognition/derecognition

Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

(iii)       Measurement

Investments are initially recognised at cost and subsequently at amortised cost. Impairment is determined by using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions at each balance sheet date. Valuation techniques used include the use of comparable recent arm's length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Impairments to Loans and receivables and the write back of impairments are included in the Income Statement. The Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Impairment is assessed by considering whether the enterprise value determined using the EBITDA multiple cannot fully cover the investment and after considering the projected performance of the investee company.

Cash and cash equivalents

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

Other receivables

Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The Directors consider that the carrying amount of other receivables approximates to their fair value.

Other payables

Other payables are not interest-bearing and are stated at their nominal value. The Directors consider the carrying amount of other payables approximates to their fair value.

Financial liabilities and equity

Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Financial liabilities and equity are recorded as the proceeds received, net of issue costs.

Zero dividend preference ('ZDP') shares

In accordance with International Accounting Standard 32 - Financial Instruments: Presentation, ZDP shares have been disclosed as a financial liability as the shares are redeemable at a fixed date and holders are entitled to a fixed return. ZDP shares are valued at amortised cost.

Incentive fee provision

A provision is recognised where the Company has a legal obligation as a result of a past event and it is probable that an outflow of economic benefits will be required in the future. Under the advisory agreement, the Company has an obligation to pay an incentive fee to the Investment Adviser.

As at 30 September 2008, an accrual of US$1,693,236 for the income incentive fee had been taken.

Income

Investment income and other income receivable are included on an accrual basis. When there is reasonable doubt that income due to be received will actually be received, such income is not accrued until it is clear that its receipt is probable. Where following an accrual of income, receipt becomes doubtful, a provision is made until the reasonable doubt is removed.

Expenses

Investment Adviser's basic fees are allocated 65% to revenue and 35% to realised capital reserve. This represents the Director's expectations of the long term split between revenue and capital. The incentive fee is attributed to those parts to which it relates.

Expenses which are deemed to be incurred wholly in connection with the maintenance or enhancement of the value of the investments are charged to realised capital reserve. All other expenses are accounted for on an accruals basis and are presented as revenue items.

Formation costs

Expenses directly attributable to the set up of the Company or the issue of share capital are charged against capital.

Finance expenses

Finance expenses are in respect of the Zero Dividend Preference ('ZDP') Shares and are accounted for on an accruals basis.

Dividends 

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

Escrow accounts

Where investments are disposed of and amounts are held in escrow pending resolution of any indemnification claims, the Company holds these amounts at nil in the accounts, until there is certainty that these amounts will become receivable by the Company.

3 Investment income

	Unaudited For the period from incorporation 14 April 2008 to 30 September 2008 US$'000
Loan note interest	4,246
Preference dividends	1,706
Payments in kind ('PIK')	3,122
Dividends from listed investments	1,032
Other income	35
	10,141

PIK - being interest on securities satisfied by the issue of further securities (with or without the right to subscribe for further equity and/or debt).

4 Taxation 

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. Close-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.

The Company suffered withholding tax of US$309,691, on income from listed investments, for the period from incorporation 14 April 2008 to 30 September 2008.

5 Reconciliation of the loss for the period to net cash from operating activities

	Unaudited For the period from incorporation 14 April 2008 to 30 September 2008 US$'000
Loss for the period	(14,273)
Increase in operational payables	2,682
Increase in receivables (US$482,000 receivable from old entity as at 1/7/2008)	(774)
Net unrealised losses	14,498
Other losses	2,414
Increase in accrued interest on investments	(6,549)
Finance costs in respect of Zero Dividend Preference shares	3,225
Net cash from operating activities	1,223

6 Return per Ordinary share

	Unaudited For the period from incorporation 14 April 2008 to 30 September 2008 US$
Revenue return	0.0700
Capital return	(0.2163)
Total return	(0.1463)
Weighted average ordinary shares in issue	97,527,916

7 Investments

Categories of financial instruments

	Carrying value at 30 September 2008 US$'000
Financial assets
Fair value through profit or loss (FVTPL)*	162,311
Loans and receivables	243,661
Total financial assets	405,972
Financial liabilities
Amortised cost
- Zero Dividend Preference Shares	165,643
Fair value through profit or loss (FVTPL)
- Derivative instruments	11,519
Total financial liabilities	177,162

* Please refer to note 2 for classification criteria

	Carrying value at 30 September 2008 US$'000
Fair value of investments from in specie transfer	414,505
Sales - Proceeds	(584)
Movement in unrealised losses on investments for the period	(14,498)
Movement on accrued interest on investments	6,549
Closing fair value at 30 September 2008	405,972

8 Zero Dividend Preference ('ZDP') shares

Authorised Capital

Unlimited number of ZDP shares of no par value.

Issued Capital

	30 September 2008 US$'000
Fair value at 1 July 2008	182,213
Finance costs in respect of ZDP shares	3,225
Unrealised currency loss on translation at period end	(19,795)
Attributable net assets at 30 September 2008	165,643
Total number of ZDP shares in issue	45,662,313
Price per ZDP share US$	US$ 3.6276
Price per ZDP share GBP	GBP 2.0460

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.

The ZDP shares are designed to provide a pre-determined final capital entitlement of 215.8925 pence on 24 June 2009 which ranks behind the Company's creditors but in priority to the capital entitlements of the Ordinary shares. They carry no entitlement to income and the whole of their return will therefore take the form of capital. The capital appreciation of 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.

9 Share capital

Authorised Capital

Unlimited number of ordinary shares of no par value.

Issued Capital

	30 September 2008 US$'000
97,527,916 Ordinary Shares of no par value	-

The Company's Ordinary shares were listed on the London Stock Exchange as from 1 July 2008, The shares were 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 (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.

The Ordinary 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 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 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.

10 Net asset value per share

The net asset value per Ordinary share of US$3.48 is based on the net assets at the period end of US$339,650,134 and on 97,527,916 Ordinary shares, being the number of Ordinary shares in issue at the period end.

11 Dividend

The Directors have declared that an interim dividend of 4.5 cents per share will be paid on 22 December 2008 to shareholders on the register at the close of business on 5 December 2008, having an ex-dividend date of 3 December 2008.

Holders of Ordinary shares will have received notification that they can elect to receive dividends in Sterling rather than in US dollars.

12 Related party transactions

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 from incorporation 14 April 2008 to 30 September 2008 total expenses included in the Income Statement were $151,415 of this amount $136,415 was outstanding at the period end and included within Other Payables.

In March 2004, JZEP invested US$17,500 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 three months ended 30 September 2008.

In November 2001, JZEP invested US$15,279 in the Common Stock of JZ International LLC ('JZI') a company managed by affiliates Jordan/Zalaznick Advisers, Inc. In 2007, a further investment has been made in JZI of US$ 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. The Company did not receive any income from JZI during the period ended 30 September 2008, and at the end of the period the investment was valued at US$ 1,430,000.

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 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. The Company did not receive any income from this investment during the three months ended 30 September 2008, and at the end of the period the investment was valued at US$ 275,000.

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. 

During the three months ended 30 September 2008, the Company retained Ashurst LLP, a UK based law firm. David Macfarlane was a former Senior Corporate Partner at Ashurst until 2002.

The Company has jointly invested in deals with The Resolute Fund, which is managed by the Jordan Company, which is owned jointly by David Zalaznick and Jay Jordan. These investments include: Harrington Holdings, Inc; Kinetek, Inc.; TAL International Group, Inc.; and Woundcare Services, Inc. and represent an aggregate value of US$71,530,000 at 30 September 2008.

Patrick Firth is both a Director of the Company and of the Administrator Butterfield Fulcrum Group (Guernsey) Limited. 

 

END

 

 

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