Interim Results
JZ Capital Partners
INTERIM RESULTS FOR THE 6 MONTHS ENDING 31 AUGUST 2012
~ Well positioned for further NAV growth ~
10 October 2012
JZ Capital Partners (JZCP), the London listed private equity fund which invests in high-quality US, European and Latin America micro cap companies, announces its interim results for the six-month period ended 31 August 2012.
Results Highlights
· US$130.8 million deployed across 17 new investments, including:
o US$85.7 million of new investments across all industry verticals in the US micro-cap portfolio, increasing the size by 41% to US$289 million
o Investments in the European Micro Cap Fund ("EMF") reached US$81.3 million representing 14% of total assets, following EMF's €13.5 million investment in Oro Direct - a precious metals trading business in Spain
o Completion of first US$6.1 million co-investment in Latin America in BSM Engenharia, a Brazil based infrastructure service business in conjunction with ACON, a private equity group with significant regional experience
· 1% NAV Total Return including:
o NAV of US$610 million (FY2011: US$615 million)
o Distributions of 18.5c per share paid in July
o Post distribution NAV per share of US$9.38 (FY2011: US$9.47)
· Interim Dividend of 14 cents per share for the period (H1 2011:6.5c per share)
· Realisations totalling US$44.0 million generated from 11 investments
· Combined EBITDA of the companies in the core micro-cap portfolio increased by 10% during the period
· Financial strength of the business remains robust with 43% of NAV invested in liquid assets and no outstanding debt on the balances
Strategic Initiatives
· Overwhelming shareholder approval received in July for a number of strategic initiatives, including:
o A simplified capital structure through a single class of ordinary shares - resulting in successful admission to trading on the London Stock Exchange's Specialist Fund Market ("SFM") in August
o New dividend policy will provide regular and more predictable distributions at a rate of 3% of NAV per year
o An increase in the percentage of total funds the Company is able to invest outside of the US from 20% to 30% in order to take advantage of micro cap opportunities in Europe and Latin America
o An investment of up to US$15.0 million in a new asset management business to meet the growing demand from endowments and pension funds in the US for fiduciary management service
Outlook
· The Company is better positioned to generate superior shareholder returns following the approval and successful implementation of the strategic initiatives (outlined above)
· Operational and financial performance of the underlying assets are expected to continue to improve despite the ongoing market uncertainty
· Proven micro-cap strategy to remain core focus of the Company and main driver of NAV growth going forward
David Zalaznick, JZCP's Founder and Investment Adviser, said:
"It is very much business as usual at JZCP. Further investment activity in high quality companies and a flow of realisations have complimented another solid performance from our core micro cap portfolio during the period.
From a strategic perspective, it has also been a busy period for the Company as we have announced a number of measures that will benefit all of our shareholders. I would like to thank shareholders for their overwhelming support received for these new strategic initiatives that are now in place. We remain confident that they will set the foundations for the Company to continue to generate future profitable growth.
Our emphasis on maintaining a strong balance sheet together with a healthy pipeline of investments, particularly in the US, leaves us in a strong position as we enter the second half of the year."
There will be an analyst and investor presentation to discuss JZCP's recent financial performance and portfolio developments at 9.30am at FTI Consulting, 26 Southampton Buildings, London WC2A 1PB. It can be accessed by dialling +44(0)20 3364 5381 (UK) or +1 646 254 3364 (US) with the participant access code 7483702.
A playback facility will be available two hours after the conference call concludes. This facility may be accessed by dialling +44 (0)20 3427 0598 (UK) or +1 347 366 9565 (US). The code to access the playback facility is 7483702.
For further information:
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Ed Berry / Tom Willetts |
+44 (0)20 7269 7237 / 7297 |
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FTI Consulting |
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David Zalaznick |
+1 212 572 0800 |
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Jordan/Zalaznick Advisers, Inc. |
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About JZCP
JZCP is a London listed private equity fund which invests in high quality US, European and Latin American micro cap companies. Our objective is to achieve a superior overall return comprised of a current yield and significant capital appreciation. JZCP receives investment advice from Jordan/Zalaznick Advisers, Inc. ("JZAI"), founded by David Zalaznick and Jay Jordan, which has advised JZCP for twenty five years and has investment professionals and offices in New York, Chicago, London and Madrid. JZAI's experts work with the existing management of micro cap companies to help build better businesses, create value and deliver strong returns to our investors. JZCP also invests in mezzanine loans, first and second lien investments and other publicly traded securities. For more information please visit www.jzcp.com
Chairman's Statement
I am pleased to report the results of JZ Capital Partners Limited ("JZCP" or the "Company") for the six-month period ended 31 August 2012.
The first six months of the year was a particularly busy period for the Company. JZCP's NAV total return (NAV appreciation and reinvested dividends) was 1% during the period, driven by a solid underlying performance from our core micro cap portfolio, some opportunistic investments and some timely realisations. The Board has also implemented a number of strategic initiatives that are designed to simplify our shareholder structure and to provide a solid foundation on which to continue growing the Company. I am delighted that the Company and our shareholders are already benefiting from these initiatives.
Performance
The period was marked by steady performance from the underlying assets. Operationally, the core micro cap portfolio continues to deliver positive results, with the combined EBITDA of the companies in the portfolio increasing by 10%.
The Company experienced a particularly strong period of investment activity with US$130.8 million put to work across 17 new investments predominantly across the verticals in the core US micro cap portfolio, whilst realisations from 11 investments generated US$44.0 million.
There was a modest reduction in the value of our private investments, as a number of outperforming investments in the US micro cap portfolio were offset by a write down in Accutest Holdings, Inc., our environmental testing company.
The return of a more buoyant equity market backdrop during the period led to an uplift in the value of the listed equity portfolio. However, this was offset by a movement in the euro / dollar exchange rate leading to a small negative impact on the value of the portfolio.
Importantly the financial strength of the business remains robust: 43% of the NAV is invested in liquid assets (cash and publically traded securities) and other than in respect of the Zero Dividend Preference shares, there is no outstanding debt on the balance sheet.
Strategic Initiatives
In August, we received overwhelming shareholder support for a number of proposals introduced by the Board that has resulted in the Company enjoying a simplified capital structure that is more suited to our mix of shareholders and will support the Company's continued commitment to provide shareholders with future profitable growth.
As a result of the new capital structure, the Company has de-listed from the main board of the London Stock exchange and I am pleased that our new listing on the Specialist Fund Market ("SFM") has progressed well and trading volumes in the stock have remained at or near to historic levels.
JZCP's investment expertise and track record has and always will be orientated around its successful micro-cap investment strategy. While this focus will continue to form the core of our investment focus, the Investment Adviser is also taking advantage of some additional exciting investment opportunities that we are seeing in the real estate and credit markets.
While these assets will form a small part of the Company's overall NAV, it's important to highlight the Investment Adviser's proven track record in both asset classes, which importantly share a similar risk / return profile to the broader portfolio. Having analysed the strategy in detail, the Board is confident that they will provide an attractive, long-term and alternative revenue stream which will ultimately further enhance returns for our shareholders.
The Company made its first US$16.8 million real estate investment in Brooklyn, New York in April. The investment is already progressing well and subsequently a further US$4.6 million has been invested in similar assets in the Brooklyn area.
The portfolio is also becoming more geographically diversified - following shareholder approval, up to 30% of NAV can now be invested outside of the US, an increase from the previous limit of 20%. While the focus outside of the US has traditionally been on European investments, the Company has seen some exciting investment opportunities elsewhere. In April, the Company applied its value orientated investment approach through its first co-investment in Brazil. It has invested US$6.1 million (1% of NAV) in BSM Engenharia S.A, in conjunction with ACON Latin America, a fund with over 15 years investment experience in Latin America.
An amendment to our distribution policy was also approved, which I will address below.
Core Portfolio Update
Investment in high quality micro cap companies continues to be the fundamental driver of the Company's investment strategy. In the US, some US$85.7 million was invested which increased the size of the portfolio by 41% to US$289.6 million. Highlights included an investment in MEDS, a healthcare services provider, which was the first in the new Healthcare Revenue Cycle Management vertical. Following strong performance, Amptek, Inc. and Nielsen Kellerman in the sensors vertical were written up but this was offset by the negative impact of commercial real estate on our environmental testing business, Accutest Holdings, Inc. Alongside the verticals strategy, the Company also made three investments in the US with partners such as Baird Capital Partners and ACON group.
The Company's investments in the European Micro Cap Fund (EMF) reached US$81.3 million following an investment in March 2012 in Oro Direct, a buyer of precious metals which is based in Spain. The other four EMF companies are continuing to operate well despite the difficult economic conditions in Spain. These European investments constituted 14% of the Company's total assets at the end of the period. The manager of EMF, JZ International, is continuing to explore opportunities for the Company to invest in high quality micro cap companies throughout Europe.
Distributions
The Company, along with the vast majority of single manager listed private equity companies, continues to trade at a significant discount to NAV. In May the Board proposed a new dividend policy to provide a long-term solution to narrow the discount by providing regular and more predictable distributions. The new policy, which was approved by shareholders in July, provides distributions at a rate of 3% of NAV per year in two instalments. The directors have accordingly declared an interim dividend of 14 cents per share. This implies an annualised yield as at 31 August 2012 of 5%.
Outlook
I am pleased with the progress the Company has made during the first half of the year. As I outlined above, the strategic initiatives that have been approved in this period put the Company in a better position to provide superior returns to our shareholders. Our SFM listing and simplification of our share capital structure is now more suitable to our shareholder profile; our investment strategy is better placed to take advantage of the opportunities we are seeing to invest in high quality micro cap businesses; and the dividend policy is more appropriate for our investors.
I believe that the Company is on course to create significant further value for shareholders. Even in the challenging economic environment that we can anticipate during the coming year, we can expect to make good progress.
David Macfarlane
Chairman
9 October 2012
Investment Adviser's Report
Dear Fellow Shareholders
We are pleased to report that JZCP had an active investment period for the six months ending 31 August 2012, taking advantage of attractive investment and realization opportunities across our portfolios. The Company has also been busy with a number of strategic initiatives, all of which received strong support from shareholders, and are aimed at permitting JZCP to generate further profitable growth going forward.
We invested US$130.8 million in 17 new investments and realized US$44.0 million from 11 investments. During this period, JZCP's total NAV return (which we define as the percentage change in JZCP's Net Asset Value during the relevant period inclusive of dividends paid to shareholders) was 1%. Before paying an 18.5 cent dividend in July 2012, our NAV per share increased from US$9.47 to US$9.56; after paying the dividend the NAV per share was US$9.38.
The financial condition of JZCP continues to be strong. Our liquidity (cash and government securities) as of 31 August 2012 was US$97.2 million, 16% of our NAV. In addition we have US$164.8 million of publicly traded securities, equities, and bank debt. Overall, the cash and publicly traded securities portion of our portfolio is 43% of our NAV. We have no outstanding debt and our only long term obligations are our Zero Dividend Preference shares which accrete to US$122.5 million due in June 2016.
Against an ongoing uncertain macro-economic backdrop, JZCP's underlying portfolio companies, both in the U.S. and Europe, have performed well on an operating basis during this interim period. On a combined basis, EBITDA of all of our micro cap businesses increased 10% over the relevant six months.
Our micro cap portfolio is valued at 6.7x EBITDA after a 24% marketability discount. The underlying leverage senior to JZCP's position in our micro cap portfolio, both in the U.S. and Europe, is under 1.5x EBITDA. Our European micro cap portfolio, currently consisting of five Spanish businesses, is performing well in a challenging macro-environment. They are high quality companies that grew through the recent recession. Given the financial environment in Spain, we have been able to buy these businesses at very attractive cash multiples --- 3.8x. We expect outsized returns from these businesses to more than compensate the increased risk in investing in a distressed economy.
Our core business and predominant driver of NAV growth comes from our diversified micro cap portfolios, which consists of 30businesses across 6 different principal business sectors. The portfolios are diversified geographically with the majority of the investments in the U.S while 14% of total assets are in Europe and earlier this year we made our first investment in Latin America. In addition, our portfolio is well diversified across vintage years.
We remain focused on securing attractive opportunities in the micro cap sector using our proprietary networks of intermediaries in both the US and Europe. Our specialist co-investment partners have successful track records of investing globally, such as Baird Capital Partners in the US, JZ International in Europe and ACON Latin America in Brazil
Strategic Initiatives
In July 2012, we completed the restructuring of our Ordinary and Limited Voting Shares to create a single class of ordinary shares which are listed on the Specialist Funds Market of the London Stock Exchange.
The new Ordinary share class structure is more appropriate to the mix of investors who own the Company and has removed a structural inadequacy that had restricted the Company's ability to accommodate US investors. The SFM listing will also help ensure that the full market capitalization of the Company is represented accurately by suppliers of market data (whereas previously the market capitalization was often reported without reference to the Limited Voting Ordinary shares) without any dilution to our shareholders.
Investing in micro cap companies has historically been the main driver of NAV growth and will continue to be so. However, our opportunistic approach has led us to some exciting new opportunities in the credit and real estate sectors which will complement our core micro cap strategy. As we mentioned in the recent annual report, we have started to diversify the portfolio into asset classes, such as real estate and distressed debt. It is important to note that we are applying the same disciplined approach to these investments as we have always used; buying businesses at reasonable values in conjunction with excellent management teams. For our real estate investments, we have been backing a management team that has extensive (and successful) experience in buying smaller off-market properties that are priced accordingly. The Company is also establishing a new asset management business in the US that will address the growing demand from endowments and pension funds for fiduciary management services.
The shareholder support for the recent strategic initiatives has been encouraging and as expected the company is progressing well under its new listing and share structure. We look forward to updating the market on the progress of the early stage investments later in the year.
NAV Growth
For the six months ending 31 August 2012, JZCP's net assets increased from US$9.47 per share to US$9.56, a 1% increase, before the 18.5 cent dividend paid in July 2012. The chart below shows the source of this change:
|
Net Asset Value per Ordinary share as of 29 February 2012 |
$9.47 |
|
- Change in private investments |
(0.04) |
|
+ Change in public investments |
0.10 |
|
-Foreign exchange effect on investments |
(0.05) |
|
+ Income from investments |
0.30 |
|
- ZDP dividend accrual |
(0.05) |
|
- Fees and expenses |
(0.20) |
|
+/- Other |
0.03 |
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Net Asset Value per Ordinary share (before dividends) |
9.56 |
|
- Dividends paid |
(0.18) |
|
Net Asset Value per Ordinary share as of 31 August 2012 |
$9.38 |
Note that most of the reduction in the Private Investments is due to a write down (13 cents) in our environmental testing company (Accutest Holdings, Inc.), as the continued malaise in the commercial real estate market has negatively affected the pricing and response times in this industry. This was offset by an increase in our sensor companies (11 cents), as both businesses (Amptek, Inc. and Nielsen-Kellerman) continue to outperform expectations.
The euro / dollar exchange rate change had a negative impact on our NAV, by 5 cents. Since 31 August 2012, the Euro has appreciated against the dollar; we have entered into a currency hedge of €13 million, to protect our position in direct loans made to European Micro Cap Fund (EMF) businesses.
Returns
The chart below summarizes the total NAV returns and total shareholder returns for the most recent 3 months, year and since the refinancing and restructuring in June 2009):
|
|
As at |
Since |
Since |
Since |
|
|
31.08.12 |
31.05.12 |
31.08.2011 |
31.08.2009 |
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|
|
|
|
|
|
Share price (in GBP) |
£3.50 |
£3.68 |
£3.75 |
£2.21 |
|
Dividends paid (in US cents) |
- |
18.5c |
25.0c |
65.0c |
|
Total shareholders return |
- |
(1.6%) |
(2.3%) |
22.3% |
|
|
|
|
|
|
|
NAV per share (in USD) |
$9.38 |
$9.38 |
$9.09 |
$6.65 |
|
NAV total returns |
- |
2.0% |
6.0% |
15.2% |
|
|
|
|
|
|
|
NAV to market price discount |
41% |
40% |
33% |
46% |
Despite our fairly valued portfolio, the market continues to undervalue our assets, a recurring trend across most of the listed private equity sector.
Portfolio summary
Below is a summary of JZCP's assets as of 31 August 2012 compared with the position as of 29 February 2012 fiscal year-end, six months ago.
|
|
No. of Investments |
|
|
|
|
|
As at |
|
|
|
|
|
31.08.12 |
31.08.12 |
29.02.12 |
Change |
|
|
|
|
|
|
|
US micro cap portfolio |
24 |
289,605 |
205,347 |
41.0% |
|
European investment |
5 |
99,344 |
85,129 |
16.7% |
|
Mezzanine investments |
5 |
25,795 |
29,632 |
(12.9%) |
|
Real estate portfolio |
4 |
20,798 |
- |
- |
|
Other portfolio |
4 |
8,742 |
1,620 |
439.6% |
|
Total private investments |
42 |
444,284 |
321,728 |
38.1% |
|
|
|
|
|
|
|
Listed equity |
3 |
65,359 |
88,639 |
(26.3%) |
|
Listed corporate bonds |
4 |
67,284 |
32,129 |
109.4% |
|
Bank debt |
4 |
32,200 |
32,512 |
(1.0%) |
|
UK treasury gilts |
|
33,629 |
33,465 |
0.5% |
|
Cash and cash deposits |
|
63,528 |
202,481 |
(68.6%) |
|
|
|
|
|
|
|
Total listed investments (and cash) |
11 |
262,000 |
389,226 |
(32.7%) |
|
|
|
|
|
|
|
Total investments (and cash) |
53 |
706,284 |
710,954 |
(0.7%) |
As mentioned below, the reduction in the Listed Equities is due to a successful sale of a significant portion of our
TAL stock
US micro cap portfolio
Our core US micro cap portfolio continues to perform well and on a combined basis the investee companies have achieved year-over-year EBITDA growth, an impressive achievement in this market environment. All of these investments employ low leverage, currently under 1.5x EBITDA of debt senior to JZCP's position. The average multiple used in valuing these entities continues to be low at 6.8x.
As mentioned above, we have written up two of our US micro cap investments (Amptek, Inc. and Nielsen Kellerman) in the sensors industry, as they continue to outperform our expectations. Offsetting this uplift is the effect that the commercial real estate downdraft has had on our environmental testing business (Accutest Holdings, Inc.); we have written this investment down, and continue to keep a close eye on this business.
We were able to put US$85.7 million to work in our US micro cap portfolio, primarily from the following:
New Investments - Verticals
We invest in our verticals with Edgewater Growth Capital Partners. When combined with Edgewater, we have a majority position in all of our verticals.
•Industrial Services
We made four acquisitions into our Industrial Services' vertical.
In April, we acquired Bay Valve which is an industrial valve distributor and provider of valve field services and equipment repair throughout the western United States. Its primary markets are petrochemical and power generation. JZCP purchased US$18.9 million of senior and subordinated notes, and a nominal amount of common stock. JZCP's equity interest in this entity is 31%.
In May, we purchased Gator Compressor, a small independent dealer of used and refurbished air compressor equipment and associated filter, lubricant and sundry parts. The company stocks a wide variety of inventory, and is capable of supplying aftermarket equipment and parts for a wide variety of OEM compressor brands. JZCP purchased 33% of this business with US$1.5 million of senior notes.
In June, we purchased National Compressors, which provides air compressor services and solutions to manufacturing plants across several end markets, including steel, power generation, automotive, and industrial and general manufacturing. We purchased US$4.4 million of senior notes, and acquired 31% of this business.
Finally, we made an investment in Pennsylvania Electric Motor Services, which specializes in the repair, rebuild, maintenance and installation of electric motors in a wide variety of uses, from integrated motion control devices to more mundane electric motors installations. The company services customers in a wide variety of end markets, including mining, metals, chemicals, and automotive industries. JZCP purchased US$6.6 million of senior and subordinated notes, and acquired 34% of the business' equity.
•Health Revenue Cycle Management
We made our first investment in our new Healthcare Revenue Cycle Management vertical. MEDS is an outsourced provider of patient benefit eligibility, enrolment and revenue recovery services to hospitals and health systems. MEDS helps its customers increase cash flow and accelerate cash collections by securing government-funded reimbursement for uncompensated medical expenses provided to uninsured and underinsured patients. JZCP purchased US$7.2 million in senior notes, and US$5.9 million of preferred and common stock, and acquired 30% of the equity of this business.
Mike Shea, our industry executive in this vertical has extensive experience in helping hospitals manage their cash flows though MEDS-type vehicles. He founded, built, ran and sold a large MEDS competitor, achieving exemplary returns for his investors. His reputation in this growing segment of the healthcare industry has helped populate a very active acquisition pipeline.
•Water Services
We made our second acquisition in our Water Services vertical. LMK is a nationwide provider of non-invasive, long- lasting repair of underground water pipes. Using patent protected proprietary technologies, LMK products allow for repair of leaking pipes with minimal or no excavation. The deterioration of infrastructure in US cities and towns implies significant growth opportunities for LMK. JZCP purchased US$6.0 million of senior notes, and US$4.2 million of preferred and common stock for 20% of this business.
•Testing Services
We made our second acquisition in our Testing Services vertical. Argus Group sells, rents and services industrial hygiene and safety equipment including gas monitoring and measurement equipment and personal protective equipment. The company's clients span a wide range of industries, from environmental consulting firms to industrial businesses. JZCP purchased $2.5 million in senior notes, and $2.9 million in preferred and common stock, and acquired 31% of the equity in this business.
New Investments - Co-Investments
Similar to our Verticals strategy, the combination of JZCP's and our partners' equity always creates a majority position in these companies.
• Along with Baird Capital Partners, we purchased 11% of MedPlast/UPG, a precision molded medical plastics business. This company designs, engineers and produces precision molded thermoplastic, rubber and elastomer components primarily for the healthcare and pharmaceutical markets. The close tolerances and highly monitored processes allow Medplast/UPG to garner higher-than-average margins. It operates from ten locations worldwide, has eight clean room production facilities, and a complete line of sub-assembly services. JZCP purchased US$10.0 million of subordinated notes, and US$7.5 million of preferred and common stock.
• Also with Baird, we purchased 19% of PC Helps, a provider of on-demand "how to" support and workforce productivity training solutions associated with software applications and mobile devices used every day at Fortune 500 and middle-market companies, federal agencies and higher education institutions. The company specializes in support for Microsoft Office and other applications and for the full range of mobile devices on the market today. JZCP invested US$9.0 million (preferred and common stock) into this business. This was a post-period acquisition, made in September 2012.
• Along with the ACON Investments group, we purchased 9% of Suzo-Happ, a designer, manufacturer and distributor of components, parts and supplies for the global gaming and amusement markets, servicing both the OEM and aftermarket channels. The growth in gaming throughout the world creates significant growth opportunities for Suzo- Happ; their products are used in most every slot machine manufacturers' products. JZCP invested US$5.0 million for its equity.
• In conjunction with ACON Latin America, a successful fund which has been investing in Latin America for 15 years, we invested in BSM Engenharia S.A., a provider of supply chain logistics, infrastructure services and equipment rental to oil and gas, petrochemical, mining and energy markets in Brazil. It operates from four ports in Brazil and its blue chip customer list includes Petrobras, Acelor Mittal and ThyssenKrupp. We purchased 4% of this business for US$6.1 million of stock.
European investments
As previously highlighted, JZCP has invested in a European Micro Cap Fund (EMF) which was established in 2010. It is managed by JZ International, a private equity company set up in 1999 by David Zalaznick, Jay Jordan, and Jock Green- Armytage, the former chairman of JZ Equity Partners. The fund invests in established and consistently profitable European micro cap companies with experienced management teams. Prior to the establishment of EMF, JZ International invested its own capital in a wide range of platform and add-on companies across Europe, including the UK, Spain, Italy, the Netherlands, Sweden, Norway and Finland.
JZCP now has US$62.4 million invested in the EMF which has a carrying value of US$80.8 million. This includes a new 30% investment in Oro Direct, which EMF purchased for €13.5 million alongside a co-investor in March 2012. Oro Direct is a leading buyer of precious metals in Spain; Oro also sells investment grade gold and silver. This business is very scalable and opened an office in Austria immediately after the EMF transaction closed.
The other four EMF businesses are operating well, despite the continued negative news from Spain. With the exception of exchange rate movements, their underlying valuations since the beginning of this fiscal year have not changed. All five investments represent approximately 14% of JZCP's total assets as of 31 August 2012.
Other assets
Over the past year, the bulk of our Mezzanine Portfolio has been re-paid. We currently have two investments of size, TTS Service Logic (a heating, ventilation and air conditioning services business) and HAAS (an automobile paint system supplier company). Both companies are performing well, and paying cash interest per their terms.
The only Legacy investment left of any size is Healthcare Products, our power wheelchair company. Despite the myriad of issues surrounding Medicare, its primary customer, this company continues to perform to plan.
Our Listed Equities have risen since the beginning of the year: TAL (the international container leasing company) and Safety Insurance (a Massachusetts based insurance company) together accounted for a NAV per share increase of 5 cents or US$3.4 million. Note that during this period we were able to sell 66% of our remaining TAL position for US$26.7 million; we have 357,418 TAL shares remaining from our initial position of 1.4 million shares.
As outlined above, we are continuing to pursue a number of Real Estate opportunities. As previously reported, we have invested US$16.8 million in what is almost an entire city block in the Williamsburg area of Brooklyn. That investment is progressing well as we begin a two to three year renovation program and start to acquire new retail and residential tenants. Post this interim period, we closed on another Brooklyn property across the street from the new Barclay's Center; the investment was approximately US$3.1 million. We also have deposits on two other properties and are proceeding with due diligence.
Balance sheet
Below is a summary of our Balance Sheet:
|
|
31.08.2012 US$'000 |
|
29.02.2012 US$'000 |
|
Cash |
63,528 |
|
202,481 |
|
UK treasury gilts |
33,629 |
|
33,465 |
|
Listed equity |
65,359 |
|
88,639 |
|
Listed corporate bonds |
67,284 |
|
32,129 |
|
Bank debt |
32,200 |
|
32,512 |
|
Private investments |
444,284 |
|
321,728 |
|
Other assets |
712 |
|
451 |
|
Total assets |
706,996 |
|
711,405 |
|
- Liabilities |
(7,130) |
|
(8,662) |
|
- Zero Dividend Preference shares |
(90,301) |
|
(87,281) |
|
Net asset value |
609,565 |
|
615,462 |
Principal Risks and Uncertainties
As an investment fund, our principal risks are those that are associated with our investment portfolio. Given the nature of the portfolio, the principal risks are associated with the financial and operating performance of the underlying investments, along with market risk associated with the publicly listed equities.
Outlook
Our investment strategy is to achieve superior returns by investing your (and our) money in a diversified portfolio of good quality niche businesses at reasonable prices. As the uncertainty in the world is manifested by deleveraging across many asset classes, JZCP's strong balance sheet and liquid assets will enable us to take advantage of great investment opportunities. We think our value oriented, value-added approach will yield strong NAV growth and we look forward to the second half of the year with confidence. Since our Board has initiated a policy of paying an annual dividend (in two instalments) equal to 3% of NAV, we expect the dividend growth will follow accordingly.
As always, thank you for your confidence in our investment strategy. Please feel free to contact us with any ideas that might be beneficial to JZCP.
Yours faithfully
Jordan/Zalaznick Advisers, Inc.
9 October 2012
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 held by the Company's associate 'EuroMicrocap Fund 2010, LP' are also valued on the basis set out below.
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 the 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 is 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
Listed investments 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.
Investment Review
|
|
|
|
|
Carrying Value |
|
|
|
|
|
Directors |
Including |
|
|
|
JZCP |
Historical |
Valuation at |
Accrued Interest |
Percentage |
|
|
Book |
Book |
31 August |
31 August |
of |
|
|
cost* |
cost** |
2012 |
2012 |
Portfolio |
|
Company |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
% |
|
|
|
|
|
|
|
|
US Micro Cap Portfolio |
|
|
|
|
|
|
ACCUTEST HOLDINGS, INC. |
|
|
|
|
|
|
Provision of environmental testing laboratories |
|
|
|
|
|
|
to the US market |
34,977 |
31,516 |
30,078 |
32,401 |
5.0 |
|
AMPTEK, INC. |
|
|
|
|
|
|
Designer and manufacturer of instrumentation used in numerous non-destructive testing and elemental analysis applications. |
|
|
|
|
|
|
Amptek, Inc. is a subsidiary of Sensors |
|
|
|
|
|
|
Solutions Holdings |
13,920 |
13,920 |
19,877 |
20,539 |
3.2 |
|
ARGUS GROUP HOLDINGS |
|
|
|
|
|
|
Sells, rents and services safety and testing equipment to a variety of industries. Argus Group Holdings is a subsidiary of Testing |
|
|
|
|
|
|
Services Holdings |
5,616 |
5,616 |
5,628 |
5,691 |
0.9 |
|
BAY VALVE SERVICES |
|
|
|
|
|
|
Provider of industrial valve services and repair throughout |
|
|
|
|
|
|
Western US. Bay Valve is a subsidiary of ISS #2 |
19,030 |
19,030 |
19,418 |
19,795 |
3.1 |
|
BG HOLDINGS, INC. |
|
|
|
|
|
|
Manufacturer of industrial gears |
19,732 |
19,732 |
28,253 |
30,047 |
4.7 |
|
CHINA DENTAL HOLDINGS, INC. |
|
|
|
|
|
|
Acquirer of China-based dental laboratories |
1,376 |
1,376 |
1,502 |
1,596 |
0.2 |
|
DENTAL HOLDINGS CORPORATION |
|
|
|
|
|
|
Operator of dental laboratories |
24,963 |
19,201 |
24,415 |
25,445 |
4.0 |
|
ETX HOLDINGS, INC. *** |
|
|
|
|
|
|
Provider of services to the auto after sales market |
392 |
392 |
617 |
649 |
0.1 |
|
GALSON LABORATORIES |
|
|
|
|
|
|
Provider of analytical air testing services as well as industrial hygiene rental equipment. Galson Laboratories is a subsidiary of |
|
|
|
|
|
|
Testing Services Holdings. |
2,855 |
2,855 |
8,330 |
8,548 |
1.3 |
|
HEALTHCARE PRODUCTS HOLDINGS, INC. *** |
|
|
|
|
|
|
Designer and manufacturer of motorised vehicles |
13,849 |
17,637 |
21,809 |
23,012 |
3.6 |
|
|
|
|
|
|
|
|
ISS COMPRESSORS INDUSTRIES, INC. Acquirer of industrial air compressor services and repair companies. ISS Compressors Industries, Inc., which owns Worthington Compressor (combination of Southern Parts & Engineering Company and Gator Compressor) and National |
|
|
|
|
|
|
Compressors, is a subsidiary of ISS #2 |
12,648 |
12,648 |
12,766 |
13,119 |
2.0 |
|
JUSTRITE MANUFACTURING COMPANY |
|
|
|
|
|
|
A manufacturer of industrial safety products |
4,428 |
4,428 |
5,645 |
5,866 |
0.9 |
|
LMK ENTERPRISES |
|
|
|
|
|
|
Environmental infrastructure company that provides technology to facilitate repair of underground pipes and other infrastructure. |
|
|
|
|
|
|
LMK Enterprises is a subsidiary of Triwater Holdings. |
10,554 |
10,554 |
10,590 |
10,775 |
1.7 |
|
MEDPLAST/UPG HOLDINGS |
|
|
|
|
|
|
Manufacturer of plastic medical components |
17,344 |
17,344 |
17,405 |
17,874 |
2.8 |
|
MEDS HOLDINGS, INC. |
|
|
|
|
|
|
An outsourced provider of patient benefit eligibility, enrolment and revenue recovery services to hospitals and health systems. MEDS |
|
|
|
|
|
|
Holdings is a subsidiary of Bolder Healthcare Solutions, LLC |
13,290 |
13,290 |
13,290 |
13,407 |
2.1 |
|
MILESTONE AVIATION GROUP, INC. |
|
|
|
|
|
|
Finance provider for helicopter and private jet owners |
12,857 |
12,857 |
13,371 |
14,131 |
2.2 |
|
NASHVILLE CHEMICAL & EQUIPMENT COMPANY |
|
|
|
|
|
|
Provider of water treatment supplies and services. Nashville |
|
|
|
|
|
|
Chemical & Equipment Co. is a subsidiary of Triwater Holdings |
7,225 |
7,225 |
7,503 |
7,811 |
1.2 |
|
NATIONWIDE STUDIOS, INC. |
|
|
|
|
|
|
Processer of digital photos for preschoolers |
16,132 |
16,132 |
4,046 |
4,200 |
0.7 |
|
|
|
|
|
|
|
|
NEW VITALITY HOLDINGS, INC. |
|
|
|
|
|
|
Direct-to-consumer provider of nutritional supplements and |
|
|
|
|
|
|
personal care products |
4,000 |
4,000 |
4,589 |
4,840 |
0.8 |
|
NIELSEN-KELLERMAN |
|
|
|
|
|
|
Designer and manufacturer of environmental measurement instruments and devices. Nielsen-Kellerman is a subsidiary of |
|
|
|
|
|
|
Sensors Solutions Holdings |
2,601 |
2,601 |
3,855 |
4,046 |
0.6 |
|
NTT ACQUISITION CORP. *** Technical education and training |
52 |
946 |
52 |
52 |
0.0 |
|
PENNSYLVANIA ELECTRIC MOTOR SERVICES |
|
|
|
|
|
|
Provider of industrial electric motor repair, rebuild, maintenance |
|
|
|
|
|
|
and installation services. Pennsylvania Electric Motor Services, is |
|
|
|
|
|
|
a subsidiary of ISS #2 |
6,745 |
6,745 |
6,779 |
6,924 |
1.1 |
|
SALTER LABS, INC. |
|
|
|
|
|
|
Developer and manufacturer of respiratory medical products and |
|
|
|
|
|
|
equipment for the homecare, hospital, and sleep disorder markets |
19,163 |
19,163 |
11,527 |
12,056 |
1.9 |
|
SUZO HAPP GROUP |
|
|
|
|
|
|
Designer, manufacturer and distributor of components for the |
|
|
|
|
|
|
global gaming, amusement and industrial markets |
4,958 |
4,958 |
4,958 |
4,958 |
0.8 |
|
TAP HOLDINGS, INC. |
|
|
|
|
|
|
Acquirer of food product manufacturers or distributors |
944 |
944 |
1,027 |
1,082 |
0.2 |
|
TIGER INFORMATION SYSTEMS, INC. *** Provider of temporary staff and computer training |
300 |
400 |
300 |
300 |
0.0 |
|
US SANITATION, LLC |
|
|
|
|
|
|
Acquirer of janitorial and sanitorial product distributors and related chemical manufacturers and blenders |
425 |
425 |
425 |
441 |
0.1 |
|
Total US Micro Cap Portfolio |
270,376 |
265,935 |
278,055 |
289,605 |
45.2 |
|
European Micro Cap Portfolio |
|
|
|
|
|
|
EUROMICROCAP FUND 2010, LP Acquirer of Europe-based microcap companies |
62,428 |
62,428 |
80,782 |
80,782 |
12.5 |
|
DOCOUT, S.L. |
|
|
|
|
|
|
Provider of digitalisation, document processing and storage |
|
|
|
|
|
|
services |
2,777 |
2,777 |
2,527 |
2,793 |
0.4 |
|
GRUPO OMBUDS |
|
|
|
|
|
|
Provider of personal security and asset protection |
14,794 |
14,794 |
13,241 |
14,493 |
2.3 |
|
ORO DIRECT |
|
|
|
|
|
|
Buyer and seller of precious metals |
1,275 |
1,275 |
1,257 |
1,276 |
0.2 |
|
Total European Micro Cap Portfolio |
81,274 |
81,274 |
97,807 |
99,344 |
15.4 |
|
|
|
|
|
|
|
|
Mezzanine Portfolio |
|
|
|
|
|
|
GED HOLDINGS, INC. |
|
|
|
|
|
|
Manufacturer of windows |
- |
6,100 |
305 |
305 |
0.0 |
|
HAAS TCM GROUP, INC. |
|
|
|
|
|
|
Speciality chemical distribution |
7,500 |
7,500 |
7,584 |
7,770 |
1.2 |
|
METPAR INDUSTRIES, INC. |
|
|
|
|
|
|
Manufacturer of restroom partitions |
6,450 |
7,754 |
604 |
750 |
0.1 |
|
PETCO ANIMAL SUPPLIES, INC. |
|
|
|
|
|
|
Retailer of pet food, supplies and services |
1,636 |
1,636 |
1,636 |
1,636 |
0.3 |
|
TTS, LLC |
|
|
|
|
|
|
Provider of technical facilities for mechanical services |
15,000 |
14,840 |
15,066 |
15,334 |
2.4 |
|
|
|
|
|
|
|
|
Total Mezzanine Portfolio |
30,586 |
37,830 |
25,195 |
25,795 |
4.0 |
|
|
|
|
|
|
|
|
Bank Debt: First Lien Portfolio |
|
|
|
|
|
|
KGB (formerly known as INFONXX, INC.) |
|
|
|
|
|
|
Worldwide provider of directory assistance |
765 |
801 |
785 |
785 |
0.1 |
|
KINETEK, INC. |
|
|
|
|
|
|
Manufacturer of electric motors and gearboxes |
3,932 |
4,274 |
4,239 |
4,239 |
0.7 |
|
WP EVENFLO HOLDINGS, INC. |
|
|
|
|
|
|
Manufacturer of children's products |
119 |
139 |
136 |
136 |
0.0 |
|
Bank Debt: Second Lien Portfolio |
|
|
|
|
|
|
DEKKO TECHNOLOGIES, LLC |
|
|
|
|
|
|
Distributor of electrical sub-components |
11,418 |
11,368 |
13,125 |
13,240 |
2.1 |
|
KINETEK, INC. |
|
|
|
|
|
|
Manufacturer of electric motors and gearboxes |
13,425 |
15,000 |
13,800 |
13,800 |
2.1 |
|
|
|
|
|
|
|
|
Total Bank Debt |
29,659 |
31,582 |
32,085 |
32,200 |
5.0 |
|
|
|
|
|
|
|
|
Listed Investments |
|
|
|
|
|
|
Equities |
|
|
|
|
|
|
SAFETY INSURANCE GROUP, INC. *** |
|
|
|
|
|
|
Provider of automobile insurance |
42,223 |
6,816 |
52,406 |
52,406 |
8.2 |
|
TAL INTERNATIONAL GROUP, INC. |
|
|
|
|
|
|
Lesser of intermodal shipping containers |
8,274 |
3,573 |
12,152 |
12,152 |
1.9 |
|
UNIVERSAL TECHNICAL INSTITUTE, INC. *** |
|
|
|
|
|
|
Vocational training in the automotive and marine fields |
835 |
15 |
801 |
801 |
0.1 |
|
|
|
|
|
|
|
|
Total Listed Equity Investments |
51,332 |
10,404 |
65,359 |
65,359 |
10.2 |
|
UK Gilts |
|
|
|
|
|
|
Treasury 2% - maturity 22/01/2016 |
32,431 |
32,431 |
33,558 |
33,629 |
5.2 |
|
|
|
|
|
|
|
|
Total UK Gilts |
32,431 |
32,431 |
33,558 |
33,629 |
5.2 |
|
|
|
|
|
|
|
|
Corporate Bonds |
|
|
|
|
|
|
GOLDMAN SACHS, 03/22/2016 |
14,205 |
14,205 |
14,170 |
14,197 |
2.2 |
|
HSBC FINANCE CORP, 06/01/16 |
13,709 |
13,709 |
14,200 |
14,234 |
2.2 |
|
HSBC FINANCE CORP, 01/15/14 |
4,867 |
4,867 |
4,960 |
4,965 |
0.8 |
|
JP MORGAN CHASE BANK NA, 06/13/16 |
18,576 |
18,576 |
19,212 |
19,248 |
3.0 |
|
WACHOVIA BANK NA, 10/28/1514,332 |
14,332 |
14,332 |
14,628 |
16,640 |
2.3 |
|
|
|
|
|
|
|
|
Total Corporate Bonds |
65,689 |
65,689 |
67,170 |
67,284 |
10.5 |
|
Real Estate |
|
|
|
|
|
|
REDBRIDGE BEDFORD, LLC Acquiror of several buildings compromising almost a square block in Williamsburg, Brooklyn, New York |
16,750 |
16,750 |
16,750 |
16,750 |
2.5 |
|
REDSKY JZ FULTON, LLC |
638 |
638 |
638 |
638 |
0.1 |
|
REDSKY JZ TRIANGLE, LLC |
410 |
410 |
410 |
410 |
0.1 |
|
REDSKY ROEBLING, LLC |
3,000 |
3,000 |
3,000 |
3,000 |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Investments |
20,798 |
20,798 |
20,798 |
20,798 |
3.2 |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
BSM ENGENHARIA S.A. |
6,115 |
6,115 |
5,370 |
5,370 |
0.8 |
|
CONSTITUENT CAPITAL MANAGEMENT, LLC Asset management company that primarily manages smaller endowments and pension funds |
833 |
833 |
833 |
833 |
0.1 |
|
JZ INTERNATIONAL, LLC *** |
1,621 |
661 |
1,621 |
1,621 |
0.3 |
|
JZ PALATINE CO-INVESTMENT, LLC |
918 |
918 |
918 |
918 |
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other |
9,487 |
8,527 |
8,742 |
8,742 |
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - Portfolio |
591,632 |
554,470 |
628,769 |
642,756 |
100.0 |
|
|
|
|
|
|
|
|
Zero Dividend Preference shares |
|
|
|
(90,301) |
|
|
|
|
|
|
|
|
|
Cash and other net assets |
|
|
|
57,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets attributable to Ordinary shares |
|
|
|
609,565 |
|
|
|
|
|
|
|
|
* Book cost to JZCP equating to transfer value as at 1 July 2008 upon the liquidation of JZEP and adjusted for subsequent transactions. The book cost excludes the transfer value and subsequent Payment In Kind ("PIK") investments.
**Original book cost incurred by JZEP/JZCP adjusted for subsequent transactions. The book cost represents cash outflows and excludes PIK investments.
*** Legacy Investments. Legacy investments are excluded from the calculation of capital and income incentive fees.
Mezzanine Portfolio includes common stock with a carrying value of US$1,691,000these investments are classified as Investments at fair value through profit or loss.
Unaudited Statement of Comprehensive Income
For the Period from 1 March 212 to 31 August 212
|
|
|
|
|
|
|
|
|
|
|
Six month period from 1 March 2012 to |
Six month period from 1 March to |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Return |
Capital Return |
Total |
Revenue Return |
Capital Return |
Total |
|
|
Notes |
US$'000 |
US$'00 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Income |
|
|
|
|
|
|
|
|
Net gain/(loss) on investments at fair value |
|
|
|
|
|
|
|
|
through profit or loss |
5 |
- |
2,653 |
2,653 |
- |
(5,980) |
(5,980) |
|
Net write back of impairments/(impairments) on |
|
|
|
|
|
|
|
|
loans and receivables |
6 |
- |
597 |
597 |
- |
(87) |
(87) |
|
Share of associate's net (expense)/income |
11 |
- |
(2,443) |
(2,443) |
- |
12,390 |
12,390 |
|
Realisations from investments held in escrow Accounts |
20 |
- |
2,145 |
2,145 |
- |
1,288 |
1,288 |
|
Net foreign currency exchange gains/(losses) |
|
- |
345 |
345 |
- |
(152) |
(152) |
|
Investment income |
7 |
19,882 |
- |
19,882 |
23,579 |
- |
23,579 |
|
Bank and deposit interest |
|
187 |
- |
187 |
236 |
- |
236 |
|
|
|
|
|
|
|
|
|
|
|
|
20,069 |
3,297 |
23,366 |
23,815 |
7,459 |
31,274 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share class restructuring costs |
|
- |
(1,608) |
(1,608) |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Investment Adviser's base fee |
9 |
(5,323) |
- |
(5,323) |
(5,069) |
- |
(5,069) |
|
|
|
|
|
|
|
|
|
|
Investment Adviser's capital incentive fee |
9 |
- |
(4,966) |
(4,966) |
- |
(4,068) |
(4,068) |
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
9 |
(1,285) |
- |
(1,285) |
(1,568) |
- |
(1,568) |
|
|
|
|
|
|
|
|
|
|
|
|
(6,608) |
(6,574) |
(13,182) |
(6,637) |
(4,068) |
(10,705) |
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
13,461 |
(3,277) |
10,184 |
17,178 |
3,391 |
20,569 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
Finance costs in respect of Zero Dividend |
|
|
|
|
|
|
|
|
Preference shares |
8 |
- |
(3,410) |
(3,410) |
- |
(3,261) |
(3,261) |
|
Profit/(loss) before taxation |
|
13,461 |
(6,687) |
6,774 |
17,178 |
130 |
17,308 |
|
|
|
|
|
|
|
|
|
|
Withholding taxes |
10 |
(644) |
- |
(644) |
(860) |
- |
(860) |
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
|
12,817 |
(6,687) |
6,130 |
16,318 |
130 |
16,448 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of Ordinary shares in issue during period |
14 |
|
|
65,018,607 |
|
|
65,018,607 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted profit/(loss) per Ordinary share using the weighted average number of Ordinary shares in issue during the period |
|
19.71c |
(10.28)c |
9.43c |
25.10c |
20c |
25.30c |
|
|
|
|
|
|
|
|
|
All items in the above statement are derived from continuing operations.
The profit for the period is attributable to the Ordinary shareholders of the Company.
The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice. There was no comprehensive income other than the profit for the period.
Unaudited Statement of Financial Position
As at 31 August 2012
|
|
|
31 August |
29 February |
|
|
|
2012 |
2012 |
|
|
Notes |
US$'000 |
US$'000 |
|
|
|
|
|
|
Assets |
|
|
|
|
Investments at fair value through profit or loss |
11 |
537,870 |
414,549 |
|
Investments classified as loans and receivables |
11 |
24,104 |
23,974 |
|
Investment in associate |
11 |
80,782 |
69,950 |
|
Cash held on deposit and investments in money market funds |
|
15,275 |
7,968 |
|
Other receivables |
|
712 |
451 |
|
Cash and cash equivalents |
|
48,253 |
194,513 |
|
Total assets |
|
706,996 |
711,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Zero Dividend Preference shares |
12 |
90,301 |
87,281 |
|
Other payables |
|
7,130 |
8,662 |
|
Total liabilities |
|
97,431 |
95,943 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital account |
|
149,269 |
149,269 |
|
Distributable reserve |
|
353,528 |
353,528 |
|
Capital reserve |
|
35,088 |
41,775 |
|
Revenue reserve |
|
71,680 |
70,890 |
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
609,565 |
615,462 |
|
|
|
|
|
|
Total liabilities and equity |
|
706,996 |
711,405 |
|
|
|
|
|
|
|
|
|
|
|
Number of Ordinary shares in issue at period/year end |
13 |
65,018,607 |
65,018,607 |
|
|
|
|
|
|
Net asset value per Ordinary share |
15 |
US$ 9.38 |
US$ 9.47 |
These unaudited financial statements were approved by the Board of Directors and authorised for issue on 9 October 2012. 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 2012 to 31 August 2012 |
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
Distributable |
|
Capital Reserve |
|
Revenue |
|
|
||
|
|
|
Account |
|
Reserve |
|
Realised |
|
Unrealised |
|
Reserve |
|
Total |
|
|
Notes |
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
Balance as at 1 March 2012 |
|
149,269 |
353,528 |
68,107 |
(26,332) |
70,890 |
615,462 |
|||||
|
Profit/(loss) for the period |
|
- |
- |
7,505 |
(14,192) |
12,817 |
6,130 |
|||||
|
Dividends paid |
21 |
- |
- |
- |
- |
(12,027) |
(12,027) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 August 2012 |
|
149,269 |
|
353,528 |
|
75,612 |
|
(40,524) |
|
71,680 |
609,565 |
|
Comparative for the period from 1 March 2011 to 31 August 2011
|
|
|
Share |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Capital |
|
Distributable |
|
Capital Reserve |
|
Revenue |
|
|
|
|||||||
|
|
|
Account |
|
Reserve |
|
Realised |
|
Unrealised |
|
Reserve |
|
Total |
|
|||||
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|||||
|
Balance at 1 March 2011 |
|
149,269 |
353,528 |
14,525 |
7,408 |
56,058 |
580,788 |
|
||||||||||
|
(Loss)/profit for the period |
|
- |
- |
(355) |
485 |
16,318 |
16,448 |
|
||||||||||
|
Dividends paid |
|
- |
- |
- |
- |
(6,144) |
(6,144) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Balance at 31 August 2011 |
|
149,269 |
|
353,528 |
|
14,170 |
|
7,893 |
|
66,232 |
|
591,092 |
|
|||||
Unaudited Statement of Cash Flows
For the Period from 1 March 212 to 31 August 212
|
|
|
Six month |
|
Six month |
|
|
|
period from |
|
period from |
|
|
|
1 March 2012 |
|
1 March 2011 |
|
|
|
to 31 August |
|
to 31 August |
|
|
|
2012 |
|
2011 |
|
|
Notes |
US$'000 |
|
US$'000 |
|
Operating activities |
|
|
|
|
|
Net cash (outflow)/inflow from operating activities |
16 |
(4,764) |
|
3,939 |
|
Cash outflow for purchase of investments |
|
(119,624) |
|
(36,954) |
|
Cash outflow for capital call by the EuroMicrocap Fund 2010, LP |
|
(13,275) |
|
(49,153) |
|
Cash outflow for purchase of corporate bonds |
|
(57,288) |
|
(24,433) |
|
Cash outflow for fixed deposits and money market funds |
|
(18,259) |
|
- |
|
Cash inflow from repayment and disposal of investments |
5,6 |
68,136 |
|
70,982 |
|
Cash inflow from fixed deposits and money market funds |
|
10,841 |
|
- |
|
|
|
|
|
|
|
Net cash outflow before financing activities |
|
(134,233) |
|
(35,619) |
|
Financing activity |
|
|
|
|
|
Dividends paid to shareholders |
21 |
(12,027) |
|
(6,144) |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
|
(12,027) |
|
(6,144) |
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
(146,260) |
|
(41,763) |
|
Reconciliation of net cash flow to movements in cash and cash equivalents |
|
|
|
|
|
Cash and cash equivalents at 1 March |
|
194,513 |
|
172,267 |
|
Decrease in cash and cash equivalents as above |
|
(146,260) |
|
(41,763) |
|
|
|
|
|
|
|
Cash and cash equivalents at period end |
|
48,253 |
|
130,504 |
The accompanying notes form an integral part of the financial statements.
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 subject to the Companies (Guernsey) Law,2008. The Company's Share Capital consists of Ordinary shares and Zero Dividend Preference ("ZDP") shares. The Ordinary shares and ZDP shares were admitted to trading on the London Stock Exchange's Specialist Fund Market ("SFM") and were admitted to listing on the Channel Islands Stock Exchange ("CISX") on 31 July 2012.
Prior to 31 July 2012, the Company's Share Capital consisted of Ordinary shares, Limited Voting Ordinary ("LVO") shares and 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 ZDP share for each JZEP ZDP share that they held.
LVO shares 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.
On 31 July 2012 the Company reorganised its capital structure to enable the Company to have a single class of Ordinary shares in place of the previous capital structure that consisted of Ordinary and LVO shares. The new, simplified structure is more appropriate to the mix of investors who own the Company and removes a structural inadequacy that restricted the Company's ability to accommodate US investors.
The Company is classed as an authorised fund under the Protection of Investors (Bailiwick of Guernsey) Law 1987.
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, real estate 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 management fee and is also entitled to performance related fees (note 9). The Company has no ownership interest in the Investment Adviser. During the period under review the Company was administered by Butterfield Fulcrum Group (Guernsey) Limited (note 9). With effect from 1 September 2012, the Company appointed Northern Trust International Fund Administration Services (Guernsey) Limited, as the new Company Secretary and Administrator.
The financial statements are presented in US$'000 except where otherwise indicated.
2 Significant Accounting Policies
The accounting policies adopted in the preparation of these condensed interim financial statements have been consistently applied during the period, unless otherwise stated.
Statement of Compliance
The condensed interim financial statements of the Company for the period 1 March 2012 to 31 August 2012 have been prepared in accordance with IAS 34,"Interim Financial Reporting" as adopted in the EU, together with applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the CISX and SFM. 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 29 February 2012.
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 accounting policies adopted in the preparation of these condensed interim financial statements have been consistent with the accounting policies stated in note 2 of the annual financial statements for the year ended 29 February 2012. The preparation of condensed interim financial statements in conformity with IAS 34,"Interim Financial Reporting" as adopted in the EU, 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 is organised into the following segments:
• Portfolio of US micro cap investments.
• Portfolio of European micro cap investments.
• Portfolio of Mezzanine investments,
• Portfolio of Bank debt.
• Portfolio of Listed investments.
• Portfolio of Real Estate investments
• Portfolio of Other 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 a diversified portfolio.
Investment in corporate bonds, money market funds and treasury gilts are not considered part of any individual segment and have therefore been excluded from this segmental analysis.
During the course of the period the Investment Manager restructured its reportable segments. Investments within the Legacy portfolio, which consisted of investments made prior to 22 July 2002, have been reanalysed as either US Micro Cap or Other. The comparative data shown below has been amended to reflect this change. The segment information provided is also presented to the Board of the Company.
For the period ended 31 August 2012
|
|
Micro Cap |
Micro Cap |
Mezzanine |
Bank |
Listed |
Real |
Other |
Total |
|
|
US |
European |
Portfolio |
Debt |
Investments |
Estate |
|
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Interest revenue |
13,396 |
665 |
1,670 |
1,415 |
- |
- |
- |
17,146 |
|
Dividend revenue |
- |
- |
- |
- |
2,148 |
- |
- |
2,148 |
|
Net (loss)/gain on investments at fair value through profit or loss |
(2,212) |
(881) |
67 |
562 |
3,438 |
- |
(745) |
229 |
|
Share of associate's net expense |
|
(2,443) |
- |
- |
- |
- |
- |
(2,443) |
|
|
|
|
|
|
|
|
|
|
|
Impairments on loans and receivables |
- |
|
597 |
- |
- |
- |
- |
597 |
|
Investment Adviser's base fee |
(2,180) |
(748) |
(194) |
(243) |
(492) |
(157) |
(66) |
(4,080) |
|
Investment Adviser's capital |
|
|
|
|
|
|
|
|
|
incentive fee1 |
(303) |
- |
(651) |
- |
(3,928) |
- |
- |
(4,882) |
|
|
|
|
|
|
|
|
|
|
|
Total segmental operating profit |
8,701 |
(3,407) |
1,489 |
1,734 |
1,166 |
(157) |
(811) |
8,715 |
For the period ended 31 August 2011
|
|
Micro Cap |
Micro Cap |
Mezzanine |
Bank |
Listed |
Real |
Other |
Total |
|
|
US |
European |
Portfolio |
Debt |
Investments |
Estate |
Investments |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Interest revenue |
16,242 |
283 |
2,726 |
1,210 |
|
|
19 |
20,480 |
|
Dividend revenue |
|
|
|
|
2,865 |
|
|
2,865 |
|
Other revenue |
|
|
|
124 |
|
|
|
124 |
|
Net gain/(loss) on investments at |
|
|
|
|
|
|
|
|
|
fair value through profit or loss |
8,023 |
530 |
|
1,868 |
(16,974) |
|
|
(6,553) |
|
Share of associate's net income |
|
12,390 |
|
|
|
|
|
12,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments on loans and receivables |
|
|
(87) |
|
|
|
|
(87) |
|
Investment Adviser's base fee |
(3,086) |
(708) |
(446) |
(319) |
(231) |
|
(49) |
(4,839) |
|
Investment Adviser's capital |
|
|
|
|
|
|
|
|
|
incentive fee1 |
(1,132) |
(485) |
2,690 |
610 |
(5,636) |
|
|
(3,953) |
|
|
|
|
|
|
|
|
|
|
|
Total segmental operating profit |
20,047 |
12,010 |
4,883 |
3,493 |
(19,976) |
|
(30) |
20,427 |
1The capital incentive fee is allocated across segments where a realised or unrealised gain or loss has occurred. Segments with realised or unrealised losses are allocated a credit pro rata to the size of the loss and segments with realised or unrealised gains are allocated a charge pro rata to the size of the gain.
At 31 August 2012
|
|
Micro Cap |
Micro Cap |
Mezzanine |
Bank |
Listed |
Real |
Other |
Total |
|
|
US |
European |
Portfolio |
Debt Investments |
Estate |
Investments |
|
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value through profit or loss |
289,605 |
18,562 |
1,691 |
32,200 |
65,359 |
20,798 |
8,742 |
436,957 |
|
Investments classified as loans and receivables |
- |
- |
24,104 |
- |
- |
- |
- |
24,104 |
|
Investment in an associate |
- |
80,782 |
- |
- |
- |
- |
- |
80,782 |
|
Other receivables |
- |
- |
- |
- |
636 |
- |
- |
636 |
|
Other payables and accrued |
|
|
|
|
|
|
|
|
|
Expenses |
(566) |
(90) |
(674) |
(29) |
(4,860) |
(19) |
(8) |
(6,246) |
|
|
|
|
|
|
|
|
|
|
|
Total segmental net assets |
289,039 |
99,254 |
25,121 |
32,171 |
61,135 |
20,779 |
8,734 |
536,233 |
At 29 February 2012
|
|
Micro Cap |
Micro Cap |
Mezzanine |
Bank |
Listed |
Real |
Other |
Total |
|
|
US |
European |
Portfolio |
Debt |
Investments |
Estate |
Investments |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value through profit or loss |
205,347 |
15,179 |
5,658 |
32,512 |
88,639 |
- |
1,620 |
348,955 |
|
Investments classified as loans and receivables |
- |
- |
23,974 |
- |
- |
- |
- |
23,974 |
|
Investment in an associate |
- |
69,950 |
- |
- |
- |
- |
- |
69,950 |
|
Other receivables |
- |
- |
- |
- |
405 |
- |
- |
405 |
|
|
|
|
|
|
|
|
|
|
|
Other payables and accrued |
|
|
|
|
|
|
|
|
|
expenses |
(4,376) |
(619) |
(109) |
(51) |
(2,357) |
- |
(2) |
(7,514) |
|
Total segmental net assets |
200,971 |
84,510 |
29,523 |
32,461 |
86,687 |
|
1,618 |
435,770 |
Certain income and expenditure is not considered part of the performance of an individual segment. This includes net foreign exchange gains, interest on cash, finance costs, management fees, custodian and administration fees, directors' fees and other general expenses.
The following table provides reconciliation between net reportable segment income and operating profits..
US$ '000
|
|
Period ending |
|
Period ending |
|
||
|
|
31.08.2012 |
|
31.08.2012 |
|||
|
|
US$ '000
|
|
US$ '000 |
|||
|
Net reportable segment profit |
8,715 |
|
20,427 |
|||
|
Net gains on treasury gilts and corporate bonds |
2,424 |
|
574 |
|
||
|
Realised gains on investments held in escrow accounts |
2,145 |
|
1,288 |
|||
|
Net foreign exchange |
345 |
|
(152) |
|||
|
Interest on treasury notes |
588 |
|
110 |
|
||
|
Interest on cash |
187 |
|
236 |
|
||
|
Fees payable to investment adviser based on non segmental assets |
(1,327) |
|
(345) |
|||
|
Expenses not attributable to segments |
(1,285) |
|
(1,569) |
|||
|
Share class restructuring costs |
(1,608) |
|
- |
|
||
|
Operating profit |
10,184 |
|
20,569 |
|
||
Other receivables and prepayments are not considered to be part of individual segment assets. Certain liabilities are not considered to be part of the net assets of an individual segment. These include custodian and administration fees payable, directors' fees payable and Other payables and accrued expenses.
The following table provides a reconciliation between total net segment assets and total net assets.
|
|
31.08.2012 US$ '000 |
29.02.2012 US$ '000 |
|
||
|
Total net segmental assets |
536,233 |
435,770 |
|
||
|
Non segmental assets and liabilities Treasury gilts |
33,629 |
33,465 |
|
||
|
Corporate bonds |
67,284 |
32,129 |
|
||
|
|
Cash held on deposit and investments in money market funds |
15,275 |
7,968 |
||
|
|
Cash and cash equivalents |
48,253 |
194,513 |
||
|
|
Other receivables and prepayments |
76 |
46 |
||
|
|
Zero Dividend Preference shares |
(90,301) |
(87,281) |
||
|
Other payables and accrued expenses |
(884) |
(1,148) |
|
||
|
Total non segmental net assets |
73,332 |
179,692 |
|
||
|
Total net assets |
609,565 |
615,462 |
|
||
4 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period, 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 29 February 2012 and the valuation policy. The key source of estimation uncertainty is on the valuation of unquoted equities and equity-related securities.
In reaching its valuation of the unquoted equities and equity-related securities the key judgements the Board have to make are those relating to the multiples and the discount factors used in the valuation models.
Loans and receivables
Certain investments are classified as Loans and Receivables, and valued accordingly, as disclosed in note 2 of the annual financial statements for the year ended 29 February 2012 and the valuation as stated in note 2. The key estimation is the impairment review and the key assumptions are as disclosed in note 2 of the financial statements for the year ended 29 February 2012.
5 Net gains/(losses) on investments at fair value through profit or loss
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Net movement in unrealised gains/losses in the period |
1,038 |
(11,666) |
|
|
|
|
|
Proceeds from investments realised |
67,452 |
70,982 |
|
Cost of investments realised |
(52,810) |
(53,381) |
|
Unrealised gains in prior periods now realised |
(13,027) |
(11,915) |
|
Total net realised gains in the period |
1,615 |
5,686 |
|
|
|
|
|
|
|
|
|
Net gain/(loss) on investments in the period |
2,653 |
(5,980) |
|
|
|
|
6 Net write back of impairments/(impairments) on loans and receivables
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Net impairments on loans and receivables |
(87) |
(87) |
|
Proceeds from investments previously written off |
684 |
- |
|
|
|
|
|
|
|
|
|
Net write back of impairments/(impairments) on loans and receivables |
597 |
(87) |
|
|
|
|
7 Investment income
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
|
|
|
|
Income from investments classified as FVTPL |
18,221 |
20,868 |
|
Income from investments classified as loans and receivables |
1,661 |
2,711 |
|
|
|
|
|
|
19,882 |
23,579 |
Income for the six month period ended 31 August 2012
|
|
Preference Dividend |
|
Loan note |
|
Other |
|
Other |
|
|
|
||||||||
|
|
Dividends US$'000 |
PIK US$'000 |
Cash US$'000 |
|
PIK US$'000 |
|
Cash US$'000 |
|
Interest US$'000 |
|
Income US$'000 |
|
Total US$'000 |
|
||||
|
|
US micro cap portfolio |
- |
6,124 |
- |
|
3,956 |
|
3,316 |
|
- |
|
- |
|
13,396 |
||||
|
|
European micro cap portfolio |
- |
- |
- |
|
- |
|
665 |
|
- |
|
- |
|
665 |
||||
|
|
Mezzanine portfolio |
- |
9 |
- |
|
195 |
|
1,466 |
|
- |
|
- |
|
1,670 |
||||
|
|
Bank debt |
- |
- |
- |
|
- |
|
- |
|
1,415 |
|
- |
|
1,415 |
||||
|
|
Listed investments |
2,148 |
- |
- |
|
- |
|
- |
|
- |
|
- |
|
2,148 |
||||
|
Treasury gilts and corporate bonds |
- |
- |
- |
|
- |
|
- |
|
588 |
|
- |
|
588 |
|
||||
|
|
2,148 |
6,133 |
- |
|
4,151 |
|
5,447 |
|
2,003 |
|
- |
|
19,882 |
|
||||
Income for the six month period ended 31 August 2011
|
|
Preference Dividend |
|
Loan note |
|
Other |
|
Other |
|
|
|
||||||||
|
|
Dividends US$'000 |
PIK US$'000 |
Cash US$'000 |
|
PIK US$'000 |
|
Cash US$'000 |
|
Interest US$'000 |
|
Income US$'000 |
|
Total US$'000 |
|
||||
|
|
US micro cap portfolio |
- |
9,167 |
- |
|
3,406 |
|
3,952 |
|
- |
|
- |
|
16,525 |
||||
|
|
European micro cap portfolio |
- |
- |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
||||
|
|
Mezzanine portfolio |
- |
15 |
- |
|
167 |
|
2,544 |
|
- |
|
- |
|
2,726 |
||||
|
|
Bank debt |
- |
- |
- |
|
- |
|
- |
|
1,210 |
|
124 |
|
1,334 |
||||
|
|
Listed investments |
2,865 |
- |
- |
|
- |
|
- |
|
- |
|
- |
|
2,865 |
||||
|
|
Treasury gilts |
- |
- |
- |
|
- |
|
- |
|
110 |
|
- |
|
110 |
||||
|
Other |
- |
19 |
- |
|
- |
|
- |
|
- |
|
- |
|
19 |
|
||||
|
|
2,865 |
9,201 |
- |
|
3,573 |
|
6,496 |
|
1,320 |
|
124 |
|
23,579 |
|
||||
8. Finance costs
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Zero Dividend Preference shares |
3,410 |
3,261 |
|
|
|
|
|
|
3,410 |
3,261 |
Finance costs arising are allocated to the statement of comprehensive income using the effective interest rate method. The rights and entitlements of the ZDP shares, which are accounted for at amortised cost are described in Note 12.
9. Expenses
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Investment Adviser's base fee |
5,323 |
5,069 |
|
Investment Adviser's capital incentive fee |
4,966 |
4,068 |
|
|
|
|
|
|
10,289 |
9,137 |
|
|
|
|
|
Administrative expenses: |
|
|
|
Legal and professional fees |
473 |
717 |
|
Other expenses |
286 |
306 |
|
Directors' remuneration |
190 |
190 |
|
Accounting, secretarial and administration fees |
211 |
200 |
|
Auditors' remuneration |
113 |
147 |
|
Custodian fees |
12 |
8 |
|
|
|
|
|
|
1,285 |
1,568 |
|
|
|
|
|
Total expenses |
11,574 |
10,705 |
Directors' fees
The Chairman is entitled to a fee of US$140,000 per annum. Each of the other Directors is entitled to a fee of US$60,000 per annum. For the period ended 31 August 2012 total Directors' fees included in the statement of comprehensive income were US$190,000(period ended 31 August 2011: US$190,000), of this amount US$63,000 was outstanding at the period end (29 February 2012: US$63,000) 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 2008 which was then amended and restated on 20 May 2009 and again on 23 December 2010 (the "Advisory Agreement").
Pursuant to the Advisory Agreement, the Investment Adviser is entitled to a base management fee and to an incentive fee. The base management fee is an amount equal to 1.5% per annum of the average total assets under management of the Company less those assets identified by the Company as being excluded from the base management fee, under the terms of the agreement. The base management fee is payable quarterly in arrears; the agreement provides that payments in advance on account of the base management fee will be made.
For the period 1 March 2012 to 31 August 2012 total investment advisory and management expenses, based on the average total assets of the Company, were included in the statement of comprehensive income of US$5,323,000 (31 August 2011: US$5,069,000) of this amount US$641,000 (29 February 2012: US$1,105,000) was outstanding at the period end and is included within other payables.
The incentive fee has two parts. The first part is calculated by reference to the net investment income of the Company ("Income Incentive fee") and is payable quarterly in arrears provided that the net investment income for the quarter exceeds 2% of the average of the net asset value of the Company for that quarter (the "hurdle") (8% annualised). The fee is an amount equal to (a) 100% of that proportion of the net investment income for the quarter as exceeds the hurdle, up to an amount equal to a hurdle of 2.5%, and (b) 20% of the net investment income of the Company above a hurdle of 2.5% in any quarter. Change in the valuation of income related (PIK) investments are also classed as an increase or decrease to investment income. Investments categorised as legacy investments and other assets identified by the Company as being excluded are excluded from the calculation of the fee. A true-up calculation is also prepared at the end of each financial year to determine if further fees are payable to the investment adviser or if any amounts are recoverable from future income incentive fees.
Investment Advisory and Performance fees (continued)
The second part of the incentive fee is calculated by reference to the net realised capital gains ("Capital Gains Incentive fee") of the Company and is equal to: (a) 20% of (x) the realised capital gains of the Company for each financial year less (y) all realised capital losses of the Company for the year less (b) the aggregate of all previous capital gains incentive fees paid by the Company to the Investment Adviser. The capital gains incentive fee is payable in arrears within 90days of the fiscal year end. Investments categorised as legacy investments and those assets of the Euro Microcap Fund 2010, LP are excluded from the calculation of the fee.
The Company provides for a capital gains incentive fee based on cumulative net realised and unrealised investments gains. At 31 August 2012 the provision for the capital gains incentive fee was US$4,966,000 (29 February 2012: US$5,357,000).
|
Provision for capital incentive fee |
31.08.2012 |
29.02.2012 |
|
|
US$ '000 |
US$ '000 |
|
Provision based on realised gains and payable within 90 days of the fiscal year |
4,966 |
5,357 |
|
|
4,966 |
5,357 |
The value of investments included in the calculation of the capital gains incentive fee based on unrealised gains excludes accrued income and PIK investments.
The Advisory agreement may be terminated by the Company or the Investment Advisor upon not less than two and one- half years' (i.e. 913 days') prior notice (or such lesser period as may be agreed by the Company and Investment Adviser).
Administration fees
Northern Trust International Fund Administration Services (Guernsey) Limited were appointed as Administrator to the Company on 3 September 2012. The Administrator is entitled to a fee payable quarterly in arrears. Fees payable to the Administrator are fixed for the three years from the date of appointment and are then subsequently subject to an annual fee review. The Administrator is also due an initial set up fee.
During the period under review Butterfield Fund Services (Guernsey) Limited ("BFGL") acted as Administrator, Secretary and Registrar. BFGL were entitled to a quarterly fee payable monthly in arrears and further fees for services provided with the Company's transition to the new service provider. For the six month period ended 31 August 2012 total expenses payable to the Administrator of US$211,000 (31 August 2011: US$200,000) were included in the statement of comprehensive income, of this amount US$33,000 (29 February 2012: US$67,000) was outstanding at the year end and is included within Other Payables. Additional fees were payable to BFGL of US$34,000within the period, for extra work on the transition of the Company's listing. This amount has been included within Share class restructuring costs.
Custodian fees
HSBC Bank (USA) N.A, (the "Custodian") was appointed on 12 May 2008 under a custodian agreement.
Auditor's remuneration
All of the auditor's remuneration relates to the annual audit and half year review report. During the period ended 31 August 2012 professional fees of US$40,000 were paid in the year to Ernst & Young for taxation services.
10. Taxation
For both 2012 and 2011 the Company applied for and was granted exempt status for Guernsey tax purposes under the terms of The Income Tax (Zero 10) (Guernsey) Law,2007.
For the period ended 31 August 2012 the Company suffered withholding tax of US$644,000 (31 August 2011: US$860,000) on dividend income from listed investments.
11. Investments
Categories of financial instruments
|
|
Listed |
Unlisted |
Carrying Value |
|
|
31.08.2012 |
31.08.2012 |
31.08.2012 |
|
|
US$ '000 |
US$ '000 |
US$ '000 |
|
Fair value through profit or loss (FVTPL) |
166,272 |
371,598 |
537,870 |
|
Loans and receivables |
- |
24,104 |
24,104 |
|
Investment in an associate |
- |
80,782 |
80,782 |
|
|
|
|
|
|
|
166,272 |
476,484 |
642,756 |
|
|
|
|
|
|
|
Listed |
Unlisted |
Carrying Value |
|
|
29.02.2012 |
29.02.2012 |
29.02.2012 |
|
|
US$ '000 |
US$ '000 |
US$ '000 |
|
Fair value through profit or loss (FVTPL) |
154,233 |
260,316 |
414,549 |
|
Loans and receivables |
- |
23,974 |
23,974 |
|
Investment in an associate |
- |
69,950 |
69,950 |
|
|
|
|
|
|
|
154,233 |
354,240 |
508,473 |
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
Unlisted |
Total |
|
|
31.08.2012 |
31.08.2012 |
31.08.2012 |
|
|
US$ '000 |
US$ '000 |
US$ '000 |
|
Book cost at 1 March 2012 |
132,577 |
381,086 |
513,663 |
|
Purchases in year |
57,288 |
119,624 |
176,912 |
|
Capital calls during year |
13,275 |
13,275 |
|
|
Payment in kind ("PIK") |
- |
4,044 |
4,044 |
|
Proceeds from investments disposed/realised |
(51,155) |
(16,981) |
(68,136) |
|
Realised gains on disposal |
10,743 |
4,583 |
15,326 |
|
|
|
|
|
|
Book cost at 31 August 2012 |
149,453 |
505,631 |
655,084 |
|
Unrealised gains/(losses) at 31 August 2012 |
16,634 |
(42,948) |
(26,314) |
|
Accrued interest at 31 August 2012 |
185 |
13,801 |
13,986 |
|
|
|
|
|
|
Carrying value at 31 August 2012 |
166,272 |
476,484 |
642,756 |
|
|
|
|
|
|
|
Listed |
Unlisted |
Total |
|
|
29.02.2012 |
29.02.2012 |
29.02.2012 |
|
|
US$ '000 |
US$ '000 |
US$ '000 |
|
Book cost at 1 March 2011 |
75,017 |
394,118 |
469,135 |
|
Purchases in year |
64,847 |
73,729 |
138,576 |
|
Capital calls during year |
- |
49,153 |
49,153 |
|
Payment in kind ("PIK") |
- |
25,995 |
25,995 |
|
Proceeds from investments disposed/realised |
(10,850) |
(215,204) |
(226,054) |
|
Realised gains on disposal |
3,563 |
53,295 |
56,858 |
|
|
|
|
|
|
Book cost at 29 February 2012 |
132,577 |
381,086 |
513,663 |
|
Unrealised gains/(losses) at 29 February 2012 |
21,514 |
(33,310) |
(11,796) |
|
Accrued interest at 29 February 2012 |
142 |
6,464 |
6,606 |
|
|
|
|
|
|
Carrying value at 29 February 2012 |
154,233 |
354,240 |
508,473 |
The above book cost is the cost to JZCP equating to the transfer value as at 1 July 2008 upon the liquidation of JZEP and adjusted for subsequent transactions.
The cost of PIK investments is deemed to be interest not received in cash but settled by the issue of further securities when that interest has been recognised in the Statement of Comprehensive Income.
Investment in associate
At 31 August 2012 the Company had one associate carrying on business which affects the profits and assets of the Company. The Company's associate consists solely of limited partnership interest directly held in the Partnership.
|
Entity |
Principal activity |
% Interest |
|
EuroMicrocap Fund 2010, LP |
Acquirer of Europe-based microcap companies |
75% |
The Company's share of the aggregated financial information of the equity accounted associate is set out below. The amounts for the period ended 31 August 2012 include the share of results and net assets in the associate for the period ended 31 August 2012.
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Share of result in associate |
(2,443) |
12,390 |
|
|
|
|
|
|
|
|
|
Non current assets |
79,950 |
60,231 |
|
Current assets |
832 |
1,312 |
|
|
|
|
|
Share of limited partner' interest in associate |
80,782 |
61,543 |
|
|
|
|
12. Zero Dividend Preference ("ZDP") shares
|
|
31.08.2012 |
29.02.2012 |
|
|
US$ '000 |
US$ '000 |
|
|
|
|
|
ZDP shares issued 22 June 2009 |
|
|
|
Amortised cost at 1 March |
87,281 |
82,341 |
|
Finance costs allocated to statement of comprehensive income |
3,410 |
6,581 |
|
Unrealised currency gain on translation during the year |
(390) |
(1,641) |
|
Amortised cost at year end |
90,301 |
87,281 |
|
|
|
|
|
Total number of ZDP shares in issue |
20,707,141 |
20,707,141 |
|
|
|
|
|
Price per ZDP share US$ |
USD 4.3701 |
USD 4.2254 |
|
|
|
|
|
Price per ZDP share GBP |
GBP 2.7547 |
GBP 2.6513 |
ZDP shares were issued on 22 June 2009 at a price of 215.80pence 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 ZDP shares 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 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.
13. Share Capital
Authorised Capital
Unlimited number of ordinary shares of no par value.
|
Ordinary shares - Issued Capital |
31.08.2012 |
29.02.2012 |
|
|
Number of shares |
Number of shares |
|
Balance at 1 March |
37,319,238 |
42,913,133 |
|
Converted from Limited Voting Ordinary shares |
27,699,369 |
1,300,000 |
|
Converted to Limited Voting Ordinary shares |
- |
(6,893,895) |
|
|
|
|
|
Total Ordinary shares in issue |
65,018,607 |
37,319,238 |
Limited Voting Ordinary shares - Issued Capital
|
|
31.08.2012 |
29.02.2012 |
|
|
Number of shares |
Number of shares |
|
Balance at 1 March |
27,699,369 |
22,105,474 |
|
Converted to Ordinary shares |
(27,699,369) |
(1,300,000) |
|
Converted from Ordinary shares |
- |
6,893,895 |
|
Total Limited Voting Ordinary shares in issue |
- |
27,699,369 |
|
|
|
|
|
Total shares in issue |
65,018,607 |
65,018,607 |
On 3 July a shareholder resolution was passed which approved the conversion of all of the Limited Voting Ordinary ("LVO") shares into Ordinary shares on the basis that one LVO share would convert into one Ordinary share. A further resolution was passed approving the proposed transfer of the listing of the Ordinary shares to the London Stock Exchange's Specialist Fund Market ("SFM"). The move to this structure removed a structural inadequacy that had restricted the Company's ability to accommodate US investors and is more appropriate to the Company's mix of investors.
On 31 July 2012 the Company announced the cancellation of the listing of its Ordinary shares on the premium segment of the Official List and trading on the London Stock Exchange's main market for listed securities. Subsequently the Company's shares were admitted to trading on the SFM. The Company also announced the admission to listing on the CISX.
LVO shares 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 were identical to, and ranked pari passu in all respects with, the New Ordinary shares except that the Limited Voting Ordinary Shares only carried a limited entitlement to vote in respect of the appointment or removal of Directors and did not carry any entitlement to vote in respect of certain other matters. The LVO shares were not listed and were not admitted to trade on or through the facilities of the London Stock Exchange.
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 entitlements 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 are entitled to receive notice of, to attend and to vote at all general meeting of the Company.
14. 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 periods ended 31 August 2012 and 31 August 2011 the weighted average number of Ordinary shares
(including Limited Voting Ordinary shares) outstanding during the period was 65,018,607.
15. Net Asset Value Per Share
The net asset value per Ordinary share of US$9.38 (29 February 2012: US$9.47) is based on the net assets at the period end of US$609,565,000 (29 February 2012: US$615,462,000) and on 65,018,607 (29 February 2012: 65,018,607) Ordinary shares, being the number of Ordinary shares in issue at the period end.
16. Notes to the Cash Flow Statement
Reconciliation of the profit for the year to net cash from operating activities
|
|
Period ended |
Period ended |
|
|
31.08.2012 |
31.08.2011 |
|
|
US$ '000 |
US$ '000 |
|
Profit for the period |
6,130 |
16,448 |
|
Increase in other receivables |
(261) |
(412) |
|
(Decrease)/increase in other payables |
(1,532) |
3,846 |
|
Net movement in unrealised gains on investments |
(1,038) |
11,666 |
|
Net impairments on loans and receivables |
(597) |
87 |
|
Share of associates expense/(income) |
2,443 |
(12,390) |
|
Adjustment for foreign currency exchange (gains)/losses |
|
|
|
|
(280) |
115 |
|
Realised gain on investments |
(1,615) |
(5,686) |
|
Increase in accrued interest on investments and adjustment for interest received as PIK |
(11,424) |
(12,942) |
|
Interest receivable from treasury gilts reinvested |
- |
(54) |
|
Finance costs in respect of Zero Dividend Preference shares |
3,410 |
3,261 |
|
|
|
|
|
|
|
|
|
Net cash (outflow)/inflow from operating activities |
(4,764) |
3,939 |
17. Commitments
At 31 August 2012 JZCP had the following financial commitments outstanding in relation to fund investments:
|
|
Period ended 31.08.2012 US$ '000 |
|
Year ended 29.02.2012 US$ '000 |
|
EuroMicrocap Fund 2010, LP |
20,072 |
|
33,347 |
|
Constituent Capital Management, LLC |
14,167 |
|
15,000 |
|
Suzo Happ Group |
5,042 |
|
- |
|
BSM Engenharia S.A. Milestone Aviation Group, Inc. |
2,085 - |
|
- 2,083 |
|
|
41,366 |
|
50,430 |
18. Related Party Transactions
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 US$142,000 has subsequently been invested in ETX Holdings, Inc. During the period ended 31 August 2012 and the year ended 29 February 2012 the Company did not receive any income from this investment. At 31 August 2012 the investment was valued at US$617,000 (29 February 2012: US$602,000).
At 31 August 2012, JZCP has invested US$62,428,000 (29 February 2012: US$49,153,000 in the EuroMicrocap Fund 2010 LP ("The Europe Fund"). At 31 August 2012 the investment was valued at US$80,782,000 (29 February 2012: US$69,950,000). The Europe Fund is 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.
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: Kinetek, Inc.; Milestone Aviation Group, Inc.; TAL International Group, Inc.; TTS, Llc and represent an aggregate value of US$58,628,000 at 31 August 2012 (29 February 2012: US$82,442,000).
The Company has invested with Fund A, a Limited Partnership in a number of US micro cap buyouts. Fund A is managed by JZAI. At 31 August 2012 the total amount of these co-investments was US$92,744,000 (29 February 2012: US$53,905,000) of the total amount of the co-investment US$76,042,000 (29 February 2012: US$44,203,000) was invested by the Company and US$16,702,000 (29 February 2012:US$9,702,000) was invested by Fund A.
Jordan/Zalaznick Advisers, Inc. (JZAI), a US based company, provides advisory services to the board of Directors of the Company in exchange for management fees, paid quarterly. Fees paid by the Company to the Investment Adviser are detailed in Note 9.
During the period ended 31 August 2012, the Company retained Ashurst LLP, a UK based law firm. David Macfarlane was formerly a Senior Corporate Partner at Ashurst until 2002.
The Directors remuneration is disclosed in Note 9.
19. Controlling Party
The issued shares of the Company are owned by a number of parties, and therefore, in the opinion of the Directors, there is no ultimate controlling party of the Company, as defined by IAS 24 - Related Party Disclosures.
20. Contingent assets
a) Amounts held in escrow accounts
Investments have been disposed by the Company, of which the consideration given included contractual terms requiring that a percentage was held in an escrow account pending resolution of any indemnifiable claims that may arise. At 31 August 2012 the Company has assessed that the fair value of these escrow accounts are nil as it is not reasonably probable that they will be realised by the Company.
As at 31 August 2012, the Company had the following contingent assets held in escrow accounts which had not been recognised as assets of the Company:
Company
|
|
|
|
|
|
31.08.2012 |
29.02.2012 |
|
|
US$'000 |
US$'000 |
|
GHW (G&H Wire) |
2,609 |
3,031 |
|
Dantom Systems, Inc. |
1,322 |
2,415 |
|
Wound Care Solutions, LLC |
5,397 |
5,398 |
|
Advanced Chemistry & Technology, Inc. |
1,613 |
1,772 |
|
Recycled Holdings Corporation |
1,300 |
1,300 |
|
Apparel Ventures, Inc. |
428 |
835 |
|
N&B Industries, Inc. |
776 |
776 |
|
Gear for Sports |
123 |
186 |
|
Roofing Supply Group, Inc. |
122 |
- |
|
|
|
|
|
|
13,690 |
15,713 |
During the period US$2,145,000 (31 August 2011: US$1,288,000) was realised relating to the escrow accounts of the Company.
b) Income incentive fee
The Company has a contingent asset of US$4,409,700 (29 February 2012: US$4,409,700) relating to an income incentive fee which was paid to the Investment Adviser during the year ended 29 February 2012. Under the terms of the Advisory Agreement the amount paid in the year is repayable to the Company as the required annual hurdle was not met. The amount is repayable on termination of the Advisory Agreement or offset against any future income incentive fees payable. As neither a date for the termination of the Advisory Agreement or the event of any future income incentive fees becoming payable can be predicted the amount is treated as a contingent asset.
21. Dividends paid and proposed
In accordance with the new dividend policy, it will be the Directors' intention for the year ending 28 February 2013 and thereafter to distribute substantially 3% of the Company's net assets in the form of dividends paid in US dollars (Shareholders can elect to receive dividends in Sterling). Prior to the new policy, the Directors have distributed substantially all of the Company's net cash income (after expenses) in the form of dividends.
A final dividend for the year ended 29 February 2012 of 18.5 cents per Ordinary share (total US$12,027,000) was paid on 6 July 2012.
An interim dividend of 14.0 cents per Ordinary share (total US$9,102,605) was declared by the Board on 9 October 2012 and will be paid on 5 November 2012.
22. Subsequent events
With effect from 1 September 2012, the Company appointed Northern Trust International Fund Administration Services (Guernsey) Limited, as the new Company Secretary and Administrator.
Independent Review Report to JZ Capital Partners Limited
Introduction
We have been engaged by the company to review the condensed interim financial statements for the six month period ended 31 August 2012 which comprise 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 22. We have read the other information contained in the condensed interim 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" ("ISRE 2410") 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 statements for the period from 1 March 2012 to 31 August 2012 are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the condensed interim financial statements in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
As disclosed in note 2, the annual financial statements are prepared in accordance with IFRS as adopted by the European Union.
The condensed interim financial statements have 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 interim financial statements based on our review.
Scope of Review
We conducted our review in accordance with ISRE 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 financial statements for the period from 1 March 2012 to 31 August 2012 are not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Ernst & Young LLP
Guernsey,
Channel Islands
Date: 9 October 2012
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 2012 |
May 2013 |
|
Annual General Meeting |
June 2013 |
|
Interim report for the six months to 31 August 2013 |
October 2013 |
In accordance with the Transparency Directive JZCP will be issuing an Interim Management Statement for the quarters ended 30 November 2012 and 31 May 2013. 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.
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 GC00B403HK58/B403KK5 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 0871 384 2265, calls to this number cost 8p per minute from a BT landline, other providers' costs may vary. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, If calling from overseas +44 (0) 121 415 7047 or access their website at www.equiniti.com. Changes of name or address must be notified in writing to the Transfer and Paying Agent.
Nominee share code
Where notification has been provided in advance, the Company will arrange for copies of shareholder communications to be provided to the operators of nominee accounts. Nominee investors may attend general meetings and speak at meetings when invited to do so by the Chairman.
Documents available for inspection
The following documents will be available at the registered office of the Company during usual business hours on any weekday until the date of the Annual General Meeting and at the place of the meeting for a period of fifteen minutes prior to and during the meeting:
(a) the Register of Directors' Interests in the share capital of the Company;
(b) the Articles of Association of the Company; and
(c) the terms of appointment of the Directors.
US Investors
General
The Company's Articles contain provisions allowing the Directors to decline to register a person as a holder of any class of ordinary shares or other securities of the Company or to require the transfer of those securities (including by way of a disposal effected by the Company itself) if they believe that the person:
(A) is a "US person" (as defined in Regulation S under the US Securities Act of 1933, as amended) and not a "qualified purchaser" (as defined in the US Investment Company Act of 1940, as amended);
(B) is a "Benefit Plan Investor" (as described under "Prohibition on Benefit Plan Investors and Restrictions on Non-ERISA Plan" below); or
(C) is, or is related to, a citizen or resident of the United States, a US partnership, a US corporation or a certain type of estate or trust and that ownership of any class of ordinary shares or any other equity securities of the Company by the person would materially increase the risk that the Company could be or become a "controlled foreign corporation" (as described under "US Tax Matters" below").
In addition, the Directors may require any holder of any class of ordinary shares or other securities of the Company to show to their satisfaction whether or not the holder is a person described in paragraphs (A), (B) or (C) above.
US Securities Laws
The Company (a) is not subject to the reporting requirements of the US Securities Exchange Act of 1934, as amended (the "Exchange Act") and does not intend to become subject to such reporting requirements and (b) is not registered as an investment company under the US Investment Company Act of 1940, as amended (the "1940 Act"), and investors in the Company are not subject to the protections provided by the 1940 Act.
Prohibition on Benefit Plan Investors and Restrictions on Non-ERISA Plans
Investment in the Company by "Benefit Plan Investors" is prohibited so that the assets of the Company will not be deemed to constitute "plan assets" of a "Benefit Plan Investor". The term "Benefit Plan Investor" shall have the meaning contained in Section 3(42) of the US Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and includes (a) an "employee benefit plan" as defined in Section 3(3) of ERISA that is subject to Part 4 of Title I of ERISA; (b) a "plan" described in Section 4975(e)(1) of the US Internal Revenue Code of 1986, as amended (the "Code"), that is subject to Section 4975 of the Code; and (c) an entity whose underlying assets include "plan assets" by reason of an employee benefit plans or a plan's investment in such entity. For purposes of the foregoing, a "Benefit Plan Investor" does not include a governmental plan (as defined in Section 3(32) of ERISA), a non-US plan (as defined in Section 4(b)(4) of ERISA) or a church plan (as defined in Section 3(33) of ERISA) that has not elected to be subject to ERISA.
Each purchaser and subsequent transferee of any class of ordinary shares (or any other class of equity interest in the Company) will be required to represent, warrant and covenant, or will be deemed to have represented, warranted and covenanted that it is not, and is not acting on behalf of or with the assets of a, Benefit Plan Investor to acquire such ordinary shares (or any other class of equity interest in the Company).
Under the Articles, the directors have the power to require the sale or transfer of the Company's securities in order to avoid the assets of the Company being treated as "plan assets" for the purposes of ERISA.
The fiduciary provisions of pension codes applicable to governmental plans, non-US plans or other employee benefit plans or retirement arrangements that are not subject to ERISA (collectively, "Non-ERISA Plans") may impose limitations on investment in the Company. Fiduciaries of Non-ERISA Plans, in consultation with their advisors, should consider, to the extent applicable, the impact of such fiduciary rules and regulations on an investment in the Company.
Prohibition on Benefit Plan Investors and Restrictions on Non-ERISA Plans (continued)
Among other considerations, the fiduciary of a Non-ERISA Plan should take into account the composition of the Non-ERISA Plan's portfolio with respect to diversification; the cash flow needs of the Non-ERISA Plan and the effects thereon of the illiquidity of the investment; the economic terms of the Non- ERISA Plan's investment in the Company; the Non-ERISA Plan's funding objectives; the tax effects of the investment and the tax and other risks associated with the investment; the fact that the investors in the Company are expected to consist of a diverse group of investors (including taxable, tax-exempt, domestic and foreign entities) and the fact that the management of the Company will not take the particular objectives of any investors or class of investors into account.
Non-ERISA Plan fiduciaries should also take into account the fact that, while the Company's board of directors and its investment advisor will have certain general fiduciary duties to the Company, the board and the investment advisor will not have any direct fiduciary relationship with or duty to any investor, either with respect to its investment in Shares or with respect to the management and investment of the assets of the Company. Similarly, it is intended that the assets of the Company will not be considered plan assets of any Non-ERISA Plan or be subject to any fiduciary or investment restrictions that may exist under pension codes specifically applicable to such Non-ERISA Plans. Each Non-ERISA Plan will be required to acknowledge and agree in connection with its investment in any securities to the foregoing status of the Company, the board and the investment advisor that there is no rule, regulation or requirement applicable to such investor that is inconsistent with the foregoing description of the Company, the board and the investment advisor.
Each purchaser or transferee that is a Non-ERISA Plan will be deemed to have represented, warranted and covenanted as follows:
(a) The Non-ERISA Plan is not a Benefit Plan Investor;
(b) The decision to commit assets of the Non-ERISA Plan for investment in the Company was made by fiduciaries independent of the Company, the Board, the Investment Advisor and any of their respective agents, representatives or affiliates, which fiduciaries (i) are duly authorized to make such investment decision and have not relied on any advice or recommendations of the Company, the Board, the Investment Advisor or any of their respective agents, representatives or affiliates and (ii) in consultation with their advisers, have carefully considered the impact of any applicable federal, state or local law on an investment in the Company;
(c) None of the Company, the Board, the Investment Advisor or any of their respective agents, representatives or affiliates has exercised any discretionary authority or control with respect to the Non-ERISA Plan's investment in the Company, nor has the Company, the Board, the Investment Advisor or any of their respective agents, representatives or affiliates rendered individualized investment advice to the Non-ERISA Plan based upon the Non-ERISA Plan's investment policies or strategies, overall portfolio composition or diversification with respect to its commitment to invest in the Company and the investment program there under; and
(d) It acknowledges and agrees that it is intended that the Company will not hold plan assets of the Non-ERISA Plan and that none of the Company, the Board, the Investment Advisor or any of their respective agents, representatives or affiliates will be acting as a fiduciary to the Non-ERISA Plan under any applicable federal, state or local law governing the Non-ERISA Plan, with respect to either (i) the Non-ERISA Plan's purchase or retention of its investment in the Company or (ii) the management or operation of the business or assets of the Company. It also confirms that there is no rule, regulation, or requirement applicable to such purchaser or transferee that is inconsistent with the foregoing description of the Company, the Board and the Investment Advisor.
US Tax Matters
This discussion does not constitute tax advice and is not intended to be a substitute for tax advice and planning. Prospective holders of the Company's securities must consult their own tax advisers concerning the US federal, state and local income tax and estate tax consequences in their particular situations of the acquisition, ownership and disposition of any of the Company's securities, as well as any consequences under the laws of any other taxing jurisdiction.
The Company's directors are entitled to decline to register a person as, or to require such person to cease to be, a holder of any class of ordinary shares or other equity securities of the Company if they believe that: such person is, or is related to, a citizen or resident of the United States, a US partnership, a US corporation or a certain type of estate or trust and that ownership of any class of ordinary shares or any other equity securities of the Company by such person would materially increase the risk that the Company could be or become a "controlled foreign corporation" (a "CFC").
In general, a foreign corporation is treated as a "CFC" only if its "US shareholders" collectively own more than 50% of the total combined voting power or total value of the corporation's stock. A "US shareholder" means any US person who owns, directly or indirectly through foreign entities, or is considered to own (by application of certain constructive ownership rules), 10% or more of the total combined voting power of all classes of stock of a foreign corporation, such as the Company.
There is a risk that the Company will decline to register a person as, or to require such person to cease to be, a holder of the Company's the Company if the Company could be or become a CFC. The Company's treatment as a CFC could have adverse tax consequences for US taxpayers.
The Company is expected to be treated as a "passive foreign investment company" ("PFIC"). The Company's treatment as a PFIC is likely to have adverse tax consequences for US taxpayers.
The taxation of a US taxpayer's investment in the Company's securities is highly complex. Prospective holders of the Company's securities must consult their own tax advisers concerning the US federal, state and local income tax and estate tax consequences in their particular situations of the acquisition, ownership and disposition of any of the Company's securities, as well as any consequences under the laws of any other taxing jurisdiction.
This information is provided by RNS
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