Last checked at 
30 Oct 2009 07:00
30 October 2009
JZ CAPITAL PARTNERS LIMITED ("JZCP")
Interim Results for the Period 1 March 2009 to 31 August 2009
Highlights
US$229m of new capital raised in June 2009 for old ZDP repayment and new investment
7.7% increase in NAV over the period to US$6.65 per share
Interim dividend of 9.0c per share
Cash balances of US$139m and no debt
Significant investment opportunities in microcap market
Commenting on the results, David Macfarlane, Chairman of JZCP, said:
"The period under review has been a significant one for JZCP. The refinancing of the old ZDPs and fund raising, which were successfully completed in June, restored the strength of the balance sheet and put JZCP in a strong position to take advantage of investment opportunities in the microcap market where historically, coming out of a recession, returns have been strongest."
For further information:
| JZCP | +44 (0)20 7360 4900 |
| David Macfarlane, Chairman | |
| Jordan/Zalaznick Advisers, Inc. | +1 212 572 0800 |
| David Zalaznick | |
| Smithfield | +44 (0)20 7360 4900 |
| Rupert Trefgarne |
Chairman's Statement
The period under review has been a critical one for JZ Capital Partners Limited ("JZCP"). Whilst JZCP's microcap investments withstood well recessionary pressures, the precipitous decline in equity and debt markets and of sterling against the US dollar had weakened the balance sheet. The refinancing of the old Zero Dividend Preference shares ("the old ZDPs") and fund raising, which was successfully completed in June 2009, restored the strength of the balance sheet and put JZCP in a strong position to take advantage of investment opportunities in the microcap sector. Whilst there is a long way to go and much work to be done, following the strengthening of the balance sheet and with improved market conditions, some progress has been seen in the reduction of the discount of the share price to Net Asset Value ("NAV").
The year end of JZCP has been changed, as was announced earlier in the year, to 28th February. Consequently these interim results are for the six month period ended 31st August 2009. These are therefore the first financial results following the refinancing of the old ZDPs and the fund raising. Approximately $229 million of new capital was raised for the repayment of the old ZDPs, and for new investments. The fund raising included the issue of 7 new Ordinary Shares for every 3 Ordinary Shares then already issued and also the consolidation of the resultant total on a 1 for 5 basis. Appropriate adjustments therefore need to be made to allow comparison between the two accounting periods.
NET ASSET VALUE
At the end of the period under review, 31st August 2009, the NAV of JZCP was $432 million ($6.65 per share) against $401 million ($6.17 per share) on 28th February 2009 (adjusted for the fundraising and other factors mentioned above), which represented an increase of 7.7%.
Again I can report that, notwithstanding the generally adverse reports that have been in circulation about the private equity investment industry for some twelve months, the performance of our microcap investments, the main plank in JZCP's investment platform for capital growth, and the application of the investment policy and principles that we are obliged to observe result in a modest net uplift in valuation in this portfolio. Increases in valuation are recorded in Dental Services, $0.04, Roofing Supply, $0.06 and Wound Care $0.09 and decreases in Sechrist ($0.05) and Nationwide Studios ($0.05). Whilst the combination of underlying performance and market comparables have given no indication that values should be marked down, the virtual closure some twelve months ago of the mergers and acquisitions market would have made the sale of any microcap investments challenging and therefore in respect of most private investments we increased the marketability discount (by reference to the relevant enterprise value less senior debt) from 10% to 20%. Though that market is showing signs of beginning to open up again we see no reason yet to reverse that decision.
JZCP's investments in first and second lien traded loans and the three listed investments that derive from flotations of private investments had been hit hard by declining markets but have made progress in the period under review, $0.12 in respect of the traded loans and $0.13 in respect of the listed investments, of which $0.10 is attributable to TAL whose market price was the hardest hit notwithstanding that for its last financial year it reported record trading and performance. JZAI looks for the opportunity to realise all the listed investments but views the market as having significantly understated their proper value.
INCOME AND DIVIDENDS
Having at the time only just completed the fund raising the directors declined to recommend a final dividend for the new accounting period ended 28th February 2009 but reiterated the policy of the board thereafter to return to ordinary shareholders substantially all of JZCP's net cash income. Revenue return for the period ended 31st August 2009 was 24.15c per share (based on end of period 65 million outstanding Ordinary Shares). After taking into consideration non-cash income, including the paid in kind securities and preference dividends, the adjusted cash revenue return was 9.37c per share (based on 65 million Ordinary Shares). Accordingly the directors have declared an interim dividend of 9.0c per share. Holders of ordinary shares may elect to receive dividends in sterling rather than in US dollars.
The directors do not intend to make distributions in respect of non-cash income, being payment in kind ("PIK") securities and preference dividends unless and until they are converted into cash, when in accordance with the policy set out above, it would be the directors' intention to return substantially all of that cash to shareholders. This would occur on the sale of an investee company or in the case of payment in kind securities, upon their earlier redemption. This could give rise to quite significantly enhanced, albeit not regular, returns.
The directors are well aware that there is an opinion that favours a policy to actively buy back shares. The directors will continue to keep under review opportunities to buy back shares but if and when the opportunity arises the decision will be driven on investment grounds. There is scant evidence that buying back shares of a listed private equity company has anything other than a short term effect on the discount. That we plan to narrow over time by performance.
INCENTIVE FEE
It is the policy of the directors to provide, where appropriate, for the capital and incentive fees to which JZAI becomes entitled under the terms of the Advisory Agreement. At 31st August 2009, no provision was taken for either a capital or income incentive fee.
OUTLOOK
The directors believe that JZCP is now in a robust position to take advantage of the investment opportunities that JZAI is researching. These are focussed on the microcap market in respect of which historically, coming out of recession, returns have been strongest. JZAI will continue to concentrate on buying at modest multiples, building on investment platforms in a limited number of indentified business sectors and adding value. The directors and JZAI are, as mentioned, working on proposals that will allow investors greater and more transparent access to JZCP.
David Macfarlane
Chairman
30 October 2009
Directors' Responsibilities
Statement of Directors' Responsibilities
The Directors are responsible for preparing interim financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period and which are in accordance with applicable laws and IAS 34 "Interim Financial Reporting." In preparing those interim financial statements the Directors are required to:
select suitable accounting policies and apply them consistently;
make judgements and estimates that are reasonable and prudent;
present information, including accounting policies;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the interim financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the condensed interim financial statements and that the going concern basis for the preparation of the condensed interim financial statements is appropriate.
So far as the Directors are aware, there is no relevant information of which the Company's auditors are unaware, having taken all the steps the Directors ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
The condensed interim financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting" rather than International Financial Reporting Standards (IFRS).
Responsibility statement of the Directors in respect of the Condensed Interim financial report
We confirm that to the best of our knowledge:
this set of condensed interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
the condensed interim report and financial statements includes information detailed in the Chairman's report and Investment Adviser's Report and Notes to the Condensed Interim Financial Statements which provides a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred for the period from 1 March 2009 to 31 August 2009 and their impact on the condensed set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year: and
(ii) DTR 4.2.7R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the period from 1 March 2009 to 31 August 2009 and that have materially affected the financial position or performance of the company during that period.
Approved by the Board of Directors and agreed on behalf of the Board on 30 October 2009.
David Macfarlane Patrick Firth
Chairman Director
Investment Adviser's Report
Dear Fellow Shareholders:
We are pleased to report that the first half of our fiscal year ending 28 February 2010 was a giant leap forward for our company. We successfully raised $229 million in new ordinary and zero dividend preference shares ("ZDP's"), while redeeming our outstanding ZDP's that were due in June 2009. Our balance sheet is very strong. We now have $139 million in cash and $92 million in readily marketable securities. In addition, JZCP's net asset value ("NAV") grew by almost 8%, from $6.17 per share to $6.65 per share during the last six months. As you will see below, this increase is due to both positive market movements in our listed investments and positive performance of our micro-cap portfolio.
Capitalisation update
On 18 June 2009, JZCP placed 227.6 million Ordinary Shares (at 42 pence per share), redeemed 29.7 million Zero Dividend Preferred ("ZDP") Shares (at par, or £2.16 per share), issued 4.7 million new ZDP Shares (at £2.16 per share), and completed a 1 for 5 Ordinary Share Consolidation. The data below assumes the actions described above had occurred on 28 February 2009. The effect of these actions on the audited 28 February 2009 balance sheet, assuming an exchange rate of £1.00 for every $1.63, would have been as follows:
| Historical | Ordinary | ZDP | ZDP | Loss on | Est | Pre share Consolidation Proforma | Post 1 for 5 Share Consolidation Proforma | |
| 28/02/2009 | 28/02/2009 | 28/02/2009 | ||||||
| US$ 000's | Proceeds | Redemption | Issued | FX contract | Expenses | US$ 000's | US$ 000's | |
| Total Assets | 440,645 | 155,791 | (104,355) | 16,530 | (27,255) | (6,700) | 474,656 | 474,656 |
| Liabilities | (437) | (437) | (437) | |||||
| ZDP (including FX Contract) | (183,224) | 110,386 | (72,838) | (72,838) | ||||
| Net Assets | 256,984 | 401,381 | 401,381 | |||||
| Ordinary shares outstanding | 97,528 | 227,565 | 325,093 | 65,019 | ||||
| NAV per share | 2.63 | 1.23 | 6.17 | |||||
NET ASSET VALUE
The data below assumes the actions described above had occurred on 28 February 2009:
| 31/08/2009 | 28/02/2009 | ||
| US$ 000's | US$ 000's | ||
| Investments | 366,864 | 333,900 | |
| Cash and cash equivalents | 139,416 | 138,739 | |
| Other net (liabilities)/assets | (582) | 1,580 | |
| Zero Dividend Preference shares | (73,441) | (72,838) | |
| Net asset value | 432,257 | 401,381 | |
| Number of Ordinary shares (000's) | 65,019 | 65,019 | |
| Net asset value per Ordinary share | 6.65 | 6.17 | |
| Market price per share | US$3.60 | US$2.10 | |
| NAV to market price discount | (46%) | (66%) |
The positive performance of the underlying portfolio contributed to narrowing the discount between our NAV and the quoted market price of our stock from 66% to 46% over the last six months. The biggest factor affecting performance was a 21.5% increase in the publicly traded equities and debt securities.
PORTFOLIO SUMMARY
Below is a summary of our portfolio by asset class.
| 31/08/2009 | 28/02/20091 | Variance | |||
| US$ 000's | US$ 000's | US$ 000's | |||
| Micro-Cap portfolio | 163,900 | 158,263 | 5,637 | ||
| Mezzanine investments | 79,737 | 70,978 | 8,759 | ||
| Legacy portfolio | 31,520 | 29,180 | 2,340 | ||
| Total private investments | 275,157 | 258,421 | 16,736 | ||
| Listed equity | 55,455 | 47,264 | 8,191 | ||
| Bank debt | 36,252 | 28,215 | 8,037 | ||
| Cash | 139,416 | 138,739 | 677 | ||
| 231,123 | 214,218 | 16,905 | |||
| Total investments | 506,280 | 472,639 | 33,641 | ||
| Other current assets | 742 | 2,017 | (1,275) | ||
| Total Assets | 507,022 | 474,656 | 32,366 |
1 Pro forma for the issuance of 227.6 million Ordinary Shares, the "rollover" of 16.0 million ZDP shares, the issuance of 4.7 million new ZDP shares, the redemption of old ZDP shares, a 1 for 5 Ordinary share consolidation and a mark to market adjustment for a forward currency derivative contract.
MICRO-CAP PORTFOLIO
As the growth engine of JZCP's net asset value, the micro-cap portfolio consists of investments in eight platform businesses. These businesses were purchased at an average EBITDA multiple of under 6.0x. Furthermore, this portfolio is only leveraged on average 1.4x EBITDA above JZCP's capital invested. As the economy improves, we may add leverage to the portfolio to enhance JZCP's returns. The portfolio continues to be conservatively valued at an average of 6.0x EBITDA. Despite the challenging economic environment, our portfolio EBITDA has remained essentially flat on a trailing twelve month basis. This performance has resulted in no current or projected covenant or money defaults with our lenders.
We have a very active backlog of potential investments, for both platform businesses and add-ons for the existing portfolio. However, we have been extremely cautious because of economic conditions and the overhang of the zero preference shares that were just redeemed three months ago. All that being said, we have made one "add-on" investment in this portfolio since 1 March 2009:
On 27 March 2009, an additional $1.5 million of Preferred Stock in BG Holdings, Inc. (Horsburgh and Scott), to fund a capital expenditure project.
MEZZANINE PORTFOLIO
Our mezzanine portfolio consists of six investments with attributable value. The largest investment continues to be a Midwestern U.S. cement plant, an infrastructure play. This portfolio has an average debt multiple of 3.4x senior to JZCP's debt. Since the beginning of this fiscal year, we have made one add-on investment in this portfolio:
On 31 March 2009, an additional $2.8 million in subordinated notes in Continental Cement, to support the company's working capital required for the start up of their new plant.
LISTED SECURITIES
The listed equities portfolio consists of three investments in transactions in which JZCP had a significant position, which were realized via successful IPOs: 66.9% is in TAL, an international container company, and 30.7% is in Safety Insurance, an insurance carrier in the New England area. Both companies have performed well in 2008 and 2009; however, their publicly traded stock prices have been significantly hit by equity market issues. We are hopeful about having the opportunity to exit these at higher prices but it will require patience.
BANK DEBT
Nine of the ten investments in bank debt are publicly quoted; the tenth is a smaller debt facility for a middle market company; 48.9% of this portfolio is in first lien loans while the remainder is in second lien facilities. The upheaval in the bank debt market drove down the quoted prices significantly from when we purchased them although they have rebounded since the beginning of this fiscal year. Our two largest investments - Kinetek and Harrington - are debt securities of two portfolio companies of The Resolute Fund, our upper middle market private equity fund.
The value of this segment's portfolio is currently at 61.6% of par. Given the historical recovery rates of 65%-70% in first lien loans, we feel these quoted values generally reflect more on continued poor bank market conditions than on the underlying value and performance of these businesses. Since the beginning of this fiscal year, we have made one add-on investment in this portfolio:
On 6 July 2009, JZCP invested $1.4 million in new Term Loans for Group Dekko, to support working capital and pay down debt. JZCP also received warrants totalling approximately 5% of Dekko's common stock.
OUTLOOK
Although recent stock market performance may imply a recovery of the United States economy, we continue to be concerned about the underlying business fundamentals. Double digit unemployment continues to be a concern, as does the continued lack of liquidity for micro-cap and middle market businesses. Until both issues work themselves out, we will continue to take a measured and conservative outlook. We are satisfied that our portfolio is solid but given our concerns about fundamentals we are closely monitoring the businesses, especially those with exposure to the housing market and general manufacturing businesses.
We are pleased that JZCP is well positioned and capitalized to take advantage of the many opportunities that inevitably come out of recession years. JZCP has $139 million of cash and $92 million of marketable securities, zero debt at JZCP and new ZDPs not due until 2016, all of which gives JZCP the flexibility to be ready to create value for its shareholders. We will continue to invest your money in high quality businesses at reasonable multiples. As many of you know, we are the largest individual shareholders of JZCP and made a significant ($25 million) personal investment in the recent fundraising effort.
For those shareholders who have been with us for many years as our partners it will be a familiar refrain that our primary goal is earning superior total returns without taking commensurate risk and, of course, not losing money along the way. To mitigate risk, we try not to overpay, don't over leverage and choose the right management teams to be our partners. In addition, we have seasoned operating executives on our staff to help our companies formulate and execute on growth plans. That's our formula and we believe it will provide JZCP with a very bright future.
As always, we appreciate your support. Please feel free to contact us if you have any questions and visit our website www.jzcp.com to see our monthly fact sheet.
Yours faithfully,
David W. Zalaznick
John W. Jordan II
Jordan/Zalaznick Advisers, Inc.
October 2009
Valuation Policy
Principles of valuation
In valuing investments in accordance with International Financial Reporting Standards, the Directors follow a number of general principles as detailed in the International Private Equity and Venture Capital Association ("IPEVCA") guidelines.
Investments are valued according to one of the following methods:
i) Mezzanine loans
Investments are generally valued at amortised cost except where there is deemed to be impairment in value which indicates that a provision should be made. Mezzanine loans are classified in the Balance Sheet as Loans and receivables and are accounted for at amortised cost using the effective interest method less accumulated impairment allowances in accordance with IFRS.
The Company assesses at each reporting date whether a financial asset or group of financial assets classified as loans and receivables is impaired. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the net present value of expected cash flows discounted at original effective interest rate.
ii) Unquoted preferred shares, micro cap loans, unquoted equities and equity related securities
Investments are normally valued at cost for the first twelve months. Adjustments to fair value, however, will be made, if appropriate, in the light of adverse circumstances. An increase in value of investments will be effected in light of actual or expected third party transactions reflecting the risks associated with the transaction. These investments are classified in the Balance Sheet as Investments at fair value through profit or loss.
Investments held for more than one year 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. Unquoted equities are classified in the Balance Sheet as Investments at fair value through profit or loss.
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 attrributable enterprise value (this is calculated by a multiple of EBITDA reduced by senior debt and marketability discount) covering the aggregate of the unquoted equity, unquoted preferred shares and debt instruments invested in the underlying company. The increase of the fair value of the aggregate investment is reflected through the unquoted equity component of the investment and a decrease in the fair value would be reflected across all financial instruments invested in a 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 Balance Sheet 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 Balance Sheet as Investments at fair value through profit or loss.
Investment Review
| Company | Book cost* US$'000 | Original JZEP Historical cost** US$'000 | Directors Valuation at 31 August 2009 US$'000 | Carrying Value Including Accrued Interest 31 August 2009 US$'000 | Percentage of portfolio % | |||||
| Bank Debt: First Lien Portfolio | ||||||||||
| EMDEON BUSINESS SERVICES, LLC Healthcare service provider | 2,579 | 2,742 | 2,643 | 2,659 | 0.7 | |||||
| HARRINGTON HOLDINGS, INC.*** Distributor of healthcare products | 4,529 | 4,863 | 4,376 | 4,376 | 1.2 | |||||
| INFONXX INC. Worldwide provider of directory assistance | 2,792 | 2,925 | 2,724 | 2,724 | 0.7 | |||||
| INTERGRAPH CORPORATION Designer and provider of SIM software | 802 | 837 | 804 | 808 | 0.2 | |||||
| KINETEK, INC.*** Manufacturer of electric motors and gearboxes | 4,390 | 4,784 | 2,870 | 2,891 | 0.8 | |||||
| PETCO ANIMAL SUPPLIES, INC. Retailer of pet food, supplies and services | 1,793 | 1,951 | 1,865 | 1,897 | 0.5 | |||||
| SCS HOLDINGS II, INC. IT solutions provider | 1,184 | 1,370 | 1,055 | 1,068 | 0.3 | |||||
| TOTES ISOTONER CORPORATION Leading designer and retailer of cold weather and rain products | 584 | 781 | 521 | 521 | 0.1 | |||||
| WP EVENFLO HOLDINGS, INC. Manufacturer of children's products | 819 | 953 | 572 | 580 | 0.2 | |||||
| Total Bank Debt: First Lien Portfolio | 19,472 | 21,206 | 17,430 | 17,524 | 4.7 | |||||
| Bank Debt: Second Lien Portfolio | ||||||||||
| BHM TECHNOLOGIES HOLDINGS, INC. Designer and producer of welded assemblies and components | 580 | 8,015 | 210 | 210 | 0.1 | |||||
| DEKKO TECHNOLOGIES, LLC Distributor of electrical sub-components | 1,417 | 11,368 | 7,107 | 7,212 | 2.0 | |||||
| EMDEON BUSINESS SERVICES, LLC Healthcare service provider | - | 500 | 471 | 476 | 0.1 | |||||
| HARRINGTON HOLDINGS, INC. Distributor of healthcare products | - | 10,000 | 6,200 | 6,200 | 1.7 | |||||
| KINETEK, INC.*** Manufacturer of electric motors and gearboxes | 33,250 | 15,000 | 4,500 | 4,630 | 1.3 | |||||
| Total Bank Debt: Second Lien Portfolio | 35,247 | 44,883 | 18,488 | 18,728 | 5.2 | |||||
| Mezzanine Portfolio | ||||||||||
| BRAXTON-BRAGG CORPORATION Distributor of equipment to stone fabricators | 1,324 | 1,324 | - | - | 0.0 | |||||
| CONTINENTAL CEMENT COMPANY, LLC Mines and processes limestone | 23,906 | 25,233 | 25,234 | 26,000 | 7.1 | |||||
| GED HOLDINGS, INC. Manufacturer of windows | - | 6,100 | - | - | - | |||||
| HAAS TCM GROUP, INC. Speciality chemical distribution | 7,584 | 7,584 | 7,584 | 7,766 | 2.1 | |||||
| M/C COMMUNICATIONS, LLC Provision of marketing services to the medical profession | 800 | 800 | - | - | - | |||||
Investment Review
Continued
| Company | Book cost* US$'000 | Original JZEP Historical cost** US$'000 | Directors Valuation at 31 August 2009 US$'000 | Carrying Value Including Accrued Interest 31 August 2009 US$'000 | Percentage of portfolio % | |||||
| METPAR INDUSTRIES, INC. Manufacturer of restroom partitions | 6,751 | 8,652 | 4,000 | 4,083 | 1.1 | |||||
| PETCO ANIMAL SUPPLIES, INC.**** Retailer of pet food, supplies and services | 17,508 | 17,508 | 17,508 | 17,938 | 4.9 | |||||
| ROOFING SUPPLY GROUP, INC. Distributor of roofing products | 13,516 | 19,632 | 15,000 | 15,543 | 4.2 | |||||
| TRANSAMERICA AUTO PARTS, INC. Distributes parts and accessories for trucks | 6,565 | 6,764 | - | - | - | |||||
| TTS, LLC Provider of technical facilities for mechanical services | 8,422 | 8,262 | 8,263 | 8,407 | 2.3 | |||||
| WIZA INDUSTRIES, LLC Manufacturer of machined parts and components | 7,307 | 7,307 | - | - | - | |||||
| Total Mezzanine Porfolio | 93,683 | 109,166 | 77,589 | 79,737 | 21.7 | |||||
| Micro Cap Portfolio | ||||||||||
| ACCUTEST HOLDINGS, INC. Provision of environmental testing laboratories to the US market | 37,483 | 35,339 | 35,338 | 37,581 | 10.2 | |||||
| BG Holdings, INC. Manufacturer of industrial gears | 22,763 | 22,810 | 20,981 | 22,251 | 6.1 | |||||
| DANTOM SYSTEMS, INC. Outsourcing of debt collection | 17,115 | 20,240 | 17,752 | 18,279 | 5.0 | |||||
| DENTAL SERVICES, INC. Manufacturer of dental services | 26,829 | 22,952 | 25,613 | 26,754 | 7.3 | |||||
| GHW HOLDINGS, INC. Manufacturer and distributor of orthodontic products | 14,311 | 8,215 | 15,173 | 15,584 | 4.2 | |||||
| NATIONWIDE STUDIOS, INC. Processer of digital photos for preschoolers | 16,788 | 16,788 | 6,732 | 6,970 | 1.9 | |||||
| SECHRIST INDUSTRIES, INC.*** Manufacturer of oxygen chambers and other respiratory products | 15,544 | 6,333 | 10,710 | 10,982 | 3.0 | |||||
| WOUND CARE SOLUTIONS, LLC*** Chronic wound care treatment | 31,917 | 55,284 | 24,752 | 25,499 | 7.0 | |||||
| Total Micro Cap Portfolio | 182,750 | 187,961 | 157,051 | 163,900 | 44.7 | |||||
| Legacy Portfolio: | ||||||||||
| ADVANCED CHEMISTRY & TECHNOLOGY, INC. Manufacturer of aircraft sealants | 3,440 | 3,439 | 3,440 | 3,472 | 0.9 | |||||
| APPAREL VENTURES, INC. Swimwear designer, manufacturer and marketeer | 12,087 | 12,087 | 12,087 | 12,087 | 3.3 | |||||
| ETX HOLDINGS, INC. Provider of services to the auto after sales market | 374 | 398 | 398 | 421 | 0.1 | |||||
Investment Review
Continued
| Company | Book cost* US$'000 | Original JZEP Historical cost** US$'000 | Directors Valuation at 31 August 2009 US$'000 | Carrying Value Including Accrued Interest 31 August 2009 US$'000 | Percentage of portfolio % | |||||
| GEAR FOR SPORTS, INC. Sports and active-wear designer and manufacturer | - | 1,495 | - | - | - | |||||
| HEALTHCARE PRODUCTS HOLDINGS, INC. Designer and manufacturer of motorised vehicles | 15,060 | 28,225 | 12,786 | 13,517 | 3.7 | |||||
| JORDAN INDUSTRIES, INC. Conglomerate | - | 21 | - | - | - | |||||
| JZ INTERNATIONAL LLC Fund of European LBO investments | 1,621 | 660 | 1,620 | 1,671 | 0.5 | |||||
| NTT ACQUISITION CORP Technical education and training | 52 | 946 | 52 | 52 | - | |||||
| TIGER INFORMATION SYSTEMS, INC. Provider of temporary staff and computer training | 300 | 400 | 300 | 300 | 0.1 | |||||
| Total Legacy Portfolio | 32,934 | 47,671 | 30,683 | 31,520 | 8.6 | |||||
| Listed Investments | ||||||||||
| SAFETY INSURANCE GROUP, INC. Provider of automobile insurance | 42,223 | 6,816 | 37,109 | 37,109 | 10.1 | |||||
| TAL INTERNATIONAL GROUP, INC.*** Lessor of intermodal shipping containers | 31,959 | 13,798 | 17,008 | 17,008 | 4.6 | |||||
| UNIVERSAL TECHNICAL INSTITUTE, INC. Vocational training in the automotive and marine fields | 835 | 15 | 1,338 | 1,338 | 0.4 | |||||
| Total Listed Investments | 75,017 | 20,629 | 55,455 | 55,455 | 15.1 | |||||
| Total - Portfolio | 439,103 | 431,516 | 356,696 | 366,864 | 100.0 | |||||
| Zero Dividend Preference shares | (73,441) | |||||||||
| Cash and other net assets | 138,834 | |||||||||
| Net assets attributable to Ordinary shares | 432,257 | |||||||||
* Book cost to JZCP equating to transfer value as at 1 July 2008 upon the liquidation of JZEP and adjusted for transactions in the period from 1 July 2008 to 31 August 2009.
**Original book cost incurred by JZEP adjusted for transactions in the period from 1 July 2008 to 31 August 2009.
*** Invested in deals with the Resolute Fund - see note 16.
**** Includes US$1,636,000 of common stock.
Note: Legacy Portfolio - Investments not subject to capital incentive fee
Unaudited Income Statement
For the Period from 1 March 2009 to 31 August 2009
| Six month period from 1 March 2009 to 31 August 2009 | Period from incorporation 14 April 2008 to 30 September 2008 | |||||||||||
| Revenue | Capital | Revenue | Capital | |||||||||
| return | return | Total | return | return | Total | |||||||
| Notes | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||||||
| Income | ||||||||||||
| Net unrealised gains/(losses) on investments at fair value through profit or loss | 9 | - | 13,508 | 13,508 | - | (8,720) | (8,720) | |||||
| Write back of Impairments /(Impairments) on loans and receivables | 9 | - | 2,918 | 2,918 | - | (4,193) | (4,193) | |||||
| Realised gains on investments at fair value through profit or loss | 9 | - | 768 | 768 | - | - | - | |||||
| Net foreign currency exchange losses | 4 | - | (1,108) | (1,108) | - | (2,414) | (2,414) | |||||
| Investment income | 5 | 19,554 | - | 19,554 | 9,288 | - | 9,288 | |||||
| Bank and deposit interest | 103 | - | 103 | 575 | - | 575 | ||||||
| Total income/(loss) | 19,657 | 16,086 | 35,743 | 9,863 | (15,327) | (5,464) | ||||||
| Expenses | ||||||||||||
| Formation costs | 7 | - | - | - | - | (267) | (267) | |||||
| Investment Adviser's base fee | 7 | (2,310) | (1,244) | (3,554) | (1,293) | (697) | (1,990) | |||||
| Administrative expenses | 7 | (1,359) | - | (1,359) | (651) | - | (651) | |||||
| Total expenses | (3,669) | (1,244) | (4,913) | (1,944) | (964) | (2,908) | ||||||
| Finance costs | ||||||||||||
| Finance costs in respect of Zero Dividend Preference shares | 6 | - | (4,772) | (4,772) | - | (3,225) | (3,225) | |||||
| Net income/(loss) before taxation | 15,988 | 10,070 | 26,058 | 7,919 | (19,516) | (11,597) | ||||||
| Taxation | 8 | (286) | - | (286) | (310) | - | (310) | |||||
| Profit/(loss) for the period | 15,702 | 10,070 | 25,772 | 7,609 | (19,516) | (11,907) | ||||||
| Weighted average number of Ordinary shares in issue during period* | 13 | 38,124,240 | 21,226,006 | |||||||||
| Basic and diluted gain/(loss) per Ordinary share using the weighted average number of Ordinary shares in issue during the period | 13 | 41.19c | 26.41c | 67.60c | 35.85c | (91.94)c | (56.10)c | |||||
| Profit/(loss) per Ordinary share using the number of Ordinary shares outstanding at the period end** | 24.15c | 15.49c | 39.64c | 7.80c | (20.01)c | (12.21)c | ||||||
*Comparative figures for weighted average number of Ordinary shares in issue during the period and basic and diluted gain/(loss) per Ordinary share have been restated to reflect the one share for five consolidation on 22 June 2009 and the bonus element of new shares issued on 22 June 2009.
** A total of 65,018,610 (30 September 2008 97,527,916) Ordinary shares, including Limited Voting Ordinary shares, were outstanding at 31 August 2009.
All items in the above statement are derived from continuing operations.
All net income is attributable to the Ordinary shareholders of the Company.
The Company's investment activities commenced on 1 July 2008 upon transfer of investments following the liquidation of JZEP.
The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice.
The accompanying notes on pages 18 to 28 form an integral part of the financial statements.
Balance Sheet
As at 31 August 2009
| 31 August | 28 February | ||||
| 2009 | 2009 | ||||
| Notes | US$'000 | US$'000 | |||
| Non-current assets | |||||
| Investments at fair value through profit or loss | 9 | 288,763 | 264,558 | ||
| Investments classified as loans and receivables | 9 | 78,101 | 69,342 | ||
| 366,864 | 333,900 | ||||
| Current assets | |||||
| Other receivables | 742 | 2,017 | |||
| Cash and cash equivalents | 139,416 | 104,728 | |||
| 140,158 | 106,745 | ||||
| Total Assets | 507,022 | 440,645 | |||
| Current liabilities | |||||
| Zero Dividend Preference shares | 10 | - | (137,858) | ||
| Forward currency derivative contract | 16 | - | (45,366) | ||
| Other payables | (1,324) | (437) | |||
| (1,324) | (183,661) | ||||
| Long term liabilities | |||||
| Zero Dividend Preference shares | 10 | (73,441) | - | ||
| Total liabilities | (74,765) | (183,661) | |||
| Net assets | 432,257 | 256,984 | |||
| Capital and reserves | 12 | ||||
| Share capital account | 149,269 | - | |||
| Share premium account | - | 353,365 | |||
| Other reserves | 282,988 | (96,381) | |||
| Total shareholders' equity | 432,257 | 256,984 | |||
| Net asset value per Ordinary share | 14 | US$ 6.65 | US$ 13.18 |
These unaudited financial statements were approved by the Board of Directors and authorised for issue on 30 October 2009. They were signed on its behalf by:
David Macfarlane Patrick Firth
Chairman Director
The accompanying notes on pages 18 to 28 form an integral part of the financial statements.
* Restated to reflect 1 for 5 share consolidation.
Unaudited Statement of Changes in Shareholders' Equity
For the period from 1 March 2009 to 31 August 2009
| Capital Reserve | |||||||||||||
| Share Capital Account | Share Premium Account | Distributable Reserve | Realised | Unrealised | Revenue Reserve | Total | |||||||
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |||||||
| Balance as at 1 March 2009 | - | 353,365 | - | (5,758) | (105,822) | 15,199 | 256,984 | ||||||
| (Loss)/profit for the period | - | - | - | (10,577) | 20,647 | 15,702 | 25,772 | ||||||
| Issue of Ordinary shares | 77,008 | - | - | - | - | 77,008 | |||||||
| Issue of Limited Voting Ordinary shares | 72,261 | - | - | - | - | 72,261 | |||||||
| Transfer of Share Premium to distributable reserve | - | (353,365) | 353,365 | - | - | - | - | ||||||
| Increase in receivables relating to JZ Equity Partners Plc | - | - | 232 | - | - | - | 232 | ||||||
| Balance as at 31 August 2009 | 149,269 | - | 353,597 | (16,335) | (85,175) | 30,901 | 432,257 | ||||||
Comparative for the period from incorporation 14 April 2008 to 30 September 2008
| Capital Reserve | |||||||||
| Share Premium Account | Realised | Unrealised | Revenue Reserve | Total | |||||
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |||||
| (Loss)/profit for the period | - | (4,189) | (15,327) | 7,609 | (11,907) | ||||
| Issue of Ordinary shares | 353,863 | - | - | - | 353,863 | ||||
| Increase in receivables relating to JZ Equity Partners Plc | 79 | - | - | - | 79 | ||||
| Balance as at 30 September 2008 | 353,942 | (4,189) | (15,327) | 7,609 | 342,035 | ||||
The accompanying notes on pages 18 to 28 form an integral part of the financial statements.
Cashflow Statement
For the period from 1 March 2009 to 31 August 2009
| 31 August | 30 September | |||
| 2009 | 2008 | |||
| Notes | US$'000 | US$'000 | ||
| Operating activities | ||||
| Net cash inflow from operating activities | 15 | 6,362 | 1,223 | |
| Cash outflow from purchase of investments | 9 | (7,847) | - | |
| Cash inflow from repayment of investments | 1,745 | 584 | ||
| Net cash outflow before financing activities | 260 | 1,807 | ||
| Financing activity | ||||
| Net cash proceeds received in consideration for Ordinary shares | 12 | 80,567 | 110,392 | |
| Net cash received in consideration for Limited Voting Ordinary shares | 12 | 76,086 | - | |
| Issue costs | 12 | (7,096) | - | |
| Net cash received for issue of new Zero Dividend Preference shares less issue costs | 10 | 16,241 | - | |
| Cash paid for redemption of old Zero Dividend Preference shares | 10 | (104,739) | - | |
| Settlement of forward currency derivative contract | 16 | (26,923) | - | |
| Proceeds relating to the liquidation of JZ Equity Partners Plc | 292 | - | ||
| Net cash inflow from financing activities | 34,428 | 110,392 | ||
| Increase in cash and cash equivalents | 34,688 | 112,199 | ||
| Reconciliation of net cash flow to movements in cash and cash equivalents | ||||
| Cash at 1 March 2009 / 14 April 2008 | 104,728 | - | ||
| Increase in cash and cash equivalents as above | 34,688 | 112,199 | ||
| Cash and Cash Equivalents as at 31 August 2009 / 30 September 2008 | 139,416 | 112,199 |
The accompanying notes on pages 18 to 28 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 now subject to the Companies (Guernsey) Law, 2008, which came in to effect on 1 July 2008. The Company's Share Capital consists of Ordinary shares and Zero Dividend Redeemable Preference ("ZDP") shares. The Ordinary shares and ZDP shares were admitted to the official list of the London Stock Exchange on 1 July 2008.
The Company was granted consent on 8 May 2008 by the Guernsey Financial Services Commission under The Control of Borrowing (Bailiwick of Guernsey) Ordinance,1959 to raise up to £300,000,000 by the issue of shares.
The Company was launched in connection with a scheme of reconstruction and voluntary winding up of JZ Equity Partners Plc ("JZEP") under section 110 of the Insolvency Act 1986. JZEP's assets, after providing for its liabilities were transferred in specie to the Company on 1 July 2008 and the Company issued to JZEP Shareholders (other than those who opted against the new scheme) one Ordinary Share for each JZEP Ordinary Share and one Zero Dividend Preference ("ZDP") Share for each JZEP ZDP Share that they held.
On 22 June 2009 a Placing and open offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. The Ordinary shares were subsequently consolidated on the basis that all holders of Ordinary shares will hold one Ordinary share for every five Ordinary Shares held immediately prior to the share consolidation. New ZDP shares were also issued following the redemption of the old ZDP shares (note 10).
Limited Voting Ordinary Shares ("LVO") were issued so that certain of the Company's existing Shareholders and certain new investors that are Qualifying US Persons could participate in the Ordinary Share Issue without causing the Company to be treated as a US domestic company for the purposes of US securities laws and/or a CFC for US tax purposes. Limited Voting Ordinary Shares are identical to, and rank pari passu in all respects with, the New Ordinary shares except that the Limited Voting Ordinary Shares will only carry a limited entitlement to vote in respect of the appointment or removal of Directors and will not carry any entitlement to vote in respect of certain other matters. The LVO shares are not listed and are not admitted to trade on or through the facilities of the London Stock Exchange.
During the period, the Guernsey Financial Services Commission (GFSC) amended the rules in respect of closed ended funds formerly authorised under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989 to bring all such funds under the Protection of Investors (Bailiwick of Guernsey) Law 1987. This amendment requires the closed ended funds to elect to be either a registered or authorised fund. The Company has elected to remain an authorised fund as there were no real benefits to seeking Registered Fund status.
The Company's corporate objective is to create a portfolio of investments in businesses primarily in the United States, providing a superior overall return comprised of a current yield and significant capital appreciation. The Company's present strategies include investments in micro-cap buyouts, mezzanine loans (sometimes with equity participations) and high yield securities, senior secured debt and second lien loans and other debt and equity opportunities, including distressed debt and structured financings, derivatives and opportunistic purchase of publicly traded securities.
The Company has no direct employees. For its services the Investment Adviser receives a monthly management fee and may also be entitled to a performance-related fee (note 7). The Company has no ownership interest in the Investment Adviser. The Company is administered by Butterfield Fulcrum Group (Guernsey) Limited (note 7).
2. Significant Accounting Policies
The accounting policies adopted in the preparation of these condensed interim financial statement have been consistently applied during the period of this statement, unless otherwise stated.
Notes to the Condensed Interim Financial Statements
(Continued)
Statement of Compliance
The condensed interim financial statements of the Company for the period 1 March 2009 to 31 August 2009 have been prepared in accordance with IAS 34, "Interim Financial Reporting" together with applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the London Stock Exchange. The condensed interim financial statements do not include all the information and disclosure required in the annual financial statements and should be read in conjunction with the annual report and audited financial statements at 28 February 2009.
Basis of Preparation
The condensed interim financial statements have been prepared under the historical cost or amortised cost basis, modified by the revaluation of certain financial instruments designated at Fair value through Profit or Loss upon initial recognition. The principal accounting policies adopted are set out below. The preparation of condensed interim financial statements in conformity with IAS 34, "Interim Financial Reporting" requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In the application of the Company's accounting policies, which are described in note 2 to the annual financial statements for the period ended 28 February 2009, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from their sources. The estimates and associated assumptions are based on historical experience of JZCP and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions and other key sources of estimation uncertainty at the Balance Sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
Fair value of investments at fair value through profit or loss ("FVTPL")
Certain investments are classified as FVTPL, and valued accordingly, as disclosed in note 2 of the annual financial statements for the period ended 28 February 2009 and the valuation policy on page 9. The key source of estimation uncertainty is on the valuation of unquoted equities and equity-related securities.
Loans and receivables
Certain investments are classified as loans and receivables, and valued accordingly, as disclosed in note 2 of the annual financial statements and the valuation policy on page 9. The key estimation is the impairment review and the key assumptions as disclosed in note 2 of the annual financial statements for the period ended 28 February 2009.
| Period ended | Period ended | ||
| 31/08/09 | 30/09/08 | ||
| US$ '000 | US$ '000 | ||
| Net movement in foreign exchange losses on derivative financial instrument | 18,443 | (22,209) | |
| Net movement in losses on foreign currency translations | (19,551) | 19,795 | |
| (1,108) | (2,414) |
Notes to the Condensed Interim Financial Statements
(Continued)
| Period ended | Period ended | ||
| 31/08/09 | 30/09/08 | ||
| US$ '000 | US$ '000 | ||
| Income from investments classified as FVTPL | 13,729 | 6,374 | |
| Income from investments classified as loans and receivables | 5,825 | 2,914 | |
| 19,554 | 9,288 |
Loan note interest receivable is analysed between interest receivable as cash and interest receivable as Payment in Kind ("PIK"). PIK is interest earned on securities which is satisfied by the issue of further securities (with or without a right to subscribe for further equity and/or debt).
Income on preference stock is compounded and payable on declaration.
Income for the six month period ended 31 August 2009
| Preference | Bank debt | Loan note | Loan note | ||||||||||||
| Dividends | Dividends | Interest | PIK | Cash | Other | Total | |||||||||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||||||||
| 1st and 2nd Lien bank debt | - | - | 1,369 | - | - | - | 1,369 | ||||||||
| Mezzanine portfolio | - | - | - | 3,063 | 2,762 | - | 5,825 | ||||||||
| Micro Cap portfolio | - | 3,566 | - | 1,895 | 2,752 | - | 8,213 | ||||||||
| Legacy portfolio | - | 12 | - | 1,077 | 52 | 1,711 | 2,852 | ||||||||
| Listed Investments | 1,295 | - | - | - | - | - | 1,295 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,295 | 3,578 | 1,369 | 6,035 | 5,566 | 1,711 | 19,554 | |||||||||
|
|
|
|
|
|
|
| |||||||||
| Income for the period from incorporation 14 April 2008 to 30 September 2008* | |||||||||||||||
| Preference | Bank debt | Loan note | Loan note | ||||||||||||
| Dividends | Dividends | Interest | PIK | Cash | Other | Total | |||||||||
| US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | |||||||||
| 1st and 2nd Lien bank debt | - | - | 995 | - | - | - | 995 | ||||||||
| Mezzanine portfolio | - | - | - | 716 | 2,198 | - | 2,914 | ||||||||
| Micro Cap portfolio | - | 1611 | - | 1,000 | 1,271 | - | 3,882 | ||||||||
| Legacy portfolio | - | 56 | - | 374 | - | - | 430 | ||||||||
| Listed investments | 1032 | - | - | - | - | - | 1,032 | ||||||||
| Other | - | - | - | - | - | 35 | 35 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,032 | 1,667 | 995 | 2,090 | 3,469 | 35 | 9,288 | |||||||||
|
|
|
|
|
|
|
| |||||||||
\* Trading period for the three months from 1 July 2008 (upon transfer of assets from JZEP) to 30 September 2008.
Notes to the Condensed Interim Financial Statements
(Continued)
6. Finance costs
| Period from | Period from | ||
| 01/03/09 to | 14/04/08 to | ||
| 31/08/09 | 30/09/08 | ||
| US$ '000 | US$ '000 | ||
| Finance costs arising on financial liabilities not at fair value through profit or loss: | |||
| Finance costs on old Zero Dividend Preference shares redeemed on 22 June 2009 | 3,784 | 3,225 | |
| Finance costs on new Zero Dividend Preference shares issued on 22 June 2009 | 988 | - | |
| 4,772 | 3,225 |
The ZDP Shares have no right to any of the income available for distribution but have an entitlement, on a predetermined growth basis, to the available assets at any winding-up date prior to 22 June 2016. The original ZDP shares were redeemed at 215.80 pence on 22 June 2009. The new ZDP shares were issued at 215.80 pence on 22 June 2009 and will have a pre-determined final capital entitlement of 369.84 pence on 22 June 2016. The new ZDP shares final capital entitlement is calculated using a rate equal to 8% return compounding on a monthly basis. Finance costs are allocated to the income statement using the effective interest rate method.
7. Expenses
| Period from | Period from | ||
| 01/03/09 to | 14/04/08 to | ||
| 31/08/09 | 30/09/08 | ||
| US$ '000 | US$ '000 | ||
| Investment Adviser's base fee | 3,554 | 1,990 | |
| Administrative fees | |||
| Legal and professional fees | 505 | 171 | |
| Other expenses | 374 | 165 | |
| Directors' remuneration | 163 | 151 | |
| Accounting, secretarial and administration fees | 202 | 101 | |
| Auditors' remuneration for audit services | 114 | 59 | |
| Custodian fees | 1 | 4 | |
| 1,359 | 651 | ||
| Formation costs | - | 267 | |
| Total expenses | 4,913 | 2,908 |
Directors fees
The Chairman is entitled to a fee of US$85,000 per annum. Each of the other Directors are entitled to a fee of US$60,000 per annum. For the period 1 March 2009 to 31 August 2009, total expenses included in the Income Statement were $163,020 of this amount $54,212 was outstanding at the period end and included within Other Payables.
Investment Advisory and Performance fees
The Company entered into an investment advisory and management agreement with Jordan/Zalaznick Advisers, Inc (the "Investment Adviser") in May 2009.
Pursuant to the Advisory Agreement the Investment Adviser is entitled to a base management fee and to an incentive fee. The base management fee is an amount equal to 1.5 per cent. per annum of the average total assets under management of the Company, payable quarterly in arrears; the agreement provides that payments in advance on account of the base management fee will be made.
Notes to the Condensed Interim Financial Statements
(Continued)
The incentive fee has two parts. The first part is calculated by reference to the net investment income of the Company and is equal to up to 20 per cent. of such income, payable quarterly in arrears provided that the net investment income for the quarter exceeds 2 per cent of the average of the net asset value of the Company for that quarter and the preceding quarter (the "hurdle") (8 per cent. annualised). The fee is an amount equal to (a) 100 per cent of that proportion of the net investment income for the quarter as exceeds the hurdle, up to an amount equal to 25 per cent. of the hurdle, and (b) 20 per cent. of the net investment income of the Company above 125 per cent. of the hurdle.
The second part of the incentive fee is calculated by reference to the net realised capital gains of the Company and is equal to: (a) 20 per cent. of (x) the realised capital gains of the Company for each financial year less (y) all realised capital losses on Investments for the year less (b) the excess (for prior years since the Effective Date) (if any) of (i) the aggregate of all previous capital gains incentive fees paid by the Company to the Investment Adviser over (ii) 20 per cent. of (x) all realised capital gains of the Company less (y) all realised capital losses of the Company, payable annually in arrears.
For the period 1 March 2009 to 31 August 2009 total Investment advisory and management expenses were included in the Income Statement of US$3,553,000. Of this amount US$499,000 was outstanding at the period end and included within Other Payables.
Administration fees
Butterfield Fund Services (Guernsey) Limited was appointed on 12 May 2008 under an Administration, Secretarial and Registrar Agreement. Butterfield Fund Services and Fulcrum Group merged during September 2008 forming Butterfield Fulcrum Group (Guernsey) Limited (the "Administrator").
The Administrator is entitled to a quarterly fee of US$100,000 payable in arrears. Fees payable are subject to an annual fee review. For the period 1 March 2009 to 31 August 2009 total expenses payable to the Administrator of US$202,000 were included in the Income Statement. Of this amount US$67,000 was outstanding at the period end and included within Other Payables.
Custodian fees
HSBC Bank (USA) N.A (the "Custodian") was appointed on 12 May 2008 under a custodian agreement. The Custodian is entitled to receive an annual fee of $2,000 and a transaction fee of $50 per transaction. For the period 1 March 2009 to 31 August 2009 total expenses were included in the Income Statement of US$1,008 of which nil was outstanding at the period end.
The Company suffered withholding tax of US$285,992 (Period ended 30 September 2008: US$309,691), on income from listed investments, for the period 1 March 2009 to 31 August 2009.
With effect from 1 January 2008, the standard rate of income tax for companies in Guernsey moved from 20% to 0% under the Income Tax (Zero Ten) (Guernsey) Law, 2007 passed by the States of Guernsey on 26 September 2007. Closed-ended investment vehicles such as the Company can continue to apply for exempt status for Guernsey tax purposes. Alternatively they may choose to automatically become tax resident, paying the nil rate. The Company elected for exempt status on incorporation.
Categories of financial instruments
| Listed | Unlisted | Carrying Value | |||
| 31/08/09 | 31/08/09 | 31/08/09 | |||
| US$ '000 | US$ '000 | US$ '000 | |||
| Fair value through profit or loss (FVTPL) | 55,455 | 233,308 | 288,763 | ||
| Loans and receivables | - | 78,101 | 78,101 | ||
| 55,455 | 311,409 | 366,864 |
Notes to the Condensed Interim Financial Statements
(Continued)
| Listed | Unlisted | Carrying Value | |||
| 31/08/09 | 31/08/09 | 31/08/09 | |||
| US$ '000 | US$ '000 | US$ '000 | |||
| Fair value through profit or loss (FVTPL) | 47,264 | 217,294 | 264,558 | ||
| Loans and receivables | - | 69,342 | 69,342 | ||
| 47,264 | 286,636 | 333,900 |
| FVTPL | L&R | Total | |||
| 31/08/09 | 31/08/09 | 31/08/09 | |||
| US$ '000 | US$ '000 | US$ '000 | |||
| Cost at 1 March 2009 | 352,469 | 87,442 | 439,911 | ||
| Cost of investments purchased | 5,017 | 2,830 | 7,847 | ||
| Cost of investments by settlement of accrued interest (PIK) | 3,782 | 3,680 | 7,462 | ||
| Cost of investments repaid | (892) | (85) | (977) | ||
| Adjust opening cost for accrued interest settled by PIK | (13,320) | (1,820) | (15,140) | ||
| Cost at 31 August 2009 | 347,056 | 92,047 | 439,103 | ||
| Impairments on investments classified as loans and receivables | - | (16,096) | (16,096) | ||
| Unrealised losses on investments classified as FVTPL | (66,311) | - | (66,311) | ||
| Directors' valuation at 31 August 2009 | 280,745 | 75,951 | 356,696 | ||
| Accrued interest at 31 August 2009 | 8,018 | 2,150 | 10,168 | ||
| Carrying value at 31 August 2009 | 288,763 | 78,101 | 366,864 |
| FVTPL | L&R | Total | |||
| 31/08/09 | 31/08/09 | 31/08/09 | |||
| US$ '000 | US$ '000 | US$ '000 | |||
| Cost at 1 July 2008 | 332,968 | 81,050 | 414,018 | ||
| Cost of investments purchased | 7,280 | 2,954 | 10,234 | ||
| Cost of investments repaid | 13,693 | 3,438 | 17,131 | ||
| Cash inflow from repayment of investments | (1,472) | - | (1,472) | ||
| Cost at 28 February 2009 | 352,469 | 87,442 | 439,911 | ||
| Adjust opening cost for accrued interest settled by PIK | (8,185) | (1,822) | (10,007) | ||
| Impairments on investments classified as loans and receivables | - | (18,053) | (18,053) | ||
| Unrealised losses on investments classified as FVTPL | (83,920) | - | (83,920) | ||
| Directors' valuation at 28 February 2009 | 260,364 | 67,567 | 327,931 | ||
| Accrued interest at 28 February 2009 | 4,194 | 1,775 | 5,969 | ||
| Carrying value at 28 February 2009 | 264,558 | 69,342 | 333,900 |
Notes to the Condensed Interim Financial Statements
(Continued)
10. Zero Dividend Preference ("ZDP") shares
Authorised Capital
Unlimited number of ZDP shares of no par value.
| 31/08/09 | 28/02/09 | ||
| US$ '000 | US$ '000 | ||
| ZDP shares redeemed 22 June 2009 | |||
| Amortised cost at 1 March 2009 and at 1 July 2008 | 137,858 | 182,214 | |
| Finance costs allocated to income statement | 3,780 | 7,851 | |
| Redemption of ZDP shares - cash | (104,739) | - | |
| Redemption of ZDP shares - rollover to new ZDP shares | (56,516) | - | |
| Currency gain on redemption of ZDP shares | 19,617 | - | |
| Unrealised currency gain on translation at period end | - | (52,207) | |
| Attributable net assets at 31 August 2009 / 28 February 2009 | - | 137,858 | |
| ZDP shares issued 22 June 2009 | |||
| Issued during period - cash received | 16,590 | - | |
| Issued during period - rollover from old ZDP shares | 56,516 | - | |
| Issue costs | (349) | - | |
| Finance costs allocated to income statement | 988 | - | |
| Unrealised currency gain on translation at period end | (304) | - | |
| Attributable net assets at 31 August 2009 / 28 February 2009 | 73,441 | - | |
| Total number of ZDP shares in issue | 20,707,141 | 45,662,313 | |
| Price per ZDP share US$ | US$ 3.5467 | US$ 3.0191 | |
| Price per ZDP share GBP | GBP 2.1767 | GBP 2.1043 |
On 1 July 2008, a total of 45,662,313 ZDP shares were issued on a one-to-one basis to holders of old JZ Equity Partners Plc ZDP shares under the terms of the reconstruction scheme. Of these shares 29,654,417 were redeemed on 22 June 2009 at a price of 215.80 pence and 16,007,896 which were rolled over in to new ZDP shares
Further ZDP shares were issued on 22 June 2009 at a price of 215.80 pence and are designed to provide a pre-determined final capital entitlement of 369.84 pence on 22 June 2016 which ranks behind the Company's creditors but in priority to the capital entitlements of the Ordinary shares. The new ZDP shares issued comprised 16,007,896 shares from the rollover of old ZDP shares and 4,699,245 which were issued for cash. They carry no entitlement to income and the whole of their return will therefore take the form of capital. The capital appreciation of approximately 8% per annum is calculated monthly. In certain circumstances, ZDP shares will carry the right to vote at general meetings of the Company as detailed in the Company's Memorandum of Articles and Association. Issue costs are deducted from the cost of the liability and allocated to the Income Statement over the life of the ZDP shares.
Authorised Capital
Unlimited number of ordinary shares of no par value.
| Ordinary shares - Issued Capital | 31/08/09 | 28/02/09 | |||||
| Number of shares | 31/08/09 US$ '000 | Number of shares | 28/02/09 US$ '000 | ||||
| Balance brought forward | 97,527,916 | - | - | - | |||
| Issued during period | 117,037,749 | - | 97,527,916 | - | |||
| Share consolidation 1 for 5 | (171,652,533) | - | - | - | |||
| Balance at 31 August 2009/ 28 February 2009 | 42,913,132 | - | 97,527,916 | - |
Notes to the Condensed Interim Financial Statements
(Continued)
| Limited Voting Ordinary shares - Issued Capital | 31/08/09 | 28/02/09 | |||||
| Number of shares | 31/08/09 US$ '000 | Number of shares | 28/02/09 US$ '000 | ||||
| Balance brought forward | - | - | - | - | |||
| Issued during period | 110,527,388 | - | - | - | |||
| Share consolidation 1 for 5 | (88,421,910) | - | - | - | |||
| Balance at 31 August 2009/ 28 February 2009 | 22,105,478 | - | - | - | |||
| Total shares in issue | 65,018,610 | - | 97,527,916 | - |
The Company's Ordinary shares were listed on the London Stock Exchange on 1 July 2008 in connection with a scheme of reconstruction and voluntary winding up of JZ Equity Partners Plc ("JZEP") under section 110 of the Insolvency Act 1986 (UK law). JZEP's assets, after providing for its liabilities were transferred in specie to the Company and the Company issued to JZEP shareholders (other than those who opted against the new scheme) one Ordinary share for each JZEP Ordinary share that they held.
On 22 June 2009 a Placing and open offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. Both Ordinary and Limited Voting Ordinary shares were subsequently consolidated on the basis all holders of shares will hold one share for every five shares held immediately prior to the share consolidation.
Limited Voting Ordinary Shares ("LVO") were issued so that certain of the Company's existing Shareholders and certain US new investors could participate in the Ordinary Share Issue without causing the Company to be treated as a US domestic company for the purposes of US securities laws and/or a CFC for US tax purposes. Limited Voting Ordinary Shares are identical to, and rank pari passu in all respects with, the New Ordinary shares except that the Limited Voting Ordinary Shares will only carry a limited entitlement to vote in respect of the appointment or removal of Directors and will not carry any entitlement to vote in respect of certain other matters. The LVO shares are not listed and are not admitted to trade on or through the facilities of the London Stock Exchange.
The Ordinary shares and LVO shares carry a right to receive the profits of the Company available for distribution by dividend and resolved to be distributed by way of dividend to be made at such time as determined by the Directors.
In addition to receiving the income distributed, the Ordinary shares and LVO shares are entitled to the net assets of the Company on a winding up, after all liabilities have been settled and the entitlement of the ZDP shares have been met. In addition, holders of Ordinary shares and LVO shares will be entitled on a winding up to receive any accumulated but unpaid Revenue reserves of the Company, subject to all creditors having been paid out in full but in priority to the entitlements of the ZDP shares. Any distribution of Revenue reserves on a winding up is currently expected to be made by way of a final special dividend prior to the Company's eventual liquidation.
Holders of Ordinary shares shall have the rights to receive notice of, to attend and to vote at all general meeting of the Company.
Further issue of shares
Under the Articles, the Directors have the power to issue new shares on a non pre-emptive basis. The Directors have resolved, however, that new shares will not be issued at a discount to the prevailing Net Asset Value per Ordinary share other than where shareholders are permitted to participate in the issue pro rata to their existing holding in the Company and, therefore, will not be disadvantageous to existing shareholders. Future issues of shares will be carried out in accordance with the Listing Rules.
The Directors will consider issuing new shares at not less than the prevailing Net Asset Value per Ordinary share where there is a significant demand for further shares.
Notes to the Condensed Interim Financial Statements
(Continued)
Purchase of own shares by the Company
It is the intention of the Directors to seek authority from shareholders on a regular basis to allow the Company to repurchase shares in the market to prevent the emergence of a significant discount on the Company's market price to the Company's Net Asset Value.
The Royal Court of Guernsey granted that on the admission of the Company's shares to the official list and to trading on the London Stock Exchange's market, the amount credited to the share premium account of the Company immediately following the admission of such shares be cancelled and any surplus thereby created accrue to the Company's distributable reserves to be used for all purposes permitted by the Companies Law, including the purchase of shares and the payment of dividends. Subject to satisfaction of the solvency test, all of the company's capital and reserves are distributable in accordance with the Companies (Guernsey) Law, 2008.
| Share Capital Account | 31/08/09 | 28/02/09 | |
| US$ '000 | US$ '000 | ||
| New Ordinary shares issued in period | 80,419 | - | |
| Limited Voting Shares issued in period | 75,946 | - | |
| Issue costs | (7,096) | - | |
| At 31 August 2009 / 28 February 2009 | 149,269 | - | |
| Share Premium Account | 31/08/09 | 28/02/09 | |
| US$ '000 | US$ '000 | ||
| Ordinary Shares | |||
| Net assets received from the liquidation of JZEP in consideration for Ordinary Shares | - | 353,376 | |
| At 1 March 2009 | 353,365 | - | |
| Increase in provisions/receivables relating to JZ Equity Partners Plc | - | (11) | |
| Transfer to distributable reserve | (353,365) | - | |
| At 31 August 2009 / 28 February 2009 | - | 353,365 | |
| Distributable Reserve | 31/08/09 | 28/02/09 | |
| US$ '000 | US$ '000 | ||
| Transfer from Share Premium | 353,365 | - | |
| Increase in provisions/receivables relating to JZ Equity Partners Plc | 232 | - | |
| At 31 August 2009 / 28 February 2009 | 353,597 | - |
Capital reserve
All surpluses arising from the realisation or revaluation of investments and all other capital profits and accretions of capital shall be credited to the Capital reserve. Any loss arising from the realisation or revaluation of investments or any expense, loss or liability classified as capital in nature may be debited to the Capital reserve.
| Capital reserve | |||||
|
| Realised | Unrealised | Total | ||
| 31/08/09 | 31/08/09 | 31/08/09 | |||
| US$ '000 | US$ '000 | US$ '000 | |||
| At 1 March 2009 | (5,758) | (105,822) | (111,580) | ||
| Unrealised gains on investments | - | 16,426 | 16,426 | ||
| Realised gains on investments disposed | 768 | - | 768 | ||
| Movement in unrealised loss on translation of foreign currency | - | (51,835) | (51,835) | ||
| Realised gain on translation of foreign currency | 32,284 | - | 32,284 | ||
| Movement in unrealised gain on derivative financial instrument | - | 56,056 | 56,056 | ||
| Realised loss on derivative financial instrument | (37,613) | - | (37,613) | ||
| Expenses charged to capital | (1,244) | - | (1,244) | ||
| Finance costs in respect of Zero Dividend Preference shares | (4,772) | - | (4,772) | ||
| At 31 August 2009 | (16,335) | (85,175) | (101,510) | ||
| At 14 April 2008 | - | - | - | ||
| Unrealised losses on investments | - | (101,973) | (101,973) | ||
| Unrealised loss on derivative financial instrument | - | (56,056) | (56,056) | ||
| Unrealised gain on translation of foreign currency | - | 52,207 | 52,207 | ||
| Realised gains on amounts received held in escrow accounts | 4,102 | - | 4,102 | ||
| Expenses charged to capital | (2,009) | - | (2,009) | ||
| Finance costs in respect of Zero Dividend Preference shares | (7,851) | - | (7,851) | ||
| At 28 February 2009 | (5,758) | (105,822) | (111,580) | ||
| Revenue reserve | 31/08/09 | 28/02/09 | |||
| US$ '000 | US$ '000 | ||||
| At 1 March 2009 and 14 April 2008 | 15,199 | - | |||
| Profit and loss for the period attributable to revenue | 15,702 | 19,588 | |||
| Dividend paid | - | (4,389) | |||
| At 31 August 2009 | 30,901 | 15,199 | |||
| Summary of reserves attributable to Ordinary shareholders | 31/08/09 | 28/02/09 | |||
| US$ '000 | US$ '000 | ||||
| Share Premium Account | - | 353,365 | |||
| Distributable Reserve | 353,597 | - | |||
| Share Capital Account | 149,269 | - | |||
| Capital reserve | (101,510) | (111,580) | |||
| Revenue Reserve | 30,901 | 15,199 | |||
| 432,257 | 256,984 | ||||
13. Basic and Diluted Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings/(loss) for the period by the weighted average number of Ordinary shares outstanding during the period.
The weighted average number of shares has been calculated as follows:
| Restated | ||||
| 31/08/09 | 30/09/08 | |||
| Number of Ordinary shares | ||||
| Qualifying shares at beginning of the period before the 1 for 5 share consolidation (See Note 11) | 325,093,053 | 97,527,916 | ||
| Qualifying shares at beginning of the period after the 1 for 5 share consolidation and after time apportionment. | 37,067,675 | 19,505,583 | ||
| Effect of the bonus element of the new shares issued | 1,056,565 | 1,720,424 | ||
| Weighted average number of Ordinary shares | 38,124,240 | 21,226,007 | ||
The weighted average number of Ordinary shares is based on the average number of Ordinary shares in issue during that period. On 22 June 2009 a Placing and Open Offer of Ordinary Shares resulted in 117,037,749 Ordinary and 110,527,388 Limited Voting Ordinary shares being issued at the price of 42 pence. The Ordinary shares were subsequently consolidated on the basis all holders of Ordinary shares will hold one Ordinary share for every five Ordinary Shares held immediately prior to the share consolidation.
Notes to the Condensed Interim Financial Statements
(Continued)
The weighted average of shares for the period ended 31 August 2009 has been computed assuming the shares in issue for the period 1 March 2009 to 22 June 2009 had also been subject to the 1 for 5 share consolidation and adjusted by a 1.09 adjustment factor in respect of the bonus element of new shares issued*.The weighted average of the number of Ordinary shares in issue during the period ended 30 September 2008 have been restated assuming they were also subject to the one share for five consolidation and the 1.09 adjustment factor representing the bonus element of the new shares being issued at a discount.
*Adjustment factor is calculated using the fair value (47.5 pence) per share at issue date as the numerator and the theoretical ex-right price (43.7 pence) per share as a denominator.
14. Net Asset Value Per Share
The net asset value per Ordinary share of US$6.65 is based on the net assets at the period end of US$432,257,000 and on 65,018,610 Ordinary shares, being the number of Ordinary shares in issue at the period end. The net asset value per share at 28 February 2009 of US$13.18 is based on the net assets at the period end of US$256,984,000 and on 19,505,583 Ordinary shares, being the number of Ordinary shares in issue at 28 February 2009 adjusted for the 1 for 5 share consolidation on 22 June 2009. The net asset value per Ordinary share previously reported at 28 February 2009 was US$2.63.
15. Notes to the Cash Flow Statement
Reconciliation of the profit/(loss) for the period to net cash from operating activities
| 31/08/09 | 30/09/08 | |||
| US$ '000 | US$ '000 | |||
| Profit/(loss) for the period | 25,772 | (11,907) | ||
| Increase in other payables | 568 | 989 | ||
| Increase in receivables (US$482,000 receivable from old entity as at 1/7/2008) | 1,215 | (754) | ||
| Net unrealised (gains)/ losses on investments | (13,508) | 12,913 | ||
| Net unrealised other (gains)/ losses adjustment | (125) | 2,414 | ||
| Realised gain on investments - shown as Finance activity | (768) | - | ||
| Increase in accrued interest on investments and adjustment for interest received as PIK | (11,662) | (5,657) | ||
| Finance costs in respect of Zero Dividend Preference shares | 4,803 | 3,225 | ||
| Unrealised currency gain on foreign cash | 67 | - | ||
| Net cash from operating activities | 6,362 | 1,223 |
Purchases and sales of investments are considered to be operating activities of the Company, given its purpose, rather than investing activities. The cash flows arising from these activities are shown in the Cash Flow Statement.
16. Related Party Transactions
The remuneration of the Directors is disclosed in Note 7.
In March 2004, JZEP invested US$17,500 in shares of JII Holdings LLC, a subsidiary of Jordan Industries, Inc (Transferred to JZCP on 1 July 2008). The Company did not receive any income from this investment during the six months ended 31 August 2009.
In November 2001, JZEP invested US$15,279 in the Common Stock of JZ International LLC ("JZI") a company managed by affiliates Jordan/Zalaznick Advisers, Inc. In 2007, a further investment has been made in JZI of US$ 424,417 in Convertible Senior Preferred Units. The investment was subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008. The Company did not receive any income from JZI during the period ended 31 August 2009, and at the end of the period the investment was valued at US$ 1,430,000.
Notes to the Condensed Interim Financial Statements
(Continued)
In July 1998, JZEP invested US$114,000 in the Common Stock of Gramtel, LLC., Jordan Industries, Inc., Jordan Speciality Plastics, Inc., Jordan Aftermarkets, Inc. and Motors & Gears Holdings, Inc., which are affiliates of Jordan/Zalanick Advisers, Inc. The investments were subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008. The Company has not received any income from these investments during the period and the investments in the portfolio were valued at US$ nil.
In 2007, JZEP invested US$ 250,000 in ETX Holdings, Inc. which was a spin off of Jordan Auto Aftermarket Holdings, Inc., a former co-investment with The Jordan Company. The investment was subsequently transferred to JZCP as part of the in specie transfer dated 1 July 2008. A further investment of US$17k was made in ETX Holdings, Inc during the six month period ended 31 August 2009 the Company did not receive any income from this investment during the period. At 31 August 2009 the investment was valued at US$ 378,000.
Jordan/Zalaznick Advisers, Inc. (JZAI), a US based company, provides advisory services to the board of Directors of the Company in exchange for management fees, paid quarterly. Fees paid by the Company to the Investment Advisor are detailed in Note 7.
During the six months ended 31 August 2009, the Company retained Ashurst LLP, a UK based law firm. David Macfarlane was a former Senior Corporate Partner at Ashurst until 2002.
The Company has invested in deals with The Resolute Fund, which is managed by the Jordan Company, which is owned jointly by David Zalaznick and Jay Jordan. These investments include: Harrington Holdings, Inc.; Kinetek, Inc.; Sechrist Industries, Inc.; TAL International Group, Inc.; and Woundcare Services, Inc. and represent an aggregate value of US$74,527,000 at 31 August 2009.
Jay Jordan and David Zalaznick each purchased a further 9,020,099 Ordinary shares and 10,304,708 Limited Voting Ordinary shares on 22 June 2009. Tthese shares were subsequently consolidated at 1 share for every 5. The share acquisition by David Zalaznick and Jay Jordan was approved by the Ordinary Shareholders at the EGM held on 18 June 2009.
Patrick Firth is a Director of the Company and was formerly Managing Director of Butterfield Fulcrum Group (Guernsey) Limited. Fees paid by the Company to the Administrator are detailed in Note 7.
17. Commitments and Contingent Liabilities
The Company has no financial commitments or contingent liabilities as at 31 August 2009. At 28 February 2009 the Company had an outstanding forward foreign exchange contract to purchase £100,000,000 at the contracted rate of £1: US$1.8882 which was settled during the year realising a loss of US$26,923,000.
18. 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 (revised 2003) - Related Party Disclosures.
19. Contingent Assets
As at 31 August 2009, the Company had contingent assets of US$3,095,000 representing escrow accounts and warrants which have been omitted from the financial results due to the inability to ascertain their recoverability at this time.
Independent Review Report
Introduction
We have been engaged by the company to review the condensed set of interim financial statements for the six month period ended 31 August 2009 which comprises the unaudited income statement, unaudited balance sheet, unaudited statement of changes in shareholders' equity, unaudited cash flow statement and the related notes 1 to 19. We have read the other information contained in the condensed interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of interim financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The condensed interim financial report for the period 1 March 2009 to 31 August 2009 is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the condensed interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
The condensed set of interim financial statements included in this condensed interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim financial reporting' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of interim financial statements in the condensed interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the condensed interim financial report for the period 1 March 2009 to 31 August 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
Guernsey, Channel Islands
Date: 30 October 2009
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 "JZCZ" 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 2010 May 2010
Annual General Meeting June 2010
Interim report for the six months to 31 August 2010 October 2010
In accordance with the Transparency Directive JZCP will be issuing an Interim Management Statement for the quarters ended 30 November 2009 and 31 May 2009. 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. Existing elections will remain in force unless altered by 13th November 2009. Shareholders who have not made that election and wish to do so should by 13th November 2009. This may be arranged by contacting the Company's Transfer and Paying Agent, Equiniti Limited on +44 (0) 121 415 7047. Payments will be paid in US dollars unless the shareholder elects to receive the dividend in Sterling.
Interim dividend timetable
Ex-dividend date 11th November 2009
Record date 13th November 2009
Payment date 4th December 2009
Share dealing
Investors wishing to buy or sell shares in the Company may do so through a stockbroker. Most banks also offer this service.
Internet address
The Company: www.jzcp.com
ISIN/SEDOL numbers
The ISIN code/SEDOL (Stock Exchange Daily Official List) numbers of the Company's Ordinary shares are GC00B2RK0R31/B2RK0R3 and the numbers of the Zero Dividend Preference shares are GC00B2RK0S48/B2RK0S4.
Share register enquiries
The Company's UK Transfer and Paying Agent, Equiniti Limited, maintains the share registers. In event of queries regarding your holding, please contact the Registrar on +44 (0) 121 415 7047 or access their website at www.equiniti.com. Changes of name or address must be notified in writing to the Transfer and Paying Agent.
Nominee share code
Where notification has been provided in advance, the Company will arrange for copies of shareholder communications to be provided to the operators of nominee accounts. Nominee investors may attend general meetings and speak at meetings when invited to do so by the Chairman.