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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Jz Capital Partners Limited | LSE:JZCP | London | Ordinary Share | GG00B403HK58 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -5.00 | -2.27% | 215.00 | 190.00 | 240.00 | 219.00 | 215.00 | 215.00 | 0.00 | 08:00:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 22.2M | 2.65M | 0.0342 | 62.87 | 166.58M |
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TIDMJZCP TIDMJZCC TIDMJZCN
JZ CAPITAL PARTNERS LIMITED (the "Company" or "JZCP")
(a closed-end investment company incorporated with limited liability under the
laws of Guernsey with registered number 48761)
INTERIM RESULTS FOR THE SIX-MONTH PERIODED
31 AUGUST 2017
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
8 November 2017
JZ Capital Partners, the London listed fund that invests in US and European
micro-cap companies and US real estate, announces its interim results for the
six-month period ended 31 August 2017.
Results and Portfolio Highlights
· NAV of $829.4 million (FYE 28/02/17: $848.8 million)
· NAV per share of $9.88 (FYE 28/02/17: $10.12)
· Total investments of $56.3 million, including: Felix Storch, Jordan
Health Products, Peaceable Street Capital and properties in Brooklyn, New York
and South Florida.
· Realisation proceeds of $27.7 million, primarily through the sale of
Fidor Bank and the recapitalisation of Jordan Health Products.
· As of 31 August 2017, the portfolio comprised:
o US micro-cap: 21 businesses including four 'verticals' and 12
co-investments, across nine industries.
o European micro-cap: 15 companies across five industries and six countries.
o US real estate: 59 properties across five major assemblages in New York
and South Florida all in various stages of (re)/development.
· JZCP made three significant post-period realisations (October and
November 2017), all at or above net asset value: Nielsen-Kellerman, K2 Towers
and Factor Energia.
Operational Highlights
· In May 2017, JZCP received shareholder approval for initiatives designed
to maximise shareholder returns, including the discontinuation of the Company's
current dividend policy and inception of a new strategy to allow for the
repurchase of shares.
· In April 2017, JZCP increased its loan facility with Guggenheim Partners
from approximately $100 million to $150 million, in order to bridge certain
planned realisations.
David Zalaznick, JZCP's Founder and Investment Adviser, said: "It has been a
steady six months for the Company. Whilst the underlying assets in our US,
European and real estate portfolios continued to perform well, the overall NAV
was impacted by pre-development real estate costs at the US real estate
portfolio.
However, we remain positive about our future prospects and have made a
promising start to the second half of the year, with three significant
realisations, all at or above NAV.
Looking forward, the Company remains focused
on returning further value from the portfolio and investing opportunistically
in high-quality assets in the US and Europe."
David Macfarlane, Chairman of JZCP, said: "The Board remains confident in and
continues to support the Investment Manager's focus on growing the Company's
NAV and following shareholder approval during the first half of the year, we
look forward to initiating a share repurchase programme as market conditions
permit. We carry great momentum into the second half of the year, as the
Company builds towards a more secure, long-term future."
Presentation details:
There will be an audiocast presentation for investors and analysts at 2pm UK
(GMT) / 9am US (EDT) on 8 November 2017. The presentation can be accessed via
http://bit.ly/2lTkDSG and by dialing +44 (0)330 336 9105 (UK) or +1
323-794-2423 (US) with the participant access code 2568566.
A playback facility will be available two hours after the conference call
concludes. This facility may be accessed via the following dial in details,
using the same participant access code as above: +44 (0)207 984 7568 (UK) or +1
719-457-0820 (US).
For further information:
Ed Berry / Kit Dunford +44
(0) 20 3727 1046 / 1143
FTI Consulting
David Zalaznick +1
212 485 9410
Jordan/Zalaznick Advisers, Inc.
Rebecca Booth +44
(0) 1481 745 189
JZ Capital Partners
About JZ Capital Partners
JZ Capital Partners ("JZCP") is one of the oldest closed-end investment
companies listed on the London Stock Exchange. It seeks to provide shareholders
with a return by investing selectively in US and European microcap companies
and US real estate. JZCP receives investment advice from Jordan/Zalaznick
Advisers, Inc. ("JZAI") which is led by David Zalaznick and Jay Jordan. They
have worked together for more than 35 years and are supported by teams of
investment professionals 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 for investors. For
more information please visit www.jzcp.com.
Chairman's Statement
I am pleased to report the results of JZ Capital Partners ("JZCP" or the
"Company") for the six-month period ended 31 August 2017.
Performance
The Company's performance over the last six months has been set against a
backdrop of short-term political and economic uncertainty, driven by US policy
and Brexit nervousness, and separatist fears across the EU.
Despite this, the US economy remains in a solid and robust expansion that is
now the third longest in US history. The expansion gathered pace in the second
quarter of 2017, with GDP growing 3.1% from April to June, driven primarily by
household spending and firmer investment by business1. In Europe, economic
growth has continued to gain momentum, supported by favourable monetary
conditions, a weaker euro and better than expected export growth.
Within this market environment, it has been a steady six months for the
Company, with the underlying assets in our US, European and real estate
portfolios continuing to perform satisfactorily. For the six-month period ended
31 August 2017, JZCP's net asset value ("NAV") per share declined 2.4% from
$10.12 to $9.88; primarily due to operating and debt service expenses at the US
real estate portfolio, offsetting the positive performance of the US and
European micro-cap portfolio.
Strategy
The Investment Adviser continues to pursue its value-added investment strategy
in the US and European micro-cap sectors and the US real estate market,
providing investors with access to a diversified and balanced portfolio of
alternative investment opportunities.
Portfolio update
It has been an active investment period for the Company, putting $56.3 million2
to work across the US micro-cap and real estate portfolios - whilst realising
$27.7 million3, primarily through the sale of Fidor Bank, an internet-based
bank licensed in Germany, and the recapitalisation of Jordan Health Products, a
build-up of healthcare equipment sales, service and installation companies.
At the end of the period, the Company's portfolio consisted of 21 US micro-cap
businesses, including four 'verticals' and 12 co-investments, across nine
industries, 15 European micro-cap companies across five industries and six
countries, and five major real estate assemblages (59 properties in total)
located across Brooklyn, New York and South Florida. The portfolio continues to
become more balanced by asset type and geography.
US and European Micro-cap
The Board is pleased with the resilient performance of the US micro-cap
portfolio during the period, which has seen a net valuation increase of 4 cents
per share, primarily due to net accrued income of 8 cents and increased
earnings at our Healthcare Revenue Cycle Management vertical (2 cents).
The US micro-cap portfolio was valued at 8.2x EBITDA, after applying an average
26% marketability discount to public comparables. The Company paid 4.8x EBITDA
on average for US micro-cap acquisitions made during the period, consistent
with the Investment Adviser's value-oriented investment strategy.
The European micro-cap sector remains a strategically important segment of the
business. JZCP invests in the European micro-cap sector through its 75%
ownership of the EuroMicrocap Fund 2010, L.P. ("EMC")4 and its approximately
18.8% ownership of JZI Fund III, L.P. ("Fund III"). This was demonstrated
during the period when JZCP acquired stakes in two new businesses via its
ownership in Fund III: Treee, Italy's first nationwide recycler of electric and
electronic goods, and Eliantus, a build-up of solar plants in Spain.
As of 31 August 2017, EMC held two investments in Spain: Factor Energia and
Oro. Fund III held nine investments: three in Spain, two in Scandinavia, two in
Italy and one each in the UK and Luxembourg. JZCP held direct loans to a
further four companies in Spain: Ombuds, Docout, Xacom and Toro Finance.
Real Estate
The Company's long-term partnership with Redsky Capital continues to lead to
attractive investment opportunities in Brooklyn, New York, and South Florida.
During the period, JZCP made investments of $23.2 million in properties in
Brooklyn, New York, and South Florida. The portfolio experienced a valuation
decrease of 17 cents per share, primarily due to operating expenses and debt
service at the property level.
As of August 2017, JZCP has approximately $366 million invested in five major
real estate assemblages (59 properties in total) with an approximate valuation
of $477 million. All properties are currently in various stages of development
and re-development.
Realisations
The Company generated realisations totalling $27.7 million during the period,
primarily through the sale of Fidor Bank ("Fidor") and the recapitalisation of
Jordan Health Products. The Company received its first tranche of proceeds
totalling $12.5 million from the sale of Fidor, and is expected to receive
total gross proceeds of approximately $25 million from the sale.
The Board is delighted with three significant post-period realisations (October
2017), all approximately at or above net asset value: Nielsen-Kellerman, K2
Towers and Factor Energia. JZCP received proceeds of $8.6 million from the sale
of NK and expects to receive total cash proceeds of $27.1 million from the sale
of K2, with further proceeds of approximately $4.2 million being rolled into a
new vehicle which is being used to fund a new portfolio of cell tower assets
with the same management partners. JZCP expects to have received total gross
proceeds (before carry) of approximately EUR69.7 million ($82.3 million) from the
sale of Factor Energia.
Outlook
I am encouraged by the level of realisation activity, post-period, which we
expect will continue to feed through to positive NAV growth in the year ahead.
The Board continues to believe that generating positive NAV growth is the most
effective driver to narrow the Company's persistent discount to NAV. In
addition, the Board continues to evaluate its option of exercising the share
buy-back programme, following shareholder approval during the first half of the
year. The timing and level of the buyback is dependent on a range of factors,
including the Company's liquidity from realisations, market conditions and
whether or not it would be accretive to shareholder value. Subject to that,
however, the Board expects to dedicate a portion of funds from realisations to
a share buyback programme in 2018.
The Company's robust balance sheet and access to a wide range of quality
investment opportunities means we are well positioned for the year ahead.
David Macfarlane
Chairman
7 November 2017
1 Bureau of Economic Analysis, US Department of Commerce - 28 September 2017.
2 Total investments in the period, as quoted in the Chairman's Statement and
Investment Advisers' report have been adjusted to exclude short-term direct
loans to investee companies ($6.6 million) which were advanced and repaid in
the period.
3 Total realisations in the period, as quoted in the Chairman's Statement and
Investment Advisers' report have been adjusted to exclude short-term direct
loans to investee companies ($7.1 million) which were advanced and repaid in
the period and to include Escrow receipts ($1.2 million).
4 EuroMicrocap Fund 2010, L.P. and EuroMicrocap Fund-C, L.P. are defined
throughout the Condensed Interim Report and Financial Statements as "EMC", both
L.P.s are held by the same limited partners and in the same ownership
percentages.
Investment Adviser's Report
Dear Fellow Shareholders,
We are very pleased to report three significant post-period realisations, all
approximately at or above net asset value: Nielsen-Kellerman Co., K2 Towers and
Factor Energia for which more details are provided later in this report.
JZCP's NAV per share fell 2.4% during the period, from $10.12 at 28 February
2017 to $9.88 at 31 August 2017, primarily due to pre-development real estate
costs. Unless otherwise stated, figures included in this report refer to the
six-month period ended 31 August 2017.
During the period, JZCP invested a total of $56.3 million, including
investments in Felix Storch, Jordan Health Products, Peaceable Street Capital
and properties in Brooklyn, New York and South Florida. We realised
$27.7 million primarily through the sale of Fidor Bank and the recapitalisation
of Jordan Health Products.
As of 31 August 2017, our US micro-cap portfolio consisted of 21 businesses,
which includes four 'verticals' and 12 co- investments, across nine industries;
this portfolio was valued at 8.2x EBITDA, after applying an average 26%
marketability discount to public comparables. The average underlying leverage
senior to JZCP's position in our US micro-cap portfolio is 3.5x EBITDA.
Consistent with our value-oriented investment strategy, we have acquired our
current US micro-cap portfolio at an average 6.1x EBITDA; we paid 4.8x EBITDA
on average for US micro-cap acquisitions made during the period.
Our European micro-cap portfolio consisted of 15 companies across five
industries and six countries. The European micro-cap portfolio has low leverage
senior to JZCP's position, of under 2.0x EBITDA.
As of the same date, our US real estate portfolio consisted of 59 properties
and can be grouped primarily into five major "assemblages", located in the
Williamsburg, Greenpoint and Downtown/Fulton Mall neighbourhoods of Brooklyn,
New York, and the Wynwood and Design District neighbourhoods of Miami, Florida.
Our assemblages are comprised of adjacent or concentrated groupings of
properties that can be developed, financed and/or sold together at a higher
valuation than on a stand-alone basis.
Net Asset Value ("NAV")
JZCP's NAV per share fell 2.4% during the period, from $10.12 at 28 February
2017 to $9.88 at 31 August 2017.
NAV per Ordinary share as of 28 February 2017 $10.12
Change in NAV due to capital gains and accrued income
+ US Micro-cap 0.04
+ European Micro-cap 0.02
- Real estate (0.17)
- Other investments (0.07)
Other increases/(decreases) in NAV
- Change in CULS fair value (0.01)
- Finance costs (0.10)
+ Net foreign exchange effect 1 0.15
- Expenses and taxation (0.10)
NAV per Ordinary share as of 31 August 2017 $9.88
1 Net foreign exchange gains includes 20 cents relating to translation of
investments, foreign exchange losses of 3 cents on the translation of the CULS
and foreign exchange losses of 2 cents as recorded in the Statement of
Comprehensive Income.
The US micro-cap portfolio performed steadily, delivering a net increase of 4
cents, primarily due to net accrued income of 8 cents and increased earnings at
our Healthcare Revenue Cycle Management vertical (2 cents). Also contributing
to the positive portfolio performance were increases at our Logistics vertical
(1 cent) and at Jordan Health Products (1 cent). We also received 1 cent of
escrow payments during the period.
Offsetting these increases were declines at our Industrial Services Solutions
("ISS") vertical (8 cents) and Nationwide, our school photography business (1
cent).
The European micro-cap portfolio continued its positive trajectory, posting a
net increase of 2 cents, primarily due to accrued income of 5 cents and a
positive carried interest adjustment of 3 cents, offset by a write-down of
Factor Energia, our energy supply business in Spain, of 6 cents.
The real estate portfolio experienced a net decrease of 17 cents, primarily due
to operating expenses and debt service at the property level.
Returns
The chart below summarises cumulative total shareholder returns and total NAV
returns for the most recent six-month, one-year, three-year, four-year and
five-year periods.
31.8.2017 28.2.2017 31.8.2016 31.8.2014 31.8.2012
Share price (in GBP) GBP5.16 GBP5.38 GBP4.53 GBP4.34 GBP3.50
NAV per share (in USD) $9.88 $10.12 $10.40 $10.11 $9.38
NAV to market price 33% 34% 43% 29% 41%
discount
6 month
return 1 year 3 year 5 year
return return return
Dividends paid (in USD) - $0.155 $0.79 $1.385
Total Shareholders' -4.2% 16.6% 32.9% 80.8%
return1
Total NAV return per -2.4% -3.6% 5.7% 21.2%
share1
1 Total returns are cumulative and assume that dividends were reinvested.
Portfolio Summary
Our portfolio is well-diversified by asset type and geography, with 36 US and
European micro-cap investments across nine industries and five primary real
estate "assemblages" (59 total properties) located in Brooklyn, New York and
South Florida. The portfolio continues to become more diversified
geographically across Western Europe with investments in Spain, Italy,
Luxembourg, Scandinavia and the UK.
Below is a summary of JZCP's assets and liabilities at 31 August 2017 as
compared to 28 February 2017. An explanation of the changes in the portfolio
follows:
31.8.2017 28.2.2017
US$'000 US$'000
US micro-cap portfolio 439,745 423,137
European micro-cap 166,244 154,277
portfolio
Real estate portfolio 477,384 468,599
Other investments 16,145 23,167
Total private 1,099,518 1,069,180
investments
Cash 35,766 29,063
Total listed investments and cash 1,135,284 1,098,243
Other assets 544 520
Total assets 1,135,828 1,098,763
Zero Dividend Preference (2022) shares 57,278 53,935
Convertible Unsecured Loan Stock 60,089 57,063
Loans payable 149,137 97,396
Other payables 39,902 41,525
Total liabilities 306,406 249,919
Net Asset Value 829,422 848,844
As previously announced, in April 2017 JZCP increased its loan facility with
Guggenheim Partners from approximately $100 million to $150 million. The
purpose of this increase in borrowings is to provide additional liquidity to
JZCP in order to bridge certain planned realisations. The entire $150 million
facility may be repaid, in whole or in part, at any time, without any
prepayment penalties.
US micro-cap portfolio
As you know from previous reports, our US portfolio is grouped into industry
'verticals' and co-investments. Our 'verticals' strategy focuses on
consolidating businesses under industry executives who can add value via
organic growth and cross company synergies. Our co-investments strategy allows
for greater diversification of our portfolio by investing in larger companies
alongside well known private equity groups.
New US investments - verticals
Vertical Number of Acquisitions JZCP Investment ($
millions)
Technical Solutions and 1 1.3
Services
Total 1 1.3
New US investments - co-investments
Portfolio Company New/Follow-on JZCP Investment ($ millions)
Peaceable Street Capital Follow-on 3.0
New Vitality Follow-on 0.1
Felix Storch New 12.0
Jordan Health Products1 Follow-on 4.5
Total 19.6
1Jordan Health Products is classified as an "Other" US Micro-cap investment in
the Investment Portfolio.
European micro-cap portfolio
JZCP invests in the European micro-cap sector through its 75% ownership of EMC
and its 18.8% ownership of JZI Fund III, L.P. ("Fund III"). JZAI has offices in
London and Madrid and an outstanding team with over fifteen years of experience
investing together in European micro-cap deals.
As of 31 August 2017, EMC held two investments in Spain: Factor Energia and
Oro. Fund III held nine investments: three in Spain, two in Scandinavia, two in
Italy and one each in the UK and Luxembourg. JZCP held direct loans to a
further four companies in Spain: Ombuds, Docout, Xacom and Toro Finance.
In November 2017 (post-period), JZCP sold its interest in Factor Energia for
expected total gross proceeds (before carry) of approximately EUR69.7 million
($82.3 million) (including deferred payments and interim distributions received
over the course of the investment), which represents an approximate gross
multiple of invested capital of 9.2x and an approximate gross IRR of 42.3% in
euro-denominated terms. See below for further information.
Recent events
During the period, JZCP acquired stakes in two new businesses via its
ownership in Fund III: Treee, Italy's first nationwide recycler of electric
and electronic goods, and Eliantus, a build-up of solar plants in Spain.
JZCP also made follow-on investments in My Lender, a consumer lending business
in Finland, and Alianzas en Aceros, a steel transformation company in Spain,
both of which are owned by Fund III.
In March 2017, JZCP received its first tranche of proceeds totalling $12.5
million from the sale of portfolio company Fidor Bank to Groupe BPCE, the
second largest banking group in France. The transaction had closed in December
2016. JZCP invested a total of $13.8 million and is expected to receive total
gross proceeds of approximately $25 million from the sale.
In July 2017, JZCP received proceeds totalling $1.5 million from the
refinancing of Petrocorner, a build-up of petrol stations in Spain, and a
distribution on loan notes from Collingwood, a niche motor insurance business
in the UK.
Real Estate Portfolio
As of 31 August 2017, JZCP had approximately $366 million invested in a
portfolio of retail, office and residential properties in Brooklyn, New York,
and South Florida which is valued at $477 million as of that date. We have made
these investments alongside our long-term real estate partner, RedSky Capital,
a team with significant experience in the sector.
Since we began investing with RedSky in April 2012, we have acquired a total of
59 properties, all currently in various stages of development and
re-development.
The real estate portfolio had a net decrease of 17 cents, primarily due to
operating expenses and debt service at the property level.
New real estate investments
JZCP Investment ($ millions)
Follow-ons & expenses 23.2
23.2
Other Investments
Our asset management business in the US, Spruceview Capital Partners, addresses
the growing demand from corporate pensions, endowments, family offices and
foundations for fiduciary management services through an Outsourced Chief
Investment Officer ("OCIO") model. Spruceview has a robust pipeline of
opportunities and continues to provide investment oversight to a European
private credit fund-of-funds tailored to the clients of an international
multi-family office as well as to the pension fund of a Canadian subsidiary of
an international confectionary company. Spruceview recently increased its
assets under management as the Canadian pension fund incorporated the assets of
another recently acquired business.
As previously reported, Richard Sabo, former Chief Investment Officer of Global
Pension and Retirement Plans at JPMorgan and a member of that firm's executive
committee, is leading a team of 12 senior investment, business development,
legal and operations professionals.
Realisations
Investment Type Portfolio Proceeds ($ millions)
Jordan Health Products Dividend Recap US 7.6
Petrocorner & Distribution European 1.7
Collingwood
Fidor Sale European 12.5
Bright Spruce Fund Liquidation Other 4.6
Escrow US 1.2
Other Real Estate 0.1
27.7
As previously mentioned, JZCP made three significant post-period realisations
(October and November 2017), all at or above net asset value: Nielsen-Kellerman
Co. ("NK"), K2 Towers ("K2") and Factor Energia ("Factor").
Nielsen-Kellerman
JZCP received proceeds of $8.6 million from the sale of NK, a designer,
manufacturer and distributer of rugged, waterproof environmental and sports
performance instruments for active lifestyles and technical applications.
NK's sale represents a 3.3x realised gross multiple on invested capital and a
19.2% realized gross IRR. JZCP first invested in NK in March 2010.
K2 Towers
JZCP expects to receive total proceeds of $31.3 million from the sale of K2 to
one of the largest publicly traded cell tower companies, representing an
overall gross multiple of invested capital of 1.5x and a gross internal rate of
return of 17.6% in just over two years. Approximately $4.2 million of these
proceeds are being re-invested into a new vehicle which is being used to fund a
new portfolio of cell tower assets with the same management partners. This
transaction provides liquidity to JZCP at an attractive valuation while
continuing to build a great cell tower portfolio with further upside.
Factor Energia
Finally, JZCP realised, at approximately net asset value, its majority equity
interest in Factor held through EMC.
Post-sale, Factor will be majority owned by an affiliate of a major North
American public pension fund. As part of this transaction, Fund III, in which
JZCP is an approximately 18.8% limited partner, has agreed to invest EUR20
million alongside the majority owner and Factor management, representing
approximately 25% of the business' fully diluted equity ownership.
JZCP invested a total of approximately EUR7.6 million ($9.6 million) in Factor
and is expected to receive total gross proceeds, (before carry) of
approximately EUR69.7 million ($82.3 million) from the sale (including deferred
payments and interim distributions received over the course of the investment),
representing an approximate gross multiple of invested capital of 9.2x and an
approximate gross IRR of 42.3% in euro-denominated terms.
Outlook
We are very pleased with how the second half of the year has started, with
three outstanding post-period realisations (NK, K2 and Factor). All of these
transactions validate JZCP's solid, if not conservative, net asset value.
Heading into the year-end, we remain committed to pursuing our value-added
investment strategy and are pleased with the current composition of JZCP's
portfolio, which we believe is well-balanced by geography and asset type.
We anticipate further exciting realisations over the next six months, which
will in turn provide more liquidity for us to invest in our growing pipeline of
attractive investment opportunities, repay debt and buy back our stock.
As always, we thank you for your continued support in our investment strategy.
Please feel free to contact us with any ideas that might be beneficial to JZCP.
Yours faithfully,
Jordan/Zalaznick Advisers, Inc.
7 November 2017
Investment Portfolio
Historical Carrying
Value
Book 31 August Percentage of
cost 2017 Portfolio
US$'000 US$'000 %
US Micro-cap portfolio
US Micro-cap (Verticals)
Industrial Services Solutions(4)
INDUSTRIAL SERVICES SOLUTIONS ("ISS")
A combination of twenty five acquired
businesses in the industrial maintenance,
repair and service industry
Total Industrial Services Solutions valuation 33,257 78,851 7.2
Healthcare Revenue Cycle Management (4)
BHS HOSPITAL SERVICES 0.0
Provider of outsourced revenue cycle
management solutions to hospitals. BHS
Hospital Services, Inc., which owns Bolder
Outreach Services (formerly known as Monti
Eligibility & Denial Solutions), Receivables
Outsourcing, Inc. and Avectus Healthcare
Solutions, LLC is a subsidiary of Bolder
Healthcare Solutions, LLC
BHS PHYSICIAN SERVICES 0.0
Provider of outsourced revenue cycle
management solutions to physician groups.
BHS Physician Services, Inc., which owns
Bodhi Tree Group and PPM Information
Solutions, Inc. is a subsidiary of Bolder
Healthcare Solutions, LLC
Total Healthcare Revenue Cycle Management 30,327 71,238 6.5
valuation
Technical Solutions and Services(4)
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
Total Testing Services Vertical valuation 12,854 11,951 1.1
Water Services(4)
TWH INFRASTRUCTURE INDUSTRIES, INC.
Environmental infrastructure company that
provides technology to facilitate repair of
underground pipes and other infrastructure.
TWH Infrastructure Industries, Inc., which
owns LMK Enterprises, Perma-Liner Industries
and APMCS is a subsidiary of Triwater
Holdings
TWH WATER TREATMENT INDUSTRIES, INC.
Provider of water treatment supplies and
services. TWH Water Treatment Industries,
Inc., which owns Nashville Chemical &
Equipment and Klenzoid Canada Company/Eldon
Water, Inc., is a subsidiary of Triwater
Holdings
TWH FILTRATION INDUSTRIES, INC.
Supplier of parts and filters for
point-of-use filtration systems, which owns
Paragon Water Systems, is a subsidiary of
Triwater Holdings
Total Water Services Vertical valuation 24,730 33,203 3.0
Total US Micro-cap (Verticals) 101,168 195,243 17.8
US Micro-cap (Co-investments)
FELIX STORCH, INC. 12,000 12,408 1.1
Supplier of specialty, professional,
commercial, and medical refrigerators and
freezers, and cooking appliances
GEORGE INDUSTRIES 12,639 12,639 1.1
Manufacturer of highly engineered, complex
and high tolerance products for the
aerospace, transportation, military and other
industrial markets
IGLOO PRODUCTS CORP(4) 6,040 6,040 0.5
Designer, manufacturer and marketer of
coolers and outdoor products
ILLUMINATION INVESTMENTS, LLC(4) 4,920 1,930 0.2
Designer and manufacturer of LED lights and
lighting systems
K2 TOWERS, LLC 20,900 19,461 1.8
Acquirer of wireless communication towers
NEW VITALITY HOLDINGS, INC.(4) 3,622 3,994 0.4
Direct-to-consumer provider of nutritional
supplements and personal care products.
ORIZON(4) 15,843 15,843 1.4
Manufacturer of high precision machine parts
and tools for aerospace and defence
industries
PEACEABLE STREET CAPITAL, LLC 28,041 27,673 2.5
Specialty finance platform focused on
commercial real estate
SALTER LABS, INC.(4) 16,762 21,474 2.0
Developer and manufacturer of respiratory
medical products and equipment for the
homecare, hospital, and sleep disorder
markets
SUZO HAPP GROUP(4) 2,572 11,700 1.1
Designer, manufacturer and distributor of
components for the global gaming, amusement
and industrial markets
TIERPOINT, LLC(4) 44,313 46,813 4.3
Provider of cloud computing and collocation
data centre services
VITALYST(4) 9,020 8,192 0.7
Provider of outsourced IT support and
training services
Total US Micro-cap (Co-investments) 176,672 188,167 17.1
US Micro-cap (Other)
HEALTHCARE PRODUCTS HOLDINGS, INC.(1),(3) 17,636 - -
Designer and manufacturer of motorised
vehicles
JORDAN HEALTH PRODUCTS, LLC 28,405 29,729 2.7
Provider of new and professionally
refurbished healthcare equipment
NATIONWIDE STUDIOS, INC. 23,074 9,860 0.9
Processer of digital photos for preschoolers
NIELSEN-KELLERMAN 2,644 6,967 0.6
Designer and manufacturer of weather, wind
and timing measurement instruments and
devices. Nielsen-Kellerman is a subsidiary of
Sensors Solutions Holdings
PRIORITY EXPRESS, LLC 13,200 9,779 0.9
Provider of same day express courier services
to various companies located in north-eastern
USA. Priority Express is a subsidiary of US
Logistics, LLC
Total US Micro-cap (Other) 84,959 56,335 5.1
Total US Micro-cap portfolio 362,799 439,745 40.0
European Micro-cap portfolio
EUROMICROCAP FUND 2010, L.P. 4,685 11,672 1.1
At 31 August 2017, held the proceeds pending
distribution from the sale of Fidor Bank
EUROMICROCAP FUND-C, L.P. 14,387 64,313 5.9
At 31 August 2017, was invested in two
companies in the European micro-cap sector:
Factor Energia and Oro Direct
JZI Fund III, L.P. 30,046 37,240 3.4
At 31 August 2017, was invested in nine
companies in the European micro-cap sector:
Petrocorner, Fincontinuo, S.A.C, Collingwood,
My Lender, Alianzas en Aceros, ERSI, Treee
and Eliantus
Direct Investments
DOCOUT, SL 2,777 3,723 0.3
Provider of digitalisation, document
processing and storage services
GRUPO OMBUDS 17,155 24,401 2.2
Provider of personal security and asset
protection
TORO FINANCE 21,619 21,178 1.9
Provides short term receivables finance to
the suppliers of major Spanish companies
XACOM COMUNICACIONES SL 2,055 3,717 0.3
Supplier of telecom products and technologies
Total European Micro-cap portfolio 92,724 166,244 15.1
Real Estate
JZCP REALTY FUND(2) 366,528 477,384 43.4
Facilitates JZCP's investment in US real
estate
Total Real Estate portfolio 366,528 477,384 43.4
Other investments
BRIGHT SPRUCE FUND, L.P. 877 100 -
Fund investing in marketable equity, fixed
income and alternative asset classes
BSM ENGENHARIA S.A. 6,115 459 0.1
Brazilian-based provider of supply chain
logistics, infrastructure services and
equipment rental
INDUSTRIAL PERFORMANCE SOLUTIONS(4) 331 450 -
Acquirer of companies providing mission
critical inspection services for a variety of
industries
JZ INTERNATIONAL, LLC(3) - 750 0.1
Fund of European LBO investments
MODJ, LLC(4) 208 293 -
Acquirer of speciality retail companies
located in the centre of shopping malls
SPRUCEVIEW CAPITAL, LLC 24,010 14,093 1.3
Asset management company focusing primarily
on managing endowments and pension funds
Total Other investments 31,541 16,145 1.5
Total - portfolio 853,592 1,099,518 100.0
(1) Original book cost incurred by JZEP/JZCP adjusted for subsequent
transactions. The book cost represents cash outflows and excludes PIK
investments.
(2) JZCP owns 100% of the shares and voting rights of JZCP Realty Fund, Ltd.
(3) Legacy Investments. Legacy investments are excluded from the calculation of
capital and income incentive fees.
(4) Co-investment with Fund A, a Related Party (Note 20).
Unaudited Statement of Comprehensive Income
For the Period from 1 March 2017 to 31 August 2017
Six month period from 1 March Six month period from 1 March
2017 to 31 August 2017 2016 to 31 August 2016
Revenue Capital Revenue Capital
return return Total return return Total
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Income
Net (loss)/gain on 6 - (12,258) (12,258) - 38,903 38,903
investments at fair value
through profit or loss
(Loss)/gain on financial - (3,026) (3,026) - 2,569 2,569
liabilities at fair value
through profit or loss
Net write back of 7 - - - - 183 183
impairments on loans and
receivables
Realisations from 22 - 1,173 1,173 - 5,315 5,315
investments held in
escrow accounts
Net foreign currency - (2,609) (2,609) - 1,944 1,944
exchange (loss)/gains
Investment income 8 13,787 - 13,787 14,343 - 14,343
Bank and deposit interest 30 - 30 28 - 28
13,817 (16,720) (2,903) 48,914 63,285
14,371
Expenses
Investment Adviser's base 10 (8,458) - (8,458) (8,724) - (8,724)
fee
Investment Adviser's 10 - 1,812 1,812 - (11,197) (11,197)
incentive fee
Administrative expenses (1,565) - (1,565) (1,292) - (1,292)
Directors' remuneration (209) - (209) (200) - (200)
(10,232) 1,812 (8,420) (10,216) (11,197) (21,413)
Operating (loss)/profit 3,585 (14,908) (11,323) 4,155 37,717 41,872
Finance costs 9 - (8,332) (8,332) - (8,024) (8,024)
(Loss)/profit before 3,585 (23,240) (19,655) 4,155 29,693 33,848
taxation
Withholding taxes 11 233 - 233 - - -
(Loss)/profit for the 3,818 (23,240) (19,422) 4,155 29,693 33,848
period
Weighted average number 21 83,907,516 83,907,516
of Ordinary shares in
issue during period
Basic earnings per 21 4.55c (27.70)c (23.15)c 4.95c 35.39c 40.34c
Ordinary share
Diluted earnings per 21 4.55c (27.70)c (23.15)c 4.60c 31.88c 36.48c
Ordinary share
All items in the above statement are derived from continuing operations.
The (loss)/profit for the period is attributable to the Ordinary shareholders
of the Company.
The format of the Unaudited Statement of Comprehensive Income follows the
recommendations of the AIC Statement of Recommended Practice.
The "Total" column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with IFRS.
There was no comprehensive income other than the (loss)/profit for the period.
The accompanying notes form an integral part of the condensed interim financial
statements.
Statement of Financial Position
As at 31 August 2017
31 August 28 February
2017 2017
Note US$'000 US$'000
Unaudited Audited
Assets
Investments at fair value through profit or loss 12 1,099,518 1,069,180
Cash at bank 35,766 29,063
Other receivables 13 544 520
Total assets 1,135,828 1,098,763
Liabilities
Convertible Unsecured Loan Stock 14 60,089 57,063
Zero Dividend Preference (2022) shares 15 57,278 53,935
Loans payable 16 149,137 97,396
Investment Adviser's incentive fee 10 35,481 37,293
Investment Adviser's base fee 10 2,264 2,026
Other payables 17 2,157 2,206
Total liabilities 306,406 249,919
Equity
Stated capital 265,685 265,685
Other reserve 353,528 353,528
Capital reserve 150,631 173,871
Revenue reserve 59,578 55,760
Total equity 829,422 848,844
Total liabilities and equity 1,135,828 1,098,763
Number of Ordinary shares in issue at period end 18 83,907,516 83,907,516
Net asset value per Ordinary share $9.88 $10.12
These unaudited condensed interim financial statements were approved by the
Board of Directors and authorised for issue on 7 November 2017. They were
signed on its behalf by:
David Macfarlane
Chairman
Patrick Firth
Director
The accompanying notes form an integral part of the condensed interim financial
statements.
Unaudited Statement of Changes in Equity
For the period from 1 March 2017 to 31 August 2017
Stated Other Capital Reserve Revenue
Capital Reserve Realised Unrealised Reserve Total
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance as at 265,685 353,528 28,034 145,837 55,760 848,844
1 March 2017
(Loss)/profit for the - - (4,604) (18,636) 3,818 (19,422)
period
Balance at 31 August 265,685 353,528 23,430 127,201 59,578 829,422
2017
Comparative for the period from 1 March 2016 to 31 August 2016
Stated Other Capital Reserve Revenue
Capital Reserve Realised Unrealised Reserve Total
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 March 265,685 353,528 59,560 97,226 75,740 851,739
2016
Profit for the period - - 19,468 10,225 4,155 33,848
Prior period finance - - (45,752) 45,752 - -
costs now realised
Dividends paid 24 - - - - (12,586) (12,586)
Balance at 31 August 265,685 353,528 33,276 153,203 67,309 873,001
2016
The accompanying notes form an integral part of the condensed interim financial
statements.
Unaudited Statement of Cash Flows
For the Period from 1 March 2017 to 31 August 2017
Six Month Six Month
Period Ended Period Ended
31 August 31 August
2017 2016
Note US$'000 US$'000
Operating activities
Net cash outflow from operating activities 23 (6,980) (7,011)
Cash outflow for investments (direct investments and 12 (62,893) (94,039)
capital calls)
Cash inflow from repayment and disposal of 12 33,643 118,670
investments
Net cash (outflow)/inflow before financing activities (36,230) 17,620
Financing activities
Proceeds from loan facilities 16 50,000 9,512
Loan issue costs paid 16 (1,840) -
Finance costs paid (5,557) (5,108)
Redemption of Zero Dividend Preference (2016) shares 15 - (47,863)
Dividends paid to Shareholders 24 - (12,586)
Net cash inflow/(outflow) from financing activities 42,603 (56,045)
Increase/(decrease) in cash at bank 6,373 (38,425)
Reconciliation of net cash flow to movements in cash at bank
Cash and cash equivalents at 1 March 29,063 91,937
Increase/(decrease) in cash at bank 6,373 (38,425)
Unrealised foreign exchange movements on cash at bank 330 313
Cash and cash equivalents at period end 35,766 53,825
The accompanying notes form an integral part of the condensed interim financial
statements.
Notes to the Financial Statements
1. General Information
JZ Capital Partners Limited ("JZCP" or 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. The Company is classed as an authorised
fund under the Protection of Investors (Bailiwick of Guernsey) Law 1987. The
Company's Capital consists of Ordinary shares, Zero Dividend Preference ("ZDP")
shares and Convertible Unsecured Loan Stock ("CULS"). The Company's shares
trade on the London Stock Exchange's Specialist Fund Segment.
The Company's Investment Policy is to target predominantly private investments,
seeking to back management teams to deliver on attractive investment
propositions. In executing its strategy, the Company takes a long term view.
The Company seeks to invest directly in its target investments, although it may
also invest through other collective investment vehicles. The Company may also
invest in listed investments, whether arising on the listing of its private
investments or directly. The Investment Adviser is able to invest globally but
with a particular focus on opportunities in the United States and Europe.
The Company is currently mainly focused on investing in the following areas:
(a) small or micro-cap buyouts in the form of debt and equity and preferred
stock in both the US and Europe; and
(b) real estate interests
The Investment Adviser takes a dynamic approach to asset allocation and, though
it doesn't expect to, in the event that the Company were to invest 100% of
gross assets in one area, the Company will, nevertheless, always seek to
maintain a broad spread of investment risk. Exposures are monitored and managed
by the Investment Adviser under the supervision of the Board.
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 10). The Company has no ownership interest in the Investment Adviser.
During the period under review the Company was administered by Northern Trust
International Fund Administration Services (Guernsey) Limited.
The unaudited condensed interim financial statements (the "interim financial
statements") are presented in US$'000 except where otherwise indicated.
2. Significant Accounting Policies
The accounting policies adopted in the preparation of these interim financial
statements have been consistently applied during the period, unless otherwise
stated.
Statement of Compliance
The interim financial statements of the Company for the period 1 March 2017 to
31 August 2017 have been prepared in accordance with IAS 34, "Interim Financial
Reporting" as adopted in the European Union, together with applicable legal and
regulatory requirements of the Companies (Guernsey) Law, 2008 and the Listing
Rules of the London Stock Exchange's Specialist Fund Segment. The 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 2017.
Basis of Preparation
The interim financial statements have been prepared under the historical cost
basis, modified by the revaluation of financial instruments designated at fair
value through profit or loss ("FVTPL") upon initial recognition. The principal
accounting policies adopted in the preparation of these interim financial
statements are consistent with the accounting policies stated in Note 2 of the
annual financial statements for the year ended 28 February 2017. The
preparation of these interim financial statements are in conformity with IAS
34, "Interim Financial Reporting" as adopted in the European Union, 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 materially differ from those estimates.
Standards, amendments and interpretations that are not effective and are not
expected to have a material impact on the financial position or performance of
the Company
IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement.
IFRS 9 introduces a new approach to the classification of financial assets,
which is driven by the business model in which the asset is held and their cash
flow characteristics. A new business model was introduced which does allow
certain financial assets to be categorised as "fair value through other
comprehensive income" in certain circumstances. The requirements for financial
liabilities are mostly carried forward unchanged from IAS 39. However, some
changes were made to the fair value option for financial liabilities to address
the issue of own credit risk.
The new model introduces a single impairment model being applied to all
financial instruments, as well as an "expected credit loss" model for the
measurement of financial assets. IFRS 9, also contains a new model for hedge
accounting that aligns the accounting treatment with the risk management
activities of an entity, in addition enhanced disclosures will provide better
information about risk management and the effect of hedge accounting on the
financial statements.
IFRS 9 carries forward the derecognition requirements of financial assets and
liabilities from IAS 39.
Effect on the financial statements
The standard is effective on or after 1 January 2018 and will be adopted for
the year ending 28 February 2019.
The Company's financial instruments consist of equity instruments and debt
instruments. The Company's financial assets under equity and debt instruments
will continue to be valued at fair value through profit or loss. Due to the
cash flow characteristics of such financial instruments, on application of IFRS
9, they will continue to be classified as fair value through the profit or
loss.
Although early adoption is permitted the Company has established that the
impact will be minimal. In addition, the Company does not apply hedge
accounting and the valuation model is consistent with the Company's current
methodology. It is anticipated that this application of IFRS 9 will not change
the measurement and presentation of the current financial instruments.
There are certain other current standards, amendments and interpretations that
are not relevant to the Company's operations.
3. Estimates and Judgements
Estimates
The following are the key judgements 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 financial year:
Fair Value of Investments at Fair Value Through Profit or Loss ("FVTPL")
Investments are classified as FVTPL, and valued accordingly, as disclosed in
Note 2 of the annual financial statements for the year ended 28 February 2017.
The key source of estimation uncertainty is on the valuation of unquoted
equities, equity- related securities and real estate investments.
In reaching its valuation of the unquoted equities, equity-related securities
and real estate investments, the key judgements and estimates the Board has to
make are those relating to the multiples, discount factors and real estate
valuation factors (Note 5) used in the valuation models.
Judgements
Investment in Associates
The Board will evaluate whether investee companies meet the definition of an
Associate. An Associate is an entity over which the Company has significant
influence. Significant influence is the power to participate in the financial
and operating policy decisions of the investee, but is not control or joint
control over those policies. Full details are disclosed in Note 3 of the annual
financial statements for the year ended 28 February 2017.
Assessment as an Investment Entity
Entities that are judged to meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value through profit
or loss rather than consolidate them. The criteria which define an investment
entity are as follows:
· An entity that obtains funds from one or more investors for the purpose
of providing those investors with investment services;
· An entity that commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income or
both; and
· An entity that measures and evaluates the performance of substantially
all of its investments on a fair value basis.
The Company has a wide range of investors, being listed on the London Stock
Exchange the Company obtains funding from a diverse group of external
shareholders. Through its Investment Adviser's expertise it enables investors
to access private equity, real estate and similar investments.
The Company's objective is consistent with that of an investment entity. The
Company has clearly defined exit strategies for each of its investment classes,
these strategies are again consistent with an investment entity.
In determining the fair value of unlisted investments JZCP follows the
principles of IPEVCA valuation guidelines. The Valuation Guidelines have been
prepared with the goal that Fair Value measurements derived when using these
Valuation Guidelines are compliant with IFRS. The Board of JZCP evaluates the
performance of unlisted investments quarterly on a fair value basis. Listed
investments are recorded at Fair Value in accordance with IFRS being the last
traded market price where this price falls within the bid-ask spread.
The Board has also concluded that the Company meets the additional
characteristics of an investment entity, in that it has more than one
investment; the investments are predominantly in the form of equities and
similar securities and it has more than one investor.
Going Concern
A fundamental principle of the preparation of financial statements in
accordance with IFRS is the judgement that an entity will continue in existence
as a going concern for a period of at least 12 months from signing of the
financial statements, which contemplates continuity of operations and the
realisation of assets and settlement of liabilities occurring in the ordinary
course of business.
The Directors consider the Company has adequate financial resources, in view of
its holding in cash and cash equivalents and the income streams deriving from
its investments and believe that the Company is well placed to manage its
business risks successfully to continue in operational existence and meet its
obligations as when they fall due for a period of at least 12 months from
signing of the financial statements and that it is appropriate to prepare the
financial statements on the going concern basis.
4. 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 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.
Segmental operating profit/(loss)
For the period from 1 March 2017 to 31 August 2017
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Interest revenue 9,836 3,916 - 35 13,787
Total segmental revenue 9,836 3,916 - 35 13,787
Realisations from investments held 1,173 - - - 1,173
in Escrow
Net (loss)/gain on investments (6,974) 14,356 (14,235) (5,405) (12,258)
at FVTPL
Investment Adviser's base (3,305) (1,177) (3,558) (137) (8,177)
fee
Investment Adviser's capital (1,117) (914) 2,847 996 1,812
incentive fee(1)
Total segmental operating (loss)/ (387) 16,181 (14,946) (4,511) (3,663)
profit
For the period from 1 March 2016 to 31 August 2016
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Interest revenue 11,450 2,643 199 43 14,335
Total segmental 11,450 2,643 199 43 14,335
revenue
Realisations from investments held 5,315 - - - 5,315
in Escrow
Net gain on investments at FVTPL 2,482 8,042 22,628 3,326 36,478
Write back of Impairments on loans - - - 183 183
and receivables
Investment Adviser's base fee (3,065) (1,286) (3,081) (433) (7,865)
Investment Adviser's capital (5,499) (176) (4,526) (483) (10,684)
incentive fee(1)
Total segmental operating profit 10,683 9,223 15,220 2,636 37,762
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.
(1) The 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.
The following table provides a reconciliation between total segmental operating
(loss)/profit and operating (loss)/profit:
Period ended Period ended
31.8.2017 31.8.2016
US$ '000 US$ '000
Total segmental operating (loss)/profit (3,663) 37,762
(Loss)/gain on financial liabilities at fair value through (3,026) 2,569
profit or loss
Net foreign exchange (loss)/gain (2,609) 1,944
Interest on cash 30 28
Expenses not attributable to segments (1,774) (1,492)
Fees payable to investment adviser based on non-segmental assets (281) (1,372)
Net gains and interest on treasury gilts and corporate - 2,433
bonds
Operating (loss)/profit (11,323) 41,872
The following table provides a reconciliation between total segmental revenue
and Company revenue:
31.8.2017 31.8.2016
US$ '000 US$ '000
Total segmental 13,787 14,335
revenue
Non-segmental revenue
Bank and deposit 30 28
interest
Interest on treasury gilts and corporate - 8
bonds
Total revenue 13,817 14,371
Segmental Net Assets
At 31 August 2017
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Segmental assets
Investments at fair value 439,745 166,244 477,384 16,145 1,099,518
through profit or loss
Other receivables - - 495 - 495
Total segmental assets 439,745 166,244 477,879 16,145 1,100,013
Segmental liabilities
Payables and accrued expenses (20,877) 684 (23,124) 3,012 (40,305)
Total segmental liabilities (20,877) 684 (23,124) 3,012 (40,305)
Total segmental net assets 418,868 166,928 454,755 19,157 1,059,708
At 28 February 2017
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Segmental assets
Investments at fair value 423,137 154,277 468,599 23,167 1,069,180
through profit or loss
Other receivables - - 495 - 495
Total segmental assets 423,137 154,277 469,094 23,167 1,069,675
Segmental liabilities
Payables and accrued expenses (19,666) 1,646 (25,796) 3,398 (40,418)
Total segmental liabilities (19,666) 1,646 (25,796) 3,398 (40,418)
Total segmental net assets 403,471 155,923 443,298 26,565 1,029,257
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 segmental assets
and total assets and total segmental liabilities and total liabilities:
31.8.2017 28.2.2017
US$ '000 US$ '000
Total segmental assets 1,100,013 1,069,675
Non segmental assets
Cash at bank 35,766 29,063
Other receivables 25
49
Total assets 1,135,828 1,098,763
Total segmental liabilities (40,305) (40,418)
Non segmental liabilities
Zero Dividend Preference (2022) shares (57,278) (53,935)
Convertible Unsecured Loan Stock (60,089) (57,063)
Loans payable (149,137) (97,396)
Other payables (1,107)
403
Total liabilities (306,406) (249,919)
Total net assets 829,422 848,844
5. Fair Value of Financial Instruments
The Company classifies fair value measurements of its financial instruments at
fair value through profit or loss ("FVTPL") using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. The
financial assets valued at FVTPL are analysed in a fair value hierarchy based
on the following levels:
Level 1
Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2
Those involving inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices). For example, investments which
are valued based on quotes from brokers (intermediary market participants) are
generally indicative of Level 2 when the quotes are executable and do not
contain any waiver notices indicating that they are not necessarily tradeable.
Another example would be derivatives such as interest rate swaps or forward
currency contracts where inputs are mostly observable and therefore may also
fall into Level 2. At the period end, the Company had assessed it held no
assets or liabilities valued at FVTPL that were using inputs that would be
classified as level 2 within the valuation method.
Level 3
Those involving inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs). Investments in JZCP's
portfolio valued using unobservable inputs such as multiples, capitalisation
rates, discount rates (see Note 5) fall within Level 3.
Differentiating between Level 2 and Level 3 fair value measurements i.e.,
assessing whether inputs are observable and whether the unobservable inputs are
significant, may require judgement and a careful analysis of the inputs used to
measure fair value including consideration of factors specific to the asset or
liability.
The following table shows financial instruments recognised at fair value,
analysed between those whose fair value is based on:
Financial assets at 31 August 2017
Level 1 Level 2 Level 3 Total
US$ '000 US$ '000 US$ '000 US$ '000
US micro-cap portfolio - - 439,745 439,745
European micro-cap portfolio - - 166,244 166,244
Real estate portfolio - - 477,384 477,384
Other investments - - 16,145 16,145
- - 1,099,518 1,099,518
Financial assets at 28 February 2017
Level 1 Level 2 Level 3 Total
US$ '000 US$ '000 US$ '000 US$ '000
US micro-cap portfolio - - 423,137 423,137
European micro-cap portfolio - - 154,277 154,277
Real estate portfolio - - 468,599 468,599
Other investments - - 23,167 23,167
- - 1,069,180 1,069,180
Financial liabilities designated at fair value through profit or loss at
inception
Financial liabilities at 31 August 2017
Level 1 Level 2 Level 3 Total
US$ '000 US$ '000 US$ US$ '000
'000
Convertible Subordinated Unsecured Loan Stock 60,089 - - 60,089
60,089 - - 60,089
Financial liabilities at 28 February 2017
Level 1 Level 2 Level 3 Total
US$ '000 US$ '000 US$ US$ '000
'000
Convertible Subordinated Unsecured Loan Stock 57,063 - - 57,063
57,063 - - 57,063
Transfers between levels
There were no transfers between the levels of hierarchy of financial assets and
liabilities recognised at fair value through profit or loss within the period
ended 31 August 2017 and the year ended 28 February 2017.
Valuation techniques
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.
When fair values of listed equity and debt securities at the reporting date are
based on quoted market prices or binding dealer price quotations (bid prices
for long positions), without any deduction for transaction costs, the
instruments are included within Level 1 of the hierarchy.
Investments for which there are no active markets are valued according to one
of the following methods:
Real estate
JZCP makes its Real Estate investments through a wholly-owned subsidiary, which
in turn owns interests in various residential, commercial, and development real
estate properties. The net asset value of the subsidiary is used for the
measurement of fair value. The underlying fair value of JZCP's Real Estate
holdings, however, is represented by the properties themselves. The Company's
Investment Adviser and Board review the fair value methods and measurement of
the underlying properties on a quarterly basis. Where available, the Company
will use third party appraisals on the subject property, to assist the fair
value measurement of the underlying property. Third-party appraisals are
prepared in accordance with the Appraisal and Valuation Standards (6th edition)
issued by the Royal Institution of Chartered Surveyors. Fair value techniques
used in the underlying valuations are:
- Use of comparable market values per square foot of properties in recent
transactions in the vicinity in which the property is located, and in similar
condition, of the relevant property, multiplied by the property's square
footage.
- Discounted Cash Flow ("DCF") analysis, using the relevant rental stream,
less expenses, for future periods, discounted at a Market Capitalisation ("MC")
rate, or interest rate.
- Relevant rental stream less expenses divided by the MC rate; this method
approximates the enterprise value construct used for non-real estate assets.
For each of the above techniques third party debt is deducted to arrive at fair
value.
Due to the inherent uncertainties of real estate valuation, the values
reflected in the financial statements may differ significantly from the values
that would be determined by negotiation between parties in a sales transaction
and those differences could be material.
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 generally
calculated by a multiple of EBITDA reduced by senior debt and a 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.
New Investments
The fair value of a new investment, classified at Level 3, is deemed to
approximate to cost for the first year the investment is held, unless there is
an event or evidence which indicates a requirement for an adjustment.
Quantitative information of significant unobservable inputs and sensitivity
analysis to significant changes in unobservable inputs within Level 3 hierarchy
The significant unobservable inputs used in fair value measurement categorised
within Level 3 of the fair value hierarchy together with a quantitative
sensitivity as at 31 August 2017 and 28 February 2017 are shown below:
Value Range
(weighted
31.8.2017 Valuation Unobservable average) Sensitivity Effect on Fair Value
US$'000 Technique input used 1 US$'000
US micro-cap EBITDA Average EBITDA 6.0x - -0.5x / 0.5x
investments 439,745 Multiple Multiple of 18.7x (42,312) 41,098
Peers (8.2x)
Discount to 10% - 35% 5% / -5%
Average (26%) (55,207) 56,756
Multiple
European EBITDA Average EBITDA 6.0x - -0.5x / 0.5x
micro-cap 166,244 Multiple Multiple of 10.0x (5,17) 5,447
investments Peers (7.2x)
Discount to 0% - 38% 5% / -5%
Average (18%) (4,575) 4,575
Multiple
Real estate Comparable Market Value $286 - -5% /5%
portfolio 2 477,384 Sales Per Square Foot $3,106 (14,398) 15,496
per sq ft
Model/Income Discount Rate 6.2% to +25bps /
Approach 7.5% -25bps (1,234) 1,520
Cap Rate/ Capitalisation 4% - 5% +25bps /
Income Rate -25bps (8,609) 9,632
Approach
Value Range
(weighted
28.2.2017 Valuation Unobservable average) Sensitivity Effect on Fair Value
US$'000 Technique input used 1 US$'000
US micro-cap EBITDA Average EBITDA 6.0x - -0.5x /
investments 423,137 Multiple Multiple of 18.7x 0.5x (37,665) 36,186
Peers (8.3x)
Discount to 10% - 35% 5% / -5%
Average (26%) (50,801) 49,462
Multiple
European EBITDA Average EBITDA 6.2x - -0.5x /
micro-cap 154,277 Multiple Multiple of 11.3x 0.5x (3,511) 3,511
investments Peers (8.6x)
Discount to 41% 5% / -5%
Average discount (4,512) 4,492
Multiple - 63%
premium
(5%
premium)
Real estate Comparable Market Value $286 - -5% / 5%
portfolio 2 468,599 Sales Per Square $3,106 (13,706) 14,786
Foot per sq ft
Model/Income Discount Rate 6.25% - +25bps /
Approach 6.75% -25bps (1,228) 1,515
Cap Rate/ Capitalisation 4% - 5% +25bps /
Income Rate -25bps (8,357) 9,349
Approach
1 The sensitivity analysis refers to a percentage amount added or deducted from
the average input and the effect this has on the fair value.
2 The Fair Value of JZCP's investment in financial interests in real estate, is
measured as JZCP's percentage interest in the value of the underlying
properties. The Directors consider the discount rate used, applied to the DCF,
when valuing the properties as the most significant unobservable input
affecting the measurement of fair value.
The following table shows a reconciliation of all movements in the fair value
of financial instruments categorised within Level 3 between the beginning and
the end of the reporting period.
Period ended 31 August 2017
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
At 1 March 2017 423,137 154,277 468,599 23,167 1,069,180
Investments in year including capital 22,243 14,480 23,170 3,000 62,893
calls
Payment in kind ("PIK") 131 - - - 131
Proceeds from investments realised (7,623) (21,227) (150) (4,643) (33,643)
Net gain on investments (6,974) 14,356 (14,235) (5,405) (12,258)
Movement in accrued interest 8,831 4,358 - 26 13,215
At 31 August 2017 439,745 477,384 16,145 1,099,518
166,244
Year ended 28 February 2017
US European Real Other
Micro-Cap Micro-Cap Estate Investments Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
At 1 March 2016 386,173 168,797 366,158 63,570 984,698
Investments in year including capital 62,778 2,739 89,506 4,500 159,523
calls
Payment in kind ("PIK") 17,793 - - 118 17,911
Proceeds from investments realised (46,996) (21,906) (8,301) (45,484) (122,687)
Net gain/(loss) on investments 5,263 1,102 21,236 (784) 26,817
Transfer (from)/to segment (1,245) - - 1,245 -
Movement in accrued interest (629) 3,545 - 2 2,918
At 28 February 423,137 154,277 468,599 23,167 1,069,180
2017
Fair value of Zero Dividend Preference ("ZDP") shares
The fair value of the ZDP shares is deemed to be their quoted market price. As
at 31 August 2017 the ask price for the ZDP (2022) shares was GBP4.24 (28
February 2017: GBP4.22 per share) the total fair value of the ZDP shares was
$65,057,000 (28 February 2017: $65,532,000) which is $7,779,000 (28 February
2017: $8,597,000) higher than the liability recorded in the Statement of
Financial Position.
ZDP shares are recorded at amortised cost and would fall in to the Level 1
hierarchy if valued at FVTPL.
6. Net (loss)/gain on Investments at Fair Value Through Profit or Loss
Period ended Period ended
31.8.2017 31.8.2016
US$ '000 US$ '000
(Loss)/gains on investments held in investment portfolio at
period end
Net unrealised (loss)/gain in period (12,355) 26,339
Unrealised gains in prior periods now - 10,192
realised
Net movement in unrealised (losses)/gains in the (12,355) 36,531
period
Net gains on investments realised in
period
Proceeds from investments realised 33,643 118,444
Cost of investments realised (33,546) (105,880)
Unrealised gains in prior periods now - (10,192)
realised
Total net gain in the period on investments realised in 97 2,372
period
Net (loss)/gain on investments in the (12,258) 38,903
period
7. Net Write Back of Impairments on Loans and Receivables
Period Period
ended ended
31.8.2017 31.8.2016
US$ '000 US$ '000
Net unrealised impairments on loans and receivables - 13
Proceeds from loans repaid - 226
Cost of loans - (56)
repaid
Realised gains on repayment of investments - 170
classified on loans and receivables
Net write back of impairments on loans and - 183
receivables
8. Investment Income
Period ended Period ended
31.8.2017 31.8.2016
US$ '000 US$ '000
Income from investments classified as 13,787 14,300
FVTPL
Income from investments classified as loans and - 43
receivables
13,787 14,343
Income for the period ended 31 August 2017
Preferred Loan note Interest Other
Dividends Interest PIK Cash Interest Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
US micro-cap portfolio - 8,921 131 784 - 9,836
European micro-cap - - 3,037 879 - 3,916
portfolio
Other - 35 - - - 35
investments
- 8,956 3,168 1,663 - 13,787
Income for the period ended 31 August 2016
Preferred Loan note Interest Other
Dividends Interest PIK Cash Interest Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
US micro-cap portfolio - 8,584 1,043 1,735 88 11,450
European micro-cap - - 1,889 754 - 2,643
portfolio
Real estate - - - - 199 199
Other - - 43 - - 43
investments
Treasury gilts and - - - - 8 8
corporate bonds
- 8,584 2,975 2,489 295 14,343
9. Finance Costs
Period ended Period ended
31.8.2017 31.8.2016
US$ '000 US$ '000
CULS interest paid (Note 14) 1,454 1,676
Zero Dividend Preference shares (Note 1,427 2,625
15)
Loan - Guggenheim (Note 16) 5,451 3,711
Margin loan - 12
8,332 8,024
10. Fees Payable to the Investment Adviser
Investment Advisory and Performance fees
The Company entered into the amended and restated investment advisory and
management agreement with Jordan/Zalaznick Advisers, Inc. (the "Investment
Adviser") 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 cent 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 six-month period ended 31 August 2017, 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$8,458,000 (period ended
31 August 2016: US$8,724,000). Of this amount US$2,264,000 (28 February 2017:
US$2,026,000) was due and payable at the period end.
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 per cent of the average of the net asset value of the Company
for that 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 a hurdle of 2.5%,
and (b) 20 per cent of the net investment income of the Company above a hurdle
of 2.5% in any quarter. 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.
For the periods ended 31 August 2017 and 31 August 2016 there was no income
incentive fee payable to the Investment Adviser.
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 per cent. of the realised capital gains of the Company for
each financial year less 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 is
payable in arrears within 90 days of the fiscal year end. Investments
categorised as legacy investments and assets of the Euro Microcap Fund 2010,
L.P., EuroMicrocap Fund-C, L.P. and JZI Fund III, L.P. are excluded from the
calculation of the fee.
For the purpose of calculating incentive fees cumulative preferred dividends
received on the disposal of an investment are treated as a capital return
rather than a receipt of income.
At 31 August 2017 and 28 February 2017, due to accumulative realised capital
losses in prior periods, there was no provision for an incentive fee based on
realised gains. At 31 August 2017, for the purpose of the capital gains
incentive fee ("CGIF") calculation JZCP had cumulative net realised capital
losses of $8,079,000
(28 February 2017: $9,572,000), an amount which the Investment Adviser must
cover through realised gains before being able to earn an incentive fee going
forward.
The Company also provides for a CGIF based on unrealised gains, calculated on
the same basis as that of the fee on realised gains/losses. For the period
ended 31 August 2017, a provision of $35,481,000
(28 February 2017: $37,293,000) has been included.
Provision At Provision At Paid during Movement in
period provision for
the period
31.8.2017 28.2.2017 31.8.2017 31.8.2017
US$ '000 US$ '000 US$ '000 US$ '000
CGIF 35,481 37,293 n/a (1,812)
(1,812)
Provision At Provision At Paid during Movement in
period provision for
the period
31.8.2016 29.2.2016 31.8.2016 31.8.2016
US$ '000 US$ '000 US$ '000 US$ '000
CGIF 36,086 24,889 n/a 11,197
11,197
The Advisory Agreement may be terminated by the Company or the Investment
Adviser 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).
11. Taxation
The Company has been granted Guernsey tax exempt status in accordance with The
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (as amended) in exchange
for a GBP1,200 annual fee (31 August 2016: GBP1,200).
During the period ended 31 August 2017, the Company was refunded $233,000
relating to tax withheld in the prior year.
12. Investments
Categories of financial instruments
Listed Unlisted Carrying
Value
31.8.2017 31.8.2017 31.8.2017
US$ '000 US$ '000 US$ '000
Fair value through profit or - 1,099,518 1,099,518
loss (FVTPL)
- 1,099,518 1,099,518
Listed Unlisted Total
31.8.2017 31.8.2017 31.8.2017
US$ '000 US$ '000 US$ '000
Book cost at 1 March 2017 - 897,856 897,856
Investments in year including capital - 62,893 62,893
calls
Payment in kind ("PIK") - 131 131
Proceeds from investments - (33,643) (33,643)
realised
Net realised gains - 97 97
Book cost at 31 August 2017 - 927,334 927,334
Unrealised gains at 31 - 145,113 145,113
August 2017
Accrued interest at 31 - 27,071 27,071
August 2017
Carrying value at 31 August - 1,099,518 1,099,518
2017
Listed Unlisted Carrying
Value
28.2.2017 28.2.2017 28.2.2017
US$ '000 US$ '000 US$ '000
Fair value through profit or - 1,069,180 1,069,180
loss (FVTPL)
- 1,069,180 1,069,180
Listed Unlisted Total
28.2.2017 28.2.2017 28.2.2017
US$ '000 US$ '000 US$ '000
Book cost at 1 March 2017 61,971 832,007 893,978
Investments in year including capital - 159,523 159,523
calls
Payment in kind ("PIK") - 17,911 17,911
Proceeds from investments (60,523) (125,801) (186,324)
realised
Net realised (loss)/gain (1,448) 14,216 12,768
Book cost at 28 February - 897,856 897,856
2017
Unrealised gains at 28 February 2017 - 157,468 157,468
Accrued interest at 28 February 2017 - 13,856 13,856
Carrying value at 28 - 1,069,180 1,069,180
February 2017
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.
13. Other Receivables
31.8.2017 28.2.2017
US$ '000 US$ '000
Accrued interest due from JZCP Realty 495 495
Fund
Other receivables and 49 25
prepayments
544 520
14. Convertible Subordinated Unsecured Loan Stock ("CULS")
On 30 July 2014, JZCP issued GBP38,861,140 6% CULS. Holders of CULS may convert
the whole or part (being an integral multiple of GBP10 in nominal amount) of
their CULS into Ordinary Shares. Conversion Rights may be exercised at any time
during the period from 30 September 2014 to 10 business days prior to the
Maturity date being the 30 July 2021. The initial conversion price is GBP6.0373
per Ordinary Share, which shall be subject to adjustment to deal with certain
events which would otherwise dilute the conversion of the CULS. These events
include consolidation of Ordinary Shares, dividend payments made by the
Company, issues of shares, rights, share related securities and other
securities by the Company and other events as detailed in the Prospectus.
CULS bear interest on their nominal amount at the rate of 6.00 per cent. per
annum, payable semi-annually in arrears. During the six-month period ended 31
August 2017: $1,454,000 (31 August 2016: $1,676,000) of interest was paid to
holders of CULS and is shown as a finance cost in the Statement of
Comprehensive Income.
31.8.2017 28.2.2017
US$ '000 US$ '000
Fair Value of CULS at 1 March 57,063 59,573
Unrealised movement in fair value of CULS 967 4,332
Unrealised currency gain to the Company on translation during 2,059 (6,842)
the period
Fair Value of CULS based on offer 60,089 57,063
price
15. Zero Dividend Preference ("ZDP") shares
ZDP (2016) shares were issued on 22 June 2009 at a price of 215.80 pence and
provided a pre-determined final capital entitlement of 369.84 pence on 22 June
2016. The shares had a gross redemption yield of 8%.
On 1 October 2015, the Company rolled over 11,907,720 existing ZDP (2016)
shares in to new ZDP shares with a 2022 maturity date. The new ZDP (2022)
shares have a gross redemption yield of 4.75% and a total redemption value of GBP
57,598,000 (approximately $75,400,000 using the period end exchange rate). The
remaining 8,799,421 ZDP (2016) shares were redeemed on 22 June 2016 the total
redemption value being GBP32,870,000 ($48,342,000) or 373.54 pence per share. The
redemption value included a 1% premium ($479,000) agreed as part of the terms
of the rollover.
ZDP shares are designed to provide a pre-determined final capital entitlement
which ranks behind the Company's creditors but in priority to the capital
entitlements of the Ordinary shares. The ZDP shares carry no entitlement to
income and the whole of their return will therefore take the form of capital.
In certain circumstances, ZDP shares carry the right to vote at general
meetings of the Company as detailed in the Company's Memorandum of Articles and
Incorporation. Issue costs are deducted from the cost of the liability and
allocated to the Statement of Comprehensive Income over the life of the ZDP
shares.
ZDP (2022) Shares
31.8.2017 28.2.2017
US$ '000 US$ '000
ZDP shares issued 1 October 2015
Amortised cost at 1 March 2016 53,935 57,400
Finance costs allocated to Statement of Comprehensive Income 1,427 2,853
Unrealised currency loss/(gain) to the Company on translation 1,916 (6,318)
Amortised cost at period end 57,278 53,935
Total number of ZDP shares in issue 11,907,720 11,907,720
ZDP (2016) Shares
31.8.2017 28.2.2017
US$ '000 US$ '000
ZDP shares issued 22 June
2009
Amortised cost at 1 March - 44,217
Finance costs allocated to Statement of Comprehensive Income - 1,180
Redeemed 22 June 2016 - (47,863)
Realised currency loss in period on redemption - 2,466
Amortised cost at period end - -
Total number of ZDP shares in issue - -
16. Loans Payable
31.8.2017 28.2.2017
US$ '000 US$ '000
Guggenheim Partners Limited 149,137 97,396
149,137 97,396
Guggenheim Partners Limited
On 12 June 2015, JZCP entered into a loan agreement with Guggenheim Partners
Limited. The agreement was structured so that part of the proceeds (EUR18
million) were received and will be repaid in Euros and the remainder of the
facility was received in US dollar ($80 million).
The loan matures on 12 June 2021 (6 year term) and interest is payable at 5.75%
+ LIBOR(1). There is an interest rate floor that stipulates LIBOR will not be
lower than 1%.
At 31 August 2017, investments valued at $954,107,000 (28 February 2017:
$918,140,000) were held as collateral on the loan. A covenant in the loan
agreement states the fair value of the collateral must be 4x the loan value and
the cost of collateral must be at least 57.5% of total assets. The Company is
also required to hold a minimum cash balance of $15 million plus 50% of
interest on any new debt. At 31 August 2017 and 28 February 2017, the Company
was in full compliance with covenant terms.
During April 2017, JZCP increased its credit facility with Guggenheim Partners
by $50 million. The purpose of this increase in borrowings is to provide
additional liquidity to JZCP in order to bridge certain planned realisations.
The entire facility may be repaid, in whole or in part, with no penalty.
31.8.2017 28.2.2017
US$ '000 US$ '000
Amortised cost (US$ drawdown) - 1 March 78,572 77,916
Amortised cost (Euro drawdown) - 1 March 18,824 19,095
Proceeds - April 2017 (US$ further drawdown) 50,000 -
Issue costs paid (1,840) -
Interest paid (4,103) (6,723)
Unrealised currency loss/(gain) on translation of Euro drawdown 2,233 (437)
Finance costs charged to Statement of Comprehensive 5,451 7,545
Income
Amortised cost at period end 149,137 97,396
Amortised cost (US$ drawdown) 128,020 78,572
Amortised cost (Euro drawdown) 21,117 18,824
149,137 97,396
(1) LIBOR rates applied are the US dollar 3 month rate ($80 million) and the
Euro 3-month rate (EUR18 million).
The carrying value of the loans approximates to fair value.
17. Other Payables
31.8.2017 28.2.2017
US$ '000 US$ '000
Provision for tax on dividends received not withheld at 1,401 1,401
source
Other expenses 222 224
Legal fees 217 250
Directors' remuneration 70 68
ZDP issue costs 247 263
2,157 2,206
18. Ordinary shares - Issued Capital
31.8.2017 28.2.2017
Number of Number of
shares shares
Total Ordinary shares in issue 83,907,516 83,907,516
The Company's shares trade on the London Stock Exchange's Specialist Fund
Segment.
During the period, the Company received shareholder approval for a new
strategy, allowing the Company to purchase its Ordinary Shares when
opportunities in the market permit, and as the Company's cash resources allow.
No Ordinary shares were purchased by the Company during the period ended 31
August 2017.
19. Commitments
At 31 August 2017 and 28 February 2017, JZCP had the following financial
commitments outstanding in relation to fund investments:
Expected date 31.8.2017 28.2.2017
of Call US$ '000 US$ '000
JZI Fund III GP, L.P. EUR47,690,000 (28.2.2017: EUR Over 3 years 56,700 56,410
53,087,000)
Spruceview Capital Partners, LLC Over 2 years 5,836 8,836
Orizon < 1 year 4,158 4,158
Suzo Happ Group > 3 years 4,491 4,491
BSM Engenharia S.A. > 3 years 2,085 2,085
Igloo Products Corp > 3 years 771 771
74,041 76,751
20. Related Party Transactions
JZCP invests in European micro-cap companies via the EuroMicrocap Fund 2010,
L.P. ("EMC 2010"), EuroMicrocap Fund-C, L.P. ("EMCC") and JZI Fund III, L.P.
("Fund III"). EMC 2010, EMC-C and Fund III are managed by an affiliate of JZAI,
JZCP's investment manager. JZAI was founded by David Zalaznick and John ("Jay")
Jordan. At 31 August 2017, JZCP's investments in EMC 2010 were valued at
$11,672,000
(28 February 2017: $21,433,000), EMCC at $64,313,000 (28 February 2017:
$61,482,000) and Fund III at $37,240,000 (28 February 2017: $26,779,000).
JZCP invests in Spruceview Capital Partners, LLC on a 50:50 basis with Jay
Jordan and David Zalaznick (or their respective affiliates). The total amount
committed by JZCP to this investment at 31 August 2017 was $30,000,000 with
$5,836,000 (28 February 2017: $8,836,000) of commitments outstanding.
JZCP has co-invested with Fund A, Fund A Parallel I, II and III Limited
Partnerships in a number of US micro-cap buyouts. These Limited Partnerships
are managed by an affiliate of JZAI. JZCP invested in a ratio of 82%/18% with
the Fund A entities. At 31 August 2017, the total value of JZCP's investment in
these co-investments was $312,875,000 (28 February 2017: $326,290,000). Fund A,
Fund A Parallel I, II and III Limited Partnerships are no longer making
platform investments alongside JZCP.
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 10.
JZCP is able to invest up to $75 million in "New JI Platform Companies". The
platform companies are being established to invest primarily in buyouts and
build-ups of companies and in growth company platforms in the US micro cap
market, primarily healthcare equipment companies. At 31 August 2017, JZCP had
invested $36.0 million (28 February 2017: $31.5 million) and during the period
received a partial redemption of $7.6 million in Jordan Health Products, LLC.
JZCP co-invests 50/50 in the platform companies with other investors ("JI
members"). David Zalaznick and an affiliated entity of Jay Jordan own
approximately 33.7% of the JI members ownership interests.
21. Basic and Diluted Earnings per share
Basic earnings per share are calculated by dividing the earnings for the period
by the weighted average number of Ordinary shares outstanding during the
period.
For the period ended 31 August 2017 the weighted average number of Ordinary
shares outstanding during the period was 83,907,516 (31 August 2016:
83,907,516).
The diluted earnings per share are calculated by considering adjustments
required to the earnings and weighted average number of shares for the effects
of potential dilutive Ordinary shares. The weighted average of the number of
Ordinary shares is adjusted assuming the conversion of the CULS ("If-converted
method"). Conversion is assumed even though at 31 August 2017 and 31 August
2016 the exercise price of the CULS is higher than the market price of the
Company's Ordinary shares and are therefore deemed 'out of the money'. Earnings
are adjusted to remove the fair value (loss) or gain on CULS ($3,026,000) (31
August 2016: $2,569,000) and finance cost attributable to CULS $1,454,000 (31
August 2016: $1,676,000). At 31 August 2017 the effect of the potential
conversion of the CULS to Ordinary shares on the Total Return was anti-dilutive
to the earnings per share and therefore the comparative dilutive earnings per
share equates to the comparative basic earnings per share.
22. Contingent Assets
Amounts held in escrow accounts
When investments have been disposed of by the Company, proceeds may reflect
contractual terms requiring that a percentage is held in an escrow account
pending resolution of any indemnifiable claims that may arise. At
31 August 2017 and 28 February 2017, the Company has assessed that the
likelihood of the recovery of these escrow accounts cannot be determined and
has therefore recognised the escrow accounts as a contingent asset.
As at 31 August 2017 and 28 February 2017, the Company had the following
contingent assets held in escrow accounts which had not been recognised as
assets of the Company:
Amount in Escrow
31.8.2017 28.2.2017
US$'000 US$'000
ETX Holdings, Inc. 77
-
- 77
During the period ended 31 August 2017 $1,173,000 (31 August 2016: $5,315,000)
was realised relating to the escrow accounts of the Company. Of the amount
realised during the period, $1,096,000 had not been recognised in the Company's
escrow accounts at 28 February 2017.
23. Notes to the Unaudited Statement of Cash Flows
Reconciliation of the (loss)/profit for the period to net cash from operating
activities
Period Period
ended ended
31.8.2017 31.8.2016
US$ '000 US$ '000
(Loss)/profit for the period (19,422) 33,848
Increase in other receivables (24) (12)
Decrease in other payables (49) (459)
(Decrease)/increase in amount owed to Investment (1,574) 11,394
Adviser
Net unrealised loss/(gain) on 12,355 (26,352)
investments
Unrealised loss/(gain) on financial liabilities at fair value 3,026 (2,569)
through profit or loss
Unrealised currency loss/(gain) on ZDP 1,916 (3,546)
shares
Adjustment for other net unrealised foreign currency exchange loss 1,903 153
Increase in accrued interest on investments, accumulated preferred (13,346) (11,799)
dividends and PIK
Realised gain on investments (97) (12,734)
Finance costs 8,332 8,024
Payment for Real Estate deposits - (5,425)
Realised currency loss on redemption of ZDP shares - 2,466
Net cash outflow from operating (6,980) (7,011)
activities
24. Dividends Paid and Proposed
During the period the Company received shareholder approval to discontinue the
Company's dividend policy of distributing approximately 3% of the Company's net
assets in the form of dividends. No dividends were paid or declared in the
six-month period ended 31 August 2017.
For the year ended 29 February 2016, a second interim dividend of 15 cents
(total $12,586,000) was paid by the Company on 10 June 2016.
25. US GAAP reconciliation
These interim financial statements are prepared in accordance with IFRS, which
in certain respects differ from the accounting principles generally accepted in
the United States ("US GAAP"). It is the opinion of the Directors that these
differences are not material and therefore no reconciliation between IFRS, as
adopted by the EU, and US GAAP has been presented.
26. Subsequent Events
Post period end, the Company made three significant realisations, all
approximately at or above net asset value: Nielsen-Kellerman (proceeds: $8.6
million), K2 Towers (expected proceeds $31.3 million) and Factor Energia. JZCP
is expected to receive total gross proceeds (before carry) of approximately
$82.3 million from the sale of Factor Energia (including deferred payments and
interim distributions received over the course of the investment).
These interim financial statements were approved by the Board on 7 November
2017. Events subsequent to the period end (31 August 2017) have been evaluated
until this date.
Board of Directors
David Macfarlane (Chairman)1
Mr Macfarlane was appointed to the Board of JZCP in April 2008 as Chairman and
a non-executive Director. Until 2002 he was a Senior Corporate Partner at
Ashurst. He was a non-executive director of the Platinum Investment Trust Plc
from 2002 until January 2007.
Patrick Firth2
Mr Firth was appointed to the Board of JZCP in April 2008. He is also a
director of a number of offshore funds and management companies, including DW
Catalyst Fund (formerly "BH Credit Catalysts Limited"), ICG-Longbow Senior
Secured UK Property Debt Investments Limited, Riverstone Energy Limited and
NextEnergy Solar Fund Limited. He is Chairman of GLI Finance Limited. He is a
member of the Institute of Chartered Accountants in England and Wales and The
Chartered Institute for Securities and Investment. He is a resident of
Guernsey.
James Jordan
Mr Jordan is a private investor who was appointed to the Board of JZCP in 2008.
He is a director of the First Eagle family of mutual funds, and of Alpha
Andromeda Investment Trust Company, S.A. Until 30 June 2005, he was the
managing director of Arnhold and S. Bleichroeder Advisers, LLC, a privately
owned investment bank and asset management firm; and until 25 July 2013, he was
a non-executive director of Leucadia National Corporation. He is a Trustee and
Vice Chairman of the World Monuments Fund, and serves as an Overseer of the
Gennadius Library of the American School of Classical Studies in Athens, and as
a Director of Pro Natura de Yucatan.
Tanja Tibaldi
Ms Tibaldi was appointed to the Board of JZCP in April 2008. She was on the
board of JZ Equity Partners Plc from January 2005 until the company's
liquidation on 1 July 2008. She was managing director at Fairway Investment
Partners, a Swiss asset management company where she was responsible for the
Group's marketing and co-managed two fund of funds. Previously she was an
executive at the Swiss Stock Exchange and currently serves on the board of
several private companies.
Christopher Waldron
Mr Waldron was appointed to the Board of JZCP in 2013. He has more than 30
years' experience as an asset manager and is a director of a number of listed
companies, including Crystal Amber Fund Limited. He is Chairman of UK Mortgages
Limited and Ranger Direct Lending Fund PLC. He was Chief Executive of the
Edmond de Rothschild companies in Guernsey until 2013, when he stepped down to
concentrate on non-executive work and investment consultancy. He is a member of
the States of Guernsey's Investment and Bond Management Sub-Committee and a
Fellow of the Chartered Institute for Securities and Investment. Mr Waldron is
a Guernsey resident.
1 Chairman of the nominations committee of which all Directors are members.
2 Chairman of the audit committee of which all Directors are members.
Directors' Responsibilities
Statement of Directors' Responsibilities
The Directors are responsible for preparing condensed interim financial
statements which give a true and fair view of the state of affairs of the
Company for that period and which are in accordance with applicable laws and
interim financial reporting standards. In preparing those Condensed Interim
Report and Financial Statements (the "interim financial statements") the
Directors are required to:
· select suitable accounting policies and apply them consistently;
· present information including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
· prepare the interim financial statements on the going concern basis,
unless it is inappropriate to presume that the Company will continue in
business; and
· provide additional disclosures when compliance with the specific
requirements of IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company's
financial position and financial performance.
The Directors confirm that they have complied with these requirements in
preparing the interim financial statements.
The interim financial statements have been prepared in accordance
with IAS 34,"Interim Financial Reporting" as adopted by the European
Union.
Each of the Directors confirms to the best of each person's knowledge and
belief that:
· this set of interim financial statements has been prepared in
accordance with IAS 34, "Interim Financial Reporting" as adopted by the
European Union;
· the interim financial statements includes information detailed in the
Chairman's Statement and Investment Adviser's Report and Notes to the 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
2017 to 31 August 2017 and their impact on the condensed set of interim
consolidated financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the period from 1 March 2017 to 31
August 2017 and that have materially affected the financial position or
performance of the Company during that period.
Going concern and principal risks and uncertainties
As an investment fund, the Company's principal risks are those that are
associated with its investment portfolio. Given the nature of the portfolio,
the principal risks are associated with the financial and operating performance
of the underlying investments.
The Directors do not consider that the principal risks and uncertainties have
changed since the publication of the annual report and accounts for the year
ended 28 February 2017 (as explained in the annual report). The Directors
continue to monitor the risks to the Company. These risks include the Company's
exposure to Euro and Sterling currencies and the impact of austerity measures
being adopted in countries within which the Company invests.
The Directors consider the Company has adequate financial resources, in view of
its holding in cash and cash equivalents and liquid investments, and the income
streams deriving from its investments and believe that the Company is well
placed to manage its business risks successfully to continue in operational
existence for the foreseeable future and that it is appropriate to prepare the
interim financial statements on the going concern basis.
Approved by the Board of Directors and agreed on behalf of the Board on 7
November 2017.
David Macfarlane
Chairman
Patrick Firth
Director
Independent Review Report to JZ Capital Partners Limited
Introduction
We have been engaged by JZ Capital Partners Limited (the "Company") to review
the Unaudited Condensed Interim Financial Statements for the six months ended
31 August, 2017 which comprise the unaudited Statement of Comprehensive Income,
the Statement of Financial Position, the unaudited Statement of Changes in
Equity, the unaudited Statement of Cash Flows and the related notes 1 to 26. We
have read the other information contained in the half-yearly Financial Report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the Unaudited Condensed 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 half-yearly Financial Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly Financial Report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the Annual Financial Statements of the Company are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The Unaudited 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 Unaudited
Condensed Interim Financial Statements 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 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 Unaudited Condensed Interim Financial Statements for the six
months ended 31 August, 2017 are 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 Conduct Authority.
Ernst & Young LLP
Guernsey
Channel Islands
7 November 2017
Notes
1. The condensed interim report and financial statements are published on
websites maintained by the Investment Adviser.
2. The maintenance and integrity of these websites are the responsibility of
the Investment Adviser; the work carried out by the Auditors does not involve
consideration of these matters and, accordingly, the Auditor accepts no
responsibility for any changes that may have occurred to the Financial
Statements since they were initially presented on the website.
3. Legislation in Guernsey governing the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
Company Advisers
Investment Adviser
The Investment Adviser to JZ Capital Partners Limited ("JZCP") is Jordan/
Zalaznick Advisers, Inc. ("JZAI") a company beneficially owned by John (Jay) W
Jordan II and David W Zalaznick. The company was formed for the purpose of
advising the Board of JZCP on investments in leveraged securities, primarily
related to private equity transactions. JZAI has offices in New York and
Chicago.
Jordan/Zalaznick Advisers, Inc.
9 West, 57th Street
New York NY 10019
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
JZ Capital Partners Limited is registered in Guernsey Number 48761
LEI: 549300TZCK08Q16HHU44
Administrator, Registrar and Secretary
Northern Trust International Fund Administration (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
UK Transfer and Paying Agent
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Independent Auditor
Ernst & Young LLP
PO Box 9
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4AF
Financial Adviser and Broker
JP Morgan Cazenove Limited
20 Moorgate
London EC2R 6DA
US Bankers
HSBC Bank USA NA
452 Fifth Avenue
New York NY 10018
(Also provides custodian services to JZ Capital Partners Limited under the
terms of a Custody Agreement).
Guernsey Bankers
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3DA
UK Solicitors
Ashurst LLP
Broadwalk House
5 Appold Street
London EC2A 2HA
US Lawyers
Monge Law Firm, PLLC
333 West Trade Street
Charlotte, NC 28202
Mayer Brown LLP
214 North Tryon Street
Suite 3800
Charlotte NC 28202
Winston & Strawn LLP
35 West Wacker Drive
Chicago IL 60601-9703
Guernsey Lawyers
Mourant Ozannes
PO Box 186
1 Le Marchant Street
St Peter Port
Guernsey GY1 4HP
Useful Information for Shareholders
Listing
JZCP Ordinary, Zero Dividend Preference ("ZDP") shares and Convertible
Unsecured Loan Stock ("CULS") are listed on the Official List of the Financial
Services Authority of the UK, and are admitted to trading on the London Stock
Exchange Specialist Fund Segment for listed securities.
The price of the Ordinary shares are shown in the Financial Times under
"Conventional Private Equity" and can also be found at https://markets.ft.com
along with the prices of the ZDP shares and CULS .
ISIN/SEDOL numbers
Ticker Symbol ISIN Code Sedol Number
Ordinary shares JZCP GG00B403HK58 B403HK5
ZDP (2022) shares JZCZ GG00BZ0RY036 Z0RY03
CULS JZCC GG00BP46PR08 BP46PR0
Alternative Performance Measures
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs")
the Board has considered what APMs are included in the annual report and
financial statements which require further clarification. An APM is defined as
a financial measure of historical or future financial performance, financial
position, or cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs included in the interim
financial statements, which are unaudited and outside the scope of IFRS, are
deemed to be as follows:
Total NAV Return
The Total NAV Return measures how the net asset value (NAV) per share has
performed over a period of time, taking into account both capital returns and
dividends paid to shareholders. JZCP quotes NAV total return as a percentage
change from the start of the period (six months) and also three-month,
one-year, three-year, four year, five-year and seven year periods. It assumes
that dividends paid to shareholders are reinvested back into the Company
therefore future NAV gains are not diminished by the paying of dividends. JZCP
also produces an adjusted Total NAV Return which excludes the effect of the
dilution per share caused by the issue of shares at a discount to NAV, the
result of the adjusted Total NAV return is to provide a measurement of how the
Company's Investment portfolio contributed to NAV growth adjusted for the
Company's expenses and finance costs. The Total NAV Return for the six-month
period ended 31 August 2017 was -2.4% (31 August 2016: 3.9%) which includes
dividends paid of nil cents (31 August 2016: 15 cents).
Total Shareholder Return
A measure showing how the share price has performed over a period of time,
taking into account both capital returns and dividends paid to shareholders.
JZCP quotes shareholder price total return as a percentage change from the
start of the period (six months) and also three-month, one year, three-year,
four year, five-year and seven-year periods. It assumes that dividends paid to
shareholders are reinvested in the shares at the time the shares are quoted ex
dividend. The Shareholder Return for the six-month period ended 31 August 2017
was -4.2% (31 August 2016: 17.3%) which includes dividends paid (Sterling
equivalent) of nil (2016: 10.4 pence).
NAV to market price discount
The NAV per share is the value of all the company's assets, less any
liabilities it has, divided by the number of shares. However, because JZCP
shares are traded on the London Stock Exchange's Specialist Fund Market, the
share price may be higher or lower than the NAV. The difference is known as a
discount or premium. JZCP's discount is calculated by expressing the difference
between the period end dollar equivalent share price and the period end NAV per
share as a percentage of the NAV per share.
At 31 August 2017, JZCP's Ordinary shares traded at GBP5.16 (31 August 2016: GBP
4.53) or $6.64 (2016: $5.93) being the dollar equivalent using the year end
exchange rate of GBP1: $1.288 (31 August 2016 GBP1: $1.31). The shares traded at a
33% (31 August 2016: 43%) discount to the NAV per share of $9.88 (2016:
$10.40).
Dividend Yield
The Company no longer considers the Dividend Yield an Alternative Performance
Measure. During the period ended 31 August 2017, the Company received
shareholder approval to discontinue the Company's dividend policy of
distributing approximately 3% of the Company's net assets in the form of
dividends. No dividends were paid or declared in the six-month period ended 31
August 2017.
Non-Mainstream Pooled Investments
From 1 January 2014, the FCA rules relating to the restrictions on the retail
distribution of unregulated collective investment schemes and close substitutes
came into effect. JZCP's Ordinary shares qualify as an 'excluded security'
under these rules and will therefore be excluded from the FCA's restrictions
which apply to non-mainstream investment products. Therefore Ordinary shares
issued by JZ Capital Partners can continue to be recommended by financial
advisors as an investment for UK retail investors.
Financial Diary
Results for the year ended 28 February 2018 May 2018 (date to be confirmed)
Annual General Meeting June/July 2018 (date to be confirmed)
Interim report for the six months ended 31 October/November 2018 (date to be confirmed)
August 2018
JZCP will be issuing an Interim Management Statement for the quarters ending 30
November 2017 and 31 May 2018. 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
In the event of a cash dividend being paid, the dividend 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 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
Foreign Account Tax Compliance Act
The Company is registered (with a Global Intermediary Identification Number
CAVBUD.999999.SL.831) under The Foreign Account Tax Compliance Act ("FATCA").
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 stated capital of the
Company;
(b) the Articles of Incorporation of the Company; and
(c) the terms of appointment of the Directors.
Warning to Shareholders - Boiler Room Scams
In recent years, many companies have become aware that their shareholders have
been targeted by unauthorised overseas- based brokers selling what turn out to
be non-existent or high risk shares, or expressing a wish to buy their shares.
If you are offered, for example, unsolicited investment advice, discounted JZCP
shares or a premium price for the JZCP shares you own, you should take these
steps before handing over any money:
· Make sure you get the correct name of the person or organisation
· Check that they are properly authorised by the FCA before getting
involved by visiting http://www.fca.org.uk/firms/systems-
· reporting/register
· Report the matter to the FCA by calling 0800 111 6768
· If the calls persist, hang up
· More detailed information on this can be found on the Money Advice
Service website www.moneyadviceservice.org.uk
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, and the related rules thereunder);
(b) is a "Benefit Plan Investor" (as described under "Prohibition on Benefit
Plan Investors and Restrictions on Non-ERISA Plans" 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
entitled 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 plan's 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.
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 authorised 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 individualised 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 thereunder; 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" within the meaning of the Code (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 will
require such person to cease to be, a holder of the Company's securities 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 has been advised that it is NOT a passive foreign investment
company ("PFIC") for the fiscal years ended February 2016 and 2015. An analysis
for the financial year ended February 2017 is currently being undertaken. A
classification as a PFIC would likely have an 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.
Investment Adviser's ADV Form
Shareholders and state securities authorities wishing to view the Investment
Adviser's ADV form can do so by following the link below:
https://adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=160932
END
(END) Dow Jones Newswires
November 08, 2017 02:00 ET (07:00 GMT)
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