Jz Capital Regulatory News (JZCP)

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)

ANNUAL RESULTS FOR THE 12 MONTHS ENDED 28 FEBRUARY 2015

12 May 2015

JZ Capital Partners Limited (LSE:JZCP.L or "JZCP"), the London listed private equity fund that invests in high quality US and European microcap companies and US real estate, announces its annual results for the twelve-month period ended 28 February 2015.

Results Highlights

· NAV Total Return of 8.9% including:

o NAV of US$705.5 million (28/2/13: US$666.5 million)

o Pre-dividend NAV of US$11.16 (28/2/14: US$10.25)

o Distribution of US$0.31 per share paid in the year (FY 28/2/14: US$0.30 per share)

· Second interim dividend declared of US$0.175 (FY 28/2/14: US$0.16 per share), implying a dividend yield of 5.1% (as at 28/2/15)

· NAV growth in 22 of the last 24 quarters

· Strong five-year total shareholder return of 79.8%

Portfolio Highlights

· Significant investment activity with US$226.5 million invested across the US micro cap (US$52.6 million), European micro cap (US$48.8 million) and real estate portfolios (US$68.1 million).

· Real estate portfolio now includes assets in Miami, Florida building on the success in Brooklyn, New York. 

· US$219.4 million of proceeds from realisations, primarily from the sale of four US micro cap businesses and our remaining Safety Insurance stock.

· At the end of the period, the total portfolio consisted of 53 micro cap businesses across eight industries in the US and Europe and 27 properties located across New York and Miami.

Strategic Initiatives

· Successful Implementation of several strategic initiatives following shareholder approval:

o Amendments to the Company's investment policy to enable the Investment Adviser to take advantage of a wider range of investment opportunities.

o US$65 million issuance of Convertible Unsecured Loan Stock (CULS) - providing a more flexible capital structure, additional capital for investments and greater liquidity in advance of repayment of ZDPs in 2016.

Outlook

· Balance sheet remains strong with a healthy pipeline of realisation and investment opportunities over the next 12 months.

David Zalaznick, JZCP's Founder and Investment Adviser, said: "Our Company has delivered strong NAV growth, driven by our portfolio of high quality assets across the US and Europe that continue to demonstrate good earnings and revenue growth.

"The US real estate portfolio has grown considerably over the past year, where we continue to execute on our opportunistic and value oriented investment strategy. Most recently, we have acquired properties in Miami's Wynwood and Design District neighbourhoods, both of which draw strong parallels to our real estate assets in Williamsburg, Brooklyn.

"We look ahead to 2015 with confidence knowing that JZCP has a strong balance sheet to take advantage of the healthy pipeline of realisation and investment opportunities."

David Macfarlane, Chairman of JZCP, said: "It has been a significant twelve months, both strategically and operationally for the Company. Whilst the underlying assets have continued to perform steadily, we have been busy preparing the Company for a more secure, long-term future. With the strengthened balance sheet position and newly amended and more flexible investment strategy the Company will be able to taking advantage of investment opportunities across asset classes and further enhance returns for our shareholders."

Presentation details:

There will be an analyst and investor presentation to discuss JZCP's recent financial performance and portfolio developments at 11:30 on 12 May 2015 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. It can be accessed by dialing +44 (0)20 3427 1917 (UK) or +1 718 971 5738 (US) with the participant access code 3705203.

A playback facility will be available two hours after the conference call concludes. This facility may be accessed by dialing +44 (0)20 3427 0598 (UK) or +1 347 366 9565 (US) with the participant access code 3705203.

For further information:

Ed Berry / Kit Dunford +44 (0) 20 3727 1143

FTI Consulting

David Zalaznick +1 212 485 9410

Jordan/Zalaznick Advisers, Inc.

Andrew Maiden +44 (0) 1481 745368

JZ Capital Partners

About JZCP

JZCP is a London listed private equity fund which invests in high quality microcap companies, real estate and other debt and equity opportunities globally but with a particular focus on opportunities in the US and Europe. Its corporate objective is to create a portfolio of investments providing a superior overall return comprised of a current yield and significant capital appreciation. JZCP receives investment advice from Jordan/Zalaznick Advisers, Inc. ("JZAI") which is led by David Zalaznick and Jay Jordan. They have worked together for 30 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.

The financial information set out below does not constitute the Company's statutory accounts for the year ended 28 February 2015. All figures are based on the audited financial statements for the year ended 28 February 2015.

The announcement is prepared on the same basis as will be set out in the audited financial statements for the year ended 28 February 2015.

The annual report and audited financial statements for the year ended 28 February 2015 will shortly be posted to shareholders and will also be available on the company website: www.jzcp.com.

Chairman's Statement

I am pleased to report the results of JZ Capital Partners ("JZCP" or the "Company") for the twelve month period ended 28 February 2015.

Market Backdrop and Performance

The Company's buoyant performance over the last twelve months has been set against the beginnings of a sustained global recovery taking place, which has been supported by low energy prices and loose monetary policy.

Performance in the Eurozone overall has improved, helped by measures taken by the ECB to boost prices and growth in the form of quantitative easing. Further afield, the US Federal Reserve ended its US$4.5 trillion bond-buying programme in October, but committed to keeping record low interest rates for a considerable time. The end of the fiscal year was dominated by financial turmoil in Greece and with the outcome still uncertain, it has the potential to further unsettle markets.

Within this market environment, the Board is pleased to announce that JZCP has produced another strong set of full year results, having achieved pre-dividend NAV growth of 8.9%, increasing from US$10.25 to US$11.16 at the end of the period. The Company's history of consistent NAV growth reflects the quality of the underlying portfolio as the majority of assets across the US and European micro cap and the new real estate strategies continue to perform well. Our shareholders have benefitted from this track record with the Company delivering solid long-term total shareholder return performance of 79.8% over the five years to 28 February 2015, compared to 64.8% from the FTSE All Share.

Strategic Developments

It has been a significant year, both strategically and operationally for the Company. The recent amendments to the Company's investment policy, which enable the Investment Adviser to take advantage of a wider range of investment opportunities as well as providing the flexibility to adapt as market opportunities warrant, received shareholder approval earlier this year.

This is a significant step forward for the Company, the success of which has largely been due to its opportunistic investment strategy and its ability to deploy capital in a nimble manner and the Board believes it will provide a solid foundation on which to continue growing the Company.

Portfolio Update

It has been one of the most active investment periods to date for the Company, putting US$226.5 million to work across the three main portfolios - US and European micro cap and US real estate - whilst realisations generated US$219.4 million, primarily from the sale of four US micro cap businesses and our remaining Safety Insurance stock.

The US and European micro cap strategies continue to be the fundamental drivers and key differentiators of the Company's investment strategy, whilst US real estate becomes an increasingly significant proportion of the Company's portfolio. At the end of the period, the total portfolio consisted of 53 businesses across eight industries in the US and Europe and 27 properties located across New York and Miami.

US Micro cap

The US micro cap portfolio continues to perform well and further progress has been made with investments and realisations. The portfolio has seen a valuation increase of US$0.47 cents per share, led by significant uplifts from the sale of Milestone Aviation (US$0.27) and Dental Services Group (US$0.22). Highlights included an investment of US$9.1 million in Paragon Water Systems, a designer and manufacturer of portable water filtration systems for use in homes and commercial locations, and a number of highly accretive add-on acquisitions to our Industrial Services Solutions vertical.

European Micro cap

Our value-orientated approach in Europe has further diversified geographically with an investment made in Italy during the period to add to the existing eight investments in Spain and the single assets in the UK and Germany, which combined represent 24.7% of total assets.

During the period, the Company invested €3.2 million in Fincontinuo, a leading independent consumer lending platform in Italy. The Company is investing alongside Avenue Capital and expects to invest a total of approximately €20 million. The Company also invested an additional €2.4 million in One World Packaging, a manufacturer of highly advanced biodegradable packaging. Post-period, the Company made its first investment in Denmark through the acquisition of S.A.C., a van leasing company, for €7.6 million.

The Company's investments in Europe are mainly made through the EuroMicrocap Fund 2010, LP.

Real Estate

The Board is pleased with the significant progress the Company has made in building a balanced portfolio of retail and residential properties in conjunction with our partner, RedSky Capital. We're delighted to report that the portfolio now includes assets in Miami, Florida building on the success in Brooklyn, New York.

During the period, the Company invested US$11.7 million to acquire its first property in Miami, located in the Wynwood neighbourhood, and post-period, a further US$16.4 million to acquire three properties, one located in the Wynwood neighbourhood and two located in the Design District neighbourhood of Miami. As of May 2015, JZCP has invested approximately US$185.9 million in 30 properties with an approximate total capitalization of US$684.9 million.

Realisations

There have been six significant realisations generating most of the US$219.4 million received during the period. The Company realised its investment in Safety Insurance, a provider of personal property and casualty insurance through two block trades, totalling US$57.3 million. The Company also realised its investment in Milestone Aviation, the world's largest helicopter leasing company for US$41.8 million. In addition, the Company received proceeds of US$50.5 million from the sale of Dental Services Group, a network of laboratories across North America providing dentists and dental practices with a wide range of laboratory services.

Capital Structure

The Company's debt comprises a short term loan of US$50 million due for repayment in June 2015, the US$65.7 million of CULS which we raised last year, the Zero Dividend Preference Shares ("ZDPs") due to be redeemed at £76.6 million, approximately US$118 million at current rates in June 2016, and US$40 million in a margin facility secured by our UK gilts and corporate bonds.

Discussions are at an advanced stage for the procurement of a new long term loan agreement for [US$100 million]. Part of this will be applied in repayment of the short term loan of US$50 million. In light of this new long term loan, the Board no longer intends to issue a second tranche of CULS.

It is important to note that the Company finished the year with US$125 million in cash net of margin loan and marketable securities, in excess of the amount required for the repayment of ZDPs in 2016.

It is the plan of the Board and the Investment Adviser that the redemption of the ZDPs in June 2016 will, whilst allowing for a continued investment programme, be funded through a combination of existing liquidity, a programme of realisations principally of identified US micro cap investments and select refinancings of assets within the US real estate portfolio.

Distributions

In accordance with their policy of distributing 3.0% of NAV per annum in two equal instalments, the Directors declared a second dividend of 17.5 cents per share for the six months ended 28 February 2015, compared to 16.0 cents for the period ended 28 February 2014. Having already paid a first interim dividend of 15.0 cents, this implies an annualised yield as at 28 February 2015 of 5.1%.

NAV Discount

We are disappointed with the discount to NAV at which JZCP's shares currently trade. The Directors' view remains that, while all available options are regularly assessed, the conventional discount control devices have no long-term effect for a listed private equity company and that the solutions to the issue lie in the combination of a less restrictive and a clear investment policy, coupled with continued strong performance and a healthy realisation pipeline.

Outlook

We have worked hard during the period better to prepare the Company for a more secure, long-term future. The Board believes the Company is well positioned to use its strong balance sheet position and newly amended and more flexible investment strategy to take advantage of opportunities to acquire high quality companies at reasonable prices in both the US and Europe and significant value-add opportunities in the New York and Miami property markets.

David Macfarlane

Chairman

11 May 2015

Report of the Directors

The Directors present their annual report together with the audited financial statements of JZ Capital Partners Limited (the "Company") for the year ended 28 February 2015.

Principal activities

JZ Capital Partners Limited is a closed-ended investment company with limited liability which was incorporated in Guernsey on 14 April 2008 under The Companies (Guernsey) Law, 1994. The Company is subject to The Companies (Guernsey) Law, 2008. The Company's Capital consists of Ordinary shares, Zero Dividend Preference ("ZDP") shares and Convertible Unsecured Loan Stock ("CULS"). In July 2014, the Company issued approximately US$65 million of CULS. The Company's Ordinary shares, ZDP Shares and CULS are traded on the London Stock Exchange's Specialist Fund Market. The Company's Ordinary share and ZDP share listings on the Channel Islands Securities Exchange was cancelled on 22 December 2014.

The Company's objective is to create a portfolio of investments providing a superior overall return comprised of a current yield and significant capital appreciation.

The Company's Investment Policy is to target predominantly private investments, seeking to back exceptional management teams to deliver on attractive investment propositions. In executing 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 Company is focused on investing in the following areas:

(a) small or micro cap buyouts in the form of debt and equity and preferred stock;

(b) real estate or real estate linked investments and natural resources investments;

(c) debt opportunities, including mezzanine investments, comprising loans and high-yield securities, and listed bank debt, including both senior secured debt and second lien loans; and

(d) other debt and equity opportunities, including distressed debt and structured and off-balance sheet financings, derivatives and publicly traded securities.

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 Investment Adviser is able to invest globally but with a particular focus on opportunities in the United States and Europe.

The above Investment Policy received shareholder approval at the EGM held on 26 February 2015. Shareholders also agreed to remove the limit of 40% of gross assets that applied to investing in businesses outside the United States.

Business review

The total profit attributable to Ordinary shareholders for the year ended 28 February 2015 was US$59,210,000 (year ended 28 February 2014: profit of US$55,454,000). The revenue return for the year was US$20,802,000 (year ended 28 February 2014: US$29,178,000), after charging directors fees and administrative expenses of US$2,378,000 (year ended 28 February 2014: US$2,486,000) and Investment Adviser's base fee of US$12,976,000 (year ended 28 February 2014: US$11,220,000). The revenue return for the prior year includes a write back of an income incentive of US$4,411,000 charged against the revenue return for the year ended 29 February 2012. The net asset value ("NAV") of the Company at the year end was US$705,510,000 (28 February 2014: US$666,456,000) equal to US$10.85 (28 February 2014: US$10.25) per Ordinary share.

For the year ended 28 February 2015, the Company had US$9,473,000 of cash outflows resulting from operating activities (year ended 28 February 2014: outflows of US$7,296,000).

A review of the Company's activities and performance is detailed in the Chairman's Statement and the Investment Adviser's Report. The valuation of the listed and unlisted investments is detailed below.

Dividends

It is the Board's policy to distribute an amount equivalent to 3% of the Company's net assets in the form of dividends.

For the year ended 28 February 2015 an interim dividend of 15.0 cents per Ordinary share (total US$9,752,791) was declared by the Board on 29 October 2014 and paid on 28 November 2014.

A second interim dividend of 17.5 cents per Ordinary share (total US$11,378,256) was declared by the Board on 11 May 2015.

Directors

The Directors listed below are all non-executive, have served on the Board throughout the year and were in office at the end of the year and subsequent to the date of this report.

David Macfarlane (Chairman)

Patrick Firth

James Jordan

Tanja Tibaldi

Christopher Waldron

All Directors are independent.

Annual General Meeting

The Company's Annual General Meeting is due to be held on 19 June 2015.

Share capital, purchase of own shares and CULS

Details of the ZDP shares and the Ordinary shares can be found in Notes 18 and 19. During the year the Company did not buy back any of its own shares.

The beneficial interests of the Directors in the Ordinary shares of the Company are shown below:

The beneficial interests of the Directors in the CULS of the Company are shown below:

None of the Directors held any interest in the Zero Dividend Preference shares during the year. There have been no changes in the Directors' interests between 28 February 2015 and the date of this report.

Discount management programme

The Directors review the share price in relation to Net Asset Value on a regular basis and determine whether to take any action to manage the discount. For additional information refer to Note 20 of the Financial Statements.

Substantial shareholders

As at 28 February 2015 and as at 8 May 2015 the Company has been notified in accordance with applicable listing rules of the following interests in the Ordinary share capital of the Company:

The percentage of Ordinary shares shown above represents the ownership of voting rights at the year end, before weighting for votes on Directors.

It is the responsibility of the shareholders to notify the Company of any change to their shareholdings when it reaches 3% of shares in issue and any change which moves up or down through any whole percentage figure above 3%.

Ongoing charges

Ongoing charges for the years ended 28 February 2015 and 28 February 2014 have been prepared in accordance with the Association of Investment Companies ("AIC") recommended methodology. The Ongoing charges for the year ended 28 February 2015 were 2.34% (28 February 2014: 2.14%) excluding incentive fees and 5.23% including incentive fees (28 February 2014: 3.54%).

Principal risks and uncertainties

As an investment fund, our principal risks are those that are associated with our investment portfolio. Given the nature of the portfolio, the principal risks are associated with the financial and operating performance of the underlying investments, along with market risk associated with the publicly-listed equities.

Statement of Directors' responsibilities

The Directors are responsible for preparing Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and the Companies (Guernsey) Law, 2008 for each financial period which give a true and fair view of the state of affairs of the Company and its profit or loss for that period. International Accounting Standard 1 - Presentation of Financial Statements requires that financial statements present fairly for each financial period the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's "Framework for the preparation and presentation of financial statements". In virtually all circumstances a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.

In preparing Financial Statements the Directors are required to:

* ensure that the Financial Statements comply with the Memorandum & Articles of Incorporation and IFRS;

* 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 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 Financial Statements.

Responsibility statement of the Directors in respect of the Financial Statements

Each of the Directors confirms to the best of each person's knowledge and belief that:

(a) The Annual Report and Accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and give a true and fair view of the financial position and profit of the Company as at and for the year ended 28 February 2015.

(b) The Annual Report includes information detailed in the Chairman's Report, Investment Adviser's, Investment Manager's and Directors' Reports, Audit Committee Report and Notes to the Annual Financial Statements required by:

(i) DTR 4.1.8 and DTR 4.1.9 of the Disclosure and Transparency Rules, being a fair review of the development and performance of the Company business and the position of the Company together with a description of the principal risks and uncertainties facing the Company; and

(ii) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of important events that have occurred since the end of the financial year and the likely future development of the Company.

Directors' statement

So far as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information. In the opinion of the Board, the Annual Report and Accounts taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the Company's performance, business model and strategy.

Approved by the Board of Directors and agreed on behalf of the Board on 11 May 2015.

David Macfarlane Patrick Firth

Chairman Director

Audit Committee Report

Dear Shareholder,

We present below the Audit Committee's Report for 2015, setting out the responsibilities of the Audit Committee and its key activities in 2014/2015. The Audit Committee has reviewed the Company's financial reporting, the independence and effectiveness of the external auditor and the internal control and risk management systems of the Company's service providers. In order to assist the Audit Committee in discharging these responsibilities, regular reports are received and reviewed from the Investment Manager, Administrator and external auditor. Following its review of the independence and effectiveness of the Company's external auditors, the Audit Committee has recommended to the Board that Ernst & Young LLP be reappointed as auditor, which the Board has submitted for approval to the Company's Members.

A member of the Audit Committee will continue to be available at each Annual General Meeting to respond to any shareholder questions on the activities of the Audit Committee.

Responsibilities

The terms of reference of the Audit Committee include the requirement to:

• monitor the integrity of the published Financial Statements of the Company

• review and report to the Board on the significant issues and judgements made in the preparation of the Company's published Financial Statements, (having regard to matters communicated by the external auditors) and other financial information

• monitor and review the quality and effectiveness of the external auditors and their independence

• consider and make recommendations to the Board on the appointment, reappointment, replacement and remuneration of the Company's external auditor

• review the Company's procedures for prevention, detection and reporting of fraud, bribery and corruption

• monitor and review the internal control and risk management systems of the service providers

• consider and make representations to the Board regarding Directors' remuneration.

The Audit Committee's full terms of reference can be viewed on the Company's website www.JZCP.com.

Key activities of the Audit Committee

The following sections discuss the assessments made by the Audit Committee during the period:

Financial Reporting:

The Audit Committee's review of the Annual Financial Statements focused on the following significant areas:

Valuation of investments:

The fair value of the Company's unlisted securities at 28 February 2015 was US$841,368,000 accounting for substantially all of the net assets of the Company. The Committee has concentrated on ensuring the Investment Manager has applied appropriate valuation methodologies to these investments in producing the net asset value of the Company.

Members of the Audit Committee meet the Investment Adviser at least annually to discuss the valuation process. The Committee gains comfort in the valuations produced by reviewing the methodologies used. The valuations were challenged and approved by the Audit Committee in a recent visit to the Investment Adviser. The Audit Committee has thus satisfied itself that the valuation techniques are appropriate and accurate.

Ownership of investments:

The Audit Committee considered the ownership of the investments held by the Company as at 28 February 2015 to be substantiated from confirmations provided by the Investment Manager, Custodian and Administrator. Following a review of the presentations and reports from the Administrator and consulting where necessary with the external auditor, the Audit Committee is satisfied that the Company duly owns its investments which are correctly stated in the Annual Report and Accounts.

NAV based fees

The Board has identified that there is a risk that management and incentives fees which are calculated based on the NAV of the Company could potentially be misstated if there were to be an error in the calculation of the NAV. However, as each monthly NAV calculation is approved by the Investment Adviser and the year end NAV has been audited, the Board are satisfied that the fees have been correctly calculated as stated in the Annual Report and Accounts.

The external auditor reported to the Audit Committee that no material misstatements were found in the course of their work. Furthermore, the Investment Manager and Administrator confirmed to the Audit Committee that they were not aware of any material misstatements including matters relating to financial statement presentation. The Audit Committee confirms that it is satisfied that the external auditor has fulfilled its responsibilities with diligence and professional scepticism. The Audit Committee advised the Board that this annual report and accounts, taken as a whole, is fair, balanced and understandable.

Risk Management:

The Audit Committee continued to consider the process for managing the risk of the Company and its service providers. Risk management procedures for the Company, as detailed in the Company's risk assessment matrix, were reviewed and approved by the Audit Committee. There were no issues noted during the year.

Fraud, Bribery and Corruption:

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Company. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

The external auditor

Independence, objectivity and fees:

The independence and objectivity of the external auditor is reviewed by the Audit Committee which also reviews the terms under which the external auditor is appointed to perform non-audit services. The Audit Committee has established pre-approval policies and procedures for the engagement of the auditor to provide non-audit and assurance services.

These are that the external auditors may not provide a service which:

• places them in a position to audit their own work

• creates a mutuality of interest

• results in the external auditor developing close relationships with service providers of the Company

• results in the external auditor functioning as a manager or employee of the Company

• puts the external auditor in the role of advocate of the Company

As a general rule, the Company does not utilise external auditors for internal audit purposes, secondments or valuation advice. Services which are in the nature of audit, such as tax compliance, tax structuring, private letter rulings, accounting advice, quarterly reviews and disclosure advice are normally permitted but will be pre-approved by the Audit Committee.

The following table summarises the remuneration paid to Ernst & Young LLP and to other Ernst & Young LLP member firms for audit services during the year ended 28 February 2015.

In line with the policies and procedures above, the Audit Committee does not consider that the provision of these non-audit services, which comprised determining whether the Company is a passive foreign investment company as defined by the U.S. Internal Revenue Code, to be a threat to the objectivity and independence of the external auditor.

Performance and effectiveness:

During the period, when considering the effectiveness of the external auditor, the Audit Committee has taken into account the following factors:-

• the audit plan presented to them before each audit;

• the post audit report including variations from the original plan;

• changes in audit personnel;

• the external auditor's own internal procedures to identify threats to independence; and

• feedback received from both the Investment Adviser and Administrator.

The Audit Committee reviewed and challenged the audit plan and the post audit report of the external auditor and concluded that the audit plan sufficiently identified audit risks and that the post audit report indicated that the audit risks were sufficiently addressed and that there were no variations from the audit plan. The Audit Committee considered reports from the external auditor on their procedures to identify threats to independence and concluded that the procedures were sufficient to identify potential threats to independence.

There were no significant adverse findings from this evaluation.

The Audit Committee has examined the scope and results of the audit, its cost effectiveness and the independence and objectivity of the external auditor and considers Ernst & Young LLP, as external auditor, to be independent of the Company.

Reappointment of external auditor:

Consequent to this review process, the Audit Committee has recommended to the Board that a resolution be put to the 2015 Annual General Meeting for the reappointment of Ernst & Young LLP as external auditor. The Board has accepted this recommendation.

Internal control and risk management systems

Additional work performed by the Audit Committee in the areas of internal control and risk management are disclosed below.

The Audit Committee has also reviewed the need for an internal audit function. The Audit Committee has decided that the systems and procedures employed by the Investment Adviser and the Administrator, including the Administrator's internal audit function, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.

In finalising the Annual Report and Accounts for recommendation to the Board for approval, the Audit Committee has satisfied itself that the Annual Report and Accounts taken as a whole are fair, balanced and understandable.

The Audit Committee Report was approved by the Board on 11 May 2015 and signed on behalf by:

Patrick Firth

Chairman, Audit Committee

Investment Adviser's Report

Dear Fellow Shareholders,

We are pleased to report that JZCP completed its fiscal year ended 28 February 2015 having achieved NAV growth of 8.9% (pre-dividend), from US$10.25 per share at 28 February 2014 to US$11.16 per share at 28 February 2015. Unless otherwise stated, figures included in this report refer to the twelve-month period ended 28 February 2015.

Our NAV has increased in 22 out of the past 24 quarters, reflecting the positive performance of the underlying assets across the portfolio. We finished the year with strong liquidity - US$125.0 million in cash net of margin loan and marketable securities, well in excess of the US$118 million at current rates we need to redeem the Zero Dividend Preference ("ZDP") shares in June 2016. In conformance with our dividend policy of distributing three percent of NAV in semi-annual installments, we paid total dividends of US$0.31 per share during the period; at our stock price as of 28 February 2015, the implied dividend yield was 5.1%.

JZCP experienced an active investment period over the past year, deploying US$226.5 million across our US micro cap, European micro cap and real estate portfolios. We realized US$219.4 million primarily through the sale of four US micro cap businesses and our remaining Safety Insurance stock. We also raised US$65.7 million through the issuance of Convertible Unsecured Loan Stock ("CULS"), with an eye to putting more capital to work and building liquidity for the repayment of the ZDPs in June 2016.

As of 28 February 2015, our US micro cap portfolio consisted of 42 businesses across seven industries. This portfolio was valued at 7.6x EBITDA, after applying an average 25 percent marketability discount to public comparables. The average underlying leverage senior to JZCP's position in our US micro cap portfolio grew to 2.8x EBITDA, as certain of our existing and new portfolio companies demonstrated an ability to support greater leverage. Consistent with our value oriented investment strategy, we have acquired our current US micro cap portfolio at an average 6.1x EBITDA. Additionally, in contrast to a very expensive US acquisition market, we paid 6.7x EBITDA on average for US micro cap acquisitions made during the year, underlining our disciplined approach to investing.

At the end of the period, our European micro cap portfolio, consisting of eight Spanish companies, one UK-based company, one German company, and one Italian company across four industries, was valued at a combined multiple of 8.2x EBITDA, after an average 25 percent marketability discount to public comparables. The European micro cap portfolio has very low leverage senior to JZCP's position, under 2.0x EBITDA. In March 2015 (post-period), we acquired one additional business, our first portfolio company located in Denmark.

NAV Growth

JZCP's pre-dividend NAV increased 8.9% from US$10.25 per share to US$11.16. The chart below details the growth in NAV on a per share basis:

*Foreign currency exchange movements are excluded and shown within Foreign exchange effect (0.41).

Our private investments increased US$1.75, reflecting a steady performance across the 53 micro cap businesses (US and Europe) and 27 properties in the real estate portfolio.

The US micro cap portfolio contributed US$0.47 to this increase, primarily due to a significant uplift from the sale of Milestone Aviation (US$0.27) at a higher price than its carrying value and increased earnings at our Industrial Services Solutions vertical (US$0.60) (as well as numerous accretive acquisitions). JZCP also realized an increase of US$0.22 from our Dental Services Group, following its sale at a price higher than its carrying value. Also contributing to NAV growth were increases at several co-investment portfolio companies: Vitalyst, a corporate IT support business (US$0.03), Suzo-Happ, a manufacturer of parts for the global gaming industry (US$0.10), and Justrite Manufacturing, an industrial safety company (US$0.05).

Offsetting these increases were decreases in: Amptek, our manufacturer of non-destructive testing equipment (US$0.10), following its sale below carrying value, Accutest, our full service environmental testing laboratory business (US$0.44), which experienced a significant earnings decline; New Vitality Holdings, our co-investment marketer of premium nutritional supplements (US$0.09), which has hit significant operating and financial hurdles due to advertising and product development issues; Healthcare Products Holdings, our power wheelchair company (US$0.04), which experienced an earnings decline; and both Nationwide Studios (US$0.05) and our water vertical (US$0.05), also as a result of decreased earnings.

Before foreign exchange effects, the European micro cap portfolio increased US$0.75, primarily due to write-ups reflecting increased performance at: One World Packaging (US$0.06), our niche manufacturer of biodegradable, environmentally friendly packaging; Ombuds (US$0.20), a private security company, Winns (US$0.21), a personal injury claims processing business, and Toro Finance (US$0.28), a provider of short-term working capital financing to major Spanish companies. These gains were offset by write-downs at gold reseller Oro Direct (US$0.03) and at Xacom (US$0.03), which has experienced delays in orders for its new products.

The overall decrease in the valuation of public investments was driven by the discount inherent in the block trade of Safety Insurance stock. Despite the discount, this was a highly successful investment.

Returns

The chart below summarizes the cumulative NAV total returns and total shareholder returns for the most recent three-month period, twelve-month period, three-year period, four-year period and five-year period.

Portfolio Summary

Our portfolio is well diversified across 53 micro cap businesses and eight industries, and continues to become more diversified geographically as we grow our European portfolio. It's also important to note that 59.1% of our portfolio is less than three years old. Also of note is the fact that the US and European micro cap portfolios are valued at a 7.8x EBITDA multiple, after a 25% discount to the public comparables used.

Below is a year on year summary of JZCP's assets. An explanation of the changes in the portfolio follows:

We have continued our program of holding highly rated listed corporate bonds as a means of earning an enhanced return on our cash. Currently, Goldman Sachs is the sole obligor of these bonds, which mature in January 2017. We also continue to hold UK Gilts, with an eye toward the 2016 maturity date of our ZDPs.

US micro cap portfolio

It has been another good year for our US micro cap portfolio, with most assets continuing to perform well and further progress made with investments and realizations. The portfolio has been written up by US$30.5 million (US$0.47 per share), led by significant uplifts from the sales of Milestone Aviation (US$0.27) and Dental Services Group (US$0.22) at prices higher than their carrying values and increased earnings at our Industrial Services Solutions vertical (US$0.60) (as well as numerous accretive acquisitions). Offsetting these significant increases were decreased operating performances of Accutest, Nationwide Studios, our water vertical, New Vitality, and the sale of Amptek below carrying value.

New US investments - verticals

Industrial Services Solutions Vertical

We made seven acquisitions during the year: Construction & Turnaround Specialists; Parts Service International; Precision Electric; Integrated Process Technologies; Pro Inspection; M&L Valve; and National Inspection & Consultants, all add-on acquisitions to our Industrial Services Solutions vertical managed by Jim Rogers, a former GE senior manager. In total, these acquisitions were funded using approximately US$43.2 million provided by our senior lender, US$7.9 million of cash on ISS' balance sheet, and US$12.3 million in seller financing. At 28 February 2015, JZCP owned approximately 34% of the combined entity on a fully-diluted basis. In March 2015 (post period), our ISS vertical completed one additional add-on acquisition, Midwest Valve Parts Supply Company.

Water Vertical

In October 2014, JZCP invested US$9.1 million to acquire 21% of Paragon Water Systems ("Paragon"), which designs and manufactures point-of-use water filtration systems for use in homes and commercial locations. Paragon is the first acquisition in the water filtration sub-vertical of our water strategy.

Also in October 2014, JZCP invested US$1.3 million to fund the acquisitions of Action Products Marketing Corporation and ConShield Technologies Incorporated (collectively, "APMCS"). APMCS is an infrastructure rehabilitation company that formulates and sells cementitious manhole and pipe rehabilitation products and provides the associated equipment used for application. JZCP owns approximately 31% of the combined entity.

Healthcare Vertical

In October 2014, JZCP invested US$1.3 million to acquire 29% of PPM Information Solutions, Inc., a provider of billing and practice management software and services to anesthesia practices.

Testing Vertical

In March 2014, JZCP invested US$1.7 million in senior notes to help fund the acquisition of Premier Safety, a Pittsburgh based distributor of industrial safety products, specializing in a wide range of portable and fixed gas detectors, respiratory equipment, fall protection and other safety and personal protective supplies. Premier Safety offered an opportunity to acquire a strong, well respected industry participant that is both highly complementary and additive to our investment in Argus Group, which sells, rents and services industrial hygiene and safety equipment. JZCP owns approximately 36% of this testing entity.

New US investments - co-investments

In April 2014, JZCP invested US$4.2 million in iconic brand name Igloo, alongside co-investor ACON Investments. Founded in 1947, Igloo designs, manufactures and markets coolers and outdoor products online and through retailers, with a dominant market position in the US. Igloo is looking to introduce new products, add new customers and sales channels and exploit international opportunities. This investment represents 3.2% of Igloo's equity. In December 2014, JZCP invested a further US$1.8 million to fund Igloo's acquisition of Cool Gear International, a manufacturer of temperature controlled drink and storage products.

In June 2014, JZCP invested US$16.2 million for 9.0% of Cequel Data Centers, LLC, the parent company of TierPoint, LLC, alongside RedBird Capital Partners, The Stephens Group and Thompson Street Capital Partners, among others. In December 2014, JZCP invested an additional US$9.2 million, helping TierPoint fund the acquisition of a large portfolio of data centers in the Northeastern United States. Managing raised floor data center space across the US, TierPoint today offers colocation, managed services and cloud computing through 13 data centers (post- acquisition of new portfolio) in Dallas, Oklahoma City, Tulsa, Spokane, Seattle, Philadelphia, New York, Boston and Baltimore.

In August 2014, JZCP invested US$4.0 million in Southern Petroleum Laboratories ("SPL"), a global industry leader in oil & gas measurement, allocations, auditing, and laboratory services. SPL has provided hydrocarbon testing services for the oil & gas industry since the company's founding in 1944 and is one of the most recognizable names in the industry. JZCP invested in this opportunity alongside Hastings Equity Partners, a firm in Houston with significant experience and success in oilfield services related transactions. JZCP owns approximately 17.2% of the combined entity on a fully-diluted basis.

European micro cap portfolio

JZCP invests in the European micro cap sector through its 75% ownership of the EuroMicrocap Fund 2010, L.P. ("EMC"). Exposure to the European micro cap sector continues to complement and diversify JZCP's existing US micro cap portfolio. As you may recall, JZI has offices in London and Madrid and an outstanding team with over fourteen years of investment experience in European micro cap deals.

It has been an active period for investments in Europe and as of 28 February 2015, EMC consisted of eight Spanish companies, and a company each in the UK, Germany and Italy, which combined, represent 24.4% of gross assets. Post-period, in March 2015, EMC made its first investment in Denmark, acquiring S.A.C., an operational (lease and service) van leasing company based south of Copenhagen.

Before foreign exchange effects, we wrote up the European micro cap portfolio by US$49.3 million (US$0.75 per share), primarily based on increased performance at One World Packaging (US$0.06), our niche manufacturer of biodegradable, environmentally friendly packaging, Ombuds (US$0.20), a private security company, Winns (US$0.21), a personal injury claims processing business, and Toro Finance (US$0.28), a provider of short-term working capital financing to major Spanish companies. These gains were offset by write-downs at gold reseller Oro Direct (US$0.03) and at Xacom (US$0.03), which has experienced delays in orders for its new products.

New European investments

In March 2014, JZCP invested an additional €2.3 million in Fidor Bank through EMC, as part of a larger capital increase from existing and new shareholders. In October 2014, JZCP invested a further €2.6 million through EMC, structured as a shareholder loan, to acquire the economic rights to two loans from Fidor Bank. In March 2015 (post- period), JZCP invested another €1.1 million through EMC, as part of larger Tier 1 capital increase from existing Fidor Bank shareholders. Following this last capital increase, JZCP's shareholding in Fidor Bank was 20.9%. With headquarters in Munich, Germany, Fidor Bank combines a social-media banking model with traditional banking services, offering internet-based and mobile-based transactions, supplemented by full service cash management solutions to retail customers.

In May 2014, JZCP provided €4.0 million in direct debt financing to Toro Finance, a portfolio company of EMC that provides short-term working capital financing to major Spanish companies. In September 2014, JZCP provided an additional €4.0 million in direct debt financing to Toro Finance. Toro Finance is well positioned to benefit as Spanish banks in recent years tightened their risk criteria and downscaled balance sheets to meet increasing capital requirements. At 28 February 2015, JZCP has lent its full €16.0 million commitment in 8% current pay debt financing to Toro Finance.

In July 2014, JZCP invested €18.0 million in Petrocorner (through EMC), a strategic build-up to acquire 2-3% of Spain's petrol station market, targeting stations in urban areas and along highly trafficked highways and roads. JZCP is investing in this opportunity alongside Avenue Capital, backing one of the industry's "best in class" management teams that has been developing this strategy for the past two years. JZCP's total commitment (through EMC) of €23.3 million will purchase approximately 30% of Petrocorner's equity, on a fully diluted basis.

In October 2014, JZCP invested €2.1 million in Fincontinuo (through EMC), a leading independent lending platform that has been distributing and servicing Cessione del Quinto ("CdQ") loans, a low risk and niche form of consumer lending in Italy since 1997. JZCP is also investing in this opportunity alongside Avenue Capital. In December 2014, JZCP invested a further €1.1 million through EMC to capitalize an alternative lending vehicle for Fincontinuo, providing an additional €3.8 million (through EMC) to fund this lending vehicle in March 2015 (post-period). As this business ramps up, JZCP expects to invest a total of approximately €20 million (through EMC).

In December 2014, JZCP invested an additional €2.4 million in One World Packaging (through EMC), a manufacturer of highly advanced, biodegradable molded pulp packaging. This additional investment will help fund the acquisition of four new production machines.

In March 2015 (post-period), JZCP invested a total of €7.6 million (€2.8 million in equity through EMC and €4.8 million directly as mezzanine lender) in S.A.C, an operational (lease and service) van leasing company based south of Copenhagen, Denmark.

Real estate portfolio

Working with high quality management teams is at the core of our investment approach and, over the past three years, we have assembled a portfolio of retail, office and residential properties in Brooklyn, New York and Miami, Florida in partnership with RedSky Capital, a team with significant experience in this sector. As of 30 April 2015, JZCP had invested US$185.9 million in the real estate portfolio.

Brooklyn is in the early stages of a renaissance where areas that have been historically industrial, low-income and/or artist communities are beginning to see seismic population changes, fuelled by an influx of young and affluent ex- Manhattan residents in search of more space and a trendier community that embraces a relaxed, artistic and young lifestyle. Our properties are located in the Williamsburg, Downtown Brooklyn, Greenpoint, and Bushwick-Wyckoff Heights neighborhoods.

We are seeing similar trends and opportunities in the Wynwood and Design District neighborhoods of Miami, Florida, which each draw strong parallels to the upscale, urban ecosystem of Williamsburg, Brooklyn. We made our first investment in Miami in January 2015, quickly followed by another three acquisitions in late February and March 2015. We believe that rapidly increasing retail rents amid a thriving arts scene are providing very attractive investment opportunities right now in Miami.

During the period, JZCP, together with RedSky, acquired ten properties, reflecting RedSky Capital's ability to originate a healthy pipeline of attractive investment opportunities in both New York and Miami. Since we began investing with RedSky in April 2012, we have acquired a total of 30 properties (three post-period in March and April 2015), all currently in various stages of development and re-development. The underlying thesis of our real estate portfolio is to acquire off-market properties in neighborhoods that are beginning to see rental and valuation growth.

We have written this portfolio up by US$46.4 million (US$0.71 per share), led by significant write-ups at our Downtown Brooklyn portfolio (US$0.36), Greenpoint development site (US$0.20) Williamsburg retail portfolio (US$0.14), and Roebling portfolio (US$0.07), offset by a slight write-down at our original Bedford property (US$0.09). Increases in value at our real estate properties are due to third-party appraisals received during the period.

New real estate investments

Brooklyn acquisitions

In May 2014, JZCP invested US$3.0 million (structured as a bridge loan) for a property in the Downtown Brooklyn neighborhood of Brooklyn, New York, one of the fastest growing communities in New York City. This bridge loan was repaid, plus interest, in June 2014.

In August 2014, JZCP acquired another two properties in the Downtown Brooklyn neighborhood, further additions to our Downtown Brooklyn portfolio. These acquisitions were funded using proceeds from a refinancing of the Downtown Brooklyn portfolio, and did not require additional cash funding by JZCP. One further acquisition into our Downtown Brooklyn portfolio, made in February 2015, required an additional US$3.8 million in equity from JZCP.

In July 2014, JZCP invested US$8.0 million to acquire one of the most attractive mixed-use loft buildings in Williamsburg, Brooklyn, located within blocks of our other assets in the neighborhood. This unique property features unparalleled window design, ceiling heights and old world character, promising post renovation to become one of the premiere rental loft properties in the area.

In August 2014, JZCP invested US$6.2 million (US$3 million of which served as a bridge loan repaid shortly thereafter with interest to JZCP) to acquire a 21 unit loft-style residential building in Brooklyn's Bushwick-Wyckoff Heights neighborhood, a rapidly maturing neighborhood just east of Williamsburg. We are planning to reposition this property into a modern industrial loft-style residential building by vacating, renovating and leasing up all units at market rate.

In December 2014, JZCP invested $14.7 million to acquire two properties in the Williamsburg neighborhood of Brooklyn, featuring 50 ft. and 40 ft., respectively, of frontage on Bedford Avenue (the most highly trafficked street in Williamsburg) and a combined 20,850 sq. ft. of build-to-suit multi-level retail space.

In April 2015 (post-period), JZCP invested $7.0 million to acquire another property in the Williamsburg neighborhood of Brooklyn, featuring 20 ft. of frontage on Bedford Avenue and up to 6,000 sq. ft. of build-to-suit multi-level retail space.

Miami acquisitions

In January 2015, JZCP invested US$11.7 million to acquire its first property in Miami, Florida, located in the Wynwood neighborhood. Over the past decade, Wynwood has seen a push towards gentrification which has recently become an all-out rush, transitioning the neighborhood into a vibrant work-live-entertainment hub.

In late February and early March 2015 (post-period), JZCP invested a further US$31.2 million to acquire three properties, one located in Miami's Wynwood neighborhood and two located in the adjacent Design District neighborhood, a vibrant shopping and cultural destination home to some of the world's most prestigious brands and retailers.

Other assets

Our recently established asset management business in the US, Spruceview Capital Partners, addresses the growing demand from endowments, foundations and corporate pension funds for fiduciary management services through an Outsourced Chief Investment Officer ("OCIO") model. Spruceview launched the first product in July 2014, the Bright Spruce Fund, L.P. JZCP invested US$50 million in the Bright Spruce Fund, whose investment strategy is capital appreciation in liquid funds while mitigating risk. JZCP is not being charged any fees on this 'fund' investment.

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. Spruceview targeting corporate pensions, university endowments, foundations and family offices and are beginning to gain traction with several accounts. While this is a long-term building process, the business continues to progress in line with expectations and we look forward to reporting on our progress in the coming year.

Significant realizations

We had six significant realizations during the period.

US micro cap

Most of the realization activity occurred in our US micro cap portfolio, reflecting the high multiples currently achievable in the US. In July 2014, we sold Galson Laboratories, receiving proceeds of US$10.1 million. Galson is a full service provider of analytical air testing using a wide array of methods and instruments which we acquired in May 2010.

In August 2014, JZCP received proceeds of US$19.4 million from the sale of Amptek, which we had acquired in December 2011. Amptek designs and manufactures instrumentation used in numerous non-destructive testing and elemental analysis applications. Albeit a successful investment that generated both a positive MOIC and IRR, Amptek's sale price was executed below its carrying value, reducing NAV by US$6.3 million.

In October 2014, JZCP realized a portion of its investment in our water vertical, refinancing certain notes, which had been used for the previously purchased water infrastructure and water treatment businesses, with third-party debt. Net of the investment in the Paragon acquisition summarized above, JZCP received US$9.8 million of proceeds.

In February 2015, JZCP received proceeds of US$50.5 million from the sale of Dental Services Group, a network of laboratories across North America providing dentists and dental practices a wide range of laboratory services.

Co-investments

In January 2015, JZCP received proceeds of US$41.8 million from the sale of Milestone Aviation to General Electric. Headquartered in Dublin, Ireland, Milestone Aviation is currently the world's largest helicopter leasing company.

Listed equities

In May and June 2014, JZCP realized its investment in Safety Insurance, a provider of personal property and casualty insurance focused exclusively on the Massachusetts market, through two separate block trades, totaling US$57.3 million (US$33 million in May 2014 and US$24.3 million in June 2014).

Escrows received

JZCP received escrow distributions totaling approximately US$6.9 million during the year.

Significant financings

In June 2014, we closed a US$50 million one-year loan facility with Jefferies, in order to enhance our short term liquidity position. Our plan is to repay this loan with either proceeds from realizations, or with a longer term loan facility. The current facility is secured by certain US investments and carries an interest rate of 7%.

In July 2014, we issued approximately US$65.0 million of CULS, increasing the flexibility of JZCP's capital structure while providing additional capital for further investments and greater liquidity in advance of the repayment of the ZDPs in June 2016. These convertible notes carry an interest rate of 6% and a conversion price equal to a 2.5% premium to the 30 June 2014 NAV per share, which was US$10.07. If not converted, the CULS will mature in June 2021.

Outlook

As we have said in the past, our investment strategy is that of opportunistic, value oriented investors with a focus on acquiring assets that we believe have more intrinsic value than we have to pay in cash and where we can enhance the growth prospects and scale the businesses. We employ reasonable leverage to increase our equity returns and seek diversity in the portfolio in terms of industries, asset classes and geography. JZCP has experienced long term NAV growth using this model of value investing, increasing in 22 of the last 24 quarters. In addition, JZCP's strong balance sheet position allows us to take advantage of investment opportunities on an immediate basis. We remain committed to pursuing this tried and tested strategy and are confident in the future prospects of the group, particularly with the newly amended and more flexible investment policy now in place. We look forward to continuing to put your (and our) money to work in a diverse portfolio of reasonably priced assets.

As always, thank you for your confidence in our investment strategy. Please feel free to contact us with any ideas that might be beneficial to JZCP.

Yours faithfully,

Jordan/Zalaznick Advisers, Inc.

Investment Review

This investment review focuses on JZCP's investment strategy in the US Micro Cap, European Micro Cap and Real Estates portfolios and details examples of the Company's major holdings.

US MICRO CAP

The primary US micro cap investment strategy is the "vertical" strategy which sees JZCP invest in well researched industry sectors, or verticals. Similar companies are purchased in the vertical, being integrated as appropriate, and the resulting larger company sold as one entity. These industries sectors/verticals include Industrial service solutions, Water treatment services and Healthcare revenue management. The verticals are managed by a seasoned industry executive whose responsibilities include managing, integrating and growing their respective vertical.

JZCP also invests in US micro cap companies through "Co-investment". JZCP partners with experienced and trusted investors, taking a minority position in a company. The strategy benefits JZCP by diversifying the US micro cap portfolio and leveraging the expertise and resources of such investors. As at 28 February 2015 JZCP's two largest co-investments by valuation were Tierpoint, LLC, and Medplast/UPG Holdings..

US MICRO CAP (VERTICALS)

INDUSTRIAL SERVICES SOLUTIONS ("ISS")

Industrial Services Solutions ("ISS") is currently a combination of seventeen acquired businesses in the industrial maintenance, repair and service industry, with services provided both in a customers' plant, and in one of the companies numerous facilities across the United States. The company also sells parts and supplies for the products it services.

Most of these activities are nondiscretionary and typically non-cyclical. In addition, the increasing complexity of the equipment in industrial settings, along with fewer maintenance staff at these plants, should encourage growth in ISS' customers' needs. This large and very fragmented industry is well suited for a consolidator.

JZCP's US$33.2 million of investments at cost are currently valued at US$77.3 million, as the JZCP has reaped the benefits of positive organic growth, some initial cross-selling among the companies, and the effects of leverage. Sales and proforma EBITDA for the year was US$271 million and US$43 million respectively.

ISS is managed by Jim Rogers, a seasoned industry executive, having held several senior management positions at GE for 26 years. His last position at GE was CEO of GE Industrial Controls.

WATER VERTICAL

Triwater Holdings is our vertical in the $500 billion water sector. To date, we have focused on three areas in this very fragmented market: infrastructure, water treatment and filtration.

Water infrastructure businesses have been created to deal with the aging and deteriorating infrastructure in the United States. Leaking underground pipes for potable water create significant waste, while leaking underground sewer pipes create a significant health hazard. The companies we own in this area have to date addressed this issue by sealing underground sewer pipes without digging, attractive for a variety of practical and cost concerns.

The current water treatment business consists of three companies which sell and distribute chemicals for industrial plants' boilers, etc and use outside plants (e.g. "fracking").

The filtration business currently owned is Paragon Water Systems, a supplier of parts and filters for point-of-use water filtration systems.

JZCP has invested US$27.7 in this vertical; it is valued at US$33.2 million as the initial investments in sales, systems and management have yet to show benefits. Annual revenues were US$135 million while proforma EBITDA was US$21 million.

The Water vertical is managed by Mike Reardon, a long time water executive who has held senior management positions at Culligan Water, and US Filter, among others.

HEALTHCARE REVENUE MANAGEMENT

This vertical provides outsourced revenue cycle management solutions to both hospitals and physicians, a very fragmented and rapidly changing industry. Services currently offered focus on accelerating receivables collections from various payers. In addition to growing via organic growth and acquisitions, cross selling of various services across the companies will contribute to the value added proposition.

JZCP has invested US$22.8 million in this relatively new vertical, which currently carries a value of US$22.3 million. Revenues and proforma EBITDA totalled US$34.4 million and US$6.9 million, respectively.

Mike Shea, an executive with more than 25 years in healthcare revenue management, is managing these businesses.

US MICRO CAP (CO-INVESTMENTS)

TIERPOINT, LLC

Co-invest partner: RedBird Capital Partners Sector: Data Centre

Acquisition Date: June 2014 Headquarters: Missouri, USA Website: www.tierpoint.com

Tierpoint is a provider of cloud, colocation and managed services designed to help organisations improve business services and manage risks. JZCP has invested along side trusted co-invest partners, it is intended to grow the business through an organic and acquisition-based growth strategy.

MEDPLAST/UPG HOLDINGS

Co-invest partner: Baird Capital [Mfg Products]

Sector: Medical/industrial plastic injection moulding

Acquisition Date: April 2012

Headquarters: Tempe, Arizona, USA

Website: www.medplastgroup.com

Medplast designs, engineers and produces precision custom moulded thermoplastic, rubber and elastomer components and moulds for the healthcare and pharmaceutical and consumer/industrial markets.

EUROPEAN MICRO CAP

JZCP's is investing in the European micro cap sector through its 75% ownership of the European Micro Cap Fund ("EMC"). The EMC's investment team has worked together for over ten years and has a proprietary network of intermediaries to deliver high quality micro cap buy-and-build opportunities throughout the continent.

Initially the team found value in investing in Spanish companies which were historically profitable and run by entrepreneurial managers. The EMC now also has investments in the UK, Germany, Italy and Denmark.

As at 28 February 2015, JZCP's three largest European Micro Cap investments by valuation were Factor Energia S.A., Toro Finance and Grupo Ombuds S.A.

FACTOR ENERGIA S.A.

Headquarters: Barcelona,

Spain Sector: Energy Supplier

Acquisition Date: July 2010

Website: www.factorenergia.com

Factor Energia is an energy distribution business in Spain, which resells electricity to smaller and medium-sized companies, a recently deregulated part of the energy sector. It purchases electricity on the spot market, and sells to its customers for a fixed or variable price, depending on the relevant contract.

TORO FINANCE

Headquarters: Madrid, Spain Sector: Financial Services Acquisition Date: December 2013

Toro Finance ("Toro") is a provider of short term receivables financing to the suppliers of major Spanish companies, taking advantage of the continued lack of financing from banks for these highly rated credits. An opportunity was identified to provide financing to this segment and in late 2013. JZCP has approached this market via this joint venture with Avenue Capital.

GRUPO OMBUDS S.A.

Headquarters: Madrid, Spain

Sector: Private Security

Acquisition Date: May 2011

Website: www.ombuds.es

Grupo Ombuds is a provider of security, surveillance and facility services to the public sector and blue chip clients in Spain. The company has successfully managed to gain market share in the private sector, achieving 80% of total sales in 2014. Management has also pursued a cost saving plan which has reduced direct costs and overheads significantly.

REAL ESTATE

JZCP invest in properties through the JZ Realty Fund. The same disciplined investment strategy is applied, as with the micro cap portfolio; buying assets at reasonable prices in conjunction with excellent management teams. The real estate portfolio has been assembled in partnership with RedSky Capital, a Brooklyn based real estate and development and management company.

In 2012, JZCP started to invest in properties in Brooklyn, a borough of New York City with a population of 2.5 million, and is in the process of a renaissance where areas that have been historically industrial and low income are beginning to see population changes, fuelled by an influx of young and affluent ex-Manhattan residents. The revival of the area along with positive demographic projections is providing exciting investment opportunities for JZCP.

At 28 February 2015, JZCP has invested US$170 million in 27 properties across 15 different property portfolios. The independent year end valuation process valued the JZ Realty portfolio at US$221 million.

Three of the JZ Realty, Brooklyn portfolios; Greenpoint, Roebling and 247 Bedford Avenue are detailed below.

GREENPOINT, BROOKLYN

In November 2013, JZ Realty acquired a 49% interest in a premiere development site on the Greenpoint waterfront offering panoramic views over the Manhattan skyline. The intention is to enter into a joint-venture with a major New York City development firm and build a high end mixed-use property.

The site includes the India Street Pier which acts as the Greenpoint terminal location for the East River Ferry, making it one of the most attractive development sites on the waterfront.

ROEBLING, BROOKLYN

JZ Realty acquired the portfolio in July 2014 with the intent to redevelop and re-tenant it into a high end mixed-use portfolio. The Roebling Portfolio is comprised of three separate buildings totaling 126,500 sq. ft.; the properties are located within two blocks of 247 Bedford Avenue, our class A mixed-use asset on Williamsburg's most desirable retail block. It is intended that value will be added by renovating and reconfiguring each building to maximize rentable square footage and achieve market rents.

247 BEDFORD AVENUE, BROOKLYN

JZ Realty acquired the property in April 2012, with the intent to redevelop and re-tenant the retail and residential into a class A mixed-use property.

247 Bedford Avenue is an 115,600 sq. ft. mixed-use asset located on one of the most desirable blocks in Williamsburg. It is the largest and most visible retail site on Bedford Avenue.

JZ Realty are in the middle of the repositioning plan. An 'AAA' credit rated company has been secured as a tenant for the largest, corner retail unit. The building is being transformed into two floors of high end retail space and upgraded residential units.

Directors' Remuneration Report

The Directors' remuneration report has been prepared on behalf of the Directors in accordance with the UK Corporate Governance Code ("the Code") as issued by the UK Listing Authority.

The Company's policy in regard to Directors' remuneration is to ensure that the Company maintains a competitive fee structure in order to recruit, retain and motivate non-executive Directors of excellent quality in the overall interests of shareholders.

Remuneration policy

The Directors do not consider it necessary for the Company to establish a separate Remuneration Committee. All of the matters recommended by the Code that would be delegated to such a committee are considered by the Board as a whole.

It is the responsibility of the Board as a whole to determine and approve the Directors' fees, following a recommendation from the Chairman who will have given the matter proper consideration, having regard to the level of fees payable to non-executive Directors in the industry generally, the role that individual Directors fulfil in respect of Board and Committee responsibilities and the time committed to the Company's affairs. The Chairman's remuneration is decided separately and is approved by the Board as a whole.

The Company's Articles state that Directors' remuneration payable in any accounting year shall not exceed in the aggregate an annual sum of US$650,000. Each Director is also entitled to reimbursement of their reasonable expenses. There are no commission or profit sharing arrangements between the Company and the Directors. Similarly, none of the Directors is entitled to pension, retirement or similar benefits. No element of the Directors' remuneration is performance related.

The remuneration policy set out above is the one applied for the year ended 28 February 2015 and is not expected to change in the foreseeable future.

Directors' and Officers liability insurance cover is maintained by the Company on behalf of the Directors.

Remuneration for qualifying services

The amounts payable to Directors as shown above were for services as non-executive Directors.

No Director has a service contract with the Company, nor are any such contracts proposed.

* Patrick Firth's Directors fee was increased to $70,000 effective 1 January 2014. The above comparative has been pro-rated to reflect the increase.

** David Allison served as a Director until his death on 26 April 2013. A final payment was made during the current year for an amount outstanding to his estate for the period 1 April 2013 - 26 April 2013.

*** Christopher Waldron was appointed to the Board on 21 October 2013.

Directors' term of appointment

Each Director retires from office at the third annual general meeting after his appointment or (as the case may be) the general meeting at which he was last reappointed and is eligible for reappointment.

The Directors were appointed as Non-executive Directors by letters issued in April 2008 and October 2013 which state that their appointment and any subsequent termination or retirement shall be subject to three-month' notice from either party in accordance with the Articles. Each Director's appointment letter provides that, upon the termination of his/her appointment, that he/she must resign in writing and all records remain the property of the Company. The Directors' appointments can be terminated in accordance with the Articles and without compensation. There is no notice period specified in the Articles for the removal of Directors. The Articles provide that the office of director shall be terminated by, among other things: (a) written resignation; (b) unauthorised absences from board meetings for six months or more; (c) unanimous written request of the other directors; and (d) an ordinary resolution of the Company.

Signed on behalf of the Board of Directors on 11 May 2015 by:

David Macfarlane Patrick Firth

Director Director

Corporate Governance

Introduction

The Board of JZ Capital Partners Limited has considered the principles and recommendations of the AIC Code of Corporate Governance published in October 2010 (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to JZ Capital Partners Limited.

The Company is a member of the Association of Investment Companies (the "AIC") and by complying with the AIC Code of Corporate Governance ("AIC Code") is deemed to comply with both the UK and Guernsey Codes of Corporate Governance. The Financial Reporting Council issued a revised UK Corporate Governance Code in September 2014 for accounting periods beginning on or after 1 October 2014. The AIC updated the AIC Code (including the Guernsey edition) and its Guide to Corporate Governance to reflect the relevant changes to the FRC document in February 2015. The Board has not early adopted this revised code.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders. To ensure ongoing compliance with these principles the Board receives and reviews a report from the Corporate Secretary, at each quarterly meeting, identifying how the Company is in compliance and identifying any changes that might be necessary.

Throughout the accounting period the Company has complied with the recommendations of the AIC Code and thus the relevant provisions of the UK Corporate Governance Code, except as set out below.

The UK Corporate Governance code includes provisions relating to:

- the role of the chief executive

- executive directors remuneration

- the need for an internal audit function

- whistle blowing policy

For the reasons set out in the AIC guide, and as explained in the UK Corporate Governance Code, the Board considers these provisions are not relevant to the position of JZ Capital Partners Limited, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions. The Directors are non-executive and the Company does not have employees, hence no whistle blowing policy is required. However the Directors have satisfied themselves that the Company's service providers have appropriate whistle blowing policies and procedures and have received confirmation from the service providers that nothing has arisen under those policies and procedures which should be brought to the attention of the Board.

Guernsey Code of Corporate Governance

The Guernsey Financial Services Commission's (GFSC) "Finance Sector Code of Corporate Governance" (Guernsey Code) came into effect on 1 January 2012. The introduction to the Guernsey Code states that companies which report against the UK Corporate Governance Code or the AIC's Code of Corporate Governance are deemed to meet the Guernsey Code.

The Board

Corporate Governance of JZCP is monitored by the Board which at the end of the year comprised five Directors, all of whom are non-executive. Biographical details of the Board members at the date of signing these Financial Statements are shown below and their interests in the shares of JZCP are shown in the Report of the Directors. The Directors' biographies highlight their wide range of business experience.

The Board considers that all of the Directors are independent of the Investment Adviser. The Board considers the Directors are free from any business or other relationship that could materially interfere with the exercise of their independent judgment. The Board reviews the independence of the Directors at least annually.

Proceedings of the Board

The Directors have overall responsibility for the Company's activities and the determination of its investment policy and strategy. The Company has entered into an investment advisory and management agreement with its Investment Adviser, JZAI, pursuant to which, subject to the overall supervision of the Directors, the Investment Adviser acts as the investment manager to the Company and manages the investment and reinvestment of the assets of the Company in pursuit of the investment objective of the Company and in accordance with the investment policies and investment guidelines from time to time of the Company and any investment limits and restrictions notified by the Directors (following consultation with the Investment Adviser). Within its strategic responsibilities the Board regularly considers corporate strategy as well as dividend policy, the policy on share buy backs and corporate governance issues.

The Directors meet at least quarterly to direct and supervise the Company's affairs. This includes reviewing the investment strategy, risk profile and performance of the Company and the performance of the Company's functionaries, and monitoring compliance with the Company's objectives. The Directors hold regular meetings to review the Investment Adviser's investment decisions and valuations and to decide if the levels of gearing within the investment portfolio are appropriate. The Directors deem it appropriate to review the valuations on a quarterly basis.

Continuing terms of Investment Adviser agreement

In the opinion of the Directors, the continuing appointment of the Investment Adviser on the terms agreed continues to be in the interests of Shareholders. In reaching its conclusion the Board considers the Investment Adviser's investment strategy and performance.

Supply of information

The Chairman ensures that all Directors are properly briefed on issues arising at Board meetings. The Company's advisers provide the Board with appropriate and timely information in order that the Board may reach proper decisions. Directors can, if necessary, obtain independent professional advice at the Company's expense.

Directors' training

The Board is provided with information concerning changes to the regulatory or statutory regimes as they may affect the Company, and are offered the opportunity to attend courses or seminars on such changes, or other relevant matters. An induction programme is available for any future Director appointments.

Chairman and senior independent Director

The Chairman is a non-executive Director, together with the rest of the Board. There is no executive Director position within the Company. Day-to-day management of the Company's affairs has been delegated to the Administrator. The Board has considered whether a senior independent Director should be appointed. However, as the Board comprises entirely non- executive Directors, the appointment of a senior independent Director for the time being, is not considered necessary. Any of the non-executive Directors are available to shareholders if they have concerns which cannot be resolved through discussion with the Chairman.

Board diversity

The Board has also given careful consideration to the recommendations of the Davies Report on women on boards and as recommended in that report has reviewed its composition and believes that it has available an appropriate range of skills and experience. In order to extend its diversity, the Board is committed to implementing the recommendations of the Davies Report, if possible within the timescales proposed in the Davies Report, and to that end will ensure that women candidates are considered when appointments to the Board are under consideration - as indeed has always been its practice.

Re-election of Directors

The principle set out in the UK Corporate Governance Code is that Directors should submit themselves for re- election at regular intervals and at least every three years, and in any event as soon as it is practical after their initial appointment to the Board. It is a further requirement that non-executive Directors are appointed for a specific period.

The Letters of Appointment of the non-executive Directors suggest that it is appropriate for Directors to retire and be nominated for re-election after three years of service, subject to the recommendation of the General Meeting. Patrick Firth and Tanja Tibaldi were re-elected to the Board at the 2014 Annual General Meeting. David Macfarlane and James Jordan were re-elected to the Board at the 2013 Annual General Meeting. The appointment of Christopher Waldron to the Board during 2013 was ratified at the 2014 Annual General Meeting.

The Board's evaluation

The Board, Audit Committee, and Nomination Committee undertake an evaluation of their own performance and that of individual Directors on an annual basis. In order to review their effectiveness, the Board and its Committees carry out a process of formal self-appraisal. The Board and Committees consider how they function as a whole and also review the individual performance of its members. This process is conducted by the respective Chairman reviewing each member's performance, contribution and their commitment to the Company. The Board as a whole reviews the performance of the Chairman. Each Board member is also required to submit details of training they have undertaken on an annual basis.

The results of the evaluation process concluded the Board was functioning effectively and the Board and its committees provided a suitable mix of skills and experience.

Board Committees

In accordance with the AIC Code, the Board has established an Audit Committee and a Nomination Committee, in each case with formally delegated duties and responsibilities within written terms of reference. The identity of each of the chairmen of the committees referred to below are reviewed on an annual basis. The Board has decided that the entire Board should fulfil the role of the Audit and Nomination committees. The terms of reference of the committees are kept under review and can be viewed on the Company's website www.jzcp.com.

Nomination Committee

In accordance with the Code, the Company has established a Nomination Committee. The main role of the committee is to propose candidates for election to the Board of Directors, including the Chairman. The Nomination Committee takes into consideration the Code's rules on independence of the Board in relation to the Company, its senior management and major shareholders. The nomination committee is chaired by David Macfarlane, and each of the other Directors is also a member. The members of the committee are independent of the Investment Adviser. The Nomination Committee has responsibility for considering the size, structure and composition of the Board, retirements and appointments of additional and replacement Directors and making appropriate recommendations to the Board.

Due to the nature of the Company being a listed investment company investing in private equity with an international shareholder base, the Company needs Directors with a broad range of financial experience. For this reason, Directors believe that it is more appropriate to use their own contacts as a source of suitable candidates as no one external consultancy or advertising source is likely to be in a position to identify suitable candidates.

The final decision with regard to appointments always rests with the Board and all such appointments are subject to confirmation by shareholders.

Audit Committee

The Audit Committee is chaired by Patrick Firth. All the other Directors are members. Members of the Committee are independent of the Company's external auditors and the Investment Adviser. The Audit Committee meets at least twice a year and meets the external auditors at least twice a year. The Audit Committee is responsible for overseeing the Company's relationship with the external auditors, including making recommendations to the Board on the appointment of the external auditors and their remuneration. The Committee also considers the nature, scope and results of the auditors' work and reviews, and develops and implements policies on the supply of any non-audit services that are to be provided by the external auditors.

Management Engagement Committee

The Company currently does not have a separate Management Engagement committee. The recommended functions and responsibilities of such a committee are exercised by the full board each member of which is unassociated with the Investment Adviser.

Remuneration Committee

In view of its non-executive and independent nature, the Board considers that it is not appropriate for there to be a separate Remuneration Committee as prescribed by the AIC Code. The process for agreeing the non-executive Directors' fees is set out in the Directors' Remuneration Report.

Board and Committee meeting attendance

The number of formal meetings of the Board and its committees held during the year and the attendance of individual Directors at these meetings was as follows:

The main Board meetings are held to agree the Company's valuation of its investments, agree the Company's financial statements and discuss and agree other strategic issues. Other meetings are held when required to agree board decisions on ad- hoc issues.

Internal Controls

Responsibility for the establishment and maintenance of an appropriate system of internal controls rests with the Board and to achieve this, a process has been established which seeks to:

- review the risks faced by the Company and the controls in place to address those risks

- identify and report changes in the risk environment

- identify and report changes in the operational controls

- identify and report on the effectiveness of controls and errors arising

- ensure no override of controls by its service providers, the Manager and Administrator.

A report is tabled and discussed at each Board meeting setting out the risks identified, their potential impact, the controls in place to mitigate them, the residual risk assessment and any exceptions identified during the period under review. The Board considers the current activities of the company and external factors and amends the risk reporting accordingly.

The Board also receives confirmation from the Administrator of its accreditation under the SOC1 report.

Further reports are received and reviewed from the Administrator in respect of compliance, London Stock Exchange continuing obligations and other matters.

Going Concern

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 Financial Statements on the going concern basis.

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") which became effective on 1 January 2013. The legislation is aimed at determining the ownership of US assets in foreign accounts and improving US tax compliance with respect to those assets. The States of Guernsey has entered into an intergovernmental agreement ("IGA") with US Treasury in order to facilitate the requirements under FATCA. In May 2014, the US announced a six month delay to the new entity account on-boarding rules, from 1 July 2014 to 1 January 2015, for the operation of the US FATCA regulations, which has been extended to the IGA. Guernsey Financial Institutions are required to have had new individual account on-boarding procedures in place with effect from 1 July 2014 and new entity account on-boarding procedures with effect from 1 January 2015. The Board has taken steps to implement on- boarding procedures, with the assistance of its professional advisers.

Inter-Governmental Agreements

The States of Guernsey have signed an intergovernmental agreement with the UK ("UK-Guernsey IGA") under which potentially mandatory disclosure requirements may be required in respect of Shareholders who have a UK connection. The Board is monitoring implementation of the UK-Guernsey IGA with the assistance of its professional advisers.

Alternative Investment Fund Managers Directive

The Company does not expect to be required to comply with the AIFM Directive except to the extent that it may be required to satisfy certain provisions of the AIFM Directive in order to permit the marketing of the Company's shares in EEA Member States. In this circumstance the relevant regime remains the national private placement arrangements in the relevant EEA Member State into which the fund is marketed. Compliance with the Directive may result in increased reporting requirements, possible changes to the governance structure of the Company and additional disclosure in the financial statements. The Company will consult with its professional advisors to minimise this impact where possible.

Relations with shareholders

The Directors believe that the maintenance of good relations with both institutional and retail shareholders is important for the long term prospects of the Company. It therefore seeks active engagement with investors, bearing in mind the duties regarding equal treatment of shareholders and the dissemination of inside information. The Board receives feedback on shareholder views from its Corporate Broker and Investment Adviser, and is circulated with Broker reports on the Company.

The Directors believe that the Annual General Meeting, a meeting for all shareholders, is the key point in the year when the Board of Directors accounts to all shareholders for the performance of the Company. It therefore encourages all shareholders to attend, and all Directors are present unless unusual circumstances prevail.

The Directors believe that the Company policy of reporting to shareholders as soon as possible after the Company's year end and the holding of the Annual General Meeting at the earliest opportunity is valuable.

The Company also provides an Interim Report and Accounts in accordance with IAS 34 and Interim Management statements for the quarterly periods in line with the requirements of the EU Transparency Directive.

Independent Auditors' Report

Independent auditors' report to the members of JZ Capital Partners Limited

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company's affairs as at 28 February 2015 and of its profit for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies (Guernsey) Law 2008.

What we have audited

We have audited the financial statements of the Company for the year ended 28 February 2015 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and related notes 1 to 34. The financial reporting framework that has been applied in their preparation is applicable law and IFRS.

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Our assessment of risks of material misstatement

We identified the following risks of material misstatement that we believed would have the greatest impact on our overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team:

• valuation of the Company's unquoted investments whose valuations are subjective and require the use of estimation and judgement;

• calculation of management and incentive fees, including the risk of management override of controls; and; and

• existence and ownership of investments because failure to obtain good title exposes the Company to significant risk of loss

Our application of materiality

We determined planning materiality for the Company to be US$14.1 million (2014: US$13.3 million), which is 2% of Net Asset Value. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures. We used equity as a basis for determining planning materiality because the Company's primary performance measures for internal and external reporting are based on net asset value.

On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that overall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Company should be 50% (2014: 75%) of materiality, namely US$7.0 million (2014: US$9.9 million). Our objective in adopting this approach was to ensure that total uncorrected and undetected audit differences in the financial statements did not exceed our materiality level.

We agreed with the Audit Committee that we would report to them all audit differences in excess of US$0.71 million (2013: US$0.67 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluated any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations.

An overview of the scope of our audit

We adopted a risk-based approach in determining our audit strategy. This approach focuses audit effort towards higher risk areas, such as management judgments and estimates.

Our response to the risks identified above was as follows;

• we confirmed our understanding of the Company's methodology, processes and policies for valuing its unquoted investments;

• we determined and challenged the appropriateness of the valuation techniques applied to unquoted investments, and obtained evidence to corroborate the inputs into the valuation model;

• we agreed valuation inputs that did not require specialist knowledge to supporting documentation and we tested the arithmetical accuracy of the Company's calculations;

• we engaged our own real estate valuation experts, in relation to the valuation of the real estate portfolio, to:

a) assist us to determine whether the methodology used to value the investment was appropriate; and

b) corroborate and challenge management's judgements and valuation inputs utilised in the valuation calculation.

Our response to the risk of incorrect calculation of management and incentive fees was as follows:

• we reperformed the management and incentive fee calculations for accuracy and consistency with agreements; and

• we reviewed the reasonableness of the inputs used in the incentive fee calculation and also considered the risk of management overriding internal controls;

Our response to the risk of existence and ownership of investments was as follows:

• we obtained independent confirmations for a sample of unquoted investments directly from the underlying investee companies and agreed them to the books and records of the Company; and

• we obtained independent confirmation from the custodian of the Company's publicly traded investments and agreed this to the records of the Company.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or

• is otherwise misleading.

In particular we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.

Under the Companies (Guernsey) Law 2008 we are required to report to you if, in our opinion:

• proper accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records; or

• we have not received all the information and explanations we require for our audit.

Christopher James Matthews, FCA

for and on behalf of Ernst & Young LLP

Guernsey, Channel Islands

11 May 2015

Notes:

1. The maintenance and integrity of the JZ Capital Partners Limited web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.

2. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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