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 2014

6 May 2014

~ Well positioned to capitalise on attractive investment opportunities

focusing on long-term NAV growth ~

JZ Capital Partners, the London listed private equity fund which invests in high-quality US and European micro cap companies, announces its annual results for the twelve month period ended 28 February 2014.

Results Highlights

· NAV Total Return of 8.8% including:

o Distribution of US$0.30 per share (FY 28/2/13: US$0.29 per share), implying a dividend yield of 4% (as at 28/2/14)

o Pre-dividend NAV per share growth of 8.8% to US$10.55 (28/2/13: US$9.69)

o Post-dividend NAV growth of 5.8% to US$666 million (28/2/13: US$630 million)

· NAV growth in 19 of the last 20 quarters

Portfolio Highlights

· Significant investment activity with US$150.1 million invested across the US micro cap (US$29.7 million), European micro cap (US$45.1 million) and real estate portfolios (US$75.2 million).

· US$72.7 million of proceeds, primarily from the realisation of two investments including the sale of Horsbugh and Scott, and the refinancing of certain Industrial Services Solutions debt.

· New industry vertical - Logistics Solutions - added to core US micro cap portfolio

· US micro cap portfolio generated EBITDA growth of 31% over the period, on a combined basis

· At the end of the period, the portfolio consisted of 50 companies across 10 industries

Outlook

· Positive outlook - improving macro-economic indicators, specialist sector focus and balance sheet strength provide the Company with attractive investment opportunities across all three portfolios

David Zalaznick, JZCP's Founder and Investment Adviser, said: "The Company has had another year of sustained NAV growth driven by strong earnings performance from our core US and European micro cap portfolios and steady progress with our maturing real estate assets in Brooklyn.

Our differentiated micro cap strategy, distinct industry verticals and proprietary network continue to provide attractive investment and realisation opportunities for the Company. Early signs of an economic recovery in our core regions of the United States and Europe will further support our ability to generate long-term growth for our shareholders and we approach the next twelve months with confidence."

David Macfarlane, Chairman of JZCP, said: "It has been another year of significant progress for the Company, in the first full year following the implementation of several strategic initiatives. The Investment Adviser's disciplined approach to micro cap investing has delivered another period of steady NAV growth and the Company remains well positioned in an improving macro-economic environment.

The Board's confidence in the outlook is reflected in the declaration of a dividend of US$0.30 per share, in line with the policy of distributing 3% of NAV per annum."

Presentation details:

There will be an analyst and investor presentation to discuss JZCP's recent financial performance and portfolio developments at midday on 6 May 2014 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. It can be accessed by dialing +44 (0)20 3427 1912 (UK) or +1 646 254 3360 (US) with the participant access code 3971962.

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 3971962.

For further information:

Ed Berry / Kit Dunford +44 (0)20 3727 1046 / 1143

FTI Consulting

David Zalaznick +1 212 572 0800

Jordan/Zalaznick Advisers, Inc.

Andrew Maiden +44 (0) 1481 745368

JZ Capital Partners

About JZCP

JZCP is a London and Channel Islands listed private equity fund which invests in high quality US and European micro cap companies. Its objective is to achieve a superior overall return comprised of a current yield and significant capital appreciation. JZCP receives investment advice from Jordan/Zalaznick Advisers, Inc. ("JZAI") 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. JZCP also invests in mezzanine loans, first and second lien investments and other publicly traded securities.

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 2014. All figures are based on the audited financial statements for the year ended 28 February 2014.

The announcement is prepared on the same basis as will be set out in the audited financial statements for the year ended 28 February 2014.

The annual report and audited financial statements for the year ended 28 February 2014 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 2014.

Performance

It has been another twelve months of positive NAV growth for the Company in its first full year since the implementation of several strategic initiatives designed to broaden the shareholder base, build on the Company's core micro cap investment strategy and lay the foundation for long-term growth.

The Company's differentiated micro cap strategy has continued to provide attractive investment and realisation opportunities in its core geographies, while increased economic optimism and signs of recovery in the US and Eurozone have provided a more stable macro-economic backdrop.

Central bank stimulus during the first half of the year paved the way for a strong equity rally as investors increased their appetite for risk. While the US economy grew at a slower annualised pace than the third quarter's 4.1% rate, the final six months of the year delivered the strongest second half since 2003, boosted by exports, consumer spending and business investment. The Eurozone and one of our core markets, Spain, emerged from a two-year recession, with export growth and companies becoming more confident, while ratings agencies raised their outlook for Spain on signs of economic improvement.

Uncertainty across global markets, particularly in developing countries leading up to and in the aftermath of the US Federal Reserve's tapering announcement, partially offset some of the strong equity gains. The end of the fiscal year was dominated by political turmoil in Ukraine and with the outcome still uncertain, the conflict continues to weigh heavily on the surer footing that the global economy had built during the year.

Against this economic backdrop, the Company delivered another year of steady NAV growth, driven by a positive performance across the underlying portfolio. The Company's NAV (including dividends paid) grew 8.8% to US$10.55, from US$9.69 (FY12). This marks the 19th quarter of positive NAV growth out of the last 20 quarterly periods, reflecting the quality of the Company's portfolio and unrivalled micro cap expertise of JZAI, the Investment Adviser.

Portfolio update

There has been significant investment activity during the year with the Company putting US$150.1 million to work across the three main portfolios - US micro cap, European micro cap and real estate, which represent 51% 28% and 17% of NAV respectively.

Operationally, the underlying portfolio continues to deliver, with US micro cap businesses generating increased EBIDTA of 21 per cent over the period, on a combined basis. This has been achieved through the strong operational focus of the experienced industry professional responsible for each of the US micro cap industry 'verticals'.

The Board has been particularly pleased with the micro cap investments which remain the Company's strategic focus and main driver of NAV growth. We have introduced a new vertical this year, Logistics Solutions, focusing on companies in the specialised transport and logistics industry. The first investment in this vertical was a 30.5% acquisition in Priority Express, offering same-day express delivery services to laboratories, hospitals and health systems and pharmaceutical organisations.

Our exposure to the European micro cap sector continues to complement and diversify the US micro cap portfolio and is a strategically important segment of the business. The Board is pleased with the significant progress within the European micro cap portfolio which now consists of seven investments in Spain, one UK-based company and one German company, representing an increase of US$77.4 million. The Company continues to explore attractive investment opportunities in Europe through its investment in the EuroMicrocap Fund, 2010 LP.

The Investment Adviser's disciplined and opportunistic approach to value investing continues to lead to a healthy investment pipeline in the real estate sector, where it replicates its proven micro cap strategy of buying businesses at reasonable values in conjunction with excellent management teams.

The Company invested 66.7 million to acquire interests in 13 retail and residential properties in rapidly growing areas in Brooklyn to bring the total number of properties in which the Company is interested within the real estate portfolio to 19.

The Company is making steady progress in establishing a new, previously announced asset management business in the US that will address the growing demand from endowments and pension funds for fiduciary management services. We look forward to updating the market on the progress of these investments later in the year.

Realisations  

There have been two significant realisations generating most of the US$72.7 million received during 2013. The Company realised its investment in Horsburgh and Scott, a manufacturer of large diameter gears for US$38.6 million. It was purchased in 2007 and earned a multiple of capital invested of 1.8x and an IRR of 13%. The Company also refinanced US$26.4 million of JZCP-held investments in the Industrial Services Solutions ("ISS") vertical with a senior debt facility.

Distributions

In accordance with their policy of distributing 3 per cent of NAV per annum in two equal instalments, the Directors declared a second Dividend of 16 cents per share for the six months ended 28 February 2014, compared to 15 cents for the period ended 28 February 2013. Having already paid a first interim dividend of 14.5 cents, this implies an annualised yield as at 28 February 2014 of 4%.

NAV Discount

Against this positive background and performance, the discount to NAV at which JZCP's shares stand in the market is disappointing. 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 solution to the issue lies in a clear explanation of strategy and transparent reporting, coupled with continued outstanding performance. We strive to achieve high standards of reporting and we are confident that performance will be delivered, noting particularly, the interest through their own substantial investment in JZCP that our Investment Adviser, JZAI, have in delivering that.

Outlook

We approach the next twelve months with confidence and a continued commitment to providing superior returns for our shareholders, through both capital and income appreciation.

The Board is encouraged by a pipeline of high quality potential investments in the US, particularly through the verticals, and quality existing and prospective investments in Europe. Positive macroeconomic indicators and a strong balance sheet means the Company is well positioned to capitalise on attractive investment opportunities in its core markets. The Company will continue to focus on long-term NAV growth and preserving shareholder value.

Special business at AGM

Shareholders will note that at current value, JZCP's European investments constitute approximately 23.3% of its total portfolio. Under JZCP's existing investment policy, the proportion of the Company's gross assets which it is permitted to invest in businesses outside the United States is limited to 30%.

This situation arises as a result of the continuing availability of outstanding investment opportunities in Europe and the success of the investments that we have already made. In these circumstances the Directors seek shareholders authority to increase this proportion to 40% and an ordinary resolution to this effect will be proposed at the Annual General Meeting. Whilst there is immediate pressure on the ceiling, the maturity of parts of the European portfolio is such that realisations might be expected, although the Directors would in the light of opportunities currently available, expect a continued significant commitment to investment in Europe.

The Board is also seeking an authority from shareholders to allot ordinary shares for cash on a non pre-emptive basis equivalent to up to 10% of its issued share ordinary share capital. The Board is considering methods of raising additional capital and this would allow it greater flexibility to do so. The Board would not raise capital at a discount to NAV.

David Macfarlane

Chairman

2 May 2014

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 2014.

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 Share Capital consists of Ordinary shares and Zero Dividend Preference ("ZDP") shares. The Ordinary and ZDP shares were admitted to the official list of the London Stock Exchange ("LSE") on 27 June 2008.

The Company's objective is to create a portfolio of investments in businesses primarily in the United States, providing a superior overall return comprised of a current yield and significant capital appreciation. The Company's present strategies include investments in micro cap buyouts, mezzanine loans (sometimes with equity participations) and high yield securities, senior secured debt and second lien loans, real estate and other debt and equity opportunities, including distressed debt and structured financings, derivatives and opportunistic purchases of publicly traded securities.

The Company's Ordinary shares are traded on the London Stock Exchange's Specialist Fund Market and the Company is also listed on the Channel Islands Securities Exchange ("CISE").

Business review

The total profit attributable to Ordinary shareholders for the year ended 28 February 2014 was US$55,454,000 (year ended 28 February 2013: profit of US$35,850,000). The revenue return for the year was US$29,178,000 (year ended 28 February 2013: US$27,113,000), after charging directors fees and administrative expenses of US$2,486,000 (year ended 28 February 2013: US$2,785,000) and Investment Adviser's base fee of US$11,220,000 (year ended 28 February 2013: US$10,707,000). The revenue return for the 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$666,456,000 (28 February 2013: US$630,182,000) equal to US$10.25 (28 February 2013: US$9.69) per Ordinary share.

For the year ended 28 February 2014, the Company had US$7,296,000 of cash outflows resulting from operating activities (year ended 28 February 2013: inflows of US$2,196,000).

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 2014 an interim dividend of 14.5 cents per Ordinary share (total US$9,427,698) was declared by the Board on 16 October 2013 and paid on 13 October 2013.

A second interim dividend of 16 cents per Ordinary share (total US$10,402,978) was declared by the Board on 2 May 2014.

Directors

The Directors listed below are all non-executive and, with the exception of Christopher Waldron, who was appointed to the Board on 21 October 2013, 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

Christoper Waldron

All Directors are independent.

Annual General Meeting

The Company's Annual General Meeting is due to be held on 19 June 2014.

Share capital and purchase of own shares

Details of the ZDP shares and the Ordinary shares can be found in Notes 17 and 18. 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:

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 2014 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 19 of the Financial Statements.

Substantial shareholders

As at 28 February 2014 and at the date of this report 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 2014 and 28 February 2013 have been prepared in accordance with the Association of Investment Companies ("AIC") recommended methodology. The Ongoing charges for the year ended 28 February 2014 were 2.14 per cent. (28 February 2013: 2.22 per cent.) excluding incentive fees and 3.54 per cent. including incentive fees (28 February 2013: 3.69 per cent.).

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 2014.

(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 2 May 2014.

David Macfarlane

Chairman

Patrick Firth

Director

Audit Committee Report

Dear Shareholder,

On the following pages, we present the Audit Committee's Report for 2014, setting out the responsibilities of the Audit Committee and its key activities in 2013/2014. 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 2014 was US$654,209,000 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 2014 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.

During the year the Audit Committee considered the early adoption of the 'Investment Entities' amendment to IFRS10. The amendment was endorsed by the European Union on 21 November 2013 and as such was formally early adopted by the Company for the preparation of these Financial Statements.

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 2014.

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 2014 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 2 May 2014 and signed on behalf by:

Patrick Firth

Chairman, Audit Committee

Investment Adviser's Report

Dear Fellow Shareholders,

We are pleased to report that JZCP's pre-dividend NAV grew 8.8 per cent in the fiscal year ended 28 February 2014, from US$9.69 as of 1 March 2013 to US$10.55 as of 28 February 2014, continuing JZCP's trend in NAV growth seen in every year since our recapitalisation in 2009. The steady NAV growth was again underpinned by positive performance from the underlying assets across the various portfolios. Post-dividend NAV increased 5.8 per cent during the same period, taking into account US$0.30 in dividend distributions made over the past year. 2014 marks the second full year of our new dividend policy of distributing 3 percent of NAV in semi-annual payments; at our stock price as of 31 March 2014, the implied dividend yield was 4.0 per cent.

JZCP had an active investment period for the fiscal year ended 28 February 2014, putting US$150.1 million to work across our three primary portfolios - US micro cap, European micro cap and real estate. During the same period, we received US$72.7 million in proceeds from realisations, primarily through asset sales and the refinancing of JZCP-held debt.

JZCP's underlying portfolio companies performed well on an operating basis during the fiscal year ended 28 February 2014. On a combined basis, earnings before interest, taxes, depreciation and amortisation ("EBITDA") of all our US micro cap businesses increased 31% per cent over that period though a decent portion of the growth came from one co-investment.

As of 28 February 2014, our US micro cap portfolio was valued at 7.3x EBITDA, after applying an average 27 per cent marketability discount. The underlying leverage senior to JZCP's position in our U.S. micro cap portfolio grew from 1.0x to 1.8x EBITDA, as certain of our portfolio companies demonstrated an ability to support greater leverage. Consistent with our value oriented investment philosophy, we acquired our US micro cap portfolio at a combined 5.9x EBITDA. Additionally, despite a very pricey acquisition market, we paid just 5.5x EBITDA on average for US micro cap acquisitions made during the year ended 28 February 2014.

Our European micro cap portfolio, currently consisting of seven Spanish companies, one UK-based company and one German company, was valued at a combined 7.3x EBITDA multiple at 28 February 2014, after a 30 per cent marketability discount. European acquisition multiples are lower than their U.S. counterparts; for acquisitions made during the year ended 28 February 2014, we paid, in cash, 3.1x EBITDA. The European micro cap portfolio has very little debt senior to JZCP's position, under 2.0x EBITDA.

We had two significant realisations in the most recent fiscal year. The first involves one of our US micro cap investments, Horsburgh and Scott, a manufacturer of large diameter gears, which we acquired in November 2007. In March 2013, we sold Horsburgh and Scott, realising cumulative proceeds of US$38.6 million on our US$21.8 million investment, for a 1.8x multiple of capital invested and a 13 per cent IRR. Given that we had been writing this investment up over time, there was a negligible effect on NAV.

We also refinanced US$26.3 million of JZCP-held investments in our Industrial Services Solutions ("ISS") vertical with a senior debt facility, as these businesses demonstrated they could prudently support increased third-party leverage.

Investing in micro cap companies has historically been the main driver of NAV growth and will continue to be so. We continue to be active in our five established business sectors, or "verticals," (Industrial Services Solution ("ISS"), Sensors Solutions, Healthcare Revenue Cycle Management, Water Services, and Testing Services) and we are excited to have introduced a new vertical this year, Logistics Solutions.

Individual verticals are managed by an experienced industry professional, who is involved in both making acquisitions and helping each business grow organically and through synergies with other portfolio companies. For these activities, we invest with Edgewater Growth Capital Partners; together, we take a majority position in all of our verticals. We are also growing our micro cap portfolio by co-investing with other well-known US buyout firms whose operational focus in buying and managing small businesses overlaps with ours.

We are now approaching our third year of investing in the real estate sector; specifically, redevelopment of properties in gentrifying neighbourhoods in Brooklyn, NY. We are applying the same disciplined approach to these investments that we have always used; buying properties at reasonable values (non-auction) in partnerships with a management team that can add considerable value.

Our newly established asset management business in the US is also taking firm root, and will address the growing demand from endowments, foundations and corporate pension funds for fiduciary management services.

NAV Growth

For the fiscal year ended 28 February 2014, JZCP's NAV increased from US$9.69 per share to US$10.55, an 8.8 per cent increase (before the US$0.30 of dividends paid in the period). The chart below details the changes in NAV on a per share basis:

The US$0.70 increase in the value of our private investments is primarily due to an increase in earnings of the underlying entities. The US micro cap portfolio contributed US$0.17 to this increase, primarily due to increased earnings at: Milestone Aviation Group, the helicopter leasing business (US$0.07); our water vertical (US$0.05); our sensors vertical (US$0.06); Nationwide Studios (US$0.04); and Justrite Manufacturing, an industrial safety co-investment (US$0.04). Offsetting these increases were decreases in (a) Healthcare Products Holdings, our power wheelchair company (US$0.10), as lower Medicare-sponsored prices hurt earnings and (b) MEDS Holdings, our healthcare revenue cycle management business (US$0.03), which was hurt by since-rectified management issues.

The European micro cap portfolio increased US$0.50, spurred by a US$0.63 increase in Factor Energia, our Spanish energy reseller, due to both increased earnings and a multiple increase. Grupo Ombuds, our personal and commercial security business, increased US$0.02 following the successful repositioning of its business. Offsetting these increases were write-downs at (a) gold reseller Oro Direct (US$0.13), hurt by falling gold prices and a government mandated investigation into the gold resale industry, and (b) Xacom (US$0.04), which was affected by delayed shipments of new products, although those shipments have begun again.

We have increased the value of one of the Fulton Mall real estate properties by US$.03, given positive movement in comparable properties values.

Safety Insurance, the only listed equity investment of material size, increased US$0.16.

Returns

The chart below summarises the cumulative total NAV returns and total shareholder returns for the most recent three-month period, fiscal year and four-year period following our refinancing and restructuring in June 2009.

Despite our rarely selling an investment for less than its carrying value, the market continues to undervalue our assets; as of 28 February 2014, our stock traded at a 27 per cent discount to NAV, compared to 22 per cent a year ago.

Portfolio Summary

Our portfolio is well diversified across 50 businesses and 10 industries, and continues to become more diversified geographically as we grow our European portfolio. Given the tough investing market from 2008 to 2011, it is not surprising that 70 per cent of our portfolio is less than three years old.

Below is a summary of JZCP's assets at 28 February 2014 as compared to 28 February 2013. As you will note, both our European micro cap portfolio and our real estate portfolio increased by US$79.3 million, due to the acquisition activity described below.

Note that 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. During the fiscal year ended 28 February 2014, as in previous periods, we purchased UK Gilts with an eye toward the 2016 maturity date of our ZDPs.

US micro cap portfolio

As mentioned, we have written this portfolio up by US$0.17, led by increased earnings at a number of our portfolio companies.

New US investments - verticals

Our activity during the period focused on ensuring the efficient operation of our most recent investments, coupled with selected high-quality new investments.

We added to our five existing industry sectors by starting a new vertical, Logistics Solutions, to be managed by Bruce Parker. Bruce built his career managing various transportation and logistics companies, including serving as an officer of Ryder System, Inc. and United Airlines as well as CEO of AirNet Systems, Inc. Our first investment in this vertical was Priority Express, which provides same-day express delivery services to reference laboratories, hospitals and health systems, pharmacy organisations and various other companies located primarily in the greater Philadelphia and Lehigh Valley regions of Pennsylvania, northern New Jersey and southern New York. The company provides both scheduled courier services as well as on-demand delivery. We invested US$8.0 million in 10 per cent senior notes and US$4.4 million in preferred equity. Post-close, JZCP owns 30.5 per cent of the combined entity on a fully-diluted basis.

We purchased Amerimex, an addition to our Industrial Services Solutions vertical managed by Jim Rogers, a former GE senior manager. Amerimex specialises in new and remanufactured alternating current ("AC") traction motors, new blowers and remanufactured direct current ("DC") traction motors for application in oil & gas (traditional drilling and hydraulic fracturing), marine and dredging industries. The company also repairs industrial AC and DC motors for a broad range of applications. JZCP invested US$4.1 million in 10 per cent PIK preferred equity. In addition to the preferred equity provided by the sponsors, a US$10.0 million term loan was provided by a third-party financing institution. Post-close, JZCP owns 30.6 per cent of the combined entity on a fully-diluted basis.

Post period (March 2014), we purchased Premier Safety, an add-on acquisition to Argus-Hazco, our industrial hygiene equipment supplier and lessor of our Testing Holdings vertical. This small acquisition helps expand Argus' geographic footprint into Pittsburgh, PA and its surrounding areas. Premier has developed a reputation as a quality provider of both products and services. JZCP assisted in the purchase of this business by investing in US$1.7 million of senior notes, already owning 30.5 per cent of Premier Safety though our existing holding company.

Recently, we purchased MedFin, our second investment in the healthcare revenue cycle management vertical. MedFin is based in Sarasota, FL and has an office in Kolkata, India. The company specialises exclusively in billing, practice management and outsourcing services for anesthesiology physician and nurse groups and ambulatory surgery centers ("ASCs"). The company's anesthesiology and nurse group clients contract with healthcare facilities (hospitals and ASCs) to provide anesthesia services and outsource their billing and practice management operations to MedFin. ASC clients own and operate the surgery centers that contract with or employ the anesthesiologists/nurses. ASC clients choose to outsource their practice management or billing operations to MedFin. Investing US$3.8 million in debt and US$3.3 million in stock, both directly and through the Bolder Healthcare Solutions holding entity, JZCP owns approximately 28 per cent of MedFin.

European micro cap portfolio

JZCP is investing in the European micro cap sector through its 75 per cent ownership of the European Microcap Fund ("EMC"). Exposure to the European micro cap sector continues to complement and diversify JZCP's existing US micro cap portfolio. As you may recall, EMC has offices in London and Madrid and an outstanding team with over ten years of investment experience in European micro cap deals. As of 28 February 2014, EMC has made seven investments in Spain, one investment in the UK and one investment in Germany, which combined represent 28 per cent of total NAV.

As mentioned previously, Factor Energia, our Spanish energy reseller, led the increase in the European micro cap portfolio (US$0.50).

New European investments 

In the fiscal year ending 28 February 2014, we made four investments into the European micro cap portfolio.

One World Packaging is a business we spun out of a larger, traditional packaging company in Spain. One World Packaging manufactures disposable trays for the food service industry in Spain and throughout Europe. This proprietary product is unique in that it outperforms plastic and is biodegradable. The company plans to sell the product to large food manufacturers and distributors in European countries which value environmentally friendly and sustainable products. EMC purchased 70 per cent of One World Packaging for €5.0 million in April 2013 and will support the company's development.

EMC co-invested £9.5 million to acquire 36 per cent of the Winn Group, a successful UK legal services firm specialising in personal injury cases and claims management. The Winn Group also provides replacement car hire, credit repair advice and medical treatment services. Founded in 2002, the Winn Group employs nearly 300 people in Newcastle and is well positioned to benefit from the rapid consolidation of the personal injury sector in the UK due to its efficient business model. EMC's investment will further enhance the Winn Group's strong growth trajectory.

EMC also invested €7.7 million to acquire 25.2 per cent of Fidor Bank, an innovative and fast growing online German bank. Founded in 2003, Fidor Bank is one of the only banks in Europe to allow customers to transfer money through social media. Additionally, Fidor Bank provides deposit and savings accounts, foreign exchange transactions, credit cards and crowd-funding, which enables small businesses to secure financing from individual lenders. The bank's deposit book in the year to 31 December 2013 increased from €156 million to €201 million, while its lending portfolio grew from €90 million to €150 million. As of December 31, 2013, Fidor Bank had 250,000 customers and is listed on the Open Market of the Frankfurt Stock Exchange.

EMC invested €10.5 million, alongside Avenue Capital Group, in a newly created vehicle, Toro Finance, which will provide short-term receivables financing to the suppliers of major Spanish companies. In addition, JZCP is participating with Avenue Capital Group in current pay securities on top of the capital structure. To date, JZCP has lent about €8.0 million and anticipates another €8.0 million to be funded this year. Toro Finance will draw on the track record of JZCP's European advisers who have worked with businesses on the continent for more than a decade. Toro Finance will also benefit from Avenue Capital Group's expertise investing in finance companies globally and strong presence in Europe, having invested more than €11.0 billion throughout the continent over the past 10 years. JZCP's total US$31 million commitment will, together with Toro Finance's management, purchase 50 per cent of Toro Finance's equity. The venture is off to a fast start and we look forward to continuing to report our progress.

Real estate portfolio

Our careful, value approach to investing has led to some exciting opportunities in the real estate sector. It is important to note that we are applying the same disciplined approach to these investments as we have always used in our micro cap portfolio; buying entities at reasonable prices in conjunction with excellent management teams. We are purchasing these properties through the JZCP Realty Fund.

Starting in April 2012, we began assembling a portfolio of properties, both retail and residential, in Brooklyn, a borough of New York City that has experienced rapid gentrification in certain neighbourhoods. The management team we are backing is RedSky Capital, a Brooklyn-based real estate and development and management company.

On its own, Brooklyn would be the fourth largest city in the United States, and demographic projections suggest that significant growth is anticipated in the next ten years. It has 2.5 million people, approximately the same size as Chicago in terms of population.

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.

In the fiscal year ended 28 February 2014, JZCP, together with RedSky acquired 13 properties. Since we began investing with RedSky in April 2012, we have acquired, a total of 19 properties. The current capitalisation of the existing portfolio is approximately US$400 million, with US$176 million in total equity, of which US$100 million was funded by separate JZ REIT entities. The properties are located in the Williamsburg, Flatbush, Greenpoint and the Fulton Mall areas of Brooklyn.

The first acquired property is almost a square block on Bedford Avenue, in the Williamsburg section of Brooklyn; JZCP's investment is US$16.5 million. This retail/residential building is in a premier location of an area that is in the biggest and most valuable retail redevelopment in Northern Brooklyn. Renovation is currently taking place.

The second acquired property involved a JZCP investment of US$3.5 million in the Flatbush area, across the street from the entrance to the newly opened US$1.2 billion Barclays Center, a 20,000 person arena in Brooklyn, home to the NBA franchise Brooklyn Nets. The Barclays Center has been the focus of a newly revitalised neighbourhood in the center of Brooklyn. Our team plans to renovate the building and build an additional floor and premium signage and lease it to a sports retailer.

The third investment, with a total investment by JZCP of US$14.5 million, is an assemblage of three contiguous properties on the Fulton Mall area, the third largest retail centre in New York City and second only to Times Square in terms of transit density. Our plans are to raze these buildings and rebuild, alongside City Point, a large mall anchored by Target.

We paid US$12.1 million for three properties on Flatbush Avenue, for both retail and residential use. Near the Barclays Center, these properties are well situated to take advantage of the influx of higher-end shoppers and residents in part driven by the Barclays Center's success.

JZCP invested US$8.2 million for two mixed use development properties on Driggs Avenue, which is adjacent to Bedford Avenue, where our first Williamsburg property is located. We plan on developing these properties and renting to a national retailer looking to create a footprint in this up-and-coming area of Brooklyn.

We invested US$32.8 million to acquire a 49 per cent interest in a development site on the Greenpoint waterfront in Brooklyn. The site allows for development of 652,000 square feet of residential and retail space, and includes a pier which acts as the Greenpoint terminal location for the East River Ferry. In conjunction with our partner, we plan on partnering with a large New York City development firm to build a residential tower on the site, containing both market rate and affordable housing, as well as 100,000 square feet of retail space.

Finally, we invested US$15.3 million to purchase several properties in Williamsburg, again nearby to the first property we purchased, with an eye to redevelop and re-tenant the retail and residential properties into a Class A mixed use area.

Other assets

We have made great strides toward launching a new portfolio company, Spruceview Capital Partners, an asset management business. As previously reported, we have recruited as our management partners, Richard Sabo (CEO) and David Russ (CIO). Most recently, Richard Sabo served as Chief Investment Officer of Global Pension and Retirement Plans at JPMorgan as well as a member of the firm's executive committee. David Russ brings with him an impressive track record as Chief Investment Officer of Dartmouth College's endowment, as well as having senior investment roles at Stanford University and the Regents of the University of California. Richard and David are complemented by a team of 10 senior investment, business development, legal and operations professionals. We will target smaller endowments, foundations, family offices and corporate pension funds that are not large enough to afford a world class team of investment professionals; this type of asset management business is known as an "outsourced CIO/Endowment model". We are excited to be working with Richard, David and their team, and will report more on this business as it develops.

Significant realisations

We had two significant realisations in the fiscal year ended 28 February 2014. The first involves one of our US micro cap investments, Horsburgh and Scott, a manufacturer of large diameter gears, which we acquired in November 2007. In March 2013, we sold Horsburgh and Scott, realising cumulative proceeds of US$38.6 million on our US$21.8 million investment, for a 1.8x multiple of capital invested and a 13 per cent IRR. Given that we had been writing this investment up over time, there was a negligible effect on NAV.

We also refinanced US$26.3 million of JZCP-held investments in our Industrial Services Solutions ("ISS") vertical with a senior debt facility, as these businesses demonstrated they could prudently support increased third party leverage.

Outlook

We are opportunistic, value oriented investors (i.e. we like to buy things that we hope have more intrinsic value and growth prospects than we have to pay in cash), an approach that has been tried and tested over the years. JZCP has experienced long term NAV growth using this model of value investing. In addition, JZCP's strong balance sheet positions us well to take advantage of investment opportunities on an immediate basis. 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 - Verticals

The primary US micro cap investment strategy is to invest in well researched industry sectors, or "verticals". We purchase similar companies in the relevant vertical, integrating them as appropriate, and selling the resulting larger company as one entity. This strategy has served us well over the years. Each of these verticals are managed by a seasoned industry executive whose responsibilities include managing, integrating and growing their respective vertical. We set out below details of four of these verticals:

Industrial Services Solutions

Industrial Services Solutions ("ISS") is currently a combination of nine acquired businesses in the industrial maintenance, repair and service industry, focusing primarily on industrial rotating equipment. Most of the maintenance and repair work is performed at and/or from any of the 20 sites across the country.

The idea for this investment is to acquire and manage these non-discretionary activities that are typically non-cyclical. In addition, the increasing complexity of the equipment in industrial settings, along with the declining maintenance staff at these plants, should encourage growth in ISS' customers' needs. This large and very fragmented industry is well suited for a build-up in this sector.

Nine companies were purchased for a total purchase price of $123.7 million; JZCP's cost of these investments was $32.4 million, representing 41% of the preferred stock in these entities, and an average of 32% the common stock. These investments are currently valued at $34.9 million, as significant management upgrades have only partially achieved their anticipated benefits. Due to the management initiatives, proforma EBITDA has grown from $16 million in 2010 to $22.9 million in 2013.

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. His leadership, ideas and oversight have been critical in creating value for ISS.

Testing Vertical

Testing Services Holdings is a business consisting of (1) laboratory testing services, and (2) sales and distribution of laboratory testing equipment. Recent EBITDA has grown for these businesses, from $15.4 million in 2012 to $20.0 million in 2013. JZCP currently has $44.6 million invested in these entities.

The laboratory businesses can be broken out into 2 major components: Environmental Testing, and Industrial Hygiene. The environmental segment includes testing soil and groundwater for contaminants, under the Accutest name. Accutest has made four laboratory acquisitions to date.

The Industrial Hygiene segment consists of four acquisitions under the Galson name. These businesses collect sample from industrial setting via on-person badges, which are then sent to a Galson lab for analysis.

The sales and distribution segment is managed under the Argus-Hazco platform, with two additional acquisitions made to expand Argus' geographic footprint. It is a renter and reseller of equipment and instruments necessary to ensure worker safety.

These businesses are led by Phil Rooney, a seasoned executive with experience in a variety of industries, with a focus on environmental businesses. Phil played a major role in achieving a commendable return on Mid-America Recycling, one of our more successful realisations. He formerly served as president of ServiceMaster and Waste Management

Water Services Vertical

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

Water infrastructure businesses have been created to deal with the ageing 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 in this area we have so far (LMK Technologies and Perma-Liner) address this second issue by sealing underground sewer pipes without digging, attractive for a variety of practical and cost concerns. We hope to add to the two current investments in this sector with manhole liners, sewer cleaning, etc.

The current water treatment business consists of three companies (Nashville Chemical, Klenzoid and Eldon) which sell and distribute chemicals for (1) industrial plants' boilers, etc and (2) outside plant use (e.g. "fracking"). This extremely fragmented business is ready for consolidation.

Pro forma EBITDA for these businesses has grown from $8.6 million in 2010, to $11.8 million in 2013. We purchased these five businesses for a total of $51.3 million, with JZCP supplying $19.8 million of capital in the form of debt, which we plan on refinancing shortly) and equity. JZCP's equity position is $13.8 million. JZCP's position is currently valued at $42.2 million.

This vertical is managed by Mike Reardon, an executive with over 25 years of experience in the water business, most recently as President and COO of Culligan International, a leader in commercial Consumer water treatment programs and products.

Logistics Services Vertical

JZCP's newest vertical involves businesses in the same day/next day delivery services sector. This vertical consists of Priority Express, a provider of same-day express courier services to reference laboratories, hospitals and health systems, pharmacy organisations and various other companies located in New Jersey and Eastern Pennsylvania. The Company provides both scheduled courier services as well as on-demand courier services. We plan on making further acquisitions in contiguous regions, as well as establishing other "beachheads' around the country.

This vertical is managed by Bruce Parker, who has significant experience managing air and ground based logistics businesses. His experience includes senior management positions at Ryder Systems, United Airlines and American Airlines

JZCP has $13.3 million invested in this business, which had EBITDA of $4.2 million in 2013. We have a very active pipeline to add to this vertical.

Investment Review - Major Holdings

The investments listed represent the top ten investments in terms of valuation (excluding investments in vertical structures):

FACTOR ENERGIA S.A.

Headquarters: Barcelona, Spain

Sector: Energy Supplier

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.

SAFETY INSURANCE GROUP, INC.

Headquarters: Boston, Massachusetts, USA

Sector: Property and Casualty Insurance

Safety Insurance Group, Inc., which is listed on NASDAQ (NASDAQ: SAFT), provides personal property and casualty insurance focused exclusively on the Massachusetts market. The Company's principal product line is private passenger automobile insurance. In addition, Safety Insurance offers commercial automobile, homeowners, dwelling fire, umbrella and business owning policies.

GREENPOINT

Location: Brooklyn, NY, USA

Sector: Real Estate

This investment represents a 49 per cent interest in a development site on the Greenpoint waterfront section in Brooklyn. The site allows for development of 652,000 square feet of residential and retail space, and includes a pier which acts as the Greenpoint terminal location for the East River Ferry.

GRUPO OMBUDS S.A.

Headquarters: Madrid, Spain

Sector: Private Security

Grupo Ombuds is a provider of security, surveillance and facility services to the public sector and blue chip clients in Spain.

DENTAL HOLDINGS, INC.

Headquarters: Minneapolis, Minnesota, USA

Sector: Healthcare Equipment and Services

Dental Holdings Corporation is the parent of Dental Services Group ("DSG"). DSG is an operator of laboratories which manufacture oral appliances for dentists and dental centres. It runs both full service labs and "sale and delivery" sites in the United States, Canada and Mexico, making it one of the largest companies of its kind.

AMPTEK, INC.

Headquarters: Bedford, Massachusetts, USA

Sector: Non-destructive testing

Amptek, Inc. ("Amptek") designs and manufactures instrumentation used in numerous non-destructive testing and elemental analysis applications. Amptek's instruments are typically used both in the field and within laboratory settings to quickly and easily identify the composition of materials using Amptek's industry-leading x-ray detectors. Amptek is the largest manufacturer of detectors in the world that utilise the x-ray flourescence method.

MILESTONE AVIATION GROUP, INC.

Headquarters: Dublin, Ireland

Sector: Financial Services

Milestone is a global aircraft leasing company focused on helicopters and private jets, providing aircraft owners and operators 100% financing on new, pre-owned and sale-leaseback transactions.

TORO FINANCE

Headquarters: Madrid, Spain

Sector: Financial Services

Toro Finance is a provider of short-term receivables financing to the suppliers of major Spanish companies.

MEDPLAST/UPG HOLDINGS

Headquarters: Tempe, Arizona, USA

Sector: Medical/industrial plastic injection moulding

Medplast designs, engineers and produces precision custom moulded thermoplastic, rubber and elastomer components and moulds for the healthcare and pharmaceutical and consumer/industrial markets. UPG Holdings operates as a manufacturer of precision plastic products for electronics, automotive, industrial, medical, datacentre and consumer markets.

SALTER LABS, INC.

Headquarters: Arvin, California, USA

Sector: Respiratory medical products

Salter Labs is a leading manufacturer of disposable oxygen delivery and respiratory therapy products in the multi-billion dollar home medical and acute care markets. Salter develops, manufactures and sells single-use, disposable products, primarily for respiratory therapies

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.

During the year Mr Firth's fees were increased to US$70,000 per annum to reflect the increasing time commitment as chairman of the audit committee.

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 2014 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.

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 figure has been pro-rated to reflect the increase.

** David Allison served as a Director until his death on 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 which state that their appointment and any subsequent termination or retirement shall be subject to three-months' 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 2 May 2014 by:

David Macfarlane

Chairman

Patrick Firth

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 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 later in these accounts 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. The Nominations Committee met on 2 May 2014 and it was decided Mr Firth and Ms Tibaldi would put themselves forward for re-election at the 2014 Annual General Meeting. David Macfarlane and James Jordan were re-elected to the Board at the 2013 Annual General Meeting. A resolution will be tabled to ratify the appointment of Christopher Waldron to the Board.

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 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. This responsibility was exercised in 2013, when Christopher Waldron was appointed to the Board following an extensive selection process.

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 Advisers.

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.

* Appointed 21 October 2013

Internal Controls

Responsibility for the establishment and maintenance of an appropriate system of internal control 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 Foreign Account Tax Compliance Act ("FATCA") 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. The Board is monitoring the implementation 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

We have audited the financial statements of JZ Capital Partners Limited (the "Company") for the year ended 28 February 2014 which comprise the Investment Portfolio, the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 33. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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.

Opinion on financial statements

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:

Our application of materiality

We apply the concept of materiality to the individual account or balance level through our determination of performance materiality, which is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

We determined materiality for the Company to be $13.3 million, which is 2% of total equity. 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.

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 75% of materiality, namely $9.9 million. Our objective in adopting this approach was to ensure that total uncorrected and undetected audit differences in all accounts did not exceed our materiality level.

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

An overview of the scope of our audit

Our response to the risks identified above was as follows;

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:

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:

Christopher James Matthews, FCA

for and on behalf of Ernst & Young LLP

Guernsey, Channel Islands

2 May 2014

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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