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)

INTERIM RESULTS FOR THE SIX MONTHS ENDING 31 AUGUST 2014

~ Robust portfolio performance and healthy investment pipeline ~

29 October 2014

JZ Capital Partners, the London listed private equity fund which invests primarily in high-quality US and European micro cap companies, announces its interim results for the six-month period ended 31 August 2014.

Results Highlights

· NAV growth in 20 of the past 22 quarters

· NAV of US$657.4 million (FYE 28/02/14: US$666.5 million)

· Pre-dividend NAV per share of US$10.27 (FYE 28/02/14: US$10.25)

· Distribution of 16 cents per share paid in June 2014

· Interim Dividend of 15 cents per share for the period (H1 2013: 14.5 cents per share)

Investment Activity

· US$96.4 million of proceeds, primarily from the following realisations:

o US$10.1 million from the sale of Galson Laboratories; US$19.4 million from the sale of Amptek; and US$57.3 million from the sale of Safety Insurance.

· Significant investment activity, with US$128.6 million invested across the US micro cap (US$26.9 million), European micro cap (US$35.2 million), real estate portfolios (US$12.5 million) and Bright Spruce, our new asset management fund (US$50.0 million).

o €18.0 million in Petrocorner, a strategic build-up to acquire 2 - 3% of Spain's petrol station market

o US$16.2 million in TierPoint, a provider of information technology and data centre services

o US$4.2 million in Igloo, the iconic outdoor cooler business

o €4.0 million in Toro Finance, our short-term working capital finance company in Spain

o Five new US real estate properties acquired through an experienced manager.

· US$65.7 million raised through the issuance of Convertible Unsecured Loan Stock ("CULS") providing a more flexible capital structure, greater liquidity and additional capital for further investments

· At the end of the period, the portfolio consisted of 65 investments across 10 industries

David Zalaznick, JZCP's Founder and Investment Adviser, said: "We are extremely pleased with the continuation of the high level of investment and realization activity over the past six months, which has delivered NAV growth for 20 of the past 22 quarters. The combination of excellent management teams and high quality portfolio companies and real estate assets, continues to position the Company for long-term growth.

"We enter the next six months with a healthy pipeline of investment opportunities, which we expect to contribute to positive NAV development in the future."

David Macfarlane, Chairman of JZCP, said: "I am very happy with the progress the Company has made during the first half of the year and the results underline the strength of the Company's disciplined investment approach against an uncertain economic backdrop. We remain committed to increasing shareholder value and delivering consistent NAV growth going forward."

Presentation details:

There will be an analyst and investor presentation to discuss JZCP's recent financial performance and portfolio developments on Wednesday, 29 October 2014 at 9.30am at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. It can be accessed by dialling +44 (0) 20 3427 1906 (UK) or +1 212 444 0895 (US) with the participant access code 2281288.

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 2281288.

For further information:

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

FTI Consulting

Andrew Maiden +44 (0) 1481 745368

JZ Capital Partners

David Zalaznick +1 (212) 485-9410

Jordan/Zalaznick Advisers, Inc.

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.

Chairman's Statement

I am pleased to report the results of JZ Capital Partners ("JZCP" or the "Company") for the six-month period ended 31 August 2014.

Performance

It has been another steady performance from the underlying portfolio during the first six months of the year, a period characterised by turbulent equity markets, rising geopolitical tensions and an uneven global recovery.

The start of the fiscal year was dominated by the continued political turmoil in Ukraine and the rising global threat as the 'Islamic State' movement gained momentum. The Eurozone's steady recovery since the spring of 2013 came to a halt in the second quarter of 2014, when GDP stagnated and the ECB moved closer to an outright programme of quantitative easing.

On the other side of the Atlantic, the U.S. economy regained traction helped by strong employment figures and increased consumer spending, yet the soft global economy continued to weigh on the U.S. as sagging growth in Europe and Asia restrained exports.

Despite the uncertain economic background, the Company's pre-dividend NAV increased from US$10.25 to US$10.27 at the end of the period. This marks the 20th quarter of positive NAV growth out of the last 22 quarterly periods. Net portfolio company valuation increases were offset by an accounting charge required by a change in fair value of the newly issued Convertible Unsecured Loan Stock ("CULS"), which traded at a premium immediately following its issuance.

Portfolio Update

It has been another active investment period for the Company putting US$128.6 million to work across the three main portfolios - US and European micro cap and US real estate - whilst realisations generated US$96.4 million, primarily from the sale of two US micro cap businesses and our remaining listed public equities. At the end of the period the total portfolio consisted of 65 businesses across ten industries in the US and Europe.

US and European Micro Cap

Investment in high quality micro cap companies continues to be the fundamental driver and key differentiator of the Company's investment strategy. Micro cap acquisitions and investments during the period totalled US$61.0 million and at the end of the period the core portfolio comprised 48 companies operating in eight industries.

In the US, some US$26.9 million was invested which, in addition to valuation increases, increased the size of the portfolio to US$368.7 million. Highlights included an investment in TierPoint, a provider of information technology and data centre services, and a number of highly accretive add-on acquisitions to our Industrial Services Solutions vertical. The Company also announced the sale of Milestone Aviation, the world's largest helicopter leasing company, post period end, generating estimated proceeds of US$40.0 million and an estimated IRR of 36%.

The Company continues to explore attractive investment opportunities in Europe through its investment in the European Micro cap Fund 2010, L.P. The Board is pleased with the significant progress within the European micro cap portfolio which now consists of eight investments in Spain, one investment in the UK and one investment in Germany, representing 25% of total assets. During the period, the Company invested €18 million in Petrocorner, a strategic build-up to acquire 2 - 3 per cent of Spain's petrol station market, targeting stations in urban areas and along highly trafficked highways and roads.

The company has further added to the portfolio, post period end, investing €2.1 million in Fincontinuo, a leading independent consumer lending platform in Italy and US$9.2 million in Paragon Water Systems, a manufacturer of water filtration systems.

The Board is also pleased to report that the newly established US asset management business, Spruceview Capital Partners launched its 'founders fund', the Bright Spruce Fund, L.P. with a US$50.0 million investment from the Company. The business will address the growing demand from endowments and pension funds for fiduciary management services with the goal of providing capital appreciation while mitigating risk.

Real Estate

The investment advisor's value driven investment approach continues to lead to exciting opportunities in the real estate sector, where it replicates its proven micro cap strategy of buying businesses at reasonable values in conjunction with an excellent management, in this case Redsky Capital. The Company invested a net US$12.5 million to acquire interests in five retail and residential properties in rapidly developing areas in Brooklyn to bring the total number of properties in the portfolio to 22, totalling US$460.0 million in which JZCP's equity is US$127.2 million.

Realisations

There have been three significant realisations generating most of the US$96.4 million received during the period. The Company realised its investment in Galson Laboratories, a full-service provider of analytical air testing for US$10.1 million, representing an IRR of 35%. The Company also realised its investment in Safety Insurance, a provider of personal property and casualty insurance through two block trades, totalling US$57.3 million, representing a multiple of capital invested of 5.1x and an IRR of 34%. In addition, Amptek, a manufacturer of instrumentation used in non-destructive testing was sold for US$19.4 million, representing an IRR of 13%.

Significant Financings

During the period, the Company took further steps towards adopting a more suitable and flexible capital structure raising US$65.7 million through the issuance of CULS. This provides JZCP with more capital to put to work across the portfolio and builds liquidity for repayment of the ZDPs in June 2016. Additionally, the Company closed a US$50.0 million one year loan facility with Jefferies, secured by a number of US investments.

Distributions

In accordance with our stated policy to distribute annually an amount equal to 3 per cent of NAV, the Directors have declared an Interim Dividend of 15 cents per share for the six months ended 31 August 2014, compared to14.5 cents for the period ended 31 August 2013. This implies an annualised yield as at 31 August 2014 of 4.3 %.

Outlook

I am encouraged by the pickup in pace of investments and realisations during the period, which we expect will continue to feed through to NAV growth in the year ahead.

The Board continues to be mindful of the significant discount to NAV at which the Company is trading. We do not consider the share buyback facility as a short term measure to narrow the discount, but instead believe that the Company's continued effort with transparent market communication combined with strong performance of the underlying portfolio will address this issue.

The Company remains in a robust financial position, and continues to position itself to take advantage of opportunities to acquire high quality companies at reasonable prices in both the US and Europe. As a result, I am confident we can deliver value over the medium term to the benefit of clients and shareholders and remain confident in the future prospects of the Company.

David Macfarlane

Chairman

28 October 2014

Investment Adviser's Report

Dear Fellow Shareholders,

JZCP had another active investment period for the six months ended 31 August 2014, investing US$128.6 million, while realizing US$96.4 million primarily through the sale of two US micro cap businesses and our remaining Safety Insurance stock. We also raised US$65.7 million through the issuance of Convertible Unsecured Loan Stock ("CULS"), with an eye to putting more capital to work and building liquidity for the repayment of the ZDPs in June 2016.

In conformance with the dividend policy of distributing 3 per cent of NAV in semi-annual installments, the Company paid a dividend of US$0.16 per share in June 2014. Pre-dividend NAV increased from US$10.25 per share to US$10.27 per share, continuing JZCP's consistent NAV growth trend, increasing in 20 out of the past 22 quarters. The net portfolio company valuation increases were offset by the CULS trading at a premium almost immediately after their issuance. Given the Company adopted mark-to-market accounting for these notes, a reduction in NAV is mandated.

As of 31 August 2014, the US micro cap portfolio consisted of 38 businesses across 7 industries. This portfolio was valued at 7.2x EBITDA, after applying an average 27 per cent marketability discount. The average underlying leverage senior to JZCP's position in our U.S. micro cap portfolio grew from 1.6x to 1.7x EBITDA, as certain of our existing and new portfolio companies demonstrated an ability to support greater leverage. Consistent with our value oriented investment philosophy, over time we have acquired our US micro cap portfolio at a combined 6.0x EBITDA.Additionally, in contrast to a very expensive acquisition market, we paid 6.5x EBITDA on average for US micro cap acquisitions made during the six-month period ended 31 August 2014, underlining our disciplined approach to investing.

As of 31 August 2014, the European micro cap portfolio, consisting of eight Spanish companies, one UK-based company and one German company across four industries, was valued at a combined multiple of 7.1x EBITDA, after a 31 per cent marketability discount. The European micro cap portfolio has very low leverage senior to JZCP's position, under 2.0x EBITDA.

As of the same date, our real estate portfolio consisted of 22 properties, five of which were acquired in the six-month period ended 31 August 2014.

NAV Growth

For the six-month period ended 31 August 2014, JZCP's pre-dividend NAV increased from US$10.25 per share to US$10.27. The chart below details the changes in NAV on a per share basis:

Net Asset Value per Ordinary Share as of 28 February 2014 US$10.25

+ Change in Private Investments 0.32

- Change in Public Investments (0.13)

+ Income from Investments 0.25

+ Escrows received 0.10

- Change in CULS fair value (0.10)

- Finance costs (0.11)

- Foreign exchange effect (0.11)

- Fees and Expenses (0.20)

- Dividends Paid (0.16)

Our private investments increased US$0.32, reflecting a steady performance across the 64 businesses in which we have investments.

The US micro cap portfolio contributed US$0.30 to this increase, primarily due to: a significant write-up at our co- investment helicopter leasing business, Milestone Aviation (US$0.24), following the announcement of its sale at a price higher than its carrying value; increased earnings at our Industrial Services Solutions vertical (US$0.17) (as well as numerous accretive acquisitions) and an increase of US$0.08 from our Dental Services Group as this group of dental laboratories has finally seen the benefit of an improving economic environment in their trading area. Also contributing to the NAV growth were increases at several other co-investment companies: Vitalyst, a corporate IT support business (US$0.04), Suzo-Happ, a manufacturer of parts for the global gaming industry (US$0.08), and Justrite Manufacturing, an industrial safety company (US$0.04).

Offsetting these increases were decreases in: Amptek, our manufacturer of non-destructive testing equipment (US$0.10), following its sale below carrying value, Accutest, our full service environmental testing laboratory business (US$0.07), which experienced an earnings decline; New Vitality Holdings, our co-investment marketer of premium nutritional supplements (US$0.09), which has hit significant operating and financial hurdles due to advertising and product development issues; Healthcare Products Holdings, our power wheelchair company (US$0.04), which experienced an earnings decline and Nationwide Studios (US$0.05), also as a result of decreased earnings.

Before foreign exchange effects, the European micro cap portfolio increased its net asset value by US$0.03. Write- ups, based on increased earnings expectations, at One World Packaging (US$0.04), our niche manufacturer of environmentally friendly packaging and Toro Finance (US$0.03), a provider of short-term working capital financing to major Spanish companies, were partially offset by write-downs at gold reseller Oro Direct (US$0.03), which was impacted by a government mandated-investigation into the gold resale industry, and at Xacom (US$0.03), which has experienced delays in orders for its new products.

The overall decrease in the valuation of public investments was driven by the discount inherent in the block trade of Safety Insurance stock. Despite the discount, we earned a Multiple of Invested Capital ("MOIC") of 5.1x from this successful investment.

Returns

The table below summarises the cumulative total NAV returns and total shareholder returns for the most recent three- month period, six-month period, twelve-month period, three-year period, and five-year period.

Below is a summary of JZCP's assets at 31 August 2014 as compared to 28 February 2014. An explanation of the changes in the portfolio follows:

Number of

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

US micro cap portfolio

We have written this portfolio up by US$0.30, led by a significant write-up at our co-investment helicopter leasing business, Milestone Aviation, following its announcement of its sale, increased earnings and several accretive acquisitions made at our Industrial Services Solutions vertical and a return to historical earnings levels of the Dental Services Group laboratory business. Offsetting these significant increases were decreased operating performances of Accutest and New Vitality, and the sale of Amptek below carrying value.

New US investments - verticals

Over the six-month period ended 31 August 2014, we made a series of acquisitions: Construction & Turnaround Specialists; Parts Service International; Precision Electric; Integrated Process Technologies; Pro Inspection and M&L Valve, all add-on acquisitions to our Industrial Services Solutions vertical managed by Jim Rogers, a former GE senior manager. These six acquisitions were separately funded, in total using approximately US$41.4 million provided by our senior lender, US$4.5 million of cash on ISS's balance sheet, and US$10.3 million in seller financing. At 31 August 2014, JZCP owned 34 per cent of the combined entity on a fully-diluted basis.

In March 2014, JZCP invested US$1.7 million in 9 per cent senior notes to help fund the acquisition of Premier Safety, a Pittsburgh based distributor of industrial safety products, specializing in a wide range of portable and fixed gas detectors, respiratory equipment, fall protection and other safety and personal protective supplies. Premier Safety offered an opportunity to acquire a strong, well respected industry participant that is both highly complementary and additive to our platform investment in Argus Group, which sells, rents and services industrial hygiene and safety equipment. JZCP owns 36 per cent of this testing entity.

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

New US investments - co-investments 

In April 2014, JZCP invested US$4.2 million in iconic brand name Igloo, alongside co-investor ACON Investments. Founded in 1947, Igloo designs, manufactures and markets coolers and outdoor products online and through retailers, with a dominant market position in the US. Igloo is looking to introduce new products, add new customers and sales channels and exploit international opportunities. This investment represents 3.2 per cent of Igloo's equity.

In June 2014, JZCP invested US$16.2 million for 9.0 per cent of Cequel Data Centers, LLC, the parent company of TierPoint, LLC, alongside a group of prominent investors led by RedBird Capital Partners. Managing nearly 140,000 square feet of raised floor data center space, TierPoint today offers colocation, managed services and cloud computing through data centers in six primary markets: Dallas, Oklahoma City, Tulsa, Spokane, Seattle, Baltimore and Philadelphia.

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

European micro cap portfolio

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

As of August 31, 2014, EMC has made eight investments in Spain, one investment in the UK and one investment in Germany, which combined represent 24 per cent of gross assets. Post-period, in October 2014, EMC made its first investment in Italy, acquiring Fincontinuo, a leading independent lending platform that distributes and services low risk, niche consumer loans in Italy.

New European investments

In March 2014, JZCP invested an additional US$3.6 million in Fidor Bank, through EMC. With headquarters in Munich, Germany, Fidor combines a social-media banking model with traditional banking services, offering internet-based and mobile-based transactions, supplemented by full service cash management solutions to retail customers. This investment increased JZCP's share of Fidor to 21.1 per cent.

In May 2014, JZCP provided €4.0 million in debt financing to Toro Finance, a portfolio company of EMC. Toro Finance provides short-term working capital financing to major Spanish companies. Toro Finance is well positioned to benefit as Spanish banks in recent years tightened their risk criteria and downscaled balance sheets to meet increasing capital requirements. At August 31, 2014, JZCP had lent about €12.0 million to Toro Finance, of a total €16.0 million commitment. In September 2014 (post-period), JZCP lent the remaining €4.0 million of its €16.0 million commitment.

In July 2014, JZCP invested €18 million in Petrocorner, a strategic build-up to acquire 2-3 per cent of Spain's petrol station market, targeting stations in urban areas and along highly trafficked highways and roads. JZCP is investing in this opportunity alongside Avenue Capital, backing one of the industry's "best in class" management teams that has been developing this strategy for the past two years. Management is forecasting significantly improving fuel margins as a result of both consolidated purchasing power and a new regulatory system that eliminates fixed margin contracts for branded petrol stations. In addition, when Spain's economy recovers, Petrocorner will be well positioned to benefit from increasing fuel consumption (40 per cent drop since 2008) and rising acquisition multiples for petrol stations (we are acquiring stations at a significant discount to 2008 prices). JZCP's total commitment of €22.5 million will purchase approximately 30 per cent of Petrocorner's equity, on a fully diluted basis.

In October 2014 (post-period), JZCP invested €2.1 million in Fincontinuo, a leading independent lending platform that has been distributing and servicing Cessione del Quinto ("CdQ") loans, a low risk and niche form of consumer lending in Italy since 1997. JZCP is also investing in this opportunity alongside Avenue Capital. As banks are expected to continue reducing their balance sheets to meet increasing capital requirements, Fincontinuo is well positioned to capitalize on this opening for alternative financing vehicles. As this business ramps up, JZCP is expected to invest approximately €20 million.

Real estate portfolio

Working with high quality management teams is at the core of our investment approach and, over the past one and one half years, we have assembled a portfolio of retail and residential properties in Brooklyn, New York in partnership with RedSky Capital, a team with significant experience in this sector. JZCP has invested $126 million of equity as part of a $460 million portfolio.

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

In the six-month period ended 31 August 2014, JZCP, together with RedSky, acquired five properties. Since we began investing with RedSky in April 2012, we have acquired a total of 22 properties, all currently in various stages of development and re-development. The underlying thesis of our real estate portfolio is to acquire off-market properties in neighborhoods that are beginning to see rental and valuation growth.

New real estate investments

In May 2014, JZCP invested US$3.0 million (structured as a bridge loan) for a property in the Downtown Brooklyn neighborhood of Brooklyn, New York, one of the fastest growing communities in New York City. This parcel adds an important corner to our Downtown Brooklyn portfolio and provides additional flexibility to our business plan. This bridge loan was repaid, plus interest, in June 2014.

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

In August 2014, JZCP acquired a further two properties in the Downtown Brooklyn neighborhood, both additions to our Downtown Brooklyn portfolio. These acquisitions were funded using proceeds from a refinancing of the Downtown Brooklyn portfolio, and did not require additional cash funding by JZCP.

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

Our recently established asset management business in the US, Spruceview Capital Partners has been progressing well and will address the growing demand from endowments, foundations and corporate pension funds for fiduciary management services. We are excited to report that in July 2014, Spruceview Capital Partners launched its 'founders' fund,' the Bright Spruce Fund, L.P. JZCP invested US$50 million in the Bright Spruce Fund, whose investment strategy has been developed based on the investment strategies of certain large foundations, trusts, endowments and leading family offices with the goal of providing capital appreciation while mitigating risk. The fund intends to achieve its investment objective by employing a long-term investment approach investing in a portfolio that is diversified across asset classes (marketable equity, fixed income and alternatives) and diversified within such asset classes. JZCP is not being charged any fees on this 'fund' investment.

As previously reported, we have recruited, Richard Sabo (CEO) and David Russ (CIO) as our management partners. 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."

Significant realisations

We had three significant realisations in the six-month period ended 31 August 2014.

The first involves one of our US micro cap investments, Galson Laboratories, a full service provider of analytical air testing using a wide array of methods and instruments which we acquired in May 2010. In July 2014, we sold Galson Laboratories, receiving proceeds of US$10.1 million, realising a 3.3x MOIC and a 35 per cent internal rate of return ("IRR"). Having previously written this investment up to US$8.6 million, the US$10.1 million in proceeds created a US$1.5 million increase in NAV. 

The second also involves one of our US micro cap investments, Amptek, which designs and manufactures instrumentation used in numerous non-destructive testing and elemental analysis applications. We acquired Amptek in December 2011. In August 2014, we sold Amptek, receiving proceeds of US$19.4 million, realising a 1.3x MOIC and a 13 per cent IRR. Albeit a successful investment that generated both a positive MOIC and IRR, Amptek's sale price was executed below its carrying value, reducing NAV by US$6.3 million. 

Additionally, JZCP realised its investment in Safety Insurance, a provider of personal property and casualty insurance focused exclusively on the Massachusetts market, through two separate block trades, totaling US$57.3 million (US$33 million in May 2014 and US$24.3 million in June 2014) earning an MOIC of 5.1x and an IRR of 34 per cent.

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

Escrows received

In the six-month period ended August 31, 2014, JZCP received the following significant escrow distributions:

• US$1.7 million from Advance Chemistry and Technology

• US$2.3 million from Wound Care Holdings

• US$1.6 million from BG Holdings

Significant financings

In June 2014, we closed a US$50.0 million one year loan facility with Jefferies, in order to enhance our short term liquidity position. Our plan is to repay this loan with either proceeds from realisations, or with a longer term loan facility. The current facility is secured by certain US investments and carries an interest rate of 7 per cent.

In July 2014, we issued US$65.7 million of CULS. These convertible notes carry an interest rate of 6 per cent and a conversion price equal to a 2.5 per cent premium to the June 30, 2014 NAV per share, which was US$10.07. If not converted, the CULS will mature in June 2021. The notes enable JZCP to have a more flexible capital structure, provide additional capital for further investments and greater liquidity in advance of the repayment of the ZDPs in June 2016.

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 related publicly-listed equities

Outlook

As we have said in the past, our investment strategy is that of opportunistic, value oriented investors with a focus on acquiring assets that we believe have more intrinsic value and growth prospects than we have to pay in cash. JZCP has experienced long term NAV growth using this model of value investing, increasing in 20 of the last 22 quarters. In addition, JZCP's strong balance sheet positions us well to take advantage of investment opportunities on an immediate basis. We remain committed to pursuing this tried and tested strategy and are confident in the future prospects of the group. 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 Portfolio

For the period from 1 March 2014 to 31 August 2014

Six month period from 1 March 2014 Six month period from 1 March 2013 to 31 August 2014 to 31 August 2013*

*For the period ended 31 August 2013, the Company's investment in its associate was accounted for using the equity method, therefore the Statement of Comprehensive Income reflected the share of the results of the operations of the associate. Under the exemption within IAS 28 Investments in Associates and Joint Ventures, the Company now measures its investment at fair value through profit or loss. The change has meant a reclassification from Share of associate's net income into net gains on investments at fair value through profit or loss of US$5,930,000 for the six month period ended 31 August 2013. There has been no change to the result for the period.

All items in the above statement are derived from continuing operations.

The profit for the period is attributable to the Ordinary shareholders of the Company.

The format of the Income Statement follows the recommendations of the AIC Statement of Recommended Practice.

The "Total" column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS There was no comprehensive income other than the profit for the period.

The accompanying notes form an integral part of the financial statements.

Unaudited Statement of Changes in Equity

For the period from 1 March 2014 to 31 August 2014

The accompanying notes form an integral part of the financial statements.

Unaudited Statement of Cash Flows

For the period from 1 March 2014 to 31 August 2014