Jz Capital Regulatory News (JZCP)

28 October 2010

JZ Capital Partners Limited ("JZCP")

Interim Results for the six months ended 31 August 2010

JZCP exists to create a portfolio of investments in businesses primarily in the United States, but also in Europe, providing a superior overall return comprised of a current yield and significant capital appreciation.

Highlights

·; NAV of US$7.62 per share - up 8.2% over the prior period

·; Special Dividend of 10.0c per share - in addition to interim dividend of 5.0c per share

·; Realisation of two investments post period:

o Disposal of Apparel Ventures creating a US$11.5m gain

o Redeemed in full US$14.8m first and second lien loans in Harrington Holdings

·; JZ Europe Fund acquired 65% in Factor Energia - a leading energy services business enjoying strong growth in the recently deregulated electricity market in Spain

·; Financial strength to take advantage of investment opportunities both in the US and Europe

Commenting on the results, David Macfarlane, Chairman of JZCP, said:

"It is hoped that the sale of Apparel Ventures is indicative of the M&A markets easing up and making for more active investment conditions as well as facilitating the realisation of JZCP's mature investments.

"We are encouraged by the opportunities in the United States and by the opportunity to diversify and spread our risk into Europe and by the quality of our first investment there. In addition to underlying investment growth we expect that there will be more occasions as we realise or refinance investments when we can make special distributions."

For further information:

JZ Capital Partners Limited

(Registration No. 48761)

Registered Office:

2nd Floor

Regency Court

Glategny Esplanade

St Peter Port

Guernsey GY1 3NQ

Tel: 01481 720321

Fax: 01481 716117

E-MAIL: JZCP@bfgl.com

Chairman's Statement

In the period under review JZCP has been able to invest some of its cash, as well as realize cash from the repayment of debt securities in its portfolio. In addition since 31 August, our Advisers were able to complete the sale of one of our legacy holdings that returned almost 2x our original investment. The microcap investments continue to perform well, and our publicly traded equities have also appreciated with the result being our NAV is up 8.2% over the prior period. Your Directors are able to declare a Special Dividend in addition to the normal interim dividend.

Post Period Realisations

We are pleased to report the realisation of two of our investments, although both transactions closed after this reporting period. The first is a long-term legacy investment - Apparel Ventures. We had purchased US$12.1 million of common stock in this women's apparel manufacturer. Our portion of this investment sold for US$22.6 million on 6 October 2010, creating an US$11.5 million gain. In addition, Harrington Holdings, a home healthcare supply company, was sold on 29 September 2010. We had a US$14.8 million investment in first and second lien loans; they were redeemed at par.

European Investment Opportunities

In addition to realisations, another significant matter to report for the last six months concerns JZCP's ambition to invest in European microcap companies and build a European portfolio. As was approved by shareholders at the AGM, there is a mandate from shareholders to vary the investment strategy and invest up to 20 per cent of its portfolio outside of the United States, specifically so as to allow investment in JZ Europe Fund 2010 LP ("JZ Europe Fund"), a new fund then being promoted by the principals of JZ International Limited ("JZI"), the European private equity platform founded in 1999 by David Zalaznick, Jay Jordan and Jock Green-Armytage. JZI has found that the fund raising process has been much slower than expected. In the meantime, the deal flow from JZI has been very robust and the opportunities very compelling.

In July, the first investment proposed for the JZI Europe Fund needed to be made or the opportunity would have been lost and thus JZCP came to invest in the fund ahead of its full capitalisation. The fund is constituted as an LLP in which the partners will be JZCP as to 75 per cent and David Zalaznick and Jay Jordan as to 25 per cent. JZ Europe Fund acquired a 65 per cent interest in Factor Energia, a leading energy services business in the recently deregulated electricity market in Spain. Based on the maximum consideration the historic transaction multiple is 6.5x 2009 EBITDA, a very reasonable multiple for a business enjoying strong growth.

A number of other investment opportunities in Spain are under letter of intent to JZI and likely to require funding before there can be any certainty that the JZ Europe Fund will be fully capitalised and in a position to invest in these deals. Fortunately, JZCP can participate in these investments as it had planned, notwithstanding that the fund has not closed.

It is therefore proposed that JZCP will invest in European investments introduced and managed by our investment adviser, JZAI and its affiliates, through the JZ Europe Fund with our advisers David Zalaznick and Jay Jordan co-investing (participation limited to 25 per cent of the fund) on identical terms to those on which JZCP invests. Other investors may be invited to co-invest if and when it is felt appropriate to spread risk or size demands it.

JZ Europe Fund will be managed by an affiliate of JZAI on the footing that JZCP will not suffer double or additional fees. There will be no change to the amount or incidence of the regular 1.5% management fee or to the rate of the 20% carry. JZCP pays a carried interest fee to the Adviser based on net realized gains and losses. But a variation is required to the incidence of the carry in the light of the proposed arrangements and the practical consideration of having two separate teams running two similar but independent micro-cap portfolios; by investing through the JZ Europe fund there is a way to ring fence the two parts of the investment portfolio which will avoid rewarding or penalising the respective teams and their respective portfolios. This arrangement would be a change to the management agreement and would require shareholders approval. The Directors believe that the opportunity to participate in the investment opportunities in Europe that JZI can make available as well as the opportunity to spread risk from the US comfortably justify the proposed change. I shall write to you shortly setting out the proposals in greater detail and seeking your approval.

Other Investments

As noted in greater detail in the Investment Adviser's Letter we have also during the period under review invested some US$30.5 million in a follow-up acquisition for Dantom Systems, China Dental Holdings (Dental Services Group), Galson Laboratories (one of our new verticals) and New Vitality.

Net Asset Value

At the end of the period under review, 31st August 2010, the NAV of JZCP was US$495.4 million ($7.62 per share) against US$457.5 million (US$7.04 per share) on 28th February 2010. The published NAV for the period ended 31 August 2010 was US$483.9 million (US$7.44 per share). The adjusted NAV per the interim financial statements reflects the post period end disposal value of Apparel Ventures, Inc.

The principal contributions to this movement have come from the revaluation of Apparel Ventures, Inc., 18c per share, the listed investments, 12c per share, and the bank debt, 15c per share. Overall the microcap portfolio is marginally increased in the directors' valuation, 4c per share, with increases in G & H Wire and the Woundcare companies, 18c per share, exceeding a write down of Dental Services of 14c per share.

Income and Dividends

It is the Directors' policy to distribute substantially all net cash income to shareholders. Like its predecessor, JZCP has followed the policy of allocating the Investment Advisers' fee between capital (65%) and income (35%). Over time this has had the effect of permitting the distribution of more cash than we generate from investment income and thus distorting reported net revenue. We propose to change that policy and to charge the whole investment advisory fee to revenue. The Directors have determined this in the confidence that investment conditions will lead to a rising income and in the expectation that conditions that will allow the payment of further Special dividends will be repeated, albeit not at regular intervals.

On that basis therefore, revenue return for the six months ended 31st August 2010 was 22.2c per share and adjusted for non-cash income, being paid in kind securities and preference dividends, and for an amount of some US$1.5 million of irregular income which is however included in the Special Dividend below, was 6.6c per share. Accordingly the Directors have declared an interim dividend of 5.0c per share (interim for year to 28th February 2010 when income was untypically skewed to the first half was 9c per share).

It is the policy of the Directors not to make distributions of non cash income unless and until it is converted into cash when it is policy that the Directors would return substantially all such cash to shareholders. Transactions have occurred principally concerning Woundcare, Continental Cement, and Roofing Supply, whereby an amount of US$7.5 million that had been recognised as non-cash income was converted into cash. The Directors have therefore in addition to the interim dividend declared a Special Dividend of 10.0c per share.

Share Buybacks

The Directors' attitude remains unchanged. They do not think that for a listed private equity investment company there is any evidence to show that buying back shares has anything other than a temporary effect on the share discount. They will continue to be alert to opportunities to buy back shares on investment grounds but having raised significant new capital as recently as 2009 they see their priority to concentrate on investment in the microcap sector.

Incentive Fees

It is the policy of the Directors to provide where appropriate for the capital and income incentive fees to which JZAI becomes entitled under the Advisory Agreement. At 31st August 2010, no provision was taken for either a capital or income incentive fee.

Outlook

JZCP is in a strong financial position. It is hoped that the sale of Apparel Ventures is indicative of the M&A markets easing up and making for more active investment conditions as well as facilitating the realisation of our mature investments. We are encouraged by the opportunities in the United States particularly through the five vertical investment sectors and vehicles established by JZAI, by the opportunity to diversify and spread our risk into Europe and by the quality of our first investment there. In addition to underlying investment growth we expect that there will be more occasions as we realise or refinance investments when we can make additional special distributions.

David Macfarlane

Chairman

27 October 2010

Investment Adviser's Report

Dear fellow shareholders:

We are pleased to report that JZCP's financial condition for the first six months ended on 31 August 2010 is excellent. During this period, JZCP's NAV per share increased by 8.2% and your company continues to be highly liquid with 43% of our assets in cash, listed equities, treasury notes or publicly traded bank debt. Our respective portfolios of investments - micro-cap buyouts, mezzanine investments, and listed equities, legacy and bank debt portfolio - have performed well. In addition, JZCP has, post 31 August, realised significant cash from the repayment of bank debt we held, as well as a realisation of one of our "legacy" companies - all enhancing the liquidity of JZCP. We also realised a US$1.5 million gain on the sale of our U.S Treasuries.

Portfolio Summary

Here is a "snapshot" of JZCP at 31 August 2010 compared with the position at our 28 February 2010 fiscal year end six months ago:

Micro-Cap Portfolio

Our microcap portfolio is the growth engine of JZCP's NAV. In our Adviser's letter in May 2010, we wrote to you about setting up five new verticals for strategic build-ups. We have now completed our research showing that there are many acquisition candidates that meet our investment criteria - high margin, non-capital or technology intensive businesses in highly fragmented industries that are scalable - and have secured the services of extremely accomplished industry executives to oversee each of the new verticals, and acquisitions into them.

The new verticals are as follows:

1. Testing Services Holdings, Inc. was created to build a full-line of speciality testing services businesses, which provide testing, inspection and certification services to various end-markets, including medical, aerospace, power generation, petro-chemical, environmental and other specialty niches. Our business executive overseeing this "vertical" is Phil Rooney, former CEO of Waste Management and contributor to JZCP's successful sale of Mid-American Recycling.

We made our first acquisition, Galson Laboratories, in the testing services business in May 2010. Galson is a full service provider of analytical testing. Galson has revenue of $11.2 million and was purchased for an enterprise value of $10 million; JZCP purchased approximately $2.7 million in preferred stock and $2.5 million in senior debt and owns 45% of the business. We are excited about the opportunity that Galson Labs creates for us in the fast-growing industrial hygiene sector.

2. Industrial Services Solutions Holdings Corporation was created to build a diversified industrial services and manufacturing business, centered around critical-to-process industrial applications, including turbines, pumps, filtration, air pollution control and industrial automation equipment. Our executive involved in this entity is Jim Rodgers, former CEO of Industrial Control Systems at General Electric and an operating partner at Clayton, Dubilier and Rice, a well-regarded private equity firm.

3. Sensors Solutions Holdings Corporation was created to build a diversified business in the growing and fragmented sensors and transmitters industry. The focus is on value-added sensing and transmitting products used by high-growth market sectors. Targeted applications include high-cost of failure environmental monitoring and industrial process controls. Gerry Posner, former CEO of Mikron and Electronic Measurement Inc., is our industry executive.

4. Specialty Foods is the vertical managed by Bob Aiken, former CEO of US First Food Service, which has the mandate to create a nationwide specialty foods holding company with both distribution and production capabilities. The focus of the strategy centers around specialty, ethnic and gourmet niches that are highly fragmented and protected from large industry competitors.

5. Tri-Water Holdings Corporation, where we have partnered with Mike Reardon, former CEO of U.S. Filter, is focused on building a portfolio of water treatment and process companies, both industrial and consumer driven.

We look forward to reporting on these respective verticals as we make new acquisitions.

We have made an add-on acquisition in our collection management company-Dantom Systems. This is the third acquisition we have made in Dantom in the last 24 months. We invested US$10.7 million of senior subordinated notes, our 50% share of the US$21 million purchase price, to help fund the acquisition of Data Image, a healthcare driven collections and statement processing business. The Dantom management team has proven its ability to professionally integrate these acquisitions into its core business. We are already seeing progress and the earning performance is good.

We also invested in a new micro-cap business, New Vitality, in partnership with Baird Capital Partners; JZCP invested US$4 million for a 9.2% ownership stake. New Vitality is a leader in the direct to consumer nutritional supplement and personal care product market and is very profitable - sales of US$45 million with EBITDA margins 20% plus; our investment was made at 6.7x EBITDA. We anticipate more opportunities to increase our investment in New Vitality as it identifies both product line extensions and competitors to acquire. This is an exciting growth company and its performance has already exceeded expectations.

We have also set up an affiliate for one of our existing portfolio companies, Dental Services Group, in China. We have extensive experience in China having been active there for the past 15 years. DSG will benefit greatly by being able to source low-cost labor and ultimately to service the great China market.

Post 31 August, we made a US$10 million commitment to Milestone Aviation, a new specialty finance business which focuses exclusively on civil helicopters and private jets. JZCP is participating in a US$300 million plus equity strategy being led by The Jordan Company. We think the returns will be excellent without great risk and we have known the CEO for over 20 years. We will keep you posted on Milestone's progress.

Our microcap portfolio is modestly leveraged, at 1.2 times trailing EBITDA. This is after adding $75 million of bank debt at our woundcare portfolio companies, allowing them to repay US$15.7 million back to JZCP of our investment in this sub-debt capital. Our Board has continued to value the micro-cap portfolio at very reasonable multiples. The effective EBITDA multiple continues to be 5.8x. We foresee no immediate refinancing risks on the microcap portfolio.

European Micro-Cap

We have embarked on building a European micro-cap portfolio for JZCP, as discussed in the Chairman's statement.

We purchased the first business, Factor Energia ("FE"), in July 2010. FE is in the energy distribution business for energy distribution business serving small and medium sized companies, a recently de-regulated part of the electric utility industry in Spain. There is a fast growing segment of the market - FE had 4,000 clients a year ago, 10,000 when we bought it and is projected to have 20,000 by December.

We purchased FE at 6.5x 2009 EBITDA from its parent company which was experiencing financial difficulties. Our JZ International team with our existing infrastructure in Spain in the financial distribution and credit management sectors will help Factor Energia's management to realize their growth plans. We expect the company to continue its fast growth and produce excellent results.

We have secured additional acquisition prospects under Letter of Intent and look forward to reporting on our progress in the near future.

Mezzanine Portfolio

Our Mezzanine Portfolio consists of six investments which have attributable value. The largest of these investments is Continental Cement, which has a carrying value of $29.4 million; the company was recently recapitalised with a large equity investment that is subordinate to JZCP's debt. Given their size, these businesses have more leverage on them than our microcap portfolio with a debt senior to JZCP of 3.5 times trailing EBITDA. We have made no new investments in our Mezzanine Portfolio in the past six months.

Legacy Investments/Realisations

The legacy investments are those that were in the JZEP portfolio prior to 2002 and were transferred to JZCP upon the liquidation of JZEP in July 2008. Almost all this segment's value on JZCP's books is in two companies-Healthcare Products Holdings,Inc. ($13.2 million) and Apparel Ventures ($12.1 million). We are delighted to report that, subsequent to the end of August, Apparel Ventures was sold and JZCP has realized $22.0 million in cash and has a $3.0 million stake in two escrow accounts - almost a 2x return on our investment today and hopefully exceeding 2x if escrows are paid in full - after sixteen years of ownership this is a very satisfactory result.

Listed Equities

Listed equities consist of three companies in which JZCP had a significant investment which were partially redeemed via an IPO. The largest portion of this portfolio is Safety Insurance, representing 61% of the listed equities, followed by TAL at 38%. The underlying economics of both these companies continues to be very positive; the respective stocks have performed well.

Bank Debt

Of the ten investments in this portfolio, nine are publicly traded; the tenth is a small bank facility. 42% of the bank debt is in first lien loans, while 58% is in second lien loans. Secondary trading in the bank market continues to be a challenge, as bank specific issues still seem to create a negative overhang on underlying portfolio investment values. All that being said; the bank portfolio has risen from 63%, as a percentage of par at the beginning of this year to 79%, at the end of this six month period. On October 1, 2010, $14.5 million of this portfolio was redeemed at 100% of par via a sale of Harrington Holdings, a home healthcare related business that was a Resolute Fund transaction.

New Opportunities

We have closed on $45 million in commitments on new and private "side car" fund, "Fund A," which will fund pro rata with JZCP on each of our new U.S. microcap buyouts. The funding ratio at present will be $150 million from JZCP and $45 million from the "side car" fund, or approximately a 3:1 ratio. This additional capital resource will provide JZCP with a larger and more diverse portfolio than it could achieve on its own. We may add additional investors to "Fund A" in due course, however, no assurances can be made given the challenging fundraising environment.

We have a robust perspective with our five new verticals and anticipate being very actively investing money in the U.S. during the next six months. Likewise, our European perspective is extremely strong. As JZCP's liquidity is invested, we anticipate it will be replenished with the proceeds from realisations. We may also consider entering into a line of credit facility to help balance JZCP's realisation and investment cycles.

Principal Risks and Uncertainties

As a fund, our risks are those associated with our investment portfolio. Given the nature of this portfolio, the principal risks are associated with the financial and operating performance of the underlying investments, along with some market risks associated with a publicly listed bank and equity portfolios. The Company's risk management processes are described on pages 52 to 59 of the Company's audited financial statements for the year ended 28 February 2010.

Outlook

We believe JZCP has the right ingredients with two superb investment teams (U.S. and Europe) and the liquidity to become a larger more diversified investment company. We hope to offer our fellow shareholders the same type of superior returns as we have in the past - just more of them.

As always, we appreciate your support and do not take it for granted. If you have any investment ideas you think may qualify as a JZCP opportunity, please do not hesitate to contact us.

Best wishes for a happy and healthy holiday season.

Yours faithfully,

David W. Zalaznick

John W. Jordan II

Jordan/Zalaznick Advisers, Inc.

27 October 2010

Investment Review

* Book cost to JZCP equating to transfer value as at 1 July 2008 upon the liquidation of JZEP and adjusted for subsequent transactions.

**Original book cost incurred by JZEP adjusted for subsequent transactions.

*** Invested in deals with the Resolute Fund - see note 19.

Mezzanine Portfolio includes common stock with a carrying value of US$2,457,000 and prefered shares with a carrying value of US$142,279, these investments are classified as Investments at fair value through profit or loss.

Legacy Portfolio - Investments not subject to capital incentive fee

Unaudited Statement of Comprehensive Income

For the Period from 1 March 2010 to 31 August 2010

*Comparative figures for weighted average number of Ordinary shares in issue during the period and basic and diluted gain per Ordinary share have been restated to reflect the one share for five consolidation on 22 June 2009 and the bonus element of new shares issued on 22 June 2009.

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

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

The Company's investment activities commenced on 1 July 2008 upon transfer of investments following the liquidation of JZEP.

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

Unaudited Statement of Financial Position

As at 31 August 2010

These unaudited financial statements were approved by the Board of Directors and authorised for issue on 27 October 2010. They were signed on its behalf by:

Unaudited Statement of Changes in Equity

For the Period from 1 March 2010 to 31 August 2010

Comparative for the period from 1 March 2009 to 31 August 2009

Unaudited Statement of Cash flows

For the Period from 1 March 2010 to 31 August 2010