Jz Capital Regulatory News (JZCP)

JZ Capital Partners Limited ("JZCP" or "the Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2011

18 October 2011

JZ Capital Partners Limited (JZCP), the London listed private equity fund which principally invests in high quality US and European micro cap companies, today announces its unaudited results for the six months ended 31 August 2011.

Highlights

·; 12th consecutive quarter of NAV growth

·; Net Asset Value ("NAV") Total Return1 of 2.9% including:

- NAV of US$591million (FY10:US$581m) / NAV per share of US$9.09 (FY10:US$8.93)

- Distributions of US$6.1million or 9.5c per share paid in July

·; Interim Dividend of 3.5c per share and a Special Dividend of 3.0c per share for the period

·; A solid operating performance from the underlying portfolio companies in the US and European micro cap portfolios with realised and unrealised investment gains offsetting listed equity declines

·; 74% of micro cap investments produced YoY EBIDTA growth

·; NAV growth driven by a valuation uplift from Factor Energia in the EuroMicrocap Fund (2010), LP (19 cents per share), Dantom (14 cents per share) and Galson Laboratories (9 cents per share) in the US

·; Acquisitions and investments during the period totalled US$67.8million in seven businesses

·; Two further acquisitions in Spain (Docout and Grupo Ombuds) increased the proportion of European investments to 9% of JZCP's NAV

·; Significant realisations including:

- Advanced Chemistry & Technology, Inc.(US$18.2million) - 5.6x of capital invested with an IRR of 35%

·; Potential for an accelerated near term investment programme in the US and Europe and for realisation in the US

·; JZCP is uniquely positioned in a challenging market environment with a strong balance sheet and a diversified portfolio

Commenting on the results, David Zalaznick, Founder and Investment Adviser to JZCP, said:

"It is particularly pleasing to have delivered another period of NAV growth, driven by increased earnings in our micro cap investments, despite sharp declines in global markets during the period. Our value orientated investment strategy has been consistent for the past 25 years and has proven to provide our shareholders with attractive returns. We are well diversified with a strong balance sheet and well positioned to invest opportunistically in high quality companies both in the US and Europe."

There will be an analyst and investor presentation to discuss the results at 9.30am (BST) today at FTI Consulting, 26 Southampton Buildings, London WC2A 1PB. Anyone who would like to attend and is yet to register is asked to contact Tom Willetts at FTI Consulting on +44 207 269 7175 or tom.willetts@fticonsulting.com

A conference call facility will also be available by dialling +44 (0)20 3364 5381 (UK) with the access code 3680487. A playback facility will be available two hours after the conference call concludes. This facility may be accessed until 25 October 2011 by dialling +44 (0)20 7111 1244 with the access code 3680487#.

For further information:

Neil Doyle/ Ed Berry +44 (0)20 7269 7237 /7297FTI Consulting

David Zalaznick +1 212 572 0800 Jordan/Zalaznick Advisers, Inc.

About JZCP

JZCP is a London listed private equity fund which invests in high quality US and European micro cap companies. Our 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 to our investors. JZCP also invests in mezzanine loans, first and second lien investments and other publicly traded securities. For more information please visit our website at www.jzcp.com

1Defined as the percentage change in the net asset value per share inclusive of dividends paid during the relevant period

Chairman's Statement

I am pleased to report the results of JZ Capital Partners Limited ("JZCP" or the "Company") for the six-month period ended 31 August 2011.

Performance

The first six months of the Company's financial year have been dominated by macroeconomic uncertainty and significant market volatility, putting an end to the sustained equity capital market rally. The effects on the Company have principally been that the quoted values of its listed investments have reduced along with the market comparables used to value some of the Company's private and micro cap investments. It has also slowed progress on potential realisations.

The Board is pleased to be able, against this background, to announce that JZCP has produced a solid set of interim results, providing shareholders with a total NAV return (NAV appreciation and reinvested dividends) of 2.9%. The Company has a disciplined investment strategy and a strong balance sheet which incorporates a significant amount of liquidity.

While the main negative contributor to NAV was the reduction in value of the Company's listed investments of US$17.0 million or 26 cents per share, this was compensated by other net investment gains of US$23.3 million or 35 cents per share. These came notably from the sale of Advanced Chemistry & Technology, Inc. and write ups, justified by earnings increases, of Galson Laboratories, Dantom Systems, Inc. and Factor Energia.

Elsewhere in the micro cap portfolio, earnings increases offset reductions in applicable comparable multiples but in the case of Salter Labs, Inc., a reduction in earnings as well as in the comparable multiple required a write down of US$5.4 million.

Portfolio

At the end of the period the portfolio consisted of 42 companies across eight industries in the US and Europe. The Board has been particularly pleased with the micro cap investments which continue to be a significant growth driver for JZCP. There is a strong pipeline of opportunities for JZCP in both the US and Europe, and our advisers JZAI are continuing to examine potential investments in the industry verticals of testing services, industrial services solutions, sensors solutions, specialty foods and water treatment industries.

One of these opportunities came to fruition in July 2011 when the Company made a US$5.4 million co-investment in Justrite Manufacturing Company, which produces safety cabinets, safety cans and spill containment systems.

Other highlights include a US$7.7 million acquisition, in our water treatment vertical, of Nashville Chemical, a manufacturer of industrial water systems products, and an additional US$3.8 million investment made in Milestone Aviation, a helicopter leasing business.

When balance sheet cash and liquid securities are netted out, the Company's non-public portfolio of businesses trades at a 47% discount to NAV. The Board values these private investments conservatively, at 6.9X EBITDA.

Acquisitions and investments during the period totalled US$67.8 million in seven businesses.

European Micro Cap

There has been significant progress with the European micro cap portfolio which now consists of four investments in Spain. Through the EuroMicrocap Fund the Company acquired two of these companies during the six months to 31 August 2011: Docout, a digital storage and processing specialist was bought in April and Grupo Ombuds, which provides asset protection and security for government officials, was acquired in May. The largest positive contribution to our NAV increase came from Factor Energia.

The Company is continuing to explore attractive investment opportunities in Spain and elsewhere in Europe that will complement and further diversify the existing portfolio.

Realisations

The Company realised its investment in Advanced Chemistry & Technology, Inc. a US based manufacturer of sealants and chemical products for the aerospace industry, for US$18.2 million (after deducting escrows). It was purchased in 2001 and earned a multiple of capital invested of 5.6x and an IRR of 35%.

Distributions

Net cash revenue for period allows the Directors to have declared an Interim Dividend of 3.5 cents per share for the six months ended 31 August 2011. In addition, revenue that had previously been reported as non-cash which has now been converted to cash allows the Directors to declare a Special Dividend of 3.0 cents per share.

Total distributions cannot necessarily be predicted or maintained because the occurrence of circumstances that allow the declaration of Special Dividends is irregular. However, the conditions that could allow further Special distributions continue to be favourable.

Share Buy backs

The Directors continue to consider using the Company's share buy back facility on investment grounds but will maintain its focus on deploying capital in the micro cap sector. The Directors will not consider using the share buy back facility as a short term measure to narrow the discount to NAV.

Incentive Fee

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 investment advisory and management agreement with Jordan/Zalaznick Advisers, Inc.. At 31 August 2011 no provision was taken for the income incentive fee but a provision of US$4.1 million was accrued for the capital incentive fee, exclusive of the capital incentive fee that is separately accrued at US$3.8 million as a carried interest in the EuroMicrocap Fund (2010), LP.

Conversion of Shares

Due to recent changes in the ownership of the Ordinary shares of no par value in the capital of the Company and to ensure that no more than 50% of the Ordinary shares are held by US residents, in August 2011 a number of US resident Shareholders of the Company voluntarily requested to convert some of their Ordinary shares into Limited Voting Ordinary shares in the capital of the Company ("LVOS").

Outlook

The outlook for the Company is positive despite the continued uncertainty of the economic environment in the US and Europe, which is making realisations and acquisitions slow and challenging. However, the Board is encouraged by the pickup in pace of investments and the prospects for activity in the US, in the industry sectors focused on by the verticals, and in Europe. The Board believes the Company is well positioned in the current market condition given the liquidity in the balance sheet.

The Company will continue to focus on preserving shareholder value throughout these turbulent times and is well positioned to grow its NAV further, using its large cash reserves to make further investments in the micro cap sector.

David Macfarlane

Chairman

17 October 2011

Investment Adviser's Report

Dear Fellow Shareholders:

We are pleased to report that JZCP's financial condition for the six months ended 31 August 2011 continues to be exceptionally strong with enhanced liquidity from realisations. During this period JZCP's Total NAV Return (which we define as the percentage change in the net asset value per share inclusive of dividends paid during the relevant period) increased by 2.9%. After paying special and final dividends of 9.5 cents in July 2011, our NAV increased from US$8.93 to US$9.09.

We feel that a strong balance sheet is highly desirable in the current environment, especially given our ambitions to build out our investment portfolio both in the US and Europe in various industry sectors. Your Company's liquidity is US$156.6 million in cash and treasury gilts (23% of assets) and there is no outstanding debt or long-term obligations other than the ZDPs due in 2016.

JZCP's underlying portfolio companies are all performing well on an operating basis. We wish our stock price had kept up with our NAV growth during the six months ended 31 August 2011, as JZCP's share price discount widened as compared to its net asset value from 26% to 33%. Although we outperformed the FTSE 100, which was down 10%, we are subject to the uncertainties hanging over the public markets. Since we can't solve the macro-economic problems, our focus continues to be on long-term NAV and dividend growth.

NAV Growth

For the six months ending 31 August 2011, JZCP's net assets increased from US$8.93 per share to US$9.09, a 1.8% increase (after the 9.5 cents of dividends paid in July 2011). This represents the 12th consecutive quarter in which the NAV has increased. The chart below shows the source of this recent growth:

As shown below, the primary source of NAV growth is the increase in the valuations of Factor Energia in the EuroMicrocap Fund (2010), LP (19 cents per share), Galson Holdings, Inc. (9 cents) and Dantom Systems, Inc. 8 cents). These gains are all due to continued operational and financial improvements in these companies. In addition, we realised a gain of 8 cents per share from the sale of one of our legacy companies, Advanced Chemistry & Technology, Inc.

Portfolio Summary

We would like to show you a "snapshot" of JZCP's assets as of 31 August 2011 compared with the position as of 28 February 2011 fiscal year-end, six months ago.

US Micro Cap Portfolio

Our US micro cap portfolio continues to perform well, with all but four of our 15 businesses showing year over year EBITDA growth. All of these investments employ low leverage, currently at 1.3x EBITDA of debt senior to JZCP's position. The average multiple used in valuing these entities continues to be low at 6.9x.

We have written up two of our US micro cap investments, as they continue to outperform expectations. Galson Holdings, Inc., the industrial hygiene testing company, has seen its value increase by US$1.4 million. Danton increased by US$5.3 million.

The uncertainty in the capital markets has made both purchasing and selling of companies challenging.

However, we were able to put US$24 million to work in our US micro cap portfolio as follows:

·; We made our third Industrial Services vertical acquisition - Southern Parts and Engineering Company ("SPE"), an independent supplier of aftermarket products and services for industrial air compressors. The company provides internal parts, filters, and lubricants for most reciprocating and rotary OEM brands of compressors. Our US$7 million investment in SPE consists of US$4.5 million of 10% notes and US$2.5 million of preferred and common stock. We hold a 41.5% equity interest in this business. 

·; We acquired Nashville Chemical, which was the first investment into our water vertical. Nashville Chemical is a specialty water treatment, chemical and services company; which treats boilers, cooling water, and process water systems for industrial and commercial customers. Nashville blends and distributes a comprehensive line of chemicals that provide scale and corrosion control in boilers, pre-boilers, and various return systems. Nashville Chemical's water treatment solutions remove harmful contaminants from water, which ultimately improve the efficiency and extend the life of its customer's assets. Our US$7.7 million investment in this entity consists of US$3.8 million in notes, and US$3.9 million of preferred and common stock. We hold a 40.1% equity interest in this business.

·; We co-invested with Baird Capital Partners in Justrite, a leading designer and manufacturer of safety products for the handling and storage of flammable and hazardous liquids. Manufacturers, laboratories, commercial buildings and other users of flammable and hazardous liquids rely on Justrite products to comply with regulatory requirements, meet safety codes and prevent catastrophic events caused by fires or spillage. We invested US$5.4 million in preferred and common stock, representing 14% of the company's equity.

·; We invested an additional US$3.8 million in Milestone Aviation, bringing our stake in this business' preferred and common stock to US$6.6 million. This investment represents 2.8% of the company's equity. JZCP has a US$10.0 million commitment to this company of which; US$3.4 million dollars remains to be invested.

European Investments

Factor Energia, the first investment of the EuroMicrocap Fund (2010), LP (of which JZCP owns 75%), is an energy distribution business in Spain, which resells electricity to small and medium-sized companies, a recently deregulated part of the electric utility sector. The Fund bought this company off €3 million EBITDA for 2009 and the company made €9.7million of EBITDA in 2010. As a result, we have written up JZCP's share of this investment by $17.6 million using a 4.5x EBITDA multiple.

Xacom, a business-to-business telecom products business, is also performing well. Xacom is growing quickly with new products and geographic expansion outside of Spain. Xacom has opened offices in Chile and Mexico since its acquisition by the Fund and there are plans to expand further into other Latin American countries.

The Fund acquired Docout, a provider of digitalization, document processing and storage services to Spanish financial institutions, utilities and insurance companies in April 2011. The Fund invested €11 million in equity and JZCP directly loaned Docout €2.0 million for working capital. Docout was awarded its largest document outsourcing contract from Bank Santander prior to its acquisition.

Finally, the Fund made a €12.7 million investment in Grupo Ombuds, a leading provider of security, surveillance and facility services to public sector and blue-chip clients in Spain. JZCP also loaned the company €8.5 million. Ombuds' service offering includes personal security protection to government officials and corporate executives, asset protection, security services to public and corporate buildings and the provision of ancillary facility services. The company is a niche player with strong growth potential and has a leading market share in Spain.

All four investments represent 9% of JZCP's total assets as at 31 August 2011.

Other Assets

Over the past year, the bulk of our Mezzanine Portfolio has been re-paid. We currently have two investments of size, Continental Cement (a Midwestern United States cement plant) and HAAS (an automobile paint system supplier company). Both companies are performing well, and paying cash interest per their terms.

Regarding our Legacy Portfolio, the sale of Advanced Chemistry & Technology , Inc. in July 2011 was a positive outcome to a long term investment. JZCP received US$18.2 million for its US$3.4 million investment, representing a 5.6x multiple of capital invested. We had written Advanced Chemistry & Technology's value up to the point where the proceeds from this sale represented a US$5.5 million gain.

The only legacy investment left of any size is Healthcare Products, our power wheelchair company. Despite the myriad "balls out of left field" from Medicare, its primary customer, this company continues to perform to plan.

Our Listed Equities declined with the market: TAL (the international container leasing company) and Safety Insurance (a Massachusetts based insurance company) together accounted for a reduction of per share NAV of 26 cents or US$17.0 million. All that being said, in April 2011, we were able to sell 22.8% of our position in TAL in a successful secondary share offering for a US$7.7 million gain.

New Opportunities and Current events

We are gaining traction on our strategic industry verticals and anticipate making several acquisitions in the near term. In addition, we are always looking for co-investments and opportunistic investments that may arise and have several under review. As expected, the upheaval in the capital markets has made realisations challenging, though we hope to have some good news within the next year.

Principal Risks and Uncertainties

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

Outlook

Our investment verticals have started to gain momentum in terms of acquisitions and we anticipate seeing the pace of investment accelerate in the next six months. At the same time, we will continue to realise on our existing portfolio and, if the capital markets cooperate, will be generating substantial cash for reinvestment.

Our basic premise is that we can continue to achieve superior returns by maintaining our investment discipline, and investing your (and our) money in a diversified portfolio of good quality niche businesses at reasonable prices. In most ways, our value oriented investment strategy has remained consistent through the years although the value-added/operations management component has increased significantly. We are pleased to have excellent managers as partners and together we develop growth strategies and work on operational efficiencies for the respective portfolio companies. This way of investing, we believe, offers superior risk adjusted returns for our shareholders over the long-term.

As we approach JZCP's 25th Anniversary this December, we are grateful to have the support of many longtime shareholders as well as from new shareholders. We've seen JZCP's assets grow from US$42 million at inception to US$700 million today and we've paid out approximately US$120 million in dividends. Our respective teams in the US and Europe have grown considerably; they do the heavy lifting and have made JZCP's growth possible.

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.

Happy Anniversary!

Yours Faithfully,

David W. Zalaznick

John W. Jordan II

Unaudited Statement of Comprehensive Income

For the Period from 1 March 2011 to 31 August 2011

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

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

Unaudited Statement of Financial Position

As at 31 August 2011

These unaudited financial statements were approved by the Board of Directors and authorised for issue on 17 October 2011. They were signed on its behalf by:

David Macfarlane Patrick Firth

Chairman Director

Unaudited Statement of Changes in Equity

For the Period from 1 March 2011 to 31 August 2011

Comparative for the period from 1 March 2010 to 31 August 2010

Unaudited Statement of Cash Flows

For the Period from 1 March 2011 to 31 August 2011

The accompanying form an integral part of the financial statements.

Notes to the Condensed Interim Financial Statements

1. General Information

JZ Capital Partners Limited (the "Company") is a Guernsey domiciled closed-ended investment company which was incorporated in Guernsey on 14 April 2008 under The Companies (Guernsey) Law, 1994. The Company is now subject to the Companies (Guernsey) Law, 2008, which came in to effect on 1 July 2008. The Company's Share Capital consists of Ordinary shares and Zero Dividend Redeemable Preference ("ZDP") shares. The Ordinary shares and ZDP shares were admitted to the official list of the London Stock Exchange on 1 July 2008.

The Company was granted consent on 8 May 2008 by the Guernsey Financial Services Commission under The Control of Borrowing (Bailiwick of Guernsey) Ordinance,1959 to raise up to £300,000,000 by the issue of shares.

The Company was launched in connection with a scheme of reconstruction and voluntary winding up of JZ Equity Partners Plc ("JZEP") under section 110 of the Insolvency Act 1986. JZEP's assets, after providing for its liabilities were transferred in specie to the Company on 1 July 2008 and the Company issued to JZEP Shareholders (other than those who opted against the new scheme) one Ordinary Share for each JZEP Ordinary Share and one Zero Dividend Preference ("ZDP") Share for each JZEP ZDP Share that they held.

Limited Voting Ordinary Shares ("LVO") were issued so that certain of the Company's existing Shareholders and certain new investors that are Qualifying US Persons could participate in the ownership of the Company without causing the Company to be treated as a US domestic company for the purposes of US securities laws and/or a CFC for US tax purposes. Limited Voting Ordinary Shares are identical to, and rank pari passu in all respects with, the New Ordinary shares except that the Limited Voting Ordinary Shares will only carry a limited entitlement to vote in respect of the appointment or removal of Directors and will not carry any entitlement to vote in respect of certain other matters. The LVO shares are not listed and are not admitted to trade on or through the facilities of the London Stock Exchange.

The Company is classed as an authorised fund under the Protection of Investors (Bailiwick of Guernsey) Law 1987.

The Company's corporate 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 and other debt and equity opportunities, including distressed debt and structured financings, derivatives and opportunistic purchase of publicly traded securities.

The Company has no direct employees. For its services the Investment Adviser receives a monthly management fee and may also be entitled to a performance-related fee (note 10). The Company has no ownership interest in the Investment Adviser. The Company is administered by Butterfield Fulcrum Group (Guernsey) Limited (note 10).

2. Significant Accounting Policies

The accounting policies adopted in the preparation of these condensed interim financial statements have been consistently applied during the period of this statement, unless otherwise stated.

Statement of Compliance

The condensed interim financial statements of the Company for the period 1 March 2011 to 31 August 2011 have been prepared in accordance with IAS 34, "Interim Financial Reporting" together with applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the London Stock Exchange. The condensed interim financial statements do not include all the information and disclosure required in the annual financial statements and should be read in conjunction with the annual report and audited financial statements at 28 February 2011.

Basis of Preparation

The condensed interim financial statements have been prepared under the historical cost or amortised cost basis, modified by the revaluation of certain financial instruments designated at Fair value through Profit or Loss upon initial recognition.

The accounting policies adopted in the preparation of these condensed interim financial statements have been consistent with the accounting policies stated in note 2 of the annual financial statements for the year ended 28 February 2011, except for the policy adopted in the period for the treatment of the Company's investment in associates (note 12). The preparation of condensed interim financial statements in conformity with IAS 34, "Interim Financial Reporting" requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. Segment Information

The Investment Manager is responsible for allocating resources available to the Company in accordance with the overall business strategies as set out in the Investment Guidelines of the Company. The Company has been organised into the following segments

• Portfolio of Bank debt.

• Portfolio of Mezzanine investments.

• Portfolio of US Micro Cap investments.

• Portfolio of European investments.

• Portfolio of Legacy investments.

• Portfolio of Listed investments.

The investment objective of each segment is to achieve consistent medium-term returns from the investments in each segment while safeguarding capital by investing in a diversified portfolio.

Investment in treasury gilts/notes are not considered part of any individual segment and have therefore been excluded from this segmental analysis.

There have been no changes in reportable segments during the course of the period. The segment information provided is also presented to the Board of the Company.

For the period ended 31 August 2011

1The capital incentive fee is allocated across segments where a realised or unrealised gain or loss has occurred. Segments with realised or unrealised losses are allocated a credit prorata to the size of the loss and segments with realised or unrealised gains are allocated a charge prorata to the size of the gain.

For the period ended 31 August 2010

At 31 August 2011

At 28 February 2011

Certain income and expenditure is not considered part of the performance of an individual segment. This includes net foreign exchange gains, interest on cash, finance costs, management fees, custodian and administration fees, directors' fees and other general expenses.

The following table provides a reconciliation between net reportable segment income and operating profits.

Other receivables and prepayments are not considered to be part of individual segment assets. Certain liabilities are not considered to be part of the net assets of an individual segment. These include custodian and administration fees payable, directors' fees payable and Other payables and accrued expenses.

The following table provides a reconciliation between net total segment assets and liabilities and total assets and liabilities.

4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

In the application of the Company's accounting policies, which are described in note 2 to the annual financial statements for the year ended 28 February 2011, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from their sources. The estimates and associated assumptions are based on historical experience of JZCP and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The following are the key assumptions and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Fair value of investments at fair value through profit or loss ("FVTPL")

Certain investments are classified as FVTPL, and valued accordingly, as disclosed in note 2 of the annual financial statements for the year ended 28 February 2011 and the valuation policy. The key source of estimation uncertainty is on the valuation of unquoted equities and equity-related securities.

Loans and receivables

Certain investments are classified as loans and receivables, and valued accordingly, as disclosed in note 2 of the annual financial statements for the year ended 28 February 2011 and the valuation policy. The key estimation is the impairment review and the key assumptions are as disclosed in note 2 of the annual financial statements for the year ended 28 February 2011.

5. Net (loss)/gain on investments at fair value through profit or loss

6. Impairments on loans and receivables

7. Share of associate's net income

8. Investment income

Income for the six month period ended 31 August 2011

Income for the six month period ended 31 August 2010

9. Bank and deposit interest

The ZDP Shares have no right to any of the income available for distribution but have an entitlement, on a predetermined growth basis, to the available assets at any winding-up date prior to 22 June 2016. The ZDP shares were issued at 215.80 pence on 22 June 2009 and will have a pre-determined final capital entitlement of 369.84 pence on 22 June 2016. The ZDP shares final capital entitlement is calculated using a rate equal to 8% return compounding on a monthly basis. Finance costs are allocated to the statement of comprehensive income using the effective interest rate method.

10. Expenses

Directors fees

The Chairman is entitled to a fee of US$140,000 per annum. Each of the other Directors are entitled to a fee of US$60,000 per annum. For the period 1 March 2011 to 31 August 2011, total expenses included in the statement of comprehensive income were US$190,000 (31 August 2010: $163,000) of this amount US$63,000 (28 February 2011: $63,000) was outstanding at the period end and included within Other payables.

Administration fees

Butterfield Fund Services (Guernsey) Limited was appointed on 12 May 2008 under an Administration, Secretarial and Registrar Agreement. Butterfield Fund Services and Fulcrum Group merged during September 2008 forming Butterfield Fulcrum Group (Guernsey) Limited (the "Administrator").

The Administrator is entitled to a quarterly fee of US$100,000 payable monthly (quarterly pre 1 October 2010) in arrears. Fees payable are subject to an annual fee review. For the period 1 March 2011 to 31 August 2011 total expenses payable to the Administrator of US$200,000 (31 August 2010: US$200,000) were included in the statement of comprehensive income. Of this amount US$33,000 (28 February 2011: US$33,000) was outstanding at the period end and included within Other payables.

Investment Advisory and Performance fees

The Company entered into an investment advisory and management agreement with Jordan/Zalaznick Advisers, Inc (the "Investment Adviser") in May 2008 which was then amended and restated on 20 May 2009 and again on 23 December 2010 (the "Advisory Agreement").

10. Expenses (continued)

Investment Advisory and Performance fees

Pursuant to the Advisory Agreement, the Investment Adviser is entitled to a base management fee and to an incentive fee. The base management fee is an amount equal to 1.5 per cent. per annum of the average total assets under management of the Company less those assets identified by the Company as being excluded from the base management fee. The base management fee is payable quarterly in arrears; the agreement provides that payments in advance on account of the base management fee will be made.

The incentive fee has two parts. The first part is calculated by reference to the net investment income of the Company and is payable quarterly in arrears provided that the net investment income for the quarter exceeds 2 per cent of the average of the net asset value of the Company for that quarter (the "hurdle") (8 per cent. annualised). The fee is an amount equal to (a) 100 per cent of that proportion of the net investment income for the quarter as exceeds the hurdle, up to an amount equal to a hurdle of 2.5%, and (b) 20 per cent. of the net investment income of the Company above a hurdle of 2.5% in any quarter. Investments categorised as legacy investments and other assets identified by the Company as being excluded are excluded from the calculation of the fee. A true-up calculation is also payable at the end of each financial year.

The second part of the incentive fee is calculated by reference to the net realised capital gains of the Company and is equal to: (a) 20 per cent. of (x) the realised capital gains of the Company for each financial year less (y) all realised capital losses of the Company for the year less (b) the aggregate of all previous capital gains incentive fees paid by the Company to the Investment Adviser. The capital gains incentive is payable in arrears within 90 days of the fiscal year end. Investments categorised as legacy investments and those assets of the EuroMicrocap Fund 2010, LP are excluded from the calculation of the fee.

For the period 1 March 2011 to 31 August 2011 total Investment advisory and management expenses, based on the average total assets of the Company, were included in the statement of comprehensive income of US$5,074,000 (31 August 2010: US$4,192,000) of this amount US$2,074,000 (28 February 2011: US$713,000) was outstanding at the period end and is included within Other Payables.

The Company provides for a capital gains incentive fee based on cumulative net realised and unrealised investments gains. At 31 August 2011 the provision for the capital gains incentive fee was US$4,068,000 (28 February 2011: US$2,093,000).