The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than to professional investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of South Africa.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which forms part of domestic law in the United Kingdom pursuant to The European Union Withdrawal Act 2018, as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019.

27 November 2023

Chrysalis Investments Limited ("Chrysalis" or the "Company")

Investment Management Arrangements Update

The Board of Chrysalis has been working for some time on a significant revision to its existing structure in order to ensure the maximisation of value for its shareholders.

The recent shareholder consultation conducted by Rothschild & Co Equity Markets Solutions Limited ("Rothschild") provided the Board with useful insight into issues of capital deployment, management remuneration and approach, as well as the Company's relationship with Jupiter Investment Management Ltd ("Jupiter"), both as an investor in Chrysalis and as Investment Adviser. The consultation covered approximately 60% of the non-Jupiter related issued shares.

The purpose of the consultation was to inform the Board and Investment Adviser of the views of shareholders ahead of a set of proposals being put to them for approval on the date of the forthcoming Annual General Meeting ("AGM") in Q1 2024. It is the Company's intention to release relevant shareholder documentation (including a final proposed Capital Allocation Policy) at the same time as the year end accounts are published and the date for the AGM is set. Shareholders will have the ability at that time to vote on:

1)    the continuation of the Company; and

2)  the revised performance fee arrangements under the proposed new management arrangements (as described further below).

Aside from these issues, one of the key responsibilities for your Board has been the oversight of the Company's investment management agreement.

At the time of the IPO, the investment management agreement was with Merian Global Investors (UK) Limited ("Merian"). While the sale of Merian to Jupiter in 2020 changed this position, the key investment staff, including the two lead portfolio managers, Richard Watts and Nick Williamson (the "Managers"), remained the same. After considering all the implications of a potential change in manager, including the payment of a substantial termination fee, the Board's unanimous conclusion was that it wished the Company to continue to be run by the existing investment team.

Since that time, the Board has worked to ensure that the best processes are in place for the Company, resulting in the appointment of an independent valuation committee to enhance the quality of valuation work; the AIFM responsibility being taken in house; and risk reporting being better tailored to the product.

There remain, however, some outstanding issues that the Board believes need to be resolved and which could affect the potential development of Chrysalis. These revolve, primarily, around the provision of sufficient dedicated resources for the management team, and the reduction of various Jupiter-managed holdings in Chrysalis.  

The Board is pleased to announce today that it has reached agreement with Jupiter and agreed Heads of Terms with the Managers to redraw the structure under which investment advisory services will be provided, which foresees the Managers leaving Jupiter to provide advisory services to the Company from a new entity.

The Board believes such a move is consistent with feedback from the recent shareholder consultation that demonstrated strong support for the Managers and their efforts in creating and running Chrysalis, a view which the Board shares. While the current NAV per share remains materially below its peak, recent events hopefully point to a more optimistic outlook, with yields generally softening and company specific news - such as discussion around Klarna's move towards IPO - also providing a more upbeat prognosis. Given the Managers' in-depth knowledge of the Company's portfolio, the Board is of the view that they are best placed to oversee the next stage of Chrysalis' growth.

The details of these arrangements will be set out in a forthcoming shareholder circular; however, a summary of the proposed new arrangements is as follows:

1)    Chrysalis and Jupiter have agreed that the six months' notice period under the existing management contract will be waived and the contract will terminate with effect from 1 April 2024.

2)    Jupiter has agreed to a reduction in the management fee, effective from 1 October 2023, from 50bps to 15bps (given likely limited investment activity in the current market environment pending the continuation vote), leading to an expected saving of approximately of £1.4m for Chrysalis shareholders over the six-month period to 31 March 2024.

3)    Jupiter has released the Managers from their employment contracts and employment restrictions, effective 31 March 2024.

4)    The Board has agreed, in principle, to enter into a tripartite contract with a new investment adviser formed by the Managers (that will also have as members and/or employ the existing executives who are focussed on the Chrysalis portfolio either immediately or following the end of their notice periods with Jupiter) to take over investment advisory services from Jupiter, and with G10 Capital Limited - part of IQ-EQ group's UK Regulatory and AIFM platform - to take over AIFM services for the Company, each with effect from 1 April 2024. As a consequence of this change, Richard Watts will be solely focussed, along with Nick Williamson, on the Company's portfolio.

5)    The Company's investment advisory fee will be comprised of (i) 50bps of net asset value per annum, which is commensurate to the level the Company has historically paid; and (ii) an additional AIFM fee of 5bps up the first £1 billion of net asset value per annum (3bps thereafter). The latter will fund both the significantly enhanced risk process that is anticipated to be established in cooperation with the Managers and the oversight of G10 Capital Limited. As noted above, the performance fee arrangements for the new investment adviser will be subject to shareholder approval at a meeting to be held immediately following the AGM. The proposed performance fee terms will be the same as those described in the Company's announcement on 13 October 2023.

6)    The new investment advisor to be led by the Managers will have a 12-month minimum initial term, following which the new agreement will be terminable on 6 months' notice.

A further announcement will be made when this agreement is finalised and entered into.

The new structure will allow investment in added resources for the management team, will make the most of IQ-EQ's regulatory and AIFM platform, which is used by a number of existing listed investment companies, and enable the Managers to focus their time soley on developing the Company.

The Board and the Managers believe the trends that led to the establishment of Chrysalis five years ago remain in force, especially the decline in IPO activity and the shrinkage of the UK stock market as a venue for listed companies. In many cases these trends have become more acute. It is also the Board's firm belief that this complete package of proposals will put Chrysalis in a better position to maximise the value of its exciting portfolio of holdings and enable it to pursue the strategy into the future for shareholders within a more transparent capital allocation policy in line with that announced in October 2023. As such, the Board plans to recommend the Company's continuation to shareholders at the vote on this matter at the forthcoming AGM. In the event that shareholders were to seek an orderly return of capital, a process which could take a number of years, the Board believes that the Managers are best placed to provide the relevant investment advice to the Company and that the terms of their remuneration (together with their significant alignment by virtue of their personal shareholdings) remain competitive with any potential alternative manager of such a strategy.

For further information, please contact:

LEI: 213800F9SQ753JQHSW24

A copy of this announcement will be available on the Company's website at https://www.chrysalisinvestments.co.uk.

The information contained in this announcement derived from the value of the Company's investments has been provided by the relevant underlying portfolio companies and has not been independently verified by the Company. The information contained herein is unaudited.

This announcement is for information purposes only and is not an offer to invest. All investments are subject to risk. Past performance is no guarantee of future returns. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results. Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

This announcement includes statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements relate to matters that are not historical facts regarding the Company's investment strategy, financing strategies, investment performance, results of operations, financial condition, prospects and dividend policies of the Company and the instruments in which it will invest.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  Forward-looking statements are not guarantees of future performance.  There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in general market conditions, legislative or regulatory changes, changes in taxation regimes or development planning regimes, the Company's ability to invest its cash in suitable investments on a timely basis and the availability and cost of capital for future investments.

The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by FSMA, the Listing Rules, the Prospectus Regulation Rules made under Part VI of the FSMA or the Financial Conduct Authority or other applicable laws, regulations or rules.