TIDMCHRY
RNS Number : 6689U
Chrysalis Investments Limited
27 November 2023
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is not for publication, release or distribution in the United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
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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 GBP1.4m 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 GBP1 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:
Media
Montfort Communications: +44 (0) 7976 098 139
Charlotte McMullen / Toto Reissland chrysalis@montfort.london
/
Lesley Kezhu Wang
Jupiter Asset Management:
Nick Black +44 (0) 800 561 4000
Liberum:
Chris Clarke / Darren Vickers
/ Owen Matthews +44 (0) 20 3100 2000
Numis:
Nathan Brown / Matt Goss +44 (0) 20 7260 1000
Maitland Administration (Guernsey)
Limited:
Chris Bougourd +44 (0) 20 3530 3109
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
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END
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