Chrysalis VCT PLC 28 January 2005 Not for release, distribution or publication, in whole or in part, in or into the United States, Canada, Australia or Japan 28 January 2005 Merger by way of recommended offers by Smith & Williamson Corporate Finance Limited on behalf of Chrysalis VCT plc ("Chrysalis") for each of Chrysalis A VCT plc ("Chrysalis A"), Chrysalis B VCT plc ("Chrysalis B") and Chrysalis C VCT plc ("Chrysalis C") (together the "Chrysalis Companies") Summary Further to the announcement of a possible merger on 22 December 2004, the boards of the Chrysalis Companies and the board of Chrysalis announce that they have reached agreement on the terms of a merger by way of recommended offers to be made by Smith & Williamson on behalf of Chrysalis for the entire issued ordinary share capital of each of the Chrysalis Companies. * The Offers will be all-share and, in addition, special dividends will be paid (tax-free to Qualifying Shareholders), subject to the Offers becoming or being declared wholly unconditional. The Offers are being made on the basis of 607, 482 and 614 New Chrysalis Shares for every 1,000 shares in Chrysalis A, Chrysalis B and Chrysalis C, respectively. The Special Dividends will be payable in cash on the basis of 10p, 1.75p and 1p per Chrysalis A, Chrysalis B and Chrysalis C Share, respectively. * The table below sets out the approximate value of the Offers (per share and for the whole of the current issued ordinary share capital of the Chrysalis Companies), when combined with the Special Dividends and based on the closing price of 52.5p per Chrysalis Share on 27 January 2005, and the premia represented by the Offers over the closing Chrysalis Companies Share prices on 21 December 2004 (Chrysalis A - 37.5p, Chrysalis B - 25.0p, Chrysalis C - 30.0p), the last business day prior to the announcement of a possible merger: Offer Special Offer value Premium to Total offer price Dividend per share market price value (incl. per share per share (incl. Special Special Dividends) Dividends) Chrysalis A 31.9p 10p 41.9p 11.6% £2.7m Chrysalis B 25.3p 1.75p 27.1p 8.2% £2.9m Chrysalis C 32.2p 1p 33.2p 10.8% £3.5m * The Merger will create a viably sized VCT with greater prospects for growth and achieve estimated cost savings of approximately £250,000 per annum. * The liquidity of the shares of the Enlarged Group will be enhanced by its share buy-back policy under which Chrysalis intends to buy back shares at a 10 per cent. discount to NAV (it will reserve up to £1.0 million (or 5 per cent. of NAV, if lower) for this purpose in the six months following the closing of the Offers). * The recent change to managing Chrysalis and the Chrysalis Companies has seen a measurable improvement in performance. This management team will continue in place following the Merger. * The valuation of each of the four companies for the purposes of the Merger has been calculated by reference to net assets adjusted on a consistent basis across the four companies. * Chrysalis Companies Shareholders who receive new Chrysalis Shares under the Offers will not lose any entitlements to VCT tax relief as a result of the Merger. * If the Merger does not proceed, shareholders in the Chrysalis Companies could potentially remain invested in small VCTs with higher overheads and limited prospects for growth. * If the Chrysalis Companies become subsidiaries of Chrysalis and their stock exchange listings are cancelled, they will lose their VCT status and certain shareholders who do not accept the Offers may thereby incur substantial tax liabilities. * The Independent Financial Advisers of the Chrysalis Companies consider the terms of the Offers, when combined with the Special Dividends, to be fair and reasonable and intend to recommend that Chrysalis Companies Shareholders accept the Offers. * The Offers will not be inter-conditional and all or any of them may become or be declared wholly unconditional. Robert Drummond, Chairman of Chrysalis and the Chrysalis Companies, commented: "We have carried out a number of major improvements to the Chrysalis VCTs over the past year resulting in greater efficiency and the performance of all four funds has already started to show considerable improvement. The proposed merger will enable the new larger VCT to improve its deal flow, better manage its portfolio, operate an effective buy back policy and distribute profits without fear of shrinking to an uneconomic size. Overall, for Chrysalis VCT the merger is good news, while for the other VCTs it is an essential move as otherwise they will have little chance of managing their affairs at a reasonable cost and liquidation would have adverse tax consequences for many of their shareholders." This summary should be read in conjunction with the full text of this announcement. Enquiries: Chrysalis VCT plc, Chrysalis A VCT plc, Chrysalis B VCT plc and Chrysalis C VCT plc Tel: 07831 091545 Robert Drummond - Chairman Smith & Williamson (financial adviser to Chrysalis) Tel: 020 7637 5377 Dr A Basirov MJ2 (financial PR adviser to Chrysalis) Tel: 020 7491 7783 Simon Astley Kingston Smith (financial adviser to Chrysalis A) Tel: 020 7566 4000 Marc Fecher St Helen's Capital (financial adviser to Chrysalis B) Tel: 020 7628 5582 Mark Warde-Norbury Kerburn Rose (financial adviser to Chrysalis C) Tel: 020 7224 4320 Charles Bunker This announcement does not constitute an offer or an invitation to purchase or subscribe for any securities. The Offers will be made solely by the Offer Document and the Forms of Acceptance, which will contain the full terms and conditions of the Offers, including details of how the Offers may be accepted. Smith & Williamson Corporate Finance Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Chrysalis VCT plc and no one else in connection with the Offers and will not be responsible to anyone other than Chrysalis VCT plc for providing the protections afforded to customers of Smith & Williamson Corporate Finance Limited nor for providing advice in relation to the Offers or any other matter referred to herein. Kingston Smith, which is regulated by the Institute of Chartered Accountants in England and Wales, and St Helen's Capital Plc and Kerburn Rose Limited, each of which is regulated in the United Kingdom by the Financial Services Authority, are acting exclusively for Chrysalis A, Chrysalis B and Chrysalis C respectively and no one else in connection with the Offers and will not be responsible to anyone other than the relevant Chrysalis Company for providing the protections afforded to customers of Kingston Smith, St Helen's Capital Plc and Kerburn Rose Limited (as applicable) nor for providing advice in relation to the Offers or any other matter referred to herein. The Offers will not be made, directly or indirectly, in or into the United States, Canada, Australia or Japan and the Offer Document and the Forms of Acceptance will not be, and should not be, mailed or otherwise distributed or sent in or into the United States, Canada, Australia or Japan or any other jurisdiction if, in the latter case, to do so would constitute a violation of the relevant laws in such jurisdiction. The New Chrysalis Shares have not been, and will not be, registered under the United States Securities Act of 1933 (as amended) or under any relevant securities laws of any state or jurisdiction of the United States, Canada, Australia or Japan and no regulatory clearances in respect of the New Chrysalis Shares have been, or will be, applied for in any jurisdiction. Accordingly, unless an exemption under the United States Securities Act of 1933 (as amended) or other relevant securities laws is applicable, the New Chrysalis Shares will not be, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan or to, or for the account or benefit of, any United States person or person resident in Canada, Australia or Japan. Certain terms used in this summary are defined in Appendix III to this announcement. Not for release, distribution or publication, in whole or in part, in or into the United States, Canada, Australia or Japan 28 January 2005 Merger by way of recommended offers by Smith & Williamson Corporate Finance Limited on behalf of Chrysalis VCT plc ("Chrysalis") for each of Chrysalis A VCT plc ("Chrysalis A"), Chrysalis B VCT plc ("Chrysalis B") and Chrysalis C VCT plc ("Chrysalis C") (together the "Chrysalis Companies") 1. Introduction Further to the announcement of a possible merger on 22 December 2004, the boards of the Chrysalis Companies and the board of Chrysalis announce that they have reached agreement on the terms of a merger by way of recommended offers to be made by Smith & Williamson on behalf of Chrysalis for the entire issued ordinary share capital of each of the Chrysalis Companies. In view of the involvement of Robert Drummond and Julie Baddeley with Chrysalis and the Chrysalis Companies (both are the only directors of Chrysalis and of each of the Chrysalis Companies), the Chrysalis Companies have each retained an independent financial adviser to consider and to provide Chrysalis Companies Shareholders with a recommendation in relation to the relevant Offer. The Offers will not be inter-conditional and all or any of them may become or be declared wholly unconditional. 2. The Offers and the Special Dividends The Offers, which will be made on the terms and subject to the conditions set out below and in Appendix I to this announcement, and to be set out in the Offer Document and in the relevant Form of Acceptance, will be made on the following basis: for every 1,000 Chrysalis A Shares 607 New Chrysalis Shares for every 1,000 Chrysalis B Shares 482 New Chrysalis Shares for every 1,000 Chrysalis C Shares 614 New Chrysalis Shares In addition, special dividends will be paid, subject to the relevant Offer becoming or being declared wholly unconditional, on the following basis: per each Chrysalis A Share 10p in cash per each Chrysalis B Share 1.75p in cash per each Chrysalis C Share 1p in cash The Special Dividends will be paid by the Chrysalis Companies to all Chrysalis Companies Shareholders on the register of members at the close of business on the day immediately preceding the date on which the relevant Offer becomes or is declared wholly unconditional. In the absence of the Offers being made and becoming unconditional in all respects, the Chrysalis Companies Directors would not have felt able to recommend or pay the Special Dividends due to the adverse impact on the cash resources of the individual Chrysalis Companies. The table below sets out the approximate value of the Offers (per share and for the whole of the current issued ordinary share capital of the Chrysalis Companies), when combined with the Special Dividends and based on the closing price of 52.5p per Chrysalis Share on 27 January 2005, and the premia represented by the Offers over the closing Chrysalis Companies Share prices on 21 December 2004 (Chrysalis A - 37.5p, Chrysalis B - 25.0p, Chrysalis C - 30.0p), the last business day prior to the announcement of a possible merger: Offer Special Offer value Premium to Total offer price Dividend per share market price value (incl. per share per share (incl. Special Special Dividends) Dividends) Chrysalis A 31.9p 10p 41.9p 11.6% £2.7m Chrysalis B 25.3p 1.75p 27.1p 8.2% £2.9m Chrysalis C 32.2p 1p 33.2p 10.8% £3.5m The Offers will extend to all Chrysalis Companies Shares unconditionally allotted or issued on the date the Offers are made and any further Chrysalis Companies Shares unconditionally allotted or issued while the relevant Offer remains open for acceptance. The Chrysalis Companies Shares to be acquired by Chrysalis pursuant to the Offers will be acquired fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and other third party rights and interests of any nature whatsoever and together with all rights now or hereafter attaching thereto, including the right to receive and retain all dividends and other distributions (if any) declared, paid or made on or after the date of this announcement other than the Final Dividends and the Special Dividends. 3. Irrevocable undertakings to accept the Offers and interests in Chrysalis Companies Shares Chrysalis has received irrevocable undertakings from certain Chrysalis Companies Shareholders (including the Chrysalis Companies Directors) to accept the Offers in respect of their beneficial holdings of Chrysalis Companies Shares, amounting in total to 200,000 Chrysalis A Shares (representing approximately 3.1 per cent. of the currently issued share capital of Chrysalis A), 70,000 Chrysalis B Shares (representing approximately 0.6 per cent. of the currently issued share capital of Chrysalis B) and 71,750 Chrysalis C Shares (representing approximately 0.7 per cent. of the currently issued share capital of Chrysalis C). The undertakings remain binding even in the event that a higher offer for any of the Chrysalis Companies is announced and will cease to be binding only if the relevant Offer lapses or is withdrawn. The Chrysalis Company Shareholders who have given irrevocable undertakings to accept the Offers in respect of their holdings in the Chrysalis Companies are: Robert Drummond (in respect of 100,000 Chrysalis A Shares); Susan Drummond (in respect of 15,000 Chrysalis B Shares); Julie Baddeley (in respect of 10,250 Chrysalis C Shares); Christopher Kay (in respect of 5,000 Chrysalis B Shares and 10,250 Chrysalis C Shares); Nicholas Lewis (in respect of 50,000 Chrysalis A Shares, 25,000 Chrysalis B Shares and 25,625 Chrysalis C Shares); and Rowan Lewis (in respect of 50,000 Chrysalis A Shares, 25,000 Chrysalis B Shares and 25,625 Chrysalis C Shares). Nominee companies owned by Smith & Williamson Holdings Limited hold 12,000 ordinary 1p shares in Chrysalis C on behalf of discretionary fund management clients. 4. Background to and reasons for the Merger Since the time of their initial offers for subscription (1998 for Chrysalis A and 2000 for Chrysalis, Chrysalis B and Chrysalis C), Chrysalis and the Chrysalis Companies have operated as separate legal entities each with obligations under the Listing Rules and the Act. These obligations entail, inter alia, separate board and shareholder meetings, audits and regulatory reporting requirements. The current combined market capitalisation of the four VCTs is approximately £19.5 million and the cost and time involved in the administration of the separately-listed entities is out of proportion to their size. Until a recent change in UK tax legislation, the merger of Chrysalis with the Chrysalis Companies would have resulted in the ending of their tax-advantaged status for investors. This obstacle was removed with effect from September 2004 with a change in the VCT tax regulations and as a result the directors of Chrysalis and the Chrysalis Companies are seeking to effect the Merger. Currently, Chrysalis and each of the Chrysalis Companies have the same directors, investment manager, administrator and auditors and similar investment strategies. They also share a number of common private equity investments. Over the last 12 months, Chrysalis and the Chrysalis Companies have achieved substantial cost savings in terms of board, investment management and administration costs: the merger of the four entities will enable further significant cost savings and enhance administrative efficiency and, due to their common features, is achievable without major costs in terms of re-arranging board, investment and administrative arrangements. The total recurring annualised savings in respect of corporate and administrative costs expected to arise from the acquisition by Chrysalis of all the Chorus Companies are estimated to be approximately £250,000. Moreover, the total annual running costs are expected to be less than 3.0 per cent. of the Enlarged Group's NAV (assuming all the Chrysalis Companies are acquired by Chrysalis); historically, such costs have amounted to 3.5-3.6 per cent. of the NAVs of Chrysalis and the Chrysalis Companies. In addition to the cost savings and enhancement of operational efficiency that are expected to arise from the Merger, there are a number of further anticipated benefits including: * the combined cash and liquid investments held within one fund will result in an increase in flexibility of implementation both of investment and share buy-back strategies; * broadened range and diversity of the investment portfolio; and * enhanced attraction of the enlarged and more liquid portfolio to professional fund managers. These benefits would be optimised if all three of the Chrysalis Companies were acquired by Chrysalis pursuant to the Merger, however the Offers are not inter-conditional and the same benefits, albeit on a reduced scale, would arise if any one or two of the Chrysalis Companies merge with Chrysalis. The level of the Offers has been determined by reference to an adjusted net asset value of each of the four companies calculated by adjusting (on a consistent basis across the four companies) the audited net asset value as at 31 October 2004. 5. Considerations for Chrysalis Companies Shareholders In forming their views on the Offers, the Independent Financial Advisers have considered, inter alia, the following factors: * The Merger will create a viably sized VCT with greater prospects for growth and achieve estimated cost savings of approximately £250,000 per annum. * Shareholders in the three Chrysalis Companies under offer will receive the Special Dividends upon the Offers becoming or being declared wholly unconditional (these dividends will be tax free to Qualifying Shareholders and are available to be paid primarily due to the increased size and liquidity of the Enlarged Group). * The liquidity of the shares of the Enlarged Group will be enhanced by its share buy-back policy under which Chrysalis intends to buy back shares at a 10 per cent. discount to NAV (it will reserve up to £1.0 million (or 5 per cent. of NAV, if lower) for this purpose in the six months following the closing of the Offers). * The value of each Offer combined with the Special Dividend represents an attractive premium to the current share price of each of the Chrysalis Companies. * The recent change to managing Chrysalis and the Chrysalis Companies has seen a measurable improvement in performance. This management team will continue in place following the Merger. * The valuation of each of the four companies for the purposes of the Merger has been calculated by reference to net assets adjusted on a consistent basis across the four companies. * Chrysalis Companies Shareholders who receive new Chrysalis Shares under the Offers will not lose any entitlements to VCT tax relief as a result of the Merger. * If the Merger does not proceed, shareholders in the Chrysalis Companies could potentially remain invested in small VCTs with higher overheads and lower prospects for growth. * If the Chrysalis Companies become subsidiaries of Chrysalis and their stock exchange listings are cancelled, they will lose their VCT status and certain shareholders who do not accept the Offers may thereby incur substantial tax liabilities. 6. Recommendations The independent financial advisers of Chrysalis A, Kingston Smith, of Chrysalis B, St Helen's Capital Plc, and of Chrysalis C, Kerburn Rose Limited, each consider the terms of the relevant Offer, when combined with the relevant Special Dividend, to be fair and reasonable. Accordingly Kingston Smith intends to recommend the shareholders of Chrysalis A, St Helen's Capital Plc intends to recommend the shareholders of Chrysalis B and Kerburn Rose Limited intends to recommend the shareholders of Chrysalis C, to accept the Offers. 7. Information on Chrysalis Shares in Chrysalis, previously named Downing Classic VCT 3 plc, were initially offered to the public in November 2000. Chrysalis raised £20.8 million (after expenses) and its shares were admitted to the Official List in April 2001. Since then Chrysalis has carried on the business of an investment company in accordance with VCT legislation. As at 31 October 2004, Chrysalis held investments in 20 companies with a total value of £9.3 million and £5.0 million in fixed interest securities, cash and bank deposits. Chrysalis' audited net asset value as at 31 October 2004 was £14.2 million (66.5p per share). Further information on Chrysalis will be set out in the Offer Document and Listing Particulars. 8. Information on the Chrysalis Companies Chrysalis A Shares in Chrysalis A, previously named Downing Classic VCT plc, were initially offered to the public in November 1998. Chrysalis A raised £6.4 million (after expenses) and its shares were admitted to the Official List in April 1999. Since then Chrysalis A has carried on the business of an investment company in accordance with VCT legislation. As at 31 October 2004, Chrysalis A held investments in 6 companies with a total value of £3.0 million and £0.5 million in fixed interest securities, cash and bank deposits. Chrysalis A's audited net asset value as at 31 October 2004 was £3.5 million (53.3p per share). Chrysalis B Shares in Chrysalis B, previously named Downing Classic VCT 2 plc, were initially offered to the public in January 2000. Chrysalis B raised £10.4 million (after expenses) and its shares were admitted to the Official List in April 2000. Since then Chrysalis B has carried on the business of an investment company in accordance with VCT legislation. As at 31 October 2004, Chrysalis B held investments in 11 companies with a total value of £3.7 million and £0.1 million in fixed interest securities, cash and bank deposits. Chrysalis B's audited net asset value as at 31 October 2004 was £3.8 million (35.3p per share). Chrysalis C Shares in Chrysalis C, previously named i-NET VCT plc, were initially offered to the public in June 2000. Chrysalis C raised £10.3 million (after expenses) and its shares were admitted to the Official List in September 2000. Since then Chrysalis C has carried on the business of an investment company in accordance with VCT legislation. As at 31 October 2004, Chrysalis C held investments in 9 companies with a total value of £3.6 million and £1.0 million in fixed interest securities, cash and bank deposits. Chrysalis C's audited net asset value as at 31 October 2004 was £4.6 million (43.3p per share). Further information on the Chrysalis Companies will set out in the Offer Document and Listing Particulars. 9. Extraordinary general meeting In view of the size of the Chrysalis Companies in relation to Chrysalis and the number of new Chrysalis Shares to be issued in connection with the Merger, the Offers will be subject to the approval of Chrysalis Shareholders at an extraordinary general meeting to be convened to consider the appropriate resolutions further details of which will be set out in the Listing Particulars to be sent to Chrysalis Shareholders. 10. Management and employees The board of Chrysalis has given assurances to the boards of the Chrysalis Companies that, following the Offers becoming or being declared unconditional in all respects, the existing employment rights, including pension rights, of all employees of the Chrysalis Companies Group will be fully safeguarded. 11. Inducement fees Each of the Chrysalis Companies has agreed to pay a fee to Chrysalis of the lesser of £20,800 in respect of Chrysalis A, £27,300 in respect of Chrysalis B and £34,000 in respect of Chrysalis C, and an amount representing 1 per cent. of the value of the relevant Offer in the event that: (a) a competing offer for the relevant Chrysalis Company is announced before the relevant Offer lapses or is withdrawn and such competing offer subsequently becomes or is declared unconditional in all respects or is otherwise completed or implemented; and (b) the Independent Financial Adviser of the relevant Chrysalis Company withdraws or adversely modifies its recommendation of the relevant Offer. 12. De-listing and compulsory acquisition If any or all of the Offers are declared wholly unconditional, Chrysalis intends to procure the making of applications by the relevant Chrysalis Companies to the UKLA for the cancellation of the listing of the relevant Chrysalis Companies Shares on the Official List of the UKLA and to the London Stock Exchange for the cancellation of trading in the relevant Chrysalis Companies Shares on its market for listed securities. It is anticipated that such cancellations will take effect no earlier than 20 business days after the date on which the relevant Offer is declared wholly unconditional. The cancellation of listing and trading would significantly reduce the liquidity and marketability of any Chrysalis Companies Shares in respect of which valid acceptances of the Offers are not received. In addition, the cancellation of listing would lead to the loss of the relevant Chrysalis Company's tax status as a VCT. If sufficient acceptances under the Offers are received, and assuming all the other conditions of the Offers have been satisfied or waived, Chrysalis intends to exercise its rights pursuant to the provisions of Sections 428 to 430F of the Act to acquire compulsorily the remaining Chrysalis Companies Shares on the same terms as the Offers. It is further intended that, following the Offers becoming or being declared wholly unconditional and following the cancellation of listing and trading referred to above, the Chrysalis Companies will be re-registered as private companies under the relevant provisions of the Act. 13. General The conditions of the Offers are set out in Appendix I to this announcement. Sources of information and bases of calculation used in the announcement are given in Appendix II to this announcement. The definitions of certain terms used in this announcement are contained in Appendix III to this announcement. Smith & Williamson, on behalf of Chrysalis, will despatch the Offer Document, setting out full details of the Offers as soon as practicable and in any event within 28 days of the date of this announcement. This announcement does not constitute an offer or an invitation to purchase or subscribe for any securities. The Offers will be made solely by the Offer Document and the Forms of Acceptance, which will contain the full terms and conditions of the Offers, including details of how the Offers may be accepted. The laws of the relevant jurisdictions may affect the availability of the Offers to persons not resident in the UK. Persons who are not resident in the UK, or who are subject to the laws of any jurisdiction other than the UK, should inform themselves about, and observe, any applicable requirements. Further details in relation to overseas shareholders will be contained in the Offer Document. The Offers will not be made, directly or indirectly, in or into the United States, Canada, Australia or Japan and the Offer Document and the Form of Acceptance will not be, and should not be, mailed or otherwise distributed or sent in or into the United States, Canada, Australia or Japan or any other jurisdiction if, in the latter case, to do so would constitute a violation of the relevant laws in such jurisdiction. The New Chrysalis Shares have not been, and will not be, registered under the United States Securities Act of 1933 (as amended) or under any relevant securities laws of any state or jurisdiction of the United States, Canada, Australia or Japan and no regulatory clearances in respect of the New Chrysalis Shares have been, or will be, applied for in any jurisdiction. Accordingly, unless an exemption under the United States Securities Act of 1933 (as amended) or other relevant securities laws is applicable, the New Chrysalis Shares will not be, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan or to, or for the account or benefit of, any United States person or person resident in Canada, Australia or Japan. The Chrysalis Directors accept responsibility for the information contained in this announcement other than that relating to the Chrysalis Companies Group and the Chrysalis Companies Directors and their connected persons and persons acting in concert with, and associates of, the Chrysalis Companies. To the best of the knowledge and belief of the Chrysalis Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. The Chrysalis Companies Directors accept responsibility for the information contained in this announcement relating to the Chrysalis Companies Group and the Chrysalis Companies Directors and their connected persons and persons acting in concert with, and associates of, the Chrysalis Companies except for the expressions of opinion and recommendation in relation to the Offers. To the best of the knowledge and belief of the Chrysalis Companies Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. The Independent Financial Advisers accept responsibility for the expressions of opinion and recommendation in relation to the Offers contained in this announcement. To the best of the knowledge and belief of the Independent Financial Advisers (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. Chrysalis VCT plc, Chrysalis A VCT plc, Chrysalis B VCT plc and Chrysalis C VCT plc Tel: 07831 091545 Robert Drummond - Chairman Smith & Williamson (financial adviser to Chrysalis) Tel: 020 7637 5377 Dr A Basirov MJ2 (PR adviser to Chrysalis) Tel: 020 7491 7783 Simon Astley Kingston Smith (financial adviser to Chrysalis A) Tel: 020 7566 4000 Marc Fecher St Helen's Capital (financial adviser to Chrysalis B) Tel: 020 7628 5582 Mark Warde-Norbury Kerburn Rose (financial adviser to Chrysalis C) Tel: 020 7224 4320 Charles Bunker This announcement does not constitute an offer or an invitation to purchase or subscribe for any securities. The Offers will be made solely by the Offer Document and the Forms of Acceptance, which will contain the full terms and conditions of the Offers, including details of how the Offers may be accepted. Smith & Williamson Corporate Finance Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Chrysalis VCT plc and no one else in connection with the Offers and will not be responsible to anyone other than Chrysalis VCT plc for providing the protections afforded to customers of Smith & Williamson Corporate Finance Limited nor for providing advice in relation to the Offers or any other matter referred to herein. Kingston Smith, which is regulated by the Institute of Chartered Accountants in England and Wales, and St Helen's Capital Plc and Kerburn Rose Limited, each of which is regulated in the United Kingdom by the Financial Services Authority, are acting exclusively for Chrysalis A, Chrysalis B and Chrysalis C respectively and no one else in connection with the Offers and will not be responsible to anyone other than the relevant Chrysalis Company for providing the protections afforded to customers of Kingston Smith, St Helen's Capital Plc and Kerburn Rose Limited (as applicable) nor for providing advice in relation to the Offers or any other matter referred to herein. APPENDIX I CONDITIONS OF THE OFFERS Each of the Offers will be subject to the following conditions: (a) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00 pm (London time) on the first closing date of the Offer (or such later time(s) and/or date(s) as Chrysalis may, subject to the rules of the Code, decide) in respect of not less than 90 per cent (or such lower percentage as Chrysalis may decide) in nominal value of the Chrysalis Company Shares to which the Offer relates, provided that this condition will not be satisfied unless Chrysalis and/or its wholly owned subsidiaries shall have acquired or agreed to acquire (whether pursuant to the Offer or otherwise) Chrysalis Company Shares carrying in aggregate more than 50 per cent of the voting rights then normally exercisable at a general meeting of the relevant Chrysalis Company, including for this purpose (except to the extent otherwise agreed by the Panel) any such voting rights attaching to the Chrysalis Company Shares that are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise, and for this purpose: (i) the expression "Chrysalis Company Shares to which the Offer relates" shall be construed in accordance with sections 428 to 430F of the Companies Act 1985; (ii)Chrysalis Company Shares which have been unconditionally allotted shall be deemed to carry the voting rights which they will carry upon issue; and (iii)valid acceptances shall be deemed to have been received in respect of Chrysalis Company Shares which are treated for the purposes of section 429(8) of the Companies Act 1985 as having been acquired or contracted to be acquired by Chrysalis by virtue of acceptances of the Offer; (b) any resolution or resolutions of Chrysalis Shareholders required to approve and implement the Offer and the acquisition of Chrysalis Company Shares by Chrysalis pursuant to the Offer being duly passed at an extraordinary general meeting of Chrysalis (or at any adjournment of that meeting); (c) the UKLA having agreed to admit the New Chrysalis Shares to be issued as consideration for the acquisition of Chrysalis Company Shares pursuant to the Offer relates to the Official List and the London Stock Exchange having agreed to admit the New Chrysalis Shares to trading; (d) no Third Party having intervened and there not continuing to be outstanding any statute, regulation or order of any Third Party in each case which would or might reasonably be expected (in any case to an extent which is material in the context of the Wider Chrysalis Group or the relevant Wider Chrysalis Company Group, as the case may be, taken as a whole) to: (i) make the Offer, its implementation or the acquisition or proposed acquisition by Chrysalis or any member of the Wider Chrysalis Group of any shares or other securities in, or control or management of, the relevant Chrysalis Company or any member of the relevant Wider Chrysalis Company Group void, illegal or unenforceable in any jurisdiction, or otherwise directly or indirectly restrain, prevent, prohibit, restrict or materially delay, to an extent which is material in the context of the Wider Chrysalis Group taken as a whole, the same or impose additional material conditions or obligations with respect to the Offer or such acquisition, or otherwise materially impede, challenge or interfere with the Offer or such acquisition, or require amendment to the terms of the Offer or the acquisition or proposed acquisition of any Chrysalis Company Shares or the acquisition of control of the relevant Chrysalis Company or the relevant Wider Chrysalis Company Group by Chrysalis; (ii)materially limit or delay the ability of any member of the Wider Chrysalis Group or any member of the relevant Wider Chrysalis Company Group to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or other securities in, or to exercise voting or management control over, any member of the relevant Wider Chrysalis Company Group or any member of the Wider Chrysalis Group; (iii)require, prevent or delay, in any case to an extent which is material in the context of the Wider Chrysalis Group taken as a whole, the divestiture or alter the terms envisaged for any proposed divestiture by any member of the Wider Chrysalis Group of any shares or other securities in the relevant Chrysalis Company; (iv) require, prevent or materially delay the divestiture or alter the terms envisaged for any proposed divestiture by any member of the Wider Chrysalis Group or by any member of the relevant Wider Chrysalis Company Group of all or any portion of their respective businesses, assets or properties or (except in relation to limitations which apply generally to entities conducting similar businesses) limit the ability of any of them to conduct any of their respective businesses or to own or control any of their respective assets or properties or any part thereof; (v) (except pursuant to Part XIIIA of the Companies Act 1985) require any member of the Wider Chrysalis Group or of the relevant Wider Chrysalis Company Group to acquire, or to offer to acquire, any shares or other securities (or the equivalent) in any member of either group owned by any third party; (vi) materially limit the ability of any member of the Wider Chrysalis Group or of the relevant Wider Chrysalis Company Group to conduct or integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Chrysalis Group or of the relevant Wider Chrysalis Company Group; (vii)result in any member of the relevant Wider Chrysalis CompanyGroup or the Wider Chrysalis Group ceasing to be able to carry on business under any name under which it presently does so; or (viii)(except in relation to matters which generally affect entities conducting similar businesses) otherwise materially and adversely affect the business, assets, profits, financial or trading position or prospects of any member of the relevant Wider Chrysalis Company Group or of the Wider Chrysalis Group, and all applicable waiting and other time periods during which any Third Party could intervene under the laws of any relevant jurisdiction having expired, lapsed or been terminated; (e) all notifications and filings which are necessary or are reasonably considered appropriate by Chrysalis having been made, all appropriate waiting and other time periods (including any extensions of such waiting and other time periods) under any applicable legislation or regulation of any relevant jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory or regulatory obligations in any relevant jurisdiction having been complied with in each case in connection with the Offer or the acquisition or proposed acquisition of any shares or other securities in, or control of, the relevant Chrysalis Company or any other member of the relevant Wider Chrysalis Company Group by any member of the Wider Chrysalis Group or the carrying on by any member of the relevant Wider Chrysalis Company Group of its business; (f) all Authorisations which are necessary or are reasonably considered necessary or appropriate by Chrysalis in any relevant jurisdiction for or in respect of the Offer or the acquisition or proposed acquisition of any shares or other securities in, or control of, the relevant Chrysalis Company or any other member of the relevant Wider Chrysalis Company Group by any member of the Wider Chrysalis Group or the carrying on by any member of the relevant Wider Chrysalis Company Group of its business having been obtained, in terms and in a form reasonably satisfactory to Chrysalis, from all appropriate Third Parties in each case where the absence of such Authorisation would have a material adverse effect on the relevant Wider Chrysalis Company Group taken as a whole and all such Authorisations remaining in full force and effect and there being no notice or intimation of any intention to revoke, suspend, restrict, modify or not to renew any of the same; (g) except as publicly announced by the Chrysalis Company that is the subject of the Offer (by the delivery of an announcement to a Regulatory Information Service) prior to 28 January 2005 or as fairly disclosed in writing to Chrysalis by or on behalf of the relevant Chrysalis Company prior to 28 January 2005, there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the relevant Wider Chrysalis Company Group is a party, or by or to which any such member or any of its assets is or are or may be bound, entitled or subject or any circumstance, which, in each case as a consequence of the Offer or the acquisition or proposed acquisition of any shares or other securities in, or control of, the Chrysalis Company or any other member of the relevant Wider Chrysalis Company Group by any member of the Wider Chrysalis Group or otherwise, could or might reasonably by expected to result in, (in any case to an extent which is or would be material in the context of the relevant Wider Chrysalis Company Group taken as a whole): (i) any material amount of monies borrowed by or any other material indebtedness or liabilities (actual or contingent) of, or any grant available to, any member of the relevant Wider Chrysalis Company Group being or becoming repayable or capable of being declared repayable immediately or prior to its stated repayment date or the ability of any member of the relevant Wider Chrysalis Company Group to borrow monies or incur any indebtedness being withdrawn or inhibited or becoming capable of being withdrawn; (ii) the creation or enforcement of any mortgage, charge or other security interest over the whole or any substantial part of the business, property, assets or interests of any member of the relevant Wider Chrysalis Company Group or any such mortgage, charge or other security interest (wherever created, arising or having arisen) becoming enforceable; (iii) any such arrangement, agreement, licence, permit, franchise or instrument, or the rights, liabilities, obligations or interests of any member of the relevant Wider Chrysalis Company Group thereunder, being, or becoming capable of being terminated or materially and adversely modified or affected or any material adverse action being taken or any obligation or liability arising thereunder; (iv) any asset or interest of any member of the relevant Wider Chrysalis Company Group being or falling to be disposed of or ceasing to be available to any member of the relevant Wider Chrysalis Company Group or any right arising under which any such asset or interest could be required to be disposed of or could cease to be available to any member of the relevant Wider Chrysalis Company Group otherwise than in the ordinary course of business; (v) any member of the relevant Wider Chrysalis Company Group ceasing to be able to carry on business under any name under which it presently does so; (vi) the creation of liabilities (actual or contingent) by any member of the relevant Wider Chrysalis Company Group otherwise than in the normal course of business; (vii) the rights, liabilities, obligations or interests of any member of the relevant Wider Chrysalis Company Group under any such arrangement, agreement, licence, permit, franchise or other instrument or the interests or business of any such member in or with any other person, firm, company or body (or any arrangement or arrangements relating to any such interests or business) being terminated, materially and adversely modified or affected; or (viii)the financial or trading position or the prospects or the value of any member of the relevant Wider Chrysalis Company Group being prejudiced or materially and adversely affected, and no event having occurred which, under any provision of any such arrangement, agreement, licence, permit or other instrument, could result in any of the events or circumstances which are referred to in paragraphs (i) to (viii) of this condition (g) in any case to an extent which is or would be material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (h) since 31 October 2004 and except as disclosed in the relevant Chrysalis Company's annual report and accounts for the year then ended or as otherwise publicly announced by the relevant Chrysalis Company (by the delivery of an announcement to a Regulatory Information Service) prior to 28 January 2005 or as otherwise fairly disclosed in writing to Chrysalis by or on behalf of the relevant Chrysalis Company prior to 28 January 2005 no member of the relevant Wider Chrysalis Company Group having in a manner which is material in the context of the relevant Wider Chrysalis Company Group taken as a whole: (i) issued or agreed to issue, or authorised the issue of, additional shares of any class, or securities convertible into or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities other than as between the relevant Chrysalis Company and wholly-owned subsidiaries of that Chrysalis Company; (ii)purchased or redeemed or repaid any of its own shares or other securities or reduced or made any other change to any part of its share capital; (iii)recommended, declared, paid or made any bonus, dividend or other distribution whether payable in cash or otherwise (other than to the relevant Chrysalis Company or a wholly-owned subsidiary of that Chrysalis Company and excluding the Special Dividends); (iv) made or authorised any change in its loan capital; (v) (other than any acquisition or disposal in the ordinary course of business or a transaction between the relevant Chrysalis Company and a wholly-owned subsidiary of that Chrysalis Company) merged or demerged with any body corporate, acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any right, title or interest in any assets (including shares in any undertaking and trade investments) or authorised the same (which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole); (vi) issued or authorised the issue of, or made any change in or to, any debentures or (except in the ordinary course of business) incurred or increased any indebtedness or liability (actual or contingent) which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (vii)entered into, varied or authorised any agreement, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which: (A) is of a long term, onerous or unusual nature or magnitude or which is or could involve an obligation of such nature or magnitude; or (B) could restrict the business of any member of the relevant Wider Chrysalis Company Group; or (C) is other than in the ordinary course of business, and which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (viii)entered into, implemented, effected or authorised any merger, demerger, reconstruction, amalgamation, scheme, commitment or other transaction or arrangement in respect of itself or another member of the relevant Wider Chrysalis Company Group otherwise than in the ordinary course of business which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (ix) entered into or varied the terms of, any contract, agreement or arrangement with any of the directors or senior executives of any member of the relevant Wider Chrysalis Company Group; (x) taken any corporate action or had any legal proceedings instituted or threatened against it or petition presented or order made for its winding-up (voluntarily or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any material part of its assets and revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (xi) been unable, or admitted in writing that it is unable, to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business in any case with a material adverse effect on the relevant Wider Chrysalis Company Group taken as a whole; (xii) waived or compromised any claim which is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (xiii)made any alteration to its memorandum or articles of association which is material in the context of the Offer; (xiv) entered into any agreement, commitment or arrangement or passed any resolution in general meeting or made any offer (which remains open for acceptance) or proposed or announced any intention with respect to any of the transactions, matters or events referred to in this condition (h) which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (i) since 31 October 2004 and except as disclosed in the relevant Chrysalis Company's annual report and accounts for the year then ended or as otherwise publicly announced by the relevant Chrysalis Company (by the delivery of an announcement to a Regulatory Information Service) prior to 28 January 2005 or as otherwise fairly disclosed in writing to Chrysalis by or on behalf of the relevant Chrysalis Company prior to 28 January 2005: (i) there having been no adverse change or deterioration in the business, assets, financial or trading positions or profit or prospects of any member of the relevant Wider Chrysalis Company Group which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (ii)no contingent or other liability of any member of the relevant Wider Chrysalis Company Group having arisen or become apparent or increased which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; (iii)no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the relevant Wider Chrysalis Company Group is or may become a party (whether as plaintiff, defendant or otherwise) having been threatened, announced, implemented or instituted by or against or remaining outstanding against or in respect of any member of the relevant Wider Chrysalis Company Group which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; and (iv)(other than as a result of the Offer) no enquiry or investigation by, or complaint or reference to, any Third Party having been threatened, announced, implemented, instituted by or against or remaining outstanding against or in respect of any member of the relevant Wider Chrysalis Company Group which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; and (j) Chrysalis not having discovered: (i) that any financial or business or other information concerning the relevant Wider Chrysalis Company Group disclosed at any time by or on behalf of any member of the relevant Wider Chrysalis Company Group, whether publicly, to any member of the Wider Chrysalis Group or otherwise, is misleading or contains any misrepresentation of fact or omits to state a fact necessary to make any information contained therein not misleading and which was not subsequently corrected before 28 January 2005 by disclosure either publicly or otherwise to Chrysalis to an extent which in any case is material in the context of the relevant Wider Chrysalis Company Group as a whole; (ii) that any member of the relevant Wider Chrysalis Company Group is subject to any liability (actual or contingent) which is not disclosed in that Chrysalis Company's annual report and accounts for the financial year ended 31 October 2004 and which in any case is material in the context of the relevant Wider Chrysalis Company Group taken as a whole; or (iii) any information which affects the import of any information disclosed at any time by or on behalf of any member of the relevant Wider Chrysalis Company Group to an extent which is material in the context of the relevant Wider Chrysalis Company Group taken as a whole. For the purpose of these conditions: (a) "Third Party" means any government, government department or governmental, quasi-governmental, supranational, statutory, regulatory or investigative body, authority (including any national anti-trust or merger control authority), court, trade agency, association, institution or professional or environmental body or any other person or body whatsoever in any relevant jurisdiction; (b) a Third Party shall be regarded as having "intervened" if it has decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference or made, proposed or enacted any statute, regulation, decision or order or taken any measures or other steps or required any action to be taken or information to be provided or otherwise having done anything and "intervene" shall be construed accordingly; (c) "Authorisations" means authorisations, orders, grants, recognitions, determinations, certificates, confirmations, consents, licences, clearances, permissions and approvals; (d) "Wider Chrysalis Group" means Chrysalis and its subsidiaries and subsidiary undertakings and associated undertakings (including any company in which any member of the Chrysalis Group is interested or any undertaking in which Chrysalis and such undertakings (aggregating their interests) have a direct or indirect interest in 20 per cent or more of the voting equity capital of an undertaking); and (e) "Wider Chrysalis Company Group" means (in relation to any Offer) a Chrysalis Company and its subsidiaries and subsidiary undertakings and associated undertakings (including any company in which any member of the Chrysalis Company Group is interested or any undertaking in which the Chrysalis Company and such undertakings (aggregating their interests) have a direct or indirect interest in 20 per cent or more of the voting equity capital of an undertaking). Subject to the requirements of the Panel, Chrysalis reserves the right to waive all or any of the above conditions, in whole or in part, except conditions (a) to (c) in relation to each of the Offers.