CIP.L Regulatory News (CIP)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION (INCLUDING THE UNITED STATES) WHERE TO DO SO WOULD CONTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

For immediate release

14 February 2022

CIP MERCHANT CAPITAL LIMITED

("CIP" or the "Company")

Publication of Defence Circular rejecting CFE's Mandatory Cash Offer

The Board of CIP (the "Board"), further to the Company's announcement of 31January 2022, announces that it is today posting its circular (the "Defence Circular") to Shareholders in respect of the hostile, mandatory cash offer by CFE for the Ordinary Shares in CIP not already held by CFE (or any persons acting in concert with it) at a price of 55 pence per Ordinary Share. As required by the Code, the Board has obtained independent advice in respect of the Offer from Strand Hanson Limited.

The full text of the letter from the Chairman of the Company, along with Appendix I, Definitions, and Appendix II, Sources of Information and Bases of Calculation (set out in full within the Defence Circular), are reproduced below. The Defence Circular and related display documents will also be made available on the Company's website at: www.cipmerchantcapital.com.

"Dear CIP Shareholder,

Response to the mandatory cash offer by Corporation Financière Européenne S.A. ("CFE") for CIP Merchant Capital Limited ("CIP" or the "Company") (the "Offer")

1. Introduction

On 14 January 2022, CFE was obliged to announce, after unconditionally agreeing to acquire 1,091,000 Ordinary Shares (representing approximately 2.0 per cent. of the Company's issued ordinary share capital) at a price of 55 pence per Ordinary Share, an unsolicited mandatory cash offer, under Rule 9 of the City Code on Takeovers and Mergers (the "Code"), for the Ordinary Shares not already held by CFE (or any persons acting in concert with it) at a price of 55 pence per Ordinary Share.

The Board strongly and unanimously believes that the Offer is highly opportunistic and considers that the Offer Price significantly undervalues CIP's current investment portfolio and the Company as a whole, and therefore does not reflect an appropriate value for independent Shareholders.

Accordingly, as announced by the Company on 27 January 2022, the Directors unanimously and unequivocally reject the Offer and recommend that all independent Shareholders should also reject the Offer.

TO REJECT THE OFFER YOU NEED TAKE NO ACTION - SIMPLY DO NOT RETURN CFE'S FORM OF ACCEPTANCE OR TAKE ANY ACTION IN CREST

This document sets out the considerations taken into account by the Directors in reaching their conclusion to reject the Offer.

2. Summary of Key Arguments

The key factors identified by your Board against the Offer can be summarised as follows:

· The Offer significantly undervalues CIP on reasonable and relevant NAV metrics

· The Offer Price represents only a very small premium to the prevailing price of an Ordinary Share immediately prior to the commencement of the Offer Period and the Directors believe is not at a premium capable of recommendation

· On every complete trading day following the Announcement, the middle market closing price of the Company's Ordinary Shares has been at or above the level of the Offer, thereby serving to demonstrate the market's view on the Offer

· Since the Announcement of the Offer, a number of pre-existing significant Shareholders in CIP have purchased Ordinary Shares in the market at average levels above the Offer Price

· The Directors who hold Ordinary Shares, the principals of the Investment Manager (via their investment vehicle and personally, as applicable) and another significant Shareholder have all provided irrevocable undertakings to the Company NOT to accept the Offer

· CFE has been vague as to its intentions for CIP, should it gain control of the Company, albeit it has made it clear that it would like, assuming valid acceptances and/or acquisitions of at least 75 per cent. of the voting rights in CIP are achieved, to procure the cancellation of the admission of the Ordinary Shares to trading on AIM and thereby remove access through the London Stock Exchange to trade the Ordinary Shares and the protections currently afforded to CIP Shareholders by virtue of its AIM quotation and compliance with the AIM Rules

· The Board would note that even if such 75 per cent. threshold was not achieved, but the acceptance condition to the Offer was nevertheless satisfied, with CFE achieving a resultant holding of 50 per cent. or more of the voting rights in CIP, if CFE requisitioned an extraordinary general meeting to propose a special resolution to cancel the admission of the Ordinary Shares to trading on AIM that resolution would only require the approval of 75 per cent. of those Shareholders present in person or by proxy which is likely to be a lower threshold than 75 per cent. of the Company's issued ordinary share capital at that time

· CFE has consistently failed to engage meaningfully with the Board, both prior to the Offer Period and, in particular, subsequent to the launch of the Offer. As such, the Board is surprised that CFE feels able to state in its offer document that "CFE has continued to be supportive of the business since it became a shareholder" given its consistent failure to communicate with the Board

· CFE has similarly been vague as to the identity of its intended replacement investment manager, merely stating in its offer document that "....CFE expects to have identified a suitable replacement within three months". The Board is surprised and disappointed, particularly in light of the length of time that CFE has had (having previously considered making a possible offer for CIP during the period from 28 September 2020 to 22 February 2021, and then prior to triggering a mandatory cash offer under Rule 9 of the Code on 14 January 2022), that CFE can provide no further clarity on this matter to CIP's other Shareholders, nor indeed provide any clarity as to the identity of any proposed representative to the Board simply stating that it "...may request the appointment of a representative to the Board of CIP" and that the "identity of any such appointee has not yet been confirmed"

Accordingly, as announced by the Company on 27 January 2022, the Directors unanimously and unequivocally reject the Offer and recommend that all independent Shareholders should also reject the Offer.

3. Background to the Offer and engagement with CFE

CFE has previously made a number of approaches to the Company, including via a letter dated 28 September 2020, and then a subsequent approach on 2 December 2020, in relation to a possible offer subsequently announced by CFE on 26 January 2021 at a price of 50 pence per Ordinary Share. The Board unequivocally and unanimously rejected such possible offer, believing it to be opportunistic and to significantly undervalue the Company at that time.

Between the time the Possible Offer was announced by CFE on 26 January 2021 and the expected end of the current Offer Period (assuming that CFE does not close the Offer prior to 1 April 2022), the Company will have been in a Code offer period for 107 days (inclusive) and subject to its obligations thereunder including the Code's rules in relation to frustrating action during an offer period, further restricting the Company's ability to execute on its strategy.

The Company's Chairman has made numerous attempts to engage with CFE since the launch of the Offer and has had no direct response from, or engagement with, CFE in relation to its intentions or otherwise. The Board further notes that, since the time of CFE's initial approach in September 2020, the Company's weekly unaudited NAV has increased by approximately 15.7 per cent. (from 25 September 2020 to 4 February 2022, as announced on 29 September 2020 and 8 February 2022, respectively).

The Board would further note, in relation to the discount of an Ordinary Share to the NAV per Ordinary Share, that it has proposed a resolution at two annual general meetings of the Company, held on 26 June 2020 and 10 September 2021 respectively, that would have authorised the Company to conduct a share buyback programme, with a view to managing such discount as is normal for a closed-ended investment company of CIP's nature. Such resolution was not passed by Shareholders on both occasions.

Accordingly, the Company has not been able to buy back any Ordinary Shares as part of a standard discount control mechanism. The Board believes that such discount control mechanism, had it been approved, would have provided it with greater flexibility when considering how best to address any imbalance between the supply of and demand for the Ordinary Shares, from time to time, in order to help manage the discount of the market price of the Ordinary Shares to the NAV per Ordinary Share. This is a matter that the Board would have discussed with CFE had it been able to open a dialogue - sadly, this has not been possible.

The Board believes that the opportunistic nature of the Offer has been recognised by the market and clearly reflected in its reaction to the Offer, with the middle market closing price of an Ordinary Share at or above the Offer Price on every complete trading day following CFE's announcement of the Offer to 11 February 2022 (being the latest practicable date prior to the date of this document).

The Board remains cognisant of its responsibility to, inter alia, maximise value for all Shareholders, and seeks to give due consideration to all options available to meet this obligation, bearing in mind the restrictions the Company is operating under as a result of the Code's frustrating actions regime and the inability of the Company to re-purchase Ordinary Shares as part of a standard discount control mechanism. The Board intends to discuss this further with interested Shareholders following conclusion of the Offer Period.

4. Rationale for rejection of the Offer

In assessing the Offer, the Board has consulted with the Investment Manager as to the analysis of the Offer set out herein such that it also reflects their views.

(a) Discount of the Offer Price to the NAV per Ordinary Share

The Board notes that the Offer values the entire issued ordinary share capital of CIP at approximately £30.25 million and that the Offer Price represents:

· a discount of approximately 36.4 per cent. to the Company's latest published unaudited  NAV per Ordinary Share of 86.5 pence as at 4 February 2022; and

· a discount of approximately 27.9 per cent. to the NAV per Ordinary Share of the Company's quoted equity investments and cash and cash equivalents less net current liabilities ("Liquidity Adjusted NAV per Ordinary Share"), which was, as at 4 February 2022, 76.3 pence per Ordinary Share.

For illustrative purposes only, the Board has also considered the Offer in the context of an adjusted NAV calculation to remove the cash and cash equivalents component of its Latest NAV, being £4.3m (approximately 7.7 pence per Ordinary Share). The prevailing NAV adjusted to exclude such cash and near cash equivalents is approximately £43.3m or 78.8 pence per Ordinary Share (the "Cash Adjusted NAV" and "Cash Adjusted NAV per Ordinary Share"). To enable a like for like comparison, adjusting the Offer Price on the same basis derives an adjusted offer price per Ordinary Share of 47.3 pence (the "Cash Adjusted Offer Price").

The Cash Adjusted Offer Price represents a significant discount of approximately 40.0 per cent. to the Cash Adjusted NAV per Ordinary Share.

The Board notes that the Company's investment portfolio (summary details of which are set out in Appendix II to this document) is predominantly comprised of quoted equity investments, which account for approximately 87.1 per cent. of its total investments (excluding UK Treasury bills).Accordingly, the Liquidity Adjusted NAV per Ordinary Share has been calculated to assess the Offer in the context of the Company's more liquid portfolio assets only by removing the investments that are not actively traded and the unquoted investments (further details of which are set out in Appendix II). The Offer Price of 55 pence per Ordinary Share represents a discount of 27.9 per cent. to the Liquidity Adjusted NAV per Ordinary Share as at 4 February 2022, being 76.3 pence per Ordinary Share, comprising quoted equities and cash and near cash equivalents less other net current liabilities.

Since the Possible Offer was announced on 26 January 2021, the NAV per Ordinary Share has increased by 13.2 per cent. from 76.4 pence per share, as at 29 January 2021, to 86.5 pence per Ordinary Share as at 4 February 2022, being the Company's latest published unaudited NAV per Ordinary Share.

The Board would note that the middle market price per Ordinary Share has also closed above the Offer Price of 55 pence on 64.8 per cent. of the trading days during that same period.

At 55 pence per Ordinary Share, CFE has chosen to offer Shareholders the absolute minimum price it is obliged to offer under the Code, being the highest price paid by CFE for any interest in Ordinary Shares during the 12 months prior to the announcement of the Offer and has refused to enter into any discussions with the Board with regard to a price level at which the Offer may be recommendable.

(b) A comparison of the Offer Price to the price of the Ordinary Shares

The Offer represents a small premium or discount to each of the most relevant share price metrics, including:

· a premium of only 7.8 per cent. to the closing middle market price of an Ordinary Share of 51.0 pence at the close of business on 13 January 2022, being the latest practicable date prior to the commencement of the Offer Period;

· a premium of only 4.2 per cent. to the 12 month volume weighted average price of an Ordinary Share of 52.8 pence to 13 January 2022, being the latest practicable date prior to the commencement of the Offer Period;

· a discount of 1.2 per cent. to the average middle market closing price for the 12 month period ended on and including 13 January 2022 of 55.7 pence;

· a discount of approximately 4.3 per cent. to the middle market closing price of 57.5 pence per Ordinary Share on 11 February 2022 (being the latest practicable date prior to the date of this document); and

· a discount of 0.9 per cent. to the volume weighted average price of an Ordinary Share of 55.5 pence from commencement of the Offer Period on 14 January 2022 to 11 February 2022 (being the latest practicable date prior to the date of this document).

(c) Market purchases by pre-existing significant CIP Shareholders

Since commencement of the Offer Period to close of business on 11 February 2022, being the latest practicable date prior to the date of this document, there have been a number of market purchases by pre--existing significant Shareholders in CIP at average levels in excess of the Offer Price (aggregated over the period) as evidenced by Dealing Disclosures pursuant to Rule 8.3 of the Code:

In addition, the closing middle market price of an Ordinary Share has been at, or above, the Offer Price on every complete trading day following the Announcement of the Offer, thereby suggesting to the Board that the market supports the Board's view that the Offer undervalues the Company.

(d) Successful exits from investments

The Company and the Investment Manager continue to seek to generate risk-adjusted returns for Shareholders through capital appreciation, investing primarily in equity and equity-related products and instruments and taking a private equity approach over a medium to long term investment horizon.

The Investment Manager monitors and analyses key markets and target sectors to identify attractive opportunities where there is a strong fundamental business case for investment, particularly in the current uncertain market environment, with the aim of generating future long-term value for Shareholders.

CFE, in the Offer Document, refers to the discount of the Ordinary Shares being greater than the average discount to NAV of the constituents of the Association of Investment Companies' (the "AIC") Flexible Investment sector (of which CIP is one). The Board is pleased to note that the Company's NAV has increased more than the average level of NAV growth within the constituent companies of the AIC Flexible Investment Sector over the 12 month period to 11 February 2022 (being the latest practicable date prior to the date of this document).

Since August 2020, the Company has successfully exited three investments, being Circassia Group plc (corresponding to a 1.4 times cash on cash return and internal rate of return of 72 per cent., as announced on 1 September 2020), Proactis Holdings plc (corresponding to a 2.3 times cash on cash return and internal rate of return of 45 per cent., as announced on 28 July 2021) and Vertu Motors plc (corresponding to a 1.6 times cash on cash return and internal rate of return of 108 per cent., as announced on 9 December 2021). Notwithstanding the positive exits achieved to date, the Board is cognisant that the NAV per Ordinary Share has still to reach the level at the time of the Company's admission to trading on AIM. Although the Board continues to have confidence in the investment strategy of the Investment Manager, as part of its ordinary course Shareholder communication process, on conclusion of the Offer Period the Board will seek to consult with CIP's major Shareholders in order to assess their feedback on CIP and the Investment Manager's performance.

The Board and Investment Manager remain confident that, over the medium term, further opportunities for value enhancing exits will emerge and create value for CIP Shareholders.

Accordingly, the Directors believe that the Offer significantly undervalues CIP, both in respect of the minimal premium to the prevailing market price per Ordinary Share immediately prior to the Offer Period and, more pertinently, the significant discount to the prevailing NAV per Ordinary Share, the Liquidity Adjusted NAV per Ordinary Share and the Cash Adjusted NAV per Ordinary Share.

5. Implications for CIP Shareholders of CFE becoming a majority Shareholder and the Board's views on the effect of the implementation of the Offer on CIP's interests, employees and locations

Immediately prior to CFE's latest share purchase on 14 January 2022, CFE was already CIP's largest Shareholder, with an aggregate interest of 29.81 per cent. in the Company's issued ordinary share capital and following settlement of the acquisition of 1,091,000 Ordinary Shares at a price of 55 pence per Ordinary Share now holds a total of 17,490,317 Ordinary Shares representing 31.8 per cent. of the Company's issued ordinary share capital.

If CFE receives sufficient acceptances of the Offer, and/or otherwise acquires Ordinary Shares, to increase its interest to 50 per cent. or more of the Company's voting rights, CFE will have significantly more influence over the Company and could use its voting power as a majority Shareholder to take actions that may be to the potential detriment of other Shareholders.

Specifically, the Directors draw your attention to the fact that, on any ordinary resolution put to Shareholders, CFE would be able to carry the vote on its own. Shareholders should also be aware that, in the event that CFE's interests reach 75 per cent. of the Company's voting rights following completion of the Offer, CFE's ability to carry the vote and lack of influence by other Shareholders would extend to any special resolution put to Shareholders.

The Board notes that, in the Offer Document, CFE states that if the Offer becomes, or is declared, unconditional in all respects, in accordance with its terms, CFE intends to terminate the investment management agreement dated 15 December 2017 between CIP and Merchant Capital Manager Limited in accordance with the agreement's terms. CFE states that it would intend to appoint a new investment manager but has not yet concluded upon which investment manager it would intend to appoint. CFE further states that it expects to have identified a suitable replacement within three months but provides no guarantee as to when that might be.

The Board feels that CFE's intentions are vague and lack both detail and substance and has been unable, given CFE's lack of response to multiple requests for dialogue, to access any further details with regard to CFE's strategic vision, if such vision exists, beyond acquiring CIP at a very significant discount to the prevailing NAV.

The Board reiterates that the Company has sought to engage directly with CFE via its Chairman on numerous occasions both prior to and since the time of the Offer and has had no response or engagement in relation to its intentions or otherwise, beyond CFE's public announcements and the Offer Document.

Accordingly, one further reason for rejecting the Offer is that if CFE receives sufficient acceptances for the Offer and/or otherwise acquires further Ordinary Shares to increase its interests to 50 per cent. or more of the Company's voting rights, CFE could thereafter, at a duly convened extraordinary general meeting of the Company, unilaterally pass ordinary resolutions, requiring, inter alia, changes to the Board, following which they could procure the termination of the Investment Manager's appointment.

As a consequence, subject to the AIM Rules, CFE would be able to make changes to the Board composition of CIP, change CIP's Nominated Adviser and ensure the success of any ordinary resolution, regardless of the voting of other Shareholders and the requirement for good corporate governance.

Further, if CFE by virtue of potential further purchases and/or valid acceptances of the Offer, acquires Ordinary Shares carrying 75 per cent. or more of the voting rights attaching to the ordinary share capital of CIP, it intends to procure that CIP will make an application to cancel trading in the Ordinary Shares on AIM ("Cancellation").

In such event, Shareholders who continue to hold Ordinary Shares at the time of such Cancellation will no longer be able to trade the Ordinary Shares on AIM and the liquidity and marketability of the Ordinary Shares will be significantly reduced; furthermore, the Company would no longer be subject to the AIM Rules and the protections afforded to Shareholders thereunder, including good corporate governance, particularly with regard to related party transactions under AIM Rule 13 and would no longer retain a Nominated Adviser. However, it should be noted that the conflicts of interest provisions set out in the Guernsey Registered Collective Investment Schemes and Guidance 2021 would continue to apply. These provisions broadly require related party transactions to be undertaken on terms at least as favourable as arm's length terms.

The Board would note that even if the abovementioned 75 per cent. threshold were not to be achieved, but the acceptance condition to the Offer was nevertheless satisfied with CFE achieving a resultant holding of 50 per cent. or more of the voting rights in CIP, if CFE requisitioned an extraordinary general meeting to propose a special resolution to cancel the admission of the Ordinary Shares to trading on AIM, that resolution would only require the approval of 75 per cent. of those Shareholders present in person or by proxy, likely to be a lower threshold than 75 per cent. of the Company's issued ordinary share capital at that time.

If CFE, by virtue of potential further purchases and/or valid acceptances of its Offer, acquires Ordinary Shares carrying 75 per cent. or more of the voting rights attaching to the ordinary share capital of CIP, if it requisitioned an extraordinary general meeting to propose a special resolution to approve the voluntary liquidation of the Company, that resolution could be unilaterally passed by CFE.

The Board notes that CIP has no employees and, therefore, does not operate any pension scheme, nor does it have any arrangement in place for any employee involvement in its capital. Furthermore, CIP has no fixed assets or research and development function.

6. Current trading

Current trading since the Company's latest published weekly NAV has been in line with expectations.

The Company notes that further to its announcement of 26 January 2022, an additional 283,000 ordinary shares in Time Out Group plc were purchased, in satisfaction of an outstanding order placed by the Investment Manager on 26 January 2022. The Company confirms that no further investments or disposals have been made since that date.

7. Recommendation of the Board

Your decision as to whether to accept the Offer will depend upon your individual circumstances. If you are in any doubt as to what action you should take, you should seek your own independent professional advice.

However, the Directors, who have been so advised by Strand Hanson as to the financial terms of the Offer, consider that the Offer significantly undervalues the Company and, in light of this, unanimously recommends that Shareholders reject the Offer. Strand Hanson is providing independent financial advice to the Directors for the purposes of Rule 3 of the Code and, in doing so, has taken into account the commercial assessments of the Directors.

Accordingly, the Directors unanimously recommend that YOU SHOULD REJECT THE OFFER and SHOULD NOT return CFE's form of acceptance. The Offer does not represent fair value for your Company and CFE do not deserve to capture control of the Company at such a significant discount to NAV and with such vague and limited plans for its future.

If you have already accepted the Offer, a summary of your rights of withdrawal is set out in paragraph 3 of Section B of Part II of the Offer Document.

The Directors who hold Ordinary Shares representing, in aggregate, approximately 0.11 per cent. of the Company's issued ordinary share capital have irrevocably undertaken not to accept the Offer in respect of their own beneficial interests in such Ordinary Shares.

In addition, three other CIP Shareholders, including the investment vehicle and, where applicable, personal interests of Messrs Fumagalli and Sgarbi, being the principals of the Investment Manager, have also irrevocably undertaken not to accept the Offer in respect of their holdings of Ordinary Shares representing, in aggregate, approximately a further 13.16 per cent. of the Company's issued ordinary share capital.

Together, these irrevocable undertakings represent, in aggregate, approximately 13.27 per cent. of the Company's issued ordinary share capital.

Yours faithfully,

Adrian Collins

Independent Non-Executive Chairman

APPENDIX IDEFINITIONS

The following definitions and technical terms apply throughout this document, unless the context otherwise requires:

"AIC" Association of Investment Companies;

"AIM" AIM, a market operated by the London Stock Exchange;

"AIM Rules" the AIM Rules for Companies published by the London Stock Exchange (as amended from time to time);

"Announcement" the announcement of the Offer, including its appendices, made pursuant to Rule 2.7 of the Code and dated 14 January 2022;

"Bloomberg" Bloomberg L.P., a financial software services, news and data company;

"Board" or "Directors" the board of directors of the Company;

"Business Day" a day (other than a Saturday, Sunday or UK public holiday) on which clearing banks in the City of London are open for the transaction of general commercial business;

"CFE" Corporation Financière Européenne S.A. incorporated in Luxembourg with company number B82680, in its capacity as discretionary investment manager, acting on behalf of the CFE Funds;

"CFE Funds" Corporation Financière Européenne S.A Fund and accounts managed by CFE;

"CIP" or the "Company" CIP Merchant Capital Limited;

"CIP Shareholders" or together the registered holders of Ordinary Shares (each individually

"Shareholders" a "Shareholder");

"Code" or "Takeover Code" the City Code on Takeovers and Mergers in the UK issued by the Panel;

"Companies Law" the Companies (Guernsey) Law, 2008, as amended;

"Disclosure Period" being the date of commencement of the Offer Period up to the Disclosure Date;

"Disclosure Date" 11 February 2022, being the last Business Day prior to the posting of this document;

"Guernsey" the Bailiwick of Guernsey;

"Group" the Company and its subsidiaries and subsidiary undertakings;

"IFRS" International Financial Reporting Standards as adopted by the European Union;

"Investment Manager" Merchant Capital Manager Limited, the Investment Manager to the Company, an affiliate of Continental Investment Partners S.A.;

"Latest NAV" the Company's unaudited NAV per Ordinary Share of 86.53 pence as at 4 February 2022 and announced on 8 February 2022;

"London Stock Exchange" London Stock Exchange plc, a public company incorporated in England and Wales under number 2075721, together with any successors thereto;

"NAV" net asset value of the Company;

"NAV per Ordinary Share" the NAV divided by the number of existing Ordinary Shares;

"Offer" the mandatory cash offer made by CFE to acquire the entire issued Ordinary Shares not already held by CFE or any persons acting in concert with it, as further detailed in the Offer Document;

"Offer Document" the document containing the Offer sent by CFE to CIP Shareholders on 31 January 2022;

"Offer Period" the period commencing on 14 January 2022 and ending on the date when the Offer becomes or is declared unconditional or lapses or is withdrawn;

"Offer Price" 55 pence in cash, being the consideration payable by CFE for each Ordinary Share under the terms of the Offer;

"Opening Position Disclosure" has the meaning given to it in Rule 8 of the Code;

"Ordinary Shares" the existing issued or unconditionally allotted and paid (or credited as fully paid) Ordinary Shares of no par value in the capital of CIP and any further Ordinary Shares which are unconditionally allotted or issued fully paid (or credited as fully paid) on or prior to the date on which the Offer closes;

"Panel" the UK Panel on Takeovers and Mergers;

"Possible Offer" the possible offer at a price of 50 pence per Ordinary Share announced by CFE on 26 January 2021 pursuant to Rule 2.4 of the Code;

"Response Announcements" the announcements of the Company dated 17 January 2022 and 27 January 2022;

"Restricted Jurisdiction" subject always to the requirements of Rule 23.2 of the Code in relation to the distribution of offer documentation to jurisdictions outside the UK, any jurisdiction where extension of the Offer would violate the laws of that jurisdiction;

"Strand Hanson" Strand Hanson Limited, being the financial adviser, nominated adviser and broker to the Company;

"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Island and its dependent territories;

"US" or "United States" the United States of America, its territories and possessions, any state of the United States of America, the District of Columbia and all other areas subject to its jurisdiction and any political subdivision thereof; and

"VAT" Value Added Tax.

All references to "GBP", "pounds", "pounds sterling", "Sterling", "£", "pence", "penny" and "p" are to the lawful currency of the United Kingdom.

In this document, references to the singular include the plural and vice versa, unless the context otherwise requires and words importing the masculine gender shall include the feminine or neutral gender.

Any references to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

APPENDIX II

SOURCES OF INFORMATION AND BASES OF CALCULATION

In this document, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:

1. As at 11 February 2022, being the latest practicable date prior to the date of this document, and as at 4 February 2022, being the date of the Company's Latest NAV calculation, CIP had 55,000,000 Ordinary Shares in issue.

2. Unless otherwise stated, all prices for the Ordinary Shares are middle market closing prices as derived from the AIM Appendix to the Daily Official List published by the London Stock Exchange for the particular date(s) concerned.

3. The volume weighted average prices for the Ordinary Shares are, in all cases, derived from Bloomberg's daily volume weighted average price data and have been rounded to the nearest two decimal places.

4. The unaudited NAV of CIP as at 4 February 2022 has been derived from the latest weekly calculation of unaudited NAV per Ordinary Share by the Company's administrator, Maitland Administration (Guernsey) Limited ("Maitland"), as notified by the Company on 8 February 2022. As set out in the Company's AIM admission document dated 15 December 2017, such weekly unaudited NAVs are calculated on the same basis as the calculation of the NAV per Ordinary Share for the purposes of the Company's published financial statements and, accordingly, are calculated in accordance with International Financial Reporting Standards ("IFRS") on the basis of market value using bid prices for listed and actively traded investments, with unlisted investments priced using the last quarterly valuation by the Investment Manager in accordance with The International Private Equity and Venture Capital Valuation (IPVEC) Guidelines. Accordingly, bid prices and foreign exchange rates used by Maitland to calculate the Company's Latest NAV were derived from Bloomberg and the Investment Manager's last quarterly valuation of the unlisted investments.

An unaudited summary of CIP's underlying investments and their carrying values, cash and cash equivalents and other net current liabilities as at 4 February 2022, pursuant to the Latest NAV calculation, is set out in the table below, which together with the number of Ordinary Shares in issue as at 4 February 2022 (as stated in section 1 above), forms the basis of the Latest NAV and derivation of the Cash Adjusted NAV, Liquidity Adjusted NAV and Cash Adjusted Offer Price referred to in this document. The figures in the table below have been rounded to the nearest whole number, such that there are marginal differences between the sum of the carrying values and the subtotals and totals thereof.

Notes:

* - Eurobond, which is not actively traded and currently valued at a 15 per cent. discount to its nominal face value, as set out in the Company's interim results announced on 30 September 2021.

** - holding company for the Company's Alkemy SpA investment.

5. The Liquidity Adjusted NAV has been calculated as the total value of the quoted equity investments (per section 4 above) plus the total of cash and near cash equivalents less other net current liabilities (per section 4 above) divided by the number of Ordinary Shares in issue (per section 1 above).

6. The Cash Adjusted NAV has been calculated as Total NAV (per section 4 above) minus the total of cash and near cash equivalents (per section 4 above). The Cash Adjusted NAV per Ordinary Share has been calculated as the Cash Adjusted NAV divided by the number of Ordinary Shares in issue (per section 1 above).

7. The Cash Adjusted Offer Price has been calculated as the Offer Price minus the total of cash and near cash equivalents (per section 4 above) divided by the number of Ordinary Shares in issue (per section 1 above).

8. Quoted equity investments as a percentage of total investments (excluding UK Treasury bills) has been derived using the relevant totals (per section 4 above).

9. Historical NAV data for the AIC Flexible Investment Sector was sourced from Bloomberg.

10. Details of the market purchases by pre-existing significant CIP Shareholders were obtained from disclosures, made pursuant to Rule 8 of the Code, by the relevant Shareholders and the average prices paid per Ordinary Share were calculated as the aggregate amount paid for the Ordinary Shares divided by the number of Ordinary Shares acquired for the period concerned.

11. The number of days that the Company has been, and is expected to be, in a Code offer period has been calculated as the aggregate number of days between 26 January 2021 and 23 February 2021, and between 14 January 2022 and 1 April 2022, inclusive.

12. The percentage increase in the Company's unaudited NAV from 25 September 2020 to 4 February 2022 was calculated using the Company's publicly disclosed NAVs of 74.76 pence and 86.53 pence per Ordinary Share, respectively.

13. The value of the Offer has been calculated by multiplying the Offer Price of 55 pence per Ordinary Share by the 55,000,000 Ordinary Shares in issue.

14. The percentage of trading days that the price per Ordinary Share has traded above the Offer Price from 26 January 2021 to 4 February 2022 (inclusive) was calculated by dividing 169 days (being the total number of days that the closing middle market price per Ordinary Share was above the Offer Price) by 261 days (being the total number of trading days for such time period), multiplied by 100. Source: Bloomberg.

15. The discount to the average middle market closing price for the 12-month period ended on and including 13 January 2022 was calculated by taking the mean average of Bloomberg's daily middle market closing prices over such period.

16. The middle market closing prices for the Ordinary Shares for the complete trading days period following the Announcement to 11 February 2022 were sourced from Bloomberg."

Terms and definitions used in this announcement shall have the same meanings as ascribed to them in the Company's Defence Circular of 14 February 2022 unless otherwise stated.

Enquiries:

Additional information

The information contained in this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (which applies in the United Kingdom by operation of the European Union (Withdrawal) Act 2018 (as amended)). The person responsible for arranging release of this announcement on behalf of CIP is Adrian Collins.

Strand Hanson Limited ("Strand Hanson"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser, nominated adviser and broker to CIP and no-one else in relation to the Offer and/or other matters described in this announcement and will not be responsible to anyone other than CIP for providing the protections afforded to clients of Strand Hanson nor for providing advice in relation to the Offer, the contents of this announcement or any other matter referred to herein. Neither Strand Hanson nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Strand Hanson in connection with the Offer, this announcement, any statement contained herein or otherwise.

Publication on a website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available on CIP's website at: www.cipmerchantcapital.com (subject to certain restrictions relating to persons resident in restricted jurisdictions) by no later than 12 noon (London time) on 15 February 2022. For the avoidance of doubt, the content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Availability of hard copies

Shareholders may request hard copies of any document published on the Company's website in connection with the Offer by contacting the Company's registrar at: Computershare Investor Services (Guernsey) Limited, 13 Castle Street, St Helier, Jersey JE1 1ES (telephone number: +44 (0)370 707 4040 or email: info@computershare.co.je). Shareholders may also request that all future documents, announcements and information to be sent to them in relation to the Offer should be in hard copy form.