Following an announcement on 18 November 2015, from Juridica Investments, that it would no longer make new investments and would be conducting a review of its cost structure, its board have now announced amendments to its fee structure and measures that the company says will reduce its fixed costs going forward.
The board says that, excluding changes to the management fees payable by the Company the estimated cost reduction for the Company targeted for 2016, as compared to the previous year, is US$900,000. These measures include, among other changes, a reduction of the annual fees payable to the Directors, which will reduce total Director fees payable by the Company to approximately US$285,000 per annum (an aggregate reduction of approximately 45% per annum as compared to Director fees paid in 2015); reduced expenses for Directors; agreement on a fixed audit fee of US$150,000 for 2016; and a reduction in the aggregate fees payable to brokers, from US$250,000 per annum to approximately US$100,000 per annum.
Furthermore, the Company has entered into an amendment agreement with the company’s investment manager. The board say that the purpose of this is to provide a simplified fixed fee structure relating to the annual management fees payable by the company and to amend the term of the Investment management agreement to more accurately reflect the run-off strategy. The existing performance fee provisions in the IMA remain unchanged and the Company’s previous investment manager (JCML 2007 Limited) will continue to be entitled to performance fees (to the extent payable) in respect of investments made prior to the end of 2013. The Company remains a shareholder in JCML 2007 Limited and is entitled to 32.5% of any performance fees received by it in such capacity.
For the financial years to 31 December 2015, the Management Fee has been calculated at a rate of 2% per annum of the adjusted net asset value of the Company at the end of the relevant accounting period. Going forwards, the Company has agreed to pay the Investment Manager a fixed annual Management Fee of US$3,000,000 in respect of the 12 months ended 31 December 2016 and US$1,750,000 in respect of the 12 months ended 31 December 2017. The agreed Management Fee for the year ended 31 December 2016 is an approximate reduction of 33% as compared to the amount that is estimated to have been payable under the IMA prior to the amendment which was based on 2% of adjusted net asset value.
The investment management agreement shall now automatically terminate on 31 December 2017 unless the Company elects to extend the term. In such circumstances, the Company will need to agree with the Investment Manager any management fee payable in respect of that additional period.
In light of the run-off strategy, the Board says that it intends to table a resolution at the next AGM to amend the Company’s articles to remove the requirement for the Company to table a winding-up proposal at a general meeting in November 2016 and every three years thereafter. They say that, given the Company’s adoption of the run-off strategy, they believe that the requirement to table a winding-up proposal is unnecessary and potentially costly to the Company.
Juridica in cost cutting mode : JIL