ZIMBALI CAPITAL SECTION 12J VCC - PRIVATE PLACEMENT MEMORANDUM (PPM) Date of issue: 1 December 2018 - Jaltech
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ZIMBALI CAPITAL
SECTION 12J VCC
PRIVATE PLACEMENT MEMORANDUM (PPM)
Date of issue: 1 December 2018
REVISION 1 www.zimbalicapital.co.za
TERM DEFINITION
An individual, trust, company or other legal entity who/which applies to Zimbali Capital to subscribe for
Applicant
Shares in respect of this Private Placement/Offer
The board of directors of the Company from time to time, which, as at the Offer Opening Date, comprises of
Board
the persons identified in section 14 of this PPM
Class Share Portfolio Investments made by the Company using proceeds received from the Shareholder/s of that Class of Shares
Shares of no par value, defined in the Company’s MOI, which are ring fenced to a particular Share Portfolio of
Class Shares investments, the associated rights of which are briefly summarised in section 9.5 of this PPM. This specifically
excludes the F Shares
Client Agreement The client agreement which forms part of the Client Pack
The pack provided to an Investor which contains all the documents the Investor needs to complete and
Client Pack sign in order to subscribe for Shares in the Company, namely the Client Agreement, Disclosure Notice and
Subscription Form
A member of the Board who assumes the shared responsibility of the board to manage Zimbali Capital.
Director
Collectively known as Directors
Disclosure Notice The disclosure notice which forms part of the Client Pack
Emboss Properties Emboss Properties (Pty) Ltd (registration number 1997/011871/07) (see section 6.4 for further information)
Shares of no par value, defined in the Company’s MOI as “F” Shares, the associated rights of which are
F Shares summarised in section 9.5 of this PPM. These Shares are issued to the Fund Manager for the services provided
by the Fund Manager
FAIS Act Financial Advisory and Intermediary Services Act
FIM Final Investment Memorandum
FSCA Financial Services Conduct Authority
FSP Financial Services Provider as defined in the FAIS Act
Beachwood Capital (Pty) Ltd, (registration number 2018/012472/07, a joint venture between Jaltech, Zimbali,
Fund Manager Zimbali Partners and a private company incorporated under the laws of South Africa (see section 6.4 for
further information)
TERM DEFINITION
An annual fee of 2% (two percent) (excluding VAT) based on the NAV of Zimbali Capital’s Share Portfolios. This
Fund Manager Fee
is a fee levied by the Fund Manager to each Share Portfolio based on that Share Portfolio’s NAV
Governing Documents The constitutional documents of the Company, which includes but is not limited to Zimbali Capital’s MOI
The total consideration paid by Shareholders of a particular share class to purchase the issued Class Shares
Gross Capital
from Zimbali Capital
Zimbali Asset Management (Pty) Ltd (registration number 2018/561754/07) a private company incorporated
Hotel Operator
under the laws of South Africa (see section 6.4 for further information)
IFA Hotel & Resorts Limited (registration number 1919/001318/06) being a subsidiary of IFA Hotel & Resorts
IFA
KPSC which is listed on the Kuwait stock exchange (see section 6.4 for further information)
Investment Mandate The general investment strategy and philosophy of Zimbali Capital as described in section 7 of this PPM
Investor An individual, trust, company or other legal entity who/which subscribes for VCC Shares in the Company
Jaltech Structuring (Pty) Ltd (registration number: 2017/142518/07), a private company incorporated under the
Jaltech
laws of South Africa (see section 6.4 for further information)
IRR Internal Rate of Return
ITA Income Tax Act
La Rez Investments (Pty) Ltd (registration number 1999/018725/07), a private company incorporated under
La Rez Investments
the laws of South Africa (see section 6.4 for further information)
The contracts listed in section 12 that govern the relationships between/amongst the various stakeholders and
Material Contracts
are deemed to be of significance to an Investor
MOI Memorandum of Incorporation
NAV Net Asset Value
Offer Close Date/Close The closing time and date of the Offer expected to be 25 February 2019 which may be amended by the
Date Company by way of an announcement released on its website
Offer Opening Date/ The opening time and date of the Offer expected to be 1 December 2018 which may be amended by the
Opening Date Company by way of an announcement released on its website
TERM DEFINITION
The opportunity described in detail in section 8.1 of this PPM which is linked to the A, B, C, D and E Shares
Opportunity LINKED
under this Private Placement/Offer.
The opportunity described in detail in section 8.2 of this PPM which is linked to the G Shares under this
Opportunity DIVERSIFIED
Private Placement/Offer.
Opportunity EQUITY The opportunity, which will be launched at a later stage, is described briefly in Section 6.6 of this document.
A fee that is 20% of the distributions to Investors, which are in excess of the Investors’ Gross Capital invested.
Performance Fee This distribution is provided to the Fund Manager through the rights associated with the F Shares. This is not
applicable to the LINKED Opportunity.
PIM Preliminary Investment Memorandum
This private offer to a selected number of private investors to subscribe for Shares in the Company, the details
Private Placement/Offer
of which are described more comprehensively in section 9 of this document
PPM Private Placement Memorandum
Qualifying Company/
A company satisfying the conditions of a qualifying company as defined in Section 12J of the ITA
Investment
Qualifying Shares An equity share issued to the Company by a Qualifying Company
The Gross Capital reduced by the tax benefit (in accordance with Section 12J of the ITA) received by Investors.
The following tax brackets are assumed:
Risk Capital
• For individuals and trusts the maximum of 45%
• For companies 28%
Rykdom 278 Portion 1 (Pty) Ltd (Registration number: 2018/211171/07), a private company incorporated under
Rykdom
the laws of South Africa (see section 6.4 for further information)
SARS South African Revenue Service
Share A Share of no par value in the Share Capital of the Company as defined in the Company's MOI
Share Capital Capital of the Company that is derived from the issue of Shares
Shareholder The holder/owner of Shares in the Company
Subscription Form The subscription form which forms part of the Client Pack
Venture Capital A company that has been approved by the Commissioner in terms of subsection (5) of Section 12J of the ITA and in
Company/VCC respect of which such approval has not been withdrawn in terms of subsection (6) or (6A) of Section 12J of the ITA
TERM DEFINITION
Zimbali Hotels and Resorts South Africa (Pty) Ltd (Registration number: 2003/023856/07), a private company
Zimbali
incorporated under the laws of South Africa (see section 6.4 for further information)
Zimbali Capital/the Zimbali Capital (Pty) Ltd (registration number 2018/028396/07), a Venture Capital Company (VCC-0124), a
Company registered (FSP 49374) and a private company incorporated under the laws of South Africa
Collectively refers to:
- Zimbali
- Rykdom
Zimbali Partners - Emboss Properties
- La Rez Investments
And any other partners which Zimbali becomes affiliated with from time to time.
(see section 6.4 for further information)
DIRECTOR DESCRIPTION OF INTEREST
Werner is the CEO of IFA and has interests in Rykdom, La Rez Investments and Emboss Properties.
Werner Burger
These parties will provide the pipeline of opportunities in which Zimbali Capital will invest.
Jonathan Maehler Director of Legends Golf and Safari Resort
Andrew Rogers n/a
Deon Viljoen Trustee of Zimbali Vacation Club
Jonty Sacks Jonty is a director of Jaltech (Pty) Ltd, the holding company of Jaltech.Offer Opening Date 1 December 2018
Offer Close Date 25 February 2019 (subject to section 17)
Applicants to be notified
2 weeks after the Offer Close Date
of success/failure
Posting of Share and tax
6 weeks after the Offer Close Date
certificates and refunds
Zimbali Capital initially intends to raise approximately R725 million to pursue the highly attractive investment
Purpose of the Private
opportunities, to which it is uniquely exposed and to enable Investors to participate in these investment
Placement
opportunities.
- LINKED Opportunity (see section 8.1)
• 45 “A’’ Shares at an issue price of R1 000 000 per A Share in terms of a Private Placement.
Expected number, type
• 41 “B’’ Shares at an issue price of R1 110 000 per B Share in terms of a Private Placement.
and subscription prices
• 36 “C’’ Shares at an issue price of R1 250 000 per C Share in terms of a Private Placement.
of Shares to be issued
• 31 “D’’ Shares at an issue price of R1 425 000 per D Share in terms of a Private Placement.
to Investors under this
• 27 “E’’ Shares at an issue price of R1 665 000 per E Share in terms of a Private Placement.
Private Placement
- DIVERSIFIED Opportunity (see section 8.2)
• 5 000 “G’’ Shares at an issue price of R100 000 per G Share in terms of a Private Placement.
Allotment of funds and
The basis of allotment if a surplus of funds are raised will remain within the discretion of the Directors of
minimum investment per
Zimbali Capital. The minimum investment per an Investor is R1 000 000 (one million South African Rands)
Investor
Qualifying Company/
A company satisfying the conditions of a qualifying company as defined in Section 12J of the ITA
Investment
Operating history Zimbali Capital is a new Section 12J VCC, it has not previously operated and has no operating history.
Beachwood Capital (Pty) Ltd (Registration number: 2018/012472/07), a joint venture between Zimbali, Jaltech
The Fund Manager
and Zimbali Partners.
Outsourced
The Fund Manager outsources certain administrative functions to Jaltech (see section 12 for Material Contracts)
administrative functions
- Zimbali
- Jaltech
Other key stakeholders
- IFA and Zimbali Partners (providers of pipeline of opportunities on an exclusive basis)
and technical partners
- Zimbali Asset Management (together with well- known/international hotel operators) as Hotel Operator and
asset manager of the properties held by Zimbali Capital’s investments.The fees charged by the Fund Manager to Zimbali Capital are as follows:
- Fund Manager Fee of 2% per annum (paid quarterly) based on the NAV of Zimbali Capital’s total Class Share
Portfolio. This is a fee levied by the Fund Manager to Zimbali Capital.
Fees - 20% Performance Fee (not applicable to the LINKED Opportunity), which is 20% of the distributions to
Investors that are in excess of the Investors’ Gross Capital invested. This distribution is provided to the Fund
Manager through the rights associated with the F Shares (refer to section 9.5 for more information on the
rights attaching to the various shares).
Shareholder reports
Quarterly
frequency15
Other technical partners/stakeholders:
DESCRIPTION INDIVIDUALS/TRUSTS CORPORATES Initial investment (Gross Capital) R1 000 000 R1 000 000 Tax relief (in the tax year of initial investment) (R450 000)2 (R280 000) Net investment (Risk Capital) R550 000 R720 000 19
Legends Golf & Safari Resort
GATED RESIDENTIAL ESTATES RETIREMENT VILLAGE MIXED USE, STUDENT HOUSING AND HOSPITALITY
- La Rez, Stellenbosch, South Africa
- Vergezicht Estate, Somerset West, South Africa
- Dempsey, Stellenbosch, South Africa
- Olijvenhof Estate, Somerset West, South Africa La Clemence, Stellenbosch,
- Habitat Center @ the Mall, Somerset West,
- Liberte, Stellenbosch, South Africa South Africa
South Africa
- Kleine Parys Estate, Paarl, South Africa
- De Zalze Lodge, Stellenbosch, South AfricaLINKED OPPORTUNITY DIVERSIFIED OPPORTUNITY
Hotels 50% - 80%
Hotels – 70% - 100%
Student accommodation 0% - 30%
Non-Qualifying Investments 0% - 15%
ASSET ALLOCATION Student
Cash/short term 0% - 100%
accommodation – 0% - 30%
Operating assets 50%-80%
Assets in development 0% - 50%
Mixture of the following
developments (or similar):
- Boulevard PAD Hospitality assets, which include student
- Boulevard Hotel accommodation, in highly desirable locations.
- Ocean Club
INVESTABLE ASSETS
- Fairmont Zimbali Resort Buy operating investments/assets at a minimum
- Legend Golf & Safari Resort yield of 5%
- De Zalze Lodge
- La Rez student
accommodation
MIN IRR TARGET 15% p.a. (with no leverage) 18% p.a. (with no leverage)
Within 3 months of raising Within 12 months of raising capital (average of
DEPLOYMENT OF FUNDS
capital 6 months)
Up to 50% leverage may be Up to 50% leverage may be utilised within
LEVERAGE
utilised within investments investments
5 - 7 years and the majority of assets/
investments selected should be flexible enough
Investees will be required
to be disposed as a whole or via specific
to have pre-determined exit
sections/units which simplifies Zimbali Capital’s
mechanisms for the units/
ability to exit
EXIT assets which they operate,
ensuring a smooth exit for
50% of the investment to have a pre-determined
Investors after the
exit mechanism/strategy. This will include pre-
investment term
arranged sale strategies with Zimbali, IFA and
Zimbali Partners (amongst others)Offer Opening Date 1 December 2018
Offer Close Date 25 February 2019 (subject to section 17)
Applicants to be notified
2 weeks after the Offer Close Date
of success/failure
Posting of Share and tax
6 weeks after the Offer Close Date
certificates and refundsRISK MITIGATION
• Upfront Section 12J tax deduction immediately increases the
returns to Investors and de-risks their capital exposure by up
to 45%
• There is a strong pipeline of quality assets for the DIVERSIFIED
Zimbali Capital does not achieve expected return for Investors
opportunity
either due to:
• For the LINKED opportunity assets are known upfront
• Fund Manager and management team have extensive experience
• lower than expected operating returns from investments; or
in the hospitality & property sector in South Africa
• lower than expected capital growth from investments or even
• Investments are backed by property assets which will reduce the
capital loss
potential for capital loss
• Experienced Hotel Operator and asset manager who will
outsource certain operations to well-known/international hotel
operator
• In depth due-diligence and investment process
• This is a risk prior to the minimum investment period of 5 years
• After the 5-year period, the nature of Zimbali Capital’s
investments reduces this risk
Zimbali Capital Class Shares are illiquid and Investors should expect • Exit mechanisms and strategies required by Zimbali Capital’s
to be invested for at least 5 years investments before investing
• Investment Mandate requires a portion or all (depending on
the Opportunity) of Zimbali Capital’s investments to have pre
determined exits
• Tourism industry in South Africa has proven to be resilient in the
face of economic and political uncertainty
Reduced demand in the hospitality sector • Tourism is expected to grow steadily and ahead of GDP in South
Africa in the coming years
• Quality assets in Zimbali Capital’s pipeline help to reduce this risk
Low deployment of capital. A risk facing many Venture Capital
Zimbali Capital has a strong pipeline of investments which is
Companies and private equity companies is the low deployment of
in excess of the targeted capital to be raised. This significantly
capital leading to the capital remaining in low yielding assets such
reduces this risk
as cash
• Within investments implement internationally recognised
Zimbali Capital will invest in high-value quality property assets. measures to prevent and minimise the damage. This includes all
Loss of property due to fire, natural disasters and general damage necessary firefighting equipment and training employees
will result in a loss in revenue and/or capital which could have a • Investments of Zimbali Capital will be required to maintain
severe impact on the Zimbali Capital’s performance minimum levels of insurance for this risk and business
interruption insuranceRISK MITIGATION
The targeted return is based on conservative assumptions for the
The Company’s targeted return is based on several assumptions. cost structure, revenue and capital appreciation, actual experience
There is no guarantee that actual experience will be the same as may be better than expected. In addition, the Section 12J deduction
assumed experience will provide a buffer increasing the Company’s chances of meeting
its target
However, to mitigate against inflation and the availability of
suitable investments:
• Zimbali Capital will increase accommodation rates in line with
Therefore, Investor returns may be lower than expected.
inflation, where possible; and
Major assumptions affecting the targeted return include:
• the Company has secured exclusive rights to an extensive pipeline
• cost structure;
of developments. The Company will also create and maintain a
• capital appreciation;
pipeline of opportunities for future investments
• inflation; and
• Zimbali Capital will also ensure that it has an extensive pipeline
• availability of suitable investments and the duration between
prior to any capital raising activities. The Company has also
raising capital and deploying money into suitable investments
secured performance standards and operating procedures from
hotel operators to provide an additional layer of protection
against low returns
Due to Socio-economic volatility interest rates and inflation may Hospitality revenue and assets are generally expected to grow in
increase line with inflation
The Company is incorporated as a VCC under Section 12J of the ITA.
The VCC regime is subject to a sunset clause terminating on 30 June
2021. It is reasonable to assume that SARS will review the efficiency
of the regime and a decision will then be made as to whether
it should be extended. To the extent that it is not extended, the The Fund Manager continues to keep up to date with the latest
Zimbali Capital may no longer be able to raise capital post this date changes to the Section 12J legislation
under the current Section 12J regime
Furthermore, other changes to the ITA may also adversely affect the
Company087 095 2742 | HELLO@MYZIMBALI.CO.ZA
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