ICAP has an excellent future. Why?

First, after its 2005 inception, ICAP was for many years enjoying a nice premium to NAV as it attracted the right quality of share owners. Since share owners, existing and future ones, bear the responsibility of determining the market price of a listed company, especially one such as ICAP, the type and quality of share owners matter. We need to appeal to share owners with the right mind set.

We have started a long-term strategy/campaign to improve the type and quality of ICAP's share owners and voting structure with a view of getting back to as close as we possibly can to the initial years. There are many components in this exciting strategy, which includes the recently announced innovative dividend policy, the launch of an ICAP Fan Club, increasing individual ownership of ICAP, and having a much fairer voting structure for a collective investment scheme like ICAP and many more.

Throughout the last 20 years, ICAP has undergone a unique journey albeit one with a clear public mission. The next 20 years will see more of these. To be sure, it is going to be a long haul and to eventually succeed, we will need the support and co-operation of all like-minded individual share owners.

Unfortunately, there are a few large voters/parties who do not think like long-term share or business owners, who are focusing on stock prices and act more like ICAP's wrecking ball. A member of this wrecking ball group joined a forum in 2019 and has since then posted 475 comments, 92% of them of which are on ICAP and are negative.

It is useful to repeat what Warren Buffett advised in his 1985 Berkshire Letter :

"Over the long term, there has been a more consistent relationship between Berkshire's market value and business value than has existed for any other publicly-traded equity with which I am familiar. This is a tribute to you. Because you have been rational, interested, and investment-oriented, the market price for Berkshire stock has almost always been sensible. This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions."

We will work hard and with our heart to attract and maintain appropriate high quality ownership in ICAP.

It can go back to a premium or close to one as we continue with this next exciting phase of ICAP's unique mission.


i Capital Newsletter Volume 35 Issue 9

Since its inception in 2005, ICAP has been trading at a premium to NAV in the first 3 years, as almost 100% of its share owners were individuals.

The share price subsequently traded at a persistent discount due to the irresponsible behavior of a few large parties, who want to wreck ICAP for their own short-term gains.

In order to address its share owners' concern of share price discount, the fund manager has come out with long-term strategies and campaigns to attract the right quality of share owners.

Ever since the nationwide roadshow conducted in Jul 2023 where several possible scenarios of ICAP were proposed and discussed, the market has shown very positive reaction. As at 3 Oct 2023, ICAP's share price has surged 26.92% since Jul (first roadshow took place on 1 Jul).

The most innovative dividend policy

On 29 Sep 23, ICAP announced its unique dividend policy that aims to narrow the gap between its share price and NAV and possibly move it back to parity or premium to its NAV.

We believe it is the first ever closed-end fund anywhere in the world that has adopted such an innovative dividend policy.

This unique dividend policy is formulated based on the aggregate of 1% of the NAV per Share (Base Rate) plus 8% of the difference in the market price of ICAP Shares and the NAV per Share (Top-up Rate). The Top-up Rate will not apply if the share price is trading at parity or a premium to NAV.

Under normal market and economic conditions, the expected dividend yield will be approximately 4%, which will be paid on a yearly basis.

From 2002 to 2022, the average 3-month fixed deposit rate in Malaysia was 2.80%; the average 3-month Malaysian Treasury Bill was 2.76%; and the average dividend yield based on the Kuala Lumpur Composite Index was 3.20%.

This suggests that the expected dividend yield of 4% is attractive. Thanks to this well-designed innovative dividend policy, ICAP remains a long-term capital appreciation fund that aims at achieving superior long-term compound return.

At the same time, a dividend reinvestment plan (DRP) will be implemented to provide greater flexibility to share owners in meeting their investment objectives.

The dividend entitlement can either be received wholly in cash, or be reinvested in new ICAP Shares at an issue price to be determined by the Board.

The DRP enlarges the issued share capital, which increases its liquidity and hence reduces the chances of share price manipulation by certain large institutional parties. On top of this, shareholders will be exposed to further capital appreciation when reinvestment option is elected.

With the Base Rate tied to ICAP's NAV, what this means is that investors who buy ICAP shares now will be able to enjoy a dividend that will be consistently rising at a compound rate.

Say ICAP's NAV doubles to RM7.16. The 1% Base Rate component of ICAP's dividend will then produce a dividend payment of 7.16 sen, double the present dividend payment of 3.56 sen.

If the NAV doubles in 5 years, your dividend payment and dividend yield doubles in 5 years. And it has no impact on ICAP's long-term capital appreciation objective. Except for the 2 pandemic years, the 1% Base Rate is below the average interest and dividend income streams that ICAP has received annually since 2006. In addition, the DRP will cater to the needs of the Top-up Rate.

This is how innovative ICAP's dividend policy is.

This innovative dividend policy and DRP is the result of extensive research conducted by Capital Dynamics and Tan Teng Boo. To appreciate its full benefits, come to ICAP's AGM and listen to an international finance expert, Dr Lorenzo, together with Tan Teng Boo, explain this unique dividend policy on Saturday, 4th Nov 2023. Dr Lorenzo will also present his independent research and assessment of ICAP's NAV and share price performance at the 2023 Investor Day on Sunday, 5th November, at the KL Convention Centre.


i Capital Newsletter Volume 35 Issue 9

The Malaysian stock market has not been performing for a long time. While many are still stuck being unwilling long-term investors of the overhyped gloves and semiconductor stocks since the pandemic, let us see how ICAP, to some, a boring and unexciting stock, has performed and what is up for its share owners in the future.

Cash is key.

Cash is the only raw material which can generate capital gains and income for ICAP. Asset allocation plays an important role in the fund's performance. When the market is overvalued, it is the strategy of ICAP's fund manager to hold more cash and wait until the market is undervalued with plenty of opportunities to invest.

While it is the fund manager's responsibility to manage its net asset value (NAV), it is important to note that the share price of a fund is determined by investors, and not a responsibility of the fund manager.

Since the pandemic, ICAP's cash level has been dropping steadily as it has been making additional investments. The fall in cash level implies an appreciation of its NAV.

This is observed when its NAV appreciated 5.06% and its share price grew 5.80% during the pandemic up until 27 Sep 2023. Both have outperformed the MSCI Malaysia index, which plunged by 4.66%.

It is ICAP's strategy to invest only in undervalued stocks.

For example, ICAP became one of Capital A's largest shareholders, accounting for 9.71% (RCUIDS and warrants inclusive) of the fund's NAV as at Sep 2023.

Being South-East Asia's largest low cost carrier which was one of the most severely impacted industries during the pandemic, Capital A not only survived without a single cent of grant from the government, but has transformed and expanded further.

With such an undervalued stock portfolio that ICAP is holding, the prospects of the fund is indeed promising.


i Capital Newsletter Volume 35 Issue 9

Since 2012, City of London has been using all kinds of tactics, including unethical ones and working together with Laxey Partners, another London activist, to pressurise Tan Teng Boo to do all kinds of things for short-term benefits and to benefit its own interests.

City of London has been forcing Tan Teng Boo to change his time proven, well thought-out value investing style, even using a prominent local media and the social media to conduct a campaign to kick Tan Teng Boo out as the fund manager in last year's AGM.

In a classic David versus Goliath battle, since 2012, Tan Teng Boo has been fighting City of London, based on his deep belief in integrity and value investing. The successful listing of icapital.biz Bhd in Oct 2005 was due to investors who shared his value investing approach and who trusted him.

Even at the risk of him being kicked out, Tan Teng Boo would not depart from what he has promised the thousands of shareowners. This is integrity, an old fashion value that an activist investment firm like City of London probably can never understand.


i Capital Newsletter Volume 27 Issue 22

Once again, despite a very tough and rough environment, icapital.biz Berhad has achieved a very strong performance with its NAV appreciating 20.93% and its share price surging 35.66% for the two years ended 25 July 2023.

Both have strongly outperformed the 7.59% plunge in the bellwether MSCI Malaysia index.

Meanwhile, icapital.biz Berhad continues to invest more. Its cash assets have been falling steadily. This implies that its NAV will be appreciating further. With Capital Dynamics’ time-proven value investing philosophy, and icapital.biz Berhad still undervalued, it is actually an excellent time to invest more in this truly low-risk, high-return investment. A profit of 35.66% in a market that fell 7.59% is indeed a rare gem.


icapital.biz Berhad 4Q23 Report

Another way a value investor expresses their humility is by holding cash - lots of it in fact - when there is nothing attractive to invest in. If there are not enough securities to fill out a portfolio that meet value investing criteria, the answer is simply to hold cash until such securities can be found.

To be sure, holding cash is not the ultimate aim of a value investor; it is a by-product of the value investing process where humility is a huge part of its risk management.

For businesses and firms, cash is a necessity for dealing with the unexpected. Cash is the heart and blood of businesses. Cash and liquidity are much more important to a firm's survival than earnings or profitability.
Cash serves a similar purpose from an investor's or a portfolio manager's standpoint.

Cash is the most vital raw material for an investor. If one can be absolutely sure that all the stocks one has bought are the correct stocks at the correct prices and valuations, or that there will not be any better opportunities coming your way later, then holding cash become superfluous. How can one be so cocky?

As Tan Teng Boo has previously shared, holding cash is like holding a very valuable option, except that it is one with no expiry date. The value of an option depends on its expiry date, amongst other factors.
The longer the expiry date, the more valuable the option becomes. An option has a fixed conversion price. With cash, it is the investor or the fund manager who decides what the conversion price will be.

Since a value investor will buy only at an attractive price, the value of the option or cash goes up. In summary, whether one is managing a business or managing a portfolio, it is a privilege to have a strong balance sheet now, one that is especially filled with cash.


i Capital Newsletter Volume 31 Issue 36 (www.icapital.biz)

Buy low sell high does not work consistently because it is very difficult to predict a market trend, a company's earnings or a country's GDP accurately on a consistent basis. Of course, out of say 100 times, there will of course be a couple of times when one gets it correct. This is like predicting heads or tails when a coin is tossed a hundred times.

If one thinks about it carefully, such a result is not surprising. If timing the stock or market could be done accurately on a consistent basis, people like the CEO of Capital Dynamics would be free to just sit in front of the monitor and trade profitably; there would be no need to work so hard and conduct all that research and analysis.

Noteworthy at this point is what Benjamin Graham, the father of value investing, has to say on such matters

"As in all other activities that emphasize price movements first and underlying values second, the work of many intelligent minds constantly engaged in this field tends to be self-neutralizing and self-defeating over the years. The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. He should never buy a stock because it has gone up or sell one because it has gone down."

- Benjamin Graham, The Intelligent Investor

Ben Graham, the teacher of Warren Buffett, added :

"A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price."

The intellectual approach towards investing in the stock market differs greatly between those who time the market or stocks and those who practise value investing. For the former, the market index or stock price is just a number to predict, making it in essence similar to gambling or speculating; for the latter, the market index is meaningless and irrelevant while the stock prices are to be used only in comparisons with the intrinsic value of a stock or business.


i Capital Newsletter Volume 31 Issue 36 (www.icapital.biz)

Despite a challenging and turbulent environment over the last 9-10 years, the share price and net asset value (NAV) of icapital.biz Berhad (5108, ICAP), a listed closed-end fund, have reached an all-time high of RM2.86, a feat achieved by only a very few companies listed on Bursa Malaysia and just a tad below its all-time high NAV at RM3.64.

These positive outcomes are a result of the painstaking efforts put in by the Board of ICAP and Tan Teng Boo, its Designated Person. To recapitulate, in its 2022 Annual General Meeting, Teng Boo proposed a slew of measures to generate the said outcomes.

From its inception in Oct 2005 to 2 Aug 2023, the share price and NAV of ICAP have appreciated at an annualised rate of 5.67% and 7.91% respectively, outperforming the MSCI Malaysia index, which gained only 1.77% per annum. However, viewing ICAP's performance on this basis hides the true performance potential of ICAP. Its NAV is at a crucial major turning point. Why?

First, despite an extremely difficult period, the share price and NAV of ICAP have been rallying on a tear for the last 1-year, 2-year and 3-year periods, thanks to the very comprehensive investor relations campaign undertaken by Capital Dynamics and supported by ICAP's Board. The share price and NAV of ICAP have outperformed the MSCI Malaysia by a huge margin. If it is just one year, one may say it is due to plain luck. If it is over 3 years, it has to be due to the investing skills of Tan Teng Boo.

Besides, its NAV discount has also narrowed substantially, allowing investors to enjoy extra returns without any risk. In the last one year up to 3 Aug 2023, ICAP's share price shot up 17.33%, nearly doubled the rise in its NAV.
For a two-year period, ICAP's share price surged 32.90%, also much higher than the 19.20% rise in its NAV. Over a 3-year period ending 3 Aug 2023, ICAP's share price jumped 28.93% while the MSCI Malaysia index plunged nearly 15% in the same period.

Put simply, an investor who put RM1,000 into the MSCI Malaysia index 3 years ago would have seen that investment shrivelled to around RM850. Had the investor put in RM1,000 into ICAP shares, his investment would have risen to RM1,289 or 51.6% more.

Why are we ending ICAP's performance on 3rd August 2023?

This is when ICAP lost its leave application in the Federal Court, allowing a rogue investor to act like a cowboy. The share price of ICAP on 3ld Aug closed at RM2.37, just a sen higher than 2 August 2023. In other words, ICAP's share price on 3 August 2023 did not benefit from the Federal Court decision.

Therefore, the strong performance of ICAP's share price and NAV up to 3 August 2023 were all due to the efforts of its Designated Person, Tan Teng Boo. This point is very important as the long-time Malaysian collaborator of the foreign investor will make all kinds of false claims in an investment forum that he joined in 2019.

Secondly, as explained by Tan Teng Boo in a series of physical nationwide roadshows, although ICAP's NAV has surged, it will substantially benefit in the future from the RM170 mln investments that ICAP has made in the last few years. ICAP's cash holdings of around RM300 mln a few years ago has dropped substantially, down by more than 50%, due to these investments.

For example, ICAP made substantial investments in Capital A (formerly AirAsia) and SAM Engineering in the last few years.

Thirdly, subsequent to the 2022 AGM, and after years of extensive work, the Board and Designated Person of ICAP have made an important breakthrough by formulating an innovative dividend strategy that will further enhance the other measures already implemented to narrow the NAV discount.

In addition, the dividend strategy is being undertaken to address the needs of various shareowners - those seeking long-term capital appreciation, those needing some regular distribution and those who may have to cash in their holdings. This innovative dividend strategy of ICAP, when fully implemented, will further boost its future share price and NAV movements.

As guided by the Designated Person and the Board, ICAP is on the right track but there is still plenty of work to be done. "In time, as the market starts to fully recognise the consistent outperformance of ICAP, it is hoped that its share price will start to trade at a premium, like it used to before certain shareholders came in," said Tan Teng Boo.


i Capital Newsletter Volume 35 Issue 2 (www.icapital.biz)

Secondly, investors' behavioral bias has been avoided by Capital Dynamic's consistent value investing approach.

A good example is its investment in Padini. icapital.biz Bhd first bought Padini in late 2005 and early 2006 in a very patient and disciplined manner - see figure 11. At that time, Padini's paid up capital was only 62.4 mln and icapital.biz Bhd restrainedly bought 2.27 mln of Padini shares.

The first sell transaction came 7 years later, in the 2nd quarter of 2013 when concerns over the outcome of the 2013 elections took hold. Since then, icapital.biz Bhd has not sold a single Padini share and still holds a substantial quantity.

The cost price of its Padini shares is less than 30 sen, even before taking into account the dividends received.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

First, icapital.biz Bhd has committed itself to a long-term investment objective. So, Capital Dynamics is never pressured by any kind of ranking among investment funds. Most funds pay their fund managers in terms of a certain percentage of assets under management plus performance fees if the NAV surpasses the previous high level.

This kind of compensation structure made fund managers biased towards building up the size of their portfolios by maximizing marketing efforts and taking asymmetrical risks, ie: fund managers will get paid a lot when the market is good, but never be punished when the market is bad.

Though Capital Dynamics is also paid based on its NAV, icapital.biz Bhd's close-end fund structure has not only alleviated incentive problems and improved corporate governance, but has also solved the inflow/outflow problems of open-end unit trust funds (UTFs).

Unlike those in UTFs or ETFs, investors in CEFs are also shareholders. As public listed companies, CEFs must hold annual general meetings (AGMs). Through these AGM or extraordinary general meetings (EGMs), investors or shareholders of CEFs can substantially influence the way the CEFs are run. They can nominate individuals to be appointed to the Board of Directors and determine who gets elected or rejected as directors as well as their fees.
The investors or shareholders can change the fund manager; they can also change the Constitution of the CEFs through AGM or EGM. No less importantly, it is much easier for investors of CEFs to terminate or wind up the fund than it is for investors of UTFs.

Although both funds can be wound up upon the occurrence of an Extraordinary Resolution passed at a general meeting or unitholders' meeting, it is in practice very difficult for the unit holders of UTFs to call for such meetings.

Nearly 1000 investors attended the 2017 AGM of icapital.biz Bhd, which lasted for a whole day. In an AGM, the share owners are able to voice their comments, raise questions and interact with the fund manager. In comparison, it is extremely difficult if not impossible for investors in a unit trust fund to have such an intimate avenue of communication with the fund manager.

Therefore, for shareholders or investors, CEFs are structurally far more democratic than UTFs or ETFs. This is an important value proposition of CEFs, as it means that shareholders or investors can better protect their interests.
In addition, the open-end structure of a UTF or OEF drags down the long-term performance. When the stock market is bullish, investors tend to flood new monies into the fund, and the fund needs to invest the monies received based on their investment mandate.

Thus, investors are 'forcing' the fund managers to invest, even when some of the shares are trading at high valuation. In a bear market, investors tend to panic and start redeeming or selling their units. Fund managers have no choice but to liquidate their portfolio to raise cash to pay the investors who sold or redeemed their units.

Thus, investors 'force fund managers to sell when the stocks may be trading at an attractive valuation. CEFs have the benefit of capital stability, which means there are no redemptions or subscriptions which would impact the fund.

The fund manager of a CEF can thus invest for the long term and also invest in attractive but less liquid securities, which explained the source of icapital.biz Bhd's superior performance.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

The explanation of icapital.biz Bhd's superior performance

Investors are bombarded with good performance results from all kinds of investment products or investment managers. The fact of the matter is that only good results will reach us, as no fund management company would advertise a fund with a bad track record. This is a classical self-selection bias problem.

So a smart investor will always ask: what are the explanations for or sources of such good performance? Will these sources or factors persist in the future? This is like when we analyze a listed company: what are the company's moats or competitive advantages, how persistent are they?

If we do not understand the rationale behind icapital.biz Bhd's past performance to appreciate why Capital Dynamics is a good fund manager, we may be easily distracted by things unimportant or irrelevant to icapital.biz Bhd's investment objective.

Investors may even wonder: are Capital Dynamics and Tan Teng Boo the lucky fools that Nassim Taleb described in his book "Fooled by Randomness"?
We believe Capital Dynamics' secret to outperform the market is not just being good at investment, but, more importantly, avoiding most mistakes and flaws of investors, especially the inability to make long-term investment decisions based on business fundamentals. There are two common biases that have contributed to disastrous results experienced by many institutional and individual investors.

The first is institutional bias. Institutional investors are often constrained by obstacles such as: the performance pressures from short-term ranking, the compensation structure leading to too much risk, open-end funds' intrinsic inflow/outflow problem, and the frenzied atmosphere of the financial markets. As a result, institutional investors become enmeshed in a short-term relative-performance derby, in which temporary price fluctuations and the latest market fads become the dominant focus.

The second bias is behavioral bias. Emotions, especially greed and fear, have always driven investors to become their own worst enemies. When prices are generally rising, greedy investors become more optimistic about speculating by focusing on return while ignoring risk. On the other hand, when the market tumbles, the fear of loss causes investors to focus solely on the possibility of further price declines to the exclusion of business fundamentals.

Let us see how icapital.biz Bhd has overcome said two biases to achieve a superior performance.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

With a long-term investment approach, icapital.biz Bhd can always make absolute gains in the long term. We can confidently say Capital Dynamics has met icapital.biz Bhd's investment objective as stated in its Prospectus.

More importantly, the only way Capital Dynamics can be incentivised is to grow the NAV. Today, if the NAV of icapital.biz Bhd is still RM140 mln, Capital Dynamics would still be getting the same fees in terms of absolute amount compared with 13 years ago.

To evaluate whether the fund manager has followed icapital.biz Bhd's investment policy by investing in stocks of which the market value is significantly lower than the underlying business value, we look at the investments of icapital.biz Bhd.

We find icapital.biz Bhd's performance has mainly been the result of capital gains instead of dividends received from its underlying investments.

We also check whether the fund manager has made a good use of its cash to fulfil the investment policy's requirement on "defensive purposes or to enable it to take advantage of buying opportunities."

In contrast to the situation from 2006 to 2012, the cash level of icapital.biz Bhd has since been rising gradually, in response to a higher-risk, lower-return investment landscape.

Said change of cash level demonstrates that Capital Dynamics has treated cash as a call option with no expiry date, an option on every asset class, and with no strike price.

icapital.biz Bhd's performance is mainly driven by capital gains with dividends only contributing a minor part. We can therefore conclude that Capital Dynamics has followed the investment policy laid out in the Prospectus.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

As stated in Item 1.2 of the Prospectus, "The primary investment objective of capital. biz Bhd is long-term capital appreciation of its investments, whilst dividend and/or interest income from these investments would be of secondary consideration."

On investment policy, "icapital. biz Bhd will select companies where there is a disparity between the company's market price (in the case of listed securities) and selling price (in the case of unlisted securities) and underlying business values over the medium to long-term. icapital.biz Bhd may also invest in cash deposits and/or in short-term obligations in order to have funds available for general corporate purposes. It may also maintain such cash deposits for defensive purposes or to enable it to take advantage of buying opportunities."

Therefore, our analysis here will focus on three questions: has the fund manager achieved this investment objective? Has the fund manager's investment followed its investment policy? More importantly, if the fund manager has or has not delivered as promised, why is this so?


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

Imagine having a community where you share common goals, values, and interests. A place for you to talk about any number of topics, from investment ideas to the latest market trends to confusing local and global politics to Japan's cruel plan to release radioactive water into the Pacific Ocean or to more light-hearted events like durian picnics or kopitiam hopping and the list goes on. Imagine building camaraderie with those you least expect, all because you are all capital. biz Berhad share owners. Enter the ICAP Fan Club.

Our research shows that the number of individual shareholdings has fallen. What started off as an impressive range of 98 to 100% from the years 2005 to 2010, has fallen to 90% in 2011 and steadily decreased to 76% by 2023. At the same time, the institutional shareholdings are growing year by year.

Hence, the launch of the proposed ICAP Fan Club.

We aim to provide a space for like-minded individual shareholders to convene, no matter your shareholdings are or if you are 18 or 90 years old. We aspire to create, promote, and sustain positive values through sound investing, nurturing a harmonious prosperous society, and working towards a sustainable environment. The ICAP Fan Club is greater than just money; it is a long-term effort to leave behind a near-ideal world for our future generations.

Preliminary details of the ICAP Fan Club are:
It will be registered as a Society under Jabatan Pendaftaran Pertubuhan Malaysia (JPPM), takes around 1-3 months to set up;
It will be governed by The Societies Act 1966;

The proposed ICAP Fan Club will be a National Level Society. Hence, 7 compulsory committee members, each from different state, are required:
President
Vice President
Secretary
Assistant Secretary
Treasurer
2 committee members

Proposed types of membership:
Ordinary membership (must own ICAP shares): carry rights to vote and hold position.
Associate, Honorary, Life-long memberships:
No right to vote and hold position.

The proposed ICAP Fan Club will provide a sense of belonging and emotional bond that we naturally crave as humans, and which have been lacking due to the pandemic these past few years. Through this fan club, ideas will be exchanged, knowledge and experience will be shared, and friendship will be formed.

Suggested activities include research visits to listed companies with Tan Teng Boo himself, casual fireside chats on various topics, and other recreational activities and trips and the list goes on.

Once you are a member, you will be entitled to an exclusive members-only online space where forums and discussions can be held. You will also receive priority tickets for all Capital Dynamics events, and purchase ICAP and Capital Dynamics products, except the funds, at discounted rates.

So, what are you waiting for? Join us in making history by registering your interest. Or you can join in our nationwide ICAP roadshows for more details. When formed, the ICAP Fan Club will be the first of its kind in Malaysia.


i Capital Newsletter Volume 34 Issue 43 (www.icapital.biz)

It is extremely important to revisit the investment objective and investment policy of icapital.biz Bhd, which should be the ONLY criteria one uses to evaluate a fund manager's performance.

i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

In the 2022 annual report of icapital.biz Bhd (ICAP), a new name appeared in the list of top 30 shareholders of ICAP. HSBC Nominees (Asing) Sdn Bhd Exempt An For Brown Brothers Harriman & Co (CGWI Ltd) disclosed owning 990,000 ICAP shares.

HSBC Nominees (Asing) Sdn Bhd is not the same as Maybank Nominees (Tempatan) Sdn Bhd for example. The vital difference is that one is Asing (foreigner), the other is Tempatan (Malaysian). Will this new person/entity holding 990,000 ICAP shares as at 24 Aug 2022 buy more ICAP shares?

Finally, there remains tremendous value yet to be unlocked in the current low market valuation of ICAP. For instance, when the discount of ICAP narrows or reverts to a premium like it did in the 2005-2008 period, an investor gets to enjoy extra returns. If ICAP is wound up, and assuming a cost price of RM2.06, the investor makes a handsome profit of RM1.34 or 65% with little risk.

As explained above, the last few years have seen the world turned upside down, inside out. Many people have lost their hard earned savings, which were avoidable in many instances. The coming years, also explained above, promise to be extremely challenging as well and certainly no less difficult than the last few.

Investors should look for low-risk, high-return opportunities like ICAP. While some have complained about the discount to NAV of any well-managed stock, these pretty dumb people have missed the whole essence of investing.

Frankly, Capital Dynamics has been steadily buying more ICAP shares, as it presents a classic low-risk, high-return investment. Tan Teng Boo loves low-risk, high-return type of investment; a key reason why he has survived decades of boom and bust.

i Capital Newsletter Volume 34 Issue 40 (www.icapital.biz)


A TRULY Low Risk-High Return Investment

Did you know that if you bought ICAP shares 2 years ago, its share price has jumped 18.5% while the KLSE plunged 14.4%?

Join Capital Dynamics in this nationwide roadshow of icapital.biz Berhad (ICAP) from 1st to 16th July 2023 in eight locations across Malaysia.

Listen to Tan Teng Boo explains why ICAP is an excellent buy now, even for the shorter-term.

Whether you are a shareowner or a potential one, come interact with him as he shares his views on markets, how we have successfully managed ICAP through uncertain times and its longer-term prospects

The last few years have been very tough for a lot of investors. Making losses, whether through scams or genuine investments on the KLSE, have been the easy and certain path. Adding on to the already long list of woes and worries are the rising cost of living and weakening Ringgit. What should an investor do? How can an investor sail through such turbulent waters safely?

The CEO of Capital Dynamics cannot understand why people can be so easily scammed, not just in an online or mobile phone environment but also on the stock market. He finds it very perplexing and exhausting that he can patiently explained for hours to investors about value investing or why they should invest in a low-risk, high return stock like icapital.biz Berhad and failed to convince them when these people can be so easily convinced to transfer their hard earned savings or to buy Top Glove or MPI or speculative stocks and then be stuck with losses.

In order to avoid avoidable losses, investors need to be smarter and think more and deeply. For example, a typical silly comment found in some of the forums about icapital.biz Bhd (ICAP) is that it has a problem and should be avoided. What is this so-called "problem"? ICAP trades at a discount to its Net Asset Value (NAV).
Any genuine value investor would know that whenever the share price of a well-managed stock trades at a discount to its intrinsic value, it is always an excellent investing opportunity; that is, a low-risk, high-return investment. And what is even more unbelievable is that some of the commentators in these forums claim to be value investors. Frankly, they actually sound like the online scammers.

The second point to understand is that when one buys a stock at a premium, one often ends up with losses, sometime permanent losses. Buying Top Glove at RM8.00 or MPI at RM50 is just plain foolhardy. Top Glove recently plunged to below RM0.60 and MPI dived to below RM24.00. How to make back such losses?
On the other hand, what happens when one invests in ICAP shares at a discount? Over the last one year (up to 7 Jun 2023), the KLSE lost 9.4%. ICAP's share price was flat and NAV went up 5.6%.

Over the last 2 years, the person who bought a discounted ICAP share made a handsome profit of 18.5% (in terms of share price) and 16.5% (in NAV terms). The KLSE plunged 14.4%. Even over the last 3 years, the person who bought a discounted ICAP share made a decent profit of 8.8% (in terms of share price) and 25.5% (in NAV terms). The KLSE plunged 17.4%.

These figures are important. For example, a person who bought a discounted ICAP share 2 years ago will be 38.4% richer than the person who invested in the MSCI Malaysia index. What matters when investing is whether one makes a profit or loss, not whether there is a premium or a discount.

What is the point of having a premium when an investor buys and loses money?


i Capital Newsletter Volume 34 Issue 40 (www.icapital.biz)

Should discount be a concern or a blessing?

First, discounts and premiums are unique features of closed-end funds that should be taken advantage of instead of being feared. For example, an investor that sells icapital. biz Berhad shares on 8 Jan 2008 when it was trading at premium of 25.6% and buys it back in Oct 2008 (when it was trading at a discount), will be able to earn additional gains that cannot be found in ETFs or open-end unit trust funds.

Secondly, discounts and premiums of CEFs are not permanent and are mean-reverting instead. Even the composition of the CEF shareholder list can be important, as exemplified by icapital.biz Berhad's experience.

Thirdly, very often, investors do not realise that they can buy the shares of icapital.biz Berhad at a discount to its NAV. On the other hand, investors of unit trust funds do not realise that they have to buy at a premium to NAV (due to entry fees) and have to sell at a discount to NAV (due to exit fees). In addition, investors of unit trust funds have to incur bid/offer spread, with the result that they do not buy or sell at NAVs. Investors in icapital.biz Berhad do not have to experience such unfair permanent premiums, discounts or bid/offer spreads.

If the transitory discount of icapital.biz Berhad is a concern, think about this : As at 26 Jul 2018, City of London has bought more than 27.6 mln (or 19.73%) of icapital. biz's shares since May 2010. Why? It has been exploiting the discount that Malaysian investors of icapital.biz Berhad have been offering to them. Crafty.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

An investor needs to match his or her own investment objective with the investment product before investing.
As Tan Teng Boo explained, to understand icapital.biz Berhad better and see if it is suitable for your investment needs, think of two types of properties:

Property A as an empty land and Property B as a shop house.

Question: which type of property is suitable for your investment needs?

If you are looking at an investment that can provide you with regular income, obviously buying a shop house with rental would be the most suitable.

If you are looking for an investment that offers high long-term capital appreciation, buying a piece of land would be far superior. In Malaysia, just think of the property tycoons that bought empty pieces of land 40 or 50 years ago in places like Bangsar, Bandar Utama, Subang Jaya, etc. and sat on them and let the land appreciate in value.

If you are looking for an investment that offers high long-term capital appreciation, buying a piece of land would be far superior. In Malaysia, just think of the property tycoons that bought empty pieces of land 40 or 50 years ago in places like Bangsar, Bandar Utama, Subang Jaya, etc. and sat on them and let the land appreciate in value.
Investing in icapital. biz Berhad is like buying such a piece of empty land.

icapital.biz Berhad calls its investors "share owners" instead of "shareholders".

icapital.biz Berhad is certainly meant for the serious long-term investors, people who want to be able to sleep soundly at night and then wake up later to see their asset value has appreciated substantially.


i Capital Newsletter Volume 30 Issue 1 (www.icapital.biz)

Warren Buffett expressed it more humorously: "We continue to make more money when snoring than when active”. To be sure, value investors are not lazy investors; they actually work pretty damn hard.

Besides that, they are critically self-honest and humbly admit that it is impossible to time the market to perfection. Remember Ben Graham advised that "You will be much more in control, if you realize how much you are not in control”?

As Tan Teng Boo has said zillions of times before, "Instead of pretending that we can be 100% accurate, our objective is to seek long-term capital appreciation while reducing the margin of error. This is achieved with a rigorous and well-defined value investing approach."

The humble philosophy underlying value investing is that investors need to have a margin of safety in order to deal with unexpected events and one's own human errors.

This is why a value investor will buy a stock or a business only when its market price is below its intrinsic value, the difference being the margin of safety created.

To be successful, one needs to recognise that mistakes will be made. Investors are after all only human. The strategy then should be to reduce the mistakes or at least reduce the impact these mistakes would have on one's investments.


i Capital Newsletter Volume 31 Issue 36 (www.icapital.biz)

Another way a value investor expresses their humility is by holding cash - lots of it in fact - when there is nothing attractive to invest in. If there are not enough securities to fill out a portfolio that meet value investing criteria, the answer is simply to hold cash until such securities can be found.

To be sure, holding cash is not the ultimate aim of a value investor; it is a by-product of the value investing process where humility is a huge part of its risk management. Take the still unfolding Covid-19 pandemic for example.

Due to the infectious nature of the novel coronavirus and the suddenness of the pandemic, governments worldwide were forced to implement lockdowns or impose strict restrictions on physical social interactions.
The impact on many businesses and firms brought business operations to an immediate standstill, and hence cash instantaneously stopped flowing into these businesses and firms. Enterprises, big or small, that do not have strong balance sheets, which always mean cash or near cash, are screaming for help. It is cash or perish.

For businesses and firms, cash is a necessity for dealing with the unexpected. Cash is the heart and blood of businesses. Cash and liquidity are much more important to a firm's survival than earnings or profitability.
Cash serves a similar purpose from an investor's or a portfolio manager's standpoint. Cash is the most vital raw material for an investor. If one can be absolutely sure that all the stocks one has bought are the correct stocks at the correct prices and valuations, or that there will not be any better opportunities coming your way later, then holding cash become superfluous. How can one be so cocky?

As Tan Teng Boo has previously shared, holding cash is like holding a very valuable option, except that it is one with no expiry date. The value of an option depends on its expiry date, amongst other factors.

The longer the expiry date, the more valuable the option becomes. An option has a fixed conversion price. With cash, it is the investor or the fund manager who decides what the conversion price will be. Since a value investor will buy only at an attractive price, the value of the option or cash goes up.

In summary, whether one is managing a business or managing a portfolio, it is a privilege to have a strong balance sheet now, one that is especially filled with cash.


i Capital Newsletter Volume 31 Issue 36 (www.icapital.biz)

At RM2.08, icapital.biz Berhad (ICAP) is capitalised at only RM291.2 mln. For this, what do investors get in return?

With ICAP, investors get a very attractive NAV discount. A rise from RM2.08 to RM3.47 would yield them a handsome gain of 67% with hardly any major risk. Even if the discount stays at 20%, investors still get to enjoy a decent 33.5% profit.

As we have shown above, a NAV discount eventually disappears. This profit projection has not yet taken into account the likelihood of further gains in ICAP's NAV.

With ICAP, investors get a well-managed CEF, founded on integrity, and offers excellent prospects. There is in fact no reason at all to wind up ICAP - why chop down a bountiful fruit tree before it has matured ?

ASX's oldest LIC has been around since 1928. NYSE and Toronto's oldest CEFs have been around since 1929, surviving even the 1929 Great Depression.

i Capital revises its rating on capital. biz Berhad from Buy below RM3.60 to a long-term Buy.


i Capital Newsletter Volume 33 Issue 4 (www.icapital.biz)

Can icapital.biz Berhad (ICAP) enjoy a similar outcome where its NAV discount vanishes ? The case for this is strong indeed. However, before we present it, one must first ask whether ICAP's NAV discount is a natural phenomenon or an artificial one.

In fact, keen-eyed investors, including the MSWG, should query City of London as to why they buy millions of ICAP shares (even going so far as to breach the regulatory 20% single shareholding limit) and consequently widen ICAP's NAV discount.

City of London used to pressure ICAP to conduct a 10% share buyback to narrow the NAV discount, while itself buying over 20% of ICAP's share capital, thereby worsening the discount it has been so persistently complaining about.

These complaints continue despite ICAP delivering an impressive performance on a consistent basis. So, what is really going on here ? Without all this interference, ICAP's share price would have been trading at a nice premium to its NAV by now, just like it did before City of London's persistent purchases.

ICAP's NAV performance over the course of its first 5,777 days was in fact superior to Scottish Mortgage's. And yet, ICAP still managed to preserve RM209 mln in cash or RM1.49 per share, poised to put it to good use at the nearest opportunity.

Perhaps Bursa Malaysia should make ICAP a constituent of the KLCI, just like the London stock exchange did with Scottish Mortgage.

On a side note, the Malaysian authorities should actively develop and promote the close-end fund industry. It will greatly benefit the Malaysian economy and capital market and thousands of retail investors.


i Capital Newsletter Volume 33 Issue 4 (www.icapital.biz)

Will icapital.biz Berhad's (ICAP) NAV discount be there forever ? Should ICAP not be wound up in order to realise its underlying asset values ?

Well, first of all, ICAP was set up by Tan Teng Boo as a CEF meant for long-term investors. How long is long ? Let us learn a few lessons from Scottish Mortgage Investment Trust PLC, an investment trust listed on the London stock exchange.

Lessons from Scottish Mortgage

Scottish Mortgage Investment Trust PLC (Scottish Mortgage) is an investment trust that aims to maximise total returns over the long term from a high-conviction, actively-managed portfolio. This is similar to ICAP.

It invests globally, looking for strong businesses with above-average returns.

It was launched in 1909, about 112 years ago. In comparison, ICAP is but a spring chicken.

Scottish Mortgage holds total assets of US$20.424 bIn.

It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Scottish Mortgage once traded at a persistent discount to its NAV. The discount disappeared in 2013, endowing its share price with a premium to NAV; in the last year or so, Scottish Mortgage's share price has traded around parity.

The share price of Scottish Mortgage rallied from around £44 in 1994 to above £1,300 in 2021, generating a massive gain of 29.5 times. An investment of $1,000 in 1994 would have been worth $29,500 in 2021. An investment of only $34,000 would have made one a millionaire.

The take-away here is that somebody who invested in Scottish Mortgage at a 15% NAV discount in 1994 would have gained "extra" returns from the disappearance of said discount. This is one of the most compelling strengths of a well-managed CEF - buy at a discount, sell at a premium.


i Capital Newsletter Volume 33 Issue 4 (www.icapital.biz)

Let me share some of the meaningful lyrics from the song "Yesterday When I Was Young":

Yesterday when I was young
The taste of life was sweet as rain upon my tongue
I teased at life as if it were a foolish game
The way the evening breeze may tease a candle flame
The thousand dreams I dreamed, the splendid things I planned
I always built, alas, on weak and shifting sand
I lived by night and shunned the naked light of day And only now I see how the years ran away.

As for the impeccable integrity of Capital Dynamics, let me quote the 1995 tribute I made to my father.

A Tribute To A Superior Man
According to Confucius, the great Chinese Teacher; there is a superior man and there is a small man. My father was a superior man. A superior man is one who is defined by his virtues, by his moral character: 2 virtues which Confucius emphasised as part of being a superior man are human-heartedness and righteousness. A rich man, a Datuk, can be a small man, for example. My father has always taught me to be a superior man. Integrity, trustworthiness and believing in honour were among his greatest hallmarks.

As a businessman, he does not believe in making money at the expense of others. He would rather work extra hard than to deceive others. We were not only taught not to cheat in our dealings but also not to be cheated. His word was his bond.

These virtuous teachings of my father run through the philosophy of i Capital and Capital Dynamics (the same applies to my mother as well, a fierce fighter of fairness and justice).

So, with the strong performance of icapital.biz Berhad and the impeccable integrity of Capital Dynamics, i Capital retains its long-term Buy rating on icapital.biz Berhad.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

Recently, a young lady from Ipoh shared with us how she was conned out of RM50,000 in just a short time by someone impersonating Tan Teng Boo in WhatsApp. As she explained, she "made" US$591.5 in only 3 nights by believing this con artist.

The impersonator even sent her a photograph of a 12-year-old girl, saying that she was Tan Teng Boo's granddaughter. The only problem is that the son and daughter of the CEO of Capital Dynamics are still single. The unwitting victim expressed her joy at earning US$591.5 in 3 nights.

We share this very valuable experience not to embarrass this young Ipoh lady but to show that it is so easy to lose one's money.

Whether it is due to a con person or through the plunging stock prices of Top Glove or ARKK or Amazon.com or many more, subscribers need to remember that the only way to achieve sustained high return is to consistently take low risk. And one needs to have the discipline to stick to this philosophy.

In May 2022, an 86-year-old person who has 3 types of cancer told Tan Teng Boo that he regretted not having invested in his Fund.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

At RM1.99, icapital.biz Berhad (ICAP) is capitalised at RM278.6 mln. For this, what do investors get in return?

[1] Strong performance of ICAP and [2] impeccable integrity of Capital Dynamics
In the issue dated 8 Dec 2022, we showed the strong performance of ICAP from various angles. Let me recapitulate this. Since its Oct 2005 listing, ICAP has outperformed the MSCI Malaysia index

We also show ICAP outperforming many global closed-end funds, including the Taiwan Fund, which is heavily weighted in semiconductor/technology stocks

In addition, the share price performance of ICAP has handsomely beaten that of Maybank

What we would like to share this week is that the share price of ICAP from 1 Jul 2020, until 22 Dec 2022, has solidly outperformed that of Amazon.com

Given the Covid-19 pandemic and the boom in e-commerce, an investor would have thought that the stock price of e-commerce giant Amazon.com would have surely beaten that of "boring" ICAP. The truth is that ICAP has outperformed Amazon.com by a huge margin.

The same pattern can be seen when comparing the stock prices of ARK Disruptive Innovation ETF (ARKK) with that of ICAP. ARKK is the flagship fund of Cathie Woods, and it invests in disruptive innovation or technologies. ARKK invests in companies like ZOOM, Tesla, Exact Sciences, Telodoc, Invite, Roku, Coinbase, Shopify, Nvidia, and many more such companies.

The facts show that ICAP is truly a low risk, high return stock. This is what investors get. As I have always advised, value investing is great as it forces one to think about the margin of safety. When an investor does this, it leads to a low risk, high return investment.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

3. Getting the right owners starts now !!

Taking into account the experiences of Scottish Mortgage, Pershing Square, Berkshire Hathaway, icapital.biz Bhd (ICAP), and the wisdom of Warren Buffett, it is obvious what the solution to ICAP's NAV discount is - get the right share owners, starting now. How can this be done?

Increase awareness of closed-end funds, in particular, ICAP, among individual investors;
Increase like-minded individual ownership;
Sustain individual ownership;

The specifics of this campaign will be revealed to the appropriate people at the appropriate time and place.

4. A Sincere Appeal

Unlike in London, New York, or Sydney, where closed-end funds or investment trusts are common, in Malaysia, we need to educate investors on the benefits of investing in ICAP, the only listed closed-end fund in Malaysia.

An effective, systematic, and sustained strategy for ICAP with the aim of increasing the ownership of individual investors or share owners will be implemented.

To quote Warren Buffett again: "virtually all of our shareholders are individuals, not institutions." This is what ICAP should aim for. The journey to achieving fewer or even zero institutional investors for ICAP will not be easy.

To achieve this important objective and permit the share price of ICAP to trade at a rational level, I will need the support of like-minded individual shareowners and here is my sincere appeal.

Share the benefits of owning ICAP shares with others, speak up at its AGM, participate in its Investor Day, and so on; I will need all available support.

Every step helps.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

2. A Simple Message

The messages from the experiences of Scottish Mortgage, Pershing Square Holdings, Warren Buffett, and our own icapital.biz Bhd (ICAP) are simple and very clear.

City of London (CoL) and gang bought more than 22% of ICAP shares, which is more than the permissible 10% share buyback, BUT the discount widened and persisted.

When institutional ownership was a measly 2.1% from Oct 2005 to Sep 2008, ICAP consistently traded at a premium to NAV for nearly 3 years, even without any share buyback or dividend payment.

In contrast, when the so-called institutional ownership jumped from zero in 2009, to over 23% now, ICAP then consistently traded at a widening discount to NAV.

Warren Buffett is spot on when he warned “Stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued."
Let me repeat the most important point - the type and quality of shareholders matter.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

2. NAV Premium/Discount history of icapital.biz Berhad (ICAP)

From its first day of listing on 19 Oct 2005 (a 1% premium) to Sep 2008, except for a very short break in 2007, ICAP traded at a premium to its NAV for almost 3 years. Many investors are not aware of this crucial fact. In fact, ICAP's NAV premium reached a peak of nearly 26% in Jan 2008.

In Oct 2008, ICAP's share price plunged from a NAV premium to an 18.3% discount. What happened ?

In the 2005 IPO of ICAP, a Canadian institutional investor, Cundill Fund, decided to invest in 3.0 ml shares (or 2.14%) of ICAP's 140.0 mln issued shares, even though Capital Dynamics and Tan Teng Boo did not market the IPO shares to them. At that time, this was the only institutional investor of ICAP.

On 15 Sep 2008, the venerable Wall Street investment broker Lehman Brothers went bust. In Sep and Oct 2008, the S&P 500 plunged 30% in just a few weeks.
In 29 Jul 2008, the Canadian institutional investor still had 1.51 mln ICAP shares. By the next financial year, or May 2009, ICAP's sole institutional investor had sold all its shares. Judging from the volume of ICAP shares traded and the fact that the said Canadian institutional investor was suffering from redemptions and huge losses in its substantial exposure to the battered Japanese consumer financing companies like Takefuji, Aiful, Ancom, etc.), it was clear that ICAP's sole institutional investor sold all its shares in Oct 2008 or thereabouts and pushed it into a discount.

After that, the NAV discount started to narrow as it logically should. By Aug 2009, the discount was only 3.68%. Then, another apparently strange thing happened - the discount widened again. Why?

In financial year 2010, ICAP did not have anyone owning more than 5% of its issued capital or any publicly announced substantial shareholder (that is, 5% or more). However, by 2022, City of London Investment Management Company Ltd. (CoL) and gang have accumulated a massive total of 32,394,800 shares, or 23.14% of ICAP, and ICAP ends up getting stuck with a persistent and widened NAV discount.

Andrew Pegge of Laxey Partners owns 990,000 shares. In short, the more ICAP shares are in the hands of institutional investors, the worse the discount gets.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

1. d) icapital.biz Berhad (ICAP).

My 4th case study of why the type and quality of share owners or shareholders matter to the share price of a listed company involves our very own ICAP.

It should come as no surprise that the type and quality of shareholders matter to share price performance. I have been saying and doing the same thing ever since ICAP was promoted and listed in Oct 2005.

During the 2005 IPO of ICAP, Capital Dynamics intentionally took charge of its fundraising and roadshows instead of passing them to Kenanga, the investment banker at that time. This was done for two simple reasons.

First, Capital Dynamics did not charge ICAP any placement fees and related expenses of about RM2.000 mln, even though it was entitled to then, in order to boost the NAV of ICAP even before it was listed. Had Kenanga done the fundraising and roadshows, it would have charged ICAP a hefty amount.

Secondly, in conducting ICAP's IPO roadshows, I intentionally targeted only individual investors, and for the same reasons as Warren Buffett, I intentionally stayed away from institutional investors events years later have proven my fears correct). Why?
Based on my own experience, my views of institutional investors are exactly the same as Warren Buffett's: "You might think that institutions, with their large staffs of highly-paid and experienced investment professionals, would be a force for stability and reason in financial markets. They are not stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued."

As Buffett said and as I have been doing since ICAP's IPO in 2005, "Our goal is to attract long-term owners who, at the time of purchase, have no timetable or price target for sale but plan instead to stay with us indefinitely."

Take a look at the share price performance of Malayan Banking (Maybank). From 2017 to 2022, Maybank's share price has performed very disappointingly. It is the top bank in Malaysia and is consistently and highly profitable. At the same time, Maybank offers consistently attractive dividend yields.

Despite all these attractions, Maybank's share price performance has been quite poor. Why ?

As Warren Buffett wisely advised, "stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued" Not surprisingly, a very substantial portion of Maybank's shares are owned by local and foreign institutional investors.

Thanks to the well-thought-out and targeted approach by Tan Teng Boo in the 2005 IPO, on its very first day of listing on 19th Oct 2005, the share price of ICAP closed at an outstanding 1% premium to its NAV, when many people thought it would trade at a discount. The share price of ICAP then went on to handsomely trade at a persistent premium to its NAV until Sep 2008.

Unfortunately, the share ownership experience of ICAP since 2009 has turned out to be different from that of Scottish Mortgage (SMT).

In 2005, only 3 mln shares, or 2.14% of ICAP's shares, were held by a Canadian institution, which subsequently sold all its shares in Sep/Oct 2008 during Lehman's Panic and pushed it into a discount.

Regrettably, the institutional ownership of ICAP has now surged to 32.39 mln shares, or 23.13%. As a consequence, ICAP's NAV discount has widened and persisted. SMT has experienced the opposite.


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

1. c) Berkshire Hathaway (BH).

Warren Buffett's long-term investment success through BH is well-known around the world. What is often overlooked in the long-term success of Warren Buffett and Berkshire Hathaway is the role played by its shareholders. Let me quote Warren Buffett on this fundamentally important factor in determining the success of a company's share price performance.

The quotes below are from his famous annual Letters to Shareholders, with the year indicated.

1983 Letter to shareholders
The key to a rational stock price is rational shareholders, both current and prospective.
In large part, however, we feel that high quality ownership can be attracted and maintained if we consistently communicate our business and ownership philosophy - along with no other conflicting messages.
Through our policies and communications – our "advertisements" - we try to attract investors who will understand our operations, attitudes and expectations. (And, fully as important, we try to dissuade those who won't.) We want those who think of themselves as business owners and invest in companies with the intention of staying a long time. And, we want those who keep their eyes focused on business results, not market prices.
People who buy for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments.
We will try to avoid policies that attract buyers with a short-term focus on our stock price and try to follow policies that attract informed long-term investors focusing on business values

1985 Letter to shareholders
Over the long term, there has been a more consistent relationship between Berkshire's market value and business value than has existed for any other publicly-traded equity with which I am familiar. This is a tribute to you.
Because you have been rational, interested, and investment-oriented, the market price for Berkshire stock has almost always been sensible.
This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions.
You might think that institutions, with their large staffs of highly-paid and experienced investment professionals, would be a force for stability and reason in financial markets. They are not: stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued.

1988 Letter to shareholders
Our goal is to attract long-term owners who, at the time of purchase, have no timetable or price target for sale but plan instead to stay with us indefinitely. Of course, some Berkshire owners will need or want to sell from time to time, and we wish for good replacements who will pay them a fair price. Therefore, we try, through our policies, performance, and communications, to attract new shareholders who understand our operations, share our time horizons, and measure us as we measure ourselves. If we can continue to attract this sort of shareholder - and, just as important, can continue to be uninteresting to those with short-term or unrealistic expectations - Berkshire shares should consistently sell at prices reasonably related to business value.

2020 Letter to shareholders
Charlie Munger and Warren Buffett feel a special kinship with "the million-plus individual investors who simply trust us to represent their interests, whatever the future may bring. They have joined us with no intent to leave, adopting a mindset similar to that held by our original partners. Indeed, many investors from our partnership years, and/or their descendants, remain substantial owners of Berkshire".


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

1. b) Pershing Square Holdings

The strategy of attracting individual investors was copied by Pershing Square Holdings (PSH), the 2nd largest closed-end fund in the world. Despite massively buying back its own shares and making regular dividend payments, PSH encountered the same NAV discount issue as Scottish Mortgage Investment Trust.

"In 2021, we increased our marketing efforts in the UK., specifically to retail investors and the 'platforms' they use, and remain focused on reaching a broader array of potential investors". In Mar 2021, PSH engaged a professional firm to cultivate demand across UK-based wealth managers and retail/adviser platforms, targeting individual investors (Source: 2021 Annual Report of PSH).


i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

Scottish Mortgage Investment Trust (SMT)
In icapital.biz Berhad's (ICAP) 2021 annual report, I wrote about Scottish Mortgage Investment Trust, an investment trust or closed-end fund listed on the London Stock Exchange. For some investors who worry about ICAP's NAV discount and whether it has an expiry date, SMT provides a wealth of valuable lessons to learn from.

SMT was launched in 1909, 113 years ago, and is still going strong with assets of US$11.36 bln. ICAP is only 16 years young.

SMT traded at a discount to its NAV for a very long time despite regular share buyback and dividend payments (City of London has stubbornly said that ICAP should follow SMT by buying back its own shares when the facts do not support such a move). However, SMT's NAV discount disappeared in 2013.

- Was the discount narrowing of SMT due to its persistent and hefty share buyback and/or regular dividend payment? The simple answer is no. What then caused such an outcome?
- The move from discount to premium for SMT was driven by increased demand from retail investors and an evolving ownership of SMT. For decades, a significant portion of SMT was owned by institutional investors, mainly UK pension schemes. They were persistent sellers, which drove the share price of SMT to a discount to its NAV.
- From 2010, SMT actively marketed itself to retail investors, who in the UK had begun taking greater control over their own finances via savings platforms. Consequently, the SMT shares owned by institutions plunged, from 54% in 1994 to only 17% in 2021.
- At the same time, share ownership by individuals jumped. It was a massive increase in ownership by individual investors that removed the NAV discount of SMT.
- Shareholders, or shareowners, existing and future ones, bear FULL responsibility for determining the share price of a listed company. So, whether the share price trades at a rational or irrational level, the type and quality of shareholders or shareowners of a listed company matters.

i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)

Two weeks ago, I showed some startling facts about the strong performance of icapital. biz Bhd (ICAP). In last week's issue, contrary to some misconceptions, I showed why ICAP is one of the most liquid stocks listed on the KLSE and shared the reasons for ICAP's success. In this final part, I will explain a proven strategy to manage the NAV discount or premium of ICAP.

1. The type and quality of shareowners matter

Few investors realised that the most important factor in determining the share price performance of a listed company, whether listed locally or overseas, is the type and quality of shareowners or shareholders that the listed company possesses. The right type will produce superior and sustainable business and share price performance; the wrong type will produce the wrong results. At this level, one can look at them from 2 aspects : institutional versus individual, and young versus old. I will look at 4 case studies to illustrate my point.

4. Why icapital.biz Bhd (ICAP) succeeds

Linked to reason number 3 is the fact that ICAP can control and have different levels of cash; ICAP does not have to deal with the inflow and outflow of funds, unlike open-end unit trust funds.

ICAP's fund manager is really the fund manager. In the case of unit trust funds, the underlying unit holders in aggregate are the real fund manager.

5. Why ICAP succeeds

Capital Dynamics, the fund manager of ICAP, is owner-operated. The branding of i Capital and Capital Dynamics is very precious to us.

We care a lot about individual owners - over the years, a special kinship has developed. In fact, it is the primary reason ICAP was set up in the first place in 2005 - to provide sound long-term investment to individual investors.

Since its conceptualisation, we have given our heart and soul to ICAP with integrity. For example, the IPO fund raising in 2005 was purposely done by Tan Teng Boo and Capital Dynamics - this saved ICAP around RM2 mln in fees in 2005. ICAP publishes a highly cost-effective annual report and IPO prospectus.

ICAP has unique Annual General Meetings, which have always been held on a Saturday. About 50% of the Investor Day expenses are borne by Capital Dynamics, which also provides the staff in conducting such laborious events.

Integrity - the most important of the 3 'i's for both i Capital and Capital Dynamics. Integrity is not the same as honesty. A crook can honestly tell you he or she is a crook. Integrity is doing the right thing, even when no one knows about it.


i Capital Newsletter Volume 34 Issue 17

3. Why icapital.biz Bhd (ICAP) succeeds

As a closed-end fund, the fund manager of ICAP, unlike the ubiquitous open-end unit trust funds, does not have to worry about redemptions (outflows of funds) _or inflows of new funds. Why is this feature such an advantage?

The fund manager of an open-end unit trust fund cannot predict and control the timing and size of such fund inflows and outflows, and this forces the said fund manager to act in ways contrary to sound investing.

There will be greed and heavy inflows when the stock market or a stock is bullish (this is precisely when stocks can generally be overvalued). This forces the fund manager of an open-end unit trust fund to buy stocks when caution is called for.

There will be fears, heavy redemptions, and an outflow of funds when the stock market or a stock is bearish (when stocks can generally be undervalued). This forces the fund manager of an open-end unit trust fund to sell stocks when the risks are low and when future returns are high. This is the time when investors and their fund manager should be brave.


i Capital Newsletter Volume 34 Issue 17

2. Why icapital.biz Bhd (ICAP) succeeds

There are many good reasons why ICAP has succeeded and why it will continue to do so.
ICAP does not engage in market timing, which is timing when bear and bull markets start and end, or predicting when a recession and recovery start and end. Why ?

It is generally difficult to be able to time the stock market and/or economic cycles accurately. Consequently, market timing cannot produce sustained superior investment results.

As explained at the 2022 Investor Day of icapital.biz Bhd, successfully buying low and selling high in terms of stock price over a prolonged period is extremely difficult, if not impossible.

ICAP deploys Tan Teng Boo's Bamboo value investing style. Why ?

It has been proven over a long period of time, it makes the most business sense, and more importantly, it produces a high return with low risk, which is the opposite of high risk and no return.

Unfortunately, many investors take high risks, thinking they will lead to high returns. Also, as explained at the 2022 Investor Day of icapital.biz Bhd, the bamboo value investing philosophy is a key pillar of Tan Teng Boo's investment framework. It allows an investor to be brave in a bear market and to be frightened in a bull market.

Buying low and selling high in terms of share price cannot produce sustainable superior performance.

Buying low and selling high in terms of business valuation, which is the essence of our bamboo value investing philosophy, produces sustained superior performance.

Let me use the example of Top Glove again. In last week's i Capital, we showed how bullish the so-called analysts were as the share price of Top Glove was skyrocketing. This week, we show what these analysts, who were essentially market-timers, were saying when the share price of Top Glove was plunging.

By Jun 2022, when the stock price of Top Glove had plunged nearly 90%, there were massive 301 'Sell' recommendations, and only 21 'Buy' ratings. By Nov 2022, most of the analysts had disappeared, leaving their poor clients stuck in Top Glove as 'long-term' investors.

If only these thousands of suffering investors had bought the so-called illiquid CAP shares instead. Well, as I have always advised, value investing is great as it forces one to think about the margin of safety. When an investor does this, it leads to a low-risk, high-return investment.

i Capital Newsletter Volume 34 Issue 17

In last week’s issue of i Capital, I showed some startling facts about the strong performance of icapital.biz Bhd (ICAP). In this week’s issue, I will show why ICAP is one of the most liquid stocks listed on the KLSE and the reasons for ICAP’s success.

1. How liquid are ICAP shares?

ICAP has 140 million shares outstanding. Unlike other listed companies, as a closed-end fund (CEF) or a collective investment scheme, ICAP is not permitted to have any controlling shareholder. Under the Securities Commission's CEF Guidelines, no single shareholder is allowed to own more than 20% of ICAP's shares.

In comparison, despite the fact that Hap Seng Consolidated Holdings Bhd has a massive 2.489 bln shares outstanding, for example, a single controlling shareholder, Gek Poh Holdings Sdn Bhd, directly owns 54.63% and indirectly owns another 8.01% via Hap Seng Insurance Services Sdn Bhd, for a massive combined total of 62.64% as at 31 Mar 2022.

In fact, the top 5 largest shareholders of Hap Seng Consolidated own more than a massive 86% of the company, as at 31 Mar 2022. In contrast, the top 30 shareowners of ICAP only own 42.5% of its issued capital as at 24 Aug 2022. Only 3.44% of its shareholders own 100,000 shares or less of Hap Seng Consolidated, whereas 21.3% of ICAP shares are held by shareowners who each own less than 100,000 shares.

Is Hap Seng Consolidated or ICAP a more liquid stock?

In financial year 2011, Gek Poh Holdings Sdn Bhd directly owns 53.48% and indirectly owns another 8.47% via Hap Seng Insurance Services Sdn Bhd for a combined total of 61.95% as at 30 Mar 2012.

In short, the controlling shareholder of Hap Seng Consolidated hardly increased its shareholdings from 2012 to 2022, but its share price shot up.

In contrast, in financial year 2011, ICAP did not have anyone owning more than 5% of its issued capital or any publicly announced substantial shareholder (that is, 5% or more).
However, by 2022, City of London Investment Management Company Ltd. (CoL) and gang have accumulated a massive total of 32,394,800 shares, or 23.14% of ICAP, and yet the share price of ICAP has hardly moved. Andrew Pegge of Laxey Partners owns 990,000 shares.

To buy 23% plus of any listed company without moving its share price shows how liquid ICAP shares really are and how easy it is for ordinary investors to buy lots of ICAP shares. See it this way - try to buy 23% of Hap Seng Consolidated and see how high its share price would skyrocket.

As I have advised repeatedly, "All truths are easy to understand once you discover them, but you have to discover them first." That buying ICAP shares is difficult is only a myth - I really wonder who created this falsehood and why.

Maybe so that there are no competing buyers?


i Capital Newsletter Volume 34 Issue 17

Some investors would say that because icapital.biz Berhad (ICAP) sells at a NAV discount, they cannot get its full value when they want to retire and sell their shares. Is this focus correct ?

Imagine that this naive investor bought MPI instead of ICAP on 19 Oct 2005, thinking that since MPI is a fast growing semiconductor stock and not selling at a NAV discount, it is a better investment than ICAP.

Well, if this naive investor had wanted to retire and sell his MPI shares years later, he would have to sell them at a huge loss. By 2011, this naïve investor would have to sell his MPI shares at a massive loss of 75% even though he did not buy them at a discount.

In fact, this naive investor would have to wait for many years for the share price of MPI to just get back to RM1.00 while he would have doubled his ICAP investment by 2010 or 2011.

i Capital Newsletter Volume 34 Issue 16

For the record, icapital.biz Berhad’s (ICAP) superior performance is not just against Top Glove or other glove stocks. When it is compared with other closed-end funds, ICAP's share price performance stands out as well.

The comparison of ICAP with the Taiwan Fund is particularly insightful. The Taiwan Fund is extremely overweight in fast growing IT/technology /semiconductor stocks, with 66.3% of its NAV invested in this one sector alone.

Its investment in TSMC alone makes up a hefty 22.5% of its NAV. And yet "boring" ICAP has outperformed the Taiwan Fund, either in USS or RM terms. ICAP has also far outperformed the funds invested in India or South Korea.

ICAP's sustained performance, whether in terms of share price or NAV, is not a fluke shot. Take a look at the share price of Malayan Banking. On 19 Oct 2005, Maybank closed at RM8.26. By Nov 2022 or 17 years later, Maybank's share price has hardly moved.

Comparing the share price performance of Maybank with that of ICAP, one can see a huge difference in their performances. The share price of ICAP, even though it sold at a discount to NAV since 2010, has far outperformed the share price of Maybank. Few investors know this startling fact and instead focused on the wrong parameter.


i Capital Newsletter Volume 34 Issue 16

An investor who invested RM50,000 in Top Glove on 30 Jan 2020 would see his or her investment shrink to only RM22,500 by 31 Oct 2022. The icapital.biz Bhd (ICAP) investor would still have RM47,150, or enough to buy more than 54,000 Top Glove shares now.

An investor who invested RM50,000 in Top Glove shares on 30 Apr 2020 would see his or her investment shrink to only RM18,300 by 31 Oct 2022. In contrast, the ICAP investor would have seen his investment grown to RM53,750 in the same period, or enough to buy nearly 62,000 Top Glove shares now.

So if you are back in Jan 2020 or Apr 2020, would you buy the sexy and fast-growing Top Glove at a premium or the "boring" ICAP at a discount? Be honest; otherwise, you will not be able to discover the truth.

What is the most important investing lesson to be learned from this simple experience? When investing, the most important objective is to be able to sustain one's long-term investment performance.

Making money for a short while is very easy, especially when the trend is up. Sustaining one's investment performance through good and bad times is not easy and not something that most investors can achieve.


i Capital Newsletter Volume 34 Issue 16

In the last 3 years, investors have seen a lot of booms and busts.

Many of them are now stuck with the once-upon-a-time hot favourite glove stocks and have unhappily been forced to be truly long-term investors as these stocks have plummeted.

Many investors are also already stuck with the parabolic semiconductor/technology stocks, even though most of them have still got a long way to go before finally bottoming out.

Then, there are those who have seen their hard-earned savings or wealth disappear into thin air in the gigantic cryptocurrency collapse. Also, not forgetting the long list of naïve victims who were so easily scammed.

Sadly, what these investors do not realise or have overlooked is that there is a solid stock on the KLSE that investors could have bought and easily sailed through the last 3 difficult years without having to suffer all this pain, and be able to sleep soundly every night and still make a decent return.

I am always advising investors to buy the shares of icapital.biz Bhd (ICAP). Whenever I advise investors to invest in ICAP, some are easily convinced and would quite quickly go ahead and invest, but for others, I would get a few typical unenthusiastic responses.

They would say that ICAP is illiquid and that it is hard to buy its shares. Or they would complain that the stock is boring and its share price hardly moves. Then, there is the parrot-like narrative that ICAP's share price sells at a discount to its NAV.

Starting with this week's issue of i Capital, I will share with our subscribers some unnoticed reasons why ICAP has succeeded far more than what investors have realized or expected.

i Capital Newsletter Volume 34 Issue 16

To briefly recapitulate, the period from May 2014 to August 2022 was filled with the following major events: crude oil price plunging in 2015, a dangerous escalation in United States’ anti-China campaign since president Trump, the Covid-19 pandemic and a sharp recession breaking out, soaring inflation especially in the developed countries, aggressive monetary tightening especially by the US Federal Reserve, a strong US$, the Ukrainian Crisis, the plunging S&P 500 and NASDAQ Composite and Malaysia’s protracted political instability.

While the MSCI Malaysia index plunged 30.28%, your Fund’s NAV jumped 9.61%. Disappointingly, despite this strong performance in a most challenging period, your Fund’s market price fell by 15.19% (the returns of your Fund’s NAV and market price assumed the dividends paid in September 2013 and December 2021 were reinvested).

As some share owners have suggested, such an irrational behaviour needs to be probed further.

The performance of your Fund’s market price ultimately depends on the quality and behavior of its existing and potential investors, especially for a listed collective investment scheme like icapital.biz Berhad. Your Fund has nearly 3,300 share owners with a large majority of them owning less than 100,000 shares.

Given such a widely distributed ownership structure and the fact that your Fund does not have a controlling shareholder, a substantial shareholder of your Fund has a disproportionately large and unhealthy impact on your Fund’s market price.

A negative impact would see a large majority of shareowners suffering persistent price and NAV distortions.


i Capital.biz Berhad 2022 Annual Report

We compare the NAV and share price performance of icapital.biz Berhad in its 2022 financial year; that is, from 1 June 2021 to 31 May 2022 with that of the performance of Scottish Mortgage (SMT) over the same period.

On both counts, the performance of icapital.biz Berhad was way ahead of SMT. There are good reasons that the NAV discount of your Fund will eventually reverse.

The NAV and share price performance of your Fund is substantially better than that of SMT, itself a well-managed investment trust.

And yet, icapital.biz Berhad still has around RM155 million in cash or RM1.11 per share as at 15 September 2022, down from RM1.49 as at 31 May 2021, waiting to be put it to good use.

If the NAV discount of SMT can swing to parity or a premium, with a sound long-term investor education strategy, an appropriate ownership structure and continued superior investment performance, the same can eventually happen to icapital.biz Berhad.

With icapital.biz Berhad, share owners get a well-managed fund, founded on integrity, and offers excellent long-term prospects.

With an attractive compound rate of return, the best gains for icapital.biz Berhad are still ahead of us. It does not make sense to chop down a bountiful fruit tree before it has matured.

i Capital.biz Berhad 2022 Annual Report

Scottish Mortgage (SMT) is more than 113 years old and still growing. Your Fund’s age is a spring chicken in comparison. Stan Truhlsen, an Omaha ophthalmologist turned 100 on 13 November 2020.

In 1959, Stan, along with 10 other young Omaha doctors, formed a partnership with Warren Buffett, called Emdee, Ltd. When this partnership distributed its Berkshire Hathaway shares in 1969, all of the doctors kept the stock they received.

Two of Stan’s comrades from Emdee are now in their high-90s and continue to hold their Berkshire shares. Value investing succeeds because it goes hand in hand with a focus on the long-term.

Value investing demands patience and the ability to be a long-term investor. Longterm is defined not just in terms of years but in decades.

Can icapital.biz Berhad enjoy an outcome similar to SMT or Berkshire Hathaway where its share price trades at a rational level ?

The case for this is strong indeed and it used to be like that when individual shareowners own nearly 98% of your Fund.

i Capital.biz Berhad 2022 Annual Report

As we were working hard to educate the existing and potential individual investors about the benefits of owning icapital.biz Berhad and its time-proven value investing philosophy, your Fund’s institutional investors were undermining our well-thought out efforts by sending out wrong or “conflicting messages” about your Fund.

An example was the 2012 messy AGM, which prevented us from conducting our Investor Day for that year. Another instance was the public posting in August 2015 of numerous false allegations about icapital.biz Berhad and its fund manager by your Fund’s institutional investor.

Coincidence or otherwise, this led to the publication of a defamatory article by a senior editor of a local financial publication just a few days before the 2015 AGM of icapital.biz Berhad.

The consequences of these conflicting messages were to seriously damage the reputation of your Fund and grievously undermined the tireless efforts of the Board and Fund Manager to increase the individual ownership and deal with the discount problem.

Let me quote Buffett again : “The market price for Berkshire stock has almost always been sensible. This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions.”

The annual general meetings of icapital.biz Berhad used to be a very joyous and productive engagement for all. My hope is that the 2022 AGM and those after that will be like them again.

The journey to achieving fewer or even zero institutional investors for your Fund will not be easy. We have to also undo the damages inflicted on your Fund by the institutional investors.

To achieve this important objective and permit the share price of icapital.biz Berhad to trade at a rational level, I will need the support of like-minded individual share owners and here is my sincere appeal.

Whether it is to share with other individuals about the benefits of owning icapital.biz Berhad or speaking up in its AGM or participating in its Investor Day, I will need all your support.

Every step helps.


i Capital.biz Berhad 2022 Annual Report

This brings me to our Investor Day. Unlike the London or New York stock market, where closed-end funds or investment trusts are common, in Malaysia, we need to educate investors on the many benefits of investing in icapital.biz Berhad, the only listed closed-end fund in Malaysia.

The Board and Fund Manager have been considering implementing an effective, systematic and sustained investor relations strategy for your Fund with the eventual aim of increasing the ownership of individual investors or share owners as we prefer to call them in icapital.biz Berhad.

Conducting the highly popular Investor Day was one of the activities held to achieve this objective of increased individual ownership.

However, your Fund’s institutional investor in September 2015 rejected this solution outright, arrogantly saying that it is not a discount control mechanism.

The experiences of Scottish Mortgage (SMT), Pershing Square Holdings (PSH), Berkshire Hathaway and your Fund have proven this rejection very foolhardy or perhaps the institutional investor wanted fewer individual investors to compete with them in buying the shares of icapital.biz Berhad.

With hindsight, our recommended strategy is the right step to take in future. For a start, the Investor Day of icapital.biz Berhad will be back, starting with the 2022 event.

Buffett correctly counselled : We feel that high quality ownership can be attracted and maintained if we consistently communicate our business and ownership philosophy - along with no other conflicting messages.


i Capital.biz Berhad 2022 Annual Report

That the type and quality of shareholders matter to the share price performance of Scottish Mortgage (SMT) or Pershing Square Holdings (PSH) or Berkshire Hathaway or icapital.biz Berhad frankly comes as no surprise to me.

icapital.biz Berhad’s own experience has the same message to deliver. I have been saying the same thing and doing the same thing ever since your Fund was promoted and listed in 2005.

During the 2005 initial public offering (IPO) of icapital.biz Berhad, Capital Dynamics intentionally took charge of its fund raising. This was done for two simple reasons.

First, Capital Dynamics did not charge icapital.biz Berhad any placement fees and related expenses of about RM2.000 million even though it was entitled to then in order to boost the NAV of your Fund even before it was listed.

Secondly, in conducting your Fund’s IPO roadshows, I intentionally targeted only individual investors and for the same reasons as Warren Buffett, I intentionally stayed away from promoting icapital.biz Berhad to institutional investors (events years later have proven my fears correct).

As Buffett said and as what I have been doing since your Fund’s IPO in 2005, “Our goal is to attract longterm owners who, at the time of purchase, have no timetable or price target for sale but plan instead to stay with us
indefinitely.”

The result of your Fund’s IPO was as I had expected – on its very first day of listing on 19th October 2005, the share price of icapital.biz Berhad closed at an outstanding 1% premium to its NAV.

The share price of icapital.biz Berhad then went on to trade at a persistent premium to its NAV until October 2008. Unfortunately, the ownership experience of icapital.biz Berhad has turned out to be different from that SMT.

While the latter saw a substantial decline in institutional ownership over the years and its discount disappearing, icapital.biz Berhad was cursed with a substantial increase in institutional ownership and a persistent discount problem.

In 2006 and 2007, only 3.000 million shares or 2.14% of your Fund’s shares were held by an institution, which sold all its shares in late 2008.

Regretably the institutional ownership of icapital.biz Berhad has now surged to 32.39 million shares or 23.13% and in the process, its NAV discount has widened and persisted.

Taking into account the experience of SMT, PSH and Berkshire Hathaway and the wisdom of Warren Buffett, it is obvious what the solution to your Fund’s nagging discount problem is – increase the ownership of individual investors.

How can this be done ?


i Capital.biz Berhad 2022 Annual Report

The long-term investment success of Warren Buffett is world famous.

What is often neglected in the long-term success of Berkshire Hathaway is the role played by its shareholders or more specifically, by the type and quality of its shareholders.

Let me quote Warren Buffett on this fundamentally important factor in determining the success of a company’s share price performance.

“Over the long term, there has been a more consistent relationship between Berkshire’s market value and business value than has existed for any other publicly-traded equity with which I am familiar.

This is a tribute to you. Because you have been rational, interested, and investment-oriented, the market price for Berkshire stock has almost always been sensible.

This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions. No other public company our size can claim the same.

You might think that institutions, with their large staffs of highly-paid and experienced investment professionals, would be a force for stability and reason in financial markets.

They are not: stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued.”

The messages from Warren Buffett are very simple and very clear.

He is not keen at all to attract institutional investors for very good reasons and that he and Charlie Munger have a special kinship for the million-plus individual investors of Berkshire Hathaway.

As he explained in 1985 and many times after that, “stocks heavily owned and constantly monitored by institutions have often been among the most inappropriately valued.”

As a long-term value investor myself, I cannot agree with Buffett more.


i Capital.biz Berhad 2022 Annual Report