Capital Dynamics Sdn Bhd, Capital Dynamics Asset Management Sdn Bhd and Tan Teng Boo (Plaintiffs) and ICAP were organising the annual Investor Day for many years with the aim of educating Malaysian retail investors about value investing and a closed- end fund like ICAP. City of London Investment Management Company Ltd was against this educational campaign.

Scottish Mortgage Investment Trust (Scottish Mortgage) is a publicly traded investment trust aka closed-end fund. It invests globally looking for strong businesses with above-average returns and Scottish Mortgage is listed on the London Stock Exchange.

For many years, Scottish Mortgage was trading at a discount despite endless share buyback (an inappropriate tactic but loved by City of London Investment Management Company Ltd) and dividend payout.

In the end, Scottish Mortgage got rid of its discount by marketing to the British retail investors and in the process, reduced the portions held by institutional investors.

We now know why City of London Investment Management Company Ltd objected to our Investor Day. Perhaps we also know why the 2015 defamatory article was written.”

i Capital Newsletter Volume 33 Issue 37 (4 of 4)

The contents in the 2015 article in the said defamation case contained a lot of materials about ICAP originally written by City of London Investment Management Company Ltd, and published in RNS, a web service of the London Stock Exchange.

Investors who bought ICAP shares at a discount in the last few years have made solid returns, much better than the MSCI Malaysia benchmark index.

We are trying to put together Part V, Market misconduct and other prohibited conduct of the Capital Markets and Services Act 2007, the said 2015 article and the behaviour of City of London
Investment Management Company Ltd in regularly deceiving Malaysian retail investors, most of whom are not familiar with a closed-end fund like ICAP. On the surface, nothing seems to be wrong but have we missed something?

i Capital Newsletter Volume 33 Issue 37 (3 of 4)

An article can be useful, harmful or inconsequential. A defamatory article is unjust, unfair and harmful. In ICAP's case, it is harmful to the Plaintiffs and to the existing thousands of ICAP's shareowners as well as many more potential owners. Reputation attack is one of the toolkits used by activist investors especially in the developed markets.

Activist investors typically mount aggressive or hidden and sophisticated public relations campaigns in order to undermine shareholder confidence in a target company's performance and leadership, whether through social media, online forums or by using the more traditional media and public relation channels.

When seen in the context of Part V of the Capital Markets and Services Act 2007, the said article about ICAP and the Plaintiffs can be more than just causing defamatory harm. The Plaintiffs decided to take the court action to protect the interests of the thousands of shareowners of ICAP and make the stock market a less dangerous place for investors.

City of London Investment Management Company Ltd, a substantial shareholder of ICAP loves to complain publicly and loudly about the discount of ICAP. On the surface, nothing wrong about making such a complaint.

Except that City of London Investment Management Company Ltd was at the same time quietly accumulating millions of ICAP shares while it was giving the false and misleading impression to the KLSE that investors should not invest in ICAP because of the discount.

This London "colonial" investor actually bought so many shares that it has now exceeded the shareholding limit set by the regulators. City of London Investment Management Company Ltd bought millions of ICAP shares because of its discount, an attractive feature of a closed-end fund that it was exploiting when it was actually making all kinds of negative noises about the discount. Why? To allow it to keep buying at a discount?


i Capital Newsletter Volume 33 Issue 37 (2 of 4)

“On 9 Sep 2016, Capital Dynamics Sdn Bhd, Capital Dynamics Asset Management Sdn Bhd and Tan Teng Boo (Plaintiffs) instituted legal proceedings against a Cindy Yeap, a senior editor from The Edge, for authoring and publishing an article titled 'icapital.biz largest shareholder says fund fees high, to vote down director reappointments' on 14 Sep 2015, which contained multiple misleading, false and deceptive statements about the Plaintiffs.

The High Court ruled on 7 Dec 2018 that the said article is defamatory of the Plaintiffs (WA-23NCVC-46-09/2016 (CDAM & Ors v Cindy Yeap). Cindy Yeap appealed against the decision on 28 Dec 2018.

Capital Dynamics is pleased to announce that the Honourable Court of Appeal of Malaysia (Court of Appeal) has concluded this matter in its favour (Court of Appeal Civil Appeal W-01(NCVC)(W)-10-01/201)

On 11 May 2022, the Court of Appeal unanimously agreed with the High Court decision and held that the said 2015 article is defamatory of the Plaintiffs.

The 3 Court of Appeal judges echoed the decision of the High Court in holding that all elements of defamation had been successfully proven by the Plaintiffs, and rejecting Cindy Yeap's defences of justification, qualified privilege and reportage and/or Reynolds defence.

Further, they noted that the timing of the said article was very close to the Annual General Meeting of ICAP on 19 Sep 2015 and hence could amount to incitement of the shareholders to remove the Plaintiffs from their respective positions.

They concluded by saying that Cindy Yeap was irresponsible in her reporting which had the effect of lowering the Plaintiffs' reputation with the public.

Why is the defamation suit by Capital Dynamics Sdn Bhd, Capital Dynamics Asset Management Sdn Bhd and Tan Teng Boo and the decision of the High Court and Court of Appeal important ?

i Capital Newsletter Volume 33 Issue 37 (1 of 4)

“At RM2.05, ICAP is capitalized at RM287 mln. What do investors get in return?

Investors get to benefit from the hard work of a highly experienced fund manager, one who has experienced all the bear markets on the KLSE, right from the one in 1973.

In addition, investors get assets worth more than RM476 mln, comprising RM165 mln in cash holdings and a portfolio worth more than RM311 mln as at 28 Feb 2022. This portfolio is poised to appreciate significantly. Why? The answer is simple.

Private consumption growth, the main driver of Malaysia’s economic recovery, is set to normalize after 2 years of disruption. Tourist arrivals to Malaysia are set to follow this same trajectory. As such, many companies ICAP invested in should benefit handsomely.

ICAP’s portfolio will get another big boost skyward when CDAM, its fund manager, invests its RM165 mln cash holdings in undervalued stocks. When ICAP’s assets reach the RM1.0 bln or RM7.14 per share mark, will you be a beneficiary? Since May 2021, CDAM and related parties have bought 260,200 additional shares in ICAP.

As ICAP is a low-risk, high-return fund, the reasons for its appeal are obvious. Without any hesitation, i Capital is retaining its rating on i Capital.biz Berhad as a Buy for the long term, although, as the last 1 to 2 years have shown, its performance in the shorter term could be very attractive too.”


i Capital Newsletter Volume 33 Issue 36

“In 2014, I asked Irving Kahn to share the most important lessons of his extraordinarily long career. By then, he was 108 years old and had worked on Wall Street since 1928. Nobody in the investment business had survived more turmoil, so I regarded him as the living embodiment of financial (and biological) resilience!

Kahn became Graham's teaching assistant at Columbia in the 1920s, and they remained friends for decades. I wanted to know what he'd learned from Graham that had helped him to prosper during his eighty-six years in the financial markets.

Kahn's answer: "Investing is about preserving more than anything. That must be your first thought, not looking for large gains. If you achieve only reasonable returns and suffer minimal losses, you will become a wealthy man and will surpass any gambler friends you may have.

This is also a good way to cure your sleeping problems.”


Richer, Wiser, Happier – How the World’s Greatest Investors Win in Markets and Life by William Green

“The world has undergone another tumultuous period since my last quarterly commentary for the period ending 30th November 2021. Besides the ongoing global COVID-19 pandemic, the Ukrainian Crisis and the current pandemic outbreak and lockdowns in China, the world has been moving from one crisis to the next.

Layered on this complex situation is surging inflation in the United States, the UK, the EU and many other countries. Due to a serious misjudgement of the current inflation trend, the US Federal Reserve is now in a panicky mode and has to aggressively tighten US monetary policy which will most likely push the US economy into a recession.

Despite such turbulent times, icapital.biz Berhad has performed exceptionally well. As at 13 April 2022, your Fund’s NAV achieved solid 1-year, 2-year, and 3-year returns of 9.13%, 28.94%, and 6.46% respectively. The same goes for its share price, which generated superior returns of 21.50%, 18.50%, and 2.37% respectively.

Both your Fund’s NAV and share price have outperformed Bursa Malaysia, which returned only - 0.03%, 17.78%, and -2.02% over the said three time periods.”


icapital.biz Berhad 3Q22 report – commentary by fund manager

“The US inflationary situation is getting to a deeply worrying state amidst the Ukrainian Crisis that is continuing with no resolution in sight. For Malaysians, the imminent GE15 is creating another level of uncertainty. What should you as an investor do given the prevailing circumstances?

icapital.biz Berhad has always been managed in such a way that its shareowners can sleep soundly at night, knowing their hard earned savings are in good hands. I have also managed icapital.biz Berhad in such a way that in times of crisis or dire need, icapital.biz Berhad is there for its share owners, witness the special RM28 million Covid Relief dividend.

Not only have I achieved all of the above, icapital.biz Berhad has also delivered superior returns to its shareowners and is still boasting a substantial cash-laden war chest. A well-managed closed-end fund like icapital.biz Berhad is an excellent investment product for individual investors, especially during tumultuous times like now.

However, after so many decades, there is still only one listed closed-end fund on Bursa Malaysia. The London, Sydney and New York stock exchanges abound with closed-end funds. For Bursa Malaysia to have the same percentage as London for example, the Malaysian stock market should see more than a hundred and thirty closed- end funds listed, instead of just one.

icapital.biz Berhad is without doubt a precious investment. Do not let any investor who refuses to be a share owner destroy such a rare gem.”

icapital.biz Berhad 3Q22 report – commentary by fund manager

“I've come to think of the best investors as an idiosyncratic breed of practical philosophers. They aren't trying to solve those abstruse puzzles that mesmerize many real philosophers, such as "Does this chair exist?"

Rather, they are seekers of what the economist John Maynard Keynes called "worldly wisdom," which they deploy to attack more pressing problems, such as "How can I make smart decisions about the future if the future is unknowable?"

They look for advantages wherever they can find them: economic history, neuroscience, literature, Stoicism, Buddhism, sports, the science of habit formation, meditation, or anything else that can help.

Their unconstrained willingness to explore "what works" makes them powerful role models to study in our own pursuit of success, not only in markets but in every area of life.”

Richer, Wiser, Happier – How the World’s Greatest Investors Win in Markets and Life by William Green

“icapital.biz is suited to investors with a longer term investment horizon, typically three years and above.

icapital.biz will suit sophisticated investors who understand and are able to take advantage of the premiums and discounts of CEFs, attracted to the prospects of capital gains and want to have a portfolio which is professionally managed.

Investors of icapital.biz are likely to seek long-term capital growth on their investments at an acceptable level of risk.”


icapital.biz Berhad Prospectus

Warren Buffett was not concerned about catching the top of the wave. He was far more interested in not wiping out. While most investors are motivated by a desire to make money, Buffett focused first on not losing money.

In that way, Buffett behaved like Old Money. The majority of investors agonize over the prospect of getting out too early and missing out on the profits that would have made them rich. But the very rich don't fret so much about making money. They have money.

Their greatest fear is losing it. This explains why, when the bidding escalates whether in a stockmarket, a "hot" real estate market, or at a Sotheby's auction - Old Money tends to step aside, letting New Money carry the day.


Bull! A History of the Boom and Bust, 1982-2004 by Maggie Mahar

Zak and I did not plan for this! We have ended up with a portfolio of owner-managed businesses as a by-product of our assessment of the quality of the people involved. In other words, these managers earned their way into the portfolio.

We feel slightly foolish for not recognizing this trait in advance, but, of course, we would have a bias toward founder-managed businesses (duh!). By the standards of the industry, we do not own very many shares (ten stocks account for over eighty percent of the Partnership) and we own them for long periods.

If the existing portfolio is to be successful then our results will come from the mismatch between the orientation of the founders and the mark to market mentality of the quarterly holding period investors that set the price of the companies on the stock market.

This principal (founder) agent (trading oriented fund manager) conflict is the deep reality of the markets and probably the dominant characteristic of our careers. I also think we understand it far better than our peers.


Nomad Investment Partnership Jun 2007 Interim Letter by Nick Sleep

Munger kept agitating to buy better quality companies, ones with strong earnings potential for the long-term and ones he believed would be less troublesome to own.

“There are huge advantages for an individual to get into a position where you make a few great investments and just sit back. You’re paying less to brokers. You’re listening to less nonsense.

If it works, the governmental tax system gives you an extra one, two or three percentage points per annum with compound effects.”


Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger – by Janet Lowe

Here was the fundamental, largely unacknowledged contradiction that haunted the People’s Market: Stocks were valued for the short term, yet investors were told that they should buy and hold for the long-term.


Bull! A History of the Boom and Bust, 1982-2004 by Maggie Mahar

Buy stocks as if you knew all markets would be closed for the next ten years, I used to urge my staff. Back in the days when performance was the name of the game such a comment may have convicted me of senility.

I still think the idea has merit.

If we buy stocks because we believe in them, expecting to hold them for the rest of our lives, the chances are good that others will come to appreciate them too. Then, if some day we do decide to sell them, they will appeal to the wisest buyers-a market that is always liquid.


100 to 1 in the Stock Market by Thomas William Phelps

If you start to think about it, my way in life was not predicting little short-term differences between the Russell index and the Standard and Poor's index. I don't have any opinion about which index is better at a given time. I never even think about it.

I'm always just looking for something that's good enough to put Munger money in, or Berkshire money in, or Daily Journal money in. I figure that I want to swim as well as I can against the tides. I'm not trying to predict the tides.

If you're going to invest in stocks for the long term, or real estate, of course there are going to be periods when there's a lot of agony and other periods when there's a boom. I think you just have to learn to live through them.

Kipling said: treat those two impostors just the same. You have to deal with daylight and night. Does that bother you very much? No. Sometimes it's night and sometimes it's daylight. Sometimes there's a boom and sometimes there's a bust.

I believe in doing as well as you can and keep going as long as they let you.


Daily Journal AGM 2022 Charlie Munger

“There are, broadly, two ways to behave as an investor. First, buy something cheap in anticipation of a rise in price, sell at a profit, and repeat. Almost everybody does this to some extent.

And for some fund managers it requires, depending upon the number of shares in a portfolio and the time they are held, perhaps many hundred decisions a year. Alternatively, the second way to invest is to buy shares in a great business at a reasonable price and let the business grow.

This appears to require just one decision (to buy the shares) but, in reality, it requires daily decisions not to sell the shares as well!

Almost no one does this, in part because it requires patience - and the locker room set does not do patience - but also because inactivity is the enemy of high fees. Regardless of how it may appear, Zak and I are drifting toward inactivity, at least as judged by our industry.

As we have set out in earlier letters, in part this is because we realise through vicarious, and not so vicarious (!), experience that we do not know that much. We certainly do not have an opinion on many hundred shares, at least, not an opinion in which we would invest money.

Second, we have learned or, rather, come to appreciate, that the character of a firm - call it the ability to resist locker room temptation - is far more important than first we realised.

This is an important insight. In the long run it may be all that matters.”


Nomad Investment Partnership Dec 2009 Annual Letter by Nick Sleep

“Given the emphasis we place on mitigating risk in our investing approach, we should elaborate on what we mean by "risk." To us, it's the probability of losing money and the potential magnitude of any such loss.

Many would define risk as volatility, the expected price sensitivity of what you own compared to the market's volatility. We don't see this as a risk (unless you're poorly positioned or leveraged and can't hang on amidst downdrafts).

Instead, we see unwarranted downside fluctuations as a buying opportunity (and excessive upside spikes as a selling opportunity). Because it is a driver of opportunity creation, volatility should more properly be considered a value investor's best friend.”


Baupost Limited Partnerships 2021 Year End Letter by Seth A. Klarman

“For the individual or institution really out to make a fortune in the stock market it can be argued that every sale is a confession of error.

I write this fully realizing that to err is human. I do not mean to criticize anyone for making a few errors of the kind I have been making for forty-five years.

But a problem well-defined is half solved. The shorter the time a stock has been held before it is sold, the more palpable the error in buying it.”


100 to 1 in the Stock Market by Thomas William Phelps

“The point of equity is that it is the only permanent capital in the balance sheet. It is there to weather storms, such as the current economic backdrop, and provide a stable base, and of course to earn the rewards of enterprise.

This basic building block of society is broken when those with their hands on the permanent capital change their minds with their underwear. It is no coincidence perhaps that pass-the-parcel and musical chairs are children’s games.

Charlie Munger described an alternative model at this year’s Wesco Financial annual general meeting.

According to Munger the English establishment was so outraged by the speculation of the South Sea bubble and subsequent share price collapses, that in the early eighteenth century Parliament passed the Bubble Act, which outlawed the issuance of shares!

That ban remained in place for over a century (1720 to 1825) and, it could be argued, during that century Britain set the stage for the Industrial Revolution, the greatest step forward in modern society. It is not clear we need to trade shares to be successful.

But trade shares we do.”


Nomad Investment Partnership Jun 2008 Interim Letter by Nick Sleep

“Why is icapital.biz Berhad a precious investment?

icapital.biz Berhad has always been managed in such a way that its shareowners can sleep soundly at night, knowing their hard earned savings are in good hands.

Not only have we achieved this, we have also managed icapital.biz Berhad in such a way that in times of crisis or dire need, icapital.biz Berhad is there for its share owners.

The 20 sen Special Covid-19 Relief Dividend recently distributed is a case in point. We need to remember that a large majority of icapital.biz Berhad’s share owners are individual investors, many of whom may have been adversely affected by the Covid-19 pandemic.

While many Bursa listed companies have slashed or suspended dividends since the pandemic broke out, icapital.biz Berhad distributed a hefty amount of dividend amounting to RM28 million in times of dire need, especially with the 2022 Chinese New Year so close by.

At the same time, the NAV of icapital.biz Berhad is at or near record levels while the KLCI is faltering.”


icapital.biz Berhad 2Q22 report – commentary by fund manager

“How do we know we are taking a different view to the crowd? A clue can be gleaned from the period that other investors typically hold the shares of the companies in the Partnership.

If Berkshire Hathaway (US), Jardine Matheson (Hong Kong) and Next Media (also Hong Kong) are excluded (these firms are in a class of their own due to either stock illiquidity or investor education) then other investors hold stocks in our portfolio for on average twenty weeks.

We expect to own shares for around two hundred and sixty weeks! So, what is going on? It seems to us that most investors look at the accounting outputs of a company (the reported financial data) as a guide to near term price movements and play the market accordingly.

As stated in the investment objective section of the Nomad prospectus our goal is to "pass custody (of your investment) over at the right price and to the right people". That's what investing is. Zak and I concentrate on a deeper reality: the inputs to future value moves.

Our peers are trading shares at the short end of the equity yield curve where the competition is the greatest, and we are investing at the long end where competition is the least. We respond to completely different stimuli.”


Nomad Investment Partnership Dec 2006 Annual Letter by Nick Sleep

“Everyone is familiar with the old saw that’s supposed to capture investing’s basic proposition: “buy low, sell high.” It’s a hackneyed caricature of the way most people view investing.

But few things that are important can be distilled into just four words; thus, “buy low, sell high” is nothing but a starting point for discussion of a very complex process.

Will Rogers, an American film star and humorist of the 1920s and ‘30s, provided what he may have thought was a more comprehensive roadmap for success in the pursuit of wealth:

“Don’t gamble, take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”

The illogicality of his advice makes clear how simplistic this adage – like many others – really is. However, regardless of the details, people may unquestioningly accept that they should sell appreciated investments.

But how helpful is that basic concept?”


Oaktree Capital January 2022 Memo – by Howard Marks

“Margin of safety is as important in Tan Teng Boo’s new value investing as it was in Buffett’s Phase 2 or Graham’s Phase 1. The necessity to derive long-term intrinsic values remains the same too.

Understanding the long-term economics of a business has remained as important as ever, if not more so in an age where disruption, originating from technology or non-technology sources or both, is probably becoming more regular.

As Tan Teng Boo explained in his Apr 2019 talk, the important drivers of New Value Investing or Phase 3 of value investing are:

- China’s once-in-a-millennium transformation;
- Disruptions from technology sources;
- The US-led 2008 global financial crisis; and now
- The Covid-19 pandemic.

The consequences of these new value creating drivers are prolonged low inflation, benign pricing environment; prolonged easy money, very low interest rate; subdued wage growth and sustained profit margin and elevated valuation.

As we wrote above, these findings are extremely valuable and you will not be able to find them elsewhere. Understand them well and you will profit well.”


i Capital Newsletter Volume 31 Number 41 (25th Jun 2020)

“If starving is a real possibility, a meal today is more important than a feast in a week’s time, and the brain’s wiring reflects that survival bias. Such notions are embedded in popular phrases such as “a bird in the hand is worth two in the bush”.

But at Nomad we try to be more analytical: it is the two birds in the bush we are concerned with and how they compare to the bird in the hand. The partnership is up this year, but you can see that it also does not mean very much compared to the deferred gains.

It is price to value that’s important.”


Nomad Investment Partnership Jun 2005 Letter by Nick Sleep

“Investing is all about the odds. When an investor approaches the equity markets, if the odds are overwhelmingly in your favor, bet heavily.”


The Dhandho Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai

“It is still amazing to me that everyone assesses a fund manager on his output, not his process. They don’t admit that of course. But that’s what happens.”


The Investment Fund for Foundations 2005 by Nick Sleep

“It is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks.

For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion.

If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy.

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”


The General Theory of Employment, Interest and Money – John Maynard Keynes

“One of Nomad’s key competitive advantages will be the aggregate patience of its investors.

We are genuinely investing for the long term (few are!), in undervalued firms run by management teams who may be making decisions the fruits of which may not be apparent for several years to come.

In the near term our results are as likely to be bad as good, but we are confident that in the long run they will prove satisfactory. If Nomad is to have a competitive advantage over our peers this will come from the capital allocation skills of your manager and the patience of our investors.

In the latter we have started well, with no investor turnover since we began and almost no enquiries into performance despite the general decline in market prices. This is very unusual and a huge credit to our investors and implies a similar long-term outlook.

Only by looking further out than the short-term crowd can we expect to beat them. It is for this reason we named Nomad an Investment Partnership and not a fund. The relationship we seek is quite different.”


Nomad Investment Partnership Dec 2002 Letter by Nick Sleep

“In the 2021 virtual AGM, Tan Teng Boo explained to the hundreds of attending share owners that while he manages the NAV of ICAP, the share or market price of ICAP is determined by its demand and supply, which are under the control of the share owners.

In such a case, the behavior of share owners, especially large ones that own 20%, is fundamentally important in determining the demand and supply of ICAP shares, which will then influence its share or market price and hence its NAV discount or premium.

When you own 20% of any listed company, you can swing the share price whichever way you want.”


i Capital Newsletter Volume 33 Number 15

“”The key to a rational stock price is rational shareholders, both current and prospective … 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.”

Warren Buffett made the above observation in the 1983 annual report of Berkshire Hathaway and it appears to be applicable to your Fund’s experience.

Your Fund is a value investor, and hopefully its owners are as well.

As I explained in last year’s report, I have constantly referred all of you as share owners and not shareholders. Holders implies something transitory while owning implies a more permanent state of affairs.”


2007 Annual Report icapital.biz Berhad – Letter to Share Owners

“”X company with a $150 profit and Y company with a $100 profit. Which one is better?”

In their first training class, freshly-minted managers are often asked the above question. They are provided additional information like “suppose X is a large conglomerate and Y is the neighborhood coffee shop” to shed light on their intuitive responses.

The intention of questions like these is to train our managers to think in relative, not absolute, terms. Efficiency is a ratio, not an absolute number.

To be efficient, for example, X company has to produce many times more profit than the neighborhood coffee shop to warrant the billions more it receives in investments. We are often amazed to find out how many managers instinctively like being “large”.

We train managers to understand and appreciate that in the real world, they have access to limited resources and their job is to maximize profits at a certain level of resources.

In other words, they are not measured on whether they are profitable, they are measured on the degree to which they are efficiently profitable. Once managers understand and practice efficiency, the result is powerful.”


China Meidong Auto Holdings 2019 Annual Report

“We are long term in our investment decisions. We own companies rather than rent shares.

We do not regard ourselves as experts in forecasting the oscillations of economies or the mood swings of markets. We think it is hard to excel in such areas as this is where so many market participants focus and where so little of the value of companies lies.

Equally Baillie Gifford is more likely to possess competitive advantages for the good of shareholders when it adopts a long-term perspective. We are a 113 year old Scottish partnership. Such stability may not be exciting but it does encourage patience in the most impatient of industries.

We only judge our investment performance over five year plus time horizons. In truth it takes at least a decade to provide adequate evidence of investment skill.”


Scottish Mortgage Investment Trust PLC 2021 Annual Report

“We make a long-term stock investment because we want it to appreciate over years or decades. Yet there we are, watching a downward tick over a few minutes, consumed by imagining the worst.

What’s the volume? Is it heavier than usual? Better check the news stories. Better check the message boards to find out what rumors are circulating.

A stock like Berkshire Hathaway reveals why ticker watching isn’t a particularly productive endeavor when you are investing for the long run. If you zoomed in the performance of Berkshire Hathaway stock during the banking crisis, you would feel terrible most days.

Yet we know from the big picture, that all those minute-to-minute and even day-to-day changes had little effect on the investment’s general upward trajectory.”


Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke

“Brokers spend their time trying to forecast the next quarter’s earnings, which is good for generating turnover and commissions, and occasionally going “over the wall” to help their banker colleagues market a new share issuance.

“Rarely does one find a brokerage house study that point outs,” wrote Benjamin Graham, “with a convincing array of facts, that a popular industry is heading for a fall or that an unpopular one is due to prosper. Wall Street’s view of the future is notoriously fallible especially when it is directed towards forecasting the course of profits in various industries.””


Capital Returns – Investing Through the Capital Cycle: A Money Manager’s Reports, 2002-15

“With new infections in Malaysia falling, along with the re-opening of the Malaysian economy and RM210 over million cash in reserve, its NAV is expected to rise further. Will its share price follow suit?

As its fund manager, my investing decisions influence the NAV performance of icapital.biz Berhad. On the other hand, the market price of icapital.biz Berhad is, positively or negatively, determined by investors, especially those who breached the 20% single shareholder limit.

Let me reiterate the power of compounding for the long term by quoting from the 2021 Annual Report:

“With icapital.biz Berhad, shareowners get a well-managed fund, founded on integrity, and offers excellent prospects. There is in fact no reason at all to wind it up – why chop down a bountiful fruit tree before it has matured?””


icapital.biz Berhad 1Q22 report – commentary by fund manager

“The NAV of icapital.biz Berhad has again jumped, this time to RM3.93. The KLCI is 18% below its all-time high; the NAV of icapital.biz Berhad is at a new record. This is the compounding power of Tan Teng Boo’s value investing philosophy.

The NAV of icapital.biz Berhad, in absolute amount, is now more than RM550 million. Time to include this stock in the KLCI?

With new infections falling, along with the re-opening of the Malaysian economy and RM200 over million cash in reserve, its NAV is expected to rise further. Its share price will follow suit.”


i Capital Newsletter Volume 33 Issue 9

“Value investing succeeds because it goes hand in hand with a focus on the long-term and compound return. With patience and a long-term focus, compound return works wonders.

Warren Buffett has not always been one of the richest men in the United States.

When he reached 30 years of age or by 1960, Buffett’s net worth was US$1 million. By age 43, Buffett’s personal net worth was at a high of US$34 million. In 1982 or age 52 years, Buffett had a net worth of US$250 million.

By 1989 at age 59, Buffett was worth US$3.6 billion. He hit US$32.3 billion in 2001. As of mid-August 2015, Buffett’s net worth is US$67 billion, and by mid-2021, he is worth more than US$105 billion.

Buffett did not become a billionaire until he was 50 years old. What is most interesting is that, 99% of Warren Buffett’s net worth was earned after his 50th birthday.

This is the secret of compound return – or as they say, let your money work for you. Compound return works best over the long-term as it needs time to unleash its reward.”


2021 Annual Report icapital.biz Berhad – Tan Teng Boo

“Will icapital.biz Berhad’s NAV discount be there forever ? How can one take advantage of such an attractive discount ? Should icapital.biz Berhad not be wound up in order to realise its underlying asset values ?

Well, first of all, icapital.biz Berhad was set up by Tan Teng Boo as a closed end fund 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.

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 icapital.biz Berhad. It was launched in 1909, about 112 years ago. In comparison, icapital.biz Berhad is but a spring chicken. 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 closed end fund – buy at a discount, sell at a premium. Can icapital.biz Berhad enjoy a similar outcome where its NAV discount vanishes? The case for it is strong indeed.

However, before we present it, one must first ask whether icapital.biz Berhad’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 icapital.biz Berhad shares (even going so far as to breach the regulatory 20% single shareholding limit) and consequently widen icapital.biz Berhad’s NAV discount.

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

These complaints continue despite icapital.biz Berhad delivering an impressive performance on a consistent basis. So what is really going on here? Without all this interference, icapital.biz Berhad’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.

icapital.biz Berhad’s NAV performance over the course of its first 5,777 days was in fact superior to Scottish Mortgage’s. And yet, icapital.biz Berhad 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 icapital.biz Berhad a constituent of the KLCI, just like the London stock exchange did with Scottish Mortgage.”


i Capital Newsletter Volume 33 Issue 4

“How will icapital.biz Berhad’s NAV perform in the coming years and decades ?

The future performance of icapital.biz Berhad’s NAV depends on the composition of its current equity portfolio and what the fund manager does with the RM209 million cash in its balance sheet as at 31 May 2021 (this is down from RM307 million as at 31 Dec 2018).

A look at icapital.biz Berhad’s existing equity portfolio would reveal that, in terms of number of shares held, BioAlpha, AirAsia, Kelington, Kronologi, Padini and Parkson are the highest, totalling around 155 million shares.

Should the share prices of these stocks increase by an average of RM1 per share, icapital.biz Berhad’s NAV would be boosted by RM155 million or RM1.11 per share, with its NAV leaping from RM3.47 to RM4.58 on this alone. Is this outcome likely?”


i Capital Newsletter Volume 33 Issue 4

“With icapital.biz Berhad, 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. A NAV discount eventually disappears. This profit projection has not yet taken into account the likelihood of further gains in icapital.biz Berhad’s NAV.

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

Australian Securities Exchange’s oldest listed investment company has been around since 1928. New York Stock Exchange and Toronto’s oldest closed-end funds have been around since 1929, surviving even the 1929 Great Depression.”


i Capital Newsletter Volume 33 Issue 4

“I have been very apprehensive about general stock market levels for several years. To date, this caution has been unnecessary.

By previous standards, the present level of “blue chip” security prices contains a substantial speculative component with a corresponding risk of loss.

Perhaps other standards of valuation are evolving which will permanently replace the old standard. I don’t think so.

I may very well be wrong; however, I would rather sustain the penalties resulting from over-conservatism than face the consequences of error, perhaps with permanent capital loss.”


Buffett 1959 Partnership Letter by Warren Buffett

“Investment is most intelligent when it is most businesslike."


The Intelligent Investor by Benjamin Graham

“Shareowners of icapital.biz Berhad can take consolation that your Fund is not managed on a top-down/market-timing approach. While the outlook for Malaysia and Bursa Malaysia is indeed worrying, as your fund manager, we have adhered strictly to our value investing approach.

The benefit of this can be seen in its NAV performance over the last few years. In the last 17-18 months, our value investing approach has enabled your Fund’s NAV to outperform the KLCI during a very challenging period with its NAV rising 26.7% versus the KLCI’s 24.7%.

Measured from the peak, the KLCI has plunged 20.58% from its peak on 19 April 2018 while your Fund’s NAV fell only 7.16% from its peak NAV. Yet, your Fund has still around RM209 million cash as it carefully increases its investment.

Investors often only focus on the upside return forgetting to manage their downside risk until it is too late. The substantial crash in the glove stocks and many others should serve as a timely reminder that investing is not a one-way street.”


icapital.biz Berhad 4Q21 report – commentary by fund manager

“The eclectic value investing philosophy of Capital Dynamics, which I formulated and developed, is best understood when compared with bamboo, also known as the poor man’s timber. Despite its humble connotation, the bamboo has a few exceptional qualities.

One, it has tensile strength greater than mild steel and can withstand compression better than concrete.

The versatile attribute of a bamboo is essential in keeping the plant, which can grow up to 60 metres in height but is only as wide at the base as the very top, from falling over and making it to be able to bend in the wind without breaking.

The bamboo has superb environmental qualities, which are largely based on the sustainability merits of the grass. Its extensive root system substantially reduces the need for intense cultivation practices. It also produces more oxygen from carbon dioxide than trees and more effectively binds soil to prevent erosion.

The eclectic value investment philosophy of Capital Dynamics reflects the qualities of bamboo, that is, adaptability, consistency, and sustainability.

Capital Dynamics realises that conventional value investing may be inappropriate in developing countries where strong, established institutions and market forces are still lacking or in an embryonic stage. As such, it adapts and innovate its value investing approach by considering factors like political and macro-economic structures.

Being versatile in analysing companies in different environment, Capital Dynamics does not deviate from its core value investing approach, which draws on the underlying intrinsic value of a company and the principle of margin of safety.

The fact that Capital Dynamics is able to consistently achieve superior returns has shown that its eclectic investment philosophy is sound and sustainable. It does not believe that high risk equals high return or low risk equals low return.

In fact, our bamboo value investing philosophy would reduce risk by taking care of the downside, and achieve consistent superior returns by being pragmatic. This is similar to the bamboo which is low in cost yet high in value.”


icapital.biz Berhad 2013 Annual Letter by Designation Person Tan Teng Boo

“You IQ and education are not that important. If they were, Newton would have been a stock market genius.

However, Newton invested his life’s savings into the South Sea Company at the top of the bubble, almost leaving his family destitute.

The biggest taboo for personal investors is to be like Newton and be seduced by the market: to buy at the market’s hottest peak and to sell at its most depressed.

If you don’t participate in speculation and stick strictly to investing in what you understand, then you won’t lose money.”


Peking University Guanghua School of Management November 2019 speech – Li Lu

“You must know the big ideas in the big disciplines, and use them routinely – all of them, not just a few. Most people are trained in one model and try to solve all problems in one way.

You know the old saying: to the man with a hammer, the world looks like a nail. This is a dumb way of handling problems.”


Wesco Financial Corporation 2000 Annual Meeting - Charlie Munger

“From Graham’s class, Warren took away three main principles that required nothing more than the stern discipline of mental independence:

- A stock is the right to own a little piece of a business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.

- Use a margin of safety. Investing is built on estimates and uncertainty. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors. The way to advance, above all, is by not retreating.

- Mr. Market is your servant, not your master. Graham postulated a moody character called Mr. Market, who offers to buy and sell stocks every day, often at prices that don’t make sense. Mr. Market’s moods should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.

Of these points, the margin of safety was most important. A stock might be the right to own a piece of a business, and the intrinsic value of the stock was something you could estimate, but with a margin of safety, you could sleep at night.”


The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

“The financial markets offer many temptations to vulnerable investors. It is easy to do the wrong thing, to speculate rather than invest.

Emotion lies dangerously close to the surface for most investors and can be particularly intense when market prices move dramatically in either direction.

It is crucial that investors understand the different between speculating and investing and learn to take advantage of the opportunities presented by Mr. Market.”


Margin of Safety: Risk Averse Value Investing Strategies for the Thoughtful Investor by Seth A. Klarman

“Though people who buy stocks about which they are ignorant may get lucky and enjoy great rewards, it seems to me they are competing under unnecessary handicaps, just like the marathon runner who decides to stake his reputation on a bobsled race.

Invest in things you know about. You’re looking for a situation where the value of the assets per share exceeds the price per share of the stock. In such delightful instances you can truly buy a great deal of something for nothing.”


One Up on Wall Street by Peter Lynch