@FastMoney, I did ask you whether you are a finance student before and you said you are not. Then you are a very fast learner, can come up with NAV(d-g), the essence of the discount factor. I was just trying to KISS. So if g>d, discount becomes a premium, like just post IPO years. Actually, the fancy degreed corporate cowboys also understood the Chinaman MO. Inject business or do an IPO at a PER of 10, guarantees 3 years of profit, walks away with 7 years buta money from suckered investors. Same principle.

Share price discount = PV ((investor discount rate - expected NAV growth rate) x NAV). The discount then depends on the difference between discount rate and expected growth rate, and the number of years to be discounted. The longer the holding period and the greater the returns gap, the greater will be the discount. As management has pointed out all this while, the fault lies with investors having too high an unreasonable discount rate or returns expectations.

Here is another free Finance 101 tutorial. One of the many stock valuation formulae is share price = PV of all future dividend payments + PV of the terminal value. Here, PV is present value at the discount rate for the investor. Terminal value is the final exit value of the investment, which to the horror of some readers here, equals the realisable value if the business is liquidated, or the shares sold finally after holding it through the ages. A discount will be priced in if the investors' internal discount rate is higher than the expected growth rate of the terminal value. So the simplest way to remove the discount is to raise the 'expected' growth rate of the NAV, i.e. talk it up through road show and investors day. So management cannot price in a discount while talking about dividend payout as it is an admission that their expected growth rate is not going to beat the investors' discount rate.

This is what my Chinaman business friend told me about how to do business that my fancy universities didn't teach - Buy at $10, sell at $7, repay the creditors $3, still make $4. So iCap makes $10, pay shareholders $4, management still earns fees on $6, same principles. And the natives hopefully are no longer restive.

@FastMoney Your arguments are still a bit rough. You should say if given the choice of 1% dividend and no price discount or 4% dividend but 20% price discount, you would choose the former and let the fund manager keep the 3% reduction in management fee cut. And I am sure most shareholders would also agree with you then. But the problem is, will you get these choices in the first place? Some one will be needed to take out COL's huge block of shares if the discount starts narrowing near to zero. The deep discount is the shark bait that got COL onto the share register in the first place. You expect them to still want to stay in such a hostile environment once they can cut loose and go somewhere else more foreign shareholder friendly? So this is the problem, once you invited someone in as a house guest with such an attractive discount, the only way to get rid of him is to narrow the discount. Since your Chinese is so geng, the saying is the one to untie the bell is the one who tied it in the first place.

@3iii This is why most funds will carry the standard disclaimer that past performance is no guarantee for future success, just in case get accused of over promised and under delivered. They then list out all the possible risks that can happen to the investment, practically telling the investors that they are buying at their own risks. Instead of relying on public prosecutors to take offenders to court, US contingency fee based class action lawyers have taken on the role of prosecutors taking companies to civil courts for a share of the damages awarded. This works as quite an effective deterrent to corporate wrong doings. Here, without such class actions, how many individual shareholder can afford to take companies to court, other than filing complaints to the regulators. Investors cannot even voice their complaints in public in case they get sued for defamation.

Yes, I could have said, been there, done that! Was collateral damage from the Pan Electric scandal that led to the suspension of the Malaysian and Singapore markets for a few days and the failures of a number of stockbrokers.

Those readers here old enough to be active in the stock market then would have heard of the stock players syndicate known as the A Team, named after the popular TV series then starring George Peppard and Mr. T. I was one of their many brokers.

A disclaimer is in order here. What I related above is from my personal experience from the past century. Any resemblance or similarities to present day events are purely coincidental and unintentional.

@FastMoney, there is this saying Do as I say, not do as I do. During my stockbroking days, corporate owners would tell all that would listen to follow him to buy his counter, or do a company SBB, but he is actually selling through his nominee accounts on the other side. I always tell my clients then, if the share is so good, why should the owner tell every one to buy unless he has already done all his buying and now wants the price to go up so that he can sell? Why let others compete with him if he is still buying? But people still want to believe in Santa Claus.

But it is also perfectly possible to have the same dreams on different beds without any connections or relations. Just need to tune to the same wavelengths.

Once management has 25% shareholdings, already set for life. The balance 75% is then working for him, not him working for the 75%. Imagine if the fund can produce a 10% NAV increase p.a. before fees. His 1.5% fee is equivalent to a 15% free carried interest in the profits. You can go back and check how many trades he does on average per year, divide that by the annual fees, that is how much he charges per stock trade.

@FastMoney How many times must I tell you that the discount is not management's problem, it is the shareholders' who ask them crazy enough to sell at a discount in the first place. As far as the manager is concerned, his KPI is NAV and his fees are based on that, not market cap. Different pages on the same book, and since your Chinese is so geng one, same bed, but different dreams.

@zhangwin If performance is so good, why price is still at discount? Should be at premium already like in the early years. What went wrong now?

@FastMoney Now you are blaming the exit of shareholders on my saying that liquidation is out of the question. Let me properly clarify it this way. Judging by past voting trends, liquidation is unlikely, i.e. improbable, but until CDAM has gained control of at least 25% of the total shares outstanding, it is not impossible, i.e. there is still a mathematical chance of it happening, e.g. if 5 shareholders acting in concert make a general offer so attractive that outside shareholders simply cannot refuse and throw in their shares, then the 75% super majority can be achieved. The question is, at what cost? I think I have explained enough for most shareholders to make their own informed judgment. I am not licensed to give financial advise and none is given here.

Haha, following FastMoney post mortem evidence analysis, the alleged conspirator should at least get a DNAA, discharge not amounting to acquittal then. Disturbing the peace maybe, which is only a misdemeanor, but definitely not trying a coup, which would be treason. Brutus and company didn't try to murder Caesar then and history needs to be rewritten.

The heroes in the Kong Wu will usually spend their energy hitting the strong with the changkul to support the weak. 👍💪 (鋤強扶弱, not sure whether you can read Chinese)

@FastMoney, your Cantonese also very geng, know what is "Kong Wu Ye Hei", must have watched a lot of kung fu movies and TV serials like Heavenly Sword and Dragon Slaying Sabre to know such terms.

I had to take English, which included Shakespeare, in my first year in U, and that pulled down my GPA, haha.

@FastMoney Thanks for the compliment. I should congratulate you in advance for making the FBI most wanted list, haha. Your Shakespeare also very keng one.

I am sure if my professor is still alive, my U mates will gladly sponsor him to fly over to KL to join in the discussions on dividend policy and defend his theorem.

Yes, shareholders should not miss the opportunity to hear in person for the first time why the Nobel Prize winning Dividend Irrelevance Theorem is no longer relevant from the esteemed Aussie professors. How the dividend money can increase in value going from the shareholders' left pocket to the right pocket, other than from no longer subject to the price discount, management fee and income tax, the bird in hand effects. Then shareholders are invited to put this money back in through DRIP and repeat the rinse and spin cycle all over again, like releasing their bird in hand again. Of course if shareholders were to use their dividend money and throw it into shares like Top Glove, Maybank, or visit Uncle Lim up in the mountains, then DRIP may well be the better option then.

@i3lurker What you just said would be called inciting a riot in US, like what Trump did to get his supporters to storm the capital. Bringing up guns put this chat to a whole new dimension already, like drug barons vs FBI TV series.

@i3lurker Management can't help looking behind its back because there was this precedent of a local CEF being liquidated. History can and do repeat itself. So having super majority vote requirements for special resolutions to remove or wind up is much safer than just a simple majority ordinary resolution. See, history learned already.

I am surprised that up till now, COL has not yet sued iCap for damages from the wrongful injunction the latter had obtained upon undertaking to pay damages. Instead of being able to buy at around the $2 level, it is now forced to buy at the much higher prices. That is cause for action.

@FastMoney You never read what I post carefully. I have said COL did nothing all these years publicly (I have no access to what it may have said privately to management) to change iCap, so they have nothing to do with the nomination of directors for election in 2012. In fact, judging from the polling results then, one of the two substantial shareholders did not vote, either abstained or got their vote somehow disqualified, You need to detox the COL poison from your mind! Have you come across any fund manager being asked to explain why they voted in a certain way at an AGM? COL obliged by posting its voting policy for the record. If I don't vote for a certain director simply because I don't like his face, so what? It is perfectly within my rights as a shareholder.

Haha, didn't know Shakespeare is still being taught in schools, or you guys are as old as I am, still educated in English medium and not BM.

@FastMoney, Because Caesar was trying to rule Rome as an emperor instead of a republic, which the senators thought was better governance wise.

Or maybe you are also a casino regular, playing sic bo betting on 666 for a fast money payoff at 150 to 1. If so, I would advise you that the true odds is 216:1, the casino is ripping you off.

@FastMoney Didn't know you also studied Shakespeare besides making fast money. Just wondering whether your 666 nick is the good guy or the bad guy? Warning people to beware of the Ides of March or instigating people to do a Brutus on Caesar? Too bad the AGM is in November, not March, so wrong timing.

At the last AGM, management supporters cast 43.7 million votes, or around 31% of total outstanding shares. When measured against total votes cast at the meeting of 76.9 million, that's a majority of 57%. Whoever is plotting to remove the manager must be delusional and likewise, management must be paranoid to even put credence to it and raise an alarm. After all, they already know the oppositions' shareholdings, unless they can mount a stealth attack, like Hamas against the Israelis.

The constitution is custom tailored, from the way the clauses are drafted. If iCap is no longer managed by CDAM, it can no longer use the name iCap, as the IP rights belong to CDAM. How many investors take the trouble to go through the constitution to read the fine print before investing? I didn't until now because of the foreign shareholdings limit issue. Interesting reading on corporate control.

One may ask, how to achieve 25% shareholding control when the limit is 20%? So elementary, multiple accounts, which have now been declared completely legal and already implemented, even though not all have been declared.

Wow, after reading the constitution one more time, I came to the realisation that iCap is takeover proof, and CDAM has got an indefinite service contract, as the contract is with the firm, not individual persons, both protected by the special resolution requirement. No wonder there are accumulation of shares all this while, to consolidate the grip on the company. No wonder all the road shows and investors days at great expense. The loyal shareholders are still needed to make up the 25% at the moment, so the dividend policy is some sort of a pacifier/gift offering, until such time their votes are no longer needed. After that, shareholders can make all the noise they want, to deaf ears.

So if there is any hustling for the upcoming AGM, what is the agenda then? There are no outsiders standing for election to the board. Worried about approval for payment of directors fees or re-election of directors?

In case you all hear of any rumours of a plot to remove the fund manager/investment advisor, please be assured that these are fake news because only the fund manager can remove himself, as otherwise, this would require a 75% special resolution vote, which as I have explained earlier. is not possible. So no need to hustle for people to attend the AGM then. His position is unshakeable.

@Patient Investor That is a pot calling the kettle black. When CDAM staff contact shareholders all over the country, what is their agenda? Wishing them happy new year, merry Xmas? If I need contacts of shareholders, I can always get them from the share register at the registrar's office, with names, address and size of holdings all neatly tabulated. In case you are not already aware, the i3 blog has a message board service, so I can already contact them directly there. All I did here was to remind them to check their chat box for messages. I can contact you there if I want to, without having to fish for your contact.

So COL collecting shares has a secret agenda, but CDAM buying the same shares for private clients have no secret agenda, as these are below the reporting threshold?

@Patient Investor I PM some of the members here because I may have some comments on what they have written that may be too sensitive for general viewing, knowing how the defamation laws work. Why should I fish for votes not knowing how many shares they have in the first place and I am not running for election. Unlike CDAM staff calling up the big shareholders calling them to attend AGM or send in proxy. What business is that for the fund manager to hustle the shareholders? If anything, it should be iCap itself doing it if they want a big members turnout, but for the fund manager to do it, what is their agenda? Are they campaigning for some directors up for re-election, since these are the only resolutions up for a vote at the AGM.

The only one asking for liquidation here that I can recall is Stockraider, but I have already told him not to dream because it requires 75% super majority vote to pass. I didn't shout I support, didn't I?

@i3lurker Thanks for the pointers on SC thinking on the foreign limits. So SC wants the company to actually insert it into the constitution, and not just to proclaim it? Big difference.

Maybe I missed it at my age, this is the link to the company constitution, go check it there.https://1drv.ms/b/s!AgLvGZpm89YswQAR-rozOimNqf_2?e=DNy86Z

Let me give another argument why cash is not a free call option as suggested, but without using the Black & Scholes options pricing formula, which may be all mumbo jumbo to some. This time, with the simpler CAPM, Capital Asset Pricing Model, which is another Nobel Prize winning theorem: Expected return of the investment = the risk-free rate + the beta of the investment times the market risk premium. The latter is the expected return on the market – the risk free rate. Since cash is not invested in the market, there is no beta, and the second part of the equation is zero return. What is then left for the expected return of cash is the risk free rate. But in iCap, the true risk free rate is bank rate - management fee - tax on interest. So there is a cost to holding cash, as the nett returns of cash is now less than the risk free rate.

And for the same reason, any proposed special resolution that may affect COL's position will also be not possible, given their shareholdings, so to add in the foreign shareholding limit now to the constitution is well nigh impossible, if it is not already in.

But anything else that don't require a special resolution is fair game, that's why the series of road shows now before the AGM, busy campaigning.

The reason why I never proposed liquidation is because this requires a special resolution with 75% approval, which is not achievable with the present shareholders fixed deposit by management, so why waste time asking for the moon?Ditto for COL,

@i3lurker Plus maybe an imaginary foreign shareholding limit. I have asked where this ruling is in the company's constitution because I couldn't find it, but so far, no one can enlighten me here.

For the record, COL has never posted in this blog before, and neither have they proposed any resolution to liquidate the fund at any AGM or EGM. So even if I am an agent of COL, for which I am not, I have also never proposed liquidation here, so all these accusations against COL pushing for liquidation are without basis. As the single largest shareholding block, suggesting ways to reduce the discount is well within its rights as a shareholder, being on the same page with me as a shareholder. This may be different from those shareholders who wear two hats at the same time. Whether other shareholders agree or not is entirely up to them, one share one vote. But to now say one foreign share is not the same as one local share is like shifting the goal posts in the middle of the game. Very well to take the foreigners' money, but now say sorry, they cannot vote. If COL decide to pull out because of this rule, think what the discount will be like then and the effect on other shareholders. Sure, the fund manager is unaffected because the fees are based on NAV, but what about the rest of the shareholders? They become collateral damage, just like the women and civilians in middle east right now. Unless the management's plan is to then take the fund private at a deep discount, like what some of these cheap selective capital reduction exercises that try to rob the minority shareholders on the cheap.

@Fastmoney Thanks for defending me, but I never proposed liquidation of the fund here. I only suggested that the NAV per share is only achievable if and when the fund is liquidated, so to most of us, it is only a theoretical number that we need to discount to a more realisable value, i.e. the share price, whether rational or not. The bulk of my posts is how to make it more rational, albeit still at a discount. The liquidation of the CEF's I cited were done by management/majority shareholders themselves, I take no credit for that.

Having put forth my ‘game theory’ on the DRIP thingy, here is an explanation of how it will work. The main objective of the DRIP is to try to capture back a portion of the cash given away as dividend by the left hand with the right hand. The question is, what percentage is this leakage? 100% is when no one takes up the offer, so they offer say a 10% discount from the market price as an incentive, like a rights issue at a discount, otherwise no one is going to take up the rights. For those faithful shareholders, they will take up the DRIP, so no net cash outflow from the company, and no new shares entering the market because these will be locked up along with the original shares. But for those less faithful ones who want to take the cash dividend, but also want to have the cake and eat it at the same time, i.e. the discount offered with the DRIP, they can sell the equivalent number of old shares in the market, using the previous example prices of 3.54 NAV, 24% price discount @$2.69 market price, and take up the DRIP at say a 10% discount of market price, or $2.42. So offering DRIP at a discount will lead to new sell orders in the market from these people when there was none before. Without offsetting new buyers in the market, such selling will depress the market price from the 2.69 level until just about the DRIP price of 2.42. Instead of narrowing the discount, this has the opposite effect of widening it. To make the numbers simple, assume that the shareholder’s cash dividend entitlement is $2.69, He can sell one original share at the then market price of 2.69, and use his cash dividend to subscribe for 1.11 DRIP shares at 10% discount (2.69/2.42 =1.11), netting 2.69 cash from the sale of original share and 0.11 additional share from DRIP There is now a net sale order of 1 share in the market that needs to be absorbed or will depress the share price. This will continue until the arbitrage is no longer profitable after trading expenses