It is an existential fight for TTB because if the courts decide in COL's favor, there is nothing to stop the latter from buying more to gain control of the board, so the litigation will go all the way to the Federal Court if necessary and this will take years. Of course things can still change if some other vulture funds come along once they smell blood in the water and take up the slack from COL, like what happened to Amanah Small Cap fund last time.

So if the 2025 or earlier liquidation resolution is defeated and COL decides to cut losses and bail out along with other stale bulls, where do you think the share price will be? This is the main deterrent acting on the share price at the moment.

A risk arbitrage is so named because the price difference can only be realised if the expected event can be completed, e.g. a takeover, corporate restructuring etc. A good example of a failed exercise is the selective capital reduction of MAA, which was rejected by shareholders and the share price is now far below the offer price then. Punters who took a position then would have taken a big hit if not baled out already. Similar situation here if resolution fails.

The current TTB supporters have been with him all this while and are unlikely to change, so they are like his fixed deposits, and until COL is allowed by the court to buy, you will need others to make up the numbers you will need. If you buy now, it is a risk arbitrage trade, not a sure thing. At the current deep discount, the downside is quite limited, mainly opportunity cost holding the shares. When it comes to a vote, the undecided majority will determine the outcome, not just the 10 million share margin indicated at the AGM.

If you are counting on COL to come to your rescue, just bear in mind that you are partly funding the legal costs to block their further purchases.

@Just 88 Did you attend the recent company AGM? COL was painted as public enemy number one and the crowd cheered. Other than COL's own big block, the vote counts were one sided. That's the reality at the moment.

@Just 88 While COL may want to buy cheap, they cannot induce shareholder to sell cheaply if they don't want to. It has always been willing buyer willing seller, unless COL's buying is so negative for the company and ther shareholders, as alleged by management, that they are induced to jump ship at a big discount.

@just88 Tabling the resolution is one thing, getting it passed is another.

@speakup please check your message inbox, the green button on top of the page.

Lots of explanation have been offered for the cash reserves, but no explanation or justification has been offered for the millions spent on the failed dual listing exercise. How was that supposed to benefit the fund or the shareholders? Why, because no one bothered to ask?

What about the millions spent on the aborted dual listed fund without most of the shareholders being aware of the amount until it was reimbursed, and that as only a footnote in the annual report?

When iCap was first listed, management was on record of projecting a 15-20% CAGR and the shares traded at a premium. We don't hear of such numbers anymore and the premium becomes a discount. Stale bulls liquidation?

@speakup The 3 Big Banks in Singapore and PNB here rather wound up their CEF and property trust respectively, even though they have the financial resources to support the share price if necessary, because those units are immaterial to their scale of operations, so better to have happy shareholders than disgruntled ones. With iCap, majority shareholders are happy with the status quo, so you and I can beef all about it here for all TTB cares.

If CEF is so good, it begs the question why there is only 1 CEF in the country vs so many unit trusts and ETF's? It is the price discount factor, which management has conveniently washed their hands off.

@Charles T Maybe that's what they mean, iCap is a low risk high returns investment, for CD, but not for the others.

It is claimed that iCap is a low risk high returns investment. What has been missing from the low risk is the elephant in the room, execution risk when it comes time to sell, what is the share price relative to the NAV then? Losing a ringgit on the price discount to NAV is not a risk? An unit trust has no such risk because the redemption price is the NAV.

Correction, the exit price comparison for iCap also needs to be adjusted for the dividends paid, so it should then be around $2.295 and not $2 in the earlier post.

More importantly, the NAV of these unit trusts are also the exit price for their investors, as there is no redemption charges. But for iCap investors, they can now only exit their investments at the market price of around $2, which is at a huge discount to the NAV, making the comparisons even worse .

Taking a page out of iCap's playbook of comparing with Top Glove, I too can make similar comparisons against other funds in the local market. Eastspring Investment Small Cap Fund, an unit trust managed by Eastspring Investment Bhd, a subsidiary of Prudential PLC, was established on 29/5/2001, but with the fsmone website, one can calculate the fund's total NAV returns for the same period as iCap, i.e. from 19/10/2005 to 30/12/2022, which came up to 602.39%, so an initial $1 investment would have grown to $7.02. Initial sales charge is 1.5%, and annual management fee is also 1.5%, same as iCap's. Unlike iCap's theoretical NAV, this fund's NAV is also the redemption price payable by the fund, being an unit trust. Taking another example, Areca Equity Trust Fund, managed by Areca Capital Sdn Bhd, which was established on 23/4/2007, around one and half year later than iCap. The total returns since launch date is 449% (as advertised in this week's Edge weekly), which means the same $1 investment is now worth $5.49. This fund has a higher initial sales charge of up to 3%, and a 1.9% annual management fee, which while higher than iCap's 1.5%, is already accounted for in the total returns, so no longer a factor. To be fair, the 29.5 sen dividend payouts of iCap in the past need to be added back to its year end NAV of $3.27 =$3.565 for comparison. Enough said.

A 10-year share price returns would have under-performed against bank FD rate, so it all depends on the period selected to make things look good. Like they say, shiok sendiri!

Viewpoints in finance can be subjective, but definition of a call option is not one of them.

For someone who has been taught options pricing formula right from its beginning by the founder himself, it makes me cringe to see such a statement like cash is a free call option from a professional money manager.

Look up Black-Scholes Option Pricing Model and Center for Research in Security Prices for more information on the above two examples and where I am coming from.

@Sslee Small individual investors need some sort of a 'guru' to guide them, but sophisticated and institutional investors are knowledgeable and experienced enough to form their own independent opinions. The latter know that there is no such thing as a free call option that has no strike price, and that the KLCI is not a total returns index, just two things that small investors may not be aware of.

@Sslee The same situation for iCap, if the shares are liquid, try to sell a 23% block of shares and see how much the price will move? Having been in both the sell and buy side of the business, my possible explanation for the liquidity is that there are plenty of small sellers, but only 1 big buyer, so the buyer can patiently collect as sellers compete to sell, thus lowering the price but with volume. But the same will not work in reverse. If the big buyer turns seller and put say a million shares on the board, all the small buyers will run away, along with the liquidity. The only consolation is that COL has such a big block that it cannot be disposed off in the market without taking a big bath, so can only move forward, but the court case is the road block at the moment, a stalemate situation.

So iCap shares are not only liquid, but it is one of the strange shares on the exchange where the more COL buys, the lower the price goes, according to the company. I think they got it reversed It is more logical that the cheaper the price, the more one should buy, if it is such a wonderful stock. Otherwise, the earlier logic will have the perverse result that the more COL sells, the higher the price goes. I am totally confused!

This is the whole basis for the rise of index funds over actively managed funds. Mathematically, the average fund will need to underperform the market index because of trading costs and management fees.

@speakup On the contrary, his supporter base is still pretty much intact, just look at the AGM voting results. Some cracks are appearing though, as the outperformance in the early years is wearing thin over time, reverting to the mean.

@i3gambler They changed the benchmark from KLCI because it has been repeatedly pointed out that the latter does not adjust for dividend yield of the component stocks, so it is not a total returns index. The same for the MSCI index, The Index does not include the dividends paid to shareholders in its returns. To invest in the Index itself, investors must invest in funds that track it. These funds do pay the dividends that the companies pay their shareholders. But the calculations of total returns of the index do include dividends, so one has to make the correct comparisons, just price index or total returns.
INDEX PERFORMANCE — PRICE RETURNS (%) (DEC 30, 2022)
ANNUALIZED
1 Mo 3 Mo 1 Yr YTD 3 Yr 5 Yr 10 Yr
Since
Dec 31, 1987
MSCI Malaysia 0.49 7.67 -4.32 -4.32 -4.45 -5.30 -2.24 4.56
MSCI Emerging Markets -2.58 3.74 -17.92 -17.92 -2.60 -2.12 2.70 8.41
FUNDAMENTALS (DEC 30, 2022)
Div Yld (%) P/E P/E Fwd P/BV
3.86 16.38 13.47 1.48
3.36 12.20 11.29 1.57
Again, cut and paste don't line up the columns correctly. For that need to go to the MSCI Malaysia index web page.
There is such a thing as benchmark and period shopping. So switch to whichever gives a more favorable result. Or just compare against the worst performing individual stocks in the market to make one look good. There are a whole lot of stocks that are down more than 75%, so plenty of examples to choose frm.

From the above historical returns, an ASG shareholder can just let the dividends be automatically reinvested all the while and make a CAGR of 9.69% NAV or 9.67% market price, with negligible price discount, or sell his dividend shares in the market and make an average 8% annual dividend cash yield. The difference between the two is because of the possibility of dollar price averaging when prices are lower with dividend reinvesting, which I have mentioned previously. So the fund can cater to both classes of long term capital accumulation and periodic income investors by taking that decision to the individual investors rather than at the fund level. Not sure whether the low price discount is the cause or effect of this dividend policy, because then there is a dividend, and it is up to the investors whether they want to reinvest or cash them out? But effectively, there is no cash outflow from the fund, so it is still a closed end fund, the only cashing out is via the stock market.

Sorry, the annual distribution is 8% of NAV, not 10%, which is for another sister fund. In case people wonder is this distribution rate sustainable, this is the fund's track record.
as of 11/30/2022
YTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years
NAV Return -26.45% -25.09% 7.81% 10.99% 12.90% 9.08% 9.69%
Market Price Return -34.64% -33.75% 6.13% 11.03% 13.81% 9.19% 9.67%
Lipper Multi-Cap Growth Average -27.96% -27.87% 7.01% 9.31% 12.15% 8.36% 9.49%
*Cumulative Total Return
Returns for the Fund and the Lipper Average are total returns, which include dividends, after deducting fund expenses. The Fund's performance is calculated assuming that a shareholder reinvested all distributions and exercised all primary rights in the Fund's rights offerings.
So the long term track record shows this is sustainable. The headings of the table and thecolumns don't show up too well from the copy and paste here, but can go direct to their website online.

Just to clarify, dividends do matter if there is a big difference between what the shareholders can earn with the cash and what the company can earn with the retained earnings. So if all the company can do is to place it in bank deposits while shareholders can do better with the cash, then of course dividend matters.

Are there other ways to narrow the price discount than the often suggested dividend payout, share buyback and liquidation? Yes, there is one cute little CEF listed in US Liberty All Star Growth fund (symbol ASG). It has managed to trade at a minimal price discount of around 2% with a neat little accounting trick of declaring an annual dividend/distribution of 10% of NAV via 4 equal quarterly payments, but payable only in shares. So nominally, there is a dividend yield of 10% to support the share price, which is higher than most other stocks in the market, but won't affect the AUM at all, i.e. no different than declaring a bonus issue. Because shares have no par requirement and company can return capital to shareholders any time, even though there is no profits for the year, the fund can still make a distribution nominally out of capital. The argument is that while the dividend is not in cash, investors can sell the dividend shares in the market and convert it to cash, and if the share price is close to NAV, the two are fungible, other than the small transaction cost of selling shares instead of banking in cash. So the fund manager is happy because there is no actual cash outflow from the fund and AUM remains unchanged, investors do not suffer steep discount like other funds, and the fund 'earns' a reputation as a solid dividend investment. Like they say, perception is everything, even though nothing has changed. And this is also proof of what my professor has maintained in the M&M Theory of Corporate Finance, that dividend doesn't matter.

One thing for sure, the main shareholders and management of at least 5 listed CEF and property trusts have decided it was in the best interests of shareholders to liquidate their funds when trading at persistent deep discount, so how valid are the opposing excuses not to do so? Superior performance? If this is true, the fund would be trading at a premium instead. That it is only temporary? How long is temporary? 10 years long enough?

BTW, for those not aware, Harimau was sponsored by OCBC Bank. UIS, managed by UOB, was the last of the CEF to be liquidated in Singapore, after persistent efforts by Laxey Partners on the price discount issue.

In the case of iCap, even though CD is also a shareholder, the management fee trounces the shareholdings, so not on the same page with the shareholders.

Singapore used to have CEF's managed by the Big 4 Banks (Big 3 after the merger of OUB with UOB), and Malaysia had Amanah Small Cap Fund and property trust PHB2, which all went into members' voluntary liquidation, as the solution to the persistent price discount problem. The big difference here is that all these funds' managers are also part of the parents organisation, which were also the largest shareholders of the funds, so even though they wear 2 hats, that of the owner's are much larger than that of the managers', in the greater scheme of things. So they are on the same page with the outside shareholders and also benefit from the liquidations to realise the full value of their investments. This is how the Harimau Investments notice to shareholders put it:
HARIMAU INVESTMENTS LIMITED
PROPOSED RESTRUCTURING TO UNLOCK VALUE FOR SHAREHOLDERS
Introduction
The Board of Directors of Harimau Investments Limited (“Harimau” or “Company”) is pleased to
announce a proposed restructuring (the “Restructuring”) of Harimau to unlock value for our
shareholders. The proposed Restructuring will involve (1) the voluntary liquidation of Harimau and
(2) the return of cash to our shareholders.
Rationale for the Restructuring
We are a closed-end investment company. We invest in marketable securities for investment
purposes. Our net asset value (“NAV”) is based on the market value of our investments. However,
our share price for the last 5 years ended 30 November 2000 has persistently been trading at a
significant discount to our NAV. Based on our month-end unaudited NAVs and our month-end share
prices for the last 5-year period, our shares had traded at a discount ranging between 23% and 61% to
our NAV per share. The last transacted price of our shares on 30 November 2000 was $1.55 as
compared to our unaudited NAV per share of $2.04 as of the same day. This represented a discount of
approximately 24%.
The Restructuring will enable us to unlock value for our shareholders to be achieved through a cash
distribution to shareholders derived from the orderly disposal of our investments.

Singapore used to have CEF's managed by the Big 4 Banks (Big 3 after the merger of OUB with UOB), and Malaysia had Amanah Small Cap Fund and property trust PHB2, which all went into members' voluntary liquidation, as the solution to the persistent price discount problem. The big difference here is that all these funds' managers are also part of the parents organisation, which were also the largest shareholders of the funds, so even though they wear 2 hats, that of the owner's are much larger than that of the managers', in the greater scheme of things. So they are on the same page with the outside shareholders and also benefit from the liquidations to realise the full value of their investments. This is how the Harimau Investments notice to shareholders put it: https://www.dropbox.com/s/7dr5u9efqven4x3/Harimau%20liquidation.pdf?dl=0 In the case of iCap, even though CD is also a shareholder, the management fee trounces the shareholdings, so not on the same page with the shareholders.

Make this a crowd funding project, haha. 60% upside if successful.

@3iii "For individual investors, better to focus on Absolute-Performance". iCap is touted as a low risk high returns investment, just what you prescribed, haha. They can do this with a significant portion of the portfolio in risk free assets.

Who is dumb enough not to see through the comparison against the share price of May bank when the current annual dividend yield of around 7% is not reflected in the share price? Compound that for 17 years and see what is the total returns. This is the same kind of unfair statistics when comparing performance against the market index which excludes adjustment for dividend yield of component stocks. Bear in mind that over long periods, the re-inventments of periodic dividend payouts allow for dollar averaging, so more shares can be bought when prices are low and bring down the average cost of the shares, so the actual total returns can be even higher than that based on the nominal starting price. For illustration, assume the share price dropped by 50% during a bear market and then recovered back to the previous level. What ever shares bought with the dividends at the bottom of the market would have made a 100% gains even though there is no difference in the share price now. As long as the final share price is higher than the starting share price, dollar averaging would have enhanced the overall returns than just a simple share price comparison.

So investors made 4.25% after 13 years while the fund managers made 1.5% p.a. x 13 years = 19.5% approximately (AUM varies from year to year). So the "low risk high return" description in the fund's fact sheet should apply to the latter rather than the former?

Most fund managers will put in the standard disclaimer that past performance is no indication nor guarantee for future results. Sure, if you can project 18% CAGR into the future, the sky is the limit.

For iCap's NAV computations, they did add back the dividends declared, so why not for the benchmark too?

@Sslee, the standard reply to such questions by management is to just compare market price returns of other shares/index against NAV returns of iCap, while ignoring the dividends declared by the former. Is that fair?

@Integrity, do you agree that as a general rule in investing, risks and returns are inversely related, the basis of the Capital Asset Pricing Model? So if you want low risks and high returns at the same time, how many can achieve that? If you hold a significant of the portfolio in cash, which barely covers management fee, the rest of the portfolio will need to outperform the market in order to achieve an overall market beating performance. This is the odds iCap is facing. If you fight with one hand tied behind your back, your other hand needs to be twice as good as your opponent just to make up for the handicap.

Another claim that has been made is that cash is a free call option. I was taught option pricing by one of the co-authors of the Nobel Prize winning Black-Scholes Options Pricing formula and one of the factors influencing prices is the Greek rho, for interest rates. If options can be free, then interest rates and tenures would not matter at all in the pricing, and a one month option should then cost the same as a 1 year option. Cash is cash, option is option, don't try to confuse the shareholders.

This novel thesis that "The performance of your Fund’s market price ultimately depends on the quality and behavior of its existing and potential investors" is worthy of a Nobel Prize in economics. Business schools will have to teach shareholders profiling as an investment course. Too bad I was on a full tuition scholarship, otherwise I may have to ask for a refund of tuition as I have been taught all the wrong stuff. Also no need to study for the CFA or MBA, just apply to join CD and learn from the guru himself.

In 2012, TTB told the press that he had been working on a world first dual listed fund, which had cost $1.5 million so far and not a single sen had been charged to the fund. Imagine the shareholders' surprise when in the 2020 accounts, a total of $6.7 million were charged as expenses to the fund, with just a footnote to explain that it was reimbursement of the dual listed fund expenses. What changed his mind to bill the fund instead, and what did the fund get out of this aborted exercise? Instead of supposedly narrowing the price discount, it got worse. Coincidently, the then chairman of the Board resigned before the AGM, citing differences in opinion. What differences? https://www.pressreader.com/malaysia/the-star-malaysia/20121107/282557310471653

During the last decade, the average month end NAV of iCap is $3.16, which at 1.5% p.a. management fee, would average 4.74 sen per year or 47.4 sen for the period. All this without owning a single share, whereas shareholders get zero. If shareholders have followed the real WB's advice and bought the dumb index fund instead, at least they would have receive an average annual dividend yield of 3%, or 30% over 10 years before compounding, disregarding price movements. So even if the index were to drop by 30% over this period, they would still end up about the same as holding the shares.