A Quick Look At iCapital's Annual Report 2008.

Eddy Lee Sin Ti said...

• Financial market is full with greed, you bet. Any regulatory efforts will be followed by even more intense evolution of the way these people doing regulatory arbitrage and taking unnecessarily high risk and thus giving an impression of superior performance. I'm not only relate this natural profit maximizing behavior to iCap but also to any kind of trading platforms in the market, maybe it be real estate, public non-financial corporations or financial institutions like investment banks or the traditional S&L.
  
  Of course, some people may argue that iCap or even open ended funds are subjected to public regulation scrutiny and thus disclosure is sufficient and make sense, but we all know it's not true. Protecting trade secrets? Come on, you are not KFC or some Viagra producing firms. You may not opt to disclosure your stock selection or valuation formula, process or frameworks or whatsoever mystical methodology but at least give some educated and really informative disclosure so to not underestimate the intellectual of the fellow investors.
  
  Again, I need to press on the fact that it is the responsibility of our SC to protect us from any intentional information asymmetry that potentially causes adverse movements in our stock/fund investment. Well, Malaysia still few ten years behind other developed countries in this sense and I don't think without few more major crises can wake them up about the seriousness of many of the issues.
  
  My conclusion so far is iCap did enough disclosure to adhere to compliance level needed just like any other public companies. This is an undeniable fact. It is up to the investors to decide whether the current level of transparency is a warning sign to any expected business, financial and operation risks involved. Simply put, take your own risk. TTB's Malaysia own Madoff? Be cautious of past performance that's too good to be true.

Eddie,

I would NOT dare accuse iCapital to be another potential Madoff. :)

Let's look more in details.

Let's have a look at their Annual Report 2008.

In the report, it states that iCapital.Biz is holding shares in F&N Holdings. Now that F&N Holdings had lost its local Coca-Cola bottling and distribution franchise, the whole long term perspective for F&N Holdings would have changed, yes?

And for some minority shareholders of iCapital.Biz this is might be a concern.

What can they do?

Do they have to wait till next annual meeting to find out the investing decision made by iCapital.Biz regarding their shareholding in F&N Holdings?

Now wouldn't some disclosure made by iCapital in their quarterly earnings be helpful? Is iCapital holding or selling the stock? Or is it going to buy more???

Or how about Axiata (formally known as TM International (TMI))?

iCaital mentioned in its annual meeting that it owned some 2,200,000 shares in Axiata worth some 17.883 million. (That should work to an average cost of some 8.12 or so). Due to the incredible rights issue, Axiata plunged to below 2.50 recently.

And iCapital is a shareholder.

Now for a share to have plunged to so low and with the upcoming rights issue, surely iCapital needs to disclose and inform its minority shareholders what it intends to do.

That is only correct, yes?

Why can't it mention this in its quarterly earnings notes?

Doesn't the minority shareholder have the right to know?

Don't you think it's rather silly to ask the minority shareholder to wait till next annual meeting to find out more?

Or how about Mieco Chipboard?

Why is iCapital a shareholder in this stock?

From the annual report, iCapital's owns some 1,632,100 shares in Mieco worth some 2,103,832. This should works to a cost of 1.28. Mieco last traded 22 sen.

As a shareholder, I would be baffled as why a fund manager who has a reputation to be good, bought a lemon stock like Mieco. The clear decline in Mieco's fundamental was clearly seen by all (see past posting Mieco Chipboard: VII and the links included)

Besides asking why iCapital is holding on to this stock whose fundamental is really weak, ( Mieco's last reported earnings Quarterly rpt on consolidated results for the financial period ended 31/12/2008 - losing money and a mountain of debts!), perhaps the minority shareholder would want to know the funds current investing decision on this stock in the portfolio.

Is iCapital still holding on to the stock? Did iCapital sell the stock? Or is iCapital making an even more terrible mistake by investing more into this stock?

How?

Wouldn't the disclosure of iCapital's stock portfolio helped?

And again... what was in the quarterly earnings report I highlighted.

What did iCapital said about the funds prospects?

Let me repaste here again.

• Although the stock market remains depressed, as a value investor, iCapital.Biz Berhad with its Fund Manager and Investment Adviser will continue to seek stocks that are attractively priced.

Is that all the fund can say?

How?

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bullbear said...

• icap closed end fund was started on 19.10.2005. At inception, its market price was MR 1 per share and its NAV was MR 0.99.
  
  On 9.4.2009, its market price was MR 1.46 and its NAV was MR 1.59.
  
  Since inception, based on market price of MR 1.46, icap has a cumulative return of 46.00% or an annualised return of 11.51%. Based on its latest NAV of MR 1.59, it has a cumulative return of 60.61% or an annualised return 14.61%.
  
  The KLCI at inception of icap closed end fund was 914.17 and on 9.4.2009 was 917.89. The broad KLCI market index has a cumulative return of 0.41% and an annualised return of 0.12%.
  
  One can take comfort that even in this severe challenging market, the performance of icap since inception has been comforting.

LOL! My favourite bullbear is around. :D

Well bullbear, again I am afraid, I have to ask you on what's the point? Still the same old some old, eh?

Look, the issue is on the lack of disclosure from iCapital in their quarterly earnings and the recent postings are not made to say that iCapital is no good.

I repeat, I am not here to say iCapital is NO good.

So don't lah get so uptight as usual.

Hey, if they would give proper disclosure and attempt to share their market perspective in their quarterly earnings, I would even be an investor. I am serious.

However, no disclosure. How to invest lah?

So what's your point of bringing out iCapital's performance since listing.

Hey, a big bull market happened since then.

And surely you know many ordinary investors performing so much better than what iCapital did. :D

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Eddy Lee Sin Ti said...

• Don't treat the "TTB's Malaysia own Madoff?" question serious :). It has totally nothing to do with accusation of any sort but a question to remind all investors to exercise their due diligence to ensure the integrity of people or firms managing their funds.
  
  Too many incidents of blind trust/poor management controls and procedures occured in the past that results in hefty investment losses. To name a few cases: Barings, Daiwa, and recent Madoff.
  
  Most of the times, fund investors are too excited about drawing expectations from past performance and doesn't really question much where they should like all the possible questioning you mentioned. Only when the fund starts to lose money, the reality check comes. Lehman Minibond's furious investors matching on the streets just to let off their steam and hope for a refund of their so called misleaded investment which they shouldn't invest in it without understanding the scheme and the stakes involved.
  
  The entire discussions on the fund is grounded on the basis of lack of transparency. Frankly speaking, I don't see any benefits to keep beating in the same bush because the fundamental source of matters revert to the level of regulations. In a similar situation I frequently question about the lack of disclosure on public companies' off balance sheet items and useful MDA and footnotes. Not much improvement though, people usually just skimp through the section without questioning much.
  
  If risk is really about uncertainty, then better make sure you are correctly compensated for the amount of unknown you need to swallow.
  
  Anyway, it's always a good effort to analysis the reports.
  
  By the way, the Investor Relation of iCap is contactable via the information here at http://www.icapital.biz/berhad/en_berhad.asp?id=7&sub=1
  
  Hopefully the IR can provide more insights for those who need it.

:D