| The portfolio of your Fund, as at 31 May 2017, ranked in terms of the market value of each stock and the quantity held, is shown in Charts 1 and 2 below. Chart 1: Market Value of Holdings as at 31 May 2017 (RM ‘000) | |||||
| Padini | 66,690 | ||||
| Boustead | 32,192 | ||||
| Suria | 19,691 | ||||
| F&N | 12,588 | ||||
| MSC | 11,753 | ||||
| Tongher | 9,389 | ||||
| Selprop | 8,282 | ||||
| Parkson | 6,177 | ||||
| APM | 5,838 | ||||
| MKH | 3,379 | ||||
| Oceancash | 1,628 | ||||
| Chart 2: Size of Holdings as at 31 May 2017 (‘000 shares) | |||||
| Padini | 19,000 | ||||
| Boustead | 12,148 | ||||
| Parkson | 10,742 | ||||
| Suria | 9,244 | ||||
| MSc | 2,902 | ||||
| Tongher | 2,579 | ||||
| Oceancash | 2,230 | ||||
| Selprop | 1,666 | ||||
| APM | 1,421 | ||||
| MKH | 1,357 | ||||
| F&N | 518 | ||||
ii. INVESTMENTS SOLD
For the financial year ended 31 May 2017, your Fund sold 900,000 shares of Tong Herr Resources Berhad, generating a loss of RM65,336.95 with a cost of RM1.810 million.
As at 31 May 2017, your Fund invested RM107.326 million with a market value of RM177.605 million, giving unrealised gains of RM87.513 million.
Of your Fund’s investments as at 31 May 2017, Boustead Holdings Berhad, Fraser & Neave Holdings Bhd, Malaysia Smelting Corporation Berhad, Padini Holdings Berhad, Suria Capital Holdings Berhad and Tong Herr Resources Berhad have substantial unrealised gains out of which Padini Holdings Berhad has the highest substantial unrealised gain of RM61.2 million.
iii. INVESTMENTS MADE
For the financial year ended 31 May 2017, your Fund made 4 new investments shown in Chart 3. These were
- APM Automotive Holdings Berhad,
- MKH Berhad,
- Oceancash Pacific Berhad, and
- Selangor Properties Berhad.
| Chart 3: Purchases made after 31 May 2016 (‘000 shares) | |||||
| Oceancash | 2,230 | ||||
| Selprop | 1,666 | ||||
| APM | 1,421 | ||||
| MKH | 1,251 | ||||
Your Fund received 511,538 shares as share dividends from Parkson Holdings Berhad and 3,470,796 shares as share dividends from Boustead Holdings Berhad.
Your Fund also subscribed to 53,010 rights shares and received 106,020 bonus shares from the rights subscription of MKH Berhad.
v. PERFORMANCE: NAV & MARKET PRICE
From 1 June 2016 to 31 May 2017, the NAV per share of your Fund increased from RM3.01 to RM3.31 (a gain of 10%) and the market price increased from RM2.31 to RM2.64 (a gain of 14%). In the same period, FBMKLCI gained 9%.
The performance of icapital.biz Berhad since its listing is shown in Tables 1 and 2.
Table 1 : Cumulative Return From 19 Oct 2005 To
Ending Date... Fund's NAV (%)... Fund's Market Price (%)... FBMKLCI (%)... Fund’s Cash Level (%)
31-May-17............ 242.53........................ 172.11........................... 93.17..................... 61.29
Table 2 : Annualised Return From 19 Oct 2005 To
Ending Date ... Fund's NAV (%) ... Fund's Market Price (%) ... FBMKLCI (%)... Fund’s Cash Level (%)
31-May-17 ..................11.18........................ 9.00 ...............................5.83 ...................... 61.29
Chart 6 : Performance as at 31 May 2017 (from the peak in 8 Jul 2014)
FBMKLCI -6.70%
ICAP NAV +7.82%
ICAP Price +6.02%
Chart 6 shows the performance of the FBMKLCI from its peak on 8 July 2014 until 31 May 2017, and the NAV and share price of icapital.biz Berhad during the same period.
The FBMKLCI lost 6.70%, your Fund’s NAV appreciated 7.82%, and its price increased 6.02%.
LONG TERM CAPITAL APPRECIATION
icapital.biz Berhad is a long-term capital appreciation fund, managed based on an eclectic value investing philosophy.
For those who are familiar with long-term value investing, there will be times when this time-proven investing style will yield superior returns, and there will be times when it will yield lower returns.
Even Buffett’s Berkshire Hathaway experiences such phases. We often read about Warren Buffett’s impressive longterm performance but one needs to bear in mind the times when Berkshire Hathaway was not performing.
In June 1998, Berkshire Hathaway traded at a high of US$84,000 per ‘A’ share. More than seven years later, it traded at a high of US$84,600 or a measly gain of less than 1% in total.
In that same period, the S&P 500 gained 8.6%, measured from a high of 1,145 points in June 1998 and a high of 1,243 points in September 2005.
Investors who are not long-term focused or not genuine value investors would have been disappointed with Buffett’s performance (Berkshire Hathaway was having US$35.96 billion cash in 2003) and could have called for his retirement.
Fortunately for Berkshire Hathaway, it has plenty of like-minded investors who have stayed with Warren Buffett (in March 2009, Berkshire Hathaway fell to a low of US$70,050).
A good fund manager should not get distracted by shorter-term noises; similarly, share owners who believe in long-term value investing should not get distracted by shorter-term investors.
For your Fund to succeed year in, year out, attracting the right share owners is very crucial.
DIRECTORS
The name of the directors of your Fund who served during the financial year until the date of this report are as follows:-
1. Datuk Ng Peng Hong @ Ng Peng Hay
2. Dato’ Seri Md Ajib Bin Anuar
3. Dato’ Tan Ang Meng
4. Dato’ Sri Syed Ismail Bin Dato’ Haji Syed Azizan
5. Leong So Seh
6. David Loo Kean Beng (Retired on 24.9.2016)
7. Harun Bin Halim Rasip (Retired on 24.9.2016)
| Directors Fees | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total (RM) 315,437 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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4.4 IMPAIRMENT
(a) Impairment of Financial Assets All financial assets (other than those categorised at fair value through profit or loss), are assessed at the end of each reporting period whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset.
For an equity instrument, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment.
An impairment loss in respect of held-to-maturity investments and loans and receivables financial assets is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the fair value reserve.
In addition, the cumulative loss recognised in other comprehensive income and accumulated in equity under fair value reserve, is reclassified from equity to profit or loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale equity instruments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss made is recognised in other comprehensive income.
5. INVESTMENTS
2017 (RM) 2016 (RM)
At market value:-
Quoted securities in Malaysia, at 1.6.2016/2015 126,022,371 145,596,798
Additions during the financial year 17,736,550 6,321,817
Disposals during the financial year (1,809,579) (10,609,805)
Changes in fair value adjustments 35,656,138 (15,286,439)
Quoted securities in Malaysia, at 31.5.2017/2016 177,605,480 126,022,371
Impairment loss recognised due to fair value changes 1,821,075 12,506,585
7. SHORT-TERM DEPOSITS
2017 (RM) 2016 (RM)
Deposits with licensed financial institutions 282,769,489 302,759,351
The deposits with licensed financial institutions of your Fund at the end of the reporting period bore effective interest rates ranging from 3.35% to 3.60% (2016 - 2.90% to 3.65%) per annum.
The deposits with licensed financial institutions have maturity periods ranging from 1 to 3 months (2016 - 1 to 3 months).
Significant Related Party Transactions and Balances
Other than those disclosed elsewhere in the financial statements, your Fund also carried out the following significant transactions with the related parties during the financial year:-
2017 (RM) 2016 (RM)
Fund management fees paid to CDAM 3,263,523 3,075,342
Investment advisory fees paid to CDSB 3,263,523 3,075,342
Prepayment to CDAM and CDSB Note: 6 1,207,808 1,131,427
Thirty Largest Shareholders
No. Name No. of shares Percentage holding (%)
1. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR EMERGING MARKETS COUNTRY FUND 4,891,200 3.4937
2. CHONG AH HIM @ CHONG KUM KWAN 4,711,500 3.3654
3. TUNKU SARA BINTI TUNKU AHMAD YAHAYA 2,800,000 2.0000
4. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR THE WORLD MARKETS UMBRELLA FUND PLC 2,670,500 1.9075
5. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR GLOBAL EMERGING MARKETS FUND 2,273,200 1.6237
6. HSBC NOMINEES (ASING) SDN BHD TNTC FOR UNITED MINE WORKERS OF AMERICA 1974 PENSION TRUST 2,101,300 1.5009
7. ANNHOW HOLDINGS SDN BHD 2,000,000 1.4286
8. MAYBANK NOMINEES (TEMPATAN) SDN BHD YEOH AH TU 1,910,200 1.3644
9. LAM FOOK SHIN 1,832,200 1.3087
10. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR EMERGING MARKETS GLOBAL FUND 1,661,300 1.1866
11. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR SCHOOL EMPLOYEES RETIREMENT SYSTEM OF OHIO 1,574,100 1.1244
12. OCUVAS SDN.BHD. 1,370,000 0.9786
13. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR CORNELL UNIVERSITY 1,357,400 0.9696
14. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR EMERGING MARKETS INVESTABLE FUND 1,284,300 0.9174
15. LEOW KOK MEOW & SONS SENDIRIAN BERHAD 1,250,000 0.8929
16. HENG KIM SIANG 1,238,100 0.8844
17. WONG YOON TET 1,080,000 0.7714
18. VOHRAH - MERICAN SDN BHD 1,078,200 0.7701
19. LAI HUI ENG 1,058,400 0.7560
20. TONG CHONG KONG 1,041,000 0.7436
21. LEE SIEW LIN 1,038,000 0.7414
22. SOON KHIAT VOON 1,002,000 0.7157
23. LOH KIAN CHONG 1,000,000 0.7143
24. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR UNIVERSITY OF PITTSBURGH 961,000 0.6864
25. CARTABAN NOMINEES (ASING) SDN BHD EXEMPT AN FOR RBC INVESTOR SERVICES TRUST (CLIENTS ACCOUNT) 895,900 0.6399
26. YEOH AH TU 832,200 0.5944
27. DB (MALAYSIA) NOMINEE (ASING) SDN BHD BNYM SA/NV FOR DESERET MUTUAL MASTER RETIREMENT PLAN 828,700 0.5919
28. DB (MALAYSIA) NOMINEE (ASING) SDN BHD THE BANK OF NEW YORK MELLON FOR CITIGROUP PENSION PLAN 824,500 0.5889
29. HSBC NOMINEES (ASING) SDN BHD TNTC FOR THE TRUSTEES OF THE HENRY SMITH CHARITY 791,500 0.5654
30. CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD 739,000 0.5279
Total 48,095,700 34.35
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