City of London Investment Group PLC Open letter to the board of icapital.biz Berhad
August 31 2017 - 10:00AM
RNS Non-Regulatory
TIDMCLIG
City of London Investment Group PLC
31 August 2017
CITY OF LONDON INVESTMENT GROUP PLC
TEXT OF LETTER TO ICAPITAL.BIZ BERHAD
(LONDON, 31 August, 2017) - City of London Investment Management
has sent a letter (published in full below) to the board of
icapital.biz Berhad (ICAP:MK) explaining its intention to oppose
the re-election of directors at ICAP's forthcoming AGM.
Background
City of London Investment Group is an institutional fund manager
which specialises in investing in closed-end investment companies.
The firm is authorised and regulated by the Financial Conduct
Authority and registered as an Investment Advisor with the
Securities and Exchange Commission.
For further information, please contact:
Simon Westlake
City of London Investment Group
+44-(0)-20-7711-1552
simon.westlake@citlon.co.uk
Full text of letter
The Directors
icapital.biz Berhad
Lot 6.05, Level 6 KPMG Tower
8 First Avenue, Bandar Utama
47800 Petaling Jaya
Selangor
Malaysia
31 August 2017
Dear Directors
13th Annual General Meeting of icapital.biz Berhad ("ICAP" or
the "Company")
Funds advised by City of London Investment Management Ltd
("CLIM" or "we") are long term investors in ICAP. We first
purchased ICAP shares on 19 May 2010. As at 31 August 2017 we own
24,056,100 shares, 17.18% of the Company. We write to advise that
we will vote against the re-election of Dato' Sri Syed Ismail Bin
Dato' Haji Syed Azizan at the 13th Annual General Meeting on
Saturday, 9 September 2017.
CLIM has, in two open letters to you dated 26 August 2015 and 15
September 2016, expressed concerns regarding ICAP, including
investment performance and the persistently wide discount to net
asset value (NAV). In the absence of action to address these
concerns, which are explained in more detail below, we will
continue to oppose directors' re-election.
a) Poor Investment Returns
We remain disappointed with ICAP's investment performance. CLIM
believes, along with the overwhelming majority of international
investors, that investment returns should be measured on a total
return basis. In our opinion a fair performance comparison should
take account of dividend income. On this basis, the 9.2% increase
in NAV in the 12 months to 31st May 2017 compares poorly with the
12.1% benchmark FTSE Bursa total return over the same period. Over
five years to 31 May 2017 ICAP's 19.5% NAV total return is also
significantly behind the 30.9% benchmark total return over this
period (all performance figures sourced from Bloomberg). We again
urge the Company to report total return comparisons so that share
owners can judge on an informed basis whether ICAP is meeting its
objectives.
b) Wide Discount
ICAP's discount to NAV has averaged over 20% for many years and
this is preventing loyal long term share owners from potentially
realising the full value of their investment. The Chairman, Datuk
Ng Peng Hong @ Ng Peng Hay, wrote in the 2017 Annual Report that
investors "should not be overly concerned" by the discount. CLIM
respectfully disagrees with this approach and urges the Board to
bring forward proposals to deal effectively with the discount
problem.
c) Excessive cash
ICAP's prospectus stated that the Company would invest primarily
in equities listed on Bursa Securities. In recent years, however,
ICAP has been invested predominantly in cash. The Company's cash
exposure as at end May 2017 was 64% and it has been above 50% at
every financial year end since 31 May 2014. The Company has, in
CLIM's opinion, abandoned its principal investment policy in favour
of accumulating an unacceptably high strategic cash position.
The decision to accumulate this strategic cash has not, in
CLIM's opinion, helped create shareholder value. The rate of
interest received has been low, particularly after considering the
management fees which are payable on total net assets, including
cash. The Designated Person assures share owners in ICAP's 2017
Annual Report that "when it is right for the cash level to drop, it
will drop". CLIM believes that cash has been a drag on ICAP's NAV
performance and that share owners deserve a fuller explanation of
why cash remains so high. In CLIM's view it should either be
substantially invested in Bursa Securities or returned to ICAP's
share owners.
Yours sincerely,
City of London Investment Management Limited
Simon Westlake
City of London Investment Group, PLC
http://www.citlon.co.uk/
Simon.Westlake@citlon.co.uk
+44 (0) 20 77111552
This information is provided by RNS
The company news service from the London Stock Exchange
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