CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

The Rationale: Massive Persistent Discount:

CDAM RESPONSE IN RED

Fact : There was massive persistent premium from 2005 to 2008.

While the manager has done a good job by delivering a NAV growth which has outperformed the FTSE Bursa Malaysia KLCI Index since inception, we are concerned about the substantial discount to Net Asset Value (NAV) that the fund has traded at and indeed continues to trade at. For the record we attach two charts from the Company 2012 Annual Report: In page 4 of the Annual Report, a gain of 3% in NAV for the financial year, vs. a 1% gain for the FBMKLCI has been reported. However, the Index is not adjusted for dividend yield, which is in excess of 4% p.a., so the actual total return of the Index was in excess of 5.6%. Because the discount on which the Ordinary shares trade widened from 19.5% to 25.5%, the comparative total return to Shareholders was negative 4.5% a total return underperformance of the index of 10.1%.

The dividend of KLCI as at 24 October 2012 is 2.93% only. Despite the fact that the KLCI pays dividend, its performance has lagged that of icapital.biz Berhad, a Fund that has always said it is a non-dividend paying Fund as can be seen even from its first annual report of 2006 onwards. If the KLCI pays no dividend, its underperformance to like icapital.biz Berhad would be even bigger! Laxey Partners analysis of our fund performance has shown their short-term focus, basing their conclusions on only one fiscal year. Since 2005, icapital.biz Berhad has outperformed the KLCI by a massive 115%. Its performance is comparable to that of the surge in gold price gold jumped 199% and icapital.biz Berhad has surged 199% - see chart below.

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

So whilst the Fund Manager received a 13% increase in management fee, the share owners to use a term in the annual report, actually lost 4.5%. This is where the Fund Managers and Shareholders interests diverge. The Fund Managers key performance measurement is the NAV, upon which its management fee is based, whereas for Shareholders, it is the share price which has suffered a widening discount.

Again Laxey Partners has distorted all the facts by focusing only on the very short-term, their undeniable area of expertise. Regarding the fund management fees, our calculations are consistent and transparent, and they are paid out on a quarterly basis, based on the beginning NAV. The annual management fees paid to the fund manager are the sum of the quarterly fees. In some years the management fee growth could be higher than that of NAV and vice versa. Please refer to the table below for reference.

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

Shareholders rely on the Board of their Company to address the issues facing them, which in the case of ICAP are, in our view, predominantly corporate governance related. Laxey has spoken to the Company to take action on the discount to no apparent effect. Laxey has earlier proposed a Resolution to be tabled at this AGM requesting the Board to address the persistent discount problem, but this was rejected by them. In our view, one of the main reasons for the discount in ICAP to exist at such an unreasonable level is the lack of a defined policy to deal with the persistent and widening discount. The global closed end fund industry has over the last decade realised that a substantial discount is not in the interest of its owners the shareholders. Incumbent boards globally have addressed the issue by instigating a series of measures which have collectively reduced both the absolute discount and discount volatility.

Without attending the AGMs and EGM, they reached the conclusion that there is a lack of a defined policy to deal with the persistent and widening discount. Laxey, given their claimed global expertise and knowledge, has proposed a Resolution that cannot be tabled. When Evelyn Ho Lai Ming nominated Andrew Pegge, Lo Kok Kee and Low Nyap Heng as directors, the biodata of the three persons were not attached. The Board of icapital.biz Berhad had to request for their curriculum vitae.
Share buybacks are one of the methods employed globally. In buying back shares cheaply, the Company can enhance its NAV per share for the benefit of all Shareholders. In addition, it should give investors confidence in the NAV, boost the demand for the shares of the Company and ultimately help to close the discount. The Company has cash backing of 99 sen/share as at 31st August 2012. Assuming this is unchanged, on 31st October 2012, with a market price of RM2.3/share and a NAV of RM2.96/share, the net NAV of the noncash portfolio is RM1.97/share against a market valuation net of cash of RM1.31/share, a discount of 33.5%. As a value investor like ICAP, what could be a better investment than buying your own portfolio at such a deep discount? We believe the Board should use an already available method to make a start on tackling the persistent and large discount. Even Warren Buffett, the value investor role model quoted by the Fund Manager, advocates buying back Berkshire Hathaways own shares if they are cheap enough. To quote from Warren Buffett 2011 Shareholder letter At our limit price of 110% of book value, repurchases clearly increase Berkshires pershare intrinsic value. And the more and the cheaper we buy, the greater the gain for continuing shareholders Are we not cheap enough yet?

If Laxey Partners had done their homework, they would have known that the issue of share buyback and other ideas like dividend payment were very extensively discussed and rejected by the shareowners. The Fund Manager had already shown why a share buyback scheme for a closed-end fund in the Malaysian context would not work. We wonder if Laxey Partners had attended the AGMs of icapital.biz Berhad. If share buyback is the magic formula, why is it that after the City of London and Laxey bought 14% of ICAP shares, ICAPs discount became wider and wider? We wonder how limited share buyback can work. Or did the discount become wider and wider because of their buying?

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

Independence of the Board & Corporate Governance Issues:

The Chairman, Tunku Tan Sri Dato Sri Ahmad bin Tunku Yahya, is nonindependent because of his indirect shareholding in Capital Dynamics Asset Management S/B, the Fund Manager of the Company. From 1982 to 1993, he was Group CEO of the Sime Darby Bhd Group and until 2007, was its Deputy Chairman. An Independent Director, Mr. David Loo Kean Beng, started his career with Sime Darby Berhad in 1987 and left in 1997 as Senior Legal Adviser. Another INED, Tunku Abdul Aziz bin Tunku Ibrahim, was at one time, group director of Sime Darby Ltd, the exact period for which has not been specified.

For Tunku Tan Sri Dato Sri Ahmad bin Tunku Yahaya, they have conveniently left out critical information like he was a Director of Bank Negara Malaysia from 1966 to 1995 and the Chairman of the Central Banks Audit Committee from 1989 to 1995. For Tunku Abdul Aziz bin Tunku Ibrahim they have conveniently left out critical information like the fact that he founded the Malaysian Chapter of Transparency International, the global coalition against corruption and in February 2006, Tunku Abdul Aziz Bin Tunku Ibrahim was appointed as Special Adviser to the Secretary General of the United Nations and pioneered the establishment of the UN Ethics Office. Evelyn Ho Lai Ming, the single person who nominated Low Nyap Heng, Lo Kok Kee, and Andrew Pegge, also works as a doctor in a Sime Darby hospital. Therefore, is Evelyn Ho Lai Ming related to the current Board? Tunku Tan Sri Dato Sri Ahmad bin Tunku Yahaya has always been on the Board of icapital.biz Berhad. Michael Wong, another former director of Sime Darby, was also on the Board. At that time there were only 4 Board directors. From 2005 to October 2008, icapital.biz Berhad was trading at a persistent premium.
The present composition of Directors would meet the requirements of the Bursa listing rules, but in terms of corporate governance, is it ideal? Should our Board be filled by a group of Directors with past ties to each other?

Since icapital.biz Berhad was listed in October 2005, it has not bought a single share of Sime Darby. Instead of claiming good corporate governance, actions speak louder than words at Capital Dynamics.
On 1st November, the Company announced the 5 additional nominees for election as Directors of the Company at the forthcoming AGM. Dr. Yin Thing Phee works at Sime Darby Medical Centre Subang Jaya. Dato Tan Ang Meng is the exCEO of the Fraser and Neave Holdings Berhad (F&N). As of th 12 September 2012, ICAP holds RM41m worth of F&N, making it the 4th largest position in its portfolio. Low Nyap Heng is 100% independent of the Company and the Sime Darby network. Lo Kok Kee is 100% independent of the Company and the Sime Darby network. Mr. Pegge is 100% independent of the Company and the Sime Darby network. He is the cofounder and a Director of Laxey. Their profiles are at the end of the letter.

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

First, Andrew Pegge, Lo Kok Kee and Low Nyap Heng have all been nominated by one same person, that is, Evelyn Ho Lai Ming, who holds only 50,000 shares. Secondly, Andrew Pegge and Lo Kok Kee have been working together in the past. For instance, Andrew Pegge and Lo Kok Kee were nominated as directors to United International Securities Limited. Andrew Pegge was appointed as director of Amanah Millenia Berhad, in which Laxey Partners held 15. 4% and Lo Kok Kee held 1,400,000 shares of Amanah Millenia respectively. Furthermore, Lo Kok Kee and Low Nyap Heng were ex-directors of the AMCO United Holdings Ltd, formerly known as Guojin Resources and Jackin International. In addition, Evelyn Ho, Lo Kok Kee and Low Nyap Heng all attended Methodist Boys School. Andrew Pegge has been nominated as Non-Independent Non-Executive Director of icapital.biz Berhad. Lo Kok Kee and Low Nyap Heng were both nominated as Independent NonExecutive Director. However, the 3 of them are associated with each other and are nominated by the same person and have been working together in the past. How independent are Lo Kok Kee and Low Nyap Heng ?
Moving Forward:
We believe that a Board of Directors should bring forward proposals to eliminate or substantially narrow the discount that the shares of the Company trade at relative to their NAV. This is a growing problem for our Company. The Company could, as a minimum, consider implementing a share buyback scheme in accordance with the provisions of Section 67A of the Companies Act, 1965 of Malaysia, in order to give investors confidence and to boost the demand for the shares of the Company. We believe that the Board should concurrently engage advisors to research other methods to permanently remove the substantial discount at which the shares trade. We have lost our confidence in the ability and commitment of the Board to address such an important issue. What Shareholders didnt get a chance to approve was a scheme that could address the discount issue. This could be your only chance to choose between the status quo and a continued discount or a change and the search for a solution to address the discount.

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK Conclusion:

CDAM RESPONSE IN RED

We are long term investors seeking to restore shareholder value and have been investing in the local market since 2002.

If Laxey Partners does not want to liquidate the Fund, does this mean that they want to manage icapital.biz Berhad and get all the Fund Management fees? If Andrew Pegge is the Fund Manager of icapital.biz Berhad, Laxey Partners track record as shown by their Terra Catalyst and Value Catalyst Funds is certainly worrying. Does this then allow us to logically conclude that he will liquidate the Fund and get all the cash for his other Funds? How would this gel with their claim of being a long-term investor?
We are a strong believer in the importance of high and proper standards of corporate governance.

Let the facts speak for themselves. [1]. The banking regulator from Switzerland conducted criminal administrative investigation against Laxey in 2008 and had to pay reparation of 1 million Swiss francs. [2]. Laxey has engaged in empty voting over many years. Empty voting is a practice that is contrary to the basic principles of law and allows a person to abuse a companys voting rights. Empty voting is the practise of acquiring voting rights without owning the shares, mainly through stock borrowing, which results in the true ownership being hidden. [3]. The Securities and Exchange Commission (SEC) of the US found that Laxey had violated an SEC rule. [4]. Andrew Pegges words are inconsistent with his actions. In his multiple-year battle against SGX-listed United International Securities Ltd (UIS), which is known to be part of the UOB stable, he admitted in August 2011 that his point in battling Wee Cho Yaw is to keep this debate going. Is he managing his clients funds or is he managing debates and his personal egos?
We believe the changes in the Board would be in the best interests of all shareholders. The discount that the shares of the Company trade at relative to their NAV simply reflects the weak investor sentiment in the Company.

The discount is due to 3 factors: One, the NAV of ICAP has surged, thanks to the patience and discipline of the Fund Manager in managing the Fund based on a long-term long value investing style. There are two factors, which are temporary in nature. Two, is it the weak sentiment in the Fund? Or is the sentiment generally very weak all over the world? The Straits Times Industrial index, the Shanghai Composite index, the Hang Seng Index and the ASX200 are for example all trading way below their 2007 peaks. So, are these weak indices reflecting the weak investor sentiment in Singapore, China, Hong Kong and Australia, which have been the most vibrant economies globally or are investors generally just concerned over the global economy?

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

Three, the political scene in Malaysia since the surprising 2008 election results has been unsettling. Many events have taken place that have not contributed to building investor confidence.
Our Board should research the means to permanently remove the discount to NAV which our shares trade at, and bring forward proposals to enact those recommendation forthwith.

It would certainly be most interesting to seek from Laxey Partners their ideas to permanently remove the discount to NAV without totally liquidating icapital.biz Berhad.
We believe that by introducing new Directors, the disparity between the current share price and NAV will be addressed to the benefit of all.

While Andrew Pegge, Laxey Partners and associates go around attacking other companies and Funds, their own Funds experience the same issue, except to a worse extent. Look at Laxeys own track record.

Terra Catalyst Fund Performance Since Inception Price NAV FTSE Benchmark -53.14% -28.28% -9.22%

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

100 80 60 40 20 0 2005

Value Catalyst Fund (VCF) Share Prices (Dec 2005 to Jun 2011)

VCF Share Price 2006 2007 2008 2009 2010

0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 -0.5 2008

Terra Catalyst Fund (TCF) Discount/Premium (Feb 2008 to Oct 2012)

Discount/Premium 2009 2010 2011 2012

Profile of Andrew Pegge: Andrew Pegge, a British citizen, is 100% independent of the ICAP.

But Andrew Pegges nomination states that he is a non-independent executive director and his funds hold 6.89% of icapital.biz Berhad.

Besides the above explanation, why do we have zero confidence in Laxey Partners, Andrew Pegge, Lo Kok Kee and Low Nyap Heng? As stated in every annual report, the reason for the Funds existence is to allow long-term shareholders or more aptly called share owners, to

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz

CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD

independence | intelligence | integrity

LAXEY PARTNERS TEXT IN BLACK

CDAM RESPONSE IN RED

benefit from value investing. Investing in your Fund allows the power of compounding to work for you. If we succeed in achieving this, we would have also shown that serious long-term investing in Bursa Securities can offer superior returns.
We have always acted with the understanding that our investors trust us with their hardearned money. We very much value this trust, thus we have put in our best efforts and have made many sacrifices to protect their interests. It saddens us deeply that some would think otherwise. There are many instances of how we have scrimped and saved on expenses because we want, as much as possible, for most of our shareowners invested monies to go fully into their investments, and not into the costs incurred from managing the Fund. There have been expenses of over RM300,000 on marketing and promotion events leading up to the 2005 IPO of the Fund; however, we have not charged any of these expenses to the Fund, even though we could have done so legally and these expenses were borne directly by Capital Dynamics, the Fund Manager. We have been deeply committed to protecting our shareowners interest, to the extent that the Fund Manager did not charge the RM 1.8 million that we could legally charge for the placement fees of the Fund in 2005. This is the reason why upon inception, our NAV was immediately up by 2% after our IPO. One of our late investors said this of us that we are 1% fees, and 99% integrity. From the beginning, all of our annual reports and IPO prospectus are printed in black and white. Why? You may ask. The printing of such necessary material cost money, and we are conscious of the expenses that are incurred, even though these cost savings do not benefit the Fund Manager at all, as all of these expenses would come from the Fund. The expenses incurred for fulfilling the verbal promise made in the 2009 EGM have totalled more than RM1.0 million and not a cent is claimed from the Fund. These are but a few of the many sacrifices that we have made solely for the benefit of our shareowners. As mentioned, it pains us that not only do our efforts go unappreciated, some people question our integrity and ethics. We have always acted in our shareowners best interests, and not only do we act in their interests, we go the extra mile to ensure that they get the best. It is through hard work, sacrifices, and integrity that we have earned our investors trust, build up icapital.biz Berhad and we do not take this responsibility lightly. Trustworthiness and integrity are in our DNA.

TAN TENG BOO CAPITAL DYNAMICS ASSET MANAGEMENT SDN BHD 7 NOVEMBER 2012

16th Floor, Plaza First Nationwide, 161 Jalan Tun HS Lee, 50000 Kuala Lumpur, Malaysia. Tel no : 603-20702106, 2107, 2108. Email : cdam@cdam.biz Website : www.icapital.biz