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This report is part of my academic program. To obtain the degree of MBA, you will have to fulfill all of your credit hours available in your course. For this reason behind, you need to complete your internship of three months subsequently producing a report addressing all of the issues you achieve in your intern period. I believed that this study helped me to applying my five years acquired knowledge in Business environment of Mutual Funds like Grameen Mutual Fund One, AIMS First Guaranteed Mutual Fund, ICB AMCL Islamic Mutual Fund. This internship program helped me to understand the organizational environment and behavior also. This program helped us for getting practical work and giving me the opportunity to adjust the theoretical knowledge and practical experience. So, I want to give my heartiest thanks to my supervisor to give such opportunity to show my capability and aptitude in this relevant area.
1.2 Motivation of the Study
Internship is a compulsory part of completing the MBA program in our department. For selecting the Mutual Funds as my potential employer as an intern is that Mutual Funds contributes heavily for the retail investors. Since I am a student of finance background, I am interested to apply my acquired knowledge to mutual funds.
1.3 Objective of the Study
The objective of this study is to acquire the practical knowledge. As a business graduate, this institution is one of the others to know all its function subsequently apply my bookish knowledge. In brief the objectives can be narrated as follows• To apply acquired knowledge. • To acquaint myself with the practical aspect of the mutual funds.
1.4 Rational of the Study
This study is important for knowing the overall performance of Mutual Funds. Mutual Funds play a vital role for the retail investor s in Bangaldesh. Because Mutual Funds act as an intender by which it collects funds from the retail investors to acquire huge amount of capital for making investment in diversified portfolio. By this investment Mutual Funds can avoid all sorts of unsystematic risk pertaining to the investment and can achieve the diversified return. Generally retail investors are risk averse investors. They always want to invest in low risk project. But for minimizing the risk it is needle to invest in a large scale of various types of securities. Since it is not possible for the individual investor to collect huge capital, Mutual Funds act on be half of them to collect capital by issuing share and invest that proceed. This study is important for me in academic point of view. Performance measurement is an important aspect for a Financial Analyst which is a dream for every finance student. Since I am a student of Finance, it is undoubtedly true that the internship in Mutual Funds will enhance my proficiency. I have tried my best to measure the performance for Mutual Funds.
Everything has its own limitation. My report is not beyond that. Though I try my best to present myself in this report as a laborious one, there is some ambiguity for preparing my report because of various factors. Factors include the followings: a. Three months time is not available to know a giant organization. b. Unavailability of information to run the mathematical tools. c. The management of Mutual Funds was reluctant to disclose their confidential information because of retaining their privacy. d. Business of the head of the division is also a reason for not the availability of information.
Methodology of the Study
2.1 Data collection Procedure
This report is mainly based on exploratory research and secondary data. Different books L& journals such as the annual reports published by the mutual funds, company’s websites, preceding studies have been used to get an insight; Primary information regarding mutual funds has been gathered through personal interviews of some of the officials of the organization. The head of every department helps me for this regard. Financial performance analysis of mutual funds has been done using the annual reports of the organization. Personal interview is the main way of collecting data.
2.2 Procedure for Data Analysis
In preparing this report I tried my best to follow some methodology for comments & evaluation in any area. These analyses are very root for the research based analysis. I have not considered the chi-square test, t-test, z-test to make this report simple and lack of practical knowledge of using statistical software is one of the bars for preparing this report as like as think tank. My considered tools are as follows: 1Ratio analysis 2Earning per share analyze 3Dividend yield 4Growth rate analyze
For this. all the members of the Mutual Funds were very helpful to provide information. of the Mutual Funds. annual reports enrich my report.To prepare this report I have gone through all the depts.3 Data Collection procedure Primary Sources: Data which are collected directly can be also described as raw data. Getting information from the in.charge of every dept. journals. Secondary Sources: Secondary sources of data are the followings: 1 2 3 4 5 6 Annual reports of the Mutual Funds Various books of the library of Mutual Funds Business Journals Mutual Funds ordinance General information Others 4 . Methodology can be divided into broad categories: 2. & using library.
This acts as an underwriter. The Fund will be providing investment incentives and opportunities in order to help broaden the investment base in Bangladesh. They act mainly an investment bank which focuses individual investment.1 Introduction There are two types of mutual funds in Bangladesh – one is owned & managed by Investment Corporation of Bangladesh (ICB) which is completely Govt. 2000 under the Securities and Exchange Commission (Mutual Fund) Regulations 1997. One of the private mutual funds is AIMS First Guaranteed Mutual Fund. The team-managed all-weather Fund is a 'close-ended capital guaranteed balanced mutual fund' established to enable both institutional and private investors to invest in the Bangladesh capital market. The life of the Fund is five years.Chapter: 3 Asset & Investment Management Services of Bangladesh Limited (AIMS) First Guaranteed Mutual Fund 3. owned & the other is the private mutual funds. 3. 2000 under the Trust Act 1882 and Registration Act 1908. They collect fund from individual by issuing shares subsequently invest that fund in shares making portfolio of securities to mitigate the risk. 5 .2 Background of AIMS First Guaranteed Mutual Fund The Trust Deed of the Fund was registered on January 02. although there are circumstances set out in the Trust Deed where the unit holders can extend the life of the Fund. The SEC registered the Fund on January 27.
. paid semiannually in advance to IDLC. The net exposure. including the sponsors. the Fund will not change the initial capital position by issuing any additional shares or repurchasing existing shares during the life of the fund. will be shared on a pro-rata basis by IDLC and AIMS and there will be an underwriting commission of 1. In compliance with the policy. shall be below the net exposure of the Capital Guarantee Scheme of the Fund. i. 6 . Guarantee Policy The investors. Additionally. where IDLC will pay interest @ 13. representing the final Fund size less future value of margin deposit at maturity. AIMS will not charge any commission on their portion of the exposure. the face value will be paid back at maturity (redemption) even if the per share NAV falls below par at that point of time. the Fund has incorporated hedging mechanism by which there will be a trigger sale by the Fund as and when market price of any security in the portfolio of the Fund falls by 25 percent of acquisition cost. on 50% of the net exposure amount.Close-ended Policy The Fund will adopt a closed-ended policy in its operation.500 (two thousand five hundred) shares.a. compounded semi-annually. provided that at no point of time the portfolio value. the Fund shall place with IDLC an irrevocable margin deposit with a validity of five years.25% p. Face Value and Market Lot For the benefit of small investors.e. The initial subscription amount. amounting to 30 percent of the final fund size.5% p. excluding the margin deposit value at maturity. of the Fund are guaranteed with respect to their initial capital investment on redemption. Under the Scheme. the Face Value of the share of the Fund is fixed at Tk 1 (one) and the market lot constitutes 2.a. The capital of the Fund is fully underwritten at redemption only at the end of the fifth year from the date of listing by IDLC of Bangladesh Limited and AIMS of Bangladesh Limited up to a maximum fund size of Tk 100 million.
the Bangladesh Bank and/or the Controller of Insurance of Bangladesh.3. equity related hybrid instruments like convertible bonds and warrants. if available. (c) The Fund may underwrite public issue of debt or equity securities. (e) Not less than 30 percent of the total assets will be invested in fixed income securities (FIS). The Fund may also invest in unlisted equity securities directly from the issuers (IPO and pre-IPO placement) at the primary market. The Fund will always adopt the investment policy that will ensure the balanced nature. including government notes and bonds. It mostly will focus on preservation of principal and at the same time earn moderate return for the shareholders. It is the intention of the Fund that where investments are made in unlisted securities. The principal investment objective and policies of the Fund as set out above will.3 Investment Objectives and Policy The primary objective of the balanced fund is to achieve capital appreciation as well as earn dividend and interest income through investment in the capital markets of Bangladesh. The Fund may also invest in listed and/or unlisted debt instruments. including the capital guarantee margin. (b) The Fund shall invest only in securities and investments approved by the Securities & Exchange Commission. Most of the investments will be made in the companies listed on the DSE and/or CSE. shall be invested only in transferable securities whether in money market or equity market or privately placed debentures or securitized debts. (d) All Money collected under the Fund. The details of the investment policies are as follows: (a) The Fund expects to be fully (with an insignificant cash margin) invested within 120 days from the date of listing. (f) Maximum of 15 percent of the NAV of the Fund may be invested in unlisted equity and/or debt securities purchased directly from issuers (IPO and Pre-IPO placement) at any point of time. such investments shall be in securities where a listing 7 . except the margin deposit against Capital Guarantee Scheme. The assets of the Fund will be invested principally in equity securities and. be adhered to during the life of the Fund. in the absence of unforeseen circumstances.
however. when investment conditions change. (h) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks.can reasonably be expected within a reasonable period of time. The manager will take a long-term position on such strategic holdings. (p) During periods in which the Investment Manager believes changes in economic. the manager will have the flexibility to use market timing to move between tactical and strategic holdings in any percentage they deem prudent. (l) In order to protect the capital and increase the profit potential. (o) Capital appreciation will be the primary consideration and dividend and interest income will be the secondary consideration in making tactical investments. (j) 40 percent of the total equity investment will be invested in large-cap blue-chip companies. (n) Dividend and interest income will be the primary consideration and capital appreciation will be the secondary consideration in making strategic investments. (m) The Fund will seek to invest in companies. (k) 60 percent of the total equity investment will be invested in small-cap growth companies. The investment objective of the Fund is not fundamental and so may be changed by the AMC and the Trustee. It is not the intention of the Fund to be a provider of 'venture' capital. no assurance or pretence that the Fund will achieve the stated objective. However. 8 . reduce holdings in equity and other securities and invest in short and/or medium-term debt securities or hold cash. (i) In order to increase the profit potential. (g) FIS investment will be made mostly in privately placed unquoted debt or depository instruments of different terms. shareholders would be notified of any material change in the Fund's objective. The manager will take a short-term position on such tactical holdings. which it considers to exhibit good growth potential and have sound management. the Fund may. for temporary defensive purposes. the manager will have the flexibility to use market timing to move between stocks and FIS in any percentage them deem prudent when investment conditions change. There is. financial or political conditions will adversely affect the Fund's portfolio.
Ministry of Industries is the Chairman and Mr. Mr.5 Manager AIMS of Bangladesh Limited Asset & Investment Management Services of Bangladesh Limited. the management company will have the flexibility to use market timing to move between stocks and Fixed Income Securities in any percentage they deem prudent when investment conditions change. M. Sandhani Life Insurance Company Limited 9 . CDC. Alam FCA the Managing Director. DEG. 3. It mostly will focus on preservation of principal and at the same time earn moderate return for the shareholders. Secretary. Ejazul Huq. C.3. 3. the Fund is less risky than the existing all-equity mutual funds available in the market. K. AKFED and Government of Bangladesh. In order to increase the profit potential. The management company will adopt both fundamental and quantitative investing approach for the Fund. Yawer Sayeed is the Managing Director & CEO of the company. Mr. the initiator of the concept. All investment decisions will be backed by thorough in-house fundamental and technical research. 2. IPDC of Bangladesh Limited IPDC is the premier joint venture private sector development finance institution operating since 1981.4 Nature & Style This team-managed all-weather Fund is a closed-end capital guaranteed balanced mutual fund. The company is owned by IFC. M. is the Manager of the Fund. Because of the balanced nature. Monzurul Haque is the Chairman and Mr. The portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks and a mix of fixed income securities.6 Sponsors 1.
Rashid-ul Hasan is the Chairman and Mr. DEG. 5. Sandhani Credit Cooperative Society Limited Sandhani Credit operating since 1998 has established their name in mobilizing and lending funds to the small and medium enterprises. 6. Alam FCA is the Chairman and Mr. M. Major (Retd) Abdul Mannan is an Alternate Director. Mr. KLB. Mr. Pangaea Partners (BD) Limited Pangaea is a joint venture merchant bank with a US investment banking and consulting institution. CBL and SBC. Uttara Finance & Investments Limited Uttara. is a joint venture between Uttara Group and Singapore based investors. 10 . AKFED. 4. It is chaired by Al-Haj Mockbul Hossain MP. 7.Sandhani Life is a leading private life insurance company of the country. Ahasanul Islam Titu MBA is the Vice Chairman and Mr. operating since 1986. Syed Anisul Huq is the Managing Director of the Bank. Khalilur Rahman is the Managing Director. operating since 1993. Sayyed Husain Jamal is the Managing Director. is the pioneer in leasing business in Bangladesh sponsored by IFC. It is chaired by Al-Haj Mockbul Hossain MP. M. Postel is the Chairman and Mr. Eric G. 3. Mr. IDLC of Bangladesh Limited IDLC. Karim the Managing Director. Aminul Islam is the Managing Director. a leasing and financing company. IPDC. C. Mr. A. KDLC. Irshadul Islam the Managing Director. Bangladesh Industrial Finance Co. Southeast Bank Limited Southeast is engaged in commercial banking since 1995. Yussuf Abdullah Harun is the Chairman and Mr. Mr. Golam Kabir is the Chairman and Mr. Ltd BIFC is a newly established finance and leasing company under joint venture with Hong Kong. Mr. 8.
Khorshed Alam. 11 . (a) The Fund shall not invest in securities having unlimited liability. Mr. 3. If a percentage restriction on investment or use of assets set forth below is adhered to at the time a transaction is effected.9 Investment Restrictions The following restrictions are fundamental policies of the Fund that may not be changed without the approval of majority of the Fund's outstanding voting securities. former Governor of Bangladesh Bank.8 Custodian Standard Chartered Bank SCB is a British Bank operating in Bangladesh for over 50 years. (c) Investments by way of privately placed debentures.7 Trustee Bangladesh General Insurance Company Limited (BGIC) BGIC is the first general insurance company of Bangladesh in the private sector operating for the last fifteen years. 3. He along with Mr. (f) The Fund shall not invest more than 20% of the funds in shares. They have been providing custodial services to foreign institutional investors. Towhid Samad is the Chairman & Managing Director of the company. securitized debts and other unquoted debt instruments shall not exceed 40% of the total assets of the Fund. (b) The Fund shall not buy its own shares. debentures or other securities of a single company.3. is in the Board of Trustees. They are experienced and skilled in this line of service. later changes of holding value due to changes in market price movement will not be considered a violation of the restrictions. (d) The Fund shall not invest more than 10% of its assets in any one particular company shares. (e) The Fund shall not own more than 15% of any company’s paid-up capital at any point of time.
000 Southeast Bank Limited 3.000 3. The respective holdings of the sponsors are as follows: Sponsors No.500.500.000.000 20. of Shares Sponsors 20.000.000 2. debentures or other securities in any one industry.000 Total Size of the Fund 50.000.000. (i) The Fund shall not invest in or lend to another scheme under the same Asset Management Company.000 12 .000.000 20.000 Sandhani Credit Co-operative Society Limited 1.000 4.000. 500.000 500.000.000.000 Pangaea Partners (BD) Limited 4.000 Pre-IPO Placement 20.500.000 Uttara Finance and Investments Limited 2.000 shares at Tk 1 each have been subscribed and paid in full by the sponsors. of Shares IPDC of Bangladesh Limited 2.500.000 Taka 2.(g) The Fund shall not invest more than 25% of its funds in shares.000 Subscription from the Sponsors 20.000.000 Bangladesh Industrial Finance Company Ltd.000.000 4.000 Sandhani Life Insurance Company Limited 4.000 Taka 20.000 10.000 50.000 shares of Tk 1 each at par totaling Tk 50.500.000. (h) The Fund shall not involve in option trading or short selling or carry forward transactions. 3.000 2.000.000 1.000 IDLC of Bangladesh Limited 2.000.000 General Investors 10.000.000.000 Total Sponsorship 20.000.000.10 Capital Structure Share Issue The Fund has issued 50.000.000.500.000.000. The total issue has been distributed as follows: Subscribers No.000.
000 5.000 shares at Tk 1 each have been privately placed with the following institutions.000 20.000.000.000. of Shares Consortium of Exchange Members & Clients7 14. NRBs General Public Total Public Offer 1.000.000 10.000 13 .000.000.000 Public Offer 10.000.000 shares at Tk 1 each are being offered to the public for subscription in cash in full on application.000 Taka 14.000.000. as follows: Pre-IPO Investors No.000 500.Pre-IPO Placement 20.000.000 Investment Corporation of Bangladesh (ICB) 500. Certificates will be allocated in the manner placed alongside.000 9.000 Total Private Placement 20.000 Pangaea Partners (BD) Limited 5.000 500.000.000 Green Delta Insurance Company Limited 500.
It has gained valuable experience and confidence in managing a mutual fund efficiently. the first SEC-approved asset management company in Bangladesh. 2001 under the Trust Act. and Registration Act. The life of the Scheme is 10 (ten) years from the date of first listing. The SEC has registered the Trust as a Mutual Fund on August 28. AIMS of Bangladesh Limited. although there is circumstances set out in the Trust Deed where the unit holders can extend the life on maturity of the tenure. Although this Fund has been launched primarily for the benefit of the 4. 4.and small savers of the country may also find this team-managed. The SEC has already approved and registered the Trust as Mutual Fund and provided consent to raise subscription from the investors through Public Offer. 1882. close-ended balanced Fund a dependable investment vehicle. 1908. 14 . 2001. pioneered mutual fund under private initiative. other micro. This encouraged Grameen Bank to give responsibility to AIMS to manage this mutual fund sponsored by the Bank. 2005 to raise subscription from the general investors through public offer. 96% of whom are women.Chapter: 4 Grameen Mutual Fund One 4. 2001 under the Securities and Exchange Commission (Mutual Fund) Rules.3 million borrowers of Grameen Bank.2 Background of initiating a close-end mutual fund The mutual fund is sponsored by the Grameen Bank principally to facilitate micro savers to invest in the country’s capital market instruments.1 Introduction Grameen One is the first scheme of Grameen Mutual Fund One. a trust property registered on May 09. The SEC has also approved the Scheme and provided consent on June 27.
All investment decisions will be backed by thorough in-house fundamental and technical research. as well as the poor people of the country. The portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks and a mix of fixed income securities. By owning units of the Mutual Fund. It mostly will focus on preservation of principal and at the same time earn moderate return for the shareholders. the Fund is less risky than the existing all-equity mutual funds available in the market. 15 . This Fund would enhance the earning potential of the savings of the poor savers by linking them with the national capital market in a structured and transparent way. to connect them with the macro economy. the management company will have the flexibility to use market timing to move between stocks and Fixed Income Securities in any percentage they deem prudent when investment conditions change. they may also be part of owners of the promising enterprises of the country.3 Nature & Style This team-managed all-weather Fund is a closed-end capital guaranteed balanced mutual fund. Not only the poor borrowers of Grameen Bank would be investing in their own income-generating activities. was to create a dependable financial instrument for the poor clients of Grameen Bank. and take advantage of the growth of the economy. Grameen Mutual Fund has been created to fulfill this dream. 4. they can also build their own old-age protection.The vision of Professor Mohammad Yunus. It would also encourage other rural savers to take advantage of this new financial opportunity. In order to increase the profit potential. Because of the balanced nature. founder of Grameen Bank. The management company will adopt both fundamental and quantitative investing approach for the Fund. give them ownership in the leading enterprises.
investors are relieved of the emotional strain associated with the day-to-day management of the fund. However. would be difficult if not impossible to achieve. 4. Moreover. they reduce market volatility by extending support to scrip prices. As a result. • • Mutual funds provide the institutional investors an access to the whole market that. at an individual level. • Mutual funds mobilize the fund and channel them into profitable investment opportunities. securities as well as entirely different markets. 10 years) of the Scheme. given that the funds are long-term investment vehicles. In compliance with the policy. therefore.e. 16 . the amounts of analytical research and study that go into selecting the best securities for a fund portfolio can prove to be overwhelming for the general investor. 000 (taka five thousand) and its multiples on a single BO account of the CDS. the Scheme will not change the capital position by issuing any additional units or repurchasing existing units during the life (i. minimum application amount for Public Offer application shall be for 500 (five hundred) units amounting Tk5. companies. Moreover.4 Competitive Advantages in investing in Grameen One • Mutual funds substantially lower the investment risk of small investors through diversification in which funds are spread out into various sectors. It is always the objective of a fund manager to maximize a fund's return for a given level of risk through tolerable risk-return tradeoff.Close-end policy The Scheme will adopt a close-end policy in its operation. Because funds are professionally managed. and is best left to the experts. Face value and market lot The face value of the units of the Scheme is fixed at Tk10 (taka ten) and since there would be no paper scrip issued against any holding. for trading at the Stock Exchanges under the CDS mechanism one unit of Tk10 each shall comprise the tradable market lot. mutual funds add liquidity to the market. no market lot is necessary and.
being itself a listed security in the Stock Exchanges. The Scheme may also invest in unlisted equity securities directly from the issuers (IPO and pre-IPO placement) at the primary 17 . The laws governing mutual funds require exhaustive disclosure to the SEC as well as the general public. The fund’s stated goal. The investor can pick and choose a mutual fund to match his/her particular needs. or investment objective influences the choice of securities. On the supply side. the demand for blue chip shares thus increases with the operation of the mutual funds. They do all the footwork to uncover opportunities and research them to make sure that the investment is appropriate for the fund. mutual funds’.• • • The investor saves a good deal of transaction costs given that s/he has access to a larger number of securities by purchasing a single unit of a mutual fund. introduces a good and reliable instrument in the capital market for the small but astute investors. since mutual fund investments are primarily in the secondary market stock and bonds bought at the Stock Exchanges. • Mutual funds are one of the most strictly-regulated investment vehicles. The laws also entail continuous regulation of fund operations by the Trustee. 4. On the demand side. It mostly shall focus on generating cash earning and at the same time preservation of capital. mutual funds are designed so that access or exit is easy. where money is tied up for a period of time. Mutual fund is the only vehicle that operates simultaneously both at the demand as well as the supply side of the market.5 Investment objectives and policy The primary objective of the Scheme is to achieve capital appreciation as well as earn dividend and interest income through investment in the capital market of Bangladesh. • Another benefit of mutual fund is liquidity. The assets of the Scheme will be invested both in equity securities and fixedincome securities (FIS). Most of the equity investments will be made in the companies listed on the DSE and/or CSE. Mutual fund units have been one of the most sought-after scrip’s. • Professional fund managers search for the attractive assets and securities. Unlike fixed deposits or CDs. the ability to move money in and out of the investment.
The principal investment objective and policies of the Scheme as set out above will. in the absence of unforeseen circumstances. c) Generally not more than 25% of the assets will be invested in the fixed-income securities (FIS). USA. the Bangladesh Bank and/or the Controller of Insurance of Bangladesh or any other competent authority in this regard. except FIS investments. f) In order to increase the profit potential. be adhered to during the life of the Scheme. the manager will have the flexibility to use market timing to move between stocks and FIS in any percentage they deem prudent when investment conditions change. shall be invested only in transferable securities whether in money market or equity market or privately placed debentures or securitized debts. 18 . including government notes and bonds. i) Capital appreciation will be the primary consideration and dividend and interest income will be the secondary consideration for the trading-security investments. h) The AMC shall categorize the investments either as ‘Trading Securities’ or as’ Available-for-Sale Securities’ as they deem prudent. b) All money collected under the Scheme. e) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks.39 corresponding to the Statement of Financial Accounting Standard (SFAS) No. g) The Scheme will seek to invest in companies. The Scheme may also invest in the listed and/or unlisted debt instruments.market. The details of the investment policies are as follows: a) The Scheme shall invest only in securities and investments approved by the SEC. d) FIS investment may be made in privately placed unquoted debt or depository instruments of different terms. which it considers to exhibit good growth potential and have sound management. The Scheme will always adopt the investment policy that will ensure the balanced nature that is being contemplated. j) Dividend and interest income will be the primary consideration and capital appreciation will be the secondary consideration for the available-for-sale security investments. as per provisions of IAS. 115 of Financial Accounting Standard Board.
financial or political conditions will adversely affect the Scheme's portfolio. AIMS is experienced in corporate and financial advisory services. 19 . The investment objective of the Scheme may be changed by the Trustee and the AMC. and also capable of constructing and managing portfolios of diverse nature and characteristics. AIMS is experienced in establishing and managing Trust Funds. Our Values: To strive for achieving and maintaining the highest ethical and moral standards to earn the trust of our clients and patrons. 4. credit analysis.6 Mission & Vision Statement Our Mission: To be a household name in Bangladesh and be recognized as a reliable companion in the pursuit of wealth creation.k) During periods in which the Investment Manager believes changes in economic. AIMS is also experienced in devising alternative non-traditional corporate finance instruments like asset and mortgage backed securitization. Capabilities: AIMS is experienced in conceiving. including debt and equity valuation. for temporary defensive purposes. developing. launching and marketing appropriate financial instruments for raising and managing capital. AIMS is capable of independently carrying out diagnostic research including micro as well as macro-economic and sectoral research studies. structuring. feasibility studies and conducting due diligence exercise. suiting specific needs. including Venture Capital and Mutual Funds. reduce holdings in equity and other securities and invest in short and/or medium-term debt securities or hold cash. However. AIMS has the capabilities for delivering corporate restructuring and management solutions and services. unit holders would be notified of any material change in the Scheme's objective. the Scheme may. Our Goal: To take the extra mile to meet the customer’s needs through continuous innovation of suitable financial products and offering the best solutions.
among others. due diligence and valuation of pilot enterprise. The five-year closed-end Fund features capital guarantees characteristics. AIMS has floated and managing the Tk 70 million first privately managed usual fund in Bangladesh sponsored by top-ranked institutions representing all he sub-sectors of the finance industry. The Tk 150 million first scheme of the Fund features a minimum assured yield. independent review & privatization plan and documentation. in collaboration with International Consultants (2004). AIMS is engaged as Financial Advisor for the Asian Development Bank ADB) financed Technical Assistance to the Privatization Commission. We are engaged as Consultant Financial Analyst & Process Coordinator of the Asian Development Bank (ADB) for the Project Preparatory Technical Assistance (PPTA) for Small & Medium Enterprises Development and Export Expansion Program (SME DEEP) Loan.7 Major Achievements AIMS has the rare distinction of being the first approved asset management company in Bangladesh under private initiative and remains so far the only one such institution in the country. 20 . which played a pioneering role in enveloping a matured investment culture. Task included. where major task among others. AIMS also has the capabilities of advising and arranging cross-border joint venture undertakings and on mergers and acquisitions as well as strategic holdings and privatization 4. a new concept in Bangladesh (2001). unique in Bangladesh (2000). included conducting international standard due diligence of participating financial institutions with international consultants (2003). AIMS is the SEC registered Asset Manager of the Grameen Mutual Fund One sponsored by the internationally reputed Grameen Bank founded by Professor Mhammad Yunus. AIMS has brought about qualitative changes in the finance sector in general and the capital market in particular through introducing innovative products and new approaches to investment finance in Bangladesh.
AIMS is first to introduce the concept of asset securitization by financing institutions in Bangladesh. AIMS conducted for the Netherlands Development Finance Company (FMO) a due diligence on Dutch-Bangla Bank Limited. AIMS was the 'Consultative Process Coordinator' of the Asian Development and (ADB) for the ‘Finance. Currently engaged in the second phase as a Member of the Core Working Group of the national task force with Bangladesh Enterprise Institute (BEI) in drafting a ‘Code of Corporate Governance’ for Bangladesh (2002-4) AIMS is the Advisor to the Asian Development Bank (ADB) and holder of Power of Attorney for their strategic divestment of equity holding in the joint venture United Leasing Company Limited (ULC). Carried out a diagnostic study for the Asian Development Bank (ADB) and co-authored with the International Financial Specialist a report on ‘Strategic Issues and Potential Response Initiatives in the Finance Industry & Trade Sector (FITS) of Bangladesh’ for them (2001) 21 . a leading non-bank financial institution in Bangladesh. AIMS is a Consultant for a study ‘Comparative Analysis of Corporate Governance in South Asia: Charting a Road Map for Bangladesh’ commissioned by the Department for International Development (DFID) of the United Kingdom (2002). for pricing and eventual public float of the Bank at a premium (2000). Conducted valuation of the company stocks and initiated negotiations with prospective strategic buyers (2002-4). donors and stakeholder groups to discuss issues and potential interventions (2002). We advised the securitization of micro-credit receivables by BRAC. the only joint-venture commercial bank in Bangladesh. the largest NGO in the world. Bridge & Standby Facility (CBSF) at Bangladesh Bank under the Financial Institutions Development Project (FIDP) of the Bank (2002). Industry & Trade Sector (FITS) Integrated Strategy Formulation’ of the Bank in Bangladesh for coordination and dialogue with the government. AIMS was the Consultant of the World Bank for the regional study and report on ‘Asset Securitization of Financial Institutions in Bangladesh’ for the Credit.
22 . including housing and leasing companies. a micro-credit financing institution in Bangladesh that researched possible legal and financial requirements and implications of commercialization of micro-credit institutions as banking or non-banking financial institutions (2002). Prepared a report on ‘Issues and Status of Financing Small & Medium Enterprises in Bangladesh’ for the Asian Development Bank (ADB) and also the background reports and papers for the “Integrated Financial Deepening’. an affiliate of the World Bank that charted a 'road map' for the development of a debt securities market in Bangladesh (1999). Washington (2001). The Managing Director of AIMS acted as the Rapporteur of the breakout session on 'The Role of the Private Sector' at the Seminar on Poverty Reduction Strategy Paper (PRSP) jointly organized by the International Monetary Fund (IMF) and the Government of Bangladesh (2002). AIMS had the honor of revealing a study on 'Asset Securitization in Bangladesh' for high level officials of the Central Bank and the Securities & Exchange Commission at the World Bank Dhaka Office that was also videolinked with the World Bank Head Office. including to Tradecraft (UK) and ECOTA Forum Bangladesh (2003). The Managing Director of AIMS led the 26 member Bangladesh delegation to the South Asia Regional Debt Market Symposium at Sri Lanka. AIMS was engaged as Consultant by the Department for International Development (DFID) of UK for a study on ‘Commercialization Review of Bureau Tangail’. AIMS was Consultant to the Shared Interest plc. At the invitation of the World Bank and the Central Bank. ‘Banking Reform & Development’ and ‘Enterprise Reform & Privatization’ for the Bank (2002). AIMS conducted a high level training program on 'Securitization of Receivables' for the non-bank financing institutions. under auspices of the International Finance Corporation (IFC). under the Financial Institutions Development Program (FIDP) of the World Bank (2001). London for feasibility study on its activity in Bangladesh as part of a Department for International Development (DFID) of UK funded project for Business Support Services (BDS).
We believe in professionalism and therefore maintain firm distinction between ownership and management. brokers/dealers. 23 . DFID and the Commonwealth Secretariat and also attended the publication ceremony of the Asian White Paper on Corporate Governance held at the ADB institute. accountants and bankers as well as international fund managers. donors and technical assistance providers. Seoul sponsored by the Asia Foundation (2004). 4. The Managing Director of AIMS attended the Asian Pension Fund Roundtable sponsored by the Asia Foundation and The Pacific Pension Institute. Tokyo (2003). financiers. We have set very high and clear objectives before us and a goal to venture in to untested grounds. The Managing Director of AIMS attended the 4th and the 5th Asian Workshop on Corporate Governance at Mumbai (2002) and Kuala Lumpur (2003). AIMS is run by a team of expert analysts and capital market & investment banking professionals and is equipped with state-of-the-art computerized automated system. AIMS ensures smooth operation through synergy with other reputed service providers including researchers. to initiate a region network (Bangkok.8 Strength At AIMS we have adopted the AIMR (Association for Investment Management and Research) code of ethics and professional standards as a corporate policy. no director or shareholder of the company or any of their relations are engaged in running the business operation of or are employed with the company. lawyers. 2003) and also attended a workshop on Pension Management and Corporate Governance in residence at the Asian Institute of Corporate Governance (AICG). AIMS maintains a full-time channel of communication and collaborative interaction with multilateral funding agencies. AIMS has developed a highly resourceful research base and all decisions and recommendations are made on the basis of thorough independent fundamental and technical analysis and research findings. Consequently as a matter of policy. as an official delegate sponsored by the OECD.
we publish various other periodic reports. The Managing Director acts as 'Compliance Officer' of the company ensuring the moral and professional standard among the practitioners within the company. Over two hundred thousand recipients worldwide receive the 'Review' every week via e-mail. A 'Chinese Wall' has been developed among different departments for effectively controlling information flow and checking unfair practices like insider trading and protect proprietary interests. 4. AIMS is a career oriented equal opportunity employer and is regarded as a knowledge based institution. AIMS is closely collaborating with leading local and multilateral institutions. Besides. sector researches and commentaries from time to time. International Finance Corporation and the Asian Development Bank. 24 . In order to develop a vibrant debt market in the country. AIMS regularly bring out various research publications to keep the general investors informed and updated. including the World Bank.9 Community Contribution AIMS has contributed to the community through mobilizing the untapped resources to the mainstream economy through indigenously developing appropriate financial products and corporate solutions. AIMS has extended the investment opportunities for the people suiting their own risk tolerances. workshops and training sessions on equity and debt market as well as asset securitization issues to educate and assist the issuers and the investors. apart from our own independent and pioneering efforts in this regard. AIMS has conducted various seminars. The 'Weekly Market Review' is one of such regular complimentary publication.
1983. managing and financing various enterprises. M. which aims to create wealth for ultimate poverty alleviation. M. Grameen Fund has formed a Trustee Committee. The Government of Bangladesh owns 5% of the Bank and the rest 95% is held by the borrowers of the Bank. Hafizuddin Khan and Mr. As the Sponsor.4. Mr. Tobarak Hossain is the Chairman and Professor Muhammad Yunus is the founder Managing Director of the Bank. 4. As the Trustee Grameen Fund.10 Sponsor of the Fund Grameen Bank Grameen Bank is the Sponsor of the ‘Grameen Mutual Fund One’. Established in 1994. In order to properly carry out their responsibilities. Grameen Fund dedicated itself in promoting. Professor Muhammad Yunus is the Chairman and Mr. especially by providing micro credit. Grameen Bank has provided an initial capital of Tk16. Empowering poor people is the ultimate objective of the Bank. for all practical purposes. Grameen Bank was established under the Grameen Bank Ordinance. 25 . a venture capital undertaking of the Grameen family limited by guarantee is the Trustee of the Fund. is the guardian of the Fund and shall be responsible for ensuring compliance as well as the protection of the properties of the Fund solely for the beneficiaries. the Bank has also set the objectives and policy guidelines of the Fund through authoring and executing the Trust Deed and the Investment Management Agreement.5 million to the first Scheme of the Fund. The Government nominates three directors including the Chairman and nine other directors are elected representatives from among the Grameen borrowers. Giasuddin Ahmed. Quazi Sultan Ahmed. Faizur Razzaque. Mr. Mr. operating with an objective to alleviate poverty through financial services. Faizur Razzaque is the Managing Director of this nonprofit company.11 Trustee of the Scheme Grameen Fund Grameen Fund. with Mr.
AIMS is actively involved in developing with the debt market and contractual savings sectors. including portfolio construction and rebalancing. highly qualified in their professed vocation and a majority of them are either returned or expatriate Bangladeshis. Monzurul Haque is the Chairman of the Company. They are also providing custodial service to AIMS First Guaranteed Mutual Fund. The shareholders of the company are all practicing professionals. 4. research analysts and economists to run the outfit. Mr. registration. under the guidelines set in the Trust Deed and the Investment Management Agreement of the Fund. and has also been rendering services in various financial sector development projects of different multilateral and donor agencies. the first and so far the only private sector mutual fund in Bangladesh. AIMS is also responsible for recurring investment activities. 26 .12 Custodian of the Scheme Standard Chartered Bank (SCB) SCB is a UK-based commercial bank operating in Bangladesh for over fifty years. timely settlement. They have been providing the custodial services to the foreign institutional portfolio investors in Bangladesh for the last several years. The core management team has been recruited with experienced managers formerly with leading institutions at home and abroad. floatation and day-to-day management of the Fund.4. They are experienced and skilled in this line of business and enjoy a reputation for confidentiality. reporting. They are responsible for designing. AIMS has the distinction of conceiving and floating ‘AIMS First Guaranteed Mutual Fund’.13 Investment Manager of the Scheme AIMS (Asset & Investment Management Services) of Bangladesh Limited AIMS of Bangladesh Limited is the Asset Management Company (AMC) or Manager of the Fund. It is equipped with a team of expert capital market professionals. M. and collecting corporate announcements for their clients. the first local private-sector mutual fund. structuring. AIMS is the first investment and fund management company of its kind under private initiative in Bangladesh.
g) The Scheme shall not invest more than 25% (twenty five percent) of its total assets in shares. 27 . 2001. e) The Scheme shall not own more than 15% (fifteen percent) of any company’s paidup capital at any point of time. debentures or other securities of a single company.4. c) Investments by way of privately placed debentures. debentures or other securities in any one industry. securitized debts and other unquoted debt instruments shall not exceed 25% (twenty five percent) of the total assets of the Scheme. k) The Scheme shall not borrow fund for investing unless authorized by the SEC. f) The Scheme shall not invest more than 20% (twenty percent) of its total assets in the shares. d) The Scheme shall not invest more than 10% (ten percent) of its assets in any one particular company shares. i) The Scheme shall not invest in or lend to another scheme under the same AMC. h) The Scheme shall not involve in option trading or short selling or carry forward transactions. If a percentage restriction on investment or use of assets set forth below is adhered to at the time a transaction is effected. b) The Scheme shall not buy its own units.14 Investment restrictions The following restrictions are fundamental policies of the Scheme that may not be changed without approval of majority of the Scheme's outstanding voting securities. later changes of holding value due to changes in market price movement or accrued gain in value over time will not be considered a violation of the restrictions. a) The Scheme shall not invest in securities having unlimited liability. j) The Scheme shall not provide term loan or advance to any entity. These are also in line with the Section-56 and the Schedule-V of the Securities and Exchange Commission (Mutual Fund) Rules.
i. fluctuate. (h) The value of the units of the Scheme may. the credit risk of the FIS issuers is also associated with the Scheme. causing difficulty to the Manager to diversify the assets. (c) Stock market activity in Bangladesh focuses on a small number of companies representing a limited number of industries. 28 . which may narrow the opportunity of short term or temporary investments of the Scheme.e. (i) Since the Scheme is a balanced fund. (e) Since Bangladesh lack secondary bond market or product variation as it would have been ideal. including those set forth below.15 RISK PARAMETERS Risk Factors The prospective investors should appreciate that investment in the Scheme involves certain special considerations and risk factors. (g) If maturity of the Scheme is extended by the unit holders at the closing meeting. the Scheme shall invest in both equity and FIS. to obtain a desired diversification of the portfolio or to realize the Scheme's investments at the prices and times that it would wish to do so. (d) The recent stock market trends portray that price of almost all the listed securities move in tandem with the market in the similar direction. there is no firm assurance that the Scheme will achieve all its stated objectives. (b) Since the capital market of Bangladesh is extremely fluctuating. be difficult to invest the Scheme's assets. investment in fixed income securities will be subject to reinvestment risk. In addition. the Manager might not be able to swap between different asset lasses. therefore. there is no guarantee that the market price of units of the Scheme will fully reflect their underlying net asset values. resulting in a potential lack of liquidity and price volatility. i. It may. In addition. as they might desire.. (f) Money market instruments are also not readily available.. in direct correlation with other listed securities. the risk of non-availability of investment opportunity at the current rate at that time.e.4. a high proportion of the equity securities listed on the DSE and CSE are closely held and the number of shares currently available for acquisition by the Scheme may be very limited. which are not necessarily exhaustive or mutually exclusive: (a) Performance of the Scheme is significantly dependent on the macroeconomic situation and the capital market in particular.
in the event of only a handful of securities qualifying as Category-A at the stock exchanges. which may affect the return of the Scheme.650. mutual funds under the SEC (Mutual Fund) Rules. (l) Since unlike the older mutual funds in the market. even at unfavorable market conditions. have restricted the operational leeway of the Fund Manager. 000. (k) The value of the Scheme's assets may be affected by uncertainties such as political or social instability.000 170.000 (taka one hundred seventy million).16 Capital Structure Share Issue The Scheme has issued 17.350. (m) Qualitative and quantitative investment restrictions imposed through the Rules. 4.000 29 .000 10.(j) Despite careful selection of stocks.000.000.000 17.000. of Units 1.000.000 (seventeen million) units of Tk10 (taka ten) each at par totaling Tk170. there is no assurance that the units will be listed with the bourses.500. distributed as follows: Subscribers Sponsors Pre-Public Offer Institutional Placement Public subscription Total Size of the Scheme No. or changes in any law or regulations of the territory. In the unlikely event of non-listing by both the exchanges. ceiling of all these restrictions have created an uneven playing field.000. translating to lower profit.500. 2001 are not allowed to have access to short-term borrowing.000 Taka 16.000 103. Since the older mutual funds in the market do not have such qualitative and quantitative restrictions. (n) Although application will be made to the DSE and CSE for the units for listing. the Scheme will be redeemed prematurely causing opportunity cost to the investors.000 5. the companies may fail to provide expected dividend or make timely disbursements.000 50. the Fund may have to meet its cash needs including dividend payments or meeting pre-IPO placement investment commitments through disposing off its investments. This may greatly curtail the earnings as well as future reinvestment capabilities of the Fund.
000 2.000 500.500.000 1.000.000. Total Private Placement No.000 150.500. Reliance Insurance Ltd.000 2.000.000 100.000 Swadesh Investment Management Ltd.000.000 Taka 4. National Housing Finance and Investment Ltd. (Portfolio) First BSRS Mutual Fund Grameen Capital Management Ltd.000 8.000.000 200.000 30 .000.000 10. (Portfolio) The City Bank Ltd.000 250.500. Investment Corporation of Bangladesh Karnaphuli Insurance Company Ltd.000 1.000 200. Midas Financing Ltd.000 400.000 300.000.000 (taka one hundred three million five hundred thousand) have been privately placed with the following financial institutions including banks.000 3.000 2.500.000.000 150.000.000 1. Grameen Capital Management Ltd.000 500.000.000 500.000 (ten million three hundred fifty thousand) units at Tk10 (taka ten) each. Equity Partners Ltd.350.000 1.000. (Portfolio) Bangladesh Shilpa Rin Sangstha EC Securities Ltd. insurance companies. IDLC of Bangladesh Ltd.000 500.000 500. of Units 400.000 800.000 400.000 2.000 8.000 50. Pragati Insurance Ltd. South Asia Capital Ltd.000.000. non-banking financial institutions and merchant banks: Pre-Public Offer Investors Bangladesh Mutual Securities Ltd. Meghna Life Insurance Ltd. (Portfolio) Green Delta Insurance Ltd. Vanik Bangladesh Ltd.000.Pre-Public Offer Institutional Placement 10.000 100.000 4.500. totaling Tk103.000 1.500.000 4.000. Pangaea Partners (BD) Ltd.000 250.000.000 250. 500.000 10.000.000 2. Sandhani Life Insurance Company Ltd.000 50. (Portfolio) 1. The Trust Bank Ltd.000 250.000 500.000. Prime Bank Ltd.000 12.500.350.000 800.000 2.000 5.000 5.000 1. Equity Partners Ltd. Prime Finance and Investment Ltd.000 10.000.000 500.000 5.000 50.000 5.000 103.200.
Units will be allocated in the manner placed alongside. Units Non Residential Bangladeshis (NRBs) General Public Total Public Offer 500.000 31 .000 (five million) units at Tk10 (taka ten) each are being offered for public subscription in cash in full on application.000.000.000 5.000 4.500.Public Offer 5.
As the conventional Funds invest and draw their income. In Islam. With keeping in view of Islamic sentiment. interest is viewed as usury or riba because of its potential for exploitation of the borrower by the lender. It may be mentioned here that there are over 100 Islamic mutual funds in the global equity markets of which half originated in the Middle East. Islam's prohibition against and charging interest prevent Muslims from investing in securities that draw their income from those activities.1 Introduction Mutual Fund presently is one of the fastest growing sectors through out the world. alcohol etc. has come forward with the proposal to act as sponsor of the ICB AMCL Islamic Mutual Fund. has decided to float a fund which will invest its funds according to the Shariah Law. ICB itself will be the Trustee and Custodian of the fund whereas ICB Asset Management Company Ltd. pornography. will act as the Fund Manager of the said Mutual Fund. ICB capital Management Ltd. In Bangladesh ICB is the harbinger of Mutual Funds. 32 . weapons. ICB and its subsidiary alone floated 11 Mutual Funds in the market. the Islamic Shariah Law forbids any involvement in or ties to gambling. Out of the total 13 Mutual Funds.Chapter: 5 ICB Islamic Mutual Fund 5. tobacco. In addition. from the above mentioned companies and debt securities. These Mutual Funds are basically conventional fund which invest their funds both in equity and debt securities. These funds are managed according to Islamic principles. ICB Asset Management Company Ltd. among others.
2 Advantages in investing in ICB AMCL Islamic Mutual Fund Generally investment in mutual funds enjoys some advantages compared to investment made directly in other securities of the capital market. The laws governing mutual funds require exhaustive disclosure to the regulator and general public. there will be a minimum risk in investment. (vii) Investment in the Fund would qualify for investment tax credit under section 44(2) of the Income Tax Ordinance 1984. the investors will be able to know the performance of the fund and accordingly they can be able to take convenient entry and exit options. the Fund is accepted to be able to achieve the targeted objectives. (vi) The investors can save a great deal in transaction cost as he/she has access to a larger number of securities by purchasing a single unit of mutual fund. this mutual fund will add liquidity to the market. (ii) As the sale proceeds will be invested in the diversified portfolio. (ix) Income will be exempted from tax to a certain level in the hand of the individual investors. (iv) By channel zing small investors saving.5. (viii) Management and operation of mutual funds are subject to prudential guidelines. 33 . (iii) Diversified portfolio of the fund help the small investor access to the whole market which is difficult at individual level. there shall be no scope of haram earnings and as a result the income in the hand of the investors will totally be halal. As a result. (v) As the fund will be professionally managed under prudent guidelines. SEC regularly monitors the performance of such funds. Investors of this mutual fund will be able to enjoy the following advantages:(i) As the Fund will be invested in Sharia compatible securities.
Musharika. Casinos/Gambling. Specifically: i) In Participation Term Certificates. o The sum of cash or interest bearing securities of the investee companies is less than or equal to 33% of the trailing 12 month average market capitalization of the company. the Fund may invest in the remaining companies if: o The total debt of the investee company is equal to or less than 33% of the trailing 12 month average market capitalization of the Company.) (ii) Screening of Acceptable Companies After removing companies with unacceptable primary business activities. Music etc. Insurance and Leasing Companies b) Alcohol c) Pork related products d) Tobacco e) Weapons and Defense f) Entertainment (Hotels. Pornography.5. 2) The Fund may also invest in other Shariah Compliant instruments as and when they are available for investment.3 Investment Objective & Policies The scheme has been designed for a specific sectoral objective i. o The Accounts Receivable is less than or equal to 45% of the Total Assets of the Company. Modaraba Certificates. Cinema. 1) The fund shall invest both in listed and non listed securities. to provide interest free return to the investors by investing the fund only in Shariah compliant instruments. 34 .e. Murabaha. Although no universal consensus exists among contemporary Sharia scholars on the prohibition of companies. While investing in securities the following criteria are to be observed: (i) Primary Selection of Companies The basic business of the company should be in consistence with the Sharia Law. most Sharia boards have advised against investment in companies involved in the activities of: a) Conventional Banks.
AMC will choose broker(s) for the purchase and sale of securities for the Fund’s portfolio. 9) The ownership of the certificates will be changed by CDBL under electronic book entry system and there will be no physical movement or endorsement of certificates. 8). Mudaraba. 3).Term Finance Certificates and all other asset backed securities. 35 . Istisna'a. The Fund will adopt a conservative strategy and will try to out-perform the index through market timing and security selection. the fund shall get the securities purchased or transferred in the name of the mutual fund. 6). Murabaha and Musharika. ii) In contracts. iv) In other instruments that may be allowed by the Rules and confirmed as Shariah Compliant by the Fund's Shariah Advisor from time to time. only the AMC will make the investment decisions and place orders for securities to be purchased or sold by the Fund. (ii) The Fund shall not involve in option trading or short selling or carry forward transactions. 5. iii) In the form of Riba-free cash deposits with Islamic Banks or financial institutions with the object of maintaining sufficient liquidity to meet the day to day requirement and to take advantage of suitable investment opportunities as and when they arise. and establishments issued on the principles of Bai' Mu'ajjal.4 Investment Restrictions In making investment decision the following restrictions should be taken due consideration: (i) The Fund shall not buy its own unit. organizations. A part of the fund will also be used to take advantage of the short term trading opportunities that may arise from time to time. securities or instruments of companies. 5). Bai' Salam. 7). Settlement of transaction will take place as per the customs and practice of the stock exchanges in the country. 4) The AMC will make the investment decisions based on best judgment supported by documents and analysis.
(ICML) was created as part of the restructuring program of ICB under Capital Market Development Program (CMDP) initiated by the Government of Bangladesh (GOB) and the Asian Development Bank (ADB). Although it is a newly created company. (v) The Fund or the ICB Asset Management Company Ltd. of Bangladesh has been issued with a view to carry out the merchant banking activities. 2000. ICB Capital Management Ltd. ICB as holding company. (ICML). However. An independent board consisting members from private and public sectors provides guidance in framing objectives & policies of the company. which involves the assumption of any liability that is unlimited or shall result in encumbrance of the Trust property in any way. company under the companies Act. 36 . 2001 and the gazette notification of Govt. 100.00crore respectively. 1994 with the Registrar of Joint Stock Companies and Firms on 05 December. (iv)The Fund shall not acquire any asset out of the Trust property. Besides. the inter fund transactions can be made through stock exchanges.00 crore and Tk. The company is being managed by high caliber professional people mostly taken from ICB. The company was incorporated as a public Ltd. on behalf of the Fund shall not give or guarantee term loans for any purpose or take up any activity in contravention of the Rules.(iii) The Fund shall not invest in or lend to another scheme under the same Asset Management Company. 5. it has enormous scope of expansion and growth in the field of merchant banking as ICB shall not undertake any new business in this area rather these functions will be carried out by this company. also supervise and control the performance of the company. 8. a subsidiary of ICB will be the sponsor of the Fund.5 Sponsor of the Fund ICB Capital Management Ltd. Registration of the company with the SEC was also obtained on 16 October. The present authorized and paid up capital of the company are Tk.
5. particularly in Merchant Banking. develop the capital market. mobilize savings. 1976 (No. the Investment Corporation of Bangladesh (ICB) itself will act as the trustee and custodian of the Fund. shares and hosts of other merchant bank related activities for the benefit of its clients. supervisory bodies and persons concerned towards the fund.00 crore under the 37 . institutional portfolios including mutual funds and unit fund were also being managed by ICB.000 investors (margin accounts). ICB also acted as underwriter/ manager to the issue to more than 370 companies of which 101 companies are publicly traded companies. The Corporation has long and proven experience in advisory function. XL of 1976) with a view to encouraging and broadening the base of investment. Mutual Funds operations and stock brokerage activities. off loading of govt. (ICB AMCL) was created as part of the restructuring program of ICB under Capital Market Development Program (CMDP) initiated by the Government of Bangladesh and ADB. ICB has been playing a unique role in the development of country’s capital market. Over the years.00 crore and a paid-up capital of Tk. The company was incorporated as a public limited company with an authorized capital of Tk.42 billion in aggregate out of total Tk. the activities of ICB have grown manifold. ICB also manages the only open-end fund in the country. corporate restructuring and engineering. The Investment Corporation of Bangladesh (ICB) was established on 1 October 1976. (ICB AMCL) a subsidiary of ICB will act as the investment manager of the Fund. ICB manages eight funds.2. Out of country’s eleven (11) closed-end mutual funds.1. under “The Investment Corporation of Bangladesh” Ordinance.6 Trustee and Custodian of the Fund In order for maximum trust and confidence of the investors.5. Besides portfolios of over 51.93 billion publicly traded debentures. ICB is the biggest investment bank and the harbinger of mutual funds in the country. ICB Asset Management Company Ltd. 5.7 Investment Manager of the Fund ICB Asset Management Company Ltd. ICB is the trustee and custodian of the ICB AMCL Mutual Fund and ICB AMCL Unit Fund floated recently by the ICB Asset Management Company Ltd. particularly in buying and selling of shares. ICB has acted as trustee to debentures amounting TK. promote and establish subsidiaries for business development & provide for matters ancillary thereto. 100.
2001. 100. Pre-IPO Placement to Institutional Investors: The following institutions have been subscribed Tk.00 each at par: 38 ..000.000/. 2000.000. ICB shall hold all or majority shares of the company and may review business objectives. The total distribution of units shall be as follows: PRE-IPO PLACEMENT Subscription from sponsor ICB Capital Management Ltd.00 each. As per relevant provision of the ICB Ordinance. 1994 with the Registrar of Joint Stock Companies & Firms on 5 December.000 units of Tk.00 for 100.Companies Act.00 each at par.000.100. has been created.000. Necessary Government Gazette Notification has also been obtained on 1st July. 20. the Company is managing one open-end Mutual Fund and one Closed-end Mutual Fund. 5.00 divided into 1. At present. 100. Registration of the company with the SEC was obtained on 14 October.8 CAPITAL STRUCTURE Issuance of unit The paid up capital of the Fund shall be Tk. An independent Board consisting 50 per cent directors from ICB and the rest from private sector.000. has already subscribed Tk.for 200. 00. 2002 to carry out the Mutual Fund operations. The CEO and other key personnel have been deputed to the company from ICB. the sponsor. 100. 100.000 units of Tk.000 units of Tk. supervise and control its performance.
00 each amounting to Tk.Public Offer 10% of the Public Offer i.000 units of Tk. 100. The distribution is as under: Chapter-6 39 . 100. 63.000 units of Tk. 70.000.e.000.00 are being offered to the Non-Resident Bangladeshis (NRBs) and the rest 630.000.00 are being offered to the general public for subscription in cash in full on application.00 each totaling Tk. 7.000.
1 Introduction To analyze the performance of Mutual Funds. financial structure . Although ratios report mostly on the past performances they can be predictive too. we followed second category of comparison.2 Profitability Ratio Profitability ratio allows us to measure the ability of the firm to earn an adequate return on sales. and adjust the business practice accordingly. Ratios are highly important tools in financial analysis that help financial analyst implement plans that improve profitability . Comparison within the industry with one fiscal year Comparison within the industry with different fiscal year. by the firm’s ability to effectively employ its resources. Ratio analysis is my first preference to measure the performance of the organization. liquidity. both in & out of the industry. a method sometimes called trend analysis. Through trend analysis. recording . Ratios can be analyzed in different ways: Comparison within one fiscal year. Profit Margin Ratio 40 . in or in part. Many of the problem s related to profitability can be explained. 6. we can identify trends. Comparison in different fiscal years. good & bad.Performance Analysis of Private Mutual Funds in Bangladesh 6. and provide lead indication of potential problem areas. total asset and invested capital. To analyze the performance of Mutual Funds. We can also compare how ratios stack up against other business. leverage and interest coverage. A. Sometime on the basis of availability and suitability we consider the year of 2006. Our considerable years are mostly from 2003 to 2005. Ratio analysis is primarily used to compare the company’s financial figures over a period of time.
56% 2004 17. AIMS First Guaranteed Mutual Fund: Net Income Sales Pr ofit M arg in = Year Net Profit Income Profit Margin 2003 6. 41 .27% Profit Margin 125. The net profit margin is the indication to the managements ability to operate the business with sufficient success not only to cover from revenues of the period.00% 100.298 10946040 62.00% 0.58% 2005 21037998 21193095 99.848.The profit margin measures the relationship between profit & sales. the expenses of operating the business (including depreciation) and the cost of borrowing fund but also to leave a margin of reasonable compensation to the owners for providing the capital at risk.00% 2003 Year 2004 2005 Figure: Net Income & sales comparison. The above graph states that the profit margin of AIMS First Guaranteed Mutual Fund is increasing successively.394 19821496 86. 1.00% 50.162.00% 75. the cost of merchandise or services. It is a good signal for the investors because it will increase the wealth of the shareholders.00% 25.
36% 30-06-2006 10298 4875501 0.2.00% 75.00% 15-02-2005 31-12-2005 Period of Time 30-06-2006 Figure: Net Income & sales comparison.00% 50.00% 0. 42 . Grameen Mutual Fund One: Pr ofit M arg in = Net Income Sales Year Net Profit Income Ratio 15-02-2005 4500000 6142267 73.21% Ratio 100.00% 25. Though the above graph reveals the decreasing trends of the profit margin but it is not certain that will it be decreasing or increasing.26% 31-12-2005 11949628 14334396 83.
00% 65.16% Profit Margin 75.00% 60.311 9. Return on Asset 43 .961.684.101.580 62.40% 2006 6.3.815.992 7.690 71. B.00% 55.00% 70.00% 2005 Year 2006 Figure: Net Income & sales comparison. The above graph reveals that the profit margin of ICB Islamic Mutual Fund is decreasing successively. ICB Islamic Mutual Fund: Pr ofit M arg in = Net Income Sales Year Net Profit Income Profit Margin 2005 5.
00% 10.00% 2003 Year 2004 2005 Figure: Return on Equity.46% Return on Asset 25.394 90322847 19. AIMS First Guaranteed Mutual Fund: Re turn on Asset = Net Income Total asset Year Net Profit Total assets Ratio 2003 6. 1.Return on asset ratio measures the efficiency with which total assets are employed within the firm.00% 15. 2.848. Grameen Mutual Fund One: 44 . From the above table we see that the return on asset is increasing from 2003 to 2005.162.00% 0.00% 5.00% 2005 21037998 93648989 22.00% 20.83% 2004 17.298 77566848 8.
00% 16. ICB Islamic Mutual Fund: 45 . 3.48% 30-06-2006 10298 174274275 0.46% 31-12-2005 11949628 184308124 6.00% 24. And this is happened because the information of Grameen Mutual Fund One is not available.01% Ratio 32.00% 8.00% 15-02-2005 31-12-2005 30-06-2006 Period of Time Figure: Return on Equity. From the above table we see that the return on asset is decreasing trend but it is not certain that will the return on asset be decreased or increased.Re turn on Asset = Net Income Total asset Year Net Profit Total assets Ratio 15-02-2005 4500000 17671388 25.00% 0.
60% 5.Re turn on Asset = Net Income Total asset Year Net Profit Total assets Ratio 2005 5.50% 5.40% 5. From the above table we see that the return on asset is increasing.564. C.20% 5.101.29% 2006 6.311 111. Definitely this is a good signal for the investors because it will increase their assets.992 107.49% 5.30% 5.434 5.118.684. Return on Equity: 46 .402 5.10% Return on Asset 2005 Year 2006 Figure: Return on Equity.
848.12% 2004 17.11% 25. 2. 1. AIMS First Guaranteed Mutual Fund: Re turn on Equity = Net Income Equity Year Net Profit Equity Ratio 2003 6.Return on equity measures the efficiency with which common shareholders equity is being employed within the firm.394 87162394 19.69% 2005 21037998 91037998 23.162.00% 15.00% 20. Grameen Mutual Fund One: 47 .298 75089482 9.00% 5.00% 0.00% 2003 Return on Equity 2004 Year 2005 Figure: Return on Equity It is recommended from the above graph that the return on equity is increasing from 2003 to 2005.00% 10.
Re turn on Equity =
Net Income Equity
Year Net Profit Equity Ratio
15-02-2005 4500000 16500000 27.27%
31-12-2005 11949628 181949628 6.57%
30-06-2006 10298 170010298 0.01%
32.00% 24.00% 16.00% 8.00% 0.00% 15-02-2005 31-12-2005 Period of Time 30-06-2006
Figure: Return on Equity
It is recommended from the above graph that the return on equity is decreasing successively from 15th February 2005 to 30th June 2006.
3. ICB Islamic Mutual Fund:
Re turn on Equity =
Net Income Equity
Year Net Profit Equity ROE
2005 5,684,992 100000000 5.68%
2006 6,101,311 100000000 6.10%
6.20% 6.00% 5.80% 5.60% 5.40% 2005 Year 2006
Figure: Return on Equity
It is recommended from the above graph that the return on equity is increasing successively from 2005 to 2006.
6.3 Capital Structure Ratio
Capital structure ratio provides insight into the extent to which non- equity capital is used to finance the assets of the firm. 49
1. AIMS First Guaranteed Mutual Fund:
Capital Structure Ratio =
Total Liabilitie s Equity
Year Total Liabilities Equity Ratio
2003 2477366 75089482 3.30%
2004 3160453 87162394 3.63%
2005 2646991 91037998 2.91%
4.00% 3.00% 2.00% 1.00% 0.00%
Capital Structure Ratio
Figure: Capital Structure ratio
The above graph reveals that the AIMS First Guaranteed Mutual Fund increases from 2003 to 2004 then it is decreasing.
2. Grameen Mutual Fund One:
Capital Structure Ratio =
Total Liabilitie s Equity
04 0.025080698 Ratio 0.070993 31-12-2005 2358496 181949628 0.08 0. ICB Islamic Mutual Fund: Capital Structure Ratio = Total Liabilitie s Equity 51 .Year Total Liabilities Equity Ratio 15-02-2005 1171388 16500000 0.02 0 15-02-2005 31-12-2005 Period of Time 30-06-2006 Figure: Capital Structure ratio The above graph reveals that the Grameen Mutual Fund One increases its non equity capital which is 158000000 Tk. 3.06 0.0129624 30-06-2006 4263977 170010298 0.
00% 0.00% Capital Structure Ratio 2005 Year 2006 Figure: Capital Structure ratio The above graph reveals that the ICB Islamic Mutual Fund increases its non equity capital from 2005 to 2006.4 Working Capital / Cash Flow Ratio The higher of this ratio.00% 9. 52 .00% 6. 6.12% 12. the higher the working capital or cash flow generated by the firm in its operations.56% 2006 11118402 100000000 11.Year Total Liabilities Equity Ratio 2005 7564434 100000000 7.00% 3.
Grameen Mutual Fund One: 53 .887064 30-06-2006 10282353 4875501 2.1. AIMS First Guaranteed Mutual Fund: Year Cash flow from operation Incomes Ratio 15-02-2005 5448587 6142267 0.1089839 Ratio 4 3 2 1 0 2005 Year 2006 Figure: Working Capital / Cash Flow Ratio We can state by using the above graph that the working capital to cash flow ratio is increasing from 2005 to 2006. 2. So it is clear that the ICB Islamic Mutual Fund’s ability to generate cash from its operations is increasing.
ICB Islamic Mutual Fund: 54 .5 0 15-02-2005 30-06-2006 Period of Time Figure: Working Capital / Cash Flow Ratio We can state by using the above graph that the working capital to cash flow ratio is increasing from 15th February 2005 to 30th June 2006.Year Cash flow from operation Incomes Ratio 15-02-2005 5448587 6142267 0.5 2 1.887064 30-06-2006 10282353 4875501 2. So it is clear that the Grameen Mutual Fund One’s ability to generate cash from its operations is increasing. 3.1089839 Ratio 2.5 1 0.
Year Cash flow from operation Incomes Ratio 2003 4318411 10946040 39. 6.00% 40.00% 20.45% 2005 652589 21193095 3. AIMS First Guaranteed Mutual Fund: 55 .5 Earning Per Share 1.45% 2004 7224785 19821496 36.00% 0.08% Ratio 50.00% 10.00% 30.00% 2003 Year 2004 2005 Figure: Working Capital / Cash Flow Ratio We can state by using the above graph that the working capital to cash flow ratio is decreasing from 2003 to 2004 slightly but it is decreasing heavily from 2004 to 2005.
24517706 2005 21037998 70000000 0.30 0.848.097833 2004 17. Grameen Mutual Fund One: 56 .162.20 0.298 70000000 0.300543 Earning Per Share(EPS) 0.Year Net Profit No of shares outstanding Earning Per Share(EPS) 2003 6.40 0.10 0. 2.394 70000000 0.00 in2003 in2004 Year in2005 Figure: Earning Per Share The above graph reveals that the earning per share is increasing from 2003 to 2005 successively.
ICB Islamic Mutual Fund: Year 2005 2006 57 .75 31-12-2005 11949628 17000000 0.Year Net Profit No of shares outstanding Earning Per Share 15-02-2005 4500000 1200000 3. It is happened because the number of share outstanding is increasing form 1200000 to 17000000 in 30th June 2006. Earning Per Share 4 3 2 1 0 15-02-2005 31-12-2005 Period of Tim e 30-06-2006 Figure: Earning Per Share We can state that the Earning per Share of Grameen Mutual Fund One shows the higher earning per share for the first 2005 then it is gradually decreasing. 3.000605765 in 30th June 2006.000605765 The earning per share is 3.0.75 Tk at 15th February2005 though it is Tk.7029193 30-06-2006 10298 17000000 0.
Earning Per Share(EPS) 6.00 5. It is happened because the net profit increases from 2005 to 2006.50 5. 6.6 Retention Ratio This ratio is very important for the fund because this is used for the further expansion of the fund.20 6.101.10 6.68 in 2005 though it is Tk.Net Profit No of shares outstanding Earning Per Share(EPS) 5.90 5.40 2005 Year 2006 Figure: Earning Per Share The earning per share of the ICB Islamic Mutual Fund in the above graph shows the increasing trend from 2005 to 2006.80 5.6.684.10 in 2006. 5.311 1000000 6. 1. This indicates how much amount a fund retains in proportion to its total earnings.60 5. This sends a positive signal to the investors because it increases the earnings of them.684992 6.101311 The earning per share is Tk.70 5.992 1000000 5. AIMS First Guaranteed Mutual Fund: 58 .
05% 2006 786.992 5.101.684. Grameen Mutual Fund One: Re tention Ratio = Re tain Earnings This Year Earnings This Year Year Retain earnings Earnings this year Retention Ratio 15-02-2005 4500000 4500000 100.992 12.311 12.89% in 2005 & 2006 respectively.00% 31-12-2005 11949628 11949628 100.89% The above table represents that the retention ratio for the ICB Islamic Mutual Fund is about same for both the year which is 12.303 6.Re tention Ratio = Re tain Earnings This Year Earnings This Year Year Retain earnings Earnings this year Retention Ratio 2005 684.05% & 12.00% 30-06-2006 10298 10298 100.00% The above table represents that the retention ratio for the Grameen Mutual Fund One is hundred percent that means the Grameen Mutual Fund One does not any dividend to its shareholders. ICB Islamic Mutual Fund: Re tention Ratio = Re tain Earnings This Year Earnings This Year Year Retain earnings 2003 5350661 2004 6662394 59 . 2. 3.
64% 2004 17.78% 7.52% 9.13% for 2003 which can be said as very high but it is decreasing the following year in 2004. 6.298 78.13% 17.Earnings this year Retention Ratio 6. Grameen Mutual Fund One: Return on Equity =Net Profit / Equity Year 15-02-2005 Net Profit 4500000 Equity 12000000 ROE 0.375 Calculation of Growth Rate (g): g = Retention Ratio * ROE 37.00006058 0.162.50% 31-12-2005 11949628 170000000 0.7 Growth Rate Growth rate indicates how much a fund will grow over the coming year.52% From the above table we see that the growth rate of the AIMS First Guaranteed Mutual Fund is 7.82% The above table represents that the retention ratio for the AIMS First Guaranteed Mutual Fund is 78.64% & 9.0702919 7. 1.848.848.162.01% 60 . AIMS First Guaranteed Mutual Fund: Year Net Profit Equity ROE g = Retention Ratio * ROE 2003 6.03% 30-06-2006 10298 170000000 0.394 38. And growth is denoted by g. 2.52% for 2003 & 2004 respectively.298 70000000 9.394 70000000 24.
79% respectively. AIMS First Guaranteed Mutual Fund: Year Dividend Yield: Dividend per share Market price per share Dividend Yield Beginning price (P0) Ending price(P1) Yield 2006 7 1.311 100000000 0. 6.684.86% 1.68% & 0.05684992 0.8 Yield Calculation Dividend yield are related to the market’s perception of future growth prospect of the funds Firm’s high growth prospects will generally have lower dividend yields.101. P1 − P0 + Dividend P0 Yeild = 1.57 445.992 100000000 0.04% 61 . ICB Islamic Mutual Fund: Year Net Profit Equity ROE Calculation of Growth Rate (g): g = Retention Ratio * ROE 2005 5.68% 2006 6.06101311 0. 3.01%.57 486.79% The growth rate is increasing from the 2005 to 2006 which is 0. The growth rate is lower because the ICB Islamic Mutual Fund pays higher dividend.The growth rate of Grameen Mutual Fund One in the above table shows that the growth rate is 37.03% growth rate and it is also subsequently decreased in June 2006 which is 0.50% in the first 2005 then in the last 2005 it shows 7.12 1.
4 34. Grameen Mutual Fund One: Year Dividend Yield: Dividend per share Market price per share Dividend Yield: Beginning price (P0) Ending price(P1) Yield 2006 5 14.33% Yeild = P1 − P 0 + Dividend P0 Grameen Mutual Fund One has higher dividend paying fund. So we can say that the growth prospect of this fund is lower which is also proved by the above growth rate this is only 9.4 17.72% 14.52% in 2006.AIMS First Guaranteed Mutual Fund is higher dividend paying fund. 2.01% in 2006. 62 .8 58. So we can say that the growth prospect of this fund is lower which is also proved by the above growth rate which is only 0.
25 0. ICB Islamic Mutual Fund: Year Dividend per share Market price per share Dividend Yield Beginning price (P0) Ending price(P1) Yield 2006 16 131.121904762 111. 63 .25 29.3.79% in 2006.64% ICB Islamic Mutual Fund has higher dividend paying fund.75 131. So we can say that the growth prospect of this fund is lower which is also proved by the above growth rate which is only 0.
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