ANALYSIS OF IDLC AND

LANKABANGLA
MUTUAL FUNDS

GROUP
1|Page
04
 Analysis of IDLC and
LankaBangla Mutual Funds

Financial Markets and Institutions

Course Code: F-304

Prepared for:
Dr. M. Kismatul Ahsan
Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Prepared by:
Group Number: 04
Serial ID Name Marks Obtained
1 23-034 Saima Khan
2 23-037 Arafat Ahmed Nihal
3 23-038 Afruza Akter
4 23-041 Md. Badrul Alam
5 23-043 Md. Azizul Haque

BBA 23rd Batch

Department of Finance

July 20, 2019

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 Letter of Transmittal
July 20, 2019

Dr. M. Kismatul Ahsan

Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Subject: Submission of Report ‘Analysis of IDLC and LankaBangla Mutual Funds’.

Dear Sir:

With great pleasure and honor we are submitting our report titled ‘Analysis of IDLC and
LankaBangla Mutual Funds’ prepared for the course ‘Financial Markets and Institutions (F-
304)’. The report reflects different aspects of analysis of the mutual funds of the two companies
from perspectives of portfolio holdings, investment performance, fund growth and returns.
Though this report has been prepared for educational purpose, it will be an effective one to
achieve the goal in practical field.

We have tried our level best to accommodate as much information and relevant issues as
possible and follow the instructions that you have given us.

We would like to thank you for providing us with the opportunity to prepare this Report.

Sincerely yours,

------------------------------
Saima Khan

On behalf of,
Group: 04
Section: A
BBA 23rd
Department of Finance
University of Dhaka

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 Table of Contents
Executive Summary.........................................................................................................................6
1.0. Background...............................................................................................................................7
1.1. Introduction...........................................................................................................................7
1.2. Origin of the Study...............................................................................................................7
1.3. Objective of the Study..........................................................................................................7
1.4. Scope of the Study................................................................................................................7
1.5. Methodology of the Study....................................................................................................7
2.0. Company Overview..................................................................................................................8
2.1. IDLC Finance Limited..........................................................................................................8
2.2. LankaBangla Finance Limited..............................................................................................8
3.0. Portfolio Holdings....................................................................................................................9
3.1. IDLC Asset Management Ltd...............................................................................................9
IDLC Balanced Fund...............................................................................................................9
IDLC Growth Fund................................................................................................................10
3.2. LankaBangla Asset Management Company Limited.........................................................10
LankaBangla 1st Balanced Unit Fund....................................................................................10
LankaBangla Al-Arafah Shariah Unit Fund..........................................................................11
4.0. Investment Performance.........................................................................................................12
4.1. IDLC Asset Management Company Limited.....................................................................12
4.1.1. Sources of Income.......................................................................................................12
4.1.2. Sector Wise Net Capital Gain......................................................................................13
4.1.3. Sector Wise Dividend Income.....................................................................................14
4.1.4. Interest Income............................................................................................................14
4.2. LankaBangla Asset Management Company Limited.........................................................15
4.2.1. LankaBangla 1st Balanced Unit Fund..........................................................................15
4.2.2. LankaBangla Al-Arafah Shariah Unit Fund................................................................15
5.0. Fund Growth...........................................................................................................................16
5.1. IDLC Asset Management Company Ltd............................................................................16
5.1.1. Balanced Fund.............................................................................................................16
5.1.2. Growth fund.................................................................................................................16
5.2. LankaBangla Asset Management Company Limited.........................................................17

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 5.2.1. 1st Balanced Fund........................................................................................................17
5.2.2 Al - Arafat Shariah Unit Fund......................................................................................17
6.0. Return Estimation...................................................................................................................18
6.1. Return Based on Net Asset Value (NAV)..........................................................................18
6.1.1. IDLC Asset Management Ltd......................................................................................18
6.1.2. LankaBangla Asset Management Company Limited..................................................18
6.2. Return Based on Market Value of Funds...........................................................................19
6.2.1. IDLC Asset Management Ltd......................................................................................19
6.2.2. LankaBangla Asset Management Company Limited..................................................19
6.3. Return on Investment..........................................................................................................20
6.3.1. IDLC Asset Management Ltd......................................................................................20
6.3.2. LankaBangla Asset Management Company Limited..................................................20
7.0. Appendix.................................................................................................................................21

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 Executive Summary
We focused on the analysis of the mutual funds of two asset management companies of the
country: IDLC Asset Management Company Ltd. And LankaBangla Asset Management
Company Limited. The first part is the portfolio holdings of each of the two types of mutual
funds of the company.

Next we analyzed the companies’ investment performance on their different sources of income.
The fund growth of the two companies do not seem to provide a greater picture as the two funds
are only three to four years since inception.

And lastly we calculated and estimated the return on different bases as they seem to provide
different pictures. The return based on NAV has seen a growth as the two companies promise to
yield greater gains to the investors. The report mainly comprises of all these things.

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 1.0. Background
1.1. Introduction

Mutual Funds are a fairly new idea for our country. Mainly an investment company sells shares
of their own and use the proceeds to manage a portfolio of securities. They pool the funds from
individual investors both in primary and secondary market.
Mutual Funds are of two types. Open Ended Funds and Closed Ended Funds. Open Ended Funds
are open to investment for investors at any time. The investors cannot sell the shares back to the
company in the Close Ended Funds. In this report, all the MFs are Open Ended.

1.2. Origin of the Study

The B.B.A program under Department of Finance, University of Dhaka requires submitting a
term paper on a specific topic determined by the course teachers for each course. According to
this rule, our honorable course teacher Md. Tanvir Hasan assigned us a term paper on ‘‘Analysis
of IDLC and LankaBangla Mutual Funds’ for the course Financial Markets and
Institutions (F- 304).

1.3. Objective of the Study

The main objective of the study was

 Learn how to read the annual report

 Learn about Asset Management Companies
 Learn about different aspects of a Mutual Fund

1.4. Scope of the Study

Main scope of this report is that it can be put into practical theoretical aspect of the study into
real life work experience.

1.5. Methodology of the Study

When we started collecting data to prepare this report, we have gained new experiences about
Insurance companies and annual report of a insurance company.
 Primary Data: No primary data was used when making this report.
 Secondary Data: We used data from the portfolio statements and financial statements of
IDLC Asset Management Company Ltd and LankaBangla Asset Management Company
Limited.

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 2.0. Company Overview
2.1. IDLC Finance Limited

IDLC started their journey in 1985 as a single product lease finance company. Now it is
considered as one of the largest multi-product multi-segment Non-Banking Financial Institution
of the country. Today they have over 1400 employees serving over 45000 clients. Their presence
marks over 20 cities, represented by 40 branches.

IDLC Asset Management Ltd. Started as a private limited company and a subsidiary of IDLC
Finance Limited in November 2015. They received their asset management license from
Bangladesh Securities and Exchange Commission in June 2016.

They mainly have two types of mutual funds:

1. IDLC Balanced Fund (launched in the beginning of 2017)

2. IDLC Growth Fund (Launched on February 2018)

2.2. LankaBangla Finance Limited

LankaBangla Finance Limited started its journey long back in 1997 as a joint-venture financial
institution with multinational collaboration having license from Bangladesh Bank under
Financial Institution Act-1993. Now LankaBangla is the country’s leading provider of integrated
financial services including corporate financial services, retail financial services, SME financial
services, stock broking, corporate advisory and wealth management services. The corporation
was enlisted in in both DSE and CSE since 2006.

LankaBangla Asset Management Company Limited (LBAMCL) is the Asset Management

wing of LankaBangla Group. LBAMCL is a fully owned subsidiary of LankaBangla Finance
Limited. The company received its license from Bangladesh Securities and Exchange
Commission (BSEC) on June 2012 to operate as a full-fledged asset management company. It
also received registration certificate from BSEC on December 2016 to act as an Alternative
Investment Fund Manager.

They also have two mutual funds:

1. LankaBangla 1st Balanced Unit Fund (Hybrid Fund) (March 2016)

2. LankaBangla Al Arafah Shariah Unit Fund (Islamic Fund) (May 2018)

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 3.0. Portfolio Holdings
3.1. IDLC Asset Management Ltd.

IDLC Balanced Fund

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IDLC Growth Fund

3.2. LankaBangla Asset Management Company Limited

LankaBangla 1st Balanced Unit Fund

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LankaBangla Al-Arafah Shariah Unit Fund

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 4.0. Investment Performance
4.1. IDLC Asset Management Company Limited

4.1.1. Sources of Income

IDLC Asset Management Company’s (IDLC AMC) income comes broadly from these three
sources named 1. Capital gain, 2. Dividend income, 3. Interest Income.

IDLC AMC invests its fund either in listed company’s stock or invest in banks and financial
institutions as deposit. Investment in stock can help to generate 2 types of return one is capital
gain and the other is dividend income. Interest is the income from deposit source.

As we can see from the following graph that all the 3 types of earnings are significantly
increased in 2019 compare to 2018. Currently the capital market is facing a very drastic scenario.
Last 1 year index is gradually falling. But in this situation IDLC AMC was successful to
generate a huge amount of capital gain. Dividend and interest income also represent a good
performance of the company.

Income Sources
25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0
Capital Gain Dividend Income Interest Income

31-Mar-18 31-Mar-19

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4.1.2. Sector Wise Net Capital Gain

IDLC AMC invests in different securities. But the performance of those sectors are not all good.
Some sectors provide good capital gain some sectors provide negative return. Some companies
in between a particular sector shows significant gain and loss. Among the different sectors Fuel
& Power sector gains higher than all other sectors which is 31%. Next is the Food & Allied
sectors which return is 22% and banking sector also perform well. Most losing sector is the
telecommunication sector. This sector gained a negative return which is 12% and this sector
contains specially GP.

Net Capital Gain

Bank
Textile
14% Pharmacuticals & Chemicals
22%
Financial Institutions
7% Fuel & Power
1% Insurance
4%
9% Telecommunication
Engineering
Food & Allied
12%
0% 31%

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4.1.3. Sector Wise Dividend Income

Dividend is another source of earning of IDLC AMC. Again Fuel & Power sector is the best
performer. About 38% dividend income is came from this sector. Following that the banking
sector is the 2nd largest contributor in the dividend segment which is 27%. Though
telecommunication sector provide a negative return income from dividend from this sector is a
substantial amount. These 3 sectors dividend income is about 83% of total dividend income.

Dividend Income

Bank Textile
Pharmacuticals & Financial Institutions
9%3% Chemicals
27%
Fuel & Power Insurance
18%
Telecommunication Engineering
0%
2%
3% Food & Allied

38%

4.1.4. Interest Income

Deposit in bank and financial institution is both short term and long term. Interest income from
short term deposit is greater than long term interest income. And in 2019 the interest income is
more than 3 times greater than the previous years. So their investment performance is in a good
position.

Interest Income
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Short Term Long Term

2018 2019

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4.2. LankaBangla Asset Management Company Limited

4.2.1. LankaBangla 1st Balanced Unit Fund

Performance of Lanka Bangla 1st Balanced Unit Fund is not satisfactory rather it is poor. Because
the sector wise net capital gain is negative for all the sectors except insurance sector. Only
insurance sector provide a net capital gain. Banking sector is the worst looser following are
telecommunication, fuel & power.

Net Capital Gain

Bank Textile
Pharmacuticals & Financial Institutions
10% Chemicals
3% 23%
Fuel & Power Insurance
21% Telecommunication Engineering
8%
Food & Allied
3% 9%
15% 7%

4.2.2. LankaBangla Al-Arafah Shariah Unit Fund

Sectorial performance of Lanka Bangla Al-Arafah Unit Fund is also in a bad condition. Only
textile sector net capital gain is positive but all the other sector net capital gain is in the red line.
Telecommunication is the highest looser because the price of GP has drastically fall last couple
of month. Overall performance of this unit fund is not good at all.

Net Capital Gain

Bank Textile
Pharmacuticals &
17% 4%5% Chemicals
10%
Fuel & Power
8%
12% Telecommunication Engineering
Food & Allied

45%

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 5.0. Fund Growth
5.1. IDLC Asset Management Company Ltd

Fund growth have been calculated based on the investment made by the company .Here the
growth have been calculated on yearly basis.

5.1.1. Balanced Fund

Year 2016 2017 2018 2019

Taka (Million) 694 559 525 493

It has average growth rate of -8.19%. Investment in growth fund is decreasing day by day.

Taka (Million)
800

750

700
694
650

600

550
559
500 525
493
450

400
2016 2017 2018 2019

5.1.2. Growth fund

The growth fund launched in 2018 with an investment of 209 million and it has decreased to 186
million with the growth rate of -11%

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5.2. LankaBangla Asset Management Company Limited

5.2.1. 1st Balanced Fund

Investment in balanced fund remarkably increased in 2016 from 208 million to 409 million but
in subsequent year it has keep going to decline.

Year 2015 2016 2017 2018

Taka (Million) 208 409 374 316

Taka (Million)
450

400
409

350 374

300 316

250

200
208

150
2015 2016 2017 2018

5.2.2 Al - Arafat Shariah Unit Fund

Shariah fund is increasing at a stable about 5.51%. It has increased to 316 million from 208
million in 4 years.

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 6.0. Return Estimation
6.1. Return Based on Net Asset Value (NAV)

The return based on the Net Asset Value (NAV) of the mutual funds is calculated on the yearly
NAV of the asset management companies. This is done because the mutual funds of the
companies are not listed in the stock exchange. So only their annual NAV is found from their
annual reports and financial statements.

Return is calculated on the cost price of the NAV adjusting for any dividends the mutual fund of
the company received. Below the return estimation is given:

6.1.1. IDLC Asset Management Ltd.

Return Based on Net Asset Value (Yearly)

201 2017 2018 2019
6
Balanced Fund 11.62 11.36 12.99
% % %
Growth Fund 11.42 13.40
% %

The return of IDLC mutual funds show a steady return of more than 10% for the last 4 years. The
growth fund launched in 2018 seems to be receiving much more returns based on the yearly
NAV.

6.1.2. LankaBangla Asset Management Company Limited

Return Based on Net Asset Value (Yearly)

2016 2017 2018 2019
1st Balanced Fund 7.15 30.63 8.99%
% %
Al - Arafah Shariah Unit 11.38 3.62%
Fund %

Lanka Bangla 1st Balanced Fund showed a promising degree of return but this seemed quite
unlikely to grow at a huge rate. The increase was because they received more than quadruple
amount of dividend (BDT 13,888,036) for the year 2017 compared to 2016 (BDT 1,120,000) and
double compared to the year 2018 (BDT 7,934,292).

On the other hand, the shariah unit declined since both the market value of their purchased
securities and the dividends they were going to receive declined at a major rate. This is
devastating for the mutual fund.

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6.2. Return Based on Market Value of Funds

Before we saw how the return of the mutual funds for the Net Asset Value (NAV) had performed
over the years. Next we try to measure the return of the funds relying on the market value of the
shares of the fund and the acquisition cost of the shares adjusting for the dividend of the year.
This helps to determine how the mutual funds have yielded return on the basis of how the shares
performed in the market throughout the years.

6.2.1. IDLC Asset Management Ltd.

Based on Market Value of Fund (Yearly)

201 2017 2018 2019
6
Balanced Fund 12.03% 1.82% 0.55%
Growth Fund 1.59% 2.28%

The balanced fund yielded a greater return in 2017 because the total market value of the mutual
fund was high throughout the year compared to the acquisition cost. Moving on, the market price
seemed to decline over the years to fall and reach for a 0.55% return in 2019 till now.

6.2.2. LankaBangla Asset Management Company Limited

Based on Market Value of Fund (Yearly)

2016 2017 2018 2019
1st Balanced Fund 8.15% 9.98% -1.49%
Al - Arafah Shariah Unit Fund -4.00% -2.74%

We saw 1st Balanced Unit Fund to grow in the second year of its inception in 2016 from the
NAV value. But this really did not have enough effect on the market price because their
unrealized gain from shares was low compared to the capital they began with.

On the other hand, Shariah unit did not seem to do great at all as they seem to have been in a
negative percentage of gain over their running years. Their NAV in the initial year was high
enough because of the unit capital they were able to receive, but soon declined in NAV as their
decisions were not performing well enough.

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6.3. Return on Investment

6.3.1. IDLC Asset Management Ltd.

Return on Investment
201 2017 2018 2019
6
Balanced Fund 3.82% 3.53% 8.60%
Growth Fund 3.90% 8.05%

A boost in the beginning of 2019 of return is seen. This is because the mutual fund has seen a
huge gain on sale of securities in the market. This has landed the more than double ROI for the
year on the balanced fund. The same goes for the Growth Fund as the second year seems to be
the year of the gain from securities for this mutual fund.

6.3.2. LankaBangla Asset Management Company Limited

Return on Investment
2016 2017 2018 2019
1st Balanced Fund 1.76 19.45 7.06%
% %
Al - Arafah Shariah Unit 4.64% 0.38%
Fund

In 2017, 1st Balanced Unit Fund of LankaBangla saw an uprising in the return as they managed
to gain BDT 75 million worth of gain from sale of securities. On the other hand, Al-Arafah
Shariah Unit fund is seeing a downturn of profits from their investment since its inception.

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 7.0. Appendix
5.0. Return Estimation

IDLC Asset Management Ltd.

IDLC Balanced Fund

2017

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2018

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IDLC Growth Fund

2018

LankaBangla Asset Management Company Limited

LankaBangla 1st Balanced Unit Fund

2016

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2017

2018

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LankaBangla Al-Arafah Shariah Unit Fund

2018

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5.0. Return Estimation

IDLC Asset Management Ltd.

IDLC Balanced Fund

Return - Based on Net Asset Value

  2017 2018 2019
NAV per unit (Market
Price) 11.35 10.29 10.89
NAV per unit (Cost Price) 10.52 10.26 10.75
Dividend per share 0.393 1.136 1.256
       
Return 0.1162318 0.11360153 0.1298573
Return (%) 11.62% 11.36% 12.99%

Return - Based on Mutual Fund Market Price

  2017 2018 2019
       
Market Price per
unit 72.16 51.14 47.23
Cost per unit 64.76 51.34 48.22
Dividend per share 0.393 1.136 1.256
       
Return 0.1202951 0.0182231 0.00547455
Return (%) 12.03% 1.82% 0.55%

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IDLC Growth Fund

Return - Based on Net Asset Value

  2018 2019
NAV per unit (Market
Price) 10.26 10.75
NAV per unit (Cost Price) 10.33 10.8
Dividend per share 1.249 1.497
     
Return 0.114166677 0.134023021
Return (%)   11.42% 13.40%

Return - Based on Mutual Fund Market Price

  2018 2019
     
Market Price per
unit 46.86 48.43
Cost per unit 47.35 48.81
Dividend per share 1.249 1.497
     
Return 0.01593052 0.022803049
Return (%)   1.59% 2.28%

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LankaBangla Asset Management Company Limited

LankaBangla 1st Balanced Unit Fund

Return - Based on Net Asset Value

  2016 2017 2018
NAV per unit (Market
Price) 10.71 12.83 11.08
NAV per unit (Cost Price) 10.17 12.31 11.45
Dividend per share 0.187 3.251 1.3998
       
Return 0.071527 0.3063264 0.089940356
Return (%) 7.15% 30.63% 8.99%

Return - Based on Mutual Fund Market Price

      2016 2017 2018
       
Market Price per
unit 34.82 93.37 65.34
Cost per unit 32.37 87.85 67.75
Dividend per share 0.187 3.251 1.400
       
Return 0.081518 0.0998205 -0.01488108
Return (%) 8.15% 9.98% -1.49%

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LankaBangla Al-Arafah Shariah Unit Fund

Return - Based on Net Asset Value

  2018 2019
NAV per unit (Market
Price) 10.38 9.88
NAV per unit (Cost Price) 10.62 10.26
Dividend per share 1.448 0.752
     
Return 0.11378176 0.03621
Return (%)   11.38% 3.62%

Return - Based on Mutual Fund Market Price

  2018 2019
     
Market Price per
unit 62.65 59.54
Cost per unit 66.77 61.99
Dividend per share 1.448 0.752
     
Return -0.040037175 -0.0274
Return (%)   -4.00% -2.74%

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