CASE STUDY

Total Marks: 100 Time: 4 Hours

Instructions:

1. Check that your question paper contains all the exhibits as mentioned in page 3. The consecu-
tive page numbering may be found under the base line at the foot of each page.

2. Use the answer script provided by the Institute. Write your name, roll no., registration no. and
name of the subject on the upper portion of the cover page of the answer script.

3. Candidates are asked not to write any particulars of identification in any other place of the an-
swer script and additional pages if taken.

4. Questions must be answered in English.

5. The answer should be referenced to the relevant workings.

6. Answer script and additional page(s) taken to write answer, used or unused, must not be re-
moved or taken away from the Examination Hall.

1
Requirements & Marks Allocation:

You are Mahinur Rahman, a senior articled student of SSS & Co., Chartered Accountants. The partner of the
firm, Mrs. Shabori Islam FCA as an advisor of DNS Theme Park & Holiday Resort Ltd. has received an e-mail
from Mr. Huang Zing, Chairman, DNS Theme Park & Holiday Resort Ltd. (Exhibit – 1). Mrs. Shabori Islam
FCA has asked you, Mahinur Rahman, to prepare a report covering all the requirements stated in the e-mail of
Mr. Huang Zing.

Requirements:

You are required to prepare a draft report to your principal Mrs. Shabori Islam FCA.Your report should
comprise the following elements:

 An executive summary of your reports

 Your responses to the detailed requirements (a), (b) and (c) set out in Exhibit -1.
 State clearly any assumptions that you make.
Marks Allocation:

All of the marks in the Case Study are awarded for the demonstration of professional skills, allocated broadly as
follows:

Requirements Professional Skills Total

Assimilating Structuring Applying Conclusions Integrative &
and using Problems and Judgment and making multidisciplinary
information solutions recommendati skills
ons
Executive 3 5 4 3 - 15
Summary
Requirement (a) (i) 3 5 3 2 - 13
(ii) 2 6 3 2 - 13
(iii) 4 5 6 4 2 21
Requirement (b) 5 3 6 5 1 20
Requirement (c) 3 6 3 4 2 18
Total 20 30 25 20 5 100

In planning your report, you should be aware that not attempting one of the requirements, including an
executive summary, will have a significantly detrimental effect on your chances of success. In addition, as
indicated above, all four skills areas will be assessed under each of the four elements of your report.
You should be clear that marks are awarded for demonstrating your professional skills, not for reproducing facts
from the case. In order to be successful, you will need to:
 Demonstrate your knowledge of the case material and make use of your analysis.
 Carryout relevant analysis of the problems and structure your proposed solutions.
 Apply your judgment on the basis of the analysis that you have carried out
 Draw conclusions from your analysis and judgment, and develop them into practical commercial
recommendations.
 Ethical issues may cover the following topic-
- Lack of professional independence or objectivity
- Conflict of interest among stakeholders
- Doubtful accounting or commercial practice or market competition or Market proximity
- Inappropriate pressure to achieve a reported result.
 Integrative & multidisciplinary skills may cover the following areas-
- Social and economic impacts with regard to employment, business competitiveness, etc.
- Physical limitations or constraints with regard to Access routes, Traffic patterns, etc.
- Impacts on surrounding development.
- Threats from potential complementary and competitive facilities from others.
- Cyber crimes threat with regard to revenue, reputation, etc.

2
 LIST OF EXHIBITS

Exhibit Description Page

reference

1 E-mail from Mr. Huang Zing, Chairman of DNS Theme Park & 4-7
Holiday Resort Ltd. to Mrs. Shabori Islam FCA, Partner in SSS & Co.,
Chartered Accountants.

2 Extract of Financial Statements of DNS Theme Park & Holiday Resort 8-9
Ltd. for the year ended on 30 June 2012-2016

3 Strategic Planning and Business Expansion Plan 10-11

4 Key Accounting and Audit issues 12-12

5 Business Challenges and Strength of DNS Theme Park 13-13

6 Social and Economic aspects of Tourism in Bangladesh 14-14

7 Crucial factors & steps in decision making for investment in tourism 15-15
sector

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 EXHIBIT – 1
E-MAIL

From : Huang Zing, Chairman, DNS Theme Park & Holiday Resort Ltd.

To : Mrs. Shabori Islam FCA, Partner, SSS & Co. Chartered Accountants

Subject : Evaluation of Business modernization and expansion proposal, investment viability based on
past performances & future prospects of the company.

Date : 20 September 2016

Dear Mrs. Sabira,

Thank you for accepting our offer of appointment as auditor cum advisor of our company, DNS Theme Park &
Holiday Resort Ltd. DNS Theme Park & Holiday Resort Ltd. operates 3 parks in Gazipur, Sylhet and Cox‟s
Bazar. As discussed in our earlier meeting, DNS Theme Park & Holiday Resort Ltd. would like to add 30 new
rides in each park and build 15 new luxury cottages in each resort. Please find below information and extracts of
financial statements of DNS Theme Park & Holiday Resort Ltd. for the year ended 30 June 2012 to 2016
(Exhibits-2) and other relevant information in Exhibits 3 to 10 for your analysis and to draw your conclusion
and recommendations for the requirements stated below:

Basis of Appointment and Fees

We have considered your experience in terms of negotiation with the regulatory bodies including central bank in
Bangladesh. Moreover, your firm acts as the auditor and adviser to Nirman Park Ltd. and Fantasy Kingdom Ltd.
who recently raised capital through initial public offering (IPO) to open two new resorts in Bandarban and
Cox‟s Bazar. Based on these primary considerations we have appointed you as our auditor cum advisor for audit
of the accounts for the year ended 30 June 2016 as well as evaluation of our strategic planning and business
expansion plan and advising on our day to day operational and strategic affairs. In addition, you, the SSS & Co.
Chartered Accountants is also expected to advise the company on close the dividend payment issue for the year
2012 to 2015 with the authorized dealer bank (ABC Bank) and central bank.

Your audit fee will be Tk. 300,000 and fee for evaluation of our expansion plan and services (for obtaining IPO
approval at premium or obtaining bank loan ) is Tk. 1,000,000; and for providing the advisory services for
business operational and strategic decisions and dealing remittance issues is Tk. 100,000 per month for next 12
months.

Shareholdings and key management issue

DNS Theme Park & Holiday Resort Ltd. is incorporated in Bangladesh under Company Act 1994 as a private
limited company in 2008. It is founded by two non-resident shareholders, namely Huang Zing and Yong Chang
Ming. Mr. Huang Zing holds 70 percent shares and Yong Chang Ming holds rest of the shares of Tk. 100
million divided into 1 million shares of Tk. 100 each. The authorized share capital is divided into 2 millions of
shares of Tk. 100 each in 2016. We appointed two independent directors, namely S. Chowdhury and P. Ahmed
in the board wherein undersigned is the Chairman since 2008 and Yong Chang Ming is the CEO of the
company. The sponsor shareholders are living in China and visit Bangladesh frequently under multiple entry
visa for 5 years. The company runs on by the appointed Executive Director along with experienced
executives,although in practice, investment and strategic decisions are made jointly by the directors outside
Bangladesh. Kabir Ahmed is the Finance Manager who is not a qualified accountant but a business graduate
experienced in treasury management. S. Chowdhury is the retired Executive Director of Bangladesh Investment
Development Authority (formerly known as Board of Investment) and P. Ahmed is the experienced economists
and currently hold an executive position in Bangladesh Securities and Exchange Commission (BSEC). P.
Ahmed did not disclose her outside business interest (OBI) to the appropriate authority including her supervisor
or line manager in BSEC.

4
Maintenance of books and preparation of Accounts

DNS Theme Park & Holiday Resort Ltd. does not keep proper books of accounts as per Companies Act 1994
since incorporation. Rather it keeps records of cash receipts and payments, pre-payments and other schedule of
outstanding.

Audit of Accounts for 2008 to 2015

ANSR & Co. has been audited the financial statements of the company for the years ended 30 June 2008 to
2011. From 2012 to 2015 MAC & Co. was the auditor. The auditor, MAC & Co. reported two separate set of
accounts, showing different net profit before tax for the same years. The company submitted one set of audited
accounts showing lesser profit to taxation authority and tax has been assessed up to 2015 accordingly. The
company hopes to do the similar practice for the year 2016 also. Attached Exhibit-2 shows the income
statements submitted to bank for dividend remittance and financing purpose. The said exhibit also shows the
business income shown to Income Tax Authority and basis of assessment order made there against.

We expect that you, SSS & Co. will carry out the statutory audit for DNS Theme Park & Holiday Resort Ltd.
for the year 2016 and will sign-off the same like previous years without any note of “qualification” or reporting
“matters of emphasis”.

Tax Planning

1. The company never made adequate provisions of income tax in the audited financial statements but made
payment of tax outside the audited accounts prepared for submission to Banks for financing and dividend
remittance purpose. The company submitted second set of audited accounts to DCT who made the
assessment orders under section 84 „Best Judgment Assessment‟. The summary of the tax assessment and
demand for tax for the years 2012 TO 2015 has been shown in Exhibit-2. Recently, the undersigned had a
informal meeting with Member- Tax Policy of NBR who shared that even after assessment is finalized,
taxation authority can serve notice for escaped income. We, therefore, will expect that you make due
diligence works for the years 2012 to 2016 and submit a report on the consequence to our company if
Taxation Authority re-open the tax files of our company.
2. MAC & Co. issued the certificate on the status of tax payment to the bank for dividend remittance of 2012.
They have indicated that in future they will not be able to do so. It is expected that as the auditor,
henceforth, you will issue similar certificate for future remittance of dividend.

The Expansion plan and Financing strategy

The Board of Directors (BOD) of DNS Theme Park & Holiday Resort Ltd. is keen to expand business in
Bangladesh by adding 30 rides in each park and constructing 15 new cottages in each park. The funds will be
raised from the IPO or Bank Loan for these expansions. The company uses a range of media to promote its
amenities and any special sales events it may be running. This includes advertising on national TV and radio in
Bangladesh, local radio, newspapers and social media. It also has an in-store magazine, „Your Life‟, and a
loyalty card, „The DNS Theme Park & Holiday Resort Ltd.‟. For detail expansion strategy, please see the
exhibit 3.

Pricing for Public Offering

The competitor companies obtained approval of IPO at premium. The premium range in some cases 40% to
75% depending on their financial strengths and negotiation with the bidders under book building method. DNS
Theme Park & Holiday Resort Ltd. expects approval from BSEC for its premium at a similar rate.

Dividend and status of dividend remittance

The management of DNS Theme Park & Holiday Resort Ltd. expects to distribute at least 75 percent of the
earnings after tax. However, the BOD of the company declared 90% cash dividend for the year ended 30 June
2012.
The ABC bank calculated remitable divided @90% on the paid up capital of Tk. 100 million. Before remitting
the company however paid 15% tax on the remitable dividend. After deducting the dividend tax, the bank
allowed Tk. 76.5 million to remit against the profit earned by the company in 2012 to the non resident
5
shareholders of the company and sought post facto approval of Bangladesh Bank in March 2016. Bangladesh
Bank scrutinized supporting documents attached with the application and informed the ABC Bank as follows:
a) The audited financial statements of the company shown accumulated profit Tk.91,407,701 for the year
ended 30.6.2012. However, Central Bank calculated accumulated profit Tk.86,158,841 for the year
ended June 30, 2012 after setting-off prior years losses.
b) Audited Financial Statements are not prepared in accordance with provisions of IAS/BAS. Even, those
do not show the comparative figures of last year and provision for taxation.

c) The certificate issued by MAC & Co. for payment of dividend is not based on correct remitable profit.

d) To return back the excess remittance within 31 December 2016 from abroad and to inform the central
bank accordingly.

e) Take punishable action against those officers who have remitted dividend without proper examination
of audited financial statements and submitted application to the central bank for seeking post facto ap-
proval of such remittance.

f) Bangladesh Bank will take action against the company, company‟s auditor and the bank, if the bank
fails to take punishable action against the responsible employees of the bank.

The difference between remitable profit calculated by ABC Bank and that of Central Bank is due to profit
diference shown in the two sets of accounts of the company for the year 2011. This has been revealed from an
investigation by ABC Bank as follows:

Basis of Profit Remittance by ABC Bank Central bank’s Calculation

Year Net Profit (Loss) Name of the Year Net Profit Name of the
Auditor (Loss) Auditor
2008 (6,171,296) ANSR & Co. 2008 (6,171,296) ANSR & Co.

2009 (57,720,451) ANSR & Co. 2009 (57,720,451) ANSR & Co.

2010 141,712 ANSR & Co. 2010 141,712 ANSR & Co.

2011 63,667,062 MAC& Co. 2011 58,418,202 MAC & Co.

2012 91,490,674 MAC & Co. 2012 91,490,674 MAC & Co.

Total 91,407,701 Total 86,158,841

Other observations of ABC Bank Ltd. while investigating on the company‟s audited accounts and related
matters may be seen at Exhibit 4.

Credit worthiness of the Company

The DNS Theme Park & Holiday Resort Ltd. is not a rated company by the external credit rating companies in
Bangladesh. Moreover, the company took a 5 years 12% term loan of Tk. 30 million from BBC Bank Ltd.
payable in equal monthly instalment at month end, 3 of which instalments were overdue, because of expenses
incurred for marketing & advertisement, and feasibility research for expansion. In this regard, the board of DNS
Theme Park & Holiday Resort Ltd. expects your assistance to get clean CIB from Bangladesh Bank and get the
loan or IPO proposal approved.

Regulatory Approvals

The proposed expansion plan requires approval from regulatory and other authorities which you will coordinate
to get it done faster to have approval from Bangladesh Securities and Exchange Commission (BSEC) for raising
necessary fund initial public offering (IPO) or CIB approval from Bangladesh Bank for obtaining local currency
bank loan at significantly lower rate from bank.

6
Social works

DNS Theme Park & Holiday Resort Ltd. runs extensive volunteering works for the improvement of the under
privileged people of the country. Under this program, the company arrange health awareness seminar, fire
awareness seminar etc. In 2016 the company did the following:

 The company has paid a donation of Tk.15 lakh to a charitable organization where one of the
executives of DNS Theme Park & Holiday Resort Ltd. is a trustee which was not disclosed.
 The company contributed Tk.3 lakh each year to the Health Program at Char Area of a district from
which one of the key regulator hails from for the free treatment of the poor people in this locality.
 The non resident directors sponsored the study tour of two BBA students of a politically exposed
person (PEP) and politically influenced person (PIP) in China.

You are advised to –

Write up an executive summary of the requirements below:

(a) (i) Submit a report on the consequence to the company if Taxation Authority re-open the tax files of the
company, (ii) Prepare the restated comprehensive income statement reflecting the cumulative correct
tax implications for the year 2016 and (iii) Prepare a draft report advising the viability of the business
expansion plan considering the business performances and growth prospects of DNS Theme Park &
Holiday Resort Ltd. and highlighting the best alternative to finance expansion plan and

(b) Critically comment on the strategic planning of the business and evaluate the strengths, weaknesses,
opportunities and threats (SWOT) of DNS Theme Park & Holiday Resort Ltd. and based on the
SWOT, recommend to the Board with justification, franchising as an alternative to the proposed
business expansion plan of DNS Theme Park & Holiday Resort Ltd.

(c) (i) Assess the economic and social impact of DNS Theme Park & Holiday Resort Ltd., (ii) evaluate the
ethical issues with regard to the proposed expansion and doing business in Bangladesh and (iii)
recommend the probable disciplinary actions would be taken against the unethical professional conduct
of MAC & Co.

I look forward to receiving your draft report on or before 21 December 2016.

Yours sincerely,

Huang Zing
Chairman

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 EXHIBIT – 2

DNS Theme Park & Holiday Resort Ltd.

Balance Sheet
For the years ended on 30 June

Extract of Financial Statements of DNS Theme Park & Holiday Resort Ltd.

A: Name of Auditor MAC & Co. MAC & Co. MAC & Co. MAC & Co. SSS & Co.
B: Year 2012 2013 2014 2015 2016
C: Currency BDT BDT BDT BDT BDT
Capital and Liabilities:
Authorized Capital:
10,00,000 Ordinary Shares of Tk. 100,000,000 100,000,000 100,000,000 100,000,000 -
100 each
20,00,000 Ordinary Shares of Tk. - - - - 200,000,000
100 each
Issued, Subscribed & Paid-up
Capital:
10,00,000 Ordinary Shares of Tk. 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000
100 each fully paid in cash

Share Deposit 314,084,838 314,084,838 314,084,838 314,084,838 314,084,838

Current Liabilities:
Sundry Creditors for expenses 3,412,896 - 167,549,133 121,406,492 115,862,205
Accounts Payable 109,354,901 103,693,884 111,813,943 141,412,181 186,086,724
Profit and Loss Account:
Dividend remitted and tax paid thereon (2012) (90,000,000)

Accumulated Profit 91,407,701 350,243,074 694,675,005 1,110,116,846 1,529,129,670

Total equity and liabilities 618,260,336 868,021,796 1,388,122,919 1,787,020,357 2,155,163,437

Property & Assets:

Fixed Assets: cost less depreciation 154,841,108 141,546,150 140,011,732 190,694,435 180,917,165
Preliminary Expenses 305,930 305,930 305,930 305,930 -
Current Assets:
Sundry Debtors 35,000 35,000 335,072,197 546,426,271 633,657,113
Security Deposit 1,837,693 1,837,693 1,837,693 1,837,693 -
Construction in Progress (Build-
ing) 16,986,053 3,060,585 44,764,471
Advance Income Tax 12,178,740 12,772,144 9,244,409 12,258,384 8,252,753
Stock Goods 182,623,139 364,495,335 330,205,264 283,791,210 344,615,758
Accounts Receivable 66,188,131 52,695,242 64,892,467 100,651,766 117,631,422
Investment in FDR 4,378,286 4,469,279 4,586,075 2,599,016 2,677,479
Cash in hand and at Bank 195,872,309 289,865,023 484,981,099 645,395,067 822,647,276
Total Property & Assets 618,260,336 868,021,796 1,388,122,919 1,787,020,357 2,155,163,437

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 DNS Theme Park & Holiday Resort Ltd.
Income Statements (IS) For the years ended on 30 June

IS for submission to Bank for remittance and Financing purpose (as per 1st set of audited accounts)

A: Name of Auditor MAC & Co. MAC & Co. MAC & Co. MAC & Co. SSS & Co.
B: Year
2012 2013 2014 2015 2016
C: Currency
BDT BDT BDT BDT BDT

Sales 2,907,148,175 2,891,432,100 3,357,291,344 4,039,437,134 3,243,709,287

Less: Cost of services Sold 2,689,380,551 2,519,591,696 2,932,600,917 3,523,372,009 2,708,600,593
Gross Profit 217,767,624 371,840,404 424,690,427 516,065,125 535,108,694
Less: Operating Expenses:
Park expenses 30,271,207 23,120,095 32,721,842 32,745,070 39,294,084
Administrative expenses 62,374,206 64,662,966 38,202,517 53,983,341 62,080,843
Selling and distribution expenses 20,994,168 22,515,978 9,036,076 10,685,540 12,822,647
Financial expenses 1,135,915 2,796,985 414,858 1,826,860 2,009,546
Total Operating expenses 114,775,496 113,096,024 80,375,293 99,240,811 116,207,120
Operating profit 102,992,128 258,744,380 344,315,134 416,824,314 418,901,574
Add: Non operating profit/(Loss) 678,286 90,993 116,797 (1,382,473) 111,250
Total net profit/(Loss) 103,670,414 258,835,373 344,431,931 415,441,841 419,012,824
Less: Advance income tax (12,179,740) - - - -
Profit/(Loss) for the year 91,490,674 258,835,373 344,431,931 415,441,841 419,012,824
Balance transferred from last year (82,973) 91,407,701 350,243,074 694,675,005 1,110,116,846
Balance transferred to bal. sheet 91,407,701 350,243,074 694,675,005 1,110,116,846 1,529,129,670

Note: Tax paid but not reflected in 1st set 37,890,715 75,781,430 113,672,145 159,141,003 160,732,413
of audited accounts.

Information from IS for submission to Income Tax Authority and Tax Assessment Orders (as per 2 nd set of audited accounts)
A: Name of Auditor MAC & Co. MAC & Co. MAC & Co. MAC & Co. SSS & Co.
B: Year 2012 2013 2014 2015 2016
C: Currency BDT BDT BDT BDT BDT
Operating Profit per above accounts 102,992,128 258,744,380 344,315,134 416,824,314 418,901,574
Additional overheads charged in 2nd 37,890,715 75,781,430 113,672,145 159,141,003 160,732,413
set of accounts
Business Income shown in the income 65,101,413 182,962,950 230,642,989 257,683,311 258,169,161
tax return
Disallowable expenditure 16,132,200 16,132,200 - - -
Depreciation as per accounts 19,186,593 16,634,114 16,831,822 22,554,693 21,749,273
Depreciation as per Taxation Authority (25,419,127) (22,877,214) (20,589,493) (18,530,544) (16,677,489)
Deemed Income for estimated additional 122,002,376 134,202,614 147,622,875 162,385,162 178,623,679
Sales and increased GP Ratio by DCT
Taxable business income 197,003,455 328,667,883 394,028,155 445,564,581 465,483,777
Non operating income/(loss) 678,286 90,993 116,797 (1,382,473) 111,250
Assessed Income 197,681,741 328,758,876 394,144,952 444,182,108 465,595,027
Tax Rate 35% 35% 35% 35% 35%
Tax demanded as per assessment order 69,188,609 114,500,980 131,118,747 -
Expected Tax Demand - - - 147,948,552 162,958,260
Note 1: Tax paid are charged as additional overheads in 2nd set of audited accounts.
Note 2: Non-operating income is from bank interest and in 2015, includes bribe paid Tk.15,00,000.

9
 EXHIBIT- 3

Strategic Planning and Business Expansion Plan

Bangladesh government reformed the national tourism policy in 2010. Aims and goals of this policy is to increase
employment, ensure economic development, environmental purity and sustainability. The major objective of the
policy is to develop Eco-tourism through conservation of natural resources and promote well-being of the community,
preservation of cultural values of the local community and their participation and sharing benefits. Government of
Bangladesh launched an act of “Protected areas of tourism and special tourism zone. Bangladesh is the country in the
region that have the least arrivals and revenue earned from tourism industry. Tourism is one of the profitable sectors in
Bangladesh. Tourism sector of Bangladesh is facing many obstacles.

Strategic directions
DNS Theme Pak takes care to monitor the popularity of its rides, shows and other attractions. We do this
through the observation of capacity utilisation and observation of waiting lines, and from customer feedback.
We will upgrade, redesign or replace any attraction that is no longer valued by our customers. We do this con-
sistently across all theme park complexes so that we can continue to claim that each park offers the same experi-
ence regardless of its location.

DNS expansion Program

DNS expansion program includes acquiring 30 new rides and expansion of existing amenities by building 15
cottages in the parks. These rides and new construction of 15 cottages requires 3 acre lands, one acre in each
park. The total investment for expansion is required for:

Acquiring land Tk. 200 million

Modernization of existing cottages Tk. 50 million
For inserting rides Tk. 50 million
Construction of new cottages Tk. 300 million
Total Tk. 600 million
The financing for the expansion can be made either of the following schemes:

Scheme 1: Bank Loan: The management consulted the investment plan with the existing banker for new
project financing who has shown keen interest to extend required fund and issued a Clearance
in Principle (CIP) in this regard. The rate of interest will be one percent lower than the rate of
interest on the loan taken in 2009. However, repayment has to be made in equal yearly instal-
ment in 10 years; OR,

Scheme 2: Public Offering of shares: DNS Theme Park & Holiday Resort Ltd. is keen to go for public
issuing of shares for Tk. 350 million and Tk. 250 million for private placement. The manage-
ment is confident that the public and institutional shareholders will subscribe the IPO offer at
the asking premium in full and Bangladesh Securities and Exchange Commission (BSEC) will
not object thereto.

Revenue & Cost after expansion:

It expected that revenue and cost will go up as follows:
Particulars Existing facilities Expansion
Sales Revenue Increase @2% over previous year Increase @25% over 2016 for first
for next 5 years and thereafter will year of expansion and thereafter will
decrease @1% over previous year increase @10% over first year revenue
for next 5 years. from expansion for next 9 years.
Cost of services Go up @ 5% over previous year for 10% of cost of services of 2016 for
next 10 years. first year of expansion and thereafter
will increase @7% over previous year.
Operating expenses Go up by 10% per annum 15% of 2016 operating expenses for
(Other than finance expenses) the first year of expansion and
thereafter will go up @10% over the
previous year expenses.

10
Market risk and expected return

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as
a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected rate of
return of an asset based on its beta and expected market returns. The average risk free rate of return is 6%. The
expected beta (β) for DNS Theme Park & Holiday Resort Ltd. is 1.25. The average expected market return from
investment in similar securities (comprising of dividend and capital gain yield) is 10% per annum. (Source:
DSE Market review September 5, 2016).

Present value factors of Tk. 1 for 10 years as follows:

Discount Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
rate %
10 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.466 0.424 0.385
11 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352
12 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.360 0.322
13 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295

The market capitalization of all securities listed in DSE Ltd. as on 05 September 2016 was Tk. 2,062,690
million and market P/E Ratio is 11.78 where tourism sector Market Capitalization was Tk. 131,577 million and
sector‟s Price earnings (P/E) ratio was 13.48. The tourism sector‟s dividend yield was 2.00 percent per annum
and Sector‟s 6 months‟ average return was 3.5 percent. Other similar stock‟s market price and EPS in DSE were
as follows:

Sl. Company Face NAV(Taka) Market Price EPS for the year
No. Value 31 Dec. 2015 (June –Dec. 2016: ending 31 Dec. 2016
(Taka) 6-Month Average)
(Taka)
a b c d e F
1 Fantasy Kingdom Ltd. 10 18.27 74.00 4.62
2 Nirman Park Ltd. 10 14.15 75.93 4.88
3 Dream Holiday Ltd. 10 16.95 78.71 5.30
4 Narshindi Resorts 10 23.28 85.87 6.57
5 Sylhet Resorts Ltd. 10 12.15 45.32 2.15

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 EXHIBIT- 4

Key Accounting and Audit issues

ABC Bank noted following observations while investigating the remittance issue of the DNS Theme Park &
Holiday Resort Ltd.:

1. DNS Theme Park & Holiday Resort Ltd. is not keeping proper books for VAT records as per VAT Act
1991 which might be a compliance issue.
2. To strengthen the government revenue collection, government has recently introduced On-Line VAT
Payment Processing which will go live on 1.07.2017. To abide by the new law, DNS Theme Park &
Holiday Resort Ltd. requires upgrading its core transactions system (which may cost about Tk.10,000,000).
3. DNS Theme Park & Holiday Resort Ltd. did not form any formal audit committee (AC). In absence AC
there is no body to review the internal control measures to safeguard the asset of the company and to check
the expenditures incurred by the management.
4. Back-up server for sales and other database is inadequate. The Disaster Recovery (DR) Site of the company
is located very near to its office. Besides, company runs on limited bandwidth resulting to slower network
to access to the sites.
5. Sales revenue is recognized at the time of receiving cash by selling tickets for rides and when the travelers
placed confirmed orders. 10 percent confirmed orders varies their travelling depending on their personal
issue. No booking money was received and hence no money is forfeited at the time of cancelling confirmed
order.
6. The Board of Directors (BOD) in its meeting dated 25 November 2015 declared cash dividend at a rate of
90% of paid up capital for the year ended 30 June 2012. The extract of minutes as follows:
“Resolved that the Managing Director is hereby requested to take necessary steps to arrange the distribution
of the dividend subject to the approval of the Annual General Meeting and also remit the dividend to the
non resident shareholders through our nominated bank – ABC Bank Limited”.
However, the minutes of the AGM dated 30 November 2014 approved the dividend as follows:
“Resolved further that the Managing Director is hereby authorised to take necessary steps to arrange the
distribution of the dividend and also remit the dividend to the non resident shareholders through our
nominated bank – ABC Bank Limited subject to maintaining all legal formalities.”
7. In recent time, cyber hacking has been increased significantly. In case of on-line booking, the hackers can
capture credit card details of the customers. In some cases personal identification of the customers may lost
from the server. As a result, credit card skimming transactions might be increased remarkably. DNS Theme
Park & Holiday Resort Ltd. is exposed to such risks and may loose revenue and reputation in future from
such crimes.

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 EXHIBIT - 5
Business Challenges and Strength of DNS Theme Park
Facilities Offered
DNS Theme Park & Holiday Resort Ltd. arranged number of facilities over children rides and cottage for over-
night stay at site with number of facilities for enjoyment and celebrate special occasions. DNS Theme Park &
Holiday Resort Ltd. also have a big hall room to arrange special party along with other presentation and meeting
facilities.
DNS Theme park Gazipur:
The young and the young at heart to a magical place full of games and activities that are guaranteed to bring a
smile to everyone‟s face. DNS Gazipur are themed to appeal to a wide range of visitors, from families with
young children through to senior citizens. There are rides and amusements, but most of these are designed to be
amusing rather than thrilling so that they can be enjoyed by all visitors. There are theatres and performance are-
as throughout each park. These offer frequent short musical acts performed throughout the day.
DNS Theme park Sylhet
It is intended for thrill seekers. It is famous for its range of rides, many of which are major attractions in their
own right. Most of the rides in DNS Sylhet park are accessible to teenage children, although some of the more
spectacular rides are restricted to those aged 18 and over. The visitors to this park tend to be families with older
children, adult couples and groups of teenagers and young adults.
DNS Theme park Cox’s Bazar
DNS Cox‟s Bazar has a marine theme, even though the parks are not necessarily situated by the sea. DNS
Cox‟s Bazar parks combine entertainment with education. Each has a large aquarium that offers visitors an op-
portunity to study many species of fish and other marine life. There are also rides and other play activities,
which are on a smaller scale than those at DNS Gazipur and DNS Sylhet, but nevertheless cater for all ages.

The entertainment and tourism has become very important for human being. Today, all people of all ages want
have some recreation, entertainment and tourism in their busy life. In spite busy schedule, everybody wants to
have joy and fun. Apart from the personal and social life, the national and world economy is also getting huge
benefit from the hospitality, entertainment and tourism. There are many countries in the world, where all most
totally rely on entertainment and tourism.

Today, having family fun and joy in Amusement park, Water park & Theme parks, pass leisure times in resorts,
rest houses and holiday homes have become major items of amusement, recreation, entertainment and
tourism. Children and youngsters love to have fun through various rides of theme, water and amusement parks.
Adults normally like to spend leisure times in resort and holiday homes in touch with nature.

Acquiring land, now a days, is not very easy in Gazipur, Sylhet and Coxe‟s Bazaar surrounding the parks. Addi-
tional facilitation cost may be required to have lands and political powers may be required to acquire the land.

Health, safety and security

The Board of Directors of DNS has worked extremely hard to promote a healthy and happy culture for parks
complexes to ensure the public‟s dreams are met in a safe environment. The directors have more than fulfilled
their roles and it is their commitment that has brought us success. Our health and safety record for customers
and employees is superb and we will continue to monitor this carefully in the future. Recently Holy Artison
event in Gulshan, Dhaka of hosting foreigners and also local people have some negative impact on travelling to
parks.

Corporate social responsibility

DNS is committed to strong corporate social responsibility and donate substantial sums to deserving children‟s
charities and other good causes. DNS keeps carbon emissions under review and try to reduce them every year as
well as offset them as much as possible by planting trees.

DNS People
DNS people are at the heart of the organisation. DNS people are committed for making the complexes success-
ful.
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 EXHIBIT -6

Social and Economic aspects of Tourism in Bangladesh

Tourism can bring many economic, social and environmental benefits, particularly in rural areas and developing
countries, yet mass tourism is also associated with negative effects. Tourism can only be sustainable if it is
carefully managed so that probable negative effects on the host community and the environment are not
permitted to outweigh the financial benefits.

Economic aspect of tourism: Tourism can provide direct jobs to the community, such as tour guides and hotel
housekeeping. Indirect employment is generated through other industries like agriculture, food production and
retail. Infrastructure development and visitors‟ expenditure generates income for the local community and can
lead to the alleviation of poverty. Sometimes jobs created by tourism are often seasonal and poorly paid, yet
tourism can push up local property prices and the cost of goods and services. Place of tourism can be affected by
terrorism.

Contribution of tourism in the Bangladesh economy

According to World Travel and Tourism Council (WTTC) report (2016), The total contribution of travel and
tourism was 4.4% of GDP in 2015 and is expected to grow 7.9% to 4.5% of GDP in 2016. It is forecasted to rise
by 6.5% per annum to 4.7% of GDP by 2024. Notable that, total contribution consists of direct, indirect and
induced contribution. Travel and Tourism generated 228,500 jobs directly in 2015 and this is forecasted to grow
by 4.0% in 2016-2017. This includes employment by hotels, airlines, travel agents and other passenger
transportation services. It will increase by 2.7% per annum on average over the next ten years. The total
contribution of Travel and Tourism to employment was 2.8% of total employment in 2015. This is forecasted to
rise to 3.9% of total employment in 2016. By 2024, travel and tourism are forecasted to support 4.2% of total
employment.

Social aspect of tourism: In addition to the revenue, tourism can bring about a real sense of pride and identity
to communities. It allows them to look at their history, and community identity. This helps the local residents to
maintain their tradition and culture. Visitor‟s behavior can have a detrimental effect on the quality of life of the
host community. For example, crowding and congestion, drugs and alcohol problems can occur. Interaction with
tourists can also lead to an erosion of traditional cultures and values.

Environmental aspect of tourism: Tourism provides financial support for the conservation of ecosystems and
natural resource management, making the destination more authentic and desirable to visitors. Sometimes
tourism poses a threat to a region‟s culture and natural resources, through overuse.

Entertainment, bar, Disco club

There are two clubs inside each park, live music club and nightclub where different celebrity came in to
perform. It opens every day from 9 pm to 3 am with small room facilities inside to have personal with friends,
and between guest. In addition, each year, the club organizes a remarkable number of Cultural and
Entertainment events suiting the taste of all members (club issued member cards for special discount to those
who are regular to the club) of different ages and their respective families. The club frequently provides musical
entertainment to its members, with an array of varied, accomplished artists.

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 EXHIBIT - 7

CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT IN TOURISM SECTOR

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into con-
sideration certain key elements. For starting an amusement park critical factors that should be considered before
the launch of the project are described below:

Number of guests/visitors to the park will determine the financial success of the project. The entrepreneur
should analyze the minimum percentage of population that will have to mobilize out of the total population to
achieve a steady flow of visitors to the park. In order to do this, the entrepreneur should analyze existing com-
peting amusement facilities in the target city.

Looking at the size of investment and potential for this amusement park, it is advised that the facility is set up in
those districts/cities of the country that have a population of over 10 million people. In that case one would have
to attract only 2-3% of the total country population in one time per year, who would visit the park for successful
running of the facility. This translates into a figure of approximately 8,000 to 16,000 visitors per day. Will earn
a revenue of 8,000 people/day X average 500 Tk. X 365 days in a year = 1,460,000,000. Upper class & upper
middle class will enjoy the value added services with spent a lot of money for their refreshments, will also give
a great achievement on revenue.

Another aspect linked with the revenue generating capacity of the project is the spending power of the potential
visitors in a specific district to visit the Theme Park. Average per capita income in Bangladesh is USD 1295/yr
(i.e. BDT. 284/day). In case the project is being considered in the premises of the capital of Bangladesh (Dhaka
City Corporation) with the expectation of required number of visitors having higher average per capita income,
it would create relaxation about the viability of the project/venture. It is estimated that the average spending per
visitor per visit will exceed average two day‟s income of that visitor. This fund will come from their savings for
their recreation for one time or multiple times, in context of relaxation from the daily urban life. This will pro-
vide an important quantitative tool to select the location of setting up an amusement park and to calculate aver-
age revenues.

Selection of rides is an important factor in the popularity of an amusement park. Rides are classified according
to the thrill level they provide. High, moderate and children rides are three broad categories for rides. It is rec-
ommended that the final selection of rides should be in line with the targeted market segment and should have a
balance of the various levels of thrill factors. Moreover, the selection of rides will also depend on the location of
the project. For an urban center with a population of over 16 million, introduction of new versions and non-
traditional rides are advisable.

In addition to rides, provision of other facilities for the visitors also plays a major role in the popularity of the
amusement park. Adequate wash rooms, sitting area, accessible ticketing counters, facilities for clean drinking
water, food and beverages shop, and provisions for visitors‟ guidance and assistance are some of the basic facili-
ties that should be incorporated in the amusement park.

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