Professional Documents
Culture Documents
Introduction
1.1 Introduction
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.
1.5 Limitations
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.
Chapter: 2
Methodology of the Study
To prepare this report I have gone through all the depts. of the Mutual Funds. Getting information from the in- charge of every dept. & using library, journals, annual reports enrich my report. Methodology can be divided into broad categories:
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
Chapter: 3
Asset & Investment Management Services of Bangladesh Limited (AIMS) First Guaranteed Mutual Fund
3.1 Introduction
There are two types of mutual funds in Bangladesh one is owned & managed by Investment Corporation of Bangladesh (ICB) which is completely Govt. owned & the other is the private mutual funds. They act mainly an investment bank which focuses individual investment. This acts as an underwriter. They collect fund from individual by issuing shares subsequently invest that fund in shares making portfolio of securities to mitigate the risk. One of the private mutual funds is AIMS First Guaranteed Mutual Fund.
Close-ended Policy The Fund will adopt a closed-ended policy in its operation. In compliance with the policy, the Fund will not change the initial capital position by issuing any additional shares or repurchasing existing shares during the life of the fund. Guarantee Policy The investors, including the sponsors, of the Fund are guaranteed with respect to their initial capital investment on redemption. The initial subscription amount, i.e., 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 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. Under the Scheme, the Fund shall place with IDLC an irrevocable margin deposit with a validity of five years, amounting to 30 percent of the final fund size, where IDLC will pay interest @ 13.5% p.a. compounded semi-annually. The net exposure, representing the final Fund size less future value of margin deposit at maturity, will be shared on a pro-rata basis by IDLC and AIMS and there will be an underwriting commission of 1.25% p.a. on 50% of the net exposure amount, paid semiannually in advance to IDLC. AIMS will not charge any commission on their portion of the exposure. Additionally, 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, provided that at no point of time the portfolio value, excluding the margin deposit value at maturity, shall be below the net exposure of the Capital Guarantee Scheme of the Fund. Face Value and Market Lot For the benefit of small investors, the Face Value of the share of the Fund is fixed at Tk 1 (one) and the market lot constitutes 2,500 (two thousand five hundred) shares.
can reasonably be expected within a reasonable period of time. It is not the intention of the Fund to be a provider of 'venture' capital.
(g) FIS investment will be made mostly in privately placed unquoted debt or depository instruments of different terms. (h) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks. (i) In order to increase the profit potential, 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. (j) 40 percent of the total equity investment will be invested in large-cap blue-chip companies. The manager will take a long-term position on such strategic holdings. (k) 60 percent of the total equity investment will be invested in small-cap growth companies. The manager will take a short-term position on such tactical holdings. (l) In order to protect the capital and increase the profit potential, the manager will have the flexibility to use market timing to move between tactical and strategic holdings in any percentage they deem prudent, when investment conditions change. (m) The Fund will seek to invest in companies, which it considers to exhibit good growth potential and have sound management. (n) Dividend and interest income will be the primary consideration and capital appreciation will be the secondary consideration in making strategic investments. (o) Capital appreciation will be the primary consideration and dividend and interest income will be the secondary consideration in making tactical investments. (p) During periods in which the Investment Manager believes changes in economic, financial or political conditions will adversely affect the Fund's portfolio, the Fund may, for temporary defensive purposes, reduce holdings in equity and other securities and invest in short and/or medium-term debt securities or hold cash. The investment objective of the Fund is not fundamental and so may be changed by the AMC and the Trustee. However, shareholders would be notified of any material change in the Fund's objective. There is, however, no assurance or pretence that the Fund will achieve the stated objective.
3.5 Manager
AIMS of Bangladesh Limited Asset & Investment Management Services of Bangladesh Limited, the initiator of the concept, is the Manager of the Fund. Mr. Monzurul Haque is the Chairman and Mr. Yawer Sayeed is the Managing Director & CEO of the company.
3.6 Sponsors
1. IPDC of Bangladesh Limited IPDC is the premier joint venture private sector development finance institution operating since 1981. Mr. K. M. Ejazul Huq, Secretary, Ministry of Industries is the Chairman and Mr. C. M. Alam FCA the Managing Director. The company is owned by IFC, CDC, DEG, AKFED and Government of Bangladesh. 2. Sandhani Life Insurance Company Limited
Sandhani Life is a leading private life insurance company of the country, operating since 1993. It is chaired by Al-Haj Mockbul Hossain MP. Mr. Ahasanul Islam Titu MBA is the Vice Chairman and Mr. M. A. Karim the Managing Director. 3. Pangaea Partners (BD) Limited Pangaea is a joint venture merchant bank with a US investment banking and consulting institution. Mr. Eric G. Postel is the Chairman and Mr. Irshadul Islam the Managing Director. 4. IDLC of Bangladesh Limited IDLC, operating since 1986, is the pioneer in leasing business in Bangladesh sponsored by IFC, DEG, AKFED, KDLC, KLB, IPDC, CBL and SBC. Mr. C. M. Alam FCA is the Chairman and Mr. Aminul Islam is the Managing Director. 5. Southeast Bank Limited Southeast is engaged in commercial banking since 1995. Mr. Yussuf Abdullah Harun is the Chairman and Mr. Syed Anisul Huq is the Managing Director of the Bank. 6. Uttara Finance & Investments Limited Uttara, a leasing and financing company, is a joint venture between Uttara Group and Singapore based investors. Mr. Rashid-ul Hasan is the Chairman and Mr. Sayyed Husain Jamal is the Managing Director. 7. 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. It is chaired by Al-Haj Mockbul Hossain MP. 8. Bangladesh Industrial Finance Co. Ltd BIFC is a newly established finance and leasing company under joint venture with Hong Kong. Mr. Golam Kabir is the Chairman and Mr. Khalilur Rahman is the Managing Director. Major (Retd) Abdul Mannan is an Alternate Director.
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3.7 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. Mr. Towhid Samad is the Chairman & Managing Director of the company. He along with Mr. Khorshed Alam, former Governor of Bangladesh Bank, is in the Board of Trustees.
3.8 Custodian
Standard Chartered Bank SCB is a British Bank operating in Bangladesh for over 50 years. They have been providing custodial services to foreign institutional investors. They are experienced and skilled in this line of service.
(g) The Fund shall not invest more than 25% of its funds in shares, debentures or other securities in any one industry. (h) The Fund shall not involve in option trading or short selling or carry forward transactions. (i) The Fund shall not invest in or lend to another scheme under the same Asset Management Company.
Subscription from the Sponsors 20,000,000 shares at Tk 1 each have been subscribed and paid in full by the sponsors. The respective holdings of the sponsors are as follows: Sponsors No. of Shares IPDC of Bangladesh Limited 2,500,000 Sandhani Life Insurance Company Limited 4,000,000 Pangaea Partners (BD) Limited 4,500,000 IDLC of Bangladesh Limited 2,500,000 Southeast Bank Limited 3,000,000 Uttara Finance and Investments Limited 2,000,000 Sandhani Credit Co-operative Society Limited 1,000,000 Bangladesh Industrial Finance Company Ltd. 500,000 Total Sponsorship 20,000,000 Taka 2,500,000 4,000,000 4,500,000 2,500,000 3,000,000 2,000,000 1,000,000 500,000 20,000,000
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Pre-IPO Placement 20,000,000 shares at Tk 1 each have been privately placed with the following institutions, as follows: Pre-IPO Investors No. of Shares Consortium of Exchange Members & Clients7 14,000,000 Pangaea Partners (BD) Limited 5,000,000 Investment Corporation of Bangladesh (ICB) 500,000 Green Delta Insurance Company Limited 500,000 Total Private Placement 20,000,000 Public Offer 10,000,000 shares at Tk 1 each are being offered to the public for subscription in cash in full on application. Certificates will be allocated in the manner placed alongside. NRBs General Public Total Public Offer 1,000,000 9,000,000 10,000,000 Taka 14,000,000 5,000,000 500,000 500,000 20,000,000
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Chapter: 4
Grameen Mutual Fund One
4.1 Introduction
Grameen One is the first scheme of Grameen Mutual Fund One, a trust property registered on May 09, 2001 under the Trust Act, 1882, and Registration Act, 1908. The SEC has registered the Trust as a Mutual Fund on August 28, 2001 under the Securities and Exchange Commission (Mutual Fund) Rules, 2001. The SEC has also approved the Scheme and provided consent on June 27, 2005 to raise subscription from the general investors through public offer. The life of the Scheme is 10 (ten) years from the date of first listing, although there is circumstances set out in the Trust Deed where the unit holders can extend the life on maturity of the tenure.
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The vision of Professor Mohammad Yunus, founder of Grameen Bank, was to create a dependable financial instrument for the poor clients of Grameen Bank, as well as the poor people of the country, to connect them with the macro economy, give them ownership in the leading enterprises, and take advantage of the growth of the economy. Not only the poor borrowers of Grameen Bank would be investing in their own income-generating activities, they may also be part of owners of the promising enterprises of the country. By owning units of the Mutual Fund, they can also build their own old-age protection. Grameen Mutual Fund has been created to fulfill this dream. 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. It would also encourage other rural savers to take advantage of this new financial opportunity.
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Close-end policy The Scheme will adopt a close-end policy in its operation. In compliance with the policy, the Scheme will not change the capital position by issuing any additional units or repurchasing existing units during the life (i.e. 10 years) of the Scheme.
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, no market lot is necessary and, therefore, for trading at the Stock Exchanges under the CDS mechanism one unit of Tk10 each shall comprise the tradable market lot. However, minimum application amount for Public Offer application shall be for 500 (five hundred) units amounting Tk5, 000 (taka five thousand) and its multiples on a single BO account of the CDS.
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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. The investor can pick and choose a mutual fund to match his/her particular needs. Mutual fund is the only vehicle that operates simultaneously both at the demand as well as the supply side of the market. On the supply side, mutual funds, being itself a listed security in the Stock Exchanges, introduces a good and reliable instrument in the capital market for the small but astute investors. Mutual fund units have been one of the most sought-after scrips. On the demand side, since mutual fund investments are primarily in the secondary market stock and bonds bought at the Stock Exchanges, the demand for blue chip shares thus increases with the operation of the mutual funds.
Mutual funds are one of the most strictly-regulated investment vehicles. The laws governing mutual funds require exhaustive disclosure to the SEC as well as the general public. The laws also entail continuous regulation of fund operations by the Trustee.
Professional fund managers search for the attractive assets and securities. They do all the footwork to uncover opportunities and research them to make sure that the investment is appropriate for the fund. The funds stated goal, or investment objective influences the choice of securities.
Another benefit of mutual fund is liquidity, the ability to move money in and out of the investment. Unlike fixed deposits or CDs, where money is tied up for a period of time, mutual funds are designed so that access or exit is easy.
market. The Scheme may also invest in the listed and/or unlisted debt instruments, including government notes and bonds. The principal investment objective and policies of the Scheme as set out above will, in the absence of unforeseen circumstances, be adhered to during the life of the Scheme. The Scheme will always adopt the investment policy that will ensure the balanced nature that is being contemplated. The details of the investment policies are as follows: a) The Scheme shall invest only in securities and investments approved by the SEC, the Bangladesh Bank and/or the Controller of Insurance of Bangladesh or any other competent authority in this regard. b) All money collected under the Scheme, except FIS investments, shall be invested only in transferable securities whether in money market or equity market or privately placed debentures or securitized debts. c) Generally not more than 25% of the assets will be invested in the fixed-income securities (FIS). d) FIS investment may be made in privately placed unquoted debt or depository instruments of different terms. e) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks. f) In order to increase the profit potential, 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. g) The Scheme will seek to invest in companies, which it considers to exhibit good growth potential and have sound management. h) The AMC shall categorize the investments either as Trading Securities or as Available-for-Sale Securities as they deem prudent, as per provisions of IAS- 39 corresponding to the Statement of Financial Accounting Standard (SFAS) No. 115 of Financial Accounting Standard Board, USA. i) Capital appreciation will be the primary consideration and dividend and interest income will be the secondary consideration for the trading-security investments. 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. 18
k) During periods in which the Investment Manager believes changes in economic, financial or political conditions will adversely affect the Scheme's portfolio, the Scheme may, for temporary defensive purposes, reduce holdings in equity and other securities and invest in short and/or medium-term debt securities or hold cash. The investment objective of the Scheme may be changed by the Trustee and the AMC. However, unit holders would be notified of any material change in the Scheme's objective.
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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
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AIMS is first to introduce the concept of asset securitization by financing institutions in Bangladesh. We advised the securitization of micro-credit receivables by BRAC, the largest NGO in the world. AIMS was the 'Consultative Process Coordinator' of the Asian Development and (ADB) for the Finance, Industry & Trade Sector (FITS) Integrated Strategy Formulation of the Bank in Bangladesh for coordination and dialogue with the government, donors and stakeholder groups to discuss issues and potential interventions (2002). 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, Bridge & Standby Facility (CBSF) at Bangladesh Bank under the Financial Institutions Development Project (FIDP) of the Bank (2002). 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). 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), a leading non-bank financial institution in Bangladesh. Conducted valuation of the company stocks and initiated negotiations with prospective strategic buyers (2002-4). AIMS conducted for the Netherlands Development Finance Company (FMO) a due diligence on Dutch-Bangla Bank Limited, the only joint-venture commercial bank in Bangladesh, for pricing and eventual public float of the Bank at a premium (2000). 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)
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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, Banking Reform & Development and Enterprise Reform & Privatization for the Bank (2002). AIMS was engaged as Consultant by the Department for International Development (DFID) of UK for a study on Commercialization Review of Bureau Tangail, 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). At the invitation of the World Bank and the Central Bank, AIMS conducted a high level training program on 'Securitization of Receivables' for the non-bank financing institutions, including housing and leasing companies, under the Financial Institutions Development Program (FIDP) of the World Bank (2001). 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, Washington (2001). AIMS was Consultant to the Shared Interest plc, 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), 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, under auspices of the International Finance Corporation (IFC), an affiliate of the World Bank that charted a 'road map' for the development of a debt securities market in Bangladesh (1999). 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).
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The Managing Director of AIMS attended the 4th and the 5th Asian Workshop on Corporate Governance at Mumbai (2002) and Kuala Lumpur (2003), as an official delegate sponsored by the OECD, DFID and the Commonwealth Secretariat and also attended the publication ceremony of the Asian White Paper on Corporate Governance held at the ADB institute, Tokyo (2003). The Managing Director of AIMS attended the Asian Pension Fund Roundtable sponsored by the Asia Foundation and The Pacific Pension Institute, to initiate a region network (Bangkok, 2003) and also attended a workshop on Pension Management and Corporate Governance in residence at the Asian Institute of Corporate Governance (AICG), Seoul sponsored by the Asia Foundation (2004).
4.8 Strength
At AIMS we have adopted the AIMR (Association for Investment Management and Research) code of ethics and professional standards as a corporate policy. We believe in professionalism and therefore maintain firm distinction between ownership and management. Consequently as a matter of 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. We have set very high and clear objectives before us and a goal to venture in to untested grounds. 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, financiers, brokers/dealers, lawyers, accountants and bankers as well as international fund managers. AIMS maintains a full-time channel of communication and collaborative interaction with multilateral funding agencies, donors and technical assistance providers. 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. 23
The Managing Director acts as 'Compliance Officer' of the company ensuring the moral and professional standard among the practitioners within the company. 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. AIMS is a career oriented equal opportunity employer and is regarded as a knowledge based institution.
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(j) Despite careful selection of stocks, the companies may fail to provide expected dividend or make timely disbursements, which may affect the return of the Scheme. (k) The value of the Scheme's assets may be affected by uncertainties such as political or social instability, or changes in any law or regulations of the territory. (l) Since unlike the older mutual funds in the market, mutual funds under the SEC (Mutual Fund) Rules, 2001 are not allowed to have access to short-term borrowing, the Fund may have to meet its cash needs including dividend payments or meeting pre-IPO placement investment commitments through disposing off its investments, even at unfavorable market conditions. This may greatly curtail the earnings as well as future reinvestment capabilities of the Fund, translating to lower profit. (m) Qualitative and quantitative investment restrictions imposed through the Rules, have restricted the operational leeway of the Fund Manager, in the event of only a handful of securities qualifying as Category-A at the stock exchanges. Since the older mutual funds in the market do not have such qualitative and quantitative restrictions, ceiling of all these restrictions have created an uneven playing field. (n) Although application will be made to the DSE and CSE for the units for listing, there is no assurance that the units will be listed with the bourses. In the unlikely event of non-listing by both the exchanges, the Scheme will be redeemed prematurely causing opportunity cost to the investors.
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Pre-Public Offer Institutional Placement 10,350,000 (ten million three hundred fifty thousand) units at Tk10 (taka ten) each, totaling Tk103, 500,000 (taka one hundred three million five hundred thousand) have been privately placed with the following financial institutions including banks, insurance companies, non-banking financial institutions and merchant banks: Pre-Public Offer Investors Bangladesh Mutual Securities Ltd. (Portfolio) Bangladesh Shilpa Rin Sangstha EC Securities Ltd. Equity Partners Ltd. Equity Partners Ltd. (Portfolio) First BSRS Mutual Fund Grameen Capital Management Ltd. Grameen Capital Management Ltd. (Portfolio) Green Delta Insurance Ltd. IDLC of Bangladesh Ltd. Investment Corporation of Bangladesh Karnaphuli Insurance Company Ltd. Meghna Life Insurance Ltd. Midas Financing Ltd. National Housing Finance and Investment Ltd. Pangaea Partners (BD) Ltd. Pragati Insurance Ltd. Prime Bank Ltd. Prime Finance and Investment Ltd. Reliance Insurance Ltd. Sandhani Life Insurance Company Ltd. South Asia Capital Ltd. (Portfolio) The City Bank Ltd. The Trust Bank Ltd. Vanik Bangladesh Ltd. Total Private Placement No. of Units 400,000 150,000 100,000 50,000 1,000,000 50,000 300,000 500,000 250,000 250,000 200,000 50,000 100,000 250,000 400,000 800,000 200,000 500,000 400,000 500,000 150,000 500,000 1,000,000 800,000 250,000 10,350,000 Taka 4,000,000 1,500,000 1,000,000 500,000 10,000,000 500,000 3,000,000 5,000,000 2,500,000 2,500,000 2,000,000 500,000 1,000,000 2,500,000 4,000,000 8,000,000 2,000,000 5,000,000 4,000,000 5,000,000 1,500,000 5,000,000 12,000,000 10,000,000 8,000,000 2,500,000 103,500,000
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Public Offer 5,000,000 (five million) units at Tk10 (taka ten) each are being offered for public subscription in cash in full on application. Units will be allocated in the manner placed alongside. Units Non Residential Bangladeshis (NRBs) General Public Total Public Offer 500,000 4,500,000 5,000,000
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Chapter: 5
ICB Islamic Mutual Fund
5.1 Introduction
Mutual Fund presently is one of the fastest growing sectors through out the world. In Bangladesh ICB is the harbinger of Mutual Funds. Out of the total 13 Mutual Funds, ICB and its subsidiary alone floated 11 Mutual Funds in the market. These Mutual Funds are basically conventional fund which invest their funds both in equity and debt securities. Islam's prohibition against and charging interest prevent Muslims from investing in securities that draw their income from those activities. In Islam, interest is viewed as usury or riba because of its potential for exploitation of the borrower by the lender. In addition, the Islamic Shariah Law forbids any involvement in or ties to gambling, pornography, tobacco, weapons, alcohol etc. As the conventional Funds invest and draw their income, among others, from the above mentioned companies and debt securities, ICB Asset Management Company Ltd. has decided to float a fund which will invest its funds according to the Shariah Law. 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. These funds are managed according to Islamic principles.
With keeping in view of Islamic sentiment, ICB capital Management Ltd. has come forward with the proposal to act as sponsor of the ICB AMCL Islamic Mutual Fund. ICB itself will be the Trustee and Custodian of the fund whereas ICB Asset Management Company Ltd. will act as the Fund Manager of the said Mutual Fund.
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Term Finance Certificates and all other asset backed securities; ii) In contracts, securities or instruments of companies, organizations, and establishments issued on the principles of Bai' Mu'ajjal, Bai' Salam, Istisna'a, Mudaraba, Murabaha and Musharika. 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. 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. 3). The Fund will adopt a conservative strategy and will try to out-perform the index through market timing and security selection. 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. 4) The AMC will make the investment decisions based on best judgment supported by documents and analysis. 5). the fund shall get the securities purchased or transferred in the name of the mutual fund. 6). only the AMC will make the investment decisions and place orders for securities to be purchased or sold by the Fund. 7). AMC will choose broker(s) for the purchase and sale of securities for the Funds portfolio. 8). Settlement of transaction will take place as per the customs and practice of the stock exchanges in the country. 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.
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(iii) The Fund shall not invest in or lend to another scheme under the same Asset Management Company. However, the inter fund transactions can be made through stock exchanges. (iv)The Fund shall not acquire any asset out of the Trust property, which involves the assumption of any liability that is unlimited or shall result in encumbrance of the Trust property in any way. (v) The Fund or the ICB Asset Management Company 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.
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Companies Act, 1994 with the Registrar of Joint Stock Companies & Firms on 5 December, 2000. Registration of the company with the SEC was obtained on 14 October, 2001. Necessary Government Gazette Notification has also been obtained on 1st July, 2002 to carry out the Mutual Fund operations. At present, the Company is managing one open-end Mutual Fund and one Closed-end Mutual Fund. As per relevant provision of the ICB Ordinance, ICB shall hold all or majority shares of the company and may review business objectives, supervise and control its performance. The CEO and other key personnel have been deputed to the company from ICB. An independent Board consisting 50 per cent directors from ICB and the rest from private sector, has been created.
The paid up capital of the Fund shall be Tk. 100,000,000.00 divided into 1,000,000 units of Tk.100.00 each. The total distribution of units shall be as follows:
PRE-IPO PLACEMENT Subscription from sponsor ICB Capital Management Ltd., the sponsor, has already subscribed Tk. 100, 00,000.00 for 100,000 units of Tk. 100.00 each at par. Pre-IPO Placement to Institutional Investors: The following institutions have been subscribed Tk. 20,000,000/- for 200,000 units of Tk. 100.00 each at par:
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Public Offer 10% of the Public Offer i.e. 70,000 units of Tk. 100.00 each totaling Tk. 7,000,000.00 are being offered to the Non-Resident Bangladeshis (NRBs) and the rest 630,000 units of Tk. 100.00 each amounting to Tk. 63,000,000.00 are being offered to the general public for subscription in cash in full on application. The distribution is as under:
Chapter-6
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6.1 Introduction
To analyze the performance of Mutual Funds, Ratio analysis is my first preference to measure the performance of the organization. Ratios are highly important tools in financial analysis that help financial analyst implement plans that improve profitability , liquidity, financial structure , recording , leverage and interest coverage. Although ratios report mostly on the past performances they can be predictive too, and provide lead indication of potential problem areas. Ratio analysis is primarily used to compare the companys financial figures over a period of time, a method sometimes called trend analysis. Through trend analysis, we can identify trends, good & bad, and adjust the business practice accordingly. We can also compare how ratios stack up against other business, both in & out of the industry. Ratios can be analyzed in different ways: Comparison within one fiscal year. Comparison in different fiscal years. Comparison within the industry with one fiscal year Comparison within the industry with different fiscal year. To analyze the performance of Mutual Funds, we followed second category of comparison. Our considerable years are mostly from 2003 to 2005. Sometime on the basis of availability and suitability we consider the year of 2006.
The profit margin measures the relationship between profit & sales. 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, the cost of merchandise or services, 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.
Pr ofit M arg in =
Profit Margin
125.00% 100.00% 75.00% 50.00% 25.00% 0.00% 2003 Year 2004 2005
The above graph states that the profit margin of AIMS First Guaranteed Mutual Fund is increasing successively. It is a good signal for the investors because it will increase the wealth of the shareholders.
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Pr ofit M arg in =
Ratio
100.00% 75.00% 50.00% 25.00% 0.00% 15-02-2005 31-12-2005 Period of Time 30-06-2006
Though the above graph reveals the decreasing trends of the profit margin but it is not certain that will it be decreasing or increasing.
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Pr ofit M arg in =
Profit Margin
The above graph reveals that the profit margin of ICB Islamic Mutual Fund is decreasing successively.
B. Return on Asset
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Return on asset ratio measures the efficiency with which total assets are employed within the firm.
Re turn on Asset =
Return on Asset
25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2003 Year 2004 2005
From the above table we see that the return on asset is increasing from 2003 to 2005.
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Re turn on Asset =
Ratio
32.00% 24.00% 16.00% 8.00% 0.00% 15-02-2005 31-12-2005 30-06-2006 Period of Time
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. And this is happened because the information of Grameen Mutual Fund One is not available.
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Re turn on Asset =
Return on Asset
2005
Year
2006
From the above table we see that the return on asset is increasing. Definitely this is a good signal for the investors because it will increase their assets.
C. Return on Equity:
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Return on equity measures the efficiency with which common shareholders equity is being employed within the firm.
Re turn on Equity =
Return on Equity
2004 Year
2005
It is recommended from the above graph that the return on equity is increasing from 2003 to 2005.
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Re turn on Equity =
Ratio
32.00% 24.00% 16.00% 8.00% 0.00% 15-02-2005 31-12-2005 Period of Time 30-06-2006
It is recommended from the above graph that the return on equity is decreasing successively from 15th February 2005 to 30th June 2006.
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Re turn on Equity =
ROE
It is recommended from the above graph that the return on equity is increasing successively from 2005 to 2006.
2003
Year
2004
2005
The above graph reveals that the AIMS First Guaranteed Mutual Fund increases from 2003 to 2004 then it is decreasing.
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Ratio
The above graph reveals that the Grameen Mutual Fund One increases its non equity capital which is 158000000 Tk.
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2005
Year
2006
The above graph reveals that the ICB Islamic Mutual Fund increases its non equity capital from 2005 to 2006.
The higher of this ratio, the higher the working capital or cash flow generated by the firm in its operations.
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We can state by using the above graph that the working capital to cash flow ratio is increasing from 2005 to 2006. So it is clear that the ICB Islamic Mutual Funds ability to generate cash from its operations is increasing.
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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. So it is clear that the Grameen Mutual Fund Ones ability to generate cash from its operations is increasing.
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Ratio
50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2003 Year 2004 2005
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.
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The above graph reveals that the earning per share is increasing from 2003 to 2005 successively.
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The earning per share is 3.75 Tk at 15th February2005 though it is Tk.0.000605765 in 30th June 2006. It is happened because the number of share outstanding is increasing form 1200000 to 17000000 in 30th June 2006.
4 3 2 1 0 15-02-2005 31-12-2005
Period of Tim e
30-06-2006
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.
Year
2005
2006
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The earning per share is Tk. 5.68 in 2005 though it is Tk.6.10 in 2006. It is happened because the net profit increases from 2005 to 2006.
6.20 6.10 6.00 5.90 5.80 5.70 5.60 5.50 5.40 2005
Year
2006
The earning per share of the ICB Islamic Mutual Fund in the above graph shows the increasing trend from 2005 to 2006. This sends a positive signal to the investors because it increases the earnings of them.
Re tention Ratio =
The above table represents that the retention ratio for the ICB Islamic Mutual Fund is about same for both the year which is 12.05% & 12.89% in 2005 & 2006 respectively.
Re tention Ratio =
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.
2003 5350661
2004 6662394
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6,848,298 78.13%
17,162,394 38.82%
The above table represents that the retention ratio for the AIMS First Guaranteed Mutual Fund is 78.13% for 2003 which can be said as very high but it is decreasing the following year in 2004.
From the above table we see that the growth rate of the AIMS First Guaranteed Mutual Fund is 7.64% & 9.52% for 2003 & 2004 respectively.
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 37.50%
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The growth rate of Grameen Mutual Fund One in the above table shows that the growth rate is 37.50% in the first 2005 then in the last 2005 it shows 7.03% growth rate and it is also subsequently decreased in June 2006 which is 0.01%.
Year Net Profit Equity ROE Calculation of Growth Rate (g): g = Retention Ratio * ROE
The growth rate is increasing from the 2005 to 2006 which is 0.68% & 0.79% respectively. The growth rate is lower because the ICB Islamic Mutual Fund pays higher dividend.
Yeild =
Year Dividend Yield: Dividend per share Market price per share Dividend Yield Beginning price (P0) Ending price(P1) Yield
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AIMS First Guaranteed Mutual Fund is 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 9.52% in 2006.
Year Dividend Yield: Dividend per share Market price per share Dividend Yield: Beginning price (P0) Ending price(P1) Yield
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 which is only 0.01% in 2006.
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Year Dividend per share Market price per share Dividend Yield Beginning price (P0) Ending price(P1) Yield
ICB Islamic Mutual Fund 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 which is only 0.79% in 2006.
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