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.
1.2 Motivation of the Study
Internship is a compulsory part of completing the MBA
program in our department. For selecting the Mutual Funds as my potential
employer as an intern is that Mutual Funds contributes heavily for the retail
investors. Since I am a student of finance background, I am interested to apply
my acquired knowledge to mutual funds.
1.3 Objective of the Study
The objective of this study is to acquire the
practical knowledge. As a business graduate, this institution is one of the
others to know all its function subsequently apply my bookish knowledge. In
brief the objectives can be narrated as follows-
To
apply acquired knowledge.
To
acquaint myself with the practical aspect of the mutual funds.
1.4 Rational of the Study
This study is important for knowing the overall
performance of Mutual Funds. Mutual Funds play a vital role for the retail
investor s in Bangaldesh. Because Mutual Funds act as an intender by which it
collects funds from the retail investors to acquire huge amount of capital for
making investment in diversified portfolio.
By this investment Mutual Funds can avoid all sorts of unsystematic risk
pertaining to the investment and can achieve the diversified return. Generally
retail investors are risk averse investors. They always want to invest in low
risk project. But for minimizing the risk it is needle to invest in a large
scale of various types of securities. Since it is not possible for the
individual investor to collect huge capital, Mutual Funds act on be half of
them to collect capital by issuing share and invest that proceed.
This study is
important for me in academic point of view. Performance measurement is an
important aspect for a Financial Analyst which is a dream for every finance
student. Since I am a student of Finance, it is undoubtedly true that the
internship in Mutual Funds will enhance my proficiency.
I have tried my best to measure the performance for
Mutual Funds.
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
2.1 Data collection Procedure
This report is mainly
based on exploratory research and secondary data. Different books L&
journals such as the annual reports published by the mutual funds, company’s
websites, preceding studies have been used to get an insight; Primary
information regarding mutual funds has been gathered through personal
interviews of some of the officials of the organization. The head of every
department helps me for this regard. Financial performance analysis of mutual
funds has been done using the annual reports of the organization. Personal
interview is the main way of collecting data.
2.2 Procedure for Data Analysis
In preparing this report I
tried my best to follow some methodology for comments & evaluation in any
area. These analyses are very root for the research based analysis.
I have not considered the
chi-square test, t-test, z-test to make this report simple and lack of
practical knowledge of using statistical software is one of the bars for
preparing this report as like as think tank.
My considered tools are as
follows:
1
Ratio analysis
2
Earning per share analyze
3
Dividend yield
4
Growth rate analyze
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:
2.3 Data Collection procedure
Primary Sources:
Data which are collected
directly can be also described as raw data. For this, all the members of the Mutual
Funds were very helpful to provide information.
Secondary Sources:
Secondary sources of data
are the followings:
1
Annual reports of the Mutual Funds
2
Various books of the library of Mutual Funds
3
Business Journals
4
Mutual Funds ordinance
5
General information
6
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.
3.2 Background
of AIMS First Guaranteed Mutual Fund
The Trust Deed of the Fund was registered on January
02, 2000 under the Trust Act 1882 and Registration Act 1908. The SEC registered
the Fund on January 27, 2000 under the Securities and Exchange Commission
(Mutual Fund) Regulations 1997. The team-managed all-weather Fund is a
'close-ended capital guaranteed balanced mutual fund' established to enable
both institutional and private investors to invest in the Bangladesh capital
market. The Fund will be providing investment incentives and opportunities in
order to help broaden the investment base in Bangladesh. The life of the Fund
is five years, although there are circumstances set out in the Trust Deed where
the unit holders can extend the life of the 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.
3.3 Investment
Objectives and Policy
The primary objective of the balanced fund is to
achieve capital appreciation as well as earn dividend and interest income
through investment in the capital markets of Bangladesh. It mostly will focus
on preservation of principal and at the same time earn moderate return for the
shareholders. The assets of the Fund will be invested principally in equity
securities and, if available, equity related hybrid instruments like convertible
bonds and warrants. Most of the investments will be made in the companies
listed on the DSE and/or CSE. The Fund may also invest in unlisted equity securities
directly from the issuers (IPO and pre-IPO placement) at the primary market. The
Fund may also invest in listed and/or unlisted debt instruments, including government
notes and bonds.
The principal investment objective and policies of
the Fund as set out above will, in the absence of unforeseen circumstances, be
adhered to during the life of the Fund. The Fund will always adopt the
investment policy that will ensure the balanced nature.
The details of the investment policies are as
follows:
(a) The Fund expects to be fully (with an insignificant
cash margin) invested within
120 days from the date of listing.
(b) The Fund shall invest only in securities and
investments approved by the Securities & Exchange Commission, the
Bangladesh Bank and/or the Controller of Insurance of Bangladesh.
(c) The Fund may underwrite public issue of debt or
equity securities.
(d) All Money collected under the Fund, except the
margin deposit against Capital
Guarantee Scheme, shall be invested only in
transferable securities whether in money market or equity market or privately
placed debentures or securitized debts.
(e) Not less than 30 percent of the total assets will
be invested in fixed income securities (FIS), including the capital guarantee
margin.
(f) Maximum of 15 percent of the NAV of the Fund may
be invested in unlisted equity and/or debt securities purchased directly from
issuers (IPO and Pre-IPO placement) at any point of time. It is the intention
of the Fund that where investments are made in unlisted securities, such
investments shall be in securities where a listing 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.
3.4 Nature
& Style
This
team-managed all-weather Fund is a closed-end capital guaranteed balanced
mutual fund. It mostly will focus on preservation of principal and at the same
time earn moderate return for the shareholders. Because of the balanced nature,
the Fund is less risky than the existing all-equity mutual funds available in
the market.
The portfolio will be a
growth-value blend basket of large-cap as well as small-cap stocks and a mix of
fixed income securities.
In order to increase the profit
potential, the management company will have the flexibility to use market timing
to move between stocks and Fixed Income Securities in any percentage they deem
prudent when investment conditions change.
The
management company will adopt both fundamental and quantitative investing
approach for the Fund. All investment decisions will be backed by thorough
in-house fundamental and technical research.
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
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.
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.
3.9 Investment Restrictions
The following restrictions are fundamental policies
of the Fund that may not be changed without the approval of majority of the
Fund's outstanding voting securities. If a percentage restriction on investment
or use of assets set forth below is adhered to at the time a transaction is
effected, later changes of holding value due to changes in market price
movement will not be considered a violation of the restrictions.
(a) The Fund shall not invest in securities having
unlimited liability.
(b) The Fund shall not buy its own shares.
(c)
Investments by way of privately placed debentures, securitized debts and other
unquoted debt instruments shall not exceed 40% of the total assets of the Fund.
(d) The Fund shall not invest more than 10% of its
assets in any one particular company shares.
(e) The Fund shall not own more than 15% of any
company’s paid-up capital at any point of time.
(f) The Fund shall not invest more than 20% of the
funds in shares, debentures or other securities of a single company.
(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.
3.10 Capital Structure
Share Issue
The Fund has issued 50,000,000 shares of Tk 1 each at
par totaling Tk 50,000,000. The total issue has been distributed as follows:
Subscribers
No. of Shares Taka
Sponsors 20,000,000 20,000,000
Pre-IPO Placement 20,000,000 20,000,000
General Investors 10,000,000 10,000,000
Total
Size of the Fund 50,000,000 50,000,000
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 Taka
IPDC of Bangladesh Limited 2,500,000
2,500,000
Sandhani Life Insurance Company Limited 4,000,000 4,000,000
Pangaea Partners (BD) Limited 4,500,000
4,500,000
IDLC of Bangladesh Limited 2,500,000 2,500,000
Southeast Bank Limited 3,000,000 3,000,000
Uttara Finance and Investments Limited 2,000,000 2,000,000
Sandhani Credit Co-operative Society Limited
1,000,000 1,000,000
Bangladesh Industrial Finance Company Ltd. 500,000 500,000
Total
Sponsorship 20,000,000 20,000,000
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 Taka
Consortium of Exchange Members & Clients7
14,000,000 14,000,000
Pangaea Partners (BD) Limited 5,000,000
5,000,000
Investment Corporation of Bangladesh (ICB) 500,000 500,000
Green Delta Insurance Company Limited 500,000 500,000
Total
Private Placement 20,000,000 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 1,000,000
General Public 9,000,000
Total
Public Offer 10,000,000
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.
4.2 Background
of initiating a close-end mutual fund
The mutual fund is sponsored by the Grameen Bank
principally to facilitate micro savers to invest in the country’s capital
market instruments. Although this Fund has been launched primarily for the
benefit of the 4.3 million borrowers of Grameen Bank, 96% of whom are women, other
micro- and small savers of the country may also find this team-managed,
close-ended balanced Fund a dependable investment vehicle. AIMS of Bangladesh
Limited, the first SEC-approved asset management company in Bangladesh,
pioneered mutual fund under private initiative. It has gained valuable
experience and confidence in managing a mutual fund efficiently. This
encouraged Grameen Bank to give responsibility to AIMS to manage this mutual
fund sponsored by the Bank. The SEC has already approved and registered the
Trust as Mutual Fund and provided consent to raise subscription from the
investors through Public Offer.
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.
4.3 Nature & Style
This
team-managed all-weather Fund is a closed-end capital guaranteed balanced
mutual fund. It mostly will focus on preservation of principal and at the same
time earn moderate return for the shareholders. Because of the balanced nature,
the Fund is less risky than the existing all-equity mutual funds available in
the market.
The portfolio will be a
growth-value blend basket of large-cap as well as small-cap stocks and a mix of
fixed income securities.
In order to increase the profit
potential, the management company will have the flexibility to use market
timing to move between stocks and Fixed Income Securities in any percentage
they deem prudent when investment conditions change.
The
management company will adopt both fundamental and quantitative investing
approach for the Fund. All investment decisions will be backed by thorough
in-house fundamental and technical research.
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.
4.4 Competitive
Advantages in investing in Grameen One
Mutual funds substantially lower the investment
risk of small investors through diversification in which funds are spread out
into various sectors, companies, securities as well as entirely different
markets. It is always the objective of a fund manager to maximize a fund's
return for a given level of risk through tolerable risk-return tradeoff.
Mutual funds mobilize the fund and channel them
into profitable investment opportunities. As a result, mutual funds add
liquidity to the market. Moreover, given that the funds are long-term
investment vehicles, they reduce market volatility by extending support to
scrip prices.
Mutual funds provide the institutional investors
an access to the whole market that, at an individual level, would be difficult
if not impossible to achieve.
Because funds are professionally managed,
investors are relieved of the emotional strain associated with the day-to-day
management of the fund. Moreover, the amounts of analytical research and study
that go into selecting the best securities for a fund portfolio can prove to be
overwhelming for the general investor, and is best left to the experts.
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 scrip’s. 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 fund’s 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.
4.5 Investment
objectives and policy
The primary objective of the Scheme is to achieve
capital appreciation as well as earn dividend and interest income through
investment in the capital market of Bangladesh. It mostly shall focus on
generating cash earning and at the same time preservation of capital. The
assets of the Scheme will be invested both in equity securities and
fixed-income securities (FIS). Most of the equity investments will be made in
the companies listed on the DSE and/or CSE. The Scheme may also invest in
unlisted equity securities directly from the issuers (IPO and pre-IPO
placement) at the primary 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.
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.
Our Mission: To be a household name in Bangladesh and be recognized as a
reliable companion in the pursuit of wealth creation.
Our Goal: To
take the extra mile to meet the customer’s needs through continuous innovation
of suitable financial products and offering the best solutions.
Our Values: To strive for achieving and maintaining the highest ethical and
moral standards to earn the trust of our clients and patrons.
Capabilities: AIMS is experienced in conceiving,
developing, structuring, launching and marketing appropriate financial
instruments for raising and managing capital, suiting specific needs.
Ø
AIMS is also experienced in devising alternative
non-traditional corporate finance
instruments like asset and mortgage backed securitization.
Ø
AIMS is experienced in corporate and financial
advisory services, including debt and equity valuation, credit analysis,
feasibility studies and conducting due diligence exercise.
Ø
AIMS is experienced in establishing and managing
Trust Funds, including Venture Capital and Mutual Funds, and also capable of
constructing and managing portfolios of diverse nature and characteristics.
Ø
AIMS is capable of independently carrying out
diagnostic research including micro as well as macro-economic and sectoral
research studies.
Ø
AIMS has the capabilities for delivering
corporate restructuring and management solutions and services.
Ø
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
Ø
AIMS has the rare distinction of being the first
approved asset management company in Bangladesh under private initiative and
remains so far the only one such institution in the country.
Ø
AIMS has brought about qualitative changes in
the finance sector in general and the capital market in particular through
introducing innovative products and new approaches to investment finance in
Bangladesh.
Ø
AIMS has floated and managing the Tk 70
million first privately managed usual fund in Bangladesh sponsored by
top-ranked institutions representing all he sub-sectors of the finance
industry, which played a pioneering role in enveloping a matured investment
culture. The five-year closed-end Fund features capital guarantees
characteristics, unique in Bangladesh (2000).
Ø
AIMS is the SEC registered Asset Manager of the
Grameen Mutual Fund One sponsored by the internationally reputed Grameen Bank
founded by Professor Mhammad Yunus. The Tk 150 million first scheme of the Fund
features a minimum assured yield, a new concept in Bangladesh (2001).
Ø
AIMS is engaged as Financial Advisor for the
Asian Development Bank ADB) financed Technical Assistance to the Privatization
Commission. Task included, among others, due diligence and valuation of pilot
enterprise, independent review & privatization plan and documentation, in
collaboration with International Consultants (2004).
Ø
We are engaged as Consultant Financial Analyst
& Process Coordinator of the Asian Development Bank (ADB) for the Project
Preparatory Technical Assistance (PPTA) for Small & Medium Enterprises
Development and Export Expansion Program (SME DEEP) Loan, where major task
among others, included conducting international standard due diligence of
participating financial institutions with international consultants (2003).
Ø
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.
Ø
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).
Ø
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).
Ø
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)
Ø
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).
Ø
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).
Ø
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)
Ø
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).
Ø
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).
Ø
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).
Ø
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 video-linked with the World Bank Head Office, Washington
(2001).
Ø
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).
Ø
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).
Ø
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).
Ø
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).
Ø
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.
At AIMS we have adopted the AIMR (Association for Investment Management and Research) code of ethics and professional standards as a corporate policy.
Ø
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.
Ø
We have set very high and clear objectives
before us and a goal to venture in to
untested grounds.
Ø
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.
Ø
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.
Ø
AIMS maintains a full-time channel of
communication and collaborative interaction with multilateral funding agencies,
donors and technical assistance providers.
Ø
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.
Ø
The Managing Director acts as 'Compliance
Officer' of the company ensuring the moral and professional standard among the
practitioners within the company.
Ø
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.
Ø
AIMS is a career oriented equal opportunity
employer and is regarded as a knowledge based institution.
Ø
AIMS has contributed to the community through
mobilizing the untapped resources to the mainstream economy through
indigenously developing appropriate financial products and corporate solutions.
Ø
AIMS has extended the investment opportunities
for the people suiting their own risk tolerances.
Ø
AIMS regularly bring out various research
publications to keep the general investors informed and updated. The 'Weekly
Market Review' is one of such regular complimentary publication. Over two
hundred thousand recipients worldwide receive the 'Review' every week via
e-mail. Besides, we publish various other periodic reports, sector researches and
commentaries from time to time.
Ø
In order to develop a vibrant debt market in the
country, AIMS is closely collaborating with leading local and multilateral
institutions, including the World Bank, International Finance Corporation and
the Asian Development Bank, apart from our own independent and pioneering
efforts in this regard.
Ø
AIMS has conducted various seminars, workshops
and training sessions on equity and debt market as well as asset securitization
issues to educate and assist the issuers and the investors.
4.10 Sponsor
of the Fund
Grameen Bank
Grameen Bank is the Sponsor of the ‘Grameen Mutual
Fund One’. As the Sponsor, Grameen Bank has provided an initial capital of
Tk16.5 million to the first Scheme of the Fund, the Bank has also set the objectives
and policy guidelines of the Fund through authoring and executing the Trust
Deed and the Investment Management Agreement.
Grameen Bank was established under the Grameen Bank
Ordinance, 1983, operating with an objective to alleviate poverty through
financial services, especially by providing micro credit. Empowering poor
people is the ultimate objective of the Bank. The Government of Bangladesh owns
5% of the Bank and the rest 95% is held by the borrowers of the Bank. Mr.
Tobarak Hossain is the Chairman and Professor Muhammad Yunus is the founder
Managing Director of the Bank. The Government nominates three directors
including the Chairman and nine other directors are elected representatives
from among the Grameen borrowers.
4.11 Trustee
of the Scheme
Grameen
Fund
Grameen Fund, a venture capital undertaking of the
Grameen family limited by guarantee is the Trustee of the Fund. Established in
1994, Grameen Fund dedicated itself in promoting, managing and financing
various enterprises, which aims to create wealth for ultimate poverty
alleviation. Professor Muhammad Yunus is the Chairman and Mr. Faizur Razzaque
is the Managing Director of this nonprofit company. As the Trustee Grameen
Fund, for all practical purposes, is the guardian of the Fund and shall be
responsible for ensuring compliance as well as the protection of the properties
of the Fund solely for the beneficiaries. In order to properly carry out their
responsibilities, Grameen Fund has formed a Trustee Committee, with Mr. M.
Faizur Razzaque, Mr. Giasuddin Ahmed, Mr. M. Hafizuddin Khan and Mr. Quazi
Sultan Ahmed.
4.12 Custodian
of the Scheme
Standard Chartered Bank (SCB)
SCB is a UK-based commercial bank operating in
Bangladesh for over fifty years. They have been providing the custodial services
to the foreign institutional portfolio investors in Bangladesh for the last
several years. They are experienced and skilled in this line of business and
enjoy a reputation for confidentiality, timely settlement, reporting, and
collecting corporate announcements for their clients. They are also providing
custodial service to AIMS First Guaranteed Mutual Fund, the first local
private-sector mutual fund.
4.13 Investment
Manager of the Scheme
AIMS (Asset & Investment Management Services)
of Bangladesh Limited
AIMS of Bangladesh Limited is the Asset Management
Company (AMC) or Manager of the Fund. They are responsible for
designing, structuring, registration, floatation and day-to-day
management of the Fund. AIMS is also responsible for recurring investment
activities, including portfolio construction and rebalancing, under the guidelines
set in the Trust Deed and the Investment Management Agreement of the Fund.
AIMS has the distinction of conceiving and floating
‘AIMS First Guaranteed Mutual Fund’, the first and so far the only private
sector mutual fund in Bangladesh. AIMS is actively involved in developing with
the debt market and contractual savings sectors, and has also been rendering
services in various financial sector development projects of different
multilateral and donor agencies.
AIMS is the first investment and fund management
company of its kind under private initiative in Bangladesh. The shareholders of
the company are all practicing professionals, highly qualified in their
professed vocation and a majority of them are either returned or expatriate
Bangladeshis. It is equipped with a team of expert capital market
professionals, research analysts and economists to run the outfit. The core
management team has been recruited with experienced managers formerly with
leading institutions at home and abroad. Mr. M. Monzurul Haque is the Chairman
of the Company.
4.14 Investment
restrictions
The following restrictions are fundamental policies
of the Scheme that may not be changed without approval of majority of the
Scheme's outstanding voting securities. These are also in line with the
Section-56 and the Schedule-V of the Securities and Exchange Commission (Mutual
Fund) Rules, 2001. If a percentage restriction on investment or use of assets
set forth below is adhered to at the time a transaction is effected, later
changes of holding value due to changes in market price movement or accrued
gain in value over time will not be considered a violation of the restrictions.
a) The Scheme shall not invest in securities having
unlimited liability.
b) The Scheme shall not buy its own units.
c) Investments by way of privately placed debentures,
securitized debts and other unquoted debt instruments shall not exceed 25%
(twenty five percent) of the total assets of the Scheme.
d) The Scheme shall not invest more than 10% (ten
percent) of its assets in any one particular company shares.
e) The Scheme shall not own more than 15% (fifteen
percent) of any company’s paid-up capital at any point of time.
f) The Scheme shall not invest more than 20% (twenty
percent) of its total assets in the shares, debentures or other securities of a
single company.
g) The Scheme shall not invest more than 25% (twenty
five percent) of its total assets in shares, debentures or other securities in
any one industry.
h) The Scheme shall not involve in option trading or
short selling or carry forward transactions.
i) The Scheme shall not invest in or lend to another
scheme under the same AMC.
j) The Scheme shall not provide term loan or advance
to any entity.
k) The Scheme shall not borrow fund for investing
unless authorized by the SEC.
4.15 RISK
PARAMETERS
Risk Factors
The prospective investors should appreciate that
investment in the Scheme involves certain special considerations and risk factors,
including those set forth below, which are not necessarily exhaustive or
mutually exclusive:
(a) Performance of the Scheme is significantly
dependent on the macroeconomic situation and the capital market in particular.
(b) Since the capital market of Bangladesh is
extremely fluctuating, there is no firm assurance that the Scheme will achieve
all its stated objectives.
(c) Stock market activity in Bangladesh focuses on a
small number of companies representing a limited number of industries, resulting
in a potential lack of liquidity and price volatility. In addition, a high
proportion of the equity securities listed on the DSE and CSE are closely held
and the number of shares currently available for acquisition by the Scheme may
be very limited. It may, therefore, be difficult to invest the Scheme's assets,
to obtain a desired diversification of the portfolio or to realize the Scheme's
investments at the prices and times that it would wish to do so.
(d) The recent stock market trends portray that price
of almost all the listed securities move in tandem with the market in the
similar direction, causing difficulty to the Manager to diversify the assets.
(e) Since Bangladesh lack secondary bond market or
product variation as it would have been ideal, the Manager might not be able to
swap between different asset lasses, as they might desire.
(f) Money market instruments are also not readily
available, which may narrow the opportunity of short term or temporary
investments of the Scheme.
(g) If maturity of the Scheme is extended by the unit
holders at the closing meeting, investment in fixed income securities will be
subject to reinvestment risk, i.e., the risk of non-availability of investment
opportunity at the current rate at that time.
(h) The value of the units of the Scheme may, in
direct correlation with other listed securities, fluctuate. In addition, there
is no guarantee that the market price of units of the Scheme will fully reflect
their underlying net asset values.
(i) Since the Scheme is a balanced fund, i.e., the
Scheme shall invest in both equity and FIS, the credit risk of the FIS issuers
is also associated with the Scheme.
(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.
4.16
Capital Structure
Share Issue
The Scheme has issued 17,000,000 (seventeen million)
units of Tk10 (taka ten) each at par totaling Tk170, 000,000 (taka one hundred
seventy million), distributed as follows:
Subscribers
No.
of Units Taka
Sponsors 1,650,000
16,500,000
Pre-Public Offer Institutional Placement 10,350,000 103,500,000
Public subscription 5,000,000
50,000,000
Total Size of the Scheme 17,000,000 170,000,000
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 No.
of Units Taka
Bangladesh Mutual Securities Ltd. (Portfolio) 400,000 4,000,000
Bangladesh Shilpa Rin Sangstha 150,000 1,500,000
EC Securities Ltd. 100,000
1,000,000
Equity Partners Ltd. 50,000
500,000
Equity Partners Ltd. (Portfolio) 1,000,000 10,000,000
First BSRS Mutual Fund 50,000 500,000
Grameen Capital Management Ltd. 300,000 3,000,000
Grameen Capital Management Ltd. (Portfolio) 500,000 5,000,000
Green Delta Insurance Ltd. 250,000 2,500,000
IDLC of Bangladesh Ltd. 250,000 2,500,000
Investment Corporation of Bangladesh 200,000 2,000,000
Karnaphuli Insurance Company Ltd. 50,000 500,000
Meghna Life Insurance Ltd. 100,000 1,000,000
Midas Financing Ltd. 250,000
2,500,000
National Housing Finance and Investment Ltd. 400,000 4,000,000
Pangaea Partners (BD) Ltd. 800,000 8,000,000
Pragati Insurance Ltd. 200,000 2,000,000
Prime Bank Ltd. 500,000
5,000,000
Prime Finance and Investment Ltd. 400,000 4,000,000
Reliance Insurance Ltd. 500,000 5,000,000
Sandhani Life Insurance Company Ltd. 150,000 1,500,000
South Asia Capital Ltd. (Portfolio) 500,000 5,000,000
Swadesh Investment Management Ltd. (Portfolio) 1,200,000 12,000,000
The City Bank Ltd. 1,000,000
10,000,000
The Trust Bank Ltd. 800,000
8,000,000
Vanik Bangladesh Ltd. 250,000 2,500,000
Total Private Placement 10,350,000
103,500,000
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) 500,000
General Public 4,500,000
Total Public Offer 5,000,000
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.
5.2
Advantages in investing in ICB AMCL Islamic Mutual Fund
Generally investment in mutual funds enjoys some
advantages compared to investment made directly in other securities of the
capital market. Investors of this mutual fund will be able to enjoy the
following advantages:-
(i) As the Fund will be invested in Sharia compatible
securities, there shall be no scope of haram earnings and as a result the
income in the hand of the investors will totally be halal.
(ii) As the sale proceeds will be invested in the
diversified portfolio, there will be a minimum risk in investment.
(iii) Diversified portfolio of the fund help the
small investor access to the whole market which is difficult at individual
level.
(iv) By channel zing small investors saving, this
mutual fund will add liquidity to the market.
(v) As the fund will be professionally managed under
prudent guidelines, the Fund is accepted to be able to achieve the targeted
objectives.
(vi) The investors can save a great deal in
transaction cost as he/she has access to a larger number of securities by
purchasing a single unit of mutual fund.
(vii) Investment in the Fund would qualify for
investment tax credit under section 44(2) of the Income Tax Ordinance 1984.
(viii) Management and operation of mutual funds are
subject to prudential guidelines. SEC regularly monitors the performance of
such funds. The laws governing mutual funds require exhaustive disclosure to
the regulator and general public. As a result, the investors will be able to
know the performance of the fund and accordingly they can be able to take
convenient entry and exit options.
(ix) Income will be exempted from tax to a certain
level in the hand of the individual investors.
5.3 Investment
Objective & Policies
The scheme has been designed for a specific sectoral
objective i.e. to provide interest free return to the investors by investing
the fund only in Shariah compliant instruments.
1) The fund shall invest both in listed and non
listed securities. While investing in securities the following criteria are to
be observed:
(i) Primary Selection of Companies
The basic business of the company should be in
consistence with the Sharia Law. Although no universal consensus exists among
contemporary Sharia scholars on the prohibition of companies, most Sharia
boards have advised against investment in companies involved in the activities
of:
a) Conventional Banks, Insurance and Leasing
Companies
b) Alcohol
c) Pork related products
d) Tobacco
e) Weapons and Defense
f) Entertainment (Hotels, Casinos/Gambling, Cinema,
Pornography, Music etc.)
(ii) Screening of Acceptable Companies
After removing companies with unacceptable primary
business activities, the Fund may invest in the remaining companies if:
o
The total debt of the investee company is equal
to or less than 33% of the trailing 12 month average market capitalization of
the Company.
o
The sum of cash or interest bearing securities
of the investee companies is less than or equal to 33% of the trailing 12 month
average market capitalization of the company.
o
The Accounts Receivable is less than or equal to
45% of the Total Assets of the Company.
2) The Fund may also invest in other Shariah
Compliant instruments as and when they are available for investment.
Specifically:
i) In Participation Term Certificates, Modaraba
Certificates, Musharika, Murabaha,
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 Fund’s 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.
5.4 Investment
Restrictions
In making investment decision the following
restrictions should be taken due consideration:
(i) The Fund shall not buy its own unit;
(ii) The Fund shall not involve in option trading or
short selling or carry forward transactions.
(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.
5.5 Sponsor
of the Fund
ICB Capital Management Ltd. (ICML), a subsidiary of
ICB will be the sponsor of the Fund. ICB Capital Management Ltd. (ICML) was
created as part of the restructuring program of ICB under Capital Market
Development Program (CMDP) initiated by the Government of Bangladesh (GOB) and
the Asian Development Bank (ADB). The company was incorporated as a public Ltd.
company under the companies Act, 1994 with the Registrar of Joint Stock
Companies and Firms on 05 December, 2000. Registration of the company with the
SEC was also obtained on 16 October, 2001 and the gazette notification of Govt.
of Bangladesh has been issued with a view to carry out the merchant banking
activities. Although it is a newly created company, it has enormous scope of
expansion and growth in the field of merchant banking as ICB shall not undertake
any new business in this area rather these functions will be carried out by
this company.
The present authorized and paid up capital of the
company are Tk. 100.00 crore and Tk. 8.00crore respectively. The company is
being managed by high caliber professional people mostly taken from ICB. An
independent board consisting members from private and public sectors provides
guidance in framing objectives & policies of the company. Besides, ICB as holding
company, also supervise and control the performance of the company.
5.6 Trustee
and Custodian of the Fund
In order for maximum trust and confidence of the
investors, supervisory bodies and persons concerned towards the fund, the
Investment Corporation of Bangladesh (ICB) itself will act as the trustee and
custodian of the Fund. The Investment Corporation of Bangladesh (ICB) was established
on 1 October 1976, under “The Investment Corporation of Bangladesh” Ordinance, 1976
(No. XL of 1976) with a view to encouraging and broadening the base of
investment, develop the capital market, mobilize savings, promote and establish
subsidiaries for business development & provide for matters ancillary
thereto. Over the years, the activities of ICB have grown manifold,
particularly in Merchant Banking, Mutual Funds operations and stock brokerage
activities. ICB is the biggest investment bank and the harbinger of mutual
funds in the country. Out of country’s eleven (11) closed-end mutual funds, ICB
manages eight funds. ICB also manages the only open-end fund in the country.
ICB is the trustee and custodian of the ICB AMCL Mutual Fund and ICB AMCL Unit
Fund floated recently by the ICB Asset Management Company Ltd.
ICB has acted as trustee to debentures amounting
TK.1.42 billion in aggregate out of total Tk.2.93 billion publicly traded
debentures. ICB also acted as underwriter/ manager to the issue to more than
370 companies of which 101 companies are publicly traded companies. Besides portfolios
of over 51,000 investors (margin accounts), institutional portfolios including
mutual funds and unit fund were also being managed by ICB. The Corporation has
long and proven experience in advisory function, particularly in buying and
selling of shares, corporate restructuring and engineering, off loading of
govt. shares and hosts of other merchant bank related activities for the
benefit of its clients. ICB has been playing a unique role in the development
of country’s capital market.
5.7 Investment
Manager of the Fund
ICB Asset Management Company Ltd. (ICB AMCL) a
subsidiary of ICB will act as the investment manager of the Fund. ICB Asset Management
Company Ltd. (ICB AMCL) was created as part of the restructuring program of ICB
under Capital Market Development Program (CMDP) initiated by the Government of
Bangladesh and ADB. The company was incorporated as a public limited company
with an authorized capital of Tk. 100.00 crore and a paid-up capital of Tk.
5.00 crore under the 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.
5.8 CAPITAL STRUCTURE
Issuance of unit
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:
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
Performance
Analysis of Private Mutual Funds in Bangladesh
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 company’s 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:
Ø
Comparison within one fiscal year.
Ø
Comparison in different fiscal years.
Ø
Comparison within the industry with one fiscal
year
Ø
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.
6.2 Profitability Ratio
Profitability ratio allows us to measure the ability
of the firm to earn an adequate return on sales, total asset and invested
capital. Many of the problem s related to profitability can be explained, in or
in part, by the firm’s ability to effectively employ its resources.
A. Profit
Margin Ratio
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.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Net Profit
|
6,848,298
|
17,162,394
|
21037998
|
Income
|
10946040
|
19821496
|
21193095
|
Profit Margin
|
62.56%
|
86.58%
|
99.27%
|
Figure: Net Income & sales comparison.
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.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Net Profit
|
4500000
|
11949628
|
10298
|
Income
|
6142267
|
14334396
|
4875501
|
Ratio
|
73.26%
|
83.36%
|
0.21%
|
Figure: Net Income & sales comparison.
Though the above graph reveals the decreasing trends of the profit margin
but it is not certain that will it be decreasing or increasing.
3. ICB
Islamic Mutual Fund:
Figure: Net Income & sales comparison.
The above graph reveals that the profit margin of ICB Islamic Mutual Fund
is decreasing successively.
B. Return on Asset
Return on
asset ratio measures the efficiency with which total assets are employed within
the firm.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Net Profit
|
6,848,298
|
17,162,394
|
21037998
|
Total assets
|
77566848
|
90322847
|
93648989
|
Ratio
|
8.83%
|
19.00%
|
22.46%
|
Figure: Return on Equity.
From the above table we see that the return on asset is increasing from
2003 to 2005.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Net Profit
|
4500000
|
11949628
|
10298
|
Total assets
|
17671388
|
184308124
|
174274275
|
Ratio
|
25.46%
|
6.48%
|
0.01%
|
Figure: Return on Equity.
From the above table we see that the return on asset is decreasing trend
but it is not certain that will the return on asset be decreased or increased.
And this is happened because the information of Grameen Mutual Fund One is not
available.
3. ICB
Islamic Mutual Fund:
Year
|
2005
|
2006
|
Net Profit
|
5,684,992
|
6,101,311
|
Total assets
|
107,564,434
|
111,118,402
|
Ratio
|
5.29%
|
5.49%
|
Figure: Return on Equity.
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:
Return on equity measures the efficiency with which common
shareholders equity is being employed within the firm.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Net Profit
|
6,848,298
|
17,162,394
|
21037998
|
Equity
|
75089482
|
87162394
|
91037998
|
Ratio
|
9.12%
|
19.69%
|
23.11%
|
It is recommended from the
above graph that the return on equity is increasing from 2003 to 2005.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Net Profit
|
4500000
|
11949628
|
10298
|
Equity
|
16500000
|
181949628
|
170010298
|
Ratio
|
27.27%
|
6.57%
|
0.01%
|
Figure: Return on Equity
It is recommended from the
above graph that the return on equity is decreasing successively from 15th
February 2005 to 30th June 2006.
3. ICB
Islamic Mutual Fund:
Year
|
2005
|
2006
|
Net Profit
|
5,684,992
|
6,101,311
|
Equity
|
100000000
|
100000000
|
ROE
|
5.68%
|
6.10%
|
It is recommended from the
above graph that the return on equity is increasing successively from 2005 to
2006.
6.3 Capital Structure Ratio
Capital structure ratio
provides insight into the extent to which non- equity capital is used to
finance the assets of the firm.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Total Liabilities
|
2477366
|
3160453
|
2646991
|
Equity
|
75089482
|
87162394
|
91037998
|
Ratio
|
3.30%
|
3.63%
|
2.91%
|
Figure: Capital Structure ratio
The above graph reveals that the
AIMS First Guaranteed Mutual Fund
increases from 2003 to 2004 then it is decreasing.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Total Liabilities
|
1171388
|
2358496
|
4263977
|
Equity
|
16500000
|
181949628
|
170010298
|
Ratio
|
0.070993
|
0.0129624
|
0.025080698
|
Figure: Capital Structure ratio
The above graph reveals that the
Grameen Mutual Fund One increases its non equity capital which is 158000000 Tk.
3. ICB
Islamic Mutual Fund:
Year
|
2005
|
2006
|
Total Liabilities
|
7564434
|
11118402
|
Equity
|
100000000
|
100000000
|
Ratio
|
7.56%
|
11.12%
|
The above graph reveals that the
ICB Islamic Mutual Fund increases its non equity capital from 2005 to 2006.
6.4 Working Capital / Cash Flow Ratio
The higher of this ratio, the higher the working capital or cash flow
generated by the firm in its operations.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
15-02-2005
|
30-06-2006
|
Cash flow from operation
|
5448587
|
10282353
|
Incomes
|
6142267
|
4875501
|
Ratio
|
0.887064
|
2.1089839
|
Figure: Working Capital / Cash Flow Ratio
We can state by using the above
graph that the working capital to cash flow ratio is increasing from 2005 to
2006. So it is clear that the ICB Islamic Mutual Fund’s ability to generate
cash from its operations is increasing.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
30-06-2006
|
Cash
flow from operation
|
5448587
|
10282353
|
Incomes
|
6142267
|
4875501
|
Ratio
|
0.887064
|
2.1089839
|
Figure: Working Capital / Cash Flow Ratio
We can state by using the above
graph that the working capital to cash flow ratio is increasing from 15th
February 2005 to 30th June 2006. So it is clear that the Grameen
Mutual Fund One’s ability to generate cash from its operations is increasing.
3. ICB
Islamic Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Cash flow from operation
|
4318411
|
7224785
|
652589
|
Incomes
|
10946040
|
19821496
|
21193095
|
Ratio
|
39.45%
|
36.45%
|
3.08%
|
Figure: Working Capital / Cash Flow Ratio
We can state by using the above
graph that the working capital to cash flow ratio is decreasing from 2003 to
2004 slightly but it is decreasing heavily from 2004 to 2005.
6.5 Earning Per Share
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
2005
|
Net Profit
|
6,848,298
|
17,162,394
|
21037998
|
No of shares outstanding
|
70000000
|
70000000
|
70000000
|
Earning Per Share(EPS)
|
0.097833
|
0.24517706
|
0.300543
|
Figure: Earning Per Share
The above graph reveals that the
earning per share is increasing from 2003 to 2005 successively.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Net Profit
|
4500000
|
11949628
|
10298
|
No of shares outstanding
|
1200000
|
17000000
|
17000000
|
Earning Per Share
|
3.75
|
0.7029193
|
0.000605765
|
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.
Figure: Earning Per Share
We can state that the
Earning per Share of Grameen Mutual Fund One shows the higher earning per share
for the first 2005 then it is gradually decreasing.
3. ICB
Islamic Mutual Fund:
Year
|
2005
|
2006
|
Net Profit
|
5,684,992
|
6,101,311
|
No of shares outstanding
|
1000000
|
1000000
|
Earning Per Share(EPS)
|
5.684992
|
6.101311
|
Figure: Earning Per Share
The earning per share of the ICB
Islamic Mutual Fund in the above graph shows the increasing trend from 2005 to
2006. This sends a positive signal to the investors because it increases the
earnings of them.
6.6 Retention Ratio
This ratio is very important for
the fund because this is used for the further expansion of the fund. This
indicates how much amount a fund retains in proportion to its total earnings.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2005
|
2006
|
Retain earnings
|
684,992
|
786,303
|
Earnings this year
|
5,684,992
|
6,101,311
|
Retention Ratio
|
12.05%
|
12.89%
|
The above table represents that
the retention ratio for the ICB Islamic Mutual Fund is
about same for both the year
which is 12.05% & 12.89% in 2005 & 2006 respectively.
2. Grameen
Mutual Fund One:
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Retain earnings
|
4500000
|
11949628
|
10298
|
Earnings this year
|
4500000
|
11949628
|
10298
|
Retention Ratio
|
100.00%
|
100.00%
|
100.00%
|
The above table represents that
the retention ratio for the Grameen Mutual Fund One is hundred percent that
means the Grameen Mutual Fund One does not any dividend to its shareholders.
3. ICB
Islamic Mutual Fund:
Year
|
2003
|
2004
|
Retain earnings
|
5350661
|
6662394
|
Earnings this year
|
6,848,298
|
17,162,394
|
Retention Ratio
|
78.13%
|
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.
6.7 Growth Rate
Growth rate indicates how much a fund will grow over the coming year.
And growth is denoted by g.
1.
AIMS First Guaranteed Mutual Fund:
Year
|
2003
|
2004
|
Net Profit
|
6,848,298
|
17,162,394
|
Equity
|
70000000
|
70000000
|
ROE
|
9.78%
|
24.52%
|
g = Retention Ratio * ROE
|
7.64%
|
9.52%
|
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.
2. Grameen
Mutual Fund One:
Return on Equity =Net Profit / Equity
|
|
|
|
Year
|
15-02-2005
|
31-12-2005
|
30-06-2006
|
Net Profit
|
4500000
|
11949628
|
10298
|
Equity
|
12000000
|
170000000
|
170000000
|
ROE
|
0.375
|
0.0702919
|
0.00006058
|
Calculation of Growth Rate (g):
|
|
|
|
g = Retention
Ratio * ROE
|
37.50%
|
7.03%
|
0.01%
|
3. ICB
Islamic Mutual Fund:
Year
|
2005
|
2006
|
Net Profit
|
5,684,992
|
6,101,311
|
Equity
|
100000000
|
100000000
|
ROE
|
0.05684992
|
0.06101311
|
Calculation of Growth Rate (g):
|
|
|
g = Retention Ratio * ROE
|
0.68%
|
0.79%
|
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.
6.8 Yield Calculation
Dividend yield are related to the
market’s perception of future growth prospect of the funds Firm’s high growth
prospects will generally have lower dividend yields.
AIMS
First Guaranteed Mutual Fund:
Year
|
2006
|
Dividend Yield:
|
|
Dividend per share
|
7
|
Market price per share
|
1.57
|
Dividend Yield
|
445.86%
|
Beginning
price (P0)
|
1.12
|
Ending price(P1)
|
1.57
|
Yield
|
486.04%
|
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.
2. Grameen
Mutual Fund One:
Year
|
2006
|
|
Dividend Yield:
|
|
|
Dividend per share
|
5
|
|
Market price per share
|
14.4
|
|
Dividend Yield:
|
34.72%
|
|
Beginning
price (P0)
|
14.4
|
|
Ending price(P1)
|
17.8
|
|
Yield
|
58.33%
|
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.
3.
ICB Islamic Mutual Fund:
Year
|
2006
|
Dividend per share
|
16
|
Market price per share
|
131.25
|
Dividend Yield
|
0.121904762
|
Beginning
price (P0)
|
111.75
|
Ending price(P1)
|
131.25
|
Yield
|
29.64%
|
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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