ICB

Internship ReportOn

The Contribution of ICB Unit Fund And Mutual Fund

Submitted To

Mrs. Shehely Parvin

Lecturer & Supervisior

Department of Marketing

The University of Marketing.

Submitted By

Muhammad Rashed Khan

MBA 6Th Batch

Roll-175; Sec-A


The University of Dhaka.

1

Date of Submission: October 15, 2006.

October 15, 2006

Mrs.Shehely Parvin

Lecturer & Supervisor

Internship Program


University of Dhaka

Dear Madam:

I am glad to submit my Internship Report for the Internship Program (MBA 6th, 2006),

herewith.

I considered your remarks and instructions very carefully while preparing this report.

I tried my level best to follow your schedule, format and discipline.

I tried to comprehend all the areas related to this report. This has certainly enhanced

my knowledge base with a practical orientation.

Thank you for your consideration.

Sincerely Yours,

Muhammad Rashed KhanMBA 6TH BATCHROLL - 175Department of MarketingUniversity of Dhaka

2

Acknowledgement

Internship is a part of MBA program. This report is based on knowledge gathered

from the internship program. I have realized that partial knowledge is very much

essential for

Professional life and it is totally different from academic knowledge. This knowledge

helps us to develop professional life and practical skills.

In preparing this report first of all I express my deep gratitude to Mrs. Shehely Parvin,

Lecturer of Marketing Department, University of Dhaka, who guided me properly by

giving direction at different times to prepare this report. It is her guided supervision

that resulted in successful completion and timely submission of the report.

I have received commendable support from all the employees of all departments of

ICB.

I am very much grateful to my organizational supervisor Mrs. Nasrin Sultana,

Assistant General manager, to give the opportunity to work at ICB. She has given me

all kind official support to complete the report perfectly.

At last my gratefulness to almighty Allah who has blessed me and given me strength

to prepare this report successfully and smoothly.

Thanks all.

3

TABLE OF CONTENTS

Pg.CHAPTER ONE : Introductory Part 7

1.1. ORIGIN OF THE REPORT 81.2. OBJECTIVES OF THE SUTDY 81.3 METHODOLOGY OF THE STUDY 91.4 IMPORTANCE OF THE STUDY 91.5 LIMITATIONS 11

CHAPTER TWO: ICB at a glance 12

2.1. HISTORICAL BACKGROUND OF ICB 132.2 OBJECTIVE OF THE ICB 132.3 BUSINESS POLICE OF THE ICB 142.4 SOURCES OF CAPITAL OF ICB 142.5 SHARE CAPITAL OWNERSHIP PATTERN 162.6 FUNCTION OF ICB 172.7 SHARE PRICE 182.8 TRANSFER OF SHARES 18

CHAPTER THREE : Organizational Structure of ICB 19

3.1 DIVISION & DEPARTMENT OF ICB 203.2 MANAGEMENT OF ICB 233.3 ORGAN GRAM OF CORPORATION 243.4 BRANCHES & DEPARTMENTAL HEADS OF THE ICB 253.5 ADMINISTRATIVE, HUMAN RESOURCE 273.6 ICB MILESTONES 27

CHAPTER FOUR : Overall Evaluation of ICB Unit Fund 29

4.1 INTRODUCTION 304.2 DETAILS DESCRIPTION OF THE ICB UNIT FUND 304.3 STATEMENTS OF GROSS SALE REPURCHASE AND NET SALE OF UNITS 304.4 SOURCES OF THE INCOME OF THE FUND 374.5 YEAR WISE DIVIDEND PAYMENT PERFORMANCE 38

CHAPTER FIVE:Overall Evaluation of the ICB Mutual Fund 43

5.1 WHAT IS MUTUAL FUND 445.2 TYPES OF MUTUAL FUND 445.3 OBJECTIVE OF MUTUAL FUND 455.4 ADVANTAGES OF MUTUAL FUND 45

4

5.5 LAUNCHING OF ICB MUTUAL FUND 465.6 DETAILS DESCRIPTION OF THE ICB MUTUAL FUND 475.7 MANAGEMENT OF THE FUND 505.8 DECLARATION OF DIVIDEND 505.9 PERFORMANCE EVALUATION OF ICB MUTUAL FUND 51

CHAPTER SIX : PROBLEMS AND FINDINGS 74

6.1 PROBLEMS RELATED TO ICB UNIT FUND & MUTUAL FUND 756.2 RECOMMENDATIONS 776.3 CONCLUSION 79

BIBLIOGRAPHY 80

5

Chapter-1

Introductory Part

1.1: Origin of the report

1.2: Objectives of the Study

1.3: Methodology of the Study

1.4: Importance of the Study

1.5: Limitations

6

Chapter 1

Origin of the Report:

Internship means receiving practical training through attending particular work

physically. Practically training means a way through which a person or a trainee can

gather experience about the related subjects and be able to apply his theoretical

experience in the field of real life action. Practical training is necessary to achieve

complete knowledge about some thing. Internship program is actually a form of

practical training.

As a student of MBA, major in marketing, internship is an academic requirement. For

doing internship every student is required to work in a selected institution to enhance

ones practical knowledge and experiences.

For my internship I was sent to the Investment Corporation of Bangladesh (ICB),

under the supervision of Mrs. Shehely Parvin, Lecturer, Department of Marketing,

and the University of Dhaka. My Supervisor asked me to prepare a report on one or

two specific departments of ICB.That’s why I have chosen the topic “Performance of

ICB Unit Fund and Mutual fund”.I have done the internship at ICB from 09.07.2006

to 09.10.2006.

1.2 Objective of the Study:

The Objectives of the report are:

a. To fulfill the requirement of MBA program as necessitated by Marketing

Department, Faculty of Business Studies, Dhaka University.

b. To analyze the performance of ICB, it’s Image and its role in the capital

market of Bangladesh.

c. To relate our theoretical learning with the practical situation.

d. To learn the practical aspect of the Investment Corporation of Bangladesh.

7

e. To get aware about the working environment in advance that will help in

adjusting a student with the future working life.

f. To review the over all performance of ICB Unit fund & Mutual fund.

g. To gather knowledge of how ICB floats and manages the Mutual Fund and

Unit Fund.

h. To focus on the overall performance of the ICB Mutual Fund and Unit

Fund.

i. To know the product of ICB at the securities market in Bangladesh.

1.3. Methodology of the Study:

Methodology can be termed as underlying principles and rules of organization that

work at the background of the study. It clarifies the problem involving the research in

an ordered and systematic way. For this study data and other information can be

collected by the following ways:

1.4. Importance of the Study:

There are a number of situations in which the evaluation of portfolio performance

becomes necessary and important, such as

a) Self – Evaluation: To evaluate how well one has done as individual

investor with a view to refining one’s skills and improving one’s performance

over period of time.

b) Evaluation of Managers: To evaluate portfolio managers by an

investment company or asset management company in order to compare

performance of these managers among several such managers each running a

separate fund or sub-fund within an organization or the performance of portfolio

manager over a number of years.

c) Evaluation of Mutual Fund: To evaluate the various mutual funds

operating in the country in order to take decision by the investor which , if any , of

these should be chosen for investment or to evaluate the efficacy by the

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individuals or organization who engage external agencies for portfolio advisory

services and

d) Evaluation Groups: To evaluate the academics or researchers the

performance of a whole group of investors and compare it with another group of

investors who use different techniques or who have different skills or access to

different information.

Thus, one important reason for doing performance evaluation is to help in

correcting errors of portfolio management and improving the performance over a

period of time.

But data constraint is a common problem in evaluating performance of any

portfolio. On the other hand, by law mutual funds must publicity disclose their

operating results. The accepted advantages of the Mutual Funds –diversification

and professional management –are appealing to many who have no time to devote

to selecting and managing a portfolio. But there is a difficulty in choosing a

consistency successful fund among as number of mutual funds with differing

sizes, availability, market prices, objectives etc. This study of evaluating mutual

fund performance would help identify the best performing mutual fund for the

investors, as well as show how the fund managers have dine their professional

services

1.4.1 Sources and Methods of Collecting Primary data:

i) Personal Interview: This is the most effective way to collect primary

data. Through this process the Trainee can confront a number of officials

of ICB and share holders. I interviewed them by asking financial operation

of ICB.

ii) Briefing Session: In case of corporate organization, this method is very

useful. During internship period we visited different departments of ICB

and took part briefing session .The head of departments gave briefs the

9

trainees which were very much useful for us and we gathered some

valuable information from their briefing.

iii) By Observation: This process is very useful for gathering primary data.

This process is very costly, time consuming. Through this process limited

but accurate data can be collected.

1.4.2 Sources and Methods of Collecting Secondary data:

The secondary data had been collected with several relevant articles of the ICB.

These are given below:

ICB Annual Report (2004-05).

Annual Report of Mutual Fund (2004-05).

Annual Report of Unit Fund (2004-05).

Others materials of the Investment Corporation.

Other sources.

1.5 Limitations of this Study:

In preparing this report I faced some limitations. During this Internship I worked all

the departments of ICB one after another for twelve weeks. ICB is a large

autonomous corporation, but three months study time is too short in an organization

like ICB and this was the main limitation of my Internship Program.

Other constraints that I faced during the course of my internship are as follows:

Official secrecy of ICB was also a problem to me.

Relevant papers and documents were not available sufficiently.

At the time of face to face discussion with officials, there were no

sufficient chairs and tables.

Inadequate information.

10

Chapter -2

ICB(Investment Corporation of Bangladesh)

At a Glance

Chapter Contents

2.1: Historical Background of ICB

2.2: Objectives of the ICB

2.3: Business Policy of the ICB

2.4: Sources of Capital of ICB

2.5: Share Capital Ownership

Pattern

2.6: Functions of ICB

2.7: Share Price

2.8: Transfer of Share

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Chapter-2

ICB at a Glance

2.1 Historical Background of ICB

The Investment Corporation of Bangladesh was established on 1st October 1976,

under “The Investment Corporation of Bangladesh Ordinance, 1976 “(NO. XL of

1976). The establishment of ICB was major step in a series of measures undertaken

by the Government to accelerate the pace of industrialization and to develop a well

organized and vibrant Capital market particularly securities market in Bangladesh.

ICB caters to the need of institutional support to meet the equity gap of the industrial

enterprises. In view of the notional policy of accelerating the rate of savings and

investment to foster enactment of the Investment Corporation of Bangladesh

(Amendment) Act, 2000 (No. XXXIV of 2000), reforms in operational strategies and

business policies have been taken place by establishing and operating subsidiary

companies under ICB.

2.2 Objectives of the ICB

The main objectives of ICB are as follows:

a. To encourage and broaden the base of investments.

b. To develop the capital market.

c. To mobilize savings.

d. To promote and establish subsidiary companies for business development.

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e. To provide for matters ancillary thereto.

13

2.3 Business Policy of the ICB

The Corporation has adopted a realistic business policy framework within which its

operation is conducted. The corporation in its operating acts on commercial

considerations with regard to the interest of industry and commerce, investment

climate, capital market depositors, investors and to the public interest generally.

The operational policies of the Corporation are as follows:

a. To provide financial assistance to projects subjects to their economic and

commercial viability.

b. To arrange equity and loans singly or through consortium of financial

institutions including banks.

c. Equity Support to projects and there by spreads the risks of understanding.

d. To develop and encourage entrepreneurs.

e. To diversify investments.

f. To inspire small and medium savers for investment in securities.

g. To create employment opportunities.

h. To encourage more investment in Agro-based and Information and

Communication Technology (ICT) sectors.

2.4: Sources of Capital of ICB:

Every organization has some sources of capital. It may be from own sources or

may be other sources. In case of Investment Corporation of Bangladesh it is a

public limited company issuing shares to the public, loans and debentures are the

main sources of ICB. The present capital structures are given to following;

14

Capital Structure

As on 30th June, 2005

(TK. In Crore)

Authorized Capital 100.00

Paid up Capital 50.00

Reserves84.11

Retained Profit5.36

Long term Govt. Loan5.25

Debentures61.80

Others 24.89

Total

231.41

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2.5 Share Capital Ownership Pattern

Classification of shareholder as on 1 January, 2005

16

2.6 Functions of ICB

The functions of ICB are given below:

Functions of ICB

Direct purchase of shares and debentures including placement and equity

participation

Participating in and financing of joint-venture companies

Providing lease finance singly and through syndication

Managing existing investment accounts

Managing Mutual funds and Unit funds.

Managing Portfolios of existing shares

Conducting computer training programmers

Providing advance against ICB Unit and Mutual Fund certificates

To act as Trustee and Custodian

Providing Bank Guarantee

Providing Consumer Credit

Operating on the stock exchanges.

Providing investment counseling to issuers and investors.

Participating in and financing of joint venture projects.

Dealing in other matters related to capital market operation.

Introducing new business products suiting market demand

To supervise and control the activities of the subsidiary companies.

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2.7 Share Price

ICB ‘s Share price varied from lowest Tk. 122.00 to highest Tk. 219.50 in the stock

exchanges during the year. As on 30 June 2005, the market price of per share was Tk.

200.00 and Tk. 201.25 in the DSE and CSE respectively.

2.8 Transfer of Shares

A total of 36269 shares of ICB were transferred during 2004-2005 as against 16085

shares transferred in 2003-2004 registering an increase of 125.48 percent. The rate of

share transfer is increased by 125.48 percent from previous year. This is the sign of

positive performance of ICB.

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Chapter-3

Organizational Structure of ICB

3.2: Management of ICB.

3.3: Organ gram of Corporation.

3.4: Branches and Departmental

Heads of the ICB.

3.5: Administration and Human

Resource.

3.1: Divisions and Department

Of ICB.

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Chapter-3

Organizational Structure of ICB

3.1: Division & Department of ICB

The entire organization of ICB is functionally divided into two broad groups namely

Wing and Administration Wing.

The functions of Operation wing is involved in the activities related to

Project Financing Research, Computer, Launching of Unit Fund and Mutual

Fund. Maintenance of investors Accounts, Shares, Transaction etc.

The functions of administration Wing is involved with the activities relating

to Administration, Accounts. Implementation and monitoring of projects,

recovery, public issue and Legal matters.

The functions of the two wings is looking after by two General Manager who are

responsible to the Managing Director. All branches are supervised by General

Manager (GM) Administration Division.

Each Wing is functionally sub-divided into divisions which are headed by Deputy

General Manager besides the above two major wings there are two divisions which

are direct under supervision of Managing Director i.e. Audit and Methods

Division ,Secretary’s Division .The description of the Division and Department are

given below.

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3.1.1: Direct Supervision under Managing

Director:

1) Secretary’s Division

a) Secretary’s Department

b) Public Relation Department

2) Audit and Methods Division

Head Office Control Department

3.1.2: Wings under Supervision of General Manager

(operation):

1) Loan Appraisal Division:

a) Loan Appraisal Department

b) EBR Department

2) Fund Division:

a) Unit Sales Department

b) Unit Registration and Procurement Department

c) Mutual Fund Department

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3) Merchandising Division:

a) Investors Department

b) Shares Department

c) Transaction Department

4) Computer Division:

a) System Analysis Department

b) Programming Department

c) Data Management Department

3.1.3 Wings under Supervision of General Manager

(Administration):

1) Administration Division:

a) Personal Department.

b) Establishment Department.

2) Accounts and Finance Division:

A) General Accounts Department.

B) Project Loan Accounts Department.

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3) Legal Affairs Division

a) Law Department

b) Public Issue Department

4) Implementation and Recovery Division

a) Implementation Department

b) Recovery and Follow up Department

5) Branches: There are seven branches of ICB .These are Located in

various places of Bangladesh such as:

a) Chittagong Branch

b) Rajshahi Branch

c) Khulna Branch

d) Barisal Branch

e) Sylhet Branch

f) Bogra Branch

g) Local office Dhaka

3.2: Management of ICB

The Head office of the corporation as per the requirement of the ordinance of ICB

is located at Dhaka. The general direction and superintendence of the corporation

created in a board of directors, which consists of persons including the chairman

and managing director of ICB

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The board of directors consists of the following directors:

a) The Chairman to be appointed by the government.

b) The directors to be appointed by the government from among persons

serving under the government.

c) One director to be nominated by the Bangladesh Bank

d) The managing directors, Bangladesh Shilpa Bank, Ex-office.

e) The managing directors, Bangladesh Shilpa Rin Sangstha, Ex-office.

f) Four other directors to be elected by the shareholders other than

the government, BB, BSB and BSRS.

g) The managing director of ICB to be appointed by the government.

3.3: Organogram of Corporation:

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3.4 Braches and Departmental Heads of the ICB

Branch Heads

Mr. Md. Abdur Rouf

Deputy General Manager ,

Local Office, Dhaka

Mr. Monoranjan Chakma

Assitant General Manager,

Chittagong Branch

Mr. Moynal Haq Khan

Manager,

Sylhet Branch

Mr. Gazi Mostafa Haq

Manager,

Rajshahi Branch

Mr. Kamal Hossain Gazi

Manager,

Khulna Branch

Mr. Md. Hamidul Islam

Manager,

Bogra Branch

Mr. Md. Emdad Hossain Mollah

Assitant General Manager,

Barisal Branch

Departmental Heads

Serial No.

Departments Department Heads

1 Secretary's Department Mrs. Dipika Bhattacharjee

2 Audit & Methods Department

Mrs. Kamrun Nahar

3 Loan Appraisal Department

Mrs. Jubaida Nasrin

4 Planning, Research & Business Development

Mr. Tarek Nizamuddin Ahmed

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5 Management Information Department

Mr. Muhammad Enayetur Rahman

6 Securities Analysis Department

Mr. Abu Taher Md. Ahmedur Rahman

7 Unit Sales Department Mr. Md. Nazrul Islam Khan

8 Unit Registration & Procurement Department

Mr. Md. Zahirul Islam

9 Mutual Fund Ms. Dilroze Habib

10 Investors' Department Mr. Abu Md. Yousuf

11 Shares Department Ms. Monowara Begum

12 System Analysis Department

Mr. Md. Abul Hossain

13 Programming Department Mr. Md. Abul Hossain

14 Personnel Department Ms. Nasreen Sultana

15 Establishment Department

Mr. Mashiur Rahman

16 Central Accounts Department

Mr. Nasir Uddin Ahmed

17 Project Loan Accounts Department

Mr. Md. Ayub Ali

18 Law Department Ms. Tanjina Chowdhury

19 Public Issue Department Ms. Tahmina Begum

20 Trusty Department Mr. Mohammad Altaf Hossain

21 Project Implementation Department Mr. Mojibur Rahman Faraji

21 Recovery & Follow-up Department

Mr. Kafil Uddin Ahmed Chowdhury

22 Branch Control Department Mr. Mohammed Ismail Hossain

26

3.5 Administrative, Human Resource

Investment Corporation of Bangladesh (ICB) providing different categories of

financial and banking services. Nature of different division/departments vary, such

that Economic and Business Research (EBR) Department requires teamwork, Loan

Appraisal division requires professional work, Funds division needs chain work.

Managing Director is entrusted with authority to transact the regular business of

the organization; he may delegate some authority to the officials of the

corporations. However most of the policy decision are taken by the different

committee with the approval of managing director and where required of the

Board. It is the discretionary authority of the Board to constitute the executive

committee and to nominate its Chairman to assist the Board in the discharging of

the function stated under the ordinance.

The Board may appoint such other committee as it thinks fit to assist it in the

efficient discharge of its functions. So far, board has appointed two such

committees-Economic and Business Research committee and loan appraisal

committee headed by General Manager.

3.6 ICB Milestones

Milestones Date/Establishment Commencement

Date of Establishment/ Commencement ICB

1st October 1976

lnvestors'Scheme 13th June 1977

First ICB Mutual Fund 25th April 1980

ICB Unit Fund 10th April 1981

Second ICB Mutual Fund 17 June 1984

27

Third ICB Mutual Fund 19 May 1985

Fourth ICB Mutual Fund 6 June 1986

Fifth ICB Mutual Fund 8 June l987

Sixth ICB Mutual Fund 16 May 1988

Nomination as the country's Nodal DFI in SADF

7 May 1992

Seventh ICB Mutual Fund 30Junel995

Eighth ICB Mutual Fund 23 July 1996

Purchase of own Land & Building

11 December 1997

Participation in Equity of SARF 16 January 1998

Advance Against ICB Unit Certificates Scheme

12 October 1998

Lease Financing Scheme 22 April 1999

"The Investment Corporation of Bangladesh (Amendment)Act, 2000" passed in the Jatiya Sangsad (Parliament) and Honourable President's assent thereof

5 and 6 July 2000

Formation and Registration of 3 Subsidiary Companies of ICB

5 December 2000

ComputerTraining Program 25 March 2001

Commencement of business operations of the subsidiary companies

ICB Capital Management Ltd01 July 2002

ICB Asset Management Company Ltd.

01 July 2002

ICB Securities Trading Company Ltd.

13 August 2002

Registration as a Trustee with SEC

20 August 2002

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Registration as a Custodian with SEC

20 August 2002

Bank Guarantee Scheme 21 June 2003

Advance Against ICB Mutual Fund Certificate Scheme

21 June 2003

Consumers Credit Scheme 15 February 2004

Chapter- 4

Overall Evaluation of ICB Unit Fund

4.1 Introduction

4.2 Details Description of ICB Unit Fund

4.3 Statements of Gross sale Repurchase and

Net Sales of Units.

4.4 Sources of Income of the Fund.

4.5 Year –wise Dividend payment performance.

4.6 Occupation –wise Classification of Unit-

Holders.

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Chapter-4

Overall Evaluation of ICB Unit Fund

4.1 Introduction

Sponsored by the Government of Bangladesh, ICB Unit Fund was established on

April 10, 1981. Its main objective is to mobilize savings through sale of its units to

small investors and invest these funds in marketable securities. The scheme provides a

potential source of equity and debt to industrial and commercial concerns and thus

contribute to the industrial development of the country.

Unit fund is an open ended Mutual Fund. It provides an opportunity to the unit

holders to invest their funds in a well managed and diversified portfolio with a high

degree of security of capital and reasonable yearly returns.

ICB units are securities within the meaning of Trust Act. 1882.

4.2. Details Description of the ICB Unit Fund

What is Unit Fund?

It is an open -end mutual fund scheme launched in April 1981, through which the

small and medium savers get opportunities to invest their savings in a balanced and

relatively low risk portfolio.ICB has so far declared attractive dividends on units

every year

Issue, Transfer and Surrender of Unit Certificates

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(I) Units are available in 1, 5, 10, 50, 100, 500, 1000, & 5000 denominations. The

names with addresses of the holders are recorded and dividends are dispatched to

them accorded and dividends are dispatched to them accordingly.

(II) Units may be transferred through prescribed transfer form duly filled in and

signed by the transferor and transferee. No stamp duty is required for such transfers.

(III) Units may be encased by way of surrendering the certificates along with the

prescribed surrender forms duly filled in and signed by the registered holders and no

prior notice is required. The certificates are required to be surrendered at the

prevailing Repurchase Price.

Registration Number

Units are issued as registered certificates. An existing Unit holder is required to

mention the previous registration number on the specified column of the application

form when he/she intends to buy Units again.

Price Fixation

Charges in sale and repurchase prices of units are notified through the newspapers and

price of a Unit is fixed periodically by ICB as its fund manager. Among others,

valuation of the assets of the Fund are taken into consideration while fixing price of a

unit.

Advance against Unit Certificates Scheme

Advance against ICB Unit Certificates Scheme was introduced in 1998, especially

designed for the ICB unit holders to meet their emergency fund requirements. One

can borrow maximum of Tk. 85 per unit by depositing his/her unit certificates under

lien arrangement from any of the ICB offices where from such unit certificates were

purchased. The rate of interest on the loan is reasonable and competitive.

Public Participation

31

The Fund is divided into units which are generally known as "ICB Unit". Each Unit

bears a certain value in the assets of the Fund. The Unit holders are the owners of the

fund and only they are benefited from it. Unit certificates can be purchased in single

or joint name (s). At present maximum of 10,000 Units can be purchased in a single

or joint name(S) at a time. Units are not sold to institutions.

Professional Counseling

Professional Counseling is rendered to the prospective & existing investors who are

eager to purchase ICB Units through ICB offices and authorized Bank branches.

Advantages of Investment in Unit Fund:

Investment in Unit Funs offers the following advantages:

h) Investment in Unit certificates is secured.

i) It enjoys liquidity.

j) It is transferable.

k) Bank Loan is available against pledge of units.

l) It offers attractive regular return.

m) Investment allowance for Income Tax is available.

n) Dividend is Income Tax exempted..

Investment by Bangladeshi Citizens Abroad

The Bangladeshi citizens living abroad may invest in certificates on fulfillment of the

following terms and conditions:

(I) The value of Units purchased is to be remitted through bank channel,

(II) The money invested in Units and benefits thereon are not allowed to be

repatriated,

32

(III) The investors must mention their local and bank addresses in Bangladesh for

convenience of registration of Units.

Investment by Foreigners Residing in Bangladesh

The foreign nationals residing in Bangladesh may also invest in Unit Certificates,

provided they produce certificates to the effect that money being invested are their

own savings and is not borrowed as loan or overdraft from any bank. These

certificates are to be collected from a Gazetted Officer or a Banker not below the rank

or Deputy General Manager.

Fund Management

The responsibility of managing the fund rests on ICB for which management fee @

Tk. 1.25 per Unit (net outstanding) is charged. The Corporation also discharges the

responsibility of loading and unloading of securities in and from the portfolio in the

interest of the Unit holders. It is also the custodian of all assets of the fund.

Dividend

The total income earned on investment/ deployment of funds, net of expenditures

incurred, in a financial year is distributed among the unit holders as dividend.

Dividend is normally declared at the end of July each year by the Board of Directors

of ICB. Dividend Warrants are dispatched soon after declaration of dividend. Since

launching of the scheme in 1981 till FY 1997-98 the rates of yearly dividend declared/

paid are as under:

Financial Year Rate of dividend per unit (Tk.)

Financial Year Rate of dividend per unit (Tk.)

1980-81

1981-82

1982-83

1983-84

15.00

16.00

16.25

17.00

1991-92

1992-93

1993-94

1994-95

16.70

17.00

17.40

17.50

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1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

20.00

21.00

24.0

24.00

25.00

25.00

18.00

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-2001 2001-2002

2002-2003

2003-2004

2004-2005

17.00

17.50

14.00

12.00

12.00

12.00 12.30

12.30

11.50

11.50

Tax Benefits

(I) Investment in Units enjoys the benefit of Investment Allowance under Sec. 44 of

Income Tax ordinance 1984.

(II) Units are treated as approved securities in accordance with the Section 2993 of

the Companies Act., 1994 and Insurance Act, 1938. These are also treated as

Securities as per Sec. 20 of the Trust Act, 1882.

Cumulative Investment Plan (CIP)

Under this scheme a holder instead of receiving dividend may reinvest such dividend

income accrued for purchasing Unit at a concessional rate. In such case, Units are

issued at Tk. 1.00 less than the opening price of the financial year.

Duplicate Dividend Warrants

Incase dividend warrants are not received in time, it should be communicated to ICB

head office immediately. Duplicate warrants are issued subject to completion of

34

required formalities and execution of an Indemnity Bond on non-judicial stamp as

applicable.

Change of Address

Unit holders should immediately communicate any charge of address to the issuing

offices so that no problem arises in dispatching dividends and surrendering the

certificates.

35

Transaction Hours

Transactions are held during banking hours every day excepting Thursday and

holidays. Transactions do not take place during the month of July each year due to

book-closure.

Where Units are Available

Units are sold/purchased at ICB Head Office and at its Branches at Dhaka,

Chittagong, Rajshahi, Khulna, Sylhet, Barisal and Bogra. Fifty seven branches of

Sonali Bank, Agrani Bank, Janata Bank, Rupali Bank Ltd., Uttara Bank Ltd., Pubali

Bank Ltd., IFIC Bank Ltd., Bangladesh Krishi Bank, Prime Bank Ltd., Dhaka Bank

Ltd., Bangladesh Shipla Rin Shangstha, United Commercial Bank Ltd., The City

Bank Ltd., and Estern Bank Ltd. locate at important cities all over the country, are

also engaged in selling and repurchasing of unit certificates.

4.3: Statements of Gross sale Repurchase and Net Sale of

Units

Issue and Repurchase of Units

During FY 2004-05, 1728270 Units of Tk.17.97 crore were issued under the

Cumulative Investment Plan(CIP) while 19,76,294 Units of Tk. 20.79 crore were

repurchased .The following table shows the comparative position of gross issue

(CIP) , repurchase and net issue of Units during 2004-2005 and 2003-2004:

36

Position of Units issue (CIP), repurchase and net Issue

particulars

2004-05 2003-04 Cumulative up to 30

June 2005

Unit Amoun

t

Unit Amoun

t

Unit Amount

Gross Issue 17,28,270 1797.40 17,10,155 1744.36 8,21,16,65

2

92,319.1

7

Repurchas

e

19,76,294 2078.92 18,16,132 1859.81 4,12,50,14

1

45,372.4

1

Net Issue (2,48,024

)

(281.52) (1,05,977

)

(115.46) 4,08,66,51

1

46946.76

Graphical Presentation of Gross Issue, Repurchase & Net Issue of

Units

37

5.4: Sources of the Income of the Fund

Dividend and Interest Income

In FY 2004-05 the Fund earned dividend amounting to Tk. 25.66 crore from 138

companies and interest on Debenture amounting to Tk. .84 crore from 8 companies

resulting in total dividend and interest income of Tk.26.50 crore of which 76.26% i.e

Tk. 20.21 crore was received in cash , The total dividend and interest income during

2002-03 was Tk. 30.42

Capital gains on Sale of Investment

During FY 20034-2005 the Fund Capital gains of Tk. 33.95 crore by selling

securities of 58 companies as compared to Tk. 24.96 crore of capital gain made in

FY 2002 -2003 through sale of securities of 62 companies.

Interest on Bank deposits:

In 2004-05 the Fund earned Tk. 2.20 crore as interest on bank deposits which was

Tk. 3.07 crore in 2002-2003.

Premium Income on Gross Sale of Units:

In 2004-05 the Fund earned Tk. 0.69 crore as premium on gross issued Units as

against Tk. 0.68 crore in 2003-2004.

Income and Expenditure:

During the year under review , the Fund earned a total income of Tk. 63.35 crore by

way of dividend , interest on debenture securities , capital gains , interest on bank

deposits , premium on sale of units and others , After deducting the total expenses of

Tk. 13.64 crore on account of management fee, interest on current account with ICB ,

38

commission and brokerage , printing and stationary , postage , Bank

charges ,provision against investment and others the fund had a net income of Tk .

49.71 crore , the Fund had a net distributed income of Tk. 11.33 crore , the Fund had a

net distributed income of Tk.61.04 crore in aggregate and Tk. 14.94 per Unit . As on

30 June, 20045 the Fund had 40866511 outstanding units against 4,11,14,535 Units

at the same date of the preceding year.

4. 4: Year –wise dividend Payment Performance

Dividend Declared: The Board of Director of ICB in its meeting held on 29 July,

2005 declared dividend at the rate of 11.50 per unit, involving tk. 46, 99, 64,877.00

for 2004-2005. The unit holders whose names appeared in he register on 30 June,

2005 were entitled to this dividend. The rest amount of Tk. 14, 04, 48,208.00 would

be carried forward as undistributed income.

39

Table shows dividend performance and dividend yield of the

Fund for the period from 1989-90 to 2004-2005.

Financial Year

Dividend per Unit(Taka)

Dividend Yield on opening price (percentage)

1989-90 25.00 23.141990-91 18.00 15.651991-92 16.70 14.651992-93 17.00 15.181993-94 17.40 15.541994-95 17.50 15.351995-96 17.00 14.531996-97 17.50 14.581997-98 14.00 11.661998-99 12.00 10.531999-00 12.00 11.012000-01 12.00 11.112002-03 12.30 11.392003-04 12.30 11.602004-05 11.50 10.65

40

Portfolio:

As on 30 June 2005 the net Investment of the Fund at cost price stood at Tk. 604.59

crore in 266 securities , the market value of which was Tk. 626.63 crore .

Details of the portfolio are given in Annex-5

Summary of investments as on 30 June 2005

SL.no. Parties No.of securities

Total Cost Total market value

(A) Share 1. Listed companies2.Non listed companies (under guaranteed return)1. Investment in SARF ( in foreign currency )

23722

2

58740.83827.37

408.99

60433.33827.37459.74

(B) Debenture

1. Listed companies2. Non listed companies

41

266.07216.00

726.77216.00

Total Investment

266 60459.26 62663.21

4.5 Occupation-wise classification of Unit holders

Classification of Unit holders:

The number of Unit holders as on 30 June, 2005 was 34,720

whose occupation –wise classification is as follows:

SL.no Occupation / Institution No. of Unit

holders

Percentage

1 Govt.& Non- Govt. Employees 18,84 58.75

2 Business man and agriculturists 3,005 9.45

41

3 Engineers and Doctors, Lawyers etc. 2,823 8.88

4 Retired person (all categories) 2,630 8.27

5 Defense personal 2,005 6.31

6 House wives 1,002 3.15

7 Others 907 2.85

8 Bangladeshis Residing Abroad 362 1.14

9 Workers and Students 340 1.07

10 Institutional Provident Fund 42 0.13

Total 31800 100

It may be observed from the above the table that out of the total Unit holders as on 30

June 2005. Public and Private sector employees accounted for maximum of 58.75

percent who are mainly of small and medium size income group. It indicates that the

Unit Fund has been succeeded in attracting small and medium size savers.

.

42

Chapter-5

Overall Evaluation of the ICB Mutual Fund

5.1: What is Mutual Fund?

5.2: Types of Mutual Fund

5.3: Objectives of Mutual Fund

5.4: Advantages of Mutual Fund

5.5: Launching of Mutual Fund

5.6: Details Description of Mutual Fund

5.7: Objectives of the Study

5.8: Importance of the Study

5.9: Dividend Declaration of Mutual Fund

5.10: Performance Evaluation of the Mutual

Fund

43

Chapter-5

Overall Evaluation of the ICB Mutual Fund

ICB Mutual Fund

Introduction

It is a recognized principle that diversification of investment reduces risk. An

individual may not have the time, expertise and resources to undertake such

diversification. Here arises the advantage of a Mutual Fund. Mutual Funds pool the

savings of a great number of investors and make investments in a wide array of

securities. In Bangladesh ICB has pioneered Mutual Funds for the sake of investors

and of the capital market. Country’s first Mutual Fund the “First ICB Mutual Fund

“was floated on 25th April 1980. Since then ICB has, over the years, floated 8 Mutual

Funds with the total capital of Tk. 17.50 crore . ICB Mutual Funds continued to

command the confidence and attraction of investors as lucrative and rewarding

investment in terms of steady dividend performance.

ICB has been able to declare attractive dividends on its Mutual Funds during 2003-

2004 as previous year. Among the 8 Mutual Funds the highest dividend of 200.00

percent was declared on the First ICB Mutual Fund followed by 50.00 percent on the

Second and Third ICB Mutual Funds, with lowest being 14.00 percent declared on the

Eighth ICB Mutual Fund during the year under review .The rates of dividends or the

previous year ranged from 13.50 to 180.00 percent. In 2003-2004 the market prices of

all the Mutual Funds on Dhaka Stock Exchange Ltd & Chittagong Stock Exchange

Ltd were above their par values reflecting strong performance of he Funds. Average

dividend yield on these 8 listed Mutual Funds worked to Tk 11.19 per certificate

based on opening price. The rate of dividend declared by First ICB Mutual Funds

ranked first amongst all the listed companies that declared dividend during 2003-04.

ICB has been succeeded to a greater extent in broad basing equity ownership through

44

Mutual Funds as is evident form the number of certificate holders which was over

33646 as on 30 June 2004.

5.1: What is Mutual Fund?

Mutual Funds are also known as close ended Mutual Funds. The issued capital of a

Mutual Fund is limited, that is, a Mutual Fund offers a limited number of certificates

for sale to the public. The amount of capital and the number of certificates of each

Mutual Fund remains unchanged. ICB Mutual Funds are independent of one another.

A Mutual Fund being listed is traded on the Stock Exchanges. Price of Mutual Fund

certificates after IPO is determined on the Stock Exchanges through interaction of

supply and demand. The market price of a Mutual Fund certificates is available in

Stock exchange quotations and in newspapers. .

5.2: Types of Mutual Fund:

Any Mutual Fund could be of either of the following two kinds

1) Open-end Mutual Fund

2) Close-end Mutual Fund

Open-end Mutual Fund:

Open-end investment company is a fund that continues to sale and repurchases their

shares after their initial public offering. They stand ready to sell additional number of

shares and thus keep going larger. The open-end fund company can by or sale their

own shares.

Close-end Mutual Fund:

A close-end investment company operates like any other public firm. Their stock are

traded on regular secondary market and the market price of its shares is determined by

the supply and demand. It has a definite target amount for the founds and can not sell

more shares after its initial offering. Its growths in terms of number of shares are

issued like any other company’s new issues listed and quoted it stock exchange.

45

5.3Objective of Mutual Fund:

The objective of any fund would fit into one of three broad categories.

i) Income: The emphasis is on producing a steady flow of dividend

payment.

ii) Capital gain: The manager concentrates on increasing the value of

principal through appreciation of the stocks held.

iii) Income and capital gain: Some combination of the first two

approaches.

5.4: Advantages of Mutual Fund:

Mutual Fund substantially minimizes the investment risk of small

investors through diversification in which funds are spread out into various

sectors, companies, securities as well as entirely different market.

Mutual Fund mobilizes the savings of small investor and channels them

into lucrative investment opportunities. As a result, Mutual Fund adds

liquidity to the market.

Mutual Fund provides the small investors 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 from the

emotional strain associated with the day to day management of the fund.

The investors save a great deal in transaction costs given that s/he has

access to a large number of securities by purchasing a single share of a

Mutual Fund.

The investors can pick and chase a Mutual Fund to match his/her particular

needs.

46

Mutual Fund is the only vehicle which operates simultaneously both at the

demand as well as the supply side of the market. On the supply side, the

Mutual Fund being itself security at the SEC introduces a good and

reliable instrument in the capital market for the small but astute investor.

Mutual Fund is one of the most strictly regulated investment vehicles. The

laws governing Mutual Fund require exhaustive disclosure to the SEC as

well as the general public. The laws also entail continuous regulations of

fund operations by the Trustee.

5.5: Launching of ICB Mutual Fund:

Launch Mutual Fund in different period with different paid

up capital.

Mutual Fund Date of Floatation Paid up capital

(Tk. In lack)

First ICB Mutual Fund 25 April,1980 50.00

Second ICB Mutual Fund 17 June,1984 50.00

Third ICB Mutual Fund 19 May,1985 100.00

Fourth ICB Mutual Fund 6 June, 1985 100.00

Fifth ICB Mutual Fund 8 June, 1987 150.00

Sixth ICB Mutual Fund 16 May,1988 500.00

Seven ICB Mutual Fund 30 June,1995 300.00

Eighth ICB Mutual Fund 23 July,1996 500.00

Source: ICB Annual Report 2003-2004

47

5.6: Details Description of the ICB Mutual Fund

Consolidated Portfolio Statement:

As on 30 June 2005cost price and market price of eight Mutual Funds were Tk.

4815.15 lac and Tk 5864.83 lac respectively. A consolidated statement of the

portfolio of the Funds is given in the following table:

Consolidated position of portfolios of ICB Mutual Funds as on June 2004

Sl.no Particulars 1st

Mutual

Fund

2nd

Mutual

Fund

3rd

Mutual

Fund

4th

Mutual

Fund

5th

Mutual

Fund

6th

Mutual

Fund

7th

Mutual

Fund

8th

Mu

tual

Fun

d

1 No. of

Companies

49 56 69 75 86 117 111 113

2 No. of

Securities

49 58 70 76 87 116 116 117

3 Total

investment

at cost

363.35 282.49 382.00 367.72 506.59 858.70 1000.74 105

3.5

6

4 Market

Value(30

June 2005)

1115.61 337.55 421.26 446.84 573.46 872.41 1014.71 108

2.9

9

Price Movement and Transactions

During the year under review, certificates of eight Mutual Funds were actively traded

on the floor of the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd.

The highest and lowest price of the eight Mutual Funds certificates on Dhaka Stock

48

Exchange Ltd and position of total transaction during 2003-04 are shown in the

following table:

Market prices of ICB Mutual Funds and Transactions during 2004-05

Sl .

no

Mutual

Funds

Highest

market

price(taka)*

Lowest

market

price(taka)*

Annual

transaction

Number Amount(Tk.

In lac)

1 First ICB

Mutual Fund

2555.00 1530.00 3069 57.10

2 Second ICB

Mutual Fund

600.00 392.00 2247 10.94

3 Third ICB

Mutual Fund

710.00 365.00 8258 43.59

4 Fourth ICB

Mutual Fund

500.00 325.00 7586 30.36

5 Fifth ICB

Mutual Fund

320.00 207.00 7590 20.09

6 Sixth ICB

Mutual Fund

210.00 144.25 59420 100.73

7 Seven ICB

Mutual Fund

190.00 130.00 25132 39.74

8 Eight ICB 175.00 124.25 43723 64.44

49

Mutual Fund

How to Buy existing Mutual Funds

An investor can purchase any of the existing eight ICB Mutual Funds certificates

through the Stock Exchanges at the prevailing Market Price. However, if an investor

buys Mutual Fund certificates through the Stock Exchanges he/she must be careful to

submit the certificates along with duly filled-in transfer deed at ICB Head Office to

ensure that the certificates are registered in his/her name.

50

Advance against Mutual Fund certificates Scheme

Advance against ICB Mutual Fund certificates Scheme was introduced in 2003,

designed for the ICB Mutual Fund Certificate holders to meet their emergency fund

requirement. One can borrow maximum of 50% value of last one year's weighted

average market price of certificates at time of borrowing by depositing his/her

certificates under lien arrangement from any of the ]CB offices. The rate of interest on

the loan is reasonable and also competitive.

Management Fee, Charge etc.

At present management fee @ 1% on the paid up capital of the Fund is charged

annually. No amount is charged on account of custodial and trust services. Part of

operating expenses are charged to the respective Mutual Funds on pro rata basis

Assets of ICB Mutual Funds

ICB Mutual Funds Certificates holders shall have unfettered ownership in the assets

of the Fund to which they are related. In case of winding up of the Corporation the

assets belonging to any ICB Mutual Fund shall not be treated as the assets of the

Corporation.

Tax Concessions

(a) Investment in Certificates provides the same tax exemptions as an investment

qualifying under Section 44 of the Income Tax Ordinance, 1984.

(b) Capital gains received on investment in the Fund Certificates shall not be included

in the total income of a Certificate holder within the limits specified in the Income

Tax Ordinance, 1984.

(c) Dividends received on investment in the Fund will be treated as dividend income

under Income Tax Act, and will be exempted from tax with the limits specified in the

Act.

51

(d) The Fund incomes are to be exempted from all taxes as granted by the

Government as per SRO No 80-L/80 dated April, 1980.

5.7: Management of the Funds

There is a decision making board in order to manage different Mutual Funds. As per

board’ s decision securities are bought under different Mutual Funds. At the same

way securities are sold . In case of new Mutual Fund subscribes for public issue. ICB

authority is made portfolio earlier by its own finance and given it name . After that it

is published on any newspaper as prospectus . By studying this prospectus public

response whether they will buy the Mutual Fund or not.

5.8: Declaration of Dividend

The net income received on investments of Funds on account of dividend, bonus,

interest, capital gain etc. are distributed amongst the Certificate holders as per

decision of the Board of Directors of ICB. Board declares such income in the form of

dividend at the end of July each year. Dividends declared by ICB in the past on the

Mutual Funds were very attractive. The year-wise per certificate dividend

performance of the Funds is given below.

Rate of the Dividend per Certificate (Taka)

FY Funds 1 st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th

1980-81 20

1981-82 20

1982-83 20

1983-84 25

1984-85 35 21

52

1985-86 38 23 21

1986-87 41 25.5 22.5 21.5

1987-88 48 28 25.5 23

1988-89 49 29 26 23.5 20.5 15.5

1989-90 49 29 26 23.5 20.5 13.25

1990-91 35 22 19 17 10 6

1991-92 31 22 19 18 11 6

1992-93 31.5 21 18 17 12 -

1993-94 45 27 22 40 25 16

1994-95 50 40 27 41 28 18

1995-96 60 42 28 41 30 20 18

1996-97 70 45 38 45 35 24 21 18

1997-98 70 30 35 32 22 18 14 12

1998-99 100 32 38 35 20 15 13 12

1999-2000 125 35 40 36 21 16 13.5 12.5

2000-2001 170 40 45 38 23 17 14 13

2001-2002 175 42 50 40 24 17.50 14.50 13.50

2002-2003 180 45 50 40 24 17.50 14.50 13.50

53

5.9: Performance Evaluation of ICB Mutual Funds

Mutual Funds substantially lower the investment risk of small investors, through

diversification, in which funds are spread out in to various sectors . Because of funds

are professionally managed, investors are relived from he emotional strain associated

with the management of the fund. For the betterment of small and medium investors

up to September,2005 ICB floated eight close ended Mutual Fund , with total paid up

capital of Tk 17.50 crore and going to float the ninth very soon.

These funds are very popular with the small and medium investors because of having

scope of capital gain as well as attractive return in terms of dividend.

It is not an easy task for the portfolio manager to manage the mutual funds, because

it’s performance is directly related with the security market and many macro

economic variable . But due to the efficient management of ICB officials , they (MF)

become attractive investment decision.

Now we will analyze the past performance of the eight mutual funds and try to

evaluate them.

Different Types of ICB Mutual Funds

Different types of ICB mutual funds are available for consumers. These funds lunched

in different period of time and different rate of interests are given on the mutual funds.

These are shortly described below:

First ICB Mutual Fund

54

The 1st ICB Mutual Fund was floated at 25th April, 1980. It is the most attractive

mutual fund among the others.

Dividend Income:

The Fund had earned dividend of Tk. 36, 82,374.00 from 26 securities during 2004-

2005 of which a sum of Tk. 28,93,974.00(78.59 percent) was received in cash within

30 June 2005 .

Capital Gains on Sale of Investments:

During 2004-05 the Fund earned Tk. 64, 05,456.00 as capital gains by securities of 8

companies as shown in the following table:

Sl. No Name of the company No.of Securities

sold

Capital

gain(taka)

1 One Bank Ltd 500 57,000.00

2 Mercantile Bank Ltd 500 51,625.00

3 National Tea Co. Ltd 8100 45,21,236.00

4 Padma Oil Company Ltd 3900 568,500.00

5 Beximco Pharmaceuticals Ltd 25000 69,600.00

6 Glaxco Smithkline Bangladesh Ltd 3000 3,54,100.00

7 Renata Ltd 870 6,64,395.00

8 Agni Systems Ltd 4000 19,000.00

Total 64,05,456.00

Income, Expenses and Distributable Income

During the year under review , the Fund earned a gross income of Tk.

1,02,33,593.00 by way of dividend income of Tk. 36,82,374.00,interest income of Tk.

55

1,12,581.00 on bank deposits , interest of Tk. 31,576.00 on current account with ICB ,

capital gains of k. 64.05.456.00 and other income of Tk. 1606.00. After deducting the

total expense of Tk. 6, 88,980.00 incurred as staff expenses, management fee, printing

and stationary ,postage and telegrams , provision against investment and others , the

net income of the fund stood at Tk. 95,44,61300. Taking into account the previous

years undistributed income of Tk. 2, 23, 18,775.00 the Fund had net distributable

income of Tk.3,18,63,388.00 as on June 2004 resulting in distributable income per

certificate of Tk. 637.27 for 2003-2004.

Dividend:

The Fund declared dividend at the rate of Tk.200.00 per certificate of Tk. 100.00 each

for the year 2004-05 as compared to Tk. 180.00 declared in the previous year. After

making provision of Tk. 1,00,00,000.00 for payment of dividend the Fund had an

undistributed income of Tk. 2,18,63,388.00 .The Year –wise dividend performance of

the Fund is shown in the following table;

Year –wise dividend Performance

Financial Year Dividend Per Certificate

1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

60.00

70.00

70.00

100.00

125.00

170.00

175.00

180.00

200.00

Portfolio:

56

As on 30 June 2005 the Fund had securities of 49 companies in its portfolio with a

total cost of Tk. 363.35 lac. During 2003-2004 the Fund made additional investment

of tk. 43.88 lac in securities of 17 companies .The market value of the portfolio as on

30 June 2004 was Tk. 1115.61 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of First Mutual

Fund stood at Tk . 2067.26 as on 30 June 2004.

The market price per certificate of Tk. 100.00 each of the fund was Tk.1672.50 and

Tk. 2500.00 as on 2 July 2003 and 30 June 2004 respectively.

The number of certificate holders of the fund was 1066 as on 30 June 2004.

57

Second ICB Mutual Fund

Dividend Income and Interest Income:

The Fund had earned dividend and interest income of Tk. 14,05173.00 from 31

securities during 2004-2005 of which a sum of Tk. 11,02,979.00(78.49 percent) was

received in cash within 30 June 2005 .


During 2003-2004, the Fund earned Tk. 40, 81,887.00 as capital gains by securities of

8 companies as shown in the following table.

Statement of Capital Gains during 2004-2005

Sl. no Name of the company No.of Securities sold Capital gain(taka)

1 Mutual Trust Bank Ltd 5000 4,45,000.00

2 Standard Bank Ltd 3400 2,44,800.00

3 One Bank Ltd 500 57500.00

4 Padma Oil Company Ltd 12500 29,75,475.00

5 Wata Chemicals Ltd 1520 46,339.00

6 Delta Millers Ltd 15340 2,98,823.00

7 Bangladesh Online Ltd 500 5550.00

8 Agni Systems Ltd 2000 8400.00

Total 40,81,887.00

58



55,64,740.00 by way of dividend income of Tk. 14,05,173.00,interest income of Tk.

73,852.00 on bank deposits , interest of Tk. 31,576.00 on current account with ICB ,

capital gains of Tk. 40,81,887.00 and other income of Tk. 3828.00. After deducting

the total expense of Tk. 16,26,236.00 incurred as staff expenses , management fee ,

printing and stationary ,postage and telegrams , provision against investment and

others , the net income of the fund stood at Tk. 39,38,504.00. Taking into account the

previous years undistributed income of Tk. 56,25,496.00.00 the Fund had net

distributable income of Tk.95,64,000.00.00 as on June 2004 resulting in distributable

income per certificate of Tk. 191.28 for 2004-05.

Dividend:


for the year 2004-2005as compared to Tk. 45.00 declared in the previous year. After

making provision of Tk. 25,00,000.00 for payment of dividend the Fund had an

undistributed income of Tk. 70,64,000.00 .The Year –wise dividend performance of




1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

42.00

45.00

30.00

32.00

35.00

40.00

42.00

45.00

50.00

59

Portfolio:




30 June 2004 was Tk. 337.55 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of First Mutual

Fund stood at Tk 364.82 as on 30 June 2004.

The market price per certificate of Tk. 100.00 each of the fund was Tk.430.00 and Tk.

599.25 as on 2 July 2003 and 30 June 2004 respectively.


Third ICB Mutual Fund


The Fund had earned dividend and interest income of Tk. 14, 70,937.00 from 39


received in cash within 30 June 2004 .


During 2004-2005, the Fund earned Tk. 37,85,917.00 as capital gains by securities of


60



sold

Capital

gain(taka)

1 Rupali Bank Ltd 3300 60,920.00


3 One Bank Ltd 500 58,000.00

4 First Lease International Ltd 400 12450.00

5 Mercantile Bank Ltd 1000 1,02,750.00

6 ICB Amcl First Mutual Fund 4800 1,96,437.50

7 Janata Insurance Company Ltd 940 78,570.00

8 Phoenix Insurance Company

Ltd

2860 5,00,033.20

9 Eastland Insurance Company

Ltd

500 65,000.00

10 Central Insurance Company

Ltd

1000 76500.00

11 Estern Cables Ltd 1000 2,11,500.00

12 B.A.T.B.C. Ltd 1600 55,904.00

13 BOC Bangladesh Ltd 14450 1,25,604.00


15 Orion Infusion Ltd 19960 3,36,525.60

16 Altex Industries Ltd 6850 75,692.70

17 Metro Spinning Ltd 20000 50,000.00

18 Aramit Ltd 10000 3,94200.00

19 Bangladesh Online Ltd 1000 12,650.00

20 Agni Systems Ltd 3000 13700.00

21 Monno Ceramic Industries Ltd 2000 3,64,660.00

Total 37,85,917.00

61



53,22,780.00 by way of dividend and interest income from investment in securities of

Tk. 14,70,937.00,interest income of Tk. 65090.00 on bank deposits , capital gains of

Tk. 37,85,917.00 and other income of Tk. 836.00. After deducting the total expense of

Tk. 12,02,195.00 incurred as staff expenses , management fee , printing and stationary

,postage and telegrams , provision against investment and others , the net income of

the fund stood at Tk. 41,20,585.00. Taking into account the previous years

undistributed income of Tk. 1,09,52,993.00 the Fund had net distributable income of

Tk.1,50,73,578.00 as on June 2004 resulting in distributable income per certificate of

Tk. 150.74 for 2003-2005.

Dividend:



making provision of Tk. 50,00,000.00 for payment of dividend the Fund had an

undistributed income of Tk. 1,00,73,578.00 .The Year –wise dividend performance of




1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

28.00

38.00

35.00

38.00

40.00

45.00

50.00

50.00

50.00

62

Portfolio:



of tk204.32 lac in securities of 28 companies .The market value of the portfolio as on

30 June 2004 was Tk. 421.26 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Third ICB

Mutual Fund stood at Tk 243.87. as on 30 June 2004.

The market price per certificate of Tk. 100.00 each of the Third ICB Mutual fund was

Tk.465.00 and Tk. 698.50 as on 3 July 2004 and 30 June 2005 respectively.

.

Fourth ICB Mutual Fund



securities during 2004-2005 of which a sum of Tk. 13, 68,492.00(86.80 percent) was

received in cash within 30 June 2005.






sold

Capital

gain(taka)


2 One Bank Ltd 500 58,500.00

3 First Lease International ltd 400 12,425.00

63

4 BATBC Ltd 25000 24,12,860.00

5 Padma Oil Company Ltd 5100 9,58,698.00

6 Eastern Lubricant Blenders Ltd 350 8,113.00

7 Glaxco Smithkliny Bangladesh Ltd 31850 29,12,827.00

8 Bangladesh Online Ltd 1000 11,150.00

9 Monno Ceramic Industries Ltd 3400 5,94,669.50

Total 71,44,243.00


During the year under review , the Fund earned a gross income of Tk. 87,96,577.00

by way of dividend and interest income from investment in securities of Tk.

15,76,586.00,interest income of Tk. 74,054.00 on bank deposits , capital gains of Tk.

71,44,243.00 and other income of Tk. 1,694.00. After deducting the total expense of




undistributed income of Tk. 65,38,919.00.00 the Fund had net distributable income of

Tk1,35,37,580.00.00 as on June 2004 resulting in distributable income per certificate

of Tk. 135.38 for 2004-05

Dividend:



making provision of Tk. 45, 00,000.00 for payment of dividend the Fund had an

undistributed income of Tk. 90, 37,580.00.

64

The Year –wise dividend performance of the Fund is shown in the following

table:



1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

41.00

45.00

32.00

35.00

36.00

38.00

40.00

40.00

45.00

Portfolio:




30 June 2005 was Tk. 446.84 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Fourth ICB

Mutual Fund stood at Tk 278.60 as on 30 June 2004.


500.00 as on 9July 2003 and 30 June 2004 respectively.

The number of certificate holders of the fund was 2335 as on 30 June 2005

65

Fifth ICB Mutual Fund





Capital Gains on Sale of Investments;

During 2004-2005, the Fund earned Tk. 37, 64131.00 as capital gains by securities of



Sl. No Name of the company No.of Securities sold Capital gain(taka)



3 One Bank Ltd 2300 1,93,800.00

4 First Lease International ltd 3000 20,175.00

5 Mercantile Bank Ltd 1000 1,03,375.00

6 ICB Amcl First Mutual Fund 1500 71,000.00

7 BATBC Ltd 22350 10,71,831.50

8 BOC Bangladesh Ltd 1650 16,745.00

9 Padma oil company Ltd 5600 11,37,676.00


11 Wata chemicals Ltd 860 29,540.00

12 Padma Textile Mills Ltd 10000 87,500.00

13 Bata Shoe company BD Ltd 500 64,785.00

14 Monno Ceramic Industries

Ltd

1060 1,73,366.00

Total 37,64,131.00

66


During the year under review , the Fund earned a gross income of Tk. 56,55,251.00


18,08,054.00,interest income of Tk. 83,066.00 on bank deposits , capital gains of Tk.

37,64,131.00 . After deducting the total expenses of Tk. 25,04,152.00 incurred as staff

expenses , management fee , printing and stationary ,postage and telegrams ,

provision against investment and others , the net income of the fund stood at Tk.

31,51,099.00. Taking into account the previous years undistributed income of Tk.

17,15,944.00 the Fund had net distributable income of Tk 48,67,043.00.00 as on June

2004 resulting in distributable income per certificate of Tk. 32.45 for 2004-2005.

Dividend :


for the year 2004-2005 Which was also Tk. 24.00 per certificate paid the previous

year. After making provision of Tk. 36, 00,000.00 for payment of dividend the Fund

had an undistributed income of Tk. 12, 67,043.00.


table:



1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

30.00

35.00

22.00

20.00

21.00

23.00

24.00

24.00

24.00

67

Portfolio:

As on 30 June 2005the Fund had securities of 87 companies in its portfolio with a



30 June 2004 was Tk. 573.46 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Fifth ICB Mutual

Fund stood at Tk 162.49 as on 30 June2005




Sixth ICB Mutual Fund








68



sold

Capital

gain(taka)

1 Mutual Trust Bank Ltd 10000 620050.00

2 One Bank Ltd 500 56500.00

3 ICB Amcl First Mutual Fund 16300 368275.00

4 Kornophuly Insurance co. Lrd 1000 87500.00

5 BATBC Ltd 2,14,700 4716993.00

6 Agricultural Marketing co. Ltd. 350 120140.00

7 BOC Bangladesh Ltd 24550 714117.50

8 Beximco Pharmaceuticals Ltd 6000 56470.00

9 Glaxco Smithkline BD Ltd 5000 25750.00

10 ACI Ltd 5000 133010.00

11 Cohinoor Chemicals Company

Ltd

1500 212595.00

12 IBN sina Pharmaceuticals Ltd 500 166300.00

13 Wata chemicals Ltd 260 9011.50

14 Delta Millers Ltd 1020 14849.00

15 Eastern Housing Ltd 2200 58862.00

16 Agni systems Ltd 2000 10400.00

17 Bata Shoe company BD Ltd 2000 107500.00

Total 74,78,323.00


During the year under review , the Fund earned a gross income of Tk. 1,12,16,455.00


36,10,443.00,interest income of Tk. 1,27,667.00 on bank deposits , capital gains of

Tk. 74,78,323.00 and other income of Tk 22.00. After deducting the total expenses of




69

undistributed income of Tk. 31,91,873.00 the Fund had net distributable income of Tk

1,11,27,461.00.00 as on June 2004 resulting in distributable income per certificate of

Tk. 22.25 for 2004-2005.

Dividend :



year. After making provision of Tk. 87,50,000.00 for payment of dividend the Fund

had an undistributed income of Tk. 23,77,461.00

The Year –wise dividend performance of the Fund is shown in the following table;



1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

20.00

24.00

18.00

15.00

16.00

17.00

17.50

17.50

17.50

Portfolio:


total cost of Tk858.70 lac. During 2003-2004 the Fund made additional investment of

tk. 506.29 lac in securities of 32 companies .The market value of the portfolio as on

30 June 2004 was Tk872.41 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Sixth ICB





70

Seventh ICB Mutual Fund


The Fund had earned dividend and interest income of Tk. 41,48,814.00 from 68




During 2004-2005, the Fund earned Tk. 68,69,872.00 as capital gains by securities of



Sl. No Name of the company No.of Securities sold

Capital gain (taka)

1 Mutual Trust Bank Ltd 18600 9,17,412.502 Standard Bank Ltd 4500 3,24,000.003 One Bank Ltd 3100 1,91,364.004 First Lease International Ltd 200 13,450.005 Bank Asia Ltd 950 1,28,250.006 Mercantile Bank Ltd. 3400 3,53,028.007 ICB Amcl First Mutual Fund 13700 2,56,137.008 Janata Insurance Company

Ltd20 920.00

9 Prime Insurance Company Ltd 1500 39,105.0010 BATBC Ltd 193950 34,76,877.5011 BOC Bangladesh Ltd 46800 7,77,433.5012 Beximco Pharmaceuticals Ltd 12000 1,35,050.0013 Orion Infusion Ltd 8660 88,571.4014 Square Pharmaceuticals Ltd 552 70700.1015 Dandy Dyeing Ltd 600 4,650.0016 Aramit Ltd 7500 69000.0017 Agni systems Ltd 4000 14600.0019 Standard Ceramic Industries

Ltd200 9322.00

Total 68,69,872.00

71


During the year under review , the Fund earned a gross income of Tk. 1,11,61,404.00


41,48,814.00,interest income of Tk. 1,42,718.00 on bank deposits , capital gains of

Tk. 68,69,872.00. After deducting the total expenses of Tk61,43,903.00 incurred as

staff expenses , management fee , printing and stationary ,postage and telegrams ,

provision against investment and others , the net income of the fund stood at Tk.

50,17,501.00. Taking into account the previous years undistributed income of

Tk20,16,119.00 the Fund had net distributable income of Tk 70,33,620.00.00 as on

June 2004 resulting in distributable income per certificate of Tk. 23.45 for 2004-05.

Dividend:






table;



1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

18.00

21.00

14.00

13.00

13.50

14.00

14.50

72

2002-2003

2003-2004

14.50

15.00

Portfolio:


total cost of Tk 1000.74 lac. During 2003-2004 the Fund made additional investment


30 June 2004 was Tk 1014.70lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Seventh ICB





Eighth ICB Mutual Fund






During 2004-2005, the Fund earned Tk 85, 90,117.00 as capital gains by securities of


73



sold

Capital gain(taka)

1 N C C Bank Ltd 1000 34,920.00



4 One Bank Ltd 3100 1,93,136.00

5 First Lease International Ltd 100 3900.00

6 Bank Asia Ltd 700 94,500.00

7 Mercantile Bank Ltd. 2500 2,52,537.00

8 ICB Amcl First Mutual Fund 17750 2,05,700.00

9 United Insurance Company Ltd 10 1541.30

10 Phoenix Insurance Company ltd 1720 87,185.00

11 Eastern Cables Ltd 3910 1,96,594.00

12 Singer Bangladesh Ltd 557 1,39,989.00

13 BATBC Ltd 134900 39,69,070.00

14 BOC Bangladesh Ltd 36700 8,41,001.00

15 Padma Oil company Ltd 1500 1,66,500.00


17 ACI Ltd 500 6,720.00

18 Beximco Infusion Ltd 1000 1,15,510.00

19 Orion Infusion Ltd 7140 65,829.00

20 Square Pharmaceuticals Ltd 908 4,24,326.50

21 Mithun Knitting and Dyeing Ltd 2140 65,077.40

22 Delta Millers Ltd 600 7,158.00

23 Dandy Dyeing Ltd 50 400.00

24 Agni systems Ltd 6000 24,800.00

Total 85,90,117.00

74


During the year under review , the Fund earned a gross income of

Tk1,31,77,777.00dividend and interest income from investment in securities of Tk.

44,73,928.00 ,interest income of Tk. 1,13,710.00 on bank deposits , capital gains of

Tk. 85,90,117.00. After deducting the total expenses of Tk 46,32,708.00 incurred as

staff expenses , management fee , printing and stationary ,postage and telegrams ,

provision against investment and others , the net income of the fund stood at

Tk85,45,069.00. Taking into account the previous years undistributed income of Tk

22,29,488.00 the Fund had net distributable income of Tk 1,07,74,557.00 as on June

2004 resulting in distributable income per certificate of Tk. 21.55 for 2003-2004.

Dividend:






table;



1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

18.00

12.00

12.00

12.50

13.00

13.50

13.50

14.00

14.00

75

Portfolio:

As on 30 June 2005the Fund had securities of 117 companies in its portfolio with a

total cost of Tk 1053.56 lac. During 2003-2004 the Fund made additional investment


30 June 2004 was Tk 1082.99 lac .

The ex-dividend net asset value per certificate of Tk. 100.00 each of Seventh ICB




76

Chapter-6

Problems & Findings

6.1 Problems Related to ICB Unit Fund & Mutual Fund

6.2 Recommendations

6.3 Conclusion

77

Chapter-6

Problems & Findings

6.1 Problems

6.1.1Problems Related to ICB Unit Fund

Bangladesh is a least developed country. Its economy depends on agriculture more

than 60%. Now it can be understood that its industrialization is in infant stage. So, for

the better growth of industrialization, capital market is so important of our country.

Because of this, ICB has been established in 1976 under the ordinance no. XL of 1976

with a view to develop capital market, to mobilize savings and to broaden the base

investment and ultimately help growing industrialization in the country. Because of

this reason, ICB has floated Unit fund (close ended) in our country and dominating

the industry.

Unit funds are managed and run by a professional management team , the success and

growth of the unit funds depend future profitability and investors confidence also

depend on the management performance .

During the internship at ICB, I have found some problems, which can affect the fund

future and the confidence of the investors. There are some problems related to fund.

They are as follows:

1. Reserve is an important part of any business. For the funds, reserve is kept of the

future uncertainty ,funds liquidation and use for buying securities without borrowing

costly capital . Reserve is kept from income as un-distributable income . But the

question is , how much a fund may keep reserve from income. I think ICB’s reserve

policy for the close end funds is not correct . Because it keeps huge amount of reserve

from funds.

2. The dividend policy of Unit Fund is not fair. Because, if we see dividend rate and

earnings of the funds, it will become clear to us.

78

3. Using of costly borrowing capital for the investment on securities is another factor

causing problem for high expenditure of maintenance of fund, which affects the

income of funds.

4. Management of ICB is sometimes inefficient in taking bold decision and has failed

to stabilize the capital market.

6.1.2: Problem Related to the ICB Mutual Fund:

Mutual funds are managed and run by a professional management team ,

the success and growth of the mutual funds depend future profitability and

investors confidence also depend on the management performance .

During the internship at ICB, I have found some problems, which can

affect the fund future and the confidence of the investors. There are some

problems related to fund. They are as follows:

From depositor’s Point of view:

o The services provided by the related personnel are not prompt. It is

taking more than required time for giving the service.

o Same laggard procedure is also taking place at the time of

execution of order.

o Withdrawal of any funds of securities is also very lengthy and

complicated process and inefficiently managed.

From Portfolio investment point of view:

ICB has not yet done any systematic analysis for measuring how

they are doing. ICB has not identified any key variables to size up

all its diversified performance.

79

From Capital market point of view:

o Dividend is one of the sources of income for the mutual fund.

Most of the companies do not declare dividend up to

satisfactory level.

o The rate of supply of fundamentally strong securities is very

low.

o Political unsteady position also hearts the investor’s sentiment

in the market and thereby leads to flat the stock market.

o Using costly borrowing capital for the investment on securities

is another factor causing problem for high expenditure of

maintenance of funds, which affects the income of funds.

6. 2: Recommendations

6.2.1 Recommendations ICB Unit Funds are suggested are on the

basis of the problems. These are:

1. Reserve should be kept at a minimum level but not more than 25% of a fund’s

income.

2. Dividend policy should be fair so that the investors may be satisfied .Dividend

policy should be earnings basis, not year basis.

3. Investing by costly borrowing funds should be reduced.

4. Orders are to be executed quickly.

5. Unnecessary documentation and levels in the process of withdraw or securities

should be eliminated.

6.2.2 Recommendations ICB Mutual Funds are suggested are on the

basis of the problems. These are:

1. The interest of making portfolio of proposed funds and the existing ICB unit

mutual fund profitable and attractive, it is imperative to design balance portfolio of

80

securities. As the supply of securities is not adequate, I think, the portfolio is

envisaged to be designed and developed from the following sources:

Shares of multinational companies

Shares of public enterprises

Primary issue of securities by companies

Secondary market operation.

Share of public enterprises means government has been pursuing policy of divesting

49% shares of government enterprises of public subscription. In this regard govt.

should reserve 30% of all new issues in all cases for ICB.

2. Reserve should be kept at a minimum level; it may vary fund to fund, but

not more than 25% of a fund’s income.

3. Investing in costly borrowing funds should be reduced. Management may

look for sources of less costly funds and reduce expenses and increase

income.

4. ICB should fix redemption date of each fund. I may redeem 1st, 2nd, and

3rd mutual fund. Because these funds are established for more than 15

years.

5. ICB may take initiative and decision to float more funds for the

stabilization of capital market and for gaining of investor’s confidence to

invest in the capital market.

6. ICB should reduce interest rate.

7. Orders are to be executed quickly.

8. Training program should be arranged for developing of management

efficiency.

81

6.3 Conclusion:ICB is a unique name in our country as an investment Bank. It

has skill and experienced labor force and professional and

dedicated management team that enable to pursue the ICB’s

goals and objectives. ICB is helping to the industrial growth in our

country by mobilizing the small savings from investors to the

capital market. ICB should be concerned about its investors,

because the investors are the risks takers. ICB has great

influence in the capital market. ICB should play its important role

for gaining of the investor’s confidence on the capital market and

further industrial growth in our country and the development and

stabilization of the capital market in country

There remains a huge gap between institutional investors and

general investors. Institutional investors are far ahead from the

general investors in respect of technical know-how, knowledge

and risk taking propensity. ICB as an institutional investor

manages its portfolio by doing three major activities: asset

allocation, weighting shift across major asset classes and

securities selection within asset classes. In financial terms it

means ensuring maximum return with minimum level of risk. At

present the gap between the institutional investors and general

investors, ICB should concentrate well in portfolio management

to uplift the interest of the general investors.

82

Bibliography

1. Investment Corporation of Bangladesh (ICB) 2003-2004. Annual

Report. Dhaka ICB.


Report. Dhaka ICB.


Report of Unit Fund, Dhaka ICB.


Report of Mutual Fund, Dhaka ICB.

5. Ahmed, MF. H.R. Khan and M.S Islam 1993, Industrial Financing

Through Capital market in Bangladesh-A Study on the Demand Side

(Dhaka: The Asian Foundation and The Bureau of Economic

research, University of Dhaka, June, P-47.

6. Sharpe, W.F. (1978), Investments (Englewood Cliffs), New Jersey:

Prentice-Hall, Inc).

7. I. M Pandey (1998), Financial Management, P-97-107. s

83

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