Mumit ICB

Chapter-1

Introductory Part

1.1. Introduction

1.2. Objectives of the Study

1.3. Methodology of the Study

1.4. Importance of the Study

1.5. Limitations

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Chapter 1

1.1 Introduction:

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 BBA, 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. Tahmina , Lecturer, Department of Finance, and

Bangladesh University Of Business And Technology. My Supervisor asked me to

prepare a report on one or two specific departments of ICB.That’s why I have chosen

the topic “Contribution of ICB Unit Fund and Mutual fund”. I have done the

internship at ICB from 01.04.2008 to 29.05.2008.

In this report, I focused the brief overview of ICB, brief portfolio of ICB Mutual

fund, brief portfolio of ICB Unit fund, performance evaluation of Mutual fund and

Unit fund, showing contribution of Unit fund and Mutual funds. At last, I also focused

findings, recommendation and conclusion.

1.2 Objective of the Study:

The Objectives of the report are:

a. To fulfill the requirement of BBA program as necessitated by Finance

Department, Faculty of Business Studies, BUBT.

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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.

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.

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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

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.

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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

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 (2006-07).

Annual Report of Mutual Fund (2006-07).

Annual Report of Unit Fund (2006-07).

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.

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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.

e. To provide for matters ancillary thereto.

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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;

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Consolidated (ICB & its subsidiaries)

18%

46%

13%

2%

15%

6%

Paid-up capital

Reserves

Retained profit

Long-term govt.loan

Debentures

Others

Capital Structure

(In corer)Particulars ICB Consolidated (ICB & Subsidiaries

As on 30 June Increase/Decrease

As on 30 June Increase/Decrease

2006 2007 (Percentage) 2006 2007 (Percentage)Paid-up capital

50.00 50.00 - 50 50 -

Reserves 100.61 122.61 21.87 104.31 130.06 24.69Retained profit

9.82 13.82 40.73 22.95 36.43 58.74

Long-term govt. loan

4.90 4.55 -7.14 4.90 4.55 -7.14

Debentures 51.80 41.80 -19.31 51.80 41.80 -19.31Others 18.93 16.29 13.95 20.13 17.18 14.65

Total 236.06 249.07 5.51 254.09 280.02 10.21Figure : Capital Structure of 2006 and 2007

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ICB

20%

48%

6%2%

17%

7%

Paid-up capital

Reserves

Retained profit

Long-term govt.loan

Debentures

Others

2.5 Share Capital Ownership Pattern

Shareholder position as on 30 June 2007

SL No

Shareholders No. of shareholders

No. of Shares

Percentage of shareholdings

1. Government of Bangladesh 1 1350000 27.00Nationalized Commercial Bank

4 1137220 22.74

2. Development Financial Institutions

2 1281550 25.53

5. Insurance Corporations 2 617781 12.356. Denationalized Private

Commercial Banks2 454263 9.09

7. Private Commercial Banks 3 28286 0.578. Foreign Commercial Banks 2 450 0.019. First BSRS Mutual Fund 1 7500 0.1510. Other Institutions 12 29454 0.5911. General Public 1121 93496 1.87

Total 1063 5000000 100.00

Source: ICB Annual Report 2006-2007.

Share holding graphical pattern as on June 2007

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Share holding pattern as on 30 June 2007Private Commercial

Banks1%

Insurance Corporations12%

Development Financial Institutions

26%

Government of Bangladesh

26%

Nationalized Commercial Bank

23%

Foreign Commercial Banks

0%Other Institutions

1%

General Public2%Denationalized Private

Commercial Banks9%

First BSRS Mutual Fund0%

2.6 Functions of ICB

The functions of ICB are given below:

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

Share price of ICB varied from lowest Tk. 140.0 to highest Tk, 485 in the stock exchanges during the year. as on 30 June 2007, the market price of share was Tk. 403 and Tk. 352 in the DSE and CSE respectively. The price movements of ICB’s share on DSE are shown graphically in below:

Fig 4.3: Price Movement of ICB’s Share on DSE (2006-2007)

2.8 Transfer of Shares

The volume of shares transferred increased substantially during the year. 626564 shares were transferred during 2006-07 as against 38598 shares transferred in 2005-06 showing an increase of 1523.31 percent.

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Chapter-3

Organizational Structure of ICB

3.1. Division and department of ICB

3.2. Management of ICB.

3.3. Organogram of Corporation

3.4. Board of Directors of ICB

3.5. Administration and Human Resource.

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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.

3.1.1: Direct Supervision under Managing Director:

1) Secretary’s Division

a) Secretary’s Department

b) Public Relation Department

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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

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

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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.

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

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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

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.

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3.3: Organogram of Corporation:

3.4 Board of Directors of ICB The board is comprised of 11 directors. Exchange managing director, all directors are non-executive and independent and represent government, bank, Insurance Corporation, financial institutions and general public. The board of directors of ICB as on 30th June 2007 is as follows:

1. Chairman, Mr. Feroz Ahmed Secretary, Ministry of Commerce Government of the People’s Republic of Bangladesh.

2. Managing Director,Mr. Md. Ziaul Haque Khondker.Directors:a) Brigadier General Md. Ahsan HabibDirector, Bangladesh National Cadet Corps.b) Md. Amanullah

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Managing Director Bangladesh Shilpa Bank.c) S.M. Aminur Rahman Managing Director

Sonali Bank.d) Md. Mukter Hussain Managing Director, Janata Bank. e) Hussain Jamil

Commissioner Chittagong Division, Chittagong f) Habibullah BaharEconomic Adviser Bangladesh Bank.g) F R M Hafiz ul IslamManaging Director,Bangladesh shilpa Rin Sangstha .h) Syed Abu Naser Bukhtear Ahmed Managing Director & CEOAgrani Banki) Elias Ahmed Managing Director Sadharan Bima Corporation Secretary, Kazi Sanaul Hoq. Deputy General Manager

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.

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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

MilestonesDate/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

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

5 and 6 July 2000

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Sangsad (Parliament) and Honourable President's assent thereof

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

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

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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

(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.

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(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

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.

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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,

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

convenience of registration of Units.

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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

1984-85

1985-86

15.00

16.00

16.25

17.00

20.00

21.00

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

16.70

17.00

17.40

17.50

17.00

17.50

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1986-87

1987-88

1988-89

1989-90

1990-91

24.0

24.00

25.00

25.00

18.00

1997-98

1998-99

1999-2000

2000-2001 2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

14.00

12.00

12.00

12.00 12.30

12.30

11.50

12.00

12.50

13.00

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

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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

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

applicable.

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 2006-07, 1786559 Units of Tk.18.22 crore were issued under the

Cumulative Investment Plan(CIP) while 2415837 Units of Tk. 25.61 crore were

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

repurchase and net issue of Units during 2005-06 and 2006-07:

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

particulars

2006-07 2005-06 Cumulative up to 30

June 2007

Unit Amount

(crore)

Unit Amount

(crore)

Unit Amount

(crore)

Gross Issue 17,86559 18.22 1688190 17.89 87218740 976.39

Repurchase 2415837 25.61 1790340 19.34 47595256 522.14

Net Issue (629278) (7.39) (102150) (1.45) 39623484 454.25

Graphical Presentation of Gross Issue, Repurchase & Net Issue of Units

4.4: Sources of the Income of the Fund:

Dividend and Interest Income

In FY 2006-07 the Fund earned dividend amounting to Tk. 21.91 crore from 133

companies and interest on Debenture amounting to Tk. 2.14 crore from 5 companies

resulting in total dividend and interest income of Tk.24.05 crore of which 74.55% i.e

Tk. 17.93 crore was received in cash , The total dividend and interest income during

2005-06 was Tk. 22.12 crore.

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Capital gains on Sale of Investment

During FY 2006-20057 the Fund Capital gains of Tk. 61.14 crore by selling

securities of 92 companies as compared to Tk. 53.15 crore of capital gain made in

FY 2005 -2006 through sale of securities of 60 companies.

Interest on Bank deposits:

In 2006-07 the Fund earned Tk. 155.2 crore as interest on bank deposits which was

Tk. 88.68 crore in 2005-2006.

Premium Income on Gross Sale of Units:

In 2006-07 the Fund earned Tk. 0.27 crore as premium on gross issued Units as

against Tk. 0.25 crore in 2005-2006.

Income and Expenditure:

During the year under review , the Fund earned a total income of Tk. 87.08 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. 30.47 crore on account of management fee, interest on current account with ICB ,

commission and brokerage , printing and stationary , postage , Bank

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

56.61 crore , the Fund had a net distributed income of Tk. 31.22 crore , the Fund had a

net distributed income of Tk.87.83 crore in aggregate and Tk. 22.17 per Unit . As on

30 June, 2007 the Fund had 39623484 outstanding units against 40252762 Units at

the same date of the preceding year.

4. 5: Year –wise dividend Payment Performance

Dividend Declared: The Board of Director of ICB in its meeting held on 30 July,

2007 declared dividend at the rate of 13.00 per unit, involving tk. 51.51crore for

31

2006-2007. The unit holders whose names appeared in he register on 30 June, 2007

were entitled to this dividend. The rest amount of Tk. 36.32 crore would be carried

forward as undistributed income.

Year-wise Dividend and Dividend Yield

Financial Year Dividend per Unit (Taka)

Dividend yield on opening price (percentage)

1989-1990 25.00 23.141990-1991 18.00 15.651991-1992 16.70 14.651992-1993 17.00 15.181993-1994 17.40 15.541994-1995 17.50 15.351995-1996 17.00 14.531996-1997 17.50 14.581997-1998 14.00 11.661998-1999 12.00 11.011999-2000 12.00 11.012000-2001 12.00 11.112001-2002 12.30 11.392002-2003 12.30 11.602003-2004 11.50 10.652004-2005 12.00 9.842005-2006 12.50 11.052006-2007 13.00 11.25

32

Portfolio:

As on 30 June 2007 the net Investment of the Fund at cost price stood at Tk. 631.73

crore in 289 securities , the market value of which was Tk. 707.52 crore .

Details of the portfolio are given in Annex-5

Summary of investments as on 30 June 2007

SL.no. Parties No.of securities

Total Cost Crore Tk.

Total market value (crore)

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

26517

1

612.525.64

.005

684.746.95

.006

(B) Debenture

1. Listed companies2. Non listed companies

24

0.9812.59

2.1713.66

Total Investment

289 631.73 707.52

4.6 Occupation-wise classification of Unit holders

Classification of Unit holders:

The number of Unit holders as on 30 June, 2007 was 25022 whose occupation –wise

classification is as follows:

SL.no Occupation / Institution No. of Unit

holders

Percentage

1 Govt.& Non- Govt. Employees 15080 60.27

2 Business man and agriculturists 2350 9.39

3 Engineers and Doctors, Lawyers etc. 2015 8.05

4 Retired person (all categories) 1806 7.22

5 Defense personal 1730 6.91

33

6 House wives 802 3.21

7 Others 643 2.57

8 Bangladeshis Residing Abroad 290 1.16

9 Workers and Students 270 1.08

10 Institutional Provident Fund 36 0.14

Total 25022 100

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

June 2007. Public and Private sector employees accounted for maximum of 60.27

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.

.

34

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

35

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.

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.

36

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.

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.

37

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.

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:

38

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 2006-2007

5.6: Details Description of the ICB Mutual Fund

Consolidated Portfolio Statement:

As on 30 June 2007, cost price and market price of eight Mutual Funds were Tk.

1171.93 lac and Tk 1544.30 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 2007

Sl.no Particular

s

1st

Mutual

Fund

2nd

Mutua

l Fund

3rd

Mutua

l Fund

4th

Mutua

l Fund

5th

Mutual

Fund

6th

Mutua

l Fund

7th

Mutual

Fund

8th

Mutu

al

Fund

39

1 Cost of

portfolio

(lac)

324.26 327.06 418.11 483.26 752.58 896.91 1130.41 1171.

93

2 Market

value of

the

portfolio

(lac)

1524.69 383.40 545.04 778.64 1246.17 1160.9

4

1493.72 1544.

30

3 Market

price per

certificate

(taka)

3433.25 900.50 654.75 628.00 453.50 279.50 283.50 272.2

5

4 No. of

certificate

holders

988 989 2740 1955 3685 8995 2797 7537

So, total cost of portfolio is taka 5505.12 lac, market value of the portfolio 8676.90

lac and the numbers of certificate holders are 29686.

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

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

following table:

How to Buy existing Mutual Funds

40

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.

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.

41

(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.

(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

42

1983-84 25

1984-85 35 21

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

43

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

2003-2004 200.00 50.00 50.00 45.00 24.00 17.50 15.00 14.00

2004-2005 210.. 55.00 52.00 48.00 27.00 18.50 16.00 15.00

2005-2006 210.00 55.00 52.00 48.00 27.00 18.50 16.00 15.00

2006-2007 190.00 62.00 56.00 52.00 33.00 23.00 22.50 18.00

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.

44

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

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. 37,22,439.00 from 34 securities during 2006-

2007 of which a sum of Tk. 21,28,407.00(57.18 percent) was received in cash within

30 June 2007 .

Capital Gains on Sale of Investments:

During 2006-07 the Fund earned Tk. 9,482,424.50 as capital gains by securities of 21

companies.

Income, Expenses and Distributable Income

During the year under review , the Fund earned a gross income of Tk. 1,41,73,493.00

by way of dividend income of Tk. 37,22,439.00,interest income of Tk. 1,86,629.00 on

bank deposits , interest of Tk. 7,79,646.00 on current account with ICB , capital gains

of k. 94,82,425.00 and other income of Tk. 2,354.00. After deducting the total

expense of Tk. 21,32,711.00 incurred as staff expenses, management fee, printing and

45

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

income of the fund stood at Tk. 1,20,40,782. Taking into account the previous years

undistributed income of Tk. 2,25,21,510.00 the Fund had net distributable income of

Tk.3,45,62,292.00 as on June 2007 resulting in distributable income per certificate of

Tk. 691.24.

Dividend:

The Fund declared dividend at the rate of Tk.240.00 per certificate for the year 2006-

07 as compared to Tk. 210.00 declared in the previous year. After making provision

of Tk. 1,20,00,000.00 for payment of dividend the Fund had an undistributed income

of Tk. 2,25,62,292.00 .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

2004-2005

2005-2006

2006-2007

60.00

70.00

70.00

100.00

125.00

170.00

175.00

180.00

200.00

210

210

190

Portfolio:

46

As on 30 June 2007 the Fund had securities of 60 companies in its portfolio with a

total cost of Tk. 324.26 lac.The market value of the portfolio as on 30 June 2007 was

1524.69.

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

Fund stood at Tk . 2977.00 as on 30 June 2007.

The market price per certificate of Tk. 100.00 each of the fund was Tk.2700.00 and

Tk. 3433.25 respectively in 2006-2007.

The number of certificate holders of the fund was 988 as on 30 June 2007.

47

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 2006-2007 of which a sum of Tk. 11,02,979.00(78.49 percent) was

received in cash within 30 June 2007 .


During 2006-2007, 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 2006-2007

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

48


During the year under review , the Fund earned a gross income of Tk. 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 2007 resulting in distributable income per certificate of

Tk. 191.28 for 2006-2007.

Dividend:

The Fund declared dividend at the rate of Tk.50.00 per certificate of Tk. 100.00 each

for the year 2006-2007as 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

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

42.00

45.00

30.00

32.00

35.00

40.00

42.00

45.00

50.00

49

2004-2005

2005-2006

2006-2007

55.00

55.00

62.00

Portfolio:


total cost of Tk. 282.35 lac. During 2006-2007 the Fund made additional investment

of tk. 69.36 lac in securities of 14 companies .The market value of the portfolio as on

30 June 2007 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 2006 and 30 June 2007 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 2007 .


During 2006-2007, the Fund earned Tk. 37,85,917.00 as capital gains by securities of



50

Sl. No Name of the company No.of Securities

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

14 Beximco Pharmaceuticals Ltd 6000 95,820.00

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

51


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

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 2007 resulting in distributable income per certificate of

Tk. 150.74 for 2003-2005.

Dividend:


for the year 2006-2007 as compared to Tk. 45.00 declared in the previous year. After

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

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

28.00

38.00

35.00

38.00

40.00

45.00

50.00

50.00

50.00

52

2004-2005

2005-2006

2006-2007

52.00

52.00

56.00

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 2007.

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 2006 and 30 June 2007 respectively.

.

Fourth ICB Mutual Fund



securities during 2006-2007 of which a sum of Tk. 13, 68,492.00(86.80 percent) was

received in cash within 30 June 2007.






sold

Capital

gain(taka)


2 One Bank Ltd 500 58,500.00

53

3 First Lease International ltd 400 12,425.00

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



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 2006-07.

Dividend:


for the year 2006-2007 as compared to Tk. 40.00 declared in the previous year. After

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

undistributed income of Tk. 90, 37,580.00.

54

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

2004-2005

2005-2006

2006-2007

41.00

45.00

32.00

35.00

36.00

38.00

40.00

40.00

45.00

48.00

48.00

52.00

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 2007.


500.00 as on 9July 2003 and 30 June 2007 respectively.

55

The number of certificate holders of the fund was 2335 as on 30 June 2007

Fifth ICB Mutual Fund



securities during 2006-2007 of which a sum of Tk. 11, 55,576.00(63.91 percent) was


Capital Gains on Sale of Investments;

During 2006-2007, 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)


2 Standard Bank Ltd 4000 2,88,000.00

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

10 Beximco Pharmaceuticals Ltd 5000 43,650.00

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

56




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 2006-2007.

Dividend :


for the year 2006-2007 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

30.00

35.00

22.00

20.00

21.00

23.00

24.00

57

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

24.00

24.00

27.00

27.00

33.00

Portfolio:

As on 30 June 2006the Fund had securities of 87 companies in its portfolio with a

total cost of Tk. 506.59 lac. During 2006-207 the Fund made additional investment of

tk. 193.99 lac in securities of 27 companies .The market value of the portfolio as on

30 June 2007 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






58





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


59



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




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 2007 resulting in distributable income per certificate of

Tk. 22.25 for 2006-2007.

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

2004-2005

2005-2006

2006-2007

20.00

24.00

18.00

15.00

16.00

17.00

17.50

17.50

17.50

18.50

18.50

23.00

60

Portfolio:


total cost of Tk858.70 lac. During 2006-2007 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 2007 was Tk872.41 lac .

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





Seventh ICB Mutual Fund


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




During 2006-2007, 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 2,56,137.00

61

8 Janata Insurance Company Ltd

20 920.00

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




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 2006-07.

Dividend:




had an undistributed income of Tk. 25,33,620.00


table;

62



1995-96

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2005-2005

2005-2006

2006-2007

18.00

21.00

14.00

13.00

13.50

14.00

14.50

14.50

15.00

16.00

16.00

22.50

Portfolio:


total cost of Tk 1000.74 lac. During 2006-2007 the Fund made additional investment


30 June 2007 was Tk 1014.70lac .

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





Eighth ICB Mutual Fund

63


The Fund had earned dividend and interest income of Tk. 52,58,000.00 from 64

securities during 2006-2007 of which a sum of Tk. 42,44,897.00 (80.73 percent) was



During 2006-2007, the Fund earned Tk 2,16,53,796.00 as capital gains by securities

of 29 companies as shown in the following table.



sold

Capital gain(taka)

1 Apex Tannery Ltd. 660 47,664.00

2 Arab Bangladesh Bank Ltd. 3180 2,515,922.00

3 Bangladesh Industrial Finance

Co.Ltd

1400 154,200.00

4 Bangladesh Welding Electrodes 26500 536,750.00

5 Beximco Farmaceuticals Ltd. 36250 906,300.00

6 BRAC Bank Ltd. 10900 4,503,112.00

7 Confidence Cement Ltd. 600 38,332.00

8 Dhaka Electric Supply Co. Ltd 3600 565,805.00

9 Eastern Cables Ltd 100 23,054.00

10 Eastern Housing Ltd. 2400 72,200.00

11 Eastland Insurance Co. Ltd 100 4,316.00

12 EXIM Bank Of Bangladesh Ltd 1700 459,100.00

13 Fu Wang Ceramics Ltd. 200 2,898.00

14 Golden Son Ltd. 12000 94,600.00

15 Heidelberg Cement Bangladesh

Ltd.

1300 506,539.00

16 IPDC 4800 991,312.00

17 ICB AMCL First Mutual Fund 800 153,600.00

64

18 ICB AMCL First NRB Mutual

Fund

950 256,312.50

19 Lankabangla Finance Ltd. 29500 456,050.00

20 Miracle Industries Ltd. 9000 90,910.00

21 Power Grid Co. Bangladesh Ltd. 20100 3,007,775.00

22 Pubali Bank Ltd. 25550 1,692,890.00

23 Shahjalal Islamic Bank Ltd. 9450 1,378,200.00

24 Shine Pukur Holdings Ltd. 1000 2,680.00

25 Sinobangla Industries Ltd 2000 600.00

26 Southest Bank Ltd. 1150 236,504.00

27 Square Phermaceuticals Ltd. 1695 2,229,736.15

28 United Leasing Co. Ltd. 480 131,756.80

29 The Primer Bank Ltd. 2350 594,675.00

Total 21,653,795.90


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

Tk2,70,22,457.00dividend and interest income from investment in securities of Tk.

52,58,000.00 ,interest income of Tk. 1,10,639.00 on bank deposits , capital gains of

Tk. 2,16,53,796.00. After deducting the total expenses of Tk 1,59,59,504.00 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

Tk1,10,62,953.00. Taking into account the previous years undistributed income of Tk

93,84,715.00 the Fund had net distributable income of Tk 2,04,47,668.00 as on June

2007 resulting in distributable income per certificate of Tk. 40.90.

Dividend:

65




had an undistributed income of Tk. 1,14,47,668.00


table;



1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

18.00

12.00

12.00

12.50

13.00

13.50

13.50

14.00

15.00

15.00

18.00

Portfolio:


total cost of Tk 1,171.93 lac. The market value of the portfolio as on 30 June 2007

was Tk 1,544.30 lac .

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


66


272.25 during 2006-2007.

Chapter-6

67

(Contribution of

ICB Unit fund & Mutual fund)

6. Contribution of ICB unit fund & Mutual fund:

ICB Unit fund and Mutual fund played very valuable and extended roles to accelerate

the pace of industrialization and to foster and widen a vibrant and sustainable capital

market in the country. In the year under review, by engaging in brisk transaction of

securities for ICB`s investment portfolio, unit fund and mutual funds portfolios and

on behalf of investment account holders ICB contributed significantly in preserving

depth, stability, reliability and liquidity of the stock market. During 2006-2007, the

total trading of ICB and its subsidiary companies in both the stock exchanges was tk.

1305.99 crore which was 91.63 percent higher than that of tk. 681.51 crore in the

previous year.

As on 30 June 2007 the net units issued stood at 39623484 nos. of tk. 454.25 crore.

An amount of tk. 64.65 crore was invested by the fund in 114 securities during 206-

2007 and securities worth tk. 84.98 crore were divested, and as a result the net

investment of the fumd stood at tk. 631.73 crore in 289 securities, market value of

hich was tk. 707.52 Crore as on 30 June 2007.

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

particulars

2006-07 2005-06 Cumulative up to 30

June 2007

Unit Amount

(crore)

Unit Amount

(crore)

Unit Amount

(crore)

Gross Issue 17,86559 18.22 1688190 17.89 87218740 976.39

Repurchase 2415837 25.61 1790340 19.34 47595256 522.14

Net Issue (629278) (7.39) (102150) (1.45) 39623484 454.25

68

During the year under review, ICB Asset Management Company Ltd. A subsiriary of

ICB floated a specific type of Mutual fund namely, ICB AMCL First NRB Mutual

Fund for the first time in Bangladesh, Which added a new dimention in the countries

stock market. It is a closed end Mutual fund. The size of the fund is tk.10.00 cror. The

fund has been designed primarily for the nonresident Bangladeshi with a view to

offering them a unique opportunity to invest in the Bangladesh stock market. And the

total paidup capital of Mutual fund is 17.50 crore which is a much enough

contribution to the stock and capital market.

Sl.

no

Particulars 1st

M.F

2nd

M.F

3rd

M.F

4th

M.F

5th

M.F

6th

M.F

7th

M.F

8th

M.F

To

tal

1 No. of

companies

60 69 83 90 102 135 129 126 794

2 No.of

securities

60 71 84 91 103 136 132 128 805

3 Total

investment

at cost

(lac)

324.

26

327.06 418.

11

483.86 752.58 896.91 1130

.41

1171

.93

5,50

5.12

(lac)

4 Market

value

1524

.69

383.40 545.

04

778.64 1246.1

7

1160.9

4

1493

.72

1544

.30

8,67

6.6

69

Chapter-7

( Problems & Findings )

7.1. Problems Related to ICB

Unit Fund & Mutual Fund

7.2. Recommendations

7.3. Conclusion

Chapter-7

70

Problems & Findings

7.1 Problems:

7.1.1 Problems 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.

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.

71

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

to stabilize the capital market.

7.1.2: 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:

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

than required time for giving the service.

Same laggard procedure is also taking place at the time of execution of order.

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.

From Capital market point of view:

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

companies do not declare dividend up to satisfactory level.

72

The rate of supply of fundamentally strong securities is very low.

Political unsteady position also hearts the investor’s sentiment in the market and

thereby leads to flat the stock market.

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.

7. 2: Recommendations

7.2.1 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.

7.2.2 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

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.

73

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.

74

7.3 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.

75

Bibliography:

1. Investment Corporation of Bangladesh (ICB) 2006-2007. Annual Report. Dhaka

ICB.

2. Investment Corporation of Bangladesh (ICB) 2005-2006. Annual Report. Dhaka

ICB.

3. Investment Corporation of Bangladesh (ICB) 2006-2007. Annual Report of Unit

Fund, Dhaka ICB.

4. Investment Corporation of Bangladesh (ICB) 2005-2006. Annual 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. ICB web site. www.icb.gov.bd.com

76

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