Financial Performance Analysis On Mutual Fund of ICB
Financial Performance Analysis On Mutual Fund of ICB
Financial Performance Analysis On Mutual Fund of ICB
On
Submitted To:
Professor Md. Shahjahan Khan
Principal
Dhaka City College
Supervised By:
Mohammad Mosharraf Hossain
Lecturer
Department of Business Administration
Dhaka City College.
Submitted By:
Md. Shakhawat Hossain
National University Roll no: 9951505
National University Registration no: 9998403
Academic Session: 2008-2009
Department of Business Administration
Dhaka City College.
ii
Letter of Transmittal
iii
Acknowledgement
I am expressing gratitude to the Almighty, the Merciful and the Benevolent Allah for His
special kindness to give me the opportunity to complete the report successfully.
I would like to express my respected appreciation to our principal Professor Md.
Shahjahan Khan. At the very outset I would like to thank our coordinator and assistant
professor Md. Shahinur Sobhan and I extended my heartiest gratitude to my teacher and
supervisor Mohammad Mosharraf Hossain, Lecturer, Department of Business
Administration, Dhaka City College, for his sincere advice, guidance, valuable
suggestion to preparing and presenting this report.
I regard, would like to extend my sincere appreciation to all of my teachers for the
invaluable contribution and cooperation in advancing this report and thereby completing
my BBA program ultimately.
I am thankful to my entire class friends who help me during the Project report when
problem arise and also my seniors.
iv
Executive Summary
Bangladesh is a least industrial country. Its financial system depends on agriculture more
than 60%. Now it can be understand that its industrialization is in infant stage. So, for the
better growth of industrialization, capital market is so important for our country. Because
of this, Investment Corporation Bangladesh 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 and Mutual Funds in our
country and dominating the industry.
ICB is- a unique institution in Bangladesh. Financial Condition of ICB is better
compared with others. Its main function is to make market active and efficient. It has
profit making objective also by operating mainly the small & medium investments in the
capital market. So, it is important to evaluate the performance of it. It has skill and
experienced labor force and professional and dedicated management team that enable to
pursue the ICB's goals and objectives. ICB should be concerned about its investors,
because the investors are the risks takers. ICB has great influence in the capital market.
For stabilizing and development of capital market in our country, the ICB is investing
through Investment Scheme, Unit fund and Mutual funds. It also acts as an underwriter
and lease financer. It also includes the scheme of term deposit and loan against Unit
Certificates. The investors are discouraged to invest in the ICB by borrowing from ICB
due to high interest rate.
At the last part, I have tried to give their historical background, objectives, mission,
vision, functions and financial analysis/information on ICB using the ratios and
theoretical description on mutual funds, in this report mainly focused on its financial
analysis, I have also tried to find out the facts from Project report from the organization
and also give some suggestions/recommendation where the corporation could have scope
to improve.
Table of Content
Chapter
Topic
Page
Number
One
Introduction
1.1
Introduction
1.2
1.3
1.4
1.5
1.6
Two
2.02
Objectives of ICB
2.03
Vision
2.04
Mission
2.05
Functions of ICB
2.06
2.07
2.08
Products of ICB
2.09
2.10
Management of ICB
2.11
2.12
2.13
2.14
2.15
2.16
Development Activities
vi
Three
3.1
3.2
Shareholders position
3.3
Financial Analysis
3.4
Four
4.2
Conclusion
4.3
Recommendation
4.4
References
Appendix- 1
Appendix- 2
Bibliography
Acronyms:
AGM
HRM
HRD
HR
ICT
EEF
SEC
PMIS
SPO
DECO
MLSS
GM
DGM
IT
MIS
vii
Chapter-1
Introductory Part
1.1: Introduction
1.2: Origin of the Report
1.3: Objectives of the Study
1.4: Sources & Methods of Data Collection
1.5: Scope of the study
1.6: Limitations of the Study
(1.1) Introduction
Bangladesh is one of the least-developed countries in the world with minimum natural
and financial resources. The development of Bangladesh is being hindered due to lack of
insufficient capital. To accelerate the aspect of industrialization through the development
of capital market and broadening the base of investment, The Investment Corporation of
Bangladesh (ICB) was established on 1 October 1976, under The Investment
Corporation of Bangladesh Ordinance, 1976. The establishment of ICB was a major step
in a series of measures undertaken by the Government to accelerate the speed of
industrialization and to develop a well-organized and vibrant Capital Market, particularly
securities market in Bangladesh.
Mutual fund was first introduced in Belgium in 1822. This form of investment soon
spread to Great Britain and France. Mutual funds became popular in the United States in
the 1920s and continue to be popular since the 1930s, especially open-end mutual funds.
Mutual funds experienced a period of tremendous growth after World War II, especially
in the 1980s and 1990s. A mutual fund is a professionally managed kind of collective
investment scheme that pools money from many investors and invests it in stocks, bonds,
short-term money market instruments or other securities. In 1980s in Bangladesh the
Investment Corporation of Bangladesh (ICB) launched by the government the first ever
Mutual Funds for the sake of investors and of the capital market. The first private sector
to take initiative of organizing a mutual fund was Asset & Investment Management
Services of Bangladesh Limited (AIMS) in 1999. Though the mutual fund industry grew
over time there has been only close ended fund since the beginning of the mutual funds.
The country's first ever open-end mutual fund hit market in the first quarter of 2010,
expanding the orbit of stock market and providing share holders a very useful and
convenient investing vehicle. Mutual funds dwell in a small market in Bangladesh. Now
a day, around 25 mutual funds listed in the Dhaka Stock Exchange (DSE) trade at an
average of 2.7 times of their net asset value (NAV).Mutual fund is normally assumed to
be safe investment due to volatility in capital market, but the market capitalization of
mutual fund was comparably lower than other sectors. It has been observed that the
demand for mutual funds fell during July-December 2008 resulting in sharp decline in
prices. The situation improved in the year 2009 as the demand for mutual funds
increased. Mutual funds have emerged as the best in terms of variety, flexibility,
diversification, liquidity as well as tax benefits. Besides, through mutual funds investors
can gain access to investment opportunities that would otherwise be unavailable to them
due to limited knowledge and resources.
This report is originated to fulfill the requirement of the assigned internship report on
Financial Performance Analysis on Mutual Fund of Investment Corporation of
Bangladesh (ICB). In this regard, an organization attachment at Investment Corporation
of Bangladesh has been given to me a period of up to three months. During the internship
period, I have worked almost 50 departments of Investment Corporation of Bangladesh
with the help of the internal supervisor.
Business.
Research Library.
Monthly review of DSE & CSE.
General Information.
Materials & documents of ICB.
Bangladesh Bureau of Statistics.
Chairs
and tables.
Inadequate information.
Secrecy of the officials.
Due to time constraint limited analytical tools have been used to draw the
In the face of these limitations the study has been conducted and the report has been
prepared with the best efforts and integrity.
Chapter-2
Literature review of ICB
2.1: Historical Background of ICB
2.2: Objectives of ICB
2.3: Vision
2.4: Mission
2.5: Function of ICB
2.6: Basic Function of ICB
2.7: Business Policy of ICB
2.8: Products of ICB
2.9: Recent Milestones of ICB
2.10: Management of ICB
2.11: Boards of Directors of ICB
2.12: Organ Gram of ICB
2.13: Description of ICB Organ Gram
2.14: Division & Dept. of ICB
2.15: Function of Merchandising Division
2.16: Development Activities
(2.03) Vision
ICB will be the leading responsible and environment friendly financial institution
operating in such a way that our fellow competitors watch, acknowledge and admire
emulates us as a role model of success.
(2.04) Mission
Being a responsible institution created by law, act in accordance with the
mandates of ordinance for fostering rapid growth of Bangladesh economy.
Being a financial architect, strive to established benchmark of values, attitudes,
behavior and commitments with earnest endeavor in generating optimum profits
and growth for shareholders by efficient use of resources.
Being an innovative solution provider, put emphasis on formulating total
solution to foster mobilization of all domestic & NBR savings into potential
investment.
Being a performance leader, intended to lead by example, operate in the interest
of the customer & committed to do everything in their power to for their
customers everlasting trust.
Continued Activities :
Private placement
Custodian and Banker to the Issues
Mergers and Acquisitions
Corporate Financial Advice
Lease Finance
Portfolio Investment
Advance Against Unit Certificates Scheme
Advance Against Mutual Fund Certificates Scheme
Consumer Credit Scheme
10
1 July 2002
13 August 2002
20 August 2002
20 August 2002
21 June 2003
21 June 2003
15 February 2004
11
26 April 2007
3 March 2008
1 June 2009
Bangladesh Fund
5 May 2011
12
Chairman
Managing Director
Md. Fayekuzzaman
Directors
Secretary
Audit Department:
Audit department manages the overall audit of Investment Corporation of Bangladesh
and it also prepare internal audit for providing to the government yearly audit officer. It
preserver all the financial transactions for the audit preparation.
Organization & Methods Department:
13
Organization & Methods Department provides the new information about how to change
the organizations overall performances. And it also provides the methodology about how
the organization moves forward.
Inspection & Compliance Department
Inspection & Compliance Department does the internal inspection of different
departments for the accountability of the accounts and human resources, especially those
terms which has some questioned to be faced for accountability.
GM Administration:
Trustee Division
Trustee Division has two departments. These are:
** Trustee Department:
ICB is acting as trustee to the debenture issue and asset-backed securitized bonds. ICB
acted as trustee to the issue of 17 companies of which 7 companies has been redeemed
successfully.
** Custodian Department:
To act as the custodian to the public issue of Open-end & Closed-ended Mutual Funds,
ICB provides professional services. It also acts as the Banker to the issues and provides
similar services through the network of its branches.
Legal Affairs Division
In Legal Affairs Division:
*** Law Department:
This department handles all the legal affair of ICB.
Prepare legal documents, advance agreements, share agreements, demand
promissory notes, memorandum etc.
process litigation cases, prepare legal notice and refer cases to legal advises and
coordinate with legal adviser in the court.
Prepare necessary memos for placement in the board meeting relating litigation
& legal affair.
*** Documentation Department:
14
Establishment Division:
Establishment Division has two departments. These are:
Procurement & service Department
This department deals with purchase and sales office supplies, office
Equipments etc.
Maintain the utility service like telephone bill, electric bill etc.
Examine the quality of the product purchase.
Register and transfer unit certificates
Maintain separate register for unit holder CIP
Verify signature of transfer deed
Issuance dividend warrants and CIP c-Certificates to the holders.
ICB Branches and Bank Branches as per requirement
Coordinate all activities relating to procurement and issue of unit certificates.
To give and complete the different steps of training for the officers/personnels
in the corporation.
To organize the seminar/workshop, symposium, if needed take specialist.
Payroll and compensation.
HR - Information system.
Preparing HR Budget.
Adhering to the statutory compliances like PF, ESI and other beneficiary
activities.
According to need, others function given by administration.
According to need, others functions which are given by administration
Accounts Division
Accounts Division has two departments. These are:
*** Central Accounts Department:
Preparation of salary statements, overtime Statement.
Maintaining liaison with commercial audit and external audit.
Preparation of annual budget and revise it as per requirement.
Preparation of Financial Statement of the corporation.
Arranging call loan & term deposit.
*** Local Accounts Department:
Preparation of salary statements of local officers.
Maintaining liaison with commercial audit and internal audit.
Provide information for preparing annual budget.
17
Finance Division
Finance Division has two departments. These are:
*** Fund Management Department:
There is a decision making board in order to manage different Mutual Funds. As per
boards 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.
Local Office:
Local Office does the shares related transactions. It does the whole work of an
organization but in a shorter level. It mainly operates the divisional branches situated in
different location of Bangladesh. These branches provide their information to the local
office and local office provide them to head office in a prepared way. These branches are:
Chittagong Branch
Rajshahi Branch
Khulna Branch
Sylhet Branch
Barisal Branch
Bogra Branch
ICML:
Underwriting of initial public offering of shares and debentures
Underwriting of repeat public offering of shares, debentures and bonds
Underwriting of right issue of shares
Issue management
Managing investors account
18
AMCL:
The activities of the company invigorated the mutual fund industry and already
established itself as one of the fast expanding asset management company up to 30 June
2009,the company floated two open end mutual funds and five closed end mutual funds.
ISTCL:
Provide online trading with DSE and CSE
Provide brokerage service for buying and selling securities.
Work as full service DP in the central depository BD Ltd.
Provide facilities to participate in automatic trading system
documentation with the following department for the perpetual work condition of the
branches.
GM ICT & Depository
Software Division
Software Division has two departments. These are:
*** Programming Department
Developing new program.
Establish new and updated program for the data preservation.
Provide higher program for the presentations.
*** System Analysis Department
Maintaining the network system.
Developing new software.
Servicing of hardware & Software troubleshooting.
Maintaining bulk amount of data.
20
Merchandising Division
Merchandising Division has two departments. These are:
*** Investors Department
The Investors' Scheme was introduced in June 1977. Over the years this scheme has
grown tremendously. ICB, at its discretion, may grant up to two times loan against the
assets of an account subject to a maximum limit of Tk. 3.00 lac. To help the investors to
develop diversified and balanced portfolio to minimize risk and earn a reasonable return,
ICB operates and manages only the old accounts and new accounts are being opened and
managed by the ICB Capital Management Ltd. a subsidiary of ICB.
Opening and maintaining of investors account Sanction loans against deposit in
Investment accounts, provide account loan margin at 1:2 ratio subject to ceiling
23
The 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:
The 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 are looked after by two General Managers 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
Manger (DGM). Besides the above two major wings, there are two divisions which are
directed under supervision of Managing Director i.e. audit and methods division
secretarys division.
The description of the division and department is given below:
SL no.
01.
Department
Personnel
Division
Administration
02.
Establishment
03.
Investors
Merchandising
04.
Shares
05.
Transactions
06.
Unit sales
Funds
07.
08.
Mutual funds
09.
Central accounts
10.
27
11.
System analysis
Loan appraisal
12.
Programming
13.
Data management
14.
Loan appraisal
Loan appraisal
15.
16.
Implementation
Implementation
recovery
17.
18.
Public issue
Legal affairs
19.
Law
20.
and
Personnel department:
This department deals with the human resource of the organization. The main functions
of this department can be described as follows:
To make necessary rules, regulation, policies for efficient administration of the
corporation.
To recruit personnel for appointment in the corporation.
To handle all personnel matters including confirmation, posting, transfer,
28
corporation.
Explores more sources of financing of foreign training.
Arranges in service training where, among other, foreign trained officers will in
turn train other will in turn train other officers through lectures.
Arranges training of new recruit institute of the corporation.
Runs training institute of the corporation.
Arranges seminars/symposium/workshops where experts in the line may be
invited to deliver lectures.
Procures training equipment and facilities for training manpower.
Deals with all matters relating to ICB employees union.
Deals with all matters relating to ICB officers association.
Develops appropriate machinery for handling and arrive at a solution.
Establishment department:
This department deals with purchase and sales of office supplies, office equipment etc.
They also maintain the utility service like telephone bill, electricity bill etc.
This department divides cost into two categories: revenue cost and fixed cost. For fixed
cost, depreciation is charged at straight-line basis.
There are two purchase commodities to accomplish the purchase. There remains a quality
control committee to examine the quality of the product purchased. For the purchase of
the products, this department gives tender offer to the listed suppliers. In case of selling
of scraps and wastage, the tender offer is also followed.
sound company shares which are expected to bring attractive returns for them in the form
of divided and capital appreciation.
The followings are the functions of this department:
Opens and maintains investors accounts for individual investors. Investors
department provides loans to their account holder currently at 1:2 ratios subject
to a ceiling of TK. two lack and confessional rate of interest, presently 13.5%
per annum. The loan is giving to the investor not in cash rather share
certificates.
Investors department receives purchase and sells order of securities in a
prescribed form from the investors.
Some time investors department gives suggestion about purchase and sale
decision of the investors for the betterment of their investment.
Investors department supplies three types of statements to the investors namely
financial statement, portfolio statement and balance sheet.
Buy and sell shares on behalf of the investors both from the primary and
secondary market.
Implement negotiated over-the counter transaction between investment account
holders.
Withdraw funds and shares from investment accounts.
Provide service to investment account holder.
Receive direct applications against public issue of shares.
Prepare a list of applicants and send it to the companies along with applications
and application money.
Receive allotment letters from the companies.
Collect commission as banker to the issue and brokerage commission from the
companies.
Keep financial records of all investment accounts.
Make periodical reconciliation of investment accounts.
Processing of withdrawal of funds.
Confirm fund position of individual accounts.
30
32
Term deposit
ICB receives deposit as term deposit from individuals/institutions offering attractive and
negotiable interest rate which helps to mobilize savings for profitable investment in
securities.
Disinvestment Program
ICB is actively associated with disinvestment process. With a view to off loading of
Govt. share holding through the Stock Market ICB has been entrusted with the
responsibility of selling Govt. owned shares of different listed Companies.
Chapter-3
Overall Evaluation of the ICB Mutual Funds
3.01: What is the meaning of Mutual Fund?
33
the total income of Tk. 848.75 crore the highest income being the capital gain of Tk.
494.70 crore (58.29 percent) followed by interest income of Tk. 254.93 crore (30.04
percent) dividend and interest income on securities of Tk. 69.88 crore (8.23 percent) fees
and commissions of Tk. 21.50 crore (2.53 percent) and Tk, 3.17 crore (0.04 percent) as
income from other sources. Due to efficient management of portfolio and favourable
market condition income from capital gain stood at Tk. 494.70 crore in 2012-2013, which
was 33.65 percent higher than the capital gain of Tk. 370.50 crore of the previous year.
despite stiff competetion at the market by dnt of prudential cash and fund management,
though the corporation earned gross interest income of Tk. 254.93 crore lower than that
of previous year. Dividend income increased by 36.18 percent in the reporting year
compared to previous year due to satisfactory dividend performance by the companies
selected in the portfolio.
Gross Profit
The gross profit before provision and tax was Tk. 446.16 crore in 2012-13 compared to
Tk. 448.68 crore in 2011-12, showing an increase of 0.56 percent lower than last year.
Net Income
During 2012-13, ICBs net profit after tax increased to Tk. 394.14 crore from Tk. 385.29
crore in 2011-2012 showing an increase of 2.30 percent.
Appropriation of Profit
The board of director of ICB recommended appropriation of Tk. 448.47 crore which
includes net profit of Tk. 394.14 crore of 2012-13 and retained profit of Tk. 54.33 crore
of the previous year.
Shareholding Position
The Shareholding Position as on 30 june 2013 is as follows:
Shareholders
9112500
%
Shareholders
27.00
7670359
22.73
3.Development
institutions
financial 1
8650460
25.63
4170020
12.36
1. Government of
peoples
Republic
Bangladesh
of
35
corporation
5.Denationalised
private 2
commercial Banks
3066270
9.08
91483
.27
7.Other institution
72
73247
.22
8.General public
2132
915661
2.71
Total
2225
33750000
100.00
Financial Analysis
The financial results and some key financial ratios of ICB pertaining to profitability,
liqudity and solvency are given in the following table:
Table- Statement of financial results & some key financial ratios
Financial Ratios
2012-13
2011-12
Increase/Decrease(%)
46.44
58
(19.93)
8.01
17.78
(54.95)
11.74
17.80
(34.04)
116.78
114.16
2.30
656.02
1031.62
(36.41)
36
2.23
2.51
(11.16)
68.07
42.81
59.00
30.57
17.05
79.30
ratio 35.68
49.58
(28.03)
Capital
Adequacy
(percentage)
Dividend yield
The dividend yield or the dividend-price ratio of a share is the company's total annual
dividend payments divided by its market capitalization, or the dividend per share, divided
by the price per share. It is often expressed as a percentage.
Dividend yield is used to calculate the earnings on investment (shares) considering only
the returns in the form of total dividends declared by the company during the year.
Year 2013
Market price per share / Dividend per share = Dividend yield
Interpretation
38
This dividend yield shows that ICB pays out 2.23% in dividends last year relative to its
share price.
Year 2013
EPS = No of . share outstanding Net / Profit
= 120.78
Intrepretation:
For each outstanding share of ICBs stock, they earn 120.78 taka(2013). Higher the EPS,
better the company, it is higher than the past year 2012.
40
2012
=
42
= 0.926920 = 0.921187043
(**Note: Sales here as total operating income)
Interpretation
As we know that the operating profit margin high is preferred, here we see that the past
year 2012 operating profit margin is lower than present year 2013.
Current Ratio
Current Ratio it is a measure of liquidity calculated by dividing the firms current assets
by its current liability.
Current Ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations, the higher the ratio, the more liquid the company is. Current ratio is equal to
current assets divided by current liabilities. If the current assets of a company are more
than twice the current liabilities, then that company is generally considered to have good
short-term financial strength. If current liabilities exceed current assets, then the company
may have problems meeting its short-term obligations.
Year 2013
Current Ratio = Current Asset / Current Liability
= 1.22 : 1
43
44
Chapter-4
Findings, Recommendations and Conclusions
4.1: Introduction:
45
Conclusion
To conclude this report it can be said that it was a great opportunity for me to study the
financial activities of the ICB as well as its Mutual fund. ICB plays a vital role to
encourage and broaden the base of investment and thereby to help develop the capital
market in Bangladesh. My main focus of this report is Financial Statements and
Theoretical Performance Analysis on Mutual Fund of Investment Corporation of
Bangladesh. From the analysis, it found that the Companies position is good.
According to CRAB, ICB has minimal credit risk involvement. The main reason behind
this there was no binding in size. The study is the first time for me to get the opportunity
for conducting such an elaborate study in a different field. Hence, I do not know how far I
am successful in writing this report. But it is true; I have tried sincerely to discharge my
duties with Zeal & enthusiasm and to the best of satisfaction. However, I remain to
apologize for any error or omission, which may happen unwillingly.
47
Recommendation
Computer shortage is their problem thats why their maximum work related paper is
written or printed copy. For this reason they need to use modern tools & technology of
human resources management.
Information should be available in websites and its all branches.
ICB needs to appoint more skilled people for Personnel Department. It is necessary
to take right decision in right time.
ICBs recruitment advertisement is not so detail oriented. It should contain job
description & job specification, so that the applicants can be easily short listed.
Orders are to be executed quickly.
Though ICB has no own permanent building, it is very important to take a
permanent office building to save cost.
Training program should be arranged for developing of management efficiency.
The organization should be fully computerized.
References
Annual Report of Investment Corporation of Bangladesh (2012-13)
Annual Report of Investment Corporation of Bangladesh (2010-12)
Conversation with various Departmental Assistant General Manager&Senior
Officer
Documents provided by ICB
Report on Performance Evaluation of ICB and Mutual fund
www.icb.gov.bd
www.dsebd.org
48
Appendix: 1
List of Abbreviations
(Glossary) AGM
HRM
HRD
HR
ICT
EEF
SEC
PMIS
SPO
DECO
MLSS
GM
DGM
IT
MIS
49
50