A Performance Analysis on Private Mutual

Funds in Bangladesh
Chapter-1: Introduction

Introduction
This report is part of my academic program. To obtain the degree of MBA, you will have to
fulfill all of your credit hours available in your course. For this reason behind, you need to
complete your internship of three months subsequently producing a report addressing all of the
issues you achieve in your intern period. I believed that this study helped me to applying my five
years acquired knowledge in Business environment of Mutual Funds like Grameen Mutual Fund
One, AIMS First Guaranteed Mutual Fund, ICB AMCL Islamic Mutual Fund. This internship
program helped me to understand the organizational environment and behavior also. This
program helped us for getting practical work and giving me the opportunity to adjust the
theoretical knowledge and practical experience. So, I want to give my heartiest thanks to my
supervisor to give such opportunity to show my capability and aptitude in this relevant area.

Motivation of the Study

Internship is a compulsory part of completing the MBA program in our department. For selecting
the Mutual Funds as my potential employer as an intern is that Mutual Funds contributes heavily
for the retail investors. Since I am a student of finance background, I am interested to apply my
acquired knowledge to mutual funds.

Objective of the Study

The objective of this study is to acquire the practical knowledge. As a business graduate, this
institution is one of the others to know all its function subsequently apply my bookish
knowledge. In brief the objectives can be narrated as follows-

To apply acquired knowledge.

To acquaint myself with the practical aspect of the mutual funds.

Rational of the Study
This study is important for knowing the overall performance of Mutual Funds. Mutual Funds
play a vital role for the retail investor s in Bangaldesh. Because Mutual Funds act as an intender
by which it collects funds from the retail investors to acquire huge amount of capital for making
investment in diversified portfolio. By this investment Mutual Funds can avoid all sorts of
unsystematic risk pertaining to the investment and can achieve the diversified return. Generally
retail investors are risk averse investors. They always want to invest in low risk project. But for
minimizing the risk it is needle to invest in a large scale of various types of securities. Since it is
not possible for the individual investor to collect huge capital, Mutual Funds act on be half of
them to collect capital by issuing share and invest that proceed.

This study is important for me in academic point of view. Performance measurement is an

important aspect for a Financial Analyst which is a dream for every finance student. Since I am a
student of Finance, it is undoubtedly true that the internship in Mutual Funds will enhance my
proficiency.

I have tried my best to measure the performance for Mutual Funds.

Limitations
Everything has its own limitation. My report is not beyond that. Though I try my best to present
myself in this report as a laborious one, there is some ambiguity for preparing my report because
of various factors.

Factors include the followings:

1. Three months time is not available to know a giant organization.

2. Unavailability of information to run the mathematical tools.

3. The management of Mutual Funds was reluctant to disclose their confidential information
because of retaining their privacy.

4. Business of the head of the division is also a reason for not the availability of
information.
Chapter: 2:Methodology of the Study

Data collection Procedure

This report is mainly based on exploratory research and secondary data. Different books L&
journals such as the annual reports published by the mutual funds, companys websites,
preceding studies have been used to get an insight; Primary information regarding mutual funds
has been gathered through personal interviews of some of the officials of the organization. The
head of every department helps me for this regard. Financial performance analysis of mutual
funds has been done using the annual reports of the organization. Personal interview is the main
way of collecting data.

Procedure for Data Analysis

In preparing this report I tried my best to follow some methodology for comments & evaluation
in any area. These analyses are very root for the research based analysis.

I have not considered the chi-square test, t-test, z-test to make this report simple and lack of
practical knowledge of using statistical software is one of the bars for preparing this report as
like as think tank.

My considered tools are as follows:

1 Ratio analysis

2 Earning per share analyze

3 Dividend yield

4 Growth rate analyze

To prepare this report I have gone through all the depts. of the Mutual Funds. Getting
information from the in- charge of every dept. & using library, journals, annual reports enrich my
report. Methodology can be divided into broad categories:
Data Collection procedure

Primary Sources:

Data which are collected directly can be also described as raw data. For this, all the members of
the Mutual Funds were very helpful to provide information.

Secondary Sources:

Secondary sources of data are the followings:

1 Annual reports of the Mutual Funds

2 Various books of the library of Mutual Funds

3 Business Journals

4 Mutual Funds ordinance

5 General information

6 Others

Chapter: 3:Asset & Investment Management

Services of Bangladesh Limited (AIMS) First
Guaranteed Mutual Fund

Introduction
There are two types of mutual funds in Bangladesh one is owned & managed by Investment
Corporation of Bangladesh (ICB) which is completely Govt. owned & the other is the private
mutual funds. They act mainly an investment bank which focuses individual investment. This
acts as an underwriter. They collect fund from individual by issuing shares subsequently invest
that fund in shares making portfolio of securities to mitigate the risk. One of the private mutual
funds is AIMS First Guaranteed Mutual Fund.

Background of AIMS First Guaranteed Mutual Fund

The Trust Deed of the Fund was registered on January 02, 2000 under the Trust Act 1882 and
Registration Act 1908. The SEC registered the Fund on January 27, 2000 under the Securities
and Exchange Commission (Mutual Fund) Regulations 1997. The team-managed all-weather
Fund is a close-ended capital guaranteed balanced mutual fund established to enable both
institutional and private investors to invest in the Bangladesh capital market. The Fund will be
providing investment incentives and opportunities in order to help broaden the investment base
in Bangladesh. The life of the Fund is five years, although there are circumstances set out in the
Trust Deed where the unit holders can extend the life of the Fund.

Close-ended Policy

The Fund will adopt a closed-ended policy in its operation. In compliance with the policy, the
Fund will not change the initial capital position by issuing any additional shares or repurchasing
existing shares during the life of the fund.

Guarantee Policy

The investors, including the sponsors, of the Fund are guaranteed with respect to their initial
capital investment on redemption. The initial subscription amount, i.e., the face value will be
paid back at maturity (redemption) even if the per share NAV falls below par at that point of
time.

The capital of the Fund is fully underwritten at redemption only at the end of the fifth year from
the date of listing by IDLC of Bangladesh Limited and AIMS of Bangladesh Limited up to a
maximum fund size of Tk 100 million. Under the Scheme, the Fund shall place with IDLC an
irrevocable margin deposit with a validity of five years, amounting to 30 percent of the final fund
size, where IDLC will pay interest @ 13.5% p.a. compounded semi-annually. The net exposure,
representing the final Fund size less future value of margin deposit at maturity, will be shared on
a pro-rata basis by IDLC and AIMS and there will be an underwriting commission of 1.25% p.a.
on 50% of the net exposure amount, paid semiannually in advance to IDLC. AIMS will not
charge any commission on their portion of the exposure.

Additionally, the Fund has incorporated hedging mechanism by which there will be a trigger sale
by the Fund as and when market price of any security in the portfolio of the Fund falls by 25
percent of acquisition cost, provided that at no point of time the portfolio value, excluding the
margin deposit value at maturity, shall be below the net exposure of the Capital Guarantee
Scheme of the Fund.
Face Value and Market Lot

For the benefit of small investors, the Face Value of the share of the Fund is fixed at

Tk 1 (one) and the market lot constitutes 2,500 (two thousand five hundred) shares.

Investment Objectives and Policy

The primary objective of the balanced fund is to achieve capital appreciation as well as earn
dividend and interest income through investment in the capital markets of Bangladesh. It mostly
will focus on preservation of principal and at the same time earn moderate return for the
shareholders. The assets of the Fund will be invested principally in equity securities and, if
available, equity related hybrid instruments like convertible bonds and warrants. Most of the
investments will be made in the companies listed on the DSE and/or CSE. The Fund may also
invest in unlisted equity securities directly from the issuers (IPO and pre-IPO placement) at the
primary market. The Fund may also invest in listed and/or unlisted debt instruments, including
government notes and bonds.

The principal investment objective and policies of the Fund as set out above will, in the absence
of unforeseen circumstances, be adhered to during the life of the Fund. The Fund will always
adopt the investment policy that will ensure the balanced nature.

The details of the investment policies are as follows:

(a) The Fund expects to be fully (with an insignificant cash margin) invested within

120 days from the date of listing.

(b) The Fund shall invest only in securities and investments approved by the Securities &
Exchange Commission, the Bangladesh Bank and/or the Controller of Insurance of Bangladesh.

(c) The Fund may underwrite public issue of debt or equity securities.

(d) All Money collected under the Fund, except the margin deposit against Capital

Guarantee Scheme, shall be invested only in transferable securities whether in money market or
equity market or privately placed debentures or securitized debts.

(e) Not less than 30 percent of the total assets will be invested in fixed income securities (FIS),
including the capital guarantee margin.
(f) Maximum of 15 percent of the NAV of the Fund may be invested in unlisted equity and/or
debt securities purchased directly from issuers (IPO and Pre-IPO placement) at any point of time.
It is the intention of the Fund that where investments are made in unlisted securities, such
investments shall be in securities where a listing can reasonably be expected within a reasonable
period of time. It is not the intention of the Fund to be a provider of venture capital.

(g) FIS investment will be made mostly in privately placed unquoted debt or depository
instruments of different terms.

(h) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap
stocks.

(i) In order to increase the profit potential, the manager will have the flexibility to use market
timing to move between stocks and FIS in any percentage them deem prudent when investment
conditions change.

(j) 40 percent of the total equity investment will be invested in large-cap blue-chip companies.
The manager will take a long-term position on such strategic holdings.

(k) 60 percent of the total equity investment will be invested in small-cap growth companies. The
manager will take a short-term position on such tactical holdings.

(l) In order to protect the capital and increase the profit potential, the manager will have the
flexibility to use market timing to move between tactical and strategic holdings in any percentage
they deem prudent, when investment conditions change.

(m) The Fund will seek to invest in companies, which it considers to exhibit good growth
potential and have sound management.

(n) Dividend and interest income will be the primary consideration and capital appreciation will
be the secondary consideration in making strategic investments.

(o) Capital appreciation will be the primary consideration and dividend and interest income will
be the secondary consideration in making tactical investments.

(p) During periods in which the Investment Manager believes changes in economic, financial or
political conditions will adversely affect the Funds portfolio, the Fund may, for temporary
defensive purposes, reduce holdings in equity and other securities and invest in short and/or
medium-term debt securities or hold cash.

The investment objective of the Fund is not fundamental and so may be changed by the AMC
and the Trustee. However, shareholders would be notified of any material change in the Funds
objective. There is, however, no assurance or pretence that the Fund will achieve the stated
objective.
Nature & Style
This team-managed all-weather Fund is a closed-end capital guaranteed balanced mutual fund. It
mostly will focus on preservation of principal and at the same time earn moderate return for the
shareholders. Because of the balanced nature, the Fund is less risky than the existing all-equity
mutual funds available in the market.

The portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks and a
mix of fixed income securities.

In order to increase the profit potential, the management company will have the flexibility to use
market timing to move between stocks and Fixed Income Securities in any percentage they deem
prudent when investment conditions change.

The management company will adopt both fundamental and quantitative investing approach for
the Fund. All investment decisions will be backed by thorough in-house fundamental and
technical research.

Manager
AIMS of Bangladesh Limited

Asset & Investment Management Services of Bangladesh Limited, the initiator of the concept, is
the Manager of the Fund. Mr. Monzurul Haque is the Chairman and Mr. Yawer Sayeed is the
Managing Director & CEO of the company.

Sponsors
1. IPDC of Bangladesh Limited

IPDC is the premier joint venture private sector development finance institution operating since
1981. Mr. K. M. Ejazul Huq, Secretary, Ministry of Industries is the Chairman and Mr. C. M.
Alam FCA the Managing Director. The company is owned by IFC, CDC, DEG, AKFED and
Government of Bangladesh.
2. Sandhani Life Insurance Company Limited

Sandhani Life is a leading private life insurance company of the country, operating since 1993. It
is chaired by Al-Haj Mockbul Hossain MP. Mr. Ahasanul Islam Titu MBA is the Vice Chairman
and Mr. M. A. Karim the Managing Director.
3. Pangaea Partners (BD) Limited
Pangaea is a joint venture merchant bank with a US investment banking and

consulting institution. Mr. Eric G. Postel is the Chairman and Mr. Irshadul Islam the Managing
Director.
4. IDLC of Bangladesh Limited
IDLC, operating since 1986, is the pioneer in leasing business in Bangladesh sponsored by IFC,
DEG, AKFED, KDLC, KLB, IPDC, CBL and SBC. Mr. C. M. Alam FCA is the Chairman and
Mr. Aminul Islam is the Managing Director.
5. Southeast Bank Limited
Southeast is engaged in commercial banking since 1995. Mr. Yussuf Abdullah Harun is the
Chairman and Mr. Syed Anisul Huq is the Managing Director of the Bank.
6. Uttara Finance & Investments Limited
Uttara, a leasing and financing company, is a joint venture between Uttara Group and Singapore
based investors. Mr. Rashid-ul Hasan is the Chairman and Mr. Sayyed Husain Jamal is the
Managing Director.
7. Sandhani Credit Cooperative Society Limited
Sandhani Credit operating since 1998 has established their name in mobilizing and lending funds
to the small and medium enterprises. It is chaired by Al-Haj Mockbul Hossain MP.
8. Bangladesh Industrial Finance Co. Ltd
BIFC is a newly established finance and leasing company under joint venture with Hong Kong.
Mr. Golam Kabir is the Chairman and Mr. Khalilur Rahman is the Managing Director. Major
(Retd) Abdul Mannan is an Alternate Director.

Trustee
Bangladesh General Insurance Company Limited (BGIC)

BGIC is the first general insurance company of Bangladesh in the private sector operating for the
last fifteen years. Mr. Towhid Samad is the Chairman & Managing Director of the company. He
along with Mr. Khorshed Alam, former Governor of Bangladesh Bank, is in the Board of
Trustees.

Custodian
Standard Chartered Bank

SCB is a British Bank operating in Bangladesh for over 50 years. They have been providing
custodial services to foreign institutional investors. They are experienced and skilled in this line
of service.
Investment Restrictions
The following restrictions are fundamental policies of the Fund that may not be changed without
the approval of majority of the Funds outstanding voting securities. If a percentage restriction on
investment or use of assets set forth below is adhered to at the time a transaction is effected, later
changes of holding value due to changes in market price movement will not be considered a
violation of the restrictions.

(a) The Fund shall not invest in securities having unlimited liability.

(b) The Fund shall not buy its own shares.

(c) Investments by way of privately placed debentures, securitized debts and other unquoted debt
instruments shall not exceed 40% of the total assets of the Fund.

(d) The Fund shall not invest more than 10% of its assets in any one particular company shares.

(e) The Fund shall not own more than 15% of any companys paid-up capital at any point of
time.

(f) The Fund shall not invest more than 20% of the funds in shares, debentures or other securities
of a single company.

(g) The Fund shall not invest more than 25% of its funds in shares, debentures or other securities
in any one industry.

(h) The Fund shall not involve in option trading or short selling or carry forward transactions.

(i) The Fund shall not invest in or lend to another scheme under the same Asset Management
Company.

Capital Structure
Share Issue

The Fund has issued 50,000,000 shares of Tk 1 each at par totaling Tk 50,000,000. The total
issue has been distributed as follows:

Subscribers No. of Shares Taka

Sponsors 20,000,000 20,000,000

Pre-IPO Placement 20,000,000 20,000,000

General Investors 10,000,000 10,000,000

Total Size of the Fund 50,000,000 50,000,000

Subscription from the Sponsors

20,000,000 shares at Tk 1 each have been subscribed and paid in full by the sponsors.

The respective holdings of the sponsors are as follows:

Sponsors No. of Shares Taka

IPDC of Bangladesh Limited 2,500,000 2,500,000

Sandhani Life Insurance Company Limited 4,000,000 4,000,000

Pangaea Partners (BD) Limited 4,500,000 4,500,000

IDLC of Bangladesh Limited 2,500,000 2,500,000

Southeast Bank Limited 3,000,000 3,000,000

Uttara Finance and Investments Limited 2,000,000 2,000,000

Sandhani Credit Co-operative Society Limited 1,000,000 1,000,000

Bangladesh Industrial Finance Company Ltd. 500,000 500,000

Total Sponsorship 20,000,000 20,000,000

Pre-IPO Placement

20,000,000 shares at Tk 1 each have been privately placed with the following institutions, as
follows:

Pre-IPO Investors No. of Shares Taka

Consortium of Exchange Members & Clients7 14,000,000 14,000,000

Pangaea Partners (BD) Limited 5,000,000 5,000,000

Investment Corporation of Bangladesh (ICB) 500,000 500,000

Green Delta Insurance Company Limited 500,000 500,000

Total Private Placement 20,000,000 20,000,000

Public Offer

10,000,000 shares at Tk 1 each are being offered to the public for subscription in cash in full on
application. Certificates will be allocated in the manner placed alongside.

NRBs 1,000,000

General Public 9,000,000

Total Public Offer 10,000,000

Chapter: 4:Grameen Mutual Fund One

Introduction
Grameen One is the first scheme of Grameen Mutual Fund One, a trust property registered on
May 09, 2001 under the Trust Act, 1882, and Registration Act, 1908. The SEC has registered the
Trust as a Mutual Fund on August 28, 2001 under the Securities and Exchange Commission
(Mutual Fund) Rules, 2001. The SEC has also approved the Scheme and provided consent on
June 27, 2005 to raise subscription from the general investors through public offer.

The life of the Scheme is 10 (ten) years from the date of first listing, although there is
circumstances set out in the Trust Deed where the unit holders can extend the life on maturity of
the tenure.

Background of initiating a close-end mutual fund

The mutual fund is sponsored by the Grameen Bank principally to facilitate micro savers to
invest in the countrys capital market instruments. Although this Fund has been launched
primarily for the benefit of the 4.3 million borrowers of Grameen Bank, 96% of whom are
women, other micro- and small savers of the country may also find this team-managed, close-
ended balanced Fund a dependable investment vehicle. AIMS of Bangladesh Limited, the first
SEC-approved asset management company in Bangladesh, pioneered mutual fund under private
initiative. It has gained valuable experience and confidence in managing a mutual fund
efficiently. This encouraged Grameen Bank to give responsibility to AIMS to manage this mutual
fund sponsored by the Bank. The SEC has already approved and registered the Trust as Mutual
Fund and provided consent to raise subscription from the investors through Public Offer.

The vision of Professor Mohammad Yunus, founder of Grameen Bank, was to create a
dependable financial instrument for the poor clients of Grameen Bank, as well as the poor people
of the country, to connect them with the macro economy, give them ownership in the leading
enterprises, and take advantage of the growth of the economy. Not only the poor borrowers of
Grameen Bank would be investing in their own income-generating activities, they may also be
part of owners of the promising enterprises of the country. By owning units of the Mutual Fund,
they can also build their own old-age protection. Grameen Mutual Fund has been created to
fulfill this dream. This Fund would enhance the earning potential of the savings of the poor
savers by linking them with the national capital market in a structured and transparent way. It
would also encourage other rural savers to take advantage of this new financial opportunity.

Nature & Style

This team-managed all-weather Fund is a closed-end capital guaranteed balanced mutual fund. It
mostly will focus on preservation of principal and at the same time earn moderate return for the
shareholders. Because of the balanced nature, the Fund is less risky than the existing all-equity
mutual funds available in the market.

The portfolio will be a growth-value blend basket of large-cap as well as small-cap stocks and a
mix of fixed income securities.

In order to increase the profit potential, the management company will have the flexibility to use
market timing to move between stocks and Fixed Income Securities in any percentage they deem
prudent when investment conditions change.

The management company will adopt both fundamental and quantitative investing approach for
the Fund. All investment decisions will be backed by thorough in-house fundamental and
technical research.
Close-end policy

The Scheme will adopt a close-end policy in its operation. In compliance with the policy, the
Scheme will not change the capital position by issuing any additional units or repurchasing
existing units during the life (i.e. 10 years) of the Scheme.

Face value and market lot

The face value of the units of the Scheme is fixed at Tk10 (taka ten) and since there would be no
paper scrip issued against any holding, no market lot is necessary and, therefore, for trading at
the Stock Exchanges under the CDS mechanism one unit of Tk10 each shall comprise the
tradable market lot. However, minimum application amount for Public Offer application shall be
for 500 (five hundred) units amounting Tk5, 000 (taka five thousand) and its multiples on a
single BO account of the CDS.

Competitive Advantages in investing in Grameen One

Mutual funds substantially lower the investment risk of small investors through diversification in
which funds are spread out into various sectors, companies, securities as well as entirely different
markets. It is always the objective of a fund manager to maximize a funds return for a given
level of risk through tolerable risk-return tradeoff.

Mutual funds mobilize the fund and channel them into profitable investment opportunities. As a
result, mutual funds add liquidity to the market. Moreover, given that the funds are long-term
investment vehicles, they reduce market volatility by extending support to scrip prices.

Mutual funds provide the institutional investors an access to the whole market that, at an
individual level, would be difficult if not impossible to achieve.

Because funds are professionally managed, investors are relieved of the emotional strain
associated with the day-to-day management of the fund. Moreover, the amounts of analytical
research and study that go into selecting the best securities for a fund portfolio can prove to be
overwhelming for the general investor, and is best left to the experts.

The investor saves a good deal of transaction costs given that s/he has access to a larger
number of securities by purchasing a single unit of a mutual fund.

The investor can pick and choose a mutual fund to match his/her particular needs.

Mutual fund is the only vehicle that operates simultaneously both at the demand as well as the
supply side of the market. On the supply side, mutual funds, being itself a listed security in the
Stock Exchanges, introduces a good and reliable instrument in the capital market for the small
but astute investors. Mutual fund units have been one of the most sought-after scrips. On the
demand side, since mutual fund investments are primarily in the secondary market stock and
bonds bought at the Stock Exchanges, the demand for blue chip shares thus increases with the
operation of the mutual funds.

Mutual funds are one of the most strictly-regulated investment vehicles. The laws governing
mutual funds require exhaustive disclosure to the SEC as well as the general public. The laws
also entail continuous regulation of fund operations by the Trustee.

Professional fund managers search for the attractive assets and securities. They do all the
footwork to uncover opportunities and research them to make sure that the investment is
appropriate for the fund. The funds stated goal, or investment objective influences the choice of
securities.

Another benefit of mutual fund is liquidity, the ability to move money in and out of the
investment. Unlike fixed deposits or CDs, where money is tied up for a period of time, mutual
funds are designed so that access or exit is easy.

Investment objectives and policy

The primary objective of the Scheme is to achieve capital appreciation as well as earn dividend
and interest income through investment in the capital market of Bangladesh. It mostly shall focus
on generating cash earning and at the same time preservation of capital. The assets of the Scheme
will be invested both in equity securities and fixed-income securities (FIS). Most of the equity
investments will be made in the companies listed on the DSE and/or CSE. The Scheme may also
invest in unlisted equity securities directly from the issuers (IPO and pre-IPO placement) at the
primary market. The Scheme may also invest in the listed and/or unlisted debt instruments,
including government notes and bonds.

The principal investment objective and policies of the Scheme as set out above will, in the
absence of unforeseen circumstances, be adhered to during the life of the Scheme. The Scheme
will always adopt the investment policy that will ensure the balanced nature that is being
contemplated.

The details of the investment policies are as follows:

a) The Scheme shall invest only in securities and investments approved by the SEC, the
Bangladesh Bank and/or the Controller of Insurance of Bangladesh or any other competent
authority in this regard.
b) All money collected under the Scheme, except FIS investments, shall be invested only in
transferable securities whether in money market or equity market or privately placed debentures
or securitized debts.

c) Generally not more than 25% of the assets will be invested in the fixed-income securities
(FIS).

d) FIS investment may be made in privately placed unquoted debt or depository instruments of
different terms.

e) The equity portfolio will be a growth-value blend basket of large-cap as well as small-cap
stocks.

f) In order to increase the profit potential, the manager will have the flexibility to use market
timing to move between stocks and FIS in any percentage they deem prudent when investment
conditions change.

g) The Scheme will seek to invest in companies, which it considers to exhibit good growth
potential and have sound management.

h) The AMC shall categorize the investments either as Trading Securities or as Available-for-
Sale Securities as they deem prudent, as per provisions of IAS- 39 corresponding to the
Statement of Financial Accounting Standard (SFAS) No. 115 of Financial Accounting Standard
Board, USA.

i) Capital appreciation will be the primary consideration and dividend and interest income will be
the secondary consideration for the trading-security investments.

j) Dividend and interest income will be the primary consideration and capital appreciation will be
the secondary consideration for the available-for-sale security investments.

k) During periods in which the Investment Manager believes changes in economic, financial or
political conditions will adversely affect the Schemes portfolio, the Scheme may, for temporary
defensive purposes, reduce holdings in equity and other securities and invest in short and/or
medium-term debt securities or hold cash.

The investment objective of the Scheme may be changed by the Trustee and the AMC. However,
unit holders would be notified of any material change in the Schemes objective.

Mission & Vision Statement

Our Mission: To be a household name in Bangladesh and be recognized as a reliable
companion in the pursuit of wealth creation.

Our Goal: To take the extra mile to meet the customers needs through continuous innovation of
suitable financial products and offering the best solutions.
Our Values: To strive for achieving and maintaining the highest ethical and moral standards to
earn the trust of our clients and patrons.

Capabilities: AIMS is experienced in conceiving, developing, structuring, launching and

marketing appropriate financial instruments for raising and managing capital, suiting specific
needs.

AIMS is also experienced in devising alternative non-traditional corporate finance

instruments like asset and mortgage backed securitization.

AIMS is experienced in corporate and financial advisory services, including debt and
equity valuation, credit analysis, feasibility studies and conducting due diligence
exercise.

AIMS is experienced in establishing and managing Trust Funds, including Venture

Capital and Mutual Funds, and also capable of constructing and managing portfolios of
diverse nature and characteristics.

AIMS is capable of independently carrying out diagnostic research including micro as

well as macro-economic and sectoral research studies.

AIMS has the capabilities for delivering corporate restructuring and management
solutions and services.

AIMS also has the capabilities of advising and arranging cross-border joint venture
undertakings and on mergers and acquisitions as well as strategic holdings and
privatization

Major Achievements

AIMS has the rare distinction of being the first approved asset management company
in Bangladesh under private initiative and remains so far the only one such institution in
the country.

AIMS has brought about qualitative changes in the finance sector in general and the
capital market in particular through introducing innovative products and new approaches
to investment finance in Bangladesh.

AIMS has floated and managing the Tk 70 million first privately managed usual fund
in Bangladesh sponsored by top-ranked institutions representing all he sub-sectors of the
finance industry, which played a pioneering role in enveloping a matured investment
 culture. The five-year closed-end Fund features capital guarantees characteristics, unique
in Bangladesh (2000).

AIMS is the SEC registered Asset Manager of the Grameen Mutual Fund One
sponsored by the internationally reputed Grameen Bank founded by Professor Mhammad
Yunus. The Tk 150 million first scheme of the Fund features a minimum assured yield, a
new concept in Bangladesh (2001).

AIMS is engaged as Financial Advisor for the Asian Development Bank ADB)
financed Technical Assistance to the Privatization Commission. Task included, among
others, due diligence and valuation of pilot enterprise, independent review &
privatization plan and documentation, in collaboration with International Consultants
(2004).

We are engaged as Consultant Financial Analyst & Process Coordinator of the Asian
Development Bank (ADB) for the Project Preparatory Technical Assistance (PPTA) for
Small & Medium Enterprises Development and Export Expansion Program (SME DEEP)
Loan, where major task among others, included conducting international standard due
diligence of participating financial institutions with international consultants (2003).

AIMS is first to introduce the concept of asset securitization by financing institutions in

Bangladesh. We advised the securitization of micro-credit receivables by BRAC, the
largest NGO in the world.

AIMS was the Consultative Process Coordinator of the Asian Development and
(ADB) for the Finance, Industry & Trade Sector (FITS) Integrated Strategy Formulation
of the Bank in Bangladesh for coordination and dialogue with the government, donors
and stakeholder groups to discuss issues and potential interventions (2002).

AIMS was the Consultant of the World Bank for the regional study and report on
Asset Securitization of Financial Institutions in Bangladesh for the Credit, Bridge &
Standby Facility (CBSF) at Bangladesh Bank under the Financial Institutions
Development Project (FIDP) of the Bank (2002).

AIMS is a Consultant for a study Comparative Analysis of Corporate Governance in

South Asia: Charting a Road Map for Bangladesh commissioned by the Department for
International Development (DFID) of the United Kingdom (2002). Currently engaged in
the second phase as a Member of the Core Working Group of the national task force with
Bangladesh Enterprise Institute (BEI) in drafting a Code of Corporate Governance for
Bangladesh (2002-4)

AIMS is the Advisor to the Asian Development Bank (ADB) and holder of Power of
Attorney for their strategic divestment of equity holding in the joint venture United
Leasing Company Limited (ULC), a leading non-bank financial institution in
 Bangladesh. Conducted valuation of the company stocks and initiated negotiations with
prospective strategic buyers (2002-4).

AIMS conducted for the Netherlands Development Finance Company (FMO) a due
diligence on Dutch-Bangla Bank Limited, the only joint-venture commercial bank in
Bangladesh, for pricing and eventual public float of the Bank at a premium (2000).

Carried out a diagnostic study for the Asian Development Bank (ADB) and co-
authored with the International Financial Specialist a report on Strategic Issues and
Potential Response Initiatives in the Finance Industry & Trade Sector (FITS) of
Bangladesh for them (2001)

Prepared a report on Issues and Status of Financing Small & Medium Enterprises in
Bangladesh for the Asian Development Bank (ADB) and also the background reports
and papers for the Integrated Financial Deepening, Banking Reform & Development
and Enterprise Reform & Privatization for the Bank (2002).

AIMS was engaged as Consultant by the Department for International Development

(DFID) of UK for a study on Commercialization Review of Bureau Tangail, a micro-
credit financing institution in Bangladesh that researched possible legal and financial
requirements and implications of commercialization of micro-credit institutions as
banking or non-banking financial institutions (2002).

At the invitation of the World Bank and the Central Bank, AIMS conducted a high
level training program on Securitization of Receivables for the non-bank financing
institutions, including housing and leasing companies, under the Financial Institutions
Development Program (FIDP) of the World Bank (2001).

AIMS had the honor of revealing a study on Asset Securitization in Bangladesh for
high level officials of the Central Bank and the Securities & Exchange Commission at the
World Bank Dhaka Office that was also video-linked with the World Bank Head Office,
Washington (2001).

AIMS was Consultant to the Shared Interest plc, London for feasibility study on its
activity in Bangladesh as part of a Department for International Development (DFID) of
UK funded project for Business Support Services (BDS), including to Tradecraft (UK)
and ECOTA Forum Bangladesh (2003).

The Managing Director of AIMS led the 26 member Bangladesh delegation to the
South Asia Regional Debt Market Symposium at Sri Lanka, under auspices of the
International Finance Corporation (IFC), an affiliate of the World Bank that charted a
road map for the development of a debt securities market in Bangladesh (1999).

The Managing Director of AIMS acted as the Rapporteur of the breakout session on
The Role of the Private Sector at the Seminar on Poverty Reduction Strategy Paper
 (PRSP) jointly organized by the International Monetary Fund (IMF) and the Government
of Bangladesh (2002).

The Managing Director of AIMS attended the 4th and the 5th Asian Workshop on
Corporate Governance at Mumbai (2002) and Kuala Lumpur (2003), as an official
delegate sponsored by the OECD, DFID and the Commonwealth Secretariat and also
attended the publication ceremony of the Asian White Paper on Corporate Governance
held at the ADB institute, Tokyo (2003).

The Managing Director of AIMS attended the Asian Pension Fund Roundtable
sponsored by the Asia Foundation and The Pacific Pension Institute, to initiate a region
network (Bangkok, 2003) and also attended a workshop on Pension Management and
Corporate Governance in residence at the Asian Institute of Corporate Governance
(AICG), Seoul sponsored by the Asia Foundation (2004).

Strength
At AIMS we have adopted the AIMR (Association for Investment Management and Research)
code of ethics and professional standards as a corporate policy.

We believe in professionalism and therefore maintain firm distinction between

ownership and management. Consequently as a matter of policy, no director or
shareholder of the company or any of their relations are engaged in running the business
operation of or are employed with the company.

We have set very high and clear objectives before us and a goal to venture in to
untested grounds.

AIMS is run by a team of expert analysts and capital market & investment banking
professionals and is equipped with state-of-the-art computerized automated system.

AIMS ensures smooth operation through synergy with other reputed service providers
including researchers, financiers, brokers/dealers, lawyers, accountants and bankers as
well as international fund managers.

AIMS maintains a full-time channel of communication and collaborative interaction

with multilateral funding agencies, donors and technical assistance providers.

AIMS has developed a highly resourceful research base and all decisions and
recommendations are made on the basis of thorough independent fundamental and
technical analysis and research findings.
 The Managing Director acts as Compliance Officer of the company ensuring the
moral and professional standard among the practitioners within the company.

A Chinese Wall has been developed among different departments for effectively
controlling information flow and checking unfair practices like insider trading and protect
proprietary interests.

AIMS is a career oriented equal opportunity employer and is regarded as a knowledge

based institution.

Community Contribution
AIMS has contributed to the community through mobilizing the untapped resources to
the mainstream economy through indigenously developing appropriate financial products
and corporate solutions.

AIMS has extended the investment opportunities for the people suiting their own risk
tolerances.

AIMS regularly bring out various research publications to keep the general investors
informed and updated. The Weekly Market Review is one of such regular
complimentary publication. Over two hundred thousand recipients worldwide receive the
Review every week via e-mail. Besides, we publish various other periodic reports,
sector researches and commentaries from time to time.

In order to develop a vibrant debt market in the country, AIMS is closely collaborating
with leading local and multilateral institutions, including the World Bank, International
Finance Corporation and the Asian Development Bank, apart from our own independent
and pioneering efforts in this regard.

AIMS has conducted various seminars, workshops and training sessions on equity and
debt market as well as asset securitization issues to educate and assist the issuers and the
investors.

Sponsor of the Fund

Grameen Bank

Grameen Bank is the Sponsor of the Grameen Mutual Fund One. As the Sponsor, Grameen
Bank has provided an initial capital of Tk16.5 million to the first Scheme of the Fund, the Bank
has also set the objectives and policy guidelines of the Fund through authoring and executing the
Trust Deed and the Investment Management Agreement.
Grameen Bank was established under the Grameen Bank Ordinance, 1983, operating with an
objective to alleviate poverty through financial services, especially by providing micro credit.
Empowering poor people is the ultimate objective of the Bank. The Government of Bangladesh
owns 5% of the Bank and the rest 95% is held by the borrowers of the Bank. Mr. Tobarak
Hossain is the Chairman and Professor Muhammad Yunus is the founder Managing Director of
the Bank. The Government nominates three directors including the Chairman and nine other
directors are elected representatives from among the Grameen borrowers.

Trustee of the Scheme

Grameen Fund

Grameen Fund, a venture capital undertaking of the Grameen family limited by guarantee is the
Trustee of the Fund. Established in 1994, Grameen Fund dedicated itself in promoting, managing
and financing various enterprises, which aims to create wealth for ultimate poverty alleviation.
Professor Muhammad Yunus is the Chairman and Mr. Faizur Razzaque is the Managing Director
of this nonprofit company. As the Trustee Grameen Fund, for all practical purposes, is the
guardian of the Fund and shall be responsible for ensuring compliance as well as the protection
of the properties of the Fund solely for the beneficiaries. In order to properly carry out their
responsibilities, Grameen Fund has formed a Trustee Committee, with Mr. M. Faizur Razzaque,
Mr. Giasuddin Ahmed, Mr. M. Hafizuddin Khan and Mr. Quazi Sultan Ahmed.

Custodian of the Scheme

Standard Chartered Bank (SCB)

SCB is a UK-based commercial bank operating in Bangladesh for over fifty years. They have
been providing the custodial services to the foreign institutional portfolio investors in
Bangladesh for the last several years. They are experienced and skilled in this line of business
and enjoy a reputation for confidentiality, timely settlement, reporting, and collecting corporate
announcements for their clients. They are also providing custodial service to AIMS First
Guaranteed Mutual Fund, the first local private-sector mutual fund.

Investment Manager of the Scheme

AIMS (Asset & Investment Management Services) of Bangladesh Limited

AIMS of Bangladesh Limited is the Asset Management Company (AMC) or Manager of the
Fund. They are responsible for designing, structuring, registration, floatation and day-to-day
management of the Fund. AIMS is also responsible for recurring investment activities, including
portfolio construction and rebalancing, under the guidelines set in the Trust Deed and the
Investment Management Agreement of the Fund.

AIMS has the distinction of conceiving and floating AIMS First Guaranteed Mutual Fund, the
first and so far the only private sector mutual fund in Bangladesh. AIMS is actively involved in
developing with the debt market and contractual savings sectors, and has also been rendering
services in various financial sector development projects of different multilateral and donor
agencies.

AIMS is the first investment and fund management company of its kind under private initiative
in Bangladesh. The shareholders of the company are all practicing professionals, highly qualified
in their professed vocation and a majority of them are either returned or expatriate Bangladeshis.
It is equipped with a team of expert capital market professionals, research analysts and
economists to run the outfit. The core management team has been recruited with experienced
managers formerly with leading institutions at home and abroad. Mr. M. Monzurul Haque is the
Chairman of the Company.

Investment restrictions
The following restrictions are fundamental policies of the Scheme that may not be changed
without approval of majority of the Schemes outstanding voting securities. These are also in line
with the Section-56 and the Schedule-V of the Securities and Exchange Commission (Mutual
Fund) Rules, 2001. If a percentage restriction on investment or use of assets set forth below is
adhered to at the time a transaction is effected, later changes of holding value due to changes in
market price movement or accrued gain in value over time will not be considered a violation of
the restrictions.

a) The Scheme shall not invest in securities having unlimited liability.

b) The Scheme shall not buy its own units.

c) Investments by way of privately placed debentures, securitized debts and other unquoted debt
instruments shall not exceed 25% (twenty five percent) of the total assets of the Scheme.

d) The Scheme shall not invest more than 10% (ten percent) of its assets in any one particular
company shares.
e) The Scheme shall not own more than 15% (fifteen percent) of any companys paid-up capital
at any point of time.

f) The Scheme shall not invest more than 20% (twenty percent) of its total assets in the shares,
debentures or other securities of a single company.

g) The Scheme shall not invest more than 25% (twenty five percent) of its total assets in shares,
debentures or other securities in any one industry.

h) The Scheme shall not involve in option trading or short selling or carry forward transactions.

i) The Scheme shall not invest in or lend to another scheme under the same AMC.

j) The Scheme shall not provide term loan or advance to any entity.

k) The Scheme shall not borrow fund for investing unless authorized by the SEC.

RISK PARAMETERS
Risk Factors

The prospective investors should appreciate that investment in the Scheme involves certain
special considerations and risk factors, including those set forth below, which are not necessarily
exhaustive or mutually exclusive:

(a) Performance of the Scheme is significantly dependent on the macroeconomic situation and
the capital market in particular.

(b) Since the capital market of Bangladesh is extremely fluctuating, there is no firm assurance
that the Scheme will achieve all its stated objectives.

(c) Stock market activity in Bangladesh focuses on a small number of companies representing a
limited number of industries, resulting in a potential lack of liquidity and price volatility. In
addition, a high proportion of the equity securities listed on the DSE and CSE are closely held
and the number of shares currently available for acquisition by the Scheme may be very limited.
It may, therefore, be difficult to invest the Schemes assets, to obtain a desired diversification of
the portfolio or to realize the Schemes investments at the prices and times that it would wish to
do so.

(d) The recent stock market trends portray that price of almost all the listed securities move in
tandem with the market in the similar direction, causing difficulty to the Manager to diversify the
assets.
(e) Since Bangladesh lack secondary bond market or product variation as it would have been
ideal, the Manager might not be able to swap between different asset lasses, as they might desire.

(f) Money market instruments are also not readily available, which may narrow the opportunity
of short term or temporary investments of the Scheme.

(g) If maturity of the Scheme is extended by the unit holders at the closing meeting, investment
in fixed income securities will be subject to reinvestment risk, i.e., the risk of non-availability of
investment opportunity at the current rate at that time.

(h) The value of the units of the Scheme may, in direct correlation with other listed securities,
fluctuate. In addition, there is no guarantee that the market price of units of the Scheme will fully
reflect their underlying net asset values.

(i) Since the Scheme is a balanced fund, i.e., the Scheme shall invest in both equity and FIS, the
credit risk of the FIS issuers is also associated with the Scheme.

(j) Despite careful selection of stocks, the companies may fail to provide expected dividend or
make timely disbursements, which may affect the return of the Scheme.

(k) The value of the Schemes assets may be affected by uncertainties such as political or social
instability, or changes in any law or regulations of the territory.

(l) Since unlike the older mutual funds in the market, mutual funds under the SEC (Mutual Fund)
Rules, 2001 are not allowed to have access to short-term borrowing, the Fund may have to meet
its cash needs including dividend payments or meeting pre-IPO placement investment
commitments through disposing off its investments, even at unfavorable market conditions. This
may greatly curtail the earnings as well as future reinvestment capabilities of the Fund,
translating to lower profit.

(m) Qualitative and quantitative investment restrictions imposed through the Rules, have
restricted the operational leeway of the Fund Manager, in the event of only a handful of
securities qualifying as Category-A at the stock exchanges. Since the older mutual funds in the
market do not have such qualitative and quantitative restrictions, ceiling of all these restrictions
have created an uneven playing field.

(n) Although application will be made to the DSE and CSE for the units for listing, there is no
assurance that the units will be listed with the bourses. In the unlikely event of non-listing by
both the exchanges, the Scheme will be redeemed prematurely causing opportunity cost to the
investors.

Capital Structure
Share Issue
The Scheme has issued 17,000,000 (seventeen million) units of Tk10 (taka ten) each at par
totaling Tk170, 000,000 (taka one hundred seventy million), distributed as follows:

Subscribers No. of Units Taka

Sponsors 1,650,000 16,500,000

Pre-Public Offer Institutional Placement 10,350,000 103,500,000

Public subscription 5,000,000 50,000,000

Total Size of the Scheme 17,000,000 170,000,000

Pre-Public Offer Institutional Placement

10,350,000 (ten million three hundred fifty thousand) units at Tk10 (taka ten) each, totaling
Tk103, 500,000 (taka one hundred three million five hundred thousand) have been privately
placed with the following financial institutions including banks, insurance companies, non-
banking financial institutions and merchant banks:

Pre-Public Offer Investors No. of Units Taka

Bangladesh Mutual Securities Ltd. (Portfolio) 400,000 4,000,000

Bangladesh Shilpa Rin Sangstha 150,000 1,500,000

EC Securities Ltd. 100,000 1,000,000

Equity Partners Ltd. 50,000 500,000

Equity Partners Ltd. (Portfolio) 1,000,000 10,000,000

First BSRS Mutual Fund 50,000 500,000

Grameen Capital Management Ltd. 300,000 3,000,000

Grameen Capital Management Ltd. (Portfolio) 500,000 5,000,000

Green Delta Insurance Ltd. 250,000 2,500,000

IDLC of Bangladesh Ltd. 250,000 2,500,000

Investment Corporation of Bangladesh 200,000 2,000,000

Karnaphuli Insurance Company Ltd. 50,000 500,000

Meghna Life Insurance Ltd. 100,000 1,000,000

Midas Financing Ltd. 250,000 2,500,000

National Housing Finance and Investment Ltd. 400,000 4,000,000

Pangaea Partners (BD) Ltd. 800,000 8,000,000

Pragati Insurance Ltd. 200,000 2,000,000

Prime Bank Ltd. 500,000 5,000,000

Prime Finance and Investment Ltd. 400,000 4,000,000

Reliance Insurance Ltd. 500,000 5,000,000

Sandhani Life Insurance Company Ltd. 150,000 1,500,000

South Asia Capital Ltd. (Portfolio) 500,000 5,000,000

Swadesh Investment Management Ltd. (Portfolio) 1,200,000 12,000,000

The City Bank Ltd. 1,000,000 10,000,000

The Trust Bank Ltd. 800,000 8,000,000

Vanik Bangladesh Ltd. 250,000 2,500,000

Total Private Placement 10,350,000 103,500,000

Public Offer

5,000,000 (five million) units at Tk10 (taka ten) each are being offered for public subscription in
cash in full on application. Units will be allocated in the manner placed alongside.

Units

Non Residential Bangladeshis (NRBs) 500,000

General Public 4,500,000

Total Public Offer 5,000,000

Chapter: 5: ICB Islamic Mutual Fund

Introduction
Mutual Fund presently is one of the fastest growing sectors through out the world. In Bangladesh
ICB is the harbinger of Mutual Funds. Out of the total 13 Mutual Funds, ICB and its subsidiary
alone floated 11 Mutual Funds in the market. These Mutual Funds are basically conventional
fund which invest their funds both in equity and debt securities. Islams prohibition against and
charging interest prevent Muslims from investing in securities that draw their income from those
activities. In Islam, interest is viewed as usury or riba because of its potential for exploitation of
the borrower by the lender. In addition, the Islamic Shariah Law forbids any involvement in or
ties to gambling, pornography, tobacco, weapons, alcohol etc. As the conventional Funds invest
and draw their income, among others, from the above mentioned companies and debt securities,
ICB Asset Management Company Ltd. has decided to float a fund which will invest its funds
according to the Shariah Law. It may be mentioned here that there are over 100 Islamic mutual
funds in the global equity markets of which half originated in the Middle East. These funds are
managed according to Islamic principles.

With keeping in view of Islamic sentiment, ICB capital Management Ltd. has come forward with
the proposal to act as sponsor of the ICB AMCL Islamic Mutual Fund. ICB itself will be the
Trustee and Custodian of the fund whereas ICB Asset Management Company Ltd. will act as the
Fund Manager of the said Mutual Fund.

Advantages in investing in ICB AMCL Islamic Mutual Fund

Generally investment in mutual funds enjoys some advantages compared to investment made
directly in other securities of the capital market. Investors of this mutual fund will be able to
enjoy the following advantages:-

(i) As the Fund will be invested in Sharia compatible securities, there shall be no scope of haram
earnings and as a result the income in the hand of the investors will totally be halal.

(ii) As the sale proceeds will be invested in the diversified portfolio, there will be a minimum
risk in investment.
(iii) Diversified portfolio of the fund help the small investor access to the whole market which is
difficult at individual level.

(iv) By channel zing small investors saving, this mutual fund will add liquidity to the market.

(v) As the fund will be professionally managed under prudent guidelines, the Fund is accepted to
be able to achieve the targeted objectives.

(vi) The investors can save a great deal in transaction cost as he/she has access to a larger number
of securities by purchasing a single unit of mutual fund.

(vii) Investment in the Fund would qualify for investment tax credit under section 44(2) of the
Income Tax Ordinance 1984.

(viii) Management and operation of mutual funds are subject to prudential guidelines. SEC
regularly monitors the performance of such funds. The laws governing mutual funds require
exhaustive disclosure to the regulator and general public. As a result, the investors will be able to
know the performance of the fund and accordingly they can be able to take convenient entry and
exit options.

(ix) Income will be exempted from tax to a certain level in the hand of the individual investors.

Investment Objective & Policies

The scheme has been designed for a specific sectoral objective i.e. to provide interest free return
to the investors by investing the fund only in Shariah compliant instruments.

1) The fund shall invest both in listed and non listed securities. While investing in securities the
following criteria are to be observed:

(i) Primary Selection of Companies

The basic business of the company should be in consistence with the Sharia Law. Although no
universal consensus exists among contemporary Sharia scholars on the prohibition of companies,
most Sharia boards have advised against investment in companies involved in the activities of:

a) Conventional Banks, Insurance and Leasing Companies

b) Alcohol

c) Pork related products

d) Tobacco
e) Weapons and Defense

f) Entertainment (Hotels, Casinos/Gambling, Cinema, Pornography, Music etc.)

(ii) Screening of Acceptable Companies

After removing companies with unacceptable primary business activities, the Fund may invest in
the remaining companies if:

The total debt of the investee company is equal to or less than 33% of the trailing 12
month average market capitalization of the Company.

The sum of cash or interest bearing securities of the investee companies is less than or
equal to 33% of the trailing 12 month average market capitalization of the company.

The Accounts Receivable is less than or equal to 45% of the Total Assets of the Company.

2) The Fund may also invest in other Shariah Compliant instruments as and when they are
available for investment. Specifically:

i) In Participation Term Certificates, Modaraba Certificates, Musharika, Murabaha,

Term Finance Certificates and all other asset backed securities;

ii) In contracts, securities or instruments of companies, organizations, and establishments issued

on the principles of Bai Muajjal, Bai Salam, Istisnaa, Mudaraba, Murabaha and Musharika.

iii) In the form of Riba-free cash deposits with Islamic Banks or financial institutions with the
object of maintaining sufficient liquidity to meet the day to day requirement and to take
advantage of suitable investment opportunities as and when they arise.

iv) In other instruments that may be allowed by the Rules and confirmed as Shariah Compliant
by the Funds Shariah Advisor from time to time.

3). The Fund will adopt a conservative strategy and will try to out-perform the index through
market timing and security selection. A part of the fund will also be used to take advantage of the
short term trading opportunities that may arise from time to time.

4) The AMC will make the investment decisions based on best judgment supported by
documents and analysis.
5). the fund shall get the securities purchased or transferred in the name of the mutual fund.

6). only the AMC will make the investment decisions and place orders for securities to be
purchased or sold by the Fund.

7). AMC will choose broker(s) for the purchase and sale of securities for the Funds portfolio.

8). Settlement of transaction will take place as per the customs and practice of the stock
exchanges in the country.

9) The ownership of the certificates will be changed by CDBL under electronic book entry
system and there will be no physical movement or endorsement of certificates.

Investment Restrictions
In making investment decision the following restrictions should be taken due consideration:

(i) The Fund shall not buy its own unit;

(ii) The Fund shall not involve in option trading or short selling or carry forward transactions.

(iii) The Fund shall not invest in or lend to another scheme under the same Asset Management
Company. However, the inter fund transactions can be made through stock exchanges.

(iv)The Fund shall not acquire any asset out of the Trust property, which involves the assumption
of any liability that is unlimited or shall result in encumbrance of the Trust property in any way.

(v) The Fund or the ICB Asset Management Company Ltd. on behalf of the Fund shall not give
or guarantee term loans for any purpose or take up any activity in contravention of the Rules.

Sponsor of the Fund

ICB Capital Management Ltd. (ICML), a subsidiary of ICB will be the sponsor of the Fund. ICB
Capital Management Ltd. (ICML) was created as part of the restructuring program of ICB under
Capital Market Development Program (CMDP) initiated by the Government of Bangladesh
(GOB) and the Asian Development Bank (ADB). The company was incorporated as a public Ltd.
company under the companies Act, 1994 with the Registrar of Joint Stock Companies and Firms
on 05 December, 2000. Registration of the company with the SEC was also obtained on 16
October, 2001 and the gazette notification of Govt. of Bangladesh has been issued with a view to
carry out the merchant banking activities. Although it is a newly created company, it has
enormous scope of expansion and growth in the field of merchant banking as ICB shall not
undertake any new business in this area rather these functions will be carried out by this
company.

The present authorized and paid up capital of the company are Tk. 100.00 crore and Tk.
8.00crore respectively. The company is being managed by high caliber professional people
mostly taken from ICB. An independent board consisting members from private and public
sectors provides guidance in framing objectives & policies of the company. Besides, ICB as
holding company, also supervise and control the performance of the company.

Trustee and Custodian of the Fund

In order for maximum trust and confidence of the investors, supervisory bodies and persons
concerned towards the fund, the Investment Corporation of Bangladesh (ICB) itself will act as
the trustee and custodian of the Fund. The Investment Corporation of Bangladesh (ICB) was
established on 1 October 1976, under The Investment Corporation of Bangladesh Ordinance,
1976 (No. XL of 1976) with a view to encouraging and broadening the base of investment,
develop the capital market, mobilize savings, promote and establish subsidiaries for business
development & provide for matters ancillary thereto. Over the years, the activities of ICB have
grown manifold, particularly in Merchant Banking, Mutual Funds operations and stock
brokerage activities. ICB is the biggest investment bank and the harbinger of mutual funds in the
country. Out of countrys eleven (11) closed-end mutual funds, ICB manages eight funds. ICB
also manages the only open-end fund in the country. ICB is the trustee and custodian of the ICB
AMCL Mutual Fund and ICB AMCL Unit Fund floated recently by the ICB Asset Management
Company Ltd.

ICB has acted as trustee to debentures amounting TK.1.42 billion in aggregate out of total
Tk.2.93 billion publicly traded debentures. ICB also acted as underwriter/ manager to the issue to
more than 370 companies of which 101 companies are publicly traded companies. Besides
portfolios of over 51,000 investors (margin accounts), institutional portfolios including mutual
funds and unit fund were also being managed by ICB. The Corporation has long and proven
experience in advisory function, particularly in buying and selling of shares, corporate
restructuring and engineering, off loading of govt. shares and hosts of other merchant bank
related activities for the benefit of its clients. ICB has been playing a unique role in the
development of countrys capital market.

Investment Manager of the Fund

ICB Asset Management Company Ltd. (ICB AMCL) a subsidiary of ICB will act as the
investment manager of the Fund. ICB Asset Management Company Ltd. (ICB AMCL) was
created as part of the restructuring program of ICB under Capital Market Development Program
(CMDP) initiated by the Government of Bangladesh and ADB. The company was incorporated
as a public limited company with an authorized capital of Tk. 100.00 crore and a paid-up capital
of Tk. 5.00 crore under the Companies Act, 1994 with the Registrar of Joint Stock Companies &
Firms on 5 December, 2000. Registration of the company with the SEC was obtained on 14
October, 2001. Necessary Government Gazette Notification has also been obtained on 1st July,
2002 to carry out the Mutual Fund operations. At present, the Company is managing one open-
end Mutual Fund and one Closed-end Mutual Fund.

As per relevant provision of the ICB Ordinance, ICB shall hold all or majority shares of the
company and may review business objectives, supervise and control its performance. The CEO
and other key personnel have been deputed to the company from ICB. An independent Board
consisting 50 per cent directors from ICB and the rest from private sector, has been created.

CAPITAL STRUCTURE

Issuance of unit

The paid up capital of the Fund shall be Tk. 100,000,000.00 divided into 1,000,000 units of
Tk.100.00 each. The total distribution of units shall be as follows:

PRE-IPO PLACEMENT

Subscription from sponsor

ICB Capital Management Ltd., the sponsor, has already subscribed Tk. 100, 00,000.00 for
100,000 units of Tk. 100.00 each at par.

Pre-IPO Placement to Institutional Investors:

The following institutions have been subscribed Tk. 20,000,000/- for 200,000 units of Tk. 100.00
each at par:

Public Offer
10% of the Public Offer i.e. 70,000 units of Tk. 100.00 each totaling Tk. 7,000,000.00 are being
offered to the Non-Resident Bangladeshis (NRBs) and the rest 630,000 units of Tk. 100.00 each
amounting to Tk. 63,000,000.00 are being offered to the general public for subscription in cash
in full on application. The distribution is as under:

Chapter-6:Performance Analysis of Private

Mutual Funds in Bangladesh

Introduction
To analyze the performance of Mutual Funds, Ratio analysis is my first preference to measure
the performance of the organization. Ratios are highly important tools in financial analysis that
help financial analyst implement plans that improve profitability , liquidity, financial structure ,
recording , leverage and interest coverage. Although ratios report mostly on the past
performances they can be predictive too, and provide lead indication of potential problem areas.

Ratio analysis is primarily used to compare the companys financial figures over a period of
time, a method sometimes called trend analysis. Through trend analysis, we can identify trends,
good & bad, and adjust the business practice accordingly. We can also compare how ratios stack
up against other business, both in & out of the industry.

Ratios can be analyzed in different ways:

Comparison within one fiscal year.

Comparison in different fiscal years.

Comparison within the industry with one fiscal year

Comparison within the industry with different fiscal year.

To analyze the performance of Mutual Funds, we followed second category of comparison. Our
considerable years are mostly from 2003 to 2005. Sometime on the basis of availability and
suitability we consider the year of 2006.
Profitability Ratio

Profitability ratio allows us to measure the ability of the firm to earn an adequate return on sales,
total asset and invested capital. Many of the problem s related to profitability can be explained,
in or in part, by the firms ability to effectively employ its resources.

A. Profit Margin Ratio

The profit margin measures the relationship between profit & sales. The net profit margin is the
indication to the managements ability to operate the business with sufficient success not only to
cover from revenues of the period, the cost of merchandise or services, the expenses of operating
the business (including depreciation) and the cost of borrowing fund but also to leave a margin of
reasonable compensation to the owners for providing the capital at risk.

1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004 2005

Net Profit 6,848,298 17,162,394 21037998
Income 10946040 19821496 21193095
Profit Margin 62.56% 86.58% 99.27%

Figure: Net Income & sales comparison.

The above graph states that the profit margin of AIMS First Guaranteed Mutual Fund is
increasing successively. It is a good signal for the investors because it will increase the wealth of
the shareholders.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Net Profit 4500000 11949628 10298
Income 6142267 14334396 4875501
Ratio 73.26% 83.36% 0.21%
Figure: Net Income & sales comparison.

Though the above graph reveals the decreasing trends of the profit margin but it is not certain
that will it be decreasing or increasing.

3. ICB Islamic Mutual Fund:

Year 2005 2006

Net Profit 5,684,992 6,101,311
Income 7,961,690 9,815,580
Profit Margin 71.40% 62.16%

Figure: Net Income & sales comparison.

The above graph reveals that the profit margin of ICB Islamic Mutual Fund is decreasing
successively.

B. Return on Asset

Return on asset ratio measures the efficiency with which total assets are employed within the
firm.

1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004 2005

Net Profit 6,848,298 17,162,394 21037998
Total assets 77566848 90322847 93648989
Ratio 8.83% 19.00% 22.46%

Figure: Return on Equity.

From the above table we see that the return on asset is increasing from 2003 to 2005.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Net Profit 4500000 11949628 10298
Total assets 17671388 184308124 174274275
Ratio 25.46% 6.48% 0.01%

Figure: Return on Equity.

From the above table we see that the return on asset is decreasing trend but it is not certain that
will the return on asset be decreased or increased. And this is happened because the information
of Grameen Mutual Fund One is not available.

3. ICB Islamic Mutual Fund:

Year 2005 2006

Net Profit 5,684,992 6,101,311
Total assets 107,564,434 111,118,402
Ratio 5.29% 5.49%

Figure: Return on Equity.

From the above table we see that the return on asset is increasing. Definitely this is a good signal
for the investors because it will increase their assets.

C. Return on Equity:

Return on equity measures the efficiency with which common shareholders equity is being
employed within the firm.
1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004 2005

Net Profit 6,848,298 17,162,394 21037998
Equity 75089482 87162394 91037998
Ratio 9.12% 19.69% 23.11%

Figure: Return on Equity

It is recommended from the above graph that the return on equity is increasing from 2003 to
2005.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Net Profit 4500000 11949628 10298
Equity 16500000 181949628 170010298
Ratio 27.27% 6.57% 0.01%

Figure: Return on Equity

It is recommended from the above graph that the return on equity is decreasing successively
from 15th February 2005 to 30th June 2006.

3. ICB Islamic Mutual Fund:

Year 2005 2006

Net Profit 5,684,992 6,101,311
Equity 100000000 100000000
ROE 5.68% 6.10%

Figure: Return on Equity

It is recommended from the above graph that the return on equity is increasing successively from
2005 to 2006.
Capital Structure Ratio

Capital structure ratio provides insight into the extent to which non- equity capital is used to
finance the assets of the firm.

1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004 2005

Total Liabilities 2477366 3160453 2646991
Equity 7508948287162394 91037998
Ratio 3.30% 3.63% 2.91%

Figure: Capital Structure ratio

The above graph reveals that the AIMS First Guaranteed Mutual Fund increases from 2003 to
2004 then it is decreasing.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Total Liabilities 1171388 2358496 4263977
Equity 16500000 181949628 170010298
Ratio 0.070993 0.0129624 0.025080698

Figure: Capital Structure ratio

The above graph reveals that the Grameen Mutual Fund One increases its non equity capital
which is 158000000 Tk.
3. ICB Islamic Mutual Fund:

Year 2005 2006

Total Liabilities 7564434 11118402
Equity 100000000 100000000
Ratio 7.56% 11.12%

Figure: Capital Structure ratio

The above graph reveals that the ICB Islamic Mutual Fund increases its non equity capital from
2005 to 2006.

Working Capital / Cash Flow Ratio

The higher of this ratio, the higher the working capital or cash flow generated by the firm in its
operations.

1. AIMS First Guaranteed Mutual Fund:

Year 15-02-2005 30-06-2006

Cash flow from operation 5448587 10282353
Incomes 6142267 4875501
Ratio 0.887064 2.1089839

Figure: Working Capital / Cash Flow Ratio

We can state by using the above graph that the working capital to cash flow ratio is increasing
from 2005 to 2006. So it is clear that the ICB Islamic Mutual Funds ability to generate cash
from its operations is increasing.
2. Grameen Mutual Fund One:

Year 15-02-2005 30-06-2006

Cash flow from operation 5448587 10282353
Incomes 6142267 4875501
Ratio 0.887064 2.1089839

Figure: Working Capital / Cash Flow Ratio

We can state by using the above graph that the working capital to cash flow ratio is increasing
from 15th February 2005 to 30th June 2006. So it is clear that the Grameen Mutual Fund Ones
ability to generate cash from its operations is increasing.

3. ICB Islamic Mutual Fund:

Year 2003 2004 2005

Cash flow from operation 4318411 7224785 652589
Incomes 10946040 19821496 21193095
Ratio 39.45% 36.45% 3.08%

Figure: Working Capital / Cash Flow Ratio

We can state by using the above graph that the working capital to cash flow ratio is decreasing
from 2003 to 2004 slightly but it is decreasing heavily from 2004 to 2005.
6.5 Earning Per Share

1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004 2005

Net Profit 6,848,298 17,162,394 21037998
No of shares outstanding 70000000 70000000 70000000
Earning Per Share(EPS) 0.097833 0.24517706 0.300543

Figure: Earning Per Share

The above graph reveals that the earning per share is increasing from 2003 to 2005 successively.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Net Profit 4500000 11949628 10298
No of shares outstanding 1200000 17000000 17000000
Earning Per Share 3.75 0.7029193 0.000605765

The earning per share is 3.75 Tk at 15th February2005 though it is Tk.0.000605765 in 30th June
2006. It is happened because the number of share outstanding is increasing form 1200000 to
17000000 in 30th June 2006.
Figure: Earning Per Share

We can state that the Earning per Share of Grameen Mutual Fund One shows the higher earning
per share for the first 2005 then it is gradually decreasing.

3. ICB Islamic Mutual Fund:

Year 2005 2006

Net Profit 5,684,992 6,101,311
No of shares outstanding 1000000 1000000
Earning Per Share(EPS) 5.684992 6.101311

The earning per share is Tk. 5.68 in 2005 though it is Tk.6.10 in 2006. It is happened because the
net profit increases from 2005 to 2006.

Figure: Earning Per Share

The earning per share of the ICB Islamic Mutual Fund in the above graph shows the increasing
trend from 2005 to 2006. This sends a positive signal to the investors because it increases the
earnings of them.
Retention Ratio

This ratio is very important for the fund because this is used for the further expansion of the
fund. This indicates how much amount a fund retains in proportion to its total earnings.

1. AIMS First Guaranteed Mutual Fund:

Year 2005 2006

Retain earnings 684,992 786,303
Earnings this year 5,684,992 6,101,311
Retention Ratio 12.05% 12.89%

The above table represents that the retention ratio for the ICB Islamic Mutual Fund is

about same for both the year which is 12.05% & 12.89% in 2005 & 2006 respectively.

2. Grameen Mutual Fund One:

Year 15-02-2005 31-12-2005 30-06-2006

Retain earnings 4500000 11949628 10298
Earnings this year 4500000 11949628 10298
Retention Ratio 100.00% 100.00% 100.00%
The above table represents that the retention ratio for the Grameen Mutual Fund One is hundred
percent that means the Grameen Mutual Fund One does not any dividend to its shareholders.

3. ICB Islamic Mutual Fund:

Year 2003 2004

Retain earnings 5350661 6662394
Earnings this year 6,848,298 17,162,394
Retention Ratio 78.13% 38.82%

The above table represents that the retention ratio for the AIMS First Guaranteed

Mutual Fund is 78.13% for 2003 which can be said as very high but it is decreasing the
following year in 2004.

Growth Rate

Growth rate indicates how much a fund will grow over the coming year. And growth is denoted
by g.
1. AIMS First Guaranteed Mutual Fund:

Year 2003 2004

Net Profit 6,848,298 17,162,394
Equity 70000000 70000000
ROE 9.78% 24.52%
g = Retention Ratio * ROE 7.64% 9.52%

From the above table we see that the growth rate of the AIMS First Guaranteed Mutual Fund is
7.64% & 9.52% for 2003 & 2004 respectively.

2. Grameen Mutual Fund One:

Return on Equity =Net Profit / Equity

Year 15-02-2005 31-12-2005 30-06-2006
Net Profit 4500000 11949628 10298
Equity 12000000 170000000 170000000
ROE 0.375 0.0702919 0.00006058
Calculation of Growth Rate (g):
g = Retention Ratio * ROE 37.50% 7.03% 0.01%

The growth rate of Grameen Mutual Fund One in the above table shows that the growth rate is
37.50% in the first 2005 then in the last 2005 it shows 7.03% growth rate and it is also
subsequently decreased in June 2006 which is 0.01%.

3. ICB Islamic Mutual Fund:

 Year 2005 2006
Net Profit 5,684,992 6,101,311
Equity 100000000 100000000
ROE 0.05684992 0.06101311
Calculation of Growth Rate (g):
g = Retention Ratio * ROE 0.68% 0.79%

The growth rate is increasing from the 2005 to 2006 which is 0.68% & 0.79% respectively. The
growth rate is lower because the ICB Islamic Mutual Fund pays higher dividend.

Yield Calculation

Dividend yield are related to the markets perception of future growth prospect of the funds
Firms high growth prospects will generally have lower dividend yields.

1. AIMS First Guaranteed Mutual Fund:

Year 2006
Dividend Yield:
Dividend per share 7
Market price per share 1.57
Dividend Yield 445.86%
Beginning price (P0) 1.12
Ending price(P1) 1.57
 Yield 486.04%

AIMS First Guaranteed Mutual Fund is higher dividend paying fund. So we can say that the
growth prospect of this fund is lower which is also proved by the above growth rate this is only
9.52% in 2006.

2. Grameen Mutual Fund One:

Year 2006
Dividend Yield:
Dividend per share 5
Market price per share 14.4
Dividend Yield: 34.72%
Beginning price (P0) 14.4
Ending price(P1) 17.8
Yield 58.33%

Grameen Mutual Fund One has higher dividend paying fund. So we can say that the

growth prospect of this fund is lower which is also proved by the above growth rate which is
only 0.01% in 2006.

3. ICB Islamic Mutual Fund:

 Year 2006
Dividend per share 16
Market price per share 131.25
Dividend Yield 0.121904762
Beginning price (P0) 111.75
Ending price(P1) 131.25
Yield 29.64%

ICB Islamic Mutual Fund has higher dividend paying fund. So we can say that the growth
prospect of this fund is lower which is also proved by the above growth rate which is only 0.79%
in 2006.