Performance Evaluation of Investment Corporation of Bangladesh

Chapter-1

Introduction of the Report

Origin of the Report

Small investors who purchase securities individually are often unable to diversify due to their limited investment capacity. Many investors have no time to take decision in respect of investment in security market. Also they have no vast knowledge and skill in security analysis. Mutual Funds offer a way by which these investors can have the opportunity of diversification with limited amount of investment. Mutual funds means a fund established in the form of a Trust to raise money through the sale of units to the public for investment. Investors who desire regular income by way of dividends and do not want to take much risk, prefers to invest in Mutual Funds. Mutual Fund scheme ensures safety of capital, assured and regular income, capital appreciation and maximum liquidity. Because of scope of diversification, management expertise and liquidity, Mutual Funds have grown at a rapid pace.

 Investment Corporation of Bangladesh (ICB) was established in 1976 with the objectives of accelerating industrialization and economic development of the country through development of capital market by mobilizing savings and encouraging and improving the investment climate in the country with particular emphasis placed on broadening the base and scope of investments as well as tapping marginal investors. Keeping in line with these objectives, the first ICB mutual fund was established in April, 1980. The business of the fund is to mobilize savings from the investors by way of selling certificates and investing the funds in securities so as to ensure maximum return with minimum possible risk for certificate holders. Since then ICB has, over the years, floated 8 mutual funds with the total capital of Tk.17.50 crore. ICB mutual funds continued to command the confidence and attraction of investors as lucrative and rewarding investments in terms of steady dividend performance.

 Objectives of the Study

The Objectives of the report are:

1)      To analyze the performance of ICB, its image and its role in the capital market of  Bangladesh.

2)      To relate our theoretical learning with the practical situation.

3)      To learn the practical aspect of the Investment Corporation of Bangladesh.

4)      To review the overall performance of ICB Mutual fund.

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

6)      To focus on the overall performance of the ICB Mutual Fund.

 Scope of the Study

The scope of the report was basically the operations and practices of Investment Corporation of Bangladesh. The scope of the study was in the organization, Investment Corporation of Bangladesh (ICB). The study was confined only on the Head office and gave more concentration on it. The data comparison was based on published information and an additional survey was performed to get in-depth information, as it was the part of the objective of the report. The empirical part included only published information and current practices of Investment Corporation of Bangladesh.

Methodology of the Study

Methodology can be termed as underlying principles and rules of organization that work at the background of the study. It clarifies the problem involving the research in an ordered and systematic way. For this study data and other information can be collected by the following ways:

Sources and Methods of Collecting Primary data

 Personal Interview: This is the most effective way to collect primary data. Through this process the Trainee can confront a number of officials of ICB and share holders. I interviewed them by asking financial operation of ICB.

• Briefing Session: In case of corporate organization, this method is very useful. I visited different departments of ICB and gathered some valuable information.
• By Observation: This process is very useful for gathering primary data. This process is very costly, time consuming. Through this process limited but accurate data can be collected.

 Sources and Methods of Collecting Secondary data

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

 These are given below:

• ICB Annual Report (2011-2012).
  • Annual Report of Mutual Fund (2011-2012).
  • Others materials of the Investment Corporation.
  • ICB Website.

Time Schedule to Carry out of the study plan

 Limitations of this Study

In spite of providing best effort, this study has following limitation:

a)      The Report is based on secondary data.

b)      No research was done to see whether there was any overestimation or misrepresentation of any information.

c)      Lack of published data and inadequate disclosures were also caused problems to carry on the comprehensive study.

 Chapter -2

Profile of the ICB

Historical Background of ICB

The Investment Corporation of Bangladesh was established on 1^st October 1976, under “The Investment Corporation of Bangladesh Ordinance, 1976 “(NO. XL of 1976)”. The establishment of ICB was major step in a series of measures undertaken by the Government to accelerate the pace of industrialization and to develop a well organized and vibrant Capital market particularly securities market in Bangladesh. ICB caters to the need of institutional support to meet the equity gap of the industrial enterprises. In view of the notional policy of accelerating the rate of savings and investment to foster enactment of the Investment Corporation of Bangladesh (Amendment) Act, 2000 (No. XXXIV of 2000), reforms in operational strategies and business policies have been taken place by establishing and operating subsidiary companies under ICB.

Objectives of the ICB

The main objectives of ICB are as follows:

1. To encourage and broaden the base of investments.
2. To develop the capital market.
3. To mobilize savings.

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

 ICB at a Glance

 Functions of ICB

The functions of ICB are given below:

• Direct purchase of shares and debentures including placement and equity participation

• Participating in and financing of  joint-venture companies
• Providing lease finance singly and through syndication
• Managing existing investment accounts
• Managing Mutual funds and Unit funds.
• Managing Portfolios of existing shares
• Conducting computer training programmers
• Providing advance against ICB Unit and Mutual Fund certificates
• To act as Trustee and Custodian
• Providing Bank Guarantee
• Providing Consumer Credit
• Operating on the stock exchanges.
• Providing investment counseling to issuers and investors.
• Participating in and financing of joint venture projects.
• Dealing in other matters related to capital market operation.
• Introducing new business products suiting market demand
• To supervise and control the activities of the subsidiary companies.

 Management of ICB

The Head office of the corporation as per the requirement of the ordinance of ICB is located at Dhaka. The general direction and superintendence of the corporation created in a board of directors, which consists of persons including the chairman and managing director of ICB.

 The board of directors consists of the following directors:

a)The Chairman to be appointed by the government.

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

c)                 One director to be nominated by the Bangladesh Bank the managing directors, Bangladesh Development Bank Ltd.

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

e)                 Four other directors to be elected by the shareholders other than the government, BB, BSB and BSRS.

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

 Administrative & Human Resource

Investment Corporation of Bangladesh (ICB). Providing different categories of financial and banking services. Nature of different division/departments vary, such that Economic and Business Research (EBR) Department requires teamwork, Loan Appraisal division requires professional work, Funds division needs chain work. Managing Director is entrusted with authority to transact the regular business of the organization; he may delegate some authority to the officials of the corporations. However, most of the policy decision are taken by the different committee with the approval of managing director and where required of the Board. It is the discretionary authority of the Board to constitute the executive committee and to nominate its Chairman to assist the Board in the discharging of the function stated under the ordinance.

 The Board may appoint such other committee as it thinks fit to assist it in the efficient discharge of its functions. So far, board has appointed two such committees-Economic and Business Research committee and loan appraisal committee headed by General Manager.

Financial Information of ICB:

Sources of Capital of ICB

Every organization has some sources of capital. It may be from own sources or may be other sources. Issuing shares to the public, loans and debentures are the main sources of collective fund of ICB. The present capital structures are given to following;                                   

 Table 2.-1: Capital structure as on 30 June 2012

Authorized Capital (500.00)

Paid Up Capital (337.50)

Reserves (1492.32)

Retained Profit (768.88)

Long-term govt. Loan (2.80)

Debentures (1.80)

Others (18.82)

 Share Capital Ownership Pattern

 Share Price

Market price of ICB ‘s  Share of tk 100 each  varied from  lowest Tk. 1235.50 to highest Tk. 3896.00 in the stock exchanges during the year. As on 30 June 2011, the market price of per share was Tk. 1981.25 and Tk. 2050.00 in the DSE and CSE respectively.

 Transfer of Shares

No share has been transferred during 2011-12 but only 5 shares have been transmitted due to demise of 1 shareholder. The number of shares transferred last year was 665.

Chapter-3

Literature Review

 Mutual Fund

A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term “mutual fund”, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as “investment companies” or “registered investment companies.” Most mutual funds are “open-ended,” meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund.

The term mutual fund is less widely used outside of the United States and Canada. For collective investment vehicles outside of the United States, see articles on specific types of funds including open-ended investment companies, SICAVs, unitized insurance funds, unit trusts and Undertakings for Collective Investment in Transferable Securities, which are usually referred to by their acronym UCITS. Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively managed.

Classification of Funds

Maturity based classification:

i)                    Open ended Schemes

ii)                  Close ended schemes

iii)                Interval schemes

iv)                Fixed Maturity Plans

   Fee based Classification:

i)                    Load funds

ii)                  No load funds

  Objective based Classification:

i)                    Income Funds

ii)                  Growth funds

iii)                 Income and growth funds

Asset based Classification:

i)                    Equity funds

ii)                  Debt Funds

iii)                Balanced Funds

iv)                Index

Other Classifications:

Sector/Thematic Funds

i)                    Pharmaceutical sector funds

ii)                  Banking sector funds

iii)                Infrastructure funds

iv)                Natural Resources fund

v)                  International fund

Special Funds

i)                    Equity Linked saving Schemes (Tax Planning Funds)

ii)                  Children education funds

iii)                Fund of Funds

iv)                Exchange traded funds

v)                  Structured funds

 Objective of Mutual Fund

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

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

 ii) Capital gain: The manager concentrates on increasing the value of principal through appreciation of the stocks held.

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

Advantages of Mutual Fund

• Mutual Fund substantially minimizes the investment risk of small investors through diversification in which funds are spread out into various sectors, companies, securities as well as entirely different market.
• Mutual Fund mobilizes the savings of small investor and channels them into lucrative investment opportunities. As a result, Mutual Fund adds liquidity to the market.
• Mutual Fund provides the small investors access to the whole market that at an individual level, would be difficult if not impossible to achieve.
• The investors save a great deal in transaction costs given that s/he has access to a large number of securities by purchasing a single share of a Mutual Fund.
• The investors can pick and chase a Mutual Fund to match his/her particular needs.

 History of Mutual Fund

The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774. The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange.

Mutual funds were introduced into the United States in the 1890s. They became popular during the 1920s. These early funds were generally of the closed-end type with a fixed number of shares which often traded at prices above the value of the portfolio.

The first open-end mutual fund with redeemable shares was established on March 21, 1924. This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However, closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929, open-end funds accounted for only 5% of the industry’s $27 billion in total assets.

After the stock market crash of 1929, Congress passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the Securities and Exchange Commission and that they provide prospective investors with a prospectus that discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors; this act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, while the Investment Company Act of 1940 governs their structure.

When confidence in the stock market returned in the 1950s, the mutual fund industry began to grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The introduction of money market funds in the high interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the Vanguard 500 Index Fund and is one of the world’s largest mutual funds, with more than $100 billion in assets as of January 31, 2011.

Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull market for both stocks and bonds, new product introductions (including tax-exempt bond, sector, international and target date funds) and wider distribution of fund shares. Among the new distribution channels were retirement plans. Mutual funds are now the preferred investment option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008.

 Performance Analysis of Mutual funds

There are usually three methods to measure the portfolio performance which are

• Treynor Portfolio Performance Measure
• Sharpe Portfolio Performance Measure
• Jensen Portfolio Performance Measure

Treynor Portfolio Performance Measure

Treynor (1965) developed the first composite of portfolio performance that included risk. He postulated two components of risk:

 (1) risk produced by general market fluctuations and

 (2) risk resulting from unique fluctuations’ in the portfolio securities.

 Treynor’s Composite Performance Measure:

Building on developments in capital market theory, he introduced a risk-free asset that could be combined with different portfolios to forma straight portfolio possibility line. He showed that rational, risk-averse investors would always prefer portfolio possibility lines with larger slopes because such high-slope lines would place investors on higher indifference curves. The slope of this portfolio possibility line (designated T) is equal to

T =  (Ri-RFR)/βi

Where  :  Ri =the average rate of return for portfolio i  during a specified time period

            RFR = the average rate of return on a risk free investment

             βi= the slope of the fund’s characteristics line.

This composite measure of portfolio performance clearly is similar to the Treynor measure; however, it seeks to measure the total risk of the portfolio by including the standard deviation of returns rather than considering only the systematic risk summarized by beta. Because the numerator is the portfolio’s risk premium, this measure indicates the risk premium return earned per unit of total risk. In terms of capital market theory, this portfolio performance measure uses total risk to compare portfolios to the CML, whereas the Treynor measure examines portfolio performance in relation to the SML. Finally, notice that in practice the standard deviation can be calculated using either total portfolio returns in excess of the risk-free rate.

The characteristic line‘s slope measures the relative volatility of the portfolio’s returns in relation to returns for the aggregate market. A higher slope (beta) characterizes a portfolio that is more sensitive to market returns and that has greater market risk. Deviation from the characteristic’s line indicate unique returns for the portfolio relative to the market. These differences arise from the returns on individual stocks in the portfolio. In a completely diversified portfolio, these unique returns for individual stocks should cancel out. As the correlation of the portfolio with the market increases, unique risk declines and diversification improves.

Sharpe Portfolio Performance Measure

The sharp measure of portfolio performance is stated as follows :

 S=  (Ri-RFR)/σi

 Where  :

   Ri =the average rate of return for portfolio i  during a specified time period

               RFR = the average rate of return on a risk free investment

               σi= the standard deviation of  the rate of return for portfolio

Treynor Vrsus Sharpe Measure: The Sharpe portfolio performance measure uses the standard deviation of returns as the measure of total risk, whereas the Treynor performance measure uses beta (systematic risk). The Sharpe measure, therefore, evaluates the portfolio manager on the basis of both rate of return performance and diversification. For a completely diversified portfolio, one without any unsystematic risk, the two measures give identical rankings because the total variance of the completely diversified portfolio is its systematic variance. Alternatively, a poorly diversified portfolio could have a high ranking on the basis of the Treynor performance measure but a much lower ranking on the basis of the Sharp performance measure. Any difference in rank would come directly from a difference in diversification.

Therefore, these two performance measures provide complementary yet different in formation, and both measures should be used. If you are dealing with a group of well-diversified portfolios, as many mutual funds are, the two measures provide similar rankings. A disadvantage of the Treynor and Sharpe measures is that they produce relative, but not absolute, rankings of portfolio performance. That is, the Sharpe measures for portfolios E and F illustrated in Exhibit 25.3 show that both generated risk-adjusted returns above the market. Further, E’s risk-adjusted performance measure is larger than F’s. what we cannot say with certainty, however, is whether any of these differences are statistically significant.

Jensen Portfolio Performance Measure

The Jensen measure  is based on the capital asset pricing model (CAPM) by the following expression :

E(Rj) = RFE + βj [E(Rm) – RFR]

Where  :  Rj =the expected return on security or portfolio j

            RFR = the one period risk free interest rate

             βj = the systematic risk (beta) for security or portfolio

            Rm = the expected return on the market portfolio of risky assets

 Performance evaluation tools

To do Individual analysis of ICB Mutual fund we can use the following tools.

a) Year wise dividend performance;

b) Ratio Analysis and Earning per share;

c) Price Earnings Ratio;

d) Return on investment and dividend payment ratio.

Chapter-04

Findings and Analysis

In Bangladesh ICB has pioneered Mutual Funds for the sake of investors and of the capital market. Country’s first Mutual Fund the “First ICB Mutual Fund “was floated on 25^th April 1980. Since then ICB has, over the years, floated 8 Mutual Funds with the total capital of Tk. 17.50 crore. ICB Mutual Funds continued to command the confidence and attraction of investors as lucrative and rewarding investment in terms of steady dividend performance.

 Launching of ICB Mutual Fund

 Table 4-1: Launching of ICB Mutual Fund

Details Description of the ICB Mutual Fund

Consolidated Portfolio Statement:

As on 30 June 2012 cost price and market price of eight Mutual Funds were Tk. 11090.39 lac and Tk. 29082.75 lac respectively. A consolidated statement of the portfolio of the Funds is given in the following table:

              Table 4-2: Consolidated position of portfolios of ICB Mutual Funds

 Declaration of Dividend

The net income received on investments of Funds on account of dividend, bonus, interest, capital gain etc. are distributed amongst the Certificate holders as per decision of the Board of Directors of ICB. Board declares such income in the form of dividend at the end of July each year. Dividends declared by ICB in the past on the Mutual Funds were very attractive. The year-wise per certificate dividend performance of the Funds is given below.

Rate of the Dividend per Certificate (Taka)

Problems       

At ICB, I have found some problems, which can affect the fund future and the confidence of the investors. There are some problems related to fund. They are as follows:

From depositor’s Point of view:

• The services provided by the related personnel are not prompt. It is taking more than required time for giving the service.
• Same laggard procedure is also taking place at the time of execution of order.
• Withdrawal of any funds of securities is also very lengthy and complicated process and inefficiently managed.

From Portfolio investment point of view:

ICB has not yet done any systematic analysis for measuring how they are doing. ICB has not identified any key variables to size up all its diversified performance.

 From Capital market point of view:

• Dividend is one of the sources of income for the mutual fund. Most of the companies do not declare dividend up to satisfactory level.
• The rate of supply of fundamentally strong securities is very low.
• Political unsteady position also hearts the investor’s sentiment in the market and thereby leads to flat the stock market.
• Using costly borrowing capital for the investment of securities is another factor causing problem for high expenditure of maintenance of funds, which affects the income of funds.

Evaluation

 First ICB Mutual Fund

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

 Dividend and Interest income:

The Fund had earned dividend of Tk. 114.12 lac from 56 securities during 2011-12 of which a sum of Tk. 72.40 lac (63.44 percent) was received in cash within 30June 2012.

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of 600 percent per certificate including 500 percent for the previous year. After making provision of Tk. 450 lac for payment of dividend the Fund had an undistributed income of Tk 645.59 lac. The Year –wise dividend performance of the Fund is shown in the following table:

 Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 453.32 lac in securities of 574300. As on 30 June 2012 the Fund had securities of 139 companies in its portfolio with a total cost of Tk. 1306.88 lac, the market value of which was Tk. 8349.16 lac. Details of the portfolio of the Fund as on 30 June 2012.

The ex-dividend net asset value per certificate of Tk. 10.00 each of First Mutual Fund stood at Tk. 1036.75 as on 30 June 2012.

The opening and closing market price per certificate of First ICB Mutual Fund of Tk.

10.00 each of the fund was Tk.993.60 and Tk. 882.00 as respectively in 2010-12.

The number of certificate holders of the fund was 845 as on 30 June 2012.

Second ICB Mutual Fund

 The 2^nd ICB Mutual Fund was floated at 17 June 1984.

Dividend and Interest income:

The Fund had earned an amount of Tk. 42.41 lac as dividend and interest from 59 securities during 2011-2012 of which, Tk. 38.58 lac (90.97 percent) was received in cash within 30June 2012.

Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 150.96 lac as capital gains by selling securities of 37 companies.

Income, Expenses and Distributable Income:

The Fund declared dividend at the rate of Tk. 300 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 250.00 per certificate in the previous year. After making provision of Tk.150.00 lac for payment of dividend the Fund had an undistributed income of Tk. 230.39 lac .The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 122.35 lac in securities of 233850. As on 30 June 2012 the Fund had securities of 141 companies in its portfolio with a total cost of Tk. 804.44 lac, the market value of which was Tk. 1585.47 lac. Details of the portfolio of the Fund as on 30 June 2011. The ex-dividend net asset value per certificate of Tk. 10.00 each of Second ICB Mutual Fund stood at Tk. 2213.59 as on 30 June 2012.

The opening and closing market price per certificate of Second ICB Mutual Fund of Tk. 10.00 each of the fund was Tk.361700 and Tk. 190.00 as respectively in 2011-12.

The number of certificate holders of the fund was 886 as on 30 June 2012.

 Third ICB Mutual Fund

The 3^rd ICB Mutual Fund was floated at 19 May 1985.

Dividend and Interest income:

The Fund had earned dividend of Tk. 48.46 lac from 70 securities during 2011-12 of which a sum of Tk. 44.99 lac (92.84 percent) was received in cash within 30June 2012.

Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 206.73 lac as capital gains by securities of 44 companies

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 200.00 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 185.00 per certificate in the previous year. After making provision of Tk 200.00 lac for payment of dividend the Fund had an undistributed income of Tk. 353.89 .The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 151.13 lac in securities of 1273750. As on 30 June 2012 the Fund had securities of 154 companies in its portfolio with a total cost of Tk. 884.92 lac, the market value of which was Tk. 2199.03 lac. The ex-dividend net asset value per certificate of Tk. 10.00 each of Third Mutual Fund stood at Tk. 177.18 as on 30 June 2012.

During 2011-12, the opening and closing market price per certificate of Third ICB Mutual Fund of Tk. 10.00 each of the fund was Tk.247.00 and Tk. 151.00. The number of certificate holders of the fund was 1202 as on 30 June 2012.

Fourth ICB Mutual Fund

The 4^th ICB Mutual Fund was floated at 06 June1986.

Dividend and Interest income:

The Fund had earned dividend of Tk. 558.17 lac from 74 securities during 2011-2012 of which a sum of Tk. 51.74 lac (88.95 percent) was received in cash within 30June 2012.

 Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 185.29 lac as capital gains by selling securities of 43 companies.

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 185.00 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 165.00 per certificate in the previous year. After making provision of Tk. 185.00 lac for payment of dividend the Fund had an undistributed income of Tk. 370.68 lac .The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 125.37 lac in securities of 251400. As on 30 June 2012 the Fund had securities of 155 companies in its portfolio with a total cost of Tk. 963.59 lac, the market value of which was Tk. 2119.70 lac.

The ex-dividend net asset value per certificate of Tk. 10.00 each of Fourth Mutual Fund stood at Tk. 163.61 as on 30 June 2012.

The opening and closing market price per certificate of Fourth ICB Mutual Fund of Tk. 10.00 each of the fund was Tk.212.20 and Tk. 144.50 as respectively in 201-12. The number of certificate holders of the fund was 1043 as on 30 June 2012.

 Fifth ICB Mutual Fund

The 5^th ICB Mutual Fund was floated at 08 June 1987.

 Dividend and Interest Income:

The fund has earned an amount of tk 79.54 lac as dividend and interest from 82 securities during 2011-12 of  which, Tk.73.27 lac(92.12%) was received in cash with in 30  June 2012.

 Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 260.60 lac as capital gains by selling securities of 45 companies.

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 10.00 per certificate of Tk. 170.00 each for the year 2011-12, which was Tk. 135.00 per certificate in the previous year. After making provision of Tk.255.00 for payment of dividend the Fund had an undistributed income of Tk. 350.12 .The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 205.59 lac in securities of 434850. As on 30 June 2012 the Fund had securities of 172 companies in its portfolio with a total cost of Tk. 1276.74 lac, the market value of which was Tk. 3044.68lac.

The ex-dividend net asset value per certificate of Tk. 00.00 each of Fifth Mutual Fund stood at Tk. 152.15 as on 30 June 2012.

The opening and closing market price per certificate of Fifth ICB Mutual Fund of Tk. 10.00 each of the fund was Tk.166.85 and Tk. 136.70 as respectively in 2011-12. The number of certificate holders of the fund was 2203 as on 30 June 2012.

Sixth ICB Mutual Fund

 The 6^th ICB Mutual Fund was floated at 16 May 1988.

Dividend and Interest income:

The Fund had earned dividend of Tk. 93.69 lac from 90 securities during 2011-12 of which a sum of Tk.87.67 lac (93.57 percent) was received in cash within 30June 2012.

 Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 496.15 lac as capital gains by selling securities of 50 companies.

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 100 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 90 per certificate in the previous year. After making provision of Tk.500.00 lac for payment of dividend the Fund had an undistributed income of Tk. 476.99 .The Year –wise dividend performance of the Fund is shown in the following table:

 Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 499.80 lac in securities of 470100. As on 30 June 2012 the Fund had securities of207 companies in its portfolio with a total cost of Tk. 1799.64 lac, the market value of which was Tk.3404.95 lac.

The ex-dividend net asset value per certificate of Tk. 10.00 each of Sixth Mutual Fund stood at Tk. 51.81 as on 30 June 2012.

The opening and closing market price per certificate of Sixth ICB Mutual Fund of Tk. 10.00 each of the fund was Tk.66.68 and Tk. 48.30 as respectively in 2010-12. The number of certificate holders of the fund was 5303 as on 30 June 2012.

Seventh ICB Mutual Fund

The 7^th ICB Mutual Fund was floated at 30 June 1995.

Dividend and Interest income:

The Fund had earned dividend of Tk.87.87 lac from ecurities during 2011-12 of which a sum of Tk. 81.50 lac (92.75percent) was received in cash within 30June 2012.

 Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 317.46 as capital gains by securities of 45 companies.

 Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 110 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 95 per certificate in the previous year. After making provision of Tk. 330.00 lac for payment of dividend the Fund had an undistributed income of Tk. 490.22 lac. The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 316.75 lac in securities of 469130. As on 30 June 2012 the Fund had securities of 197 companies in its portfolio with a total cost of Tk. 1829.77 lac, the market value of which was Tk. 3883.34 lac.

The ex-dividend net asset value per certificate of Tk. 10.00 each of First Mutual Fund stood at Tk. 94.80 as on 30 June 2012.

The opening and closing market price per certificate of Seventh ICB Mutual Fund of Tk. 10.00 each of the fund was Tk. 114.60 and Tk. 1102.00 as respectively in 2011-12. The number of certificate holders of the fund was 1957 as on 30 June 2012.

 Eighth ICB Mutual Fund

The 8^th ICB Mutual Fund was floated at 23 July 1996.

 Dividend and Interest income:

The Fund had earned dividend of Tk. 101.60 lac from 91 securities during 2011-12 of which a sum of Tk. 94.98 lac (93.48 percent) was received in cash within 30June 2012.

Capital Gains on Sale of Investments:

During 2011-12, the Fund earned Tk. 492.03 lac as capital gains by securities of 50 companies.

Income, Expenses and Distributable Income:

Dividend:

The Fund declared dividend at the rate of Tk. 100 per certificate of Tk. 10.00 each for the year 2011-12, which was Tk. 90 per certificate in the previous year. After making provision of Tk. 500.00 lac for payment of dividend the Fund had an undistributed income of Tk. 675.78 lac .The Year –wise dividend performance of the Fund is shown in the following table:

Year –wise dividend Performance

Portfolio:

During 2011-12, the fund made investments of Tk. 471.32 lac in securities of 526800. As on 30 June 2012 the Fund had securities of 192 companies in its portfolio with a total cost of Tk. 2224.41 lac, the market value of which was Tk. 4496.42 lac.

The ex-dividend net asset value per certificate of Tk. 10.00 each of First Mutual Fund stood at Tk. 68.96 as on 30 June 2012.

The opening and closing market price per certificate of Eighth ICB Mutual Fund of Tk. 10.00 each of the fund was Tk. 70.90 and Tk. 52.30 as respectively in 2011-12. The number of certificate holders of the fund was 5918 as on 30 June 2012.

Ratio Analysis and Earning per share

First ICB Mutual Fund:

Interpretation: The standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 2.94:1which is above of standard. In this case the current asset of ICB compared to current liabilities is sufficient. Again the actual ratio for the fiscal year 2010-11 is 3.66:1 which is above of the standard. Here the current asset of ICB compared to current liability is satisfactory.

Second ICB Mutual Fund:

Interpretation: Standard ratio in this case 2:1. The actual ration for the fiscal year 2011-12 is 1.67:1 which is below of standard. In this case the current asset of ICB compared to current liability is not sufficient. Again the actual ratio for the fiscal year 2010-11 is 1.63:1 which is same to the standard. Here the current asset of ICB compared to current liability is satisfactory.

Third ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 2.02:1 which is above of standard. In this case the current asset of ICB compared to current liability is sufficient. Again the actual ratio for the fiscal year 2010-11 is 2.01:1 which is above of the standard. Here the current asset of ICB compared to current liability is satisfactory.

Fourth ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 1.78:1 which is below of standard. In this case the current asset of ICB compared to current liability is not sufficient. Again the actual ratio for the fiscal year 2010-11 is 1:74:1 which is below of the standard. Here the current asset of ICB compared to current liability is not satisfactory.

Fifth ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 1.60:1 which is below of standard. In this case the current asset of ICB compared to current liability is not sufficient. Again the actual ratio for the fiscal year 2010-11 is 1.53:1 which is also below of the standard. Here the current asset of ICB compared to current liability is not satisfactory.

Sixth ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 2.55:1 which is above of standard. In this case the current asset of ICB compared to current liability is sufficient. Again the actual ratio for the fiscal year 2010-11 is 2.53:1 which is also above of the standard. Here the current asset of ICB compared to current liability is satisfactory.

Seventh ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 1.62:1 which is below of standard. In this case the current asset of ICB compared to current liability is not sufficient. Again the actual ratio for the fiscal year 2010-11 is 1.55:1 which is also below of the standard. Here the current asset of ICB compared to current liability is not satisfactory.

Eighth ICB Mutual Fund:

Interpretation: Standard ratio in this case is 2:1. The actual ratio for the fiscal year 2011-12 is 2.03:1 which is below of standard. In this case the current asset of ICB compared to current liability is not sufficient. Again the actual ratio for the fiscal year 2010-11 is 1.98:1 which is also below of the standard but it is very near to the standard level. Here the current asset of ICB compared to current liability is better but not satisfactory.

Earnings Per Share

First ICB Mutual Fund:

Second ICB Mutual Fund:

Third ICB Mutual Fund:

Fourth ICB Mutual Fund:

Fifth ICB Mutual Fund:

Sixth ICB Mutual Fund:

Seventh ICB Mutual Fund:

Eighth ICB Mutual Fund:

            Figure-4.1 Earning Per Share

EPS means Earning per Share. So, maximum earn from per share shows the maximum profit and company’s growth is well.

Here we see that, EPS is increases in 2011-12 from previous year of 2010-11. It is a good sign for a company. And here most EPS comes from 1^st ICB Mutual Fund.

Price Earnings Ratio

First ICB Mutual Fund:

Second ICB Mutual Fund:

Third ICB Mutual Fund:

Fourth ICB Mutual Fund:

Fifth ICB Mutual Fund:

Sixth ICB Mutual Fund:

Seventh ICB Mutual Fund:

Eighth ICB Mutual Fund:

Here we see that, all PE ratios are flow down . PE ratio gives an idea of what the market is willing to pay for the company’s earnings. Lower PE ratio indicates the lower risk for investors. And higher ratio not better for investors. Most of the ICB Mutual Fund’s PE ratio goes down. That means investors are less willing to pay for the mutual funds.

Capital Gain on Investment

 First ICB Mutual Fund:

Second ICB Mutual Fund:

Third ICB Mutual Fund:

Fourth ICB Mutual Fund:

Fifth ICB Mutual Fund:

Sixth ICB Mutual Fund:

Seventh ICB Mutual Fund:

Eighth ICB Mutual Fund:

Here we see that, the capital gain some are increases and some are decreases. If it is maximize we can say it’s good. Authority and the committee are working properly, but here we see in 3^rd ICB Mutual Fund decreases the capital gain 37.38% in 2009-10 and  6^th 36% in year of 2010-11It’s a very bad sign of this sector.

 Return on Investment ratio

First ICB Mutual Fund:

Second ICB Mutual Fund:

Third ICB Mutual Fund:

Fourth ICB Mutual Fund:

Fifth ICB Mutual Fund:

Sixth ICB Mutual Fund:

Seventh ICB Mutual Fund:

Eighth ICB Mutual Fund:

Here we see that, in every mutual fund’s return on investment are decreases in 2011-12 from the year of 2010-11. It is a very bad scenario. Every company wants to maximize the return on investment.

 Dividend Payout Ratio

First ICB Mutual Fund:

Second ICB Mutual Fund:

Third ICB Mutual Fund:

Fourth ICB Mutual Fund:

Fifth ICB Mutual Fund:

Sixth ICB Mutual Fund:

Seventh ICB Mutual Fund:

Eighth ICB Mutual Fund:

Here we see that, all ICB Mutual Funds D/P ration is increases. If dividend pay out ratio is increases this is indicates increasing capability of ICB to invest fund. And other hand if it’s decreases which indicates decreasing capability of ICB to investment.

Chapter-05

Recommendations & Conclusion

Recommendations

a)    ICB should fix redemption date of each fund. Because these funds have grate  contribution to assuage the capital market turmoil.

b)    ICB may take initiative and decision to float more funds for the stabilization of capital market and for gaining of investor’s confidence to invest in the capital  market.

c)    The interest of making portfolio of proposed funds and the existing ICB mutual         fund profitable and attractive, it is imperative to design balance portfolio of       securities. As the supply of securities is not adequate, I think, the portfolio is envisaged to be designed and developed from the following sources:

• Shares of multinational companies
• Shares of public enterprises

d)   Training program should be arranged for developing of mutual funds   management efficiency.

Conclusion

ICB is a unique name in our country as an investment Bank. It has skill and experienced labor force and professional and dedicated management team that enable to pursue the ICB’s goals and objectives. ICB is helping to the industrial growth in our country by mobilizing the small savings from investors to the capital market. ICB should be concerned about its investors, because the investors are the risks takers. ICB has great influence in the capital market. ICB should play its important role for gaining of the investor’s confidence on the capital market and further industrial growth in our country and the development and stabilization of the capital market in country

There remains a huge gap between institutional investors and general investors.  Institutional investors are far ahead from the general investors in respect of technical know-how, knowledge and risk taking propensity. ICB as an institutional investor manages its portfolio by doing three major activities: asset allocation, weighting shift across major asset classes and securities selection within asset classes. In financial terms it means ensuring maximum return with minimum level of risk. At present the gap between the institutional investors and general investors, ICB should concentrate well in portfolio management to uplift the interest of the general investors.

Bibliography

1. Investment Corporation of Bangladesh (ICB) 2010-2011. Annual Report. Dhaka ICB.
2. Investment Corporation of Bangladesh (ICB) 2011-12. Annual Report. Dhaka ICB.
3. Investment Corporation of Bangladesh (ICB) 2011-12. Annual Report of Unit Fund, Dhaka ICB.
4. Investment Corporation of Bangladesh (ICB) 2011-12. Annual Report of Mutual Fund,Dhaka ICB.
5. Ahmed, MF. H.R. Khan and M.S Islam 1993, Industrial Financing through Capital market in Bangladesh-A Study on the Demand Side (Dhaka: The Asian Foundation and the Bureau of Economic research,University of Dhaka, June, P-47.
6. Sharpe, W.F. (1978), Investments (Englewood Cliffs), New Jersey: Prentice-Hall, Inc).
7. I. M Pandey (1998), Financial Management, P-97-107.
8. www.ICB.govt.bd