auditors' report on the financial statements of first ... · interest on bank deposits and...

Auditors' Reporton the Financial Statements

ofFirst Bangladesh Fixed Income Fund

For the year ended June 30, 2013

Howladar Yunus &'Co.Gulshan Office

INDEPENDENT AUDITORS' REPORT TO THE TRUSTEEOF

FIRST BANGLADESH FIXED INCOME FUND

Howladar Y!Jnus& Co.House - 14 (4th floor)Road - 16A, Gulshan -1Dhaka - 1212Bangladesh

T +88 (0)2 9883863F +88 (0)2 9552989www.howladaryunus.com

IntroductionWe have audited the accompanying Financial Statements of First Bangladesh Fixed Income Fund(the Fund) namely, which comprise the Statement of Financial Position (Balance sheet) as at June30, 2013 and the Statement of Comprehensive Income (Revenue Account), Statement of CashFlows for the year then ended, and a summary of significant accounting policies and otherexplanatory information.

Management's responsibility for the financial statementManagement is responsible for the preparation and fair presentation of these financialstatements in accordance with Bangladesh Financial Reporting Standards (BFRSs), the CompaniesAct 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations andfor such internal control as management determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibilityOur responsibility is to express an opinion on these Financial Statements based on our audit. Weconducted our audit in accordance with Bangladesh Standards on Auditing (BSAs). Thosestandards require that we comply with relevant ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment, including the assessment of the risk of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments; we consider internalcontrol relevant to the entity's preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity's internal control. An auditalso includes evaluating the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasisfor our audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financialposition of First Bangladesh Fixed Income Fund as at June 30, 2013 and its financial performanceand its cash flows for the period then ended in accordance with Bangladesh Financial ReportingStandards (BFRSs).

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Chartered AccountantsCorrespondent firm of Grant Thornton International Ltd.

Howladar Yunus & Co.Chartered Accountants.

We also report that:a) we have obtained a" the information and explanations which to the best of our knowledge

and belief were necessary for the purposes of our audit and made due verification thereof;b) in our opinion, proper books of account as required by law have been kept by the company

so far as it appeared from our examination of those books;c) the Statement of Financial Position and Statement of Comprehensive Income dealt with the

report are in agreement with the books of accounts and returns.d) the expenditure incurred and payments made were for the purpose of the Fund's.

Dated: July 17, 2013Dhaka

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Howladar Yunus & Co.Chartered Accountants

First Bangladesh Fixed Income FundStatement of Financial Position

As on June 30, 2013

Amount (Taka)30-Jun-13

ASSETS

Listed securities -at cost

Non-Listed Securities at cost

Cash and bank balances

Preliminary and issue expenses

Other current assetsTotal Assets

1,269,558,8841,085,499,7533,170,959,134

107,336,138124,071,672

34567

5,757,425,581

CAPITALAND LIABILITIES

CapitalRetained earnings

Dividend equalization reserve

5,000,000,000716,280,534

8

5,716,280,534

Current liabilities and provisions 41,145,0489

Total Capital and Liabilities 5,757,425,581

Net Asset Value per Unit

At Cost

At Market

11.43

11.64

The annexed notes form an integral part of these Financial Statements.

~Trustee

Investment Corporation of Bangladesh ( ICB)Asset Manager

RACE Management pel

Signed in terms of our report of even date annexed


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First Bangladesh Fixed Income FundStatement of Comprehensive Income

For the period ended June, 2013

INCOMEDividend from investment in sharesProfit on sale of investmentInterest on bank deposits and bondsTotal Income

10

EXPENDITURE

Amortization of preliminary expensesManagement feesAnnual Listing FeeTrustee feesCDBLchargeCustodian feesAudit feeOther operating expensesTotal Expenditure

Net Profit for the periodLess:Market risk reserveLess:Dividend equalization reserveAccumulated profit carried forward

11

Earnings per unit for the period


Amount (Taka)Apri10~2012 toJune

30.2013

35,521,958119,181,988867,273,792

1,021,977,737

16,801,030269,835,144

5,100,00012,142,581

47,797824,401

57,500888,750

305,697,203716,280,534

716,28Q,534

1.43

The annexed notes form an integral part ofthese Financial Statements.

~RACEManagement PCl

~Trustee

Investment Corporation of Bangladesh ( ICB)

Signed in terms of our report of even date annexed

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First Bangladesh Fixed Income FundStatement of Cash Flows

For the period from 01 April 2012 to 30 June 2013

Amount (Taka)1

Cash Flows from Operating Activities:

Dividend incomeInterest on bank deposits and bonds

Other advance deposit and receivable

Operating expenses

Net Cash from Operating Activities (A)

26,418,284879,752,201

(755,590)(265,956,676)639,458,219

Cash Flows from Investing Activities:

Value of listed securities

Issue and preliminary expenses

Non-Listed Securities at cost

Net Cash Used in Investing Activities (B)

(1,206,502,442)(176,496,891)

(1,085,499,753)(2,468,499,085)

Cash Flows from Financing Activities:

Capital contribution

Net Cash from Financing Activities (C)Net Increase in Cash (D = A+B+C)Opening cash and bank balances (E)Closing cash and bank balances (F = D+E)

5,000,000,000

5,000,000,000

3'170,959,~341

3,170,959,134

~L.Asset Manager

RACE Management PCl

TrusteeInvestment Corporation of Bangladesh ( ICB)


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First Bangladesh Fixed Income FundNotes to financial statements

For the period from 01 April 2012 to 30 June 2013

1. LegalStatus and Nature of Business

First Bangladesh Fixed Income Fund (hereinafter called as "Fund") was established under a TrustDeed signed on 15 February 2011 between Sonali Bank ltd, Janata Bank Ltd., Eastern Bank Ltd., ICBUnit Funds as 'Sponsor's and the Investment Corporation Bangladesh(ICB) as a "Trustee" under theTrust Act 1882. The Fund was registered with the Bangladesh Securities and Exchange Commission(BSEC)on 2 March 2011 under the Securities and Exchange Commission (Mutual Fund) Bidhimala(Rules) 2001. The operations of the Fund was commenced on 01 April 2012 after listing with Dhakaand Chittagong Stock Exchanges and fund investment permission from BSEC.

As provided in Trust Deed, RACE Management PCl is the Manager of the Fund. RACE ManagementPCl was incorporated as a private limited company under Companies Act 1994 on March 2008.

First Bangladesh Fixed Income Fund is a special purpose investment fund with tenure of ten years.The objectives of the Fund are the development of the Bangladesh Bond Market by improving thedemand side, promoting research based investing and becoming a captive buyer in the nascent fixedincome market in Bangladesh. The Fund consists of 500,000,000 units of Taka 10 each. The units ofthe Fund are transferable.

2. Significant Accounting Policies

2.1 Basisof preparation of accounts

These financial statements have been prepared under historical cost convention inaccordance with generally accepted accounting principles as laid down in the InternationalAccounting Standards (IASs)/lnternational Financial Reporting Standards (IFRSs), applicable tothe Fund so far adopted by the Institute of Chartered Accountants of Bangladesh asBangladesh Accounting Standards (BASs)/Bangladesh Financial Reporting Standards (BFRs).The disclosures of information made in accordance with the requirements of Trust Deed,Securities and Exchange Rules 1987, Securities and Exchange Commission (Mutual Fund)Bidhimala (Rules) 2001 and other applicable Rules and regulations.

2.2 Presentation of financial statements

The fund was registered with BSEC on 02 March 2011 and subsequently on 19 March 2012listed with Stock Exchanges with fill investment commencing from 01 April 2012 by receivinginvestment permission from BSEC. Therefore, Financial Statements are prepared andpresented covering the period from 01 April 2012 to 30 June 2013 and the transactions

before that date are duly accounted for. A net income of Tk. 133,764,017 from preliminaryperiod has been duly incorporated into the accounts.

The fund generated income of Tk. 259,651,010 (Interest Income Tk. 245,572,774; Dividend

Income Tk. 6,593,129 and Profit on sale of investment Tk. 7,485,107) and incurred expenses

Tk. 125,886,993 as pre-operational expenses after obtaining BSEC approval and before listed

with stock exchanges. All income and expenses were recorded in the accounts under

appropriate Heads of Accounts.

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2.3 Investment

All purchases and sales of securities that require delivery within the time-frame established byregulation or market convention are recognized at the date of trading ie, the date on whichthe Fund commits to purchase or sell the investment.

Bonus entitlements, if any, are not accounted for as income rather included in the portfolio toreduce the average cost.

2.3.1 Valuation of investment

Listed securities are valued at average closing quoted market prices prevailed as of 30June 2013 on an aggregate portfolio basis.

Investment is recorded in the Financial position at cost.

2.4 Taxation

The income of the Fund is exempted from Income Tax as per SRO No. 333-Act/lncomeTax/2011 dated 10 November 2011, under Section 44(4) clause (b) of Income Tax Ordinance,1984; hence no provision for tax is required.

2.5 Amortization of preliminary expenses

Preliminary and issue expenses represent expenditure incurred prior to commencement ofoperations and establishment of the Fund. These costs are amortized within ten years' tenureafter adjusting interest income from escrow accounts as per trust deed and Securities andExchange Commission (Mutual Fund) Bidhimala (Rules) 2001.

2.6 Market risk reserve

Investment has been valued on aggregated portfolio basis and no provision is required to bemade on portfolio value of investments as of 30 June 2013.

2.7 Dividend policy

As per Rule 66 of Securities and Exchange Commission (Mutual Fund) Bidhimala (Rules) 2001,the Fund is required to distribute in the form of dividend to its unit holders an amount whichshall not be less than 70% of annual profit during the year, net provisions.

2.8 Revenue recognisation

Gains/losses arising on sale of investment are included in the Revenue Account on the date atwhich the transaction takes place. Dividend and interest income are recognised as per BAS-18and Securities and Exchange Commission (Mutual Fund) Bidhimala (Rules), 2001.

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Howladar yunus & Co.Chartered Accountants

Amount (Taka)

3. Listed Securities - At Cost 1,269,558,884

Sector-wise break up of investment in shares are as follows:

Sector/category Number of Amounts in Taka

shares Cost Market value Difference

Bank 6,853,185 214,791,285 163,867,588 (50,923,697)Cement 35,300 10,408,748 11,825,500 1,416,752Corporate Bond 16,125 15,279,275 15,101,063 (178,213)Engineering 200 5,000 9,560 4,560Food and Allied 63,527 35,366,952 55,316,098 19,949,147Fuel and Power 321,308 28,844,282 27,957,137 (887,145)Insurance 170,362 66,872,088 84,473,460 17,601,372Miscellaneous 8,800 6,160,888 6,348,105 187,217Mutual Funds 15,434,100 172,863,581 163,704,070 (9,159,511)NBFI 279,147 93,353,029 77,114,620 (16,238,409)Pharma 571,461 305,806,114 294,116,240 (11,689,874)Tannery 52,600 16,410,046 13,223,640 (3,186,406)Telecommunication 531,910 40,696,461 113,732,870 73,036,409Textile 24,000 959,472 602,400 (357,072)Travel & Leisure 3,051,570 261,741,665 348,184,137 86,442,472

27,413,595 1,269,558,884 1,375,576,486 106,017,602

4 Non-Listed Securities

Bank Asia - Zero Coupon BondRenata Limited - Short term BondSk. Akij Uddin Limited - Short term BondFarmers Bank Ltd.

209,944,196370,000,000250,000,000255,555,557

1,085,499,753

5 Cash and Bank BalancesFixed depositsShort term deposits with:

Sponsor A/e EBL-1011320165124Sponsor -JBL-004001452Sponsor EXIM- 00113100464648SponsorSEBL-0083-13100000007Sponsor-One Bank- 0123000000584Sponsor Premier Bank- 104136000000009Sponsor-E BL-1011320172403Esceow - EBL-1011320177327IPO-EBL(BDT)-10113602005 75IPO-EBL(USD)-1013050200585Sponsor-EBL-1011360207097Sponsor-EBL-1011360191973Sponso~EBG1011360212938Brac Bank ttd- 1526202236300003Brac Bank Ltd- 1526202236300002Brac Bank Ltd- 1526202236300001

1,374,469,259

53,209,99054,30995,168

560,680,900136,148,695950,125,027

89,48334,073,510

3,353,855795,000

20,235,953383,792

36,393,921781,695

29,39639,180

.3,170,959,134

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6 Preliminary and Issue ExpensesAmount (Taka) I

Total preliminary and issue expensesLess:Interest on escrow account

189,219,75465,082,586

Less:Amortization of preliminary and issue expenses124,137,168

16,801,030107,336,138

7 Other Current Assets

Interest receivablesDividend ReceivableOther advance and depositsReceivablefrom Securities

52,604,1769,103,6735,855,590

56,508,233124,071,672

8 Capital

500,000,000 units of Taka 10 each fully paid 5,000,000,000

9 Current Liabilities and Provisions

Payableto sundry securitiesManagement feesCustodian feesAudit feeWithholding income tax payableWithholding VAT payablePrinting & Publication expensesBankersto the issue

382,68874,082

824,40145,000

33,702,4314,621,446

100,0001,395,000

41,145,048

10 Interest on Bank Deposits and Bonds

Interest onShort term depositsFixed depositsCorporate bonds

461,187,880363,971,988

42,113,924867,273,792

11 Other Operating Expenses

Bank chargesOther expenses

420,690468,060888,750

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12. Others

12.1 These notes form an integral part of the annexed financial statements and accordingly are to beread in conjunction therewith.

12.2 Figures in these notes and annexed financial statements have been rounded off to the nearest Taka

Asset ManagerRACEManagement PCl Trustee

Investment Corporation Bangladesh (ICB


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