Post on 28-Mar-2023
Chapter 1Background information and methodologies
1.1 OverviewInvestment Corporation of Bangladesh (ICB) is astatutory corporation. It is mainly an investmentbank. As an investment bank is a financialinstitution, which mobilizes fund from the surpluseconomic units through various mutual funds and saleof securities and develops funds for the deficiteconomic units through purchase and/or underwritingof securities..The Investment Corporation of Bangladesh (ICB) wasestablished on 1 October 1976. under "The InvestmentCorporation of Bangladesh Ordinance, 1976" (No. XL of1976). The establishment of ICB was a major step in aseries of measures undertaken by the government toaccelerate the pace of industrialization and todevelop a well-organized and vibrant capital marketparticularly securities market in Bangladesh. ICBcaters to the need of institutional support to meetthe equity gap of the industrial enterprises. In viewof the national policy of accelerating the rate ofsavings and investment to foster self-relianteconomy, ICB assumes an indispensable and pivotalrole. Though the enactment of the InvestmentCorporation of Bangladesh (Amendment) Act, 2000 (No.of XXIV of 2000), reforms in operational, strategicand business polices have taken place by establishingand operating subsidiary companies under ICB.
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1.2 Statement of the problemICB has a strong impact in the capital market inBangladesh. It has diversified objectives since itsinception. The main concern of the present study isto assess the performance of ICB, i.e to measure towhat extent it has achieve its objectives and forthis ICB’s three major functional areas have beenevaluated. These are mobilization of funds, making ofportfolios and formulating and implementing adividend policy that have contribution to furtherexpansion of the organization.
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1.3 Rationale of the studyThe study has been conducted to identify how ICB isperforming in the three major functional areas andin the same time how contribution it has in thedevelopment of the capital market. The study has alsoassessed whether the other financial organizationsand the individual investors are benefited by itsperformance. Meanwhile, the study has also assessedhow much contribution it has in creating the bases ofinvestment and mobilization of savings as part of itscommitment. Finally, the study has reflected how ICBis contributing to the financial market by itsfunctions and activities.
1.4 Objective of the study
The broad objective of the study is to assess theperformance of ICB in three broad functional areaslike: pooling of funds, making of portfolios anddividend policy as its contribution in the financialmarket in Bangladesh. Investment Corporation ofBangladesh is a state-own statutory organization,which was mainly, established to strengthen andreenergize the final market of Bangladesh.
The specific objectives of the study are to assess:
1) The role of ICB to broadening and encouragingthe base of investment;
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2) The role of ICB in mobilization of savings fromthe households and channeling them to thefinancial markets;
3) Success of ICB in the development of the capitalmarket;
4) Performances of ICB in the recent years in thethree major functional areas;
5) Making of ICB’s portfolios after mobilizingfunds from the investors; and
6) The dividend policy of ICB
1.5 MethodologiesThe evaluation has been made by assessing in three
major areas of ICB. The study has been designed in a
way that, it reflects the details functions and
activities of the organization of the firm. The
methodologies that have been used are- the
mobilization of funds by the ICB from the general
households, the making of portfolios by the generated
funds and the dividend policy and further expansion
Besides the above-mentioned approach, the
methodologies covered the following:
a) Sources of data: In conducting the study data
and information have been collected from the
diversified sources. Firstly, data have been
collected from the published financial statement
and prospectus of the company. Each and every
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year the firm published the financial report.
So, this information from the report has been
used for the study. Again, many other published
materials are here in the collection of ICB. So,
this information has also been used. Meanwhile,
there are a lot of published materials, which
will also be used for this study purpose. The
last but not the least thing is that, assistance
from the Internet has also be en taken for the
study purpose. However, in conducting the study,
mainly the assistance from the financial
statements and report of the firm has been taken
for the study.
b) Quality Control: In the part of the quality control, throughout the
data collection, quality control was the special
concern. Whenever, data have been collected,
special care was given in this respect so that
accurate information can come for the accurate
calculation. So, this thing has been done with
special care. Again in collecting the data from
the financial statement of the firm, various
years’ data has been taken for the accurate
calculation of the study. Meanwhile special care
has been devoted at the time of copying the digits
from the financial statement to the calculations
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sheet. In collecting the information, most recent
published data and information has been taken from
the reliable sources for ensuring the quality
control.
c) Data Processing: Data that have been collected from different sectors
was not be available in the processed form. So, after
getting the data the second job is to process those
data into form so that they were in the arranged
form. In processing the data, most recent published
data and information has been taken from the reliable
sources. For example, five years data has been taken
for the performance analysis of the firm. So, in
taking the samples most recent data and information
was taken for the accurate measurement of the
performance. At the time of processing the data
special care was given so that the digits are not
changed mistakenly when they were shifted from the
report to the calculation sheet.
1.6 Expected outcome of the study and its use:The study has been conducted to assess the
performances of ICB. Among the many functional areas
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of ICB three major areas have been evaluated to
assess the performance of ICB. However, so far he
study has been done the information form the all
groups of people to have an idea about the ICB can
use the report. The information can deliver the ideas
about ICB in some of the important functional areas.
General investor can use the information from the
study to determine about their investment decision at
ICB. As ICB pools fund from the general households
and invest this fund again in different areas, so the
investor can have idea about it from this report.
Meanwhile, the information in the report can also
been used for the further study.
1.7 Limitation of the studyThis report so far has some limitations in some
areas. In preparing the report a lot of data and
information were required data, but sufficient
information and data has not been found for the
report to be made really impressive. However, in
spite of the scarcity, effort has been given much to
make the report acceptable and reliable. Meanwhile,
to assess the performance of ICB, not all the
functional areas has been considered In this respect,
three major areas were considered to evaluate the
performance of ICB.
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Chapter 2
Company profiles2.1 BackgroundInvestment Corporation of Bangladesh (ICB) is a
statutory corporation. It is mainly an investment
bank. As an investment bank is a financial
institution, which mobilized fund from the surplus
economic units by savings securities and developed
funds to the deficit economic unit also by
buying/underwriting securities. After liberation in
view of social economic changes, the scope for
private sector investment in the economy was kept
limited by allowing investment in projects up to tk.
25 lac. The new investment policy, which was
announced in July, 1972 provides for an expanded role
of private sector by allowing investment in a project
up to tk. 3 crore. The ceiling has further being
raised to tk. 10 crore in spite of the adequate
facilities and incentives provided to the private
sectors encouraging response was not for the coming.
One of the reasons among other was the lack of
institutional facilities, which provides underwriting
support (Like former ICB) to industrial enterprise
that was required to raise much need equity fund.
Thus, the need for reactivation for capital market,
stock market was keenly felt.
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The Investment Corporation of Bangladesh (ICB) was
established on 1 October 1976. under "The Investment
Corporation of Bangladesh Ordinance, 1976" (No. XL of
1976). The establishment of ICB was a 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 national policy of accelerating the rate of
savings and investment to foster self-reliant
economy, ICB assumes an indispensable and pivotal
role. Though the enactment of the Investment
Corporation of Bangladesh (Amendment) Act, 2000 (No.
of XXIV of 2000), reforms in operational strategic
and business polices have taken place by establishing
and operating subsidiary companies under ICB.
2.2 Objective of ICB
The objectives of the corporation are:
To encourage and broaden the base of
investments,
To develop the capital market,
To mobilize savings,
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To promote and establish subsidiaries for
business development,
To provide for matters ancillary thereto.
2.3 Business policy
The business policies of ICB are in the following:
To act on commercial consideration with due
regard to the interest of industry, commerce,
depositors, investors and to the public in
general,
To provide financial assistance to projects
subject to their economic and commercial
viability,
To arrange consortium of financial institutions
including Merchant Banks to provide equity
support to projects,
To develop and encourage entrepreneurs,
To diversify investments,
To induce small and medium savers for investment
in securities,
To create employment opportunities,
To encourage investment in Agro-based and IT
sectors.
2.4 Basic functions
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In order to achieve the previously mentioned
objectives, the corporation may carryout the
following functions:
Direct purchase of shares and debentures
including placement and equity participation,
Participating in and financing of joint-ventures
companies,
Providing lease finance singly and through
syndication,
Managing existing Investor's Accounts,
Managing existing Mutual Funds and Unit Fund,
Managing Portfolios,
Conducting computer training program,
Providing advance against ICB Unit and Mutual
Fund certificates,
To act as Trustee and Custodian,
Providing Bank Guarantee,
Providing investment counseling to investors,
Participating in Government divestment program,
Introducing new business products suiting market
demand,
Dealing in other matters related to Capital
Market.
2.5 Organization’s manpower
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The general direction and superintendence of
corporation is created in a board of directors, which
consists of clever (11} persons including the
chairman and managing director of ICB. This is the
most powerful board compare to other govt. financial
institutions in terms of their experience and
knowledge. The managing director is the chief
executive of the organization. Two general managers
assist him, viz. G.M. (Operation) and G.M. (Admin.).
Total manpower of ICB at present is 372.
2.6 Business area of ICB
Private Placement: ICB is authorized to act as
an agent of issuers and investors for private
placement of securities. Under this arrangement,
ICB places securities to
individuals/institutions on behalf of the issuer
for which it charges fees. ICB also acquires
shares/securities for its own portfolios.
Underwriting: In order to raise long-term debt
equity from the primary market, the Government
bodies, enterprises, corporation or Companies
may seek intermediary assistance from ICB in the
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form of underwriting. Because of its long and
proven experience, reputation, asset back up and
established network of regional offices, ICB is
in an excellent position to attract the
potential investors to the proposed issue of
shares, debenture and other securities for
successful floatation of IPO & placement.
Custodian and Banker to the Issues: To act as
the custodian to the public issue of Open-end &
Mutual Funds, ICB provides professional
services. It also acts as the Banker to the
issues and provides similar services through the
network of its branches. Fees in this regard are
negotiable.
Merger and Acquisitions: Companies willing to
expand their business through mergers or
acquisitions or to divest projects that no
longer fit into present scale of operation
contact the corporation. ICB provides
professional services & advice in respect of
shaping up the cost and financial structures to
ensure best possible operation results.
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Corporate Financial Advice: Companies and
Government enterprises intending to go public
often seek professional & financial advice on
corporate restructuring & reengineering. ICB
through its expertise provide such services.
Lease Financing: ICB provides lease finance
mainly for machinery, equipment and transport.
ICB is in a position to provide professional
advice and financial assistance to the intending
clients. The period of lease, rental, changes
and other terms and conditions are determined on
the basis of assets and the extent of assistance
required by the applicants.
Advanced against ICB Mutual Fund Certificates
Scheme: Advanced against ICB Mutual Fund
Certificates Scheme was introduced in 2003,
designed for the ICB Mutual Fund certificate
holder to meet their emergency fund requirement.
One can borrow maximum of 50% value of last one
year's weighted average market price of
certificates at the time of borrowing by
deposing his/her certificates under lien
arrangement from any of the ICB's offices. The
rate of interest on the loan is reasonable and
also competitive.
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Bunk Guarantee Scheme: As part of ICB's business
diversification program, the corporation
introduced bank guarantee scheme during the year
2002-2003 ICB provides (1) bid bond for enabling
the business people to participate in any tender
or bidding; (2) performance bond for helping the
business community to continue their business
smoothly by fulfilling their obligations
promised by them to their clients; (3) customs
guarantee for solving different disagreements
between the customs authority and the business
classes at the initial stage. The maximum limit
of guarantee is tk. 2.00 crore and would be
issued against at least 20% cash and 80% easily
encashable securities or against 100% cash
margin. Re-guarantee from other financial
institutional is required for guarantee against
the amount exceeding tk. 2.00 crore.
ICB Mutual Fund: ICB has so far floated eight
close-ended Mutual Funds. The first ICB Mutual
Funds was floated on 25April, 1980, while the
eight ICB Mutual Fund was floated on 23 July
1996. The aggregate size of these funds is tk.
17-5 crore. About 35,000 certificates holders
own these funds. Dividends declared on the funds
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were very attractive ranging from 13.5 to 180
per certificate for 2002-2003. Investors show
overwhelming interest in all the ICB Mutual
Funds. One can invest in such funds through the
stock exchanges with which these funds are
listed. Through corporate restructuring, new
mutual funds are being floated through "ICB
Asset Management Company Limited", subsidiary
company of ICB.
ICB Unit Fund: It is an open-ended Mutual Fund
scheme launched in April 1981, through which the
small and medium savers get opportunity to
invest their savings in a balanced and
relatively low risk portfolio. ICB has so far
declared attractive dividends on units every
year ranging from taka 12 to 25 per unit.
Investment in units enjoys tax benefit, amount
being applicable as per law. However, under the
ICB's restructuring program new unit certificate
are being sold by ICB's new subsidiary company
"ICB Asset Management Company Limited".
Investors Scheme: The Investors' Scheme was
introduced in June 1977. Over the years, this
scheme has grown tremendously. ICB, at its
discretion, may grant up to times loan against
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the assets of the account subject to a maximum
limit of tk. 3 lac. An account holder may use
the combined balance of his/her equities and
loan to buy shares/securities. To help the
investors to develop diversified and balanced
portfolio to minimize risk and earn a reasonable
return, ICB provides professional advice and
other support services. Under the restructuring
program, ICB operates and manage only the old
accounts and new accounts are being opened and
managed by the ICB Capital Management Limited, a
subsidiary of ICB.
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2.7 Share Capital Ownership Pattern of ICB
Classification of Shareholders as on 1 January 2004
Shareholder No. Of
Shareholde
rs
No. Of
Shares
Percenta
ge
Government of Bangladesh 1 1350000 27.00
Nationalized Commercial
Banks
4 1137220 22.74
Development Financial
Institutions
2 681550 13.63
Insurance Corporations 2 628691 12.57
Bangladesh Bank 1 600000 12.00
Denationalized Private
Commercial Banks
2 454262.
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9.09
Private Commercial Banks 4 28571 0.57
Foreign Commercial Banks 2 42830 0.86
First BSRS Mutual Fund 1 6900 0.14
Other Institutions 9 13024 0.26
General Public 1026 56951.5 1.14
Total 1054 5000000100.00
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Source: ICB annual report 2005-06.
2.7 Milestone of ICB
MilestonesDate/Establishment
Commencement
Date of Establishment/
Commencement ICB1st October 1976
lnvestors' Scheme 13th June 1977
First ICB Mutual Fund 25th April 1980
ICB Unit Fund 10th April 1981
Second ICB Mutual Fund 17 June 1984
Third ICB Mutual Fund 19 May 1985
Fourth ICB Mutual Fund 6 June 1986
Fifth ICB Mutual Fund 8 June l987
Sixth ICB Mutual Fund 16 May 1988
Nomination as the
country's Nodal DFI in
SADF
7 May 1992
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Seventh ICB Mutual Fund 30Junel995
Eighth ICB Mutual Fund 23 July 1996
Purchase of own Land &
Building11 December 1997
Participation in Equity
of SARF16 January 1998
Advance Against ICB Unit
Certificates Scheme12 October 1998
Lease Financing Scheme 22 April 1999
"The Investment
Corporation of Bangladesh
(Amendment)
Act, 2000" passed in the
Jatiya Sangsad
(Parliament) and
Honorable President's
assent thereof
5 and 6 July 2000
Formation and
Registration of 3
Subsidiary Companies of
ICB
5 December 2000
Computer Training Program 25 March 2001
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Commencement of business
operations of the
subsidiary companies
ICB Capital Management
Ltd. 01 July 2002
ICB Asset Management
Company Ltd.01 July 2002
ICB Securities Trading
Company Ltd.13 August 2002
Registration as a Trustee
with SEC20 August 2002
Registration as a
Custodian with SEC20 August 2002
Bank Guarantee Scheme 21 June 2003
Advance Against ICB
Mutual Fund Certificate
Scheme
21 June 2003
Consumers Credit Scheme 15 February 2004
Received BASIS-SEDF Best
IT Use Award in
SOFTEXPO,2004
28 November 2004
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Chapter 3
Company information
3.1 Institutional framework
Investment Corporation of Bangladesh is a corporate
body as per section 3 of Investment Corporation of
Bangladesh Ordinance, 1976 and deemed to be a banking
company within the meaning of the Banking Companies
Ordinance, 1962 (LVII of 1962). The shares of
corporation are listed with the stock exchange. ICB
is an authorized broker of DSE.
3.2 Regulatory framework
As the mentioned earlier the regulatory framework of
ICB is the, Investment Corporation Bangladesh
Ordinance, 1976. This ordinance and regulations laid
under the authority of the ordinance is the source of
all power and authority of ICB. Through the recent
enactment of " The Investment Corporation of
Bangladesh (Amendment) Act, 2000" (XXIV) of 2000,
scope of ICB's activities through the formation of
subsidiaries, have been expanded. In addition to
these, to resume its duties and functions, it has to
compelled by Companies Act 1994, trust Act 1882,
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Insurance Act 1983. Security and Exchange Commission
Act 1993, Banking Companies Act 1993, Foreign
Exchange Regulation 1974, Income Tax Act etc.
It is to note that no provision of law relating to
the winding up of companies or bank shall apply to
the Corporation and the Corporation shall not be
wound up save by order of the government and in such
manner as it may direct.
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3.3 Management of ICBThe Head office of the corporation as per the
requirement of the ordinance of ICB is located al
Dhaka. The general direction and superintendence of
the corporation is created in a board of directors,
which consist of 11 persons including the chairman
and managing director of ICB.
The Board of directors consists of the following
directors:
The chairman to be appointed by the government,
The directors to be appointed by the government
from among persons serving under the government,
One director to be nominated by the Bangladesh
Bank,
The managing directors, Bangladesh Shilpa Bank,
Ex-office,
The managing directors, Bangladesh Shilpa Rin
Sangstha, Ex-office,
Four other directors to be elected by the share
holders other than the government, BB,BSB,&BSRS.
3.4 Administration and Human resourcesInvestment Corporation Of Bangladesh (ICB) providing
different category of financial and banking services.
Nature of the different division departments vary,
such that Economic and Business Research (EBR)
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Department requires teamwork, Loan Appraisal division
requires professional work. Funds divisions need
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 decisions 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 execute
committee and to maintain its Chairman to assist the
Board in the discharging of the function stated under
the ordinance. The board may appoint such other
committee (s) as it thinks fit to assist it in the
efficient discharge of its function. So far, board
has appointed two such committees. Economic and
Business Research (EBR) committee and Loan Appraisal
committee headed by General Manager.
3.5 Board of directors
The Board is comprised of 11 directors. Exchange
managing Director, all directors are non-executive
and independent and represent government, banks,
Insurance Corporation, financial institutions and
general public.
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3.6 Future contrivance of the organization
ICB is going to float two new Mutual Funds. ICB
AMCL, a subsidiary of the state owned
institutional investor, will launch and operate
the funds. The Funds are:
ICB AMCL Pension Holder Unit Fund and
ICB AMCL Islamic Mutual Fund, each worth Tk. 10
crore.
A great deal of planning effort of the
corporation has been towards future IT structure
and related operations. In the roadmap the
following goals have been set:
Establishing ICB firmly on IT industry not only
as a consumer but also as a formidable IT
solution provider especially in the financial
sector.
In the long run, ICB may consider establishing a
separate business entity on IT, if found viable.
ICB is considering going for starting full
pledge activity in the field of IT area.
ICB is actively considering to provide web-based
online services to its clients and to connect
all its branches through WAN with head office.
So that customers at any corner of the country
can get instant services.
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Chapter 4
Departments
4.1 Personnel department
This department deals with the human resources of
the organization. It makes the rules and
regulation of the right person to the right place.
The process may be held by two ways:
Direct recruitment
Promotion
This department takes disciplinary action
gradually to that employee who violates the
rules and regulation of the organization. This
action is of two types:
Light Punishment
Heavy punishment
The other functions of this department are as
follows:
Make necessary rules, regulations, and
policies for efficient administration of
the Corporation;
Handle all personnel matter including
confirmation, posting, transfer, fixation,
leaves etc.
Process all promotion, time-scale encashment;
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Process registration, retirement cases;
Deal with retirement benefits including
gratuity, pension, provident fund etc.
4.2 Central accounts departmentAll kinds of receipts and payments of ICB are done by
the Central Account Department. The bill of all
departments end destination is account department.
Account department holds and maintain all accounts
separately. For this reason adjustment and
rectification of any transaction of all departments
become easier to this department.
4.3 Loan appraisal department
ICB provide credit facilities to the public limited
companies to meet heir equity gap. There are two
modes by which ICB provides credit facilities to the
prospective public limited companies, through:
Direct underwriting for BMRE and
Underwriting through bridge financing
4.4 Economic and business research department
The functions of the EBR department are as
follows:
Performance portfolio management decision
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Conduct meeting of the securities and sale
committee
Prepare annual reports for ICB, Unit Fund and
Mutual Fund
Convey securities sell or purchase decision to
the merchandising division
Prepare and distribute annual Report
Maintain information related to DSE, CSE,
dividend, right share, bonus declared by
different companies, public issues, half yearly
accounts of listed companies etc.
Maintain liaison with Ministry of Finance,
Bangladesh Bank and provide TCB related
information to interested parties,
Prepare board memo regarding declaration
dividends on ICB's own portfolio, unit and
mutual funds
4.5 Unit sales department
ICB unit is an open end Mutual Fund through which the
small and medium savers get opportunity to invest
their savings in a balanced and relatively low risk
portfolio. It ensures a continuous and regularly
flows of incomes for the holders and is easily
cashable. The responsibility undertaken for managing
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the fund, management fee charges @ Tk. 1.00 per unit
sold. Units are sold through ICB offices and other
authorized bank branches. In lieu of cash dividend,
one can reinvest his/her dividend income under
Cumulative Investment plan (CIP) to purchase
additional units with a price rebate.
ICB stopped selling of Unit Certificates from 1st day
of July after the business operation starts of ICB
Asset Management Company Limited.
The main functions of this department are to sale,
repurchase and transfer of Unit
Certificates.
Act as manager of Unit Fund,
Promote sales of Unit Certificates,
Sell and issue Unit Certificates to the
applicants,
Repurchase Unit Certificates,
Issue new Unit Certificates in lieu of
mutilated, lost or defaced Unit Certificates.
4.6 Unit registration and procurement department
The following are the functions of this department:
Registration and transfer Unit Certificates,
Maintain a separate register for unit holder
under CIP,
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Verify signature of transfer deed,
Issue dividend warrants and CTP certificates to
the holders,
Procure unit certificates of various
denominations from the printing.
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4.7 Mutual fund department
Broadly the functions of Mutual Funds Department
consist of:
Act as manager of all mutual funds,
Maintenance of ledger with the name,
address and number of certificates along
with distinct folio number for each Mutual Fund
separately,
Verify the signature of the holders in the 117
forms,
Preparation of dividend list from the ledger
position,
Issue dividend warrants to the holders of the
certificates,
Distribution of final dividend warrants to the
certificate holders after completing necessary
formations.
4.8 Investors department
The main task of Investors Department is to
accumulate the investment of small and new investors
of the capital market by helping them open an
investment account in the concern department. This
department deals with 'Investors scheme'.
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The following are the main functions of this
department:
Open and maintain Investment accounts:
Sanction loans against deposits in Investment
Accounts;
Buy and sale shares on behalf of the investors;
Counsel investors in respect of building up
their portfolios;
Withdraw funds and shares from Investment
Accounts;
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4.9 Share department
The shares act as the custodian of securities. These
department facilities the physical transfer of
shares. For performing the above mentioned activities
Share Department is divided into five sections. These
sections are:
Investors portfolio section
Sale and withdrawal section
Funds portfolio section
Securities reconciliation section
4.10 System analyst department
The main functions of this department are:
System administration of the entire network
setup;
Performing system analysis wherever ICB feels
the need for periodic change in computerization
setup;
Performing miscellaneous small hardware and
software related servicing tasks on the
many workstations, network system, sever
and other components and provide training to
staff of other departments about computer usage,
Any other assignment given by the management.
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4.11 Public issue department
The public issue department is a vital department in
the ICB as the ultimate objective of sanction loan is
to help the project to go for public issue. The
department is engaged in:
Visit and collect audited financial statement
from the sponsors,
Analyzing the financial statement of on going
projects,
Advice and pursue sponsors of on going projects,
Assists in preparing prospectus for issuing
shares and debentures,
Examines the prospectus submitted by the
sponsors and help getting approval,
Advise companies in issuing allotment letters
and warrants,
Make necessary adjustments of bridge loan of the
concerned company,
Make liaison with the recovery and follow up
department regarding realization of dues and
overdue.
4.12 Law department
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Law department is a specialized department; handle
any kind of legal affairs of ICB. ICB takes the
resource of legal actions against the defaulting
borrowers who did not come forward to repay loans
despite repeated persuasion and reminders.
4.13 Project implementation department
The following are the tasks of this department:
Placement of IPO,
Justify the projects terms and conditions,
Help implementation of sanctioned projects,
Review progress of implementation of projects
and recommend disbursement of funds,
Submit progress reports to the management
regarding implementation,
Process the case for cancellation of sanctioned
projects,
Inspect the site and books of accounts of
projects.
4.14 Recovery and follow up department
Loan recovery and follow-up department is the key
operation as it ensures the recovery of funds
provided as credit. There remains two 'Task Forces'
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and the 'Review & Monitoring Committee' for giving
necessary guidelines for accelerates process of
recovery. As a result, ICB recovered an amount of tk.
7.67crore during 2002-2003, which was 2.27% higher
than the recovery of tk. 7.5crore during 2001-2002.
Interest of loan recovered in quarterly basis.
4.15 Secretary department
The main functions of this department are:
Arrange meetings of the Board of Directors,
Executive Committee and other Committee,
Communicate with the directors of the
Corporation,
Call board meeting,
Prepare work schedule of directors meeting and
collect signature of the Chairman,
Send work schedule to Govt. and board of
directors,
Call Annual General Meeting.
4.16 Public relation department
The main function of this department is to:
Maintain close liaisons with the Ministry of
Finance and other concerned officers
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Help publish all types of official
advertisements
Furnish management with the relevant newspaper
cuttings
Help focusing ICB through mass media
Meet all adverse comments about the Corporation
published in Different newspapers and
periodicals
Publish internal newsletter or journal
Appraise the management of its overall relation
to public
40
4.17 Audit departmentDepartment under Audit & Method Division are showing
in the following:
1. Audit & Method Head Office
2. Audit & Method Branches
This department with regard to ICB does three kinds
of Audit:
Internal Audit: Accomplished by Head Office
Audit Department
External Audit: Accomplished by Ministry of
Finance
Commercial Audit: Accomplished by Government
Audit Department
Audit Department mainly performs two types of
audit:
Pre Audit: Done before the starts of the job,
Post Audit: Done after the completion of the
job.
41
Chapter 5
Operational and functional areas and results
5.1 ICB’s role in the financial market
As in the previous year, ICB and its subsidiaries
played very important and expanded roles through
participation in the both primary and secondary
markets to quicken the pace of industrialization and
to develop and enlarge a vibrant and sustainable
capital market in the economy.
As on 30 June 2006, the number of ICB assisted
securities was 122 out of 303 listed securities of
the Dhaka Stock Exchange Ltd.
Out of 213 listed securities of the Chittagong Stock
Exchange Ltd. ICB assisted securities was 80.
5.2 Operational activitiesICB has continued to provide financial and other
assistance to projects in different forms with a view
to accelerating the pace of industrialization as well
as to develop a well organized and vibrant capital
market.
Commitments
42
During 2005-06, ICB made commitment of total
financial assistance of Tk. 57.15 crore to 11
projects. In 2004-05, ICB;s commitment of total
financial assistance was Tk. 149.05 crore to 11
projects.
Details of commitments made by ICB during 2004-05 and
2005-06n are shown below in the following table:
(Amounts in Crore Tk.)
Nature of financial
assistance
2005-06
2004-05
Decrease
in
amount(%
)
no. of
projects
Amount
s
No. Of
projects
Amount
s
Pre IPO placement of
shares 2 2.5 2 16.5 84.85
Purchase of
preference share 1 4 1 20 80
Equity participation 1 3.75 1 5 25
Advance against
equity 2 30
Purchase of 4 15.85 6 57 72.19
43
debentures
Lease financing 2 1.05 1 50.55 97.92
Total 11 57.15 11 149.05 61.66Source: ICB annual report 2005-06.
5.3 Other operational activities
Other operational activities of ICB includes advance
against ICB mutual certificates. bank guarantee
scheme and consumer credit scheme.
Advance against ICB mutual certificates:
Disbursement under this scheme amounted to Tk. 4.65
crore in the year2005-06 which was Tk. 4.66 crore in
the previous year registering a decrease of 0.21
percent. Icb provides advance against the
certificates of Icb unit /Mutual funds and ICB AMCL
unit fund.
Consumer credit scheme
As part of business diversification program of ICB,
“consumer credit scheme” was introduced in 2003-04.
Under this scheme the cumulative amount of loan-
disbursed up to 30 June 2006 was Tk. 2.82 crore
including Tk. 1.54 crore during the year under
review.
44
5.4 Merchandising operations
Merchandising operation has been one of the
foundations of ICB functions, which are discussed, in
detailed form in the separate part. ICB has continued
its pivotal contribution significantly to the capital
market through merchandising operations like
management of mutual funds and investment accounts.
ICB has three other subsidiaries. Among them, ICB
Asset Management Company Limited started its
operation in 1 July 2002 to carry out merchant
banking and fund management activities respectively
5.5 Recovery and rehabilitation activities
As in the previous year, ICB continued to put strong
emphasis on recovery of overdue project loans during
the year 2005-06 from the projects financed by ICB.
At the same time, increased focus as given on
recovery of dues on account of dividend/interest on
securities and fees and commissions of different
schemes. In order to make recovery drive more
effective, two task forces and a “Debt collection
unit for written- off loans” comprising senior
officers of ICB make necessary guidelines and follow
45
up. Besides the concerned executives also maintain
relentless efforts to make the recovery drive
successful.
5.6 Participation in international activitiesICB also participate in some international
activities. Among them, some are discussed below:
ICB’s involvement with South Asian Development Fund
(SADF)
SAARC fund for regional projects (SFRP) and SAARC
Rejional Fund were established in 1991 with the
collaboration of member countries of the SAARC. The
established of SADF was officially declared by
dissolving SFRP and SRF in a meeting of the member
countries held in Dhaka in June 1996.
Investment in South Asian Regional Fund
To facilitate investment in SAARC member countries a
development fund of US$ 200.00 million, namely, the
South Asia Regional Fund (SARF) was launched in the
Commonwealth Summit held in 1997. The fund is
maanaged by a wholly owned subsidiary of Commonwealth
Development Corporation(CDC) incorporated in
Mauritius.
46
5.7 Financial results
Total income
ICB earned a total income of Tk. 166.41 crore in
2005-06 which was 2.33 percent lower than Tk. 170.38
crore earned in 2004—05. Though the total income in
2005-06 was lower than that of previous year, the
income was 10.23 percent higher than the previous.
Total expenditures
During 2005-06 the total expenditure stood at
Tk.143.22 croreas compared to Tk. 148.45 crore in the
year 2004-05.
Net income
During 2005-2006 ICB’s net income after tax stood at
Tk. 23.19 crore as compared to net income of Tk.
21.93 crore earned in the year 2004-05 showing as
increased of 5.71 percent.
Dividend
The Board of Directors declared dividend at the rate
of Tk. 12.0 per share for 2005-06. The same of rate
of dividend was declared in the previous.
Appropriation of profits
The board of directors recommended appropriation of
net profit of Tk. 23.19 crore in the manner as stated
below:
47
Comparative position of appropriation of profit(Tk. In crore)
Particulars 2005-06 2004-05
Dividend: 12.0 percent(Proposed)
(2004-05: 12.0 percent) 6 6
General reserve 2 1
Reserve for building 14.5 14
Benevolent reserve 0.4 0.3
Retained profit 0.29 0.63
Total 23.19 21.93Source: ICB annual report 2005-06.
Financial analysis The overall financial position of ICB remained
satisfactory during the reporting year. Financial results
of ICB own and after consolidation of accounts including
its subsidiaries along with some key financial ratios
relating to profitability, liquidity and solvency are
given below:
Particulars
ICB Consolidated
(ICB and its
subsidiaries)
2005-062004-05 2005-06 2004-05
Financial results
Total income (Tk. In crore) 166.41 170.38 180.2 187.82
48
Total expense (Tk. In
crore) 119.17 82.72 122.9 86.82
Profit before provision 47.24 87.66 57.3 101.53
Provision made 24.05 65.73 26.84 69.85
Net profit (Tk. In crore) 23.19 21.93 30.46 31.68
Financial ratios
Net profit to income
(percentage) 13.93 12.87 16.9 16.87
Return on investment
(Percentage) 10.68 9.27 13.02 14.5
Return on equity
(percentage) 14.45 15.73 17.19 20.91
EPS 46.38 43.87 60.92 63.36
Book value per share 325.92 281.63 361.8 307.11
Dividend yield (percentage) 8.45 6
Dividend payout
ratio(percentage) 25.88 27.35 19.7 18.94
P/E ration 3.06 4.56 2.33 3.16
Current ratio
1.18:1
1.11:1
1.24:1
1.15:1
Debt equity ratio 26.74 32.68 24.76 31.69
Source: calculated on the basis of the performance
published in the annual report 2005-06.
49
Chapter 6
Mobilization of fund
6.1 ICB mutual fund
Mutual funds are very attractive investment means due
to its provision of professional asset management
services and "instant diversification" at less
brokerage cost than smaller investor. ICB has played
a pioneering role in the field of closed-end funds.
Up to June 2003 the corporation floated eight closed-
end mutual funds with total paid up capital of TK.
17.50 crore. The funds have been goods source of
consistent income for the certificate holders. These
funds have gain wide spread popularity at home and
abroad because of having scope of capital gain as
well as satisfactory return in term of dividend.
6.1.1 Roles and Performance of ICB Mutual Fund in
the Capital Market
ICB has played a pioneering role in the development
of close-ended mutual fund in Bangladesh. The
country’s first mutual fund that is the “ First ICB
Mutual Fund was launched on 25 April 1980. Since
then, ICB has floated eight mutual funds of total
51
capital of TK. 17.5 crore over the years. ICB mutual
funds have become very popular due to among others
payment of constantly attractive dividend.
52
6.1.2 Comparative Performance of ICB Mutual Funds
Mutual funds seek to offer comparatively safe and
attractive investment revenue to small and medium
investors. Here below analyzed comparative performance of
ICB mutual funds in year 2005.
Table:01 Comparative Performance ofICB Mutual Funds
(Yr. – 2005)
Name ofthe
MutualFund
Sizeof
Fund(Tkin
crore)
MarketValueof
Portfolio
MarketPriceper
Certificate at
DSE(Taka)
Dividend
Declared perCertificate
No. OfCertificate
Holders
Costof
Portfolio
(crore)
MarketCapitaliza
tion(crore)
1st ICBMutualFund .50 13.09 2655 210 973 3.12 13.28
2nd ICBMutualFund .50 3.12 820 55 994 2.84 4.10
3rd ICBMutualFund 1.00 4.73 697 52 2748 4.17 6.97
4th ICBMutualFund 1.00 4.57 564 48 2152 3.82 5.64
5th ICBMutualFund 1.50 7.13 341 27 3923 5.99 5.12
6th ICBMutualFund 5.00 10.02 217 18.5 9712 9.42 10.89 7thICB
Mutual
3.00 12.21 217 16 3163 11.09 6.53
53
Fund8th ICBMutualFund 5.00 12.79 205 15 7671 11.54 10.26Source: ICB annual report from year 2001 to year
2006.
54
6.1.3 First ICB Mutual Fund
First ICB Mutual Fund was established in April 1980,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 50 lac divided into 50000
Certificates of Tk. 100 each. The management of the
fund is vested with ICB.
In the above Table-01 shown that as on 30th June, 2005
market value of portfolio of First ICB Mutual Fund
consisting of 973 certificate holders amounted to TK.
13.09 crore as against cost of portfolio TK. 3.12
crore. That means capital appreciation of TK. 9.97
crore. In year 2005 market price per certificate at
DSE was TK. 2655 and First Mutual Fund was declared a
dividend of per certificate was TK. 210.
6.1.4 Second ICB Mutual Fund
Second ICB Mutual Fund was established in June 1984,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 50 lac divided into 50000
Certificates of Tk. 100 each. The management of the
fund is vested with ICB.
In year 2005 Second ICB mutual fund no of certificate
holders was 55 and market price per certificate at
DSE was TK. 820. In that year market value of
55
portfolio was Tk. 3.12 and cost of portfolio was Tk.
2.84 crore. In year 2005 Second ICB mutual fund
declared a dividend of Tk. 55.
6.1.5 Third ICB Mutual FundThird ICB Mutual Fund was established in May 1985,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 1 crore divided into
100,000 Certificates of Tk. 100 each. The management
of the fund is vested with ICB.
In the above Table-01 shown that as on 30th June, 2005
market value of portfolio of third ICB Mutual Fund
consisting of 2748 certificate holders amounted to
TK. 4.73 crore as against cost of portfolio TK. 4.17
crore. That means capital appreciation of TK. 0.56
crore. In year 2005 market price per certificate at
DSE was TK. 697 and Third Mutual Fund was declared a
dividend of per certificate was TK. 52.
6.1.6 Fourth ICB Mutual FundFourth ICB Mutual Fund was established in June 1986,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 1 crore divided into
100,000 Certificates of Tk. 100 each. The management
of the fund is vested with ICB.
56
As on June 30, 2005 the market value of the portfolio
consisting 2152 certificate holders amounted to Tk.
4.57 crore as against cost of portfolio of Tk. 3.82
crore indicating capital appreciation of Tk. 0.75
crore. In year 2005 market price per certificate at
DSE was TK. 564 and Fourth Mutual Fund was declared a
dividend of per certificate was TK. 48.
6.1.7 Fifth ICB Mutual Fund
Fifth ICB Mutual Fund was established in June 1987,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 5 crore divided into
500,000 Certificates of Tk. 100 each. The management
of the fund is vested with ICB.
In the above Table-01 shown that market value of
portfolio of Fifth ICB mutual fund was Tk. 7.13 crore
and cost of portfolio was Tk. 5.99. In that year
market price per certificate at DSE was Tk. 341 and
number of certificate holders was 3923. Fifth Mutual
Fund was declared a dividend of per certificate was
TK. 27 in year 2005.
6.1.8 Sixth ICB Mutual Fund
57
Sixth ICB Mutual Fund was established in June 1988,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 1.50 crore divided into
150,000 Certificates of Tk. 100 each. The management
of the fund is vested with ICB.
In the above Table-01 shown that market value of
portfolio of Sixth ICB mutual fund was Tk. 10.02
crore and cost of portfolio was Tk. 9.42. In that
year market price per certificate at DSE was Tk. 217
and number of certificate holders was 9712. Sixth
Mutual Fund was declared a dividend of per
certificate was TK. 18.5 in year 2005.
6.1.9 Seventh ICB Mutual Fund
Seventh ICB Mutual Fund was established in July 1995,
under regulation 29A of ICB (general) regulations
with a total capital of TK. 3 crore divided into
300,000 Certificates of Tk. 100 each. The management
of the fund is vested with ICB.
As on June 30, 2005 the market value of the portfolio
consisting 3163 certificate holders amounted to Tk.
12.21 crore as against cost of portfolio of Tk. 11.09
crore indicating capital appreciation of Tk. 1.12
crore. In year 2005 market price per certificate at
58
DSE was TK. 217 and Seventh Mutual Fund was declared
a dividend of per certificate was TK. 16.
6.1.10 Eight ICB Mutual FundEighth ICB Mutual Fund was established in August
1996, under regulation 29A of ICB (general)
regulations with a total capital of TK. 5 crore
divided into 500,000 Certificates of Tk. 100 each.
The management of the fund is vested with ICB.
In the above Table-01 shown that market value of
portfolio of Eighth ICB mutual fund was Tk. 12.79
crore and cost of portfolio was Tk. 11.54. In that
year market price per certificate at DSE was Tk. 205
and number of certificate holders was 7671. Eighth
Mutual Fund was declared a dividend of per
certificate was TK. 15 in year 2005.
6.1.11 Cause Behind Investing in ICB Mutual Fund
ICB Mutual fund is regarded as the most trusted
medium of investment in the country and it is very
much popular with the small and medium investors. The
close it for various reasons, these are-
Diversified Investment: 25% investors come here
because of this reason.
59
Free from Tax: Investment in mutual fund is free
from income tax. This advantage of mutual fund
attracts mainly the businesspersons to invest
here. They study shows that 5 per cent investors
come here with this vision.
High Return: Most small and medium investors
seek a smooth return from their investment. The
dividend payment against each certificate was
very much attractive. This brings satisfaction
to the investors. From the study was found that
10 per cent investors come here because of the
security of their investment.
Free of Harassment: Many investors want to avoid
the harassment in the investment process. That
is why they do not for buying share from the
primary or secondary market. Moreover, it was
found that 5 per cent investors interested
because of this reason.
Risk Free: Small and medium investors are very
much carious about the security of their
investment and they found that there is no
chance to loss their savings and not doubt about
the institution that is will not close its
operation without any notification.
6.2 ICB Unit fund
60
ICB Unit Fund is an open end Mutual Fund and its
share capital is not fixed like other companies or
closed end finds like ICB Mutual Fund. The Fund issue
Unit Certificates freely on the basis of demand and
fix the unit prices as and when deemed necessary
considering the underlying value of its own assets.
The factors responsible for fluctuations in the
quoted price of shares in the stock market are not
applicable to the unit certificates. With the
approval and cooperation of the government,
investment corporation of Bangladesh (ICB) Launched
ICB Unit Fund Scheme on 10 April 1981. The scheme
induces the small and medium savers to participate in
the activities of industrial development of the
country
Unit Fund" means the Fund constituted of all the
assets for the time being held or deemed to be held
on account of the ICB Unit Certificate excluding any
amount standing to the credit of dividend
distribution account, any sum payable to the
corporation as its management charge and other
charges in establishment and administration of the
fund and any amount for purposes of meeting any
requirement of the fond. The corporation issue unit
certificate against unit fund. Unit certificate means
61
a certificate issued by the corporation for the share
in the Unit Fund.
6.2.1 Objectives of the unit fund
Its main objective is to mobilize savings through
sale of its units to small investors and invest these
funds in marketable securities. Thus, the scheme
induces the small and medium savers to participate in
the activities of industrial development of the
country.
6.2.2 Advantages of investing in ICB unit fundGenerally investment in open-end mutual fund enjoys
the following
Advantages.
Unit fund mobilizes the savings of small
investors and channels them in to lucrative
investment opportunities- As a result open-end
mutual fund adds liquidity of the market.
Moreover, given that the fund is long-term
investment vehicle, it reduces market volatility
by offering support to scrip price,
Due to diversified portfolio, open-end mutual
fund helps in reducing investment risk of small
investors.
62
Diversified portfolio of the fund help the small
investors access to the whole market, which is
difficult at individual level.
The investors save a great deal in transaction
costs as he/she has access to a large number of
securities by purchasing a single unit of mutual
fund.
As funds are professionally managed, investors
are relieved from the emotional stress
associated with day-to-day management of
individual investment portfolio,
Only the open —end mutual fund operate
simultaneously both at the demand as well as the
supply side of the market.
Investment in open-end mutual fund may relief
investors from various rules and regulations
applicable to individual investment parameters,
Expertise in stock selection and timing is made
available to investors by gathering higher
return to them,
Mutual fund helps investors to liquidate their
fund out of the investment.
Investment in unit fund contributes not only to
economic growth but also broaden the base of
investment.
63
Unit fund is an open-end mutual fund through
small and medium savers an opportunity to invest
in a balanced portfolio at relatively low risk.
6.2.3 Management of the ICB Unit Fund
Under the Capital Market Development Program
initiated by the Govt. of Bangladesh and Asian
Development Bank ICB Asset Management Company Ltd.
has been formed as per the provision of the
Investment Corporation of Bangladesh (Amendment) Act,
2000 (XXIV of 2000) and started their operation from
the first day of July 2002. Accordingly ICB stopped
selling of Unit Certificate from the same date. There
are some provisions regarding management of ICB Unit
Fund whish are as follows:
Fund share holdings shall be registered in the
same of the corporation on behalf of the Unit
Fund with the respective companies whose shares
are so acquired.
The fund share holdings shall be retained and
held by the corporation for the benefit of the
unit fund certificate holders subject to the
64
provisions of the Articles of Associations of
the respective companies.
The corporation will collect all dividends and
other income in respect of the fund
shareholdings and deal with and act in respect
of, the fund share holdings as shareholders of
the companies without reference to the
certificate holders.
The corporation will provide necessary staff for
management and administration of unit fund and
realize the expenditure incurs there fore
provided, however, such expenditure should not
be added to the price of the unit certificate
exceeding five percent of the total sale price
while determining the price of the unit
certificate.
The corporation shall keep separate books of
account relating to the income and expenditure
of and connected with the unit fund. The said
books of account shall be opened to inspection
only by the Directors of the corporation and the
corporation shall not be accountable to any one
65
expect to its Board in respect of the income and
expenditure relating to any unit fund.
The accounting records of the unit fund will be
kept on the basis of accounting period ending of
the last day of June in each calendar year.
At least one in every year the auditors will
audit the accounting records of the unit fund.
The fees of the auditor’s -will be charged
against and payable out of the income of the
said fund. The statement relating to each period
with the auditors report annexed shall be
conclusive and binding and copies thereof shall
be opened for inspection during usual business
hours by any certificate holder at the head
officer of the corporation of with agents. The
corporation shall be absolutely protected in
retying on and shall act upon an audited
statement.
The profits if any, available in respect of the
unit fund at the end of accounting period will
be distributed to the registered certificate
holders in proportion to the number of
certificate help by them on the accounting date.
66
Deducting the management shall assess the amount
available for distribution in respect of any
accounting period and administration charge from
the total income received by the cooperation in
the accounting period by way of interest,
divided and other receipts and after making such
adjustments as the corporation may think it.
Bonus shares and right shares acquitted in
respect of fund shareholding may be added to the
portfolio of the unit fund or, in the discretion
of the corporation may be sold and its proceeds
added to the income of the said fund.
The corporation shall be competent to do all
other acts that, in the opinion of the board may
be necessary to promote the interest of the
certificate holders and that may be necessary in
view of the capital market and the investment
climate in Bangladesh and warranted by
commercial considerations.
67
6.2.4 Issue of Unit Certificates
ICB units are issued as registered which can be
bought and sold by Govt. recognized charitable
institutions only 10,000 certificates. The
corporations have the right to restrict the
acquisition by a person of the units over and
above certain numbers from time to time. Units
may be offered for sale to institutions also it
the Board may so determine.
These can be bought from the offices
of ICB, approved bank branches of different
commercial bank in Dhaka and other districts.
The units can be transferred using such forms
available for the purpose. Inter officer
transfer of units are allowed it the unit holder
so desires.
ICB units are available in 1, 5, 10, 50, 100,
250, 500, 1,000 and 5,000 denominations and
issued at the discretion of a buyer at the time
of acquisition. Every holder shall be entitled
to exchange any or all of his certificates for
one or new certificates of such denominations as
he may require for the aggregate number of his
against payment of prescribed fee.
68
The units can be sold back of ICB unit fund of
its repurchase price. Only the issuing office of
ICB or banks can repurchase the units at the
prevailing repurchase price.
The units can be pledged with banks for
obtaining loans by the unit holders in terms of
circular of Bangladesh Bank.
The units are regarded as an approved security
for investment and are entitled to investment
allowance under income Tax Act.
The corporation may issue new certificates for
worn out mutilated or defaced ones or in case of
last, stolen or destroyed ones upon satisfactory
proof against payment of prescribed fees.
In case of the death of any one of the Joint
holders of unit certificates, the corporation as
having the title of ownership in these units
shall recognize the survivor or surveyors.
In case of an individual holders death his
successors shall be recognized by the
corporation provided they produce a succession
certificate issued by a court as having the
title to the units.
The books of the fund remain closed during the
month of July every year and sale and repurchase
69
of units remain suspended in all the officers of
ICB and authorized bank branches.
The income derived from professional management
of the fund and capital appreciation from its
operations are determined on the basis of
audited accounts as on 30th June each year. The
annual dividend is declared by the fund in July
and al holders of units are entitled to full
amount of dividend whose names appear in the
register as on the ebbing date, irrespective of
their date of purchase.
Dividend of units up to Tk. 10,000 is exempt
from tax for individuals. Such relief is not
available for dividends on institutional
investment and is subject to 15% deduction of
source. In case of individuals, amount of
dividends exceeding Tk. 10,000 is subject to 10%
deduction at source.
Fresh units can be obtained at confessional rate
1 (One) taka per unit less on the opening sale
price by the existing unit holders through
option for reinvestment of their dividend income
under cumulative investment plan (CIP). No limit
of sale/holding of unit certificates shall apply
to those under CIP scheme.
70
The opening sale and repurchase price of units
are refined after declaration of dividend, which
comes into effect from 1st August each year.
6.2.5 Role and Performance of Unit Fund in the
Capital Market
Unit Fund is an open-end Mutual Fund, which the small
and medium savers get opportunity to invest their
savings in a balanced portfolio in a profitable way
with a relatively lower risk. Investment in unit fund
does not only contribute to the economic and
industrial development of the country buy also
broadens the base of the ownership in the securities.
So, its main objective is to accelerate the pace of
economic development particularly for meeting the
demand growing industrial development by way of
mobilizing savings of small and medium savers and
channeling those in the productive industrial sector.
The flotation of open-end mutual fund demand of
securities in the capital market.
Initially, to develop a healthy and well-organized
capital, open-end Mutual Fund played a significant
role in the securities segment of the capital market,
the investment corporation of Bangladesh (ICB)
started open end Mutual Fund. The investment
71
corporation of Bangladesh (ICB) has been successful
in secondary market merchandising through open end
Mutual Fund. It is the response is highly
satisfactory. The open end Mutual Fund has also
played a significant role in activating the stock
market. The investment corporation of Bangladesh
regularly participates in the trading on the floor of
Dhaka stock exchange (DSE) as its member to buy/sell
listed securities on behalf of ICB itself,
unit/Mutual Fund and of the investment account
holders. Infect, ICB has been the single larger
trader in the last few years. Hence, the activities
of open end Mutual Fund have provided the basis for
the demand of securities, which is interest part of
the development of capital market.
6.2.6 Comparative Position of ICB Unit Fund
ICB operated an open-end Unit fund since April 1981.
As a result of business of ICB Asset Management
Company LTD. From 1 July 2002 the corporation has
discontinued sale of Unit certificate. However, the
existing portfolio of ICB Unit Fund is being managed
by ICB.
Here below shown comparative performance of ICB Unit
Fund from year 2001 to year 2005. This table shows
72
performance of gross issue, repurchase, net issue,
investment costs, market price of investment, no. of
securities held in the portfolio, total amount of
dividend and dividend per unit.
Sl.No. Particulars
Year -2001
Year -2002
Year –2003
Year -2004
Year -2005
1 Gross Issue 28.75 29.26 17.44 17.97 17.092 Repurchase 41.99 34.54 18.60 20.79 23.463 Net Issue (13.24) (5.28) (1.16) (2.82) (6.37)
4Investment at Cost 423.55 397.76 431.33 604.59 637.09
5
Investment at Market Price 376.76 270.28 314.75 626.63 700.89
6
No. of Securities Held in The Portfolio 247 254 262 266 271
7Dividend Per Unit (Taka) 12 12.30 12.30 11.50 12.00
8 Dividend Amount 50.06 50.70 50.57 47.00 48.42Source: ICB annual report 2005-06.
From the above Table- shows that during 2004-2005, a
total of gross issue were Tk. 17.09 crore and Tk.
23.46 crore were repurchased under the Cumulative
Investment Plan (CIP). As on 30 June 2005, the net
issued stood Tk. 463.09 crore. In that year
investment at cost were Tk. 637 crore and market
value of investment were Tk. 700.89 crore. During
73
that time no. of securities held in the portfolio
were 271 and dividend per unit was Tk. 12.
6.2.7 Cost of Investment and Market price of
Investment of ICB Unit Fund
Source: ICB annual report 2005-06.
Above Graph- shows cost of investment and market
price of investment of ICB Unit Fund from year 2001
to year 2005. In year 2005 total investment at cost
of ICB Unit Fund was Tk. 637.01 crore, which is
highest investment cost in compare to other four
years. In year 2002 total investment at cost was Tk.
397.32 crore, which is lowest investment cost in
compare to other four years.
In year 2005 market price of investment of ICB Unit
Fund was Tk. 700.89 crore, which is highest market
price of investment in compare to other four years.
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In year 2002 market price of investment was Tk.
270.28 crore, which is lowest market price of
investment in compare to other four years. From the
above graph we see that both cost of investment and
market price of investment were increase year to
year.
6.2.8 Gross Issue and Repurchase of ICB Unit Fund
Source: ICB annual report 2005-06.
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Chapter 7
Portfolio Making and management
7.1 Making of portfolio
Portfolio management is the cornerstone of ICB’s
activities. Being a leading institutional investor,
ICB contributes significantly to the development of
the country’s capital market through active portfolio
management.
By pooling of funds from different sources especially
from the households investors ICB make portfolio to
invest the funds in the best possible opportunities.
During, 2005-06, a total investment of Tk. 87.03
crore was made in the portfolio of ICB including Tk.
2.5 crore in shares of two companies through
different tools.
7.2 Choosing investment areas
ICB pools fund from the different sources and invest
the fund, which will bring maximum benefit to the
investors. For this purposes, ICB continuously look
for different suitable areas where it can invest the
fund to procure the best benefits. Usually ICB look
for those areas which carry maximum amounts of yield.
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7.3 Allocating funds in different investment
Once ICB find out the investment areas for the
investment purpose, the second step is to take
decision how much amount of fund will be invested in
the different areas. In this purpose, ICB follows a
criterion on the basis of the possible rate of return
from the investment areas. Firstly, ICB invest funds
in that sector which will carry maximum amount of
benefit. In the portfolio setting, then come the
subsequent investment proposals. So, on the basis of
the possible rate of return from the different areas
the weight is given.
As on 30 June 2006, the market value of the
securities of ICB’s investment portfolio was Tk.
394.35crore against the net investment value of Tk.
421.12 crore. 7.4 Pre IPO placements
7.4 Pre IPO placements
During the year 2005-06, a total investment of Tk.
87.03 crore was made in the portfolio of ICB
including Tk. 2.5 crore in shares of two companies
through pre-IPO placement, Tk. 2.22 crore in right
shares of eight companies, Tk. 15.51 crore in
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debentures of 5 companies and Tk. 2.35 crore in the
preference shares of two companies.
7.5 Investment in marketable securities
Despite the sluggish trend prevailing in the
securities market in 2005-2005, ICB earned Tk. 48.67
crore as capital gains through sale of securities of
Tk. 41.62 crore out of its investment portfolio,
which was 31.0 percent lower than the capital gain of
Tk.70.53 crore made in the year 2004-05. During 2005-
06, an amount of Tk.19.04 crore was earned as
dividend on shares and interest on debentures as
against Tk. 20.67 crore in 2004-05,registering a
decreased slightly than that of the previous mainly
due to declaration of lower rates of cash dividend
and declaration of stock dividend by a number of
companies in lieu of cash dividend during the year.
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Chapter 8
Dividend policy
8.1 Dividend or further expansion
The amounts of funds ICB collects from the investors
through different tolls are invested in different
areas. The yield from the investment ICB gets is
whether distributed to the investors or use the money
for further investment. If the amount is used for
further investments, then the investors do not get
the divined in cash rather in other way. For example,
ICB has three other subsidiaries namely: ICB capital
Management, ICB Asset Management Company Limited and
ICB securities Trading Company Limited. These are the
one sort of further investment projects, which are
owned by the investors.
8.2 Market Capitalization of ICB Mutual Fund in
the Capital Market
Nameof theMutualFund Year-2001 Year-2002 Year-2003 Year-2004 Year-2005
1stICB
7.50 7.50 8.37 12.50 13.28
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MutualFund2ndICB
MutualFund 1.99 1.95 2.20 3.00 4.103rdICB
MutualFund 4.32 4.10 4.60 6.98 6.974thICB
MutualFund 3.90 3.40 3.62 5.00 5.645thICB
MutualFund 3.47 3.23 3.35 4.80 5.126thICB
MutualFund 7.99 8.10 7.95 9.72 10.89 7thICB
MutualFund 4.74 4.20 4.25 5.40 6.538thICB
MutualFund 7.27 6.86 6.80 8.36 10.26
Source: ICB annual report 2005-06.
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Source: ICB annual report 2005-06.
8.3 Dividend Declared By ICB Mutual Fund in the
Capital Market
Name of
the
Mutual
Fund Year-2001 Year-2002 Year-2003 Year-2004
Year-
2005
1st ICB
Mutual
Fund 170 175 180 200 2102nd ICB
Mutual
Fund 40 42 45 50 553rd ICB
Mutual
Fund 45 50 50 50 524th ICB
Mutual
Fund 38 40 40 45 48
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5th ICB
Mutual
Fund 23 24 24 24 276th ICB
Mutual
Fund 17 17.50 17.50 17.5 18.5 7th ICB
Mutual
Fund 14 14.50 14.50 15 168th ICB
Mutual
Fund 13 13.50 13.50 14 15Source: ICB annual report 2005-06.
Source: ICB annual report 2005-06.
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8.4 No. Of Certificate Holders of ICB Mutual Fund
Name of
the
Mutual
Fund Year-2001Year-2002Year-2003Year-2004
Year-
2005
1st ICB
Mutual
Fund 1129 1090 1100 1066 9732nd ICB
Mutual
Fund 1134 1087 1085 1074 9943rd ICB
Mutual
Fund 2908 3047 3030 2952 27484th ICB
Mutual
Fund 2528 2430 2390 2335 21525th ICB
Mutual
Fund 4320 4195 4172 4114 39236th ICB
Mutual
Fund 11067 10524 10382 10076 9712 7th ICB 3649 3459 3400 3335 3163
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Mutual
Fund8th ICB
Mutual
Fund 9117 8811 8771 8694 7671Source: ICB annual report 2005-06.
Source: ICB annual report 2005-06.
84
8.5 Market price Per Certificate of ICB Mutual
Fund in DSE
Name ofthe
MutualFund Year-2001Year-2002Year-2003Year-2004
Year-2005
1st ICBMutualFund 1500 1500 1675 2500 2655
2nd ICBMutualFund 397 390 440 599.25 820
3rd ICBMutualFund 432 410 460 698.50 697
4th ICBMutualFund 390 340 362 500 564
5th ICBMutualFund 232 215 223.50 320 341
6th ICBMutualFund 160 162 159 194.50 217
7th ICBMutualFund 158 140 141.75 180 217
8th ICBMutualFund 145 137.25 136.25 167.25 205
Source: ICB annual report 2005-06.
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Source: ICB annual report 2005-06.
8.6 Market Value of Portfolio of ICB Mutual Fund
in the Capital Market
Name ofthe
MutualFund Year-2001Year-2002Year-2003Year-2004
Year-2005
1st ICBMutualFund 7.89 6.92 7.74 11.15 13.09
2nd ICBMutualFund 2.75 2.41 2.80 3.37 3.12
3rd ICBMutualFund 3.49 2.38 2.42 4.21 4.73
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4th ICBMutualFund 4.69 3.64 3.96 4.47 4.57
5th ICBMutualFund 4.06 2.96 3.42 5.73 7.13
6th ICBMutualFund 6.23 5.77 5.50 8.72 10.02
7th ICBMutualFund 6.43 4.25 7.02 10.15 12.21
8th ICBMutualFund 8.44 5.66 7.07 10.83 12.79
Source: ICB annual report 2005-06.
Source: ICB annual report 2005-06.
8.7 Dividend Per Unit Declared By ICB Unit Fund
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Source: ICB annual report 2005-06.
Above Graph- shows dividend per unit declared by
ICB Unit Fund from year 2001 to year 2005. In year
2002 and year 2003 amount of dividend per unit was
Taka 12.30 respectively, which is the highest
dividend per unit declared by ICB in compare to other
four years. Lowest dividend per unit was made in the
year 2004, which was Taka 11.50.
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Findings:
As we know, the main objective of ICB was to
encourage and broaden the base investment, to develop
capital market and to mobilize savings from the
surplus unit and many other issues. Although there in
no doubts that, in the recent years the performance
if ICB was not that much satisfactory. In almost all
the areas, ICB’s performance was deterioration in
compared to the past few years. Some of the issues
are as follows:
Dividend payment in the year 2006 was not
increased in compared to the previous year. It
was a rate of 12.00% in both years.
Net operating income of ICB was decreased in the
year 2006, which was Tk. 592915361but in the
year 2005 net operating income was Tk.
985838483. So, net operating income in the year
2006 was tk. 392923122 less than the previous
year.
Operating profit also decreased in the year
2006, which was Tk.465114496 in the year 2006,
whereas in the year 2005, the operating profit
was Tk. 860445114.
In terms of sale securities, ICB’s capital gain
has also decreased in the year 2006 in compared
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to 2005. The reason may be identifies as the
inept choosing of shares in the market.
The amount of its investment in the main
operational areas has also been decreased. In
terms of lease financing, Project commitments
etc the amount of allocation is decreasing.
In terms of recovery of loans and advances the
performance was not that much satisfactory.
From the above findings, it is seen that, in the
recent years performance of ICB is not that much
satisfactory in compared to the past few years.
Whereas almost in all the areas the performance has
been deteriorated compared to the past few years.
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Justification:
In the justification part after the findings from the
previous page, it can be said that, in the recent years
the performance if ICB was not that much satisfactory..
Some clues under the following tables will help to give
the decision and to compare the performance:
2005-06
2004-05Incomes and gains
Net operating income 592915361 985838483
Total expenses 1191700000 827200000
Operating profit 465114496 860445114
Capital gains 86787866 94248972
Dividend payments 194008022 206698233
Performance ratios
Net profit to total income(%) 13.93 12.87
Return on investment(%) 10.68 9.27
Return on equity(%) 14.45 15.73
Earning per share(Tk.) 46.38 43.87
Dividend yeild(%) 8.45 6
Dividend payout ratio(%) 25.88 27.35
Price earning ratio(Times) 3.06 4.56
Current ratio 1.18:1 1.11:1
Debt equity ratio 26:74 32:68
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Recovery
Lease financing 16.92 5.06
Consumer credit 0.64 0.24
Recovery of project loans 4.47 14.1
Others 175.58 245.27
Total recovery 197.61 264.67
Appendix and references:
1) Annual reports published by ICB.
2) ICB’s official website-www.icb.gov.bd.
3) www.mhhe.com
4) www.google.com
5) And other materials (both from internet and
published).
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