table of ca project paper on: “performance in pooling of funds, making of portfolios and dividend...

Chapter 1Background information and methodologies

1.1 OverviewInvestment Corporation of Bangladesh (ICB) is a statutory corporation. It is mainly an investment bank. As an investment bank is a financial institution, which mobilizes fund from the surplus economic units through various mutual funds and sale of securities and develops funds for the deficit economic units through purchase and/or underwriting of securities..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.

1.2 Statement of the problemICB has a strong impact in the capital market in Bangladesh. It has diversified objectives since its inception. The main concern of the present study is to assess the performance of ICB, i.e to measure to what extent it has achieve its objectives and for this ICB’s three major functional areas have been evaluated. These are mobilization of funds, making of portfolios and formulating and implementing a dividend policy that have contribution to further expansion of the organization.

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1.3 Rationale of the studyThe study has been conducted to identify how ICB is performing in the three major functional areas and in the same time how contribution it has in the development of the capital market. The study has also assessed whether the other financial organizations and the individual investors are benefited by its performance. Meanwhile, the study has also assessed how much contribution it has in creating the bases of investment and mobilization of savings as part of its commitment. Finally, the study has reflected how ICB is contributing to the financial market by its functions and activities.

1.4 Objective of the study

The broad objective of the study is to assess the performance of ICB in three broad functional areas like: pooling of funds, making of portfolios and dividend policy as its contribution in the financial market in Bangladesh. Investment Corporation of Bangladesh is a state-own statutory organization, which was mainly, established to strengthen and reenergize the final market of Bangladesh.

The specific objectives of the study are to assess:

1) The role of ICB to broadening and encouraging the base of investment;2) The role of ICB in mobilization of savings from the households and

channeling them to the financial markets;3) Success of ICB in the development of the capital market;4) Performances of ICB in the recent years in the three major functional

areas;5) Making of ICB’s portfolios after mobilizing funds from the investors;

and6) The dividend policy of ICB

1.5 Methodologies

The 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

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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 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 sheet. In collecting the

information, most recent published data and information has been taken

from the reliable sources for ensuring the quality control.

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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 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 study

This 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 profiles

2.1 Background

Investment 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.

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.

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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,

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

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,

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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

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.

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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 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.

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.

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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.

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 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

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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 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

Shareholders

No. Of

Shares

Percentage

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 454262.5 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

Source: ICB annual report 2005-06.

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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 SADF7 May 1992

Seventh ICB Mutual Fund 30Junel995

Eighth ICB Mutual Fund 23 July 1996

Purchase of own Land & Building 11 December 1997

Participation in Equity of SARF 16 January 1998

Advance Against ICB Unit

Certificates Scheme12 October 1998

Lease Financing Scheme 22 April 1999

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"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 ICB5 December 2000

Computer Training Program 25 March 2001

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 SEC 20 August 2002

Registration as a Custodian with SEC 20 August 2002

Bank Guarantee Scheme 21 June 2003

Advance Against ICB Mutual Fund

Certificate Scheme21 June 2003

Consumers Credit Scheme 15 February 2004

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Received BASIS-SEDF Best IT Use

Award in SOFTEXPO,200428 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, 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 ICB

The 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 resources

Investment 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) 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.

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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.

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;

Process registration, retirement cases;

Deal with retirement benefits including gratuity, pension, provident fund

etc.

4.2 Central accounts department

All 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.

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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

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 the

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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,

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'.

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.

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,

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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

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' and the

'Review & Monitoring Committee' for giving necessary guidelines for

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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

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

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4.17 Audit department

Department 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.

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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 activities

ICB 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

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.)

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Nature of financial

assistance 2005-06 2004-05

Decrease in

amount(%)

no. of projects Amounts No. Of projects Amounts

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 debentures 4 15.85 6 57 72.19

Lease financing 2 1.05 1 50.55 97.92

Total 11 57.15 11 149.05 61.66


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.

27

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 up. Besides the concerned executives

also maintain relentless efforts to make the recovery drive successful.

5.6 Participation in international activities

ICB 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.

28

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.

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:

29

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 21.93


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)

2005-06 2004-05 2005-06 2004-05

Financial results

Total income (Tk. In crore) 166.41 170.38 180.2 187.82

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

30

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.

31

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 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.

32

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 of ICB Mutual Funds (Yr. – 2005)

Name of the

Mutual Fund

Size of Fund (Tk in crore)

Market Value of Portfolio

Market Price per

Certificate at DSE (Taka)

Dividend Declared

per Certificate

No. Of Certificate

Holders

Cost of Portfolio (crore)

Market Capitalization

(crore)1st ICB Mutual Fund .50 13.09 2655 210 973 3.12 13.28

2nd ICB Mutual Fund .50 3.12 820 55 994 2.84 4.10

3rd ICB Mutual Fund 1.00 4.73 697 52 2748 4.17 6.97

4th ICB Mutual Fund 1.00 4.57 564 48 2152 3.82 5.64


6th ICB Mutual Fund 5.00 10.02 217 18.5 9712 9.42 10.89



Source: ICB annual report from year 2001 to year 2006.

33

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

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 Fund

Third 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

34

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 Fund

Fourth 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


with ICB.

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


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

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

35


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


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 DSE was TK. 217 and Seventh Mutual Fund was

declared a dividend of per certificate was TK. 16.

6.1.10 Eight ICB Mutual Fund

Eighth 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.

36

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.

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

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

37

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 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 fund

Generally 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.

38

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.

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:

39

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 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

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

40

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.

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.

41

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.

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.

42

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 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.

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

43

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 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 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.

44

Sl. No. ParticularsYear - 2001

Year - 2002

Year – 2003

Year - 2004

Year - 2005

1 Gross Issue 28.75 29.26 17.44 17.97 17.09

2 Repurchase 41.99 34.54 18.60 20.79 23.46

3 Net Issue (13.24) (5.28) (1.16) (2.82) (6.37)

4 Investment at Cost 423.55 397.76 431.33 604.59 637.09

5Investment at Market Price 376.76 270.28 314.75 626.63 700.89

6No. 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 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


45

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. 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


46

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.

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

47

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 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.

48

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

Name of the

Mutual Fund Year-2001 Year-2002 Year-2003 Year-2004 Year-2005

1st ICB Mutual Fund 7.50 7.50 8.37 12.50 13.28

2nd ICB Mutual Fund 1.99 1.95 2.20 3.00 4.10

3rd ICB Mutual Fund 4.32 4.10 4.60 6.98 6.97

4th ICB Mutual Fund 3.90 3.40 3.62 5.00 5.64


6th ICB 7.99 8.10 7.95 9.72 10.89

49

Mutual Fund





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 170 175 180 200 210

2nd ICB

Mutual

Fund 40 42 45 50 55

3rd ICB 45 50 50 50 52

50

Mutual

Fund

4th ICB

Mutual

Fund 38 40 40 45 48

5th ICB

Mutual

Fund 23 24 24 24 27

6th ICB

Mutual

Fund 17 17.50 17.50 17.5 18.5

7th ICB

Mutual

Fund 14 14.50 14.50 15 16

8th ICB

Mutual

Fund 13 13.50 13.50 14 15



51

8.4 No. Of Certificate Holders of ICB Mutual Fund

Name of the

Mutual

Fund Year-2001 Year-2002 Year-2003 Year-2004 Year-2005

1st ICB

Mutual Fund 1129 1090 1100 1066 973

2nd ICB

Mutual Fund 1134 1087 1085 1074 994

3rd ICB

Mutual Fund 2908 3047 3030 2952 2748

4th ICB

Mutual Fund 2528 2430 2390 2335 2152

5th ICB

Mutual Fund 4320 4195 4172 4114 3923

6th ICB

Mutual Fund 11067 10524 10382 10076 9712

7th ICB

Mutual Fund 3649 3459 3400 3335 3163

8th ICB

Mutual Fund 9117 8811 8771 8694 7671


52


8.5 Market price Per Certificate of ICB Mutual Fund in DSE

Name of the Mutual Fund Year-2001 Year-2002 Year-2003 Year-2004 Year-2005

1st ICB

Mutual Fund 1500 1500 1675 2500 26552nd ICB

Mutual Fund 397 390 440 599.25 8203rd ICB

Mutual Fund 432 410 460 698.50 6974th ICB

Mutual Fund 390 340 362 500 5645th ICB

Mutual Fund 232 215 223.50 320 3416th ICB

Mutual Fund 160 162 159 194.50 217 7th ICB

Mutual Fund 158 140 141.75 180 2178th ICB

Mutual Fund 145 137.25 136.25 167.25 205Source: ICB annual report 2005-06.

53


8.6 Market Value of Portfolio of 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 7.89 6.92 7.74 11.15 13.092nd ICB

Mutual Fund 2.75 2.41 2.80 3.37 3.123rd ICB

Mutual Fund 3.49 2.38 2.42 4.21 4.734th ICB



Mutual Fund 6.23 5.77 5.50 8.72 10.02 7th ICB


Mutual Fund 8.44 5.66 7.07 10.83 12.79Source: ICB annual report 2005-06.

54


8.7 Dividend Per Unit Declared By ICB Unit Fund


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.

55

8.8 No. Of Securities Held in the Portfolio


56

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 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.

57

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 2004-05

Incomes 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

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

58

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).

59

http://www.google.com/

http://www.mhhe.com/

table of ca project paper on: “performance in pooling of funds, making of portfolios and dividend...

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