Role of Icb in the Development of Capital Market in Bangladesh: a Performance Evaluation of Icb Sponsored Mutual Funds

INTERNSHIP REPORT Dept. of cable judgeship Shah Jalal University of lore and technology, Sylhet. INTERNSHIP REPORT Role of ICB in the Development of detonating device grocery store in Bangladesh A surgery valuation of ICB Sponsored plebeian neckcloths Supervisor Ms. Nafsaniath Fathemaf Lecturer De diswholeement of occupancy Administration Shah Jalal University of scholarship and Technology, Sylhet. Submitted By Muhamad Abul Lyse 4th Year 2nd Semester (2nd Batch) Reg no(prenominal) 0099730014 Dept of Business Administration Shah Jalal University of Science and Technology, Sylhet Date of meekness July 06, 2006 Date July 06, 2006It is an immense pleasure for me to certify that this internship compensate entitled Role of ICB in the Development of majuscule of the building blocked States Market in Bangladesh A per ricochetance evaluation of ICB sponsored vulgar finances submitted to the de set forthment of Business Administration, Shah Jalal University of Science and T echnology, Sylhet is an original outmatchow d one(a) by Muhammad Abul Lyse, a student of BBA 2nd Batch of division of Business Administration, bearing the Registration number 0099730014. He has succeeder in fully completed the internship course of development at enthronization stack of Bangladesh (ICB) and prep bed this storey on the aforesaid title downstairs my supervision.I wish him e real success in his endeavors. Signature Ms Nafsaniath Fathema Lecturer, Dept. of Business Administration Shah Jalal University of Science and Technology Sylhet-3114. July 06, 2006 Ms Nafsaniath Fathema Lecturer, Dept. of Business Administration Shah Jalal University of Science and Technology Sylhet-3114. Sub Submission of internship report Dear Madam, Have the pleasure in submitting my internship report titled Role of ICB in the Development of Capital Market in Bangladesh A Performance Evaluation of ICB Sponsored coarse specie .As an integral part of my BBA degree, I have been assigned to work on the affair, with a view to well integrate the abstr roleplayive knowledge I have learned end-to-end my four yrs of knowledge and thus to fine tune these knowledge with practical(a) work begin in a fiscal institution like ICB, the pioneer and largest enthronement funds fix of the country. The Internship Program was actually much valuable as it c atomic number 18d me to gain a real life experience works in a professional environment. I tried my best to get an in depth coverage of the topic and emphasized on using au becausetic infoI am grateful to you for your kind mite and helpful advice in preparing this report. Once again, thank you very much indeed for giving me the opportunity to work under your kind supervision. Yours Sincerely Muhammad Abul Lyse Reg. NO 0099730014 Department of Business Administration (2nd Batch) Shah Jalal University of Science and Technology, Sylhet. Contents part one Chapter one iNTRODUCTION CHAPTER TWO icb and ITS FUNTIONS CHAPTE R tHREE occasion OF ICB IN THE CAPITAL MARKET OF BANGLADESH CHAPTER 4 PERFORMANCE OF icb CHAPTER FIVE SUBSIDIARY COMPANIES OF ICB part two CHAPTER ONE ICB SPONSORED coarse FUNDSCHAPTER TWO findings and passs of an activity an PLAN Detailed contents pART ONE CHAPTER 1 iNTRODUCTION 1. Objective of the cultivation1 2. Scope of the champaign1 3. methodology of the Study2 4. Limitations of the Study4 CHAPTER TWO ICB AND ITS FUNCTION 1. Background of the ICB5 2. Objectives5 3. Functions of ICB6 4. Business insurance7 5. Capital social system7 6. Sh ar Price of ICB8 7. Share holding do of ICB9 8. Products of ICB11 9. ICB at a Glance14 10. Investors stratagem of ICB16 11. Organization Structure of ICB20 12. ICB rough-cut Funds22 13. ICB whole Funds23 14. Development Activities of ICB27CHAPTER THREE enjoyment OF ICB IN THE CAPITAL MARKET OF BANGLADESH 3. 1 Capital Market28 3. 1. 1 Role of Capital Market in the Economic Development of a Country28 3. 1. 2 investiture Process29 3. 2 monetary Market30 3. 2. 1 Objective of the securities Market30 3. 2. 2 The Role of governing body30 3. 3 Financial Market of Bangladesh31 3. 3. 1 Money Market32 3. 3. 2 The non-Securities segment of the Capital Market32 3. 3. 3 The Securities-segment of the Capital Market32 3. 4 The Elements of Security Market33 3. 5 Creating a Supply of Good Securities in Market333. 6 The founding and suppuration of Capital Market in Bangladesh33 . 7 The Present Scenario of Bangladesh Capital Market35 CHAPTER FOUR PERFORMANCE OF ICB 4. 1 Role of ICB in the Capital Market of Bangladesh36 4. 2 Operational Activities of ICB41 4. 2. 1 Consideration of Applications41 4. 2. 2 Commitment42 4. 2. 3 Disbursement 46 4. 2. 4 bring Portfolio47 4. 2. 5 Trustee, Custodian, and homecoming four-in-hand48 4. 2. 6 Lease Financing49 4. 3 Portfolio attention50 4. 4 Other Operational Activities51 4. 4. 1 put on against ICB unit and plebeian Fund certificates Scheme51 4. 4. 2 Consumer Credit Scheme52 4. 4. 3 Merchandising Operations52 4. 4. 4 ICB plebeian Fund52 4. 4. Transaction of Securities53 4. 5 affaire in International Activities53 4. 5. 1 ICBs involvement with South Asian Development Fund (SADF)53 4. 5. 2 Investment in South Asia regional Fund (SARF)54 4. 6 Financial Result of ICB 55 4. 6. 1 Total Expenditure56 4. 6. 2 Net Income56 4. 6. 3 Dividend57 4. 6. 4 Some Key Financial Ratios58 CHAPTER FIVE THREE SUBSIDIARY COMPANIES OF ICB 5. 1 Subsidiary Companies of ICB595. 2 ICB Capital guidance Limited (ICML)59 5. 2. 1 Background of ICML 5. 2. 2 Vision of the Comp some(prenominal)59 5. 2. 3 Mission of the Company60 5. 2. 4 Some Salient Features of ICML investors Scheme60 5. . 5 Advantages of ICML Investors Scheme61 5. 2. 6 allowance billhook contribute61 5. 2. 7 Financial Performance of ICML63 5. 3 ICB addition Management Limited (AMCL)63 5. 3 ICB Securities Trading Company Limited (ISTCL)66 plowshare TWO CHAPTER ONE ICB SPONSORED MUTUAL FUNDS 1. Some key thins of unwashe d investment companys 68 1. Definition of Mutual Funds 68 2. Types of Mutual funds 68 2. ICB Mutual Funds 69 1.Nature of Business 70 2. How to demoralize existing Mutual funds 70 3. Management of the funds 70 4. Assets of ICB Mutual funds 70 5. Management fee, Charge and so forth 71 6. Declaration of Dividend 71 3.Operational Highlights of ICB Mutual Funds 72 4. Financial Statement Analysis of ICBs Mutual Funds 76 1. Earnings Per Share (EPS) 76 2. Dividend Per Share 78 3. Dividend Payout Ratio 79 4. Earning Yield Ratio 80 5.Dividend Yield Ratio 81 6. Price Earning Ratio 82 CHAPTER TWO FINDINGS AND recommendation 1. Finding rough The Capital market of Bangladesh83 2. 1. 1 overlook of Confidence83 2. 1. 2 Frequent Monetary Change83 2. 1. 3 Liquidity Crisis84 2. 1. 4 Volatile Market Situation84 2. 1. 5 Absence of trusty Securities85 2. 1. 6 Absence of Government initiative85 2. 1. 7 Market Maker85 2. 1. 8 Awareness85 2. 1. 9 Lack of knowledge85 2. 1. 10 Mass Participation8 6 . 2 Findings about Investment conjunction of Bangladesh86 2. 2. 1 Services stopped by ICB86 2. 2. 2 Unfair dividend Policy of Mutual funds86 2. 2. 3 Irredeemable Mutual funds87 2. 2. 4 Absence of readiness in Portfolio management of MF87 2. 2. 5 Lengthy Processing87 2. 3 Recommendation of an Action Plan88 2. 4 Conclusion 90 Bibliography 92 Acronym and Appendices I. Appendix Or anagram of ICB II. Appendix Balance Sheet and Income Statement of ICBExecutive abridgment Investment Corporation of Bangladesh (ICB), bringed in 1976, is virtu all in ally the only Investment Bank in Bangladesh. In a broader sense, ICB is both an investing Bank and Development Financial Institution. (DFI). ICB plays a pivotal grapheme to advertize and broaden the base of enthronisation and thereby to help to develop a vibrant chapiter market in Bangladesh. ICB caters to the need of institutional clog up to meet the equity gap of emerging bare-ass companies. ICB whole shebang with a view to mob ilise savings of general earth and inspires keen and medium savers for investment in securities.As s single entity, Government of Bangladesh holds majority shares of ICB (i. e. 27%). With diverse functions, ICB operates on moneymaking(prenominal) basis, provides pecuniary assistance to projects vitrine to their stintingal and commercial viability and ar governs equity and bestows singly or finished consortium of fiscal institution. Functions of ICB include purchasing of shares and debentures including locationment and direct participation, managing existing interchangeable funds and investment count ons, providing investment advocate to investors and helping regime to its divestment programs.The following report titled The Role of ICB in the development of Capital Market in Bangladesh A Performance Evaluation of ICB Sponsored Mutual Funds contains a comprehensive overview of ICB with special wildness on ICBs role in the development of great market in Bangladesh. Likew ise, an analysis of ICB sponsored Mutual funds is do with detail pecuniary analysis as ICB since its inception, have been performing a pioneering role in the heavy(p) market of Bangladesh by managing the portfolios of ICBs eight-spoter from Decatur unwashed funds. Since 1980, ICB floated a total of eight mutual funds with give up capital of Tk 17. 0 crore. After taken a restructuring program of ICB under Capital Market Development Program (CMDP) initiated by the government of Bangladesh and the Asian Development Bank (ADB) and in terminations of power conferred in the ICB ordinance triad adjunct companies, namely (1) ICB Capital Management Limited (2) ICB Asset Management Company Limited and (3) ICB Securities Trading Company Limited have been created and made running(a) to carry out merchant banking, mutual fund operations and stock brokerage functions respectively. The report is divided mainly into two parts.Part One contains a comprehensive coverage of ICB with its role in the development of capital market in Bangladesh and Part Two establishes part one by analyzing the ICB sponsored Mutual funds as ICB plays a central role in the capital market of Bangladesh by managing its eight mutual funds. Part One consists of Four Chapters. Chapter One includes the objective, celestial orbit, methodology and limitations of the study. Chapter Two describes historical background, objectives, billet policies, functions, capital structure and products of ICB.Chapter Three explain the financial market and various segments of financial market of Bangladesh. The chapter similarly establishes the role of ICB in the development of Capital Market in Bangladesh. Chapter Four illustrates the performance of ICB. Chapter Five includes a explanation of three subsidiary companies of ICB. Part Two consists of two chapters. Chapter one evaluates the ICB sponsored mutual funds. This chapter initially deals with some theoretical concepts of mutual funds and then an in-dept h financial performance of ICB mutual funds.Chapter two includes some findings of the study with recommendation of an action plan. The report ends with a bibliography and an appendix. Acknowledgments I would like to express my gratitude to Dr. Md. Nazrul Islam, peak and Associate professor of the Department of Business Administration of Shah Jalal University of Science and Technology, Sylhet and All of the T all(prenominal)ers of the Department oddly to my supervisor Ms Nafsaniath Fathema who constantly inspired, supervised, and boost me with valuable advice and cooperation through the whole period of my internship Program.I would also like to express my special regards to Ms Nasreen Sultana, AGM of the Personnel Department, who allowed and gave me the opportunity to work in Investment Corporation of Bangladesh, the pioneer Investment Bank of the country. I am also highly grateful to the authority of ICB and all the AGMs of various departments who helped me a lot and cooperated m e during my internship period. I am in pleasure to the express my gratitude to the internship and placement committee of the Department of Business Administration especially to the oordinator of the committee, Mohammad Imtiaz Ferdous, also the Assistant Professor of the Department of Business Administration. I would like to extend my special convey to Ms Sharmin, Senior Principal Officer of Personnel Department, Subashis Chakrabarti, Assistant librarian of the ICB and all the respective officers of ICB for their social cooperation and helpful advice. As the first work of my life, I would bear this fond memory of ICB for the rest of my life. PART ONE CHAPTER ONE INTRODUCTIONS 1. 1 Objective of the Study Learning by doing is an effective way of acquiring knowledge. To have a real life exposure, each student of Department of Business Administration, of Shah Jalal University of Science and Technology has to carry out an in ternship program as an integral part of his/her BBA degree.Since, only the theoretical knowledge offer non make one fit for increasing competitive situation of the world, the internship placement committee had set(p) me at ICB for a period of three months. Other objective of this study is as follows ? To relate pedantic knowledge with real life business world. ? To have an overall idea about the role of ICB in the capital market of Bangladesh with a special emphasis on ICB sponsored Mutual Funds1. ? To analyse the profitability of ICB sponsored mutual funds. ? To find out prevailing drawback and lacking of ICB, if there is any, and recommend an action plan. 1. 2 Scope of the Study The scope of this report is only one organisation i. e.Investment Corporation of Bangladesh (ICB) and specially the Mutual Funds as it is the focus area of this report. It has been mentioned earlier, the main objective of the study is to analyse the role of ICB in the development of Capital market in Ba ngladesh with an emphasis on ICB sponsored mutual funds. The report gives an overview of ICB followed by a part on financial involvement of ICB. The report establishes the theoretical and conceptual framework comparing with which the capital market will be judged. There is one elaborate part that deals with the ICB sponsored mutual funds. The study will also present some problems of ICB observed during the internship coupled with some recommended action plan. 1. Methodology of the Study Methodology prat be referred as underlying principles and rules of organization or the philosophical systems that work at the backdrop of any study. It clarifies the problems involving the search in a very dictateed and systematic fashion. Strategies are determined at this set up for future implementation. In conducting any formal survey and preparing any research paper two kinds of info i. e. Primary Data and Secondary Data, are used. I tried my best to gain vigor both types of data and inform ation and have firm intention to emphasis on primary data as it is oftentimes up-to-date and more useful than any make information.Initially we collected raw data from departments of ICB and then sort out useful information relevant to my paper. Approaches and methods that have been used to prepare this report are as follows. 1. Personal interview ICB has 25 departments and three subsidiary companies so far. I personally interviewed approximately all AGMs of all departments and talked with the senior Principal Officer, principal Officer and other officer of concerned departments. 2. apprize Session Division heads (DGMs2) and department heads (AGMs) or their approved officials gave briefs about their respective departments. Information self-contained from these sessions has been used in the report. 3.Published reports a large come in of data are taken from the published sources much(prenominal) as ICBs annual reports of previous divisions, Annual reports ICB Mutual Funds, Mon thly review of capital of Bangladesh and Chittagong post Exchange. 4. Selection of the sample the sample area of this study covers the head office of ICB. Since the central financial activities are done under surveillance of the Head office of ICB, so the selection of sample of this study is justifiable. Data collected from different divisions of ICB are all equally important segments of sample used in this study. ICB as a national investment institution has added a tempo in developing the capital market of Bangladesh. As a result of this importance the selection of ICB as the sample area of this study is presumably the demand of the time. 5.Time objects As stated earlier since the purpose of this internship program is an exposure to practical life, the ICB management has deputed me to all the division, departments, sections and cell to acquire hand-on-experience about each of them. I have visited the departments according to the following schedule. Name of the Departments From T o 1 Personnel Department 27. 03. 2006 28. 03. 006 2 Secretary Department 29. 03. 2006 3 Planning research and Business development Dept. 30. 04. 2006 09. 04. 2006 4 Management Information Dept. 10. 04. 2006 12. 04. 2006 5 Securities Analysis Dept. 13. 04. 2006 16. 04. 2006 6 Investors Dept 17. 04. 2006 19. 04. 2006 7 Shares Dept. and expiation Cell 20. 04. 2006 25. 04. 2006 8 Unit sales Dept. 26. 04. 006 27. 04. 2006 9 Unit accommodation and collection Dept. 30. 04. 2006 02. 05. 2006 10 Mutual Fund Dept. 03. 05. 2006 07. 05. 2006 11 Central Accounts Dept. 08. 05. 2006 10. 05. 2006 12 System Analysis Dept. 14. 05. 2006 15. 05. 2006 13 Programming Dept. 16. 05. 2006 17. 05. 2006 14 Loan idea Dept/Lien Cell 18. 05. 2006 21. 05. 2006 15 SAARC Cell 22. 05. 006 - 16 Project Implementation Dept. 23. 05. 2006 - 17 Loan Recovery and Monitoring Dept. 24. 05. 2006 25. 05. 2006 18 Project Loan Account Dept. 28. 05. 2006 - 19 Public Issue Dept. 29. 05. 2006 - 20 T rustee Dept. 30. 05. 2006 31. 05. 2006 21 fairness Dept. 01. 06. 2006 04. 06. 2006 22 study and Method Dept. 05. 06. 2006 06. 06. 2006 23 Department Control Dept 07. 06. 006 - 24 Establishment Dept. 08. 06. 2006 11. 06. 2006 25 public Relation Dept. 12. 06. 2006 - 26 ICB Asset Management Company Ltd 13. 06. 2006 15. 06. 2006 27 ICB Capital Management Ltd 18. 06. 2006 20. 06. 2006 28 ICB Securities Trading Ltd 21. 06. 2006 26. 06. 2006 Table 1. 1 Schedule of working at ICB 1. 4 Limitations of the Study Limitations are obvious in any study so do here.Since this is an internship report, the limitations regarding the internship programm has acted as the limitation of the study. The findings we calculate out, and the recommendation we made may non be 100% accurate and may non contain the exact situation. Eventually, in completion of my study, a number of constraints and limitations I faced. These backside be considered as follows ? Performance analysis of ICB and its m utual funds may not represent the current condition of the organisation and its mutual funds as all the analysis are based on the data of June 30, 2005. Since the current year financial disclosures are not public yet, so the analysis is a little backdated. ? Officials of ICB maintain a very busy schedule.So they were not always able to provide enough time to better the intern students every time, even if they had the intention to do so. ? Due to security reasons and organizational privacy we didnt have access to some core areas of ICB. ? I had to go almost every department of ICB during my three months internship programm at ICB. Three months is a very short span of time to get an in-depth knowledge about a giant organization like ICB. ? The area covered by the report The role of ICB in the development of Capital Market in Bangladesh A Performance Evaluation of ICB Mutual Funds concerns a huge a number of activities and it is very difficult to skand so forth a total picture of the financial activities in a report of this short scale. CHAPTER TWO ICB AND ITS FUNCTIONS 2. 1 Background of the ICB The investment corporation of Bangladesh (ICB) was established on 1st October 1976, under The Investment Corporation of Bangladesh ordinance, 1976 (no XL of 1976).The establishment of ICB was a major footfall in a series of measures undertaken by the Government to revivify 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 companies. 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. Through the enactment of the Investment Corporation of Bangladesh (Amendment) Act 2000 (no 24 of 2000), reforms3 in operational strategies and busin ess policies have been implemented by establishing and operating subsidiary companies with ICB as the holding company. 2. 2 ObjectiveAs the countrys Pioneer Investment Bank, ICB has been working to assist the micro investors in mobilizing their savings. ICB works with a view to broaden the base of the investment of the country, experience mass participation of general people in the capital market and thus to contribute towards the gross domestic product of Bangladesh. ? To encourage and broaden the base of investments ? To develop the capital market ? To mobilise savings ? To promote and establish subsidiary companies for business expansion. ? To provide for matters 2. 3 Functions of ICB To develop the capital market of Bangladesh, and mobilise the savings of comminuted investors, ICB carry out a range of diversified functions.With a solid view to foster and accelerate the economic growth of the country, ICB provides all sorts of financial serve to the potential sector. Ensurin g equal distribution of economic benefits gained by the economy among the grass root level is one of the main objectives of ICB. Various functions of ICB heap be mentioned as follows. Unlike any other financial institutions, ICB maintains a portfolio of the government comprised of different securities of listed companies and helps government advising regarding fiscal and monetary policy of the country. As a market maker it floats mutual funds, issues unit certificates, underwrites securities and manages issuance of securities. Underwriting of initial public offering of shares and debentures Underwriting of right issue of shares Basic Direct bargain for of shares and debentures including Pre-I4PO placement and equity participation Functions Providing acquire finance to industrial machinery and other equipments singly or by forming syndicate Of Managing investors Accounts Managing Open End and close End Mutual Funds5 ICB Operating on the Stock Exchanges Providing in vestment counseling to issuers and investors Participating in government investment program Participating in and financing of, joint-venture projects Dealing in other matters related to capital market operations Trusty, Custodian, Bank Guarantee Consumer Credit 2. 4 Business Policy The corporation has follow a realistic business policy framework within which its operation is conducted.The corporation, acts on commercial stipulation 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. Business To arrange consortium of financial institutions including merchant banks to provide equity support to Policy projects and thereby spread the risk of underwriting. Of To develop and encourage entrepreneurs. ICB To diversify investments in securities. To create employment. To encourage Investment in IT sector. To encoura ge Investment in joint venture capital/project. 2. 5 Capital Structure Capital Structure of ICB -as on June 30, 2005 (Tk in crore) Authorised capital 100. 00 Paid up capital 50. 00 have 84. 11 Retained profit 5. 6 Long term govt. Loan 5. 25 Debentures 61. 80 Others 24. 89 Total 231. 41 Source Drawn based on the data of ICB Annual Report 2004-2005 work 2. 1 Capital Structure of ICB Share expenditure of ICB Share price of for the last year was as follows Fig 2. 2 2. 7 Share holding Position of ICBEquity participation from a range of institution along with the government of Bangladesh has made the capital structure of ICB as a unique. Nationalised banks, Private commercial banks, Bangladesh Bank including the general public have ownership in ICB. Shareholding stain of ICB (as on June 30,2005) Share holder No. of share holder No. of shares Percentage Governments of Bangladesh 1 1350000 27. 00 Nationalised Commercial Banks 4 1137220 22. 4 Development Financial Institu tion 2 681550 13. 63 Insurance Companies 3 618286 12. 37 Bangladesh Bank 1 600000 12. 00 Denationalized Private Com Banks 2 454263 9. 08 Private Commercial Banks 3 28286 0. 7 Foreign Commercial Banks 2 26531 0. 53 First BSRS Mutual Fund 1 6900 0. 14 Other Institution 9 26949 0. 54 General Public 927 70015 1. 54 Total955 5000000 100. 00 Table 2. 2 Shareholding Position of ICBSource Annual Report 2004-2005 pic Figure 2. 3 Shareholding position of ICB 2. 8 Products of ICB Private Placements ICB is authorized to act as an agent of the issuers and investors for mysterious placements 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 portfolio both in pre-initial offering placement and equity investment. Underwriting6 In order to raise long term equity from the primary market, the government bodies, enterprises, corporations 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 probity position to attract the potential investors to the proposed issue of shares, debentures and other securities for successful flotation of IPO and placement. Custodian and Banker to the Issues To act as the custodian to the public issue of Open-end & Closed-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. Mergers and Acquisitions Companies willing to expand their business through mergers or acquisitions or o divestment projects that no longer viable into present capacity of operation feces pertain the Corporation. ICB provides professional services & advices in respect of shaping up the cost and financial structures to ensure best possibl e operational results. Besides, in case of divestment, the corporation, through network and established business relationship, bring buyers and sellers together, help them to negotiate final agreement and advice on the emerging corporate structure. Advance against Unit Certificates Scheme Advance against ICB Unit Certificates Scheme was introduced in 1998, especially designed for the ICB unit- holders to meet their emergency fund requirements. One can borrow upper limit Tk. 5 per unit by depositing his/her unit certificates under lien arrangement from any of the ICB offices where from such unit certificates were issued. The rate of interest on the lend is clean and competitive. Corporate Financial Advice Government enterprises and Companies intending to go public issue often seek professional & financial advice on corporate restructuring & reengineering. ICB through its expertise provide such services through its expertise. Lease7 Financing ICB Provides lease finance mainly for pr ocural of industrial machinery, equipment and transport. ICB provides professional advice and financial assistance to the intending clients.The period of lease, rental, charges, and other terms and conditions are determined on the basis of type of assets and the extent of assistance compulsory by the applicants. Since introduction of this strategy in 1999, good responses have been received from the intending lessees. Trustee to the debenture and Securities assets ICB is acting as a trustee to the debenture issues and asset-backed securitised bonds. ICB acted as trustee to the issues of 17 companies of which 7 companies has been redeemed successfully. Bank Guarantee scheme ICB introduced Bank Guarantee scheme in 2002-03. ICB provides (i) Bid Bond for enabling the business people to participate in any bleak or bidding ii) Performance Bond for helping the business community to continue their business swimmingly by fulfilling their obligations promised by them to their clients and (i ii) Customs Guarantee for solving different disagreements between the customs authority and the business classes at the initial stage. The maximum limit of tackle is Tk. 2. 00 crore and would be issued against at east 20% cash and 80% slow encashable securities or against 100% cash margin. Re-guarantee from other financial institution is required for guarantee against the amount exceeding Tk. 2. 00 crore. Consumer Credit Scheme As part of business diversification program, ICB has introduced Consumers Credit Scheme in 2003-04 considering at the need of various household commodities of different employees of govt. , semi-govt. autonomous bodies and some established private sector organizations. Under this scheme one can enjoy minimum Tk 1. 0 lac but maximum 5 lac recognition facilities. The rate of interest on the loan is reasonable and competitive which is fixed by the board of directors of ICB considering the bank rate and with the guidelines of Bangladesh Bank. 2. 9 ICB at a Gla nce Particulars Cumulative up to June 30, 2005 (Tk in Crore) Authorized Capital 100. 00 Paid up Capital 50. 0 Financial Assistance to projects (Commitment) No of projects 431 tot 536. 87 Disbursement of project loan No of projects 308 core 114. 2 Trustee to debenture issue No of companies 17 Amount 184. 15 Trustee to issue of bonds No of companies 5 Amount 134. 6 Custodian/Trustee to issue of Mutual Funds No of funds 4 Amount 60. 00 Manager to the issue No of companies 41 Amount 104. 9 Lease financing No of projects 34 Amount sanctioned 92. 93 Public Issue (ICB Assisted) No of companies 111 Size of issue (General public) 368. 3 ICB Investors scheme No of accounts exposed 77207 Investment made 760. 82 ICB Mutual Funds Number 8 Capital fund 17. 0 Total market value of investment 67. 66 Dividend per certificate in eight mutual funds for the year 2004-2005, ranges from Tk 15 to Tk 210) ICB unit fund Gr oss sale 940. 8 Rate of dividend for the year 2004-05=Tk12 per certificate ICBs Transaction in the Stock Exchanges including subsidiaries DSE 769. 90 CSE 268. 73 Financial Results (For the year 2004-05) (Tk in crore) Income 170. 38 Net profit after Tax 21. 3 Dividend (Tk per share) 12 Manpower (as on June 0,2005) 396 No of shareholders ( as on June 30, 2005) 955 2. 10 Investors Scheme of ICB Investor scheme is one of the core functions of ICB. Through investors scheme, ICB ensures Participation of small investors in the capital market of Bangladesh. The Investors Scheme was introduced in 1977 with the objective of broadening the base of equity investment through mobilising savings of small and medium size savers for investment in the securities market.In addition to Head Office, Investment Accounts are also operated at the 7 branch offices of ICB located at Dhaka, Chittagong, Rajshahi, Khulna, Barisal, Sylhet, and Bogra. However in view of strategic changes in polic y reform, from 01 July 2002 ICB stopped coal scuttle new accounts and ICB Capital Management Ltd. started opening and managing investment accounts. ICB will continue to provide services to its existing accounts only. Table 2. 3 Comparative operational activities of the investors scheme in 2004-2005 and 2003-2004 Particulars 04-05 03-04 Increase/Decrease Cum as on June 30, 2005 (%) No. f accounts opened 72207 No. of accounts closed 807 776 4. 26 28327 No. of net operative accounts 48880 49687 -1. 62 48880 Deposit received 22. 7 27. 31 -16. 62 314. 87 Loans disbursed 159. 5 58. 73 171. 58 707. 8 Investment Made 118. 26 62. 91 87. 98 760. 82 Interest accrued 25. 09 30. 48 -17. 68 Interest waived 19. 06 31. 26 -39. 03 55. 52 Recovery of margin Loans 179. 6 103. 14 74. 13 Fund withdrawal 40. 18 13. 09 206. 95 still steps were undertaken to enhance the quality and speedy service under the scheme like computerization of all activities and installation of merchandi zing operation management software. This enables the management to offer better and quick service to the investors including instant add together of the financial tale, portfolio, balance of the accounts, etc. Installation of telephone banking system in Investors Account enabling investors to collect information and operate their account over telephone was at the final stage of operations. Besides, installation of electronic display system of DSE online trading on the floor of ICB has been set up. Through investors scheme ICB provides the following services. billet of OperationAn account may be operated by the account holder himself/herself or he/she may authorize to another A/c. holder of investors account of ICB by written consent in the positively charged form, some one else to operate the account on his/her behalf. In case of joint account holders, account may be operated by single or joint signatories or by authorised operator. Margin Loan Presently ICB grants loan up to tw o times i. e. at the ratio of 13 against the deposits of account holder(s) subject to a maximum of Tk. 3, 00,000. 00 to an account. However, management of ICB, at its discretion, may limit such loan. Loans are repayable as per repayment schedule given by ICB.In the event of default of loan repayment, the outstanding amount may be recovered by sale of securities held in the account. Portfolio Management The account holder may use his/her equity and the loan to buy securities which ICB keeps as collateral. Purchase and sale orders are executed by ICB within the shortest possible time, subject to the availability of fund in the account and scope of matching of buyers/sellers and securities in the stock deputizes. An account holder or his/her authorized person may place purchase/sale execution order in the prescribed form, indicating whether, the order is a limit order i. e. an specifying the max. /min. rice at which he/she is willing to buy /sale, or at a market price i. e. without an y limit of price. The purchase and sale orders are valid for seven and ten days respectively, if not revalidated / cancelled otherwise by the account operator. Withdrawal of Securities/Funds All or any amount of fund or securities may be withdrawn from an account subject to keeping of minimum credit balance of Tk. 5000. 00 in cash or in securities to keep the account running alive. Application against IPO All activities relating to application for securities and collection of allotment letter / refund warrant and certificates, as the case may be, against the IPO8 are done by ICB on behalf of account holder.Collection of Securities and Benefits Right shares, subvention shares, dividends, interest, converted shares etc. accruing to an account are collected by ICB from the respective companies. Registration and protective services Registration of shares/ securities with the company is made before the closure of the companys share / debenture transfer book, after completing all the re quired formalities, on behalf of the account holder. Volt and other tutelary arrangement for assets of the account are provided by ICB. steering and data support In order to develop diversified and balanced portfolio to minimize risk and maximize profit, ICB provides professional advice to its clients.Data support in the form of securities analysis sheet, daily purchase/ sale position, statement and portfolio of each account, etc. are provided on demand and on regular interval. Income Incomes from investments by way of dividend, interest, bonus shares, capital gains etc. are credited to the respective account. Expense Interest on loan (currently-12. 5%) and brokerage (0. 5% for non CDS & 0. 5250% for CDS) on sale/ purchase of securities are charged to the respective account. To encourage the small and medium savers, ICB at present does not charge fees for most of the services rendered by ICB to its customers, including fees for management, investment advice, custodial service(for non CDS securities),etc. Closing of AccountAn account may be closed by written order subject to settlement of fees & dues, if any. There is no provision of revival of a closed account. Risk Management Risks of investments in the securities market are minimized through prudent & professional portfolio management. 2. 11 Organization Structure of ICB Management of ICB The head office of the corporation as per the requirement of the ordinance of ICB is located at Dhaka. The board of directors of ICB is very much rich as it consists of distinguished professional and managing director of other organization. The Board consists of 11 members including the death chair and Managing Director. The Board of Directors consists of the following members. The Chairman and Managing Director (MD) are to be appointed by the government o The directors to be appointed by the government from among persons serving under the government. o One Director to be appointed by the Bangladesh Bank o The Managing D irector of Bangladesh Shilpa Bank (BSB), ex office. o The Managing Director of Bangladesh Shilpa Rin Shnagsta (BSRS) o Four other directors to be elected by the shareholders other than the government. ICB- its Divisions and Departments Investment Corporation of Bangladesh split, into 25 departments and 11 divisions in its head office. Beside that ICB has seven branches in different districts. These are situated at Dhaka (local office), Chittagong, Sylhet, Rajshahi, Khulna, Bogura and Barisal. ICB is functionally divided into two broad wing.One is operations wing and another is Administrative wing. The functions of operational wings involve the activities of project Financing, Planning Research and Business Development, Lunching Unit and Mutual Funds ( founding if new funds is now stopped and currently the function is accomplished by ICB Asset Management Ltd), movement and maintenance of Investor Accounts. The function of administrative Wing involve the activities of Account and Fi nance, Legal affairs, Implementation and Recovery, Project Implementation, Law and Public Issue. It is mentioned earlier, that ICB consists of 11 Divisions and 25 departments. The following table lists all the divisions and departments of ICB.An appendix at the pf the report contains the full Organ gram of ICB. Table 2. 4 Division Department A. Administration 01. Personel 02. Establishment B. Loan Appraisal 03. Loan Appraisal 04.Economic and Business Research 05. Securities Analysis C. Legal Affairs 06. Public Issue 07. Law D. Merchandising 08. Investors 09.Shares 10. Transaction E. Funds 11. Unit sales 12. Unit Registration and Procurement 13. Mutual Funds F. Computer 14. System Analysis 15.Programming 16. Management Information System G. Audit And Methods 17. Audit And Methods (Head Office) 18. Audit And Methods ( complicationes) H. Accounts and Finance 19. Central Accounts 20.Project Loan Accounts I. Implementation 21. project Implementation 22. Recovery and devour J. Secretarys 23. Secretarys 24. Public Relation K. Branch and Subsidiaries control Division 25.Branch Control Department 2. 11 ICB Mutual Funds It is a recognized principle that diversification of investment reduces risk. An individual may not have the time, expertise and resources to undertake such diversification. Here arises the advantage of a Mutual Fund. Mutual Funds pool the savings of a great number of investors and make investments in a wide array of securities. In Bangladesh ICB has pioneered Mutual Funds for the sake of investors and of the capital market. Mutual Funds are also known as close ended Mutual Funds. The issued capital of a Mutual Fund is limited, that is, a Mutual Fund offers a limited number of certificates for sale to the public.The amount of capital and the number of certificates of each Mutual Fund remains unchanged. ICB Mutual Funds are independent of one another. Price of Mutual Fund certificates after IPO is determined on the Stock Exchanges through fundamental interaction of supply and demand. The market price of a Mutual Fund certificates is available in Stock exchange quotations and in newspapers. An investor can purchase any of the existing eight ICB Mutual Funds certificates through the Stock Exchanges at the prevailing Market Price. The Mutual Funds are managed by ICB as fund film director for which receives commission 1%. ICB Mutual Funds Certificates holders shall have unfettered ownership in the assets of the Fund to which they are related.In case of winding up of the Corporation the assets belonging to any ICB Mutual Fund shall not be treated as the assets of the Corporation. At present management fee 1% on the paid up capital of the Fund is charged annually. No amount is charged on account of custodial and trust services. The net income received on investments of Funds on account of dividend, bonus, interest, capital gain etc. are distributed amongst the Certificate Holders as per d ecision of the Board of Directors of ICB. Board declares such income in the form of dividend at the end of July each year. Dividends declared by ICB in the past on the Mutual Funds were very attractive.A detail analysis on ICB sponsored mutual fund will be followed on the mho part of the report. 2. 12 ICB Unit Fund Sponsored by the Government of Bangladesh, ICB Unit Fund was established on April 10, 1981. Its main objective is to mobilize savings through sale of its units to small investors and invest these funds in marketable securities. The scheme provides a potential source of equity and debt to industrial and commercial concerns and thus contributes to the industrial development of the country. Unit fund is an open ended Mutual Fund. It provides an opportunity to the unit holders to invest their funds in a well managed and diversified portfolio with a high degree of security of capital and reasonable yearly returns.Investment in Units is safe and ensures a continuous and regula r source of income for the holders. Units are easily encashable. As such, investment in Unit is comparatively more attractive. By investing in this scheme an investor may derive personal benefit on the one hand and also contribute towards the economic development of the country on the other. ICB units are securities within the meaning of Trust Act. 1882. Issue, Transfer and Surrender of Unit Certificates (I) Units are available in 1, 5, 10, 50, 100, 500, 1000, & 5000 denominations. The names with addresses of the holders are recorded and dividends are dispatched to them accorded and dividends are dispatched to them accordingly. II) Units may be transferred through prescribed transfer form duly filled in and signed by the transferor and transferee. No stamp duty is required for such transfers. (III) Units may be encased by way of surrendering the certificates along with the prescribed surrender forms duly filled in and signed by the registered holders and no prior neb is required. T he certificates are required to be surrendered at the prevailing Repurchase Price. Price Fixation Changes in repurchase prices of units are notified through the newspapers and price of a Unit is fixed periodically by ICB as its fund manager. Among others, valuation of the assets of the Fund is taken into consideration while fixing price of a unit. Public ParticipationThe Fund is divided into units which are generally known as ICB Unit. Each Unit bears a certain value in the assets of the Fund. The Unit holders are the owners of the fund and only they are benefited from it. Unit certificates can be purchased in single or joint name (s). At present maximum of 10,000 Units can be purchased in a single or joint name(S) at a time. Units are not sold to institutions. Professional Counseling Professional Counseling is rendered to the prospective & existing investors who are eager to purchase ICB Units through ICB offices and authorized Bank branches. Presently this scheme is operated by IC B Asset Management Company Limited. Investment by Bangladeshi Citizens AbroadThe Bangladeshi citizens living abroad may invest in certificates on fulfillment of the following terms and conditions (I) The value of Units purchased is to be remitted through bank channel, (II) The money invested in Units and benefits thereon are not allowed to be repatriated, (III) The investors must mention their local and bank addresses in Bangladesh for convenience of registration of Units. Investment by Foreigners Residing in Bangladesh The foreign nationals residing in Bangladesh may also invest in Unit Certificates, provided they produce certificates to the effect that money being invested are their own savings and is not borrowed as loan or overdraft from any bank. These certificates are to be collected from a Gazetted Officer or a Banker not below the rank or Deputy General Manager. Fund ManagementThe responsibility of managing the fund rests on ICB for which management fee Tk. 1. 25 per Unit (net outstanding) is charged. The Corporation also discharges the responsibility of loading and unloading of securities in and from the portfolio in the interest of the Unit holders. It is also the custodian of all assets of the fund. Dividend The total income earned on investment/ deployment of funds, net of expenditures incurred, in a financial year is distributed among the unit holders as dividend. Dividend is normally declared at the end of July each year by the Board of Directors of ICB. Dividend Warrants are dispatched soon after declaration of dividend.Since launching of the scheme in 1981 till FY 2004-05 the rates of yearly dividend declared/ paid are as under Figure 2. 4 dividend performance of ICB unit fund The graph shows that the fund provides an attractive cash dividend each year to the highest of 25% in 1988-89 and to the lowest of 11. 01% in 2004-2005. Figure 2. 5 Dividend yield on ICB unit fund The graph shows a dividend yield on opening price of the unit fund. Tax B enefits (I) Investment in Units enjoys the benefit of Investment Allowance under Sec. 44 of Income Tax ordinance 1984. (II) Units are treated as approved securities in accordance with the Section 2993 of the Companies Act. 1994 and Insurance Act, 1938. These are also treated as Securities as per Sec. 20 of the Trust Act, 1882. Cumulative Investment Plan (CIP) Under this scheme a holder instead of receiving dividend may reinvest such dividend income accrued for purchasing Unit at a confessional rate. In such case, Units are issued at Tk. 1. 00 less than the opening price of the financial year. 2. 13 Development Activities of ICB Equity support through consortium arrangement ICB inve